The Effect of Accounting Understanding and Business Size on The Quality of MSMEs Financial Statements

Abstract

The economic growth of Indonesia is greatly supported by the abundance of Micro, Small, and Medium Enterprises (MSMEs). MSMEs plays a crucial role in economic growth and development, giving rise to new economic sectors. During the pandemic, the number of MSMEs in Sidoarjo Regency declined, resulting in an average decrease of 61% in business profit. One of the strategies to restore profit growth is by reviewing financial reports. However, MSMEs still faces difficulties in managing financial reports. This research aims to analyze the influence of accounting understanding and business size on the quality of MSMEs financial reports, using the financial reporting theory according to PSAK 1. This study employs a quantitative descriptive design. The research findings indicate that accounting understanding and business size significantly influence the quality of financial reports.
Keywords: Accounting Understandin; Business Size; Financial Report Quality