Pamantasan ng Cabuyao

College of Business Administration and Accountancy

CHAPTER I THE PROBLEM AND ITS BACKGROUND
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INTRODUCTION Every business organization must have an accounting information system which will generate reliable financial information needed by the decision-makers in a timely manner. The design and operation of a system must consider the anticipated users of the information and the types of decision they are expected to make, the design of the system to meet the entitys information requirement defends on the firms size, nature of operations, volume of transaction data, organizational structure, form of business and extent of government regulation. These will influence the way in which the information and reported in financial instruments. An accounting information system is the combination of personnel, records and procedures that a business uses to meet its need for financial information. Most firms have an accounting manual that specifies the policies and procedures to be followed in accumulating information system. This manual details what events are to be recorded in the accounts, and when and how the information is to be classified and accumulated (Ballada, 2012). Accounting information system is an essential attribute a business enterprise should have for it serves as its backbonea backbone that connects all of the functions of a business enterprise. It is a combination of personnel, records, and procedures that a business uses to meet its need for financial information. It has become a necessity for businesses especially those bigger companies to be able to organize its day-to-day and end-of-period financial transactions and satisfy the demand for a more accurate and reliable financial information. An enterprise can choose to employ either among three types of accounting information system which are all designed to capture information regarding accounting events to prepare financial statements. These are the manual or traditional, which utilize paper-based journals (general and special) and ledgers; the computerbased transaction system which replaces paper records with computer records, and; the database system which embed accounting data within the business event data on which they are based.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
Taxation is the process or means by which the sovereign, through its lawmaking body, raises income to defray the necessary expenses of the government. Taxation, as a power of the State, is inherent in sovereignty. Most people receive their initial exposure to the Philippine income tax system when first faced with the responsibility of filing out government formsnot a very challenging activity (Ballada, 2012). But in the modern times, a lot of the mechanical chores of tax practice are already handled by computer systems that allow professionals on tax and managers to put a lot of their time and attention to more important matters. Small and medium enterprise or small and medium-sized enterprise (SMEs, small and medium-sized businesses, SMBs and variations thereof) are companies whose personnel numbers fall below certain limits. The abbreviation "SME" is used in the European Union and by international organizations such as the World Bank, the United Nations and the World Trade Organization (WTO). In most economies, smaller enterprises outnumber large companies by a wide margin. SMEs are said to be responsible for driving innovation and competition in many economic sectors (Wikipedia, no author, 2008). In the Philippines, 99.1% of the businesses are small and medium enterprises (SMEs) and only 0.99% are large enterprises. Republic Act No. 9501, The Magna Carta for Micro, Small and Medium Enterprises (MSMEs), signed by President Gloria Macapagal Arroyo on 23 May 2008 defines micro enterprises as entities with total assets of not more than Php 3,000,000, small enterprises as The new law, R.A. 9501 amends the 17-year old R.A. 6977 or the Magna Carta for Small Medium Enterprises. SMEs are perceived to have greater linkages to micro-enterprises (backward linkage) and medium and large businesses (forward subcontracting links). Among the rationale for developing SMEs in the Philippines includes the fact that they use resources more efficiently than large enterprises. The Philippines advantages in terms of investment environment includes having an open market economy, reliable infrastructure support, available special economic zones and strategic location, hospitable lifestyle, competitive investment incentives and quality human resources. Philippine SMEs usually join a bigger organization, cooperative and association. This study was conducted to assess the adoption of accounting information system of small and medium enterprises in selected barangays in Cabuyao as a basis for effective taxes collection.
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Pamantasan ng Cabuyao
College of Business Administration and Accountancy
THEORETICAL FRAMEWORK In economics, the Laffer curve is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. It is used to illustrate the concept of taxable income elasticity (that taxable income will change in response to changes in the rate of taxation). The curve is constructed by thought experiment. First, the amount of tax revenue raised at the extreme tax rates of 0% and 100% is considered. It is clear that a 0% tax rate raises no revenue, but the Laffer curve hypothesis is that a 100% tax rate will also generate no revenue because at such a rate there is no longer any incentive for a rational taxpayer to earn any income, thus the revenue raised will be 100% of nothing. If both a 0% rate and 100% rate of taxation generate no revenue, it follows from the extreme value theorem that there must exist at least one rate in between where tax revenue would be a maximum. The Laffer curve is typically represented as a graph which starts at 0% tax, zero revenue, rises to a maximum rate of revenue raised at an intermediate rate of taxation and then falls again to zero revenue at a 100% tax rate. One potential result of the Laffer curve is that increasing tax rates beyond a certain point will become counterproductive for raising further tax revenue. A hypothetical Laffer curve for any given economy can only be estimated and such estimates are sometimes controversial. The New Palgrave Dictionary of Economics reports that estimates of revenue-maximizing tax rates have varied widely, with a mid-range of around 70%. Most governments take revenue which exceeds that which can be provided by nondistortionary taxes or through taxes which give a double dividend. Optimal taxation theory is the branch of economics that considers how taxes can be structured to give the least deadweight costs, or to give the best outcomes in terms of social welfare. The Ramsey problem deals with minimizing deadweight costs. Because deadweight costs are related to the elasticity of supply and demand for a good, it follows that putting the highest tax rates on the goods for which there is most inelastic supply and demand will result in the least overall deadweight costs. Some economists sought to integrate optimal tax theory with the social welfare function, which is the economic expression of the idea that equality is valuable to a greater or lesser extent.
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Pamantasan ng Cabuyao
College of Business Administration and Accountancy
If individuals experience diminishing returns from income, then the optimum distribution of income for society involves a progressive income tax. Mirrlees optimal income tax is a detailed theoretical model of the optimum progressive income tax along these lines. Over the last years the validity of the theory of optimal taxation was discussed by many political economists. Canegrati (2007) demonstrated that if we move from the assumption that governments do not maximise the welfare of society but the probability of winning elections, the tax rates in equilibrium are lower for the most powerful groups of society, instead of being the lowest for the poorest as in the optimal theory of direct taxation developed by Atkinson and Joseph Stiglitz Silver et al. (1995) provided two views on (IS) and IS-centered view that includes software, hardware, data, people, and procedures. A second managerial view includes people, business processes and Information Systems. There are various types of information systems, for example: transaction processing systems, office systems, decision support systems, knowledge management systems, database management systems, and office information systems. Critical to most information systems are information technologies, which are typically designed to enable humans to perform tasks for which the human brain is not well suited, such as: handling large amounts of information, performing complex calculations, and controlling many simultaneous processes. Information technologies are a very important and malleable resource available to executives. Many companies have created a position of Chief Information Officer (CIO) that sits on the executive board with the Chief Executive Officer (CEO), Chief Financial
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Officer(CFO), Chief Operating Officer (COO) and Chief Technical Officer (CTO). The CTO may also serve as CIO, and vice versa. The Chief Information Security Officer (CISO) focuses on information security management.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
CONCEPTUAL FRAMEWORK
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Conceptual Paradigm

Input
SMEs: 1. Nature of business operations 2. Accounting information system employed 3. Procedures payinglocal government taxes

Process

Output

Data Analysis Assessment Data Collection And Organization

Implications on effective taxes collection of the local government on SMEs:

FEEDBACK

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
STATEMENT OF THE PROBLEM
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The study aimed to assess the adoption of accounting information system of small and medium enterprises in selected barangays in Cabuyao as a basis for effective tax collection. Specifically, it sought to answer the following questions: 1) What is the nature of operations of the small and medium enterprises in selected barangays in Cabuyao? 2) What is the accounting information system adopted by small and medium enterprises in selected barangays in Cabuyao: 1.1 Manual/Traditional system 1.2 Computer-based transaction system 1.3 Database system 3) What are the procedures followed by such small and medium enterprises in paying local government taxes in terms of: 2.1 Tax base and tax rate 2.2 Computation of tax due 2.3 Period/Date of payment 4) What is the significant relationship between the accounting information system adopted, and the procedures in paying local government taxes followed by small and medium enterprises in selected barangays in Cabuyao? 5) What is the significant relationship between the accounting information system used and the nature of operations of the small and medium enterprises in selected barangays in Cabuyao?

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
OBJECTIVES
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The following are the objectives of the study: 1) To determine the nature of operations of the small and medium enterprises in selected barangays in Cabuyao 2) To determine the accounting information system adopted by small and medium enterprises in selected barangays in Cabuyao: 1.1 Manual/Traditional system 1.2 Computer-based transaction system 1.3 Database system 3) To deternine the procedures followed by such small and medium enterprises in paying local government taxes in terms of: 2.1 Tax base and tax rate 2.2 Computation of tax due 2.3 Period/Date of payment 4) To determine the significant relationship between the accounting information system adopted, and the procedures in paying local government taxes followed by small and medium enterprises in selected barangays in Cabuyao 5) To determine the significant relationship between the accounting information system used and the nature of operations of the small and medium enterprises in selected barangays in Cabuyao

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
STATEMENT OF THE HYPOTHESIS
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Null Hypothesis: There is no significant relationship on the adoption of Accounting Information System to the Effectivity of Taxes collection of the Small and Medium Enterprises in selected barangays in Cabuyao.. Alternative Hypothesis: There is a significant relationship on the adoption of Accounting Information System to the Effectivity of Taxes collection of the Small and Medium Enterprises in selected barangays in Cabuyao.. Null Hypothesis: There is no significant relationship between the Accounting Information System used and the Nature of Operations of the Small and Medium Enterprises in selected barangays in Cabuyao. Null Hypothesis: There is a significant relationship between the Accounting Information System used and the Nature of Operations of the Small and Medium Enterprises in selected barangays in Cabuyao.

SIGNIFICANCE OF THE STUDY The study is significant since it would help to assess the effect of cityhood of Cabuyao in the profitability of SME which is essential in the economic growth of economy. Government, as they would be able to find out how information systems, particularly accounting information systems contribute to their collection of taxes from a rapid-growing form of business like SME and develop ways to support them. Business owners, as they would able to decide what the edges of using accounting information systems are and develop this. New business entrants, as they would be able to determine the importance and advantages of using accounting information system and eventually employ one.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
Potential Investors, as they would be able to decide that investing in AIS-adopting SMEs will be a better choice. Future Researchers, as they would be able to gather necessary information regarding this topic and they would be benefited in conducting a research that is in line with this.
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SCOPE AND DELIMITATION This study limits its coverage on the SME only.Its main purpose is to assess the adoption if accounting information system as a basis for effective taxes collection. Moreover, the study would like to propose recommendations regarding the views of SME owners.

This study considers factors such as taxes collection that will possibly be affected by the adoption of accounting information system of SMEs. Each of the SME respondents is given the same questionnaire to answer. This study focuses on the SMEs in Cabuyao City only.

DEFINITION OF TERMS Taxation. It refers to the act of a taxing authority actually levying tax. Taxation as a term applies to all types of taxes, from income to gift to estate taxes. It is usually referred to as an act; any revenue collected is usually called "taxes." Tax. Sum of money demanded by a government for its supportor for specific facilities or services, levied upon incomes,property, sales, etc. Accounting. The skills or practice of maintaining and auditing accounts and preparing reports on the assets, liabilities, etc. of a business. SME (Small and Medium Enterprises). It refers to companies that are larger than the small office/home office (SOHO), but not huge. Local Government. The administration of the civic affairs of a city, town, or district by its inhabitant rather by the state or country at large. The governing body of a town or district.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
Enterprise. It is a company organized for commercial purposes; business firm. Information System. An integrated set of components for collecting, storing, processing and communicating information. Tax Rate. The percentage of the value of a property to be paid as a tax. Tax Base. Collective value of taxable assets. Income Tax Return. Document giving the tax collector information about the taxpayers tax liability; his gross income was enough that he had to file a tax return.
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Pamantasan ng Cabuyao
College of Business Administration and Accountancy
CHAPTER II REVIEW OF THE RELATED LITERATURE AND STUDIES
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It is also important to relate some literature and studies to the research that will help the research to understand more about the study. In this chapter, the researchers created the link the between the proposed research and the researches already done.

REVIEW OF FOREIGN LITERATURE AND STUDIES According to Hopwood, accounting change over time. However relatively little is known of the preconditions for such change, the process of change or its organisational consequences. Existing perspectives on accounting change are reviewed and evaluated. Thereafter three examples of accounting change are discussed. Based on these cases, a number of theoretical issues relating to the understanding of the process of accounting change are examined. Emphasis is placed on the diversity of factors implicated in accounting change, the constitutive as well as reflective roles of accounting and the ways in which accounting change can shift the preconditions for subsequent organizational changes (p.1, n.d.). Due to rapid globalization in this world. Accounting processes has become more complex and the need to change the processes involved therein are needed. It has been suggested recently that the accounting systems used in developing countries may be irrelevant to their needs because they originate in Western countries with different cultural values. The accounting literature on this point, however, is vague in its assessment of exactly what aspects of Western accounting systems fail to meet the test of relevance. Furthermore, it is not clear whether the differences between the needs of users in various countries are differences in kind or only differences in degree. This article analyses these issues by introducing technical considerations in addition to the behavioural ones usually discussed and by separating out problems of accounting measurement from problems of accounting disclosure. This distinction is used to argue that it is the specific disclosure rules of particular calculations inherent in Western accounting systems rather than the transaction cost database that are most likely to fail to satisfy

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
the needs of users in developing countries. The effect of the importation of the French Unified Accounting System to Lebanon is examined and an amended version of the Hofstede-Gray cultural accounting framework is used to clarify the concept of cultural relevance (Baydoun, Willet, 2005). That is why it was really important to give emphasis to the role of information systems (IS) research and practice associates technology innovation with the context within which it is embedded. It identifies three principles to be followed in order to address the contextual processes involved in IS implementation: first, technology innovation should be considered in relation to socio-organizational change; second, analysis should consider not only the local organizational, but also the national and international context; and third, analysis should consider both the technical/rational decisions and actions involved in the innovation process and the cultural, social and cognitive forces of such a process. These principles are demonstrated with the analysis of a case study of organizational reform in Cyprus. Within the past ten years, literature concerned with accounting information system design has increased significantly. More importantly, perhaps, the number of distinct approaches or methodologies to information systems research and design has also multiplied. For instance, a recent American Accounting Association (1971) committee report identified statistical decision theory, information economics, cybernetics, communication theory, measurement theory, and behavioral theories as providing both research methodologies and a body of knowledge which underly information theory and ultimately accounting (Criver, Mock, n.d). The concept of New Public Management (NPM) has assumed a dominant role in the reforms of the public sector in the 1980s and 1990s. There has been considerable speculation on the origins of NPM. The focus of this special issue is more on what NPM is what it has become and how accounting is implicated in this phenomenon. The NPM trend has been characterized as having a number of dimensions: as a component part of restructuring of the public services, particularly where there is decentralization and corporatization; the displacement of old-style public administration with a new management focus in public services; as part of the desire to place public services in market or quasi-market services, particularly where the trappings of the market place- the need for contracts, employee incentives to performare deployed in the name of
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Pamantasan ng Cabuyao
College of Business Administration and Accountancy
a greater efficiency in the public services; a more explicit role for the management (in a top-down, hierarchical, functional concept) of the public services; the perceived need to rationalize public services and, above all, the stress on quantification as a means of demonstrating achievements (efficiency gains, new levels of performance) and of holding responsible persons accountable. These strands of the NPM are evident in many of the reforming economies. Guthrie et al. (this issue) show how this NPM direction is a global phenomenon (Lapsley, Financial Accountability and Management, 2005).
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Accounting theoreticians have argued that control system should be modified in accordance with the business strategy of a firm. This study tests this hypothesis by examining differences in accounting control system attributes between two groups of firms following distinctly different strategies. Interview data and questionnaire data are used to provide evidence of the ways in which firms align their control system and strategy. In addition, preliminary evidence is discussed which suggests a relationship between accounting control systems, business strategy and firm performance Most of the research to date concerning the design of an accounting information system has taken a rather narrow and inflexible view of accounting information. The primary intent of this paper is to provide a broader and more adaptive framework for designing such. A contingency approach, which takes into account the environment, organizational attributes, and managerial decision making styles, is advocated. In this context, several hypotheses are offered concerning the requisites of accounting information. There are significant positive correlations between the performance of an AIS and the influence factors such as user involvement, capability of IS personnel and organization size. It was also proved that the relationships between performance of AIS and influence factors are significantly influenced by the evolution level of IS. Hence for the success of AIS, each influence factor should be considred differently in the degree of importance according to the level of IS evolution.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
The roles of user participation (UP) in the design of Management Accounting Information System(s) (MAS) have long received the attention of MAS researchers. By surveying business firms through a structured questionnaire, this study investigated the interactions among contextual variables (Task uncertainty and organizational structure), information characteristics (Scope, timeliness and aggregation) and UP. The results suggest that under high task uncertainty, aggregated and timely information with high UP is positively associated with increased MAS performance. However, when the task uncertainty is low, the UP makes no impact on the relation between performance and information characteristics. In a less structured organization, broad scope, timely and aggregated information with high UP has a positive influence on the performance. In mechanistic organization, narrow scope and disaggregated information through the high UP can lead to higher MAS performance (Choe, n.d.).
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Accounting system not only promote a particular view of the activities of an organization or a subunit, but in their very implementation and operation mobilize other organizational members in a particular direction. The implications of such an interpretation are explored in this paper. Firstly through a discussion of some of the theoretic constructs that have been proposed to frame ANT research. Secondly an attempt is made to relate some of these ideas to aspects of the empirics in a qualitative case study. The case site is in the health sector and involves the implementation of a casemix accounting system. Evidence from the case research is used to exemplify aspects of the theoretical constructs (Lowe, n.d.).

REVIEW OF LOCAL LITERATURE AND STUDIES

In developed countries, governmental accounting is considered as an integral part and a successful aspect of public sector reforms. Besides being a tool for government financial management modernisation, accounting is regarded as a weapon against fraud and waste in government. The aim of this article is to compare, taking the IPSAS No.1 as a benchmark, the information content of the financial statements submitted by the central governments of Anglo-

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
Saxon, Nordic, European Continental and Mercosur zone countries. The results give us a point of reference as to where the central governmental accounting of each country studied lies in the spectrum from cash to full accrual accounting and to what extent the IPSASs are able to fit into diverse public administration styles in order to improve the transparency, accountability and reliability of the financial information disclosed (Torres, 2004). Research was conducted to establish the factors that lead to the successful adoption of Information Technology (IT) by Small and MediumEnterprises (SMEs) in todays turbulent times. The opinions of owners and managers of Australian SMEs on 10 factors representing modern IT adoption practices were obtained. The analysis of their responses identified three major IT acquisition phases and their significance. First, SMEs should assess IT benefits, the organisational culture and IT suitable for the firm. Second, they should determine if sufficient internal resources are available and appropriate procedures exist for the successful selection and implementation of IT. Third, SMEs need to evaluate the external environment, support and resources, particularly if inhouse resources and support are lacking. At the end of each phase, the decision should be made on whether or not to continue with IT acquisition. The recommended phased approach minimises the overall risk of technology acquisition The adoption of Information Technology (IT) in a small business, especially in its accounting processes, contributes to a small business success. The researchers conducted the study to be able to determine the factors that influence the Small and Medium Enterprises (SMEs) in the Philippines to adopt IT in their accounting processes. Prior studies (Thong, 1999) presented four categories that impact a small business owners decision to adopt IT. These include the characteristics of the organizational decision makers, technological innovation, organization, and environment in which the organization operates. Results showed that even though some of these really do affect the decision of SMEs for IT adoption in their accounting system, these relationships are not statistically significant (Lim et al,n.d.). Generally Accepted Accounting Principles (GAAP) and the more recent International Financial Reporting Standards (IFRS) form the basis of the accounting transactions and reports used in taxation accounting. However this has always been an uneasy relationship. One apparent
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Pamantasan ng Cabuyao
College of Business Administration and Accountancy
factor contributing to this is that these two accounting processes serve different purposes. The aim of this study is to research international literature and experience to gain an insight into the basis and form of this divergence. According to Sy (2009), the distinction between tax avoidance and tax evasion is very clear in the academe. Tax books have often defined tax avoidance as an attempt to minimize the payment or altogether eliminate tax liability by lawful means, while taxevasion refers to the elimination or reductions of one's correct and proper tax by fraudulent means. The consequence of each case is also clear. The former is not criminally punishable while the latter is criminally punishable. However, the distinction between the two cases seems to have been blurred by the inconsistent practice of the government in its treatment of the subject matter.
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Very often, the Bureau of Internal Revenue (BIR) asks for a valid business purpose whenever a taxpayer enters into a transaction which has the effect of reducing tax liability. For instance, when a father sells a parcel of land to his son, the BIR looks into the financial capability of the son to buy the subject land, in order to ensure that the sale was not for the sole purpose of saving on the payment of estate taxes. The taxpayer has to come up with a valid reason for selling his land to his son. An honest answer from the taxpayer that thetransaction was for purposes of tax avoidance will not be acceptable to the BIR. The BIR will impose the higher tax rate in its assessment, as well as the corresponding interests and penalties. This situation leads one to wonder whether tax avoidance is legal or not in Philippines. In recognition of their substantial contribution to the economy both in terms of number of enterprises and workers, the Philippine government has put in place a number of policies and programs designed specifically to boost SME productivity and competitiveness in the country. However, the performance of SMEs in the last decade has not been vigorous enough to boost the Philippine manufacturing industry. As such, the deepening of high technology industries in terms of the creation of backward linkages has remained weak. While the countrys exports of high technology products have grown rapidly, the value added of these exports is very low due to the limited links of large domestic and foreign companies to the domestic economy. Rapid changes in

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
the international trade and the growing complexity of global production system, pose a significant challenge to Filipino SMEs. Informal payments are a frequently overlooked source of local public finance in developing countries. Informal taxation is widespread, particularly in rural areas, with substantial in-kind labor payments. The wealthy pay more, but pay less in percentage terms, and informal taxes are more regressive than formal taxes. Failing to include informal taxation underestimates household tax burdens and revenue decentralization in developing countries. They propose a simple model of information and enforcement constraints that parsimoniously explains the patterns in the data (Singhal, Olken,). The new Philippine Financial Reporting Standard for Small and Medium-sized Entities (PFRS for SMEs) became effective on January 1, 2010, with earlier application allowed. The standard was adopted by the Financial Reporting Standards Council (FRSC) from the international version issued by the International Accounting Standards Board (IASB). The Securities and Exchange Commission (SEC) has made the PFRS for SMEs a part of its rules and regulations, requiring covered companies to implement the new standard starting with 2010 financial statements to be filed with the SEC (Punongbayan & Araullo). Small and medium enterprises (SMEs) play a crucial role in the development of the Philippine economy. They represent 99.6 per cent of all businesses registered in the country and employ 69.9 per cent of the total labour force. In addition, they account for 32 per cent of the country's gross domestic product (GDP). Underscoring the importance of SMEs in the country's economic growth and development, President Gloria Macapagal-Arroyo has included in her 10-point national development agenda the creation of 6-10 million jobs in six years, through more opportunities given to entrepreneurs, a tripling of the amount of loans available to SMEs, and the development of 1-2 million hectares of land for agri-business.
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Pamantasan ng Cabuyao
College of Business Administration and Accountancy
SYNTHESIS OF THE REVIEW OF THE RELATED LITERATURE AND STUDIES
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Necessary and relevant information were extracted from the previously mentioned related literature and studies to serve as a guide and reference for the proponents to have a wider and clearer overview about the perceived effect of adopting accounting information system on the effectivity of small and medium enterprises. The researchers carefully analyzed the researches and then relate it to the current study. The results and findings suggest that small and medium enterprises are very important factors in considering the development of a country. That is why it is also important to consider the accounting processes involved therein. The Philippine Financial Reporting Standards has adopted accounting standards that is related to the conduction of business operations of small and medium enterprises. It emphasized that proper accounting treatment must be made for small and medium enterprises in order to arrive at the right income which will become the basis for the tax to be imposed.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
CHAPTER III RESEARCH METHODOLOGY
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This Chapter includes the research design , locale of the study, sampling design, population or respondents, and the research method/instrument of the study.

RESEARCH DESIGN In order to construct the investigation about the significant relationship of accounting information system and effectivity of collecting government taxes, the researchers utilized the inferential approach. This method is used in order to describe, analyze and interpret data of the study. Aside from that, this method is designed to give conclusion in a given two or more variables. It is either used to describe whether there is a significant difference or significant relationship between the two given variables. Over-all, the inferential research type of method is suitable since it involves giving conclusions from the given facts, condition, analysis and interpretation of data and information gathered.

RESPONDENTS OF THE STUDY In order to conduct the research, the researchers chooses the respondents of the study which are focused only to the head of accounting department of selected small and medium enterprises in Cabuyao, Laguna. There is also a set of questionnaires that are carefully prepared and logically intended for them.

VALIDATION OF THE INSTRUMENT The questionnaires were presented to the professors and adviser in accountancy. The researchers anticipated that there would be modifications changes and deletions of the different items that are listed. The final draft of the questionnaire was finalized and these set of questionnaires will be distributed to the respondents and the data accumulated from these

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
instruments will become the basis of finding the conclusion in finding the conclusion in finding the significant relationship between accounting information system and effectivity of taxes collection.
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EVALUATION The questionnaire was divided into five major categories. The first major category is about the nature of business operations. The second category is about the type of the accounting information system that the small and medium enterprises used in terms of whether it is manual, computerized-based or data based system. The third question is about the procedures followed by such small and medium enterprises in paying the local government taxes in terms of tax base and tax rates computation of tax due and period/date of payment. The fourth and fifth category will generate whether there is a significant relationship between accounting information system and effectively of taxes collection and the significant relationship between the nature of operation and accounting information system. The fourth and third category will be rated with the interpretation of whether there is significant relationship or not. YES NO

DATA GATHERING PROCEDURES The researchers believed that the thay can generate the conclusion by conducting surveys. Aside from the surveys, the researchers also read articles, and other literary works which is related to the study. Another important thing that the researchers have made is by reading books to know the basic principles behind this study. In order to conduct the study. The researchers first get permission from the perspective personnel from Pamantasan ng Cabuyao. And then ask directly to the accounting heads which is indeed, the respondents.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
STATISTICAL TREATMENT The following are the statistical treatment of the study: Pearsons R Correlation
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Where: Cov(y,x) = the covariance of y and x Var(x)= the variance of x Var(y)= the variance of y

ANALYSIS OF VARIANCE (ANOVA) One Way

F=

Where: = denotes the sample mean in the ith group ni = is the number of observations in the ith group = denotes the overall mean of the data. Yij = is the jth observation in the ith out of K groups N = is the overall sample size.

Pamantasan ng Cabuyao
College of Business Administration and Accountancy
THE WEIGHTED MEAN (X)
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X= N where: X = the weighted mean f = frequency = the scores of the data N = the number of samples = the summation notation

The Percentage (P) was used to describe the profile of the respondents.

P =

f x 100 N

where: P = the percentage value f = the number of frequency in the interval n = number of data