Chapter- One

CHPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Since the prospects of getting white collar jobs has become harder and harder, many people,
educated and non-educated, are reverting to being self-employed. One way of being self-
employed is to start a small business. A small business is any business that is independently
owned and operated (Kuehl, 2006). Generally, Small and medium enterprises (SMEs) are
businesses whose turnovers fall below certain limits. The current definitions categorize
businesses with less than 10 employees as “micro,” those with fewer than 50 employees as
“small” and those with less than 250 as medium”. SMEs therefore need to have between 20-500
employees (Williams, 2010). In Ethiopia context, with less than 6 employee and whose capital is
less than Birr 100,000 are considered as ‘micro’’, ‘’those with less than 30 employees and
whose capital is between Birr100,000 and 1,500,000 as ‘’small’’ and those with less than
100employees and whose capital less than Birr 2,000,000 as ‘’medium’’ (Debre Markos town
investment bureau). SMEs play a big role in the economy as they provide employment and taxes
in all sectors of the economy including agriculture and mining. Small and medium enterprises
make up the backbone of the world economy (Aremu &Adeyemi, 2011). For example, they
account for 67.1% of the European Union non-financial business economy workforce. Hence, in
many countries in the world it has been recognized that an SME-friendly business environment is
crucial for growth and jobs creation (Kuehl, 2006). In some key industries, such as textiles, wood
products, metal products, publishing, construction and furniture-making, SMEs account for more
than 70% of all jobs. Small business enterprises are therefore a part of the informal sector and
they bridge the gap of slow growth of the informal sector in the economy.

In Ethiopia, SMEs play a major role in the economy. They contribute to the economy in terms of
output of goods and services, creating demand and supply for their products, contribute to
increased participation of indigenous Ethiopians in the economic activities, strengthen forward
and backward linkages among socially, economically and geographically diverse sectors of the
economy and offer opportunities for entrepreneurial and managerial talents. The enterprise also
create job opportunity for unemployed youth and women.

In Debre markos town there are many small and medium enterprises which play a big role in
the development of the economy.

The evolution of the system of record keeping which come to be called “Double entry system "
so, that debit equal to its credit. The first known description of the system is published in Italy in
1494 by Luca Pacioli a Franciscan monk, was a mathematician who thought in various
universities, he did the text and Leonardo da Vinci the illustration. Scholars define the system “it
is the most beautiful innovation of the human sprite, & every good business man should use it in
their economic undertaking & it provides for recording of both aspects of transactions (Kentrot&
Michael, 2009). Double entry bookkeeping is the recording of all financial transaction in a
systematic and logical manner. Double entry accounting system is confused with single entry
accounting system. But double entry accounting system is a system of financial accounting
where each transaction is recorded in at least one debit and one credit (fees warren, 2006).

Transactions include sales, and payments by an individual or organization (joseph, 2014). Book
keeping is usually performed by a book keeper using common methods of bookkeeping such as
single entry and double entry systems. While these systems may be seen as “real” book keeping,
any process that involves recording of financial transactions is a bookkeeping process (Haber,
2004). Primary bookkeeping records all business transactions and allocates the income and
expenses to various income and expenses account in separate account records (McCarthy, 2000).
The single book keeping can be done with book keeping software to speed up manual calculation
(Haber, 2004). Double entry book keeping system involves recording of financial information in
a financial accounting system where a financial transaction impacts at least two different
accounts. In modem accounting, this is done using debits and credits and serves a kind of error
system. If at any point the system of debits doesn’t equal to the sum of credits then an error has
occurred. In SMEs, bookkeeping vary in size, frequency, sensitivity, maturity and the level of
growth of the SMEs including the relative importance of fixed working capital (joseph,2014).
The system of book keeping depends on the operator of the SMEs (Enon, 2000). The reason why
the researcher with this tittle is to understand the difference between single entry accounting
system and double entry accounting system, to know the actual implementation of double entry
accounting system in debre markos town small and medium enterprises.

1.2 Statement of the problem

 Chapter three
3. Research methodology

3.1 Research design

In this study descriptive type of design will be used. Because, this method is used to describe the
characteristics function of variables that utilized in the study and it also describe the actual
problem that arises in the ordinary course of business.

3.2 Types of data and source

For this study, the researcher will be used both primary and secondary source of data. The
primary source of data will be collected by using open ended and close ended questions and
interviews. Secondary source of data will be collected from different materials such as; annual
and periodic reports, manuals, internal organization books or balance sheets.

3.3 Method of data collection

The data will be collected by distributing structured questionnaires to the employees of the
organization and through interview to the managers. This leads to the researchers to obtain
relevant information. The secondary data will be collected by assessing different materials such
as; annual and periodic reports, internal organization books, and available literature document of
the enterprises.
3.4 Sample size and sample technique

The researchers will be use judgmental sampling technique to select 15 enterprises from the
total of 148 enterprises in Debre Markos town. The reason to select this technique is that, the
researchers have complete freedom to choose the sample enterprises as well as it has low cost in
terms of money, save time and it is convenience to visit and select enterprises that are near to the
town. The total populations in the selected enterprises are 275 and the target populations are 30.
Therefore, the researchers will be census sampling technique to select the respondents from the
target population. The reason to select this technique is the target population and the respondents
that provide relevant information for this study is only 30.

3.5 Method of analysis

The researchers will be uses percentage to analyze the responses of the respondents and it will be
presents in the form of tables to provide comprehensive listing and discussion of the standardized
implementation of double entry accounting system in Debre Markos town small and medium
enterprise.

3.6 Data presentation and interpretation

The data will be collect from the respondents by using primary data and secondary data
collection. Then the presentation and interpretation will be in the form of tables and percentages.
 CHAPTER FOUR

COST AND WORK PLAN

4.1 Cost

1.9. Budget schedule and cost breakdown

Number of item Unit quantity price Total cost

measurement
Stationary cost
Paper Ream 1 140 140
Pen Packet ½ 6 72
Pencil Pica 1 1 1
Exercise book Piece 1 12 12
Calculator 1 140 140
Binding 3 10 30
Secretary cost
Typing 40 5 200
Printing 40 3 120
Copy 40 0.75 30
Transport cost 3 48 144
Miscellaneous 100
cost
Total cost 989
Contingency 98.9
 (10%)
Overall total 1 087.9

4.2 Work plan

The following plan will show taking on a specific activity during a period of study during nine month.

No Activity Novembe Decembe January February March April May June

r r
1 Title 
selection
2 Proposal 
writing
3 Prepare 
literature
review
4 Instrument 
construction
5 Data 
collection
6 Data 
analysis
7 First draft 
report
8 Final draft 
report
9 Typing 

10 Final paper 
summation
and
presentation