Accounting for Small Business Essay

ABSTRACT SMEs play a very important role in India’s economy and have a great potential for strengthening the real sector in India. But there has not been appropriate infrastructure yet which is accounting system to show the business feasibility. Traditional business in Indian Villages had been started by a family and ancestors, but has gotten bigger now. This business has many strengths and weaknesses. Based on the condition and background, the proposed-accounting system has been developed. It has been also successfully tested for a month transaction and revised. Adding knowledge management into accounting system is an alternative way to develop the proposed-accounting system. The four modes of knowledge creation will facilitate the business and its owner to add some modules in accounting system and to reengineer the business process. See more: Distinguish between problem-focused coping and emotion-focused coping Essay INTRODUCTION: Small business plays a very important role in India’s economy, particularly in aspects increased employment, income generating, economic development. In addition, this sector is considered as a driving force for the rural economy. But until now there are still many problems to hinder the small business growth. Facts in the Asia Pacific region revealed that Small and Medium Enterprises (SMEs) employ about 60 percent of the workforce. Only 10 percent of the total companies in Asia Pacific which is a big business, the rest are SMEs. For India, according to Small & Medium Business Corner (SMBC) data in 2012 the numbers of micro, small and medium enterprises develop into 130 Lakhs (http://www.smeindia.net/export_schemes/OverviewofMSME.html) by giving employment to 410 Lakhs people and able to contribute to the total national GDP amounted to 8-9 percent in 2012. Basic problem of management in small business is inability of owners to determine their management style that appropriate with the business need and development stage. In early stage of business, family management style leads to one-man show. According to improvement of business environment, that conventional style could not be pushed longer. Especially in financial management, the business owners could not be able to separate the financial management of business and family yet. Besides, they have not well planned, managed and reported periodically yet. It is caused by there is no appropriate infrastructure which is accounting system. The impact is that the owners of small business have difficulties to cooperate with external such as bank or another financial institution. The owners have difficulties to show their feasibility business when they want to propose credit or make a business contract with another business. Based on the importance of an accounting system, this research results a proposed-accounting system which can be applied by owners of small business in India. The proposed-accounting system is a generic model of purchasing and selling system that should be enhanced according to business need and by refer to the knowledge management approach. LITERATURE REVIEW: ACCOUNTING SYSTEM: According to Gillespie, accounting system is an organization of document, form and report which is managed to provide information for management. Based on that definition, elements of accounting system are documents, forms and reports, but still concern with procedure and internal control. Therefore, proposed-elements in this study will refer to it. SMALL BUSINESS: Under the law of Micro, Small and Medium Enterprises (2008), definition of SMEs in India is explained by the table below. Based on the definition, the research object is categorized as a small business. DEFINITION OF SMES IN INDIA Enterprises engaged in providing or rendering of services (i) A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh; (ii) A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore; and (iii) A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore. Enterprises engaged in the manufacture or production, processing or preservation of goods (i) A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh; (ii) A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore; and (iii) A medium enterprise is an enterprise where the investment in plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore. SYSTEM DEVELOPMENT: System development in this study will follow the three main steps a.System analysis: Activities in this stage are initial study, feasibility study, requirement definition, and specification system arrangement. b.System design:   After finishing system analysis, the next activities are system design, system building and system testing. c.System implementation:   Based on system testing, a revised system will be established. Finally, system is implemented and operated. At this stage, company will conduct maintenance activity. RESEARCH METHODOLOGY: Since this study wants to develop a proposed-accounting system, â€Å"Research and development† approach which is applied in this study is a research program that is followed by a development program. It is a combination of descriptive study that describes the actual phenomenon in an object and exploratory research that develops a proposed -accounting system. A proposed-accounting system is focused on purchasing and selling system since those are the main activities in the business. The location of this study, Traditional small business in Indian Villages, was chosen on purpose, because this business in the Villages has significantly improved in sales and human empowering, also government is paying attention by giving assistantship for both management and technology. Primary data of this study was the results of guided interviews and observation. The steps of this study are designed as follow: a.Initial study Preliminary research was conducted to comprehend previous studies and literature, guided questionnaire drafting, and Traditional business understanding. b.System requirement defining At this stage, the data was obtained by interview with business owners and observation directly to the business. By understanding the research object condition and background, also the strength and weakness, the accounting system requirement could be defined. c.Development of proposed-accounting system At this stage, development of proposed-accounting system was managed by interviews, observation, and group discussion among owners, researcher and government, related to main accounting system elements, which are document, form and report. In its development, knowledge management approach was proposed to use since it can facilitate business daily operation into business standard operation. The result of this stage was a proposed-accounting system. d.Testing and implementation Testing was accomplished by implementing the proposed system to handle a month transactions. Owners and their staff used it to run transactions of purchasing and selling for a month. By running the system, problems were found and then they were used to revise the system. At this stage, a revised-accounting system was established. e.Conclusions and recommendations In the final stage of this study, conclusions and suggestions from all research processes were stated. RESULT AND DISCUSSION: PROFILE OF TRADITIONAL BUSINESS IN INDIAN VILLAGES: India is one of the major exporter and supplier of handicrafts and gift products to the world market. The Indian handicrafts industry is highly labor intensive and decentralized, being spread all across the country in rural and urban areas. The sector is considered as the second largest employment-generating sector after agriculture with numerous artisans engaged in craft work on a part-time basis. The industry offers employment to over 6 million artisans, including a large number of women and people from the weaker sections of society. The present day handicraft tradition of India is a perfect example of assimilation between the traditional designs and modern techniques. The fast growing demand for Indian handicraft and gifts products have made this sector a full-fledged large scale organized industry that is growing day by day. History The rich history of India’s craft tradition has evolved over the centuries offering a legacy of Indian culture promising everything – beauty, dignity, form and style. The variety is comprehensive and ranges from age-old stone carvings to modern handicrafts making use of glass flints and mirrors. The most popular crafts, include metalware, earthenware, pottery, sculpting, woodwork, hand-printed textiles and scarves, embroidered and crocheted goods, shawls, zari products, stone carving and imitation jewelry. There is a myriad of art and craft traditions in India that depend on social, economic and regional factors. The present status of the sector in India owes much to the rich crafts history and tradition of the past. Majority of the crafts from the past continues to flourish due to their utilitarian characteristics, availability to the common people and popularity in domestic and global markets. Today, some of the sectors within the craft industry have even become full fledged industries in their own, like – carpet weaving, traditional textile (Banarsi silk sari, Chikankari etc), gem cutting and polishing, jewelry making, the world famous diamond cutting and polishing industry, brassware, jute products, etc. The growth of these industries is due to their ever-increasing demand and the popularity of Indian crafts in the domestic market and overseas. Gems and jewelry, carpet making, metalware, leather products, jute products etc. are some industries, which are growing rapidly.