2. Significant Accounting Policies
2.1 Basis of Preparation of Financial statements
These financial statements are prepared in accordance with Indian Generally Accepted Accounting principles
(GAAP) under the historical cost convention on the accrual basis. GAAP comprises mandatory accounting standards
as prescribed under Section 133 of the Companies Act,2013("the act") read with Rule 7 of the Companies (Accounts)
Rules,2014, the provisions of the Act.
2.2 Use of Estimates:
The preparation of financial statements in conformity with Indian GAAP requires judgements, assumptions to be
made that effect the reported amount of assets and liabilities, disclosure of contingent liabilities on the date of
financial statement and the reported amount of revenues and expenses during the reporting period. Difference
between the actual results and estimates are recognised in the period in which the results are known/materialised.
2.3 Accounting Convention
The company follows the mercantile system of accounting, recognizing income and expenditure on accrual basis.
The accounts are prepared on historical cost basis and as a going concern basis. Accounting policies not referred to
specifically otherwise, are consistent with the generally accepted accounting principles.
2.4 Property, Plant & Equipment
Tangible Assets
Property, plant and equipment are stated under the cost model.i.e.at cost less accumulated depreciation and
impairment, if any, costs directly attributable to acquisition are capitalised until the property, plant and equipment
are ready for use, as intended by the management. Cost comprises the purchase
Property, plant and equipment are stated under the cost model.i.e.at cost less accumulated depreciation
and impairment, if any, costs directly attributable to acquisition are capitalised until the property, plant
and equipment are ready for use, as intended by the management. Cost comprises the purchaseprice
and any attributable cost of bringing the asset to its working condition for its intended use. Input tax
credit of GST grants on capital goods are accounted for by reducing the cost of capital goods.
Subsequent expenditures relating to property, plant and equipment are capitalised only when it is
probable that future economic benefits associated with them will flow to the company and the cost of
expenditure can be measured reliably. Repairs and maintenance costs are recognized in the statement
of profit and loss when they are incurred.
When assets are disposed or retired, their cost is removed from the financial statements. The gain or loss
arising on the disposal or retirement of an asset is determined as the difference between sales proceeds
and the carrying amount of the asset and is recognized in statement of profit and loss for the relevant
financial year.
Intangible Assets
Intangible assets are measured at cost on initial recognition and are amortized on a straight-line basis
over their estimated useful lives, which are reviewed annually.
2.5 Depreciation
Depreciation on property, plant and equipment, tangible and intangible assets has been provided under
straight line method over the useful life of assets estimated by the management which is in line with
the terms prescribed in schedule II to the Companies act,2013. Depreciation for assets purchased/sold
during the period is proportionately charged. Depreciation method, useful life and residual value are
reviewed periodically.
2.6 Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the company
and the revenue can be reliably measured.
Sale of Goods
Revenue is recognized when the significant risks and rewards of ownership of the goods have been
passed to the buyer. Sales are disclosed net of GST, trade discounts and returns as applicable.
Income from services
Revenue from services is recognized when services have been rendered and there should be no uncertainty
regarding consideration and its ultimate collection.
Interest Income
Interest income is recognized on a time proportionate basis taking into account the amount outstanding
and the rate applicable.
Dividend Income
Dividend income is recognised on receipt basis.
2.7 Inventories
Raw materials including stores item and packing material have been valued at cost. Cost is determined
on FIFO basis.
Cost of finished goods and semi-finished goods includes all cost of purchase, conversion cost and other
cost incurred in bringing the inventories to their present location and condition. The net realizable value
is estimated selling price in the ordinary course of business less the estimated costs of completion and
estimated cost necessary to make the finished goods/product ready for sale. Finished Goods has been
valued at Cost or Net realizable value whichever is lower. NRV is assessed at each reporting date
2.8 Investment
Investment which are readily realizable and intended to be held for not more than one year from the
date on which such investments are made, are classified as current investments. All other investments
are classified as non- current investments.
On initial recognition, all investments are measured at cost. The cost comprises purchase price and
directly attributable acquisition charges such as brokerage, fees and duties.
2.9 Retirement benefits and other employee benefits
All Short-term employee benefits are accounted on undiscounted basis during the accounting period
based on services rendered by employees. The company's contribution to provident fund is charged to
the statement of profit and loss on accrual basis. The company's obligation is limited to the amount to be
contributed by it. Gratuity is accounted for based on actuarial valuation using the Projected Unit Credit
Method. The scheme is unfunded
2.10 Borrowing cost
Borrowing costs that are directly attributable to the acquisition or construction of qualifying assets are
capitalized as part of the cost of such assets till such time the asset is ready for its intended use. A
qualifying asset is one that necessarily takes substantial period of time to get ready for intended use.
Costs incurred in raising funds are amortized equally over the period for which the funds are acquired.
All other borrowing costs are charged to profit and loss account.
2.11 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects
of transactions of non-cash nature, any deferrals or accruals of past or future operating cash receipts
or payments and items of income or expenses associated with investing and financing cash flows. The
cash flows from operating, investing and financing activities are segregated. Cash and cash equivalents
comprise cash at bank and in hand and short-term investments with an original maturity of three months
or less.
2.12 Taxation
The accounting treatment for the income tax in respect of the company's income is based on the
accounting standard on "accounting for taxes on Income" (AS-22). The provision made for income
tax in accounts comprises both, the current tax and deferred tax. Provision for current tax is made
on the assessable income as per Income tax rate is applicable to the relevant assessment year after
considering various deductions available under income tax act,1961.
Deferred tax is recognised for all timing differences, being the differences between the taxable income
and accounting income that originate in one period and are capable of reversal in one or more subsequent
periods. Such deferred tax is quantified using the tax rates and laws enacted or substantively enacted as
on the balance sheet date. The carrying amount of deferred tax asset/liability is reviewed at each balance
sheet date and consequential adjustments are carried out.
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