A PROJECT REPORT ONPETTY CASH &

DISBURSEMENT(L&T BHUBANESWAR)

(Orissa)

ByMs. Sweta Leena Patnaik

Regn. No. - 4027

Under the esteem guidance of

Mr. Prasenjit Paul

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Project Report On

Petty Cash & Disbursements(L&T Bhubaneswar)

Sweta Leena PatnaikRegn. No.- 4027

Project submitted in partial fulfillment for

Award of the degree of PGDMVVISM

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DECLARATION

I Sweta Leena Patnaik, declare that this project report

entitled “Petty Cash & Disbursement” is the original work

done in L&T Limited. And is submitted by me towards partial

fulfillment of my Post Graduate Diploma in Management, under

the guidance of faculties & the employees named as Mr.

Prasenjit Paul.

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Date:

Place: Bhubaneswar (Orissa) Signature

ACKNOWLEDGEMENT

I am grateful to Mr. Prasenjit Paul for providing me an

opportunity to do my project work in L & T Ltd.

I take this opportunity to express my deep sense of

gratitude to my superior Mr. Prasenjit for the guidance and

other staff of the organization for extending their valuable

support and help in the preparation of this project report.

I am also thankful to my friends and seniors for extending

their co-operation in completion of this project report.

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Date:

Place: Bhubaneswar (Orissa) Signature

CERTIFICATE

This is to certify that the Project Report titled as “Petty Cash & Disbursements”

submitted in partial fulfillment for award of Post Graduate Diploma in

Management (PGDM) was carried out by Ms. Sweta Leena Patnaik under my

guidance. This has not been submitted to any other University or Institution for

the award of any Degree / Diploma/ Certificate.

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Name & Address of the

Branch Manager

Signature of the Branch Manager

Signature of the Supervisor

Date:

Place:

TABLE OF CONTENTS

CHAPTER-1 - INTRODUCTION

- Scope of the Study

- Significance of the Study

- Objectives of the Study

CHAPTER-2 – ORGANIZATIONAL PROFILE

- Company Profile

- Department Details

CHAPTER-3 – RESEARCH METHODOLOGY

- Sources of Data

- Methodology

- Tools and Techniques used

- Limitations

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CHAPTER-4 – RECOMMENDATION & SUGGESTION

CHAPTER-5 – CONCLUSION

ANNEXURE

BIBLIOGRAPHY

INTRODUCTION

Meaning of Petty Cash-:

Petty cash is a small amount of discretionary funds in the form of cash used for

expenditures where it is not sensible to make the disbursement by check, because

of the inconvenience and costs of writing, signing and then cashing the check.

Petty cash allows you to make small purchases or reimbursements, in cash, for items such

as stamps, office supplies, parking, etc. The fund should be enough to cover petty cash

expenditures for about a month. If it is too small you will have to constantly replenish the

funds, and if it is too large it means you have cash on hand which could be more safely

kept in your bank account / Cash Box. The petty cash fund should be kept in a locked box

or drawer Management recommend that only one person, called the custodian, have

access to this cash, and that person be responsible for all petty cash activity. To disburse

petty cash funds, the organization will need to buy or develop petty cash vouchers for

documenting each transaction, and determine who in the organization can approve petty

cash payments. Petty cash must approve by department heads or the petty cash custodian.

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Documentation & Uses of Petty Cash-:

All petty cash transactions must have adequate support which substantiates (1)

what was purchased, and (2) that payment was made. A detailed listing of each

item purchased must be provided, and the original paid invoice/ receipt attached

to the Cash Reimbursement Request form. Photocopies or faxes of

invoices/receipts are not acceptable.

1. Enter the amount of the total purchase.

2. Enter a detailed description of the purchase.

3. The person receiving the cash advance or reimbursement must sign.

4. The custodian is to enter the account number to be charged and sign the

form.

Petty Cash Safeguard

 

•  The petty cash fund should be kept in a locked, secure place.

 

• Access to the petty cash fund should be restricted to the custodian and a

back-up person.

 

• Petty cash should be disbursed only by the custodian (or a back-up

person in the custodian's absence).

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• Original receipts should be required in order to disburse petty cash.

Receipts should be maintained in the petty cash fund box for reconciling.

 

• The person to be reimbursed should indicate on the original receipt what

was purchased (if not obvious on the receipt), the business purpose, and

account and fund to be charged.

 

• The original receipts should be approved and signed by an appropriate,

authorized individual, such as the supervisor of the person to be

reimbursed.

 

• The petty cash fund should not be used for personal expenses, personal

loans, or the cashing of personal checks.

 

• The Custodian should be responsible for regularly reconciling the petty

cash fund. (The sum of cash plus original receipts plus any outstanding

reimbursements should equal the full, original amount of the fund.)

 

•   Requests for closing a petty cash account should be made timely. The

Accounting Services Department performs a fortnightly written

confirmation of the petty cash account balances.

 

Petty Cash Internal Controls Checklist-:

The following questions reflect common internal accounting controls related to

petty cash. We may use this list to review your own internal accounting controls

and determine which areas require further action.

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o Is an imprest petty cash fund maintained for payment of small, incidental

expenses?

o Is there a limit to the amount that can be reimbursed by the petty cash fund?

o Is supporting documentation required for all petty cash disbursements?

o Is a petty cash voucher filled out with supporting documentation, name of person

being reimbursed and proper authorization?

o Is access to petty cash limited to one person who is the fund custodian?

Overview of the Study-:

This study is completed by me at Bhubaneswar (Orissa) L & T Branch office.

Basically this study is meant to find out functioning of Petty Cash with proper

internal controls in the company. My job in L & T was basically to observe petty

cash dealings & other disbursements in Accounts.

Vision of the Company:-

The company shall be a professionally managed Indian multinational, committed

to total customer satisfaction and enhancing shareholder value. The company

shall foster a culture of caring, trust and continuous learning while meeting

expectations of employees, shareholders and society. The employees of the

company shall be an innovative, entrepreneurial and empowered team constantly

creating value and attaining global benchmarks.

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Mission of the company:-

To compete and grow in a globalize business environment, the company is

implementing a strategic plan (LAKSHYA) for 2005-10. The plan has been drawn

up in consultation with a leading international strategy consultant. It has set

ambitious growth targets for each business and also included are opportunities for

diversification of the company’s business portfolio.

Global Presence-:

L&T has a global presence. A thrust on international business over the years has

seen overseas revenues growing steadily. The company has manufacturing

facilities in India, China, Oman and Saudi Arabia. It has a global supply network

with offices in 10 locations worldwide, including Houston, London, Milan,

Shanghai, and Seoul. The customers include global majors in over 30 countries.

Scope of the Study-:

The scope of my study was basically fund management of this office. I was doing

my project in the Larsen & Toubro Marketing Network. So my work was to check

the expense vouchers submitted by employees in respect of proper authorization,

correct Dept code & GL code. Maintenance of daily Cash book in register and as

well as in SAP.

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Significance of the Study-:

After being involved in the project I came to know that what the objective of

my study was. My objective was to check whether proper internal controls were

followed and expenses are booked with correct Dept code & accounting code. I

was also monitoring the Bank Balance & Cash Balance to maintain minimum

level. During my project I got an opportunity to learn SAP. It will be very helpful

for me in my future. I dealt with the journal entry, rectification entry and the

general ledger codes etc with the help of SAP.

Objective of the Study-:

This project aims at studying the present financial position of the L&T marketing

network of Bhubaneswar (Orissa). This is the very important area of their

business. Basically the aim was to maintain minimum possible balance either in

Bank or Cash and operate accordingly. So the interest burden less for the

company.

Scheme of the Report

My project report starts with the introduction. In this I have given a brief

introduction of petty cash book. Then, I have given the overview of the study,

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which tells all about the project. After this I have shown vision, mission and the

global presence of the company. I have given scope, significance and objective of

the study.

In the second chapter I have given the company’s profile and the details of all its

departments.

Company Profile

INTRODUCTION

Larsen & Toubro Limited (L&T) is a technology, engineering, construction and

manufacturing company. It is one of the largest and most respected companies in

India's private sector. Seven decades of a strong, customer-focused approach and

the continuous quest for world-class quality have enabled it to attain and sustain

leadership in all its major lines of business. L&T has an international presence,

with a global spread of offices. A thrust on international business has seen

overseas earnings grow significantly. It continues to grow its overseas

manufacturing footprint, with facilities in China and the Gulf region. The

company's businesses are supported by a wide marketing and distribution

network, and have established a reputation for strong customer support. L&T

believes that progress must be achieved in harmony with the environment. A

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commitment to community welfare and environmental protection are an integral

part of the corporate vision.

L&T was founded in Bombay (Mumbai) in 1938 by two Danish engineers,

Henning Holck-Larsen and Soren Kristian Toubro. Both of them were strongly

committed to developing India's engineering capabilities to meet the demands of

industry. Beginning with the import of machinery from Europe, L&T rapidly took

on engineering and construction assignments of increasing sophistication. Today,

the company sets global engineering benchmarks in terms of scale and

complexity.

Henning Holck-Larsen and Soren Kristian Toubro, school-mates in Denmark,

would not have dreamt, as they were learning about India in history classes that

they would, one day, create history in that land. In 1938, the two friends decided

to forgo the comforts of working in Europe, and started their own operation in

India. All they had was a dream. And the courage to dare. Their first office in

Mumbai (Bombay) was so small that only one of the partners could use the office

at a time! In the early years, they represented Danish manufacturers of dairy

equipment for a modest retainer. But with the start of the Second World War in

1939, imports were restricted, compelling them to start a small work-shop to

undertake jobs and provide service facilities. Germany's invasion of Denmark in

1940 stopped supplies of Danish products. This crisis forced the partners to stand

on their own feet and innovate. They started manufacturing dairy equipment

indigenously. These products proved to be a success, and L&T came to be

recognized as a reliable fabricator with high standards. The war-time need to

repair and refit ships offered L&T an opportunity, and led to the formation of a

new company, Hilda Ltd., to handle these operations. L&T also started two repair

and fabrication shops - the Company had begun to expand. Again, the sudden

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internment of German engineers (because of the War) who were to put up a soda

ash plant for the Tatas, gave L&T a chance to enter the field of installation - an

area where their capability became well respected.

L & T’s Journey-

In 1944, ECC was incorporated. Around then, L&T decided to build a portfolio of

foreign collaborations. By 1945, the Company represented British manufacturers

of equipment used to manufacture products such as hydrogenated oils, biscuits,

soaps and glass. In 1945, L&T signed an agreement with Caterpillar Tractor

Company, USA, for marketing earthmoving equipment. At the end of the war,

large numbers of war-surplus Caterpillar equipment were available at attractive

prices, but the finances required were beyond the capacity of the partners. This

prompted them to raise additional equity capital, and on 7th February 1946,

Larsen & Toubro Private Limited was born. Independence and the subsequent

demand for technology and expertise offered L&T the opportunity to consolidate

and expand. Offices were set up in Kolkata (Calcutta), Chennai (Madras) and

New Delhi. In 1948, fifty-five acres of undeveloped marsh and jungle was

acquired in Powai. Today, Powai stands as a tribute to the vision of the men who

transformed this uninhabitable swamp into a manufacturing landmark. 

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Public Limited Company-:

In December 1950, L&T became a Public Company with a paid-up capital of Rs.2

million. The sales turnover in that year was Rs.10.9 million. Prestigious orders

executed by the Company during this period included the Amul Dairy at Anand

and Blast Furnaces at Rourkela Steel Plant. With the successful completion of

these jobs, L&T emerged as the largest erection contractor in the country. In

1956, a major part of the company's Bombay office moved to ICI House in

Ballard Estate. A decade later this imposing grey-stone building was purchased by

L&T, and renamed as L&T House - it’s Corporate Office. The sixties saw a

significant change at L&T - S. K. Toubro retired from active management in

1962. The sixties were also a decade of rapid growth for the company, and

witnessed the formation of many new ventures: UTMAL (set up in 1960), Audco

India Limited (1961), Eutectic Welding Alloys (1962) and TENGL (1963).

Expanding Horizon-:

By 1964, L&T had widened its capabilities to include some of the best

technologies in the world. In the decade that followed, the company grew rapidly,

and by 1973 had become one of the Top-25 Indian companies. In 1976, Holck-

Larsen was awarded the Magsaysay Award for International Understanding in

recognition of his contribution to India's industrial development. He retired as

Chairman in 1978. In the decades that followed, the company grew into an

engineering major under the guidance of leaders like N. M. Desai, U. V. Rao, S.

D. Kulkarni and A. M. Naik. Today, L&T is one of India's biggest and best

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known industrial organizations with a reputation for technological excellence,

high quality of products and services, and strong customer orientation. It is also

taking steps to grow its international presence. For an institution that has grown to

legendary proportions, there cannot and must not be an 'end'. Unlike other stories,

the L&T saga continues...

Record of Achievements-:

Larsen & Toubro’s signature of excellence is evident on:

Refinery projects executed in the GCC countries.

World’s largest coal gasifier made in India and exported to China.

The world’s largest ethylene oxide reactor supplied to a petrochemical

complex.

Oil and gas platform projects executed to global benchmark to oil majors

including those in Abu Dhabi.

The world’s largest continuous catalyst regeneration reactor.

The simultaneous execution of clean fuel project.

L & T’s Business Profile:-

Larsen & Toubro Limited (L&T) is India's largest engineering and construction

conglomerate with additional interests in electrical, electronics and IT. A strong

customer-focus approach and constant quest for top-class quality have enabled

L&T to attain and sustain leadership over 6 decades. EPC project business

constitutes a critical part of the L&T's engineering core. L&T has integrated its

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strengths in basic and detailed engineering, process technology, project

management, procurement, fabrication and erection, construction and

commissioning, to offer single point responsibility under stringent delivery

schedules. Strategic alliances with world leaders enable L&T to access technical

know-how and execute process intensive, large scale turnkey projects to maintain

its leadership position. L &T's international presence is on the rise, with a global

spread of over 30 offices and joint ventures with world leaders. Its large

technology base and pool of experienced personnel enable it to offer integrated

services in world markets. L&T enjoys a brand image in India and several

countries offshore. With factories and offices located all over the country and

abroad, L&T operations are supplemented by a comprehensive distribution

network and nationwide ramifications for customer service and

Larsen & Toubro Limited - engineering and construction major - is among the

largest and most reputed companies in India's private sector. The Construction

division of Larsen & Toubro Limited - is India's largest construction organization.

Many of the country's prized landmarks - its exquisite buildings, tallest structures,

largest industrial projects, longest flyover, and highest viaducts - have been built

by ECC. Leading-edge capabilities cover every discipline of construction: civil,

mechanical, electrical and instrumentation. As a division of L&T, ECC has the

resources to execute projects of large magnitude and technological complexity in

any part of the world. The business of ECC Division is organized in six business

sectors which will primarily be responsible for Technology Development,

Business Development, International Tendering and work as Investment Centers.

ECC Division's head quarters in Chennai, India. In India, 7 Regional Offices and

over 250 project sites. In overseas its has offices in Gulf and other overseas

locations.

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Larsen & Toubro , India's top engineering and construction firm, plans to sell 10.3

million shares of Ultratech Cement for up to $160 million. L &T will sell the

shares, 8.3 percent of the equity in the cement maker, at 720 to 735 rupees each in

block deals. The price range is lower by 3.7 to 5.7 percent to Ultratech. Larsen &

Toubro limited ), a 100% subsidiary of the US$ 3.5 billion Forbes Global 1000

and Business Week Asia top 50 technology-driven engineering and construction

major, Larsen & Toubro Limited, offers comprehensive, end-to-end software

solutions and services. Leveraging the heritage and domain expertise of the parent

company, its services encompass a broad technology spectrum, catering to leading

international companies across the globe. A Range of Products & Services.

History of L & T Limited:-

L & T was founded by two Danish engineers, Holck Larsen and Soren Kristian

Toubro, in 1938. Beginning with the import of machinery from Europe, L & T

rapidly took on engineering and construction assignments of increasing

sophistication. It now has a major presence in key sectors of the economy. A

strong, suctomer-focussed approach and the constant quest for top class quality

have enabled the company to attain and sustain leadership in its major lines of

business across seven decades.

With factories and offices located around the country, further supplemented by

a comprehensive marketing and distribution network, L & T enjoys an equity in

virtually every district of India. The company has an international presence, with

a global spread of offices and joint ventures with world leaders. L & T’s large

technology base and pool of experienced personnel enable it to offer integrated

services in world markets.

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The Sales and Order Inflow Statement-:

I am giving the order inflow and sales graph of L & T group of companies. From

the graphs it will be very clear about the growth of the company.

Order inflow in Billion:

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From the above graph it is very clear that X-axis measures the Year from

2005 to 2008. The Y-axis measures the order inflow growth in the company in

Billion. In 2005-2006 the growth rate 224 Billion. In 2006-2007, it is increased to

306 Billion. In 2007-2008 it is increased to 420 Billion. It is the highest growth

rate. From this we can understand the order inflow in the company is increasing

year by year. It is the largest construction company.

Sales in Billion:

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From the above graph it is clear that the X-axis measures the Year from 2005 to

2008. The Y-axis measures the sales growth in billion. In 2005-2006 the sales

growth is 150 Billion. In 2006-2007 the sales growth has increased to 179 Billion.

In 2007-2008 it has increased to 252 Billion. It is the highest sales growth. From

the above graph it is very clear about the sales growth of the company.

Major Awards Received by L&T in 2009

L&T is ‘Best for Investor Relations’: Asiamoney

Technology Block at Hazira wins LEED Platinum Rating

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L&T-Chiyoda bags ICWAI Award for Excellence in Cost Management

L&T Wins Golden Peacock Award for Corporate Social Responsibility

Chemtech Business Leader of the Year

L&T bags FICCI Award for Outstanding Corporate Vision

Padma Bhushan for Mr. A. M. Naik

ET Business Leader of the Year for Mr. A. M. Naik

Mr. A.M. Naik Conferred Gujarat’s Highest State Honour - ‘Gujarat Garima Award’

Departments of Larsen & Toubro

The company is having the following departments. The common aims of these

departments are “Sales and Services”.

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MES / MED - Medical Equipment Section / Department

PSD / EMS - Parts Service Department / Earthmoving Machinery Service ESP - Electrical Standard Product

WPB - Welding Product Business

PDP - Petrol Dispensing Pump

CEB - Construction Equipment Business

LTCEPL - L&T Case Equipment Private Limited

VBG - Valves Business Group

E&C - Engineering & Construction

IIPM - Indian Institute of Production Management

ADMINISTRATION & HR - Administration & HR

ACTS - Accounts

My Work in L & T

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At Larsen & Toubro Limited I was doing office work. Mr. Prasenjit Paul and Mr.

Bijaya Nayak helped me a lot. They taught me a little bit techniques of "Systems

Applications and Products (SAP)”. Basically there, my work was to how fund is

being managed by way of disbursing cheques and cash payments and amount

received from various customers towards sales. They also briefed me about the

sales tax. They generally pay their taxes on the 20 th of every month. So they have

to calculate their taxes before the due date. They taught me the calculation of tax.

I helped them in calculating the tax. We generally calculate all the departments’

tax separately. Then we add all the taxes, calculate it. After that we submit it to

the Bhubaneswar (Orissa) Sales tax office. After working there for 45 days I

understood the value of Waybill. Generally in the corporate like L&T the value of

the Waybill is very important. It is used to transfer the goods from one state to

another. This is the document that is issued from the sales tax office of

Bhubaneswar (Orissa).

From the very first day of my work they taught me that how to deposit cheques in

the Bank. Then they taught me the ways or techniques of SAP, because most of

the work of the company is done in SAP only. So I am very much thankful to the

organization for giving me the opportunity to work with them for few days.

In L & T, I was doing the following work:

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Payment Vouchers were being scrutinized by me after it came Accounts

Dept. Basically authorization part were ckecked.

I was also checking GL (General Codes) mentioned in the vouchers

company for proper accounting.

I have done some accounting work like entry of cheques, journal entry etc.

in SAP.

The most important thing that I have done is the Bank Reconciliation.

About the transfer of their stock or inventory i.e. all about the Waybill.

Rectification entry in SAP

About the taxation system of the company. The taxation includes VAT,

CST, Entry Tax (ET), C-Form, and F-Form.

Research Methodology

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Sources of the Data:-

There are two sources from where I was collecting the data everyday. One source

is from the employer’s applications and from the expenses bills of the employees.

Methodology and Limitation:- The methodology adopted for this study includes both qualitative and quantitative

types of analysis to arrive at a conclusion.

Tools and Techniques:-

MS-Excel and SAP

Working Area: L & T Branch Office Bhubaneswar (Orissa)

Research Design: Descriptive Design

Questionnaire: 6 questions

Limitations:-

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I was working in the branch office of L&T. That is the office of L&T’s Marketing

Network. I feel, the following are the limitation of the company.

Emergency payment sometimes become difficult since fund has to

come from H.O

The work area is very big.

Time constraint, I have to complete the study within time.

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Nature of Reimbursement to employees in Bhubaneswar Branch

Cash payment for employees inside Office.

The following procedures are followed in this company :-

Fund is getting transferred from Head Office on request to Local Bank (Current)

account . The request is based on expense vouchers available with dept.

Then amount is being withdrawn from Bank for disbursement of cash.

Where the request is from outside Bhubaneswar then the same is settled through

cheque.

A manual Cash Book is being maintained for cash payments and closing balance

is arrived.

End of the day the balance is being tallied with physical cash and denominations

are written in the cash book. If tallied then the same is being signed by the Branch

Accountant. I find this as a very good system in control point of view.

After this all the vouchers are entered in SAP and further tallied with Cash Book

in SAP and also corresponding GL Account.

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Payment to employees outside Bhubaneswar

Employees who are posted in other location like Rourkela, Jharsuguda, Barbil,

etc, the reimbursement process is done by cheque. Basically their expenses are

clubbed for the whole month and being sent to this office. After receipt of the

vouchers the expenses are scrutinized and properly authorized by respective

persons. Then the expenses are reimbursed by cheque in favour of employees.

The following activities take place for disbursement in the company.

1. Cheque payment

2. Vouchers payment

3. Bank Reconciliation

4. Imprest account System

5. Business I.O.U.

6. Rectification Entry

These are the petty cash dealings in the company L&T. Let’s explain these one by

one.

Cheques

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A cheque (British English/Canadian) or check (American English) is a negotiable

instrument instructing a financial institution to pay a specific amount of a specific

currency from a specified demand account held in the maker/depositor's name

with that institution. Both the maker and payee may be natural persons or legal

entities.

The most common spellings of the word (in all its senses) were check, checque,

and cheque from the 1600s until the 1900s. Since the 1800s, the spelling cheque

(from the French word chèque) is standard for the financial sense of the word in

the UK, Ireland, and the Commonwealth, while only check is retained in its other

senses, thus distinguishing the two definitions in writing.

The cheque had its origins in the ancient banking system, in which bankers

would issue orders at the request of their customers, to pay money to identified

payees. Such an order was referred to as a bill of exchange. The use of bills of

exchange facilitated trade by eliminating the need for merchants to carry large

quantities of currency (e.g. gold) to purchase goods and services. A draft is a bill

of exchange which is not payable on demand of the payee. (However, draft in the

U.S. Uniform Commercial Code today means any bill of exchange, whether

payable on demand or at a later date; if payable on demand it is a "demand draft",

or if drawn on a financial institution, a cheque.)

The ancient Romans are believed to have used an early form of cheque known

as praescriptiones in the first century BC. During the 3rd century AD, banks in

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Persia and other territories in the Persian Empire under the Sassanid Empire

issued letters of credit known as Ṣakks.

Muslims are known to have used the cheque or ṣakk system since the times of

Harun al-Rashid (9th century). In the 9th century, a Muslim businessman could

cash an early form of the cheque in China drawn on sources in Baghdad,a

tradition that was significantly strengthened in the 13th and 14th centuries, during

the Mongol Empire. Indeed, fragments found in the Cairo Geniza indicate that in

the 12th century cheques remarkably similar to our own were in use, only smaller

to save costs on the paper. They contain a sum to be paid and then the order "May

so and so pay the bearer such and such an amount". The date and name of the

issuer are also apparent.

Between 1118 and 1307, it is believed the Knights Templar introduced a cheque

system for pilgrims travelling to the Holy Land or across Europe.The pilgrims

would deposit funds at one chapter house, then withdraw it from another chapter

at their destination by showing a draft of their claim. These drafts would be

written in a very complicated code only the Templars could decipher.

Cheques generally contain:

1. Place of issue

2. Cheque number

3. Date of issue

4. Payee

5. Amount of currency

6. Signature of the drawer

7. Account number

Let’s see one example of cheque.

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In L & T we generally separate the cheques in two names.

1. Local cheque

2. Outstation cheque

All the cheques coming from Bhubaneswar is called as local cheque. Because the

branch office is situated in Bhubaneswar(Orissa). All cheques and other

Negotiable Instruments payable locally would be presented through the clearing

system prevailing at the centre. Cheques are being collected by authorized

representatives of Collection Bank before the specified cut-off time will be sent

for clearing on the same day. Bank branches situated at centers where no clearing

house exists, would present local cheques on drawee banks across the counter and

it would be the bank’s endeavor to credit the proceeds at the earliest.

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Cut-off time up to which cheques received will be sent for clearing on the

same day depending upon the local Clearing House rules shall be displayed

prominently for the customers by each branch for cheques received across the

counter / in the drop box / for high value clearing and for credit to Govt. A/cs like

Income Tax etc.

All the cheques coming outside Bhubaneswar (Orissa) is called as outstation

cheques. Cheques drawn on other banks at outstation centers will normally be

collected through bank’s branches at those centers. Where the bank does not have

a branch of its own, the instrument would be directly sent for collection to the

drawee bank or collected through a correspondent bank. The bank would also use

the National Clearing services offered by the Reserve Bank of India at centers

where such collection services exist.

Cheques drawn on bank’s own branches at outstation centers will be collected

using the inter-branch arrangements in vogue. Branches which are connected

through a centralized processing arrangement and are offering anywhere banking

services to its customers will provide same day credit to its customers in respect

of outstation instruments drawn on any of its branches in the CBS network.

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Vouchers

A voucher is an accounting document representing an internal intent to make a

payment to an external entity, such as a vendor or service provider. A voucher is

produced usually after receiving a vendor invoice, after the invoice is successfully

matched to a Purchase Order. A voucher will contain detailed information

regarding the payee, the monetary amount of the payment, a description of the

transaction, and more. In Accounts Payable systems, a process called a "payment

run" is executed to generate payments corresponding to the unpaid vouchers.

These payments can then be released or held at the discretion of an Accounts

Payable supervisor or the company Controller.

In L & T accounts section is using two types of vouchers. They are:

1. Payment Vouchers

2. Receipt Vouchers

The Payment Voucher is an Voucher used for cash and bank payments.

One employee has to spend some amount of money for official use . After

the submission of the payment bills he can get his money back from the

company. For this purpose he uses the payment voucher.

The Receipt Vouchers are used only to receive the cash and cheques from

the bank. L & T is dealing with two banks. They are :

AXIS Bank

CITI Group bank

This is all about the Voucher system of L & T group of companies

~35~

Bank Reconciliation

Bank reconciliation is the process of comparing and matching figures from the

accounting records against those shown on a bank statement. The result is that any

transactions in the accounting records not found on the bank statement are said to

be outstanding. Taking the balance on the bank statement adding the total of

outstanding receipts less the total of the outstanding payments this new value

should (match) reconcile to the balance of the accounting records.

Bank reconciliation allows companies or individuals to compare their account

records to the bank's records of their account balance in order to uncover any

possible discrepancies. Discrepancies could include: cheques recorded as a lesser

amount than what was presented to the bank; money received but not lodged; or

payments taken from the bank account without the business's knowledge. A bank

reconciliation done regularly can reduce the number of errors in an accounts

system and make it easier to find missing purchases and sales invoices.

Similar to the process of verifying that bank accounts are in agreement,

Custodian banks who hold securities for clients must also verify that the count of

securities held at the bank matches the client's account(s).

There are many different types of security reconcilements, such as between an

investment manager and the Custodian bank, Fund Accounting or between the

Custodian bank and a depository (such as Euroclear or The Depository Trust

Company)

~36~

Security reconcilements are usually either positional or transactional in

nature. In both cases, the reconcilement is frequently conducted at the security

identifier level, such as CUSIP, ISIN, or SEDOL.

In a positional reconcilement, the shares are counted between two parties and

compared. If the counts match, then the position is said to be in balance. If the

positions do not match, then it is considered "out of balance", also referred to as a

"break".

In a transactional reconcilement, only the changes from transactions are

applied to accounts. The reconcilement occurs by matching offsetting transactions

between the two sides of the reconcilement. If a transaction cannot be properly

matched with its counterpart, it is left open and referred to as an "exception".

A transactional reconcilement can be more accurate when trying to resolve

exceptions. In a positional reconcilement, the only fact known is that the positions

do not agree; in a transactional environment, all of the details are available to

allow for more granular research.

In some locations, reconciliations are required for regulatory reasons.

Most positions are reconciled daily to reduce risk, though for situations where

positions are illiquid or traded less frequently (such at OTC Derivatives), they

might be reconciled weekly or monthly.

A company's general ledger account Cash contains a record of the transactions

(checks written, receipts from customers, etc.) that involve its checking account.

The bank also creates a record of the company's checking account when it

processes the company's checks, deposits, service charges, and other items. Soon

after each month ends the bank usually mails a bank statement to the company.

~37~

The bank statement lists the activity in the bank account during the recent month

as well as the balance in the bank account.

When the company receives its bank statement, the company should verify that

the amounts on the bank statement are consistent or compatible with the amounts

in the company's Cash account in its general ledger and vice versa. This process

of confirming the amounts is referred to as reconciling the bank statement, bank

statement reconciliation, bank reconciliation, or doing a "bank rec." The benefit

of reconciling the bank statement is knowing that the amount of Cash reported by

the company (company's books) is consistent with the amount of cash shown in

the bank's records.

Because most companies write hundreds of checks each month and make many

deposits, reconciling the amounts on the company's books with the amounts on

the bank statement can be time consuming. The process is complicated because

some items appear in the company's Cash account in one month, but appear on the

bank statement in a different month. For example, checks written near the end of

August are deducted immediately on the company's books, but those checks will

likely clear the bank account in early September. Sometimes the bank decreases

the company's bank account without informing the company of the amount. For

example, a bank service charge might be deducted on the bank statement on

August 31, but the company will not learn of the amount until the company

receives the bank statement in early September. From these two examples, you

can understand why there will likely be a difference in the balance on the bank

statement vs. the balance in the Cash account on the company's books. It is also

possible (perhaps likely) that neither balance is the true balance. Both balances

may need adjustment in order to report the true amount of cash.

~38~

After you adjust the balance per bank to be the true balance and after you adjust

the balance per books to also be the same true balance, you have reconciled the

bank statement. Most accountants would simply say that you have done the bank

reconciliation or the bank rec.

A bank reconciliation statement is a statement prepared by organizations to

reconcile the balance of cash at bank in a company's own records with the bank

statement on a particular date. This statement is the most common tool used by

organizations for reconciling the balance as per books of company with the bank

statement and is made at the end of every month. The main objective of

reconciliation is to ascertain if the discrepancy is due to error rather than timing.

The difference between the two records on a given date may arise because of the

following:

Cheques drawn but not yet presented to the bank.

Cheques received but not yet deposited in the bank.

Interest credited and not recorded in the organization's books.

Bank charges debited but not recorded in the organization's books.

Bank Reconciliation Statement process is being outsourced to professional

accounting firms by large organizations. This helps them have an accurate view

and also ensure that the company's bookkeeping is good. Accounting firms make

monthly reconciliation statements for clients and help them determine any

discrepancy.

Simply saying bank reconciliation is used to equalize our own cash book to the

bank’s cash book.

~39~

Procedure followed for Bank Reconciliation at Bhubaneswar

1. Bank statement for the month is being downloaded from net.

2. GL for Bank Book is downloaded from SAP.

3. Both the data are merged and sorted according to cheque no.

4. If the cheque no and amount matches then the same separated.

5. The left out data is considered for reconciliation item and tallied Bank

Balance.

6. A sample copy is attached for reference.

~40~

Imprest System

Simply saying imprest amount means the small expenses of the office. Petty cash

imprest system allows only replenishing the spending. So, if you start the month

with Rs.1000 in your petty cash float and spend Rs.900 of that cash in the month,

an amount of Rs.900 will be then placed in your petty cash float to bring the

balance of your petty cash float back to Rs.1000. In this example the maximum

amount of petty cash that can be issued (spent) is Rs.1000. You can only spend

what you have and you are only replenished with what you spend, in this case

Rs.900.

In a non imprest system where a fixed amount is issued every month e.g. Rs.1000

every time cash is required, there is no incentive to ensure all money issued has

been documented because when money is all spent a cheque for a fixed amount is

issued. It is much more difficult to reconcile a non imprest system as you never

know how much exactly should be in the float.

In an imprest system the amount requested is documented. The documentation

being the petty cash dockets and their associated receipts or invoices. So at all

times you can check how much should be left in the petty cash float by deducting

the amount spent from the opening petty cash float. The imprest system ensures

that you must document how the petty cash is spent. In a petty cash system, petty

cash dockets are written for each amount issued. So when all of these dockets are

totalled at the end of the month and deducted from the opening petty cash float,

the calculated value must agree with what is left in the petty cash float. Under the

imprest system, only that which is recorded as spent is replenished. Any shortfalls

~41~

may have to be replenished by the guardian, usually a bookkeeper, of the petty

cash float from their own personal resources. In a non-imprest system, a fixed

amount is issued every month.

Every time cash is required, there is no incentive to ensure all money issued has

been documented because when money is all spent, a cheque for a fixed amount is

issued by the chief cashier. It is much more difficult to reconcile a non-imprest

system as you never know how much exactly should be in the float. In an imprest

system, the amount requested is documented. So, at all times, you can check how

much should be left in the petty cash float by deducting the amount spent from the

opening petty cash float.

An imprest system of petty cash means that the general ledger account. Petty Cash

will be set at a given amount. As long as set amount is adequate for small

disbursements the Petty Cash account will never have an entry again. When the

amount in the account gets low, a request will be made to replenish the money

that was disbursed. The requested check is drawn on the organization's checking

account, the Cash account will be credited not the Petty Cash account. The

expense accounts will be debited as shown by the petty cash receipts, e.g. Postage

expense, supplies expense. In a nut shell, the general ledger account Petty Cash is

not shown to be involved in the replenishment.

~42~

Business I.O.U.

Business I.O.U. is issued in only exceptional cases. It is issued to employee only

for the business purpose. Example; Meeting, training programme etc. It is

otherwise known as the advance payment. If he didn’t use it in his work he has to

return it to the company with proper explanation. Two Business I.O.U.s cant be

issued in the name of one employee. At first he has to settle his 1 st I.O.U.. Then

the second I.O.U. will be issued. This I.O.U have to settled in 3 days, in

exceptional cases maximum of seven days are allowed.

An abbreviation of the phrase I.O.U. is "I owe you."

An I.O.U. in the business community is actually a legally binding agreement

between a borrower and a lender. The terms of the loan are set out in a contract,

and, once it's signed, the two parties must abide by the terms of the contract or

face legal repercussions. For example, when a corporation issues bonds, it is in

essence issuing an I.O.U. to bondholders. The I.O.U. or bond contract sets out the

terms, including the principal that will be owed, the interest that will be paid, and

the time at which these payments will occur.

~43~

Rectification Entry

Every businessman is interested in finding out the true profit and correct financial

position of his business at the close of the trading period. The effort of the

accountant is to prepare the final accounts in such a fashion which exhibits true

picture of the business. Accounts are considered to be authentic proof of true

financial position of a concern. But in spite of best efforts there are certain

transactions which are omitted to be recorded or entered wrongly in the books.

Such errors affect the final accounts. An accountant should, therefore, try to

locate such errors and rectify them before the preparation of final accounts.

 

Accountants prepare trial balance to check the correctness of accounts. If total of

debit balances does not agree with the total of credit balances, it is a clear-cut

indication that certain errors have been committed while recording the

transactions in the books of original entry or subsidiary books. It is our utmost

duty to locate these errors and rectify them, only then we should proceed for

preparing final accounts. We also know that all types of errors are not revealed by

trial balance as some of the errors do not affect the total of trial balance. So these

cannot be located with the help of trial balance. An accountant should invest his

energy to locate both types of errors and rectify them before preparing trading,

profit and loss account and balance sheet. Because if these are prepared before

rectification these will not give us the correct result and profit and loss disclosed

by them, shall not be the actual profit or loss.

This entry is used to rectify or to correct one entry. Let’s take an example of the

rectification entry.

~44~

“Conveyance expense”

Wrong Entry: Cost of Ticket A/c……Dr.

To Cash Journal

Correct Entry: Conveyance exp A/c……Dr

To Cash Journal A/c

Rectify Entry: Conveyance exp A/c ……..Dr

To Cost of Ticket A/c

This is the correct entry that means the rectification entry. This entry is used to

cancel one entry. We can use this entry in SAP cash journal entry.

~45~

Recommendation & Suggestions

I am very pleased that I got a project in L&T Ltd. While doing my project I found

that everyone is very hard working. They have good knowledge about their work.

They come to office on time, do their work properly and if the work is more, then

they overstay to complete the task.

Being associated with them for one and half months, I have some observations

mentioned below. This might help the department in reduction of idle fund and

time management.

1. One employee is settling many vouchers (4-5 time) a month. This can be

restricted to only 1. This will reduce cashiers time as well punching time

in SAP. Also minimize vouchers which will help them in space

management.

2. The average daily cash balance for the month of May’09 was approx.

Rs.30,000/-. This amount is on higher side. This can be brought down to

less than Rs.10,000/- and improve their fund management.

3. Also average daily Bank Balance for the month of May’09 was approx.

Rs.2.61L. This amount is also on higher side and same can be reduced to

Rs.1 L.

~46~

Findings-:

As I have mentioned earlier that I was working for the marketing network of the

L&T, basically my work was to deal with the cash balance of the company. This

is all about the proper functioning of the cash in the company. As I mentioned that

my work was to deal with petty cash and disbursement in the company, so I have

to check the payment vouchers of the company.

Through my questionary I came to know that by using petty cash in the company

we can maintain the cash properly. The employees of the company can be

satisfied with the proper functioning the petty cash and disbursement.

~47~

Date Cash Balance No. Of Vrs Date Bank Balance

1-May-09 20563 4 1-May-09 311238

2-May-09 20563 2-May-09 311238

3-May-09 20563 3-May-09 311238

4-May-09 20563 4-May-09 235895

5-May-09 20563 5-May-09 213866

6-May-09 20563 6-May-09 213866

7-May-09 52440 12 7-May-09 163866

8-May-09 39966 9 8-May-09 156866

9-May-09 39966 9-May-09 156866

10-May-09 39966 10-May-09 156866

11-May-09 17134 11 11-May-09 156866

12-May-09 17134 12-May-09 156866

13-May-09 11534 6 13-May-09 113762

14-May-09 11534 14-May-09 313762

15-May-09 17004 6 15-May-09 313762

16-May-09 17004 16-May-09 263762

17-May-09 17004 17-May-09 263762

18-May-09 17004 18-May-09 263762

19-May-09 5278 6 19-May-09 263762

20-May-09 48000 4 20-May-09 1138762

21-May-09 48000 21-May-09 279163

22-May-09 48000 22-May-09 279163

23-May-09 48000 23-May-09 240266

24-May-09 45376 4 24-May-09 240266

25-May-09 42987 4 25-May-09 240266

26-May-09 42487 1 26-May-09 229727

27-May-09 35712 1 27-May-09 223250

28-May-09 35452 3 28-May-09 221499

29-May-09 32107 4 29-May-09 221499

30-May-09 36107 1 30-May-09 221499

31-May-09 36107 31-May-09 221499TOTAL 924681 TOTAL 8098730

~48~

Daily Avg

Balance

29828.42 Daily Avg

Balance

261249

~49~

Conclusion

Well, I am very thankful to Larsen & Toubro Limited for giving me an

opportunity to do my project. The culture of Larsen & Toubro is very good and

everyone is fully devoted to their work.

I feel that I am very much lucky for doing my internship in Larsen & Toubro

Limited Bhubaneswar (Orissa).

~50~

ANNEXURE

1. What is your job title or designation in this company?

2. What is your initial name in the company?

3. What is the product that you have purchased for the company?

4. Do you have any bill as evidence?

5. Any other expenditure?

6. For any extraordinary expenditure, whether any prior approval is

there or not ?

Date:Place: Bhubaneswar (Orissa) Signature

~51~

Bibliography

www.larsentoubro.com

www.google.com

www.answers.com

www.corporate.finance.com

www.wikipedia.org

www.wikianswers.com

~52~