An Assessment of Basic Accounting Practices and Business Entity Concept on the Performance of Small and Medium Enterprises in Kenya

Small and Medium Enterprises (SMEs) in many economies play significant roles in the economic growth of both developed and developing countries including employment generation and poverty reduction among others. These facts notwithstanding, majority of SMEs have failed to embrace Accounting Business Entity Concept. Instead they have treated business assets as private assets. This has resulted into a number of SMEs operating below standards and in worst cases even collapsing. The main objective of the study was an assessment of the relationship between basic accounting practices and Business Entity Concept on the performance of SMEs in Kenya. A cross-sectional descriptive research design was adopted to establish the performance of SMEs that practiced the accounting basics and applied the concept of Business Entity. Data was obtained through personalised interviews to 50 small and medium enterprises business owners. The study revealed that first; there is a direct relationship between accounting basics practices and SMEs performance and second, that there is a moderating effect of Business Entity Concept on the relationship between accounting basics practices and SMEs performance. The study recommended that SMEs should embrace the application of Business Entity Concept if they are to perform well. The study concentrated on basic accounting practices on the performance of SMEs moderated by Business Entity Concept against prior studies that hitherto concentrated only on accounting record keepin