Features, Costs and Benefits of Financial Accounting and Reporting: A Study in Small and Medium-Sized Enterprises in Malaysia

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Financial accounting which is a crucial element in any business entity including small and medium enterprises has always been a concern and a profound topic of interest. However, the lack of empirical evidence has prompted the researcher to analyse the financial accounting and reporting practices of small and medium-sized enterprises (SMEs) in Malaysia. This research examines the key features of SMEs’ financial reporting and assesses its costs and benefits to the stakeholders. This study adopts a positivist paradigm using a questionnaire. The research design involved a survey of 150 owner-managers of SMEs in the East Coast Region of Malaysia. The data were analysed statistically using both univariate and multivariate analyses. The findings revealed that financial information in the SMEs’ financial statements was incapable to satisfy the main users’ requirements. Besides, it was also indicated that the main weaknesses of SMEs’ financial statement are in terms of its preparation with outdated information, tax motivation and limited disclosures. The outcomes of this research are expected to be valuable to the existing literature on SMEs’ financial reporting practices, particularly in terms of the information required by financial statement users, as well as the costs and benefits of financial reporting. As the findings of this research are of particular concern to SME, their accountants, stakeholders and other jurisdictions; thus, it can be concluded that in the future, this research could assist policymakers in formulating an appropriate policy on the financial reporting of SME in the future.