1.

1 INTRODUCTION
An accounting practice is the routine manner in which the day-to-day financial activities
of a business entity are gathered and recorded. A firm's accounting practice refers to the method
by which its accounting policies are implemented and adhered to on a routine basis, typically by
an accountant and/or auditor or a team of accounting professionals. An accounting practice is
intended to enforce a firm's accounting guidelines and policies. It exists as the daily recording of
financial data that is important to the evaluation and monitoring of the firm's economic activities.
Accounting practice refers to the normal, practical application of accounting and/or auditing
policies that occurs within a business.

Accounting practice is the system of procedures and controls that an accounting

department uses to create and record business transactions. Accounting practice should
ideally be extremely consistent, since there are a large number of business transactions that
must be dealt with in exactly the same manner in order to produce consistently reliable
financial statements. Auditors rely upon consistent accounting practice when examining a
company's financial statements.

The development of a high level of accounting practice calls for the routine
examination of any departures from the mandated process flow, so that errors can be spotted
and the underlying causes corrected. This level of self-examination is only possible if the
accounting staff has a sufficiently high level of training to understand the proper process
flow.

Accounting practice also calls for the continual installation and updating of best
practices, so that both the efficiency and effectiveness of the accounting processes are
improved over time. Doing so calls for additional skills in identifying best practices and in
the installation and monitoring of any changes made.

Accounting principles were established to help keep accounting information accurate,

relevant and to help keep accountants and other financial officers in a business from mishandling
the numbers in a business regardless of its size. There are certain rules that apply to accounting
known as generally accepted accounting principles, or GAAP, for short. The basic tenants of
these rules are typically incorporated into basic accounting practices for small businesses to help
streamline business functions.

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1.2 OBJECTIVES OF THE STUDY

The study was carried out in Powertek Enterprises, situated at Pathanapuram, is to

achieve the following specific objectives:

1.2.1 To familiarize with the organisation and its functioning.

1.2.2 To familiarize with the accounting practices followed in the organisation.
1.2.3 To study the hierarchy of the accounts department.
1.2.4 To understand the method recording, preparing and maintaining day book, ledgers and
final accounts.
1.2.5 To understand the reconciliation process and rectification of errors.
1.2.6 To familiarize with the auditing and taxation mechanism.

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1.3 SCOPE OF THE STUDY

The Study at Powertek Enterprises, Pathanapuram aims at getting familiarized to the day-
to-day activities and business environment of the firm. The study was conducted to understand
the structure, function and process of accounts department and its interdependence.

3
1.4 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problems. The

research has tried to give detailed information about the history of the industry, organisation and
the field of the study.

DATA COLLECTION

Data is collected in two ways:

a) Primary data
b) Secondary data

Primary Data

The primary data are those which are collected for the first times and thus happen to be
original character in primary data do not already exist in publications. In this study primary data
was collected through observation and interview.

Secondary Data

The secondary data means already available data. Here the data is collected from
Company Records, Websites, Annual Reports, Journals and other company published sources
etc.

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1.5 LIMITATIONS OF THE STUDY

There were some limitations in conducting the study at Powertek Enterprises,

Pathanapuram. They are:

1.5.1 There were difficulties in obtaining data from executives and managers due to their busy
schedule.
1.5.2 An in-depth study of the organisation could not be carried out due to shortage of time
1.5.3 The reliability of data used for study largely depends upon the companies reports and the
information given by the executives.
1.5.4 The company has the limitation to disclose their financial details, so a detailed analysis of
financial performance of the company is not possible.

5
2.1 INDUSTRY PROFILE

The machine industry or machinery industry is a subsector of the industry that produce
and maintain machines for consumers, the industry, and most other companies in the economy.
This machine industry traditionally belongs to the heavy industry. Nowadays, many smaller
companies in this branch are considered part of the light industry. Most manufacturers in the
machinery industry are called machine factories.
The machine industry is a subsector of the industry that produces a range of products
from power tools, different types of machines, and domestic technology to factory equipment
etc. On the one hand the machine industry provides:

 The means of production for businesses in the agriculture, mining, industry and construction.
 The means of production for public utility, such as equipment for the production and
distribution of gas, electricity and water.
 A range of supporting equipment for all sectors of the economy, such as equipment
for heating, ventilation, and air conditioning of buildings.
These means of production are called capital goods, because a certain amount
of capital is invested. Much of those production machines require regular maintenance, which
becomes supplied specialized companies in the machine industry.
On the other end the machinery industry supplies consumer goods, including kitchen
appliances, refrigerators, washers, dryers and a like. Production of radio and television, however,
is generally considered belonging to the electrical equipment industry. The machinery industry
itself is a major customer of the steel industry.
The production of the machinery industry varies widely from single-unit production
and series production to mass production. Single-unit production is about constructing unique
products, which are specified in specific customer requirements. Due to modular design such
devices and machines can often be manufactured in small series, which significantly reduces the
costs. From a certain stage in the production, the specific customers requirements are build in,
and the unique product is created.

HISTORY
The machinery industry came into existence during the Industrial Revolution.
Companies in this emerging field grew out of iron foundries, shipyards, forges and repair shops.
Often companies were a combination of machine factory and shipyard. Early in the 20th century
several motorcycle and automobile manufacturers began their own machine factories. Prior to
the industrial revolution a variety of machines existed such as clocks, weapons and running gear
for mills (watermill, windmill, horse mill etc.). Production of these machines were on much

6
smaller scale in artisan workshops mostly for the local or regional market. With the advent of the
industrial revolution manufacturing began of composite tools with more complex construction,
such as steam engines and steam generators for the evolving industry and transport. In addition,
the emerging machine factories started making machines for production machines as textile
machinery, compressors, agricultural machinery, and engines for ships.
18th century
During the first decades of the industrial revolution in England, from 1750, there was a
concentration of labor usually in not yet mechanized factories. There were all kinds of new
machines invented, which were initially made by the inventors themselves. Early in the 18th
century, the first steam engines, the Newcomer engine, came into use throughout Britain and
Europe, principally to pump water out of mines.
In the 1770s James Watt significantly improved this design. He introduced a steam
engine easy employable to supply a large amounts of energy, which set the mechanization of
factories underway. In England certain cities concentrated on making specific products, such as
specific types of textiles or pottery. Around these cities specialized machinery industry arose in
order to enable the mechanization of the plants. Hereby late in the 18th century arose the first
machinery industry in the UK and also in Germany and Belgium.
19th century
The Industrial Revolution received a further boost with the upcoming railways. These
arose at the beginning of the 19th century in England as innovation in the mining industry. The
work in coal mines was hard and dangerous, and so there was a great need for tools to ease this
work. In 1804, Richard Trevithick placed the first steam engine on rails, and was in 1825
the Stockton and Darlington Railway was opened, intended to transport coals from the mine to
the port. In 1835 the first train drove in continental Europe between Mechelen and Brussels, and
in the Netherlands in 1839 the first train drove between Amsterdam and Haarlem. For the
machinery industry this brought all sorts of new work with new machinery for metallurgy,
machine tool for metalworking, production of steam engines for trains with all its necessities etc.
In time the market for the machine industry became wider, specialized products were
manufactured for a greater national and often international market. For example, it was not
uncommon in the second half of the 19th century that American steelmakers ordered their
production in England, where new steelmaking techniques were more advanced. In the far east
Japan would import these product until the early 1930s, the creation of an own machinery
industry got underway. .
20th century - now
The term "machinery industry" came into existence later in the 19th century. One of the
first times this branch of industry was recognized as such, and was investigated, was in a
production statistics of 1907 created by the British Ministry of Trade and Industry. In this

7
statistic the output of the engineering industry, was divided into forty different categories,
including for example, agricultural machinery, machinery for the textile industry and equipment,
and parts for train and tram.
The inventions of new propulsion techniques based on electric motors, internal
combustion engines and gas turbines brought a new generation of machines in the 20th century
from cars to household appliances. Not only the product range of the machinery industry
increased considerably, especially smaller machines could delivered products in much greater
number fabricated in mass production. With the rise of mass production in other parts of the
industry, there was also a high demand for manufacturing and production systems, to increase
the entire production.
Shortage of labor in agriculture and industry at the beginning of the second half of the
20th century, raised the need for further mechanization of production, which required for more
specific machines. The rise of the computer made further automation of production possible,
which in turn set new demands on the machinery industry.

CLASSIFICATION OF MACHINERY INDUSTRY

 Agricultural machine industry

 Metalworking Machine - Industry and machine tool factories
 Manufacturers of machinery and equipment for the food, chemical and allied industries
 Manufacturers of machinery and equipment for the rubber and plastics
 Manufacturers of gears, gearing and driving elements
 Manufacturers of machinery and equipment and wood furniture etc.
 Manufacturers of steam boiler, and power tools industry
 Office machinery industry
 Other machinery and equipment industry

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2.2 COMPANY PROFILE

POWERTEK ENTERPRISES is one of the leading machine manufacturers, exporters

and suppliers from South India. Over the years, they have established a large customer base.
Powertek Enterprises is an established manufacturer and supplier of construction machiners,
paper plate making machines, chappathi making machines, food processing machines etc.

They follow business principles and ethics moreover, after working round the clock,
they have mastered a rich customer base. Their client-friendly and dedicated approach brought
them into limelight as distinct business entity. In a short period of time the company has shared
the path of success with lot of entrepreneurs. Powertek enterprise has become a big name for the
best range of Industrial Machines.

The company provides the highest quality end products to the customers while
striving to make them the leaders in their respective industries. The company has grown
dramatically with a continuous strategy of offering the highest level of production quality and
exceptional customer service.

They have their own design and products are 100%made with high quality
components, process and standards which in turn increases the machine life and productivity.
Spares are readily available and continued expert service team. Their technically advanced
machines assures long life and trouble free running.

VISION

“We want to be recognized as the very pinnacle of excellence. The commitment to

our clients and the understanding of their needs is the provision of the highest quality service. To
guarantee our continued services we will achieve a reasonable profit, continue to be the leader in
our industry through individual and combined dedication, innovation and integrity. We will give
our employees the opportunity for both personal and professional growth.”

MISSION

“At, we strive for innovative improvements that are continuous, cost-effective and
customer-driven. We are committed to improving and enhancing our excellence in every aspect
of our work. Engineering will do so by giving our clients the services and products will help
them in their business. Here we exceed customer’s expectations through continuous innovation
and to provide leadership and direction in the manufacturing sector for the overall industrial
growth of the nation.”

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 COMPANY HISTORY

Powertek Enterprise has a long history in the field of industrial machinery. They
have been the pioneers in the industrial machine industry for many years and are known for
the innovative steps.

 2011 - START WITH HOLLW BRICKS MACHINE

This was the time when they started their industrial machine sale. They had no idea how far they
would go, they weren’t even sure that they would be able to survive for a few years. What drove
them to start the sale was the understanding that they could provide a service after sale no one
else was providing.

 2012 - NEW OFFICE & FIRST EMPLOYEES

This was the first period when Powertek actually felt like it would stick around for a while. They
realized they were growing more stable and expanding at the same time. They needed a new
office and employees.

 2012 - START PRODUCTION & BRANCHES

By this time they were a well known name within the industry. They had been prominent
members of the industry and worked for some of the biggest clients in the industry. They started
their Hollow bricks production unit in Coimbatore and branch offices in Bangalore &
Kottarakara.

 2013 – RECOGNISATION

As a prominent member in the industrial machine industry in short period, 'Dhanam' - business
magazine published Powertek enterprises as the new Entrepreneurs in Industrial machine.

 2015 - Powertek Family

Their journey brought them higher. They need a new office as they had severely outgrown the
last one. They started their new showroom in Pathanapuram, near Mini civil station. They started
their production in Paving tile machine, Mixer machine, constructional equipment such as
trolley, chain block etc.

By the time they are a well known name within the machine industry. Many multi nation
companies approaches them. Now we are dealing with chapathy making machine, paper cup

10
making machine, paper bag making machine, paper plate making machine, bakery machines and
Kitchen equipment machines.

ACTIVITIES OF POWERTEK ENTERPRISES

Powertek approaches every client’s business as if it were our own. They have
marketing and research team, So they can easily advise the client to purchase the machine
exactly as per his requirement. They put themselves in their clients business, and collaborate to
unlock the full potential of their business. This builds deep and enjoyable relationships.

The right approach is necessary for the right outcome. Powertek approaches start from
implementation to the future. They know that in order to maximize the potential of success for
their customers they shape their clients growth and increase the quality of product day by day.

Design & Production

The research and development team improve the quality of machine design day by day
with the feedback from technical expertise, service engineers, comparison of same products and
fact based prediction

Marketing & sales

They help to reduce your machine cost by direct selling. The marketing & sales team
introduce machines other than any third party dealers and delivery the machine on customer
sites.

Machine installation & Trial.

The expertise engineering team install the machine in perfect and long running
configurations. It give you the maximum efficiency and feasibility.

Annual maintenance service

The technical expertise do the annual maintenance service and analyse the condition
of machine and components to create a lower and steady maintenance cost.

Repair and replacement

They work with our customers to increase their efficiency and eliminate the harmful
practices. As the order of complaint registered the technical expertise analyse the complaints and
replace the spare parts.

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Raw materials providing

The marketing & sales team also provides the raw materials for the production as per
the orders.

INFRASTRUCTURE

They own sophisticated infrastructure comprising of advanced R&D wing, Hi-tech

processing unit and hygienic storage premises. Sprawled across a wide area of land, the
manufacturing unit is equipped with upgraded machines. In addition to that they have other
departments such as quality, packaging and logistics department.

MAJOR MARKETS

They have created a wide distribution network making the machines available in
various parts of the world. Some of the major market areas we cater to are:
1. India
2. UAE
3. Africa
4. West Indies
5. Canada

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2.3 PRODUCT PROFILE

Powertek Enterprises are manufacturing various kinds of products. They are:

1. Hydralically operated block making machines

2. Auto feeder double punch hollow block machine
3. High density hydraulic operated paving block machine
4. Soil interlock block making machine
5. Vibro-interlock machine
6. Construction lifts
7. Concrete mixer machine
8. Paper cup forming machine
9. Paper bag making machine
10. Paper plate forming machines
11. Nonwoven bag making machine
12. Rotary oven
13. Fully automatic chappathi making machine
14. Semi automatic chappathi making machine
15. Incinarator
16. Construction equipments

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3.1 ACCOUNTS DEPARTMENT

The accounts department of the Powertek Enterprises takes the responsibility for
organizing the accounting and financial affairs including the preparation and presentation of
appropriate accounts, and the provision of financial formation for managers. The accounts
department consists of three employees including a manager and two executives. The department
records accounts payable and receivable, inventory, payroll, fixed assets and all other financial
elements. The accountants review the records of each department to determine the company's
financial position and any changes required to run the organization cost effectively. All
accounting information is maintained in accounting department and with
these available accounting information, finance department plans and control the funds.
The major functions of finance department are:

 Book keeping procedures

 Preparing final accounts
 Providing management function
 Raising finance

In small companies, an accounting departmentmay consist of one or two people who handle all
accounting affairs. Larger companies, however, may have multiple accounting sub-departments.
The part of an organization that manages its money. The business functions of a finance
department typically include planning, organizing, auditing, accounting for and controlling its
company's finances. The finance department also usually produces the company's financial
statements.

An accounting department of any given company play an important role in managing

money, gathering payments and collecting receivables, paying bills and utilities on time and
ensuring the company keeps a positive net worth value. Accountants often set goals and
objectives for the entire department to ensure the business performs the best possible accounting
practices at any given time. These objectives and goals may differ for each given company.

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3.2 HIERARCHY OF ACCOUNTS DEPARTMENT

The accounts department of Powertek Enterprises consists of three employees. They

are accounts manager, accounts executive and delivery coordinator. The top level of accounts
department is the accounts manager who heads and controls the subordinators and activities of
the department. The middle level includes the accounts executive who deals with the preparation
of day book, ledger etc. The delivery coordinator is in the bottom level who coordinates all the
delivery activities.

Accounts
manager

Accounts executive

Delivery cordinator

3.1 Hierarchy of accounts department

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3.3 DUTIES OF OFFICIALS IN ACCOUNTS DEPARTMENT

DUTIES OF ACCOUNTS MANAGER

 Achieves accounting operational objectives by contributing accounting information and

recommendations to strategic plans and reviews; preparing and completing action plans;
implementing production, productivity, quality, and customer-service standards;
resolving problems; completing audits; identifying trends; determining system
improvements; implementing change.
 Meets accounting financial objectives by forecasting requirements; preparing an annual
budget; scheduling expenditures; analyzing variances; initiating corrective actions.
 Confirms financial status by monitoring revenue and expenses; coordinating the
collection, consolidation, and evaluation of financial data; preparing special reports.
 Maintains accounting controls by establishing a chart of accounts; defining accounting
policies and procedures.
 Guides other departments by researching and interpreting accounting policy; applying
observations and recommendations to operational issues.
 Maintains financial security by establishing internal controls.
 Avoids legal challenges by understanding current and proposed legislation; enforcing
accounting regulations; recommending new procedures.
 Protects organization's value by keeping information confidential.
 Updates job knowledge by participating in educational opportunities; reading
professional publications; maintaining personal networks; participating in professional
organizations.
 Accomplishes accounting and organization mission by completing related results as
needed.

DUTIES OF ACCOUNTS EXECUTIVE

 Prepares asset, liability, and capital account entries by compiling and analyzing account
information.
 Documents financial transactions by entering account information.
 Recommends financial actions by analyzing accounting options.
 Summarizes current financial status by collecting information; preparing balance sheet,
profit and loss statement, and other reports.
 Substantiates financial transactions by auditing documents.
 Maintains accounting controls by preparing and recommending policies
 Reconciles financial discrepancies by collecting and analyzing account information.
 Secures financial information by completing data base backups.

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3.4 RECORDING DAILY TRANSACTIONS

Transactions are first recorded in the books of prime entry and then recorded on
the ledger system. A prime entry record (or book of prime entry) is where a transaction is first
recorded.

These records consist of:

 The cash book:

This records amounts paid into and out of the bank account

 The petty cash book:

This records small amounts of cash paid for day to day expenses, such as buying postage
stamps and teas or coffee for the office.

 The sales day book:

sales invoices issued to credit customers

 The purchases day book:

purchase invoices received from suppliers

 The journal:

where adjustments, such as correcting errors, are first recorded.

The books of prime entry serve to ‘capture’ transactions as soon as possible so that
they are not subsequently lost or forgotten about. The cash book and the petty cash book are part
of the double entry system and record cash coming in and going out. The day books and journal
are not part of the ledger and entries are made from there to the ledgers.

In Powertek Enterprises, they record their daily transactions both manually and
automatically. The accountant records the transaction in day books as well as in their tally
software. They own customized tally software for recording and processing their daily business
transactions.

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3.5 MAINTAINING CASH BOOK

Cash Book is a Book in which all cash receipts and cash payments are recorded. It is
also one of the books of original entry. It starts with the cash or bank balance at the beginning of
the period. In case of new business, there is no cash balance to start with. It is prepared by all
organisations. When a cash book is maintained, cash transactions are not recorded in the Journal,
and no cash or bank account is required to be maintained in the ledger as Cash Book serves the
purpose of Cash Account.

Generally cash transactions are numerous. What is credit transaction today, will be cash
transactions tomorrow. In other words, all credit transactions are finally settled by cash. If like all
other transactions cash transactions are also recorded primarily in Journal, the cash aspect of the
transactions will be required to be posted to Cash A/C, in the Ledger separately. This involves
much time and labour. This is why, cash transactions are recorded in a separate book named
Cash Book. It saves much time and labour.

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3.6 RECONCILIATION PROCESS

Reconciliation is the process of comparing transactions and activity to supporting

documentation. Further, reconciliation involves resolving any discrepancies that may have been
discovered. The process of reconciliation ensures the accuracy and validity of financial
information. Also, a proper reconciliation process ensures that unauthorized changes have not
occurred to transactions during processing.

Accounting software is one of a number of tools that organisations use to carry out
this process thus eliminating errors and therefore making accurate decisions based on the
financial information. Reconciliation of accounts determines whether transactions are in the
correct place or should be shifted into a different account.
To ensure the reliability of the financial records, reconciliations must, therefore, be
performed for all balance sheet accounts on a regular and ongoing basis. A robust reconciliation
process improves the accuracy of the financial reporting function and allows the finance
department to publish financial reports with confidence. There are two ways in which
reconciliation can take place:

1. Using a documentation review, “document review is a formalised technique of data

collection involving the examination of existing records or documents.” This is the most
common approach of account reconciliation. This method is done by using accounting
software.
2. The second method used is analytics review. Reconciliation of accounts using this
method is undertaken by estimating the transactions that should be in an account, usually
based on other data.

An account reconciliation is usually done for all asset, liability, and equity
accounts, since their account balances may continue on for many years. It is less common to
reconcile a revenue or expense account, since the account balances are flushed out at the
end of each fiscal year. However, this may be done simply to verify that transactions were
recorded in the correct account; a reconciliation may reveal that a transaction should be
shifted into a different account. Usually, this means moving an expense into a different
account.

In Powertek enterprises, they perform the reconciliation process in daily, monthly

and yearly basis in order to reduse the errors. On a daily basis, the accounts manager checks the
accounts and only after getting sanction the employees of this department could leave the office.
On a monthly basis there is internal check and there is year wise external audit to ensure the
transparency in the records.

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3.7 PREPARATION OF LEDGERS

The book in which accounts are maintained is called ledger. Generally, one account
is opened on each page of this book, but if transactions relating to a particular account are
numerous, it may extend to more than one page. All transactions relating to that account are
recorded chronologically. From journal each transaction is posted to at least two concerned
accounts - debit side of one account and credit side of another account. Remember that, if there
are two accounts involved in a journal entry, it will be posted to two accounts in the ledger and if
the journal entry consists of three accounts (compound entry) it will be posted to three different
accounts in the ledger. The process of transferring information from journal to ledger accounts is
known as posting. The goal of all transactions is ledger. Ledger is known as the destination of
entries in journal but it must be remembered that transactions cannot be recorded directly in the
ledger - they must be routed through journal.

The ledger is a permanent summary of all amounts entered in

supporting journals which list individual transactions by date. Every transaction flows from a
journal to one or more ledgers. A company's financial statements are generated from summary
totals in the ledgers.
Types of ledgers are:

1. General Ledger

The general ledger accumulates information from journals. Each month all journals are totalled
and posted to the General Ledger. The purpose of the General Ledger is therefore to organise and
summarise the individual transactions listed in all the journals.

2. Debtors Ledger

The Debtors Ledger accumulates information from the sales journal. The purpose of the Debtors
Ledger is to provide knowledge about which customers owe money to the business, and how
much.

3. Creditors Ledger

The Creditors Ledger accumulates information from the purchases journal. The purpose of the
Creditors Ledger is to provide knowledge about which suppliers the business owes money, and
how much.
In Powertek Enterprises, the posting of transactions is not done manually. It is done
through tally software.

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3.8 RECTIFICATION OF ERRORS

Accounting errors are the errors committed by persons responsible for recording and
maintaining accounts of a business firm in the course of accounting process. These errors may be
in the form of omitting the transactions to record, recording in wrong books, or wrong account or
wrong totalling and so on.

In accounting practice there are some definite methods to rectify the accounting errors.
These are based on accounting practices and procedures. Rectification of errors using these
methods is called rectification of accounting errors. So it is a process of rectification. It is
generally done by passing an entry to nullify the effect of error.

Methods of rectification of accounting errors

(i) instant correction

(ii) correction in the affected account

(i) Instant correction

If the error is detected immediately after making an accounting entry, it may be corrected by
neatly crossing out the wrong entry and making the correct entry and the accountant should put
his initials

(ii) Correction in the affected accounts.

In case error is detected on a date later than the date on which the transaction was recorded but
before the Trial Balance, the rectification will be made by making a correction in the affected
account.

In Powertek Enterprises there is a daily check system which reduces the chances of
errors and due to this system the accountant is able to correct the errors at the time itself.

21
3.9 INTERNAL CHECK SYSTEM

Internal check is a method of organising the accounts system of a business concern

where the duties of different clerks are arranged in such a way that the work of one person is
automatically checked by another and thus the possibility of fraud, or error or irregularity is
minimised unless there is collusion between the clerks. For example, the receipt of cash is
entered by the cashier on the debit side of the cash book; this entry is carried to the ledger by
another clerk; the statement of account relating to this transaction is sent to the customer by a
third clerk and so on. Thus the same transaction has passed through three different hands and the
work of one is checked automatically by the other. It is a kind of division of labour. This
minimizes the possibilities of frauds and errors unless all the three join hands in defrauding their
employer.
The essential elements of an internal check are :
(a) Instituting of checks on day-to-day transactions.
(b) These checks operate continuously as a part of routine system.
(c) Work of each person is made complementary to the work of another.
In Powertek enterprises, there is daily check system in which all the business
transactions in the organisation must be checked and verified and signed by the accounts
manager before the employees are leaving the organisation. This internal check helps the
organisation to maintain their transparency and this reduces the possibilities of fraud practices.

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3.10 INVENTORY CONTROL PRACTICES

"Inventory control is the process where by the investment in materials and parts
carried in stocks is regulated, within pre-determined limits set in accordance with the inventory
policy established by the management." In Powertek Enterprises, they follow FIFO (First In First
Out) method.

FIFO METHOD

The first in, first out (FIFO) method of inventory valuation is a cost flow
assumption that the first goods purchased are also the first goods sold. In most companies,
this assumption closely matches the actual flow of goods, and so is considered the most
theoretically correct inventory valuation method. The FIFO flow concept is a logical one for
a business to follow, since selling off the oldest goods first reduces the risk of obsolescence.

Under the FIFO method, the earliest goods purchased are the first ones removed
from the inventory account. This results in the remaining items in inventory being
accounted for at the most recently incurred costs, so that the inventory asset recorded on
the balance sheet contains costs quite close to the most recent costs that could be obtained in
the marketplace. Conversely, this method also results in older historical costs being matched
against current revenues and recorded in the cost of goods sold; this means that the gross
margin does not necessarily reflect a proper matching of revenues and costs. For example,
in an inflationary environment, current-cost revenue dollars will be matched against older
and lower-cost inventory items, which yields the highest possible gross margin.

The FIFO method is allowed under both Generally Accepted Accounting

Principles and International Financial Reporting Standards. The FIFO method provides the
same results under either the periodic or perpetual inventory system.

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3.11 FINAL ACCOUNTS

Final account is the last step involved in accounting cycle. It is maintained with a view
to knowing the over result of a business operation. The final account depicts the results from
operations of a business organization and also reflects the financial condition of the business
organization during a certain period in other words; it is prepared to achieve overall objectives of
accounting. The operation result is shown by profit and loss account thus indication profit or loss
made during a period. Similarly, the financial position is depicted by balance sheet showing
assets and liabilities of the business organization in a certain date.

After having checked the accuracy of the books of accounts through preparation of Trial
Balance, businessman wants to ascertain the profit earned or loss suffered during the year and
also the financial position of his business at the end of the year. For this purpose he prepares
‘Final Accounts’ which are also termed as ‘Financial Statement’. These include the following:
1. Trading Account
2. Profit and Loss Account
3. Balance Sheet

1. Trading Account
Trading account is prepared for calculating the gross profit or gross loss arising or incurred as a
result of the trading activities of a business. In other worlds, it is prepared to show the result of
manufacturing, buying and selling of goods. If the amount of sales exceeds the amount of
purchases and the expenses directly connected with such purchases, the difference is termed as
gross profit. On the contrary, if the purchases, and direct expenses exceed the sales, the
difference is called gross loss. A Trading Account records the amount of purchases of goods and
also the expenses which are incurred in bringing that commodity to a saleable state. IN other
words, all expenses which relate to either purchase of raw material for manufacturing of goods
are recorded in the Trading Account. All such expenses are called ‘Direct Expenses’.
Trading Account is a Nominal Account and all expenses which relate to either
purchase or manufacturing of goods are written on the Dr. side of the Trading Account.

2. Profit And Loss Account

Trading account only discloses the gross profit earned as a result of buying and selling
of goods. However, a businessman has to incur a number of expenses which are not taken to
trading account. Hence, a businessman is more interested in knowing the net profit earned or net

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loss incurred during the year. As such, a Profit & Loss Account is prepared which contains all
the items of losses and gains pertaining to the accounting period
A Profit and Loss Account is started with the amount of gross profit or gross loss
brought down from the Trading Account. As such, all those expenses and losses which have not
been debited to the Trading Account are now debited to Profit & Loss Account. These expenses
include administrative expenses, selling expenses, distribution expenses etc. These are called
‘Indirect Expenses’. Profit and Loss Account is a Nominal Account and as such, all the expenses
and losses are shown on its debit side and all the incomes and gains are shown on its credit side.

3. Balance Sheet
After ascertaining the net profit or loss of the business enterprise, the businessman
would also like to know the exact financial position of his business. For this purpose a statement
is prepared which contains all the Assets and Liabilities of the business enterprise. The statement
so prepared is called a Balance Sheet because it is a sheet of balances of ledger accounts which
are still open after the transfer of all nominal accounts to the Trading and Profit & Loss Account.
Balances of all the personal and real accounts are grouped as assets and liabilities. Liabilities are
shown on the left hand side o the Balance Sheet and assets on the right hand side.
In Powertek Enterprises, The balance sheet is prepared on the end of a financial year and is
verified by the internal as well as the external auditor.

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3.12 TAXATION MECHANISM

The Powertek Enterprises is following the GST. Before the introduction of GST
they were liable to a sales tax of about 5%. But after the introduction of GST, they are paying a
tax rate of 18%. And the tax is paid on every month.

Goods and Services Tax (GST) is an indirect tax which was introduced in India
on 1 July 2017 and was applicable throughout India which replaced multiple cascading taxes
levied by the central and state governments. It was introduced as The Constitution (One Hundred
and First Amendment) Act 2017, following the passage of Constitution 122nd Amendment Act
Bill. The GST is governed by a GST Council and its Chairman is the Finance Minister of India.
Under GST, goods and services are taxed at the following rates, 0%, 5%, 12% ,18% and 28%.

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3.13 AUDITING

An audit is a systematic and independent examination of books, accounts,

statutory records, documents and vouchers of an organization to ascertain how far the financial
statements as well as non-financial disclosures present a true and fair view of the concern. It also
attempts to ensure that the books of accounts are properly maintained by the concern as required
by law.
Internal and External audit takes place in Powertek enterprises.

Internal Audit

Internal audit is the review of operations and records undertaken within a business
by specially assigned staff on a continuous basis. Internal audit has been defined as "the
independent appraisal of activity within an organization for the review of accounting, financial
and other business practices as a protective and constructive arm of management. It is a type of
control which functions by measuring and evaluating the effectiveness of other types of
controls." Therefore it is clear that internal audit not only includes the verifications of accounting
matters but also financial and other matters.

Internal audit takes place in every 2 months in Powertek enterprises. It is done by the internal
officials of the company to rectify the errors and reduce the possibilities of fraud.

External Audit

An external audit, defined as a company audit which is performed by a party

which is not a department or employed by business to be audited, are very commonly performed.
The external audit approach has 2 main purposes: The company believes an outside party will be
more efficient at the work or because a governmental entity, such as the IRS, is auditing the
business.

An external audit, explained also as a voluntary or non-voluntary audit

performed by a 3rd party, is a necessary tool. It provides both business and government with a
valuable check of company accounting. The internal and external audit differences effect the
value of the audit in many ways. Generally, an external audit conflict of interest is less likely to
happen than when an internal audit occurs.

When contracted from the business controllers, the external audit

process happens for 2 reasons. First, the company can receive more efficiency by using an
external auditor. This could happen for many reasons: company employees are already occupied
on other tasks, external auditors are better trained for the purpose, internal fraud may prevent an

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internal audit from being valuable, and more. In any event, the company will use an external
auditing company to find the answer to certain questions about their accounting. The external
audit plan by professional companies may be concerned with missing funds, providing a second
opinion, or merely auditing the Accounting Cycle which a company follows.

Second, an external audit report may occur when a governmental entity

questions part of the financial statements of a company. In this instance, an external audit will
not be voluntary. It will be mandated, usually by the IRS or a court. There are many reasons why
an external audit will occur under these situations: the IRS questions the financial statements of a
company, the IRS may detect internal fraud, the company may not be creating GAAP compliant
statements, a court authorizes the audit because they suspect funds may have been spent on
illegal activities, and more. External audit fees are usually paid by the business being audited.
The exception to this is that if illegal activity has been found; the business may be charged with
the costs of the external audit.

In Powertek Enterprises, External audit happens every year which is done by an extenal auditor.

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3.14 PROCESS FLOWCHART

PETTY CASH BOOK

MAIN CASH BOOK

TRANSACTION ENTRY

MAINTAINING/RECONCILIATION

STATEMENT FOLLOWUP (BANK)

FUND TRANSFER (NEFT, RTGS, IMPS)

8F DELIVERY

OPENING STOCK RECONCILIATION

VOUCHER MAINTAINING

SALARY CALCULATION

DEDUCTION, DAMAGE, MAINTENANCE

BUSINESS INCENTIVE CALCULATION

SPARE UPDATION

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4.1 FINDINGS

The findings of the study conducted are:

4.1.1 The Powertek Enterprises has a very efficient accounts department which includes three
employees, an accounts manager, accounts executive and delivery coordinator.

4.1.2 The company records its daily business transactions both manually and automatically. It
uses tally and ERP softwares.

4.1.3 The company has an internal check system, internal audit and external audit.

4.1.4 The company follows an inventory control practice namely FIFO.

4.1.5 The company pays tax, GST, every month.

4.1.6 The organisation follows strict rules and procedures in order to maintain its transparency.

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4.2 SUGGESTIONS

4.2.1 The company should reduce the cost of management.

4.2.2 Powertek Enterprises has potential for high growth for that it should should incfease its net
profit and carefully plan for it.

4.2.3 The company should control its non operation expense and other expense.

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4.3 CONCLUSION

Powertek Enterprises are enumerated amid the leading and foremost Manufacturers,
Exporters and Suppliers of a complete range of precisely crafted Industrial Machinery. Each and
every product belonging to the product range are checked on numerous parameters throughout
the production stage for ensuring that they comply with our leading quality traits. Premium
quality raw material infused with cutting-edge machinery, renders their range of products
like Paving Tile Making Machine, Paper Cup Making Machine, Construction Equipment,
etc. with leading quality attributes. Their product range caters to a large number of industrial
giants indulged in different sectors, which invests their faith and monetary resources with us.

The study on Powertek Enterprises gave us a new insight towards the accounting
practices followed by organizations. It help us to know how the day book, cash book, ledger was
prepared and maintained and how they are recording their daily transactions. It also give us a
knowledge about the theoretical and practical aspects of reconciliation process, auditing, internal
check system etc. The financial statements depict the financial position of a firm. The Powertek
Enterprises provided us with rich knowledge in both theoretical and practical areas of accounting
practices.

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BOOKS REFFERED

1. S N Maheshwari, Suneel K Maheshwari, Sharad K Maheshwari, Accounting For

Management, Vikas Punblishing House, New Delhi, 2012
2. Gupta S. C, Grewal T.S, Introduction to Accountancy, Sultan Chand, New Delhi, 2009

WEBSITES

1. powertekenterprise.tradeindia.com
2. sol.du.ac.in
3. www.accountingtools.com
4. en.wikipedia.org
5. onlineaccountreading.blogspot.in
6. powertekenterprise.com

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