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Person is not a perfect in all the contexts of his life. He has a limited mind and mind thinking approaches. It is the guidance from the almighty Allah that shows the man light in the darkness and the person finds his way in this light. Without this helping light, person is nothing but a helpless creation.
The teaching of the Holy Prophet Muhammad (PBUH) were also the continuous source of guidance for us especially his order of getting knowledge and fulfilling once duty honestly was key motivation force for us.
I am very grateful to Almighty Allah who permitted me to be trained in a real world organization, KAPCO, as well as to complete this report in a very limited time. I am also very grateful to every person of kapco staff especially
Mr. Sahib Khan Saif Manager HR
Mr. Muhammad Bilal Manager purchase
Mr. Zubair aslam Manager Tax and treasure
Mr. Muhammad Nawaz Ass. Manager HR
Mr. Muhammad Zubair Ass. Manager procurement
Mr. Muhammad Amin Ass. procurement
Mr.Fazal Mehmood Ass. procurement
Syed mujahid ali shah Ass. HR
Hamid hassan Ass. HR
Mr.Mushtaq Anjum Ass. HR
Mr. Abdul malik Assist. Finance Dept.
Mr. M.Akram Store manager
Mr. Farhan Khan O.D Section
Introduction
KAPCO is the largest Independent Power Producer (IPP) having the largest Combined Cycle Power Plant in Pakistan with total capacity of 1600 MW. The plant is located in Kot Addu, district Muzaffargarh on 180 acres of land. A further 200 acres are covered by the residential colony which comprises of over 900 houses, a ten bed hospital, staff and officer’s recreational facilities, two shopping centres, a bachelor hostel, three guest houses, two schools with over 1,400 students and three mosques.
KAPCO is the first industrial privatisation in Pakistan and came into being on 27th of June 1996 under an agreement between the Government of Pakistan, National Power – the UK’s largest power company (Now called “International Power”) and the Water And Power Development Authority (WAPDA).
The company has the solid background of profits and efficiency catering to the 7 % energy requirements of the country with a share of 29 % in the total power generation of IPPs in Pakistan. In theory the tariff structure of every IPP is such that its shareholders are guaranteed a fixed return, assuming they meet certain conditions set in Power Purchase Agreement (PPA) with Wapda. KAPCO has a three way relation with WAPDA. All at the same time, Wapda is its customer, lender as well as shareholder.
Initial Public Offering (IPO):
Privatization Commission of Pakistan has offered 20 % shares to Resident / Non-resident Pakistani Investors and the transferred KAPCO employees. Initially 88.025 million shares have been offered to general public at Rs. 30 per share.
Who constitute Kot Addu Power Company?
There are two main shareholders of KAPCO.
International Power plc, U.K is a leading independent electricity generating company with facilities in operation (10990 MW net) and under construction (610 MW net) in countries such as UAE, USA, UK, Australia, Czech Republic, Portugal, Turkey, Malaysia, Pakistan and Thailand.International Power has 36% management shares.
WAPDA, the Water and Power Development Authority, was created in 1958 as a Semi-Autonomous Body for the purpose of accelerated and unified development of water & power resources. WAPDA is one the largest organisation in Pakistan with regard to infrastructure, assets and human resources.WAPDA holds 64 % shares as well as it is the only customer for getting the electricity produced by KAPCO.
Description of the Plant
KAPCO is a combined cycle power plant with 10 gas turbines and 5 steam turbines. It is the most modern and economical combined cycle power plant in Pakistan. KAPCO plant with a capacity of 1600 MW is a multi fuel fired power plant running on Gas, HSD and Low Sulphur Furnace Oil (LSFO) simultaneously to avoid interruption in production and also to reduce cost of generation. It is also the only major power plant in the country with the ability to self start in case of a country wide blackout.
The gas turbines have low installation cost, easy and speedy erection and high loading rate as compared to conventional steam turbines. At gas turbine exhaust, substantial amount of heat energy is available in the form of hot exhaust gases, which leave the turbine at about 550 °C. This wasteful energy is used to generate steam in conduction type boiler commonly known as HEAT RECOVERY STEAM GENERATOR. High pressure steam so generated is then used to run the steam turbine which thus produces power without any fuel. This raises the plant efficiency to nearly 49 % against the 28 % of the conventional gas turbine. Generally a combined cycle power plant comprises of two gas turbines and one steam turbine. For reliability of machines, each gas turbine is provided with exhaust gases control dampers. These dampers lead the hot gases into the boiler or to the atmosphere as per operation mode of the plant. With this provision, the gas turbine can be run in simple cycle mode if the associated steam turbine is under maintenance or unavailable due to some other reason.
General Data of the Units
| Gas Turbines | Manufacturer | Capacity (MW) IDC | Fuel | Installation year |
| GT-1 | Siemens Germany | 95 | Gas / HSD / LSFO | 1987 |
| GT-2 | Siemens Germany | 95 | Gas / HSD / LSFO | 1987 |
| GT-3 | Fiat Italy | 82 | Gas / HSD | 1987 |
| GT-4 | Fiat Italy | 82 | Gas / HSD | 1987 |
| GT-5 | GE-Alsthom France | 79 | Gas / HSD / LSFO | 1988 |
| GT-6 | GE-Alsthom France | 82 | Gas / HSD / LSFO | 1988 |
| GT-7 | GE-Alsthom France | 77 | Gas / HSD / LSFO | 1988 |
| GT-8 | GE-Alsthom France | 79 | Gas / HSD / LSFO | 1988 |
| GT-13 | Siemens Germany | 106 | Gas / HSD / LSFO | 1994 |
| GT-14 | Siemens Germany | 106 | Gas / HSD / LSFO | 1994 |
| Steam Turbines | Manufacturer | Capacity (MW) IDC | Fuel | Installation year |
| STG-9 | ABB Germany | 87 | No Fuel | 1991 |
| STG-10 | ABB Germany | 97 | No Fuel | 1991 |
| STG-11 | GE-Alsthom France | 76 | No Fuel | 1995 |
| STG-12 | GE-Alsthom France | 82 | No Fuel | 1995 |
| STG-15 | Siemens Germany | 120 | No Fuel | 1996 |
| | Total Load (IDC): | 1345 MW | | |
| | Total Load (ADC): | 1360 MW | | |
The plant generated 5,918 GWH of electricity in the year ending June 2004, which was 1.5% higher than the previous year. The proportion of gas used to generate electricity was 72.1% while furnace oil was 27.5% and 0.5% was HSD. The plant utilization stood at 56.4%. Throughout the year 85.1% capacity was made available to WAPDA as against 77.9% during the year 2003. The Annual Dependable Capacity (ADC) Test of the power plant was successfully performed in April 2004. The plant achieved 15 MW above the required Initial Dependable Capacity (IDC).
After extending the gas supply, all the 10 gas turbines can run on gas fuel, which is the cheapest fuel.
Human resource department
Human resource department
Human resource is a greatest asset of any organization. Each organization either a manufacturing or service oriented does its best for the proper arrangement of its employees. These are the employees who are the distinction between organizations. These are the pillars of success in services or manufacturing organization.
People are needed to manage people. There must be in charge to direct and guide people in the organizations. So, human resource management is the art of managing people in the organization. For this purpose almost every organization has separate department which is called human resource department or personnel department.
In KAPCO this department was named as ADMIN in earlier as in WAPDA. In 2004 a new department “Human resource & corporate services” formed. This department has the following sections;
1) Operations
2) Organizational development
3) Corporate services
4) Security
( 1 ) Operations
The human resources (ops) section is performing all day to day activities of KAPCO regarding human resource. This section is performing following functions.
Ø New recruitment and selection
Ø Orientation and training
Ø Promotion and benefits
Ø Apprentices and Internship
Ø Updating personal information
Ø Maintain record of leave, loan, EPF,EOBI, etc
Ø Dealing with trade unions
1. New recruitments
HR operation deals with the recruitment of all kinds of employment including, regular employment, apprentices, Graduate Trainee engineers and wages employees.
a. Requisition of new employee
Sectional head not below the rank Grade M-2 sends employee’ s requisition form to HR Manager through Head of Department/General manager after obtaining approval from competent authority (chief executive officer).
b. Advertisement
The vacant position is advertised internally through notice board or externally through national newspapers. HR Manager with the help of the concerned sectional head finalizes the contents and format of advertisement outlining the following important points;
I. Clear name of position
II. Grade
III. Job description
IV. Qualification
V. Experience, age limit
VI. Last date of submission of applications.
HR Manager advertises the post after receipt of the approved requisition. C;;)..Scrutiny of applications
The applications are short listed on the basis of following;
lack of appropriate qualification, lack of experience, age, any other reason. New recruitments of trainee engineers carried out during my first week of internship.
D) SELECTION PROCEDURE
I saw recruitment procedure closely. The following procedure was carried out.
1) Test
2) Presentation
3) Group discussion
4) Interview
1) Test
I was the member of team who conducted test for new trainee engineers. The test consisted of three portion, English, general knowledge and technical.
2) Presentation
After written test the eight groups were called for presentation against selection committee. Each group of candidates was evaluated by their separate selection committee in closed rooms.
3) Group discussion
After presentation there was a session of group discussion. the purpose of this was to evaluate their abilities of communication, leadership and team management.
4) Interview
After then there was a session of interview. This was a group panel interview. This was a structured interview. The candidates were evaluated on the basis of the following;
ü Appearance
ü Technical/ professional knowledge
ü Experience
ü Potential
ü Maturity
E) Post interview process
Immediately following the final interview, each panel member -independently ranked the candidates before any discussion takes place amongst them. Then the HR section representatives collate the rankings and after mutual discussion, the panel arrive at a consensus on their recommendation for appointment on the prescribes number of posts and 10 % reserve candidates. The KAPCO sends the feedback to the unselected candidates and mentioned the reasons of their failure.
f) Orientation
The orientation is introduction of new employees to the organization and their work. The new employees are given information of
ü Organizational structure
ü Policies and rules applicable in the company
ü Attendance and leave procedure
ü General discussion about the company
The time of orientation is not more than two hours in KAPCO. But in case of trainee the orientation was not covering all the elements as mentioned above. They were not aware of policies and rules even after orientation.
2) Employee’s provident fund ( E.p.f)
The record of employee’s provident fund is also maintained by this section. The employee can contribute up to 10 % of his basic salary. Employees can take loan from this fund but maximum installment for repayment is 48 and also interest is charged on the outstanding loan. He can also take an option of permanent withdrawal once in his service time.
3) Company loan
Employees apply here for company loan. They can take loan for the following purposes;
i. Purchase of house
ii. Purchase of plot of land
iii. Repaying house building loan
iv. Purchase of conveyance
v. Marriage of self and children
Their 50 % of provident fund is retained as security. The employee also gives the guarantee of another employee of KAPCO.
4) Medical facilities, leaves & allowances
The HR Ops maintains the current information of employees. They update their record. For medical facility they provide record of dependents of employees. The record of employees leaves is also updated here e.g. annual leaves, frozen leaves, study leaves etc. The allowances are also calculated on basic salary by this section. Gross salary of employer is calculated here.
5) Training
The HR Ops Is also responsible for the training of staff.
6) Pension
Different organizations are providing the facility of pension to its employees which are paid to the employee at the time of his retirement. It is totally employer’s contribution and no deduction is made from the salary of the employee.
In kapco the pension is calculated as per company ploicy which varies from year to year. The employees are able to get this facility after the 25 year of service. In case of death of the employee his family can get pension amount but the employee must have completed 10 year of service. The pension is paid 50 percent in lump sum at the time of retirement of the employee and balance is commutated.
Organizational development
This section was formed on 2006. They perform the following functions
1. Training of officers
2. Performance appraisal of officers
1) Training of officers
For this purpose a training need assessment is carried out. There are two types of training
I. In- house training
II. External training
In-house training
This is carried out for operations, Maintenance and safety. The last t raining was conducted by a company NAVITUS. This was a in house training for the purpose of safety.
External training
In this the employees are sent to different training institutions. The engineers were sent to LUMS for management training for one year.
Evaluation of training
The evaluation of training is done through tests, discussion or exams during or at the end of training program. At the end of training an assessment panel may check improvement of trainees through interviews.
Performance appraisal
Performance refers to the degree of accomplishment of the tasks that make up an employee’s job. Where as performance appraisal refers to the evaluation and communication to an employee how he or she is performing the job and establishing a plan for the improvement.
Performance appraisal method at KAPCO
The kapco is using the management by objective method for the performance appraisal of the employees. This process is still limited up to the officers but in future there is plan for the same type of system for staff. The targets are set and performance is measured on quarterly basis and on the final analysis of one year the employees are awarded with cash bonuses. They are according to their performance which meets the targets or work more than these targets.
I5 % of annual basic pay who meets expectancy
30% of annual basic pay who works more than expectancy
35% of annual basic pay for those who works is exceptional.
Corporate services
The concept of corporate services in human resources department is new for us. The human resources department of KAOCO is also providing many corporate services to its employees. This section consists of four employees who are responsible to answer the GM HR and CS.
The corporate services section is providing the different functions for the employees of the KAPCO. These functions are
Hospitality services
It includes the stay arrangements of guests, meal arrangements and maintenance of the residential areas.
Transportation services
Requisition handling, vehicle insurance and claim, officer’s cars insurance, vehicle maintenance and driver’s professional training.
Administrative services
It includes the availability of furniture and fixture, offices allocation and setting, Canteen services and printing and stationary.
Traveling and hotel arrangements
International and domestic traveling, hotel arrangements etc are the main parts of this function.
Social action programme
This function includes the services to arrangements of the medical camps, infrastructure improvements in schools and hospitals of the local community. It also includes the general welfare projects.
Fair price shop
It includes the requisition for the purchase of items and inventry and quality management at the shop and also sale of the items as per defined quota for the employees.
Functions and celebration
The preparation of the budget for upcoming functions, support to the organizing committee and providing them the transportation and medical facilities is also the function of this section.
Contract and procurement
Contract and procurement
Procurement is the acquisition of goods or services at the best possible total cost of ownership, in the right quantity and quality, at the right time, in the right place for the direct benefit or use of governments, corporations, or individuals. Purchasing refers to a function in business whereby the enterprise obtains the inputs for what it produces, as well as other goods and services it requires. In larger businesses, the function is frequently carried out in a purchasing department, headed by a purchasing manager. The purchasing includes raw material,labour,services of experts,transportation,and storing of purchase items. The companies usually make cost benefit analysis while going for purchase decision especially in case of assets. In purchase contract the terms of payments, quality and quantity of goods, lead time, price and validity of order is mentioned. The companies try best to select the best supplier for the purchases, for this they use to see the past experience with the contractor and maintain performance records of different suppliers.
Tendering process
Procurement may also involve a bidding process i.e., Tendering. A company may want to purchase a given product or service. If the cost for that product/service is over the threshold that has been established (eg: Company X policy: "any product/service desired that is over Rs.1,000 requires a bidding process"), depending on policy or legal requirements, Company X is required to state the product/service desired and make the contract open to the bidding process. Company X may have ten submitters that state the cost of the product/service they are willing to provide. Then, Company X will usually select the lowest bidder. If the lowest bidder is deemed incompetent to provide the desired product/service, Company X will then select the submitter who has the next best price, and is competent to provide the product/service.
Purchase procedure
The purchase procedure of KAPCO is designed to ensure that the goods and services required by KAPCO are obtained at the best possible price, to the required quality and within the time. This procedure is followed by all those who are involved in the procurement process, and does not apply solely to Procurement personnel. The purchase process of KAPCO includes:
1) Identification of Requisition
2) Stock verification of Inventory in stores
3) Selecting potential suppliers or contractors
4) Invitation for tender
5) Tender opening and analysis of offers.
6) Authorization from Technical Engineer and Finance manager for budget purpose.
7) Placement of order
8) Payment (including taxes)
9) Maintaining records of performance
All employees of kapco shall conduct themselves in a manner that ensures maximum benefit to kapco. Therefore no employee commits to buy anything regarding plant without involving procurement department.
Requisition:
This is the very basic step for the procurement process. Whenever there is any requirement related to plant, then Technical officer of the individual block prepare a requisition on a predefine “purchase requisition Form” and after it, send this form to purchase manager for further process. The “purchase requisition form” contains number of items; quantity required description about purchase, commodity code, estimated cost, suggested suppliers or contractors and signatures of the relevant officer etc.
Stock verification:
As requisition received and reviewed, then staff member verify the stock in stores through software named as Q4W stock. And also new Enquiry number is issued for further process.
Selecting suppliers or contractors:
Selecting suppliers or contractors is much important task for kapco and the procurement manager asses the suppliers on their experience and quality control issues etc.
Invitation for tender:
Procurement department will issue the enquiries to different suppliers. These will be sent through courier service’s-mail enquiry can be sent in urgent requirement. During this process it’s the responsibility of purchase department that all suppliers are treated equally.
Tender opening and analysis of offers:
On receiving the tender in a closed envelop, they will be placed in the tender box. Two locks will secure the tender box and Finance department and purchase department will hold the keys for these. Tender panel will open the tenders twice in a weak or by their mutual agreement. The tender panel will stamp and sign the tender. After it procurement manager will prepare the analysis comparison statement.
Authorization for budget:
The comparison statement is then sent to technical officer who analyze the technical issues and with previous purchase rates and also checks the make of which company. Then send his report with comments to procurement department for further action. The purchase manager then negotiate with supplier or contractor for reducing the rates and finalize the terms and condition. After allocation of budget codes then file is transferred to Finance department to get the authorization of budget for payments
Placement of order:
Whenever negotiation has done and finance department gave authorization of budget, then purchase department place the order to the selected best supplier. Purchase order consists of lead time, payment terms, freight, and delivery situation.
Payments:
The company is in habit of making payment within 30 days after receiving the satisfactory note from purchase department. All the payments are made through bank. The payments may be made in advance it depends upon different situations.
Performance record:
KAPCO has developed a supplier assessment questionnaire to see the efficiency and good dealing of suppliers. The new suppliers are required to submit their auditable evidence. The KAPCO use to send this questionnaire at the end of two years.
Call off orders
The specification should clearly make reference to the fact that the order will operate as a call off order, and should clearly define the duration of the order. Normally these will be renewable on an annual basis. The method for tendering and placing the call off order are similar as for other orders, but once placed the KAPCO “call off” its requirements through a call off order.
Additional Rates
In call off orders if there is need to change the prices due to any reason(inflation, change in the value of currency) of these items than the company is in the policy to set the new price with the negotiation of the supplier so as the company has good relations with its suppliers so many times it has happened that the company easily handle these things.
Urgent or Emergency Purchase
As the KAPCO is in production industry and a lot number of machines are used at the plant and always there is danger to happen any emergency regarding the working of these machines. So for this the engineers are allowed to submit emergency purchase order. Such actions is warranted where there is insufficient time to go through the formal procurement process and failure to acquire the goods or services
Would represent unacceptable commercial or operational risk(safety, environmental, availability, lost generation or damage)
Reorder level
It is the level of different items which is set by the engineers with the negotiation of the purchase department. In simple words it is that quantity at which the engineer will give requisition for new purchase.
Reorder quantity
It is the quantity the engineer can ask at reorder level. For example if reorder level of any item is 2 and reorder quantity is 10 than the engineer is allow to send the requisition of 10 items when the 2 items are remain in the store. This level can be changed but the stock description form will be filled by the engineer or budget holder.
Import/Export Section:
Different companies in the market are engaged in the import/export of different business related items. Import basically refers to the purchase of goods and services from abroad. Where as export refers to the selling of goods to the foreign companies. As a power generation company KAPCO has a large quantity of installed machines and as a developing country we are still not able to generate such type of heavy machinery so KAPCO is doing import for machinery and services of experts.
Similarly when the KAPCO sends its machinery for the overhauling purpose to the foreign countries, then this process is called export cum re-import. And all this process is done by the import/export section.
Procedure for import purchase:
The procedure for import the goods are same as local purchase. The purchase order generally shows the ordered goods, their quantity, price (with currency), taxes, time and place of delivery, payments terms and delivery terms.
Payments Terms
Payments terms are an integral part of purchase order which are state the responsibilities of KAPCO towards payments. In
Local purchase the payment can be in advance or after the delivery of goods, but in case of imports there are multiple payment options available depending on requirements of KAPCO and the exporters which are as follows.
ü Direct payments
ü Letter of credit
Direct payments
Where KAPCO is agree with the exporter for advance payments than the amount is transferred to the exporter bank electronic funds transfers systems.
Letter of credits
The KAPCO is also using the method of letter of credit for making payments to the exporters. A letter of credit is a document issued mostly by a financial institution which usually provides an irrevocable payment undertaking to a beneficiary against complying documents as stated in the letter of credit. How it works
After a purchase order between KAPCO and seller, Mapco’s bank supplies a letter of credit to the seller through seller’s bank or through its own correspondent bank in seller’s city.
Seller consigns the goods to a carrier in exchange for a bill of lading for sea or airway bill for air shipments.
Seller provides commercial invoice, packing list, bill of lading to his bank in exchange for payments. Seller’s bank exchanges these documents for payment from KAPCO’s bank, which transfers it to the KAPCO for payments.
KAPCO provides bill of lading/airway bill to the carrier and takes delivery of goods
Export cum Re-import Process
Export cum re-import means, export for the purpose of re-import. Purchase order must be raised before export purpose. To export the goods for refurbishment, we must have
Performa Invoice
Bill of entry
Supplier’s letter
Indemnity bond
Packing List
Airway Bill/BL
Proforma Invoice:
This commercial invoice must contain into terms, original payment, delivery terms and HS Code. According to decided payment terms, LC is established or any other as per decided.
Bill of Entry:
Bill of entry is prepared by the agent as I have already described in import process.
Supplier’s Letter:
Upon completion of goods, supplier sends the arrival notice and that arrival notices include complete schedule of delivery time and date.
Indemnity Bond:
Indemnity bond is a legal requirement from the Government of Pakistan for the purpose of export cum re-import. It bounds the company that within specified time period, company will import the same equipment after refurbishment. Otherwise the company will pay the whole taxes on the original amount of that specified equipments.
Packing List
Packing list contains the detail of all the items being exported. This list shows the carton number, goods description, and gross and net weight
Airway Bill:
Airway bill contains the amount charged against goods. Different models are used for freight charges just like in kilograms.
Commercial Documents for re-import:
The authority letter will be issued to the clearing agent for collection and the custom clearance. Whenever completion has done, supplier sends the arrival timing, Airway bill, packing list, date, and port. Because these documents are required to get delivery order from airline. Clearing agent gets the documents form importer.
Stores process
Procurement department is managing seven stores. Three storekeepers manage all stores with their assistants and a store manager supervises all these stores. The stores names are alphabetically from A to G.These stores contain about 30,000 inventory level, which is controlled by software, named as Q4w stock. Each store is containing inventory approximately as
Store No Inventory Level
A 3743
B 3215
C 3215
D 3215
E 6500
F 3271
G 8117
PROCEDURE TO ISSUE ITEMS FROM STORE
In kapco, store department had issued an ‘ISSUE BOOK’ to every department. The requisitioning department fills the store issue note and gets approval from the store manager. The stores issue the required goods to the specified department. The storekeeper at that time makes required entries in the issuance register as well as in software. Three copies of store issue note are prepared, one copy is kept in department, second copy is sent to accounts and the third copy is kept in store record.
PROCEDURE OF STORE ISSUE
When goods and material are received in the stores, the relevant storekeeper requests an inspection of the goods and material by the engineer. The Engineer will check and verify the material in quantity and quality. In case of rejection of material, supplier will be notified immediately.
In kapco, store department has issued an issue book to every department. The repositioning department sends the store issue note and signs it from departmental head and store manager. The storekeeper issues the goods to the specified department and makes an entry in issue computer. Three copies of store issue note are prepared. One copy is kept in relevant department, second copy is sent to the Finance department and third copy is kept in store record.
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Finance department
Finance department
Finance Manger is supervising the all activities of this department.Financil Controller is responsible for accounting procedure and Tax & treasurer is responsible about the matters of taxation, and investment. Very first and an important function of finance department is recording the business transactions on vouchers. This is also called process of vouching. This is made for internal record keeping. Auditors specifically audit vouchers. Wrong vouching will lead to error in the system and ultimately create problems.
From vouchers information is recorded in daybook and cashbook. As each voucher along with its invoice, PO and other necessary documents are kept in the record room so daybook is one that can give information about parties DR and name of account CR along with amount.
In order to see accounts in condense form ledger is used. From daybook all the entries are posted in ledger. Ledger represents DR or CR balance of each party. So from ledger we can see amount that is to be paid to a party or the amount that is to be received and the balance at the end of the month.
After this all the DR balances and CR balances of all the parties are posted in trial balance. The trial balance must be equal at both sides. Otherwise there is any error in recording the transactions.
Now trial balance becomes the source of profit and loss and balance sheet.
This department also designs the accounting policies. All the work in this department is being take place on accrual basis.
The department prepares trial balance at the end of every three months and Profit and loss accounts and balance sheet are prepared at the end of year. The financial year ends on june30 of each year. The financial statements are presented to shareholders.
Exact Software:
Kapco is using accounting software named as EXACT. This software helps in preparing the final annual statements.
The Finance department of kapco is responsible for the entire accounting process of the organization and for an efficient handling of the accounts. The accounts department mainly performs the following functions:
Short term investment
The finance department of kapco is responsible for investment of funds in different companies but with the approval of the finance manager. The short term investment of KAOPCO in different companies is with the name of placements. The company has TFC of following companies
· Egro pvt ltd
· Bank al-habib
· Jahagir Siddqui bank
· PMCL
· Defense saving certificate
The interest on DSC is recorded as accruals and it is received on maturity with the principal.
Payments to suppliers
The finance department makes the payments to all suppliers regarding their sales to the company. The engineers sends the inspection report with invoice and goods received note to the purchase department, which sends these documents to the finance department for payment. If the delivery is late and no information is given than the finance department is charge .5percent for late delivery. The payments are recorded in purchase ledger invoice.
Petty cash book
For the payments which are less than 10000 the company has maintained the petty cash book. For getting amount from petty cash the individual has to fill a form which is approved by finance manager. Than the payment will be made to the individual and entry will be
Name of the employee Dr
Cash Cr
After the person submits the invoice of the purchase than the entry will be
Name of the expense Dr
Name of the employee Cr
Sale invoice recording
There are different companies which are using the residences and electricity, gas, house rent facilities of the KAPCO. So it the responsibility of the cash dealing officer to issue sale invoices to these different firms. The issue entry will be
Name of the company Dr
Name of the income Cr
Fair price shop dealings
The quotas of different employees are set for their purchasing
From fair price shop and it is totally on cards which issued to each employee. The deductions are made on monthly basis from the salaries of the employees. When purchases are made for the fair price shop the entry will be
Fair price shop DR
Name of the contractor Cr
Purchases
There are two types of purchases which are handling by the finance department of the KAPCO. It may be
Stock item
Direct charge expense
In case of stock item the entry will be
Stock Dr
Bills Payable Cr
In case of direct charge expense
Expense by name Dr
Account payable Cr
Financial Analysis
Financial analysis involves the use of various financial statements. These statements do several things. First the balance sheet summarizes the assets, liabilities, and owner equity of business at a moment of time. Next the income statement summarizes the revenues and expenses of the firm over a particular of time.
To see the financial positions of any company for short term and long term investment and for giving loan the analysis of different ratio is very necessary for a finance manager. Financial ratio is an index that relates two accounting numbers and is obtained by dividing one number by the other.
Importance of financial ration analysis
The analysis of financial ratios involves two types of comparison.
Internal comparison
The analyst can compare a present ratio with past and expected future ratios for the same company.
With the comparison of different ratio we can see whether the firm is going towards improvements or deterioration in the firms financial conditions.
External comparison
This method of comparing involves the comparing the ratios of one firm with those of similar firms or with industry averages at the same point in time.
Current ratio
This ratio shows the firm ability to pay the current liabilities which will arise in next accounting year. The ratio will be the more strong the company will be considered.
Current ratio = current assets/ current liabilities
17642951000/9530326000= 1.85
Year ratios
2007 1.85
2006 3.97
The firm has 1.85 rupee in current assets for the nest year liabilities.
Quick ratio
For looking the more liquidity of any firm the calculation of quick ratio is essential in this the slow moving items from assets like prepaid expenses and inventory is deducted from the current asset.
Quick ratio= current asset-inventory/current liabilities
Year ratios
2007 1.66
2006 6.86
Interest coverage ratio
The major part of the expenses of any business is interest expense which the company has to pay for the advances which it has taken for different purposes.
= EBIT/interest expense
Year ratios
2007 6.71
2006 6.86
It shows that the firm has 6.71 rupee for each one rupee of interest
expense
Debt Ratio
The debt Ratio indicates the firm long term debt paying liability and it is computed as follow
Formula
Total liabilities/ Total asset
Year ratios
2007 52%
2006 41%
This ratio shows that the firm 52 percent of total assets are financed through debt. And this ratio is increasing
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Swot analysis
SWOT Analysi
Strengths
§ Kapco has the hardworking, cooperative and trained staff. As well as very friendly environment.
§ The turnover ratio is very low because it is offering best packages to its employees.
§ ISO 9001, 14001, 18001 under the umbrella of IMS through SGS has been accomplished.
§ The HR dept is working for the increasing communication and computer skills of lower staff.
§ All manual procedures have been computerized.
§ Modern software’s are in use for quick and efficient system
§ .Health and safety department has ensured complete safety and security to workforce.
§ The price of the share of the kapco is always high than the price of share issue 1st time.
§ It has the biggest store in Pakistan.
§ Easy access to the top management
Weaknesses
§ As the wapda is the only buyer of electricity so the company is bound to give supply according to the choice of wapda.
§ After 2006 it is paying taxes while the 1st ten years it was exempt from this.
§ During the last ten years no expansion has been made for power generation.
§ The fear of inquiries is always there as the new government has changed the some points of power purchase agreement.
Opportunities:
§ All the expansion programs of KAPCO is free of tax.
§ As the whole country is facing the problem of electricity the importance of this power plant has much increased and it is effecting its share price.
Threats:
§ As the wapda is the only buyer of the electricity in Pakistan and company is bound to sale electricity to wapda, so it is totally depending on wapda for payments.
§ The kapco has to import the machinery and spare parts as well as the services of experts from abroad so the security conditions in Pakistan is very important.
§ In Pakistan, Several other projects are coming up in power generation. So Kapco management will face numeral challenges in technical workforce, because new competitors will offer better packages.
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