Buteermilk

Introduction to Small Scale Industry
India is a developing country & most of the people in India depend
on agriculture but slowly & gradually people are coming in Industrial
sector. Due to less rainfall and unemployment in agriculture.
Before 1991, there was huge importance given to large scale
industry but after govt. realize that only Small Scale Industry can lead to
overall development of country. So govt. started to give emphasis on
Small Scale Industry.
The industries are classified into three categories.
a) Large Scale Industry
b) Medium Scale Industry
c) Small Scale Industry
Small Scale Industry is most important part of any country. SSI
provides platform to entrepreneurs for starting business. Govt. has
defined SSI many times on different parameters. The industry whose
investment in plant & machinery is up to 3 crores is termed as SSI.
SSI is the base for medium & large scale industry. It also give
chance to new & young entrepreneurs to start a unit with very limited
capital & it would ultimately play great role in shaping the country’s
economy.
Project Report is very important for any business unit. Each unit is
required to prepare project report for finance or for other purposes. A
successful project contributes towards increase in Gross National
Product which results into ultimate well being of the people in general.
An unsuccessful project on the contrary, proves a burden on the scarce
national resources as it does not contribute towards Gross National
Product. Even- though it has developed resources for creation of assets
lying unutilized or underutilized.
This project report is on Small Scale Unit which is engaged in
producing buttermilk. Buttermilk is a fast developing product which falls
under dairy industry. Low Cost, easy installation of machinery, simple
production process, easy storage make it ideal for the purpose.
1

Project at a Glance
Name of Unit : KANHA DAIRY
Address of the unit : KANHA DAIRY
Shapar Industrial Area,
Rajkot – Gondal Highway,
Rajkot –360 002.
Name of the Product : Drinker’s Delight
Form of Organization : Partnership Firm
SSI Registration No. : Applied for
Sub. Registration No. : Applied for
Cost of Project : 29, 50,000 Rs.
Cost of Machinery : 6, 91,000 Rs.
Working Capital : 2, 45,000 Rs. Per month.
Cost of Production : 33, 45,900 Rs.
Profit or Loss : Profit [estimated]
Means of finance : » Ownership – Partners
» Borrowed – Loan from
Gondal Nagrik Sahakari
Bank Ltd.
Market Area : Rajkot city [in 1st
year]
Average Cost of Capital: 10.50%
2

Return on Investment : 18.46%
As R.O.I. is greater than C.O.C., it shows unit is making profit &
therefore project is feasible.
Implementation Schedule
1) Scheme preparation & approval : 1 month
2) SSI provisional registration : 1-2 months
3) Sanction of loan by financial institutes : 2-5 months
4) Installation of machinery & Power
Connection : 5-8 months
Trail & Production will start from 8th
month onwards.
3

Partner’s Background
1st
Partner
Name : HARDIK KHAKHAR
5 – Gayakwadi “PRAKASH”
Opp, sindhi temple
Rajkot.
Age : 19Yrs.
Educational Qualification: B.B.A.
Work Experience : No
Function : Mktg. & Personnel
Capital Contribution : 7, 37,500 Rs.
2nd
Partner
Name : KHKHAR KISHAN
5 – Gayakwadi “PRAKASH”
Opp, Sindhi temple
Rajkot.
Age : 50 Yrs.
Educational Qualification: B.Com. & M. Com.
Work Experience : 25Yrs.
Function : Finance & Production
Capital Contribution : 7, 37,500 Rs.
4

Organizational Structure
Owners
Mktg. Finance Super Personnel
Manager Manager visor Manager
Salesman Accountant Workers Clerical Staff
Staff staff Staff
5

Justification of location
» At present the plant is located at: KANHA DAIRY
Shapar Industrial Area,
Rajkot-Gondal Highway,
Village – Veraval,
Rajkot – 360 002.
It is situated on Rajkot – Gondal Highway. Mainly it is an industrial
area & therefore enjoys some favorable advantages & benefits that are
as under:
a) Availability of Raw Materials:
The unit is situated in Rajkot. Here dairy products are available in
bulk as well as in variety. The main Raw Material is milk which
can be acquired easily. Salt, water & masala are also available
easily.
b) A proximity to market:
The unit deals in Rajkot market thus, market is very near for the
unit. In the future to expand market is also easy because Gondal,
Morbi, Shapar, Veraval etc. small towns are also near.
c) Availability of land:
The unit is situated in industrial area & thus land is available at
cheaper rates. This is one of the greatest advantages.
d) Availability of transport facility:
Being located in an industrial area it gets the benefit of various
facilities like transportation & telecommunication of reasonable
cost, which helps in efficient working of the firm.
e) Availability of utilities:
The industry as such does not face any difficulty regarding power
supply & gas cylinders as it gets a regular power supply & gas
cylinders at their plant location.
f) Availability of man power:
Such problems are not faced in city like Rajkot. As it is one of the
leading Engineering cities, technical & skilled personnel are
available. Also, the unskilled labor is easily available from the rural
areas of the city. Thus, the co. has an ideal location for the plant
situated at Shapar.
6

Product Details
“Butter milk” is a very common household product in Gujarat. It is
used daily in almost all the houses. There are many families that they
consume buttermilk twice a day. The market version of buttermilk will
ease the work of housewives.
“Butter milk” is a product which falls under the category of “Dairy
Industry” & thus, it has a wider scope of usage. The raw materials used
& manufacturing process is also simple. The product is more famous in
Guaranties & Gujarati public is spread in all over India. Thus, our
product can cover more area of market for the sale of product. Hence, in
general the product is accepted by all & used on a large scale.
7

Market Potential
The market potential for packed buttermilk is huge. While there
are a vast no. of people who refuse to accept market version as their
opinion is “homemade is butter than market product”. But Rajkot is that
kind of market where variety of people lives in. So there are huge public
who prefer to buy their buttermilk rather than making it themselves.
Thus, initially we will try to exploit this segment of market & later as
words of mouth spreads. We would also like to draw the non – buyers.
Gujarati public is crazy about buttermilk. Not only daily sales will
be taken care of. In occasions of marriage function, party, religious
function, etc. We will provide buttermilk on order basis also. Even we will
take care of those potential customers who are traveling for a long route.
Thus, on railway stations our product will be available easily. Because of
this facility travelers will not have to carry buttermilk as their luggage.
As the public gets more & more health conscious & demands
value – added, our product “Drinkers Delight” is sure to meet those
expectations. We decided to come-up with this product, precisely,
because of the fact that there exists virtual monopoly in this area
because the product sold by local dairy can easily be surpassed by our
product.
8

Details of Raw Materials
The two basic raw materials used in the product is “milk” &
“water”. Secondly, “Salt” & “masala” are added to it for obtaining flavors’.
The raw materials used in the product are simple & are available easily
in city like “Rajkot”.
However to maintain quality of final product a bit higher prices are
to be paid for inputs. Easy availability & enough quantity are the best
features of the raw materials. Even it is really easy to transport the
materials. Milk, Masala, Salt & Water are common household product
that ease the task of material management & thus, it reduces
overlapping or backtracking in manufacturing process also.
Details of Machinery
Like raw materials machinery is also available easily. Some of the
mare acquired from local market only & some are acquired from
Ahmadabad city.
Charmers, bowls, freezers, heater are the machinery used in
production process of buttermilk.
Sr.
No
.
Name of
Machinery
Name of
Suppliers
Units Rs. Per
Unit
Amount
1. Charmers “Classic
Machinery”
Ahmadabad
22 3,500 77,000
2. Bowls “Jay sons
Steel Shop”
Rajkot
1800 200 3,60,000
3. Freezers “Ever new”
Ahmadabad
5 50,000 2,50,000
4. Heaters “Samkirt
Enterprise”
Ahmadabad
1 4,000 4,000
6,91,000
9

Manufacturing Process
Manufacturing process of Buttermilk is very simple; it is so widely
prepared in households. Curds have to be put into charmers along with
the required quantity of water, to get rich buttermilk in no time. Once
refrigerated its stimulating taste is hard to beat. Prepared plain, salted or
masala it is a “Drinkers Delight”. Ease of manufacture is a primary
reason for selecting this product for manufacture.
Buying Milk
↓
Pasteurizing the Milk
↓
Curding the Milk
↓
Empting the curd into charmers
↓
Adding water & masala
↓
Churning
↓
Refrigeration
10

Production Capacity Schedule
Year Installed
Capacity
Utilized
Capacity
Units
Produced
1st
year 100% 50% 3,96,000
2nd
year 100% 75% 5,94,000
3rd
year 100% 100% 7,92,000
i) No. of shifts per day : 1 shift [i.e. 8 hours]
ii) No. of working days p.m.: 25 days
iii) No. of working days p.a. : 300 days
11

Staff & Labour
i) Top Level:
No. Particulars No. of
Person
Rate Monthly Yearly
1 Managers 2 10,000 20,000 2,40,000
2 Accountant 1 6,000 6,000 72,000
26,000 3,12,000
ii) Middle Level:
Person
Rate Monthly Yearly
1 Supervisors 1 3,500 3,500 42,000
2 Skilled
Workers
3 2,500 7,500 90,000
3 Salesman 1 4,000 4,000 48,000
15,000 1,80,000
ii) Bottom Level:
Person
Rate Monthly Yearly
1 Peon 2 1,700 3,400 40,800
2 Watchmen 2 1,300 2,600 31,200
3 Driver 1 2,000 2,000 24,000
4 Unskilled
Workers
6 2,000 12,000 1,44,000
20,000 2,40,000
12

Financial Details
1) Land & Building:
Particulars Units Rate Value
• Land 2350 yard 335 7,87,250
• Building
»Office & Admn. area
»Factory shed
200 sq. mt.
2000sq. mt.
350
350
70,000
7,00,000
• Other construction - - 31,750
15,89,000
2) Machinery:
Particulars Quantity Rate per
Machine
Value
• Charmers 22 3,500 77,000
• Bowls 1800 200 3,60,000
• Freezers 5 50000 2,50,000
• Gas [Heater] 1 4000 4,000
6,91,000
13

3) Other assets:
Particulars Value
• Cost of office furniture & equipments 25,000
• Cost of Bottles & Packs of various size 20,000
• Computer 75,000
• Delivery Van 2,50,000
• Preliminary exp. 50,000
4,20,000
4) Fixed assets:
Particulars Value
• Land & Building 15,89,000
• Machinery 6,91,000
• Other assets 4,20,000
27,00,000
14

Cost of Production
1) Raw Material
Particul
ars
Rate /
S.P.
[P.U.]
Req. Per Day Req. Per Month Req. Per Annum
Qty Amt. Qty Amt. Qty. Amt.
Milk
Masala
Salt
Water
12
16
8
2
400 ltrs.
0.4 kg.
0.2 kg.
920 ltrs.
4800
6.4
1.6
1840
10,000
ltrs.
10 kg.
5 kg.
23,000
ltrs.
1,20,000
160
40
46,000
1.20.000
ltrs.
120 kg
60 kg
2, 76,000
ltrs.
14,40,000
1,920
480
5,52,000
6648 1,66,200 19,94,400
2) Man Power Required
Particulars No. of
Person
Rate Per
Month per
emp
Amt. Per
Month
Amount Per
annum
Manager 2 10,000 20,000 2,40,000
Accountant 1 6,000 6,000 72,000
Supervisor 1 3,500 3,500 42,000
Peon 1 1,700 3,400 40,800
Watchman 2 1,300 2,600 31,200
Driver 1 2,000 2,000 24,000
Skilled Worker 3 2,500 7,500 90,000
Unskilled Workers 6 2,000 12,000 1,44,000
Salesman 1 4,000 4,000 48,000
61,000 7,32,000
3) Utilities
15

Particulars Amt. Per Month Amt. Per annum
Power 2,000 24,000
Gas Cylinder 1,000 12,000
3,000 36,000
4) Other Expenses
Particulars Amt. Per
Month
Amt. Per
annum
Postage & Stationery 1,000 12,000
Conveyance 1,200 14,400
Telephone 1,600 19,200
General Insurance 2,250 27,000
Marketing & Selling Expenses 1,400 16,800
Miscellaneous Expenses 1,000 12,000
Repairs & Maintenance 500 6,000
Ins. of Factory shed & machinery 2,750 33,000
Advertising exp. 2,800 33,600
Water exp. 300 3,600
14,800 1,77,600
16

Total Working Capital
Month
Amt. Per
annum
Raw Materials 1,66,200 19,94,400
Man power 61,000 7,32,000
Utilities 3,000 36,000
Other Expenses 14,800 1,77,600
2,45,000 29,40,000
Total Cost of Project
Particulars Amount (Rs.)
Fixed Assets 27,00,000
Working Capital 2,45,000
Cash Balance 5,000
29,50,000
Source of Finance
Particulars Proportion Amount (Rs.)
Ownership Capital 50% 14,75,000
Borrowed Capital
(Gondal Nagrik Sahakari Bank Ltd.)
50% 14,75,000
100% 29,50,000
17

Interest on Capital
Particulars Amount Rate Amount of
Interst P.A.
Ownership Capital 14,75,000 8% 1,18,000
Borrowed Capital 14,75,000 13% 1,91,750
29,50,000 3,09,750
Depreciation [R.B.M.]
Particulars Value Rate 1st
Year 2nd
Year 3rd
Year
Land & Building 15,89,000 10% 15,89,000 1,43,010 1,28,709
Plant & Machinery 6,91,000 25% 1,72,750 1,29,563 97,171
Other Assets 2,95,000 15% 44,250 37,617 31,970
Computers 75,000 40% 30,000 18,000 10,800
27,00,000 4,05,900 3,28,190 2,68,650
Annual cost of production
Particulars Value
Raw Materials 19,94,400
Recurring Expenses 9,45,600
Depreciation 4,05,900
33,45,900
18

Sales Forecast
Year Product Unit Per
Annum
Rate or
S.P.
Amount
1st
year Plain
Salted
Masala
70,000
1,16,000
2,10,000
7.50
9.00
11.00
5,25,000
10,44,000
23,10,000
3,96,000 38,78,000
2nd
year Plain
Salted
Masala
1,04,500
1,74,000
3,14,900
7.00
8.00
10.00
7,31,500
13,92,000
31,49,000
5,93,400 52,72,500
3rd
year Plain
Salted
Masala
1,40,400
2,31,900
4,19,950
6.50
7.50
9.50
9,12,600
17,39,250
39,89,525
7,92,250 66,41,375
4th
year Plain
Salted
Masala
1,40,450
2,31,850
4,19,980
6.50
7.50
9.50
9,12,925
17,38,875
39,89,810
7,92,280 66,41,610
5th
year Plain
Salted
Masala
1,40,290
2,31,900
4,19,900
6.50
7.50
9.50
9,11,885
17,39,250
39,89,050
7,92,090 66,40,185
19

Cost Per Unit
Total Cost
Month
Amt. Per
annum
Interest on Capital
Depreciation
Postage & Stationery
Conveyance
Telephone
General Insurance
Marketing & Selling Expenses
Miscellaneous Exp.
Repairs & Maintenance
Ins. Of Factory and Machinery
Advertising Expenses.
Water Expenses
Salary
Preliminary Exp.
Power
Raw Materials
Gas Cylinders
---
---
1,000
1,200
1,600
2,250
1,400
1,000
500
2,750
2,800
300
61,000
-
2,000
1,66,200
1,000
3,09,750
4,05,900
12,000
14,400
19,200
27,000
16,800
12,000
6,000
33,000
33,600
3,600
7,32,000
5,000
24,000
19,94,400
12,000
Total Cost 2,47,700 36,60,650
Cost per unit = Total cost
No. of Units
= 36, 60,650
3, 96,000
= 9.24 Rs.
20

BEP Analysis
Variable Cost
Particulars Amount Per
Month
Rate Amount Per
Annum
Postage & Stationery 1,000 60% x 12 7,200
Conveyance 1,200 70% x 12 10,080
Telephone 1,600 70% x 12 13,440
Mktg. & Selling 1,400 70% x 12 11,760
Misc. Exp. 1,000 60% x 12 7,200
Repairs &
Maintenance
500 75% x 12 4,500
Advertising Exp. 2,800 80% x 12 26,880
Power 2,000 100% x 12 24,000
Salary 61,000 30% x 12 2,19,600
Raw Material 1,66,200 100% x 12 19,94,400
Gas Cylinder 1,000 100% x 12 12,000
Water Expenses 300 70% x 12 2,250
Total Variable Cost 23,33,580
Cost per unit = Total cost
No. of Units
= 23, 33,580
3, 96,000
= 5.89 Rs.
21

Sales Price Per Unit = Sales
No. of Units
= 38, 79,000
3, 96,000
= 9.80 Rs.
Contribution Per Unit = S.P. - V.C.
= 9.80 - 5.89
= 3.91 Rs.
B.E.P. = FC
CPU
= 36, 60,650 – 23, 33580
3.91
= 13, 27,070
3.91
= 3, 39,404 units
B.E.P.(Rs.) = BEP units x S.P.
= 3, 39,404 x 9.80
= 33, 26,160 Rs.
22

Term loan repayment
Date Opening
Balance
Installment Closing
Balance
Interest
31-03-06 14,75,000 2,10,000 12,65,000 1,91,750
31-03-07 12,65,000 2,10,000 10,55,000 1,64,450
31-03-08 10,55,000 2,10,000 8,45,000 1,37,150
31-03-09 8,45,000 2,10,000 6,35,000 1,09,850
31-03-10 6,35,000 2,10,000 4,25,000 82,550
31-03-11 4,25,000 2,10,000 2,15,000 55,250
31-03-12 2,15,000 2,15,000 --- 27,950
Cost of Capital
Capital Amount Rate Interest
Owned 14,75,000 8% 1,18,000
Borrowed 14,75,000 13% 1,91,750
29,50,000 3,09,750
Average cost of Capital = Total Interest x 100
Total Capital
= 3, 09,750 x 100
29, 50,000
= 10.50%
Profitability Analysis
23

EBIT = 5, 44,530 Rs.
EBT = 2, 34,780 Rs.
EAT / Net Profit = 1, 48,800 Rs.
• Gross Profit Ratio = Gross Profit x 100
Sales
= 15, 41,400 x 100
38, 79,000
= 39.74%
• Net Profit Ratio = Net Profit x 100
Sales
= 1, 48,800 x 100
38, 79,000
= 3. 84%
• Fixed Assets = Sales
Turnover Ratio Fixed Assets
= 38, 79,000
27, 00,000
= 1.44
24

Return on Investments
ROI = EBIT x 100
Total Project Cost
= 5, 44,530 x 100
29, 50,000
= 18.46%
Risk Factors
 Competition :
This is one common risk factor which is faced by every
businessman. Even if the product is new & innovative then also
this factor of risk of obvious. Butter milk is a very common
product, so there are enough of chances that new businessman
come in the market. This can result into fewer sales also. But we
will try our best to maintain customers by adopting different
marketing strategies.
 Lack of awareness :
Buttermilk is a common household product. Thus,
consumers may not adopt market version of the product or it may
happen that they may not be aware about the market version of
the product. Thus, we will try to make consumers aware of the
product & its features. With the help of advertising of marketing
the task of consumer we will perform awareness.
25

Name & address of the Raw Material
Suppliers
a) Milk:
» Ramakrishna Dairy Farm
End of 20 new Jagnath,
Dr. Yagnik Road,
Rajkot - 360 001.
b) Salt & Masala:
» Rajani Provision Stores
Purnima Complex,
Vidhyanagar Main Road,
Nr. Virani Chowk,
Rajkot - 360 002.
c) Distilled Water:
» Dhara Water Suppliers
Hanumanmadhi Chowk,
Aamrapali Road,
Nr. Kismat Water,
Rajkot - 360 005.
26

Name & address of Machinery
Suppliers
a) Charmers:
» "Classic Machinery"
Vidhya Complex,
Nehru nagar Chowk,
Near Bhopal,
Ahmadabad.
b) Bowls:
» "Jay sons" Steel Shop
Opp. 20 new Jagnath
Dr. Yagnik Road,
Rajkot - 360 001.
c) Freezers:
» "Ever new"
Jaishal Complex,
Navrangpura
Nr. ICICI Bank Branch
Ahmadabad.
d) Heater / Gas:
» "Samkirt Enterprise"
Ishan Chambers
Behind Law Garden
Ellis bridge,
Ahmadabad.
27

Projected Operating Statement
(a) Operating Statement of 2005-2006
Particulars Amount Amount
•
•
•
•
•
•
•
•
•
•
•
Sales
Int. of Investment
Govt. Securities 21,230
Cost of Operation
» Raw Materials :-
Milk 14,40,000
Masala 1,920
Salt 480
Water 5,52,000
Staff & Labour :
Top Level 3,12,000
Middle Level 1,80,000
Bottom Level 2,40,000
Utilities :
Power 24,000
Gas Cylinder 12,000
+ Op. St. of R.M.
+ Op. St. of F.G.
- Cl. St. of R. M.
- Cl. St. of F. G.
Total Cost of operation
Gross Profit
Indirect Exp. :
Total Factory Cost
Total Office Cost
Total Selling Cost
Total Indirect Exp.
EBIT {GP - TIE}
» Int. on Cap. :
Owned
Borrowed
EBT
- Tax
EAT / Net Profit
38,79,000
21,230
19,94,400
7,32,000
36,000
---
---
---
---
3,70,650
1,60,250
62,400
1,18,000
1,91,750
39,00,230
27,62,400
11,37,830
5,93,300
5,44,530
3,09,750
2,34,780
88,960
1,45,820
28

(b) Operating Statement of 2006-2007
•
•
•
•
•
•
•
•
•
•
•
Sales
Int. of Investment
Subsidiary Co. 30,000
Cost of Operation
» Raw Materials :-
Milk 21,60,000
Masala 3,200
Salt 800
Water 9,00,000
Staff & Labour :
Top Level 3,12,000
Utilities :
Power 36,000
Gas Cylinder 18,000
+ Op. St. of R.M. -
+ Op. St. of F.G. -
- Cl. St. of R. M. 72,400
- Cl. St. of F. G. 4,500
Gross Profit
Indirect Exp. :
Total Factory Cost
Total Office Cost
Total Selling Cost
Total Indirect Exp.
EBIT {GP - TIE}
» Int. on Cap. :
Owned
Borrowed
EBT
- Tax
EAT / Net Profit
52,72,500
93,690
30,64,000
7,32,000
54,000
-
3,85,000
-
76,900
3,14,573
1,72,667
1,19,400
1,18,000
1,64,450
53,66,190
37,73,100
15,93,090
6,06,640
9,86,450
2,82,450
7,04,000
2,66,760
4,37,240
29

(c) Operating Statement of 2007-2008
•
•
•
•
•
•
•
•
•
•
•
•
Sales
Int. of Investment
Subsidiary Co. 42,000
Int. of Drawings.
Cost of Operation
» Raw Materials :-
Milk 30,00,000
Masala 4,000
Salt 1,000
Water 11,28,000
Staff & Labour :
Top Level 3,12,000
Utilities :
Power 60,000
Gas Cylinder 30,000
+ Op. St. of R.M. 72,400
+ Op. St. of F.G. 4,500
- Cl. St. of R. M. 96,600
- Cl. St. of F. G. 3,125
Gross Profit
Indirect Exp. :
Total Factory Cost
Total Office Cost
Total Selling Cost
Total Indirect Exp.
EBIT {GP - TIE}
» Int. on Cap. :
Owned
Borrowed
EBT
- Tax
EAT / Net Profit
66,41,375
1,05,690
16,800
41,33,000
7,32,000
90,000
76,900
50,31,900
99,725
2,73,880
1,68,660
1,29,000
1,18,000
1,37,150
67,63,865
49,32,175
18,31,690
5,71,540
12,60,150
2,55,150
10,05,000
3,80,820
6,24,180
30

Projected Cost Sheet
(i) 1st Year
Cost Sheet of Khakhar & Sons Co. for the year 2005-06
Particulars Amount Amt. P.U.
Raw Materials Consumed
Op. Stock of Raw Material
+ Purchase of Raw Material
- Returns of Raw Materials
- Closing stock of Raw material –
- Cost of Scrap Material
Cost of Material Consumed
Direct Wages
Other Direct Exp.
+ Op. St. of W/p.
- Cl. St. of W/p.
Prime Cost
Factory Overheads
Utilities 36,000
Unproductive Wages 73,200
Repairs & Maintenance 6,000
Dep. on Plant & -
Machinery 1,72,750
Ins. of factory shed bldg. 33,000
Factory Cost
-
19,94,400
-
19,94,400
-
-
19,94,400
2,34,000
-
-
22,28,400
-
-
5.04
-
5.04
-
-
5.04
0.59
-
-
5.63
-
22,28,400
3,20,950
25,49,350
5.63
0.81
6.44
31

Office Overheads
Salary 3,52,800
Insurance 27,000
Postage & Stationery 12,000
Dep. on land & Bldg. 1,58,900
Dep. on Other assets 44,250
Dep. on Computers 30,000
Telephone 19,200
Water Exp. 3,600
Cost of Production
+ Op. St. of Finished Goods
- Cl. St. of Finished Goods
Cost of Production of Goods Sold
Selling & Distribution Exp.
Salary 72,000
Conveyance 14,400
Mktg. & Selling Exp. 16,800
Misc. Exp. 12,000
Advt. Exp. 33,600
Cost of Sales / Total Cost
+ Net profit / Loss
Sales
6,47,750
31,97,100
-
31,97,100
-
31,97,100
1,48,800
33,45,900
5,33,100
38,79,000
1.63
8.07
-
8.07
-
8.07
0.38
8.45
1.35
9.80
32

(ii) 2nd Year
- Cost of Scrap Material -
Direct Wages
Other Direct Exp.
+ Op. St. of W/p.
- Cl. St. of W/p.
Prime Cost
Factory Overheads
Utilities 54,000
Dep. on Plant & -
Machinery 1,29,563
Factory Cost
-
30,64,000
-
30,64,000
72,400
-
29,91,600
2,34,000
-
-
32,25,600
-
-
5.16
-
5.16
0.12
-
5.04
0.39
-
-
5.43
-
32,25,600
2,98,763
35,24,363
5.43
0.50
5.93
33

Office Overheads
Salary 3,52,800
Insurance 27,000
Telephone 24,000
Water Exp. 3,750
Cost of Production
Salary 72,000
Conveyance 21,600
Misc. Exp. 17,400
Advtg. Exp. 60,000
+ Net profit / Loss
Sales
6,21,177
41,45,540
-
41,45,540
4,500
1.05
6.98
-
6.98
0.01
41,41,040
2,13,000
43,54,040
9,18,46
6.97
0.36
7.33
1.55
52,72,500 8.88
34

(iii) 3rd Year
- Cost of Scrap Material
Direct Wages
Other Direct Exp.
+ Op. St. of W/p.
- Cl. St. of W/p.
Prime Cost
Factory Overheads
Utilities 90,000
Dep. on Plant & Machinery97,171
Factory Cost
72,400
41,33,000
-
42,05,400
96,600
-
41,08,800
2,34,000
-
-
43,42,800
-
0.09
5.22
-
5.31
0.12
-
5.49
0.30
-
-
5.49
-
43,42,800
3,08,371
46,51,171
5.49
0.38
5.87
35

Office Overheads
Salary 3,52,800
Insurance 27,000
Telephone 26,400
Water Exp. 3,750
Cost of Production
Salary 72,000
Conveyance 33,000
Misc. Exp. 18,000
Advt. Exp. 63,000
+ Net profit / Loss
Sales
5,99,429
52,50,600
4,500
52,55,100
3,125
0.76
6.63
0.01
6.64
0.01
52,51,975
2,34,000
54,85,975
11,55,400
6.63
0.30
6.93
1.46
66,41,375 8.39
36

Final Accounts
1st
Year
Trading A/c. of Khakhar & Sons Co. for the
year ending on 31-03-2006
Particulars Amount Particulars Amount
To Opening Stock
To Purchase 19,94,400
- P/R. ---
To wages
To utilities
To Gross Profit
(Transferred to P&L A/c)
19,94,400
3,07,200
36,000
15,41,400
By Sales 38,79,000
- S/R --- 38,79,000
38,79,000 38,79,000
37

Profit & Loss A/c. of Khakhar & Sons Co. for the
To Salary
To repair & maint.
To B. D. R. 2%
To Postage & Stat.
To Telephone Exp.
To Water Exp.
To General Ins.
To Ins. of Factory
Shed & Bldg.
To conveyance
To mktg. & selling exp.
To Advt. Exp.
To. Misc. exp.
To preliminary expw/o.
To Depreciation
P&M 1,72,750
Land&Bldg. 1,58,900
Other Assets 44,250
Computers 30,000
To int. on Loan
To Net profit
(transferred to P&L
appropriation a/c)
4,24,800
6,000
4,800
12,000
19,200
3,600
27,000
33,000
14,400
16,800
33,600
12,000
5,000
4,05,900
1,91,750
3,52,780
By Gross Profit
(Transferred from
trading a/c.)
By int. on invt. in
govt. security
15,41,400
21,230
15,62,630 15,62,630
38

Profit & Loss appropriation A/c.of Khakhar & Sons Co.
For the year ending on 31-03-2006
To Int. on Partner's
Capital
Hardik Khakhar59,000
Kishan Khakhar59,000
To tax at 35% with
surcharges
To Net Profit
(transfer to B/S.
liabilities side)
1,18,000
88,960
1,45,820
By Net Profit
(transferred from
P&L a/c)
3,52,780
3,52,780 3,52,780
39

Balance Sheet of Khakhar & Sons Co. on 31-3-2006
Liabilities Rs. Assets Rs.
Capital :
Hardik Khakhar7,37,500
+ Int. on cap. 59,000
7,96,500
+ Profit 72,910
Kishan Khakhar
7,37,500
+ Int. on cap. 59,000
7,96,500
+ Profit 72,910
Borrowed Capital :
Loan from Gondal
Nagrik Sahakari Bank
Ltd.
8,69,410
8,69,410
14,75,000
P & M 6,91,000
- Dep.25% 1,72,750
L & B. 15,89,000
- Dep. 10% 1,58,900
Other Assets 2,95,000
- Dep. 15% 44,250
Computer 75,000
- Dep. 40% 30,000
Preliminary Exp.
50,000
- W/o 5,000
Bill Receivables
Cash Balance
Bank Balance
Invt. at 15.5% in govt.
Securities
(on 1/12/2005)
Debtors 2,40,000
- B.D.R. 2% 4,800
5,18,250
14,30,100
2,50,750
45,000
45,000
1,60,000
68,620
50,000
4,10,900
2,35,200
32,13,820 32,13,820
40

2nd
Year
To Opening Stock
To Purchase
30,64,000
- P/R. --
To wages
To utilities
To Gross Profit
(Trasferred to P&L
A/c)
-
30,64,000
3,07,200
54,000
19,24,200
By Sale 52,72,500
- S/R --
By Closing Stock
52,72,500
76,900
53,49,400 534,9,400
41

To Salary
To repair & maint.
To Bad Debts
6,700
+ B.D.R. 5% 14,000
To Postage & Stat.
To Telephone Exp.
To Water Exp.
To General Ins.
To Ins. of Factory
Shed & Bldg.
To conveyance
To mktg. & selling
exp.
To Advtg. Exp.
To. misc. exp.
To preliminary
Expenses w/o.
To Depreciation
P&M 1,29,563
L&Bldg. 1,43,010
Other Assets 37,617
Computers 18,000
To int. on Loan
To Net profit
(transferred to P&L
appropriation a/c)
4,24,800
9,000
20,700
15,000
24,000
3,750
27,000
33,000
21,600
42,000
60,000
17,400
5,000
3,28,190
1,64,450
8,22,000
By Gross Profit
(transferred from
trading a/c.)
By int. on invt.
Govt. securities
35,000
+ O/s. 28,690
Subsidiary Co.
11,500
+ O/s. 18,500
19,24,200
63,690
30,000
20,17,890 20,17,890
42

Profit & Loss appropriation A/c. of Khakhar & Sons Co.
Capital
Hardik Khakhar
59,000
Kishan Khakhar
59,000
To tax at 35% with
surcharges
To Net Profit
(transfer to B/S.
liabilities side)
1,18,000
4,37,240
2,66,760
By Net Profit
(transferred from
P&L a/c)
8,22,000
8,22,000 8,22, 000
43

Capital :
Hardik Khakhar
7,37,500
+ Int. on cap 59,000
7,96,500
+ Profit 2,18,620
Kishan Khakhar 7,37,500
+ Int. on cap. 59,000
7,96,500
+ Profit 2,18,620
Borrowed Capital :
Loan from Gondal
Ltd.
10,15,120
10,15,120
12,65,000
P & M 5,18,250
-Dep.25% 1,29,563
L & B. 14,30,100
- Dep. 10% 1,43,010
Other Assets2,50,750
- Dep. 15% 37,617
Computer 45,000
- Dep. 40% 18,000
Preliminary Exp.
45,000
- W/o 5,000
Bill Receivables
Cash Balance
Bank Balance
Invt. at 15.5% in govt.
Securities
4,10,900
+ O/S. int. 28,690
Invt. at 10% in
Subsidiary Co.
3,00,000
+ O/S. int 18,500
Debtors 2,80,000
- B.D.R. 5% 14,000
Closing Stock
3,88,687
12,87,090
2,13,133
27,000
40,000
81,840
56,500
1,00,000
4,39,590
3,18,500
2,66,000
76,900
32,95,240 32,95,240
44

S3rd
Year
To Opening Stock
To Purchase
41,33,000
- P/R. --
To wages
To utilities
To Gross Profit
(Trasferred to P&L
A/c)
76,900
41,33,000
3,07,200
90,000
21,34, 000
By Sales
66,41,375
- S/R --
By Closing Stock
66,41,375
99,725
67,41,100 67,41,100
45

To Salary
To repair & maint.
To Bad Debts
5,240
+ B.D.R. 5% 7,500
To Postage & Stat.
To Telephone Exp.
To Water Exp.
To General Ins.
To Ins. of Factory
Shed & Bldg.
To conveyance
To mktg. & selling
exp.
To Advtg. Exp.
To. misc. exp.
To preliminary
expw/o.
To Depreciation
P&M 97,171
L&Bldg. 1,28,709
Other Assets 31,970
Computers 10,800
To int. on Loan
To Net profit
(transferred to P&L
appropriation a/c)
4,24,800
15,000
12,740
18,000
26,400
3,750
27,000
33,000
33,000
48,000
63,000
18,000
5,000
2,68,650
1,37,150
11,06,200
By Gross Profit
(transferred from
trading a/c.)
By int. on invt.
Govt. securities
[15.5%] 31,690
+ O/s. 32,000
(A) Subsidiary Co.
[10%] 10,000
+ O/s. 20,000
(B) Subsidiary Co.
[12%] 3,500
+ O/s. int 8,500
21,34,000
63,690
30,000
12,000
22,39,690 22,39,690
46

Profit & Loss appropriation A/c. of Khakhar & Sons Co.
Capital
Hardik Khakhar 59,000
Kishan Khakhar 59,000
To tax at 35% with
surcharges
To Net Profit
(transfer to B/S.
liabilities side)
1,18,000
3,80,820
6,24,180
By Net Profit
(transferred from P&L
a/c)
By Int. on Drawings:
Hardik Khakhar
10,000
Kishan Khakhar
6,800
11,06,200
16,800
11,23,000 11,23,000
47

Capital :
Hardik Khakhar7,37,500
+ Int. on cap. 59,000
7,96,500
+ Profit 3,12,090
11,08,590
- Drawings 1,00,000
10,08,590
- Interest of
Drawing 10, 000
Kishan Khakhar
7,37,500
+ Int. on cap. 59,000
7,96,500
+ Profit 3,12,090
11,08,590
- drawings 68,000
10,40,590
- Interest on
Drawings 6,800
Borrowed Capital :
Loan from Gondal
Ltd.
9,98,590
10,33,790
10,55,000
P & M 3,88,687
- Dep.25% 97,171
L & B 12,87,090
- Dep. 10% 1,28,709
Other Assets2,13,133
- Dep. 15% 31,970
Computer 27,000
- Dep. 40% 10,800
Preliminary Exp.
40,000
- W/o 5,000
Bill Receivables
Cash Balance
Bank Balance
Invt. At 15.5% in govt.
Securities 4,10,900
+ O/S. int. 32,000
Invt. At 10% in
Subsidiary Co.
(A) 3,00,000
+ O/S. int 20,000
Subsidiary Co.
(B) 1,00,000
+ O/s. int. 8,500
Debtors 1,50,000
- B.D.R. 5% 7,500
Closing Stock
2,91,516
11,58,381
1,81,163
16,200
35,000
1,27,765
53,730
1,10,000
4,42,900
3,20,000
1,08,500
1,42,500
99,725
30,87,380 30,87,380
48

Particulars of Raw Materials Consumed
1) 1st
Year:
Particulars
Milk Masala Salt Water
Qty. (ltrs) Rs. Qty.
(kg)
Rs. Qty.
(kg)
Rs. Qty.
(ltrs)
Rs.
Op. Balance
+ Purchase
- Cl. Stock
used
-
12,00,000
12,00,000
-
12,00,000
-
14,40,000
14,40,000
-
14,40,000
-
120
120
-
120
-
1920
1920
-
19820
-
60
60
-
60
-
480
480
-
480
-
2,76,000
2,76,000
-
2,76,000
-
5,52,000
5,52,000
-
5,52,000
2) 2nd
Year:
Particulars
(kg)
Rs. Qty.
(kg)
Rs. Qty.
(ltrs)
Rs.
Op. Balance
+ Purchase
- Cl. Stock
used
-
18,00,000
18,00,000
-
18,00,000
-
21,60,000
21,60,000
-
21,60,000
-
200
200
20
180
-
3200
3200
320
2880
-
100
100
10
90
-
800
800
80
720
-
4,50,000
4,50,000
36,000
4,14,000
-
9,00,000
9,00,000
72,000
8,28,000
3) 3rd
Year:
Particulars
(kg)
Rs. Qty.
(kg)
Rs. Qty.
(ltrs)
Rs.
Op. Balance
+ Purchase
- Cl. Stock
used
-
24,00,000
24,00,000
-
24,00,000
-
30,00,000
30,00,000
-
30,00,000
20
250
270
30
240
320
4000
4320
480
3840
10
125
135
15
120
80
1000
1080
120
960
36,000
5,64,000
6,00,000
48,000
5,52,000
72,000
11,28,000
12,00,000
96,000
11,04,000
49

Particulars of Finished Goods Sold
1) 1st
Year:
Particulars
Plain Salted Masala
Qty.
(ltrs)
Rs. Qty.
(ltrs)
Rs. Qty.
(ltrs)
Rs.
Op. Balance
+ Production
- Sales
-
70,000
70,000
70,000
-
5,25,000
5,25,000
5,25,000
-
1,16,000
1,16,000
1,16,000
-
10,44,000
10,44,000
10,44,000
-
2,10,000
2,10,000
2,10,000
-
23,10,000
23,10,000
23,10,000
Closing Stock - - - - - -
2) 2nd
Year:
Particulars
Plain Salted Masala
Qty.
(ltrs)
Rs. Qty.
(ltrs)
Rs. Qty.
(ltrs)
Rs.
Op. Balance
+ Production
- Sales
-
1,05,000
1,05,000
1,04,500
-
7,35,000
7,35,000
7,31,500
-
1,74,000
1,74,000
1,74,000
-
13,92,000
13,92,000
13,92,000
-
3,15,000
3,15,000
3,14,900
-
31,50,000
31,50,000
31,49,000
Closing Stock 500 3,500 - - 100 1000
3) 3rd
Year:
Particulars
Plain Salted Masalas
Qty.
(ltrs)
Rs. Qty.
(ltrs)
Rs. Qty.
(ltrs)
Rs.
Op. Balance
+ Production
- Sales
500
1,40,000
1,40,500
1,40,400
3500
9,10,000
9,13,500
9,12,600
-
2,32,000
2,32,000
2,31,900
-
17,40,000
17,40,000
17,39,250
100
4,20,000
4,20,100
4,19,950
1000
39,90,000
39,91,000
39,89,525
Closing Stock 100 900 100 750 150 1475
50

Schedule of Fixed Assets
Particulars Gross
Block
addi
tion
dedu
ction
Gross
Block
Depre
ciation
Total
Dep.
Net Block
L & B
P & M
Other assets
Computers
15,89,000
6,91,000
2,95,000
75,000
-
-
-
-
-
-
-
-
15,89,000
6,91,000
2,95,000
75,000
1,58,900
1,72,750
44,250
30,000
-
-
-
-
14,30,100
5,18,250
2,50,750
44,250
26,50,000 26,50,000 4,05,900 22,44,100
Schedule of Factory Overheads
Particulars Rs.
• Utilities
• Unproductive Wages
• Repairs & Maintenance
• Depreciation on Plant & Machinery
• Insurance of Factory Shed & Bldg/.
36,000
73,200
6,000
1,72,750
33,000
3,20,950
51

Schedule of Selling & Administrative Over
heads
Particulars Rs.
• Salary
• General Insurance
• Postage & Stationery
• Depreciation on Plant & Machinery
• Depreciation on Other assets
• Depreciation on Computers
• Telephone Expenses
• Conveyance
• Marketing & Selling expenses
• Advertising Exp.
• Miscellaneous Expenditure
4,24,800
27,000
12,000
1,58,900
44,250
30,000
19,200
3,600
14,400
16,800
12,000
33,600
7,96,550
Disclosure of significant accounting entries
1) Method of accounting:-
» Double Entry System
2) Method of Depreciation:-
» Reducing balance method
3) Valuation of Inventory:
» First in First out [FIFO] method
4) Deferred Revenue Expenditure:
» Preliminary expenses & write off of preliminary expenses
52

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