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Browsing Research Projects by Subject "Accounting records"

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    Effect of Financial Record Keeping on the Taxation of Small and Medium Enterprises in Malindi Town
    (KESRA/JKUAT - Unpublished research project, 2020) Charo, James Gona
    Small and Medium Enterprises have been on record that they are not performing well. Under the self-assessment tax regime in Kenya, a person is required to declare and pay taxes without any assessment from the tax authorities. This has led to the reduction of the number of compliance checks. It has been noted that a number of taxpayers file their tax returns with incomplete, incorrect records or no records at all. This can be attributed to the reduced number of compliance checks to monitor the records being kept by business people. Reports from the itax system in Kenya indicate inconsistences in the tax returns being made by taxpayers thereby querying the accuracy and adequacy of the records. Research has shown that not all businesses keep adequate records but does not go further to explain the quality of these records. This study therefore sought to investigate how the financial recordkeeping affects the taxation of small and Medium Enterprises. The study was guided by the measurement theory, decision usefulness theory which describe the practice of financial record keeping and the Allingham and Sandmo theory which relates to tax compliance. The aim of the study was to examine the effect of financial record keeping on the taxation of Small and Medium Enterprises- SMEs in Malindi. With the Specific objectives: to determine the effect of types of accounting records on taxation of SME’s in Malindi, to investigate the effect of managerial competence on taxation of Small and Medium Enterprises in Malindi and to ascertain the effect of book keeping methods on taxation of Small and Medium Enterprises SME’s in Malindi. To achieve these objectives, a Cross Sectional survey design was adopted which involved surveying SMEs to obtain responses on how they perceive the relationship of record keeping and its effect on taxation. The target population were the 101 VAT registered sole traders in in Malindi town from which a sample size of 81 traders was drawn using the Slovin’s formula. Systematic random sampling was used to select the respondents from the sampling frame. Primary data was collected using structured questionnaires whereas secondary data pertaining to taxpayers’ information was obtained from Kenya Revenue Authority database. The data from the respondents was then analyzed by multiple regression analysis to establish any relationship between the dependent and independent variables. Statistical package for Social Sciences (SPSS) was used in this analysis. Information from the analyzed data was represented using tables. The researcher’s findings indicated that the large portion of businesses in Malindi keep Cash book, Purchase book, Creditors Account and Debtors Account. Accounting records were found to have a Significant or strong Correlation with the Taxation of SMEs at Malindi with the coefficient r =0.822. this implied that Accounting records strongly influences how these SMEs are tax Compliant. Therefore, the need to have quality and good accounting records will significantly improve compliance levels of these SMEs in Malindi. Managerial competency was found to have the least influence on the taxation or compliance on the SMESs in Malindi, with a coefficient r=0.678 indicated a strong influence or a positive direct correlation between the Managerial competence and the Taxation of SMEs in Malindi. Bookkeeping System had a correlation r=0.750, this denoted a strong positive correlation to the dependent variable – Taxation of the SMEs in Malindi. This indicated a very strong correlation between the Bookkeeping systems/methods and how the SMEs are tax compliant in Malindi. From the research findings, the researcher recommends on the following; Further taxpayer education on Accounting Records Keeping to target the SMEs in Kenya, hiring of Certified Accountants and Professionals, adoption of modern hybrid Accounting systems or double accounting systems so as to improve the efficiency and accuracy during payment of taxes and filing of returns.