Challenges of Accounting Practices and Its Prospects: Evidence from Small and Medium Enterprises of Selected Districts, South West Shoa Zone, Ethiopia

Abstract

Small and Medium Enterprise are neglected area in the accounting and finance function which require support in the functional areas of their businesses. The study aimed to assess the accounting practices and its prospects in small and medium enterprise of south west Shoa zone, Ethiopia with special references to recordkeeping, financial reporting, financial planning, analysis, and the use of accounting information system. The study employed primary data which obtained from small and medium enterprises through questionnaires. The total population of the study was 1,005, out of which 287 were taken as a sample by using probability sampling technique. Data obtained from primary sources were processed through SPSS version-22. The study concluded that, most of small and medium enterprises of the study areas sometimes involved in preparation of profit and loss accounts. Again, the study found that, nearly all of the small and medium enterprises of the study areas who tried to maintain records were followed GAAP. Hence, the newly adopted accounting standard i.e., IFRS was generally not in use in the study areas. Moreover, the study concluded that, most small and medium enterprises in the study areas did not engaged in the preparation of cash flow budget and analyzing trends in sales. Finally, the study suggested that, small and medium enterprises better to improve the quality of their reports by adopting internationally accepted accounting standards such as IFRS.  In addition, accounting training programs for small and medium enterprises should be initiated by concerned bodies –especially, the trade and industry bureaus, academic staffs, and the technical and vocational schools.  Most importantly, the government should put in place a regulatory body to ensure that small and medium enterprises keep proper books and prepare final accounts.

Keywords: Challenges, Accounting Practices, Prospects, Small and Medium Enterprises

DOI: 10.7176/RJFA/10-11-07

Publication date:June 30^th 2019