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Sri Sharada Institute of Indian
Management-Research
7, Institutional Area, Phase-II,
Vasant Kunj, New Delhi 70
Website: www.srisiim.org
SUMMERINTERNSHIP
PROJECTREPORTON
ACCOUNT PAYABLE &
FIXED ASSETS
PUNEET (20110112)
PGDM (2011-13)
FACULTY GUIDE: INDUSTRIAL GUIDE:
Mr. SSAANNJJEEEEVVSSAARREEEENN Mr. DEEEEPPAAKKGGHHOOSSHH
(Head of Cooperate accounts)
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Sri Sharada Institute of Indian Management-Research
7, Institutional Area, Phase-II, Vasant Kunj, New Delhi 70
Website: www.srisiim.org
SUMMERINTERNSHIP PROJECT REPORT ON
ACCOUNT PAYABLE & FIXED ASSETS
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF
POST GRADUATE DIPLOMA IN MANAGEMENT
SESSION 2011-2013
FACULTY GUIDE: INDUSTRIAL GUIDE:
Mr. SSAANNJJEEEEVVSSAARREEEENN Mr. DEEEEPPAAKKGGHHOOSSHH
(Head of Cooperate accounts)
SUBMITTED BY:
PUNEET (20110112)
PGDM (2011-13)
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DECLARATION
I PUNEET student of PGDM (2011-13) hereby declare that I have
completed this project ACCOUNT PAYABLE & FIXED ASSETS.
The information submitted is true to the best of my knowledge.
PUNEET (20110112)
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Table of Content
1. ACKNOWLEDGEMENT . 4
2. EXECUTIVE SUMMARY . 5
3. INTRODUCTION .. 6
4. COMPANYSHISTORY .. 11
5. COMPANY PROFILE . 12
6. CEOMESSAGE . 15
7.NMCPHILOSOPHY . 17
8. RESEARCH METHODOLOGY . 20
9. DOCUMENTS REQUIRED FORACCOUNTS PAYABLE . 23
10.ACCOUNT PAYABLE PROCESS OFNMC . 28
11.FIXED ASSETS CAPITALIZATION PROCEDURE . 34
12.ANALYSIS &PRESENTATION OF DATA AND INTERPRETATION . 36
13.FINDING . 50
14.SUGGESTIONS &RECOMMENDATIONS: . 51
15.CONCLUSION . 52
16.REFERENCES/BIBLIOGRAPHY . 53
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ACKNOWLEDGEMENT
Its a privilege to be associated with NMC Healthcare, one of the mostrespected and dominant business houses in the UAE. This
acknowledgement is not only the means of formality, but to me, it is a way by
which I am getting the opportunity to show the deep sense of gratitude and
obligation to all the people who have provided me with inspiration, guidance and
help during the preparation of the project.
At the very outset, I would like to express my gratitude from bottom of my heart to
MR.RAVEENDRARAI(Vice President) of HR & Personnel for giving me theopportunity to do my Summer Internship Project in this esteemed organization.
I articulate my sincere gratitude to my project guide MR.DEEPAKGHOSHHead of
Coorporate Accounts who has spend his valuable time and guided me throughout
the training process in spite his busy schedule, in shaping of my project.
I owe the enormous intellectual debt towards my
CMDSWAMI (DR.)PARTHASARTHY of SRI SIIM who helped to provide methe opportunity to undergo my Summer Internship Project in NMC Healthcare and
my faculty guide, MR.SANJEEV SAREEN for guiding and helped me in
preceding my project work, which ultimately resulted in successful completion of
the project. But last not the least I am thankful to my parents, friends and all well-
wishers for blessing me for my success.
PUNEET (20110112)
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Executive Summary
This project deals in Account Payable and Fixed Assets at NMC healthcareL.L.C.. Payable Management and Fixed Asset Management is one of the most
important aspects of the organization, as they all deal with the internal management
of the organization. The Accounts payable help to reduce the liabilities of the
companies and sound fixed asset management can lead to a substantial tax savings
in depreciation deductions, poor fixed asset practices can threaten the accuracy of
financial reports, causing re-reporting and negatively impacting the bottom line.
Therefore it needs a careful analysis and proper management.Creditor are the liabilities for the company which company have to pay
as soon as possible in this Accounts payable helps the company to pay
off the creditors. On the other hand Fixed Asset Management helps the
company to put tracking and depreciating fixed asset, which is an
important task for the organization.
With an increasing domestic and international competition, NMC
Healthcare L.L.C is using decent policy, in order to maintain its
premium position, with proper control on Accounts Payable and Fixed
Assets Management.
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INTRODUCTION
LITERATUREREVIEW:-
For Accounts Payable:
What is Account Payable?
Accounts Payable is a means by which you can monitor the disbursement of
money from you company simply put, Accounts payable records and pays a
companys bill or liabilities.
When a liability or debt is incurred, the vendor to whom the money is owed issuesan invoice. The debt or liability is recorded into Account Payable when you enter
the invoice. On the basis of this Account payable, the company is able to pay off all
their liabilities.
The Accounts Payable Cycle
Accounts Payable is normally operated on a monthly accounting cycle. During the
month you enter and post hand checks as they are issued. Then perhaps weekly, bi-weekly or even daily, depending on the volume of invoices you receive, you use the
checks processing cycle to create, print and post machine check payment to your
vendors. At the end of the month, print the monthly reports and balance the
accounts payable subsidiary ledger to your General Ledger. Finally, run the close
month process to close accounts payable for the current month and prepare for the
next months processing.
Reports can be printed and inquiries used to supply information at any time during
the month.
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For Fixed Assets:
Fixed assets are those assets which are required and held permanently
for a pretty longtime in the business and are used for the purpose for
earning profits The successful continuance of the business depends uponthe maintenance of such assets, They are not meant for resale in the
ordinary course of business and the utility of these assets remains so
long as they are in work order, so they are also known as capital assets.
Land and buildings, plant and machinery, motor vans, furniture and
fixtures are some examples of these assets. Financial transactions are
recorded in the books keeping in view the going concern aspect of the
business unit. It is assumed the business unit has a reasonable
expectation of continuing business at a profit for an indefinite period oftime. It will continue to operate in the future. This assumption provides
much of the justification for recording fixed assets at original; cost and
depreciating them in a systematic manner without reference to their
current realizable value.
It is useless to show fixed assets in the balance sheet at their estimated
realizable values if there is no immediate expectation of selling them.
Fixed resale; so they are shown at their book values (i.e. cost less
depreciation provided) and not at their current realizable values. The
market value of a fixed asset may change with the passage of time, but
for accounting purpose it continues to be shown in the books at its bulk
value, i.e., the cost at which it was purchased minus depreciation
provided up to date. The cost concept of accounting depreciation
calculated on the basis of historical costs of old assets is usually lower
than that of those calculated at current value or replacement value. This
result in more profits on paper, which if distributed in full, will lead to
reduction of capital.
NEED FOR VALUATION OF FIXED ASSETS:
Valuation of fixed assets is important in order to have fair measure of
profit or loss and financial position of the concern.
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Fixed assets are meant for use for many years the value of these assets
decreases with their use or with time or for other reasons. A portion of
fixed assets reduced by use is converted into cash though charging
depreciation for correct measurement of income, proper measurement of
depreciation is essential, as depreciation constitutes a part of the totalcost of production.
Learning Objective:
1.Accounts payable: -AP is the short term liabilities that
a business owes to any of the outside companystakeholders.
Accounts payable has a lot of importance when you want to
run yourbusiness successfully.
The first important reason is that if we dont exactly know to
whom we owe what we can be fooled by anyone who can
receive repeated payments from us. This usually happens
with businesses when there are no records maintained or the
amount is so much that it becomes extremely difficult to keep
a lid on things. Not knowing the exact date of the payment ofan account payable will result into accumulation of interest
on your company only because of the negligence.
Accounts payable are also important for maintaining the cash
flows. When you are dealing with mass purchases, you often
can negotiate the terms of your accounts payable.
2.Fixed Assets: -Fixed Assets plays very important role inrelating companys objectives the firms to which capital
investment vested on fixed assets. This fixed asset is not
convertible or not liquid able over a period of time the total
owner funds and long-term liabilities are invested in fixed
assets. Since fixed assets playing dominant role in total
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business the firms has realized the effective utilization of
fixed assets. So ratio contributes very much in analyzing and
evaluating the performance of fixed assets. If firms fixed
assets are idle and not utilized properly it effects long-term
sustainability of the firms, which may affect liquidity andsolvency and profitability positions of the company. The idle
of fixed assets lead a tremendous in financial cost and
intangible cost associate to it. So there is need for the
companies to evaluate fixed assets performance. Comparison
with similar company and comparison with industry
standards. So chose a study to conduct on the fixed assets
analysis of NMC corporate using ratio in comparison with
previous year performance. The title of the project is analysison fixed assets.
Scope of Study:
For Account Payable:-
Validate all Account Payable invoices for the month (this is
ongoing).
Review supplier statements and check all invoices are secondary
approved/or current (i.e. not due for payment).
Review employee expense claims/advances to ensure they are up-to-date and processed.
Review credit card statements to supporting receipts/vouchers and
journal expenditure from the department suspense account to
relevant cost centre.
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Run Invoices on Hold, Report to list invoices placed on hold and
then action all holds, as necessary.
For Fixed assets:
Fixed asset is an asset held with the intention of being used for the
purpose of producing or providing goods or services and is not held for
sale in the normal course of business. Fixed assets often comprise a
significant portion of the total assets of an enterprise, and therefore are
important in the presentation of financial position. Furthermore, the
determination of whether expenditure represents an asset or an expense
can have a material effect on an enterprise's reported results of
operations.
Fixed Assets also need to be capitalized because when it start giving
revenue we have to record it how much a asset is giving the Profit and
how much depreciation we are charging on it.
The project is covered of fixed assets of NMC drawn from annual
reports of the company. The fixed assets considered in the projectare which cannot be converted into cash with one year. Ration
analysis is used for evaluating fixed assets performance of NMC.
The subject matter is limited to fixed assets it analysis and its
performance but not any other areas of accounting corporate,
marketing and financial matters.
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Companys History
NMC Health was founded by H.E. Abdulla Humaid Al-Mazroei and B.
R. Shetty in 1977 as the "New Medical Centre" in Abu Dhabi, and isnow the largest private hospital chain in the UAE.
NMC Healthcare LLC is one of the most respected and dominant
business houses in the UAE, engaged in business sectors ranging from
healthcare, trading (marketing and distribution) and information
technology. Apart from these main business sectors, NMC Healthcare
LLC also has affiliate companies serving business sectors such as
healthcare, financial services, pharmaceutical manufacturing, hospitality,real estate and media.
From a small one room clinic in 1973, NMC Healthcare LLC has
evolved into an integrated healthcare company with a wide network of
hospitals, medical centres, and pharmacies across the UAE. NMC
Healthcare LLC provides a comprehensive range of healthcare services,
supported by experienced medical professionals cutting across various
disciplines, covering the entire gamut of medical diagnosis andtreatment. Over the years, NMC Healthcare LLC has earned reputation
as a world-class medical institution synonymous with genuine care,
concern and commitment.
In 2012 it became listed on the London Stock Exchange.
http://en.wikipedia.org/wiki/B._R._Shettyhttp://en.wikipedia.org/wiki/B._R._Shettyhttp://en.wikipedia.org/wiki/London_Stock_Exchangehttp://en.wikipedia.org/wiki/London_Stock_Exchangehttp://en.wikipedia.org/wiki/B._R._Shettyhttp://en.wikipedia.org/wiki/B._R._Shetty -
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Company Profile:
NMC Healthcare
Hospitals Pharmacies Trading Trading InformationHealthcare FMCG Technology
&Education
Specialty HospitalsHospital &
Medical Centers
These are the Branches of NMC which I explain one by one:
1.Hospitals: - In UAE NMC has 5 Hospitals. In which 3 are
Special Hospital and 2 are Hospital and Medical Centres. Those
are:
A)Specialty Hospitals: These are 3 Specialty hospitals
NMC Specialty hospitals Abu Dhabi
NMC Specialty hospitals Dubai
NMC Specialty hospitals Al Ain
B)Hospitals and Medicals Centres: These are 2 Medical centres
New Medical Centre Hospital Dubai New Medical Centre Sharjah
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Pharmacies: In Pharmacies there are 2 sections.
A)Bait Al Shifa
B)New Pharmacy
Trading Healthcare: There are 3 divisions in this.
A)Scientific Division
B)Pharmacy Division
C)Veterinary Division
Trading FMCG and Education: In this there are 3 Division.
1.Food Division
2.Non Food Division
3.Education Division
Information Technology: IT is divided into 3 categories.
1.Healthcare IT
2.Business Application IT
3. Infrastructure
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Vision of NMC Healthcare:
To be the trusted healthcare provider in UAE and abroad driven by
excellence through innovation, Quality, Team Work, advanced
technologies, Patient safety, and customized care offering.
Mission of NMC Healthcare:
To lead the healthcare industry in UAE by providing customized
healthcare solution to different segments of the society.
To provide consistent high quality cost-effective patient care in acompassionate and caring environment.
To achieve high level of customer satisfaction through integrity,
dedication, professionalism, teamwork, and timely service.
To introduce latest technologies in healthcare for better diagnosis
and treatment.
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CEO Message:
At NMC Healthcare, we guarantee personalized care, genuine concern
and a sincere commitment to the overall well-being of the society. We
believe that healthcare is simply not about detecting, diagnosing,
informing or treating an individual but it is about helping people to lead
a wholesome and healthy life. We are committed to serve the
communities where we do business and pledge to provide our customerswith hope - Hope of a Healthy and Happy Life.
As the expression goes, The journey of a thousand miles begins with a
single step, our incredible journey also began with our first step in
1973, when we established a small clinic and pharmacy in Abu Dhabi
under the name New Medical Center (NMC).
During the initial years, NMC, being the first private health care
provider was confronted with many complicated challenges. Instead of
viewing these challenges as setbacks, we perceived them as
Opportunities - Blessings in Disguise, and resolved them successfully
with grit, perseverance, determination, and strength. We attribute our
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success today to the sincerity, hard work and commitment of our staff,which have helped us to grow and prosper over the years.
We believe in the policy of providing healthcare to all sections of the
society while upholding ethical medical practices and discouragingmalpractices. Our customers are assured of receiving personalized care
in a compassionate and friendly environment under highest standards of
quality at affordable charges. These founding principles continue to
guide and motivate us everyday as we aspire to become the leadinghealthcare brand in the region.
Continuing with our mission to provide advanced healthcare services to
all the customers, we are also keen to explore new business
opportunities with like-minded partners in the UAE and abroad. With
the sustained patronage of customers and Almightys Blessings, we are
confident of addressing emerging opportunities and achieving more
milestones in the years ahead.
Our corporate motto Together We Smile has its origins rooted in our
resolute belief to make a positive change in the lives of people whom
our service touches and bring smiles to all. Lets together cross lifes
miles with a smile.
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NMC Philosophy:
One of the strategic objectives of NMC Healthcare is to position itself as
a Pan-UAE healthcare player through a network of specialty hospitals,medical centres, day-care centres, clinics, and pharmacies in different
Emirates to provide high quality, reliable, and cost effective medical
services in accordance with global standards of excellence.
Adhering to the policy of providing healthcare to all sections of the
society.
Upholding ethical medical practices and discouraging malpractice.
Providing customized care in a compassionate and friendly manner.
Maintaining highest standards of quality and affordable servicecharges.
NMC Healthcare has been successful in creating a work culture that
attracts and retains highly skilled and specialized medical professionals
from different parts of the world. All medical professionals are carefully
selected through rigorous recruitment processes and ongoing training
programs and are mandated to undergo periodic training programs and
workshops to upgrade their skills. Over the decades, NMC Healthcarehas earned a reputation as employer of choice in the market as evident
from a long list of employees serving for decades as well as the
continuing trend of several family members preferring to work in the
company.
Critical Success FactorsThe key factors that facilitate NMC Healthcare to deliver quality careand attain the status of being the premier healthcare institution are:
Employing skilled doctors and paramedics with sound educational
background, proven work experience, polite behavior, and caring
nature.
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Emphasizing capacity building in medical diagnostics (laboratory and
radiology) by incorporating advanced equipment, cutting-edge
technologies, and highly skilled medical professionals.
Imbibing widely accepted quality standards such as those prescribed by
Joint Commission International (JCI) and International Organization for
Standardization (ISO) 9001.
Creating a sophisticated technology infrastructure to deliver seamless
healthcare services through Wipro Hospital Information System (HIS)
and Oracle Enterprise Resource Planning (ERP).
Improving services processes continuously and introducing new
services in a timely manner.
Cultivating harmonious working relationships with federal and local
regulatory authorities, insurance companies, government entities, and
local communities.
Establishing seamless referral systems for advance treatment within
and outside the NMC Healthcare network through affiliations withreputed healthcare institutions around the world.
Serving a diverse pool of patients transcending nationality and income
levels.
Catering to the requirements of all insurance companies and third party
administrators (TPAs) with customized IT solutions.
Adhering to corporate governance and sound management practices.
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NMC Healthcare strives to continuously improve healthcare in the UAE
and shares the vision of the Government of UAE to position the country
as a world-class quality healthcare destination.
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RESEARCH METHODOLOGY
1.Research objective: -
Account payable:
My objective is to find out a short-term liquidity measure
used to quantify the rate at which a company pays off its
suppliers. Accounts payable turnover ratio is calculated by taking
the total purchases made from suppliers and dividing it by the
average accounts payable amount during the same period.
Accounts Payable Turnover=
The measure shows investors how many times per period the
company pays its average payable amount.
Fixed Assets:
The study is conducted to evaluate fixed assets performance ofNMC.
The study is conducted to evaluate the fixed assets turnover of
NMC.
The study is made to known the amount of capital expenditure
made by the company during study period.
The study is conducted to evaluate depreciation and method of
depreciation adopted by NMC.
The study is conducted to known the amount of finance made by
long-term liabilities and owner funds towards fixed assets.
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Study is conducted to evaluate that if fixed assets are liquidated.
What is the proportion of fixed assets amount will contribute for
payment of owner fund and long term liabilities.
The study is evaluate is giving adequate returns to the company.
2.Research Methodology:-
Both for FIXED ASSETS and ACCOUNT PAYABLE:
The data used for analysis and interpretation form annual reports of thecompany that is secondary forms of data. Ratio analysis is used for
calculation on purpose.
The project is presented by using tables graphs and with their
interpretations. No survey is undertaken or observation study is
conducted in evaluating FIXED ASSETS and ACCOUNT PAYABLE
performance of NMC.
3.Limitations:-
Both for FIXED ASSETS and ACCOUNT PAYABLE:
The study period of 42 days as prescribed by university.
The study is limited unto the date and information provided by
NMC and its annual reports.
The report will not provide exact fixed assets status and position in
NMC; it may vary from time to time and situation to situation.
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This report is not helpful in investing in NMC either through
disinvestments or capital market.
The accounting procedure and other accounting principles are
limited by the company changes in them may vary the fixed assetsperformance.
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DOCUMENTS REQUIRED FORACCOUNTS PAYABLE
1. INVOICE
2.PURCHASE ORDER
3.GRIN(GOODS RECEIVED AND INSPECTIONNOTE)
4.GRN(GOODS RECEIVEDNOTE)
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1. INVOICE
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2.PO(PURCHASE ORDER)
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3.GRIN(GOODS RECEIVED AND INSPECTIONNOTE)
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4.GRN(GOODS RECEIVEDNOTE)
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ACCOUNT PAYABLE PROCESS OF NMC
Accounts Payables is nothing but a Liability which has to be paid by the
company for the goods that they have purchased or services that theyhave availed from a Vendor. The Firm is Accountable or responsible to
pay for the goods purchased or services that they have availed.
Accounts payable best practices in controlling accounts payable with the
intention of contributing positively to cash flow and bearing jointly
beneficial relationships with suppliers. The hope between a company
and its suppliers seems to be shaken by accounts payable actions there
by upsetting supplier relations. On the other hand, paying your bills on
time improves your relationship with the supplier. An improved
relationship with suppliers is essential to a company since they supply
priceless trade credit, and also offer ideas for new methods and products,
which are considered as important role in customer service.
As NMC follows centralized Accounting, which is why Payable is also
centralized in NMC healthcare. So, the procedure is different from other
companies.
The procedure of Accounts Payable in NMC is as follows:
a)Collecting invoices from all section
b)Checking
c) the accuracy of invoices with GRN, PO and also the approval of
the H.O.D
d)Preparing files for processed and un paid invoices for necessary
accounting
e)Writing accounts heads in each invoices
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f) Arranging invoices alphabetically and put Document Numbers
g)Entering the bills in to computer and checking all the invoices
accounted as correct or not.
h)Copies of invoices generated in H.O sending to various affiliates
i) Preparing payment advices for each suppliers
j) Party reconciliation
k)Proper filing of invoices
l) Checking of GRN list monthly to ensure all the purchase are
entered
m)Proper Bill matching with payment vouchers
n)Preparing monthly expenses details for Trading & Reliance
COLLECTING INVOICES FROM ALL SECTION:In this step Accounts payable department collect all the
invoices from various branches of NMC Healthcare. The document
which I show is of Al Ain branch.
CHECKING THE ACCURACY OF INVOICES WITH GRN,PO AND
ALSO THE APPROVAL OF THE H.O.D:In this step employee check the accuracy of GRN and PO
that the amount which GRN and PO is showing is correct and matched
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or not. There is one more document is required that is Approval of Head
of Department (H.O.D).
PREPARING FILES FORPROCESSED AND UN PAID INVOICES
FOR NECESSARY ACCOUNTING:In this step the employee makes an separate file for the
processed and unpaid invoices. After that, they do proper accounting
treatment for it.
WRITING ACCOUNTS HEADS IN EACH INVOICES:In this step employee put every transaction in their prescribed
Accounting head.
ARRANGING INVOICES ALPHABETICALLY AND PUT
DOCUMENT NUMBERS:In this step employee put the entire document in the
alphabetical order and also put the document numbers on every Invoice.
This helps the employee to find the invoice whenever they need it.
ENTERING THE BILLS IN TO COMPUTER AND CHECKING ALL
THE INVOICES ACCOUNTED AS CORRECT ORNOT:After all the above steps, in this step the employee put all the
invoice transaction in the computer in their respective accounting head.
After that they have to check that the entire amount which you
accounted is correct or not.
COPIES OF INVOICES GENERATED IN H.O SENDING TO
VARIOUS AFFILIATES:In this step all the invoices were sent to all the different
branches of NMC healthcare. In which they cross check all the data that
all those data is accounted correctly. This step is done because this
company follows the centralized control.
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PREPARING PAYMENT ADVICES FOR EACH SUPPLIER:In this step H.O employee makes the payment advice in
Excel sheet. Accordingly, they pay their debt to their suppliers. Actually
it is a Statement on which the Account payable employee gives advice to
the company on how much amount they have to pay to whom.
PARTY RECONCILIATION:
In this part account payable made the suppliersreconciliation. In this they make tally their account with the supplier
account or if there is any omission then that value comes under the
Reconciliation Account.
PROPERFILING OF INVOICES:After the reconciliation next step is to make a proper filing of
all the invoices because in reconciliation we record those values which isnot appear in the supplier or NMC statement. After payment of those
omitted values proper filing is mandatory.
CHECKING OF GRN LIST MONTHLY TO ENSURE ALL THE
PURCHASE ARE ENTERED:Now, in this step monthly list of GRN is checked with the
Books of NMC by the Employee to know there is no omission or wrongentry.
PROPERBILL MATCHING WITH PAYMENT VOUCHERS:
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In this step the employee have to match the entire bill with
the payment vouchers.
PREPARING MONTHLY EXPENSES DETAILS FORTRADING &
RELIANCE:This is the last step of Account payable procedure, in this the
Account payable employee prepares the detail monthly expenses which
is done by the trading and Reliance Department.
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Invoice sent
to H.O
DIAGRAM FOR ACCOUNTS PAYABLE
No
Yes
No
Yes
1st QC (Whether
all invoices
belong to related
Sent wrong
invoices to
validator
Segregate and saveinvoices in specific folder
for required validation
Invoices approved by validator
(with expense account number
and cost center)
Book invoice inaccounting software
according to validation
Invoice is
approved forpayment
Make Payment by using approved
bank account
2n
QC*
(Invoices
saved must beequal to
invoices
3rd QC*
(Accountnumber and cost
center must besame as given by
validator)
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QC* = Quality Check
FIXED ASSETS CAPITALIZATION PROCEDURE
1.Budget for capital Expenditure
2. Identify the suppliers
3.Select quotation
4.Raise PO to the lowest quotation
5.Receive the Item/ Install
6.Once commissioned then capitalized
7.Charge depreciation
BUDGET FORCAPITAL EXPENDITURE:It is the first step in fixed assets capitalization, in which we
make the Budget for capital expenditure. In this budget we estimate how
much that asset cost to the company and how much we pay for that fixed
asset.
IDENTIFY THE SUPPLIERS:After estimating the budget, now we proceed to inviting the
suppliers to whom we purchase the assets. There are lots of suppliers
with their quotations but at different prices.
Change status to
Complete
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SELECT QUOTATION:Now, after getting the quotation, company selects the best
price from those quotations.
RAISE PO TO THE LOWEST QUOTATION:In this step we choose the lowest quotation, on which we
raise the PO (Purchase Order) to Purchase the assets.
RECEIVE THE ITEM/INSTALL:In this step, after issuing the purchase order the asset is being
received by the company from the supplier or if it is machinery then it
need to be installed.
ONCE COMMISSIONED THEN CAPITALIZED:In this step, after when the machinery is installed or any other
assets is being purchased and that asset or machinery is ready to use.
Then we say, that asset is being capitalized.
CHARGE DEPRECIATION:This is the last step, in this we start charging depreciation on
assets. This depreciation is charged by 2 methods.
1.Straight line method
2.Written down value method
But, NMC uses the written down value method on
their assets.
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ANALYSIS &PRESENTATION OF DATA AND INTERPRETATION
ANALYSIS FORACCOUNTS PAYABLE:
DEBT TO ASSET RATIO
Explanation of Debt to Asset Ratio:
The Debt to Asset Ratio measures the percentage of the company's Total
Assets that are financed with debt (Total Liabilities). This ratio basically
looks at what debt the company owes, and compares that debt to what
assets the company owns.
Importance of Debt to Asset Ratio:
The lower the Debt to Asset Ratio, the better, as companies with high
amounts of debt introduce more risk. You certainly want to look very
hard at companies that have more Total Liabilities than Total Assets, as
this is a precarious position for a company to be in.
Depending on the industry of the company, you might expect the
company to have two or three times as many assets as liabilities.
Anything less than this might be a signal that the company is running
into trouble.
Debt to Asset Ratio Formula:
http://www.spireframe.com/define/financial-statement-term/total-assetshttp://www.spireframe.com/define/financial-statement-term/total-assetshttp://www.spireframe.com/define/financial-statement-term/total-liabilitieshttp://www.spireframe.com/define/financial-statement-term/total-liabilitieshttp://www.spireframe.com/define/financial-statement-term/total-assetshttp://www.spireframe.com/define/financial-statement-term/total-assetshttp://www.spireframe.com/define/financial-statement-term/total-liabilitieshttp://www.spireframe.com/define/financial-statement-term/total-liabilitieshttp://www.spireframe.com/define/financial-statement-term/total-assetshttp://www.spireframe.com/define/financial-statement-term/total-assets -
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Debt to Asset ratio =
Interpreting the Calculator Results:
I f Debt to Asset Ratio increases over time:
An increasing Debt to Asset Ratio means the amount of debt the
company has compared to its assets is increasing, which can be a bad
sign.
I f Debt to Asset Ratio decreases over time:
A decreasing Debt to Asset Ratio means the amount of debt the
company has compared to its assets is shrinking, which is generally a
good sign.
I f Debt to Asset Ratio stays the same over time:
An unchanged Debt to Asset Ratio means the amount of debt the
company has compared to its assets has remained the same.
Debt to Asset Ratio Calculation:
Debt to Asset ratio=
Debt to Asset ratio 2009 =
= 76.35
Debt to Asset ratio 2010 =
= 75.36
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Debt to Asset ratio 2011 =
= 71.75%
Interpretation:
As in the above graph, in 2009 the Debt to Assets Ratio is 76.35
which come down to 71.75 in 2011. This shows a decline in Debt to
Assets Ratio, which is a good sign for a company, because as decreasing
Debt to Asset Ratio means the amount of debt the company has
compared to its assets is shrinking, which is generally a good sign.
ACCOUNTS PAYABLE TURNOVERRATIO:
The accounts payable turnover ratio indicates how many times a
company pays off its suppliers during an accounting period. It measureshow a company manages paying its own bills. A higher ratio is generally
more favorable as payables are being paid more quickly. When placed
on a trend graph accounts payable turnover analysis becomes simplified:
the line raises and lowers just as the ratio does. Common adaptations
used to calculate accounts payable turnover yield results like accounts
69
70
71
72
73
74
75
76
77
2009 2010 2011
Debt to Assets Ratio
Debt to Assets Ratio
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payable turnover ratio in days, Accounts Payable turnover in days, and
more. A useful tool in managing and measuring the efficiency of paying
bills is a Flash Report.
ACCOUNTS PAYABLE TURNOVERRATIO FORMULA:
A solid grasp of the accounts payable turnover ratio formula is of utmost
importance to any business person. Though some ratios may or may not
apply to different business models everyone has bills to pay. The need to
understand Accounts Payable turnover is universal.
Accounts payable turnover = Cost of goods sold / Average accounts
payable
Or = Credit purchases / average accounts payable.
Purchases = Cost of goods sold + ending inventory - beginning
inventory.
ACCOUNTS PAYABLE TURNOVERCALCULATION:
Accounts payable turnover is calculated by dividing total purchases
made from suppliers by the average accounts payable amount during the
same period.Average Accounts payable is the average of the opening and closing
balances for Accounts payable.In real life, sometimes it is hard to get the number of how much of the
purchases were made on credit. Investors can assume that all purchases
are credit purchase as a shortcut. When this is done, it is important to
remain consistent if the ratio is compared to that of other companies.
http://www.strategiccfo.com/infostore/spreadsheet.asp?id=11&tool=true&sid=14http://www.strategiccfo.com/infostore/spreadsheet.asp?id=11&tool=true&sid=14http://www.strategiccfo.com/infostore/spreadsheet.asp?id=11&tool=true&sid=14http://www.strategiccfo.com/infostore/spreadsheet.asp?id=11&tool=true&sid=14 -
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Average Accounts Payable =51488
Cost of Goods Sold= Opening inventory + PurchasesClosing
Inventory
Cogs = 48798 + 103700054178
= 1031620
Accounts payable turnover ratio =
Accounts payable turnover ratio = 20.1times
Account payable Turnover Days =
Account payable Turnover Days = 18 Days.
INTERPRETATION:
This ratio represents how much time a company takes to pay off its
suppliers. According to this ratio, NMC takes 18 days to pay off itssuppliers. This shows a good sign for the company as they pay off their
supplier this quickly.
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ANALYSIS FORFIXED ASSETS:
The analysis returns on fixed assets of National Medical Centre (NMC)
is studied with the help of Ratio Analysis.
RATIO ANALYSIS:
Ratio analysis is a powerful tool of financial analysis. A ratio
is defined as the indicated quotient of two mathematical expressionsand as the relationship between forevaluating the financial position and
performance of a firm. The absolute accounting figure reported in
financial statement do not provide a meaningful understanding of the of
the performance and financial position of a firm. An accounting figure
conveys meaning when it is related to some other relevant information.
Ratios help to summarize large quantities of financial data and to make
qualitativejudgment about the firms financial performance.
FIXED ASSETS TO NET WORTH RATIO:
This ratio establishes the relationship between Fixed Assets and Net
worth
Net worth = Share Capital + Reserves & Surplus + Retained Earnings.
Fixed Assets or Net Worth Ratio =
100
This ratio of Fixed Assets to Net worth indicates the extent to which
shareholder funds are sunk into the fixed assets. Generally, the purchase
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of fixed assets should be financed by shareholders, equity including
reserves & surpluses and retained earnings. If the ratio is less than 100%
it implies that owners funds are more than total Fixed Assets and a part
of the working capital is provided by the shareholders.
When the ratio is more than 100% it implies that owners funds are notsufficient to finance the fixed assets and the finance has to depend upon
outsiders to finance the fixed assets. There is no rule of thumb to
interpret this ratio but 60% to 65% is considered to be satisfactory ratio
in case of industrial undertaking.
Long Term Debt to Total Asset Ratio:
Def in iti on of Long Term Debt to Total Asset Ratio
Long Term Debt to Total Asset Ratio is the ratio that represents the
financial position of the company and the companys ability to meet all
its financial requirements. It shows the percentage of a companys assets
that are financed with loans and other financial obligations that last over
a year. As this ratio is calculated yearly, decrease in the ratio would
denote that the company is fairing well, and is less dependents on debts
for their business needs.
Formula for Long Term Debt to Total Assets Ratio
The formula to ascertain Long Term Debt to Total Assets Ratio is as
follows:
Long Term debt to Total Assets Ratio = Long Term Debt / Total Assets
I nterpretation:
The higher the level of long term debt, the more important it is for a
company to have positive revenue and steady cash flow. It is very
helpful for management to check its debt structure and determine its debt
capacity. It also shows how many assets of your company are finances
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with the help of debts. To calculate long term debt to total assets ratio
you need to add together your current and long term debts and sum up
the current and fixed assets and divide both the total liabilities and the
total asset to get an output in percentage form.
The output is the assets that are financed by the debt financing while theother half is financed by the investors in your firm. Having the long term
debt to total asset ratio as a high percentage should be worrying factor
for the firm and the company should look in to it and determine the
reason of the high percentage and try to minimize it as much as possible.
The high value would mean that your company needs to have a good
cash inflow to meet all the expenses.
Long Term Debt to Total Asset Ratio therefore provides a measurementto the investor regarding the percentage of a companys assets which are
financed with the help of loans or debts for a period lasting over a year.
FIXED ASSETS AS A % TO CURRENT LIABILITIES
The ratio measures the relationship between fixed assets and the funded
debt and is a very useful so the long term erection. The ratio can be
calculated as below
Fixed Assets as a % to Current Liabilities =
GROSS CAPITAL EMPLOYED
The term Gross capital employed usually comprises the total assets,
fixed, as well as current assets used in a business
Gross Capital employed = Fixed Assets + Current Assets
http://www.readyratios.com/reference/accounting/fixed_assets.htmlhttp://www.readyratios.com/reference/accounting/fixed_assets.html -
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RETURN ON FIXED ASSETS
RETURN ON FIXED ASSETS=
This ratio is calculated to measure the profit after tax against the amount
invested in total assets to ascertain whether assets are being utilized
properly or not. The higher the ratio the better it is for the concern.
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FIXED ASSETS TO NET WORTH:
The ratio indicates the extent to where shareholders funds are struck in
the fixed assets. The formula to compute fixed assets to net worth is
calculated as follows. Fixed assets (after depreciation) / Net worth.
NET WORTH = Share capital + Reserves & surplus + Retained
Earnings.
If the ratio is less than 100% it implies that owner funds are more thanthe fixed assets and the shareholders and vice-versa provide a part of
working capital.
Fixed Assets or Net Worth Ratio =
100
Year Net Worth GROSS FIXEDASSETS
RATIO IN %
2009 89,865 1,71,165 190.46
2010 1,01,363 1,64,937 162.72
2011 99,287 88,434 89.07
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INTERPRETATION:
The Gross fixed assets to net worth ratio are fluctuating from year to
year. In the year 2009 the gross fixed assets to net worth ratio is 190.46
in the year 2011 the fixed assets to net worth ratio is 89.07 decreased
which shows that the net worth utilization to acquire the fixed assets is
decrease in the year 2011 when compare to 2009. The highest ratio
recorded in 2009 at 190.46 the lowest ratio is recorded at 89.07 years
2011.
Long Term Debt to Total Asset Ratio:
Formula for Long Term Debt to Total Assets Ratio
The formula to ascertain Long Term Debt to Total Assets Ratio is as
follows:
Long Term debt to Total Assets Ratio = Long Term Debt / Total Assets
Long Term Debt to Total Assets Ratio =
190.46
162.72
89.07
0
20
40
60
80
100
120
140
160
180
200
2009 2010 2011
RATIO IN %
RATIO IN %
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= 0.1
I nterpretation:
This means that the company has AED 0.1 as a long term debt for everyDirham it has in assets.
FIXED ASSETS AS A PERCENTAGE CURRENT LIABILITY:
Fixed assets as a % to Current Liabilities = Fixed Assets/ Current
Liabilities
Year Fixed Assets Current
Liabilities
Percentage
2009 171,165 219,820 77.862010 164,937 287,154 57.44
2011 88,434 210,571 42
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I nterpretation:
The ratio was fluctuating trend percentage in review period. Form the
above table it is observed that the ratio was recorded at 77.86 in the
2009and is gradually changing to 42 in 2011, which indicates that the
current funds are used in the fixed assets, which is quite satisfactory.
FIXED ASSETS AS A PERCENTAGE TO TOTAL ASSETS:
Fixed Assets as a % to Total Assets =
Year Net fixed Assets Total Assets Percentage
2009 171,165 384,287 103.8
2010 164,937 417,909 39.46
2011 88,434 355,235 24.89
0
10
20
30
40
50
60
70
80
2009 2010 2011
Percentage, 42
AxisTitle
Year
Percentage
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Interpretation:
From the above table it is examined that Fixed Assets to total assets ratio
is fluctuating trend during the review period of time. During the year
2009 the ratio was recorded at 103.8 % and the year 2011 the ratio
decreased to 24.89.
0
20
40
60
80
100
120
2009 2010 2011
Percentage
Percentage
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FINDING
Finding for Accounts Payable
Companys debt has compared to its assets is shrinking, which is
generally a good sign.
NMC takes 18 days to pay off its suppliers, this shows a good sign
Finding for Fixed Assets
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Regarding the fixed assets to net worth it has observed that it has
been decreased slightly to 89.07.
Regarding the fixed assets it has been observed that the fixed asset
has decreased.
The company has AED 0.1 as a long term debt for every Dirham it
has in assets.
Current funds are used in the fixed assets, which is quite
satisfactory
Regarding the fixed assets as a percentage of current liabilities it isobserved it is decreased over the Years.
Regarding the fixed assets to total assets it has been observed that
there was Decrease.
FROM THE ABOVE STUDY IT CAN BE SAID THAT THE NMC FINANCIALPOSITION ON FIXED ASSETS IS QUITE SATISFACTORY.
SUGGESTIONS &RECOMMENDATIONS:
Suggestion and Recommendation for Accounts Payable are as follow:
The company should adopt the automatic recording of Accounts
payable entries
The company should adopt the decentralized way of recording
Accounts payable entries.
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Suggestions for efficient management of fixed assets of NMC are:
The NMC should follow the NPV method or IRR method both at a
time rather than following only NPV method.
The NMC should analyze and measure a list of projects for
evaluation.
The NMC capital budgeting policies should be achieved in the
forthcoming Years.
NMC must concentrate on other diversification and takeover.
NMC must be expanded with profit making units with low cost.
CONCLUSION:
Conclusion for Accounts Payable:
By using this Account Payable System user can get following items.
Discover the latest timesavers for processing payables
It is more effective internal controls for reducing duplicate
payments, fraud and wasteful spending
Turn your AP department into a profit center!
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Streamline the entire payment process with simple techniques
and dramatically boost your efficiency
Build safety nets into your processing system that guarantee billsget paid on time
Conclusion for Fixed Assets:
After analyzing the financial position of NEW MEDICAL
CENTRE (NMC) and evaluating its fixed assets Management or
capital budgeting techniques in respect of ratio analysis. The
following conclusions are drawn from the project preparation.
The progress of the NMC shows that the company is in good
condition as its Long Term Debt to Total Assets Ratiois quite
satisfactory. The financial position of NMC regarding investment
it has been increasing from 100%.
REFERENCES/BIBLIOGRAPHY
www.wikipedia .com
www.Investopedia.com
http://www.heka-finance.com/
http://www.accountingtools.com
http://www.nmc.ae/
http://www.heka-finance.com/http://www.heka-finance.com/http://www.accountingtools.com/http://www.accountingtools.com/http://www.nmc.ae/http://www.nmc.ae/http://www.nmc.ae/http://www.accountingtools.com/http://www.heka-finance.com/ -
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