Project Report - Accounting On Sme

ACCOUNTING of SME Done in

NASA Fried CHICKEN, Pondicherry

PROJECT REPORT

Submitted By KAMALAKKANNAN G

DEPARTMENT OF MANAGEMENT STUDIES SCHOOL OF MANAGEMENT PONDICHERRY UNIVERSITY PONDICHERRY – 605014

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ACKNOWLEDGEMENT The successful completion of any task would be incomplete without mentioning the names of the persons who helped to make it possible. I take this opportunity to express my gratitude in a few words to all those who helped me in the completion of this project. I convey my sincere thanks to Dr. B.CHARUMATHI for giving this opportunity to have such a detailed study about Accounting in SME. I express our sincere thanks and deep sense of gratitude to Mr. NASAR for providing all the information to successfully complete this project. Finally, I express my sincere thanks and deep sense of gratitude to my friends for giving timely advice in all the aspects for the success of this project work.

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CONTENTS

S. No.

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TITLES

PageNo.

1

SME – Introduction

4

2

SME - Company Profile

6

3

Objective of the Project

8

4

Accounting Registers in NFC

9

5

Asset Register

11

6

Expenses Register

11

7

Purchase / Consumption Register

12

8

Suggestion to the Enterprise

16

SME – Introduction Small and medium enterprises (also SMEs, and variations thereof) are companies whose headcount or turnover falls below certain limits. SMEs comprise approximately 99% of all firms and employ between them about 65 million people. In many sectors, SMEs are also responsible for driving innovation and competition. Globally SMEs account for 99% of business numbers and 40% to 50% of GDP. As per EU: Its current definition categorizes companies with fewer than 10 employees as "micro", those with fewer than 50 employees as "small", and those with fewer than 250 as "medium".

Type of Enterprise

Employee Count

Micro Enterprise

<= 10

Small Enterprise

10 < Count <= 50

Medium Enterprise

50 < Count <= 250

In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39% of the manufacturing output and around 33% of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. 4|Page

As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises. The lack of a universal size definition makes business studies and market research more difficult.

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SME – Company Profile NASA Fried Chicken & Burger (NFC) is a small fast food shop which is located at centre of the Pondicherry city. NFC is now providing about 35 different fast food items and quality is not compromised at any cost. NFC has a strong customer base, who are of repeated ones for their uncompromised quality and perfectly asthetically pleasing ambience.

NFC is just 4 months old (Since April 2009) Enterprise which was started by a group of friends. They had a forecast report that there is a strong liking in western food by Tamilians especially Pondicherrians. This is becoming trend in Metros and it was found migrated towards Pondicherry also in the span of recent years. With a sizeable number of French People in Pondicherry the change in trend cannot be surprised.

The Business, runs for 9 hours a day, is having a lot of plans for improvement in coming days. 75 Minutes of Discussion with the properitor made me aware of the accounting method which they are following in the shop, which is quick as well as accurate. The Net Profit which they calculate is the deciding factor of the plan, which they did early to be executed or not. So they are very cautious and accurate in calculating the Profit.

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Address of the Enterprise:

NASA Fried Chicken & Burger No. 2, Anna Salai, Puducherry – 1 Phone: 0413 – 3207778 Mobile: 9894377708 Properieter: Mr. Nasar

Data Collection Method: Telephonic / Direct Contact Mode of Contact

Date of Contact

Span of Discussion

Topic Discussed

Direct Contact

22nd August 2009, 8 PM

15 Minutes

Accounting

Telephonic Contact

24th August 2009, 11 AM

15 Minutes

General Discussion

Telephonic Contact

26th August 2009, 4 PM

15 Minutes

General Discussion

Direct Contact

28th August 2009, 2 PM

30 Minutes

Accounting

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OBJECTIVE OF THE PROJECT As a part of “Accounting forManagers” curriculum we are instructed to do this project to have a detailed view of how transactions are recorded in realtime. The main objectives of this Project are  Identify the Accounting Method followed in Small and Medium Enterprise  Analyse the Accounting Method  Suggesting improved method if any

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Accounting Registers in NFC Transactions are recorded in NFC by three different registers (at three different times) in order to facilitate the fast processing of bills generation phase while functioning.

The three registers are a) Asset Register (Register 1) b) Other Expenses Register (Register 2) c) Purchase / Sales Entry (Register 3)

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ASSET REGISTER Raw Material Watages if any Sales Stocks Remaining

Frequency of Updation is low. Once Asset is Purchased.

OTHER EXPENSES REGISTER Electricity Expenses Wages Telephone Charges Rent Any recurring Expenses

Frequency of Updation is Medium.Monthly – 10 (Approx)

PURCHASES / SALES ENTRY Raw Material Watages if any Sales Stocks Remaining

Frequency of Updation is Very High. Daily – 100 Transactions (Approx) 10 | P a g e

ASSET REGISTER This register holds CAPITAL Invested, Capital Equipments bought, adds if any bought new. This register has been kept separate and it will be updated only if any of the transaction mentioned above happens. The Register is not an accounting note. It is maintained in ordinary note book with exact details of what / when bought for the business. Single entry system is followed in this register.

OTHER EXPENSE REGISTER Monthly expenses like a) Wages b) Electricity Bills c) Rent d) Telephone Bills e) Unexpected Expenses f) Donations if any g) Water Charges are Accounted in seprate ACCOUNTING NOTE. The transaction updation in this is done immediately once the expense mentioned incurs.

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Purchase / Sales / Wastage Entry: This part of transaction entries are done in Computer. A Visual Basic Program costing about Rs.9,000 will do the part of this entries. When the program is installed initial entries such as Name of the Raw material with units of entry (for Cheese it is ‘No.s’), Exact no. of Raw material used to make a food item (ex.: For Burger: 1 Bun, 1 Patty, 1 Lettuse leaves, 1 Chesse Slice, ½ Cucumber) in terms of units entered.

A total of 78 raw materials are used in the shop. 36 food Items are made out of it. 78 Raw materials with its unit of Entry and exact ingredients of 36 food items are entered at initial pace in VB. Price of the food item is arrived by the manual rough calculation which includes the profit percentage as we decide.

Whenever Sales happens the Food items and number of food items are entered in “VB Billing Screen”. Bill will be generated and cashed from Customers. This transaction indirectly reduce the stock level of a set of raw materials, which are required for making the food items contained in the bill.

If any wastage happens at the day end it will be entered in “VB Wastage Screen”. This transaction will also reduce the raw material stock for the corresponding food material wastage. At the end of the day the stock remaining will be printed. They maintain 3 levels of Stocks a) High level Stock b) Medium Level Stock c) Critical Level Stock

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STOCK LEVELS 90 80 70 60 High Level

50

Medium Level

40

Critical Level

30 20 10 0 Bun (Imperishable)

Cheese (Perishable)

Lettuse Leaves (Semi Perishable)

For perishable material they keep them in Medium level Stocking and they are purchased every day for consumption. Raw Materials which can be stored for long time (Imperishable) are kept in High Level Stocking. Once any of the 78 Raw Material falls below the Critical level has to be treated urgent and the stockings has to be done. When Medium level stock reaches, it is a remainder for fresh Purchase.

Every Raw Material has a predefined High / Medium / Critical levels of Stock. The level has been identified by the consumption / usage of the material for the span of days by the sales.

Ex: Cheese Slices are perishable Medium / Critical levels of stock are 50 / 10 pieces

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Material Inward Entry Updates the following in Background (VB) Updating Expense Incured (↓)

Updating Raw Material Stock Level (↑)

Raw Material Inward Entry

Billing Updates the following in Background (VB) Updating Sales Register (↑)

Updating Raw Material Stock Level (↓)

Billing for Customer for Food

↑ / ↓ - Represents Increase / Decrease revenue

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Output from Visual Basic:

Billing for Customer for Food

Raw Material / Wastage Expenses

Net Profit Output from Visual Basic

Net Other Expenses (Register 3)

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Suggestions for Improvement in Accounting: a) Depreciation is not accounted in any of the registers, which they maintain. It is going to affect them in long run. So accounting Depreciation atleast from now would avoid adverse capital expenditure in the coming years. b) No reserves are Maintained to meet unexpected expenses. So maintaining reserves will prevent unexpected expenses and also can be used for future plans. c) Bank accounts are not used extensively rather than credit card payment. Using Banks would improve the accounting. d) Assets should be maintained in proper register instead of ordinary note book (Accounting register is Prefered). e) Some items (ex: salt / sause / pepper) are manually checked every day for stock. Some provisions must be made in Visual Basic like buying those items regularly in a fixed time. f) Taking (Withdraw) money from shop for personal use is not recorded and it is recommended to have a record over that. g) No promotional campaigns or hoardings are used for promoting the business. It is recommended to promote the enterprise for better growth in the coming years.

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