SUMMER INTERNSHIP PROGRAMME

2009-2010

HINDUSTAN AERONAUTICS LIMITED (HAL)ENGINE DIVISION

KORAPUT DIVISION, SUNABEDA-2

FACULTY GUIDE INDUSTRY GUIDE MR NITUJ GUPTA B.SENAPATI

PREPARED AND SUBMITED BY SWADHIN KUMAR PATTNAIK REG.NO. GZ751AC0115

A PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF

BUSINESS ADMINISTRATION IN THE MADURAI KAMRAJ UNIVERSITY

CERTIFICATE

THIS TO CERTIFY THAT MR. SWADHIN KUMAR PATTNAIK A STUDENT

OF MBA WITH A SPECIALIZATION IN FINANCE FROM MAGTECH

MANAGEMENT INSTITUTE (MMI), GHAZIABAD AFFILIATED MADURAI

KAMRAJ UNIVERSITY, BEARING REGISTRATION NO. GZ751ACO115

HAS SUCCESSFULLY COMPLETED HIS SUMMER INTERNSHIP PROJECT

WORK ON “WORKING CAPITAL MANAGEMENT” IN HINDUSTAN

AERONAUTIC LIMITED (HAL), ENGINE DIVISION KORAPUT,

SUNABEDA DURING THE PERIOD STARTING FROM 26TH MAY TO 24TH

JUNE 2009.

HE IS SINCERE AND HARDWORKING. I WISH HIM ALL SUCCESS IN HIS

LIFE.

S.C.CHANDMANAGER (TRAINING)

HAL, ENGINE DIVISION KORAPUT

CERTIFICATE

THIS TO CERTIFY THAT MR. SWADHIN KUMAR PATTNAIK A STUDENT

OF MBA WITH A SPECIALIZATION IN FINANCE FROM MAGTECH

MANAGEMENT INSTITUTE (MMI), GHAZIABAD AFFILIATED MADURAI

KAMRAJ UNIVERSITY, BEARING REGISTRATION NO. GZ751ACO115

HAS SUCCESSFULLY COMPLETED HIS SUMMER INTERNSHIP PROJECT

WORK ON “WORKING CAPITAL MANAGEMENT” IN HINDUSTAN

AERONAUTIC LIMITED (HAL), ENGINE DIVISION KORAPUT,

SUNABEDA DURING THE PERIOD STARTING FROM 26TH MAY TO 24TH

JUNE 2009.

HE IS SINCERE AND HARDWORKING. I WISH HIM ALL SUCCESS IN HIS

LIFE.

B. SENAPATISENIOR MANAGER (FINANCE)

HAL, ENGINE DIVISION KORAPUT

DECLARATION

I hereby declare that this project report “WORKING CAPITAL MANAGEMENT” submitted to the MAGTECH MANAGEMENT INSTITUTE, GHAZIABAD in partial fulfillment for the award of degree of Master in Business Administration, is a bonafide work done by me and it was not submitted to any other University or Institution previously.

Place: Ghaziabad SWADHIN KUMAR PATTNAIKDate: 24/06/09 REG.NO. GZ751AC0115

The report entitled “WORKING CAPITAL MANAGEMENT” a study in Hindustan Aeronautic Limited represents the guidance and co-operation of a few individuals, to whom I would like to express my deep sense of gratitude.

I express my sincere and heartiest gratitude to my internal guide, Mr. NITUJ GUPTA, (Director) MAGTECH MANAGEMENT INSTITUTE (MMI), GHAZIABAD for their valuable suggestion and guidance, which have given a finite shape to this report.

I am also grateful to Mr. B. SENAPATI, (SENIOR MANAGER FINANCE) HINDUSTAN AERONAUTIC LIMITED (HAL), for giving me this opportunity to conduct the project study in HAL engine division, Koraput.

I am also obliged to the staff members especially Mr. MANASH KUMAR MOHANTY and Mr. B. SANTOSH (FINANCE AND ACCOUNT ASSISTANT), of the book keeping department for their help and assistance.

Finally, I am also thankful to my friend SAGAR PATTNAIK and my cousin CHINTU who helps me every time in the project.

ACKNOWLEDGEMENT

THIS IS TO REFER THAT MR SWADHIN KUMAR PATTNAIK STUDENT OF MAGTECH MANAGEMENT INSTITUTE (MMI), GHAZIABAD HAS DONE A SURVEY IN OUR ORGANISATION AND PRESENTED BEFORE OUR MANAGEMENT WITH RELEVANT SUGGESTION AND CONCLUSION. I APPRECIATE THE HARDWORK IMPLEMENTED BY HIM IN ORDER TO GET EFFECTIVE FEEDBACK FOR US.

THANKS & REGARDS

B.SENAPATIMANAGER

FINANCE

TO WHOMSEVER IT MAY CONCERN

Finance as a subject of study, has received wide-spread support from both academic and business segment people.

The topic “WORKING CAPITAL MANAGEMENT” in HAL was selected as to understand the financial need and importance with special reference to HAL, Engine Division, Koraput.

As the working capital refers to the administration of all the analysis of working capital, ratios and sources and application of funds and the company by studying, interpreting various financial statements using various techniques such as comparative statements analysis, funds flow statement analysis etc.

Even efforts have been made to collect the relevant information about the topic. The present study about WORKING CAPITAL MANAGEMENT in HAL Engine Division, Koraput it based on my four week project study in FINANCE AND ACCOUNT DEPARTMENT in HAL.

This training gives me an opportunity to make a study and analysis the system adopted by the organization. It enables me to build the practical knowledge acquired during the class study with practical training received during my project.

PREFACE

CHAPTER 1INTRODUCTION

ABSTRACTOBJECTIVE OF THE SURVEYSCOPE OF THE SERVEYRESEARCH METHODOLOGYTECHNIQUES OF DATA COLLECTION

CHAPTER 2COMPANY PROFILE

2.1 GENERAL PROFILE2.2 HISTORY OF HAL2.3 PRODUCTS OF HAL2.4 OBJECTIVE OF HAL2.5 STRATEGY OF HAL2.6 VISION, MISION & VALUES2.7 INTERNATIONAL AND DOMESTIC DEALS2.8 CUSTOMERS2.9 OTHER PROGRAMS OF HAL2.10 EVOLUTION AND GROWTH OF THE COMPANY2.11 SERVICES 2.12 DIVISIONS OF HAL2.13 EXPORTS OF HAL2.14 FINANCIAL HIGHLIGHTS OF HINDUSTAN

AERONAUTICS LTD 2.15 HAL KORAPUT DIVISION2.16 FINANCIAL AND ACCOUNTING FUNCTION 2.17 ACCOUNTING POLICY FOLLOWED BY HAL

TABLE OF CONTENT

CHAPTER 3CONCEPTUAL PROFILE

3.1 INTRODUCTION3.2 NATURE AND TYPES OF WORKING CAPITAL3.3 MANAGEMENT OF WORKING CAPITAL3.4 REASONS FOR ADEQUATE WORKING CAPITAL3.5 OBJECTS OF WORKING CAPITAL MANAGEMENT3.6 SOURCES OF WORKING CAPITAL 3.7 FINDING ANALYSIS AND INTERPRETATIONS

CHAPTER 4 FINDINGS RECOMMENDATION LIMITATIONCONCLUSION

BIBILOGRAPHYANNEXURE

ABSTRACT

I am a student of MAGTECH MANAGEMENT INSTITUTE, GHAZIABAD.

Summer season is the project period of all management institutes. I decided to

do my summer project in my state, Orissa. So I went to Koraput, where the

engine division of Hindustan Aeronautics Limited is situated. This company is

well known as one of the DPSUs (Defence Public Sector Undertakings). I am

very lucky to get a chance to do a project in such an organization of high

esteem. I got my letter from my institute which is to be signed by the head of

the Finance Department and then submitted to the Training and Development

Centre. Then they issued a letter to the concerned department to cooperate with

me in my project work. I started in my project in the Finance Department from

26th may 2009. The staffs are very much cooperative there. I got all the data

required for my project with ease. I met with the booking keeping employees as

a part of my project. I completed my project on 24th June 2009. Then I got the

certificate from the Training and Development Centre. This was indeed a great

project done by me in such an excellent organization. Where I met with the

officers of high ranks and stature, without whose support I would have never

completed my project.

OBJECTIVE OF THE SURVEY

To serve as an instrument of the national policy to achieve self reliance in design, development and production of aircraft and aeronautical equipments to meet country’s changing and growing needs with special emphasis on military requirements.

To conduct its business economically and efficiently so that it can contribute its due share to the national effort for achieving reliant and self generating economy.

To study the components, determinants of working capital. To study how to keep the capital that is tied up in the working capital cycle

at a minimum and maximizing profit. To study how HAL finances working capital requirements of the firms. Interpreting, analyzing based on the various ratios, the liquidity position of

HAL. To ascertain the amount of working capital.

SCOPE OF THE SURVEY

Keeping the magnitude of the work in mind the scope of the study has been

determined. It covers the outset, a description of the role played by the corporation

in improving financial strength of organization. The study has emphasized

working capital and its application in different enterprises.

RESEARCH METHODOLOGY

The present study is based upon primary and secondary data. The sources of

primary data are the official records and discussion with the officers in the finance

dept. of the organization. The secondary sources of the data include various

publications of the organization and annual reports and audited financial

statements. The data, which are presented in this report, have been taken from

secondary sources. The data of Hindustan Aeronautics Limited, Engine Division,

Koraput, for the year 2007-08 and 2008-09 used in these report have been taken

from financial statements i.e., the Profit & Loss Account, Balance Sheet for the

relevant years.

TECHNIQUES OF DATA COLLECTION

Working capital management policy has a great effect on firm’s profitability, liquidity and its structural health.

For analyzing the performance of working capital management, simple

mathematical tools like Percentages, Averages, and Ratios have been used in this

project work. To know the financial performances of this division, calculation of

Operation Cycle, Earning before Interest & Taxes have been calculated.

Primary data: Was collected through the discussion with the concerned

executives.

Secondary data: Was collected through the official records, various

publications of the organization, annual report and audited financial

statements.

2.1 GENERAL PROFILE

Hindustan Aeronautics Limited (HAL) based in Bangalore, India, is one of Asia's largest aerospace companies. Under the management of the Indian Ministry of Defence, this public sector company is mainly involved in aerospace industry, which includes manufacturing and assembling aircraft, navigation and related communication equipment, as well as operating airports. HAL built the first military aircraft in South Asia and is currently involved in the design, fabrication and assembly of aircraft, jet engines, helicopters and their components and spares. It has several facilities throughout India including Nasik, Korwa, Kanpur, Koraput, Lucknow, and Hyderabad. The German engineer Kurt Tank designed the HF-24 Marut fighter-bomber, the first fighter aircraft made in India.

2.2 HISTORY OF THE COMPANY

Hindustan Aeronautics has a long history of collaboration with several other international and domestic aerospace agencies such as the Airbus Industries, Boeing, Sukhoi Aviation Corporation, Israel Aircraft Industries, RSK MiG, BAE Systems, Rolls-Royce plc, Dassault Aviation, Dornier Flugzeugwerke, Aeronautical Development Agency and Indian Space Research Organisation.

HAL was established as Hindustan Aircraft in Bangalore in 1940 by Walchand Hirachand to produce military aircraft for the Royal Indian Air Force. The initiative was actively encouraged by the Kingdom of Mysore, especially by the Diwan, Sir Mirza Ismail. The British Government bought a one-third stake in the company by April 1941 as it believed this to be a strategic imperative. Later in April 1942, it bought out the stakes of Walchand Hirachand himself and other promoters so that it can act freely. The decision by United Kingdom was primairly motivated to boost British military hardware supplies in Asia to counter the increasing threat posed by Imperial Japan during Second World War. However, the Mysore Kingdom refused to sell its stake in the company but yielded the management control over to the British Government. Thus, within 2 years of establishment, it was nationalized.

Hindustan Aeronautics Limited (HAL) came into existence on 1st October 1964. HAL was set up as a amalgamation of Hindustan Aircraft Limited along with Aeronautics India Limited and Aircraft Manufacturing Depot located in Kanpur,

India. Hindustan Aeronautics Limited has it headquarter located at Bangalore, India. HAL is one of the largest aerospace company which is run by the Ministry of Defense. The principal activities of HAL involve manufacturing aircraft, aerospace, navigation, and instruments for communication purposes. Apart from these, few other activities performed by HAL are

designing, manufacturing, and collecting aircraft, jet engines, helicopters, along with their elements and spares. Hindustan Aircraft Limited which located at Bangalore, was incorporated by the industrialist the late Seth Walchand Hirachand in December 1940. The Government of India became a stakeholder of the company in 1941 and seized the management department in 1942. HAL has 19 Production Units and 9 Research and Design Centers in 7 locations in India. The Company has an impressive product track record - 12 types of aircraft manufactured with in-house R & D and 14 types produced under license. HAL has manufactured over 3550 aircraft, 3600 engines and overhauled over 8150 aircraft and 27300 engines. HAL has been successful in numerous R & D programs developed for both Defence and Civil Aviation sectors. HAL has made substantial progress in its current projects:

Dhruv, which is Advanced Light Helicopter (ALH) Tejas - Light Combat Aircraft (LCA) Intermediate Jet Trainer (IJT) Various military and civil upgrades.

Dhruv was delivered to the Indian Army, Navy, Air Force and the Coast Guard in March 2002, in the very first year of its production, a unique achievement.

HAL has played a significant role for India's space programs by participating in the manufacture of structures for Satellite Launch Vehicles like

PSLV (Polar Satellite Launch Vehicle) GSLV (Geo-synchronous Satellite Launch Vehicle)

IRS (Indian Remote Satellite)I NSAT (Indian National Satellite)

HAL has formed the following Joint Ventures (JVs) :

BAeHAL Software Limited Indo-Russian Aviation Limited (IRAL) Snecma HAL Aerospace Pvt. Ltd. SAMTEL HAL Display System Limited HALBIT Avionics Pvt. Ltd. HAL-Edgewood Technologies Pvt. Ltd. NFOTECH HAL Ltd

 Apart from these seven, other major diversification projects are Industrial Marine Gas Turbine and Airport Services. Several Co-production and Joint Ventures with international participation are under consideration.

HAL's supplies / services are mainly to Indian Defence Services, Coast Guards and Border Security Forces. Transport Aircraft and Helicopters have also been supplied to Airlines as well as State Governments of India. The Company has also achieved a foothold in export in more than 30 countries, having demonstrated its quality and price competitiveness.

HAL has won several International & National Awards for achievements in R&D, Technology, Managerial Performance, Exports, Energy Conservation, Quality and Fulfillment of Social Responsibilities.

HAL was awarded the “INTERNATIONAL GOLD MEDAL AWARD” for Corporate Achievement in Quality and Efficiency at the International Summit (Global Rating Leaders 2003), London, UK by M/s Global Rating, UK in conjunction with the International Information and Marketing Centre (IIMC). 

HAL was presented the International - “ARCH OF EUROPE” Award in Gold Category in recognition for its commitment to Quality, Leadership, Technology and Innovation. 

At the National level, HAL won the "GOLD TROPHY" for excellence in Public Sector Management, instituted by the Standing Conference of Public Enterprises (SCOPE).

The Company scaled new heights in the financial year 2006-07 with a turnover of Rs.7, 783.61 Cores.

2.3 PRODUCTS OF HAL

PRODUCTS IN CURRENT MANUFACTURING RANGE

Su 30 MKI

Twin-seater, Multi-role, Long range Fighter / Bomber / Air Superiority Aircraft.

MiG-27 MSingle-seater Tactical Fighter / Bomber with variable sweep wings.

MiG-21 VARIANTSSingle-seater Front line Tactical Interceptor/ Fighter Aircraft.

METALLIC DROP TANKS

The Division manufactures different types of metallic drop (Jettisonable) tanks with capacity of 490 and 800 litres 

UNDERCARRIAGE The Division has facilities and expertise in the manufacture and overhaul of Undercarriages of both MiG-27M and MiG-21 variants. The landing gears are of a conventional tricycle type and consist of one steerable Nose wheel leg and two Main wheel legs to roll the aircraft in motion, on the ground, during take-off run and landing run. The Landing Gear legs have Pneumatic shock absorbers.

EJECTION-SEATThe Ejection Seat is installed to provide safe escape to the Pilot from the Aircraft while catapuling is effected with the help of a combined Ejection Gun. The

Engine Division - Korapu t, a unit of HAL's vast network, was set up in April 1964 to manufacture R11-f2 turbo jet engine of MiG-21 FL aircraft under

licence from the erstwhile USSR. Subsequently, the division took up, under various licence agreements,

manufacture of R-11 series engines of MIG-21 FL and MiG-21M aircraft, R-25 series engines of MiG-21 BIS aircraft and R-29B engines for Mig-27M aircraft. Simultaneously, facilities were set up for overhaul of R-11 and R-25 series engines, which started in 1971 and 1983 respectively. Starting from 1997 - 98 we have also undertaken overhaul of RD - 33 Engines of MiG-29 aircraft. The Division has stepped into diversification by signing on MOU with GTRE for supply of components belonging to three modules (gear box, fan and turbine modules) of KAVERI engine meant for LCA.

The Division has also entered the export market by overhauling R25 engines for Vietnam, supply of helicopter gears for MH1, Japan and supply of spares for Egypt. The Division has bagged an order from M/s allied Signals, USA for machining of castings. The Division has a long term plan to undertake manufacture of AL-31FP engines for SU-30MKl aircraft under licence.

Today we have behind us a rich and enviable experience of manufacturing more than 1000 aero-engines and overhaul of nearly 4500 powerplants. The Division has the unique distinction of manufacturing almost all types of components required for manufacture and overhaul of engines and spares for service exploitation. The Division is equipped with modern Forge and Foundry shops which cater to the requirements of prevision forgings and castings.

PRODUCTS IN CURRENT MANUFACTURING RANGE

The Engine Division at Koraput, a unit of HAL's vast network, has the unique distinction of being one amongst the few Aero Engine manufacturers in the world. The spectrum of manufacturing facilities extends literally from the production of nuts and bolts to discs, shafts, blades, forgings and castings - all that are required to make an Aero Engine right from the Raw materials. This spectrum is further enlarged to include overhaul of Aero Engines for the MiG family and supply of spares required during service.

AL-31FP-ENGINE

AL-31FP is a high temperature turbojet by-pass engine of modular design. A specific feature of AL-31FP is an axi-symmetric vectoring nozzle with a thrust vector angle of ±15° in the vertical plane providing super maneuverability of the aircraft. The vectoring nozzle control is integrated with the

engine control system. AL-31FP engines ensure stable operation in all available evolutions of the aircraft in super maneuverability modes. AL-31FP engines power advanced multi-purpose Su-30 MKI fighters of the 4+ generation.

R25-ENGINE

This is a Twin Spool, Axial Flow, Turbojet Engine fitted with After burner and a variable area Jet nozzle. It powers the MiG-21 BiS multi-role Fighter Aircraft. The Engine has provision for an emergency After-burner thrust boost, which can be selected below 4.5 KM altitude.

R-29B-ENGINE

This Engine is a Twin spool, Axial flow Turbojet Engine incorporating After-burner system and variable area Jet nozzle of convergent-divergent type. The Engine is equipped with automatic Fuel egulation system, Turbo-starter, Anti-surge system, Temperature controller, Constant speed drive for AC Generator and Two speed drive for Hydraulic Pump. R-29B Engine powers MiG-27 M, a Multi-role Ground attack / Air combat Aircraft.

PRECISION-COMPONENTS

The Division also produces precision components like: total gamut of Blades ranging from Compressor Rotors and Stators to Turbine Blades and Nozzle Guide Vanes, intricate Cored Magnesium Alloy Gear Casings, Compressor and Turbine Discs and Shafts, JIS class-l/DlN 5 Spur, Helical Gears and DIN 6 straight and Hypoid / Spiral Bevel Gears ranging from module 1 to 6.

2.16 FINANCIAL AND ACCOUNTING FUNCTION

Finance and accounting both play very vital role in any business organizational setup. The main function of any finance and accounting of an organization are founds management, cost monitoring, cost reduction and finance appraisal.Money and finance are not one and the same things.

Money stored in vaults or kept in the shape of gold bars or ornaments is not finance.

Money is very resource and is the most sought after commodity because all the transaction of human society is settled in terms of money.

Depending upon the requirement and close monitoring of expenditure, HAL Koraput Division has formed the following section for smooth running of the finance and accounts department and to maintain the liquidity position of the company.

Bills payable section Bills receivable section Book keeping section Cash office section Costing section Finance section Material section Payroll section Provident fund section

These sections are described as follows:

BILLS PAYABLE

This section mainly divided into three sub sections such as:

Bills payable (inland): This section deals with payment and accounting of supplies and services rendered by inland/domestic vendor to the company.Bills payable (civil work): This section deals with service rendered by the contractor of the company.

Bills payable (foreign): This section deals with payment and accounting of supplies and services rendered by the foreign collaborators to the company.

BILLS RECEIVABLE SECTION

This section is responsible for preparation and submission of invoice to customer for the suppliers made and services rendered and follow up for recovery of the amounts and accounting of the same.

BOOK KEEPING SECTION

This is the section in which the financial position of the organization can be reflected through the presentation of profit and loss account and balance sheets. It is the apex section of the finance and accounts department, which cover the following important functions.

Co-ordination of all sections for relevant information

Maintenance of journal and ledger.Preparation of trial balance, profit and loss account and balance sheets.Maintenance of capital assets ledger.Preparation of fixed assets and depreciation schedules.Furnishing of data for determination of income tax liability.Preparation of performance budget.Dealings with sales tax matters.Disposal of surplus/condemned plant and machinery and other assets.Reconciliation of control account of other division/corporate office.Liaison with audit authority.Submission of various types of reports/returns as when required by corporate office/MD (MIG) and other agencies.Updating the accounting policy/procedure based upon the guidelines issue by the corporate office.

CASH OFFICE SECTION

The section is responsible for all receipt and payment of cash/cheque and accounting of the same in the book. The main functions are as follows:

Receipt of cash, cheque, bank draft & issue of official receipt for the same.Banking of all receipt.Drawl of cash from bank to cater for daily needs.Payment of vouchers by cash/cheque.Writing cash/bank books.Preparation of Bank Reconciliation Statement.Safe Custody of cash, cheque books, bank guarantees, fixed deposits receipts & other investments etc.

COSTING SECTION

The main functions of this section are:

Fixation of fixed cost quotation.Fixation of standard man-hour rate.Preparation of operating statement.Accounting & adjustment of differed revenue expenditure.Accounting of non-production of overhead.Preparation of man-hour rate. Accounting of work in progress.Setting of sales.Submission of monthly reports to various agencies.

FINANCE SECTION

The main functions are: Security & financial concurrent as per the delegation of power of proposal for:

Capital expenditureRevenue expenditurePurchase of Material, stores tools & other servicesManpower requirementsIncentivesWrite off-of lossesCases involving relaxation of rulesSales of company assetsContracts enter into with suppliers/ collaboration/ subcontractors.

Estimates & errors of contracts in respect of Civil/ Electrical/ Plant Order.

MATERIALS SECTIONThis section covers the following:

Maintenance of material ledger cards for all materials held in stores.Accounting of receipts of all materials by various classes & issue of all materials draws on work order & expenses accounts.Reconciliation of balances with general ledger.Quality reconciliation of Bin Card balances with with Materials ledge balances.Accountings of inter divisional transfer of materials & its reconciliation.Scrutiny of slow, non-moving inventories.

PAYROLL SECTION

The main function of payroll covers the following:

Placement of time punching cards in the time card racks for recording attendance.Receipt of approved leave application, over time authorization, attendance sheet and employees gate pass etc.Maintenance of level records and feeding of attendance data to computer.Disbursement of salary and wages.Payment and recovery of advances.Maintenance of employees punching card.Recovery of dues from employees.Accounting of all payroll transaction.

PROVIDENT FUND SECTION

This section deals with the transaction preparing to PF as:

Account of Provident Fund transaction.

Remittance of amounts recovered from employee to a fund called provident

fund trust fund.

Providing refundable & nonrefundable loan & adjustment thereof.

2.17 ACCOUNTING POLICY FOLLOWED BY HAL

ACCOUNTING METHODS

The financial accounts are prepared under the accrual basis & at historical cost unless otherwise stated.

FIXED ASSETS

Land received from the state Government till 31st March 1969 has not been valued. Such land which have been taken over by the company after 1st April 1969, have been valued at estimated fair price ruling on the date of taking possession. Land other than above has been capitalized at cost to the company and no account has been taken of the cost borne by the state Govt. Expenditure on development is shown under land.

Fixed assets acquired with financial assistance/subsidy from outside agencies either wholly or partly is capitalized at net cost of the company.Minor Civil work including addition, alterations etc. costing individually Rs.50000/- and below not resulting in additional floor space are charged to revenue.Where the actual costs of the fixed/current assets are not readily ascertainable, they are accounted initially on provisional basis but adjusted subsequently to cost when ascertained.Assets declared surplus/discarded are retained in the books at cost and depreciation provided till the end of the month, proceeding the month in which they are disposed off. Proceeds from sales of assets in excess of net book value are credited to profit and loss account.Expenditure on reconditioning, resetting and relay out of machinery and equipments which does not increase the future benefits from the existing assets beyond the previously assessed.Standard of performance based on the technical assessment is not capitalized.Cost of the initial pack of spares procures with plant, machinery and equipment is capitalized and depreciated in the same manner as plant machinery and equipment.

TOOLS AND EQUIPMENTS

Expenditure on special purpose tools, jigs and fixture including those specific to project/product is initially capitalizes for amortization over production on technical assessment and to the extent not amortized is carried forward as on assets. Expenditure on maintenance, rework, reconditioning, periodical inspection, referencing of tooling, replenishing of cutting tools and work of similar nature is charged to revenue act at the time of issue.

RESEARCH AND DEVELOPMENT

Research and development is built up by the appropriation from profit. Research and development expenditure is debited to the Profit and Loss account. To the extent the expenditure are meet out of the research and development reserve amounts to that extent are transferred from the research and development reserve to the profit and loss account.

DEFERRED REVENUE EXPENDITURE

Expenditure on training personnel/foreign technical fees and expenses, pre-production expenses, etc. specific to projects/products is amortized over production on technical estimates and to the extent not amortized is carried forward

DEFERRED DEBTS

Unpaid installment payments under deferred payment terms for the cost of imported material and tooling content of the equipment/products sold are accounted as deferred debt from the customers and are recovered as and when the installment are paid.

SUNDRY DEBTORS

Disputed/time barred debts from the Government Departments are generally not treated as doubtful debts.

INVENTORY

Raw material, components, stores and spare parts are value at cost.Work-in-progress/stock in trade is valued at lower of cost on realizable value.Adjustment is not made for under/over observation of cost on jobs, if the extent of under/over observation in a year does not exceed 0.5% of the net operating expenses.Customs duty where applicable is loaded to cost of goods when cleared and passed through customs.Stationary, uniform, medical and canteen, stores are charged to revenue at the time of receipt.Semi-perishable, welfare and Miscellaneous equipments (other then fixed assets) Costing individually Rs.20000/- and below are charged to revenue at the time of issue and those costing above.Rs.20000/- is written off to revenue in two years including the year of issue.Provision for redundancy is maintained at a suitable percentage/level of the value of closing inventory of Raw Materials and Components, Stores and Spares parts and construction material less the value of inventory to be borne by the customer and the value of the inventory for the initial phase of the new projects. Besides, where necessary, adequate provision is made for redundancy of such materials in respect of completed/specific project and other surplus/redundant material pending transfer to salvage stores. Stores declared surplus/unserviceable/redundant are charged to revenue.Material issued from main stores and lying unused at the end of the year is not reckoned as inventory.

INDIRECT EXPENSES ON EXPANSIONS

Expenses on administration and supervision in respect of expansion facilities/new projects at the existing operating division are charged to revenue.

SALES

Sales are set up on completion of contracted work on the basis of signaling out/acceptance by the customer’s inspection of the product. Where sale price are not established, sales are set up on provisional basis at price likely to be realized. Research and development expenditure financed by the customer is billed and accounted as sales.

RETIREMENT BENEFITS

Liabilities towards gratuity provided on yearly actuarial valuation in respect of all employees is remitted to a trust progressively.Provision for vocation leave is made on accrual basis and un-utilized leave at the year-end is restated as if such benefits is payable at the close of the year.Employer’s contribution of provident fund for the year is provided for at the Govt. stipulated rate and are remitted to the trust.

INTEREST

Interest on loan/borrowing for different projects is charged to revenue.

DEPRECIATION

Depreciation on fixed assets is charged on ‘straight line method’. The rate of depreciation on assets acquired on prior to 01.04.1989 is on the basis of estimated life. The rate of depreciation is as prescribed in scheduled XIV to the companies Act 1956 for assets capitalized after 01.04.1989 (except for assets separately listed in notes to Balance Sheet). However, prorate depreciation charge to the assets from the first day of the month of addition. Fixed assets costing Rs.10000/- and below are depreciated fully in the year of purchase. Where cost of internal partitions exceeds Rs.50000/- they are depreciated with in a period of 5years or the lease period of premises which ever is less.

FOREIGN CURRENCY TRANSACTION

Foreign Currency transaction are recorded and reported as per requirement of Accounting Standard-II of ICAI except in respect of liability for deferred payments on supplies/services from the Russian federation arising in terms of inter Govt. agreement entered into between Govt. of India and USSR Govt. of Russian federation. The liability is set up on the transaction date at the rate of exchange notified by the Reserve Bank of India (R.B.I) for deferred payments under the protocol arrangements between the Government The different arising out of the re-calculation of Rubles into Rupee in terms of protocol arrangement is charged to the revenue at the time of payment and is realized from the customs. No adjustment is made at the close of the year. However, the impact on this account is disclosed as note to the accounts.

CLAIM ON SUPPLIERS/UNDERWRITERS/CARRIERS, ETC

Claim on suppliers/underwriters/carriers towards loss/damage and claims on customs department for refund are accounted when claims are preferred.

DISPOSABLE SCRAP

Saleable/Disposable scrap is valued at estimated realizable.

3.1 INTRODUCTION

Cash is the lifeline of a company. If this lifeline deteriorates, so does the company's ability to fund operations, reinvest and meet capital requirements and

 

 

REFERENCE BOOKS

MANAGEMENT ACCOUNTING – S.P.JAIN & K.L.NARANGFINANCIAL MANAGEMENT- R.P.RUSTAGIFINANCIAL MANAGEMENT - DR. S N MAHESHWARI

REPORTS

BALANCE SHEET OF HALPROFIT AND LOSS ACCOUNT OF HALANNUAL BOOK REPORT OF HAL

WEBSITES

www.google.comwww.hal-india.com

HINDUSTAN AERONAUTICS LIMITED

DIVISION:KORAPUT

PROFIT AND LOSS ACCOUNTFor the year ended 31st March 2009 (Rs. in Lakhs)INCOMEGross Sales 140991.83

Less Excise DutyNet Sales 140991.83Transfer to inter divisional units 754.03Changes in WIP/SIT/Scrap 36766.73Other Income 4748.82Chances received on iter divisional transfers 75.4

Transfer from R&D reserves183336.81

EXPENDITUREConsumption of Raw Material, Components, etc 123733.45Amortization &Other charges 15214.51Salaries and Wages 21104.93Other Expenses 8412.15Charges paid on its divisional Transfer 3.3Interest 1.41Depreciation 3659.52Provisions 9218.99Inter services/common services 1585.9Transfer of IDT 182934.16Deduct :Expenditure relating to 11643.31Capital & Other Accounts Net Expenditure 171290.85

Profit for the Year 12045.96

Less :Provision For Taxation (Net) Provision For Fringe Benefit Tax Provision For Deferred Taxation (Net) Profit After Tax 12045.96Profit Available For Appropriations APPROPRIATIONSInterim Dividend Proposed Final Dividend Debenture redemption reserveGeneral Reserve

Balance carried to balance sheetTotal of Appropriations 12045.96

HINDUSTAN AERONAUTICS LIMITEDDIVISION:KORAPUT

BALANCE SHEET (Rs in Lakhs)As at 31st March 2009 31st March 2009SOURCES OF FUNDSShareholders' FundsHead office control account 4712.43Reserves and Surplus 12045.96

16758.39Loan Funds Secured Loans 259.75Unsecured Loans 0

259.75Deferred Liabilities (Net) 0.44Deferred Tax Liabilities (Net)

17018.58APPLICATION OF FUNDSFixed AssetsGross block 60053.35Less : Depreciation 23475.2Less :impairment loss Net Block 36578.15Capital Work-in-progress 7522.95

44101.1Special Tools and Equipments 113380.82InvestmentsDeffered tax assetsCURRENT ASSETS, LOANS & ADVANCESInventories 153860.31Sundry debtors 14655.86Cash & Bank balance 11.95Loans & advances 92334.81

260862.93Less: current liabilities & provisionsLiabilities 411352.28Provisions 22538.14

433890.42Net current assets -173027.49INTANGIBLE ASSETS

Gross carrying amount 44467.53Less: cumulative amortization & impairment loss 11903.38NET CARRYING AMOUNT 32564.15

17018.58

BALANCE SHEET (Rs in Lakhs)DIVISION:KORAPUT

As at 31st March 2008 31st March 2008SOURCES OF FUNDSShareholders' FundsHead office control account -89880.19Reserves and Surplus 12630.29

-77249.9Loan Funds Secured Loans 468.56

Unsecured Loans 468.56

Deferred Liabilities (Net) 0.74Deferred Tax Liabilities (Net)

-76780.6APPLICATION OF FUNDSFixed AssetsGross block 46430.09Less : Depreciation 19817.22Less :impairment loss Net Block 26612.87

Capital Work-in-progress 9145.97

35758.84Special Tools and Equipments 110774.82InvestmentsDeffered tax assetsCurrent Assets, Loans & AdvancesInventories 94998.36Sundry debtors 5883.47Cash & Bank balance 19.98Loans & advances 51617.16

152518.97Less: current liabilities & provisionsLiabilities 387792.34Provisions 17758.51

405550.85Net current assets -253031.88Intangible assetsGross carrying amount 38257.78

Less: cumulative amortization & impairment loss 8540.16Net carrying amount 29717.62

-76780.6

HINDUSTAN AERONAUTICS LIMITEDDIVISION:KORAPUT

PROFIT AND LOSS ACCOUNTFor the year ended 31st March 2008 (Rs. in Lakhs)INCOMEGross Sales 140816.78Less Excise DutyNet Sales 140816.78Transfer to inter divisional units 312.82Changes in WIP/SIT/Scrap -9121.13Other Income 2406.65Chances received on iter divisional transfers 31.28

Transfer from R&D reserves134446.4

EXPENDITUREConsumption of Raw Material, Components, etc 64227.08Amortization &Other charges 11164.18Salaries and Wages 7697.32Other Expenses 8412.15Charges paid on its divisional Transfer 2.04Interest 4.06Depreciation 2369.55Provisions 1116.81

Inter services/common services16110.35

Transfer of IDT 128246.37Deduct :Expenditure relating to 6430.26Capital & Other Accounts Net Expenditure 121816.11

Profit for the Year 12630.29

Less :Provision For Taxation (Net) Provision For Fringe Benefit Tax Provision For Deferred Taxation (Net) Profit After Tax 12630.29Profit Available For Appropriations APPROPRIATIONSInterim Dividend Proposed Final Dividend Debenture redemption reserveGeneral Reserve

Balance carried to balance sheetTotal of Appropriations 12630.29