Assessing Financial Reporting Practices of Small Retailers: A Malaysian Evidence

Abstract

The growth of small retailers in Malaysia has increased substantially over the years. Such growth can contribute to a significant portion of the government’s income via tax revenue that can reduce if they do not practice financial reporting. This study examines the financial reporting practices of the small retailers in Malaysia. Specifically, this study examines whether the small retailers prepare financial statements, whether they keep accounting records and their motivation for doing so and the reasons for not keeping accounting records. Using a questionnaire survey on 150 small retailers, this study shows that the financial reporting practices among the small retailers are satisfactory. This study shows that the important motivations for them to practice financial reporting are performance evaluation and income distribution. In addition, time consuming and difficulty in maintaining system are the two main reasons for their failure in preparing financial reports. However, this study shows that sales generated by the small retailers are an important predictor to them practicing financial reporting. This study suggests the provision of financial reporting awareness and training programs to the small retailers so that they can appreciate the importance of financial reporting, and inculcate such practice in their business. The findings in this study can assist the interested parties particularly the Inland Revenue Board in understanding the challenges faced by the small retailers in practicing accountability to the government.