ip & Org

Nyathi and Benedict, J Entrepren Organiz Manag 2017, 6:2

Journal of Entrepreneurship &
rsh a
eu
DOI: 10.4172/2169-026X.1000216

ni
n

zat
ntrepre

ion Mana
Organization Management
of E

ISSN: 2169-026X
g
al

em
rn ent
Jou

Research Article
Research Article Open
OpenAccess
Access

An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail

Clothing Industry in Cape Town, South Africa
Nyathi M* and Benedict OH
Faculty of Business and Management Sciences, Cape Peninsula University of Technology, South Africa

Abstract
Bookkeeping is regarded as a day-to-day function of a business operation in tracking cash inflows and cash out
flows. Micro-entrepreneurs emanate from a wide range of disciplines with or without bookkeeping knowledge; however,
bookkeeping execution is inevitable in operating a sustainable business. The purpose of this paper was to analyse
micro-entrepreneurs’ bookkeeping practises within the retail clothing industry in Cape Town. Data were collected by
means of questionnaires under positivism approach. The sample size was n=62. The Statistical Package for Social
Sciences (SPSS) was used to quantify and analyse data collected. The findings showed that most micro-entrepreneurs
do practise bookkeeping manually, but do not complete the bookkeeping cycle. Worryingly was that was that most micro-
entrepreneurs indicated that decision making is based on maintained financial records. This translates to unstainable
poor decision-making emanating from incomplete bookkeeping records which may ultimately result in business failure.
To this effect, it was recommended that micro-entrepreneurs’ should engage on complete bookkeeping practises so that
business decisions are based on accurate financial records hence insightful quality business decision outcome towards
business success.

Keywords: Bookkeeping practises; Micro-entrepreneurs; Retail outcome-reward [7,17,18]. Expectancy (effort-performance) refers to
clothing industry; Cape Town the perceived link between the level of effort expended and the level of
resultant performance; instrumentality (performance-outcome) refers
Introduction to the perceived correlation between performance and the achievement
Micro-entrepreneurs’ business success has been recognised of job rewards; valence (outcome-reward) refers to the perceived
as essential for economic growth and poverty eradication. Micro- desirability of the potential rewards [18-21]. Similarly, a micro-
entrepreneurs contribute towards economic growth and poverty entrepreneur’s willingness to execute bookkeeping duties will depend
eradication through self-employment, job creation and wealth creation on how the business owner perceives bookkeeping outcome and how
and promote the general welfare of the citizens [1-4]. However, bookkeeping practise may contribute towards business success.
previous studies have shown a worrying small business’ failure as a Previous studies on the expectancy theory [19,21,22] indicate
result of insufficient entrepreneurial skills [5-7]. To achieve a successful that insights on abilities and skills influence expectancy perceptions.
micro-enterprise business operation, sound bookkeeping practises are Motivational effort exerted towards business success is dependent
regarded as the most essential entrepreneurial skill requirement [8-12]. upon the entrepreneur’s belief in his/her competencies and capabilities
Bookkeeping practising is one of the inevitable duties which micro- [20,23]. Moreover, Shaver et al. [20] state that an entrepreneur’s
entrepreneurs should execute in order to determine the business’ willingness to perform certain tasks on business operations will be
performance and profitability [1,8,10,13,14]. In this paper, a particular influenced by the expected outcomes. “A person must believe that
attention is devoted on analyzing bookkeeping practises of micro- exerting a given amount of effort can result in the achievement of a
entrepreneurs within the retail clothing industry. Businesses operate particular level of performance” [24]. Therefore, it is the researcher’s
for the purpose of making profits; small businesses usually for the opinion that the extent to which the micro-entrepreneur practices
purpose of survival. Hence the monitoring and measurement of this bookkeeping is influenced by the business owner’s beliefs on possible
expectation lies in the accountability of the business. bookkeeping benefits. Hence the below presumed illustrative diagram
The remaining part of the paper proceeds as follows; theoretical (Figure 1) is based on the expectancy theory [15].
perspective based on expectancy theory in relation to bookkeeping Literature Review Bookkeeping Methods of Micro-
practices, then literature review on bookkeeping and micro-
entrepreneurs’ records followed by the research methodology
Entrepreneurs
undertaken for this study. Subsequently, the findings are presented In the following literature review are explanations and discussions
and discussed. Finally, the paper is ended with conclusion and
recommendations.
Theoretical perspective expectancy theory *Corresponding author: Nyathi M, Faculty of Business and Management
Sciences, Cape Peninsula University of Technology, South Africa, Tel: 021 460
The expectancy theory refers to a set of decision theories of work 3174; E-mail: [email protected]
motivation and performance based on valence, instrumentality and Recieved May 16, 2017; Accepted August 18, 2017; Published August 25, 2017
expectancy (VIE) model [15]. The expectancy theory states that the Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of
levels of effort of an individual to perform an act are a function of “the Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town, South Africa. J
strength with which he/she expects certain outcomes to be obtained Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216
from the act, times the attractiveness of the expected outcomes” Copyright: © 2017 Nyathi M, et al. This is an open-access article distributed under
[16]. Expectancy theory has three components; expectancy-effort- the terms of the Creative Commons Attribution License, which permits unrestricted
performance, instrumentality-performance-outcome and valence- use, distribution, and reproduction in any medium, provided the original author and
source are credited.

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X
Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town,
South Africa. J Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216

Page 2 of 8

Expectancy

Effort-performance: Perceived effort that practicing bookkeeping through

recording all financial transactions will lead to business performance
understanding and quality decision-making

Instrumentality

Performance-outcome: Perceived probability that recording all transactions will lead

to business performance measurement and quality decision-making towards business
success

Valence

Outcome-reward: Knowledge of business performance measurement and quality

decision-making resulting in competitive advantage and sustainable profitability

Motivation

Recording of all business transactions; cash inflows and cash outflows

Figure 1: Expectancy theory in relation to micro-enterprises.

on the types of bookkeeping methods utilised by micro-entrepreneurs; businesses: debtor’s records, invoices and sales receipt records,
micro-entrepreneurs records maintained that is cash inflow and cash creditor’s records, expenses records, payroll records, petty cash
outflow records; inventory records, description of records, classification records, and inventory records [3,13,28,33,]. According to Service
of records and the last stage of bookkeeping. (2016) transactions are divided into cash inflows (Income/receipts)
and cash outflows (Expenditure/payments). Cash inflows comprise:
Bookkeeping method debtors records, invoices and sales receipt records. Cash outflows
Manual bookkeeping and electronic bookkeeping are two methods include: expenses records, payroll records, petty cash records and
of bookkeeping utilised by businesses in maintaining their records. inventory purchases records. The main aim of business operation is
Some businesses simultaneously utilise both electronic bookkeeping profit generation of which profit determination cannot be achieved in
and manual bookkeeping method [13,14,25-27]. Manual record- isolation bookkeeping execution with particular focus on cash inflows
keeping systems consist of paper-based journals/entries and the and cash outflows [1,13,14,27,34].
journals are divided into separate sections for receipts and payments
Cash inflows (Income/receipts)
[13,26,27]. The main aim of manual bookkeeping is to record
receipts and expenditures to maintain revenue and expense journals Sales records capture all the sales of goods and services rendered,
Pinson [13] and Benedict [27] highlight that manual bookkeeping is resulting in an increase in either cash or debtors [32,35-37]. Debtors
easy to understand, and is mostly used by small businesses and can are invoiced through a process of billing a customer for goods or
be extremely effective. Arguably, manual bookkeeping tasks are services that are provided due to be paid until a future date, while
tedious hence substantially substituted by computerised electronic cash sales are transactions which are paid for with cash or credit cards
bookkeeping [4,6,28-30]. at the point of sale [13,25,28,35,38]. Kimmel et al. [35] note that an
enterprise keeps a sales invoice which is a supporting document for
Alternatively, businesses can use electronic bookkeeping where
credit sales to keep track of debtors. The debtors account records all
an accounting software is used to maintain journals automatically
credit sales, hence enabling the micro-enterprise to keep track of its
[13,25,30,31]. Electronic bookkeeping refers to the utilisation of
customers and amounts owed by debtors [13,28,39,40]. Invoices are
accounting software for recording transactions [13,25,27,28,30]. The
sent to debtors as a reminder to settle outstanding accounts [2,41,42].
process of transaction capturing is simplified for the user in the sense
This account will be applicable to micro-retail clothing enterprises
that the transactions are easily entered and matched to the relevant
which sell goods or render services on credit or lay-by and are essential
account [4,13,25,30,32]. Next, the accounting software “automatically
to avoid non-payment through keeping track of debtors [2,27]. Cash
debits and credits the proper corresponding account” classified based
sales are recorded on the cashbook when using manual bookkeeping
on cash inflows and cash outflows.
or on the accounting software when using electronic bookkeeping
Micro-entrepreneurs’ bookkeeping records [13,27,33]. Both cash sales and credit sales records serves as evidence of
goods sold. Benedict [27] declares that sales results to profits which are
The following are bookkeeping transactions recorded by small the main motive for doing business, hence they probably are the most

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X
Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town,
South Africa. J Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216

Page 3 of 8

important record of an enterprise. [27,28,35]. Inventory is directly linked to cash inflow and cash outflow
on business transactions. Inventory records serve to keep track of stock
Cash outflows (expenditure/payments) available at hand and enable the micro-entrepreneur to determine
There are several accounts which result in cash outflows and these which type of clothing moves fast and the stock of clothes which moves
include; purchase account, creditors account, petty cash account, slowly. Therefore, proactive inventory records play an essential role
payroll account [13,26,28,33,43]. Purchase account shows all purchases on stock purchasing decisions and on managing business finances
of goods, and the purchases are recorded when the business receives [28,33,40]. Furthermore, inventory records aid on supplier and
the goods from the seller [13,33,44,45]. Purchases are made either on a customer accounts’ adjustment on returned goods.
cash basis or electronically at the time of purchase or on a credit basis to
Description of records
settle the account at a later date [33,35,38,43,46,47]. A purchase invoice
is provided by the supplier to the business as a supporting document for According to Gibson [36] the general journal comprises journal
each credit purchase [35]. Credit purchases result on creditors which entries and is called the book of original entry. Gibson [36] defines
are recorded on the creditors account. Creditor account records all journal entries as all transactions which are recorded in a general
monies due to suppliers who have provided goods or rendered services journal with a full description of the transaction. Comprehensively,
to the business to be paid at a later date [13,25,26,33,37] and the time- Warren et al. [61] affirm that a journal entry entails the recording of: the
lag before payment is usually between one and two months [2,25,38]. date of the transaction, the title of the account debited, the title of the
The business has an obligation to pay for the goods purchased on credit account credited and a brief transaction description. General journal is
[35,46,48]. The credit account captures all credit purchases and enables the book of source and the transactions are recorded chronologically in
the business to keep track of clients’ owed [2,25,38]. By keeping track of accordance to date of occurrence. The process of recording transactions
clients owed, micro-entrepreneurs are able to settle debts in time and/ in a journal is called journalising [61]. Therefore, micro-entrepreneurs
or communicate with suppliers in case of insufficient funds to settle are expected to adequately describe business transactions on journal
debts, hence maintaining good relations. Also, credit account records entries. This is useful for the owner and outside users for information
act as a reminder to the business owners to settle the accounts on time, and legal evidence.
hence maintaining good credit record.
Classification of records
Some businesses keep petty cash for the purposes of purchasing
small items. Petty cash is used to purchase small items which cost General ledger contains posted journal entries which would
small amounts of money for day-to-day operation of micro-enterprises have been initially recorded on the general Journal, hence called
[35,49,50]. Petty cash purchases may account for a huge amount of book of second entry [61]. General ledger summarises and classifies
money by the end of a year. Therefore it is essential to keep proper general journal entries to specific accounts irrespective of their date
records, such as receipts, of all petty expenditures which will enable of occurrence [25]. The general ledger contains ledger accounts which
the micro-entrepreneur to categorise those expenses at the end of the represent the accumulated information about changes in: assets,
period [13,50]. If the micro-entrepreneur has employees, he/she is liabilities, owner’s equity, revenues or expenses [25,33,43,45]. The
obligated to remunerate the employees. The employees’ remuneration process of recording ledger accounts is called posting. Each ledger
is recorded on payroll account. The payroll account records include is identified by its account name or subaccount [25,43]. The micro-
both salaries and wages, of which salaries are based on monthly or entrepreneur uses the general ledger as a reference document with
yearly-basis monetary rewards, while wages are monetary rewards regards to the overall business financial records Rosen [33].
based on hourly rates usually paid on a weekly basis [33,35,38,51,52]. A Last stage of bookkeeping cycle
micro-enterprise’s payroll will comprise both the owner of the business’
monetary reward together with the salaries/wages of employees Bookkeeping is concluded by drafting a trial balance. The trial
[27,33,52]. The payroll record enables the micro-entrepreneur to balance comprise of a list of all the accounts in the general ledger in
determine the overall cash spent on remuneration and also helps on which all the debit accounts (Cash inflows) are put on one side and all
taxation calculations. credit accounts (Cash outflows) are put on the other side [37,38,43].
Trial balance is used to check the occurrence of errors as a result of
Previous studies [3,8,30,32,33,40,53-55] have revealed that execution not making a credit entry for every debit entry or balancing an account
of bookkeeping duties enables business owners to benefit in numerous incorrectly [33,43]. If there are no mathematical mistakes or errors of
business aspects such as profit calculation, inventory buying decision, omission, debit accounts equal credit accounts. Trial balance is used as
income statement preparations, measuring of business performance the base for preparation of final accounts which determine whether the
by comparing current and previous financial records, understanding business is making a profit or a loss. The trial balance is the last stage
the big view of the business financials, forecasting, budgeting and in the bookkeeping cycle [25,26,37,62]. In conclusion, bookkeeping
attracts potential investors or funding institutions. It was found that records are categorised into cash inflows and cash out flows, either
micro-entrepreneurs engage in incomplete bookkeeping procedure captured by means of manual bookkeeping method or electronic
and they have difficulties in understanding the proper bookkeeping bookkeeping method. Bookkeeping records are used for numerous
criteria hence unable to enjoy the above-mentioned outcome benefits purposes which include but not limited to calculate profit, enable the
of bookkeeping [3,56]. It is therefore essential for micro-entrepreneurs micro-entrepreneur to determine which type of clothing moves fast
to practise bookkeeping as it is one of the important business skills. and the stock of clothes which moves slowly, to make stock purchasing
Failure to practise bookkeeping has dire consequences which may lead decisions, to track stock, to calculate tax and to track payments, of
to business failure [3,57-60]. which all ultimately have an impact on business success. Therefore,
Inventory/stock records micro-entrepreneurs should ensure that all business records are
captured, properly described and the bookkeeping cycle is completed
Inventories are goods available for future sales to customers so that the financial information is usable in business decision making.

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X
Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town,
South Africa. J Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216

Page 4 of 8

Failure to engage in bookkeeping practises poses a threat to micro- entrepreneurs’ demographic information, bookkeeping methods used
entrepreneurs business success. and bookkeeping practises.

Research Methodology Table 1 shows that most (67.7%) of the retail clothing enterprises
are operated by female. Similarly, previous studies show that women
The positivism research approach was utilised to collect data are increasingly perusing entrepreneurship and the clothing industry
using a questionnaire as a data collection instrument. The research in particular is exclusively dominated by women [3]. This finding can
methodology used aimed at obtaining information on bookkeeping also be explained by passion and strength required in the clothing
practises. The questionnaire was standardized based on objective industry which is a motivational factor for women entrepreneurs [3].
questions where respondents answered the questions without being The majority (40.3%) of micro-entrepreneurs were between the ages
governed by their feelings and opinions or influenced by the researcher. of 20 and 30 years old Khosa [63] found that most of small-business
The data were then quantified and analysed using the Statistical Package owners in Cape Town, South Africa are owned by individuals between
for Social Sciences software (SPSS) into descriptive statistics. the ages of 20 and 30 years old. This can be explained by an increase
Population on unemployment among youth hence resorting to entrepreneurship.
The next age group with a significant percentage (24.2%) were the
The target population for this research study were micro- ages ranging between 30-40 years. These findings are comparable to
entrepreneurs within the retail clothing industry located in Cape Town, Chrysostome [64], Tengeh [65], Fatoki and Patswawairi [66] who state
South Africa. Years of operation were not considered in delineating the that small business are mainly owned by middle-aged entrepreneurs.
subjects (micro-entrepreneurs) of the study. The researcher observed This finding can be explained by the exit from entrepreneurship to the
that it was going to be expensive and impractical to find a list of all retail job market of the individuals whom their businesses failed or individuals
clothing entities operating small businesses in Cape Town. Therefore, who were concurrently job-hunting while operating their businesses.
generalisations were made with reference to small businesses within The respondents had a wide range of level of education, 36.1%
the retail clothing industry in Cape Town. having attained a national diploma certificate, 21.3% with a metric or
equivalent to metric certificate, 19.7% completed secondary education
Sample technique level, 16.4% with a bachelor’s degree, 3.3% without formal education
Questionnaires were distributed to a sample of 62 participants with and respondents with a master’s degree and primary education
questions pertaining to bookkeeping practises. The study employed constituted of 1.6% each. The trend of entrepreneurs’ qualifications in
non-probability purposive and cluster sampling. Non-probability South Africa follows this pattern whereby the majority are with matric
purposive sampling was employed by selecting micro-entrepreneurs or post-matric qualifications and the minimum are without any formal
within the clothing industry. Businesses in other industries were education or with a master’s degree Fatoki and Garwe [63,66,67]. The
excluded from the sample. Based on cluster sampling, the suburban missing (1.6%) may account for and be explained by the fact that post-
clusters were selected. The selection was based on areas where the masters qualification were excluded in the question selection.
retail clothing businesses dominate in Cape Town so as to obtain a Out of 62 micro-entrepreneurs, 40.3 percent used a manual
representative sample. The following suburban clusters which are bookkeeping system; 27.4 percent captured their transactions
mainly dominated by retail clothing business in Cape Town were electronic and 32.3 percent used both a manual and an electronic
selected; Cape Town Central Business District, Woodstock, Salt River, record-keeping method (Table 2). The results show that the majority
Maitland, Bellville, Observatory, Mowbray, Ronderboch, Claremont, of the participants use manual bookkeeping. This finding is in line
Wynberg, Waterfront, and Greenpoint. with the findings by Pinson [13] and Benedict [27] that small-business
Presentation of Results and Discussions owners maintain their business records manually because it is easy to
understand. Also, the use of manual bookkeeping is cheap compared
This section presents and subsequently discusses results on micro- to the computerised bookkeeping system. This implies that micro-

Gender Frequency % Age Frequency % Education Frequency %

Male 20 (32.3%) <20 years 1 (1.6%) No formal education 02 (3.2%)
Female 42 (67.7%) 20-30 years 25 (40.3%) Primary education 01 (1.6%)
31-40 years 15 (24.2%) Secondary education 12 (19.4)
41-50 years 11 (17.7%) Certificate/Metric 13 (21.0%)
51-60 years 6 (9.7%) Diploma 22 (35.5%)
60 years and above 4 (6.5%) Bachelor’s degree 10 (16.1%)
Master's degree 01 (1.6%)
61 (98.4%)
Missing 1 (1.6%)
Total 62 (100%) 62 (100%) 62 (100%)
Table 1: Gender, age and level of education of micro-entrepreneurs.

Variable accounting bookkeeping method Frequency Percentage Cumulative percentage

Electronic 17 27.4 27.4
Manual 25 40.3 67.7
Both 20 32.3 100
Total 62 100
Table 2: Accounting bookkeeping method.

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X
Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town,
South Africa. J Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216

Page 5 of 8

Variable bookkeeping execution Never Rarely Sometimes Often Always

practices Frequency Percentage Frequency Percentage Frequency Percentage Frequency Percentage Frequency Percentage
I record all the money coming in and 3 4.8 2 3.2 6 9.7 7 11.3 44 71
going out of the business
I record all the money withdrawn 6 9.7 3 4.8 6 9.7 6 9.7 41 66.1
from the business for personal use
I separate my personal finances from 5 8.1 3 4.8 4 6.5 8 12.9 42 67.7
business finances
I process invoices with suppliers 4 6.5 1 1.6 2 3.2 1 16.1 45 72.6
I give customers receipt and stay 1 1.6 1 1.6 3 4.8 6 9.7 51 82.3
with a copy
I record all amount that the business 12 19.4 3 4.8 6 9.7 3 4.8 38 61.3
owes
I adjust accounts when debtors 6 9.7 2 3.2 1 1.6 1 22.6 39 62.9
settle their debts
I name and describe the transactions 4 6.5 1 1.6 3 4.8 1 22.6 40 64.5
I record
I make use of the general ledger 19 30.6 6 9.7 5 8.1 7 11.3 25 40.3
I check whether debits and credits 6 9.7 4 6.5 5 8.1 1 22.6 33 53.2
balance
I draft the trial balance on monthly 18 29 11 17.7 4 6.5 9 14.5 20 32.3
basis
I use the business records to know 9 14.5 1 1.6 6 9.7 7 11.3 39 62.9
how much cash I have.
Table 3: Micro-entrepreneurs’ bookkeeping execution practises.

entrepreneurs’ who cannot afford electronic bookkeeping system when stock is bought from the wholesalers where it is a requirement
opt for manual bookkeeping. Significantly, 32.3 percent of micro- to process all documentation when transactions are made. Likewise,
entrepreneurs use both manual and electronic bookkeeping method. Kimmel et al. [35], Benedict [27], Chauhan [46] emphasis on the
Likewise, Pinson [13] states that businesses can either utilise manual importance of keeping payments records to keep track of both debtors
bookkeeping or electronic bookkeeping systems, alternatively both and creditors obligations. Even though micro-entrepreneurs process
manual and bookkeeping execution practises electronic bookkeeping invoices, significantly 19 percent of micro-entrepreneurs’ do not keep
can be utilised concurrently in capturing business transactions (Table 3). records of the money which the business owes which may result in
late debt payments. Late debt payment is not a health culture for the
A small percentage (27%) of micro-entrepreneurs solely
business, particularly where debt interest is charged and future credit
utilises electronic bookkeeping system for recording their business
purchases are expected. Most 88% (Always=65% and Often=23%)
transactions. In total, at least 59.7 percent of micro-entrepreneurs
of the respondents name and describe transactions when capturing
use electronic bookkeeping. This can be explained by the fact that
records and a minimum percentage rarely (2%) or sometimes (5%)
businesses are increasing opting for computerised bookkeeping.
name and describe transactions when capturing records. In line with
Computerised bookkeeping is more efficient as massive paper usage
Warren et al. [61] and Gibson [36] most micro-entrepreneurs capture
and data entry mistakes associated with manual bookkeeping are
the full description of the transactions. Detailed information enables
substantially eliminated [4-30].
micro-entrepreneurs to deal with disputes associated with returns.
In table 3 questions pertaining to bookkeeping practises of micro-
As displayed in Table 3, most 80.6 (Always=67.7% and
entrepreneurs within the retail clothing industry were asked using a
Often=12.9%) of micro-entrepreneurs separate their personal finance
five-point Likert-scale (1-Never, 2-Rarely, 3-Sometimes, 4-Often,
from business finances. Slightly more than three quarters or 76%
5-Always) method. Respondents were asked to indicate the frequency
(Always=66% and Often=10%) of the participants frequently record all
of executing the indicated bookkeeping.
the money withdrawn from their business and almost three quarters
The majority 82 percent (Always=71% and Often=11%) of the 74% (Always=63% and Often=11%) of the participants use business
participants record all monetary inflows and outflows of their business records to determine cash available within the business. Although
while 13% (Rarely=3% and Sometimes=10%) of the participants rarely most micro-entrepreneurs indicated they record all cash inflows
or sometimes account for money coming in and going out of the and cash outflows and separate business finances from personal
business. Similarly, 86 percent (always=63% and often=23%) of the finances, about a quarter do not rarely maintain withdrawal records.
respondents adjust their business accounts when debtors settle their This can be explained by the fact that some micro-entrepreneurs do
debts and 89 percent (Always=73% and Often=16%) of the respondents not separate business finance and personal finance. Failure to record
constantly process suppliers invoices. This can be explained by the withdrawals imply that the actual cash available in the business is less
fact that both cash flow records and debt settlement records are than what is reflected on financial records [13,35]. Slightly above half
directly linked to the money coming in and out of the business. It 51% (Always=40% and Often=11%) of the respondents make use of
also explains that most of the micro-entrepreneurs acknowledge the general ledger in classification of recorded transactions and a total
obligation to pay suppliers through invoice processing and updating of 31% of the respondents never make use of the general ledger. This
their transactions when debtors settle their accounts hence they are result correlates with the findings on bookkeeping methods used by
able to track payments. Micro-entrepreneurs are obliged to track micro-entrepreneurs, whereby below half of micro-entrepreneurs
payments because there are two or many entities involved, particularly use manual bookkeeping method and above half use either electronic

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X
Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town,
South Africa. J Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216

Page 6 of 8

bookkeeping method or both manual and electronic bookkeeping. References

On manual bookkeeping there is no need to use the general ledger 1. Ademola S, Adeyemi AZ, Odebiyi I (2017) Financial Management Practices and
system on recordkeeping. General ledger is mostly used electronic Women Entrepreneurs Performance: An Empirical Investigation. International
bookkeeping system. Slightly above three quarters 76% (Always=53% Journal of Economics and Business Management 3: 70-79.
and Often=23%) of the respondents often or always checked whether 2. Agyei-Mensah BK (2010) Working capital management practices of small firms
credits and debits balance when recording business transactions. A in the Ashanti region of Ghana. 2: 567-583.
total of 15% (Rarely=7% and Sometimes=8%) of the respondents 3. Ajao OS, Oyeyemi OG, Moses OI (2016) Bookkeeping and sustainability of
sometimes or rarely checked whether debits and credits balance while small scale businesses in Nigeria: An assessment of Agbara Local Government
10% of the participants never checked whether credits and debits Area, Ogun State. Unique Journal of Business Management Research 3: 11-21.
balance. Conversely, a significant 29 percent of the respondents do 4. Alves MDC (2010) Information technology roles in accounting tasks-A multiple-
not draft the trial balance on a monthly basis with below half. 46.8 case study. International Journal of Trade, Economics and Finance 1: 103-107.
percent (Always=32% and Often=15%) of the respondents who drafts 5. Arasti Z, Zandi F, Bahmani N (2014) Business failure factors in Iranian SMEs:
the trial balance on monthly basis. The statistical contradiction on Do successful and unsuccessful entrepreneurs have different viewpoints?
Journal of Global Entrepreneurship Research 4: 1-14.
higher percentage indicating that they check whether credits and debits
balance verses the low percentages indicating that they do not draft 6. Aziz K (2003) Accounting information system satisfaction and job satisfaction
a trial balance which checks whether credits and debits balance may among Malaysian accountants. Paper Presented at the 7th Pacific Asia
Conference on Information Systems (PACIS), Adelaide, Australia, pp: 786-803.
be explained by the fact that; most micro-entrepreneurs are survalist
operating on continuous mode without closing financial books on 7. Baumann MR, Bonner BL (2017) An Expectancy theory approach to group
coordination: Expertise, task features, and member behavior. Journal of
monthly basis. Therefore, credits and debits are checked at the time Behavioral Decision Making 30: 407-419.
of the transaction not collective credit and debit entries at the end of
the month. Bookkeeping cycle is concluded by drafting a trial balance 8. Rajaram R, O’Neill C (2009) Profit or No Profit-Does the SME Sector Really
Know? Themes in Management and Informatics 16: 99-119.
[37,38,43]. These results imply that micro-most entrepreneurs’ do
not complete the bookkeeping cycle, therefore maintain incomplete 9. Brigham E, Ehrhardt M (2013) Financial management: theory & practice.
Cengage Learning.
bookkeeping records. Similarly, findings by Maseko and Manyani [56]
and Ajao et al. [3] show that small businesses engage on incomplete 10. Drexler A, Fischer G, Schoar A (2014).Keeping it simple: Financial literacy and
rules of thumb. American Economic Journal: Applied Economics 6: 1-31.
bookkeeping practices. In relation to expectancy theory, the level
of micro-entrepreneurs bookkeeping will be depending on their 11. Gaskill LR, Van Auken, HE, Kim HS (2015) Impact of operational planning on
expectations on the outcome and benefits of financial records produced small business retail performance. Journal of Small Business Strategy 5: 21-36.
[7,15,19,18,24,68]. 12. Höglund H, Sundvik D (2016) Financial reporting quality and outsourcing of
accounting tasks: Evidence from small private firms. Advances in Accounting
Table 4 presents data reliability verification Cronbach’s Alpha 35: 125-134.
analysis is used to determine through the use of Cronbach’s Alpha 13. Pinson L (2007) Keeping the books: basic record-keeping and accounting for
analysis internal consistency and data collection instrument reliability. the successful small business. United States of America: Kaplan Publishing.
The Cronbach’s Alpha coefficient’s of ‘Micro-entrepreneurs’
14. Tuyisenge HJ, Mugambi F, Kamirembe OM (2015) The role of financial literacy
bookkeeping execution practices’ is 0.893 greater than 0.707 which; on loan repayment among small and medium entrepreneurs in Rwanda case
Nunnaly [69], Peterson [70], Gliem [71] explains that the variable study: Urwego opportunity bank. International Journal of Small Business and
items on the five-point Likert-scale used are reliable. [72-85]. Entrepreneurship Research 3: 33-66,

15. Vroom VH (1964) Work and motivation. New York: Wiley.

Conclusion and Recommendation/s
16. Hackman JR, Porter LW (1968) Expectancy theory predictions of work
The study analysed the bookkeeping practices of micro- effectiveness. Organizational Behavior and Human Performance 3: 417-426.
entrepreneurs within the retail clothing industry. From the results, 17. Schmidt FL (1973) Implications of a measurement problem for Expectancy
it can be concluded that most micro-entrepreneurs utilise manual Theory research. Organizational Behavior and Human Performance 10: 243-251.
bookkeeping system. However, are increasingly adopting to electronic 18. LaFleur KE, Arnold DR, Smith GD (2013) Expectancy theory: a framework for
bookkeeping system within their businesses. The results further analyzing relations between dependent yet autonomous channel members.
In: Retail and marketing channels: Economic and marketing perspectives on
showed that micro-entrepreneurs do practise bookkeeping, but do
producer-distributor relationships. Pellegrini L, Reddy SK editors. United States
not complete the bookkeeping cycle hence suggesting that incomplete of America: Routledge Publisher, pp: 138-145.
bookkeeping records are maintained. Worryingly was that most micro-
19. Katzell RA Thompson DE (1990) Work motivation: Theory and practice.
entrepreneurs indicated that decision making is based on maintained American Psychologist 45: 144-153.
financial records. This translates to unstainable poor decision-making
20. Shaver KG, Gartner WB, Crosby E, Bakalarova K, Gatewood EJ (2001)
emanating from incomplete book keeping records which may ultimately Attributions About Entrepreneurship: A Framework and Process for Analyzing
result in business failure. To this effect, it is therefore recommended Reasons for Starting a Business. Entrepreneurship Theory and Practice Winter
that micro-entrepreneurs’ should engage in complete bookkeeping pp: 5-32.
practises so that the business records show the true reflection of the 21. Purvis RL, Zagenczyk TJ, McCray GE (2015) What’s in it for me? Using
business’ financial performance hence quality decision making towards expectancy theory and climate to explain stakeholder participation, its direction
business success. and intensity. International Journal of Project Management 33: 3-14.

22. Rasch RH, Tosi HL (1992) Factors affecting software developers’ performance
Variable Items Cronbach’s Alpha an integrated Information approach. Management System Quarterly 16: 395-413.
Micro-entrepreneurs’ bookkeeping executing 12 0.893 23. Chen L, Ellis SC, Suresh N (2016) A supplier development adoption framework
practices using expectancy theory. International Journal of Operations & Production
Table 4: Reliability on Micro-entrepreneurs’ bookkeeping execution practices. Management 36: 592-615.

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X
Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town,
South Africa. J Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216

Page 7 of 8

24. Renko M, Kroeck KG, Bullough A (2012) Expectancy theory and nascent 48. Quinn M (2012) Brilliant Accounting: Everything you need to know to manage
entrepreneurship. Small Business Economics 39: 667-684. the success of your accounts. Pearson UK.

25. Calder L (2011). Junior Bookkeeper: Computerised Bookkeeping Pastel 49. Gourville JT (2003) The effects of monetary magnitude and level of aggregation
Accounting. Cape Town: edge learning media. on the temporal framing of price. Marketing Letters 14: 125-135.

26. Maritz J (2011) Bookkeeping to trial balance. Cape Town: Edge learning media. 50. Di Muro F, Noseworthy TJ (2013) Money isn’t everything, but it helps if it
doesn’t look used: How the physical appearance of money influences spending.
27. Benedict RG (2012) An investigation of the accounting records maintained by Journal of Consumer Research, 39: 1330-1342.
black businesses in rural Qwaqwa.A dissertation submitted in full fulfilment
of the requirements for the degree of Masters Commercii: Accounting in the 51. Konings J, Murphy AP (2006) Do multinational enterprises relocate employment
Faculty of Economic and financial sciences at the University of Johannesburg. to low-wage regions? Evidence from European multinationals. Review of World
Economics 142: 267-286.
28. Vinayagamoorthy A, Sakila N (2013) A study on impact of e-accounting. Indian
Journal of Accounting 1: 93-101. 52. Burman K (2008) Income tax returns: Technical financial accountant. South
Africa: Edge learning media.
29. Silva WAC, Rocha AM, De Oliveira Melo AA (2014) Management and Internal
Control System: An Analysis of Accounting Offices Located in Belo Horizonte, 53. Bruwer JP, Watkins A (2010) Sustainability of fast moving consumer goods
MG, Brazil, and Its Metropolitan Area, Using the Four-Stage Model of Kaplan retail SMMEs. African Journal of Business Management 4: 3550-3555.
and Cooper. International Journal of Finance and Accounting, 3: 162-173.
54. Oosterbeek H, Van Praag M, Ijsselstein A (2010) The impact of entrepreneurship
30. Zakaria WZW, Ilias N, Wahab N (2017) A Survey on the Impact of Accounting education on entrepreneurship skills and motivation. European Economic
Information System on Tasks Efficiency: Evidence from Malaysian Public Review 54: 442-454.
Sector Agencies. International Review of Management and Marketing 7: 183-
190. 55. Velimirović D, Velimirović M, Stanković R (2011) Role and importance of key
performance indicators measurement. Serbian Journal of Management 6: 63-
31. Molanazari M, Abdolkarimi E (2010) The effects of task uncertainty, 72.
decentralisation and accounting information systems characteristics on the
accounting information systems performance in Tehran stock exchange: Three 56. Maseko N, Manyani O (2011) Accounting practices of SMEs in Zimbabwe: An
way interaction model. Paper Presented at the 2nd International Conference on investigative study of record-keeping for performance measurement (A case
Information and Financial Engineering 3: 443-448. study of Bindura). Journal of Accounting and Taxation 3: 158-161.

32. Cadden DT, Schneider GP (2014) Accounting and Entrepreneurship students: 57. Benzing C, Chu HM, Kara O (2009) Entrepreneurs in Turkey: A factor analysis
Scope and delivery issues. Academy of Entrepreneurship 20: 2-8. of motivations, success factors, and problems. Journal of Small Business
Management 47: 58-91.
33. Rosen B (2016) Best practices for accounting procedures for micro, small and
medium-sized businesses. Arizona Journal of International & Comparative Law 58. Fatoki O, Garwe D (2010) Obstacles to the growth of new SMEs in South
33: 317-328. Africa: A principal component analysis approach. African Journal of Business
Management 4: 729-738.
34. Lin SM, Ansell J, Andreeva G (2012) Predicting default of a small business
using different definitions of financial distress. Journal of the Operational 59. Fischer MJ (2000) Luca Paciolo on Business Profits. Kluwer Academic
Research Society 63: 539-548. Publishers: Netherlands. Journal of Business Ethics 25: 299-312.

35. Kimmel PD, Weygandt JJ, Kieso DE (2009) Accounting: Tools for business 60. Mitchelmore S, Rowley J (2013) Entrepreneurial competencies of women
decision making. John Wiley & Sons. entrepreneurs pursuing business growth. Journal of Small Business and
Enterprise Development 20: 125-142.
36. Gibson CH (2013) Financial statement analysis. 13th (edn) International edition.
Cengage learning. 61. Warren C, Reeve J, Duchac J (2013) Financial & managerial accounting.
Cengage Learning.
37. Service C (2016) Gripping Generally Accepted Accounting Principles, (16thedn.)
Pietermaritzburg: LexisNexis. 62. Service C (2011) Gripping Generally Accepted Accounting Principles 12th
(edn.), Pietermaritzburg: LexisNexis.
38. Bradshaw J, Brooks M (1996) Business Accounting and Finance for Managers
and Business Students. Juta and Company Ltd. 63. Khosa RM (2014) An analysis of challenges in running micro-enterprises: a
case of African foreign entrepreneurs in Cape Town, Western Cape.
39. Pushplata C, Rakhi H (2013) Liquidity analysis of bajaj auto limited. Indian
Journal of Accounting 1: 112-119. 64. Chrysostome E (2010) The success factors of necessity immigrant
entrepreneurs: In a search of a model. Thunderbird International Business
40. Kirsten CL, Fourie JR (2012) The accounting professions’ role in financial Review 52: 137-152.
management skills development of small businesses.Journal of Economic and
Financial Sciences 5: 459-479. 65. Tengeh RK (2011) A business framework for the effective start-up and operation
of African immigrant-owned businesses in the Cape Town Metropolitan area,
41. Zervides A, Tsappi P (2000) U.S Patent No. 6,052,674. Washington DC: U.S South Africa.
Patent and Trademark Office.
66. Fatoki O, Patswawairi T (2012) The motivations and obstacles to immigrant
42. Broadhead A, Light G (2007) Deadlines and Reminders. English for Personal entrepreneurship in South Africa. Kamla-Raj 32:133-142.
Assistants: The essential handbook for doing business internationally, pp: 106-112.
67. Kalitanyi V, Visser K (2010) African immigrants in South Africa: job takers or
43. Flynn D, Koornhof C, Kleynhans K, Meyer L, Posthumus L (2012) Fundamental job creators?. South African Journal of Economic and Management Sciences,
accounting (5thedn.), Juta and Company Ltd. 13: 376-390.
44. Needles B, Powers M, Crosson S (2012) Principles of accounting. Cengage 68. Ferris KR, (1977) A test of the Expectancy Theory of motivation in an accounting
Learning Norek CD (2002). Returns management: making order out of chaos. environment. Accounting review 53: 605-615.
Supply Chain Management Review 6: 34-42.
69. Nunnally JC (1978) Psychometric Theory. 2nd Edition, McGraw-Hill, New York.
45. Osuala EC, Adukwu EA (2014) Utilization of Computer Software in Posting
Transactions to Ledger Accounts in the Teaching of Financial Accounting 70. Peterson RA (1994) A meta-analysis of Cronbach’s coefficient alpha. Journal of
in Tertiary Institutions in the North-East Nigeria. Journal of Education and Consumer Research 21: 381-391.
Practice 5: 1-6.
71. Gliem JA, Gliem RR (2003) Calculating, Interpreting, and Reporting Cronbach’s
46. Chauhan NM, (2013) Accounting for Sales Revenue and Sales Return.Journal Alpha Reliability Coefficient for Likert-Type Scales. Midwest Research-to-
of Research in Humanities and Social Sciences 1: 15-19. Practice Conference in Adult, Continuing, and Community Education, Ohio
State University, Columbus, pp. 82-88.
47. Service C (2015) Gripping Generally Accepted Accounting Principles, (16th
edn.), Pietermaritzburg: LexisNexis. 72. Chen Y, Gupta A, Hoshower L (2006) Factors that motivate business faculty

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X
Citation: Nyathi M, Benedict OH (2017) An Analysis of Bookkeeping Practises of Micro-Entrepreneurs in the Retail Clothing Industry in Cape Town,
South Africa. J Entrepren Organiz Manag 6: 216. doi: 10.4172/2169-026X.1000216

Page 8 of 8

to conduct research: An Expectancy Theory Analysis. Journal of Education for management. Industrial Marketing Management 29: 45-56.
Business 81: 179-189.
79. Lawler EE, Suttle JL (1973) Expectancy theory and job behavior.Organizational
73. Chiang CF, Jang SS Deborah Canter, Bruce Prince (2008) An expectancy Behavior and Human Performance 9: 482-503.
theory model for hotel employee motivation. International Journal of Hospitality
Management 9: 327-351. 80. Liao HL, Liu SH, Pi SM (2011) Modeling motivations for blogging: An
expectancy theory analysis. Social Behaviour and Personality an International
74. Daugherty PJ, Richey RG, Genchev SE, Chen H (2005) Reverse logistics: Journal 39: 251-264.
superior performance through focused resource commitments to information
technology. Transportation Research Part E: Logistics and Transportation 81. McMahon RG, Holmes S (1991) Small business financial management
Review 41: 77-92. practices in North America: a literature review. Journal of Small Business
Management 29: 19-29.
75. DO Valle PO, Menezes J, Reis E, Rebelo E (2009) Reverse logistics for
recycling: The customer service determinants. International Journal of Business 82. Mustapha M, Yaen CH (2016) Demand for voluntary audit by small companies
Science and Applied Management 4: 1-17. in Malaysia. Malaysian Accounting Review 12: 73-88.

76. Guide VDR, Jayaraman V, Linton JD (2003) Building contingency planning 83. Parlikad AK, McFarlane D, Fleisch E, Gross S (2003) The role of product
for closed-loop supply chains with product recovery. Journal of operations identity in end-of-life decision making. Auto ID Centre White Paper cam-autoid-
Management 21: 259-279. wh017.

77. Haltiwanger J, Jarmin RS, Miranda J (2013) Who creates jobs? Small versus 84. Service C (2011) Gripping Generally Accepted Accounting Principles, (12th
large versus young. Review of Economics and Statistics 95: 347-361. edn.) Pietermaritzburg: LexisNexis.

78. Lancioni RA, Smith MF, Oliva TA (2000) The role of the Internet in supply chain 85. Srivastava SK (2008) Network design for reverse logistics. Omega 36: 535-548.

J Entrepren Organiz Manag, an open access journal Volume 6 • Issue 2 • 1000216

ISSN: 2169-026X