Certification of Company Accounts Accounting : Art of recording, classifying and summarizing monetary transactions and events and interpreting the results thereof. Govt Accounts : Maintained on cash basis. No profit making hence no P&L A/c & B/S. Slide 2.2

Govt Accounts : Maintained on cash basis. No profit making hence no P&L A/c & B/S. Company Accounts : Comparison between Govt Accounts & Company Accounts. Slide 2.2

Companies Act 1956 Maintenance of books of accounts on – accrual basis & according to double entry system of accounting. Schedule VI the Act : Part – I : Format of B/S and disclosures to be made under various heads Part – II : Requirements of disclosure in the P&L A/c. Slide 2.2

Audit Committees / Management Audit Management audit is an audit to examine, review and appraise various policies & actions of mgmt on the basis of certain standard. Steps involved : Identification of objectives of orgn. Break-up of objectives into detailed targets & plans. Review of organization structure. Performance evaluation. Suggestion of a realistic course of action. Slide 2.2

Accounting Standards Slide 2.2 Issued by the ICAI Describe the a/ctg principles Methods of applying these principles Ensure true & fair view of the financial statement Enjoys legal recognition Section 211 (3B) : According to this sec., the deviation from the AS the reasons for such deviation the financial effect, if any, of such deviation should be made by way of a disclosure in the accounts.

AS mainly applicable in BSNL & MTNL AS 1 : Disclosure of accounting policies AS 2 : Valuation of Inventories AS 6 : Depreciation Accounting AS 9 : Revenue recognition AS 10 : Accounting for fixed assets AS 15 : Accounting for retirement benefits in the financial standards. Slide 2.2

Trial Balance & Financial Statements Trial Balance : A list of debit & credit of the balances taken out from ledger including Cash & Bank balance. Objective : to ascertain arithmetical accuracy of ledger accounts to help in locating errors to help in preparation of final accounts. Slide 2.2

Financial Statements Basic Statements : Income Statement or Trading and P&L A/c Statement of Financial Position or Balance Sheet Additional statements : Statement of Retained Earnings Cash Flow statement Slide 2.2

Trading Account Determines the Gross Profit or Loss Only Direct Expenses taken into account here Comparison of Closing Stock with the previous year Provides safety against possible losses Profit and Loss A/c Determines the Net Profit or Loss All indirect expenses taken into account here Discloses all losses & gains of that accounting period Slide 2.2

SAP (Standard Accounting Practices) The Auditors while discharging their functions have to ensure that the Standard Accounting Practices are complied with. SAP 1 : Describes the basic principles which govern the auditors professional responsibilities. SAP 2 : Describes the overall objectives and scope of audit of financial statements. SAP 3 : Documentation Slide 2.2

Cash Flow and Fund Flow Statements : The sources & uses of funds raised during the period are reflected in the FFS whereas cash & cash equivalents alone are taken in CFS. Ratio Analysis : A means to analyze the financial health & working of the company Common ratios : Liquidity ratios Profitability ratios Debt equity ratios Price earnings ratiosSlide 2.2

Commercial Accounts Basic records to be checked : Journal Bank & Cash book Bank Reconciliation statement General ledgers Sub-ledgers Trail Balance & Financial statements Slide 2.2

Commercial Accounts Records It includes following schedules for detail checking : Land Builiding Work in progress Sundry Debtors schedule Claims receivables General ledger Notes to Accounts & Auditors report Permanent File Slide 2.2

Types of Audit : Internal Audit Statutory audit Management Audit / Audit Committee Systems Audit Govt Audit – Propriety Audit – Certification of Accounts MAOCARO Requirements CAG’s Directives Slide 2.2