Perception of Accounting Practices in less developed countries

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Small and Medium Enterprises (SMEs) dominate the economic activities in Cambodia while this country is eager to achieve the higher economic growth rate in order to reduce poverty. Increasingly, SMEs make up approximately 99 percent of all enterprises and absorb almost half of employment.

By carrying out a survey based method, this research will present and analyze some issues related to the accounting practices in SMEs in Cambodia. It will also find out what kinds of accounting information do SMEs consider useful, and what do they actually use.

The regulations are the main drives why SMEs prepare financial statement and financial information. Moreover, there are some SMEs called "Non-preparers" who prepare nothing, not even Balance Sheet and Income Statement. This is because of their business size, or they are in the business sectors such as handicraft, repairing service, tourism service and so on which do not require doing so. Taking care their customers, and predicting their sale activities are actually the major reasons why their businesses still operate and run successfully.

I. INTRODUCTION

The primary goal of Cambodian government is to reduce the incidence of poverty. In the fight against poverty, the government recognizes that Small and medium Enterprises (SMEs) play a significant role in promoting economic development and creating sustainable employment and incomes. That is why the SME Development Framework has been developed to improve and coordinate the government's efforts in promoting SME activity in a market economy. It also incorporates and elaborates the Government's key SME policies including that set out in the July 2004 'rectangular strategy' (Building Peace, Stability and security; international and regional integration; and economic promotion and social development).

Because of their importance in economic growth and poverty reduction, the Royal Government of Cambodia has emphasized the important role SMEs play through various policy documents including the Second Socio-Economic Development Plan and National Poverty Reduction Strategy. The Government's 'Rectangular Strategy' also emphasizes the importance of the SMEs and sets out 13 SME development policies for strengthening the SME sector. Through these strategies the Government has made it clear that SMEs will be a major emphasis of economic development polices for many years to come.

Countries often use specific definitions of SMEs for administrative or legal purposes. Those definitions are based on the dimension of enterprises. All enterprises below a certain threshold are usually considered SMEs. In some countries, these thresholds can vary in different contexts (i.e. for accessing to special credit lines, for reporting on fiscal and other administrative obligations, etc.) and can be expressed in terms of number of employees, fixed assets value, total assets value, paid-up and registered capital, annual sales, value of production, equity capital or some other measure.

Cambodia does not yet have a legal definition of what constitutes an SME. SMEs have been variously defined in terms of either value of fixed assets excluding land, size of employment or a combination of the two. While some statistical data has been collected for SMEs, there is generally a lack of accurate information available. The limited statistical data, compounded by the lack of a definition for SMEs, has led to uncertainty and confusion as to what is an SME.

However, according to Ministry of Industry, Mine and Energy, one workable definition could be based on employment and the other on size of capital in real terms. SMEs in Cambodia are divided into three sectors, Production sector including agricultural processing, manufacturing, and mining, Service sector, and Trading sector including wholesale and retail. That definition can be summarized as in the below table;

In Cambodia, 99% of the number of firms and 45% of employment are dominated by the Small and Medium Enterprise (SME) sector in Cambodia's economy. They are playing various and critical roles not only in enhancing regional development, but also boosting free market economy.

To summarize, the important roles of SMEs are as follow:

Generate employment opportunities, raise income levels and living standards specially in the regions, reduction poverty

Create an entrepreneur class, which is so necessary for industrial development.

Increase raw material supplies, especially to manufactured exports, which boost economic growth.

Create self-employment, which would enable people to live and work with dignity.

Given that the economy is dominated by SMEs, the future development strategy of the country must take into account the SME sector so that its rapid growth will result in increased productive employment and reductions in poverty. A key factor in strengthening the SME sector is to reduce the cost of doing business. Cambodia is facing tough competition from neighboring countries, which have lower cost business environments as a result of better infrastructure, a better trained labor force and lower costs related to bureaucratic red tape. As Cambodia becomes more integrated with international markets through its membership in the World Trade Organization, it will be vital for SMEs to become more competitive and to better integrate into both national and international markets.

This research will then present and analyze some issues related to accounting information, especially and only for financial and management accounting practices in SMEs in Cambodia. Survey based method will be used in conducting this research study. It will find out what kinds of accounting and financial information do SMEs in Cambodia consider useful, and what do they actually use.

One motivation for this research study is to understand the concepts and practices of financial and management accounting in SMEs in order to integrate and adapt them to design a suitable approach for the existing SMEs.

Therefore, the main objectives for this research study are as follows:

To survey what kinds of accounting and financial information do SMEs in Cambodia consider as useful

To survey what kinds of accounting and financial information do SMEs in Cambodia use

To survey the financial and management accounting practices used in SMEs in Cambodia.

II. LITERATURE REVIEW

Businesses are created with a view toward financial success. Due to lack of necessary planning and know-how, many fail to survive their first year. Perhaps the most important element of success is the ability to plan an change plans with conditions (Wiersema, 2005)

2.1 Accounting and its Information

Accounting is a systematic process of measuring the economic activity of a business to provide useful information to those who make economic decisions. In addition, accounting information systems provides the means of collecting, organizing, and summarizing the economic transactions data which is then transformed into accounting information by accounting judgments, practices and application of rules (kotchetova, 2003).

Figure 2.1 presents a model of accounting process. In order to be efficient and competitive, SMEs must realize the need of sound accounting practices in managing their business activities and in making quicker and better decision. Whatever financial support is provided to the development of SMEs, the awareness of the entrepreneurs and support of skill human resources would be inevitable for their success.

Financial Accounting

Financial Accounting is the face your business shows the outside world, through the financial statements that are prepared for banks, stockholders, investors, and government agencies. These financial statements are basically historical records that cover a particular time period, including balance sheet, income statement, statement of cash flow, and statement of shareholders' equity (Webster, 2004). Moreover, financial accounting information is the product of corporate accounting and external reporting systems that measure and publicly disclose audited, quantitative data concerning the financial position and performance of publicly held firms (Bushman et al., 2001).

According to Yu-Lee (2005), there are three problems the typical manager often runs into when trying to reduce costs, increase cash flow, improve margins, or save money: (1) the relationship between cost reduction and cash flow is not as it should be; (2) techniques used to calculate the improvement are often flawed; (3) the rhetoric used is ambiguous.

The most widely used set of accounting principles is referred to as generally accepted accounting principles (GAAP). GAAP is currently set by the Financial Accounting Standards Board (FASB). In statement of Financial Accounting Concepts No. 1: Objectives of Financial Reporting by Business Enterprises (SFAC1) [1978], the Financial Accounting Standards Board (FASB) maintains that the function of financial accounting is to generate information useful to a group of users (investors and creditors) for decision-making (Salvary, 2003).

International Accounting Standards are the most effective tool for harmonization with global accounting practice and principle. The Standards guide the business in transaction recording and representation to view its realities and ultimately the result of the operation of the business (Hussain, 2003). The main objectives of the accounting standards are to have high quality, transparency, comparable and understandable information in financial statements and to promote their world wide acceptance and harmonization in the field of accounting (Hussain, 2003). International Accounting Standard Committee (IASC) issues International Accounting Standards (IASs), most recently replaced by International Financial Reporting Standards (IFRSs), which are implemented by the countries and enterprises for their accounting system. IASB (2004) recognizes that in most countries, many or even all entities have a legal obligation to prepare financial statements that conform to a required set of accounting principles that are generally accepted in that country (national GAAP).

Across the EU and in many other countries, from 2005 all quoted companies will use International Financial Reporting Standards (IFRS) and such change from national accounting rules to international accounting rules will allow better comparison of companies' results across different countries (O'Brien, 2003).

However, adopting International Accounting Standards (IAS) does not in itself ensure high transparency. Because it is cheap for countries such as Cambodia with low-transparency incentives to adopt the IAS label, high-transparency countries might be hesitant to identify their standards with IAS (Ball et al., 2000).

In Cambodia, the financial statements have to be prepared, by state-owned enterprises and private companies, in accordance with Cambodian Accounting Standards (CAS) issued by National Accounting Council (NAC). NAC had issued fifteen CAS and ten Cambodian Standards on Auditing (CSA). In accordance with the CAS-1, as developed from IAS-1 [paragraph 7 of IAS 1 (IASB, 2002)], a complete set of financial statements includes the following components:

Balance sheet;

Income statement;

A statement showing either (i) all changes in equity; or (ii) changes in equity other than those arising from capital transactions with owners and distributions to owners;

Cash flow statement; and

Accounting policies and explanatory notes.

2.3 Management Accounting

Management accounting is the practice of identifying, collecting, sorting, estimating, and analyzing cost, performance, and other information to make timely decisions and to plan and control the future through budgets, forecasts, and estimates (Webster, 2004).

Drury and Tayles (1995) concluded the issues derived from the other surveys that the same rules and procedures established for external reporting (financial accounting) are likely also to be applied to internal reporting (management accounting) even some rules, referred to theory, are inappropriate for management accounting. Though external and internal reporting tend to employ the same rules, it does not mean that management accounting is subservient to financial accounting. The reason that most companies adopt the identical practices for both reporting systems is because firms prefer their internal profit to report consistently with external financial accounting requirements so that they will be comparable with outsiders' assessments of overall company performance. In the other words, companies would like to be ensured that internal accounting systems do not have any conflicts with external financial accounting requirements.

In order to understand more in-depth management accounting, its objectives had been highlighted here (Amat et al.):

Compliance: some countries have explicit national cost accounting regulations or requirements. Compliance with tax rules or price controls can also have an impact on management accounting.

Bonus Schemes: both the extent to which management accounting information is employed and the ways in which it is used, for salary and bonus decisions vary between countries.

Ideology: Bromwich and Wang (1991), discussing the spread of western management accounting techniques in China, observe: "somewhat surprisingly from a western perspective, the philosophical view in China required theoretical and political justification of these techniques before they could be applied" (p.53). Similarly, Lin & Deng (1992) observe: "The nature of accounting is defined as something that is intrinsically ideological" (p.173).

Competition: the growth of competition gives rise to an objective of more effective management accounting

The advocacy role: In some countries there is a stronger tendency than in others for budgets to be manipulated to support a manager's desired case.

Operational involvement: the contrast in the role of the management accountant in the UK and Germany has been highlighted in the study of accounting in the brewing industry by Ahrens (1997).

Attitudes to labor cost: there is a difference between a cost cutting role in the UK and an explicit rejection of that role in France and Belgium.

Despite the fact that management accounting is important, many SMEs owners/managers fail to utilize these data well. Since they do not plan ahead and required information is untimely prepared when needed, as a result decisions are often put off (Turner 1997). Holmes and Nicholls (1989) summarized management accounting information is associated with success and failure in SMEs depending upon how they produced and utilized in their companies.

However, Horngren (1995) argued that cost accounting or management accounting concepts and techniques are neutral instruments. It is not the cause of poor management but primarily symptoms since it may be used wisely or stupidly by managers of the firms. He also suggested the criterion to judge a management system by using the cost-benefit criterion. Undoubtedly, cost-benefit criterion is commonly acceptable. Sophisticated systems are expensive and time-consuming. In contrast, simple systems might not be accurate enough for producing report in some cases. Therefore managers should thoroughly consider about pros and cons of the installation and adaptation of systems in the firms to attain functional system at reasonable cost.

Activity-Based Costing (ABC) is a system of costing proposed by Professor Johnson and Robert Kaplan in their book "Relevance Lost: The Rise and Fall of Management Accounting" in 1987. Dey and Bhattacharyya (2004) stated that "as a powerful tool for measuring performance, ABC is used to identify, describe, assign costs and reports this on agency operations. It is a more accurate cost management system than Traditional Cost Accounting (TCA). ABC identifies the opportunities to improve business process, effectiveness and efficiency by determining the "true" cost of product and service… Most companies seem to recognize that their costing systems are not responsive to today's competitive business environment. The methods of allocation of overhead among their products are hopelessly obsolete, quite simple and inadequate. ABC helps to allocate cost on the basis of cause and effect relationship."

However, in the Asian countries, mostly in developing countries, traditional management accounting practices are still widely used for various reasons like the lack of awareness of new techniques, the lack of expertise and, perhaps, more importantly, and the lack of top management support. Additional factors include the high cost of implementation and the fact that there simply was "no reason to change" from the traditional technique to the new tool (Tho et al., 1998)

Apparently, accounting and financial information are important to SMEs in order to utilize in financial management, decision making, and operation through various reports (balance sheet, income statement, cash budget, etc.) and methods (financial ratio analysis, etc.) However, SMEs owners/managers should not overlooked the process in obtaining data and preparing reports since if they wrongly record, they would produce meaningless reports. Then they may make decision in the wrong ways.

III. METHODOLOGY

This section will mainly explain identification of study areas, the procedure for data collection, data analysis and the constraints or limitation faced by the researcher during data collection. To study and investigate financial and management accounting practices in SMEs, this study is primarily based on quantitative research by employing the questionnaire survey as a major instrument. In addition, descriptive analysis is used to explain phenomena, response to the questions mostly on use and usefulness of financial and management accounting in practices for SMEs, as well as measure relationships between variables systematically and statistically.

3.1 Methodology

This research was carried out by gathering data from both secondary and primary data that enable to achieve the research objectives. With relevant collected data, data analysis was conducted based on theoretical framework and then conclusion is presented.

Secondary Data Collection

A comprehensive literature review was conducted with relevant articles and research papers to gain in-depth knowledge about concerned topic in general and practices in other countries. In Cambodia, there is not much widely discussion related to financial and management accounting practices and related issues. Most of the previous studies are related to financing SMEs in Cambodia, consulting services in Cambodia especially in SMEs.

Primary Data Collection

Based on literature review and theoretical framework, the questionnaire survey was developed to be the major tool for this research study. The objective is to gain an understanding of financial and management accounting practices in SMEs in Cambodia. By using a research study of Guilding et al (2000) as a guideline, this research focused mainly on what and how financial and management accounting practices are used in the company and respondents' opinion on usefulness of the practices.

After the questionnaire was developed, it was then distributed to the relevant department in the various SMEs in Phnom Penh, preferably to the Finance Department. We had requested the company to send the questionnaire to the finance department and preferably we would like the owner, finance manager, or at least the accountant to fill up the questionnaire; so that the information obtained will be reliable and valid.

Numbers of Completed Questionnaires

In case of this research study, like many others, there are some people who did not respond to the questionnaire. Table 3.2.1 presents the number of distributed and collected questionnaires.

3.3 The Organization of the Questionnaire

The questionnaire was divided into two sections - general information of the enterprise and level of opinion indicated the specific statements - which responded to the accounting information classifications used by Holmes and Nicholls (1989) as well as McMahon (1999) - Statutory (ST), Statutory/Budget (SB), and Statutory/Budget/Additional (SBA).

The organization of questionnaire could be classified as follows:

Characteristics of the enterprises and their accounting organization and practices

General characteristics of the firms: location, business age, registered capital and fixed assets value (exclude land), number of employees, nature of business, main business activity, form of legal registration, stage of development, annual revenue.

Use of both financial and management accounting practices including objectives as well as the ways of using accounting information

Attitude toward the training program in related issues i.e. accounting practices, tax regulations

Characteristics of owners/managers and in-charge of financial and accounting matters:

The questions asked about the level of knowledge, skill, and familiarity with accounting.

Statutory

Method and frequencies in preparation of financial statements

The component of annual financial statements which they prepare and how much they are complied with regulation set by National Accounting Council (NCA) and Tax Department which are main regulatory bodies to manipulate the related issue.

Budget and cost management

Product/service cost measurement

Budgeting

Additional information

Variance analysis

Financial indicators

3.4. Variable Measurement

The study of Holmes and Nicholls (1989) indicated the significant influences on such information acquisition or preparation in the company based on four variables: (a) business size; (b) the number of years the business had been operating under existing management; (c) industrial sector; and (d) the education of a business' owner/manager. Therefore, using these variables as the guideline, this research indicates three independent variables which are business size (categorized by registered capital, fixed asset excluding land, number of employees and annual revenue), business age, and industrial sector to study the use and usefulness of financial and management accounting practices.

In order to appraise variables, Likert scale was provided in the questionnaire for rating the level of respondents' attitude toward the given statements. The statements are specified mainly on usage rate and perceived merit of the studied topic. The Likert scale provided is ranged from "1" (strongly disagree) to "4" (strongly agree). Moreover all the questions, respondents could also indicate "do not know" if they do not know whether the proposed statement is applied to accounting practices in their organization. Using five scales from strongly disagree to do not know might not be usual; however, the aim is to avoid the raters that are reluctant to give extreme judgments thus causing ambiguous in data analysis.

3.5 Data Analysis Methods

Statistics and descriptive analysis are applied in order to capture and explain survey phenomena. Most of the results would be analyzed by frequency, percentages, means and standard deviation. Paired t-Test would be used for measurement relationship of use and usefulness of each variable, mainly on financial indicators and variance analysis. Moreover, one-way ANOVA and independent sample T-test were employed to compare any differences among given variables. Spearman's Rank Correlation had been used to calculate the degree of correlation between Use and Usefulness of both Financial Accounting Indicators and Management Accounting Practices. The formula for Spearman's Rank Correlation is:

The hypotheses t-test, Rank Correlation had been applied to test the significance of rs with the formula:

with degree of freedom = (n-2) and 0.05 significance level.

The results of analysis could be interpreted in table 3.5.1.

The relationship between one variable and others would be tested quantitatively by complying with hypotheses testing at the 95% confidence interval (α=0.05). The hypotheses are following:

H0: Given variable is not related to other given variable

H1: Given variable is related to other given variable

Besides, the differences would be tested under hypotheses testing at the same confidence interval.

3.6 Scope and Limitation of the Study

Due to limited time, resources and financial constraints, the scope was limited and the research is conducted based on:

The accounting information only composes of Financial and Management Accounting Information. This survey does not take into account the Tax Accounting Practices.

The financial and management accounting practices in SMEs in Cambodia within the selected SMEs, mainly in Phnom Penh city. It does not focus on all cities and provinces in Cambodia.

The availability of data collected

The interview with some accountants (through calling), some businessman, and the secondary data.

IV. ANALYSIS AND DISCUSSION

Use and Usefulness Perception of Accounting Practices

In General

Table 4.1.1 presents the use of accounting practices in the firms. Overall, the enterprises have concerned in using accounting practices in important level for their companies (mean = 2.958). In addition, they also concerned in using it in general objective (mean = 2.96). With consideration in each objective, the surveyed enterprises showed that they employed accounting practices for analyzing their financial position and performance (mean = 3.16). Second one is for reporting to the state bodies (mean = 3.12). For proving the financial stability to the lenders and to the partners are almost in the same level (important with the mean = 2.80 and mean = 2.75 respectively).

The standard deviation of these measurements is quite wide, especially using financial and management accounting for proving the financial position to the partners (with the standard deviation of 1.057). Therefore, the statistic results concluded that the surveyed enterprises have concerned the least in terms of using accounting practices for proving the financial position to the partners. On the other hand, the statistics results investigated that the most they have worried in using accounting practices is for analyzing the financial position and performance (with the standard deviation = 0.807).

Table 4.1.1 shows, among the surveyed companies, that accounting software usage is important to manage data as well as in preparing accounting and financial reports (mean = 3.25). These enterprises also use, in the important level, financial information provided by other companies to improve themselves i.e. business performance improvement (mean = 2.75). From the table 5.6, it also presents the surveyed companies which have highly extensive use of accounting information in decision making and strategic planning (mean = 2.91).

The usefulness of accounting practices in the firms is presented in Table 4.1.2 The enterprises have concerned the usefulness of accounting practices for financial position and performance analysis in the most important level (mean = 3.30) and they concerned it in the important level in operative management of the enterprise. Moreover, the financial accounting data produced for regulator purpose is also important for internal decision making (mean = 3.17).

According to the survey, respondents indicated level of their opinion on usefulness of various management accounting practices and financial accounting indicators. SMEs seem to recognize usefulness of these practices and indicators. In order to investigate which practices SMEs consider the most important and the least important for them, management accounting practices and financial accounting indicators were rank together. The list of management accounting practices and financial accounting indicators could be listed in table 4.1.3.

4.2 Financial Accounting Indicators

Table 4.2.1 presents the Use and Usefulness of Financial Accounting Indicators. Generally the investigated companies highly employ the financial accounting indicators to evaluate the company performance and they consider its usefulness in the important level for their enterprises (mean = 3.08 and 3.12 respectively)

Among these indicators, the most important financial assessment is sales and the least important one is return on assets (ROA). It might be inferred from the survey that most of the investigated firms are sale-oriented since they greatly consider their profit and loss. On the other hand, they ignore Balance Sheet statement to analyze resources used in the organization. Apparently from next three important indicators, they are net profit, growth rate of sales, and net profit.

In view of their usefulness, the investigated enterprises also take into account the sales. In contrast, most firms are likely to pay less attention to inventory level, return on equity (ROE) and return on assets (ROA).

By applying Spearman's Rank Correlation (rs) [1] test, a very high degree of positive correlation (rs = 0.912) has been obtained between the ranks in using and usefulness of the financial accounting indicators and it indicates a very strong relationship between the use and their usefulness. There are 10-pairs of ranks; the significance of rs has been testes here by applying hypotheses t-test [2] , Rank Correlation, with [(n-2) = (10-2)] 8 degree of freedom (df), with the following hypothesis:

(The rank correlation in the population is zero)

(The rank correlation in the population is positive among the rank)

The computed value of t = 6.29; therefore, null hypothesis (H0) is rejected because the computed t (t = 6.29) is greater than 1.833 (from Student's t Distribution Table with 0.05 significance level, One-Tailed test and 9 df). The alternative hypothesis is accepted and it can be concluded that the rank correlation in the population is different from zero, or there is a positive correlation between the ranks in using and in usefulness of financial accounting indicators. Considering the overall mean in using and usefulness, it can be inferred that despite their understanding about the usefulness, financial accounting indicators are not used as wide as their usefulness among the surveyed enterprises. It might be because of many reasons such as lack of skilled people and maybe for additional costs.

For all the financial accounting indicators, the ideal means are expected to be 4 (the highest rank). Therefore, following two types of difference or gap can be observed from table 4.3.2.

Gap to Ideal = (Ideal Mean - Mean in Usefulness)

Aspiration Gap = (Mean in Usefulness - Mean in Using)

One sample-t test has been applied against the expected mean value of 4 to check the validity of the "gap to ideal". The result of t value = -16.210, which is lower than -2.262. [From Student's t Distribution Table with 0.05 significance level, two tailed-test, and (10-1) = 9 df]. Therefore, it can be concluded that the mean values of usefulness of Financial Accounting Indicators are significantly lower than the ideal mean. That means the gap to ideal is statistically significant.

In order to check the "aspiration gap", paired-t test has been applied. The paired-t test can be applied for mean value in using and in usefulness of 10 financial indicators to test the significance of the aspiration gap. Hence, the following null and alternative hypotheses (considering two variables are dependent) have been tested:

(The difference of the population mean is zero)

(The difference of the population mean is not zero)

The computed value of t is -1.515, which is greater than -2.262 [from Student's t Distribution Table with 0.05 significance level, two tailed-test, and (10-1) = 9 df]. Therefore, null hypothesis (H0) has been accepted. Thus, it can be said that two population means are equal, and it can be concluded that the use and usefulness of the financial accounting indicators are the same. In other words, the aspiration gap has no statistically significant difference.

4.3 Management Accounting Practices

Overall most of the investigated firms highly measure unit cost of products and services regularly (mean = 3.07). Moreover, unit cost of products and services include direct material, direct labor, and manufacturing overhead. It might be concluded that most companies measure their products and services costs based on full costing. Similar to the study of Haldma and Laats (2002), Szychta (2002), and Drury and Tayles (1995), they claimed that full costing are widely used in various companies since the companies would like to be ensured that all costs are included in products and services costs. Besides the level of using activity based costing (ABC) to allocate overheads to products and services are relatively high (mean = 2.91).

Among the surveyed enterprises, there are 26 enterprises which indicate that they do not know whether ABC is applied and is widely used in their companies. It might be inferred from the survey that in case SMEs would like to use ABC; therefore, they need accounting personnel who have higher knowledge and skill together with efficient and effective accounting system to handle these matters. It might not worthwhile for SMEs to invest in this system. In term of annual operating budgets preparation, the companies highly and regularly prepare the annual budgets (mean = 3.01) which corresponds with usefulness of budgeting that most firms think it is useful. Moreover, the analysis of variance of actual performance compared to budget is an important management tool in the investigated companies (mean = 3.24) and most of them considered that variance analysis is an important management tool for them in decision making process (mean = 3.19). Table 4.3.1 presents the Use of Management Accounting Practices.

The computed value of t = 0.415; therefore, null hypothesis (H0) is accepted because the computed t (t = 0.415) is lower than 1.796 (from Student's t Distribution Table with 0.05 significance level, One-Tailed test and 11 df). It can be concluded that the rank correlation in the population is zero, or there is a no correlation between the ranks in using and in usefulness of Management Accounting Practices.

For all the Management Accounting Practices, the ideal means are expected to be 4 (the highest rank). Therefore, following two types of difference or gap can be observed in table 4.3.2.

Gap to Ideal = (Ideal Mean - Mean in Usefulness)

Aspiration Gap = (Mean in Usefulness - Mean in Using)

One sample-t test has been applied against the expected mean value of 4 to check the validity of the "gap to ideal". The result of t value = -28.289, which is lower than -2.179. [From Student's t Distribution Table with 0.05 significance level, two tailed-test, and (13-1) = 12 df]. Therefore, it can be concluded that the mean values in usefulness of the management accounting practices are significantly lower than the ideal mean. That means the gap to ideal is statistically significant.

In order to check the "aspiration gap", paired-t test has been applied. The paired-t test can be applied for mean value in using and usefulness of 13 management accounting practices to test the significance of the aspiration gap. Hence, the following null and alternative hypotheses (considering two variables are dependent) have been tested:

The computed value of t is 0, which is greater than -2.179 [from Student's t Distribution Table with 0.05 significance level, two tailed-test, and (13-1) = 12 df]. Therefore, null hypothesis (H0) has been accepted. Thus, it can be said that two population means are equal, and it can be concluded that the use and usefulness of the management accounting practices are the same. In other words, the aspiration gap has no statistically significant difference.

V. CONCLUSION

Economic activity in Cambodia is dominated by Small and Medium Enterprises (SMEs), which are seen as playing a major role in economic growth and poverty reduction.

Small and Medium Enterprises (SMEs) in Cambodia face a weak legal and regulatory environment which creates uncertainties and increases the risk of doing business. These uncertainties and risks result in high transaction costs and the high costs of doing business in general. That is one of the reasons why most of SMEs do not registered in the Ministry of Commerce. Besides these issues, SMEs still have other difficulties which do not facilitate their businesses to run and operate successfully such as lacking the accounting and financial knowledge.

Most of the SMEs in Cambodia, they ignored the use and usefulness of financial and management accounting even it is very crucial for the company, both internal and external use, in helping the entrepreneurs to plan and manage their operation toward the companies' goals.

By using the questionnaire as the tool to investigate the financial and management accounting practices in SMEs in Cambodia, the study could be concluded as follows:

More than half of surveyed SMEs hire their own staffs and employ accounting software to deal with accounting information and prepare annual financial statements, mostly Balance Sheet, Income Statement and Cash Flow. And monthly frequency is the most frequency where all the investigated SMEs prepare their financial statements roughly without proper closing the account.

In the perspective of SMEs, they highly use, as the first priority, financial and management accounting statistically to analyze the enterprise's financial position and performance. Moreover, not only in using it but it seems it is very useful for them as well comparing to the usefulness of financial and management accounting in operative management of the enterprise. Secondly, they use it for reporting to the state bodies. And financial and management accounting are less concerned by most surveyed SMEs in using it for proving the financial stability and position to lenders and partners respectively.

Financial accounting data produced for regulatory purpose is highly useful not only for internal decision making but SMEs also highly makes an extensive uses of its in decision making and strategic planning as well. In addition, SMEs is highly effective in using financial information of other companies to improve business performance.

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