The Accounting System In Aviation Industries In Lagos State A Research Project Submitted

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Efforts is made here to assess the accounting systems of Nigeria Aviation industries and to stress the need for uniformity in their accounting systems. The major areas of concern are: the nature and operations of accounting system and the internal control procedures in the accounting systems of Aviation industries. The data was analyzed statistically. A relative high degree of resemblance in the nature and operations of the accounting systems as well as the internal control procedures of the Nigeria Aviation industries was revealed. Precisely, through the frequency and percentage analysis, above eighty-five percent of similarity was observed in the nature and operation of accounting systems. Equally eighty-five percent of similarity was recorded in their internal control procedures. Moreso, the chi-square test fails to reject my null hypothesis of no difference in the accounting system and the internal control procedures of the organization. This further confirmed my results. Conclusively, it is my recommendation that a uniform accounting systems should be installed in aviation industries, this will help erase the fear about having non-comparable financial reports of aviation industries.
















Title Page                                                                                         i

Certification                                                                                     ii

Dedication                                                                                        iii

Acknowledgements                                                                          iv

Abstract                                                                                            v

Table of contents                                                                                       vi



Introduction                                                                                      1

General Background                                                                        1

The research Problem                                                                      4

The Purpose of Study                                                                       5       

Statements of Hypotheses                                                               6

Significance of the Study                                                                6

Definition of Operating Accounting Terms       Accounting          10                                                              


Literature Review                                                                            13

Introduction                                                                                      13

Designing and Installing an Accounting Systems

(A Case Study of the Aviation Industry Visited)                            23

Dependence of Accounting System                                                           27



Research Design and Methodology                                                           33

Introduction                                                                                      33

Population                                                                                         33

Sampling Procedure                                                                         33

Nature and Sources of Data                                                              34

The Instrument Used for the Collection of Data                             34

Method of Data Presentation                                                                     36

Statistical Tools of Analyses                                                                     37



Presentation and Analysis of Data                                                   39

Presentation of Data                                                                         39              

Distribution and Collection of Questionnaire                                 40

Analysis of Date                                                                              41

Testing of Hypothesis                                                                      43                                                              


Summary and Conclusion                                                                49

Summary                                                                                          49

Conclusion and Recommendations                                                            51

Further Areas of Interest Suggested for Research                          52

Bibliography                                                                                    53

Appendices                                                                                       63







Table 1:      “Yes” and “No’’ responses from the

questionnaire for parts I and II                                     55     


Table 3:      Computation of test statistics contingency table

 of accounting systems of the three aviation

industries classified as similar practice (“yes”)

 and non-similar practice )”no”)                                  63


Table 4:      Expected distributions of accounting systems

of the three aviation industries classified as

 “similar practice” (yes”) and ;non-similar’

 practice (“no”)                                                             64


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

Table 6:      Contingency table of internal control procedures

of three aviation industries classified as

similar practice (“yes”) and non-similar

practice )”no”).                                                             67


Table 7:      Expected distributions of accounting systems

of the three aviation industries classified as

“similar practice” (yes”) and ;non-similar’

 practice (“no”)                                                             68


Table 8:      Computation of chi-square using the responses

 of the three aviation industries classified as

 similar practice’ (“yes”) and non-similar (“no”)

 in their internal control procedures of the

accounting systems                                                       69










Fig 1:          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                                                            31


Fig 4:          Decision support System (DSS)

(Mainframe Computer System)                                   33


Fig 5:          Aviation Industry Organization Chart

Of The Accounts Department                                         73


Fig 6:       The organization of Accounts in the financial

       Accounting system of the aviation industry                             76


Fig. 7:        Source Documents                                                        77


Fig 8:          The Management Accounting Sub-System       

And Its Relationship With The Financial

Accounting Sub-System                                               80

















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:

i)                   The functions or the activities which show the manner in which tasks to be done are organized.

ii)                The people that make up enterprise

iii)              The machinery through which tasks are carried out.

iv)              The network of paper, records and reports that collection, assemble and transmit information.

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).














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 accounting bases.

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:

i)                   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

ii)                 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 taken.

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:

i)                   Is there uniformity in accounting systems practiced by Aviation Industries in a particular kind of industry?

ii)                Are the internal control procedures in the accounting system of Aviation Industries and the same.



The purpose of this study is to know the following:

i)                   The extent of resemblance of the accounting system in aviation industries

ii)                To examine if there is any uniformity in the internal control of accounting system of such Aviation Industries.

iii)              To 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.


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 statistically.

Hypothesis I:           No difference exists in the accounting systems in aviation industry.

Hypothesis 2:           Difference in the internal control procedure in the accounting systems in aviation industries is non existent.



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:

i)                   In providing a ground whereby accounting information provided in financial reports of Aviation Industries would without iota of doubt be relied upon.

ii)                In enabling organizations especially companies in the Aviation Industries to establish and adopt accounting system that will yield comparable financial reports.

iii)              In laying more emphasis on the reliability of the information about the pattern and operations of accounting systems of the Aviation Industries to be studied.

iv)              This study on its own will contribute immensely towards ideas with which much importance will be attached to companies in the aviation industry.

v)                 It will highlight the basic principles behind the designing and installing of an accounting system in an organization and finally.  


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 ten years.



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.



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:

i)                   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.

ii)                The major data collection instrument was the questionnaire and so the study was some how limited to the questions and statements of the questionnaire.

iii)              Oral interview were conducted/administered by the researcher to the important personnel and their views and responses recorded.

iv)              There 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 of data.

v)                 Time limit available to the researcher had been too short. This limitation was due to the challenging and detailed nature of the research.




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:

i)                   Making decisions concerning the use of limited resources including the identification of crucial decision areas and determination of objectives and goals.

ii)                Effectively directing and controlling of an organization’s human and material resources.

iii)              Maintaining and reporting on the custodianship of the resources and

iv)              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.


“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 records”.

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 assigned staff.


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 resources (cost)


An industry is combination of many firms producing the similar/same line of goods/service(s) in economy.




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The Accounting System In Aviation Industries In Lagos State  A Research Project Submitted