 Accrual accounting and access to external funds: Evidence from small businessesPhilip Keejae Hong, Kyonghee Kim, Sukesh Patro and Kyunghwa Yu Advances in accounting, 2025, vol. 68, issue C Abstract: This study explores how the use of accrual accounting, as opposed to cash accounting, is related to small businesses' access to external funds and the type of borrowing relationships they have. The findings show that the use of accrual accounting is associated with better access to lines of credit and trade credit, which are important sources of external financing for small businesses. The use of accrual accounting is also positively associated with larger borrowing amounts, more favorable borrowing terms, the establishment of more credit relationships, and with more distant financial institutions. Likewise, accrual accounting is associated with shorter borrowing relationships and less reliance on personal contact with financial institutions. Overall, this study demonstrates a significant association between the use of accrual accounting and improved access to external finance for small businesses, suggesting that the informational limitations of cash accounting may be related to greater constraints in accessing external funding. Keywords: Accrual accounting; Small business; External financing; Lines of credit; Trade credit; Relational financing; Arm's length financing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:68:y:2025:i:c:s0882611024000579 DOI: 10.1016/j.adiac.2024.100786 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.