This paper explores the financial accounting practices adopted by small-scale enterprises operating in Dhanbad and Bokaro districts of the State of Jharkhand by analyzing a sample of 52 units consisting of retail shops, manufacturing firms and suppliers of various services through administration of a structured questionnaire. The study identifies that most of the investigated enterprises do not adhere to the financial accounting rules laid down by the appropriate government authorities. Thus, a further attempt is made to analyze the different factors influencing the non-adherence to properly laid down accounting rules by the small-scale units. The findings reveal that most of these small-scale units lack knowledge in bookkeeping, cost computation and compilation, and time management in maintaining financial records, which in turn affects the adoption of proper financial accounting guidelines by these business units.

There is no single, uniformly acceptable definition of a small firm (Storey, l994). This is so because no single definition can capture all the dimensions of small enterprises; nor can it be expected to reflect the differences between entities in different industrial sectors or countries at different levels of development. Small businesses range from 15 employees under the Australian Fair Work Act 2009, 50 employees according to the definition used by the European Union, and fewer than 250 employees to qualify for many US Small Business Administration programs. In virtually every jurisdiction, from the largest economies to the smallest, over 99% of companies have fewer than 50 employees. Small enterprises have also been defined in various other ways according to their invested capital in the enterprise, size, ownership and management of the enterprises and sales volume. As per the provision of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 of India, the small-scale enterprises are classified into two classes: (1) enterprises engaged in manufacturing; and (2) enterprises engaged in rendering services. For the purpose of undertaking manufacturing activities, a unit can be considered as a small-scale unit if its investment in plant and machinery is more than 25 lakh, but does not exceed 5 cr. However, for rendering services, a small-scale enterprise is an enterprise where the investment in equipment is more than 10 lakh, but does not exceed 2 cr.

According to Ozar et al. (2008), there has been a growing interest and attention in the role that small enterprises play in the economy since the 1980s. One of the reasons for this considerable attention is that these enterprises have been found to have potential to generate employment and also to contribute to poverty alleviation in most countries. Small enterprises’ importance is always viewed from the perspective of employment generation, contribution to export earnings and the Gross Domestic Product (GDP). In industrialized countries, Small and Medium Enterprises (SMEs ) are the major contributors to private sector employment. Empirical studies have shown that SMEs contribute over 50% of GDP and over 60% of total employment in high income countries. SMEs and formal enterprises account for over 60% of GDP and over 70% of total employment in low income countries, while they contribute about 70% of GDP and 95% of total employment in middle income countries (World Bank, 1977).

Accounting Research and Audit Practices, Small and Medium Enterprises Development (MSMED), Gross Domestic Product (GDP), Small and Medium Enterprises (SMEs ), Financial Accounting, Practices, Business Development Service (BDS), Small Enterprises, Issues and Challenges.