Standard Operating Procedures

Accounts and Finance Department Submitted to Accounts Depts. Mr. Jai Sethi Company Name: Meenakshi Polymers Date. Page No. 30 September 2011 2-14

Index
Serial No Subject 1 Page No.

Accounts and Finance: Nature & 2 Scope Accounts and Finance: Objectives 2

3 4 5 5 6

Activity Based Information Division 3 Financial Accounting Division 3-4

Financial Reporting and Analysis 4-11 Division Financial Forecasting and budget 12 preparing Division Conclusion 13

1. Accounts and Finance: Nature & Scope

Financial statements, which consist of a balance sheet, an income statement, and a statement of cash flows, are used to evaluate the financial condition of an enterprise. Financial analysis is of particular interest to creditors, potential and current stockholders, management, government agencies, customers, and labor. Creditors are primarily interested in the ability of the company to meet its current and long-term debts. Stockholders are more interested in the present and future profitability of the enterprise. Management usually focuses on the trend in net earnings and makes decisions concerning possible changes in the existing capital structure in an attempt to maximize profits. The Internal Revenue Service might use the financial statements to determine whether the enterprise is paying its fair share of taxes, while other branches of the government use the information to study economic trends in the industry. Customers are concerned that the company will be financially able to maintain a steady source of supply and meet all of its commitments. Finally, labor might use the statements to formulate realistic (or unrealistic) wage Proposals.

2. Accounts and Finance: Objectives

To provide information: That is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions. To help present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts from dividends or interest and the proceeds from the sale, redemption, or maturity of securities or loans. About the economic resources of an enterprise, the claims on those resources, and the effects of transactions, events, and circumstances that change its resources and claims to those resources.

Accounts and Finance Department is divided into 4 divisions. There are various functional areas in each division where SOPs can be made.

3. Activity Based Information Division

The primary responsibilities of the ABI Division are to: Provide leadership in the area of cost management Ensure compliance with relevant Managerial Cost Accounting standards Determine and report the costs of achieving internal and external performance goals Manage the ABI program and maintain the Activity Based Information System (ABIS) infrastructure Prepare quarterly reports and briefings on cost of operations for executives and program managers Prepare quarterly Statement of Net Cost and supporting notes Provide cost input and analysis for the Annual Performance and Accountability Report

4. Financial Accounting Division

Specific functions are as follows: Recording transactions and preparing accounts: Recording transactions investment of cash, receipt of cash, accounts receivables, payment of rent etc; Preparing accounts for each entry made in journal and finally preparing balance sheets, income statements and cash flow statements. Vendor Payments: The program areas will receive notification from vendors requesting shipments of products. These shipments must be invoiced to the vendors for payment. The program areas will be responsible for creating the invoice and sending it to the Accounting department to process and maintain. The Accounting Department will send the invoices to the vendors for payment. A database will be maintained in the accounting department keeping track of all invoices and payments received.

Preparing the Invoice: Enter all applicable information as indicated below. a. Invoice No: Enter the next sequential number for your program area. All program areas will be responsible for assigning their own invoice number. To avoid duplicate invoice numbers it is requested that the program area enter their department/program code prior to the invoice number. b. Invoice Date: Enter the date the invoice has been prepared. c. Page: Enter 1, unless the invoice is on multiple pages.
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d. Sold To: Enter the vendors Name and complete address. e. Ship To: Enter the address to where the items were shipped. f. Center Number: Enter the programs center number to be charged. g. Customer PO: Enter the Purchase Order number for the shipment if applicable. h. Payment Terms: This is a fixed field. It will always be Net 30 Days. i. Due Date: Should be 30 days from the invoice date. j. Technical Contact: Enter the name the vendor should contact if there are questions. k. Telephone: Enter the telephone number of the Technical Contact. l. Ship Via: Enter the shipping method used (i.e. FedEx, UPS, Courier, etc.) m. Ship Date: Enter the date the products were shipped. n. Quantity: o. Description: Enter the description of the item(s) sold. p. Unit Price: Enter the cost of each item. q. Extension: This is a calculated field. This will record the total for each line. Tab to enter multiple lines. r. Subtotal: This is a calculated field. It will total the amount in the Extension column. s. Freight: Enter an amount for freight/shipping costs. If there were no costs, enter zero. t. Total Amount: This is a calculated field. This will add the subtotal and freight charges together. Maintaining Invoices 1. All invoices and payments will be received in the Accounting Department to maintain. 2. Monthly the Accounting Department will prepare reports to the program areas recording all invoices and payments received for the department. 3. An aging report will be attached to the reports. 4. Outstanding invoices (over 60 days old), will be put into the collection process. Accounting will make a request for payment to the vendor via email, mail, or fax. The program will be copied on this request and no further shipments should be made until the outstanding invoice(s) are paid. Travel Reimbursements - Process travel vouchers for employees upon completion of governmental travel. Imprest Fund - Reimburse employees for miscellaneous "out-of-pocket" expenses Travel Support Services - Obtain passports, tickets, visas, etc. for employees going on governmental travel.

5. Financial Reporting and Analysis Division:

The primary responsibilities of the Financial Reporting and Analysis Division are to: prepare the financial statements and reports
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coordinate with the Office of Inspector General in planning for, and carrying out, the required annual financial statement audit respond to financial statement audit reports and prepare corrective action audit plans prepare monthly, quarterly and annual financial reports for both internal use and submission to the Department of Commerce, Treasury Department and the Office of Management and Budget perform analyses of financial reports and data to identify and analyze fluctuations, trends and unusual variances to provide an accurate reporting of the U.S. Patent and Trademark Office's financial condition and results of operations Perform reviews of internal controls.

1 step: Preparation of financial statements: Preparing balance sheets, income statement and cash flow statement for a financial year and then creating reports for further analysis. Preparation of Ledger: The main accounting record of a business which uses doubleentry bookkeeping. It will usually include accounts for such items as current assets, fixed assets, liabilities, revenue and expense items, gains and losses. Each General Ledger is divided into debits and credits sections. The left hand side lists debit transactions and the right hand side lists credit transactions. This gives a 'T' shape to each individual general ledger account. A "T" account showing debits on the left and credits on the right. Debits Credits

There are five (seven) basic categories in which all accounts are grouped: 1. 2. 3. 4. 5. 6. 7. Assets Liability Owner's equity Revenue Expense Gains Loss
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 Balance sheet: In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition". Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year. Assets 1. 2. 3. 4. Cash and cash equivalents Inventories Accounts receivable Prepaid expenses for future services that will be used within a year

Non-current assets (Fixed assets) 1. 2. 3. 4. Property, plant and equipment Investment property, such as real estate held for investment purposes Intangible assets Financial assets (excluding investments accounted for using the equity method, accounts receivables, and cash and cash equivalents) 5. Investments accounted for using the equity method 6. Biological assets, which are living plants or animals. Bearer biological assets are plants or animals which bear agricultural produce for harvest, such as apple trees grown to produce apples and sheep raised to produce wool.[17] Liabilities 1. Accounts payable 2. Provisions for warranties or court decisions 3. Financial liabilities (excluding provisions and accounts payable), such as promissory notes and corporate bonds 4. Liabilities and assets for current tax 5. Deferred tax liabilities and deferred tax assets 6. Unearned revenue for services paid for by customers but not yet provided Equity The net assets shown by the balance sheet equals the third part of the balance sheet, which is known as the shareholders' equity. It comprises: 1. Issued capital and reserves attributable to equity holders of the parent company (controlling interest) 2. Non-controlling interest in equity
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2 step: Fixed Asset management: All Fixed Asset must be Recorded in Fixed Asset Register Each Capital Asset must be coded and shall be assigned to Some Department headed by defined HOD. HOD must sign on F/A Register to acknowledge the charge of Asset. All unassigned Asset must be headed by Admin Department. Fixed Asset Verification must be done at least twice a year randomly. Every asset must bear a code and sticker bearing asset code. Every asset must go through regular maintenance schedule. Asset can be discarded only by the approval of VP/President. Purchase of every capital asset above Rs. 1,000/- must be approved by purchase committee.

3 step: Inventory management: Classifying inventory Determining inventory Inventory Costing Analysis of inventory

4 step: Cash management: 1. Control of cash flows 1.1. Inflows It is necessary to minimize the interval between the time when cash is received and the time it is available for carrying out expenditure programs. Collected revenues need to be processed promptly and made available for use. When tax collection is done by the tax administration offices (or by Treasury offices) the administrative organization of these offices may have to be reviewed and their equipment modernized. 1.2. Outflows For cash management, the control of cash outflows, which is directly related to organizational arrangements for budget execution, can pose more difficulties than the control of cash inflows. However, issues related to cash management should not be confused with issues related to the distribution of responsibilities for accounting control and administration of the payment system. The major purpose of controlling cash outflows is to ensure that there will be enough cash until the date payments are due and to minimize the costs of transactions, while keeping cash outflows compatible with cash inflows and fiscal constraints. 2. Centralizing cash balances To minimize borrowing costs or maximize interest-bearing deposits, operating cash balances should be kept to a minimum. In countries where funds are released through an imprest system, spending agencies often accumulate idle balances their bank accounts. These idle
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balances increase the borrowing needs of the government, which must borrow to finance the payments of some agencies, even if other agencies have excess cash.

5 step: Accounts Receivables Management:

6 step: Accounts Payable Management:

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7 step: Fund Management:

Start

Cash and Treasury Management

Minimum level of cash is maintained at RS 50000

Withdraw cash from bank if cash goes below

All cheques are to be issued only by payment advice

Payment advice to be signed by President/Vice President if payment may exceed 25000

Stop

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6.Financial Forecasting and budget preparing Division:

This manual provides information concerning the Forecast and Budget Call, along with he detailed steps to submit your Forecast and Budget data through eReports. This manual consists of three Sections: Section A- Guidelines which provide detailed information about the 2010-11 Forecast. Section B- Guidelines which provide detailed information about the 2011-12 Budget Call, including how to obtain the necessary tools required for budget submission. Section C- Provide step by step instructions to aid planners and administrators in the input and retrieval of their Forecast and Budget information from various eReporting Tools. The following budget principles are meant to provide planners and administrators with a Common understanding and framework for developing their budget(s): A. Cost Centre budget for the Division, Faculty, Department or unit should be balanced. This means that the total expenditures should not exceed the total revenue from all sources. There are two exceptions to this rule: If an area has a surplus carry forward available from previous years. In this case, areas may Overspend its in-year revenue from all sources, thereby drawing down the surplus carry forward. A. deficit budget submission that was approved in advance by both the Vice-President overseeing that area. B. Once a budget is set for the fiscal year it should not be revised based on Actuals. The budget is an estimate only. Differences between Actuals and Budgets should be explainable. C. Divisions, Faculties, Departments and units are monitored and evaluated on a bottom-line /net Income basis and are accountable for the use of its own revenue. D. The budget approval process is authorized via eReports by the AVP or SEO of your Division or Faculty. E. Once a budget is authorized, the Office of the Budgets and Planning will reconcile the Central Revenue budget and post the budget information into the PeopleSoft Financials system. Posting of the budgets into the PeopleSoft Financials is transparent to the community, but can be viewed from the eReports Statement of Operations and the Forecast and Budget Call Module on the next business day.

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7. Conclusion
Accounts and Finance is compulsory for organizations for recording, identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. This department is very necessary to handle cash and maintain liquidity in the organization. The purpose of financial accounting statements is mainly to show the financial position of a business at a particular point in time and to show how that business has performed over a specific period. There are two main purposes of financial statements: (1) To report on the financial position of an entity (e.g. a business, an organization); (2) To show how the entity has performed (financially) over a particularly period of time.

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