Report On Internship In The Field Of Accounting And Finance
AMAC was formed in 2006. Head office is located in Federal-B Area Karachi. It is engaged in the services, supplies, distribution and marketing of petroleum & petrochemical products. It have expertise in fuel and lubricants industry. Being in the business since last ten years and having worked for market leaders like Shell and Chevron, AMAC has ample experience in this field. Company obtained its National Tax Certificate in July, 2007 and also registered in General Sales Tax (GST) in May, 2008 to expand nationwide operation; AMAC has also registered in Company Act 1984, as a Private Limited Firm in Pakistan since Feb-2012. AMAC PVT LTD worked with Shell Pakistan Lubricants as an Authorized Agent in 2013 and 2014. Then resigned from Agent-ship to acquire Distribution ship of Chevron Pakistan Lubricants in late 2014, and now working as Authorized Industrial Distributor.
Functions of Finance Department
Finance department is one of the most important department at AMAC. This department is merely responsible to keep a check on the operations happening inside and outside the AMAC House mainly at the Terminals in all over karachi. This department is responsible for the accounting for product purchases, hospitality, and costing and product profitability analysis, in addition to that it also accounts the transshipments and sales that are made through tank Lorries, rails and pipelines to different depots in the country. This department also manages audit and recovery of PDC from the government of Pakistan, and conducts financial analysis of new business opportunities that arose in the country. Another major function of this department is to set the prices of fuel on monthly, fortnightly and in some conditions on need basis as well.
Whole department is subdivided into 3 subdivisions, Purchasing, Inventory and Pricing. In purchasing we have Hospitality income as well. The inter-department structure is as follows:
Pricing Section: Pricing includes costing of both regulated and deregulated products. Regulated Products are those products whose prices are regulated by Oil and Gas Regulatory Authority (OGRA) (such as PMG. Deregulated products are those products whose prices are determined by Oil Marketing Company itself (such as Lubricants) with concerned with marketing department with an eagle eye on their competitor.
Cost plus margin technique is used to determine selling prices and OMC’s and Dealers Margin are set by Oil and Gas Regulatory Authority. Inventory Accounting is another function of finance department which involves day to day accounting of their inventory because AMAC has immense storage capacity therefore inventory accounting plays important role in decision making. It also provides check in balance on those responsible for operational activities relating to inventory. For financial reporting purposes First in First out (FIFO) basis is used to account for inventory. Purchasing is also very important part of this department which involves ordering inventory at appropriate level which does not give rise to unnecessary holding cost and availing discounts by negotiations. It also involves accounting of Goods and Services Tax which is imposed by Government of Pakistan on purchase of products.
Purchasing section basically estimates the demand of the oil in the Pakistani market and place order to refineries. They purchase the petroleum products from local and international markets. The process flow of the purchase department basically starts with estimating the demand, placing the order & forecasting for the next order placement.
The department also manages the agreement of National refinery limited (NRL), Pak-Arab refinery limited (PARCO), Attock refinery limited (ARL), Bosicor Pakistan limited (BPL) and Oil & gas development corporation of Pakistan limited (OGDCL). Some of the below mentioned points were found similar in the agreements.
Subject Matter: Refineries have to deliver their products which are in the schedule and AMAC has to buy the products.
Effective date and period: In effective Date and Period, starting and expiry date of the agreement is mentioned.
Product specifications: Quality and quantity of a specific product is mentioned by the AMAC, the specified product has to be received as per the agreement.
Delivery: There are 3 modes of delivery:
- Tank lorries
- Tank Wagons
Sampling and Testing: Test is done in the refinery’s laboratory, under AMAC representative and certificate is provided to AMAC before loading, that certificate is known as Certificate of Quality (COQ). In case the quality does not meet the requirement so an independent surveyor checks the quality of the product and then report.
Pricing: Pricing is set by the Oil and Gas Regulatory Authority (OGRA). -Force Majeure:The delivery is to done on time which is mentioned by AMAC in the contract in case any force majeure (strike, natural disasters etc. ) occurs the delivery can be delayed but AMAC has to accept the petroleum product which is delivered by refineries.
Arbitration: Any case any dispute occurs between both parties so (1+1) arbiters are hired by AMAC and other refineries to resolve the dispute among both parties.
This section deals with the hospitality income from the tanks storing of fuels for other OMCs by charging rent on them so it has kind of a secondary functions such as management and accounting of Hospitality income. As AMAC believes in welfare of whole society therefore it also allows small Oil Marketing Companies which do not have much storage capacity, to use their storage tanks for which AMAC charges them rent to cover the maintenance and opportunity cost. This income is then accounted as other incomes in profit and loss statement.
Strategic Planning and Financial Planning & Analysis
This function is done by higher level of management, particularly Head of Finance. After seeing the reports generated by the department then Dept. GM decides which areas need improvement and how it can smooth financial operations of the business after discussing with General Manager Finance.
Finance Department regularly checks for cash available in the bank to payout the expenses such as gas, electricity, wages, salaries and maintenance. Askari bank handles the account for AMAC head office. If the balance is low then further funds are injected into the bank to run day to day operations.
In this section there are two main functions regarding managing inventory;-Monitoring and accounting of Tank Stock Loss Report (TSLR) which happens due to the Working Procedures, Temperature, Density, Inter Tank Transfer (ITT) of the oil stock. Then the Reconciliation Statement of the TSLR is made between the Physical and SAP stock.
Inventory Accounting involves day to day accounting of their inventory because AMAC has immense storage capacity therefore inventory accounting plays important role in decision making. It also provides check in balance on those responsible for operational activities relating to inventory. For financial reporting purposes First in And First out (FIFO) basis is used to account for inventory. In the end Comparative Analysis of TSLR of same month with comparison of previous year is made in the form of reports.
Common tasks that fall to this function include sourcing and diversification into lucrative businesses, deals, raising debt and equity financing, best suitable location from which company can take benefits, making capital structure decisions and providing insight into high level strategic decisions such as entering a new market.
Tasks done as Internee
At AMAC Finance is a vast department with several assignments taking place. Different employees work on different assignments with just one major objective, which is the transparency of all operations.
The assignments that I was assigned during my 6 weeks included:
Introduction/Functions of different departments: I started my first week of internship with the introduction, functions of all the departments and its importance. The first week was mostly aimed at me observing different departments and how departments coordinate with each other. At the end of the 1st week I was able to think that how all the departments of the company work together and there is a chain of command that goes from Person A to Person B and so on.
Reconciliation of Accounts: Every month the transactions of the lubricants are measured in two ways; one is done physically/manually, the other is done on QuickBook. At the end of every month, the two entries are compared, this is known as the reconciliation. The values of both the records are matched, and if there is some difference, then that can be tried to justified, in terms of some physical or computer error. Otherwise the difference, is questioned, and has to be justified. I was able to reconcile of two months August and September 2018.
Analysis of TSLR: TSLR stands for Tank Stock Loss Report in which the losses/gain in the oil, are mentioned. The objective of this analysis was to determine the total loss/gain of specific tank at a specific terminal. The tank’s net of every month was noted separately and was punched in the excel sheet to prepare a proper analysis of the TSLR for the last fiscal year.
Analysis of the justifications from the operations department: In case of some abnormal behavior of the performance of certain specific terminal, Finance department questions the operations department about the abnormal behavior in writing. The operations department is bound to answer those justification based on certain facts and figures. After receiving those justifications, they need to be verified. If the answers are justifiable then the questions are removed, others are then questioned in the CFT meeting of the month.
Research report on the impact of CNG products on Petrochemical products: A research report was assigned to every finance intern individually, the topic that I was assigned was the Impact of CNG Products on Petrochemical Products. We were bound to submit the report on the final day of our internship, we were suggested to interview supervisors of different finance departments, read articles & news, and surf on the internet to find the adverse effects of the CNG Products on petrochemicals. My report was prepared after I had interviewed many supervisors and after researching the online journals and articles, and finally concluded that CNG has many positive points, one is the high amount of gas in the country, it is less harmful to the environment and the government support with it. So initially it had affected the petrochemicals really badly, but as the decrease in the government support with CNG, which can recently be observed by the prices of CNG, and the closure of CNG stations is leading a rise in the petrol/diesel consumption yet again.
Theories/Concepts learned in IoBM which applied in practical and were useful:
My internship at AMAC was a great learning experience. It helped me get a practical insight on how departments work in such an immense organization. Finance being one of the most important department in the purchasing process of AMAC, Private limited, gave me a lot of experience.
Computer Concepts & Applications: I studied this course in my first semester and this really helped me out as Microsoft Excel is a very important application which is being used in all the organizations. While preparing the monthly Reconciliation report, major help was acquired with MS Excel, in which functions like VLOOKUP, SUMMATION, IF, AND & HLOOKUP were used. Other simple functions of MS Excel like making tables, merging cells etc. were used for the other assignments.
Business & Professional Speech: BPS was studied by me in my 7th semester and it really helped me a lot because as most of the time employees/supervisor used to talk to me in English and I was able to reply to them with confidence and in a clear way so that it was a two way communication. When I took this course, my teacher helped me in gaining my confidence to speak more fluently.
Financial Management: This course really helped me in understanding of financial statements. One of the major issue that was constantly being discussed with the interns for a unique solution was of the Circular debt, that AMAC is facing. I studied the concept of circular debt in Financail Management, which refers to as the debt prevailing among different companies. Each company is liable to pay to the other company, and is dependent on the other company to pay. In Financial Management, during the preparation of the report on the Working Capital Management of Oil & Gas Marketing Companies, we analyzed the performance decline because of the circular debt as well.
Pakistan Economic Policy: Pakistan Economic Policy was another important course that I studied and realized its importance while serving as an intern in the finance department. While being briefed about the purchasing section, I found out that the order for the delivery of petrochemicals is placed at least 15 days before. Keeping in mind the economic conditions of the country, the estimated requirement of the country is calculated and the order is made. As per the confidential information provided, if in case of war, Pakistan can survive without oil supply for the next 21 days. Hence the requirement is calculated to keep the country running for the next 21 days without any oil supply.
Methods in Business Research: As a part of our internship, we were assigned a topic to every individual finance intern to research on a topic, the topic I was assigned was “Impact of CNG Products on the POL Products”, for this research I was suggested to interview different executives and senior in my department, as well as other departments. So I personally interviewed quite a few senior employees to complete my research. The research interview skills that I learned in the Methods in Business Research course were really helpful, and my research was supported by many of the senior employees in the finance department of AMAC, Private limited.
New Theory Learned: After working 6 weeks as a intern with AMAC, A got a sound knowledge of the accounting software quickbook as I was using that software during my intership. Including that I also learned to compete in the corporate world, how to manage risk, how to mitigate the risk and how to work in the critical situations. I also got the knowledge of supply chain and logistics as I was in touch with that department as well. Overall apart from my university subjects, I got a very practical knowledge regarding the operations of the company which are priceless for me.
My experience at AMAC was quite amazing. It opened up my mind how to work efficiently in a systematic way. My internship was filled with responsibilities and I did them carefully and timely but this would not be possible without the help of supervisors and some employees who showed me how the work is done. Moreover, I was able to apply the theoretical knowledge I learnt from IOBM into the projects and I realized how useful were all those core courses and electives and how they helped me in my entire tenure of internship at AMAC. I was able to perform all the tasks efficiently and was able to come in the good books of my supervisor and colleagues around. I learned in my electives in the practical world and I also learned that how you should get the work done through third party. Hence, I would like to conclude that internship at a Oil marketing Sector was the best experience I could have up till now.
My recommendations to AMAC are:
- Interns working at their specific departments should also be rotated or given work of other departments so that their knowledge and understanding could be enhanced.
- They should increase there transport facility upto 20 to 30% as the demand is huge.
- It is very hard for someone to find the location, plus the site office located at Soraab goth (Super Highway) causes numerous instances of theft, High Security is recommended.
- They should develop more new ways for increasing their exports.