a. Basis of Accounting
The Company follows the mercantile system of accounting and recognises
income and expenditure on accrual basis except those with significant
b. Revenue Recognition
Sale Revenue represents revenue earned (net of returns, discount and
allowances) from the sale of products & services. Sale revenue is
recorded when the goods are despatched.
c. Capital Subsidy
Amount received as capital subsidy from the government for setting up
an industrial undertaking in a backward area is credited to Capital
d. Fixed Assets & Depreciation Gross Block
* All fixed assets except Land, Building and Plant & Machinery acquired
before 1992 are stated at cost. Fixed Assets which are revalued by the
company are stated at their revalued book value. The increase in the
revalued amount over their historical cost has been credited to
All costs, relating to the acquisition and installation of fixed assets
are capitalised and include financing costs relating to borrowed funds
attributable to consturction or acquisition of fixed assets upto the
date the industrial unit started production.
* The Company provides depreciation under written down value method (at
rates prescribed under Schedule XIV of Companies Act, 1956) except in
the case of Building and Plant & Machineries in which case depreciation
is provided as per straight line method pursuant to section 205(2)(b)
of Companies Act, 1956.
* In the case of revalued assets, the additional charge of depreciation
pertaining to revaluation amount is withdrawn from the Revaluation
Reserve and adjusted to the depreciation charged in accounts.
* Depreciation on addition to or sale/discardment of assets is
calculated prorata from the date of such additions or upto the date of
sale/discardment as the case may be.
* Intangible Assets are stated at cost of acqusition less accumulated
amortisation. Computer Software (Purchase cost, User licence fees
etc.), Technical Know-how are amortised over a period of 4 years.
Amortisation is done on Straight Line Method.
e. Impairment of Assets
An asset is treated as impaired when the carrying cost of assets
exceeds its recoverable value. An impairment loss is charged to the
Profit & Loss A/c in the year in which the asset is identified as
Investments are stated at cost. Provision for diminution in the value
of the long term investments are made only if in the opinion of the
management, the decline is other than temporary.
* Raw and Packing Materials are valued at cost or market value
whichever is lower. Cost includes taxes and duties other than credits
* Finished and Semi finished goods are valued at lower of cost and net
realisable value. They include cost of conversion and other costs
incurred in bringing them to their present condition. Stock against
cancelled orders or without any sale orders are suitably depreciated as
market value is not ascertainable
h. Borrowing Cost
Borrowing costs that are attributable to the acquisition, production or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale.
All other borrowing costs are recognised as an expense in the period in
which they are incurred.
i. Excise & Customs Duty
* Excise duty payable on the finished goods is accounted for on the
clearance of goods from the factory and the liability is provided at
the end of the year only on the finished goods stock lying in the
* Customs duty is accounted for on the clearance of goods from the port
/ bonded warehouse and the liability of the same is provided at the end
of the year on rawmaterial stock in custom bonded warehouse or under
* CENVAT allowed on the raw material consumed in production of finished
goods and in semi finished goods is reduced in material consumption.
j. Foreign Exchange Transactions
* Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of the transaction or at the exchange rates as
per related forward exchange contracts. Transactions not covered by
forward exchange rate and outstanding at the year end are also
translated at exchange rates prevailing at the year end and the profit
/ loss so determined and also the realised exchanged gains / losses are
recognised in the Profit & Loss account.
* Exchange differences arising either on settlement or on translation
of monetary items are recognised as income or expenses in the year in
which they arise, except in cases where they relate to acquisition of
fixed assets in which case they are adjusted in the carrying cost of
k. Retirement Benefits
* The Company has taken a policy under Group Gratuity Scheme with the
Life Insurance Corporation of India. The company is liable to make up
for the contribution in case funds in the hands of the trustees are
insufficient to meet the actual claims of the employees under the rules
of the fund.
* Leave Encashment is accounted for on actual payment. l. Export
incentives are accounted for on cash basis
m. Research and Development Expenditure
Revenue Expenditure, including overhead on research and development, is
charged to profit & loss a/c as expenditure through the natural heads
of expenses in the year in which it is incurred. n. Miscellaneous
Expenditure (to the extent not written off or adjusted)
* Share Issue expenses is written off in ten yearly instalments. o.
* Provision for taxation is made in accordance with the income tax laws
and rules prevailing at the time of the relevant assessment years.
* Deferred tax liability is recognised for all timing differences being
the differences between taxable income and accounting income that
originate in one period and are capable of reversal in one or more
subsequent periods. It is quantified using the tax rates and laws
enacted or substantively enacted as on Balance Sheet date.
* Deferred tax assets are recognised only to the extent that there is a
reasonable certainity that sufficient future taxable income will be
available against which such deferred tax assets can be realised.
* Wealth Tax is accounted for at the time of actual payment by debit to
Prior Year Expenses in the year of payment and no provision is made in
the accounts for the same.
p. Provisions & Contingent Liabilities
Provisions are recognised in the accounts in respect of present
probable obligations, the amount of which can be reliably estimated.
Contingent Liabilities are disclosed in respect of possible obligations
that arise from past events but their existence is confirmed by the
occurance or non-occurance of one or more uncertain future events not
wholly within the control of the company.