- INTRODUCTION
A proper and transparent system of accounting and administration is of great importance and it is even more important for Organizations who are utilizing fund for the poorest and the most disadvantaged people. However, the information provided through this system must also be accurate, timely and understandable.
For ensuring such a system SARA introduced a financial guideline which can be viewed as a tool for to change, to adopt or to reject as appropriate.
Effective financial policies applied through a well designed and transparent system of accounting together with the observance of standard accounting practices are of great importance for an entity specially for the Organization who are utilizing the fund for upliftments of the hard core poor. However, the information provided though this system must also be accurate, timely, understandable and objective to the purpose.
Through this handy manual intends to provide a guideline for introducing appropriate financial policies, designing a tailor-made accounting system couple with generally accepted accounting principles and practices with a view to ensure better degrees of financial control, transparency and accountability in day to operations.
Thus the main purpose of this manual is for further development of Financial and Administrative system which in turn will enable the effective and efficient management of the Organization.
Through use of this guideline it is expected that good accounting practice be made easier through the clear explanations with representative type of illustration inside and will reduce the possibility of confusing and misunderstanding during the applications.
- FUND OPERATIONAL PROCEDURE
- Methods of Fund receipts:
Fund is normally received in advance after signing the Agreement Co-operation in
between Donor and SARA and getting the approval of Govt. of Bangladesh.
- Fund receipts procedure:
Receiving of Fund depends on the agreement of Co-operation signed between Donor
and SARA
An Example of receiving fund from Donor to SARA in two installments per project
year is given below:
First Installment: After signing the Agreement of Co-operation and getting
approval from the Govt. by SARA Organization the first
installment is received as in advance.
Second Installment: After submission of First Half yearly Activity/ Program
Report along with the Financial Report to the Donor by
SARA Organization.
- Acknowledgment of Fund:
Receipts of a fund to be acknowledged by the SARA Organization immediately
to the Region/Country/Head office of Donor by submitting a receipt stating the
amount of fund.
- Obtaining of Permission :
The Organization SARA is responsible for obtaining any permission or legal
documents needed for the implementation of the said program.
- Progress Report & Financial Report
SARA will be submitted the progress report to the related Donor within 60 days
after the end of each period.
– A half yearly progress Report of activities and Financial Report.
– A comprehensive Annual Progress Report of activities and Financial Report.
- AUDIT
- External Audit:
Audit will be done by the Chartered Accountants once a year. In some cases
SARA will conduct external Audit as per requirement of of the project/GOB.
The audit report will be submitted to the Donor not later then three months
after the period audited.
- Internal/Special Audit:
SARA will arrange internal/special Audit throughout the fiscal year as
determined by the Executive Director /Chairman
- PROCUREMENT PROCEDURE
The assistance/grant provided for procurement of supplies will require complete accounting and the expenses must be substantiated by proper documentation. The procedures to be followed for procurement of supplies are listed below.
- Procurement Committee:
A list of approval authorities for procurement along with their approval limit must be given to authority of SARA prior to receipt of any fund. Any subsequent changes must be immediately notified by the SARA. This list must be approved by the authority of the SARA.
- Purchase Committee :
SARA will have a Purchase Committee containing at least three members. Two will be the Program Staff (Coordinator, Technical Officer, Supervisor) and the rest an Administration staff of SARA.
- When an item is to be purchased, a request form (own prescribe format) is to be prepared by the management/administration staff member of SARA and will be submitted to the approval authority for authorization. The following method of purchases and purchase limits must be followed during purchase of supplies.
| Amount | Source | Quotation | Method of Purchase |
| Tk. 01-10,000.00 | Open market/Enlisted Vendors | None | Direct purchased by Purchase Committee |
| Tk. 10,001-40,000 | Open Market/Enlisted Vendors. | One | Purchased by Purchase Committee through Procurement Committee. |
| Tk. 40,001-200,000 | Open Market/Enlisted Vendors. | Three | Through a Contract of Purchase(COP) |
| Tk. 200,000 and above | Open Market/Enlisted Vendors. | Through sealed bid and Contract of Purchase (COP) |
- For purchase between Tk. 01-10,000/- purchase committee member will arrange purchases from amongst any one enlisted vender. If an enlisted vender is unavailable for a particular item, then the requested item could be bought from open market without seeking any quotation.
- For purchase between Tk. 10,001-40,000/- purchase committee member will arrange purchases based on one quotation obtained from amongst enlisted venders. If enlisted venders are unavailable for a particular item, then the requested item could be procured from open market. In case of electrical goods, a contract of purchase must be signed by the Head of SARA for more than amounting Tk.20,000/-.
- For purchase between Tk. 40,001.00-200,000.00 a Summary of Bid Evaluation (SBE) must be prepared by procurement committee based on three quotations obtained. Moreover, for any purchases from Tk. 40,001.00 a contract of purchase must be signed by the Executive Director. Summary of Bid Evaluation (SBE) must contain a rationale for selecting a vendor out of three vendors from whom quotations have been obtained. Approval of SBE will be provided by the Executive Director and subsequently signing of Contract of Purchase (COP) will be done by authorized signatory.
- For purchases of over Tk. 200,001.00 procurement committee of SARA will arrange to obtain sealed bids at least from 5 vendors. Sealed bids will be opened in presence of the bidders and also members of the Tender Committee. A Summary of Bid Evaluation must be prepared justifying the selection of the supplier by the Tender Committee. Based on the decision of the Committee, SARA will prepare COP and obtain signature from the Executive Director.
However, it is recommended to go for press tender when there is very limited number of supplier for a requested item’s. Press tender could also be floated to tap new sources of suppliers. In such an instance, a tender notice should be published in one local & one national reputable dailies. Quotations received through tender should be opened in presence of the bidders and also members of the tender committee. Based on the decision of the tender committee, the work will be awarded to a vendor or vendors. COP will be signed by the Executive Director.
- Over Tk. 5,000.00 payment must be made by A/C payee cheque. If it is not possible to purchase without A/C payee cheque then concerned Executive Director upto Tk. 10,000.00. Because law requires all expenditure of the NGOs exceeding Tk. 10,000.00 will be payable by bank cheques and an open cheque is as good as cash.
- Procedures of Contract of Purchase.
It is important that all the contract conditions in details are clearly addressed on the COP in order to avoid controversy of any kind at any point. The following statements are intended to provide guidance to the Procurement Committee in preparing, negotiating a Contract of Purchase :
- Specification : Be complete and to the point in terms of description, brand name, model name, country of make etc.
- Ordering : Orders will be placed for each project.
- Identification : Instruct vendors to include both contract number and specific order number (if any) on all invoices.
- Termination : Keep provision for termination of contract.
- Quality Standards : Identify precisely the standards of quality and what they represent.
- Payment Conditions : Explain, if partial payment should be allowed, contract of purchase should have detailed explanation of circumstances and conditions listed on the contract of purchase under which partial payments can be allowed. Unless it becomes absolutely necessary for the best interest of the user project, partial payment should be avoided.
- Delivery Schedule : Clearly identify desired delivery points, dates and time
- Accounting Instruction : Record clear, complete and appropriate accounts instruction. Accounting instruction should be recorded on the COPs.
- Payment Procedures : Unless it is absolutely necessary, cash payment to the suppliers should be strictly prohibited. In normal cases all payments to the suppliers for material and services will be tendered through “Account Payee” Cheques.
- Earnest Money : It is recommended that a reasonable amount of deposit in advance is recorded from the selected vendors in the form of Pay Order/Pay Slip/Demand Draft (as applicable) in order to ensure that a selected vendor does not fall back on terms of contract for supply of goods and services. However, earnest money should not normally be asked for orders below Tk. 200,001.00
- Penalty : A clause for imposting penalty for non-performance should, where applicable, be incorporated on the COP to make sure that the vendor fulfills all the contract terms. Penalty is imposed on the supplier’s inability to execute the contract as per terms outline on the COP. Forfeiture if earnest money is a normal practice in our country to penalize vendors due to non-fulfillment of contract terms.
- Tax : It should be clearly mentioned in the COP that which party will bear the Source Tax for amounting over Tk. 200,000.00
- Cash and Cash Control
Definition of Cash
For accounting purpose, cash is defined as any item on with monetary value that a commercial bank with accept for deposit, plus any amount currently on deposit with a bank. This definition including not only the coin and currency that a business has in hand, but also personal cheques, money order (bank or postal) made payable to the cheque and bank draft. Also included in our definition are any fund that are on deposit to bank and readily available such as in a cheque or saving account.
Cash policy
- Cash is a monetary current asset immediately available to management for planned activities.
- Cash as an asset cannot have a credit balance. Any negative cash balance shows something wrong in the cash book.
- Cash is the most sensitive liquid asset subject to misappropriation and thus custody control is extremely essential in this area.
- How to avoid misappropriation :
- There must be at least three (3) individuals involved in the processing of cash.
- Handling : This individual prepares the cheque and the transaction voucher as well receives all cheques all cheques/cash and deposits same via a transaction voucher. Cash security money should be written by the partner NGO as a term of appointment from the person responsible for handling office cash.
- Recording/Accounting : This individual enters the transaction into the journal and post it to the appropriate ledger.
- Approval : This individual approves the vouchers and may also sign the cheque.
Note : The above functions are not required full time of an individual.
- All cash received must be deposited daily into the bank. All cash received in respect of organization should be recorded in a pre-numbered money receipt for each single transaction.
- All cash disbursement and receipts must be supported by a voucher.
- Disbursement vouchers, purchase orders and invoices are to be stamped/used “PAID” seal.
- All payments should be ensured after authorization/approval from the Executive Director.
- There should be a recipient signature by the receiver at the time of receiving payment.
- Cash ledger/book should be written up a daily and the cash balance should be not exceeded than the approval limit.
- Cash should be agreeing with the allotted fund after every closing day.
- The physical cash in hand at the end of day should be counted by a person other than the cashier and duly authenticated.
- Cash should be kept in safety place under lock and key. Key should be kept with another responsible person (excluding a petty cashier)
- Someone should have access for reviewing the records periodically and randomly other than the employee who keeps the records regularly.
PETTY CAH CONTROL
Petty cash is used for small expenditures where it is not practical to issue cheques usually for amounts less than Tk. 1000.00. Initially, this fund will start with the allocated amount and after the funds are exhausted balance is replenished from the bank. Policy issues related to petty cash operation are listed below.
- Petty cash amount should be Tk. 5000.00 of less. Depending on the usage of petty cash fund, it may be reduced or increased with prior approval by Executive Director.
- The petty cash fund must be kept in a lockable metal box during petty cash hours and after the close of the work day, the petty cash box should be kept in locked area.
- Cash should be handled by a responsible person.
- All payments should be ensured after approval form Executive Director. The petty cashier should not authorize the disbursement of petty cash.
- “PAID” seal should be used on the bills and invoices just after making payment.
- There should be a recipient signature by the receiver at the time of receiving payment.
- Cash payment can be made only for small payments. A limit for cash payment should be set.
- There should be documented (bill/invoice) against every disbursement. The petty cash transaction will be recorded for each payment.
- Petty cash ledger/ book should be written up a daily and the cash balance should be not exceeded than the approval limit.
- It should be ensured the appropriate charging for any expenses to record in petty cash and bill/invoice.
- Cash should be agreeing with the allotted fund after every closing day.
- The physical cash in hand at the end of the day should be counted by a person other than the cashier and duly authenticated.
- Cash should be kept in safety place under lock and key. Key should be kept with another responsible person (excluding petty cashier)
- Inventory Management
Definition:
The term ‘inventory management’ is the process of managing the proper record keeping of tangible assets regarding receipt, issue, balance, accounting, ensure adequate supporting documentation, control, monitor and ensure proper safeguard.
- CLASSIFICATION OF INVENTORY :
The following way we can consider inventory.
- Office Supplies & Stationery
- Vehicle fuel, oil & spare parts
- Office Equipment
- Office Furniture & Fixture
- Vehicles (Motor Cycle & Bi-cycle)
- Office Supplies & Stationery
Office supplies etc. and stationeries includes supplies & stationeries, office file, milk, sugar etc. Normally these items are purchased and received from local market and NGOs office. We may keep these against prepaid expenses under HD-7 until issue for future projects use. After issue these items, we normally charged to HD-41, 42, 43 ,44 ,45, 46, 47, 48 & 49 by a debit entry and reduced to HD-7 by a credit entry through a GAV/AV. An Inventory Status Report (ISR) will be prepared and retained in NGO Office on a monthly basis. In some cases we needed to purchase some items from the market for direct use by the project and charged to HD-41, 42, 45, 47-49
- Vehicle fuel, oil and spare parts :
Vehicles fuel, oil and spare parts for all types of motor cycles. Normally these items are purchased and received from local market and SARA Head Office. We may keep these against prepaid expenses under HD-7 until issue for future project use. After issue these items, we normally charged to HD-44 by a debit entry and reduced to HD-7 by a credit entry through a GAV/AV. An Inventory Status Report (ISR) will be prepared and retained in SARA Office on a monthly basis. In some cases we needed to purchase some items from the market for direct use by the project and charged to HD-44.
- Project Materials and Equipment:
Most of project materials & equipment directly disburses to the project beneficiaries. These items normally purchased by project coordination unit as per the requirement of the project and directly charged to HD-48.
- Furniture, Fixture & Equipment :
Furniture, fixture & equipment (FF & E) includes tables, Chair, Calculator, Computer, Printer, Photocopier, Generator, Sofa sets, Fire Extinguisher, File cabinet etc. These items normally procure from locally and received from Head Office. These items cost are charged to HD-47. Depreciation will be under Diminishing Balance Method at rates varying to 10% to 20% per annum.
- Vehicles:
Vehicles includes Motorcycles, Bicycle are also reported to Head Office through vehicles fault report if any changes. Depreciation will be deducted on each item under Diminishing Balance Method at rates varying to 10% to 20% per annum.
- INVENTORY FORMATS:
- Delivery Challan
- Store Requisition Form
- Purchase Request Form
- FF&E Report (Yearly)
- Individual Inventory Register
- FF&E Write up Report & Missing Report Form.
- INTERNAL CONTROL GUIDE LINE FOR INVENTORY :
- Accommodation
SARA have a separate store room and it must be kept in a place under lock & Key.
- Store authorized/Approved Person:
Store Requisition From(SRF) will be approved by the Executive Director. Store Requisition From(SRF) will be authorized by the Executive Director before issuance of store items.
- Competent Personnel:
Store will be handled by a competent person.
- Responsibilities:
Responsibilities for and access to the Store must be clearly established.
- Receipt procedures:
- Inventory receipts must be recorded into Inventory Status Report or Stock register immediately after the receipt. If any item is received after office hours, it must be recorded within the next or following working day.
- There should be documented challan or bill/invoice against every receipt.
- There should be a recipient signature (store in charge) by the receiver at the time of receiving inventory items from the Central office store or procurement person.
- Issuance procedures:
- Store item should be issued to the staff or designated person against individual SRF.
- There should be documented SRF or Waybill against every issuance or disbursement.
- There should be a recipient signature ( Staff or designated person) by the receiver at the time of receiving inventory items from the store.
- Issuance procedures:
It should be ensured that appropriate charging information for any issued items is recorded in stock Register properly.
- Physical Inventory:
The balance of physical inventory at the end of each month should be agreeing with the Stock Register.
- Documentation:
- Keep sufficient detailed records of both incoming and outgoing inventory.
- Some one other than the employee keeping the records should review the store and its record periodically and randomly.
- How to avoid miss appropriation:
There must be at least three (3) individuals involved in the processing of inventory in the store for :
- Handling/Recording
- Purchasing/Accounting
- Approval
- ADVANCES AND ITS ADJUSTMENT PROCEDURES :
- Advance for Travel, Project and Miscellaneous cost:
- When one more staff is likely to incur expenses on the SARA behalf for travel, program or miscellaneous costs, an Advance Requisition form will be completed and signed by the Executive Director. The Executive Director of SARA will review the requisition and recommend that an advance be provided. It is the responsibility of the Finance Officer/designated person to determine the appropriate amount of the advance so that excess amounts of advances against actual cost are not given.
- Advance for Travel, Project and Miscellaneous cost:
- The Accountant or the designate should review the advance request to determine if all previous advances have been adjusted. If the employee listed on the advance request has a previous advance that is still unadjusted, the accountant or the designate will not provide an advance until the previous advance has been adjusted.
- Following this review, the Accountant or designate will prepare a Debit Voucher with the advance request as supporting documentation for the recommended amount. For advances associated with ; program advance & travel advance debited accounting distribution.
- If the advance is for one employee, the Debit Voucher and cheque will be made with the individual employee as payee.
However, if one or more employees require advance on the same day, a Debit Voucher and cheque is prepared for the total value of the advance request in the name of the petty cashier. It the advance request is program specific, that should be the name of designate person.
- The completed Debit Voucher is signed by the person preparing the request which is audited by the Accountant. The Debit Voucher and a cheque with the employee or petty cashier as payee is presented to the Director.
- It the cheque is made payable to the petty cashier, they will cash the cheque at the bank and receive the The petty cashier or concerned person or project then give the advance to each employee listed on the advance request and after receipt of the advance, each employee signs against their name as receiving the advance.
- Travel, Program advance adjustment :
- Upon completion of SARA related travel or completion of expenditures related to an advance given for program costs, either a travel & program expense report is prepared by the responsible person that summarizes the allowable expenses incurred while on SARA related activities. In some instances, no advance is given to an employee however, if an employee has been on SARA related activities and incurred expenses, they may submit a such expenses report for reimbursement.
- In order to adjust the advance that have been given an employee in timely manner, the expenses report and adjustment should be completed as soon as possible after the return from travel or completion of works. In most instances, this should be completed within seven (7) days after the return to office or completion of expenditures.
- The completed expenses report is reviewed by the Accountant or designate with regard to the field visit schedule, activities that were completed. Following their review, the Accountant or designate will audit the expenses report with supporting documents to determine the arithmetical accuracy and proper account code distribution.
Following the audit, the Executive Director will be approved the expenses report.
- For the adjustment of an approved expenses report where the original advance was given to an individual employee via a cheque, there will be a payable receivable or nil amount against the advance.
- Adjustment is made via a credit voucher/cash receipt voucher (CRV) when the total advance is greater than the total expenses incurred against the employee’s Expense Report (ER). The receivable amount, the amount owed by the individual employee to the office, is the individual employee to the office is adjusted with a receipt of funds from the employee.
- The petty cashier receives the funds from the employee and prepares a credit voucher which is audited by the Accountant. Following the audit, the petty cashier deposits the money in the bank account. Ultimately, the credit voucher is approved by the Executive Director. After the receipt of fund, a Acknowledge/Receipt is issued to the employee. The cash receipt voucher has the ER as supporting documentation.
- Adjustment is made via a cash disbursement voucher when the expenses listed on the employee’s ER is greater then the total advance. The payable amount, the amount owed the individual employee by the office, is adjusted via a disbursement of funds.
- The petty cashier prepares a cash disbursement voucher with the employee as payee which is audited by the Accountant. The Cheque Request and a cheque with the employee as payee is presented to the Executive Director signature. When the employee receives the cheque, they sign the cash disbursement voucher as receiving the amount as reimbursement for expenses.
- Adjustment is made via an adjusting journal entry when the ER amount equals the advance.
- This is done by debiting the appropriate project and expense account’s and crediting HD-4 thru 6.
- For the adjustment of approved EDs for those who took advances on the advance request on the same day via a single cheque drawn by the petty cashier and the advance was debited to the same Head, a net payable, net receivable or nil amount will remain against the net advance request. Advances for a group of employees for costs associated with travel expenses should have been listed on a separate advance request and HD-6 debited. Advances for a group of employees for miscellaneous costs should have been listed on a separate advance request and HD-4 debited, for program expenses should have been listed on a separate advance request and HD-5 debited.
- SERIES AND CHART OF ACCOUNTS
SARA’s general accounts series are in relation to the following major heads
SL# Major Heads Series of Accounts
- Assets 1 to 19
- Liabilities 20 to 29
- Income 30 to 39
- Expenditure 40 to 120
Chart of Accounts – a list of general ledger account names and numbers. A complete list of all accounts utilized by a business enterprise of a company. This list also contains account descriptions and other identifying codes.
Head No. Description of Individual Head
Assets :
HD -1 Cash ledger
The cash ledger (Form – E) us chronological record of the receipt and disbursement of funds by the SARA cash account. Cash ledger is maintained to record on a regular basis. Example : Donation received in cash, members contribution received in cash etc.
HD – 2 Bank Ledger
The bank ledger (Form-E) is chronological record of the receipt and disbursement of funds from the company bank account. Whenever a receipt memo or cheque request is made and funds have been either received or disbursed, the information should be entered on the bank ledger.
HD – 3 Petty Cash Ledger
The petty cash ledger (Form-F) is maintained to record daily petty cash funds. Disbursements will be reimbursed periodically from SARA Bank account.
HD – 4 Miscellaneous Advances
This advance is applicable for miscellaneous expenses such as tickets, postage and other small expenses. This type of advance to be given to SARA staff. It should be debited HD-4 and adjustment should be made against expenses HD-40 – 120
HD – 5 Programs/Training/Seminar/Workshop Advance
It is applicable for programs expenses (where a bank account dost not exist) such as training, beneficiary payments and miscellaneous program expenses. It should be debited HD-5 and adjustment should be made against expenses HD-40 to 120
HD – 6 Travel Advance
It is applicable for travel for field trips, other office trips and donor office trips. It should be debited HD-6 and adjustment should be made against expenses HD-40 to 120
HD – 7 Prepaid Expenses
It may be necessary to advance money for services to be received over a period of time (months of year). A common example would be office/ware house, rent advance which would cover a period anywhere between two months to no. of years. While this advance is given, it should be debited HD-7 and credited Bank A/C (HD-2). Each month for which the advance applies, an adjusting journal entry is prepared crediting HD-7 and debiting by the appropriate expenses HD-40 to 120.
HD – 8 Vendor Advance
It may be necessary to provide an under capitalized vendor with an advance in order to obtain project materials and equipment. It is expected that such advances will be adjusted within a short period not more then three months. Such advances are debited to HD-8. Upon receipt of the item an adjusting journal entry is prepared debiting by the appropriate expenses HD- 40 to 120.
HD – 9 Miscellaneous Receivable
In general, the term receivables are claims held against others for money, goods or services. The term receivables is utilized in accounting to include any money due to be received from any party or entity for any reason due to a past transaction such as office maintenance and repairs. Telephone & Electric bill ect. expenses on behalf of land lord (Form –F). Such receivable is debited to HD-9 and credited to cash/bank (HD-1 or 2)
Liabilities
HD – 20 SARA Fund (Loan) Account
This accounts will be established when SARA will provide the initial fund as loan for starting before receiving fund from foreign donor.
HD – 21 Donor Fund (cash in transit)
The cash in transit ledger (Form-F) is a chronological record of the transfers of direct fund from Foreign Donor through Demand Draft. This ledger will always have zero or credit balance.
HD – 22 Miscellaneous Payable Account.
In general, the term payables are amount owed by SARA to other entities. The payable is utilized in accounting to include any money owe to be paid to any party of entity for any reason due to a past transaction such as office maintenance and repairs, telephone bill ect. expenses on behalf us. Payments received from transferring personnel to pay for personal bills received after their departure.
HD – 23 Accrued Expenses
Service/goods have been received but payment not yet made, this is called accrued expenses. Thus accruals may be occurred of each month/quarter/year or at the end of a contractual agreement with a donor or any other unavoidable situation.
Income :
HD – 30 Miscellaneous Income
Gain or sale project equipments, materials, non fixed assets and received any miscellaneous sources such as bank interest, donation etc. Such transactons are debited to cash/bank (HD-1 or 2) and credited to Miscellaneous Income HD – 30.
HD – 31 Accrued Income
This accrual is concerned with expected future cash receipts against our services or goods provided to or for others. Such as materials sold but amount not yet received on time.
Expenses :
HD – 40 Personnel Cost (Salaries and benefits)
This accounts includes all type of staff salaries (Executive Director/Accountant/Coordinator/Supervisor/Technical Offcier/Contract employee/field workers) if hired on a regular and casual basis for project implementation.
HD – 41 Training/Meeting/Seminar/Workshop- ect.
All expenses related to training, orientation, meeting, seminar, workshop like staff development training, skill development training, agri package training, health & nutrition training, HR training, Seminar on HIV/AIDS, WatSan, Gender, Workshop with school teacher, Govt. officer etc.
HD – 42 Office Accommodation
Expenses related to office rent and utilities like head office rent, Utility bills (Electric/telephone/water/gas bill) etc.
HD – 43 Travel and Lodging
Expenses related to travel while on official business. Such as travel allowance & Dearness allowance, daily allowance, fuel for M/C and other expenses related to field work.
HD – 44 Repairs and Maintenance Cost
Expenses related to repair and maintenance of M/C and Bi-cycle like purchase of spare parts, mechanical charge etc.
HD – 45 Office Administration Cost
All expenses related to administrative such as photocopy, news papers, local transport (rickshaw fare, carrying cost) publication of reports and news papers, sign board making cost, bank charge, audit fee, office maintenance, stationery and other paper supply, printing and other expenses.
HD – 46 Communication
Expenses related to postage, fax, mobile bill, courier service and e-mail bill.
HD – 47 Furniture, Fixture and Equipment
Expenses related to purchase of office secretarial table, chair, steel almira, wooden rack, ceiling fan, table fan, board, water filter, motor cycle, bicycle, computer, photocopiers, tools and other equipment.
HD – 48 Commodities
All commodities including; food, medicines, relief goods, seeds, roofing materials, sapling, bamboo, rope/sutli, fertilizer, pesticide, carrying charges (any mode of transport) in connection of commodities and spade, khunit, umbrella, torch light, megaphone etc.
HD – 49 Miscellaneous and Sundries
This account is to be utilized for miscellaneous and sundry expenses those are not included the above heads.
- FINANCIAL DOCUMENTS
SARA are required to prepare and retain the following documents related to each transaction. These documents must be preserved for the next five years for future auditing purpose.
- Vouchers :
- Credit Voucher (Cash Receipt Voucher)
- Debit Voucher (Cash Disbursement Voucher)
- Journal Voucher (for any entry or CV/DV)
- Journals (in case of manual system)
- Cash receipt journal
- cash disbursement journal
- Adjusting journal entry
- Ledgers : (Head-wise)
- Cash and Bank Ledger
- Petty cash ledger
- Fund ledger
- Advance ledger
- Expenses ledger
- Bank Documentation :
- Cash Recap by Bank form
- Bank Reconciliation Report
- Bank Statement.
- Trial Balance
- Financial Statement
- Receipts & Payment Account
- Income & Expenditure Account
- Balance Sheet
Form – A
Form – B
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Form – C
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Form – D
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Form – E
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Form – F
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Form – G
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- ACCOUNTING CONCEPTS AND TERMINOLOGIES
Financial Management :
Financial management is concerned with the acquisition, financing and management of assets with some overall goal in mind. Thus, the decision function of financial management can be broken down into three major areas ; the investment, financing and management decisions.
Accounting Theory :
Accounting is the process of recording, measuring, interpreting and communicating of financial data. The set of principles and procedures for financial book keeping and for analyzing and interpreting the events which affect the financial condition of a business enterprise.
Accounting :
The set of principles and procedures for financial book keeping, and for analyzing and interpreting the events which affect the financial condition of a business enterprise.
Book Keeping :
The process of classifying and recording business transaction in terms of money or some other unit of measurement in the books of account.
Double-entry book keeping :
Recording of transactions that requires entries to at least two accounts. Every transaction is reflected in offsetting debits and credits. Where debits are always equal of credit.
Financial Statement :
A document prepared by book keepers and accountants which summarizes the effects of business transactions during an accounting period; for example, the balance sheet and income statement.
Accrual Accounting :
Accrual accounting- attempts to recognize noncash events and circumstances as they occur and involve not only accruals but also deferrals, including allocations and amortization. Accrual is concerned with expected future cash receipts and payments. It is the accounting process of recognizing assets or liabilities and related liabilities, assets , revenues, expenses, gains of losses for amounts to be received or paid, usually in cash in the future.
Some Basic Concepts :
The following definitions are per the statement of financial accounting concepts.
- Assets :
Assets are defined as resources of an entity. They are any owned physical object or right having economic value to its owner.
- Liabilities :
Liabilities are defined as claims against assets or debts owed to another entity. It is an amount owed by one person to another payable in money or goods and services.
- Expenses :
Expenses – are outflows or other using up of assets or incurrences of liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations.
- Revenues :
Revenues are defined as net inflows of resources that effect equity arising from services rendered or products sold. It is also know as an inflow or enhancement to assets that have been earned by the organization.
- Equity :
Equity is defined as residual ownership of assets after claims and debts (liabilities) have been settled.
- Net Assets :
Net assets is the residual interest in the assets of an entity that remains after deducting its liabilities. Nonprofit profit organizations in general do not have owners and thus do not have equity. The concept that substitutes for equity is net assets which are defined as assets for which no liability exists. This is also known as fund balances. In other words they are the excess of assets over liabilities.
- Gains :
Gains-are increase in net assets from principal or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from revenue or investments by owners.
- Losses :
Losses- are decreases in net assets from principal or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity except those that result from expenses or disbursements to owners
- Other :
Transactions and other events and circumstances affecting an entity – the sources or causes of changes in assets, liabilities and net assets.
What are assets :
Assets are defined as resources of an entity. They are any owner physical object or right having economic value to its owner.
Type of Assets :
- Current Assets
- Fixed Assets
- Current Assets : assets which include cash and other assets which are reasonably expected to be realized in cash, delivered or consumed during the normal operating cycle of an entity or one year, whichever is less.
- Fixed assets : an item with physical substance, with a life of more then one year and acquired for use in the operation of the business.
What is liabilities :
Liabilities are defined as claims against assets or debts owed to another entity. It is an amount owed by one person to another payable in money or goods and services.
Type of liabilities :
- Short term or Current liabilities
- Long term liabilities
- Short term or current liabilities : liabilities whose liquidation is reasonably expected to require the use of current assets within one year.
- Long term liabilities : liabilities whose liquidation is reasonably expected to require the use of assets more then one year.
ACCOUNTING TERMINOLOGIES :
Account :
An account can be defined as a classification or storage unit utilized to group and summarize money measurements of an activity. An account is a formal record of a particular type or transaction expressed in money or other unit of measurement and kept in a ledger.
Type of Account :
- Nominal Account
- Real Account
- Personal Account
- Nominal A/C – a revenue, expenses, gain or loss account.
- Real account – an asset. liability or net asset account
- Personal Account – persons or organization/received/given
Transaction :
Transaction – events or happenings that change the financial position or earning on an entity. Transactions should be recorded in a journal by a voucher and then posted to a ledger.
Rule for transaction in double entry book keeping
“For every debit entry, there must be a corresponding credit entry that is equal in amount.
The rules for transactions to accounts are :
- A debit is defined as an entry on the left –hand side of the account
- A credit is defined as an entry on the right – hand side on the account
- Assets and expense account always have zero or debit balances.
- Liability, net assets and revenue accounts always have zero or credit balances.
This rule of debit and credit is illustrated as follows :
Debit Credit
Increase assets Decrease assets
Decrease liabilities Increase liabilities
Decrease Net assets Increase net assets
Decrease revenues Increase revenues
Increase expenses Decrease expenses
Entry :
A record, in a book of account or other accounting document, of the effect of an operation or transaction.
Posting :
To transfer an amount to a ledger from a book of original entry or from a source documents positing- the act of transferring journal recorded transactions to the records of the general ledger (and the subsidiary ledger if applicable)
Adjusting Entry :
Adjusting entry – also known as adjusting journal entry
- Accounting entry made at the end of an accounting period to bring accounts up to date on accrual basis of accounting.
- A correcting entry to correct a previous entry.
Closing Entry :
An entry or series of entries to reduce the balances of nominal accounts to zero in order to prepare the accounts for next period’s transactions.
Petty Cash :
Petty cash – an amount of money kept on hand to meet small incidental expenditures. Petty cash is controlled via an imprest system for disbursements.
Cheque :
Cheque- a draft against a financial institution payable upon demand to the person named on the draft.
Nature of Donor Contribution :
- By Cash
- By Contribution-in-kind
- Cash funding or donations to an entity are funds received in paper currency, coins, cheque etc. except postdated cheques, IOUs and notes receivable.
- Contribution-in-kind (CIK) – also “In-kind-Contribution” – are funding or donations to an entity that are received in other than cash. Such as land food commodities, equipment, goods, services and use of facilities.