1

Chapter 1

THE PROBLEM AND ITS SETTING

Background of the study

Nowadays, comprehensive record keeping makes it possible for entrepreneurs to
develop efficient and timely financial reports that show the progress and current
financial condition of the business. With the financial report, the business can generate
from a good record keeping system, you can compare financial performance during one
period of cycle (month, quarter or year) with another cycle, calculate trends and plan for
the business's future. In essence, record keeping is one thing an entrepreneur cant
afford to ignore. Knowledge and skills in record keeping is one of the major factor that
impacts positively on sustainability and growth of business. Failure to record business
financial transactions can cause an unreliable and timely financial reports that is
basically the most important document that a business establishment must have.
In Tanzania , Rasco General Trading, one of the majority of small business
enterprises in Madukani that didnt practice proper record keeping due to unnecessary
cost and time consuming, that greatly affects their financial reports. The business cant
suffice the need of financial statements on time. Also, they cant present proper and
accurate financial information for their tax purposes in the end of the year (Lazaro et.al,
2014)

In the Philippines, as to A & J Videoke Rental, a small business enterprise have

lack of skills in preparing financial records, due to improper practice in record keeping.
Its lack of verifiable and credible information or past credit records in their financial
records diminishes the access of small businesses to formal loans. Also, it affects the
reliability of their financial statements due to lack of credible information of their records
(Ramos, 2010).
In Panabo City, some sole proprietor businesses do not follow the practice of
record keeping in their day to day operations. Per interview, the owner of Sian
Enterprises, Silvino V. Santander Jr., said that in most cases, problem occurs when they
cannot present on time financial statements when it is badly needed arising from
unmanaged practice of proper record keeping such as recording of transactions with
supporting documents that is very important to determine what will be the cash out flow
and in flow of money in the business.
Thus, this encourage the researcher to conduct the study in order to discover if
there is relationship between record keeping practice and reliable and timely financial
reports among selected sole proprietorship businesses in Panabo City.

Statement of the Problem

This study aims to determine the relationship between record keeping practice
and financial report among selected sole proprietorship businesses in Panabo
City.
1. What is the level of record keeping practice among selected sole proprietorship
businesses in Panabo City in terms of:
a. Efficiency
b. Security

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2. What is the level of financial report among sole proprietorship businesses in

Panabo City in terms of timeliness and reliability?

3. Is there a significant relationship between record keeping practice and financial
report among selected sole proprietorship businesses in Panabo City?
Theoretical and Conceptual Framework
This study was anchored the theory of Elankavi (2013) that record keeping can
help business establishments indicated by efficiency and security, that can affect the
financial reporting.
According to Belkaoui (2002) stated that financial information can be measured
through its timeliness and reliability.
As exhibited in the conceptual paradigm in Figure 1, the independent variable of
this study is the record keeping practice which are indicated by efficiency and security
which refers to precise and secured practice of record keeping. The dependent variable
is financial reports which are indicated by timeliness and reliability.

INDEPENDENT VARIABLE

DEPENDENT VARIABLE

RECORD KEEPING
PRACTICE

Efficiency
Security

FINANCIAL
REPORT

Timeliness
Reliability

Figure 1. Conceptual Paradigm Illustrating the Variables of the Study

Hypothesis

The null hypothesis of the study has been tested at 0.05 level of significance
which states that there is no significant relationship between record keeping practice
and financial report among selected sole proprietorship businesses in Panabo City.
Significance of the Study
The result of the study will provide insight and valuable contribution to the
following:
Business owners. To improve on methods of record keeping for efficient and effective
financial reports of their businesses.
Bureau of Internal Revenue (Government Agency).This study will help policy makers
by provision of data about the financial reports of the businesses for tax purposes.
Bookkeepers. Will help them in further research into all aspects of management
including record keeping.
Researchers. To gain knowledge on what is record keeping and how it influences the
financial report of sole proprietorship businesses.
Scope and Delimitation
The scope of this study focuses on the record keeping practice and financial
reports among selected sole proprietorship businesses in Panabo City. The target
respondents are the managers and the owner of sole proprietorship businesses. The
study is delimited in scrutinizing the record keeping practice and financial reporting
among selected sole proprietorship businesses in Panabo City.

Definition of terms
The terms used in the study are herein defined for clarity and easy understanding for
the readers.
Record keeping. It involves identification, classification, storage and protection,
receipt and transmission, retention and disposal of records for preparation of financial
statements. (Parker, 2002). In this study, record keeping means the action taken by the
owners of business to develop and enhance their financial reports such as cash flow
management to be used for future decision making and to monitor the business
performance.
Financial Report. Records that outline the financial activities of a business, an
individual or any other entity. Financial reports are meant to present the financial
information of the entity as clearly and concisely as possible for both the entity and for
readers (Investopedia, 2015). In this study, financial report means owners source of
information that can provide or useful in making economic decision.

Chapter 2
REVIEW OF RELATED LITERATURE

This chapter, literature is reviewed as provided by different authors concerning

the various aspects of record keeping practice and financial report among selected sole
proprietorship businesses to provide better background of the study.
Record Keeping

Parker (2002), stated that record keeping is essential to every business

management. Record keeping involves identification, classification, storage and
protection, receipt and transmission, retention and disposal of records for preparation of
financial statements. It includes the policies, systems, procedures, operations and
personnel required who administered the records. Thus, record keeping plays a vital
role in management of knowledge that can affect the financial report of business
organization. Similarly, Sarah (2009) states that good record keeping support effective
business adjustment and decision making, help to identify risks, enable detection of
complication and assists in resource allocation and performance planning.
In addition, Mc Lean (2000), pointed out that the most important reason to have a
good record keeping in every business establishment are to improve efficiency and
productivity, assimilate new records management to ensure proper cash flow
management and ensure regulatory compliance. Accounting records include entries
from day to day transactions of business. For instance, transactions in respect to
receipts and expenditures. Records may include a list of organizational assets and
liabilities that could help the enterprise to evaluate their performance in a particular
period of time usually at the end of a financial period.

Moreover, Shepherd (2006) stated that records which are managed as part of an
appropriate records management programme will help the organization to conduct
business in an efficient, accountable manner, deliver services consistently, support
managerial decision making and transparent policy formation and ensure continuity in
policy execution, management and administration.
Likewise, Sarah (2010) pointed out that proper record keeping provides evidence
of how the transaction was handled and substantiates the steps that were taken in order
to comply with business standards. Record keeping is the foundation on which a
compliance program should be built upon measures should be put in place to capture
the documentation and events that take place throughout a transaction commencing
from delivery and payment
In addition, Kanzi (2010) stated that an effective record keeping practice will
ensure that records are available for use when needed, that privacy and confidentiality
are maintained, that redundant records are destroyed and that records ultimately
contribute towards sustaining service delivery.
However, Howard (2009) elaborated that the system used to record information
may vary from business to business, but the principles are the same. However,
Wahlstedt (2000) clarified that the importance of record keeping practice in every
business was to monitor all money coming and going out of the business, to identify
financial transactions, to look at how the business operates and lastly is to identify how
financial transactions are processed. He also stated that many small businesses fail to
keep adequate records that leads to major problems and quite possibly the closing of
the business.

Moreover, Paul (2005) stated that record keeping practices in most of small
businesses particularly sole proprietorship businesses more relied upon mental or
verbal information, thus this gives possibility of forgetfulness, that cause problems in
planning for the future. Trusting the information on the memory involves danger and the
most obvious danger was forgetfulness of the accurate amount of every transactions
day to day. Mental or verbal information is not available for references.
In contrary, Reynolds (2010) pointed out that a successful practice of record
keeping is one that doesnt limit record keeping as only the documentation of
transactions but it also includes the implementation and maintenance of written
standards, operating procedures, documented training and education, all mitigating
factors and demonstration of due diligence and reasonable care.
Sian (2006) stated that the owner or the managers of the business should be
personally involved in record keeping.
Efficiency. According to EC (2008) in order to have accurate and efficient
records in most sole proprietor business in many countries, the laws require that
businesses must prepare financial statements and, often have to be audited. This
requires business owners to have some knowledge about record keeping and
accounting procedures.
In addition, Ismail and King (2007) concluded that developing a sound
accounting information depends on the owners level of accounting knowledge.

10

However, Dorasamy (2009) argue that the high cost of hiring professional
bookkeepers or accountants leaves the owners or the managers with no option to
consign the practice of record keeping and leaves an inaccurate accounting information.
Therefore, Wichman (2000) concludes that accounting record keeping pose a
major challenger to the management of business and recommends that managers or
owners must learn about record keeping and accounting.
McMahon (2000) added that records must be kept and maintained in a sound
accounting arrangement. To ensure to have a proper and accurate records the following
are practiced: (i) a record of all business sales, with copies of any invoices one has
issued, (ii) a record of all ones business purchases and expenses, (iii) invoices for all
business purchases and expenses, (iv) details of any amounts one personally pay into
or take from the business and (v) copies of business bank statements. Since
businesses are different, there are specific types of record that may need to be kept.
In addition, Gilbert Associates, Inc. (2015) states that an record keeping function
can be attained by creating policies for the monthly cutoff of invoicing and recording
expenses, organizing records in much easier way to handle (e.g creating coding cover
sheet), trains staff to fully familiarize the use of the records system to fully familiarize the
system to save time and cost, ensure that records are kept only as legally and
operationally required and review the records system from time to time.
Security. Zaizi (2007) stated that security refers to mechanisms that enforce
particular policies on information flow. It deals with the prevention and detection of
unauthorized actions by users. The definition is based on the three aspects which are

11

prevention of unauthorized disclosure of information, prevention of unauthorized

withholding of information or resources, and prevention of unauthorized modification of
information.
In addition, NSW (2015) states that security in record keeping practice is very
important to ensure the integrity of records will not be compromised. Having an effective
security will ensure that records are available when appropriate for use, are not subject
to unauthorized users, cannot be changed and cannot be inappropriately destroyed.
Additionally, UOG, (2014) states that records must be secured in order that
financial information contains personal or confidential information and sensitive or
commercial information. Company and businesses must ensure that data/ information is
not changed (either accidentally or purposefully), should be protected against loss, and
that if it is lost, that there is some backup or copy, should be protected against loss in
transit, and against the danger of falling into the wrong hands, the authenticity and
integrity of the information should be maintained and back upped, in case it is needed
as evidence (ways of ensuring are maintaining and preserving the previous records and
controlling the accessibility of the records) and ensuring that records are kept in the best
location for the purpose, whether electronic or physical.
Accounting records are important as a source of information and thus they must
be stored properly. NCSS (2007) defined record storage as the housing of records that
are semi-active or inactive but must still be retained. The records should be stored in a
well-built records center, archives, commercial storage and the basement.

12

In addition, NAS (2013) defined that records must be securely maintained to

prevent unauthorized access, alteration, damage or removal. They must be stored in a
secure environment, the degree of security reflecting the sensitivity and importance of
the contents. Where records are migrated across changes in technology, the evidence
preserved must remain accurate.
Financial Report
According to SBA (2014) understanding financial statements is essential to the
success of a small business. It can be used as a roadmap to steer you in the right
decision and help avoid costly breakdowns. Financial statements have a value that
goes far beyond preparing tax returns or applying for loans.
In addition, Jay Way (2015) emphasized that financial reports provides various
financial information that investors and creditors use to evaluate a companys financial
performance.
Likewise, Zamora (2013) stated that financial report hold the secrets of a
company. Aside from stating whether the company earns or loses money, they also
provide clues on where the management might find more resources to boost its
revenue. In addition, financial statements reveal a companys past performance and
potential.
Zinio (2006) stated also that annual financial statements shall be prepared in the
manner established by legal acts and (or) if the preparation of the entitys financial
statements is provided for in the by-laws of an individual enterprise or in the agreement
on joint activities of a partnership.

13

However, Robinson (2011) argued that financial records or statements has

always created some anxiety for entrepreneurs. For individuals, jumping to the world of
business ownership, this can be a daunting path to entrepreneurial success. It was
supported by Wicks (2015) that starting a business is quite confusing in determining
which reports are important and how to read the financial reports.
In contrary, Vogt (2015) signified that businesses must have financial statements
to provide a picture of how the current business models are running and whether they
are profitable. Financial statements can also include information on

capital

expenditures, business income, business trends, cash flow, company balance sheets
and how cash is handled. As a small business manager, there are a variety of reasons
why it is important to constantly analyze the company's financial statements.
Likewise, Wang, L. (2003) elaborated that complete and accurate financial
records are crucial for your business success. Good records provide the financial data
that help to operate more efficiently thus increasing business profitability.
Furthermore, Griffin (2015) added that analyzing companys financial statements
to meet financial reporting obligations and to assist in strategic decision-making, firms
prepare financial statements. However, the information provided in the financial
statements is not an end in itself as no meaningful conclusions can be drawn from these
statements alone.
Moreover, Foster (2015) states that the important thing to remember is that
everyone who looks at the financial report will conduct a financial statement analysis, in
one form or another and businesses will be judged according to the financial report.

14

Timeliness. According to Carslaw and Kaplan (2000), timeliness is also an

important qualitative attribute in the financial releases meaning that the financial
information should reach the interested parties as soon as possible.
Also, Al-Ajmi (2008) stated that timeliness of financial reports is one of the
qualitative characteristics of financial reporting because it determines the relevancy of
the information and it influences the decisions made by the users and beneficiaries of
financial reports. Information of the financial reports, however, is required to be made
available within a short period of time; otherwise, it loses some of its economic value.
It was agreed by Kamran (2003), that financial information needs to be available
to its users as rapidly as possible to make corporate financial statement information
relevant decision making process. Timely reporting on financial statements is necessary
for healthy financial markets. Timely financial reporting helps in efficient and timely
allocation of resources by reducing dissemination of asymmetric information, by
improving pricing of securities, and by mitigating insider trading, leaks and rumors in the
market.
Similarly, Iizuka (2000) states that Japans paragraph 1 Art. 146 of AO (Tax code)
prescribes cash records and disbursements must be daily recorded to have timely
financial records. Also, it acknowledges the logic of timeliness of entries in book of
accounts.
In addition, Iyoha (2012) states that timely financial reporting has become
particularly imperative due to the increasing exposure of business organizations to
international capital markets. Thus, the business organizations are being obliged to

15

satisfy the information demands of foreign investors and to provide them with more
timely information in annual financial reports.
Weltman, (2013) states that retaining records timely is important because it is a
need in preparing income tax returns. The type of records to keep and how long to keep
them, depend on the items involved which are asset purchases and various expenses.
However Lev and Zarowin, (2000), states that there are also contrary arguments
indicating that the usefulness of financial information has been deteriorating due to a
change in the economic conditions and operations of the companies However, Kinney
and McDaniel (2003) stated that many researchers argue that the timing of earnings
releases is of high significance since markets reactions are created by the
announcements of financial release.
Additionally, CGA, (2014) states that late financial information can cause serious
issues in the understanding of the liabilities owing by the company, especially where
future cash flow requirements are not made clear enough in time for the business owner
to bring cash in to make payments on time.
It was stated in AS (Accounting Simplified), (2013) that timeliness of accounting
records is generally more relevant to users while conversely, delay in provision of
information tends to render it less relevant to the decision making needs of the users.
In addition, CCG (2008) states that to have timely financial reports, it must be
produced close enough to the related time period to give input into management in time
to make changes. Also, owners must also include checklist for daily, weekly, monthly
and annual activities to monitor the financial records coming in and coming out.

16

Also, Eve (2010) states that accounts must be closed before reporting period
ends because this will allow the invoices for items related to the prior month to be
recorded in the correct period. Thus, it will improve the accuracy and timeliness of
financial reports or every businesses.
Reliability. Belkaoui (2002) noted that qualities of financial reports includes
reliability and timeliness. Supported by Best, (2009) opined that the fundamental
qualities of financial reports which are reliability and timeliness are most important to
determine the context of financial reporting information.
AS (Accounting Simplified), (2013) states that information is reliable if a user can
depend upon it to be materially accurate and if it faithfully represents the information
that it purports to present. Significant misstatements or omissions in financial
statements reduce the reliability of information contained in them.
Additionally, Adediran (2013) states that reliability in relation to financial reports is
an important attribute of accounting information. It may influence whether the
information is useful to those who read the financial statement. The reliability of audited
corporate annual financial report is considered to be crucial and an essential factor
affecting the usefulness of information made available to various users. The accounting
profession has recognized that the reliability of reports is a significant characteristic of
financial accounting information and for regulatory and professional agencies. He also
added that to measure the reliability of financial report these characteristics of financial
reports must be followed; (1) truth and fair, (2) free of material error, (3) Neutral, (4)
Completeness and (5) faithful representation. Also, he added that financial reports must

17

be reported based on the intention of presenting true and fair picture of the companys
results and condition and based on accurate information.
In addition, Lempert (2014) states that financial reports are reliable if it contains
information collected from transactional data that is easy to understand, competent
persons are reviewing the date to ensure that it is accounted correctly, and supported
by evidence (e.g receipts, invoices) and can be audited.
Lastly, FASAC (2004) states that reliability assures that information is reasonably
free from error or bias and faithfully represents what is the purpose to represent. With
respect to measure, it states that the reliability of a measure rests on the faithfulness
with which it represents what it purports to represent, coupled with an assurance for the
user, which comes through verification, that it has that representational quality

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Chapter 3

METHODOLGY

In this chapter research design, research subject, research instrument, data

gathering processes and statistical treatment of data was discussed to further
understand the methods used in this study.
Research Design
In this study, descriptive correlation method is employed with the help of the
researcher-made survey questionnaire used in gathering the required data from the
respondents.
Research Subject
The sample comprised of 31 randomly selected businesses. These were
selected depending on the type of business give that it is a sole proprietorship business
and assigned with identification numbers. Sole proprietor business units operators in
Panabo City responded to the questionnaire given by the researcher on behalf of their
businesses to determine the level of record keeping practice and financial report, this is
because they were at the center of the operation of their businesses and the decisions
depend much more on them.

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Table 1
Distribution of the Respondents

Name of Business

Number of Respondents

Smile Cellphone Accessories and General

Merchandise

EMZ Milk XPress

Gold Mobile

VLB General Merchandise

Mega Blocks Construction and Supply

J & A Commercial

Jeschee Business

Daylight Enterprises

Riveras Petron Service Station

Rojo Glass Services

Frux Food Products

Ter Rey Motor Parts & Vulcanizing Shop

Jams Apartelle

Rose Travel & Tours

Health and Hand Body Massage and Spa

SRJ Trucking Services

Pads Kamayan

Miriam Pharmacy

Central Power Electronics

SBB Building

Panabo FV Hardware

20

Balloonworx
1
Red Enterprises

RVC Goldsmith

Growex Marketing

Lovely Bazaar

Ka Hao Mobile and Accessories

Donna Mar Pharmacy

VSP Laundry Room

Kakay Scabbard and Knives

Jorich Direct Selling

TOTAL

31

Research Instrument
The researcher used questionnaires as data collection instrument. These
questionnaires were administered by the researcher himself and was validated by the
experts to attest that questions used will be appropriate to meet the objective of the
study and for purpose of explaining to the respondents the reason for the research and
receive appropriate and reliable information from the respondents.
To determine the level of record keeping practice, the following scale was used:
Scale
4.20 5.00

Descriptive equivalent
Very High

Interpretation
This means that record
keeping
practiced.

is

always

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3.40 4.19

High

This means that record

keeping

is

often

practiced.
2.60 3.39

Moderate

This means that record

keeping is sometimes
practiced.

1.80 2.59

Low

This means that record

keeping

is

less

practiced.
1.0 1.79

Very Low

This means that record

keeping is never
practiced.

To determine the level of financial report, the following scale was used:
Scale
4.20 5.00

Descriptive equivalent
Very High

Interpretation
This means that the usefulness

of financial report of the business

is very satisfactory.

22

3.40 4.19

High

This means that the usefulness

of financial report of the business
is satisfactory.

2.60 3.39

Moderate

This means that financial

report of the sole proprietorship
is useful.

1.80 2.59

Low

This means that the usefulness

of financial report of the business
is less satisfactory.

1.0 1.79

Very Low

This means that the usefulness

of financial report of the business
is not satisfactory.

Data Gathering Process

In conducting the study, the process involved the following steps:
Seeking permission to conduct the study. The researchers asked consent from the
in charge of the selected sole proprietorship business in Panabo City to allow the
researcher to conduct the study and distribute the questionnaires.
Formulation of the questionnaires. The questionnaires were administered by the
researchers themselves and was validated by the experts.

23

Administration of the instrument. The questionnaires were administered by the

researchers themselves to the respondents and conducted interviews at the convenient
time of the respondents.
Retrieval of the Questionnaire. The researchers themselves administered the
gathering of questionnaires that were be the source of the data for this study. Data were
tallied, computed, analyzed and interpreted through the help of the statistician.
Statistical Treatment of Data.
The following statistical tools were used in this study to analyze and interpret
data:
Mean. This was used to determine the level of financial report in terms of
timeliness among selected sole proprietorship businesses in Panabo City.
Pearson r. This was used to identify the significant relationship between record
keeping practice and financial report among selected sole proprietorship businesses in
Panabo City.
Chapter 4

PRESENTATION AND ANALYSIS OF FINDINGS

This chapter is composed of the presentation, analysis and interpretation of data

which is relevant to the queries in the statement of the problem. The sequence of the
major topics in the study are as follows: the level of record keeping practice, the level of
financial report among selected sole proprietorship business in Panabo City and the

24

significant relationship between record keeping practice and financial report among
selected sole proprietorship business in Panabo City.
Level of Record Keeping Practice among selected
Sole Proprietorship Businesses in Panabo City
The level of record keeping practice is measured in terms of efficiency and
security. The evaluation is based on 5 items question relating to efficiency of record
keeping practice and another 5 items question relating to security of record keeping
among selected sole proprietorship businesses in Panabo City answered by the
owners.
Further, it shows that the overall mean is 4.67 with the descriptive equivalent of
very high which means that the level of record keeping among selected sole
proprietorship businesses in Panabo City is always practiced. It indicates that the
business has met the business standards. According to Sarah (2010) pointed out that
proper record keeping provides evidence of how the transaction was handled and
substantiates the steps that were taken in order to comply with business standards.

Table 2
Level of Record Keeping Practice among selected Sole Proprietorship
Businesses in Panabo City
Efficiency
The business
1. have a monthly cut off for invoicing and
recording expenses.
2. organize records in much easier way to handle
by creating coding.
3. trains staff to fully familiarize the use of the
records system in order to save time & cost.
4. ensure that records are kept only as legally and

Mean

Descriptive Equivalent

4.48

Very High

4.45

Very High

4.29

Very High

4.84

Very High

25

operationally required.
5. review the records system regularly.
Mean
Security

4.74
4.56

Very High
Very High

4.74

Very High

4.77

Very High

4.81

Very High

4.87

Very High

4.74
4.79
4.67

Very High
Very High
Very High

The business
1. prevents unauthorized users to access the
financial information.
2. keeps previous years documents.
3. does not allow any unauthorized modification of
data.
4. ensures that records are kept in the best
location.
5. keeps back up or copies of records.
Mean
Overall Mean
Legend:
Scale
4.21-5.00
3.41-4.20
2.61-3.40
1.81-2.60
1.00-1.80

Description
Very High
High
Moderate
Low
Very Low

As reflected in Table 2, the over-all mean of efficiency is 4.56 with a descriptive

equivalent of very high. It means that the level of efficiency of record keeping among
selected sole proprietorship businesses in Panabo City is always practiced. It indicates
that the business owners have enough knowledge for a better and sound record
keeping practices and accounting procedures. As stated by EC (2008) that in order to
have accurate and efficient records in most sole proprietor business in many countries,
the laws require that businesses must prepare financial statements and, often have to
be audited. This requires business owners to have some knowledge about record
keeping and accounting procedures.

26

Item 4 ensure that records are kept only as legally and operationally required got
the highest mean of 4.84 with a descriptive equivalent of very high which means that the
business only kept records that can be used for legal purposes and for their operation
especially those who are needed on BIR purposes. Item 3 trains staff to fully familiarize
the use of the records system in order to save time & cost got the lowest mean with
4.29 with the descriptive of very high. It means that mostly of business owners trains
their staff for better quality of work.
The remaining items of the this indicator, item 2 organize records in much easier
way to handle by creating coding with a mean of 4.45 and item 1 have a monthly cut off
for invoicing and recording expenses with a mean of 4.48, both have a descriptive
equivalent of very high respectively. It means that business owners organize and
managed their record in order to have proper and efficient record keeping practice.
While, item 5 review the records system regularly got the mean of 4.74 with a
descriptive equivalent of very high which means that the business owners ensures that
record keeping system was regularly reviewed for better management and to avoid
errors.
As shown in Table 2, the over-all mean of security is 4.79 with a descriptive
equivalent of very high, which means that the level of security in record keeping among
selected sole proprietorship businesses in Panabo City is always practiced. It indicates
that the business owners stored their record properly and implemented practices that
ensure the integrity of records. Zaizi (2007) stated that security refers to mechanisms
that enforce particular policies on information flow. It deals with the prevention and
detection of unauthorized actions by users. Furthermore, NCSS (2007) defined record

27

storage as the housing of records that are semi-active or inactive but must still be
retained. The records should be stored in a well-built records center, archives,
commercial storage and the basement.
Item 4 ensures that records are kept in the best location got the highest mean of
4.87 with the descriptive equivalent of very high shows that the level of security in
record keeping among selected sole proprietorship business is very high. It means that
record keeping practice among selected sole proprietorship businesses in Panabo City
is always practiced. Also, it indicates that business owners ensure that their records are
kept in a safe and best location. While, Item 1 prevents unauthorized users to access
the financial information and item 5 keeps back up or copies of records both got the
lowest mean of 4.74 with a descriptive equivalent of very high. It means that record
keeping practice among selected sole proprietorship businesses in Panabo City is
always practiced. It implies that the business owners prevents unauthorized personnel
to access records for security purposes and ensures that the records kept are back up if
there will be loss. The remaining item of this indicator, item 2 keeps previous years
documents with a mean of 4.77 with descriptive equivalent of very high. It indicates that
the business owners keep their records that can be used especially for business and
government requirements. While, item 3 does not allow any unauthorized modification
of data got the mean of 4.81 with the descriptive equivalent of very high which means
that the business does not allow any changes of data especially those who are
unauthorized personnel.
Level of Financial Reports among selected
Sole Proprietorship Businesses in Panabo City

28

Table 3 present the level of financial reports among selected Sole Proprietorship
Businesses in Panabo City. The evaluation is based on 5 items question relating to
timeliness of financial reports and another 5 items question relating to reliability of
financial reports among selected sole proprietorship businesses in Panabo City
answered by the owners.
Also, it shows that the over-all mean is 4.52 with the descriptive equivalent of
very high. It means that the level of financial reports among selected sole proprietorship
businesses in Panabo City is very satisfactory. It indicates that the financial reports of
business are prepared in manner. Zinio (2006) stated also that annual financial
statements shall be prepared in the manner established by legal acts and (or) if the
preparation of the entitys financial statements is provided for in the by-laws of an
individual enterprise.

Table 3
Level of Financial Reports among Selected Sole Proprietorship Businesses in
Panabo City
Timeliness
The financial reports of the business
1. are produced close enough to related time
period to give input to the management on
time.
2. are made available within a short period of
time.
3. should reach to the interested parties on time.
4. need to be available to users rapidly.
5. ensure that cash records and disbursements is
recorded daily to have timely financial records.
Mean
Reliability

Mean

Descriptive Equivalent

4.42

Very High

4.26

Very High

4.19
4.29

High
Very High

4.74

Very High

4.38

Very High

29

The financial reports of the business

1. contains information collected from
4.71
Very High
transactional data that is easy to understand.
2. are based on accurate information from
4.61
Very High
company results and condition.
3. are reviewed by competent person or staff to
ensure that it is accounted correctly and
4.61
Very High
supported by evidence.
4. assure that data is free from errors or bias.
4.61
Very High
5. represents faithfully as to its purpose.
4.74
Very High
Mean
4.66
Very High
Overall Mean
4.52
Very High
Legend:
Scale
Description
4.21-5.00
Very High
3.41-4.20
High
2.61-3.40
Moderate
1.81-2.60
Low
1.00-1.80
Very Low
As reflected in Table 3, the over-all mean of timeliness is 4.38 with a descriptive
equivalent of very high which means that the level of financial reports among selected
sole proprietorship business in Panabo City is very satisfactory. It indicates that the
financial reports reaches the owner on time.
According to Carslaw and Kaplan (2000), timeliness is also an important
qualitative attribute in the financial releases meaning that the financial information
should reach the interested parties as soon as possible. Furthermore, Al-Ajmi (2008)
stated that information of the financial reports, however, is required to be made
available within a short period of time; otherwise, it loses some of its economic value.
As shown in Table 3, item 5 are produced from daily recorded cash records and
disbursements got the highest mean of 4.74 with a descriptive equivalent of very high. It
means that the usefulness of financial reports among selected sole proprietorship
businesses in Panabo City is very satisfactory. It indicates that information came from

30

daily sales and expenses. Item 3 should reach to the interested parties on time got the
lowest mean of 4.19 with a descriptive equivalent of high. It means that the usefulness
of financial reports among selected sole proprietorship businesses in Panabo City is
satisfactory. It indicates that the financial report of business reach the interested parties
on time.
The remaining items, item 2 are made available within a short period of time with
a mean of 4.26 and item 4 need to be available to users rapidly with a mean of 4.29 with
descriptive equivalent of very high respectively. It indicates that the financial reports are
made on time and reach the users rapidly especially the owner and the management.
While, item 1 are produced close enough to related time period to give input to the
management on time got the mean of 4.42 with a descriptive equivalent of very high
which means that the financial reports give enough information to the management on
time.
Depicted in Table 3, the mean of reliability is 4.66 with a descriptive equivalent of
very high. It means that the level of reliability of financial reports among selected sole
proprietorship businesses in Panabo City is very satisfactory. It indicates that financial
reports among selected sole proprietorship businesses contains information that is true
and fair, free from material error, neutral, complete and faithfully represented. According
to Adediran (2013) states that reliability in relation to financial reports is an important
attribute of accounting information. It may influence whether the information is useful to
those who read the financial statement. The reliability of audited corporate annual
financial report is considered to be crucial and an essential factor affecting the
usefulness of information made available to various users. The accounting profession

31

has recognized that the reliability of reports is a significant characteristic of financial

accounting information and for regulatory and professional agencies. He also added
that to measure the reliability of financial report these characteristics of financial reports
must be followed; (1) truth and fair, (2) free of material error, (3) Neutral, (4)
Completeness and (5) faithful representation.
Item 5 represents faithfully as to its purpose got the highest mean of 4.74 with
descriptive equivalent of very high. It means that the usefulness of financial reports
among selected sole proprietorship businesses in Panabo City is very satisfactory. It
indicates that financial reports of sole proprietor businesses are represented in faithful
manner for whatever purpose. While, item 2 are based on accurate information from
company results and condition, item 3 are reviewed by competent person or staff to
ensure that it is accounted correctly and supported by evidence, and item 4 assure that
data is free from errors or bias got the lowest mean of 4.61 with descriptive equivalent
of very high. It means that the usefulness of financial reports among selected sole
proprietorship businesses in Panabo City is very satisfactory. It indicates that financial
reports are reviewed by staff or personnel and shown accurate and bias free
information.
. While the remaining Item 1 contains information collected from transactional
data that is easy to understand got the mean of 4.71 with descriptive equivalent of very
high. It connotes that the financial reports information are easy to understand.
Significant Relationship between Record Keeping
Practice and Financial Reports among selected
Sole Proprietorship Businesses in Panabo City

32

The significance relationship between the level of record keeping practice and
financial reports among selected sole proprietorship businesses in Panabo City is
shown in table 4. The independent variable, record keeping practice has an over-all
mean of 4.67 with a descriptive equivalent of very high. It indicates that record keeping
practice in terms of efficiency and security is always practiced by the business. The
dependent variable, financial reports has an over-all mean of 4.52 with the descriptive
equivalent of very high. It means that the usefulness of financial reports in the business
is very satisfactory.

Table 4
Significant Relationship between Record Keeping Practice and Financial Reports
among Selected Sole Proprietorship Business in Panabo City

Variables

Mean

Record Keeping Practice

4.67

Financial Report

4.52

r-value

P-value

Decision on Ho @ 0.05 level of

significance

0.513

0.003

rejected

33

The record keeping practice and financial reports correlation obtained r-value of
0.513 and p-value of 0.003. The acceptance of the null hypothesis is based on the pvalue 0.003 which is lower than the 0.05 level of significance. Therefore, the null
hypothesis (Ho) is rejected which means that there is a significant relationship between
record keeping practice and financial reports among selected sole proprietorship
businesses in Panabo City. It indicates that record keeping practice among selected
sole proprietorship businesses in Panabo City affects the reliability and timeliness of
financial reports.
Therefore, the result of this study is supported by the theory of Elankavi (2013)
that record keeping can help business establishments indicated by efficiency and
security that can affect the financial reporting.

34

/
Chapter 5

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION

Presented in this chapter are the summary of findings, conclusions and

recommendations drawn by the researchers from the results of the study.
Findings
The findings of the study are the following:
1. The mean rating obtained by record keeping practice in terms of efficiency
and security is 4.67 which is described as very high.
2. The mean rating obtained by financial reports in terms of timeliness and
reliability is 4.52 which is described as very high.

35

3. Record keeping practice and financial reports obtained a significant value of

0.003 which is lower than the 0.05 level of significance. Therefore, the null
hypothesis (Ho) is rejected.
Conclusion
Based on the findings, the following conclusions are drawn:
1. The level of record keeping practice in terms of efficiency and security is always
practiced.
2. The level of usefulness of financial reports in terms of usefulness is very high.
3. There is significant relationship between record keeping practice and financial
reports among selected Sole Proprietorship Businesses in Panabo City.
Recommendation
Based

on

the

findings

and

conclusions

of

the

study, the

following

recommendations are drawn by the researchers:

1. It is recommended that businesses in Panabo City maintains training for their
staff to fully familiarize their records system. Also, businesses must maintain
backup copies of the important records which are saved in flash drive, external
hard disk and computer local disk that can be recovered in case of loss of the
original copies. Also, it is recommended to improve the security of the financial
reports information by putting passwords that cannot be disclosed by any
unauthorized users.

36

2. The researchers also recommends that sole proprietorship businesses must

maintain deadlines whether daily, weekly or monthly for the financial reports to be
submitted, to reach the interested parties on time. It is also recommended that
sole proprietorship businesses top management must check all the supported
evidence and records of the financial information daily to maintain accurate and
bias free information.

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