INTERNSHIP REPORT

ON

ACCOUNTING INFORMATIONSYSTEM OF REAL ESTATE BUSINESS IN BANGLADESH”-AN EMPIRICAL STUDY

OF

[pic]

PREPARED FOR

Farzana Afrin Internship Supervisor & Lecturer Dept. of Business Studies Stamford University Bangladesh.

PREPARED BY Mahmood Hossain Id: 02707400 Section: 27(Q)

Date:

LATTER OF TRANSMITTAL
April

Ms Farzana Afrin
Lecturer
Stamford University
Dhanmondi, Dhaka

Dear Madam,

I feel myself fortunate enough for having the scope to conclude the study on “The Accounting information System of Real Estate Business in Bangladesh”-An Empirical study of Building For Future Ltd, Which you assigned me to do as a part of the study. Obviously, this type of practical work made me acquainted with “Real Estate Finance” in real life situation. Here, I can’t deny the help that I got from the staff of Building For Future Ltd. who ensured me a full congenial atmosphere to access over a plenty of information with relevant papers and a practical survey. I am thankful to them for showing their highest degree of tolerance in answering my inexorable questions, sometimes repeated.

I would enthusiastically provide you related information depending on your queries. The report was prepared under your able leadership and I do respectfully appreciate guidance to me to learn about the practical implication of finance and reporting procedures. I like to mention that due to my limited knowledge, I have some errors and mistakes. I am however hopeful that you would consider the fact I am still within learning process.

Finally, I am thankful to you for assigning me such practical oriented assignment.

Yours Sincerely,

Name : Mahmood Hossain

ID. No : BBA- 02707400

ACKNOWLEDGEMENT

First of all, I remember the almighty. I gratefully acknowledge the support I have received from my supervisor and the other officials at in preparing the report. I would like to express my gratitude to Ms Farzana Afrin ,lecturer &Research supervisor in Stamford university ,Bangladesh for his valuable advice
I would like to express my indebtedness to Mr.AkbarHossain, Chief Financial Officer of BFL for giving me the opportunity to do internship in this reputed organization. I would like to express my deepest gratitude to the Mr. Ahmed ullah(Internal Auditor), and also Mr. Sajid Ahmed(Accounts Manager). No words are strong enough to hold the thanks and gratitude. I want to express to them named Md. Munna ( Asst. manager marketing), Md. Jamil ( marketing executive), Md. Apu sarower ( Junior officer), I specially like to thank my parents and all my family members for extending their helping hand at a time when I need it most. I remember all the care and love of my friends who made my every existence more meaningful and worthy.

Finally I would like to thank the officials of Stamford University, Bangladesh, My instructor and classmates and other officials were spontaneous and in sharing their expertise and experiences to make this report informative and reliable. They enriched my educational understanding with their well-organized logical and constructive condemnation.

Mahmood Hossain
Id-02707400

Intern’s Declaration/Assertion

This is to notify that this report entitled as “THE Accounting Information System of Real estate business in Bangladesh”–an empirical study of Building For future ltd” has been prepared as a part of my internship formalities. It is an obligatory part of our BBA program to submit an internship report. Moreover, I was inspired and instructed by my Supervisor Ms Farzana Afrin, CFO(Accounts Department) of BFL & other employees of BFL for submitting a report of this kind. In this regard, I like to mention that this report has not been prepared for any other purpose like presentation, reproduce or investigation for any other authorities.

___________________

Mahmood Hossain
Program: BBA
Batch: 27th
ID No: 02707400
Stamford University Bangladesh

CERTIFICATION OF THE RESEARCH SUPERVISOR

Date:

This is to certify that Mahmood Hossain ID=02707400,Batch no:27,Major:Accounting Department of Accounting, student of Stamford University Bangladesh of BBA program has completed the internee report titled “ The Accounting Information System of Real estate Business in Bangladesh ”-An empirical study of Building For Future Ltd. successfully under my supervision.

No part of this report has been submitted for any degree, diploma fellowship, other similar terms titles, prizes or recognition before.

I wish his every success in life.

Supervisor

___________________________
Farzana Afrin
Lecturer & Internship supervisor
Department of Business Administration
Stamford University Bangladesh CERTIFICATION OF THE SUPERVISOR OF BUILDING FOR FUTURE LTD

Date:

This is to certify that Mahmood Hossain ID=02707400,Batch no:27,Major:Accounting Department of Accounting, student of Stamford University Bangladesh of BBA program has completed his internship Program in our company at Accounting Department at head office from 1st January2008 to 31st March 2009.
His report topic was “The Accounting Information System of Real estate Business in Bangladesh”-An empirical study of Building For Future Ltd.

During the program of internship he was very good performer, honest, sincere, hardworking, regular enough to learn the Accounting Information System of Building For future ltd.

I wish his success in life.

Sincerely,

Mr akbar Hossain
Chief Financial Officar(CFO)
Building For Future ltd

Table of content:

EXECUTIVE SUMMARY

The internship report is concentrated in the real estate sector of Bangladesh. I have tried to analyze the industry as well as the company Building for future ltd.

An accounting information system is merely a kind of an information system which in turn is a kind of a system. Therefore, the study of basic principles of systems in general and, information systems in particular, is important for a thorough understanding of accounting information systems. Our approach to the study of accounting information systems, as will become clear, is an engineering one, where one proceeds through a methodical path of specification, design, construction, testing & evaluation, operation and maintenance. A well engineered system is easy to understand, build, maintain, and upgrade.

The objective of AIS in real estate business and other organization are to support the day to day operations, to support decision making by internal decision maker, to fulfill obligation relating to stewardship. The accounting information system of real-estate business in Bangladesh is in the primary stage. There is no such well organized accounting information system in the real estate companies.

1) Origin of the report:

As a mandatory part of the BBA program under Stamford University, each student has to conduct an Internship for practical experiences and have to write a formal report for enriches knowledge. So I have conducted an Internship program in Building For Future Ltd and intended to write a report titled

“Accounting Information System of Real Estate business in Bangladesh”

An Empirical Study of Building for Future Ltd

1.2) OBJECTIVES OF THE STUDY:

The main purpose of the study is to evaluate and understand the present overall situation and also to measure the future prospect of this sector as well as the company BFL. • To be familiar with the financial aspect of the Company. • To know about the Company’s Accounting Process and auditing procedure. • To analyze the logistics activities of the company. • To analyze the SWOT of the company. • To know about the legal side of this company. • Recommendations for overcoming those problems that are found in our study. • To know about the satisfaction of the Real estate companies about their AIS and problems of AIS.

1.3) METHODOLOGY OF THE STUDY:

For my study purpose I have to collect information from both primary and secondary sources

Primary sources:

For collecting the primary data firstly, I personally discussed with different officials of different developers on the basis of the Questionnaire (Annexure 1).

Secondly, data were collected from executives, manager’s etc. of BUILDING FOR FUTURE LTD

Thirdly, a participative discussion was conducted by Mr. Tanveerul Haque Probal, MD. of BUILDING FOR FUTURE LTD from which I have collected information about the company and the industry.

Secondary sources:

• Reports • Articles • Bulletin etc • REHAB

By surveying the developers I came to know about this sector. Their position in the industry their target groups, existing problems and prospect of this sector. I also surveyed some ongoing projects of the developers to know about the construction side. I have visited REHAB (Real Estate Housing Association of Bangladesh) to know about the current situation of this sector.

The Research Approach The study approach is to collect the qualitative data and the following three approaches were used:

1. Discussion 2. Personal Interview and 3. The observation method

While collecting the primary data the instant response were found and it was possible to observe the real situation.

Research Instrument Questionnaires are used to collect the primary data from the developers.

Sampling Plan In order to retrieve the necessary information as precisely as possible from the survey, the following sampling plan was pursued:

1. Sample unit: The sample populations are comprised of respondents from the selected prominent developers.

2. Sample size: The size of the sample was ten leading organizations involved in the real – estate business specially those developers who are creating luxury apartments.

3. Sampling procedure: For the shake of simplicity and ease of operation, a convenience sampling procedure was pursued for the survey. The names of the prominent organizations were provided by BUILDING FOR FUTURE LTD Management. These are 1) EIIL 11) CC 111) ADTL 1V) UDDL V) AMF V1) BTI V11) SP V111) PDL

4. Contact method: The information was collected by the way of face to face interviews and discussions with each developer.

1.4) SCOPE OF THE STUDY

The total industry of the real estate is the scope of the study. There are more than 126 developers in the city. Few of them are working in other divisions especially in Chittagong, i.e. the study is concentrated in the Dhaka city only due to the time limitation. But I did not able to consider all the developers in the Dhaka, I only considered those developers who are working in the Dhaka city as well as creating luxury apartments in this city. Moreover in the internship program I have to do a lot of works for my study purpose.

1.5) LIMITATIONS

During the internship program I have faced a lot of problems to complete the study. In the short time it is not possible for me to know everything about the total sector. Even then I have tried to know the important side of this sector as well as marketing and logistics that are taken here for the study purpose.

Problems I have faced for the study purpose:

• I did not get up to date information about the sector. • Maximum developers did not provide me all information that is needed for my study purpose. • I have to go several times to the developers for getting information which consumes my valuable times.

CHAPTER ONE

INTRODUCTION

INTRODUCTION

2.1) MEANING OF REAL ESTATE

In our day-to-day life, real estate is being used in various manner; we make use of real estate resources to provide shelter, comfort, convenience, and privacy, a place of work, recreational facilities and related service. In an estimate real estate represents more than 40% of national wealth.

The name given to the commodity reality which includes not only land but also all human improvements placed on the land. The name given to the business engaged in by those people who conduct commercial transactions in real estate.

The main component of real estate as a commodity is land. It states not only the surface of the earth but also the property rights and interests that attach to owner ship of reality, including subsurface minerals. Thus the real estate means acquisition of land and building which is called inherent right. The people who are the owner, user, maker, financier or marketer of the property have some rights to the property.

Since, entry and exit are free in this sector so day by day market is being competitive. Bargaining powers of the clients are increased in this competitive market. In this situation some companies are kicked out of the market for their poor management. These weak companies’ market shares are acquired by leading companies.

2.2) BACKGROUND

Multistory living is a relatively new phenomenon in Bangladesh in late 70s apartment project was started in Dhaka city in early 80s the business started flourishing. Until recently multistoried are built for office and commercial purpose only. But today there is a boom in building high rise buildings as living quarters, known as apartment or condominiums. This process started after the developers had taken up the business of constructing high rise buildings and selling the apartments. Is it a welcome phenomenon or an approach to the forward upon?

There are ample reasons why people have taken to liking multistory living. Extreme sortie of open space in the important area of Dhaka city, hazards of purchasing land and construction building and increasing in population have encouraged people to like multistory living. The populated is increasing leaps and bounds and land is scarce. Sprawling growth with single unit houses in subdivisions is not very feasible because service like access of roads, electricity, water, gas, etc. do not reach peripheral regions very easily. All the concentrations have to take place in the central part of the city. Peripheral land is usually bought by speculators. Some services gradually creep into peripheral regions for their demands. The process has usually taken about a decade. Travel from periphery to the central part of the city has become so difficult because of traffic chaos & jam, which takes hours. So, important person of business wants to live as close to the center as possible. A renowned economist once mentioned that in Dhaka with

Sufficient money most of the services need of an individual can be met. Faulty water supply can be overcome by sucking water from the supply line by a pump or sinking a tube-well if necessary. In case, school is not available for one is child’s one can start one good. For medical services one can take a trip abroad for consultation or treatment. All these can be done with sufficient money but one cannot avoid the traffic jam & fly to the office every day. Accessibility is the most serious problem that cannot be solved individually. Hence proximity to the place of work is a priority. Increase in land value encourages raising buildings. The higher the value of land the higher the buildings tend to rise.

In Dhaka land value is increasing day by day. The fact is that if the cost of one square foot of land is more than one square foot of built area, developers will go for high rise buildings. Cost of construction per square feet at present is among 700 to 1200 taka. Whenever the cost of land per katha that is 721 sft is more than taka five lacs, there is sufficient incentive for building high rise.

Apartments building and selling is being a relative very new type of business, e.g. real estate business. It has started in the last seventies. Little is known about its different aspects as yet. But from observation evident investment in this type of business is quite big. As well as the prices of apartments are also high. The buyers of apartments are well off and have acquired the temperament of community living. They want to buy apartments for security and consider it a symbol of status.

All these issues create genuine interest to get ideas about this type of real estate business sector and with that end in view the present study report was undertaken. This study aims at understanding the overall aspects, specially marketing & logistics aspects of the industry as well as the company BFL.

Total House holds position in Dhaka (SMA)

|Year |No. of Applications |No. of plans passed by RAJUK |
| |Received by RAJUK | |
|1991 |3701 |2913 |
|1992 |3897 |2809 |
|1993 |5532 |3872 |
|1994 |8202 |5905 |
|1995 |6995 |4966 |
|1996 |8112 |6012 |

Source: Primary data from RAJUK.

CHAPTER TWO

COMPANY

BACKGROUND & ANALYSIS

3.1) HISTORICAL BACKGROUND OF THE COMPANY:

Building For Future Ltd. Started its journey in 1994 with the aim of developing the construction technology to a world class standard. It has already earned the reputation of making first class buildings in Dhaka city by its sincere persuasion. Such rigid stance for commitment was never easy in a competitive field. This company is proud to have many land mark projects within such a short span of time.
In response to the increasing demand of quality production, our company has set its course to become a vanguard of private sector housing development in Bangladesh in the 21st century. With the belief "Quality creates its own demand" we are confident to have continuous support from all our well-wishers, customers, staffs and colleagues, in the pursuits of making comfortable built environment in the future.
As citizens of an over populated country, we are very much familiar with the demand of various types of basic requirements. The scenario of the demand of urban shelter is crucial due to the rapid growth of population.
In a society governed by market economy such demand is shaped by different income and taste level. New scientific and technological advancements have also been contributing in refining the taste factor of the consumers. Building development sector in Bangladesh is no exception to that situation.

Other Companies under the "BFL"
1. Nirnoy Upadeshta Ltd.
2. Housing & Technology Ltd.
3. Time Power Engineering Ltd.
4. Sthapattya O' Nirman
5. Swarnali Publishers
6. The Hospitality Ltd.
7. Optel Communications Ltd.

3.2) Towards 21st Century

As citizens of an over populated country, we are very much familiar with the demand of various types of basic requirements. The scenario for the demand of urban shelter is crucial due to the rapid growth of population.

In a society governed by market economy such demand is shaped by different income and taste level. New scientific and technological advancements have also been contributing in refining the taste factor of the consumers. Building development sector in Bangladesh is no exception to that situation.

The private sector Real Estate department of Bangladesh is working to support the country for the last 30 years without any foreign investment. These national entrepreneurs achieved reasonable success to provide home and shelter to the citizens of the country.

Building For Future Ltd. started its journey in 1994 with the aim to develop the construction technology to a world class standard. It has already earned the reputation of making first class building in Dhaka city with the help of its sincere persuasion. Such rigid stance for commitment was never easy in a competitive field. This company is proud to have many land mark projects within such a short span of time.

In response to increasing demand of our quality production our company has set its course to become a vanguard of private sector housing development in Bangladesh in the 21st country. With the belief “ Quality creates its own demand” we are confident to have continuous support from all our well-wishers, customers, staff and colleagues, in the pursuit of making comfortable built environment in the future.
3.3) Management Theme:

‘In BFL we do not use the word “employee”, we use “company member” instead as because we all work in a team. Any individual encounters a job and that job encourages the individual and the process is accelerated by the management body. All the company members develop themselves during the process of their duties and we believe that this is an ideal relationship between company members and the top management. The secret of BFL’s corporate activities is the co-operation and quick information sharing between all the departments.

‘Before designing any project, we prepare a theme based on our existing technical support and accordingly we classify the product depending on the demand of different groups of customers. As a result each and every apartment of BFL is enriched with our guarantee of reliability towards customers. The reach this reliability we give stress on continuous research & development and on regular staff training program.

‘Our management policy is not to create a large company or to claim the number 1 company in the country. Rather our aim is to make BFL into a first class and responsible company. This aim gives us the strength and opportunity to create 1st class products.

‘Quality product’ backed by ‘Quality after sales service’ is our objective. This is our challenge and commitment and BFL takes professional pride in meeting those challenges. We have designed our company only to think for ‘Quality and Durability’ since the first day of our business. We love to adopt new technology and innovation in this field.

We encourage our company members to spend some portion of their time to develop creativity, leadership and planning ability. We have enriched our information network systems so that everyone can work in a creative environment. We believe that every individual is a pillar of our organization. We endeavor to set up an environment in which company members are recognized through exact assessment of achievements.

BFL started computerization to systemize the organization into a corporate since 2000 and at present it is in a matured stage. Our financial-management and accounting system is transparent and able to provide all sort of back up information needed for other departments. Our Engineering department is capable to meet any technical difficulties regarding construction with the engineers who are continuously checking the quality of the materials, techniques & skill of labors, time schedule for each job. They put all their information into the computerized data bank. Our marketing and sales departments also record their activities to the main stream of information. This customized MIS enables our company to take appropriate decisions and to move faster.

BFL in all respect choose the simple and straight way. Our sales team makes everything clear to the customer to avoid any confusion in later stage, our engineers ensure the quality of the construction to the highest level, accounts department makes all the transactions with necessary documents and keeps the customer updated to hold their confidence. Our suppliers are always happy to get their payments in due time. Also we pay the taxes and duties in a regular basis. Such transparency in operation pays back through giving a very strong foundation to the confidence of the people who deals with BFL.

3.4) ORGANIZATIONAL STRUCTURE:

Chairman:
Kazi Anisuddin Iqbal a graduate from Bangladesh University of Engineering and Technology (BUET) in Architecture is a renowned Architect in the country. He is the key perso9n of designing and supervising all the projects of BFL. While designing he takes advantage of modern concepts. Building is not a mere structure; it has to interact with human beings, that is his belief. His perfe3ct guidance for precise workmanship encourages the company activists to dedicate themselves to up hold the highest standard of work. He is also the editor of the famous quarterly journal 'Sthapattya O Nirman'. His wife is a pediatrician working with BIRDEM hospital.

Managing Director:

Tanveerul Haque Probal graduate from Bangladesh University of Engineering and Technology (BUET) in Civil Engineering. He believes in speed of work and empowerment to concerned work group. He encourages his staffs by giving training, personal care and awarding. He upholds the friendly working environment in the company and maintains it through constant monitoring of the work progress. His leadership quality is also acknowledged by the REHAB through electing him as the General Secretary. His wife is a research fellow physician associated with I.C.D.D.R.B.

3.5) General Terms and Conditions of the company:

3.5.1) Application for allotments should be made on the prescribed application form duly signed by the applicant along with the earnest money. The company reserves the right to accept or reject any application without assigning any reason thereto.

3.5.2) The Company will issue an allotment letter to the applicant after acceptance of the application. After then the applicant will start making payments.

3.5.3 ) Allotment of apartment will be given on the basis of the first come first served. However preference may be given to clients paying cash in lump sum or booking more than one apartments.

3.5.4 )All sorts of payments such as earnest money, installments, car parking cost, additional works and other charges shall be made in the form A/C payee cheques, Bank Drafts or Pay Order in favor, of Building for Future Ltd. and respective receipts will be issued by the company. Allottees residing abroad may remit payments in foreign exchange by DD or TT. Payment will be considered as received when the sum is actually credited in the Company’s account.

3.5.5 )Timely payment of the installments, car parking cost and other charges shall be the essence of the contract delay in payments beyond the due date will make the allottee liable to pay a delay charge of 3% per 30 days on the amount of payment delayed. In case the payment is delays beyond 60 days the company shall have the right to cancel the allotment and allot the same to some one else. In such cases the amount paid by the allottee will be refunded after deducting the Earnest Money.

3.5.6. )The company reserves the right to cancel an allotment due to non payment of installment in disregard of reminders and after final intimation to allottee by registered post at the address in the application form.

3.5.7 ) An agreement will be made between the company and the allottee for safeguarding the interest of the allottee as well as the company after payment of minimum 25% of the apartment price.

3.5.8. ) The Company may seek and may arrange financing facilities for an allottee and the maximum amount of the facilities would be 40% of the cost of apartment. However it is the final discretion of the concerned financial institute for such financing.

3.5.9 ) Utility connection fees / charges, security deposits and other incidental expenses payable for water supply, sewerage, electric and gas connections are not included in the price of the apartments. These payments will be made by the company directly to the authorities concerned on the allottees account. The allottees have to pay utility charges against each apartment. The allottee has to make his/her/their own arrangements for telephone connections.

3.5.10 .If for some unavoidable reasons, it is necessary to make minor charges in the specifications, design and/or layout of the apartments and other facilities, the company has the right to do so.

3.5.11 ) on completion and on full payment of installments and other charges and dues, the company will handover the possession to the allottee, otherwise the possession of the apartment will remain with the company.

3.5.12 ) Stamp duties, documentation charges and all other miscellaneous expenses likely to be incurred in connection with the Deed of Agreement or Transfer of shares of Registration of the apartment will be borne by the allottee. Only the actual sums shall be charged.

3.5.13 ) the allottee(s) must consult wit the Company and take necessary permissions before undertaking any structural or layout changes within the apartment complex after taking possession of the apartment. Failure to do so will be at the sole risk of the allottee and the Company will not be responsible for any damage or mishap/faults.

3.5.14) the construction of the project will be completed within the schedule time of the company. The schedule of implementation of the project has been methodically prepared to ensure high quality and smooth progress of the work.

3.5.15 ) Force measure, natural calamities, strikes, political disturbances, economic depression and changes in the Fiscal / Commercial policy of the state etc. may affect the competition period of the construction of the project. In this case the company reserves the right to reschedule the construction time.

3.5.16) Due to any practical reason beyond the control of the Company, the implementation of the project is abandoned, the Company will refund to the allottee all installments deposited along with the Earnest Money within sixty (60) days from the announcement made to this effect, in this case, the allottee will not be entitled to any claims or damage whatsoever.

3.5.17) upon registration of the apartment the allottee (Irrespective of the floor) becomes the proportionate owner of the land on which the building is to be constructed.

3.5.18 ) The allottee will elect from amongst themselves a Managing Committee who will be responsible for the maintenance and management of the building and the general affairs of the committee. All allottees must agree to abide by the rules of the Committee.

3.5.19 ) each allottee (for each allotment of apartment) must initially deposit an amount, to be decided by the company, towards reserve fund of the managing committee for management expenses of the complex such as lifts, pump, security etc.

CHAPTER THREE

Ais An overview:

4.1 What is a system?

A system is a set of inter-dependent components (some of which may be systems in their own right) which collectively accomplish certain objectives.

4.2 Some basic concepts & strategies in the study of systems

Abstraction: an exceptionally powerful technique for dealing with complexity. We abstract from it. Unable to master the entirety of a complex object, we choose to ignore the inessential details, dealing instead with the generalized, idealized model of the object" Wulf in Shaw, 1981).
Formality: Rigor at each stage in the development of a system.

Divide and conquer: Divide a complex problem into a set of simpler problems that can be solved.

Hierarchical ordering: Order the simplification of the problem in ``divide & conquer" in hierarchies.

Cohesion & coupling: Modularize the system such that interactions within components (cohesion) are maximized and interactions between components (coupling) are minimized. This way, the impact of errors, when they arise, is localized and does not cascade through the system. Diagnosis of offending components is also made easier.

Information hiding: Each module (or subsystem) must have available to it just the information that is needed by it.

Conceptual integrity: Consistency in design.

Completeness: Ensuring that the design meets all the specifications.

Logical independence: Emphasis on the statement of system objectives in terms of logical functions independent of physical implementation.

Correctness & Efficiency: Correct in the sense that the design meets all the user requirements. Efficient in that the system accomplishes the objectives with minimum computing resources.

4.3 What is an Accounting Information System (AIS?)

Accounting Information Systems (AISs) combine the study and practice of accounting with the design, implementation, and monitoring of information systems. Such systems use modern information technology resources together with traditional accounting controls and methods to provide users the financial information necessary to manage their organizations.
Accounting Information Systems provide efficient delivery of information needed to perform necessary accounting work and to assist in delivery of accurate and informative data to users, especially those who are not familiar with the accounting and financial reporting areas itself.
We will first define a system, define an information system and, finally define an accounting information system. It should be obvious that all information systems are systems but not all systems are information systems. A vending machine, for example, is a system that is not an information system. Similarly, all accounting information systems are information systems, but the reverse is not always the case. Human resource information systems, production scheduling systems, strategic planning systems are examples of information systems that are not accounting information systems.
An accounting information system is merely a kind of an information system which in turn is a kind of a system. Therefore, the study of basic principles of systems in general and, information systems in particular, is important for a thorough understanding of accounting information systems. Our approach to the study of accounting information systems, as will become clear, is an engineering one, where one proceeds through a methodical path of specification, design, construction, testing & evaluation, operation and maintenance. A well engineered system is easy to understand, build, maintain, and upgrade.

4.4 AIS TECHNOLOGY

Input The input devices commonly associated with AIS include: standard personal computers or workstations running applications; scanning devices for standardized data entry; electronic communication devices for electronic data interchange (EDI) and e-commerce. In addition, many financial systems come "Web-enabled" to allow devices to connect to the World Wide Web.
Process Basic processing is achieved through computer systems ranging from individual personal computers to large-scale enterprise servers. However, conceptually, the underlying processing model is still the "double-entry" accounting system initially introduced in the fifteenth century.
Output Output devices used include computer displays, impact and nonimpact printers, and electronic communication devices for EDI and e-commerce. The output content may encompass almost any type of financial reports from budgets and tax reports to multinational financial statements

4.5 AIS—INFORMATION SYSTEMS IN CONTEXT

AISs cover all business functions from backbone accounting transaction processing systems to sophisticated financial management planning and processing systems.
Financial reporting starts at the operational levels of the organization, where the transaction processing systems capture important business events such as normal production, purchasing, and selling activities. These events (transactions) are classified and summarized for internal decision making and for external financial reporting.
Cost accounting systems are used in manufacturing and service environments. These allow organizations to track the costs associated with the production of goods and/or performance of services. In addition, the AIS can provide advanced analyses for improved resource allocation and performance tracking.
Management accounting systems are used to allow organizational planning, monitoring, and control for a variety of activities. This allows managerial-level employees to have access to advanced reporting and statistical analysis. The systems can be used to gather information, to develop various scenarios, and to choose an optimal answer among alternative scenarios.
4.6 DEVELOPMENT of AIS:
The development of AIS includes five basic phases: planning, analysis, design, implementation, and support. The time period associated with each of these phases can be as short as a few weeks or as long as several years.
Planning—project management objectives and techniques The first phase of systems development is the planning of the project. This entails determination of the scope and objectives of the project, the definition of project responsibilities, control requirements, project phases, project budgets, and project deliverables.
Analysis The analysis phase is used to both determine and document the accounting and business processes used by the organization. Such processes are redesigned to take advantage of best practices or of the operating characteristics of modern system solutions.
Data analysis is a thorough review of the accounting information that is currently being collected by an organization. Current data are then compared to the data that the organization should be using for managerial purposes. This method is used primarily when designing accounting transaction processing systems.
Decision analysis is a thorough review of the decisions a manager is responsible for making. The primary decisions that managers are responsible for are identified on an individual basis. Then models are created to support the manager in gathering financial and related information to develop and design alternatives, and to make actionable choices. This method is valuable when decision support is the system's primary objective.
Process analysis is a thorough review of the organization's business processes. Organizational processes are identified and segmented into a series of events that either add or change data. These processes can then be modified or reengineered to improve the organization's operations in terms of lowering cost, improving service, improving quality, or improving management information. This method is appropriate when automation or reengineering is the system's primary objective.
Design The design phase takes the conceptual results of the analysis phase and develops detailed, specific designs that can be implemented in subsequent phases. It involves the detailed design of all inputs, processing, storage, and outputs of the proposed accounting system. Inputs may be defined using screen layout tools and application generators. Processing can be shown through the use of flowcharts or business process maps that define the system logic, operations, and work flow. Logical data storage designs are identified by modeling the relationships among the organization's resources, events, and agents through diagrams. Also, entity relationship diagram (ERD) modeling is used to document large-scale database relationships. Output designs are documented through the use of a variety of reporting tools such as report writers, data extraction tools, query tools, and on-line analytical processing tools. In addition, all aspects of the design phase can be performed with software tool sets provided by specific software manufacturers.
Reporting is the driving force behind an AIS development. If the system analysis and design are successful, the reporting process provides the information that helps drive management decision making. Accounting systems make use of a variety of scheduled and on-demand reports. The reports can be tabular, showing data in a table or tables; graphic, using images to convey information in a picture format; or matrices, to show complex relationships in multiple dimensions.
There are numerous characteristics to consider when defining reporting requirements. The reports must be accessible through the system's interface. They should convey information in a proactive manner. They must be relevant. Accuracy must be maintained. Lastly, reports must meet the information processing (cognitive) style of the audience they are to inform.
Reports are of three basic types: A filter report that separates select data from a database, such as a monthly check register; a responsibility report to meet the needs of a specific user, such as a weekly sales report for a regional sales manager; a comparative report to show period differences, percentage breakdowns and variances between actual and budgeted expenditures. An example would be the financial statement analytics showing the expenses from the current year and prior year as a percentage of sales.
Screen designs and system interfaces are the primary data capture devices of AISs and are developed through a variety of tools. Storage is achieved through the use of normalized databases that assure functionality and flexibility.
Business process maps and flowcharts are used to document the operations of the systems. Modern AISs use specialized databases and processing designed specifically for accounting operations. This means that much of the base processing capabilities come delivered with the accounting or enterprise software.
Implementation The implementation phase consists of two primary parts: construction and delivery. Construction includes the selection of hardware, software and vendors for the implementation; building and testing the network communication systems; building and testing the databases; writing and testing the new program modifications; and installing and testing the total system from a technical standpoint. Delivery is the process of conducting final system and user acceptance testing; preparing the conversion plan; installing the production database; training the users; and converting all operations to the new system.
Tool sets are a variety of application development aids that are vendor-specific and used for customization of delivered systems. They allow the addition of fields and tables to the database, along with ability to create screen and other interfaces for data capture. In addition, they help set accessibility and security levels for adequate internal control within the accounting applications.
Security exists in several forms. Physical security of the system must be addressed. In typical AISs the equipment is located in a locked room with access granted only to technicians. Software access controls are set at several levels, depending on the size of the AIS. The first level of security occurs at the network level, which protects the organization's communication systems. Next is the operating system level security, which protects the computing environment. Then, database security is enabled to protect organizational data from theft, corruption, or other forms of damage. Lastly, application security is used to keep unauthorized persons from performing operations within the AIS.
Testing is performed at four levels. Stub or unit testing is used to insure the proper operation of individual modifications. Program testing involves the interaction between the individual modification and the program it enhances. System testing is used to determine that the program modifications work within the AIS as a whole. Acceptance testing ensures that the modifications meet user expectations and that the entire AIS performs as designed.
Conversion entails the method used to change from an old AIS to a new AIS. There are several methods for achieving this goal. One is to run the new and old systems in parallel for a specified period. A second method is to directly cut over to the new system at a specified point. A third is to phase in the system, either by location or system function. A fourth is to pilot the new system at a specific site before converting the rest of the organization.
Support The support phase has two objectives. The first is to update and maintain the AIS. This includes fixing problems and updating the system for business and environmental changes. For example, changes in generally accepted accounting principles (GAAP) or tax laws might necessitate changes to conversion or reference tables used for financial reporting. The second objective of support is to continue development by continuously improving the business through adjustments to the AIS caused by business and environmental changes. These changes might result in future problems, new opportunities, or management or governmental directives requiring additional system modifications.

4.7 ATTESTATION

AISs change the way internal controls are implemented and the type of audit trails that exist within a modern organization. The lack of traditional forensic evidence, such as paper, necessitates the involvement of accounting professionals in the design of such systems. Periodic involvement of public auditing firms can be used to make sure the AIS is in compliance with current internal control and financial reporting standards.
After implementation, the focus of attestation is the review and verification of system operation. This requires adherence to standards such as ISO 9000-3 for software design and development as well as standards for control of information technology.
Periodic functional business reviews should be conducted to be sure the AIS remains in compliance with the intended business functions. Quality standards dictate that this review should be done according to a periodic schedule.

4.8 ENTERPRISE RESOURCE PLANNING (ERP)

ERP systems are large-scale information systems that impact an organization's AIS. These systems permeate all aspects of the organization and require technologies such as client/server and relational databases. Other system types that currently impact AISs are supply chain management (SCM) and customer relationship management (CRM).
Traditional AISs recorded financial information and produced financial statements on a periodic basis according to GAAP pronouncements. Modern ERP systems provide a broader view of organizational information, enabling the use of advanced accounting techniques, such as activity-based costing (ABC) and improved managerial reporting using a variety of analytical techniques.

4.9 The Strategy in Functional Modeling

The methodology of structured systems analysis & design provides a roadmap for the development of functional specifications for an accounting information system, shown in the Figure below. [pic]
Figure: Structured Systems analysis & Design Methodology
The functional specifications are documented graphically in Dataflow Diagrams (DFDs) described in the next section below. STEP 0: (Defining the scope of the system under study.) This accomplished by drawing the context diagram for the system.

STEP 1: (Documentation of how the existing system works.) This is accomplished by drawing the Physical DFDs of the existing system. These DFDs specify the current implementation of the existing system, and would answer questions such as: • Who performs the tasks? • How they are performed? • When or how often they are performed? • How the data is stored (media)? • How the data flows are implemented (media)? These physical DFDs may be leveled, or, if the system is not very large, prepared all on a single DFD. STEP 2: (Documentation of what the existing system does.)This is documented in Logical DFDs of the existing system. Deriving these logical DFDs of the existing system from the physical DFDs involve abstraction of all implementation details. Since the systems designer would not like to be tied down by the current implementation of the system, all such details are abstracted. These logical DFDs are usually leveled in order to reduce the perceived complexity of the system, and balanced in order to assure consistency in the design.

STEP 3: (Documentation of what the proposed system will do.) After step 2, the systems designer will examine why the existing system does not meet the user requirements, and how it can be modified in order to meet such needs. The result is a set of logical DFDs which describe what the modified (proposed) system will do. These functional specifications are devoid of implementation considerations, and therefore rather abstract specifications of the proposed system. These logical DFDs are also leveled and balanced.

STEP 4: (Documentation of how the proposed system will work.) The logical DFDs of the proposed system derived in step 3 above are then examined to determine which implementation of it meets the user requirements most efficiently. The result is a set of physical DFDs of the proposed system. They answer questions such as: • Who will perform the various tasks? • How they will be performed? • When or how often they will be performed? • How the data will be stored (media)? • How the data flows will be implemented (media)?
In this step, man-machine boundaries are drawn, and media selected for all data flows & data stores.

4.10 Systems Development Life Cycle

Referred to variously as the waterfall model and linear cycle, this methodology is a coherent description of the steps taken in the development of information systems. The reason why it is referred to as the waterfall model should be obvious from the following figure (from Horner, 1993): [pic]
Figure: Systems Development Life Cycle

The methodology SDLC is closely linked to what has come to be known as structured systems analysis & design. It involves a series of steps to be undertaken in the development of information systems as follows: • Problem definition: On receiving a request from the user for systems development, an investigation is conducted to state the problem to be solved. o Deliverables: Problem statement.

• Feasibility study: The objective here is to clearly define the scope and objectives of the systems project, and to identify alternative solutions to the problem defined earlier. o Deliverables: Feasibility report. • Systems analysis phase: The present system is investigated and its specifications documented. They should contain our understanding of HOW the present system works and WHAT it does. o Deliverables: Specifications of the present system.

• Systems design phase: The specifications of the present system are studied to determine what changes will be needed to incorporate the user needs not met by the system presently. The output of this phase will consist of the specifications, which must describe both WHAT the proposed system will do and HOW it will work. o Deliverables: Specifications of the proposed system.

• Systems construction: Programming the system, and development of user documentation for the system as well as the programs. o Deliverables: Programs, their documentation, and user manuals.

• System testing & evaluation: Testing, verification and validation of the system just built. o Deliverables: Test and evaluation results and the system ready to be delivered to the user/client.

The figure below provides an illustration for the above description.

[pic] Figure: Dataflow Diagram for SDLC
The waterfall model has many attractive features: Clearly defined deliverables at the end of each phase, so that the client can take decisions on continuing the project, Incremental resource commitment. The client does not have to make a full commitment on the project at the beginning Isolation of the problem early in the process.

4.11 Principles of accounting Information System:
Efficient and effective accounting information system is based on certain basic principles. The Principles are:
Cost effectiveness: benefits of information must outweigh the cost of providing it.
Useful output: information must be understandable, relevant, reliable, timely and accurate.
Flexibility: the system should be flexible to meet the resulting changes in the demands made upon it.

4.12 Objectives of Accounting Information System: 1) To support the day to day operations. 2) To support decision making by internal decision makers 3) To fulfill obligation relating to stewardship

4.13 Qualitative characteristics of Accounting Information

FASB[1] (US Financial Accounting Standard Board) describes the qualitative characteristics of accounting information in Concept No.2. It breaks down the qualities into two primary classifications: relevance and reliability.

Relevance is subdivided into (a) predictive value, (b) feed- back value, and (c) timeliness. Relevant accounting information assists users in predicting the future, provides feedback on past decisions, and is available when needed.

An example will be useful in explaining these qualities. Investors use EPS data to assess the future earnings potential of an enterprise because EPS data have predictive value. Investors can assess the quality of their past decisions by looking at present EPS data. And, needless to add, the EPS data must be available at the appropriate time to be used for either of these functions.

The reliability quality has been subdivided into (a) verifiability, (b) representational faithfulness, and (c) neutrality. Earlier, we noted that one virtue of accounting information is that it is verifiable; it has some form of verifiable, objective evidence to support it. We shall see that automation of accounting functions significantly alters what constitutes verifiable, objective evidence. Accounting information must faithfully represent the financial position of an enterprise. Thus, accounting information has to be a close approximation of the state of the entity to satisfy the reliability test. Neutrality refers to the unbiased estimation of facts. For example, when an income statement is prepared, the result may be a profit or a loss. An income statement should not be prepared with the objective of showing a profit. Any statement prepared with such an objective would not present an unbiased estimate of the facts-it would fail the neutrality test and be useless.

4.14 The Value of Accounting Information

The value of any information depends on two factors: (a) its accuracy, and (b) its ability to reduce uncertainty.[2] Accuracy is defined as the degree of mapping from the events to the data. When accounting data closely represent the measured events, the data are said to have high accuracy and the value of information based on the data increases. On the other hand, data that do not represent the measured events closely cannot be used to develop valuable information.

Uncertainty is a characteristic of any decision situation. One major objective of information is to reduce uncertainty. Thus, initial uncertainty in a decision situation increases the value of information. Accounting data are useful and of value when they have the potential to reduce uncertainty in a decision situation. The costs of collecting additional information must always be balanced against the value expected.

4.15 USERS OF ACCOUNTING INFORMATION SYSTEMS

Many people from within and outside the organization use accounting information for making decisions. Accounting information is useful in all types of organizations: a business organization, a not-for-profit organization, or a government agency. The survival and growth of an organization depend, to a large extent, on supplying effective accounting information to internal and external users. The size of an organization determines the appropriate volume and complexity of accounting information for managerial decisions in such areas as purchasing, production, hiring, borrowing, and investment.

Outsiders who use accounting information include creditors, shareholders, regulatory agencies, government data-gathering agencies, economists, trade unions, customers, industry analysts, and potential investors. Most accounting systems tend to concentrate on meeting the needs of managers, creditors, and shareholders and to ignore the remaining users.

4.15.1 Internal Users

Internal users of accounting information work for the organization. They usually have some managerial or supervisory responsibilities in a line or staff functions. Production or marketing are typical line functions. Staff functions include activities such as accounting, data processing, and planning. A production foreman, a line supervisor, a plant manager, a division manager, and a production vice president are examples of internal users. The types of information used people in an organization vary according to the function and level of the user. For example, the production foreman will be interested in daily and weekly cost reports showing details such as those presented in Table 1-1; the production vice president will be interested in corporation-wide reports of budgets and performance data.

4.15.2 External Users

Organizations supply accounting information to outsiders to meet regulatory needs, business needs and to inform others interested in the affairs of the organization. External users are interested in the accounting information of a firm for a variety of reasons. External users include present and potential stockholders, government agencies, banks, trade unions, and professional institutions. Government agencies commonly include tax authorities (Internal Revenue Service I (known as IRS in USA), the trade and commission regulators (FTC in USA), and the capital market authorities (Securities and Exchange Commission (known as SEC in USA). Accounting information needs of government agencies are met by supplying information on special forms for each agency. The needs of other users are normally met by the corporation's routine published reports which are published in the form of general purpose financial statements.

Privately held companies, nonprofit organizations, and government agencies do not face the same external reporting requirements as publicly owned companies. However, they encounter varying reporting requirements and have to consider external users' needs. The accounting information systems of these organizations have goals similar to those of the publicly owned companies, but they may have significantly different output requirements.

4.16 THE ROLES OF ACCOUNTANTS IN AIS

Accountants perform a wide variety of roles relating to accounting, financial, and information systems functions within an organization. The position designations of accountants depend on the functional roles they perform. An accountant may specialize in any branch of accounting-financial, cost, governmental, tax, investment. He or she will be concerned with specific tasks within these branches, such as fixed assets, cash, payroll, inventory , billing, general ledger At the lower end of the hierarchy, accounting clerks, supervisors, and managers perform these and related subtasks. Upper-level managers and controllers work in broader areas such as financial accounting, cost accounting, or managerial accounting. Many large organizations have a systems branch that specializes in translating accounting needs into data processing specifications and performing other liaison tasks with the information systems group.

AIS cover accounting functions at all levels from data entry to control and reporting. An accountant working in any specific accounting function needs expertise to manipulate the system effectively. Depending on the nature of the work, an accountant should be able to recognize valid data, make required inputs, perform functional manipulations, generate reports, and interpret results.

To be an accountant today one requires:
I. Expertise in functional area accounting
2. Computer competence and understanding of applications software
3. A clear understanding of how the accounting system works
4. An awareness of the business as a whole

The modern AIS has expanded the roles of accountants in many ways. Accountants not only manipulate larger volumes of data and generate more timely reports in a wider variety of formats, but also share greater responsibility for personal interactions, data processing, hardware and software acquisitions, and for coordination inside and outside the accounting domain.

The development of accounting information systems has in- creased the importance of accounting functions and the responsibilities of accountants. This, in turn, has contributed to the prestige of the profession.

4.17 THE COMPUTER AND ACCOUNTING INFORMATION

IN HISTORICAL PERSPECTIVE

The computer was initially introduced into most organizations to satisfy the efficiency concerns of processing vast amounts of accounting transaction data at the operational control level. It has proved so effective in this role that virtually no sizable organization can survive competitive pressures without using computer. Throughout the 1970s, computer technology limited the production of accounting information to predetermined formats. These standard reports were usually adequate to support the needs of external users and many of the internal functions of management control. The introduction of microcomputers in the early 1980s brought a rapid rise in the computer literacy of all levels of management and contributed to the development of a new class of programs aimed specifically at meeting the needs of strategic management. Many of these programs are based on accounting information processed by the AIS. Figure 1-3 is a graphic depiction of the growth of the AIS in a typical business organization.
The scope of today's AIS is influenced by two factors: (1) the rapid growth of information processing technology, and (2) the increased complexity of business in general. The AIS of the foreseeable future must establish and maintain the capability for complex manipulation of vast volumes of financial and non-financial data with higher speed and greater accuracy than ever before.

[pic]

The enhanced power of data handling in a complex environment has altered the character of the AIS. The AIS of the past was little more than bookkeeping which relied on electronic devices of limited capability and requires a great deal of human involvement at almost every step of process. Such an AIS was not able to cope with the dynamic challenges of business complexity. Its products were unable to satisfy user’s needs for planning and control information. The primary concern of the AIS was to manipulate historical data, satisfy audit needs, and produce after the fact financial statements. And provide preformatted reports for managerial use.

Today’s AIS deals with future events as well as historical data. It must produce projected financial statements as well as historical ones. It must support unanticipated managerial needs for financial information for decision making, in addition to satisfying the needs of auditors. It must develop new and efficient controls, reporting techniques, and audit trials in response to trends toward increasing public access to accounting data and reports. As a simple example, consider the monthly statements provided by many banks and credit card companies to their customers. They incorporate detailed information about numerous transactions performed in a variety of ways from many locations. A financial institutions today provide access to its customers to perform financial transactions from anywhere in the world. A bank cannot survive today without providing this level of services. Capability to do so did not exist even a few years ago.

CHAPTER FOUR

AIS of Real Estate Business:

5.1 An overview of Real estate Business in Bangladesh:

The real estate business concept was developed in Bangladesh in the sixties’ decades. Ispahani and EHL are the pioneers of this business. This business was flourished in the first eighties’ decades. Now a day there are more than 126 real estate companies are in this sector and this number is growing day by day because of the profit margin of this sector. By showing plans and locations they sell apartments. For this reason this product is called “unseen” product. Companies have to borrow a negligible amount of taka from the banks. The growth rate of industry is about 15%. Profit margin is about 15% - 25% on an .0average. It attracts the new business firms to this sector. The industry is in the transition to maturity stage of its life cycle. Again some companies’ growth rates are higher than others. This rising sector may be collapsed for some dishonest entrepreneurs. In this research report I have discussed the overall situations on management style, land procurement, design and engineering, marketing, legal and logistics of the industry and the company Building For Future ltd. with SWOT analysis.

|Ratio |Description |
| | |
|Receivable Turnover in days |Credit Sales/Average debtors |
| | |
|Inventory Turnover in days |Cost of goods sold / Average Inventory |
| | |
|Payable Turnover in days |Credit purchase/Average creditors |
| | |
|Debt utilization Ratio | |
| | |
|Debt to Equity (%) |External equity / Internal equity. |
| | |
|Debt to Total Assets (%) |External equity / Total Assets |
| | |
|Times Interest ratio |Net operating income/Interest Expenses |
| | |
|Coverage Ratio |Net profit + Financial expenses+ Depreciation |
|Debit service coverage (Times) |Financial Expenses + Current liabilities( Bank loan + LTR) |
| | |
| | |
| |Net profit before Financial charges |
|Interest coverage in times |Financial charges |
| | |
| | |
|Liquidity Ratio | |
| |current Assets/current liabilities |
|Current Ratio |(Current Assets-Inventory)/Current Liabilities |
|Quick Ratio | |
| | |
| | |
|Profitability Ratios | |
| | |
|Return on Asset |Net Income after tax/Total asset |
|Return on Equity |Net Income after tax/Total Equity |
| | |

5.2 Analysis of Financial Statement:

5.3 Proposed Bangladesh 'Real Estate Management Ordinance 2008

The Bangladesh Government and the Real Estate developers are apparently at loggerhead over the enactment of a draft ordinance named as 'Real Estate Management Ordinance 2008,' which is intended to regulate the country's booming real estate sector. The law ministry has been asked to place the draft before the council shortly for its final nod. The draft regulation stipulates jail terms and financial penalties for delinquent developers.

The government officials sat with the leaders of the Real Estate and Housing Association of Bangladesh (REHAB) quite a number of times to make the new laws and regulations acceptable to both the parties. The REHAB submitted a set of recommendations to the government for incorporating those in the ordinance. But after the passage of the draft ordinance, it was seen that those were left unnoticed. The REHAB quickly came up with a notice that if the ordinance is implemented, it will destroy the real estate sector, which accounts for around 11 per cent GDP.

Allegations of fraud and deception in handing over plots or flats, and illegal encroachment of private and public land are rife against a section of real estate companies. Many innocent people are often lured by false assurances of hole-in-the-wall housing companies due to lax monitoring of the sector, prompting the government to initiate the move to bring the fast-growing sector under a stringent law.

It suggested that real estate companies must obtain registration from the authorities concerned and get project designs approved under the Private Housing Project Land Development Rules-2004. An occupancy certificate is a must for handover of any plot or flat. The companies must clearly state in their prospectuses the consequences of failure to pay the installments by the buyers, and they must not sell out the flats of defaulters to third parties within 90 days of notification. The draft law stipulates that real estate companies will have to return the entire money along with interest to the buyers in three months' time in case of missing handover deadlines.

The developers have to take initiatives for ensuring utility services in the project areas. If any company is found that it starts the project work without permission, the company will be fined up to Tk 1.0 million and its executives may be punished with three years of imprisonment. It also imposes bar against mortgage of any plot or flat before it is handed over to its owner. Developers will be fined for failing to inform its client’s before-hand about the mortgage of any complete or under-construction land, apartment or space. Besides, there will be penalties for not using agreed materials in construction and suspending a project without consulting clients.

The people, mainly the clients of new flats and plots are largely satisfied with the provisions of the new law. They said it might be able to reduce their sufferings to some extent. But it is apprehended that the government might not be able to implement it since the developers are very influential and can dictate terms.

As per ordinance, developers cannot file any case against those government officials who are responsible for supervising the activities of their activities. Yet any official from the developer's side can be fined or jailed for violating any clause of the ordinance. This is highly immoral and contrary to ethical norms, said the REHAB. No good and meritorious person will like to remain in the real estate sector, it added. The REHAB has over 350 members as of now. Besides them, a number of companies are now operating in small scale. The service sector witnessed a rapid growth in the last two decades, employing tens of thousands of workers in construction work and contributing to the expansion of related sectors like cement and steel.

The recent moderate earthquakes that hit Dhaka and adjoining area caused development experts in Bangladesh to contemplate the possible scenario of deaths and destruction in case an earthquake of severe intensity. Thousands of high-rise apartments were constructed almost overnight on hurriedly filled-up ditches and using low quality cements and iron rods in violation of a six-storied limit, imposed by the national building code. The other grim side of the story is that most of the land-owners or real estate developers, to avoid cost escalation, have relied heavily on ordinary masons instead of qualified structural engineers for technical advice while constructing the buildings.

Some unscrupulous real estate developers - certainly not all - usually indulge in all kinds of shoddiness to maximize their profits. A government agency like RAJUK is responsible to oversee the conduct of all real estate developers in the capital city to ensure that they follow the rules and codes and do not cheat the unsuspecting flat owners who would eventually buy them. However, before the draft ordinance goes to the council of advisers for its final approval, there should be a consensus settlement between the government and the leaders of the REHAB on the issues they have differences. Otherwise, the whole real estate sector is poised to witness chaos and confusion leading to its destruction.

5.4 Vat Register:

The rate of vat on registration of apartment @ 1.5% on deed value of apartment .vat deduct from source @ 2.25% on procurement provider and 4.5% on contractors. The vat is to collected on issuance of money receipt and the same to be deposited into vat office. A separate vat register is required to be maintained showing the name of branches, premium earned and vat payable thereof which is also required to be signed and scaled by the vat authority on monthly basis.

5.5 Preparing the Financial Statements OF Real Estate:

Objective of IAS 1
The objective of IAS 1 (revised 1997) is to prescribe the basis for presentation of general purpose financial statements, to ensure comparability both with the entity's financial statements of previous periods and with the financial statements of other entities. IAS 1 sets out the overall framework and responsibilities for the presentation of financial statements, guidelines for their structure and minimum requirements for the content of the financial statements. Standards for recognizing, measuring, and disclosing specific transactions are addressed in other Standards and Interpretations.
Scope
Applies to all general purpose financial statements based on International Financial Reporting Standards. [IAS 1.2]
General purpose financial statements are those intended to serve users who do not have the authority to demand financial reports tailored for their own needs. [IAS 1.3]
Objective of Financial Statements
The objective of general purpose financial statements is to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions. To meet that objective, financial statements provide information about an entity's: [IAS 1.7] • Assets. • Liabilities. • Equity. • Income and expenses, including gains and losses. • Other changes in equity. • Cash flows.
That information, along with other information in the notes, assists users of financial statements in predicting the entity's future cash flows and, in particular, their timing and certainty.
Components of Financial Statements
A complete set of financial statements should include: [IAS 1.8] • a statement of financial position at the end of the period, • a statement of comprehensive income for the period, • a statement of changes in equity for the period • statement of cash flows for the period, and • Notes, comprising a summary of accounting policies and other explanatory notes.
When an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements, it must also present a statement of financial position as at the beginning of the earliest comparative period.
An entity may use titles for the statements other than those stated above.
Reports that are presented outside of the financial statements -- including financial reviews by management, environmental reports, and value added statements -- are outside the scope of IFRSs. [IAS 1.9-10]
Fair Presentation and Compliance with IFRSs
The financial statements must "present fairly" the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events, and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of IFRSs, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation. [IAS 1.13]
IAS 1 requires that an entity whose financial statements comply with IFRSs make an explicit and unreserved statement of such compliance in the notes. Financial statements shall not be described as complying with IFRSs unless they comply with all the requirements of IFRSs (including Interpretations). [IAS 1.14]
Inappropriate accounting policies are not rectified either by disclosure of the accounting policies used or by notes or explanatory material. [IAS 1.16]
IAS 1 acknowledges that, in extremely rare circumstances, management may conclude that compliance with an IFRS requirement would be so misleading that it would conflict with the objective of financial statements set out in the Framework. In such a case, the entity is required to depart from the IFRS requirement, with detailed disclosure of the nature, reasons, and impact of the departure. [IAS 1.17-18]

Going Concern
An entity preparing IFRS financial statements is presumed to be a going concern. If management has significant concerns about the entity's ability to continue as a going concern, the uncertainties must be disclosed. If management concludes that the entity is not a going concern, the financial statements should not be prepared on a going concern basis, in which case IAS 1 requires a series of disclosures. [IAS 1.23]
Accrual Basis of Accounting
IAS 1 requires that an entity prepare its financial statements, except for cash flow information, using the accrual basis of accounting. [IAS 1.25]
Consistency of Presentation
The presentation and classification of items in the financial statements shall be retained from one period to the next unless a change is justified either by a change in circumstances or a requirement of a new IFRS. [IAS 1.27]
Materiality and Aggregation
Each material class of similar items must be presented separately in the financial statements. Dissimilar items may be aggregated only if the are individually immaterial. [IAS 1.29]
Offsetting> Assets and liabilities, and income and expenses, may not be offset unless required or permitted by a Standard or an Interpretation. [IAS 1.32]
Comparative Information
IAS 1 requires that comparative information shall be disclosed in respect of the previous period for all amounts reported in the financial statements, both face of financial statements and notes, unless another Standard requires otherwise. [IAS 1.36]
If comparative amounts are changed or reclassified, various disclosures are required. [IAS 1.38]
Structure and Content of Financial Statements in General
Clearly identify: [IAS 1.46] • the financial statements • the reporting enterprise • whether the statements are for the enterprise or for a group • the date or period covered • the presentation currency • The level of precision (thousands, millions, etc.)
Reporting Period
There is a presumption that financial statements will be prepared at least annually. If the annual reporting period changes and financial statements are prepared for a different period, the enterprise must disclose the reason for the change and a warning about problems of comparability. [IAS 1.49]
Statement of Financial Position
An entity must normally present a classified statement of financial position, separating current and noncurrent assets and liabilities. Only if a presentation based on liquidity provides information that is reliable and more relevant may the current/noncurrent split be omitted. [IAS 1.51] In either case, if an asset (liability) category commingles amounts that will be received (settled) after 12 months with assets (liabilities) that will be received (settled) within 12 months, note disclosure is required that separates the longer-term amounts from the 12-month amounts. [IAS 1.52]
Current assets are cash; cash equivalent; assets held for collection, sale, or consumption within the enterprise's normal operating cycle; or assets held for trading within the next 12 months. All other assets are concurrent. [IAS 1.57]
Current liabilities are those to be settled within the enterprise's normal operating cycle or due within 12 months, or those held for trading, or those for which the entity does not have an unconditional right to defer payment beyond 12 months. Other liabilities are noncurrent. [IAS 1.60]
Long-term debt expected to be refinanced under an existing loan facility is noncurrent, even if due within 12 months. [IAS 1.64]
If a liability has become payable on demand because an entity has breached an undertaking under a long-term loan agreement on or before the reporting date, the liability is current, even if the lender has agreed, after the reporting date and before the authorization of the financial statements for issue, not to demand payment as a consequence of the breach. [IAS 1.65] However, the liability is classified as non-current if the lender agreed by the reporting date to provide a period of grace ending at least 12 months after the reporting date, within which the entity can rectify the breach and during which the lender cannot demand immediate repayment. [IA 1.66]
Minimum items on the face of the statement of financial position [IAS 1.68] • (a) property, plant and equipment; • (b) investment property; • (c) intangible assets; • (d) financial assets (excluding amounts shown under (e), (h) and (i)); • (e) investments accounted for using the equity method; • (f) biological assets; • (g) inventories; • (h) trade and other receivables; • (i) cash and cash equivalents; • (j) trade and other payables; • (k) provisions; • (l) financial liabilities (excluding amounts shown under (j) and (k)); • (m) liabilities and assets for current tax, as defined in IAS 12; • (n) deferred tax liabilities and deferred tax assets, as defined in IAS 12; • (o) minority interest, presented within equity; and • (p) Issued capital and reserves attributable to equity holders of the parent.
Additional line items may be needed to fairly present the entity's financial position. [IAS 1.69]
IAS 1 does not prescribe the format of the balance sheet. Assets can be presented current then noncurrent, or vice versa, and liabilities and equity can be presented current then noncurrent then equity, or vice versa. A net asset presentation (assets minus liabilities) is allowed. The long-term financing approach used in UK and elsewhere fixed assets + current assets - short term payables = long-term debt plus equity is also acceptable.
Regarding issued share capital and reserves, the following disclosures are required: [IAS 1.76] • numbers of shares authorized, issued and fully paid, and issued but not fully paid • par value • reconciliation of shares outstanding at the beginning and the end of the period • description of rights, preferences, and restrictions • treasury shares, including shares held by subsidiaries and associates • shares reserved for issuance under options and contracts • a description of the nature and purpose of each reserve within owners' equity
Statement of Income
In the 2003 revision to IAS 1, the IASB is now using "profit or loss" rather than "net profit or loss" as the descriptive term for the bottom line of the income statement.
All items of income and expense recognized in a period must be included in profit or loss unless a Standard or an Interpretation requires otherwise. [IAS 1.78]
Minimum items on the face of the statement of income should include: [IAS 1.81] • revenue • finance costs • share of the profit or loss of associates and joint ventures accounted for using the equity method • a single amount comprising the total of (i) the post-tax profit or loss of discontinued operations and (ii) the post-tax gain or loss recognized on the disposal of the assets or disposal group(s) constituting the discontinued operation • tax expense • profit or loss
The following items must also be disclosed on the face of the income statement as allocations of profit or loss for the period: [IAS 1.82] • profit or loss attributable to minority interest • profit or loss attributable to equity holders of the parent
Additional line items may be needed to fairly present the enterprise's results of operations.
No items may be presented on the face of the statement of income or in the notes as "extraordinary items". [IAS 1.85]
Certain items must be disclosed either on the face of the statement of income or in the notes, if material, including: [IAS 1.87] • write-downs of inventories to net realizable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs • restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring • disposals of items of property, plant and equipment • disposals of investments • discontinuing operations • litigation settlements • other reversals of provisions
Expenses should be analyzed either by nature (raw materials, staffing costs, depreciation, etc.) or by function (cost of sales, selling, administrative, etc.) either on the face of the statement of income or in the notes. [IAS 1.88] If an enterprise categorizes by function, additional information on the nature of expenses “at a minimum depreciation, amortization, and staff costs must be disclosed. [IAS 1.93]
Statement of Cash Flows
Presentation of the Statement of Cash Flows
Cash flows must be analyzed between operating, investing and financing activities. [IAS 7.10]
Key principles specified by IAS 7 for the preparation of a statement of cash flows are as follows: • operating activities are the main revenue-producing activities of the enterprise that are not investing or financing activities, so operating cash flows include cash received from customers and cash paid to suppliers and employees [IAS 7.14]

• investing activities are the acquisition and disposal of long-term assets and other investments that are not considered to be cash equivalents [IAS 7.6]

• financing activities are activities that alter the equity capital and borrowing structure of the enterprise [IAS 7.6]

• interest and dividends received and paid may be classified as operating, investing, or financing cash flows, provided that they are classified consistently from period to period [IAS 7.31]

• cash flows arising from taxes on income are normally classified as operating, unless they can be specifically identified with financing or investing activities [IAS 7.35]

• for operating cash flows, the direct method of presentation is encouraged, but the indirect method is acceptable [IAS 7.18]

The direct method shows each major class of gross cash receipts and gross cash payments. The operating cash flows section of the statement of cash flows under the direct method would appear something like this:
|Cash receipts from customers |xx,xxx |
|Cash paid to suppliers |xx,xxx |
|Cash paid to employees |xx,xxx |
|Cash paid for other operating expenses |xx,xxx |
|Interest paid |xx,xxx |
|Income taxes paid |xx,xxx |
|Net cash from operating activities |xx,xxx |

The indirect method adjusts accrual basis net profit or loss for the effects of non-cash transactions. The operating cash flows section of the statement of cash flows under the indirect method would appear something like this:

|Profit before interest and income taxes | |xx,xxx |
|Add back depreciation | |xx,xxx |
|Add back amortisation of goodwill | |xx,xxx |
|Increase in receivables | |xx,xxx |
|Decrease in inventories | |xx,xxx |
|Increase in trade payables | |xx,xxx |
|Interest expense |xx,xxx | |
|Less Interest accrued but not yet paid |xx,xxx | |
|Interest paid | |xx,xxx |
|Income taxes paid | |xx,xxx |
|Net cash from operating activities | |xx,xxx |

• the exchange rate used for translation of transactions denominated in a foreign currency and the cash flows of a foreign subsidiary should be the rate in effect at the date of the cash flows [IAS 7.25] • • cash flows of foreign subsidiaries should be translated at the exchange rates prevailing when the cash flows took place [IAS 7.26]

• as regards the cash flows of associates and joint ventures, where the equity method is used, the statement of cash flows should report only cash flows between the investor and the investee; where proportionate consolidation is used, the cash flow statement should include the venture’s share of the cash flows of the investee [IAS 7.37-38]

• Aggregate cash flows relating to acquisitions and disposals of subsidiaries and other business units should be presented separately and classified as investing activities, with specified additional disclosures. The aggregate cash paid or received as consideration should be reported net of cash and cash equivalents acquired or disposed of [IAS 7.39] • cash flows from investing and financing activities should be reported gross by major class of cash receipts and major class of cash payments except for the following cases, which may be reported on a net basis: [IAS 7.22-24]

o cash receipts and payments on behalf of customers (for example, receipt and repayment of demand deposits by banks, and receipts collected on behalf of and paid over to the owner of a property) o cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short, generally less than three months (for example, charges and collections from credit card customers, and purchase and sale of investments) o cash receipts and payments relating to fixed maturity deposits o cash advances and loans made to customers and repayments thereof

• investing and financing transactions which do not require the use of cash should be excluded from the statement of cash flows, but they should be separately disclosed elsewhere in the financial statements [IAS 7.43] • the components of cash and cash equivalents should be disclosed, and a reconciliation presented to amounts reported in the statement of financial position [IAS 7.45] • the amount of cash and cash equivalents held by the enterprise that is not available for use by the group should be disclosed, together with a commentary by management [IAS 7.48]
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Statement of Changes in Equity
IAS 1 requires an entity to present a statement of changes in equity as a separate component of the financial statements. The statement must show: [IAS 1.96] • profit or loss for the period • each item of income and expense for the period that is recognized directly in equity, and the total of those items; • total income and expense for the period (calculated as the sum of (a) and (b)), showing separately the total amounts attributable to equity holders of the parent and to minority interest • for each component of equity, the effects of changes in accounting policies and corrections of errors recognized in accordance with IAS 8
The following amounts may also be presented on the face of the statement of changes in equity, or they may be presented in the notes: [IAS 1.97] • capital transactions with owners • the balance of accumulated profits at the beginning and at the end of the period, and the movements for the period • a reconciliation between the carrying amount of each class of equity capital, share premium and each reserve at the beginning and at the end of the period, disclosing each movement
Notes to the Financial Statements
The notes must: [IAS 1.103] • present information about the basis of preparation of the financial statements and the specific accounting policies used; • disclose any information required by IFRSs that is not presented on the face of the balance sheet, income statement, statement of changes in equity, or cash flow statement; and • Provide additional information that is not presented on the face of the balance sheet, income statement, statement of changes in equity, or cash flow statement that is deemed relevant to an understanding of any of them.
Notes should be cross-referenced from the face of the financial statements to the relevant note. [IAS 1.104]
IAS 1.105 suggests that the notes should normally be presented in the following order: • a statement of compliance with IFRSs • a summary of significant accounting policies applied, including: [IAS 1.108] o the measurement basis (or bases) used in preparing the financial statements o the other accounting policies used that are relevant to an understanding of the financial statements • supporting information for items presented on the face of the balance sheet, income statement, statement of changes in equity, and cash flow statement, in the order in which each statement and each line item is presented • other disclosures, including: o contingent liabilities (see IAS 37) and unrecognized contractual commitments o non-financial disclosures, such as the entity's financial risk management objectives and policies (see IAS 32)
Disclosures of judgment. New in the 2003 revision to IAS 1, an entity must disclose, in the summary of significant accounting policies or other notes, the judgments, apart from those involving estimations, that management has made in the process of applying the entity's accounting policies that have the most significant effect on the amounts recognized in the financial statements. [IAS 1.113]
Examples cited in IAS 1.114 include management's judgments in determining: • whether financial assets are held-to-maturity investments • when substantially all the significant risks and rewards of ownership of financial assets and lease assets are transferred to other entities • whether, in substance, particular sales of goods are financing arrangements and therefore do not give rise to revenue; and • whether the substance of the relationship between the entity and a special purpose entity indicates that the special purpose entity is controlled by the entity
Disclosure of key sources of estimation uncertainty. Also new in the 2003 revision to IAS 1, an entity must disclose, in the notes, information about the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. [IAS 1.116] These disclosures do not involve disclosing budgets or forecasts.
The following other note disclosures are required by IAS 1.126 if not disclosed elsewhere in information published with the financial statements: • domicile of the enterprise • country of incorporation • address of registered office or principal place of business • description of the enterprise's operations and principal activities • name of its parent and the ultimate parent if it is part of a group

Other Disclosures
Disclosures about Dividends
The following must be disclosed either on the face of the income statement or the statement of changes in equity or in the notes: [IAS 1.95] • the amount of dividends recognized as distributions to equity holders during the period, and • The related amount per share.
The following must be disclosed in the notes: {IAS 1.125] • the amount of dividends proposed or declared before the financial statements were authorized for issue but not recognized as a distribution to equity holders during the period, and the related amount per share; and • The amount of any cumulative preference dividends not recognized.
Capital Disclosures
In August 2005, as part of its project to develop Financial Instruments: Disclosures, the IASB also amended IAS 1 to add requirements for disclosures of: • the entity's objectives, policies and processes for managing capital; • quantitative data about what the entity regards as capital; • whether the entity has complied with any capital requirements; and • if it has not complied, the consequences of such non-compliance.
These disclosure requirements apply to all entities, effective for annual periods beginning on or after 1 January 2007, with earlier application encouraged. Illustrative examples are provided as guidance.
Disclosures about Putt able Shares and Obligations Arising Only on Liquidation
In February 2008, the IASB published an amendment to IAS 1 that requires the following additional disclosures if an entity has a puttable instrument that is presented as equity: • summary quantitative data about the amount classified as equity; • the entity's objectives, policies and processes for managing its obligation to repurchase or redeem the instruments when required to do so by the instrument holders, including any changes from the previous period; • the expected cash outflow on redemption or repurchase of that class of financial instruments; and • Information about how the expected cash outflow on redemption or repurchase was determined.
If an instrument is reclassified into and out of each category (financial liabilities or equity) the amount, timing and reason for that reclassification must be disclosed. If an entity is a limited-life entity, disclosure is also required regarding the length of its life.
The foregoing disclosures are required for annual periods beginning on or after 1 January 2009, with earlier application permitted.
September 2007 Revised IAS 1 Is Issued
On 6 September 2007, the IASB issued a revised IAS 1 Presentation of Financial Statements. The main changes from the previous version are to require that an entity must: • Present all non-owner changes in equity (that is, 'comprehensive income' see box below) either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income may not be presented in the statement of changes in equity. • Present a statement of financial position (balance sheet) as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies an accounting policy retrospectively or makes a retrospective restatement. • Disclose income tax relating to each component of other comprehensive income. • Disclose reclassification adjustments relating to components of other comprehensive income.
IAS 1 changes the titles of financial statements as they will be used in IFRSs: • 'balance sheet' will become 'statement of financial position' • 'income statement' will become 'statement of comprehensive income' • 'Cash flow statement' will become 'statement of cash flows').
Entities are not required to use the new titles in their financial statements. All existing Standards and Interpretations are being amended to reflect the new terminology.
The revised IAS 1 resulted in consequential amendments to 5 IFRSs, 23 IASs, and 10 Interpretations.
The revised IAS 1 is effective for annual periods beginning on or after 1 January 2009. Early adoption is permitted. +
Comprehensive Income
Comprehensive income for a period includes profit or loss for that period plus other comprehensive income recognized in that period. The components of other comprehensive income include: • Changes in revaluation surplus (IAS 16 and IAS 38). • Actuarial gains and losses on defined benefit plans recognized in accordance with paragraph 93A of IAS 19. • Gains and losses arising from translating the financial statements of a foreign operation (IAS 21). • Gains and losses on remeasuring available-for-sale financial assets (IAS 39). • The effective portion of gains and losses on hedging instruments in a cash flow hedge (IAS 39).

5.6 MANAGEMENT INFORMATION SYSTEMS (MIS)

MISs is interactive human/machine systems that support decision making for users both in and out of traditional organizational boundaries. These systems are used to support an organization's daily operational activities; current and future tactical decisions; and overall strategic direction. MISs are made up of several major applications including, but not limited to, the financial and human resources systems.
Financial applications make up the heart of AIS in practice. Modules commonly implemented include: general ledger, payables, procurement/purchasing, receivables, billing, inventory, assets, projects, and budgeting.
Human resource applications make up another major part of modern information systems. Modules commonly integrated with the AIS include: human resources, benefits administration, pension administration, payroll, and time and labor reporting.

5.7 Internal Control System:

Internal control:

Internal control consists of policies and procedures designed to provide management with reasonable assurance that the company achieves its objectives and goals. These policies and procedures are often called controls and collectively they comprise the entity’s internal control. Internal control is the whole system of controls financial and otherwise, established by the management , in order to carry on the business of enterprise, in an orderly and efficient manner ,ensure adherence to management policies, safeguard its uses, and secure as far as possible the completeness, accuracy and reliability of records.

Procedures of internal control:

Components of internal control:

5.8 INTERNAL AUDIT:
Internal auditing is a profession and activity involved in helping organizations achieve their stated objectives. It does this by using a systematic methodology for analyzing business processes, procedures and activities with the goal of highlighting organizational problems and recommending solutions. Professionals called internal auditors are employed by organizations to perform the internal auditing activity.
The scope of internal auditing within an organization is broad and may involve topics such as the efficacy of operations, the reliability of financial reporting, deterring and investigating fraud, safeguarding assets, and compliance with laws and regulations.
Internal auditing frequently involves measuring compliance with the entity's policies and procedures. However, internal auditors are not responsible for the execution of company activities; they advise management and the Board of Directors (or similar oversight body) regarding how to better execute their responsibilities. As a result of their broad scope of involvement, internal auditors may have a variety of higher educational and professional backgrounds.
Publicly-traded corporations typically have an internal auditing department, led by a Chief Audit Executive ("CAE") who generally reports to the Audit Committee of the Board of Directors, with administrative reporting to the Chief Executive Officer.
The profession is unregulated, though there are a number of international standard setting bodies, an example of which is the Institute of Internal Auditors ("IIA"). The IIA has established Standards for the Professional Practice of Internal Auditing and has over 150,000 members representing 165 countries, including approximately 65,000 Certified Internal Auditors.

History of internal auditing

The Internal Auditing profession evolved steadily with the progress of management science after World War II. It is conceptually similar in many ways to financial auditing by public accounting firms, quality assurance and banking compliance activities. Much of the theory underlying internal auditing is derived from management consulting and public accounting professions. With the implementation in the United States of the Sarbanes-Oxley Act of 2002, the profession's growth accelerated, as many internal auditors possess the skills required to help companies meet the requirements of the law.

Nature of the internal audit activity

Based on a risk assessment of the organization, internal auditors, management and oversight Boards determine where to focus internal auditing efforts. Internal auditing activity is generally conducted as one or more discrete projects. A typical internal audit project involves the following steps: 1. Establish and communicate the scope and objectives for the audit to appropriate management. 2. Develop an understanding of the business area under review. This includes objectives, measurements, and key transaction types. This involves review of documents and interviews. Flowcharts and narratives may be created if necessary. 3. Describe the key risks facing the business activities within the scope of the audit. 4. Identify control procedures used to ensure each key risk and transaction type is properly controlled and monitored. 5. Develop and execute a risk-based sampling and testing approach to determine whether the most important controls are operating as intended. 6. Report problems identified and negotiate action plans with management to address the problems. 7. Follow-up on reported findings at appropriate intervals. Internal audit departments maintain a follow-up database for this purpose.
Project length varies based on the complexity of the activity being audited and Internal Audit resources available. Many of the above steps are iterative and may not all occur in the sequence indicated.
By analyzing and recommending business improvements in critical areas, auditors help the organization meet its objectives.

ROLE OF INTERNAL AUDIT:

Role in internal control

Internal auditing activity is primarily directed at improving internal control. Under the COSO Framework, internal control is broadly defined as a process, affected by an entity's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following internal control categories: • Effectiveness and efficiency of operations. • Reliability of financial reporting. • Compliance with laws and regulations.
Management is responsible for internal control. Managers establish policies and processes to help the organization achieve specific objectives in each of these categories. Internal auditors perform audits to evaluate whether the policies and processes are designed and operating effectively and provide recommendations for improvement.

Role in risk management

Internal auditing professional standards require the function to monitor and evaluate the effectiveness of the organization's Risk management processes. Risk management relates to how an organization sets objectives, then identifies, analyzes, and responds to those risks that could potentially impact its ability to realize its objectives.
Under the COSO enterprise risk management (ERM) Framework, risks fall under strategic, operational, financial reporting, and legal/regulatory categories. Management performs risk assessment activities as part of the ordinary course of business in each of these categories. Examples include: strategic planning, marketing planning, capital planning, budgeting, hedging, incentive payout structure, and credit/lending practices. Sarbanes-Oxley regulations also require extensive risk assessment of financial reporting processes. Corporate legal counsel often prepares comprehensive assessments of the current and potential litigation a company faces. Internal auditors may evaluate each of these activities, or focus on the processes used by management to report and monitor the risks identified. For example, internal auditors can advise management regarding the reporting of forward-looking operating measures to the Board, to help identify emerging risks.

Role in corporate governance

Internal auditing activity as it relates to corporate governance is generally informal, accomplished primarily through participation in meetings and discussions with members of the Board of Directors. Corporate governance is a combination of processes and organizational structures implemented by the Board of Directors to inform, direct, manage, and monitor the organization's resources, strategies and policies towards the achievement of the organizations objectives. The internal auditor is often considered one of the "four pillars" of corporate governance, the other pillars being the Board of Directors, management, and the external auditor.

CHAPTER 5

AIS OF BUILDING FOR FUTURE LTD

6.1 The Accounting Process (The Accounting Cycle)

The accounting process is a series of activities that begins with a transaction and ends with the closing of the books. Because this process is repeated each reporting period, it is referred to as the accounting cycle and includes these major steps: o Identify the transaction or other recognizable event. o Prepare the transaction's source document such as a purchase order or invoice. o Analyze and classify the transaction. This step involves quantifying the transaction in monetary terms (e.g. dollars and cents), identifying the accounts that are affected and whether those accounts are to be debited or credited. o Record the transaction by making entries in the appropriate journal, such as the sales journal, purchase journal, cash receipt or disbursement journal, or the general journal. Such entries are made in chronological order o Post general journal entries to the ledger accounts.

The above steps are performed throughout the accounting period as transactions occur or in periodic batch processes. The following steps are performed at the end of the accounting period:

o Prepare the trial balance to make sure that debits equal credits. The trial balance is a listing of all of the ledger accounts, with debits in the left column and credits in the right column. At this point no adjusting entries have been made. The actual sum of each column is not meaningful; what is important is that the sums be equal. Note that while out-of-balance columns indicate a recording error, balanced columns do not guarantee that there are no errors. For example, not recording a transaction or recording it in the wrong account would not cause an imbalance. o Correct any discrepancies in the trial balance. If the columns are not in balance, look for math errors, posting errors, and recording errors. Posting errors include: o posting of the wrong amount, o omitting a posting, o posting in the wrong column, or o Posting more than once. o Prepare adjusting entries to record accrued, deferred, and estimated amounts. o Post adjusting entries to the ledger accounts. o Prepare the adjusted trial balance. This step is similar to the preparation of the unadjusted trial balance, but this time the adjusting entries are included. Correct any errors that may be found. o Prepare the financial statements. o Income statement: prepared from the revenue, expenses, gains, and losses. o Balance sheet: prepared from the assets, liabilities, and equity accounts. o Statement of retained earnings: prepared from net income and dividend information. o Cash flow statement: derived from the other financial statements using either the direct or indirect method. o Prepare closing journal entries that close temporary accounts such as revenues, expenses, gains, and losses. These accounts are closed to a temporary income summary account, from which the balance is transferred to the retained earnings account (capital). Any dividend or withdrawal accounts also are closed to capital. o Post closing entries to the ledger accounts. o Prepare the after-closing trial balance to make sure that debits equal credits. At this point, only the permanent accounts appear since the temporary ones have been closed. Correct any errors. o Prepare reversing journal entries (optional). Reversing journal entries often are used when there has been an accrual or deferral that was recorded as an adjusting entry on the last day of the accounting period. By reversing the adjusting entry, one avoids double counting the amount when the transaction occurs in the next period. A reversing journal entry is recorded on the first day of the new period. o Instead of preparing the financial statements before the closing journal entries, it is possible to prepare them afterwards, using a temporary income summary account to collect the balances of the temporary ledger accounts (revenues, expenses, gains, losses, etc.) when they are closed. The temporary income summary account then would be closed when preparing the financial statements.

6.2 Recording, classifying and summarizing system of transaction of BFL:

Rules of Debit and Credit:

Basic Equation:

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Double entry accounting system:

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Voucher:

Vouchers are documentary record of financial transactions and prepared as a primary record for transaction. Each voucher provides detail information about the transaction occurring between concerned department and parties.

Types of voucher:

1) cash payment voucher 2) Bank payment voucher 3) Journal voucher 4) Contra voucher 5) Bank receipt voucher 6) Cash receipt voucher

Cash payment voucher:

All types of payment in cash are made through cash voucher. cash payment voucher is to be posted into the cash book.

CASH PAYMENT VOUCHER

BUILDING FOR FUTURE LTD

GAGAN SHRISH, 76& 76/1, PANTHAPAT, DHAKA

No : Cp---- Dated: ----
|Particulars |Dr. |Cr. |
|Accounts : | | |
|-------------- |--------- | |
|--------------- | |------------ |
| | | |
|On Account of: | | |
|------------------------- | | |
| | | |
|Amount (In word) ------------------ | | |

Received by Prepared by Checked by approved by

Bank payment Voucher:

All cheque payments are made through bank payment voucher supported. Cheque payment voucher is to be posted into bank book.

BANKPAYMENT VOUCHER

BUILDING FOR FUTURE LTD

GAGAN SHRISH, 76& 76/1, PANTHAPAT, DHAKA

No: Bp---- Dated: ----
|Particulars |Dr. |Cr. |
|Accounts : | | |
|-------------- |--------- | |
|--------------- | |------------ |
| | | |
|On Account of: | | |
|------------------------- | | |
| | | |
|Amount (In word) ------------------ | | |

Received by Prepared by Checked by approved by

JOURNAL VOUSHER:

Journal Voucher is used for final stage of accounting record in head office. Journal vouchers are also used for adjustment, recertification, opening, closing, provisional and other accrual entries including entries for income. Completion of transactions in the central accounts is made through Journal voucher.

JOURNAL VOUCHER

BUILDING FOR FUTURE LTD

GAGAN SHRISH, 76& 76/1, PANTHAPAT, DHAKA

No: JV---- Dated: ----
|Particulars |Dr. |Cr. |
|Accounts : | | |
|-------------- |--------- | |
|--------------- | |------------ |
| | | |
|On Account of: | | |
|------------------------- | | |
| | | |
|Amount (In word) ------------------ | | |

Prepared by Checked by approved by

CONTRA VOUCHER:

CONTRA VOUCHER

BUILDING FOR FUTURE LTD

GAGAN SHRISH, 76& 76/1, PANTHAPAT, DHAKA

No: CN---- Dated: ----
|Particulars |Dr. |Cr. |
|Accounts : | | |
|-------------- |--------- | |
|--------------- | |------------ |
| | | |
|On Account of: | | |
|------------------------- | | |
| | | |
|Amount (In word) ------------------ | | |

Received by Prepared by Checked by approved by

BANK RECEIPT VOUCHER:

All cheque receipt is made through bank receipt voucher supported with bills and advance.

BANK RECEIPT VOUCHER

BUILDING FOR FUTURE LTD

GAGAN SHRISH, 76& 76/1, PANTHAPAT, DHAKA

No: BR---- Dated: ----
|Particulars |Dr. |Cr. |
|Accounts : | | |
|-------------- |--------- | |
|--------------- | |------------ |
| | | |
|On Account of: | | |
|------------------------- | | |
| | | |
|Amount (In word) ------------------ | | |

Received by Prepared by Checked by approved by

CASH RECEIPT VOUCHER:

Real estate companies receive money from various transactions. These money receipt transaction are recorded in cash receipt voucher.

CASH RECEIPT VOUCHER

BUILDING FOR FUTURE LTD

GAGAN SHRISH, 76& 76/1, PANTHAPAT, DHAKA

No: CR---- Dated: ----
|Particulars |Dr. |Cr. |
|Accounts : | | |
|-------------- |--------- | |
|--------------- | |------------ |
| | | |
|On Account of: | | |
|------------------------- | | |
| | | |
|Amount (In word) ------------------ | | |

Received by Prepared by Checked by approved by

DEPOSIT SLIP:

Deposit slip is documentary evidence against deposit of money. Real estate business deposits their collected money in different accounts in bank. Bank issue deposit slip against cash, cheque etc. deposit slip is preserved for bank reconciliation purpose whether the money deposited or not in bank. Deposit of cash items are also made into cd bank accounts through deposit slip.

ADJUSTING JOURNAL:
Adjusting entries are journal entries made at the end of the accounting period to allocate revenue and expenses to the period in which they actually are applicable. Adjusting entries are required because normal journal entries are based on actual transactions, and the date on which these transactions occur may not be the date required to fulfill the matching principle of accrual accounting.
The two major types of adjusting entries are: • Accruals: for revenues and expenses that are matched to dates before the transaction has been recorded. • Deferrals: for revenues and expenses that are matched to dates after the transaction has been recorded.

Accruals

Accrued items are those for which the firm has been realizing revenue or expense without yet observing an actual transaction that would result in a journal entry. For example, consider the case of salaried employees who are paid on the first of the month for the salary they earned over the previous month
For example, in the case of a small company accruing $80,000 in monthly salaries, the
Journal entry might look like the following:
1)
|Date |Account Titles & Explanation | Debit | Credit |
|9/30 |Salary expense |80,000 | |
| | Salaries payable | |80,000 |
| |Salaries accrued in September, | | |
| |to be paid on Oct 1. | | |

2) Advance to supplier against raw material:

Raw material Dr

To supplier a/c
3) Provision for Depreciation on asset:

Depreciation Dr

To Particular assets

Some accrued items for which adjusting entries may be made include: • Salaries • Past-due expenses • Income tax expense • Interest income • Unbilled revenue

Deferrals

Deferred items are those for which the firm has recorded the transaction as a journal entry, but has not yet realized the revenue or expense associated with that journal entry. In other words, the recognition of deferred items is postponed until a later accounting period .an example of a deferred item would be prepaid insurance. Suppose the firm prepays a 12-month insurance policy on Sep 1. Because the insurance is a prepaid expense, the journal entry on Sep 1 would look like the following:
|Date |Account Titles & Explanation | Debit | Credit |
|9/1 |Prepaid Expenses |12,000 | |
| | Cash | |12,000 |
| |12-month prepaid insurance policy. | | |

The result of this entry is that the insurance policy becomes an asset in the Prepaid Expenses account. At the end of September, this asset will be adjusted to reflect the amount "consumed" during the month. The adjusting entry would be:
|Date |Account Titles & Explanation | Debit | Credit |
|9/30 |Insurance Expense |1,000 | |
| | Prepaid Expenses | |1,000 |
| |Insurance expense for Sep. | | |

This adjusting entry transfers $1000 from the Prepaid Expenses asset account to the Insurance Expense account to properly record the insurance expense for the month of September. In this example, a similar adjusting entry would be made for each subsequent month until the insurance policy expires 11 months later.
Some deferred items for which adjusting entries would be made include: • Prepaid insurance • Prepaid rent • Office supplies • Depreciation • Unearned revenue

REVENUE COLLECTION:

Real estate business collects several types of revenue from several sources. For the collection of revenue the real estate business record journal entries. Accounting entries for revenue collection are;

For collection of revenue:

Cash/Bank Dr

To clients A/C

EXTRA COST:

When extra cost required to pay:

Clients A/C Dr

To Cash /Bank

When Extra cost required to Realize:

Cash /Bank Dr

To Clients A/C

VAT REGISTER:

A separate vat register is required to be maintained showing the name of branches and vat payable thereon which is also required to be signed and scaled by the VAT authority on monthly basis.

Entries for VAT:

For collection of vat:

Bank Dr

To vat payable/collection

For payment of vat:

Vat payable/collection Dr To Bank A/C

Books & Register:

The following books & records should be kept to continue the smooth operation of the company:

A) Mail Register B) Movement Register. C) Cheque Register. D) Telephone Bill Register. E) Utilities Bill Register. F) Fuel Consumption Register. G) Attendance Register. H) Leave Register.

01.21.06 RECEIPTS:

BFL receive payment from the following sources:

• From Sale of Apartment:

• Sale of products

• Other Sources.

There should be a monthly schedule of receivable to be collected within the month from Apartment sales.

Payment receipts from sales are to be collected when they become due. The officers responsible for collection of dues have to exercise due care and diligence. Preference shall be given to cash sales i.e. collection before delivery of products or rendering services for sale. Receipts from other sources include - Sale of Wastage, Gunny bags, newspapers etc., Sale of old furniture or other assets. A committee shall be formed having more than three members, which will include 1 person from Accounts Department, before selling of any of the above.

The following rules have to be followed for collecting payment against sales.

a) Money Receipt:

i) No money is to be received without issuing Money Receipt (MR) to payer in the prescribed form. These forms (MR) shall have consecutive number printed on it, bind in book, kept in safe custody.

ii) The receiver and the Manager Accounts of respective

business unit will sign MR.

iii) MR will be in 3 copies. 1st copy will be issued to payer, 2nd copy will be attached with voucher and the 3rd copy will remain as book copy.

iv) MR issued against receipt of cheque will be valid subject to

the collection of the same to the company’s bank account.

v) “In case of cheque, this Money Receipt is valid subject to

collection’’ shall be printed at the foot of MR. vii) In no case cancellation is acceptable without 1st copy of the MR viii) Erasing, over-writing and use of white fluid of entries once made is strictly prohibited.

b) Record in Bank / Cash Book:

i)When Money received, Voucher shall be passed immediately

and record in the accounting software.

ii) The Accounts Manager shall be personally responsible for the safety and security of money and for their proper and correct accounting.

iii) Payment can be received in Cash or in the form of Cheque, Pay Order, and Demand Draft. Received in the form of other than cash shall be drawn in the name of respective company of the group.

iv)Cheques, DD or PO of Non-scheduled and co-operative bank

shall not be accepted.

v)Cash / Bank book shall be reconciled regularly on monthly basis.

BUILDING FOR FUTURE LTD. “Gagan Shirish”, 76 & 76/1, Panthapath, Dhaka-1215

MONEY RECEIPT

Business Unit:

No…………. Date……….. Received with thanks from ………………………………………………………………. ……………………………………………………………………………………………. a sum of taka (in words ………………………………………………………………….) only in cash or by Cheque / Draft No ……………..Bank…………………Date………... on account of ……………………………………………………………………………... Against Bill No ………………… Date……………..

TK. ………………. For & on behalf of

Name of business unit

Customer Signature Authorized Signature

01.21.08.04 Issuance of Cheque:

i)Manager Accounts is responsible to ensure that the cheques

are properly issued based on the approved vouchers.

ii)Cheque issued should be crossed and market” ACCOUNT

PAYEE” if the cheque amount is equal or more than TK.

10,000.00.Uncrossed cheques may be issued to the employees of the payee company with the approval from the Managing Director of the said company.

iii) Any cheque issued to a person other than company must

bear the payee’s name and unique identification.

iv)For reimbursement of petty cash and payment of utility bills

such as electricity, gas, water etc., cash cheque may be

issued when necessary.

v)Cheque book is to be kept locked in a locked cabinet.

vi)A cheque issue register is to be maintained. Manager

Accounts will ensure that all cheques issued must be recorded

in the register.

vii)Register of chequebooks is to be maintained. Counter foil of

the chequebooks is to be preserved and maintained in the

locked cabinet.

viii)Cancelled cheque (if for any reason) must be cancelled and

stamped” CANCELLED” and counter signed by Finance Controller. Cancelled cheques must be preserved with the counter foil of the said cheque.

Specimen of Cheque Issue Register:

BUILDING FOR FUTURE LTD

Gagan Shirish”, 76 & 76/1 Panthapath, Dhaka-1215

Cheque # Date Name of Payee Purpose Amount Accounts Manager Authorized Signature

6.3. ACCOUNTING POLICIES OF BFL

6.3.1 Objectives:

To prepare and produce a true and fair view Financial Statements which are in compliance with the Generally Accepted Accounting Standards and Principles.

6.3.2 Formulation:

In establishing the Accounting Policies, the following are considered:

- Relevance: Financial Statements must provide information which

Which bears on users in regard to economic decision making and

accountability.

- Materiality.

- Consistency: Accounting Policies adopted must be consistent from one accounting period to another.

- Prudence.

- Substance over form.

6.3.3 Historical Cost Concept: The accounts shall be prepared on the basis of Historical Cost Convention, whereby the assets, liabilities and capital are recorded at the values prevailing on the dates the assets were acquired, the liabilities were incurred or the capital was obtained.

6.3.4 Revaluation of non-current assets: It is the Companies policy not to revalue the non-current assets on regular basis. However the non-current assets may be revalued from time to time as considered appropriate by the Board of Directors. But in no case revaluation amount shall not be more than its recoverable amount.

6.3.5 Fixed Assets:

Any item acquired that has its useful life or expenditure incurred and has economic benefits -

- Exceeding one year,

- Costing more than Tk.5, 000.00 per unit,

- Intended to be used on a continuous basis and not intended for sale in the ordinary course of business shall be capitalized as Fixed Asset.

Fixed Assets shall be stated at cost. Costs include any expenses incurred in the acquisition or construction of the asset.

No depreciation shall be provided on freehold land and the addition to Fixed Asset for that year.

The estimated useful life and depreciation rates are as follows: -

Fixed Assets Depreciation Rate (%)

Plant & Machinery 20%

Building 20% Office equipment 15% Furniture & Fixture Motor Vehicle 10%

Computer 20%

Other Assets 10%

6.3.6 Gain or loss sale of Fixed Asset:
Gain or losses on disposal of fixed assets are taken into account in determining the profit for the year.

6.3.7 Asset under construction:
All expenditure incurred on asset under construction shall be capitalized as Capital Work in Progress. This expenditure shall include:

- Direct expenses incurred in bringing the asset to its completion or location up to completion, these include expense on planning and design, installation, testing and commissioning.

- Any indirect expenses shall be excluded and expenses off in the year in which it is incurred.

6.3.8 Leased Assets:

Assets acquired under finance leases are included as property in the Balance Sheet.
Finance leases effectively transfer from the lessor to lessee substantially all the risks and benefits incidental to the leased property. Where assets are acquired on the basis of finance lease, the lease terms is recognized as cost of the asset.
The leased assets are amortized over its useful life as that of other assets. As for operating leases, lease payments are charged to expenses over the period of expected benefit.

6.3.9 Circulating Asset:
Pre-operating expenses / preliminary expenses should be capitalized and amortized within 5 years.

6.3.10 Stock:

Stocks are stated at the lower of cost and net realizable value.
Cost includes all expenses incurred in bringing the stock to its present condition.

Net realizable value is the price at which the stock can be sold in the ordinary course of business less any expenses of selling.

6.3.11 Provision for stock obsolescence:
The value of stock shall be reviewed at the end of each financial year to provide for changes in price, condition and obsolescence.

All material adjustments to the value of stock shall be approved by
BOD.

6.3.12 Operating Revenue:
Operating Revenue shall be classified into revenue from all major sources, including but not limited to the following:

- Sales

- Other Income

6.3.13 Bad and doubtful Debts:

At the end of each financial year, total outstanding receivable that exceeds 6 months shall be reviewed. If, in opinion of the BOD, any adjustment need to be made such adjustment shall be made thereto as Bad Debts.

6.3.14 Inter group Transactions:
Proper note must be issued for any transaction within the entities of the group.
Debit note shall be issued by the paying entity to the favoring /
Receiving entity and Credit Notes shall be issued for any adjustment between different entities.

6.3.15 Responsibility of Finance Controller / Chief of Finance:

- Implement an effective and reliable accounting system.

- To keep abreast with the development of International Accounting Standards in order to take advantage of any changes that may benefit the company.

6.3.16 Financial Year:
Financial year of all entity of the group is from 1st day of July of a calendar year to 30th Day of June of next following calendar year. Any change in the financial year is subjected to the approval of the BOD.

6.3.17 Monthly Financial and Management Report:
The Financial and Management report is to be produced on monthly basis not later than 7th Day of the following month to the Management. Financial Statement includes:

i) Cash Flow Statement,

ii) Income Statement

Management report includes:

i) Payables Statement

ii) Receivable Statement

iii) Bank Reconciliation Statement, etc. as required by themanagement from time to time.

6.3.18 Annual Report:
The annual financial statement shall be produced not later than the end of September following the end of financial year for audit.
Financial Statement includes Balance Sheet, Income Statement, Cash Flow Statement, and Notes to the Accounts etc.

The audited financial statements shall be presented to the BOD not later than December of the following year.

6.3.19 Security:
The General Ledger and the subsidiary ledgers with adequate back-up copies (i.e. Computerized system) will be locked in a locked cabinet.

6.4 General Policy of BFL on Accounting:
• There shall be an Accounts Department which will be headed by a qualified Chartered Accountant or by other suitably qualified person having adequate experience to his / her credit.

• The Accounts Managers as well as Head of the department shall be the custodian of all accounting documents related to the company property.

•The company shall keep its books of account in double entry

system of book-keeping under the guidance of the Finance

Controller.

• The books of accounts must be always kept up-to-date.

• Accounts shall be prepared on accrual basis.

• Building For Future ltd will follow all Generally Accepted Accounting

Principles, as applicable for each unit.

• Every company shall follow International Accounting Standard

(IAS), which has been adapted by the Institute of Chartered

Accountants of Bangladesh (BAS) as related to the business of the individual units of the Group.

• A Fixed Assets Register shall be introduced and maintained in proper form, all relevant details in respect of the individual asset shall be consistently followed.

• Depreciation shall be charged in reducing balance method and

rates shall be consistently followed.

• There shall be Chart of Accounts, i.e., classified listing of all

balance sheet and revenue account items.

• No new account shall be opened without approval of Head of

Finance.

• All business transactions, either cash or adjustment, must be properly authorized, documented, recorded and processed so that Annual and Monthly Financial Statements of the company may be prepared promptly and accurately.

• Bills payable shall be accounted for as and when received, if all required supporting documents and approval attached with the bills. These shall be carefully done as to avoid duplication in payments.
• Photocopy / carbon copy/ duplicate copy of any bill shall not be accepted without written approval of the BOD.

• Goods received against valid Purchases Order shall be taken into account along with corresponding invoice value even if such invoice has not been received at the year-end, a separate list of such transactions shall be kept for reference.

• Each company shall prepared annual and monthly budgets (Income Statement and Cash Flow). Actual performance shall be reviewed with the budget figures on monthly basis. The BOD

Shall consider these.

• Capital budget shall be prepared for consideration of the BOD. No capital expenditure shall be incurred which is not covered by budget or which doesn’t bear the approval of BOD.

• Income Tax and other tax matters shall be kept up to date. Payment of tax shall be made within the statutory time limits. All tax returns and statement must be scrutinized by the Accounts Manager and signed by Finance Controller and BOD before submission.

• Any adverse tax assessment must be reviewed and appeal filed

within the statutory time limit.

• Following Books of Accounts shall be maintained:

o General Ledger (soft copy in computerized accounting software and printed copy after completion of each accounting year).

o Fixed Assets Register.

o Subsidiary Ledger and records, i.e. Customer Ledger, Creditors Ledger, Store Ledger etc.

• In addition to the above mentioned books and record, each entry must be properly documented and duly authorized. Documents perform the function of transmitting information both within and outside organization.

• The following principles for proper design and use of documents

should be followed:

o Pre-numbered serially to facilitate control.

o Prepared at or soon after a transaction take place. o Designed for multiple copies to be used for several functions, e.g., recording of sale, receivables, authorizing delivery etc.

6.5 REVENUE RECONGNITION:

BFL earns Revenue from the following two categories:
a) Sale of Apartment

b) Sale of products

c) Sale of Service

d) Other Source

International Accounting Standard18 will be followed for revenue

recognition purpose.

a) Sale of Apartment: Sales shall be recognized as soon as the apartments handed over to the customers upon registration.
b) Sales of products : Sales Shall be recognized as soon as the handed over of flat goods delivered from Factory Premises / Godown.

c) Sale of Service: Sales shall be recognized as soon as

Service provided / rendered.

Separate voucher shall be passed for any return from customer. But in that case returned goods must be kept in the separate place and return challan must be must be attached with voucher. 6.6 FINANCIAL DTATEMENT OF BFL:
|BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
|BALANCE SHEET AS AT 30TH JUNE 2008. |
| |TAKA |
|CAPITAL AND LIABILITIES : | |
|AUTHORISED CAPITAL | |
|10,000,000 Ordinary Shares @ Tk.100 | 1,000,000,000.00 |
| | |
|ISSUED , SUBSCRIBED & PAID UP CAPITAL | |
|71000 Ordinary Shares | 7,100,000.00 |
|@ Tk.100 each fully paid up | |
| | |
|BANK OVERDRAFT | 244,159,094.36 |
|Schedule -L/01 | |
| | |
|ADVANCE FROM PARTY | 458,386,229.73 |
|Schedule - L/02 | |
| | |
|LTR AND TEARM LOAN | 56,299,088.54 |
|Schedule - L/03 | |
|CURRENT LIABILITIES | 565,004.00 |
|Schedule - L/04 | |
| | 766,509,416.63 |
|PROPERTY & ASSETS | |
|FIXED ASSETS:(Cost less Depreciation) | |
|Schedule - A/01 | 50,010,845.57 |
|PRELIMINARY EXPENSES: | 12,172.00 |
|ADVANCE , DEPOSIT& PRE-PAYMENT | 22,041,278.93 |
|Schedule - A/02 | |
|WORK IN PROGRESS: | 344,984,075.54 |
|Schedule - A/03 | |
|INVESTMENT | 60,382,950.00 |
|Schedule - A/04 | |
|STOCK OF FLATES | 235,441,081.73 |
|CASH AND BANK BALANCES: | 3,139,354.42 |
|Schedule - A/05 | |
|PROFIT & LOSS APPROPRIATION ACCOUNT: | 50,497,658.44 |
| | 766,509,416.63 |

|BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
| | | | |
| | | | |
|PROFIT & LOSS APPROPRIATION ACCOUNT |
|FOR THE YEAR ENDED 30TH JUNE ,2008 |
| | | | |
| | | | |
| | | | |
| | | | |
|PARTICULARS |TAKA |PARTICULARS |TAKA |
| | | | |
| | | | |
|Balance B/F | 47,649,450.71 | | |
| | | Balance C/D | 50,497,658.44 |
|Net Loss this year | 2,848,207.73 | | |
| | | | |
| | | | |
| | 50,497,658.44 | | 50,497,658.44 |
| | | | |

|BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
|PROFIT & LOSS ACCOUNT |
|FOR THE YEAR ENDED 30TH JUNE, 2008. |
|PARTICULARS |TAKA |PARTICULARS |TAKA |TAKA |
| | | | | |
|Director's Remuneration & Allowances | 1,200,000.00 |Gross Profit From: | | |
|Staff Salary & Allowances | 5,610,540.00 |Flat Sale A/C | | 41,096,340.73 |
|Arch. Design & Drawing Bill | 1,500,000.00 | | | |
|Office Rent | 210,000.00 | | | |
|Sales Commission & Land Commission | 2,584,160.00 | | | |
|Postage & Stamp | 89,560.00 |FDR Interest Received | | |
|Stationary & Photocopy | 207,564.00 |Net Interest | 5,033,771.18 | |
|Entertainment | 225,650.00 |Add. Income Tax deduction | 560,257.93 | |
|Medical Expenses | 19,000.00 |Add. Bank Charges | 8,550.00 | |
|Traveling & Conveyance | 412,509.00 | | | 5,602,579.11 |
|Oil & Lubricant | 301,164.00 | | | |
|Electric Bill | 193,159.00 |Net Loss | | 2,848,207.73 |
|Telephone Bill | 364,746.00 | | | |
|Fax Bill | 28,727.00 | | | |
|Gas Bill | 11,320.00 | | | |
|Mobile Phone Bill | 75,692.00 | | | |
|Bank Interest & Charges | 28,344,930.52 | | | |
|Internet Bill | 51,900.00 | | | |
|License renewal Fees | 6,250.00 | | | |
|Audit Fee | 3,000.00 | | | |
|Tax Advisor’s Fees | 40,000.00 | | | |
|Car Repairs & Maintenance | 112,356.00 | | | |
|WASA Bill | 46,210.00 | | | |
|Misc. Expenses | 102,054.00 | | | |
|Depreciation | 7,806,636.05 | | | |
| | | | | |
| | 49,547,127.57 | | | 49,547,127.57 |

|BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
| | | | | |
|TRADING ACCOUNT (FLAT SALE) |
|FOR THE YEAR ENDED 30TH JUNE, 2008 |
| | | | | |
| | | | | |
|PARTICULARS |TAKA |PARTICULARS |TAKA |TAKA |
| | | | | |
|Opening Stock | 68,320,132.00 |SALE OF FLATS: | | |
|Purchase of Materials | 228,152,300.00 |28 Flats of Gagan Shirish | 86,745,200.00 | |
|Wages & Labour Charges | 99,854,050.00 |04 Flats of Rosydale | 12,489,000.00 | |
|Carriage | 990,524.00 |02 Flats ot Madhubilata | 6,070,000.00 | |
|Site Expenses | 5,125,635.00 |01 Flat of Camellia | 2,808,000.00 | |
| | |01 Flat of Jayantika | 2,800,000.00 | |
| | |02 Flats of Fragrance Popy | 8,650,000.00 | |
| | |05 Flats of Shandhamaloti | 16,620,000.00 | |
| | |02 Flats of Dolonchapa | 6,200,000.00 | |
| | |03 Flats of Kamini | 16,756,000.00 | |
| | |03 Flats of Krishnachura | 10,396,500.00 | |
| | |13 Flats of Rajanigandha | 38,563,200.00 | |
|Gross Profit | 41,096,340.73 | | | 208,097,900.00 |
| | |STOCK OF FLATS: | | |
| | |02 Flats ot Madhubilata | 4,926,511.00 | |
| | |01 Flats of Camellia | 2,215,160.00 | |
| | |03 Flats of Rosydale | 7,309,418.57 | |
| | |10 Flats of Fragrance Popy | 24,654,320.00 | |
| | |44 Flats of Gagan Shirish | 107,721,632.29 | |
| | |11 Flats of Dolon Chapa | 24,231,753.90 | |
| | |01 Flats of ShandhaMaloti | 3,695,413.00 | |
| | |03 Flats of Rajanigandha | 8,019,178.93 | |
| | |08 Flat of Jayantika | 21,884,612.04 | |
| | |05 Flats of Kamini | 13,677,880.00 | |
| | |06 Flats of Krishnachura | 17,105,202.00 | |
| | | | | 235,441,081.73 |
| | | | | |
| | 443,538,981.73 | | | 443,538,981.73 |

|BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
|SCHEDULE OF FIXED ASSET AS ON 30TH JUNE ,2008. |
| |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
| | | | |
| | | | |
|SCHEDULE OF ADVANCE DEPOSIT & PREPAYMENT |
|FOR THE YEAR ENDED 30TH JUNE ,2008. |
| | | | |
| | | |SCHEDULE - A/02 |
| | | | |
|SL NO |PARTICULARS |TAKA |TAKA |
| | | | |
|01 |Security against office Rent | 45,000.00 | |
| |Less: Adjustment | 45,000.00 | |
| | | | -|
| | | | |
|02 |Advance Tax Payment on Flat sale | 2,086,954.00 | |
| |AIT Payment on previous sales | 127,850.00 | |
| | | | 2,214,804.00 |
| | | | |
|03 |Advance Income Tax deduction on FDR |O/B 447,679.00 | |
| |Add. During this year | 560,257.93 | |
| | | | 1,007,936.93 |
| | | | |
|04 |Loan to The Hospitality Ltd | | 1,360,038.00 |
| | | | |
|05 |Loan to The Housing & Technology Ltd. | | 10,958,500.00 |
| | | | |
|06 |Loan to The HTL Febricators Ltd. | | 500,000.00 |
| | | | |
|07 |Advance for Materials to Time Power Engineering Ltd. | 6,000,000.00 |
| | | | |
| | | | |
| |Total | | 22,041,278.93 |

|BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
| | | | |
| | | | |
|SCHEDULE OF WORKING IN PROGRESS |
|FOR THE YEAR ENDED 30TH JUNE ,2008. |
| | | | |
| | | |SCHEDULE - A/03 |
| | | | |
|SL |NAME OF THE PROJECT |TAKA | |
| | | | |
|01 |Polwel Carnation at Uttara | 138,908,435.54 | |
|02 |Kanak Chapa at Wari | 21,956,400.00 | |
|03 |Krishna Chura at Azimpur | 27,582,178.00 | |
|04 |Akashmoni at BCC Road, Wari | 18,456,200.00 | |
|05 |Kamini Project at Wari | 21,187,900.00 | |
|06 |Iris Noorjahan at Kakrail | 27,281,657.00 | |
|07 |Bonotosini at Firmgate | 1,942,444.00 | |
|08 |Engr.Marigold at Kachukhat | 7,520,974.00 | |
|09 |Jaba Niloy at Uttara | 21,728,754.00 | |
|10 |Chandramallika at Uttara | 11,977,600.00 | |
|11 |Blue Passion at Uttara | 7,827,614.00 | |
|12 |Gladiolus at Uttara | 8,029,892.00 | |
|13 |Madabi Kunja at Uttara | 7,045,500.00 | |
|14 |Tulips at Gulshan | 10,263,000.00 | |
|15 |Susi Saba at Moghbazar | 617,926.00 | |
|16 |Snow Dropes at Uttara | 3,699,401.00 | |
|17 |Angelika at Gulshan | 8,958,200.00 | |
| | | | |
| |Total | 344,984,075.54 | |

|BUILDING FOR FUTURE LTD. | |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. | |
| | | | | |
| | | | | |
|SCHEDULE OF CASH AND BANK BALANCE | |
|FOR THE YEAR ENDED 30TH JUNE ,2008. | |
| | | | | |
| | | |SCHEDULE - A/05 | |
| | | | | |
|SL NO |BANK NAME |A/C NO |TAKA | |
| | | | | |
|01 |Standard Chartered Bank |01-1104241-02 | 383,582.38 | |
|02 |Bank Alfalah Ltd. |017-00-0307 | 26,205.00 | |
|03 |PBL, Gulshan Br. |11811050000261 | - | |
|04 |PBL, Gulshan Br. |110.11.383 | 621.00 | |
|05 |PBL, Mohakhali Br. |110.10.055 | 2,389,555.00 | |
|06 |DBBL, Gulshan Br. |11640200000024 | nil | |
|07 |DBBL, Gulshan Br. |116.110.201 | 13,855.05 | |
|08 |DBBL, Gulshan Br. |116.110.837 | 89,062.47 | |
|09 |Southeast Bank |111.00.9671 | 77,378.52 | |
|10 |United Commercial Bank Ltd. |011.00.5182 | 8,550.00 | |
| | | | | 2,988,809.42 |
| | | | | |
| |Cash in Hand | | | 150,545.00 |
| | | | | |
| |Total | | | 3,139,354.42 |

|BUILDING FOR FUTURE LTD. | |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. | |
|SCHEDULE OF BANK LOAN | |
|FOR THE YEAR ENDED 30TH JUNE ,2008. | |
| | | |SCHEDULE - L/01 | |
| | | | | |
|SL NO |BANK NAME |ACCOUNT NUMBER | |CLOSING BALANCE |
| | | | | |
|01 |United Commercial Bank Ltd. |SOD # 71000250(H) | 118,371,154.32 |
|02 |Dutch Bangla Bank |SOD # 116.400.91 | | nil |
|03 |Prime Bank Ltd. |Lease Finance A/C # 72700227 | nil |
|04 |Prime Bank Ltd. |SOD # 11877360011847 | 8,873,641.81 |
|05 |Prime Bank Ltd. |Lease Finance A/C # 72800226 | nil |
|06 |Prime Bank Ltd. |CD A/C # 72400199 | nil |
|07 |Prime Bank Ltd. |HB Loan A/C # 72400138 | nil |
|08 |United Commercial Bank Ltd. |HB Loan A/C # 7271600210 | nil |
|09 |United Commercial bank Ltd. |HB Loan A/C # 71600000249 | nil |
|10 |United Commercial bank Ltd. |HB Loan A/C # 7271600000261 | 7,787,113.65 |
|11 |Delta Brac Finance Corporation |A/C # 1005353 | | 10,000,000.00 |
|12 |Delta Brac Finance Corporation |A/C # 1006316 | | 18,658,320.00 |
|13 |Prime Bank Ltd. |CD # 72400206 | | nil |
|14 |Prime Bank Ltd. |CD # 72400221 | | 43,555,259.89 |
|15 |Bank Alfalah Ltd. |HB Loan # 014-000024 | 5,159,438.02 |
|16 |Bank Alfalah Ltd. |HB Loan # 014-000066 | 31,754,166.67 |
| | | | | |
| |Total | | | 244,159,094.36 |

| BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
|SCHEDULE OF ADVANCE FROM CUSTOMER (ALL PROJECT) |
|FOR THE YEAR ENDED 30TH JUNE ,2008 |
| | | |
| | |SCHEDULE - L/02 |
| | | |
|SL NO |PARTICULARS OF THE PROJECT | TAKA |
| | | |
|01 |Akashmoni at BCC Road, Wari | 1,187,500.00 |
|02 |Blue Passion at Uttara | 10,545,750.00 |
|03 |Chandramallika at Uttara | 15,906,400.00 |
|04 |Engr.Marigold at Kachukhat | 1,965,200.00 |
|05 |Gagan Shirish at Panthapath | 105,715,722.73 |
|06 |Iris Noorjahan at Kakrail | 21,545,000.00 |
|07 |Jaba Niloy at Uttara | 19,558,500.00 |
|08 |Jayantika at Wari | 10,556,400.00 |
|09 |Kamini Project at Wari | 39,804,500.00 |
|10 |Kanak Chapa at Wari | 13,545,000.00 |
|11 |Krishna Chura at Azimpur | 28,423,000.00 |
|12 |Polwel Carnation at Uttara | 78,546,000.00 |
|13 |Tulips at Gulshan | 31,655,000.00 |
|14 |ShandhaMaloti | 3,500,000.00 |
|15 | Madhubilata | 3,823,072.00 |
|16 | Camellia | 2,222,320.00 |
|17 | Rosydale | 4,566,310.00 |
|18 | Fragrance Popy | 28,010,480.00 |
|19 | Rajanigandha | 6,980,000.00 |
|20 | Dolon Chapa | 30,330,075.00 |
| |Total | 458,386,229.73 |

|BUILDING FOR FUTURE LTD. |
|GAGAN SHIRISH 76&76/1, PANTHAPATH , DHAKA - 1215. |
|SCHEDULE OF CURRENT LIABILITIES |
|AS ON 30TH JUNE ,2008 |
| | | |
| | | |
| | | |
|SL NO |PARTICULARS | TAKA |
| | | |
|01 |Mobile Bill | |
|02 |Telephone Bill | |
|03 |Internet Bill | |
|04 |Fax Bill | |
|05 |Salary & Allowance | |
|06 |Office Rent | |
|07 |Audit Fee | |
|09 |Arch. Design & drawing Bill | |
|10 |Tax deduction on: | |
| |Audit Fees | 300.00 |
| |Tax Adviser's Fees | 4,000.00 |
| | | |
| |Total | |

|Schedule of Working in Progress: | | | |Schedule No - A/03 |
| | | | | | |
| | | | | | |
|Particulars of the Project |Opening Balance |During the Year |Administrative overhead|Hand over project |Total Amounts Tk |
| |Amount in Tk. |Amount in Tk. | |maintence cost | |
| | | | | | |
|Krishna Chura at Azimpur | 22,687,506.18 | 13,354,569.00 | 2,108,920.00 |131183 | 38,282,178.18 |
|Kamini Project at Wari | 26,726,185.25 | 12,384,356.00 | 1,955,706.00 |121653 | 41,187,900.25 |
|Jayantika at Wari | 13,106,207.04 | 2,441,533.00 | 385,561.00 |23983 | 15,957,284.04 |
| | | | | | |
| | TOTAL | | | | 95,427,362.47 |

6.7 Preparation procedure of Financial Statement of BFL:

Once the adjusting entries have been made or entered into a worksheet, the financial statements can be prepared using information from the ledger accounts. Because some of the financial statements use data from the other statements, the following is a logical order for their preparation: • Income statement • Statement of retained earnings • Balance sheet • Cash flow statement

Income Statement

The income statement reports revenues, expenses, and the resulting net income. It is prepared by transferring the following ledger account balances, taking into account any adjusting entries that have been or will be made: • Revenue • Expenses • Capital gains or losses

Statement of Retained Earnings

The retained earnings statement shows the retained earnings at the beginning and end of the accounting period. It is prepared using the following information: • Beginning retained earnings, obtained from the previous statement of retained earnings. • Net income, obtained from the income statement • Dividends paid during the accounting period

Balance Sheet

The balance sheet reports the assets, liabilities, and shareholder equity of the company. It is constructed using the following information: • Balances of all asset accounts such cash, accounts receivable, etc. • Balances of all liability accounts such as accounts payable, notes, etc. • Capital stock balance • Retained earnings, obtained from the statement of retained earnings

Cash Flow Statement

The cash flow statement explains the reasons for changes in the cash balance, showing sources and uses of cash in the operating, financing, and investing activities of the firm. Because the cash flow statement is a cash-basis report, it cannot be derived directly from the ledger account balances of an accrual accounting system. Rather, it is derived by converting the accrual information to a cash-basis using one of the following two methods: • Direct method: cash flow information is derived by directly subtracting cash disbursements from cash receipts. • Indirect method: cash flow information is derived by adding or subtracting non- • cash items from net income.

6.8Trial Balance:

If the journal entries are error-free and were posted properly to the general ledger, the total of all of the debit balances should equal the total of all of the credit balances. If the debits do not equal the credits, then an error has occurred somewhere in the process. The total of the accounts on the debit and credit side is referred to as the trial balance.
To calculate the trial balance, first determine the balance of each general ledger account as shown in the following example:
Once the account balances are known, the trial balance can be calculated as shown:

Trial Balance

|Account Title | Debits | Credits |
|Cash |6825 | |
|Accounts Receivable |275 | |
|Parts Inventory |2225 | |
|Accounts Payable | |2000 |
|Capital | |7500 |
|Revenue | |1100 |
|Expenses |1275 | |
| |[pic] |[pic] |
| |10600 |10600 |
| |[pic] |[pic] |
| | |[pic] |
| |[pic][pic] | |

In this example, the debits and credits balance. This result does not guarantee that there are no errors. For example, the trial balance would not catch the following types of errors: • Transactions that were not recorded in the journal • Transactions recorded in the wrong accounts • Transactions for which the debit and credit were transposed • Neglecting to post a journal entry to the ledger
If the trial balance is not in balance, then an error has been made somewhere in the accounting process. The following is listing of common errors that would result in an unbalanced trial balance; this listing can be used to assist in isolating the cause of the imbalance. • Summation error for the debits and credits of the trial balance • Error transferring the ledger account balances to the trial balance columns o Error in numeric value o Error in transferring a debit or credit to the proper column o Omission of an account • Error in the calculation of a ledger account balance • Error in posting a journal entry to the ledger o Error in numeric value o Error in posting a debit or credit to the proper column • Error in the journal entry o Error in a numeric value o Omission of part of a compound journal entry
The more often that the trial balance is calculated during the accounting cycle, the easier it is to isolate any errors; more frequent trial balance calculations narrow the time frame in which an error might have occurred, resulting in fewer transactions through which to search.

6.9 Chart of Accounts

The chart of accounts is a listing of all the accounts in the general ledger, each account accompanied by a reference number. To set up a chart of accounts, one first needs to define the various accounts to be used by the business. Each account should have a number to identify it. For very small businesses, three digits may suffice for the account number, though more digits are highly desirable in order to allow for new accounts to be added as the business grows. With more digits, new accounts can be added while maintaining the logical order. Complex businesses may have thousands of accounts and require longer account reference numbers. It is worthwhile to put thought into assigning the account numbers in a logical way, and to follow any specific industry standards. An example of how the digits might be coded is shown in this list:

Sample Chart of Accounts

Asset Accounts

Current Assets
|[pic] |[pic] |
|1000 |Petty Cash |
|1010 |Cash on Hand (e.g. in cash registers) |
|1020 |Regular Checking Account |
|1030 |Payroll Checking Account |
|1040 |Savings Account |
|1050 |Special Account |
|1060 |Investments - Money Market |
|1070 |Investments - Certificates of Deposit |
|1100 |Accounts Receivable |
|1140 |Other Receivables |
|1150 |Allowance for Doubtful Accounts |
|1200 |Raw Materials Inventory |
|1205 |Supplies Inventory |
|1210 |Work in Progress Inventory |
|1215 |Finished Goods Inventory - Product #1 |
|1220 |Finished Goods Inventory - Product #2 |
|1230 |Finished Goods Inventory - Product #3 |
|1400 |Prepaid Expenses |
|1410 |Employee Advances |
|1420 |Notes Receivable - Current |
|1430 |Prepaid Interest |
|1470 |Other Current Assets |

Fixed Assets
|[pic] |[pic] |
|1500 |Furniture and Fixtures |
|1510 |Equipment |
|1520 |Vehicles |
|1530 |Other Depreciable Property |
|1540 |Leasehold Improvements |
|1550 |Buildings |
|1560 |Building Improvements |
|1690 |Land |
|1700 |Accumulated Depreciation, Furniture and Fixtures |
|1710 |Accumulated Depreciation, Equipment |
|1720 |Accumulated Depreciation, Vehicles |
|1730 |Accumulated Depreciation, Other |
|1740 |Accumulated Depreciation, Leasehold |
|1750 |Accumulated Depreciation, Buildings |
|1760 |Accumulated Depreciation, Building Improvements |

Other Assets
|[pic] |[pic] |
|1900 |Deposits |
|1910 |Organization Costs |
|1915 |Accumulated Amortization, Organization Costs |
|1920 |Notes Receivable, Non-current |
|1990 |Other Non-current Assets |

Liability Accounts

Current Liabilities
|[pic] |[pic] |
|2000 |Accounts Payable |
|2300 |Accrued Expenses |
|2310 |Sales Tax Payable |
|2320 |Wages Payable |
|2330 |401-K Deductions Payable |
|2335 |Health Insurance Payable |
|2340 |Federal Payroll Taxes Payable |
|2350 |FUTA Tax Payable |
|2360 |State Payroll Taxes Payable |
|2370 |SUTA Payable |
|2380 |Local Payroll Taxes Payable |
|2390 |Income Taxes Payable |
|2400 |Other Taxes Payable |
|2410 |Employee Benefits Payable |
|2420 |Current Portion of Long-term Debt |
|2440 |Deposits from Customers |
|2480 |Other Current Liabilities |

Long-term Liabilities
|[pic] |[pic] |
|2700 |Notes Payable |
|2702 |Land Payable |
|2704 |Equipment Payable |
|2706 |Vehicles Payable |
|2708 |Bank Loans Payable |
|2710 |Deferred Revenue |
|2740 |Other Long-term Liabilities |

Equity Accounts

|[pic] |[pic] |
|3010 |Stated Capital |
|3020 |Capital Surplus |
|3030 |Retained Earnings |

Revenue Accounts

|[pic] |[pic] |
|4000 |Product #1 Sales |
|4020 |Product #2 Sales |
|4040 |Product #3 Sales |
|4060 |Interest Income |
|4080 |Other Income |
|4540 |Finance Charge Income |
|4550 |Shipping Charges Reimbursed |
|4800 |Sales Returns and Allowances |
|4900 |Sales Discounts |

Expenses

|[pic] |[pic] |
|6000 |Default Purchase Expense |
|6010 |Advertising Expense |
|6050 |Amortization Expense |
|6100 |Auto Expenses |
|6150 |Bad Debt Expense |
|6200 |Bank Fees |
|6250 |Cash Over and Short |
|6300 |Charitable Contributions Expense |
|6350 |Commissions and Fees Expense |
|6400 |Depreciation Expense |
|6450 |Dues and Subscriptions Expense |
|6500 |Employee Benefit Expense, Health Insurance |
|6510 |Employee Benefit Expense, Pension Plans |
|6520 |Employee Benefit Expense, Profit Sharing Plan |
|6530 |Employee Benefit Expense, Other |
|6550 |Freight Expense |
|6600 |Gifts Expense |
|6650 |Income Tax Expense, Federal |
|6660 |Income Tax Expense, State |
|6670 |Income Tax Expense, Local |
|6700 |Insurance Expense, Product Liability |
|6710 |Insurance Expense, Vehicle |
|6750 |Interest Expense |
|6800 |Laundry and Dry Cleaning Expense |
|6850 |Legal and Professional Expense |
|6900 |Licenses Expense |
|6950 |Loss on NSF Checks |
|7000 |Maintenance Expense |
|7050 |Meals and Entertainment Expense |
|7100 |Office Expense |
|7200 |Payroll Tax Expense |
|7250 |Penalties and Fines Expense |
|7300 |Other Taxes |
|7350 |Postage Expense |
|7400 |Rent or Lease Expense |
|7450 |Repair and Maintenance Expense, Office |
|7460 |Repair and Maintenance Expense, Vehicle |
|7550 |Supplies Expense, Office |
|7600 |Telephone Expense |
|7620 |Training Expense |
|7650 |Travel Expense |
|7700 |Salaries Expense, Officers |
|7750 |Wages Expense |
|7800 |Utilities Expense |
|8900 |Other Expense |
|9000 |Gain/Loss on Sale of Assets |

6.10 Notes to the Financial Statements

Notes to the Financial Statements are additional notes and information added to the end of the financial statements to supplement the reader with more information. Notes to Financial Statements help explain the computation of specific items in the financial statements as well as provide a more comprehensive assessment of a company's financial condition. Notes to Financial Statements can include information on debt, going concern, accounts, contingent liabilities, or contextual information explaining the financial numbers (e.g. to indicate a lawsuit). The information contained within the notes not only supplements financial statement information, but they clarify line-items that are part of the financial statements. For example, if a company lists a loss on fixed asset impairment in their income statement, Notes to Financial Statements could serve to corroborate the reason for the impairment by providing specific information relative to how the asset became impaired. Notes to the Financial Statements are also used to explain the method of accounting used to prepare the financial statements (all publicly traded companies are required to use accrual basis accounting for financial reporting purposes as mandated by the SEC), and they provide valuations for how particular accounts have been represented. In consolidated financial statements, all subsidiaries should be listed as well as the amount of ownership (controlling interest) that the parent company has in the subsidiary companies. Any items within the financial statements that are valuated by estimation should be part of the Notes to Financial Statements if a substantial difference exists between the amount of the estimate previously reported and the amount of the actual results. Full disclosure of the effects of the differences between the estimate and the actual results should be in the note.

6.11 Human Resource Planning of Building for Future Limited.

Introduction: If an organization is to achieve its goals, it needs inputs: financial resources such as money and credit, physical resources such as building and equipment and the main are human resource means people. Too often managers forget about the important third factor, the people variable is to the success of an organization. Human Resource Planning is one of the most important elements in a successful HRM program. Specially, human resource planning is the process by which an organization ensures that it has the right number and the right kinds of people at the right places, at the right time, capable of effectively and efficiently completing those tasks that will help the organization achieve its overall objectives. Human resource planning then translates the organization's objectives and plans in to the number of workers needed to meet these objectives. Without clear - cut planning, estimation of an organization's human resource need is reduced to mere guesswork.

For manpower planning demand and supply forecast is a very important element. The personal demand forecast only provides half the staffing equation by answering the question "how many employees will be needed?" Nest supply must be forecasted.

Like other organization BFL determined the positions to be filled in the organization, the duties of these positions and characteristics of people who should be hired for them on the basis of industrial practices, i.e., what is being done in the similar type of firms.

But the basic factor in Human Resource Planning is the demand for the product the company is undertaking for product the company is undertaking to produce. Thus they project the sales first. Then volume of production to meet these sales requirements is determined. Finally the employees need to maintain this volume of output.

Some elements of HRP:
1. Establishing and recognizing the future job requirements
2. Identifying deficiency in terms of quantity
3. Identifying deficiency in terms of quality and specification
4. Identifying the sources of right type of man
5. Developing the available manpower and
6. Ensuring the effective utilization of work force.

6.11.1BFL are Benefited through HRP:
By formulating a well-conceived HRP some benefits can be accrued by the organization as well as by the human resource management. These benefits are given below:

1. Better view of business decision: Upper management has a better view of the human resource dimensions of business decisions.
2. Minimum cost: HR costs may be lower because management can anticipate imbalances before they become unmanageable and expensive.
3. Anticipated talent: More time is available to locate talent because needs are anticipated and identified before the actual staffing is required.
4. Management Development: Proper HRP ensured the development of managers through training programs.
5. Improved Utilization: HRP improves the methods of utilization of HR of the organization.
6. Economy in hiring: Effective HRP sets the system of hiring HR for the organization with minimum cost and efforts.
7. Information base: HRP helps in expanding the HRM information based to assist other HR activities and organizational units.
8. Coordination: Coordination of different HRM programs and activities is possible the help of a well-established HRP.
9. Technological change: Rapid technological changes make HRP more important as the demand for new skills is increasing.
10. Reduction of wastage: Proper HR planning reduces two types of wastage i.e. (1) Voluntary (marriage, pregnancy, immigration, early retirement) (2) incidental (death, retirement and dismissal) rate.
11. Corporate asset: HRP stresses the value of human resources as corporate assets.
12. Gradual growth: Interest in HRP is increasing because the size of the organization is gradually increasing.

In addition to sales demand, they also consider some other factors:
1. Projected migration rate: Job turnover is termed as migration in real estate sector. The management estimates about projected migration rate of the industry to decide about employee needs.
2. Quality and nature of employees: There are some male workers, ratio around 30% of the workers. According to the usual practice most of the workers in BFL are young. The average age of female workers is 22 years and male workers 32 years. As per restriction on employment of children BFL did not employ a child below the age of eighteen.
3. Absenteeism rates: In absenteeism rates of the workers of BFL are minimum because the greater job satisfaction level to the organization.

3.3 Human Resources Planning Method of BFL
The Co. is following the method of HRP, which contains four steps. These methods are used to determine the requirements of personnel. By using these methods, human resource planning unit can formulate an effective human resource planning for the organization.
1. Annual estimate of expected vacancies:
2. Long range estimate of expected vacancies:
3. Man specification requirements:
4. Job requirements:

HR manager examines the organizational structure regularly to anticipate its manpower requirements. A job analysis is made to know the requirements of a particular job.

This co. analysis three components to know the nature of economic forces available in the business and industrial arena, latest position of demand and supply of labor in the market and lastly possibility of skills change and shortage or surplus of human resources.

6.11.2 Steps of HR Planning followed by the Co.
1. Goal of the organization: For making a plan, every organization should set its goals. These goals will lead the organization as well as its people to perform their activities properly.
2. Business mission: In the second step, business mission of the organization should be established. This mission is meant for the achievement of organizational goal only.
3. Strategic decision: The organizational mission can be achieved through some strategic decisions; these strategic decisions may help the organization to attain performance levels of the organization.
4. Functional structure of the organization: Every organization should have a functional stricture showing the positions of executives and employees. Throughout the organization shows the relationships among the executives and employees.
5. Implementing authority: It means chimer resource Planning division or human resource division; this division discharges responsibility of implementing the stages of human resource planning in Bangladesh.
6. Goal achievement: It is the sixth stage of human resource planning process in Bangladesh. It depends on the degree of implementation; if Human Resource Planning is implemented properly to a great extent.
7. Feedback or evaluation: In the last or seventh stage of Human Resource Planning in Bangladesh, goal achievement should be properly monitored on evaluated. Because evaluation is the basis of formulating Human Resource Planning for the future days in Bangladesh.

3.5 Sources of recruitment of BFL:
Recruiting is more likely to achieve its objectives if recruiting sources reflect the type of position to be field. Certain recruiting sources are more effective than others for filling certain types of jobs. Generally there five sources of recruitment, which are discussed below:

1. Internal Source: Employees can be recruited firstly from the internal source. Management is usually interested to recruit known and experienced employees from within the organization. Because management knows the performance level, skills and efficiency, sincerity and commitment and the like of internal employees. Therefore thy can easily recruit employees from form within the same organization. It includes Promotion, Transfer, Temporary assignment and Additional assignment.
2. External Sources: There are some external sources of HR recruitment. This source includes Advertisements, Employee agencies, Schools, Colleges and Universities, Professional organizations, Casual or Unsolicited applicants.
3. Employee referrals: Employee referrals are in excellent means of locating potentials candidates for first hand-to-fill vacant positions. Recommendation from the current employee and appropriate for hard to fill positions.
4. Alternatives to Recruitment: It includes Temporary help services, Employee leasing, Independent contractors.
5. Cyberspace Recruitment: Use of computer has become a very important source of job information in Bangladesh. BFL sometimes get helps from the cyberspace for recruitment purpose.

6.11.3 Steps of recruitment followed by BFL:
1. Assessment of recruitment: The first step of recruitment of employees is proper assessment of the job. Whether the work is difficult or normal, experience is required or not. What qualities are needed for work to be done? When the work will be started? All these things are to be assessed for a job.
2. Requisition: After assessment of the job, candidate-seeking department gives requisition of human resource to the top management. After getting the requisition from the departmental heads, top management assesses the proposal and last of all if it is seen reasonable and acceptable, top management issues order for advertisement.
3. Inviting application: After the assessment of requisition proposal of vacant jobs. The next step of recruitment is attracting applicants through advertisement. The advertisement includes name of position, nature of the work, qualities required for the job. Age, educational qualification, experience, expected salary etc.
4. Receiving Applications: In the advertisement potentials job candidates are asked to submit their applications along with their resume and other necessary documents. In response to the advertisement, job candidates apply for the vacant positions and human resource or assigned department receive the application
5. Spot interview: In case of need, BFL needs manpower for implementing plans or strategies. For the purpose it cannot wait for regular recruitment or selection organizational manager, under this circumstance, visit the sources of manpower and recruit on the spot.

3.11.4 Guidelines follow by BFL interviewers:
1. Detailed information about the job for which applicants are being interviewed:
2. Structure the interview so that the interview follows a set procedure.
3. Review the candidates' applications form and or resume.
4. Put the applicant at Ease.
5. Ask their questions.
6. Conclude the interview
7. Complete a post-interview evaluation form.

6.11.5 Selection Part:
Selection is the process of choosing the best one from among the number of candidates. There is always and element of prediction in selection, making and informed estimate for the job being filled.
Process of selection:
Selection activities typically follow a standard pattern, beginning with an initial screening, interview and concluding with the final employment decision. Selection process typically consists of eight steps. Such as -
1. Initial screening interview: The first step in the selection process where by inquiries about a job are screened. It is a two steps procedure. It is excellent opportunity for Human Resource Management to describe the job in detail so the candidates can consider seriously about applying. During the initial screening it is important to identify a salary range. It is a two steps procedure, a) The screening of inquires, b) The provision of screening interview.
2. Completion of the application form: The application form gives a job performance related synopsis of what applicant has been doing during their adult life, their skills and their accomplishments. Applications are also useful in that they obtain information the company wants.
3. Employment tests: Intelligence, aptitude, ability and interest tests arc needed to provide major input to the selection process. In this step handwriting analysis and honesty tests have also been used with the attempt to learn more about the candidate.
4. The comprehensive interview: A selection device in which in-depth information about a candidate can be obtained. Human Resource Management interviewers, and senior managers may interview the applicant. This interview assesses one's motivation, ability to work under pressure and ability to "fit in" with the organization.
5. Background investigation: This stage contacting former employers to confirm the candidates work record and to obtain their appraisal of his or her performance. Contacting other references and verifying the educational accomplishments are shown in the application. It is also checking credit references and criminal records and even using third-party investigators to do the background check.
6. Conditional job offer: Job offer made to an individual, which will become permanent after passing tests such as a substance abuse test. Conditional job offer is usually made by an HRM representative.
7. Physical or Medical examination: Physical exam can only be used, who are unable to physically comply with the requirements of a job. It is to show that minimum standards of health exist to enroll in company health and life insurance program.
8. Job offer: Those individuals who perform successfully in the preceding steps are now considered to be eligible to receive the employment offer.

Each of these steps represents a decision point requiring some affirmative feedback for the process to continue. Each step in the process seeks to expand the organization's knowledge about the applicant's background, abilities, and motivation and it increases the information from which decision makers will make their predictions and final choice. Where, some steps may be omitted if the do not yield data that will aid in predicting success, or if the cost of the step is not warranted.

After having a pool of potential job candidates through recruitment sources, the next step is to select the best persons for the job before making the hiring decision. BFL follows the following process to select an employee for workers and managerial level:
1. Screening the application form and CV
2. Interviewing the workers
3. Background investigation and reference check
4. Testing on the job sample
5. Physical examination

6.11.6 Different Tests of selection are performed by BFL:
At least four types of tests are used in BFL to measure the verbal, quantitative and logical skills:
1. Written tests to determine the academic and theoretical knowledge.
2. Achievement tests to determine the capability of achievement for the organizational target.
3. Intelligent tests to determine the intelligence level.
4. Performance tests to determine the performance level possible by the applicant to perform in practical life.
5. Honesty tests to determine the dependence in terms of financial, informational, strategically and confidential data.
6. Aptitude tests to determine job suitability.
7. Psychological tests to determine the favorable psychosocial support for the job.
8. Personality test to determine the applicant's maturity and sociability.
9. Dexterity test to determine how applicants can use their hands and fingers.
10. Skill test to determine the applicant's proficiency in specific areas.

6.11.7 Key components:
There are key components of the selection process. The components are the essence, which can either make the process successful.
1. Deciding on terms of appointment
a. Terms of appointment: Having decided on the grade and rank of the staff required and the timing concerned, the department should consider what the most appropriate terms of appointment would be. This should take into account the nature of the duties to be performed and the overall manpower deployment of the department. The different terms of appointment that can be offered are-
Permanent and pension able; agreement terms; Temporary terms (month-to-month or day-to-day); Part time.
b. Flexibility: To minimize recruitment difficulties as well as attract and retain the best people, there are flexibilities, which include recruitment overseas, offer of agreement terms, lowering entry qualifications and granting incremental credit for experience.
c. During probation: Staff is introduced to the mission, objectives and values of the civil service and their departments. Probation is a serious process, which provides regular feedback on performance and assesses suitability for employment in the civil service.
d. On-the-job training: Staff should be exposed to the different duties required for their rank. In this way they can learn the skills expected of them and managers can verify their long-term suitability.

2. Probation:
Supervision and guidance: Newly joined staff must be told the legth of their probationary period, which varies with the requirement of each grade. If there are indications that staff is not suitable for confirmation, they must be counseled and then warned in writing if the problem persists. Confirmation is the step whereby a member of staff on probation is found suitable for the job and employed on permanent and pension able terms.
3. The selection process: Selection is the process of choosing individuals who have the necessary qualifications to perform a particular job well. Organizations differ as to the complexity of their selection systems. Some organizations make a strategic decision to fill positions quickly and inexpensively by scanning over application blanks and hiring individuals based on this information alone. Other organizations however make a strategic decision to choose the best person. Each element in this process is given below;
4. Application blanks and resumes: Examining resumes and having the applicant fill out an application blank usually do the initial screening of potential employees. Application blank usually include information regarding the name and address of the applicant, work history, education, training, skills, and reference
5. References: Most organizations ask an applicant for a list of references to include previous supervisors or coworkers. Since the employee generates this list of references, these individuals will most likely present a positive image of the applicant. Letter of recommendation are also considered a type of reference.
6. Reliability and validity in Testing: Test reliability means that the test is consistent in its measurement. Two common types of reliability are discussed: Stability and Internal consistency. Both stability and consistency rely on a correlation coefficient as the index for reliability.

6.11.8 Causes of Recruiting Experienced Managers by BFL:
Generally the organization requires experienced executives for many reasons. But ultimate objectives are to get better services. The causes of recruiting experienced managers are of six types, which are briefly mentioned below:
1. Company knowledge: The experienced employees have enough knowledge about the different jobs. Thus they can work efficiently and effectively.
2. Knowledge about personal traits: An experienced person has knowledge about his/ her personal traits and qualities for working in any difficult situation.
3. Training facilities: Experienced personnel have proper training about work in an organization. So they arc usually preferred.
4. Systems of work: An experienced employee knows about the system of work in any situation and can also train others.
5. Readiness to take pressure: An experienced person easily takes pressure in any place, any moment.
6. Quick achievement of goal: An experienced person can achieve organizational goal through the use of his/her experience.

The midlevel & administrative managers are selected on the basis of the following criteria:
Architecture:
# Technical expertise
# Ability to lead subordinates
# Ability to work hard under pressure to meet deadlines.
Marketing Manager:
# High academic qualifications
# Excellent interpersonal skills
# Strong command over, both spoken & written English and Bengali communication.
# Self motivated and strong drive to establish good rapport and winning relation with the customers. # Computer literacy

7.1 SWOT Analysis:

SWOT is an acronym that stands for Strengths, Weakness, Opportunities, and threats. SWOT analysis is the careful evaluation of organizational internal strengths and weakness as well as its environmental opportunities and threats. In SWOT analysis, the best analysis accomplishes an organization’s mission by (A) exploiting an organization’s opportunities and Strengths while (B) neutralizing its threats and (C) avoiding or correcting its weakness.

| |
|SWOT Analysis |
| |
|To formulate strategies that support the mission |
| |
|Internal External |
|Analysis Analysis |
|Strength Opportunities |
| |
| |
| |
| |
|Weakness Threats |

| |
|Good strategies |
| |
|Those support the mission: |
| |
|(1) Exploit opportunities |
|(2) Neutralist threats |
|(3) Avoid Weakness |

SWOT analysis of Building For Future Ltd is given below:

Potential internal strength

• A distinctive competence • Adequate financial resources • Good competitive skills • Well thought of buyers • An acknowledged market leader • Better advertising campaigns • Product innovation skills • Proven management • Ahead on experience curve • Better construction capability

Potential internal weakness • Obsolete facilities • Plagued with internal operating problems • Failing behind in R & D • Too narrow product line • Higher overall unit cost to key competitors

Potential external opportunities

• Serve additional customer group • Enter new markets or segments • Expand product line to meet broader range of customer needs • Diversify into related products • Vertical integration • Faster market growth

Potential external threats

• Entry of lower cost foreign competitors • Rising sales of substitute products • Adverse shifts in the foreign exchange rates • Vulnerability to recession and business cycle • Growing bargaining power of customers or suppliers • Changing buyers needs and tastes

Conclusion:

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Analysis of financial statement:

To analyze the fifalcial statement the key ratios are as under;

| Liquidity Ratios | |
|Current Ratio: |Current Assets/Current liabilities |
|Quick Ratios: |(current Assets-Inventory)/current Liabilities |
| | |
|Receivable Turnover in days |Credit Sales/Average debtors |
| | |
|Inventory Turnove in days |Cost of goods sold / Average Inventory |
| | |
|Payable Turnove in days |Credit purchase/Average creditors |
| | |
|Debt utilization Ratio | |
| | |
|Debt to Equity (%) |External equity / Internal equity. |
| | |
|Debt to Total Assets (%) |External equity / Total Assets |
| | |
|Coverage Ratio | |
| | |
|Debit service coverage (Times) |Net profit + Financial expenses+Depreciation |
| |Financial Expenses + Current liabilities( Bank |
| |loan + LTR) |
| | |
| | |
|Interest coverage in times |Net profit before Financial charges |
| |Financial charges |

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Design and operation

Assess control risk

Test control

Decide planned detection risk and substantive tests

Control Environment

Risk Assessment

Control Activities

Information and Communication

Monitoring

Assets

Liabilities

Stock holder Equity

Normal Balance --- Debit

Asset Accounts

Debit Credit

Expense Accounts

Debit Credit

Normal Balance --- Credit

Liability Account

Debit Credit
- (Decrease) + (Increase)

Stockholders Equity Accounts

Debit Credit
- (decrease) + (increase)

Revenue Accounts

Debit Credit
- (decrease) + (increase)