RESEARCH PROPOSAL

Introduction
Background of the organization
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). The definition of an SME may also depend on the number of
employees, business turnover and assets (Aremu & Adeyemi, 2011).

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 (Republic of
Ethiopia, 2012). Until 2004/200, the national strategy was implemented by Federal SMEs
Development Agency organized only at national level. Because of this, it was very difficult to
make the strategy practical specially in delivering business development service for SME
operators. Thus, by considering the critical role of the sector and the constrained faced by SME
operators since 2004/2005 the government of Ethiopia decide to establish SMEs coordinating
body at regional level. Accordingly, SMEs development Agencies are setup in all regions, even
sub branch offices at zone/district level. The system helps to support a lot of SMEs and there by
to create job opportunity for unemployed youth and women. In Debre markos town there is some
small and medium enterprise. Although, SMEs play a big role in the development of the
economy, some researchers point out that they have not performing well. Most probable cause is
lack of double entry accounting system.

BACKGROUND OF THE STUDY

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, purchase income, 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.

Statement of the problem

Double entry accounting system is a method of bookkeeping that recognizes both sides of a
business transaction by debiting the amount of the transaction to one account and crediting it to
another account so the total debits equal the total credits (Yigzaw, 2018). Accounting records,
prepared on the basis of uniform practices enable business to compare results of one period with
another period (joseph, 2014). Double entry accounting system helps you avoid mistakes. This is
why professional accountant use if double entry system provides a good check and balance
benefit, by making it easier for you to travel the source of entry error. Double entry accounting
also serves as the most efficient way for a company to monitor its financial growth, especially as
the scale of business grows. Effective and efficient recording of transaction in double entry
accounting system is essential for small and medium enterprise (Yigzaw, 2018). But, if there is
ineffective and inappropriate recording of transaction can be affect the finance and economic
development, If transaction are recorded due to carelessness and asset, liability and owner equity
are not recorded appropriately, If transactions are not in line with GAAP .It affects small and
medium enterprise. Different researches has been conducted on this issue like (yigzaw,2018) has
been conducted on standardized implementation of double entry accounting system in
Edagahamus town finance and economic development office, in tigray region.

The aim of this study will to try to assess the standardized implementation of double entry
accounting system and factor that affect the implementation in small and medium enterprise in
Debre markos town.

As a result of those problems, the researchers will try to answer the following questions,

1. What type of bookkeeping is used in small and medium enterprise in Debre Markos Town?
2. What is the effective and efficient source document of the enterprise?
3. How double entry accounting system is record in the organization?
4. Are the accounting records compliance with GAAP?
5. Are there an educated accountant in the enterprise?
 6. What are the factor that affect the implementation of double entry accounting system in
small and medium enterprise in Debre markos town?

OBJECTIVE OF THE STUDY

General objective of the study
The general objective of this study will be to assess the standardized implementation of double
entry accounting system in small and medium enterprise in Debre markos town.

Specific objective of the study

 To determine the type of bookkeeping among the small and medium enterprise in Debre
Markos town.
 To establish the effective and efficient use of source document in bookkeeping.
 To identify the record of double entry accounting system in small and medium enterprise
 To identify how the accounting records are compliance with GAAP.
 To know an educated accountant is employed in the enterprise.
 To identify the factors that affect implement the double entry accounting system in
enterprise.
 To make some recommendation for the overall issue.

Scope of the study

The study will focuse on the area of debre markos town small and medium enterprise to analyze
the standardized implementation of double entry accounting system. So, the scope of the study
will be limited to cover only standardized implementation of double entry accounting system
small and medium enterprise in debre markos town. Because, when the researchers to cover wide
area it needs finance and time.by this reason the researchers only focus on in debre markos town.

Significance of the study

The researchers believes that, the study will have the following significances

To improve implementation of double entry accounting system in the small and medium
enterprise in Debre markos town . This helps the enterprise to equalize the debit and credit
balance and also to prepare financial report for the user of the information and understandable
for decision.

To provide solutions for the problem which appear in the enterprise.

For future researcher to do with an awareness about double entry accounting system.