Académique Documents
Professionnel Documents
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PH021T/1.0/15.09.99
Table of Contents
INTRODUCTION ......................................................................................................................................... 4
ORGANIZATION STRUCTURE................................................................................................................ 5
ORGANIZATION STRUCTURE OF KIRLOSKAR BROTHERS LIMITED (KBL) ................................................. 5
ORGANIZATION STRUCTURE OF ACCOUNTS DEPARTMENT ...................................................................... 5
MASTER DATA ........................................................................................................................................... 6
GENERAL LEDGER MASTER ....................................................................................................................... 6
CUSTOMER MASTER .................................................................................................................................. 6
VENDOR MASTER ....................................................................................................................................... 7
DEPOTS LEDGER MASTER ......................................................................................................................... 8
ADVANCES (EMPLOYEE) MASTER.............................................................................................................. 8
BANK MASTER ............................................................................................................................................ 9
COST CENTERS MASTER ........................................................................................................................... 9
GENERAL LEDGER ..................................................................................................................................10
CONSOLIDATION PROCESS .......................................................................................................................10
CASH AND BANK ACCOUNTING .................................................................................................................11
PAYROLL ACCOUNTING .............................................................................................................................13
ASSET ACCOUNTING .................................................................................................................................15
BUDGETING ...............................................................................................................................................17
YEAR-END / PERIOD END CLOSING OPERATIONS. ...................................................................................18
ACCOUNTS RECEIVABLE ......................................................................................................................23
DOMESTIC SALES ......................................................................................................................................23
Kirloskarvadi ........................................................................................................................... 23
Dewas..................................................................................................................................... 31
Shirwal .................................................................................................................................... 35
Area Offices ............................................................................................................................ 38
PROJECT SALES .......................................................................................................................................42
EXPORTS ...................................................................................................................................................48
AFTER SALES SERVICE .............................................................................................................................53
Kirloskarvadi ........................................................................................................................... 53
Dewas..................................................................................................................................... 56
Shirval..................................................................................................................................... 58
STOCK TRANSFER CORRECTIONS ............................................................................................................60
RECEIVABLE MANAGEMENT (COLLECTIONS)............................................................................................62
Kirloskarvadi – Domestic & Export and Dewas Export ........................................................ 62
Dewas , Shirwal and Area Offices - Domestic ....................................................................... 68
Projects................................................................................................................................... 71
SALES RETURN / CREDIT NOTES .............................................................................................................74
Kirloskarvadi ........................................................................................................................... 74
Dewas & Area Offices ............................................................................................................ 77
Shirval..................................................................................................................................... 79
Projects................................................................................................................................... 81
BUSINESS DEPOSITS , ADVANCES FROM CUSTOMERS ............................................................................83
Kirloskarvadi ........................................................................................................................... 83
Dewas / Shirval / Area Offices................................................................................................ 86
Projects................................................................................................................................... 88
Introduction
Kirloskar Group is one of the India’s Premier and more than a Century
old engineering group. The group turnover is around Rs. 20 Billion. The
group is known for largest distribution network and excellence in
manufacturing. The group consists of 20 companies including joint
ventures.
Mission Statement
Future Direction
To become a focussed player in engineering products, shift focus from top line to
bottom line and aggressive cost cutting & increasing productivity of capital and
human resources.
Project e-MAD
This project is a SAP R/3 implementation project. The scope of the project covers
the business processes related to Marketing And Distribution (MAD) Division of
KBL, which is providing services to all SBUs for their Domestic & International
Market. The entire factory operations are out of the scope of the project.
Manufacturing set up and external vendors are the sources of Products to
Marketing Division. The modules covered in this project are:
Organization Structure
Organization Structure of Kirloskar Brothers Limited (KBL)
KBL is divided into seven strategic business units (SBU) on the basis of product
groups for the purpose of proper control and accountability. These cover both
manufacturing and marketing activities of particular product. These are supported
by Central Corporate Function at Pune for common services such as
international marketing, taxation, accounts, finance, internal audit, information
technology, public relations etc.
Note: Organization Chart for SBU 6 (Press) is not provided as activity of this
SBU is not material with respect to company’s overall activity and not within
the scope of the project.
Master Data
General Ledger Master
Nature of From To
Accounts
Liabilities 100000 199999
Assets 200000 299999
Income 300000 399999
Expenses. 400000 499999
Coding Structure: 1st digit indicates the nature of account as tabulated above. In
case G/L master ends with 00, this account balance is depicted in financial
statements.
The details of all the G/L master records are stated in Data-GL.xls.
Customer Master
The customer number starts from 10001 to 19999. There are no further sub-
groupings of customer master records based on certain criteria such as
associate concerns, export customers etc. All the customers created between
aforesaid range are automatically (built in Accounting Package and not in
customer master) assigned to control account 240100 in General Ledger. In case
of customers at Kirloskarvadi, if transactions are in the nature of sale on
acceptance basis and the dealer does not sell it within 180 days, the same is
returned to Kirloskarvadi. Such transactions are posted to control account
240150 in General Ledger.
Coding Structure: Accounts in these ledgers are prefixed with a code in 4 digit.
First two digits indicate Region to which the customer belongs and the last two
digits indicate class of buyer i.e. dealer, stray customer, OEM etc. To illustrate,
customers master number 0901010011, means Pune Region (09), Dealer (01),
Ramchangra & Company (10011).
The name and complete postal address of the customer is stored in master
record. The master data does not contain information of Sales Tax Registration
Numbers, Excise Control Code, Permanent Account Number etc. of customer.
Vendor Master
The name and complete postal address of the Vendor is stored in master record.
The master data does not contain information of Sales Tax Registration
Numbers, Excise Control Code, Permanent Account Number etc. of Vendor.
Class of vendor i.e. manufacturer, trader, SSI etc. cannot be ascertained from
the present system.
The Depots Ledger ( area office / branch / regional office / factory ) Master
records are maintained in in-house developed Financial Accounting Software of
KBL in Foxpro language. Depots Ledger account numbers are stored as 5 digit
numeric field with grouping of numbers as stated below.
Particulars From To
Depots Ledger 30001 39999
All the Depots Ledger Masters created between aforesaid range are
automatically (built in Accounting Package) assigned to control account 240300
in General Ledger.
Particulars From To
All the Advances (Employees) Master created between aforesaid range are
automatically (built in Accounting Package) assigned to control account 240400
in General Ledger.
Coding Structure: Last four digits are ticket number (Personnel number) of the
employee. This logic is not strictly followed.
Bank Master
Address of the bank / branch of the bank does not appear on the master.
Similarly, borrowing limit, rate of interest, nature of security / hypothecation,
names of authorized signatories etc. does not form a part of the master.
Separate master of cost centers is not maintained in the existing system. Each
cost center is given a department number in 3 digits and entries in books of
accounts are passed with reference to Department Number, wherever possible
but it is not mandatory.
General Ledger
Consolidation Process
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-GL
Name of Business Process : Consolidation Process
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-GL
Name of Business Process : Cash and Bank Accounting
Flow Chart of Business Process : FC-Cash Bank.Doc
Details of Business Process:
Basis of Payment
We prepare vouchers for receipt and payment of cash and bank for payment to
and from vendors, employees, area offices, customers, factories, Corporate
Office etc. depending upon the nature of transaction.
Accounting
After making / receiving the payment, the cashier defaces the vouchers by
putting rubber stamp. The cashier maintains a cash scroll and accounts for the
vouchers through Cash / bankbook. He takes out daily print out of the cashbook
and tallies the cash on hand.
At the end of the month all the cash / bank cash vouchers are incorporated in
Finance System and ledgers are processed.
Expenses of C.I.D.
Routine administration expenses of C.I.D. (i.e. Salaries, Travelling, Conveyances
etc) are accounted in the books of Corporate Finance and Accounts Department,
Pune. Similarly, expenses of overseas offices also are accounted in the books of
Corporate Finance and Accounts Department, Pune. Product specific expenses
(such as advertisement, exhibition, sales promotion, remuneration,
reimbursement of trucking expenses, bank guarantee expenses, inspection
charges etc) incurred by C.I.D. are accounted in the books of Kirloskarvadi /
Dewas factories as the case may be. Sometimes, the expenses are paid through
EEFC Account also. Expenses of this / similar kind not paid as on the date of
Balance Sheet are provided for in the books of accounts. All these expenses are
shown under Expenditure in Foreign Currencies in the Notes to Final Accounts.
Concern Areas, if any : Present system does not facilitate automatic processing
of vouchers, remittance letters & cheques.
Output from this business process sent to other functions : Internal users.
Payroll Accounting
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-GL
Name of Business Process: Payroll Accounting
Flow Chart of Business Process :
Details of Business Process:
Except for Pune, Nagpur and Mumbai area offices and Projects Division,
processing of pay takes place at respective locations. Pay roll is processed
through our present Pay Processing System in Foxpro language.
Wherever the payments are made by way of cheque, the entry is passed for net
amount.
For difference between gross amount and amount paid through bank, the entry is
passed with cash code.
Concern Areas, if any: Since this activity is not under SAP, comments are not
offered.
Output from this business process sent to other functions: Internal users.
Asset Accounting
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-GL
Name of Business Process: Assets Accounting
Flow Chart of Business Process :
Details of Business Process:
Purchase Order
Purchase Orders are placed after getting Board Approval.
Receipt of assets
Store Memo is issued for receipt of asset.
Transfer of assets
In case there are transfers of asset from one place to another, debit / credit
advice are raised on receiving office for transfer of cost and accumulated
depreciation.
Closing operations
Physical inventory of assets is taken on periodic intervals.
Depreciation is charged in books of accounts at the year-end as per rates
applicable to each class of asset on Straight Line Method.
Other Information
We have following accounts for asset accounting :
Opening Block for various assets,
Additions A/c for various assets,
Deductions A./c for various assets,
Opening Depreciation for various assets,
Concern Areas, if any: Since this activity is not under SAP, comments are not
offered.
Output from this business process sent to other functions: Internal users.
Budgeting
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-GL
Name of Business Process : Budgeting
Flow Chart of Business Process :
Details of Business Process: At present this activity is carried out at factory
level.
Concern Areas, if any : Since this activity is not under SAP, comments are not
offered.
Output from this business process sent to other functions: Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-GL
Name of Business Process: Year-end / Period-end Closing Operations
Flow Chart of Business Process :
Details of Business Process:
General Processing of ledgers in parts at the end of each quarter and three parts
at the time of year-end.
Preparation of inventory sheets.
Valuation of inventory.
At the year-end, outstanding export debtors are updated with exchange rate
prevailing on the date of Balance Sheet by preparing a journal voucher.
Similarly, credit balance to overseas supplier’s account is updated with exchange
rate prevailing on the date of Balance Sheet by preparing a Journal Voucher.
Sundry Debtors Group account Dr/ Cr.
Purchase Account Dr / Cr
Sales account Dr/ Cr.
Creditors on Purchases Account Dr / Cr
This aforesaid journal voucher is reversed in next financial year. The entry
passed is :
Sundry Debtors Group A/c Dr / Cr
Difference in Exchange Account Dr / Cr
updated at the end of the year at exchange rate prevailing on the date of Balance
Sheet by preparing a journal voucher.
Amount of invoice actually realized less actual freight charges and insurance
charges and Amount of outstanding invoice updated as per rate prevailing on
date of Balance Sheet less actual freight charges and insurance charges.
For the purpose of published accounts, Exports to Bhutan and Nepal etc. in
Indian currencies are considered. However, for the purpose of Tax Audit, those
ignored.
Similarly, at the end of each quarter, C.I.D. requires a statement showing FOB
value of realized exports. This statement also is prepared manually as of now.
In case of export of compressors, we do not claim any export benefit. The same
are claimed by the supplier viz. Kirloskar Copeland Ltd. In order to enable them
to claim the benefits, we give a disclaimer certificate to them every year.
We also pass entries for write off of debtors where we have received approval
from Reserve Bank of India.
Delivery note number and date for dispatch of material for export,
Destination of dispatch,
Commercial Invoice Number and date,
Purpose (i.e. whether exhibition)
This acts as internal check on the certificate given by Clearing House Agent.
Domestic Sales
Send letters to all the customers for confirmation of balance.
Calculation of interest on business deposit.
Processing of credit advices
Accounting of credit advices
Calculation of interest on advances received from customers
Deduction of Income Tax at source
Processing of TDS Certificate
Return in prescribed format
We also pass entries for write off of debtors where we have received approval
from Vice President.
Project
At year-end, the Area Offices transfer the Sales, Purchases, Debtors, Creditors,
Advances received from customers, and Advances given to suppliers and stock
received account to Project Pune. These accounts are transferred by drawing
necessary debit or credit advice. Project Pune records these advices by crediting
the particular product sale and purchases account, debiting sundry debtors
account for debtors, crediting creditors on purchases account for creditors,
advances received from customers for advances from customers and Advances
account for advances given to suppliers. The individual debtors or creditors
accounts are not transferred by the Area Officer but only controlling accounts are
given effects. These debtors, creditors and advances account are reversed to the
concerned area offices in next year.
Project accounts merges these entries in its Trial Balance. Transfers expenses
pertaining to other SBUs to respective SBU accounting departments. Completes
its year ending activities and sends the Trial Balance to Kirloskarvadi accounts
department for merging purpose.
details). Yes
Output from this business process sent to other functions: Internal users.
Accounts Receivable
Domestic Sales
Kirloskarvadi
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Domestic Sales (kirloskarvadi)
Flow Chart of Business Process : FC-Sales-KOV.Doc
Details of Business Process:
Invoicing
Bills Section starts the billing activity on receipt of delivery note (Consignment
Note) from Dispatch Section.
Kirloskarvadi Accounts Department raises bills for domestic sales of SBU 1, 2, 3,
4 and 7.
Following series are allotted for raising invoices :
Inland sale of
Complete
Articles & Set 01 21 41 61 81
Exports 02 22 42 62 82
Spare Parts 03 23 43 63 83
Service Charges 04 24 44 64 84
Sale in Transit 05 25 45 65 85
180 days credit 06 26 46 66 86
Additional
Invoice 07 27 47 67 87
Free Supply 08 28 48 68 88
Job Work 09 29 49 69 89
Stock Trans-
Fer to Aos 10 30 50 70 90
GSD * 11 31 51 71 91
Tool Room
(Captive Use) 12 32 52 72
PSC for Reje-
Cted Casting 13 33 53 73
Leasing 14 34 54 74 94
Sale of Asset 15 35 55 75 95
Spares – Manual
(Cr note reversal)16 36 56 76 96
Rectification
Voucher Inland
DR 17 37 57 77 92
CR 18 38 58 78 93
GSD from
Prod. Divn. 19
Rectification
Voucher Export
DR 98
CR 99
* ( Serial Numbers in this series are : 00001 to 01000 General Stores, 01001 to
02000 Cast Iron Foundry, 02001 to 03000 Heavy Foundry and 03001 to 04000
Non Ferrous Foundry ).
a) Commercial invoices for domestic sale of products and services. These are
accounted for in books of accounts. These invoices are raised in the series
as mentioned above depending upon the product and the selling SBU. The
invoices are raised through computerized system as well as manually. The
invoices which are raised through computerized system, get automatically
incorporated into Finance Data at the time of processing books of account.
The invoices raised manually require to be fed into the computer in the
Financial Accounting System for the purpose of recording into books of
accounts.
There is no written down policy for offering terms of payment. The terms of
payment differ from client to client and case to case. We put terms of
payment on invoices, which are mentioned in the Order Acceptance.
b) Submission invoices for collecting payment. These are not accounted for in
books of accounts. Many times, the terms of payment committed to the
customer are of deferred nature i.e. 90 % payment against proof of
dispatch and balance 5 % after receipt of material at site and balance 5 %
after erection / commissioning / alignment. In our present system, we
cannot raise more than one invoice for one supply / consignment note.
Therefore, such invoices are required to be raised. These invoices are
raised through a separate computer package after raising of commercial
bill for the supply. Therefore, the activity of raising this invoice gets
secondary priority and there is delay in raising the invoice and sending it to
area office, which ultimately results in late realization of sale proceeds.
There is a problem from Sales Tax angle too. The customer gives Sales
Tax declaration with reference to the submission invoices as those are
accounted for in his books of accounts, whereas we show our commercial
invoice to the assessing authority. In the event that when there are two
financial years involved in these transactions, it becomes difficult to satisfy
the assessing authorities.
c) Direct Sales Bills ( for trading material directly delivered by the vendor to
customer’s place ). These are accounted for in books of accounts as
mentioned at item No. (a) above. These are raised for sale in course of
transit. We receive lorry way bill and other documents from the vendor and
on the basis thereof, raise Sale Invoice on the customer which is called as
Direct Sale Bill. We cannot process such bills from our present finance
system. However, we have developed a tailor made package for this
activity.
d) Stock Transfer bills ( for movement of material from factory to area offices /
Dewas). These are accounted for in books of accounts as mentioned at
Item No. (a) above.
Disposal of invoices
Bills Section disposes off the invoices in accordance with terms of Order
Acceptances along with required documentation.
Exclusions
Invoices raised in SBU 2 series i.e. 21 to 40, are not accounted in the books
of accounts of Kirloskarvadi but are sent for accounting to Projects Division,
Pune. For the purpose of Sales Tax compliance, we raise a debit advice for
stock transfer on Projects Division for supplies covered under such invoices
on month to month basis. The stock transfer invoice is raised at 92.5 % of the
product value.
At the time of year end, Area Office prepares a physical inventory statement of
products of Kirloskarvadi lying in stock at their end and sends it to Kirloskarvadi
for the purpose of valuation and incorporation in books of accounts.
Exclusions
The activity of raising invoices for sale of scrap, stores material, capital goods,
goods for captive consumption, cash sales etc. is excluded as the said sale does
not form a part of Marketing and Distribution Activity.
Concern Areas, if any: Serial numbers of the products do not appear on the
invoice. Documentation required along with invoicing does not come as OAMISI.
Performa invoice and submission invoice can not be generated from the system.
Verification of purchase with sales and vice versa is not possible.
Invoice,
Check runs for verifying the accuracy of the data keyed in. In case errors are
found, necessary corrections are made, control totals are tallied,
Mis-match report ( unadjusted credit against debit or vice versa ),
Sales Journal,
Credit Notes Journal,
Debtors Ledger ( Outstanding ) ( account serial number wise, region wise ),
Dues / overdues statement,
Output from this business process sent to other functions : Customers and
Internal users.
Dewas
AS-IS Document
For KBL e-MAD Project
Date : June 20, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Domestic Sales (Dewas)
Flow Chart of Business Process : FC-Sales-Dewas.Doc
Details of Business Process:
Production Planning
In case of make to stock products, at factory level the production plan is taken on
forecasting basis as well as on the basis of indents received from Area Offices.
In case of made to order products the production is made on the basis of orders
placed directly and the dispatches are made according to the terms of contract.
Invoicing
In case of make to stock products, factory raises stock transfer invoices under 54
series for dispatches to Area Offices /C & F agents. Stock transfers are effected
at dealer price (i.e list price less standard discount). In case of material directly
dispatched to dealer excise / commercial invoice is raised on the basis of
delivery challan issued by Stock & Dispatch Department. Pricing of invoices are
done on the basis of commercial policy. As regards sales tax the same is
charged as per prevailing tax rules/act. Specific codification for tax rate is given
in the invoice.
In case of Works Contract Order, the products are supplied from Dewas to
customer’s location directly or through Area Office and the sale invoice is raised
from the delivering point (Dewas/Area Office). The incidental activities like
installation, erection etc. are carried out by way of subcontracting. Sub
Contractors’ invoices are accounted at Dewas on the basis of order placed on
subcontractor and is co-related with invoice raised on tendering authority.
Regular transaction for sale of scrap to outsiders is routed through same invoice
series. Amount of such sale is credited to Misc. Stores Sales.
Accounting Entries
In case of excess / short / wrong dispatch of products to area office / C&F agent,
accounting entry for the same is passed in factory books on the basis of credit or
debit advises received from area office.
Discounts
Cash discount is parted through sales invoice considering payment will be
realized within 4 banking days from date of invoice by way of local cheque or by
D/D in case of outstation dealer. Cash Discount is reverted if the payment is not
received as per above terms by raising debit advice on the dealer and is
accounted through journal. Cash Discount is allowed @3% on product value (list
price less std. Discount)
In addition to cash discount additional discount of 1% is allowed on product value
in the invoice itself if value of single invoice is as under.
Value of single invoice = Previous year’s off-take x Rate of growth /30 or
Rs.25000/- (for new dealer) whichever is higher. The growth rate is fixed on the
basis of off-take during last year. This differs from dealer to dealer.
At every month end, data of sales invoice is transferred to accounts dept from
the invoice package and monthly trial balance is processed.
Incentive
In order to encourage the dealers, growth incentive is introduced this year. The
calculation of incentive is based on last years off-take and rate of growth given in
the commercial policy. The incentive @3% on net product value (list price less
standard discount less stock discount) is to be allowed by way of credit note at
the year end. The amount of incentive should be debited to Sales Promotional
Expenses.
Output from this business process sent to other functions : Customer and
other Internal users
Shirwal
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Domestic Sales (Shirwal)
Flow Chart of Business Process : FC-Sales-Shirval.Doc
Details of Business Process:
Pre-sales Activity
Indents for stock to sale material is placed on fortnightly basis by area offices
except area offices located in Maharashtra. As of today 14 area offices have
their godowns and they are also operating through C&F agents. In case of
indents placed by area offices the material is dispatched by stock and dispatch
dept to stocking point (AO godowns /C&F). In case of order placed by dealer on
factory the material is dispatched directly to the destination of the dealer/
customer.
Production Planning
At the factory level the production plan is taken on forecasting basis as also on
the basis of indents received from various area offices.
Invoicing Activity
Factory raises stock transfer invoice under 54 series for dispatches to area
offices and in case of material directly dispatched to dealer excise / commercial
invoice is raised. Stock transfer are effected at pre determined standard price.
Accounting entries for these transactions are passed as under.
Regular transaction for sale of scrap to outsiders is routed through same invoice
series. Amount of such sale is credited to Misc. Stores Sales
Discount Structure
Standard Discount varies from area office to area office for stock transfer.
We have separate invoice package built in FOXPRO , and the same is operated
by store keeper/marketting personnel/Accountant.
At every month end data of sales invoice is transferred to accounts dept from the
invoice package and monthly trial balance is processed.
Sales Tax
Shirwal Unit has been granted exemption certificate by Sales Tax authorities,
and has been given eligibility certificate by SICOM in 1999. The limit of
exemption is 1.34 crores. This certificate is valid up to Jan 2005 or utilizing limit
of 1.34 crore whichever is earlier.
Output from this business process sent to other functions: Customers and
Internal users.
Area Offices
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Domestic Sales – Area Offices (Dewas & Shirwal
Products)
Flow Chart of Business Process : FC-Sales-Area Offices.Doc
Details of Business Process:
Pre-sales Activity
Orders are placed by dealers on area offices / factories. As of today 14 area
offices have their godowns and they are also operating through C&F agents. In
case of orders placed on area offices the material is dispatched from the stocking
point (godowns /C&F). In case of order placed on factory the material is
dispatched directly to the destination of the dealer. Area offices place indents on
factory for the requirement of material based on the best judgement of marketing
personnel.
Production Planning
At the factory level the production plan is taken on forecasting basis as also on
the basis of indents received from various area offices. In case of made to order
products the production is made on the basis of orders placed directly and the
dispatches are made according to the requirements.
Invoicing
Factory raises stock transfer invoice under 54 series for dispatches to area
offices.
On receipt of material at area office godowns the store- keeper takes out store
memo on the basis of physical receipt of material. Deviation in receipt of material
in relation of stock transfer invoice is informed to accounts dept. Accountant on
the basis of store memo and stock transfer invoice pass following entries.
1) Stock Recd – Dr . Stock Received from Factory (General Ledger)
Cr. Current Account of Factory (Depot Ledger)
In few area offices the handling charges are recovered at @1% of product value
in the invoice itself elsewhere the amount of transportation is recovered in the
invoice at actual.
C&F activity
Stocks are maintained at the godowns of C&F locations. C&F agent caters
dealers in his area as per the instructions from area office. The requirement of
material for stocking purpose is informed to area office by C&F agent. Stock
transfer invoice is raised from area office on C&F for such transfer of material.
Receipt of material - accounting is same as per the practices of area office and in
case of sales also the practices of area offices is followed. Accounts books of
C&F locations are maintained at respective area office to which C&F agent is
attached
Stock transfer of material also takes place between area offices located at
various locations. The accounting treatment is same as explained above. This is
restricted to own manufactured products only.
Contract Order through area offices/ Dewas factory. Supply of material for such
orders is from area office / Dewas directly to customer’s location and the sale
invoice is raised from the delivering point. In case of activities like installations,
the same is carried out by subcontracting the job. Sub Contractor’s invoice is
passed at respective area office / Dewas on the basis of order placed on him and
is co-related with AO/Dewas invoice raised on tendering authority. The
accounting entry is as under.
Dr. Customer A/C (Debtors Ledger)
Cr. Sale of Own Product A/C (General Ledger)
Cr. Sale of Trading Articles (Bought-out Items) (General Ledger)
Cr. Services Rendered A/C (Installation Charges) (General Ledger)
Cr. Works Cont. Tax A/C(General Ledger)
Discount Structure
Cash discount is parted through sales invoice considering payment will be
realized within 4 banking days from date of invoice by way of local cheque or by
D/D in case of outstation dealer. Cash Discount is reverted if the payment is not
received as per above terms by raising debit advice on the dealer and is
accounted through journal. Cash Discount is allowed @3% on product value (list
price less std. Discount)
At every month end, data of sales invoice is transferred to accounts dept from
the invoice package and monthly trial balance is processed.
Concern Areas, if any : Credit limits of dealers and balance available is not
readily available (on line). Calculation of overdue interest, reversal of cash
Output from this business process sent to other functions: Customers and
other internal users.
Project Sales
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Project Sales
Flow Chart of Business Process : FC-Sales-Projects.Doc
Details of Business Process:
Invoicing at Kirloskarvadi
The invoice prepared at Kirloskarvadi contains the Name and address of the
customer (If Project is to be billed from the Area Office then Name of the Area
Office), the name and address of the consignee, the order acceptance number,
the customer purchase order number, LR number, the product value of main as
well as spares, the Excise classification number, the amount of Excise Duty paid,
Freight, Insurance charges and applicable Sales Tax etc. All this information is
based on the billing break up given in the Order Acceptance. The invoice
received from Kirloskarvadi is not accounted in project if terms of payment are
different. Kirloskarvadi raises a debit advice of stock transfer price, which is
recorded as debit to stock received from Kirloskarvadi, crediting to Kirloskarvadi.
The Invoice raised by Kirloskarvadi is not accounted by Kirloskarvadi.
The copy of the invoice prepared along with the lorry waybill and other necessary
documents such as instruction manuals are given to Pune CCR (Credit Control
and Recovery Department.)
receives a copy of invoice from kirloskarvadi directly. The area office credits
Projects Pune and debit the stock received from project account. On the basis of
this invoice and other documents received from Kirloskarvadi, the area office
prepares the submission invoice and records in its books. The area office
accountant maintains the customer master at concerned area office. The
customer account is debited, crediting the product sale account, sales tax and
other charges account like transportation account. The sale recorded is
transferred to project Pune on yearly basis. Excise duty recovered is transferred
by project Pune to kirloskarvadi. The sales tax account is debited on payment.
If the purchase order of the customer contains a separate item for erection and
commissioning, the invoice for such erection and commissioning is prepared on
the basis of protocol signed by the site engineer and approved by the customer.
If the Purchase Order contains single item for erection and commissioning, the
bill is raised for the entire value after completion of the entire erection and
commissioning. The expenses are accumulated in the similar fashion. If the
purchase order contains erection and commissioning item for each of the supply
item, the invoice is prepared on the basis of protocol referred above. If expenses
against such sale could not be directly related, then such sale and expenses for
the project are accumulated as referred above and recognized as revenue items
only after the entire erection and commissioning activity is completed.
Civil Activity
Project along with supply and erection and commissioning, also undertakes civil
construction activity. Civil activity is covered by the accounting standard 7 issued
by The Institute of Chartered Accountants of India. The method of accounting
followed by project is percentage completion method. All income relating to work
completed is accounted on the basis of running bill prepared on the basis of work
recorded in measurement book. For any additional work done at site, not
included in the customer’s order, though billed on the customer, is not accounted.
The expenses incurred for such activity is however accounted. This is followed
as per the conservative method of accounting. If on a comparison of entire
contract price and our estimated cost, we anticipate that we would incur a loss, a
provision for such apparent loss will be made in the respective year itself. A sale
and purchase connection report is prepared. On this basis a provision for
purchase or closing stock (WIP) is calculated.
manually deleted from the order data to generate the pending orders status.
Concern Areas, if any : Serial numbers of the products do not appear on the
invoice. Documentation required along with invoicing does not come as OAMISI.
Proforma invoice and submission invoice can not be generated from the system.
Verification of purchase with sales and vice versa is not possible.
Output from this business process sent to other functions : Customers and
Internal users.
Exports
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Export Invoicing (kirloskarvadi and Dewas)
Flow Chart of Business Process : FC-Exports.Doc
Details of Business Process:
At the same time Head Offices issues a credit advice to facilitate the accounting
at Kirloskarvadi.
Invoicing
After getting Shipping Documents from the Customs House Agent, C.I.D. raises
commercial invoice on the customer in 02 series, for Kirloskarvadi products and
in “D” series for Dewas products. . We have allotted the invoice series SBUwise
also e.g. 02 for SBU 1, 22 for SBU 2, 42 for SBU 3, 62 for SBU 4, 82 for SBU
7and ‘D’ for SBU 5. However, as of today, the export invoices are raised in 02
and D series only for Kirloskarwadi and Dewas respectively.
The invoices are raised in various currencies. However, one invoice is never
raised in multi currencies.
C.I.D. sends accounting copy of export invoice to respective Accounts
Departments for accounting.
The product codes are mentioned in the invoice in 7 digits, customer’s account
number in Debtors Ledger is put in, sales tax code is put in and General Ledger
Account numbers for crediting income are put.
The invoice is punched in the present Financial Accounting System for the
purpose of recording into books of accounts.
Entry to Debtors Ledger Account appears with reference to Invoice Series,
Invoice Serial Number, Date of Invoice, Gross Amount of the invoice, Reference
of Acceptance of Order, Credit Period allowed and due date of payment.
Entry to General Ledger Account appears as summary entry of the invoice
series.
The invoice is accounted in books of account at the exchange rate informed by
C.I.D.
C.I.D. obtains this rate from the bank prevailing on the date of submission of
document to the bank for the purpose of discounting / collection/ purchase etc.
Accounting system does not record foreign currency information. Following
accounting entry is passed.
Export Incentives
C.I.D. applies for all sorts of export entitlements i.e. duty drawback, DEPB,
Advance / Special Import License. On receipt of cheques towards settlement of
the claims, we account for entries in books of accounts by debiting the bank
account and crediting Duty Draw Back Received Account or Duty Draw Back
Receivable Account as the case may be, through journal or Bank Cash Book.
We have accounts with Bank of India, Ballard Estate Branch, State Bank of India,
Fort, State Bank of India, Andheri and State Bank of India, Sahar for direct credit
of duty drawback and DEPB claims by respective Government Departments. At
the time of year-end, we get a statement from C.I.D. giving list of unsettled
claims. On this basis we pass entries in books of accounts by debiting Duty
Draw Back Receivable Account and crediting Duty Draw Back Received Account
through journal. Excise Cell at Kirloskarvadi / Dewas looks after lodging of
claims arising out of AR 4 and settlement thereof.
In case of Advance / Special Import License, we do not pass any entry in books
of accounts.
Concern Areas, if any : Serial nos of the products do not appear on the
invoice. Accounting in multiple currencies is not possible. System does not
generate 1) Statement of FOB value, 2) Impact of difference in exchange and 3)
quantity statement in various formats.
the ledgers on month to month basis. We get following print-outs for above
activities :
Check runs for verifying the accuracy of the data keyed in. In case errors are
found, necessary corrections are made, control totals are tallied,
Mis-match report ( unadjusted credit against debit or vice versa ),
Sales Journal,
Credit Notes Journal,
Debtors Ledger ( Outstanding ) ( account serial number wise, region wise ),
Dues / overdues statement,
Business Deposit Ledger,
Advance Received Against Order Ledger,
Advance Received Against Order Ledger Outstanding,
Trial balances for all the above ledgers consolidate for Kirloskarvadi / Dewas
and SBUwise,
Discounted Draft Register,
Productwise listing of quantities and values for domestic invoices, export
invoices, credit notes and total on monthly as well as cumulative basis,
Schedule code wise Sales Tax List and
Schedule code wise Sales Tax Register
Output from this business process sent to other functions : Customers and
Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : After Sales Service (Kirloskarvadi – Domestic
& Exports)
Flow Chart of Business Process : FC-After Sales Service-KOV.Doc
Details of Business Process:
(a) Exports
Rejections / Rectification
In case there are rejections / rectification in / to the goods supplied to overseas
customers, C.I.D. requests the overseas office / distributor / agent to get those
repaired locally and send their claim for reimbursement to us. On receipt of the
claim at their end, C.I.D. prepares a letter in favor of Bank to remit the amount to
the client. A copy of this letter is endorsed to Accounts Department,
Kirloskarvadi. After receipt of bank advice for effecting the payment, we pass
entry to appropriate account. In case the amount is not remitted till the date of
Balance Sheet, we make a provision therefor. Sometimes, these payments are
effected through EEFC Account only. In such cases, we receive a debit advice
from Corporate Finance Department along with required details. On the basis of
this debit advice, entries are passed in books of accounts. These payments are
shown in Expenditure in Foreign Currencies in the notes to Final Accounts.
Sometimes, the payment is adjusted against remuneration payable to the
distributor / dues from him. In case the defect cannot be repaired locally, CID
decides in consultation with the factory for free replacement.
(b) Domestic
The customer lodges his complaint with factory or area office. The complaint is
resolved in following ways :
Representative from Area Office visits the customer and inspects the product. If
required, representatives from factory ( Quality Control, Product Engineering,
Service Cell etc ) visit the customer and inspect the product. Such visits are on
chargeable basis as well as non chargeable basis. If on chargeable basis, we
raise a debit advice on the customer as per recommendation from Marketing
Department. This debit advice is accounted for through Journal by debiting the
customer’s account in Debtors Ledger and crediting Services Rendered Account.
If possible, they purchase required material locally and repair the product. In
such case, the area office pays to the supplier or to the representative for making
cash purchase and raises a debit advice on Kirloskarvadi. This debit advice is
accounted through Bank Cash Book. Corresponding entry for this debit advice is
passed at Kirloskarvadi through Journal by debiting respective expenses account
and crediting the area office account in Depot Ledger. Almost in all cases, the
cost of such purchases is borne by Kirloskar Brothers Limited only.
In case it is not possible to purchase the material locally and it needs to be
dispatched from Kirloskarvadi, Marketing Department issues Order Acceptance
and directs the factory to supply required material to the customer either free of
cost or on chargeable basis. Supply of material free of cost is done in two ways :
(I) Dispatch the material under a delivery note in FREE Series. No accounting
entry is passed for such dispatches and cost of the product dispatched free gets
loaded to Material Consumption because the figure of consumption is arrived at
by classical method i.e. Opening Stock + Purchases – Closing Stocks. (ii) The
material is dispatched on 180 days’ credit. In such case the material is
dispatched under a delivery note in regular series and invoice is raised on the
customer. This invoice is accounted in books of accounts through Sales Journal.
The only difference is : the customer’s account is linked to controlling account
No. 240100 in General Ledger. A pre-condition of transaction under this method
is that the customer has to return the originally supplied part, which is in defective
condition, to the factory. On receipt of the defective part at Kirloskarvadi and on
getting a Returned Goods Memo from Dispatch Section, Accounts Department
issues credit note in favor of the customer for nullifying the bill raised on 180
days’ credit.
In case it is impossible to repair the product, the customer is advised to return the
product to Kirloskarvadi. On receipt of the defective product at Kirloskarvadi and
on getting a Returned Goods Memo from Dispatch Section, Accounts
Department issues credit note in favor of the customer for nullifying the bill
raised.
Output from this business process sent to other functions : Internal users.
Dewas
AS-IS Document
For KBL e-MAD Project
Date : June 20, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : After Sales Service (Dewas)
Flow Chart of Business Process : FC-After Sales Service-Dewas.Doc
Details of Business Process:
Warranty Status
Considering the status of such defective material i.e. whether in warranty or out
of warranty action for raising invoice for material consumed / services given is
decided. The warranty period as per commercial policy is 18months from date of
dealer/sub-dealer invoice. In few cases the defective material against sales made
from area offices / C&F locations are also received at Dewas for repairs. In case
the pumps are in warranty period, spares consumed /services charged are born
by the Company.
Accounting Entries
For receipt of material from dealer / customer no accounting entry is passed, only
store memo is generated and the material is delivered to servicing dept. under
credit slip.
After the confirmation from servicing dept. about repaired activity, invoice is
raised for spares consumed. Dispatched qty is nullified with store memo qty by
passing accounting entry.
In case of serviced pumps not in warranty period
present company does not have consumption accounting and only purchase
accounting)
Dr. Spares Consumed (General Ledger)
Cr. Spares Inventory (General Ledger)
B) For spares provided by the dealer
Dr. after Sale Services (General Ledger)
Cr. Dealers (Customer Ledger)
C) For service Charges
No accounting document is generated.
Concern Areas, if any : The current system is not suiting the requirements of
activity.
Output from this business process sent to other functions : Internal users.
Shirval
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : After Sales Service (Shirwal)
Flow Chart of Business Process : FC-After Sales Service-Shirval.Doc
Details of Business Process:
Warranty Status
Considering the status of such defective material i.e. whether in warranty or out
of warranty action for raising invoice for material consumed / services given is
decided. The warranty period as per commercial policy is 12 months from date of
dealer / sub dealer invoice. In case the defective pumps are not repairable at
service center those are send back to Shirwal.
Accounting Entries
For receipt of material from dealer / customer no accounting entry is passed, only
store memo is generated and the material is delivered to service center. After the
confirmation from servicing dept. about repaired activity, invoice is raised for
spares consumed. Dispatched qty is nullified with store memo qty by passing
accounting entry. In case pumps are within warranty period no accounting
document are generated.
In Shirwal Books
Dr. Stock sent to Area Office (General Ledger)
Cr. Current A/C of AO (Depot Ledger)
Finally area office issues credit note to dealer or free replacement is given from
AO stock. The qty is nullified by accounting store memo and free replacement
invoice / credit note.
Concern Areas, if any : The current system is not suiting the requirements of
activity.
Output from this business process sent to other functions : Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Stock Transfer Corrections
Flow Chart of Business Process : FC-Stock Transfer Correction.Doc
Details of Business Process:
e.g. in the stock transfer invoice product X is mentioned, and the physical receipt
is of product Y, then following entry is passed.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Receivable Management (Kirloskarvadi –
Domestic & Export ) and Dewas Export
Flow Chart of Business Process : FC-Collections-KOV.Doc
Details of Business Process:
Our bank duty courier at Pune collects such advices on daily basis together with
supporting given by the bank and sends the same to Accounts Department at
Kirloskarvadi on weekly basis for accounting.
issues a credit advice in our favour indicating foreign currency realized, rate
applied for conversion, amount in Indian Rupees, the deductions made by the
customer / negotiating bank etc. Similarly on realization of bills sent for collection,
the bank issues credit advice in our favor indicating above details. Many times
the amount is credited to our EEFC Account with the bank as per instructions
from Corporate Finance Dept.
Our bank duty courier at Pune collects such advices on daily basis together with
supporting given by the bank and sends the same to Accounts Department at
Kirloskarvadi on weekly basis for accounting. In case of amounts credited to
EEFC Account, Corporate Finance Department issues credit advice in favor of
Kirloskarvadi and the realization is accounted for on this basis through journal.
Accounting at Kirloskarvadi
Sometimes, the invoices negotiated / discounted / purchased with the bank are
delinked if the payment is not realizing within 180 days. At that time the Bank
reverses the entry for purchase / discounting / negotiation in their books and
informs us by way of an advice. We pass corresponding entries in our books of
accounts.
B) Domestic Sales
Our bank duty courier collects such advices on daily basis together with
supporting given by the bank and sends the same to Accounts Department at
Kirloskarvadi on daily / weekly basis for accounting.
Our bank duty courier collects such advices on daily basis together with
supporting given by the bank and sends the same to Accounts Department at
Kirloskarvadi on daily / weekly basis for accounting.
Many times, the bills are sent to Area Offices for collection along with consignee
copy of Lorry Way Bill. Area offices collect the payment from customers or some
times the bills are directly sent to customers and payment is received from them
directly at Kirloskarvadi / Area Office / Head Office etc. We have following
methods of depositing the realizations:
In case the instrument received at area office cannot be handed over to HDFC,
the concerned area office deposits the same into their local bank account and
issues a credit advice in favor of Kirloskarvadi giving details of realizations. This
credit advice is accounted at Kirloskarvadi through journal by debiting the
account of concerned area office in Depot Ledger and crediting the customer’s
current / business deposit / advance account, as the case may be. After credit of
the cheque by the local bank to the account of area office, Area Office procures a
demand draft in favor of Kirloskarvadi payable at Pune / Sangli / Kirloskarvadi
and sends the said demand draft together with a debit advice to Kirloskarvadi for
accounting. This debit advice is accounted at Kirloskarvadi through Bills
Receivable by debiting the account of the bank wherein the instrument is
deposited and crediting the account of respective area office.
Advances received from domestic customers against the orders placed by them
on us are accounted for to the concerned customer’s account in Advance
Received Against Order ledger. Similarly, business deposits received from
customers are accounted for to the concerned customer’s account in Business
Deposit Ledger.
Dishonor of Cheque
Whenever any negotiable instrument received from the customer is dishonored
by the bank, we receive the original instrument together with bank’s note
explaining the reason of dishonor. In case the bank has requested to present it
again, we do not reverse the original entry passed, redeposit the cheque, do not
pass any entry and wait for clearance. In case the matter is to be referred to the
customer, we reverse the entry in following way:
Debit A/c No. 19999 in Debtors ledger and credit respective bank account,
through Bank Cash Book and
Raise a debit advice on the customer and send the original to him along with
Xerox of cheque and bank’s intimation. This debit advice is accounted through
journal ( J 4 ) by debiting the customer’s account in Sales Ledger and crediting
A/c no. 19999.
Output from this business process sent to other functions : Customers and
Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Receivable Management (Dewas, Shirwal &
Area Offices)
Flow Chart of Business Process : FC-Collections-Dewas.Doc
Details of Business Process:
Commercial Policy
The receivables management for Dewas and Shirval Products is governed by a
common Commercial Policy for dealers all over India.
The dealers working for more than one year are given credit limits based on the
performance of previous year. The credit period extended to old dealers is 45
days from the date of invoice. The collections are by way of adequate security or
by demand drafts to be received at area office location on or before 45th day
from the date of invoice.
In case of New Dealers no such credit facility is extended at least up to
completion of first year operations. New dealers are subject to operate on cash
and carry basis. The collections are by way of local cheques / demand drafts
realizable within 4 banking days from the date of invoice.
Accounting Procedure
Transfer of balances of customers: - In case of direct billing from Dewas / Shirval
on area office dealers / end-customers, the out-standings are transferred to
concerned area office in the subsequent month of invoicing. The balance is
transferred by way of debit/Credit advices. Dewas Books carry only export,
associate concern debtors & Shirval Books does not carry any debtors.
The Money receipts are accounted as under through cash and bankbook
Provision for doubtful debts is made on the basis of discussion with marketing
dept. & Debtors are written off as per instructions from SBU Head. & following
entry is passed
For provision
Output from this business process sent to other functions : Customers and
Internal users.
Projects
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance And Controlling Chapter: FI-AR
Name of Business Process : Receivable Management (Project)
Flow Chart of Business Process : FC-Collections-Projects.Doc
Details of Business Process:
Realisation
For recovery of the dues against the invoices raised, Project has a separate CCR
department. This department looks after the collection of payments from the
customers. The collection of payments contains collection of payments as per
terms of payment accepted by the customer in his purchase order.
The above said benefits differ from project to project based on the category of
deemed export. If a power project is funded by United Nations or by World Bank,
the Excise Duty is exempted on application to Ministry of Commerce on the basis
of certificate issued by the project authority.
Accounts
Output from this business process sent to other functions : Customers and
Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance And Controlling Chapter: FI-AR
Name of Business Process Sales Returns / Credit Notes (Kirloskarvadi)
Rectification of error in invoicing : When Bill Section notices any error in invoice
raised ( on self verification as well as on the basis of complaint from customer /
area office ), credit note is issued for rectification. This may be to the extent of
error or for cancellation of invoice in toto. In such case fresh invoice is raised on
the customer. Reference of credit note issued is mentioned in the invoice to
which it pertains. The reference contains Serial Number of Credit Note, Date,
Amount and reason. In case fresh invoice is raised, it contains reference of
original invoice number, date, credit note number and date. Simultaneously the
credit note contains reference of fresh invoice number and date.
Adherence to terms as per O. A. : If the O.A. stipulates terms for issuing credit
notes such as Remuneration for pre-sale canvassing, Remuneration for follow up
and collection of payment, Liquidated Damages etc., Bill Section issues the credit
notes. Reference of such credit note is mentioned on the respective invoice.
In such cases, Marketing Department prepares a Credit Note Memo. This memo
contains the history warranting issuance of credit note and is signed by the
Regional Sales Manager. It is, then, sent for approval of Zonal Manager and
Vice President.
Cancellation
Of Invoice 01 21 41 61 81
Difference in 02 22 42 62 82
Price/Discount
Remuneration 03 23 43 63 83
Liquidated 04 24 44 64 84
Damage
Refund of 05 25 45 65 85
Other Charges
Export difference06 26 46 66 86
In realization
Foundry
Supplies 07 27 47 67 87
Re-invoicing 08 28 48 68 88
The entire activity of issuing credit notes is manual. At the first instance, the
credit note is prepared by hand ( this is called as valuation ). Then it is got
typed, checked, signed and circulated. The credit notes issued are keyed in at
the month end and accounted for by debiting respective income / expense /
provision account and crediting the account of the customer in debtors ledger.
Records
Bills Section maintains two registers with them as under :
Delivery Note Register : to record invoice number against each delivery note
so as to ensure that sale invoice is raised against each delivery note.
Credit Note Register : to record each credit note so as to ensure that all the
credit notes are accounted for.
a) Credit Notes,
b) Credit Notes Journal,
c) Product-wise / party-wise quantity statement and
d) Schedule code-wise sales tax register
Output from this business process sent to other functions : Customers and
Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance And Controlling Chapter: FI-AR
Name of Business Process : Sales Returns / Credit Notes (Dewas)
Flow Chart of Business Process: FC-Sales Returns-Dewas.Doc
Details of Business Process:
Organizational Structure
We have 14 area offices located all over India. Very few of those are having our
own service stations, else where we have authorized service centers.
Accounting Procedure
On receipt of credit memo, credit note is issued by account dept and is
authorized by Regional Sales Manager of the concerned area office.
For receipt of material from dealer / customer no accounting entry is passed, only
store memo is generated and the material is delivered to service center. After
instruction from marketing dept credit note is issued and following entries are
passed.
Dr. Sale of Product (General Ledger)
Dr. Sales Tax A/c (General Ledger)
Cr. Dealer/Customer (Debtors Ledger)
Sales tax is parted only if the pumps are returned within six months from the date
of invoice.
In case of free replacement given to dealer from area office stock, the store
memo and free replacement invoice (zero value) are accounted at the same time
for qty effect.
In case of direct dispatches from Dewas the pumps are send by dealer /
customer without involving area offices, Dewas deals with customer / dealer
directly for replacement and in case of credit note, the credit balance is
transferred to respective area office.
a) Credit Notes
b) Credit Notes Journal
c) Product-wise / party-wise quantity statement
d) Schedule code-wise sales tax register
Output from this business process sent to other functions : Customers and
Internal users.
Shirval
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process: Sales Returns / Credit Notes (Shirval)
Flow Chart of Business Process: FC-Sales Returns-Shirval.Doc
Details of Business Process:
Organizational Structure
We have 14 area offices located all over India. Very few of those are having our
own service stations, else where we have authorized service centers.
Accounting Procedure
On receipt of credit memo, credit note is issued by account dept and is
authorized by Regional Sales Manager of the concerned area office.
The accounting entries for this activity are as under.
For receipt of material from dealer / customer no accounting entry is passed, only
store memo is generated and the material is delivered to service center. After
instruction from marketing dept credit note is issued and following entries are
passed.
Dr. Sale of Product (General Ledger)
Dr. Sales Tax A/c (General Ledger)
Cr. Dealer/Customer (Debtors Ledger)
Sales tax is parted only if the pumps are returned within six months from the date
of invoice.
In case of free replacement given to dealer from area office stock, the store
memo and free replacement invoice (zero value) are accounted at the same time
for qty effect.
a) Credit Notes
b) Credit Notes Journal
c) Product-wise / party-wise quantity statement
d) Schedule code-wise sales tax register
Output from this business process sent to other functions : Customers and
Internal users.
Projects
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process: Sales Returns / Credit Notes (Projects)
Flow Chart of Business Process: FC-Sales Returns-Projects.Doc
Details of Business Process:
Credit Notes
At end of the quarter or year, if the deductions made by the customers are
considered doubtful of recovery, a provision is made for such deductions. This
provision is made by debiting the deductions account (If exists in General Ledger
such as Liquidated damages for late supplies) and credit to sundry debtors
account. When the deductions made by customer or deductions so provided are
considered not recoverable, these are written off by raising credit note on the
customer. The credit note is initiated by the CCR department on approval from
Vice President (Marketing). The credit note is raised by accounts department.
Credit Note is raised in three copies. First copy is for customer, Second for CCR
Department and third for accounts department. The current finance system
generates monthly credit note register. Sometimes the balance to the customer’s
account is considered as non-recoverable by the CCR department. On approval
from the SBU Head, these balances are written off as bad on the basis of credit
memo initiated by the CCR department. The SBU Head approves this credit
memo. On the basis of this credit memo, the accounts department draws a credit
note, crediting the customer and debiting the bad debts account. This credit note
is also drawn in triplicate.
memo, if CCR department at Pune consider this material is not returnable, draws
a credit note memo and forwards it to the accounts department. Accounts
department on the basis of this credit memo draws a credit note debiting to sales
and crediting the customers account in sales ledger.
a) Credit Notes
b) Credit Notes Journal
c) Product-wise / party-wise quantity statement
d) Schedule code-wise sales tax register
Output from this business process sent to other functions : Customers and
Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Business Deposits , Advances from
Customers (Kirloskarvadi)
Flow Chart of Business Process : FC-Deposits,Advances-KOV.Doc
Details of Business Process:
a) Exports
In case the cheque is deposited but not credited by bank upto 31 st March, we
account for the advance by passing above entry at exchange rate prevailing on
the date of Balance Sheet.
Adjustment of Advances
We pass transfer entries from Advance Received against Order Account to
customer’s account in Sales Ledger on the basis of adjustments shown by C.I.D.
in the invoice and / or as per the recommendation of C.I.D., through Journal. This
does not happen automatically through the system.
The exchange difference (i.e. difference between accounting value of the invoice
and realized value and difference between adjustment of advance at invoice rate
and realized value) is accounted to Account No. 19999 in Sales Ledger if the
invoice pertains to current year. If the invoices are pertaining to previous financial
b) Domestic
A) In case of refund:
Dr. Dealer A/C in (Business Deposit Sub Ledger)
Cr. Bank A/C (General Ledger)
Output from this business process sent to other functions : Customers and
Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Business Deposits , Advances from
Customers (Dewas / Shirval)
Flow Chart of Business Process : FC-Deposits,Advances-Dewas.Doc
Details of Business Process:
Accounting Entries
For acceptance of BD
Dr Bank A/C (General Ledger)
Cr. Dealer A/C in (Business Deposit Sub Ledger)
For refund of BD
On the termination of dealership agreement the business deposit is either
adjusted in current account (in case of Outstanding) or repaid by cheque or
demand draft.
A) In case of refund:
Dr. Dealer A/C in (Business Deposit Sub Ledger)
Cr. Bank A/C (General Ledger)
B) In case adjustment to Current a/c :
Dr. Dealer A/C in (Business Deposit Sub Ledger)
Cr. Dealer A/C in (Sales Ledger)
Output from this business process sent to other functions : Customers and
Internal users.
Projects
AS-IS Document
For KBL e-MAD Project
Date : June 20, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AR
Name of Business Process : Business Deposits , Advances from
Customers (Projects)
Flow Chart of Business Process: FC-Deposits,Advances-Projects.Doc
Details of Business Process:
Dealer’s Deposit
The commercial policy of SBU 2 specifies collection of dealership deposit
minimum of Rs. Three Lakhs. Though the acceptance of such deposit is
discretionary to the Regional Sales Manager subject to approval of the SBU
Head. In some cases the deposit may be below the minimum prescribed by the
policy. At the time of year-end, interest at the rate prescribed by the commercial
policy is calculated and credited to the dealers account in sales ledger. Presently
the rate of interest is 10% per year. In case there is no outstanding on the
dealer’s account, the interest is paid to the dealer. The TDS deducted from the
interest is transferred to the Head Office. Head Office issues the TDS
Certificates.
Output from this business process sent to other functions : Customers and
Internal users.
ACCOUNTS PAYABLE
Purchase Accounting
Kirloskarvadi
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AP
Name of Business Process : Purchase Accounting (Kirloskarwadi –
Domestic and Exports)
a) Exports
c) Domestic
In case the material is dispatched directly to the customer, the supplier raises his
bill on the Area Office. On the basis of dispatch documents handed over by the
supplier to Area Office, the Area Office raises sale invoice on the customer and
accounts for the bill of the vendor and effects payment to the vendor. In such
cases, at the year end, the balances appearing to the Purchases and Sales
accounts in the books of area offices are transferred by the Area Office to
Kirloskarvadi by way of debit and credit advices, which are accounted through
Journal.
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AP
Name of Business Process : Purchase Accounting (Dewas & Shirval)
Flow Chart of Business Process : FC-Purchases-Dewas.Doc
Details of Business Process:
Purchase Order
At Dewas purchase order is raised by ancillary dept. on the ancillary units /
vendors for supply of finished products. (As of today we are purchasing End
Suction, Mini pumps and valves from vendors). At area offices, marketing
department place purchase orders directly on vendors for their requirements but
at the agreed terms of Dewas with vendor such as price, delivery period, terms of
payment etc. Copy of purchase order is given to accounts department.
Payments to Vendors:
We have a system of centralized payment from Dewas for vendors of finished
products. Payments are made as per availability of funds. In case of transporter’s
also the payments are made from Dewas except for local transportation at area
offices.
Output from this business process sent to other functions : Vendors and
Internal users.
Projects
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: FI-AP
Name of Business Process : Purchase Accounting (Project)
Flow Chart of Business Process : FC-Purchases-Projects.Doc
Details of Business Process:
Accounts department rechecks these documents with purchase order copy and
passes this invoice. Accounting entry made is debiting the product purchases
account, crediting the suppliers account in purchase ledger. Accounts
department maintains the purchase ledger master. The master contains
information of Account Number of the supplier (decided by the person keeping
the purchase ledger master), name and address of the supplier.
Debit Advices
While passing the supplier’s invoice, if some mistakes found by the accounts
department, necessary deductions are made. The mistakes normally are amount
excess claimed by the supplier, taxes, freight or insurance wrongly charged,
description of the product differs from the purchase order etc. If some amount
has to be debited to the supplier on account of these mistakes or if the delivery is
delayed beyond the delivery schedule mentioned in the purchase order, such
debit is charged to the suppliers account on the basis of debit advice raised. The
accounts department in duplicate raises this debit advice. Original copy is meant
for the supplier and accounts department keeps second copy. Debit except on
Payment to Suppliers
The suppliers invoices are paid by the accounts department on the basis of due
dates quoted in the purchase order subject to the availability of required funds. If
some cases if required funds are available with the accounts department and
supplier agrees for a cash discount, his invoices are paid before due date. The
rate of cash discount is based upon the applicable situations. Considering to pay
the supplier, accounts department prepares a remittance letter in duplicate and
cashier on the basis of this remittance letter draws a cheque in favour of supplier
and cheque is given to the supplier. Cashier takes acknowledgement of the
supplier on duplicate copy of the remittance letter while forwarding the cheque.
Original copy of the remittance is given to the supplier along with the cheque.
The work of drawing remittance letter and cheque is manual in the present
system. The TDS and ESI applicable to the class of the supplier are deducted
while passing the bill or while payment to the supplier. The TDS is credited to
‘Tax Deducted at Source’ account in General Ledger and the ESI deducted is
credited to ESI account opened in Advance Ledger. The balance to these
accounts is transferred to the Head Office on monthly basis. Head Office issues
TDS certificates on yearly basis. Head Office deposits ESI.
Imports
The contract for imports are normally for technical know how, import of parts of
pump, submission of manuals and for supervision of construction of the pump.
The terms of payment differ depending upon the nature of import. The terms of
payment for supply are normally back-to-back. The currency in which the
payments are to be made to the foreign suppliers are kept in EEFC account. In
case the currency received is short of the amount of payment, the payment is
made in Indian rupees to the bank. These payments are normally made through
Letter of Credit.
On receipt of the documents from the foreign bank, the Indian bank submits the
documents along with the necessary advices to execution department in Project.
Execution department verifies the invoice with the purchase order placed on the
foreign supplier. The execution department forwards this invoice along with the
bill of entry and other necessary documents to the accounts department.
Accounts department rechecks these documents with the Purchase Order and
passes the suppliers invoice. The invoice is recorded at rate prevailing on the
date of passing the invoice. The payment of out EEFC account is recorded
normally at rate prevailing on the payment date. The difference is accounted to
the product purchase account. The execution department receives the clearing
agent’s invoices directly, verifies and submits to the accounts department for
payment. Accounts department on receipt of these invoices, rechecks the
charges charged by the clearing agent and pays for the same as normal payment
procedures. These charges are debited to respective purchases account. At the
time of year-end, if any balance is there on foreign supplier’s account, it is
revalued at the rates prevailing on 31st March. The difference is accounted to
difference in exchange account. Similarly, the balance in EEFC account is
revalued based on the rates as on 31st March and the difference is taken to
difference in exchange account.
Output from this business process sent to other functions : Vendors and
Internal users.
AS-IS Document
For KBL e-MAD Project
Date : June 24,2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: CO-CCA
Name of Business Process : Cost Centre Accounting
Flow Chart of Business Process :
Details of Business Process:
Concern Areas, if any : Online information is not available and its time
consuming job to prepare such reports. Budget data for each department can not
be stored and not available for monitoring. Formal system of allocation and
appropriation is not in operation to provide meaningful information
Any reports related to current business process : Need based reports are
generated.
Whenever management requires any information for particular order, the same is
prepared by analyzing the ledger accounts of particular G/L account. If required
account vouchers are also analyzed to prepare the report. But this information is
not available and not updated on regular basis.
Concern Areas, if any : Online information is not available and its time
consuming job to prepare such reports. Budget data for each order can not be
stored and not available for monitoring. Formal system of allocation and
appropriation is not in operation to provide meaningful information
Any reports related to current business process : Need based reports are
generated.
INFORMATION SYSTEM
AS-IS Document
For KBL e-MAD Project
Date : June 24, 2000
Business Unit : Kirloskar Brothers Limited
Module : Finance and Controlling Chapter: IS
Name of Business Process : Reporting
Area Offices
Sales, stock and recovery figures are reported by Marketing Staff to Head,
National Sales, Dewas on daily basis.
Accounts Department at Area Office reports to Head Office monthly information
regarding
Sales, Recovery, Employee Related Expenses, Other Expenses, Stocks,
Debtors, Aging of Debtors and Stocks, details of statutory payments such as
income tax, provident fund, E S I, Sales Tax etc., I
Information of customers due outstanding for period of more than 6 months is
reported through Head, National Sales along with the comments from Marketing
Personnel at Area Office about recovery plan of the sale, details of Government
debtors between 180 to 270 days. .
Projects Division
Monthly Profit and Loss Account and Balance Sheet
Daily recovery and trading sale figures.
Aging of debtors’ details of Government debtors between 180 to 270 days.
Details of monthly civil contract activity report, billing to top ten customers on
month to month basis and cumulative up to each quarter.
Monthly cash flow,
Report on product-wise material cost of trading articles on quarterly basis.
Kirloskarvadi factory
Daily production and despatch report.
Daily SBU-wise Invoicing report.
Daily SBUwise inflow.
Monthly Profit and Loss Account and Balance Sheet.
Concern Areas, if any: Required data is not available readily at all locations,
hence the activity becomes time consuming, resulting in to rework, duplications,
digging out data etc.
Output from this business process sent to other functions: Internal users.