ART E Penti Kurniawati Findi EP Hermawan Accounting for small Full text
ACCOUNTING FOR SMALL AND MEDIUM ENTERPRISES (SMEs)
Elisabeth Penti Kurniawati
Findi Esa Putri Hermawan
Faculty of Economics and Business
Satya Wacana Christian University
Diponegoro Street No 52-60 Salatiga, 50711
Central Java, Indonesia
Phone 62 298 321212
Fax 62 298 311881
bet@staff.uksw.edu
fiendy_eza@yahoo.com
ABSTRACT
Small and Medium Enterprises (SMEs) have important role in the development of Indonesian
economics. In general, SMEs face many weaknesses in accounting implementation caused by
several factors. This research aimed to analyse accounting application on SMEs in
Magelang, Central Java, Indonesia with obstacles they face.
Data taken in this research were from 46 SMEs using convenience sampling method. Data
were gathered through interview and questionnaire. The analysis technique is descriptive
qualitative analysis technique.
Results show that 69.56% of SMEs had done recording, but only 34.78% of them made
financial statements. Transactions recorded include sales transactions (69.57%), purchase
transactions (65.22%), cash inflows and cash outflows (91.30%), inventories (63.04%),
salary (56.52%), and other operational expenses (50.00%). Reports which were made by the
managers were sales reports (45.65%), purchase reports (30.43%), income statements
(52.17%), statement of owner's equity (17.39%), and balance sheet (28.26%).
The obstacles which hindered accounting application in SMEs were the education factor and
the lack of understanding about accounting and its importance. Therefore, it is better to
create a simple accounting information system for SMEs. The government should cooperate
with high education institutions to improve the comprehension of the SMEs about accounting
application in managing their business.
Key words:
1
Accounting, Small and Medium Enterprises (SMEs)
PREFACE
Small and Medium Enterprises (SMEs) has an important role in the economic development in
Indonesia. The global finance crisis in 1998 caused a lot of companies to shut down, and lead
to the dismissal of many employees. Although the crisis also hit SMEs, they could overcome
the pressure and survive up to this day. SMEs, in fact, provide job opportunities so significant
that the unemployment rate can be reduced. This is the point that stands out from SMEs
compared to big companies, because the bigger the company the bigger the risk it has to face
during the crisis.
By considering the importance of SMEs for Indonesian economy, it needs more serious
management. SMEs need comprehensive information to support their business management.
SMEs need qualified accounting information to support their decision making. Data from
“Economic Sector” 2000-2006 showed that more than 99% business units in Indonesia were
small scale business, and even, the majority of them were micro business (Karyawati, 2008).
SMEs need accounting to improve their business, because they ussually have great ideas, yet
do not know how to manage finance records, and to seek finance information they need
(Prasetyo, 2007). By practising accounting such as making finance report can help small
business to evaluate company's performance, so that they can get bank loan and make
business decisions (Tugiman, 1996). Warren, et all. (2005) stated that by doing accounting
process, information is produced for the sake of the interested parties to make decisions
regarding the company's activities and condition. Accounting information is needed to
formulate various decisions to solve problems faced by the company (Soemarso, 1992).
To small business, finance accounting information has an important role in recording and
reporting process related to transactions that happen, to discover the company's development,
its capital structure, and its profit in a certain period of time (Hidayat, 2004). Eventhough
accounting has an important role for SMEs, the application still has many weaknesses and
troubles. Besides, most small companies consentrate on every aspect of organization such as
production, marketing, and cooperation in new business, but forgeting important accounting
such as making finance report (Tunggal, 1997). This research aimed to analyse accounting
application on SMEs in Magelang, Central Java, Indonesia with obstacles they face.
LITERATURE REVIEW
Accounting
Warren, et all, (2005) defined accounting as information system that produces reports to the
interesting parties about economic activities and company's condition. Accounting serves as a
process to identify, measure, and communicate information to help the user make right
decision or judgment (American Accounting Association, 1996). Warren, et all, (2005) stated
that the objective of accounting is simply to produce information used by managers to run
company's operation. Accounting also gives information to the interesting parties about
economic performance and company's condition.
Accounting process is divided into four process, recording, grouping, reporting, and finance
data analyzing of an organization (Soemarso, 1992). Recording and grouping activities are
routine and repeated process whenever transaction occurs. While reporting and analyzing
activities can be done occasionally on sheduled times (Winata, et all, 1992). Reporting is
done by compiling finance reports based on available data from notes or books. Analyzing
the finance report is to rate or to analyze data in the finance report. From the analysis result
towards the finance data, we can find out company's ability to fulfill its obligations, its
property, and its ability in business.
Small business usually does a simple accounting, which is called bookkeeping. Bookkeeping
is a process of recording transactions in manual books such as notebooks, agenda, or even in
other papers. Accounting in small business serves as a tool to plan and to judge performance
for the company's internal affairs, while getting fund from finance organizations such as
banks for the company's external affairs (Karyawati, 2008).
Accounting in small scale business activities almost resemble to bookkeeping system, it is a
single book arrangement where only important notes have full records. In single book
arrangement, transactions in small or medium enterprises are recorded in logbooks, and
subsidiary books. Logbooks contain of cash receipts, cash disbursements, sales ledger, buying
ledger, and memorial ledger. Subsidiary ledger contain of account receivable subsidiary
ledger, account payable subsidiary ledger, and inventory subsidiary ledger. Those books are
replacement for account (ledger) in normal accounting (Tunggal, 1997).
Small or medium enterprises use three financial measurements which include statement of
cash flow, income statement, and balance sheet. Statement of cash flow describes the inflows
and the outflows of cash or cash equivalent (Iien, 2009). Income statement reports revenues
and expenses during a certain period of time. Balance sheet report the total assets, liabilities,
and owner's equity during a certain period of time (Warren, et all, 2005).
Small and Medium Enterprises
The definitions of small and medium enterprises according to Indonesian Regulation Number
20, 2008 about Micro, Small, and Medium Enterprises are:
a) Small enterprises is a productive economic activity which is private and owned by an
individual, or a business entity that is not a subsidiary or a branch of a company not
owned, ruled, or become, directly or indirectly, a part of medium or large business that
fulfills the criteria of small business as mentioned in this act.
b) Medium enterprises is a productive economic activity which is private and owned by an
individual, or a business entity that is not a subsidiary or a branch of a company not
owned, ruled, or become, directly or indirectly, a part of medium or large business with net
worth or amount of annual sales as provided in this act.
The criteria for small and medium enterprises according to the same act are:
a) Small Enterprises:
1. Net asset is more than IDR 50,000,000 to IDR 500,000,000, but land and building are
not included.
2. Annual sale is more than IDR 300,000,000 to IDR 2,500,000,000.
b) Medium Enterprises:
1. Net asset is more than IDR 500,000,000 to IDR 10,000,000,000, but land and building
are not included.
2. Annual sale is more than IDR 2,500,000,000 to 50,000,000,000.
RESEARCH METHOD
Population of this research was Small and Medium Enterprises in Magelang, Central Java,
Indonesia. The samplings used convenience sampling method by choosing SMEs according
to Indonesian Regulation number 20, 2008 as the samples and are willing to be interviewed
and given questionnaires. From 70 respondents chosen, 5 companies refused an interview and
questionnaires, 19 companies did not meet the criteria which stated in the regulation, and so,
there were 46 others left which will be researched furthermore. The sampling was based on
rules of the thumb mentioned by Roscoe, that is the adequate sample measurement ranges
from 30-500 (Supramono and Utami, 2003).
Data which was used in this research was primary data from interview and questionnaires
results which were given to the SMEs managers (owners or employees). The analysis
technique is descriptive qualitative analysis technique.
DATA ANALYSIS AND DISCUSSION
Description of the Research Objects
SMEs in Magelang consist of various businesses from service, trading, to manufacture
business. The amount of SMEs in Magelang is 9.736 companies (Biro Pusat Statistik,
modified data, 2008). This research took 46 companies as the samples. Most of SMEs
managers (80.43%) were the owners (See table 1).
Table 1. Business Managers
Number
Explanation
Amount of the
Respondent
Percentage
1
Run by owners
37
80.43%
2
Run by employees
9
19.57%
46
100%
Total
source: modified primary data, 2010
Most of SMEs managers were high school graduates (43.38%), some were mid-school
graduates or below (21.75%). Most of the companies had been established for 6-10 years.
This research observed the accounting application in recording and reporting of these SMEs.
Accounting Records
The result showed that not all of the managers kept records of their transactions. Only
58.70% managers had transaction documents and 41.30% of them did not have any (See table
2).
Table 2. Ownership of the Transaction Documents
Ownership of the Transaction Documents
Yes
No
Total
Respondents
Amount
Percentage
27
58.70%
19
41.30%
46
100%
source: modified primary data, 2010
The result which was related to transaction documents used by the managers is in table 3.
Most of the managers (43.48%) used sales notes as the transaction documents. In general,
these notes also served as receipts for the customers. They were also used as the basic for
calculating the cash amount from sales transactions.
Table 3. Transaction Documents being Used
Respondents
Amount
Percentage
20
43.48%
1
2.18%
6
13.04%
27
58.70%
Transaction Documents being Used
Sales notes
Purchase notes
Sales notes and purchase notes
Total
source: modified primary data, 2010
For business managers who keep records of their transactions, the results showed that most of
them (91.30%) recorded cash inflows and cash outflows (see table 4). Almost all managers
have recorded cash inflows and cash outflows, because managers simply assume that the
profit can be estimated from the difference between cash inflows and cash outflows. This is
possible since most of their transactions made in cash.
Table 4. Transaction Records
Respondents
Num
Recorded Transaction
Recorded
Not Recorded
Amount of the
Respondents
1
2
3
Sales
Purchases
Cash inflows
Amount
32
30
42
Percentage
69.57%
65.22%
91.30%
Amount
14
16
4
Percentage
30.43%
34.78%
8.70%
Total
46
46
46
Percentage
100%
100%
100%
4
5
Cash outflows
Inventories
42
29
91.30%
63.04%
4
17
8.70%
36.96%
46
46
100%
100%
6
7
Salary expenses
Other operational expenses
26
23
56.52%
50.00%
20
23
43.48%
50.00%
46
46
100%
100%
source: modified primary data, 2010
According to the types of the business (See table 5), all the manufacture companies made
records of their sales transactions. By knowing sales amount, it helped the managers to
estimate the amount of production for the next period. Meanwhile, most of trading and
service companies' managers made records of cash inflows and cash outflows. Besides the
fact that transactions were usually done in cash, the managers usually made the records based
on cash basis, and not accrual basis.
Table 5. Transaction Records According to Types of Business
Num
1
2
3
4
5
6
7
Manufacture
Companies
Recorded Transaction
Sales
Purchases
Cash inflows
Cash outflows
Inventories
Salary expenses
Other operational expenses
Total
Amount
4
3
3
3
3
3
3
4
Trading
Companies
Percentage
100%
75%
75%
75%
75%
75%
75%
100%
Amount
25
24
28
28
21
15
9
31
Sevice
Companies
Percentage
80.64%
77.42%
90.32%
90.32%
67.74%
48.39%
29.03%
100%
Amount
3
3
11
11
5
8
11
11
Percentage
27.27%
27.27%
100%
100%
45.45%
72.72%
100%
100%
source: modified primary data, 2010
All service companies managers also had to made records of operational expenses such as
electricity, water, and phone bills. The amount of these expenses helped them to set the price
for their service to the customers.
Periodicity of Transaction Recording
The result concerning periodicity of transaction recording showed that most of the managers
(50%) made records of sales and purchase transactions during the transactions (See table 6).
It was done because sales and purchase transactions connected directly to customers and
suppliers who needed records every time a transaction took place. Cash inflows and cash
outflows recording were usually done daily (52-54%). Inventories were also recorded daily
(39%) to know the amount of ending inventories by the end that day. By doing so, if the
inventories ran low, an immediate order will be done. Salary expenses and operational
expenses recording were usually done monthly (52%), because they were usually paid
monthly.
Table 6. Periodicity of Transaction Records
Respondents who recorded transactions
Sales
Periodicity
Purchases
Cash inflows
Cash outflows
Salary
Expenses
Inventories
Other
Operational
Expenses
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
Every
Transaction
23
50.00%
23
50.00%
17
36.95%
18
39.13%
2
4.35%
0
0
3
6.52%
Daily
9
19.57%
6
13.04%
25
54.35%
24
52.17%
18
39.13%
0
0
0
0
Weekly
0
0
1
2.18%
0
0
0
0
0
0
2
4.35%
1
2.18%
Monthly
0
0
0
0
0
0
0
0
9
19.57%
24
52.17%
19
41.30%
Total
respondents
who made
records
32
69.57%
30
65.22%
42
91.30%
42
91.30%
29
63.04%
26
56.52%
23
50.00%
source: modified primary data, 2010
Recording Technique
Most of the managers (76.09%) still used manual method to make records, because they were
used to it. Besides, small scale businesses were not so complex that a computerized records
system was not necessarily needed (See table 7).
Table 7. Technology of Recording
Num
1
2
Explanation
Computerized
Manual
Total
Amount of
Respondents
Percentage
11
35
46
23.91%
76.09%
100%
source: modified primary data, 2010
Accounting Reports
Managers compiled their reports which were usually related to the records. 52.17% managers
made income statement which showed total revenues and expenses for one period of time,
28.26% managers made the balance sheet and 17.39% of them made statement of owner's
equity (See table 8). Besides financial statement, manufacture and trading companies also
made sales report (45.65%) and purchase report (30.43%). Both reports were usually used for
daily business management needs.
Table 8. Reports
Reports
Income statement
Statement of owner's equity
Balance sheet
Sales report
Purchase report
Make Reports
Amount Percentage
24
52.17%
8
17.39%
13
28.26%
21
45.65%
14
30.43%
Not Make Reports
Amount
Percentage
22
47.83%
38
82.61%
33
71.74%
25
54.35%
32
69.57%
Amount of
Respondents
Total
Percentage
46
100%
46
100%
46
100%
46
100%
46
100%
source: modified primary data, 2010
Periodicity of Reports
Based on the research result, periodicity of income statement, statement of owner's equity,
and balance sheet was usually done monthly (See table 9). Meanwhile, sales and purchase
report were usually done every day.
Table 9. Periodicity of Reports
Reports
Periodicity
Income
Statement
Statement of
Owner's Equity
Balance Sheet
Sales Report
Purchase Report
amount
%
amount
%
amount
%
amount
%
amount
%
Daily
Weekly
Monthly
0
0
24
0
0
52.17%
0
0
8
0
0
17.39%
0
0
13
0
0
28.26%
19
0
2
41.30%
0
4.35%
11
0
3
23.91%
0
6.52%
Total
respondents who
make reports
24
52.17%
8
17.39%
13
28.26%
21
45.65%
14
30.43%
source: modified primary data, 2010
The Objective of Reports
Most managers (89.13%) made reports for internal management needs, that was for daily
business management. Only 4.35% managers made records and at the same time, applied for
bank loan and paid taxes, in addition to internal management needs (See table 10).
Table 10. The Objectives of Reports
Objectives
Management
Bank loans
Taxes
Management and bank loans
Management and taxes
Management, bank loans, and taxes
Total
Respondents
Amount
Percentage
41
89.13%
0
0
0
0
3
6.52%
0
0
2
4.35%
46
100%
source: modified primary data, 2010
Obstacles
A person's education is very influential on their understanding about something, including
their understanding of accounting. SMEs managers need to have an adequate knowledge
about accounting, so that they can apply it in their business. Most of the managers'
background were high school graduates (43.48%) and some were mid-school graduates or
below (21.75%). In Indonesia, accounting is not taught in all high schools. Only high schools
which have economic as their major, put accounting in their curriculum. Besides, accounting
is not in mid-schools' curriculum. Therefore, it is not uncommon to see that many SMEs
managers do not apply accounting in their business. Even perhaps, it is not crossed their
minds to apply it because they do not understand accounting.
Besides the education level, the involvement in accounting trainings and workshops also
influences the accounting application in a business. Outside the formal education system, one
can learn accounting from trainings and workshops. The fact from the research indicated that
most managers (84.78%) had never been in accounting trainings, so that their understanding
about the function of accounting was still low.
The research result showed that most SMEs managers felt that they did not need accounting
training (84.78%). They thought that it was enough to them to manage the business in their
own fashion. Derived from their own experiences that the companies still ran well without an
adequate accounting system, they came to a conclusion that they did not need it anyway.
Most SMEs were run by the owners (80.43%), thus they could control the business directly,
although they did not apply accounting in their business management.
CLOSING
Conclusion
From the research result, it can be concluded that 69.56% of SMEs had done recording, but
only 34.78% of them made financial statements. Records which were made included sales
transactions (69.57%), purchase transactions (65.22%), cash inflows and cash outflows
(91.30%), inventories (63.04%), salary (56.52%), and other operational expenses (50.00%).
Meanwhile, reports which were made by the managers were sales reports (45.65%), purchase
reports (30.43%), income statements (52.17%), statement of owner's equity (17.39%), and
balance sheet (28.26%).
The obstacles which hindered accounting application in SMEs were the education factor, and
the lack of understanding about accounting and its importance.
Suggestion
The research suggests, it is better to create a simple accounting information system for SMEs,
it is a single book where transactions are recorded in subsidiary books, contain of sales
subsidiary book, purchases subsidiary book, cash inflows and cash outflows subsidiary book,
inventories subsidiary book, salary expenses and other operational expenses subsidiary book.
Based on these subsidiary books SMEs can create simple reports that used for daily business
management needs.
The government should cooperate with high education institutions to improve the knowledge,
understanding, and the awareness of the SMEs managers about accounting application in
managing their business. By applying accounting in their business, it is hoped that it will
improve the decision making quality, help the business management, and facilitate SMEs to
get fund source from the third party to expand their business. It is hoped also that accounting
will improve the SMEs performance in Indonesian economics.
Research limitation
This research limitation was in the data accuracy. Most respondents were reluctant to reveal
their real turnover and assets. The other limitation was that the respondents did not allow the
researcher to do survey and held some data which was needed by the researcher.
REFERENCES
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Laporan Keuangan. Wissen-Sistem Consulting.
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Tugiman, Hiro. (1996). Akuntansi untuk Badan Usaha Koperasi. Kanisisus, Jakarta.
Tunggal, Amin Widjaja. (1997). Akuntansi Untuk Perusahaan Kecil dan Menengah. PT
Rineka Cipta, Jakarta.
Indonesian Regulation Number 20 (2008) about Micro, Small, and Medium Enterprises
(Undang-Undang Republik Indonesia No. 20 Tahun 2008 Tentang Usaha Mikro Kecil
Menengah).
Warren, Carl S., Reeve, James M., & Fess, Philip E. (2005). Accounting. 21st edition. South
Western.
Winata, Lanita, et all. (1992). Pengantar Akuntansi 1. PT Gramedia Pustaka Utama, Jakarta.
Elisabeth Penti Kurniawati
Findi Esa Putri Hermawan
Faculty of Economics and Business
Satya Wacana Christian University
Diponegoro Street No 52-60 Salatiga, 50711
Central Java, Indonesia
Phone 62 298 321212
Fax 62 298 311881
bet@staff.uksw.edu
fiendy_eza@yahoo.com
ABSTRACT
Small and Medium Enterprises (SMEs) have important role in the development of Indonesian
economics. In general, SMEs face many weaknesses in accounting implementation caused by
several factors. This research aimed to analyse accounting application on SMEs in
Magelang, Central Java, Indonesia with obstacles they face.
Data taken in this research were from 46 SMEs using convenience sampling method. Data
were gathered through interview and questionnaire. The analysis technique is descriptive
qualitative analysis technique.
Results show that 69.56% of SMEs had done recording, but only 34.78% of them made
financial statements. Transactions recorded include sales transactions (69.57%), purchase
transactions (65.22%), cash inflows and cash outflows (91.30%), inventories (63.04%),
salary (56.52%), and other operational expenses (50.00%). Reports which were made by the
managers were sales reports (45.65%), purchase reports (30.43%), income statements
(52.17%), statement of owner's equity (17.39%), and balance sheet (28.26%).
The obstacles which hindered accounting application in SMEs were the education factor and
the lack of understanding about accounting and its importance. Therefore, it is better to
create a simple accounting information system for SMEs. The government should cooperate
with high education institutions to improve the comprehension of the SMEs about accounting
application in managing their business.
Key words:
1
Accounting, Small and Medium Enterprises (SMEs)
PREFACE
Small and Medium Enterprises (SMEs) has an important role in the economic development in
Indonesia. The global finance crisis in 1998 caused a lot of companies to shut down, and lead
to the dismissal of many employees. Although the crisis also hit SMEs, they could overcome
the pressure and survive up to this day. SMEs, in fact, provide job opportunities so significant
that the unemployment rate can be reduced. This is the point that stands out from SMEs
compared to big companies, because the bigger the company the bigger the risk it has to face
during the crisis.
By considering the importance of SMEs for Indonesian economy, it needs more serious
management. SMEs need comprehensive information to support their business management.
SMEs need qualified accounting information to support their decision making. Data from
“Economic Sector” 2000-2006 showed that more than 99% business units in Indonesia were
small scale business, and even, the majority of them were micro business (Karyawati, 2008).
SMEs need accounting to improve their business, because they ussually have great ideas, yet
do not know how to manage finance records, and to seek finance information they need
(Prasetyo, 2007). By practising accounting such as making finance report can help small
business to evaluate company's performance, so that they can get bank loan and make
business decisions (Tugiman, 1996). Warren, et all. (2005) stated that by doing accounting
process, information is produced for the sake of the interested parties to make decisions
regarding the company's activities and condition. Accounting information is needed to
formulate various decisions to solve problems faced by the company (Soemarso, 1992).
To small business, finance accounting information has an important role in recording and
reporting process related to transactions that happen, to discover the company's development,
its capital structure, and its profit in a certain period of time (Hidayat, 2004). Eventhough
accounting has an important role for SMEs, the application still has many weaknesses and
troubles. Besides, most small companies consentrate on every aspect of organization such as
production, marketing, and cooperation in new business, but forgeting important accounting
such as making finance report (Tunggal, 1997). This research aimed to analyse accounting
application on SMEs in Magelang, Central Java, Indonesia with obstacles they face.
LITERATURE REVIEW
Accounting
Warren, et all, (2005) defined accounting as information system that produces reports to the
interesting parties about economic activities and company's condition. Accounting serves as a
process to identify, measure, and communicate information to help the user make right
decision or judgment (American Accounting Association, 1996). Warren, et all, (2005) stated
that the objective of accounting is simply to produce information used by managers to run
company's operation. Accounting also gives information to the interesting parties about
economic performance and company's condition.
Accounting process is divided into four process, recording, grouping, reporting, and finance
data analyzing of an organization (Soemarso, 1992). Recording and grouping activities are
routine and repeated process whenever transaction occurs. While reporting and analyzing
activities can be done occasionally on sheduled times (Winata, et all, 1992). Reporting is
done by compiling finance reports based on available data from notes or books. Analyzing
the finance report is to rate or to analyze data in the finance report. From the analysis result
towards the finance data, we can find out company's ability to fulfill its obligations, its
property, and its ability in business.
Small business usually does a simple accounting, which is called bookkeeping. Bookkeeping
is a process of recording transactions in manual books such as notebooks, agenda, or even in
other papers. Accounting in small business serves as a tool to plan and to judge performance
for the company's internal affairs, while getting fund from finance organizations such as
banks for the company's external affairs (Karyawati, 2008).
Accounting in small scale business activities almost resemble to bookkeeping system, it is a
single book arrangement where only important notes have full records. In single book
arrangement, transactions in small or medium enterprises are recorded in logbooks, and
subsidiary books. Logbooks contain of cash receipts, cash disbursements, sales ledger, buying
ledger, and memorial ledger. Subsidiary ledger contain of account receivable subsidiary
ledger, account payable subsidiary ledger, and inventory subsidiary ledger. Those books are
replacement for account (ledger) in normal accounting (Tunggal, 1997).
Small or medium enterprises use three financial measurements which include statement of
cash flow, income statement, and balance sheet. Statement of cash flow describes the inflows
and the outflows of cash or cash equivalent (Iien, 2009). Income statement reports revenues
and expenses during a certain period of time. Balance sheet report the total assets, liabilities,
and owner's equity during a certain period of time (Warren, et all, 2005).
Small and Medium Enterprises
The definitions of small and medium enterprises according to Indonesian Regulation Number
20, 2008 about Micro, Small, and Medium Enterprises are:
a) Small enterprises is a productive economic activity which is private and owned by an
individual, or a business entity that is not a subsidiary or a branch of a company not
owned, ruled, or become, directly or indirectly, a part of medium or large business that
fulfills the criteria of small business as mentioned in this act.
b) Medium enterprises is a productive economic activity which is private and owned by an
individual, or a business entity that is not a subsidiary or a branch of a company not
owned, ruled, or become, directly or indirectly, a part of medium or large business with net
worth or amount of annual sales as provided in this act.
The criteria for small and medium enterprises according to the same act are:
a) Small Enterprises:
1. Net asset is more than IDR 50,000,000 to IDR 500,000,000, but land and building are
not included.
2. Annual sale is more than IDR 300,000,000 to IDR 2,500,000,000.
b) Medium Enterprises:
1. Net asset is more than IDR 500,000,000 to IDR 10,000,000,000, but land and building
are not included.
2. Annual sale is more than IDR 2,500,000,000 to 50,000,000,000.
RESEARCH METHOD
Population of this research was Small and Medium Enterprises in Magelang, Central Java,
Indonesia. The samplings used convenience sampling method by choosing SMEs according
to Indonesian Regulation number 20, 2008 as the samples and are willing to be interviewed
and given questionnaires. From 70 respondents chosen, 5 companies refused an interview and
questionnaires, 19 companies did not meet the criteria which stated in the regulation, and so,
there were 46 others left which will be researched furthermore. The sampling was based on
rules of the thumb mentioned by Roscoe, that is the adequate sample measurement ranges
from 30-500 (Supramono and Utami, 2003).
Data which was used in this research was primary data from interview and questionnaires
results which were given to the SMEs managers (owners or employees). The analysis
technique is descriptive qualitative analysis technique.
DATA ANALYSIS AND DISCUSSION
Description of the Research Objects
SMEs in Magelang consist of various businesses from service, trading, to manufacture
business. The amount of SMEs in Magelang is 9.736 companies (Biro Pusat Statistik,
modified data, 2008). This research took 46 companies as the samples. Most of SMEs
managers (80.43%) were the owners (See table 1).
Table 1. Business Managers
Number
Explanation
Amount of the
Respondent
Percentage
1
Run by owners
37
80.43%
2
Run by employees
9
19.57%
46
100%
Total
source: modified primary data, 2010
Most of SMEs managers were high school graduates (43.38%), some were mid-school
graduates or below (21.75%). Most of the companies had been established for 6-10 years.
This research observed the accounting application in recording and reporting of these SMEs.
Accounting Records
The result showed that not all of the managers kept records of their transactions. Only
58.70% managers had transaction documents and 41.30% of them did not have any (See table
2).
Table 2. Ownership of the Transaction Documents
Ownership of the Transaction Documents
Yes
No
Total
Respondents
Amount
Percentage
27
58.70%
19
41.30%
46
100%
source: modified primary data, 2010
The result which was related to transaction documents used by the managers is in table 3.
Most of the managers (43.48%) used sales notes as the transaction documents. In general,
these notes also served as receipts for the customers. They were also used as the basic for
calculating the cash amount from sales transactions.
Table 3. Transaction Documents being Used
Respondents
Amount
Percentage
20
43.48%
1
2.18%
6
13.04%
27
58.70%
Transaction Documents being Used
Sales notes
Purchase notes
Sales notes and purchase notes
Total
source: modified primary data, 2010
For business managers who keep records of their transactions, the results showed that most of
them (91.30%) recorded cash inflows and cash outflows (see table 4). Almost all managers
have recorded cash inflows and cash outflows, because managers simply assume that the
profit can be estimated from the difference between cash inflows and cash outflows. This is
possible since most of their transactions made in cash.
Table 4. Transaction Records
Respondents
Num
Recorded Transaction
Recorded
Not Recorded
Amount of the
Respondents
1
2
3
Sales
Purchases
Cash inflows
Amount
32
30
42
Percentage
69.57%
65.22%
91.30%
Amount
14
16
4
Percentage
30.43%
34.78%
8.70%
Total
46
46
46
Percentage
100%
100%
100%
4
5
Cash outflows
Inventories
42
29
91.30%
63.04%
4
17
8.70%
36.96%
46
46
100%
100%
6
7
Salary expenses
Other operational expenses
26
23
56.52%
50.00%
20
23
43.48%
50.00%
46
46
100%
100%
source: modified primary data, 2010
According to the types of the business (See table 5), all the manufacture companies made
records of their sales transactions. By knowing sales amount, it helped the managers to
estimate the amount of production for the next period. Meanwhile, most of trading and
service companies' managers made records of cash inflows and cash outflows. Besides the
fact that transactions were usually done in cash, the managers usually made the records based
on cash basis, and not accrual basis.
Table 5. Transaction Records According to Types of Business
Num
1
2
3
4
5
6
7
Manufacture
Companies
Recorded Transaction
Sales
Purchases
Cash inflows
Cash outflows
Inventories
Salary expenses
Other operational expenses
Total
Amount
4
3
3
3
3
3
3
4
Trading
Companies
Percentage
100%
75%
75%
75%
75%
75%
75%
100%
Amount
25
24
28
28
21
15
9
31
Sevice
Companies
Percentage
80.64%
77.42%
90.32%
90.32%
67.74%
48.39%
29.03%
100%
Amount
3
3
11
11
5
8
11
11
Percentage
27.27%
27.27%
100%
100%
45.45%
72.72%
100%
100%
source: modified primary data, 2010
All service companies managers also had to made records of operational expenses such as
electricity, water, and phone bills. The amount of these expenses helped them to set the price
for their service to the customers.
Periodicity of Transaction Recording
The result concerning periodicity of transaction recording showed that most of the managers
(50%) made records of sales and purchase transactions during the transactions (See table 6).
It was done because sales and purchase transactions connected directly to customers and
suppliers who needed records every time a transaction took place. Cash inflows and cash
outflows recording were usually done daily (52-54%). Inventories were also recorded daily
(39%) to know the amount of ending inventories by the end that day. By doing so, if the
inventories ran low, an immediate order will be done. Salary expenses and operational
expenses recording were usually done monthly (52%), because they were usually paid
monthly.
Table 6. Periodicity of Transaction Records
Respondents who recorded transactions
Sales
Periodicity
Purchases
Cash inflows
Cash outflows
Salary
Expenses
Inventories
Other
Operational
Expenses
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
amo
unt
%
Every
Transaction
23
50.00%
23
50.00%
17
36.95%
18
39.13%
2
4.35%
0
0
3
6.52%
Daily
9
19.57%
6
13.04%
25
54.35%
24
52.17%
18
39.13%
0
0
0
0
Weekly
0
0
1
2.18%
0
0
0
0
0
0
2
4.35%
1
2.18%
Monthly
0
0
0
0
0
0
0
0
9
19.57%
24
52.17%
19
41.30%
Total
respondents
who made
records
32
69.57%
30
65.22%
42
91.30%
42
91.30%
29
63.04%
26
56.52%
23
50.00%
source: modified primary data, 2010
Recording Technique
Most of the managers (76.09%) still used manual method to make records, because they were
used to it. Besides, small scale businesses were not so complex that a computerized records
system was not necessarily needed (See table 7).
Table 7. Technology of Recording
Num
1
2
Explanation
Computerized
Manual
Total
Amount of
Respondents
Percentage
11
35
46
23.91%
76.09%
100%
source: modified primary data, 2010
Accounting Reports
Managers compiled their reports which were usually related to the records. 52.17% managers
made income statement which showed total revenues and expenses for one period of time,
28.26% managers made the balance sheet and 17.39% of them made statement of owner's
equity (See table 8). Besides financial statement, manufacture and trading companies also
made sales report (45.65%) and purchase report (30.43%). Both reports were usually used for
daily business management needs.
Table 8. Reports
Reports
Income statement
Statement of owner's equity
Balance sheet
Sales report
Purchase report
Make Reports
Amount Percentage
24
52.17%
8
17.39%
13
28.26%
21
45.65%
14
30.43%
Not Make Reports
Amount
Percentage
22
47.83%
38
82.61%
33
71.74%
25
54.35%
32
69.57%
Amount of
Respondents
Total
Percentage
46
100%
46
100%
46
100%
46
100%
46
100%
source: modified primary data, 2010
Periodicity of Reports
Based on the research result, periodicity of income statement, statement of owner's equity,
and balance sheet was usually done monthly (See table 9). Meanwhile, sales and purchase
report were usually done every day.
Table 9. Periodicity of Reports
Reports
Periodicity
Income
Statement
Statement of
Owner's Equity
Balance Sheet
Sales Report
Purchase Report
amount
%
amount
%
amount
%
amount
%
amount
%
Daily
Weekly
Monthly
0
0
24
0
0
52.17%
0
0
8
0
0
17.39%
0
0
13
0
0
28.26%
19
0
2
41.30%
0
4.35%
11
0
3
23.91%
0
6.52%
Total
respondents who
make reports
24
52.17%
8
17.39%
13
28.26%
21
45.65%
14
30.43%
source: modified primary data, 2010
The Objective of Reports
Most managers (89.13%) made reports for internal management needs, that was for daily
business management. Only 4.35% managers made records and at the same time, applied for
bank loan and paid taxes, in addition to internal management needs (See table 10).
Table 10. The Objectives of Reports
Objectives
Management
Bank loans
Taxes
Management and bank loans
Management and taxes
Management, bank loans, and taxes
Total
Respondents
Amount
Percentage
41
89.13%
0
0
0
0
3
6.52%
0
0
2
4.35%
46
100%
source: modified primary data, 2010
Obstacles
A person's education is very influential on their understanding about something, including
their understanding of accounting. SMEs managers need to have an adequate knowledge
about accounting, so that they can apply it in their business. Most of the managers'
background were high school graduates (43.48%) and some were mid-school graduates or
below (21.75%). In Indonesia, accounting is not taught in all high schools. Only high schools
which have economic as their major, put accounting in their curriculum. Besides, accounting
is not in mid-schools' curriculum. Therefore, it is not uncommon to see that many SMEs
managers do not apply accounting in their business. Even perhaps, it is not crossed their
minds to apply it because they do not understand accounting.
Besides the education level, the involvement in accounting trainings and workshops also
influences the accounting application in a business. Outside the formal education system, one
can learn accounting from trainings and workshops. The fact from the research indicated that
most managers (84.78%) had never been in accounting trainings, so that their understanding
about the function of accounting was still low.
The research result showed that most SMEs managers felt that they did not need accounting
training (84.78%). They thought that it was enough to them to manage the business in their
own fashion. Derived from their own experiences that the companies still ran well without an
adequate accounting system, they came to a conclusion that they did not need it anyway.
Most SMEs were run by the owners (80.43%), thus they could control the business directly,
although they did not apply accounting in their business management.
CLOSING
Conclusion
From the research result, it can be concluded that 69.56% of SMEs had done recording, but
only 34.78% of them made financial statements. Records which were made included sales
transactions (69.57%), purchase transactions (65.22%), cash inflows and cash outflows
(91.30%), inventories (63.04%), salary (56.52%), and other operational expenses (50.00%).
Meanwhile, reports which were made by the managers were sales reports (45.65%), purchase
reports (30.43%), income statements (52.17%), statement of owner's equity (17.39%), and
balance sheet (28.26%).
The obstacles which hindered accounting application in SMEs were the education factor, and
the lack of understanding about accounting and its importance.
Suggestion
The research suggests, it is better to create a simple accounting information system for SMEs,
it is a single book where transactions are recorded in subsidiary books, contain of sales
subsidiary book, purchases subsidiary book, cash inflows and cash outflows subsidiary book,
inventories subsidiary book, salary expenses and other operational expenses subsidiary book.
Based on these subsidiary books SMEs can create simple reports that used for daily business
management needs.
The government should cooperate with high education institutions to improve the knowledge,
understanding, and the awareness of the SMEs managers about accounting application in
managing their business. By applying accounting in their business, it is hoped that it will
improve the decision making quality, help the business management, and facilitate SMEs to
get fund source from the third party to expand their business. It is hoped also that accounting
will improve the SMEs performance in Indonesian economics.
Research limitation
This research limitation was in the data accuracy. Most respondents were reluctant to reveal
their real turnover and assets. The other limitation was that the respondents did not allow the
researcher to do survey and held some data which was needed by the researcher.
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