INTERNATIONAL JOURNAL OF MULTIDISCIPLINARY RESEARCH AND ANALYSIS ISSN(print): 2643-9840, ISSN(online): 2643-9875 Volume 03 Issue 12 December 2020 DOI: 10.47191/ijmra/v3-i12-07, Impact Factor: 5.522 Page No.- 310-317 310 Page www.ijmra.in IJMRA, Volume 3 Issue 12 December 2020 A Challenge of Accounting Practices on Small and Medium Enterprises (SMEs): Case Study of Palestine. 2 Ishaq A.H. Talahmeh , 1 Adnan A.A. Qubbaja 1,2 Department of Finance, Palestine Ahlia University-Bethlehem- Palestine ABSTRACT: This paper examined the accounting practices of SMEs drawing on a survey of 100 SMEs in Palestine. The results revealed that majority of SMEs failed to keep proper accounting records pertaining to their businesses. Consequently, it was difficult for the owner-managers to determine the profit earned or loss suffered in the business during a particular accounting .The major reasons for the entities failure to maintain proper accounting records and prepare a complete set of financial statements included inability to prepare financial reports as a result of poor records keeping, Lack of skills, inability to prepare financial Reports, Distrustful attitude of owner /manager, Cost of hiring qualified employees, finally fear to disclose all information to government It is recommended that training programs must be organized to sensitize owners/managers on the need to maintain proper books of accounts. The government should also come out with the necessary legal instruments to make the preparation of proper books of accounts mandatory in order to improve SMEs practice of accounting in Palestine. KEY WORDS: Accounting practices of SMEs, Palestine, SMEs practice of accounting I. INTRODUCTION The Small and Medium Sized Enterprises (SME) sector is one of the primary driving forces for economic growth and job creation. SMEs and micro-enterprises constitute over 95 per cent of all enterprises and account for two thirds to one half of total non-farm employment and Gross Domestic Product (GDP) worldwide The percentage contribution of SMEs to (GDP) ranges from 60% in China, 57% in Germany, 55.3% in Japan, 50% in Korea and 47.3% in Malaysia(Mira & Ogollah, 2013 . SMEs play pivotal roles in creating dynamic, market oriented economic growth, employing the growing workforce in developing countries, alleviating poverty and promoting democratization (Mira & Ogollah, 2013). In Palestine SME’s sector constitutes more than 95 percent of the entire enterpr ises of the Palestinian economy. It also has great care from PMA since it is a key component in promoting economic development and ensuring financial inclusion in Palestine (Palestine Monetary Authority, 2017) These important roles of SMEs can best be sustained through the implementation of fundamental financial and accounting practices (Schwenk & Schrader, 1993). However, it has been reported that many SMEs failed to keep adequate accounting records to generate the much needed accounting information that owner-managers and other users require for their decision making purposes which led to major problems (Madurapperuma, Thilakerathne, & Manawadu, 2016). (Larson & Clute, 1997) further reported of weak internal accounting systems of some SMEs which resulted in poor planning, weak expense control, low collection of accounts receivable, poor financial condition, and inadequate information for decision making purposes II. LITERATURES REVIEW Definitions of MSEs A. There is no universally accepted definition of a small and medium-sized business. The term SMEs covers a wide range of country to country and varying between the sources reporting SME statistics. Some of the commonly used criteria are the number of employees, total net assets, sales and investment level (Ademola et al 2012) . Thus, definition depends on the government policies of the country