ACCOUNTING SYSTEM FOR SMALL BUSINESS IN INDIA
(CASE STUDY ON TRADITIONAL BUSINESS IN VILLAGESS)
N Naveen Kumar
Finance & Accounts Manager
Harini Hatcheries & Farms Pvt. Ltd.
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.
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.
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.
Under the law of Micro, Small and Medium Enterprises (2008), definition of SMEs in India is...