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ASSETS Fixed Assets Land Building Plant & Equipment Less Accum.

Depreciation Capital Work-in-Process Net Fixed Assets

Other Assets - Investments

Current Assets Cash/ Bank Balance Accounts Receivable Inventories Total Current Assets

Current Liabilities Short-term Loans Accounts Payable Total Current Liabilities

Net Current Assets

Total Assets

Long-term Liabilities Long-term Loan Debenture Deposits

EQUITY & LIABILITIES Equity Equity Share Capital Preference Share Capital Retained Earning Total Equity

LIABILITIES Equity Capital Stock Retained Earnings Total Equity

Long-term Liabilities Long-term Debt

Current Liabilities Short-term Loans Accounts Payable Total Current Liabilities

TOTAL LIABILITIES & EQUIY

CONSISTENCY ONCE A METHOD OR POLICY IS ADOPTED, SUBSEQUENT TRANSACTIONS WILL BE TREATED IN THE SAME WAY; OTHERWISE, CHANGES SHOULD BE EXPLAINED

8)

COSERVATISM TO AVOID OVERSTATEMENT, WHENEVER THERE IS CHOICE IN VALUING ASSETS OR LIABILITIES THE MORE CONSERVATIVE VALUE WILL BE USED

9)

MATERIALITY

TRIVIALITIES ARE IGNORED. PERSONAL JUDGEMENT AND COMMON SENSE DETERMINE WHETHER AN ITEM IS TRVIAL OR NOT

The Going Concern Concept ACCOUNTING IS BASED ON ASSUMPTION THAT THE ENTERPRISE WILL OPERATE INDEFINITELY

4)

The Cost Concept FIXED ASSETS ARE ACCOUNTED FOR AT ACQUISITION COST RATHER THAN VALUE THEY COULD BE SOLD FOR

5)

The Dual Aspect Concept EVERY (EVENT) TRANSACTION RECORDED AFFECTS AT LEAST TWO ITEMS IN A FINANCIAL STATEMENT

6)

The Accrual Concept INCOME AND EXPENSES ARISING FROM TRANSACTIONS ARE RECORDED IN THE PERIOD IN WHICH THEY OCCUR RATHER THAN THE PERIOD IN WHICH PAYMENT IS MADE. SEEKS TO MATCH COSTS WITH REVENUES

The raw material has to be cut to size. This is done with a variety of tools. The most common way to cut material is by Shearing (metalworking); Special band saws designed for cutting metal have hardened blades and a feed mechanism for even cutting. Abrasive cut-off saws, also known as chop saws, are similar to miter saws but with a steel cutting abrasive disk. Cutting torches can cut very large sections of steel with little effort. Burn tables are CNC cutting torches, usually natural gas powered. Plasma and laser cutting tables, and Water jet cutters, are also common. Plate steel is loaded on a table and the parts are cut out as programmed. The support table is made of a grid of bars that can be replaced. Some very expensive burn tables also include CNC punch capability, with a carousel of different punches and taps. Fabrication of structural steel by plasma and laser cutting introduces robots to move the cutting head in three dimensions around the material to be cut.
the maximum output rate a process can achieve under ideal conditions (Krajewski and Ritzman, 2003). The company believes that the CSI effectively communicates how well a process meets customer specifications, and it provides more useful feedback to the production system. For instance, a 65% of CSI in cutter operation was measured over a two-month period, which indicates that only 65% of peak capacity was utilized to meet customer needs. In other words, 35% of machine capacity was either wasted (due to setup, wait for material, maintenance, or breakdown) or produced items that failed to meet customer specifications. The 65% of CSI was then used as a baseline to measure the level of improvement made by this project. The goal (performance outcome) established for this process was 80 percent of CSI, which was considered to be the standard for world-class practice.

Once the measure and process capability for cutting operations was defined, the project team proceeded to analyze the root cause of poor CSI performance. A Pareto analysis was next performed, and the team discovered that the cutter grinder accounted for 40% of machine downtime on the cutting machines (Figure 3). The project team interviewed the operators and found that, due to lack of proper lubrication of the blades, many cutting heads did not attain their maximum life. Moreover, as the dull blades were removed for re-sharpening, cutter grinders became idle and thus failed to keep up with the production schedule. Apparently, the dullness of the blades caused substantial downtime at the cutters. Furthermore, a dull blade also resulted in many defect-prone items including rough finish along the cutter lines and machine crash. In summary, the root cause of poor CSI was found to be blade inefficiency, since it caused machine downtime and defective cutter bodies.

Specifically, neither traditional unit cost reduction nor local operations productivity increase was used to determine the improvement effort. Instead, the impact of the improvement on overall quality of axle and system throughput was used to select the improvement project.

Figure 2 displays a simplified process flow of the Axle manufacturing. Following the TOC approach, the project team first searched for the bottleneck by identifying operations associated with large piles of inventory. Gear cutting operation was suspected to be the bottleneck. The project team further interviewed the operators of the downstream operation, lapping, and confirmed that lapping was constantly starving for competed ring set from the cutting operation. Accordingly, cutting operation was determined to be the bottleneck and was chosen as the target for improvement. Incorporating TOC concept into improvement process enabled the project team to select a project that could increase the plant throughput and bottom-line performance.

(take in Figure 2) Value analysis was first performed to determine the various activities in the cutter operation that add both customer and operational value to the process (Table 1). The purpose of value analysis is to streamline the value chain to reduce all non-value added waste in the system and to look for ways to enhance high value-added activities. The machine cycle that includes the cutting operation is both a customer and operational value-added activity. Improving the yield of a highvalue added activity such as blade cutting would increase the overall capacity of the plant. Increasing the gear cutting capacity would have a positive impact on manufacturing system throughput. This could be achieved through a reduction of hours required per gear set, which would in turn increase the capacity and remove the need for new capacity investments. (take in Table 1)

After confirming gear cutters as the bottleneck, the project team initially discussed purchasing additional cutting capacity. The company was using a solvent-cutting device, where the cutting head was lubricated to increase the shelf life of the cutting blades. Newer technology in this process had advanced to dry cutting, a significant increase in the life of the blade, thereby increasing the capacity. However, with the capital constraints facing the plant, it was not feasible to upgrade to the dry cutting process. As suggested by the TOC concept, the team decided to exploit or maximize the utilization of the current technology rather than make new capital investment in additional cutting capacity. In other words, the team would proceed to investigate the current performance of the solvent-based cutting machines and identifying ways to increase quality and throughput without additional capital expenditures.

The business case for this project was initiated because of the eroding sales revenue, which went down by 23% in 2000, while fixed expenses went up by as much as 22% within the same year.

Management was faced with either shutting down the plant or eliminating the non-value added processes to increase capacity without incurring new capital expenditures. The Axle facility had some experience in successfully applying Six Sigma to its process improvement. After receiving training on TOC, managers decided to combine TOC and Six Sigma to guide their improvement effort. They felt that the concept of TOC could provide them with a focus on global system improvement. With careful study and planning, an eight-member project team was formed. The project team was composed of the plant manager, the controller, two six-sigma certified employees, and four operators from the plant. One of the authors of this paper and a student team served as external resources for the project. The team was charged with the responsibility of seeking process improvement that would result in a minimum of $175,000 savings per year. This was the minimum standard established by the plant for any major process improvement project. The team started by reviewing the process map to determine possible bottlenecks in the process. Extensive interviews were conducted, and an in-depth observation of the processes was undertaken to identify probable causes of inefficiencies in the system. After the extensive investigation, the cutting process was singled out as the likely bottleneck operation. The proposed integrated framework was adopted to make the improvement. The various stages of the process implementation are discussed below. Phase 1 of this integrated framework is identical to both strategies, and its purpose is to identify current constraint(s) that block the improvement of global performance, such as meeting customer needs or improving system throughput. Accordingly, a specific process is selected for improvement. Phases 2 and 3 follow the spirit of TOC by exploring the capacity of the selected process. Phase 2 measures the current performance of the process and identifies the root causes needed to be corrected for improvement. The two phases of Six Sigma, measure and analyze, are involved in this step. Once the root causes are confirmed, Phase 3 of the integrated approach applies conventional Six Sigma strategy by using the key manufacturing, engineering, and statistical techniques to remove root causes of the problem for making necessary process improvement. The purpose is to best utilize the current capacity of the process without incurring additional capital expenditures.

Phase 4 ensures the changes made in previous steps are properly supported by the rest of the system. For example, managers may need to change policies and obtain buy-in from employees to implement the changes. Training is often required for a revised process. Phases 5 and 6 are taken from the TOC process. If the improvement of the selected process is insufficient to satisfy customer needs or goals, managers have to consider various options (e.g., outsourcing and additional investment) to raise the capacity of the process. Finally, managers must stay alert to the dynamic nature of the manufacturing system and constantly monitor occurrence of new constraints.

Overall, when the integrated framework is applied to improve a specific process, these two techniques seem to complement each other. The integration is made by combining the management aspect of TOC and the engineering aspect of Six Sigma. Specifically, for firms that apply Six Sigma, TOC provides a global perspective in identifying the constraints and examining necessary changes to the rest of the systems. On the other hand, Six Sigma brings in the perspectives of customer needs, performance measures, and engineering and statistical tools during

the stages Theory of Constraints (TOC) was developed by Eliyahu M. Goldratt during the 1980s (McMullen, 1998). The core idea of TOC is that every organization has at least one constraint that prevents management from achieving the goal of the organization to a larger degree. Constraints can be physical resources or policies. TOC develops a set of procedures and methodologies to identify and optimize such constraints. For the purpose of continuous improvement, TOC uses a systematic approach which consists of five focusing steps (Goldratt and Cox, 1992).

1. Identify the systems constraint(s). 2. Decide how to exploit the systems constraint(s). 3. Subordinate everything else to the above decision. 4. Elevate the systems constraint(s). 5. If a constraint has been broken, go back to Step 1. Do not allow inertia to cause a systems constraint.

The implementation of Six Sigma strategy involves a series of steps specifically designed to facilitate a process of continuous improvement. The strategy takes the key manufacturing, engineering, and transactional processes of entire process through the five transformational phases (Plotkin, 1999).

1. Define: Identify customer needs and a project suitable for Six-Sigma effort. 2. Measure: Determine what and how to measure the performance of the selected process. 3. Analyze: Understand and determine the variables that create quality variations. 4. Improve: Identify means to remove causes of defects and modify the process. 5. Control: Maintain the improvement.

The primary objective of the five-step process is to recognize critical customer requirements, identify and validate the improvement opportunity, and upgrade the business processes. A large number of companies have boosted their profitability, increased market share, and improved customer satisfaction through the implementation of Six-Sigma. Companies such as Allied Signal, General Electric, Sony, Texas Instruments, Bombadier, Crane Co., Lockheed Martin, and Caterpillar are beginning to dir

The swot anlysis of the Perpetual Inventory System is as under: STREGTHS:

Accurate Reporting

Companies often experience more accurate financial reporting with a perpetual inventory system. Accountants update the general ledger after each inventory transaction. This results in a general ledger account that closely mirrors the actual physical inventory on hand. Owners and managers can then make quality decisions based on the accuracy of reporting inventory values. Multiple inventory types also benefit from this method, as accountants accurately track each one through the general ledger.

Electronic Management

Perpetual inventory systems often use electronic methods to record transactions. An example is the barcode system a clothing retailer uses when selling goods. Each scan records data that updates the company's inventory value. Accountants use this information to balance the general ledger. Companies also use the data to order goods using a just-in-time system. Electronic ordering helps to prevent stock outs and lost sales.

WEAKNESSES:

Cost

Many perpetual inventory systems are expensive. The cost for these systems is twofold. The technology necessary to make the system work can be a major capital expense. Updating the system for new changes to the technology is also costly. Training employees to properly use the system is yet another expense. On the administrative side, companies must find accountants who can work the system and manage frequent changes to the general ledger.

Process

Perpetual inventory systems are often time-consuming. Electronic updates to a company's general ledger may result in a need for account reconciliations. Accountants will often spend copious hours each week or month to reconcile inventory. Persistent errors can also cause further complications. Accountants need to correct errors and balance the inventory account prior to closing the company's books. Reporting inaccurate inventory figures can trigger an audit, resulting in potential problems for the company. Additional record-keeping Increase workload, increase in staff. Additional costs Staff costs, costs of computer package to maintain inventory records.

First-In, First-Out (FIFO) is one of the methods commonly used to calculate the value of inventory on hand at the end of a period and the cost of goods sold during the period. This method assumes that inventory purchased or manufactured first is sold first and newer inventory remains unsold. Thus cost of older inventory is assigned to cost of goods sold and that of newer inventory is assigned to ending inventory. The actual flow of inventory may not exactly match the first-in, first-out pattern. First-In, First-Out method can be applied in both the periodic inventory system and the perpetual inventory system. Example Use the following information to calculate the value of inventory on hand on Mar 31 and cost of goods sold during March in FIFO periodic inventory system and under FIFO perpetual inventory system.
Mar 1 Beginning Inventory 60 units @ $15.00 per unit

Purchase

140 units @ $15.50 per unit

14

Sale

190 units @ $19.00 per unit

27

Purchase

70 units @ $16.00 per unit

29

Sale

30 units @ $19.50 per unit

Solution

FIFO Periodic

Units Available for Sale

= 60 + 140 + 70

= 270

Units Sold

= 190 + 30

= 220

Units in Ending Inventory

= 270 220

= 50

Cost of Goods Sold

Units

Unit Cost

Total

Sales From Mar 1 Inventory

60

$15.00

$900

Sales From Mar 5 Purchase

140

$15.50

$2,170

Sales From Mar 27 Purchase

20

$16.00

$320

220

$3390

Ending Inventory

Units

Unit Cost

Total

Inventory From Mar 27 Purchase

50

$16.00

$800

FIFO Perpetual

Purchases Date Units Unit Cost Total Units

Sales

Balance

Unit Cost

Total

Units

Unit Cost

Total

Mar 1

60

$15.00

$900

140

$15.50

$2,170

60

$15.00

$900

140

$15.50

$2,170

14

60

$15.00

$900

10

$15.50

$155

130

$15.50

$2,015

Under the perpetual inventory system, an entity continually updates its inventory records to account for additions to and subtractions from inventory for such activities as received inventory items, goods sold from stock, and items picked from inventory for use in the production process. Thus, a perpetual inventory system has the advantages of both providing up-to-date inventory balance information and requiring a reduced level of physical inventory counts. However, the calculated inventory levels derived by a perpetual inventory system may gradually diverge from actual inventory levels, due to unrecorded transactions or theft, so you should periodically compare book balances to actual on-hand quantities. Perpetual inventory is by far the preferred method for tracking inventory, since it can yield reasonably accurate results on an ongoing basis, if properly managed. The system works best when coupled with a computer database of inventory quantities and bin locations, which is updated in real time by the warehouse staff using wireless bar code scanners, or by sales clerks using point of sale terminals. It is least effective when changes are recorded on inventory cards, since there is a significant chance that entries will not be made, or will be made incorrectly. Balance sheets complete the sequence of accounts, showing the ultimate result of the entries in the production, distribution and use of income, and accumulation accounts. Balance sheets and accumulation accounts form a group of accounts that are concerned with the value of assets owned by institutional units or sectors, and their liabilities at particular points in time and with the evolution of those values over time. Balance sheets measure the values of stocks and are compiled at the beginning and end of the accounting period. On the other hand, the accumulation accounts record the changes in the values of assets and liabilities during the accounting period. They are flow accounts, whose entries depend on the amounts of economic or other activities that take place within a given period of time. In the balance sheets three categories of assets are distinguished: a) non-financial produced assets b) non-financial non-produced assets c) financial assets (i) Periodic stock verification (ii) Continuous stock verification

(i) Periodic stock verification: It refers to a system where physical stock verification is normally done periodically, i.e., once or twice in a year. Under this method, value of stock is determined by physical counting of the stock on a particular date, usually at the end of the year. It is a simple and economical method of stock-taking and is adopted in small concerns. This type of verification is good only for the items which do not find place in the perpetual inventory records, e.g., works-in-progress, components and consumable stores at site etc. But there are many limitations of this method. Stores may' be closed down for a few days to facilitate stock-taking. There is possibility of fraud] discrepancy, etc. (ii) Continuous stock verification: This system comprises of counting and verifying i number of items at random daily throughout the year so that all items of stores are verified several times during the year. Notice of the particular stock to be verified each clay is given to the store-keeper only on the date of actual verification. As there is an element of surprise check in this system of stock-taking, effective control over the items of stores can be exercised. The system does not necessitate the closing down of the stores to facilitate stock-taking. There is also less possibility of fraud and discrepancy, but the method is expensive and is adopted by big concerns only. The actual stock of material should not differ from the recorded stock under normal circumstances. But-sometimes differences arise due to the following reasons: (i) Breakage and wastage of materials due to improper handling. (ii) Shrinkage and evaporation.

In earlier periods, non-continuous, or periodic inventory systems were more prevalent. Starting in the 1970s digital computers made possible the ability to implement a perpetual inventory system. This has been facilitated by bar coding and lately radio frequency identification (RFID) labeling which allows computer systems to quickly read and process inventory information as part of transaction processing. Perpetual inventory systems can still be vulnerable to errors due to overstatements (phantom inventory) or understatements (missing inventory) that can occur as a result of theft, breakage, scanning errors or untracked inventory movements, leading to systematic errors in replenishment. The ESA95 recommends the Perpetual Inventory Method (PIM) for the calculation of the stock of Fixed assets whenever direct information is missing (par. 6.04). The calculation of consumption of Fixed capital can be based on these stocks of assets. Besides net capital stock which appears in the Balance sheets can be derived within a PIM approach. In this paragraph the basic principles of the PIM will be discussed. Using the PIM, gross capital stock is calculated as the sum of gross fixed capital formation in Previous years, of which the service live is not yet expired. In the simplest case it is assumed that the total investment of a particular asset does not deteriorate during the expected service life of that asset and is discarded as a whole after that period of time.

Becoming a preferred employer involves more than learning the characteristics of such an organization, howeverit also requires that you understand what top performers want and value in a relationship with an employer. Interestingly, the answers to both questions are the same. To begin with, top-tier employers offer more than competitive pay and benefits. In fact, the word "competitive" implies that you're simply matching what many other businesses are providing. Even important additional elements, such as a good environment and open communication, won't necessarily make the difference. Studies show that the most important factor is how people feel about their role in the business. Employees perform at different levels based on how they're engaged in the lifeblood activities of the company. When an employer brings in people who are talented, aligned with the company's values and focused on its goals, the results can be tremendous. Want to set your company apart from your competitors? Here are some steps that can help you draw the best people to your business:

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