1

Or i gi n of t he Repor t
The report was originated to make a study on the product cost analysis of Beximco
Pharmaceuticals Limited, one of the most important cycles and as a part of the fulfillment
of internship program required for the completion of the Bachelor of Business
Administration (BBA program of the !epartment of Accounting " #nformation $ystems
of the %aculty of Business $tudies of $tamford uni&ersity of Bangladesh' #nternship
program is an attempt to acquaint the students with the real world situations so that the
knowledge gained from the classroom is further strengthened' As the classroom
discussion alone can not make a student perfect in handling the real (usiness situation,
therefore it is an opportunity for the students to know a(out the real life situation through
this internship program This internship report was prepared under the super&ision of md'
)amunur *ashid, lecturer, department of (usiness administration of $tamford uni&ersity
of Bangladesh and )r' %a+lul ,aque, !eputy )anager, %inance and Accounts, Beximco
Pharmaceuticals Ltd'
Backgr ound of t he Repor t
Accounting #nformation $ystem (A#$ is the oldest and most widely used
information system in (usiness as they record and report (usiness transaction and
other economic e&ents' -omputer (ased A#$ records and reports the flow of
funds through an organi+ation on a historical (asis and produce important financial
statements such as Balance $heet, #ncome $tatement, -ash %lows, etc' $uch
systems also produce forecasts of future conditions such as Pro.ected %inancial
$tatements and %inancial Budget' Ad&ancement in information and communication
technology in last twenty years has changed the traditional &iew of Accounting
#nformation $ystem for good' -omputer (ased Accounting #nformation $ystems has
ena(led us to enter data from different geographical locations simultaneously, process
data at a &ery high speed, and generate reports &ery quickly' -ontrol mechanisms for
/

computer (ased A#$ is also a little different from manual A#$' All these things ha&e
made me interested to ha&e an in0depth look on the A#$ of a large manufacturing
concern' This report is an attempt to &isuali+e the e&aluation of Accounting
#nformation $ystem of the B12#)-3 Pharmaceuticals Ltd'
Scope of t he St udy
The full package of Accounting #nformation $ystem of a pu(lic limited company is a
(road area' 4ithin the time period of three months allotted for internship, it is &irtually
impossi(le to co&er all aspects of A#$' $o, the scope of my report is limited only to the
sur&ey of A#$, the recording, processing and disseminating of information produced from
this and related internal control issues'
Obj ect i ves of t he St udy
The (road o(.ecti&e of preparing this report is to (roaden my knowledge and
understanding of Accounting #nformation $ystems (y adding practical experience in
a real (usiness set up, its operation and culture to my acquired knowledge in the
classroom'
The specific o(.ecti&es of the study are5
To gi&e a (rief o&er&iew of Beximco Pharmaceuticals Limited (BPL'
To (e familiar with the corporate en&ironment'
To ha&e an idea a(out the organi+ation6s product and mode of operations'
To &i&idly understand how the functional areas of Beximco (BPL operate and
they are interlinked with each other'
To ha&e a comprehensi&e look into the expenditure cycle of a large manufacturing
concern like BPL'
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To understand the nature, design, use and implementation of A#$ and also
reporting of financial information'
Met hodol ogy of t he St udy
This report has (een prepared on the (asis of experience gathered during the period of
internship' %or preparing this report, # ha&e also got information from annual reports and
we(site of the Beximco Pharmaceuticals Limited' The details of the work plan are
furnished (elow5
Data collection method
*ele&ant data for this report has (een collected primarily (y direct in&estigations of
different records, papers, and documents' The inter&iews were administered (y formal
and informal discussion and no structured questionnaire has (een used'
Data sources
The data and information for this report ha&e (een collected from (oth the primary and
secondary sources' Among the primary sources, face to face con&ersation with the
respecti&e stuffs of the head office and the auditors of the company and practical work
experience are important' The secondary sources of information are annual reports,
we(sites, and study of rele&ant reports, documents and different manuals'
Data processing
!ata collected from primary and secondary sources ha&e (een processed manually and
qualitati&e approach in general and quantitati&e approach in some cases has (een used
throughout the study'
8

Data analysis and interpretation
9ualitati&e approach has (een adopted for data analysis and interpretation taking the
processed data as the (ase' $o the report relies primarily on an analytical .udgment and
critical reasoning'
Data Presentation
!ata : #nformation ha&e (een presented in a narrati&e manner; flow diagrams are also
used to gi&e a clear and precise understanding of the situation'
Li mi t at i on of t he St udy
#n spite of all sincere and honest efforts the study:report contains a num(er of limitations,
which was (eyond my control' )a.or limitations of the study:report are5
1' All the comments made, conclusion reached and suggestions for possi(le impro&ement
pro&ided are purely (ased on my le&el of understanding, knowledge and my way of
interpreting a particular statement'
/' Beximco Pharmaceutical Limited follows a policy of not disclosing all the information
needed to prepare my report for o(&ious reason'
7' Because of the lack of information, # ha&e to make some assumptions that may cause
few errors or personal mistakes in the report'
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=

2.0 Overview of Pharmaceutical Industry
The pharmaceutical industry de&elops, produces, and markets drugs licensed for use as
medications' Pharmaceutical companies can deal in generic and:or (rand medications'
They are su(.ect to a &ariety of laws and regulations regarding the patenting, testing and
marketing of drugs'
2.1 History
The earliest drugstores date (ack to the middle Ages' The first known drugstore was
opened (y Ara(ian pharmacists in Baghdad in ><8, and many more soon (egan operating
throughout the medie&al #slamic world and e&entually medie&al 1urope' By the 1?th
century, many of the drug stores in 1urope and @orth America had e&entually de&eloped
into larger pharmaceutical companies'
)ost of today6s ma.or pharmaceutical companies were founded in the late 1?th and early
/Ath centuries' Bey disco&eries of the 1?/As and 1?7As, such as insulin and penicillin,
(ecame mass0manufactured and distri(uted' $wit+erland, Cermany and #taly had
particularly strong industries, with the DB, D$, Belgium and the @etherlands following
suit'
Legislation was enacted to test and appro&e drugs and to require appropriate la(eling'
Prescription and non0prescription drugs (ecame legally distinguished from one another as
the pharmaceutical industry matured' The industry got underway in earnest from the
1?<As, due to the de&elopment of systematic scientific approaches, understanding of
human (iology (including !@A and sophisticated manufacturing techniques'
@umerous new drugs were de&eloped during the 1?<As and mass0produced and marketed
through the 1?=As' These included the first oral contracepti&e, EThe PillE, -ortisone,
(lood0pressure drugs and other heart medications' )A3 #nhi(itors, chlorproma+ine
(Thora+ine, ,aldol (,aloperidol and the tranquili+ers ushered in the age of psychiatric
medication' Falium (dia+epam, disco&ered in 1?=A, was marketed from 1?=7 and rapidly
(ecame the most prescri(ed drug in history, prior to contro&ersy o&er dependency and
ha(ituation'
>

Attempts were made to increase regulation and to limit financial links (etween
companies and prescri(ing physicians, including (y the relati&ely new D'$' %ood and
!rug Administration (%!A' $uch calls increased in the 1?=As after the thalidomide
tragedy came to light, in which the use of a new tranquili+er in pregnant women caused
se&ere (irth defects' #n 1?=8, the 4orld )edical Association issued its !eclaration of
,elsinki, which set standards for clinical research and demanded that su(.ects gi&e their
informed consent (efore enrolling in an experiment' Pharmaceutical companies (ecame
required to pro&e efficacy in clinical trials (efore marketing drugs'
-ancer drugs were a feature of the 1?>As' %rom 1?>G, #ndia took o&er as the primary
center of pharmaceutical production without patent protection'
The industry remained relati&ely small scale until the 1?>As when it (egan to expand at a
greater rate' Legislation allowing for strong patents, to co&er (oth the process of
manufacture and the specific products came in to force in most countries' By the mid0
1?GAs, small (iotechnology firms were struggling for sur&i&al, which led to the formation
of mutually (eneficial partnerships with large pharmaceutical companies and a host of
corporate (uyouts of the smaller firms' Pharmaceutical manufacturing (ecame
concentrated, with a few large companies holding a dominant position throughout the
world and with a few companies producing medicines within each country'
The pharmaceutical industry entered the 1?GAs pressured (y economics and a host of new
regulations, (oth safety and en&ironmental, (ut also transformed (y new !@A
chemistries and new technologies for analysis and computation'Hcitation neededI !rugs
for heart disease and for A#!$ were a feature of the 1?GAs, in&ol&ing challenges to
regulatory (odies and a faster appro&al process'
)anaged care and ,ealth maintenance organi+ations (,)3s spread during the 1?GAs as
part of an effort to contain rising medical costs, and the de&elopment of pre&entati&e and
maintenance medications (ecame more important' A new (usiness atmosphere (ecame
institutionali+ed in the 1??As, characteri+ed (y mergers and takeo&ers, and (y a dramatic
increase in the use of contract research organi+ations for clinical de&elopment and e&en
for (asic *"!' The pharmaceutical industry confronted a new (usiness climate and new
regulations, (orn in part from dealing with world market forces and protests (y acti&ists
in de&eloping countries' Animal *ights acti&ism was also a pro(lem'
G

)arketing changed dramatically in the 1??As, partly (ecause of a new consumerism' The
#nternet made possi(le the direct purchase of medicines (y drug consumers and of raw
materials (y drug producers, transforming the nature of (usiness' #n the D$, !irect0to0
consumer ad&ertising proliferated on radio and TF (ecause of new %!A regulations in
1??> that li(erali+ed requirements for the presentation of risks' The new antidepressants,
the $$*#s, nota(ly %luoxetine (Pro+ac, rapidly (ecame (estsellers and marketed for
additional disorders'
!rug de&elopment progressed from a hit0and0miss approach to rational drug disco&ery in
(oth la(oratory design and natural0product sur&eys' !emand for nutritional supplements
and so0called alternati&e medicines created new opportunities and increased competition
in the industry' -ontro&ersies emerged around ad&erse effects, nota(ly regarding Fioxx in
the D$, and marketing tactics' Pharmaceutical companies (ecame increasingly accused of
disease mongering or o&er0medicali+ing personal or social pro(lems'
2.1.1 Research and development
!rug disco&ery is the process (y which potential drugs are disco&ered or designed' #n the
past most drugs ha&e (een disco&ered either (y isolating the acti&e ingredient from
traditional remedies or (y serendipitous disco&ery' )odern (iotechnology often focuses
on understanding the meta(olic pathways related to a disease state or pathogen, and
manipulating these pathways using molecular (iology or Biochemistry' A great deal of
early0stage drug disco&ery has traditionally (een carried out (y uni&ersities and research
institutions'
!rug de&elopment refers to acti&ities undertaken after a compound is identified as a
potential drug in order to esta(lish its suita(ility as a medication' 3(.ecti&es of drug
de&elopment are to determine appropriate %ormulation and !osing, as well as to esta(lish
safety' *esearch in these areas generally includes a com(ination of in &itro studies, in
&i&o studies, and clinical trials' The amount of capital required for late stage de&elopment
has made it a historical strength of the larger pharmaceutical companies'
3ften, large multinational corporations exhi(it &ertical integration, participating in a
(road range of drug disco&ery and de&elopment, manufacturing and quality control,
marketing, sales, and distri(ution' $maller organi+ations, on the other hand, often focus
?

on a specific aspect such as disco&ering drug candidates or de&eloping formulations'
3ften, colla(orati&e agreements (etween research organi+ations and large pharmaceutical
companies are formed to explore the potential of new drug su(stances'
2.1.2 Industry revenues
%or the first time e&er, in /AA=, glo(al spending on prescription drugs topped J=87
(illion, e&en as growth slowed somewhat in 1urope and @orth America' The Dnited
$tates accounts for almost half of the glo(al pharmaceutical market, with J/G? (illion in
annual sales followed (y the 1D and Kapan' 1merging markets such as -hina, *ussia,
$outh Borea and )exico outpaced that market, growing a huge G1 percent'
D$ profit growth was maintained e&en whilst other top industries saw slowed or no
growth' !espite this, Ethe pharmaceutical industry is L and has (een for years L the
most profita(le of all (usinesses in the D'$' #n the annual %ortune <AA sur&ey, the
pharmaceutical industry topped the list of the most profita(le industries, with a return of
1>M on re&enue'
Pfi+er6s cholesterol pill Lipitor remains the (est0selling drug in the world for the fifth year
in a row' #ts annual sales were J1/'? (illion, more than twice as much as its closest
competitors5 Pla&ix, the (lood thinner from Bristol0)yers $qui(( and $anofi0A&entis;
@exium, the heart(urn pill from AstraNeneca; and Ad&air, the asthma inhaler from
Claxo$mithBline'
#)$ ,ealth pu(lishes an analysis of trends expected in the pharmaceutical industry in
/AA>, including increasing profits in most sectors despite loss of some patents, and new
6(lock(uster6 drugs on the hori+on'
Teradata )aga+ine predicted that (y /AA>, J8A (illion in D'$' sales could (e lost at the
top 1A pharmaceutical companies as a result of slowdown in *"! inno&ation and the
expiry of patents on ma.or products, with 1? (lock(uster drugs losing patent'
1A

2.2 Pharmaceutical Industry in angladesh
Bangladesh is one of the ten most populous countries in the world' #t is also one of the
poorest' Access to e&en the most (asic healthcare pro&ision remains &ery poor, despite
the ongoing efforts of the go&ernment, aided (y considera(le international assistance'
Adequate secondary or tertiary care is (eyond the reach of all (ut a &ery few people'
Co&ernment hospitals are often little more than clinics, and suffer from se&ere shortages
of trained staff' There is growing pri&ate hospital sector, largely (ased in !haka, which
caters to the well0off' #t is in the pri&ate sector where the most ad&anced ser&ices are
located, and where almost all the demand for the pharmaceutical market will (e found'
Clo(ally, political pressure for health care cost containment and reform ha&e lead
gradually to more fa&ora(le legislation and policies supporting increased utili+ation of
generics' )any of the top generic companies who themsel&es are now huge glo(al
players ha&e sei+ed on the opportunities as wa&e of (lock(uster patents expires' They
ha&e inspired confidence in generic drugs as high quality, therapeutic equi&alents to the
(rand' Today the generics hold approximately 7<M share of the total D$ market (y
&olume and some are e&en out pacing the (ig Pharma companies in earnings
performance' #ndian companies are slowly (ut surely on the &erge of penetrating this &ery
lucrati&e market and yet Bangladeshi Pharmaceutical companies ha&e not made any
sincere effort to (e in this regulated market'
2.2.1 !he rise of the pharmaceutical sector of angladesh
#n Bangladesh the pharmaceutical sector is one of the most de&eloped hi0tech sectors
which is contri(uting in the country6s economy' After the promulgation of !rug -ontrol
3rdinance 0 1?G/, the de&elopment of this sector was accelerated' The professional
knowledge, thoughts and inno&ati&e ideas of the pharmacists working in this sector are
the key factors for this de&elopment' !ue to recent de&elopment of this sector it is
exporting medicines to glo(al market including 1uropean market' This sector is also
pro&iding ?>M of the total medicine requirement of the local market' Leading
pharmaceutical companies are expanding their (usiness with the aim to expand export
11

market' *ecently few new industries ha&e (een esta(lished with high tech equipments
and professionals which will enhance the strength of this sector'
2.2.2 angladeshi Pharmaceutical Industry
#n Bangladesh, the pharmaceutical sector is one of the fastest growing sectors'' #n /AAG
the total si+e of the pharma market in Bangladesh was estimated to (e D$! >AA million
and is growing at a steady rate' The pharmaceutical sector is the second highest
contri(utor to the @ational 1x0-hecker and the largest white collar la(or intensi&e
employment sector of the country' There are /8< registered pharmaceutical
manufacturing companies in Bangladesh' The local pharmaceutical manufacturers cater
to a(out ?>M of the internal demand'
Today, Bangladesh Pharmaceutical #ndustry is successfully exporting AP#s and a wide
range of products co&ering all ma.or therapeutic classes and dosage forms to >1
countries' Beside regular forms like; Ta(lets, -apsules " $yrups, Bangladesh is also
exporting high0tech speciali+ed products like ,%A #nhalers, -%- #nhalers, $uppositories,
@asal $prays, #n.ecta(les, #F #nfusions, etc' are also (eing exported from Bangladesh,
and ha&e (een well accepted (y the )edical Practitioners, -hemists, Patients and the
*egulatory Bodies of all the importing nations' The packaging and the presentation of the
products of Bangladesh are compara(le to any international standard and ha&e (een
accept'
The Pharma #ndustry of Bangladesh is now on the &erge of entering highly regulated
o&erseas markets like D$A and 1urope' #n this connection, se&eral pharmaceutical
manufacturers ha&e already made huge in&estments in their new state of art
manufacturing facilities' A num(er of companies ha&e already o(tained or in the process
of o(taining DB),*A, 1D, TCA, AD$T*AL#A and C-- certifications'
The future of pharmaceutical exports from Bangladesh is (right' After the inclusion of the
!oha declaration in 4T3 : T*#P$ Agreement, each and e&ery country (elonging to the
L!- -ategory has the option not to opt for pharmaceutical product patent until /A1=,
which means they can now legally re&erse engineer patented products and sell in their
markets as well as can export to other L!-s' This creates a huge export opportunities for
1/

Bangladesh, (ecause, among all the <A L!-s, Bangladesh is the only country which had
a strong (ase for the pharma manufacturing' Besides direct export operations, there is
also a huge opportunity for the Bangladeshi companies to go for the -ontract
)anufacturing and compulsory licensing' The good news is, the leading pharmaceutical
exporters of Bangladesh ha&e already started a&ailing these opportunities
The well0known industries are0
A-# Ltd'
Acme La(oratories Limited'
Alco Pharma Ltd'
Am(ee Pharmaceuticals Ltd
Am#co La(oratories Ltd'
Apcco Ltd
Apollo Pharmaceutical La(oratories Ltd
Aristo Pharma Ltd
A&entis Pharma Ltd'
Bengal Techno -hemical 4ork Limited
Beximco Pharmaceuticals Ltd'
Bikalpa Pharmaceuticals Ltd'
Bio0 Pharma La(oratories
Bristol Pharmaceuticals
-entral Pharmaceuticals Ltd'
-hemist La(' Limited
-ity -hemicals " Pharmaceuticals
17

-osmic -hemical #ndustries Ltd
2.2." Regulatory authorities
Two organi+ations, one go&ernment (!irectorate of !rug Administration and one semi0
go&ernment (Pharmacy -ouncil of Bangladesh, control pharmacy practice in
Bangladesh' The Bangladesh Pharmaceutical $ociety is affiliated with international
organi+ations #nternational Pharmaceutical %ederation and -ommonwealth
Pharmaceutical Association'
2.2.# Regulated $ar%et
%or Bangladeshi pharmaceutical companies to (e a glo(al player in the regulated market
(primarily D$A and 1urope they ha&e to go through a significant learning cur&e, similar
to where #ndia was a(out 1A years (ack' %or a pharmaceutical manufacturer to (e an
accepta(le supplier to the regulated market, more specifically to the D$, the first step is
to register as a manufacturer with the %ood and !rug Administration (%!A' @ext is to
su(mit an application' %or prescription finished dosage forms (ta(lets, capsules,
in.ecta(les, etc', the firm must su(mit a drug application in the form of @!A (new !rug
Application or A@!A (A((re&iated @ew !rug Application' %or generic drugs, the
pathway is (y the A@!A route 0 one that Bangladeshi companies need to pursue' 4hen
taking the A@!A route the firms would not (e required to demonstrate safety and
efficacy through clinical trials, rather they would ha&e to demonstrate that the drug
products that they are filing are therapeutically equi&alent to the *eference Listed !rug'
3ne of the ma.or (arriers that pharmaceutical companies must o&ercome to enter the
regulated market is to (e fully compliant with current Cood )anufacturing Practices
(cC)Ps' Although many of the firms are #$3 certified, it is a fact that &irtually none of
the pharmaceutical manufacturing plants that are currently in operation in Bangladesh
fully complies with cC)P regulations as descri(ed in the D$ -ode of %ederal *egister
18

(-%*' %!A inspections of manufacturing operations are meant to e&aluate a firm6s
cC)Ps, and to &erify documents, data and manufacturing records su(mitted in the
A@!A' This inspection is a critical part of the drug application appro&al process' The
firms must demonstrate su(stantial compliance to the satisfaction of the %!A
in&estigators if they are to a&oid recei&ing %!A o(ser&ations (8G76s and appro&al of their
A@!As'
2.2.& 'ttitude ( )ommitment
Dntil a(out a few years (ack, #ndia was &irtually an unknown player in the regulated
pharmaceutical market' Articles were written a(out #ndian firms that failed to pass the
%!A inspections (ecause of inadequate or non0existent written $tandard 3perating
Procedures ($3Ps, documentation practices that were su(standard and poor, non
0existing training record, inadequate &alidation, etc' #n short the firms were not following
cC)P' ,owe&er, within the last few years, numerous #ndian firms ha&e turned the tide in
their fa&or and ha&e successfully passed the %!A inspections and ha&e recei&ed appro&al
of their A@!As as a prerequisite to market products in the D$A' #f one looks at this
scenario and analy+es the root cause for this turn around, one has to acknowledge the fact
that the #ndian pharmaceutical managers recogni+ed that for #ndia to (e successful in the
glo(al market, they must understand and use the concept of cC)P as the (arometer for
change' Today this concept has not only (een accepted (ut em(raced (y #ndian
pharmaceutical companies interested in entering the regulated market'
%or Bangladeshi pharmaceutical companies to appreciate this change and endorse this
model there has to (e a sincere commitment, on their part, to identify pro(lem areas and
push for meaningful reform' Analogous to the pharmaceutical trade associations, that
exist in the regulated and emerging countries, the Bangladeshi trade and professional
associations must not only deal with the socio0economic scene (ut also routinely discuss,
in regularly scheduled seminars, meetings and workshops, regulatory and quality issues'
They should feature speakers not only from the local industry (ut in&ite speakers from
the regulated countries to pro&ide their perspecti&es on this matter' These regulatory
experts can share with the Bangladeshi pharmaceutical executi&es, results of %!A
inspections, and the significance of %!A08G7 o(ser&ations and de&elop programs to
1<

demonstrate how indi&idual firms can enhance their quality systems to (e compliant with
the regulations' Although the areas of focus will &ary from one company to the next, in
general one should concentrate on a detailed re&iew the o&erall quality system;
encompassing manufacturing methods, facilities and equipment qualification,
maintenance and cleaning, utilities, la(oratory facilities, test methods practices and
operations, &alidations, documentation practices, etc' #n short all aspects of cC)Ps
should (e assessed, correcti&e measures identified and commitment made (y the firm6s
executi&es to execute these changes'
Bangladeshi firms, to (e competiti&e in the international arena, must de&elop a
moti&ated, dedicated, ethical and highly educated and technically competent workforce'
-ertainly the fact that Bangladesh can compete effecti&ely, with any nation, as a low cost
producer is a (ig plus' The cost of la(or in Bangladesh is typically less than <M of their
D$ counterparts' The cost of (uilding materials is, likewise, relati&ely inexpensi&e' 4ith
low construction costs, a new plant can (e constructed rather inexpensi&ely compared to
an equi&alent si+ed plant in the D$ 'and in other similar economics, such as 1urope,
Kapan, etc' The ma.or cost is associated with the purchase of equipment that is imported
from a(road and the cost associated with the qualification of this equipment' #t should (e
noted that some of the #ndian companies ha&e (een successful more than others, simply
(ecause of the fact that they ha&e &ertically integrated the manufacture of their raw
materials with the manufacture of the finished dosage forms' Although Bangladesh is
currently not a ma.or manufacturer of raw materials, this is an area that could pro&ide
some OnicheP opportunities for the Bangladeshi firms down the road'
1=

1>

Beximco Pharmaceuticals Ltd' (BPL is a pu(lic limited manufacturing organi+ation' #t
produces finished goods' #ts (usiness lines consist of manufacturing and marketing of
pharmaceutical finished formulation products, large &olume parenterals and acti&e
pharmaceuticals ingredients'
#t is one of the leading edge pharmaceutical companies and is a mem(er of the
B12#)-3 Croup, the largest pri&ate sector industrial conglomerate in Bangladesh' The
strategic strengths of Beximco Pharma are its strong (rand recognition, highly skilled
work force and di&ersified (usiness mix' Beximco Pharma (rands 0 @eoceptin *
(*anitidine, @apa (Paracetamol, Amdocal (Amlodipine, @eofloxin (-iprofloxacin,
Bexitrol % ($almeterol Plus %luticasone, Bextrum Cold ()ulti&itamin and )ulti
)ineral and Ato&a (Ator&astatin are among the most recogni+ed (rands in the
Bangladesh Pharmaceutical industry'
Beximco Pharma started its operation in 1?GA, manufacturing products under the licenses
of Bayer AC of Cermany and Dp.ohn #nc' of D$A and now has grown to (ecome nation6s
one of the leading pharmaceutical companies, supplying 1<M of country6s total medicine
need' Today Beximco Pharma manufactures and markets its own Q(randed generics6 for
almost all diseases from A#!$ to cancer, from infection to asthma, from hypertension to
dia(etes, (oth nationally and internationally'
The recipient of three times Qgold6 national export trophy, Beximco Pharma is the largest
exporter of pharmaceuticals from Bangladesh, spreading its presence in many de&eloping
1G

and de&eloped countries across the glo(e' Beximco Pharma is the only company in
Bangladesh to recei&e this highest national accolade for export, for record three times'
)ompany Profile
Price *D!+
,-I$)O Pharmaceuticals .imited /0.20
angladesh ,0port Import )o. .td. 121.20
,-I$)O 3ynthetics .imited #"1.2&
3hinepu%ur )eramics .imited 11."0
43D*mn+
D!*mn+
!otal amount traded at D3, #&.22
"##&.15
'mount traded of ,-I$)O
2.11
21".2/
Percentage 5.216
!otal $ar%et )ap. of D3, "#7&&".&#
2752/7&2#.#"
!otal $ar%et )ap. of ,-I$)O 1001."2
25720#.1#
1?

Percentage 2./06
1?>= -ompany incorporated
1?GA

$tarted manufacturing and marketing of licensee products of Bayer AC of
Cermany and Dp.ohn #nc' of D$A
1?G<

Listing in the !haka $tock 1xchange (!$1 as a Pu(lic Limited -ompany
(PL-
1??/ $tarted export operation with Acti&e Pharmaceutical #ngredients (AP#s
1??7 %irst export market operation with finished pharmaceutical products
1??= #ntroduction of sustained release dosage form in the market
/AAA -ontract manufacturing agreement of )etered !ose #nhaler ()!# with
Claxo $mithBline
/AA1 #ntroduction of $mall Folume Potential ($FP products
1sta(lishment of Analgesic0Anti0inflammatory (ulk drug plant
/AA/

4on the first pri+e of #-AB @ational Awards /AAA for 6Best Pu(lished
Accounts and *eports6 in @on0%inancial $ector -ategory
The first Bangladeshi company to supply pharmaceuticals to *affles
,ospital0 the most prestigious hospital of $ingapore
/AA<

)erger of Beximco #nfusions Ltd' with Beximco Pharmaceuticals Ltd'
Admission to Alternati&e #n&estment )arket (A#) of London $tock
1xchange (L$1
/AA= Lunched -%- free ,%A inhalers for the first time in Bangladesh'
/AA> 3ral $olid dosage facility was commissioned according to D$ %!A
standers'
/AAG 1
st
B! company recei&e C)P clearance from Therapeutic Coods
Administration (TCA Australia and Culf center committee fro !rug
*egistration, for C-- states'
/A

/AA? 3nly Bangladesh company to recei&e C)P certification from A@F#$A,
Bra+il5 #3@ unit was lunched for producing in.ecta(les , ophthlmics and
na(uli+er solutions'
/A1A The only pharmaceutical company in Bangladesh to enter the D$ market
through the acquisition of an A((re&iated @ew !rug Application(A@!A
for a product5 C)P Accreditation from #@F#@A, -olom(ia'
The mission statement of B12#)-3 P,A*)A implies its keenness to (e socially
responsi(le in true sense' #t says5
The motto of BPL
is to (ring
happiness and smile
to life through
fulfilling
responsi(ilities' #n
their words5
Medi ci ne i s di rectly rel ated to human l ife and therefore,
i ts manufacturers have immense soci al responsi bil ity of
provi di ng safe and efecti ve medi cation, demandi ng
/1
Each of our activities must beneft and add value to
the common wealth of our society. We frmly believe
that, in the fnal analysis we are accountable to each of
the constituents with whom we interact; namely our
employees, our customers, our business associates, our
fellow citi!ens and our shareholders. Each of our
activities must beneft and add value to the common
wealth of our society. We frmly believe that, in the fnal
analysis we are accountable to each of the constituents
with whom we interact; namely our employees, our
customers, our business associates, our fellow citi!ens
and our shareholders."

uncompromi si ng eforts at al l level s of its activi ti es.
#e$i mco %harmaceuti cal s &td.' the l eadi ng heal th care
company i n #angl adesh, has been ma(i ng every efort to
ensure the efectiveness and safety of the medi ci nes that
i t produces. %hysi ci ans and patients of the country rel y
on the e)cacy of the medi ci nes of #e$imco %harma at the
time of criti cal needs demonstrati ng thei r confdence and
trust on #%& products.*
BPL has a promise to make a healthier tomorrow for the society where the citi+ens will
en.oy a (etter life' The highlights of B12#)-3 P,A*)ARs endea&or towards a
healthier society are inno&ation and the ad&enture of risk taking through (old decisions5
#%&+ s hi story i s one of i nnovati on and adventure, of
ri s(s ta(en and bol d deci si ons made towards a nobl e
purpose bui l di ng a heal thi er tomorrow where our fel l ow
ci ti !ens can l i ve l onger, heal thi er and better. , n -../, we
have redef ned success as somethi ng broader than mere
performance i n the mar(etpl ace and have ta(en
i ni ti ati ves to prepare for the future.

#%& i s the f rst l ocal company who dared to i nvest i n
manufacturi ng 0cti ve %harmaceuti cal , ngredi ents 10%, s2
and to enter forei gn mar(ets of di versi f ed cul ture and
stri ngent regul atory envi ronment. 3ver the l ast decade,
the ri s( ta(en has pai d us of. 4ow our capabi l i ty i n
manufacturi ng 0%, s and e$perti se i n e$pl orati on of
forei gn mar(ets have pl aced us i n a rel ati vel y better
posi ti on over other l ocal compani es to face the post'W53
era.
//

0bove al l what adds more to our pri de i s our commi tment
to the soci ety. 5hi s i s re6 ected i n our l aunchi ng of 0nti '
7, 89 0, :; drugs f rst ever i n #angl adesh, whi ch was
further rei nforced through the i ntroducti on of anti '
cancer drugs.
Wi th our conti nuous i mprovement i n performance and
commi tment to our customers, we are conf dent to
strengthen our posi ti on i n the mar(etpl ace further and
i ncrease the sharehol ders+ val ue. "
-orporate ,eadquarters 1> !hanmondi *:A,*oad @o'/
!haka 1/A<, Bangladesh
Phones5 GGA0/0G=G//A, G=1G?1
%ax5 GGA0/0G=78>A, G=>=8>
3perational ,eadquarters 1? !hanmondi *:A,*oad @o'>
!haka 1/A<, Bangladesh
Phones5 GGA0/0G=?1<1(to <
%ax5 GGA0/0G=7GGG, G=78>A
%actory Tongi' Dnit, 1/= Bathaldia, Tongi, Ca+ipur B!
Sear of esta(lishment 1?>=
-ommercial Production 1?GA
$tatus Pu(lic Limited -ompany
Type of (usiness
3&erseas 3ffices "
Associates
)anufacturing and )arketing of Pharmaceutical
%inished %ormulation products ,large &olume
Parenterals and acti&e Pharmaceuticals #ngredients
(AP#s and *aw )aterials'
DB, D$A, Pakistan, )yanmar, $ingapore, Benya,
Semen, @epal, Fietnam, -am(odia and $ri0lanka'
/7

Authori+ed -apital in Taka Taka ?,1AA,AAA thousand
Paid0up capital Taka /,A?G,A=< thousand
@um(er of
$hareholders
?7,7>1
$tock exchange listing !haka (!$1, -hittagong (-$1 and London stock
1xchande'
@um(er of employees /<A>
1xport acti&ities Bhutan, Ceorgia, Cermany, ,ong Bong, #ran,
Benya, )alaysia, )yanmar, @epal, Pakistan,
*ussia, $ingapore, $outh Borea, Taiwan, Thailand,
Dkraine, Fietnam, Semen #raq, -am(odia'
/8

The (oard of directors is the highest le&el of authority in the organi+ation structure of
BPL' The (oard is responsi(le for the o&erall direction and is ultimately accounta(le to
/<

the shareholders for the acti&ities, strategies and performance of the company' -urrently,
the (oard of directors of BPL comprises of 11 mem(ers with )r' A $ % *ahman as
-hairman and )r' $alman % *ahman as Fice -hairman'
The prime concern of the (oard is to ensure that the o&erall acti&ities of the (usiness are
conducted responsi(ly and with focus on long T term &alue creation' The (oard meets
periodically to transact matters placed (efore them that require (oardRs appro&al and:or
direction' Board re&iews the o&erall acti&ities of the (usiness and where necessary,
strategic guidelines are gi&en for onward implementation'
BPL has ma.or functional departments headed (y highly qualified professional
staff' #ntroduction of &arious di&isions are as follows5
)entral Product $anagement *)P$+ Department
The acti&ities of -P) are5
)arket research
$election of new product
!esign and testing of product (!TP
$ample store (logistics management
)aking strategy
The department deals with the controlla(le marketing &aria(les, the 8p6s' This
department takes decisions in the following areas5
Product 8 $i+e, color, shape, packaging etc'
/=

Price 8 *aw materials cost, customer a(ility, regulatory (ody6s appro&al etc'
Promotion 8 Promotional aids include (rochure, pads, folder, and plant &isit (y
physicians, health0related people, students, and people of different student'
Purchase Department
The purchase department deals with all the purchase (pharmaceuticals raw
materials, packaging materials, office equipment, machinery6s etc' of the
organi+ation' Based on the information pro&ided (y the planning department, the
purchase department prepared the import authori+ation formats' Then the format is
sent to (e he director (commercial for appro&al' After an L:- is opened all
information a(out its latest status is documented in a 6purchase consignment (P-
folder6 preser&ed (y the purchase department' And for the monitoring (current status "
information record of all L:-, such (ooks are essential'
Planning Department
The planning department is concerned with the production planning and raw material
procurement' After getting the sales forecast from the sales department, the planning
department goes through the current stock information of different raw materials' The
statement shows the position of raw materials in the pipeline (under process, awaiting
shipment, in transit, at port, under clearance, deli&ery : recei&ing' -onsidering the status
of stock, the planning department then decides a(out which materials (acti&e
pharmaceutical ingredients, packaging materials etc' should (e procured' #t first
calls for limited tender among the enlisted sources (local agents for the supply of
particular materials' The list of suppliers is kept in a data(ase preser&ed (y the
planning dept' 4ithin 1< days, the quotations are su(mitted (y the competing
suppliers' Then the planning dept' prepares a comparati&e statement and forwards it to
the purchase department'
/>

Sales Department
$ales department is a marketing execution department' #t supplies sales forecast to
the planning department' #t is headed (y the !irector, )arketing who is aided (y
the $ales )anager' The sales manager looks after the acti&ities of the Assistant
$ales )anagers' 1ach Assistant $ales )anager super&ises < *egional $ales -ontrollers
(*$-' 1ach *$- super&ises < to G %ield $uper&isors (%$' 1ach %$ super&ises and
monitors the acti&ities of 8 to < )edical *epresentati&es ()*'
The core responsi(ility of an )* is to generate demand of products' An )* is gi&en
8/0day training (a(out anatomy, human (ody, (asic sales skill etc' (y the $1"T
department one he successfully goes through the written and oral test' Then a
territory is assigned to an )* (ased on T
Ceographical location
-ommunication
@um(er of customers
Business potentiality
A monthly tour program is de&eloped for each )*' Then the day0wise
(reakdown is done' The sales : promotional plan is de&eloped (for chemist co&erage
1< calls ha&e to (e made, or for doctor6s co&erage 1= calls ha&e to (e make each day'
The guideline is gi&en to the )*s (y the -P) : $ales : )edical : training
department in each cycle conference' Promotional strategies are also set there'
Performance analysis of )*s is recei&ed'
%$ sometimes goes for surprise &isit to see whether things got going as planned'
,e is required to ensure the achie&ement of target within the time frame'
,is main responsi(ilities are T
/G

People management; and
Time management
%$ meets )*s prior to call, during call and after call to monitor their acti&ities' An *$-
maintains the prescription trend up' ,e is concerned with T
Territory de&elopment; and
$uper&isor de&elopment
*$- reports to the $ales )anager whose main responsi(ilities are T
#nteraction with distri(ution and production department
Ci&ing feed(ack to -#)
,uman *esources de&elopment
Fisit the critical customers
!onation management'
Distribution Department
Beximco -hemical !i&ision carries out its distri(ution acti&ities through its
own distri(ution company called # " # $er&ices Ltd' A senior distri(ution )anager
/?

is charged with ensuring the smooth functioning of the distri(ution system' ,e is aided
(y two Asst' !istri(ution )anager T one looks after the operations and the other
looks after the administration' There are ? $enior !istri(ution 3fficers' There
are also !istri(ution 3fficers and Asst' !istri(ution 3fficers'
BPL has 1< depots throughout the country located in T !haka, @arayangon.,
-omilla, Bushtia, Bhulna, Barisal, -hittagong, $ylhet, )ymensingh, %aridpur,
*a.shahi, @oakhali, Bogra, *angpur and -ox6s Ba+ar' 1ach depot is headed (y a depot0
in0charge' BPL is a retail0oriented company selling to more than //,AAA retail outlets
throughout the country' 4holesale is less than 1M and sales to Co&t' are less than
A'<M' The field force promotes in its own territory to gi&e deli&ery order (y
sending an in&oice for allocation' The allocation is made (y the distri(ution
assistant in each depot' ,e also gi&es the amount recei&ed as cash sales to the
distri(ution cashier' A sales summary (a sales .ournal is prepared each month for
each depot' #t is the sales report of the month that shows how much is sold in cash
and how much in credit'
Human Resource Department
Two ma.or types of acti&ities are accomplished (y this department' These are5
Administrati&e functions (maintenance and protocol ser&ices
,uman resource related functions
The o(.ecti&es of ,uman *esource !epartment are5

*ecruitment policy and procedure
-onformation policy and procedure
Placement of employees
7A

,uman *esource !e&elopment
3rgani+ational structure re&iew and modification
-areer planning
,iring and firing
Ko( description preparation
-onducting appraisal at the end of each year
)aintaining and de&eloping employees personal files
$afety0security
Business Research & Development Department
Business *"! !epartment (egan its operation from Kanuary l, /AAA' #t is
working on market de&elopment, (oth domestic and international' The functions that
are done (y this department are5
3utsourcing negotiated
@ew product study
@ew technology study
Pro.ect feasi(ility study
-ommercial negotiation
3(ser&ing the world pharmaceuticals market
MIS Department
71

The )#$ !epartment takes care of total automation of BPL' #t supports the hardware and
software network of the company and the factory' This department pro&ides
ser&ices through $@A $er&er, 4#@ @T $er&er, $9L $er&er' BPL operational
headquarters is linked to the corporate headquarters through fi(er optic ca(le'
The department also esta(lished a 4ide Area @etwork (4A@ with the 1< depots
around the country' )#$ department de&elops the access -ontrol " attendance
monitoring $ystem internally' The department maintains the radio0link (etween the
factory and the head0office' The software section is to work for de&eloping
software solutions as per organi+ational requirements'
Multimedia Department
%unctions of the multimedia department are5
4e( page designing'
!e&eloping multimedia presentation for presentation programs'
)aking &ideos of conferences, meeting etc'
)aking &ideo for products'
)aking &ideo for company'
Beeping the records of annual meeting and other meeting'
Medical Department
This department is a unique department in this industry as BPL esta(lished this first
7/

e&er in order to create easy relationship through using the professional linkage
with the doctors, the ultimate customer of the pharmaceutical companies' #t pro&ides
ser&ices (e' g' slide preparation, pro&iding different .ournals, (ooks etc' to the health
professional on different issues and recei&es feed(ack from them' #t arranges seminars
on different issues such as deseases and their cures in different parts of the
country'
Factory
BPL6s production facility is situated in Tongi' #t has state of the art technology for
its solid, liquid, semi solid production plants' There is also a plant for inhaler
production' The construction of a %!A appro&ed plant is on the pipeline'
Accounts & Finance Department
The acti&ities of the finance department are carried o&er (y 8A persons whose
operations are di&ided under the three heads5
Treasury
Accounts
-ost and Budget
Treasury section deals with (i cash at (anks and (ii (ills' #t also looks after the
cash planning and management' A re&iew is made e&ery week for this purpose'
Accounts section is the custodian of all records and transactions' A computer
software program called 6)AP#-$6 ()anagement Accounting Planning
#nformation -ontrol $ystem is used to aid the acti&ities'
-ost and Budget !epartment identifies the cost centers and prepares the (udget' There
are almost 8A cost centers'
77

The annual (udget preparation starts at 3cto(er' The past data is pro&ided there' $tandard
operating guidelines are also there' Budget re&iew is done quarterly (internally and
half0yearly ((y the top management'

The -ompany has a(out ?7,7>1 shareholders' The directors place high importance on
maintaining good relationships with the shareholders and ensure to keep them informed
of significant company de&elopments' The company formally reports twice a year0
summari+ed half yearly report and detailed annual report' Annual general meeting is an
important opportunity to meet and communicate with shareholders' 1&ery $hareholder or
his duly authori+ed representati&e has the right to attend such meeting' #t pro&ides the
forum for discussion of the (usiness, its future prospects and other matters of interest and
concern to the shareholders' #n addition, the -ompany has a full fledged corporate affairs
secretarial department who addresses different issues like di&idend payment enquiries,
share transfer, loss of share certificate:di&idend warrants etc'
78

7<

$uccess of a pharmaceutical company depends on how effecti&ely it esta(lishes its (rands
in the market' The excellent (lending of world class manufacturing technology and
inno&ati&e marketing strategies made BPL successful in achie&ing (rand equity for its
products' As a result the num(er one product (y &alue and the num(er one product (y
unit in Bangladesh Pharmaceutical )arket and also the highest selling drug in the
cardio&ascular class (elong to BPL'
9eoceptin R :
the num(er one product (y &alue 3ne of the ma.or re&enue earning products of BPL is
@eoceptin *' #t is also the highest selling product (y &alue and is the undisputed leader in
Bangladesh Pharmaceutical )arket'
9apa :
the num(er one product (y unit
@apa is the highest selling product (y unit' @apa has (ecome a household (rand in the
mind of physicians as well as consumers of Bangladesh'
'mdocal :
the highest selling drug in cardio&ascular market' Amdocal is one of the most prestigious
and re&enue earning products of BPL' #t is the highest selling product in the
cardio&ascular market'
7=

Beximco Pharma has a well0 esta(lished and (alanced portfolio of products
to meet the patient needs' BPL, with more then 8AA products, is a(le to
respond to the wild rang of needs of physicians, patients and helth care
pro&iders, (oth therapeutically and economically'
Increasing trends in product offering
;ear
9o. of
products
introduced
$a<or revenue earning products
1?G7 = @apa, Lactameal
1?G8 < Tycil, $panil
1?G< > -ephalen, %ilmet, Centosep
1?G= 7 @eoceptin *
1?G> G Tynisol, Asco(ex, -lo(ex
1?GG 8 Bronkolax, Aristofol0%e
1?G? 8 Dltrafen, 1trocin, Aristo&it0B
1??1 / @eofloxin
1??7 ? Tofen, Beolax, -ardopril, Aristoplex, Proceptin
1??8 1A 3mastin, Aristo&it0)
1??< 1A !iactin, Amdocal
1??= 1/ A+ithrocin, *ostil
1??> 1< Pedeamin, #ntracef, 1naril, A+masol, Bexitrol, Atri+in
1??G 17
@eosten, @a+olin, ,efolin $*, %ormula01, !ecomit,
-arocet
1??? = Tripec, A&astin
/AAA 11 !iapro, -ox0B
/AA1 /= Triocim, Arixon, Prosan, *ecox, Ato&a
/AA? /=
ophthalmic drops, respirator,anti0
diarrheal,multi&itamin
/A1A /> ,%A asthma inhalers,musculoskeletal,anti infecti&e
7>

7G

'ccounting=
7?

Accounting can (e defined as an information system' The operations concerned with
accounting can (e identified as a recording economic data (data collection ( data
maintenance c presenting quantitati&e information in financial terms (#nformation
generation' Accounting can also (e classified as the language of (usiness' $o in (rief
accounting may (e &iewed as an instrument of pro&iding financial information needed for
the o&erall functioning of an entity (a (usiness firm'
Information=
#nformation is intelligence that is meaningful and useful to persons for whom it is
intended' #nformation has &alue to the firms and to the managers' #nformation is
(asically pro&ided (y A#$ through financial statements to external parties and through
&arious types of managerial reports to insiders' This information can (e used (y the
managers for different types of decision making'
At first data is made a&aila(le for the organi+ation' !ata (ecome information through
three stages' These stages are input, process and output'
3ystem=
A system is two or more interrelated components that interact to achie&e a goal' $ystems
are almost composed of smaller su(systems, each performing a specific function
important to and supporti&e of the larger system of which it is a part'
A system can (e defined as a group of interacting parts that function together to achie&e
its purpose' $ome of the systems are natural and some of them are made (y human'
$uppose )ississippi ri&er can (e classified as a natural system whereas clock can (e
classified as a system made (y human (eing'
'ccounting and information systems=
8A

A#$ is a structure within an entity such as a (usiness firm, that employs physical
resources and other components to transform economic data into accounting information
to pro&ide it to different types of user for the purpose of decision making'
>ig 1= !he operational system of a manufacturing firm *?il%inson7 )erullo7
Raval and ?ong8On8?ing7 20107P81+
According to Romney and 3tein@art, OAn A#$ consists of fi&e components5
1' The people who operate the systems and perform &arious functions'
/' The procedures (oth manual and automated, in&ol&ed in collecting, processing,
and storing data a(out the organi+ations acti&ities
7' The data a(out the organi+ations (usiness process
8' The software used to process organi+ations data
<' The information technology infrastructure including computers, peripheral
de&ices, and network communication de&ices'P
!he need for studying 'I3
%acilities
La(or
(human
ser&ices
!ata
%unds
Acquiring
)aterials
Producing
%inished
Coods
$toring
%inished
Coods
$hipping
%inished
Aoods
Coods to
-ustomer
$upporting
3perations
'I3
#nformation
%unds
)aterial
from
$upplier
Manuacturing Firm
Data and information flow
Physical flows
81

The Accounting 1ducation -hange -ommission recommended that the accounting
curriculum should pro&ide students with a solid understanding of three essential
concepts5
1' The use of information in decision making
/' The nature, design, use and implementation of an A#$
7' %inancial information reporting
The knowledge of A#$ for e&ery Accounting student is &ery crucial for the following
reasons5
1' The A#$ course focuses on understanding how the accounting system works5
,ow to collect data a(out an organi+ationRs acti&ities and transactions
,ow to transform that data into information that management can use to run
the organi+ation
,ow to ensure the a&aila(ility, relia(ility, and accuracy of that information
/' Auditors need to understand the systems that are used to produce a companyRs
financial statements'
7' Tax professionals need to understand enough a(out the clientRs A#$ to (e
confident that the information used for tax planning and compliance work is
complete and accurate'
8' 3ne of the fastest growing types of consulting ser&ices entails the design,
selection, and implementation of new Accounting #nformation $ystems'
<' A sur&ey conducted (y the #nstitute of )anagement Accountants (#)A indicates
that work relating to accounting systems was the single most important acti&ity
performed (y corporate accountants'
8/

The ultimate goal of any (usiness is to pro&ide &alue to its customers' A (usiness will (e
profita(le if the &alue it creates is greater than the cost of producing its products or
ser&ices' An organi+ationRs &alue chain consists of nine interrelated acti&ities that
collecti&ely descri(e e&erything it does *Porter and $illar7 1/1&7 P.1#/8150+. The fi&e
primary acti&ities consist of the acti&ities performed in order to create, market, and
deli&er products and ser&ices to customers and also to pro&ide post0sales ser&ices and
support' The four support acti&ities in the &alue chain make it possi(le for the primary
acti&ities to (e performed efficiently and effecti&ely' The nine &alue chain acti&ities are5
Primary acti&ities5
1' In@ound logistics consist of recei&ing, storing, and distri(uting the materials
that are inputs used (y the organi+ations to create the ser&ice and products that
it sells'
/' Operations acti&ities transform input in to final products or ser&ices'
7' Out@ound logistics are the acti&ities in&ol&ed in distri(uting finished goods
or ser&ices to customers'
8' $ar%eting and sales refers to the acti&ities in&ol&ed in helping customers to
(uy the organi+ations products and ser&ices'
<' 3ervice acti&ities pro&ide post sale support to customers'
$upport $er&ices5
87

1' >irm infrastructure refers to the accounting, finance, legal support, and
general administration acti&ities that are necessary for any organi+ation to
function'
/' Human resources activities include recruiting, hiring, training and pro&iding
employee (enefits and compensations'
7' !echnology acti&ities impro&e a product and ser&ice' 1xamples include
research and de&elopments, production design'
8' Purchasing includes all the acti&ities in&ol&ed in procuring raw materials,
supplies, machinery and the (uildings used to carry out primary acti&ities'
How an 'I3 adds value to a @usiness=
The A#$ can add &alue to an organi+ation (y pro&iding accurate and timely information
so that the fi&e primary &alue chain acti&ities can (e performed more effecti&ely and
efficiently' 4ell designed A#$ can do this (y5
1' #mpro&ing the quality and reducing the costs of products or ser&ices'
/' #mpro&ing the efficiency5 A well designed A#$ can help impro&e the efficiency of
operations (y pro&iding more timely information'
7' #mpro&ed decision making5 A#$ can impro&e decision making (y pro&iding
accurate information in a timely manner'
8' $haring of knowledge5 well0designed A#$ can make it easier to share knowledge
and expertise, perhaps there(y impro&ing operations and e&en pro&iding a
competiti&e ad&antage'
88

)#$ pro&ides information to the managers of the firm' )#$ pro&ides information needed
to plan and control the acti&ities of the firm' #t includes all types of data including non0
transactional data'
Relationship @etween 'I3 ( $I3=
$ome &iew A#$ ha&ing the narrow scope of the )#$, since the data accepted (y the )#$
ha&e a (roader scope' 3n the other hand, A#$ ser&es a wider group of users (oth internal
and external' Thus in conclusion it can (e said that A#$ " )#$, each of them ha&e
particular mission " to some extent these are interrelated'
>ig 2= 'I3 as an $I3 su@system *?il%inson7 )erullo7 Raval and ?ong8On8?ing7
20107 P812+
'I3
3alesB
$ar%eting
Personnel
8<

A#$ perform three (asic functions5
1. To collect and store data a(out the organi+ationRs (usiness acti&ities and
transactions efficiently and effecti&ely5
-apture transaction data on source documents'
*ecord transaction data in .ournals, which present a chronological
record of what occurred'
Post data from .ournals to ledgers, which sort data (y account type'
/' To pro&ide management with information useful for decision making5
#n manual systems, this information is pro&ided in the form of reports
that fall into two main categories5
- financial statements
- managerial reports
7' To pro&ide adequate internal controls5
1nsure that the information produced (y the system is relia(le'
1nsure that (usiness acti&ities are performed efficiently and in
accordance with managementRs o(.ecti&es'
$afeguard organi+ational assets
Data collection and processing
The data collection and processing cycle consists of four steps5 data input, data storage,
data processing and information output' The trigger for data input is usually (usiness
acti&ity' !ata must (e collected a(out5
1ach e&ent of interest
The resources affected (y each e&ent
The agents who participate in each e&ent
Data Input=
8=

,istorically, most (usinesses used paper source documents to collect data and then
transferred that data into a computer' Today, most data are recorded directly through data
entry screens' Dsually the data entry screen retains the same name as the paper source
document it placed' 4ell designed source documents and data entry screens impro&e (oth
control and accuracy of capturing data a(out (usiness acti&ities' 1xamples of source
documents5
3ource document >unction
$ales order To record customer order
!eli&ery ticket To record deli&ery of merchandise to customer'
-redit memo To support ad.ustments in customers account for sales return,
sales discount etc'
!eposit slip To record amounts of cash " cheques deposited in company
(ank account'
Purchase requisition To request that purchase department orders specific goods'
Purchase order To request merchandise from &endors'
*ecei&ing report To record receipt of merchandise from &endors'
Time cards *ecord time worked (y employees
-ontrol o&er data collection is impro&ed (y5
prenum(ering each source document since it simplifies &erifying that all
transactions ha&e (een recorded and that none of the documents has (een
misplaced
ha&ing the system automatically assign a sequential num(er to each new
transaction
employing source data automation such as AT)s used (y (anks, P3$
scanners used in retail stores
Data Processing=
3nce data a(out a (usiness entity has (een collected, the next step usually in&ol&es
updating pre&iously stored information a(out the resources affected (y the e&ent and the
8>

agents who participated in the acti&ity' %or example, data a(out a sales transaction result
in updating the information a(out in&entory to reduce the quantity on hand of the item
sold, as well as updating the customers account (alance' This updating can either (e done
periodically, such as once a day or week, or immediately as each transaction occurs'
Batch processing is the periodic updating of the data stored a(out resources and
agents
3n0line, real0time processing is the immediate updating as each transaction occurs
Data 3torage=
An entity is something a(out which information is stored' 1xamples of entities include
employees, in&entory items, and customers' 1ach entity has attri(utes, or characteristics
of interest, which need to (e stored' An employee pay rate and customer address are
examples of attri(utes' Cenerally, each type entity possesses the same set of attri(utes'
%or example, all employees possess an employee num(er, pay rate and home address'
The specific data &alues for those attri(utes howe&er will differ among entities'
Record transaction data in <ournal=
After transaction data ha&e (een captured on source documents, the next step is to record
the data in a .ournal' A .ournal entry is made for each transaction showing the accounts
and amounts to (e de(ited and credited.
The general .ournal records infrequent or non routine transactions'
$peciali+ed .ournals simplify the process of recording large num(ers of repetiti&e
transactions'
Post transactions to ledger=
#n an A#$, the files used to store cumulati&e information a(out resources and agents are
called ledgers' )ost companies should ha&e (oth general ledger and a set of su(sidiary
ledgers' The general ledgers contain summary data for e&ery asset, lia(ility, equity,
re&enue and expense account of the organi+ation' A su(sidiary ledger records all the
detailed data for any general ledger account that has any many indi&idual su(0accounts'
%or example, the general ledger contains one account that summari+es the total amount
owed to the company (y all customers' The su(sidiary accounts recei&a(le ledger has a
separate record for each indi&idual customer, each of which contains detailed information
8G

a(out a particular customer' $u(sidiary ledgers are commonly used for accounts
recei&a(le, in&entory, fixed assets and account paya(le'
)hart of 'ccounts=
1ach general ledger account is assigned an a specific num(er' The chart of accounts is a
list of all general ledger accounts an organi+ation uses *Romney and 3tein@art7 20027 P8
"0+' The structure of the chart of accounts is one of the most important aspects of A#$,
(ecause it affects the preparation of financial statements and reports' !ata stored in
indi&idual accounts can easily (e summed for presentation in reports, (ut data stored in
summary accounts can not (e easily (roken down and reported in more detail'
-onsequently, it is important that the chart of accounts contain sufficient detail to meet an
organi+ationRs information needs'
Providing information for decision ma%ing
A second function of the A#$ is to pro&ide management with information useful for
decision making' 4hether presented in the form of paper reports or displayed on a
computer screen, the information an A#$ pro&ides falls in to two main categories5
financial statements and managerial reports' %inancial statements are primarily designed
for external parties to use in making decisions a(out extending credit to or in&esting in
the organi+ations' The following steps are used to5
Prepare a trial (alance'
)ake ad.usting entries'
Prepare the ad.usted trial (alance'
Produce the income statement'
)ake closing entries'
Produce the (alance sheet'
Prepare the statement of cash flows'
$anagerial reports=
An organi+ationRs A#$ must (e a(le to pro&ide managers with detailed operational
information a(out the organi+ationRs performance'
udgets and performance reports=
Two important types of managerial reports are (udgets and performance reports' A
(udget is the formal expression of goals in financial terms' 3ne of the most common and
8?

important type of (udget is the cash (udget' A cash (udget shows pro.ected cash inflows
" outflows'
Performance reports, in contrast, are used for financial control' A performance report lists
the (udgeted and actual amounts of re&enues and expenses and also shows the &ariances
or differences (etween these amounts'
Internal )ontrol
The third function of an A#$ is to pro&ide adequate internal controls to accomplish three
(asic o(.ecti&es5
1' 1nsure that the information is relia(le'
/' 1nsure that (usiness acti&ities are performed efficiently'
7' $afeguard organi+ational assets'
The two important methods for accomplishing these o(.ecti&es are5
1' Pro&ide for adequate documentation of all (usiness acti&ities'
/' !esign the A#$ for effecti&e segregation of duties'
'deCuate Documentation=
Adequate documentation of all (usiness transactions is the key to accounta(ility'
!ocumentation allows management to &erify that assigned responsi(ilities were
completed correctly' 4ell0designed documents and records can help organi+ations
quickly identify potential pro(lems' %or example, gaps in the sequence of completed
source documents might indicate that some documents ha&e (een misplaced, in which
case some transactions may not ha&e (een recorded' $uch a gap may also, howe&er, (e a
sigh of more serious pro(lem' %or example, a missing check may ha&e (een written for
fraudulent purposes' Adequate documents and records can also ensure that an
organi+ation does not make commitments it cannot keep'
3egregation of duties=
$egregation of duties refers to di&iding responsi(ility for different portion of a transaction
among se&eral people *Romney and 3tein@art7 20027 P8"2+' The o(.ecti&e is to pre&ent
<A

one person from ha&ing total control o&er all aspects of a (usiness transaction' !ifferent
person should perform the following acti&ities5
authori+ing transactions
recording transactions
maintaining custody of assets
!ocumentation encompasses the narrati&es, flowcharts, diagrams and other written
material that explain how a system works' This information co&ers the who, what, when,
where, why and how of data entry, processing, storage, information output and system
controls' 3ne popular means of documenting a system is to de&elop diagrams,
flowcharts, ta(les and other graphical representations of information' These are then
supplemented (y a narrati&e description of the system, a written step0(y step explanation
of system components and interactions'
Documentation=
!ocumentation descri(es the procedures for recording data, the commands that run
computer programs, the processing steps that A#$ follow and the logical and physical
flows of accounting data through the system'
Importance of documentation=
1' 3ne of the (asic purposes of documentation is to explain how A#$ operates'
!ocumentation helps employees to understand how does a system works, helps
accountants to impro&e it and help managers to control it'
<1

/' !ocumentation also includes the user guides, procedure manuals and operating
instructions; which are so helpful' These are helpful to train users to operate A#$
hardware and software, to sol&e new operating pro(lems and to perform the .o(s
(etter'
7' !ocumentation also helps to de&elop new systems' #t is also helpful to maintain
the existing one'
8' @arrati&e descriptions may &ary significantly, depending on who writes them'
$imilarly, the indi&idual reading a narrati&e may interpret it differently from the
way it was intended' But a system flowchart or data flow diagram that uses
common sym(ol is more likely to (e interpreted in the same way (y all of the
parties &iewing it'
<' !ocumentation helps the auditors to determine the strengths and weaknesses of
the organi+ation so easily' Thereafter, the auditors can identify the scope "
complexity of the audit'
Different types of documentation techniCue
An organi+ation can use different types of documentation techniques a&aila(le to it' $ome
ma.or types are5
Dataflow diagram
A data flow diagram (!%! graphically descri(es the flow of data within an organi+ation'
#t is used to document existing systems and to plan and design new ones' There is no
ideal way to de&elop a !%!' A data flow diagram (!%! is composed of the following
four (asic elements5
!ata sources and destinations
!ata flows
Transformation processes
!ata stores
>lowchart
</

A flowchart is an analytical technique used to descri(e some aspect of an information
system in a clear, concise, and logical manner' %lowcharts use a standard set of sym(ols
to pictorially descri(e transaction processing procedures' %lowcharts are of three types5
Document flowchart=
A document flowchart illustrates the flow of documents and information (etween areas of
responsi(ility within an organi+ation' !ocument flowcharts trace a document from its
cradle to its gra&e' They show where each document originates, its distri(ution, the
purposes for which it is used, its ultimate disposition, and e&ery thing that happens as it
flows through the system'
3ystem flowchart=
$ystem flowcharts depict the relationship among the input, processing, and output of an
A#$' A system flowchart (egins (y identifying (oth the inputs that enter the system and
their origins' The input can (e new data entering the system, data stored for future use or
(oth' The input is followed (y the processing portion of the flowchart, which is the steps
performed on the data' The logic the computer uses to perform the processing task is
shown on a program flowchart' The resulting new information is the output component,
which can (e stored for later use, displayed on a screen or printed on paper' #n many
instances, the output from one process is an input to another'
Program flowchart=
A program flowchart descri(es the specific logic to perform a process shown on a
systems flowchart' A flow line connects the sym(ols and indicates the sequence of
operations' The processing sym(ol represents a data mo&ement or arithmetic calculation'
Differences @etween D>Ds and >lowcharts
<7

!%!s emphasi+e the flow of data and what is happening in a system, whereas a
flowchart emphasi+es the flow of documents or records containing data'
A !%! represents the logical flow of data, whereas a flowchart represents the
physical flow of data'
%lowcharts are used primarily to document existing systems' !%!s, in contrast,
are primarily used in the design of new systems and do not concern themsel&es
with the physical de&ices used to process, store, and transform data'
According to Romney and 3tein@art7 DAccounting #nformation $ystems consist of fi&e
su(systems' These are5
1' The re&enue cycle5 in&ol&es acti&ities of selling goods or ser&ices and
collecting payment for those sales'
/' The expenditure cycle5 in&ol&es acti&ities of (uying and paying for goods or
ser&ices used (y the organi+ation'
7' The human resources:payroll cycle5 in&ol&es acti&ities of hiring and paying
employees'
8' The production cycle5 in&ol&es acti&ities con&erting raw materials and la(or
into finished goods'
<' The financing cycle5 in&ol&es acti&ities of o(taining necessary funds to run
the organi+ation, repay creditors, and distri(ute profits to in&estors'P
Revenue )ycle=
The re&enue cycle is a recurring set of (usiness acti&ities and related information
processing operations associated with pro&iding goods and ser&ices to customers and
collecting cash in payment for those sales *Romney and 3tein@art7 20027 P8"&/+
<8

Romney and 3tein@art identified four (asic re&enue cycle (usiness acti&ities' These are5
1 $ales order entry
/ $hipping
7 Billing and accounts recei&a(le
8 -ash collections
3ales order entry=
$ales order entry process entails three steps5
1' Taking the customerRs order
/' -hecking and appro&ing the customerRs credit
7' -hecking in&entory a&aila(ility
3hipping=
The second (asic acti&ity in the re&enue cycle T filling customer orders and shipping the
desired merchandise T entails two steps5
1' Picking and packing the order
/' $hipping the order
illing and accounts receiva@le=
The third (asic acti&ity in the re&enue cycle in&ol&es5
1' Billing customers
/' Dpdating accounts recei&a(le
)ash collection=
The fourth step in the re&enue cycle is cash collections' #t in&ol&es5
1' ,andling customer remittances
/' !epositing remittances in the (ank
,0penditure )ycle
<<

The expenditure cycle is a recurring set of (usiness acti&ities and related data processing
operations associated with the purchase of and payment for goods and ser&ices *Romney
and 3tein@art7 20027 P8#1&+' The primary o(.ecti&e of the expenditure cycle is to
minimi+e the total cost of acquiring and maintaining in&entories, supplies, and the
&arious ser&ices necessary for the organi+ation to function'
The three (asic (usiness acti&ities in the expenditure cycle are5
1' 3rdering goods, supplies and ser&ices
/' *ecei&ing and storing goods, supplies and ser&ices
7' Paying for goods, supplies and ser&ices
Production )ycle
The production cycle is a recurring set of (usiness acti&ities and related data processing
operations associated with the manufacturing of products *Romney and 3tein@art7 20027
P8#51+' Accurate and timely cost accounting information is essential input to decisions
a(out5
U Product mix
U Product pricing
U *esource allocation and planning
U -ost management
There are four (asic acti&ities in the production cycle5
1' Product design
/' Planning and scheduling
7' Production operations
8' -ost accounting
Human ResourceB Payroll )ycle
The ,*):payroll cycle is a recurring set of (usiness acti&ities and related data
processing operations associated with effecti&ely managing the employee work force
*Romney and 3tein@art7 20027 P8&0&+' $ome of the more important acti&ities include
the following tasks5
<=

T *ecruitment and hiring
T Training
T Ko( assignment
T -ompensation (payroll
T Performance e&aluation
T !ischarge of employees, due to &oluntary or in&oluntary termination
The three (asic functions the A#$ pro&ide in the ,*):payroll cycle are5
1' Processing transactional data a(out employee acti&ities
/' $afeguarding the organi+ationRs assets
7' Pro&iding information for decision0making
The (asic acti&ities performed in the payroll cycle are5
1' Dpdate master payroll file
/' Dpdate tax rates and deductions
7' Falidate time and attendance data
8' Prepare payroll
<' !is(urse payroll
=' -alculate employer0paid (enefits and taxes
>' !is(urse payroll taxes and other deductions
Aeneral .edger and Reporting 'ctivities
This part discusses the information processing operations in&ol&ed in updating the
general ledger and preparing reports that summari+e the results of an organi+ationRs
acti&ities'
The four (asic acti&ities performed in the general ledger and reporting system are5
1' Dpdate the general ledger
/' Post ad.usting entries
7' Prepare financial statements
<>

8' Produce managerial reports
The expenditure cycle is a recurring set of (usiness acti&ities and related data processing
operations associated with the purchase of and payment for goods and ser&ices' The
primary o(.ecti&e of the expenditure cycle is to minimi+e the total cost of acquiring and
maintaining in&entories, supplies, and the &arious ser&ices necessary for the organi+ation
to function'
Eey decisions=
4hat is the optimal le&el of in&entory and supplies to carryV
4hich suppliers pro&ide the (est quality and ser&ice at the (est pricesV
4here in&entories and supplies should (e heldV
,ow can the organi+ation consolidate purchases across units to o(tain optimal
pricesV
,ow can information technology (e used to impro&e (oth the efficiency and
accuracy of the in(ound logistics functionV
#s sufficient cash a&aila(le to take ad&antage of any discounts suppliers offerV
,ow can payments to &endors (e managed to maximi+e cash flowV
usiness activities=
Romney and 3tein@art identified three (asic (usiness acti&ities in the expenditure cycle'
These are5
1' 3rdering goods, supplies and ser&ices
<G

/' *ecei&ing and storing goods, supplies and ser&ices
7' Paying for goods, supplies and ser&ices
'ctivity 1= Ordering goods7 supplies and services
The first ma.or (usiness acti&ity in the expenditure cycle is ordering in&entory or
supplies' The traditional in&entory control method is often called economic order quantity
H139I' This approach is (ased on calculating an optimal order si+e so as to minimi+e the
sum of ordering, carrying, and stockout costs'
Alternati&e in&entory control methods are5
1. $RP *material reCuirement planning+
This approach seeks to reduce required in&entory le&els (y scheduling production, rather
than estimating needs'
2. FI! *<ust in time+
K#T systems attempt to minimi+e (oth carrying and stockout costs'
A ma.or difference (etween )*P and K#T is5
)*P systems schedule production to meet estimated sales need, there(y creating a stock
of finished goods in&entory where K#T systems schedule production to meet customer
demands, there(y &irtually eliminating finished goods in&entory'
Documents and procedures=
The purchase requisition is a document that identifies the following5
T requisitioner and item num(er
T specifies the deli&ery location and date needed
T specifies descriptions, quantity, and price of each item requested
T may suggest a &endor
The purchase order is a document that formally requests a &endor to sell and
deli&er specified products at designated prices' #t is also a promise to pay and
(ecomes a contract once it is accepted (y the &endor' %requently, se&eral purchase
orders are generated to fill one purchase requisition'
<?

'ctivity 2= Receiving and 3toring Aoods7 3upplies and 3ervices
The second ma.or (usiness acti&ity in&ol&es the receipt and storage of ordered items'
Bey decisions and information needs5
The recei&ing department has two ma.or responsi(ilities5
!eciding whether to accept a deli&ery
Ferifying quantity and quality
Documents and procedures=
The recei&ing report documents details a(out each deli&ery, including the date recei&ed,
shipper, &endor, and purchase order num(er' %or each item recei&ed, it shows the item
num(er, description, unit of measure, and count of the quantity recei&ed'
'ctivity "= Pay for Aoods and 3ervices
'pprove Gendor Invoices=
The third acti&ity entails appro&ing &endor in&oices for payments'
The accounts paya(le department appro&es &endor in&oices for payment
The cashier is responsi(le for making the payment
The o(.ecti&e of accounts paya(le is to authori+e payment only for goods and ser&ices
that were ordered and actually recei&ed'
Improving accounts paya@le=
Processing efficiency can (e impro&ed (y5
*equiring suppliers to su(mit in&oices electronically, either (y 1!#
(1lectronic !ata #nterchange or &ia the #nternet
1liminating &endor in&oices' This Oin&oicelessP approach is called
e&aluated receipt settlement (1*$'
Pay approved invoices=
The cashier appro&es in&oices
=A

The com(ination of &endor in&oice and supporting documentation is
called a &oucher package'
A key decision in the cash dis(ursement process is determining whether to
take ad&antage of discounts for prompt payment'
Information needs=
The third function of the A#$ is to pro&ide information useful for decision making'
Dsefulness in the expenditure cycle means that the A#$ must pro&ide the operational
information needed to perform the following functions5
!etermine when and how much additional in&entory to order'
$elect the appropriate &endors from whom to order'
Ferify the accuracy of &endor in&oices'
!ecide whether purchase discounts should (e taken'
)onitor cash flow needs to pay outstanding o(ligations'
1fficiency and effecti&eness of the purchasing department
Analyses of &endor performance such as on0time deli&ery, quality, etc'
Time taken to mo&e goods from the recei&ing dock into production
Percentage of purchase discounts taken
=1

Internal )ontrol=
The traditional definition of internal control is that internal control is the plan of
organi+ation and the methods a (usiness uses to safeguard assets, pro&ide accurate and
relia(le information, promote and impro&e operational efficiency, and encourage
adherence to prescri(ed managerial policies'
$anagement control=
)anagement control encompasses the following three features5
1' #t is an integral part of management responsi(ilities'
/' #t is designed to reduce errors, irregularities, and achie&e organi+ational goals'
7' #t is personnel0oriented and seeks to help employees attain company goals'
The specific control procedures used in the internal control and management control
systems may (e classified using the following four internal control classifications5
1' Pre&enti&e, detecti&e, and correcti&e controls
/' Ceneral and application controls
7' Administrati&e and accounting controls
8' #nput, processing, and output controls
#n 1??/, -3$3 (-ommittee of $ponsoring 3rgani+ation issued the results of a study to
de&elop a definition of internal controls and to pro&ide guidance for e&aluating internal
control systems' The report has (een widely accepted as the authority on internal
controls' The -3$3 study defines internal control as the process implemented (y the
(oard of directors, management, and those under their direction to pro&ide reasona(le
assurance that control o(.ecti&es are achie&ed with regard to5
T effecti&eness and efficiency of operations
T relia(ility of financial reporting
T compliance with applica(le laws and regulations
-3$3Rs internal control model has fi&e crucial components5
T -ontrol en&ironment
T -ontrol acti&ities
T *isk assessment
=/

T #nformation and communication
T )onitoring
The #nformation $ystems Audit and -ontrol %oundation (#$A-% recently de&eloped the
-ontrol 3(.ecti&es for #nformation and related Technology (-3B#T' -3B#T
consolidates standards from 7= different sources into a single framework' The framework
addresses the issue of control from three &antage points or dimensions5
1' #nformation5 needs to conform to certain criteria that -3B#T refers to as
(usiness requirements for information
/' #T resources5 people, application systems, technology, facilities, and data
7' #T processes5 planning and organi+ation, acquisition and
implementation, deli&ery and support, and monitoring
,lements of Internal )ontrol
The elements of internal control as identified (y -3$3 are (riefly discussed (elow5
)ontrol ,nvironment
The first component of -3$3Rs internal control model is the control en&ironment' The
control en&ironment consists of many factors, including the following5
1' -ommitment to integrity and ethical &alues
/' )anagementRs philosophy and operating style
7' 3rgani+ational structure
8' The audit committee of the (oard of directors
<' )ethods of assigning authority and responsi(ility
=' ,uman resources policies and practices
>' 1xternal influences
)ontrol 'ctivities
Cenerally, control procedures fall into one of fi&e categories5
1' Proper authori+ation of transactions and acti&ities
/' $egregation of duties
7' !esign and use of adequate documents and records
8' Adequate safeguards of assets and records
=7

<' #ndependent checks on performance
Proper 'uthoriHation of !ransactions and 'ctivities=
)anagement lacks the time and resources to super&ise each acti&ity and decision' $o they
esta(lish policies for employees to follow and then empower them to perform
accordingly' This empowerment is called authori+ation' -ertain acti&ities or transactions
may (e of such consequence that management grants specific authori+ation for them to
occur' %or example5 the appro&al is often required if the credit sale is o&er TB 7A,AAA' #n
contrast, management can authori+e employees to handle routine transactions without
special appro&al, a procedure known as general authori+ation'
Authori+ation is the empowerment management gi&es employees to
perform acti&ities and make decisions'
!igital signature or fingerprint is a means of signing a document with a
piece of data that cannot (e forged'
$pecific authori+ation is the granting of authori+ation (y management for
certain acti&ities or transactions'
3egregation of Duties=
Cood internal control demands that no single employee (e gi&en too much responsi(ility'
An employee should not (e in a position to perpetrate and conceal fraud or unintentional
errors' The following three types of function should (e segregated'
'uthoriHation means appro&ing transactions and decisions'
Recording means preparing source documents, .ournals, ledgers, or other files,
preparing reconciliations and preparing performance report'
)ustody means handling cash maintaining an in&entory storeroom, recei&ing
checks, writing checks'
=8

#f two of these three functions are the responsi(ility of a single person, pro(lems can
arise' $egregation of duties pre&ents employees from falsifying records in order to
conceal theft of assets entrusted to them'
Design and 4se of 'deCuate Documents and Records=
The proper design and use of documents and records helps ensure the accurate and
complete recording of all rele&ant transaction data' !ocuments that initiate a transaction
should contain a space for authori+ation' The following procedures safeguard assets from
theft, unauthori+ed use, and &andalism5
effecti&ely super&ising and segregating duties
maintaining accurate records of assets, including information
restricting physical access to cash and paper assets
ha&ing restricted storage areas
'deCuate safeguards of assets and records=
3nce upon a time, people had (een thinking to ha&e the safeguard for cash or for physical
assets' But now a day, information is also the &alua(le one' The following procedures
safeguard assets from theft, unauthori+ed use, and &andalism'
*ecording %unctions
Preparing source documents
)aintaining .ournals
Preparing reconciliations
Preparing performance reports
-ustodial %unctions
,andling cash
,andling assets
4riting checks
*ecei&ing checks in mail
Authori+ation %unctions
Authori+ation of
Transactions
=<

1ffecti&ely super&ising and segregating duties'
)aintaining accurate records of assets including information'
*estricting physical access to assets'
Protecting records and documents'
*estricting access to computer rooms, computer files'
The following can (e used to safeguard assets5
T cash registers
T safes, lock(oxes
T safety deposit (oxes
T restricted and fireproof storage areas
T controlling the en&ironment
T restricted access to computer rooms, computer files, and information
Independent chec% on performance=
4e ha&e here &arious types of independent checks'
*econciliation of two independently maintained sets of records5 Bank
reconciliation is the example' Another example is comparing the accounts
recei&a(le su(sidiary ledger total with the accounts recei&a(le total in the general
ledger'
-omparison of actual quantities with the recorded amounts' The cash in a cash
register drawer at the end of each clerkRs shift should (e the same as the amount
recorded on the cash register'
#ndependent re&iew5 After one person processes a transaction, a second person
sometimes re&iews the work of the first'
Ris% 'ssessment
The third component of -3$3Rs internal control model is risk assessment' -ompanies
must identify the threats they face5
strategic L doing the wrong thing
==

financial L ha&ing financial resources lost, wasted, or stolen
information L faulty or irrele&ant information, or unrelia(le systems
Information and )ommunication
The fourth component of -3$3Rs internal control model is information and
communication' The people of the organi+ation will capture and exchange the
information needed to conduct, manage and control its operation' According to A#-PA,
an A#$ has fi&e primary o(.ecti&es' These are5
#dentification and recording of all &alid transactions' %or example5 if a company
records fictitious sales, at that time re&enue is o&erstated'
Proper classification of transaction' %or example5 improperly classifying an
expense as an asset o&erstates assets and net income'
*ecording transactions at their proper &alue' %or example5 an accounts recei&a(le
that (ecomes uncollecti(le should (e written off' '
*ecording transactions in the proper accounting period'
Properly presentation and related disclosures in the financial statement is
important' %or example5 A lawsuit against the company will (e disclosed in the
disclosure'
$onitoring Performance
The fifth component of -3$3Rs internal control model is monitoring' The entire process
will (e monitored and the modification will (e done as needed' Bey methods of
monitoring performance include effecti&e super&ision, responsi(ility reporting and
internal auditing'
,ffective supervision= #t includes training and assisting employees, monitoring
their performance, correcting errors, safeguarding assets (y o&erseeing employees
who ha&e access to them'
Responsi@ility accounting= *esponsi(ility accounting system includes (udget,
schedules, standard costs and quality standards'
Internal auditing= #t is important to identify the internal control effecti&eness'
=>

=G

Beximco Pharmaceuticals Ltd' (BPL is the (iggest company of Beximco6s -hemical
!i&ision' #t is also one of the largest manufacturers of pharmaceutical products in the
country' #t not only satisfies the domestic needs with its &ast range of products, (ut also
exports to many different countries' To manage this huge (usiness, to keep track of numerous
e&eryday transactions, to facilitate management for different types of decision0making and
to keep the stakeholders informed with different kind of information in different times
are daunting tasks' Farious types of information need to (e generated, accumulated and
customi+ed according to the users6 requirements' Accounting #nformation $ystem (A#$ is
one of the ma.or information systems that play a &ital role in this regard'
Being an accounting professional today requires far more than .ust a
text(ook understanding of de(its and credits, .ournali+ing and posting steps
and the latest accounting and auditing pronouncements' The accounting
professionals of /1st century must also stay a(reast of the many technological
ad&ances, which continually reshape the (usiness world' These ad&ances ha&e sparked
an information re&olution, which in the past few decades has transformed almost
e&ery aspect of accounting' Perhaps the greatest impact of the information
re&olution has (een on the accounting system itself indeed, accounting systems
and the world of computers and data processing has (ecome insepara(le'
*ecognition of this fact has gi&en rise to a new accounting specialty area known as
Accounting #nformation $ystem'
The dynamic and systematic Accounts and %inance department with esta(lished
network and different sophisticated and user friendly softwares are the keys for
such organi+ed and relia(le A#$ that BPL possesses' 3&er the years the A#$ of BPL
=?

has (een de&eloped to meet almost all the accurate and timely information needs
(oth for the internal and external requirements'
An accounting information system is a unified structure within an entity, such as a
(usiness firm, that employs physical resources and other components to transform
economic data into accounting information for the purpose of satisfying the
information needs of a &ariety of users'
#n fact the A#$ is a su(system of a (roader information system that encompasses
all information generating acti&ities' The A#$ consists of people, procedure and
information technology' #t performs the following three functions in the organi+ation5
#t collects and stores data a(out acti&ities and transactions so that the organi+ation
can re&iew what has happened'
#t processes data into information that is useful for making decisions that ena(le
management to plan, execute and control acti&ities'
#t pro&ides adequate controls to safe guard the organi+ation assets, including its
data' These controls ensure that the data is a&aila(le when needed and that it is
accurate " relia(le'
This study has identified one of the ma.or components of the accounting information
system of BPL T 1xpenditure cycle, the technology, the output " users, and the
control mechanisms related to this cycle' $ome of them are input to the system, some
work to process the input, and some represent the output' *egardless of what they are,
they work together to achie&e the system6s o(.ecti&e which is to satisfy the information
needs of the users'
>A

Business e&ents, also called transactions, are the steps, within the physical "
financial processes of firms' 4e may group the (usiness e&ents of BPL into process
sequences called transactions cycles' )ost 3rgani+ations engaged in many similar
and repetiti&e transactions' These transaction types can (e grouped into four (asic
cycles, each of which constitutes a (asic su(system in the A#$' These four cycles (or
su(systems of the A#$ are related to one another and each feeds data to the general
ledger " reporting system that pro&ides information to (oth internal " external users'
'ccounting 3oftware
BPL uses a computer software program called E)AP#-$E for its transaction processing
purpose' E)AP#-$E is the acronym of E)anagement Accounting Planning
#nformation -ontrol $ystemE' The software was de&eloped and launched in the
market (y #B) -orporation in 1?GA' #t is !3$ (ased' )AP#-$ is (atch processing
software' #n BPL transactions are entered in (atches for a month and the (atch is then
posted and reports are generated according to pre0designed format' By structure
)AP#-$ is a modular software' BPL uses the following modules of )AP#-$5
Ceneral Ledger'
Budget Preparation'
%inancial *atio Analysis'
%ixed Asset Accounting'
Accounts *ecei&a(le'
L - )onitoring $ystem'
>1

Apart from )AP#-$, BPL uses some other software for accounting purpose such as5
%ixed Assets )anagement $ystem'
Payroll $ystem'
#n&entory -ontrol $ystem'
$ales and Billing $ystem'
Production #nformation $ystem'
All these softwareRs are de&eloped (y the )#$ department of BPL and these softwares are
not integrated with )AP#-$'
%urthermore, )$ 1xcel is extensi&ely used (y the accounts department'
The expenditure cycle is a recurring set of (usiness acti&ities and related data processing
operations associated with the purchase and payment for goods and ser&ices' The
expenditure cycle of BPL includes5
1' Acquisition of raw and packing material
Local Purchase
#mport
/' Acquisition of fixed asset
7' 3ther re&enue expenditure
The focal point of this report is to put light on the acquisition of raw and packing material
form local and foreign sources and related accounting treatments' Acquisition of fixed
assets and other re&enue expenditures are discussed (riefly'
>/

The domestic purchase of raw material includes following (usiness functions;
1' Processing purchase order
/' *ecei&ing goods, material and ser&ices
7' *ecogni+ing the lia(ility
8' Processing and recording cash dis(ursement
Processing Purchase Order
The procedure (egins with need recognition' The respecti&e department identifies its
need, gets appro&al of the departmental head and with the appro&al an authori+ed person
sends purchase reCuisition to purchase department to initiate purchase' #n case of
property, plant and equipment acquisition, (efore sending purchase requisition, a (udget
has to (e prepared (y the user department' #f the departmental head or higher authorities,
whiche&er is required, appro&e the proposed (udget a purchase requisition is sent to
purchase department' And in case of raw or packing materials, the planning department
determines the quantity and timing of raw materials' This department informs the
purchase department when to (uy materials'
4hen the purchase department got the requisition, it calls for quotation or tender' After
recei&ing the quotation or tender, supplier has (een selected' The supplier may (e local or
international' #f the terms and conditions are in fa&or of (oth BPL and the selected
supplier, an order for the purchase is than issued (y the purchase department' #n case of
raw or packing material, the purchase order is issued (y the factory' A purchase register is
maintained (y the purchase department in which they maintain all the required
information relating to a consignment'
>7

Receiving $aterial7 Aoods and 3ervices
Cenerally the goods and ser&ices are recei&ed (y the user department who has issued the
purchase requisition or in some cases (y the authori+ed department' )aterials are
recei&ed (y 9uality Assurance !epartment (9A! in the factory' After recei&ing
materials, goods and ser&ices an $RR ()aterial *ecei&ing *eport is issued for material
and other than material a ARR (Coods *ecei&ing *eport is issued (y recei&ing
department to purchase department' #n the mean time the in&oice or (ill is recei&ed (y
the purchase department'
Before using the product (y user department that is at the time of deli&ery, it has (een
inspected (y the inspection team or 9-! (9uality -ontrol !epartment, (y user
department or (y authori+ed department' 9-! examined the materials on a sample
testing (asis and pro&ide a certificate' @ormally,
1' 9-! inspects standardi+ed items like raw material, packing material etc'
/' Dser department inspects non standardi+ed items like ser&ices, stationeries etc'
7' #nspection department inspects machineries, plants etc'
Again at BPL there are some authori+ed departments for inspection' %or example,
computer or #T related products are inspected (y #T department, furniture are (y ,*
department' #f the recei&ed goods, material and ser&ices are not according to purchase
requisition BPL may
*efuse the order
*eorder the item
*ecei&ed on condition
>8

Before taking any action, there is a discussion (etween BPL and the supplier' After re0
communication it has (een decided whether the payment to the supplier will (e made or
not'
>igure "= Receiving >unction
RecogniHing the lia@ility
The purchase department compares the in&oice:(ill and )**: C**: 9- with the
purchase order' #f e&ery thing has (een complied, the amount paya(le to supplier is
appro&ed (y the purchase department' There is a seal on the in&oice named WAppro&ed
ByR with the signature of purchase manager' #t means the purchase department is satisfied
with the information mentioned in the (ill' A copy of all this documents is kept (y
purchase department and the main copies along with copies not negotia(le are sent to
accounts and finance department'
Fendor
4arehouse: %actory:
*eady for Dse
Accept
!eli&ery (y
Dser
department:
%actory
-ount "
#nspect
goods (y
respecti&e
departments
Purchasing order
(y Purchase:
Planning !ept
)**: C**
Fendor
Packing
slip
Coods "
ser&ices
Packing
$lip
Coods "
ser&ices
Coods "
ser&ices
)**:C**
><

The accounts and finance department is then ready for gi&ing provision voucher' An
authori+ed person is lia(le for gi&ing pro&ision &oucher' ,e examines the not negotia(le
copy of (ill: in&oice at the time of gi&ing pro&ision &oucher' Cenerally the lia(ility is
recogni+ed when the &endor sends the in&oice or (ill' But in some cases it may (e
recogni+ed at the time of goods recei&ed'
Processing and Recording )hec%B )ash Dis@ursement
After a certain period of time when the date (ecomes matured for the lia(ility the
payment is made (y BPL' The matured date has (een calculated in the aged paya@le
report for each &endor' The due amount for an indi&idual &endor is identified from
vendor @usiness position report' #n this stage another report is prepared for forecasting
cash requirement' An indi&idual person enters data in )AP#-$ for ha&ing this reports
and forecasts' The same person checks the arithmetical accuracy, casts, cross casts,
deductions and paya(le amounts' #f the checking is matched with those reports checks are
issued to pay &endor'
The mode of payment is usually pre num(ered check' #n most cases the payment is made
(y payee only check' #n some cases the payment may (e made (y cash or (y (earer check
or paid in ad&ance fully or partly'
#ssuing check is a sensiti&e issue' #t is prepared (y that person who will gi&e the payment
&oucher' And it is signed (y senior management' The payment voucher is gi&en (y the
same person who has checked the reports and paya(le amounts' This &oucher includes
original (ills, )**: C**, Fat (musok 11 and challan' #t is recorded in the record (ook
after the sign has (een made'
After all the procedure has (een completed the check is gi&en to &endor and the counter
foil of that check is preser&ed (y BPL' #f the payment amount is large part (y part
payment is made'
>=

>igure #= Pay for Aoods >unction
The acquisition and payment procedure are summari+ed (elow with the help of a
flowchart=
Purchase
order
%actory: Dser
department
Fendor
Appro&e
&endor
in&oices (y
purchase
department
Pay Fendor
(cash
dis(urseme
nts
Purchase
!epartment
Accounts "
%inance
!epartment
Fendor
in&oice
A:P
Payment
Foucher
A:P
Pro&ision
Foucher
)**:C**
Bill: #n&oice
Purchase 3rder
)**: C**
FAT ()D$3B 11
-hecks
>>

4ith appro&al of the
departmental head
Tender : 9uotation call
*equisition of respecti&e
department
#ssuing order
*ecei&ing goods : $er&ices (y
factory: *especti&e !epartment
Produce )** : C**
#ssuing check
$ent (ills to accounting
department
-omply the (ills with order,
)** : C** and appro&e
*ecei&ing (ills (y purchase
department
Accounts paya(le payment
&oucher
*eady for payment
Accounts paya(le .ournal
&oucher: pro&ision &oucher
By Purchase !epartment
or (y Dser !epartment
By 9A!, or (y
recei&ing
department
Payment procedure is
complied with sec
<1(A, </ of income tax
ordinance01?G8 and rule
1= of income tax
*ule1?G8 and )usok 11
of FAT Act 1??1
>igure &= Procurement of
local material
>G

Input Information
1. Purchase ReCuisition
#tRs a requisition generate (y respecti&e department' !ata elements con&eyed (y a
purchase requisition of BPL include unique num(er of purchase requisition, -1P and
purchase order num(er with date name and description of material and ser&ice, unit
num(er, required quantity, unit price and quantity ordered' #t also includes signature and
appro&al of authori+ed person, supplierRs name; mode of payment, ad&ance payment (if
any, terms and conditions, )** num(er, in&oice num(er etc'
#f the requisition is for fixed asset then a -1P (-apital 1xpenditure Proposal is raised (y
the user department' #n this case, proposed suppliers name, estimated (udget, .ustification
for proposed expenditure and estimated life of proposed expenditure is also required' A
sample of -1P is gi&en in the annexure'

2. Purchase Order
#tRs a document through which an order is made' The heading contains the purchase order
num(er, purchase requisition num(er and date' The (ody contains the description of
required item, quantity required and ordered, amount with unit price, supplierRs name and
address, terms and condition of order, due date, other rele&ant dates etc' Besides, it also
descri(es the mode of purchase, ad&ance payment (if any, purchase reference and other
rele&ant information'
#. $aterial Receiving Report *$RR+ B Aoods Receiving Report *ARR+
#tRs a report produced (y the inspection department or recei&ing department' #t is used to
reflect the receipt of goods on consignment or goods returned to supplier' The report
indicates item ordered, name of the material and supplier with the date of arri&al of
products, its quantity, quality and description of the recei&ed item' #t also includes )**
num(er, order num(er, signature of the authori+ed person etc' The report is also used as
inspection report' Because it mentioned information regarding to
>?

9uantity ordered (efore quality test
9uantity recei&ed after quality test
9uality
4hether as per specification or not
-ountry of origin
!eli&er in time or not
Pricing
Legal requirements etc'
#. Invoice B ill
This document is generated (y supplier: ser&ice pro&ider that mentions the quantity and
amount, (ill num(er with date etc' The (ill is attached with )D$3B 11, deli&ery challan
etc'
&. !a0 and G'! *$uso% 11+ Report
BPL prepares these reports for calculating the amount of Tax and FAT deducted at source
of suppliers' Tax and FAT amount is deducted from the total amount due' !eduction and
calculation is made according to section <1(A, </ of #T30 1?G8
1
, rule 1= of #T*01?G8
/
,
and the FAT Act01??/ ()ushok 11' The reports contain &endor num(er, &endor name,
and period, total amount due, tax amount, amount excluding tax amount, FAT amount
and amount excluding FAT' A sample of tax and FAT report is added with annexure'
1
#ncome Tax 3rdinance 1?G8'
/
#ncome Tax *ules 1?G8'
GA

Information processing
'ccounts Paya@le Provision Goucher
Dnder this document pro&ision i'e', entry is gi&en against acquisition' Accounts paya(le
is credited here' %rom the sample (gi&en in the annexure we see that information relating
to &oucher no, &endor no, in&oice no, )** no is required with their date for pro&ision
.ournal' Besides, information a(out due date for payment, item name, item num(er, unit,
party name and the num(er of the account under which the item (elongs to is also
required' Dsing this .ournal &oucher, an entry is gi&en in )AP#-$ for recording
in&entory and also for &aluation of in&entory' #nformation regarding price is taken from
supplierRs (ill and information regarding quantity recei&ed is taken from )**:C**' The
following .ournal entry is gi&en5
'ccounts Paya@le Payment Goucher
The accounts paya(le recogni+ed in the earlier part are paid through this payment
&oucher after deducting appropriate taxes' The &oucher contains he information of the
payment date, mode of payment, item or (atch no, &oucher no with date, AP .ournal
G1
VAT Rules 1991: Section 9 &13: The registered person who sells locally and
exports taxable goods for the production of which he uses raw materials
purchased paying VAT, can claim rebate by including the paid amount of VAT
into the Treasury Deposit and Rebate column of form VAT-!"
Inventory (Raw Material) DR
VAT DR [10.< of 805=
Accounts Payable CR

&oucher num(er with date, amount, party name and other related information' A sample
of this &oucher is gi&en in the appendix' The following entry is gi&en in )AP#-$5
Output information
3utput information can (e of two types5
#nformation Affecting the Annual *eport %igures or 1xternal *eporting
#nformation for #nternal )anagement or #nternal *eporting'
,0ternal report
The entire process of import procurement and accounting for its related transactions
affects se&eral heads in the Annual %inancial *eports' Below # mention the affected heads
with reference to 'nnual >inancial Report for 2010
)ost of Aoods 3old=
The detail of cost goods sold is pro&ided in the 9oteI#0' Dnder this head the affected
su(heads are5
G/
ITO 1984: Section 52: #here any payment is to be made, whether in
full or in part, or by way of ad$ance, on account of indenting
commission shipping agency commission or supply of goods or
execution of contract, to any such person or class of persons as may
be prescribed, the person responsible for ma%ing the payment shall,
at the time of ma%ing such payment deduct tax on the amount so
payable at such rate as may be prescribed"
Accounts Payable DR
TDS(alicable rate) CR
!an" CR

*aw )aterials -onsumed (Purchase + J9ote I#1K= This amount is the total of raw
materials purchased during a financial year' 4hen raw materials are recei&ed
*A4 )AT1*#AL PD*-,A$1 A:- is de(ited' The end (alance is the amount
shown in the Annual *eport'
Packing )aterials -onsumed (Purchase J9ote I#1K= $imilarly, it is the total of
packing materials purchased during a financial year' 4hen packing materials are
recei&ed PA-B#@C )AT1*#AL PD*-,A$1 A:- is de(ited' The end (alance is
the amount shown in the Annual *eport'
I n v e n t o r i e s =
The in&entories affected (y import operations and related accounting are found in 9ote
I225
*aw )aterials #n&entory
Packing )aterials #n&entory
La(oratory -hemical #n&entory
*aw and Packing material in transit
$pares and accessories
Internal report
To ser&e the internal reporting needs the following reports are prepared5
Accounts paya(le payment &oucher
Fendor ledger
Fendor account (alance
Kournal register
-ash requirement report
Aged paya(le
Tax report
FAT ()usok 11 report
Fendor (usiness position
G7

*eport on purchase
*eport on payment
Gendor account @alance
#t is nothing (ut a report a(out the due amount paya(le to an indi&idual &endor or a
num(er of &endors on a certain date' The report includes &endorsR name, code and the
total due amount'
Fournal register
%rom this register management of BPL will get all related information of accounts
paya(le transaction for a certain period of time' %or example, if management wants to
know a(out the amount of purchase of an indi&idual &endor for a certain period of time
with related deductions they can get it from .ournal register' 1&en the register also
informs a(out whether any payment has (een made or not and the due amount of that
period' A sample of the register is gi&en in appendix'
)ash reCuirement report
#tRs a managerial enquiry regarding &endorsR paya(le amount to forecast the current
lia(ilities' %rom this report management of %inance and Accounts !epartment can (e
informed a(out the cash to (e paid to indi&idual &endor for a certain period of time' A
sample of this report is gi&en in the annexure'
'ged Paya@le Report
#tRs a report a(out forecasting the maturity date of paya(le' #t reflects the status of old
unpaid in&oices or &ouchers' After the maturity date the payment will (e made' The date
will (e matured according to purchase order contract' The reference date for age
calculation is the &oucher date or due date at when the product has (een recei&ed'
Gendor usiness Position
#t is the e&aluation of o&erall &endor position with BPL' #n this report BPL generates
information a(out &endorsR net due amount at a certain period of time' %rom this report
management can ha&e knowledge a(out the amount of gross paya(le; amount of tax, Fat,
G8

payment and other deduction deducted from gross paya(le amount and the net amount
has to (e paid to those &endors on that period'
Another source of raw and packing material is importing from o&erseas market' %or this
purpose, purchase department must open a letter of credit at (ank' #t ensures the liquidity
of foreign supplier' After opening a letter of credit, Purchase department maintains a file
where all the related documents are kept separately for each L- and sends a copy of each
document to the %inance and Accounts department for further processing of information
and to prepare the cost sheet for the materials recei&ed against each L-' This file is called
P- (pharmaceutical consignment file' The finance and accounts department has three
sections5
Treasury
-ost and Budgeting
Accounts
The processing of information related to import procurement takes place in the -ost and
Budgeting section' %or the con&enience of the users # ha&e discussed the whole thing into
three parts' They are5
#@PDT #@%3*)AT#3@
#@%3*)AT#3@ P*3-1$$#@C
3DTPDT #@%3*)AT#3@
Input Information
3ource of information=
Three departments are in&ol&ed in the entire materials procurement process'
They carry their own responsi(ilities in this regard' The departments are5
G<

$ales !epartment
Planning !epartment
Purchase !epartment
The entire process looks like5
The planning department is concerned with the production planning and material
procurement' After getting the sales forecast from the sales department, the planning
department goes through the current stock information of different raw and packing
materials' #t prepares an import procurement schedule which helps them manage the
procurement planning' The ta(ular format of the schedule is too large to
accommodate here' Therefore # am .ust mentioning the column heads' The column
heads are5
General
1. Material ID: 2. Name of the Material:
3. Procurement Time: 4. Unit cost:
5. Monthly Requirement:
Stock
Factory Stock: I&I
3
Stock: Stock in Hand:
Pipeline
Under Process: Await Shipment: In transit:
At port: Under Clearance: Received:
Summary
Total stock in all stages: Total Req. As per Factory:
Balance to be ordered: EOQ:
Month Covered: To be procured this Month:
After considering this stock information it first calls for limited tender among the
enlisted sources (local agents for the supply of particular materials' The list of
suppliers is kept in a data(ase preser&ed (y the planning dept' 4ithin 1< days, the
7
#"# $er&ices is the sole distri(utor of B12#)-3 P,A*)A and a sister concern of B12#)-3 C*3DP'
G=
3ales Department
$ales %orecast
Planning Dept.
#mport Procurement
schedule
Purchase Dept.
Pro forma #n&oice
L- openning
'ccounts
P-, #F, B-
%iles

quotations are su(mitted (y the competing suppliers' Then the planning dept'
prepares a comparati&e statement and forwards it to the purchase department'
Purchase Procedure=
The purchase department is concerned with all the purchases of the firm' Dsually
the lowest (idder gets the offer to supply materials (considering their past
performance, credit terms etc'' Then an #mport Authori+ation %ormat6 is prepared
(y the purchase dept' The format is then sent to the !irector (commercial for
appro&al' The dept' then asks for pro0forma in&oice (;in case of direct purchase from
foreign suppliers or indent (in case of supplies (y local agents' Then the firm
applies for QBlock List6 (for appro&al from !rugs authority to import the raw
materials' After doing all these prior works, the firm proceeds to open an L:-'
The purchase dept' first collects a form of application for the opening of letter of
credit from a (ank' An L-A form (in quintuplicate is also collected' After filling up
these forms, they are su(mitted to the (ank along with the pro forma in&oice
appro&ed (y the Block list of !rug Administration and #)P form of Bangladesh
Bank' The L:- margin (a certain percentage of L:- amount, (ank charges and
commissions for opening the L:-, insurance payment (if made at that time etc' are
also made' The insurance co&ers all risks from the (eginning of transit'
The opening (ank sends a copy of L:- to the ad&ising (ank and another copy is also
sent (y the company to the local agent or indenting company' The supplier then
takes necessary measures to ship the materials' #t sends the non0negotia(le shipping
documents (copies of (ill of lading : airway (ill, in&oices, certificate of analysis of
each (atch' %orm0?, packing list, certificate of origin etc' to the (uyer (the firm (y
courier within > days and su(mits negotia(le copy of all documents to the
negotiating (ank' Then the supplier asks the ad&ising : negotiating (ank to make the
payment' After paying off the supplier, the ad&ising (ank asks the L:- opening (ank
to pay the amount within >/ working hours (7 working days' The opening (ank
then pays it off within the stipulated time' The (ank then collects the L:- payment
from the firm (applicant on an agreed upon date' #n case where the materials are
(orne in air transport, the firm needs the endorse copy document to get clearance
G>

from the customs authority after it reaches the airport' The !rug -learance of
in&oice issued (y the !rug authority is also required' The -"% agent of the firm is
engaged in the goods clearance formalities' After getting the clearance, the materials
are (orne to the factory'
Documents received
Purchase department sends copies of all the rele&ant documents to the -ost and
Budgeting section of %inance and Accounts department' The documents are kept in three
types of files according to their purpose5
P) >ile (%or *aw and Packing )aterials and Also spare parts for
pharmaceuticals machinery
IG >ile (%or #nfusion *aw and Packing materials and Also spare parts
for #nfusion machinery
) >ile (%or Basic -hemical
The documents kept in these files can (e categori+ed as follows5
Documents with relevant financial information
1. .B) Related Documents from an%=
The L:- slip and the copy of (anks L:- (ook is recei&ed' The (ooks contain detail
information on L:-s' The rele&ant information extracted from this (ook are5
L:- )argin
3pening charge
Amendment -harge
Telex: -ourier ser&ice -harge
Bank -harge
GG

!ocument *etirement
2. Premium ill=
Premium (ill is prepared (y the insurance company' This (ill is non negotia(le' The
information included in this (ill is5
A'
". ) ( > ill=
The - " % (ill is prepared (y the clearing and forwarding companies' !ifferent - " %
agencies operate at different land, sea and airports' #mports are made through all these
three types of ports' The - " % agent does the necessary formalities with the customs
authority and sends the materials to the destination' They contain the following5
B'
G?
@on @egotia(le Premium Bill5
)arine X x'xxM
222'22
22'22
4ar and $trike X x'xxM
@et Premium
222'22
22'22
Add5 FAT 1<M
$tamp !uty
2'22
Total Premium
----.--
- " % B#LL Against P- YZZZZZZZZZ
Amount
-ustoms !uty and Taxes YYYY
4herfrent and *emo&al YYY
!ocumentation YY
-ooly wages YYY
Transport YY
)isc' 1xpenses YY
1xpenses under section G/ YYY
Audit: treasury: Bank 1xp' YYY
Agency -ommission X A'AxM YYY
T3TAL IIIII
Less5 #ncome tax on Agency commission (YY
A!FA@-1 (YYYYY
!D1 YYY

#. 3hed ill with Fetty )hallan=
This (ill is prepared (y the Biman Bangladesh Airline Authority (in case air port; the
-hittagong port Authority (in case of sea port; Benapole Land port Authority (in case
of land port' This is prepared for the dock or warehouse charges' %or reporting purpose
two types of information are extracted from this (ill'
Total !1)
FAT on !1)
&. ill of ,ntry and 'ssessment 9otice=
These two documents are the most important in regards to reporting and accounting
purposes' The -ustoms authority prepares this (ill against the - " % Agency' #t
includes the information on the !uty and taxes and FAT paya(le on imported materials'
#n all the ports the same type (ill is prepared without any exception (ecause the
customs authority uses identical software for all the ports' $ome materials need to go
through P$# (Pre $hipment #nspection; so they are su(.ect to P$# charges' The detail of
the duty and taxes and their rates are discussed in the later chapter'
The (ills include following information5
-'
?A
angladesh )ustoms 'uthority
ill of ,ntry
-alculation of taxes5
Type Tax (ase *ate Amount
-ustoms !uty HaI [ H(I
$upplementary !uty H(I [ HcI
FAT H(I [ HdI
A#T HaI [ HeI
!e&elopment $urcharge HaI [ HfI
@ote5 The alpha(ets used in this ta(le will used for further reference in the chapter to come'
-onsignor5
-onsignee5
Agent5
@ame of -arrier5 @ationality5
!escription5
#n&oice @o5
Bank @ame5
L- Type5
L- @o5
,$ -ode5
Cross 4eight5
@et 4eight5
#tem Assessa(le Falue5 HaI

!'
Documents with relevant non8financial information
Invoice from 3upplier=
Although it contains financial information a(out the cost of raw materials, it is not
needed for financial reporting' Because the amount that concerns is the L:- margin and
?1
angladesh )ustoms 'uthority
'ssessment 9otice
3ffice5 !haka: -hittagong -ustoms
-ustoms !eclaration @o5
@o " !ate of Assessment5 #tems5
Agent5
*eference5
#mporter5 Account @o5
)ode of Payment5 -ash : -heque $tatement no " !ate5
-! H(I
HcI
HdI
HeI
HfI
HgI
HhI
$!
FAT
A#T
!$-
Ad&ance Trade FAT
P$#
!O!'. !'-,3 JmK
!ocument Processing %ee HpI
HqI
HrI
FAT on -"% -ommission
#ncome Tax on -"% commission
!O!'. A.O'. !'-,3 JsK
!O!'. '33,33,D '$O49! JmKLJsK
'$O49! !O , P'ID JmKLJsK

the payment on L:- *etirement' As there is no direct transaction with the suppliers the
original in&oice is not needed for reporting'
Pac%ing .ist or ?eight .ist=
This list contains the detail information on the quantity of materials shipped; the num(er
of packages; the type of packaging and the gross and net weight (efore shipment'
)ertificate of 'nalysis=
-ertificate of Analysis contains chemical analysis of the materials' The chemical
contents, weight, color and other related information is disclosed and certified (y the
producing country are presented in the certificate'
)ertificate of Origin=
-ertificate of 3rigin is issued (y the trade (ody (-ham(er of -ommerce of the
respecti&e country and certifies that it is a product of their country'
>orm 8/=
%orm0? is required under the 1uropean regulation' All the countries producing chemical
or pharmaceutical materials adopted it' This contains decoration from the producer
regarding the permission to use the product which is licensed (y them' #t also sets the
limit of using that licensed product'
'irway ill=
Airway (ill is .ust like ticket of the materials shipped' #t contains the information on the
material shipped, the destination, the carrier and the airport of departure'
)onsignment Presentation 3lip=
?/

-onsignment presentation slip is prepared at the port (y the port authority and certifies
the possession of the consignment' The slip includes following information5
Part A5 -onsignment !etails
Part B5 1xamination Transfer to deli&ery warehouse
Part -5 Paper -hecking and -ollection of -harges
Part !5 %inal !eli&ery #nformation
Information Processing
#nformation processing is done through three stages' The records and reports prepared in
those stages are different' The stages are5
L:- 3pening $tage
L:-s in Transit $tage
Post -learance $tage
.B) Opening 3tage
.B) opening process=
The purchase dept' first collects a form of application for the opening of letter of
credit from a (ank' An L-A form (in quintuplicate is also collected' After filling up
these forms, they are su(mitted to the (ank along with the pro forma in&oice
appro&ed (y the Block list of !rug Administration and #)P form of Bangladesh
Bank' The L:- margin (a certain percentage of L:- amount, (ank charges and
commissions for opening the L:-, insurance payment (if made at that time etc' are
also made' The insurance co&ers all risks from the (eginning of transit'
?7
Purchase
Department
(Pro Forma Invoice,
Drug, IMP)
.ocal an%
(L:- )argin, 3png -hrg,
Bank -harge
>oreign an%

As mentioned earlier (see5 1'/'1 the accounts department gets copy of the L:- and the
Banks statement mentioning other related cost' #t is done through the foreign exchange
account of B12#)-3 P,A*)A held with different (anks'
Records and Reports=
Farious records are kept during this stage' !ata related to L:- are maintained in two
ways' They are5
)$ 1xcel 4orksheets
)AP#-$
$3 ,0cel ?or%sheets=
Two different sets of spreadsheets are prepared' The spreadsheets contain the following
information' # am .ust mentioning the column heads of the spreadsheets and explanations
where necessary'
$preadsheet containing !ata on L:- )argin and 3pening -harges5
o L:- @um(er
o )argin in Taka
o 3pening -ommission HpI
o -ourier ser&ice -harge HqI
o $upplementary Tax HrI
o FAT HsI
o Amendment -harge HtI
o !otal ta%a *JpKLJCKLJrKLJsKLJtK+
$preadsheet containing !ata on !ocument *etirement
o L:- num(er
o P-:#F:B- @um(er
o *etirement !ate
o Payment
?8

o Payment !ate
$'PI)3 ,ntries=
)AP#-$ ()anagement Accounting Production #n&entory -ontrol $ystem is a
software custom made for B12#)-3 C*3DP which ser&es the (oth the financial and
management accounting needs' #n the L:- opening stage two types of entry are made into
the software5
!ata(ase 1ntry
Kournal Foucher
!ata(ase 1ntry5
This entry is made to maintain a data(ase of L:-s and shipments' The entry includes5
L:- @um(er
P- @um(er
$hipment !ate
*etirement !ate
This data(ase is also linked with the accounting system (uilt within the software'
4hene&er a .ournal entry is made with the L:- account this data(ase is linked with that
entry' #t detects any inconsistency with the L:- num(er and P- num(er'
Kournal 1ntry5
The .ournal entry made at this stage includes the opening charges, L:- margin, Bank
charges, -ourier -harges, Amendment -harges, etc' The Kournal 1ntry made through the
Bank Foucher' The entry is5

?<
#$C Mar%in DR
&enin% C'ar%e DR
A(en)(ent C'ar%e DR
Courier Service DR
VAT DR
!an" C'ar%es DR
!an" A$C CR
VAT Rules, 2007. Rule 19(2& The tax payer can claim
'() of the VAT as claim against input tax in respect of
charges for *" +,- ser$ices*"".

All the de(it entries are posted to the L:- group account' These are all considered as
expenditures' All the amounts are found in the summary spreadsheet prepared with )$
1xcel'
.B)s in transit stage
The opening (ank sends a copy of L:- to the ad&ising (ank and another copy is also
sent (y the company to the local agent or indenting company' The supplier then
takes necessary measures to ship the materials' #t sends the non0negotia(le shipping
documents to the (uyer (the firm (y courier within > days and su(mits negotia(le
copy of all documents to the negotiating (ank' Then the supplier asks the
negotiating (ank to make the payment' After paying off the supplier, the ad&ising
(ank asks the L:- opening (ank to pay the amount within >/ working hours (7
working days' The opening (ank then pays it off within the stipulated time' The
(ank then collects the L:- payment from the firm (applicant on an agreed upon
date'
Records and Reports prepared at this stage=
Two records could take place during this stage' Both the records are made using the
)AP#-$ software in the form of .ournal entries through Paya(les &oucher and Bank
Foucher' The transactions are5
Payment of Insurance Premium=
#nsurance premium is set on the in&oice price' The materials are normally insured to
make co&er for fire:marine and war:strike risks' A FAT of 1<M is imposed on the
insurance premium' To facilitate the .ournal entry a spreadsheet analysis is made
using )$ 1xcel, which contains5
#' L:- @um(er ##' P- @um(er ###' #tem name
?=

#F' Total #nsurance Premium (see figure A5 premium @ill
F' FAT on #nsurance Premium (see figure A5 premium @ill
F#' @et #nsurance Premium *!otal Premium8106of G'!+
The .ournal entry is often made through paya(les &oucher' The entry is5
'dvance payment to the )(> 'gent=
The -"% agents are responsi(le to make customs clearance from the ports and make
deli&ery to the factory at Ca+ipur or where&er required' The estimated amount for
clearing and forwarding process is paid in ad&ance' The .ournal entry is made through
Bank &oucher using )AP#-$ software' The entry is5
Post )learance stage
After successful clearing and deli&ery of the consignment the -"% agent sends all the
rele&ant documents' The documents include5
-"% Bill
$hed (ill with Ketty -halan
Bill of 1ntry
Assessment @otice
-onsignment Presentation slip
This marks the completion of the import process' After recei&ing these documents the
P-:#F:B- files are completely ready'
Records and Report s Prepared duri ng t hi s s t age=
?>
Insurance Pre(iu( DR [VI*
VAT DR [>.< of
805=
Accounts Payable (Insurance
VAT Rules, 2007. Rule 19(1& The tax payer can claim
!() of the VAT as claim against input tax in respect of
charges for *" /nsurance ser$ices*"".
C+, A%ent (A)vance) DR
!an" A$C CR

A detailed spreadsheet is prepared to facilitate the .ournal entry in the first place' The
entire spreadsheet is presented into different parts for con&enience'
D4!; !'-,3 3PR,'D3H,,!=
Part '= Aeneral Information=
P'R! = )urrency and Muantity=
P'R! )= an% )harge and Insurance Premium=
P'R! D= Duty
)olumn ID )olumn Head 3ourceB >ormula
B -ustoms !uty Assessment @otice H(I
L $upplementary !uty Assessment @otice HcI
) !e&elopment $urcharge Assessment @otice HfI
@ Pre0shipment #nspection Assessment @otice HhI
O !otal Duty EL.L$L9
P'R! ,= G'! and 'I! *'dvance Income !a0+
)olumn ID )olumn Head 3ourceB >ormula
9 FAT Assessment @otice HdI
* !%(!ocumentation fee FAT Assessment @otice HsI
$ A#T (3n -"% commission Assessment @otice HrI
T !%:FAT less A#T(c"f H*I0H$I
4 !otal G'! JMKLJRK8J3K
?G
1' $LY
/' L:- @um(er
7' P-:#F @um(er
8' #tem @ame
<' #tem Type (*aw:Packing:$pares
1' %oreign -urrency (D$J:1D*
/' -ost in %oreign -urrency
7' Dnit
8' BC:P-
1' Bank -harge
/' #nsurance Premium
7' FAT on #nsurance Premium
8' @et #nsurance Premium (H/I 0 GAMof H7I

F A#T Assessment @otice HeI
P'R! >= !otal D4!;7 G'! and
'I!
P'R! A=
D,$
*?arehouse and Other charges+

P'R! H= $iscellaneous ,0penses and )(> commission
These two are extracted from the -"% (ill' )iscellaneous 1xpenses could include5
-"% commission is imposed on the assessed &alue of imported materials'
P'R! I=
'gent
P'R! F= >inal summary for Fournal ,ntry
)olumn ID )olumn Head 3ourceB >ormula
? !otal D4!;7 G'!7 'I! JOKLJ4KLJGK
)olumn ID )olumn Head 3ourceB >ormula
2 !1) $hed Bill: Ketty -halan
S Auction $hed Bill: Ketty -halan
N FAT !1) $hed Bill: Ketty -halan
AA @et !1) H2I\HSI0HNI
!ocumentation
-ooly wages
Transport
)isc' 1xpenses
1xpenses under section G/
Audit: treasury: Bank 1xp'
)olumn ID )olumn Head 3ourceB >ormula
AB )isc' 1xp' -"% Bill
A- -"% -omm' -"% Bill
)olumn ID )olumn Head 3ourceB >ormula
A! Total Amount H4I\HAAI\HNI\HABI\HA-I
A1 Ad&ance Amount -"% Bill
A% !ue HA!I0HA1I
AC Agent Agent @ame
)olumn ID )olumn Head 3ourceB >ormula
A, !DTS H3I
A# FAT H9I\H*I[=AM\HNI
AK A#T HFI
AB !1) HAAI
AL )#$- HABI\H*I[8AM0H$I
A) -"% -ommission HA-I
A@ T3TAL A,\A#\AK\AB\AL\A)
??

)laim for G'! Re@ate=
FAT re(ate is claimed 1AAM on the FAT paid on cost of materials and FAT paid on
warehouse charges' =AM FAT re(ate is claimed on FAT paid on -"% commission' The
law in this states as follows5
Therefore FAT is claimed 1AAM on FAT paid on cost and !1) FAT and =AM on FAT
paid on !otal Alo@al !a0es' The rest 8AM is added to the miscellaneous expenses and the
income paid on -"% commission is deducted from the miscellaneous expenses amount to
match the total amount due to the Agent'
-./.-. 57E ?3@A40& E45AB C3A :@5B, 50D 04: 805
The amounts for the .ournal entry are summari+ed in the spreadsheet (see part C' The
.ournal entry is made as follows using the )AP#-$ software5
[$ee Part K of spreadsheet for references of the amounts'
The duty tax; miscellaneous expenses and -"% commission goes to the L:- group
account' The other accounts are posted through general .ournal'
1AA
VAT Act 1991: Section 9 &13: The registered person who sells locally and
exports taxable goods for the production of which he uses raw materials
purchased paying VAT, can claim rebate by including the paid amount of VAT
into the Treasury Deposit and Rebate column of form VAT-!"
VAT Rules, 200!. Rule 19 (2& The tax payer can claim '() of the VAT as
claim against VAT paid in respect of charges for *"-01 -ommission *"".
Duty TA-.S DR [A/*
VAT DR [AI*
AIT DR [A0*
D.M DR [A1*
Misc2 .32 DR [A#*
C + , Co((2 DR [AM*
C+, A%ent
(#iability) CR [A4*

Output Information
As # ha&e discussed the necessary .ournal entries in the pre&ious chapter, it is already
clear a(out the output information of these acti&ities' Better output of information reflects
(etter accounta(ility to the stakeholders and greater efficiency of the decision makers or
managers' 3utput information can (e of two types5
#nformation Affecting the Annual *eport %igures or 1xternal *eporting
#nformation for #nternal )anagement or #nternal *eporting'
The transactions in&ol&ed in the process of import procurement affects (oth the a(o&e'
But it is more important from the internal reporting point of &iew' The net effect of these
acti&ities on the external report and the decisions of the in&estors are &ery remote' But it
has a materially significant part to play in internal decision making (eg' costing,
in&entory control, pricing, etc''
,0ternal report
The entire process of import procurement and accounting for its related transactions
affects se&eral heads in the Annual %inancial *eports' Below # mention the affected heads
with reference to 'nnual >inancial Report for 2010
)ost of Aoods 3old=
The detail of cost goods sold is pro&ided in the 9oteI#0' Dnder this head the affected
su(heads are5
*aw )aterials -onsumed (Purchase + J9ote I#1K= This amount is the total of raw
materials purchased during a financial year' 4hen raw materials are recei&ed
*A4 )AT1*#AL PD*-,A$1 A:- is de(ited' The end (alance is the amount
shown in the Annual *eport'
Packing )aterials -onsumed (Purchase J9ote I#1K= $imilarly, it is the total of
packing materials purchased during a financial year' 4hen packing materials are
1A1

recei&ed PA-B#@C )AT1*#AL PD*-,A$1 A:- is de(ited' The end (alance is
the amount shown in the Annual *eport'
'dvances=
Ad&ances are current assets and it is detailed in 9ote I2#. The import procurement
process affects two types of ad&ances5
- " % Agent5 As mentioned earlier - " % agents are paid in ad&ance for smooth
fulfillment of their responsi(ility' The - " % account is de(ited on payment of the
ad&ance' The year end (alance appears in the annual reports as an ad&ance'
FAT5 As # ha&e shown earlier the amount of FAT su(.ect to re(ate is de(ited to
FAT account' The FAT amounts paya(les are credited to the same account' #f it
has a de(it (alance at the end of the year then it appears as current asset'
I n v e n t o r i e s =
The in&entories affected (y import operations and related accounting are found in 9ote
I225
*aw )aterials #n&entory
Packing )aterials #n&entory
La(oratory -hemical #n&entory
*aw and Packing material in transit
$pares and accessories
Internal reports
The most important destination of the accounting reports related to import of raw
materials is the internal management' %or efficient decision making the internal
management is constantly is need of timely and appropriate reports on costing' To ser&e
the internal reporting needs the following reports are prepared5
1A/

!he )ost 3heet=
This is the most important report prepared on the import procurement process of raw
materials' -ost sheets are prepared for indi&idual raw and packing material items, as well
as spares and capital machinery' -ost sheet is generated (y the )AP#-$ software' #t is
the summary of entries de(ited through the .ournal &oucher of L:-' #t is used for costing
and pricing decisions' The cost sheets include the following5
)O3! 3H,,!
)ompany 9ame= ,-I$)O PH'R$' 3hipment 9o=
3upplier 9ame= Date=
.B) 9o= Date= ,0change rate=
Invoice 9o= Date= ),P= Date=
PA*T#-DLA*$ 1 / Total
)aterial @ame
)** @o
)** !ate5
#n&oice 9uantity
%- -ost: Dnit
Total %- -ost
L:- )argin
3pening -harge
!ocument *etirement
!uty, L-A, #!$- " others
- " % -ommission
#nsurance Premium
)iscellaneous 1xpenses
!O!'. )O3!
)O3! P,R 49I!
1A7

)ost 3ummary=
-ost summary is a summary of the cost sheets prepared on a monthly (asis' #t is a )$
1xcel worksheet' All the information are extracted from the cost sheet' The column heads
are5
)onth
L:- @um(er
P-:#F:B- @um(er
)aterials @ame
9uantity
-"% *ate
%oreign currency -ost
-urrency HD$J:1D*3:S1@I
1xchange rate
-"% in Taka H1xchange *ate[%- -ostI
3ther costs H!uty: L-A, -"% -ommission, #nsurance premium, )isc' 1xp',
3pening -hargeI
Landed cost H-"% in Taka \ 3ther -ostsI
-ost per Dnit HLanded -ost : 9uantityI
$upplier @ame and -ountry
.B) alance=
This is prepared to facilitate the payment of L:- lia(ilities' #t is used (y &arious
departments including the treasury' The columns are5
L:- @um(er
Total Taka
3pening !ate
-"% Falue in Taka
1A8

BPL has a well0defined policy guideline for capital expenditure' This cycle in&ol&es
acquisition of property, plant and equipment' %irst, the capital expenditure must (e
included in the yearly (udget' Then the head of the department raising the capital
expenditure proposal (-1P must .ustify the proposal' A sample of -1P is gi&en in
appendix' The -1P includes following information5
1' -lassification of the asset such as new purchase or replacement of an asset'
/' !escription of the item
7' *eason or .ustification for the proposed expenditure
8' 1conomic life
<' 1stimated expenditure
=' Budget pro&ision for the proposed expenditure
>' $uggested supplier
G' Appro&al with signature of !epartmental head, !irector, -ommercial and
!irector, %inance
?' %inal appro&al (y -13(-hief 1xecuti&e 3fficer
Then the !irector, %inance &erifies the -1P along with the (usiness research and
de&elopment department and the -1P is sent to the -13 for final appro&al' After getting
the -13 appro&al, purchase department acquires the capital asset from the enlisted local
or foreign suppliers' Accounts department records the transaction and makes the payment
as per terms'
1A<

Recording aspects of capital e0penditures=
Input Information
All the necessary information for the purpose of recording acquisition of fixed assets are
taken from -apital 1xpenditure Proposal, Purchase order, Budget prepared for this
purpose, chart of accounts, supplierRs (ill appro&ed (y purchase department, Bill of entry,
Assessment notice, L:- related documents for import of machineries'
Information processing
BPL initially records all property, plant and equipment at cost and charges depreciation
o&er their expected useful life' The cost of acquisition of an asset comprises its purchase
price and any directly attri(uta(le cost of (ringing the asset to its working condition for
its intended use inclusi&e of inward freight, duties and non0refunda(le taxes' #n respect of
ma.or pro.ects in&ol&ing construction, related pre0operational expenses form part of the
&alue of asset capitali+ed' 1xpenses capitali+ed also include applica(le (orrowing cost'
1xchange loss is also capitali+ed as an addition to the cost of the asset'
1xpenditure incurred after the assets ha&e (een put into operation, such as repairs "
maintenance, is normally charged off as re&enue expenditure in the period in which it is
incurred' #n situation, where it can (e clearly demonstrated that the expenditure has
resulted in an increase in the future economic (enefit expected to (e o(tained from the
use of the fixed assets, the expenditure is capitali+ed as an additional cost of the assets'
$oftware expenses are generally charged off as re&enue expenditure'
3n retirement or otherwise disposal of fixed assets, the cost and accumulated
depreciation are eliminated and, any gain or loss on such disposal is reflected in the profit
and loss account which is determined with reference to the net (ook &alue of the assets
and the net sales proceeds' The gain or loss resulted from disposition of an asset are
treated as other income which does nor result from companyRs ma.or operating acti&ities
and so are not included in gross profit'
1A=

BPL charges no depreciation on land and uses reducing (alance method for charging
depreciation n respect of all other fixed assets' !epreciation is pro&ided to amorti+e the
cost of the assets after commissioning, o&er their expected useful economic li&es' %ull
year6s depreciation is charged on additions and no depreciation is pro&ided on retirement,
irrespecti&e of date of addition or retirement respecti&ely'
The annual depreciation rates applica(le to the principal categories of assets are5
Assets Rate
Building and other -onstruction 1AM
Plant and other )achinery 1<M
%urniture and %ixtures 1AM
Transport and Fehicle /AM
3ffice 1quipment 1AM to <AM
BPL maintains a separate module named W%ixed Asset AccountingR in )AP#-$ where
.ournal entries are gi&en to record the acquisition of new asset, replacement, renewal and
disposition of asset and related depreciation according to the rate' #n the )AP#-$, only
control ledgers for principal categories of assets are kept' %or the purpose of keeping
su(sidiary ledger, a separate software named W%ixed Assets )anagement $ystemR is used
where another person gi&es entry for the same transaction' This is (asically a duplication
of work'
Output Information
3utput information can (e of two types5
#nformation Affecting the Annual *eport %igures or 1xternal *eporting
#nformation for #nternal )anagement or #nternal *eporting'
,0ternal reports=
The entire process of capital expenditure and accounting for its related transactions
affects se&eral heads in the Annual %inancial *eports' Below # mention the affected heads
with reference to 'nnual >inancial Report for 2010.
Property7 Plant and ,Cuipment : )arrying Galue
The details of all property, plant and equipment are gi&en in the 9ote I20. #n the notes to
the financial statements section, BPL discloses all the necessary information regarding
1A>

property, plant, and equipment including the cost of the assets at the (eginning of the
year, additions and disposals in the current year, ad.ustment on disposal, exchange loss,
accumulated depreciation at the (eginning of the year, depreciation charged for the
current year and carrying &alue at the end of the year'
Internal Report=
The sum of all assets is reflected in annual report' But for the preparation of (udget and
making decisions regarding the current status of each class of assets, periodic statements
are prepared where detailed (reakdown of each ma.or class of asset are included'
The expense cycle of BPL is little difficult to descri(e (ecause of the &arying nature of
expenses' %or the sake of simplicity, expense cycle is presented here in a
segregated manner according to the ma.or types of expenses namely factory
o&erhead, administrati&e expense and selling, marketing and distri(ution
expense'
>actory overhead
The ma.or types of factory o&erhead are salary and wages, power, insurance, stores and
spares consumed repairs and maintenance, research and de&elopment, municipal tax and land
re&enue, telephone and postage expense etc' These expenses are incurred in the factory'
4hene&er an expense is incurred, it is re&iewed and recommended (y the immediate
super&isor of the person incurring it' Then it is sent to the head of the respecti&e department
for appro&al' After getting the appro&al finance and accounts department records the
transaction to the appropriate cost center and makes the payment'
'dministrative ,0penses
The ma.or types of administrati&e o&erhead are salary of the executi&es of head office,
utility, rent, legal and professional fees, printing and stationary, AC) expenses, audit
fees, entertainment, petrol and fuel etc' These expenses are incurred in different
departments of the head office' 4hene&er an expense is incurred, it is re&iewed
and recommended (y the immediate super&isor of the person incurring it' Then
it is sent to the head of the respecti&e department for appro&al' After getting the
1AG

appro&al finance and accounts department records the transaction to the appropriate cost
center and makes the payment'
3elling7 $ar%eting and Distri@ution ,0penses
The ma.or types of selling and distri(uti&e o&erhead are ad&ertisement, promotional
expense, tra&eling and con&eyance, training of medical representati&es, (ooks and
periodicals etc' These expenses are incurred (y the sales and promotion department'
4hene&er an expense is incurred, it is re&iewed and recommended (y the
immediate super&isor of the person incurring it' Then it is sent to the head of the
respecti&e department for appro&al' After getting the appro&al finance and accounts
department records the transaction to the appropriate cost center and makes the payment'
Recording aspects of revenue e0penditures=
Input information
#nput information for recording purpose is o(tained from the respecti&e department
where the expenses are incurred' 1ach department sends the (ill to Accounts and %inance
department' This (ill is used as the source document' After &erifying supporting
documents, a person records the expense as o&erhead item through appropriate code in
)AP#-$'
Information Processing
After &erifying supporting documents, a person records the expenses as o&erhead items
or operating expenses through appropriate code in )AP#-$' The appropriate code is
determined (y chart of accounts' !epending upon the nature of expenses, input is fed into
the software against a code' Besides this, some other custom made softwares are used to
record the ad&ance payment to different parties including employees, utility expenses,
e&ent management etc'
Output Information
3ut put information are of two types5
#nformation Affecting the Annual *eport %igures or 1xternal *eporting
#nformation for #nternal )anagement or #nternal *eporting'
1A?

,0ternal report
#n annual reports, administrati&e expenses and selling, marketing and distri(uti&e
expenses are shown as operating expenses' %actory o&erhead is included in the
calculation of costs of goods sold' These information are reported in the notes to the
financial statements' *elated parts are extracted in the appendix'
Internal reports
A report highlighting the actual expenses, (udgeted amount for those expenses and
&ariance is prepared monthly for internal decision making'
The internal control of BPL for expenditure cycle is strong enough to detect, pre&ent and
correct any errors and mistakes made in authori+ing, recording, processing transactions
and pro&iding output to user groups' $ome internal control mechanisms are discussed
(elow5
'uthoriHation of Purchase
As descri(ed earlier in recording process section, at BPL the user department sends
purchase requisition to purchase department with the appro&al of departmental head' An
authori+ed person checks that requisition and made the purchase order' 4ithout purchase
requisition no purchase order will (e made' #n case of materials, the planning department
identifies the required quantities of materials and sent requisition to purchase department'
And in case of fixed asset BPL required appro&al of -13 or deputy chairman' But (efore
requisition a (udget has (een made for that asset' #n each case there is a limit amount for
ordering goods'
The purchase order document contains a unique num(er' This unique num(er is used as
reference for further proceeds' #t also contains the signature of the person raising
requisition' The purchase department is responsi(le for making the order only' #t is not
responsi(le for authori+ing or recei&ing goods' #t maintains a purchase register where all
gi&en orders are recorded with ordered item, quantity, unit price and suppliersR name'
11A

3eparation of 'sset )ustody from Other >unctions
Dsually, the ordered items are recei&ed (y user department' But in case of in&entoria(le
item, that is raw or packing material, it is recei&ed (y factory' The recei&ing department
produces the )**: C**' The same report is also used as inspection report' #n case of
raw or packing material, 9uality -ontrol !epartment generates 9uality Assurance report'
3ne copy of )**: C**: 9A is kept (y the recei&ing department, one copy is sent to
purchase department and another copy is sent to accounts department' $o the personnel
are separate from each other' Again there is a physical control o&er item from their
acquisition to dis(ursement' A cross departmental monitoring acti&ity is a common scene
here'
The (ank reconciliation statement is prepared monthly (y an employee independent of
recording cash dis(ursements or custody of assets'
!imely Recording and Independent Review of !ransactions
BPL recogni+es accounts paya(le as its lia(ility at the time of &endors in&oice is
recei&ed' #t recogni+es the lia(ility (y analy+ing the following documents;
@ot negotia(le copy of purchase order
)**: C**
@ot negotia(le copy of in&oice: (ill
Fat report
#f the person is satisfied with those documents he will then gi&e the pro&ision &oucher'
This person does not ha&e the access to handle the cash, securities or other assets'
'uthoriHation of Payments
BPL pays its &endors after the date has (een matured for payment' @ormally the payment
is made (y pre0num(ered check' A specially designed check is designed for this purpose'
A separate person gi&es the payment &oucher' Before gi&ing payment &oucher he checks
all the documents and reports relating to that transaction and also examined that the (ills
are appro&ed (y purchase department' The payment &oucher includes original (ills,
)**: C**, FAT ()D$,3B 11 and challan'
111

4hen the authori+ed person signs the checks, he .ust skims through the attached
documents with the payment &oucher' @ormally these signs are made (y managers or
director of accounts and finance'
Physical 3ecurity $easure
BPL has instituted some physical security measures to protect its assets and records from
(eing misappropriated or misused' %or example, a gate pass is needed to take out
any kind of mo&ea(le property (oth at head office and at factory, cash in transit is insured
and cash at office is placed under lock and keys, all the records and documents are
placed under the super&ision of responsi(le company officials' The company has also
employed closed circuit tele&ision (--TF system to monitor e&ery entry and exit'
udgetary control
Budgetary control is primarily used for the re&enue expenditures' %or each class of
re&enue expenditure, a (udget is prepared for each month and the actual expenses are
compared against the (udgeted amount'
!hreats and )ontrol Procedure
Another function of a well0designed A#$ is to pro&ide adequate controls that meet the
following o(.ecti&es5
1' All transactions are properly authori+ed
/' All recorded transactions are &alid
7' All &alid, authori+ed transactions are recorded
8' All transactions are recorded accurately
<' Assets are safeguarded from loss or theft
=' Business acti&ities are performed efficiently and effecti&ely
The documents and records descri(ed in the pre&ious section play an important role in
achie&ing these o(.ecti&es' $imple, easy0to0complete documents with clear instructions
facilitate the accurate and efficient recording of transaction data'
The following ta(le lists the ma.or threats and exposures in the expenditure cycle and the
applica(le control procedures that are placed in operation to mitigate them' The ta(le is
organi+ed around the stages of the expenditure cycle'
11/

'ctivity !hreats 'pplied )ontrol Procedure
Order goods
Pre&enting stock outs
and:or excess in&entory
1. To guard against these threats, BPL
esta(lishes an accurate in&entory
control system' The perpetual
in&entory method is used to ensure
that information a(out in&entory
stocks is always current'
2. BPL selects suppliers who are
known to meet the deli&ery
commitments'
*equesting unnecessary
items
1. BPL is &ery much aware of
purchasing items that are not
currently needed' To ensure this,
e&ery purchase requisition is
appro&ed (y the departmental head'
Purchasing goods at
inflated price or of inferior
quality
1. To pre&ent this, an open tender is
arranged for the suppliers' BPL
selects those suppliers who are
capa(le of deli&ering highest quality
goods as reasona(le price'
2. BPL prepares a monthly (udget for
the purchase of goods' Actual costs
are compared periodically with
(udget allowance' To facilitate
control, these reports highlight any
significant de&iations from (udgeted
amounts for further in&estigation'
117

Purchasing goods of
inferior quality
1. To a&oid the purchase of goods of
inferior quality, BPL has esta(lished a
list of appro&ed suppliers known to
pro&ide goods of accepta(le quality'
2. #n addition, supplier performance
data is collected and periodically
re&iewed to maintain the accuracy of
this appro&ed suppliers list'
Receive and store
goods
*ecei&ing unordered goods
1. *ecei&ing departments accept only
those deli&eries for which there is an
appro&ed copy of the purchase order
and matches the quantity mentioned
in the purchase order with goods
recei&ed'
$tealing in&entory
1. #n&entories are stored in secured
locations with restricted access'
2. All transfers of in&entory are
properly documented'
". $eparation of asset custody from
recording responsi(ility'
118

'pprove and pay
vendor invoices
%ailing to catch errors in
&endor in&oices
1. Fendor in&oices may contain errors
such as discrepancies (etween quoted
and actual prices charged or
miscalculations of the total amount
due' To detect mathematical accuracy
of &endor in&oices, those in&oices are
compared with purchase order and
recei&ing report'
Paying for goods not
recei&ed
1. The control procedure used here is
that the person responsi(le for
payment to the &endors compares the
quantities indicated on the &endor
in&oices with the quantities
mentioned in the materials or goods
recei&ing report'
Paying the same in&oice
twice'
1. #n&oices are appro&ed for payment
only when accompanied (y a
complete &oucher package (purchase
order and recei&ing report
2. Payments are made only on the
(asis of original in&oices' !uplicate
in&oices are marked clearly that these
are duplicate'
". Payments are ne&er authori+ed for
a photocopy of an in&oice
#. 4hen the check to pay for an
in&oice is signed, the in&oice and the
&oucher package are marked Wpaid
and canceledR
11<

*ecording and posting
errors in accounts paya(le
1. The person making the payment
compares the difference in supplier
account (alances (efore and after
processing checks with the total
amount of in&oices processed'
2. ,ere the control is deficient in one
aspect i'e' the non existence of limit
test'
)isappropriating checks
1. Dse of prenum(ered cheque'
2. Access to cheque writing machine
is restricted as well'
". Proper segregation of duties i'e'
custody of cheque is segregated from
the authori+ing function'
#. 1&ery cheque is signed (y two
persons (efore making the payment'
Aeneral )ontrol Losing data
1. All the supporting documents are
kept separately in a file'
2. Both internal and external la(els
are attached to each file'
". Access control is esta(lished &ia
use of passwords and user #!'
11=

11>

The effort and skill put (ehind the entire process of recording and reporting related to
expenditure cycle is exceptional' The staffs demonstrate their knowledge and experience
with sheer professionalism' !espite these efforts some shortcomings may remain and
there is always an opportunity to o&ercome those and step ahead in the race to (e more
accounta(le and socially responsi(le' # ha&e found some area where the practice should
ha&e (een (etter'
Inconsistency with the law on a few G'! related issues
805 on EFC Eommi ssi on
Before getting into the analysis of the practice let us first go though the law itself5

The issue under the spotlight is the FAT paid on the -"% agentRs commission' The law
has clearly mentioned the term VAT paid charges for C&F agents' But current
practice is different'
-urrently =AM FAT re(ate is claimed on the Total Clo(al Taxes *3ee J)olumn I'IK in
Part A of the Duty ta0es spreadsheet+. The amount considered as !% FAT is in fact the
amount of Total Clo(al Taxes *3ee JsK in the 'ssessment 9oticeN also refer to column R
in Part ! of the Duty ta0es spreadsheet+. The total Clo(al taxes amount is the aggregate
of5
!ocument Processing %ee
FAT on -"% -ommission
#ncome Tax on -"% -ommission'
The last item0 "Income #a$ on %&F %ommissionO is the income tax on the income of the
-"% agent deducted at source (y the customs authority' The importer is not lia(le to pay
this amount in any circumstances' This amount is deducted from the -"% (ill which
11G
VAT Rules 200!. Rule 19(2: The tax payer can claim '() of the VAT as
claim against input tax in respect of charges for telephone, tele-printer,
fax, internet, freight forwarders, -01 agents, audit and accounting firms,
supplier, security ser$ices, carrying agents, +,- ser$ices, 2lectricity, and
other related taxable ser$ices".

means B12#)-3 P,A*)A ne&er pays the income tax amount on the -"% commission
and it is not supposed to pay' The question arises when a =AM FAT re(ate is claimed for
this amount; (ecause it is quiet clear that5
The importer can ne&er claim FAT re(ate on an amount that he ne&er paid'
The item eligi(le for re(ate is not the income tax, it is the FAT paid on -"%
commission'
The o(&ious question that arises is how it is possi(le that an amount is de(ited which has
ne&er had any payment against it or any lia(ility' This should ha&e caused an error in the
(alances in the financial statements' The mismatch is a&oided (y deducting the W#ncome
Tax on -"% -ommissionR amount from the miscellaneous expenses' Let us go through
the entire process of dealing with #ncome Tax on -"% -ommission5
%irst of all =AM of the amount is de(ited as FAT re(ate (as it is included in the
Total Clo(al Taxes on which re(ate is currently (eing claimed'
$econdly 8AM of the amount is added to miscellaneous expenses (as the
unclaimed amount is to (e treated as expenses'
The 1AAM amount is then again deducted from miscellaneous expenses'
Although apparently the amount is deducted and the net effect seems to (e +ero, it lea&es
a trail of misreporting'
5he Efect of the ,nconsistency on the Cinancial Aeport
#t lea&es a two fold effect' They are5
11?

%irstly, an excess FAT re(ate claimed for an amount equal to =AM of the income
tax paid (y -"% agent' 4hich means current asset is increased'
$econdly, miscellaneous expenses are under cast with an amount equal to =AM of
the income tax paid (y -"% agent which causes an increase in profit figures' This
happens (ecause 8AM of the amount is added to miscellaneous expenses and
su(sequently 1AAM is deducted'
The figures might not (e as (ig to ha&e an effect on the in&estors decision, (ut the (ottom
line is that, it in&ol&es the companyRs social responsi(ility' $ome times the Total Clo(al
Taxes include fees and penalties which causes an inconsistency of an e&en (igger
amount' -ertainly people wonRt like a socially responsi(le company to ignore these facts
and figures'
!he Recommended Practice in this Regard
%rom the Total Clo(al Taxes only the FAT paid on the -"% -ommission is su(.ect to
FAT re(ate' The company has nothing to do with the #ncome Tax paid on the -"%
commission which paid (y the agent' The !ocumentation fee (a &ery negligi(le amount
might (e added to the miscellaneous expenses' The inclusion of this negligi(le amount
with the FAT will not create any considera(le difference (ecause after all it is paid (y the
company'
805 on :emur r age Ehar ges
4hen clearance of the consignment is delayed at the port the port authority charges an
amount for each days delay with some other charges (eg' use of fork lifts' This ser&ice
(y the port authority is also taxa(le under FAT rules 1??1' -urrently a 1AAM re(ate is
claimed on this FAT' @ow again let us look at the law5
1/A

The law indicates that 1AAM re(ate on FAT paid can (e claimed on the FAT charged on
the raw material and =AM re(ate could (e claimed on related ser&ices' !emurrage0 which
is (asically charged for using the port warehouse and other facilities, should not (e
considered as inclusi&e in the raw materials taxa(le price' Although the name W4arehouse
$er&icesR is not explicitly mentioned in the law, this can (e considered as a related ser&ice
which is entitled to a =AM re(ate' But # think, the correct practice is to treat this expense
as an item of miscellaneous expense and not to claim re(ate (ecause demurrage is like a
fine or penalty for not releasing the goods from port warehouse timely' -urrently practice
shows that 1AAM of the FAT paid on this regard is de(ited *3ee )O.4$9 AI in P'R!
A of the spreadsheet where JPK implies G'! on D,$+.
5he Efect of the ,nconsistency on the Cinancial Aeport
The apparent effects on the (alances are5
1xcess FAT is claimed equal to 8AM of the FAT paid on !1); as a result
current asset is inflated'
!1) expenses are under0cast (y 8AM of the FAT paid on !1) which causes
a rise in the net profit figure'
!he Recommended Practice in this Regard=
=AM of the FAT paid on !1) charges should (e claimed as re(ate and the amount is
de(ited' The rest 8AM cannot (e claimed as re(ate thus it should (e added to the !1)
expense which is de(ited'
1/1
VAT Act 1991: Section 9 &13: The registered person who sells locally and
exports taxable goods for the production of which he uses raw materials
purchased paying VAT, can claim rebate by including the paid amount of VAT
into the Treasury Deposit and Rebate column of form VAT-!"
VAT Rules, 200!. Rule 19(2& The tax payer can claim '() of the VAT as
claim against input tax in respect of charges for telephone, tele-printer,
fax, internet, freight forwarders, -01 agents, #A3A, audit and accounting
firms, supplier, security ser$ices, carrying agents, +,- ser$ices, 2lectricity,
and other related taxable ser$ices".

!herefore the amended analysis of the spreadsheet would @e=
P'R! A= >inal summary for Fournal ,ntry
Data Redundancy
,0istence of multiple systems
Traditionally, the A#$ has (een referred to as a transaction processing system (ecause its
only concern was financial data and accounting transactions' %or example, when a sale
took place, the A#$ would record a .ournal entry showing only the date of the sale, a de(it
to either cash or accounts recei&a(le, and a credit to sales' 3ther potentially useful
nonfinancial information a(out the sale, the time of day that it occurred, would
traditionally (e collected and processed outside of the A#$' -onsequently many
organi+ations de&eloped additional information systems to collect, process, store and
report information not contained in the A#$' 1&en sometimes two supporting softwares
are used to record the same transaction which are not interlinked' Dnfortunately the
existence of multiple systems creates numerous pro(lems and inefficiencies' BPL also
experiences this pro(lem' $ince )AP#-$ cannot generate su(sidiary ledger for each
class of assets, BPL uses W%ixed Asset )anagement $ystemR software to generate
management report' 3ften the same data is captured and stored (y two systems, which
not only results in redundancy across systems, (ut also leads to discrepancies if data are
)olumn ID )olumn Head 3ourceB >ormula
A, !DTS H3I
A# FAT H9I\HTI[=AM\HNI[=AM
AK A#T HFI
AB !1) HAAI \ HNI[8AM
AL )#$- HABI\HTI[8AM
A) -"% -ommission HA-I
A@ T3TAL A,\A#\AK\AB\AL\A)
1//
Currently5 [6*7[R*890:7[;*
Currently5 [A!*7[R*8<0:=[S*
Currently5 [AA*

changed in one system (ut not in others' #n addition, it is difficult to effecti&ely integrate
data from the &arious systems'
!he Recommended solution in this Regard=
1nterprise resource planning (1*P systems are designed to o&ercome these pro(lems as
they integrate all aspects of a companyRs operations with its traditional A#$' Thus when
the sales force enters an order, the effect of the transaction automatically flows to all
affected parts of the company' #n&entory is updated, production schedules are ad.usted
and purchase orders are initiated to acquire any needed raw materials and supplies'
)oreo&er important nonfinancial data, such as the time the acti&ity occurred, is collected
and stored in the same system'
A key feature of 1*P systems is the integration of financial with other nonfinancial
operating data' The &alue of such integration suggests that there may (e strategic (enefits
to more closely linking the traditionally separate functions of information systems and
accounting, and many organi+ations are (eginning to com(ine these two functions'
$3 ,0cel ?or%sheet
The summary reports prepared with )$ 1xcel are often su(.ect to data redundancy' 3n a
few occasions same set of data is used in different spreadsheets' This causes redundancy
and makes the data entry process unnecessarily lengthy' #t really does kill &alua(le time
of the responsi(le staffs and as a result he:she might fail to deli&er reports on time when
he:she is (urdened with excessi&e data entry and related .o(s'
Proposed )hanges=
)$ Access could (e &ia(le option as it gi&es the user flexi(ility through $9L' By linking
the large )$ 1xcel spreadsheets as ta(les in )$ Access could pro&ide a solid (ase to go
use $9L options' The reporting flexi(ility of )$ Access could also (e useful to generate
W3n !emandR reports for the management in the quickest possi(le time' The auditors also
ask for different reports which are not always readily a&aila(le' Dsing )$ Access
different types of reports can (e produced and it takes little time'
1/7

Internal )ontrol Issues
.imit !est
#nternal control regarding expenditure cycle of Beximco Pharmaceuticals Limited is quite
satisfactory' BPL has introduced a num(er of control policies to ensure proper recording
and reporting of different types of expenses' #n the pre&ious part, # ha&e mentioned one
area where internal control is deficient' The area is to writing the cheques and making the
payments' 4hen a check is prepared, all supporting documents are &erified (y the person
preparing the cheque' At the time of writing the cheque, an error may occur resulting into
the possi(ility of o&erpayment' This may occur when 1A to 1< in&oices are paid at a time'
Though e&ery check is signed (y two different persons (at least one from top
management, it is not always possi(le to &erify all the in&oices and sum up total figure'
%or example, an in&oice of Tk' /,/<,AAA can (e written as Tk' /,</,AAA while gi&ing
entry in )AP#-$ to record the payment causing de(it (alance in accounts paya(le
account' There is no (uilt0in checking system in the software that will not accept any
amount in excess of pro&ision made earlier for this purpose'
Proposed solution=
The software used ()AP#-$ to record the payment to suppliers should incorporate a
limit test which will not allow the user to write an amount in excess of the pro&ision
made' 4hen the accounts paya(le ledger account will ha&e a de(it (alance, the software
should show a message that a particular supplierRs account is going to (e o&erpaid' BPL
follows a policy that the person making the payment should compare the difference in
supplier account (alances (efore and after processing checks with the total amount of
in&oices processed' This could (e regarded as a compensating control for the same
purpose' But the inclusion of limit test in the software can make this task more easily and
with less effort'
1/8

Pro@lems with coding
BPL uses a fi&e segment, twel&e digit code for its general ledger accounts' )ost of the
items are assigned a code' But due to &arying nature of expenses, sometimes confusion
arises as to how a particular expense is to (e treated and which code is appropriate for
this' $ometimes no codes are a&aila(le for an item' The decision in this regard is taken (y
the person recording the transaction' #f that person cannot understand the nature of
expenses, a wrong code may (e used (y him'
Proposed solution
-hart of Accounts must (e detailed enough to co&er all types of items to a&oid the use of
personal .udgment'
1/<

#n today6s complex yet highly competiti&e (usiness en&ironment management needs
quality information for decision making purpose' @ow a days two things make the
difference (etween a successful firm and a failed one T quality of managerial decision
and the a(ility to adapt new technology' The quality of managerial decision of BPL is
pro&ed in its success in the market; also BPL has successfully adapted latest
1/=

technological (reakthrough in #-T'
The )#$ department of BPL is constantly working on the de&elopment of new soft wares
and on the impro&ement of the existing soft wares' #t is hoped that the BPL would (e the
first local company, as they ha&e (een in many other cases, to implement a complete 1*P
solution system'
B12#)-3 P,A*)A-1DT#-AL$ LT!' is the first Bangladeshi company to (e listed
with the London $tock 1xchange' This was an added challenge to all the accounting
staffs as the listing the accounta(ility of the organi+ation has gained a glo(al reach' The
e&er expanding export trade also indicates greater responsi(ility to the world' The
%inance and Accounts department took the challenge and pro&e their mettle (y the timely
pu(lication of /A1A Annual %inancial *eports glo(ally' 1ach and e&ery section in the
department deser&es to (e complemented for their endea&or' %rom raw material import to
the (ringing of smile for the society, on e&ery le&el, professionalism and dedication is the
key to this success'
Bi(liography
Annual *eport of Beximco Pharmaceuticals Limited' /A1A
)arshall, B' *' and P'K' $tein(art' /AA>' Accounting Information Systems' @inth edition'
$ingapore, Pearson 1ducation'
1/>

Porter, )'1' and F'1' )illar' 1?G<' Ho Information !i"es #ou Competiti"e Ad"antage.
,ar&ard Business *e&iew (Kuly0August'
4ilkinson et al' /AA>' Accounting Information Systems$ %ssentia& Concepts and
App&ications. %ourth 1dition' @ew Sork, Kohn 4illey " $ons' #nc'
4e(site
www'(eximcopharma'com
www'google'com
' 3ample of ),P
1/G

3ample of Purchase Order
,-I$)O QQQQQ.DIGI3IO9
-AP#TAL 12P1@!#TD*1 P*3P3$AL (-1P
$PA*1 PA*T$ APP*3FALDnit !epth!ate$erial Y-lassification5
*eplacement Addition !e&elopment
!escription of item with #! @um(er (if Any5
*eason: Kustification for proposed expenditure5
G' *emarks
1conomic life (Sears<' $upplier5=' 1stimated 1xpenditure
>' Budget Pro&ision5
$ignature of Budget 3fficerAppro&ed By-13: !eputy -hairman$u(mitted
By*ecommended By*ecommended By!epartmental ,ead!irector,
-ommercial!irector, %inance!ate5!ate5!ate5
1/?
Purchase 3rder @o'Purchase *equisition @o]]]]]!ate of *eceipt (y
P!]]]]]] $L @o'@ame and !escription of )aterial : $er&iceDnit
@o9uantity 3rderedDnit Price9uantity 3rderedAmount1/78ZZZZZZZZZZZZZZZ
$ign of Person *aising *equisitionZZZZZZZZZZZZZZZZ
Appro&al of !epartmental ,ead ZZZZZZZ
!ateTotal )ode of Purchase
-ash : Against 3rder
Purchase *ef'ZZZZZZZZZZZZZZZZZ
Ad&ance *equired Tk'ZZZZZZZZZZ
Pay -ash:#ssue -heck:3rder to (e PlacedZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ
@ame of the PartyZZZZZZZZZZZZZZZZZZZZZZZZZZZZZ
3rder : Ad&ance Payment Authori+ed
Terms and -ondition of 3rder5
!ate]]]]
ZZZZZZZZZZZZZZZZZ
Authori+ed $ignature

'ccounts Paya@le Provision Goucher
17A
Beximco Pharma AP Kournal Foucher !ate5
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Foucher @o 5 ]]'' 3riginal Foucher @o5 ]]'' A:AA:AA
Fendor @o 5 ]]]
#n&oice : Bill 5 ]]] !ate5 ]]] )**:9-:43 5 ]]' A:AA:AA
!ue !ate 5 ]]]
!escription 5 ]]]
Paya(le 5 ]]]'' Amount -r'
Fat 5 ]]]'' Amount !r
-ommission 5 ]]]'' Amount !r Total (Tk 5
#tem !escription Account no Amount
(Tk
!r':
-r

$ignature !ate @otes
Prepared (y
-hecked (y
Appro&ed (y
Posted (y
)** @3' ZZZZZZZZZZZ
!ate
#n&oice: Foucher @oZZZZZZZZ!ateZZZZZZZZZ
Amount for *efundZZZZZZZZZZZZZZZZZZZZZZ
Amount !ue for PaymentZZZZZZZZZZZZZZZZZ
ZZZZZZZZZZZZZZZZZZZZZZZZZZ ZZZZZZZZ
Passed for Payment: Ad.ustment !ate
)** @3' ZZZZZZZZZZ!AT1 ZZZZZZZZZZ
)** @3' ZZZZZZZZZZ!AT1 ZZZZZZZZZZ
)** @3' ZZZZZZZZZZ!AT1 ZZZZZZZZZZ
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!a0 and G'! Report
'ccounts Paya@le Payment Goucher
Tax and FAT *eport
FendorRs noFendorRs namePeriodTotal amount dueTax amountFAT Amount3ther
deductions@et amount due
171
Beximco Pharma AP Payment Foucher !ate5
]]''
(-ash : Bank
Batch:item @o5 ]]''
Foucher @o 5 ]]] 3riginal Foucher @o5 ]]'' A:AA:AA
AP KF @o KF !ate Fendor
@o
-heck
@o
type Account
no
Amount
(Tk
!r'
:-r

$ignature !ate Payee
Prepared (y
-hecked (y
Appro&ed (y
Posted (y

1. Gendor ledger
3ample of Fournal Register
3ample of )ash ReCuirement Report
17/
Beximco Pharma Kournal *egister
%rom A:AA:AA to A:AA:AA
Payment Dpto A:AA:AA
$ummary (y Fendor
Fendor
@o "
@ame
Purchase Fat
Amount
Tax
Amount
3ther
Amount
@et
Paid
!ue
Amount

3ample of 'ged Paya@le Report
3ample of Gendor usiness Position Report
Beximco Pharma -ash *equirement *eport ($ummery
By #n&oice Dpto A:AA:AA
Payment Dpto A:AA:AA
*ef' !ate for Age -alculation5 Goucher Date Paya@le 'mount ( a@ove days old
Fendor @oFendor @amePaya(lePaid!eduction!ue Amount
Beximco Pharma Fendor Business Position *eport
%rom A:AA:AA to A:AA:AA
Fendor @oFendor @amePaya(leFatTaxPay0ment3ther !eduction!ue Amount
177
Beximco Pharma Aged Paya(le *eport ($ummery
By #n&oice Dpto A:AA:AA
Payment Dpto A:AA:AA
*ef' !ate for Age -alculation5 Goucher Date Paya@le 'mount ( a@ove days old
Fendor
@o
Fendor @ame Total
!ue
Amount
A07A
!ays
710=A
!ays
=10?A
!ays
A(o&e
?A
!ays
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fied