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Expenditure Cycle – A Major Subsystem of Accounting Information Systems Of Beximco Pharmaceuticals Limited

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The expenditure cycle is a recurring set of business activities and related data processing operations associated with the purchase of and payment for goods and services. In the expenditure cycle, the primary external exchange of information is with suppliers. Within the organization, information flows to the expenditure cycle from the revenue and production cycles, inventory control and various departments about the need to purchase goods and materials. Once the goods and materials arrive, notification of their receipt flows back to those sources from the expenditure cycle. Expense data also flows from the expenditure cycle to the general ledger and reporting function for inclusion in the financial statements and various management reports. The primary objective in the expenditure cycle is to minimize the total cost of acquiring and maintaining inventories, supplies and the various services the organization needs to function. In addition management must be able to monitor and evaluate the efficiency and effectiveness of expenditure cycle process. That requires easy access to detailed data about the resources employed in the expenditure cycle, the events that affect those resources and the agents who participate in those events. Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company in our country. Beximco Pharma has successfully made its footmark in the global market when it made its debut on the London Stock Exchange as the first Bangladeshi company to be listed in the world's most prestigious bourse. In 2002, Beximco Pharma won the first prize of ICAB National Awards 2000 for 'Best Published Accounts and Reports' in Non-Financial Sector Category which added a new feather in the crown of its success. This award proves that the accounting information systems of Beximco Pharmaceuticals Limited is of superior standard and capable of providing quality information for internal and external decision making. This report examines the three basic functio

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									                            Table of Contents


Letter of Transmittal                                       I
Acknowledgement                                            II
Abstract                                                  III
Table of Contents                                         IV

Chapter 1: Introduction

Origin of the Report                                      1
Background of the Report                                  1
Scope of the Study                                        2
Objectives of the Study                                   2
Methodology of the Study                                  2
Limitation of the Study                                   3

Chapter 2: Literature Review

Accounting and Information Systems (AIS)- An Overview      4
Role of AIS in the value chain                             6
Management Information Systems (MIS) and AIS               8
Basic functions of AIS                                     9
Documentation Techniques                                  14
Basic Subsystems in the AIS                               17
Expenditure Cycle – A Closer Look                         20
Internal Control and AIS                                  24

Chapter 3: Company Profile

Beximco Pharma at a Glance                                30
The Profile: Beximco Pharmaceuticals Limited              32
Mission Statement of Beximco Pharma                       33
Managing the Champion Organization                        35
The Footprints Left Over by BPL Over Time                 37
Departments of Beximco Pharma                             38
Quality - The Passion of BPL                              44
Research and Development - A Promise Kept by BPL          45
Blockbuster Products - BPL's Major Contributors           47
Chapter 4: Findings of the Study

Accounting Information System of BPL            49
Expenditure Cycle of BPL                        51
   Local Purchase of Raw and Packing Material   51
      Input Information                         57
      Information Processing                    58
      Output Information                        60
   Import of Raw and Packing Material           62
      Input Information                         63
      Information Processing                    70
      Output Information                        77
   Capital Expenditure cycle                    82
      Input Information                         82
      Information Processing                    83
      Output Information                        84
   Revenue Expenditure Cycle                    85
Internal control for Expenditure cycle          87

Chapter 5: Recommendations                      93

Chapter 6: Conclusion                           100

Bibliography                                    101

Origin of the Report

The report was originated to make a study on the Expenditure Cycle 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 Master of Business
Administration (MBA) program of the Department of Accounting & Information
Systems of the Faculty of Business Studies of University of Dhaka. Internship 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 business situation, therefore it is an
opportunity for the students to know about the real life situation through this internship
program This internship report was prepared under the supervision of Pallab Kumar
Biswas, Lecturer, Department of AIS, Faculty of Business Studies, University of Dhaka
and Mr. Jamal Ahmed Choudhury, Senior Manager, Finance and Accounts, Beximco
Pharmaceuticals Ltd.

Background of the Report

Accounting Information System (AIS) is the oldest and most widely used
information system in business as they record and report business transaction and
other economic events. Computer based AIS records and reports the flow of
funds through an organization on a historical basis and produce important financial
statements such as Balance Sheet, Income Statement, Cash Flows, etc. Such
systems also produce forecasts of future conditions such as Projected Financial
Statements and Financial Budget. Advancement in information and communication
technology in last twenty years has changed the traditional view of Accounting
Information System for good. Computer based Accounting Information Systems has
enabled us to enter data from different geographical locations simultaneously, process
data at a very high speed, and generate reports very quickly. Control mechanisms for
computer based AIS is also a little different from manual AIS. All these things have
made me interested to have an in-depth look on the AIS of a large manufacturing
concern. This report is an attempt to visualize the Expenditure cycle of
Accounting Information System of the BEXIMCO Pharmaceuticals Ltd.
Scope of the Study

The full package of Accounting Information System of a public limited company is a
broad area. Within the time period of three months allotted for internship, it is virtually
impossible to cover all aspects of AIS. So, the scope of my report is limited only to the
survey of expenditure cycle, the recording, processing and disseminating of information
produced from this cycle and related internal control issues.

Objectives of the Study

The broad objective of preparing this report is to broaden my know ledge and
understanding of Accounting Information Systems by adding practical experience in
a real business set up, its operation and culture to my acquired knowledge in the

The specific objectives of the study are:
    To give a brief overview of Beximco Pharmaceuticals Limited (BPL).
    To be familiar with the corporate environment.
    To have an idea about the organization's product and mode of operations.
    To vividly understand how the functional areas of Beximco (BPL) operate and
       they are interlinked with each other.
    To have a comprehensive look into the expenditure cycle of a large manufacturing
       concern like BPL.
    To understand the nature, design, use and implementation of AIS and also
       reporting of financial information.

Methodology of the Study

This report has been prepared on the basis of experience gathered during the period of
internship. For preparing this report, I have also got information from annual reports and
website of the Beximco Pharmaceuticals Limited. The details of the work plan are
furnished below:
Data collection method
Relevant data for this report has been collected primarily by direct investigations of
different records, papers, and documents. The interviews were administered by formal
and informal discussion and no structured questionnaire has been used.
Data sources
The data and information for this report have been collected from both the primary and
secondary sources. Among the primary sources, face to face conversation with the
respective 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,
websites, and study of relevant reports, documents and different manuals.
Data processing
Data collected from primary and secondary sources have been processed manually and
qualitative approach in general and quantitative approach in some cases has been used
throughout the study.
Data analysis and interpretation
Qualitative approach has been adopted for data analysis and interpretation taking the
processed data as the base. So the report relies primarily on an analytical judgment and
critical reasoning.
Data Presentation
Data / Information have been presented in a narrative manner; flow diagrams are also
used to give a clear and precise understanding of the situation.

Limitation of the Study

In spite of all sincere and honest efforts the study/report contains a number of limitations,
which was beyond my control. Major limitations of the study/report are:
1. All the comments made, conclusion reached and suggestions for possible improvement
provided are purely based on my level of understanding, knowledge and my way of
interpreting a particular statement.
2. Beximco Pharmaceutical Limited follows a policy of not disclosing all the information
needed to prepare my report for obvious reason.
3. Because of the lack of information, I have to make some assumptions that may cause
few errors or personal mistakes in the report.
Accounting and Information Systems- An Overview

Accounting can be defined as an information system. The operations concerned with
accounting can be identified as a) recording economic data (data collection) b) data
maintenance c) presenting quantitative information in financial terms (Information
generation). Accounting can also be classified as the language of business. So in brief
accounting may be viewed as an instrument of providing financial information needed for
the overall functioning of an entity (a business firm).

Information is intelligence that is meaningful and useful to persons for whom it is
intended.   Information has value to the firms and to the managers. Information is
basically provided by AIS through financial statements to external parties and through
various types of managerial reports to insiders. This information can be used by the
managers for different types of decision making.
At first data is made available for the organization. Data become information through
three stages. These stages are input, process and output.

A system is two or more interrelated components that interact to achieve a goal. Systems
are almost composed of smaller subsystems, each performing a specific function
important to and supportive of the larger system of which it is a part.
A system can be defined as a group of interacting parts that function together to achieve
its purpose. Some of the systems are natural and some of them are made by human.
Suppose Mississippi river can be classified as a natural system whereas clock can be
classified as a system made by human being.

Accounting and information systems:
AIS is a structure within an entity such as a business firm, that employs physical
resources and other components to transform economic data into accounting information
to provide it to different types of user for the purpose of decision making.
  Facilities                        Manufacturing Firm
    Labor                                         Operations

 Material                           Producing         Storing     Shipping
  from             Acquiring                                                    Goods to
                   Materials         Finished         Finished    Finished      Customer
 Supplier                             Goods            Goods       Goods

    Data                                                                       Information


   Funds                                                                         Funds
                                  Data and information flow
                                  Physical flows

   Fig 1: The operational system of a manufacturing firm (Wilkinson, Cerullo,
            Raval and Wong-On-Wing, 2005,P-8)

According to Romney and Steinbart, ―An AIS consists of five components:
   1. The people who operate the systems and perform various functions.
   2. The procedures both manual and automated, involved in collecting, processing,
      and storing data about the organizations activities
   3. The data about the organizations business process
   4. The software used to process organizations data
   5. The information technology infrastructure including computers, peripheral
      devices, and network communication devices.‖
The need for studying AIS
The Accounting Education Change Commission recommended that the accounting
curriculum should provide students with a solid understanding of three essential
   1. The use of information in decision making
   2. The nature, design, use and implementation of an AIS
   3. Financial information reporting
The knowledge of AIS for every Accounting student is very crucial for the following
   1. The AIS course focuses on understanding how the accounting system works:
            How to collect data about an organization‘s activities and transactions
            How to transform that data into information that management can use to run
              the organization
            How to ensure the availability, reliability, and accuracy of that information
   2. Auditors need to understand the systems that are used to produce a company‘s
       financial statements.
   3. Tax professionals need to understand enough about the client‘s AIS to be
       confident that the information used for tax planning and compliance work is
       complete and accurate.
   4. One of the fastest growing types of consulting services entails the design,
       selection, and implementation of new Accounting Information Systems.
   5. A survey conducted by the Institute of Management Accountants (IMA) indicates
       that work relating to accounting systems was the single most important activity
       performed by corporate accountants.

Role of AIS in the Value Chain

The ultimate goal of any business is to provide value to its customers. A business will be
profitable if the value it creates is greater than the cost of producing its products or
services. An organization‘s value chain consists of nine interrelated activities that
collectively describe everything it does (Porter and Millar, 1985, P.149-160). The five
primary activities consist of the activities performed in order to create, market, and
deliver products and services to customers and also to provide post-sales services and
support. The four support activities in the value chain make it possible for the primary
activities to be performed efficiently and effectively. The nine value chain activities are:
Primary activities:

       1. Inbound logistics consist of receiving, storing, and distributing the materials
           that are inputs used by the organizations to create the service and products that
           it sells.

       2. Operations activities transform input in to final products or services.

       3. Outbound logistics are the activities involved in distributing finished goods
           or services to customers.

       4. Marketing and sales refers to the activities involved in helping customers to
           buy the organizations products and services.

       5. Service activities provide post sale support to customers.

Support Services:

       1. Firm infrastructure refers to the accounting, finance, legal support, and
           general administration activities that are necessary for any organization to

       2. Human resources activities include recruiting, hiring, training and providing
           employee benefits and compensations.

       3. Technology activities improve a product and service. Examples include
           research and developments, production design.

       4. Purchasing includes all the activities involved in procuring raw materials,
           supplies, machinery and the buildings used to carry out primary activities.

How an AIS adds value to a business:
The AIS can add value to an organization by providing accurate and timely information
so that the five primary value chain activities can be performed more effectively and
efficiently. Well designed AIS can do this by:
   1. Improving the quality and reducing the costs of products or services.
   2. Improving the efficiency: A well designed AIS can help improve the efficiency of
       operations by providing more timely information.
   3. Improved decision making: AIS can improve decision making by providing
       accurate information in a timely manner.
   4. Sharing of knowledge: well-designed AIS can make it easier to share knowledge
       and expertise, perhaps thereby improving operations and even providing a
       competitive advantage.
Management Information Systems (MIS)

MIS provides information to the managers of the firm. MIS provides information needed
to plan and control the activities of the firm. It includes all types of data including non-
transactional data.
Relationship between AIS & MIS:
Some view AIS having the narrow scope of the MIS, since the data accepted by the MIS
have a broader scope. On the other hand, AIS serves a wider group of users both internal
and external. Thus in conclusion it can be said that AIS & MIS, each of them have
particular mission & to some extent these are interrelated.

          Sales/                                                                 Production
         Marketing                                                                  Info



   Fig 2: AIS as an MIS subsystem (Wilkinson, Cerullo, Raval and Wong-On-Wing,
   2005, P-12)
Basic Functions of AIS

An AIS performs three basic functions:
   1. To collect and store data about the organization‘s business activities and
        transactions efficiently and effectively:
                Capture transaction data on source documents.
                Record transaction data in journals, which present a chronological
                   record of what occurred.
                Post data from journals to ledgers, which sort data by account type.
   2.          To provide management with information useful for decision making:
                In manual systems, this information is provided in the form of reports
                   that fall into two main categories:
                             -         financial statements
                             -         managerial reports
   3.          To provide adequate internal controls:
                Ensure that the information produced by the system is reliable.
                Ensure that business activities are performed efficiently and in
                   accordance with management‘s objectives.
                Safeguard organizational assets

Data collection and processing
The data collection and processing cycle consists of four steps: data input, data storage,
data processing and information output. The trigger for data input is usually business
activity. Data must be collected about:
    Each event of interest
    The resources affected by each event
    The agents who participate in each event

Data Input:
Historically, most businesses 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. Usually the data entry screen retains the same name as the paper source
document it placed. Well designed source documents and data entry screens improve
both control and accuracy of capturing data about business activities. Examples of source

    Source document                                    Function
   Sales order              To record customer order
   Delivery ticket          To record delivery of merchandise to customer.
   Credit memo              To support adjustments in customers account for sales return,
                            sales discount etc.
   Deposit slip             To record amounts of cash & cheques deposited in company
                            bank account.
   Purchase requisition     To request that purchase department orders specific goods.
   Purchase order           To request merchandise from vendors.
   Receiving report         To record receipt of merchandise from vendors.
   Time cards               Record time worked by employees

Control over data collection is improved by:
           prenumbering each source document since it simplifies verifying that all
              transactions have been recorded and that none of the documents has been
           having the system automatically assign a sequential number to each new
           employing source data automation such as ATMs used by banks, POS
              scanners used in retail stores

Data Processing:
Once data about a business entity has been collected, the next step usually involves
updating previously stored information about the resources affected by the event and the
agents who participated in the activity. For example, data about a sales transaction result
in updating the information about inventory to reduce the quantity on hand of the item
sold, as well as updating the customers account balance. This updating can either be 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 about resources and
    On-line, real-time processing is the immediate updating as each transaction occurs

Data Storage:
An entity is something about which information is stored. Examples of entities include
employees, inventory items, and customers. Each entity has attributes, or characteristics
of interest, which need to be stored. An employee pay rate and customer address are
examples of attributes. Generally, each type entity possesses the same set of attributes.
For example, all employees possess an employee number, pay rate and home address.
The specific data values for those attributes however will differ among entities.

Record transaction data in journal:
After transaction data have been captured on source documents, the next step is to record
the data in a journal. A journal entry is made for each transaction showing the accounts
and amounts to be debited and credited.
    The general journal records infrequent or non routine transactions.
    Specialized journals simplify the process of recording large numbers of repetitive

Post transactions to ledger:
In an AIS, the files used to store cumulative information about resources and agents are
called ledgers. Most companies should have both general ledger and a set of subsidiary
ledgers. The general ledgers contain summary data for every asset, liability, equity,
revenue and expense account of the organization. A subsidiary ledger records all the
detailed data for any general ledger account that has any many individual sub-accounts.
For example, the general ledger contains one account that summarizes the total amount
owed to the company by all customers. The subsidiary accounts receivable ledger has a
separate record for each individual customer, each of which contains detailed information
about a particular customer. Subsidiary ledgers are commonly used for accounts
receivable, inventory, fixed assets and account payable.

Chart of Accounts:
Each general ledger account is assigned an a specific number. The chart of accounts is a
list of all general ledger accounts an organization uses (Romney and Steinbart, 2003, P-
30). The structure of the chart of accounts is one of the most important aspects of AIS,
because it affects the preparation of financial statements and reports. Data stored in
individual accounts can easily be summed for presentation in reports, but data stored in
summary accounts can not be easily broken down and reported in more detail.
Consequently, it is important that the chart of accounts contain sufficient detail to meet
an organization‘s information needs.

Providing information for decision making
A second function of the AIS is to provide management with information useful for
decision making. Whether presented in the form of paper reports or displayed on a
computer screen, the information an AIS provides falls in to two main categories:
financial statements and managerial reports. Financial statements are primarily designed
for external parties to use in making decisions about extending credit to or investing in
the organizations. The following steps are used to:
    Prepare a trial balance.
    Make adjusting entries.
    Prepare the adjusted trial balance.
    Produce the income statement.
    Make closing entries.
    Produce the balance sheet.
    Prepare the statement of cash flows.

Managerial reports:
An organization‘s AIS must be able to provide managers with detailed operational
information about the organization‘s performance.
Budgets and performance reports:
Two important types of managerial reports are budgets and performance reports. A
budget is the formal expression of goals in financial terms. One of the most common and
important type of budget is the cash budget. A cash budget shows projected cash inflows
& outflows.

Performance reports, in contrast, are used for financial control. A performance report lists
the budgeted and actual amounts of revenues and expenses and also shows the variances
or differences between these amounts.

Internal Control
The third function of an AIS is to provide adequate internal controls to accomplish three
basic objectives:
       1. Ensure that the information is reliable.
       2. Ensure that business activities are performed efficiently.
       3. Safeguard organizational assets.
The two important methods for accomplishing these objectives are:
       1. Provide for adequate documentation of all business activities.
       2. Design the AIS for effective segregation of duties.

Adequate Documentation:
Adequate documentation of all business transactions is the key to accountability.
Documentation allows management to verify that assigned responsibilities were
completed correctly. Well-designed documents and records can help organizations
quickly identify potential problems. For example, gaps in the sequence of completed
source documents might indicate that some documents have been misplaced, in which
case some transactions may not have been recorded. Such a gap may also, however, be a
sigh of more serious problem. For example, a missing check may have been written for
fraudulent purposes. Adequate documents and records can also ensure that an
organization does not make commitments it cannot keep.
Segregation of duties:
Segregation of duties refers to dividing responsibility for different portion of a transaction
among several people (Romney and Steinbart, 2003, P-37). The objective is to prevent
one person from having total control over all aspects of a business transaction. Different
person should perform the following activities:
    authorizing transactions
    recording transactions
    maintaining custody of assets

Documentation Techniques

Documentation encompasses the narratives, flowcharts, diagrams and other written
material that explain how a system works. This information covers the who, what, when,
where, why and how of data entry, processing, storage, information output and system
controls. One popular means of documenting a system is to develop diagrams,
flowcharts, tables and other graphical representations of information. These are then
supplemented by a narrative description of the system, a written step-by step explanation
of system components and interactions.

Documentation describes the procedures for recording data, the commands that run
computer programs, the processing steps that AIS follow and the logical and physical
flows of accounting data through the system.

Importance of documentation:
   1. One of the basic purposes of documentation is to explain how AIS operates.
       Documentation helps employees to understand how does a system works, helps
       accountants to improve it and help managers to control it.

   2. Documentation also includes the user guides, procedure manuals and operating
       instructions; which are so helpful. These are helpful to train users to operate AIS
       hardware and software, to solve new operating problems and to perform the jobs
   3. Documentation also helps to develop new systems. It is also helpful to maintain
       the existing one.

   4. Narrative descriptions may vary significantly, depending on who writes them.
       Similarly, the individual reading a narrative may interpret it differently from the
       way it was intended. But a system flowchart or data flow diagram that uses
       common symbol is more likely to be interpreted in the same way by all of the
       parties viewing it.

   5. Documentation helps the auditors to determine the strengths and weaknesses of
       the organization so easily. Thereafter, the auditors can identify the scope &
       complexity of the audit.

Different types of documentation technique
An organization can use different types of documentation techniques available to it.
Some major types are:

Dataflow diagram
A data flow diagram (DFD) graphically describes the flow of data within an organization.
It is used to document existing systems and to plan and design new ones. There is no
ideal way to develop a DFD. A data flow diagram (DFD) is composed of the following
four basic elements:
    Data sources and destinations
    Data flows
    Transformation processes
    Data stores

A flowchart is an analytical technique used to describe some aspect of an information
system in a clear, concise, and logical manner. Flowcharts use a standard set of symbols
to pictorially describe transaction processing procedures. Flowcharts are of three types:
Document flowchart:
A document flowchart illustrates the flow of documents and information between areas of
responsibility within an organization. Document flowcharts trace a document from its
cradle to its grave. They show where each document originates, its distribution, the
purposes for which it is used, its ultimate disposition, and every thing that happens as it
flows through the system.

System flowchart:
System flowcharts depict the relationship among the input, processing, and output of an
AIS. A system flowchart begins by identifying both the inputs that enter the system and
their origins. The input can be new data entering the system, data stored for future use or
both. The input is followed by 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 be stored for later use, displayed on a screen or printed on paper. In many
instances, the output from one process is an input to another.

Program flowchart:
A program flowchart describes the specific logic to perform a process shown on a
systems flowchart. A flow line connects the symbols and indicates the sequence of
operations. The processing symbol represents a data movement or arithmetic calculation.

Differences between DFDs and Flowcharts
    DFDs emphasize the flow of data and what is happening in a system, whereas a
       flowchart emphasizes the flow of documents or records containing data.
    A DFD represents the logical flow of data, whereas a flowchart represents the
       physical flow of data.
    Flowcharts are used primarily to document existing systems. DFDs, in contrast,
       are primarily used in the design of new systems and do not concern themselves
       with the physical devices used to process, store, and transform data.
Basic Subsystem in the AIS

According to Romney and Steinbart, “Accounting Information Systems consist of five
subsystems. These are:
       1. The revenue cycle: involves activities of selling goods or services and
           collecting payment for those sales.
       2. The expenditure cycle: involves activities of buying and paying for goods or
           services used by the organization.
       3. The human resources/payroll cycle: involves activities of hiring and paying
       4. The production cycle: involves activities converting raw materials and labor
           into finished goods.
       5. The financing cycle: involves activities of obtaining necessary funds to run
           the organization, repay creditors, and distribute profits to investors.‖

Revenue Cycle:
The revenue cycle is a recurring set of business activities and related information
processing operations associated with providing goods and services to customers and
collecting cash in payment for those sales (Romney and Steinbart, 2003, P-359)
Romney and Steinbart identified four basic revenue cycle business activities. These are:
   1   Sales order entry

   2   Shipping

   3   Billing and accounts receivable

   4   Cash collections

Sales order entry:
Sales order entry process entails three steps:
           1. Taking the customer‘s order

           2. Checking and approving the customer‘s credit

           3. Checking inventory availability
The second basic activity in the revenue cycle – filling customer orders and shipping the
desired merchandise – entails two steps:
            1. Picking and packing the order

            2. Shipping the order

Billing and accounts receivable:
The third basic activity in the revenue cycle involves:
            1. Billing customers

            2. Updating accounts receivable

Cash collection:
The fourth step in the revenue cycle is cash collections. It involves:
            1. Handling customer remittances

            2. Depositing remittances in the bank

Expenditure Cycle
The expenditure cycle is a recurring set of business activities and related data processing
operations associated with the purchase of and payment for goods and services (Romney
and Steinbart, 2003, P-415). The primary objective of the expenditure cycle is to
minimize the total cost of acquiring and maintaining inventories, supplies, and the
various services necessary for the organization to function.
The three basic business activities in the expenditure cycle are:
            1. Ordering goods, supplies and services

            2. Receiving and storing goods, supplies and services

            3. Paying for goods, supplies and services

Production Cycle
The production cycle is a recurring set of business activities and related data processing
operations associated with the manufacturing of products (Romney and Steinbart, 2003,
P-468). Accurate and timely cost accounting information is essential input to decisions
           •   Product mix

           •   Product pricing

           •   Resource allocation and planning

           •   Cost management

There are four basic activities in the production cycle:
           1. Product design

           2. Planning and scheduling

           3. Production operations

           4. Cost accounting

Human Resource/ Payroll Cycle
The HRM/payroll cycle is a recurring set of business activities and related data
processing operations associated with effectively managing the employee work force
(Romney and Steinbart, 2003, P-505). Some of the more important activities include
the following tasks:
           –   Recruitment and hiring

           –   Training

           –   Job assignment

           –   Compensation (payroll)

           –   Performance evaluation

           –   Discharge of employees, due to voluntary or involuntary termination

The three basic functions the AIS provide in the HRM/payroll cycle are:
           1. Processing transactional data about employee activities

           2. Safeguarding the organization‘s assets

           3. Providing information for decision-making

The basic activities performed in the payroll cycle are:
           1. Update master payroll file
              2. Update tax rates and deductions

              3. Validate time and attendance data

              4. Prepare payroll

              5. Disburse payroll

              6. Calculate employer-paid benefits and taxes

              7. Disburse payroll taxes and other deductions

General Ledger and Reporting Activities
This part discusses the information processing operations involved in updating the
general ledger and preparing reports that summarize the results of an organization‘s
The four basic activities performed in the general ledger and reporting system are:
              1. Update the general ledger

              2. Post adjusting entries

              3. Prepare financial statements

              4. Produce managerial reports

Expenditure Cycle - A Closer Look

The expenditure cycle is a recurring set of business activities and related data processing
operations associated with the purchase of and payment for goods and services. The
primary objective of the expenditure cycle is to minimize the total cost of acquiring and
maintaining inventories, supplies, and the various services necessary for the organization
to function.

Key decisions:
    What is the optimal level of inventory and supplies to carry?
     Which suppliers provide the best quality and service at the best prices?
     Where inventories and supplies should be held?
    How can the organization consolidate purchases across units to obtain optimal

    How can information technology be used to improve both the efficiency and
       accuracy of the inbound logistics function?

    Is sufficient cash available to take advantage of any discounts suppliers offer?

    How can payments to vendors be managed to maximize cash flow?

Business activities:
Romney and Steinbart identified three basic business activities in the expenditure cycle.
These are:
             1. Ordering goods, supplies and services

             2. Receiving and storing goods, supplies and services

             3. Paying for goods, supplies and services

Activity 1: Ordering goods, supplies and services
The first major business activity in the expenditure cycle is ordering inventory or
supplies. The traditional inventory control method is often called economic order quantity
[EOQ]. This approach is based on calculating an optimal order size so as to minimize the
sum of ordering, carrying, and stockout costs.

Alternative inventory control methods are:
1. MRP (material requirement planning)
This approach seeks to reduce required inventory levels by scheduling production, rather
than estimating needs.
2. JIT (just in time)
JIT systems attempt to minimize both carrying and stockout costs.
A major difference between MRP and JIT is:
MRP systems schedule production to meet estimated sales need, thereby creating a stock
of finished goods inventory where JIT systems schedule production to meet customer
demands, thereby virtually eliminating finished goods inventory.
Documents and procedures:
    The purchase requisition is a document that identifies the following:

           –   requisitioner and item number

           –   specifies the delivery location and date needed

           –   specifies descriptions, quantity, and price of each item requested

           –   may suggest a vendor

    The purchase order is a document that formally requests a vendor to sell and
       deliver specified products at designated prices. It is also a promise to pay and
       becomes a contract once it is accepted by the vendor. Frequently, several purchase
       orders are generated to fill one purchase requisition.

Activity 2: Receiving and Storing Goods, Supplies and Services
The second major business activity involves the receipt and storage of ordered items.
Key decisions and information needs:
The receiving department has two major responsibilities:
    Deciding whether to accept a delivery

    Verifying quantity and quality

Documents and procedures:
The receiving report documents details about each delivery, including the date received,
shipper, vendor, and purchase order number. For each item received, it shows the item
number, description, unit of measure, and count of the quantity received.

Activity 3: Pay for Goods and Services
Approve Vendor Invoices:
The third activity entails approving vendor invoices for payments.
              The accounts payable department approves vendor invoices for payment

              The cashier is responsible for making the payment

The objective of accounts payable is to authorize payment only for goods and services
that were ordered and actually received.
Improving accounts payable:
Processing efficiency can be improved by:
             Requiring suppliers to submit invoices electronically, either by EDI
              (Electronic Data Interchange) or via the Internet

             Eliminating vendor invoices.      This ―invoiceless‖ approach is called
              evaluated receipt settlement (ERS).

Pay approved invoices:

             The cashier approves invoices

             The combination of vendor invoice and supporting documentation is
              called a voucher package.

             A key decision in the cash disbursement process is determining whether to
              take advantage of discounts for prompt payment.

Information needs:
The third function of the AIS is to provide information useful for decision making.
Usefulness in the expenditure cycle means that the AIS must provide the operational
information needed to perform the following functions:
                 Determine when and how much additional inventory to order.

                 Select the appropriate vendors from whom to order.

                 Verify the accuracy of vendor invoices.

                 Decide whether purchase discounts should be taken.

                 Monitor cash flow needs to pay outstanding obligations.

                 Efficiency and effectiveness of the purchasing department

                 Analyses of vendor performance such as on-time delivery, quality, etc.

                 Time taken to move goods from the receiving dock into production

                 Percentage of purchase discounts taken
Internal Control and AIS

Internal Control:
The traditional definition of internal control is that internal control is the plan of
organization and the methods a business uses to safeguard assets, provide accurate and
reliable information, promote and improve operational efficiency, and encourage
adherence to prescribed managerial policies.
Management control:
Management control encompasses the following three features:
       1. It is an integral part of management responsibilities.
       2. It is designed to reduce errors, irregularities, and achieve organizational goals.
       3. It is personnel-oriented and seeks to help employees attain company goals.

The specific control procedures used in the internal control and management control
systems may be classified using the following four internal control classifications:
           1. Preventive, detective, and corrective controls
           2. General and application controls
           3. Administrative and accounting controls
           4. Input, processing, and output controls

In 1992, COSO (Committee of Sponsoring Organization) issued the results of a study to
develop a definition of internal controls and to provide guidance for evaluating internal
control systems. The report has been widely accepted as the authority on internal
controls. The COSO study defines internal control as the process implemented by the
board of directors, management, and those under their direction to provide reasonable
assurance that control objectives are achieved with regard to:
           –   effectiveness and efficiency of operations

           –   reliability of financial reporting

           –   compliance with applicable laws and regulations
COSO‘s internal control model has five crucial components:
           –    Control environment
           –    Control activities
           –    Risk assessment
           –    Information and communication
           –    Monitoring

The Information Systems Audit and Control Foundation (ISACF) recently developed the
Control Objectives for Information and related Technology (COBIT). COBIT
consolidates standards from 36 different sources into a single framework. The framework
addresses the issue of control from three vantage points or dimensions:
               1. Information: needs to conform to certain criteria that COBIT refers to as
                  business requirements for information
               2. IT resources: people, application systems, technology, facilities, and
               3. IT     processes:   planning   and      organization,   acquisition   and
                  implementation, delivery and support, and monitoring

Elements of Internal Control
The elements of internal control as identified by COSO are briefly discussed below:

Control Environment
The first component of COSO‘s internal control model is the control environment. The
control environment consists of many factors, including the following:
   1. Commitment to integrity and ethical values
   2. Management‘s philosophy and operating style
   3. Organizational structure
   4. The audit committee of the board of directors
   5. Methods of assigning authority and responsibility
   6. Human resources policies and practices
   7. External influences
Control Activities
Generally, control procedures fall into one of five categories:
   1. Proper authorization of transactions and activities
   2. Segregation of duties
   3. Design and use of adequate documents and records
   4. Adequate safeguards of assets and records
   5. Independent checks on performance
Proper Authorization of Transactions and Activities:
Management lacks the time and resources to supervise each activity and decision. So they
establish policies for employees to follow and then empower them to perform
accordingly. This empowerment is called authorization. Certain activities or transactions
may be of such consequence that management grants specific authorization for them to
occur. For example: the approval is often required if the credit sale is over TK 30,000. In
contrast, management can authorize employees to handle routine transactions without
special approval, a procedure known as general authorization.
            Authorization is the empowerment management gives employees to
               perform activities and make decisions.

            Digital signature or fingerprint is a means of signing a document with a
               piece of data that cannot be forged.

            Specific authorization is the granting of authorization by management for
               certain activities or transactions.

Segregation of Duties:
Good internal control demands that no single employee be given too much responsibility.
An employee should not be in a position to perpetrate and conceal fraud or unintentional
errors. The following three types of function should be segregated.
    Authorization means approving transactions and decisions.
    Recording means preparing source documents, journals, ledgers, or other files,
       preparing reconciliations and preparing performance report.
    Custody means handling cash maintaining an inventory storeroom, receiving
       checks, writing checks.
               Custodial Functions

                Handling cash
               Handling assets
               Writing checks
           Receiving checks in mail                      Authorization Functions

                                                                Authorization of
             Recording Functions                                 Transactions
        Preparing source documents
           Maintaining journals
         Preparing reconciliations
       Preparing performance reports

If two of these three functions are the responsibility of a single person, problems can
arise. Segregation of duties prevents employees from falsifying records in order to
conceal theft of assets entrusted to them.
Design and Use of Adequate Documents and Records:
The proper design and use of documents and records helps ensure the accurate and
complete recording of all relevant transaction data. Documents that initiate a transaction
should contain a space for authorization. The following procedures safeguard assets from
theft, unauthorized use, and vandalism:
            effectively supervising and segregating duties
            maintaining accurate records of assets, including information
            restricting physical access to cash and paper assets
            having restricted storage areas

Adequate safeguards of assets and records:
Once upon a time, people had been thinking to have the safeguard for cash or for physical
assets. But now a day, information is also the valuable one. The following procedures
safeguard assets from theft, unauthorized use, and vandalism.
    Effectively supervising and segregating duties.

    Maintaining accurate records of assets including information.
    Restricting physical access to assets.

    Protecting records and documents.

    Restricting access to computer rooms, computer files.

The following can be used to safeguard assets:
           –     cash registers
           –     safes, lockboxes
           –     safety deposit boxes
           –     restricted and fireproof storage areas
           –     controlling the environment
           –     restricted access to computer rooms, computer files, and information

Independent check on performance:
We have here various types of independent checks.
    Reconciliation of two independently maintained sets of records: Bank
       reconciliation is the example. Another example is comparing the accounts
       receivable subsidiary ledger total with the accounts receivable total in the general

    Comparison of actual quantities with the recorded amounts. The cash in a cash
       register drawer at the end of each clerk‘s shift should be the same as the amount
       recorded on the cash register.

    Independent review: After one person processes a transaction, a second person
       sometimes reviews the work of the first.

Risk Assessment
The third component of COSO‘s internal control model is risk assessment. Companies
must identify the threats they face:
            strategic — doing the wrong thing

            financial — having financial resources lost, wasted, or stolen

            information — faulty or irrelevant information, or unreliable systems
Information and Communication
The fourth component of COSO‘s internal control model is information and
communication. The people of the organization will capture and exchange the
information needed to conduct, manage and control its operation. According to AICPA,
an AIS has five primary objectives. These are:
    Identification and recording of all valid transactions. For example: if a company
       records fictitious sales, at that time revenue is overstated.
    Proper classification of transaction. For example: improperly classifying an
       expense as an asset overstates assets and net income.
    Recording transactions at their proper value. For example: an accounts receivable
       that becomes uncollectible should be written off. .
    Recording transactions in the proper accounting period.
    Properly presentation and related disclosures in the financial statement is
       important. For example: A lawsuit against the company will be disclosed in the

Monitoring Performance
The fifth component of COSO‘s internal control model is monitoring. The entire process
will be monitored and the modification will be done as needed. Key methods of
monitoring performance include effective supervision, responsibility reporting and
internal auditing.
    Effective supervision: It includes training and assisting employees, monitoring
       their performance, correcting errors, safeguarding assets by overseeing employees
       who have access to them.
    Responsibility accounting: Responsibility accounting system includes budget,
       schedules, standard costs and quality standards.
    Internal auditing: It is important to identify the internal control effectiveness.
                BEXIMCO PHARMA at a Glance

Beximco Pharmaceuticals Ltd. is a leading edge pharmaceutical company and is a
member of the BEXIMCO Group, the largest private sector industrial conglomerate in
Bangladesh. The strategic strengths of Beximco Pharma are its strong brand recognition,
highly skilled work force and diversified business mix. Beximco Pharma brands -
Neoceptin R (Ranitidine), Napa (Paracetamol), Amdocal (Amlodipine), Neofloxin
(Ciprofloxacin), Bexitrol F (Salmeterol Plus Fluticasone), Bextrum Gold (Multivitamin
and Multi Mineral) and Atova (Atorvastatin) are among the most recognized brands in
the Bangladesh Pharmaceutical industry.

Beximco Pharma started its operation in 1980, manufacturing products under the licenses
of Bayer AG of Germany and Upjohn Inc. of USA and now has grown to become
nation's one of the leading pharmaceutical companies, supplying 15% of country's total
medicine need. Today Beximco Pharma manufactures and markets its own `branded
generics' for almost all diseases from AIDS to cancer, from infection to asthma, from
hypertension to diabetes, both nationally and internationally.

Beximco Pharma manufactures a range of dosage forms including tablets, capsules, dry
syrup, powder, cream, ointment, suppositories, large volume intravenous fluids, metered
dose inhalers etc. in several world-class manufacturing plants, ensuring high quality
standards complying with the World Health Organization (WHO) approved current Good
Manufacturing Practices (cGMP).

The recipient of three times `gold' national export trophy, Beximco Pharma is the largest
exporter of pharmaceuticals from Bangladesh, spreading its presence in many developing
and developed countries across the globe. Beximco Pharma is the only company in
Bangladesh to receive this highest national accolade for export, for record three times.
Beximco Pharma markets its brands through professional sales and marketing teams in
African, Asian and European markets. It also supplies its products to renowned hospitals
and institutions in many countries, including Raffles Hospital and K K Women &
Children Hospital in Singapore, MEDS and Kenyatta National Hospital (KNH) in Kenya,
Jinnah Hospital, Agha Khan Hospital and Shaukat Khanum Memorial Hospital in
Pakistan. Beximco Pharma is also an enlisted supplier of WHO and UNICEF.

Another important business activity of Beximco Pharma is the contract manufacturing for
major international brands of leading multinational companies.

Beximco Pharma is acclaimed domestically and internationally for its outstanding
product quality, world class manufacturing facilities, product development capabilities
and outstanding service.

Beximco Pharma has a strong market focus and is anticipating continued future growth
by leveraging business capabilities and developing superior product brands and markets.
In particular the company is very interested in developing a strong export market in USA
and Europe. To meet the future demand Beximco Pharma has invested US$ 50 million to
build a new state-of-the-art manufacturing plant, confirming to USFDA and UK MHRA
standards. This new plant will also offer contract-manufacturing facility to leading
pharmaceutical companies, especially from Europe and US.

Corporate Headquarter           17 Dhanmondi R/A, Road No. 2
                                Dhaka 1205, Bangladesh
Operational Headquarter         19 Dhanmondi R/A, Road No. 7
                                Dhaka 1205, Bangladesh
Factory                         126 Kathaldia, Tongi, Gazipur
Year of Establishment           1976
Commercial Production           1980
Status                          Public Limited Company
Business Lines                  Manufacturing and marketing of
                                pharmaceutical finished products and Active
                                Pharmaceutical Ingredients (APIs)
Overseas Offices & Associates   UK, USA, Pakistan, Myanmar, Singapore,
                                Kenya, Yemen, Nepal, Czech Republic,
                                Vietnam, Cambodia and Sri Lanka
Export Markets                  Bhutan, Cambodia, Czech Republic,Germany,
                                Hong Kong, Iran, Iraq,Kenya, Malaysia,
                                Mozambique, Myanmar, Nepal, Pakistan,
                                Philippines,Russia, Singapore, South Korea, Sri
                                Lanka, Thailand, Ukraine, Vietnam,Yemen
Authorized Capital (Taka)       1,000 million
Paid-up Capital (Taka)          559.76 million
Net Turnover 2004 (Taka)        2,402.7 million
Number of Shareholders          50750 (As on Dec 31, 2004)
Stock Exchange Listings         Dhaka, Chittagong, London
Number of Employees             1,385
                                Mission Statement of BEXIMCO PHARMA
           The mission statement of BEXIMCO PHARMA implies its keenness to be socially
           responsible in true sense. It says:

“ Each of our activities must benefit and add value to the
                                                                                                   The motto of BPL
common wealth of our society. We firmly believe that, in the final
                                                                                                   is          to          bring
analysis we are accountable to each of the constituents with
                                                                                                   happiness and smile
whom we interact; namely: our employees, our customers, our
                                                                                                   to        life       through
business associates, our fellow citizens and our shareholders.
Each of our activities must benefit and add value to the common
                                                                                                   responsibilities.          In
wealth of our society. We firmly believe that, in the final analysis
                                                                                                   their words:
we are accountable to each of the constituents with whom we
interact; namely: our employees, our customers, our business
associates, our fellow citizens and our shareholders .”                                            “ M e d ic i n e           is
                                                                                                   r e l a t ed              to
           h u m a n l i f e a nd t he r e f o r e , i t s ma n u fa c t u r e r s ha v e i mm e n s e s o c i a l
           responsibility            of     p r o v id i n g      s a fe     and     e ff e ct iv e       m e d i c at i o n,
           d e m a nd i n g u nc om p r o m i s i n g e ff o r t s a t a l l le v e l s o f i t s a c t iv i t i e s .
           B e x i m c o P ha r m a ce u t i ca l s L t d. - t h e le a d i ng h ea l t h ca r e c o mp a n y
           in   Bangladesh,               ha s   been          ma k i n g    every     ef f o rt   to        ensure         t he
           e f f ec t iv e n e s s   a nd    safety       of      t he      medicines       t ha t      it    p r o d u ce s .
           P h y s i c i a n s a nd p a t i e n t s of t he c o u nt r y r e l y o n t h e e ff ic a c y of t he
           medicines           of    Beximco          Pharma          at     the   time      of      c r it i c a l    n e ed s
           d e m o n s t r a t i n g t h e ir c o n f id e n c e a nd t r u s t o n B P L p r o d uct s . "

           BPL has a promise to make a healthier tomorrow for the society where the citizens will
           enjoy a better life. The highlights of BEXIMCO PHARMA‘s endeavor towards a
           healthier society are innovation and the adventure of risk taking through bold decisions:
“BPL’s history is one of innovation and adventure, of risks taken
and bold decisions made towards a noble purpose building a
healthier tomorrow where our fellow citizens can live lon ger,
healthier and better. In 2003, we have redefined success as
something broader than mere performance in the marketplace
and have taken initiatives to prepare for the future.

BPL     is    the        first   local    company       who        dared   to    invest    in
manufacturing Active P harmaceutical Ingredients (APIs) and to
enter        foreign        markets      of   diversified       culture    and    stringent
regulatory environment. Over the last decade, the risk taken has
paid     us    off.      Now     our     capability    in   manufacturing        APIs     and
expertise in exploration of foreig n markets have placed us in a
relatively better position over other local companies to face the
post-WTO era.

Above all what adds more to our pride is our commitment to the
society. This is reflected in our launching of Anti -HIV/AIDS drugs
first ever in Bangladesh, which was further reinforced through the
introduction of anti-cancer drugs.

With         our        continuous        improvement         in     performance          and
commitment to our customers, we are confident to strengthen our
position           in     the    marketplace          further      and     increase       the
shareholders’ value.”

             Managing the Champion Organization

The management of BEXIMCO PHARMA is simply exceptional in comparison to any
other listed companies in this country. It has a blend of professionalism and wisdom,
which plays a key role in managing the champion organization. The Board of Directors

       A S F Rahman                                  Chairman

       Salman F Rahman                               Vice Chairman

       Iqbal Ahmed                                   Director

       M.A. Qasem                                    Director

       O.K. Chowdhury                                Director

       Dr. Abdul Alim Khan                           Director

       A.B. Siddiqur Rahman                          Director

       Dr. Farida Huq                                Director

       C. H. Rahman                                  Director

       Barrister Faheemul Huq                        Director

       Ahsanul Karim                                 Director

A dedicated Management committee and an Executive Committee make sure that
BEXIMCO PHARMA achieves its target with sheer professionalism. The committees

                  The Management Committee:

              Nazmul Hassan, CEO
            Osman Kaiser Chowdhury
                   Ali Nawaz
              Afsar Uddin Ahmed
                    The Executive Committee:

          Osman Kaiser Chowdhury
        Chowdhury Hafizur Rahman
               Nazmul Hassan
                  Ali Nawaz
             Afsar Uddin Ahmed

The responsibility of the company secretary is carried out by Mr. Md. Asad Ullah,

The Footprints Left Behind by BPL Over time

1976 : Registration of the company
1980 : Started manufacturing and marketing of licensee products of Bayer AG of Germany
and Upjohn Inc. of USA
1985 : Listing in the Dhaka Stock Exchange (DSE) as a Public Limited Company

1990 : Commissioning of Basic Chemical Unit
1992 : Started export operation with Active Pharmaceutical Ingredients (APIs)
1993 : First export market operation with finished formulation


1998 : First pharmaceutical company of the country achieving „National Export Trophy
(Gold)‟for 1994-95
1999 : UNICEF approval of BPL as an enlisted supplier
2000 : Agreement to manufacture Metered Dose Inhaler (MDI) for Glaxo SmithKline
2001 : Introduction of Small Volume Parenterals (Injectables) Establishment of Analgesic-
Antiinflammatory API plant 2002 : Won the first prize of ICAB National Awards 2000 for
„Best Published Accounts and Reports‟in Non- Financial Sector Category The first
Bangladeshi company to supply pharmaceuticals to Raffles Hospital- the most prestigious
hospital of Singapore
2003 : Received „National Export Trophy (Gold)‟for consecutive 2 years (1998-99, 1999-
2000) Won the Silver prize of ICAB National Awards 2003 for „Best Published Accounts
and Reports‟in Non-Financial Sector Category. Won a tender to supply Neoceptin R and
Neofloxin to Raffles Hospital of Singapore for the whole year‟s consumption Introduced
Anti-HIV drugs for the first time in Bangladesh. Diversification into Anti-Cancer
therapeutic class.

2004: Signed contract with Novartis to manufacture their liquid, cream, ointment and
suppository products under “toll Manufacturing” agreement.

2005: Merger of Beximco Infusions Ltd. with Beximco Pharmaceuticals Ltd.

                Departments of Beximco Pharma

BPL has major functional departments headed by highly qualified professional
staff. Introduction of various divisions are as follows:
Central Product Management (CPM) Department

The activities of CPM are:

             Market research

             Selection of new product

             Design and testing of product (DTP)

             Sample store (logistics) management

             Making strategy

The department deals with the controllable marketing variables, the 4p's. This
department takes decisions in the following areas:

      Product - Size, color, shape, packaging etc.

      Price - Raw materials cost, customer ability, regulatory body's approval etc.

      Promotion - Promotional aids include brochure, pads, folder, and plant visit by
         physicians, health-related people, students, and people of different student.

Purchase Department

The purchase department deals with all the purchase (pharmaceuticals raw
materials, packaging materials, office equipment, machinery's etc.) of the
organization. Based on the information provided by the planning department, the
purchase department prepared the import authorization formats. Then the format is
sent to be he director (commercial) for approval. After an L/C is opened all
information about its latest status is documented in a 'purchase consignment (PC)
folder' preserved by the purchase department. And for the monitoring (current status &
information record) of all L/C, such books 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, delivery / receiving). Considering the status
of stock, the planning department then decides about which materials (active
pharmaceutical ingredients, packaging materials etc.) should be procured. 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 database preserved by the
planning dept. Within 15 days, the quotations are submitted by the competing
suppliers. Then the planning dept. prepares a comparative statement and forwards it to
the purchase department.

Sales Department

Sales department is a marketing execution department. It supplies sales forecast to
the planning department. It is headed by the Director, Marketing who is aided by
the Sales Manager. The sales manager looks after the activities of the Assistant
Sales Managers. Each Assistant Sales Manager supervises 5 Regional Sales
Controllers (RSC). Each RSC supervises 5 to 8 Field Supervisors (FS). Each FS
supervises and monitors the activities of 4 to 5 Medical Representatives (MR).

The core responsibility of an MR is to generate demand of products. An MR is given
42-day training (about anatomy, human body, basic sales skill etc.) by the SE&T
department one he successfully goes through the written and oral test. Then a
territory is assigned to an MR based on –

               Geographical location
               Communication
               Number of customers
               Business potentiality

 A monthly tour program is developed for each MR. Then the day-wise
 breakdown is done. The sales / promotional plan is developed (for chemist coverage
 15 calls have to be made, or for doctor's coverage 16 calls have to be make each day).

 The guideline is given to the MRs by the CPM / Sales / Medical / training
 department in each cycle conference. Promotional strategies are also set there.
 Performance analysis of MRs is received.

 FS sometimes goes for surprise visit to see whether things got going as planned.
 He is required to ensure the achievement of target within the time frame.
 His main responsibilities are –

      People management; and

      Time management

 FS meets MRs prior to call, during call and after call to monitor their activities. An RSC
 maintains the prescription trend up. He is concerned with –

      Territory development; and

      Supervisor development

 RSC reports to the Sales Manager whose main responsibilities are –

      Interaction with distribution and production department

      Giving feedback to CIM

      Human Resources development

      Visit the critical customers

      Donation management.

Distribution Department
Beximco Chemical Division carries out its distribution activities through its
own distribution company called I & I Services Ltd. A senior distribution Manager
is charged with ensuring the smooth functioning of the distribution system. He is aided
by two Asst. Distribution Manager – one looks after the operations and the other
looks after the administration. There are 9 Senior Distribution Officers. There
are also Distribution Officers and Asst. Distribution Officers.

BPL has 15 depots throughout the country located in – Dhaka, Narayangonj,
Comilla, Kushtia, Khulna, Barisal, Chittagong, Sylhet, Mymensingh, Faridpur,
Rajshahi, Noakhali, Bogra, Rangpur and Cox's Bazar. Each depot is headed by a depot-
in-charge. BPL is a retail-oriented company selling to more than 22,000 retail outlets
throughout the country. Wholesale is less than 1% and sales to Govt. are less than
0.5%. The field force promotes in its own territory to give delivery order by
sending an invoice for allocation. The allocation is made by the distribution
assistant in each depot. He also gives the amount received as cash sales to the
distribution cashier. A sales summary (a sales journal) is prepared each month for
each depot. It is the sales report of the month that shows how much is sold in cash
and how much in credit.

Human Resource Department

Two major types of activities are accomplished by this department. These are:
              Administrative functions (maintenance and protocol services)
              Human resource related functions
The objectives of Human Resource Department are:
              Recruitment policy and procedure
              Conformation policy and procedure
              Placement of employees
              Human Resource Development
              Organizational structure review and modification
              Career planning
              Hiring and firing
              Job description preparation
              Conducting appraisal at the end of each year
              Maintaining and developing employees personal files
              Safety-security

Business Research & Development Department

Business R&D Department began its operation from January l, 2000. It is
working on market development, both domestic and international. The functions that
are done by this department are:
         Outsourcing negotiated

         New product study

         New technology study

         Project feasibility study

         Commercial negotiation

         Observing the world pharmaceuticals market

MIS Department

The MIS Department takes care of total automation of BPL. It supports the hardware and
software network of the company and the factory. This department provides
services through SNA Server, WIN NT Server, SQL Server. BPL operational
headquarters is linked to the corporate headquarters through fiber optic cable.
The department also established a Wide Area Network (WAN) with the 15 depots
around the country. MIS department develops the access Control & attendance
monitoring System internally. The department maintains the radio-link between the
factory and the head-office. The software section is to work for developing
software solutions as per organizational requirements.

Multimedia Department

Functions of the multimedia department are:
        Web page designing.
        Developing multimedia presentation for presentation programs.
        Making videos of conferences, meeting etc.
        Making video for products.
        Making video for company.
        Keeping the records of annual meeting and other meeting.

Medical Department

This department is a unique department in this industry as BPL established this first
ever in order to create easy relationship through using the professi onal linkage
with the doctors, the ultimate customer of the pharmaceutical companies. It provides
services (e. g. slide preparation, providing different journals, books etc.) to the health
professional on different issues and receives feedback from them. It arranges seminars
on different issues such as deseases and their cures in different parts of the
BPL's production facility is situated in Tongi. It 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 FDA approved plant is on the pipeline.

Accounts & Finance Department

The activities of the finance department are carried over by 40 persons whose
operations are divided under the three heads:

              Treasury
              Accounts
              Cost and Budget

Treasury section deals with (i) cash at banks and (ii) bills. It also looks after the
cash planning and management. A review is made every week for this purpose.

Accounts section is the custodian of all records and transactions. A computer
software   program      called   'MAPICS'       (Management      Accounting      Planning
Information Control System) is used to aid the activities.

Cost and Budget Department identifies the cost centers and prepares the budget. There
are almost 40 cost centers.

The annual budget preparation starts at October. The past data is provided there. Standard
operating guidelines are also there. Budget review is done quarterly (internally) and
half-yearly (by the top management).

                 Quality: The Passion of BPL

Over the years the trust and reliability on their products has emerged as one of their core
competencies. Today the name BPL has been synonymous with trust and reliability
inherent in the term quality. Quality is their relentless passion. Quality is ingrained in
their values and in all what they do. Their business processes and practices are designed
to achieve quality results that would meet the expectation of patients and physicians
through getting highest quality products, of shareholders and stakeholders through
achieving returns. When it comes to manufacturing, this guiding principle places even
more social responsibility of ensuring quality in terms of quantity, purity, stability, safety,
efficacy, and overall presentation of the products. Their quality assurance system
establishes control or checkpoint to ensure the quality of the products during production
and upon completion of production. It starts with raw material and component testing and
includes in-process quality control, packaging, labeling, and finished product testing as
well as batch auditing and stability monitoring. Standard Operating Procedures (SOPs)
developed in accordance with the latest WHO approved current Good Manufacturing
Practices (cGMP) are being strictly followed in every step.

To ensure all these, a highly dedicated academically sound and professionally competent
team comprising of pharmacists, chemists, biochemists, microbiologists, and engineers
are using most modern and sophisticated equipment like High Performance Liquid
Chromatography (HPLC), Gas Chromatography (GC), Infrared (IR) Spectrophotometer,
Ultraviolet (UV) Spectrophotometer, Homogenize, In-Vitro Bioavailabilty tester, Lung
simulator, Disintegrator, Dissolution tester, & many other latest computer-aided quality
control instruments and accessories. This passion to the total quality has helped BPL
from its inception to create many blockbuster brands in a fiercely competitive generic
pharma market.

 Research and Development: A Promise Kept by BPL

BPL employs a significant part of its resources in R&D that makes BPL a forerunner in
the Bangladesh pharmaceutical industry. The R&D team comprises of academically
sound and professionally competent personnel who have firm commitment to new
product development. R&D team of BPL is consistently striving towards:

                      Developing new formulations
                      Simplifying manufacturing processes
                      Bringing cost efficiency

The sincere and relentless effort of our R&D team has taken the company a step further
in 2004 by developing Ultrafen Plus (Drug for pain & inflammation) and Pretin-D (Drug
for allergic rhinitis with congestion) applying unique formulation technology for the first
time in Bangladesh. These two drugs added new momentum to the sales revenue of 2004.

A good number of APIs are also in the development pipeline to ensure availability of raw
materials in the pharmaceutical patent regime. Many APIs of different therapeutic classes
have already been developed and manufactured and some more drugs of antifungal,
antihistamine, cardiovascular, antiinflammatory, anti-HIV, anticancer and other
therapeutic classes are in the final development stage.

This reverse engineering capability of our R&D team would be an added advantage for
BPL in the pharmaceutical patent regime.

   Environment, Health and Safety: BPL’s Commitment to Care
One of the primary goals of BPL is to contribute to keep the earth clean. BPL is aware of
its responsibility of caring for the environment and the importance of reducing
environmental effects of manufacturing activities to a practical minimum.

BPL is committed to a green operation and its facilities are carefully designed and
operated to prevent all forms of pollution. Discharge of conventional substances from the
company‘s manufacturing plant is subject to stringent controls. Regular environmental
monitoring is carried out. Effluent treatment plant reduces the hazardous impact of the
emissions to a minimum. Solvents used in the synthesis processes are recovered in
efficient recovery plants.

Wherever practicable, BPL works to reduce the impact of its operations on the
environment. BPL continuously strives to improve performance and optimize the use of
all material and human resources, thereby minimizing adverse impact on environment.

  Blockbuster Products: BPL’s Major Contributors
Success of a pharmaceutical company depends on how effectively it establishes its brands
in the market. The excellent blending of world class manufacturing technology and
innovative marketing strategies made BPL successful in achieving brand equity for its
products. As a result the number one product by value and the number one product by
unit in Bangladesh Pharmaceutical Market and also the highest selling drug in the
cardiovascular class belong to BPL.

Neoceptin R - the number one product by value
One of the major revenue earning products of BPL is Neoceptin R. It is also the highest
selling product by value and is the undisputed leader in Bangladesh Pharmaceutical

Napa - the number one product by unit
Napa is the highest selling product by unit. Napa has become a household brand in the
mind of physicians as well as consumers of Bangladesh.

Amdocal - the highest selling drug in cardiovascular market. Amdocal is one of the most
prestigious and revenue earning products of BPL. It is the highest selling product in the
cardiovascular market.

Findings of the Study

Beximco Pharmaceuticals Ltd. (BPL) is the biggest company of Beximco's Chemical
Division. It is also one of the largest manufacturers of pharmaceutical products in the
country. It not only satisfies the domestic needs with its vast range of products, but also
exports to many different countries. To manage this huge business, to keep track of numerous
everyday transactions, to facilitate management for different types of decision -making and
to keep the stakeholders informed with different kind of information in different times
are daunting tasks. Various types of information need to be generated, accumulated and
customized according to the users' requirements. Accounting Information System (AIS) is
one of the major information systems that play a vital role in this regard.

Being an accounting professional today requires far more than jus t a
textbook understanding of debits and credits, journalizing and posting steps
and the latest accounting and auditing pronouncements. The accounting
professionals of 21st century must also stay abreast of the many technological
advances, which continually reshape the business world. These advances have sparked
an information revolution, which in the past few decades has transformed almost
every aspect of accounting. Perhaps the greatest impact of the information
revolution has been on the accounting system itself indeed, accounting systems
and the world of computers and data processing has become inseparable.
Recognition of this fact has given rise to a new accounting specialty area known as
Accounting Information System.

The dynamic and systematic Accounts and Finance department with established
network and different sophisticated and user friendly softwares are the keys for
such organized and reliable AIS that BPL possesses. Over the years the AIS of BPL
has been developed to meet almost all the accurate and timely information needs
both for the internal and external requirements.

Accounting Information Systems of BPL

An accounting information system is a unified structure within an entity, such as a
business 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 variety of users.
In fact the AIS is a subsystem of a broader information system that encompasses
all information generating activities. The AIS consists of people, procedure and
information technology. It performs the following three functions in the organization:

    It collects and stores data about activities and transactions so that the organization
       can review what has happened.

    It processes data into information that is useful for making decisions that enable
       management to plan, execute and control activities.

    It provides adequate controls to safe guard the organization assets, including its
       data. These controls ensure that the data is available when needed and that it is
       accurate & reliable.

This study has identified one of the major components of the accounting information
system of BPL – Expenditure cycle, the technology, the output & users, and the
control mechanisms related to this cycle. Some of them are input to the system, some
work to process the input, and some represent the output. Regardless of what they are,
they work together to achieve the system's objective which is to satisfy the information
needs of the users.

Business events, also called transactions, are the steps, within the physical &
financial processes of firms. We may group the business events of BPL into process
sequences called transactions cycles. Most Organizations engaged in many similar
and repetitive transactions. These transaction types can be grouped into four basic
cycles, each of which constitutes a basic subsystem in the AIS. These four cycles (or
subsystems) of the AIS are related to one another and each feeds data to the general
ledger & reporting system that provides information to both internal & external users.

Accounting Softwares

BPL uses a computer software program called "MAPICS" for its transaction processing
purpose. "MAPICS" is the acronym of "Management Accounting Planning
Information Control System". The software was developed and launched in the
market by IBM Corporation in 1980; BPL uses the 1995 upgraded version. It is DOS
based. MAPICS is batch processing software. In BPL transactions are entered in batches
for a month and the batch is then posted and reports are generated according to pre -
designed format. By structure MAPICS is a modular software. BPL uses the following
modules of MAPICS:

    General Ledger.

    Budget Preparation.

    Financial Ratio Analysis.

    Fixed Asset Accounting.

    Accounts Receivable.

    L C Monitoring System.

Apart from MAPICS, BPL uses some other software for accounting purpose such as:

    Fixed Assets Management System.

    Payroll System.

    Inventory Control System.

    Sales and Billing System.

    Production Information System.

All these softwares are developed by the MIS department of BPL and these softwares are
not integrated with MAPICS.

Furthermore, MS Excel is extensively used by the accounts department.

Expenditure Cycle

The expenditure cycle is a recurring set of business activities and related data processing
operations associated with the purchase and payment for goods and services. The
expenditure cycle of BPL includes:
        1. Acquisition of raw and packing material
              Local Purchase
              Import
        2. Acquisition of fixed asset
        3. Other revenue 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 revenue expenditures are discussed briefly.

Local Purchase of Raw and Packing Material

The domestic purchase of raw material includes following business functions;
1.   Processing purchase order
2.   Receiving goods, material and services
3.   Recognizing the liability
4.   Processing and recording cash disbursement

Processing Purchase Order
The procedure begins with need recognition. The respective department identifies its
need, gets approval of the departmental head and with the approval an authorized person
sends purchase requisition to purchase department to initiate purchase. In case of
property, plant and equipment acquisition, before sending purchase requisition, a budget
has to be prepared by the user department. If the departmental head or higher authorities,
whichever is required, approve the proposed budget 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 buy materials.
When the purchase department got the requisition, it calls for quotation or tender. After
receiving the quotation or tender, supplier has been selected. The supplier may be local or
international. If the terms and conditions are in favor of both BPL and the selected
supplier, an order for the purchase is than issued by the purchase department. In case of
raw or packing material, the purchase order is issued by the factory. A purchase register
is maintained by the purchase department in which they maintain all the required
information relating to a consignment.

Receiving Material, Goods and Services
Generally the goods and services are received by the user department who has issued the
purchase requisition or in some cases by the authorized department. Materials are
received by Quality Assurance Department (QAD) in the factory. After receiving
materials, goods and services an MRR (Material Receiving Report) is issued for material
and other than material a GRR (Goods Receiving Report) is issued by receiving
department to purchase department. In the mean time the invoice or bill is received by
the purchase department.

Before using the product by user department that is at the time of delivery, it has been
inspected by the inspection team or QCD (Quality Control Department), by user
department or by authorized department. QCD examined the materials on a sample
testing basis and provide a certificate. Normally,
1.     QCD inspects standardized items like raw material, packing material etc.
2.     User department inspects non standardized items like services, stationeries etc.
3.     Inspection department inspects machineries, plants etc.

Again at BPL there are some authorized departments for inspection. For example,
computer or IT related products are inspected by IT department, furniture are by HR
department. If the received goods, material and services are not according to purchase
requisition BPL may
       Refuse the order
       Reorder the item
       Received on condition
Before taking any action, there is a discussion between BPL and the supplier. After re-
communication it has been decided whether the payment to the supplier will be made or
                Packing              Accept
                Slip               Delivery by                    Purchasing order
 Vendor                               User                        by Purchase/
                                   department/                    Planning Dept
              Goods &
              services               Factory

                              Packing       Goods &
                                  slip      services

                                    Count &
  Vendor                             goods by                         MRR/ GRR

                                            Goods &
                            MRR/GRR         services

                              Warehouse/ Factory/
                              Ready for Use

                             Figure 3: Receiving Function

Recognizing the liability
The purchase department compares the invoice/bill and MRR/ GRR/ QC with the
purchase order. If every thing has been complied, the amount payable to supplier is
approved by the purchase department. There is a seal on the invoice named ‗Approved
By‘ with the signature of purchase manager. It means the purchase department is satisfied
with the information mentioned in the bill. A copy of all this documents is kept by
purchase department and the main copies along with copies not negotiable are sent to
accounts and finance department.

The accounts and finance department is then ready for giving provision voucher. An
authorized person is liable for giving provision voucher. He examines the not negotiable
copy of bill/ invoice at the time of giving provision voucher. Generally the liability is
recognized when the vendor sends the invoice or bill. But in some cases it may be
recognized at the time of goods received.

Processing and Recording Check/ Cash Disbursement
After a certain period of time when the date becomes matured for the liability the
payment is made by BPL. The matured date has been calculated in the aged payable
report for each vendor. The due amount for an individual vendor is identified from
vendor business position report. In this stage another report is prepared for forecasting
cash requirement. An individual person enters data in MAPICS for having this reports
and forecasts. The same person checks the arithmetical accuracy, casts, cross casts,
deductions and payable amounts. If the checking is matched with those reports checks are
issued to pay vendor.

The mode of payment is usually pre numbered check. In most cases the payment is made
by payee only check. In some cases the payment may be made by cash or by bearer check
or paid in advance fully or partly.

Issuing check is a sensitive issue. It is prepared by that person who will give the payment
voucher. And it is signed by senior management. The payment voucher is given by the
same person who has checked the reports and payable amounts. This voucher includes
original bills, MRR/ GRR, Vat (musok 11) and challan. It is recorded in the record book
after the sign has been made.

After all the procedure has been completed the check is given to vendor and the counter
foil of that check is preserved by BPL. If the payment amount is large part by part
payment is made.
    Purchase        Factory/ User                           Vendor
   Department        department

    Purchase        MRR/GRR
     order                                            Vendor

                             invoices by

                                          Bill/ Invoice
                                          Purchase Order
                                          MRR/ GRR
                                          VAT (MUSOK 11)

                            Accounts &               A/P
                             Finance                 Payment
                            Department               Voucher

                            Pay Vendor
                               (cash                  A/P
                            disburseme                Provision
                                nts                   Voucher


                       Figure 4: Pay for Goods Function

The acquisition and payment procedure are summarized below with the help of a
    1. Requisition of respective                  With approval of the
       department                                 departmental head

             Tender / Quotation call

                      Issuing order                       By Purchase Department
                                                          or by User Department

                  Receiving goods / Services by
                 factory/ Respective Department

                                                                 By QAD, or by
                            Produce MRR / GRR                    receiving

                            Receiving bills by purchase

                               Comply the bills with order,
                                MRR / GRR and approve

                                      Sent bills to accounting

                                        Accounts payable journal
                                       voucher/ provision voucher
     Payment procedure is
        complied with sec
  51(A), 52 of income tax
  ordinance-1984 and rule                      Ready for payment
         16 of income tax
  Rule1984 and Musok 11
        of VAT Act 1991
                                               Accounts payable payment

                                                          Issuing check
Figure 5: Procurement of
local material
Input Information

1. Purchase Requisition
It‘s a requisition generate by respective department. Data elements conveyed by a
purchase requisition of BPL include unique number of purchase requisition, CEP and
purchase order number with date name and description of material and service, unit
number, required quantity, unit price and quantity ordered. It also includes signature and
approval of authorized person, supplier‘s name; mode of payment, advance payment (if
any), terms and conditions, MRR number, invoice number etc.

If the requisition is for fixed asset then a CEP (Capital Expenditure Proposal) is raised by
the user department. In this case, proposed suppliers name, estimated budget, justification
for proposed expenditure and estimated life of proposed expenditure is also required. A
sample of CEP is given in the annexure.

2. Purchase Order
It‘s a document through which an order is made. The heading contains the purchase order
number, purchase requisition number and date. The body contains the description of
required item, quantity required and ordered, amount with unit price, supplier‘s name and
address, terms and condition of order, due date, other relevant dates etc. Besides, it also
describes the mode of purchase, advance payment (if any), purchase reference and other
relevant information.

3. Material Receiving Report (MRR) / Goods Receiving Report (GRR)
It‘s a report produced by the inspection department or receiving department. It 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 arrival of
products, its quantity, quality and description of the received item. It also includes MRR
number, order number, signature of the authorized person etc. The report is also used as
inspection report. Because it mentioned information regarding to
   Quantity ordered before quality test
   Quantity received after quality test
      Quality
      Whether as per specification or not
      Country of origin
      Deliver in time or not
      Pricing
      Legal requirements etc.

4. Invoice / Bill
This document is generated by supplier/ service provider that mentions the quantity and
amount, bill number with date etc. The bill is attached with MUSOK 11, delivery challan

5. Tax and VAT (Musok 11) Report
BPL prepares these reports for calculating the amount of Tax and VAT deducted at
source of suppliers. Tax and VAT amount is deducted from the total amount due.
Deduction and calculation is made according to section 51(A), 52 of ITO- 19841, rule 16
of ITR-19842, and the VAT Act-1992 (Mushok 11). The reports contain vendor number,
vendor name, and period, total amount due, tax amount, amount excluding tax amount,
VAT amount and amount excluding VAT. A sample of tax and VAT report is added with

Information processing

Accounts Payable Provision Voucher
Under this document provision i.e., entry is given against acquisition. Accounts payable
is credited here. From the sample (given in the annexure) we see that information relating
to voucher no, vendor no, invoice no, MRR no is required with their date for provision
journal. Besides, information about due date for payment, item name, item number, unit,
party name and the number of the account under which the item belongs to is also
required. Using this journal voucher, an entry is given in MAPICS for recording

    Income Tax Ordinance 1984.
    Income Tax Rules 1984.
inventory and also for valuation of inventory. Information regarding price is taken from
supplier‘s bill and information regarding quantity received is taken from MRR/GRR. The
following journal entry is given:

           Inventory (Raw Material)                    DR
           VAT                                         DR [100% of VAT]
                  Accounts Payable                     CR

  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-18.

Accounts Payable Payment Voucher
The accounts payable recognized in the earlier part are paid through this payment
voucher after deducting appropriate taxes. The voucher contains he information of the
payment date, mode of payment, item or batch no, voucher no with date, AP journal
voucher number with date, amount, party name and other related information. A sample
of this voucher is given in the appendix. The following entry is given in MAPICS:

         Accounts Payable                            DR
              TDS(applicable rate)                   CR
              Bank                                   CR

       ITO 1984: Section 52: Where any payment is to be made, whether in
       full or in part, or by way of advance, 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 making the payment shall,
       at the time of making such payment deduct tax on the amount so
       payable at such rate as may be prescribed.
Output information

Output information can be of two types:
          Information Affecting the Annual Report Figures or External Reporting
          Information for Internal Management or Internal Reporting.

External report

The entire process of import procurement and accounting for its related transactions
affects several heads in the Annual Financial Reports. Below I mention the affected heads
with reference to Annual Financial Report for 2006.

Cost of Goods Sold:

The detail of cost goods sold is provided in the Note#40. Under this head the affected
subheads are:

          Raw Materials Consumed (Purchase) [Note #41]: This amount is the total of raw
           materials purchased during a financial year. When raw materials are received
           RAW MATERIAL PURCHASE A/C is debited. The end balance is the amount
           shown in the Annual Report.

          Packing Materials Consumed (Purchase) [Note #41]: Similarly, it is the total of
           packing materials purchased during a financial year. When packing materials are
           received PACKING MATERIAL PURCHASE A/C is debited. The end balance is
           the amount shown in the Annual Report.


The inventories affected by import operations and related accounting are found in Note

           Raw Materials Inventory

           Packing Materials Inventory

           Laboratory Chemical Inventory

           Raw and Packing material in transit

           Spares and accessories
Internal report
To serve the internal reporting needs the following reports are prepared:
   Accounts payable payment voucher
   Vendor ledger
   Vendor account balance
   Journal register
   Cash requirement report
   Aged payable
   Tax report
   VAT (Musok 11) report
   Vendor business position
   Report on purchase
   Report on payment

Vendor account balance
It is nothing but a report about the due amount payable to an individual vendor or a
number of vendors on a certain date. The report includes vendors‘ name, code and the
total due amount.

Journal register
From this register management of BPL will get all related information of accounts
payable transaction for a certain period of time. For example, if management wants to
know about the amount of purchase of an individual vendor for a certain period of time
with related deductions they can get it from journal register. Even the register also
informs about whether any payment has been made or not and the due amount of that
period. A sample of the register is given in appendix.

Cash requirement report
It‘s a managerial enquiry regarding vendors‘ payable amount to forecast the current
liabilities. From this report management of Finance and Accounts Department can be
informed about the cash to be paid to individual vendor for a certain period of time. A
sample of this report is given in the annexure.
Aged Payable Report
It‘s a report about forecasting the maturity date of payable. It reflects the status of old
unpaid invoices or vouchers. After the maturity date the payment will be made. The date
will be matured according to purchase order contract. The reference date for age
calculation is the voucher date or due date at when the product has been received.

Vendor Business Position
It is the evaluation of overall vendor position with BPL. In this report BPL generates
information about vendors‘ net due amount at a certain period of time. From this report
management can have knowledge about the amount of gross payable; amount of tax, Vat,
payment and other deduction deducted from gross payable amount and the net amount
has to be paid to those vendors on that period.

Import of Raw and Packing Material

Another source of raw and packing material is importing from overseas market. For this
purpose, purchase department must open a letter of credit at bank. It 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 LC and sends a copy of each
document to the Finance and Accounts department for further processing of information
and to prepare the cost sheet for the materials received against each LC. This file is called
PC (pharmaceutical consignment) file. The finance and accounts department has three

                              Treasury
                              Cost and Budgeting
                         Accounts
The processing of information related to import procurement takes place in the Cost and
Budgeting section. For the convenience of the users I have discussed the whole thing into
three parts. They are:

                    INPUT INFORMATION

                    INFORMATION PROCESSING

                    OUTPUT INFORMATION
Input Information
Source of information:
Three departments are involved in the entire materials procurement process.
They carry their own responsibilities in this regard. The departments are:
                         Sales Department
                         Planning Department
                         Purchase Department
The entire process looks like:

                              Planning Dept.           Purchase Dept.               Accounts
    Sales Department          Import Procurement       Pro forma Invoice           PC, IV, BC
    Sales Forecast            schedule                 LC openning                    Files

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. It prepares an import procurement schedule which helps them manage the
procurement planning. The tabular format of the schedule is too large to
accommodate here. Therefore I am just mentioning the column heads. The column
heads are:

1.   Material ID:                         2. Name of the Material:
3. Procurement Time:                      4. Unit cost:
5. Monthly Requirement:
Factory Stock:                    I&I3   Stock:          Stock in Hand:
Under Process:                    Await Shipment:                In transit:
At port:                          Under Clearance:               Received:
Total stock in all stages:                    Total Req. As per Factory:
Balance to be ordered:                        EOQ:
Month Covered:                                To be procured this Month:

    I&I Services is the sole distributor of BEXIMCO PHARMA and a sister concern of BEXIMCO GROUP.
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 database preserved by the planning dept. Within 15 days, the
quotations are submitted by the competing suppliers. Then the planning dept.
prepares a comparative statement and forwards it to the purchase department.

Purchase Procedure: The purchase department is concerned with all the purchases
of the firm. Usually the lowest bidder gets the offer to supply materials (considering
their past performance, credit terms etc.). Then an Import Authorization Format' is
prepared by the purchase dept. The format is then sent to the Director (commercial)
for approval. The dept. then asks for pro-forma invoice (;in case of direct purchase
from foreign suppliers) or indent (in case of supplies by local agents). Then the firm
applies for `Block List' (for approval from Drugs authority) to import the raw
materials. After doing all these prior works, the firm proceeds to open an L/C.

The purchase dept. first collects a form of application for the opening of letter of
credit from a bank. An LCA form (in quintuplicate) is also collected. After filling
up these forms, they are submitted to the bank along with the pro forma invoice
approved by the Block list of Drug Administration and IMP form of Bangladesh
Bank. The L/C margin (a certain percentage of L/C amount), bank charges and
commissions for opening the L/C, insurance payment (if made at that time) etc. are
also made. The insurance covers all risks from the beginning of transit.

The opening bank sends a copy of L/C to the advising bank and another copy is also
sent by the company to the local agent or indenting company. The supplier then
takes necessary measures to ship the materials. It sends the non-negotiable shipping
documents (copies of bill of lading / airway bill, invoices, certificate of analysis of
each batch. Form-9, packing list, certificate of origin etc.) to the buyer (the firm) by
courier within 7 days and submits negotiable copy of all documents to the
negotiating bank. Then the supplier asks the advising / negotiating bank to make the
payment. After paying off the supplier, the advising bank asks the L/C opening bank
to pay the amount within 72 working hours (3 working days). The opening bank
then pays it off within the stipulated time. The bank then collects the L/C payment
from the firm (applicant) on an agreed upon date. In case where the materials are
borne in air transport, the firm needs the endorse copy document to get clearance
from the customs authority after it reaches the airport. The Drug Clearance of
invoice issued by the Drug authority is also required. The C&F agent of the firm is
engaged in the goods clearance formalities. After getting the clearance, the materials
are borne to the factory.

Documents received

Purchase department sends copies of all the relevant documents to the Cost and
Budgeting section of Finance and Accounts department. The documents are kept in three
types of files according to their purpose:

                    PC File (For Raw and Packing Materials and Also spare parts for
                     pharmaceuticals machinery)

                    IV File (For Infusion Raw and Packing materials and Also spare parts
                     for Infusion machinery)

                     BC File (For Basic Chemical)

The documents kept in these files can be categorized as follows:

    Documents with relevant financial information

1. L/C Related Documents from Bank:
 The L/C slip and the copy of banks L/C book is received. The books contain detail
 information on L/Cs. The relevant information extracted from this book are:
                     L/C Margin
                     Opening charge
                     Amendment Charge
                     Telex/ Courier service Charge
                     Bank Charge
                     Document Retirement

2. Premium Bill:
  Premium bill is prepared by the insurance company. This bill is non negotiable. The
  information included in this bill is:
                             Non Negotiable Premium Bill:
     A.     Marine @ x.xx%                                            XXX.XX
            War and Strike @ x.xx%                                     XX.XX
                             Net Premium                              XXX.XX
            Add: VAT 15%                                               XX.XX
            Stamp Duty                                                  X.XX
                             Total Premium                           XXXX.XX

     3. C & F Bill:
 The C & F bill is prepared by the clearing and forwarding companies. Different C & F
 agencies operate at different land, sea and airports. Imports are made through all these
 three types of ports. The C & F agent does the necessary formalities with the customs
 authority and sends the materials to the destination. They contain the following:
                            C & F BILL Against PC #_________

                 Customs Duty and Taxes                               ####
                 Wherfrent and Removal                                 ###
                 Documentation                                           ##
                 Cooly wages                                           ###
                 Transport                                               ##
                 Misc. Expenses                                          ##
                 Expenses under section 82                             ###
                 Audit/ treasury/ Bank Exp.                            ###
                 Agency Commission @ 0.0x%                             ###
                                                       TOTAL         #####
                 Less: Income tax on Agency commission                 (##)
                                                   ADVANCE         (#####)
                                                         DUE           ###

     4. Shed Bill with Jetty Challan:
 This bill is prepared by the Biman Bangladesh Airline Authority (in case air port); the
 Chittagong 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. For reporting purpose
 two types of information are extracted from this bill.
                Total DEM
                VAT on DEM
     5. Bill of Entry and Assessment Notice:
 These two documents are the most important in regards to reporting and accounting
 purposes. The Customs authority prepares this bill against the C & F Agency. It
 includes the information on the Duty and taxes and VAT payable on imported
 materials. In all the ports the same type bill is prepared without any exception because
 the customs authority uses identical software for all the ports. Some materials need to
 go through PSI (Pre Shipment Inspection); so they are subject to PSI charges. The
 detail of the duty and taxes and their rates are discussed in the later chapter.

 The bills include following information:

C.                                   Bangladesh Customs Authority
                                             Bill of Entry

          Consignor:                                                              Bank Name:

          Consignee:                                                              LC Type:
                                                                                  LC No:
                                                                                  HS Code:
          Name of Carrier:                           Nationality:                 Gross Weight:
          Description:                                                            Net Weight:
          Invoice No:                                                             Item Assessable Value: [a]

                                               Calculation of taxes:
                             Type                  Tax base      Rate                     Amount
                   Customs Duty                            [a]               *                 [b]
                   Supplementary Duty                      [b]               *                 [c]
                   VAT                                     [b]               *                 [d]
                   AIT                                     [a]               *                 [e]
                   Development Surcharge                   [a]               *                 [f]
                Note: The alphabets used in this table will used for further reference in the chapter to come.
                               Bangladesh Customs Authority
                                     Assessment Notice

        Office: Dhaka/ Chittagong Customs
        Customs Declaration No:
        No & Date of Assessment:                           Items:

        Importer:                                          Account No:
        Mode of Payment: Cash / Cheque                     Statement no & Date:

                       CD                                     [b]
                       SD                                     [c]
                       VAT                                    [d]
                       AIT                                    [e]
                       DSC                                    [f]
                       Advance Trade VAT                      [g]
                       PSI                                    [h]
                                           TOTAL TAXES        [m]
                       Document Processing Fee                [p]
                       VAT on C&F Commission                  [q]
                       Income Tax on C&F commission            [r]
                                TOTAL GLOBAL TAXES             [s]
                            TOTAL ASSESSED AMOUNT           [m]+[s]
                                   AMOUNT TO BE PAID        [m]+[s]

      Documents with relevant non-financial information

    Invoice from Supplier:

Although it contains financial information about the cost of raw materials, it is not
needed for financial reporting. Because the amount that concerns is the L/C margin and
the payment on L/C Retirement. As there is no direct transaction with the suppliers the
original invoice is not needed for reporting.

    Packing List or Weight List:

This list contains the detail information on the quantity of materials shipped; the number
of packages; the type of packaging and the gross and net weight before shipment.
   Certificate of Analysis:

Certificate of Analysis contains chemical analysis of the materials. The chemical
contents, weight, color and other related information is disclosed and certified by the
producing country are presented in the certificate.

   Certificate of Origin:

Certificate of Origin is issued by the trade body (Chamber of Commerce) of the
respective country and certifies that it is a product of their country.

   Form -9:

Form-9 is required under the European 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 by them. It also sets the
limit of using that licensed product.

   Airway Bill:

Airway bill is just like ticket of the materials shipped. It contains the information on the
material shipped, the destination, the carrier and the airport of departure.

   Consignment Presentation Slip:

Consignment presentation slip is prepared at the port by the port authority and certifies
the possession of the consignment. The slip includes following information:

       Part A: Consignment Details

       Part B: Examination Transfer to delivery warehouse

       Part C: Paper Checking and Collection of Charges

       Part D: Final Delivery Information
Information Processing
Information processing is done through three stages. The records and reports prepared in
those stages are different. The stages are:
                      L/C Opening Stage
                      L/Cs in Transit Stage
                      Post Clearance Stage
L/C Opening Stage
L/C opening process:
The purchase dept. first collects a form of application for the opening of letter of
credit from a bank. An LCA form (in quintuplicate) is also collected. After filling
up these forms, they are submitted to the bank along with the pro forma invoice
approved by the Block list of Drug Administration and IMP form of Bangladesh
Bank. The L/C margin (a certain percentage of L/C amount), bank charges and
commissions for opening the L/C, insurance payment (if made at that time) etc. are
also made. The insurance covers all risks from the beginning of transit.

 Purchase Department              Local Bank
 (Pro Forma Invoice,              (L/C Margin, Opng             Foreign Bank
 Drug, IMP)                       Chrg, Bank Charge)

As mentioned earlier (see: 1.2.1) the accounts department gets copy of the L/C and the
Banks statement mentioning other related cost. It is done through the foreign exchange
account of BEXIMCO PHARMA held with different banks.

Records and Reports:
Various records are kept during this stage. Data related to L/C are maintained in two
ways. They are:
                      MS Excel Worksheets
                      MAPICS
MS Excel Worksheets:
Two different sets of spreadsheets are prepared. The spreadsheets contain the following
information. I am just mentioning the column heads of the spreadsheets and explanations
where necessary.
      Spreadsheet containing Data on L/C Margin and Opening Charges:
           o L/C Number
           o Margin in Taka
           o Opening Commission [p]
           o Courier service Charge [q]
           o Supplementary Tax [r]
           o VAT [s]
           o Amendment Charge [t]
           o Total taka ([p]+[q]+[r]+[s]+[t])

      Spreadsheet containing Data on Document Retirement
           o L/C number
           o PC/IV/BC Number
           o Retirement Date
           o Payment
           o Payment Date

MAPICS Entries:
MAPICS (Management Accounting Production          Inventory Control System) is a
software custom made for BEXIMCO GROUP which serves the both the financial and
management accounting needs. In the L/C opening stage two types of entry are made into
the software:
      Database Entry
      Journal Voucher
Database Entry:
This entry is made to maintain a database of L/Cs and shipments. The entry includes:
          L/C Number
          PC Number
          Shipment Date
          Retirement Date
This database is also linked with the accounting system built within the software.
Whenever a journal entry is made with the L/C account this database is linked with that
entry. It detects any inconsistency with the L/C number and PC number.

Journal Entry:
The journal entry made at this stage includes the opening charges, L/C margin, Bank
charges, Courier Charges, Amendment Charges, etc. The Journal Entry made through the
Bank Voucher. The entry is:

                  L/C Margin                                DR
                  Opening Charge                            DR
                  Amendment Charge                          DR
                  Courier Service                           DR
                  VAT                                       DR
                  Bank Charges                              DR
                       Bank A/C                             CR

            VAT Rules, 2006. Rule 19(2): The tax payer can claim
            60% of the VAT as claim against input tax in respect of
            charges for …. L/C services…..”

All the debit entries are posted to the L/C group account. These are all considered as
expenditures. All the amounts are found in the summary spreadsheet prepared with MS
L/Cs in transit stage

The opening bank sends a copy of L/C to the advising bank and another copy is also
sent by the company to the local agent or indenting company. The supplier t hen
takes necessary measures to ship the materials. It sends the non-negotiable shipping
documents to the buyer (the firm) by courier within 7 days and submits negotiable
copy of all documents to the negotiating bank. Then the supplier asks the
negotiating bank to make the payment. After paying off the supplier, the advising
bank asks the L/C opening bank to pay the amount within 72 working hours (3
working days). The opening bank then pays it off within the stipulated time. The
bank then collects the L/C payment from the firm (applicant) on an agreed upon
Records and Reports prepared at this stage:
Two records could take place during this stage. Both the records are made using the
MAPICS software in the form of journal entries through Payables voucher and Bank
Voucher. The transactions are:
Payment of Insurance Premium:
Insurance premium is set on the invoice price. The materials are normally insured to
make cover for fire/marine and war/strike risks. A VAT of 15% is imposed on the
insurance premium. To facilitate the journal entry a spreadsheet analysis is made
using MS Excel, which contains:
         I. L/C Number      II. PC Number        III. Item name
        IV. Total Insurance Premium (see figure A: premium bill)
        V. VAT on Insurance Premium (see figure A: premium bill)
        VI. Net Insurance Premium (Total Premium-80%of VAT)
The journal entry is often made through payables voucher. The entry is:

         Insurance Premium             DR   [VI]
         VAT                           DR [80% of VAT]
              Accounts Payable (Insurance
              Company)                 CR
          VAT Rules, 2006. Rule 19(1): The tax payer can claim
          80% of the VAT as claim against input tax in respect of
          charges for …. Insurance services…..”
Advance payment to the C&F Agent:
The C&F agents are responsible to make customs clearance from the ports and make
delivery to the factory at Gazipur or wherever required. The estimated amount for
clearing and forwarding process is paid in advance. The journal entry is made through
Bank voucher using MAPICS software. The entry is:

                     C&F Agent (Advance)                            DR
                          Bank A/C                                  CR

Post Clearance stage

After successful clearing and delivery of the consignment the C&F agent sends all the
relevant documents. The documents include:
                  C&F Bill
                  Shed bill with Jetty Chalan
                  Bill of Entry
                  Assessment Notice
                  Consignment Presentation slip
This marks the completion of the import process. After receiving these documents the
PC/IV/BC files are completely ready.

Records and Reports Prepared during this stage:
A detailed spreadsheet is prepared to facilitate the journal entry in the first place. The
entire spreadsheet is presented into different parts for convenience.

Part A: General Information:

                       1. SL#
                       2. L/C Number
                       3. PC/IV Number
                       4. Item Name
                       5. Item Type (Raw/Packing/Spares)
PART B: Currency and Quantity:

                   1. Foreign Currency (US$/EUR)
                   2. Cost in Foreign Currency
                   3. Unit
                   4. KG/PC

PART C: Bank Charge and Insurance Premium:

                   1. Bank Charge
                   2. Insurance Premium
                   3. VAT on Insurance Premium
                   4. Net Insurance Premium ([2] - 80%of [3]

PART D: Duty

         Column ID              Column Head               Source/ Formula
               K                Customs Duty            Assessment Notice [b]
               L             Supplementary Duty         Assessment Notice [c]
               M           Development Surcharge        Assessment Notice [f]
               N           Pre-shipment Inspection      Assessment Notice [h]
               O                 Total Duty                 K+L+M+N

PART E: VAT and AIT (Advance Income Tax)

         Column ID              Column Head               Source/ Formula
               Q                    VAT                 Assessment Notice [d]
               R         DF(Documentation fee) VAT      Assessment Notice [s]
               S          AIT (On C&F commission)       Assessment Notice [r]
               T           DF/VAT less AIT(c&f)               [R]-[S]
               U                Total VAT                   [Q]+[R]-[S]
               V                   AIT                  Assessment Notice [e]


        Column ID              Column Head               Source/ Formula
            W            Total DUTY, VAT, AIT              [O]+[U]+[V]

PART G: DEM (Warehouse and Other charges)
         Column ID              Column Head              Source/ Formula
              X                      DEM               Shed Bill/ Jetty Chalan
              Y      DocumentationAuction              Shed Bill/ Jetty Chalan
              Z      Cooly wages VAT DEM               Shed Bill/ Jetty Chalan
             AA      Transport      Net DEM                 [X]+[Y]-[Z]
                     Misc. Expenses
                     Expenses under section 82
                     Audit/ treasury/ Bank Exp.
PART H:                                                             Miscellaneous
Expenses and C&F commission
These two are extracted from the C&F bill. Miscellaneous Expenses could include:

C&F commission is imposed on the assessed value of imported materials.

         Column ID              Column Head              Source/ Formula
             AB                   Misc. Exp.                C&F Bill
             AC                  C&F Comm.                  C&F Bill

PART I: Agent

       Column ID              Column Head               Source/ Formula
           AD                Total Amount           [W]+[AA]+[Z]+[AB]+[AC]
           AE               Advance Amount                  C&F Bill
           AF                     Due                      [AD]-[AE]
           AG                   Agent                     Agent Name

PART J: Final summary for Journal Entry
        Column ID                 Column Head           Source/ Formula
            AH                       DUTY                      [O]
            AI                        VAT               [Q]+[R]*60%+[Z]
            AJ                        AIT                      [V]
            AK                       DEM                      [AA]
            AL                       MISC              [AB]+[R]*40%-[S]
            AM                   C&F Commission               [AC]
            AN                      TOTAL            AH+AI+AJ+AK+AL+AM

Claim for VAT Rebate:
VAT rebate is claimed 100% on the VAT paid on cost of materials and VAT paid on
warehouse charges. 60% VAT rebate is claimed on VAT paid on C&F commission. The
law in this states as follows:

  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-18.

  VAT Rules, 2006. Rule 19 (2): The tax payer can claim 60% of the VAT as
  claim against VAT paid in respect of charges for ….C&F Commission …..”

Therefore VAT is claimed 100% on VAT paid on cost and DEM VAT and 60% on VAT
paid on Total Global Taxes. The rest 40% is added to the miscellaneous expenses and
the income paid on C&F commission is deducted from the miscellaneous expenses
amount to match the total amount due to the Agent.

The amounts for the journal entry are summarized in the spreadsheet (see part G). The
journal entry is made as follows using the MAPICS software:
                   Duty TAXES                     DR      [AH]
                   VAT                            DR      [AI]
                   AIT                            DR      [AJ]
                   DEM                            DR      [AK]
                   Misc. Exp.                     DR      [AL]
                   C & F Comm.                    DR      [AM]
                          C&F Agent
                          (Liability)             CR              [AN]
                  *See Part J of spreadsheet for references of the amounts.

The duty tax; miscellaneous expenses and C&F commission goes to the L/C group
account. The other accounts are posted through general journal.

Output Information
As I have discussed the necessary journal entries in the previous chapter, it is already
clear about the output information of these activities. Better output of information reflects
better accountability to the stakeholders and greater efficiency of the decision makers or
managers. Output information can be of two types:
       Information Affecting the Annual Report Figures or External Reporting
       Information for Internal Management or Internal Reporting.
The transactions involved in the process of import procurement affects both the above.
But it is more important from the internal reporting point of view. The net effect of these
activities on the external report and the decisions of the investors are very remote. But it
has a materially significant part to play in internal decision making (eg. costing,
inventory control, pricing, etc.).

External report

The entire process of import procurement and accounting for its related transactions
affects several heads in the Annual Financial Reports. Below I mention the affected heads
with reference to Annual Financial Report for 2006.

Cost of Goods Sold:
The detail of cost goods sold is provided in the Note#40. Under this head the affected
subheads are:

          Raw Materials Consumed (Purchase) [Note #41]: This amount is the total of raw
           materials purchased during a financial year. When raw materials are received
           RAW MATERIAL PURCHASE A/C is debited. The end balance is the amount
           shown in the Annual Report.

          Packing Materials Consumed (Purchase) [Note #41]: Similarly, it is the total of
           packing materials purchased during a financial year. When packing materials are
           received PACKING MATERIAL PURCHASE A/C is debited. The end balance is
           the amount shown in the Annual Report.


Advances are current assets and it is detailed in Note #24. The import procurement
process affects two types of advances:

          C & F Agent: As mentioned earlier C & F agents are paid in advance for smooth
           fulfillment of their responsibility. The C & F account is debited on payment of the
           advance. The year end balance appears in the annual reports as an advance.

          VAT: As I have shown earlier the amount of VAT subject to rebate is debited to
           VAT account. The VAT amounts payables are credited to the same account. If it
           has a debit balance at the end of the year then it appears as current asset.


The inventories affected by import operations and related accounting are found in Note

           Raw Materials Inventory

           Packing Materials Inventory

           Laboratory Chemical Inventory
         Raw and Packing material in transit

         Spares and accessories

Internal reports

The most important destination of the accounting reports related to import of raw
materials is the internal management. For efficient decision making the internal
management is constantly is need of timely and appropriate reports on costing. To serve
the internal reporting needs the following reports are prepared:

The Cost Sheet:

This is the most important report prepared on the import procurement process of raw
materials. Cost sheets are prepared for individual raw and packing material items, as well
as spares and capital machinery. Cost sheet is generated by the MAPICS software. It is
the summary of entries debited through the journal voucher of L/C. It is used for costing
and pricing decisions. The cost sheets include the following:

                                      COST SHEET

Company Name: BEXIMCO PHARMA                                Shipment No:
Supplier Name:                                              Date:
L/C No:                                  Date:              Exchange rate:
Invoice No:                              Date:              CEP:              Date:
PARTICULARS                                      1                  2            Total
Material Name
MRR Date:
Invoice Quantity
FC Cost/ Unit
Total FC Cost

L/C Margin
Opening Charge
Document Retirement
Duty, LCA, IDSC & others
C & F Commission
Insurance Premium
Miscellaneous Expenses
                           TOTAL COST
                         COST PER UNIT

Cost Summary:

Cost summary is a summary of the cost sheets prepared on a monthly basis. It is a MS
Excel worksheet. All the information are extracted from the cost sheet. The column heads

           Month

           L/C Number

           PC/IV/BC Number

           Materials Name

           Quantity

           C&F Rate

           Foreign currency Cost

           Currency [US$/EURO/YEN]

           Exchange rate

           C&F in Taka [Exchange Rate*FC Cost]

           Other costs [Duty/ LCA, C&F Commission, Insurance premium, Misc. Exp.,
            Opening Charge]

           Landed cost [C&F in Taka + Other Costs]

           Cost per Unit [Landed Cost / Quantity]
          Supplier Name and Country

L/C Balance:
This is prepared to facilitate the payment of L/C liabilities. It is used by various
departments including the treasury. The columns are:

                     L/C Number

                     Opening Date

                     C&F Value in Taka

                     Total Taka

Capital Expenditure Cycle
BPL has a well-defined policy guideline for capital expenditure. This cycle involves
acquisition of property, plant and equipment. First, the capital expenditure must be
included in the yearly budget. Then the head of the department raising the capital
expenditure proposal (CEP) must justify the proposal. A sample of CEP is given in
appendix. The CEP includes following information:

   1. Classification of the asset such as new purchase or replacement of an asset.

   2. Description of the item

   3. Reason or justification for the proposed expenditure

   4. Economic life
   5. Estimated expenditure

   6. Budget provision for the proposed expenditure

   7. Suggested supplier

   8. Approval with signature of Departmental head, Director, Commercial and
       Director, Finance

   9. Final approval by CEO(Chief Executive Officer)

Then the Director, Finance verifies the CEP along with the business research and
development department and the CEP is sent to the CEO for final approval. After getting
the CEO approval, 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.

Recording aspects of capital expenditures:

Input Information
All the necessary information for the purpose of recording acquisition of fixed assets are
taken from Capital Expenditure Proposal, Purchase order, Budget prepared for this
purpose, chart of accounts, supplier‘s bill approved by purchase department, Bill of entry,
Assessment notice, L/C related documents for import of machineries.

Information processing
BPL initially records all property, plant and equipment at cost and charges depreciation
over their expected useful life. The cost of acquisition of an asset comprises its purchase
price and any directly attributable cost of bringing the asset to its working condition for
its intended use inclusive of inward freight, duties and non-refundable taxes. In respect of
major projects involving construction, related pre-operational expenses form part of the
value of asset capitalized. Expenses capitalized also include applicable borrowing cost.
Exchange loss is also capitalized as an addition to the cost of the asset.

Expenditure incurred after the assets have been put into operation, such as repairs &
maintenance, is normally charged off as revenue expenditure in the period in which it is
incurred. In situation, where it can be clearly demonstrated that the expenditure has
resulted in an increase in the future economic benefit expected to be obtained from the
use of the fixed assets, the expenditure is capitalized as an additional cost of the assets.
Software expenses are generally charged off as revenue expenditure.

On 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 book value 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 company‘s major operating activities
and so are not included in gross profit.

BPL charges no depreciation on land and uses reducing balance method for charging
depreciation n respect of all other fixed assets. Depreciation is provided to amortize the
cost of the assets after commissioning, over their expected useful economic lives. Full
year's depreciation is charged on additions and no depreciation is provided on retirement,
irrespective of date of addition or retirement respectively.
The annual depreciation rates applicable to the principal categories of assets are:
                               Assets                               Rate
                   Building and other Construction                  10%
                     Plant and other Machinery                      15%
                        Furniture and Fixtures                      10%
                        Transport and Vehicle                       20%
                          Office Equipment                       10% to 50%

BPL maintains a separate module named ‗Fixed Asset Accounting‘ in MAPICS where
journal entries are given to record the acquisition of new asset, replacement, renewal and
disposition of asset and related depreciation according to the rate. In the MAPICS, only
control ledgers for principal categories of assets are kept. For the purpose of keeping
subsidiary ledger, a separate software named ‗Fixed Assets Management System‘ is used
where another person gives entry for the same transaction. This is basically a duplication
of work.

Output Information
Output information can be of two types:
      Information Affecting the Annual Report Figures or External Reporting
      Information for Internal Management or Internal Reporting.
External reports:
The entire process of capital expenditure and accounting for its related transactions
affects several heads in the Annual Financial Reports. Below I mention the affected heads
with reference to Annual Financial Report for 2006.

Property, Plant and Equipment – Carrying Value
The details of all property, plant and equipment are given in the Note #20. In the notes to
the financial statements section, BPL discloses all the necessary information regarding
property, plant, and equipment including the cost of the assets at the beginning of the
year, additions and disposals in the current year, adjustment on disposal, exchange loss,
accumulated depreciation at the beginning of the year, depreciation charged for the
current year and carrying value at the end of the year.

Internal Report:
The sum of all assets is reflected in annual report. But for the preparation of budget and
making decisions regarding the current status of each class of assets, periodic statements
are prepared where detailed breakdown of each major class of asset are included.

Revenue Expenditure Cycle
The expense cycle of BPL is little difficult to describe because of the varying nature of
expenses. For the sake of simplicity, expense cycle is presented here in a
segregated manner according to the major types of expenses namely factory
overhead, administrative expense and selling, marketing and distribution
Factory overhead
The major types of factory overhead are salary and wages, power, insurance, stores and
spares consumed repairs and maintenance, research and development, municipal tax and land
revenue, telephone and postage expense etc. These expenses are incurred in the factory.
Whenever an expense is incurred, it is reviewed and recommended by the immediate
supervisor of the person incurring it. Then it is sent to the head of the respective department
for approval. After getting the approval finance and accounts department records the
transaction to the appropriate cost center and makes the payment.

Administrative Expenses
The major types of administrative overhead are salary of the executives of head office,
utility, rent, legal and professional fees, printing and stationary, AGM expenses, audit
fees, entertainment, petrol and fuel etc. These expenses are incurred in different
departments of the head office. Whenever an expense is incurred, it is reviewed
and recommended by the immediate supervisor of the person incurring it. Then
it is sent to the head of the respective department for approval. After getting the
approval finance and accounts department records the transaction to the appropriate cost
center and makes the payment.

Selling, Marketing and Distribution Expenses
The major types of selling and distributive overhead are advertisement, promotional
expense, traveling and conveyance, training of medical representatives, books and
periodicals etc. These expenses are incurred by the sales and promotion department.
Whenever an expense is incurred, it is reviewed and recommended by the
immediate supervisor of the person incurring it. Then it is sent to the head of
the respective department for approval. After getting the approval finance and accounts
department records the transaction to the appropriate cost center and makes the payment.

Recording aspects of revenue expenditures:
Input information
Input information for recording purpose is obtained from the respective department
where the expenses are incurred. Each department sends the bill to Accounts and Finance
department. This bill is used as the source document. After verifying supporting
documents, a person records the expense as overhead item through appropriate code in
Information Processing
After verifying supporting documents, a person records the expenses as overhead items
or operating expenses through appropriate code in MAPICS. The appropriate code is
determined by chart of accounts. Depending 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 advance payment to different parties including employees, utility expenses,
event management etc.
Output Information
Out put information are of two types:
        Information Affecting the Annual Report Figures or External Reporting
        Information for Internal Management or Internal Reporting.
External report
In annual reports, administrative expenses and selling, marketing and distributive
expenses are shown as operating expenses. Factory overhead is included in the
calculation of costs of goods sold. These information are reported in the notes to the
financial statements. Related parts are extracted in the appendix.
Internal reports
A report highlighting the actual expenses, budgeted amount for those expenses and
variance is prepared monthly for internal decision making.

Internal control for Expenditure Cycle
The internal control of BPL for expenditure cycle is strong enough to detect, prevent and
correct any errors and mistakes made in authorizing, recording, processing transactions
and providing output to user groups. Some internal control mechanisms are discussed

Authorization of Purchase
As described earlier in recording process section, at BPL the user department sends
purchase requisition to purchase department with the approval of departmental head. An
authorized person checks that requisition and made the purchase order. Without purchase
requisition no purchase order will be made. In 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 approval of CEO or deputy chairman. But before
requisition a budget has been made for that asset. In each case there is a limit amount for
ordering goods.

The purchase order document contains a unique number. This unique number is used as
reference for further proceeds. It also contains the signature of the person raising
requisition. The purchase department is responsible for making the order only. It is not
responsible for authorizing or receiving goods. It maintains a purchase register where all
given orders are recorded with ordered item, quantity, unit price and suppliers‘ name.

Separation of Asset Custody from Other Functions
Usually, the ordered items are received by user department. But in case of inventoriable
item, that is raw or packing material, it is received by factory. The receiving department
produces the MRR/ GRR. The same report is also used as inspection report. In case of
raw or packing material, Quality Control Department generates Quality Assurance report.
One copy of MRR/ GRR/ QA is kept by the receiving department, one copy is sent to
purchase department and another copy is sent to accounts department. So the personnel
are separate from each other. Again there is a physical control over item from their
acquisition to disbursement. A cross departmental monitoring activity is a common scene
The bank reconciliation statement is prepared monthly by an employee independent of
recording cash disbursements or custody of assets.
Timely Recording and Independent Review of Transactions
BPL recognizes accounts payable as its liability at the time of vendors invoice is
received. It recognizes the liability by analyzing the following documents;
    Not negotiable copy of purchase order
    MRR/ GRR
    Not negotiable copy of invoice/ bill
    Vat report
If the person is satisfied with those documents he will then give the provision voucher.
This person does not have the access to handle the cash, securities or other assets.

Authorization of Payments
BPL pays its vendors after the date has been matured for payment. Normally the payment
is made by pre-numbered check. A specially designed check is designed for this purpose.
A separate person gives the payment voucher. Before giving payment voucher he checks
all the documents and reports relating to that transaction and also examined that the bills
are approved by purchase department. The payment voucher includes original bills,
MRR/ GRR, VAT (MUSHOK 11) and challan.

When the authorized person signs the checks, he just skims through the attached
documents with the payment voucher. Normally these signs are made by managers or
director of accounts and finance.

Physical Security Measure
BPL has instituted some physical security measures to protect its assets and records from
being misappropriated or misused. For example, a gate pass is needed to take out
any kind of moveable property both 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 supervision of responsible company officials. The
company has also employed closed circuit television (CCTV) system to monitor every
entry and exit.

Budgetary control
Budgetary control is primarily used for the revenue expenditures. For each class of
revenue expenditure, a budget is prepared for each month and the actual expenses are
compared against the budgeted amount.
Threats and Control Procedure
Another function of a well-designed AIS is to provide adequate controls that meet the
following objectives:
       1. All transactions are properly authorized
       2. All recorded transactions are valid
       3. All valid, authorized transactions are recorded
       4. All transactions are recorded accurately
       5. Assets are safeguarded from loss or theft
       6. Business activities are performed efficiently and effectively
The documents and records described in the previous section play an important role in
achieving these objectives. Simple, easy-to-complete documents with clear instructions
facilitate the accurate and efficient recording of transaction data.

The following table lists the major threats and exposures in the expenditure cycle and the
applicable control procedures that are placed in operation to mitigate them. The table is
organized around the stages of the expenditure cycle.
     Activity                    Threats                     Applied Control Procedure
                                                      1. To guard against these threats, BPL
                                                      establishes an accurate inventory
                                                      control     system.      The     perpetual
                                                      inventory method is used to ensure
                          Preventing stockouts
                                                      that    information      about   inventory
                         and/or excess inventory
                                                      stocks is always current.
                                                      2. BPL selects suppliers who are
   Order goods
                                                      known      to     meet     the    delivery
                                                      1. BPL is very much aware of
                                                      purchasing       items    that   are    not
                        Requesting unnecessary
                                                      currently needed. To ensure this,
                                                      every      purchase       requisition    is
                                                      approved by the departmental head.
                                                    1. To prevent this, an open tender is
                                                    arranged for the suppliers. BPL
                                                    selects those suppliers who are
                                                    capable of delivering highest quality
                                                    goods as reasonable price.
                       Purchasing goods at
                    inflated price or of inferior   2. BPL prepares a monthly budget for
                              quality               the purchase of goods. Actual costs
                                                    are   compared      periodically     with
                                                    budget      allowance.   To     facilitate
                                                    control, these reports highlight any
                                                    significant deviations from budgeted
                                                    amounts for further investigation.

                                                    1. To avoid the purchase of goods of
                                                    inferior quality, BPL has established
                                                    a list of approved suppliers known to
                                                    provide goods of acceptable quality.

                       Purchasing goods of
                                                    2. In addition, supplier performance
                          inferior quality
                                                    data is collected and periodically
                                                    reviewed to maintain the accuracy of
                                                    this approved suppliers list.

                                                    1. Receiving departments accept only
                                                    those deliveries for which there is an
Receive and store                                   approved copy of the purchase order
                    Receiving unordered goods
     goods                                          and matches the quantity mentioned
                                                    in the purchase order with goods
                                               1. Inventories are stored in secured
                                               locations with restricted access.
                                               2. All transfers of inventory are
                     Stealing inventory
                                               properly documented.
                                               3. Separation of asset custody from
                                               recording responsibility.

                                               1. Vendor invoices may contain
                                               errors such as discrepancies between
                                               quoted and actual prices charged or
                  Failing to catch errors in
                                               miscalculations of the total amount
                      vendor invoices
                                               due. To detect mathematical accuracy
                                               of vendor invoices, those invoices are
                                               compared with purchase order and
Approve and pay
                                               receiving report.
vendor invoices
                                               1. The control procedure used here is
                                               that   the   person   responsible   for
                                               payment to the vendors compares the
                   Paying for goods not        quantities indicated on the vendor
                          received             invoices     with     the    quantities
                                               mentioned in the materials or goods
                                               receiving report.
                                               1. Invoices are approved for payment
                                               only    when     accompanied    by   a
                                               complete voucher package (purchase
                                               order and receiving report)
                                               2. Payments are made only on the
                                               basis of original invoices. Duplicate
                  Paying the same invoice      invoices are marked clearly that these
                           twice.              are duplicate.
                                               3. Payments are never authorized for
                                               a photocopy of an invoice
                                               4. When the check to pay for an
                                               invoice is signed, the invoice and the
                                               voucher package are marked ‗paid
                                               and canceled‘
                                               1. The person making the payment
                                               compares the difference in supplier
                                               account balances before and after
                   Recording and posting       processing checks with the total
                  errors in accounts payable   amount of invoices processed.
                                               2. Here the control is deficient in one
                                               aspect i.e. the non existence of limit
                                               1. Use of prenumbered cheque.
                                               2. Access to cheque writing machine
                                               is restricted as well.
                                               3. Proper segregation of duties i.e.
                  Misappropriating checks
                                               custody of cheque is segregated from
                                               the authorizing function.
                                               4. Every cheque is signed by two
                                               persons before making the payment.
General Control          Losing data           1. All the supporting documents are
                                                       kept separately in a file.
                                                       2. Both internal and external labels
                                                       are attached to each file.
                                                       3. Access control is established via
                                                       use of passwords and user ID.

The effort and skill put behind the entire process of recording and reporting related to
expenditure cycle is exceptional. The staffs demonstrate their knowledge and experience
with sheer professionalism. Despite these efforts some shortcomings may remain and
there is always an opportunity to overcome those and step ahead in the race to be more
accountable and socially responsible. I have found some area where the practice should
have been better.
               Inconsistency with the law on a few VAT related issues

VAT on C&F Commission:
Before getting into the analysis of the practice let us first go though the law itself:

   VAT Rules 2006. Rule 19(2): The tax payer can claim 60% of the VAT as
   claim against input tax in respect of charges for telephone, tele-printer,
   fax, internet, freight forwarders, C&F agents, audit and accounting firms,
   supplier, security services, carrying agents, L/C services, Electricity, and
   other related taxable services.”

The issue under the spotlight is the VAT paid on the C&F agent‘s commission. The law
has clearly mentioned the term ‘VAT paid … charges for… C&F agents’. But current
practice is different.

Currently 60% VAT rebate is claimed on the Total Global Taxes (See [Column #AI] in
Part G of the Duty taxes spreadsheet). The amount considered as DF VAT is in fact the
amount of Total Global Taxes (See [s] in the Assessment Notice; also refer to column
R in Part E of the Duty taxes spreadsheet). The total Global taxes amount is the
aggregate of:
                   Document Processing Fee
                   VAT on C&F Commission
                   Income Tax on C&F Commission.
The last item- ‘Income Tax on C&F Commission’ is the income tax on the income of the
C&F agent deducted at source by the customs authority. The importer is not liable to pay
this amount in any circumstances. This amount is deducted from the C&F bill which
means BEXIMCO PHARMA never pays the income tax amount on the C&F commission
and it is not supposed to pay. The question arises when a 60% VAT rebate is claimed for
this amount; because it is quiet clear that:

         The importer can never claim VAT rebate on an amount that he never paid.
         The item eligible for rebate is not the income tax, it is the VAT paid on C&F

The obvious question that arises is how it is possible that an amount is debited which has
never had any payment against it or any liability. This should have caused an error in the
balances in the financial statements. The mismatch is avoided by deducting the ‗Income
Tax on C&F Commission‘ amount from the miscellaneous expenses. Let us go through
the entire process of dealing with Income Tax on C&F Commission:
          First of all 60% of the amount is debited as VAT rebate (as it is included in
            the Total Global Taxes on which rebate is currently being claimed).
          Secondly 40% of the amount is added to miscellaneous expenses (as the
            unclaimed amount is to be treated as expenses).
          The 100% amount is then again deducted from miscellaneous expenses.
Although apparently the amount is deducted and the net effect seems to be zero, it leaves
a trail of misreporting.

The Effect of the Inconsistency on the Financial Report:

It leaves a two fold effect. They are:
      Firstly, an excess VAT rebate claimed for an amount equal to 60% of the income
       tax paid by C&F agent. Which means current asset is increased.
      Secondly, miscellaneous expenses are under cast with an amount equal to 60% of
       the income tax paid by C&F agent which causes an increase in profit figures. This
       happens because 40% of the amount is added to miscellaneous expenses and
       subsequently 100% is deducted.

The figures might not be as big to have an effect on the investors decision, but the bottom
line is that, it involves the company‘s social responsibility. Some times the Total Global
Taxes include fees and penalties which causes an inconsistency of an even bigger
amount. Certainly people won‘t like a socially responsible company to ignore these facts
and figures.

The Recommended Practice in this Regard

From the Total Global Taxes only the VAT paid on the C&F Commission is subject to
VAT rebate. The company has nothing to do with the Income Tax paid on the C&F
commission which paid by the agent. The Documentation fee (a very negligible amount)
might be added to the miscellaneous expenses. The inclusion of this negligible amount
with the VAT will not create any considerable difference because after all it is paid by the

VAT on Demurrage Charges:

When 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 service
by the port authority is also taxable under VAT rules 1991. Currently a 100% rebate is
claimed on this VAT. Now again let us look at the law:
  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-18.

   VAT Rules, 2006. Rule 19(2): The tax payer can claim 60% of the VAT as
   claim against input tax in respect of charges for telephone, tele-printer,
   fax, internet, freight forwarders, C&F agents, WASA, audit and accounting
   firms, supplier, security services, carrying agents, L/C services, Electricity,
   and other related taxable services.”

The law indicates that 100% rebate on VAT paid can be claimed on the VAT charged on
the raw material and 60% rebate could be claimed on related services. Demurrage- which
is basically charged for using the port warehouse and other facilities, should not be
considered as inclusive in the raw materials taxable price. Although the name
‗Warehouse Services‘ is not explicitly mentioned in the law, this can be considered as a
related service which is entitled to a 60% rebate. But I think, the correct practice is to
treat this expense as an item of miscellaneous expense and not to claim rebate because
demurrage is like a fine or penalty for not releasing the goods from port warehouse
timely. Currently practice shows that 100% of the VAT paid on this regard is debited
(See COLUMN AI in PART G of the spreadsheet where [Z] implies VAT on DEM).

The Effect of the Inconsistency on the Financial Report:

The apparent effects on the balances are:

          Excess VAT is claimed equal to 40% of the VAT paid on DEM; as a result
           current asset is inflated.

          DEM expenses are under-cast by 40% of the VAT paid on DEM which causes
           a rise in the net profit figure.

The Recommended Practice in this Regard:

60% of the VAT paid on DEM charges should be claimed as rebate and the amount is
debited. The rest 40% cannot be claimed as rebate thus it should be added to the DEM
expense which is debited.
Therefore the amended analysis of the spreadsheet would be:
PART G: Final summary for Journal Entry

       Column ID               Column Head                  Source/ Formula
            AH                  DUTY                              [O]
            AI                   VAT                     [Q]+[T]*60%+[Z]*60%
            AJ                   AIT                              [V]
            AK                  DEM                         [AA] + [Z]*40%
            AL                  MISC                         [AB]+[T]*40%
            AM              C&F Commission                       [AC]
            AN                 TOTAL                    AH+AI+AJ+AK+AL+AM

                                          Currently: [Q]+[R]*60%+[Z]

                  Currently: [AB]+[R]*40%-[S]

                                                  Currently: [AA]

                                   Data Redundancy

Existence of multiple systems
Traditionally, the AIS has been referred to as a transaction processing system because its
only concern was financial data and accounting transactions. For example, when a sale
took place, the AIS would record a journal entry showing only the date of the sale, a debit
to either cash or accounts receivable, and a credit to sales. Other potentially useful
nonfinancial information about the sale, the time of day that it occurred, would
traditionally be collected and processed outside of the AIS. Consequently many
organizations developed additional information systems to collect, process, store and
report information not contained in the AIS. Even sometimes two supporting softwares
are used to record the same transaction which are not interlinked. Unfortunately the
existence of multiple systems creates numerous problems and inefficiencies. BPL also
experiences this problem. Since MAPICS cannot generate subsidiary ledger for each
class of assets, BPL uses ‗Fixed Asset Management System‘ software to generate
management report. Often the same data is captured and stored by two systems, which
not only results in redundancy across systems, but also leads to discrepancies if data are
changed in one system but not in others. In addition, it is difficult to effectively integrate
data from the various systems.

The Recommended solution in this Regard:
Enterprise resource planning (ERP) systems are designed to overcome these problems as
they integrate all aspects of a company‘s operations with its traditional AIS. Thus when
the sales force enters an order, the effect of the transaction automatically flows to all
affected parts of the company. Inventory is updated, production schedules are adjusted
and purchase orders are initiated to acquire any needed raw materials and supplies.
Moreover important nonfinancial data, such as the time the activity occurred, is collected
and stored in the same system.
A key feature of ERP systems is the integration of financial with other nonfinancial
operating data. The value of such integration suggests that there may be strategic benefits
to more closely linking the traditionally separate functions of information systems and
accounting, and many organizations are beginning to combine these two functions.

MS Excel Worksheet

The summary reports prepared with MS Excel are often subject to data redundancy. On a
few occasions same set of data is used in different spreadsheets. This causes redundancy
and makes the data entry process unnecessarily lengthy. It really does kill valuable time
of the responsible staffs and as a result he/she might fail to deliver reports on time when
he/she is burdened with excessive data entry and related jobs.

Proposed Changes:

MS Access could be viable option as it gives the user flexibility through SQL. By linking
the large MS Excel spreadsheets as tables in MS Access could provide a solid base to go
use SQL options. The reporting flexibility of MS Access could also be useful to generate
‗On Demand‘ reports for the management in the quickest possible time. The auditors also
ask for different reports which are not always readily available. Using MS Access
different types of reports can be produced and it takes little time.

                                 Internal Control Issues

Limit Test
Internal control regarding expenditure cycle of Beximco Pharmaceuticals Limited is quite
satisfactory. BPL has introduced a number of control policies to ensure proper recording
and reporting of different types of expenses. In the previous part, I have mentioned one
area where internal control is deficient. The area is to writing the cheques and making the
payments. When a check is prepared, all supporting documents are verified by the person
preparing the cheque. At the time of writing the cheque, an error may occur resulting into
the possibility of overpayment. This may occur when 10 to 15 invoices are paid at a time.
Though every check is signed by two different persons (at least one from top
management), it is not always possible to verify all the invoices and sum up total figure.
For example, an invoice of Tk. 2,25,000 can be written as Tk. 2,52,000 while giving
entry in MAPICS to record the payment causing debit balance in accounts payable
account. There is no built-in checking system in the software that will not accept any
amount in excess of provision made earlier for this purpose.

Proposed solution:
The software used (MAPICS) 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 provision
made. When the accounts payable ledger account will have a debit balance, the software
should show a message that a particular supplier‘s account is going to be overpaid. BPL
follows a policy that the person making the payment should compare the difference in
supplier account balances before and after processing checks with the total amount of
invoices processed. This could be regarded as a compensating control for the same
purpose. But the inclusion of limit test in the software can make this task more easy and
with less effort.
Problems with coding
BPL uses a five segment, twelve digit code for its general ledger accounts. Most of the
items are assigned a code. But due to varying nature of expenses, sometimes confusion
arises as to how a particular expense is to be treated and which code is appropriate for
this. Sometimes no codes are available for an item. The decision in this regard is taken by
the person recording the transaction. If that person cannot understand the nature of
expenses, a wrong code may be used by him.

Proposed solution
Chart of Accounts must be detailed enough to cover all types of items to avoid the use of
personal judgment.


In today's complex yet highly competitive business environment management needs
quality information for decision making purpose. Now a days two things make the
difference between a successful firm and a failed one – quality of managerial decision
and the ability to adapt new technology. The quality of managerial decision of BPL is
proved in its success in the market; also BPL has successfully adapted latest
technological breakthrough in ICT.

The MIS department of BPL is constantly working on the development of new soft wares
and on the improvement of the existing soft wares. It is hoped that the BPL would be the
first local company, as they have been in many other cases, to implement a complete ERP
solution system.

BEXIMCO PHARMACEUTICALS LTD. is the first Bangladeshi company to be listed
with the London Stock Exchange. This was an added challenge to all the accounting
staffs as the listing the accountability of the organization has gained a global reach. The
ever expanding export trade also indicates greater responsibility to the world. The
Finance and Accounts department took the challenge and prove their mettle by the timely
publication of 2005 Annual Financial Reports globally. Each and every section in the
department deserves to be complemented for their endeavor. From raw material import to
the bringing of smile for the society, on every level, professionalism and dedication is the
key to this success.


Annual Report of Beximco Pharmaceuticals Limited. 2006.
Marshall, B. R. and P.J. Steinbart. 2003. Accounting Information Systems. Ninth edition.
      Singapore, Pearson Education.
Porter, M.E. and V.E. Millar. 1985. How Information Gives You Competitive Advantage.
        Harvard Business Review (July-August).
Wilkinson et al. 2003. Accounting Information Systems: Essential Concepts and
       Applications. Fourth Edition. New York, John Willey & Sons. Inc.


A Sample of CEP
BEXIMCO …………….DIVISION                               Unit
SPARE PARTS APPROVAL                                 Date
                                                     Serial #
1. Classification:
   Replacement                    Addition               Development

2. Description of item with ID Number (if Any):

3. Reason/ Justification for proposed expenditure:         8. Remarks

4. Economic life (Years)
5. Supplier:

6. Estimated Expenditure

7. Budget Provision:

Signature of Budget Officer
                       Approved By

             CEO/ Deputy Chairman
Submitted By           Recommended By                      Recommended By

Departmental Head             Director, Commercial         Director, Finance
Date:                         Date:                        Date:

Sample of Purchase Order

 Purchase Order No.                          Purchase Requisition No……………
                                             Date of Receipt by PD………………
 SL   Name and Description of         Unit   Quantity Unit Quantity Amount
 No   Material / Service              No     Ordered Price Ordered
 MRR NO. __________DATE __________
 MRR NO. ___________                   Invoice/ Voucher No________Date_________
 MRR NO. __________DATE __________     Amount for Refund______________________
 MRR NO. __________DATE __________     Amount Due for Payment_________________
 MRR NO. __________DATE __________     __________________________      ________
                                       Passed for Payment/ Adjustment    Date



Accounts Payable Provision Voucher

 Beximco Pharma             AP Journal Voucher                         Date:

Voucher No       : ……..       Original Voucher No: ……..                0/00/00
Vendor No                 : ………
Invoice / Bill   : ……… Date: ………        MRR/QC/WO : …….            0/00/00
Due Date         : ………
Description      : ………
Tax and VAT Report

                            Tax and VAT Report
 Vendor‘s Vendor‘s Period     Total    Tax     VAT  Other     Net
   no      name              amount amount Amount deductions amount
                               due                            due

Accounts Payable Payment Voucher

 Beximco Pharma             AP Payment Voucher              Date:
                               (Cash / Bank)

 Batch/item No : ……..
 Voucher No : ………           Original Voucher No: ……..       0/00/00
8. Vendor ledger

Sample of Journal Register

 Beximco Pharma                                    Journal Register
                             From 0/00/00 to 0/00/00
                              Payment Upto 0/00/00
 Summary by Vendor
Vendor    Purchase              Vat        Tax        Other      Net    Due
No &                            Amount     Amount     Amount     Paid   Amount

Sample of Cash Requirement Report
 Beximco Pharma          Cash Requirement Report (Summery)
                             By Invoice Upto 0/00/00
                              Payment Upto 0/00/00
 Ref. Date for Age Calculation: Voucher Date          Payable Amount & above days old
Vendor     Vendor Name                         Payable     Paid      Deduction   Due
No                                                                               Amount

Sample of Aged Payable Report

 Beximco Pharma          Aged Payable Report (Summery)
                            By Invoice Upto 0/00/00
                              Payment Upto 0/00/00
 Ref. Date for Age Calculation: Voucher Date          Payable Amount & above days old
Vendor   Vendor Name         Total      0-30      31-60      61-90      Above    Unclassi-
No                           Due        Days      Days       Days       90       fied
                             Amount                                     Days

Sample of Vendor Business Position Report

 Beximco Pharma          Vendor Business Position Report
                             From 0/00/00 to 0/00/00

Vendor   Vendor Name        Payable     Vat     Tax       Pay-       Other       Due
No                                                        ment       Deduction   Amount
 Calculation: Voucher Date         Payable Amount & above days old
Vendor     Vendor Name                         Payable     Paid      Deduction   Due
No                                                                               Amount

Sample of Aged Payable Report

 Beximco Pharma          Aged Payable Report (Summery)
                             By Invoice Upto 0/00/00
                              Payment Upto 0/00/00
 Ref. Date for Age Calculation: Voucher Date         Payable Amount & above days old
Vendor   Vendor Name         Total      0-30      31-60      61-90      Above    Unclassi-
No                           Due        Days      Days       Days       90       fied
                             Amount                                     Days

Sample of Vendor Business Position Report

 Beximco Pharma          Vendor Business Position Report
                             From 0/00/00 to 0/00/00

Vendor   Vendor Name        Payable     Vat Tax           Pay-       Other       Due
No                                                        ment       Deduction   Amount

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