ACCOUNTING PROCEDURES IN PARTNERSHIP BUSINESS (A CASE STUDY OF S AND C BUILDING AND TRADING COMPANY AWKA

ABSTRACT

This project is written in partial fulfillment of the requirement for the award of Higher National Diploma (HND).

Let me state here that I was motivated to write on the topic “Accounting Procedures in Partnership Business” mainly because of the weight of area of Accounting in our society.

Looking back at the quality of lectures received on the Accounts of Partnership and it procedures, I can now happily say that this work is a dream come true.

The purpose of this work is to make known to people, the role Partnership Accounts plays in our society.

This project is organized in Five Chapters.  Chapter one Introduction and origin of Accounting, which presents the background of the study, statement of hypothesis, objectives of study, delimitation, scope of study and limitation and definition of terms.

In chapter two, the existing literature and the history of the topic, nature of partnership business, history and method of studying Accounting Procedures in Partnership business will be reviewed.

In chapter three, the research methodology, that is the source of data used will be explained.

Chapter four will deal with the presentation and data analysis, other findings and Test of hypothesis.

The fifth and final chapter deals with possible recommendations, conclusion and summary and Bibliography.

TABLE OF CONTENTS

CONTENTS                                                              PAGES

TITLE PAGE                                                                     i

APPROVAL PAGE                                                             ii

DEDICATION                                                                   iii

ACKNOWLEGEMENT                                                       iv

ABSTRACT                                                                       vi

TABLE OF CONTENTS                                                     viii

CHAPTER ONE

1.0      INTRODUCTION

1.1   Origin of Accounting

1.2   Background of the Study

1.3   Statement of Problem

1.4   Research Questions

1.5   Statement of Hypothesis

1.6   Objectives of the Study

1.7   Significance of the Study

1.8   Delimitation, Scope of the Study and Limitation

1.9   Definition of Terms

CHAPTER TWO

2.0      LITERATURE REVIEW

2.1   Introduction

2.2.2  Formation/Creation of Partnership

2.2.3  Kinds of Partnership

2.2.4  Types of Partnership

2.2.5  Partnership Agreement

2.2.6  Entity Concept

2.2.7  Advantages and disadvantages of Partnership

2.3.1  History and Method of Study

2.3.2  Accounting Procedures in Partnership Business

2.3.3  Allocation of Partnership Profits

2.3.4  Admission of New Partner/Goodwill

2.3.5  Revaluation of Assets

2.3.6  Dissolution of Partnership using the Rule in

        Garner V Murray and Piecemeal Realization

        of Assets

2.3.7    Amalgamation of Partnership

2.3.8    Sale of a Partnership to a Limited Company

CHAPTER THREE

3.0      RESEARCH METHODOLOGY

3.1      Research Design

3.2      Area of Study

3.3      The Population

3.4      Sources of Data

3.5      Location of Data

3.6      Method of Data Collection

3.7      Method of Data Analysis

3.8      Questionnaires Design

CHAPTER FOUR

4.0      DATA PRESENTATION AND ANALYSIS

4.1      Presentation

4.2      Data Analysis

4.3      Other Findings

4.4      Survey Instruments

CHAPTER FIVE

5.0      SUMMARY OF FINDING

5.1      Discussion of Findings

5.2      Conclusion

5.3      Recommendation

BIBLIOGRAPHY

CHAPTER ONE

INTRODUCTION

1.1   ORIGIN OF ACCOUNTING

In the prehistoric times when man as individual unit, he lived alone, and produce all that he wanted.  His only needs were food, shelter and clothing which he provided by himself. He had no business to transact with anybody or keeping record.

When man began to depend on others as a result of the division of labour which heeds man to specialization on a particular occupation and field of production and exchanges his surplus for what he does not produce out needed.  Still, man could not take or keep any record of what he exchanged.  In the sense that man has no idea of record keeping or documentation and the system of exchange was known as “Barter” which is the exchange of goods for other goods.  There is no specific measurement that can be taken so no record can be kept.  It was so cumbersome that man has to device another means for exchange in the form of commodity money such as cowries, copper wire, brassards etc. but records were not kept because they had no knowledge of such.

The first system of record keeping started at about 3,500 B. C. during the Babylonian era, when records were kept on clays or stones. As commercial activities continued to grow, the keeping of records, data and information improved.

In place of clays/stones, they make use of the following:

(a)         Magnetic Tape

(b)        Compact Disc

(c)         Magnetic Disc

As at that time, individual firms or organizations still went on transacting business without absolute records in their day to day business.  Some did not even care to know the cost of goods they had on stock or purchased.

According to Adam, the growth in specialization as a result of the division of labour in man improved the system of exchange.  In the course of commerce growth, men have to alleviate the use of commodity money which was not convenient enough for the use of the British pound and shilling as a universal accepted money.

As soon as the Ancient Empires and States (Rome and Egypt) started world wide as a means of providing checks and balances in commercial activities with the advent of the colonial business in Africa the European system of accounting was introduced into writing of business transactions and the compilation of purchases and sales, income and expenditure of the business in such a way that the business position could be ascertained at any time.  The system of record keeping is what is known as accounting.

1.2   BACKGROUND OF THE STUDY

Accounting is said to be the language of business.  It is used in the business world to describe the transactions entered into by all kinds of organizations.  Accounting terms concepts and conventions are therefore used by people associated with business, be they manager, stock brokers, owners, investors, bankers, lawyers, estate agents, or accountants.  As it is, the business language there are words and terms that could mean one thing in accounting by meaning different thing in ordinary language usage.

Accounting is concerned with the use to which those records are put, their analysis and interpretation.  An accountant should be concerned with more than just record-marking phase.  In particular, he should be interested in the relationship between the financial result and the events which have created them and to study the various alternatives open to the firm.

Partnership business is a legal form of business organization and ownership that results from a contract between two or more competent persons to associate themselves in the common ownership and management of a lawful business enterprise for profit.  The fundamental characteristics being that it arise out of a contractual relationship between two or more partners. (Peterson and Plowman 1958).

The earliest record of partnership business dates back to the Babylonian times.  Despite this long historical standing, its growth has continued to dwindle due to the presence of certain factors which have also hindered its expansion.  Generally, the rate at which partnership business are being established is shown compared to the growth of other firms of business organization like the sole proprietorship and Limited Liability Company.  Individuals find it easier to invest in the latter two types, than in partnership.  Yet, the importance of large partnership cannot be over emphasized.  Partnership business cannot be a satisfying experience but starting a business can involve great risks, a modicum of talent, a bit of good luck and an enormous amount of carefully planned hard work.

The subject, accounting procedures in partnership business is vital to any organization be it profit-oriented or non-profit-oriented, lack of keeping proper procedures in partnership business has result to many firms easily go out of business because of keeping poor accounting records, misinterpretation or not bothering fraud, procedure in which retired partner and dissolution of partnership business should be recorded in accounting procedure.

It is due to the problems mentioned above which is associated with lack of financial procedure in any organization, that has motivated the researcher to choose the topic “Accounting Procedures in Partnership Business” through a system of control S and C Buildings and Trading Company Awka has been chosen as a case study in trying to discuss how accounting procedures will be effective to achieving in partnership business account.  In any business organization, account is the life wire of such organization.  Any organization whose accounting system is weak or not properly controlled, the progress of that organization can never grow fine.

Internal control system comprise the plan of organizational and all co-ordinate method and measures adopted in a business.  To safeguard its assets, checks accuracy and reliability of its accounting data.  These ideas are not easily and effectively understood if they are classified according to certain similarities.  This procedure enables relationship to be discovered.

However, the procedures in partnership account is to enhance its financial accountability depend mostly on the type and effectiveness of it.  Internal control system should be designed in such a way that it is effective as to benefit primarily the organization.

1.3   STATEMENT OF THE PROBLEM

Every policy formulated in boardrooms would have been a success if they were being carried out there too.  But adherence to planned policies employee is the problem of many, a management of companies.

Management is the act of getting things done through others. The owners of every business expect a reasonable return on their investments, irrespective of who accepts the policies.  Therefore focused on examining the issues in Accounting Procedures in Partnership business relations and operations with particular references to investigate and identify the indifferences to growth posed by the negligence a written agreement, inadequate capital has lead the firm to bankruptcy.  Those problems intended in the peculiar nature of partnership business.

1.4   RESEARCH QUESTIONS

Based on the above premises, this study attempts to find solutions to the following problems that ensure in the practice and partnership business.

1.          In practice over partnership business, the importance of a written agreement is glaring, do partnership firms operate with a written agreement?

2.          Outside the deed, do they have any other tool that indicated the flow of authority and responsibility?

3.          The importance of qualified and promising personal to an organization is obvious.  Are partnership firms capable of engaging and maintaining qualified and efficient staff?

4.          Are there any problem(s) inherent in partnership firms, despite their wide capital base over the business because of their nature?

5.          Partnership firms, despite their wide capital base over the sole proprietorship still suffer form the problems emanating from inadequate capital why?

Where applicable, efforts, are made to investigate these and other similar problems and suggest solutions to them.

1.5   STATEMENT OF HYPOTHESIS

Based on the problems and objectives of the researcher the following hypothesis are formulated.

1.     Null Hypothesis (Ho):

Effective internal control system does not inherent partnership because of their nature

2.     Ho:

Effective internal control system cannot eliminate fraud nor enhance prudent allocation of a firms resources.

HI:

Effective internal control system can eliminate fraud and enhance a prudent allocation of a firms resources.

1.6   OBJECTIVES OF THE STUDY

A research into the procedure system of any organization is a research into its efficiency, profitability apparatus, viability prospectus and of course accountability of the entire organization.

It is the purpose of this study therefore to have a close look at the suit procedure existing in S and C Building and Trading Company Awka if there is any, then to know how effective this has assisted in attaining.  The important areas to be looked into are as follows:

(a)         Whether or not partnership firms operate with a written agreement.