Annual Accounts

by
Shri Gautam Kumar Hui
AO RFI
 Annual Accounts
• Annual Accounts is the compilation of all the
expenditure incurred during a financial year in a
Factory.
• Annual Accounts in traditional format is in three
parts:
– Annual Accounts Vol. I comprising of different
accounts.
– Annual Accounts Vol. II comprising of detailed element-
wise expenditure of principal items
– Review Chapter showing analysis of both Vol. I and Vol.
II of Annual Accounts
 History of Annual Accounts

First publication in 1911 in a precise format.

Detailed format was introduced from 1938 summarizing expenditure

under different head of accounts.

In the year of independence two accounts were published– one for
pre- independence period and the other was for post-independence.

Previously publication was made under two volumes—

(I) Vol. I exhibits different accounting information under
different head of Accounts.
(ii) Vol. II represents detail information on Principal items of
production.
 Objectives
Annual Accounts of an Ord. Factories are prepared ;

To exhibit expenditure & recoveries as reflected in the

financial compilation i.e., CCO2.
To compile different accounts adopting cost accounting
techniques
To Calculate the COP, Value of Issues & Profit/loss
To assess the status of Closing Inventory
To assess the status of capital assets
To highlight the core information to the GM, OFB, CGDA
& Ministry on major activity areas of Ord. Fys.
The following accounts and statements are prepared:
1. Production Account
2. Store Account

3. Finished Stock Accounts

4. Capital Accounts

5. Statement of Assets and Liabilities

6. Summary of total cost of production

7. Summary of Fixed Indirect Expenditure Statement

8. Summary of Variable Indirect Expenditure Statement

9. Analysis of Suspense Adjustment

10. Losses sanctioned during the year

11. Analysis of Components

12. Details of Principal Items manufactured

13. Details of Items manufactured other than Principal items
 COST ACCOUNTING
• Annual Accounts – Monthly/Qtrly/Annual
Issue Vr Finished
Issues MSA
Stock A/c
Bills Rt Vr PSA Store A/c

Principal Production
Ledger A/c
Material Material abstract
Capital A/c
Labour Abstract
Labour
Statements
Overhead OH Abstract of Assets &
Liabilities
 Total Cost of Production
Ord. FYs DN/RN EDP
Accounts
Office

Production planning Bills Material

Abstract +
Warrants
Material
DN/RN Shops Ledger
Job Cards &
Cost Punching
Stores Provision
Medium

Pay Labour
NIE/NGO/GO Section

Allocation Allocation sheets

Costing
Section Lab/Mat/OH
Abstract
COST
CARD
 Annual Accounts
• Traditional format
– Production Account
– Finished Stock Account
– Store Account
– Capital Assets Account
– Statement of Assets and Liabilities.
• Commercial format
– Profit & Loss Account
– Balance Sheet
– Manufacturing Account
– 27 Schedules
 PROCESS FLOW

• Material Procurement – TPCs (Revenue & Capital heads)

• Financial Advice by the IFA (in this case the JCFA/DCFA/ACFA I/c)
• Payments to the contractors – Bill Passing
• Booking of the Expenditure through PM
• Inventory Accounting
• Labour Cost
• Pay & Allowances of IEs
• Pay & Allowances of GOs, NGOs,& NIEs
• TA/DA/LTC/Medical Claims/ Advances
• Booking in the relevant code heads through PM
• Costing & Overheads
• Estimate Pricing
• Cost Inputs in the form of labour & material Abstracts (Cost Cards)
• Overhead booking
• Concurrent review of the finances & Budgeting
• Pricing
• Principal Ledger - Annual Production & Store Accounts
 Direct Direct Labour
Labour
Manufacture

Indirect .Labour Overhead

•Research &Sup. Ch.
•Maintenance M&E
•Transportation Indirect
•Other Expenses Expenses
•Revenue Works
•Transfer to RR
•RR allocation Indirect
Material

Store Budget Direct Material

Budget Cost of
Production
 Features of Principal Ledger

• Principal Ledger - closed annually.

• Closing Balances at the year end – transferred finally to the

Balance A/c.

• Dr. balances of Balance A/c - Assets

• Cr. balances of Balance A/c – Liabilities

• Arithmetical accuracy of posting made into various heads of

accounts of Principal Ledger verified through Tallying Balance
A/c.
ANNUAL ACCOUNTS IN
TRADITIONAL FORMAT
 Production Account
Dr Cr
 Opening WIP  Closing WIP
 Direct Labour  COP
 Direct Material
 Store profit
 Direct Expenses
 Store Losses  KOP (losses)
 Overheads  Abnormal rejection
 Supervision  Misc credits heads
 Contingent (I&M)  Electricity
 Miscellaneous Charges  Water
 Superannuation Charges  License fee
 Depreciation  Misc credits
 Losses  ODC
 KOP (not directly linked)
 Finished Stock Account
Dr Cr
• Opening Components  Indentor wise loss
(40/41 series WO)
 Closing Components &
• Opening Completed Articles
Articles (inspection –
EP)  VOI (MSA)
• COP  GST paid for issue to
 Overhauls (05 WO) different indentor
 Normal Prod
• Indentor wise Profit
 Statement of Assets & Liabilities
Dr Cr
 Net Capital [(Total Assets –  Net Block (from Capital A/c) –
Total Liabilities) from Bldg Value (CB)
balance Accounts)]
 CB – Finished stock, articles,
 Store liabilities (order SIH
placed)
 SIT
 M/c liabilities (order placed)
 All Assets
 Issues (MHA adv)
 Suspense
 Suspense Account (EMD
 Unabsorbed Preliminary
lapsed, SD etc)
Expense & Deferred Revenue
 Profit
 Under-absorption
 Over-absorption
 Capital Account
Dr Cr

• OB – Bldg, M/c, Land,  Depreciation

 Bldg
Vehicle, Computer
 M/c
Hardware, Office Furniture,  Vehicle
Office equipments, Stock  Computer Hardware

Pile  Office Furnitures & Fixtures

 Office Equipments
• OB – WIP M/c (04 WO)
 Other Items

• Total CCO2 expdr on Bldg  CB

• M vrs
 Store Accounts
Dr Cr
• Opening Store in Hand  Consumption
 Sale of Scrap/obsolete etc
• Total Receipts
 Total Store Issue
• IFD Stores  Stores Losses
• Profit on surplus of  Closing Stock – SM/NM/BI
Stores
• Surplus of Stock Taking
ANNUAL ACCOUNTS IN
COMMERCIAL FORMAT
 Why Commercial Format?

• Conformity to Standard Accounting formats.

• ‘Actual’ Cost of Production
– Charged Overheads only. Difference (up to +/- 5%), if any, between
actual and charged overhead accounted separately as under/over
absorbed overhead.

• Capital as on 31st March, as shown in the ‘Statement of

Assets & Liabilities’ is a balancing figure.
• Some OFs - in certain years show minus (-) Capital
 Manufacturing Account
• Total Material consumed
• Cost of Human resources
– Direct & Indirect Labour
– OFB HQ Expenses
– Accounts & Audit Department Expenses
• Depreciation, Other operating expenses.
• Cost of Production is worked out after deduction of
Value of work on Capital & Own Stock, Recoveries &
Misc. credit from total expenditure.
• Cost of Production.
 Profit & Loss Account
• Income comprising of Issues/Sales to Indentors (VOI)
• Accretion (+)/ Decretion (-) to Finished Article &
Components
• Operating Surplus/Deficit is worked out after
deduction of cost of production (as per Proforma
Manufacturing Account) from income.
• Total Surplus/Deficit is worked out by adding Non-
Operating Income and deducting Non-Operating
expenses and losses including cost of abnormal
rejection with the amount of Operating
Surplus/Deficit.
 Balance Sheet
• Capital Outlay Account: - Represents the amount equivalent to
the Net Block plus dues in as Work-in-Progress in respect of
Capital Asset items plus closing value of Stockpile items. For
the entity, this represents the (Govt’s) equity.
• Revenue Outlay Account: - Represents the Net Current Assets
and the unabsorbed balance of Preliminary and Deferred
Revenue Expenses after adjusting the amount of reserve and
profit/loss for the year.
• Reserves: - Reflects the balance of Revaluation Reserve
Account. In the OFB Accounts balance retained in R R Fund is
also included
• Profit & Loss: - Amount of Surplus/Deficit as worked out
through Proforma Profit & Loss Account is exhibited.
 Balance Sheet
• Balance Sheet also shows application of fund under
Fixed Assets and Current Assets.

• Net Current Assets is worked out by deducting Current

Liabilities from total of Current Assets.

• Misc. Expenditure and unabsorbed Preliminary

Expenses are also shown under application of fund.
 Schedules
SCHEDULE ITEMS SCHEDULE ITEMS

Schedule No. 1 Store Schedule No. 15 Advances for store not received

Schedule No. 2 Other Operating Expenses Schedule No. 16 Other Advances

Schedule No. 3 Work-in-progress Schedule No. 17 Misc Expenditures

Schedule No. 4 Finished Good/Finished Article Schedule No. 18 Sundry credotors

Schedule No. 5 Misc. Credits Schedule No. 19 Advances received from customers

Schedule No. 6 Non Operating Expenses Schedule No. 20 Misc. Liabilities

Schedule No. 7 Issue/Sale to Indentors Schedule No. 21 Other Funds in Public Account

Schedule No. 8 Work on Capital Schedule No. 22 Misc. Deposits

Schedule No. 9 Non Operating income Schedule No. 23 Reserve

Schedule No. 10 Non Operating Losses Schedule No. 24 Profit & Loss

Schedule No. 11 Fixed Assets Schedule No. 25 Other Current Asset

Schedule No. 12 Capital work-in-progress Schedule No. 26 Cost of Human Resources

Schedule No. 13 Inventories Schedule No. 27 Share of OFB Hq Expenses

Schedule No. 14 Sundry Debtors/Amount Receivables

 Reflection
• Cost of production

• Value of Issues

• Profit / loss.

• Value of Inventory.

• Value of Capital Assets

• Reserve Stock Pile.

• Net Capital (investment)