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Session 7: Part (ii)

This part deals with accounting system of : stores; Health and sanitation; Special Fund; Financial statement; Balance Sheet; and Audit points. Session 7: Part (ii). Accounting system of Stores. Introduction.

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Session 7: Part (ii)

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  1. This part deals with accounting system of :stores;Health and sanitation;Special Fund;Financial statement;Balance Sheet; andAudit points. Session 7: Part (ii) Training Module on 'Audit of ULBs' Session 7 Part II

  2. Accounting system of Stores Training Module on 'Audit of ULBs' Session 7 Part II

  3. Introduction • Municipalities / corporations empower respective Departments to maintain their own stores viz. • Public Works, • Health-Sanitation, • Health-Medical, • Water Works, • Workshop for Vehicles and Machinery repairs and • Public Lighting. Next Training Module on 'Audit of ULBs' Session 7 Part II

  4. Introduction • The financial transactions carried out by Stores will arise on account of: • Receipt and refund of Earnest Money Deposit (EMD) • Payment of advance to the contractor • Delivery of material and its documentation • Consumption of materials • Payments to Suppliers • Adjustments of Security Deposits • Write-off / disposal of obsolete, scrap and unusable materials. Training Module on 'Audit of ULBs' Session 7 Part II

  5. Accounting records and procedures for Stores- accounting of receipt of EMD • The Stores shall prepare a Summary of Daily Collection which shall be forwarded to the Accounts Department. • On receipt of Summary of Daily collections, the Accounts Department shall pass the following entry:(figures are illustrative) Next Training Module on 'Audit of ULBs' Session 7 Part II

  6. Accounting procedures for receipt of EMD • The Stores shall prepare a Summary of Daily Collection which shall be forwarded to the Accounts Department. • On receipt of Summary of Daily collections, the Accounts Department shall pass the following entry: (figures are illustrative) Training Module on 'Audit of ULBs' Session 7 Part II

  7. Accounting procedures foradditional Security Deposit received • Where the terms of agreement entered into provide for • collection of a certain percentage of Security Deposit in advance, • a receipt shall be issued to the successful bidder for the amount collected. Training Module on 'Audit of ULBs' Session 7 Part II

  8. Recording of advance paid to suppliers • As per the terms of agreement, advance may be provided to the supplier. • On receipt of an application for grant of advance, the Stores shall prepare a Payment Order and forward it to the Accounts Department. Training Module on 'Audit of ULBs' Session 7 Part II

  9. Receipt of materials • As per the terms of the agreement with the Supplier, the materials shall be delivered to the ULBs. • The Stores shall prepare a Material Receipt Note. • From the Material Receipt Note, the Stores shall record the receipt of materials in the Stores Ledger. Training Module on 'Audit of ULBs' Session 7 Part II

  10. Receipt of materials • On receipt of bill, the Stores shall verify • the bill received with the Material Receipt Note and • record it in the Register of Bills for Payment. Training Module on 'Audit of ULBs' Session 7 Part II

  11. Recording of liability due in respect ofmaterials purchased • On acceptance and approval of the material supplied and on receipt of the processed bill from the Stores Department, the Accounts Department shall pass the entry shown in the next slide: Training Module on 'Audit of ULBs' Session 7 Part II

  12. Recording of liability due in respect ofmaterials purchased (figures are illustrative) Training Module on 'Audit of ULBs' Session 7 Part II

  13. Recording of payment made to supplier • On receipt of Payment Order together with the supporting documents and on making payment and passing of requisite entries the Accounts Department shall intimate the Stores of the payment made. Training Module on 'Audit of ULBs' Session 7 Part II

  14. Valuation of Closing stock at period-end • At the end of every accounting period, the Stores shall send a Statement of Closing Stock. Next Training Module on 'Audit of ULBs' Session 7 Part II

  15. Valuation of Closing stock at period-end • Such a statement shall consist of two parts: • Part A shows • the items for which the invoices/bills received from the suppliers have already been sent by the Stores to the Accounts Department. • Part B consists of • the items for which the materials have been received and accepted but for which the invoices/bills have not been processed as yet. • This Statement shall be drawn from the entries made in the Stores Ledger. Next Training Module on 'Audit of ULBs' Session 7 Part II

  16. Valuation of Closing stock at period-end • At the end of the financial year, a reconciliation shall be carried out by the Stores-in-charge to match the physical stock with the book stock. • Discrepancies identified shall be incorporated in the Statement of Closing Stock. • Balances in various accounts of the item-wise Stores Ledger shall be extracted and valued as per First-in-first Out (FIFO) Method. Training Module on 'Audit of ULBs' Session 7 Part II

  17. Recording of Closing stock • On the basis of Statement of Closing Stock in prescribed form received from Stores, for recording closing stock, the Accounts Department shall pass the following entry: (figures are illustrative) Training Module on 'Audit of ULBs' Session 7 Part II

  18. Recording of Closing stock • The closing stock at the end of an accounting period shall be • the opening stock of the subsequent accounting period for which the Accounts Department shall pass the necessary entry on the first day of the subsequent accounting period. Training Module on 'Audit of ULBs' Session 7 Part II

  19. Disposal of material • The unutilised / unusable material in the Stores of the municipalities / corporations may be disposed of as per the principles framed by the concerned municipalities / corporations. • An entry for the material disposed shall be made in the records maintained at the Stores. Training Module on 'Audit of ULBs' Session 7 Part II

  20. Recording of receipt of sale proceeds • The Stores shall prepare a Summary of Daily Collection for sale proceeds and forward it along with the collection to the Accounts Department. • An example is given in the next slide: Training Module on 'Audit of ULBs' Session 7 Part II

  21. Recording of receipt of sale proceeds • (an amount of Rs 600 realised against the sale of stores with a recorded value of Rs 500). On receipt of Summary of Daily Collections, the Accounts Department shall pass the entry as shown in the following example: • Say, an amount of Rs 600 is realised against the sale of stores with a recorded value of Rs 500) (figures are illustrative) Training Module on 'Audit of ULBs' Session 7 Part II

  22. Write-off of material • The pilfered / damaged material in the Stores of the municipalities/corporations may be • written-off as per the principle framed by the concerned municipalities/corporations. Training Module on 'Audit of ULBs' Session 7 Part II

  23. Recording of write-off of material • An entry for the material written-off shall be made in the records maintained at the Stores. The Accounts Department shall record the entry as shown in the table below : Training Module on 'Audit of ULBs' Session 7 Part II

  24. Procedure followed in West Bengal* Municipalities* (This is to be adopted as per State Specific Scenario) • For Stock and Stores Account, register shall be kept in prescribed form with any additional details or columns which may be found requisite. • A separate set of pages shall be assigned to each description of stock. Next Training Module on 'Audit of ULBs' Session 7 Part II

  25. Procedure followed in West Bengal* Municipalities* (This is to be adopted as per State Specific Scenario) • The figures entered in column ‘balance’ shall be certified half-yearly by the competent authority. • If any excess or deficiency be found the register shall be corrected accordingly. Training Module on 'Audit of ULBs' Session 7 Part II

  26. Internal Control • Budget monitoring shall be on accrual basis rather than payment basis. • The Head of the Accounts Department shall ensure that all the purchase bills/invoices were journalised before release of the payments. Next Training Module on 'Audit of ULBs' Session 7 Part II

  27. Internal Control • At the end of the financial year, • the Stores-in-charge, • the Head of the Accounts Department and • the Municipal Chief Auditor shall • physically verify the stock lying in stores and • compare it with the stock as per the book records. Next Training Module on 'Audit of ULBs' Session 7 Part II

  28. Internal Control • In case of any difference, • appropriate remedial steps as prescribed by the concerned municipalities / corporations shall be taken. Next Training Module on 'Audit of ULBs' Session 7 Part II

  29. Internal Control • The Stores-in-charge shall ensure • availability of adequate budget allocation before procuring any material, • after considering all commitments made against the budget allocation. Next Training Module on 'Audit of ULBs' Session 7 Part II

  30. Internal Control • At the time of issue of any material to the Departments, the Stores-in-charge shall ensure that • there is an adequate budget provision in respect of that department. Next Training Module on 'Audit of ULBs' Session 7 Part II

  31. Internal Control • The Head of the Accounts Department shall ensure that • all the dues recoverable including advance provided to supplier has been recovered • before making the final payment to the supplier. Next Training Module on 'Audit of ULBs' Session 7 Part II

  32. Internal Control • Further, it should be ensured that • only net amount has been paid to the supplier, as may be applicable to the materials actually received or accepted. Next Training Module on 'Audit of ULBs' Session 7 Part II

  33. Internal Control • It shall be ensured that • the Payment Order provides reference to the Stores Ledger. • The Stores-in-charge shall ensure that • materials for which bills have been received but not forwarded to the Accounts Department are stated separately in the Statement of Closing Stock. Next Training Module on 'Audit of ULBs' Session 7 Part II

  34. Internal Control • The Chief Executive Officer/Head of the concerned ULB shall • specify appropriate calendar of returns / reports for monitoring. • All Reconciliation Statements shall be • certified by the Head of the Accounts Department and • verified by the concerned Municipal Chief Auditor. Training Module on 'Audit of ULBs' Session 7 Part II

  35. Presentation in the financial statements • The various heads of accounts used for the accounting of Stores shall be • reflected in the Financial Statements • All such Financial Statements and schedules should be • affixed with signature and seal of designated authorities. Training Module on 'Audit of ULBs' Session 7 Part II

  36. Accounting System of Health and Sanitation Training Module on 'Audit of ULBs' Session 7 Part II

  37. Introduction • The Health Department is • primarily involved in operating the hospitals, dispensaries & maternity homes and • in monitoring sanitation and other public health related activities, within the limits of the ULBs. Next Training Module on 'Audit of ULBs' Session 7 Part II

  38. Main sources of incomes earned by the Health Department • Fees and User Charges: • Fees from Medical Institutions • Registration Fees for Patients • Recovery of Cost of Medicines • Examination Charges • Ambulance Charges • License fees from Butchers and Traders of Meat • Disposal Charges (Solid Waste) etc. • Sale & Hire Charges: • Sale of Garbage/Manure Training Module on 'Audit of ULBs' Session 7 Part II

  39. Expenses incurred by Health Deptt. • Following is an illustrative list of the expenses incurred in respect of the Health Department: • Sanitation related expenses e.g. • Solid Waste Management related expenses. • Own Programmes • Consumption of Health Stores – Solid Waste Management, etc. Next Training Module on 'Audit of ULBs' Session 7 Part II

  40. Expenses incurred by Health Deptt. • Medical related expenses, repairs and maintenance – Medical/Health related assets. • Family welfare expenses, pulse polio vaccination expenses, aids awareness expenses, etc. Training Module on 'Audit of ULBs' Session 7 Part II

  41. Accounting Principles for health and sanitation • Revenue in respect of the following shall be recognised on actual receipt: • Hospital fees, diagnostic centre fees and dispensaries fees • Hospital training fees • Rent and/or hire charges in respect of ambulance etc. • Sale of fertilisers and waste etc. Next Training Module on 'Audit of ULBs' Session 7 Part II

  42. Accounting Principles for health and sanitation • Revenue in respect of Trade License Fees shall be accrued in the year to which it pertains. • Revenue in respect of rent of equipment provided to the contractors, deducted from their bills, shall be recognised as and when the deductions are made. Next Training Module on 'Audit of ULBs' Session 7 Part II

  43. Accounting Principles for health and sanitation • All revenue expenditures incurred shall be • recognised on admission of the bills for payment by the concerned ULB. • Provision shall be • made at the year-end for all bills received up to a cut off date (30th April of the next financial year). Next Training Module on 'Audit of ULBs' Session 7 Part II

  44. Accounting Procedure for health and sanitation • The collection in respect of the medical fees shall be made at the respective units. • A Receipt shall be issued to the person making the payment at the respective units. Next Training Module on 'Audit of ULBs' Session 7 Part II

  45. Accounting Procedure for health and sanitation • The amount collected by the units shall be • deposited in a Designated Bank Account or • forwarded to the Ward Office or • to the Accounts Department. Next Training Module on 'Audit of ULBs' Session 7 Part II

  46. Accounting Procedure for health and sanitation • Recording of collection of medical fees. • On the basis of the Summary of Daily Collection received from the various Units, Ward Offices, Health Department, etc., the Accounts Department shall pass entry as shown in the table below: (figures are illustrative) Next Training Module on 'Audit of ULBs' Session 7 Part II

  47. Accounting Procedure for health & sanitation • The income in respect of trade license fees shall be • recognised on accrual basis. • It shall be • accrued in the year to which it pertains and • where the demand is raised based on applicable Acts of the concerned State. Training Module on 'Audit of ULBs' Session 7 Part II

  48. Accounting Procedure for health & sanitation • The procedure and accounting entries in respect of • demand raised for trade license fees, • collections made, • provisioning for unrealised fees, etc. shall be similar to the Accounting procedure for Incomes. Training Module on 'Audit of ULBs' Session 7 Part II

  49. Expenditures pertaining to health & sanitation • The accounting for expenditures pertaining • to hospitals, • dispensaries, • sanitation, • scavenging, etc., shall be same as Public Works and Stores. Training Module on 'Audit of ULBs' Session 7 Part II

  50. Internal Control • A quarterly reconciliation shall be • carried out in respect of the amount collected under the various heads based on • the Functional Income Subsidiary Ledger and • the Collection Register maintained at the Health Department. Next Training Module on 'Audit of ULBs' Session 7 Part II

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