CHAPTER 2

REVIEW OF RELATED LITERATURE

Accounting Practices

Accounting practices offers financial information that could serve as a

measurement of financial performance for the owners and managers of any company in

any industry. It has already been proven that an appropriate accounting information is

truly necessary for the success of any business entity, whether big or small (European

Commission (EC), 2008). Moreover, Okwoh further identified that “Accounting ensures

that not only that all identified sources of revenue are efficiently tapped but that such

realized revenues are fully accounted for. In terms of accounting for revenues, the

requirement is that adequate period. This involves maintaining adequate source

documents such as receipts and invoices, and books of accounts such as the cashbook,

ledger accounts, balance sheet and other forms of analysis” Okwoh(2005)

Business decisions is necessary to be assisted by a good financial Information

which need to be relevant, friendly users and timely (European Federations of

Accounting). According to Ntim (2014), the accounting Information that is used to

measure the financial performance of the smes is provided by the accounting system. It

gives a source of Information to owners and managers of MSME’s. According to Padachi

(2012), "in developing countries, MSME’s served as the bridge of the informal economy

of family and the formalized corporate sector. “ Olufunso (2010) stated that detailed

accounting records and auditing of financial statements of MSME’s on an accrual basis is

being recommended.
 Philippine accounting practices date back to the pre-Spanish period, when

Filipinos conducted business with Chinese, Indians and Malays from neighboring

countries. These trading activities forced Filipinos to prepare crude accounting records

that were based mainly on cash receipts and payments. Today, the Philippines’

Accountancy profession is one of the world’s most vibrant and is also considered as one

of the most restricted. A mixture of regulation and private involvement characterizes

professional organization (Reid, 2002). On one hand, a World Bank review of Philippine

financial reporting practices favorably concluded that “… according to users of financial

statements—including banks and investment banks—accounting and disclosure

regulations and standards in the Philippines compare favorably with those in many Asian

countries. But the same users report that enforcement by regulators is weak and that

auditors seldom issue caveats that might raise questions about the reliability of the

information contained in client financial statements. In addition, there is no tradition of

legal actions by investors and lenders against company officers or auditors in connection

with cases of deficient or misleading financial reporting. Hence, the true financial state of

companies may not be known sufficiently in advance to arrest a potentially serious

deterioration in performance.”

Neighborhood (sari-sari) store is rapidly growing here in Philippines. This kind

of business, it doesn't need a big amount of capital to start with that's why the Filipinos

can start their business immediately. It also helps the country's economic development in

farther and rural places.It has a big part of every country’s economy. They play an

important role in nation economic status. Small businesses create employment and jobs,

and serves as a major tool for solving poverty alleviation and economic development.
According to the list of establishments of the Philippine Statistics Authority (PSA, 2017)

in the Department of Trade and Industry website, there are total of 924.721 operating

businesses in the Philippines and 99.56% of this are from the Micro, small and medium

enterprises (MSMEs). In the 920,677 of the total establishments, 89.59% (828,436) were

from the microenterprises, 9.56% (88,412) were small enterprises, and 0.41% (3,829)

were medium enterprises. Large enterprises made up the remaining 0.44% (4,044). In this

percentage, it pertains that the Micro small and medium enterprises (MSMEs) have an

important role in Philippine economy. Overall, 49.7% of MSMEs are in the

wholesale/retail trade and repair services with 384,746 business establishments.

CALABARZON is in the second place in the top five region with the most of MSME

establishments and employment in regional distribution.

As per Philippine Association of Stores and Carinderia Owners, there are about

1.3 million neighborhood or sari-sari stores in the Philippines. According to market

research firm study by Nielsen (2015), 94 percent of shoppers visited them. These are

followed by wet or public market stalls, which are the destination of 72 percent of

shoppers. Moreover, sari-sari stores have the purpose of bringing convenience to every

customer by allowing them to buy products on “tingi” or per piece and at retail price.

Philippine MSMEs, specifically sari-sari stores are considered significant in the recovery

of the national economy (Ibarra, 2012).

AGE

In business, age is just a number. Anyone can start a business at any age.

However, there are some studies that says most of the business owners who are in middle

age are most likely to be successful. According to a study conducted by MIT, it stated
that "Our primary finding is that successful entrepreneurs are middle-aged, not young,”

Also, "Founders in their early 20s have the lowest likelihood of successful exit or

creating a 1 in 1,000 top growth firm."These facts clearly suggest one side over the other.

According to studies from Duke University, the Kauffman Foundation, the Founder

Institute, and Northwestern, the average age of an entrepreneur is 40 years old when

starting a business and the average age of leaders of high-growth startups is 45 years old

According to Ressi, "Older individuals have generally completed more complex

projects--from buying a house to raising a family. In addition, older people have

developed greater vocational skills than their younger counterparts in many, but not all,

cases," he says. "We theorize that the combination of successful project completion skills

with real-world experience helps older entrepreneurs identify and address more realistic

business opportunities." One study by Alusen(2019), most of the sari-sari store owners’

age is between 38 to 43 years old, because people in this age are usually comfortable at

home that is why it suggests that a considerable number of sari-sari store owners prefer

staying at home while operating their own business.

SEX

Sex is categorized as a female and male. In terms of neighborhood (sari-sari)

stores, it is known that women are more common to be the owner. According to

Kalleberg & Leicht(1991).Women’s’ firms have the same chances to succeed as those

headed by men. Male or female has an opportunity to build a micro business in their

home. Most of the men make decisions based on strategy and procedure rather than

considering their feelings and intuition. According to a study presented at the 2009

Forum Public Policy, men are more likely than women to engage in unethical behavior in
their business. Based on numerous studies, women like these store owners contribute

nearly most of their income back to their families and communities. Because it is

convenient and easiest way to have an income.

EDUCATIONAL ATTAINMENT

People says "Education is the key to success", that's why education is the most

important factor that sari-sari store owners must consider. A study "Small business

success factors: the role of education and training "conducted by Simpson, Tuck and

Bellamy (2004), investigates the impact of training, education, prior knowledge and

experience on the success of the business. Four categories were developed, but only one

category showed clear evidence that education had a positive effect on the success of the

business.However, there are still some entrepreneurs or business owners who didn't

achieve higher education but still became successful.According to Jordan (2018),

numerous business owners decided not to seek higher education, and there's no

requirements for them to do as such. Moreover,some of the business owners said that it's

better to learn from people who have experience than studying entrepreneurship from

school. As the Talk Business(2018) stated in an online article, there’s a need for

entrepreneurs to focus more on doing and making things happen, in the real world, rather

than the more academic approach. Be that as it may, it's an efficient way to advance the

understanding of the inner workings of a business, and can make life simpler.

A survey conducted by CNBC (2017), shows that majority of small business

owners lack college degree. It is a hidden fact not often talk about.Business owners who

didn't have college degrees outnumbers those who finished college education. These
entrepreneurs don't uniformly express a dislike for higher education. The truth is, less

than half of business owners are degree holders according to Census data.

Self-education in business is a great method to lessen overheads as a sari-sari

store owner. Because being a sole proprietor means you have a lot of responsibilities to

handle within the business. The most important thing to remember is that education is

extremely important for business owners, yet academic education might not be the most

effective way; there is a lot of business owners who don’t have a degree but are doing

well as a result – because their mindset are different; they have the freedom to think and

feel like a business leader... but there are times when the knowledge acquired from a

formal education can be helpful (Talk Business,2018)

MARITAL STATUS

Marital status is the state of individual which a person are classified as single,

married, divorced, separated and/or widowed. Firm's owner marital status also influences

the SME's financial and economic growth. It also influences the self-employment of an

individual. According to a new study of U.S metropolitan areas, Self-employment are

increasing among the single women that supports entrepreneurship and innovation than

the man and married women. Also, a study conducted by Carlianne Patrick, marital

status and other dimensions, including the ability and business's surrounding and cultural

environment is considered in the diversity of women's self-employment choices. When it

comes to risk taking, the Business that managed by single owners have higher levels of

stock return volatility and more aggressive investment policies than to the companies

whose the owners are married (Roussanov and Savor, 2013). Also, the findings that is
presented by Dr. Lu, Ray and Teo (2016), show that single hedge fund managers are

more risk takers than the married fund managers.

SUMMARY

Accounting practices produces financial reports that help the business owners

know the performances and cash flow of the business.According to Okwoh

(2005),accounting practices involves maintaining source documents such as receipts and

invoices, and books of accounts such as the cashbook. Furthermore, Ntim (2014) also

stated that accounting information is used to measure the financial performance of the

MSME’s that is provided by the accounting system.

MSME’s particularly neighborhood sari-sari store has growing practically

everywhere in the Philippines.Filipinos are accustomed in buying their everyday needs in

this type of retail store because it has the purpose of bringing convenience to every

customer by allowing them to buy products on “tingi” or per piece and at retail price.

Philippine Association of Stores and Carinderia Owners stated that there are about 1.3

million neighborhood or sari-sari stores in the Philippines.49.7% of MSMEs are in the

wholesale/retail trade and repair services with 384,746 business establishments.

CALABARZON is in the second place in the top five region with the most of MSMEs

establishments and employment in regional distribution. Thus, it is believed that as they

expands the economy also grows.

There are some study that states that age is just a number when it comes to

business owners. However, according to studies from Duke University, the Kauffman

Foundation, the Founder Institute, and Northwestern, the average age of an entrepreneur
is 40 years old when starting a business and the average age of leaders of high-growth

startups is 45 years old. One study by Alusen(2019), most of the sari-sari store owners’

are in the age between 38 to 43 because they are usually comfortable at home that is why

it concluded that a considerable number of sari-sari store owners prefer staying at home

while operating their own business.

Sex is categorized as male and female. Male or female has an opportunity to build

a micro business in their home .Most of the men make economic decisions based on

strategy and procedure. According to a study presented at the 2009 Forum Public Policy,

men are more likely than women to engage in unethical behavior in their business.

However, with regard to sari-sari store, women are most likely to be the owner.

According to Kalleberg & Leicht(1991),Women’s’ firms have the same chances to

succeed as those headed by men.

“Education is the key to success”, that’s why education is an important factor that

sari-sari store owners must consider to be successful. A study "Small business success

factors: the role of education and training "conducted by Simpson, Tuck and Bellamy

(2004), investigates the impact of training, education, prior knowledge and experience on

the success of the business. Four categories were developed, but only one category

showed clear evidence that education had a positive effect on the success of the

business.However, there are still some entrepreneurs or business owners who didn't

achieve higher education but still became successful.According to Jordan (2018),

numerous business owners decided not to seek higher education, and there's no

requirements for them to do as such. Moreover,some of the business owners said that it's

better to learn from people who have experience than studying entrepreneurship from
school. As the Talk Business(2018) stated in an online article, there’s a need for

entrepreneurs to focus more on doing and making things happen, in the real world, rather

than the more academic approach.

Marital status is one of the demographic profile that affects the firm's owner and

firm's performance. Self employment are increasing among the single firm's owner than

the married owner(US Metropolitan areas). Married women is mostly entrepreneurs but

single women leads entrepreneurial growth (Carlianne Patrick). Single firm's owners are

also a risk taker, the firm that the single owner managed is more prospect, have higher

levels of stock return volatility and more agressive investment policies. (Roussanov and

Savor, 2013)