Perceived accounting skills for accounting record keeping in small and medium enterprises in Tanzania

Abstract

Success of any firm highly depends on accounting and record-keeping skills, which are to be possessed by Small-Medium Enterprises (SMEs) or business owners. This will help in increasing performance, growth and profitability of business. This article explored perceived accounting skills for small- and medium-sized enterprises' accounting record keeping in Tanzania. The study employed the Agency Theory and the Resource-Based View (RBV) theory. The study is guided by the hypotheses that there is a relationship between the business growth of SMEs and accounting record keeping; there is a relationship between the business performance of SMEs and accounting record keeping; and there is a relationship between the business profitability of SMEs and accounting record keeping in Tanzania. The study deployed an empirical literature review in which different past studies were reviewed and secondary data was recorded and discussed from different literature in Tanzania regarding each study hypothesis. Results of this article depended on the methodology used within the reviewed literature, and their findings were discussed in detail regarding each study objective. The methodology employed a descriptive design to analyse data collected quantitatively from the reviewed literature. The findings indicated that SMEs' performance, profitability and growth are highly dependent on their perceived accounting skills in proper accounting record keeping. And thus, there was an existing positive relationship between business growth, profitability, and performance with accounting record keeping. Business growth is possible when the business owner or SMEs have the ability to report proper accounting records, which have been prepared correctly and comply with all the procedures of accounting record keeping. Business performance is possible when the SMEs have adopted an accounting management system that is cheap, based on technology, and that allows personnel perception. The accounting record-keeping system should be easier depending on the size of the business, supported by the management, easy to use, and supported by available infrastructure and external environments so as to perform better. Further, business profitability by SMEs was found to be possible when they have useful knowledge on preparing profit and loss accounts, debtors’ and creditors’ accounts, financial statements, cash accounts and stock accounts. Proper preparation of these accounting records reflects directly if the business is making a profit or loss and can be used for immediate response to reduce negative impacts on the business. It is recommended for the responsible development stakeholders and the government to ensure there are attractive strategies enhancing SMEs to receive perceived accounting skills so as to be able to perform better in their business. From this perspective they will be able to grow their businesses rather than stagnating, make profits rather than losses and achieve goals and objectives as a reflection of business performance. Under the globalised skills, people are to be prepared with accounting record-keeping skills regardless of their professionalism. This will enhance the attitude of better performance in their businesses after being executive officers in their areas of professionalism.