E1E1--E2 E2

Management ModuleManagement Module

BSNL CORPORATE PRACTICE & ACCOUNTIG

For internal circulation of BSNL only

WELCOME

• This is a presentation for the E1-E2 Management Module for

the Topic: BSNL Corporate Practice & Accounting

• Eligibility: Those who have got the Upgradation from E1 to

E2.

• This presentation is last updated on 21-3-2011.

• You can also visit the Digital library of BSNL to see this topic.

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Agenda

� Banking System in BSNL

� BSNL Accounting Policies

� Interpretation of Financial Statements

� Introduction of Limited Company

� Capital Projects and Capital Budget

� Hiring of Rented Buildings

� Hiring of Vehicles

� Purchase of land

� Statutory Audit of Annual Accounts

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BSNL CORPORATE PRACTICE & ACCOUNTIG

For internal circulation of BSNL only

BANKING SYSTEMS IN BSNL BANK BANKACCOUNTS

�Bank Books

�COLLECTION A/C OPERATIONAL A/C

�COLLECTION BANK BOOK OPERRATION BANK BOOK

�COLLECTION CASH BOOK OPERRATION CASHBOOK

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ACCOUNTS IN ACCOUNTING UNITS

BSNL CORPORATE PRACTICE & ACCOUNTIG

Two bank accounts i.e. one collection and one

operation account are opened by all the accounting

units .

Bank accounts in circle HQ.

Bank accounts at corporate office

The SSA/PAUS will have to intimate their 10 days requirement

of funds.

Breaking up the expenditures into revenue and capital

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Supply of funds

BSNL CORPORATE PRACTICE & ACCOUNTIG

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Accounting policies

• The salient features of BSNL accounting policies are given

below:-

�The accounts are prepared under historical convention

adopting the accrual method of accounting concept

�Depreciation is calculated under “written down value

method”

�Preparation and maintenance of records in cash, TRA,

WORKS, AND CLAMS SECTION.

� Reconciliation of all transactions and posting to correct

accounts.

� Bank reconciliation for both Operation and collection

accounts.

� Maintenance of sundry Debtors and Sundry creditors

accounts.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Accounting policies

� Maintenance of Work Registers and Fixed Asset

Accounts with accumulated depreciation.

� Preparation of annual accounts with general Ledger and

supporting schedules

� Preparation of Segmental reports for various services.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Accounting policies

� Every transaction in the accounting system involves two

persons.

� One receives the benefit and the other gives the benefit.

� The person receiving the benefit is called “Debtor”. The

person giving the benefit is called Creditor.

� Thus each and every transaction involves TWO entries.

One for Debit and the other for Credit.

� This kind of recording the transactions in TWO places

simultaneously is called Double Entry System.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Double Entry System

This Double Entry System is operated on “Generally

Accepted Accounting Principles” (GAAP) and has set of

rules for making entries into the books of accounts.

Real Account – Debit the A/C which comes in

-Credit the A/C which goes out.

Personal Account - Debit the account who receives

-Credit the account who pays

Nominal Account – Debit all Expenditure & losses

-Credit all Income & gains.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Double Entry System

The following are the important journals maintained in

the accounting units.

1. Purchase Journal

2. Sales Journal

3. Bills Payable Journal

4. Salaries Payable Journal

5. Wages Payable Journal

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Subsidiary Records

Accounting is an art of Recording, Classifying, Summarizing

& interpreting all financial events with following objectives:

(i) For ascertaining gains or losses during the period

(ii) How Profit & Loss made

(iii) Ascertaining value of Assets & Liabilities as on date of

closure of Accounts.

(iv) Amount owing by customer / debtors.

(v) Amount owed by customer/ creditors.

(vi) Liabilities of taxes.

(vii) How business stands in comparison to similar business.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

BSNL Accounting Stages

• The transactions are segregated in to two parts.

• One in CASH and the other is NON-CASH.

• The Cash transactions are entered through Cash book

and Bank book.

• The non-cash transactions are entered through Journal

Vouchers (JV).

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Recording Transactions in the Cash/Bank Books

• The following books of accounts are to be maintained for

making entries of the transactions.

• Operation Cash Book – for recording day to day cash

expenses.

• Operation Bank Book – for recording day to day

expenses by cheque

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Recording Transactions in the Cash/Bank Books

BSNL CORPORATE PRACTICE & ACCOUNTIG

• Collection Cash Book – for recording day to day

collection cash and remittance to bank a/c.

• Collection Bank book – for recording collection by

cheque and transfer to Nodal branch.

• Journal Entry Register – for recording non-cash

transactions

• Separate set of books are to be maintained for each

bank under operation and collection.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Recording Transactions in the Cash/Bank Books

� Balance sheet : shows the financial position of the firm

at a given point of time in terms of assets and liabilities.

� Profit and loss statement: reflects the performance of

the firm over a period of time.

� Cash flow statements: Display the sources & uses of

cash during the period.

�For analysing the performance and status of the company

these financial statements are interpreted by working out

various Accounting ratios.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

General Financial Statements

1. Recording Cash / Bank Transactions in Cash/ Bank

Books.

2. Recording (Non-cash) Transactions in Journals

3. Classification & posting in general-ledger

4. Preparation of Trial Balance

5. Profit & Loss Account

6. Balance Sheet

7. Interpretation by Ratio Analysis

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Accounting Cycle

� Company is a legal entity independent of its members.

� It is a form of associated enterprise.

� The company being a corporate form of organization is

the owner of its assets and liabilities.

� The liability of the members is limited.

� The formation & functions of the company are regulated

by the companies Act 1956.

� Companies are playing important roles in the economic

field.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Introduction of a Limited Company

1) It is a voluntary association of persons.

2) It has a separate legal entity.

3) It is an artificial person.

4) It has a common seal.

5) It has a perpetual succession.

6) The liabilities of the members are limited

7) A Board of Directors manages the Company.

8) It must have a registered office.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Main features of the Company

Every company shall keep in its registered office proper

books of accounts with respect to ;-

I. All sums of money received and spent by the company

and the matter in respect of which receipts and

payments took place.

II. All sales and purchases of the company

III. Assets & liabilities of the company.

Such books may be kept at the other places as decided

by the board of directors under intimation to the

Registrar within seven days of such decision.

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Accounting Records of Company

BSNL CORPORATE PRACTICE & ACCOUNTIG

Consequent upon liberalization policies of Government of

India and changes in the global economy due to

globalization process, it was decided to separate DOT and

DTS as a precursor of corporation.

�DOT - Department of Telecom for policy making.

�DTS - Department of telecom Services – for execution of

work.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Financial information of BSNL

(i) Aims & Objectives

� All the activities of Govt. departments are regulated by

rules and policies fixed by Govt., Govt. Departments

grow in shelter of national economy.

� But, in a Company structure, Directors headed by a

C.M.D governs the whole administration, Interest and its

policies are being decided by Board of Directors in a

Company .

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Procedural Difference between Govt.Departments and Limited Company

(ii) Revenue Recognition

� In a Govt. department only actual amount received is

taken as revenue.

� Whereas, in a company all the accrued revenue during

the accounting period whether received or receivable is

considered as income for the period .

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Procedural Difference between Govt.Departments and Limited Company

(iii) Expenditure Recognition

� In govt. departments like revenue, the expenditure is

also considered as actual money paid.

� But in a company all expenses which have been accrued

during the period whether paid or payable are

considered as expenditure.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Procedural Difference between Govt. Departments and Limited Company

(iv) Financing/Fund Allotment

� In govt. set up, the sources of funds for department was

mainly from Consolidated Fund of India, and Public

Fund of India.

� After formation of BSNL it had started its business with

its own working capital and have to arrange the funds

with its own resources.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Procedural Difference between Govt. Departments and Limited Company

(v) Marketing Strategy

� DOT was having monopoly in Telecom area and there

was no need to behave on commercial pattern or to think

about obtaining market share of Telecom Services.

� In BSNL setup ,it is most important to achieve maximum

market share by adopting good marketing strategy.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Procedural Difference between Govt. Departments and Limited Company

� The term project is used to indicate a goal oriented task which

is complete in itself and includes many components required.

Construction of building, installation of exchange/equipment

are examples of project.

� Capital projects are projects involving capital nature of

expenditure, i.e. expenditure meant for getting assets those are

utilised to earn revenue for company.

� Capital budget is anticipated / planned expenditure to acquire

assets to increase the revenue earning capacity of the

company.

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Capital Projects & Capital Budget

BSNL CORPORATE PRACTICE & ACCOUNTIG

Budget for capital projects broadly classified in 2 categories

according to quantum of expenditure.

1. Statement for projects costing Rs 20 crore and above.

2. Statement for projects costing less than Rs 20 crore

Budgets in our department are to be prepared

keeping in view the spirit of zero base budgeting.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Capital Projects & Capital Budget

• Zero base budgeting:-means justifying the expenditure

of the project for the ensuing year independently, in

light of present need and market rates and index,

without giving much weightage to past trend of

expenditure.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Capital Projects & Capital Budget

Various type of estimates are prepared at different stages

of execution

(1) Project Estimate

Before sanction of project for assessment of its

viability

(2) Detailed Estimate

It is prepared after AOP to assess the more accurate

value of work

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BSNL CORPORATE PRACTICE & ACCOUNTIG

TYPES OF ESTIMATES

(3)Supplementary Estimate

During the course of execution of a project, it may found

necessary for some extension or development of the said

project and if it results in exceeding the original estimate by

more than 10%, then such excess must be covered by

preparation of supplementary estimate.

(4) Revised Estimate -

There may be other reason, than as in supplementary

estimate which also causes the expenses by more than 10%

of original sanctioned estimate. Revised Estimate needs to

be prepared.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

TYPES OF ESTIMATES

� While preparing the Project estimate, it should be

ensured that it is sufficiently justified and financially

viable.

� Profitability is determined with reference to Annual

Recurring Expenditure (ARE) and Anticipated receipts &

savings of a project.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Profitability of Projects

(i) Register of Works

(ii) Liability Register

As soon as any material/item/services have been

received, the respective amount is treated as liability for

the company. Till the time of payment, such amounts are

kept as liability and shown as a single consolidated

figure in Balance sheet at the end of year.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Other Important Areas

1.Tenders should be invited in the most open and public

manner.

2. Tenders must be invited for hiring of accommodation on

the basis of carpet area.

3. The building selected must be technically suitable and

justifying rent also.

4. Assessment of rent may be got done by civil wing of the

department.

5. Assessment of rent and suitability of accommodation

should be recommended by The F.R.A.C. (Fair Rent

Assessment Committee).

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Hiring of Rented BUILDINGS

� Guidelines for Hiring Vehicles on Long Term

�1. Vehicles should be hired against sanctions.

�2. Hiring should be based on competitive tenders from open

market.

�3. No. of vehicles hired should not exceed 75% of the

shortage

�4. Shortage should not include vehicles under repairing and

periodical maintenance.

�5. Hired vehicles should be utilised fully and shortage in

utilising the contractual kms. in any particular month should

be adjusted over a period of subsequent 3 months.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Hiring of Vehicle

6. In emergent circumstances like Flood, Natural

Calamities, Bandh etc. extra vehicles as deemed

necessary by CGM ,can be hired for official

works/movement of staff.

7. Log book should maintained for each hired vehicle

8. No privately owned vehicles should be hired

9. Cost of hiring should be booked in Admn. expenses

10.Given monetary limit should be observed

11. SuitableTaxes may be deducted at source

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Hiring of Vehicle

BSNL CORPORATE PRACTICE & ACCOUNTIG

Land may be acquired by two ways-

(i) Acquisition through L. A .Act.

(ii) Acquisition from private parties.

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BSNL CORPORATE PRACTICE & ACCOUNTIG

Purchase of land

� Land should be free from any encroachment.

� Immediate fencing is to be done.

� Display of ownership board.

� Site to be inspected at least once in every six months.

� Vacant land can be used temporarily.

� Land should not be kept unutilized for a long period

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Measures to be taken after acquisition of land

BSNL CORPORATE PRACTICE & ACCOUNTIG

� Annual A/C of SSA/PAU should be audited by authorized

C A.

� P&L a/c and Balance sheet should be prepared at circle.

� Accounts of all circles are compiled at BSNL Corporate

office

� Balance sheet and P&L A/C shall be approved by Board

of Directors.

� Finally it is submitted to statutory auditor.

� After audit these accounts can be laid in AGM

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BSNL CORPORATE PRACTICE & ACCOUNTIG

STATUTORY AUDIT OF ANNUAL ACCOUNTS

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