DON HONORIO VENTURA STATE UNIVERSITY

College of business studies

RESEARCH TITLE

A Research Proposal Submitted to the

College of Business Studies
Don Honorio Ventura State University

In Partial Fulfilment
of the Requirements for Accounting 111
Accounting Research Methods

by

_____________
___________
___________

to

Dr. Juris C. Ponio

Month, Year
 TABLE OF CONTENTS

Cover Page………………………....…………………...………..………………………i

Table of Contents……………………...……………..…...…………………...……...…ii

List of Tables and Figures……….……...…………………………...…..…...…............iv

Recommendation and Approval Sheet ……………...…………………………..…........v

Acknowledgment…………………...…………………...……………………..….……vi

Title Page…………………………….…………………...………………….…..……viii

Abstract……………………………….…………………...…………….…………...…ix

CHAPTER I INTRODUCTION……………….…………………..……..…...……
Background of the Study……...…………………...………………….………........
Review of Related Literature and Studies…...……………………...…..…….....….
Statement of the Problem…..………………..………………….………..…....……
Hypotheses of the Study...…………………………...……..………...………….....
Conceptual Framework…………………………………………………..……....
Significance of the Study…….……………..…………………………………....
Scope and Delimitation...…………………..……………...……………….........
Definition of Terms …………………………………….……….......................

CHAPTER II METHODS……………………………………………………...……..
Research Design…………..…………………..………………………………...….
Population of the Study………………………..………………………………..….
Sampling Design ………………………………………………………………..……
Data Gathering Procedure……………………………………….……………..……..
Research Instrument……………………..………………….…………………....…
Validity and Reliability……………………………………………………….………
Statistical Treatment…………………………………………………………….……
Ethical Considerations………………………………………………………….…….

References………………………….………………………………………..........…
Appendices………………………….………………………………………...……..…
 CHAPTER I

THE PROBLEM AND ITS BACKROUND

Introduction

Micro, Small, and Medium Enterprises (MSMEs) had a pivotal job in building

up the Philippine economy. They help decrease destitution by making employments

for the nation's developing work power. It contributes to the national economy as the

small enterprises increases. In addition, they animate financial improvement in-

country and distant. Also, they fill in as essential accomplices to enormous

undertakings as providers and suppliers of help administrations. MSMEs fill in as a

reproducing ground for new business people and huge companies.

A lively MSME part means that a flourishing and developing economy.

Despite arrangements that intend to give an empowering situation to MSME

advancement, the industry still faces different limitations that keep it from

understanding its full development and potential. (Anoos et al. 2020). There is a

broad understanding that MSMEs are imperative to accomplishing respectable and

profitable work as they all-around record for 66% everything being equal and make

most of the new posts. Along these lines, the advancement of SMEs has been a

primary region of intercession for the International Labor Organization (ILO). Its

warning administrations on SME strategies are in intense interest among ILO part

nations (Hughes & Haworth, 2013). With regards to this, the study focuses on the

change in bookkeeping and how MSMEs (Micro Small and Medium Enterprises) deals
with their accounting systems and process that will derive to the reporting of their

financial status and performance.

MSMEs are viewed as essential for a nation's commercial development, work

creation, and advancement. Their absence of access to financing has regularly cited as

one of the significant constraints affecting their performance and competitiveness.

The lack of access to funding implies that a substantial number of SMEs cannot obtain

financing from banks and other sources to start, innovate, grow, and develop their

enterprises (Aldaba, 2010). Small businesses do not share the same financial

management problems with large companies. Then again, the absence of access to

financing has been distinguished as the strictest requirement for MSME development

and improvement. As per Cassar (2004), funding, especially from outside sources, for

example, banks, turns out to be increasingly necessary as firms begin growing.

Although assets have been made accessible by government budgetary organizations

and private banks, most MSMEs still have difficulty accessing these funds because of:

insufficient collateral, limited credit histories and banking relationships; inadequate

financial records and business plans; and high-interest rates. MSMEs would tend to

rely on informal non- banking channels for financing support.

From a document entitled 2018 Survey Of Entrepreneurs And MSMEs In The

Philippines, published last October 2018, within the 21 economies of the Asia Pacific

Economic Cooperation (APEC), MSMEs are the drivers of economic growth and

innovation, representing more than 97% of businesses and employing more than

50% of the workforce across the region. In the Philippines, MSMEs account for

99.57% of all business and provide 63.27% of total employment in the country. As
one of APEC’s fastest-growing economies with a projected 6.7% gross domestic

product (GDP) growth rate over the next two years, the economic prosperity in the

Philippines relies heavily on small businesses. As a result, the government has

developed significant and widespread policies and programs to support the

development and growth of MSMEs. The cornerstone policy, the Magna Carta for

Micro, Small, and Medium Enterprises, came into force in 2008. The policy is geared

toward developing an entrepreneurial ecosystem and supporting a business

environment conducive to the country’s dominant MSME sector. Guided by the high-

level, strategic policy direction developed for the country, in 2014 the Philippines

enacted the Go Negosyo Act that provides practical, on-the-ground support for

entrepreneurs and growing MSMEs in the form of support centers, a start-up fund,

and training in various areas such as marketing and management. Despite best efforts

in this policy space, gaps still exist in training and delivery of services (Survey Of

Entrepreneurs and MSMEs In the Philippines, 2018).

The same article shows indicates that those entering MSME sectors are

largely pursuing personal prosperity. Passion and market need, in comparison, lag

behind as reasons for founding an MSME. From the results of the survey, it is

noteworthy that only 25% of respondents checked ‘market need’ as a rationale for

founding an enterprise. This could be indicative of a variety of factors, and different

interpretations of the term, ‘market need.’ However, knowledge of the market context

that an aspiring entrepreneur is entering is key to achieving success in that space. A

policy intervention ought to focus on helping new and aspiring entrepreneurs to

think strategically about their particular market context, and include training on how
to leverage trade shows, utilize e-commerce, and access market information online

for different country and regional economies.

There is a saying that “Money makes the world go around”. This is also true in

the case of every business enterprise. Financial Management is the key factor which

determines whether a business will be successful over the long term. An accounting

system is the basis of financial management as all the financial data is first of all

recorded according to the rules of accounting in the business books of accounts. In

order to survive, MSME owners need updated, accurate and timely accounting

information. Accounting information is used to measure and communicate financial

information of the enterprise that is needed by management in decision making.

Accounting information exerts an important influence on the success of MSMEs,

therefore it is important that accounting practice of MSMEs could provide complete

and relevant financial information needed by entrepreneurs in decision making. In

order to enhance the profitability of MSMEs and their continuity, there is need for

adequate record keeping which will help the owners to keep track of the performance

of these enterprises. (Jeyaseeli & Justus, 2021)

Financial education needs deciding how others are influenced when an

individual settles on a budgetary choice (Buchanan, 2014; Kirman, 2010). It is an

aggregate issue of the entire country as it directly affects a younger age (Hastings et

al., 2013; Lusardi et al., 2010). It is significant for the country to make arrangements

on the best way to execute the idea of money related education in an ideal way.

Money related proficiency needs deciding how others are influenced when an

individual settles on a monetary choice. In developing nations, the high level of the
populace is monetarily unskilled and outside money related part. In this examination,

it discovered that the utilization of proportions in money related investigation of the

organization was just 36% on productivity, 43% on obligation, 38% for viability, and

62% for liquidity wherein shockingly this is a little rate (Plakalović, 2015). A study

conducted in Ghana reveals that there was insufficient financial literacy amongst

small and middle entrepreneurs because of which 44% of them did not have access to

financial services. More financially literate entrepreneurs would probably make use

of financial services, and consequently, financial education would have a positive

connection with the usage of financial services (Nunoo & Andoh, 2011).

Based on an article in The Economic Times: Small business accounting: “ Why

it is essential for SMEs to go for book keeping? ” here are the enumerated advantages

and important things to consider for a MSMEs to conduct formal accounting and

bookkeeping. First is to prepare Financial Statement: balance sheet, profit and loss

account, cash flow statement are the key elements for reporting to your investors/

financiers/bankers on crucial information about the financial status of the

enterprises, and to prepare these financial statements you need books of account.

Second, to fulfill tax obligations: if you want to do business, you have to pay taxes like

income tax, sales tax, excise duty, service tax, central sales tax etc. and to know the

correct amount of tax obligation and to settle the business/legal litigations, you

should have adequate and accurate books of account. Lastly, price fixation: price

fixation is the biggest issue for the small businessmen - at what price he should sell

his product or service? Price of most the products have been fixed on cost plus
margin basis and to ascertain the cost of a product you should have proper records of

cost elements of the product (Rahul Kumawat, 2017).

Bookkeeping is the compilation of business-related events in a precise and

coherent way with the goal that financial condition and business performance can be

communicated anytime. It became the underpinning of today’s businesses. Nyathi and

Benedict (2017) viewed bookkeeping as an everyday capacity of a business task in

tracking inflows and money outflows. The level of bookkeeping in business has brought

about numerous challenges against the effectual operation and accountability of those

(Onaolapo, Fasina, Opoola, & Olatunji, 2011).

According to Romero and Martinez- Román (2012), the application of business

skills and knowledge helped entrepreneurs to be successful. Consequently, in the study of

Breuer, Frumusanu, and Manciu (2013); and Umeji and Obi (2014) they argued that, if the

business events are recorded properly, decision-making process would be easy for small-

scale business entrepreneurs. Similarly, reported profits reflect changes in wealth of

owners and this can explain why major economic decisions in business are important

(Maseko & Manyani, 2011).

Micro-entrepreneurs contribute towards economic growth and poverty eradication

through self-employment, job creation, wealth creation and promotion of the general

welfare of the citizens (Ademola, Adeyemi, & Odebiyi, 2017; Agyei-Mensah, 2010; Ajao,

Oyeyemi, & Moses, 2016). A micro-entrepreneur is the one who operates a micro-

enterprise or a small-scale entrepreneur. And, a micro-enterprise is any small-scale

business with a small number of employees. Goods and services are the major products

that most micro-enterprises are specialized in and provided in their local areas.
 However, despite numerous previous researches on Micro, Small, and Medium

Enterprises (MSMEs), there is a need to focus on the bookkeeping practices of micro-

enterprises. Bookkeeping know-how and proper recording is specifically one of the factors

that have a significant influence on the sustainable performance and growth of MSMEs.

Furthermore, micro-enterprises play a big role in the advancement of a community,

municipality, and/or even a city by providing employment and taxes for the local

government. According to Germain (2009), one of the causes of business catastrophe and

bankruptcy within the few months of operation was the failure to embrace the practice of

proper recording of business financial transactions or bookkeeping. Chepkemoi (2013)

also noted that it is important to keep records on business transactions in order to know

how to break even or even know how much each different product is really making a

profit. Hence, bookkeeping is one thing that an entrepreneur should not set aside and

ignore.

Hatteu (2012) further postulated that the information needed in making decisions

about small business is provided by the accounting system. Hatteu (2012) also added that

understanding the use of the entry system and the application of accounting equations are

important. Consequently, Hatteu (2012) pointed out that the accounting system must be

easy to use, accurate, timely, consistent, understandable, dependable, and complete.

Accordingly, the standard of generally accepted accounting principles (GAAP) should be

followed by small businesses in the preparation of accounting records. Similarly, Mbroh

and Attom (2011) noted that good accounting system should be able to meet the

information needed in both internal and external decision makers for decision-making;

instead of the ability to keep records. The same thing with training in business
management, particularly, business finance and record keeping showed a significant

relationship with business performance (Bowen et al., 2009). Additionally, the European

Commission (2008) recommended that the accounting systems that fits small-scale

businesses depends on their specific business operation needs, which includes the

following: the use of financial records such as general journal, the use of the double-entry

bookkeeping which indicates the debit and credit side, the use of simplified formats in

preparing the business’ financial statements, and the use of the accrual basis of accounting

in recording of (sales, collections, pre-payments, and payables).

MSMEs in the Philippines as claimed by Ibarra (2012) are significant in the

national economic recovery. The category of MSMEs is based on the number of

employees and size of business’ assets, not including land. The law also updated the

definition of MSMEs by increasing the net assets threshold. Business enterprises are

categorized as micro-enterprise if their assets before financing are P3 million or less and

has 9 employees or less; categorized as small enterprise if the assets before financing

exceeds P3 million but not more than P15 million with 10 up to 99 employees; and

categorized as medium enterprise if the assets before financing exceeds P15 million up to

P100 million with 100 to 199 workers (Ballada, 2010).

There were 915,726 active business enterprises in the Philippines, based on the

2016 List of Establishments of the Philippine Statistics Authority (PSA), which was 1.64%

more than the 900,914 business establishments reported in 2015. Of these, 99.57% or

911,768 of the total businesses are micro, small and medium enterprises (MSMEs);

wherein 89.63% or 820,795 are micro, 9.50% or 86,955 are small, 0.44% or 4,018 are

medium, and 0.43% or 3,958 comprising the large enterprises, respectively.

 According to the 2016 number of MSMEs, the top five industries include

wholesale and retail trade, repair of motor vehicles and motorcycles, which comprise the

420,638 businesses; accommodation and food service activities comprising the 119,718

businesses; manufacturing comprising the 115,748 businesses; other service activities with

56,466 businesses; and financial and insurance activities comprising the 39,925 businesses.

Of the total number of MSMEs, 82.5% were accounted for by these industries mentioned

previously.

In the 2015 report, most of the MSMEs are operating in the National Capital

Region (NCR), with 190,166 businesses; Region 4-A (CALABARZON) with 131,011;

Region 3 (Central Luzon), with 100,880; Region 7 (Central Visayas), with 53,218; and

Region 1 (Ilocos) with 47,996. Of the total number of MSMEs in the country, 58.4% are

accounted by the aforementioned location.

In terms of employability, 4,879,179 jobs in total are generated by MSMEs in

2016 versus the 2,831,729 that generated the large enterprises. The report shows that

MSMEs comprise about 63.3% of the total jobs generation in all kinds of businesses. Of

the total job generated, micro-enterprises emerged 30.4% or about 2,345,992 jobs, small

enterprises generated 25.7% or 1,981,316, and medium enterprises 7.2% or 551,871. These

large corporations are the country’s top taxpayers yet, collectively, micro, small, and

medium enterprises (MSMEs) provide employment for 69.1% of the country’s labor force

(Ballada, 2010).

Micro-enterprises make up the backbone of San Simon, one emerging

municipalities in the province of Pampanga. Micro-enterprises play a big role in the

advancement of the municipality by providing employment and taxes for the local
government. Although many micro-enterprises have been contributing to the development

of the municipality, the growth is still minimal. Local government provides sources of

finances to micro-enterprises, yet, certain opportunities to suffice the micro-enterprises’

needs should still be provided, with regards to effective decision making; through financial

literacy programs and to promote an entrepreneurial culture and environment, since,

keeping proper records of business-related transactions and events are required in

managing a business to be successful.

Knowledge in bookkeeping and proper recording is specifically one of the factors

that have a significant influence on the sustainable performance and growth of MSMEs in

San Simon, Pampanga. Thus, Germain (2009) states, that the cause of business catastrophe

and bankruptcy within the few months of operation was the failure to embrace the practice

of proper recording of business financial transactions or the bookkeeping.

Micro Small and Medium Enterprises (MSMEs) play a significant role in

developing the Philippine economy by reducing poverty and creating jobs for the country’s

growing labor force. Due to the prevailing problems on the low financial literacy among

the people, there is a need to undertake this study among the MSMEs with the end view of

improving the socio-economic standard among the owners and employees with the growth

of MSMEs. The management of business monetary resources is very critical in the case of

SMEs or MSMEs and the various challenges confronting them in their quest for survival in

the market have to be conducted.

The micro-enterprises in San Simon, Pampanga are aware of the importance of

bookkeeping in their business operation change to: maximizing profit and minimizing

costs. However, bookkeeping is seldom implemented by micro-enterprises, and some of

them carry out bookkeeping themselves with minimal training and knowledge. Zhou

(2010) postulated that the main problem of business owners and managers of micro-

enterprises was commonly their inability to keep sufficient records, which should help

them in decision-making. Likewise, another problem is the difficulty in the preparation of

proper financial statements due to poor and insufficient records. Implementation of

bookkeeping is necessary to have a basic understanding of how it is properly applied.

The study will examine the small and medium enterprises (SMEs), specifically, at

the Nayong Tsinoy Market in Barangay San Pablo Proprio, San Simon Pampanga, sought

to assess and determine the SMEs business profile and its bookkeeping practices applied to

their respective enterprise, as well as the benefits and challenges of bookkeeping practices,

since bookkeeping is one thing that an entrepreneur would not set aside and ignore to be

successful in any, particularly, small-scale business ventures. Also, according to Butler

(2009), businesses without accurate and complete records were destined to fail from the

start of the operation. The researchers want to determine what are the accounting methods

and practices applied from its simplest up to more formal way of business finance in

measuring their assets and capital value, how they implement bookkeeping and the

benefits it has for them in projecting their monthly, quarterly and annual reports. This

research also wants to provide significant data, sources and information to the small-scale

businesses and recommendation to the growth and profitability of their respective

businesses. Furthermore, this study will serve as evidence that bookkeeping practices are

important financial tools that should be integrated into the MSMEs business operation to

keep track of their financial performance for short-term and long-term decision making.

This will also serve as policy implications for the local government of San Simon
specifically in the Nayong Tsinoy Market of Barangay San Pablo Proprio to conduct

seminars on financial literacy and proper recordkeeping program to help micro-enterprises

improve their livelihood and business’ sustainability.

Statement of the Problem
Hypotheses of the Study
Conceptual Framework
Significance of the Study
Scope and Delimitation
Definition of Terms
Acronyms
 METHODS

Research Design
Population of the Study
Sampling Design
Data Gathering Procedure
Research Instrument
Data Processing and Statistical Treatment
Ethical Considerations
References
Appendix A
Appendix B