CHAPTER-5
Organizational Setup of the Finance and Accounting
Department
Finance and accounts department is under the supervision
of member (Finance) who is a qualified person. The department is headed by a
chief finance and accounts officer is also a qualified person.
5.1 Organization of Finance and Accounts Department
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| INVENTORY MANAGEMENT |
5.2 Functions of
Finance and Accounts Department
The function of finance and account department are
summarized below:
v
To maintain books of accounts and record therein
by day to day transaction of the mills.
v
Preparation of annual income and expenditure
statement and Balance sheet.
v
Preparation of periodical financial statement of
industry.
v
To carry out pay fixation, prepare payroll and
arrange payment of salaries and wages.
v
To process bill for payment.
v
To furnish various data to management for
financial control.
v
Preparation of budget and funds flow statement.
v
Maintenance of capital account and revenue
account.
v
Maintenance of related accounts of fund of
mills.
v
Maintenance of fixed and current assets and
loans and related accounts.
v
Preparation of the accounts related to provident
fund, gratuity, poor fund group insurance and benevolent fund.
v
Maintenance of accounts related to collection of
charges on accounts of electricity.
v
Maintenance of accounts related to granting
loans and advance and its recovery or payment to staff/workers.
v
Assistance to Internal and external auditor with
supporting documents.
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| INVENTORY MANAGEMENT |
5.3 Section of Finance and Accounts Department
The finance and accounts
department has seven sections such as;
v
Finance and Budget section.
v
M.I.S Section.
v
Bill Section.
v
Sugar Account Section.
v
Store Account Section.
v
Sales Section.
v
Audit Account Section.
5.4 Actual Manpower of
Finance and Accounting Department of Rajshahi Sugar Mills Ltd.
|
SL.No.
|
Name
of Officials and Staff
|
Number
|
|
1.
|
Member of finance
|
1
|
|
2.
|
Chief finance and
accounts officer
|
1
|
|
3.
|
Deputy chief
finance and accounts officer
|
1
|
|
4.
|
Senior account
officer
|
2
|
|
5.
|
Senior finance
officer
|
1
|
|
6.
|
Finance officer
|
1
|
|
7.
|
Accounts officer
|
1
|
|
8.
|
Assistant account
officer
|
2
|
|
9.
|
Accountant
|
4
|
|
10.
|
Senior clark
|
2
|
|
11.
|
Junior clark
|
2
|
|
12.
|
Bill chequer
|
2
|
|
13.
|
Typist
|
2
|
|
14.
|
Bearer
|
2
|
|
15.
|
Peon
|
4
|
|
16.
|
Total
|
28
|
6.1 Accounting
Practice of Rajshahi Sugar Mills Ltd.
The industry is a product
and service oriented organization. Here accounting practice is necessary not
only for recording of transaction but also for managerial planning and control.
It is also necessary for compliance with legal requirements. The industry
follows the double entry systems of recording transactions.
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| INVENTORY MANAGEMENT |
6.2 Maintenance of
Necessary Books
It maintenance the
following books for the purpose of recording transactions and facilitating the
preparation of financial statements:
(i)
Cash Book or Bank Book
(ii)
Journal
(iii)
General ledger
(iv)
Personal Ledger
(v)
Expenditure ledger
(vi)
Income ledger
(vii)
Fixed Assets register
(viii)
Capital work in progress register.
A brief discussion of
various book are given below-
(i) Cash Book or Bank
Book:
In the industry there is no
cash transaction for receipts and expenditure. All receipts and expenditure are
made through Bank. So it is one of the important books of accounts and record
of receipts and expenditure.
(ii) Journal:
Journal is used for
recording transaction with different users and principals. Entries relating to
dealings with them are passed on the basis of accounts submitted by them
(user). Besides opening, closing adjustment and rectifying entries are passed
though journal.
(iii) General Ledger:
It contains the accounts of
assets and liabilities other than fixed assets capital work- in process and
those of personal ledger. The chart of account for general ledger contains as
many one hundred and thirty eight account. Under this head investments stores,
trade debtors, sundry debtors advances deposit, prepayments, cash in hand, cash
at bank, capital accounts, capital reserve, revenue reserve, long term loans,
government loan, creditors advance and deposits received, collection on agent,
accrued interest due, other accrued expenses and provision and sundry credit
balance and the like.
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| INVENTORY MANAGEMENT |
(iv) Personal ledger:
It contains the personal
accounts in respect of Sugar cane purchases, handling labour, revenue and
capital expenditure.
(v) Expenditure ledger:
It records revenue
expenditure analyzed by cost centers-
Example: Over Profit
Bonus, leave pay and gratuity, employee
contribution to provident found etc.
(vi) Income ledger:
It contains all accounts of income of the mills.
Example: Sales of
sugar, sales of bagasse and molasses.
(vii) Fixed Assets
Register:
This register is maintained
for recording control and subsidiary accounts of all fixed assets owned by the
mill, control accounts are maintained for trial balance preparation.
(viii) Capital Work In
Process Register:
The register is maintained
for recording expenditure incurred in respect of going projects. Control
Accounts are maintained for keeping projectwise accounts while subsidiary
accounts are kept for detailed regarding of individual assets.
Besides the above principal book the mills maintains a good
number of subsidiary books for facilitating their preparation.
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| INVENTORY MANAGEMENT |
6.3 Preparation of Trail
Balance
After the preparation of
above journal and ledger books the mill prepare trial balance at the end of
accounting year.
6.4 Preparation of
Financial Statements
When trial Balance is
prepared then the mill prepare the following financial statement:
(a) Manufacturing
Trading Account and Profit & Loss Account:
This account is prepared
with the balances of the income ledger and expenditure ledger. Income are
classified according to the chart of accounts while the expenditures are
classified by cost centers. The Manufacturing Trading and Profit & Loss
Account shows the net surplus or deficit during the accounting period.
(b) Balance Sheet:
The balance sheet is
prepared with the balance of general ledger, personal ledger, Fixed assets
register, capital, work-in-process resister and cash book classification of
investment. Current assets and current liabilities are made in accordance with
the chart of accounts for general ledger. The balance sheet shown fixed assets,
Net current Assets, assets employed and the mode of financing the assets i.e.
financing by long term loan by capital and other funds.
6.5 Coding System Used
For the purpose of the
manual system the mills have to establish the following code for different Head
of Accounts, which is shown below:
The Rajshahi Sugar Mills Ltd.
Coding plant for Control Accounts
|
Class and Accounts title
|
Code (Five digit code)
|
|
Balance Sheet:
|
|
|
Share capital and reserves
|
12,000 to 15, 900
|
|
Loan capital
|
16,000 to 16, 900
|
|
Current liabilities
|
18,000 to 26, 000
|
|
|
|
|
Balance sheet items
|
|
|
Fixed Assets and Depreciation
|
20,000 to 35, 600
|
|
Current Assets
|
35,000 to 45, 500
|
|
Income Accounts
|
46,000 to 50, 500
|
|
Cost of production Accounts
|
51,000 to 58, 600
|
|
Expenditure
|
59,000 to 98, 500
|
6.6 Cost Center Code
The new cost centre code is
designed to place greater emphasis on responsibility accounting. Upto 30th
June 1974, ten cost centre were is use. These have now been extended to
thirteen and reordered so that their sequence corresponds to the production
process The code numbers given to each cost centre conform to a pattern which,
it is hoped, will eventually apply uniformly throughout the nationalized
industries of Bangladesh. Broadly, the Pattern is;
v
Manufacturing, Packing and Storing take the
digits 00-39.
v
Ancillary Services to the mills take the digits-
70-78.
v
Administration takes the digits- 79-99.
Applying this broad pattern
to the Sugar industry given the following cost centers and code should be used
from the 18 July 1964:
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| INVENTORY MANAGEMENT |
|
Cost Centre
|
Code
|
|
Cane procurement
|
01
|
|
Transport
|
02
|
|
Crushing and Mechanical maintenance
|
05
|
|
Sugar processing and chemical control
|
06
|
|
Sales and Distribution
|
35
|
|
Steam Generation
|
40
|
|
Power Generation
|
41
|
|
Electrical Maintenance
|
44
|
|
Civil Maintenance
|
45
|
|
Cane Development
|
63
|
|
Experimental farm
|
64
|
|
Machine Cultivate
|
66
|
|
Accounts
|
69
|
|
Administration
|
82
|
6.6 Accounting
Principles
The structure of accounting
system has developed over the countries through a set of principles, which is
preparing convention. In the accounting process the mills follows the following
General Accepted Accounting Principles, (GAAP):
a)
Entity principle
b)
Double entry principle
c)
Money Measurement principle
d)
Objective evidence principle
e)
Historical cost principle
f)
Going concern principle
g)
Accounting period principle
h)
Accrual principle
i)
Matching principle
j)
Consistency convention
k)
Conservatism convention.
l)
Materiality convention.
m) Disclosure
convention
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| INVENTORY MANAGEMENT |
6.8. Accounting Standard
Accounting standard may be
defined as the method of accounting, their applications in practice and their
disclosures in the financial statement set by professional or governmental
bodies as recommendations or regulation after appropriate studies, consultation
and tests.
The Institute of Cost and
Management Accounts of Bangladesh (ICMAB) and the Institute of Charted Accounts of Bangladesh (ICAB) the two wings
of accountancy profession in Bangladesh. Both ICMAB and ICAB are member of the
International Accounting Standards Committee (IASC) and has adopted 16 I.A.S
which is named once as Accounting Standard in Bangladesh.
Rajshahi Sugar Mills Ltd. follows the
following standards:
AS- 1: Disclosure of accounting
principle – IAS-I
AS- 2: Information to be disclosed in
financial statement –IAS-5
AS- 3: Accounting for property plant
and equipment- IAS- 16
AS- 4: Depreciation Accounting – IAS-4
AS- 6: Statement of charges in
financial position – IAS-6
AS- 12: Revenue Recognition –IAS-12
AS- 16: Related party disclosure-
IAS-24
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