Abstract
This aims of this paper is to examine the effects of social accounting practices on the financial performance of business organizations in the city of Dessie, South Wollo, Ethiopia. To fulfill this objective, a stratified-random sampling design was used, followed by proportional sampling techniques. The research data were obtained from primary and secondary sources and analyzed using multiple linear regression to understand the effect of corporate social responsibility accounting practices on financial performance. The results of the study indicated that report on social accounting was indeed necessary, however, there was no standard guideline followed when reporting except the Ethiopian commercial code and statement of socio-economic operations. Likewise, the observation during this research showed that an increase in corporate social responsibility scores would lead to an increase in the company's financial performance.
Highlights
Social accounting is a branch of accounting which attempts to measure the social benefits that an organization provides and the social costs that an organization incurs, with a view of using such to make available information that would enhance appropriate allocation of scarce resources for the benefit of the organization and the society (Huang & Watson, 2015). Crowther (2000) considers social accounting as an approach for reporting the firm’s activities that stresses the need for identification of socially relevant behavior and its social performance by the development of appropriate measures and reporting techniques
This study aimed at determining the methods of social accounting practices and reporting guidelines referred to by organizations and examine whether social accounting practices have an effect on the company's financial performance as measured by Return on Assets
To achieve the research objectives, data are grouped into demographic factors, disclosure methods of Corporate Social Responsibility (CSR) activities in the Reporting format and to study the effect of social accounting practices on financial performance
Summary
Social accounting is a branch of accounting which attempts to measure the social benefits that an organization provides and the social costs that an organization incurs, with a view of using such to make available information that would enhance appropriate allocation of scarce resources for the benefit of the organization and the society (Huang & Watson, 2015). Crowther (2000) considers social accounting as an approach for reporting the firm’s activities that stresses the need for identification of socially relevant behavior and its social performance by the development of appropriate measures and reporting techniques. Society is seen to benefit when organizations implement a social approach to accounting and reporting in a number of ways; honoring stakeholders right of information, balancing corporate power with corporate responsibility, increasing transparency of corporate activity, identifying social and environmental costs of economic success (Gray, 2000). Organization will benefit from applying social accounting practices in the following ways; increasing information for decision making, establishing more accurate product or service costs, improving image and public relations management, identifying social responsibility, identifying market development opportunities and maintaining legitimacy. The firms can disclose their social activities in the annual statements stating the positive activities in limited manner They use other channels of communicating such as newspapers and the company websites (Kalunda, 2007)
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