Title: ACCOUNTING PRACTICE AND ITS EFFECT ON ACCESS TO FINANCE FROM DEVELOPMENT BANK OF ETHIOPIA; SURVEY STUDY ON THE SMALL AND MEDIUM ENTERPRISES IN WERABE TOWN, ETHIOPIA
Authors:
Arga Shure, Tarikkechema (PHD)
Abstract:
This study seeks to examine the accounting practice of small and medium-sized enterprises and its effect on access to finance by the development bank of Ethiopia at Werabe town. It identifies the sector as the key to unlocking the economic potential of the country. However, the sector is constrained by a number of factors which include among others minimum or poor accounting practice and difficulty in accessing credit facilities. For the achievement of the objective of the study quantitative research approach particularly survey design were used and the data obtained were analyzed using descriptive statistics and ordinary least square regression. The study revealed that the majority of the studied firm has no formal accounting practice. From the sample SME 83 percent is the VAT register and maintain a VAT records. 20 percent, 32 percent, 24 percent, 53 percent, 14 percent and 47 percent of sample firm maintain bank statement, income statement, balance sheet, periodic management account, working capital management and inventory and cost control respectively. Only a few number of the maintain cash budget, sales budget and expense budget. The study also revealed that the major sources of finance available for the establishment and expansion of SMEs in Addis Ababa are personal saving, microfinance, money from friends or relative, iqub and less from banks. The result of ordinary least square regression evidences that variables such as capital, manager education level and age of the firms are the significant determinants of firms’ accounting practices whereas the problems significantly associated with access to bank credits are the demand for collateral, accounting practice or formal accounting information and age of the firm.
Keywords: Accounting, practice, enterprise.
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