Accounting Complete Notes For Audit & Accounts Test

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Accounting Principles & Procedure:
Transaction:-
Any financial dealing between two person or things is a transaction. It
may be relate to purchase and sells goods, receipt and payment of cash
and rendering of service by one party to another.
OR
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A business event which can be
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measured in terms of money and which must be recorded in books of
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account is called transaction.
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Classification:-
Transaction may be divided into two groups.
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(1) Cash Transaction:-
If the value of a transaction in met is cash
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immediately, it is called cash transaction. e.g. We buy furniture for Rs.
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2000/- from Zubair and immediately pay him in cash. It is cash
transaction.
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(2) Credit Transaction:-

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If a transaction is made with the consent to

make the payment in some future time, against such transaction.
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Business:-
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Any legal activity which is done for the purpose of earning profit
is known as business. e.g. banking business, an insurance business,
etc.
Proprietor:-
He is owner of a business. He invests capital in it,
gives his time and attention to it. He is entitled to receive the profit or
bear loss arising out of it.
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Capital:- It is the source of funds provided by the

owner of the business and it is long term liability of the business
which is re-payable to the owner at the time of dissolution of the
business or any other case.
Drawing:- The amounts of cash or goods taken away by

owners from the business for his personal use are known as
drawings.
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Purchases:- In accounting language the word purchases
has special meaning. When tradable goodsare brought in business
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it is called that purchases have been made.
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Cash Purchases:- If goods are purchases from a supplier and
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payment is made to him at the same time, such purchases are
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known as cash purchases.
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Credit Purchases or Purchases on Account:-
When goods are purchased from seller/supplier and
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payment is not made to him at the same time, rather the

payment is arranged to be made at some future date, such
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purchases are known as credit purchases or purchases on

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account.
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Purchases Return or Returns Outwards:- Goods once

purchased may subsequently be sent back to the seller for
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certain reasons, i.e. goods are defective, not according to

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specification, damaged or below standard. Such return of

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goods to the seller is known as purchases return.

Purchases Discount:- The concession given by the supplier
to the buyer on purchases of goods is known as purchases
discount.
Sales: - When goods of the business are sale out to someone

others for earning profit, this is known as sale is made the
business.
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Cash Sales:- If goods are sold to customers at a specific price

and price of goods is received from them at the time of sale of
goods, such sales are known as cash sales.
Credit Sales:-If goods are sold to customers and he does not

pay the price of goods at the same time but to make payment on
some future date, the sales are called credit sales or sales on
account.
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Sales Returns or Return Inwards:- If a customer to whom
goods have been sold finds that the goods are defective,
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unsatisfactory, below standard Or not according to the
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specification, he may return these goods to the seller. Such return
of goods is known as sales return.
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Trade Discount:-Discount allowed by manufacturer or
wholesaler at the time of selling goods to retailer as a deduction
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from the list price or catalogue price is called trade discount.
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Debtors/Accounts Receivable:-A person who owes money to
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another is debtor when we say that we owe Mr. Amir Rs. 5000/
we mean that we have received from Mr. Amir 5000/ which we
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have to repay. We stand as debtor to Mr. Amir for Rs. 5000/ it is

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also termed as account receivable.

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Creditors/Accounts Payable:-A person who pays out

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something or to whom money owing is a creditor. It is also

termed as accounts payable.
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Commission:-It is form of remuneration for services rendered

by one person to another.
Expenses:-Expenses are the cost of the goods and services used

up in the process of obtaining revenue. e.g. Salaries, Insurance,
rent etc.
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Appropriation Accounts
Federal Appropriation Accounts show the audited accounts of
expenditure from the appropriations for the year with full explanations
of all important variations between the original and modified
appropriations and expenditure.
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The Federal Appropriation Accounts of defence services deal with:
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A general review of expenditure on Defence Service. This will
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include explanation for variation between the original modified
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Appropriation and the actual by Main Heads of Accounts.
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Changes in form of the Accounts or in their classification.
Misc. observations. sc
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Federal Appropriation Accounts showing the figures for original
modified Appropriation and actual by Major Heads.
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Goods merchandise:-It includes all merchandise commodities,

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which are purchased by the business for selling purpose.

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Stock Inventory:-(List of Goods)

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Goods or merchandise on hand that is goods

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remaining unsold is called stock in trader inventory.

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Bad debt:- A bad debt is a business loss. The debts, which are
irrecoverable from debtors, are called bad debts
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Depreciation:- Gradual decrease in the machinery value

of an asset due to usage in business is known as depreciation.
Depreciation is a loss to the business.
Fluctuation:- The decrease or increase in value of an asset not

due to use in business is known a fluctuation.
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Petty cash book: - A book, in which small cash payments

recorded, which are not convenient to record in the main cash
book directly (like postage traveling expenditure purchase of
stationery are recorded) is petty cash book.
Imprest system;_ A system in which a fixed sum of money is
given to cashier for the month is called Imprest system.
Assets:- These are the things of value possessed by a trader
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such as Building, Stock, Debtor, Cash, Goodwill
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etc.Assets have the following kinds mentioned below:-
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Fixed Assets:- Assets which have long life and which are
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bought for use in business for long period of time are called
fixed assetse.g. Land Buildings, Furniture etc.
or
Current Assets/ Circulatory/ Floating Assets:- Assets
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which have short life and which can be converted into cash
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quickly to meet the short terms liabilities are called current
assets e.g stock, Debtor, Cash etc. These are also called
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circulatory or floating assets.

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Tangible Assets:-Assets which have physical existence and

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which can be seen, touched or felt are called tangible assets

e.g land buildings, machinery.
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Intangible Assets:- Assets which have no Physical

existence and which cannot be seen, touched or felt are
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called intangible assets e.g Good will, patent right, Trade

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mark etc.
Liquid or Quick Assets:- Assets which can be converted
into cash very quickly or which are already in the form of
cash are called liquid or Quick assets. E.g cash in hand, cash
at bank etc.
Wasting Assets:-Those assets whose value gradually

reduce on account of use and finally exhausted completely
are called wasting assets.
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Liabilities:- Liabilities are debts or obligation of a business which

are payable to outsiders or the persons inside the business like
owners of the business.
Fixed liabilities:- Fixed liabilities, which are repayable after

a long Period. E.g. long term loan, capital etc.
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Current Liabilities:-The debts that are repayable within a
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short period are called current or short-term liabilities e.g
Creditors, bills payable bank overdraft.
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Contingent liabilities:Contingent liabilities is not a liabilities
at present but may or may not become liability in future it
or
depends upon certain future event.
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Contra Entry;- Anentry in which cash a/c and bank a/c involved
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and it is recorded on both sides of cash book is called contra
entry.
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Accounting:-Accounting is the art of recording, classifying and

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summarizing in a significant manner and in terms of money,

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transaction and events, which are, in part at least, of a financial

character, and interpreting the result thereof.
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Book Keeping:-Bookkeeping is the art of recording monetary

transactions in the books of accounts in a proper manner.
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Accounting & Accountancy:-The two words Accounting and

Accountancy are often used to mean the same thing. But it is not
correct. Accountancy is a main subject and Accounting is one of its
branches. The word Accountancy is for wide and extensive
compared to Accounting. It covers the entire body of theory and
practice. i.e. Books Keeping, Accounting, Costing, Auditing,
Transaction.
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Financial Accounting:- The main purpose of Financial Accounting

is to ascertain the true result (profit or loss) of the business
operations during a particular period of time and to state the
financial position of the business on a particular point of time.
Management Accounting:- It is accounting for the management

i.e. accounting, which provides necessary information to the
management for discharging their duties. It take decisions and to
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control activities.
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Cost Accounting:-The main object of cost accounting is to
determine the cost of product and to the business in controlling the
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costs by indication avoidable losses and wastes.
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Cash System of Accounting:-Under this system of accounting,
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transactions are recorded only when cash is received or paid,
whether they are related to current year or not.
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Accrual System of Accounting:The system under which all items
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of revenues and expenses relating to the current accounting period

whether received or paid in cash or not are taken into consideration
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while determing the profit or loss of the business, is called accrual

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system of accounting or Mercantile system of accounting.

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Accrual Revenues:- The revenue, which we have been earned in

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the current year but has not been received in cash within the current
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year, it will be received in next year, is known as accrued revenue

e.g. accrued commission (CR), Rent receivables etc.
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Accrual Expenses or Outstanding Expenses:-

The expenses which have been incurred during the current
year but have not been paid till the end of the current year are called
outstanding expenses payablee.g. Wages Payable, accrued Salaries etc.
Capital Expenditure:An expenditure, which results in the
acquisition of permanent asset in the business for the purpose of
earning revenue, is known as capital expenditure.
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Revenue Expenditure:All those expenditure which are incurred in

the day-to-day conduct and the administration of a business and the
effect of which is completely exhausted within the current
accounting year are known as Revenue Expenditures. These are also
known as Expenses or Expired Cost.
Debit Note:-If goods bought on credit are returned to seller for any
solid reason the buyer debit the seller account and inform the seller
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through a note. This note is called debit note.
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Credit Note: - If goods sold on credit are returned by the buyer,
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the seller credits the buyer account and informs the buyer through a
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note. This note is called credit note.
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Cash Discount: - It is a deduction or allowance given by a
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creditor to a debtor before the due date.
Trade Discount:- Discount allowed by manufacturer or
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wholesaler at the time of selling goods to retailer as a deduction
from the list price or catalogue price is called trade discount.
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1. FINAL ACCOUNT
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It is prepared to determine the profit and loss of the business

and its financial position.
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2. TRADING & PROFIT & LOSS ACCOUNT/ INCOME

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STATEMENT
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As the name of this account, it is made up two accounts that in

trading account and profit & loss account. Trading Account in
prepared to determine the gross profit or gross loss of a trader
while profit & loss account is prepared to determine the net profit
or net loss of a trader.
Trading & profit & loss account/income statement is
prepared in both ways. It is prepared in T form (T Account) as
well as in report form.
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3. DIRECT EXPENSES
Direct expenses are those which are incurred to convert the raw
material into finished goods. Direct expenses are charged to
Trading Account for example wages, freight, cartage, excise duty
etc.
4. MANUFACTURING EXPENSES
Manufacturing Expenses are those which are relating to
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manufacturing process/factory such as factory insurance and
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factory repair etc. these expenses are direct expenses and shall
be charged to Trading Account.
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5. PROFIT & LOSS ACCOUNT
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Profit & Loss Account is prepared to determine the net profit or
net loss of a trader.
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6. COST OF GOODS SOLD
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Indicates the cost price of goods which have been sold during a
given period. Simply it can be written as Opening Stock + Cost of
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goods purchase = Cost of Goods Sold Closing Stock.
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7. GROSS PROFIT.
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The excess of the net income from sales over the cost of goods
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sold is called gross profit and through this, we can obtain net
profit or net income of the business.
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8. OPERATING EXPENSES.
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Operating expenses are two types there are. Selling expenses

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and administrative or general expenses. Selling Expenses are

incurred directly and entirely due to sale of goods for example
Salaries of Salesman, Advertisement etc.
Administrative or General Expenses are incurred due to the
administration of business for examples office Salaries, Office
Supplies etc.
9. NET PROFIT
The final figure on the Profit & Loss Account is called net profit or
net loss and which is carried to the balance sheet.
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10. BALANCE SHEET

It is a statement which shows the financial state of the
expenditure. It is the statement of all the assets and liabilities. It
is prepared after trading and profit & loss account.
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DEFINE ASSETS AND WHAT ARE THE MAIN TYPES OF
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ASSETS/ CLASSIFICATION OF ASSETS.
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ASSETS
Any valuable thing possessed by the firm or owner of
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the business in called asset for example Building, Plant, Machinery,
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etc.
TYPE/ CLASSIFICATION OF ASSETS
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The main types of classes are as follows:-
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i. FIXED ASSETS
Fixed Assets are those which are acquired
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not for sale but only for permanent use in the

business are called fixed assets e.g. Plant,
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Machinery, Land, Building etc.

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ii. FLOATING/ CIRCULATING/CURRENT

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ASSETS
Floating or circulating or current assets are
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those which are held for sale and which are

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converted into cash after sometime for example

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Bill Receivable, Stock of Goods etc.

iii. LIQUID ASSETS
Liquid assets are those which are with us
in cash or which are easily converted into cash
for example cash in hand, cash at bank etc.
iv. WASTING ASSETS
Wasting Assets are those which have
become depreciated through fair wear & tear
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with the passage of time. It is a sub class of

fixed asset e.g. Land, Building, Machinery etc.
v. FICTITIOUS ASSETS/ INTANGIBLE

ASSETS.
Fictitious or intangible assets are those
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which have no physical existence and which
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neither can be seen with eyes nor touched with
hands for example Good Will, Prepaid Insurance
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etc.
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vi. CONTINGENT ASSETS
Contingent Assets are those which are
or
arise after happening of a certain event. For
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example uncalled capital for a limited company.
vii. Outstanding Assets
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Out Standing Assets are those when
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expenses paid in advance are called outstanding

assets for example prepaid wages etc.
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DEFINE LIABILITY? WHAT ARE THE TYPES/

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CLASSIFICATION OF LIABILITIES?
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LIABILITY
The outstanding amount against the assets of
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the firm is called liability.

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TYPE OF LIABILITY
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There are following types of liabilities:-

a. FIXED LIABILITIES
These are the liabilities which are not
payable immediately or in near future. These
liabilities are payable after a long period of time
for example long term loans etc.
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b. CURRENT LIABILITIES
These liabilities are payable immediately or
in near future such as creditors, Bank loans etc.
c. CONTINGENT LIABILITIES.
These are liabilities which are arises after
happening of a certain event. The event may or
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may not involve. Thus a contingent liabilities
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may or may not involve the payment of money
These liabilities are not recorded in the
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balance sheet. It is just sufficient to make a foot
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note on balance sheet for example a pending
case against a person in court etc, debtor fails
or
to fulfill his obligation.
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d. OUT STANDING LIABILITIES
Outstanding expense or unearned income is
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called out standing liability for example

outstanding wages, outstanding rent,
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outstanding salary etc.

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ACCOUNTING EQUATION
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ASSETS = LIABILITIES + CAPITAL

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RULES OF DEBIT AND CREDIT

FOR ASSETS ACCOUNTS:
Increase in an asset is debit.. Dr.
Decrease in an asset is credit....Cr.
FOR LIABILITIES ACCOUNTS:
Increase in a liability is credit.. Cr.
Decrease in a Liability is Debit.......Dr.
FOR PROPRIETORSHIP/CAPITAL ACCOUNT:
Increase in Capital is Credit .Cr.
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Decrease in Capital is Debit .Dr.

FOR REVENUE ACCOUNTS
Increase in Revenue is Credit.Cr.
Decrease in Revenue is Debit..Dr.
FOR EXPENSES ACCOUNTS
Increase in Expense is Debit.Dr.
Decrease in Expense is Credit..Cr.
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DEFINE CAPITAL? WHAT ARE THE TYPES?
CAPITAL
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Sum of cash or goods invested in business by
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the owner is called capital.
TYPE OF CAPITAL
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The following are the main types of the Capital
a. sc
TRADING CAPITAL
The profit of the funds of a concern which is
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represented by fixed or floating assets is called
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trading capital.
b. FIXED CAPITAL
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The portion of the funds of a concern, which is

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represented by fixed assets, is called fixed

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capital.
c. CIRCULATING CAPITAL
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The portion of the funds of a concern which is

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represented by floating or circulating assets is

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called circulating capital.

d. WORKING CAPITAL
The excess of the floating assets over the
floating liabilities is called working capital
e. LOAN CAPITAL
Debentures or other fixed loans are called loan
capital
f. WATERED CAPITAL
It is represented by fictitious assets.
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DESCRIBES THE DIFFERENCE BETWEEN THE TRIAL

BALANCE & BALANCE SHEET?
Sr. TRIAL BALANCE Sr. BALANCE SHEET

No. No.
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01 It is the list of balance 01 It is a statement of assets
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obtainedfrom the ledger and liabilities.
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account.
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02 It contains the balances of 02 It contains the balances of
all accounts real, nominal& assets and liabilities.
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personal A/Cs.
03 It is prepared before 03
trading and profit & loss
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and profit and loss account.
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Account.
04 It does not contain the 04 It contains the value of
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value of closing stock. closing stock which appears

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on the assets side.

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05 Expenses due but not paid 05 Expenses due but not paid,
income due but not income due but not
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received do not appear in received appears in the

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the trial balance. balance sheet.

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OUTSTANDING EXPENSE
Expenses incurred but have not been actually paid are
called out standing expenses for example outstanding
wages, outstanding rent etc. these are shown in profit &
loss account as expenses and shown in the balance sheet as
liabilities.
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PREPAID EXPENSES
Expenses paid in advance before they have fallen due
are called prepaid expenses for example prepaid rent,
prepaid wages etc. these are shown in profit & loss account
by deducting from the relevant account on debit side and
shown in balance sheet as assets
ACCRUED INCOME
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Earning or income such as interest on loan,
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commission, dividend and rent receivable from tenant is
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called accrued income. This will be shown in profit & loss
account as income on credit side and will be shown in
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balance sheet as an asset
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UN EARNED INCOME
Income received in advance but not earned is called
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un earned income for example rent, interest commission
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and discount etc which might have been receivable in
advance but full service have not been given so for this will
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be shown in profit & loss account by deduction from the

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relevant account on credit side and will be shown in balance

sheet as liability.
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SOME IMPORTANT DEFINITIONS

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PRIME COST
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The sum of direct material, direct labour are called

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prime cost. It is also called basic or flat cost.

1. CONVERSION COST/ TOTAL COAST
It is the total cost which converts the basic raw
martial from one stage of production to the next stage
of production. It is the cost which converting the
direct raw material into prepared material or finished
goods excluding the cost of raw material.
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2. MARGINAL COST
It is the difference in the cost of alternatives is called
marginal cost.
3. FACTORY COST/ TOTAL WORK COST/ TOTAL
MAIN COST
This cost is made up of prime cost plus factory
overhead. In other words, it is the figure by which
completed goods are shown in the inventory. This is
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also known as total works cost or total manufacturing
cost.
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4. VARIABLE COST/ FLUCTUATION COSTS
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Variable costs are those which fluctuate in proportion
to the volume of production are called variable costs
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e.g. direct material and direct labour.
5. FACTORY OVERHEAD sc
Factory overhead are those costs which are indirectly
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related with production and are incurred before the
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goods are put into the finished goods.

6. FIXED/ CONSTANT COSTS
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Fixed/ constant costs are those costs which remain

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fixed in total except the charges in the volume of

production or sale.
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7. OVER TRADING
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Means purchasing beyond your capital is called over

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trading.
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8. OVER HEADS
Over-heads are indirect expenses e.g. selling
expenses administration expenses and financing
expenses are called overheads.
9. COST OF GOODS MANUFACTURED
Cost of goods manufactured is a summary of the costs
included in the manufacture of goods e.g. cost
materials, labors etc.
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10. DIRECT LABOUR/ WAGES

The labour engaged directly in the production of
goods and which converts the raw material into
finished goods is called direct labour.
11. INDIRECT LABOUR
Which is not involved directly in the production
manufacturing from but helps the manufacturing
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process indirectly is called indirect labour.
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12. INDIRECT EXPENSES
In direct expense are those which are not directly
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related to the production but helps in-directly in the
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production process is called indirect expense e.g. rent,
insurance, Gen expenses etc.
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13. TURN OVER
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The total sales of a trader within a given period is
called turn over.
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14. DIRECT COST
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The aggregate of the material which is directly used in

the course of manufacture is called direct cost.
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15. INDIRECT COST.

The aggregate of the material which is not directly
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used in the course of manufacture is called indirect

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cost e.g. repair to machinery, inspection etc.

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16. GOOD WILL

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The value of a business bought as a going concern

over and above the cash price of its marketable assets
such as houses, lands and plants etc.
17. SINKING FUNDS
A sinking fund is a reserve created out of profit and
usually invited outside the business in early
marketable securities.
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18. DEPRECIATION
Depreciation means the gradual decrease in the value
of an asset. The net results of asset deprecation are
that sooner or later the asset will become useless.
19. DIVIDEND
The term dividend means the profit of a company
which is distributed among its shareholders. It is the
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liability of the company and appears in the balance
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sheet on liability side.
20. BAD DEBTS
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Irrecoverable recoveries from debtors are called bad
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debts.
21. DOUBTFUL DEBTS
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When the recoveries from debtors are seems, to
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become bad debt, such debts are called doubtful
debts.
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22. TRANSFER ENTRY
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Transfer Entries are the entries, which are intended to

transfer an item form one head of account to another
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23. PETTY CASH & PETTY CASH BOOK

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The sum of small money which is required for the

purpose of small payment.
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24. SUSPENSE ACCOUNT.

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The word suspense means uncertainty. It is an

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account in which the transactions are not entered in

its proper head due to lack of information.
25. PUNCHING MEDIA
Punching Media is an extract of certain date pertaining
to a voucher which is sent by audit sections of
Controllers Office to the Data Management section of
MAGs Office for compilation.
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26. PREFERENCE SHARE

These are the shares whose holders have preferential
rights in respect of the payment of dividend and
repayment of capital in the event of winding up. The
rate of dividend on these shares is fixed.
27. PARTNERSHIP DEED
It is a document which contains all necessary rules
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and regulations which are required to run the
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partnership business.
28. ACCOMMODATION BILL
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Accommodation Bill is a bill of exchange which has
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been drawn and accepted for financial assistance.
29. BILL OF EXCHANGE
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It is an unconditional order in writing to pay
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addressed by one person to another, and a person
who gives must be sign in it and a person who
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receives it must be accepted. It may be drawn on any
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paper. Stamp Duty has to be paid on bill of exchange.

It can be drawn is sets.
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30. Promissory Note.

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It is an unconditional promise in writing signed by the

maker to pay on demand. There are only two parties
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the drawer in to the payee. There is no need of

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acceptance. It is never drawn in sets.

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31. Bank DRAFT.

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Commercial Banks give the facility of transferring

money from one place to another place. So it means
that the bank draft is a source of transferring money
from one place to another. It is an order from one
bank to its other branch at another place to pay the
specified sum to or the order of the holder on demand
for value received.
32. POSTAL ORDER.
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It is an instrument like bank draft but the postal

department issues it.
33. BANK OVER DRAFT.
When a customer is authorized to overdraw an agreed
amount in excess of his bank balance is called our
draft/Bank overdraft. The bank charged the interest
on the amount which is overdrawn by the customer.
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34. TYPE OF DEPRECIATION
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There are following types of depreciation.
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a. Straight line method
b. Diminishing method/ Reducing method
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c. Annuity method
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d. Depreciation fund method.
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e. Revaluation method.
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35. ANNUITY
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It is methods of depreciation in which the valued of an

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asset along with interest are written down annually by

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equal installments until the book value is reduced to

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nil. The annual charge is to be made out by way of

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depreciation, which is found out from annuity tables.

36. MEMORANDUM OF ASSOCIATION.
It is a document which contains the right, powers and
objects of company business. It is the main document
of the business.
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37. ARTICLES OF ASSOCIATION

It is a document, which contains the rules and
regulations of the business.
38. RESERVE FUNDS
It is a fund, which is made against profits of the
business to avoid the losses uncertain condition which
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may arise in future. It is the liability of the business.
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COMPANY AND ITS TYPES
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Company means an association of persons who contribute
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money or moneys worth for a common stock and uses it for
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a common purpose of business.

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KIND OF COMPANIES
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a. on the basis of liability

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b. on the basis of investment

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a. On The Basis Of Liability

w
(i) Unlimited Company:In these companies, the

w
liability of the members is unlimited. It may or may

not house share capital. When this company winds up,
the private property of the members is also liable to
pay companys debt.
22
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(ii) Companies limited by share

In these companies, the liability of the members is
limited up to the value of their share.
(iii) Companies limited by Guarantee

In these companies every member gives guarantee to
o
nf
contribute a specified amount of money at the
r.i
winding up of company. This company may be formed
ne
with or without share capital.
or
b. ON THE BASIS OF INVESTMENT
I.
sc
PRIVATE COMPANY
ee
Private company is a company which has the
oy
following characteristics
pl
i. Minimum members are two and maximum

m
members are 50
.e
ii. The shares of the company are not

w
transferable.
w
iii. The company uses the word private with its

w
name.
iv. It is not necessary for the company to issue
prospectus.
II. PUBLIC COMPANY
Public Company has the following characteristics
23
Faisal Qureshi
a. Minimum members must be Seven and no

limit for maximum members.
b. The word limited is used after the name of
company.
c. Shares are easily transferable.
d. It is necessary for the company to issue
o
nf
prospects.
r.i
ne
Differentiates between a private company and a
or
public company.
sc
ee
PRIVATE COMPANY PUBLIC COMPANY
oy
1 In private Company Minimum 1 In Public Company minimum

members are two and members must be Seven and
pl
maximum members are fifty . there is no limit for maximum

m
members.
.e
2 The shares of the company are 2 The shares of the company are
w
not transferable . transferable .

w
3 The company uses the word 3 The Company was the word
w
Private with its name . Limited after its name.

4 It is not necessary for the 4 It is necessary for the company
company to issue prospectus . to issue prospectus .
5 A private company cannot sells 5 A public company can sells its
its shares to public . share.
6 The audit of the company is not 6 The audit of the company is
compulsory . compulsory.
24
Faisal Qureshi
7 The member of directors must 7 The number of directors must

be at least two. be at least seven .
BRANCHES OF ACCOUNTING
Financial Accounting: it is the original form of accounting. It is mainly
confined to the preparation of financial statements for the use of
o
nf
outsiders like creditors, bankers and financial institutions etc. the main
r.i
purpose of financial accounting is to calculate profit or loss made by the
ne
business during the year and exhibit financial position of the business
as on a particular date.
or
Cost Accounting: The main purpose of cost accounting is to determine
sc
the of the product and to help the management in the control of cost.
ee
In the first phase it determines the standards of all the elements of cost
oy
i.e. Direct Material, Direct Labour and FOH costfor production

pl
department to control the cost of the product.

m
Management Accounting:Accounting which provides necessary

.e
information to the management for discharging its functions. It is the

w
reproduction of financial accounts in such a way as will enable the

w
management to take decision and to control activities.

w
System of Accounting
Cash system of Accounting: It is a system in which accounting entries

are made only when cash is received or paid. No entry is made when a
payment or receipt is merely due.
25
Faisal Qureshi
Accrual System of Accounting: It is a system in which accounting

entries are made on the basis of amount having become due for
payment or receipt. For example payment system of salaries of PMAD.
ACCOOUNTING CYCLE/ACCOUNTING PROCEDURE.
o
nf
r.i
ne
or
sc
ee
oy
pl
m
.e
w
w
w
COST ACCOUNTING SYSTEM
26
Faisal Qureshi
It is a system of collecting, processing and evaluating

the operating data i.e. cost of products, cost of operation,cost of
processing the jobs, cost of material used, cost of labour used
etc. for internal planning and control as well as for external
control and reporting.
System of Cost Accounting
o
nf
i) Actual Cost Accounting System
r.i
ii) Standard Cost Accounting System
ne
NATURE/PURPOSE OF COST ACCOUNTING
or
it is helpful and provide the guidelines in the following ways
PLANNING
sc
ee
Controlling
oy
Evaluation of alternatives
pl
Internal Reporting
m
External Reporting
.e
Pricing of products and projects.

w
Analysis of Financial Statements

w
w
KINDS OF COST
Standard Cost: It is the predetermined cost of
manufacturing a single unit or a specific Quantity of Goods. It has

two components, a physical standard (i.e., standard quantity of
27
Faisal Qureshi
inputs per unit of output) and a price standard (i.e. rate per unit
of output)
Fixed Cost: Cost which is not change with the
change of Production activity, e.g Rent of Factory Building
Variable Cost:which change according to the change
o
of activity level, e.g. D. Material and D.Labour cost of the product.
nf
Semi-variable Cost: composed of both fixed and
r.i
ne
variable cost of production eg. Cost of electricity consumed in the
factory.
or
i) Cost for lighting and air conditioning purpose is fixed
sc cost.
ee
ii)Electricity consumed for driving the machines is the
oy
Component which change with the activity level of output

pl
CONTROLLABLE COST
m
Which may control by the manager with some planning and

.e
activity, e.g for a production, cost of D. material and D. Labour

w
cost may control with some strict control over the activity?
w
w
UNCONTROLLABLE COST
Depreciation of plant, accidental losses, insurances,
taxes, supervisor salaries etc.
Capacity level
28
Faisal Qureshi
It means ability to produce up to a specific level and it is

also known activity level or volume for capacity.
Theoretical Capacity
It is a maximum capacity level that could be attained if
there were 100% Utilization of time and resources. This level can
o
nf
never be achieved because of unavoidable interruptions e.g.
r.i
Sunday holidays, repairs, maintenance, break down of machines
ne
and break down of electricity etc.
or
Practical capacity
It is the maximum activity level that can be attained
sc
under effective working condition. (Theoretical capacity level
ee
unavoidable losses.)
oy
Expected Actual Capacity

pl
It is the level which is expected to be attained during the

m
financial year for which the budget is being prepared. It is heavily

.e
dependent on the market demand for the products. It may be

w
equal to or less then the practical capacity. Term Annual Budget

w
volume and Master Volume are also used to denote expected

w
Actual Capacity.
Normal Capacity
Normal Capacity is the average of expected Actual Capacity
over a number of year. The object of computing such and
average activity level is to smooth out the effects of seasonal,
cyclical and trend variations.
29
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Factory Over Heads

All manufacturing Costs other then the Direct
Material and Direct Labour costs are collectively termed as
Factory Overhead cost. It is also known as manufacturing
overheads, indirect material, indirect labour, power, lights,
depreciation charges, repairs, cleaning and maintenance charges.
o
nf
etc. Some examples of FOH is given below.
r.i
ELEMENTS OF VARIABLE OVERHEADS
ne
Pay & allowances and over time (officers/staff employed in
or
Production shop).
General shop labour

Over Time / Piece Work
sc
ee
Wages Under / Over Allocation.
oy
Shop store (consumable)

pl
Maintenance & repair services

m
Idle time
.e
Maintenance & repair of tools for general shop use

w
Utilities Expenses
w
Electricity
w
Gas
Steam
Compressed air high pressure
Water
Ice
30
Faisal Qureshi
ELEMENTS OF FIXED OVERHEADS

Pay & Allowances (officers & staff of non production shops /
manager & above)
Pay & Allowances (officers & staff of services at factory level
i.e. TPT, telephone & yard etc.
Admin expenses at factory level
o
nf
Group insurance
r.i
Misc. Charges
ne
Assistance package
or
Store adjustment / loss
TA / DA

sc
Shop Store (other than consumable items)
ee
Maintenance of Building
oy
Maintenance / repair of Plant & Machinery.

pl
Maintenance & repair of TPT., Rail & Road

m
Repair of Furniture
.e
Depreciation
w
KINDS OF FACTORY OVERHEADS

w
Plant wise or Blanket Rate:

w
It is a kind of rate which is calculated for the

whole factory over head expenses of entire Factory.
Shop/Departmental Rate:
This type of rate may be calculated for all the
shops of the factory separately through which the product pass.
31
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DEPRECIATION
Value of an asset gradually reduces on account of
use. Such reduction in value is known as
depreciation. or we can say that depreciation is the
gradual and permanent decrease in the value of fixed
o
asset from any cause.
nf
Kinds of Depreciation
r.i
1) Depreciation: This term is used with reference
ne
to tangible fixed assets for their reduction in
or
value.
2) Depletion: sc The depletion is used for the
depreciation of wasting assets such as mines, oil
ee
well, timber trees etc.
oy
3) Amortization: The term amortization is used in

pl
respect of intangible assets like patents,

m
copyright, leasehold and good will which are

.e
recorded at cost.
w
w
MATHODS OF DEPRECIATION
w
There are following methods of depreciation.

a. Straight line method: under this method the
expected life of an asset is first calculated, in
years.After this scrap value deducted from the cost
of the asset then net value divided on the useful
life of the asset. In this way a fixed amount
32
Faisal Qureshi
calculated which is charged every year from the

value of an asset.Depreciation of copy right, patent
and short lease etc.
Formula:
Depreciation = Cost of Machinery Breakup Value(Scrap value)
o
Estimated life of Machinery
nf
r.i
ne
b. Diminishing method/ Reducing
or
method/written down value method.
sc
Under this method the asset is depreciated at
ee
fixed percentage calculated on the debit balance of
the asset which is diminished year after year on
oy
account of depreciation. Depreciation of machinery

pl
and plant etc.

m
.e
c. Annuity method
w
According to this method the cost of the asset

w
w
and interest are written down annually by equal

installments until the book value of the asset in
question is reduced to nil or its breakup value at
the end of its effective life. These charges made by
way of depreciation out of annuity tables.
This is applicable on long leases assets.
33
Faisal Qureshi
d. Depreciation fund method/Sinking Fund

Amortization method.
Under this method a fund known as
depreciation Fund is created and an amount is
added at this accommodated fund until the life
of the asset.
o
nf
It is suitable whenever it is desired not
r.i
only to charge depreciatio0n but also to replace
ne
the asset as happens in case of plant and
or
machinery and other wasting assets.
sc
e. Insurance policy system.
ee
Under this method the amount represented by
oy
the depreciation fund, instead of being used to

pl
buy securities is paid to an insurance company

m
as premium. The insurance company issues a

.e
policy promising to pay a lump sum at the end

w
of the working life of the asset for its

w
replacement.
w
34
Faisal Qureshi
JOURNAL,LADGER & CASH BOOK
JOURNAL:
The word journal has been derived from the French word Jour. Jour
o
means day. So journal mean daily. Transactions are recorded daily in Journal
nf
and hence it has been named so.
r.i
It is a book of original entry to record chronologically, means date wise
recordings are made on daily biases. It is also called Day Book, as per the
ne
recording of entries.
or
Important Features of journal Entries.
Journal is the first successful step of the Double Entry system. A
sc
transaction is recorded first of all in thejournal. So, journal is called book
ee
of original entry.
oy
A transaction is recorded on the same day it takes place. so, journal is

pl
called Day Book.

m
Transactions are recorded chronologically. So, journal is called

.e
Chronological Book.
w
For each transaction the names of the two concerned accounts indicating
w
which is debited and which is credited, are clearly written in two

w
consecutive lines. This makes ledger-posting easy. That is why journal is

called Assistant to ledger orSubsidiary Book .
Narration is written below each entry.
The amount is written in the last two columns----debut amount in Debit
Column and credit amount in Credit Column.
35
Faisal Qureshi
Example of Journal
Jan 15,2012 Mr. Malik Zaman started Business with cash Rs. 15,00,000/-
Jan 21,2012. Purchase Building for Cash Rs. 12,00,000/-
Journal
Date Particulars L.F. Debit Credit
Rs. Rs.
o
P-
2012 Cash Account No.03& 15,00,000
nf
Jan-15 Capital Account 04 15,00,000
r.i
Started business with cash
P-NO
Jan-21 Building Account 05 &03 12,00,000
ne
Cash Account 12,00,000
or
Purchase Building on cash
sc
LEDGER ACCOUNTS
ee
When all the transactions for a given period have been
oy
journalized, the next step is to classify them according to the accounts

pl
affected. For example, all transactions relating to cash must be put in

m
one place. Similarly, all transactions with a customer or a supplier must

.e
also be assembled at one place. The book in which this classification is

w
done is called the Ledger.

w
Recording of data from original book of entry/journal to ledger is

w
known as posting of data.
FEATURES OF LEDGER BOOK

It has two identical sides ---Left side is Debit side and Right
side is called Credit side.
36
Faisal Qureshi
Debit aspect of all the concerned transaction is recorded on

Debit side, while credit aspect on Credit side according to
date:
Difference of the totals of the two sides represents balance.
The excess of Debit side over Credit side indicates debit
balance and vice versa.
o
nf
Usually balance is drawn at the end of the year and
r.i
recorded on deficit side to make the two sides equal. This
ne
balance is known as closing balance.
or
The closing balance of the current year will be the opening
sc
balance of the next year.
Separate account is opened for each item of assets,
ee
liabilities, expense and revenue. In this way relevant
oy
closing balance is transferred to Trial Balance accordingly.

pl
Complete and reliable information is available in respect of

m
each and every account.

.e
w
EXAMPLE OF POSTING FROM JOURNAL TO

w
LEDGER ACCOUNTS
w
Jan 15,2012 Mr. Malik Zaman started Business with cash Rs.
15,00,000/-
Jan 21, 2012. Purchase Building for Cash Rs. 12,00,000/-
37
Faisal Qureshi
Journal
Date Particulars L.F. Debit Credit
Rs. Rs.
P-
2012 Cash Account No.03& 15,00,000
Jan-15 Capital Account 04 15,00,000
Started business with cash
o
nf
P-NO
Jan-21 Building Account 05 & 12,00,000
r.i
Cash Account 03 12,00,000
ne
Purchase Building on cash
or
sc
LEDGER ACCOUNTS (POSTING OF DATA FROM
ee
JOURNAL TO LEDGER)
oy
Cash Accounts
pl
Date Particular J.F. Amount Date Particular J.F. Amount

m
Rs. Rs.
.e
2012 2012
w
Jan-15 Capital a/c 15,00,000 Jan-21 Building a/c 12,00,000

w
w
Jan-31 Balance a/c B/F 3,00,000
Jan-31 Total 15,00,000 Total 15,00,000
Capital Accounts
38
Faisal Qureshi

Rs. Rs.
2012 2012
Jan-31 Balance a/c B/F 15,00,000 Jan-21 Capital a/c 15,00,000
o
nf
r.i
Jan-31 Total 15,00,000 Total 15,00,000
ne
or
sc
ee
Building Accounts
oy
Rs. Rs.
pl
2012 2012
m
Jan-21 Cash a/c 12,00,000

.e
Jan-31 Balance a/c B/F 12,00,000

w
w
w
Jan-31 Total 12,00,000 Total 12,00,000
TRIAL BALANCE
Having posted all the transactions into the ledger, it is
necessary to check the correctness of the work done before
39
Faisal Qureshi
proceeding further. In order to test the arithmetical accuracy of our

ledger we should prepare a statement called the Trial Balance.
A trial Balance is a statement prepared by taking out the debit
and credit balances of all accounts appearing in the ledger.
o
nf
Example of Trial Balance
r.i
Note: please carry on the above stated example
ne
Ledger Accounts L.F Dr. Cr. Balance
or
Balance
Cash Accounts
sc 3,00,000 -
ee
Capital Accounts - 15,00,000
oy
Building Accounts 12,00,000 -

pl
m
.e
Total 15,00,000 15,00,000

w
w
w
CASH BOOK
The cash book is the book of original entry in which transactions
relating only to cash receipts and payments are recorded in detail.
When the cash is received it is entered on the debit or left side and
40
Faisal Qureshi
similarly cash is paid out, the same is recorded on the credit or the right
hand side of the cash book.
The cash book is balanced at the end of a given period by
inserting the excess of the debit on the credit side as By balance
carried down to make both sides agree. The balance is then shown on
the debit by to balance brought down to start the next period.
o
nf
Kinds of Cash Book
r.i
The following are the three forms of Cash Books met with in
ne
practice:
or
Simple or Single Column Cash Book
sc
ee
Dr. (Receipt Side) Cr. (Payment Side)
oy

pl
Rs. Rs.
m
.e
Double Column Cash Book

w

w
w
Date Particular V.No J.F. Disc Amount Date Particular V.No J.F. Disc Amount
Rs. Rs.
41
Faisal Qureshi
o
nf
Triple Column Cash Book
r.i
ne
or
Date Particular V.No J.F. Disc Disc Cash Bank Date Particular V.No J.F. Disc Disc Cash Bank
sc
ee
oy
pl
m
.e
w
w
w
42
Faisal Qureshi
PUBLIC PROCUREMENT RULES,2004

Islamabad, June 9, 2004
NOTIFICATION
S.R.O. 432(I)/2004.- In exercise of the powers conferred by section 26
of the Public Procurement Regulatory Authority Ordinance, 2002 (XXII
o
of 2002), the Federal Government is pleased to make the following
nf
rules, namely:-
r.i
1. Short title and commencement.-
ne
(1) These rules may be called the Public Procurement Rules, 2004.
or
(2) They shall come into force at once.
GENERAL PROVISIONS sc
ee
2. Definitions.-
(1) In these rules, unless there is anything repugnant in the subject or
oy
context,-
pl
(a) bid means a tender, or an offer, in response to an invitation, by a

m
person, consultant, firm, company or an organization expressing his or

its willingness to undertake a specified task at a price;
.e
(b) Bidder means a person who submits a bid;

w
(c) competitive bidding means a procedure leading to the award of

w
a contract whereby all the interested persons, firms, companies or

w
organizations may bid for the contract and includes both national
competitive bidding and international competitive bidding;
(d) Contractor means a person, consultant, firm, company or an
organization who undertakes to supply goods, services or works;
(e) Contract means an agreement enforceable by law;
(f) corrupt and fraudulent practices includes the offering, giving,
receiving, or soliciting of anything of value to influence the action of a
public official or the supplier or contractor in the procurement process
or in contract execution to the detriment of the procuring agencies; or
43
Faisal Qureshi
misrepresentation of facts in order to influence a procurement process

or the execution of a contract, collusive practices among bidders (prior
to or after bid submission) designed to establish bid prices at artificial,
non-competitive levels and to deprive the procuring agencies of the
benefits of free and open competition and any request for, or
solicitation of anything of value by any public official in the course of
the exercise of his duty;
o
(g) emergency means natural calamities, disasters, accidents, war
nf
and operational emergency which may give rise to abnormal situation
r.i
requiring prompt and immediate action to limit or avoid damage to
person, property or the environment;
ne
(h) lowest evaluated bid means,-
or
(i) a bid most closely conforming to evaluation criteria and other
conditions specified in the bidding document; and
sc
(ii) having lowest evaluated cost;
ee
(i) Ordinance means the Public Procurement Regulatory Authority
Ordinance, 2002 (XXII of 2002);
oy
(j) Repeat orders means procurement of the same commodity from

pl
the same source without competition and includes enhancement of

contracts;
m
(k) Supplier means a person, consultant, firm, company or an

.e
organization who undertakes to supply goods, services or works; and

w
(l) value for money means best returns for each rupee spent in
w
terms of quality, timeliness, reliability, after sales service, up-grade

w
ability, price, source, and the combination of whole-life cost and quality
to meet the procuring agencys requirements.
(2) The expressions used but not defined in these rules shall have the
same meanings as are assigned to them in the Ordinance.
3. Scope and applicability.-
Save as otherwise provided, these rules shall apply to all procurements
made by all procuring agencies of the Federal Government whether
within or outside Pakistan.
4. Principles of procurements.- Procuring agencies, while engaging
in procurements, shall ensure that the procurements are conducted in a
44
Faisal Qureshi
fair and transparent manner, the object of procurement brings value for
money to the agency and the procurement process is efficient and
economical.
5. International and inter-governmental commitments of the

Federal Government.- Whenever these rules are in conflict with an
obligation or commitment of the Federal Government arising out of an
international treaty or an agreement with a State or States, or any
o
international financial institution the provisions of such international
nf
treaty or agreement shall prevail to the extent of such conflict.
r.i
6. Language.-
ne
(1) All communications and documentation related to procurements of
the Federal Government shall either be in Urdu or English or both.
or
Except where a procuring agency is situated outside the territories of
Pakistan and procurements are to be made locally, the procuring
sc
agency may use the local language in addition to Urdu or English.
ee
(2) Where the use of local language is found essential, the original
documentation shall be in Urdu or English, which shall be retained on
oy
record; for all other purposes their translations in local language shall
be used:
pl
Provided that such use of local language ensures maximum economy

m
and efficiency in the procurement.

(3) In case of the dispute reference shall be made to the original
.e
documentation retained on record.

w
7. Integrity pact.- Procurements exceeding the prescribed limit shall

w
be subject to an integrity pact, as specified by regulation with approval

w
of the Federal Government, between the procuring agency and the

suppliers or contractors.
Issued within thirty days of the expiry of the said period enabling the
supplier or contractor to submit the final bill. Except for unsettled
claims, which shall be resolved through arbitration, the bill shall be paid
within the time given in the conditions of contract, which shall not
exceed sixty days to close the contract for final audit.
45
Faisal Qureshi
PROCUREMENT PLANNING
. Procurement planning.-
Within one year of commencement of these rules, all procuring
agencies shall devise a mechanism, for planning in detail for all
proposed procurements with the object of realistically determining the
requirements of the procuring agency, within its available resources,
delivery time or completion date and benefits that are likely to accrue
o
to the procuring agency in future.
nf
. Limitation on splitting or regrouping of proposed
r.i
procurement.-
ne
Save as otherwise provided and subject to the regulation made by
the Authority, with the prior approval of the Federal Government, a
or
procuring agency shall announce in an appropriate manner all proposed
procurements for each financial year and shall proceed accordingly
sc
without any splitting or regrouping of the procurements so planned.
ee
The annual requirements thus determined would be advertised in
advance on the Authoritys website as well as on the website of the
oy
procuring agency in case the procuring agency has its own website.
pl
Specifications.-
m
Specifications shall allow the widest possible competition and shall

not favour any single contractor or supplier nor put others at a
.e
disadvantage. Specifications shall be generic and shall not include

w
references to brand names, model numbers, catalogue numbers or

similar classifications. However if the procuring agency is convinced
w
that the use of or a reference to a brand name or a catalogue number

w
is essential to complete an otherwise incomplete specification, such use

or reference shall be qualified with the words or equivalent.
. Approval mechanism.-
All procuring agencies shall provide clear authorization and
delegation of powers for different categories of procurement and shall
only initiate procurements once approval of the competent authorities
concerned has been accorded.
46
Faisal Qureshi
PROCUREMENT ADVERTISEMENTS
. Methods of advertisement.-
(1) Procurements over one hundred thousand rupees and up to the
limit of two million rupees shall be advertised on the Authoritys website
in the manner and format specified by regulation by the Authority from
time to time. These procurement opportunities may also be advertised
in print media, if deemed necessary by the procuring agency:
o
Provided that the lower financial limit for advertisement on
nf
Authoritys website for open competitive bidding shall be the prescribed
financial limit for request for quotations under clause (b) of rule 42; and
r.i
(2) All procurement opportunities over two million rupees should be
ne
advertised on the Authoritys website as well as in other print media or
newspapers having wide circulation. The advertisement in the
or
newspapers shall principally appear in at least two national dailies, one
in English and the other in Urdu.
sc
(3) In cases where the procuring agency has its own website it may
ee
also post all advertisements concerning procurement on that website as
well.
oy
(4) A procuring agency utilizing electronic media shall ensure that the
information posted on the website is complete for the purposes for
pl
which it has been posted, and such information shall remain available
m
on that website until the closing date for the submission of bids.
.e
Response time.-
w
(1) The procuring agency may decide the response time for receipt of
bids or proposals (including proposals for pre-qualification) from the
w
date of publication of an advertisement or notice, keeping in view the

w
individual procurements complexity, availability and urgency. However,

under no circumstances the response time shall be less than fifteen
days for national competitive bidding and thirty days for international
competitive bidding from the date of publication of advertisement or
notice. All advertisements or notices shall expressly mention the
response time allowed for that particular procurement along with the
information for collection of bid documents which shall be issued till a
given date, allowing sufficient time to complete and submit the bid by
the closing date:
Provided that no time limit shall be applicable in case of emergency.
47
Faisal Qureshi
(2) The response time shall be calculated from the date of first
publication of the advertisement in a newspaper or posting on the web
site, as the case may be.
(3) In situations where publication of such advertisements or notices
has occurred in both electronic and print media, the response time shall
be calculated from the day of its first publication in the newspapers.
. Exceptions.-
o
It shall be mandatory for all procuring agencies to advertise all
nf
procurement requirements exceeding prescribed financial limit which is
applicable under sub-clause (i) of clause (b) of rule 42. However under
r.i
following circumstances deviation from the requirement is permissible
ne
with the prior approval of the Authority,-
(a) the proposed procurement is related to national security and its
or
publication could jeopardize national security objectives; and
(b) the proposed procurement advertisement or notice or publication of
sc
it, in any manner, relates to disclosure of information, which is
ee
proprietary in nature or falls within the definition of intellectual property
which is available from a single source.
oy
PRE-QUALIFICATION, QUALIFICATION AND DIS-

pl
QUALIFICATION OF SUPPLIERS AND CONTRACTORS

m
. Pre-qualification of suppliers and contractors.-

.e
(1) A procuring agency, prior to the floating of tenders, invitation to

w
proposals or offers in procurement proceedings, may engage in pre-

qualification of bidders in case of services, civil works, turnkey projects
w
and in case of procurement of expensive and technically complex

w
equipment to ensure that only technically and financially capable firms

having adequate managerial capability are invited to submit bids. Such
pre-qualification shall solely be based upon the ability of the interested
parties to perform that particular work satisfactorily.
(2) A procuring agency while engaging in pre-qualification may take
into consideration the following factors, namely:-
(a) Relevant experience and past performance;
48
Faisal Qureshi
(b) Capabilities with respect to personnel, equipment, and plant;

(c) Financial position;
(d) Appropriate managerial capability; and
(e) Any other factor that a procuring agency may deem relevant, not
inconsistent with these rules.
Pre-qualification process.-
(1) The procuring agency engaging in pre-qualification shall announce,
o
in the pre-qualification documents, all information required for pre-
nf
qualification including instructions for preparation and submission of the
pre-qualification documents, evaluation criteria, list of documentary
r.i
evidence required by suppliers or contractors to demonstrate their
ne
respective qualifications and any other information that the procuring
agency deems necessary for pre-qualification.
or
(2) The procuring agency shall provide a set of pre-qualification
documents to any supplier or contractor, on request and subject to
payment of price, if any.
sc
ee
Explanation.- For the purposes of this sub-rule price means the cost of
printing and providing the documents only.
oy
(3) The procuring agency shall promptly notify each supplier or

contractor submitting an application to pre-qualify whether or not it has
pl
been pre-qualified and shall make available to any person directly

m
involved in the pre-qualification process, upon request, the names of all

suppliers or contractors who have been pre-qualified. Only suppliers or
.e
contractors who have been pre-qualified shall be entitled to participate

w
further in the procurement proceedings.

(4) The procuring agency shall communicate to those suppliers or
w
contractors who have not been pre-qualified the reasons for not pre-
w
qualifying them.
. Qualification of suppliers and contractors.-

A procuring agency, at any stage of the procurement
proceedings, having credible reasons for or prima facie evidence of any
defect in suppliers or contractors capacities, may require the suppliers
or contractors to provide information concerning their professional,
technical, financial, legal or managerial competence whether already
pre-qualified or not:
49
Faisal Qureshi
Provided that such qualification shall only be laid down after recording
reasons therefore in writing. They shall form part of the records of that
procurement proceeding.
Disqualification of suppliers and contractors.-

The procuring agency shall disqualify a supplier or contractor if it
finds, at any time, that the information submitted by him concerning his
qualification as supplier or contractor was false and materially
o
inaccurate or incomplete.
nf
. Blacklisting of suppliers and contractors.-
r.i
The procuring agencies shall specify a mechanism and manner to
ne
permanently or temporarily bar, from participating in their respective
procurement proceedings, suppliers and contractors who either
or
consistently fail to provide satisfactory performances or are found to be
indulging in corrupt or fraudulent practices. Such barring action shall be
sc
duly publicized and communicated to the Authority:
ee
METHODS OF PROCUREMENT
oy
. Principal method of procurement.-

pl
Save as otherwise provided hereinafter, the procuring agencies

m
shall use open competitive bidding as the principal method of

procurement for the procurement of goods, services and works.
.e
w
Open competitive bidding.-

Subject to the provisions of rules 22 to 37 the procuring agencies
w
shall engage in open competitive bidding if the cost of the object to be

w
procured is more than the prescribed financial limit which is applicable

under sub-clause (i) of clause (b) of rule 42
. Submission of bids.-
(1) The bids shall be submitted in a sealed package or packages in such
manner that the contents are fully enclosed and cannot be known until
duly opened.
50
Faisal Qureshi
(2) A procuring agency shall specify the manner and method of

submission and receipt of bids in an unambiguous and clear manner in
the bidding documents.
Bidding documents.-
(1) Procuring agencies shall formulate precise and unambiguous
bidding documents that shall be made available to the bidders
immediately after the publication of the invitation to bid.
o
(2) For competitive bidding, whether open or limited, the bidding
nf
documents shall include the following, namely:-
(a) Invitation to bid;
r.i
(b) Instructions to bidders;
ne
(c) Form of bid;
(d) Form of contract;
or
(e) General or special conditions of contract;
(f) Specifications and drawings or performance criteria (where
applicable);
sc
ee
(g) List of goods or bill of quantities (where applicable);
(h) Delivery time or completion schedule;
oy
(i) Qualification criteria (where applicable);

(j) bid evaluation criteria;
pl
(k) Format of all securities required (where applicable);

m
(l) Details of standards (if any) that are to be used in assessing the
quality of goods, works or services specified; and
.e
(m) Any other detail not inconsistent with these rules that the procuring
w
agency may deem necessary.

w
(3) Any information, that becomes necessary for bidding or for bid
w
evaluation, after the invitation to bid or issue of the bidding documents

to the Prospectivebidders shall be provided in a timely manner and on
equal opportunity basis. Where notification of such change, addition,
modification or deletion becomes essential, such notification shall be
made in a manner similar to the original advertisement.
(4) Procuring agencies shall use standard bidding documents as and
when notified by regulation by the Authority:
Provided that bidding documents already in use of procuring agencies
may be retained in their respective usage to the extent they are not
51
Faisal Qureshi
inconsistent with these rules and till such time that the standard
bidding documents are specified by regulations.
(5) The procuring agency shall provide a set of bidding documents to
any supplier or contractor, on request and subject to payment of price,
if any.
Explanation. - For the purpose of this sub-rule price means the cost of
printing and providing the documents only.
o
. Reservations and preference.-
nf
(1) Procuring agencies shall allow all prospective bidders to participate
in procuring procedure without regard to nationality, except in cases in
r.i
which any procuring agency decides to limit such participation to
ne
national bidders only or prohibit participation of bidders of some
nationalities, in accordance with the policy of Federal Government.
or
(2) Procuring agencies shall allow for a preference to domestic or
national suppliers or contractors in accordance with the policies of the
sc
Federal Government. The magnitude of price preference to be accorded
ee
shall be clearly mentioned in the bidding documents under the bid
evaluation criteria.
oy
Bid security.-
pl
The procuring agency may require the bidders to furnish a bid

m
security not exceeding five per cent of the bid price.

.e
Bid validity.-
w
(1) A procuring agency, keeping in view the nature of the procurement,

shall subject the bid to a bid validity period.
w
(2) Bids shall be valid for the period of time specified in the bidding
w
document.
(3) The procuring agency shall ordinarily be under an obligation to
process and evaluate the bid within the stipulated bid validity period.
However under exceptional circumstances and for reason to be
recorded in writing, if an extension is considered necessary, all those
who have submitted their bids shall be asked to extend their respective
bid validity period. Such extension shall be for not more than the period
equal to the period of the original bid validity.
(4) Bidders who,-
52
Faisal Qureshi
(a) Agree to extension of their bid validity period shall also extend the
validity of the bid bond or security for the extended period of the bid
validity;
(b) Agree to the procuring agencys request for extension of bid validity
period shall not be permitted to change the substance of their bids; and
(c) Do not agree to an extension of the bid validity period shall be
allowed to withdraw their bids without forfeiture of their bid bonds or
securities.
o
nf
. Extension of time for submission of bids.-
Where a procuring agency has already prescribed a deadline for the
r.i
submission of bids and due to any reason the procuring agency finds it
ne
necessary to extend such deadline, it shall do so only after recording its
reasons in writing and in an equal opportunity manner. Advertisement
or
of such extension in time shall be done in a manner similar to the
original advertisement.
sc
ee
OPENING, EVALUATION AND REJECTION OF BIDS
oy
Opening of bids.-
pl
(1) The date for opening of bids and the last date for the submission of
m
bids shall be the same. Bids shall be opened at the time specified in the
bidding documents. The bids shall be opened at least thirty minutes
.e
after the deadline for submission of bids.

w
(2) All bids shall be opened publicly in the presence of the bidders or
their representatives who may choose to be present, at the time and
w
place announced prior to the bidding. The procuring agency shall read
w
aloud the unit price as well as the bid amount and shall record the
minutes of the bid opening. All bidders in attendance shall sign an
attendance sheet. All bids submitted after the time prescribed shall be
rejected and returned without being opened.
Evaluation criteria.-
Procuring agencies shall formulate an appropriate evaluation
criterion listing all the relevant information against which a bid is to be
evaluated. Such evaluation criteria shall form an integral part of the
53
Faisal Qureshi
bidding documents. Failure to provide for an unambiguous evaluation

criteria in the bidding documents shall amount to mis-procurement.
. Evaluation of bids.-
(1) All bids shall be evaluated in accordance with the evaluation criteria
and other terms and conditions set forth in the prescribed bidding
documents. Save as provided for in sub-clause (iv) of clause (c) of rule
36 no evaluation criteria shall be used for evaluation of bids that had
o
not been specified in the bidding documents.
nf
(2) For the purposes of comparison of bids quoted in different
currencies, the price shall be converted into a single currency specified
r.i
in the bidding documents. The rate of exchange shall be the selling
ne
rate, prevailing on the date of opening of bids specified in the bidding
documents, as notified by the State Bank of Pakistan on that day.
or
(3) A bid once opened in accordance with the prescribed procedure
shall be subject to only those rules, regulations and policies that are in
sc
force at the time of issue of notice for invitation of bids.
ee
Clarification of bids.-
(1) No bidder shall be allowed to alter or modify his bid after the bids
oy
have been opened. However the procuring agency may seek and
accept clarifications to the bid that do not change the substance of the
pl
bid.
m
(2) Any request for clarification in the bid, made by the procuring
agency shall invariably be in writing. The response to such request shall
.e
also be in writing.
w
Discriminatory and difficult conditions.-

Save as otherwise provided, no procuring agency shall introduce
w
any condition, which discriminates between bidders or that is

w
considered to be met with difficulty. In ascertaining the discriminatory

or difficult nature of any condition reference shall be made to the
ordinary practices of that trade, manufacturing, construction business
or service to which that particular procurement is related.
. Rejection of bids.-
(1) The procuring agency may reject all bids or proposals at any time
prior to the acceptance of a bid or proposal. The procuring agency shall
upon request communicate to any supplier or contractor who submitted
54
Faisal Qureshi
a bid or proposal, the grounds for its rejection of all bids or proposals,
but is not required to justify those grounds.
(2) The procuring agency shall incur no liability, solely by virtue of its
invoking sub-rule (1) towards suppliers or contractors who have
submitted bids or proposals.
(3) Notice of the rejection of all bids or proposals shall be given
promptly to all suppliers or contractors that submitted bids or
proposals.
o
nf
. Re-bidding.-
(1) If the procuring agency has rejected all bids under rule 33 it may
r.i
call for a re-bidding.
ne
(2) The procuring agency before invitation for re-bidding shall assess
the reasons for rejection and may revise specifications, evaluation
or
criteria or any other condition for bidders as it may deem necessary.
sc
. Announcement of evaluation reports.-
ee
Procuring agencies shall announce the results of bid evaluation in
the form of a report giving justification for acceptance or rejection of
oy
bids at least ten days prior to the award of procurement contract. .

Procedures of open competitive bidding.-
pl
Save as otherwise provided in these rules the following

m
procedures shall be permissible for open competitive bidding, namely:-

(a) Single stage one envelope procedure.-
.e
Each bid shall comprise one single envelope containing, separately,

w
financial proposal and technical proposal (if any). All bids received shall
be opened and evaluated in the manner prescribed in the bidding
w
document.
w
(b) Single stage two envelope procedure.- (i) The bid shall comprise a
single package containing two separate envelopes. Each envelope shall
contain separately the financial proposal and the technical proposal;
(ii) The envelopes shall be marked as FINANCIAL PROPOSAL and
TECHNICAL PROPOSAL in bold and legible letters to avoid confusion;
(iii) Initially, only the envelope marked TECHNICAL PROPOSAL shall
be opened;
(iv) The envelope marked as FINANCIAL PROPOSAL shall be retained
in the custody of the procuring agency without being opened;
55
Faisal Qureshi
(v) The procuring agency shall evaluate the technical proposal in a

manner prescribed in advance, without reference to the price and reject
any proposal which does not conform to the specified requirements;
(vi) During the technical evaluation no amendments in the technical
proposal shall be permitted;
(vii) The financial proposals of bids shall be opened publicly at a time,
date and venue announced and communicated to the bidders in
advance;
o
(viii) After the evaluation and approval of the technical proposal the
nf
procuring agency, shall at a time within the bid validity period, publicly
open the financial proposals of the technically accepted bids only. The
r.i
financial proposal of bids found technically non-responsive shall be
ne
returned un-opened to the respective bidders; and
(ix) The bid found to be the lowest evaluated bid shall be accepted.
or
(c) Two stage bidding procedure.-
First stage
sc
(i) The bidders shall first submit, according to the required
ee
specifications, a technical proposal without price;
(ii) The technical proposal shall be evaluated in accordance with the
oy
specified evaluation criteria and may be discussed with the bidders

regarding any deficiencies and unsatisfactory technical features;
pl
(iii) After such discussions, all the bidders shall be permitted to revise
m
their respective technical proposals to meet the requirements of the

procuring agency;
.e
(iv) The procuring agency may revise, delete, modify or add any aspect
w
of the technical requirements or evaluation criteria, or it may add new

requirements or criteria not inconsistent with these rules:
w
Provided that such revisions, deletions, modifications or additions are

w
communicated to all the bidders equally at the time of invitation to

submit final bids, and that sufficient time is allowed to the bidders to
prepare their revised bids:
Provided further that such allowance of time shall not be less than
fifteen days in the case of national competitive bidding and thirty days
in the case of international competitive bidding;
(v) Those bidders not willing to conform their respective bids to the
procuring agencies technical requirements may be allowed to
withdraw from the bidding without forfeiture of their bid security;
Second stage
56
Faisal Qureshi
(vi) The bidders, whose technical proposals or bids have not been
rejected and who are willing to conform their bids to the revised
technical requirements of the procuring agency, shall be invited to
submit a revised technical proposal along with the financial
proposal;
(vii) The revised technical proposal and the financial proposal shall be
opened at a time, date and venue announced and communicated
to the bidders in advance; and
o
(viii) The revised technical proposal and the financial proposal shall be
nf
evaluated in the manner prescribed above. The bid found to be
the lowest evaluated bid shall be accepted:
r.i
Provided that in setting the date for the submission of the revised
ne
technical proposal and financial proposal a procuring agency shall
allow sufficient time to the bidders to incorporate the agreed
or
upon changes in the technical proposal and prepare their financial
proposals accordingly.
sc
(d) Two stage - two envelope bidding procedure.-
ee
First stage
(i) The bid shall comprise a single package containing two separate
oy
envelopes. Each envelope shall contain separately the financial

proposal and the technical proposal;
pl
(ii) The envelopes shall be marked as FINANCIAL PROPOSAL and

m
TECHNICAL PROPOSAL in bold and legible letters to avoid

confusion;
.e
(iii) Initially, only the envelope marked TECHNICAL PROPOSAL shall

w
be opened;
(iv) The envelope marked as FINANCIAL PROPOSAL shall be retained
w
in the custody of the procuring agency without being opened;

w
(v) The technical proposal shall be discussed with the bidders with
reference to the procuring agencys technical requirements;
(vi) Those bidders willing to meet the requirements of the procuring
agency shall be allowed to revise their technical proposals following
these discussions;
(vii) Bidders not willing to conform their technical proposal to the
revised requirements of the procuring agency shall be allowed to
withdraw their respective bids without forfeiture of their bid
security;
Second stage
57
Faisal Qureshi
(viii) after agreement between the procuring agency and the bidders on
the technical requirements, bidders who are willing to conform to
the revised technical specifications and whose bids have not
already been rejected shall submit a revised technical proposal
and supplementary financial proposal, according to the technical
requirement;
(ix) The revised technical proposal along with the original financial
proposal and supplementary financial proposal shall be opened at
o
a date, time and venue announced in advance by the procuring
nf
agency:
Provided that in setting the date for the submission of the revised
r.i
technical proposal and supplementary price proposal a procuring
ne
agency shall allow sufficient time to the bidders to incorporate the
agreed upon changes in the technical proposal and to prepare the
or
required supplementary financial proposal; and
(x) The procuring agency shall evaluate the whole proposal in
sc
accordance with the evaluation criteria and the bid found to be
ee
the lowest evaluated bid shall be accepted.
oy
. Conditions for use of single stage two envelope, two stage

and two stage two envelope bidding procedures.-
pl
Single stage one envelope bidding procedure shall ordinarily be

m
the main open competitive bidding procedure used for most of the
procurement. Other appropriate procedures of open competitive bidding
.e
shall be selected in the following circumstances, namely:-

w
(a) single stage two envelope bidding procedure shall be used where
the bids are to be evaluated on technical and financial grounds and
w
price is taken into account after technical evaluation;

w
(b) two stage bidding procedure shall be adopted in large and complex
contracts where technically unequal proposals are likely to be
encountered or where the procuring agency is aware of its options in
the market but, for a given set of performance requirements, there are
two or more equally acceptable technical solutions available to the
procuring agency; and
(c) two stage two envelope bidding method shall be used for
procurement where alternative technical proposals are possible, such as
certain type of machinery or equipment or manufacturing plant
58
Faisal Qureshi
ACCEPTANCE OF BIDS AND AWARD OF PROCUREMENT

CONTRACTS
Acceptance of bids.-
The bidder with the lowest evaluated bid, if not in conflict with
any other law, rules, regulations or policy of the Federal Government,
shall be awarded the procurement contract, within the original or
extended period of bid validity.
o
. Performance guarantee.-
nf
Where needed and clearly expressed in the bidding documents,
the procuring agency shall require the successful bidder to furnish a
r.i
performance guarantee which shall not exceed ten per cent of the
ne
contract amount.
or
Limitation on negotiations.-
Save as otherwise provided there shall be no negotiations with
sc
the bidder having submitted the lowest evaluated bid or with any other
ee
bidder:
Provided that the extent of negotiation permissible shall be
oy
subject to the regulations issued by the Authority.

pl
Confidentiality.-
m
The procuring agency shall keep all information regarding the bid
evaluation confidential until the time of the announcement of the
.e
evaluation report in accordance with the requirements of rule 35.

w
Alternative methods of procurements.-

w
A procuring agency may utilize the following alternative methods

w
of procurement of goods, services and works, namely:-

(a) Petty purchases.-
Procuring agencies may provide for petty purchases where the object of
the procurement is below the financial limit of twenty five thousand
rupees. Such procurement shall be exempt from the requirements of
bidding or quotation of prices:
Provided that the procuring agencies shall ensure that procurement of
petty purchases is in conformity with the principles of procurement
prescribed in rule 4:
59
Faisal Qureshi
Provided further that procuring agencies convinced of the

inadequacy of the financial limit prescribed for petty purchases in
undertaking their respective operations may approach the Federal
Government for enhancement of the same with full and proper
justifications.
(b) Request for quotations.-
A procuring agency shall engage in this method of procurement
only if the following conditions exist, namely:-
o
(i) The cost of object of procurement is below the prescribed limit of
nf
one hundred thousand rupees:
Provided that the respective Boards of Autonomous bodies are
r.i
authorized to fix an appropriate limit for request for quotations method
ne
of procurement subject to a maximum of rupees five hundred thousand
which will become financial limit under this sub-rule:
or
(ii) The object of the procurement has standard specifications;
(iii) Minimum of three quotations have been obtained; and
sc
(iv) The object of the procurement is purchased from the supplier
ee
offering the lowest price:
Provided that procuring agencies convinced of the inadequacy of
oy
the financial limit prescribed for request for quotations in undertaking

their respective operations may approach the Federal Government for
pl
enhancement of the same with full and proper justifications;

m
(c) direct contracting.- A procuring agency shall only engage in direct

contracting if the following conditions exist, namely:-
.e
(i) The procurement concerns the acquisition of spare parts or

w
supplementary services from original manufacturer or supplier:

Provided that the same are not available from alternative sources;
w
(ii) Only one manufacturer or supplier exists for the required

w
procurement:
Provided that the procuring agencies shall specify the appropriate
forum, which may authorize procurement of proprietary object
after due diligence; and
(iii) Where a change of supplier would oblige the procuring agency to
acquire material having different technical specifications or
characteristics and would result in incompatibility or
disproportionate technical difficulties in operation and
maintenance:
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Faisal Qureshi
Provided that the contract or contracts do not exceed three years in

duration;
(iv) Repeat orders not exceeding fifteen per cent of the original
procurement;
(v) In case of an emergency:
Provided that the procuring agencies shall specify appropriate forum
vested with necessary authority to declare an emergency;
(vi) When the price of goods, services or works is fixed by the
o
government or any other authority, agency or body duly authorized by
nf
the Government, on its behalf, and
(vii) For purchase of motor cars from local original manufacturers or
r.i
their authorized agents at manufacturers price.
ne
(d) Negotiated tendering.- A procuring agency may engage in
negotiated tendering with one or more suppliers or contractors with or
or
without prior publication of a procurement notification. This procedure
shall only be used when,-
sc
(i) The supplies involved are manufactured purely for the purpose of
ee
supporting a specific piece of research or an experiment, a study
or a particular development;
oy
(ii) For technical or artistic reasons, or for reasons connected with

protection of exclusive rights or intellectual property, the supplies
pl
may be manufactured or delivered only by a particular supplier;

m
(iii) For reasons of extreme urgency brought about by events

unforeseeable by the procuring agency, the time limits laid down
.e
for open and limited bidding methods cannot be met. The

w
circumstances invoked to justify extreme urgency must not be

attributable to the procuring agency:
w
Provided that any procuring agency desirous of using negotiated

w
tendering as a method of procurement shall record its reasons

and justifications in writing for resorting to negotiated tendering
and shall place the same on record.
On account payments.- All procuring agencies shall make prompt

payments to suppliers and contractors against their invoices or running
bills within the time given in the conditions of the contract, which shall
not exceed thirty days.
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Faisal Qureshi
. Entry into force of the procurement contract.-

A procurement contract shall come into force,-
(a) Where no formal signing of a contract is required, from the date the
notice of the acceptance of the bid or purchase order has been given to
the bidder whose bid has been accepted. Such notice of acceptance or
purchase order shall be issued within a reasonable time; or
(b) Where the procuring agency requires signing of a written contract,
from the date on which the signatures of both the procuring agency
o
and the successful bidder are affixed to the written contract. Such
nf
affixing of signatures shall take place within a reasonable time:
Provided that where the coming into force of a contract is contingent
r.i
upon fulfillment of a certain condition or conditions, the contract shall
ne
take effect from the date whereon such fulfillment takes place.
or
Closing of contract.-
(1) Except for defect liability or maintenance by the supplier or
sc
contractor, as specified in the conditions of contract, performance of
ee
the contract shall be deemed close on the issue of overall delivery
certificate or taking over certificate which shall be issued within thirty
oy
days of final taking over of goods or receiving the deliverables or

completion of works enabling the supplier or contractor to submit final
pl
bill and the auditors to do substantial audit.

m
(2) In case of defect liability or maintenance period, defect liability

certificate shall be issued within thirty days of the expiry of the said
.e
period enabling the supplier or contractor to submit the final bill. Except
w
for unsettled claims, which shall be resolved through arbitration, the bill
shall be paid within the time given in the conditions of contract, which
w
shall not exceed sixty days to close the contract for final audit.
w
MAINTENANCE OF RECORD AND FREEDOM OF INFORMATION
. Record of procurement proceedings.-

(1) All procuring agencies shall maintain a record of their respective
procurement proceedings along with all associated documentation for a
minimum period of five years.
(2) Such maintenance of record shall be subject to the regulations
framed in this regard from time to time.
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Faisal Qureshi
Public access and transparency.- As soon as a contract has been

awarded the procuring agency shall make all documents related to the
evaluation of the bid and award of contract public:
Provided that where the disclosure of any information related to the
award of a contract is of proprietary nature or where the procuring
agency is convinced that such disclosure shall be against the public
interest, it can withhold only such information from public disclosure
subject to the prior approval of the Authority.
o
REDRESSAL OF GRIEVANCES AND SETTLEMENT OF DISPUTES
nf
Redressal of grievances by the procuring agency.-
r.i
(1) The procuring agency shall constitute a committee comprising of
ne
odd number of persons, with proper powers and authorizations, to
address the complaints of bidders that may occur prior to the entry into
or
force of the procurement contract.
(2) Any bidder feeling aggrieved by any act of the procuring agency
sc
after the submission of his bid may lodge a written complaint
ee
concerning his grievances not later than fifteen days after the
announcement of the bid evaluation report under rule 35.
oy
(3) The committee shall investigate and decide upon the complaint
within fifteen days of the receipt of the complaint.
pl
(4) Mere fact of lodging of a complaint shall not warrant suspension of

m
the procurement process.

(5) Any bidder not satisfied with the decision of the committee of the
.e
procuring agency may lodge an appeal in the relevant court of

w
jurisdiction.
Arbitration.-
w
(1) After coming into force of the procurement contracts, disputes

w
between the parties to the contract shall be settled by arbitration.

(2) The procuring agencies shall provide for a method of arbitration in
the procurement contract, not inconsistent with the laws of Pakistan.
Mis-procurement.-
Any unauthorized breach of these rules shall amount to mis-
procurement.
Overriding effect.-
The provisions of these rules shall have effect notwithstanding anything
to the contrary contained in any other rules concerning public
procurements:
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Faisal Qureshi
Provided that the prevailing rules and procedures will remain applicable
only for the procurement of goods, services and works for which notice
for invitation of bids had been issued prior to the commencement of
these rules unless the procuring agency deems it appropriate to re-
issue the notice for the said procurement after commencement of these
rules.
o
nf
r.i
ANNUAL BUDGET & CONTROL OVER
ne
EXPENDITURE
or
sc
GOVT. BUDGETING SYSTEM
A government budget is the forecast by a government of its
ee
revenue and expenditure for a specific period of time. Through
oy
budgetary process a Govt. decides how much to spend, the

pl
purpose for which it will be spent and where the money will
m
come from.
.e
It is away of process to determine size and composition of

w
revenue and expenditure to run the Govt activities.

w
The Annual Budget Statement comprising the estimated

w
receipt and expenditure of the Federal Government pertaining to

every financial year shall be laid before the National Assembly
by the Federal Government.
The Annual Budget Statement shall separately indicate the
charged and other expenditure proposed to be made from the
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FederalConsolidated Fund. It is constituted under the Article 80 of

the 1973 Constitution:
BUDGET CYCLE
A common pattern of budgetary process consists of following
o
nf
stages:
r.i
Preparation
ne
Authorization
or
Implementation
Evaluation sc
ee
FUNCTIONS OF BUDGET
oy
TOOL OF ACCOUNTABILITY.
INSTRUMENT OF ECONOMIC POLICY.
pl
AID TO MANAGEMENT.
.e
w
Budget cycle
w
The budget cycle consists of six phases:

w
Setting of budget policy and initiatives

Cabinet will meet to determine budgetpolicy, initiatives and
priorities. The budget policy, initiatives and priorities willthen be
communicated to the Ministry of Finance, who will then
communicatethese to ministries and departments via the financial
advisers
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Preparation - The preparation of the budget papers commences in

October ofeach financial year with the preparation and submission of
entity estimatesand the subsequent review and consolidation of those
submissions by theMinistry of Finance
Authorization - This phase commences with the submission of the
annualbudget to the Assembly and is completed when the entity gains
o
nf
control over itsappropriations
r.i
Implementation- The next step in the cycle is for the entity to
ne
implement theactivities for which it has been funded. The recording and
or
control of theseactivities is the subject of the accounting system
sc
Reporting- Reporting is the first step through which individuals within
ee
the entityand the Minister are held accountable for the implementation
oy
of the budget.This step involves both internal and external reporting

pl
m
Performance review - This phase incorporates both internal and

.e
externalreview and together with the reporting phase covers most of

w
what is referredto as accountability. The principal offices concerned

w
with the review ofperformance are the Auditor-Generals office and the
w
Public Accounts.
Federal Consolidated Fund: comprises all federal revenues,

all loans raised by the government and all moneys received by it in
repayment of any loan.
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Public Account :
All other moneys received by or on behalf of the Federal
Government or received by or deposited with the Supreme Court
or any other federal court shall constitute the public account of
the Federation.
o
Procedure of Annual Budget of PMAD
nf
(Para-114 of procedure of MAG office)
r.i
ne
Each CMA prepares his own Budget Estimates and submits
them to the Concern Section on the dates prescribed. B.Estimates
or
for the MAG office is prepared by the General Sec received from
sc
various controllers. G sec checked and compared the past actual
ee
and received Estimated of the Current year with regard to any
oy
abnormal expenditure. After the checked made of the Estimated

figures they consolidate the organization wise and send to the
pl
m
respective Budget Directorates on due date.

.e
Para-115
w
Budget Estimates for the Following Year. These are prepared

w
by the various controllers and the G sec of the MAGs office based on
w
the actual strength of the offices concerned. It should be reached to

Admin sec by the 25th July and the budget Estimates by the 25th Oct
each year supported by necessary justification.
The above stated estimates are scrutinized and
submitted to the respective Budget Directorates before 25th Sep
and 15th Dec each year.
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Preliminary Revised Estimates: (Para-118)

This estimate is a forecast as accurate as possible of
what the actual expenditure of the year is likely to be. All
important changes tending to increase or decrease the budget
estimates during the year are taken into account in the
preparation of these estimates.It is based on the actual
o
nf
expenditure for the first 2 months of the year.
r.i
Revised Estimates (Para-119): This is more accurate
ne
estimates of what the expenditure of the year is likely to be and is
or
based mainly on actual expenditure for the first 3 months of the
year. It is submitted by the controller and the G sec of MAG
sc
office by the 25th Oct each year and consolidated estimate is
ee
submitted to the respective Budget Directorate before 15th Dec,
oy
each year.
pl
Control of Expenditure within the limit: The MAG controlsall

m
expenditure for keeping the expenditure within the sectioned

.e
allotment. The actual expenditure compiled under several

w
detailed heads by the DM sec of MAG office in shape of

w
Expenditure statement in respect of all Pakistan Defence Services

w
and issue an extracts monthly.The actual expenditure compiled by

the different CMAs under detail heads like Transportation, Hiring
of Accommodation, Medical Charges, Welfare grant,
Repair/Renovation, Contingencies and Misc Expense etc. are
compared with their proportionate allotments and cases where
found variation brought to the notice of head of office concerned.
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PENSION
PENSION IS A PERIODICAL PAYMENT TO THE GOVT.
SERVANT AFTER THE RETIREMENT BY THE GOVERNMENT IN
CONSIDERATION OF HIS/ HER PAST SERVICES RENDERED FOR
THE GOVERNMENT.
o
Family:
nf
The family under Pension-Cum-Gratuity Scheme
r.i
includes the following relatives of the govt. servant:
ne
1- Wife or Wives (in case of male govt. servant)
or
2. Husband (in case of female govt. servant.
sc
3. Children of the government servant.
ee
4. Widow or Widows and children of a deceased son of the govt.
servant.
oy
KINDS OF PENSION
pl
m
Compensation Pension:
.e
If govt. wants to reduce the establishment, the govt.

w
servants have the option to take compensation pension or

w
gratuity to which he may be entitled for the service he has

w
already rendered.
INVALID PENSION
It is awarded when a govt. servant who by bodily or
mental infirmity is permanently incapacitated for the public
service, or for the particular branch of it to which he belongs.
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The infirmity has, however, to be certified by a duly

constituted Medical Board.
SUPERANNUATION PENSION
It is granted to a govt. servant who is entitled or compelled,
by rule, to retire at a particular age i.e. 60 years.
o
RETIRING PENSION
nf
r.i
A retiring pension is granted to a govt. servant who is
ne
permitted to retire after completing qualifying service of 25
or
years.
sc
In case of voluntary retirement of govt. servant the
ee
Heads of Departments are responsible for ensuring verification
oy
of qualifying service by the Audit within one month from the

date of receipt of applicant for voluntary retirement after 25
pl
m
years qualifying service.

.e
If the qualifying service comes out to be less than 25

w
years, the govt. servant will have to continue in service till he

w
completes that length of service. This fact should be pointed

w
out by the Head of the Department to the Govt. servant before

expiry of three months notice period.
Conditions of qualifying service.
The service begins to qualify for pension from the date
the employee takes charge of the office to which he is first
appointed.The service must be under government. A
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government servant does not qualify his service for pension

unless he is appointed and his duties and pay are regulated
by the government.
The employment must be substantive and permanent.
The continuous temporary service of more than 5 years counts
o
for pension or gratuity .Continuous temporary service of less
nf
r.i
than 5 years immediately followed by confirmation is also
ne
count for pension or gratuity.
or
Emoluments reckoned for pension sc
ee
The term Emoluments means which a government
oy
servant was receiving immediately before his retirement and

pl
includes:
m
Pay as defined in FR 9(21) (a)(i).

.e
Personal Pay
w
Technical Pay
w
w
Increments accrued during L.P.R.

Indexed Pay
Annual Increment in the year of retirement if service is
six months in that year.
Senior Post Allowance (apply to officers who retire on or
after 1-5-1977).
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Any other addition to pay which may specifically be

declared by President as emoluments reckoning for
pension.
Orderly allowance is paid as an additional pension to B-20
& above.
o
Medical Allowance is paid with the pension.
nf
r.i
ne
Note: The term Average means the average
or
calculated upon the last 12 months of service. If the pay
sc
of a government servant has been reduced otherwise
ee
than as penalty, the average of last 3 years pay can be
oy
calculated if opted by the pensioner.

pl
m
PENSION DOCUMENTS
.e
The following documents are prepared before the case is

w
submitted to the competent authority for approval of pension.

w
Revised CSR 25 (approved application form)

w
LPC ( last pay Certificate)

PFA-357
Bankers Name
Copy of CNIC of the Pensioners
Photo Graph
Death Certificate & Nomination in case of family pension
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Service Performa
List of family members
Option Certificate
Commutation of Civilian Pension
Under taking/not to take participate in politics
Article 922( a) CSR
o
nf
Concerned from recovery of Govt dues
r.i
No demand Certificate
ne
Daily office order Part-II ( retirement order)
or
Signature and Thumb impression
sc
HEADS OF GOVT ACCOUNTS
ee
Revenue Division
oy
Capital Division
pl
m
Debt Division
.e
Remittance Division
w
w
w
The following main heads of Accounts deals as under.

Revenue Division
Deals with the proceeds of taxation and other receipts
classed as Revenue and the Expenditure there from.
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Capital Division:
Deals with the expenditure usually met from Reserved/
borrowed fund, Being incurred with the object of increasing
concrete assets (Plant, Machinery etc.), or Of reducing
recurring liabilities such as those for future pensions by
o
nf
payment of the capitalized value.
r.i
ne
Debts Divisions:
or
It comprises long term debts and short term debts
sc
eg: A/P, Preliminary expenses etc. receipts in respect of which
ee
Government becomes liable to repay the moneys received (
oy
known as deposits), and the payments in respect of which

pl
Government has a claim to recover the amounts paid (known

m
as Advances).
.e
Remittance Division:
w
w
It shall embrace all merely adjusting heads under which

w
shall appear items in transit between different account (eg

MID/CID schedules), circles in Pakistan including the Accounts
Department of the Ambassador for Pakistan in United Kingdom
as well as the Account Department of the diplomatic
representative of the Government of Pakistan in any other
foreign country.
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SCRUTINY OF CONTRACT AND AUDIT OF LOCAL

PURCHASE BILLS
Contractor bills are divided into two main classes
i. Bills for store purchased locally for stock in supply or
o
nf
store Depots and for direct delivery to consuming units.
r.i
ii. Bills for hired transport including carriage of personal
ne
luggage on transport indents and of Military passenger and
or
their baggage on the authority of road and river warrants.
sc
NOTE:- the term store Depot as used includes an
ee
Arsenal , Ordnance, clothing, Medical store and
oy
remount Depot, a heavy Repair shop and a

pl
Mechanical Transport store Depot.

m
The Term supply Depot means the HQrs of Supply

.e
Depot or sub depot thereof holding separate stock

w
of store
w
w
All contractor bills should be paid as soon as possible.

After audit they will be entered in the Income Tax Register
by an auditor. The entries in the bill and income tax register
will be checked by AAO.
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The register and bills submitted to the officer in charge of

the section for scrutiny and approval and be submitted to
disbursement section.
Scrutiny of contract
The contracts must be concluded by the competent
o
nf
administrative authority. Sanction has been accorded by an
r.i
authority competent to sanction it. All orders received from
ne
time to time by the Govt must be kept in view.Lowest
or
tender must be accepted, if other than lowest is accepted
sc
than reasons must be recorded.Price current rates have
ee
been obtained from civil authorities.Tenders are issued to all
oy
contractors on list of approved contractor.The selected rates

pl
compare favorably with last years contract rates and the

m
price current rates.Terms of the contract must be precise

.e
and no room left for ambiguity.No contract involving an

w
uncertain or indefinite liability or any condition of unusual

w
w
character should be entered into without previous consent

of the competent financial authority.Competent financial
authority means the authority within whose financial powers
the amount at issue fallsContract must be placed only after
tenders have been called.The original copy of the contract is
duly signed by contractor, witnesses and the officer
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concluding the contract. The schedules are framed

according to instructions contained in regulations and letters
from Govt and administrative authorities.Schedule may be
of delivery or rate etc.Amount of security must be
deposited.The amount of security deposited is noted on the
o
schedule and is correctly calculated in accordance with the
nf
r.i
terms of the contract and rules laid down in FR Vol I, 1986.
ne
If the security is waived sanction of the QMG is
or
necessary.
sc
The rates must be clearly written in words and figures.
ee
The rates accepted are same as are noted in the
oy
comparative statement and have not been tampered.

pl
m
AUDIT OF LOCAL PURCHASE BILLS

.e
The bills should be audited in accordance with the general

w
rules laid down in Military Audit Code. The purchase is

w
within the financial power of the officer in charge. A letter of

w
sanction must be obtained when necessary by the officer in

charge of the Armed Forces Medical Store & Depot.The
rates charged should agree with those in the contract
Register rate sanctioned by the Director General Medical
services. Bills and vouchers must be in prescribed form and
original.The detail work up to the total and totals are in
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words and figures.No erasures and alternation, if it happens

it must be attested by the officer as many times as made
alternations are made.Bills must be signed in ink. No
stamped signature is accepted. No signature on the bill by
the subordinate officer is acceptable. When a local purchase
o
bill has been passed for payment by the officer, and before
nf
r.i
it is sending to the Disbursement section, the auditor will
ne
detach the CRVs etc and enter the total number on a
or
proforma. Monthly summary of CRVs etc will be kept in a
sc
loose pad until the end of the month.
ee
At the end of the month the auditor will add up the total
oy
number of CRVs and make sure that the number is actually

in his pad and will forward to the concerned LAO office.
pl
m
.e
Auditor should not at liberty to make relaxation in

w
audit of their own motion it is considerable

w
importance that the prescribed check should be

w
observed in true spirit
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General Rule of Audit and Scrutiny

Bills and vouchers must be in prescribed form and
original.
The detail work up to the total and the totals are in words
and figures.
o
nf
No erasures and alternation, if it happens it must be
r.i
attested by the officer as many times as alternations are
made.
ne
or
Bills must be signed in ink. No stamped signature is
accepted. sc
ee
No signature on the bill by the subordinate officer is
acceptable.
oy
pl
The copies of sanctions are certified by the sanctioning

m
officer or by the gazetted officer authorized to sign for

him.
.e
w
Revenue stamp must be affixed and defaced.

w
w
In case agreement is effected between two different

documents, facts must be written down on both the
documents.
Income tax and sales tax must be deducted.
Claims preferred after 12 months need sanction of the

competent authority.
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`
Necessary entries must be made in prescribed audit
register.
All documents after payment must be stamped PAID.
o
nf
DUTIES OF AN AUDITORS
r.i
DUTIES WITH RESPECT TO DAK:-
ne
Count the letters and bills, delivered to you by the Dak supervisor
or
or the group accountant before initialing the receipt.
sc
See that the letters etc actually pertains to the portion of the
ee
work dealt with you. If a particular letter or bill does not pertain
oy
to you, it should be transferred to the group concerned (if in the

same section) or to the section concerned on the same day
pl
through the work book or record section, as the case may be, in
m
no case should the letter or bill not pertaining to you, be kept

.e
with you.
w
w
MAINTENANCE OF WORK BOOK:-

w
Each auditor will maintain a work book in which:-

Enter immediately all letters and bills etc, received on each day in
your work book. The number thus entered must tally with the
receipt given by you.
Mark the disposal of each letter and bill in your work book
showing therein the date of submission of the disposal and the
date of its dispatch.
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Prepare daily outstanding list of letters and bills, etc, in the work
book at the close of each day, showing the number outstanding
as also the date of oldest letter and bill etc, in hand.
Submit your work book daily to A.A.O. of the group.
MAINTENANCE OF Note BOOK:-
Maintain a note book in which all important orders and decisions
o
nf
affecting the work dealt with in your section, especially those
r.i
relating to the portion of work allotted to you, are properly noted.
ne
Submit your note book to the AAO for examination every month.
or
However a master note book will be maintained by the AAOs, and
shall be handed over to his successor on his
sc
transfer/relinquishment of charge.
ee
Disposal of Correspondence:-
oy
All letters and bills etc, received by you should be dealt with
pl
promptly and systematically. In fact it should be your Endeavour

m
to dispose of your correspondence etc. on the date of receipt or

.e
on the following day at the least.

w
If any special difficulty is encountered, or delay is anticipated in

w
dealing with a particular case, you should bring the matter

w
promptly to the notice of AAO. You should not delay or neglect

such cases for prolonged periods, in order that attention may be
given to other work.
Duties with respect to Files:-
a) Give a Subject on each file opened by you.
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b) Allot a number to each new file opened with reference to the file
index register (maintained in AN Section) and enter its
subject in that register against the particular number allotted.
c) Keep your files neat and in tidy manner.
d) Allot page numbers to correspondence in the file and link and
interlink the correspondence when necessary.
o
nf
e) Do not file correspondence letters in the subject file.
r.i
f) Open a new part of the file after it has reached between 150 to
ne
200 pages.
or
Do not keep Dead files in the section, transfer them to Record
Section after due approval.
sc
Duties with respect to Registers:-
ee
Ensure that fly leaf instructions are pasted in the each register
oy
and are being initialed by the AAO every month.

pl
Keep all register posted up to date

m
Submit all registers to the officer in charge or group officer as

.e
and when required / asked

w
Demand / Payment register is one of the most important

w
register, see that all new demands are duly noted in this register
w
and all demands adjusted on receipt of bills, treasury

receipts are properly scored out.
Duties with respect to Bills:-
a) Deals with the bills promptly, e.g. arithmetical calculations,
rates, etc.
b) Verification of signatures.
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c) After subjecting each bill to audit check, enface it with payment

order.
d) Submit each bill with the relevant register e.g. provisional
payment register to AAO
e) If the payment of the bills affects the demand register make
necessary entries in that register simultaneously with
o
nf
submission of bills
r.i
f) Prepare punching medium and cheque slip at the time of
ne
payment
or
g) Check the punching medium if prepared by the unit accountant
h) Pursue promptly all objections raised as a result of Post Audit of
sc
bills, etc until they are settled.
ee
Duties with respect to Reports & Returns:-
oy
a) A list of reports and returns due in and due out is required to

pl
be kept by the Auditor, see that with reference to this list all
m
reports and returns due in are actually received by you in time

.e
and necessary use of them for which they are rendered by

w
outside parties is made without delay.

w
b) Similarly, see that reports and returns due out with reference to
w
the list of reports and returns are submitted by the auditor to the
AAO in sufficient time to admit to their being dispatched to the
parties concerned on due dates.
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General Computer Knowledge

Computer
A computer is a general purpose device that can be programmed to
carry out a finite set of arithmetic or logical operations. Since a
o
sequence of operations can be readily changed, the computer can solve
nf
more than one kind of problem.
r.i
ne
Conventionally, a computer consists of at least one processing element,
typically a central processing unit (CPU) and some form of memory.
or
The processing element carries out arithmetic and logic operations, and
sc
a sequencing and control unit that can change the order of operations
ee
based on stored information. Peripheral devices allow information to be
oy
retrieved from an external source, and the result of operations saved

and retrieved.
pl
m
The first electronic digital computers were developed between 1940

.e
and 1945 in the United Kingdom and United States. Originally they were
w
the size of a large room, consuming as much power as several hundred

w
modern personal computers (PCs). In this era mechanicalanalog

w
computers were used for military applications.

Modern computers based on integrated circuits are millions to billions of
times more capable than the early machines, and occupy a fraction of
the space. Simple computers are small enough to fit into mobile
devices, and mobile computers can be powered by small batteries.
Personal computers in their various forms are icons of the Information
Age and are what most people think of as "computers". However, the
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embedded computers found in many devices from mp3 players to

fighter aircraft and from toys to industrial robots are the most
numerous.
Input Devices
o
The computer keyboard is used to enter text information into the
nf
computer, as when you type the contents of a report. The keyboard
r.i
can also be used to type commands directing the computer to perform
ne
certain actions. Commands are typically chosen from an on-screen
or
menu using a mouse, but there are often keyboard shortcuts for giving
these same commands. sc
ee
Pointing Devices
The graphical user interfaces (GUIs) in use today require some kind of
oy
device for positioning the on-screen cursor. Typical pointing devices

pl
are: mouse, trackball, touch pad, track point, graphics tablet, joystick,
m
and touch screen.

.e
Pointing devices, such as a mouse, connected to the PC via a serial

w
ports (old), PS/2 mouse port (newer), or USB port (newest). Older Macs
w
used ADB to connect their mice, but all recent Macs use USB (usually to
w
a USB port right on the USB keyboard).
Mouse
The mouse pointing device sits on your work surface and is moved with
your hand. In older mice, a ball in the bottom of the mouse rolls on the
surface as you move the mouse and internal rollers sense the ball
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movement and transmit the information to the computer via the cord of
the mouse.
Touch pad
Most laptop computers today have a touch pad pointing device. You
move the on-screen cursor by sliding your finger along the surface of
the touch pad. The buttons are located below the pad, but most touch
o
nf
pads allow you to perform mouse clicks by tapping on the pad itself.
r.i
Touch pads have the advantage over mice that they take up much less
ne
room to use. They have the advantage over trackballs (which were
or
used on early laptops) that there are no moving parts to get dirty and
result in jumpy cursor control.
Track point
sc
ee
Some sub-notebook computers (such as the IBM ThinkPad), which lack
oy
room for even a touch pad, incorporate a track point, a small rubber
pl
projection embedded between the keys of the keyboard. The track

m
point acts like a little joystick that can be used to control the position of
.e
the on-screen cursor.

w
w
Trackball
w
The trackball is sort of like an upside-down mouse, with the ball

located on top. You use your fingers to roll the trackball, and internal
rollers (similar to whats inside a mouse) sense the motion which is
transmitted to the computer. Trackballs have the advantage over mice
in that the body of the trackball remains stationary on your desk, so
you dont need as much room to use the trackball. Early laptop
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computers often used trackballs (before superior touch pads came

along).
Trackballs have traditionally had the same problem as mice: dirty rollers
can make their cursor control jumpy and unsmooth. But there are
modern optical trackballs that dont have this problem because their
designs eliminate the rollers.
o
nf
Joysticks
r.i
Joysticks and other game controllers can also be connected to a
ne
computer as pointing devices. They are generally used for playing
or
games, and not for controlling the on-screen cursor in productivity
software.
Touch screen
sc
ee
Some computers, especially small hand-held PDAs, have touch sensitive
oy
display screens. The user can make choices and press button images on
pl
the screen. You often use a stylus, which you hold like a pen, to write
m
on the surface of a small touch screen.

.e
w
Graphics tablet
w
A graphics tablet consists of an electronic writing area and a special

w
pen that works with it. Graphics tablets allows artists to create
graphical images with motions and actions similar to using more
traditional drawing tools. The pen of the graphics tablet is pressure
sensitive, so pressing harder or softer can result in brush strokes of
different width (in an appropriate graphics program).
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Scanners
A scanner is a device that images a printed page or graphic by digitizing
it, producing an image made of tiny pixels of different brightness and
color values which are represented numerically and sent to the
computer. Scanners scan graphics, but they can also scan pages of text
which are then run through OCR (Optical Character Recognition)
o
nf
software that identifies the individual letter shapes and creates a text
r.i
file of the page's contents.
ne
Microphone
or
A microphone can be attached to a computer to record sound (usually
through a sound card input or circuitry built into the motherboard). The
sc
sound is digitizedturned into numbers that represent the original
ee
analog sound wavesand stored in the computer to later processing
oy
and playback.
pl
m
.e
w
MIDI Devices
w
MIDI (Musical Instrument Digital Interface) is a system designed to

w
transmit information between electronic musical instruments. A MIDI

musical keyboard can be attached to a computer and allow a performer
to play music that is captured by the computer system as a sequence of
notes with the associated timing (instead of recording digitized sound
waves).
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Output Devices
CRT Monitor
The traditional output device of a personal computer has been the CRT
(Cathode Ray Tube) monitor. Just like a television set (an older one,
anyway) the CRT monitor contains a large cathode ray tube that uses
o
an electron beam of varying strength to paint a picture onto the color
nf
phosphorescent dots on the inside of the screen. CRT monitors are
r.i
heavy and use more electrical power than flat panel displays, but they
ne
are preferred by some graphic artists for their accurate color rendition,
or
and preferred by some gamers for faster response to rapidly changing
graphics. sc
ee
Flat Panel Monitor
A flat panel display usually uses an LCD (Liquid Crystal Display) screen
oy
to display output from the computer. The LCD consists of several thin
pl
layers that polarize the light passing through them. The polarization of
m
one layer, containing long thin molecules called liquid crystals, can be
.e
controlled electronically at each pixel, blocking varying amounts of the

w
light to make a pixel lighter or darker.

w
w
Ink Jet Printer

For hardcopy (printed) output, you need some kind of printer attached
to your computer (or available over a network). The most common type
of printer for home systems is the color ink jet printer. These printers
form the image on the page by spraying tiny droplets of ink from the
print head. The printer needs several colors of ink (cyan, yellow,
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magenta, and black) to make color images. Some photo-quality ink jet
printers have more colors of ink.
Laser Printer
A laser printer produces good quality images by the same technology
that photocopiers use. A drum coated with photosensitive material is
charged, then an image is written onto it by a laser (or LEDs) which
o
nf
makes those areas lose the charge. The drum then rolls through toner
r.i
(tiny plastic particles of pigment) that is attracted to the charged areas
ne
of the drum. The toner is then deposited onto the paper, and then
or
fused into the paper with heat.
sc
ee
COMPUTER DATA STORAGE
oy
Computer data storage, often called storage or memory, is a

pl
technology consisting of computer components and recording media

m
used to retain digital data. It is a core function and fundamental

.e
component of computers.
w
In contemporary usage, memory is usually semiconductor storage read-

w
write random-access memory, typically DRAM (Dynamic-RAM) or other

w
forms of fast but temporary storage. Storage consists of storage

devices and their media not directly accessible by the CPU, (secondary
or tertiary storage), typically hard disk drives, optical disc drives, and
other devices slower than RAM but are non-volatile (retaining contents
when powered down).[1] Historically, memory has been called core,
main memory, real storage or internal memory while storage devices
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have been referred to as secondary storage, external memory or

auxiliary/peripheral storage.
Hierarchy of storage
Various forms of storage, divided according to their distance from the

central processing unit. The fundamental components of a general-
o
nf
purpose computer are arithmetic and logic unit, control circuitry,
r.i
storage space, and input/output devices.
ne
Primary storage
Primary storage (or main memory or internal memory), often referred
or
to simply as memory, is the only one directly accessible to the CPU. The
sc
CPU continuously reads instructions stored there and executes them as
ee
required. Any data actively operated on is also stored there in uniform
oy
manner.
pl
Historically, early computers used delay lines, Williamss tubes, or

m
rotating magnetic drums as primary storage. By 1954, those unreliable

.e
methods were mostly replaced by magnetic core memory. Core

w
memory remained dominant until the 1970s, when advances in

w
integrated circuit technology allowed semiconductor memory to become

w
economically competitive.
This led to modern random-access memory (RAM). It is small-sized,
light, but quite expensive at the same time. (The particular types of
RAM used for primary storage are also volatile, i.e. they lose the
information when not powered).
Main memory is directly or indirectly connected to the central
processing unit via a memory bus. It is actually two buses (not on the
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diagram): an address bus and a data bus. The CPU firstly sends a
number through an address bus, a number called memory address, that
indicates the desired location of data. Then it reads or writes the data
itself using the data bus. Additionally, a memory management unit
(MMU) is a small device between CPU and RAM recalculating the actual
memory address, for example to provide an abstraction of virtual
o
nf
memory or other tasks.
r.i
As the RAM types used for primary storage are volatile (cleared at start
ne
up), a computer containing only such storage would not have a source
or
to read instructions from, in order to start the computer. Hence, non-
volatile primary storage containing a small startup program (BIOS) is
sc
used to bootstrap the computer, that is, to read a larger program from
ee
non-volatile secondary storage to RAM and start to execute it. A non-
oy
volatile technology used for this purpose is called ROM, for read-only
pl
memory (the terminology may be somewhat confusing as most ROM

m
types are also capable of random access).

.e
Secondary storage
w
Secondary storage (also known as external memory or auxiliary

w
storage), differs from primary storage in that it is not directly accessible

w
by the CPU. The computer usually uses its input/output channels to

access secondary storage and transfers the desired data using
intermediate area in primary storage. Secondary storage does not lose
the data when the device is powered downit is non-volatile. Per unit,
it is typically also two orders of magnitude less expensive than primary
storage. Consequently, modern computer systems typically have two
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orders of magnitude more secondary storage than primary storage and

data are kept for a longer time there.
In modern computers, hard disk drives are usually used as secondary
storage. The time taken to access a given byte of information stored on
a hard disk is typically a few thousandths of a second, or milliseconds.
By contrast, the time taken to access a given byte of information stored
o
nf
in random-access memory is measured in billionths of a second, or
r.i
nanoseconds. This illustrates the significant access-time difference
ne
which distinguishes solid-state memory from rotating magnetic storage
or
devices: hard disks are typically about a million times slower than
memory. Rotating optical storage devices, such as CD and DVD drives,
sc
have even longer access times. With disk drives, once the disk
ee
read/write head reaches the proper placement and the data of interest
oy
rotates under it, subsequent data on the track are very fast to access.
pl
To reduce the seek time and rotational latency, data are transferred to
m
and from disks in large contiguous blocks.

.e
w
Tertiary storage
w
Tertiary storage or tertiary memory provides a third level of storage.

w
Typically it involves a robotic mechanism which will mount (insert) and

dismount removable mass storage media into a storage device
according to the system's demands; these data are often copied to
secondary storage before use. It is primarily used for archiving rarely
accessed information since it is much slower than secondary storage
(e.g. 560 seconds vs. 110 milliseconds). This is primarily useful for
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extraordinarily large data stores, accessed without human operators.

Typical examples include tape libraries and optical jukeboxes.
Off-line storage
Off-line storage is computer data storage on a medium or a device that
is not under the control of a processing unit. The medium is recorded,
usually in a secondary or tertiary storage device, and then physically
o
nf
removed or disconnected. It must be inserted or connected by a human
r.i
operator before a computer can access it again. Unlike tertiary storage,
ne
it cannot be accessed without human interaction.
or
Off-line storage is used to transfer information, since the detached
medium can be easily physically transported. Additionally, in case a
sc
disaster, for example a fire, destroys the original data, a medium in a
ee
remote location will probably be unaffected, enabling disaster recovery.
oy
Off-line storage increases general information security, since it is

pl
physically inaccessible from a computer, and data confidentiality or

m
integrity cannot be affected by computer-based attack techniques. Also,

.e
if the information stored for archival purposes is rarely accessed, off-

w
line storage is less expensive than tertiary storage.

w
w
Operating Systems
An operating system (OS) is a set of programs containing
instructions that work together to coordinate all the activities among
computer hardware resources. Most operating systems perform similar
functions that include starting and shutting down a computer, providing
a user interface, managing programs, managing memory, coordinating
tasks, configuring devices, establishing an Internet connection,
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monitoring performance, providing file management and other utilities,

and automatically updating itself and certain utility programs. Some
operating systems also allow users to control a network and administer
security.
Operating System Functions
Many different operating systems exist, designed for all types of
o
computers. Regardless of the size of the computer, however, most
nf
operating systems provide similar functions. The following sections
r.i
discuss functions common to most operating systems. The operating
ne
system handles many of these functions automatically, without
or
requiring any instructions from a user.
sc
ee
oy
Difference between System Software and

pl
Application Software
m
System software and application software are computer programs. The

.e
system software is also installed during the installation of the operating

w
system. However, the application software utilizes the capabilities of the

w
computer on which it is installed.

w
System Software
The programs and the file that comprises the operating system are
called system software. These files include configuration files, system
preferences, system services, libraries of functions and the drivers for
the hardware installed on the computer. The computer programs in
system software include compilers, system utilities, assemblers,
debuggers and file management tools.
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Once you install the operating system, the system software is also
installed. Program such Software update or Windows update can be
used to update the system software. However, the end user does not
run the system software. For example, while using the web browser,
you dont need to use the assembler program.
System software is also called low-level software as it runs at most
o
nf
basic level of the computer. It just creates a graphical user interface
r.i
thorough which the user can interact with hardware with the help of
ne
operating system. System software just runs at the back so you dont
or
need to bother about it.
The system software provides an environment to run application
sc
software and it controls the computer as well as the applications
ee
installed on the machine.
oy
Application software
pl
The subclass of a computer program which utilizes the capabilities of

m
computer is called application software. Application here means the

.e
application software and the implementation. The example of

w
application software programs includes media players, spreadsheets

w
and word processors. When multiple applications are packaged

w
together then it is called application suite.

There is a common user interface in each application suite which makes
it easier for the user to learn different applications. In some cases, such
as Microsoft Office, the various application programs have the ability to
interact with each other. This facility is very handy for the user. For
example, a user can embed the spreadsheet in a word processor using
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the application software. Application software cannot run without the

presence of system software.
Difference between system software and application software

1. System software gets installed when the operating system is
installed on the computer while application software is installed
o
according to the requirements of the user.
nf
2. System software includes programs such as compilers,
r.i
debuggers, drivers, assemblers while application software
ne
includes media players, word processors, and spreadsheet
or
programs.
sc
3. Generally, users do not interact with system software as it works
ee
in the background whereas users interact with application
oy
software while doing different activities.

4. A computer may not require more than one type of system
pl
software while there may be a number of application software

m
programs installed on the computer at the same time.

.e
5. System software can run independently of the application

w
w
software while application software cannot run without the

w
presence of the system software.

6. System software is an all-encompassing term for computer data
while application software does a certain task.
7. Application softwares are executable while system software may
or may not be executable
8. System software provides a platform for the execution of
application software.
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9. There are various types of system software like Operating system,

Utility Programs, Communication Software while also various
types of application software are Education Software, Personal
Assistance Software, Word Processing software etc.
Low-level programming language
o
nf
In computer science, a low-level programming language is a
r.i
programming language that provides little or no abstraction from a
ne
computer's instruction set architecture. Generally this refers to either
or
machine code or assembly language. The word "low" refers to the small
or nonexistent amount of abstraction between the language and
sc
machine language; because of this, low-level languages are sometimes
ee
described as being "close to the hardware."
oy
Low-level languages can be converted to machine code without using a

pl
compiler or interpreter, and the resulting code runs directly on the

m
processor. A program written in a low-level language can be made to

.e
run very quickly, and with a very small memory footprint; an equivalent
w
program in a high-level language will be more heavyweight. Low-level

w
languages are simple, but are considered difficult to use, due to the
w
numerous technical details which must be remembered.
Machine code
Machine code is the only language a microprocessor can process
directly without a previous transformation. Currently, programmers
almost never write programs directly in machine code, because it
requires attention to numerous details which a high-level language
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would handle automatically, and also requires memorizing or looking up

numerical codes for every instruction that is used. For this reason,
second generation programming languages provide one abstraction
level on top of the machine code.
Assembly
Assembly language is not considered a programming language as it has
o
nf
no semantics and no specification, being only a mapping of human
r.i
readable tokens to op codes. The human readable tokens are
ne
assembled directly into machine code on a, usually, one to one basis.
or
The assembly code can also be abstracted to another layer in a similar
manner as machine code is abstracted into assembly code.
sc
Low-level programming in high-level languages
ee
Experiments with hardware support in high-level languages in the late
oy
1960s led to such languages as PL/S, BLISS, BCPL, and extended

pl
ALGOL for Burroughs large systems being used for low-level

m
programming. Forth also have applications as a systems language.

.e
However, the language that became pre-eminent in systems

w
programming was C.
w
C is considered a third generation programming language, since it is

w
structured and abstracts from machine code (historically, no second

generation programming language emerged that was particularly
suitable for low-level programming). However, many programmers
today might refer to C as low-level, as it lacks a large runtime-system
(no garbage collection etc.), basically supports only scalar operations,
and provides direct memory addressing. It therefore readily blends with
assembly language and the machine level of CPUs and microcontrollers.
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C's ability to abstract from the machine level means that the same code
can be compiled for different hardware platforms; however, fine-
grained control at the systems level is still possible providing that the
target platform has certain broadly-defined features in place, such as a
flat memory model, and memory that is divided into bytes. C
programmes may require a certain amount of 'tweaking', often
o
nf
implemented by conditional compilation, for different target platforms.
r.i
The process of adapting a systems programme for a different platform
ne
is known as porting.
or
Relative meaning
The terms high-level and low-level are inherently relative. Some
sc
decades ago, the C language, and similar languages, were most often
ee
considered "high-level". Many programmers today might refer to C as
oy
low-level.
pl
Assembly language may itself be regarded as a higher level (but often

m
still one-to-one if used without macros) representation of machine

.e
code, as it supports concepts such as constants and (limited)

w
expressions, sometimes even variables, procedures, and data

w
structures. Machine code, in its turn, is inherently at a slightly higher

w
level than the microcode or micro-operations used internally in many

processors.
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LAN vs. WAN

Comparison chart
LAN WAN
WAN (Wide Area Network) is
LAN (Local Area Network) a computer network that
o
is a computer network covers a broad area (e.g.,
nf
covering a small any network whose
Definition:
r.i
geographic area, like a communications links cross
ne
home, office, schools, or metropolitan, regional, or
or
group of buildings. national boundaries over a
sc long distance
ee
Speed: high speed(1000mbps) less speed(150mbps)
WANs have a lower data
oy
Data transfer LANs have a high data

transfer rate as compared to
pl
rates: transfer rate

LANs
m
Network in an organization Internet is a good example of

.e
Example:
can be a LAN a WAN
w
w
Tend to use certain WANs tend to use technology

w
connectivity technologies, like MPLS, ATM, Frame Relay

Technology:
primarily Ethernet and and X.25 for connectivity over
Token Ring the longer distances
one LAN can be connected Computers connected to a
to other LANs over any wide-area network are often
Connection:
distance via telephone connected through public
lines and radio waves networks, such as the
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LAN WAN
telephone system. They can
also be connected through
leased lines or satellites
Layers 3 devices Routers,
Layer 2 devices like
o
Multi-layer Switches and
switches, bridges. layer1
nf
Components: Technology specific devices
r.i
devices like hubs ,
like ATM or Frame-relay
ne
repeaters
Switches etc.
or
LANs tend to have fewer WANs tend to be less fault
Fault
sc
problems associated with tolerant. as it consists of a
ee
them, as there are a large amount of systems
Tolerance:
smaller amount of systems there is a lower amount of
oy
to deal with. fault tolerance.

pl
Data Experiences more data

m
Experiences fewer data

Transmission transmission errors as
.e
transmission errors
Error: compared to LAN
w
w
WANs (like the Internet) are

w
Typically owned, not owned by any one

controlled, and managed organization but rather exist
Ownership:
by a single person or under collective or distributed
organization ownership and management
over long distances
If there is a need to set-up In this case since networks in
Set-up costs:
a couple of extra devices remote areas have to be
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LAN WAN
on the network, it is not connected hence the set-up
very expensive to do that costs are higher. However
WANs using public networks
can be setup very cheaply,
o
just software (VPN etc)
nf
Because it covers a
r.i
Maintaining WAN is difficult
relatively small
ne
Maintenance because of its wider
geographical area, LAN is
costs: geographical coverage and
or
easier to maintain at
higher maintenance costs.
sc
relatively low costs.
ee
Have a small geographical Have a large geographical range
Geographical range and do not need any generally spreading across
oy
Spread: leased telecommunication boundaries and need leased

pl
lines telecommunication lines

m
.e
w
w
w
103

Accounting Complete Notes For Audit & Accounts Test

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Accounting Complete Notes For Audit & Accounts Test

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Faisal Qureshi

Accounting Principles & Procedure:

(2) Credit Transaction:-

If a transaction is made with the consent to

Capital:- It is the source of funds provided by the

Drawing:- The amounts of cash or goods taken away by

payment is not made to him at the same time, rather the

purchases are known as credit purchases or purchases on

Purchases Return or Returns Outwards:- Goods once

certain reasons, i.e. goods are defective, not according to

specification, damaged or below standard. Such return of

goods to the seller is known as purchases return.

Sales: - When goods of the business are sale out to someone

Cash Sales:- If goods are sold to customers at a specific price

Credit Sales:-If goods are sold to customers and he does not

have to repay. We stand as debtor to Mr. Amir for Rs. 5000/ it is

also termed as account receivable.

Creditors/Accounts Payable:-A person who pays out

something or to whom money owing is a creditor. It is also

Commission:-It is form of remuneration for services rendered

Expenses:-Expenses are the cost of the goods and services used

Goods merchandise:-It includes all merchandise commodities,

which are purchased by the business for selling purpose.

Stock Inventory:-(List of Goods)

Goods or merchandise on hand that is goods

remaining unsold is called stock in trader inventory.

Depreciation:- Gradual decrease in the machinery value

Fluctuation:- The decrease or increase in value of an asset not

Petty cash book: - A book, in which small cash payments

Assets:- These are the things of value possessed by a trader

circulatory or floating assets.

Tangible Assets:-Assets which have physical existence and

which can be seen, touched or felt are called tangible assets

Intangible Assets:- Assets which have no Physical

called intangible assets e.g Good will, patent right, Trade

Wasting Assets:-Those assets whose value gradually

Liabilities:- Liabilities are debts or obligation of a business which

Fixed liabilities:- Fixed liabilities, which are repayable after

Accounting:-Accounting is the art of recording, classifying and

summarizing in a significant manner and in terms of money,

transaction and events, which are, in part at least, of a financial

Book Keeping:-Bookkeeping is the art of recording monetary

Accounting & Accountancy:-The two words Accounting and

Financial Accounting:- The main purpose of Financial Accounting

Management Accounting:- It is accounting for the management

of revenues and expenses relating to the current accounting period

while determing the profit or loss of the business, is called accrual

system of accounting or Mercantile system of accounting.

Accrual Revenues:- The revenue, which we have been earned in

year, it will be received in next year, is known as accrued revenue

Accrual Expenses or Outstanding Expenses:-

Revenue Expenditure:All those expenditure which are incurred in

It is prepared to determine the profit and loss of the business

2. TRADING & PROFIT & LOSS ACCOUNT/ INCOME

As the name of this account, it is made up two accounts that in

Operating expenses are two types there are. Selling expenses

and administrative or general expenses. Selling Expenses are

10. BALANCE SHEET

not for sale but only for permanent use in the

Machinery, Land, Building etc.

ii. FLOATING/ CIRCULATING/CURRENT

those which are held for sale and which are

converted into cash after sometime for example