VINAYAK RAO , I.R.A.S.

1
OVERVIEW OF STORES ACCOUNTS

• BY
• VINAYAK RAO , I.R.A.S.
• DY. CAO (CP)
• WESTERN RAILWAY HQ,
• MUMBAI.

2
PURCHASES BY I. R.

• 1999-00 RS. 9398 CR.
• 2000-01 RS. 10,835 CR.
• 1999-00 RS. 8601 CR. INDEGENOUS
• 2000-01 RS. 10,373 CR. INDEGENOUS
• 1999-00 91.5 INDEGENOUS PURCHASES
• 2000-01 95.7 INDEGENOUS PURCHASES

3
MODE OF PROCUREMENT

• ZONAL RAILWAYS AND PU s PROCURE MOST OF THE
  MATERIAL THEY NEED. CERTAIN ITEMS ARE PROCURED
  THROUGH RAILWAY BD., AND DGSD.
• IN 2000-01 48 WAS PROCURED BY ZONAL RLYS AND PU
  s, 47 BY RAILWAY BD. AND 5 BY DGSD.

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INVENTORY TURN OVER RATIO (TOR)

• INV. TOR VALUE OF BALANCE STOCK
• ISSUES DURING THE YEAR
• YEAR TOR
• 1999-00 10.22
• 2000-01 12

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STORES BALANCES ISSUES (W/O FUEL)
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INVENTORY TURNOVER RATIO (W/O FUEL)
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DISPOSAL OF UNUSABLE ASSETS ON I. R.

• DURING 2000-01 RS. 949 CR. WAS REALIZED BY
  DISPOSAL OF UNUSABLE ASSETS. THIS CONSTITUTES
  ROUGHLY 10 OF PURCHASES. SCRAP DISPOSAL

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ORGANISATION AT RLY. BD. LEVEL
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ORGANISATION AT ZONAL LEVEL
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ASSOCIATE ACCOUNTS
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FUNCTIONS OF STORES DEPT.

• PURCHASE, INSPECTION, CUSTODY, ISSUE OF RLY.
  STORES AND CONDUCT PURCHASES IN MOST
  EFFICIENT,ECONOMIC,FAIR,AND TRANSPARENT MANNER
• INVENTORY MGT. STANDARDIZATION
• DEVELOPMENT OF COST EFFECTIVE MATERIALS
• COMPILATION OF STORES BUDGET IN CONSULTATION WITH
  ACCOUNTS
• SATISFY PUBLIC ACCOUNTABILITY AT ALL STAGES OF
  TRANSACTIONS PURCHASE, ISSUE, SALE

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FUNCTIONS OF STORES A/CS DEPT.

• COMPLETE AND INDEPENDENT AUDIT OF STORES
  TRANSACTIONS
• FUNCTIONS OF ASSOCIATE FINANCIAL ADVISOR
• MAINTAINING ACCOUNTAL PASSING BILLS
• COMPILE MONTHLY STORES ACCOUNTS AND PERIODICAL
  RETURNS
• STOCK VERIFICATION

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IMPORTANT TERMS

• MOVABLE SURPLUS
• THAT STORES WHICH IS LIKELY TO BE ISSUED IN FUTURE

• DEAD SURPLUS
• THAT STORES WHICH IS NOT LIKELY TO BE ISSUED IN
  FUTURE

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IMPORTANT TERMS

• STOCK ITEMS
• WHICH ARE STOCKED IN STORES DEPOTS

• N. S. ITEMS
• WHICH ARE NOT STOCKED IN STORES DEPOTS

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CONCEPT OF AVERAGE ANNUAL CONSUMPTION

• BASED ON THE AVERAGE OF ANNUAL CONSUMPTION OF
  PAST THREE YEARS
• THIS IS VERY USEFUL IN DECIDING THE QUANTITIES TO
  BE PROCURED

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HISTORY SHEET FOR ITEM X(FIGURES IN RED
INDICATE NO. OF DAYS WHEN ITEM WAS OUT OF STOCK)
DEP. YR-3 AC YR-2 AC YR-1 AC AAC
KTT 700 60 838 890 100 1226 650 150 1103 1056
SBI 1400 50 1622 1800 80 2479 2000 40 2246 2116
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VETTING OF NON-STOCK INDENTS

• REALISTIC ASSESSMENT KEEPING IN VIEW THE CANONS
  OF FINANCIAL PROPRIETY
• SPECS SHOULD BE DETAILED AND UNAMBIGUOUS
• USE BIS OR IRS SPECS
• SPECS SHOULD BE SUCH THAT THEY DO NOT SUIT ONLY
  ONE PARTICULAR MANUFACTURER

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(CONTD.)

• FUNDS AVAILABILITY
• LAST PURCHASE RATE
• ED/ST/CST/OCTROI HAS TO BE TAKEN INTO ACCOUNT
• INDENTS gt RS. 40,000 ARE VETTED BY ASSOCIATE
  ACCTS
• INDENTS gt RS. 2,000 ARE SIGNED BY JAG OR HIGHER
  OFFICER

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5 R s OF PURCHASING

• RIGHT QUANTITY
• RIGHT QUALITY
• RIGHT PRICE
• RIGHT DELIVERY
• RIGHT SOURCES

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TYPES OF TENDERS

• OPEN / LIMITED / SINGLE
• FOR SAFETY ITEMS APPEARING AS RDSOS APPROVED
  SUPPLIERS LIST OR GMS APPROVED SUPPLIERS LIST
• BULLETIN TENDERS

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SCRUTINY OF TENDERS

• OPENING OF TENDERS
• COMPARATIVE STATEMENT.
• DETAILS OF ED, ST / CST, PACKING CHARGES AND
  CALCULATIONS
• FIN. IMPLICATIONS OF OTHER CONDITIONS, e.g. QTY.
  DISCOUNTS, EARLY PAYMENT DISCOUNT, ETC.
• LAST PURCHASE RATES
• CREDENTIALS
• PAST PERFORMANCE

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CONTD...

• CONSTITUTION OF T. C.
• LATE OR DELAYED TENDERS TO BE REJECTED
• UNSOLICITED OFFERS TO BE REJECTED
• NEGOTIATION WITH L1 ONLY

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.SPLITTING

• SPLITTING CAN BE RESORTED TO KEEPING IN MIND THE
  FOLLOWING
• VITAL AND CRITICAL NATURE OF THE ITEM
• QUANTITY.
• DELIVERY REQUIREMENTS
• CAPACITY OF FIRMS
• PAST PERFORMANCE

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I. R. S. CONDITIONS OF CONTRACT

• RISK PURCHASE
• LIQUIDATED DAMAGES
• BOOK EXAMINATION CLAUSE
• FALL CLAUSE
• FORCE MAJURE CLAUSE
• TIME PREFERENCE

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PRECHECK OF P. O. AND BILLS

• PRE CHECK OF ALL P.O.s gt RS. 40,000 IS
  COMPULSORY
• COMPARISION WITH ORIGINAL OFFERS AND TC MINUTES
• CHECK BILLS WITH REF. TO P.O. AND ALL THE SPECIAL
  CONDITIONS MENTIONED THEREIN

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PURCHASES (IMPORTED)

• BILL OF LADING IS A DOCUMENT GIVING TITLE OF
  GOODS SIGNED BY A SHIPPING COMPANY OR THEIR
  AGENTS CONTAINING DECLARATION REG. RECEIPT OF
  GOODS ( CARGO) CONDITIONS ON WHICH TRANSPORTATION
  IS MADE AND DELIVERY OF GOODS AT PRESCRIBED PORT

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LETTER OF CREDIT

• L.C. IS A BANK INSTRUMENT AUTHORISING THE
  (ISSUING ) BANK ON BEHALF OF THE
  PURCHASER(APPLICANT) TO PAY A CERTAIN SUM TO
  SPECIFIED SELLER (BENEFICIARY) PROVIDED THE
  SELLER SUBMITS THE DOCUMENTS AS PRESCRIBED IN THE
  LETTER OF CREDIT.

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TYPES OF L. C.

• REVOCABLE VS. IRREVOCABLE LC
• CONFIRMED LC
• TRANSFERRABLE LC
• REVOLVING LC

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STORES SUSPENSE HEADS

• PURCHASES INDEGENOUS P 7110
• PURCHASES IMPORTED P 7120
• PURCHASES DGSD P 7130
• SALES REALISATION P 7140
• STORES P 7160
• STOCK ADJUSTMENT P 7180
• MISC. ADV. (CAP) P 7310

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STORES (P-7160)DR. WITH COST OF STORES

• BY CR. TO
• PURCHASE CAP. 7110 OR 7130 FOR IMPORTED, AND
  INDIGENOUS ITEMS
• WMS 7210 FOR W/S MANUFACTURED ITEMS
• REV./ WORKS FOR STORES RETURNED TO DEPOTS
• DTR (7170)
• MAC CAP.7130 (FABRICATED MATERIALS),
• ETC.

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P 7160 is Credited by cost of stores issued by
Dr. to

• Sales (cap.7140) in case of sale
• WMS (7210) in case of issue to w/shop
• Rev./ Wks allocation for issue to rev./wks
• DTR in case of depot transfer
• MAC(7310) for issue for fabrication
• NOTEBalance in Cap. 7160 indicates value of
  stores held in stock.

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SINT (DTR)

• OPERATED TO WATCH RECEIPT ACCOUNTAL OF STORES
  TRANSFERRED FROM ONE DEPOT TO ANOTHER.
• STORES ISSUED DURING A MONTH BUT NOT RECEIVED IN
  THE SAME MONTH BY THE RECEIVING DEPOT ARE
  NOTED DOWN IN THE REGISTER OF SINT(DTR)

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PURCHASE SUSPENSE

• OPERATED TO WATCH PAYMENTS TO FIRMS FROM WHOM
  MATERIAL HAS BEEN RECEIVED AND TAKEN INTO STOCK
  BEFORE PAYMENTS ARE MADE.
• CREDIT BALANCE IF PAYMENT IS MADE AFTER MATERIAL
  IS RECEIVED
• DEBIT BALANCE IF PAYMENT IS MADE BEFORE MATERIAL
  IS RECEIVED.

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SINT (PURCHASE)

• CREDITS TO PURCHASE A/C ARE POSTED FROM RECEIPT
  ORDER (RO).
• POSTING OF SUCH RO s WILL BE DONE IN PRICE
  LEDGERS ONLY WHEN THE MATERIAL IS RECD. AND
  ACCEPTED IN ITS NUMERICAL LEDGER. IN SUCH CASES
  ACCOUNTAL IS DELAYED BEYOND THE MONTH IN WHICH
  THE RO IS ISSUED. ALL SUCH ITEMS ARE POSTED IN
  SINT (PURCHASE).

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STOCK ADJ. A/C

• PT. I
• DIFFERNCE IN STOCK- DIFFERENCE BETWEEN GROUND
  BAL. BOOK BAL.

• PT. II
• DUE TO REVISION OF RATES ON ACCOUNT OF
  DEPRECIATION

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STOCK ADJ. A/C (CONTD...)

• PT. III
• ALL DIFFERNCES BETWEEN BOOK VALUE AND VALUE
  REALISED IN AUCTION SALES, LOSSES ON A/C OF
  LEAKAGE, THEFT, OBSOLOSCENCE, ETC.

• REVIEW OF STOCK ADJ. A/C
• TWICE A YEAR ON 31.3 AND 30.09

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W/SHOP MANUFACTURING SUSPENSE (WMS)

• THOUGH IT RECORDS LABOUR COST, MATERIAL COST, AND
  OTHER MISC. CHARGES INCURRED ON THE WORKS
  UNDERTAKEN IN RAILWAY WORKSHOPS, STORES FORMS A
  MAJOR PORTION OF THIS. THUS IT IS AN IMPORTANT
  ITEM FROM THE POINT OF VIEW OF STORES BUDGET.

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OUTPUTS FROM EDP CENTRE

• LIST OF STOCK MASTER
• LIST OF VOUCHERS WHERE BOOK AVERAGE RATE (BAR)
  CHANGES BY gt 10
• DEBIT CREDIT SUMMARY- STORES MONTHLY SUMMARY
• DIVISION WISE ISSUES TO REVENUE DEMANDS
• TRANSACTION REGISTER
• CONTROL CLASS LEDGER

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WHY DO WE NEED B.A.R.?

• THOUGH THERE ARE VARIOUS METHODS FOR PRICING
  ISSUES SUCH AS LIFO, FIFO,ETC. THE BOOK AVERAGE
  OFFERS A SIMPLE AND SCIENTIFIC METHOD FOR
  ALLOCATING VALUE TO ISSUES FROM STOCK.

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Book Average Rate (BAR) AN ILLUSTRATION
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RETURN STORES

• STOCK ITEMS
• IF ITEM IS NOT OVERSTOCK CREDIT IS GIVEN AT BAR
• FOR SECOND HAND MATERIAL AT 1/2 THE VALUE

• FOR ALL NON STOCK ITEMS AT APP. SCRAP RATE

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DISPOSAL OF SCRAP

• RECEIPT OF SCRAP
• PROXY AUCTION
• FORMATION OF LOTS
• LOT REGISTER
• VALUATION OF SCRAPNON FERROUS SCRAP R.P. IS
  VETTED BY HQ A/Cs
• SALE THROUGH AUCTION, TENDER, TENDER CUM AUCTION,
  DIRECT SALES
• STAFF SALE

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CONTD

• EARNEST MONEY VALUE UPTO RS. 2000
• _at_ 25 OF VALUE FOR RS. 2000- 10,000
• _at_10 OF VALUE FOR RS. gt RS. 10,000
• TIME PERIOD FOR PAYMENT
• FOR lt RS. 1 LAC 10 DAYS
• FOR gt RS. 1 LAC 20 DAYS
• FOR gt RS. 2 LACS INSTALMENTS CAN BE GRANTED BY
  C O S

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DIRECT SALE

• FREIGHT _at_5
• INCIDENTAL CHARGES _at_ 2
• DEPARTMENTAL CHARGES _at_ 12.5 OVER AND ABOVE.

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INVENTORY CONTROL

• OBJECTIVES
• AVOID BLOCKING OF CAPITAL
• MINIMISE CARRYING COST
• MINIMISE HANDLING COST
• MINIMISE OBSOLESCENCE

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TECHNIQUES OF I. C.

• A B C ANALYSIS
• AA CATEGORY- ANNUAL ISSUES gt RS. 5 LACS
• A CATEGORY - ANNUAL USAGE BET. RS. 50,000 RS.
  5 LACSNOTgt 3 MONTHS REQ.
• B1 CATEGORY - BET. RS. 25,000 TO 50,000NOT gt 6
  MONTHS REQ.

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CONTD...

• B2 CATEGORY ANNUAL USAGE BET. RS. 10,000 BUT lt
  RS. 25,000 NOT MORE THAN 6 MONTHS REQ.
• C CATEGORY - USAGE lt RS. 10,000 P.A.NOT gt 12
  MONTHS REQ.

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V.E.D. ANALYSIS

• VITAL ITEMS ARE THOSE WITHOUT WHICH EQUIPMENT
  WILL NOT FUNCTION
• ESSENTIAL ITEMS ARE THOSE WITHOUT WHICH
  EEFFICIENCY WILL BE AFFECTED ADVERSLY
• DESIRABLE ITEMS ARE THOSE WITHOUT WHICH EQUIPMENT
  WILL STILL WORK.

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STOCK VERIFICATION

• There is a separate cadre of the Stock verifiers
  (SV s) and Inspectors of Stores Accounts (ISA s).
  They carry out verification of stock in depots,
  and with the plant holders in the field /
  workshops.
• The differences detected between the book
  balances and the ground balance is reported
  through stock sheets.

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Stock verification (contd.)

• Disposal of stock sheets
• The stock sheets are discussed by the controlling
  officer with the accounts officer and
  explanations are offered. If these are
  acceptable, the stock sheets are closed without
  further action.
• If not then action under DAR is recommended
  against the defaulting staff.

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LAST BUT NOT THE LEAST, .

• THANK YOU FOR PATIENT LISTENING
• VINAYAK RAO