Ubesiri, K. E.Gunaratne, Y.M.C.2022-01-312022-01-3120159789550481088http://www.erepo.lib.uwu.ac.lk/bitstream/handle/123456789/8276/12-ENM-A%20Study%20of%20impact%20of%20accounting%20record%20keeping%20practices%20on%20.pdf?sequence=1&isAllowed=yAccounting practice refers to the ordinary, practical application of accounting and or auditing policies that occur within a business (European Commission, 2008). The American Institute of Certified Public Accountants defines accounting record keeping as the analysis, classification and recording of financial transactions in books of accounts to permit informed judgment and decision making by the users of the information. SMEs play important roles in the economic growth and sustainable development of every nation (Maseko and Manyani, 2011). Failure to record business transactions (bookkeeping) leads to collapsing of the business within few month of its establishment (Muchira, 2007). It has been recognized that appropriate accounting information is important for a successful management of any business entity, whether large or small (European Commission, 2008). One of the reasons for failure of SMEs is not having proper accounting practices (David and Thomas, n.d.; Ramawickrama, 2011; Scovia, 1998). In other words there is a direct relationship between book keeping and financial performance. Therefore, poor book keeping would lead to poor financial performance and proper book keeping would lead to better financial performance of the SMEs. As such there is need for the owners and managers of the SMEs to embrace proper book keeping practices in order to be successful in their financial performance (David and Thomas, n.d.). There were only few studies conducted in Sri Lankan with regard to the accounting recordkeeping of Sri Lankan SMEs and financial performance Karunannda and Jayamaha, n.d.). Accordingly, the first objective was to identify the relationship between accounting record keeping practices and financial performance of the SMEs and second objective was to identify the challenges SME owners face in their record keeping in SMEs. Methodology The population of this study was SMEs which have got registered in Chamber of Commerce in Badulla District Sri Lanka. Only 50 SMEs was used to collect data. The convenience sampling technique was used for the purpose of the research by covering the Divisional Secretariats of Badulla district Structured questionnaire was used to collect quantitative data and further few focus group discussions were carried out to confirm the results. Descriptive statistics, Pearson correlation coefficient and multiple linear regressions were used to analyze quantitative data. The analyzed data were presented using tables and graphs. In addition, Cronbach Alpha reliability test was employed to assess the validity of the questionnaire and it was 0.77. The financial accounting practices measure by using accounting system (AS), accounting principles (AP), accounting transactions (AT), double entry bookkeeping (DE), use of accounting formats (AF), financial statements (CFS). Sales growth (SG) used to measure financial performance.enEntrepreneurship and managementManagementMarketingFinancial ManagementFinancialOther