An Analysis of Basic Accounting Practices of Microenterprises

Abstract

Every microenterprise needs to learn and perform basic accounting practices to ensure that their business progress is running smoothly. Besides able to improve the business performance of a company, accounting practices also represent the result of operations of a company, as well as the statement of financial position. Therefore, by understanding financial performance very well might help the microenterprises not only to evaluate and monitor their business activities but also facilitate them in a critical way to make a better decision. The purpose of this paper is to study the application of basic accounting practices among the microenterprises in Batu Pahat. The data were collected among 157 owners of microenterprises. The data were analysed in frequency and percentage form by using The Statistical Package for Social Sciences (SPSS). The findings showed that most of the microenterprises practiced a very basic accounting system, maintained both cash and accrual accounting and practiced recording both electronically and manually. The survey also showed that most of the microenterprises completed the accounting cycle by keeping records of their daily business transaction and prepared the financial statement at the end of period mostly on income statement and statement of cash flow. With such well-maintained and completed financial records, it can be translated into feasible and good decision-making which may eventually result in business success. Besides, this survey found that the main challenges that were faced by microenterprises were lack of accounting knowledge and limited cost and time in preparing the financial statement for their businesses. Thus, it was recommended that microenterprises should improve their accounting skills and increase their knowledge by joining any training for seminar on the accounting practices toward the effectiveness of their financial management and entrepreneurial development.