Standard Operating Procedure (SOP) for Accounts

Department
1. OBJECTIVE

The aim of this SOP is to lay down necessary directives for the smooth and efficient
administrative functioning, handling, operating, and functioning of the F&A Department and to
ensure that statutory compliances are made in the following areas:

a) Delegation of Authorities and Financial Powers

b) General accounting and bookkeeping procedures
c) Review of Statutory Compliances
d) Procurement Policies
e) Maintenance of Cash and Bank Balances
f) Disbursement of Salaries / Payroll
g) Determining and controlling the manufacturing and other overhead expenses
h) Fixed assets purchases and its accounting

2. DELEGATION OF AUTHORITIES AND ACCOUNTS / FINANCE MANAGER

With a view to improve the overall efficiency of funds management and to avoid delays in
sanctions for expenditure, the procedure has been outlined below.

The structure of the F&A Department would be as follows:

FINANCE & ACCOUNTS DEPARTMENT

Managing Director

Sr. Accounts / Finance Manager

Accounts / Finance Manager

Assistant Accounts Manager Accounts Executive Accounts Executive

3. KEY CONTROLS WITHIN F&A DEPARTMENT

3.1 Receipt of Bills

The following procedures shall be followed at the time of receipt of bills.

a) Entry shall be made giving details of the bills received such as date of receipt of invoice,
name of vendor, date of invoice, description in the invoice, amount, etc in the manual
register maintained by Executives - Accounts.

b) A unique serial number code on the top of the bill would be mentioned which would be
the same as the serial number on which the bill was entered in the manual register.

c) It should be ensured that the entry of the bills in the register will be made on the same
day of receipt of bills from the vendor and hand over the details to the Assistant
Accounts Manager.

3.2 Entry of Bill in the Books of Accounts

a) After review of the bill by the Assistant Accounts Manager, the bill would be checked
with the Purchase Order/Agreement/Approval of the bill. He/she would ensure that
necessary supporting documents are attached to the bill.

b) The Assistant Account Manager would check the TDS implication and Service Tax
implications or any other statuary Implications on the bill and provide support for the
same and will send all the original bills to the head office twice a week.

c) In case of purchase of any material or goods, the relevant entry would be made in the
stock register for the quantity and value and the serial number given in the stock register
would be mentioned in the Purchase Invoice.

d) After the purchase bills are approved by the Accounts Manager at head office, entry
would be made in the books of accounts at head office.

e) It would be ensured that the entry of the bills will be made within 24 hours of receipt of
the bills.

f) Also it would be ensured that the Serial numbers are correct for posting the entry in
books of accounts.
3.3 Preparation of Approval note for payment

a) After the above steps, an approval note for the release of payment as per our payment terms
of the bill shall be prepared from head office along with the relevant supporting documents
such as Original Invoice, Journal Voucher, Purchase order, and agreement (wherever
applicable).

b) After preparing the approval note, the Accounts Manager would ensure that the approval
note is signed by the relevant authorities. Once this is signed by relevant signatories, the
payment note will be approved by the Managing Director.

3.4 Issue of Cheques / RTGS / NEFT / Remittance / Direct Debit

a) Upon receipt of approval of the Managing Director, the Account Manager would prepare the
Cheque or documents accordingly on the basis of the approval note signed by the relevant
authorities.

b) Once the same is approved for payment, payment entry would be made in the books of
accounts by Account Executives on the same day.

3.5 Dispatch of Cheques

a) The cheques should be dispatched on the same day through courier unless they are hand-
delivered.

b) A control register would be maintained by the Accountant for all the couriers sent giving
details of courier number, Cheque no, name of party, and amount, and follow-up should be
done by the Accounts Assistant twice a week with the courier company on the delivery of
the Cheque so that the control register can be updated accordingly.

3.6 Cash payments

a) Cash payments would be avoided as far as possible. Only petty bills or imprest
accounts can be paid in cash for the following petty expenses:

i. Expenditure for refreshments during official meetings.

ii. Staff Conveyance.
iii. Office Maintenance of a petty nature
iv. Printing & Stationary of a petty nature
v. Any Other Petty Expense.

b) No cash payments above Rs 10,000 should be made against a single bill.

c) Cash payments would be released only after approval of relevant authorities on receipt of the
bill for payment.
 3.7 Payroll

a) The Assistant Accounts Manager will check a monthly salary sheet by/before the 5th of
every month on the basis of attendance and leave records of the employees given by the HR
Department.

b) TDS deduction would be checked with the computation of taxable income prepared for each
employee and tax deducted so far before the current month.

c) Any adjustments for any advances or loans taken by the employee would be made before the
approval of salary.

d) In the case of new employees, appointment letters would be checked along with other
relevant documents such as the last employer's salary slip while preparing the TDS
calculations, the last employer's Form 16 should be considered.

e) The salary sheet would then be checked and approved by the HR Manager & Finance Manager.

f) In case of any employees leaving the company, the full and final settlement account would
be prepared by the Assistant Accounts officer and approved by the HR Manager and
accounts Manager. The HR Manager & Assistant Accounts Manager would check the
following documents before making the full and final payment:

Letter of resignation, acceptance of resignation by adjustment, any loans/ staff advance/impress

outstanding, any TDS short deducted on the basis of declarations not received, copy of tax savings
investments such as payment of LIC premiums, PPF, House rent receipts, home loans certificates for
which credit has been taken, etc.; any office equipment such as laptop, mobile, blackberry handed
over, etc.

3.8 Staff Advances and Loans

a) Staff advances and loans can only be given to employees after the Managing Director as per
the company’s HR policy.

b) The Assistant Accounts Manager will ensure the advance is being adjusted on a monthly
basis before disbursement of salaries as per terms of sanction.

3.9 Statutory Compliances

To ensure that the compliance of relevant statutory provisions of various Acts i.e. Income Tax,
Service Tax, Value Added Tax, Central Sales Tax, KTEG, Central Excise, Service Tax, PF,
ESIC, etc. is made and dues of the same remitted on time as per Act.

3.10 Debtors, Creditors, and Bank Account Reconciliation

To ensure that the balance with debtors, and creditors must match, the balance in bank accounts
must be reconciled on a daily basis.
3.11 Fixed Asset Register

A fixed asset register (FAR) will be maintained in the system. The FAR will contain the
following details:
 Asset Code
 Asset Account Code
 Class and description of asset
- Make/Manufacturer
- Supplier and Model number
- Date of purchase
 Quantity
 Location and Department using the asset
 Value of asset (gross block, net block)
 Useful life of Asset and depreciation rate
 Unit of Measurement
 Depreciation (accumulated depreciation and depreciation for the year)
 Details of transfer and disposal
 WDV of assets

The Assistant Accounts Manager will paste the asset code sticker against the asset entry in the
FAR and also on the physical asset. The accounts Manager would conduct physical verification
of fixed assets on a quarterly basis and submit the report to directors.

3.12 Internal Audit Team

a. Members

b. Responsibilities

The Audit team will be the final responsible for the final verification and approval of all the
purchases and payments and ensure the adoption of all accounting procedures and systems as
laid down under law and their maintenance for the Company.

All members are required to and will ensure that all the procedures/systems are strictly followed
in terms of the limitations, and approval process and that all necessary quotes and paperwork as
approved and sanctioned as per Indian accounting practices.
4 PURCHASE DEPARTMENT AND MAINTENANCE OF STORE RECORDS

The following procedures shall be followed before purchasing anything -

a) Purchase orders would be issued and signed by the relevant authoritative personnel. A
copy of the signed PO should be provided and checked by Finance & Accounts. It is
mandatory that different price quotations shall be taken before placing any order.

b) The PO would be consulted with the Accounts Manager before signing to review the
statutory compliances, legal terms and conditions, etc.

c) The lowest quotation would generally be approved by the management; unless otherwise
approved by the Managing Director.
d) The price lists and other documentation should be maintained by the Store and Accounts
Department.

e) On receipt of material, the goods should be checked by the Store Manager to ensure they
meet quality standards.

f) Entry should be made in the Goods Inward register by the Store Manager or Assistants.

g) A copy of GRN along with the bill should be forwarded to the Accounts department.

h) The F&A department is to review the final invoice against the Purchase Order /
Agreement for any differences in quantities, prices and terms and conditions.