FINANCIAL ACCOUNTING

TABLE OF CONTENTS
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TABLE OF CONTENTS
Sr. No.
1 2 3 4 5 Introduction to NESTLE Balance sheet Schedules forming part of balance sheet Profit and Loss Account Schedules forming part of profit and loss account

TOPIC

PAGE NO.
3 7 9 21 23

DONE BY : Smriti Gupta - 115 Rohan Nirmal 61 Kanov Kapadia - 79

-driving nutrition health and wellness.

INTRODUCTION
Nestle touches the lives of millions of people everyday and is amongst the most trusted companies in India. It is an integral part of the social fabric and focused on understanding the changing lifestyle of India, to anticipate consumer needs. Nestle brands are leaders in India because the company has continuously tracked consumer needs and provided relevant products whenever, wherever and however consumers may need them.

HISTORY
Nestle was founded in 1867 in Geneva, Switzerland by Henri Nestle. Nestle's first product was "Farine Lactee Nestle", an infant cereal. In 1905, Nestle acquired the Anglo-Swiss Condensed Milk Company. Nestls relationship with India started 1912, when it began trading as The Nestle Anglo-Swiss Condensed Milk Company (Export) Limited, importing and selling finished products in the Indian market. The company now has a strong presence worldwide. Nestl is the world's foremost Nutrition, Health and Wellness company. Nestl India Limited is the Indian arm of Nestle SA,which holds a 51% stake in the company.

PLANT LOCATIONS
Nestle started its manufacturing operations with Milkmaid in 1962 at Moga factory. Manufacturing of Nescafe started in 1964 at the same factory. The company set up another factory at Cherambadi in Tamil Nadu, for manufacture of infant foods, coffee etc. For almost two decades there were no new additions of manufacturing facilities due to restrictive policy environment. The company set up its Nanjangad (Karnataka) factory in 1989 and the Samlakha (Haryana) factory in 1992. The Ponda (Goa) factory started operations in 1995. The Company set up its sixth manufacturing unit in 1997 at Bicholim in Goa

NESTLES BRANDS
Quality and nutritional value are the essential ingredients in all of the nestles brands. Millions of people prefer Nestl products every day, happy with the addition to their wellness that they bring. If you are looking for a specific brand our product, just use the alphabetical index below to jump straight to a listing. Or you can explore by category.

PRODUCTS
Nestl India manufactures products of truly international quality under internationally famous brand names such as NESCAF, MAGGI, MILKYBAR, MILO, KIT KAT, BARONE, MILKMAID and NESTEA and in recent years the Company has also introduced products of daily consumption and use such as NESTL Milk, NESTL SLIM Milk, NESTL Fresh 'n' Natural Dahi and NESTL Jeera Raita.

MARKET SCENARIO
In 2008, the whole industry was hit by tremendous uncertainties, characterized by high commodity prices and inflation. The market took a further hit with the unprecedented economic crisis which affected all the companies throughout the world. Despite these factors, Nestl India showed a strong growth potential and delivered good turnover and profits. It also has a distinctive advantage of having access to Nestl S.As extensive Research and Development and latest food technology. This has helped the company to establish itself as one of the leaders in food and package industry in India.

COMPETITORS
Fast Moving Consumer Goods segment is characterized by quick turnover and relatively low cost inventory. Nestl is third largest FMCG Company in India after HUL and ITC. The main Competitors of Nestl in India are Cadbury, Amul and Britannia. FMCG sector has huge growth potential in India. Nestl India is a responsible organization and facilitates initiatives that help to improve the quality of life in the communities where it operates.

Balance sheet of Nestle India Ltd as on 31st December 2008

2008 (Rs. in thousands)
SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital Reserves and surplus LOAN FUNDS Secured Loans DEFERRED TAX LIABILITIES/(ASSETS) (NET) SCHEDULE

A B

964,157 3,769,340

4,733,497

C D

8,177 368,810 5,110,484

APPLICATION OF FUNDS FIXED ASSETS Gross block Less: Depreciation Net block Capital work-in-progress Z INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES Inventories Sundry debtors Cash and bank balances Loans and advances Less: CURRENT LIABILITIES AND PROVISIONS Liabilities Provisions NET CURRENT ASSETS/(LIABILITIES)

E 14,048,460 6,518,538 7,529,922 1,091,689 8,621,611 F G 4,349,117 455,933 1,936,893 1,237,589 7,979,532 H 5,066,494 6,773,157 11,839,651 (3,860,119) 5,110,484 348,992

Balance Sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a company assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition". Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time. The form of balance sheet of a company is prescribed in Schedule VI of the Companies Act, 1956. Now we shall examine the items in the balance sheet.

Liability
There are two types of items included in the liabilities. Firstly those items which are related to owners equity. It mainly includes share capital, reserves and surplus. Second those items which create claims of creditors in the company. Examples of such items are secured loans, unsecured loans, current liabilities and provisions etc. We shall now analyze every schedule that is a part of the balance sheet.

SCHEDULES FORMING PART OF THE BALANCE SHEET AS AT DECEMBER 31, 2008

SCHEDULE A
SHARE CAPITAL Authorised 100,000,000 2008 (Rs.in thousands)

Equity shares of Rs. 10 each (Previous year 100,000,000)

1,000,000

Issued, subscribed and paid-up 96,415,716 Equity shares of Rs. 10 each fully paid up (Previous year 96,415,716) Of the above: 73,413,626 Shares of Rs. 10 each (Previous year 73,413,626) were allotted as fully paid-up bonus shares by capitalisation of general reserves Rs. 73,897 thousands (Previous year Rs. 73,897 thousands) and share premium Rs. 660,239 thousands (Previous year Rs. 660,239 thousands). 736,331 Shares of Rs.10 each (Previous year 736,331) were allotted as fully paid up pursuant to a contract without payment being received in cash.

964,157

the above: 32,166,274 27,463,680

Shares of Rs. 10 each (Previous year 32,166,274) are held by Nestl S.A. Shares of Rs. 10 each (Previous year 27,463,680) are held by Maggi Enterprises Limited, the ultimate holding company being Nestl S.A

Share capital
Share capital means the share of the owners in the company. Under the heading share capital the following details are shown.

1. Authorised
Authorized share capital is the amount of share capital that a company is authorized to raise according to its Memorandum of Association. It may have only equity share capital or both preference share capital and equity share capital. The company has only equity share capital. Authorized share capital of nestle is Rs.100,00,000 at Rs10 per equity share.

2. Issue Subscribe and Paid up

Issued share capital is that part of authorized share capital which the company has issued for subscription till the date of balance sheet. Subscribed share capital is that part of issued share capital which has been subscribed by the applicants along with called up share capital. Paid up share capital is that part of subscribed share capital which has been paid up by the subscriber towards share capital.

SCHEDULE B
RESERVES AND SURPLUS Share premium account As per last balance sheet Less : Transferred to profit and loss account (Refer Note 22- Schedule O) Capital subsidy As per last balance sheet Add : Received during the year

2008 (Rs. in thousands)

432,363 432,363 2,500 2,500 5,000

General reserve As per last balance sheet Less : Transferred to profit and loss account (Refer Note 22 - Schedule O) Add : Transferred from profit and loss account

2,660,062 430,857 534,082 2,763,287 1,001,053 3,769,340

Surplus, being balance in profit and loss account (undistributed profits)

Reserve and Surplus

When a business creates a "Reserve", they are essentially setting aside a certain amount of money for a specific purpose. Often times, reserves are monies set aside to act as a buffer against future losses.

1. Share Premium Account

It is the amount paid by shareholders for shares in excess of their nominal value ie Rs.432,363.

2. Capital Subsidy
A subsidy (also known as a subvention) is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry. As for nestle the capital subsidy is Rs.2500 thousands.

3. General Reserve
It is a reserve created by transferring certain amount of undistributed profit for funding expansion, acquisition, paying dividends, discharging of liabilities, writing off extraordinary and/or contingent losses, buyback and/or redemption of securities. It has amounted to Rs.2,763,287 thousands.

Surplus
It refers to the credit balance of profit and loss account after proposed allocation or appropriations for dividend, bonus, transfer to reserves etc. The surplus is Rs.1,001,053 thousands.

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SCHEDULE C
SECURED LOANS Loans from Banks Secured by a first pari passu charge on all movable assets (excluding plant and machinery), finished goods, work-in-progress, raw materials and book debts.

2008 (Rs. in thousands)

8,177 8,177

Secured loans
If a company gives security for the loan by a mortgage or charge on all or any of its properties, the loan is classified as secured loans. Nestle has taken a loan from the bank worth Rs.8,177 thousands.

SCHEDULE D
DEFERRED TAX LIABILITIES AND ASSETS Deferred tax liabilities Difference between book and tax depreciation Other temporary differences

2008 (Rs. in thousands)

739,574 18,303 757,877

Deferred tax assets Provision for contingencies Provision for employee costs Other items deductible on payment or deposit of withholding taxes Other temporary differences 269,093 68,847 27,653 23,474 389,067 368,810

Deferred tax liabilities/(assets) (net)

Deferred tax
Deferred taxes are the result of temporary differences in the recognition of revenues and expenses for taxable income relative to reported income. Although depreciation methods are the most common source, other temporary differences arise from the methods used to account for installment of sales, long term contracts, leases, warranties and service contracts, pension and other employee benefits and subsidiary investment earnings. They are called temporary differences because the total amount of expense and revenue recognized will eventually be the same for tax and reporting purposes. A deductable temporary difference is one that causes taxable income to exceed financial income, with the expectation that the difference will be offset in the future.

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Deferred tax liabilities

Deferred tax liabilities generally arise where tax relief is provided in advance of an accounting expense, or income is accrued but not taxed until received. It amounts to Rs.757,877 thousands. Examples of such situations include:

a company claims tax depreciation at an accelerated rate relative to accounting depreciation a company makes pension contributions for which tax relief is provided on a paid basis, whereas accounting entries are determined in accordance with actuarial valuations

Deferred tax assets

Deferred tax assets generally arise where tax relief is provided after an expense is deducted for accounting purposes. It amounts to Rs.389,067 thousands. Examples of such situations include:

a company may accrue an accounting expense in relation to a provision such as bad debts, but tax relief may not be obtained until the provision is utilized a company may incur tax losses and be able to "carry forward" losses to reduce taxable income in future year

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Schedule E ( Refer to the annual report ) Asset

. 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 Asset
These are purchased for continued and long-term use in earning profit in a business. They are written off against profits over their anticipated life by charging depreciation expense). Accumulated depreciation is shown in the face of the balance sheet or in the notes

Intangible Assets
Intangible assets lack physical substance and usually are very hard to evaluate. 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. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are amortized to expense over 5 to 40 years with the exception of goodwill.

Tangible Assets
Tangible assets are those that have a physical substance and can be touched, such as currencies, buildings, plant and machinery, furniture and fixtures, real estate, vehicles, inventories, equipment, and precious metals.

Addition
Addition is the amount of asset purchased in the given accounting year. It is added to the previous years balance.

Depreciation
Depreciation is the reduction in the cost of an asset used for business purposes during certain amount of time due to usage, passage of time, wear and tear, technological outdating or obsolescence, depletion, inadequacy, rot, rust, decay or other such factors. Depreciation is provided as per the straight-line method at rates provided in Schedule XIV to the Companies Act, 1956, except for the following classes of fixed assets, where the useful life has been estimated as under: Information technology equipment: 3 years Furniture and fixtures and Vehicles: 5 years Leasehold land and improvements: Lease period Management information systems (Intangible fixed asset) : 5 years For example, In lease hold the previous years balance was Rs.94,657 thousand and the addition purchase was of Rs.338 thousand which amounted to a total of Rs.94,995 for the year 2008. The depreciation for the year 2007 and 2008 amounted to Rs.2,961 thousand. Hence, the value of lease hold on 31st December, 2008 is 94,995 2,961= 92,034 thousands.

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Freehold Land
Real property held under fee simple absolute in possession is a freehold land.

Leasehold Land
Real property held by a tenant (lessee) under a lease for a fixed term, after which it returns to the freehold owner is a leasehold land.

Building
Permanent or temporary structure enclosed within exterior walls and a roof, and including all attached apparatus, equipment, and fixtures that cannot be removed without cutting into ceiling, floors, or walls is a building.

Railway siding
Short-distance railroad track serving a factory or warehouse, and connected to the main track via a switch.

Furniture and Fixtures

Items considered as personal property unless they are affixed to the real property, such as chairs, desks, filing cabinets, computer equipment, copier, fax machine, telephone equipment are called as furniture and fixture.

Information Technology Equipment

IT equipments are a set of tools, processes, and methodologies (such as coding/programming, data communications, data conversion, storage and retrieval, systems analysis and design, systems control) and associated equipment employed to collect, process, and present information. In broad terms, IT also includes office automation, multimedia, and telecommunications.

Vehicle
Particular type of vehicle (such as aircraft, ship, truck) used by a carrier or transporter is as asset.

Management Information System

Organized approach to the study of information needs of a management at every level in making operational, tactical, and strategic decisions is management information system.

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SCHEDULE F
INVESTMENTS (NON TRADE, UNQUOTED) CURRENT (at cost or fair value, whichever is lower) GOVERNMENT SECURITIES Treasury bills 1,000,000 Face value of Rs. 1,598,400 thousands purchased and Rs. 1,498,400 thousand sold during the year MUTUAL FUNDS - DEBT [Units of face value Rs. 10 each, unless otherwise stated] TATA Mutual Fund 134,900 Units of Tata Liquid Super High Investment Fund Daily Dividend Reinvestment Plan (3,225,463 Units of face value of Rs.1000 each purchased and 3,232,994 Units sold during the year)

2008 (Rs. in thousands)

98,340

150,349

Birla Sun Life Mutual Fund 10,010,791 Units of Birla Cash Plus Institutional Premium Dividend Reinvestment Plan (218,430,678 Units purchased and 219,763,896 Units sold during the year)

100,303

Repurchase price as at December 31, 2008

Rs. 349,887 thousands

348,992

During the year, the following current investments were purchased and sold : MUTUAL FUNDS - DEBT ( UNQUOTED) (Units of face value of Rs.10 each) 1) 18,151,249 Units of Prudential ICICI Floating Rate - Daily Dividend Reinvestment Plan 2) 181,991,254 Units of ICICI Prudential Liquid Plan - Super Institutional - Daily Dividend Reinvestment Plan 3) 5,001,535 Units of IPMRD ICICI Prudential Interval Fund 1 Month Plan A - Retail Dividend-Reinvestment Plan 4) 38,107,606 Units of Birla Sun Life Liquid Plus - Institutional Premium - Daily Dividend - Reinvestment Plan 5) 134,127,712 Units of HSBC Cash Fund Institutional Plus - Daily Dividend Reinvestment Plan 6) 20,141,189 Units of ABN AMRO Money Plus Institutional - Daily Dividend Reinvestment Plan 7) 78,975,603 Units of JM High Liquidity Fund - Super Institutional Plan - Daily Dividend (92) Reinvestment Plan 8) 18,002,407 Units of JM Money Manager Fund Super Plus Plan - Daily Dividend (171) Reinvestment Plan 9) 52,075,739 Units of Reliance Liquid Fund - Treasury Plan Instituitional Option - Daily Dividend Reinvestment Plan 10) 7,505,213 Units of Reliance Liquidity Fund - Daily Dividend Reinvestment Plan 11) 10,225,540 Units of SBI Debt Fund Series 90 days-29 - Dividend COMMERCIAL PAPERS ( UNQUOTED) (Units of face value of Rs.500,000 each) 1 ) 200 Units of GE Capital Service India Ltd Commercial Paper 2) 100 Units of RABO India Finance (P) Ltd Commercial Paper DEBENTURE ( QUOTED) (Units of face value of Rs.1,000,000 each) 1) 250 Units of Citi Financial- Non Convertible Debenture

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Government Securities
Government securities are bonds, notes, and other debt instruments sold by a government to finance its borrowings. These are generally long-term securities with the highest market ratings. As investment assets they are sold by auction in weekly lots with tap issues to Discount House, banks and other public agencies. Treasury bills are issued through commercial banks and Discount Houses as primary market dealers, on a discount basis - that is, they are sold originally at a price below their face value, with face value payable at maturity.

Mutual Funds
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests typically in investment securities (stocks, bonds, short-term money market instruments, other mutual funds, other securities, and/or commodities such as precious metals).

Commercial Papers
Commercial Paper is a money-market security issued (sold) by large banks and corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note. Since it is not backed by collateral, only firms with excellent credit ratings from a recognized rating agency will be able to sell their commercial paper at a reasonable price

Debentures
In law, a debenture is a document that either creates a debt or acknowledges it. The term is used in corporate finance for a medium to long-term debt instrument used by large companies to borrow money. Non-convertible debentures, which are simply regular debentures, cannot be converted into equity shares of the liable company. They are debentures without the convertibility feature attached to them. As a result, they usually carry higher interest rates than their convertible counterparts.

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2008 (Rs. in

SCHEDULE G
CURRENT ASSETS, LOANS AND ADVANCES Inventories Stores and spare parts * Stock-in-trade ** : Finished goods Work-in-progress Raw materials Packing materials * At cost ** At cost or net realisable value, whichever is lower Sundry debtors (Unsecured) Considered good Over six months Others Considered doubtful Over six months Others Less: Provision for doubtful debts

thousands)

248,931 2,327,186 385,378 1,213,980 173,642 4,349,117

8,667 447,266 14,067 15,650

455,933

29,717 485,650 29,717 455,933

Cash and bank balances Cash in hand Cheques in hand With scheduled banks - on current accounts - on deposit accounts Loans and advances (Unsecured, considered good - unless otherwise stated) Advances recoverable in cash or in kind or for value to be received* Considered good Secured Unsecured Considered doubtful Less: Provision for doubtful advances Taxation (payments less provisions) * Advances recoverable, disbursed under the Companys housing loans scheme for its employees, includes Rs. Nil due from a Director of the Company - maximum amount due during the year Rs. 5,433 thousands

32 25,262 101,349 1,810,250 1,936,893

43,940 1,184,043

1,227,983 8,723 1,236,706 8,723 1,227,983 9,606 1,237,589 7,979,532

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Current assets, loans and advances

In accounting, a current asset is an asset on the balance sheet which is expected to be sold or otherwise used up in the near future, usually within one year, or one operating cycle whichever is longer. Current Assets = Cash +Bank + Debtors + Bills Receivable + Short Term Investment + Inventory + Prepaid Expenses. Loans and advances includes loans given to different persons, advances against purchase of goods and various expenses by the company etc. We shall now analyze schedule G which explains the above.

Inventories
Inventory is a list for goods and materials, or those goods and materials themselves, held available in stock by a business. Inventories are items held for sale or used in the manufacture of products that will be sold. Inventories are classified into different types like raw materials, work in progress, finished goods, stock in trade etc.

Stores and Spare Parts

Replaceable component, sub assembly, and assembly identical to and interchangeable with the item it is intended to replace are called spare or service part which has amounted to Rs.248,931 thousands

Stock in Trade
Stock in trade is the inventory of merchandise held for sale.

Finished Goods
Finished goods are goods ready for sale to customers which is worth Rs.2,327,186 thousands.

Work in Progress
Works in progress are materials and components that have begun their transformation to finished goods which is worth Rs.385,378 thousands.

Raw Material
Raw materials are materials and components scheduled for use in making a product which is worth Rs.1,213,980 thousands.

Packing Material
In order for the product to reach the end consumer in a consumable state, a whole array of packaging materials is required and this amounted to Rs.173,642 thousands.

Sundry Debtors
A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. In finance, unsecured debt refers to any type of debt or general obligation that is not collateralized by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation.

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Doubtful Debts
Doubtful debts are those debts which a business or individual is unlikely to be able to collect. The reasons for potential nonpayment can include disputes over supply, delivery, and conditions of goods, the appearance of financial stress within customers operation. It has amounted to Rs.29,717 thousands.

Provision for Doubtful Debts

It reduces the reported amount of accounts receivable. Providing an allowance for doubtful accounts presents a more realistic picture of how much of the accounts receivable will be turning to cash. After all, a company selling products on credit to thousands of customers will likely have a few customers who will not be able to pay the full amount they owe to the company. It amounted to Rs.29,717 which is deducted from debtors.

Cash and Bank Balance

Cash are the most liquid assets found within the asset portion of a company's balance sheet. Cash in hand is the cash the company has in hand to use when required. Nestle cash in hand is Rs.32 thousand. Cash at bank is the liquid asset that is present in the companys bank account. It is a deposit account held at a bank or other financial institution, for the purpose of securely and quickly providing frequent access to funds on demand, through a variety of different channels.

Loans and Advances

An unsecured loan is a loan that is not backed by collateral. Unsecured loans are based solely upon the borrower's credit rating. As a result, they are often much more difficult to get than a secured loan, which also factors in the borrower's income. An unsecured loan is considered much cheaper and carries less risk to the borrower. However, when an unsecured loan is granted, it does not necessarily have to be based on a credit score.

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SCHEDULE H CURRENT LIABILITIES AND PROVISIONS Current liabilities Sundry Creditors Micro and small enterprises (Refer to Note 17 - Schedule O) Others Investor Education and Protection Fund shall be credited by the following: Unpaid dividends # Provisions Pension and Gratuity Contingencies (Refer Schedule N) Employee Benefits, Incentives and Welfare * Proposed final dividend Corporate dividend tax

2008 (Rs. in thousands)

15,917 5,001,981 48,596 5,066,494 3,076,982 1,971,794 370,762 1,156,989 196,630 6,773,157 11,839,651

# There is no amount due and outstanding to be credited to Investor Education and Protection Fund. * Includes compensated absences, restricted stock unit plans, long service awards and ceremonial gifts.

Current Liabilities
In accounting, current liabilities are considered liabilities of the business that are to be settled in cash within the fiscal year or the operating cycle, whichever period is longer.

Sundry Creditors
A creditor is a party (e.g. person, organization, company, or government) that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption (usually enforced by contract) that the second party will return an equivalent property or service. Nestle has creditors like micro and small enterprise, investor education and protection funds etc which totally amounted to Rs.5,066,494.

Provisions
Provision is an amount written or retained by way of providing for depreciation, renewal or diminution in value of assets or retained by providing for any known liability of which the amount cannot be determined with substantial accuracy. Provisions include pension and gratuity, contingencies, employ benefit, incentives and welfare etc which totally amounted to Rs.6,773,157. Provision for pension is made on the basis of an actuarial valuation carried out by an independent actuary as at the year-end. Provision for gratuity is made on the basis of actuarial valuation after taking into account the net result of gratuity trust fund. Recognition of other long term employee benefits, comprising largely of long service awards, is done on a discounted, accrual basis over the expected service period until the benefits become vested.

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PROFIT AND LOSS ACCOUNT OF NESTL INDIA LIMITED FOR THE YEAR ENDED DECEMBER 31, 2008
2008 (Rs. in thousands)

SCHEDULE INCOME Sales Domestic Export Gross Less: Excise Duty Net Sales Other Income EXPENDITURE Materials consumed and purchase of goods Manufacturing and other expenses K Interest Depreciation Adjustment due to decrease / (increase) in stock of finished goods and work-in-progress

41,326,718 3,383,907 44,710,625 1,468,175 I 43,242,450 338,852 43,581,302 21,386,673 13,563,778 16,430 923,601 (345,448) 35,545,034 8,036,268 3,084 304,916 7,728,268 2,223,114 81,836 82,496

J L E M

PROFIT BEFORE ADDITIONAL EMPLOYEE COST, IMPAIRMENT, CONTINGENCIES AND TAXATION Impairment loss/(gain) on fixed assets (Refer Note 1 - Schedule O) E Provision for contingencies (Refer Note 2 - Schedule O) N PROFIT BEFORE TAXATION Income tax expense Current tax Deferred tax Fringe benefit tax PROFIT AFTER TAXATION Balance brought forward Add : Transferred from Share Premium Account (Refer Note 22- Schedule O) Add : Transferred from General Reserve (Refer Note 22 - Schedule O) BALANCE AVAILABLE FOR APPROPRIATION Appropriations: Dividends: Interim Final proposed Special (Refer Note 22 - Schedule O) Corporate dividend tax General reserve SURPLUS CARRIED TO THE BALANCE SHEET BASIC AND DILUTED EARNINGS PER SHARE (IN RUPEES) O

2,387,446 5,340,822 125,159 432,363 430,857 6,329,201

2,217,561 1,156,989 723,118 696,398 534,082 1,001,053 55.39

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Profit and Loss Account

The profit and loss account differs significantly from the balance sheet. It is a record of firms trading activities over a period of time. The profit and loss account looks at how well the firm has traded over the time period concerned. It shows how much the firm has earned from selling its product or service and how much it has paid out in costs. The net of these two is the amount of profit or loss for that concerned period.

Income
Income is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity, other than those relating to contributions from equity participants. It r arises from the following.

Sales
Sale is the pinnacle activity involved in selling products or services in return for money or other compensation. It is an act of completion of a commercial activity. It is further classified into domestic and export.

Domestic
Domestic sale refers to selling goods and services in the home country itself. The amount generated from this is Rs.41,326,718 thousands.

Export
Export refers to selling goods and services produced in home country to other countries. The amount generated from export is Rs.3,383,907 thousands.

Excise Duty
An excise duty be defined broadly as an inland tax on the production or sale of a good, or narrowly as a tax on a good produced within the country. It amounted to Rs.1,468,175 thousands.

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SCHEDULE I OTHER INCOME Dividend on current, non-trade investments Interest on income tax refund in relation to earlier years interest received on loans, deposits & debentures (gross) (Tax deducted at source Rs. 25,172 thousands previous year Rs. 4,439 thousands) Export incentives Miscellaneous income

2008 (Rs. in thousands)

58,974 3,115 145,058

9,754 121,951 338,852

Other Income
Income represents income from activities other than normal business operations, such as investment interest, foreign exchange gains, rent income, profit from the sale of noninventory, export incentives, dividend on investments etc. T his all together amounted to Rs.338,,852 thousands

Expenditure
In accounting, costs are the monetary value of expenditures for supplies, services, labour, products, equipment and other items purchased for use by a business or other accounting entity. It is the amount denoted on invoices as the price and recorded in bookkeeping records as an expense or asset cost basis It includes the following.

SCHEDULE J MATERIALS CONSUMED AND PURCHASE OF GOODS Raw materials consumed Packing materials consumed Purchase of goods - outside manufacture

2008 (Rs. in thousands)

17,352,859 3,531,546 502,268 21,386,673

Materials consumed and purchase of goods

Material consumed includes materials that are used in order to produce the finished product. It includes the following.

Raw materials consumed

It is the amount of unfinished goods (raw material) used by a manufacturer to produce his goods (finished goods) i.e. RS.17,353,859 thousands.

Packing materials consumed

It is the amount of raw materials used by a manufacturer in packaging his products which he produces i.e.Rs.3,531,546 thousands.

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Manufacturing and other expenses

Manufacturing expenses are those expenses that are incurred in order to produce the finished goods. For example, in order to produce goods we need employees and hence we need to pay them wages and salaries. The expenses mentioned below are incurred by Nestle which has totally amounted to Rs.13,563,778 thousands.
2008
SCHEDULE K MANUFACTURING AND OTHER EXPENSES Employee cost Salaries, wages, bonus, pension, gratuity, performance incentives etc. Contribution to provident and other funds Staff welfare expenses Advertising and sales promotion Freight, transport and distribution General licence fees (net of taxes) Taxes on general licence fees Power and fuel Maintenance and repairs Plant and machinery Buildings Others Travelling Contract manufacturing charges Rates and taxes Rent Information technology and management information systems Milk collection and district development expenses Consumption of stores and spare parts (excluding Rs.160,775 thousands charged to other revenue accounts, previous year Rs.136,678 thousands) Training expenses Market research Deficit on fixed assets sold/scrapped/written off Laboratory (quality testing) expenses Insurance Miscellaneous expenses (Rs. In Thousands)

2,853,949 102,088 189,771

3,145,808 1,943,555 2,035,530 1,459,570 226,233 1,597,565

278,069 33,716 59,948

371,733 418,069 456,500 201,483 176,972 400,391 114,490 151,846

175,239 96,591 27,260 137,557 16,563 410,823 13,563,778

Employee cost is generally deducting the pay you give your employees for the services they perform for your business. It has amounted to Rs. 2,853,949 thousands.
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. From the point of a business, salary can also be viewed as the cost of acquiring human resources for running operations, and is then termed personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts.

Wages are where each job hour or other unit is paid separately, rather than on a periodic
basis. Salaries, wages, bonus etc has altogether amounted to Rs. 102,088 thousands.

Staff welfare expense is an expense incurred for the betterment of employees which has
amounted to Rs. 189,771 thousands.
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Advertisement and sales promotion is the expense paid on advertising and promoting a
product which has amounted to Rs. 1,943,555 thousands.

Freight is charges paid for carriage or transportation of goods (cargo) by air, land, or sea.
Goods may be transported (shipped) on freight-prepaid or freight-collect basis. It has amounted
to Rs. 2,035,530 thousands.

Maintenance and repairs is an expenditure incurred on any asset in order to keep it

working in a good condition. This expenditure is incurred on assets like plant and machinery, building etc. It has amounted altogether to Rs.371,333 thousands.

Taxes deduct various federal, state, local, and foreign taxes directly attributable to your trade
or business as business expenses. It has amounted to Rs.201,483 thousands.

Rent Expense is any amount you pay for the use of property you do not own. In general,
you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible. It has amounted to Rs. 176,972 thousands.

Insurance is deducting the ordinary and necessary cost of insurance as a business expense,
if it is for your trade, business, or profession. It has amounted to Rs.16,563 thousands.

Miscellaneous expenses are expenses other than the ones mentioned above which has
amounted to Rs. 410,823 thousands.

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SCHEDULE L INTEREST Interest on fixed loans Others

2008 (Rs. in thousands)

13,117 3,313 16,430

Interest
Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money or, money earned by deposited funds. A fixed interest rate loan is a loan where the interest rate doesn't fluctuate during the fixed rate period of the loan. This allows the borrower to accurately predict their future payments
2008 (Rs. in thousands)

SCHEDULE M ADJUSTMENT DUE TO (INCREASE)/DECREASE IN STOCK OF FINISHED GOODS AND WORK-IN-PROGRESS Opening stock Work-in-progress Finished goods Less: Excise duty Net opening stock (A) Less: Closing stock Work-in-progress Finished goods Less: Excise duty Net closing stock (B) Movement in opening and closing stock (A-B)

424,279 1,977,141 2,401,420 129,300 2,272,120 385,378 2,327,186 2,712,564 94,996 2,617,568 (345,448)

Opening Stock
Opening stock is the goods present in the beginning of a financial year which is carried forward from the previous year. It can be either finished goods or goods that are being produced i.e. work in progress. An excise duty be defined broadly as an inland tax on the production or sale of a good, or narrowly as a tax on a good produced within the country. After deducting this from the opening stock the goods amounted to Rs.2,272,120 thousands.

Closing Stock
Closing stock is the goods available at the end of a financial year. Again this can be in the form of finished goods or goods that are being produced i.e. work in progress. After deducting the excise duty from this the goods amount to Rs.2,617,568 thousands.

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Profit before Additional Employee Cost, Impairment, Contingencies and Taxation Impairment Loss (gain) on Fixed Asset
It is the downward revaluation of fixed assets. An asset is impaired when its carrying amount exceeds its recoverable amount. During the year ended December 31, 2008, Impairment loss on fixed assets (Gross - Rs. 3,084 thousands, net of deferred taxes -Rs. 2,036 thousands) relates to various items of plant and machinery that have been brought down to their recoverable values upon evaluation of future economic benefits from their use.
2008 (Rs. in

SCHEDULE N
PROVISION FOR CONTINGENCIES Balance as at December 31, 2007 Add: Created during the year Less: Reversed/utilised during the year Net provision taken to the Profit and Loss Account Balance as at December 31, 2008

thousands)

1,666,878 325,882 (20,966) 304,916 1,971,794

Provision for Contingencies

Contingency is a potential or pending development that may result in a future gain to the company, such as a successful lawsuit against another company. Conservative accounting practice dictates that gain contingencies should not be booked, although footnote disclosure of the particulars may be made. The Company has created a contingency provision of Rs. 325,882 thousands for various contingencies resulting mainly from issues, which are under litigation/dispute and other items requiring management judgment and discretion. The Company has also reversed contingency provision of Rs. 20,966 due to the satisfactory settlement of certain disputes and other matters for which provision was no longer required.

Profit before Taxation Deferred Tax is an accounting concept (also known as future income taxes), meaning a future tax liability or asset, resulting from temporary differences or timing differences between the accounting value of assets and liabilities and their value for tax purposes. It has amounted to Rs. 81,836 thousands. Fringe Benefits Tax (FBT) is the taxation of most, but not all fringe benefits, which
are generally non-cash employee benefits. The rationale behind FBT is that it helps restore equity and fairness to those employees who do not receive such benefits, and allows a Federal Government to more fairly assess taxpayer entitlement to government benefits, or liability to government taxes or levies. It has amounted to Rs.82,496 thousands.

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Profit after Taxation

It the net profit earned by the company after deducting all expenses like interest, depreciation and tax. PAT can be fully retained by a company to be used in the business. However dividend is paid to the share holders from this residue.

Balance Available For Appropriation Interim Dividend

It is a dividend which is declared and distributed before the company's annual earnings have been calculated; often distributed quarterly. It has amounted to Rs.2,217,561 thousands.

Final Dividend
The final dividend is declared at a company's Annual General Meeting (AGM) for any given year. This amount is calculated after all financial statements are recorded and the directors are aware of the company's profitability and financial health. It has amounted to Rs. 1,156,989 thousands.

Special Dividend
A special dividend is a payment made by a company to its shareholders that is separate from the typical recurring dividend cycle, if any, for the company. The difference may be the result of the date of issue, the amount, the type of payment, or a combination of these factors. It has amounted to Rs.723,118 thousands. Corporate Dividend Tax Dividend Tax is type of an income tax which is levied on the payments made as the dividend to the shareholders of the company paying the tax. Dividends are the shares of the profit of the company which are the given to the shareholders. It has amounted to Rs.696,398 thousands.

General Reserve
It is a reserve created by transferring certain amount of undistributed profit for funding expansion, acquisition, paying dividends, discharging of liabilities, writing off extraordinary and/or contingent losses, buyback and/or redemption of securities. it has amounted to Rs.534,082 thousands.

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