Accounting Policies & Procedures

Basis of Accounting

• The organization shall prepare its accounts on the basis of historical basis of accounting but assets shall be re-valued from their historic cost to reflect current values as necessary.
• The organization shall apply accrual based accounting method. Revenue and grants/donations shall be recorded in the accounting period it is received and expenses recognized when incurred. Loan and Grant revenue is recognized when received. Other revenues are recognized in accordance with the accruals concept.
• Grants and donations if any shall be recorded separately from operational activities. They will be shown “below” the operating line on the Income Statement, together with non-operating income and expenses and taxes. When transferred to the Balance Sheet, they will not be included in the Retained Earnings from operations, but in Contributed Capital (or Donated Equity).
• In-kind contributions must be recognized through journal adjustments that are supported by appropriate and objective documentation (e.g. agreements, formal letters or memos, Memorandum of Understanding).

Maintaining Accounting Trail

Every transaction would need to be traced back and forth since the account=books are maintained in a set pattern.

The trail is as follows:

• Expense—–Cash memo——voucher——cash book——ledger——trail balance——income and expenditure statement, balance sheet
• Hand in hand with an accounting trail, we can trace what we can call as a programmatic trail.
• Program plan—–Activity to be performed—–Authorization from the program head for the expense related to the activity—–Perform the activity—-Maintain the relevant program records.

The accounting trail is important as it helps to check/countercheck expenditure incurred/ activities done and thus helps in maintaining a transparent system.

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