THE ACCOUNTING SYSTEM IN AVIATION INDUSTRIES IN LAGOS STATE
TABLE OF CONTENTS
Table of contents
The research Problem
The Purpose of Study
Statements of Hypotheses
Significance of the Study
Definition of Operating Accounting Terms Accounting 10
Literature Review 13
Designing and Installing an Accounting Systems
(A Case Study of the Aviation Industry Visited) 23
Dependence of Accounting System
Research Design and Methodology
Nature and Sources of Data
The Instrument Used for the Collection of Data 34
Method of Data Presentation
Statistical Tools of Analyses
Presentation and Analysis of Data
Presentation of Data
Distribution and Collection of Questionnaire 40
Analysis of Date
Testing of Hypothesis
Summary and Conclusion
Conclusion and Recommendations
Further Areas of Interest Suggested for Research 52
LIST OF TABLES
Table 1: “Yes”
and “No’’ responses from the
questionnaire for parts I and II 55
Computation of test statistics contingency table
of accounting systems
of the three aviation
industries classified as similar practice (“yes”)
Table 4: Expected
distributions of accounting systems
of the three aviation industries classified as
(yes”) and ;non-similar’
Table 5: Computation
of chi-square using the responses
of the three aviation industries classified as
similar practice’ (“yes”) and non-similar (“no”)
in their accounting system 65
Contingency table of internal control procedures
of three aviation industries classified as
similar practice (“yes”) and non-similar
Table 7: Expected
distributions of accounting systems
of the three aviation industries classified as
“similar practice” (yes”) and ;non-similar’
Computation of chi-square using the responses
of the three aviation
industries classified as
(“yes”) and non-similar (“no”)
in their internal
control procedures of the
LIST OF FIGURES
Outlines Of Accounting System 5
Fig 2: The
organization of Accounting in the
financial accounting sub-system (FAS) of the
Aviation industries 29
Fig 3: The
Organization of Aviation Industries
Management Accounting Sub-System (MASS) in
Relation to FAS
Decision support System (DSS)
(Mainframe Computer System) 33
Aviation Industry Organization Chart
Of The Accounts Department 73
Fig 6: The
organization of Accounts in the financial
system of the aviation industry 76
Fig. 7: Source
Fig 8: The
Management Accounting Sub-System
And Its Relationship With The Financial
According to Corbett (1960), “accounting is concerned with
the collection of data on the firms activities, the conversion of this data
into monetary values and with the processing and presentation of this data into
a form suitable for the user.
The accounting system therefore constitute the means by
which the statement figures are developed and may be defined as the system of
forms, records, procedures and devices used to process data concerning the
operation of an economic entity to produce the feed back in the form of
statement and reports necessary for management to control these operations. The
basic elements that make up an accounting system are therefore the following:
The functions or the activities which show the manner in which tasks to
be done are organized.
people that make up enterprise
machinery through which tasks are carried out.
network of paper, records and reports that collection, assemble and transmit
As a system, accounting has the basic goal of providing
information. It has clear and, well defined elements in the form of people and
equipment and has the typical system consisting of inputs, process and output.
Since the goal of the system include to meet the needs of users of accounting
information like managers, shareholders, employees, customers, creditors,
government and the community at large, the output requirement determine the
type of data selected as input for processing into information output. Decision
makers rely greatly on the accounting information of organization which must be
provided by the accounting system of the organization. Therefore a fully
integrated accounting system is an important element in evaluating management
performance with respect to its profitability, liquidity, solvency and leverage
position. Accounting system has completely moved from its traditional
procedural function of encompassing record keeping and related work as the
presentation of budgets and final accounts, towards the adoption of a role
which emphasized its social importance.
Hence, “the inherent obligations for stewardship and accountability
necessitate a system of accounts and report that will ensure full disclosure of
the results of their operation of their financial positions.
An accounting system should orderly assemble and analyze
accounting data in order to facilitate the preparation of financial systems and
reports. It should also be able to supply management with relevant information necessary
to plan and control business activities moreover, “accounting system must
report timely and reliable financial statements prepared in accordance with the
statutory and professional guideline. Thus accounting practices are based on
the legislative and professional guidelines (Uche, 1985 Vol. 2).
FIG 1: OUTLINES
OF ACCOUNTING SYSTEM
THE RESEARCH PROBLEM
As a result of the growing need for genuine and reliable
information for rational economic decisions, there arises the need for the
establishment and enforcement of accounting and auditing standards for the
preparation of financial statements. Nevertheless, one cannot expect to find
uniform standards where financial statements are being prepared from different
Management are allowed to adopt and consistently follow any
accounting policies deemed suitable as to present fairly the financial
position. Cases abound when more than one method of applying fundamental
accounting concepts to financial transactions is acceptable in principle but
any accounting policy followed can greatly affect reported financial position.
As a result of this, one can identify the following
Problems may arise in respect of judging the extent to which financial
statements of different companies are comparable, even though these financial
statements are prepared based on different but approved accounting policies
Preparers of financial reports may encounter or have doubts when
selecting accounting policies in their organizations. The problem of
subjectivity may therefore be increased when accounting decision are to be
There is therefore the need for consistency and/or
uniformity in accounting practice since differences arise as a result of
different and acceptable accounting practices being adopted by organization.
However, uniformity of accounting practices is being greatly
influenced by the increasing complexity of the present day business.
The relevant questions therefore are:
Is there uniformity in accounting systems practiced by Aviation
Industries in a particular kind of industry?
the internal control procedures in the accounting system of Aviation Industries
and the same.
THE PURPOSE OF STUDY
The purpose of this study is to know the following:
The extent of resemblance of the accounting system in aviation
examine if there is any uniformity in the internal control of accounting system
of such Aviation Industries.
find out whether the accounting system of such Aviation Industries are in line
with the legal requirements of the company Allied Matters Decree 1990 and legal
bodies, like the Nigeria in Accounting standard Board (NASB) and the institute
of chartered Accountants of Nigeria (ICAN) with respect to the preparation of
financial statements and reports and disclosure requirements.
\STATEMENTS OF HYPOTHESES
Organizations have different aims and this makes the
adoption of uniform accounting policies dependent upon these objectives.
Adoption of uniform accounting bases can only be justifiable if there is a high
degree of similarity in operation and internal control procedures of accounting
system of companies in the Aviation Industries.
This study presents two hypotheses which are to be tested
No difference exists in the accounting systems in aviation industry.
Difference in the internal control procedure in the accounting systems
in aviation industries is non existent.
SIGNIFICANCE OF THE STUDY
Modern accounting researchers have been expressing concern
over the degree of non-comparability of financial reports of various
organization. The desire to study the accounting system of organizations has been
on the increase. The fact that if financial statements of organizations, more
especially companies in the same kind of industry are continued to be viewed by
those who make use of accounting information as being comparable if would be
extremely hard to believe that economic decision takers would rely solely on
the information supplied by the financial reports of the organizations.
In respect of this, the present study is made with the
intention that the end-product of all will be helpful in the following ways:
In providing a ground whereby accounting information provided in
financial reports of Aviation Industries would without iota of doubt be relied
enabling organizations especially companies in the Aviation Industries to
establish and adopt accounting system that will yield comparable financial
laying more emphasis on the reliability of the information about the pattern
and operations of accounting systems of the Aviation Industries to be studied.
study on its own will contribute immensely towards ideas with which much
importance will be attached to companies in the aviation industry.
will highlight the basic principles behind the designing and installing of an
accounting system in an organization and finally.
SCOPE OF STUDY
An arbitrary choice was made of the aviation industry in
relation to the present study. In Nigeria, aviation industry among others is
growing tremendously in various states of the country. Nevertheless, a choice
was made of Lagos state. This is because of the inconvenience the researcher
might meet while carrying out this study in all the states of the federation.
There are about three companies in aviation industry in Lagos state but the
reason Lagos was considered in this project/study.
This study would take into consideration the nature and
operations of the accounting systems and the internal control procedures of
accounting systems of the compiled that have been in operation for a period of
PLAN OF THE STUDY
This study contains five chapters. In the first chapter
there is a general introduction and framework of account system. The reasons
for the research/study research problem, aims of the study, hypotheses
statement and the significance of the study.
The contents of this chapter are reviews of past studies on
accounting system. The views are held by previous researchers and writers in
respect of making a choice of accounting system. The principles needed in
designing and installing an accounting systems and the accounting systems of
the aviation industry visited coupled with the need for the dependence on accounting
systems all form part of the Literature Review of chapter two.
Chapter three offers the method of researcher work adopted
by the researcher. This includes the method of collecting data and
instruments/techniques used in analyzing the data.
The data actually collected in the course of carrying out
the research data analyzed and the discussions of the results are clearly shown
in chapter four.
The last chapter is the summary and conclusion of the study.
Recommendations made are also found in this chapter five. There are detailed
bibliography and appendices at the end of the study.
PROBLEM AND LIMITATIONS OF THE STUDY
It would be out of place to say that a research of this
nature was free from limitations/constraints. The research encountered several
problems during the course of his investigation. One of the must significant
problems was the attitude of most of the financial officers and staff of the
accounting departments. Most of them seemed to be suspecting and misconstruing
the researcher’s intensions.
As a result of this, getting access to the relevant data was
always delayed and this was a very serious problem.
In general, the
following are the limitations of this study:
The choice of sample size was limited by the number of aviation
industries found in the area of study, there are tree aviation industries in
Lagos state but only one gave attention to the questionnaire.
major data collection instrument was the questionnaire and so the study was
some how limited to the questions and statements of the questionnaire.
interview were conducted/administered by the researcher to the important
personnel and their views and responses recorded.
was a general lack of adequate data on the related literature on the topic
which compelled the researcher to travel beyond his state of origin in search
Time limit available to the researcher had been too short. This
limitation was due to the challenging and detailed nature of the research.
DEFINITION OF OPERATING ACCOUNTING TERMS
Accounting may be defined as the process of identifying,
measuring and communicating economic information to permit informed judgments
and decisions by users of the information… the objectives of accounting are to
provide information for the following purpose:
Making decisions concerning the use of limited resources including the
identification of crucial decision areas and determination of objectives and
Effectively directing and controlling of an organization’s human and
Maintaining and reporting on the custodianship of the resources and
Facilitating social function and control.
“Accounting policies are the specific accounting bases
judged by business enterprises to be most appropriate to their circumstances
and adopted by them for the purpose of preparing their financial accounts.
“Accounting bases can be defined as the methods which have
been developed for expressing or applying fundamental accounting concepts to
specific financial transactions and items.
SYSTEMS AND PROCEDURES
“A system is an assembly of interdependent parts (such
systems) whose interaction determine its survival.
It is a network of related procedure developed according to
one intergraded scheme for performing a major activity of the business.
A procedure is a sequence of clerical operations, usually,
involving several people in one operation, usually, involving several people in
one or more departments established to ensure uniform handing of a transaction
of the business.
Internal control is defined as:
“not only internal check and internal audit but the whole
system of controls, financial and otherwise, established by the management in
order to carry on the business of the company in an orderly manner, safeguard
its assets and secure as far as possible the accuracy and reliability of its
Internal check is the routine checks on day-to-day
transactions which operate as part of the system.
Internal audit is described as a review of operations and
records, sometimes continuous, undertaken within a business by specially
This is an accounting financial data organized and processed
for the special purpose of decision making.
Efficiency is the
accomplishment of a desired objective, goal or action with the minimum
An industry is combination of many firms producing the
similar/same line of goods/service(s) in economy.