AN ASSESSMENT OF

THE STUDY ON THE ROLE OF ACCOUNTING AND FINANCIAL RECORDS

(DAPHNE PAPER MILL & BINDERY PVT. LTD (DPMB))

(Small Business) CHAPTER - I INTRODUCTION

1.1 Background

Nepal is an agricultural country. More than 90% of the economically active population is employed in agricultural. Agricultural also contribute 60% of GDP and is a major source of foreign earnings. The challenge that confronts Nepal is to transform the agrarian economy into a dynamic one. Industrialization is thus regarded as one of the most powerful means with the aid of which the vicious circle of backwardness and poverty can be eliminated. Industrial contribution to national income on Nepal is about 6% of GDP. Besides organized industrial in the country, there is a large number of micro enterprises which are run on a cottage basis. They contribute about 4% of GDP, provide 95% of industrial employment and produce 20% of all manufactured experts. Although small scale is quite industries are backbone of the economy, their failure rate is quite high. This is natural as there is lack of entrepreneurship in Nepal. Small scale industries are facing capital and labour problems. The product produced by them competition with those produced in foreign countries. There is a large number of small industries in Nepal. Present industrial policy classifies industries into four categories. 1 Traditional based cottage industries(Industrial Policy 1992)

Small Industry: Except traditional based cottage industry having fixed capital investment up to 10 millions. Medium Industry: Having fixed capital investment between Rs 10 millions to Rs 50 millions. Large Industry: Having fixed capital investment at least Rs 50 millions.

The new industrial policy categories industries only in terms of the total capital outlay not in terms of machine and manpower employed as categorized in old policy.
1.2 Meaning of Small Business

If we go through the literature of business studies we cannot find the exact definition of small business. Small business is considered for the business of which the capital is relatively lower than medium scale business and large scale business. In the context of Nepal small business under 1 crore is considered. From the above explanation we can understand that small businesses are those businesses which are carried out in local level and which utilized local resources. Small business is an organization. It is engaged in production and marketing. The various types of activities can be: manufacturing, services, construction, transport and trade. It is everywhere. The small business owner establishes and manages the business to attain personal objectives. The business is an extension of the owners needs, objectives and personality. The business growth is not a primary objective. The aim is to continue operation over a long period of time.
1.2.1

Importance of Small Business

Small business is important for utilization of resources in local level .It has more importance in the countries like Nepal where there is lack of infrastructure development & lack of adequate resources for utilization in large scale. Importance of small business can be explain in the following points.
1. Small business basically focuses on mobilization of resources which is

available in local level. It tends to mobilized them by using local manpower and local technology as far as practicable.
2. It creates job opportunities for self and others. Family members can be

employed. This helps business sustainability through inheritance by children. 3. Therefore, it helps in solving unemployment problem of the country.
4. Government collect tax, fees, royalties in terms of revenue from the

small business which can be utilized in meeting government expenditure as well as can be invested in agricultural development of the country.
5. Innovation refers to invention of new products, new technology and new

concept where as entrepreneurship refers to applying new concept in business. Innovation &entrepreneurship can be possible in small business because the ownership of that business will be with limited no of investors & management will also be in the hand of few people. Therefore it will possible to apply new concept in those small business.
1.3 Meaning of Entrepreneurship

An entrepreneur is neither a scientific innovator nor a salaried manager, but he\she is assumed to be an opportunity seeker. An entrepreneur initiates ventures develops markets and influences the development of managerial thoughts. As stated by Benjamin Higgins Entrepreneurship is meant the function of seeing investment and production opportunities, organizing an enterprise to undertake a new production process, raising capital, hiring labor , arranging for the supply of raw materials, finding and combining these factors of production into a going concern, introducing new techniques and selecting

top managers for day to day operation. Entrepreneurship is thus, characterized by the dominant element of innovation, a steak f creativity and ready for risk bearing. An entrepreneur could be a trader, a technician, an educated unemployed, an experienced hand, a landlord and the like. However, the common element in them is the strong desire to breakaway the traditional ways of doing things and faces the organizational problems. Thus entrepreneurship in this study is taken in a broad sense; entrepreneur does all sorts of things to make an enterprise a going concern in a true sense of the term. Various writers have defined entrepreneurship as follows: According to Joseph Schumpter Entrepreneurship is based on purposeful and systematic innovation it essentially consists in doing things that are not generating done in the ordinary course of business routine. According to Peter Drucker Entrepreneurship is gathering and using resources to produce results it is allocating resources to opportunities rather than to problems. According to David Holt Entrepreneurship is a process of innovation that reallocates resources to new opportunitysthrough unusual combination of resources and the skills of risk taking. According to Hisrich and Peters Entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying risks, and receiving the resulting rewards.
1.4 Historical Background of Paper

The word paper is derived from pepirus. At the bank of Neel River Mishra country there is one type of grass named pepirus. In ancient time cover of that grass (pepirus) use as paper.
1.4.1

Development of Nepali Paper

It is said that the art of making paper is started from china. But near about 2000 years ago or beginning of A.D. before the Chinese find out this art of making paper, Nepal had already started the industry of paper. The King Anshu Burmas daughter Bhrikuti was married to King of Shrongchong Gampo of Bhot. After the married, to teach the Nepali art and culture Nepali artist went to Bhot. At that time Nepali artist advertised the art of making paper in Bhot. In Bhot Chinese people get knowledge about to make paper but they didnt flash it. After the war of east Tiloristhan Muslim get knowledge to make paper by Chinese prisoners. Arabian spread in Europe and Mugal spread in India and after then wherever they went they spread this art. The message related with Hindus and Buddhism is seen in Nepali paper where it is made. But it can be guessed that it is found at the beginning of A.D. By the research of developed countries it is found that paper making machine was discovered in France. But also they dont know from where this paper making was started. This industry was not known by anybody. Before the establishment of paper cloth I used to send message from one place to another. At that time where ever there is work of paper it is made by hand.
1.4.2

Handmade Paper in Nepal

Nepal is a neighbor country of India. Nepal has depend upon Indias market so that it directly affect in Nepalese market. Bhot used to buy Nepali paper in large quantity. Tibet suddenly closes down the trade with Nepal. And also

continuously the use of Nepali paper in government work also less and Nepali paper industry is going down towards the failure. Today paper is one of the important things to human body. Without it no one can write successfully. In that case also it is made by natural heritage of human power it is important to our country. Due to interest over this handmade paper by the HMG it is popular day by day. Nepali handmade paper is Nepalese traditional industry. Simply, it is good, cheap and it is not destroyed by any insects. So that it is used in government offices. Especially it is used in the court. Beside this it is used to make envelop, file, invitation, card, calendar. So that this hand made paper is available in the market from the ancient time. Few years ago Neplali handmade paper (Nepali kagaj) had spread over the international market. Made by Nepali handmade paper like welcome card, file, envelop, different types of decorated things are popular in Nepalese market. Due to this it is one of the industry whish foreign currencies in Nepal. To make Nepali handmade paper local raw materials& local manpower is used tats why its future is bright. From the ancient time in hilly region of Nepal there is one kind of tree named lokta &cover of this tree is use to make Nepali handmade paper. From the sea level this tree is found at the height of 4000 to 10000 feets. Especially it is found sufficiently at the height of 7000 to 9000 feets. In different place this tree has different name. But it is also it is popular at the name of lokta. Actually this trees flower comes only in chaitra & baishak. And it has a good smell. If anybody go this area of flower then they feel dizziness. While cutting lokta if new people went there to cut then the man face will be swell due to its power. So it affect directly to the man. Lokta paper is not eaten by any insect& its silk is longer than other so it is long lasting. In Nepal beside lokta it is being popular that different other materials are also using to make Nepali paper. Like Babiyo, thatch, straw, jute, vang KO lokta bamboo leaf, maizes cover,

bananas leaf, dale grass, khattu ko lokta, Sal tree etc are used to make Nepali paper. In Nepal paper industries are running small business in urban area. In Nepal to developed the small industries first of all Nepali cloth and small business work advertisement Adda was established in 1996 B.S. This Adda was changed to training and development of small business. For the development of paper industries HMG started giving training from 2013 B.S under this Adda.
1.5 Introduction of Daphne Paper mill &Bindery Pvt. Ltd(DPMB)

In the heart of Himalayas Nepali craftsman is producing hand made paper for a thousand of years. The people of Nepal use natural paper in their daily life for sacred or popular for kites etc. The monks of Tibet has been always used it for their manuscripts and for printing sacred texts. He paper is renowned for its exceptional durability and for its living and special texture. Paper making and block printing are major components of cottage industries in Nepal at the establishment period, it is said that art of making paper came to Nepal via Tibet and its use in Nepal started in 11-12th centuries. Until about 1930 handmade paper was the standard paper for its used by almost all the people of the country. Daphne Paper Mill & Bindery Pvt. Ltd was established in Buddhanagar Kathmandu. It is registered under Kathmandu municipality and established in Jestha 1 2054. The factory of DPMB is located at Nangkhel, Bhaktapur. Abut 30 people including technical helper and administrative are working still under the industry management. The present trend of market demands and sales of buyer is in the good position. It is completely labour intensive and profit oriented industry. The industry is planning for the expansion manufacturing capacity increment in addition to the existing product.

The main objectives of this company is to produce Nepali paper and different other item made by Nepali paper like gifts items, stationary and produce product are exported to different countries. During the production of new reliable, cheap stationary products using Nepali paper cutting, printing binding or folding process is done with the maintaining the required quality and standard will be mentioned by the company. The company will produce standard and good quality products using Nepali paper, especially for foreigners &tourist and Import the product to third countries market. Company will produce product & will do the market promotion by a well managed management.

1.6 Objectives of the study

1. To focus on the study of particular small business organization i.e. Daphne Paper Mill &Bindery Pvt. Ltd 2. To analyze profit, loss and expenses and their impact on total performance.
3. To analyze the entrepreneurship of the firm.

4. To explain accounting procedures and maintenance of records made in small business like Daphne Paper Mill &Bindery Pvt. Ltd
1.7 Limitation of the study

A lot of limitation has been focused during the preparation of this work. It is mainly based on one industry i.e. Daphne Paper Mill & Bindery Pvt. Ltd Since the study is based on secondary data, the findings are based on the information provided by Daphne Paper Mill & Bindery Pvt. Ltd. The degree of the truth is fully dependent upon the information provided ny the concerned authorities. Due to lack of experience in research work, there may be lack of detailed information required for research.
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This study has to be prepared and submitted within the time limitation as provided by T.U. More or less, the study is time consuming.

1.8 Methodology

Research is a systematic & organized effort to investigate a specific problem that needs solution. Methodology refers to the various steps that are generally adapted by a researcher in studying the research problem. So, in research methodology it is mainly defined with the method which is used during the period of research. This chapter basically highlights methodological procedures which were all applied to conduct this study including introduction of the study area, research design, data collection and analysis processes.
1.8.1

Research Design

Research design is organized way of research methods or techniques used for through the entire study. Research design is the plan, structure and strategy for conducting the study. For the research design, first of all the information and data concerned with the study should be collected. So, I choose Daphne Paper Mill & Bindery Pvt. Ltd for the purpose contacted and discussed several personnel and collected information and data as availed by them. All the information and data have been studied carefully and systematically analyzed.
1.8.2

Sources of data

The study is mainly based on secondary types of data. All the data are collected and based on secondary data. In concern with secondary types of data, I studied Balance sheet, Trading, manufacturing &P\L account of last five years. Besides this, I also consulted several published data, books, magazines.
1.8.3

Tools used

Different statistical mathematics & financial tools are used to have clear and proper analysis and interpretation of the collected data, figures etc. To conclude final decisions the tools used are explained below. A. Liquidity Ratio:
1. Current Ratio= Current assets

Current liabilities
2. Liquid Ratio= Current assets-Inventories

Current Liabilities 3 Debt to Equity Ratio= Total debt Total Equity B. Profitability Ratio:
1. Return On Equity(ROE)=Net Profit 100

Equity
2. Return On Assets(ROA)=Net Profit100

Total Assets
3. Net Profit=Profit 100

Sales

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CHAPTER - II DATA PRESENTATION AND ANALYSIS

2.1 Presentation of Data Data presentation and analysis is the heart of report and it is most crucial part. This chapter includes details accounting data of current assets, current liabilities, expenses, income, profit as well as description and results of questionnaires and their analysis. 2.2 Data Analysis It consists of assessment, tabulation, organization and mathematical or statistical result of particular sample company Daphne Paper Mill &Bindery (P) ltd. also tables to make presentation of data more effective & quickly understandable. 2.2.1 Analysis of Liquidity Ratio 2.2.1.1 Current assets & Current Liabilities of DPMB (P) Ltd Table No 2.1 Current Assets & Current Liabilities F/Y 2059/60 2060/61 2061/62 2062/63 2063/64 For Year 2059/60 Current Assets 944351 1287010.66 1294820 109388 1117217.16 Current Liabilities 1045746 1175955.66 1197454 2000 349254

Current Ratio =

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For Year 2060/61

Current Ratio =

For Year 2061/62

Current Ratio =

For Year 2062/63 Current Ratio =

For Year 2063/64

Current Ratio =

= 2.2.1.2 Current Assets (CA), Current Liabilities (CL) &Inventory of DPMB (P) Ltd

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Table No 2.2 Current Assets, Current Liabilities & Inventory F/Y 2059/60 2060/61 2061/62 2062/63 2063/64 For Year 2059/60 Liquid Ratio = Current Assets 944351 1287010.66 1294820 109388 1117217.16 Current Liabilities 1045746 1175955.66 1197454 2000 349254 Inventory 818378 484000 288962

For Year 2060/61 Liquid Ratio =

For Year 2061/62 Liquid Ratio =

= For Year 2062/63 Liquid Ratio =

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For Year 2063/64 Liquid Ratio =

2.2.1.3 Debt Capital & Total Equity (TE) DPMB (P) Ltd Table No 2.3 Debt Capital & Total Equity F/Y 2059/60 2060/61 2061/62 2062/63 2063/64 For Year 2059/60 Debt to equity Ratio = Debt Capital 1045746 1175955.66 1197454 2000 349254 Total Equity 1500000 1500000 1500000 1500000 1489259

For Year 2060/61 Debt to equity Ratio =

14

For Year 2061/62 Debt to equity Ratio =

For Year 2062/63 Debt to equity Ratio =

For Year 2063/64 Debt to equity Ratio =

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2.2.2 Analysis of Profitability Ratio 2.2.2.1 Net Profit (NP) & Shareholders equity of DPMB (P) Ltd Table No 2.4 Net Profit & Shareholders equity F/Y 2059/60 2060/61 2061/62 2062/63 2063/64 For Year 2059/60 Return on Equity (ROE) = Net profit (42370.50) 66030.78 (143315.91) (112177.64) (865568.71) Shareholders equity 1500000 1500000 1500000 1500000 1489259

= -2.8247%

For Year 2060/61 ROE =

For Year 2061/62

ROE =

For Year 2062/63

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ROE =

For Year 2063/64

ROE =

2.2.2.2 Net Profit & Total Assets (TA) of DPMB (P) Ltd Table No 2.5 Net Profit & Total Assets F/Y 2059/60 2060/61 2061/62 2062/63 2063/64 For Year 2059/60 Net Profit (42370.50) 66030.78 (143315.91) (112177.64) (865568.71) Total Assets 2545746 2699615.94 2697454.00 1262018.73 2134948.20

Return on Assets (ROA) =

For Year 2060/61

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ROA =

For Year 2061/62

ROA =

For Year 2062/63

ROA =

= -8.88%

For year 2063/64

ROA =

2.2.2.3 Net Profit & Sales of DPMB (P) Ltd Table No 2.6 Net Profit & Sales

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F/Y 2059/60 2060/61 2061/62 2062/63 2063/64 For Year 2059/60 Net Profit Margin = NP Sales = (42370.50) 2479129 = -1.709% For Year 2060/61 Net Profit Margin = NP Sales = 66030.78 2630744 = 2.50% For Year 2061/62 Net Profit Margin = NP Sales = (143315.91) 1229451 = -11.65% For Year 2062/63 Net Profit Margin = NP Sales = (112177.64) 750600

Net Profit (42370.50) 66030.78 (143315.91) (112177.64) (865568.71)

Sales 2479129 2630744 1229451 750600 2112896

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= -14.94% For Year 20063/64 Net Profit Margin = NP Sales = (865568.71) 2112896 = -40.96% 2.3 Major Findings During field work it has been discovered the following things.

The current ratio for the year 2063/64 is 3.198 times. The liquid ratio for the year 2063/64 is 2.71 times. The debt to equity ratio for the year 2063/64 is 0.2345 times. The return on assets for the year 2063/64 is -58.120% The return on assets for the year 2063/64 is -40.59% The net profit margin for the year 2063/64 is -40.96%

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CHAPTER III SUMMARY, CONCLUSION AND RECOMMENDATIONS

3.1 Summary

Small business is the integral part of the economy. Small business is the backbone of the economy. No one can magazine the industrialization without small business. Small business is small size in terms of number of employees, total fixed assets, annual sales volume and capital investment. In small business management his closely held ownership and its management is independent. Small businesses are locally operated and use local resources. Small business is more flexible to changing markets. Small business focuses on quality aspects and develops new unique products. Innovation and entrepreneurship is started from small business. Entrepreneurship is the engine of economic development. So, small business should be given more importance and provide more preference. Daphne Paper Mill and Bindery Pvt. Ltd. Was established in Jestha 1 2054 BS registered under Kathmandu Municipality. It is located at Buddhanagar Kathmandu and the factory is located at Nangkhel, Bhaktapur. It is manufacturing factory and has technical manpower. The DPMB Pvt. Ltd main objective is to produce Nepali paper and different other items made by Nepali paper, these products which are produced by DPMB Pvt. Ltd are exported as well as popular in local market. This field work report has been prepared by studying balance sheet, Trading & manufacturing & P/L account of DPMB Pvt. Ltd. This field work report is based on five year financial statement .The major study of field work is The study on the rate of Accounting & Financial Record in Daphne Paper Mill & Bindery Pvt Ltd.

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This fieldwork report contain the information about liquidity ratio, profitability ratio, current ratio, liquid ratio, debt to equity ratio, ROE, ROA, Net profit margin of the DPMB Pvt. Ltd. All these tools are used in this fieldwork for its preparation. 3.2 Conclusion

From the analysis of data, for finding liquidity ratio, current ratio, liquid ratio and debt equity ratio and profitability ratio including ROA, ROE, and NP Margin are calculated. DPMB Pvt Ltd has high liquidity position since there has been significant change in the excess liquidity status of the industrial section. While calculating profitability ratios only one year ratio is positive and remaining are negative. So it is bad symbol for the firm. The firm has net loss for several years and net loss is in increasing trend. So, the government and industrial sector should focus these types of handmade paper to develop and upliftment of these industries. 3.3 Recommendation

The following are the recommendations for the DPMB Pvt Ltd. These recommendations are desired by studying and analyzing the data. Firm should increase sales to increase profit. As it is suffering from loss for several years. The factory and office of firm should be same place. The Firm should produce qualitative product and give more preference in export for earning foreign currency. The firm should leave the traditional method and adapt new technology to earn maximum profit margin in future.

There should be the good management system in the company in order to increase sales and profit.

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