1.1 DISCLOSURE AND BASIS OF ACCOUNTING
a) The financial statements have been prepared under the historical
cost convention which is in accordance with the generally accepted
accounting principles and provisions of the Companies Act, 1956. The
Company has complied with the Accounting Standards prescribed by the
Institute of Chartered Accountants of India and as referred u/s 211
(3C) of the Companies Act, 1956.
b) The Company has been consistently following the accrual basis of
accounting in respect of its Income and Expenditure.
c) The Accounts are prepared on the basis of going concern concept.
d) The presentation of financial statements require estimates and
assumptions to be made which affect the reported amount of assets and
liabilities on the date of the financial statement and the reported
amount of revenue and expenditure during the reporting period.
1.2 VALUATION OF INVENTORIES
Inventories are valued at the lower of cost and net realizable value.
Waste stock is valued at net realizable value. The cost formula used
for different inventories are as follows.
i) Cotton - On specific identification basis
ii) Grey Fabrics, Chemicals, Stores & Spares - At weighted average
iii) Yarn, Finished Goods & Process Stock - At average cost.
1.3 CASH FLOW STATEMENT
The Cash Flow Statement is prepared under indirect method as per the
Institute of Chartered Accountants of India guidelines.
1.4 CONTINGENT LIABILITY
a) Provisions involving substantial degree of estimation in measurement
are recognized when there is a present obligation as a result of past
events and it is probable that there will be an outflow of resources.
Contingent Liabilities are not recognized but are disclosed in the
notes. Contingent Assets are neither recognized nor disclosed in the
b) Contingent liability in respect of show cause notice received are
considered only when they are converted into demand.
1.5 NET PROFIT FOR THE PERIOD AND PRIOR PERIOD ITEMS
a) All items of income and expenses pertaining to the year are included
in arriving at the net profit for the period unless specifically
mentioned elsewhere in the financial statement or as required by
b) Prior period items are disclosed separately in the Statement of
Profit 6 Loss .
1.6 DEPRECIATION ACCOUNTING
Depreciation on fixed assets has been provided under straight line
method at the rates prescribed in Schedule XIV of the Companies
Act,1956. The Company uses both continuous process machines and general
plant & machinery and other assets for which the respective applicable
rates of depreciation as prescribed under Schedule XIV have been
1.7 RESEARCH AND DEVELOPMENT
Revenue expenditure, including overheads on Research and Development is
charged out as an expense through the natural heads of account in the
year in which incurred.
1.8 REVENUE RECOGNITION
a) Revenue from sale transactions is recognized as and when the
property in the goods sold is transferred to the buyer for a definite
consideration and there is no uncertainty regarding the amount of
consideration or collectability.
b) Sales are reported at net of Sales Tax and Cess.
c) Export sales are accounted inclusive of export benefits.
d) Export incentives under DEPB license are accounted on accrual basis.
e) Other incomes are also accounted on accrual basis.
1.9 ACCOUNTING FOR FIXED ASSETS
Fixed Assets are stated at cost of acquisition and / or construction.
All costs relating to acquisition and installation of fixed assets are
1.10 FOREIGN CURRENCY / CONVERSION / TRANSACTIONS
The export sales are converted at rates prevailing on the date of
transaction, on the date of negotiation of export bills which
approximates the actual rate prevailing on the date of the transaction
and/or at forward contract rate, as the case may be Foreign Currency
liabilities are converted at the exchange rate prevailing on the last
working day of the accounting year and/or on the forward Contractual
rate, if so applicable. The net variation arising on account of such
conversion in case of liabilities incurred for acquisition of fixed
assets and other variations are charged to the statement of profit and
loss. Monetary assets are converted at the exchange rate prevailing on
the last day of the accounting year.
1.11 ACCOUNTING FOR INVESTMENTS
Long term investments are shown at cost. Permanent diminution in value,
if any, will be written off in the year of diminution.
1.12 ACCOUNTING FOR EMPLOYEE RETIREMENT BENEFITS
a) Contribution to Provident Fund has been made to the respective
b) Short term employee benefits (other than termination benefits) which
are payable within 12 months after the end of the period in which the
employees render service are accounted on accrual basis. Company''s
contributions paid / payable during the year to Provident Fund and ESIC
are recognized in the statement of profit and loss. All leave
encashment dues for the year are settled within the same year.
c) Gratuity liability as per the Actuarial Valuation has been provided
in the accounts as at the year end.
1.13 BORROWING COSTS
Borrowing costs that are attributable to the acquisition of
construction of qualifying assets are capitalized as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are recognized as an expense in the period in which
they are incurred.
1.14 RELATED PARTY DISCLOSURES
The related party transactions are disclosed in the notes on accounts
as per the Institute of Chartered Accountants of India guidelines.
1.15 EARNING PER SHARE
The Earnings considered in ascertaining the Company''s earnings per
share comprises of Net Profit after tax and includes post tax
adjustments, prior period and extra-ordinary items.
1.16 ACCOUNTING FOR TAXES ON INCOME
Deferred tax arising out of timing differences between book and tax
profits is accounted under liability method at current rate of tax to
the extent the timing difference is to be crystallized.
1.17 RECOGNITION OF IMPAIRMENT OF ASSETS
The company recognizes impairment losses in the year in which the
assets are identified as impaired: Impairment losses are measured as
the excess of carrying amount of an asset over its recoverable amount.
The recoverable amount of an asset is the higher of an asset''s net
selling price and its value in use.