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. 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

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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.

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 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)

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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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