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L2 : COMMERCIAL PROCEDURES/ASSET ACCOUNTING

CONCEPTS
Objective
The main objective of the company (BSNL) is to increase the tele-density in the
country by providing 8!"# la$hs of Telephone connections before %&&-%&#&"
'or this the company needs enormous financial investment besides the internal
resources" The other objectives of BSNL are(
)rovide telephone on demand by *arch %&&+
)rovide telephone in all villages by ,ecember %&&%
-aise telephone density to . by %&&! and #! by %&#&
)rovide Band/idth on demand
Build 0ustomers confidence through 1uality and reliable service
)rovide /orld class telecom infrastructure

*obili2ation *anagement and 3ccounting of the financial objects more effectively


re4uires s$ill and better accounting system" There have been phenomenal
changes in the telecom sector during the recent past and the BSNL is pushed
into competitive mar$et along /ith )rivate 5perators in providing telecom
service" Being a company6 BSNL has to adopt 0ompanies 3ct #!7 and follo/
the scientific 3ccounting System /ith 0lear 3ccounting 0oncept"
Accounting Concept
The 'inancial Statements of Bharat Sanchar Nigam Limited are prepared under
the historical cost convention and on accrual basis in accordance /ith 8ndian
9enerally 3ccepted 3ccounting )rinciples and in accordance /ith the provisions
of the 0ompanies 3ct #!7" The salient features of BSNL are enlisted belo/(
#" The 3ccounts are prepared under historical convention adopting
the 3ccrual method of accounting concept"
%" ,epreciation is calculated under :;ritten ,o/n *ethod<"
+" *aintenance of Boo$s of 3ccounts as per 0ompany 3ct on realistic
basis" This means that the transactions are recorded in the boo$s of
accounts only /hen the actual transactions ta$e place"
=" )reparation and *aintenance of Separate 3ccounts in 0ash6 T-36
;or$s and 0laims Sections on monthly basis /ith complete supporting
schedules"
!" >ffective Budget 0ontrol and 0ollection account *anagement /ith
fund flo/ and cash flo/ Statements"
7" -econciliation of all transactions and posting to correct accounts"
." Ban$ reconciliation for both 5peration and collection accounts"
8" *aintenance of sundry ,ebtors and Sundry creditors accounts"
" *aintenance of ;or$ -egisters and 'i?ed 3sset 3ccounts /ith
accumulated depreciation"
#&" )reparation of annual accounts /ith general Ledger and supporting
schedules"
##" )reparation of Segmental reports for various services"
The accounting policy is based on accrual method of accounting" This is to say
that the amount pertaining to that particular accounting period alone should be
accounted" Both -evenue and >?penditure are to be calculated for a specific
3ccounting )eriod instead of ta$ing the entire transactions" 'or e?ample6 a
Telephone bill is issued on &#"&!"%&&% covering rental for the period from
&#"&%"%&&% to +&"&="%&&+6 the entire revenue billed should not be ta$en into
account in the current @ear of accounting (%&&%-%&&+)" The revenue in this case
should be segregated into three parts6 one for the previous year (&#-&%-%&&% to
+#-&+-%&&%) and boo$ed against A)rior )eriod 8ncomeB6 second for the current
(&#-&=-%&&% to +#-&=-%&&+) and against the current year revenue and the third
for the ne?t year (&#-&=-%&&+ to +&-&+-%&&+) and boo$ed against advance
revenue" The amount boo$ed against A3dvance -evenueB /ill be accounted in
the ne?t accounting year"
Li$e/ise if there is payment covering t/o accounting periods6 the portion relating
to the current year should be segregated and accounted in the current @ear
leaving the Balance for Ne?t @ear 3ccounting and sho/ing it as A )re-paid
e?pensesB in the current year" ,ues that are liable to be paid for the 0urrent @ear
but not paid should be included in the current @ear account itself by debiting the
e?penditure head and crediting the Liability head"
Before proceeding to the actual /or$ involved in the sections6 it is very much
necessary to understand the rules of A,ouble >ntry SystemB follo/ed in the Boo$
Ceeping"
Doube Ent!" S"#te$
>very transaction in the scientific accounting system involves t/o persons or t/o
accounts" 5ne receives the benefit and the other issues the benefit" The person
receiving the benefit or the account receiving the benefit is called A,ebtorB" The
person giving the benefit or account issuing the benefit is called 0reditor" Thus
each and every transaction involves T;5 entries" 5ne for ,ebit and the other for
0redit" This $ind of recording the transactions in T;5 places simultaneously is
called ,ouble >ntry System" This ,ouble >ntry System is operated on A9enerally
3ccepted 3ccounting )rinciplesB (933)) and has set of rules for ma$ing entries
into the boo$s of accounts"
-eal 3ccount D ,ebit the 3E0 /hich comes in
- 0redit the 3E0 /hich goes out"
)ersonal 3ccount D ,ebit the account /ho receives
- 0redit the account /ho pays
Nominal 3ccount D debit all >?penditure F losses
- 0redit all 8ncome F gains"
%SNL Accounting St&ge#
3ccounting is an art of -ecording6 0lassifying6 Summarising F 8nterpreting all
financial events /ith follo/ing objectives(
(i) 'or ascertaining gains or losses during the period
(ii) Go/ )rofit F Loss made
(iii) 3scertaining value of 3ssets F Liabilities as on date of closure of
3ccounts"
(iv) 3mount o/ing by customer E debtors"
(v) 3mount o/ed by customerE creditors"
(vi) Liabilities of ta?es"
(vii) Go/ business stands in comparison to similar business"
Reco!'ing T!&n#&ction# in t(e C&#(/%&n) %oo)#
The transaction are segregated in to t/o parts" 5ne in 03SG and the other is
N5N-03SG" The 0ash transactions are entered through 0ash boo$ and Ban$
boo$" The non-cash transactions are entered through Hournal Iouchers (HI)" The
follo/ing boo$s of accounts are to be maintained for ma$ing entries of the
transactions"
5peration 0ash Boo$ D for recording day to day cash e?penses"
5peration Ban$ Boo$ D for recording day to day e?penses by che4ue"
0ollection 0ash Boo$ D for recording day to day collection cash and
remittance to ban$ aEc"
0ollection Ban$ boo$ D for recording collection by che4ue and transfer to
Nodal branch"
Hournal >ntry -egister D for recording non-cash transactions
Separate set of boo$s are to be maintained for each ban$ under operation and
collection"
Reco!'ing Non*C&#( T!&n#&ction+
3ll the non-cash transactions are entered through Hournal Iouchers (HI) on
double entry principle" The entries on both debit and credit side should tally
al/ays" No transactions affecting the cash or ban$ balances are entered through
journals"
Sub#i'i&!" Reco!'#
The follo/ing are the important journals maintained in the accounting units"
#" )urchase Hournal
%" Sales Hournal
+" Bills )ayable Hournal
=" Salaries )ayable Hournal
!" ;ages )ayable Hournal
C&##i,ic&tion
3mong all6 the very important part of a transaction is 0LL3SS8'803T85N i"e
boo$ing to the correct account code (Gead of 3ccount)" 8n BSNL /e have
major schedules for classifying the revenue or e?penditure6 /hich are further
divided into *inor and ,etail head" The schedule indicates the type of
transactions li$e capital6 revenue6 etc" the minor code indicates sub-sections of
transactions" The detail head is the actual 5BH>0T li$e Salary6 ;ages6 Land
Building6 0ables6 etc"
Su$$&!i-ing
3fter recording all cash and non cash transactions on the basis of defined
classification a general ledger is prepared" 5n the basis of resultant figure of this
ledger at the end of the month a Trial Balance is prepared at each primary
accounting unit" 5n the basis of Trial balances of all units for the /hole
accounting period a profit F loss 3E0 and Balance-sheet get prepared at each
circle6 as circles are the profit centres in BSNL"
5n the basis of consolidated Trial Balance of all circles for the /hole
financial period of accounting6 the BSNL head4uarters Ne/ ,elhi (0orporate
5ffice) prepare the )F Loss 3E0 F Balance Sheet of the year for BSNL"
Inte!p!eting t(e ,in&nci& po#ition
*anagers6 shareholders6 creditors and other interested groups see$ ans/er to
the follo/ing important 4uestions about a firm"
;hat is the financial position of the firm at a given point of timeJ
Go/ /as the firm performed financially over a given period of timeJ
;hat have been the sources and uses of cash over a given period of
timeJ
To ans/er the above 4uestions6 the accountant prepares t/o principal
statements - the balance sheet and the profit and loss account and ancillary
statement6 the cash flo/ statement" The balance sheet sho/s the financial
position (or condition) of the firm at a given point of time" 8t provides a snap shot
and may be regarded as a static picture" The profit and loss account reflects the
performance of the firm over a period of time" 'inally6 the cash flo/ statement
displays the sources and uses of cash during the period"
Thus 6
.+ %&&nce #(eet : sho/s the financial position of the firm at a given point of
time in terms of assets and liabilities"
2+ P!o,it &n' o## #t&te$ent : reflects the performance of the firm over a period
of time"
/+ C&#( ,o0 #t&te$ent# : ,isplay the sources F uses of cash during the period"
'or analysing the performance and status of the company these financial
statements are interpretated by /or$ing out various 3ccounting ratios"
The /hole process can be e?plained diagrammatically as



Reco!'ing C&#(
/ %&n) T!&n#&ction# in
C&#(/ %&n) %oo)
Reco!'ing
1Non*c&#(2
T!&n#&ction# in 3ou!n&#
C&##i,ic&tion
4 po#ting in
gene!&*e'ge!
P!ep&!&tion o, T!i&
%&&nce
P!o,it 4 Lo## Account
%&&nce S(eet
Inte!p!et&tion
b"
R&tion An&"#i#
MANAGEMENT OF STORES AND INVENTORY
Invento!" M&n&ge$ent 4 Accounting
I$po!t&nt o, Invento!" M&n&ge$ent:
Bharat Sanchar Nigam Limited is engaged in the business of
telecommunications" Telecom Sector is highly capital intensive and re4uires a
high initial investment to develop the infrastructure li$e s/itching e4uipment6
transmission systems6 lines and /ires6 cables etc" material forms around 8&K of
capital investment for the BSNL" >ven in operating cost of BSNL" =! to !&
percent cash outflo/ is on material li$e maintenance stores6 consumables6 loose
tools and assets of petty value charged to revenue" >very year BSNL procures
and consumes >ngineering materials /orth #%6&&& 0r" This is in addition to
normal consumable materials li$e paper6 stationary6 petrolEdiesel6 computer and
office machines replacements etc" hence BSNL has to introduce and implement
all modern 8nventory *anagement techni4ues" The BSNL /as having inventories
of the /orth +#6.&+6#!& thousands of rupees as on +#"+"%&&+"
5unction# o, t(e M&te!i& M&n&ge$ent
The material management function has the follo/ing responsibilities(
(a) )rocurement i"e" purchasing of materials
(b) -eceiving6 inspection6 storing and issue of materials and
maintenance stoc$ records"
(c) 3ccounting- maintenance of priced store ledgers6 accounting of
receipts and issues of materials /ith values"
(d) Stoc$ verification
(e) 8nventory control"
Go/ the above functions have been organised in BSNL is discussed in the
follo/ing chapters"
De$&n' An&"#i# 4 Sto!e 5o!ec&#ting
The material manager is al/ays in search of techni4ues to correctly assess the
stores re4uirement" Statistical decision D ma$ing techni4ues help him6 in
correctly forecasting the material demand" Statistical techni4ues help him in
calculating fluctuations in demands6 price variations6 averaging seasonal factors6
fi?ing consumption norms and in other areas"
The *aterial *anager should collect the statistics of consumption of various
materials over a period of time6 say %= months6 and should calculate
*eanE*odeEmedian and standard deviation6 so that an optimum level of stoc$
can be maintained regularly" Seasonal fluctuations in consumption6 availability of
funds during a particular period6 lead time in getting the materials from the date
of ordering processing time for tenders changes in policy decisions of the
management6 technological changes and ne/ inventions are some of the
reasons for deviation"
8n ,5T6 the consumption during first half of the financial year used to be lo/6 due
to non-receipt of budget allotment of funds and high during second half due to
chasing the targets of ne/ connections and rush of e?penditure to avoid lapse of
funds" Similarly consumption of construction material and e?ternal plant stores is
lo/ during Hune to 5ctober /here as maintenance store consumption is high
during the period due to monsoon and occasional floods" 3ll such factors should
be ta$en into account /hile analysing the demands"
5o!ec&#t# o, Sto!e#:
The business activities under ta$en today are based on yesterday<s plans and
tomorro/<s e?pectations" The inventory or material managers have to forecat
their future activities and ma$e their plans" The top management is interested in
long range planning diversification and e?pansion" The 'inance *anager is
concerned /ith capital budgets6 operating budgets6 cash in flo/s and cash
outflo/s" The management ma$es ambitious plans of e?pansion and demands
ready supply of material and finance can not provide funds re4uired and material
*anager has to reconcile /ith the situation" -obust common-sense intrinsic
analytical s$ills and high 8"1 are pre re4uisites in material planning"
'orecasts should be both short-term and long-term" 5bviously6 short term
forecasts must fit in long term forecast" The factors influencing forecasts include
social6 economical6 political6 fiscal6 government and technological" The micro
factors influencing the forecasts include credit regulations ta?ation policies6
budgetary policies6 e?portEimport policies6 licensing policies and inflation" The
micro level policies cover the /or$ing capital6 operating costs6 pricing aspects6
management information system6 and reliability of the source of supply"
8n BSNL6 the SS3s and 3rea 5ffices of *iscellaneous 0ircles li$e )rojects6
*aintenance6 Telecom 'actories6 Telecom Store ,epots etc6 compiles stores
forecasts every year for the re4uirement during the ne?t t/o years" These
forecasts are prepared on the basis of re4uirements given by the subordinate
field units engaged in installation6 maintenance6 operations and production"
I'enti,ic&tion o, Sou!ce# o, Supp"
*ismanagement of purchase functions is a fre4uent case of delays in e?ecuting
developmental and operational projects" 3t times6 this has lead to costly
interruptions and sometimes abandonment of re4uirements given by the
subordinate projects" Gence the buyer has to locate6 develop and preserve the
sources of supply"
Sources of information about the supplies are(
#" 3gent of the suppliers
%" )ublicity of the mar$eting departments
+" )eriodical visits to industrial units
=" Gandouts of the ,9T, suppliers directories of the ,9SF,
!" @ello/ pages of Telephone ,irectories
7" 3dvertisements in journals and ne/spapers
." 8ndustrial e?hibitions
)oints to be considered before selecting a supplier
(a) Technical capacity
(b) ,esign F specifications of the product
(c) 'inancial bac$ground
(d) Ban$ reference
(e) *ajor customers of the supplier
(f) 8nspection facilities
(g) ;arranty and after sales service
(h) 8mage of the company in mar$et
(i) )revious performance
(j) 3bility to meet une?pected contingenciesEemergencies
($) 0apacity for absorbing ne/ technologies
(l) ;illingness to share the information on cost of manufacturing
(m) 8S8 and 8S5 certifications
(n) 0ompany balance sheet and other publications about the product"
Met(o'# o, P!ocu!e$ent
Stores and materials re4uired for the /or$s or administration are received
through purchase orders of the 0entral Gead 1uarters6 0ircle Gead 1uarters6
09* Telecom Stores etc" in addition to stores received from store organi2ations6
direct purchases are also made by the SS3s and other local offices" These local
purchases are made on local en4uiries6 4uotations or tenders" The detailed
procedure for calling for tenders and entering in contracts has been discussed
else/here"
The recent delegation of 'inancial )o/ers to SS3 heads by BSNL permit
purchase /ithout 4uotation up to -s!&&& in each case and purchases /ith
4uotation up to -s" %!6&&&" The open tender procedure is adopted for the
purchases e?ceeding -s" %6&&6&&&"
9eneral 8nstructions governing the purchase of stores(
(a) )urchases shall be made in the most economical manner in
accordance /ith the definite re4uirements of the public service"
(b) Stores shall not be purchased in small 4uantities" )urchase orders
shall not be split up to avoid the necessity of obtaining the sanction
of higher authority"
(c) 8f possible the >51 (>conomic 5rder 1uantity) formula may be
adopted"
(d) ;here stores are re4uired to be supplied and paid for in a particular
financial year6 indents shall not be sent so late in the year to ma$e
the compliance difficult"
(e) )urchases are to be approved only by officers /ho are vested /ith
'inancial )o/ers or by those /ho are authori2ed by higher officers
vested /ith financial po/er to ma$e local purchases"
(f) )urchases are to be made against the budget provisions F
provisions made in sanction estimate"
Invento!" St&tu#
8nventory status is ascertained by the value of stores on hand for future use" This
item is sho/n separately in the Balance sheet"
;henever material is received and is not immediately allotted for any purpose
and $ept in stores amount is classified under 8nventory" ;hen such inventories
are transferred to specific /or$6 the value may be transferred to /or$ in progress
under specified estimate and head of account"
;hen 8nventories issued to maintenance or repairs6 it may be classified as repair
and maintenance e?penditure under /or$ing e?penses"
I, not ,o! #peci,ic pu!po#e

6(en I##ue' to
Speci,ic e#ti$&te
Rep&i! 4
M&inten&nce 16o!)ing
E7pen#e# 8e&' 2

Thus 8nventory is a form of e?penditure6 /hich is $ept idle" Therefore huge
amount under 8nventory for a longer period sho/s poor control by e?ecutive
head"
8t is an important area over /hich proper control is demanded"
5i7e' A##et#
6+I+P
Invento!"
I, pu!c(&#e' &#
co$pete unit
C&pit& 8e&'
6(en C/R Ree&#e' /
In#t&&tion co$$i##ione'
6(en
Pu!c(&#e'
5o! #peci,ic
e#ti$&te
P
U
R
C
8
A
S
E
Invento!" Reco!'#
8nventory records are numerical accounts of stores received6 issued and
remaining in stoc$ /here as priced stores ledgers are valued accounts of stores
maintained in stores accounts section" 3s per general convention Store Ceepers
are responsible for maintenance of inventory records /hereas 3ccounts Section
is responsible for parallel 3ccounts records" ;hereas inventory records li$e Bin
0ards6 stoc$ registers6 store ledgers cards indicate the 4uantity accounts of
stores6 valued accounts popularly called priced store ledgers indicate both the
4uantity as /ell as value of stores transactions" 'GB 888 )art 88 of )FT
,epartment specifically states that the >?ecutive 5fficer (li$e 0TS6 3>-stores) is
responsible for numerical accounting of stores and safe custody of the stoc$s
/here 3ccounts 5fficer is responsible for maintenance of value accounts"
3ccounting policies of the BSNL also prescribe the priced stores ledger as one of
the important 3ccounting -ecord"
Iery fe/ instructions on maintenance of 8nventoryEStores -ecords are available
and they are scattered in various manuals li$e stores and /or$shops manual6
8nitial 3ccount 0ode )FT *anual Iol" L and )FT 'GB 888 )art D 88" 3ll these
instructions are very old and mainly deal /ith stores supplied by 09*TS
0alcutta and manufactured by the Telecom 'actories" )FT *anual Iol L
highlights about the indents of stores6 store-dumps and stoc$ records of
>ngineering 5fficers engaged in construction and maintenance" No/ /ith the
decentralisation of purchase and transfer of 0ircle Store ,epots stoc$ to the
0irclesE,istricts6 to be follo/ed in circles and districts also till BSNL adopts and
prescribes a scientific and systematic procedure to suit the present needs" Such
procedure already e?ists in *TNL and similar procedure can be adopted in BSNL
units also" The follo/ing discussion on 8nventory -ecords and priced stores
ledger is based on the procedure adopted in a modern commercial organisation6
e?isting instructions in erst/hile )FTE9*TS organisation and procedures and
records adopted in *TNL"
8ndents6 9oods -eceived Notes6 goods 8ssued Notes6 ,aily -eports of -eceipts
and 8ssues
Sto!e# In'ent#
>?ecutive 5fficers entrusted /ith the /or$ of construction and maintenance of
assets are re4uired to dra/ the stores from store depots by issuing a re4uisition
/hich is popularly $no/n as Store 8ndent" The follo/ing information should be
furnished by the indenting officer in stores indent"

a" Name of the /or$
b" Gead of account
c" 0onsignee address or addresses
d" )roper nomenclature6 code and rate list number of the article
e" The appro?imate date by /hich stores are re4uired"
Goo'# Receive' Note# 1GRN2
*aterials and goods received are entered in 9oods -eceived Note by the
-eceiving Section or *aterial *anagement Section" The 9oods -eceived Notes
contain6 interalia reference to purchase order and particulars as to the name of
the supplier6 date of supply6 code number and description of goods6 4uantity6
prices6 total value of purchase etc" one copy of 9-N along /ith the material is
passed on to stores /here they are $ept in appropriate bins6 dra/ers6 rac$s or
other receptacles or stoc$ed at properly mar$ed space in the store room" 0opies
of 9oods received Notes should also be sent to-
#" Supplier along /ith ac$no/ledged copy of 8nvoice"
%" 0ashEfinance section of reconciling /ith the bill"
+" Stores 3ccounts ,epartment
=" ,epartment initiating purchase re4uisition"
!" 5ne copy retained in receiving department"

3 specimen form of 9oods -eceived Note is given belo/(
9oods received note NoMMMM"" ,ateM"
,epot code( ,epot No""
)urchase order No" ,ate(
8ssued by ( Supplier< Name F 0ode(
--EL- No( ,ate( 8nvoice No( date(
8tem
0ode
,escription 1uantity
0hallanned
1uantity
-eceived
1uantity
3ccepted
-emar$s
Ce!ti,ic&te# :
#" The Stores have been physically chec$ed and found in good condition"
%" the accepted 4uantity have been entered in stoc$ register"
+" the purchase is debitable MMMMM""(classification)"
=" payments made (i) 5ctroi (ii) 'reight (ii) ,emurrage
SdE- SdE- SdE-
-eceived by Ta$en to stoc$ by 5fficer 8E0 of Store ,epot
Goo'# I##ue Note#
'or each issue of stores6 an issue note should be prepared" 3t least si? copies of
8ssue Note should be prepared and disposed off as follo/s(
#" 5ne copy retained by the depot"
%" T/o copies sent to the Stores 3ccounts Section
+" T/o copies handed over to the carrier of the stores along /ith
goods"
=" 5ne copy sent in advance to the 8ndenting 5fficer
The issue notes should be printed in a convenient form and care should
be ta$en to include the follo/ing particulars"
#" Serial number and date of the issue note"
%" Name and code of the store depot"
+" ,escription of Stores6 code and -ate List number"
=" Name of the unit indenting and consignee details"
!" Number and date of indent"
7" Gead of account"
." 1uantity indent and 4uantity issued
8" -ate and Ialue"
" Balance in stoc$ after the transaction"
#&" *ode of transport and date of despatch"
##" 'reight charges paid or to be paid"
#%" 0olumns for ac$no/ledgement by the consignee"
#+" Names F signature of issuing store-$eeping F officer in charge of
the store depot"
D&i" Repo!t# o, Receipt# &n' I##ue#+
Store 3ccounts are constructed and priced store ledgers and other sub-ledgers
are maintained in Stores 3ccounts Section on the basis of periodical reports
received from store depots or officers in charge of store depots" 8n store depots
under 9*TS organisation6 those reports are sent daily in the follo/ing pro forms6
one for daily receipts and another for daily issues"
,aily -eport6 datedMMM""for -eceiptsE8ssues onMMMMMM"
-eceiptsE8ssues inMM"9odo/nE,epot and accounted for onMMMMM""(date)
9-NE98N
Nos"
'rom
To
Total No" of
Iouchers
Total No" of
Transactions
-emar$s
)revious daily report sent under NoMMM"dated the MMMM"for/arded to the
3ccount 5fficer K"""""""""""""
These daily reports are supported by the copies of 9-Ns F 98Ns issued daily"
No/ /ith the circle stores depots brought under the control local SS3s under
territorial circles6 separate Store 3ccounts sections should be formed in all SS3s
not only for 3ccounting transactions of circles store depots6 but also receipts of
stores by the material management sections of the SS3s and other field units"
Bin 0ards6 Stoc$ -egisters6 and Numerical 3ccounts of Stoc$
5ne of the main functions of the officer in charge of the store depots is to
maintain proper records of receipts6 issue6 adjustments and balances" Nature
and e?tent of records to be maintained /ill depend upon the si2e of store depot6
types of materials received6 fre4uency of transactions and other circumstances"
The record may be a card6 or a folio in the loose lead binder or registers" To
facilitate the prompt noting of the transaction6 the stoc$ card should be attached
to or in close pro?imity of the bins6 rac$s6 almirahs /here the materials are
stored" This record is called B8N 03-," 3 specimen copy of the Bin 0ard is given
belo/(

B8N03-, 5' MMM"",>)5T
,escription of *aterial Bin No"
)lace"
0odeE-ate List No Store ledger folio(
*a?-level MM" *in-levelMM" -ecording LevelM""
-eceipts 8ssues Balance -emar$s
9oods
on order
etc"
,ate 9"-"No" 1ty" ,ate -e4"No"# 9"8"
No"
1ty"
Bin 0ards( the bin cards portray physical movement of stores and indicate the
physical balance at any moment" This facilitates $eeping proper /atch over
observance of the prescribed stoc$6 levels and introduction of a system of
continuous stoc$ ta$ing"
Stoc) Regi#te!#:
8n addition to Bin cards attached to bins6 shelves or rac$s6 separate numerical
records of stoc$ have to be maintained in major store organisations6 /here a
number of store depots and different $inds of a stores are under the charge of an
officer or section" 3 separate stoc$ card or stoc$ register should be maintained by
such officer or section for each description of article6 bearing a separate code or
rate list number" 8n this card or register each and every transaction of receipt or
issue of that article and the balance in stoc$ after each transaction should be
recorded" The stoc$ card or page number of the register should also be noted at
the same time on 9oods -eceived Note or Store 8ssue Ioucher" >ach card
should sho/ the name of the depot6 code and rate list number6 authorised
description of the article6 the class of stores under /hich the article is included
(li$e 3F)6 LF;6 0able6 8nstruments etc)6 the ma?imum and minimum balance
fi?ed etc"
Invento!" 9&u&tion
Ialuation of stoc$s has to be done on t/o occasions"
;hile issuing the material for production construction or maintenance"
;hen periodic performance statements are prepared and stoc$s in hand
are to be reflected in the accounts"
There are many methods of valuation of inventories" These are
(i) '8'5 method N'irst in first outO
(ii) L8'5 method NLast in first outO
(iii) Simple 3verage method
(iv) ;eighted 3verage method
Gere under last t/o methods are e?plained out of /hich the adopted
practice by BSNL is /eighted average method"
Simple 3verage *ethod(
8n this method6 the prices paid for the purchases from /hich issues are made6
are averaged and the entire issues are valued at that price" 8n this e?ample
the average price paid for purchases6 from /hich issues are made is -s" "
This method is very simple to operate and give reasonably valid figure of
issue price"
But over a long period it is difficult to monitor the prices and /or$ out the
average price and apply that price for entire issues" 3t the most average
purchase can be /or$ed for a month as in the e?ample or for a year if
transactions are fe/ in a year" This average is also called periodic average
and the pricing method is called periodic average method" 8n this method all
the issue of %6!&& 4uantity are valued at -s" total issues /ill be -s" %%6!&&
and value of closing stoc$ /ill be -s" =6!&&"
6eig(te' Ave!&ge $et(o'
The simple average method do not consider the 4uantities purchased and is
not practicable for a long or continuous period /hen purchase transactions
are fre4uent and issues have to valued concurrently at the time of transaction
itself" 8t is also reasonable to e?pect the price paid for a large 4uantity to have
a comparatively greater /eightage in determining the valuation rate of issues"
To meet this re4uirement6 /eighted average of the prices are ta$en as the
basis6 the /eights being the 4uantities that are brought at these prices" *any
8ndian organisations6 including BSNL have adopted this method and this
method is approved both by the Statutory 3udit as /ell as Ta? 3uthorities" The
/or$ing of ;eighted 3verage method is as given"
,ate Transaction )rocurement
price per unit
1uantity
in units
#&
th
Han
%&
th
Han
%+
rd
Han
%8th Han
+#
st
Han
-eceipt
-eceipt
8ssue
-eceipt
8ssue
8

-
#&
-
#6&&&
#6&&&
#6!&&
#6&&&
#6&&&
Ent!ie# in 6eig(te' Ave!&ge Met(o'
,ate -eceipts 8ssues Stoc$
Han 1ty -ate Ialue 1ty -ate Ialue 1ty -ate Ialue
#&
%&
%+
%8
+#
#6&&&
#6&&&
-
#6&&&
-
8

-
#&
-
86&&&
6&&&
-
#&6&&&
-
-
-
#6!&&
-
#6&&&
-
-
8"!
-
"!
-
-
#%6.!&
-
6!&&
#6&&&
%6&&&
!&&
#6!&&
!&&
8
8"!
8"!
"!
"!
86&&&
#.6&&&
=6%!&
#=6%!&
=6.!&
Total +6&&& - %.6&&& %6!&& - %%6%!& -
8n this case the value of issues during the Hanuary is -s"%%6%!& /hereas the
value of stoc$ in hand is -s" =.!&"
Surplus/ Obsolete Spares (SOS) Management
8n the field of *aterial management6 organi2ations li$e Telecom6 sudden
developments of high E ne/ technology E automationE design change6 leads to
fre4uent obsolescence of product"
8n ade4uate forecasting of services6 faulty planning and incorrect purchasing
practices are prime causes leading to such obsolescence and sometime Surplus
items"
The Surplus materials are merely in e?cess of /hat is needed /hile obsolete
materials are those /hich are not re4uired at all" The scarp /ill referred to
unusable material6 /hose value is only in terms of its material content" ;hile the
surplus material in one unite can be diverted to other needy units6 prompt
disposal obsolete materials is essential function of *aterial management
Golding obsolete surplus items along/ith scrap material cost very much to any
orgaisation" ,ot had specified verification of obsolete and surplus stores F
,isposals as a major point for noting in his self inspection report of SS3 Gead"
(,5T Lr No " -+E->bdt" ##-##-)
3s such SS3 Gead can deputes S,> (**)E39* (**) to conduct 4uarterly
inspection of subunits E e?changes to revie/ the obsoleteE surplus stoc$s /ithin
the SS3 and ta$e necessary action for disposal /here re4uired"
Su!pu# Sto!e#
8" Stores remaining in stoc$ for over a year shall be considered surplus
unless there is any good reason to treat them other /ise"
(##(+) of 9'-s)
ii " Balances of stores shall not be held in e?cess of re4uirements of a
reasonable period or in e?cess of any prescribed limit"
(##(#) of 9--s)
Di#po#& o, Su!pu# #to!e#
To enable the accounts of an estimate to be closed6 serviceable stores including
recovered material rendered surplus /hen the /or$ is completed6 must be either
be utili2ed on other /or$s in the area ( e?cept items /hich re4uire special
allotment from the ,5T) or returned to the Store ,epot and should not be left
behind"
(Iide )ara +!6 )FT *an" Iol L)
Un#e!vice&be / Ob#oete #to!e#
3s is desirable to avoid $eeping /orthless materials in stoc$6 /hen stores of and
$ind are declared unserviceable or obsolete they should be brought on to a
A-egister of Pnserviceable StoreB in form 30' .+ 3 and a report in from 30>
must be made to T,> by the Sub ,ivisional 5fficer or the 5fficer D in charge of a
telephone e?change or telegraph office6 etc" as the case may be"
8n the reports6 an e?planation or their condition should be given and the period
during /hich the articles have been in stoc$ or in use6 and the cause of
deterioration /ould as far as possible6 be stated"
,uring the e?ecution of a /or$s6 reports of unserviceable stores in form 30> D
should from time to time be submitted by the officer D in charge of the /or$ to the
,ivisional >ngineer /ho /ill6 if /ithin his po/ers6 pass order about the disposal
of these stores6 5ther/ise he /ill submit the report to the ne?t higher authority
for orders"
Pnder no circumstance the disposal to unserviceable stores is to be delayed
unduly" ( )ara +78 I5L L)
Pnserviceable line stores and tools should be sold to the best advantage6 as rule
at siteQ or at nearest large city lift is e?pected the sales /ill have more proceeds
there"
( The items mentioned under Note 88 under para +.% of Iol" L can also be
disposed locally)"
E7ception:
,isposal of Pnserviceable ;ireless F -adio >4uipment
Pnserviceable /ireless e4uipment cannot be disposed by auction due to the
possibility of some components of transmission e4uipment being used by
outsiders for unauthorised purposes" But small components li$e condensers6
registers6 transformers6 etc6 are sent to telegraph depot6 as there may be
difficulty in stoc$ing them" Some components /hich may have some use ful life
left but may not find effective use independently6 they can be put to use as
replacements etc"
Ta$ing into account all these considerations it has been decided that all
unserviceable /ireless e4uipment /hich have outlived their Life and are obsolete
should be cannibali2ed and useful components available6 be utilised for
maintenance purposes" Such materials recovered in nonstandard bits and pieces
/hich cannot be engineered for re-use6 should be ta$en on numerical account
but /ithout any debit or credit"
( )ara +.% D 3 )FT *an" Iol L)
Pnserviceable obsolete and surplus stores( ,isposal
(i) ;henever store become unserviceable6 obsolete or surplus6 they
should be declared as such and disposed of under the orders of an
authority competent to sanction the /rite off of a loss caused by
deficiencies and depreciation e4uivalent to their value"
This procedure should be follo/ed both in cases of normal /ear and tear
as /ell as in cases /here /ear and tear may be held to be abnormal" The
authority competent to order disposal should ta$e into account the
circumstances in /hich the store became unserviceable6 obsolete or
surplus" ;here the competent authority holds the stores have become
unserviceable6 obsolete or surplus o/ing to normal /ear and tear6 no
4uestion of loss arises"
;here the competent authority hold that stores have become
unserviceable obsolete or surplus o/ing to negligence6 fraud etc"6 on the
prt of individual 9overnment servants6 it /ill be necessary to fi? the
responsibility for the loss and to devise remedial measures to prevent
recurrence of such cases" 8n either case6 the order of the competent
authority declaring the stores in 4uestion as unserviceable6 obsolete or
surplus and directing the mode in /hich they should be disposed of /ould
be sufficient to cover the loss to 9overnment6 if any and no separate
sanction for the /rite off of the loss /ill be necessary"
(ii) >ach order declaring stores as unserviceable6 obsolete or surplus
should indicate the causes leading to the stores having become
unserviceable6 obsolete or surplus" 3 copy of each such orders should be
endorsed by the 0ompetent authority to the 3udit 5fficer E 0ircle
3ccountant concerned"
(iii)" 8t /ill be seen from para (i) above that the sanction for /rite off of loss
/ill not necessary /here the stores are bodily present" 8t is only in such
cases /here the stores are missing (as in the case of fire6 theft etc" ) that
formal sanction for /rite off of losses /ill be necessary"
iv" The term A value of stores A for the purpose of issue of sanction for
disposal of unserviceable6 or surplus stores6 /rite off of losses of stores
should be ta$en as (a) boo$ value /here priced accounts are maintained
and ( b) the replacement value i"e" mar$et value ( at the time of issue of
sanction for the disposalE /rite off )" 5f a ne/ articles or an article of
similar nature6 /here no priced accounts are maintained" The sale
proceeds of unserviceable6 obsolete or surplus stores should not be ta$en
into account for determining the value of stores for purposes of issue of
sanction for disposal of stores"
Note:*
(i) The stores are designated Pnserviceable /hen they are not useful
for the department being beyond economic repairs" (i"e" non-standard6 non
D stoc$ed6 obsolete and surplus)"
(ii) 5bsolete ( Stores that are going to be declared as non-standard
shortlyQ generally ne/ orders are not to be placed" Ii2"6 non-standard6 non
stoc$ed6 surplus and unserviceable"
(iii) Surplus( Stores are called surplus /hen they are in e?cess or
re4uirement for a specified period c"f" non-standard6 non6 obsolete and
unserviceable6 Gere the term does not6 ho/ever6 include serviceable
stores found in e?cess of re4uirement for a particular /or$ for /hich they
/ere indented for by the ,istrictsE divisions and are brought on to the site
of the /or$"
(iv) Pnserviceable Stores( 8n the >ngineering Branch of the department
materials /hich are found to be unsociable may by divided into t/o
classes (i) materials /hich are recovered by dismantlement from lines and
offices and are found to be unserviceable6 and (ii) materials /hich become
unserviceable through lying in stores"
(-ule 8& of 'GB Iol 888 pt 88)
Recove!e'
Pnserviceable stores( ,isposal
Pnserviceable6 obsolete and Surplus Stores recovered from line and offices are
noted in a register of unserviceable and obsolete stores in 'orm 30>- .+ through
/hich their disposal is /atched" -ecovered copper /ire6 /hether serviceable or
unserviceable is invariably sent to the nearest -egional depot for disposal"
The 5fficer D in charge of the 8nstallationE ;or$ should determine /hether the
recovered instruments or e4uipments can be repaired economically and reused
/ithin his o/n jurisdiction" 8f6 ho/ever6 the e4uipmentsE instruments are not
re4uired /ithin the jurisdiction of the officer concerned6 he should refer the matter
to his higher authority for use in some other /or$ /ithin the ,ivision concerned" 8f
the e4uipmentsE instruments are not re4uired /ith the ,ivision6 the ,ivision
>ngineer (SS3) should ta$e up the matter /ith his Gead of the Telecom 0ircle for
use in some other SS3 /ith in 0ircle"
8f it is ultimately decided by the Gead of the 0ircle the there is no use for the
e4uipmentsE instruments in his o/n circle6 although these are economically
repairable6 the matter may be referred to the 09*6 Telecom6 Stores6 /ho /ill
refer the matter to the Telecom Gead 1uarters6 if necessary" ('or intimating other
circles) ;ith each proposal for sanction of disposal of surplus stores a certificate
from the 09*Ts" Should be recorded the list of stores /ere circulated to Geads
of Telecom" 0ircles and ,istricts and that there is no demand for these"
Sto!e# Sc!&pping Co$$ittee#: 5o!$&tion
3F) 8tems
8n the case of 3pparatus and )lant of all types recovered from installations or
/or$s the recommendations of the 0ircle level Stores Scrapping committee
should be obtained before they are finally declared unserviceable"
The composition of the 0ommittee is as follo/s(-

#" ,irector of Telegraphs6
,y" 9eneral *angerQ Telephone ( 0hairman
or the ,istrict *anager"
%" ,ivisional >ngineer in-charge of the e?change ( *ember
area concerned"
+" 3ssistant >ngineer of Sub-,ivisionalQ ( *ember
5ffice of the installation concerned"
Line Stores
8n the case of line stores6 the ,ivisional >ngineer /ill be the authority competent
to declare the stores unserviceable" ()ara+.& of Iol L)
Sto!e# Sc!&pping co$$ittee#: 5unction#
8f the recovered instrumentsEe4uipments are6 in the opinion of the 5fficer in
charge of the /or$E installation6 beyond economic repairs and are held to be
unserviceable a proper case should be made out and submitted to the Stores
Scrapping 0ommittee at circle level" The committee /ill consist of the ,irector of
Telegraphs (,9*) of the concerned 0ircle (or SS3) as chairmen6 the ,ivisional
>ngineer-in-charge as a member and the 3ssistant >ngineer E Sub-,ivisional
5fficer concerned as Secretary"
The 0ommittee /ill e?amine the recovered instrumentsE e4uipments and decide
/hether these should be declared as unserviceable for the purpose of disposal"
The cost of repairs6 the assured prescribed life6 the actual period of use and
other relevant aspects /ill be ta$en into account in arriving at the decision"
0omponents6 /hich are considered useful6 should be e?tracted locally by the
Staff of the local PnitE -epair center and these should issued on a numerical
account over /hich are considered useful6 should be issued on a numerical
account over /hich a /atch should be $ept" The committee shall meet once in
t/o months or /henever there is substantial 4uantify of accumulated stores
a/aiting e?amination"
The Secretary shall $eep a record of the proceedings of meetings and submit a
copy of the same to the authority competent for sanctioning the disposal of
unserviceable stores in 'orm (30>-)
The stores declared unserviceable should be entered in the list of unserviceable
stores in 'orm 30>- and copy of the list sent to the concerned 0ircle
3ccountant (035 F 8'3 of SS3) after obtaining the sanction of the competent
authority for disposal"
3fter obtaining sanction of competent authority6 action should be ta$en for
disposal of these unserviceable stores under the rules prescribed in )FT *anual
Iol" L and the orders issued from time to time and disposal arranged locally"
8n addition the committee /ill ta$e over the follo/ing function(
(i) >?amination and listing of the 4uantity and value of stores held in
e?cess of % years re4uirements"
(ii) >?amination of the possibility of utili2ing the items for ,epartments
use as substituted is necessary"
(iii) >?amination of the stoc$ list /ith a vie/ the rationalising the types
of stores and reducing the number of si2ed consistent /ith
technical efficiency"
(iv) 8n cases /here it is not possible /ithin the 0ircle to utilise the
surplus stores even as a substituted6 the matter /ill be referred to
the 9eneral *anger Telecom6 Stores /ho /ill obtain the order of
the Surplus Stores committee for their final disposal"
(-ule 8# of 'GB Iol 88 )t 88)
Co$petent &ut(o!it" to S&nction 1ACE*:2
'or the purpose of determining the po/ers of sanction of the competent
authority6 the value of the stores /ill be the boo$ value6 if priced accounts are
available or the replacement value at the mar$et rate6 at the time of issue of
sanction6 of a ne/ article or an article of similar nature6 if no priced accounts are
available6 The sale proceeds of the stores /ill be ignored for the purpose of
determining the authority competent to sanction the loss"
The boo$ value of unserviceable stores recovered from /or$s for /hich original
rate list values are not $no/n6 should be determined by the ,ivisional >ngineer
concerned /ho /ill be in a position to fi? the boo$ value by reference to the cost
of replacement or by reference"