PH Proc 6 Finance Proceduer Manual 21-05-V3

POLYCROME HOLDINGS PVT LTD Issue No: 02
OPERATIONAL PROCEDURES Date of Issued :2015-09-16
Doc. No. : PH/PROC/06 Page No 1 of 34 Date of Revised :2021-05-19

TITLE PROCESS FOR FINANCE AND ACCOUNTING
1.0 Objective
This procedure has been prepared to document the internal accounting
procedures for Finance Department in Polycrome Electrical Industries (Pvt)
Ltd. Its purpose is to ensure that assets are safeguarded, that financial statements
are in conformity with generally accepted accounting principles, and that
finances are managed with responsible stewardship.
All personnel with a role in the management of Company’s fiscal operations are
expected to uphold the policies in this manual. It is the intention of Finance
Department that this accounting procedure serves as our commitment to proper,
accurate Financial Management and Reporting
2.0 Scope : This policy applies to all staff and Executive and all operations of Polycrome
Controlled
3.0 Responsibility : ACC.ASSI, AA, DFM, FA, HOF
4.0 Authority : HOF
5.0 Abbreviations : ACC.ASSI – Accounts Assistant, AA- Assistant Accountants, FA- Finance
Accountant, HOF – Head of Finance, DFM-Deputy Finance Manager
MD-Managing Director
6.0 General Procedure / Policies
 All cash accounts owned by company will be held in financial institutions which are
governmentally insured and have received a favorable rating.
 All capital expenditures which exceed Rs.4, 000/- will be capitalized on the books and
records of company.
 Employee pay cheques and/or personal cheques will not be cashed through the petty
cash fund of company.
 No salary advances will be made from Petty Cash under any circumstances.
 No travel cash advances will be made except under special conditions and preapproved
by the Head of Finance/MD. Reimbursements will be paid upon full expense reporting
using the IOU within the normal disbursement schedule.
 It is the policy of company to reimburse out of pocket expenses only when supporting
documentation has been presented for approved costs incurred.
 It is the policy of company to establish pay rates which equal or surpass the government
minimum wage.
 It is the policy of company to maintain a minimum of ten percent (10%) of the operating
budget between its operating and bank accounts at all times.
Reviewed by DFM Signature :

Approved by FM Signature :

 All funds received by company will be segregated into separate accounts in the general
ledger to avoid any possibility of general operating funds. A full computerized ledger
accounting system will be maintained. Monthly financial statements including Balance
Sheet and Statement of Revenues and Expenses will be produced for each company as
a separate Financial Reports.
 The Managing Director has the power to sign cheques and transfers of all company
bank accounts. Any two out of FD, Director Commerce and Finance Manager have the
authority to sign the cheques. Even though the MD’s signature is adequate for any
disbursements, it is required to get two signatures for all the disbursements.
 Bank statements will be reconciled monthly in order to account for any outstanding or
lost cheques.
 Expense reports will be maintained which will disclose the nature of expenses, and the
dates incurred.
 Separate files will be maintained for each bank account and each vendor. Files will be
kept separately for each fiscal year.
 The services of a Chartered Accountant will be engaged to prepare a formal financial
audit of the company fiscal year-end.
7.0 Fixed Assets:
7.1 Fixed asset should be recognized when:
 It is probable that future economic benefit associated with the asset will flow to the
company
 The cost of the asset to the company can be measured reliably
The procedure for procurement of all fixed asset should be as per Authority given in
section 4.0 to this report.
7.2 Depreciation of Asset
All assets should be started depreciate in the month it is purchased using the Straight Line
Method.
As soon as an asset is booked, the Accountant should pass a depreciation entry.
7.3 Asset Depreciation Process
 Since This is one-time process transaction, the last ERP system backup date need to be
checked and confirmed with IT department, if anything went wrong to restore the last
system backup.
 Fixed Asset Module will be used to generate a depreciation batch.


FIXED ASEETS
TRANSACTIONS
GL DEPRICIATION
BATCH
GENERATE BATCH
SELECT PERIOD
OK
 After running the above process, depreciation Journal Batch will be generated
automatically in GL.
 After posting the journal batch, Ledger balance need to be reconciled with Module
Balances.
 If there the balances are not tallying, check the records manually in both module and GL
to identify the issue and pass corrective journal entries under the approval of Ass.
Accountant.
7.4 Assets disposal procedure
 Upon determination that a fixed asset is either no longer need or not usable or nonexistence,
it will be categorized as disposable item. Disposal decision and the way of disposal will be
decided by the Managing Director.
 Relevant Department head has to get the approval for the disposal and Disposal form need
to be sent to fiancé department in order to pass the necessary transaction to record the
Disposal.
 Disposal for contains below information.
 Assets code
 Date of purchase
 Description of the asset
 Reason for the disposal
 Disposal value
An Asset disposal may happen due to one or more of the following reasons.


7.5 Sale of the assets
 Assets will be sold as per the decision of the managing director.

 After the sales transaction, System will be updated with relevant GL Entries.
 Assets and the relevant documents will be handed over within 24 hours unless there is
holiday.
 The cash receipts will be banked within 24 hrs unless there is bank holiday.
7.6 Stolen/missing assets
 The system will be updated with the approval of the Managing Director.
7.7 Damaged\Destroyed\Scraped Assets.
When an asset or group of assets get damaged significantly by natural causes, accidents,
vandalism etc. According to the judgment of the managing Director and the Board of
directors, the estimated cost of the repair is sufficient to decide the assets should be disposed,
the following procedure will be applied.
 Disposal form need to be prepared by the Head of the Department.

 The Disposal Form should be forwarded to Managing Director to get his recommendations.
 The appropriate decision will be taken by the managing director regarding the damaged
Asset.
 Relevant Disposal transaction will be updated in the system by the finance department.
7.8 Financial statement disclosure
In accordance with accounting standards specified by the Institute of Chartered Accountants

of Sir Lanka.
8. Stores/Inventories
 Inventories are valued at either cost and net realizable value whichever is lower after
making due allowance for obsolete and slow moving items purchase or construction.
However, cost of the inventory is calculated on average cost. Finished goods and work in
progress are valued at average cost and includes labour and appropriate overheads adsorbed
under normal level of activity.
 All materials, Semi finished goods and finished goods movements should be done through
the system itself. If manual transaction done due to unavoidable circumstances, the system
should be updated immediately.
 At any given time, system balance and the physical balance should be tallied.


 For the controlling purposes the company maintains Re order levels and order quantities
for each locally purchased goods using EOQ model and re order levels have been entered
in to the system.
 Payment for loading and unloading will be based on the memo issued in this regard.
 All other areas relating to stores and inventories will be covered under stores operating
procedures.
8.1 Physical Stock Count and stock variance adjustment
 Physical Stock counting will be performed at end of every month in order to make sure the
physical stock balances are tallying with system stock balances.
 The reasons for the stock variances will be discussed with the respective warehouse owners
and the management will decide the acceptance of the justifications of respective
warehouse owners.
 Even though the physical stock counts take place every month end, stock variance
adjustment entries will be passed to system based on the year end stock count.
 Stock variance report will be prepared by the Operating Business Partner together with the
Dept. Fiancé Manager and it will be reviewed by the director board and Finance manager,
Factory managers will be attended to meeting where necessary.
 Depending on the decision of the Management, relevant stock variance adjustment entries
will be passed focusing on annul financial audit.
9. Customer Creation in the sage System
 Customer file need to be submitted with the approval of the directors to the finance through
the Head of Sales & Marketing.
 For a distributor, the following information need to be included in the file.
 Customer registration from signed by HOSM and approved by a director.
 Copy of the bank guarantee signed by a director
 Copy of the business registration, ID copy of the distributor
 Copy of the VAT registration certificate (For VAT registered customer).
 For a project customer

 Customer registration from signed by HOSM and approved by a director.
 Copy of the business registration
 Copy of VAT & SVAT registration certificate (For VAT registered
customers).
 Customer creation will be done by the accounts executive under the instruction of the
Assistant Accountant with in the day if the completed file received before 12.00 pm, if not
it will be created within the next working day.

10.0 Trade and other receivables & due from related parties
 Trade and other receivables and due from related parties are stated in the Balance sheet at
the amount estimated to realize.
 Outstanding debtor balances over 60days and monthly settlements will be checked by the
accounts assistant. Statement for ‘settlement due but not received’ will be prepared
accordingly and letters will be sent to customers to notify their outstanding balance where
necessary.
 Monthly reconciliations and schedules must be prepared as appropriate. The accountant
and the HOF have to duly review.
 An age analysis report must be available for Trade Debtors’ balance. Second week of every
month, Account Assistant shall get the explanations form Sales and marketing department
for debtor balances which are over 60 days’ and the Ass. Account-Treasury shall verify
those. These explanations will be reviewed at the monthly debtors’ meeting with the Board.
 Credit Due Dates are as follows

 Polycrome Electrical (Pvt) Ltd 60 Days
 Polycrome Cable Management (Pvt)Ltd 60 Days
 Polycrome Lighting (Pvt) Ltd 92 Days
10.1 Cash and Cheque Receipts
 Collecting cash will be only during working hours.

 Cash received above Rs. 25,000, should be informed to the Director of commerce before
sending for deposit.
 Cheques accepted should be written in favor of the company name and crossed as “A/C
payee only”
10.2 Cash Receipt
 Only the Accounts Assistant who is assigned for receiving, recording and banking shall
receive the cash. The Accountant shall check the purpose and approval for the cash received
and ensure the cash received has deposited properly. Also he shall update the bank deposit
register.
 Accounts Assistant shall enter and allocate the cash receipts for customer settlements.
 All cash receipts must be signed by Director Commerce.


10.3 Cheque Receipts
 All the cheques will be received by the Accounts Assistant.

 Cheque can be categorized as follows;
 Customer settlements
 Postdated cheques
 Insurance claimed
 Miscellaneous /Assets sales
10.4 Customer Settlements-Normal cheques
 These cheques will be handed over to Accounts Assistant by the sales and marketing
department.
 Accounts Assistant shall enter the all cheque receipt to the system and he shall check and
allocate receipts to the relevant customers, also system generated receipt should be printed
and hands over the director of commerce.
 Deposit register should be updated with all the cheque receipts.
 All the cheque receipts should be deposited in the bank daily basis.
 The deposit register shall contain following information;
 Deposited date
 Customer Name
 Cheque number
 Bank name
 Branch name
 Amount
 Cheque return details (If any)
 Accounts Assistant is responsible to maintain Deposit Register properly to avoid any error
which can be occurred during cheque depositing process.
 Once the cheque is realized, Accounts Assistant shall put a tick on the register to confirm
the realization.

 The validated deposit slip should be signed by Director. The slip must be filed in a separate
‘‘Deposit Slip File” and the receipt should be filed in a “Receipt File”.
 All the receipts must be filed on the basis of receipt number.
 Cheque/cash must be banked at the same day or following day of receipt.


 Any deposit which is not forwarded to the bank, should be locked in the safe of Accounts
Department. A deposit cannot be kept more than 24 hours in the safe or hands of Accounts
department.
 Daily proceed and realizations must be checked by the Accounts Assistant under the
supervision of the ass. Accountant.
10.5 Customer settlements – Postdated cheques
 The Accounts Assistant shall enter the postdated cheques to the system and print the
receipts accordingly.
 the postdated cheque cheques (together with a list) will be handover to Directress-
Commerce by the Accounts Assistant.
 When a postdated cheque become due for deposit, Directress- Commerce shall handover
the cheque to Account assistant for deposit.
 The deposit procedure will be same as normal cheque deposits.
10.6 Other cheques-insurance claim/sale of Assets etc.
 Accounts assistant shall enter the cheque details to the deposit register and update the
system accordingly. He shall send the cheque to bank for deposit.
10.7 Customer Settlements-Direct deposits
 The Accounts assistant shall get the information from sales and marketing department
about the unidentified bank deposits captured from the bank statement.
 In the system, he shall allocate the deposits against relevant invoices of the customer.
10.8 Return Cheques
 An Email should be sent to sales and marketing department copying HOF about the
cheque return at the following working day.
 System should be updated with returned cheque
10.9 Sales return approval Process (Credit Note)
 After the Managing Director’s approval of Sales retuned, such goods will return to
warehouse (Head office Raththanapitiya) immediately.
 All returned items must be in full compliance with the Return Note, which is fully certified
by the distribution agent and approved by the company's driver upon receipt upon receipt.


 When approving a Credit note, retuned price of items must be checked with relevant invoice
price. if finding of relevant invoice price is not practical, CRN should be approved at the
lower price of retune price or distributor/dealer price.
 All the goods should be allocated to intermediary warehouse within two days via a CRN
(Trans-HO)
 After that store manager must allocate goods to specific warehouse based on the results of
quality inspection report.
 Printed Credit note should be handed over to sales department. Copies must be sent to
relevant distributor, store managers and one copy should be filled at sales department.
11.0 Trade Creditors & other payables
 Trade creditors balances should indicate the amounts owing to vendors where the vendors
invoices have been received and have been processed onto the SAGE Suppliers system but
not yet paid at the period end.
 Where the invoice has not been received but goods or service has been received, an accrual
should be made based on best available information (purchase order. Etc.)
 Creditors payment should be made on the basis of the terms and conditions agreed with
each individual Creditor.
 Trade creditors should be recognized as current liabilities unless payment is not due until a
period greater than 1 year from the balance sheet date in which case they shall disclose as
a non-current liability.
 Vendor/Creditor statements from vendors should be reconciled to the SAGE Supplier sub-
ledger on a regular basis (at least once a month) to ensure trade creditor balances and
accrued liabilities are accurately recorded.
11.1 Payments and Authorization criteria
 Purchasing Department is responsible for ordering the product, Materials or service. And
also to check the validity of the invoice against the order, and work accomplished/delivered.
Purchasing Department shall prepare documents within 1-2 days and a handover to
Accounts Assistant for the Payments at the time of Original Documents received from
Factory.
 All payments should be checked by Accounts Assistant before the preparing payment
vouchers. And all Supplier payments should be check on the below basis.
 Purchase Order (PO) – Price approval, Quantity ordered

 Goods Received Voucher (GRV) – PO No, GRV date, GRV No, Quality Seal,
Bin Card, Updated Seal, Notes, Authorized Signature


 Dispatch Notes – Quantity with GRV, Security Seal, Date, Item with GRV,
Authorized signature
 Supplier Invoice Generated by Accounting Software – Indicate Suppler
updating
 Vendor Invoice – This represents supplier item, quantity, date, Authorized
Signature, and it should be reconciled with our PO, GRV.
11.2 Credit Period
 Company has agreed credit period with all suppliers and it maintains from
the date of last goods received from relevant suppler and it should be match with the
security seal of the last Dispatch Note.
 After entering all the payments into the system, the Accounts Assistant will hand over the
documents to Assistant accountant treasury and he is responsible to ensure;
 Whether the payment is genuine and there is no error or duplication.

 Accountant assistant has entered data correctly into the system
 All the goods received and QC approved and all other steps followed.
 Accounts Assistant shall print the cheque and cancel the invoice by stamping PAID seal on
it in blue ink hand over to A. Accountant treasury for;
 Verification of the cheque name and the amount.
 Posting the cheque into the system.
 The cheque and the supporting documents shall hand over to Head of Finance for
authorization. Before authorizing, Head of Finance has to ensure the payment is genuine
and there is actual liability for the payment and cheque printed correctly.
 After that the cheque and supporting document shall hand over to the Managing Director
for second signature.
 The second signatory will double check the payment information and sign accordingly.
After that cheque will be passed to the Accounts Assistant to issuing to the relevant payee.
All cheque will be issued as soon as this process is completed. If the due date of the invoice
is a future date, the cheque will be retained by the Assistant accountant (In the Safe) and
release on due date.
 Cheque register should be run and filed together with the disbursement transmittal form
(cheque Carbon Copy).
 Supporting documents will be filed by the Accounts Assistant in the relevant Supplier files.
 The Accounts Assistant will utilize the paid invoice files to respond to any discrepancies
which arise with vendors or other payees.


 Once monthly, the Accounts Assistant will check the supplier age analysis to determine if
there are any outstanding invoices which have not yet been paid. If so, the Accounts
Assistant will investigate the reason for the delay and take corrective actions immediately.
 Accounts Assistant shall prepare the supplier cheque within 10 working days of receiving
the document to the finance department and put the cheques in the due date wise folder.
 Accounts Assistant shall forward the supplier payments cheque to the HOF 10 working
days before the due date and has to get the signature from HOF and forward on or before 7
days to the due date.
 Accounts Assistant has to follow up with secretory to MD to get signed the supplier
payment on or before due date and keep in the folder until handed over to the supplier.
11.3 Payment Authorization Criteria
 Approval of Payments up to Rs.5000.00 from factory Petty cash – Factory Manager

 Approval of Payments up to 1000.00 from HO petty cash - Head of departments
 Any other payment which exceeds above criteria need to be approved by the MD or any of
the board member.
 Cheque payment criteria has defined in General Procedure / Policies of this document.
11.4 Bill payments/ Miscellaneous
 All miscellaneous payments have to be approved by the Managing director except routing
payment such as telephone, electricity, etc. and send to Accounts Assistant for processing
payment and will follow the same process as above and has to ensure to keep ready the
cheques three working days before the due date.
 Factory electricity, water and telephone bills must to be checked and signed by the factory
Manager.
 Staff Dialog bills have to be checked by Payroll Assistant for limits and any excess
deductible form payroll and forward to Accounts Assistant for payment.
11.5 Sales Expenses checking and payment
 Salsas department is responsible for the preparation of sales expenses. reimbursement sheet
of every field sales employees and has to hand over to the finance department. The expenses
reimbursements are as follows;
 Postage and courier
 Maximum amount of reimbursement is as per the budget for the year.
 Payment will be made separately as an outside payment to the salary.


 Night-Outs and Hotel Booking

 Maximum rate per night-out have been given in the budget for the year.
 In every month, in the first week the Sales department should plan the visit of
every ASMs and keep update the out-of-city visits with the Business Analyst in
Finance department.
 Requirements for hotel booking arising in the Sales department and forward the
requirement to the Business Analyst in the Finance department.
 Daily checking the requirement of hotel with the ASM or the Sales department
and advice to pay to MD’s Sec.
 Once the upload is done by MD’s Sec., the payment proceeds by the Finance
Manager. And forward the cash transfer slip to the Sales department coping to
the Business Analyst in the Finance department.
11.6 Payments-Commission to sales staff
 Head of Finance checks the following before placing his signature for payment.
 Actual vs budget allocation
 Trail of certification by A.A. Treasury for processing payment
 Casting on sample basis
 Accuracy of remittance advice amount.
 Complete set of calculation sheets will be submitted to Board of Directors for signature
for effecting bank payments on or before 25th of the month from original submission of
documents to finance division by sales and marketing department.
 Submitting remittance advice to the bank and follow up with the bank by A.A. Treasury


Sales Commission calculation and payments.
Collecting sales reports from the sales

department for the relevant month.
Data Collection
Generate system Reports
Data Entering to the commission format.
Edit Commission
Detail. Commission Calculation.
Achievers' Reservation Note 01
Whole Report Create Payment sheet
The report is submitted to the Business analysis & Note 02

Finance Manager
Create HNB slip and

forward to
Commission Payment processing
Miss,Nadeeka for
upload.
Achievers' Payment sheets handover to sales

department.
End
Note 01 Achievement measured at 85%.
Note 02 After Business analyst & Finance manager's Inspection, report submit to the director of commerce.


11.7 Reimbursement- Coupon payment
 The Accounts assistant will receive coupons, distributors’ statements and the summary
prepared by sales department. The summary statement has to be approved by AGM-Sales
and Marketing.
 This summary statement has to be checked with the coupons & approved rates and signed
by the Administrative officer.
 The rate of payments per coupon will be as per the management decision.
 The document will be sent to Account executive to check and verify the accuracy.
 After his verification, Head of finance will endorse the document for payment.
 Then the document shall handover to director for final approval.
 After the approval of director, Bank transfer will be made to the bank accounts of relevant
Sales representatives and Area Sales Managers. If the coupon collected by the
Distributors, credit note will be issued for the distributor.
12.0 Fuel Cards
12.1 Monthly fuel payment
 Within First 3 days of every month NTB Bank statement for Fuel Payment summary,
Fuel usage summary and account summary shall receive to finance department.
 Final payment amount will be prepared after checking the usage with cards together with
the carried forward amounts and ‘brought forward amounts.
 The above payment information will be forwarded to MD’s Sec. to transfer the cash to
company NTB account by Business analyst.
 Uploading the monthly fuel amount to system by Sec. to MD.
 Transfer the money to company NTB account by Head of Finance.
 Finally, NTB Account Statement, Fuel Payment summery forwarding to Account
Executive to take into the Ledgers.
12.2 Fuel over-usage Deduction from Salaries
 Within First 3 days of every month NTB Bank statement for Fuel Payment summary,
Fuel usage summary and account summary shall receive to finance department.
 Check the usage and if there any over usage, ‘The fuel deduction format will be
forwarded to HR department.
 HR department shall enter the performance ratios to identify the any deduction form
salaries.


12.3 Issuing new Fuel card
 Receiving a new fuel card requisition application with the authorized signatures, from the
Sales department to the Finance department.
 The correct application forwarding to the NTB bank card center.
 The NTB bank card center replying with a new card within 14 working days to the
Business Analyst in the Finance department.
 After updating the master card summary by the Finance department, forwarding the same
to the sales department.
13.0 Opening Bank Accounts
 Managing Director will take the decision of new bank account opening.
 Managing Director shall decide the limit and the Authorize signatories for cheque
signing.
 After the accounts opening, the accounts must be link to the company’s ERP system and
bank reconciliation must be prepared.
13.1 Unpresented Cheques -Greater Than 6 Months
 Account Assistant shall identify the cheques which are greater than 6months by doing the
bank reconciliation. Also Assistant accounts shall identify such cheques during the review
of bank reconciliation.
 Cheques issued to other parties that have not been presented for a period of six months
from the date of issue should be cancelled. The original payment entry should be reversed
at the balance sheet date. A provision of the amount should be made.
 Instructions should be given to bank to stop payment for such cheque.
An investigation should be taken place to identify the reason for not presenting the
cheque. Depending on the decision of the management/HOF, a new cheque may issue
replace the previous cheque
13.2 Preparation of Bank Reconciliation
 Accounts Assistant is responsible for preparing bank reconciliation. Bank reconciliation

must be carried out promptly at the end of each accounting period (monthly) and
independently reviewed by the HOF/Accountant.
 Accounts Assistant shall receive the bank statement on monthly basis (Printed copies).
And he shall receive the daily bank statement through the internet banking facility.
Assistant Accountant/ HOF can access the internet banking facility.
 All the Bank Accounts should be reconciled with in first 5 working days of the following
month.

 Account assistant shall pay his attention on the below matters when preparing a bank
reconciliation, but he shouldn’t limit to them.
 A comparison of dates and amounts of daily deposits shows in the bank statements with
the cash receipts journals.
 A comparison of inter-company bank transfers, (to be certain that both sides of the
transactions have been recorded in the books).
 An investigation of transactions rejected by the bank, i.e., returned cheques or deposits
 A comparison of canceled cheques with the disbursement journal (cheque number, payee
and amount).
 An investigation of canceled cheques for authorized signatures, irregular endorsements,
and alterations.
 A review and proper mutilation of void cheque
 Identification of cheques which have been outstanding for more than six months.
 Check the bank charges, Interest and loan settlements and enter the in to the system.
13.3 Bank reconciliation process in ERP system
 Get the full month bank statement for the relevant month and get the system bank
reconciliation (from the Sage system).
 Check and tick the system ledger the amounts which are tallying with the bank statement.
 Identify the amounts appeared in the bank statement which are not in the system then
identify the reasons, after that enter those transactions in to the system with the
supervision of the Assistant Accountant.
 Inform bank for any unidentified entries and get the details. Also inform the bank through
the HOF any entries not belong to the company.
 Check and tick the newly posted entries and make sure that there is no any difference.
 Finalize the reconciliation and take printouts and forward to the Assistant Accountant for
authorization.
 Completed bank reconciliations should be reviewed by the HOF and dated by the
reviewer.
 The Accountant upon receipt of the completed bank reconciliations prepares any general
ledger adjustments.
 Copies of the completed bank reconciliations will be forwarded to the Managing Director
for the reviewing purpose.
14.0 Petty Cash

 Petty cash should be kept in a locked safe. .
 Company Petty cash-Head office float is Rs. 25,000.00
 Factory Petty cash –Homagama float is Rs. 45,000.00
 Factory Petty cash –Mathugama folat is Rs. 35,000.00


 Unloading Petty cash float is Rs. 20,000.00

 Petty cash vouchers are to be prepared for each payment and be authorized.
 Petty cash is to be reconciled with petty cash records and vouchers in hand daily.
 Random periodic checks of petty cash is to be done by the Assistant Accountant.
 Expenditure from petty cash will be limited to:
 The purchase of non-recurring items where it is uneconomical for an official
company purchase order to be placed
 An expenditure of Rs 1,000/- or less and upto Rs 5,000/- to factory managers
for any urgent maintenance activity.
 All petty cash vouchers are to be sequentially numbered.
 All supporting documents must be marked as paid when petty cash has been paid, to
prevent re-use. A “PAID” stamp should evidence this.
 It is a policy of a company, any kind of Cash Cheques cannot realize through the petty
cash fund.
 The Accounts Assistant is the custodian of the petty cash float at Head office and HR
Assistant/OBP is the custodian for petty cash Float at factory.
 The petty cash float shall be operated on an impress basis. This means, when it is time to
replenish the petty cash float, the Accounts Assistant/HR Assistant shall total out the
expenses made and record those expenses in the general ledger. When the cheque
payment is submitted for payment it should tally with the total amount need to bring the
float back to original amount. Also payment should narrow down to the various expense
accounts being charged and the amount charged for each transaction.
 When a request for petty cash reimbursement is made to the Assistant Accountant
Treasury, the item will be listed on the Petty Cash Float Reconciliation Sheet. A
description of the item being charged should be recorded together with the amount.
 The recipient of the petty cash floats must sign the sheet, IOU to indicate receipt of the
floats. The paid receipt should be attached to the sheet. All documents/vouchers should
remain in the locked petty cash box until it is time to replenish the float. At that time, the
Petty Cash Float Reconciliation Sheet and associated receipts are attached to the Payment
Voucher.
 The petty cash box is to be locked at all times when the Accounts Assistant is not
disbursing or replenishing the float. The locked petty cash box is to be kept in the locked
file cabinets within the Finance Department.
 At least once annually, the Head of Finance should conduct a surprise audit of the float.
The audit should be performing at the present of HOF, the total Cash on hand and the
total amount of receipts in the petty cash box. Any discrepancies should be discussed and
resolved immediately.
 Factory petty cash payment will be authorized by the Factory Manager and Operating
Business partner will enter the vouchers to the system and send them to head office for
reimbursement. Once the document received to head office, accounts assistant shall check


the vouchers and arrange the reimbursement. The reimbursement amount will transfer to
the factory current account. OBP and factory manager are the authorized signatories to
sign the cheques from factory current account.
 Accounts Assistant will check the factory petty cash voucher with the system and ensure
that transactions are entered properly and forward to the Assistant Accountant – Treasury
for checking.
15.0 Long term loan /lease
 Acquisition of Assets under the lease is on the final decision of the Managing Director
considering the request made by the responsible officer.
 The ledgers per the Accounting standards laid down by the Institute of Chartered
Accountants of Sri Lanka.
 Separate lease file will be maintained by the Accounts Assistant including all the
correspondents such as lease agreement & loan agreements etc.
 The bank will do the loan and interest deduction on due dates.
 The ledger recording will be made as per the bank statement including the details of date
of payment, installment number and amount.
15.1 Settlements of loans-TR Loan
 Based on the cash flow projection the Head of Finance will advise early settlement of TR
loans to the bank.
 Other than the above, due payments will be debited to the accounts by the bank
depending on the availability of the funds.
16.0 LC/DA/TT opening process
 Factory Managers have to send the material requirement plan to the Purchasing
department for the raw material purchases including the required date of material to be
received to factories
 Sales department / supply chain manager have to prepare finished goods requirement plan
based on the sales forecast prepared by sales department.
 As per the requirement, purchasing department has to send the request including items
and quantities to get a Performa invoice form the supplier.
 Based on the agreement the supplier declare the payment terms on the preform invoice
and the required quantities of the items.
 If it is LC, the bank application has to be filed as per the bank requirement and prepare a
file including all the details relating to the imports.


 Then LC/DA/TT file will be forwarded to finance manager to certify for the funds
arrangements
 Then the file will be forwarded to MD for the approval.
 If it is LC Forwarded the LC application and perform invoice to the bank and if it is DA,
the approved Performa invoice will be forwarded to the supplier.
16.1 LC/DA Payment process
 Purchasing department prepare a payment approval letter with TR application on due date
and forward to finance manager for the signature.
 Finance manager check from online banking facility and imports loan schedule the
amount and due dates and if correct the document will be sign and forward to MD.
 With the approval of MD the documents will be forwarded to the bank to make the
payment to the supplier.
16.2 TT Payment process
 Some new supplier may request TT payment with the confirmation to process the order.
 In such instances, a TT application will be filled with the preform invoice confirmation
and will be forwarded to finance department.
 Finance manager check correctness of the document and place the signature and forward
to MD.
 With the approval of MD the documents will be forwarded to the bank to make the
payment to the supplier.
16.3 Interest payments
 Based on the cash flow projection settle the loan interest (Commercial papers). This will
be handling by the Head of Finance.
 TR loan interest will be debited by the bank at the end of the month and Assistant
accountant will check the accuracy of the interest before preparing the bank
reconciliation.


17.0 Bank Guarantee
17.1 New Bank Guarantee Requirement
 The Sales department or the ASM directly informing to the Business Analyst in the
Finance department about the new bank guarantee requirement in writing.
 The Finance department shall send the letter for new bank guarantee requirement to the
relevant bank and also send a scanned copy of the letter of new bank guarantee
requirement.
 Once the Original bank guarantee letter receive to the Finance department, re-confirm
with the bank about the new bank guarantee letter and enter into the bank guarantee
register and forward the same to Directress of Commerce with the copy.
 The Directress of Commerce will return the copy of bank guarantee to the Finance
department advising the credit exposure.
17.2 Renewing Existing Bank Guarantee
 Before the minimum of 15 days to the expiry of bank guarantee, the Finance department
shall send the letter of bank guarantee renewal requirement to the relevant bank and also
send a scanned copy of the letter of bank guarantee renewal requirement.
 Once the renewal of Bank Guarantee with the expiry date, the original bank guarantee
letter will receive to the Finance department, re-confirm with the bank about the new
bank guarantee letter and enter into the bank guarantee register and forward the same to
Directress of Commerce with the copy.
 The Directress of Commerce will return the copy of bank guarantee to the Finance
department advising the credit exposure.
18.0 Payment –salaries
 HR Department will send general pay summaries with HR Managers approval.

 Assistant Accountant will check the pay summary and sample calculation.
 Assistant Accountant sends the details to Finance Manager for checking and then forward
to HR department.
 HR manager upload salaries to HNB pay fast with the approval of the Directors and
Finance manager approve the pay fast files.
 Salary cheque payments will be prepared on the same day and forward to the directors for
signature and after that signed cheque will be forwarded to HR department to deliver to
the factories and employees.
 The salary payment acknowledgement records will be kept by the HR department.


19.0 PR & Advance Settlements
Procedures Preparation/ Approval/Resp

Checking onsible
1. PR needs to be prepared by the respective departments/ In FM
case of stock items by the stores.
2. Items relating to Plumbing & Electrical, and other factory Store MM/FM
maintenance keeper/Stores
If the item purchased to keep a stock in the stores Executive
MM
Building, Garden maintenance & any consumable items

required by the factory
To be Authorized by FM
 Items Relating to Maintenance Engineering mould Assistant FM/EM
development and modification assigned
3. All the PR will be sent to Purchasing Department Purchasing MM/FM

Assistant
Factory
4. Purchasing Assistant has to be forwarded the PR to the Pur Assist Log. Manager
finance Department with updated book.
5. Update PR books with Settlement details and in case of Acc Assistant Ass Accountant
unsettled bills the reason for non-settlement and forward to
MD
6. Follow up and get the approved PR from MD Ass MD
Accountant
7. Cheques will be prepared based on the approval by MD as Acc Assistant DFM/Fin Mgr
stated in the PR
8. Cheques will be written to the suppliers name if the AE/ASS.AC/F Fin Mgr/MD
payment can be made directly to supplier, otherwise, A
cheque will be written to the name of the purchasing officer.
9. Cheques are to be collected from the head office from the Purchasing MM/FM/OBP
Purchasing Officer Factory. Cheques should be collected Assistant
from the day morning from the head office on the way to Factory/Acc
purchase the goods. If cheques collected early, those should Assistant
be handed over to OBP factory with cash unsettled.
10. Once, cheque collected, the details are to be sent through a Acc Assistant Ass. Acc
mail by Ass Assistant including date of the cheque,


description, PR number, Cheque number and the amount to

OBP,EM and FM
11. Goods should be purchased as stated only on the PR and if Purchasing MM/EM/FM
there is a new requirement new PR has to be prepared and Assistant
forwarded to get the cash. If there is any requirement to Factory
purchase a substitute item due to non-availability of the
item stated in the PR, a remark need to be written by the
officer who authorized PR.
12. It is required to get a new price approval, if there is a price Purchasing MM/EM/FM
increase than the price stated in the approved PR on the Assistant
items which are going to purchase. Factory
If there is any excess cash available due to some reason, it Purchasing OBP/FM/EM
should be handed over to OBP/Assis Accountant on the Assistant
same day with the details. Factory
13. The item purchased and the balance cash handing over Purchasing OBP/FM/EM
should be checked and certified by the officer authorized Assistant
the PR. Factory
14. All the PR settlement should be made to Finance Purchasing OBP/FM/EM/A

Department with all the documents with 7 days of cheque Assistant ssist Accountant
collection. Factory/Accou
 When settling any PR, document should be affix security nts Assistant
seal and the signature and also the signature of the goods
recipient and the officer authorized PR.
15. All the PR settlement should be made to Finance Purchasing OBP/PM/EM
Department with all the documents with 7 days of cheque Assistant
collection. Factory
 When settling any PR, document should be affix OBP Ass .Acc
security seal and the signature and also the
signature of the goods recipient and the officer
authorized PR.
 Settlements details have to be sent by OBP on
weekly basis and E mail also are to be send
including settlement detail to Ass Acc,FM & Fin
Manager


16. AA-will make the settlement through the system and Acc Assistant Ass .Acc
forward to Ass Accountant verification and then Ass Acc
to post the entry to the system
20.0 Purchase Order Approval.
 Purchasing department shall create the PO based on the purchased requisition.

 When, PO is created, it will assign to Dept.Fin. Manager for the approval.
 When approving a PO, below process should be followed.
 Check the supplier name, Item codes, Purchase quantity, Due date, Quantity
available.
 Re-order quantity and re-order level should be checked before approve the PO.
 Purchased price should be checked with approved price list of MD.
20.1 Amendment of Raw Material Prices in the system.
 Due to many reasons, Raw material prices may change during a period. In such occasion
Purchasing department will present MD the increased prices of raw material (with
quotations of potential supplies) and get the approval to continue the purchasing.
 When, MD approves the new price, the approved document will forward to
Dept.Fin.Manager to amend the price in the system.
 Based on the above document, Dept.Fin.Manager shall change price in the system.
21.0 Accrual
 Accruals must be shown as current liabilities in the balance sheet.

 Accounts assistant should check all Purchase Order prepared and check receipt of goods
or services.
 Review of all recurring monthly expenses should be done to ensure accounting of all
accruals.


22.0 Financial Reporting-Statutory
 At the Financial year end, Assistant Accountant should prepare the balance sheet, income
statement and cash flow statement and relevant balance sheet schedules and income and
expenses analysis and submit to the auditory on or before 15th June of the following year.
 Corporate tax calculation has to be done by the Assistant Accountant and forward to the
HOF and after that get approval from the BOD.
 The auditing process to be started on or before 16th June and to be finished on or before
31st October.
 Audit report has to get finalized and file the tax return on or before 30th November as per
the statutory requirement.
23.0 Revenue & Expenses Recognition
23.1 Revenue
 Revenue is generally accounted for on an accrual basis and is recognized as follows;

 The entity has transferred to the buyer the significant risk and rewords of
ownership of the goods.
 The entity retains nether continuing managerial involvement to the degree
usually associated with ownership nor effective control over the goods sold
 The amount of revenue can be measured reliably.
 It is probable that the economic benefits associated with the transaction will
flow to the entity.
 The costs incurred or to be incurred in respect of the transaction can be
measured reliably.
23.2 Cost of sales
 When all significant risks and rewords of ownership have been transferred to the buyer
which normally occurs on delivery of goods and services.
 No specific procedures required. As per the system BOM requirement the cost of sales of
the sold items will be charged to the profit and loss account.


23.3 Expenses booking
 The expenditure relating to or directly attributable to operating unit is reported under each
operating unit.
 Expenses should be booked as a separate line item when they are material or extraordinary
in nature.
 The chart of accounts is organized by type of expense. This is done to allow for analysis
of expense by category and to help define which expenses are incurred by the company.
 Expenses are further classified by cost center. This is done to enable analysis of the cost of
each of the Company’s key activities.
24.0 Management Reporting
 Assistant Accountant after closing the month, should prepare following reports
 Profit and loss statements for the month and year to date
 Expenses analysis for the month and year to date
 Balance sheet – for Management Reports
 Schedules to the balance sheet – Management Reports
 Cash Flow Statement
 The Assistant Accountant should prepare a set of monthly Financial Reports to distribute
to the Board of Director. The reports should include: a balance sheet and a statement of
income and expenses for each Company (operating, project); a budget-to-actual report for
all accounts included in the annual operating budget; a list of deferred and receivable funds,
and a cash flow projection.
 The monthly statements should be reviewed by the Head of Finance prior to distribution to
the Managing Director for reviewing of Financial Statements. After the approval of HOF,
the statements will be submitted to the Managing Director every month and to the full board
as stated above. The monthly statements will be forwarded to the Directors within 10
working days of the following month.
24.1 Reconciliations of Other General Ledger Accounts:
 Accounts Assistant has to prepare the reconciliation of all balance sheet accounts, relevant
income and expenses accounts. Accountant and the finance manager has to review those
reconciliations before finalizing the Monthly management accounts.


25.0 Product Costing.
 Product costing for Locally manufacturing products will be calculated based on the
Individual Product’s Bill of Material. Bill of material contains the material and other
component requirements to manufacture a product. Other Overhead costs will be absorbed
based on the ratios agreed on annual budgeted P&L (Admin/S&D/Finance Cost). But in
some scenarios, depending on the MD’s instruction, the overhead allocation ratios can be
changed to optimize the profitability of product.
 Product costing for Imported product will be calculated by considering its landed cost.
Other Overhead costs will be allocated as the same way of locally manufactured product.
 Market based and cost plus margin pricing techniques will be applied at the point of product
pricing under the supervision of Management.
26.0 FG Price Changes and sage system updating
 Revised costing will be prepared with every budget, import shipments of finished products
and also with above 10% raw material price changes and forward to the directors to take
price revision decisions.
 If the directors approved to revise the prices, original price list will be handed over to
secretory to MD to circulate it to the FM, HOSM, Stores in charge, HOSC & also to the
finance department.
 The system will be updated by the Dept.Fin.Manager with the copy of the price list on the
effective date and copy of the price list will be acknowledged by Dept.Fin.Manager with
the date and keep in the file maintained for price revisions.
27.0 Import Costing
 Packing list has to be received form the factory confirming the goods received by the
stores in charge and purchasing department has to send the import file with all the
supporting documents.
 Dept.Fin.Manager will check the import file and the packing list and prepare the costing
including all the direct cost of the shipment.
 The GRN will be processed by Dept.Fin.Manager within 2 working days and send to the
stores and stores in charge has to sign the GRN and send back to purchasing department.
 The GRN will be processed to the quantity received. If there is any shortage, it will be
accounted to the shortage WH and excess will be accounted to excess WH.
 All the Imported finished goods received to be accounted as semi-finished goods and
other material to the respective raw material warehouse of the stores.


28.0 Budgeting
 The finance department has to prepare the monthly budget for a period of 12 months and
will include the following
 Sales budget
 Material requirement budget
 Operating expenses budget
 Cash budget
 The preparation of the budget will be based on set of parameters of anticipated
expenditure growth as well as other budgetary assumptions. Projections and goals stated
in the strategic plan are important factions in the development of projections.
 Monthly budget for the next year has to be entered to the system before 1st April of every
year. The departmental budgets should be available with each department head before the
year stated.
28.1 Budget development process
Budget development process Responsibility
Strategic Request Budget information on or before 15th January HOF

Planning,
Goals and
Objectives Budget information to Finance on or before 15th DEPARTMENTS
February HEADS GM/FM
Budget completion on or before 10th March HOF/AMA/FA
Budget Review March 11-15 MD/HOF
Amendm
ents Budget Adjustment and Finalization-15th March – HOF
required April 1
System sudation March -15th March –April 1 HOF/AMA/FA


29.0 Income Tax
 Income tax computation will be prepared for all the liable companies monthly.
 On or before 25th of the following month the monthly tax liability will be discussed with
FD & MD and request the approval.
 Information will be sent to Tax consultant quarterly and their proposal also will be taken
in to consideration for the next quarter.
 Quarterly payments will be made as per the rules laid down by the Inland Revenue. i.e.
the quarterly payment will be ¼ of the total last tear tax liability.
30.0 References
 Sri Lanka Financial Reporting Standards
 Sri Lanka Auditing Standards
31.0 Attachment
 GATE PASS – 7/R/ST/01

 DELIVERY ORDER – 7/R/ST/02
 MATERIAL REQUISITION NOTE – 7/R/ST/03
 SUPPLIER RETURN NOTE -POLYCROME 7/R/ST/04
 GOOD RECEIVED VOUCHER POLYCROME– 7/R/ST/05
 WAREHOUSE TRANSFER JOURNAL-POLYCROME – 7/R/ST/06
 MANUFACTURE REPORT – 7/R/ST/07
 PURCHASE ORDER - 7/R/PU/01
 SALES RETURN NOTE - 7/R/S&M/05
 DAMAGED TRANSFER BOOK - 7/BK/ST/01
 OUTGOING LETTER REGISTER - 7/RG/ST/01
 GRV REGISTER - 7/RG/ST/02
 GOODS RETURN REGISTER - 7/RG/ST/03
 INVOICE REGISTER – - 7/RG/ST/04
 MIN REGISTER - 7/RG/ST/05
 SUPPLIER RETURN NOTE -7/R/ST/08
 GOOD RECEIVED VOUCHER DEPCOE– 7/R/ST/09
 WAREHOUSE TRANSFER JOURNAL – 7/R/ST/10
 FIXED ASSETS DISPOSAL FORM--9/R/FA/01
 CHEQUE PAYMENT VOUCHER--9/R/FA/02
 PETTY CASH PAYMENT VOUCHER-9/R/FA/03
 CASH BOOK BATCH-9/R/FA/04
 RECEIPT BATCH-9/R/FA/05
 BALANCE SHEET-9/R/FA/06
 INCOME STATMENT -9/R/FA/07
 COSTING SHEET -9/R/FA/08


FIXED ASSETS DISPOSAL FORM--9/R/FA/01
ASSETS DISPOSAL FORM

COMPANY:……………………………………..
Reason:
Sale/ Donate Damaged
Return to Store Lost, Stolen
Others (Specify)
Originator: Department:
Item: No of Units:
Description
Prepared By Approved By


CHEQUE PAYMENT VOUCHER--9/R/FA/02


PETTY CASH PAYMENT VOUCHER-9/R/FA/03


CASH BOOK BATCH-9/R/FA/04


RECEIPT BATCH-9/R/FA/05


INCOME STATMENT -9/R/FA/07


PH Proc 6 Finance Proceduer Manual 21-05-V3

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PH Proc 6 Finance Proceduer Manual 21-05-V3

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POLYCROME HOLDINGS PVT LTD Issue No: 02

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 1 of 34 Date of Revised :2021-05-19

4.0 Authority : HOF

6.0 General Procedure / Policies

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 2 of 34 Date of Revised :2021-05-19

7.0 Fixed Assets:

7.1 Fixed asset should be recognized when:

7.2 Depreciation of Asset

7.3 Asset Depreciation Process

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 3 of 34 Date of Revised :2021-05-19

7.4 Assets disposal procedure

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 4 of 34 Date of Revised :2021-05-19

7.5 Sale of the assets

 Assets will be sold as per the decision of the managing director.

7.6 Stolen/missing assets

7.7 Damaged\Destroyed\Scraped Assets.

 Disposal form need to be prepared by the Head of the Department.

7.8 Financial statement disclosure

In accordance with accounting standards specified by the Institute of Chartered Accountants

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 5 of 34 Date of Revised :2021-05-19

8.1 Physical Stock Count and stock variance adjustment

9. Customer Creation in the sage System

 For a project customer

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 6 of 34 Date of Revised :2021-05-19

 Credit Due Dates are as follows

10.1 Cash and Cheque Receipts

 Collecting cash will be only during working hours.

10.2 Cash Receipt

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 7 of 34 Date of Revised :2021-05-19

10.3 Cheque Receipts

 All the cheques will be received by the Accounts Assistant.

10.4 Customer Settlements-Normal cheques

 The deposit register shall contain following information;

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 8 of 34 Date of Revised :2021-05-19

10.5 Customer settlements – Postdated cheques

10.6 Other cheques-insurance claim/sale of Assets etc.

10.7 Customer Settlements-Direct deposits

10.8 Return Cheques

10.9 Sales return approval Process (Credit Note)

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 9 of 34 Date of Revised :2021-05-19

11.0 Trade Creditors & other payables

11.1 Payments and Authorization criteria

 Purchase Order (PO) – Price approval, Quantity ordered

Reviewed by DFM Signature :

OPERATIONAL PROCEDURES Date of Issued :2015-09-16

Doc. No. : PH/PROC/06 Page No 10 of 34 Date of Revised :2021-05-19

11.2 Credit Period