Danphe Paper Milll and Bindary

8/6/2019 Danphe Paper Milll and Bindary

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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 =

13



=

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


=

14



For Year 2061/62


=

For Year 2062/63


=

For Year 2063/64


=

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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


Sales

= 66030.78

2630744

= 2.50%

For Year 2061/62


Sales

= (143315.91)

1229451

= -11.65%

For Year 2062/63


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.

Danphe Paper Milll and Bindary

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