Relationship of Accounting Practices on Financial Performance in MSME’s

Abstract

This study examines how accounting methods relate to financial performance and profitability, this study looked at Micro, Small, and Medium-Sized Enterprises (MSMEs) in Navotas City. The study specifically evaluated MSMEs' accounting procedures in terms of management accounting, financial reporting, and financial auditing and examined how these practices affected their financial performance. A structured questionnaire was used to gather data from thirty-eight (38) registered MSMEs as part of a descriptive-correlational study design. The data was analyzed using regression analysis, descriptive statistics, and Pearson correlation. The results showed that small firms largely involved in retail/trading and service-oriented operations make up the majority of MSMEs. With all indicators evaluated as Agree, the results demonstrated that MSMEs typically implement accounting procedures linked to management accounting, financial reporting, and financial auditing. Strong and statistically significant correlations between accounting methods and profitability were found through correlation analysis. Regression study also showed that accounting procedures significantly improve MSMEs' financial performance, which accounts for a sizable amount of the variance in financial performance. Effective accounting procedures are essential for improving the financial performance and profitability of MSMEs in Navotas City, according to the study's findings. Better financial control and well-informed decision-making are facilitated by appropriate financial reporting, frequent audits, and the utilization of management accounting data. In order to improve MSMEs' accounting practices and understanding, the report suggests that government organizations and business support organizations offer training programs and that MSME owners fortify their accounting systems.