AP-As-is New Version - Final

Contents
Contents..........................................................................................................................................................1
1.00 Master data creation........................................................................................................................5
1.01 Supplier Master Data creation...............................................................................5
2.00 Procurement for export Orders...................................................................................................6
2.10 Foreign Import...........................................................................................................................6
2.11 Foreign Import with L/C.........................................................................................6
2.12 Foreign import with L/C and shipping guarantee...............................................7
2.13 Foreign import without L/C...................................................................................8
2.14 Foreign import with Free of cost (FOC)................................................................8
2.15 Sample at FOC with bulk price adjustment..........................................................8
2.16 Foreign services without L/C................................................................................. 9
2.17 Quality and similar claim from suppliers and customers ‘as suppliers agent’. .9
2.18 Price adjustments................................................................................................... 9
2.19 Freight amount within commercial invoice price................................................9
2.20 Inspection shortage but payment as per invoice.................................................9
2.21 L/C margin............................................................................................................. 10
2.30 Local Import for export orders...........................................................................................11
2.31 Import with L/C..................................................................................................... 11
2.32 Import without L/C............................................................................................... 12
2.33 Import with goods receiving acknowledged without receiving delivery........12
2.34 Sample at FOC....................................................................................................... 12
2.35 Sample payment with Bulk invoice.....................................................................12
2.36 Quality and similar kinds of claim.......................................................................13
2.37 Future or previous price adjustment..................................................................13
2.38 Inspection shortage but payment as per Invoice..............................................13
2.40 Procurement for export orders from EPZ.......................................................................13
2.41 With LC and shipping guarantee.........................................................................13
2.42 Without LC............................................................................................................ 14
1
2.43 Inspection shortage but payment as per Invoice..............................................14
2.50 Goods and services procured internally for export orders........................................14
2.51 Wash...................................................................................................................... 14
2.52 RMG Sewing.......................................................................................................... 15
2.53 Accessories and packaging.................................................................................. 15
2.55 Embroidery, printing etc......................................................................................15
2.60 Transfer pricing (within LE) for export orders...............................................................15
2.61 Wash...................................................................................................................... 15
2.62 RMG Sewing.......................................................................................................... 16
2.63 Accessories and packaging.................................................................................. 16
2.65 Embroidery, printing etc......................................................................................16
2.70 Local procurement for export orders...............................................................................16
2.71 Procurement of goods/services with PO............................................................16
2.72 Subcontract bill – Sewing, Washing, Embroidery and Mending......................18
2.73 Procurement of goods/services without PO......................................................19
2.80 Local cost of imported items for export orders..........................................................20
2.81 LC opening related bank charges........................................................................20
2.82 Freight................................................................................................................... 20
2.83 Custom and port charges.....................................................................................21
2.84 C&F agent expenses............................................................................................. 21
2.85 Local transport charges........................................................................................21
2.86 Loading/unloading and other expenses.............................................................21
2.87 Financial Charges.................................................................................................. 22
3.00 Bulk procurement for deemed export....................................................................................22
3.01 Import of Dyes and Chemicals, Paper and Accessories items etc....................22
3.02 Purchase from local market with PO..................................................................22
4.00 Procurement for Projects.............................................................................................................22
4.01 Import for Projects............................................................................................... 22
4.02 Local purchase for projects..................................................................................24
2
4.03 Sub contract for projects.....................................................................................26
5.00 Non business procurements.......................................................................................................26
5.01 Non business procurements................................................................................26
6.00 Procurement of assets and CAPEX...........................................................................................27
6.01 Import of Capital machinery and others assets with LC...................................27
6.02 Local procurement of capital assets and spares................................................27
6.03 Capital expenses for existing assets...................................................................27
6.04 Spares and other items procured with Machinery and other equipment’s....28
6.05 Import of inventory items other than export contract.....................................28
7.00 Local Procurement of goods and services.............................................................................28
7.01 Local Procurement of goods or services with P. O............................................28
7.02 Local Procurement of goods or services without P.O.......................................30
7.03 Procurement from Inter-companies and inter unit...........................................33
7.04 Discount/ Freight.................................................................................................. 33
7. 05 Intercompany/unit expense allocation..............................................................33
7.06 Maintenance expenses with reference to specific assets/utilities...................33
7.07 Vehicle maintenance expenses with tracking vehicle reference......................34
7.08 Purchase without supplier...................................................................................34
7.09 Payroll related invoice.......................................................................................... 34
8.00 Tax and VAT......................................................................................................................................35
8.01 Withholding Tax................................................................................................... 36
8.02 Withholding VAT.................................................................................................. 36
8.03 Periodic VAT reporting with expense.................................................................37
9.00 Bank Guarantee and Shipping Guarantee.............................................................................37
9.01 Bank Guarantee.................................................................................................... 37
9.02 Shipping Guarantee.............................................................................................. 37
9.03 FDR lien for Guarantee......................................................................................... 37
10.00 Invoicing Currency.......................................................................................................................38
10.01 Foreign currency Invoice....................................................................................38
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10.02 Invoice currency other than payment currency...............................................38
11.00 Invoice approvals..........................................................................................................................38
11.01 Invoice approvals................................................................................................ 38
11.02 Batch approvals.................................................................................................. 38
11.03 Invoice Hold........................................................................................................ 38
12.0 Payments............................................................................................................................………… 39
12.01 Scheduling of payment...................................................................................... 39

12.02 Daily payment planning with bank balance.....................................................39
12.03 Multiple payment for one invoice or group of invoice...................................39
12.04 Multiple Invoices paid together........................................................................39
12.05 Payment for other business unit or company..................................................39
12.06 Payment notification..........................................................................................40
12.07 Advance payments............................................................................................. 40
12.08 Payment by new bank liability of UPAS/EDF/Deferred..................................40
12.09 Payment by bill of exchange.............................................................................40
12.10 Payment by Cheque/PO/FDD............................................................................41
12.11 Payment by BEFTN/RTGS/TT/Wire transfers...................................................41
12.12 Payment with personal Credit cards.................................................................41
12.13 Payment in Cash................................................................................................. 42
12.14 Petty expenses payment....................................................................................42
12.15 Refund from Suppliers and others....................................................................42
4
1.00 Master data creation
1.01 Supplier Master Data creation
After receiving an invoice we check supplier name into system. In case of a new supplier, we
generate a manual request to authorized person to create supplier name into the system with
cross validation with IT Team.
Apart from suppler name, IT department generally adds supplier address and contact number
into the system with other required information.
AP team periodically checking duplicate suppliers name gradually and update supplier master
data.
5
2.00 Procurement for export Orders
2.10 Foreign Import
Accounts payable work flow chart for foreign Import
2.11 Foreign Import with L/C

We import raw materials from overseas through BTB L/C against export contract. Upon
request from Merchant Team/sourcing team with PO and other related doc, Bank & LC section
opens LC as per PI and send LC copy to concerned team and suppliers.
6
After shipment, suppliers send vessels details with non-negotiable copy documents to our
Logistics Department and Bank & LC Team. Then they check the documents with LC terms and
same copies are sent to our C& F department for tracking vessel information.
C&F agent informs Bank & LC regarding vessel information and request Bank LC department
and logistics to collect original shipping documents from bank for clearing goods.
After clearance from Logistic Department regarding discrepancy of documents against LC

terms, Trade Finance team arrange for documents retirement from bank by
acceptance/payment/creating loan.
At present accounting entries are generated during document retirement as per commercial
import statement. Process up gradation is undergoing to accounting for payment against
suppliers and inventory recognition on receiving materials by warehouse.
At present documents retirement from bank is accounted as below:

JV Inventory 10,000
Bill payable-EDF/UPAS 10,000
Payment of loan is accounted as below:

BP Bills payable- EDF/UPAS 10,000
Interest Account 1,000
Bank Account 11,000
2.12 Foreign import with L/C and shipping guarantee

In most cases, goods arrived in port before documents at Bank. Beside we receive copy
documents from supplier. Accordingly we get endorsed copy documents from our Applicant
Bank by allowing shipping guarantee against blocked fund. On receiving Original documents
later on Applicant Bank pay to supplier from blocked fund.
By endorsed copy documents C&F will release materials from port.
At present transaction for shipping guarantee is not accounted.
However, following entries are under process for proper accounting:

JV Goods in transit A/C 5,000
Shipping guarantee A/C 5,000
JV Inventory A/C 5,000

Goods in transit A/C 5,000
JV Shipping guarantee A/C 5,000
7
Accounts payable-Supplier 5,000
JV Accounts payable-Supplier 5,000

Bills payable-EDF/UPAS 5,000
BP Bills payable-EDF/UPAS 5,000

Interest A/C 100
Bank A/C 5,100
2.13 Foreign import without L/C

In addition to importing raw materials through BTB L/C, we import some raw materials
through Advance payment or otherwise then LC:
Accounting entries are as follows:
BP Advance to Parties 10,000

Bank Account 10,000
JV Inventory 10,000
Advance to Parties 10,000
2.14 Foreign import with Free of cost (FOC)

In some cases, we are working on CM basis and customers send materials for manufacturing
for free of cost (FOC). We receive such materials without cost from supplier but we may have
to bear for local part of landed cost.
Generally suppliers send sample at FOC but landed cost and other cost incurred in this case.
At present these receiving are not accounted.
2.15 Sample at FOC with bulk price adjustment

Sample collection is needed to import prior to production for quality confirmation.
Accordingly sometimes supplier send sample at FOC on condition of payment with bulk
shipment. At present this are not accounted when sample is received against liability.
2.16 Foreign services without L/C

Sometimes services are taken from overseas like Lab test, third party inspection, training fee or
others. In this regard, we pay through FTT/FDD.
Accounting entries for the expenses are as follows:

JV Lab test / Inspection /training fee A/C 10,000
Accounts payable-foreign 10,000
8
BP Accounts payable- foreign 10,000
Bank Account 10,000
2.17 Quality and similar claim from suppliers and customers ‘as suppliers agent’
If any fabrics or other direct materials are rejected from Q.C department, we then issue debit
note against supplier for defective or inferior quality of goods.
Our accounting entries are as follows:

JV Suppliers Account 5,000
Inventory 5,000
BR Bank Account 5,000

Suppliers Account 5,000
2.18 Price adjustments

In case of defects/quality issue of materials Merchant/Sourcing raise claims to Suppliers.
Suppliers sometimes agrees to adjust the claim with next purchase.
These RECEIPT are accounted against crediting Inventory.
2.19 Freight amount within commercial invoice price.

Importing materials with payment of Freight on suppliers account, generally freight is
separately mentioned in supplier commercial invoice. We record both separately freight and
remaining commercial Invoice value.
At present such freight value are not recorded separately but accounted properly with
inventory value.
2.20 Inspection shortage but payment as per invoice
Generally Fabric received from suppliers with Rolls with certain quantity each and Standard
group confirmed quantity after inspection by inspection team. Most cases quantity after
inspection did not matched with Supplier Invoiced Quantity and results in short receiving.
At present some cases we have to pay for full invoiced amount although shortage declaration
by Inspection Team.
9
2.21 L/C margin
In terms of importing capital machinery, spares, dyes and chemicals and others, we have to
deposit margin into bank as lien for the LC opening at the time of LC opening. Margin is
refunded, when original shipping documents are released.
In this case, bank keeps aside fund as margin and provide us advice, accordingly, we show
advance against L/C in the books of accounts.
Margin accounted as below:

BP Advance against L/C 5,000
Bank A/C 5,000
When margin is refunded by bank:

BR Bank A/C 5,000
Advance against L/C 5,000
When margin not refunded and liabilities are settled:

BP Accounts payable-UPAS//EDF 50,000
Bank a/c 45,000
Advance against L/C 5,000
10
2.30 Local Import for export orders
Accounts payable work flow chart for Local Import
2.31 Import with L/C

Documents relating to quantities received from warehouse are checked as per inventory
report, commercial invoices, pro forma Invoice and MMPO or three way matching and finally
documents are prepared for creating liabilities supplier wise into system.
When documents are checked from our end, we send Journal Voucher with related
documents to Bank & LC section for Issuance of IC as per LC terms.
Upon accepting of bill of exchange, Bank and LC section send the voucher back with
acceptance advices to Accounts Payable team.
11
Accounting entries are as below:

Accounts payable-supplier A/C 1,000
JV Accounts payable-supplier A/C 1,000

Bills payable-EDF/UPAS A/C 1,000
BP Bills payable-EDF/UPAS A/C 1,000

Interest A/C 100
Bank A/C 1,100
2.32 Import without L/C

In addition to importing raw materials through BTB L/C, we import some raw materials urgent
basis through Advance payment to Suppliers.

BP Advance to parties A/C 1,000
Bank Account A/C 1,000

Advance to parties A/C 1,000
2.33 Import with goods receiving acknowledged without receiving delivery

Some cases we endorse payment related documents i.e delivery challan, bill of exchange,
commercial invoice, packing list etc. before goods being delivered to us. Suppliers then deliver
goods to store and asks for acceptance. We confirm with warehouse whether goods are
received in our store.
On receiving approved vouchers from AP team, Bank & LC sections allow official acceptance
of back to back documents.
2.34 Sample at FOC

Most cases we collect samples from various suppliers for product development and quality
confirmation.
At present we generally do nor record receiving of sample at FOC.
2.35 Sample payment with Bulk invoice

Sometimes suppliers send samples at FOC on condition of get paid with bulk invoice price.
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At present sample receiving are not recorded at MM and payment for such invoices are
proceeded after written confirmation from Merchant or related team.
2.36 Quality and similar kinds of claim

Receiving defective materials, concerned team raise claim to suppliers.
Accordingly Debit/credit note is raised to/from suppliers.
JV AP – Suppliers account 5,000
Inventory 5,000
BR Bank A/C 5,000

AP – Suppliers account 5,000
2.37 Future or previous price adjustment

Upon raising quality claims to suppliers, sometime suppliers requested us to adjust such claim
against next purchases or PO.
At present we have accounted such claim against reducing inventory value.
2.38 Inspection shortage but payment as per Invoice

inspection did not match with Supplier Invoiced Quantity and results in short receiving.
by Inspection Team.
2.40 Procurement for export orders from EPZ

2.41 With LC and shipping guarantee
In most cases, goods arrived in port before documents at Bank. Beside we receive copy
documents from supplier. Accordingly we get endorsed copy documents from our Applicant
Bank by allowing shipping guarantee against blocked fund. On receiving Original documents
later on Applicant Bank pay to supplier from blocked fund.
By endorsed copy documents C&F will release materials from port.
At present transaction for shipping guarantee is not accounted.
However following entries are under process for proper accounting:

JV Goods in transit A/C 5,000
Shipping guarantee A/C 5,000
13
Goods in transit A/C 5,000
JV Shipping guarantee A/C 5,000



Interest A/C 100
Bank A/C 5,100
2.42 Without LC
In addition to importing raw materials through BTB L/C, we import some raw materials urgent
basis through Advance payment to EPZ Suppliers.


2.43 Inspection shortage but payment as per Invoice

inspection did not matched with Supplier Invoiced Quantity and results in short receiving.
by Inspection Team.
2.50 Goods and services procured internally for export orders
2.51 Wash
Generally washing unit under one legal entity executed washing for other legal entities.
At present internal PO or related documentation are not maintained and accordingly
corresponding accounts payable/receivable are not maintained.
Only required financial transaction with LC and related formal documents has been generated
as per requirement of Custom Department and accounted accordingly.
14
However financial transactions for FIRST SALE arrangements has been transacted and
recorded accurately.
2.52 RMG Sewing

To manage lead time and other practical reasons, garments sewing planning is coordinated
centrally and accordingly sometimes one legal entity carried sewing operation for other legal
entity’s export order.
At present internal service PO or related documentation are not maintained and accordingly
corresponding accounts payable/receivable are not maintained.
2.53 Accessories and packaging

A portion accessories and other items are manufactured internally by one legal entity and
supplied to other legal entities. At present PO is generated in most cases for internal orders.
We are yet to account for 100% intercompany transaction by receivable/payable.
2.55 Embroidery, printing etc.

Internal services for above are not recognized in books of accounts.
2.60 Transfer pricing (within LE) for export orders

2.61 Wash
Generally washing unit executed washing for other units with same legal entities.
corresponding accounts payable/receivable are not maintained for respective units.
for within legal entity as per requirement of Custom Department and accounted accordingly.
2.62 RMG Sewing

As stated above sewing planning is coordinated centrally and one business unit is carried
sewing operation for other unit within same legal entity.
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corresponding accounts payable/receivable are not maintained for respective units.
2.63 Accessories and packaging

As stated above a portion accessories and other items are manufactured internally by one
business unit and supplied to other business unit with legal entities. At present PO is
generated in most cases for internal orders. We are yet to account for 100% intercompany
transaction by receivable/payable.
2.65 Embroidery, printing etc.

Internal services for above are not recognized in books of accounts.
2.70 Local procurement for export orders

Accounts payable work flow chart for PO match Invoice
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2.71 Procurement of goods/services with PO
 Material requirement/requisition is being created by merchant department and send to
sourcing dept.
 Sourcing dept. collect quotation from supplier and prepare CS (Comparative Statement)
 Procurement committee select supplier and approve comparative statement.
 After selection, sourcing department create PO and send to respective supplier through mail
or by post.
 Supplier send the material based on Purchase Order along with Delivery Challan.
 Q.C inspect manually.
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 Audit team validate the Delivery Challan and pass the same.
 Audit team send the same to Inventory team for creating the GRN and inventory team
create GRN in the custom system.
 After receiving the documents, sourcing dept. approve and send to AP team,
 Then AP Team check the documents and create a payments request and fill up all
information (such as: Unit name, Payments type, Supplier Name, Accounting head,
Requested Persons, Bill date & Number, TDS, VDS & Bill amount and Narration)
 After creating a payments request, we send documents and payments request to audit
department.
 After received from audit dept. AP team approved the bill value, adjusted advance, TDS &
VDS and other than creating liabilities supplier wise into system. Then print out the voucher
and send to cash management for create daily payment indent.
 After receiving approved indent, along with AP voucher and bill document treasury team
print cheque as per indent and send to signing authority.
 After signing cheque then send it to the supplier manually.
 After payment is complete then send to audit dept.
 Audit team bank payment voucher check and sign and then send to AP for keep it in file.

1. When advance paid to supplier:
BP Advance to Parties (Supplier) 4,000
Bank A/C 4,000
2. When final bill received from supplier:

JV Chemical/Fabric 10,000
Accounts Payable-Local (Supplier) 10,000
3. When advance adjusted from supplier bill:

JV Accounts Payable-Local 4,000
4. When TDS/VDS deducted from bill:

JV Accounts Payable-Local 150
Tax Deducted at Source-AP 50
VAT Deducted at Source-AP 100
5. When net amount paid to supplier:
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BP Accounts Payable-Local 5,850
Bank A/C 5,850
6. When Tax and VAT paid to Govt.:

CP Tax Deducted at Source-AP 50
Cash in hand 150
2.72 Subcontract bill – Sewing, Washing, Embroidery and Mending

 Service requirement is being created by merchant department and send to Planning dept.
 Planning dept. collect quotation from service provider and prepare CS (Comparative
Statement).
 Approval committee select service provider and approve the comparative statement.
 After selection, we create work order and send to respective supplier through mail or by
post.
 When service is finished, service provider send invoice, challan copy.
 Planning dept. approved and manually send all set of documents to AP Team.
 AP team check the documents and create a payments request.
 After creating a payments request, we send documents and payments request to Audit
department.
 After receiving from audit dept. we approve the bill value and create liabilities supplier
wise into system.
 After creation of liabilities, then print out the voucher and send to cash management for
creating daily indent.
1) When advance paid to supplier:
Bank A/C 4,000
2) When final bill received from supplier:

JV Subcontract Expenses 10,000
3) When advance adjusted from supplier bill

4) When net amount paid to supplier:
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Bank A/C 6,000
2.73 Procurement of goods/services without PO

Accounts payable work flow chart for Non PO match Invoice
i)Lab test bill

Merchants send order request to Lab test service providers. Consequently, they execute
order instantly and create invoices which are sent to us monthly.
We prepare a worksheet in Excel and check prices of the test according to approved price
list and send to merchants for their comments and verifications as well.
20
After invoices are checked by merchants, invoices are sent to audit for verification, and
accounts creates a payment request in the system and is also responsible for deducting TAX
and VAT.

1. When final approve bill received:
JV Lab test Charge 6,000
Accounts Payable-Local 6,000


Bank A/C 5850

Cash in hand 150
ii) Third party Inspection

There are few types of inspections incurred in the factory premises conducted by Lab test
providers as requested by merchants.
Respective service providers issue invoices and send to accounts department for payment.
Accounts Payable send to merchants for management approval. When approved,
merchants send back to accounts department and accounts creates a payment request in
the system and invoices are sent to audit for verification.

1. When final approve bill received:
JV Inspection Charge 6,000

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Bank A/C 5850

Cash in hand 150
2.80 Local cost of imported items for export orders

2.81 LC opening related bank charges
The following charges incurred while opening LC for goods import. Usually bank deducts
those charges from respective current accounts of concern units.
 LC Opening Charge
 Bank Charge & Commission
 LC acceptance commission
 LC amendment charge
 LC Stamp charge
 Swift /Cable charge
 Handling charge
At present all above charges are accounted as expense under bank charges heading. Recently
we are working to include these costs with inventory.
2.82 Freight
Sometimes Sea/air Freight is paid in local currency to local forwarders as per logistics
departments.
At present these costs are accounted as expense under expense heading.

JV Sea/air Freight A/C 5,000
Accounts payable-Local 5,000
BP Accounts payable-Local 5,000

Bank Account 5,000
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2.83 Custom and port charges
All sorts of custom and port charges are paid by C & F agent as business unit of the group.
At present invoices are generated by C&F agent for actual expenses for reimbursements and
service receiving entity has accounts these charges as expense.
2.84 C&F agent expenses

Historically C&F agent did not invoiced for service charges as the agent is a business unit of
the group. Recently C&F has started to generate invoice for service charges.
At present these are these charged are accounted as expense.
2.85 Local transport charges

Local transport cost is incurred to carry materials form port to our site.
At present these costs are not accounted to calculate total cost of ownership of materials
imported.
JV Carrying Charge A/C 5,000
Accounts payable 5,000
BP Accounts payable 5,000

Bank Account 5,000
2.86 Loading/unloading and other expenses

Loading and unloading cost incurred for imported materials at various points. Accordingly we
pay for loading and unloading charges. At present these costs are not accounted to calculate
total cost of ownership of materials imported.
2.87 Financial Charges

Some cases financial charges are incurred up to a point of receiving materials. But at present
these financial charges are not accounted to include to raw materials cost.
Present accounting entries are as below:

BP LC Opening Charge 300
Swift charge 200
Bank Charge & Commission 500
LC acceptance commission 600
Bank Account 1,600
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3.00 Bulk procurement for deemed export
3.01 Import of Dyes and Chemicals, Paper and Accessories items etc.
Dyes and chemicals, papers, accessories packaging materials and other materials are imported
in bulk for deemed export business units like washing and accessories, etc.
General process of executing import transactions are followed as above.
JV Dyes and chemicals/ accessories/ packing materials 10,000
Cash L/C Raw materials A/P 10,000
BP Cash L/C Raw materials A/P 10,000

Bank A/c 10,000
3.02 Purchase from local market with PO

Sometimes we purchase raw materials including dyes and chemicals, accessories and packing
materials from local market with PO for deemed exporters unit.
These transactions are accounted with respective inventory items and processed as in above
2.71.
4.00 Procurement for Projects

4.01 Import for Projects
Inventory items or assets are imported with reference to specific projects either for
construction, real estate or projects for other business units. Generally project is traced in
detail for project profitability and other management needs.

JV Construction of consumable materials 10,000

Bank A/c 10,000
For advance payment to suppliers

Accounting entries are as follows;
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4.02 Local purchase for projects
The following descriptions are as per above mentioned diagram:
 Existing Material check and create material requisitions.

 Material Requirements/requisitions approve by this project team in-charge then sends to
HO Civil Construction Dept.
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 Material purchases requisition check, verify and approve by authority and send to the
procurement team for purchase.
 Procurement team collect quotation from supplier, prepare CS (Comparative Statement)
and check & approved by the authority.
 Then create purchase order and send to the vendor.
 Project, receive goods or materials from supplier against Indent and manual goods receive
challan, get pass and supplier bill send to the procurement team.
 Procurement team check and match with submitted bill by supplier.
 After checking procurement team all document sends to the AP team for payment.
 AP team make forwarding and sign and send all document to HO construction dept. for
approval.
 After receiving approved bill from HO construction, AP team send to audit team.
 Audit team check the documents, if okay then send to the cash management team for
approval sign.
 AP team. Then create payment request against approved bill and send to cash management
for create indent.
 After receiving approved indent, along with AP voucher and bill document treasury team
print cheque as per indent and send to signing authority.
 After signing cheque then send it to the supplier manually.
 After payment is complete then send to audit dept.
 Audit team bank payment voucher check and sign and then send to AP for keep it in file.

Bank A/C 4,000

JV Consumption of construction material 10,000


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Bank A/C 5,850

Cash in hand 150
4.03 Sub contract for projects

We have some construction project in different site working for our building construction and
maintenance by different sub-contractors receiving funds in advance and submitting bills as
per work in progress. After project is ended sub-contractors submit final bill for payment and
advance adjustment accordingly.
Our accounting entries are as follows
JV Advance to parties 5,000
Bank Account 5,000
BP Construction sub contract-CWIP 6,000

Advance to parties 5,000
Bank Account 1,000
5.00 CSR project related procurements

5.01 Non business procurements
We build mosque, madrasah, School, College and others as per management approval in
different location. Construction materials and other goods/services are procured from local
market for those these purposes.
Generally these expenses are accounted in business with separate headings.
6.00 Procurement of assets and CAPEX

6.01 Import of Capital machinery and others assets with LC
Capital machinery or other assets are imported following above mentioned process for LC
opening and after due management approval.

JV Capital Machinery 10,000
27

Interest Account 1,000
Bank A/c 11,000
6.02 Local procurement of capital assets and spares

We procure capital assets and spares through issuing PO from local market. Then goods are
delivered to concerned store and store receive goods and update GRN into system.
JV Capital Machinery/spares 10,000

Bank A/c 10,000
6.03 Capital expenses for existing assets

In case of additional expenses are incurred for existing assets as capital expenditure in nature,
we record such expenses as asset in related ledger of the assets. However at it may not be
possible to relate additional expenses to the assets in existing FA module.

JV Assets account 10,000

Bank A/c 10,000
6.04 Spares and other items procured with Machinery and other equipment’s
We purchase machinery and other equipment’s along with spare parts with zero value.
At present all such spare parts cost are not accounted separately as inventory.
6.05 Import of inventory items for local business
Such items are imported for non-garments business and some items for garments business.
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Bank and LC section Bank & LC section start import proceedings after due approval of
requisition/PI/PO by management.

In case of cash L/C
JV Inventory 10,000

Bank A/c 10,000
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7.00 Local Procurement of goods and services
7.01 Local Procurement of goods or services with P. O
Department
Requirement of Purchase indent (In- Approved

Functional
Start
Materials by Manual house System) Requisition
End
Department
Checked by Audit
Audit
Yes No
(Out of Sysytem)
Yes
PO create & approve

RFQ Quotations & Create Payment
Procurement
Department
by department in Approved PO sent to

Comparative Request (In-house
charge (In-house Supplier (Manual)
Statement (Manual) System)
System)
Yes
Store /Inventory
Quality & Quantity

Material receipt
Inspection Check checked through
GRN create against PO from Yes
(Manual) Delivery Challan
Supplier (Manual)
(Manual)
Received all
AP Voucher create
Request send to document along
Department
based on Payment
Payable
chief accountant for with Payment

Request No (In-
Approval (Manual) Request No
house System)
(Manual)
Approve voucher
Indent send to After payment Bill
Management
Department
receive from AP Indent create (In- Cheque prepared Payment to supplier

Cash
treasury for voucher send to

team for create house System) (In-house System) (In-house System)
Payment (Manual) Audit
Indent (Manual)
The following descriptions are as per above mentioned diagram:
30
 Material requisition/requirement is being created by Functional department in excel format
and send to store.
 After received the requisition, create purchase Indent by store in house system & then send
to audit team as a hard copy for review and approval.
 Approved indent sends to procurement team for process the RFQ quotations as well
comparative statement by manual.
 Procurement dept. collect quotation from supplier and prepare CS (Comparative
Statement).
 Procurement Committee select the supplier and approved comparative statement.
 Procurement team create PO based on approved CS & approved the same by the
department in-charge.
 Send the approved PO copy to respective supplier through mail or by post.
 Supplier send the material based on Purchase Order along with Delivery Challan.
 Quality team do the inspection manually.
 Audit team validate the Delivery Challan and passed the same and send to Inventory team.
 After received, Inventory team create GRN in house custom system and send to
Procurement team.
 Procurement team create the Payment Request and send all set of approved documents to
AP team.
 Then AP team, check the documents and fill up all information in payments request form
(such as: Unit name, Payments type, Supplier Name, Accounting head, Requested Persons,
Bill date & number, TDS, VDS & bill amount and Narration)
 Then approve the bill value, adjust the advance, TDS & VDS amount and create liabilities
supplier wise into system.
 After create liabilities, print out the voucher and send to cash management for creating
daily payment indent.
 Chief Accountant approve the AP Voucher and send to Cash Management team.
 Cash Management team create Indent in the system.
 In the indent Bank Name, Account number has been mentioned by the cash management
team.
 Then send this to Treasury team manually for payment.
 In the system, they prepared the cheque & the send to supplier manually.
 After payment Bill Voucher send to audit team for post audit.
BP Advance to Parties 4,000
Bank A/C 4,000
31
JV Material/Service 10,000


VAT Deducted at Source-AP 1,000

Bank A/C 4,500

VAT Deducted at Source-AP 1,000
Cash 1,500
7.02 Local Procurement of goods or services without P.O

We pay for some goods and service without PO or work order. Some example of payment
without PO is as below:
i) Insurance premium:
Insurance cover note is required when opening BTB L/C. To do so, Bank L/C department assess
the insurance cost based on invoice price and submit documents to Insurance Company.
Afterwards, we pay to Insurance Company against insurance cover note through consolidated
advance.
After month end, they submit bills along with cover note, then we adjust the advance.

BP Advance to party 6,000
Bank Account 6,000
JV Insurance expense A/C 5,000
32
Advance to party 5,000
ii) Utility bill:
Factory Accounts dept. receive audited bill and send through mail set of documents of
(Electric or Gas bill) to AP team.
After receiving the documents we create a payments request and fill up all information (such
as: Unit name, Payments Type, Accounting head, Supplier Name, Bill number & date, amount
and Narration)
After creating a payments request, we approve the bill value and create liabilities supplier wise
into system. After liabilities creation, then print out the voucher and send to cash
management for creating daily payment indent.
i. When final bill received from supplier:

JV Utility Bill 10,000
ii. When TDS/VDS deducted from bill:


Cash at Bank 9,500
iii) Factory medical treatment:

Factory Accounts receive the treatment sheet from Medical dept. AP team receive monthly
treatment summary from factory accounts. Then every month service providers submit
medical bill to AP team. After receiving the documents, we match these two reports and send
to audit department. We create liabilities into system after audit verification. As per summary
sheet factory accounts receive due amount from employees and give entries into register
manually and auditor verify register day to day as well.

a) When cash received from Employee (monthly entry to cash book):
CV Cash in Hand - Factory - Liquid Cash 10,000
33
Head Office remittance 10,000
b) Alternatively HO Cash book entry:

JV Factory Remittance 10,000
Provision for Medical Bill 10,000
c) When final bill received from supplier:

JV Provision for Medical Bill 10,000
d) When amount paid to supplier:

Bank A/c 10,000
iv) Medicine Bill

Factory Accounts receive the deduction summary from medical dept. against medicine. After
receiving the audited summary they collect due amount from employees at the end of the
month. After collection, they remit to head office.
a) When purchased medicine
JV Medicine (inventory) 15,000
b) When pay to supplier

Bank A/C 15,000
c) When cash received from Employee and sent to Head office:

CR Cash in Hand - H/O - Liquid Cash 10,000
Medicine-Inventory 10,000
v) Air Ticket (Travelling) Bill

Admin dept. manually send set of documents of supplier bill, E-ticket, etc. After receiving the
documents we create a payments request and fill up all information (such as: Unit name,
Payments Type, Accounting head, Supplier Name, Bill number & date, and Narration). After
creating a payments request, we send the documents and payments request to Audit
department. After receiving from audit dept. we approve the bill value and create liabilities
supplier wise into system.
34

JV Airfare exp. 5,000
2. When pay to supplier:

Bank A/c 5,000
vi) Mobile Expense
Employees are allowed to use corporate mobile SIM up to a certain amount that is considered
mobile expenses monthly. Furthermore, Employees are seen to use more than the limit they
have. That is adjusted with their salary as well.
Mobile operator sends monthly mobile bill to us and after audit verifies HR data. Accounts
payable creates a payment request in the system. Initially payment is made from a particular
company and afterwards adjustment is made among sister concern units.
In this circumstance, our accounting entries are as follows:
X Unit:
i. When mobile bill received from supplier:
JV Mobile expenses 8,000
Sister concern unit-Y 2,000
ii. When amount paid to supplier:

Bank A/C 10,000
Y Unit:
i. When sister concern unit book expenses:
JV Mobile expenses 2,000
Sister concern unit-X 2,000
vii) Freight and B/L Charge (Export)
We pay advance for air Freight and B/L Charge in local currency to local forwarders as per
export departments.
Finally these costs are accounted as expense after advance adjustment.
35
vii) When advance paid to supplier
Bank A/C 5,000
viii) When final bill received from supplier
Air Freight-outward or B/L Charge 5,000
ix) When advance adjusted from supplier bill

vii) Freight (Import)

Sometimes Sea/air Freight is paid in local currency to local forwarders as per logistics
departments.
At present these costs are accounted as expense under expense heading.
JV Sea/air Freight A/C 5,000
Bank Account 5,000
7.03 Procurement from Inter-companies and inter unit

When any unit requires to procure anything from inter companies or inter unit, this particular
unit issues P.O/W.O for the services.

JV Repairs & maintenance (electrical) 10,000

Bank Account 10,000
36
7.04 Discount/ Freight
Sometime suppliers allow discounts after PO price and we adjust such discounts with invoice
value.
Sometimes we bear local carrying cost in addition to PO price and record such cost as
expense.
7. 05 Intercompany/unit expense allocation

Certain goods or services are procured at Group level such for diesel, mobile, cash carrying
etc. Accordingly we pay for total invoice from a particular unit.
Such expenses are allocated monthly within intercompany units on the basis of use by manual
calculation.
7.06 Maintenance expenses with reference to specific assets/utilities

We have different types of assets in our business and there are many assets for which
maintenances are required periodically but, currently expenses are not being booked asset
wise.

JV Repairs & maintenance-Assets 10,000
2. When amount paid to supplier:

Bank A/C 10,000
7.07 Vehicle maintenance expenses with tracking vehicle reference

We have more than 300 vehicles which are used in our organizations and therefore
maintenances are required periodically. All expenses incurred regarding vehicle maintenance
are booked unit wise and vehicle number wise.

JV Repairs & maintenance-Vehicles 10,000
2. When amount paid to supplier:

Bank A/C 10,000
37
7.08 Purchase without supplier
In some cases, we pay advance (IOU) to our employees for emergency purchase. Respective
departments purchase different kinds of materials from suppliers. After purchase, they submit
approved bill to treasury for adjustment.

JV Cash in hand-IOU (Employee) 10,000
Cash in hand 10,000
BP Materials 10,000
Cash in hand-IOU (Employee) 10,000
7.09 Payroll related invoice

When employees resign or retire from their services, payroll team prepare a final settlement as
per salary sheet, deduction sheet. After documentation, they send the set of documents to
Audit.
On receiving the documents from payroll, we create a payment request and create liability
into system employee wise
i. When final settlement amount creating a liabilities:

JV Salary & Allowance 5,000
Earn Leave 500
Service Benefit (both debit and credit) 200
Notice Pay 1,000
Salary & Allowances-AP 4,700
ii. When net amount paid to Employee:

BP Salary & Allowances-AP 4,700
Cash at Bank 4,700
8.00 Tax and VAT
38
8.01 Withholding Tax
At present we calculate and deduct withholding manually from supplier’s invoice as per
Income tax regulation and accordingly we deposit deducted amount into govt. treasury
through treasury challan. After depositing TAX to national exchequer, we gave copy of TR
Challan and Tax certificate to respective supplier.
In case of advance payment we only set aside taxable amount from advance. After final bill is
submitted, we create Tax payable into system and consequently we deposit into Govt.
treasury.
Accounting entries are as follows

JV Material Purchase A/C 1000
A/C Payable 1000
JV A/C Payable 100

TDS Payable A/C 100
BP A/C Payable 900
39
Bank A/C 900
CP TDS Payable A/C 100

Cash A/C 100
8.02 Withholding VAT

Like withholding tax, withholding VAT required to be deducted and deposited to Government
treasury for procurement of certain goods and services. Accordingly we deduct from and
create VAT payable into system and finally we deposit into Govt. treasury.
Accounting entries are as follows

JV Material Purchase A/C 1000
A/C Payable 1000
BP A/C Payable 800

Bank A/C 800
JV A/C Payable 200

VDS Payable A/C 200
CP VDS Payable A/C 200

Cash A/C 200
8.03 Periodic VAT reporting with expense

Generally vat amount is included in invoice price and we pay total invoice price against
expense or inventory.
During submission of vat return we need to include total amount vat paid for procuring goods
or services within invoice price and we report such amount by manual calculation.
Finally vat department coming to us at any point of time and request us to give a statement of
total vat paid as per audited financial statement. As present we prepare such statement
manually with physical checking of every voucher.
9.00 Bank Guarantee and Shipping Guarantee
40
9.01 Bank Guarantee
Generally bank is issued for utility connection, tender submission or any types of contract as
required. Accordingly we request Bank to issue bank guarantee in favor of requested
authority. Bank generally issue guarantee after getting certain percentage as Margin in FDR.
9.02 Shipping Guarantee

As stated earlier shipping guarantee is generally issued by Bank as per our request to release
goods from port without Original documents from supplier.
AP present liability for shipping guarantee is recorded manually as a statement but not
recognize in books of accounts.
9.03 FDR lien for Guarantee

When we require bank guarantee, and then request to bank for issuing bank guarantee. In this
regard, bank creates a FDR against bank guarantee. This FDR remains lien against bank
guarantee.
Our accounting entry are as follows:
BP FDR A/C 50,000
Bank A/C 50,000
BP Bank charge 1,000

Interest expense (B. guarantee) 500
Bank A/C 1,500
BR Bank A/C 60,000

Interest income 10,000
FDR A/C 50,000
10.00 Invoicing Currency

10.01 Foreign currency Invoice
We generally import raw materials, capital machinery, spare parts and pay against those in
USD or any other foreign currency. At present we record the invoice in foreign currency with
exchange rate.
10.02 Invoice currency other than payment currency

Some cases invoices generated by supplier in a foreign currency other than currency of bank
accounts.
41
In this cases we manually convert invoicing currency to USD and record in existing system.
11.00 Invoice approvals

11.01 Invoice approvals
Firstly, we create invoice into system for payment and take a print copy of the voucher along
with approved documents with signature and send to our chief of accounts for invoice
approval coupled with we send invoice information through in house system.
11.02 Batch approvals

We create single invoice into system supplier bill wise and take print copies of the vouchers
with signature and send to our chief of accounts through in house system, our chief of
accounts incorporate all single invoices and create a batch for approval. There is an option in
our in house system which our COA selects and system itself forms a batch with all
incorporated invoices.
11.03 Invoice Hold

When we need to hold invoice, we inform our chief of accounts of the invoice and they do not
send into our daily indent for payment.
12.0 Payments
12.01 Scheduling of payment
Some time we manually schedule for local supplier payment, then we pay as per manual
schedule.
Accepted bill and some other liabilities has paid on maturity or a certain prescheduled date.
Some of these are schedule maintained as a statement in existing Software.
12.02 Daily payment planning with bank balance

After creating invoice and submitting to our chief of accounts, they make a plan with all
invoices waiting in cue to as per bank balance of a particular day. As per their payment
schedule, they create daily indent in our system.
12.03 Multiple payment for one invoice or group of invoice

Some time we generate multiple payment at different dates for a single invoices or group of
invoice for same supplier.
12.04 Multiple Invoices paid together

After batch approval, our chief of accounts send into daily indent and treasury print out a
group invoice and cheque for payment to suppliers.
 As per daily indent, cheques are printed from in-house custom systems.
42
 Even for multiple invoice payments, users individually select the invoices from the list of
values in the Indent.
 Treasury team takes the bank payment voucher printout and then along with the cheque
send to authorised signatory.
 After getting approval cheque disburses to supplier and collect money receipt.
 Payment to the domestic supplier is generally made through pay order, Cheque and Cash.
12.05 Payment for other business unit or company

In some cases, we pay to supplier from other concern unit when fund is insufficient. In this
case, we select bank account of other concern unit for payment and our in house system
automatically create a journal entry into the concern unit.
X Unit:
JV Materials Accounts 1,000
JV Accounts payable 1,000

Sister concern unit-Y 1,000
Y Unit:
BP Sister Concern unit-X 1,000
Bank Account 1,000
12.06 Payment notification

At present we manually notify our suppliers to inform to take their instrument when it
becomes ready.
12.07 Advance payments

 For advance payment, Procurement department send the PO copy and payment request for
pre-payments.
 When actual invoice is received purchasing department also specifies the advance already
taken and create payment request and send to AP team.
 For advanced payment TDS/VDS amount deduct from bill and adjustment with final bill.
BP Advance to Supplier A/C 500
Bank A/C 500
JV Expense A/C 1,000

Accounts payable A/C 1,000
43
JV Accounts payable A/C 500
Advance to supplier A/C 500
BP Accounts payable A/C 500

Bank A/C 500
12.08 Payment by new bank liability of UPAS/EDF/Deferred

When we pay to suppliers at sight basis, then bank on our behalf pays to suppliers and on the
contrary bank gives a credit facilities in UPAS or EDF forms as negotiated with bank.
Consequently we pay the amount with interest at maturity. In terms of deferred payment,
bank pays the amount on due date from our FC account as negotiated with suppliers.
12.09 Payment by bill of exchange

In terms of LC payment, seller issues bill of exchange that conveys payment order to us and
we pay to supplier for goods at maturity. In this case, we duly sign at the back page of the bill
of exchange and liability to suppliers becomes bills liability.
Afterwards, sellers submit bill of exchange to banks and bank pays the amount accordingly.
12.10 Payment by Cheque/PO/FDD

 Cheque: As per daily indent, cheques are printed from in-house custom systems.
 Treasury team takes print out of the bank payment voucher along with the cheque and
send to authorised signatory.
 After getting approval cheque are delivered to suppliers and in return, we collect money
receipt.
 Pay Order/FDD: Payment to the suppliers is generally made through pay order/FDD. After
getting approval from authorised signatory, corporate team advise bank to make Pay
Order/FDD for the suppliers. Bank prepares pay orders/FDD. Supplier collects pay order
from Treasury.
12.11 Payment by BEFTN/RTGS/TT/Wire transfers/bkash

In some cases, we pay to suppliers through BEFTN/TT/wire transfers. We use RTGS system for
fund transfer within our business units. To do so, we have to fill out a bank prescribed form
with approval and send to our concern bank.
44
12.12 Payment with personal Credit cards
Payment against Compliance services is made overseas through online credit card payment.
When we receive req. by mail from compline dept. with online link. After payment is done we
maintain accounting entry as below:

1. Fund deposited to card account:
BP Directors current A/C 6,000
Bank A/C 6,000
2. When expenses charged

JV Expenses A/C 6,000
3. Supplier payment from card:

Directors current A/C 6,000
12.13 Payment in Cash

Employees are generally given advance in cash for travel related expenses which is also
adjusted (remaining balance) in cash after the travel. Also, other employee expenses are paid
in cash. In case of small amount, supplier is also paid in cash. In some cases, employees are
given IOU (advance) for official requirement. After finishing the work, employees submit the
bill and adjust their IOU.
1. When cash paid to employee:
CP IOU (employee name) 6,000
Cash A/C 6,000
2. When bills submitted for adjustment

JV Expenses A/C 6,000
IOU (employee name) 6,000
12.14 Petty expenses payment

There are too many petty expenses incurred in a day and therefore we keep aside a petty cash
to meet those expenses and we usually reconcile end of the day.
45
1. When cash paid for petty expenses:
CP Entertainment/ refreshment/ conveyance 6,000
Petty Cash A/C 6,000
12.15 Refund from Suppliers and others

Sometime suppliers refund against advance or for other reasons.
46

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Contents

12.01 Scheduling of payment...................................................................................... 39

2.11 Foreign Import with L/C

After clearance from Logistic Department regarding discrepancy of documents against LC

At present documents retirement from bank is accounted as below:

Payment of loan is accounted as below:

2.12 Foreign import with L/C and shipping guarantee

However, following entries are under process for proper accounting:

JV Inventory A/C 5,000

JV Shipping guarantee A/C 5,000

JV Accounts payable-Supplier 5,000

BP Bills payable-EDF/UPAS 5,000

2.13 Foreign import without L/C

Accounting entries are as follows:

BP Advance to Parties 10,000

2.14 Foreign import with Free of cost (FOC)

2.15 Sample at FOC with bulk price adjustment

2.16 Foreign services without L/C

Accounting entries for the expenses are as follows:

Our accounting entries are as follows:

BR Bank Account 5,000

2.18 Price adjustments

These RECEIPT are accounted against crediting Inventory.

2.19 Freight amount within commercial invoice price.

Margin accounted as below:

When margin is refunded by bank:

When margin not refunded and liabilities are settled:

2.31 Import with L/C

JV Inventory A/C 1,000

JV Accounts payable-supplier A/C 1,000

BP Bills payable-EDF/UPAS A/C 1,000

2.32 Import without L/C

Accounting entries are as below:

JV Inventory A/C 1,000

2.33 Import with goods receiving acknowledged without receiving delivery

2.34 Sample at FOC

At present we generally do nor record receiving of sample at FOC.

2.35 Sample payment with Bulk invoice

2.36 Quality and similar kinds of claim

BR Bank A/C 5,000

2.37 Future or previous price adjustment

2.38 Inspection shortage but payment as per Invoice

2.40 Procurement for export orders from EPZ

However following entries are under process for proper accounting:

JV Inventory A/C 5,000

JV Shipping guarantee A/C 5,000

JV Accounts payable-Supplier 5,000

BP Bills payable-EDF/UPAS 5,000

Accounting entries are as below:

JV Inventory A/C 1,000

2.43 Inspection shortage but payment as per Invoice

2.50 Goods and services procured internally for export orders

2.52 RMG Sewing

2.53 Accessories and packaging

2.55 Embroidery, printing etc.

2.60 Transfer pricing (within LE) for export orders

2.62 RMG Sewing

2.63 Accessories and packaging

2.65 Embroidery, printing etc.

2.70 Local procurement for export orders

Accounting entries are as follows:

2. When final bill received from supplier:

3. When advance adjusted from supplier bill: