ACCOUNTING PRACTICES OF SMALL AND MEDIUM SIZED ENTERPRISES AND ITS EFFECT ON ACCESS TO FINANCE IN WOLKITE

Abstract

This study seeks to examine the accounting practice of small and medium sized enterprises and its effect on access to finance in Wolkite. It identifies the sector as the key to unlocking the economic potentials of the country. However, the sector is constrained by a number of factors which include among others minimum or poor accounting practice and difficulty in accessing credit facilities. For the achievement of the objective of the study quantitative research approach particularly survey design were used and the data obtained were analyzed using descriptive statistics. The study revealed that the majority of the studied firm has no formal accounting practice. The study also revealed that the major sources of finance available for the establishment and expansion of SMEs in Wolkite are personal saving, microfinance, money from friends or relative, Iqub and less from banks. The problems significantly associated with access to bank credits are the demand for collateral, accounting practice or formal accounting information and age of the firm