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A Study on Fixed Asset Management

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Chapter 1
Introduction
ABOUT INDUSTRY
The Electronics Industry in India took off around 1965 with an orientation towards
space and defence technologies. This was rigidly controlled and initiated by the
government. This was followed by developments in consumer electronics mainly with
transistor radios, Black & White TV, Calculators and other audio products. Color
Televisions soon followed. In 1982-a significant year in the history of television in India
- the government allowed thousands of colour TV sets to be imported into the country to
coincide with the broadcast of Asian Games in New Delhi. 1985 saw the advent of
Computers and Telephone exchanges, which were succeeded by Digital Exchanges in
1988. The period between 1984 and 1990 was the golden period for electronics during
which the industry witnessed continuous and rapid growth.
From 1991 onwards, there was first an economic crises triggered by the Gulf War which
was followed by political and economic uncertainties within the country. Pressure on the
electronics industry remained though growth and developments have continued with
digitalization in all sectors, and more recently the trend towards convergence of
technologies.
After the software boom in mid 1990s India's focus shifted to software. While the
hardware sector was treated with indifference by successive governments. Moreover the
steep fall in custom tariffs made the hardware sector suddenly vulnerable to international
competition. In 1997 the ITA agreement was signed at the WTO where India committed
itself to total elimination of all customs duties on IT hardware by 2005.

CURRENT SCENARIO
In recent years the electronic industry is growing at a brisk pace. It is currently worth
US$ 32 Billion and according to industry estimates it has the potential to reach US$ 150
billion by 2010. The largest segment is the consumer electronics segment. While is
largest export segment is of components. The electronic industry in India constitutes just

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0.7 per cent of the global electronic industry. Hence it is miniscule by international
comparison. However the demand in the Indian market is growing rapidly and
investments are flowing in to augment manufacturing capacity.
The output of the Electronic Hardware Industry in India is worth US$11.6 Billion at
present. India is also an exporter of a vast range of electronic components and products
for the following segments
Display technologies
Entertainment electronics
Optical Storage devices
Passive components
Electromechanical components Corporate Catalyst India A report on Indian Electronics
Industry
Telecom equipment
Transmission & Signaling equipment
Semiconductor designing
Electronic Manufacturing Services (EMS)
This growth has attracted global players to India and leaders like Solectron, Flextronics,
Jabil, Nokia, Elcoteq and many more have made large investments to access the Indian
market. In consumer electronics Korean companies such as LG and Samsung have made
commitments by establishing large manufacturing facilities and now enjoy a significant
share in the growing market for products such as Televisions, CD/DVD Players, Audio
equipment and other entertainment products. The growth in telecom products demand has
been breathtaking and India is adding 2 million mobile phone users every month! With
telecom penetration of around 10 per cent, this growth is expected to continue at least
over the next decade. Penetration levels in other high growth products are equally high
and growth in demand for Computer/ IT products, auto electronics, medical, industrial, as
well as consumer electronics is equally brisk. Combined with low penetration levels and
the Indian economy growing at an impressive 7 per cent per annum, the projection of a
US$150 Billion+ market is quite realistic and offers an excellent opportunity to
electronics players worldwide.

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India is well-known for its software prowess. But on the hardware front, the progress is
rather slow. However, the country has been making gains in this sector also. Already, 50
Electronics Manufacturing Services (EMS)/Original Design Manufacturers (ODMs)
providers are operating in India.


Meaning of asset
Asset is the one used by the International Accounting Standards Board. The following is
a quotation from the IFRS Framework: "An asset is a resource controlled by the
enterprise as a result of past events and from which future economic benefits are expected
to flow to the enterprise." The accounting equation is the mathematical structure of
the balance sheet. It relates assets, liabilities, and owner's equity:
Assets = Liabilities + Capital (where Capital for a corporation equals Owner's
Equity)
In financial accounting, an asset is an economic resource. Anything tangible or intangible
that is capable of being owned or controlled to produce value and that is held to have
positive economic value is considered an asset.
Two major asset classes are tangible assets and intangible assets.
Tangible assets contain various subclasses, including current assets and fixed assets.
Current assets include inventory, while fixed assets include such items
as buildings and equipment.
Intangible assets are nonphysical resources and rights that have a value to the firm
because they give the firm some kind of advantage in the market place.
Examples of intangible assets are goodwill, copyrights, trademarks, patents and computer
programs, and financial assets, including such items as accounts
receivable, bonds and stocks.

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Meaning of fixed asset management.
Fixed assets management is an accounting process that seeks to track fixed assets for
the purposes of financial accounting, preventive maintenance, and theft deterrence. Fixed
asset management is a part of asset management that involves asset management software
also.
Organizations face a significant challenge to track the location, quantity, condition,
maintenance and depreciation status of their fixed assets. A popular approach to tracking
fixed assets uses serial numbered Asset Tags, which are labels often with bar codes for
easy and accurate reading. Periodically, the owner of the assets can take inventory with a
mobile bar code reader and then produce a report.
Off-the-shelf software packages for fixed asset management are marketed to businesses
small and large. Some Enterprise Resource Planning systems are available with fixed
assets modules.
Some tracking methods automate the process, such as by using fixed scanners to read bar
codes on railway freight cars or by attaching a radio-frequency identification (RFID) tag
to an asset.

FIXED ASSETS MEANING.
Fixed assets are long lived assets in the sense that they provide enduring benefits to the
entity. An enterprise holds a fixed asset (property, plant and equipment, or intangible
assets) for use in production and supply of goods or services, for rental or for
administrative purposes on a continuing basis. It expects to use a fixed asset for more
than one accounting period and does not intend to sell the same in the normal course of
business. Examples of fixed assets are land, building, plant and equipment, furniture and
fixtures, vehicles, goodwill, and patent. Disposal of fixed asset on retirement is a
peripheral activity.



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Fixed assets may be tangible or intangible.
Assets acquired for safety and environmental reasons qualify as fixed assets. Although
they may not directly increase future economic benefits, they help the entity to obtain
future economic benefits from other fixed assets.
A fixed asset is carried at cost less accumulated depreciation and accumulated
impairment loss. The depreciable amount, that is, the cost less estimated residual value
of the asset, is allocated over the estimated useful life of the asset.

Impairment loss occurs when the asset is unable to recover its carrying amount. In this
situation, the carrying amount of the asset is reduced to the recoverable amount and the
difference between the carrying amount and the recoverable amount is recognized as
impairment loss. The recoverable amount becomes the new carrying amount.

DEFINITIONS
The following terms are used in this statement with their meanings specified:

Fixed asset is an asset held with the intention of being used for the purpose of
producing or providing goods or services and is not held for sale in the normal course of
business.
Fair market value is the price that would be agreed in an open and unrestricted
market between knowledgeable and willing parties dealing at arms length who are fully
informed and are not under any compulsion to transact.
Gross book value of a fixed asset is its historical cost or other amount substituted
for historical cost in the books of account or financial statements. When this amount is
shown net of accumulated depreciation, it is termed as net book value.

EXPLANATION
Fixed assets often comprise a significant portion of the total assets of an enterprise, and
therefore are important in the presentation of financial position. Furthermore, the

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determination of whether expenditure represents an asset or an expense can have a
material effect on an enterprises reported results of operations.

IDENTIFICATION OF FIXED ASSETS
The above definition gives criteria for determining whether items are to be
classified as fixed assets. A judgment is required in applying the criteria to specific
circumstances or specific types of enterprises. It may be appropriate to aggregate
individually insignificant items, and to apply for the criteria to the aggregate value. An
enterprise may decide to expense an item which could otherwise have been included as
fixed assets, because the amount of the expenditure is not material.
Stand-by equipment and servicing equipment are normally capitalized. Machinery
spares are usually charged to the profit and loss statement when consumed. However, if
such spares can be used only in connection with an item of fixed assets and their use is
expected to be irregular, it may be appropriate to allocate the total cost on a systematic
basis over a period not exceeding the useful life of the principal item.
In certain circumstances, the accounting for an item of fixed asset may be
improved if the total expenditure thereon is allocated to its component parts, provided
they are in practice separable, and estimates are made of the useful lives of these
components. For example, rather than treat an aircraft and its engines as one unit, it may
be better to treat the engines as a separate unit if it is likely that their useful life is shorter
than that of the aircraft as a whole.

COMPONENTS OF COST
The cost of an item of fixed assets comprises its purchase price, including import
duties and other non-refundable taxes of levies and any directly attributable cost of
bringing the asset to its working condition for its intended use; any trade discounts and
rebates are deducted in arriving at the purchase price.
Example: Determination of cost of fixed asset


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Details

Amount(Rs.) Amount(Rs)
Invoice price-Net

55,00,000
Less: CENVAT credit availability 4,00,000 51,00,000
Add: Transportation charges to
factory site.
25,000
Add: Special foundation and
installation charges
75,000
Cost of the machine 52,00,000
(Source: Financial accounting management by Ambharish Gupta)
Examples of directly attributable costs are:
Site preparation;
Initial delivery and handling costs;
Installation cost, such as special foundations for plant; and
Professional fees, for example fees of architects and engineers.
The cost of a fixed asset may undergo changes subsequent to its acquisition or
construction on account of exchange fluctuations, price adjustments, and changes in
duties or similar factors.

Financing costs relating to deferred creditors or to borrowed funds attributable to
construction or acquisition of fixed assets for the period up to the completion of
construction or acquisition of fixed assets are also sometimes included in the
gross book value of the asset to which they relate. However, financing costs
(including interest) on fixed assets purchased on a deferred credit basis or on
monies borrowed for construction or acquisition of fixed assets are not capitalized
to the extent that such costs relate to periods after such assets are ready to be put
to use.

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Administration and other general overhead expenses are usually excluded from
the cost of fixed assets because they do not relate to a specific fixed asset.
However, in some circumstances, such expenses as are specifically attributable to
construction of a project or to the acquisition of a fixed asset or bringing to its
working condition, may be included as a part of the cost of the construction
project or as a part of the cost of the fixed asset.
The expenditure incurred on start-up and commissioning of the project, including
the expenditure incurred on test runs and experimental production, is usually
capitalized as an indirect element of the construction cost. However, the
expenditure incurred after the plant has begun commercial production, i.e.,
production intended for sale or captive consumption, is not capitalized and is
treated as revenue expenditure even though the contract may stipulate that the
plant will not be finally taken over until after the satisfactory completion of the
guarantee period.
If the interval between the dates of a project is ready to commence commercial
production and the date at which commercial production actually begins is
prolonged, all expenses incurred during this period are charged to the profit and
loss statement. However, the expenditure incurred during this period is also
sometimes treated as deferred revenue expenditure to be amortized over a period
not exceeding 3 to 5 years after the commencement of commercial production.
SELF-CONSTRUCTED FIXED ASSETS
In arriving at the gross book value of self-constructed fixed assets, the same
principles apply as those described in above lines. Included in the gross book value are
costs of construction that relate directly to the specific asset and cost that are attributable
to the construction activity in general and can be allocated to the specific asset. Any
internal profits are eliminated in arriving at such costs.




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NON-MONETARY CONSIDERATION
1. When a fixed asset is acquired in exchange for another asset, its cost is usually
determined by reference to the fair market value of the consideration give. It
may be appropriate to also consider the fair market value of the asset acquired if
this is more clearly evident. An alternative accounting treatment that is
sometimes used for exchange of assets, particularly when the assets exchanged
are similar is to record the asset acquired at the net book value of the asset given
up. In each case an adjustment is made for any balancing receipt or payment of
cash or other consideration.
2. When a fixed asset is acquired in exchange for shares or other securities in the
enterprise, it is usually recorded at its fair market value, or the fair market value
of the securities issued, whichever is more clearly evident.

IMPROVEMENTS AND REPAIRS
Frequently, it is difficult to determine whether subsequent expenditure related to
fixed assets represents improvements that ought to be added to the gross book
value or repairs that ought to be charged to the profit and loss statement. Only
expenditure that increases the future benefits from the existing asset beyond its
previously assessed standard at performance is included in the gross book value.
E.g. an increase in capacity.
The cost of an addition or extension to an existing asset which is of a capital nature
and which becomes an integral part of the existing asset is usually added to its
gross book value. An addition of extension which has a separate identity and is
capable of being used after the existing asset is disposed of, is accounted for
separately.



AMOUNT SUBSTITUTED FOR HISTORICAL COST

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Sometimes financial statements that are otherwise prepared on a historical cost
basis include part or all of fixed assets at a valuation in substitution for historical
costs and depreciation is calculated accordingly. Such financial statements are to
be distinguished from financial statements prepared on a basis intended to reflect
comprehensively the effects of changing prices.
A commonly accepted and preferred method of restating fixed assets is by
appraisal, normally undertaken by competent values. Other methods sometimes
used are indexation and reference to current prices which when applied is cross-
checked periodically by appraisal method.
The revalued amounts of fixed assets are presented in financial statements, either
by restating both the gross book value and accumulated depreciation so as to give
a net book value equal to the net revalued amount or by restating the net book
value by adding there in the net increase on account of revaluation. An upward
revaluation does not provide a basis for crediting to the profit and loss statement
the accumulated depreciation
Existing at the date of revaluation
Different bases of valuation are sometimes used in the same financial statements to
determine the book value of the separate items within each of the categories of
fixed assets or for the different categories of fixed assets. In such cases, it is
necessary to disclose the gross book value included on each basis.
Selective revaluation of assets can lead to unrepresentative amounts being reported
in financial statements. Accordingly, when revaluations do not cover all the
assets of a given class, it is appropriate that the selection of assets to be revalued
be made on a systematic basis. For example: an enterprise may revalue a whole
class of assets within a unit.
It is not appropriate for the revaluation of a class of assets to result in the net book
value of that class being greater than the recoverable amount of the assets of that
class.

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An increase in net book value arising on revaluation of fixed assets is normally
credited directly to owners interests under the heading of revaluation reserves
and is regarded as not available for distribution.
An decrease in net book value arising for revaluation of fixed assets is charged to
profit and loss statement expect that, to the extent that such a decrease is
considered to be related to a previous increase on revolution that is included in
revaluation reserve, it is sometimes charged against that earlier increase. It
sometimes happens that an increase to be recorded is a reversal of a previous
decrease arising on revaluation which has been charged to profit and loss
statement in which case the increase is credited to profit and loss statement to the
extent that it offsets the previously recorded decrease.
RETIREMENTS AND DISPOSALS
An item of fixed asset is eliminated from the financial statements on disposal.
Items of fixed assets that have been retired from active use and are held for
disposal are stated at the lower of their net book value and net realizable value
and are shown separately in the financial statements. Any expected loss is
recognized immediately in the profit and loss statement.
In historical cost financial statements, gains or losses arising on disposal are
generally recognized in the profit and loss statement.
On disposal of a previously revalued item of fixed asset, the difference between
net disposal proceeds and the net book value is normally charged or credited to
the profit and loss statement except that, to the extent such a loss is related to an
increase which was previously recorded as a credit to revaluation reserve and
which has not been subsequently reversed or utilized, it is charged directly to that
account. The amount standing in revaluation reserve following the retirement or
disposal of an asset which relates to that asset may be transferred to general
reserve.


VALUATION OF FIXED ASSETS IN SPECIAL CASES

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In the case of fixed assets acquired on hire purchase terms, although legal
ownership does not vest in the enterprise, such assets are recorded at their cash
value, which if not readily available, is calculated by assuming an appropriate rate
of interest. They are shown in the Balance Sheet with an appropriate narration to
indicate that the enterprise does not have full ownership thereof.
If the enterprise owns fixed assets jointly with others(otherwise than as a partner in
a firm), the extent of its share in such assets and the proportion in the original
cost, accumulated depreciation and written-down value are stated in the Balance
Sheet. Alternatively, the pro rata cost of such jointly owned assets is grouped
together with similar fully owned assets. Details of such jointly owned assets are
indicated separately in the fixed assets register.

E.g.: JOINTLY OWNED FIXED ASSETS
JOINTLY OWNED FIXED ASSETS
(Rs.lakhs)

Gross Block as at
31.3.02

Total depreciation
and Amortization up
to 31.3.02

W.D.V. as at
31.3.02

Total fixed
assets of the
company

2,974,061.06

1,096,081.90

1,877,979.16

Details of the companys share of jointly owned assets included above.
(Rs.Lakhs)
Assets
particulars

Name of the
joint owners

Original
cost

Accumuated
depreciaion&
amortization

W.D.V. as at
31.3.02


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Land free hold HPC/IBP 119.02 0.00 119.02
Land-Leasehold BPC/IBP 95.31 10.50 84.81
Buildings HPC 42.54 7.38 35.16
Plant and
machinery
HPC/BPC/IBP/G
SFC/IPCL/ACC/
CSIR
1157.46 304.10 853.36
Transport
equipment
RAILWAYS 18234.86 8875.95 9358.91
Railways sidings HPC/BPC 2243.8
5

592.05 1651.80
Drainage,
Sewage & Water
supply
GSFC 99.4

94.13 4.97
21,992.44 9884.41 12108.03


(Source: Ambharish gupta financial accounting management)
Basket purchase: The several assets are purchased for a consolidated price; the
consideration is apportioned to the various assets on a fair basis as determined by
competent values.
FIXED ASSETS OF SPECIAL TYPES
Goodwill, in general, is recorded in the books only when some consideration in
money or moneys worth has been paid for it. Whenever a business is acquired
for a price (payable either in cash or in shares or otherwise) which is in excess of
the value of the net assets of the business taken over, the excess is termed as
goodwill.
Goodwill arises from business connections, trade name or reputation of an
enterprise or from other intangible benefits enjoyed by an enterprise.

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As a matter of financial prudence, goodwill is written-off over a period. However,
many enterprises do not write-off goodwill and retain it as an asset.
Patents are normally acquired in two ways: (i) by purchase, in which case patents
are valued at the purchase cost including incidental expenses, stamp duty, etc. and
(ii) by development within the enterprise, in which case identifiable costs incurred
in developing the patents are capitalized. Patents are normally written-off over
their legal term of validity or over their working life, whichever is shorter.
Know-how in general is recorded in the books only when some consideration in
money or money worth has been paid for it. Know-how is generally of two types:
Relating to manufacturing process
Relating to plans, designs and drawings of building or plant and machinery
Know-how related to plans, designs and drawings of buildings or plant and
machinery is capitalized under the relevant asset heads. In such cases
depreciation is calculated on the total cost of those assets, including the cost of the
know-how capitalized. Know-how related to manufacturing processes is usually
expensed in the year in which it is incurred.
The amount said for know-how is composite sum in respect of both the types
mentioned in paragraph 16.4; such consideration is apportioned amongst them on
a reasonable basis.
The consideration for the supply of know-how is a series of recurring annual
payments as royalties, technical assistance fees, contribution to research, etc.,
such payments are charged to the profit and loss statement each year.



DISCLOSURE
Certain specific disclosures on accounting for fixed assets are already required by
Accounting Standard 1 on Disclosure of Accounting Policies and Accounting
Standard 6 on Depreciation Accounting.

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Further disclosures that are sometimes made in financial statements include:
Gross and net book values of fixed assets at the beginning and end of an
accounting period showing addition, disposals, acquisitions and other movements;
Expenditure incurred on account of fixed assets in the course of construction or
acquisition. Revalued amount substituted for historical cost of fixed assets, the
method adopted to compute the revalued amounts, the nature of any indices used,
the year of any appraisal made, and whether an external value was involved, in
case where fixed assets are stated at revalued amounts.
The items determined in accordance with the above definition of this statement
should be included under fixed assets in financial statements.
The gross book value of a fixed asset should be either historical cost or a
revaluation computed in accordance with this Standard. The method of
accounting for fixed assets included at historical cost and the method of
accounting for revalued assets is set out.
The cost of a fixed asset should comprise its purchase price and any attributable
costs of bringing the asset to its working condition for its intended use. Financing
cost relating to deferred credits or to borrowed funds attributable to construction
or acquisition of fixed assets for the period up to the completion of construction or
acquisition of fixed assets should also be included in the gross book value of the
asset to which they relate. However, the financing costs (including interest) on
fixed assets purchased on a deferred credit basis or on monies borrowed for
construction or acquisition of fixed assets should not be capitalized to the extent
that such costs relate to periods after such assets are ready to be put to use.
The cost of a self-strutted fixed asset should comprise those costs that relate
directly to the specific asset and those that are attributable to the construction
activity in general and can be allocated to the specific asset.
When a fixed asset is acquired in exchange or in part exchange for another asset,
the cost of the asset acquired should be recorded either a fair market value or at
the net book value of the asset given up, adjusted for any balancing payment or
receipt of cash or other consideration. For these purposes fair market value may

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be determined by reference either to the asset given up or to the asset acquired,
whichever is more clearly evident. Fixed asset acquired in exchange for shares or
other securities in the enterprise should be recorded at its fair market value, or the
fair market value of the securities issued, whichever is more clearly evident.
Subsequent expenditure related to an item of fixed asset should be added to its
book value only if it increases the future benefits from the existing asset beyond
its previously assessed standard of performance.

Material items retired from active use and held for disposal should be stated at the
lower of their net book value and net realizable value and shown separately in the
financial statements.
Fixed asset should be eliminated from the financial statements on disposal or when
no further benefit is expected from its use and disposal.
Losses arising from the retirement or gains or losses arising from disposal of fixed
asset which is carried at cost should be recognized in the profit and loss statement.
Fixed asset is revalued in financial statements, an entire class of assets should be
revalued, or the selection of assets for revaluation should be made on a systematic
basis. This basis should be disclosed.
The revaluation in financial statements of a class of assets should not result in the
net book value of that class being greater than the recoverable amount of assets of
that class.
Fixed asset is revalued upwards any accumulated depreciation existing at the date
of the revaluation should not be credited to the profit and loss statement.
An increase in net book value arising on revaluation of fixed assets should be
credited directly to owners interests under the head of revaluation reserve, except that, to
the extent that such increase is related to and not greater than a decrease arising on
revaluation previously recorded as a charge to the profit and loss statement, it may be
credited to the profit and loss statement. A decrease in net book value arising on
revaluation of fixed asset should be charged directly to the profit and loss statement

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except that to the extent that such a decrease is related to an increase which was
previously recorded as a credit to revaluation reserve and which has not been
subsequently reversed or utilized, it may be charged directly to that account.

On disposal of a previously revalued item of fixed asset; the difference between
net disposal proceeds and the net book value should be charged or credited to the
profit and loss statement except that to the extent that such a loss is related to an
increase which was previously recorded as a credit to revaluation reserve and
which has not been subsequently reversed or utilized, it may be charged directly
to that account.

Fixed assets acquired on hire purchase terms should be recorded at their cash
value, which, if not readily available, should be calculated by assuming an
appropriate rate of interest. They should be shown in the Balance Sheet with an
appropriate narration to indicate that the enterprise does not have full ownership
thereof.
In the case of fixed assets owned by the enterprise jointly with others, the extent of
the enterprises share in such assets, and the proportion of the original cost,
accumulated depreciation and written-down value should be stated in the Balance
Sheet. Alternatively, the pro rata cost of such jointly owned assets may be
grouped together with similar fully-owned assets with an appropriate disclosure
thereof.
Where several fixed assets are purchased for a consolidated price, the
consideration should be apportioned to the various assets on a fair basis as
determined by competent values.
Goodwill should be recorded in the books only when some consideration in money
or moneys worth has been paid for it. Whenever a business is acquired for a
price (payable in cash or in shares or otherwise) which is in excess of the value of
the net assets of the business taken over, the excess should be termed as
goodwill.

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The direct costs incurred in developing the patent should be capitalized and
written-off over their legal term of validity or over their working life, whichever
is shorter.
Amount paid for know-how for the plans, layout and designs of buildings and/or
design of the machinery should be capitalized under the relevant asset heads, such
as buildings, plants and machinery etc. Depreciation should be calculated on the
total cost of those assets, including the cost of the know-how capitalized. Where
the amount paid for know-how is a composite sum in respect of the
manufacturing process as well as plans, drawings and designs for buildings, plants
and machinery, etc., the management should apportion such consideration into
two parts on a reasonable basis.
DISCLOSURE
The following information should be disclosed in the financial statements:
1) Gross and net book values of fixed assets at the beginning and end of an
accounting period, showing additions, disposals, acquisitions and other
movements;
2) Expenditure incurred on account of fixed assets in the course of construction or
acquisition; and
3) Revalued amount substituted for historical costs of fixed assets, the method
adopted to compute the revalued amounts, the nature of indices used, the year of
any appraisal made, and whether an external value was involved, in case where
fixed assets are stated at revalued amount.

ACCOUNTING UNDER INDIAN GAAP
SCOPE
AS-10 was issued in November, 1985. It became mandatory from accounting
periods commencing on or after April 1, 1991 for:
Companies governed by the Companies Act, 1956.

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Entities other than sole proprietary concerns/individuals, partnership firms,
societies registered under Societies Registration Act, trusts, Hindu undivided
families and associations of persons.
AS-10 became mandatory for all entities for accounting periods commencing on or after
April 1, 1993. However, it is not applicable to:
Forests, plantations and similar regenerative natural resources
Wasting fixed assets including mineral rights, expenditure on the exploration for or
the extraction of minerals, oil, natural gas and similar non-regenerative resources.
Expenditure on real estate development.
` AS-10 does not deal with intangible fixed assets. Expenditure on individual items
of fixed assets used to develop or maintain activities covered in the given cases but
separable from those activities is accounted for in accordance with AS-10.

NATURE OF FIXED ASSETS

IDENTIFICATION OF FIXED ASSETS
The Standard gives a definition of fixed asset, but does not prescribe specific
criteria for the classification of assets as fixed. Therefore, an enterprise applies judgment
in deciding which assets should be classified as fixed assets, after taking into
consideration its nature of business and specific circumstances.

The Standard permits aggregation of individually insignificant items. Similarly, it
permits an enterprise to expense an item which would otherwise be classified as fixed
assets, because the amount of the expenditure is not material.

STAND BY EQUIPMENT AND SERVICING EQUIPMENT
Stand-by equipment and servicing equipment are fixed assets in their own right.

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For example, a stand-by generator is a separate item of fixed assets.

INSURANCE SPARES
Machinery spares which are used only in connection with an item of fixed asset
and which are expected to be irregularly used are fixed assets. On the other hand,
machinery spares, which are in regular use, form part of inventory. They are charged to
profit and loss account for the period in which they are consumed.
Accounting Standards Interpretation (ASI)-2 explains that whether or not to capitalize
machinery spares depends on the facts and circumstances of each case. For example, a
special pump (which can be used only in specific equipment) should not be classified as
inventory if its use is irregular.
Entities purchase certain critical spares along with sophisticated equipment to minimize
idle time due to breakdown. Those spares are usually proprietary items and are available
only with the manufacturer of the equipment. They cannot be used with any other
equipment and their use is irregular. These spares are known as insurance spares.

COMPONENT ACCOUNTING
Where several fixed assets are purchased for a consolidated price, the
consideration should be apportioned to various assets on a fair basis, as determined by
competent valuers.
Similarly, separable components of an asset should be recognized separately if;
Their useful lives are different
They provide benefits to the entity in a different pattern.
Examples of this are the separate recognition of an aircraft and its engine, or the separate
recognition of components of a ropeway. For the former, the useful life of the engine is
usually different from the useful life of the aircraft; therefore, separate recognition of the
engine and the aircraft improves the estimate of depreciation.
Appropriate accounting for the replacement of a component of a fixed asset is to write off

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the written down value of the components and to capitalize costs of the new component.
This requires the determination of the value of the component to be replaced. This
information is available only if the old component had a separate identity and was
recognized separately from the principal asset. Thus, component accounting improves
accounting for the replacement of components. Total cost of acquisition is allocated to
components and the principal asset on an equitable basis.

LAND AND BUILDING, AND COST OF LAND
DEVELOPMENT
Land and building are recognized separately in financial statements. Therefore,
composite cost of land and building is allocated to land and building on some equitable
basis.
The accounting for land development expenditure depends on the status of land
ownership. The cost of land development that provides enduring benefit to the business
is capitalized. In case of owned or leasehold land the development expenditure instead of
being shown separately, should be added to the cost of the land. The net cost of
leasehold land should be amortized if the lease agreement provides for recovery of
development expenditure from the lesser on termination of the lease. The net cost is the
cost of land development minus the recoverable amount, if any.
Land development expenditure, which does not provide enduring benefit, should be
written off in the year in which it is incurred. In case the amount is too large, the entity
may treat such expenditure as deferred revenue expenditure and write it off over a period
of three years or so.
INITIAL RECOGNITION
AS-10 does not specify the conditions that should be met for the recognition of an item of
tangible fixed assets. However, as a general accounting principle, an asset should be
recognized only if:
It is probable that the future economic benefits associated with the asset will flow
to the entity

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The enterprise has control over the asset
The cost of the assets or its fair value can be measured reliably

(AS-26) Intangible Asset, stipulates the conditions for recognition of an intangible asset.
The same principle should be applied in recognizing tangible fixed assets. (AS-10)
requires that a fixed asset should initially be recognized at historical cost.
The cost of a fixed asset comprises

Its purchase price, including stamp duty
Import duties and other non-refundable taxes or levies
Any cost attributable to bringing the asset to working condition

AS-10 does not specifically stipulate whether the cost of bringing the fixed asset to the
location of its intended use should be included in its cost. However, it is implicit that the
same should form a part of the cost of the fixed asset. For example, voyage expenses
incurred in the maiden voyage of a dredger acquired in a foreign country for use in India
should be included in its cost. (EAC opinion in CA. November, 2002).

Examples of costs that are directly attributable to the acquisition of fixed asset are:
Costs of site preparation
Initial delivery and handling costs
Installation cost, such as special foundations for plant
Professional fees
Costs of knowhow related to plans, designs and drawings of buildings or plant and
machinery
Borrowing costs, subject to certain conditions stipulated in AS-16.

THE COST OF SELF-CONSTRUCTED FIXED ASSET

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The cost of a self-constructed fixed asset comprises:
Costs that relate to the construction of the specific fixed asset directly
Costs that are attributable to the construction activity in general and that may be
allocated to the specific fixed asset
The cost does not include administration and general overhead cost and abnormal
waste/loss. For example, excessive indirect cost (like idle capacity cost) should be
charged to the profit and loss account instead of being included in the cost of
construction. Internal profits are eliminated in arriving at the cost of construction.

EXPENDITURE DURING CONSTRUCTION PERIOD
Expenditure incurred during the construction period of a new project is usually incurred
to construct new facilities. A large part of the expenditure is directly attributable to fixed
assets constructed during that period.
Therefore, expenditure incurred during construction period (except those which cannot be
attributed to construction activities) is allocated to fixed assets constructed during that
period.

Expenditures that are capitalized include:
General administration and office expenditure
Expenditure on running of vehicles
Expenditure in connection with temporary structure and service facilities
Depreciation of fixed assets used
The general principles are:
Preliminary stage costs should be expensed
Pre-acquisition costs should be capitalized only if they are attributable to a specific
fixed asset.

EXCHANGE OF FIXED ASSET

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(AS-10) stipulates that when a fixed asset is acquired in exchange of another fixed asset,
its cost is usually determined by reference to the fair market value of the consideration
given (asset given), adjusted for cash or cash equivalent transferred. It may be
appropriate to consider the fair market value of the fixed asset acquired if this is more
evident. As-10 as an alternative permits recording the fixed asset acquired at the net
book value of the fixed asset given up.
Although it is stipulated in the AS-10, as a matter of practice an enterprise uses the
alternative accounting method only in a rare situation when the enterprise is unable to
reliably estimate the fair value of either of the fixed assets exchanged.
An entity may acquire a fixed asset in exchange for shares or other securities. In that
case, the entity records the asset at the fair market value of the securities issued or the fair
market value of the fixed asset acquired, whichever is more evident.
AS-10 stipulates the same accounting principles for transactions involving the exchange
of dissimilar and similar assets.

DEMOLITION COSTS
Demolition costs should be charged to the profit and loss account for the period in which
they are incurred. However, they should be capitalized only if they were contemplated as
a part of the acquisition. For example, if a piece of land with a dilapidated building is
acquired, the cost of demolishing the building should be capitalized because at the time
of purchase the demolition was contemplated. Similarly, the cost of treating acquired
property with a known asbestos problem should be capitalized. These costs should be
capitalized as a part of the land or the new building depending on the nature of the cost.

ASSET RETIREMENT OBLIGATION
An entity acquires constructs or operates assets it often incurs obligations other than
those unavoidably related to the acquisition of the asset. An example of such an
obligation is Asset Retirement Obligations (ARO). An example of ARO is the
obligation to dismantle and remove the asset and restore the site. AS-10 does not

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specifically deal with ARO. AS-29, Provisions, Contingent Liabilities and contingent
assets, refers to the accounting for ARO. However, the accounting principles for ARO
are given by IAS-16, and US GAAP.
AS-29, Provisions, Contingent Liabilities and Contingent Assets, given the following
conditions for the recognition of a provision:
The entity has a present obligation as a result of a past event
It is probable that economic benefits will outflow from the entity to settle the
obligation
The amount of the obligation can be estimated reliably
AS-29 further provides that the amount recognized as provision should be the best
estimate of the management. The best estimate should take into account the risk and
uncertainties surrounding the obligation.
Therefore, ARO should be recognized only if these conditions are met. AS-29
does not recognize constructive obligation. Therefore, ARO should be recognized only if
it arises from a contract or by the operation of law. The cost of the asset should include
the amount of the provision for ARO.
AS 6: DEPRECIATION ACCOUNTING
Meaning of Depreciation:Depreciation is a measure of the wearing out,
consumption or other loss of value of a depreciable asset arising from use, passage of
time or obsolescence through technology and market changes.
Depreciation is nothing but distribution of the total cost of a depreciable asset over its
useful life.
Depreciable assets
Depreciable assets are those which
1. Are expected to be used during more than one accounting period;

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2. Have a limited useful life;
3. Are held by an enterprise for use in the production or supply of goods and services

Depreciable amount
Depreciable amount of a depreciable asset is its historical cost, or other amount
substituted for historical cost less the estimated residual value.

Applicability of the Accounting standard: This accounting standard is not
applied on the following items.
Forests and plantations
Wasting assets
Research and development expenditure
Goodwill
Live stock

There are two method of depreciation:
1. Straight Line Method (SLM)
2. Written Down Value Method (WDVM)
Note:
A combination of more than one method may be used.
Selection of appropriate method of depreciation depends upon the factors such as
type
of asset, nature of use of such asset and circumstances prevailing in the business
Selected method of depreciation should be applied from period to period,
consistently.
Calculation of depreciation: The amount of depreciation is calculated as under
using

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Historical cost or revalued amount
Estimated useful life of depreciable asset
Estimated scrap value of depreciable asset

Therefore depreciation under straight line method is calculated as follows:

Depreciation =Cost Scrap value at the end of useful life
Estimated useful life in No. of years

Procedure to be followed in case of change in the method of depreciation:
Step 1: Compute depreciation by applying the new method from the date of its
acquisition/installation up to the date of change in the method.
Step 2: Compute the difference between depreciation calculated under step 1 and
accumulated depreciation under old method.
Step 3: The resultant figure may be surplus or deficit. Surplus is credited to P&L A/c
under the head Depreciation written back. Deficit is debited (charged) to P&L A/c.
Step 4: Such change in the method of depreciation should be treated as change in the
accounting policy and its effect must be quantified and disclosed.

AS 12: ACCOUNTING FOR GOVERNMENT GRANTS
Government Grants
Government grants are assistance by the Government in the form of cash or kind to an
enterprise in return for past or future compliance with certain conditions.
They are also called as subsidies, cash incentives etc.,
Government grants do not include Government assistance other than in the form
of Government grants AND Government participation

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Government assistance which cannot be valued reasonably is excluded from
Government grants.
Recognition of Government grants
Government Grants should be recognized where there is a reasonable assurance that
The enterprise sill comply with the conditions attached to them, and
The grants will be received.
Kinds of Government grants
There are two types of Government grants namely,
a. Non-monetary grants: Grants received in kind like assets such as Land, Plant &
Machinery etc.,
b. Monetary grants: Grants in the form of Cash with respect to a depreciable or non
asset.
Government grants may be received in following ways.
A. Grants related to acquisition of fixed assets
B. Grants related to revenue
C. Grants related to promoters contribution
D. Grants related to compensation for expenses.
Disclosures:
1. The accounting policy adopted for accounting for Government Grants, including
the method of presentation in the financial statements.
2. The nature and extent of Government Grants recognized in the financial
statements, including grant of non-monetary assets given at the concessional rates
or free of cost.
3.
A. Accounting treatment W.R.T grant related to acquisition of fixed asset:

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1. For receipt of Non-monetary grants:
a. If the grant is given at concessional rate, then such asset is recorded at cost of
b. acquisition applicable for the organization.
c. If the grant is given free of cost, then such asset is recorded at nominal value.
2. For receipt of monetary grants:
a. Related to depreciable fixed asset there are two types of accounting treatment
1. If the grant received is treated as capital receipt - the asset is recorded at Gross
Value less Grant received, if the Grant received is less than the cost of the fixed
asset. The asset is recorded at nominal value.
2. If the Grant received is more than or equal to the cost of the fixed asset.
OR
3. If the grant received is treated as deferred income. The deferred income is
recognized in the Profit & Loss A/c on a systematic basis over the useful life of
the asset. The balance of the un-appropriated deferred income is shown under
Reserves & Surplus on the liabilities side of the balance sheet as Deferred
Government Grant.

Grants related to non-depreciable fixed asset
The asset is recorded at Gross Value less Grant received, if the Grant received is less
than the cost of the fixed asset.
The asset is recorded at nominal value, if the Grant received is more than or equal to the
cost of the fixed asset.
B. Accounting treatment W.R.T grants related to revenue
Government grants related to revenue should be recognized on a systematic basis in the
profit and loss account over the periods necessary to match with the related costs,
which they are intended to compensate. Such grants should either be shown as Other
Income or be deducted from the related expenses.

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C. Accounting treatment W.R.T grants in Nature of Promoters Contribution
Grants should be credited to capital reserve and it should form part of the shareholders
fund.
D. Accounting treatment W.R.T grants related to compensation for
expenses
Government grants receivable as compensation for expenses or losses (with no further
costs) should be recognized as an income in the year of receivable as an Extra-ordinary
item.
Refund of Government Grants:
Government grants become refundable because certain conditions are not fulfilled. The
grant
refundable is treated as an extraordinary item. Refund of grants may relate to
I. Revenue
II. Specific asset
III. Grants in the nature of Promoters Contribution
Example: Governments grant treatment.

BALACHANDRAN ELECTRONICSLTD.
TREATMENT OF GOVERNMENT GRANT AND ITSIMOACTONVALUTATION OF
FIXED ASSET.
BALACHANDRAN ELECTRONICSLTD ACQUIRES A .Machine whose total
costcomestoRs.315lacs.the co., received a grant of Rs.35lakhs from the central govt. against the
machine. Determine its book value the two alternatives.Useful life of the machine is
5yrs.depreciation will be apportioned in equal trenches @20% over 5 years. Determine
depreciation under the 2alternatives and show the grant will be treated in thefinancial statements.


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SOLUTION
First alternative: Amount (Rs.)
Cost of the machine 3,15,00,000
Less: Government Grant 35,00,000
Book value 2,80,00,000
Depreciation in this case will be applied to 2, 80, 00,000 that is Rs.56, 00,000 every year.
Second alternative:
Book value of the machine under the second alternative: Rs.3, 15, 00,000. Depreciation
in this case will Rs.63, 00,000 every year.
Grant of Rs.35, 00,000 will be treated as deferred income and allowed to income
over the periods, and, in the proportions in which depreciation on machine is
charged. Since the machine has a useful life of 5yrs and thus depreciation @20%
p.a. as above, the following will be treated of grant.
Year 1 Year 2 Year 3 Year 4 Year 5
Rs. Rs. Rs. Rs. Rs.
BALANCE
SHEET

Source of
funds:

Reserves
and surplus


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(Source: Financial management accounting, Ambharish Gupta)
Deferred
Govt.grants
35,00,0
00
28,00,0
00
21,00,0
00
14,00,0
00
7,00,00
0
Less:
Transferred
to profit and
loss
Account @
20% of the
grant
received
7,00,00
0
7,00,00
0
7,00,00
0
7,00,00
0
7,00,00
0
Added to
source of
funds
28,00,0
00
21,00,0
00
14,00,0
00
7,00,00
0
Nil
Secured
loans


PROFITAN
D LOSS
ACCOUNT

Expenses


depreciation

63,00,0
00
63,00,0
00
63,00,0
00
63,00,0
00
63,00,0
00
Income:
Governmen
t Grants
7,00,00
0
7,00,00
0
7,00,00
0
7,00,00
0
7,00,00
0
Net expense
charge to
profit and
loss
account.
56,00,0
00
56,00,0
00
56,00,0
00
56,00,0
00
56,00,0
00

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AS-16: BORROWING COSTS
Meaning Borrowing Cost
Interest and other costs incurred by an enterprise in connection with borrowing of funds
are termed as borrowing costs.
Borrowing cost may include:
i. Interest and commitment charges on borrowings (long-term or short-term)
ii. Amortization of discounts or premiums relating to borrowings
iii. Amortization of ancillary costs incurred in connection with the arrangement of
borrowings
iv. Financial charges in respect of assets acquired under finance lease or under other
similar arrangements
v. Exchange difference arising from borrowings to the extent it amounts to interest costs.
Qualifying asset
An asset which takes substantial period of time to get ready for its intended use or sale, is
called qualifying asset.

Example: Any tangible fixed assets, which are in construction process or acquired
tangible fixed assets, which are not ready for use or resale. (Plant and machinery,
Building etc.,) Any intangible assets, which are in development phase or acquired but nit
ready for use or resale. (Patents, copyright etc.,)
Investment property
Inventories that require a substantial period to bring them to a saleable condition.(may be
more than one year)
A. Recognition:

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The borrowing costs which directly relates to the acquisition, construction or
Production of qualifying assets should be capitalized.
The following conditions should be satisfied for capitalization of borrowing costs
as a
Part of the cost of the qualifying asset
The borrowing costs should directly relate to the acquisition, construction or
Production of qualifying assets and the cost can be measured reliably.
The qualifying asset should result in future economic benefits to the enterprises.
Any other borrowing costs should be recognized as an expense in the period in
which
they are incurred.
B. Borrowing cost eligible for capitalization
Specific Borrowings
Funds borrowed specifically for the purpose of obtaining a qualifying
asset is called specific borrowings.
Amount of borrowing cost eligible for capitalization = Actual borrowing cost less
any income on temporary investment of those borrowings.
General Borrowings
Funds borrowed generally (not specifically for the purpose of obtaining a qualifying
asset) is called general borrowings.
Amount of borrowing cost eligible for capitalization should be determined by
applying a capitalization rate to the expenditure on that asset.
Amount of borrowing cost eligible for capitalization = Expenditure on the asset
Capitalization rate.
The capitalization rate should be weighted average of the borrowing costs applicable
to the general borrowings of the enterprises outstanding during the period.
Capitalization Rate = Weighted average borrowing cost
Weighted average borrowing cost =Total borrowing cost x100
Total average outstanding borrowings

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The amount of borrowing cost capitalized during a period should not exceed the
amount of borrowing cost incurred during that period.

C. Commencement of capitalization of borrowing cost (When to start capitalization of
borrowing cost) The following conditions must be satisfied for commencement of
capitalization of borrowing cost
a. Expenditure for acquisition, construction or production of a qualifying
asset is being incurred;
b. Borrowing cost is incurred;
c. Activities which are necessary to prepare the asset for its intended use or
sale are in progress.
Expenditure on a qualifying asset includes payment of cash, transfer or other asset
or assumption of interest bearing liabilities.
Any progressive payments received or grants received towards the cost incurred
should be deducted from the expenditure.
D. Suspension of capitalization of borrowing cost (Stop capitalization for a short
period)
Capitalization of borrowing cost should be suspended period in which active
development is interrupted.
Capitalization of borrowing cost is not suspended when a temporary delay is a
necessary part of the process of getting an asset ready for its intended use or sale.

E. Cessation of capitalization of borrowing cost (Stop capitalization)
Capitalization of borrowing cost should cease when substantially all the activities
necessary to prepare the qualifying asset for its intended use or sale are
completed.

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When the construction of a qualifying asset is completed in parts and a completed
part is capable of being used while construction continues of other parts,
capitalization of borrowing costs in relation to a part should cease when
substantially all the activities necessary to prepare that part for its intended use or
sale are completed.

Disclosure:
a. The Accounting Policies adopted for borrowing costs.
b. The amount of borrowing costs capitalized during the period.







Chapter -2
RESEARCH DESIGN

TITLE OF THE STUDY: A Study on Fixed Assets Management at Versabyte
Data Systems Pvt.Ltd.

PROBLEM OF THE STUDY:-
Every organization faces the problem of fixed assets management start from purchasing

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to disposal of an asset. That is finance problem (borrowing cost), maintenance problem
(repairs & maintenance), depreciation problem, Man power to maintain it (technical
staff), other things regarding fixed asset.
Fixed asset management is a process of management accounting. This process tracks for
such purposes as theft protection, financial accounting, and preventive measures. It is
quite a big problem for many companies and organizations to detect condition, location,
status and other parameters of their fixed assets. A popular method of fixed asset
management supposes the usage of asset tag with serial number. Such tags can also
contain bar code for comfortable reading and understanding.
The project studied regarding all the above problems.

OBJECTIVES OF THE STUDY:-
To study and have an overview of in Versabyte Data Systems Pvt.ltd(VDS)
managing fixed assets.
To study various risk involved VDS Company.
To study working, mechanism and benefits of fixed assets management.
To study whether the method and the sales of the depreciation for the fixed assets
is appropriate as per the companies act 1956.
To study the scope and coverage of (AS-10) on valuation of fixed assets.

To know application of (AS-11) government grant.
To study the borrowing cost problem facing by the company (AS-16)
SCOPE OF THE STUDY
The study mainly concentrates on the fixed assets management, fixed assets utilization
and risk-return dynamics of assets by the VDS Company. Borrowing cost problem, and
also on the measuring the efficiency of fixes assets of and the impact of extent of
utilization of fixed assets on sales and operating profits of VDS.This will help us to know
fixed assets utilization and their credit to profits which helps to the growth of the
company. And also which fixed assets are not in active use or idle or which are stated at

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the lower of their net book value.
Review of Fixed Asset Management Systems
Article (By isaac m. O'bannon, technology editor on nov 29, 2010)
Here in this article he has studied that ,For those with many fixed assets, the ability to
perform mass actions is essential, as are asset location and tracking capabilities,
particularly for organizations with multiple locations.
Strategic and effective asset management is somewhat of a combination of knowledge of
tax law and the art of structuring variable depreciation methods into beneficial and legal
treatments that help a business take the greatest advantage of offsets to their tax
liabilities, and to plan for future investment. As a tax and accounting professional, you
are the artist. And a fixed asset management program and knowledge of tax law are some
of the tools of your trade.
Books
D.S.Rawat, accounting standards explained about accounting standards.
S.P.Jain ,K.I.Narang,advanced accounting explained about accounting related to
fixed assets
R.K.agarwal,GAAP explained about the Indian GAAP
R.K.Agarwal,Accounting standards explained about the accounting standards
relating to Indian accounting standards( IICA)
Ambharish Gupta, Financial accounting for management explained about the
overall assets valuation methods
Simplified material of accounting standards by Rachan kumar explained in short
the all accounting standards
Journals
Oorja international journal of management of IT, (A study on efficiency and financing
fixed assets) by Dr.M.Sekar,M.Gowr,A.G.Ramya . used trend analysis to measure the
efficiency of fixed assets performance in the organization.


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Operational definition of concepts
Primary and secondary sources.
Primary data refers to the data that one has collected using his or her own efforts.
Primary data, by contrast, are collected by the investigator conducting the research.
Secondary data on the other hand refers to data that has been collected by another
party. Secondary data can usually be accessed through published or electronic form. .
Common sources of secondary data for social science include censuses, organizational
records and data collected through qualitative methodologies or qualitative research.
SOURCES OF DATA:-
The data required for the study would be collected from both primary and
secondary sources.
The primary data pertains to data collection from interviews and observations.
The secondary data relates to data collection from the websites, articles, journals,
reference books, and annual reports of the company, etc.
Data was also collected through personal visits to persons. The data has been
analyzed statistical tools.
Data has been presented with the help of bar graph and line graph.
SAMPLE DESIGN: Only the fixed assets of VDS Company.

METHODOLOGY:-
To address the objectives underlying the study, the primary data would be
collected through questionnaires and interviews. The observations are analyzed using
various statistical tools and trends.

TYPES OF RESEARCH PLUS TOOLS FOR DATA COLLECTION.
1. www.google.com.
2. Journals
3. Company information as hard and soft copy.

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4. Ratio analysis
5. Reference books
PLAN OF ANALYSIS
Classification and tabulation is made for the information which is collected through
company .Results is highlighted by preparing the tables for information collected through
primary data. Percentage will be calculated and different graphs are prepared.

LIMITATIONS OF STUDY:-
The study curtails comparison as it is within the preview of only one organization.
The study can only be used as a preview to entire range of problems.
The information provided by the organization was limited to a far extent due the
company rules and secrecy purpose.
The reference period is taken as 5 years.
Time factor as a period of one month for gathering data


CHAPTER SCHEME

CHAPTER 1: INTRODUCTION:
This chapter views the theory part of Fixed Assets Management and its importance,
usefulness, status and why the study is needed.

CHAPTER 2: RESEARCH DESIGN
This chapter views the methodology of the study, the research design, and sources of
data, sampling plan, field work, data processing and plan of analysis.

CHAPTER 3: INDUSTRY & COMPANY PROFILE
This chapter views the origin & growth of VSD, its objectives, Mission, Developmental

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activities & profile of company in general, etc.
CHAPTER 4: DATA ANALYSIS & INTERPRETATION
In this chapter data collected is complied, tabulated, processed &analyzed and interpreted
with the help of graph to present data analysis.

CHAPTER 5: FINDINGS, SUGGESTIONSAND CONCLUSION
This Chapter deals in providing summary of findings through Data analysis and
interpretations from the previous chapters, and gives suitable suggestions based on the
study made from this project, and This chapter contains the summary providing an
overall study of the project.







Chapter -3 company profile
ABOUT INDUSTRY
Power supply units
A power supply unit (PSU) converts mains AC to low-voltage regulated DC power for
the internal components of a computer. Modern personal computers universally use a
switched-mode power supply. Some power supplies have a manual selector for input
voltage, while others automatically adapt to the supply voltage.

EVOLUTION
Address by Frank Toich, Sales Manager, at Kepco's 50th Anniversary Celebration1926
Ad for Motorola Battery Eliminator. The power supply industry dates back to the early

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1920s, when crude devices were first developed to serve as "B" battery eliminators to
power radios in both the commercial and consumer markets.
The market for separate power supplies evaporated around 1929, when most radios
manufactured included a built-in power supply. The need for stand-alone power supplies
remained relatively small in the 1930s and into the 1940s. The dominant technology
during this period consisted of vacuum tube linear regulators.
Power supplies used vacuum tubes for both the power and control elements. Typically, a
voltage regulator (VR) tube, the predecessor to today's zener diodes, was used to produce
a stable reference. Control was pretty much limited to the manual twisting of knobs. In
those days we did not care too much about dissipation. Under normal circumstances,
vacuum tubes ran pretty hot -- and unless the plate of the tubes glowed red, or glass
started to melt, no one worried much about it.In the mid 1940s, three companies set up
shop in a relatively obscure community in Queens, New York A milestone in the industry
occurred in the 1950s when semiconductors were first introduced into the power supply
design In the 1970s, an energy crisis, which affected the entire industrial world, provided
the switching power supply with an opportunity to re-surface and establish a significant
position in the electronic marketplace. The big breakthrough in the 1970s was the
development of low loss ferrite (transformer core material), coupled with the readily
available, higher speed silicon transistors that made possible the practical reality of high
frequency products which could operate above 20KHz where they were inaudible. The
1980s saw many new start-up companies enter the market producing switch-mode
products. Many of these new companies were based in the Pacific Rim, first in Japan, and
eventually shifting to Taiwan and Hong Kong.
Inception
The idea of establishing versa byte data systems pvt.ltd is started by 4 members who are
active players and share holders and the directors too.

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Previously many products were like IT products, telecommunication products (message
Account terminals, telegraphic terminals) were importing from Russia. so the idea
clicked to manufacture the same products in our own country and can supply to other
countries including India too.
Like this versa byte data systems running now after crossing many pitfalls, at good
position.
Company history
Versa byte data systems private limited (VDS) started operations in the year 1987
addressing the requirements of defence, telecommunition and other general industries in
the area of power supplies and microprocessor based products. Over the years, it has
provided customized solutions to various satisfied customers and continues to do so even
today.
Over the years we have pioneered in successfully meeting the challenges of producing Hi
reliability custom built products for defense services.

VDS specializes in design and development of MIL standards power supplies for Indian
defence Establishments. The products have been fully designed in house to suit the
customers requirement. These products have found good standing amongst the users
because they are import substitutes and low priced. All these products are MIL standard
satisfying stringent quality requirements like dimensions, size and special features. These
are approved by defence authorities like CRI, CRE, ALISDA, ASIEO, DLRA, and
RCMA. Density power supplies for submarine applications are approved by NSTL and
WE. Our products are qualification approved by defense quality approving authorizes.
We extend life time support to our products delivered.

VDS has the capacity to provide any technical skill in power electronics field by
selecting appropriate technology and suitable personnel because of years of cumulated
experience directors of the company.
Best of the public sector undertakings and other units who meet the defence requirement

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government of India are the satisfied customers of the company.
The strength of the company is a experienced design team supported by qualified
engineers and dedicated administrative staff. We stand unique in the power projects
because of our technical capability and selection of products.
Objectives of the company
To carry on the business as:
manufacturers,assemblers,buyers,sellers,indentors,hirers,repairers,importers,system
engineers,systemanalystsandconsultantsofalltypesofcomputersandmicroprocessorsbaseds
ystems,mainframesystems,personelcomputers,wordprocessors,computerised power
systems and
othercomputerizedandmicroprocessorbasedsystemsandothercomputerizedandmicroproces
sorbasedsystemsforcommunication,medical,business,commercial,industrial,environmenta
l,processcontrol,instrumentsandperipherals,acecssories,apparatus and all things used there
with or in the manufacture,maintenance,repair and working thereof
To carry on the business as:
manufacturers,buyers,sellers,indentors,hirers,repairers,importers,exporters,promoters,age
nts.representatives and consultants of all kinds of peripherals and associated equipments
such as printers,disk,drivers,video display units, line printers, magnetic tape drivers, hard
disk controllers and inter faces instruments. Logic analyzers and control equipments
including data acquition systems,analog,A to D and D to A converters.line
receivers,paging and data acquisition systems.
To function as consultants and advisers to individuals, firms, bodies, corporation,
local authorities and government departments in
business,industry,management,engineering technological and research fields.
Vision
Serve nation by quality products to navy, army, and airforce.
Mission
You can get in touch with us with an idea and we will make it a reality

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Nature: The Company is engaged in the manufacturing and research and development
of power supply units at present Versa byte data systems
Board of directors
Mr.P.S.Reddy
Mr.Narahari.C.N
Mr.Rajesh.P.Reddy

Achievements in the year 2008-09
One of the companiess reputed customer to whom power supply units were supplied in
earlier years had placed orders for design, development and supply of 1 to 3 phase of
power converters. These are successfully designed, manufactured and supplied to
customers to their entire satisfaction.
We had orders worth orders Rs.1457.80lakhs as on 1
st
April 2008 and received about
Rs.717.19 lakhs worth orders during the year. After executing the orders worth
Rs.1173.62 (Basic cost), we had about Rs.1001.37 confirmed orders in hand as on the
closure of the year 2008-09.
Achievements in the year 2010-11
Company had received developmental order from a reputed sector unit for the
development and supply of EPC (electronic power controller) for MPM (microwave
power module)and succeeded in delivering SIX(6) such units during first phase for
approval.
We had orders worth orders Rs.584.84lakhs as on 1
st
April 2010 and received about
Rs.849.34 lakhs worth orders during the year. After executing the orders worth Rs.684.85
(Basic cost), we had about Rs.749.33lakhs confirmed orders in hand as on the closure of
the year 2010-11.
Achievements in the year 2011-12
Company had received an order for the development and supply of electronic power
control distribution unit for 270V DC a project from a defense unit of government of

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India, Bangalore and have delivered 4 units during the year.
We had orders worth orders Rs.749.33lakhs as on 1
st
April 2011 and received about
Rs.231.69 lakhs worth orders during the year. After executing the orders worth Rs.660.82
(Basic cost), we had about Rs.2996.20lakhs confirmed orders in hand as on the closure of
the year 2011-2012.
Achievements in the year 2012-13
Company had received an order for one of project for the development and supply of
MULTI OUTPUT DC DC POWER SUPPLY WITH CBIT FACILITY QTY-12 NOS
value Rs.171.42lakhs from a defense unit of government of India, Bangalore and the
work is in progress.
We had orders worth orders Rs.2499.90lakhs as on 1
st
April 2012 and received about
Rs.917.96lakhs worth orders during the year. After executing the orders worth Rs.943.76
(Basic cost), we had about Rs.2474.10lakhs are in hand as on the close of the year 2012-
2013.

Future plan 2012-13
For the year 2012-13 work is in progress for the designing and development of a product
being name high Endurance Astra power supply units which we developed during the
year and will be delivered in current year.
Development of a new product by the name ANTENNA LRU PSU for one of the defence
unit of government of India is in progress.
Company had received an order of Rs.1692.96lakhs from a reputed public sector unit for
the repair of transmitters. The delivery of the units is spread over for 3 years.
For the year 2013-14 development of a new product being name ANTENNA LRU PSU
for one of the defence unit of government of India,which is in progress and during the
year it will be delivered in current year.
Company has successfully executed 1
st
year of contract order of Rs.402.48lakhs out of
1692.96lakhsfrom a reputed public sector unit for the repair of transmitters. The contract
is spread over for 3 years.
Company is having plans to complete the development activities for the orders received

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from defence R & D units and to settle for the production supplies during the next year.
The company has go allotted half acre of industrial land by KSSIC at Somapura industrial
estate, dabaspet, nelamangala TQ for future expansion and the possession certificate has
been received.

Company strength
1) PCB design multi layers -12 layers and testing.
2) High voltage planar transformers fabrication/assembly.
3) High voltage design upto20KV
4) In house designing and testing facility
5) Embedded software development for digital control and communication.
6) Experience of handling and testing of any microwave tubes solid state amplifiers
and passive components.
7) EMI/EMC compliances of the product.
8) Registered DGQA and CEMILAC approved design house.
9) Very strong research and development background across a range of power
solutions.
10) Developed and productionised 18 different type approved units
11) Presently 8 units under development for type approval.
12) Designing products qualifying standards required by air force, navy, army and
civil aircraft.
13) Vast experience ensures delivery of the right product with the right economics at
the right time
14) Knowledge on NAVMAT P4855-1A guidelines for ESS and design.

Facilities
1) Equipments like spectrum analyzer oscilloscope arbitrary wave form generator
available with us.
2) Vacuum potting and packing facility available in house

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a. Rapid temp cycling chambers with humidity test facilities
b. Dry heart chambers
c. Vibration shaker 2000kgs f
3) High precision mechanical fabrication, aluminium casting /dip brazing facility for
chassis fabrication.
4) In house CNC machine.

Our products meet the following standards
We have in house capability of testing the products to meet
a. MIL-STD-810: environmental test methods and engineering guidelines.
b. MIL-STD-2164: environmental stress screening process for electronic equipments.
c. MIL-STD-461E: EMI/EMC compatibility (we have capabilities to check at lab
level conducted EMI and radiated EMI).
d. MIL-STD-1389: design requirements for standard electronic modules.


Mechanical design aspect of electronic equipment
We have capability of designing of enclosures, chassis, heat sink, cold plate and other
parts taking into consideration ruggedisation and light weight for military application in
particular airborne application.
Our designs safeguards electronic components, devices and PCB from large displacement
and high temperature caused by vibration and thermal environment specified by MIL
STD specified by customer.
A virtual prototype is build before the fabrication of the product, in the computer in
which the parts are created and assembled to sort out the problems like interference,
clearance and accessibility.
The product thus visualized through virtual prototype is set for communication with
various discipline for alteration and modification etc.
The design parameter like stress, strain natural frequency and temperature, vital for

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functioning of the equipment, is evaluated and corrected in the computer with the help of
CAE software.
A proto-type of product is build with appropriate manufacturing process like machining,
casting welding and sheet metal operation and tested its strength in vibration and thermal
lab according to MIL spec.
The product function is checked measuring design parameter like stress, natural
frequency, temperature airflow volume and velocity using appropriate measuring
techniques and instruments.
Action taken for production of product after the prototype passes the required tests
specified by customer.

CERTIICATION
Prominent test houses who had certified versabyte products :
1. CEMILAC
2. RCMA
3. ALISDA

4. DGAQA
5. QAE (N)

APPORVED
We are CEMILAC approved design firm for
Design and development of airborne power supply units.
Design and development of airborne electronic units, microprocessor based units.
Rebuilding airborne electrical machines through modifications and reverse
engineering.

Test facility available
Measurement of current ,voltage,resitence

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Wave form analysis/ measurement
EMI/EMC
High voltage
Temperature measurement
Frequency converter

AWARDS
Best entrepreneur from bank of Baroda.
Industry appreciation award from Naval Science and Technological
laboratory, vishakapatanam on 15th February 2007.





PRODUCTS LIST




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Chapter 4 - Analysis and Interpretation


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Analysis
The above table shows that the fixed asset turnover ratio when compare to the year
2008-09 was 25.63, year 2009-10 is decreased to 6.59 and further its increased to 6.73
in the year 2010-11.But decreased to 3.92 in the year 2011-12.and finally in the year
2012-13 it has been increased to 5.46. This indicates about the fixed assets turnover ratios
are fluctuating in each year.




GRAPH 1: REPRESENTING FIXED ASSETS TURNOVER RATIO


Fixed assets turnover ratio: This ratio measures the productivity of the
fixed assets in the firm.


Fixed assets turnover ratio= Sales
Fixed assets


TABLE 1: SHOWING FIXED ASSETS TURNOVER RATIO

YEAR SALES
FIXED
ASSETS RATIO
2008-09 150,047,200

5,854,121 25.63
2009-10 68,537,345

10,392,685 6.59
2010-11 77,279,471

11,481,663 6.73
2011-12 75,260,705

19,184,555 3.92
2012-13 111,933,860

20,514,846 5.46

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Interpretation

The above graph indicates that the fixed assets turnover ratio when compared to the year
2008-09 to year 2009-10 is decreased and further it increased in the year 2010-11,and
decreased in the year 2011-12. And at the year 2012-13 it has been considerably
increased. This indicates about the fixed assets turnover ratio fluctuating in each year.
The ratio shows increase of fixed assets than increase in sales it causes to decrease in the
turnover ratio of the firm.





Fixed assets to net worth ratio: This ratio measures the portion of share capital and
reserves used to finance fixed assets.

Fixed assets to net worth ratio= Fixed assets
Net worth
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2008-09 2009-10 2010-11 2011-12 2012-13
25.63
6.59 6.73
3.92
5.46
RATIO

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TABLE 2: SHOWING FIXED ASSETS TO NET WORTH RATIO

YEAR
FIXED
ASSETS
NET
WORTH RATIO
2008-09 5,854,121 46,389,137 0.13
2009-10 10,392,685 52,669,559 0.20
2010-11 11,481,663 56,857,327 0.20
2011-12 19,184,555 60,270,350 0.32
2012-13 20,514,846 69,152,208 0.30



Analysis

This table shows that fixed assets to net worth ratio when compared to year 2008-09 was
0.13, year 2009-10 is increased to 0.20 and remains constant at 0.20 in the year 2010-11
,and it again increased to 0.32 in 2011-12.and finally declined to 0.30 in 2012-13. This
indicates about fixed assets to net worth ratio have been gradually fluctuating in each
year.








GRAPH 2: REPRESENTING FIXED ASSETS TO NET WORTH RATIO



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Interpretation:
The above Graph indicates that the fixed assets to net worth ratio when compared to year
2008-09 to year 2009-10 is increased and further remains constant in the year 2010-11,
in 2011-12 it has been increased and decreased in 2012-13. This indicates about long
term financial soundness of the company.









Fixed assets to Long term funds ratio: This ratio measures the proportion of long term
funds used for fixed assets.


Fixed assets to Long term funds ratio = Fixed assets
Long term funds
0.13
0.20
0.20
0.32
0.30
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
2008-09 2009-10 2010-11 2011-12 2012-13
FIXED ASSETS TO NET WORTH RATIO
RATIO

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TABLE 3: SHOWING FIXED ASSETS TO LONG TERM FUNDS RATIO

YEAR FIXED ASSETS
LONG TERM
FUNDS RATIO
2008-09 5,854,121

13,377,435 0.44
2009-10 10,392,685

7,866,055 1.32
2010-11 11,481,663

13,791,073 0.83
2011-12 19,184,555

3,739,962 5.13
2012-13 20,514,846

4,451,905 4.61





Analysis

This table shows that fixed assets to long term funds was in 2008-09 is 0.44 and in the
year 2009-10 increased to 1.32 at 2 times and further decreased to 0.83 in the year 2010-
11,tremendously increased to 5.13 that is by 6times ,but finally decreased to 4.61 in the
year 2012-13.






GRAPH 3: REPRESENTING FIXED ASSETS TO LONG TERM FUNDS RATIO



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Interpretation:

The above graph indicates that fixed assets to long term funds. In the year 2008-09 got
more, remaining all the years were less. Fixed assets and long term funds are not so
utilized effectively in the business and it affects the profitability of the company.









Total assets turnover ratio: This ratio measures the productivity of the total assets of the
firm.


Total assets turnover ratio= Net sale
2008-09 2009-10 2010-11 2011-12 2012-13
0.44
1.32
0.83
5.13
4.61
FIXED ASSETS TO LONG TERM FUNDS RATIO
RATIO

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Total assets
TABLE 4: SHOWING TOTAL ASSETS TURNOVER RATIO













Analysis

This table
shows
that sales to total assets was in 2008-09 is 2.05 and in the year 2009-10 decreased to
1.06 and further decreased to 0.86 in the year 2010-11,tremendously decreased to
0.53,but finally increased to 0.79 in the year 2012-13. This indicates about sales to total
assets ratio have been gradually fluctuating in each year.











GRAPH 4: REPRESENTING TOTAL ASSETS TURNOVER RATIO


YEAR SALES
TOTAL
ASSETS RATIO
2008-09

150,047,200

73,157,987 2.05
2009-10

68,537,345

64,964,047 1.06
2010-11

77,279,471

89,850,482 0.86
2011-12

75,260,705

141,438,562 0.53
2012-13

111,933,860

141,270,599 0.79

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Interpretation

The above graph represents the total assets turnover ratio. As the graph indicates that the
total assets turnover ratio is more in 2008-09 when compared to rest of the years as the
sales are more. Then due to decline in sales it has been come down.






Current assets to fixed asset ratio: This ratio measures the how many current assets are
bought or utilized through fixed assets. There is no specific ratio for this. It measures the
proportion between the fixed assets and current assets the company as acquired.

2008-09
39%
2009-10
20%
2010-11
16%
2011-12
10%
2012-13
15%
TOTAL ASSETS TURNOVER RATIO

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Current assets to Fixed assets ratio= Current assets
Fixed assets

TABLE 5: SHOWING CURRENT ASSETS TO FIXED ASSETS RATIO

YEAR
CURRENT
ASSETS
FIXED
ASSETS RATIO
2008-09

67,303,866

5,854,121 11.50
2009-10

54,571,362

10,392,685 5.25
2010-11

78,368,819

11,481,663 6.83
2011-12

122,254,007

19,184,555 6.37
2012-13

120,755,753

20,514,846 5.89



Analysis

This table shows that the Current assets to Fixed assets ratio. In the year 2008-09, it was
11.50 and it has decreased to 5.25 in 2009-10.and increased to 6.83 in 2010-11
.Gradually decreased to 6.37 and 5.89 in 2011-12 and 2012-13 respectively. The Current
assets to fixed assets ratio have been gradually fluctuating in each year.







GRAPH 5: REPRESENTING CURRENT ASSETS TO FIXED ASSETS RATIO



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Interpretation

The above Graph explains about the current assets and fixed assets. There is fluctuation
in the figures over the period of time. The fixed assets are increasing and current assets
are not so gradually fluctuating so the company financial position quite good.






Return on Fixed assets: This ratio measures the productivity of the fixed assets in the
company.

11.50
5.25
6.83
6.37
5.89
2008-09 2009-10 2010-11 2011-12 2012-13
CURRENT ASSETS TO FIXED ASSETS RATIO
RATIO

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Return on Fixed assets = Net profit/loss *100
Fixed Assets



TABLE 6: SHOWING RETURN ON FIXED ASSETS RATIO


YEAR
NET PROFIT
AFTER TAX
FIXED
ASSETS RATIO
2008-09 12,636,170 5,854,121 215.85
2009-10 6,280,422 10,392,685 60.43
2010-11 4,187,768 11,481,663 36.47
2011-12 3,413,023 19,184,555 17.79
2012-13 8,881,858 20,514,846 43.29


Analysis

This table shows that the Return on Fixed assets. The year 2008-09 is 215.85% it is
double to fixed assets and compared to this 2009-10,2010-11,2011-12 all are at the
declining rate at 60.43,36.47,17.79 respectively. And in the year 2012-13 bit increased to
43.29,. Returns on Fixed assets ratio have been gradually decreasing in each year It
shows a negative sign of the company.











GRAPH 6: REPRESENTING RETURN ON FIXED ASSETS RATIO


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Interpretation

The Above Graph indicates about the return on fixed assets. When compared to the year
2008-2009. In the succeeding years the ratio of fixed assets turnover ratio is
tremendously decreased so it shows the cash outflow and negative effect to the company.







Gross profit to fixed assets ratio: This ratio measures the gross profit out of fixed assets
during the year in the company.

Gross profit to fixed assets ratio =Gross profit * 100
Fixed Assets
2008-09
2009-10
2010-11
2011-12
2012-13
215.85
60.43
36.47
17.79
43.29
RETURN ON FIXED ASSETS RATIO
RATIO

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TABLE 7: SHOWING GROSS PROFIT ON FIXED ASSETS RATIO

YEAR
GROSS
PROFIT
FIXED
ASSETS RATIO

2008-09

19,683,300

5,854,121 336.23

2009-10

9,030,422

10,392,685 86.89

2010-11

5,756,918

11,481,663 50.14

2011-12

5,125,230

19,184,555 26.72

2012-13

13,701,083

20,514,846 66.79






Analysis

The above table shows that the gross profit charges to fixed assets ratio when compared
to the year 2008-09 is 336.23, year 2009-10 is 86.89 ,year 2010-11 50.14,and for year
2011-12 it is 26.72.finally at the last year 66.79.so the Gross profit to fixed assets ratio
has been fluctuating in each year.





.



GRAPH 7: REPRESENTING GROSS PROFIT ON FIXED ASSETS RATIO



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Interpretation
The above graph indicates about the gross profit charges on the fixed assets done by the
companies. In the year 2008-09 gross profit to fixed assets ratio is very high when
compare to rest of the years.2009-10, 2010-11 ,2011-12 gross profit to fixed assets ratio
is at decreasing rate .2012-13 gross profit as been increased by2 times of previous year.
2011-12. The gross profit of the company is decreasing so the company profit position is
not well and good . It shows cash outflow of the company





Net worth or proprietary ratio: These ratio measures the proportion of equity funds
utilized to finance total assets.

Net worth or proprietary ratio= Equity funds
Total assets

2008-09
2009-10
2010-11
2011-12
2012-13
336.23
86.89
50.14
26.72
66.79
GROSS PROFIT ON FIXED ASSETS RATIO
RATIO

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TABLE 8: SHOWING NET WORTH OR PROPRIETARY RATIO

YEAR
EQUITY
FUNDS
TOTAL
ASSETS RATIO

2008-09

46,389,137

73,157,987 0.63

2009-10

52,669,559

64,964,047 0.81

2010-11

56,857,327

89,850,482 0.63

2011-12

60,270,350

141,438,562 0.43

2012-13

69,152,208

141,270,599 0.49



Analysis

This table shows that the equity funds to total assets ratio. In the year 2008-09, it was
0.63 and it has increased to 0.81 in 2009-10. It gradually decreased to 0.63 and 0.43 in
2010-11, 2011-12 respectively. Finally in the year 2012-13 it as increased to 0.49. The
equity funds to total assets ratio gradually fluctuating in each year.













GRAPH 8: REPRESENTING NET WORTH OR PROPRIETARY RATIO



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Interpretation

The Above Graph indicates about the equity funds to total assets ratio. When compared
to the year 2009-2010. In the preceding and succeeding years the ratio of equity funds to
total assets ratio is tremendously decreased so it shows that the proportion of equity funds
were not effectively used to finance total assets.



Current asset ratio: These ratio measures the firms ability to pay short term liabilities
by using short term assets.

Current asset ratio= Current assets
Current liabilities
2008-09
21%
2009-10
27%
2010-11
21%
2011-12
14%
2012-13
17%
NET WORTH OR PROPRIETARY RATIO

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TABLE 9: SHOWING CURRENT ASSET RATIO

YEAR
CURRENT
ASSETS
CURRENT
LIABILITIES RATIO
2008-09

67,303,866

13,396,415 5.02
2009-10

54,571,362

4,433,433 12.31
2010-11

78,368,819

19,207,082 4.08
2011-12

122,254,007

77,664,081 1.57
2012-13

120,755,753

67,496,593 1.79


Analysis

This table shows that current asset to Current liabilities ratio. In 2008-09 is 5.02 and in
the year 2009-10 increased to 12.31 at 2 times and further decreased to 4.08, 1.57, in the
year 2010-11, 2011 respectively. But finally increased to 1.79 in the year 2012-13. The
current asset ratio is highly fluctuating in each year.











GRAPH 9: REPRESENTING CURRENT ASSET RATIO



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Interpretation

The Above Graph indicates about current asset ratio. When compared to the year 2009-
2010. In the preceding and succeeding years the ratio of current assets ratio is
tremendously decreased so it shows that the proportion of current assets are more
sufficient to meet the current liabilities of a company.





Liquid ratio: Liquid ratio measures the firms ability to use quick money to pay quick
assets

Quick assets= Current asset- (stock & prepaid expenses)

Quick liabilities= Current liabilities-bank overdraft

2008-09
2009-10
2010-11
2011-12
2012-13
5.02
12.31
4.08
1.57
1.79
CURRENT ASSET RATIO
RATIO

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Liquid ratio= Quick assets
Quick liabilities


TABLE 10: SHOWING LIQUID/QUICK RATIO

YEAR
QUICK
ASSETS QUICK LIABILITIES RATIO
2008-09

58,999,128

13,396,415 4.40
2009-10

38,071,629

4,433,433 8.59
2010-11

51,646,785

19,207,082 2.69
2011-12

75,155,922

77,664,081 0.97
2012-13

69,736,389

67,496,593 1.03

Analysis

The above table shows that the liquid/quick ratio. in the year 2008-09 is 4.40 and
increased to 8.59 in the year 2009-10,then decreased to 2.69,0.97 in the year 2010-11
,2011-12 respectively. At the year 2012-13 it was increased by bit that is 1.03.So the
liquid/quick ratio shows that the quick assets are more enough to meet the quick
liabilities of the company. Because the ratio should be at 2:1.









GRAPH 10: REPRESENTING LIQUID/QUICK RATIO



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Interpretation

The Above Graph indicates about the current assets ratio. When compared to the year
2009-2010. In the preceding and succeeding years the ratio of quick assets to quick
liabilities is at decreasing rate. The liquid/quick ratio shows that the quick assets are more
enough to meet the quick liabilities of the company. Because the ratio should be at 2:1.



Net profit ratio: This ratio measures the overall efficiency of the firm.

Net profit ratio= Net profit
Sales


TABLE 11: SHOWING NET PROFIT RATIO
2008-09, 4.40
2009-10, 8.59
2010-11, 2.69
2011-12, 0.97
2012-13, 1.03
LIQUIDITY/QUICK RATIO
RATIO

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AIMS, PEENYA Page 83


YEAR NET PROFIT SALES RATIO
2008-09

12,636,170

150,047,200 8.42
2009-10

6,280,422

68,537,345 9.16
2010-11

4,187,768

77,279,471 5.42
2011-12

3,413,023

75,260,705 4.53
2012-13

8,881,858

111,933,860 7.93

Analysis

The above table shows that the net profit ratio. In the year 2008-09 is 8.42%,then
increased to 9.16 in the year 2009-10and gradually decreased to 5.42 and 4.53
respectively in the year 2010-11 and 2011-12..finally increased to 7.93% in the year
2012-13..So the net profit ratio has been fluctuating in each year.















GRAPH 11: REPRESENTING NET PROFIT RATIO


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Interpretation
The above graph representing the net profit ratio. In the year 2009-10 it has the highest
profit than rest of the years it has been fluctuating due to sales are fluctuation in every
year as the .net profit is dragged by sales.











Return on equity fund ratio: This ratio measure the return on equity fund invested by
the shareholders in the company.


Return on equity fund ratio= PAT-preference dividend
Equity funds

2008-09 2009-10 2010-11 2011-12 2012-13
8.42
9.16
5.42
4.53
7.93
NET PROFIT RATIO
RATIO

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AIMS, PEENYA Page 85



TABLE 12: SHOWING RETURN ON EQUITY FUND RATIO

YEAR
PROFIT AFTER
TAX
EQUITY
FUNDS RATIO
2008-09

12,636,170

46,389,137 0.27
2009-10

6,280,422

52,669,559 0.12
2010-11

4,187,768

56,857,327 0.07
2011-12

3,413,023

60,270,350 0.06
2012-13

8,881,858

69,152,208 0.13



Analysis

Above the table shows the return on equity funds ratio. Only in the year 2008-09 the
returns are high at 0.27 but in the succeeding years like 2009-10, 2010-11, 2011-12 the
returns are at decreasing rate that is at 0.12, 0.07, and 0.06 respectively. From these we
can observe that the returns are very low on equity funds.










GRAPH 12: REPRESENTING RETURN ON EQUITY FUND RATIO



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Interpretation

The Above Graph indicates about the return on equity funds. When compared to the year
2008-2009. In the succeeding years the ratio of return on equity funds ratio is
tremendously decreased. So it shows the decrease in profit level even though the equity
funds are increasing yearly. It reflects negative effect to the company.


Interest coverage ratio: This ratio measures the availability of profits to pay interest


Interest coverage ratio= PAT + Interest
Interest



TABLE 13: SHOWING INTEREST COVERAGE RATIO
2008-09 2009-10 2010-11 2011-12 2012-13
0.27
0.12
0.07
0.06
0.13
RETURN ON EQUITY FUND RATIO
RATIO

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YEAR
PROFIT AFTER TAX
INTEREST RATIO INTEREST
2008-09

16,178,163

3,541,993 4.57
2009-10

8,285,664

2,005,242 4.13
2010-11

5,067,432

879,664 5.76
2011-12

7,543,973

4,130,950 1.83
2012-13

14,312,191

5,430,333 2.64




Analysis

The above table states the interest coverage ratio. In the year 2008-09 the ratio is 4.57
then decreased by bit to 4.13 in the year 2009-10.further increased to 5.76 and decreased
to 1.83 in the year 2010-11 and 2011-12 respectively. At the last year it has increased to
2.64.we can notice that the interest coverage ratio is continuously fluctuating in every
year.










GRAPH 13: REPRESENTING INTEREST COVERGE RATIO



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Interpretation
The Above Graph indicates about the interest coverage ratio. When compared to 2008-09
the ability to pay the interest from the profits of the company is considerably fluctuating
to due to the decrease in the profit rates also. So it symbolizes the negativity of the
company.



Earnings per share ratio: This ratio measures the earnings per share invested by equity
share holders of the company.


Earnings per share ratio= PAT preference dividends
Number of equity shares


0.00
4.57
4.13
5.76
1.83
2.64
2008-09 2009-10 2010-11 2011-12 2012-13
INTEREST COVERGE RATIO
RATIO

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TABLE 14: SHOWING EARNINGS PER SHARE RATIO

YEAR PROFIT AFTER TAX EQUITY SHARES RATIO
2008-09 12,636,170 30,000 421.21
2009-10 6,280,422 30,000 209.35
2010-11 4,187,768 30,000 139.59
2011-12 3,413,023 30,000 113.77
2012-13 8,881,858 30,000 296.06



Analysis

Above the table shows the earnings per share ratio . Only in the year 2008-09 the returns
are at very high that is 421.21. But in the succeeding years like 2009-10, 2010-11, 2011-
12 the earnings per share are at decreasing level that is at209.35,139.59and 113.77
respectively. And finally in the year 2012-13 it has move towards positively that is to
296.06. From these we can observe that the earnings are often fluctuating..










GRAPH 14: REPRESENTING EARNINGS PER SHARE RATIO



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Interpretation

The Above graph indicates about the earnings per share ratio. Here all the years number
of shares are same but the earnings on it are at fluctuating due to the low profits of the
company. Only in the year 2008-09 and 2012-13 it has a good returns .





Debt equity ratio: It represents the proportion of debt in the capital structure of the
company
Debt= interest bearing long term liabilities.

2008-09 2009-10 2010-11 2011-12 2012-13
421.21
209.35
139.59
113.77
296.06
EARNINGS PER SHARE RATIO
RATIO

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Debt equity ratio= Debt
Equity



TABLE 15: SHOWING DEBT EQUITY RATIO


YEAR
LONG TERM
FUNDS EQUITY FUNDS
RATI
O
2008-09

13,377,435 46,389,137 0.29
2009-10

7,866,055 52,669,559 0.15
2010-11

13,791,073 56,857,327 0.24
2011-12

3,739,962 60,270,350 0.06
2012-13

4,451,905 69,152,208 0.06




Analysis

The table states the debt equity ratio. The year 2008-09 has 0.29 and the very next year
decreased to 0.15 that is in 2009-10.but in the year 2010-11 again increased to 0.24.next
after two assessment years also the ratio remains the same in 2011-12 and 2012-13.this
shows that the equity is more utilized than debt. This is not good for the company as the
ratio should at 1.5:1.






GRAPH 15: REPRESENTING DEBT EQUITY RATIO



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Interpretation

The Above Graph indicates about the debt equity ratio. The company is utilizing more
equity funds than the debt which has to be avoided as there is more risk involved in
equity than debt. Because the ratio should be at1.5:1 that is debt1.5 means equity at 1
ratio. This can be observed in the graph.



Depreciation ratio: This ratio measures the depreciation charged on the fixed assets of
the company.
Depreciation is calculated on written down value method.


Depreciation ratio = Gross block of fixed assets
36%
18%
30%
8%
8%
DEBT EQUITY RATIO
2008-09
2009-10
2010-11
2011-12
2012-13

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Depreciation




TABLE 16: SHOWING DEPRECIATION RATIO

YEAR
GROSS BLOCK OF
DEPRECIATION RATIO FIXED ASSETS
2008-09 18,361,527 1,017,210 18.05
2009-10 24,212,575 1,312,484 18.45
2010-11 26,928,470 1,649,556 16.32
2011-12 36,594,062 2,246,522 16.29
2012-13 40,948,366 3,024,013 13.54




Analysis

The above table states the depreciation ratio. In the year 2008-09 the depreciation ratio is
18.05 then increased by bit to 18.45 in 2009-10.Next in the coming years decreased to
16.32, 16.29 and13.54 in 2010-11, 2011-12 and 2012-13 respectively. These shows that
fixed assets are decreasing in the company only than the depreciation is decreased.









GRAPH 16: REPRESENTING DEPRECIATION RATIO



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Interpretation
The Above Graph indicates about the depreciation ratio. The depreciation is more in the
year 2009-10 this shows more fixed assets presence and in the rest of the years fixed
assets are less so the depreciation is also less .The reason for this is that the fixed assets
are sold and decreased


Chapter 5
FINDINGS AND SUGESSTIONS
FINDINGS
18.05 18.45 16.32 16.29 13.54
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008-09 2009-10 2010-11 2011-12 2012-13
RATIO

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Sales are fluctuating from 2008-09 to 2012-13 in these years 2008-09 have highest
sales and 2009-10 has the lowest sales. But after it keeps on increasing in the year
2012-13 it has second highest sales when compared to 5 years.
Depreciation has been provided on written down value method at ht rates specified
in schedule xiv of the companies act,1956. In the case assets acquired durig the
year,pro-rata depreciation for the period for which the sset is used is provided.
Company is not dealing with or trading I share, securities, debentures and other
investments. Accordingly clause4 (xiv) of the order not applicable.
The term loans have been applied for the purpose for which they were raised.
No funds raised on short term basis have been utilized for long term investment.
No long term funds used to finance short term assets.
The company has not made any preferential allotment of shares.accordignly clause
4 (xviii) of the order not applicable.
The company has not issued any debentures.accordinglyclause 4 (xix) of the order
is not applicable.
The company has not raised any money by public issue during the year.
Accordingly clause 4 (xx )of the order is not applicable.
Fixed assets are stated at cost less depreciation. Costs comprise the purchase price
and any attributable costs of bringing the asset to working condition for its
intended use.
Sales are reported net after adjustments and return. They are accounted only after
the dispatch of goods and are inclusive of excise duty and sales tax.
As per requirement of the company act 1956 all the expenses and revenues are
accounted on accrual basis except interest on investments (national saving
certificates),which will be accounted on cash basis.
Bank of Baroda has financed for various fixed assets with interest to VDS.
Plant and machinery are considerably increasing in the year 2008-2013 without
any scrap.
Furnitures and fixtures are also increasing at higher rate in the 5 years without any
scrap.

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Office equipments are also increasing at higher rate from 2009-2013 without any
scarp.
Vehicles are sold and also purchased in between the 5 years.
Buildings were highly increased from 2008-2013 that is from 10lakh to 1crore.
Computers are also increasing at higher rate from 2008-2013 without any scarp.
No government grant has been provided for the VDS co., on fixed assets.
Valuation fixed assets includes cost of asset, installation charges, taxes, etc.
Recently the deletions of fixed assets were less other than vehicles.
Maintenance cost of plant and machinery is high when compared to other fixed
assets.
As the company is involved in Research & Development and Manufacturing. Plant
and machinery and computers are more utilized in production as both are need for
manufacture of products
They are the original manufacturers and their products cannot be manufactured by
others as they are certified by the concerned authority.
VDS co., has no competition as they produce customized products and not the
commercial products.
If any minor problems in plant and machinery will be done by staff itself as all the
employees are well educated with B.E. and diploma in engineering.
The most advantageous thing is that the same plant and machinery can be utilized
for the production of some different types of power supply units (products).
All the accounting transactions related to the company are maintained till date upto
the time without fail.
All the books of accounts related to various aspects of the company are cleanly
maintained.
The company is also neatly maintained with sufficient staff and in good
environment.
The company has granted no loans and advances on the basis of security by way of
pledge of shares debentures and other securities.

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No adequate place for assets due to environment reason as the area surrounding the
company is residential area.
Rent has to been paid for the asset kept outside factory.
Sometimes the usage of plant and machinery remains ideal due to the products
variation, i.e.each product require separate machine.
Without security no finance is provided to fixed assets from bank.
From government they get only the orders but no other facilities like govt.grant,
subsidies, and tax benefits.
Here the products are produced according to the customers specifications no own
designed products are manufacturing is restricted. So it restricts the usage of
machine.
The production of the product is up to the requirement or required quantity only if
any extra may be wasted.










SUGGESTIONS
It is suggested to issue their shares to public, the public shares creates more inflow
of cash as capital.

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Instead of borrowing loan from banks the public shares amount can be used to
finance fixed assets.
The financial risk can be reduced by this.
It is suggested to innovate more new products by Research & development.
Ti is suggested to concentrate on their sales as it is gradually decreasing.
Net profit should be increased so the Earnings per share will be more to them as all
are Equity share holders.
It suggested to maintain always liquid ratio at 2:1 ratio which is good for a
company.
Fixed assets turnover ratio is also to be maintained and concentrate to improve
sales.
Avoiding constant borrowing from bank because profit is less to cover the interest
rate
It is suggested to reduce the maintenance cost on plant and machinery as it is
yearly increasing by proper timely services to it.










CONCLUSION


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In financial accounting, an asset is an economic resource. Anything tangible or intangible
that is capable of being owned or controlled to produce value and that is held to have
positive economic value is considered an asset.
Fixed assets are long lived assets in the sense that they provide enduring benefits to the
entity. An enterprise holds a fixed asset (property, plant and equipment, or intangible
assets) for use in production and supply of goods or services, for rental or for
administrative purposes on a continuing basis.
Fixed assets management is an accounting process that seeks to track fixed assets for
the purposes of financial accounting, preventive maintenance, and theft deterrence. Fixed
asset management is a part of asset management that involves asset management software
also.
By analyzing we can conclude that the fixed assets are main part of revenue generating to
the company if they were fails to utilize those assets many factors in the company will be
affected. This leads to many pitfalls of the company. So the fixed assets have to taken
proper care to run the company at high level.















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