i) METHOD OF ACCOUNTING
The financial statements are prepared under the historical cost
convention in accordance with generally accepted Accounting Principles
in India & the Provisions of the Companies Act, 1956 and the applicable
accounting standards notified under the Companies Accounting Standards
ii) Use of Estimates
The preparation of the financial statements in conformity with GAPP
requires the Management to make estimates and assumptions that affect
the reported balances of assets and liabilities and disclosures
relating to contingent liabilities as at the date of the financial
statements and reported amounts of income and expenses during the
period. Accounting estimates could change from period to period. Actual
results could differ from those estimates. Appropriate changes in
estimates are made as the Management becomes aware of changes in
circumstances surrounding the estimates. Changes in estimates are
reflected in the financial statements in the period in which changes
are made and, if material, their effects are disclosed in the notes to
the financial statements.
iii) RECOGNITION OF INCOME & EXPENDITURE
Revenues/Incomes and costs / expenditures are generally accounted on
accrual, as they are earned or incurred. Sales are inclusive of excise
duty but exclusive of Sales Tax / VAT collected. With regard to sale
of product, Sales are recognised, net of returns and trade discounts,
on transfer of significant risks and rewards of ownership to the buyer,
which generally coincides with the delivery of goods to customers.
Sales include excise duty but exclude sales tax and value added tax.
iv) EXCISE DUTY
Excise duty is accounted on the bases of both, payment made in respect
of goods cleared and also provision made for goods lying in bonded
warehouses. Excise duties in respect of Finished Goods lying in stock
are shown separately as an item of Other Manufacturing Expenses.
v) FIXED ASSETS
(a) Fixed assets are stated at cost (net off of Cenvat & VAT), less
accumulated depreciation (other than land and goodwill where no
depreciation is charged).
(b) Capital Work in Progress is stated at cost.
(c) Intangible assets are recorded at the consideration paid for
Current investment are carried at the lower of cost or quoted/fair
value. Long Term Investments are stated at cost of acquisition.
Provision for diminution in the value of long term investment is made
only if such a decline is other than temporary.
vii) VALUATION OF INVENTORIES
a) Raw materials are valued at lower of cost or net realizable value
whichever is lower.
b) Work in progress is valued at cost of materials and labour charges
together with relevant factory overheads.
c) Finished Goods are valued at lower of cost or net realizable value
which ever is lower. (Inclusive of Excise Duty).
d) Goods in transit are valued at cost.
viii) METHOD OF DEPRECIATION
(a) Depreciation on fixed assets (other than land & goodwill where no
depreciation is provided) has been provided on straight line method in
accordance with the provisions of section 205(2)(b) of the Companies
Act, 1956, at the rates specified in Schedule XIV to the Companies Act,
(b) Depreciation in respect of fixed assets put to use during the
year/period is charged on pro- rata basis with reference to the
installation of the assets.
(c) No depreciation has been provided on the assets where the
accumulated depreciation has exceeded 95% of its original cost.
(d) No depreciation has been provided in respect of Capital Work In
(e) No depreciation has been provided on self generated intangible
(f) Intangible assets acquired during the year are written off over a
period of five year.
ix) FOREIGN CURRENCY TRANSACTIONS
Transactions in the foreign currency which are covered by forward
contracts are accounted for at the contracted rate; the difference
between the forward rate and the exchange rate at the date of
transaction is recognized in the profit & loss account over the life of
the contract. Foreign currency denominated monetary assets and
liabilities are translated into the relevant functional currency at
exchange rates in effect at the Balance Sheet date. The gains or losses
resulting from such translations are included in the Statement of
Profit and Loss. Non-monetary assets and non- monetary liabilities
denominated in a foreign currency and measured at fair value are
translated at the exchange rate prevalent at the date when the fair
value was determined. Non-monetary assets and non-monetary liabilities
denominated in foreign currency and measured at historical cost are
translated at the exchange rate prevalent at the date of
transaction. Revenue, expense and cash-flow items denominated in foreign
currencies are translated into the relevant functional currencies using
the exchange rate in effect on the date of the transaction. Transaction
gains or losses realized upon settlement of foreign currency
transactions are included in determining net profit for the period in
which the transaction is settled.
x) IMPAIRMENT OF ASSETS
The Management periodically assesses using, external and internal
sources, whether there is an indication that an asset may be impaired.
An impairment loss is recognized wherever the carrying value of an
asset exceeds its recoverable amount. The recoverable amount is higher
of the asset''s net selling price and value in use, which means the
present value of future cash flows expected to arise from the
continuing use of the asset and its eventual disposal. An impairment
loss for an asset other than goodwill is reversed if, and only if, the
reversal can be related objectively to an event occurring after the
impairment loss recognized. The carrying amount of an asset other than
goodwill is increased to its revised recoverable amount that would have
been determined (net of any accumulated amortization or depreciation)
had no impairment losses been recognized for the asset in prior years.
- Income-tax expense comprise of current tax, wealth tax and deferred
tax charge or credit.
- Provision for current tax is made on the basis of the assessable
income at the tax rate applicable for the relevant assessment year.
- The deferred tax asset and deferred tax liability is calculated by
applying tax rate and tax laws that have been enacted or substantively
enacted by the balance sheet date. Deferred tax assets arising mainly
on account of brought forward losses and unabsorbed depreciation under
tax laws, are recognized, only if there is a virtual certainty of its
realization, supported by convincing evidence. Deferred tax assets on
account of other timing differences are recognized only to the extent
there is a reasonable certainty of its realization. At each balance
sheet date, the carrying amounts of deferred tax assets are reviewed to
xii) RETIREMENT BENEFITS
a) Short Term
Short term employee benefits are recognized as an expense at the
undiscounted amount expected to be paid over the period of services
rendered by the employees to the company.
b) Long Term
The company has both defined contribution and defined benefit plans, of
which some have assets in approved funds. These plans are financed by
the Company in the case of defined contribution plans.
c) Defined Contribution Plans
These are the plans in which the Company pays pre-defined amounts to
separate funds and does not have any legal or informal obligation to
pay additional sums. These comprise of contribution to Employees
Provident Fund. The Company''s payments to the defined contribution
plans are reported as expenses during the period under which an
employee perform the services that the payment covers.
d) Defined Benefit Plans
Expenses for defined benefit gratuity payment plans are calculated as
at the balance sheet date by independent actuaries in the manner that
distributes expenses over the employees working life. These commitments
are valued at the present value of the expected future payments, with
consideration for calculated future salary increase, using a discounted
rate corresponding to the interest rate estimated by the actuary having
regard to the interest rate on Government Bonds with a remaining terms
i.e. almost equivalent to the average balance working period of
e) Leave Encashment
The company is providing for Leave Encashment on the basis of unavailed
leave by the employees.
xiii) CONTINGENT LIABILITES/ CONTINGENT ASSETS
a) Contingent liabilities are disclosed by way of note in the Balance
b) Contingent Assets are neither recognized nor disclosed in the
ix) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit
before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash
receipts or payments and item of income or expenses associated with
investing or financing cash flows. The Cash flows from operating,
investing and financing activities of the Group are segregated.
Cash and Cash equivalents presented in the Cash Flow Statement consist
of cash on hand and demand deposits with banks.
x) Earning per Share :
Basic earning per share is calculated by dividing the net profit after
tax for the year attributable to Equity Shareholders of the Company by
the weighted average number of Equity Shares in issue during the year.
Diluted earning per Share is calculated by dividing net profit
attributable to equity Shareholders (after adjustment for diluted
earnings) by average number of weighted equity shares outstanding
during the year.
xi) PROPOSED DIVIDEND & CORPORATE DIVIDEND TAX
Dividend proposed by the Board of Directors along with corporate
dividend tax is provided in the books of accounts. Approval in the
General Meeting is pending for the same.
Note: 1 Working Capital facilities from Bank of Baroda is secured by
way of hypothecation of raw-materials, stores and spares,
work-in-progress of finished goods and book debts of the company both
present and future and first charge on company''s plant & machinery,
other movable assets of the company as well as secured by mortgage of
companies factory land and building situated at Plot no. 805, 806, 807,
and 810 at Rakanpur, Tal. Kalol, Dist. Gandhinagar and also equitable
mortgage on plot no 811 of the company situated at village Rakanpur
Taluka Kalol Dist Gandhinagar as collateral security and is also
personally guaranteed by the Promoters of the company.