3.

Accounting Information System

An Overview:

3.1 What Is Accounting Information Systems:

3..Accounting information system(AIS)

Accounting is the service function that seeks to provide the users with
quantitative information.On the other hand,AIS is an information system that
isw designed to make the accomplishment of accounting function possible.AIS
process data and transactions to provide users with the information they need
to plan,control,and operatetheir business (Romney et al.1997:2)

An accounting information system can be a manual system,or a compurterized

system using computers.Regardless of the type,AIS is designed to
collect,enter,process,store,and report data and information.The following
paragraphs explain AIS in detail.

3.3.1 Data input function:In manual AIS,the data are computered with the source
documents and directly processed in journals and transferred to ledger accounts.On
the other hand,in computerized AIS,after data are captured,they should be
converted into machine-readable form.In most computerized AIS,source data
automation devices that capture data at the time and place of their origins are
used.For example,bar cod scanners used in retail stores can record the sale
transaction just as scanning devices read the codes located on the products.In
addition to the data scanned into the computer,there existing data bases that
contain stored data for future processing.A database includes information about
entities.An entity is something about which information is stored.For
example,information about existing customers is stored in database.In this
case,customers represent entities.Information about customers such as account
number,credit limit,and current balance of the customer can be stored in the
database.Master files are used to store data about entites in database in an
computerizedAIS.Master files have replaced the subsidiary ledgers that are used in
manual systems.For example,records in accounts receivable master file include
customer name,customer account number,address,and balance due.Master files are
frequently updatedas transactions are taking place. Fr example,as sales are made or
receivanle are collected,accounts receivable master files are changed.

3.3.2 Data Processing:After tge data are collected and enterd into computers,they
are processed.The most common data processing activity is data maintenance.Data
maintenance is the processing of transactions to update stored data. For
example,When sales transaction takes place,data are enterd into the computer.In
turn,computer immediately updates sales and accounts receivable files.

In Computerized system,records are updated by using primary keys that uniquely

idntifies each record.For example,When a sales transaction takes place,related
customer file should be updated.In order to find related customer master
file,customer account number can be used as the primary key because every
customer has unique customer account number.In other words,it is not possible that
two or more customers have common customer account number.

3.3.3 Information output:Aftr the data are entered in to the computer and
processed,information output is producedto meet the needs of the
users.Information is presented to a query.Documents are records of transactions or
company data such as invoices.these documents van be printed out using printers.In
addition,they can be stored as electronic images in the computer databases.

Reports are prepared for internal and external users.For example,to meetthe needs
of external users such as creditors, financial statements should be prepared.In
addition,computers can be programmed to display financial information
automatically in a required from such as spreadsheets.Today,electronic
communication system enable companies to transmit financial reports to the users
electronically.This of course,eliminates paperwork and reduces cists.In addition to
the reports producedfor the needs of external users,reports can also be produced to
meet the needs of the internal users such as managers.

Sometimes,documents and periodic reports may not be enough to meet the needs
of the users.If unexpected problems arise,managers can enter the system and query
the information they need.A user enters a request in to the computer to get the
information, and the computer performs necessary tasks to solicit the required
information.once found,the information is retrieved and analyzed by the user.

In a manual AIS,transactions are first recorded in journals and they are posted to
ledger accounts.At the end of each accounting period,financial statements are
prepared by using the ending balance of ledger accounts.on the other hand in a
computerized AIS all the information is gathered in relational tables.In this
case,financial statements can be prepared at any by entering necessary commands
in to the computer.
.

3.2 Manual Vs. Computerized Accounting Systems

1. Manual Accounting
o Manual accounting systems utilize several paper ledgers to record
financial transactions. Companies have separate ledgers for each part
of the accounting system, such as accounts payable, accounts
receivable and sales. Accountants then consolidate these ledgers into
one general ledger, providing the balance for each ledger. The general
ledger notebook assists in creating financial statements.

Manual Accounting Benefits

o While tedious and time consuming, manual accounting systems offers
some benefits. The ledgers are easy to review and accountants can
make simple changes if necessary; individual accounts are easily
reconciled because information is in a systematic order through each
ledger. Accountants also have the benefit of physically handling each
ledger and creating notes in customer accounts regarding any issues
that need clarification or corrections.

Computerized Accounting
o Spreadsheets and accounting information systems require accountants
to enter financial data into them, and then mathematical algorithms
compute the information into the necessary ledgers and financial
statements. Computerized systems also allow accountants to create
trending analysis and report any variances quickly and accurately.
Additionally, transactions from all company divisions are accessible
through computerized accounting systems, giving accountants better
access to financial information.

Computerized Accounting Benefits

o Computerized accounting offers several more benefits than manual
accounting; accountants process more information quicker, formulas
verify calculated totals and errors are less common. Accounting
systems also are customizable by industry, allowing accountants the
opportunity to use preset templates for their general ledger.
Accountants also can store several years of financial information with
relative ease, giving them the opportunity to review previous year's
information without sorting through stacks of paper ledgers.
 Best Method
o Most companies will use a computerized accounting system for
recording and presenting their financial information. This system
allows companies to record business transactions accurately and
generate financial reports quickly for management review.

While the functions of manual accounting have changed, it will never

go away completely. Accountants must review the information
presented on financial reports from the accounting system and ensure
that it is accurate and valid. Accountants must also ensure that all
financial information follows the Generally Accepted Accounting
Principles and any other guidelines from regulatory agencies.

3.3 Components of Accounting Information Systems

An accounting information system (AIS) is a system of collection, storage and
processing of financial and accounting data that is used by decision makers. An
accounting information system is generally a computer-based method for tracking
accounting activity in conjunction with information technology resources. The
resulting statistical reports can be used internally by management or externally by
other interested parties including investors, creditors and tax authorities.

Accounting information systems are composed of six main components:

1. People: users who operate on the systems

2. Procedures and instructions: processes involved in collecting, managing and
storing the data
3. Data: data that is related to the organization and its business processes
4. Software: application that processes the data
5. Information technology infrastructure: the actual physical devices and systems
that allows the AIS to operate and perform its functions
6. Internal controls and security measures: what is implemented to safeguard the
data

3.4 The Basic Functions of an Accounting Information

System
 An accounting information system (AIS) provides financial information about
a business. This information helps managers plan and control operations and
provides reports to outside parties such as stockholders, creditors and
government agencies.

Parts of an accounting information system might include financial reporting,

cost accounting, management accounting and enterprise resource planning
 (ERP). A well-designed AIS gives a business a consistent way to view and
analyze financial information and has three basic functions.

Collect and Store Data

 One function of an accounting information system is to efficiently and
effectively collect and store data about business activities and transactions.
The system must capture transaction data on source documents, record
transaction data in journals to present a chronological record of transactions,
and post data from journals to ledgers that sort the data by account type.

Provide Information
 The second function of an accounting information system is to provide
information useful for making decisions. This information usually involves
reports in the form of financial statements and managerial reports.

Provide Controls
 The third function of an accounting information system is to incorporate
controls to ensure the accurate recording and processing of data. The system
must make certain that the information that comes out of the system is reliable,
ensure that business activities are efficient and in line with management's
objectives and keep business assets safe.

Traditionally, bookkeepers and accountants did the work of accounting

systems by hand on paper, but today much of the work is automated with
computers. According to Maryville University, setting up an accounting
information system requires knowledge of topics such as database design and
development, business process analysis, accounting applications, internal
control requirements, information technology (IT) auditing and accounting
requirements.

3.5 Objectives of an Accounting System

An accounting system serves to inform interested parties of past performance and to

provide guidance for future performance. It should provide information that is
understandable, is useful and allows investors and creditors to predict future cash
flows. The accounting system should measure the efficiency of a company's use of
resources and how it converts resources into earnings.

1. Users Drive Objectives

 o End users of the information, known as stakeholders, drive the
accounting system objectives. According to the Financial Accounting
Standards Board, stakeholders are interested in the financial condition
of a company because there is a financial tie to the company. These
stakeholders can be internal users (members of the board of directors,
management and employees) and external users (investors, creditors,
suppliers, analysts and customers). An accounting system should be
able to satisfy the information requirements of both groups.

Types of Accounting Information

o According to the Small Business Administration, an accounting system
should provide both management and financial accounting
information. Management accounting information, also known as
managerial or cost accounting, focuses mainly on financial reporting
for internal users. Financial reporting, on the other hand, is geared
toward external users. A company's accounting system should allow
both users of managerial and financial accounting to drill down into
details that drive performance. The system should allow for adding
notes to the financial information to provide clarity to users.

External Funding Information

o External users often require detailed information from an accounting
system. For example, external users such as creditors need information
about the income and growth of a company to decide whether to lend
to the company and what interest rate to charge to cover the risk.
Investors need information to decide if they should buy, hold or sell
shares of a company. Investors should have access to past company
performance and future prospects for earnings growth.

General Purpose Financial Statements

o An accounting system should have an objective to produce an accurate
balance sheet, income statement and cash flow statement. The balance
sheet displays the resources and obligations of a company at certain
point in time; the income statement reports sales, expenses and net
income over a specific time span; the statement of cash flows reports,
for a certain time period, the amount of cash generated and used by a
company through operating, financing and investing activities. The
accounting system should be able to produce these statements with
reasonable speed and at a low cost to the company.
Subsystems Accounting Information System

Accounting Information System is an Information System which handles issues related to

accounting in a company or organization. In practice, the SIA is divided into several
subsystems. This is because SIA is a fairly complex system. Thus divided into several
subsystems to facilitate implementation. In this post, I will discuss about the
Subsystem Accounting Information Systems (AIS).

Here Subsystem of Accounting Information Systems (AIS) is:

1.The Revenue Circle
includes sales and revenue in the form of cash.
2. The Expenditure Cycle
purchasing activities and payment with cash.
3. The Human Resources / payroll cycle
includes the activities of contract and hire employees
4. The production cycle
the process of changing raw materials into finished material
5. The financing cycle
includes activities to get data from investors, as well as their payments again.

USERS OF ACCOUNTING INFORMATION SYSTEM

Accounting is an information system which identifies records and communicates this
information to the interest users in the form of financial statements. These financial
statements are transferred to the Users of Accounting Information for making
informed accounting decision because an effective and well organized financial report
encourage A the decision makers to make greater decisions. These financial reports
are transferred to the users in two forms-Internal and External. Internal financial
reports are used by an individual who runs, manages and operates the daily activities
of inside area of an organization. Manager, supervisor, financial director are the most
featured examples of internal users and their area of work is referred as managerial
accounting.

Management accounting generally deals with the information which is needed for
organizing, planning and directing the internal task of an organization. Management
accounting provides detail information of internal financial report to the internal users
to make decisions for their company. This information is not available to the
outsiders. For example, management accounting of ABC Company focuses on the
information regarding the producing cost of any item, the number of product they
need to produce, the way to produce the product etc. After having all these detail
information, the management accounting of ABC Company will make informed
decision.

External financial reports are used by individuals and organizations who want
financial accounting information. External users are not the part of management of the
company but they are interested to have financial accounting information about the
company. External users get this accounting information through balance sheet,
income statement and cash flow statement. There are many external users but
investors and creditors are most common of them:

 Creditors: Creditors (Lenders) are generally focused on those information

which are related to the borrower before making a large loan such as the Bank
(creditors) will want information about the borrower regarding some criteria:
the ability of the borrower to repay the loan, the amount of assets and
liabilities of the borrower, evidence of income, tax policies and so on. The
creditors will make the loan after having this detail information through
financial accounting statement of the borrower.
 Investors: Investors generally provide money to individual or organization to
start a business. Before investing money investors generally want to know
whether they should invest or not or if they would invest to start a business
now then how much return they will get from their investment. The investors
will decide based on the financial accounting information of that business.

Other Users:

 Government Regulatory Agencies: Government regulatory agencies like

Federal and State Government Agencies and Security and Exchange
commission want financial accounting information which is related to the
investors, business organizations or any individuals. These regulatory agencies
want the information to know that whether the business organizations are
following the business rules and regulation or not or whether the investors are
able to invest or make decisions or not. Securities & Exchange Commission
want accounting information to evaluate the financial accounting disclosures
of companies who sell their share or borrow money.
 Taxing Authority: Taxing authority wants financial accounting information
related to the tax policies, tax laws, amount of payable tax etc. from the
individual or organization. Taxing authority wants financial accounting
information to know that the business organizations are following tax rules or
not and their ability to pay income tax because income tax is based on the
financial accounting reports.
 Suppliers & Customers:Sometimes customers also want to know about
company on issues like warranty, product development etc. Suppliers want to
 know about company’s future goals so that they can serve best materials in
coming days.
 Employers and Labor Unions: Employers use accounting information for
their own benefit. Accounting information help the employee to ensure their
future benefit from the company like pension, health provision, retirement
benefit etc. Labor unions want accounting information to know their future
salary

Benefit of Accounting Information System

An accounting information system (AIS) is a system that first collects and stores
data and then processes it into information used by investors, creditors, and
managers. An accounting information system provides accurate and timely
financial information for internal management purposes. This information
generated from an AIS can ultimately help decision makers to manage
organizations more efficiently. The term AIS is most commonly referred to as a
complex computer-based system combining the resources and capability of
information technology with traditional accounting methods and controls. It can
also integrate and fulfill departmental and company-wide objectives.

An Accounting Information Systems are composed of 6 main components:

1.Software: application that processes the data.

2.Internal controls and security measures: what is implemented to safeguard the
data.
3.Data: data that is related to the organization and its business processes.
4.People: users who operate on the systems.
5.Information technology infrastructure: the actual physical devices and systems
that allows the AIS to operate and perform its functions.
6.Procedures and instructions: processes involved in collecting, managing and
storing the data.

When an AIS is implemented, organizations sometimes makes the mistake of not

considering each of these six components and treating them equally in the
implementation process. This results in a system being "built 3 times" rather than
once because the initial system is not developed to meet the requirements of the
company, the organization then tries to get the system work and ultimately, the
organization begins again, following the right procedure so that they can be
benefited from AIS and then gain huge profits.
What is Management Information Systems?
Management Information Systems (MIS) is the study of people, technology, and
organizations and the relationships among them. MIS professionals help firms realize
maximum benefit from investment in personnel, equipment, and business processes.
It’s a people-oriented field with an emphasis on service through technology. If you
have an interest in technology and have the desire to use technology to improve
people’s lives, a degree in MIS may be for you.

All businesses use information systems at all levels of operation to collect, process,
and store data. This data is aggregated and disseminated in the form of information
needed to carry out the functions of business. Everyone who works in business, from
someone who pays the bills to the person who makes employment decisions, uses
information systems. A car dealership could use a computer database to keep track of
which products sell best, and a retail store could use a computer-based information
system to sell products over the Internet. In fact, all businesses are concentrating on
the alignment of MIS with Business to achieve competitive advantage over other
businesses.

MIS professionals create information systems for data management (i.e., storing,
searching, and analyzing data). In addition, they manage various information systems
so that the needs of managers, staff, and customers are best served. By working
collaboratively with various members of their work group, as well as with their
customers/clients, MIS professionals are able to play a key role in areas such as
information security, integration, and exchange. As an MIS major, you will learn how
to design, implement, and use business information systems in innovative ways to
increase the effectiveness and efficiency of your organization.

There is a common misconception that MIS is all programming. However,

programming is just a small part of the MIS curriculum and there are many jobs in
MIS that do not utilize programming at all. A large portion of the MIS degree is
centered on team work, leadership, project management, customer service, and
underlying business theories. These aspects of the degree are what set the MIS
professional apart from a computer science specialist.
Computerized Accounting Information System :
advancement in information technology(it) have enabled companies to use computers to
carry out their activities that were previously performed manually. Accounting systems that
were previously performed manually can now be performed with the help of computers .
Therefore,improvements in the information technology hsve facilitade the use of cost and
management accounting proceducers On the other hand,most of the companies have
started to apply just in time production system as a tool to become competitive
applying.Companies applying jit production system aim at minimizing all inventory levels and
delivering the goods and services ti customers on time.Inthis sense,use of IT has also helped
companies apply jit production system more effectively.The aim of this paper is to identify
how improvements in IT have influenced accounting systemns.More importantly,this paper
will also focus on examinig the benefits of information technology for companies applying jit
production system.

3.1Introducion

The ongoing reveloution in infotmation technology (IT)has had a significant influence on

accounting information system (AIS).Improvements in the IT have brought improvements in
their daily businesses.As computers become smaller, faster, easier,easier to use,and less
expensive, the computerization of accounting work will continue.

Accounting activities that were previously performed manually can now be performed with
the use of computers.That is,accountants are now able to perform their activities more
effectively and efficiently than before.
3. 2.Information system in General

An information system is an organized means of collecting, entering,and processing

data and storing,managig,controlling,and reporting information so that an
organization can achive its objectives and goals(Romney et al.1997:18).This
definition of information system shows that an information system has following
components.

3.2.1 Goals and Objectives: Every information system is designed to accomplish

one or more goals or objecdtives.For example,an information system may be
designed to collect and process data about employees to help managers prepare
payroll reports.

3.2.2 Output:Output is the mean ingful and information produced by the

information system.For example,weekly payroll report produced by the information
sustem is an output.

3.2.3 Data storage:In addition to the external data entered into the information
system,there should be internally stored data used for processing.

3.2.4 Processors:In order to produce produce useful and meaningful

information,data must be processed.Most companies process data by using
computers.

3.2.5 Instructions and Procedures:An information system produces data by the

following instructions and procedures. In computerized information sustem,software
includes procedures and instructions that direct computers to process the data.

3.2.6 Users:Users are people who use the information produced by the system and
who interacts with the system. For example,managers who use financial statements
that are produced by an accounting information system are the users of the
information sustem.

3.2.7 Control Measures:In order to make the information system produce

correct,and error free information,necessary measures should be taken to protect
and control the information system.

Any system that includes the above components is known as an information

system.The following section wick show how accounting systems are established
using these components.
3.4 Software Tools in the Accounting Process

This section includes the most-frequently used software tools and their most
appropriate use.Accountants must be familiar with the software tools because they
help the users perform the accounting functions more effectively and efficiently.

3.4.1 Accounting software:This software contains the basic accounting function such
as input,processing and output.there are two classifications of accounting software
as loe-end and high –end.Low-end is all-in-one software,which means all of the
functions of accounting system are performed within one software.Threfore,loe-end
software is used for smaal companies.On the other hand,in higj-end software,each
accounting function comes in a separate module.Each module checks data for
correctness ,process it,and updates all relevant accounts.and finally,produces
outputs such as documents and reports. Personal computer(pc)-based accounting
software allows companies to computerize their manual systems and to provide
better and timely information.In addition,pcs have been connected to another pcs
via networks.This allows companies to process indefinite number of transactions
occurring at differdnt locations simultaneously within several minutes.

3.4.2 Income Tax:Because tax laws are frequently changing ,it is becoming
exceedingly difficult to deal with them.herefore,manual tax preparationis becoming
more and more difficult and time consuming.Fottunately ,tax preparation software is
currently available for companies.Therefore,insteadof processing tax
manually,companies can use computer software to perform the same functions.As a
result,even complex calculations can be performed via computers is a short period of
time.

3.4.3 Audit:Information technology has also computerized the auditing professions.If

auditors perform auditing functions manually,it takes time.However,audit software
packages are currently available for auditors.

4.ACCOUNTING INFORMATION SYSTEM OF NATIONAL BANK

LTD.
4.1 Statement of Compliance

The financial statements have been prepared in compliance with the Bangladesh Financial
Reporting Standards (BFRS),Bangladesh Accounting Standats (BASS),Bangladesh Bank
circulars,Bank companies Act 1991,the companies Act 1994,Securities and Exchange Rules
and other rules and regulations as applicable in Bangladesh.

4.2Basis of Preparation of financial statements

The Financial statements of the Bank as at 31 December,2010 have been prepared on going
concern basis under the historical cost convention and in accordance with the “First
Schedule’’ of the Bank companies Act,1991 as amended by BRPD Circular No.14 dated 25
June 2003,other Bangladesh Circulars, Bangladesh Financial reporting
Standars(BFRS),Bangladesh Accounting Standars(BASs),the Companies Act 1994,the
Securities and Exchange Rules 1987,the Listing Regulations of the Stock Exchange and other
Laws and rules applicable in Bangladesh.

4.3Basis of consolidation

A separate set of record for consolidation of Balance Sheet and profit & Loss Account of the
branches and head office of the Bank are maintained based on which these Financial
statements haqv been prepared.

4.4 Use of estimates and judgement

Preparation of the Financial Statements in conformity with BFRS/BAS requires management

to make gudgements,estimates and assumptions.These judgments,estimates and
assumptions affect the application of accounting policies and the reported amount of assets
and liabilities as well as income and expenses in the Financial Statements presented.Actual
result may differ from the estimates and assumption made.

Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to

accounting estimates are recognized in the period in which the estimate in revised and in any
future period affected.
4.5 Functional and presentation currency

The Financial Statements have been prepared and presented using BDT the functional
currency of NBL.

4.6 Assets and basis of their valuation

4.6.1Loans and advances

a) loans and advances are stated in the Balance Sheet at gross basis.General provisions
on unclassified & contingent assets,Specific provisions for classified loans and
interest suspense account thereon are shown under other liabilities.
b) Loans and advances are written off to the extent that (i)there is no realistic prospect
of recovery and (ii)agaist which legal cases are pending as per guidelines of
Bangladesh Bank.However,the write off will not reduce the claim against the
borrower.Detailed memorandum records for all of such write off accounts are
maintained.

4.6.2 Lease finance

To comply with Bangladesh Accounting Standard (BAS) No.17 “Lease”,the books of account
for leasing operation has been prepared under finance method of accounting since assets
Leased to customers under agreements transfer substantially all the risks and rewards
associated with ownership,other than Legal title,to to the customers and all Leases are full
payout Leases.

In accordance with the said standard,the aggregate Lease receivables are recorded as gross
Lease receivables while the excess of gross lease receivables over the total acquisition cost
including interest during the period of acquiring the lease equipment constitutes the
unearned lease income.

at the execution of each lease,a portion of the unearned lease is recoznized as revenue
income in the period in which it is matured.The balance of the unearned lease income is
amortized to revenue on a monthly basis over the primary lease yielding a constant rate of
return over the period.
4.6.3 Investments

Investments are classified broadly in three catagoties and accounted for as under.

(a)Held to maturity

Held-to-maturity investments are non-derivative financial assets with fixed or determinable

payments anf fixed maturities that the NBL’s management has the intention and ability to
hold to maturity.If the bank were to sell other than an insignificant amount of held-to-
maturity assets,the entire category would be reclassified as available for sale.

(b) Held for trading

Investments classified in this category are acquired principally for the purpose of selling or
repurchasing in short trading or if designed as such by the management.After initial
recognition,investments are measured at fair value and changes are recognized in the profit
& loss account as income for the period as per provision of BAS-39 “Financial
instruments:Recognition and measurement”.

(c) Sale and repurchase agreement

Securitues sold subject to repurchase agreement (REPO)are reclassified in the Financial

Statements as pledged assets when the transferee has the right by contract or custom to sell
or re-pledge the collateral;the counter-party liability is included in amounts due to other
banks,deposits from banks, other deposits or deposits due to customers,as
appropriate.Securities purchased under agreements to resell (REVRSEREPO)are recorded as
loans and advances to other banks or customers,as appropriate.The difference between sale
and purchase price is treatedas interest and accrued over the life of the agreements using the
effective interst method.

Value of investment has been determined as follows:

Items Applicable accounting value

Goverenment treasury bills (HTM) At present value

Goverenment treasury bills (HFT) At market value

T & T bomds At Cost

Bangladesh Govt.treasury bonds At present Value

Prize Bond At Cost

BHBFC-debenture Face value

Investments in shares Marked to market

Foreign Investment in Share and FDR At rolling exchange rate on Balance Sheet date

Fixed assets and depreciation

a)All fixed assets are stated at cost less accumulated depreciation.

b)Depreciation is charged for the year using straight line method on all fixed assets other
than land at the following”

Category of fixed assets Rate of depreciation

2010 2009
 Land Nill Nill

Building 2.50% 2.50%

Furniture,Fixture & Fitting 10% 10%

General Equipment 20% 20%

Computer Equipment 33.33% 33.33%

Vehicles 20% 20%

Books 20% 20%

c)On addition to fixed assets depreciation is charged from the date of acquisition and no
depreciation is charged in the year of diposal of the same.

Non-Banking Assets

The Bank has shown Non-Banking assets acquired by vitue of decree from artha-Rin-adalat
at this market value as required by BRDP circular No.14 dated 25 june 2033.

Liabilities and provisions

a.Short –term benefits

Short –term benefits are employees benefits which fall due wholly within twelvw month after
the end of the period in which the employees render the related service.The Bank provide
various short –term benefits to its like incentive bonus,medical service, leave fare assistance
etc.

b.post-employment benefits:

i.Defined contribution plans

Defined contribution plans are post employment benefit plans under which an entity pays a
fixed contributions into a separate entity (Fund)and will have no legal or constructive
obligations to pay further.obligation for contribution to defined contribution pansion plans
are recognixed as an expense in the profit & loss account when they are due.
provident fund

the benefits of provident fund are given to the employeesof the bank in accordance with the
recognized Provident fund Rules as per section 2(52) of income Tax ordinance,1984 .The
provident fund was recognized with effect from 31 march,1987.The fund is operated by a
Board trustees consisting of 6 (six) members of the bank.All confirmed employees of the bank
contribute 10% of their basic salary as subscription to the fund. The bank also contributes
equal amount to the Fund.interest earned from the invesrments of fund is credited to the
members account on yearly basis.

ii.Defined benefit plans

Defined benefit plans are most employment benefit plans other than defined contributions
plans.The defined benefit plans of the bank to its employees includes.

Gratuity

The bank operates a funded gratuity scheme with effect from 01 july,2005,which is
administrated by a board of trustees consisting of 4 (four) members.Provision has been made
for liabilities under gratuity scheme in compliance with BAS-19 and Bangladeshbank
instruction provided in letter No.DBl 1 (private)/82/2008-257 dated February 20,2008.

Superannuation fund

The bank operates a Superannuation fund Trust by a board of trustees consisting of 5 (five)
members.The death-cum-survival benefits are given to the employees as per the eligibility
narrated in the trust rules.The fund got recognition from the national board of revenue with
effect from july 01,2005,as per part –A of first schedule of income tax ordinance,1984.The
Bank contributes to the fund annually as per suoerannuation fund rules.

C.Other Benefits

Other benefits includes leave encashment,house,building ,computer and car loan at a

consessional rate.

Provision for liabilities

A provision is recognized in the balance sheet when the bank has a legal or constructive
obligation as a result of a past event and it is probable that an outflow of economic benefit
will be required to settle the obligations,in accordance eith BAS-37 “Provisions, Contingent
Liabilities and Contingent Asets”.

Provosions for loans and advances

Provision against classified loans and advances is made on the basis of periodical review by
the management and instruction contained in BCD Circular No.12 dated 4 september
1995,BRDP circular no.16 dated 6 december 1988,BRDP circular No.9 dated 14 may
2001,BRDP circular No.02 dated 15 february 2005,BRDP circular No.05 dated 27 april 2005
and BRDP circular No.32, dated October 27,2010.The provisioning rate as per Bangladesh
Bank circular are as follows:

Business unit Rates of provisions

UC SMA SS DF BL

House Building & Professional 2.00% 5.00% 20.00% 50.00% 100.00%

Otherthan House Building & Professional 5.00% 5.00% 20.00% 50.00% 100.00%

Small & Medium Enterprise 1.00% 5.00% 20.00% 50.00% 100.00%

 BHs/MBs/SDs against shares 2.00% 5.00% 20.00% 50.00% 100.00%

All others 1.00% 5.00% 20.00% 50.00% 100.00%

Provision for Taxation

a.Current Tax

Current tax is expected tax payable on taxatble income for the year,using tax rates enacted
or substainlly enacted at the reporting date,and any adjustment payable in respect of
previous years.Provision for current income tax has been made @ 42.50% as prescribed in
the Finance act,2010 of the profit made by the Bank after considering major taxable
allowances and disallowances.

b.Defered Tax

Deferred Tax is calculated on the taxable / deductible temporary differences between tax
base amount and carrying amount of assets and liabilities as required by Bangladesh
Accounting Standard (BAS)-12 “Income Taxes”

Taxable temporary differences are temporary differences that will result in taxable amounts
in determining taxatble profit/(loss) for future periods when the carrying amount of the asset
or liability is recorded or settled.

Deductible temporary differences are differences that will result in amount that are
deductible in determining taxable profit (loss) of future periods when the carrying amount of
asset or liability is recovers or settled.

Revenue recognition
The revenues during the year are recognized complying all conditions of revenue recognition
as prescribed in Bangladesh Accounting Standard (BAS)-18, “Revenue Rcognition”

Interst income

The interst receivable is recognized on accrual basis.Interst on loans and advances ceases to
be taken into income when such advances are classified.It is then kept in interest suspense
account and in memorandum account. Interest on classified advances is accounted for on a
cash receipt basis.

Investment income

Income on investment is recognized on realization & accrual basis where applicable

Fees and commission income

Fees and commission income arises on services provided by the Bank are recognizede on a
cash receipt basis.Commissiom charged to customers on letters of credit and letters of
guarantee are credited to income at the time of effecting the transactions.

Dividend income on shares

Dividend income from shares is recognized during the period in which they are actually
received.Stock Dividend is recognized as income in the year in which it is sold.

Interest paid on Borrowing and Deposits

Interest paid on borrowing and deposits are calculated on a day basis and recognized on
accrual basis.
Management and other expenses

Expenses incurred by the Bank are recognized on actual basis whwnever necessary.

Foreign currencies translation and balance with other banks

Amount in foreign currency ara translated in accordance with the principles setforth in
Bangladesh Accounting standard-21 “The Effects of Changes in foreign Exchange Rates”.As
per this standard monetary items not denominated in BDT and cash transactions not
completed at the reporting date are translated in to BDT using current market rates.Non –
monetary items carried at fair value are translated into BDT using current market price at the
reporting date and non-monetery items carried at cost are translated using the rate
applicable at the time of acquisition.Transaction rates used to translate the items rlaqted to
income and expences.

Internal control and compliance management

Operational loss may arise from error and fraud due to lack of internal control and
compliance.Management through Internal control and Compliance Division controls
operational produce of the bank.Internal control and compliance Division undertakes
periodical and special audit of the branches and departments at Head Office for review of the
operation and compliance of statutory requirement.The Audit Committee of thee Board
subsequently reviews the reports of the internal Control and Compliance Division.

Earning Per Share (EPS)

Earning per share (EPS) have been calculated in accordance with BAS-33, “Earning per
Share”which is shown on the face of the profit & loss account.This has been calculated by
diving the net profit after tax by the weighted average number if ordinary shares outstanding
as ob 31 december,2010. Earning per share is adjusted for issue of bonus shares for the year
2009.
Cash Flow statement

Cash flow statement has been prepared in accordance with BAS-7 “Cash flow stements”and
under the guidelines of Bangladesh Bank BRDP Circular No.14 Dated 25 june,2003.The cash
flow statement shoes the structure of changes in cash and cash equivalent during the
financial year.It is broken down into operating activities,investing,activities and financial
activities.

Statement of changes in equity

Statement of changes in equity has been prepared in accordance with BAS-1, “Presentation
of Financial Statements” and under the guidelines of Bangladesh Bank BRDP Circular No.14
dated 25 june,2003.

Revaluation of foreign investments has been made in 2010 as per BAS-21 “Effect of changes
I Foreign Exchange Rates”on the other hand Govt.treasury bill and bonds have been valued
at market price as per Bangladesh Bank BRDP Circular No.05 dated 31.10.2005.
5 .Comments
National Bank limited is a private commercial bank established in 1983. At
present it has 111 branches and I’ve worked in its uttara branch as part of my
internship program. Uttara is a residential area and large portions of this branch’s
customers are people residing in the area. These people are mainly deposit
holders. Business transaction is concentrated in two large real estate firms and a
few private universities of the area. A large number of student make up the
branch’ regular customers.

The branch consists of a branch manager, assistant manager and 21 other

officers of various level and two peons and three guards. Work is distributed to
every officer. Each officer is assigned his/her work. As part of job rotation system
every officer is transferred within different departments of the branch within a
year. All officers report to the assistant vice president or thes Senior vice
president. The manager looks after the overall management of the branch.

The different departments of the branch are the accounts opening,

clearing, accounts, western union, deposit collection, foreign exchange, credit
management etc.

I’ve started my internship at the accounts opening department. Then I

moved on to the clearing department and credit department, foreign exchange,
cash department deposit western union, foreign remittance &card division.

The work in accounts opening & Cheque book issue section is simply
customer service. Only one officer is assigned with the job. Although this seems
enough during slack period, during rush hour there is clearly a need for another
employee in this department.

The clearing department consists of one principal officers. One officer

examines the cheque and makes the entries in the computer. The other officer
examines and verifies cheques, writes the vouchers, makes OBC and LBC entries,
writes other accounts information and etc.

The work distribution in this department is also rather uneven. One

officer seems to have a lot of time in his hand and other seems to be submerged
with work.

The credit department consists of two principal officers. The work consist
of issuing credit cards.

Acting as the primary bank contact with borrowers, maintaining thorough

knowledge of borrower’s business and industry through regular contact,
factory/warehouse inspections, etc.

It is the duty of officers in this department to proactively monitor the

financial performance and account conduct of borrowers, to be responsible for
the timely and accurate submission of Credit Applications for new proposals and
annual reviews, taking into account the credit assessment requirements and to
highlight any deterioration in borrower’s financial standing and amend the
borrower’s Risk Grade in a timely manner.

The overall atmosphere in the branch is friendly. Employees are warm and
friendly to customers as well as to each.
6.Recommendation
It is very difficult to recommend a strong organization like National Bank
Limited, which is performing over 26 years. I a suggesting to improve in some
areas. So it can perform better in future.

 NBL always take conservative decision to implement new idea.

 NBL should give attention to man power assessment and provide the
actual number of officer that need to run the every Branch.
 NBL have to more conscious about the promotional activities. They
pursued advertisement campaign in order to build a strong image
among the people. They should carry out aggressive marketing
campaign to attract clients. They can give advertisements in newspaper
and magazine, television
 NBL can pursue a diversification strategy in expanding its current line
of business. The management can consider options of starting merchant
banking.
 NBL should move towards Online banking operations.
 They have more CSR (Corporate Social Responsible) oriented.
7.Conclusion
In 2008 NBL earned the highest profit since it started in January
1983 and achieved strong growth in terms of capital and business size despite
uneasy domestic economic condition and Global recession.

With a strong deposit balance and assets National Bank Ltd run a efficient
way not only in our but also in the abroad. National Bank Limited has been trying
to operate its business successfully since 1983. The bank has already developed
good image and goodwill among its clients by offering excellent services. As a
newly established Branch, NBL Elephant Road is serving at its locality with utmost
satisfaction of the customer. So, NBL Elephant Road Branch has to compete with
those banks as well as other Commercial Banks. Today, the whole Banking sector
is facing a tough competition and challenge. In this situation this Branch is in
good position than any other Bank of its locality and day-by-day is increasing its
activities & goodwill.

Finally I can say that among the entire private bank in Bangladesh,
National Bank limited always providing the efficient service with very affordable
price. It is expanding their business all over the world with their performance
rapidly.