University Finance And

Accounting System

Presented by:PRANESH DEBNATH

28/03/2015

Finance

• Finance is defined as the provision of money at the time when it is required. It performs all the activity

relating to procurement and proper allocation of resources to produce a better intended results.

28/03/2015University Finance and Accounting System

Step 1: Estimating the financial requirement

Step 2: Deciding the

capital structure Step 3: Selection of

source of finance

Step 4: Pattern of investment

Step 5: Proper cash manageme

nt

Step 7: Implementation

of financial control Step 6:

Proper use of surplus

Function of

Finance

Classification of Finance

28/03/2015University Finance and Accounting System

Central GovernmentState GovernmentLocal authority

Personal FinanceBusiness FinanceFinance of academic

intuition, & Other Non profit making organization

Finance

Private FinancePublic Finance

Admission Fee Central Govt. Land & Building Staff Payments

Registration Fee State Govt. Furniture Administrative Exp.

Tuition Fee Other Funding Agency Equipment. Academic Exp.

Examination Fee Donations Books & Journal Transportation Exp.

Guest House Rent Vehicles Repair & Maintenance

Sale of Prospectus Computer & Xerox Finance Cost

Miscellaneous Miscellaneous Other Exp.

Depreciation

28/03/2015University Finance and Accounting System

Financial System of University

Sources Applications

Internal External Planned Expenditure

Non-planned Expenditure

Accounting

• Accounting may be defined as the process of recording, classifying, summarizing, analyzing and interpreting

the financial transaction and communicating the result thereof to the person interested in such information.

Following functions are involve in accounting practice:

1. Recording,

2. Classifying,

3. Summarizing,

4. Analysis and Interpretation and

5. Communicating the information to interested parties.

Accounting is basically accountable for answering the following questions

1. What is owned by an organization;

2. what is owed to other;

3. . what is the amount of surplus/deficit for a particular period; and

4. Financial position at a particular date.28/03/2015University Finance and Accounting System

Basic assumption of University Accounting practice

• Fund based accounting: (W.J.Vatter in 1947)

In this concept of accounting instead of owner or separate entity an activity oriented unit (i.e. fund) is taken as basis of accounting. Here fund includes money and other resources employed for the attainment of intended objective. Mathematically it can be expressed as

Assets = Restriction on Assets*

*Liabilities against the fund.

Basically at the initial period cash basis of accounting was dominated in fund based accounting system because of some benefits of cash basis of accounting.

1.No need to exercise any judgment in determining non cash income & expenditure.

2.Compilation of cash based information is easier.

3.Operating costs are lower etc.

4.More objective in recording of transaction least subjectivity.28/03/2015University Finance and Accounting System

Limitations of Cash basis of Accounting

28/03/2015University Finance and Accounting System

Information Cash Basis

Accrual Basis

Is information about the assets & liabilities available? NO YES

Whether matching of costs and benefits is possible? NO Yes

Whether financial information is Comparable in wide manner?

NO Yes

Accrual basis of accounting enjoys some advantages over the cash basis of accounting and because of that in some developed countries like UK, USA, Australia, Canada, Germany, Itali etc. Government organization also maintaining their books of account on accrual basis and developing South Asian countries are in the stage of implementation of accrual based accounting system for public sector and other non profit making institutions for financial reporting purpose.

Source: www. http://esafa.icai.org/wp-content/uploads/2014/03/Study-Accrual_Accounting_in_SAARC_Governments_1.pdf

Basis of University Accounting

28/03/2015University Finance and Accounting System

Cash basis (recording of transaction on the basis of actual receipts and

payments of cash)

Accrual basis (recording of transaction based on its relation with the current period )

1. Fees from students, Interest on Savings A/c

Grant from UGC: utilized (Capital + Revenue expenditure) unutilized.

Sponsored Project2. Purchase of stocks

3. Purchase of computer

4. Retirement benefits

Balance Sheet of University

28/03/2015University Finance and Accounting SystemSource: www. http://mhrd.gov.in/

SOURCES OF FUNDS Schedule Current Year Previous YearUNRESTRICTED FUNDS

Corpus Fund 1 General Funds 2 Earmarked Funds 3

RESTRICTED FUND 4LOANS/BORROWINGS 5

Secured UnsecuredCURRENT LIABILITIES & PROVISIONS 6

TOTALAPPLICATION OF FUNDS

FIXED ASSETS 7 Tangible Assets Intangible Assets Capital W-I-P

INVESTMENTS 8 Long Term Short Term

CURRENT ASSETS 9LOANS, ADVANCES & DEPOSITS 10

TOTALNotes on Accounts 22

(Amount Rs………..)

Income and Expenditure A/C of University

28/03/2015University Finance and Accounting SystemSource: www. http://mhrd.gov.in/

R.F.CorpusDesignated General Capital Total Total

INCOME Academic Receipt 11

Grants & Donations 12

Income from Investments 13

Other Income 14

TOTAL(A)EXPENDITURE

Staff payments & Benefits 15

Academic Expenses 16

Administrative Expenses 17

Transportation Expenses 18

Repair & Maintenance 19

Finance Cost 20

Other Expenses 21

Depreciation 7

TOTAL(B)

Surplus/Deficit carried to General FundNotes on Accounts 22

Unrestricted FundPrevious

Year

Balance being excess of Income over Expenditure(C=A-B)

Transfer to/ from designated fund, building fund, other(D)

(Amount Rs………...)

ScheduleCurrent Year

28/03/2015University Finance and Accounting System

Role of Audit

When the accounting work is completed, an Auditor is invited to check the accounts prepared by the accountants. That means “Auditing begins where accounting ends”. After completion of his (Auditor’s) work he has to submit a report stating the fact whether or not the financial statements exhibits a true and fair position of the financial affairs of an organization.

AuditInternal Audit

Statutory Audit

Transparency

Accountability

Good Governance

Efficiency

Economy

Effectiveness

Conclusion• Accounting and Finance are distinct from each other but these two terms are

not mutually exclusive rather complementary in nature because in present business scenario large volume of financial activity is hardy possible without proper record keeping and accounting without financial activity has no use.

• Accounting is a knowledge and this knowledge helps in finance function. In a nutshell Finance is the life blood which helps to keep the organisation alive and Accounting is the record keeper and reporter of information regarding financial activity i.e. both of them take equal part in forming the financial system of an organisation.

28/03/2015University Finance and Accounting System

Thank You

28/03/2015University Finance and Accounting System