Table of Contents

Topics
Page
Number
Letter of Transmittal I
Acknowledgement II
Abstract III
Table of Contents IV
Chapter 1: Introduction
Origin of the Report 1
Background of the Report 1
cope of the tud! "
Ob#ecti$es of the tud! "
%ethodolog! of the tud! "
Limitation of the tud! &
Chapter 2: Literature Review
Accounting and Information !stems 'AI() An O$er$iew *
Role of AI in the $alue chain +
%anagement Information !stems '%I( and AI ,
Basic functions of AI -
.ocumentation Techni/ues 1*
Basic ubs!stems in the AI 10
12penditure C!cle 3 A Closer Look "4
Internal Control and AI "*
Chapter : Compan! Profile
Be2imco 5harma at a 6lance &4
The 5rofile7 Be2imco 5harmaceuticals Limited &"
%ission tatement of Be2imco 5harma &&
%anaging the Champion Organi8ation &9
The :ootprints Left O$er b! B5L O$er Time &0
.epartments of Be2imco 5harma &,
;ualit! ) The 5assion of B5L **
Research and .e$elopment ) A 5romise <ept b! B5L *9
Blockbuster 5roducts ) B5L=s %a#or Contributors *0
Chapter ": #indings of the $tud!
Accounting Information !stem of B5L *-
12penditure C!cle of B5L 91
Local 5urchase of Raw and 5acking %aterial 91
Input Information 90
Information 5rocessing 9,
Output Information +4
Import of Raw and 5acking %aterial +"
Input Information +&
Information 5rocessing 04
Output Information 00
Capital 12penditure c!cle ,"
Input Information ,"
Information 5rocessing ,&
Output Information ,*
Re$enue 12penditure C!cle ,9
Internal control for 12penditure c!cle ,0
Chapter %: Recommendations -&
Chapter &: Conclusion 144
'ibliograph! 141
(nne)ure
*r i gi n of t he Repor t
The report was originated to make a stud! on the 12penditure C!cle of Be2imco
5harmaceuticals Limited> one of the most important c!cles and as a part of the fulfillment
of internship program re/uired for the completion of the %aster of Business
Administration '%BA( program of the .epartment of Accounting ? Information !stems
of the :acult! of Business tudies of @ni$ersit! of .hakaA Internship program is an attempt
to ac/uaint the students with the real world situations so that the knowledge gained from
the classroom is further strengthenedA As the classroom discussion alone can not make
a student perfect in handling the real business situation> therefore it is an opportunit! for
the students to know about the real life situation through this internship program This
internship report was prepared under the super$ision of 5allab <umar Biswas> Lecturer>
.epartment of AI> :acult! of Business tudies> @ni$ersit! of .haka and %rA Bamal
Ahmed Choudhur!> enior %anager> :inance and Accounts> Be2imco 5harmaceuticals
LtdA
'ac+gr ound of t he Repor t
Accounting Information !stem 'AI( is the oldest and most widel! used
information s!stem in business as the! record and report business transaction and
other economic e$entsA Computer based AI records and reports the flow of
funds through an organi8ation on a historical basis and produce important financial
statements such as Balance heet> Income tatement> Cash :lows> etcA uch
s!stems also produce forecasts of future conditions such as 5ro#ected :inancial
tatements and :inancial BudgetA Ad$ancement in information and communication
technolog! in last twent! !ears has changed the traditional $iew of Accounting
Information !stem for goodA Computer based Accounting Information !stems has
enabled us to enter data from different geographical locations simultaneousl!> process
data at a $er! high speed> and generate reports $er! /uickl!A Control mechanisms for
computer based AI is also a little different from manual AIA All these things ha$e
made me interested to ha$e an in)depth look on the AI of a large manufacturing
concernA This report is an attempt to $isuali8e the 12penditure c!cle of
Accounting Information !stem of the B1CI%CO 5harmaceuticals LtdA
$cope of t he $t ud!
The full package of Accounting Information !stem of a public limited compan! is a
broad areaA Dithin the time period of three months allotted for internship> it is $irtuall!
impossible to co$er all aspects of AIA o> the scope of m! report is limited onl! to the
sur$e! of e2penditure c!cle> the recording> processing and disseminating of information
produced from this c!cle and related internal control issuesA
*b, ect i ves of t he $t ud!
The broad ob#ecti$e of preparing this report is to broaden m! knowledge and
understanding of Accounting Information !stems b! adding practical e2perience in
a real business set up> its operation and culture to m! ac/uired knowledge in the
classroomA
The specific ob#ecti$es of the stud! are7
To gi$e a brief o$er$iew of Be2imco 5harmaceuticals Limited 'B5L(A
To be familiar with the corporate en$ironmentA
To ha$e an idea about the organi8ation=s product and mode of operationsA
To $i$idl! understand how the functional areas of Be2imco 'B5L( operate and
the! are interlinked with each otherA
To ha$e a comprehensi$e look into the e2penditure c!cle of a large manufacturing
concern like B5LA
To understand the nature> design> use and implementation of AI and also
reporting of financial informationA
-et hodol og! of t he $t ud!
This report has been prepared on the basis of e2perience gathered during the period of
internshipA :or preparing this report> I ha$e also got information from annual reports and
website of the Be2imco 5harmaceuticals LimitedA The details of the work plan are
furnished below7
Data collection method
Rele$ant data for this report has been collected primaril! b! direct in$estigations of
different records> papers> and documentsA The inter$iews were administered b! formal
and informal discussion and no structured /uestionnaire has been usedA
Data sources
The data and information for this report ha$e been collected from both the primar! and
secondar! sourcesA Among the primar! sources> face to face con$ersation with the
respecti$e stuffs of the head office and the auditors of the compan! and practical work
e2perience are importantA The secondar! sources of information are annual reports>
websites> and stud! of rele$ant reports> documents and different manualsA
Data processing
.ata collected from primar! and secondar! sources ha$e been processed manuall! and
/ualitati$e approach in general and /uantitati$e approach in some cases has been used
throughout the stud!A
Data analysis and interpretation
;ualitati$e approach has been adopted for data anal!sis and interpretation taking the
processed data as the baseA o the report relies primaril! on an anal!tical #udgment and
critical reasoningA
Data Presentation
.ata E Information ha$e been presented in a narrati$e mannerF flow diagrams are also
used to gi$e a clear and precise understanding of the situationA
Li mi t at i on of t he $t ud!
In spite of all sincere and honest efforts the stud!Ereport contains a number of limitations>
which was be!ond m! controlA %a#or limitations of the stud!Ereport are7
1A All the comments made> conclusion reached and suggestions for possible impro$ement
pro$ided are purel! based on m! le$el of understanding> knowledge and m! wa! of
interpreting a particular statementA
"A Be2imco 5harmaceutical Limited follows a polic! of not disclosing all the information
needed to prepare m! report for ob$ious reasonA
&A Because of the lack of information> I ha$e to make some assumptions that ma! cause
few errors or personal mistakes in the reportA
(ccounting and Information $!stems. (n *verview
Accounting:
Accounting can be defined as an information s!stemA The operations concerned with
accounting can be identified as a( recording economic data 'data collection( b( data
maintenance c( presenting /uantitati$e information in financial terms 'Information
generation(A Accounting can also be classified as the language of businessA o in brief
accounting ma! be $iewed as an instrument of pro$iding financial information needed for
the o$erall functioning of an entit! 'a business firm(A
Information:
Information is intelligence that is meaningful and useful to persons for whom it is
intendedA Information has $alue to the firms and to the managersA Information is
basicall! pro$ided b! AI through financial statements to e2ternal parties and through
$arious t!pes of managerial reports to insidersA This information can be used b! the
managers for different t!pes of decision makingA
At first data is made a$ailable for the organi8ationA .ata become information through
three stagesA These stages are input> process and outputA
System:
A s!stem is two or more interrelated components that interact to achie$e a goalA !stems
are almost composed of smaller subs!stems> each performing a specific function
important to and supporti$e of the larger s!stem of which it is a partA
A s!stem can be defined as a group of interacting parts that function together to achie$e
its purposeA ome of the s!stems are natural and some of them are made b! humanA
uppose %ississippi ri$er can be classified as a natural s!stem whereas clock can be
classified as a s!stem made b! human beingA
Accounting and information systems:
AI is a structure within an entit! such as a business firm> that emplo!s ph!sical
resources and other components to transform economic data into accounting information
to pro$ide it to different t!pes of user for the purpose of decision makingA
:acilities
Labor 'human ser$ices(
.ata
:unds
Ac/uiring %aterials
5roducing :inished 6oods toring :inished 6oods hipping :inishedGoods
6oods to Customer
upporting Operations
AIS
Information
:unds
%aterial from upplier
Manufacturing Firm
Data and information flow Physical flows
Fig 1: The operational system of a manufacturing firm !il"inson# $erullo#
%a&al and !ong'(n'!ing# )**+#P',-
According to %omney and Stein.art> GAn AI consists of fi$e components7
1A The people who operate the s!stems and perform $arious functionsA
"A The procedures both manual and automated> in$ol$ed in collecting> processing>
and storing data about the organi8ations acti$ities
&A The data about the organi8ations business process
*A The software used to process organi8ations data
9A The information technolog! infrastructure including computers> peripheral
de$ices> and network communication de$icesAH
The need for studying AIS
The Accounting 1ducation Change Commission recommended that the accounting
curriculum should pro$ide students with a solid understanding of three essential
concepts7
1A The use of information in decision making
"A The nature> design> use and implementation of an AI
&A :inancial information reporting
The knowledge of AI for e$er! Accounting student is $er! crucial for the following
reasons7
1A The AI course focuses on understanding how the accounting s!stem works7
Iow to collect data about an organi8ationJs acti$ities and transactions
Iow to transform that data into information that management can use to run
the organi8ation
Iow to ensure the a$ailabilit!> reliabilit!> and accurac! of that information
"A Auditors need to understand the s!stems that are used to produce a compan!Js
financial statementsA
&A Ta2 professionals need to understand enough about the clientJs AI to be
confident that the information used for ta2 planning and compliance work is
complete and accurateA
*A One of the fastest growing t!pes of consulting ser$ices entails the design>
selection> and implementation of new Accounting Information !stemsA
9A A sur$e! conducted b! the Institute of %anagement Accountants 'I%A( indicates
that work relating to accounting s!stems was the single most important acti$it!
performed b! corporate accountantsA
Rol e of (I $ i n t he /al ue Chai n
The ultimate goal of an! business is to pro$ide $alue to its customersA A business will be
profitable if the $alue it creates is greater than the cost of producing its products or
ser$icesA An organi8ationJs $alue chain consists of nine interrelated acti$ities that
collecti$el! describe e$er!thing it does Porter and Millar# 1/,+# P011/'12*-0 The fi$e
primar! acti$ities consist of the acti$ities performed in order to create> market> and
deli$er products and ser$ices to customers and also to pro$ide post)sales ser$ices and
supportA The four support acti$ities in the $alue chain make it possible for the primar!
acti$ities to be performed efficientl! and effecti$el!A The nine $alue chain acti$ities are7
5rimar! acti$ities7
1A In.ound logistics consist of recei$ing> storing> and distributing the materials
that are inputs used b! the organi8ations to create the ser$ice and products that
it sellsA
"A (perations acti$ities transform input in to final products or ser$icesA
&A (ut.ound logistics are the acti$ities in$ol$ed in distributing finished goods
or ser$ices to customersA
*A Mar"eting and sales refers to the acti$ities in$ol$ed in helping customers to
bu! the organi8ations products and ser$icesA
9A Ser&ice acti$ities pro$ide post sale support to customersA
upport er$ices7
1A Firm infrastructure refers to the accounting> finance> legal support> and
general administration acti$ities that are necessar! for an! organi8ation to
functionA
"A 3uman resources acti&ities include recruiting> hiring> training and pro$iding
emplo!ee benefits and compensationsA
40 Technology acti$ities impro$e a product and ser$iceA 12amples include
research and de$elopments> production designA
*A Purchasing includes all the acti$ities in$ol$ed in procuring raw materials>
supplies> machiner! and the buildings used to carr! out primar! acti$itiesA
3ow an AIS adds &alue to a .usiness:
The AI can add $alue to an organi8ation b! pro$iding accurate and timel! information
so that the fi$e primar! $alue chain acti$ities can be performed more effecti$el! and
efficientl!A Dell designed AI can do this b!7
1A Impro$ing the /ualit! and reducing the costs of products or ser$icesA
AIS
Sales5
Mar"eting
Personnel
Production Info
Finance
"A Impro$ing the efficienc!7 A well designed AI can help impro$e the efficienc! of
operations b! pro$iding more timel! informationA
&A Impro$ed decision making7 AI can impro$e decision making b! pro$iding
accurate information in a timel! mannerA
*A haring of knowledge7 well)designed AI can make it easier to share knowledge
and e2pertise> perhaps thereb! impro$ing operations and e$en pro$iding a
competiti$e ad$antageA
-anagement I nf or mat i on $!st ems 0 -I $1
%I pro$ides information to the managers of the firmA %I pro$ides information needed
to plan and control the acti$ities of the firmA It includes all t!pes of data including non)
transactional dataA
%elationship .etween AIS 6 MIS:
ome $iew AI ha$ing the narrow scope of the %I> since the data accepted b! the %I
ha$e a broader scopeA On the other hand> AI ser$es a wider group of users both internal
and e2ternalA Thus in conclusion it can be said that AI ? %I> each of them ha$e
particular mission ? to some e2tent these are interrelatedA
Fig ): AIS as an MIS su.system !il"inson# $erullo# %a&al and !ong'(n'!ing#
)**+# P'1)-
'asi c #unct i ons of (I $
An AI performs three basic functions7
1A To collect and store data about the organi8ationJs business acti$ities and
transactions efficientl! and effecti$el!7
Capture transaction data on source documentsA
Record transaction data in #ournals> which present a chronological
record of what occurredA
5ost data from #ournals to ledgers> which sort data b! account t!peA
"A To pro$ide management with information useful for decision making7
In manual s!stems> this information is pro$ided in the form of reports
that fall into two main categories7
- financial statements
- managerial reports
&A To pro$ide ade/uate internal controls7
1nsure that the information produced b! the s!stem is reliableA
1nsure that business acti$ities are performed efficientl! and in
accordance with managementJs ob#ecti$esA
afeguard organi8ational assets
Data collection and processing
The data collection and processing c!cle consists of four steps7 data input> data storage>
data processing and information outputA The trigger for data input is usuall! business
acti$it!A .ata must be collected about7
1ach e$ent of interest
The resources affected b! each e$ent
The agents who participate in each e$ent
Data Input:
Iistoricall!> most businesses used paper source documents to collect data and then
transferred that data into a computerA Toda!> most data are recorded directl! through data
entr! screensA @suall! the data entr! screen retains the same name as the paper source
document it placedA Dell designed source documents and data entr! screens impro$e both
control and accurac! of capturing data about business acti$itiesA 12amples of source
documents7
Source document Function
ales order To record customer order
.eli$er! ticket To record deli$er! of merchandise to customerA
Credit memo To support ad#ustments in customers account for sales return>
sales discount etcA
.eposit slip To record amounts of cash ? che/ues deposited in compan!
bank accountA
5urchase re/uisition To re/uest that purchase department orders specific goodsA
5urchase order To re/uest merchandise from $endorsA
Recei$ing report To record receipt of merchandise from $endorsA
Time cards Record time worked b! emplo!ees
Control o$er data collection is impro$ed b!7
prenumbering each source document since it simplifies $erif!ing that all
transactions ha$e been recorded and that none of the documents has been
misplaced
ha$ing the s!stem automaticall! assign a se/uential number to each new
transaction
emplo!ing source data automation such as AT%s used b! banks> 5O
scanners used in retail stores
Data Processing:
Once data about a business entit! has been collected> the ne2t step usuall! in$ol$es
updating pre$iousl! stored information about the resources affected b! the e$ent and the
agents who participated in the acti$it!A :or e2ample> data about a sales transaction result
in updating the information about in$entor! to reduce the /uantit! on hand of the item
sold> as well as updating the customers account balanceA This updating can either be done
periodicall!> such as once a da! or week> or immediatel! as each transaction occursA
Batch processing is the periodic updating of the data stored about resources and
agents
On)line> real)time processing is the immediate updating as each transaction occurs
Data Storage:
An entit! is something about which information is storedA 12amples of entities include
emplo!ees> in$entor! items> and customersA 1ach entit! has attributes> or characteristics
of interest> which need to be storedA An emplo!ee pa! rate and customer address are
e2amples of attributesA 6enerall!> each t!pe entit! possesses the same set of attributesA
:or e2ample> all emplo!ees possess an emplo!ee number> pa! rate and home addressA
The specific data $alues for those attributes howe$er will differ among entitiesA
%ecord transaction data in 7ournal:
After transaction data ha$e been captured on source documents> the ne2t step is to record
the data in a #ournalA A #ournal entr! is made for each transaction showing the accounts
and amounts to be debited and credited.
The general #ournal records infre/uent or non routine transactionsA
peciali8ed #ournals simplif! the process of recording large numbers of repetiti$e
transactionsA
Post transactions to ledger:
In an AI> the files used to store cumulati$e information about resources and agents are
called ledgersA %ost companies should ha$e both general ledger and a set of subsidiar!
ledgersA The general ledgers contain summar! data for e$er! asset> liabilit!> e/uit!>
re$enue and e2pense account of the organi8ationA A subsidiar! ledger records all the
detailed data for an! general ledger account that has an! man! indi$idual sub)accountsA
:or e2ample> the general ledger contains one account that summari8es the total amount
owed to the compan! b! all customersA The subsidiar! accounts recei$able ledger has a
separate record for each indi$idual customer> each of which contains detailed information
about a particular customerA ubsidiar! ledgers are commonl! used for accounts
recei$able> in$entor!> fi2ed assets and account pa!ableA
$hart of Accounts:
1ach general ledger account is assigned an a specific numberA The chart of accounts is a
list of all general ledger accounts an organi8ation uses %omney and Stein.art# )**4# P'
4*-A The structure of the chart of accounts is one of the most important aspects of AI>
because it affects the preparation of financial statements and reportsA .ata stored in
indi$idual accounts can easil! be summed for presentation in reports> but data stored in
summar! accounts can not be easil! broken down and reported in more detailA
Conse/uentl!> it is important that the chart of accounts contain sufficient detail to meet an
organi8ationJs information needsA
Pro&iding information for decision ma"ing
A second function of the AI is to pro$ide management with information useful for
decision makingA Dhether presented in the form of paper reports or displa!ed on a
computer screen> the information an AI pro$ides falls in to two main categories7
financial statements and managerial reportsA :inancial statements are primaril! designed
for e2ternal parties to use in making decisions about e2tending credit to or in$esting in
the organi8ationsA The following steps are used to7
5repare a trial balanceA
%ake ad#usting entriesA
5repare the ad#usted trial balanceA
5roduce the income statementA
%ake closing entriesA
5roduce the balance sheetA
5repare the statement of cash flowsA
Managerial reports:
An organi8ationJs AI must be able to pro$ide managers with detailed operational
information about the organi8ationJs performanceA
8udgets and performance reports:
Two important t!pes of managerial reports are budgets and performance reportsA A
budget is the formal e2pression of goals in financial termsA One of the most common and
important t!pe of budget is the cash budgetA A cash budget shows pro#ected cash inflows
? outflowsA
5erformance reports> in contrast> are used for financial controlA A performance report lists
the budgeted and actual amounts of re$enues and e2penses and also shows the $ariances
or differences between these amountsA
Internal $ontrol
The third function of an AI is to pro$ide ade/uate internal controls to accomplish three
basic ob#ecti$es7
1A 1nsure that the information is reliableA
"A 1nsure that business acti$ities are performed efficientl!A
&A afeguard organi8ational assetsA
The two important methods for accomplishing these ob#ecti$es are7
1A 5ro$ide for ade/uate documentation of all business acti$itiesA
"A .esign the AI for effecti$e segregation of dutiesA
Ade9uate Documentation:
Ade/uate documentation of all business transactions is the ke! to accountabilit!A
.ocumentation allows management to $erif! that assigned responsibilities were
completed correctl!A Dell)designed documents and records can help organi8ations
/uickl! identif! potential problemsA :or e2ample> gaps in the se/uence of completed
source documents might indicate that some documents ha$e been misplaced> in which
case some transactions ma! not ha$e been recordedA uch a gap ma! also> howe$er> be a
sigh of more serious problemA :or e2ample> a missing check ma! ha$e been written for
fraudulent purposesA Ade/uate documents and records can also ensure that an
organi8ation does not make commitments it cannot keepA
Segregation of duties:
egregation of duties refers to di$iding responsibilit! for different portion of a transaction
among se$eral people %omney and Stein.art# )**4# P'4:-A The ob#ecti$e is to pre$ent
one person from ha$ing total control o$er all aspects of a business transactionA .ifferent
person should perform the following acti$ities7
authori8ing transactions
recording transactions
maintaining custod! of assets
2ocument at i on Techni 3ues
.ocumentation encompasses the narrati$es> flowcharts> diagrams and other written
material that e2plain how a s!stem worksA This information co$ers the who> what> when>
where> wh! and how of data entr!> processing> storage> information output and s!stem
controlsA One popular means of documenting a s!stem is to de$elop diagrams>
flowcharts> tables and other graphical representations of informationA These are then
supplemented b! a narrati$e description of the s!stem> a written step)b! step e2planation
of s!stem components and interactionsA
Documentation:
.ocumentation describes the procedures for recording data> the commands that run
computer programs> the processing steps that AI follow and the logical and ph!sical
flows of accounting data through the s!stemA
Importance of documentation:
1A One of the basic purposes of documentation is to e2plain how AI operatesA
.ocumentation helps emplo!ees to understand how does a s!stem works> helps
accountants to impro$e it and help managers to control itA
"A .ocumentation also includes the user guides> procedure manuals and operating
instructionsF which are so helpfulA These are helpful to train users to operate AI
hardware and software> to sol$e new operating problems and to perform the #obs
betterA
&A .ocumentation also helps to de$elop new s!stemsA It is also helpful to maintain
the e2isting oneA
*A Karrati$e descriptions ma! $ar! significantl!> depending on who writes themA
imilarl!> the indi$idual reading a narrati$e ma! interpret it differentl! from the
wa! it was intendedA But a s!stem flowchart or data flow diagram that uses
common s!mbol is more likel! to be interpreted in the same wa! b! all of the
parties $iewing itA
9A .ocumentation helps the auditors to determine the strengths and weaknesses of
the organi8ation so easil!A Thereafter> the auditors can identif! the scope ?
comple2it! of the auditA
Different types of documentation techni9ue
An organi8ation can use different t!pes of documentation techni/ues a$ailable to itA ome
ma#or t!pes are7
Dataflow diagram
A data flow diagram '.:.( graphicall! describes the flow of data within an organi8ationA
It is used to document e2isting s!stems and to plan and design new onesA There is no
ideal wa! to de$elop a .:.A A data flow diagram '.:.( is composed of the following
four basic elements7
.ata sources and destinations
.ata flows
Transformation processes
.ata stores
Flowchart
A flowchart is an anal!tical techni/ue used to describe some aspect of an information
s!stem in a clear> concise> and logical mannerA :lowcharts use a standard set of s!mbols
to pictoriall! describe transaction processing proceduresA :lowcharts are of three t!pes7
Document flowchart:
A document flowchart illustrates the flow of documents and information between areas of
responsibilit! within an organi8ationA .ocument flowcharts trace a document from its
cradle to its gra$eA The! show where each document originates> its distribution> the
purposes for which it is used> its ultimate disposition> and e$er! thing that happens as it
flows through the s!stemA
System flowchart:
!stem flowcharts depict the relationship among the input> processing> and output of an
AIA A s!stem flowchart begins b! identif!ing both the inputs that enter the s!stem and
their originsA The input can be new data entering the s!stem> data stored for future use or
bothA The input is followed b! the processing portion of the flowchart> which is the steps
performed on the dataA The logic the computer uses to perform the processing task is
shown on a program flowchartA The resulting new information is the output component>
which can be stored for later use> displa!ed on a screen or printed on paperA In man!
instances> the output from one process is an input to anotherA
Program flowchart:
A program flowchart describes the specific logic to perform a process shown on a
s!stems flowchartA A flow line connects the s!mbols and indicates the se/uence of
operationsA The processing s!mbol represents a data mo$ement or arithmetic calculationA
Differences .etween DFDs and Flowcharts
.:.s emphasi8e the flow of data and what is happening in a s!stem> whereas a
flowchart emphasi8es the flow of documents or records containing dataA
A .:. represents the logical flow of data> whereas a flowchart represents the
ph!sical flow of dataA
:lowcharts are used primaril! to document e2isting s!stemsA .:.s> in contrast>
are primaril! used in the design of new s!stems and do not concern themsel$es
with the ph!sical de$ices used to process> store> and transform dataA
'asi c $ubs!st em i n t he (I $
According to %omney and Stein.art# ;Accounting Information !stems consist of fi$e
subs!stemsA These are7
1A The re$enue c!cle7 in$ol$es acti$ities of selling goods or ser$ices and
collecting pa!ment for those salesA
"A The e2penditure c!cle7 in$ol$es acti$ities of bu!ing and pa!ing for goods or
ser$ices used b! the organi8ationA
&A The human resourcesEpa!roll c!cle7 in$ol$es acti$ities of hiring and pa!ing
emplo!eesA
*A The production c!cle7 in$ol$es acti$ities con$erting raw materials and labor
into finished goodsA
9A The financing c!cle7 in$ol$es acti$ities of obtaining necessar! funds to run
the organi8ation> repa! creditors> and distribute profits to in$estorsAH
%e&enue $ycle:
The re$enue c!cle is a recurring set of business acti$ities and related information
processing operations associated with pro$iding goods and ser$ices to customers and
collecting cash in pa!ment for those sales %omney and Stein.art# )**4# P'4+/-
%omney and Stein.art identified four basic re$enue c!cle business acti$itiesA These are7
1 ales order entr!
" hipping
& Billing and accounts recei$able
* Cash collections
Sales order entry:
ales order entr! process entails three steps7
1A Taking the customerJs order
"A Checking and appro$ing the customerJs credit
&A Checking in$entor! a$ailabilit!
Shipping:
The second basic acti$it! in the re$enue c!cle 3 filling customer orders and shipping the
desired merchandise 3 entails two steps7
1A 5icking and packing the order
"A hipping the order
8illing and accounts recei&a.le:
The third basic acti$it! in the re$enue c!cle in$ol$es7
1A Billing customers
"A @pdating accounts recei$able
$ash collection:
The fourth step in the re$enue c!cle is cash collectionsA It in$ol$es7
1A Iandling customer remittances
"A .epositing remittances in the bank
<=penditure $ycle
The e2penditure c!cle is a recurring set of business acti$ities and related data processing
operations associated with the purchase of and pa!ment for goods and ser$ices %omney
and Stein.art# )**4# P'11+-A The primar! ob#ecti$e of the e2penditure c!cle is to
minimi8e the total cost of ac/uiring and maintaining in$entories> supplies> and the
$arious ser$ices necessar! for the organi8ation to functionA
The three basic business acti$ities in the e2penditure c!cle are7
1A Ordering goods> supplies and ser$ices
"A Recei$ing and storing goods> supplies and ser$ices
&A 5a!ing for goods> supplies and ser$ices
Production $ycle
The production c!cle is a recurring set of business acti$ities and related data processing
operations associated with the manufacturing of products %omney and Stein.art# )**4#
P'12,-A Accurate and timel! cost accounting information is essential input to decisions
about7
L 5roduct mi2
L 5roduct pricing
L Resource allocation and planning
L Cost management
There are four basic acti$ities in the production c!cle7
1A 5roduct design
"A 5lanning and scheduling
&A 5roduction operations
*A Cost accounting
3uman %esource5 Payroll $ycle
The IR%Epa!roll c!cle is a recurring set of business acti$ities and related data
processing operations associated with effecti$el! managing the emplo!ee work force
%omney and Stein.art# )**4# P'+*+-A ome of the more important acti$ities include
the following tasks7
3 Recruitment and hiring
3 Training
3 Bob assignment
3 Compensation 'pa!roll(
3 5erformance e$aluation
3 .ischarge of emplo!ees> due to $oluntar! or in$oluntar! termination
The three basic functions the AI pro$ide in the IR%Epa!roll c!cle are7
1A 5rocessing transactional data about emplo!ee acti$ities
"A afeguarding the organi8ationJs assets
&A 5ro$iding information for decision)making
The basic acti$ities performed in the pa!roll c!cle are7
1A @pdate master pa!roll file
"A @pdate ta2 rates and deductions
&A Validate time and attendance data
*A 5repare pa!roll
9A .isburse pa!roll
+A Calculate emplo!er)paid benefits and ta2es
0A .isburse pa!roll ta2es and other deductions
General >edger and %eporting Acti&ities
This part discusses the information processing operations in$ol$ed in updating the
general ledger and preparing reports that summari8e the results of an organi8ationJs
acti$itiesA
The four basic acti$ities performed in the general ledger and reporting s!stem are7
1A @pdate the general ledger
"A 5ost ad#usting entries
&A 5repare financial statements
*A 5roduce managerial reports
4)pendi t ur e C!cl e . ( Cl oser Loo+
The e2penditure c!cle is a recurring set of business acti$ities and related data processing
operations associated with the purchase of and pa!ment for goods and ser$icesA The
primar! ob#ecti$e of the e2penditure c!cle is to minimi8e the total cost of ac/uiring and
maintaining in$entories> supplies> and the $arious ser$ices necessar! for the organi8ation
to functionA
?ey decisions:
Dhat is the optimal le$el of in$entor! and supplies to carr!M
Dhich suppliers pro$ide the best /ualit! and ser$ice at the best pricesM
Dhere in$entories and supplies should be heldM
Iow can the organi8ation consolidate purchases across units to obtain optimal
pricesM
Iow can information technolog! be used to impro$e both the efficienc! and
accurac! of the inbound logistics functionM
Is sufficient cash a$ailable to take ad$antage of an! discounts suppliers offerM
Iow can pa!ments to $endors be managed to ma2imi8e cash flowM
8usiness acti&ities:
%omney and Stein.art identified three basic business acti$ities in the e2penditure c!cleA
These are7
1A Ordering goods> supplies and ser$ices
"A Recei$ing and storing goods> supplies and ser$ices
&A 5a!ing for goods> supplies and ser$ices
Acti&ity 1: (rdering goods# supplies and ser&ices
The first ma#or business acti$it! in the e2penditure c!cle is ordering in$entor! or
suppliesA The traditional in$entor! control method is often called economic order /uantit!
N1O;OA This approach is based on calculating an optimal order si8e so as to minimi8e the
sum of ordering> carr!ing> and stockout costsA
Alternati$e in$entor! control methods are7
10 M%P material re9uirement planning-
This approach seeks to reduce re/uired in$entor! le$els b! scheduling production> rather
than estimating needsA
)0 @IT 7ust in time-
BIT s!stems attempt to minimi8e both carr!ing and stockout costsA
A ma#or difference between %R5 and BIT is7
%R5 s!stems schedule production to meet estimated sales need> thereb! creating a stock
of finished goods in$entor! where BIT s!stems schedule production to meet customer
demands> thereb! $irtuall! eliminating finished goods in$entor!A
Documents and procedures:
The purchase re/uisition is a document that identifies the following7
3 re/uisitioner and item number
3 specifies the deli$er! location and date needed
3 specifies descriptions> /uantit!> and price of each item re/uested
3 ma! suggest a $endor
The purchase order is a document that formall! re/uests a $endor to sell and
deli$er specified products at designated pricesA It is also a promise to pa! and
becomes a contract once it is accepted b! the $endorA :re/uentl!> se$eral purchase
orders are generated to fill one purchase re/uisitionA
Acti&ity ): %ecei&ing and Storing Goods# Supplies and Ser&ices
The second ma#or business acti$it! in$ol$es the receipt and storage of ordered itemsA
<e! decisions and information needs7
The recei$ing department has two ma#or responsibilities7
.eciding whether to accept a deli$er!
Verif!ing /uantit! and /ualit!
Documents and procedures:
The recei$ing report documents details about each deli$er!> including the date recei$ed>
shipper> $endor> and purchase order numberA :or each item recei$ed> it shows the item
number> description> unit of measure> and count of the /uantit! recei$edA
Acti&ity 4: Pay for Goods and Ser&ices
Appro&e Aendor In&oices:
The third acti$it! entails appro$ing $endor in$oices for pa!mentsA
The accounts pa!able department appro$es $endor in$oices for pa!ment
The cashier is responsible for making the pa!ment
The ob#ecti$e of accounts pa!able is to authori8e pa!ment onl! for goods and ser$ices
that were ordered and actuall! recei$edA
Impro&ing accounts paya.le:
5rocessing efficienc! can be impro$ed b!7
Re/uiring suppliers to submit in$oices electronicall!> either b! 1.I
'1lectronic .ata Interchange( or $ia the Internet
1liminating $endor in$oicesA This Gin$oicelessH approach is called
e$aluated receipt settlement '1R(A
Pay appro&ed in&oices:
The cashier appro$es in$oices
The combination of $endor in$oice and supporting documentation is
called a $oucher packageA
A ke! decision in the cash disbursement process is determining whether to
take ad$antage of discounts for prompt pa!mentA
Information needs:
The third function of the AI is to pro$ide information useful for decision makingA
@sefulness in the e2penditure c!cle means that the AI must pro$ide the operational
information needed to perform the following functions7
.etermine when and how much additional in$entor! to orderA
elect the appropriate $endors from whom to orderA
Verif! the accurac! of $endor in$oicesA
.ecide whether purchase discounts should be takenA
%onitor cash flow needs to pa! outstanding obligationsA
1fficienc! and effecti$eness of the purchasing department
Anal!ses of $endor performance such as on)time deli$er!> /ualit!> etcA
Time taken to mo$e goods from the recei$ing dock into production
5ercentage of purchase discounts taken
I nt er nal Cont r ol and (I $
Internal $ontrol:
The traditional definition of internal control is that internal control is the plan of
organi8ation and the methods a business uses to safeguard assets> pro$ide accurate and
reliable information> promote and impro$e operational efficienc!> and encourage
adherence to prescribed managerial policiesA
Management control:
%anagement control encompasses the following three features7
1A It is an integral part of management responsibilitiesA
"A It is designed to reduce errors> irregularities> and achie$e organi8ational goalsA
&A It is personnel)oriented and seeks to help emplo!ees attain compan! goalsA
The specific control procedures used in the internal control and management control
s!stems ma! be classified using the following four internal control classifications7
1A 5re$enti$e> detecti$e> and correcti$e controls
"A 6eneral and application controls
&A Administrati$e and accounting controls
*A Input> processing> and output controls
In 1--"> COO 'Committee of ponsoring Organi8ation( issued the results of a stud! to
de$elop a definition of internal controls and to pro$ide guidance for e$aluating internal
control s!stemsA The report has been widel! accepted as the authorit! on internal
controlsA The COO stud! defines internal control as the process implemented b! the
board of directors> management> and those under their direction to pro$ide reasonable
assurance that control ob#ecti$es are achie$ed with regard to7
3 effecti$eness and efficienc! of operations
3 reliabilit! of financial reporting
3 compliance with applicable laws and regulations
COOJs internal control model has fi$e crucial components7
3 Control en$ironment
3 Control acti$ities
3 Risk assessment
3 Information and communication
3 %onitoring
The Information !stems Audit and Control :oundation 'IAC:( recentl! de$eloped the
Control Ob#ecti$es for Information and related Technolog! 'COBIT(A COBIT
consolidates standards from &+ different sources into a single frameworkA The framework
addresses the issue of control from three $antage points or dimensions7
1A Information7 needs to conform to certain criteria that COBIT refers to as
business re/uirements for information
"A IT resources7 people> application s!stems> technolog!> facilities> and data
&A IT processes7 planning and organi8ation> ac/uisition and
implementation> deli$er! and support> and monitoring
<lements of Internal $ontrol
The elements of internal control as identified b! COO are briefl! discussed below7
$ontrol <n&ironment
The first component of COOJs internal control model is the control en$ironmentA The
control en$ironment consists of man! factors> including the following7
1A Commitment to integrit! and ethical $alues
"A %anagementJs philosoph! and operating st!le
&A Organi8ational structure
*A The audit committee of the board of directors
9A %ethods of assigning authorit! and responsibilit!
+A Iuman resources policies and practices
0A 12ternal influences
$ontrol Acti&ities
6enerall!> control procedures fall into one of fi$e categories7
1A 5roper authori8ation of transactions and acti$ities
"A egregation of duties
&A .esign and use of ade/uate documents and records
*A Ade/uate safeguards of assets and records
9A Independent checks on performance
Proper AuthoriBation of Transactions and Acti&ities:
%anagement lacks the time and resources to super$ise each acti$it! and decisionA o the!
establish policies for emplo!ees to follow and then empower them to perform
accordingl!A This empowerment is called authori8ationA Certain acti$ities or transactions
ma! be of such conse/uence that management grants specific authori8ation for them to
occurA :or e2ample7 the appro$al is often re/uired if the credit sale is o$er T< &4>444A In
contrast> management can authori8e emplo!ees to handle routine transactions without
special appro$al> a procedure known as general authori8ationA
Authori8ation is the empowerment management gi$es emplo!ees to
perform acti$ities and make decisionsA
.igital signature or fingerprint is a means of signing a document with a
piece of data that cannot be forgedA
pecific authori8ation is the granting of authori8ation b! management for
certain acti$ities or transactionsA
Segregation of Duties:
6ood internal control demands that no single emplo!ee be gi$en too much responsibilit!A
An emplo!ee should not be in a position to perpetrate and conceal fraud or unintentional
errorsA The following three t!pes of function should be segregatedA
AuthoriBation means appro$ing transactions and decisionsA
%ecording means preparing source documents> #ournals> ledgers> or other files>
preparing reconciliations and preparing performance reportA
$ustody means handling cash maintaining an in$entor! storeroom> recei$ing
checks> writing checksA
Recording :unctions
5reparing source documents
%aintaining #ournals
5reparing reconciliations
5reparing performance reports
Custodial :unctions
Iandling cash
Iandling assets
Driting checks
Recei$ing checks in mail
Authori8ation :unctions
Authori8ation of
Transactions
If two of these three functions are the responsibilit! of a single person> problems can
ariseA egregation of duties pre$ents emplo!ees from falsif!ing records in order to
conceal theft of assets entrusted to themA
Design and Cse of Ade9uate Documents and %ecords:
The proper design and use of documents and records helps ensure the accurate and
complete recording of all rele$ant transaction dataA .ocuments that initiate a transaction
should contain a space for authori8ationA The following procedures safeguard assets from
theft> unauthori8ed use> and $andalism7
effecti$el! super$ising and segregating duties
maintaining accurate records of assets> including information
restricting ph!sical access to cash and paper assets
ha$ing restricted storage areas
Ade9uate safeguards of assets and records:
Once upon a time> people had been thinking to ha$e the safeguard for cash or for ph!sical
assetsA But now a da!> information is also the $aluable oneA The following procedures
safeguard assets from theft> unauthori8ed use> and $andalismA
1ffecti$el! super$ising and segregating dutiesA
%aintaining accurate records of assets including informationA
Restricting ph!sical access to assetsA
5rotecting records and documentsA
Restricting access to computer rooms> computer filesA
The following can be used to safeguard assets7
3 cash registers
3 safes> lockbo2es
3 safet! deposit bo2es
3 restricted and fireproof storage areas
3 controlling the en$ironment
3 restricted access to computer rooms> computer files> and information
Independent chec" on performance:
De ha$e here $arious t!pes of independent checksA
Reconciliation of two independentl! maintained sets of records7 Bank
reconciliation is the e2ampleA Another e2ample is comparing the accounts
recei$able subsidiar! ledger total with the accounts recei$able total in the general
ledgerA
Comparison of actual /uantities with the recorded amountsA The cash in a cash
register drawer at the end of each clerkJs shift should be the same as the amount
recorded on the cash registerA
Independent re$iew7 After one person processes a transaction> a second person
sometimes re$iews the work of the firstA
%is" Assessment
The third component of COOJs internal control model is risk assessmentA Companies
must identif! the threats the! face7
strategic P doing the wrong thing
financial P ha$ing financial resources lost> wasted> or stolen
information P fault! or irrele$ant information> or unreliable s!stems
Information and $ommunication
The fourth component of COOJs internal control model is information and
communicationA The people of the organi8ation will capture and e2change the
information needed to conduct> manage and control its operationA According to AIC5A>
an AI has fi$e primar! ob#ecti$esA These are7
Identification and recording of all $alid transactionsA :or e2ample7 if a compan!
records fictitious sales> at that time re$enue is o$erstatedA
5roper classification of transactionA :or e2ample7 improperl! classif!ing an
e2pense as an asset o$erstates assets and net incomeA
Recording transactions at their proper $alueA :or e2ample7 an accounts recei$able
that becomes uncollectible should be written offA A
Recording transactions in the proper accounting periodA
5roperl! presentation and related disclosures in the financial statement is
importantA :or e2ample7 A lawsuit against the compan! will be disclosed in the
disclosureA
Monitoring Performance
The fifth component of COOJs internal control model is monitoringA The entire process
will be monitored and the modification will be done as neededA <e! methods of
monitoring performance include effecti$e super$ision> responsibilit! reporting and
internal auditingA
<ffecti&e super&ision: It includes training and assisting emplo!ees> monitoring
their performance> correcting errors> safeguarding assets b! o$erseeing emplo!ees
who ha$e access to themA
%esponsi.ility accounting: Responsibilit! accounting s!stem includes budget>
schedules> standard costs and /ualit! standardsA
Internal auditing: It is important to identif! the internal control effecti$enessA
'4 5I -C * P6(R-( a t a 7l a nc e
Be2imco 5harmaceuticals LtdA is a leading edge pharmaceutical compan! and is a
member of the B1CI%CO 6roup> the largest pri$ate sector industrial conglomerate in
BangladeshA The strategic strengths of Be2imco 5harma are its strong brand recognition>
highl! skilled work force and di$ersified business mi2A Be2imco 5harma brands )
Keoceptin R 'Ranitidine(> Kapa '5aracetamol(> Amdocal 'Amlodipine(> Keoflo2in
'Ciproflo2acin(> Be2itrol : 'almeterol 5lus :luticasone(> Be2trum 6old '%ulti$itamin
and %ulti %ineral( and Ato$a 'Ator$astatin( are among the most recogni8ed brands in
the Bangladesh 5harmaceutical industr!A
Be2imco 5harma started its operation in 1-,4> manufacturing products under the licenses
of Ba!er A6 of 6erman! and @p#ohn IncA of @A and now has grown to become nation=s
one of the leading pharmaceutical companies> suppl!ing 19Q of countr!=s total medicine
needA Toda! Be2imco 5harma manufactures and markets its own Rbranded generics= for
almost all diseases from AI. to cancer> from infection to asthma> from h!pertension to
diabetes> both nationall! and internationall!A
Be2imco 5harma manufactures a range of dosage forms including tablets> capsules> dr!
s!rup> powder> cream> ointment> suppositories> large $olume intra$enous fluids> metered
dose inhalers etcA in se$eral world)class manufacturing plants> ensuring high /ualit!
standards compl!ing with the Dorld Iealth Organi8ation 'DIO( appro$ed current 6ood
%anufacturing 5ractices 'c6%5(A
The recipient of three times Rgold= national e2port troph!> Be2imco 5harma is the largest
e2porter of pharmaceuticals from Bangladesh> spreading its presence in man! de$eloping
and de$eloped countries across the globeA Be2imco 5harma is the onl! compan! in
Bangladesh to recei$e this highest national accolade for e2port> for record three timesA
Be2imco 5harma markets its brands through professional sales and marketing teams in
African> Asian and 1uropean marketsA It also supplies its products to renowned hospitals
and institutions in man! countries> including Raffles Iospital and < < Domen ?
Children Iospital in ingapore> %1. and <en!atta Kational Iospital '<KI( in <en!a>
Binnah Iospital> Agha <han Iospital and haukat <hanum %emorial Iospital in
5akistanA Be2imco 5harma is also an enlisted supplier of DIO and @KIC1:A
Another important business acti$it! of Be2imco 5harma is the contract manufacturing for
ma#or international brands of leading multinational companiesA
Be2imco 5harma is acclaimed domesticall! and internationall! for its outstanding
product /ualit!> world class manufacturing facilities> product de$elopment capabilities
and outstanding ser$iceA
Be2imco 5harma has a strong market focus and is anticipating continued future growth
b! le$eraging business capabilities and de$eloping superior product brands and marketsA
In particular the compan! is $er! interested in de$eloping a strong e2port market in @A
and 1uropeA To meet the future demand Be2imco 5harma has in$ested @S 94 million to
build a new state)of)the)art manufacturing plant> confirming to @:.A and @< %IRA
standardsA This new plant will also offer contract)manufacturing facilit! to leading
pharmaceutical companies> especiall! from 1urope and @A
Corporate Headquarter
Operational
Headquarter
Factory
Year of Establishment
Commercial Production
Status
Business Lines
Overseas Oices !
"ssociates
E#port $ar%ets
"uthori&ed Capital
'(a%a)
Paid*up Capital '(a%a)
+et (urnover ,--.
'(a%a)
+umber of Shareholders
17 Dhanmondi R/A, Road No. 2
Dhaka 1205, Bangladesh
19 Dhanmondi R/A, Road No. 7
Dhaka 1205, Bangladesh
126 Kathaldia, Tongi, a!i"#$
1976
19%0
&#'li( )imited *om"an+
,an#-a(t#$ing and ma$keting o-
"ha$ma(e#ti(al .nished "$od#(ts
and A(ti/e &ha$ma(e#ti(al
0ng$edients 1A&0s2
3K, 34A, &akistan, ,+anma$,
4inga"o$e, Ken+a, 5emen, Ne"al,
*!e(h Re"#'li(, 6ietnam,
*am'odia and 4$i )anka
Bh#tan, *am'odia, *!e(h
Re"#'li(,e$man+, 7ong Kong,
0$an, 0$a8,Ken+a, ,ala+sia,
,o!am'i8#e, ,+anma$, Ne"al,
&akistan, &hili""ines,R#ssia,
4inga"o$e, 4o#th Ko$ea, 4$i )anka,
Thailand, 3k$aine, 6ietnam,5emen
1,000 million
559.76 million
2,902.7 million
50750 1As on De( :1, 20092
Stoc% E#chan/e Listin/s
+umber of Employees
Dhaka, *hittagong, )ondon
1,:%5
Compan! Profile: '45I-C* P6(R-(C48TIC(L$ LI-IT42
-ission $tatement of '45I-C* P6(R-(
The mission statement of B1CI%CO 5IAR%A implies its keenness to be sociall!
responsible in true senseA It sa!s7
The motto of B5L is
to bring happiness
and smile to life
through fulfilling
responsibilitiesA In
their words7
0Medi ci ne i s
di rectl y
rel ated to
human li fe
and therefore, its manufacturers have i mmense soci al
responsi bi li ty of provi di ng safe and efective medi cati on,
demandi ng uncompromi si ng eforts at al l l evel s of its
acti vi ties. Beximco Pharmaceuti cal s Ltd.- the leadi ng
heal th care company i n Bangl adesh, has been maki ng
!ach of our activities must bene"t and add value to
the common #ealth of our society. $e "rmly believe
that, in the "nal analysis #e are accountable to each of
the constituents #ith #hom #e interact% namely& our
employees, our customers, our business associates, our
fello# citi'ens and our shareholders. !ach of our
activities must bene"t and add value to the common
#ealth of our society. $e "rmly believe that, in the "nal
analysis #e are accountable to each of the constituents
#ith #hom #e interact% namely& our employees, our
customers, our business associates, our fello# citi'ens
and our shareholders.(
every efort to ensure the efecti veness and safety of the
medi ci nes that it produces. Physi ci ans and pati ents of the
country rely on the e)cacy of the medi ci nes of Bexi mco
Pharma at the time of cri ti cal needs demonstrati ng thei r
con"dence and trust on BPL products.*
B5L has a promise to make a healthier tomorrow for the societ! where the citi8ens will
en#o! a better lifeA The highlights of B1CI%CO 5IAR%AJs endea$or towards a
healthier societ! are inno$ation and the ad$enture of risk taking through bold decisions7
BPL+ s hi story i s one of i nnovati on and adventure, of
ri sks taken and bol d deci si ons made to#ards a nobl e
purpose bui l di ng a heal thi er tomorro# #here our fel l o#
ci ti 'ens can l i ve l onger, heal thi er and better. , n -../, #e
have rede" ned success as somethi ng broader than mere
performance i n the marketpl ace and have taken
i ni ti ati ves to prepare for the future.

BPL i s the " rst l ocal company #ho dared to i nvest i n
manufacturi ng 0cti ve Pharmaceuti cal , ngredi ents 10P, s2
and to enter forei gn markets of di versi " ed cul ture and
stri ngent regul atory envi ronment. 3ver the l ast decade,
the ri sk taken has pai d us of. 4o# our capabi l i ty i n
manufacturi ng 0P, s and experti se i n expl orati on of
forei gn markets have pl aced us i n a rel ati vel y better
posi ti on over other l ocal compani es to face the post-$53
era.
0bove al l #hat adds more to our pri de i s our commi tment
to the soci ety. 5hi s i s re6 ected i n our l aunchi ng of 0nti -
7, 89 0, :; drugs " rst ever i n Bangl adesh, #hi ch #as
further rei nforced through the i ntroducti on of anti -
cancer drugs.
$i th our conti nuous i mprovement i n performance and
commi tment to our customers, #e are con" dent to
strengthen our posi ti on i n the marketpl ace further and
i ncrease the sharehol ders+ val ue. (

-a na g i ng t he C ha mp i o n *r g a ni 9 a t i o n
The management of B1CI%CO 5IAR%A is simpl! e2ceptional in comparison to an!
other listed companies in this countr!A It has a blend of professionalism and wisdom>
which pla!s a ke! role in managing the champion organi8ationA The Board of .irectors
includes7
A S F Rahman Chairman
Salman F Rahman Vice Chairman
Iqbal Ahmed Director
M.A. Qasem Director
O.K. Chowdhr! Director
Dr. Abdl Alim Khan Director
A.". Siddiqr Rahman Director
Dr. Farida #q Director
C. #. Rahman Director
"arrister Faheeml #q Director
Ahsanl Karim Director
A dedicated %anagement committee and an 12ecuti$e Committee make sure that
B1CI%CO 5IAR%A achie$es its target with sheer professionalismA The committees
are7
T h e Ma n a g e me n t $ o mmi t t e e :
T h e < = e c u t i & e $ o mmi t t e e :
$a%ml #assan& C'O
Osman Kaiser Chowdhr!
Ali $awa%
A(sar )ddin Ahmed
Rabbr Re%a
*t(r Rahman
Md. +a,aria S Chowdhr!
Mohd. -ahir siddiqe
A R M +ahidr Rahman
.amal Ahmed Chodhr!
Osman Kaiser Chowdhr!
Chowdhr! #a/%r Rahman
$a%ml #assan
Ali $awa%
A(sar )ddin Ahmed
The responsibilit! of the compan! secretar! is carried out b! %rA %dA Asad @llah>
:CA
T h e # o o t p r i n t s L e f t ' e h i n d b ! ' P L *v e r t i me
1234*1253
1976 ; Regist$ation o- the (om"an+
19%0 ; 4ta$ted man#-a(t#$ing and ma$keting o- li(ensee "$od#(ts o-
Ba+e$ A o- e$man+ and 3"<ohn 0n(. o- 34A
19%5 ; )isting in the Dhaka 4to(k =>(hange 1D4=2 as a &#'li( )imited
*om"an+
1255*1223
1990 ; *ommissioning o- Basi( *hemi(al 3nit
1992 ; 4ta$ted e>"o$t o"e$ation ?ith A(ti/e &ha$ma(e#ti(al
0ng$edients 1A&0s2
199: ; @i$st e>"o$t ma$ket o"e$ation ?ith .nished -o$m#lation
1225*,--6
199% ; @i$st "ha$ma(e#ti(al (om"an+ o- the (o#nt$+ a(hie/ing
ANational =>"o$t T$o"h+ 1old2B-o$ 1999C95
1999 ; 3N0*=@ a""$o/al o- B&) as an enlisted s#""lie$
2000 ; Ag$eement to man#-a(t#$e ,ete$ed Dose 0nhale$ 1,D02 -o$
la>o 4mithKline
2001 ; 0nt$od#(tion o- 4mall 6ol#me &a$ente$als 10n<e(ta'les2
=sta'lishment o- Analgesi(CAntiinDammato$+ A&0 "lant 2002 ; Eon the
.$st "$i!e o- 0*AB National A?a$ds 2000 -o$ ABest &#'lished A((o#nts
and Re"o$tsBin NonC @inan(ial 4e(to$ *atego$+ The .$st Bangladeshi
(om"an+ to s#""l+ "ha$ma(e#ti(als to RaFes 7os"italC the most
"$estigio#s hos"ital o- 4inga"o$e
200: ; Re(ei/ed ANational =>"o$t T$o"h+ 1old2B-o$ (onse(#ti/e 2
+ea$s 1199%C99, 1999C20002 Eon the 4il/e$ "$i!e o- 0*AB National
A?a$ds 200: -o$ ABest &#'lished A((o#nts and Re"o$tsBin NonC
@inan(ial 4e(to$ *atego$+. Eon a tende$ to s#""l+ Neo(e"tin R and
NeoDo>in to RaFes 7os"ital o- 4inga"o$e -o$ the ?hole +ea$Bs
(ons#m"tion 0nt$od#(ed AntiC706 d$#gs -o$ the .$st time in
Bangladesh. Di/e$si.(ation into AntiC*an(e$ the$a"e#ti( (lass.
2009; 4igned (ont$a(t ?ith No/a$tis to man#-a(t#$e thei$ li8#id,
($eam, ointment and s#""osito$+ "$od#(ts #nde$ Gtoll ,an#-a(t#$ingH
ag$eement.
2005; ,e$ge$ o- Be>im(o 0n-#sions )td. ?ith Be>im(o
&ha$ma(e#ti(als )td.
2epar t ment s of 'e)i mco Phar ma
B5L has ma#or functional departments headed b! highl! /ualified professional
staffA Introduction of $arious di$isions are as follows7
$entral Product Management $PM- Department
The acti$ities of C5% are7
%arket research
election of new product
.esign and testing of product '.T5(
ample store 'logistics( management
%aking strateg!
The department deals with the controllable marketing $ariables> the *p=sA This
department takes decisions in the following areas7
Product ' i8e> color> shape> packaging etcA
Price ' Raw materials cost> customer abilit!> regulator! bod!=s appro$al etcA
Promotion ' 5romotional aids include brochure> pads> folder> and plant $isit b!
ph!sicians> health)related people> students> and people of different studentA
Purchase Department
The purchase department deals with all the purchase 'pharmaceuticals raw
materials> packaging materials> office e/uipment> machiner!=s etcA( of the
organi8ationA Based on the information pro$ided b! the planning department> the
purchase department prepared the import authori8ation formatsA Then the format is
sent to be he director 'commercial( for appro$alA After an LEC is opened all
information about its latest status is documented in a =purchase consignment '5C(
folder= preser$ed b! the purchase departmentA And for the monitoring 'current status ?
information record( of all LEC> such books are essentialA
Planning Department
The planning department is concerned with the production planning and raw material
procurementA After getting the sales forecast from the sales department> the planning
department goes through the current stock information of different raw materialsA The
statement shows the position of raw materials in the pipeline 'under process> awaiting
shipment> in transit> at port> under clearance> deli$er! E recei$ing(A Considering the status
of stock> the planning department then decides about which materials 'acti$e
pharmaceutical ingredients> packaging materials etcA( should be procuredA It first
calls for limited tender among the enlisted sources 'local agents( for the suppl! of
particular materialsA The list of suppliers is kept in a database preser$ed b! the
planning deptA Dithin 19 da!s> the /uotations are submitted b! the competing
suppliersA Then the planning deptA prepares a comparati$e statement and forwards it to
the purchase departmentA
Sales Department
ales department is a marketing e2ecution departmentA It supplies sales forecast to
the planning departmentA It is headed b! the .irector> %arketing who is aided b!
the ales %anagerA The sales manager looks after the acti$ities of the Assistant
ales %anagersA 1ach Assistant ales %anager super$ises 9 Regional ales Controllers
'RC(A 1ach RC super$ises 9 to , :ield uper$isors ':(A 1ach : super$ises and
monitors the acti$ities of * to 9 %edical Representati$es '%R(A
The core responsibilit! of an %R is to generate demand of productsA An %R is gi$en
*")da! training 'about anatom!> human bod!> basic sales skill etcA( b! the 1?T
department one he successfull! goes through the written and oral testA Then a
territor! is assigned to an %R based on 3
6eographical location
Communication
Kumber of customers
Business potentialit!
A monthl! tour program is de$eloped for each %RA Then the da!)wise
breakdown is doneA The sales E promotional plan is de$eloped 'for chemist co$erage
19 calls ha$e to be made> or for doctor=s co$erage 1+ calls ha$e to be make each da!(A
The guideline is gi$en to the %Rs b! the C5% E ales E %edical E training
department in each c!cle conferenceA 5romotional strategies are also set thereA
5erformance anal!sis of %Rs is recei$edA
: sometimes goes for surprise $isit to see whether things got going as plannedA
Ie is re/uired to ensure the achie$ement of target within the time frameA
Iis main responsibilities are 3
5eople managementF and
Time management
: meets %Rs prior to call> during call and after call to monitor their acti$itiesA An RC
maintains the prescription trend upA Ie is concerned with 3
Territor! de$elopmentF and
uper$isor de$elopment
RC reports to the ales %anager whose main responsibilities are 3
Interaction with distribution and production department
6i$ing feedback to CI%
Iuman Resources de$elopment
Visit the critical customers
.onation managementA
Distri.ution Department
Be2imco Chemical .i$ision carries out its distribution acti$ities through its
own distribution compan! called I ? I er$ices LtdA A senior distribution %anager
is charged with ensuring the smooth functioning of the distribution s!stemA Ie is aided
b! two AsstA .istribution %anager 3 one looks after the operations and the other
looks after the administrationA There are - enior .istribution OfficersA There
are also .istribution Officers and AsstA .istribution OfficersA
B5L has 19 depots throughout the countr! located in 3 .haka> Kara!angon#>
Comilla> <ushtia> <hulna> Barisal> Chittagong> !lhet> %!mensingh> :aridpur>
Ra#shahi> Koakhali> Bogra> Rangpur and Co2=s Ba8arA 1ach depot is headed b! a depot)
in)chargeA B5L is a retail)oriented compan! selling to more than "">444 retail outlets
throughout the countr!A Dholesale is less than 1Q and sales to 6o$tA are less than
4A9QA The field force promotes in its own territor! to gi$e deli$er! order b!
sending an in$oice for allocationA The allocation is made b! the distribution
assistant in each depotA Ie also gi$es the amount recei$ed as cash sales to the
distribution cashierA A sales summar! 'a sales #ournal( is prepared each month for
each depotA It is the sales report of the month that shows how much is sold in cash
and how much in creditA
3uman %esource Department
Two ma#or t!pes of acti$ities are accomplished b! this departmentA These are7
Administrati$e functions 'maintenance and protocol ser$ices(
Iuman resource related functions
The ob#ecti$es of Iuman Resource .epartment are7
Recruitment polic! and procedure
Conformation polic! and procedure
5lacement of emplo!ees
Iuman Resource .e$elopment
Organi8ational structure re$iew and modification
Career planning
Iiring and firing
Bob description preparation
Conducting appraisal at the end of each !ear
%aintaining and de$eloping emplo!ees personal files
afet!)securit!
8usiness %esearch 6 De&elopment Department
Business R?. .epartment began its operation from Banuar! l> "444A It is
working on market de$elopment> both domestic and internationalA The functions that
are done b! this department are7
Outsourcing negotiated
Kew product stud!
Kew technolog! stud!
5ro#ect feasibilit! stud!
Commercial negotiation
Obser$ing the world pharmaceuticals market
MIS Department
The %I .epartment takes care of total automation of B5LA It supports the hardware and
software network of the compan! and the factor!A This department pro$ides
ser$ices through KA er$er> DIK KT er$er> ;L er$erA B5L operational
head/uarters is linked to the corporate head/uarters through fiber optic cableA
The department also established a Dide Area Ketwork 'DAK( with the 19 depots
around the countr!A %I department de$elops the access Control ? attendance
monitoring !stem internall!A The department maintains the radio)link between the
factor! and the head)officeA The software section is to work for de$eloping
software solutions as per organi8ational re/uirementsA
Multimedia Department
:unctions of the multimedia department are7
Deb page designingA
.e$eloping multimedia presentation for presentation programsA
%aking $ideos of conferences> meeting etcA
%aking $ideo for productsA
%aking $ideo for compan!A
<eeping the records of annual meeting and other meetingA
Medical Department
This department is a uni/ue department in this industr! as B5L established this first
e$er in order to create eas! relationship through using the professional linkage
with the doctors> the ultimate customer of the pharmaceutical companiesA It pro$ides
ser$ices 'eA gA slide preparation> pro$iding different #ournals> books etcA( to the health
professional on different issues and recei$es feedback from themA It arranges seminars
on different issues such as deseases and their cures in different parts of the
countr!A
Factory
B5L=s production facilit! is situated in TongiA It has state of the art technolog! for
its solid> li/uid> semi solid production plantsA There is also a plant for inhaler
productionA The construction of a :.A appro$ed plant is on the pipelineA
Accounts 6 Finance Department
The acti$ities of the finance department are carried o$er b! *4 persons whose
operations are di$ided under the three heads7
Treasur!
Accounts
Cost and Budget
Treasur! section deals with 'i( cash at banks and 'ii( billsA It also looks after the
cash planning and managementA A re$iew is made e$er! week for this purposeA
Accounts section is the custodian of all records and transactionsA A computer
software program called =%A5IC= '%anagement Accounting 5lanning
Information Control !stem( is used to aid the acti$itiesA
Cost and Budget .epartment identifies the cost centers and prepares the budgetA There
are almost *4 cost centersA
The annual budget preparation starts at OctoberA The past data is pro$ided thereA tandard
operating guidelines are also thereA Budget re$iew is done /uarterl! 'internall!( and
half)!earl! 'b! the top management(A
:u a l i t ! : T h e P a s s i o n o f ' P L
O$er the !ears the trust and reliabilit! on their products has emerged as one of their core
competenciesA Toda! the name B5L has been s!non!mous with trust and reliabilit!
inherent in the term /ualit!A ;ualit! is their relentless passionA ;ualit! is ingrained in
their $alues and in all what the! doA Their business processes and practices are designed
to achie$e /ualit! results that would meet the e2pectation of patients and ph!sicians
through getting highest /ualit! products> of shareholders and stakeholders through
achie$ing returnsA Dhen it comes to manufacturing> this guiding principle places e$en
more social responsibilit! of ensuring /ualit! in terms of /uantit!> purit!> stabilit!> safet!>
efficac!> and o$erall presentation of the productsA Their /ualit! assurance s!stem
establishes control or checkpoint to ensure the /ualit! of the products during production
and upon completion of productionA It starts with raw material and component testing and
includes in)process /ualit! control> packaging> labeling> and finished product testing as
well as batch auditing and stabilit! monitoringA tandard Operating 5rocedures 'O5s(
de$eloped in accordance with the latest DIO appro$ed current 6ood %anufacturing
5ractices 'c6%5( are being strictl! followed in e$er! stepA
To ensure all these> a highl! dedicated academicall! sound and professionall! competent
team comprising of pharmacists> chemists> biochemists> microbiologists> and engineers
are using most modern and sophisticated e/uipment like Iigh 5erformance Li/uid
Chromatograph! 'I5LC(> 6as Chromatograph! '6C(> Infrared 'IR( pectrophotometer>
@ltra$iolet '@V( pectrophotometer> Iomogeni8e> In)Vitro Bioa$ailabilt! tester> Lung
simulator> .isintegrator> .issolution tester> ? man! other latest computer)aided /ualit!
control instruments and accessoriesA This passion to the total /ualit! has helped B5L from
its inception to create man! blockbuster brands in a fiercel! competiti$e generic pharma
marketA
Research and 2evel opment: ( Promi se ;ept b! 'PL
B5L emplo!s a significant part of its resources in R?. that makes B5L a forerunner in
the Bangladesh pharmaceutical industr!A The R?. team comprises of academicall!
sound and professionall! competent personnel who ha$e firm commitment to new
product de$elopmentA R?. team of B5L is consistentl! stri$ing towards7
.e$eloping new formulations
implif!ing manufacturing processes
Bringing cost efficienc!
The sincere and relentless effort of our R?. team has taken the compan! a step further
in "44* b! de$eloping @ltrafen 5lus '.rug for pain ? inflammation( and 5retin). '.rug
for allergic rhinitis with congestion( appl!ing uni/ue formulation technolog! for the first
time in BangladeshA These two drugs added new momentum to the sales re$enue of "44*A
A good number of A5Is are also in the de$elopment pipeline to ensure a$ailabilit! of raw
materials in the pharmaceutical patent regimeA %an! A5Is of different therapeutic classes
ha$e alread! been de$eloped and manufactured and some more drugs of antifungal>
antihistamine> cardio$ascular> antiinflammator!> anti)IIV> anticancer and other
therapeutic classes are in the final de$elopment stageA
This re$erse engineering capabilit! of our R?. team would be an added ad$antage for
B5L in the pharmaceutical patent regimeA
4nvironment< 6ealth and $afet!: 'PL=s Commitment to Care
One of the primar! goals of B5L is to contribute to keep the earth cleanA B5L is aware of
its responsibilit! of caring for the en$ironment and the importance of reducing
en$ironmental effects of manufacturing acti$ities to a practical minimumA
B5L is committed to a green operation and its facilities are carefull! designed and
operated to pre$ent all forms of pollutionA .ischarge of con$entional substances from the
compan!Js manufacturing plant is sub#ect to stringent controlsA Regular en$ironmental
monitoring is carried outA 1ffluent treatment plant reduces the ha8ardous impact of the
emissions to a minimumA ol$ents used in the s!nthesis processes are reco$ered in
efficient reco$er! plantsA
Dhere$er practicable> B5L works to reduce the impact of its operations on the
en$ironmentA B5L continuousl! stri$es to impro$e performance and optimi8e the use of
all material and human resources> thereb! minimi8ing ad$erse impact on en$ironmentA
'l oc+bust er Pr oduct s: 'PL= s -a, or Cont r i but or s
uccess of a pharmaceutical compan! depends on how effecti$el! it establishes its brands
in the marketA The e2cellent blending of world class manufacturing technolog! and
inno$ati$e marketing strategies made B5L successful in achie$ing brand e/uit! for its
productsA As a result the number one product b! $alue and the number one product b!
unit in Bangladesh 5harmaceutical %arket and also the highest selling drug in the
cardio$ascular class belong to B5LA
Deoceptin % ' the number one product b! $alue
One of the ma#or re$enue earning products of B5L is Keoceptin RA It is also the highest
selling product b! $alue and is the undisputed leader in Bangladesh 5harmaceutical
%arketA
Dapa ' the number one product b! unit
Kapa is the highest selling product b! unitA Kapa has become a household brand in the
mind of ph!sicians as well as consumers of BangladeshA
Amdocal ' the highest selling drug in cardio$ascular marketA Amdocal is one of the most
prestigious and re$enue earning products of B5LA It is the highest selling product in the
cardio$ascular marketA
#i ndi ngs of t he $t ud!
Be2imco 5harmaceuticals LtdA 'B5L( is the biggest compan! of Be2imco=s Chemical
.i$isionA It is also one of the largest manufacturers of pharmaceutical products in the
countr!A It not onl! satisfies the domestic needs with its $ast range of products> but also
e2ports to man! different countriesA To manage this huge business> to keep track of numerous
e$er!da! transactions> to facilitate management for different t!pes of decision)making and
to keep the stakeholders informed with different kind of information in different times
are daunting tasksA Various t!pes of information need to be generated> accumulated and
customi8ed according to the users= re/uirementsA Accounting Information !stem 'AI( is
one of the ma#or information s!stems that pla! a $ital role in this regardA
Being an accounting professional toda! re/uires far more than #ust a
te2tbook understanding of debits and credits> #ournali8ing and posting steps
and the latest accounting and auditing pronouncementsA The accounting
professionals of "1st centur! must also sta! abreast of the man! technological
ad$ances> which continuall! reshape the business worldA These ad$ances ha$e sparked
an information re$olution> which in the past few decades has transformed almost
e$er! aspect of accountingA 5erhaps the greatest impact of the information
re$olution has been on the accounting s!stem itself indeed> accounting s!stems
and the world of computers and data processing has become inseparableA
Recognition of this fact has gi$en rise to a new accounting specialt! area known as
Accounting Information !stemA
The d!namic and s!stematic Accounts and :inance department with established
network and different sophisticated and user friendl! softwares are the ke!s for
such organi8ed and reliable AI that B5L possessesA O$er the !ears the AI of B5L
has been de$eloped to meet almost all the accurate and timel! information needs
both for the internal and e2ternal re/uirementsA
(ccount i ng I nf or mat i on $!st ems of 'PL
An accounting information s!stem is a unified structure within an entit!> such as a
business firm> that emplo!s ph!sical resources and other components to transform
economic data into accounting information for the purpose of satisf!ing the
information needs of a $ariet! of usersA
In fact the AI is a subs!stem of a broader information s!stem that encompasses
all information generating acti$itiesA The AI consists of people> procedure and
information technolog!A It performs the following three functions in the organi8ation7
It collects and stores data about acti$ities and transactions so that the organi8ation
can re$iew what has happenedA
It processes data into information that is useful for making decisions that enable
management to plan> e2ecute and control acti$itiesA
It pro$ides ade/uate controls to safe guard the organi8ation assets> including its
dataA These controls ensure that the data is a$ailable when needed and that it is
accurate ? reliableA
This stud! has identified one of the ma#or components of the accounting information
s!stem of B5L 3 12penditure c!cle> the technolog!> the output ? users> and the
control mechanisms related to this c!cleA ome of them are input to the s!stem> some
work to process the input> and some represent the outputA Regardless of what the! are>
the! work together to achie$e the s!stem=s ob#ecti$e which is to satisf! the information
needs of the usersA
Business e$ents> also called transactions> are the steps> within the ph!sical ?
financial processes of firmsA De ma! group the business e$ents of B5L into process
se/uences called transactions c!clesA %ost Organi8ations engaged in man! similar
and repetiti$e transactionsA These transaction t!pes can be grouped into four basic
c!cles> each of which constitutes a basic subs!stem in the AIA These four c!cles 'or
subs!stems( of the AI are related to one another and each feeds data to the general
ledger ? reporting s!stem that pro$ides information to both internal ? e2ternal usersA
Accounting Softwares
B5L uses a computer software program called T%A5ICT for its transaction processing
purposeA T%A5ICT is the acron!m of T%anagement Accounting 5lanning
Information Control !stemTA The software was de$eloped and launched in the
market b! IB% Corporation in 1-,4F B5L uses the 1--9 upgraded $ersionA It is .O
basedA %A5IC is batch processing softwareA In B5L transactions are entered in batches
for a month and the batch is then posted and reports are generated according to pre)
designed formatA B! structure %A5IC is a modular softwareA B5L uses the following
modules of %A5IC7
6eneral LedgerA
Budget 5reparationA
:inancial Ratio Anal!sisA
:i2ed Asset AccountingA
Accounts Recei$ableA
L C %onitoring !stemA
Apart from %A5IC> B5L uses some other software for accounting purpose such as7
:i2ed Assets %anagement !stemA
5a!roll !stemA
In$entor! Control !stemA
ales and Billing !stemA
5roduction Information !stemA
All these softwares are de$eloped b! the %I department of B5L and these softwares are
not integrated with %A5ICA
:urthermore> % 12cel is e2tensi$el! used b! the accounts departmentA
4)pendi t ur e C!cl e
The e2penditure c!cle is a recurring set of business acti$ities and related data processing
operations associated with the purchase and pa!ment for goods and ser$icesA The
e2penditure c!cle of B5L includes7
1A Ac/uisition of raw and packing material
Local 5urchase
Import
"A Ac/uisition of fi2ed asset
&A Other re$enue e2penditure
The focal point of this report is to put light on the ac/uisition of raw and packing material
form local and foreign sources and related accounting treatmentsA Ac/uisition of fi2ed
assets and other re$enue e2penditures are discussed briefl!A
Local Pur chase of Raw and Pac+i ng -at er i al
The domestic purchase of raw material includes following business functionsF
1A 5rocessing purchase order
"A Recei$ing goods> material and ser$ices
&A Recogni8ing the liabilit!
*A 5rocessing and recording cash disbursement
Processing Purchase (rder
The procedure begins with need recognitionA The respecti$e department identifies its
need> gets appro$al of the departmental head and with the appro$al an authori8ed person
sends purchase re9uisition to purchase department to initiate purchaseA In case of
propert!> plant and e/uipment ac/uisition> before sending purchase re/uisition> a budget
has to be prepared b! the user departmentA If the departmental head or higher authorities>
whiche$er is re/uired> appro$e the proposed budget a purchase re/uisition is sent to
purchase departmentA And in case of raw or packing materials> the planning department
determines the /uantit! and timing of raw materialsA This department informs the
purchase department when to bu! materialsA
Dhen the purchase department got the re/uisition> it calls for /uotation or tenderA After
recei$ing the /uotation or tender> supplier has been selectedA The supplier ma! be local or
internationalA If the terms and conditions are in fa$or of both B5L and the selected
supplier> an order for the purchase is than issued b! the purchase departmentA In case of
raw or packing material> the purchase order is issued b! the factor!A A purchase register is
maintained b! the purchase department in which the! maintain all the re/uired
information relating to a consignmentA
%ecei&ing Material# Goods and Ser&ices
6enerall! the goods and ser$ices are recei$ed b! the user department who has issued the
purchase re/uisition or in some cases b! the authori8ed departmentA %aterials are
recei$ed b! ;ualit! Assurance .epartment ';A.( in the factor!A After recei$ing
materials> goods and ser$ices an M%% '%aterial Recei$ing Report( is issued for material
and other than material a G%% '6oods Recei$ing Report( is issued b! recei$ing
department to purchase departmentA In the mean time the in$oice or bill is recei$ed b!
the purchase departmentA
Before using the product b! user department that is at the time of deli$er!> it has been
inspected b! the inspection team or ;C. ';ualit! Control .epartment(> b! user
department or b! authori8ed departmentA ;C. e2amined the materials on a sample
testing basis and pro$ide a certificateA Kormall!>
1A ;C. inspects standardi8ed items like raw material> packing material etcA
"A @ser department inspects non standardi8ed items like ser$ices> stationeries etcA
&A Inspection department inspects machineries> plants etcA
Again at B5L there are some authori8ed departments for inspectionA :or e2ample>
computer or IT related products are inspected b! IT department> furniture are b! IR
departmentA If the recei$ed goods> material and ser$ices are not according to purchase
re/uisition B5L ma!
Refuse the order
Reorder the item
Recei$ed on condition
Before taking an! action> there is a discussion between B5L and the supplierA After re)
communication it has been decided whether the pa!ment to the supplier will be made or
notA
Vendor
DarehouseE :actor!E Read! for @se
Accept .eli$er! b! @ser departmentE :actor!
Count ? Inspect goods b! respecti$e departments
5urchasing order b! 5urchaseE 5lanning .ept
%RRE 6RR
Vendor
5acking slip 6oods ? ser$ices
5acking
lip
6oods ? ser$ices
6oods ? ser$ices
%RRE6RR
Figure 4: %ecei&ing Function
%ecogniBing the lia.ility
The purchase department compares the in$oiceEbill and %RRE 6RRE ;C with the
purchase orderA If e$er! thing has been complied> the amount pa!able to supplier is
appro$ed b! the purchase departmentA There is a seal on the in$oice named UAppro$ed
B!J with the signature of purchase managerA It means the purchase department is satisfied
with the information mentioned in the billA A cop! of all this documents is kept b!
purchase department and the main copies along with copies not negotiable are sent to
accounts and finance departmentA
The accounts and finance department is then read! for gi$ing pro&ision &oucherA An
authori8ed person is liable for gi$ing pro$ision $oucherA Ie e2amines the not negotiable
cop! of billE in$oice at the time of gi$ing pro$ision $oucherA 6enerall! the liabilit! is
recogni8ed when the $endor sends the in$oice or billA But in some cases it ma! be
recogni8ed at the time of goods recei$edA
Processing and %ecording $hec"5 $ash Dis.ursement
After a certain period of time when the date becomes matured for the liabilit! the
pa!ment is made b! B5LA The matured date has been calculated in the aged paya.le
report for each $endorA The due amount for an indi$idual $endor is identified from
&endor .usiness position reportA In this stage another report is prepared for forecasting
cash re/uirementA An indi$idual person enters data in %A5IC for ha$ing this reports
and forecastsA The same person checks the arithmetical accurac!> casts> cross casts>
deductions and pa!able amountsA If the checking is matched with those reports checks are
issued to pa! $endorA
The mode of pa!ment is usuall! pre numbered checkA In most cases the pa!ment is made
b! pa!ee onl! checkA In some cases the pa!ment ma! be made b! cash or b! bearer check
or paid in ad$ance full! or partl!A
Issuing check is a sensiti$e issueA It is prepared b! that person who will gi$e the pa!ment
$oucherA And it is signed b! senior managementA The payment &oucher is gi$en b! the
same person who has checked the reports and pa!able amountsA This $oucher includes
original bills> %RRE 6RR> Vat 'musok 11( and challanA It is recorded in the record book
after the sign has been madeA
After all the procedure has been completed the check is gi$en to $endor and the counter
foil of that check is preser$ed b! B5LA If the pa!ment amount is large part b! part
pa!ment is madeA
5urchase order
:actor!E @ser department Vendor
Appro$e $endor in$oices b! purchase department
5urchase .epartment
Vendor in$oice
%RRE6RR
BillE In$oice
5urchase Order
%RRE 6RR
VAT '%@O< 11(
Checks
Figure 1: Pay for Goods Function
The ac/uisition and pa!ment procedure are summari8ed below with the help of a
flowchart:
5a! Vendor 'cash disbursements
Accounts ? :inance .epartment
AE5 5a!ment Voucher
AE5 5ro$ision Voucher
BillE In$oice
5urchase Order
%RRE 6RR
VAT '%@O< 11(
Dith appro$al of the departmental head
Tender E ;uotation call
Re/uisition of respecti$e department
Issuing order
Recei$ing goods E er$ices b! factor!E Respecti$e .epartment
5roduce %RR E 6RR
Issuing check
ent bills to accounting department
Compl! the bills with order> %RR E 6RR and appro$e
Recei$ing bills b! purchase department
Accounts pa!able pa!ment $oucher
Read! for pa!ment
Accounts pa!able #ournal $oucherE pro$ision $oucher
B! 5urchase .epartment or b! @ser .epartment
B! ;A.> or b! recei$ing department
5a!ment procedure is complied with sec 91'A(> 9" of income ta2 ordinance)1-,* and rule 1+ of income ta2 Rule1-,* and %usok 11 of VAT Act 1--1
Figure +: Procurement of local material
Input Information
10 Purchase %e9uisition
ItJs a re/uisition generate b! respecti$e departmentA .ata elements con$e!ed b! a
purchase re/uisition of B5L include uni/ue number of purchase re/uisition> C15 and
purchase order number with date name and description of material and ser$ice> unit
number> re/uired /uantit!> unit price and /uantit! orderedA It also includes signature and
appro$al of authori8ed person> supplierJs nameF mode of pa!ment> ad$ance pa!ment 'if
an!(> terms and conditions> %RR number> in$oice number etcA
If the re/uisition is for fi2ed asset then a C15 'Capital 12penditure 5roposal( is raised b!
the user departmentA In this case> proposed suppliers name> estimated budget> #ustification
for proposed e2penditure and estimated life of proposed e2penditure is also re/uiredA A
sample of C15 is gi$en in the anne2ureA

)0 Purchase (rder
ItJs a document through which an order is madeA The heading contains the purchase order
number> purchase re/uisition number and dateA The bod! contains the description of
re/uired item> /uantit! re/uired and ordered> amount with unit price> supplierJs name and
address> terms and condition of order> due date> other rele$ant dates etcA Besides> it also
describes the mode of purchase> ad$ance pa!ment 'if an!(> purchase reference and other
rele$ant informationA
40 Material %ecei&ing %eport M%%- 5 Goods %ecei&ing %eport G%%-
ItJs a report produced b! the inspection department or recei$ing departmentA It is used to
reflect the receipt of goods on consignment or goods returned to supplierA The report
indicates item ordered> name of the material and supplier with the date of arri$al of
products> its /uantit!> /ualit! and description of the recei$ed itemA It also includes %RR
number> order number> signature of the authori8ed person etcA The report is also used as
inspection reportA Because it mentioned information regarding to
;uantit! ordered before /ualit! test
;uantit! recei$ed after /ualit! test
;ualit!
Dhether as per specification or not
Countr! of origin
.eli$er in time or not
5ricing
Legal re/uirements etcA
10 In&oice 5 8ill
This document is generated b! supplierE ser$ice pro$ider that mentions the /uantit! and
amount> bill number with date etcA The bill is attached with %@O< 11> deli$er! challan
etcA
+0 Ta= and AAT Muso" 11- %eport
B5L prepares these reports for calculating the amount of Ta2 and VAT deducted at source
of suppliersA Ta2 and VAT amount is deducted from the total amount dueA .eduction and
calculation is made according to section 91'A(> 9" of ITO) 1-,*
1
> rule 1+ of ITR)1-,*
"
>
and the VAT Act)1--" '%ushok 11(A The reports contain $endor number> $endor name>
and period> total amount due> ta2 amount> amount e2cluding ta2 amount> VAT amount
and amount e2cluding VATA A sample of ta2 and VAT report is added with anne2ureA
Information processing
Accounts Paya.le Pro&ision Aoucher
@nder this document pro$ision iAeA> entr! is gi$en against ac/uisitionA Accounts pa!able
is credited hereA :rom the sample 'gi$en in the anne2ure( we see that information relating
to $oucher no> $endor no> in$oice no> %RR no is re/uired with their date for pro$ision
#ournalA Besides> information about due date for pa!ment> item name> item number> unit>
part! name and the number of the account under which the item belongs to is also
re/uiredA @sing this #ournal $oucher> an entr! is gi$en in %A5IC for recording
in$entor! and also for $aluation of in$entor!A Information regarding price is taken from
1 Income Ta2 Ordinance 1-,*A
" Income Ta2 Rules 1-,*A
supplierJs bill and information regarding /uantit! recei$ed is taken from %RRE6RRA The
following #ournal entr! is gi$en7
Accounts Paya.le Payment Aoucher
The accounts pa!able recogni8ed in the earlier part are paid through this pa!ment
$oucher after deducting appropriate ta2esA The $oucher contains he information of the
pa!ment date> mode of pa!ment> item or batch no> $oucher no with date> A5 #ournal
$oucher number with date> amount> part! name and other related informationA A sample
of this $oucher is gi$en in the appendi2A The following entr! is gi$en in %A5IC7
(utput information
Inventory (Raw Material) DR
VAT DR [10.< of 805=
Accounts Payable CR
VAT Rules 1991: Section 9 &13: The registered person who sells locally and
exports taxable goods for the production of which he uses raw materials
purchased paying VAT, can claim rebate by including the paid amount of VAT
into the Treasury Deposit and Rebate column of form VAT-!"
Accounts Payable DR
TDS(alicable rate) CR
!an" CR
ITO 1984: Section 52: #here any payment is to be made, whether in
full or in part, or by way of ad$ance, on account of indenting commission
shipping agency commission or supply of goods or execution of contract,
to any such person or class of persons as may be prescribed, the person
responsible for ma%ing the payment shall, at the time of ma%ing such
payment deduct tax on the amount so payable at such rate as may be
prescribed"
Output information can be of two t!pes7
Information Affecting the Annual Report :igures or 12ternal Reporting
Information for Internal %anagement or Internal ReportingA
<=ternal report
The entire process of import procurement and accounting for its related transactions
affects se$eral heads in the Annual :inancial ReportsA Below I mention the affected heads
with reference to Annual Financial %eport for )**20
$ost of Goods Sold:
The detail of cost goods sold is pro$ided in the DoteE1*A @nder this head the affected
subheads are7
Raw %aterials Consumed '5urchase - FDote E11G: This amount is the total of raw
materials purchased during a financial !earA Dhen raw materials are recei$ed
RAD %AT1RIAL 5@RCIA1 AEC is debitedA The end balance is the amount
shown in the Annual ReportA
5acking %aterials Consumed '5urchase( FDote E11G: imilarl!> it is the total of
packing materials purchased during a financial !earA Dhen packing materials are
recei$ed 5AC<IK6 %AT1RIAL 5@RCIA1 AEC is debitedA The end balance is
the amount shown in the Annual ReportA
I n & e n t o r i e s :
The in$entories affected b! import operations and related accounting are found in Dote
E))7
Raw %aterials In$entor!
5acking %aterials In$entor!
Laborator! Chemical In$entor!
Raw and 5acking material in transit
pares and accessories
Internal report
To ser$e the internal reporting needs the following reports are prepared7
Accounts pa!able pa!ment $oucher
Vendor ledger
Vendor account balance
Bournal register
Cash re/uirement report
Aged pa!able
Ta2 report
VAT '%usok 11( report
Vendor business position
Report on purchase
Report on pa!ment
Aendor account .alance
It is nothing but a report about the due amount pa!able to an indi$idual $endor or a
number of $endors on a certain dateA The report includes $endorsJ name> code and the
total due amountA
@ournal register
:rom this register management of B5L will get all related information of accounts
pa!able transaction for a certain period of timeA :or e2ample> if management wants to
know about the amount of purchase of an indi$idual $endor for a certain period of time
with related deductions the! can get it from #ournal registerA 1$en the register also
informs about whether an! pa!ment has been made or not and the due amount of that
periodA A sample of the register is gi$en in appendi2A
$ash re9uirement report
ItJs a managerial en/uir! regarding $endorsJ pa!able amount to forecast the current
liabilitiesA :rom this report management of :inance and Accounts .epartment can be
informed about the cash to be paid to indi$idual $endor for a certain period of timeA A
sample of this report is gi$en in the anne2ureA
Aged Paya.le %eport
ItJs a report about forecasting the maturit! date of pa!ableA It reflects the status of old
unpaid in$oices or $ouchersA After the maturit! date the pa!ment will be madeA The date
will be matured according to purchase order contractA The reference date for age
calculation is the $oucher date or due date at when the product has been recei$edA
Aendor 8usiness Position
It is the e$aluation of o$erall $endor position with B5LA In this report B5L generates
information about $endorsJ net due amount at a certain period of timeA :rom this report
management can ha$e knowledge about the amount of gross pa!ableF amount of ta2> Vat>
pa!ment and other deduction deducted from gross pa!able amount and the net amount
has to be paid to those $endors on that periodA
I mpor t of Raw and Pac+i ng -at er i al
Another source of raw and packing material is importing from o$erseas marketA :or this
purpose> purchase department must open a letter of credit at bankA It ensures the li/uidit!
of foreign supplierA After opening a letter of credit> 5urchase department maintains a file
where all the related documents are kept separatel! for each LC and sends a cop! of each
document to the :inance and Accounts department for further processing of information
and to prepare the cost sheet for the materials recei$ed against each LCA This file is called
5C 'pharmaceutical consignment( fileA The finance and accounts department has three
sections7
Treasur!
Cost and Budgeting
Accounts
The processing of information related to import procurement takes place in the Cost and
Budgeting sectionA :or the con$enience of the users I ha$e discussed the whole thing into
three partsA The! are7
IK5@T IK:OR%ATIOK
Sales Department
ales :orecast
Planning Dept0
Import 5rocurement schedule
Purchase Dept0
5ro forma In$oice
LC openning
Accounts
5C> IV> BC :iles
IK:OR%ATIOK 5ROC1IK6
O@T5@T IK:OR%ATIOK
Input Information
Source of information:
Three departments are in$ol$ed in the entire materials procurement processA
The! carr! their own responsibilities in this regardA The departments are7
ales .epartment
5lanning .epartment
5urchase .epartment
The entire process looks like7
The planning department is concerned with the production planning and material
procurementA After getting the sales forecast from the sales department> the planning
department goes through the current stock information of different raw and packing
materialsA It prepares an import procurement schedule which helps them manage the
procurement planningA The tabular format of the schedule is too large to
accommodate hereA Therefore I am #ust mentioning the column headsA The column
heads are7
General
1. Material ID: 2. Name of the Material:
3. Procurement Time: 4. Unit cost:
5. Monthly Requirement:
Stock
Factory Stock: I&I
3
Stock:Stock in Hand:
Pipeline
Under Process: Await Shipment: In transit:
At port: Under Clearance: Received:
& I?I er$ices is the sole distributor of B1CI%CO 5IAR%A and a sister concern of
B1CI%CO 6RO@5A
Summary
Total stock in all stages: Total Req. As per Factory:
Balance to be ordered: EOQ:
Month Covered: To be procured this Month:
After considering this stock information it first calls for limited tender among the
enlisted sources 'local agents( for the suppl! of particular materialsA The list of
suppliers is kept in a database preser$ed b! the planning deptA Dithin 19 da!s> the
/uotations are submitted b! the competing suppliersA Then the planning deptA
prepares a comparati$e statement and forwards it to the purchase departmentA
Purchase Procedure: The purchase department is concerned with all the purchases
of the firmA @suall! the lowest bidder gets the offer to suppl! materials 'considering
their past performance> credit terms etcA(A Then an Import Authori8ation :ormat= is
prepared b! the purchase deptA The format is then sent to the .irector 'commercial(
for appro$alA The deptA then asks for pro)forma in$oice 'Fin case of direct purchase
from foreign suppliers( or indent 'in case of supplies b! local agents(A Then the firm
applies for RBlock List= 'for appro$al from .rugs authorit!( to import the raw
materialsA After doing all these prior works> the firm proceeds to open an LECA
The purchase deptA first collects a form of application for the opening of letter of
credit from a bankA An LCA form 'in /uintuplicate( is also collectedA After filling up
these forms> the! are submitted to the bank along with the pro forma in$oice
appro$ed b! the Block list of .rug Administration and I%5 form of Bangladesh
BankA The LEC margin 'a certain percentage of LEC amount(> bank charges and
commissions for opening the LEC> insurance pa!ment 'if made at that time( etcA are
also madeA The insurance co$ers all risks from the beginning of transitA
The opening bank sends a cop! of LEC to the ad$ising bank and another cop! is also
sent b! the compan! to the local agent or indenting compan!A The supplier then
takes necessar! measures to ship the materialsA It sends the non)negotiable shipping
documents 'copies of bill of lading E airwa! bill> in$oices> certificate of anal!sis of
each batchA :orm)-> packing list> certificate of origin etcA( to the bu!er 'the firm( b!
courier within 0 da!s and submits negotiable cop! of all documents to the
negotiating bankA Then the supplier asks the ad$ising E negotiating bank to make the
pa!mentA After pa!ing off the supplier> the ad$ising bank asks the LEC opening bank
to pa! the amount within 0" working hours '& working da!s(A The opening bank
then pa!s it off within the stipulated timeA The bank then collects the LEC pa!ment
from the firm 'applicant( on an agreed upon dateA In case where the materials are
borne in air transport> the firm needs the endorse cop! document to get clearance
from the customs authorit! after it reaches the airportA The .rug Clearance of
in$oice issued b! the .rug authorit! is also re/uiredA The C?: agent of the firm is
engaged in the goods clearance formalitiesA After getting the clearance> the materials
are borne to the factor!A
Documents recei&ed
5urchase department sends copies of all the rele$ant documents to the Cost and
Budgeting section of :inance and Accounts departmentA The documents are kept in three
t!pes of files according to their purpose7
P$ File ':or Raw and 5acking %aterials and Also spare parts for
pharmaceuticals machiner!(
IA File ':or Infusion Raw and 5acking materials and Also spare parts
for Infusion machiner!(
8$ File ':or Basic Chemical(
The documents kept in these files can be categori8ed as follows7
Documents with rele&ant financial information
10 >5$ %elated Documents from 8an":
The LEC slip and the cop! of banks LEC book is recei$edA The books contain detail
information on LECsA The rele$ant information e2tracted from this book are7
LEC %argin
Opening charge
Amendment Charge
Tele2E Courier ser$ice Charge
Bank Charge
.ocument Retirement
)0 Premium 8ill:
5remium bill is prepared b! the insurance compan!A This bill is non negotiableA The
information included in this bill is7
AA
40 $ 6 F 8ill:
The C ? : bill is prepared b! the clearing and forwarding companiesA .ifferent C ? :
agencies operate at different land> sea and airportsA Imports are made through all these
three t!pes of portsA The C ? : agent does the necessar! formalities with the customs
authorit! and sends the materials to the destinationA The! contain the following7
BA
10 Shed 8ill with @etty $hallan:
This bill is prepared b! the Biman Bangladesh Airline Authorit! 'in case air port(F the
Chittagong port Authorit! 'in case of sea port(F Benapole Land port Authorit! 'in case
Kon Kegotiable 5remium Bill7
%arine V 2A22Q
CCCACC
CCACC
Dar and trike V 2A22Q
Ket 5remium
CCCACC
CCACC
Add7 VAT 19Q
tamp .ut!
CACC
Total 5remium
HHHH0HH
C ? : BILL Against 5C WXXXXXXXXX
Amount
Customs .ut! and Ta2es WWWW
Dherfrent and Remo$al WWW
.ocumentation WW
Cool! wages WWW
Transport WW
%iscA 12penses WW
12penses under section ," WWW
AuditE treasur!E Bank 12pA WWW
Agenc! Commission V 4A42Q WWW
TOTAL EEEEE
Less7 Income ta2 on Agenc! commission 'WW(
A.VAKC1 'WWWWW(
.@1 WWW
of land port(A This is prepared for the dock or warehouse chargesA :or reporting purpose
two t!pes of information are e2tracted from this billA
Total .1%
VAT on .1%
+0 8ill of <ntry and Assessment Dotice:
These two documents are the most important in regards to reporting and accounting
purposesA The Customs authorit! prepares this bill against the C ? : Agenc!A It
includes the information on the .ut! and ta2es and VAT pa!able on imported materialsA
In all the ports the same t!pe bill is prepared without an! e2ception because the
customs authorit! uses identical software for all the portsA ome materials need to go
through 5I '5re hipment Inspection(F so the! are sub#ect to 5I chargesA The detail of
the dut! and ta2es and their rates are discussed in the later chapterA
The bills include following information7
CA
8angladesh $ustoms Authority
8ill of <ntry
Calculation of ta2es7
T!pe Ta2 base Rate Amount
Customs .ut! NaO Y NbO
upplementar! .ut! NbO Y NcO
VAT NbO Y NdO
AIT NaO Y NeO
.e$elopment urcharge NaO Y NfO
Kote7 The alphabets used in this table will used for further reference in the chapter to comeA
Bank Kame7
LC T!pe7
LC Ko7
I Code7
6ross Deight7
Ket Deight7
Item Assessable Value7 NaO
Consignor7
Consignee7
Agent7
Kame of Carrier7 Kationalit!7
.escription7
In$oice Ko7
.A
Documents with rele&ant non'financial information
In&oice from Supplier:
Although it contains financial information about the cost of raw materials> it is not
needed for financial reportingA Because the amount that concerns is the LEC margin and
the pa!ment on LEC RetirementA As there is no direct transaction with the suppliers the
original in$oice is not needed for reportingA
8angladesh $ustoms Authority
Assessment Dotice
Office7 .hakaE Chittagong Customs
Customs .eclaration Ko7
Ko ? .ate of Assessment7 Items7
Agent7
Reference7
Importer7 Account Ko7
%ode of 5a!ment7 Cash E Che/ue tatement no ? .ate7
C. NbO
NcO
NdO
NeO
NfO
NgO
NhO
.
VAT
AIT
.C
Ad$ance Trade VAT
5I
T(TA> TAH<S FmG
.ocument 5rocessing :ee NpO
N/O
NrO
VAT on C?: Commission
Income Ta2 on C?: commission
T(TA> G>(8A> TAH<S FsG
T(TA> ASS<SS<D AM(CDT FmGIFsG
AM(CDT T( 8< PAID FmGIFsG
Pac"ing >ist or !eight >ist:
This list contains the detail information on the /uantit! of materials shippedF the number
of packagesF the t!pe of packaging and the gross and net weight before shipmentA
$ertificate of Analysis:
Certificate of Anal!sis contains chemical anal!sis of the materialsA The chemical
contents> weight> color and other related information is disclosed and certified b! the
producing countr! are presented in the certificateA
$ertificate of (rigin:
Certificate of Origin is issued b! the trade bod! 'Chamber of Commerce( of the
respecti$e countr! and certifies that it is a product of their countr!A
Form '/:
:orm)- is re/uired under the 1uropean regulationA All the countries producing chemical
or pharmaceutical materials adopted itA This contains decoration from the producer
regarding the permission to use the product which is licensed b! themA It also sets the
limit of using that licensed productA
Airway 8ill:
Airwa! bill is #ust like ticket of the materials shippedA It contains the information on the
material shipped> the destination> the carrier and the airport of departureA
$onsignment Presentation Slip:
Consignment presentation slip is prepared at the port b! the port authorit! and certifies
the possession of the consignmentA The slip includes following information7
5art A7 Consignment .etails
5art B7 12amination Transfer to deli$er! warehouse
5art C7 5aper Checking and Collection of Charges
5art .7 :inal .eli$er! Information
Information Processing
Information processing is done through three stagesA The records and reports prepared in
those stages are differentA The stages are7
LEC Opening tage
LECs in Transit tage
5ost Clearance tage
>5$ (pening Stage
>5$ opening process:
The purchase deptA first collects a form of application for the opening of letter of
credit from a bankA An LCA form 'in /uintuplicate( is also collectedA After filling up
these forms> the! are submitted to the bank along with the pro forma in$oice
appro$ed b! the Block list of .rug Administration and I%5 form of Bangladesh
BankA The LEC margin 'a certain percentage of LEC amount(> bank charges and
commissions for opening the LEC> insurance pa!ment 'if made at that time( etcA are
also madeA The insurance co$ers all risks from the beginning of transitA
As mentioned earlier 'see7 1A"A1( the accounts department gets cop! of the LEC and the
Banks statement mentioning other related costA It is done through the foreign e2change
account of B1CI%CO 5IAR%A held with different banksA
%ecords and %eports:
Various records are kept during this stageA .ata related to LEC are maintained in two
wa!sA The! are7
Purchase
7epartment
1&$o @o$ma 0n/oi(e,
D$#g, 0,&2
>ocal 8an"
'LEC %argin> Opng Chrg>
Bank Charge(
Foreign 8an"
% 12cel Dorksheets
%A5IC
MS <=cel !or"sheets:
Two different sets of spreadsheets are preparedA The spreadsheets contain the following
informationA I am #ust mentioning the column heads of the spreadsheets and e2planations
where necessar!A
preadsheet containing .ata on LEC %argin and Opening Charges7
o LEC Kumber
o %argin in Taka
o Opening Commission NpO
o Courier ser$ice Charge N/O
o upplementar! Ta2 NrO
o VAT NsO
o Amendment Charge NtO
o Total ta"a FpGIF9GIFrGIFsGIFtG-
preadsheet containing .ata on .ocument Retirement
o LEC number
o 5CEIVEBC Kumber
o Retirement .ate
o 5a!ment
o 5a!ment .ate
MAPI$S <ntries:
%A5IC '%anagement Accounting 5roduction In$entor! Control !stem( is a
software custom made for B1CI%CO 6RO@5 which ser$es the both the financial and
management accounting needsA In the LEC opening stage two t!pes of entr! are made into
the software7
.atabase 1ntr!
Bournal Voucher
.atabase 1ntr!7
This entr! is made to maintain a database of LECs and shipmentsA The entr! includes7
LEC Kumber
5C Kumber
hipment .ate
Retirement .ate
This database is also linked with the accounting s!stem built within the softwareA
Dhene$er a #ournal entr! is made with the LEC account this database is linked with that
entr!A It detects an! inconsistenc! with the LEC number and 5C numberA
Bournal 1ntr!7
The #ournal entr! made at this stage includes the opening charges> LEC margin> Bank
charges> Courier Charges> Amendment Charges> etcA The Bournal 1ntr! made through the
Bank VoucherA The entr! is7

#$C Mar%in DR
&enin% C'ar%e DR
A(en)(ent C'ar%e DR
Courier Service DR
VAT DR
!an" C'ar%es DR
!an" A$C CR
VAT Rules, 2006. Rule 19(2& The tax payer can claim
'() of the VAT as claim against input tax in respect of
charges for *" +,- ser$ices*"".
All the debit entries are posted to the LEC group accountA These are all considered as
e2pendituresA All the amounts are found in the summar! spreadsheet prepared with %
12celA
>5$s in transit stage
The opening bank sends a cop! of LEC to the ad$ising bank and another cop! is also
sent b! the compan! to the local agent or indenting compan!A The supplier then
takes necessar! measures to ship the materialsA It sends the non)negotiable shipping
documents to the bu!er 'the firm( b! courier within 0 da!s and submits negotiable
cop! of all documents to the negotiating bankA Then the supplier asks the
negotiating bank to make the pa!mentA After pa!ing off the supplier> the ad$ising
bank asks the LEC opening bank to pa! the amount within 0" working hours '&
working da!s(A The opening bank then pa!s it off within the stipulated timeA The
bank then collects the LEC pa!ment from the firm 'applicant( on an agreed upon
dateA
%ecords and %eports prepared at this stage:
Two records could take place during this stageA Both the records are made using the
%A5IC software in the form of #ournal entries through 5a!ables $oucher and Bank
VoucherA The transactions are7
Payment of Insurance Premium:
Insurance premium is set on the in$oice priceA The materials are normall! insured to
make co$er for fireEmarine and warEstrike risksA A VAT of 19Q is imposed on the
insurance premiumA To facilitate the #ournal entr! a spreadsheet anal!sis is made
using % 12cel> which contains7
IA LEC Kumber IIA 5C Kumber IIIA Item name
IVA Total Insurance 5remium 'see figure A7 premium .ill(
VA VAT on Insurance 5remium 'see figure A7 premium .ill(
VIA Ket Insurance 5remium Total Premium',*Jof AAT-
The #ournal entr! is often made through pa!ables $oucherA The entr! is7
Ad&ance payment to the $6F Agent:
The C?: agents are responsible to make customs clearance from the ports and make
deli$er! to the factor! at 6a8ipur or where$er re/uiredA The estimated amount for
clearing and forwarding process is paid in ad$anceA The #ournal entr! is made through
Bank $oucher using %A5IC softwareA The entr! is7
Post $learance stage
After successful clearing and deli$er! of the consignment the C?: agent sends all the
rele$ant documentsA The documents include7
C?: Bill
hed bill with Bett! Chalan
Bill of 1ntr!
Assessment Kotice
Consignment 5resentation slip
This marks the completion of the import processA After recei$ing these documents the
5CEIVEBC files are completel! read!A
%ecords and %eport s Prepared duri ng t hi s s t age:
Insurance Pre(iu( DR [VI*
VAT DR [>.< of
805=
Accounts Payable (Insurance
VAT Rules, 2006. Rule 19(1& The tax payer can claim
!() of the VAT as claim against input tax in respect of
charges for *" /nsurance ser$ices*"".
C+, A%ent (A)vance) DR
!an" A$C CR
A detailed spreadsheet is prepared to facilitate the #ournal entr! in the first placeA The
entire spreadsheet is presented into different parts for con$enienceA
DCTK TAH<S SP%<ADS3<<T:
Part A: General Information:
PA%T 8: $urrency and Luantity:
PA%T $: 8an" $harge and Insurance Premium:
PA%T D: Duty
$olumn ID $olumn 3ead Source5 Formula
< Customs .ut! Assessment Kotice NbO
L upplementar! .ut! Assessment Kotice NcO
% .e$elopment urcharge Assessment Kotice NfO
K 5re)shipment Inspection Assessment Kotice NhO
( Total Duty ?I>IMID
PA%T <: AAT and AIT Ad&ance Income Ta=-
$olumn ID $olumn 3ead Source5 Formula
; VAT Assessment Kotice NdO
R .:'.ocumentation fee( VAT Assessment Kotice NsO
AIT 'On C?: commission( Assessment Kotice NrO
T .:EVAT less AIT'c?f( NRO)NO
C Total AAT FLGIF%G'FSG
1A LW
"A LEC Kumber
&A 5CEIV Kumber
*A Item Kame
9A Item T!pe 'RawE5ackingEpares(
1A :oreign Currenc! '@SE1@R(
"A Cost in :oreign Currenc!
&A @nit
*A <6E5C
1A Bank Charge
"A Insurance 5remium
&A VAT on Insurance 5remium
*A Ket Insurance 5remium 'N"O ) ,4Qof N&O
V AIT Assessment Kotice NeO
PA%T F: Total DCTK# AAT and AIT
$olumn ID $olumn 3ead Source5 Formula
! Total DCTK# AAT# AIT F(GIFCGIFAG
PA%T G: D<M !arehouse and (ther charges-
$olumn ID $olumn 3ead Source5 Formula
C .1% hed BillE Bett! Chalan
Z Auction hed BillE Bett! Chalan
[ VAT .1% hed BillE Bett! Chalan
AA Ket .1% NCO\NZO)N[O

PA%T 3: Miscellaneous <=penses and $6F commission
These two are e2tracted from the C?: billA %iscellaneous 12penses could include7
.ocumentation
Cool! wages
Transport
%iscA 12penses
12penses under section ,"
AuditE treasur!E Bank 12pA
C?: commission is imposed on the assessed $alue of imported materialsA
$olumn ID $olumn 3ead Source5 Formula
AB %iscA 12pA C?: Bill
AC C?: CommA C?: Bill
PA%T I: Agent
$olumn ID $olumn 3ead Source5 Formula
A. Total Amount NDO\NAAO\N[O\NABO\NACO
A1 Ad$ance Amount C?: Bill
A: .ue NA.O)NA1O
A6 Agent Agent Kame
PA%T @: Final summary for @ournal <ntry
$olumn ID $olumn 3ead Source5 Formula
AI .@TZ NOO
AI VAT N;O\NROY+4Q\N[O
AB AIT NVO
A< .1% NAAO
AL %IC NABO\NROY*4Q)NO
A% C?: Commission NACO
AK TOTAL AI\AI\AB\A<\AL\A%
$laim for AAT %e.ate:
VAT rebate is claimed 144Q on the VAT paid on cost of materials and VAT paid on
warehouse chargesA +4Q VAT rebate is claimed on VAT paid on C?: commissionA The
law in this states as follows7
VAT Act 1991: Section 9 &13: The registered person who sells locally and
exports taxable goods for the production of which he uses raw materials
purchased paying VAT, can claim rebate by including the paid amount of VAT
into the Treasury Deposit and Rebate column of form VAT-!"
VAT Rules, 2006. Rule 19 (2& The tax payer can claim '() of the VAT as
claim against VAT paid in respect of charges for *"-01 -ommission *"".
Therefore VAT is claimed 144Q on VAT paid on cost and .1% VAT and +4Q on VAT
paid on Total Glo.al Ta=esA The rest *4Q is added to the miscellaneous e2penses and the
income paid on C?: commission is deducted from the miscellaneous e2penses amount to
match the total amount due to the AgentA
-./.-. 57! ?3@A40L !45AB C3A :@5B, 50D 04: 805&
The amounts for the #ournal entr! are summari8ed in the spreadsheet 'see part 6(A The
#ournal entr! is made as follows using the %A5IC software7
Yee 5art B of spreadsheet for references of the amountsA
The dut! ta2F miscellaneous e2penses and C?: commission goes to the LEC group
accountA The other accounts are posted through general #ournalA
(utput Information
As I ha$e discussed the necessar! #ournal entries in the pre$ious chapter> it is alread!
clear about the output information of these acti$itiesA Better output of information reflects
better accountabilit! to the stakeholders and greater efficienc! of the decision makers or
managersA Output information can be of two t!pes7
Information Affecting the Annual Report :igures or 12ternal Reporting
Information for Internal %anagement or Internal ReportingA
The transactions in$ol$ed in the process of import procurement affects both the abo$eA
But it is more important from the internal reporting point of $iewA The net effect of these
acti$ities on the e2ternal report and the decisions of the in$estors are $er! remoteA But it
Duty TA-.S DR [A/*
VAT DR [AI*
AIT DR [A0*
D.M DR [A1*
Misc2 .32 DR [A#*
C + , Co((2 DR [AM*
C+, A%ent
(#iability) CR [A4*
has a materiall! significant part to pla! in internal decision making 'egA costing>
in$entor! control> pricing> etcA(A
<=ternal report
The entire process of import procurement and accounting for its related transactions
affects se$eral heads in the Annual :inancial ReportsA Below I mention the affected heads
with reference to Annual Financial %eport for )**20
$ost of Goods Sold:
The detail of cost goods sold is pro$ided in the DoteE1*A @nder this head the affected
subheads are7
Raw %aterials Consumed '5urchase - FDote E11G: This amount is the total of raw
materials purchased during a financial !earA Dhen raw materials are recei$ed
RAD %AT1RIAL 5@RCIA1 AEC is debitedA The end balance is the amount
shown in the Annual ReportA
5acking %aterials Consumed '5urchase( FDote E11G: imilarl!> it is the total of
packing materials purchased during a financial !earA Dhen packing materials are
recei$ed 5AC<IK6 %AT1RIAL 5@RCIA1 AEC is debitedA The end balance is
the amount shown in the Annual ReportA
Ad&ances:
Ad$ances are current assets and it is detailed in Dote E)10 The import procurement
process affects two t!pes of ad$ances7
C ? : Agent7 As mentioned earlier C ? : agents are paid in ad$ance for smooth
fulfillment of their responsibilit!A The C ? : account is debited on pa!ment of the
ad$anceA The !ear end balance appears in the annual reports as an ad$anceA
VAT7 As I ha$e shown earlier the amount of VAT sub#ect to rebate is debited to
VAT accountA The VAT amounts pa!ables are credited to the same accountA If it
has a debit balance at the end of the !ear then it appears as current assetA
I n & e n t o r i e s :
The in$entories affected b! import operations and related accounting are found in Dote
E))7
Raw %aterials In$entor!
5acking %aterials In$entor!
Laborator! Chemical In$entor!
Raw and 5acking material in transit
pares and accessories
Internal reports
The most important destination of the accounting reports related to import of raw
materials is the internal managementA :or efficient decision making the internal
management is constantl! is need of timel! and appropriate reports on costingA To ser$e
the internal reporting needs the following reports are prepared7
The $ost Sheet:
This is the most important report prepared on the import procurement process of raw
materialsA Cost sheets are prepared for indi$idual raw and packing material items> as well
as spares and capital machiner!A Cost sheet is generated b! the %A5IC softwareA It is
the summar! of entries debited through the #ournal $oucher of LECA It is used for costing
and pricing decisionsA The cost sheets include the following7
$(ST S3<<T
$ompany Dame: 8<HIM$( P3A%MA Shipment Do:
Supplier Dame: Date:
>5$ Do: Date: <=change rate:
In&oice Do: Date: $<P: Date:
5ARTIC@LAR 1 " Total
%aterial Kame
%RR Ko
%RR .ate7
In$oice ;uantit!
:C CostE @nit
Total :C Cost
LEC %argin
Opening Charge
.ocument Retirement
.ut!> LCA> I.C ? others
C ? : Commission
Insurance 5remium
%iscellaneous 12penses
T(TA> $(ST
$(ST P<% CDIT
$ost Summary:
Cost summar! is a summar! of the cost sheets prepared on a monthl! basisA It is a %
12cel worksheetA All the information are e2tracted from the cost sheetA The column heads
are7
%onth
LEC Kumber
5CEIVEBC Kumber
%aterials Kame
;uantit!
C?: Rate
:oreign currenc! Cost
Currenc! N@SE1@ROEZ1KO
12change rate
C?: in Taka N12change RateY:C CostO
Other costs N.ut!E LCA> C?: Commission> Insurance premium> %iscA 12pA>
Opening ChargeO
Landed cost NC?: in Taka \ Other CostsO
Cost per @nit NLanded Cost E ;uantit!O
upplier Kame and Countr!
>5$ 8alance:
This is prepared to facilitate the pa!ment of LEC liabilitiesA It is used b! $arious
departments including the treasur!A The columns are7
LEC Kumber
Opening .ate
C?: Value in Taka
Total Taka
Capi t al 4)pendi t ur e C!cl e
B5L has a well)defined polic! guideline for capital e2penditureA This c!cle in$ol$es
ac/uisition of propert!> plant and e/uipmentA :irst> the capital e2penditure must be
included in the !earl! budgetA Then the head of the department raising the capital
e2penditure proposal 'C15( must #ustif! the proposalA A sample of C15 is gi$en in
appendi2A The C15 includes following information7
1A Classification of the asset such as new purchase or replacement of an assetA
"A .escription of the item
&A Reason or #ustification for the proposed e2penditure
*A 1conomic life
9A 1stimated e2penditure
+A Budget pro$ision for the proposed e2penditure
0A uggested supplier
,A Appro$al with signature of .epartmental head> .irector> Commercial and
.irector> :inance
-A :inal appro$al b! C1O'Chief 12ecuti$e Officer(
Then the .irector> :inance $erifies the C15 along with the business research and
de$elopment department and the C15 is sent to the C1O for final appro$alA After getting
the C1O appro$al> purchase department ac/uires the capital asset from the enlisted local
or foreign suppliersA Accounts department records the transaction and makes the pa!ment
as per termsA
%ecording aspects of capital e=penditures:
Input Information
All the necessar! information for the purpose of recording ac/uisition of fi2ed assets are
taken from Capital 12penditure 5roposal> 5urchase order> Budget prepared for this
purpose> chart of accounts> supplierJs bill appro$ed b! purchase department> Bill of entr!>
Assessment notice> LEC related documents for import of machineriesA
Information processing
B5L initiall! records all propert!> plant and e/uipment at cost and charges depreciation
o$er their e2pected useful lifeA The cost of ac/uisition of an asset comprises its purchase
price and an! directl! attributable cost of bringing the asset to its working condition for
its intended use inclusi$e of inward freight> duties and non)refundable ta2esA In respect of
ma#or pro#ects in$ol$ing construction> related pre)operational e2penses form part of the
$alue of asset capitali8edA 12penses capitali8ed also include applicable borrowing costA
12change loss is also capitali8ed as an addition to the cost of the assetA
12penditure incurred after the assets ha$e been put into operation> such as repairs ?
maintenance> is normall! charged off as re$enue e2penditure in the period in which it is
incurredA In situation> where it can be clearl! demonstrated that the e2penditure has
resulted in an increase in the future economic benefit e2pected to be obtained from the
use of the fi2ed assets> the e2penditure is capitali8ed as an additional cost of the assetsA
oftware e2penses are generall! charged off as re$enue e2penditureA
On retirement or otherwise disposal of fi2ed assets> the cost and accumulated
depreciation are eliminated and> an! gain or loss on such disposal is reflected in the profit
and loss account which is determined with reference to the net book $alue of the assets
and the net sales proceedsA The gain or loss resulted from disposition of an asset are
treated as other income which does nor result from compan!Js ma#or operating acti$ities
and so are not included in gross profitA
B5L charges no depreciation on land and uses reducing balance method for charging
depreciation n respect of all other fi2ed assetsA .epreciation is pro$ided to amorti8e the
cost of the assets after commissioning> o$er their e2pected useful economic li$esA :ull
!ear=s depreciation is charged on additions and no depreciation is pro$ided on retirement>
irrespecti$e of date of addition or retirement respecti$el!A
The annual depreciation rates applicable to the principal categories of assets are7
(ssets Rate
Building and other Construction 14Q
5lant and other %achiner! 19Q
:urniture and :i2tures 14Q
Transport and Vehicle "4Q
Office 1/uipment 14Q to 94Q
B5L maintains a separate module named U:i2ed Asset AccountingJ in %A5IC where
#ournal entries are gi$en to record the ac/uisition of new asset> replacement> renewal and
disposition of asset and related depreciation according to the rateA In the %A5IC> onl!
control ledgers for principal categories of assets are keptA :or the purpose of keeping
subsidiar! ledger> a separate software named U:i2ed Assets %anagement !stemJ is used
where another person gi$es entr! for the same transactionA This is basicall! a duplication
of workA
(utput Information
Output information can be of two t!pes7
Information Affecting the Annual Report :igures or 12ternal Reporting
Information for Internal %anagement or Internal ReportingA
<=ternal reports:
The entire process of capital e2penditure and accounting for its related transactions
affects se$eral heads in the Annual :inancial ReportsA Below I mention the affected heads
with reference to Annual Financial %eport for )**20
Property# Plant and <9uipment M $arrying Aalue
The details of all propert!> plant and e/uipment are gi$en in the Dote E)*0 In the notes to
the financial statements section> B5L discloses all the necessar! information regarding
propert!> plant> and e/uipment including the cost of the assets at the beginning of the
!ear> additions and disposals in the current !ear> ad#ustment on disposal> e2change loss>
accumulated depreciation at the beginning of the !ear> depreciation charged for the
current !ear and carr!ing $alue at the end of the !earA
Internal %eport:
The sum of all assets is reflected in annual reportA But for the preparation of budget and
making decisions regarding the current status of each class of assets> periodic statements
are prepared where detailed breakdown of each ma#or class of asset are includedA
Revenue 4)pendi t ur e C!cl e
The e2pense c!cle of B5L is little difficult to describe because of the $ar!ing nature of
e2pensesA :or the sake of simplicit!> e2pense c!cle is presented here in a
segregated manner according to the ma#or t!pes of e2penses namel! factor!
o$erhead> administrati$e e2pense and selling> marketing and distribution
e2penseA
Factory o&erhead
The ma#or t!pes of factor! o$erhead are salar! and wages> power> insurance> stores and
spares consumed repairs and maintenance> research and de$elopment> municipal ta2 and land
re$enue> telephone and postage e2pense etcA These e2penses are incurred in the factor!A
Dhene$er an e2pense is incurred> it is re$iewed and recommended b! the immediate
super$isor of the person incurring itA Then it is sent to the head of the respecti$e department
for appro$alA After getting the appro$al finance and accounts department records the
transaction to the appropriate cost center and makes the pa!mentA
Administrati&e <=penses
The ma#or t!pes of administrati$e o$erhead are salar! of the e2ecuti$es of head office>
utilit!> rent> legal and professional fees> printing and stationar!> A6% e2penses> audit
fees> entertainment> petrol and fuel etcA These e2penses are incurred in different
departments of the head officeA Dhene$er an e2pense is incurred> it is re$iewed
and recommended b! the immediate super$isor of the person incurring itA Then
it is sent to the head of the respecti$e department for appro$alA After getting the
appro$al finance and accounts department records the transaction to the appropriate cost
center and makes the pa!mentA
Selling# Mar"eting and Distri.ution <=penses
The ma#or t!pes of selling and distributi$e o$erhead are ad$ertisement> promotional
e2pense> tra$eling and con$e!ance> training of medical representati$es> books and
periodicals etcA These e2penses are incurred b! the sales and promotion departmentA
Dhene$er an e2pense is incurred> it is re$iewed and recommended b! the
immediate super$isor of the person incurring itA Then it is sent to the head of the
respecti$e department for appro$alA After getting the appro$al finance and accounts
department records the transaction to the appropriate cost center and makes the pa!mentA
%ecording aspects of re&enue e=penditures:
Input information
Input information for recording purpose is obtained from the respecti$e department
where the e2penses are incurredA 1ach department sends the bill to Accounts and :inance
departmentA This bill is used as the source documentA After $erif!ing supporting
documents> a person records the e2pense as o$erhead item through appropriate code in
%A5ICA
Information Processing
After $erif!ing supporting documents> a person records the e2penses as o$erhead items
or operating e2penses through appropriate code in %A5ICA The appropriate code is
determined b! chart of accountsA .epending upon the nature of e2penses> input is fed into
the software against a codeA Besides this> some other custom made softwares are used to
record the ad$ance pa!ment to different parties including emplo!ees> utilit! e2penses>
e$ent management etcA
(utput Information
Out put information are of two t!pes7
Information Affecting the Annual Report :igures or 12ternal Reporting
Information for Internal %anagement or Internal ReportingA
<=ternal report
In annual reports> administrati$e e2penses and selling> marketing and distributi$e
e2penses are shown as operating e2pensesA :actor! o$erhead is included in the
calculation of costs of goods soldA These information are reported in the notes to the
financial statementsA Related parts are e2tracted in the appendi2A
Internal reports
A report highlighting the actual e2penses> budgeted amount for those e2penses and
$ariance is prepared monthl! for internal decision makingA
I nt er nal cont r ol f or 4)pendi t ur e C!cl e
The internal control of B5L for e2penditure c!cle is strong enough to detect> pre$ent and
correct an! errors and mistakes made in authori8ing> recording> processing transactions
and pro$iding output to user groupsA ome internal control mechanisms are discussed
below7
AuthoriBation of Purchase
As described earlier in recording process section> at B5L the user department sends
purchase re/uisition to purchase department with the appro$al of departmental headA An
authori8ed person checks that re/uisition and made the purchase orderA Dithout purchase
re/uisition no purchase order will be madeA In case of materials> the planning department
identifies the re/uired /uantities of materials and sent re/uisition to purchase departmentA
And in case of fi2ed asset B5L re/uired appro$al of C1O or deput! chairmanA But before
re/uisition a budget has been made for that assetA In each case there is a limit amount for
ordering goodsA
The purchase order document contains a uni/ue numberA This uni/ue number is used as
reference for further proceedsA It also contains the signature of the person raising
re/uisitionA The purchase department is responsible for making the order onl!A It is not
responsible for authori8ing or recei$ing goodsA It maintains a purchase register where all
gi$en orders are recorded with ordered item> /uantit!> unit price and suppliersJ nameA
Separation of Asset $ustody from (ther Functions
@suall!> the ordered items are recei$ed b! user departmentA But in case of in$entoriable
item> that is raw or packing material> it is recei$ed b! factor!A The recei$ing department
produces the %RRE 6RRA The same report is also used as inspection reportA In case of
raw or packing material> ;ualit! Control .epartment generates ;ualit! Assurance reportA
One cop! of %RRE 6RRE ;A is kept b! the recei$ing department> one cop! is sent to
purchase department and another cop! is sent to accounts departmentA o the personnel
are separate from each otherA Again there is a ph!sical control o$er item from their
ac/uisition to disbursementA A cross departmental monitoring acti$it! is a common scene
hereA
The bank reconciliation statement is prepared monthl! b! an emplo!ee independent of
recording cash disbursements or custod! of assetsA
Timely %ecording and Independent %e&iew of Transactions
B5L recogni8es accounts pa!able as its liabilit! at the time of $endors in$oice is
recei$edA It recogni8es the liabilit! b! anal!8ing the following documentsF
Kot negotiable cop! of purchase order
%RRE 6RR
Kot negotiable cop! of in$oiceE bill
Vat report
If the person is satisfied with those documents he will then gi$e the pro$ision $oucherA
This person does not ha$e the access to handle the cash> securities or other assetsA
AuthoriBation of Payments
B5L pa!s its $endors after the date has been matured for pa!mentA Kormall! the pa!ment
is made b! pre)numbered checkA A speciall! designed check is designed for this purposeA
A separate person gi$es the pa!ment $oucherA Before gi$ing pa!ment $oucher he checks
all the documents and reports relating to that transaction and also e2amined that the bills
are appro$ed b! purchase departmentA The pa!ment $oucher includes original bills>
%RRE 6RR> VAT '%@IO< 11( and challanA
Dhen the authori8ed person signs the checks> he #ust skims through the attached
documents with the pa!ment $oucherA Kormall! these signs are made b! managers or
director of accounts and financeA
Physical Security Measure
B5L has instituted some ph!sical securit! measures to protect its assets and records from
being misappropriated or misusedA :or e2ample> a gate pass is needed to take out
an! kind of mo$eable propert! both at head office and at factor!> cash in transit is insured
and cash at office is placed under lock and ke!s> all the records and documents are
placed under the super$ision of responsible compan! officialsA The compan! has also
emplo!ed closed circuit tele$ision 'CCTV( s!stem to monitor e$er! entr! and e2itA
8udgetary control
Budgetar! control is primaril! used for the re$enue e2pendituresA :or each class of
re$enue e2penditure> a budget is prepared for each month and the actual e2penses are
compared against the budgeted amountA
Threats and $ontrol Procedure
Another function of a well)designed AI is to pro$ide ade/uate controls that meet the
following ob#ecti$es7
1A All transactions are properl! authori8ed
"A All recorded transactions are $alid
&A All $alid> authori8ed transactions are recorded
*A All transactions are recorded accuratel!
9A Assets are safeguarded from loss or theft
+A Business acti$ities are performed efficientl! and effecti$el!
The documents and records described in the pre$ious section pla! an important role in
achie$ing these ob#ecti$esA imple> eas!)to)complete documents with clear instructions
facilitate the accurate and efficient recording of transaction dataA
The following table lists the ma#or threats and e2posures in the e2penditure c!cle and the
applicable control procedures that are placed in operation to mitigate themA The table is
organi8ed around the stages of the e2penditure c!cleA
Acti&ity Threats Applied $ontrol Procedure
(rder goods
5re$enting stockouts
andEor e2cess in$entor!
10 To guard against these threats> B5L
establishes an accurate in$entor!
control s!stemA The perpetual
in$entor! method is used to ensure
that information about in$entor!
stocks is alwa!s currentA
)0 B5L selects suppliers who are
known to meet the deli$er!
commitmentsA
Re/uesting unnecessar!
items
10 B5L is $er! much aware of
purchasing items that are not
currentl! neededA To ensure this>
e$er! purchase re/uisition is
appro$ed b! the departmental headA
5urchasing goods at
inflated price or of inferior
/ualit!
10 To pre$ent this> an open tender is
arranged for the suppliersA B5L
selects those suppliers who are
capable of deli$ering highest /ualit!
goods as reasonable priceA
)0 B5L prepares a monthl! budget for
the purchase of goodsA Actual costs
are compared periodicall! with
budget allowanceA To facilitate
control> these reports highlight an!
significant de$iations from budgeted
amounts for further in$estigationA
5urchasing goods of
inferior /ualit!
10 To a$oid the purchase of goods of
inferior /ualit!> B5L has established a
list of appro$ed suppliers known to
pro$ide goods of acceptable /ualit!A
)0 In addition> supplier performance
data is collected and periodicall!
re$iewed to maintain the accurac! of
this appro$ed suppliers listA
%ecei&e and store
goods
Recei$ing unordered goods 10 Recei$ing departments accept onl!
those deli$eries for which there is an
appro$ed cop! of the purchase order
and matches the /uantit! mentioned
in the purchase order with goods
recei$edA
tealing in$entor!
10 In$entories are stored in secured
locations with restricted accessA
)0 All transfers of in$entor! are
properl! documentedA
40 eparation of asset custod! from
recording responsibilit!A
Appro&e and pay
&endor in&oices
:ailing to catch errors in
$endor in$oices
10 Vendor in$oices ma! contain errors
such as discrepancies between /uoted
and actual prices charged or
miscalculations of the total amount
dueA To detect mathematical accurac!
of $endor in$oices> those in$oices are
compared with purchase order and
recei$ing reportA
5a!ing for goods not
recei$ed
10 The control procedure used here is
that the person responsible for
pa!ment to the $endors compares the
/uantities indicated on the $endor
in$oices with the /uantities
mentioned in the materials or goods
recei$ing reportA
5a!ing the same in$oice
twiceA
10 In$oices are appro$ed for pa!ment
onl! when accompanied b! a
complete $oucher package 'purchase
order and recei$ing report(
)0 5a!ments are made onl! on the
basis of original in$oicesA .uplicate
in$oices are marked clearl! that these
are duplicateA
40 5a!ments are ne$er authori8ed for
a photocop! of an in$oice
10 Dhen the check to pa! for an
in$oice is signed> the in$oice and the
$oucher package are marked Upaid
and canceledJ
Recording and posting
errors in accounts pa!able
10 The person making the pa!ment
compares the difference in supplier
account balances before and after
processing checks with the total
amount of in$oices processedA
)0 Iere the control is deficient in one
aspect iAeA the non e2istence of limit
testA
%isappropriating checks
10 @se of prenumbered che/ueA
)0 Access to che/ue writing machine
is restricted as wellA
40 5roper segregation of duties iAeA
custod! of che/ue is segregated from
the authori8ing functionA
10 1$er! che/ue is signed b! two
persons before making the pa!mentA
General $ontrol Losing data 10 All the supporting documents are
kept separatel! in a fileA
)0 Both internal and e2ternal labels
are attached to each fileA
40 Access control is established $ia
use of passwords and user I.A
Recommendat i ons
The effort and skill put behind the entire process of recording and reporting related to
e2penditure c!cle is e2ceptionalA The staffs demonstrate their knowledge and e2perience
with sheer professionalismA .espite these efforts some shortcomings ma! remain and
there is alwa!s an opportunit! to o$ercome those and step ahead in the race to be more
accountable and sociall! responsibleA I ha$e found some area where the practice should
ha$e been betterA
Inconsistency with the law on a few AAT related issues
805 on EFC Eommi ssi on&
Before getting into the anal!sis of the practice let us first go though the law itself7

The issue under the spotlight is the VAT paid on the C?: agentJs commissionA The law
has clearl! mentioned the term VAT paid charges for C&F agentsA But current
practice is differentA
Currentl! +4Q VAT rebate is claimed on the Total 6lobal Ta2es See F$olumn EAIG in
Part G of the Duty ta=es spreadsheet-0 The amount considered as .: VAT is in fact the
amount of Total 6lobal Ta2es See FsG in the Assessment DoticeN also refer to column R
VAT Rules 2006. Rule 19(2: The tax payer can claim '() of the VAT as claim
against input tax in respect of charges for telephone, tele-printer, fax,
internet, freight forwarders, -01 agents, audit and accounting firms, supplier,
security ser$ices, carrying agents, +,- ser$ices, 2lectricity, and other related
taxable ser$ices".
in Part E of the Duty ta=es spreadsheet-0 The total 6lobal ta2es amount is the aggregate
of7
.ocument 5rocessing :ee
VAT on C?: Commission
Income Ta2 on C?: CommissionA
The last item) Income Tax on C&F CommissionO is the income ta2 on the income of the
C?: agent deducted at source b! the customs authorit!A The importer is not liable to pa!
this amount in an! circumstancesA This amount is deducted from the C?: bill which
means B1CI%CO 5IAR%A ne$er pa!s the income ta2 amount on the C?: commission
and it is not supposed to pa!A The /uestion arises when a +4Q VAT rebate is claimed for
this amountF because it is /uiet clear that7
The importer can ne$er claim VAT rebate on an amount that he ne$er paidA
The item eligible for rebate is not the income ta2> it is the VAT paid on C?:
commissionA
The ob$ious /uestion that arises is how it is possible that an amount is debited which has
ne$er had an! pa!ment against it or an! liabilit!A This should ha$e caused an error in the
balances in the financial statementsA The mismatch is a$oided b! deducting the UIncome
Ta2 on C?: CommissionJ amount from the miscellaneous e2pensesA Let us go through
the entire process of dealing with Income Ta2 on C?: Commission7
:irst of all +4Q of the amount is debited as VAT rebate 'as it is included in the
Total 6lobal Ta2es on which rebate is currentl! being claimed(A
econdl! *4Q of the amount is added to miscellaneous e2penses 'as the
unclaimed amount is to be treated as e2penses(A
The 144Q amount is then again deducted from miscellaneous e2pensesA
Although apparentl! the amount is deducted and the net effect seems to be 8ero> it lea$es
a trail of misreportingA
5he !fect of the ,nconsistency on the Cinancial Aeport&
It lea$es a two fold effectA The! are7
:irstl!> an e2cess VAT rebate claimed for an amount e/ual to +4Q of the income
ta2 paid b! C?: agentA Dhich means current asset is increasedA
econdl!> miscellaneous e2penses are under cast with an amount e/ual to +4Q of
the income ta2 paid b! C?: agent which causes an increase in profit figuresA This
happens because *4Q of the amount is added to miscellaneous e2penses and
subse/uentl! 144Q is deductedA
The figures might not be as big to ha$e an effect on the in$estors decision> but the bottom
line is that> it in$ol$es the compan!Js social responsibilit!A ome times the Total 6lobal
Ta2es include fees and penalties which causes an inconsistenc! of an e$en bigger
amountA Certainl! people wonJt like a sociall! responsible compan! to ignore these facts
and figuresA
The %ecommended Practice in this %egard
:rom the Total 6lobal Ta2es onl! the VAT paid on the C?: Commission is sub#ect to
VAT rebateA The compan! has nothing to do with the Income Ta2 paid on the C?:
commission which paid b! the agentA The .ocumentation fee 'a $er! negligible amount(
might be added to the miscellaneous e2pensesA The inclusion of this negligible amount
with the VAT will not create an! considerable difference because after all it is paid b! the
compan!A
805 on :emur r age Ehar ges&
Dhen clearance of the consignment is dela!ed at the port the port authorit! charges an
amount for each da!s dela! with some other charges 'egA use of fork lifts(A This ser$ice
b! the port authorit! is also ta2able under VAT rules 1--1A Currentl! a 144Q rebate is
claimed on this VATA Kow again let us look at the law7
The law indicates that 144Q rebate on VAT paid can be claimed on the VAT charged on
the raw material and +4Q rebate could be claimed on related ser$icesA .emurrage) which
is basicall! charged for using the port warehouse and other facilities> should not be
considered as inclusi$e in the raw materials ta2able priceA Although the name UDarehouse
er$icesJ is not e2plicitl! mentioned in the law> this can be considered as a related ser$ice
which is entitled to a +4Q rebateA But I think> the correct practice is to treat this e2pense
AAT Act 1//1: Section / 614: The registered person who sells locall! and e2ports ta2able goods for the production of which he uses raw materials purchased pa!ing VAT> can claim rebate b! including the paid amount of VAT into the UTreasur! .eposit and RebateJ column of form VAT)1,A
AAT %ules# )**20 %ule 1/)-7 The ta2 pa!er can claim +4Q of the VAT as claim against input ta2 in respect of charges for telephone> tele)printer> fa2> internet> freight forwarders> C?: agents> DAA> audit and accounting firms> supplier> securit! ser$ices> carr!ing agents> LEC ser$ices> 1lectricit!> and other related ta2able ser$icesAH
as an item of miscellaneous e2pense and not to claim rebate because demurrage is like a
fine or penalt! for not releasing the goods from port warehouse timel!A Currentl! practice
shows that 144Q of the VAT paid on this regard is debited See $(>CMD AI in PA%T
G of the spreadsheet where FPG implies AAT on D<M-0
5he !fect of the ,nconsistency on the Cinancial Aeport&
The apparent effects on the balances are7
12cess VAT is claimed e/ual to *4Q of the VAT paid on .1%F as a result
current asset is inflatedA
.1% e2penses are under)cast b! *4Q of the VAT paid on .1% which causes
a rise in the net profit figureA
The %ecommended Practice in this %egard:
+4Q of the VAT paid on .1% charges should be claimed as rebate and the amount is
debitedA The rest *4Q cannot be claimed as rebate thus it should be added to the .1%
e2pense which is debitedA
Therefore the amended analysis of the spreadsheet would .e:
PA%T G: Final summary for @ournal <ntry
$olumn ID $olumn 3ead Source5 Formula
AI .@TZ NOO
AI VAT N;O\NTOY+4Q\N[OY+4Q
AB AIT NVO
A< .1% NAAO \ N[OY*4Q
AL %IC NABO\NTOY*4Q
A% C?: Commission NACO
AK TOTAL AI\AI\AB\A<\AL\A%
Data %edundancy
<=istence of multiple systems
Traditionall!> the AI has been referred to as a transaction processing s!stem because its
onl! concern was financial data and accounting transactionsA :or e2ample> when a sale
took place> the AI would record a #ournal entr! showing onl! the date of the sale> a debit
to either cash or accounts recei$able> and a credit to salesA Other potentiall! useful
nonfinancial information about the sale> the time of da! that it occurred> would
traditionall! be collected and processed outside of the AIA Conse/uentl! man!
organi8ations de$eloped additional information s!stems to collect> process> store and
report information not contained in the AIA 1$en sometimes two supporting softwares
are used to record the same transaction which are not interlinkedA @nfortunatel! the
e2istence of multiple s!stems creates numerous problems and inefficienciesA B5L also
e2periences this problemA ince %A5IC cannot generate subsidiar! ledger for each
class of assets> B5L uses U:i2ed Asset %anagement !stemJ software to generate
management reportA Often the same data is captured and stored b! two s!stems> which
not onl! results in redundanc! across s!stems> but also leads to discrepancies if data are
Currently5 [6*7[R*890:7[;*
Currently5 [A!*7[R*8<0:=[S*
Currently5 [AA*
changed in one s!stem but not in othersA In addition> it is difficult to effecti$el! integrate
data from the $arious s!stemsA
The %ecommended solution in this %egard:
1nterprise resource planning '1R5( s!stems are designed to o$ercome these problems as
the! integrate all aspects of a compan!Js operations with its traditional AIA Thus when
the sales force enters an order> the effect of the transaction automaticall! flows to all
affected parts of the compan!A In$entor! is updated> production schedules are ad#usted
and purchase orders are initiated to ac/uire an! needed raw materials and suppliesA
%oreo$er important nonfinancial data> such as the time the acti$it! occurred> is collected
and stored in the same s!stemA
A ke! feature of 1R5 s!stems is the integration of financial with other nonfinancial
operating dataA The $alue of such integration suggests that there ma! be strategic benefits
to more closel! linking the traditionall! separate functions of information s!stems and
accounting> and man! organi8ations are beginning to combine these two functionsA
MS <=cel !or"sheet
The summar! reports prepared with % 12cel are often sub#ect to data redundanc!A On a
few occasions same set of data is used in different spreadsheetsA This causes redundanc!
and makes the data entr! process unnecessaril! length!A It reall! does kill $aluable time
of the responsible staffs and as a result heEshe might fail to deli$er reports on time when
heEshe is burdened with e2cessi$e data entr! and related #obsA
Proposed $hanges:
% Access could be $iable option as it gi$es the user fle2ibilit! through ;LA B! linking
the large % 12cel spreadsheets as tables in % Access could pro$ide a solid base to go
use ;L optionsA The reporting fle2ibilit! of % Access could also be useful to generate
UOn .emandJ reports for the management in the /uickest possible timeA The auditors also
ask for different reports which are not alwa!s readil! a$ailableA @sing % Access
different t!pes of reports can be produced and it takes little timeA
Internal $ontrol Issues
>imit Test
Internal control regarding e2penditure c!cle of Be2imco 5harmaceuticals Limited is /uite
satisfactor!A B5L has introduced a number of control policies to ensure proper recording
and reporting of different t!pes of e2pensesA In the pre$ious part> I ha$e mentioned one
area where internal control is deficientA The area is to writing the che/ues and making the
pa!mentsA Dhen a check is prepared> all supporting documents are $erified b! the person
preparing the che/ueA At the time of writing the che/ue> an error ma! occur resulting into
the possibilit! of o$erpa!mentA This ma! occur when 14 to 19 in$oices are paid at a timeA
Though e$er! check is signed b! two different persons 'at least one from top
management(> it is not alwa!s possible to $erif! all the in$oices and sum up total figureA
:or e2ample> an in$oice of TkA ">"9>444 can be written as TkA ">9">444 while gi$ing
entr! in %A5IC to record the pa!ment causing debit balance in accounts pa!able
accountA There is no built)in checking s!stem in the software that will not accept an!
amount in e2cess of pro$ision made earlier for this purposeA
Proposed solution:
The software used '%A5IC( to record the pa!ment to suppliers should incorporate a
limit test which will not allow the user to write an amount in e2cess of the pro$ision
madeA Dhen the accounts pa!able ledger account will ha$e a debit balance> the software
should show a message that a particular supplierJs account is going to be o$erpaidA B5L
follows a polic! that the person making the pa!ment should compare the difference in
supplier account balances before and after processing checks with the total amount of
in$oices processedA This could be regarded as a compensating control for the same
purposeA But the inclusion of limit test in the software can make this task more eas! and
with less effortA
Pro.lems with coding
B5L uses a fi$e segment> twel$e digit code for its general ledger accountsA %ost of the
items are assigned a codeA But due to $ar!ing nature of e2penses> sometimes confusion
arises as to how a particular e2pense is to be treated and which code is appropriate for
thisA ometimes no codes are a$ailable for an itemA The decision in this regard is taken b!
the person recording the transactionA If that person cannot understand the nature of
e2penses> a wrong code ma! be used b! himA
Proposed solution
Chart of Accounts must be detailed enough to co$er all t!pes of items to a$oid the use of
personal #udgmentA
Concl usi on
In toda!=s comple2 !et highl! competiti$e business en$ironment management needs
/ualit! information for decision making purposeA Kow a da!s two things make the
difference between a successful firm and a failed one 3 /ualit! of managerial decision
and the abilit! to adapt new technolog!A The /ualit! of managerial decision of B5L is
pro$ed in its success in the marketF also B5L has successfull! adapted latest
technological breakthrough in ICTA
The %I department of B5L is constantl! working on the de$elopment of new soft wares
and on the impro$ement of the e2isting soft waresA It is hoped that the B5L would be the
first local compan!> as the! ha$e been in man! other cases> to implement a complete 1R5
solution s!stemA
B1CI%CO 5IAR%AC1@TICAL LT.A is the first Bangladeshi compan! to be listed
with the London tock 12changeA This was an added challenge to all the accounting
staffs as the listing the accountabilit! of the organi8ation has gained a global reachA The
e$er e2panding e2port trade also indicates greater responsibilit! to the worldA The
:inance and Accounts department took the challenge and pro$e their mettle b! the timel!
publication of "449 Annual :inancial Reports globall!A 1ach and e$er! section in the
department deser$es to be complemented for their endea$orA :rom raw material import to
the bringing of smile for the societ!> on e$er! le$el> professionalism and dedication is the
ke! to this successA
Bibliograph!
Annual Report of Be2imco 5harmaceuticals LimitedA "44+A
%arshall> BA RA and 5ABA teinbartA "44&A Accounting Information SystemsA Kinth editionA
ingapore> 5earson 1ducationA
5orter> %A1A and VA1A %illarA 1-,9A Ho Information !i"es #ou Competiti"e Ad"antage.
Iar$ard Business Re$iew 'Bul!)August(A
Dilkinson et alA "44&A Accounting Information Systems$ %ssentia& Concepts and
App&ications. :ourth 1ditionA Kew Zork> Bohn Dille! ? onsA IncA
Debsite
wwwAbe2imcopharmaAcom
Anne=ure
A Sample of $<P
Sample of Purchase (rder
Accounts Paya.le Pro&ision Aoucher
%RR KOA XXXXXXXXXXX
.ate
%RR KOA XXXXXXXXXX.AT1 XXXXXXXXXX
%RR KOA XXXXXXXXXX.AT1 XXXXXXXXXX
%RR KOA XXXXXXXXXX.AT1 XXXXXXXXXX
%RR KOA XXXXXXXXXX.AT1 XXXXXXXXXX
In$oiceE Voucher KoXXXXXXXX.ateXXXXXXXXX
Amount for RefundXXXXXXXXXXXXXXXXXXXXXX
Amount .ue for 5a!mentXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX
5assed for 5a!mentE Ad#ustment .ate
Be2imco 5harma A5 Bournal Voucher .ate7
]]AA
Voucher Ko 7 ]]AA Original Voucher Ko7 ]]AA 4E44E44
Vendor Ko 7 ]]]
In$oice E Bill 7 ]]] .ate7 ]]] %RRE;CEDO 7 ]]A 4E44E44
.ue .ate 7 ]]]
.escription 7 ]]]
5a!able 7 ]]]AA Amount CrA
Vat 7 ]]]AA Amount .r
Commission 7 ]]]AA Amount .r Total 'Tk( 7
Item .escription Account no Amount
'Tk(
.rAE
Cr

ignature .ate Kotes
5repared b!
Checked b!
Appro$ed b!
5osted b!
Ta2 and VAT Report
Ta= and AAT %eport
Accounts Paya.le Payment Aoucher
Be2imco 5harma A5 5a!ment Voucher .ate7
]]AA
'Cash E Bank(
BatchEitem Ko7 ]]AA
Voucher Ko 7 ]]] Original Voucher Ko7 ]]AA 4E44E44
A5 BV Ko BV .ate Vendor
Ko
Check
Ko
t!pe Account
no
Amount
'Tk(
.rA
ECr

ignature .ate 5a!ee
5repared b!
Checked b!
Appro$ed b!
5osted b!
,0 Aendor ledger
Sample of @ournal %egister
Sample of $ash %e9uirement %eport
Be2imco 5harma Bournal Register
:rom 4E44E44 to 4E44E44
5a!ment @pto 4E44E44
ummar! b! Vendor
Vendor
Ko ?
Kame
5urchase Vat
Amount
Ta2
Amount
Other
Amount
Ket
5aid
.ue
Amount
Be2imco 5harmaCash Re/uirement Report 'ummer!(
B! In$oice @pto 4E44E44
5a!ment @pto 4E44E44
RefA .ate for Age Calculation7 Aoucher DatePaya.le Amount 6 a.o&e days old
Be2imco 5harmaVendor Business 5osition Report
:rom 4E44E44 to 4E44E44
Sample of Aged Paya.le %eport
Sample of Aendor 8usiness Position %eport
Be2imco 5harma Aged 5a!able Report 'ummer!(
B! In$oice @pto 4E44E44
5a!ment @pto 4E44E44
RefA .ate for Age Calculation7 Aoucher Date Paya.le Amount 6 a.o&e days old
Vendor
Ko
Vendor Kame Total
.ue
Amount
4)&4
.a!s
&1)+4
.a!s
+1)-4
.a!s
Abo$e
-4
.a!s
@nclassi)
fied