Accounting Knowledge, Practices, and Controls of Micro, Small and Medium Enterprises : Evidence from the Philippines

Of the business enterprises operating in the Philippines, 99.6% are micro, small, and medium enterprises (MSMEs). The Magna Carta of Small Enterprises (Republic Act 6977) governs these MSMEs. However, they are still subject to laws on the declaration of income and other regulations as imposed by the Bureau of Internal Revenue (BIR), including proper accounting in accordance with accounting standards. This paper looks at the accounting knowledge, practices and controls of MSMEs located in Metro Manila cities and in several Quezon Province towns. The study primary investigates whether or not MSMEs understand accounting principles, have acceptable accounting practices and controls. Majority of the MSMEs are either very knowledgeable or knowledgeable on accounting principles and concepts. MSMEs common accounting methods used are cash, accrual and installment. Common accounting practices used by MSMEs are manifested in their bad debt estimation, depreciation method used, net receivable estimation, business documents used and payment methods. MSMEs practice basic accounting controls; however, computers are not commonly used. ANOVA reveals that there are significant differences between MSMEs in Metro Manila and in Quezon Province on their knowledge of accounting principles, accounting practices and controls