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1 EXECUTIVE SUMMARY STUDY OF ACCOUNTING PROCEDURES WITH THE OBJECTIVE TO PREPARE AN ACCOUNTING MANUAL Lark Group India s Second Largest manufacturer of winding wires has three units, one unit at Vadodara and two units at Goa. A manufacturing company has to perform many jobs such as procurement of raw materials, issuing of materials to different departments for production, payment to suppliers, receipts from customers, managing the sales, fulfilling various statutory requirements etc. Now the management is interested to know if all these activities are properly monitored and timely completed. The Procedure and Accounting System has been divided into the following modules : 1. Purchase Module: This includes the study from deciding the need to the actual receipt of material & payment to suppliers. This module is divided into two parts: a. Raw material b. Consumables 2. Revenue Module: This includes the study of the process from order generation to actual dispatch of material & receipts from customers. 3. Cash & Bank Module: This includes the study of the process involved in receipts from customers, payment to suppliers, inter branch transfers. 4. Taxation Module: Analysis of the procedures followed for calculation and accounting of various taxes applicable: a. Excise Duty and Education Cess b. Sales Tax ( C.S.T / V.A.T) c. T.D.S d. Service Tax
Transcript
1
EXECUTIVE SUMMARY
STUDY OF ACCOUNTING PROCEDURES
WITH THE OBJECTIVE TO PREPARE AN ACCOUNTING MANUAL
Lark Group India s Second Largest manufacturer of winding wires has three units, one
unit at Vadodara and two units at Goa.
A manufacturing company has to perform many jobs such as procurement of raw
materials, issuing of materials to different departments for production, payment to
suppliers, receipts from customers, managing the sales, fulfilling various statutory
requirements etc. Now the management is interested to know if all these activities are
properly monitored and timely completed.
The Procedure and Accounting System has been divided into the following modules :
1. Purchase Module: This includes the study from deciding the need to the actual receipt
of material & payment to suppliers. This module is divided into two parts:
a. Raw material
b. Consumables
2. Revenue Module: This includes the study of the process from order generation to
actual dispatch of material & receipts from customers.
3. Cash & Bank Module: This includes the study of the process involved in receipts from
customers, payment to suppliers, inter branch transfers.
4. Taxation Module: Analysis of the procedures followed for calculation and accounting
of various taxes applicable:
a. Excise Duty and Education Cess
b. Sales Tax ( C.S.T / V.A.T)
c. T.D.S
d. Service Tax
2
Project has been carried out by visiting each unit and step by step questioning of
respective personnel into units. In all modules the documentation preparation, its
validation and the documentation flow has been the focus area of study.
The duration of the project was 2 months. 15 days were spent in Vadodara unit and 15
days in the two Goa units.
Conclusion
One controlling accounting authority for all the units, who would be guide the accounts
person and provide standardized entries.
Implementation of new accounting software would help standardization and
centralization of accounts department.
For better control for all the departments, implementation of ERP system in all units.
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OBJECTIVES
OBJECTIVES: The basic objectives of this project study are:
To study the existing procedures and accounting system at Lark Wires and InfoTech
Ltd. with an objective to prepare a standardized accounting manual for all the 3 units.
To find loopholes, if any, in the system.
To study the functionalities and the flow of Documents in the each department of the
company.
To highlight the various modifications and simplification process that may be adopted
to make the process more effective and user friendly.
To study the existing accounting treatment of various transactions and to provide
standardization at all units.
To help in practical implementation of the project.
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COMPANY PROFILE
LARK WIRES AND INFOTECH LTD
Meeting Horizons of Quality
ISO 9002 company
Mission
Respecting your requirements of economic value addition and translating it into an
augmented product through disciplined diligent hard work.
Vision
" Our vision to be a leader in magnet wires is based on our competitive edge of cost,
quality and customer satisfaction through integration of people, equipment and
standardization. "
Organisation Structure
The company's day to day operations are managed by Shri Vikash Ladha- MD, Plant
Production. Mr Vivek Ladha is MD, HRD & Quality Control. Mr. Rajesh Ladha is
Director Marketing in Northern region; Mr Kamal Ladha Director Marketing East & Co-
Affairs. They are assisted by Shri Avinash Ladha in Corporate Marketing & Finance, and
also by Shri Rahul Nath who is Vice President Marketing.
Company s technical team is led by Shri. Suresh Roy at Goa and Shri. K S. Tewari at
Baroda. Mr. Rai & Tewari were trained at Italy by SCET spa.
BOARD OF DIRECTORS:
Kishore Chakravarty
Sharad Sarin
Bob Quinn
Kamal Kumar Ladha
Rajesh Kumar Ladha
Vivek Ladha - MD
Vikash Ladha MD
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KEY PERSONNEL
Gaurav Ladha
Avinash Ladha
Rahul Nath
A.C.Sharma
N.Vardharajan
History of Organisation
Lark wires & InfoTech is an existing profit making company. It was incorporated on 25-
04-1990 in the name & style of M/s V L Cables Ltd. However the name the company was
changed from V L Cables Ltd. to Lark Wires & InfoTech Ltd. w.e.f. 24-03-2000.
It is an ISO 9002 company; ISI marked company & reported to be first Indian company
to offer UL approved class wires (Lark UL 35 & Lark UL 73).
Group Companies:
Lark Wires & InfoTech Ltd.
Ashoka Creations Ltd.
Unit : Lark Finance
Ashoka Credit Ltd.
Unit : Gerson Engineering Works
Kamal Packaging Pvt. Ltd.
Branches at:
1. Mumbai
2. Calcutta
3. Delhi
4. Faridabad
5. Goa
6. Nagpur
7. Vadodara
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Production:
Production plants at:
1. Goa
2. Vadodara
3. Setting up new plant at Jammu
Production Capacity:
Licensed Capacity: 5000.00 mt
Installed Capacity: 4066.00 mt
Products:
1. Super Enameled Copper Wire
2. Self Adhesive Tapes
3. Coated and Released Papers
4. Pot / DTI Tes & Paper Cores
5. Marketing & Distribution
6. Financial Services
Turnover:
Lark Wires & InfoTech Ltd.:
75 crores for year 2005-06
Ashoka Credit Limited :
20 crores for year 2005-06
Competitors:
Precision Wires India Ltd.
Ramratna Wires Ltd.
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Customers:
1. Videocon
2. Lucas TVS
3. Crompton Greaves
4. Electrolux
5. United Technologies Otis Elevator
The key financials of the Company for the last 4 years are as follows.
Particulars 31.03.2003
(Audited)
31.03.2004
(Audited)
31.03.2005
(Audited)
31.03.2006
(Provisional)
Net Worth 1140.67 1202.75 1429.00 1589.31
DER 1.18 1.16 2.06
Sale & Other
Income 4065.43 5254.58 5137.00 7369.89
PBIT 334.19 401.82 352.01 673.95
PAT 0.56 0.31 22.70 301.22
Cash Profit 117.68 119.65 139.95 421.22
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RESEARCH METHODOLOGY
Problem:
To study the existing procedures, documentations and accounting system at Lark
Wires and InfoTech Ltd. & with an object to prepare a standardized accounting manual.
Type of data required:
1. Primary Data: The hand information, which has been collected for the first time.
Information collected for the first time through interviews, documents assessment on
sample basis and observation.
2. Secondary Data: Data which has already been collected, compiled and presented
earlier by an agency or any others.
Data collected for analysis from the company s Trial Balance and Audit Report.
Method of Data collection:
Following methods of data collection were used:
1. Preparation of Modules
2. Questionnaire & Interviews
3. Assessments of documents on sample basis
4. Observation
The analysis of the documentation and accounting procedures of a manufacturing
company, as large as Lark Wires and InfoTech Ltd. is a lengthy process as it involves lot
of planning and detailed study of past records.
1. Preparation of Modules: To simplify the lengthy analysis all the processes were
divided into the following modules:
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a. Purchase Module: This module contains the study for the process of acquiring Raw
Material and Consumables. The analysis is carried out as per the following steps:
Need for acquiring material
Requisition for material
Enquiry / /Invitations for tenders, quotations
Finalization of tenders
Purchase order:
o Verbal
o Documentation
Acknowledgement of P.O
Advance Payment if any
Material receipt
Inspection
Storage of material
Taxation
Payment to supplier
Accounting Entries
b. Revenue Module: This module deals with the actual sales procedure followed by the
company. The study of this module has been divided into the following steps:
Generation of Enquiry
Rate Negotiations
Receipt of Sales Order
Confirmation of Order
Advance Payment received if any
Order forwarded to Production Dept
Dispatch of Material
Invoicing
Receipt from Customers
Accounting Entries
Sales Returns if any
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c. Expenses Module: This module deals with the procedure followed to incur Revenue
Expenditure only. The study of this module has been divided into the following steps:
Need for expense
Requisition
Approval
Authorization
Documentation
Payment Process
Reimbursement of expenditure to Staff if any
Accounting treatment of each expense
d. Cash Module: This module deals with the cash payment and cash receipts for the
company. This study included the following:
Determining cash requirement
Disbursal of cash
Maintenance of Petty Cash
Documentation
Accounting treatment
e. Bank Module: This module deals with all the banking transactions concerning the
manufacturing units. The study of this module includes the following steps:
Bank receipts procedure
Inter-Bank / Inter Branch transfers
Maintenance of documents
Bank Payment Procedure
Reconciliation
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f. Taxation Module: This module deals with the study of the following taxes
applicable to this particular manufacturing concern:
Excise Duty & Education Cess
Sales Tax ( C.S.T / V.A.T)
T.D.S
Service Tax
2. Questionnaire and Interviews: A general questionnaire was designed keeping in
mind the modules. Department wise interviews were conducted based on the
questionnaire; with modifications as per the role of the employee. The general
questionnaire contained the following questions:
a) What is the role of the employee?
b) Paper work handled by the employee ( position in flow of documents )?
c) How and when does the employee report to his senior?
d) What reports does he get from his subordinates?
e) How does he use these reports?
f) Details of the documentations maintained?
g) Consistency maintained in the process?
3. Assessment of Documents: Assessment of the documents involved in the above
mentioned modules was done on sample basis. The following documents were analyzed
Purchase Order prepared by Lark
Sales Orders received
Documents involved in the Material Inward Procedure
Documents involve in the dispatch procedure
Inter Office Memo
Statutory documents maintained for taxation
All documents required and maintained for L.C and Hundis
Payment and Receipt vouchers
4. Observation: A comparative study was done between respondent s answers and the
actual system being followed to note the difference between the two.
The company used the following self developed software:
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A. FME: This is accounting software developed and applied in the company since the
year 1996 to suit the growing needs of the company. This is Single Entry software.
B. LOTS: This is software used to assist customer order processing. It deals only with
the sales order processing. There is no different module developed for Purchases in this
software.
Area of study:
1. Mumbai
2. Vadodara : The manufacturing unit and the administrative office are located in
different places. The accounting function is carried out in the administrative office.
3. Goa: The group has 2 units in Goa, one of them at Verna Industrial Estate and the
other at Kundaim Industrial Estate ( Gerson Engg. Works Ltd. ); which comes under
Ashoka Credit Ltd.
Period of study:
2 months (1st June 2006 to 31st July 2006)
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DATA FINDINGS
Purchase Module:
a) Need:
The first step in the purchase process is determining the need for acquiring the material.
In all the three units i.e. Lark Baroda, Lark Goa and Gerson Engg. Works Ltd. the
need for raw material is decided by the Production department in consultation with the
marketing department. The decision to acquire more raw materials is based on the
following factors:
1. Pending Orders
2. Stock available
The estimated monthly requirement of raw material is calculated at the beginning of
every month by the respective production and marketing departments collectively. The
estimated quantity of copper is conveyed to the Mumbai office by each unit via e-mail.
Enamel Purchase Decision is taken by respective units as per their requirements.
The decision on purchase of consumables is taken by the various department heads; as
and when needed.
b) Requisition for material:
Raw Material: The requisition for copper is made verbally to the Mumbai office by
the respective manufacturing units. There is no Purchase Order prepared for acquiring
copper. The Mumbai office is responsible for placing the order for copper for all the three
units.
The production department forwards a Purchase Requisition to the stores department for
acquisition of Enamel.
This Purchase Requisition has the following details:
1. P.R No.
2. Date.
3. Budget Head
4. Intending Department
5. Description of Material
6. QUANTITY: Required, In Stock, Sanctioned
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7. Approximate Value
8. Purpose and Proposed make/source.
The Head of the Production department signs the requisition.
Stores Department also signs the requisition.
Consumables: For acquiring consumables a different processes are followed in Goa
and Vadodara.
Goa:
A Material Requisition note is prepared by the indenting department. This note is
forwarded to stores department.
There are 2 copies made of this material requisition. 1 kept in the stores department
and the other in the indenting department.
Material Requisition contains the following details:
1. Sr. No, Date and Department.
2. Particulars
3. Quantity required
4. Quantity Issued
5. Stores Folio No.
6. Rate per unit
7. Amount Rs.
8. Remarks/ Machine no.
This requisition is authorized by the Head of the indenting department.
In case of non availability of material; the shortage quantity is mentioned on the material
requisition note by the stores department.
The indenting department then has to raise a purchase requisition for the same quantity
which is again forwarded to the stores department.
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Vadodara:
There is no material issue note prepared for acquiring material from stores. An entry in
separate store register is made by the indenting department person. The procurement of
consumables is decided by Plant Manager.
c) Enquiry / Invitation for Tenders:
Tenders for required quantity of Copper for all units are invited by Mumbai Office as and
when required. For purchasing enamel respective units invites proforma invoice.
Consumables are mostly purchased from regular supplier without inviting tenders.
d) Finalization of Tender:
Finalization of Tender for Raw Material is done by Director and Finance Manager at
Mumbai office only. Enamel pricing is based on market price & from only one domestic
supplier and one international supplier, so there is no need of finalization for purchasing
of enamel.
Prices of Consumables are finalized with supplier verbally on phone.
e) Purchase Order:
After the receipt of Purchase Requisitions the commercial executive prepares the
Purchase Order. The following details are mentioned in the P.O:
1. Suppliers name
2. P.R No
3. Buyer Code
4. P.O number
5. P.O date
6. Item Specifications
7. Material Code
8. Order Quantity
9. Rate (Rs.)
10. Discount
11. Excise %
12. Special Excise %
13. Delivery Schedule
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3 copies are made of the P.O.
Yellow is retained in the Purchase book.
Red is forwarded to the stores department.
White copy is sent to the supplier.
This P.O is authorized either by the Marketing head or the Production head. An entry in
the Purchase control register is made; which is maintained by the stores department.
P.O. is not prepared at units for Purchasing of Copper and Order is processed verbally or
by email through Mumbai office.
f) Acknowledgement of P.O.:
Acknowledgement of receipt of P.O is not sent by the supplier. Sometimes a verbal
acknowledgement is sent.
g) Advance Payment:
In case of Enamel 100% advance payment by way of L.C. is done by each unit.
h) Receipt of Material:
No prior intimation is sent by the supplier regarding the dispatch of material.
In case of Copper
and Enamel the security department first informs either the Plant
Manager or a senior administrative personnel (V.P. / M.D.).
In case of consumables only the stores department is intimated. A phone call is also
made to the Stores department by the security guard.
Weighing of material is done at Weighbridge in supervision of a Security Person or
stores personnel. Material Quantity is verified at Gate against the Invoice.
One copy of invoice is given to Transporters Stamped and Signed by the security as
an acknowledgment of receipt of Material.
Invoice is stamped at the back and the inward serial no. is given as per the
MATERIAL INWARD REGISTER is written.
Material Inward Register contains the following details:
1. Sr. No
2. Date
3. Gate Entry No.
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4. Challan No.
5. Bill No.
6. Party name
7. Item Name
8. Quantity
9. Rate
10. L/F
11. Sign
12. Remark
Entry in Inward Register and Preparation of MIV (Material Inward Voucher) is done
by the Security. The MIV is also Signed & Stamped by security person.
MIV contains the following details:
1. Suppliers Name
2. Suppliers Code
3. Store Entry No.
4. Invoice Challan No.
5. Sr. No. (as per given by the Security at the time of entry)
6. P.O no.
7. Date.
8. Material Code (mentioned on the incoming invoice or packaging)
9. QUANTITY: Received, Rejected, And Accepted.
10. Store L.F no.(as per given by the Store Dept.)
11. Remark.
12. Store receipts counted and checked by Store Personnel.
13. Quantity checked by (as per specifications) Store Personnel by.
14. Inspected and checked for quality by the QC department.
15. Indentor: checked and signed by the Head of the concerned department.
16. Gate entry Signed and stamped by Security.
Invoice & MIV is forwarded to Stores Department.
Unloading of material under is done the supervision of StoreKeeper.
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The date of receipt of material and a tick is marked against the initial entry made in
the Purchase Control register.
i) Inspection (Quality Control):
a. Raw Material
MIV is then sent to QC.
QC collects a sample of the raw material.
Details of the material are entered in the Raw Material register maintained by QC
department.
There are different registers maintained for
Copper
Enamel
D.M water
Lubricant
Test Certificates received with the material are stored in a separate file by the QC
department.
A serial no is given to the copper reel, which is used for further reference.
Enamel is given special code according to the specifications.
Tests are conducted to verify the quality of the raw material and if found usable the
MIV is passed by the QC department.
The MIV is sent to the respective department heads (indentor for the purchase) and
they sign it and it is forwarded to accounts department.
b. Consumables
Inspection of consumables is done by the indenting department.
j) Storage of Material:
Unloading of material is done under the supervision of the Head of the Stores
department. A tick is marked against the initial entry in the Purchase Control Register to
signify closure of the order.
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k) Taxation:
Documentation and accounting for taxation is done in following manner in the respective
unit:
Vadodara:
RGI register is maintained in the factory by the head of the stores department. He enters
the Excise tax paid on each purchase in this register. The details of RGI register are sent
to the administrative office on a monthly basis for the purpose tax payment. Entry for
C.S.T / V.A.T paid is directly done in the accounting software FME. There is no separate
register maintained for this purpose.
Lark Goa:
A separate RGI register is maintained in Excel format by the head of the taxation
department.
A separate Excel sheet is also maintained for C.S.T/ V.A.T.
Gerson Goa:
A separate Excel sheet is maintained for Excise Tax and C.S.T/V.A.T by the head of the
accounts department. Both the sheets are forwarded to Lark Goa s taxation department on
a weekly basis.
l) Payment to Supplier:
Payment to suppliers is done in 3 ways:
1. Cash: For purchase of consumables
2. Cheque: For purchase of consumables and enamel; if from a local supplier.
3. L.C: For purchase of copper and for import of enamel.
m) Accounting Treatment:
The following main account heads are debited in the case of any purchases:
a. Copper: This account shows the purchases made of the CC Rods from the suppliers.
b. Enamel: This account shows the purchases of the enameling material required for the
manufacturing process.
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c. Spool: This account shows the spools purchases required for winding of copper wires.
d. Packing Material:
This account shows the purchase of packing material like Material
packing Box. The P.P box strapping material is also included in this account head.
e. Stores and Consumables:
This account head includes bearings, nut bolts and all
consumable items like oil, cotton waste.
The entry is made in the same format of the Purchase Invoice. The computerized
accounting entry is made in the accounting software FME as per the format of the invoice
which contains the product details, payment details and the various taxes applicable i.e.
SALES TAX, EXCISE, CESS. A ledger account when opened is given a specific code no
which is maintained for further recording of entries. As this code is entered in the format,
a debit or credit given to the ledger according to the module.
Entry for receipt of material:
Purchases a/c(Exps A/c head) Dr
Excise PLA a/c Dr
Cess a/c Dr
Purchase C.S.T / VAT a/c Dr
To Supplier a/c
(being material received vide MIV No.____ ,dated___, from
respective supplier)
Entry at the time of payment to supplier:
Payment via cheque:
Supplier's a/c Dr
To Bank a/c
(being payment made to suppliers by cheque no.__ dated__ against bill
no.__ of _______bank )
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Payment by Cash
Supplier s a/c Dr
To Cash a/c
(Being cash paid to supplier against bill no_____ , dated ___)
Payment through L.C.
Supplier's a/c Dr
To Bank a/c
(being payment made through LC dated___ BILC no.___vide bill no.___
due date___ material received vide MIV no___)
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FLOW CHART
PURCHASE MODULE
PURCHASES
RAW MATERIAL Misc. Material
Copper Enamel A
Requirement Requirement Production Manager Production Manager & Marketing Head & Marketing Head
Convey to Convey to Director / V.P. Director / V.P.
Convey to Mumbai Office if Import Domestic Supplier Finance Manager
Rates as per Rates as per Market Rates as per Market HCL/Delhi Office
L.C. Opening Requisition for P.O. authorized by (Mumbai Office) proforma invoice from Director / V.P. or
Supplier Tongling, China Production Manager
One Copy of L.C. to Supplier & One copy to lark, Goa Receipt of Proforma Invoice Receipt of Proforma
Lark, Goa Invoice
Dispatch of Material Against L.C. by supplier Fax to Mumbai Office 100% Advance payment
by cheque
L.C. Opening (Mumbai Office) Dispatch of Material
by Supplier
One copy of L.C. to Supplier via Internet & One copy To Lark Goa
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Dispatch of Material Against L.C. by Supplier
Material Received at Gate
Intimation to Director / V. P. Or Production / Marketing Head By Security Guard
Weighing of Material At Weigh Bridge under Security / Store personnel
Material Quantity is verified by Security against Invoice
Invoice is stamped at back And MIV is prepared by Security
Entry in Material Inward Register (Security)
MIV forwarded to stores
Unloading of Material under Stores dept.
MIV signed & forwarded to Q.C. dept.
Q.C. Test
MIV signed and forwarded to Stores Personnel
MIV signed by indentor
Transporter s copy of L. R. Signed & Stamped By security
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Entry in Store-FME against MIV by Stores Incharge
MIV with Invoice & L.R. Forwarded to Account Dept. Stored in Single File
Verification of MIV and Accounting entry in FME software By Account Executive
Payment as per terms (For L.C.) Mumbai Office
Receipt of Bank Advice
Bank Payment Voucher by Accounts Executive
Accounting Entry (Including L.C. Charges)
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MISC PURCHASES
A
Purchase requisition By concern dept. person (Indentor)
Authorised by Head of Department
Rate Negotiations By Head of Department
Requistion forwarded to Stores Department
Stores Dept. enters in Purchase Control Register
In Case of Local Purchase In case of Outside Purchase
Requisition forwarded Purchase Order is prepared To Purchase Personnel by stores personnel & Signed by
indenting Department s Head
Purchase Personnel Collects Cash from accounts dept. Preparation cash payment Material received at gate Voucher by Accounts Executive (Authorised by V.P. / Director)
Purchase Personnel Purchases Security enters it in Material & gives material Material Inward Register at Gate with Invoices/Bills Prepares MIV, Stamped at
Back of Invoice
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Security enters it in Material Inward Register Material, MIV & Invoices Prepares MIV, Stamped at forwarded to Stores Dept. Back of Invoice & writes Through Purchase Personnel
Purchase Requistion, Material, MIV & Invoices forwarded to Store Department
Store Dept. receives material, Signed and forwarded MIV to Indenting dept.
Indenting Dept. Checks Material And signed in MIV & again forward it Stores Dept.
Stores Dept. Make entry in Purchase Control Register
Entry in FME
Stores
By Stores Incharge Receipt of Material
Accounting entry in FME By Account Executives
Payment Payment already made in cash By In case of Purchases through Purchase Personnel Cheque
Accounts Executives prepared Cheque & Bank Payment Voucher
Cheque Signed & Authorised By V.P. / Director
Cheque issued to party With Payment Advice
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Revenue Module:
a) Generation of Enquiry:
All the regions; Mumbai, Vadodara, Bangalore, Delhi & Chennai have been appointed
marketing personnel who are responsible for generating enquiry and orders.
b) Rate Negotiations:
The raw material rates are fixed according to the price list issued by the Delhi office. For
major orders the fabrication rates are decided by the respective unit s Marketing head and
the V.P / M.D. In other cases the regional marketing personnel have been authorized to
fix the fabrication rates with prior approval from higher authorities.
c) Receipt of Sales Order:
Vadodara:
The regional marketing person receives the sales order in the written form. Along with
the order they also forward MF1 (Marketing Form 1) to the respective administrative
office.
The MF1 contains the following details:
1. Purchase Order No. and Date
2. ST/CST no./date
3. Name of Customer
4. Customer Code
5. Delivery Address
6. Marketing/Sales representative code
7. Depot/Branch code
8. Dealer or agent code
9. Product Description: Size, Specification No., Grade(G1/G2/G3), Total, Rates(as per
PL/Discounts), Fabrication rate, Job Work, Customer s Item Code No, Delivery
Schedule.
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Charges Applicable are also mentioned:
1. Insurance
2. Bank Charges Customer/ Lark
3. Freight: Customer/ Lark/Paid/ To pay. If paid by transport. Paid to transport by
LarkWire/depot/branch or debit note to customer.
4. Octroi to be paid by Customer/Lark
5. Spool Code details
6. Credit Period
7. Local Sales Tax/CST
8. Door delivery/up to
9. Permit
10. Invoice through
11. Contract No.
12. Transporters details
13. Payment Details
14. Customer Limit
15. Customer O/s
16. Customer Overdue Limit
17. Delivery as on
This MF1 is authorized by the Senior Commercial Executive / Marketing Head.
The P.O and MF1 is received at the administrative office initially. Here it is authorized
and then 1 copy of each is forwarded to the factory via fax / courier.
Total 3 copies of the MF1 are made
1 copy is sent to the factory with copy of P.O.
1 copy is retained in the office in respective customer s file.
1 copy of MF-1 Stored in a separate MF-1 File as per serial number with P.O.
Goa:
Here the orders are received via fax, email sent by the regional marketing personnel.
There is no MF1 preparation here. The orders are stored in 2 separate files
1 in Sales order file
2nd in the respective Customer Correspondence file
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d) Confirmation of Order:
Order acceptance is sent via email or verbally. This is not followed on regular basis.
e) Advance Payment received if any:
In case of new customers 100% advance payment is received against the Proforma
Invoice. For regular customers there is credit period of 60 to 90 days according to their
credit status.
f) Order forwarded to Production Dept:
Vadodara:
After the receipt of MF1, it is entered in the MF1 control register by the stores manager.
It contains the following details:
1. MF1 No. and date
2. Amendment Slip No./date
3. Customer Name
4. Size
5. Grade
6. Part/Type
7. Quantity
8. Dispatch Quantity
9. Invoice No. and Date
10. L.R No. and Transporter
11. Balance Quantity
12. Dispatched Quantity
13. Invoice No and Date
14. LR no and Transporter
After checking for the material in stock the order is then forwarded to the Production
department. Here the production manager does the planning
taking in consideration the order requirements and the availability of material.(no time
constraints).
30
Following are the details of Production Planning and work order given to the Operators.
1. Job No.
2. Size
3. Grade
4. Type
5. Quantity: Order, stock, Production Required, Actual Planned
Separate planning is done for Wire Drawing is also maintained by the plant manager. The
details provided in this work order are:
1. Machines to be used
2. Job No.
3. Size to be drawn
4. Required for final size/inlet
5. Quantity
6. Bobbin Type(Dies)
7. No of Bobbins
8. For Machinery No.
9. To be Annealed: Yes/No
10. Inlet
This is put up on the factory notice board to inform the workers.
Inspection and Quality Assurance: The first inspection stage is done after the Wire
Drawing stage. A Wire Drawing Test Register is maintained for it. The results of all the
tests are maintained here. The material, which is accepted, is marked OK against its ID
and if rejected it is marked as N/C.
After the tests if the material is verified as OK then a tag containing the size and grade of
material is attached to the spool. After the completion of first stage of enameling a line
sampling test is done. This record is maintained in the Line Sample Register. Online
Inspection is done during the Production Process. If any problems are found a memo is
given to the operator.
31
2 copies of this memo are made: 1 with the operator and one with Q.C dept.
Final Testing is done after the end of Production Process. The results of this test are
maintained in the Final Test Register. Once the material tested OK a green tag is attached
to the material/spool and it is sent to stores. Spool no is given by the operators.
A Rejection Register is also maintained.
Goa ( Lark & Gerson):
Here also the MF1 is entered in the Pending Order register. A software LOTS is used
from this stage on to further keep a track of the order processing. After the entry in the
Pending Order register the order is entered in the Customer Order screen in LOTS by the
marketing head. After the feeding of Customer Order in the LOTS software; the
marketing personnel feeds the due date for the finished product.
The Production Manager, is then able to access this new order on his Production
Schedule Sheet. The Start Time and the End Time on this sheet is filled by Production
Manager. This is supposed to be the time period in which the production has to be
completed. After filling the Start Time and the End Time, this screen is made accessible
to the machine operators as Production Screen. The Start and the End time in this screen
are the actual time required for production.
The machine operator sticks a Manual Spool Label on the spool about to be produced,
and he enters this Manual Spool No. in the Production Screen. Against this Manual No.
the software generates a spool no of its own starting with the alphabet to indicate the
machine it has been produced on.
A for E1
B for E2 .and so on.
Both these spool nos. are later printed on the Packing Label, Packing Slip. The Weight
List Summary contains only the Software generated spool No.
32
Inspection and Quality Assurance:
The Q.C procedures are the same that are followed in
all units. Only the final entry stage differs due to the software LOTS in both units of Goa.
After the final testing of the material the Q.C personnel manually puts a sticker on each
individual spool to indicate it s quality.
Green: O.K
Yellow: ShortPack or Rewinding
Red: Scrap.
An entry in the LOTS software is also made regarding the status of the material.
Material accepted and sent for weighing is marked Green.
Material still under Q.C is marked Grey.
Material on Hold is marked Yellow.
Scrap Material is marked Light Pink.
Material Returned by customer is marked Pink.
The accepted material is then passed on to the weighing department.
g) Dispatch & Invoicing:
A computerized weight list summary is prepared and attached with the out going invoice.
3 copies of this weight list are made.
1 is sent with the transporter,
1 is sent to the party
1 is retained in the factory in separate Box File.
Dispatch Documents: Gate Pass, Bill, Lorry Receipt, Weight List Summary.
33
Loading is supervised by store department head. He verifies the material as per the
weight list summary and puts a tick mark for every correct entry on his copy of the
weight list summary.
Vadodara:
Invoice (Bill of Excisable goods) The bills are prepared by the stores person or a dispatch
person and the maker of the bill signs on the bottom left corner.
The plant manager does the authorized signature.
The following are the details of the bill:
1. Invoice No.
2. Name and Address of the Consignee
3. CST/LST No
4. ECC No
5. Customer Code
6. MF1 No and date
7. Order No and date
8. Transporter or LR No and date
9. Item Code
10. Description
11. No of packets
12. Quantity
13. Rate
14. Value
15. Excise Duty@ 16%
16. Education Cess @ 2% on Excise duty
17. Sales Tax against Form 19 NIL for local and against CST (@4%) for inter state.
18. Total Invoice Amount
19. Date & Time of Removal
20. Vehicle No.
21. Insurance Details.
34
4 copies of this bill are made.
Pink: Transporter,
White: Party,
Green: Office (Baroda),
Yellow: Retained with the Factory.
The gate pass is prepared by Dispatch person who signs on the left bottom corner and
also mentions the vehicle no.
At the centre bottom the security personnel at the gate sings it and stamps it. He does so
after duly verifying the material with the weight list and the bill.
The plant manager signs as the authorized person on the bottom right corner.
The details mentioned in the Gate pass are as follows:
1. Date and time
2. Sr. no.
3. Particulars
4. Quantity
5. Challan no./ invoice no.
6. Date
2 copies of the gate pass are made.
1 is stored in a separate box file and another is retained in the Gate Pass book.
The documents dispatched with the material are:
1. Bill in Pink Copy
2. Weight List Summary
3. Lorry Receipt
4. Other forms (if required)
35
Goa:
The material passed by Q.C is then brought to the weighing department from the
production floor.
The weighing / Dispatch department is intimated by the marketing head about the day s
delivery schedule in the morning itself. Weighing of the material is recorded on the
Weighing 2 screen in the LOTS software. After weighing is done and all the details are
filled in the material is sent for Packing.
The no. of spools to be packed in a corrugated box is pre-decided according to the spool
type and the size of the box. A Packing Slip is prepared from the LOTS Pack Auto Form
screen.
The Packing Slip contains the following details:
1. Case No.
2. IS No.
3. Size
4. Grade
5. Type
6. Spool Type
7. Reel
8. Spool No. (software generated)
9. Gross Wt
10. Tare Wt
11. Net Wt
12. Net Total
The Slip is attached on the Corrugated Box and the pack is sent for invoicing/dispatch.
This box is entered in the finished goods stores.
The Invoice is prepared by Marketing Head or Marketing person.
36
The Invoice Screen in LOTS contains the following details:
1. Invoice
2. Invoice No.
3. Date
4. Preparation time
5. Customer
6. Consignee
7. P.O No.
8. Against
9. Payment Terms
Vehicle Details
1. L.R no
2. L.R date
3. Transporter
4. Vehicle No
5. Regn No
6. Removal Dt
7. Removal Time
Amount
1. Item Amount
2. Excise
3. Cess
4. Sales Tax
5. VAT
6. Service Tax
7. Other(%)
8. Invoice Amount
37
Spools
1. Sr. no
2. Order No
3. Size
4. Grade
5. Type
6. Pack Type
7. Approximate Quantity
8. WL Quantity
9. Rate
10. Case
11. Excise Duty Rate
12. Customer Copper Rate per kg
13. Other Details : Remarks
The vehicle is called in by Dispatch head. After the weight list is printed the material is
loaded in the vehicle according to the list. After the loading of material the final Invoice
print is taken.
The details mentioned in this Invoice are:
1. Name of Excisable Good
2. Tarrif No./ Sub-heading No.
3. Ecc no.
4. Pan no
5. C.S.T no
6. Service tax no
7. Tin No
8. Customer Code
9. Invoice No
10. P.O No
38
11. Date
12. Time
13. Name and Address of Consignee
14. CST No
15. TIN No
16. Excise Regd No
17. Name and Address of Buyer if he is not Consignee
18. CST No
19. TIN No
20. Excise Regd No
21. Sr. No
22. Item Code
23. Description of Goods
24. Size
25. No of Cases
26. Weight
27. Rate per kg
28. Value
29. Excise Duty Payable
30. CST Payable/VAT
31. Others
32. Invoice amount
33. Transporter
34. L.R No.
35. L.R date
36. Vehicle No
37. Against
38. Terms of Payment
39. Date of Removal
40. Time of removal
41. Remarks.
42. Insured Policy No.
The authorized signatory is Marketing Head.
39
5 copies of this invoice are made
1. Original for Buyer
2. Duplicate for Transporter
3. Triplicate for Assessee
4. Quadruplicate for Accounts
5. Extra Copy for Personnel department
Documents of Dispatch:
1. Invoice - Transporters
2. Weight List Summary
3. Test Certificate from Q.C.
4. L.R. Copy
5. Gate Pass
h) Receipt from Customers:
There are following methods of receipts from customers:
1. Amount directly deposited in Lark bank accounts by customer/regional marketing
personnel: Under such conditions intimation is made from the party to the marketing
personnel beforehand.
In case the cheque is handed over to the marketing personnel and he deposits in the bank,
the details of deposit sent to Marketing head or Senior Commercial Executive fax or
email.
2. The cheque is sent to Lark Wires office through courier.
3. The third method is a bill of exchange: The terms and conditions of payment are
already decided by the marketing personnel while receiving the PURCHASE Order from
the customer.
40
The bill is prepared by the commercial executive.
It is authorized by the M.D / V.P.
This bill is either stored with the office in separate file until its maturity or it is
discounted with the bank as and when needed.
The decision of bill discounting is taken and authorized by the M.D. the discounted bill
copy is stored in the separate file.
i) Accounting Treatment:
Entry at the time of dispatch of material:
To make a sales entry in the software; a STOCK INWARD entry has to be made first. This
entry is made against Material Received from Manufacturing Unit as it is mentioned in
FME Software.
The Stock Inward entry is passed as per the invoice.
The amount of stock inward is equal to TOTAL INVOICE amount
SALES TAX
i.e. it
includes the value of product, the excise and the education cess levied on it.
Sales Tax is not included as there is no sale made.
Entry : Stock Inward A/c Dr.
To Store A/c
Person making the entry in the FME software marks the Invoice on the top left corner
with an entry number which is same as the invoice no. This number is circled.
The stores account is given a debit after a certain period by preparing a journal entry.
Store A/c Dr.
To Stock Inward A/c
41
These entries are dummy entries. These are made to accommodate with FME software,
these are not related with accounting effects.
After Stock Inward entry an immediate sale entry is passed which is shown on the debit
side of customer s account by total invoice amount i.e. Sale Price+ Excise and Cess+
Sales Tax
The invoice is marked with the entry no which is same as the invoice no. this no. is
marked upper right side of the invoice. For example 665/665.
The computerized accounting entry is made in the accounting software FME as per the
format of the invoice which contains the product details, payment details and the various
taxes applicable i.e. SALES TAX, EXCISE, CESS.
Customer's A/c Dr.
To Sales a/c
To Sales - C.S.T / VAT a/c
(being sale made against invoice no. ___dated ____)
In Case of payment receipt through cheques:
Bank A/c Dr.
To Customer s A/c
(being payment received by cheque no.___ dated___ deposited in
____bank against bill no.____ dated____)
In case of Bill of Exchange:
At the time of discounting of bill
Bank A/c Dr.
To BPBD A/c
(being bill no. ___ discounted and credited on account of___ against
invoice no ___ dated____ amount____ )
42
Bank Charges(BPBD) A/c Dr
To Bank A/c
(being amount debited by bank as per bank advice bill no.__ dated
______ discounted by bank)
Service Tax A/c Dr.
To Bank A/c
(being service tax deducted by bank @ ___%)
At the time of maturity of bill
BPBD A/c Dr.
To Bank A/c
(being payment recd against bill no.___)
43
FLOW CHART
SALES MODULE
SALES ENQUIRY : Marketing Personnel
At Branch Offices Send P.O. / MF-1 to Lark, Goa
Receipt of Order & Enters details in Customer Order Module in Lots: Marketing Head
& also in Pending Order / Dispatch Register
Production Planning (Duration of Production and Dispatch) Entered in Lots : Marketing Head
Production Scheduling in Lots by Production Manager
Production
Inspection & Quality Control
Weight of Spool entered in Lots Weighing Personnel
Labeling & Packing of Material
Dispatch Schedule Prepared by Marketing Head every morning
& informed to Dispatch Personnel
Preparation of Invoice & Generation of Weight List Summary in Lots
By Marketing Executive
Weight List Summary printed and L.R. Details are entered in Lots
by Weighing Personnel
44
Material Loaded as per Weight List Summary
Invoice Printed in 5 Copies by Marketing Executive & Signed by V.P. / Marketing Head and
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