If you want that report contact on this number 0333-6519686

INTERNSHIP REPORT ON
FAUJI FERTILIZER COMPANY LIMITED
RAWALPINDI





BY

Your Name
ROLL #

Submitted in Partial fulfillment of the requirements
For the degree of Master of Commerce

AT

NATIONAL UNIVERSITY OF MODERN LANGUAGES
ISLAMABAD,PAKISTAN
August 2014



NATIONAL UNIVERSITY OF MODERNLANGUAGES
Faculty of Management Science


It is certify that the report has been carefully read and recommended to the faculty of
Management Science for acceptance Internship Report at FFBL Rawalpindi by
Your name, Roll no Session Sep 2014 to June 2014 in partial fulfillment of the
requirement for the degree of Master in commerce of National University of Modern
Languages Islamabad.



Date: ________________
Supervisor: ___________________________
Observer: _____________________________
Head of Department: ____________________
i





PREFACE
This report presents the vital role that Finance Department is playing
in the Fauji Fertilizer Bin Qasim Limited. It shows the basic operations
of finance department required to run the company and manage its
funds.
The report is primarily addressed to the NUML Faisalabad (Campus)
and Finance Manager of FFBL, head office. I am required to submit a
report on the various things I learned and experienced during my
internship spanning 6 weeks (June 30
th
August 15
th
, 2014) at FFBL.
Grateful acknowledgment is here made to those who helped me gather
data for this report. This work would not have reached its present form
without their invaluable help.
The aim to write this report is to share meaningful material and
concepts about the field of accounting, finance and its application in
industry.








ii



ACKNOWLEDGEMENT

To Him belongs the dimension of the Heavens and the earth, it is He
who gives Life and death and He has power over all things. (Al-
Quran)
I am very thankful to Allah Almighty for the successful completion of my internship
in the FFBL which is one of the largest and growing fertilizer complex in Pakistan.
Being an internee at FFBL Rawalpindi it was a very excellent and knowledgeable
experience. In the first phase of my practical career in a Fertilizer industry I was a
little bit worried about how I shall carry on all the tasks assigned at the workplace, but
Mr. Asif (Manager, Talent) and Madam Tahira provided me excellent guidance at
that level and make me able to learn the things so easily.

I am also thankful to my Mother, Teachers and all employees of FFBL who
remained supportive and cooperative during the work. They also helped me from the
formative stages to the completion of this internship report.

I am also thankful to Mr. Shakeel, Mr. Kashif, Sir Jawad and my honorable and
affectionate Supervisor (Mr. Attiq) who made me able to perform this task, and
boost my morale at every time when I have disappointed and lost my hope. I am very
thankful from the core of heart. I like to place on record my appreciation for all the
Faculty members of Management Sciences, National University of Modern
Languages Faisalabad.

Last but not the least I want to pay special thanks to my university group
fellows love, kindness and unstoppable support. May Allah bless them all and
succeed them in every field of life.

iii


EXECTIVE SUMMARY

Fauji Fertilizer Bin Qasim Limited Plant site is a modern Granular Urea and DI-
Ammonium Phosphate (DAP) fertilizers manufacturing complex, built at a cost of
US$ 468 Million and located in the Eastern Zone of Bin Qasim, Karachi, with Head
Office at Harley Street, Rawalpindi.
By the grace of Allah, I was given an excellent opportunity from my department to
do my internship with this organization. The reason why I choose this industry is
because FAUJI GROUP is the biggest well known group of Pakistan. There are
many departments in FFBL, as my field relates to finance department in which I have
learnt about Local payments, Treasury & Foreign payments, Payroll and Taxation,
Financial Reporting and Budgeting and Planning which are very useful and helpful in
my future practical and professional life. Each unit of Finance department has a
number of important functions based on the need and work segregation. I required to
submit each units report to the department to be approved by the Section manager of
the concerned unit.
Admin division deals with different administrative and HR (HCM) supportive
functions they make salaries, grant employee loans, medical facilities and recruitment
related functions. The foreign payment section deals all the import and export cases in
the business area with the help of the commercial banks and the Supply chain
Department.
All the workings of units of Finance Division are discussed in detail after learning
from all the staff members of the units. It was a great experience to do work here
because there is a lot of information about the workings of Fertilizer Industry.

At the end of report some recommendations are also given based on my observation
and study of system of FFBL Rawalpindi such as, Company should have separate
organized marketing department.Resident facility should be provided to employees as
well as internees.


iv









DEDICATION

I would like to consecrate all of my efforts, words and sentences to Haji Sb whose
prayers, well-wishing and affectionate behaviour makes me able to do that. I am also
very grateful to my Amaa Jan and my Teachers for being so supportive of me
throughout the entire degree.


v

TABLE OF CONTENTS
Chapter Page
PREFACE.... i
ACKNOWLEDGEMENT... ii
EXECUTIVE SUMMERY . iii
DEDICATION.... iv

CHAPTER NO.1 INTRODUCTION ............................................................................. 1
1.1 FFBL HISTORY ............................................................................................................ 2
1.2 FFBL HISTORY ............................................................................................................ 3
1.2.1 PERFORMANCE&PRODUCTION ..................................................................... 3
1.3 PAKISTAN MAROC PHOSPHORE S.A, (PMP) MOROCCO ................................... 5
1.4 INVESTMENT IN FAUJI CEMENT COMPANY LIMITED (FCCL) EXPANSION
PROJECT ................................................................................................................................... 6
1.5 GRANULAR UREA (SONA UREA) ........................................................................... 8
1.6 VISION & MISSION STATEMENT ............................................................................ 8
1.7 STRATEGIC GOALS ................................................................................................... 9
1.8 CORE VALUES ............................................................................................................ 9
1.9 CODE OF CONDUCT ................................................................................................ 10
1.9.1 CORPORATE IMAGE ........................................................................................ 10
1.9.2 Health and Safety ................................................................................................. 10
1.9.3 Confidentiality ..................................................................................................... 10
1.9.4 Stakeholders ......................................................................................................... 10
1.9.5 Respect for People & Team Work ....................................................................... 10
1.9.6 Integrity and Honesty ........................................................................................... 10
1.9.7 Dedication to Quality ........................................................................................... 10
1.9.8 Legal Compliance ................................................................................................ 10
1.9.9 Unauthorized Use of Corporate Assets ................................................................ 10
1.9.10 1.9.10 Conflict of Interest .................................................................................... 11
1.9.11 1.9.11 Corporate Records..................................................................................... 11
1.10 COMPANY INFORMATION ..................................................................................... 11
1.10.1 BOARD OF DIRECTORS .................................................................................. 11

CHAPTER NO.2 INTRODUCTION TO DEPARTMENTS ..................................... 15
2.1 HUMAN CAPITAL MANAGEMENT DEPARTMENT: .......................................... 16
vi

2.1.1 INTRODUCTION ............................................................................................... 16
2.1.2 RECRUITMENT POLICY .................................................................................. 16
2.1.3 INDUCTION & GROOMING ............................................................................ 16
2.1.4 FACILITIES & BENEFITS................................................................................. 16
2.2 FINANCE DEPARTMENT ........................................................................................ 16
2.3 INTERNAL AUDIT DEPARTMENT ........................................................................ 17
2.4 TECHNOLOGY DEPARTMENT .............................................................................. 17
2.5 BUSINESS EXCELLENCE DEPARTMENT ............................................................ 17
2.6 ADMINISTRATION DEPARTMENT ....................................................................... 18

CHAPTER NO. 3 MY INTERNSHIP PROGRAM.................................................... 19
3.1 INTERNSHIP SCHEDULE ........................................................................................ 20
3.2 PURPOSE .................................................................................................................... 20
3.3 IN FFBL NUMBER OF DIVISION AND DEPARTMENTS ARE WORKING: ...... 20
3.4 FINANCE DIVISION AT A GLANCE ...................................................................... 21
3.5 HIERARCHY OF FINANCE DIVISION IN FFBL HEAD OFFICE ......................... 22

Chapter No 4 LOCAL PAYMENT SECTION .......................................................... 23
4.1 INTRODUCTION ....................................................................................................... 24
4.2 PURPOSE: ................................................................................................................... 24
4.3 ACTIVITIES OF LOCAL PAYMENT SECTION ..................................................... 24
4.4 DETAILS ABOUT TAX RATES ............................................................................... 25
4.5 ACCOUNTS PAYABLE WORKFLOW .................................................................... 25
4.6 DOCUMENTS AND TERMINOLOGIES USED IN LOCAL PAYMENT SECTION
26
4.6.1 PURCHASE REQUISITION .............................................................................. 26
4.6.2 PURCHASE ORDER .......................................................................................... 26
4.6.3 AT PLANT SITE ................................................................................................. 26
4.6.4 AT HEAD OFFICE ............................................................................................. 27
4.6.5 PAYMENT PROCESS IN LOCAL PAYMENT SECTION .............................. 27
4.6.6 PROCEDURE FOR PAYMENTS....................................................................... 28
4.6.6.1 For Goods: ....................................................................................................... 28
4.6.6.2 For Services: .................................................................................................... 28
4.6.6.3 Payments related to Local Payment Section .................................................... 28
4.6.6.4 Direct Invoices ................................................................................................. 28
vii

4.6.6.5 Purchase Order related Payments .................................................................... 29
4.6.6.6 Completed, Under Inspection/Rejected ........................................................... 29
4.6.6.7 Withholding Tax .............................................................................................. 29
4.6.7 GENERAL FORMAT OF DOCUMENTS ......................................................... 30
4.6.8 LOCAL PURCHASE ORDER ............................................................................ 31

CHAPTER NO 5 PAYROLL & TAXATION ............................................................. 32
5.1 PURPOSE .................................................................................................................... 33
5.2 ACTIVITIES OF PAYROLL AND TAXATION SECTION ..................................... 33
5.3 EMPLOYEE CATEGORIES AT FFBL ...................................................................... 34
5.3.1 MANAGEMENT: ................................................................................................ 34
5.3.2 NON-MANAGEMENT: ...................................................................................... 34
5.4 PAYROLL INCLUDES: ............................................................................................. 34
5.4.1 RETIREMENT: ................................................................................................... 34
5.4.2 RESIGNATION: .................................................................................................. 34
5.4.3 TERMINATION: ................................................................................................. 35
5.5 EMPLOYEES LOAN ................................................................................................. 35
5.6 HOUSE RENT ADVANCE ........................................................................................ 35
5.7 INTEREST FREE LOAN ............................................................................................ 35
5.8 CAR LOAN ................................................................................................................. 35
5.9 LEAVE ENCASHMENT ............................................................................................ 36
5.10 NON CASH BENEFITS .............................................................................................. 36
5.11 FINAL SETTLEMENT ACCOUNT ........................................................................... 37
5.12 TAXATION ................................................................................................................. 37
5.12.1 According to Income Tax Ordinance 2001 .......................................................... 37
5.12.2 Advance Tax/ Tax Deducted at Source ................................................................ 38
5.12.3 Income Tax Returns ............................................................................................. 38
5.12.4 Withholding Tax .................................................................................................. 38
5.12.5 Tax payments ....................................................................................................... 38
5.12.6 SALE TAX .......................................................................................................... 38
5.12.6.1 According to Sale Tax Act 1990 .................................................................. 38
5.12.7 PROCEDURE OF SALE TAX ............................................................................ 39
5.12.8 Two Conditions Exist .......................................................................................... 39
5.12.9 EMPLOYEE TAX ............................................................................................... 39
5.12.10 CUSTOM DUTY ............................................................................................. 39
viii

5.12.11 ................................................................................................................................. 40
5.12.12 CAPITAL GAIN TAX..................................................................................... 40

CHAPTER NO.6 TREASURY ..................................................................................... 41
6.1 INTRODUCTION ....................................................................................................... 42
6.2 PURPOSE .................................................................................................................... 42
6.3 ACTIVITIES................................................................................................................ 42
6.4 MAIN FUNCTIONS ................................................................................................... 43
6.4.1 FINANCING ........................................................................................................ 43
6.4.1.1 Short Term Loan: ............................................................................................. 43
6.4.1.2 Long Term Loan: ............................................................................................. 43
6.5 INVESTMENTS .......................................................................................................... 44
6.5.1 BANK DEPOSIT ................................................................................................. 44
6.5.2 PROFIT AND LOSS ACCOUNT / P/L ACCOUNT .......................................... 44
6.5.3 TERM DEPOSIT RECEIPT / TDR ..................................................................... 44
6.5.4 MUTUAL FUND ................................................................................................. 44
6.5.4.1 OPEN-END FUNDS ....................................................................................... 45
6.5.4.2 CLOSED-END FUNDS .................................................................................. 45
6.6 Main Activities of Treasury Section ............................................................................ 45
6.6.1 FUNDS TRANSFER ........................................................................................... 45
6.6.2 FUNDS STATUS MONITORING ...................................................................... 45
6.6.3 BANK RECONCILIATION................................................................................ 46

CHAPTER NO.7 EMPLOYEE FUND ........................................................................ 47
7.1 INTRODUCTION ....................................................................................................... 48
7.2 PURPOSE .................................................................................................................... 48
7.3 MAIN POINTS OF EMPLOYEE FUND .................................................................... 48
7.4 EMPLOYEES RETIREMENT BENEFITS ............................................................... 49
7.4.1 PROVIDENT FUND ........................................................................................... 49
7.4.1.1 SUPPOSE ........................................................................................................ 49
7.4.1.2 PURPOSE ........................................................................................................ 49
7.4.1.3 INTEREST BASE PF ...................................................................................... 50
7.4.1.4 NON INTEREST BASE PF ............................................................................ 50
7.4.2 GRATUITY FUND ............................................................................................. 50
7.4.2.1 PURPOSE ........................................................................................................ 50
ix

7.4.2.2 Final Settlement ............................................................................................... 50
7.5 BOARD OF TRUSTEES ............................................................................................. 50
7.6 SECP MISSION........................................................................................................... 51
7.6.1 Investment Guidelines of SECP are illustrated through diagram below: ............. 51
7.7 PROVIDENT LOAN ................................................................................................... 52
7.8 FINAL SETTLEMENT ............................................................................................... 52
7.9 Board of Trusty ............................................................................................................ 53

CHAPTER NO.8 FOREIGN PAYMENTS ................................................................. 54
8.1 INTRODUCTION ....................................................................................................... 55
8.2 PURPOSE .................................................................................................................... 55
8.3 TRADE TERMS/ INCOTERMS ................................................................................. 56
8.3.1 USE OF TRADE TERMS: .................................................................................. 56
8.4 INCOTERMS can be divided into four Groups: E, F, C & D .................................. 57
8.4.1 Further INCOTERMS CAN BE CLASSIFIED ACCORDING TO THE MODE
OF TRANSPORTATION AS FOLLOWING ..................................................................... 58
8.4.1.1 CFR :( COST & FREIGHT) ............................................................................ 58
8.4.1.2 CPT: (CARRIAGE PAID TO) ........................................................................ 59
8.4.1.3 FOB: (FREE ON BOARD).............................................................................. 59
8.5 PAYMENT TERMS USED IN INTERNATIONAL TRADE .................................... 60
8.5.1 FOREIGN TELEGRAPHIC TRANSFERS:- ...................................................... 62
8.5.2 LETTER OF CREDIT:- ....................................................................................... 62
8.5.3 CASH AGAINST DOCUMENTS:- .................................................................... 63

CHAPTER NO.9 FINANCIAL REPORTING SECTION ........................................ 65
9.1 INTRODUCTION ....................................................................................................... 66
9.2 MAIN RESPONSIBILITIES OF FR SECTION ......................................................... 66
9.3 PREPARATION OF FINANCIAL STATEMENTS .................................................. 66
9.3.1 Steps to prepare financial Statements .................................................................. 66
9.3.2 Chart of Accounts ................................................................................................ 66
9.4 PUBLICATION OF FINANCIAL STATEMENTS ................................................... 67
9.5 FINANCIAL STATEMENTS & ITEMS .................................................................... 67
9.6 AUDIT OF FINANCIAL STATEMENT .................................................................... 70
9.7 SALES:- ....................................................................................................................... 70

x

CHAPTER NO. 10 PLANNING & BUDGETING SECTION .............................. 71
10.1 INTRODUCTION ....................................................................................................... 72
10.2 PURPOSE: ................................................................................................................... 72
10.3 ACTIVITIES: .............................................................................................................. 72
10.4 BUDGET ..................................................................................................................... 72
10.4.1 TYPES OF BUDGET .......................................................................................... 72
10.4.2 OPERATIONAL BUDGET ................................................................................ 73
10.4.3 CAPITAL BUDGET ........................................................................................... 73
10.5 BUDGET MONITORING ........................................................................................... 73
10.6 PROJECT PLAN ......................................................................................................... 73
10.7 FINANCIAL ANALYSIS ........................................................................................... 74
10.8 NEW PROJECTS ........................................................................................................ 74
10.8.1 STEPS OF ANALYSIS ....................................................................................... 74
10.8.1.1 Collect the Inputs ......................................................................................... 74
10.8.1.2 Prepare Financial Statements ....................................................................... 75
10.8.1.3 Application of Capital Budgeting Techniques ............................................. 75
10.8.2 CRITERIA OF SELECTION .............................................................................. 75
10.8.3 SENSITIVITY ANALYSIS ................................................................................ 75
10.9 EXISTING PROJECTS ............................................................................................... 76
10.9.1 RELEVANT COSTING APPROACH ................................................................ 76
10.10 MANAGEMENT REPORTING ............................................................................. 76
10.11 QUANTITATIVE ANALYSIS ............................................................................... 76
10.12 VARIANCE ANALYSIS ........................................................................................ 77
10.13 REASONING OF VARIANCES............................................................................. 77
10.14 INDUSTRIAL COMPARISON ANALYSIS .......................................................... 77
10.15 ACTUALIZATION ................................................................................................. 77
10.16 COST AUDIT .......................................................................................................... 78

CHAPTER NO. 11 SWOT ANALYSIS ................................................................... 79
11.1 INTRODUCTION SWOT ANALYSIS ...................................................................... 80
11.1.1 Strengths .............................................................................................................. 80
11.1.2 Weaknesses .......................................................................................................... 80
11.1.3 Opportunities ........................................................................................................ 80
11.1.4 Threats.................................................................................................................. 80
11.2 Internal and External Factors ....................................................................................... 80
xi

11.2.1 Internal Factors .................................................................................................... 80
11.2.2 External Factors ................................................................................................... 80
11.3 FFBL SWOT Analysis ................................................................................................. 81
11.3.1 Strengths .............................................................................................................. 81
11.3.2 Weaknesses .......................................................................................................... 81
11.3.3 Opportunities ........................................................................................................ 81
11.3.4 Threats.................................................................................................................. 81

CHAPTER NO.12 Recommendations & Conclusion ............................................. 82
12.1 Recommendations ........................................................................................................ 83
12.2 Conclusion ................................................................................................................... 84

Reference


1











1 CHAPTER NO.1
INTRODUCTION




2

1.1 FFBL HISTORY

1993 Incorporation of the Company
1996 Listed with Karachi, Lahore and Islamabad Stock Exchanges
2000 Commencement of commercial production
2003 Successful commissioning of Desulphurization Project
Agreement with Office Cherifien des Phosphates (OCP), Morocco for supply of raw
material (P2O5)
2005 Joint venture with Office Cherifien des Phosphates (OCP), Morocco to
incorporate Pakistan Maroc Phosphore S.A (PMP) costing 2,030 million Moroccan
Dirhams with equity participation of 25%
2006 Achieved ISO Certification in QMS (9001:2000), EMS (14001:2004) and
OHSAS (18001:1999)
2007 Successful completion of Ammonia BMR resulting in increased production of
Ammonia by 23% from 1,270 MT to 1,570 MT and Urea by 15% from 1,670 MT to
1,920 MT per day
2008 DAP Revamp is resulting in increased production by 51% from 1,472 MT to
2,232 MT per day
Start of PMPs commercial production and shipment to FFBL in April 2008 and May
2008 respectively
Investment in Fuji Cement Company Limited
2010 Investment in Wind Power Projects
Successful implementation of SAP- ERP system, evolving excellence through
technological integration
2011 Rewarding year for FFBL, exhibiting the highest standards of performance,
surpassing all previous records PMP achieved a landmark by producing 382 thousand
tonnes of P2O5, surpassing the nameplate capacity of 375 thousand tonnes in any year
2013 Incorporation of Fauji Meat Limited and Fauji Foods Limited
Investment in Askari Bank Limited
Highest ever DAP production of 744,436 MT



3

1.2 FFBL HISTORY

Fauji Fertilizer Bin Qasim Limited Plantsite is a modern Granular Urea and DI-
Ammonium Phosphate (DAP) fertilizers manufacturing complex, built at a cost of
US$ 468 Million and located in the Eastern Zone of Bin Qasim, Karachi, with Head
Office at Harley Street, Rawalpindi.
Initially named as FFC-Jordan Fertilizer Company (FJFC) w.e.f 17th Nov 1993, with
FFC (30%), FF (10%) and JPMC (10%) as main sponsors. The company was
formally listed with stock exchanges in May 1996 and commercial production
commenced w.e.f Jan 2000. However, it continued to run in crises due to technical,
financial and managerial reasons till 2001. DAP Plant brought into suspension in
2001 due to accumulated loss of Rs. 6.5 Billion. It resumed production in Sep 2003,
after a lapse of 2 years.
Renamed as Fauji Fertilizer Bin Qasim Ltd. (FFBL) in 2003, as such Jordan
Phosphate Mines Co. (JPMC) had sold its entire equity in the company. Accordingly
Phosphoric acid supply agreement with Jordan was terminated. The company turned
out to be profitable after 3 years, i.e., by 2004 and declared 'maiden dividend' in 2004.
Profitability has constantly been on the rise since then and 2007 has been the most
profitable year of the company. One of the milestones in the success of FFBL is its
accreditation of ISO certification, which was achieved in Mar 2006 for both the Head
Office and Plantsite.
FFBL also have membership of industry association and trade bodies;
Rawalpindi Chamber of Commerce
International Fertilizer Association

1.2.1 PERFORMANCE&PRODUCTION
The FFBL fertilizer complex is a state of the art manufacturing facility with an
advanced Distributed Control System for safe and efficient operation. The phosphoric
acid being raw material for DAP plant is imported from Morocco and initially stored
in tanks at Port Qasim. Design capacity viz-a-viz actual production of Plants is as
under:


4


Manufacturing Plants Production (Metric Ton /
Day)

Original Actual (Approx)
Urea Granular 1670 1920
DAP 1350
2230 (After
Revamp)
Ammonia 1270
1570 (After
Revamp)
Our Distinction
FFBL is the only fertilizer complex in Pakistan produces DAP fertilizer and Granular
Urea thus making a significant contribution towards agricultural growth of the country
by meeting 45% of the demand of DAP and 13% of Urea in domestic market.
















5

1.3 PAKISTAN MAROC PHOSPHORE S.A, (PMP) MOROCCO
Phosphoric Acid, being the main raw material for DAP production is being imported
from Morocco. To ensure the continuous supply of this strategic raw material to run
our DAP plant in Karachi, Office Cherifien des Phosphates (OCP), Morocco, the
biggest industrial group of the Kingdom of Morocco and the Fauji Group (Fuji
Foundation, FFC and FFBL) entered into a joint venture for its uninterrupted supply.
The company, named as Pakistan Maroc Phosphore S.A (PMP) costing 2030 million
Moroccan Dirhams (US$ 250 million) was formed in Morocco. The project has
successfully been completed in record time and within the budget. Commercial
production and shipment to FFBL started in April 2008 and May 2008 respectively.
The plant is designed to produce 375,000 MT per year of Phos acid, thus meeting the
total requirement of DAP plant of FFBL. Surplus acid shall be sold in the
international market.
6

The Project is one of its kind with strategic significance of involving two of the
largest business groups of two brotherly Muslim nations i.e, Fauji Group of Pakistan
and OCP Group of Morocco. Its formal inauguration was performed by His Majesty
the King of Morocco in October 2008. Dignitaries from Pakistan also attended the
ceremony.
Significant benefits associated with this project are:
Production of 375,000 metric tons of phosphoric acid per annum will not only ensure
un-interrupted supply of raw material, catering the entire post-BMR demand of the
DAP requirement of FFBL, but would also be a source of profit in the form of selling
out the surplus production. This, in turn, will enhance FFBL earnings in the form of
dividends.
This is the first ever foreign investment by the Fauji Group. Apart from its imminent
contribution towards economic growth of Pakistan, it has added to the prestige of the
Country. May also prove a gateway for others to invest in the international market
Long-term raw material supply guaranteed in an extremely turbulent international
market.

1.4 INVESTMENT IN FAUJI CEMENT COMPANY LIMITED
(FCCL) EXPANSION PROJECT

The cement industry has witnessed exceptional growth in local consumption as well
as in exports in the recent years, which has been a result of higher local construction
and shortages in the region. The cement industry is expected to maintain its growth
and in order to benefit from the increasing demand, expansion is becoming necessary
for all cement manufacturers.
Fauji Cement Company Limited (FCCL), an Associated Company of FFBL, is in the
process of expanding its existing operating capacity from 1.17 MTPA to 3.51 MTPA
(200% expansion). The Fauji Cement Brand carries a premium in the market and is
perceived as a better quality product. This is why FCCL has been operating at a
higher capacity than the industry over the last 5 years. FCCL operates one of the most
efficient and well-maintained cement plants in Pakistan, which consumes
approximately 50% less energy with quicker production turnaround time. Its multi-
fuel burning capability allows it to use either natural gas, coal or furnace oil for its
7

operations and further optimizing its fuel efficiency to improve operating margins.
FCCL's management is also composed of senior technical personnel with vast
experience of the local cement sector.
Diversification of business will help FFBL sustain profitability and add to
shareholders' value. Since FCCL is issuing fresh equity (at Rs 16 per share having a
face value of Rs 10 each) in order to finance its expansion project, FFBL has invested
an amount of Rs. 300 Million, thereby becoming a 2.7% ordinary shareholder (of
revised equity) in FCCL. The plant is scheduled to start its commercial production by
the end of first Quarter 2010,
IN SHAA ALLAH.

Associated Companies
Fauji Fertilizer Company Limited (www.ffc.com.pk)
Fauji Foundation (www.fauji.org.pk)
Pakistan Maroc Phosphore S.A
(Joint Venture between Fauji Group, Pakistan & OCP Group, Morocco)
Foundation Wind Energy I
Foundation Wind Energy II
Fauji Cement Company Limited (www.fccl.com.pk)
8

1.6 VISION & MISSION STATEMENT

VISION
To be a premier organization focused on quality and growth, leading to enhanced
stakeholders value
1.5 GRANULAR UREA (SONA UREA)


With its state of the art Fertilizer Plant, Fauji Fertilizer Bin Qasim Limited is the only
Granular Urea manufacturer in Pakistan.

Urea is a synthetic organic compound containing 46 % nitrogen in amide form
Available in the form of white solid pillars. Free flowing for easy application
Being hygroscopic, urea is packed in moisture proof high density polyethylene bags

Features and Benefits:

Our product, granular urea (Sona Urea) has the cutting edge over the conventional
Prilled urea with the following superior qualities:

Cheapest among all nitrogen fertilizers based on per unit cost of nutrient
Less acidifying than many other nitrogenous fertilizers hence most suited for high
pH soils
High concentration of nutrients makes packing, storage and transport cost cheaper
Larger granular size
Greater granules strength
Minimum fines, dust and powder
Minimum losses in the air
Least caking property
Easy to spread on the fields
No settling on crops/leaves

Application

Can be applied to soil. Also suitable in solution form as spray
The application is recommended in split doses for better use efficiency.


9

MISSION
Fauji Fertilizer Bin Qasim Limited is committed to remain amongst the best
companies by maintaining the spirit of excellence through sustained growth rate in all
activities, competitive price, quality fertilizer and providing safe and conducive
working environment for the employees

1.7 STRATEGIC GOALS

Boosts agricultural yield of the country
Lead fertilizer business
Be an environmentally friendly and socially responsible Company
Create new opportunities for business growth and diversification
Manufacture prime quality products
Maintain operational, technological and managerial excellence
Maximize productivity and expand sales
Eliminate duplication of resources to economize cost

1.8 CORE VALUES

Professional Integrity
Winning Work Environment
Accountable for Actions
Innovations and Creativity
Corporate Social Responsibility
Focus on Results






10

1.9 CODE OF CONDUCT

1.9.1 CORPORATE IMAGE

Companys reputation and identity are among the Companys most valuable assets.

1.9.2 Health and Safety
We are all responsible for maintaining a safe workplace by following health and
safety rules and practices.

1.9.3 Confidentiality
Every employee is obligated to protect the Companys confidential information,
which is proprietary to the Company.

1.9.4 Stakeholders
Stakeholders are valuable equal partners for us with whom a long-term, fair and
trustworthy relationship is built.

1.9.5 Respect for People & Team Work
We are dedicated through dignity and respect, owe nothing less to each other. We
know it well that none of us acting alone can achieve success.

1.9.6 Integrity and Honesty
By maintaining the highest level of corporate integrity through open, honest and fair
dealings, we earn trust for ourselves from everyone.

1.9.7 Dedication to Quality
Our quality policy is an integral part of our business philosophy and we are
committed to provide total customer satisfaction.

1.9.8 Legal Compliance
The Companys activities and operations are carried out in strict compliance with all
applicable laws and the highest ethical standards.

1.9.9 Unauthorized Use of Corporate Assets
Every employee is obligated to protect the assets of the Company.

11

1.9.10 1.9.10 Conflict of Interest
All employees must avoid any personal or business influences that affect their ability
to act in the best interests of the Company.

1.9.11 1.9.11 Corporate Records
Documents and records of the Company are part of the Companys assets and
employees are charged with maintaining their accuracy and safety.

1.10 COMPANY INFORMATION

1.10.1 BOARD OF DIRECTORS

Lt Gen Muhammad Mustafa Khan, HI (M), (Retired)
Chairman
Lt Gen Muhammad Zaki, HI, HI (M), (Retired)
(Resigned as CE & MD on 25th Feb 2014)
Lt Gen Muhammad Haroon Aslam, HI(M), SBt, (Retired)
Chief Executive & Managing Director
(Appointed CE & MD on 26th Feb 2014)
Lt Gen Naeem Khalid Lodhi, HI (M), (Retired)
Mr Qaiser Javed
Dr Nadeem Inayat
Maj Gen Ghulam Haider, HI (M), (Retired)
Brig Parvez Sarwar Khan, SI (M), (Retired)
Brig Dr Gulfam Alam, SI (M), (Retired)
Brig Muhammad Saeed Khan, (Retired)
Mr Naved A. Khan
Mr Nasier A. Sheikh
Dr Rashid Bajwa






12

Company Secretary
Brig Shaukat Yaqub Malik, SI (M), (Retired)

Chief Financial Officer
Syed Aamir Ahsan

Registered Office
73-Harley Street, Rawalpindi.
Tel: (051) 9272196-97
Fax: (051) 9272198-99
E-mail: secretary@ffbl.com
Web: http://www.ffbl.com

Plant site
Plot No. EZ/I/P-1 Eastern Zone,
Port Qasim, Karachi 75020.
Tel: (021) 34724500-29
Fax: (021) 34750704
Email: information@ffbl.com

Shares Registrar
M/s Corplink (Pvt) Limited
Wrings Arcade, 1-K,
Commercial,
Model Town, Lahore.
Tel: (042) 35839182
Fax: (042) 35869037

Auditors
KPMG Taseer Hadi & Co
6th Floor, State Life Building,
Jinnah Avenue, Islamabad.

13

Legal Advisors
Orr Dignam & Co Advocates,
3-A, Street 32, Sector F-8/1,
Islamabad.

Web Presence
www.ffbl.com

14

15








2 CHAPTER NO.2
INTRODUCTION TO DEPARTMENTS














16

2.1 HUMAN CAPITAL MANAGEMENT DEPARTMENT:

2.1.1 INTRODUCTION
Like any progressive, growing and dynamic organization, the Management of Fauji
Fertilizer Bin Qasim Ltd. accords due priority to the Human Resources realizing their
vital role in the overall performance.

2.1.2 RECRUITMENT POLICY
Our recruitment policy is based on sound planning and correct assessment. The
Human Capital Management Department is mindful of its demanding responsibilities
and is committed to hunt "Right People for Right Job" by adopting transparent,
creative, innovative and well thought out recruitment policy.

2.1.3 INDUCTION & GROOMING
FFBL recognizes that employees need to be equipped with knowledge and skills
necessary to meet the challenges of time. The Technical Training Center conducts and
organizes technical as well as management development trainings using in-house and
outside resources.

2.1.4 FACILITIES & BENEFITS
Employees are provided with all welfare oriented facilities. These include full medical
coverage, transport facility, accommodation at Plant Site or in nearby areas on a
subsidized basis, catering of all employees during office hours etc. These services are
provided to ensure that employees are committed fully to their jobs.

2.2 FINANCE DEPARTMENT

Finance is the department that deals with financial matters in every organization. It
can be told as the father of all the departments in every organization. In FFBL, the
finance department is related to the accounting and bookkeeping as the financial
matters of the organization are discussed in the head office of the FFBL at
Rawalpindi. Finance department in details is discussed in the 4th chapter.

17

2.3 INTERNAL AUDIT DEPARTMENT

In FFBL, internal audit department is an autonomous body, which does not come
under finance department, rather it directly reports to the Managing Director.
Execute a wide range of audits and reviews
Provide an independent, objective assurance and consulting services to
management, with the principal aims of evaluating and improving the
effectiveness of risk management, control and governance processes

2.4 TECHNOLOGY DEPARTMENT

In 2010, ERP & SAP systems were successfully implemented in FFBL, which was
an indispensable step to lead the company towards attainment of their goals in todays
cut-throat market environment. The technology department:
Installs, configures, and optimizes operating systems.
Develops, tests, documents, implements and enhances backup and recovery
procedures.
Designs, develops, tests, and documents programs and scripts that automate
routine tasks.
Develops, documents, implements and enhances applications change-management
procedures and activities.
Installs, tests, and documents security patches.

2.5 BUSINESS EXCELLENCE DEPARTMENT

FFBL has established an esteem department to reach its objectives towards
excellence. Business Excellence functions are to promote business excellence and
showcase role models to set standards.
The business Excellence department is currently, primarily engaged with Fuji Meat
and Fuji Dairy projects.


18

2.6 ADMINISTRATION DEPARTMENT

The administration staff is in charge of the following matters:
Provision of all office equipment to staff for use
Ensuring availability of lightning, water, telecommunication, computers, fax
etc.....
To provide fuel for all vehicles
Acquisition and management of assets
Recommending disposal of assets





19







3 CHAPTER NO. 3
MY INTERNSHIP PROGRAM








20

3.1 INTERNSHIP SCHEDULE

A Specific schedule was issued from the Finance Department to me regarding the
Internship which includes 4 to 5 days visit to the different sections step by step.

3.2 PURPOSE

The purpose behind this Rotation into different section is to seek learning,
understanding the operation, activities and data processing system at FFBL in respect
of Finance.

3.3 IN FFBL NUMBER OF DIVISION AND DEPARTMENTS
ARE WORKING:

Finance
Administration
Internal Audit (IA)
Business Excellence (BE)
Secretary office/MD Office
Information Technology (IT)
Supply Chain Management (SCM)
Human Capital Management (HCM)







21

3.4 FINANCE DIVISION AT A GLANCE




















Finance
Division

Financial
Reporting

Payroll
&
Taxation

Treasury
&
Foreign
Payment

Budgeting
&
Planning


Local
Payment

22

General
Manager
Finance
Senior Finance
Manager
Unit Manager
Planning &
Budgeting
Unit Manager
Treasury &
F.Payments
Finance
Manager
Unit Manager
Financial
Reporting
Unit Manager
Local Payments
Unit manager
Payroll &
Taxation
3.5 HIERARCHY OF FINANCE DIVISION IN FFBL HEAD
OFFICE
















23








4 Chapter No 4
LOCAL PAYMENT SECTION











24

4.1 INTRODUCTION

The first week of my Internship, I have visited the Local payment Section. The local
payment section is mainly responsible to make payments to different vendors,
suppliers and contract for all sorts of procurement of Goods and Services.

4.2 PURPOSE:

The local payment section made all the payment possible that relates inland/ in the
country transactions. This section made payment to vendor against the goods receipts
and acquiring/hiring services after deducting the Tax at specific Rate.

4.3 ACTIVITIES OF LOCAL PAYMENT SECTION

Following activities performed by the local payment section.
Documents receipts from plant site through mail as well as Hardcopy of the
documents.
Receive and verify invoices and requisitions for goods and services.
Data enters invoices for payment.
Process backup reports after data entry.
Check the status regarding the invoice.
Different signal shows and convey the different meaning.
If Green signal shows that mean the document ready for payment.
Head office puts/update the status of that invoice.
Maintain a list of accounts payable.
Cheques made by the head office on vendor name.
Maintain updated vendor files and file numbers.
Manage the weekly and daily cheque run.
Record all cheques.
Mostly issue cross cheques.
Withholding tax deducted from vendor.
Finally intimate to the bankers to transfer the money in favour of the vendor.
If case related to employees then transfer payment to the employees account.
25

Prepare manual cheques as and when required.

4.4 DETAILS ABOUT TAX RATES

For Goods For Services
Companies 4% 8%
AOP/Individual 4.5% 10%
This section also makes payments to FFBL employees specially reimbursements,
approved claims regarding TA/DA, Air tickets and Other Direct Expenses. All the
data processing system at FFBL is carried out through a software i.e. SAP. The lotus
mailing system also used for small amounts of transaction that take place shorter time
period.

4.5 ACCOUNTS PAYABLE WORKFLOW

In this section I have learned the importance of using the accounts payable process
instead of writing a check for business expenses.
Access the Vendor Center.
Create a purchase order to the vendor (optional).
Receive inventory (optional).
Enter bills against inventory.
Enter a bill to the vendor.
Pay the bill (Typically within the agreed-upon payment terms for that vendor; for
example, 30 days from the bill date).
Bill Payment Check (Pays the vendor bill and decreases accounts payable and
bank/cash account balances.)





26

Start



END


Bank Transfer the amount

4.6 DOCUMENTS AND TERMINOLOGIES USED IN LOCAL
PAYMENT SECTION

4.6.1 PURCHASE REQUISITION
Document generated by a user department or storeroom-personnel to notify the
purchasing department of items it needs to order, their quantity, and the timeframe.
Also called purchase request, requisition and P.R.
An official order from use by companies when purchasing a product or services
includes description and quantity and may include an authorized purchase.

4.6.2 PURCHASE ORDER
A buyer generated document that authorizes a purchase transaction. When accepted
by the seller, it becomes a contract between parties.
Purchase order consists of quantity, price, discount, date of performance and other
terms and conditions, and identifies a specific seller. Purchase order also called order
and P.O.

4.6.3 AT PLANT SITE
MIGO: When the particular consignment is accepted by FFBL Material Where
House, it is called Migo. This activity occurs at the plant site, or production place.
Parking: Complete the data entry into SAP by local payment staff and parking the
invoice to seniors at Section.
Purchase
Requisition
Purchase
Order
Material
Receipts

Liability of
Vendor
Book
Make a checque after
deduction of
Withholding Tax
27

Posting: Reviewed by the Supervisor and booking of liability against.
When material received at the warehouse / plant site, then Entry will be made in
SAP.
Stock
To (GRIR)
GRIR stands for Good Receipts and Invoice Receipts.

4.6.4 AT HEAD OFFICE
MIRO: stands for material invoice receipts, order When a payable is booked against
suppliers (vendors/contracts and employees). This activity occurs at head office.
When an invoice received at head office and verified goods received according to
terms and condition.
When invoice Receipts and enter into SAP at head office, then Entry will be passed
GRIR
To Vendor
4.6.5 PAYMENT PROCESS IN LOCAL PAYMENT SECTION
When invoice inter into SAP then the liability of the vendor stand and payment
process started. After entering the invoice with respect of vendor a cheque is made
with the/on the name of the vendor. Finally, deduct the withholding tax on chic and
intimate the banker to transfer the payment on behalf of FFBL.
Following Entry is made at that time
Vendor
To Bank
To Withholding Tax
Note:-
Sometime approved authority converted the cross cheque into open cheque by singed
the cheque.




28

4.6.6 PROCEDURE FOR PAYMENTS
4.6.6.1 For Goods:
If the material amount is an excess of Rs 10000 then the payments will be through
Purchase Order when the particular amount is less than Rs10000 then the Payment
will be through Payment Order/cash.
4.6.6.2 For Services:
If the amount of services is excess of Rs20000 then the payments will be through
Purchase Order otherwise through Payment Order.
4.6.6.3 Payments related to Local Payment Section
Payments of material related to plants.
Payments of Utility bills.
Payments to Travel agency.
Payments of Office rent.
Payments of Courier charges.
Reimbursement to employee
Payments of Medical bills
Consultancy Fee paid
4.6.6.4 Direct Invoices
Local payment section also receives verified bills of expenses from different
departments in the company or outside the company such as hotel bills, travel
agencies, medical store along with approved PO from authorized persons.
At FFBL the booking of payable and Disbursement of payments is carried out by a
separate person, e.g. booking of payable is the responsibility of D. Manger or Senior
Executive and the Disbursement of the Cheque is the Responsibility of Senior In-
charge.
Reimbursement to employees will be through check if the desired amount is access of
Rs10000 but if the amount is less than Rs10000 then payments will be through petty
cash. There will be no Tax deduction for reimbursement.
Direct Invoices such as utility bills, Stationary, Medicine, TCS charges and employee
reimbursement, etc. will be always paid through payment order. The finance personal
will enter and select each invoice to particular account, e.g. select the relevant vendor
and also select the G/L account and the document/invoice is then posted i.e. liability
booked.

29

4.6.6.5 Purchase Order related Payments
After receipt of Invoices from different vendors the Local payment section will ensure
the consignment with particular reference, e.g. DC No or Purchase Order etc.The
section may also review the invoice and compare it with own SAP data and see
whether the transactions are:
4.6.6.6 Completed, Under Inspection/Rejected
If the transaction indicates a green signal with reference of sign A, then the payment
will be made to that vendor, but if it indicates Red or yellow sign, then the section
management will just note the date and wait for the consignment to be complete.
Every working day the staff will see the particular transaction.
Once it's complete or accepted by the plant department, then again the screen line of
that transaction will show a green signal with significantly A after that the payment
process will be started to that Vendor through Bank Check etc.
If any transaction indicates a green sign with R it indicates that the Material
warehouse has rejected that particular consignment therefore the invoice will be
returned to vendor without any payments.
The payment section is also responsible to review the details such as start date and
delivery dates if there is any delayed then they will send a request for extension. Once
the extension is received, then the managements will attach the extension letter with
specified vendor invoice and process payments.
4.6.6.7 Withholding Tax
The government has given authority to payers (FFBL) to withhold or deduct the tax
from the payments on behalf of FBR and pay the tax to the Government later on.
Withholding tax rates increased for taxpayers other than companies on the sale of
Goods (4.5%), Rendering of Services (10%).
FFBL will deposit the tax to the Government Treasury within 7 days of the payments.



30

4.6.7 GENERAL FORMAT OF DOCUMENTS









31

4.6.8 LOCAL PURCHASE ORDER
Serial No
Vendor's Name & Address__________________________________
Delivery Date ________________________________________________
Terms of Payment ____________________________________________
Delivery Point ___________
PR REF: ____________________________ Order Date ____________
This document constitutes an agreement between the vendor and the buyer. See terms and
conditions of this purchase listed on the reverse side
Item No. Specification Unit Quantity Unit Price Total Value








Tax
Total Value
Amount in Words:
_________________________________________Currency___________________
Sign: _________________________ Date____________
Supplier Acceptance/Stamp Prepared by: ____Date_______
Approval A/C Code:
_____________________
Sign: ________________________ Date____________ Financial Review:
_________
Director/Head of Dept (Approval for Capital Items) .
32







5 CHAPTER NO 5
PAYROLL & TAXATION







33

5.1 PURPOSE

Payroll and Taxation section verify the payroll made by the Human Capital
Management (HCM) division. Then check deduction, tax on the employees income
at the prescribed rate and finally write to the bank to transfer of money from FFBL
A/C to the employees account.

5.2 ACTIVITIES OF PAYROLL AND TAXATION SECTION

The following activities are performed in Payroll and Taxation Section
Monthly update/upload GST file in FBR portal.
Update withholding Tax file of FBR portal.
Withholding Tax on Suppliers
Withholding Tax on Employees Salaries
Weekly deposit of payment of advance Tax.
Declaration of advance tax on sale of monthly basis.
Liaison with different departments regarding the gathering of information for
submission of the above mentioned file.
Answers the show cause notices received from FBR.
Filling of Annuals is withholding Tax statement.
Filling of Capital gains tax paid on fixed assets.
Calculation of the Depreciation and amortization of fixed assets.
Payroll receipts from H.R (HCM) and after comprehensive working intimate the
bank for transferring amount into respective accounts.
Final Settlement of Ex- employees accounts.
Payments of vehicle loan, House Rent Advance and interest free loan.
Payment of EOBI
Submission of Sales Tax Returns to FBR of:-
FFBL (Fauji Fertilizer Bin Qasim Limited.)
FML (Fauji Meat Limited.)
FFL (Fauji Foods Limited.)

34

5.3 EMPLOYEE CATEGORIES AT FFBL

5.3.1 MANAGEMENT:
Regular employees
Management Associate
Contract employees
5.3.2 NON-MANAGEMENT:
Regular Non-Management, Employee
Apprentice staff
Contract employees
Internees
Company's employee (at Plant site)

5.4 PAYROLL INCLUDES:

In FFBL payroll section includes the following payments that are made by the payroll
section.
Disbursement of monthly salary
Bonuses
Final settlement of account
Retirement
Resign or
Termination

5.4.1 RETIREMENT:
When job of an employee came to an end with respect of time period is called
retirement. In FFBL retirement age consider (60 years).

5.4.2 RESIGNATION:
When the employee left the job due to personal reasons, then it is called the
resignation.

35

5.4.3 TERMINATION:
When employer says to the employee that his services are no more required is called
Termination. The employer may give a notice or not.

5.5 EMPLOYEES LOAN

FFBL provides some of the following loans to their employees for their financial
assistance.
House Rent Advance
Interest Free Loan
Car Loan

5.6 HOUSE RENT ADVANCE

The House Rent Advance Allowance is provided by FFBL to their employees so that
they can meet their accommodation needs. The time limit to repay such amount is 1 a
year. This advance is given up to 1 year rent or equal to 6 basics of the employees.

5.7 INTEREST FREE LOAN

FFBL also provide interest free loans to their regular Staff employees. The time limit
to repay the amount is about 4 years. There is no interest charged on the loan. This
loan is usually granted to that employees who have completed two or more than two
years of services with the company.

5.8 CAR LOAN

This loan is provided by the FFBL to their regular employees. With the help of this
loan employee can purchase his personal car.



36

5.9 LEAVE ENCASHMENT

As per Services' rules every employee is entitled to certain no of leave per annum. If
an employee does not utilize all his leaves available to him per annum, such
unutilized leaves either get lapsed or get carried forward which can be enchased later.
Currently at FFBL the desired annual leave is varying from rank to rank. Such carry
forward leaves are liquidated in cash form on retirement, it is known as leave
encashment/salary.
The company also provides sick & causal leaves for their employees. These leaves are
fixed for every employee and cannot be Carry Forward to next year.

5.10 NON CASH BENEFITS

Employees are also issued/paid a furnishing allowance (home furnishing etc.) & a
perquisite allowance (Provide AC etc.) as per their entitlements. FFBL also provides
other assets to their employees such as Cars, Laptops, and Mobile phones etc.
For Civilian 90 Days
For Ex-Armed Force 120 Days

In FFBL Salary of Employees Includes
Basis Salary
Bonuses
House Rent Allowance
Utility Allowance
Gross Salary ****
Deductions:
EOBI
Provident Fund
Any other Deduction
Net Salary *****

37

5.11 FINAL SETTLEMENT ACCOUNT

Final Settlement of Account is carried out at FFBL to ensure that all the final balances
are settled with an employee who has resigned from the job during the services or at
the end of their retirement. The separation minute is signed by MD and the payments
to employees will be approved by GMF for the clearance of accounts.
The final payments made to the employee through a Bank Cheque e.g.
Finance head approval
Deduct the Provident loans, etc. if any
Mentioned the name of the desired employee on the Cheque
And finally Issue the Cheques to Ex-employee.
Note: -
At the time of final settlement, employees can purchase Car, Mobile Phone at the
time of the left over the job.
Separation Sheet Singed by manager of all departments at the time of final settlement
of an employees account.

5.12 TAXATION

The Taxation section at FFBL may responsible to deal with different taxes.
FFBL deals with the following Taxes
Income Tax
Withholding Tax
Sale Tax
Salary Tax
Custom duty
Capital Gain Tax
5.12.1 INCOME TAX

5.12.1 According to Income Tax Ordinance 2001
FFBL pay the Income Tax on their annual earnings. The tax rate for the companies
reduced from 34% to 33%. Normally tax is paid on a quarterly basis and the tax
liability balance is adjusted at the time of final payments at every year end.
38

5.12.2 Advance Tax/ Tax Deducted at Source
Advance Tax Deducted on sale from Dealer for the specific time period and this tax is
submitted to Govt. Treasury. Advance Tax is also known as Dealer Tax. The current
tax rate is 0.2% & 0.4%.

5.12.3 Income Tax Returns
Following types of Taxpayers are required to file the income tax return
All Companies
Sale Tax Registered Persons
All Salaried Persons
Note:-In Case of non-registered person 1% tax deduct from the seller and the amount
paid to Govt. Treasury.

5.12.4 Withholding Tax
The government has given authority to (FFBL) to withhold or deduct the tax from the
payments on behalf of FBR and pay the tax to the Government later on. Withholding
tax rates increased for taxpayers other than companies on the sale of Goods (4.5%),
Rendering of Services (10%).

5.12.5 Tax payments
The initial payment of Tax instalment is paid on the basis of previous Tax Paid. On
filling of return date FFBL tax liability is determined on the basis of plus/minus by
pervious advance tax instalments. Instalments paid on a quarterly basis and adjust the
balance in the last quarter.

5.12.6 SALE TAX
5.12.6.1 According to Sale Tax Act 1990
Standard rate of sales tax is increased from 16% to 17%. The company net off the
input tax and output tax on a monthly basis, and payments made accordingly. All
sales Tax registered payers are required to file the returns.
Sale Tax


Admissible
Inadmissible
39

Input Tax: - Input tax will be paid by FFBL for the purchases of goods or raw
material etc.
Two types of Input tax: - Claimable plant related taxes and on-Claimable admin
office related taxes.
Output Tax: - Output tax is charged by the FFBL on behalf of Tax authority on their
final product (FG) or scrape and deposit Govt. Treasury within 7 days.

5.12.7 PROCEDURE OF SALE TAX
Total out Put Tax (Net) *****
Less: -Total Input Tax (Net) *****
Net Balance of input and output ******
Add:-
With Holding Tax ********
Net GST Payable along with holding Tax ^^^^^^^
5.12.8 Two Conditions Exist
If the total output balance is greater than the total input balance, then Net Balance
(Input and Output) is payable along with GST Withheld.
Amount Payable with Return
Balance of Output and Input + GST withheld
If the total input balance is greater than the total output balance, then only GST
withheld is payable and balance of excess input is adjusted in the next month.
Amount Payable with Return
Only GST withheld
5.12.9 EMPLOYEE TAX
FBR has also authorized FFBL to deduct the tax from the employees salary and
supplier (vendors) according to the applicable tax rate in each month end and deposit
to the Govt. Treasury.

5.12.10CUSTOM DUTY
Tax levied on imports and on exports by the Custom Authorities of a country to raise
state revenue, to protect domestic industries from more efficient or predatory
competitors from abroad. Custom duty is mainly charged on the basis of the value of
goods or upon the weight, dimensions, or some other criteria of the particular items
such as size of item etc.
40

Every company should retain the import documents as proof that they have paid the
custom duty on those particular items.
5.12.11
5.12.12 CAPITAL GAIN TAX
Capital Gain Tax will be applicable on the sale of non inventory, Assets/things such
as
Selling and purchasing of Properties
Selling and Purchasing of Shares
The Capital Gain Tax (CGT) rate is 10%. CGT will be paid on 15th of each month.




















41









6 CHAPTER NO.6
TREASURY













42

6.1 INTRODUCTION

The treasury section holds a high importance in the structure of FFBL because it is the
one who manages all kinds of inflows and outflows of funds in FFBL. This Section
pays interest on Borrowing/ Financing and receives interest on Investment.

6.2 PURPOSE

The main function of Treasury Section is to arrange funds for all series of payments
and invests the Idle Funds in different banks or in Mutual funds. The section also
ensures that the placement of the funds is safe with a minimum risk. Whenever the
company needs funds, the section has the responsibility to arrange funds from best
possible source. The main source of cash inflow is selling the DAP and Urea and the
outflow of cash is Payments for raw materials, salary, loan payments and markup etc.

6.3 ACTIVITIES

The following activities are performed in Treasury Section
Investments
Fundraising
Bank relations
Risk management
Exchange rates update
Income recording
Working capital monitoring
Fund Transfer (On daily basis)
Reporting, Treasury Status to higher Management
Provide quick finance to the Company
Markup payments
Maintain a proper record of CRV, J.V and B.V
Preparation of Bank Reconciliation at the month end
Intimation to banks for change in authorized signatory.

43

6.4 MAIN FUNCTIONS

Financing
Investments

6.4.1 FINANCING

It is the responsibility of Treasury Section to fulfil the requirement of the cash flow
needed by company for expansion and operations. The requirement of the cash flow
may be for a short term or long term. Short term financing used to meet the day to day
activities and long term financing used to meet the long term Project need or any kind
of expansion. These requirements can be fulfilled using one of the following ways.
Both of loans have their own advantages and drawbacks.
Short term loan
Long term loan.

6.4.1.1 Short Term Loan:
The maturity of loans is less than 1 year, which may include bank overdraft and
Running Finance (RF) or Demand Finance (DF). The amount of Running Finance is
not fixed and the interest will only be charged on the utilized where as the Demand
Finance is defined amount to a fixed markup rate and maturity. Using of such finance
mix the company can fulfil the working capital requirements.
For this purpose FFBL maintained the Current Account with different Banks. Interest
on loans is paid off quarterly Basis and on Maturity.

6.4.1.2 Long Term Loan:
The maturity of such loan is greater than 12 months. The interest rate charged on the
long term loan is greater than short term loans. Long term loan is may be useful when
a company decides to expand their operations. This loan is used for a long period of
time due to long period of time this type of loan bear greater interest rate.



44

6.5 INVESTMENTS

Investment means to invest the surplus money that can generate the reasonable return.
The Treasury Section of (FFBL) invests the surplus funds in Banks and Mutual funds
Different banks offer the different rate of interest that depends upon the credit
worthiness of the Organization. Most banks offer the best and reasonable rate offers to
the FFBL due to the superior standing in the market. The bank rate also determine on
the bases of KIBOR.

6.5.1 BANK DEPOSIT
The treasury section can Deposit the funds into bank either in daily product or in
Term Deposit Receipt (TDR). Both of these deposits have different interest rates. The
section needs to ensure that which avenue is more beneficial for the FFBL.

6.5.2 PROFIT AND LOSS ACCOUNT / P/L ACCOUNT
The treasury section has an option to draw the amount at any time they need the cash.
There is no restriction, but the interest rate will be low as compare to TDR.

6.5.3 TERM DEPOSIT RECEIPT / TDR
The company (FFBL) will be bound and cannot draw the amount until the fixed time
period has been over, but the return of the amount will be higher than the P/L
investment.

6.5.4 MUTUAL FUND
A mutual fund is a company that brings together money from many people and
invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or
other assets the fund owns are known as its portfolio.
Mutual funds may include investments in stocks, bonds, options, futures, currencies
and market securities. Depending on the stated objective of the fund, each will vary
in regard to content and risk
Mutual fund is professionally managed by experts. They attract different investors to
make investment into mutual funds in return for some management fee. The mutual
funds can be Open end & close end.

45








6.5.4.1 OPEN-END FUNDS
A type of mutual fund that does not have restrictions on the amount of shares the fund
will issue. If demand is high enough, the fund will continue to issue shares no matter
how many investors there are. Open-end funds also buy back shares when investors
wish to sell.
6.5.4.2 CLOSED-END FUNDS
A closed-end fund functions much more like an exchange traded fund than a mutual
fund. They are launched through an IPO in order to raise money and then trade in the
open market just like a stock.
Note:
FFBL invests in open end financial income funds.

6.6 Main Activities of Treasury Section

6.6.1 FUNDS TRANSFER
The treasury section has also the responsibility to deposit the funds in the most
appropriate way. The funds can be transferred through the fallowing ways e.g.
Through a Cheques, Letter or Real Time Gross Settlement (RTGS). Without two
signatures on the above documents the transfer cannot be effective.

6.6.2 FUNDS STATUS MONITORING
Treasury section should continuously monitoring the funds status and Update the
funds on a regular basis/routinely e.g. draw the funds from a particular bank to
another bank that offered and/or committed to pay more competitive interest and have
minimum risk.
Mutual Fund
Close End Fund Open End Fund
46

6.6.3 BANK RECONCILIATION
At the end of each month the Treasury Section receives the Bank statement from the
all banks and reconciles the bank balance with the GL accounts which are maintained
by the Section through SAP.
Note:
Balance as per bank statement and Balance of GL account of FFBL must be matched
with each others. In case of mismatch of balances details reconciliation take place.
Bank reconciliation statement is made by the treasury department every month for the
purpose of reconciling the balances in following manners.

Bank Reconciliation Statement
Bank Balance as per bank statement ****
Less: Unpresented Cheques ***
Add/Less: Reconciling ***
Balance as per bank book *****
Balance as per G.L *****

6.6 Hierarchy of Treasury Section








Balanced
Treasury Section
CFO

Unit
Manger

Deputy
Manager

Treasury
Staff

47








7 CHAPTER NO.7
EMPLOYEE FUND







48

7.1 INTRODUCTION

Providing resources, usually in form of money, or other values to the employee by
private or public institution is known as employee fund.
In FFBL employee fund maintained on both places at plant and at head office. At
plant site (Karachi) only worker profit participation fund maintained for the welfare of
employees but on other hands provident fund and gratuity fund are maintained by
FFBL at head office (Rawalpindi).
Employee fund elaborate with the help of diagram





7.2 PURPOSE

The purpose behind the fund is to motivate the existing employees as well as attract
the new employees. These funds create for welfare of employees. Provident fund and
Gratuity fund also considered the retirement funds. Worker profit participation fund is
maintained for non-management employees only. A specific portion of FFBL profit is
transferred to WPPF that may be 5% or more.

7.3 MAIN POINTS OF EMPLOYEE FUND

Employee fund maintained its own books of account.
Statement of this fund maintained Annual Basis.
Conduct Audit on the basis of Semi annually and annually.
Income statement and Balance sheet is separately maintained by Employee fund.
Statements of the accounts also mailed to the member of Fund.

Employee Funds
At Plant site and H.Office
Provident Fund
Gratuity Fund
Worker profit
participation
Fund
49

7.4 EMPLOYEES RETIREMENT BENEFITS

The company has the fallowing plans for its employees:
Provident Fund
Gratuity Fund

7.4.1 PROVIDENT FUND
The Company operates a defined contributory provident fund for its all permanent
employees. The fund is administered by trustees. Monthly contributions are made to
the fund both by the company and employees at the rate of 10% of basic pay.

7.4.1.1 SUPPOSE
If an employee basic salary is Rs.40, 000 then the calculation of provident fund made
in following manners
Calculation of P.Fund
Employee contribution 4000
Employer contribution (40000*10%) 4000
Total contribution of single employee to fund 8000

7.4.1.2 PURPOSE
The purpose behind the Provident fund is to give monetary security to employee for
long term. This fund can also motivate the employees at the organization. The
creation of provident fund is two way contribution i.e. employee and company. On
behalf of employee the company will deduct some of amount from their salary and the
company also contributes the same amount into the scheme.
Amount avail for Provident fund = Employees contribution + FFBL contribution
The total amount invests the further into banks, stocks and mutual fund for generating
the revenue with different ratio. The whole process is done for the benefits of the
employee.
The employee will be entitled to provident fund either he terminate the job during the
service or at the end of the retirement. There are two types of provident fund accounts
maintained at FFBL, which includes Interest Base Fund and Non Interest Base Fund.

50


7.4.1.3 INTEREST BASE PF
Interest base Fund the employee will be entitled to received the fund among with a
fixed % of interest and when ever he/she apply for the provident loan then the
company will also charged the same % of interest on that loan.

7.4.1.4 NON INTEREST BASE PF
In this case the employee will only received the provident Fund and no element of
interest will be involved. It is also called interest free loan. At the end the company
will only receive the Provident Loan amount no interest % will be charged.

7.4.2 GRATUITY FUND
The Company operates a defined benefit funded gratuity for all employees who
complete qualifying period of service and age. The fund is administered by trustees.
Contribution to the fund is made on the basis of actuarial valuation using projected
unit credit method. Amount determined by the actuary as charged for the year is
included in profit and loss account for the year.

7.4.2.1 PURPOSE
The purpose behind this scheme is to motivate and retain the skill employee for long
term. Only those employee can be eligible for this scheme who have served their
services to company for at least minimum (xxxx) period and the fund will be paid at
the end of retirement. The method to calculate the scheme is as under.
Gratuity fund=Basic salary*number of served years.
7.4.2.2 Final Settlement
At the end of his/her retirement the employee will receive the gratuity fund calculated
on the basis of terms and conditions as above (formula).

7.5 BOARD OF TRUSTEES

Board of Trustee consist of two groups (Group A, Group B)
GROUP (A) GROUP (B)
CFO Company Secretary
Senior Finance Head of HCM
Deputy Manager Admin
51

7.6 SECP MISSION

To Develop a Fair, Efficient and Transparent Regulatory Framework, based on
International Legal Standards and best practices, for the protection of investors and
mitigation of systematic risk aimed growth of a healthy corporate sector.

7.6.1 Investment Guidelines of SECP are illustrated through diagram below:











Or




Note:
These investing rules of SECP applicable for both provident fund and gratuity fund.
In case of provident fund employer and employee contribute the equal amount, but in
case of gratuity fund only the employer contributes.
Possibilities occurs regarding SECP Investment Rule
Total Amount avail for investment = Banking Sector + Mutual Fund
Total Amount avail for investment =Banking Sector + Mutual Fund + Equity
SECP
Investment
Rule
100%
Minimum
50%
Banks

Maximum
30%
Stock

20%
Mutual Funds


52

Limit of investment and Risk Level of these sectors
Sr.No. Investment Area Investment Limit Risk Level
1 Banking Minimum 50% Less
2 Mutual Fund = >20% , up to 50% Moderate
3 Equity Maximum 30% High
Total 3 100% 3

The philosophy behind the investing rules of SECP is that dont put all eggs in a
single basket. The concept states that the company should not invest the whole fund
into a single company or investment opportunity. The company should split the risk
through investment of fund into different companies to reduce the risk as much as
possible.

7.7 PROVIDENT LOAN

If any employee need provident loan he/she should fill the desire application and
submit it at Fund Section. The Fund Section will verify their fund balance whether the
specific employee is eligible for the provident loan or not and send a copy of
application to HCM and Finance Department if the desire employee meets the criteria
i.e. (balance exist in their a/c).When the application is received from HCM & Finance
department. The Fund Section again sends it for approval to Board of Trustee for the
purpose of signature. Once the application is approved then the payment of loan will
be made to employee.

7.8 FINAL SETTLEMENT

At the end of his/her retirement or service termination the company will be entitled to
pay the remaining balance after the deductions if any e.g. provident loans etc. The
interest charged by the company on the provident loan given to employee will be the
same % of profit distributions.


53

7.9 Board of Trusty

The below Designations are performed both function (Finance & Board of Trustee)
(CFO) Trustee
Unit Manager (Work as a Trustee)
Deputy Manager (Sectary Fund)

















54








8 CHAPTER NO.8
FOREIGN PAYMENTS














55

8.1 INTRODUCTION

FFBL has a lot of imports throughout the year, mainly because all the spare parts of
the plant come from abroad more over phosphoric acid, which is the main raw
material for DAP is not present locally therefore have to make huge amount of
imports. For this purpose this section has been assigned the responsibility to deal with
all the transactions.

8.2 PURPOSE

The foreign payment section has made all the payment possible that relates outside
the country transactions. This section made payment to vendor against the goods
receipts and acquiring/hiring services.
Import is a kind of foreign trade, in which a certain commodities are imported from
the foreign country.
To buy the goods/products from any foreign country which are not available in the
local market up to the required standard in connection with price, quantity and quality
is called Import.
Items Imported by the FFBL.
Spare Parts
Raw Material
Services
Levies on Import
Custom duty
Sales Tax
Regulatory duty
Import letter of credit opening Procedure.
Applicant accounts in the bank with sufficient transactions
Contract / Per-Forma invoice (Both parties duly signed)
Request letter for import letter of credit opening
Undertaking (IB-8 Form)
L.C opening Application
Insurance covers valuing the 110 % of the invoice value
56

Form (I) for report to State bank of Pakistan
L.C opened in favour of Beneficiary
Copy sends to the opener
Original L.C advised to the Beneficiary by advising bank
Confirmation added by the bank, if any

8.3 TRADE TERMS/ INCOTERMS

The INCOTERMS (International Commercial Terms) is a universally recognized set
of definitions of international trade terms, such as FOB, CFR and CIF, developed by
the International Chamber of Commerce (ICC) in Paris, France and first published in
1936. It defines the trade contract responsibilities and liabilities between buyer and
seller.
It is very useful and cost-saving tool. The exporter and the importer need not
undergo a lengthy negotiation about the conditions of each transaction. Once they
have agreed on a commercial term like FOB, they can sell and buy at FOB without
discussing who will be responsible for the freight, cargo insurance, and other costs
and risks.

8.3.1 USE OF TRADE TERMS:
Sales contracts involving transportation customarily contain abbreviated terms
to describe:
Price and place of payment
When a buyer takes delivery.
Who arranges for transportation
The time when the risk of loss shifts from the seller to the buyer
The costs of freight and insurance









57

8.4 INCOTERMS can be divided into four Groups: E, F, C & D

Group
"E"
Departure EXW Ex-works
Group
"F"
Main Carriage
Unpaid
FCA Free Carrier
FAS Free Alongside Ship
FOB Free on Board
Group
"C"
Main Carriage
Paid
CFR Cost & Freight
CIF Cost, Insurance & Freight
CPT Carriage Paid To
CIP Carriage & Insurance Paid To
Group
"D"
Arrival
DAF Delivered at Frontier
DES Delivered Ex-Ship
DEQ Delivered Ex-Quay
DDU Delivered Duty Unpaid
DDP Delivered Duty Paid










58


8.4.1 Further INCOTERMS CAN BE CLASSIFIED ACCORDING TO THE
MODE OF TRANSPORTATION AS FOLLOWING

Note:
IN FFBL, THESE TERMS ARE MOSTLY USED LIKE CRF (C&F), CPT AND
FOB.

8.4.1.1 CFR :( COST & FREIGHT)
The cargo insurance and delivery of goods to the named port of destination
(discharge) at the seller's expense. Buyer is responsible for the import customs
clearance and other costs and risks.
In the export quotation, indicate the port of destination (discharge) after the
abbreviation CIF, for example CIF Karachi and CIF Singapore.
Under the rules of the INCOTERMS 1990, the term CIF is used for ocean freight
only. However, in practice, many importers and exporters still use the term CIF in the
air freight.
Term Stands For Mode Term Stands For Mode
"E"
Departure EXW Ex-Works ANY
FCA
Free Carrier
Alongside
ANY FAS
Free alongside
Ship
Sea or InLand
Water Way
ANY FOB Free On Board
Sea or InLand
Water Way
CPT
Carriage Paid
to
ANY CFR Cost & Freight
Sea or InLand
Water Way
CIP
Carriage,
Insurance Paid
to
ANY CIF
Cost, Insurance
& Freight
Sea or InLand
Water Way
DAF
Delivered at
Frontier
ANY
DDU
Deleivered
Duty Unpaid
ANY DES
Delivered Ex-
Ship
Sea or InLand
Water Way
DDP
Deleivered
Duty Paid
ANY DEQ
Delivered Ex-
Quay
Sea or InLand
Water Way
"F"
"C"
"D"
Main
Carriage
Unpaid
Main
Carriage Paid
Arrival
Refer to Any Mode of
Transportation Represent To Group
Refer to Sea and InLand Water Way
Transport Only
59

8.4.1.2 CPT: (CARRIAGE PAID TO)
The delivery of goods to the named place of destination (discharge) at seller's
expense. Buyer assumes the cargo insurance, import customs clearance, payment of
customs duties and taxes, and other costs and risks. In the export quotation, indicate
the place of destination (discharge) after the abbreviation CPT, for example CPT Los
Angeles and CPT Osaka.

8.4.1.3 FOB: (FREE ON BOARD)
The delivery of goods on board the vessel at the named port of origin (loading), at
seller's expense. Buyer is responsible for the main carriage/freight, cargo insurance
and other costs and risks. In the export quotation, indicate the port of origin (loading)
after the abbreviation FOB, for example FOB Karachi and FOB Shanghai.







60

8.5 PAYMENT TERMS USED IN INTERNATIONAL TRADE

Following payment methods are being used in international trade to fulfil the
international trade requirements positively.
Abbrev
iation
Method Particular
CASH
1. Payment Method
2. Payment Time
3. Good availability
4. Sellers Risk
5. Buyer Risk
1. Cash in Advance
2. Before or during delivery
3. After payment
4. None if funds are "good", or collected
5. Relies completely on seller to ship the proper
goods; political and economic risks.

D/P

1. Payment Method
2. Payment Time
3. Good availability
4. Sellers Risk
5. Buyer Risk

1. Documents Against Payment (Collection
Method)
2. The local bank notifies the buyer receipt
of documents.
3. After payment, unless directly consigned to the
buyer
4. Many risks such as buyers integrity and
standing
5. Relies completely on seller to ship goods
unless the buyer is allowed to inspect goods
before payment

D/A

1. Payment Method
2. Payment Time
3. Good availability
4. Sellers Risk
5. Buyer Risk

1. Documents Against acceptance (Collection
Method with time draft)
2. The local bank notifies the buyer receipt
of documents.
3. Before payment, but after buyer accepts the
draft
4. Rely on buyer to pay the draft when due
5. Relies completely on seller to ship goods
unless the buyer is allowed to inspect goods
before payment
61

Sight
L/C
1. Payment Method
2. Payment Time
3. Good availability
4. Sellers Risk
5. Buyer Risk
1. Letter of credit to sight draft
2. Upon presentation of conforming documents to
the negotiating bank.
3. After payment
4. Very Little, Depend L/C Terms
5. Relies completely on seller to ship goods
described in the documents
Time
L/C
1. Payment Method
2. Payment Time
3. Good availability
4. Sellers Risk
5. Buyer Risk
1. Letter of credit with time draft
2. After shipment and presentation of required
documents to the negotiating bank and Bank
acceptance.
3. Before payment, but after bank accepts the
doc.
4. Very Little, Depend L/C Terms
5. Relies completely on seller to ship goods
described in the documents
Consen
t
1. Payment Method
2. Payment Time
3. Good availability
4. Sellers Risk
5. Buyer Risk
1. Consignment Method
2. After Sales of Goods
3. Before Payment
4. Relies completely on Buyer to pay as agreed
5. None
O/A
1. Payment Method
2. Payment Time
3. Good availability
4. Sellers Risk
5. Buyer Risk
1. Open an Account
2. As agreed
3. Before Payment
4. Relies completely on Buyer to pay as agreed
5. None
Note:
In FFBL, these payment methods are mostly used like FTT, L.C and CAD
There are three methods of payments are used by FFBL, which are listed below
FTT (Foreign Telegraphic Transfer)
L.C (Letter of Credit)
CAD (Cash Against Documents)
62

8.5.1 FOREIGN TELEGRAPHIC TRANSFERS:-
Telegraphic Transfer or Telex Transfer, often abbreviated to TT, is an electronic
means of transferring funds overseas. A transfer charge is collected while sending
money. A banking term commonly called "T/T", meaning a cable message from one
bank to another in order to affect the transfer of money
Note: TT is used by FFBL for payment option $ 10000.

8.5.2 LETTER OF CREDIT:-
A letter of credit is a method of payment in which a bank guaranteeing that a buyer's
payment to a seller will be received on time and for the correct amount. In the event
that the buyer is unable to make payment on the purchase, the bank will be required to
cover the full or the remaining amount of the purchase.
The parties to a letter of credit are usually a beneficiary who is to receive the money,
the issuing bank of whom the applicant is a client, and the advising bank of whom the
beneficiary is a client. In some case confirming bank also involves exist in the country
of export.
Following types of letters of credits are the most common which are being used
worldwide to meet the International Trade Requirements.
Revocable Letter of Credit
Irrevocable Letter of Credit
Transferable Letter of Credit
Confirmed Letter of Credit
Unconfirmed Letter of Credit
Revolving Letter of Credit
Back-to-back Letter of Credit
Standby Letter of Credit
Cash advance against letter of credit
Note: Irrevocable Letter of Credit is mostly used by FFBL.




63

HOW LETTER OF CREDIT IS OPENED, AND OPERATED


8.5.3 CASH AGAINST DOCUMENTS:-
Cash against documents is a type of transaction in which the title to purchasing goods
is released to the buyer after the total sale price is paid using cash. Often,
a commission house or a similar financial institution upon verification of
the cash payment handles the actual transfer of title. Usage of the cash against
document method is commonly employed with transactions that involve imports.

64

After accepting an order from an international customer, the exporter prepares the
export documents required by both the country of origin and the destination. Among
the documents is a form that is normally referred to as an Export Collection Form.
This form, along with other manifests and copies of shipping documents, is forwarded
to the bank used by the exporters the next step in a purchasing using the cash against
documents method, the exporters bank forwards the necessary documents to the bank
designated by the purchaser or importer. The documents are provided with a provision
that they are not to be released to the importer until payment for the shipment is made
in full. Until the payment is received by the exporters bank, the transaction is not
considered complete.

Once the importers bank receives authorization to honour the exporters invoice,
cash payment, electronically transfers to the exporters financial institution. After
receiving confirmation that the payment was executed and posted properly, the
importers bank releases all documents pertaining to the transaction to the buyer.

Mainly the imports of FFBL are from countries like Morocco, Germany, England,
France, Singapore and Scotland. Whenever a shipment is booked a copy is sent to
EFU insurance to get it insured. Every ship of FFBL is insured by EFU General
Insurance.

Eastern Federal Union Insurance Company Limited. (EFU)









65






9 CHAPTER NO.9
FINANCIAL REPORTING SECTION













66

9.1 INTRODUCTION

The financial reporting section is mainly concerned with the preparation of financial
statement and distributes the presented information to the end user such as
shareholders and other stakeholders. The financial statements include Balance Sheet,
Profit & loss Account, Statement of Comprehensive Income, Cash Flow and
Statement of Change in Equity.

9.2 MAIN RESPONSIBILITIES OF FR SECTION

Preparation of Financial statements
Dealing with external auditor

9.3 PREPARATION OF FINANCIAL STATEMENTS

It is the responsibility of FR to prepare financial statements as per requirements and
guidelines of International Accounting Standards (IAS). Financial Statements include
Balance Sheet
Profit & Loss Account
Statement of Comprehensive Income
Statement of Cash Flows
Statement of Change in Equity

9.3.1 Steps to prepare financial Statements
Recording each transaction
Parking & Posting
Extraction of Trial balances by Reporting section
Preparation of financial statement & related Notes

9.3.2 Chart of Accounts
The chart of accounts defines the cost centre & General Ledger Codes such as the
Finance department (3401010) and Admin (320100) etc. Cost centre is allocated on
the basis of departments which are denoted by their cost centre codes. These codes
67

represent a particular G/L account and Items such as furniture, asset or Expenses a/c
etc.
Fixed Asset is represented by 1000000
Current Asset 2000000
Liabilities 3000000
Revenues 4000000
Expenses 5000000

9.4 PUBLICATION OF FINANCIAL STATEMENTS
The responsibility of this section is to prepare, presenting and reporting financial and
nonfinancial information to users and other stakeholders quarterly and annually so
they can understand the entire true picture of business position, performance and take
economic decisions as appropriate. The shareholders and investors are concerned
with the Company financial statements.

9.5 FINANCIAL STATEMENTS & ITEMS

Balance Sheet as at 31-12-2013
(Rupees, 000)
SHARE CAPITAL & RESERVES
Share capital X
Capital reserve X
NON CURRENT LIABILITIES
Long term loans X
Deferred liabilities X
CURRENT LIABILTIES
Trade & other Payables X
loans X
Provision for income tax
XXX
NON CURRENT ASSETS
68

PP & equipments X
Intangible asset X
CURRENT ASSETS
Stock X
Cash & bank balances X
Advances X
XXX

Profit & Loss Account for the year ended 31-12-2013
(Rupees, 000)
Turnover XX
Cost of sales (X)
Gross Profit Xx
Selling & distribution cost (x)
Administrative expenses (x)
Operating expense (x)
Finance cost (x)
Other expenses (x)
Profit before tax xx
Taxation (x)
Profit after tax XX

Statement of Comprehensive Income for the year ended 31-12-2013
(000)
Profit after tax XX
Other comprehensive Incomes XX


69

Cash Flow statement for the year ended 31-12-2013
(Rupees, 000)
Cash Flows from Operating Activities X
Finance paid
Tax paid

Cash flows from Investing Activities X
Long term investments
Fixed asset expenditure

Cash flows from Financing Activities X
Long term financing repayments
Dividend paid

Cash & Cash Equivalents XX
Cash & Cash Equivalents ending XX

Statement of Change in Equity for the year ended 31-12-2013
(Rupees, 000)
Balance as at January 1, 2013 X
Total comprehensive income X
Profits for the year X
Final dividend X
Interim dividend X



70

9.6 AUDIT OF FINANCIAL STATEMENT

KPMG (Salman Taseer Hadi & Co) is currently engaged with FFBL to verify the
financial statement. The FFBL financial statement will be disclosed to shareholders
and the public after the completion of the annual audit. It is also the responsibility of
reporting section to deal with external auditors. During the audit or final review stage
of financial statement & notes to the accounts the external auditor may need some
information through which they can verify the desired items.

The main audit procedures they carrying out are as follow:
Inspection items
Inquiries
Third party confirmation
Observations etc.

The firm will review the financial statement and pass their opinion (reasonable
assurance) whether the presented information is free from material misstatement. The
audit firm also conducts an interim audit & an annual audit to ensure that the
assignment is completed on time.
After the completion of final audit, FFBL does disclose the audited financial
statements to shareholders and other stakeholders.
Note: -Audit is conducted by KPMG Semiannually and annually basis.

9.7 SALES:-

FFBL does not have his own marketing and selling department. Its parent company
FFC does all the selling and marketing for FFBL. For that FFC charges its
commission on each bag sold. Reporting and accounting of sales are the responsibility
of this section.


71









10 CHAPTER NO. 10
PLANNING & BUDGETING SECTION











72

10.1 INTRODUCTION

Planning and budgeting plays a vital role in the performance of any organization. So,
in FFBL this section is also playing a major role in the financial activities. Planning
and budgeting section is a sub part of finance division.

10.2 PURPOSE:

Budgeting section sends circulars to all other departments of head office and plant
site. In response to this, they send their estimated budgets inputs. These estimated
budgets are approved by the Board of Directors, if they are satisfied by the
justifications provided by the departments.

10.3 ACTIVITIES:

In FFBL, Planning & Budgeting section performs the following activities:
Budget
Project Plans
Management Reports

10.4 BUDGET

An estimate of income and expenditure for a set period of time
Budget is an important tool of profit planning. The purpose of budgeting is to present
a general view of budgeting as a device of planning and preparation of various types
of budgets. The financial year of FFBL is from 1
st
Jan 31
st
Dec.
10.4.1 TYPES OF BUDGET
There are two main types of budgets:
Operational Budget
Capital Budget

73

10.4.2 OPERATIONAL BUDGET
It is also referred as Period Cost or OPEX. This type of budget is related to
carrying out the day to day activities of the company and keeps the business of the
company running. It consists mainly of:
Production Plan
Sales Plan
Training Plan

10.4.3 CAPITAL BUDGET
It is also referred as CAPEX. This type of budget relates to the assets which have
the benefit of more than one year. It consists of:
Building
Equipment
Plant
Machinery
Cars

10.5 BUDGET MONITORING

It is also the responsibility of the budgeting section, to regularly monitor the actual
expenses to the approved. Purchase Requisition is a document prepared on a daily
basis to monitor the budget, while the Budget variance report is prepared monthly to
report the variance of actual expenses to budget approved.

10.6 PROJECT PLAN

Project is a non routine, non repetitive, one-of undertaking, with
well defined time, financial and technical performance goal.
Project planning is required in an organization to ascertain the investment
opportunities in new businesses or upgradation in existing one. It helps the
management to decide whether to take that investment decision or not, in the
prevailing situation

74

Planning involves three steps:
Market Analysis
Technical Analysis
Financial Analysis/ Financial Model
As far as market/ technical analysis is concerned, the technical department of FFBL
has the responsibility to evaluate it. A planning section in the finance department
evaluates the financial viability of any budget by using different capital budgeting
techniques.

10.7 FINANCIAL ANALYSIS

Financial Evaluation is a Planning Process used to determine whether a firms
low term investment in the project is financially feasible or not. On the basis of
expected inflows and outflows in future.
The financial model is established on the basis of findings in the Market and
Technical Analysis, and furthermore following factors are considered:
Identify benefits
Identify costs
Calculate net benefits
Prioritize options
Assess risk and uncertainty

10.8 NEW PROJECTS

If FFBL wants to conceive any new project, first of all detailed market and technical
study is carried out. If a project seems viable on technical grounds, in next step
financial model is developed.

10.8.1 STEPS OF ANALYSIS
10.8.1.1 Collect the Inputs
Consider and interpret all the factors that might affect the plan, such as market
analysis, technical analysis, financial analysis, exchange rates, KIBOR, sales trends,
revenues, and costs etc..
Furthermore, consider pricing and quantity
75

.
10.8.1.2 Prepare Financial Statements
In this step various financial statement like Profit/Loss Account, Cash Flow Statement
and Balance Sheet is prepared.

10.8.1.3 Application of Capital Budgeting Techniques
Various capital budgeting techniques are applied to ascertain the feasibility of project
on financial grounds.
NPV The difference between the present value of cash inflows and the present
value of cash outflows. NPV is used in capital budgeting to analyse the
profitability of an investment or project.
IRR The discount rate often used in capital budgeting that makes the net present
value of all cash flows from a particular project equal to zero.
PBP The length of time required to recover the cost of an investment.
PI An index that attempts to identify the relationship between the costs and
benefits of a proposed project.

10.8.2 CRITERIA OF SELECTION
If the IRR is greater than the cost of capital then the project will be accepted,
otherwise rejected.
If the NPV is positive, then the project will be accepted, otherwise rejected.
If PBP is less than or equal to rough estimates of management, then the project
will be accepted, otherwise rejected.
If more than one project is under consideration, then the project with lesser PI will
be opted.

10.8.3 SENSITIVITY ANALYSIS
Several factors like change in dollar exchange rate, implies a drastic effect on the
outcome of suggested projects. Several scenarios are created by altering the value of
these factors, and it is assessed that what the possible outcomes could the company
face in future.


76

10.9 EXISTING PROJECTS

10.9.1 RELEVANT COSTING APPROACH
This approach is used to compare the current revenues and costs, to those revenues
and costs which we expect to get after applying the change.
Things get quite easier in development or up gradation of existing projects. While
upgrading existing project everything get quite clear and distinct and your expertise is
quite flourished in that familiar project.
Planning in existing projects it involves only two aspects.
Incremental Revenue
Incremental Cost
You only have to analyse that what will be your incremental cost and what will be
your incremental revenue. If the difference between both is positive enough only then
it is implemented

10.10 MANAGEMENT REPORTING

Monthly management reports are prepared for onward submission to GMF/MD.
These reports present the overall performance of FFBL in the form concise reports to
help the management take any necessary actions they feel are vital. These reports
contain following details:
Quantitative Analysis
Variance Calculations
Reasons for Variances

10.11 QUANTITATIVE ANALYSIS

It involves the listing of physical inventory of various heads like Ammonia, Sulphuric
Acid, prepared stock of Urea and DAP in warehouses, Production Capacity, fuel in
storage tanks. Current month inventory is compared with the same month of the
previous year. This report is generated and is reviewed by MD at month end and by
BODs at quarter end.
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10.12 VARIANCE ANALYSIS

Variance analysis is done on a monthly basis and on a yearly basis. This analysis
compares the current month or year performance, to pervious years months or a
whole year in terms of Rupees. The various heads are Revenue from DAP, Revenue
from Urea Granular, Cost of gas, Cost of production, costs of overheads etc...
The types of analysis being used in FFBL are:
Actual vs. Actual Analysis
Actual vs. Estimated Budget
Headways Analysis
Individual Product Analysis

10.13 REASONING OF VARIANCES

Proper justification and logical reasoning along with the factors causing the variance
are stated in order to satisfy the management. The reasoning enables management to
make counter policies to tackle the situation. This report is generated and is reviewed
by MD at month end and by BODs at quarter end.

10.14 INDUSTRIAL COMPARISON ANALYSIS

This report is prepared annually to study the performance of FFBL to the other
leading companies in the industry such as Fatima Fertilizers. The financial reports of
rivals are also studied in order to know what their competitive edge is and how FFBL
can change the odds in its favour.

10.15 ACTUALIZATION

It is also referred as Outlook. Its the process of projecting future trends of profit
based on previous trends and current industry conditions. The scope of actualization is
limited to one year only.
Actual Data of past months of current year + Budgeted values of the remaining
months
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10.16 COST AUDIT

External auditors KPMG Ltd. conducts audit of FFBL and certify that weather all
documents were prepared as required by law or not and certify that Fraud is not being
committed. An audit report is made public at the annual general meeting.






















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11 CHAPTER NO. 11
SWOT ANALYSIS













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11.1 INTRODUCTION SWOT ANALYSIS

A SWOT analysis (alternatively SWOT Matrix) is a structures, planning method
used to evaluate the Strengths, Weaknesses, Opportunities, Threats involved in a
project or in a business venture. By specifying clear objectives and identifying
internal and external factors that are either helpful or not, a short and simple SWOT
analysis is a useful resource which may be incorporated into an organizations strategic
planning model.

11.1.1 Strengths
Internal attributes that are helpful to the organization to achieving its objective.

11.1.2 Weaknesses
Internal attributes that are harmful to the organization to achieving its objective.

11.1.3 Opportunities
External factors that help the organization achieve its objective.

11.1.4 Threats
External factors that are harmful to the organization to achieving its objective.
After identifying the SWOTs identification of the factors and their interdependence
clarify the steps needed to achieve the ending objectives.

11.2 Internal and External Factors

The aim of any SWOT analysis is to identify the key internal and external factors that
are important to achieving the objective. SWOT analysis groups key pieces of
information into main categories:

11.2.1 Internal Factors
The strengths and weaknesses internal to the organization

11.2.2 External Factors
The opportunities and threats presented by the external environment
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11.3 FFBL SWOT Analysis

11.3.1 Strengths
The only granular Urea plant in Pakistan
The only DAP manufacture in Pakistan
Offshore joint venture to secure the supply of raw material
Competent and committed human resource

11.3.2 Weaknesses
Dependency of single source of gas supply
Depending on costly logistics in the absence of railway network

11.3.3 Opportunities
Growing fertilizer demand in the country
Diversification of investment
Opportunity to export fertilizer
Brand goodwill

11.3.4 Threats
Increasing trend of gas price & curtailment
Fluctuation in international prices of DAP & Phosphoric Acid
Law and order situation
General inflation & environmental threats (Floods)

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12 CHAPTER NO.12
RECOMMENDATIONS & CONCLUSION
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12.1 Recommendations

Company should capture Middle East markets.
The marketing strategies are not so much satisfied.
Company should introduce products with its own brand name.
Company should have separate organized marketing department.
Company should try to enhance its customer portfolio by increasing marketing
efforts.
Promotions, increments and other benefits should be performance based in the
company.
The company should build a dispensary for workers in the premises of every
Division.
Company shouldnt depend upon large customers it should also try to capture
small ones.
Organization takes the necessary step to stabilize and maintain the net profit
margin.
Gross profit margin and return on equity of associate is not satisfactory need to be
improved.
And also the earning per share of organization needed to be improved.
The use of information technology is not as per international standard.
Huge gap between the Staff employees and top management that must be reduce.
Decisions making should be decentralized. Middle and lower level management
should have participation in decision making
A monitoring team/committee should be established to evaluate, examine and
ensure the individual performance/progress of the Internees working in different
departments.
After evaluation a summary/report should be prepared, which contains the names
of those Internees who successfully completes their assignments and are working
in the good benefit/profit of their Departments.
This summary should send to Top Management with a suggestion or proposal to
adjust them to fill out the vacant posts in their respective departments, at least
enlargement of their internship period or hiring them on contract basis.
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Proper training should be given to all the employees (specially technical and
managerial staff) for the purpose of improving office working quality, output and
efficiency.
Human Resource (HCM) and I.T departments should play their respective roles
for improvement.
The Officers should motivate other Staff for the enhancement of their working
quality.
Technological advancement needed in Offices .i.e. Introduction and use of I.T
tools in Offices.
Proper check and balance of all the Issues.
More Funds should be required for Development sector to improve Infrastructure.
Resident facility should be provided to employees.
Resident facility should also be provided to Outstation Internees.
Proper attention must be given to the internees in order to enhance their ability
and implicit knowledge.
All recruitment must be on merit bases not on the bases of personal reference.
Internal Employees should be encouraged to come up with revolutionary thoughts

12.2 Conclusion

To conclude, I will state that all sections in finance division are functioning very well.
Infect these sections perform function according to rules, regulations and international
accounting standards. They have also drafted their work flows very effectively.
Routine transactions are recorded, manipulated and audited on a regular basis. There
is hardly any chance of mistakes, but these mistakes are adjusted with the
recommendation of the heads. I felt that there has been a strong coordination between
all sections of finance division. My personal experience during my internship reveals
that the working environment is very friendly and one can learn a lot even during his
limited tenure.




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References

www.ffbl.com
Deputy Manager of each section of Finance division.
Staff employees.