Accounts

The Accounts department has been established primarily to record all the transactions which have financial impact and financial reporting. Accounts department has to establish control on all the transactions happening in the organization. This includes payments, receipts, purchases, sales, salary payments, construction costs, contractor bills, operating expenses, selling & marketing expenses, staff expenses, bank charges, etc. Furthermore, accounts department reconciles and verifies all the transactions taking place with other ends.

There will be someone responsible for all the departmental working. There should be primary and secondary responsible for each department.

Primary Responsible

General Manager Accounts (GM Accounts) will be primary responsible for the department

Secondary Responsible

Manager Accounts will be responsible for the departmental working in absence of GM Accounts.

The following are the objectives of the Accounts Department;

1. All the transactions, which have financial impact must be recorded in appropriate heads of accounts

2. Payables of the company must be updated and known at any given time

3. Receivables of the company must be updated and known at any given time

4. Materials are recorded in accounts department and store accounting must be done.

5. All the transactions must be checked and verified well before payment.

6. All types of reconciliations including land reconciliations, inter-company reconciliations, bank reconciliations, material reconciliation, reconciliation with vendors, etc should be done in a timely manner.

7. Financial reporting of all the companies should be prepared on monthly basis

8. Management accounts must be presented to the management on monthly basis

9. Costing of projects should be monitored and report to the management.

10. There should be Budgets for all types of expenses and their monitoring

11. Records of fixed assets should be updated and maintained properly.

12. Tax returns should be filed on timely basis and liabilities are deposited in government treasury in time.

13. All the requirements of local bodies including SECP should be fulfilled in time.

Book-keeping

One of the core responsibilities of Accounts department is book-keeping. All the transactions those have a financial impact, finally reach accounts department and recorded accordingly. There can be multiple financial transactions in a business. However, all are covered under following categories in general;

• Cash transactions (payments and receipts)

• Bank transactions (payments and receipts)

• Booking the purchases (cash or credit)

• Booking the sales (cash or credit)

• Booking expenses (direct expenses, indirect expenses, admin expenses, selling expenses, marketing expenses, distribution expenses etc.)

• Booking financial charges (financial charges, bank service charges, premiums, interests, etc.)

• Booking inventory transactions (receipts, issuance, rejections, returns, etc.)

• Booking accruals and deferral incomes and costs

• Booking adjusting entries to settle the effects in various heads of accounts

It is essential now days to use specialized software for book-keeping purpose. There are many standards software in the market. Good software should provide certain basic features those include;

• Multi-level chart of account

• Concept of responsibility centre, cost centre, profit centre or revenue centre

• Store accounting

• Basic accounting based on double entry system

• Back tracking of each transaction from any level

• Compilation of data and financial reporting

• Reconciliation features

• Audit trail

• Work log maintenance (user wise)

• Auto Posting of accrual entries

• Fixed asset register

• Tracking transactions against one work order

We consider that accounts department at least covers following areas when performs book-keeping role;

1. Voucher preparation based on transaction nature

2. Proper utilization of the software – using all available features of the software

3. Maintaining hard form of data as well for vouchers

4. Maintaining the inventory records; receipts, issuances

5. Preparing Store accounts

6. Track of all the transactions is well maintained not only in software but in manual records as well

7. Concept of cost centre i.e. project accounting is performed

8. Track of transactions against one project, against one purchase order is possible

9. Financial record for previous periods is well maintained, properly filed and easily traceable at any given time

10. Updated book-keeping of imprest accounts

11. Updated book-keeping of advance against salaries and advance for purchases

12. Updated aging reports for sales and purchases

13. Accrual entries are well known and updated in the software

Budgeting

Budgeting is a broad role and varies from organization to organization. We consider budgeting role of accounts department and it is specific to the expenses. Budget is designed to direct company’s financial and human resources. There are following general types of expenses;

• Admin expenses

• Selling expenses

• Marketing expenses

• Distribution expenses

All these expenses are regular in nature and can be predicted on different basis, usually on basis of historical expenses. Furthermore, budgets can be prepared for departments; department heads are responsible to give feedback about their budgets. It is role of accounts department to do the following;

1. Preparation of budgets

2. Identifying and incorporating control measures

3. Assigning departmental responsibilities and budget limits

4. Monitoring the budget

5. Notifying budget variances in real time

Costing

Costing helps the company management to decide about a sales order to be accepted or rejected. If proper costing of a product, service or project is conducted well in time, management may know exactly the contribution margin that can be earned from that order. Furthermore, a post costing measures the actual results of an order. Therefore, it is used to measure the performance of company resources including human resource as well.

Accounts dept. performs following activities to fulfil this role;

1. Breakeven analysis

2. Identifying direct expenses / CGS

3. Application of costing method and preparation of pre-costing

4. Contribution margin calculation

5. Reviewing actual costs

6. Variance reporting

7. Post costing and identifying the profit or loss

Financial Reporting

Preparation and presentation of financial statements is the most important role of accounts department. Being custodian of the records of all financial transaction, accounts dept. prepares company financials, preferably management accounts are prepared on monthly basis, all the financial statements are prepared on quarterly basis and half yearly review is also conducted by an external source. However, legally, company is bound to prepare and submit company accounts once a year as per Government laws.

Financial reporting in real time is always important. Company management is interested to know the financial performance and financial position of the company on regular basis. Also, it is important to project future cash flow requirements to run the business operations smoothly. For this purpose following financial reports are prepared and presented by the accounts department on regular basis;

1. Trading and Profit & Loss Account (Projected and actual)

2. Balance Sheet

3. Statement of cash flows (projected and actual)

4. Aging reports

5. Budget reports

6. Store accounts

Certain statements are also added when set of statements is required by a Government body, tax office or by banks. For all the financial statements those are submitted to the said institutions, all the applicable international accounting standards, international financial reporting standards and local laws must be complied with.

Fixed Assets Management

In some industries fixed assets are the backbone of the business and are a major investment. Inability to plan the exact requirement of fixed assets and invest in only those assets that add value to the organization is a critical step for any business. Improper execution of this step may lead to investor value being destroyed and essential resources locked in.

Moreover, it is essential to keep detailed record of all the fixed assets. Accounts dept. prepares fixed asset register that contains complete record of every fixed asset. Following areas are covered by the accounts department for fixed asset management;

All these expenses are regular in nature and can be predicted on different basis, usually on basis of historical expenses. Furthermore, budgets can be prepared for departments; department heads are responsible to give feedback about their budgets. It is role of accounts department to do the following;

1. Preparation of budgets

2. Identifying and incorporating control measures

3. Assigning departmental responsibilities and budget limits

4. Monitoring the budget

5. Notifying budget variances in real time

Monitoring and Verification

Monitoring and verification is a wide role and one of the most important roles being performed in the organization. Being custodian of all the financial transactions of the organization, accounts dept. performs this important role.

Concept of monitoring is to keep an eye on the financial targets of all the departments. Following areas are considered critical and regularly monitored by the accounts dept.;

Verification becomes a primary role of accounts dept. in absence of Internal Audit dept. However, even if, there is internal audit dept. is in place, Accounts dept. has a significant role of verification of financial transactions.

Accounts dept. is involved in book-keeping of all the financial transactions of the company, therefore, is in position to check whether all the company rules & regulations, company policies and procedures are being followed regarding each transaction. For this purpose, accounts department performs the following activities;

1. Verifying the transaction details, all the supporting documents before posting in the accounting system

2. Such verification procedures should be available in writing with accounts personnel to ensure the effectiveness of the verification

3. Verifying that the transaction is pre-approved by the relevant signing authority

4. Verifying the calculations of the transactions

5. Verifying the reasonableness of the expenses keeping in view the recent transactions of similar nature

6. Verifying the calculation basis of interest charges and financial charges charged by bank keeping in view the facility offer letter.

7. Verifying the calculation basis of insurance premiums observing the insurance agreements

8. Verifying the basis of salary preparations, files of new comers, final settlement records, random check on attendance records, calculation basis of overtime bills and contractor bills

Payable Management

Accounts dept. records all the payables of the company. All the procurement transactions are routed to accounts dept. where all the purchases are recorded. Furthermore, accounts dept. has the knowledge of cash flow projections, can plan or stop the payments as per company policy.

Accounts dept. makes sure;

1. To abide by company policy about payment

2. To abide by payment procedure to vendors and employees

3. To prepare aging reports of all the payables

4. To reconcile payments with vendors

5. To prepare cheques

6. To keep the record of payables and payment

Receivable Management

Accounts dept. records all the receivables of the company. All the sales transactions are routed to accounts dept. where all the sales are recorded. Furthermore, accounts dept. has the knowledge of cash flow projections and financial targets, can follow up the receivables as per company policy.

Accounts dept. makes sure;

1. To abide by company policy about receivables

2. To abide by procedures of receivable management

3. To prepare aging reports of all the receivables

4. To reconcile receivables

5. To follow up with customers

6. To keep the record of receivable and receipts

Reconciliation

There are multiple transactions being held in the organization in different departments. All the transactions, which have financial impact, are required to be recorded by the Accounts dept. this is role of accounts department to ensure the completeness of the records to point out any mistake or flaw during execution of the transaction or during book-keeping.

For this purpose, accounts dept. reconciles all such areas, which include;

1. Reconciling imprest accounts with cash register

2. Reconciling bank ledgers with bank statements

3. Reconciling payables with vendor records

4. Reconciling sales with the record of sales dept.

5. Reconciling material consumption

6. Reconciling inventory by conducting stock taking

Taxation & Corporate Affairs

Taxation is a wide scope which is a legal obligation of every company where taxes are applicable. This is role of accounts department to make sure the record keeping of tax transactions. Also, this is responsibility of accounts dept. to file tax returns before or on due date of filing. In case that company is in agreement with a tax consultant, the major responsibility is shifted to the tax consultant. Accounts dept. should ensure the following in this regard;

1. To keep the record of tax transactions

2. To prepare tax return

3. To file the tax return before or on due date of filing

4. To liaison with tax consultant and provide assistance

5. To respond to the tax authorities regarding their concerns, notices, etc.

6. To deposit the tax liability in Government treasury

7. To apply for refund / to liaison with tax consultant and provide required data

There are certain legal obligations of other government bodies like Securities and Exchange Commission of Pakistan (SECP). It is responsibility of Accounts department to fulfil all the requirements of SECP enquired on time to time basis and submit the required documentation as per schedule for all the group companies.

Related: Go to All Roles

Based on the roles of the department, the departmental JDs are established. Job Description contains the main activities and roles required to be performed at the departmental level.

Following are the job descriptions of the Accounts department;

1. Book-keeping of all the transactions which have financial impact according to accounting standards

2. Verification of all the transactions

3. Recording of material receipt and consumption

4. Preparation of Pre-costing and post costing analysis

5. Reconciliations of banks, materials, land, inter-company, vendors and customers

6. Preparation of financial reporting of all the companies on monthly basis

7. Preparation and presentation of management accounts on monthly basis

8. Preparation of budgets of all types of expenses and their real time monitoring

9. Strong Control on expenses, payments and materials

10. Preparation of all the reports required to monitor and control the company resources

11. Maintaining the fixed assets register and its reconciliation with physical assets.

12. Submission of tax returns for all the group companies in time

13. Fulfilling the corporate requirements of SECP in time

14. Any other task assigned by the company management on time to time basis.

Departmental Job Description is the expansion of the roles and functions of the Department. However, it will be brief and short and will not go into further details.

So, when we prepare Job Descriptions of employees then we will expand it and allocate particular responsibilities to each staff members. 

Related: Go to All Policies & SOPs

Related: Go to All Risks & Controls

Related: Go to All KPIs

Related: Go to All Documents & Reports

Related: Go to Consolidated Information to be Maintained

Related: Go to Consolidated Authority Matrix

Related: All Dashboards