Determinant Factors Affecting the Accounting Method Choices and Reported Profits of Big Industrial Companies in Indonesia

Abstract

This study aims to find out the determinant factors affecting the choice of accounting methods and the reported profit of big industrial companies in Indonesia. The results showed: (1) Total assets of big industrial companies, DER and bonus managers simultaneously had a significant influence on the choice of Accounting Methods which increase profit of the companies. This was supported by Nagel R Square of 0.558 or it could be interpreted that the model could give an effect to change variations of the choice of accounting methods by 58.80%. (2) The debt of big industrial companies which is represented by debt to equity ratio has a significant effect on the choice of Accounting Methods. It means that the greater the company's debt, the greater the tendency of the company to select the accounting methods that increase reporting of company’s profit. (3) Big industrial companies that have a bonus managers have significant effect on the choice of the Accounting Method because the Wald test value is 59,356> 2 or p-value 0,00 <alpha 0,05. This means that the greater the bonus manager of the company, the greater the tendency of the company to select accounting methods that increase reported profit. (4) Sales volume, Debt to Equity Ratio, and Bonus  managers simultaneously have significant effect on the reporting of company’s profit of big industrial companies in Indonesia. This was stated by F_a which was greater than F_table or 377.82 > 1.96 at (a = 0.05; k-1; Nk) or P value 0,000 <0.05 and supported by Adjusted R Square of 0.641 or 64.10% or it can be interpreted that this model can influence the change variations of reported profit of companies 64.10%. (5) Companies with a greater sales volume have a significant effect on reporting of company’s profit. This was indicated by t_a > t_-table at (a= 0.05; N-k) or 33,642> 1.96 (a= 0.05; N-k) or with a significance level of P value 0,000 <0.05. This means that the greater the company's sales volume, the greater the company's profit will be.

Key words: Asset, Debt to equity ratio, Accounting methods, and Profit

DOI: 10.7176/RJFA/10-20-09

Publication date:October 31^st 2019