PRINCIPAL OF MANAGEMENT PROJECT

Financial Accounting

PROJECT report

ON assets cycle of

BAHRIA UNIVERSITY

SUBMITTED BY (GROUP 3):

MBA-1 (EVENING)

1. ALTAF HUSSAIN (59848)

2. QAMBAR ALI (59659)

3. ADEEL AHMED (59574)

4. FOUZIA GHAZAL (59532)

Acknowledgement

First of all, we would thank Allah Almighty, the most Beneficent and Merciful for giving us the opportunity and strength to work on this report.

We would like to thank our course teacher for his help, guidance, support and cooperation.

We are especially thankful to Commander (Retd) Ashiq Hussain PN, Manager Accounts (Contact No. 021-99240004 Ext.238) at Bahria University for taking out time from their busy schedules and addressing our queries.

Letter of Transmittal

MR. SHAHAM AHMED

Sr. Lecturer

Financial Accounting

At PAF K.I.E.T

KARACHI April 17th, 2015

Dear Sir,

A person is not a perfect in all the contexts of his life, He has a limited mind and thinking approaches. With prayers of our parents and your support, it became possible for us to formulate this report. We pay high regards to you and our parents. We are also thankful to all our friends and class fellows who provided us support to complete financial accounting course report.

This report has given us insights of Assets Cycle carried out at Bahria University. We had a comprehensive learning experience with the report formulation. With our knowledge at this level, we have put all the efforts to summarize our knowledge and experience in this report, to make it comprehensive and meet your expectations.

Regards,

Altaf Hussain (59848)

Qambar Ali (59659)

Adeel Ahmed (59574)

Fouzia Ghazal (59532)

Table Of Content

S.NO

DESCRIPTION

1.

Introduction of Bahria University

2.

Asset Recognition/Capitalization Policy

3.

Asset Procurement Cycle

4.

Asset Recording Procedure

5.

Assets Control System

6.

Asset Register Format

7.

Depreciation Policy

8.

Asset Disposal/De-Recognition Policy

Introduction of Bahria University

Bahria University ("the University") was established under Presidential Ordinance of Bahria University Ordinance, V2000. The University offers various programs in the fields of management, psychology, computer sciences, marine sciences, medical and dental at graduate, post graduate and doctorate level through its constituent units namely Bahria Institute of Management and Computer Sciences (BIM&CS), National Centre for Maritime Policy Research (NCMPR), Institute of Professional Psychology (IPP) and Bahria University Medical and Dental College (BUMDC) located at Islamabad, Lahore and Karachi.

Asset Recognition/Capitalization Policy

Financial assets and liabilities are recognized when the University becomes a party to the contractual provisions of the instrument; the particular recognition methods adopted are disclosed in the individual policy statements associated with each item. The University derecognizes the financial assets and liabilities when it ceases to be a party to such contractual provisions of the instruments. The University recognizes the regular way purchase or sale of financial assets using settlement date accounting.

Property and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Cost of tangible assets consists of historical cost and other directly attributable cost of bringing the asset to working condition.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the University and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to income and expenditure account during the year in which they are incurred.

Purchase Cycle For Assets & Inventory

Guidelines for Purchase Procedure

XE "Purchase "

All purchases related to assets/inventory will be done through the Local Purchase Committee (LPC). Cases for purchase of Assets/Stores will be initiated by the concerned section of BU/CU XE "Constituent Unit" through a minute sheet for approval/sanction of Rector/Pro-Rector XE "Pro-Rector" /DG or Director of the CU depending upon their financial powers with relevant details and specifications. On the approval of the concerned financial authority the minute sheet will be marked to the President LPC for further processing. LPC will be nominated/constituted by the Rector, Pro-Rector, DG or Heads of CU, as applicable.

The LPC will comprise of a President and two members. Chairperson of LPC shall not be below the status of a Deputy Director/equivalent in case of purchase up to Rs. 500,000/-.

In case of purchases over Rs. 500,000 the Chairperson LPC shall not be below the level of Director/equivalent. Chairperson LPC will ensure timely action for tender inquiries and preparation of comparative statements on receipt of quotations.

The Chairperson LPC shall ensure that the correct purchase procedure consistent with the amount involved is followed.

Purchase up to Rs 50,000: Items will be purchased on single quotation/bill basis after verification of the market rates. Items so purchased will be deposited with the Store Section of BU/CU XE "Constituent Unit" . Finance section of the unit concerned will then prepare the contingent bill for recoupment of funds from which cash has been drawn.

Purchases Between Rs 50,001 & 300,000: Three quotations will be asked from at least three officially registered firms through a written request for forwarding their quotations through a sealed envelope in the name of the President LPC. The LPC will then proceed as follows:

Quotations will be opened in the presence of the members of the LPC who will sign them for authentication.

A comparative statement shall be prepared duly signed by the Chairperson LPC and his members and added to the minute sheet of the case for approval of the rates/comparative statement by the competent authority.

Chairperson LPC will forward the approved comparative statement to finance section for issuance of delivery note to the firm concerned.

On receipt of stores, members of the LPC along with the representative of the demanding section will inspect the items/ stores for correctness and final acceptance. Chairperson LPC will endorse his remarks on the minute sheet that the stores have been inspected and accepted along with goods received note.

The minute sheet along with the bill and the consignment will be handed over to finance section for further processing i.e. for arranging payment to the firm and taking the items on charge and further issue to the concerned section.

Purchase Exceeding Rs 300,000 XE "Purchase " : A Tender inquiry should be advertised in at least two leading newspapers (one English and one Urdu) and also disseminated through BU/CU XE "Constituent Unit" s website. If public funds are being used for purchases above Rs 2.0 million, the tender notice will also be advertised on PPRA website. Information posted on the websites shall be complete and shall remain available on the sites till the closing date for the submission of bids. The tender notice should include basic information about the items required to be procured and should specify estimated quantities. The tender inquiry should carry reasonable time for submission of bids which shall not be less than 15 days.

The Competent Authority XE "Competent Authority" shall reserve the right to accept or reject any tender without assigning any reason. Upon request, however, the Competent Authority shall communicate to any supplier or contractor who submits a bid or proposal, the grounds for its rejection of bid or proposal, but is not required to justify those grounds.

Assets Control System

Heads of CUs are responsible for:

Maintaining Inventory of plants, equipments and furniture in their Units. Reports relating to the internal audit, check, physical verification of stores and the libraries shall be presented to the Director Finance XE "Director Finance" who will prepare a consolidated statement for the Rector.

Establishing adequate arrangements for the custody and control of stocks and stores within their premises, and ensuring their regular inspection and stocktaking.

Ensuring that the system used for stores and spares accounting must have the approval of the Director Finance XE "Director Finance" .

Ensuring that the stock-taking procedures for the stocks which require valuation in the Balance Sheet the approval of Director Finance XE "Director Finance" .

Ensuring that the stocks and stores of hazardous nature are subject to appropriate security checks

Rector shall report non-observance of the above procedures to the Board annually.

Depreciation Policy

Depreciation on all operating property and equipment is charged to income and expenditure account on reducing balance method after taking into account residual value, if any, so as to write off the depreciable amount of an asset over its estimated useful life at the rates as given below. Depreciation on additions is charged from the month the assets are available for use while no depreciation is charged in the month in which the assets are disposed off. The residual values and useful lives of assets are reviewed by the management at each financial year end and adjusted if impact on depreciation is significant.

ASSET DESCRIPTION

RATE

Building

5%

Computers

33%

Furniture & Fixture

10%

Electrical Installation

20%

Office Equipment's

20%

Electronic Lab/Equipment

33%

Vehicles

20%

Telephone Equipment

20%

Drawing and painting

20%

Library Books

20%

Teaching Aids

33%

Flexible Lab. Equipment's

33%

Other Equipments

20%

Impairement of Assets

An assessment is made at each balance sheet date to determine whether there is any indication of impairment or reversal of previous impairment, including items of property and equipment. In the event that an asset's carrying amount exceeds its recoverable amount and impairment loss is recognized in the income and expenditure account. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount, however not to an amount higher than the carrying amount that would have been determined (net of depreciation), had no impairment losses been recognized for the asset in the prior years. Reversal of impairment loss is restricted to the original cost of the asset.

Assets Disposal/Derecognition Policy

An item of property and equipment is derecognized on disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and carrying amount of the asset) is included in the income and expenditure account in the year the asset is derecognized.

Disposal must be in accordance with procedure agreed by the Finance and Planning Committee XE "FPC" . The Local Disposal Committee will be constituted by the Rector (for BU) and Heads of CUs in case of CU XE "Constituent Unit" . The Committee will comprise of a Chairperson & two members. The Chairperson Local Disposal Committee will not be below the status of Director/equivalent.

Disposal of lands and buildings will take place only with the prior authorization of BOG XE "BOG" on the advice of the Rector.