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Accounting Information System of Beximco Pharma


An accounting information system is a unified structure within an entity, such as a business firm, that
employs physical resources and other components to transform economic data into accounting
information for the purpose of satisfying the information needs of a variety of users.
In fact the AIS is a subsystem of a broader information system that encompasses all
information generating activities. The AIS consists of people, procedure and information technology.
It performs the following three functions in the organization:
It collects and stores data about activities and transactions so that the organization can review
what has happened.
It processes data into information that is useful for making decisions that enable management to
plan, execute and control activities.
It provides adequate controls to safe guard the organization assets, including its data. These
controls ensure that the data is available when needed and that it is accurate & reliable.
This study has identified one of the major components of the accounting information system of
BPL Expenditure cycle, the technology, the output & users, and the control mechanisms
related to this cycle. Some of them are input to the system, some work to process the input, and
some represent the output. Regardless of what they are, they work together to achieve the system's
objective which is to satisfy the information needs of the users.
Business events, also called transactions, are the steps, within the physical & financial
processes of firms. We may group the business events of BPL into process sequences called
transactions cycles. Most Organizations engaged in many similar and repetitive transactions.
These transaction types can be grouped into four basic cycles, each of which constitutes a basic
subsystem in the AIS. These four cycles (or subsystems) of the AIS are related to one another and
each feeds data to the general ledger & reporting system that provides information to both internal &
external users.
Accounting Software
BPL uses a computer software program called "MAPICS" for its transaction processing purpose.
"MAPICS" is the acronym of "Management Accounting Planning Information Control
System". The software was developed and launched in the market by IBM Corporation in
1980. It is DOS based. MAPICS is batch processing software. In BPL transactions are entered in
batches for a month and the batch is then posted and reports are generated according to pre-
designed format. By structure MAPICS is a modular software. BPL uses the following modules of
MAPICS:
General Ledger.
Budget Preparation.
Financial Ratio Analysis.
Fixed Asset Accounting.
Accounts Receivable.
L C Monitoring System.
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Apart from MAPICS, BPL uses some other software for accounting purpose such as:
Fixed Assets Management System.
Payroll System.
Inventory Control System.
Sales and Billing System.
Production Information System.

All these softwares are developed by the MIS department of BPL and these softwares are not
integrated with MAPICS.
Furthermore, MS Excel is extensively used by the accounts department.
Expenditure Circle of BPL
The expenditure cycle is a recurring set of business activities and related data processing operations
associated with the purchase and payment for goods and services. The expenditure cycle of BPL
includes:
A. Acquisition of raw and packing material
a. Local Purchase
b. Import
B. Acquisition of fixed asset
C. Other revenue expenditure
The focal point of this report is to put light on the acquisition of raw and packing material form local
and foreign sources and related accounting treatments. Acquisition of fixed assets and other revenue
expenditures are discussed briefly.
A.a: Local Purchase of Raw and Packing Materials

The domestic purchase of raw material includes following business functions;
1. Processing purchase order
2. Receiving goods, material and services
3. Recognizing the liability
4. Processing and recording cash disbursement

1. Processing Purchase Order
The procedure begins with need recognition. The respective department identifies its need, gets
approval of the departmental head and with the approval an authorized person sends purchase
requisition to purchase department to initiate purchase. In case of property, plant and equipment
acquisition, before sending purchase requisition, a budget has to be prepared by the user department.
If the departmental head or higher authorities, whichever is required, approve the proposed budget a
purchase requisition is sent to purchase department. And in case of raw or packing materials, the
planning department determines the quantity and timing of raw materials. This department informs
the purchase department when to buy materials.
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When the purchase department got the requisition, it calls for quotation or tender. After receiving the
quotation or tender, supplier has been selected. The supplier may be local or international. If the
terms and conditions are in favor of both BPL and the selected supplier, an order for the purchase is
than issued by the purchase department. In case of raw or packing material, the purchase order is
issued by the factory. A purchase register is maintained by the purchase department in which they
maintain all the required information relating to a consignment.

2. Receiving Material, Goods and Services
Generally the goods and services are received by the user department who has issued the purchase
requisition or in some cases by the authorized department. Materials are received by Quality
Assurance Department (QAD) in the factory. After receiving materials, goods and services an MRR
(Material Receiving Report) is issued for material and other than material a GRR (Goods Receiving
Report) is issued by receiving department to purchase department. In the mean time the invoice or
bill is received by the purchase department.
Before using the product by user department that is at the time of delivery, it has been inspected by
the inspection team or QCD (Quality Control Department), by user department or by authorized
department. QCD examined the materials on a sample testing basis and provide a certificate.
Normally,
I. QCD inspects standardized items like raw material, packing material etc.
II. User department inspects non standardized items like services, stationeries etc.
III. Inspection department inspects machineries, plants etc.

Again at BPL there are some authorized departments for inspection. For example, computer or IT
related products are inspected by IT department, furniture are by HR department. If the received
goods, material and services are not according to purchase requisition BPL may
Refuse the order
Reorder the item
Received on condition

Before taking any action, there is a discussion between BPL and the supplier. After re-
communication it has been decided whether the payment to the supplier will be made or not.
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Figure: Receiving Function

3. Recognizing The Liability
The purchase department compares the invoice/bill and MRR/ GRR/ QC with the purchase order. If
every thing has been complied, the amount payable to supplier is approved by the purchase
department. There is a seal on the invoice named Approved By with the signature of purchase
manager. It means the purchase department is satisfied with the information mentioned in the bill. A
copy of all this documents is kept by purchase department and the main copies along with copies not
negotiable are sent to accounts and finance department.

Vendor

Warehouse/ Factory/
Ready for Use
Accept Delivery
by User
department/
Factory
Count &
Inspect goods
by respective
departments
Packing
slip
Goods &
services
Packing
Slip
Goods &
services
Goods &
services
MRR/GRR

Vendor

MRR/ GRR

Purchasing order
by Purchase/
Planning Dept
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The accounts and finance department is then ready for giving provision voucher. An authorized
person is liable for giving provision voucher. He examines the not negotiable copy of bill/ invoice at
the time of giving provision voucher. Generally the liability is recognized when the vendor sends the
invoice or bill. But in some cases it may be recognized at the time of goods received.

4. Processing and Recording Check/ Cash Disbursement
After a certain period of time when the date becomes matured for the liability the payment is made
by BPL. The matured date has been calculated in the aged payable report for each vendor. The due
amount for an individual vendor is identified from vendor business position report. In this stage
another report is prepared for forecasting cash requirement. An individual person enters data in
MAPICS for having this reports and forecasts. The same person checks the arithmetical accuracy,
casts, cross casts, deductions and payable amounts. If the checking is matched with those reports
checks are issued to pay vendor.
The mode of payment is usually pre numbered check. In most cases the payment is made by payee
only check. In some cases the payment may be made by cash or by bearer check or paid in advance
fully or partly.
Issuing check is a sensitive issue. It is prepared by that person who will give the payment voucher.
And it is signed by senior management. The payment voucher is given by the same person who has
checked the reports and payable amounts. This voucher includes original bills, MRR/ GRR, Vat
(musok 11) and challan. It is recorded in the record book after the sign has been made.
After all the procedure has been completed the check is given to vendor and the counter foil of that
check is preserved by BPL. If the payment amount is large part by part payment is made.
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Figure: Pay for Goods Function







Factory/ User
department

Vendor
Approve
vendor
invoices by
purchase
department
Pay Vendor
(cash
disbursement
s
Purchase
Department
Accounts &
Finance
Department
Vendor
invoice
Bill/ Invoice
Purchase Order
MRR/ GRR
VAT (MUSOK 11)
Checks
A/P Payment
Voucher

A/P
Provision
Voucher

Purchase
order

MRR/GRR

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The acquisition and payment procedure are summarized below with the help of a chart:




























Requisition of respective
department
Tender / Quotation call

Accounts payable payment
voucher

Issuing order
Ready for payment
Accounts payable journal
voucher/ provision voucher

Sent bills to accounting
department

Comply the bills with order,
MRR / GRR and approve

Receiving bills by purchase
department

Produce MRR / GRR
Receiving goods / Services
by factory/ Respective
Department

Issuing check

With approval of the departmental head
By Purchase Department or by User
Department

By QAD, or by receiving department

Payment procedure is complied with sec 51(A), 52 of
income tax ordinance-1984 and rule 16 of income
tax Rule1984 and Musok 11 of VAT Act 1991

Figure: Procurement of local material

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Input Information

Purchase Requisition
Its a requisition generate by respective department. Data elements conveyed by a purchase
requisition of BPL include unique number of purchase requisition, CEP and purchase order number
with date name and description of material and service, unit number, required quantity, unit price and
quantity ordered. It also includes signature and approval of authorized person, suppliers name; mode
of payment, advance payment (if any), terms and conditions, MRR number, invoice number etc.
If the requisition is for fixed asset then a CEP (Capital Expenditure Proposal) is raised by the user
department. In this case, proposed suppliers name, estimated budget, justification for proposed
expenditure and estimated life of proposed expenditure is also required. A sample of CEP is given in
the annexure.

Purchase Order
Its a document through which an order is made. The heading contains the purchase order number,
purchase requisition number and date. The body contains the description of required item, quantity
required and ordered, amount with unit price, suppliers name and address, terms and condition of
order, due date, other relevant dates etc. Besides, it also describes the mode of purchase, advance
payment (if any), purchase reference and other relevant information.

Material Receiving Report (MRR) / Goods Receiving Report (GRR)
Its a report produced by the inspection department or receiving department. It is used to reflect the
receipt of goods on consignment or goods returned to supplier. The report indicates item ordered,
name of the material and supplier with the date of arrival of products, its quantity, quality and
description of the received item. It also includes MRR number, order number, signature of the
authorized person etc. The report is also used as inspection report. Because it mentioned information
regarding to
Quantity ordered before quality test
Quantity received after quality test
Quality
Whether as per specification or not
Country of origin
Deliver in time or not
Pricing
Legal requirements etc.

Invoice / Bill
This document is generated by supplier/ service provider that mentions the quantity and amount, bill
number with date etc. The bill is attached with MUSOK 11, delivery challan etc.

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Tax and VAT (Musok 11) Report
BPL prepares these reports for calculating the amount of Tax and VAT deducted at source of
suppliers. Tax and VAT amount is deducted from the total amount due. Deduction and calculation is
made according to section 51(A), 52 of ITO- 1984
1
, rule 16 of ITR-1984
2
, and the VAT Act-1992
(Mushok 11). The reports contain vendor number, vendor name, and period, total amount due, tax
amount, amount excluding tax amount, VAT amount and amount excluding VAT. A sample of tax
and VAT report is added with annexure.

Information processing

Accounts Payable Provision Voucher
Under this document provision i.e., entry is given against acquisition. Accounts payable is credited
here. From the sample (given in the annexure) we see that information relating to voucher no, vendor
no, invoice no, MRR no is required with their date for provision journal. Besides, information about
due date for payment, item name, item number, unit, party name and the number of the account under
which the item belongs to is also required. Using this journal voucher, an entry is given in MAPICS
for recording inventory and also for valuation of inventory. Information regarding price is taken from
suppliers bill and information regarding quantity received is taken from MRR/GRR. The following
journal entry is given:













Accounts Payable Payment Voucher
The accounts payable recognized in the earlier part are paid through this payment voucher after
deducting appropriate taxes. The voucher contains he information of the payment date, mode of
payment, item or batch no, voucher no with date, AP journal voucher number with date, amount,



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-18.


Inventory (Raw Material) DR
VAT DR [100% of VAT]
Accounts Payable CR
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party name and other related information. A sample of this voucher is given in the appendix. The
following entry is given in MAPICS:

















Output information
Output information can be of two types:
Information Affecting the Annual Report Figures or External Reporting
Information for Internal Management or Internal Reporting.
External report
The entire process of import procurement and accounting for its related transactions affects several
heads in the Annual Financial Reports. Below I mention the affected heads with reference to Annual
Financial Report for 2012
Cost of Goods Sold:
The detail of cost goods sold is provided in the Note. Under this head the affected subheads are:
Raw Materials Consumed (Purchase) [Note]: This amount is the total of raw materials
purchased during a financial year. When raw materials are received RAW MATERIAL
PURCHASE A/C is debited. The end balance is the amount shown in the Annual Report.
Packing Materials Consumed (Purchase) [Note]: Similarly, it is the total of packing materials
purchased during a financial year. When packing materials are received PACKING
MATERIAL PURCHASE A/C is debited. The end balance is the amount shown in the
Annual Report.


ITO 1984: Section 52: Where any payment is to be made, whether in full or in
part, or by way of advance, 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
making the payment shall, at the time of making such payment deduct tax on
the amount so payable at such rate as may be prescribed.



Accounts Payable DR
TDS(applicable rate) CR
Bank CR
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I n v e n t o r i e s :
The inventories affected by import operations and related accounting are found in Note:
Raw Materials Inventory
Packing Materials Inventory
Laboratory Chemical Inventory
Raw and Packing material in transit
Spares and accessories

Internal report
To serve the internal reporting needs the following reports are prepared:
Accounts payable payment voucher
Vendor ledger
Vendor account balance
Journal register
Cash requirement report
Aged payable
Tax report
VAT (Musok 11) report
Vendor business position
Report on purchase
Report on payment

Vendor account balance
It is nothing but a report about the due amount payable to an individual vendor or a number of
vendors on a certain date. The report includes vendors name, code and the total due amount.
Journal register
From this register management of BPL will get all related information of accounts payable
transaction for a certain period of time. For example, if management wants to know about the amount
of purchase of an individual vendor for a certain period of time with related deductions they can get it
from journal register. Even the register also informs about whether any payment has been made or
not and the due amount of that period. A sample of the register is given in appendix.
Cash requirement report
Its a managerial enquiry regarding vendors payable amount to forecast the current liabilities. From
this report management of Finance and Accounts Department can be informed about the cash to be
paid to individual vendor for a certain period of time. A sample of this report is given in the
annexure.

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Aged Payable Report
Its a report about forecasting the maturity date of payable. It reflects the status of old unpaid
invoices or vouchers. After the maturity date the payment will be made. The date will be matured
according to purchase order contract. The reference date for age calculation is the voucher date or
due date at when the product has been received.
Vendor Business Position
It is the evaluation of overall vendor position with BPL. In this report BPL generates information
about vendors net due amount at a certain period of time. From this report management can have
knowledge about the amount of gross payable; amount of tax, Vat, payment and other deduction
deducted from gross payable amount and the net amount has to be paid to those vendors on that
period.

A.b: Import of Raw and Packing Materials

Another source of raw and packing material is importing from overseas market. For this purpose,
purchase department must open a letter of credit at bank. It ensures the liquidity of foreign supplier.
After opening a letter of credit, Purchase department maintains a file where all the related documents
are kept separately for each LC and sends a copy of each document to the Finance and Accounts
department for further processing of information and to prepare the cost sheet for the materials
received against each LC. This file is called PC (pharmaceutical consignment) file. The finance and
accounts department has three sections:
Treasury
Cost and Budgeting
Accounts

The processing of information related to import procurement takes place in the Cost and Budgeting
section. For the convenience of the users I have discussed the whole thing into three parts. They are:
Input Information
Information Processing
Output Information


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Input Information
Source of information:
Three departments are involved in the entire materials procurement process.
They carry their own responsibilities in this regard. The departments are:
Sales Department
Planning Department
Purchase Department

The entire process looks like:





The planning department is concerned with the production planning and material procurement.
After getting the sales forecast from the sales department, the planning department goes
through the current stock information of different raw and packing materials. It prepares an
import procurement schedule which helps them manage the procurement planning. The tabular
format of the schedule is too large to accommodate here. Therefore I am just mentioning the
column heads. The column heads are:

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:
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 supply of particular mat erials. The list of suppliers is kept in a
database preserved by the planning dept. Within 15 days, the quotations are submitted by the
competing suppliers. Then the planning dept. prepares a comparative statement and forwards it
to the purchase department.



Sales Department
Sales Forecast
Planning Dept.
Import Procurement
schedule
Purchase Dept.
Pro forma Invoice
LC opening
Accounts
PC, IV, BC
Files
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Purchase Procedure:

The purchase department is concerned with all the purchases of the firm. Usually the lowest
bidder gets the offer to supply materials (considering their past performance, credit terms etc.).
Then an Import Authorization Format' is prepared by the purchase dept. The format is then sent
to the Director (commercial) for approval. The dept. then asks for pro-forma invoice (;in case
of direct purchase from foreign suppliers) or indent (in case of supplies by local agents). Then
the firm applies for `Block List' (for approval from Drugs authority) to import the raw
materials. After doing all these prior works, the firm proceeds to open an L/C.

The purchase dept. first collects a form of application for the opening of letter of credit from a
bank. An LCA form (in quintuplicate) is also collected. After filling up these forms, they are
submitted to the bank along with the pro forma invoice approved by the Block list of Drug
Administration and IMP form of Bangladesh Bank. The L/C margin (a certain percentage of
L/C amount), bank charges and commissions for opening the L/C, insurance payment (if made
at that time) etc. are also made. The insurance covers all risks from the beginning of transit.

The opening bank sends a copy of L/C to the advising bank and another copy is also sent by the
company to the local agent or indenting company. The supplier then takes necessary measures
to ship the materials. It sends the non-negotiable shipping documents (copies of bill of lading /
airway bill, invoices, certificate of analysis of each batch. Form-9, packing list, certificate of
origin etc.) to the buyer (the firm) by courier within 7 days and submits negotiable copy of all
documents to the negotiating bank. Then the supplier asks the advising / negotiating bank to
make the payment. After paying off the supplier, the advising bank asks the L/C opening bank
to pay the amount within 72 working hours (3 working days). The opening bank then pays it off
within the stipulated time. The bank then collects the L/C payment from the firm (applicant) on
an agreed upon date. In case where the materials are borne in air transport, the firm needs the
endorse copy document to get clearance from the customs authority after it reaches the airport.
The Drug Clearance of invoice issued by the Drug authority is also required. The C&F agent of
the firm is engaged in the goods clearance formalities. After getting the clearance, the materials
are borne to the factory.

Documents received
Purchase department sends copies of all the relevant documents to the Cost and Budgeting section of
Finance and Accounts department. The documents are kept in three types of files according to their
purpose:
PC File (For Raw and Packing Materials and Also spare parts for pharmaceuticals
machinery)
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IV File (For Infusion Raw and Packing materials and Also spare parts for Infusion
machinery)
BC File (For Basic Chemical)
The documents kept in these files can be categorized as follows:

Documents with Relevant Financial Information:

1. L/C Related Documents from Bank:

The L/C slip and the copy of banks L/C book is received. The books contain detail information on
L/Cs. The relevant information extracted from this book are:
L/C Margin
Opening charge
Amendment Charge
Telex/ Courier service Charge
Bank Charge
Document Retirement
2. Premium Bill:
Premium bill is prepared by the insurance company. This bill is non negotiable. The information
included in this bill is:


A.








3. C & F Bill:
The C & F bill is prepared by the clearing and forwarding companies. Different C & F agencies
operate at different land, sea and airports. Imports are made through all these three types of ports.
The C & F agent does the necessary formalities with the customs authority and sends the materials
to the destination. They contain the following:

Non Negotiable Premium Bill:
Marine @ x.xx%
XXX.XX
XX.XX
War and Strike @ x.xx%
Net Premium
XXX.XX
XX.XX
Add: VAT 15%
Stamp Duty
X.XX
Total Premium
XXXX.XX

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B.



















4. Shed Bill with Jetty Challan:
This bill is prepared by the Biman Bangladesh Airline Authority (in case air port); the Chittagong
port Authority (in case of sea port); Benapole Land port Authority (in case of land port). This is
prepared for the dock or warehouse charges. For reporting purpose two types of information are
extracted from this bill.
Total DEM
VAT on DEM

5. Bill of Entry and Assessment Notice:
These two documents are the most important in regards to reporting and accounting purposes. The
Customs authority prepares this bill against the C & F Agency. It includes the information on the
Duty and taxes and VAT payable on imported materials. In all the ports the same type bill is
prepared without any exception because the customs authority uses identical software for all the
ports. Some materials need to go through PSI (Pre Shipment Inspection); so they are subject to PSI
charges. The detail of the duty and taxes and their rates are discussed in the later chapter.

The bills include following information:



C & F BILL Against PC #_________

Amount
Customs Duty and Taxes ####
Wherfrent and Removal ###
Documentation ##
Cooly wages ###
Transport ##
Misc. Expenses ##
Expenses under section 82 ###
Audit/ treasury/ Bank Exp. ###
Agency Commission @ 0.0x% ###
TOTAL #####
Less: Income tax on Agency commission (##)
ADVANCE (#####)
DUE ###

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C.






















D.






















Bangladesh Customs Authority
Bill of Entry











Calculation of taxes:
Type Tax base Rate Amount
Customs Duty [a] * [b]
Supplementary Duty [b] * [c]
VAT [b] * [d]
AIT [a] * [e]
Development
Surcharge
[a] * [f]

Note: The alphabets used in this table will used for further reference in the chapter to come.
Consignor:

Consignee:

Agent:

Name of Carrier: Nationality:
Description:
Invoice No:
Bank Name:

LC Type:
LC No:

HS Code:
Gross Weight:
Net Weight:
Item Assessable Value: [a]
Bangladesh Customs Authority
Assessment Notice

Office: Dhaka/ Chittagong Customs
Customs Declaration No:
No & Date of Assessment: I tems:

Agent:
Reference:
I mporter: Account No:
Mode of Payment: Cash / Cheque Statement no & Date:

CD [b]
[c]
[d]
[e]
[f]
[g]
[h]
SD
VAT
AIT
DSC
Advance Trade VAT
PSI
TOTAL TAXES [m]
Document Processing Fee [p]
[q]
[r]
VAT on C&F Commission
Income Tax on C&F commission
TOTAL GLOBAL TAXES [s]
TOTAL ASSESSED AMOUNT [m]+[s]
AMOUNT TO BE PAID [m]+[s]




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Documents with Relevant Non-Financial Information:

Invoice from Supplier:
Although it contains financial information about the cost of raw materials, it is not needed for
financial reporting. Because the amount that concerns is the L/C margin and the payment on L/C
Retirement. As there is no direct transaction with the suppliers the original invoice is not needed for
reporting.
Packing List or Weight List:
This list contains the detail information on the quantity of materials shipped; the number of packages;
the type of packaging and the gross and net weight before shipment.
Certificate of Analysis:
Certificate of Analysis contains chemical analysis of the materials. The chemical contents, weight,
color and other related information is disclosed and certified by the producing country are presented
in the certificate.
Certificate of Origin:
Certificate of Origin is issued by the trade body (Chamber of Commerce) of the respective country
and certifies that it is a product of their country.
Form -9:
Form-9 is required under the European regulation. All the countries producing chemical or
pharmaceutical materials adopted it. This contains decoration from the producer regarding the
permission to use the product which is licensed by them. It also sets the limit of using that licensed
product.
Airway Bill:
Airway bill is just like ticket of the materials shipped. It contains the information on the material
shipped, the destination, the carrier and the airport of departure.
Consignment Presentation Slip:
Consignment presentation slip is prepared at the port by the port authority and certifies the possession
of the consignment. The slip includes following information:

Part A: Consignment Details
Part B: Examination Transfer to delivery warehouse
Part C: Paper Checking and Collection of Charges
Part D: Final Delivery Information

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Information Processing
Information processing is done through three stages. The records and reports prepared in those stages
are different. The stages are:
L/C Opening Stage
L/Cs in Transit Stage
Post Clearance Stage

L/C Opening Stage

L/C opening process:
The purchase dept. first collects a form of application for the opening of letter of credit from a
bank. An LCA form (in quintuplicate) is also collected. After filling up these forms, they are
submitted to the bank along with the pro forma invoice approved by the Block list of Drug
Administration and IMP form of Bangladesh Bank. The L/C margin (a certain percentage of
L/C amount), bank charges and commissions for opening the L/C, insurance payment (if made
at that time) etc. are also made. The insurance covers all risks from the beginning of transit.






As mentioned earlier (see: 1.2.1) the accounts department gets copy of the L/C and the Banks
statement mentioning other related cost. It is done through the foreign exchange account of
BEXIMCO PHARMA held with different banks.

Records and Reports:
Various records are kept during this stage. Data related to L/C are maintained in two ways. They are:
MS Excel Worksheets
MAPICS
MS Excel Worksheets:
Two different sets of spreadsheets are prepared. The spreadsheets contain the following information.
I am just mentioning the column heads of the spreadsheets and explanations where necessary.
Spreadsheet containing Data on L/C Margin and Opening Charges:
o L/C Number
o Margin in Taka
Purchase Department
(Pro Forma Invoice,
Drug, IMP)
Local Bank
(L/C Margin, Opng
Chrg, Bank Charge)

Foreign Bank
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o Opening Commission [p]
o Courier service Charge [q]
o Supplementary Tax [r]
o VAT [s]
o Amendment Charge [t]
o Total taka ([p]+[q]+[r]+[s]+[t])

Spreadsheet containing Data on Document Retirement
o L/C number
o PC/IV/BC Number
o Retirement Date
o Payment
o Payment Date

MAPICS Entries:
MAPICS (Management Accounting Production Inventory Control System) is a software custom
made for BEXIMCO GROUP which serves the both the financial and management accounting needs.
In the L/C opening stage two types of entry are made into the software:
Database Entry
Journal Voucher
Database Entry:
This entry is made to maintain a database of L/Cs and shipments. The entry includes:
L/C Number
PC Number
Shipment Date
Retirement Date
This database is also linked with the accounting system built within the software. Whenever a journal
entry is made with the L/C account this database is linked with that entry. It detects any inconsistency
with the L/C number and PC number.

Journal Entry:
The journal entry made at this stage includes the opening charges, L/C margin, Bank charges,
Courier Charges, Amendment Charges, etc. The Journal Entry made through the Bank Voucher. The
entry is:

21















All the debit entries are posted to the L/C group account. These are all considered as expenditures.
All the amounts are found in the summary spreadsheet prepared with MS Excel.

L/Cs in transit stage
The opening bank sends a copy of L/C to the advising bank and another copy is also sent by the
company to the local agent or indenting company. The supplier then takes necessary measures
to ship the materials. It sends the non-negotiable shipping documents to the buyer (the firm) by
courier within 7 days and submits negotiable copy of all documents to the negotiating bank.
Then the supplier asks the negotiating bank to make the payment. After paying off the supplier,
the advising bank asks the L/C opening bank to pay the amount within 72 working hours (3
working days). The opening bank then pays it off within the stipulated time. The bank then
collects the L/C payment from the firm (applicant) on an agreed upon date.

Records and Reports prepared at this stage:
Two records could take place during this stage. Both the records are made using the MAPICS
software in the form of journal entries through Payables voucher and Bank Voucher. The
transactions are:
Payment of Insurance Premium:
Insurance premium is set on the invoice price. The materials are normally insured to make
cover for fire/marine and war/strike risks. A VAT of 15% is imposed on the insurance
L/C Margin DR
Opening Charge DR
Amendment Charge DR
Courier Service DR
VAT DR
Bank Charges DR
Bank A/C CR
VAT Rules, 2007. Rule 19(2): The tax payer can claim
60% of the VAT as claim against input tax in respect of
charges for . L/C services..
22
premium. To facilitate the journal entry a spreadsheet analysis is made using MS Excel, which
contains:
I. L/C Number II. PC Number III. Item name
IV. Total Insurance Premium (see figure A: premium bill)
V. VAT on Insurance Premium (see figure A: premium bill)
VI. Net Insurance Premium (Total Premium-80%of VAT)

The journal entry is often made through payables voucher. The entry is:









Advance payment to the C&F Agent:
The C&F agents are responsible to make customs clearance from the ports and make delivery to the
factory at Gazipur or wherever required. The estimated amount for clearing and forwarding process is
paid in advance. The journal entry is made through Bank voucher using MAPICS software. The entry
is:






Post Clearance stage

After successful clearing and delivery of the consignment the C&F agent sends all the relevant
documents. The documents include:
C&F Bill
Shed bill with Jetty Chalan
Bill of Entry
Assessment Notice
Consignment Presentation slip
This marks the completion of the import process. After receiving these documents the PC/IV/BC files
are completely ready.
Insurance Premium DR [VI]
VAT DR [80% of VAT]
Accounts Payable (Insurance
Company) CR
VAT Rules, 2007. Rule 19(1): The tax payer can claim
80% of the VAT as claim against input tax in respect of
charges for . Insurance services..
C&F Agent (Advance) DR
Bank A/C CR
23

Records and Report s Prepared du ri ng t hi s s t age:
A detailed spreadsheet is prepared to facilitate the journal entry in the first place. The entire
spreadsheet is presented into different parts for convenience.

DUTY TAXES SPREADSHEET:
Part A: General Information:







PART B: Currency and Quantity:






PART C: Bank Charge and Insurance Premium:






PART D: Duty

Column ID Column Head Source/ Formula
K Customs Duty Assessment Notice [b]
L Supplementary Duty Assessment Notice [c]
M Development Surcharge Assessment Notice [f]
N Pre-shipment Inspection Assessment Notice [h]
O Total Duty K+L+M+N

PART E: VAT and AIT (Advance Income Tax)

Column ID Column Head Source/ Formula
Q VAT Assessment Notice [d]
R DF(Documentation fee) VAT Assessment Notice [s]
S AIT (On C&F commission) Assessment Notice [r]
T DF/VAT less AIT(c&f) [R]-[S]
U Total VAT
[Q]+[R]-[S]
V AIT Assessment Notice [e]
1. SL#
2. L/C Number
3. PC/IV Number
4. Item Name
5. Item Type (Raw/Packing/Spares)
1. Foreign Currency (US$/EUR)
2. Cost in Foreign Currency
3. Unit
4. KG/PC
1. Bank Charge
2. Insurance Premium
3. VAT on Insurance Premium
4. Net Insurance Premium ([2] - 80%of [3]
24


PART F: Total DUTY, VAT and AIT

PART G: DEM (Warehouse and Other charges)








PART H: Miscellaneous Expenses and C&F commission

These two are extracted from the C&F bill. Miscellaneous Expenses could include:

C&F commission is imposed on the assessed value of imported materials.



PART I: Agent



PART J: Final summary for Journal Entry

Column ID Column Head Source/ Formula
W Total DUTY, VAT, AIT [O]+[U]+[V]
Column ID Column Head Source/ Formula
X DEM Shed Bill/ Jetty Chalan
Y Auction Shed Bill/ Jetty Chalan
Z VAT DEM Shed Bill/ Jetty Chalan
AA Net DEM [X]+[Y]-[Z]
Documentation
Cooly wages
Transport
Misc. Expenses
Expenses under section 82
Audit/ treasury/ Bank Exp.
Column ID Column Head Source/ Formula
AB Misc. Exp. C&F Bill
AC C&F Comm. C&F Bill
Column ID Column Head Source/ Formula
AD Total Amount [W]+[AA]+[Z]+[AB]+[AC]
AE Advance Amount C&F Bill
AF Due [AD]-[AE]
AG Agent Agent Name
Column ID Column Head Source/ Formula
AH DUTY [O]
AI VAT [Q]+[R]*60%+[Z]
AJ AIT [V]
AK DEM [AA]
AL MISC [AB]+[R]*40%-[S]
AM C&F Commission [AC]
AN TOTAL AH+AI+AJ+AK+AL+AM
25



Claim for VAT Rebate:
VAT rebate is claimed 100% on the VAT paid on cost of materials and VAT paid on warehouse
charges. 60% VAT rebate is claimed on VAT paid on C&F commission. The law in this states as
follows:








Therefore VAT is claimed 100% on VAT paid on cost and DEM VAT and 60% on VAT paid on
Total Global Taxes. The rest 40% is added to the miscellaneous expenses and the income paid on
C&F commission is deducted from the miscellaneous expenses amount to match the total amount due
to the Agent.



The amounts for the journal entry are summarized in the spreadsheet (see part G). The journal entry
is made as follows using the MAPICS software:










*See Part J of spreadsheet for references of the amounts.

The duty tax; miscellaneous expenses and C&F commission goes to the L/C group account. The
other accounts are posted through general journal.


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-18.


VAT Rules, 2006. Rule 19 (2): The tax payer can claim 60% of the VAT as
claim against VAT paid in respect of charges for .C&F Commission ..

Duty TAXES DR [AH]
VAT DR [AI]
AIT DR [AJ]
DEM DR [AK]
Misc. Exp. DR [AL]
C & F Comm. DR [AM]
C&F Agent
(Liability) CR [AN]
THE JOURNAL ENTRY FOR DUTY, TAX AND VAT:

26
Output Information
As I have discussed the necessary journal entries in the previous chapter, it is already clear about the
output information of these activities. Better output of information reflects better accountability to the
stakeholders and greater efficiency of the decision makers or managers. Output information can be of
two types:
Information Affecting the Annual Report Figures or External Reporting
Information for Internal Management or Internal Reporting.
The transactions involved in the process of import procurement affects both the above. But it is more
important from the internal reporting point of view. The net effect of these activities on the external
report and the decisions of the investors are very remote. But it has a materially significant part to
play in internal decision making (eg. costing, inventory control, pricing, etc.).
External report
The entire process of import procurement and accounting for its related transactions affects several
heads in the Annual Financial Reports. Below I mention the affected heads with reference to Annual
Financial Report for 2012.

Cost of Goods Sold:
The detail of cost goods sold is provided in the Note#. Under this head the affected subheads are:
Raw Materials Consumed (Purchase) [Note #]: This amount is the total of raw materials
purchased during a financial year. When raw materials are received RAW MATERIAL
PURCHASE A/C is debited. The end balance is the amount shown in the Annual Report.
Packing Materials Consumed (Purchase) [Note #]: Similarly, it is the total of packing
materials purchased during a financial year. When packing materials are received PACKING
MATERIAL PURCHASE A/C is debited. The end balance is the amount shown in the
Annual Report.
Advances:
Advances are current assets and it is detailed in Note #. The import procurement process affects two
types of advances:
C & F Agent: As mentioned earlier C & F agents are paid in advance for smooth fulfillment
of their responsibility. The C & F account is debited on payment of the advance. The year end
balance appears in the annual reports as an advance.
VAT: As I have shown earlier the amount of VAT subject to rebate is debited to VAT
account. The VAT amounts payables are credited to the same account. If it has a debit
balance at the end of the year then it appears as current asset.

27
I n v e n t o r i e s :
The inventories affected by import operations and related accounting are found in Note #22:
Raw Materials Inventory
Packing Materials Inventory
Laboratory Chemical Inventory
Raw and Packing material in transit
Spares and accessories

Internal reports
The most important destination of the accounting reports related to import of raw materials is the
internal management. For efficient decision making the internal management is constantly is need of
timely and appropriate reports on costing. To serve the internal reporting needs the following reports
are prepared:

The Cost Sheet:
This is the most important report prepared on the import procurement process of raw materials. Cost
sheets are prepared for individual raw and packing material items, as well as spares and capital
machinery. Cost sheet is generated by the MAPICS software. It is the summary of entries debited
through the journal voucher of L/C. It is used for costing and pricing decisions. The cost sheets
include the following:
COST SHEET
Company Name: BEXIMCO PHARMA Shipment No:
Supplier Name: Date:
L/C No: Date: Exchange rate:
Invoice No: Date: CEP: Date:
PARTICULARS 1 2 Total
Material Name
MRR No
MRR Date:
Invoice Quantity
FC Cost/ Unit
Total FC Cost






28
L/C Margin
Opening Charge
Document Retirement
Duty, LCA, IDSC & others
C & F Commission
Insurance Premium
Miscellaneous Expenses
TOTAL COST
COST PER UNIT

Cost Summary:
Cost summary is a summary of the cost sheets prepared on a monthly basis. It is a MS Excel
worksheet. All the information are extracted from the cost sheet. The column heads are:
Month
L/C Number
PC/IV/BC Number
Materials Name
Quantity
C&F Rate
Foreign currency Cost
Currency [US$/EURO/YEN]
Exchange rate
C&F in Taka [Exchange Rate*FC
Cost]
Other costs [Duty/ LCA, C&F
Commission, Insurance premium,
Misc. Exp., Opening Charge]
Landed cost [C&F in Taka + Other
Costs]
Cost per Unit [Landed Cost /
Quantity]
Supplier Name and Country

L/C Balance:
This is prepared to facilitate the payment of L/C liabilities. It is used by various departments
including the treasury. The columns are:
L/C Number
Total Taka
Opening Date
C&F Value in Taka


29
B. Capital Expenditure Cycle
BPL has a well-defined policy guideline for capital expenditure. This cycle involves acquisition of
property, plant and equipment. First, the capital expenditure must be included in the yearly budget.
Then the head of the department raising the capital expenditure proposal (CEP) must justify the
proposal. A sample of CEP is given in appendix. The CEP includes following information:
1. Classification of the asset such as new purchase or replacement of an asset.
2. Description of the item
3. Reason or justification for the proposed expenditure
4. Economic life
5. Estimated expenditure
6. Budget provision for the proposed expenditure
7. Suggested supplier
8. Approval with signature of Departmental head, Director, Commercial and Director, Finance
9. Final approval by CEO(Chief Executive Officer)
Then the Director, Finance verifies the CEP along with the business research and development
department and the CEP is sent to the CEO for final approval. After getting the CEO approval,
purchase department acquires the capital asset from the enlisted local or foreign suppliers. Accounts
department records the transaction and makes the payment as per terms.



Input Information

All the necessary information for the purpose of recording acquisition of fixed assets are taken from
Capital Expenditure Proposal, Purchase order, Budget prepared for this purpose, chart of accounts,
suppliers bill approved by purchase department, Bill of entry, Assessment notice, L/C related
documents for import of machineries.

Information processing

BPL initially records all property, plant and equipment at cost and charges depreciation over their
expected useful life. The cost of acquisition of an asset comprises its purchase price and any directly
attributable cost of bringing the asset to its working condition for its intended use inclusive of inward
freight, duties and non-refundable taxes. In respect of major projects involving construction, related
Recording Aspects Of Capital Expenditures:

30
pre-operational expenses form part of the value of asset capitalized. Expenses capitalized also include
applicable borrowing cost. Exchange loss is also capitalized as an addition to the cost of the asset.

Expenditure incurred after the assets have been put into operation, such as repairs & maintenance, is
normally charged off as revenue expenditure in the period in which it is incurred. In situation, where
it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic
benefit expected to be obtained from the use of the fixed assets, the expenditure is capitalized as an
additional cost of the assets. Software expenses are generally charged off as revenue expenditure.

On retirement or otherwise disposal of fixed assets, the cost and accumulated depreciation are
eliminated and, any gain or loss on such disposal is reflected in the profit and loss account which is
determined with reference to the net book value of the assets and the net sales proceeds. The gain or
loss resulted from disposition of an asset are treated as other income which does nor result from
companys major operating activities and so are not included in gross profit.

BPL charges no depreciation on land and uses reducing balance method for charging depreciation n
respect of all other fixed assets. Depreciation is provided to amortize the cost of the assets after
commissioning, over their expected useful economic lives. Full year's depreciation is charged on
additions and no depreciation is provided on retirement, irrespective of date of addition or retirement
respectively.
The annual depreciation rates applicable to the principal categories of assets are:
Assets Rate
Building and other Construction 10%
Plant and other Machinery 15%
Furniture and Fixtures 10%
Transport and Vehicle 20%
Office Equipment 10% to 50%

BPL maintains a separate module named Fixed Asset Accounting in MAPICS where journal entries
are given to record the acquisition of new asset, replacement, renewal and disposition of asset and
related depreciation according to the rate. In the MAPICS, only control ledgers for principal
categories of assets are kept. For the purpose of keeping subsidiary ledger, a separate software named
Fixed Assets Management System is used where another person gives entry for the same
transaction. This is basically a duplication of work.

Output Information

Output information can be of two types:
Information Affecting the Annual Report Figures or External Reporting
31
Information for Internal Management or Internal Reporting.
External reports:
The entire process of capital expenditure and accounting for its related transactions affects several
heads in the Annual Financial Reports. Below I mention the affected heads with reference to Annual
Financial Report for 2012.
Property, Plant and Equipment Carrying Value
The details of all property, plant and equipment are given in the Note #. In the notes to the financial
statements section, BPL discloses all the necessary information regarding property, plant, and
equipment including the cost of the assets at the beginning of the year, additions and disposals in the
current year, adjustment on disposal, exchange loss, accumulated depreciation at the beginning of the
year, depreciation charged for the current year and carrying value at the end of the year.
Internal Report:
The sum of all assets is reflected in annual report. 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 major class of asset are included.

C. Revenue Expenditure Cycle
The expense cycle of BPL is little difficult to describe because of the varying nature of expenses.
For the sake of simplicity, expense cycle is presented here in a segregated manner according
to the major types of expenses namely factory overhead, administrative expense and
selling, marketing and distribution expense.
Factory overhead
The major types of factory overhead are salary and wages, power, insurance, stores and spares consumed
repairs and maintenance, research and development, municipal tax and land revenue, telephone and
postage expense etc. These expenses are incurred in the factory. Whenever an expense is incurred, it is
reviewed and recommended by the immediate supervisor of the person incurring it. Then it is sent to the
head of the respective department for approval. After getting the approval finance and accounts
department records the transaction to the appropriate cost center and makes the payment.

Administrative Expenses
The major types of administrative overhead are salary of the executives of head office, utility, rent,
legal and professional fees, printing and stationary, AGM expenses, audit fees, entertainment, petrol
and fuel etc. These expenses are incurred in different departments of the head office. Whenever an
expense is incurred, it is reviewed and recommended by the immediate supervisor of the
32
person incurring it. Then it is sent to the head of the respective department for approval. After
getting the approval finance and accounts department records the transaction to the appropriate cost
center and makes the payment.
Selling, Marketing and Distribution Expenses
The major types of selling and distributive overhead are advertisement, promotional expense,
traveling and conveyance, training of medical representatives, books and periodicals etc. These
expenses are incurred by the sales and promotion department. Whenever an expense is incurred,
it is reviewed and recommended by the immediate supervisor of the person incurring it.
Then it is sent to the head of the respective department for approval. After getting the approval
finance and accounts department records the transaction to the appropriate cost center and makes the
payment.




Input information
Input information for recording purpose is obtained from the respective department where the
expenses are incurred. Each department sends the bill to Accounts and Finance department. This bill
is used as the source document. After verifying supporting documents, a person records the expense
as overhead item through appropriate code in MAPICS.
Information Processing
After verifying supporting documents, a person records the expenses as overhead items or operating
expenses through appropriate code in MAPICS. The appropriate code is determined by chart of
accounts. Depending upon the nature of expenses, input is fed into the software against a code.
Besides this, some other custom made softwares are used to record the advance payment to different
parties including employees, utility expenses, event management etc.
Output Information
Out put information are of two types:
Information Affecting the Annual Report Figures or External Reporting
Information for Internal Management or Internal Reporting.
External report
In annual reports, administrative expenses and selling, marketing and distributive expenses are shown
as operating expenses. Factory overhead is included in the calculation of costs of goods sold. These
Recording Aspects Of Revenue Expenditures:

33
information are reported in the notes to the financial statements. Related parts are extracted in the
appendix.
Internal reports
A report highlighting the actual expenses, budgeted amount for those expenses and variance is
prepared monthly for internal decision making.

Internal Control for Expenditure Cycle

The internal control of BPL for expenditure cycle is strong enough to detect, prevent and correct any
errors and mistakes made in authorizing, recording, processing transactions and providing output to
user groups. Some internal control mechanisms are discussed below:

Authorization of Purchase
As described earlier in recording process section, at BPL the user department sends purchase
requisition to purchase department with the approval of departmental head. An authorized person
checks that requisition and made the purchase order. Without purchase requisition no purchase order
will be made. In case of materials, the planning department identifies the required quantities of
materials and sent requisition to purchase department. And in case of fixed asset BPL required
approval of CEO or deputy chairman. But before requisition a budget has been made for that asset. In
each case there is a limit amount for ordering goods.

The purchase order document contains a unique number. This unique number is used as reference for
further proceeds. It also contains the signature of the person raising requisition. The purchase
department is responsible for making the order only. It is not responsible for authorizing or receiving
goods. It maintains a purchase register where all given orders are recorded with ordered item,
quantity, unit price and suppliers name.

Separation of Asset Custody from Other Functions
Usually, the ordered items are received by user department. But in case of inventoriable item, that is
raw or packing material, it is received by factory. The receiving department produces the MRR/
GRR. The same report is also used as inspection report. In case of raw or packing material, Quality
Control Department generates Quality Assurance report. One copy of MRR/ GRR/ QA is kept by the
receiving department, one copy is sent to purchase department and another copy is sent to accounts
department. So the personnel are separate from each other. Again there is a physical control over
item from their acquisition to disbursement. A cross departmental monitoring activity is a common
scene here.
The bank reconciliation statement is prepared monthly by an employee independent of recording cash
disbursements or custody of assets.
34
Timely Recording and Independent Review of Transactions
BPL recognizes accounts payable as its liability at the time of vendors invoice is received. It
recognizes the liability by analyzing the following documents;
Not negotiable copy of purchase order
MRR/ GRR
Not negotiable copy of invoice/ bill
Vat report
If the person is satisfied with those documents he will then give the provision voucher. This person
does not have the access to handle the cash, securities or other assets.

Authorization of Payments
BPL pays its vendors after the date has been matured for payment. Normally the payment is made by
pre-numbered check. A specially designed check is designed for this purpose. A separate person
gives the payment voucher. Before giving payment voucher he checks all the documents and reports
relating to that transaction and also examined that the bills are approved by purchase department. The
payment voucher includes original bills, MRR/ GRR, VAT (MUSHOK 11) and challan.
When the authorized person signs the checks, he just skims through the attached documents with the
payment voucher. Normally these signs are made by managers or director of accounts and finance.

Physical Security Measure
BPL has instituted some physical security measures to protect its assets and records from being
misappropriated or misused. For example, a gate pass is needed to take out any kind of
moveable property both at head office and at factory, cash in transit is insured and cash at office is
placed under lock and keys, all the records and documents are placed under the supervision of
responsible company officials. The company has also employed closed circuit television (CCTV)
system to monitor every entry and exit.

Budgetary control
Budgetary control is primarily used for the revenue expenditures. For each class of revenue
expenditure, a budget is prepared for each month and the actual expenses are compared against the
budgeted amount.
Threats and Control Procedure
Another function of a well-designed AIS is to provide adequate controls that meet the following
objectives:
1. All transactions are properly authorized
35
2. All recorded transactions are valid
3. All valid, authorized transactions are recorded
4. All transactions are recorded accurately
5. Assets are safeguarded from loss or theft
6. Business activities are performed efficiently and effectively
The documents and records described in the previous section play an important role in achieving
these objectives. Simple, easy-to-complete documents with clear instructions facilitate the accurate
and efficient recording of transaction data.

The following table lists the major threats and exposures in the expenditure cycle and the applicable
control procedures that are placed in operation to mitigate them. The table is organized around the
stages of the expenditure cycle.

Activity Threats Applied Control Procedure
Order goods
Preventing stock outs and/or
excess inventory
1. To guard against these threats, BPL
establishes an accurate inventory control
system. The perpetual inventory method
is used to ensure that information about
inventory stocks is always current.
2. BPL selects suppliers who are known
to meet the delivery commitments.
Requesting unnecessary items
1. BPL is very much aware of purchasing
items that are not currently needed. To
ensure this, every purchase requisition is
approved by the departmental head.
36
Purchasing goods at inflated
price or of inferior quality

1. To prevent this, an open tender is
arranged for the suppliers. BPL selects
those suppliers who are capable of
delivering highest quality goods as
reasonable price.

2. BPL prepares a monthly budget for the
purchase of goods. Actual costs are
compared periodically with budget
allowance. To facilitate control, these
reports highlight any significant
deviations from budgeted amounts for
further investigation.
Purchasing goods of inferior
quality

1. To avoid the purchase of goods of
inferior quality, BPL has established a list
of approved suppliers known to provide
goods of acceptable quality.

2. In addition, supplier performance data
is collected and periodically reviewed to
maintain the accuracy of this approved
suppliers list.
Receive and store
goods
Receiving unordered goods
1. Receiving departments accept only
those deliveries for which there is an
approved copy of the purchase order and
matches the quantity mentioned in the
purchase order with goods received.
Stealing inventory
1. Inventories are stored in secured
locations with restricted access.
2. All transfers of inventory are properly
documented.
3. Separation of asset custody from
recording responsibility.
37
Approve and pay
vendor invoices
Failing to catch errors in
vendor invoices

1. Vendor invoices may contain errors
such as discrepancies between quoted and
actual prices charged or miscalculations
of the total amount due. To detect
mathematical accuracy of vendor
invoices, those invoices are compared
with purchase order and receiving report.
Paying for goods not received
1. The control procedure used here is that
the person responsible for payment to the
vendors compares the quantities indicated
on the vendor invoices with the quantities
mentioned in the materials or goods
receiving report.

Paying the same invoice
twice.
1. Invoices are approved for payment
only when accompanied by a complete
voucher package (purchase order and
receiving report)
2. Payments are made only on the basis of
original invoices. Duplicate invoices are
marked clearly that these are duplicate.
3. Payments are never authorized for a
photocopy of an invoice
4. When the check to pay for an invoice
is signed, the invoice and the voucher
package are marked paid and canceled
Recording and posting errors
in accounts payable
1. The person making the payment
compares the difference in supplier
account balances before and after
processing checks with the total amount
of invoices processed.
2. Here the control is deficient in one
aspect i.e. the non existence of limit test.
38
Misappropriating checks
1. Use of prenumbered cheque.
2. Access to cheque writing machine is
restricted as well.
3. Proper segregation of duties i.e.
custody of cheque is segregated from the
authorizing function.
4. Every cheque is signed by two persons
before making the payment.
General Control Losing data
1. All the supporting documents are kept
separately in a file.
2. Both internal and external labels are
attached to each file.
3. Access control is established via use of
passwords and user ID.




39
Annexure


A Sample of CEP









BEXIMCO .DIVISION
CAPITAL EXPENDITURE PROPOSAL (CEP)
SPARE PARTS APPROVAL
Unit
Depth
Date
Serial #
1. Classification:
Replacement Addition Development

2. Description of item with ID Number (if Any):

3. Reason/ Justification for proposed expenditure:

8. Remarks






4. Economic life (Years)
5. Supplier:
6. Estimated Expenditure

7. Budget Provision:


Signature of Budget Officer
Approved By

CEO/ Deputy Chairman
Submitted By Recommended By Recommended By

Departmental Head Director, Commercial Director, Finance
Date: Date: Date:


40
Sample of Purchase Order



































Purchase Order No. Purchase Requisition No
Date of Receipt by PD
SL
No
.
Name and Description of
Material / Service
Unit
No
Quantity
Ordered
Unit
Price
Quantity
Ordered
Amount
1
2
3
4
_______________
Sign of Person
Raising
Requisition
________________
Approval of
Departmental Head
_______
Date
Total
Mode of Purchase
Cash / Against
Order

Purchase Ref._________________
Advance Required Tk.__________


Pay Cash/Issue Check/Order to be
Placed
_________________________________
Name of the Party
_____________________________
Order / Advance Payment
Authorized

Terms and Condition of Order:






Date

_________________
Authorized Signature

MRR NO. ___________




Date








From








To




Invoice/ Voucher No________Date_________
Amount for Refund______________________
Amount Due for Payment_________________
__________________________ ________
Passed for Payment/ Adjustment Date
MRR NO. __________DATE __________
MRR NO. __________DATE __________
MRR NO. __________DATE __________
MRR NO. __________DATE __________


41
Accounts Payable Provision Voucher

























Tax and VAT Report











Tax and VAT Report
Vendor
s no
Vendor
s name
Perio
d
Total
amoun
t due
Tax
amoun
t
VAT
Amoun
t
Other
deduction
s
Net
amoun
t due





Beximco Pharma AP Journal Voucher Date:
..

Voucher No : .. Original Voucher No: .. 0/00/00
Vendor No :
Invoice / Bill : Date: MRR/QC/WO : . 0/00/00
Due Date :
Description :

Payable : .. Amount Cr.
Vat : .. Amount Dr
Commission : .. Amount Dr Total (Tk) :


Item Description Account no Amount
(Tk)
Dr./
Cr





Signature Date Notes
Prepared by
Checked by
Approved by
Posted by



42
Accounts Payable Payment Voucher


















8. Vendor ledger

Sample of Journal Register
















Beximco Pharma AP Payment Voucher Date:
..
(Cash / Bank)


Batch/item No : ..
Voucher No : Original Voucher No: .. 0/00/00



AP JV No JV Date Vendor
No
Check
No
type Account
no
Amount
(Tk)
Dr.
/Cr








Signature Date Payee
Prepared by
Checked by
Approved by
Posted by



Beximco Pharma Journal Register
From 0/00/00 to 0/00/00
Payment Upto 0/00/00
Summary by Vendor

Vendor
No &
Name
Purchase Vat
Amount
Tax
Amount
Other
Amount
Net
Paid
Due
Amount

43
Sample of Cash Requirement Report



Sample of Aged Payable Report










Sample of Vendor Business Position Report







= 0 =
Beximco Pharma Vendor Business Position Report
From 0/00/00 to 0/00/00


Vendor
No
Vendor Name Payable Vat Tax Pay-
ment
Other
Deduction
Due
Amount

Beximco Pharma Cash Requirement Report (Summery)
By Invoice Upto 0/00/00
Payment Upto 0/00/00
Ref. Date for Age Calculation: Voucher Date Payable Amount & above days old

Vendor
No
Vendor Name Payable Paid Deduction Due
Amount

Beximco Pharma Aged Payable Report (Summery)
By Invoice Upto 0/00/00
Payment Upto 0/00/00
Ref. Date for Age Calculation: Voucher Date Payable Amount & above days old

Vendor
No
Vendor Name Total
Due
Amount
0-30
Days
31-60
Days
61-90
Days
Above
90
Days
Unclassi-
fied