Aakar’s
OFFICE PRACTICE
and
ACCOUNTANCY
Book 10
Authors:
C. P. Sedhai
MBA., M.Edn
Edited by:
Dr. R.K. Singh | Mr. Suraj Maharjan
Mr. Sagar Adhikari
Aakar Publisher & Distributor Pvt. Ltd.
Kathmandu, Nepal, Tel: 01-4278629
Aakar’s
OFFICE PRACTICE
And
ACCOUNTANCY
Book 10
Published & Distributed by:
AAKAR Publisher & Distributor Pvt. Ltd.
Kathmandu, Nepal, Tel: 01-4278629
Author: C. P. Sednai
Language Edited By:
Dr. R. K. Singh | Mr. Suraj Maharjan
Text Editor
Niran Maharjan, Kathmandu | Mr. Sagar Adhikari
Graphic Mobilizer / Design
PSDESIGN # Manoz Manohar | Baghbazar, Kathmandu @ 9849055680
Copyright: © Author
First Edition : 2066
2 Edition : 2068
nd
3 Edition : 2069
rd
Revised Edition : 2076 (2019)
Revised Edition : 2078 (2020)
Printed in Nepal
Preface
Accounting knowledge is a core business skill that both complements and enhances
your other talents. Congratulations! You’ve received the right book to start developing
those accounting skills at school level. This book “Office Practice & Accountancy for
Grade 10” has been designed mainly for secondary level students on the basis of the New
Syllabus developed by Curriculum Development Centre (CDC), Government of Nepal.
While writing this book, I have applied very easy and practical approach. Both traditional
and modern approaches of accounting and basic official and budgetary concepts have
been given for easiness of teachers and students. With my past rich experiences (3
decades) in teaching profession, I have made every effort to present simple and practical
questions and their solutions, theoretical rules and detail explanations. I hope all teachers,
students and other concerned readers will have benefits from this book.
As you go through this book, you’ll find that accounting concepts or information influence
almost every decision you will make as a future manager. I’m interested in making sure that
you finish with an understanding of several key accounting concepts. The Key Features of
this book are as follows:
The matters are presented and designed in simple and easy way as to fulfill the requirement of
curriculum.
The syllabus developed by CDC is given in each chapter.
The learning objectives are given in each chapter.
The colourful pictures are used to make understandable of the topics.
Important and popular definitions of various scholars’ relevant subjects are given to enhance
the knowledge of learner.
Enough illustrations and examples are given according to the requirement of subject matter.
Important points and concepts are presented as ‘points to remember’ and ‘key point’ to remind
the major points of the topics.
Each chapter contains word index to learn the difficult words.
Each topic, theoretical questions are set as very short answer questions, short answer questions
and long answer questions according to the present question pattern.
Depth and sufficient numerical problems are given in practice as much as possible.
Necessary project works are given in most of the chapters to enhance the practical knowledge
of the students.
To develop this book to this form, I have got significant help from my colleagues;
Mr. D.R. Simkhada, Mr. Sagar Binod Adhikari, Mr. Niran Maharjan, Mr. Suraj Maharjan, and
Gaurav Chhetri. I highly appreciate the support and comments that I have got from
teachers and students. Without their classroom experience, guidance and advice, this
book could not have been prepared so effectively. I would like to thank the publishers
for publishing the series of the textbooks for class 8, 9 and 10.
Finally, I am still expecting the comments and creative suggestions from teachers, students
and well wishers so that I can bring out the next edition with improvements for better
impression.
Author
This book belongs to:
Name: ...............................................................................................................................
School: ...............................................................................................................................
Address: ...........................................................................................................................
Section: ........................................... Roll No.: ...........................................
CONTENT
S.N. Chapter Pages
1. Office Procedures 7
2. Filing 21
3. Trade 39
4. Financial Institutions 61
5. Trial Balance 99
6. Final Accounts 127
7. Government Accounting System 179
8. Journal Voucher 211
9. Bank Cash Book 255
10. Budget Sheet 277
11. Monthly Statement 293
Specification Grid 316
Model Question -1 317
Model Question -2 319
6 Aakar’s Office Practice and Accountancy - 10 Office Procedures 7
1 Office Procedures
Unit
CDC Syllabus 10 Periods
1.1 Introduction of an Office
1.2 Importance of an Office
1.3 Establishment of an Office Learning
1.4 Types of Offices Objectives
1.5 Introduction to Office Personnel After studying this unit, students will
1.6 Types of Office Personnel be able to :
Office Chief understand the meaning of office
Branch Office Chief procedure,
Office Assistant: Introduction and know the meaning and objectives of
Types Tippani,
Qualification, Functions and state the considerable points while
Qualities of Office Assistant drafting tippani,
know the meaning, objectives and
types of resolution,
explain the meaning, objective and
types of report,
know the considerable points for
preparing a report.
6 Aakar’s Office Practice and Accountancy - 10 Office Procedures 7
Office Procedures
1. Introduction
‘Office Procedure’ consists of two words. The word ‘Office’ is the place where jobs
are performed and the word ‘Procedure’ means the specific way of performing task. In any
enterprises, office activities are performed by a large number of persons having different
posts and responsibilities. The activities of such persons must be systematically organized.
The opinions and suggestions of all the staff should also be taken into consideration in
decision making process. All these things should be done through certain ways and
techniques. In this sense, all the persons working in an organization should participate
in decision making process through certain formal and legal ways and such ways and
techniques are called office procedures. The decisions are taken by the executives and
activities are done by the subordinate officers and assistants. Thus, for making effective
and democratic decisions in an organization, the executives should collect the opinions
and suggestions of the subordinates through certain ways and techniques and such ways
and techniques are known as office procedures.
According to Zone K. Quible, “Office procedure is that way and techniques of collecting the
opinions, views, suggestions and ideas of the staff for the effective decision making.”
According to Carl Heyel, “A procedure is a series of logical steps by which all repetitive business
action is initiated, performed, controlled and finished.”
Thus, office procedures may be defined as the ways and techniques of collecting ideas,
views, experiences, opinions and suggestions from the subordinate staff i.e. officers and
assistants for making effective decisions. By following the various office procedures, the
executive can take decisions according to time and situation and under the prescribed
legal provisions. All the necessary inquiries related with the problems, situations or cases
are made by the lower level staff and they suggest the executives accordingly. It is the best
way for the management to get things done through others with the distribution of right
job to right persons and the appropriate allocation of physical resources. In government
offices of Nepal, “Civil Service Codes and Rules” is the rule for office procedures but
in non-governmental offices, it is as per their own code of practice. Memo, resolution,
report, etc. are some of the important types of office procedures in the Nepalese offices.
They are:
Office Procedure
Tippani Report Resolution
To perform the office procedures, the following points should be considered.
i. Work should be done simply and easily.
ii. Work should be done efficiently.
iii. Work should be done effectively.
8 Aakar’s Office Practice and Accountancy - 10 Office Procedures 9
iv. Work should be done flexibly listing enough others opinions, views, suggestions
and revision should be made on the basis of them.
v. One should make himself believable to others for their contributions and efforts for
completion of the job.
Key Point Office procedure is a planned sequence of operations for handling recurring
business transaction and official activities uniformly and consistently.
Memo (Tippani)
2. Introduction
A memo, also known as tippani, is a kind of statement prepared at lower level and
forwarded to the higher level for taking decisions on various issues. It is prepared by a
staff at lower level i.e. an officer or assistant level in case when he/she does not deserve
right to take decisions on the issues or feels the necessity of the amendment in the existing
rules and regulations or even for the formation of new rules and policies.
It is an upward process and thus, it is forwarded to the respective higher level authorities.
The officers should carefully study the statements and facts, and write their opinions for
recommendations with their signature. In this way it reaches upto that level where the
final decision is made.
The top authority takes `Yes’ or `No’ decision on the case or event even by mentioning
sometimes a short reason. A memo is a statement of a case or a problem, including there
the factual information, provisions of prevailing rules and regulations and the opinions
and recommendations of the writer, prepared by a staff at lower level to forward to the
higher level for taking decisions. It also includes the past decisions if they have been
made earlier on similar cases. Sometimes, memos may be forwarded up to the Council of
Ministers for taking the final decision.
According to Oxford Dictionary, “Memo is an official note from one person to another in the
same organization”.
According to these definition, the tippani or memo is an internal process and reaches
the decision making level. Memos may be written for the approval of establishment or
upgrading of schools or colleges, creation of new posts, long term leave of the employees,
etc. against the respective applications.
Key Point Tippani is a written statement prepared by lower level staff and forwarded
to the upper level for making yes/no decision by the authorized person.
3. Objectives of Tippani
A memo is prepared for different purposes as per the condition and case of the
organization. Basically, a memo is prepared to supply necessary facts, statistics and
information to the executives for making various decisions. The important objectives of a
memo are mentioned below:
8 Aakar’s Office Practice and Accountancy - 10 Office Procedures 9
i. To inform the problems and situations to the executives.
ii. To collect different statistics, opinions and suggestions from the concerned staff
about a case or situation.
iii. To provide necessary information to the executive for taking reasonable decisions on
different cases.
iv. To make final decision from authorized level.
v. To suggest/ recommend for the necessary amendments in the prevailing rules,
regulations and policies.
vi. To guide the performance in the similar cases and conditions in the future and even
to create a proof, if necessary.
vii. To involve lower level staff in decision procedures for establishing democratic norms
and system.
viii. To formulate new rules, regulations and polices.
4. Drafting a Memo (Tippani)
Drafting a memo means the act of writing it. Since, it is an administrative process, it
should be written with due care. It needs special skill, knowledge and experience because
it should contain all the necessary and factual information and the provision of the
prevailing act, rules and regulations along with the writer’s opinion and suggestions. The
memo reader must understand the subject matter. The language must be simple, clear
and to the point. Thus, in order to make an effective memo, the following things should
be taken into mind and should be followed:
Considerations for Drafting a Memo
It is an upward process to communicate the problems, unclear matters, opinions and
suggestions from lower level to higher level for making decision. While drafting a tippani,
the important facts, present rules and regulations, etc. must be considered. Some of them
are as follows;
i. The subject i.e. the case, problem or situation should be mentioned at top and it
should be underlined or written on bold type letters.
ii. It should be simple, clear and concise so that, it can be easily understood.
iii. The current law, rules and regulations concerning the case should also be mentioned
clearly.
iv. All the necessary factual information along with the past decisions on similar cases
if any should be orderly/systematically mentioned so that, authorized officer can
make the effective decision.
v. All the supporting papers and documents to the case should be attached in serial
order with the memo for the authenticity of the information.
vi. The writer’s opinions and suggestions regarding the case should also be mentioned
so as to assist the chief for decision making.
viii. A tippani paper should be kept on the left side and all supportive documents on the
right side of a file.
vin. Since, it is forwarded to the higher authority, it should be written in polite and
courteous tone and words.
10 Aakar’s Office Practice and Accountancy - 10 Office Procedures 11
ix. Each officer receiving it should study carefully to ensure that it does not fall short
of any necessary information. Then, he/she should add his recommendations for
the approval of the case along with his signature and should forward it to the senior
authority for further procedures.
5. Specimen and Example of Memo
Memo may be written for the approval of establishment or upgrading of academic
institutions, creation of posts, approval of leave of the employees, etc. against the
respective application. The following is an example of a Tippani for the approval of sick
leave of a teacher in a school.
Approval of sick leave
United Academy
Pokhara, Kaski
Tel. No. 061-523804
Ref. No. 111/075/76 Date: 2075/10/16
Tippani and Order
Sub : Approval of sick leave of the Nepali Teacher Mr. Bhuban Acharya
Dear sir,
The letter of application for the approval of sick leave submitted by Mr. Bhuban
Acharya, the Nepali Teacher, of this school on 14-10-075, along with the doctor’s
certificate, is attached with this memo.
In the application, he has asked to approve his sick leave of two months with effect
from 21-8-075 as he was hospitalized completely for 60 days in TU, Teaching. Hospital,
Kathmandu and recommended to have, at least 45 days bed rest.
According to the provisions of the prevailing rules and regulations, a permanent
teacher can get a sick leave for 2 years, if proved by hospitalized documents and other
justifiable reasons, without paying the regular salary for the period, exceeding 15 days
a years. Records show that Mr. Ram Shrestha, the Social Teacher, had also enjoyed a
sick leave of 3 months, 2 years ago, for his medical treatment and was approved by the
Principal.
Thus, the school Principal can approve such a leave by fulfilling some formalities of
verifying the necessary documents.
Viewing all these conditions, I forward it for the approval of sick leave.
Submitted by :
.................. (sign) ..................
Mr. Hari Panta
Academic Administrator
It is forwarded with recommendation for approval, since there is not any short of logics.
Recommended by: Approved:
.................. (Sign) .................. .................. (Sign) ..................
Mr. Krishna Gurung Mr. Moti Gurung
Vice-Principal Principal
10 Aakar’s Office Practice and Accountancy - 10 Office Procedures 11
Resolution (Prastab)
6. Introduction
An organization may face a number of difficulties
and problems in the regular course of its operation.
It should tackle them in such a way that they can be
democratically solved. Similarly, a number of plans
and policies and some additional programmes are also,
to be approved and executed in the same way. For such
all purposes, they are to be systematically presented in
a meeting or conference for discussion and decision. As
such, a resolution is written form of proposal i.e. subject
mater or topic forwarded in a meeting or conference Meeting with staff
for discussion and decision. Thus, a proposal or agenda
when forwarded in a meeting or conference for discussion and decision is known as
resolution. It is said ‘Prastab’ in Nepali, it keeps similar meaning with the word “proposal”
and “Agenda of meeting, conference” and “subject matter of meeting.”
The resolutions of a company may be related with the election of directors, appointment
of auditors, declaration of dividends, bonus, raising of funds, amendment of articles
and memorandum of association, change of name, address or capital of the company,
dissolution of the company and so forth which are presented in the general meeting of
shareholders and board of directors, etc. They are accepted by the required majority of the
concerned members participated in the discussion and decision on the resolution. When
the proposals are forwarded in the meeting, some of them may be approved, as it is, some
others after necessary amendments and become resolutions but some may be rejected or
postponed until the next meeting. When it is passed or accepted by majority, it becomes
law or rule and should be followed by all.
Key Point A resolution is a written proposal / agenda presented in the meeting by a
member for discussion and decision.
7. Objectives of Resolution
There are certain objectives of resolutions. They are mentioned below.
i. To present the case, problem or situation in a systematic and orderly manner.
ii. To solve the problems and handle the cases by mass consensus.
iii. To conduct the meeting or conference successfully.
iv. To supply the necessary information by means of the decisions approved from the
meeting.
v. To formulate the rules and regulations, laws, plans and polices in favour of the
organization.
vi. To settle the misunderstanding and disputes by using as a proof document.
vii. To help for making effective decisions.
viii. To solve the problems of organization in democratic way.
12 Aakar’s Office Practice and Accountancy - 10 Office Procedures 13
8. Types of Resolution
There are different types of resolutions as the nature and type of meeting or conference.
Some of them are related with peace, security and defense, some others with financial
affairs, some are political, some others are religious, etc. Resolutions may be classified
from different angles but according to Nepal Company Act, 2063B.S., a resolutions is
divided as (a) ordinary resolution and (b) special resolution.
Types of resolution
Ordinary Resolution Special Resolution
a. Ordinary Resolution
Ordinary resolutions refer to those proposals which
are presented in the general meeting of the shareholders
or in the regular meeting of the Board of Directors and
accepted by the required majority. Simple majority or
shareholders holding more than 50% of total shares is
enough to approve the decision. The ordinary resolution
is related with the following affairs.
i. Presentation of audited financial statement of the
last year.
ii. Election of Board of Directors.
iii. Declaration of dividends and bonus. Resolution (Prastab)
iv. Appointment of auditors.
v. Fixation of remuneration and allowance of auditor & board of directors, etc.
Key Point An ordinary resolution relates to general matters of the company which is
presented and passed by the simple majority in the regular meeting.
b. Special Resolution
Special resolution refers to the major issues of company’s affairs. These are required
to be presented in the company’s general meeting or special general meeting. It can be
passed only by the special majority or the shareholders holding at least 75% or 3/4 of
th
the total shareholders present in the meeting. The special resolutions are related with the
following affairs:
i. Increase and decrease in capital of a company.
ii. Change in the memorandum of association and articles of association.
iii. Change in the company’s capital, name, address, objectives, etc.
iv. Issue of bonus shares and stock dividend.
v. Conversion of company from private limited to public limited and public limited to
private limited.
vi. Amalgamation, absorption and dissolution of the company
12 Aakar’s Office Practice and Accountancy - 10 Office Procedures 13
Moreover, the proposals presented and passed in the special session of the parliament
and special resolutions passed by the council of ministers are also said to be the special
resolutions.
Key Point The resolution presented in urgent or special meeting which can be passed
only by the special majority (3/4 or 75%) of the members is known as
special resolution.
9. Differences Between Ordinary and Special Resolution
Ordinary resolution Special resolution
1. It is presented for open discussion in 1. It is presented for open discussion in
simple issue and passed by simple major issue by special majority i.e.
majority i.e. above 50%. above 75%
2. It is presented in regular meeting. 2. It is presented in regular and special
meeting.
3. Decisions are made by simple majority. 3. Decisions are made by special majority.
4. Main issues of ordinary resolution 4. Main issues of special resolution are
are dividend and bonus declaration, changing of the rules and regulations of
appointment of directors, auditors, company, issues of bonus shares, liquidation
discussion of an audit report, etc. of the company, changing name, objectives
and capital of the company, etc.
5. It refers to general issue of the company. 5. It refers to the important issues of the
company.
6. It can be presented either oral or written 6. It must be presented in written form only.
form in the meeting for discussion.
Report (Pratibedan)
10. Introduction
An organization begins with certain goals and carries out the activities through its
office. Mere conduction of the activities is not enough for its success. It should observe the
progress of its performance in a regular interval of time, like a month, quarter, half year or
year, etc. As such, a report is a statement of the evaluation of progress of a job or project
after certain period or after its completion.
Similarly, some incidents or happenings such as strike, lockout, theft, accident, murder,
etc. may take place in an organization and in a social life in course of time. That should
be investigated and settled by the authorities even by forming various commissions and
committees. Such a commission or committee presents a descriptive statement of the
happening after a detailed study and investigation which is also a kind of report.
14 Aakar’s Office Practice and Accountancy - 10 Office Procedures 15
According to George R. Terry, “A report is written statement based on the collection of facts,
events and opinions usually expresses in summarized and interpretative value of the information.
It may deal with past accomplishments, present conditions and probable future development.”
Thus, a report may be defined as a historical statement of the evaluation of progress
of a job or project after certain period prepared by the authority or it is a descriptive
statement of an incident or happening prepared by the authorized body, commission or
committee with the facts and findings of the study, research and investigation along with
the opinion and suggestions of the writer. It is the best way of providing information to
the concerned authority about the achievement of the objectives and about the cause of
the happening or incident and its remedial measures in the private business organization
and in government offices as well. There are certain steps to be followed while preparing
a report.
i. Identification of problem ii. Determination of objectives
iii. Method of preparing report iv. Collection of data and presentation
v. Analysis and interpretation vi. Conclusion
vii. Recommendation
Key Point A report is a descriptive statement of any case, project or job presenting
real facts, findings, conditions and positions along with recommendations.
11. Objectives of Report
A report is one of the important office procedures. It is a source of information about
the performance and its progress or an incident. There are some objectives of preparing a
report. The main objectives of a report are mentioned below:
i. To inform the executives and the staff about the official condition and situation.
ii. To assist the executive or chief in the formulation of programmes, plans and policies.
iii. To evaluate the progress of a job or project.
iv. To find out the causes of delay in office procedures, if any, and the remedies for
removing them.
v. To suggest the concerned authorities about commencing a programme or project, its
impact upon the public life.
vi. To observe whether public services and welfares have been properly given or not.
vii. To bring into public knowledge, the findings of study, inspections, research and
investigation of any incident or happening.
viii. To stand as basis for making decision .
ix. To provide evidence and handle disputes and misunderstanding.
x. To guide the way of clarifying out official activities to staff.
12. Types of Report
According to the nature of subject matters, a report may be of different types such as
the employees’ performance report, progress report of a job, case report i.e. inspection or
investigation report, excursion visit report, academic report, etc. The main types of report
are described below:
14 Aakar’s Office Practice and Accountancy - 10 Office Procedures 15
Annual Report
Government Report
Types of Report Academic/Educational Report
Audit Report
Committee Report
i. Annual Report
It is a report prepared by a company, corporation or
other institution at the end of each fiscal year to evaluate the
performance progress during the year. It is prepared once in
a year. Annual report is a must for a company to submit to
the annual general meeting of the shareholders for getting
approval. The directors of a company prepare it by mentioning
the progress and achievement of annual targets and the
problems and difficulties faced during the performance. It also
includes the annual financial statements i.e. the income and
expenditures statement, balance sheet, etc. An annual report is
an important tool for performance appraisal. Annual report
Key Point The report which is prepared by the companies, constitutional bodies and
others organizations after completion of a year disclosing the part progress,
problems during the year, activities done in a year, achievement, etc. is
known as annual report.
ii. Government Report
A report prepared by a government authority mentioning
about the plan, its expenditure and achievement for public
knowledge is known as government report. The government
of any country launches a number of programmes and
projects in different public welfare sectors in order to render
services to its people. It incurs a large amount of expenditure
and different costly resources in such programmes. It should
publish the detail statement of the programme regarding its
income and expenditures and the achievement from time to
time for public knowledge. Collection of revenue, budget
of country, expenditure of budget, achievement of goods
and plans, service to the public, etc. are the examples of Government report
government report.
Key Point The report which is prepared by the government to give information to
the public about government plans, policies, programmes, activities done
by government, budget, etc. is called government report.
16 Aakar’s Office Practice and Accountancy - 10 Office Procedures 17
iii. Academic/Educational Report
This is the report prepared by a student or group of
students on a certain topic or chapter during or after an
academic session. It may also be written about extra-curricular
activities, exhibitions, excursion visit, etc. In Nepal, the
students of the post graduate level write academic report as
thesis and excursion activities. Nowadays, the students of the
graduate level have also started to write academic reports on
different topics. Academic report
Key Point The report which is prepared by the school, students or teachers on
completion of an academic year is known as educational report.
iv. Audit Report
Every organization maintains several books of account for
recording its financial transactions. It is necessary to examine
the books of account in a regular interval of time, say monthly,
quarterly, half-yearly and annually at the close of each fiscal
year to see whether the books of account are maintained as
per the accounting principles and prescribed financial rules
and regulations. The act of examining the books of account is
known as auditing and the person who performs auditing is
known as auditor. As such, the report prepared by an auditor,
after examining the books of account including therein the fact
and findings is known as audit report. It contains all the facts,
frauds, errors, etc. of the books of account and the auditor’s
suggestions to correct such frauds and errors. Such a report is Audit report
submitted to the authority to which the auditor is responsible.
There may be different types of audit reports. Internal audit report and final audit report
are the common and important ones, specially in case of a company.
The books of account of all the government and public enterprises are audited by the
Office of the Auditor General and those of the private organizations by the private
auditors having audit license from the Institute of Chartered Accountant.
Key Point The report which is prepared by an auditor after examination of books of
account is known as audit report.
v. Committee Report
There may happen many incidents into the social life and also in the organizational
environment such as theft, accident, murder, strike, etc. A commission or committee is
formed by the government authority or even by an organization for its detailed study
and investigation. The committee submits a statement of the detail findings of its study
and investigation on the incident to the authority to which it is responsible. Sometimes,
16 Aakar’s Office Practice and Accountancy - 10 Office Procedures 17
such a committee may be formed in different sectors as required. As such, a committee
report is the one which is prepared by a committee on a certain case, or happening after
the completion of its study and investigation, including therein the techniques used, the
facts and findings and the opinions and suggestions of the committee regarding the case.
The report of different parliamentary committees like Public Accounts Committee, Water
Resource Committee, the report of inspection committee, evaluation committee, etc. are
the examples of committee report.
Key Point The report which is prepared by the group of individuals formed by
organizations or government on completion of defined job or investigation
is known as committee report.
vi. School Report
The report which is prepared by the principal or head teacher by mentioning all
activities like future plans and policies, achievement of last academic year, financial
conditions, income and expenditure, future budget, etc. of the school to be presented
in the parent’s day or annual day of the school is the school report. In this report, it
includes academic result, achievements, performances, problems, progress, income and
expenditures, etc. of the school an annual basis for the public knowledge.
Key Point The report which is prepared by the principal or head teacher by
mentioning all activities like future plans and policies, achievement of last
academic year, financial conditions and budgets, etc. of the school to be
presented in the annual day is known as school report.
13. Drafting / Writing a Report
A report is an authentic source of important information and thus, it is a strong
basis for formulating plans and policies. It measures the actual performance of a job or
project with the planned standard or target and if any deviation is found between them,
its helps to apply the necessary corrective measures. Thus, a report should be simple,
factual, concise and complete to relay all such necessary information to all the concerned
parties. In this sense, a report should be carefully written so as to make it readable and
supportive to the objectives. A report writer should take many things into account while
writing it. The important things to be considered while writing a report are mentioned
hereunder.
Considerations for writing a report
i. On the top of the paper, the topic on which the report is written should be mentioned. It
includes the name of the report i.e. subject or head such as annual report, employees’
performance report, financial report, etc.
ii. The address to the reader or readers should be given according to their status.
iii. The period of performance i.e. half yearly, yearly, after completion of job, etc. in case
of the progress report or the duration of the commission or committee for the study
and investigation of the case should be clearly mentioned.
18 Aakar’s Office Practice and Accountancy - 10 Office Procedures 19
iv. The real picture of the performance should be presented in a report. If it is related to a
case study then the methods and techniques of the study, investigation, their findings
and the remedial measures should be presented in an analytical and orderly way.
v. If the report is related with an inspection visit, the problems found, their remedial
measures, etc. should be logically presented.
vi. It should be simple, concise and complete so that, there may not remain any
ambiguity and confusion to the readers. Moreover, it should be written in a polite
and courteous language to show due courtesy to them.
vii. Generally, codes, symbols, etc. should be avoided; otherwise the necessary
explanations of such codes and symbols should be given as notes.
viii. The report writer should state the findings of survey.
ix Date on which the report has been submitted should be mentioned.
x. The report writer for its validity should duly sign each report/page.
xi. The report writer should give his opinions and suggestions, if necessary. He should
mention them in separate paragraphs.
Glossary
Procedure : way of doing
Audit : act of checking the books of account
Drafting : writing
Approval : final positive decision made by authorized person
Amendment : change / improvement
Board of director : chief of managing committee/ board member
Board of directors : team of managing committee/ board member
Dividend : part of profit provided to shareholders
Remuneration : amount paid for definite work i.e. salary, wages, intensive, etc.
Bonus : additional incentive
Majority : more than 50% of the members in favour or against of any decision
Concise : to the point
Exercise
A. Answer the following questions in one sentence.
1. What is report?
2. What is meant by resolution?
3. What is meant by office procedures?
4. Define a memo.
5. What is drafting of a memo?
6. Mention the types of resolution.
7. Which office gives license to the auditor?
8. What is special resolution?
9. Why is tippani prepared in office?
18 Aakar’s Office Practice and Accountancy - 10 Office Procedures 19
10. Write any four types of report.
11. Write any two differences between ordinary resolution and special resolution.
B. Give short answers to the following questions.
12. What is Office Procedure? Explain any three types of office procedure.
13. What is office procedure? Explain any four points of importance of Tippani in
office procedure.
14. What is Tippani? Write any four points to be considered while drafting it.
2072 (S)
15. Write any five objectives of a memo.
16. “Tippani is an upward process,” Prove it.
17. Write a Tippani for an application tendered by Laxman Babu on 2075/11/2
requesting a sick leave for 35 days to be apportioned as 10 days from surplus
of leave of current year and 25 days in advance to be adjusted from the coming
year.
18. What is resolution? Explain its types. 2073
19. What is resolution? Write any two similarities and any two dissimilarities
between special resolution and ordinary resolution.
20. Explain five types of report. 2067 (R)
21. Write the differences between simple resolution and special resolution.
22. Write any five points that should be considered while drafting a report.
23. How does a report play a vital role to take a decision? Explain any three
objectives of a report.
24. Write any five objectives of report?
C. Write long answers to the following questions.
25. Why is tippani prepared? Mention any four points that should be considered
while drafting it. 2074 (PABSON), 2070, 2072
26. What is an office procedure? What are the importance of tippani? Write down
six considerable points while preparing a tippani.
27. Why is a report prepared? Mention any four points that should be considered
while drafting a report. 2070 (S), 2069 (S)
28. What is report? Write any four types of report in brief. 2076, 2074 (R)
29. What is office procedure? Mention any four points to be considered while
drafting a tippani. 2066 (S), 2067 (SOS)
30. What is report? Mention any four points to be considered while drafting it.
2069 (R)
31. What is resolution? Explain two types of it. 2073
32. What is proposal? Write any four differences between general proposal and
special proposal. NPABSON (2074)
Project Work
a. Draft a report of educational visit/tour of any place.
b. Make a report about the decision process in your school by consulting
your Principal, Vice-principal and teachers.
Filing
Aakar’s Office Practice and Accountancy - 10
20 20 Aakar’s Office Practice and Accountancy - 10 Office Procedures 21 21
2 Filing
Unit
CDC Syllabus 12 Periods
2.1 Introduction and need
2.2 Traditional filing-Box and misil file
2.3 Methods of filing-Alphabetic,
Numeric, Geographic and
Subjective
2.4 Vertical and Horizontal filing
2.5 Indexing-Introduction and use of
Objectives
indexing in filing Learning
After studying this unit, students will
be able to :
write the meaning of filing and
indexing,
state the objectives and importance of
filing,
classify the methods of filing,
describe the types/systems of filing,
write merits and demerits of different
types of filing,
know the use of indexing in filing.
Filing
Aakar’s Office Practice and Accountancy - 10
20 20 Aakar’s Office Practice and Accountancy - 10 Office Procedures 21 21
1. Introduction
An office is a source of information in the sense that it creates and collects various
kind of information and supplies it to the necessary parties by processing and recording
them duly. The term ‘record’ refers to notices, circulars, invoices, vouchers, charts, reports,
memos, books of account, policies, letters, agreements, contracts, treaties, business
statements, etc. Such records are necessary for an office from time to time to refer about
the past activities and introduce as a proof when required. Therefore, the records are to
be preserved in a regular and systematic manner so that, they are well safeguarded and
readily available. The arrangement and storing of information/record in a systematic
way is known as filing. Filing is the process of keeping the records of an organization
systematically for future reference. It is an important aspect of record management.
Various scholars define the term filing. Some of them are given below:
In the words of J.C. Denyer, “Filing is the process of classifying, arranging and storing records
so that, they can be located when required.”
Similarly, according to Kahn, Yerin and Steward, “Filing is the process of classifying,
arranging and storing records so that, they will be obtainable quickly when needed.”
According to A.N. Agrawal, “The systematic preservation of letters for the future reference is
known as filing.”
According to M.C. Shukla, “Filing means the preserving of letters, papers and documents so
that, they can be rapidly found out when required.”
In conclusion, filing may be defined as a regular and systematic process of collecting,
arranging and preserving the necessary records so that, they can be found and delivered
without delay and difficulty when required.
Key Point Filing is the systematic and scientific arrangement of documents, bills,
letters, etc. in a file for future reference and use.
2. Needs, Importances, Objectives of Filing
Filing is an important task of storing and preserving the records and documents.
The success of business largely depends upon a good filing system. Filing is storing of
records, not only for safety but also for locating them quickly when needed. Simplicity,
safety, flexibility, time saving, less space consuming, economy, completeness, etc. are
the qualities of the good filing. Filing brings a number of advantages to the business. The
following advantages of filing clearly indicate its importance and objectives.
i. Safeguarding Records
Filing preserves the records in files/folders and cabinets. So, it safeguards them by
protecting from the damaging factors like insects, rats, dust, water, fire, theft, etc.
ii. Providing Proof for the Future
Filing is a systematic and classified arrangement and storing of documents in
accordance with the pre-determined indexing. So, the records and documents from the
files can be immediately and easily found for future references in settling disputes and
misunderstanding, guidelines to the working staff and information to the executives in
formulating plans and policies.
22 Aakar’s Office Practice and Accountancy - 10 Filing 23
iii. Legal Formality
There may be a legal obligation to preserve some of the official records for a certain
time in the future. In such a case, filing fulfils the legal formality by presenting the records
for the future. Such records may be agreements enforceable by law, treaties, audited
books of A/c in case of a public company, etc.
iv Builds Business Image and Goodwill
A good filing system helps an organization to build up and boost its image and
goodwill in the society. It enables the society to make positive attitude towards the
organization, which results a good social relation. A good social relation leads an
organization towards success through their help and cooperation.
v. Increases Efficiency
A good filing system helps in providing the records whenever needed without delay
and difficulty. It facilitates the smooth performance and prompt replies of inquiries, etc.
In this way, filing serves in increasing office efficiency by means of regular supply of the
necessary information to the various units of the organization in time.
vi. Providing Information
Filing collects and preserves records and documents. It provides information to
the shareholders, government authorities, debtors, creditors, house owner and others. It
supplies reports of achievement, activities and information at the time of need with the
help of collected and preserved documents.
Vii. Collection of Documents
The main objectives or importance of filing is to collect documents from difference
sources. They cannot be preserved without their collection. Hence, collection of letters
and documents can be regarded as the objective or importance of filing.
Points to Remember
i. Safeguarding records ii. Providing Proof for the Future iii. Legal formality
iv. Builds business image and goodwill v. Increases efficiency vii. Providing information
vii. Collection of Documents
3. Classifications / Methods of Filing
Classification or method of filing refers to a particular way of arranging the records and
documents in a file/folder or cabinet. Files can be arranged in order of alphabets, numbers,
places, subjects and dates. Some important methods of filing are briefly discussed below.
Methods of Filing
Alphabetical Filing Numerical Filing Geographical Filing Subject Filing
Method Method Method Method
22 Aakar’s Office Practice and Accountancy - 10 Filing 23
A. Alphabetical Filing Method
In alphabetical classification, records and files are arranged in alphabetical order.
Alphabetical filing is a process of arranging and classifying records alphabetically by
applying the alphabetic indexing rules. Under this method, files are kept systematically
from the front to the back or from the left to the right in drawer or cabinet in the order of
alphabets like A, B, C, .............. Z, in English script and s, v, u, ===================== 1 and c, cf,
O, ======================= cM. in devanagari script. If several names occur from the same alphabet,
the second letter is considered and again if the first two letters are same, then the third
letter is taken and so on. For example, if there are two names as Abdul and Abbal then,
Abbal is taken first because the third letter is ‘b’ in Abbal whereas it is ‘d’ in Abdal i.e.
‘b’ is the earlier letter than ‘d’. The alphabetical filing may be used for correspondence of
files, records, etc. It has two special merits, viz. (a) it is based on alphabetic sequence to
which everyone is familiar and (b) no card index is required for this filing method.
Key Point The process of the arrangement of files and folders in a drawer according to
the names of correspondents in alphabetical order is known as alphabetical
filing method.
Rules for Making Order of Names in Folder
The following are the rules for making order of names in the folders.
Individual Name
Suman Regmi as Regmi, Suman
Ram Babu Sedhai as Sedhai, Ram Babu
Individual Name with title and degree
Dr. Gyandra Neupane as Neupane, Gunandra (Dr.)
Dean. Dr. Bharat Thapa as Thapa, Bharat (Dean, Dr.)
Capt. Subash Thapa as Thapa, Subash (Capt.)
Firm Name
Bharati Textile Industry as Bharati Textile Industry
Piya Trade Links as Piya Trade Links
Individual as well as firm Name
Ganesh Neupane Motor Parts as Neupane, Ganesh Motor Parts
Sabina Neupane Jewelers as Neupane, Sabina Jewelers
Rules for Alphabetical Filing
Most of the organizations file their records in alphabetical order. In organizing
alphabetical filing, there are some common rules, which are introduced below in short:
i. Primary guide card
Primary guides are those guides, which divide the folders into major alphabetical
sections. These guide cards are kept at the beginning of each section respectively. It has a
tab at the top left corner before the individual folders. Alphabetical captions are written
in the tab of such primary guides.
24 Aakar’s Office Practice and Accountancy - 10 Filing 25
ii. Individual File/Folder A A-E
Individual file is the one, which is maintained in
the name of a person or firm having at least five records.
Individual folders are arranged alphabetically after the
respective guides. The individual files are kept behind the
primary guide cards.
iii. Special File/Folder
Special file or folder is the one, which is maintained for the correspondent, whose
documents are very important and frequently used from time to time. In order to identify
the special files, the files with tabs, positioned at the right hand side, are used and the
name of the person or subject is written in bold typed letters or in different colour in the
tabs.
A Acharya, Sudip Aakar Publication
A Acharya, Sudip
Special file
Individual file
Individual file Primary guide
Primary guide
iv. Out Guide Card
When a file or folder is taken out of the filing cabinet for reference, out guide is put
on that place. This card contains a tab at the right hand side. The out guide indicates the
date and time of the folder taken out. Name, position and the signature of the person or
authority taking it should be mentioned along with the duration and the purpose of the
folder So, taken out. An out guide may be as the following.
OUT
Name of the person/ Name and No. of the file
Date Time Position Signature
authority file
v. Miscellaneous files/folders
Miscellaneous file is the one, which is used for those Miscellaneous
persons and firms who have less than five documents or
letters. The tab of miscellaneous file is placed just in right side
of special file or individual file. The word ‘miscellaneous’ is
mentioned on its tab. When the documents of a person reach
up to five or more in this file, a separate individual file is
created for him and is placed at the back of the primary guide.
Advantages
i. It is easy and simple to understand and use because the files are arranged in
alphabetical order and alphabetic letters are common to everyone.
24 Aakar’s Office Practice and Accountancy - 10 Filing 25
ii. It is a flexible method in the sense that it can easily adjust additional files and delete
the old ones which are no longer required.
iii. It provides a direct reference to records because the records are grouped by names.
iv. No separate indexing is necessary, as the files are self indexed.
v. It is suitable for both small as well as big offices and mostly to those where names are
more frequently used than numbers.
vi. It is economical, as it does not need separate index and trained staff.
Disadvantages
i. It is not suitable for the big and modern types of offices because it cannot cover the
ever increasing records/documents under its rules and order.
ii. Difficulties arise in the arrangement of records/documents due to misspelling of the
names and files of the same names.
iii. It is difficult to arrange the names while writing on the tab of the files.
iv. It is not suitable for those organizations where numbers are used instead of the
names.
v. It is not secret method as name is written on the tab of files.
vi. It is difficult for arranging documents due to mis-spellings of the names.
B. Numerical Filing Method
Numerical Filing Method is a process of assigning
distinctive number to each file and arranging them numerically
i.e. 1, 2, 3................ . If the same person has more than one
file, such file will be given decimal numbers like 2.1, 2.2, 2.3
.................. . Under this method, each person, firm or subject
is allotted with a number. All the records/documents related
with a particular person or subject are placed in one file
bearing its distinctive number. There is no chance of giving
the same number to different folders and thus, there is no
chance of confusion in arranging and finding out the folders in
the drawers. Thus, a Numerical Filing Method is that method
of filing, in which the files are arranged in the order of their Numerical files
number instead of alphabet of the name.
A separate index is prepared for the name of the person/ firms or subjects of the
corresponding file number. This helps in finding out a given file/folder from the drawer
quickly and easily. Index may be prepared in the order of alphabet of the name of persons
or subjects or in serial orders.
Cards containing name, address, phone number, subject and other necessary details are
prepared and inserted in proper places. The filing clerk must consult alphabetic index
to determine the file number, otherwise it becomes difficult to locate the concerned files.
Key Point The process of arrangement of files/folders in a drawer according to the
numbers of correspondents in numerical order is known as numerical
filing method.
26 Aakar’s Office Practice and Accountancy - 10 Filing 27
Advantages
i. It is the most systematic method because it can be used or adopted as per time and
situation.
ii. It is a flexible method because it can easily expand and reduce the documents and
files/folders.
iii. Since there is a separate index, it is easy and quick to find out any of the files with the
help of index cards and catalogues.
iv. It is useful for those organizations which have large number of files because there is
no any limit to the numbers to classify the ever increasing records.
v. It is a must to the organizations like traffic police, insurance company, library, etc.
which use numbers of the correspondents instead of their names.
vi. It is a secret method of filing as only a number is allotted to the file which does not
provide any information to the outsiders.
Disadvantages
i. This method is expensive because it needs separate index and trained manpower to
handle it. Thus, smaller and poorer firms cannot adopt it.
ii. It is not suitable for those offices which use names of the correspondents or subject
instead of the numbers.
iii. This method is more time consuming while referring the guide cards and index
cards to know the numeric code.
iv. It is more complex and difficult to understand. So, staff without having technical
knowledge cannot use it.
v. It consumes more space due to arrangement of folders in vertical position and
separate card index.
vi. It is quite impossible to remove the useless file because the number given to a
particular file cannot be removed.
C. Geographical Filing Method
Geographical filing method is that, which classifies
the records/ documents according to the geographical
location of places, then again the documents of each
location are classified in alphabetical or numerical order.
This method is mostly applied by those organizations,
which operate the business all over the country or many
countries of the world. The classification may be made
country wise, province, zone, district, state wise, or town Geographic filing method
wise order. Post offices, mail order business, public utility
service organizations, banking institutions use this method to classify, and arrange their
records. It applies, at least, two classification one, on the basis of places, the other, on the
basis of alphabet, number or subject but within the geographical classification.
Key Point The process of classifying the files and folders according to the geographical
locations and arranging them in alphabetical or numerical order in the
separate cabinet or drawer is known as geographical filing method.
26 Aakar’s Office Practice and Accountancy - 10 Filing 27
Advantages
i. This method is very easy to understand and use. Files are arranged in the order of
the names of the places and different drawers and cabinets are used to keep the files
of a definite place.
ii. This method is advantageous, specially for those firms, which have correspondence
with a large number of places in home country and foreign countries and which
have several branches.
iii. Both alphabetical and numerical methods can be used under the geographical
classification.
iv. It is very easy to find out the files when names of the places are known.
v. It saves time for filing and obtaining documents due to the provision of alphabetic
geographic guides.
Disadvantages
i. There is a trouble in making various types of guide cards and indices.
ii. It is expensive because it is a huge system and thus, cannot be used by small
organizations.
iii. It is difficult to make the order for arrangement of files without appropriate
knowledge of geographical location of places, and thus, there is more like for the
errors to occur.
iv. The names of the places of the correspondents are written in the drawers and folders,
so secrecy cannot be maintained.
v. It takes more time to find the files and documents.
vi. Trained and qualified manpower is required.
D. Subject Filing Method
The method of arranging and storing records/
documents according to their subjects is known as
subject filing method. This method of filing is useful
where subject is more important than the name of the
person or firm. Thus, in this filing, all documents related
with a subject are brought together in one file even
though they may have come from different sources. Subject filing method
In a government office, subject may be salary, labour
budget, furniture, stationery, machineries, contingencies, etc. In trading office, the subject
may be salary, rent, clothes metallic materials, oil, sport materials, and miscellaneous.
If the number of records /documents/correspondence subject file of a certain subject is
too large, sub-divisions are also made. For example, the records of clothes may be sub-
divided into polyster, cotton, wool, nylon, etc. For the identification of a particular subject,
guide cards are also place in drawers. The subjects are alphabetically classified. Primary
guide, subject guide, subject or individual file, miscellaneous files, etc. are used under this
method.
Key Point The process of arranging files and folders according to the subject of
correspondence in alphabetical order is known as subject filing method.
28 Aakar’s Office Practice and Accountancy - 10 Filing 29
Advantages
i. This method is simple and easy to understand and use because subject head is
written on the file.
ii. It is a flexible method because the number of files can easily be added and deducted.
iii. It is easy to keep, arrange and locate the file as different guide cards are used.
iv. It is suitable for those offices where subject is more important than name and numbers
like, Land Revenue Office, Chief District Office, Court, etc.
v. The documents related with a same subject can be found in one file.
Disadvantages
i. It is difficult to find the document of a particular person because the documents of a
person are kept into different files as per their subject.
ii. It is difficult to decide the subject of a document or a paper.
iii. It is not a secret method as the details related with files are on the face of files.
iv. It is an expensive method as it requires trained manpower and more cabinets.
v. It is difficult to divide the subject and sub-subjects of documents due to having two
or more subjects in the same document.
vi. It is not useful for miscellaneous papers due to having no specific subject.
4. Differences between Alphabetical Filing and Numerical
Filing
Alphabetical filing Numerical filing
1. The name of the file holder is written on the 1. The number is written on the face of file.
face of file.
2. Files are arranged in order of alphabets like 2. Files are arranged in order of serial number
ABC....Z or s to 1. like 1, 2, 3, 4.
3. Separate index card is not required to find 3. Separate index cards are required to find the
the files. files.
4. It is used by the office which has more 4. It is used by the office which has more
importance of name than numbers. importance of number than name.
5. It is simple method in use. 5. It is complex method in use.
6. It is an economical method. 6. It is expensive method.
7. It is flexible method. 7. It is flexible method.
8. It is suitable for small offices which have 8. It is suitable for big offices which have large
limited number of files to be preserved. number of files to be preserved.
5. Types / System of Filing
System of filing refers to the style or way of keeping the documents in a file/folder
and the file/folder in a cabinet. It must not be confused with the method of arrangement
and storing of documents, file/folder. Different offices from the past have used different
28 Aakar’s Office Practice and Accountancy - 10 Filing 29
systems/types of filing. Thus, there are many systems of filing found in practice from the
past to the present. They may be categorized as the following types:
Filing System
Traditional filing system Modern filing system
Misil filing/case filing Box filing Horizontal filing Vertical filing system
A. Traditional Filing System B. Modern Filing System
A. Traditional Filing System
The filing systems which have been used from the long past and still today, in some
offices, are known are traditional /old system of filing. The common types of traditional
systems are discussed below.
i. Misil Filing /Case Filing ii. Box Filing
i. Misil Filing /Case Filing
Misil file is that type/ system, in which the
documents related with a particular case are collected
and kept in pile, one after another in the order of dates.
All the documents of a certain case, in a particular limit,
are just punched at the top left corner and tied together
with a lace. The process of collecting and arranging
documents related with a particular subject or case in a
pile by punching and typing in chronological order is
called misil filing. This system of filing is very common in
the courts. Different numbers may be given to different
misils such as misil 1 for criminal case, misil 2 for civil
case, etc. The case classified under each number can also
be subdivided into different heads. The advantages and
disadvantages of misil filing are mentioned below: Misil filing
Key Point The process of collecting and arranging documents relating to a particular
case of subject in a file/pile by punching and typing in chronological order
is called misil filing.
Advantages
i. This is a simple and easy system, so special knowledge is not required.
ii. It is a flexible system because any letter/document related with a particular case
may be added or reduced, at any time.
iii. The previous cases can be referred to take the decisions in the new cases of similar
types as the documents can be easily taken from the concerned misil with the help of
the number.
30 Aakar’s Office Practice and Accountancy - 10 Filing 31
iv. It is suitable for the courts because the cases can be identically classified into certain
subject/misils.
v. This system is suitable where different cases are handled.
vi. Misils can be located easily in order of misil numbers.
vii. This system is cheap/economical.
Disadvantages
i. This system is unscientific and impracticable for the offices other than the courts.
ii. The documents may be dropped down or lost away, while taking or adding any
document.
iii. The words or figures may disappear, while punching the papers, which may cause a
wrong or incomplete meaning.
iv. Indexing is required in this system.
v. It consumes more time in punching and filing the documents.
vi. It consumes more time to find the particular file of a person.
vii. It is not safe because the files are kept on floor or open drawer or cabinet.
ii. Box Filing
The way of keeping records / documents in a metal,
wooden or paper box is known as box file. Papers and
documents are just kept loose in pile inside the boxes, unless
they are full in the chronological order. Under this system, the
documents of earlier dates are placed at the bottom and the
latest dates are placed at the top of the box. This is also a very
old type of filing and mostly used in household transactions.
In some offices, it is found being used to keep the papers of
temporary terms. It may be kept at the side of the table or
corner of the room. A specimen of box filing is as given below. Box filing
Key Point The act of collecting and preserving the letters, bills and documents of
temporary nature in a box in loose position is known as box filing.
Advantages
i. It is a simple and easy system of filing.
ii. It is economical in the sense that only a few boxes are enough and it does not need
more place and trained staff.
iii. Since the papers are not punched, their spelling and meaning will not be spoilt.
iv. Since the papers are kept loose, it is easy to take out any paper from the box.
v. Paper and documents become safe inside the box.
vi. It consumes less space to keep the box at a corner of the floor or on the table.
Disadvantages
i. There’s enough chance for the papers to be misplaced or lost because they are not
tied.
30 Aakar’s Office Practice and Accountancy - 10 Filing 31
ii. It is difficult to open and lock the box frequently, and get the paper from the middle
of the pile.
iii. It is not suitable for big and modern types of organizations because such box cannot
hold many files and folders.
iv. It is not suitable for preserving the documents having long term importance.
v. It takes more time to find the required papers and documents because the papers are
kept in a pile.
vi. It is not flexible.
B. Modern Filing System
The old and traditional systems of filing could not fulfil the requirement of the
modern business organizations. The importance of filing has been increasing in course
of the development and growth of business activities. The information technology has
been more advanced and the filing also has become complex, in the same extent. The new
and modern ones replace the old filing system. Many improved and sophisticated filing
equipments and tools are developed to meet the filing requirement of a business concern.
The commonly used, modern filing systems are discussed below.
i. Horizontal Filing ii. Vertical Filing System
i. Horizontal Filing
Horizontal filing system is the one, under which records
/documents are kept in the file/folder and the files/folders
are kept on the table/drawer in flat or sleeping position, one
upon another. In this system, the folders made of thick paper of
cardboard are used to hold the papers. Generally, flat files set
with hinges to fasten the papers and lever arch files containing
metal arches for holding papers are used in this system. The
papers are first punched and inserted in the hinge of the files.
All the papers related with a certain person, firm or subject are
placed in the folder in a chronological order as shown below or
the papers to be filed are punched and inserted in the arches.
The lever is pressed to insert and take out the papers in and
from the file/ folder as shown below. Horizontal filing
Key Point The way and style of keeping files on the table/drawer in sleeping or flat
position, one upon another is known as horizontal filing.
Advantages
i. It is simple to understand and operate.
ii. It requires less equipments and tools and does not require trained staff. Thus, it is
comparatively cheaper.
iii. Papers are safe in this system because they are tied or fastened in the folders.
iv. It is flexible because the increase/decrease of the number of files does not create a
notable problem.
32 Aakar’s Office Practice and Accountancy - 10 Filing 33
v. Since the documents of a person/firm or subject are kept in chronological order in
separate files/folders, they can be quickly found.
vi. It occupies less space as the files are kept one upon another in a pile and can be kept
on the table.
Disadvantages
i. This system is more time consuming for punching the documents and keeping them
by fastening and taking out by opening the hinges or arches.
ii. It is difficult to arrange a large number of documents in the file folder as they are
kept in a pile and their position cannot be seen at a time.
iii. While punching the documents, the words or figures may also be punched, this may
cause loss of spellings and meanings.
iv. There’s not enough security of the documents since they are not kept in drawers and
cabinet with lock system.
v. It is not suitable for large scale organization because it has less expansion or scope.
ii. Vertical Filing System
The way and style of keeping files in standing or
upright position in support of each other is vertical filing.
This is the most modern type or system of filing, which is
the remedy for the limitations of other systems of filing. It
is suitable for those offices, which have increasing volume
of papers/ documents. Since folders are kept in the vertical
position, there is no need of punching and tying papers.
The folders are placed in the drawers or cabinets in an
alphabetic, numeric or subject wise order along with the
guide cards. A simple example of vertical folder is as given
below. Vertical filing
Key Point The way or style of keeping files / folders in drawer/cabinet in standing or
upright position in the support of each other is known as vertical filing.
Advantages
i. It facilitates ready reference as the caption or heading of each folder is visible from
the tab or extended edge of the back sheet.
ii. Since papers are kept loose, it is prompt to keep and take out them without disturbing
their order.
iii. It is suitable for all types of classification such as alphabetic, numeric, geographic,
subject wise, etc.
iv. It also provides greater safety to the documents since they are well protected by
folder and kept safely in drawers.
v. It is flexible enough because it has enough ground for expansion and contraction.
32 Aakar’s Office Practice and Accountancy - 10 Filing 33
Disadvantages
i. There is chance for the papers to come out, or be dropped or misplaced, while
keeping and taking out the documents.
ii. It is costlier because it requires various types of tools and equipment like special
drawers, cabinets, folders and separate index i.e. the list of files and trained personnel.
So, it is not suitable for small and traditional types of organizations.
iii. It takes more time for the preparation of index and guide cards.
iv. It occupies more space because under this system big and heavy filing cabinets are
used.
v. It requires a trained person for its operation due to its complexity.
6. Differences between Horizontal and Vertical Filing
Cause of Difference Horizontal Filing Vertical Filing
1. Position of files Files/folders are kept in a flat or Files/folders are kept in a standing
sleeping position on the table or or upright position in drawer or
drawer, cabinet.
2. Use of instruments Flat files or arch files are used in Specially, made folders, which can
keeping documents and even the be stood in itself and a filing cabinet
drawers are as required. are used to keep documents.
3. Cost element and It is less costlier and thus, it can It is more costlier and thus, suitable
suitability also be followed by small scale only for the rich, big and modern
organizations. organizations.
4. Time consumption It is more time consuming as the Documents can be quickly filed
documents are to be punched and as punching and fastening are not
inserted in hinges or arches. required. It is less time consuming.
5. Safety In this system, documents are tied Since documents are kept loose
together. So, there is less chance in folders, there’s a chance of
of misplacing and damaging misplacing or dropping any of the
documents. documents from its place.
6. Flexibility It is less flexible, in the sense that, It is duly flexible because it has
it has no enough ground to insert enough ground for expansion and
the new documents and delete contraction of documents as well
the old and unnecessary ones, as the folders.
frequently as required.
7. Ready reference It is comparatively more difficult It facilitates ready reference as the
to locate a file and again the large caption or heading of each folder
number of documents because they is visible from the tab or extended
are kept in a pile and their position edge of the back sheet.
cannot be seen at a time.
34 Aakar’s Office Practice and Accountancy - 10 Filing 35
Indexing
7. Introduction
The literal meaning of indexing is an indicator or guide about some matters like
documents, files, papers, books of accounts, legal documents, bills, vouchers, etc. In an
office there may be thousands of records such as circulars, memos, reports, minutes, letter,
agreements, contracts, treaties, maps of boarder, etc. The records are the documentary
properties of an office. So, they are preserved in different files and folders in a systematic
order. When a certain file is required, it should be found easily and in time. For that,
the location of the file of folder in the drawer and cabinet should be properly guided;
otherwise it becomes very difficult and almost impossible to see the required file from
among the files. In record management, indexing may be defined as an indicator or guide
to locate a certain document, file or folder in drawer or cabinet.
10 A
Aryal, Ashish
Aryal, Ashish
Bharatpur-9, Chitwan
Phone: 9845070844
Telephone diary Rotary card index Index card
According to J. C. Denyer, “An index is anything that indicates or points out. Its prime function
is to act as a guide to a body of data or to a collection of records.”
Sexena “Indexing is a system which helps to locate the position of files quickly and easily.”
The prime function of indexing is to act as a guide to a body of data or to collected records.
Contents in a book, subscribers’ names and addresses in telephone directory, the head
words given on the left hand and right hand side of the pages in a dictionary, name and
guide cards, file and folder numbers, etc. are some examples of indexing.
Key Point An indicator or guide to locate a certain document, file or folder in drawer/
cabinet is known as indexing.
8. Need/Importance of Indexing
Indexing is indispensable to those organizations where there are a large number of
documents. It is essential for a librarian to find out certain book from among many books
of different authors and publisher, for student or teacher to find out a certain chapter in
a book and a word in a dictionary, to a person to see the subscriber’s name and phone
number in a telephone directory and on more important side, to business organization to
find out certain document, file or folder from among memos, reports, notices, circulars,
resolution and the personal or institutional letters, etc. The common importance of
indexing is stated as given below.
34 Aakar’s Office Practice and Accountancy - 10 Filing 35
i. Systematic Storing of Documents
Indexing presents an orderly list of the files and records regarding the name, number
and address and other necessary details of a correspondent on the basis of which the
documents are arranged and stored systematically as per the determined list and schedule.
ii. Easy and Quick Location
There may be thousands of records and documents in an office. But the useful and
important records are retained in the office for future reference. Indexing guides to
the location of the records or documents properly. Thus, it indicates the location of the
required records/documents easily and quickly as and when required.
iii. Maintaining Economy
Since indexing sets up a systematic way of arrangement and storing of the important
records and documents, it saves time and labour in filing as well as finding a particular
document. So, it maintains economy both in time and cost.
iv. Providing Necessary Information
Indexing presents an orderly list of the details of the records/documents.
When a document is required, it guides about it, through a book, card or any other
guides regarding the name, file number, telephone, subject and other address of the
correspondent or document. So, it provides necessary information required for an office
of any correspondent.
v. Increasing Efficiency
Most of the records and document are the guidelines for current as well as future
activities. Since indexing helps in locating the required documents easily in time, it
increase the efficiency of record management as well as of the office as a whole.
Points to Remember
i. Systematic storing of documents ii. Easy and quick location iii. Maintaining economy
iv. Providing necessary information v. Increasing efficiency
Glossary
Flexible : changeable/elastic
Distinctive : unique/typical
Miscellaneous : sundry/ mixed/various
Economical : cheap, reasonable cost
Indexing : indicative list of files, folders, etc.
Correspondent : letter writer
Document : letter, bill, invoice, etc. which can be used as evidence for getting information
Indicator : guide
Allotted : selected/division
Cabinet : cupboard (a box used for arranging files or cards in it.)
36 Aakar’s Office Practice and Accountancy - 10 Filing 37
Exercise
A. Answer the following questions in one sentence.
1. Define the term ‘filing.’
2. What is traditional filing system?
3. What is case filing?
4. What is modern filing system?
5. Define the term ‘indexing.’
6. What is alphabetical filing method?
7. What is numerical filing method?
8. What is subjective filing method?
9. What is geographical filing method?
10. In which filing system are files arranged in sleeping position?
11. In which filing system, files are placed in standing position?
B. Give short answers to the following questions.
12. What is filing? Write any four points of importance of filing. 2074 (R)
13. What is filing? Explain its four methods. 2070 (R)
14. Define filing and mention any four of its objectives. 2066 (R)
15. Explain any five points of importance of filing.
16. Define alphabetical filing method and write any four advantages and
disadvantages of it.
17. Which filing method do you consider as more scientific: Numerical or
Alphabetical filing and why? Support your answer on the basis of four
reasons. 2068 (PABSON)
18. What is alphabetical filing method? Write the any four rules for making order
of names in filing.
19. What is numerical filing method? Write any four advantages and disadvantages
of numerical filing method. 2069, 2073 (S)
20. What is geographical filing method? Write any four advantages and
disadvantages of it.
21. What is filing? Explain any four differences between alphabetic and numerical
filing methods. 2074 (PABSON)
22. What is filing? List out any four advantages and four disadvantages of numerical
filing method. 2067 (SOS)
36 Aakar’s Office Practice and Accountancy - 10 Filing 37
23. What is subjective filing? Write any four advantages and disadvantages of
subjective filing.
24. What is misil filing? Write the advantages and disadvantages of misil filing.
25. What is box filing? Write the advantages and disadvantages of box filing.
26. What is horizontal / flat file? Write any four advantages and disadvantages of
horizontal filing. 2070 (S), 2072 (S)
27. What is vertical file? Write any four advantages and disadvantages of vertical
file. 2071
28. What is indexing? Explain any four uses of indexing in filing.
29. “Indexing and filing are complementary to each other,” Justify.
30. Distinguish between horizontal and vertical filing systems.
31. What are the types of traditional filing system? Describe any two of them.
2074 (NPABSON)
32. Introduce the filing system that is most popular in an office, nowadays and
mention any four advantages and four disadvantages of it. (2068 PAB.)
33. What is vertical filing? List five advantages and five disadvantages of it.
34. What is filing? Introduce its two methods. 2067 (S)
35. Introduce traditional filing and explore the difference between misil file system
and box file system. 2069
Project Work
a. Which filing method or system is used in your school or an office nearby?
With detail study, make a list of its advantages and disadvantages.
b. Study/observe and make a report about the indexing system which is used
by local/well managed library near your school.
Trade
Aakar’s Office Practice and Accountancy - 10
38 38 Aakar’s Office Practice and Accountancy - 10 Filing 39 39
3 Trade
Unit
CDC Syllabus 12 Periods
3.1 Introduction
3.2 Procedures/method of home and Learning
foreign trade Objectives
3.3 Invoice - Introduction and types After studying this unit, students will
3.4 Means of payment- Introduction be able to :
and types (LC, Cheque, ATM card,
Bank draft, Electronic transfer and define trade and its types,
Hundi) explain the procedures of home and
foreign trade,
explain the terms and conditions of
home and foreign trade,
know the documents to be used in
home and foreign trade,
understand the modes and means of
payment,
explain invoice and its types and
importance,
know about international trade
agencies; WTO and SAFTA.
Aakar’s Office Practice and Accountancy - 10
Filing
38 38 Aakar’s Office Practice and Accountancy - 10 Trade 39 39
1. Introduction
Goods produced by an industry should be distributed to the customers in the market.
Distribution of goods is done by the way of commercial activities, i.e. buying, selling and
other management services. Trade may be defined as a regular process of buying and
selling goods and services for cash or credit with a profit motive. It is an act of transferring
the goods along with their ownership from one person to another in consideration of
some monetary value. Trade acts as a link between the producers and the consumers in
the form of different channels.
But a consignment trade is slightly different from that of ordinary trade. It is a process
of sending goods to a person, say an agent, without transferring the ownership on them
but requiring that person to make sales thereof subject to a certain remuneration and
commission. The consignee acts entirely on behalf of the consignor. Some of the popular
definitions of trade are given below:
According to A.N. Agrawal, “Trade refers to the sale, transfer or exchange of goods and services.”
According to Oxford Dictionary of Finance and Banking, “Trade is the activity of selling
goods and service in order to make a profit.”
According to F.C. Hopper, “All activities which exchange ownership between the persons or
organization with the view of profit.”
From the above definitions, it can be concluded that trade is the act of selling and buying
of goods and services among persons or organizations, with the object of earning profit.
Key Point A regular process of buying and selling of goods and services in cash or
credit with profit motive is known as trade.
2. Types of Trade
With the growth and development of business activities, trade is also developed in
a considerable size inside and outside a country. Some sorts of goods and services are
exchanged within the same country whereas some others to foreign countries. As the
nature of trade dealing, a trade can be classified as home trade and foreign trade.
Types of Trade
Home trade Foreign trade
Wholesale Retail Import Trade Export Trade Entrepot Trade
a. Home Trade
Home trade refers to that trade which is limited
within the geographical boundaries of a country. It is also
known as internal trade. In this trade, goods and services
are exchanged between the persons or organizations of the
Home trade
40 Aakar’s Office Practice and Accountancy - 10 Trade 41
same country and the payment of money is also made in the local currency. As the size of
dealing, this trade is further divided as wholesale trade and retail trade.
Key Point The process of buying and selling of goods and services within the
geographical boundary of a country is known as home trade.
a. Types of Home Trade
i. Wholesale Trade
Wholesale trade refers to that trade in which goods are purchased in bulk quantity
from dealers or directly from the producers and sell them to retailers. They do not sell the
goods to the final consumers.
Producer Dealer Wholesaler Retailer
Key Point Wholesale trade is the act of buying goods in large quantity directly from
the producer and selling them to the retailer in smaller quantity.
ii. Retail Trade
Retail trade refers to that trade in which goods are purchased in small quantities
from the wholesalers or dealers and sold to the final consumers. Generally, the retail price
of the goods is higher than its wholesale price.
Producer Dealer Wholesaler Retailer Customer
Both of the wholesale trade and the retail trade are the intermediaries between the
producers and final consumers in the process of distribution of goods.
Key Point Retail trade is the act of buying goods from wholesaler in smaller quantity
and selling them to the final consumers in required quantity.
b. Procedures of Home Trade
As mentioned earlier, home trade refers to the trade, which is carried on within the
boundaries of a country, it is carried out between the traders of the same country. Trade
dealing through personal contact i.e. face to face dealing may not be possible in every
situation, specially when the traders are in distant places. In such a case, they generally
establish and maintain the documentary relation between them. The customers come
to know about the manufacturers and suppliers through advertisement and publicity.
Different documents/ procedures are commonly used by them to establish trade
relationship between them. Some of the common procedures are briefly described below:
i. Inquiry Letter
The customers generally come to know about a number of manufacturers through
their advertisement and publicity. Then, after identifying them, they make the necessary
inquiries about their goods. Thus, an inquiry letter refers to the letter which is written by
40 Aakar’s Office Practice and Accountancy - 10 Trade 41
a probable buyer to the producer / supplier or seller by asking about the information of
the goods like quality, size, quantity, colour, price, discount and the terms and conditions
of payment, etc. Sometimes, inquiries are made through telephone, trade representatives,
telegram, etc. but mostly, a letter of inquiry is written for the inquiry of the goods.
ii. Reply to the Inquiry or Quotation Letter
It is the second document of home trade. The sellers/suppliers write quotation
letters as the reply to the inquiry letters of the probable buyers or against the invitation of
quotation published by the customers. Thus, quotation letter is that letter which is written
by a seller to the probable buyer by replying his inquiries about the goods. It is known as
quotation letter in the sense that it quotes the price of the goods. Sometimes the samples
of the goods may also be sent along with this letter. Since this letter becomes the basis for
future trade dealing, it should be written with due considerations.
iii. Follow-up Letter
It is the follow-up of a quotation letter. Sometimes, a supplier/seller may wait till the
response of the probable buyers to his quotation letter. If there is no response from the
buyers for a long time, he may forward an another letter by reminding the buyers about
their quotations. It does not take place in the regular course of documentary dealing and
thus, is not a regular procedure.
iv. Order Letter
When a buyer finds the specification of the goods and the trade terms and conditions
favourable to him, he places the order for the goods. Sometimes, the buyers may give
some instructions about the delivery of the goods in the order letter. Thus, an order letter
refers to that letter which is written by a buyer to the chosen seller by demanding the
certain goods as agreed by them. This letter is the true beginning of trade relation between
the seller and the buyer.
Bharatpur Books Distributor
Bharatpur, Chitwan
Ph. No.: 056-532844
Ref. No. 1115/075/076 Date 2075/12/15
To,
The Sales Manager,
Aakar Publication Pvt. Ltd.
Putalisadak, Kathmandu
Sub: Purchase Order
Dear Sir,
Thank you very much for your quotation dated 2075/12/3 and the
samples sent to us.
Would you supply us the following books by ‘Chandan Transport’ along
with the bill and instructions for payment, if any, otherwise we will make the
payment immediately by bank draft.
1 . Social Studies 9 and 10 each 200 pcs.
2. Practice Science 9 and 10 each 150 pcs.
3. Aakar’s Office Practice & Accountancy 8, 9 and 10 each 400 pcs.
4. Aakar’s Mathematics 9 and 10 each 160 pcs.
Looking forward to receiving books from you.
Yours faithfully
..........................................
Manager
42 Aakar’s Office Practice and Accountancy - 10 Trade 43
v. Letter of Acknowledgement
After receiving the letter of order, the supplier/seller should inform to the buyer
about the receipt of the order and its acceptance. He should also give the information
about the delivery of the goods in written form. As such, a letter of acknowledgement
is that letter which is written by a seller to the buyer by assuring the delivery of goods
specified.
After the confirmation of order, the seller should process onward for the dispatch of the
goods up to the buyer. The following are the further procedures to be followed by the seller.
vi. Collection of Goods
After the letter of order is received, the seller collects the goods from his own godown
and even from the other suppliers at a place.
vii. Packing of Goods
The goods should be packed with appropriate packing system. Necessary warnings
should be printed on the packages as according to the nature of goods. The brand name of
the goods, date of manufacture, etc. along with the name and address of the buyer should
also be printed on it. Then, after the goods are ready for dispatch, the invoice should be
prepared.
viii. Preparation of Invoice
Invoice is a kind of bill prepared by a seller to the name of the buyer mentioning
therein the particulars of the goods, the net value of trade and the credit terms and
conditions, etc. It is prepared in necessary copies and of which, one is sent to the buyer,
second to the carrier company along with the goods and the last copy is kept by himself for
future reference. After collecting goods and preparing invoice, the goods are dispatched
to the carrier company for delivery.
ix. Transportation of Goods
As mentioned just above, after the final preparation of goods, the seller dispatches
them to the buyer through the chosen carrier company. If the buyer has given any special
instruction for the carriage of goods, the same should be followed, otherwise the safest
and fastest means of transport should be chosen.
x. Receipt and Carriage of Goods
When the goods are dispatched with its invoice to the carrier company, it makes
the verification of the goods with the invoice and issues a receipt to the seller in return.
Receipt of goods is the proof of the acceptance of goods by the carrier company to deliver
them to the buyer. If any instructions are given by the seller that should be followed by
the company, otherwise the total responsibilities of the goods in transit remain with the
carrier company itself.
xi. Letter of Complaint
When the goods are delivered upto the buyer, he receives them by their physical
verification with the invoice that he has got. If he finds any defects in the goods in terms
of quantity, quality, colour, size, etc. some or all of the goods are returned to the seller
42 Aakar’s Office Practice and Accountancy - 10 Trade 43
himself along with a complaint letter. As such, a complaint letter is that letter which is
written by the buyer to the seller by making complaints against goods being not as per his
order, if any. A complaint letter may cause a negative effect on their mutual relation and
thus, it should be written in a polite way.
xii. Adjustment of Complaint
Adjustment letter is that which is written by the seller to his buyer or customer by
informing about the receipts of complaints and assuring for the necessary correction of
defects and its compensation. When such complaints are received that should be tackled
sincerely so that, a good trade relation can be further continued with him.
xiii. Payment
Trade transactions are preformed in cash or credit terms. The payment of cash
transaction is made immediately with the receipt of goods but the payment of credit
transactions is made as the terms of credit. The payment should be made as per the
instruction of the seller or through a common and reliable means of payment before or
at the due date. The common means of payment are postal order, bank draft, telegraphic
transfer (TT), money transfer or IME, etc. It is considerable here, that the payment in
home trade is made in local currency.
Points to Remember
i. Inquiry letter ii. Reply to the inquiry letter iii. Follow-up letter
iv. Order letter v. Letter of acknowledgement vi. Collection of Goods
vii. Packing of Goods viii. Preparation of Invoice ix. Transportation of Goods
x. Receipt and Carriage of Goods xi. Letter of Complaint xii Adjustment of Complaint
xiii. Payment
c. Terms and Conditions of Home Trade
Sometimes, the buyer and the seller may have some misunderstanding and disputes
on account of the description of the goods, modes and terms of delivery, credit terms,
means of payment, etc. So, they should clarify over such matters before hand so that,
there may not exist any sort of misunderstanding and disputes between them. As such,
the descriptions of the goods like quantity, quality, colour, size, price, modes of delivery,
credit terms, means of payment, etc. are known as the terms and conditions of home
trade.
i. Quantity of Goods
It refers to the weight, unit, number of the goods, etc. It directly affects the value of
trade to be paid. So, it should be clear to both the buyer and the seller about the quantity
of the goods to be traded, otherwise the buyer will not be liable for the payment of the
excess quantity or can return it to the seller in his own (seller’s) expenses. Besides this, if
the quantity of the goods is less than demanded, it can create bad impression to the buyer
about the seller and trade relation cannot be maintained any longer.
44 Aakar’s Office Practice and Accountancy - 10 Trade 45
ii. Kind and Quality of goods
Kind denotes the group, nature, batch no., lot no., etc. of the goods and quality refers
to the degree of goodness for satisfying one’s desires. Since, goods may be of various
kinds and quality, that should be clearly agreed by both parties before the trade dealing,
otherwise it may affect the value of the goods traded and disputes may exist in the future.
iii. Size and Colour
Size and colour also specify the goods. Sometimes, customers may make the
choice in terms of the size and colour of goods. In such a case, the buyer should clearly
state and specify about their size and colour, otherwise there may exist some sort of
misunderstanding between them.
iv. Price and Discount
Price and discount are the key factors in a trade. Price is the major factor in creating
demand and discount is the facility offered by the seller. Price determines the total value
of trade and discount reduces it and thus, price and discount determine the net value of
trade to be paid. So, the buyer and the seller should agree about the price of the goods and
their discount before entering into trade contract.
Discount is of two types, viz. trade discount and cash discount. Trade discount is the
rebate in the price of the goods which is made by the bargaining between seller and buyer
before buying the goods and cash discount is the rebate made in the net payable amount
for the payment made before or at the due date.
v. Packing of the Goods
Packaging refers to the covering of goods to save them from any sort of damage.
It also makes the goods look attractive. This is also a term of trade in the sense that
misunderstanding may create on this topic too. There can be a choice of customers on
packaging style. The packaging should be done according to the nature of the goods and
choice of the buyer, if instructed.
vi. Mode of Delivery
Delivery refers to the transportation of the goods upto the buyer. There are various
modes and means of delivery such as land, air and water transport. The buyer and
the seller should agree on the mode and time of delivery beforehand. Commonly the
most reliable but the cheapest and the fastest means should be chosen. The payment of
transportation is made as their agreement.
vii. Insurance
It is a process of transferring risk of individual entities to an insurer i.e. insurance
company to a specified extent of losses against the payment of a certain premium. There
are many chances of losses of goods in the transit. The buyer, the seller and even the
transport/carrier company should be clear about the terms of insurance whether it
is required or not and if required, who is liable to pay the premium and under what
situations etc. Otherwise there may create misunderstandings between them.
44 Aakar’s Office Practice and Accountancy - 10 Trade 45
viii. Term of Credit and Means of Payment
Terms of credit refer to the credit period allowed by the seller for the payment of
the trade value. After the goods are received, the buyer should make the payment of the
value of trade before or at the due date. There are many modes and means of payment
like postal order, money order, TT, bank drafts, etc. The most reliable and common means
of payment should be chosen for the remittance of money or it should be as instructed by
the seller.
Points to Remember
i. Quantity of goods ii. Kinds and quality of goods iii. Size and colour
iv. Price and discount v. Packaging of goods vi. Mode of delivery
vii. Insurance viii. Terms of credit and means of payment
d. Documents Used in Home Trade
Documents are the proofs which help us to settle any kinds of disputes and can be
used as evidence in the future. The following documents are used in home trade:
i. Inquiry Letter
The customers generally come to know about a number of manufacturers through
their advertisements and publicity. Then, after identifying them, they make the necessary
inquiries about their goods. Thus, an inquiry letter refers to the letter which is written by
a probable buyer to the producer / supplier or seller by asking about the information of
the goods like quality, size, quantity, colour, price, discount and the terms and conditions
of payment, etc. Sometimes, inquiries are made through telephone, trade representatives,
telegram, etc. but mostly, a letter of inquiry is written for the inquiry of the goods.
ii. Reply to the Inquiry or Quotation Letter
It is the second document of home trade. The sellers/suppliers write quotation
letters as the reply to the inquiry letters of the probable buyers or against the invitation of
quotation published by the customers. Thus, quotation letter is that letter which is written
by a seller to the probable buyer by replying his inquiries about the goods. It is known as
quotation letter in the sense that it quotes the price of the goods. Sometimes the samples
of the goods may also be sent along with this letter. Since, this letter becomes the basis for
future trade dealing, it should be written with due considerations.
iii. Follow-up Letter
It is the follow-up of a quotation letter. Sometimes, a supplier/seller may wait till the
response of the probable buyers to his quotation letter. If there is no response from the
buyers for a long time, he may forward an another letter by reminding the buyers about
their quotations. It does not take place in the regular course of documentary dealing and
thus, is not a regular procedure.
iv. Order Letter
When a buyer finds the specification of the goods and the trade terms and conditions
favourable to him, he places the order for the goods. Sometimes, the buyers may give some
46 Aakar’s Office Practice and Accountancy - 10 Trade 47
instructions about the delivery of the goods in the order letter. Thus, an order letter refers
to that letter which is written by a buyer to the chosen seller by demanding the certain
goods as agreed by them. This letter is, in truth, beginning of trade relation between the
seller and the buyer.
v. Letter of Acknowledgement
After receiving the letter of order, the supplier/seller should inform the buyer about
the receipt of the order and its acceptance. He should also give the information about the
delivery of the goods in written form. As such, a letter of acknowledgement is that letter
which is written by a seller to the buyer by assuring the delivery of goods specified.
After the confirmation of order, the seller should process onward for the dispatch of the
goods up to the buyer. The following are the further procedures to be followed by the
seller.
vi. Preparation of Invoice
Invoice is a kind of bill prepared by a seller to the name of the buyer mentioning
therein the particulars of the goods, the net value of trade and the credit terms and
conditions, etc. It is prepared in necessary copies and of which, one is sent to the buyer,
second to the carrier company along with the goods and the last copy is kept by himself for
future reference. After collecting goods and preparing invoice, the goods are dispatched
to the carrier company for delivery.
vii. Letter of Complaint
When the goods are delivered upto the buyer, he receives them by their physical
verification with the invoice that he has got. If he finds any defects in the goods in terms
of quantity, quality, colour, size, etc., some or all of the goods are returned to the seller
himself along with a complaint letter. As such, a complaint letter is that letter which is
written by the buyer to the seller by making complaints against goods being not as per his
order, if any. A complaint letter may cause a negative effect on their mutual relation and,
thus, it should be written in a polite way.
viii. Adjustment of Complaint
Adjustment letter is that which is written by the seller to his buyer or customer by
informing about the receipts of complaints and assuring for the necessary correction of
defects and its compensation. When such complaints are received, these should be tackled
sincerely so that, a good trade relation can be further continued with him.
B. Foreign Trade
Business activities are developed all over the
world with the globalization of communication,
transportation and banking network. People of
different countries have come in contact through the
exchange of goods or services in the international
market in terms of foreign trade. Thus, foreign trade
refers to the buying and selling of goods between or
among different countries. It is also, termed as external Foreign trade
46 Aakar’s Office Practice and Accountancy - 10 Trade 47
or international trade. In international trade, the payment is made in foreign currencies.
The parties involved in this trade are known as importer and exporter. The party buying
the goods is known as the importer and that, selling the goods is known as the exporter.
This trade is also of three types, viz. import trade, export trade and entrepot trade.
Key Point The process of buying and selling of goods between the parties of different
countries is known as foreign trade.
a. Types of Foreign Trade
i. Import Trade
Import trade refers to the purchase of goods from any of the foreign countries. The
traders should agree the terms and conditions of foreign trade and rules and regulations
of both of the countries regarding foreign trade.
ii. Export Trade
This trade refers to the sales of goods to foreign countries. A number of procedures
and formalities are to be fulfilled by the parties even after agreeing the terms and
conditions of foreign trade. It is one of the major sources of earning foreign currency.
iii. Entrepot Trade
When the goods are imported from one country and exported the same to another country,
it is known as enterpot trade. This trade helps to establish the trade relationship among
the countries by the way of exchange of goods. When a Nepalese merchant imports goods
from China and exports the same to India or Pakistan, it is entrepot trade.
b. Procedures of Foreign Trade
Since foreign trade consists of import and export trade, all the formal procedures
of these trades are considered as the procedures of foreign trade. Person who wants
to import any goods from abroad has to obtain can import license. An importer has to
secure foreign exchange after obtaining import license. This can be done through Nepal
Rastra Bank or other banks. The common procedures or documents of foreign trade are
discussed below.
i. Inquiry Letter
The probable importers come to know about the manufacturers/suppliers of
the goods in the foreign countries through advertisement and publicity of business
information. Then they write letters to the exporter by asking the detail descriptions of the
goods. As such, an inquiry letter is that which is written by an importer to the exporter of
a foreign country by asking about the description of the goods, their prices and discount,
mode and timing of delivery, credit terms, means of payment, etc. It is the beginning
documentary relation between the trade parties of the different countries.
ii. Reply to the Inquiry
When the exporters receive the inquiry letters from the foreign customers, they
should give the reply according to their inquiries. Sometimes the exporters should also
48 Aakar’s Office Practice and Accountancy - 10 Trade 49
quote other specifications and facilities offered by them in order to influence the foreign
customers/importers. Since the reply to inquiry letter is a motivating document, it should
possess the realities and intimacy to the importers.
iii. Letter of Order
A letter of order is that which is written by an importer to the name of the exporter
by demanding the goods as specified. Purchase order in foreign trade is more complex
and requires longer formalities. When the quotation letter is found favourable to him, the
importer begins the import procedures. First of all, he should obtain import license, by
producing income tax certificate or VAT registration certification and auditor’s certificate
of the past years import trade dealings. After the import license is received, he should
collect the necessary amount of foreign currency and should open letter of credit (LC) in a
reputed bank. In this way, by producing all necessary documents and bank guarantee, he
sends the order letter to the exporter of the foreign country along with the letter of credit.
The order is placed in two ways, viz. direct placement of order and indirect placement of
order.
Direct Placement of Order
If the importer sends an order letter directly to the exporter/supplier by himself without
any agent/intermediator, the order is called a direct placement of order.
Indirect Placement of Order
If the importer sends an order letter to the exporter/supplier through the agent/
intermediator, the order is called indirect placement of order. Agent helps to conduct
foreign trade easily and smoothly.
iv. Letter of Acknowledgement
After receiving the letter of order, the supplier/exporter should inform to the importer
about the receipt of the order and its acceptance. He should also give the information
about the delivery of the goods in written form. As such, a letter of acknowledgement is
written by exporter to the importer by assuring the delivery of goods specified. The act of
acknowledgement of the order means conforming the order.
v. Preparation of Goods and Invoice
First of all, after the order is received, the exporter will make the goods ready for
dispatch by collecting them from his own store, or even purchasing immediately from
other suppliers. Then the goods will be finally packed with appropriate packaging system
as according to their nature. Then the invoice is prepared in necessary copies. An invoice
is a bill drawn by the exporter in the name of the importer stating the price and the other
necessary details of the goods. In this way, the exporter prepares the goods ready for
dispatch.
vi. Dispatch of the Goods and Bill of Lading
The act of dispatching the goods to the carrier company for their final delivery is
known as dispatch of goods. Goods should be dispatched through the most reliable and
the cheapest and the fastest mode and mean of transport. But if the importer has given
any special instruction about the delivery of the goods, that should be followed by the
48 Aakar’s Office Practice and Accountancy - 10 Trade 49
exporter. In foreign trade, waterways are used in ordinary course of delivery of goods.
A letter including the particulars of goods and carriage instructions, if any, is given to
the shipping company which is known as bill of lading. The bill of lading is termed by
different names in different modes of transport i.e. railway receipt in railway transport,
airway bill in airways, etc. In this way, the dispatch of goods and bill of lading are other
documents of foreign trade.
vii. Receipt and Carriage of Goods
After dispatching the goods to the transport company along with the bill of lading, the
company should physically verify them. When the company finds the goods as specified
in the bill of lading, it returns a copy of the bill of lading to the exporter with its authorised
signature, this document, then, is known as receipt of the goods. It is the evidence of
acceptance of the goods to deliver upto the importer. Many formalities like dock chalan
i.e. the permission of the dock authority to load the goods on the ship, custom/export
pass etc. are to be fulfilled. Then the transport company begins the carriage of the goods.
The total responsibility of the goods in transit should be borne by the transport company
unless otherwise mentioned.
viii. Remittance of Money
After the goods are verified and received by the importer, he should remit the net
total value of trade to the exporter before or at the due date. The remittance is made
through the most reliable means like bank draft or telegraphic transfer (TT) from the
importer’s bank to the exporter’s bank or it is done as the instruction of the exporter. The
payment of money is made in equivalent foreign currency.
Points to Remember
i. Inquiry letter ii. Reply to the Inquiry
iii. Letter of order (purchase order) iv. Letter of acknowledgment
v. Preparation of goods and invoice vi. Dispatch of the goods and bill of lading
vii. Receipt and carriage of goods viii. Remittance of money
c. Terms and Conditions of Foreign Trade
Terms and conditions of foreign trade refer to the specification of the goods like
quantity, quality, colour, size, package, price, mode, means of transport insurance,
terms of credit, means of payment, etc. There terms should be cleared before dealing the
activities between importer and exporter. Otherwise it creates problems in the future.
The following are the common terms and conditions for foreign trade:
i. Quantity of goods ii. Kinds and quality of goods
iii. Packaging iv. Price and discount
v. Invoice and carriage vi. Insurance
vii. Mode and timing of delivery viii. Credit terms and conditions
ix. Means of payment x. After sales services
50 Aakar’s Office Practice and Accountancy - 10 Trade 51
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