ICFAI BUSINESS SCHOOL, MUMBAI

Optimization of Accounting & Financial process of a Construction Company
Grace Group of Companies
Abhishek Kacharia

2008-10

summer internship program

A REPORT ON OPTIMIZATION OF ACCOUNTING AND FINANCIAL PROCESS FOLLOWED IN A CONSTRUCTION COMPANY

Submitted to:
Dr. G.C. Nag Faculty member ICFAI Business School

Submitted to:
Mr. Naved Patel Accounts Manager Grace Group of Companies

Submitted by: Abhishek Kacharia 08BS0000111

ICFAI BUSINESS SCHOOL, MUMBAI

Page 2

ACKNOWLEDGEMENT
I wish to acknowledge my indebtedness to my project guide Mr. Naved Patel, Accounts Manager, Grace Group Of Companies and faculty guide Dr. G.C.Nag, ICFAI Business School, Mumbai without whose sincere guidance and support this project would not have been a success. Thanking them is a small gesture of generosity shown. I’m also extremely grateful to Mr. Sameer and Mr. Anand (Accounts Executives, Grace Group of Companies) for helping me and providing me useful information. By interacting with them I learnt important and useful business tips which will help me in a long way in enriching my career. Finally, I take this opportunity to thank the entire senior executives’ team and every associate of Grace Group Of Companies, who have helped me directly and indirectly during this period of project preparation.

DECLARATION
ICFAI BUSINESS SCHOOL, MUMBAI Page 3

MUMBAI Page 4 . Mumbai. This project has not been submitted elsewhere for any award or any degree. Mumbai. Grace Group Of Companies) and Dr.I do here by declare that this project is submitted as a part of my summer internship program for the MBA program from ICFAI Business School. G. Date: ___________________ Signature of the Student TABLE OF CONTENTS ICFAI BUSINESS SCHOOL. Naved Patel (Accounts Manager.Nag. faculty member of ICFAI Business School.C. The project has been done under the able guidance of Mr.

& Limitations 2. & professional fees. Scope. Making e-TDS payment. Cheque Preparation 3.27-31 a.A Detailed Account…………………………7-9 Introduction ………………………………………………………………10-12 1. Filing TDS return. suppliers. Partner’s Capital Account c. Purpose. Observation of the Company 2. Balance Sheet Analysis & Interpretations……………………………………………. b. Posting in Tally 5.6 Grace Group of Companies.Abstract ………………………………………………………………………. Du Point Analysis ICFAI BUSINESS SCHOOL. MUMBAI Page 5 . TDS deduction from contractors. Observation of the accounting system followed The Accounting Process followed………………………………………16-27 1. Profit & Loss Account To be covered in final project. & 8. 7. Sources & Methods Main Text…………………………………………………………………13-15 1. 6. Posting in Passbook 4. Voucher Preparation 2. Finalization of Accounts a.

………………………………………………………………34 References ………………………………………………………………………..b. MUMBAI Page 6 . Economic Value Added Analysis Findings…………………………………………………………………………32 Conclusions …………………………………………………………………….36 ICFAI BUSINESS SCHOOL.35 Glossary ………………………………………………………………………….33 Recommendations To be covered in final report.

Since the first day when I started my internship. the company structure. ICFAI BUSINESS SCHOOL. At this point I feel it’s very fundamental to acquaint to the reader that the very chief objective of my project was to analyze the accounting and financial process followed in a construction company and also sound maintenance of books of accounts which in turn will help the company in maintaining financial stability as well as find out the best company from its bunch of companies. etc. Doing everything on computer rather than manually as in classroom was a very different experience. at what rate. For example how the tax were deducted at source.” So is the case with me as I being a fresher entered the corporate world and found it very different from the world of classroom. its method of maintenance of books of accounts. and most importantly how these were paid through electronic media and also their filing with the Income Tax Authority. etc. Going strictly as per the schedule I started my project with finding out the type of accounting methodology adopted by the company. till this day I have ceaselessly but unremittingly kept on imbibing and garnering the basics of the construction company. As my project is mainly based on observation. professional service providers. Then I started off with preparing vouchers and cheques for the transactions. and the company. MUMBAI Page 7 . After getting the very primary knowledge of the initiation of the accounting process I jumped to make the entries of those transactions into the company passbook. interaction so to work more precisely on my project topic I learnt Tally Accounting Package from one of executives at the company. After getting conversant with Tally I started to learn about the transactions between the suppliers.ABSTRACT OF THE WORK TILL DATE As James Cash Penny very rightly said.” It is always the start that requires the greatest effort.

Road. khar Andheri East Completion Year 1999 2000 2000 2001 2001 2002 2002 2002 2003 2003 2003 Page 8 ICFAI BUSINESS SCHOOL. Bandra Ahimsa Marg. Parvez S Lakdawala. Bandra Almeida park. Bandra Off Linking Road.GRACE GROUP OF COMPANIES – A DETAILED ACCOUNT The Grace Group of Companies is a premier construction company in the city of Mumbai. Bandra Almeida park. Moreover the company has 37 sub-companies under its name. Bandra Station Road. Bandra Almeida park. MUMBAI . khar Hill Road.V. Residential Residential Residential Residential Residential Residential Resi/Comm Residential Residential Resi/Comm Location S. The company is a partnership firm registered under the Indian Partnership Act 1932. etc. The company is very famous with its projects going in Mumbai as well as in places adjoining Mumbai like Lonavla. The company was established in the year 1989 by the promoter Mr. Let’s have a look at the track record of the company. COMPANY’S TRACK RECORD Projects God Gift Tower Grace Apartment Sadanand Classic Ayesha Manor Razia Manor Reminess Grace Classic Shams Palace Murli Govind Anand Sagar Bemisal Residential/Commercial Resi/Comm. The company is into building new apartments as well as developing the slums and rehabilitating the slum dwellers. Bandra Off Linking Road. Panchgani. The company makes commercial as well as residential buildings at very posh areas of Mumbai. Bandra Almeida park.

Bandra Almeida Park. khar 16th Road. khar Bandra Station Almeidapark.Bandra 25th Road. Bandra MIDC. Mazgaon Taha Co-op Hsg Society. Guru Nanak Park. Bandra Kit-Kat wadi. MUMBAI Total area being developed 800000 sqft 70000 sqft 50000 sqft 20000 sqft 25000 sqft 30000 sqft Page 9 . Mazgaon Tulsiwadi. Grant Road 2003 2004 2004 2006 2006 PROJECTS UNDER CONSTRUCTION Projects Prima Villa Queenie Jawaharabad Grace Heritage Grace Plaza Gildana Ann Villa Location 7th & 8th Road. Road. Carter Road Vertical Towers. Bandra Alibhai Premji Marg. Bandra 30th Road. Byculla S. Bandra ICFAI BUSINESS SCHOOL. Andheri East 29th Road. Bandra Completion expected by March 2008 March 2008 March 2008 March 2008 March 2008 March 2008 March 2008 PROJECTS UNDERTAKEN Location Tadwadi. Bandra Jalsagarika. 1st Road.Grace Residency Aradhana Sheetal Palace Neel Mahal Grace Heights Residential Residential Residential Residential Residential 21st Road.V.

445 tenants Durgamata CHS. 29 tenants Area to be developed 600000 sqft.16th Road. MUMBAI Page 10 . Malad 23000 sqft 48000 sqft 99000 sqft PROJECTS UNDERTAKEN UNDER THE SLUM REHABILITATION SCHEME Projects Malad. 30000 sqft ICFAI BUSINESS SCHOOL. Prabhadevi. Mahakali Nagar 1155 tenants Andheri Tape Village. Bldg No. Wadala. Bandra Manish Nagar. 135 tenants Sanyukt Ekjut Griha Nirman Sanstha.21 Andheri (W) Village Valani. 250000 sqft. 200000 sqft.

Likewise my project on analyzing the accounting and financial process of the company largely and immensely depend upon how acutely I get into the company structure. Posting of transactions in passbook. 1. Now if I visualize my project to be a structure then it’s pretty clear that in order to raise a structure one needs to layout its groundwork first because it is the aspect of supreme importance without which no superstructure can permanently last. Posting of transactions in Tally. MUMBAI Page 11 . Making e-TDS payment. during that session a well planned schedule was chalked out by the duo. the method of accounting followed in recording the transactions of business . Learning cheque preparation. For this thing I used substantial amount of my tenure in studying some documents of the company which were of help to me.Com graduate was able to analyze it more acutely. g. e. Learning voucher preparation. Maintaining proper books of accounts will help the company in analyzing the true income and also help in maintaining its financial position as firm and strong as possible. 2. The purpose further extends to maintenance of books of accounts in a very apposite manner. d. SCOPE & LIMITATIONS:‘Everything happens with a reason and a purpose. so was my project having a very firm reason and purpose which was aimed at serving the organization as well as me as an experience. b.INTRODUCTION PURPOSE. c. f. Preceding the above my company guide suggested that I should the start of as follows:a. Now this immensely depends on your educational background as I being a B. I suggested that first of all I should study the structure of the company and the method of accounting followed by the company. Regarding the scope of the project I was briefed by my company guide on day one. & ICFAI BUSINESS SCHOOL.’. and it serves you. Filing TDS return. TDS deduction from contractors and suppliers. The focal point of my project was to analyze the accounting and financial process followed in the company.

I also used to study the partnership deeds and the sale deeds to get into the intricacies of the suggested topic. He guided my footsteps whenever and wherever I stumbled on the way to my objective. so knowledge relating to that was also very limited. was the sole source of everything which was important for my easier-said-than-done project to materialize. so the methodology is mostly related to observation method. Doing the above adjustment will also result in strengthening the financial position of the individual companies and also of the group as a whole. By observing the book of accounts I can make adjustments to reduce the expenses and increase the revenue thereby. Finalization of Accounts. Interaction with the other executives at the accounts department also helped me a lot. i. I faced quite a number of adversities and problems during the tenure of my project. Available at my disposal were the data fed into the Tally accounting package as well as the Partnership deeds. The project is mainly considered with maintaining of books of accounts. As far as limitations are concerned. Profit and Loss Account. Even the company did not deal in some important matters like Value Added Tax (VAT) so the exposure relating to VAT was missing. I used to study for long hours the data in the Tally Package to extract as much as basic knowledge for my project. There were whole lot of things to study in detail but the time was not permitting as such time was a big constraint. ICFAI BUSINESS SCHOOL. my respected company guide. ii. & Balance Sheet.h. SOURCES AND METHODS:“Naved Patel”. Partner’s Capital Account. MUMBAI Page 12 . As the group is a partnership firm so they don’t deal in Provident Fund. There was as such no exposure relating to Service Tax. iii.

etc. was conferred with the responsibility of greeting the people dropping in. MAIN TEXT This place under the heading main text is the most appropriate place for me to pour my heart out and acknowledge my observation with due integrity and earnestness. I used to make entries in Tally and find out various ratios. Similarly I gradually got to know about the roles and duties of Accounts Executives. In a nutshell. their suggestions. the Legal Advisor. addressing the grievances relating to the tenants. I have segregated the different aspects of the observation into different sub headings. In process I came to know the rationale behind the posters of building projects which were displayed across the company premises. MUMBAI Page 13 . I commence with the discussion about: OBSERVATION OF THE COMPANY I first went through the structure and function of the company who’s over all ambiences was aesthetically maintained. ICFAI BUSINESS SCHOOL. A brief amplification of the roles and the functions of the various employees will be a welcome step here. Company Head.The methodology of the project will also include interaction with the other officials working in the Accounts Department so as to elicit and gather more knowledge and information regarding my project. I tried to elicit the information as to which part or the aspect of the business activity is taken care of by whom. During the project I was also given a golden opportunity to learn Tally which helped me a lot in the project. After observing the company meticulously I went to those particular places wherein different employees were stationed to cater to the various needs of people coming in. for an instance. the method of my project was mainly interaction with the accounts officials and observing how the accounting treatment of the business transactions was done. at length. etc. Accounts Manager. Here I have made up my mind to discuss my observation work. Person in charge of welcome desk. including the sessions of interaction with the accounts executives.

If the business buys goods on ICFAI BUSINESS SCHOOL.Com days I have learnt that there are types of methods of maintenance of books of accounts.& 3. the business only records the purchase of supplies or goods that will later be sold when actually cash is paid. Hybrid or Mixed basis. As such accounting is called the language of business. and analysis of financial statements of a business. I think it is very necessary to describe all three and then decide which method the company follows. 2. They are mainly concerned with the day to day recording of business transactions and maintaining and keeping the books of accounts up to date. 4. Mercantile or Accrual basis. cheque. electronic transfer. He looks after the legal works. Accounts Executives: These people are the backbone of the Accounts Department. All the executives report under him. transactions are recorded in the books when cash actually changes hands. 3. reporting. With the cash-basis accounting method. or other means used to pay for a transaction.1. Cash basis. At this point. meaning when cash payment is received by the company from customers or paid out by the company for purchases or other services. credit card. 2. He is the person with absolute authority and responsibility who is expected to be a jack of all trades for in case the team deviates from the target set he provides them with the required direction. Cash receipt or payment can be in the form of cash. OBSERVATION OF THE ACCOUNTING SYSTEM FOLLOWED: Accounting is nothing but systematic recording. Accounts Manager: He is the head of accounts department. MUMBAI Page 14 . They also look after the entire back office job of the accounts department. Mainly he looks into all documentation and cases relating to small causes with the tenants as well cases of concerned with the MCGM like obtaining NOC. Company Head: A Company Head is the alpha and omega of the entire company. They are namely: 1. He looks and supervises the work of the accounts executives. Legal Advisor: The legal advisor is the main legal person of the company. etc. They act as assistants to the Accounts manager in the department. Under the cash basis of accounting. In my B.

if you sell on store credit. Revenue is realizable means that it is reasonable to expect that cash will be received in the future. revenues and expenses are recognized as follows:  Revenue recognition: for recognizing revenue two conditions are needed to be met. For example. Revenues is actually earned when goods or services is sold whereas revenue is realized when cash is received. it doesn't get recorded as a transaction until the cash is actually paid out. & b) Revenue is realized or realizable. a) Revenue is actually earned. you record the transaction immediately and enter it into an Accounts Receivable account until you receive payment.credit to be paid later. So we can say that accrual basis of accounting is good when it comes to cash flow tracking and also following the Matching Principle. If you buy goods on credit. For example supplies purchased in this month but are sold in next month. even if no cash changes hands. you immediately enter the transaction into an Accounts Payable account until you pay out cash. so here the matching principle becomes ineffective.  Expense recognition: expense is recognized in the same period when the related expense is recognized. Cash basis of accounting is good when it comes to tracking the cash flow in the business but it becomes ineffective while matching the revenue with the expenses. Grace Group of Companies follows the accrual system of accounting in its daily business for recording the transactions. The Hybrid or Mixed basis as the name suggests is mix of both the bases. Whereas under the accrual basis of accounting we record all transactions in the books as and when they occur. As the company is a mid-sized business and it is needed to keep an ICFAI BUSINESS SCHOOL. Under the accrual basis accounting. MUMBAI Page 15 .

(with which the transaction will be carried on in case of bank transactions) Cheque number. Date. A typical voucher has the following items to be filled: • • • • • • • • • Company name. Bank. A few of the additional benefits of accrual basis are as follows: • Greater focus on the business output. so accrual basis helps in this sense a lot.accurate picture of the company’s profitability on a regular basis. Account head of the party with whom the transaction is to be carried on. THE ACCOUNTING PROCESS FOLLOWED VOUCHER PREPARATION: Every accounting process starts with preparation of vouchers. A short narration of the transaction. MUMBAI . The company records the revenues matching it with the expenses in the same period of occurrence. Amount of the transaction. not the input. Name of the person passing it. Vouchers or Journal vouchers or General vouchers as called with different names are just a document or a proof that will be recorded in the accounting system. This helps to give a true and fair picture of the business income and also the financial position which in turn help the senior executives to plan out schedule for further investment and retention. Name of the person preparing it. • The full cost of providing your product or service can be compared across industry standards. just to name the most common. • More cost-effective and efficient use of resources. • Improved accountability and better financial management. & Page 16 ICFAI BUSINESS SCHOOL.

As such a debit voucher is prepared whenever any transaction is to be carried on with the supplier to supply materials. A cheque is a negotiable instrument which consists of an order to the particular bank to pay the mentioned amount to the mentioned person. so in case if there is any internal transfer of funds from one company account to the other company account within the group then both red debit and yellow credit voucher are prepared. A debit voucher is again segregated into cash and cheque vouchers used specifically for the kind of transactions. After the voucher for a transaction is authorized. or factors owe to business or it can be said as the amount which leads to increase in assets or decrease in liability. CHEQUE PREPARATION: Next comes in the sequence is cheque preparation. As such a credit voucher is prepared whenever we are to receive some amounts from others on credit thereby increasing our liability. MUMBAI Page 17 . Further the cash debit vouchers are colored green. To make it simpler the company has again segregated the vouchers into different colors. A cheque usually consist the following things: ICFAI BUSINESS SCHOOL. The company account from where funds are transferred represents the red debit voucher and similarly the company account receiving the funds is represented by the yellow credit voucher.• Name of the person approving it. for instance the debit vouchers are colored red. In a nutshell a voucher is an authorization of any transaction. A debit voucher indicates amount to be paid by the business which represents decrease in liability. It serves in audit trail. Generally vouchers are of two types namely: • • Debit voucher. suppliers. In similar lines a credit represents the amount business owes to others or it can be said that credit represents increase in liability or decrease in assets. For example as the group has 35 sub companies under its name. A debit as the name suggests represents the amount lenders. It is also used as a future reference. & Credit voucher. It represents an amount of loan taken. and the credit vouchers are colored yellow. then the cheque is prepared. as all the information regarding a particular transaction is available.

This is maintained so as keep a strong proof as such a proper documentation of transaction.e. The party to whom the cheque is endorsed is called the endorsee and the person endorsing it is called the endorser.• • • • • • Drawee i. The company also maintains its own manual passbook where all the transactions are entered as and when they occur. ‘Endorsed to Mr. MUMBAI Page 18 . Endorsement of cheque refers to transferring the ownership of cheques. Whenever the company receives cheque payments it prepares deposit slips to keep a more detailed track of the cheque. ‘A/C Payee’. Transaction date. of which one is submitted with the bank and the other is kept with company for future reference. . This can be done by simply writing on the back of the cheque. A pair of deposit slips is prepared for every transaction. the person in whose name the cheque is drawn.’ and also the endorser has to sign below it. Bank name. In other words this kind of cheque has no security. On the other hand crossed cheques are more secured as they are paid only to the person whose name is written in the cheque. the person who draws the cheque.. To cross a cheque one just have to make two cross lines at the upper left edge of the cheque and also write the words. ICFAI BUSINESS SCHOOL. POSTING IN PASSBOOK: Third in the sequence comes the step of posting the transactions manually in the passbook of the company. This is also used as a future reference. Drawer i. Cheque is of two types namely: • • Bearer cheque. A cheque can also be endorsed. & Crossed or Account Payee cheque. Bearer cheques are those in which the payment can be made to anyone who produces the cheque to the bank teller. Amount payable. & Cheque serial number. Deposit slips are issued to the company by the same bank which has issued the cheque book.e.

 Withdrawal: this column is for writing the amount of funds withdrawn i.  Cheque number: here the cheque number through which the transaction has taken place is recorded. if payment is made to somebody then it is recorded in this column.  Deposit: this column records the amount of funds which have come in the company account. MUMBAI Page 19 .e. Passbook is updated on a weekly basis. Such is the process of recording transactions in the company passbook. A reconciliation statement as the ICFAI BUSINESS SCHOOL. Sometimes it so happens that the passbook also shows negative balance which shows that the amount of withdrawals are more than the amount of deposits.  Date: here the date of the transaction taking place is recorded. Let’s take for example a transaction: The company deposits Rupees ten lacs cheque in some bank.e. deposits less the withdrawals. The implications of the transaction for the company – as the deposit of the cheque results in decrease of funds with the company on hand so the company in its passbook will record the ten lacs amount in the withdrawal column and the particulars column will be filled with “By bank”. A passbook has following columns:  Serial number: here the serial numbers of transactions are recorded. The method of recording transaction in company passbook is just the opposite of the way the bank record in their passbook. A passbook is available at the stationeries shop.Posting in the company passbook is very different to the method followed by the banks to record the transactions in the bank passbook. But in case if the transaction is done through cash then the space is left vacant. the detail of the transaction.e. Whereas if the implications of the transaction are looked for the bank then it’s a deposit for the bank as such the bank will record this transaction in their deposit column as this result in the increment of funds with the bank. Moreover in cases when the transaction is directly done through e-banking facility then this particular space is filled with ‘e-banking’  Particulars of the transaction: particulars refer to the short narration of the transaction i. To match the balance as per passbook and the balance as per bank statement we also prepare reconciliation statement.  Balance: this column record the amount of balance i.

Accounting vouchers is of two types i. In the inventory voucher there is stock journal and physical stock taking. financial year beginning from. Whereas physical stock taking refers to physically counting the amount of stock and the entering the details in the journal. Tally is an accounting package. Receipt vouchers are prepared whenever there is a transaction for receipt of something and payment vouchers are prepared whenever there is transaction of payment. After the first step of company creation is done then we jump to the next step of feeding the data into the Tally package. How to work in Tally? To start with Tally first of all we have to create a company. the Bill of Materials. receipt and payment vouchers. sales order. other base currency information. rejections out. ICFAI BUSINESS SCHOOL. physical stock. contra. mailing address. currency symbol. credit note. POSTING IN TALLY: Next in the sequence is posting of transactions in Tally. MUMBAI Page 20 . books beginning from. To create a company we have to give information like company name. When u click the option voucher types a list of choices come up like debit note. delivery note. etc.e. Stock journal refers to making stock details in the journal as per the BOM i.name suggests that it deals with the matching of balances as per passbook and balance as per bank statement. purchase order. memorandum. rejections in. then deciding upon the unit of measurement of stock. method of maintenance of accounts whether with or without inventory. statutory compliance for state. Here all the transactions of business can be recorded. Further we need to create the inventory information which includes creation of inventory groups whether single or multiple. Then we also decide on the voucher types. For example.e. sometimes bank charges are not recorded in the passbook then they are reconciled with the bank statement and recorded in the passbook. Then we need to create transaction files. Then we need to create master files and enter the data for account information. This includes preparation of accounting vouchers and inventory vouchers. creation of stock items same single or multiple. stock journal. Under this we create ledger account of individual account head.

&  Stock category summary. Physical stock register. TDS DEDUCTION FROM CONTRACTORS. In order to overcome these problems. it will be dealt in detail later in the report. TDS. government started deducting some amount of tax from the amount which is receivable by the assessees. Purchase bills pending. TDS is deducted from various heads of income. Ratio analysis is an important tool to analyze the financial statements. Purchase order.After we feed all the data into the Tally package then we view reports which Tally prepares like as follows:     Balance Sheet. The amount of tax so deducted is called as “Tax Deducted at Source”. MUMBAI Page 21 . Tally itself prepares the ratios so as to analyze the statements of the business. Due to this rule the tax collection is delayed till the completion of the previous year. Movement analysis. SUPPLIERS. & PROFESSIONAL SERVICE PROVIDERS: Tax Deducted at Source Concept: The IT department says that assessees pays tax in the assessment year on the income earned in previous year. & Ratio analysis.  Sales order.. Even sometimes people conceal their income and the tax is not paid at all. They are prescribed by the Indian Income Tax Authority as follows: ICFAI BUSINESS SCHOOL. Profit and Loss Account. Stock summary.  Sales bill pending. This is how posting in Tally is done. Tally gives full summary about the stock or inventory as it provides detail about the following:      Godown summary. Regarding the Balance Sheet and Profit and Loss account. i.e.

TDS on dividend. There are some requisitions which are needed to be fulfilled for deducting TDS from contractors’ payment. interior designer. which is bifurcated as follows:  2% tax on the amount to be paid . TDS on contractor’s payment. a local authority. ICFAI BUSINESS SCHOOL.  . This also has requisitions to be fulfilled for qualifying for tax deductions. TDS on winning (lottery or horse races). MUMBAI Page 22 .000.06 %. & TDS on rent. They are as follows:  Payment must be made in lieu of professional services rendered. Tax from contractors’ payment is deducted @ 2. etc. Payment must be made by government. TDS ON PROFESSIONAL FEES: TDS on professional fees is deducted from the fees paid to the architects. etc. engineers. whichever is earlier. As the group is into construction business so it mainly deals in TDS deduction from contractors’ payment and professional fees like that of architects. whichever is earlier. etc. a firm. 20. TDS on professional fees. designers. TDS ON CONTACTOR’S PAYMENT: TDS on contractors’ payment comes under section 194(C) of the Income Tax Act.       TDS on salary.  Tax to be deducted at the time of making due or making payment. Tax to be deducted at the time of making due or making payment. TDS on interest on securities. Tax to be deducted if and only if the payment exceeds Rs. They are as follows:     Payment must be made as a part of the contract.06% to be deducted towards education cess.

3%.95. There are certain identification numbers which are needed at the time of paying TDS online. MUMBAI Page 23 . MAKING e-TDS PAYMENT: With the advent of technology. After the payment of tax is made online a counterfoil is obtained which signifies that the tax has been paid.  TDS only if amount exceeds Rs. The bank provides us the password using which we can pay TDS online. No TDS on payment made due before 1. 20. They are as follows:  Tax Deduction Account Number (TAN) of the Deductor: the IT authority says that every person deducting tax at source must have a tax deduction account number which it must quote in all documents relating to TDS like the TDS challans. which is bifurcated as follows:  10% on amount to be paid. For this we need to have account with particular bank. FILING TDS RETURN: ICFAI BUSINESS SCHOOL.  Section which tax has been deducted. We can make the payment online through portals provided by banks. TDS certificates. Tax from professional fees is deducted @ 10. TDS returns. etc.7.  Amount of tax deducted.  Challan serial number. The counterfoil is also called the TDS challans and following are contents of the challan:  BSR code of the bank branch. making TDS payment has become easy.  0.  Permanent Account Number of the Deductee: the PAN number of the deductee must also be quoted.  Permanent Account Number of the Deductor: the PAN number of the deductor must be quoted while making TDS payment online.  Date of payment of tax.3% as education cess.000.

education cess. surcharge. book entry. It also contains guidelines regarding the dos and don’ts. PAN number. deductee address. PAN reference. TDS circle. the whole database is then taken into a CD or floppy and sent to the Income Tax Authorities. Sheet 3: It contains the field description. Details such as deductee serial number under section 414. deductee code. designation of that person. serial number in challan as per section 401. section code. surcharge. mode. education cess. address of the company. Section codes for different sources of income are given. PAN of the deductee. address of that person.After the payment of the tax is made online and TDS challan is obtained. interest. total tax deducted. date of tax deposit. BSR code of bank branch (code to banks given by RBI). total tax deposited. TDS. MUMBAI Page 24 . rate of deduction. reason for no or lower deduction. For filing of TDS with the Income Tax Authority. total tax deposited. Details such as Tax deduction Account Number (TAN). cheque or demand draft number. Sheet 4: It contains details about the challan. others. Details of the sheets are given as follows: Sheet 1: It contains the detail about the deductor of the tax. date of deduction . Sheet 5: It contains the section codes. amount paid. It contains six sheets. date of payment. After all the data is entered into the software. the next step in the conduit is the filing of that tax amount with the Income Tax Authority. WHAT DOES THE SOFTWARE CONTAIN? The software is based in Microsoft excel. for example 194C denotes payment made to contractors and suppliers and 194J denotes TDS on professional fees. Sheet 6: It contains the instructions for working on the software. Filing of TDS is a long step. TDS. Details such as running serial number. name of the responsible person. software in excel base has to be installed in the computer. name of the company. Following are the features of electronic TDS filing: ICFAI BUSINESS SCHOOL. Sheet 2: It contains the details about the deductee. transfer voucher or challan serial number. name of deductee.

26.  e-TDS return must contain the TAN of the deductor without which the return will not be accepted.  All the data should be in a single CD/floppy. Name and address of the deductee.(contractor or professional) Amount on which tax is calculated.  CD/floppy should be virus free.e. MUMBAI . Page 25 ICFAI BUSINESS SCHOOL. TDS certificate should be furnished with the e-TDS return. Quarter and acknowledgement for the same.  But in case of form 24. Nature of payment. or 27 should be in separate CD/floppy.  In case of form 26 and 27. TDS. A TDS certificate signifies that we have filed the return of the tax with the income tax authorities. TAN of the deductor. Contractors.  There is also validation software available with the help of which the data of the e-TDS prepared must be validated. After the tax return is filed (with CD/floppy along with signed verification in form 26Q). PAN of the deductee. A TDS certificate contains the following fields:           Name and address of the deductor.  It should be prepared according to the data format prescribed by the e-filing administrator. Each TDS return file either form 24. the deductor must furnish physical copies of certificate of no deduction or lower deduction received from the deductees. PAN of the deductor. an acknowledgment is given by the income tax authority which signifies receipt of tax amount by the income tax authorities. Date of credit i. date of the transaction as per Tally. suppliers.  No copy of bank challan.  The CD/floppy should be accompanied by a signed verification in form 27A in physical form. and professional service providers ask for TDS certificates in form 16A which is used by them in their tax assessment. the deductor should not furnish physical copies of certificate of no deduction or lower deduction received from the deductees.

It is a statement sent by seller to his customer intimating that. Cheque/ DD number. After the TDS certificates are given than all matters relating to TDS for that year is completed.tin-nsdl. MUMBAI Page 26 . Debit note: When goods are received from the supplier. Credit: It is the amount which represents an increase in liability or decrease in assets or amount business owes to others.com GLOSSARY: BSR code: It is the code given to banks by the RBI. Challan serial number. BSR code of the bank branch. It is the opposite of debit. When goods are returned the supplier account is debited. Credit note: It is a follow up of the debit note. Education cess. the supplier account is credited. In the case of purchase returns a debit note is ICFAI BUSINESS SCHOOL. www. Data fed in Tally of the company. 2. Contra: If an entry is passed but sometimes later if it is to be cancelled due to some reason then an opposite entry is passed which is called as contra entry.      Surcharge. REFERENCES: 1. if any. his account has been credited with the amount of goods return by him or any other allowances granted to him. Date of payment of tax.

one will be sent to the customer and one will be kept as a office copy. Inventory: It refers to the stock of materials. grade. Two copies of debit note will be prepared. quantity. Physical stock register: It is the register maintained in Tally which is based on physical counting of stock. Rejections out: It is also called as purchase return or return outwards. MUMBAI Page 27 . signed by the buyer or consignee. Delivery note: Document accompanying a shipment of goods that lists the description. and quantity of the goods delivered. Ledger: It is an account where transactions of a particular type are recorded. Journal: It is a day book in which the daily transactions are recorded in a chronological manner. Sales order: It is the order received by the business from a customer. It is the return of goods by the buyer. is returned to the seller or consignor as a proof of delivery. price at which required and is given by the buyer to the supplier. Rejection in: It is also called as return inwards or sales return. PAN: it is the permanent account number of an individual issued by UTI. Godown summary: It is a report generated by Tally on the basis of physical stock taking. It should contain all the details of purchase returns. Debit: It is the amount which represents an increase in assets or decrease in liability or amount suppliers. It is the return of goods to the supplier by the business. contractors & factors owe to the business. A copy of the delivery note. Movement analysis: It is a report generated by Tally regarding the amount of materials brought in and the amount taken out. ICFAI BUSINESS SCHOOL. Purchase order: A requisition format in Tally which mentions details such as material required.prepared.

It is issued by NSDL. MUMBAI Page 28 .Stock category summary: It is a summary which shows the categories of stock the business maintains. TAN: It is the tax deduction account number which is very much essential for TDS return filing. ICFAI BUSINESS SCHOOL.

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