Cash Drill Procedure for Factory

CASH DRILL PROCEDURE FOR FACTORY:

INTRODUCTORY: (A) Contents of the cash drill procedure- Drill for accounting of cash and the maintenance

of cash book in factory will be as detailed below:-

Accounts officer in the “drill” means the Accounts officer attached to the Factory unless otherwise stated.

(B) Procedure of the cash drill supplementary to basic rules or Government orders on the subjects:- The procedure laid down in this “drill” is supplementary to and in amplification of the rules of the subjects

and nothing in it will be held to supersede any of the standing rules or regulations or orders of the Government of India with which it may be at variance.

GENERAL PROCEDURE OF CASH ACCOUNTING:-

1. The superintendent/officer-in-charge of the factory may delegate the duty of writing up the cash book to any of his Gazetted officers or to the cashier. He is not any way relieved of financial responsibilities by this delegation of duty.

2. The officer-in-charge, cash will exercise direct supervision overall money transaction and personally check and initial all entries in the cash book on a day to day basis after

he has verified that the cash voucher are complete in all respects as required by the regulations particularly in regard to payees receipts.

3. All receipts and payments of money whether in coins, notes, cheques, bank drafts, etc., must without reservation and without any exception whatsoever, be posted in the cash book, the receipts being posted on the debit side and payment on the credit side. When cash is drawn in lump each transaction should be shown separately in the column “Particulars”.

4. Transactions occurring during the course of the day must be posted in

the cash book on the same day. On no account should they be left over for being posted in the cash book on subsequent days, except on the main pay days for non-industrial staff and industrial establishment. Payment to non-industrial staff and industrial establishment on the main pay days may be posted in the cash book on the following day.

5. Sum drawn should be utilized only for the purpose for which they have been drawn. e.g., an amount drawn for the purpose of payment to industrial employees should be used for payment of industrial personnel only and not for payment to the permanent establishment or for any other payment.

6. Sums drawn for a specific purpose but not subsequently required for that purpose must be remitted into the Treasury on a receivable order to the credit of the Government.

7. No money will be billed for from the accounts officer unless required for immediate use. Similarly no money should be drawn from the factory’s current account unless there is immediate prospect of its disbursement. It is essential that the cash in hand with the cashier in the factory should be kept down to the minimum consistent with meeting accrued claim in a reasonable time.

8. Money remitted by money order should be entered in a money order check register I.A.F.Z. 2067 wherein

the money order receipt and the postal acknowledgement should also be posted vide Rule, Section, and Cheques [Rules 19(3)(b), F.R.I., Part-2]. The posting in this money order check register does not avoid the necessity for posting such a payment in the cash book and the entry in the money order check Register should be vouchers number with the entry actually making the payment I the cash book.

9. For all recoveries in cash the payee should be granted a receipt on I.A.F.A. 175 and the counter fall in the receipt book retained for accounting and audit purpose. All blank receipt books (I.A.F.A.-175) should be kept in the safe custody of the cash officer. The Receipt books will be issued to the cashier

according to serial number and the issues should be recorded and receipted for by the cashier.

10.Private deposits are not to be kept in the Treasure chest.

11.At the time of disbursement deductions should be made from the individual concerned for changes affecting their salary which may have been noticed after the submission of the bill.

12.A summary showing the total amount disbursed on different dates will be recorded on the pay bills and attested by an officer.

13.Amount remaining undisbursed which may be due to absence, discharge, etc., of the payee will be paid into the treasury on a receivable order to the credit of the C.D.A(fys.), before the last day of the month without fail, or should in variably be credited through the next pay bill, in respect of personnel other than industrial employee, unless, it is definitely known that the absentees will call for payment with in a definite period. In such cases the required amount mat be retained and shown in the balance sheet as liability. In any case the undisbursed amount will not be carried over beyond the end of the following month.

14.Amount subsequently required for payment of the absentees whose dues were credited to Government

may be treasury receipt C.D.A(fys.) on the submission of the bill where in the treasury receipt or bill through which the undisbursed amount was credited and the number of the forwarding letter with which the treasury receipt or bill was sent to the account officer should be quoted.

15.Payment of staff other than the industrial employees will be made on the first working day of the month and absentees will be paid on dates fixed from time to time.

MAINTENANCE OF CASH BOOK:

1. The cash book is to be maintained in Form I.A.F.O.1887(slightly modified to suit local conditions). The manner in which the cash book has got to be ruled and postings have to be made and the instructions relating to the totaling and balancing of the cash book are set down in explanatory notes (not reproduced) and this should be studied carefully.

2. The existing Heads of Accounts in the cash book will be as laid down though changes can be made to suit conditions with the approval of the local Accounts Officer.

3. Entries on the debit and credit sides on any one page of the cash book should be for the same dates, e.g., payments for the 10th of a month

should be posted on the credit side of the cash book on which the receipts for that date appear on the debit side and vice versa.

4. Blank spaces should be ruled diagonally across the page, the line starting from the right hand edge of the page on top and ending at the bottom left hand corner.

5. The correctness of the entries in the cash book should be verifiable at any time as the difference between the totals of cash and bank on the debit and credit sides will always be equal to the difference of the totals of the detailed headings on those sides.

6. The balance as per cash book at the end of the day must be checked and agreed by the cash officer with the

actual cash in the factory’s cash box and/or safe.NOTE:- The balance as per cash book on any day (including contingencies) must always agree with the actual cash and difference, if any, which can be due only to errors in posting the cash book or in receiving or paying money, must be immediately reconciled, Discrepances must on no account be left over to be reconciled later. Any actual deficiency in cash must be reported forthwith to the superintendent/officer-in-charge who will take necessary action as required by regulations.

7. The entries in the cash book should be serially numbered (in the column ‘Entry No’ of the cash book) there

being separate serial for the debit and credit sides and for each month. These serial no. should be entered on the bill, voucher, cheque, slip, etc., to which the entry may relate.

8. The bill and voucher number relating to each posting in the cash book must be posted in the column ‘Voucher No.’ of the cash book.

9. Figures once written in the cash book must on no account be erased or over written, incorrect entries if any should be neatly second through and the correct figures written above it which must be attested under the dated initials of the Officer-in-charge, cash as close as possible on the left hand side of the new figure as provided for the Rule , Section

, ‘General Financial Principal’ (Rule 83, F.R.I., Part 2).

10. A balance sheet (statement of assets and liabilities) as laid down will be prepared monthly and recorded in the cash book at the end of each month. The assets side (which should be on the right hand side) of the balance sheet will show the unexpected balance remaining in hand and the amount due from accounts officers and liabilities side (on the left hand side) will exhibit what this unexpected balance consist of, i.e., those items for which funds have been drawn but which have not been spent.

11.A Reconciliation Statement in the form laid down will also be prepared at the end of the month in order to reconcile the bank balance as per

cash book with the balance held in the bank at the credit of factory’s account on the date.

12.The Superintendent/officer-in-charge of factory will at the end of each month endorse a certificate in the cash book on the following line:-

“CASH COUNTED AND FOUND TO BE CORRECT.”

MONTHLY CLOSING OF THE CASH BOOK:-(1) On the last day of the month after

all entries in the cash book have made, the cash book will be closed in the following manner:-

(a) Debit side :- A line will be drawn below the last entry on the debit side, each column will be totaled and the total thus arrived at, will be recorded in their respective columns below the line. Another line will be drawn below these totals and the cash book will be considered as closed so far as debit side is concerned and no further entry or correction will be permissible.

(b) Credit side :- The balance at the end of the month under each cash book heading (i.e., Bank, Cash, S. & E., Industrial establishment ) will be worked out and entered in the respective columns below the last entry for the month. A line will then be drawn below the balance so

entered and the total for the whole month, inclusive of the balance, will be entered below the line and another line drawn below these totals indicating final closing for the month.

(c) The grant totals for the month as at (a) above should be equal to the similar total at (b) above, if the cash book entries are correct.

NOTE :- The totaling on the debit and the credit side must be done independently

(2) The balance at the end of the month appearing in the credit side as per (1) (b) above must further be reconciled as under:-

(a) The balance in the ‘Bank’ column must be agreed with the book or statement of balances sent by the bank. Difference, if any, must be reconciled and a reconciliation statement recorded to the cash book.

(b) The balance in the ‘Cash’ column of the cash book represents actual cash with the factory and the Superintendent/Officer-in-charge of the factory must ensure by actual count of the cash in the cash box and/or in the safe that the same agrees with the cash book as balance referred to above.

(3) The balance shown on credit side of the cash book should then be

attested by the superintendent/officer-in-charge of the factory in token of his having verified the same with the actual cash and bank Pass Book.

(4) The above balance on the credit side at the end of the month should be carried over to the next month on the debit side (in their respective column) as the opening balance. Officer-in-charge, cash will verify that there balances have been correctly brought forward, and then attest the opening entries in token of his having done the verification.

(5) A balance sheet will be prepared at the end of each month under the signature of the Officer-in-

charge, cash. The cash in hand and bank as per balance sheet must agree with that arrived at and shown as at sub-para. (1) (b) above.

HOW FACTORY OBTAIN REQUIREMENT FOR CASH:-

(1) The C.D.A.(fys.) is the ‘Pay master’ for factory and requisitions for the

cash requirements are submitted to him.NOTE:- As a temporary measure the accounts officer attached to factory have been authorized to issue cheques and consequently all claim (with certain exceptions such as withdrawal from funds, adjustment of claims of travelling allowance, etc.) will be submitted to the accounts officer for provisional payment.

(2) Payment by the Accounts officer or C.D.A.(fys.) are made by cheques to the Reserve bank of India, the State Bank of India, a local Treasury, or as arranged for provisional payment.

(3) Every cheque is supported by a ‘Cheque Slip’ which shows detailed of the bill, etc., in payment of which

the cheque is issued. One copy of the cheque slip accompanies the cheques and one copy is sent to the factory.

ACOUNTING OF CONTINGENT EXPENDITURE:-(1) Every factory is allowed a fixed

amount of permanent advance from which its pay to day miscellaneous expenses of the nature referred to in Rule , Section ‘Permanent Advance’ (Rule 488, P. & A. Regulations, Vol.2), are defrayed.

(2) The imprest account is maintained in the cash book under column ‘contingency.’

(3) Cheque received from the C.D.A(fys.) or account officer in recoupment of the imprest are included in the cash book on the

debit side under column contingency.

(4) The detailed daily payment from the imprest of the factory will be posted in the cash book under the appropriate column.

(5) If the imprest runs short and in any case at the end of each month, bills will be submitted to the local accounts officer for recoupment of the imprest.

(6) In the balance sheet of the factory the sanctioned amount of the imprest will appear on the liability side and the balance of the cash in hand and the amount spent but not yet recouped or bill submitted to the accounts officer

but awaiting recoupment on the assets side.

AUDIT OF CASH BOOK:-(1) The cash account of the

factory will be inspected monthly by the factory accounts officer.

(2) The Accounts officer will count cash at the time of local audit and inspection not less than twice in the year.

(3) Objection issued by the account officer will be replied to within ten days of their receipt in the factory. In the case of objections which are accepted, immediate steps

will be taken by the factory to rectify the defect.

HANDLING AND TAKING OVER OF CASH:-

(1) The superintendent/officer-in-charge of factory will at the time of handling over charge of his office, check the Government cash in his custody in company with the officer who relieves him.

(2) The relieving officer will record a certificate in the cash book as under:-

“cash counted on and found to be Rs.

Which agree with the cash book balance of date .”

(3) The certificate will be recorded on the disbursement (credit) side of the cash book and blank space between this certificate and the last entry in the cash book before recording the certificate should be ruled diagonally across the page.

(4) Below the certificate referred to in sub-para. (2) above the relieved and the relieving officer will jointly sign the cash book in token of their handling and taking over as under:-Hand over. Taken over.Relieved officer. Relieving officer.

(5) Further entries in the cash book will commence to be made below the

above certificate, blank space, if any being ruled as usual.

(6) The relieving officer will also satisfy himself that the books are correct and complete and then sign a certificate.

(7) The above procedure will be followed also by the officer-in-charge, cash or the cashier at the time of having over charge of his office.

CUSTODY OF FACTORY CASH WHILE STORAGE OR IN TRANSIT:-(1)SAFE CUSTODY OF CASH:- It is

obligatory that all Government

cash, large or small, must remain in secured condition, under proper guard. Under no circumstances, should any relaxation of this essential condition be allowed. The drill to be followed in this connection is:-(a)All money must kept in a safe

must remain in the strong room will have 3 locks each opening with a separate key, one key remaining with the cash officer, the second with the cashier and the third with the guard commander. The safe will have double locking arrangement and one key will remain with the cash officer and the other with the cashier. Guard will be provided by Armed Military personnel (M.D.S.C.) where available,

otherwise, by armed civil police. Where neither of these are available the local Military Authorities should be approached for providing guard.

(2)TRANSACTIONS WITH BANK:-In no circumstances must the cashier be put in complete charge of money on transit to or from the bank. A Gazetted Officer, normally the cash officer, must always go with him to the bank, accompanied by an adequate number or armed guards, the number of guards being determined by the accompanying officer with reference to the amount taken to or to be brought from bank. The whole party must remain with the cash until it has been deposited into the bank or

when brought from the bank, delivered to proper quarters in the factory.

CASH BALANCE TO BE CHECKED DAILY BY THE CASH OFFICER:- In order to minimize risk of misuse of cash, the actual cash balance should be checked every day by an officer, normally the cash officer, to see that it agrees with the balance shown in the cash book and thereafter, the cash balance in hand should be locked up in his guard room/strong room.

CHEQUES PREPARED TO BE EXAMINED BY CASH OFFICER:-Subject to the overall responsibility of the Superintendent/officer-in-charge of factory, the cash officer must examine each cheque prepared even if he does not write it out himself.

SUGGESTIONS

1. Cash section should be operated in synchronized manner.

2. The technical portion of cash section should be operated by the person who has technical knowledge.

3. There must be computer literacy to every person of cash section.

BIBLIOGRAPHY

1. FINANCIAL MANAGEMENT – I.M. PANDEY

2. RESEARCH METHODOLOGY- C.R. KOTHARI

3. BALANCE SHEET OF OPF

4. www.ofb.gov.in

INTRODUCTION TO CASH

MANAGEMENT

CASHMANAGEMENT IN OPF

ABOUT OPF