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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)
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2 Small Industry: Except traditional based cottage industry having
fixed capital investment up to 10 millions.
3 Medium Industry: Having fixed capital investment between Rs 10
millions to Rs 50 millions.
4 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 owner’s 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
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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
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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
opportunity’s…through 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
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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
Burma’s 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 didn’t 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 don’t 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 India’s 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
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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
tree’s 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, maize’s cover,
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banana’s 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.
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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
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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 Profit×100
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 AnalysisIt 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 Current Assets Current Liabilities
2059/60 944351 1045746
2060/61 1287010.66 1175955.66
2061/62 1294820 1197454
2062/63 109388 2000
2063/64 1117217.16 349254
For Year 2059/60
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 Current Assets Current
Liabilities
Inventory
2059/60 944351 1045746 818378
2060/61 1287010.66 1175955.66 484000
2061/62 1294820 1197454 -
2062/63 109388 2000 -
2063/64 1117217.16 349254 288962
For Year 2059/60
Liquid Ratio =
=
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 Debt Capital Total Equity
2059/60 1045746 1500000
2060/61 1175955.66 1500000
2061/62 1197454 1500000
2062/63 2000 1500000
2063/64 349254 1489259
For Year 2059/60
Debt to equity Ratio =
=
For Year 2060/61
Debt to equity Ratio =
=
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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 Net profit Shareholders equity
2059/60 (42370.50) 1500000
2060/61 66030.78 1500000
2061/62 (143315.91) 1500000
2062/63 (112177.64) 1500000
2063/64 (865568.71) 1489259
For Year 2059/60
Return on Equity (ROE) =
= = -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 Net Profit Total Assets
2059/60 (42370.50) 2545746
2060/61 66030.78 2699615.94
2061/62 (143315.91) 2697454.00
2062/63 (112177.64) 1262018.73
2063/64 (865568.71) 2134948.20
For Year 2059/60
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 Net Profit Sales
2059/60 (42370.50) 2479129
2060/61 66030.78 2630744
2061/62 (143315.91) 1229451
2062/63 (112177.64) 7506002063/64 (865568.71) 2112896
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
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= -14.94%
For Year 20063/64
Net Profit Margin = NPSales
= (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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