Presentation on theme: "A.K.Sharma Corporate Accounting A.K.Sharma, DGM(F&A) Advanced Level Telecom Training Centre Ghaziabad."— Presentation transcript:
A.K.Sharma Corporate Accounting A.K.Sharma, DGM(F&A) Advanced Level Telecom Training Centre Ghaziabad
A.K.Sharma BSNL AS A CORPORATION Bharat Sanchar Nigam Ltd. (BSNL) as a Govt. of India Enterprise had started its Commercial Operations from 1 st Oct Under Companies Act, BSNL switched over completely to the commercial practices and accounting as enjoined in Sections 209 to 223 of Companies Act 1956
A.K.Sharma Accounting procedure in BSNL BSNL had disclosed its accounting procedures for adoption wherever the existing system of Accounting of DOT requires a change. In other cases, the Procedures, Rules and maintenance of other records as was being followed in erstwhile DOT would continue until otherwise prescribed by BSNL Head quarters.
A.K.Sharma Annual Financial Statements - Responsibilities In accordance with section 210 of Companies Act 1956, BSNL as a Company has to lay before the Government, a Balance Sheet as at the end of the period as specified in subsection (3) ibid along with Profit & Loss Account for that period. Circles are required to prepare its own P&L Account and Balance Sheet.
A.K.Sharma Mandatory Accounting Standards Primarily every Profit & loss Account and Balance Sheet of the Company has to Comply with the Accounting Standards as recommended by ICAI
A.K.Sharma Mandatory Accounting Standards (Contd.) Out of 29 Accounting Standards as at present, the standards mostly relevant to BSNL unit offices(Circles) would be : Disclosure of Accounting Policies – AS 1 Valuation of Inventories -- AS2 Cash flow Statements -- AS3 Contingencies & Events occurring After the balance sheet date --AS4
A.K.Sharma Mandatory Accounting Standards (Contd.) Net Profit or Loss; Prior period items & change in the Accounting policies -- AS5 Depreciation Accounting -- AS6 Revenue Recognition -- AS9 Accounting of Assets -- AS10 Accounting for Retirement Benefits in financial statements -- AS15 Segment Reporting -- AS17 Accounting of leases -- AS19 Impairment of Asset -- AS28
A.K.Sharma Fundamental Accounting Assumption The financial statements of Bharat Sanchar Nigam Limited are prepared under the historical cost convention adopting the accrual method of accounting in accordance with Indian Generally Accepted Accounting Principles and in accordance with the provisions of the Companies Act 1956.
A.K.Sharma Significant Accounting Policies Accounting Policies stated as significant accounting policies contains information about methods that are being adopted for preparation of financial statements. These significant Accounting Policies becomes part of financial statements. Disclosure of significant Accounting Policies that are being followed by Co. during the Accounting period is pre-requisite in preparation of financial statements as required by AS-l.
A.K.Sharma Significant Accounting Policies Accounting Policies broadly cover items such as – Basis of accounting & its conventions. Treatment of Fixed Assets & Current Assets Depreciation Treatment of Inventories, verification & valuation Treatment of Dividends & Reserves Revenue/Income Recognition, Deferred Revenue Expenditure cases. Retirement benefits Treatment of contingent liabilities
A.K.Sharma Changes in Accounting Policies Changes in Accounting policies generally arise in cases as follows – Methods of depreciation – Treatment of Expenditure during construction – Conversion or translation of foreign currency item. – Valuation of inventories – Valuation of Fixed Asset – Treatment of retirement benefits – Treatment of contingent liability.
A.K.Sharma Changes in Accounting Policies Changes in Accounting Policies will be made in the following conditions:- Where adoption of different accounting policies is required by statute or for compliance with certain Accounting Standard. Where it is considered that change would result in more appropriate presentation of financial statement of the company.
A.K.Sharma Income & Expenditure The accounts are prepared under the historical cost convention adopting the accrual method of accounting except for the following – Annual recurring charges for overlapping financial years. Interest on loans and advances to employees. Interest Income Income from prepaid calling cards and internet connection Claims from/on local authorities and other bodies on account of Civil and Electrical works. Medical reimbursements to employees.
A.K.Sharma Revenue Recognition Revenue for all services is recognized when earned. Unbilled revenues from the billing date to the end of the year is recorded as accrued revenue. Provision is made against the amount of disputed billings to the extent considered necessary by the management. Provision is made for bad and doubtful debts in regard to debts outstanding for more than two years.
A.K.Sharma Revenue Recognition(Contd.) Installation Charges recovered from subscribers at the time of new telephone connections are recognized as income in the first year of the billing. Sale process of scrap arising from maintenance and project work are taken into miscellaneous income in the year of sale.
A.K.Sharma Revenue Recognition(Contd.) Income from SIMs, recharge coupons of Mobile, Prepaid Calling Cards, and Prepaid internet connection cards are treated as income of the year in which the payment is received since the extent of use of these cards within the financial year could not be ascertained.
A.K.Sharma Revenue Recognition(Contd.) Where ever there is uncertainty in realization of income, such as liquidated damages, claims on Government Departments & local authorities etc., these are recognized on collection basis.
A.K.Sharma Revenue Recognition(Contd.) Other income by way of interest on loans to employees, security deposit with Government Departments and local authorities, being not material, are accounted for on collection.
A.K.Sharma Employees Benefits In respect of employees of DoT who have opted for absorption in the Company and employees on deemed deputation from Government, pension contribution is provided at the applicable rates as per Government Pension Rules, Companys contributions towards Provident Fund are accounted for an accrual basis. For employees on deemed deputation from Government, leave salary contribution is 11 % of the basic pay to DoT. Leave encashment for other employees is provided on accrual basis.
A.K.Sharma License Fees The one time license fee paid by the company for acquiring new licenses has been capitalized and is being amortized over the license period. The variable license fees computed at prescribed rates of revenues is being charged to profit and loss in the year in which revenue arises.
A.K.Sharma Fixed Assets Fixed assets are carried at cost less depreciation. Cost includes directly related establishment and other expenses including employee remuneration and benefits on actual basis directly identifiable to the construction of the asset. Assets are capitalized to the extent management certificates have been issued, wherever applicable. Land is capitalized when possession of the land is taken. Building is capitalized to the extent is is ready for use based on completion certificate. In case of building purchased capitalization is done after possession is taken over.
A.K.Sharma Fixed Assets (Contd.) Apparatus and Plants principally consisting of Telephone Exchanges, Transmission Equipments and air- conditioning Plant are capitalized as and when an Exchange is commissioned and put to use either in full or in part. Lines and Wires are capitalized as and when erected or laid to the extent completion certificates have been issued thereof. Cables are capitalized as and when ready for connection to the main system. Vehicles and other assets are capitalized as and when possessed.
A.K.Sharma Fixed Assets (Contd.) Expenditure on replacement of assets, equipment, instruments and rehabilitation work is capitalized, if, in the opinion of the management, it results in enhancement of revenue generating capacity. The cost of stores and materials is charged to project at the time of issue.
A.K.Sharma Fixed Assets (Contd.) IMPAIRMENT OF ASSETS Assets, which are impaired by disuse or obsolescence, are segregated from the concerned assets category and shown as Decommissioned Assets and provision made for the difference between their net carrying cost and the net realizable value.
A.K.Sharma Inventories Inventories other than Exchange Equipment are valued at cost generally on weighted average method. Exchange equipment is valued at acquisition cost. Obsolete/non moving inventories are valued at net realizable value.
A.K.Sharma Foreign Currency Transaction Transaction in foreign currency are recorded at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year-end are translated into rupees at the rates of exchange prevailing at the year end. All non-monetary assets and liabilities are stated at the rates prevailing on the date of the transaction. Gains / (losses) arising out of fluctuations in the exchange rates are recognized in income in the year in which they arise.
A.K.Sharma Contingent Liabilities Contingent Liabilities, barring frivolous claims, are disclosed and those liabilities, which are possible of maturing are provided for.
A.K.Sharma Segment Reporting Information about multiple products/services and its operation in different geographical areas is called Segment Information. The disclosure of above informations is termed as Segment Reporting, covered by Accounting Standard – 17.
A.K.Sharma Objective of Segment Reporting For better understanding the performance of Enterprise. For better assessment of risks and returns of enterprise. For establishing the system for cost based tariff. For assessment of risks and returns of Multiple products/services and its operation in different geographical areas.
A.K.Sharma Segment Information of BSNL For the time being, Basic and Cellular services have been considered as primary Business segments for reporting under AS- 17 Segment Reporting issued by ICAI. The manufacturing activities have not been treated as a separate segment since such activities are essentially carried on as support service to other segments.
A.K.Sharma Significant Accounting Policy of BSNL Relating to Segment Reporting Segment Revenue includes service income and other income directly identifiable with/allocable to the segment. Income which relates to the Company as a whole and not allocable to individual business segment is included in Unallocable Corporate Income. Expenses that are directly Identifiable with/ allocable to segments are considered for determining segment Results. The expenses, which relates to the Company as a whole and not allocable to individual business segment is included under Other Unallocable Expenditure Segment Assets and Liabilities include those directly identifiable with the respective segments.
A.K.Sharma Accounting of some other Items Small Tools - These are to be charge to P&L Account. The Expenditure involved may be for the activities of Installation, maintenance or for operation. The expenditure may be changed according to its nature. Depreciation is provided based on the WDV method at the rates prescribed in Schedule XIV to the Companies Act Full depreciation is charged on capital expenditure up to Rs. 5000/- in the year of purchase.
A.K.Sharma Accounting of some other Items(Contd.) Partitions : Partitions are a common expenditure which either occur due to new construction or replacement or repair. All expenditure which is in the nature of replacement or repair is to be charged to P&L A/C. New construction of partitions should be debited to Furniture and Fixture. However, partitions valued up to Rs. 2 lakhs should be charged to the P&L Account and a separate register for such assets it to be maintained.
A.K.Sharma Accounting of some other Items(Contd.) Temporary Sheds – Expenditure incurred for the construction of Ty. Sheds is purely wasteful asset. Therefore such assets may be depreciated 100%.
A.K.Sharma Prior Period Items Prior Period items are income or expenses which arise in current period as a result of error or omission in the preparation of financial statement of one or more prior periods. Any adjustment on account of settlement of disputes regarding wrong billing is not treated as prior period item. Items of income/expenditure exceeding Rs.5,00,000 only are considered for disclosure as prior period items. Prior Period Items are dealt in Accounting Standard 5.
A.K.Sharma Books of Accounts : Companies Act Every Company is required to keep proper books of accounts in respect of a) all sums of money received and expended by the Company and matters in respect of which the receipt and expenditure has taken place. b) all sale and purchase of goods by the company. c) all the Assets and liabilities of the company
A.K.Sharma Books of Accounts of BSNL Cash Books (for cash transactions) Bank Books (for Operational & for Collection Journals (for recording non cash & adjustment items) and General Ledger
A.K.Sharma Subsidiary Records Purchase Register Salary payable Register Wages payable Register Bills payable Register Liability Register Imprest/Advance Register Register of Bills issued (TRA & other Bills) Contractors Ledger.
A.K.Sharma Subsidiary Records(Contd.) Registers of Fixed Assets & related schedules. Registers of Works-in-Progress Price Stores ledgers etc. Inventory Records.
A.K.Sharma Perseverance of Books of Accounts Section 209(4A) provides that the books of account of every company relating to period of not less than eight years shall be preserved in good order.
A.K.Sharma Bank Reconciliation At the end of each month the balances in each Bank book will be reconciled with the balances in the Bank. Bank reconciliation statement should be submitted by each SSA every month to Corporate Accounts Section of the Circle.
A.K.Sharma Bank Reconciliation (Year end Actions) Bank reconciliation up to xx should be completed invariably. Any cheque(s) remaining un-cleared but which have become time-barred on due date will be written back in the bank book. This will apply both to cheques received and also to cheques issued.
A.K.Sharma Reconciliation of Balances, Provisions & Liabilities All the balances appearing in the Balance Sheet needs to be reconciled. These are – Cash & bank balance – Sundry debtors – All receivables – Loans & Advances – Inventories – WIP – Fixed Assets – Sundry Creditors including EMD and SD – All payables (Salary, bills, wages, bonus)
A.K.Sharma Cash & bank balance These are reconciled by drawing bank reconciliation statement
A.K.Sharma Sundry debtors The balance under this head should be reconciled with respect to the details of sundry debtors as per the sub ledger.
A.K.Sharma Receivables Subsidiary records for receivables should be available with each SSA and the amt. booked in trial balance should agree with the details available in the subsidiary records.This include receivables from DOT.
A.K.Sharma Loans & Advances Loans & Advances include amount advanced or value of materials supplied as loan to contractors, suppliers, employees, recoverable in cash or in kind or for value to be received at a later date. Such as a) Loans & Advances to Staff (Interest bearing & Non-interest bearing) b) Loans given to Contractors which also include loans to Co- op Societies & Dept. canteens, c) Advances to Staff in connection with works expenditure etc., d) Purchase Advances, e) Capital advance
A.K.Sharma Loans & Advances(Contd.) All such loans and advances should agree with the details available in the subsidiary registers. Details of outstanding loans & advances to employees will be available in RR. A broad sheet must be prepared for each type of loans and advances. Balance appearing in the Trial balance against any type of loans and advance must agree with the balance as shown in the broad sheet.
A.K.Sharma Inventories The materials received by C.S.D will be accounted under inventory. The numerical Account is maintained in Bin Card and Value account for the same is maintained in priced Store Ledger. Periodical reconciliation between figures of Bin Cards and PSL is to be done. The balance under inventory as shown in the trial balance should agree with the balance as shown in PSL.
A.K.Sharma WIP Amt. appearing in trial balance under this head should be supported by detailed schedule.
A.K.Sharma Sundry Creditors Amt. appearing under sundry creditor must be reconciled with the unpaid bills as shown by the purchase journal. EMD and SD should be reconciled with the detailed registers maintained.
A.K.Sharma All payables This include – Salary payable Bills payable Payable to DOT Payable to others
A.K.Sharma Reconciliation of Revenue bookings The bookings in the trial balance under various revenue heads should be reviewed and reconciled with the figures of sub ledger in respect of following items – Service wise amt. billed for and amt. collected. All types of deposits, Value of various cards sold. Service Tax Surcharge
A.K.Sharma Overall reconciliation of bookings After incorporating all journal voucher for booking in trial balance the trial balance will be prepared after ensuring that all types of entries in respect of bank books and cash books for debits and credits during the month are also incorporated in the trial balance. One copy of printout of TB will be obtained for reviewing progressive balances and for any misclassification. Same should be rectified by passing JEs
A.K.Sharma Overall reconciliation of bookings(Contd.) While reconciling the figures it may be noted that some accounts head carry only debit balances and some only credit balance. It may be ensured that trial balance should exhibit progressive debit or credit balances against these heads correctly.
A.K.Sharma Provisions & Liability What is Provision ? Provision means an amount retained by way of providing for known liability the amount of which cannot be determined with substantial accuracy.
A.K.Sharma Provisions & Liability(Contd.) Liabilities comprise all short term obligations admitted in the normal course of business for purchase of stores & spares etc., contractors bills received towards provision of Telecom services, payments to be made to the employees and others for the services already received but not paid for, as at the date of accounts.
A.K.Sharma Creation of Liabilities Full liability would be created by debiting the relevant expenditure heads and crediting Current Liabilities under schedule, in respect of following items:- – Claims payable to DOT, VSNL, CMTS – Claims payable towards Rents on Buildings – Claims payable on Retirement Benefits – Claims payable to other operators on account of IUC. – Claims payable to Service Taxes, Sale Taxes – Lease charges – Refunds due to Telephone subscribers.