The Relationship Between Accounting Understanding and Financial Report Quality of MSMEs in Bandungrejosari Village

Abstract

Micro, small, and medium enterprises (MSMEs) hold a strategic position in the Indonesian economy, yet many owners still prepare financial reports without adequate accounting knowledge. This study examines the relationship between accounting understanding and financial report quality among MSMEs in Bandungrejosari Village, Sukun District, Malang City. A quantitative correlational approach was applied to 90 respondents selected through purposive sampling, with the sample size determined using the Slovin formula from a population of 831 MSME actors. Data were collected through a five-point Likert-scale questionnaire covering transaction recording, separation of business and personal finances, and understanding of financial-report functions, as well as relevance, reliability, completeness, understandability, and comparability. Data were analyzed using Pearson product-moment correlation after passing validity, reliability, and normality tests. The results show a positive and significant relationship between accounting understanding and financial report quality (r = 0.499; p = 0.000), classified as a moderate correlation, with a coefficient of determination of 24.9%. These findings confirm that stronger accounting understanding among MSME actors is associated with better financial report quality, although 75.1% of the variation is explained by other factors.