Professional Documents
Culture Documents
Day Work Card is the record of jobs done and time taken thereon by
workmen engaged as Day Workers.
Indirect (S.I.) charges and are usually absorbed on the basis of total
direct labour (hand and machine) expended on a job.
'P' Voucher: Vouchers on which the stores are issued direct from the
production of the factories are known as Production Vouchers or in its
abbreviated form 'P' Vouchers.
Piece work Card is the document used for recording the operations
to be carried out and the results of work done by the piece workers at a
fixed money rate for each unit completed.
Abbreviations used
A/T Acceptance of Tender
AFL Agreement Form of Labour
AHSP Authority Holding Stores Particulars
AO Accounts Office/Accounts Officer
BER Beyond Economical Repairs
BM Building Maintenance
CCA City Compensatory Allowance
CP Central Purchase
CSR Civil Service Regulations
CST Comparative Statement of Tenders
DA Dearness Allowance
DC Disbursement Certificate
DGOF Director General, Ordnance Factories
DGS & D Director General of Supplies and Disposals
DV Disbursement Voucher
EM Electrical Maintenance
ESTT Establishment
FOH Fixed Overhead
HRA House Rent Allowance
I.E. Industrial Employee
I/Note Inspection Note
IFD Inter Factory Demand
LAO Local Accounts Officer
LB Labour Bureau
LO Labour Office
LP Local Purchase
MM Mechanical Maintenance
N.P. Charges Non-Productive Charges
NC Grant New Capital Grant
NDA Night Duty Allowance
NDB/NSB Night Duty Bonus/Night Shift Bonus
NRR Non-recurring rates
OFB Ordnance Factory Board
OT Overtime
P & M Charges Power and Machinery Charges
'P' Vouchers Production Vouchers
PDC Probable Date of Completion
PLB Productivity Linked Bonus
PM Plant and Machinery
PW Piece Work
R&E Rates & Estimates
Factory Accounting
7
Elements of Costs
&
Analysis of Expenditure
The expenditure incurred in manufacture is classified under three main
categories viz. (a) Wages paid to Industrial Workers, (b) Materials and (c)
Other Expenses. In relation to product costs, the expenditure falling under
the above three categories are further classified as direct and indirect
expenditure. For the purpose of costing, wages are analysed into direct
labour costs and indirect labour costs, materials into direct material costs
and indirect material costs, other expenses, the bulk of which represents
salaries paid to supervisory and administrative personnel, generally fall
under the category of indirect expenditure. Indirect labour, indirect
material and other indirect expenses together constitute the overhead
expenditure. While the direct labour expenditure and direct material
incurred in the manufacture of each product can be measured accurately
and charged direct to each job, overhead expenditure representing the
cost of providing various production and administrative services incidental
to production, cannot be charged directly to each job. Such expenditure
being common to all production activity, it is apportioned to the cost of
each job as equitably as possible, following certain well-recognised cost
accounting principles.
Analysis of Expenditure
------------------------------------------------------------------------------------------
Indirect Expenses
____________________________________________________________
1. Direct Material ]
2. Direct Wages ] PRIME COST
3. Direct Expenses ]
4. PRIME COST + ]
Production or ] WORKS COST
Works or ]
Manufacturing Expenses ]
Factory Accounting
11
Factory
Production Service Administrative
Sections Sections Sections
MM, EM, LB, ESTT, BG, LO
BM, MT etc.
etc.
The most important feature of the cost accounting system is control over
utilization of labour and material expenditure on each job through
predetermined estimates. For repeat items, production of which is well
established, the estimates are standardised by proper time and motion
study and these estimates are called Standard Estimates. The Estimate is
prepared for a standard batch showing the details of various labour
operations required in the production of the article, the time required for
Factory Accounting
13
each operation and the labour cost of the operation. Similarly, each
material required for production of the article is shown in detail indicating
the quantity required for a normal batch.
Extracts
Ordnance Factories are under the control of OFB. OFB in liaison with
Ministry of Defence gets the order for the requirement of stores for Army,
Navy, Air Force etc. Ordnance Factory Board directs the Ordnance
Factories to manufacture the stores for Military by placing Extract on the
factory. Extract is the authority issued by OFB to Ordnance Factory to
undertake manufacture of any item in the concerned factory.
Classes of Extract
Class Description
Class I Orders for Army, Navy, Air Force as per their requirement for
manufacture/repair of stores
Class II Payment Work Order from State Governments, Railways, MES etc.
Class III Services rendered by one Ordnance Factory to other Ordnance
Factory (IFD)
Class IV For services internal to factories other than capital service. This is
also known as Supplementary Work Order Draft (SWOD).
Class V For Capital services (e.g. Manufacture of Machines for Stock)
Then one copy of Extract is sent to the concerned factory by OFB and 3
copies are sent to AHSP (Authority Holding Stores Particulars) generally
Controller of Inspection. AHSP, after checking the nomenclature,
specifications, drawing and other necessary particulars to guide for
manufacturing of stores, sends one copy duly vetted to Factory and one
Factory Accounting
15
copy to local Inspectorate and retains one copy for itself. Depot indents
are also are sent to Factory through AHSP. IFDs are sent directly to
factories.
One copy of this Extract is also sent to Local Accounts Officer (LAO)
directly by indenter or by concerned factory on receipt of extract for
costing purpose.
After receiving the Extract in the factory, it is sent to Central Planning for
recording entry in the Extract Register. Thereafter it is sent to the
concerned planning group for necessary actions. Planning Officer in
consultation with Production Officer decides which Production Section will
undertake the job/operations involved. Works Office allocates Work Order
Number and Warrant Number.
R & E Section will prepare and send Material Estimate to Planning for
initiation of procurement of material. Planning office issues both Material
Warrant and Labour Warrant as per Estimates received from R & E
Section to the concerned Production Shop(s) who will start manufacturing
of the item.
Factory Accounting
17
Estimates
For all but small orders, which are unlikely to be of a recurring nature,
Standard Estimates will be prepared detailing
Spot Estimates
Categories of warrants
Material Warrant
Production Warrants
Factory Accounting
21
Numbering of warrants
From the number shown on the warrants the category of warrant can be
understood.
Warrant Number has 11 digits. First seven digits indicate the main
warrant, 8th digit indicates the type of warrant and last three digits are
used to issue sub-warrants.
0017513 1 000
Tool Warrants
Quarterly warrants
Duly completed warrants will be returned to Warrant Office for closing and
onward transmission to Accounts. Warrants received from each section
will be scrutinised and kept in Warrant Office. When all the sections
involved in a warrant have returned their warrant duly completed, warrant
will be kept for closing in a separate folder. Warrants are closed once in a
month and forwarded to Accounts. A monthly report of outstanding
warrants is prepared and forwarded to OFB duly vetted by Accounts.
Except system
Sub-warrant system
In this system there is only one warrant number for Assembly and
components of assembly. Assembly will be given main Warrant number
component will be numbered with a sub-warrant number as shown below:
Duration of warrants
I/Notes
There are different kinds of I/Notes raised for warrants issued. These are:
Transfer Vouchers
Recording of attendance of
Industrial Employees
Normal Working Hours:
The normal working hours a week in Ordnance Factories have been fixed
at 44 3/4 hours, at the rate of 8 hours per day for 5 days from Monday to
Friday and 4 3/4 hours on Saturday. Sunday is weekly off day or Holiday.
Each worker is issued with a token duly marking the ticket number
allotted to him/her. The same will be picked up from the Central Ticket
Board at the Factory (Workshop) Gate and hung at the Section Ticket
Board while mustering in.
Soon after the Gate is closed, LB section prepares a shopwise list showing
the ticket numbers of tokens that have not been lifted (picked up) from
the Central Ticket Board.
Casualty Report
working more than one shift will submit Casualty Report for each shift
separately. Late Memos in respect of individuals who have reported late
also will be sent to Accounts.
Muster Roll
Leave, shortage of work, injury, off duty, OT, absent, etc. will be marked
in the Muster Roll by different symbols. Night Duty, Day Duty, Casual OT,
etc. will also be found in the Muster Roll. These particulars will be marked
by LB on day to day basis.
Factory Accounting
28
Working Hours
(Provisions of the Factories Act, 1948)
Weekly working hours: Not more than 48 hours in any week for
adult workers.
(i) The worker has or will have a holiday for a whole day on any of
the three days immediately before or after the said weekly
holiday, which is substituted.
(iii) The substitution does not result in any worker working for more
than 10 days consecutively without a holiday for a whole day.
(iv) In case the substituted holiday falls on any of the three days
immediately preceding the weekly holiday, for the purpose of
calculation of weekly hours of work, the work done on Sunday
is to be included in the preceding week.
Daily hours of work: The daily working hours for adult workers shall
not exceed nine hours in any day. This is subject to the limit on weekly
hours of work also.
To facilitate change of shift this limit may be exceeded with the approval
of Chief Inspector of Factories.
½ hour for rest prescribed is the minimum limit. The rest period may be
one hour or more subject to the condition regarding spread over.
Period of work not exceeding 6 hours without an interval for rest may be
permitted by the Chief Inspector.
Spread over: The periods of work including intervals for rest shall not
spread over more than ten and half hours in any day.
These limits may be varied by State Government for any factory or group
of factories. But such variation cannot authorize the employment of any
woman between the hours 10 p.m. and 5 a.m.
For Piece workers, ‘time rate’ shall be deemed to be the ‘ordinary rate of
wages’.
‘Time rate’ is equivalent to the daily average of their full time earnings for
the days on which they actually worked on the same or identical job
during the month immediately preceding the calendar month during which
the overtime work was done.
In computing the full time earnings, the allowances such as DA, HRA, CCA
and Transport Allowance are included.
The State Government is also empowered under the Act to make rules
providing for exemption to such extent and subject to such conditions as
may be prescribed, of adult workers engaged on urgent repairs or work
which must be carried on continuously for technical reasons and so on.
(a) The total number of hours of work in any day shall not exceed
ten
(b) The spread over, inclusive of intervals for rest, shall not exceed
twelve hours in any day
(d) The total number of hours of overtime shall not exceed fifty for
any quarter
(a) The total number of hours of work in any day shall not exceed
twelve
(b) The spread over, inclusive of intervals for rest, shall not exceed
thirteen hours in any day
If any necessity, however, arises for idle time payment for causes other
than those enumerated above separate Government sanction will be taken
to meet such contingency. The idle payment will not be admissible on
occasions when it is due to wrongful action or misconduct of the
employees making it impracticable to employ certain classes of workmen.
Incentive Bonus
Incentive Bonus is paid to essential maintenance workers employed in the
maintenance of plant and services. It is paid as per the following rates: -
Overtime Wages
(Extract of G.I., M of D, F. No. 14(1)/97/D (Civ-II) dated 1st July, 1998)
the orders dated 25.6.1983 referred to above. This will not entitle
anyone who is not covered by 25.6.1983 orders to claim OTA.
Section 59:
“59. Extra wages for overtime:- (1) Where a worker works in a factory for
more than nine hours in any day or for more than forty-eight hours in any
week he shall, in respect of overtime work, be entitled to wages at the
rate of twice his ordinary rate of wages.
(2) For the purpose of sub-section (1), “ordinary rate of wages” means
the basic wages plus such allowances, including cash equivalent of the
advantage accruing through concessional sale to workers of food grains
and other articles, as the worker is for the time being entitled to, but does
not include a bonus and wages for overtime work.”
Who is a “worker”?
Section 64 (1)
The State Government may make rules defining the person who holds
positions of supervision or management or are employed in a confidential
position in a factory, or empowering the Chief Inspector to declare any
person, other than a person defined by such rules, as a person holding
position of supervision or management or employed in a confidential
position in a factory if, in the opinion of the Chief Inspector, such person
holds such position or is so employed and the provisions of this Chapter,
Factory Accounting
36
Provided that any person so defined or declared shall, where the ordinary
rate of wages of such person does not exceed the wage limit specified in
sub-section (6) of Section 1 of the Payment of Wages Act, 1936, as
amended from time to time, be entitled to extra wages in respect of
overtime work under Section 59.
For work in excess of normal working hours and up to 9 hours on any day
or 48 hours in any week, overtime will be paid at the rate prescribed in
the Departmental Rules. (Normal working hours for Ordnance Factories
are 44 ¾ hours a week at the rate of 8 hours per day for five days from
Monday to Friday and 4 ¾ hours on Saturday.) For calculating overtime
pay under Dept. Rules, Basic Pay, Dearness Allowance, Special pay,
Personal pay, Pension (to the extent taken for fixation of pay) in the case
of re-employed pensioners and City Compensatory Allowance shall be
taken into account. House Rent Allowance, Conveyance Allowance,
Travelling and Daily Allowances, Clothing Allowance, Uniform Allowance,
Washing Allowance, Children Education Allowance shall not be included 1.
M of D Corr. No. 14(5)/64/D (Civ-II) dt. 21.10.65 Circulated under DGOF No. 525/A/A/(VI) dt.
1
18.11.65.
Factory Accounting
37
In Govind Bapu Salvi & ors. V. Vishwanath Janardhan Joshi & ors. (1995)
29 ATC 103 SC, the Hon’ble Supreme Court has held as follows:
“The language of this section (Section 59 (2) of the Factories Act) is very
clear. It says that the ordinary rate of wages which is referred to in sub-
section (1) of Section 59 means basic wages plus such allowances…as
the worker is for the time being entitled to, but excludes bonus and
wages for overtime work. (Words in parenthesis and emphasis added).
3. Admittedly, the appellants (Govind Bapu Salvi & ors) are not entitled to
the payment of house rent allowance since they are occupying the official
quarters. Hence for calculating the overtime wages, the house
rent allowance cannot be taken into account”. (Words in
parenthesis and emphasis added).
(b) An extra half hour pay calculated at the hourly rate of 1/200 of the
monthly basic pay or the monthly basic pay and dearness pay where
admissible, for every hour of systematic overtime work on the night
shifts in addition to the piece work earnings. [This is called ‘Night Duty
Bonus’].
of basic Pay plus twice all allowances. In other words, if P represents the
monthly basic pay and D stands for all allowances such as DA, HRA, CCA
(and Transport Allowance) overtime for each hour will be
“ –as per the provisions of the Factories Act O.T.A. is payable even for
piece rated workers. Sub-section (3) of Section 59 provides that where
any worker in factory are paid on a piece rate basis, the time rate shall be
deemed to be equivalent to the daily average of their full time earnings
for the days on which they actually worked on the same or identical job
during the month immediately preceding the calendar month during which
the overtime work was done and such time rate shall be deemed to be the
ordinary rate of wages of these workers.
The above principle may be followed for the purpose of paying overtime
to piece rated workers for the days they work overtime.”
In view of the position explained above piece workers who are put on day
work for part of wage period may be paid OTA under Deptt. Rules, only
for the period he is on day work.
2
The Chief Controller of Accounts (Fys), Calcutta letter No. Pay/Tech-II/183 dated 18th Nov. 1991.
Factory Accounting
39
The time wage for the period a piece worker works as a day worker
should continue to be calculated @1/N-S vide Min. of Def. New Delhi
Corrg. No. 15(3)/67/D(Civ-I) dated 16.4.68 (AT/62 dated 5.6.68)”.
2. Since the transport allowance has not been excluded from the
compensatory allowance etc. under clause (2) of the Section 59 of
the Factories Act, 1948 and hence, Transport Allowance should be
included in the basic rate of wages for purpose of computation of
OTA.”
3
Ministry of Labour U.O. No. S-25025/2/97-ISILIL, dated 12.6.2000 forwarded under OFB letter
No. 525/O/A/A/(VI) dated 03.8.2000
Factory Accounting
40
The rate is half hour pay (Basic Pay including DA and CCA) for each Night
Duty Bonus hour.
Factory Accounting
41
Apart from their trades and grades, the workmen in Ordnance Factories
can be classified into the following three categories:
(1) Day Workers i.e. men who are paid their wages irrespective of the
work done provided they are present in the Factory for the entire
working period.
(2) Piece Workers i.e. men engaged on work carrying piecework rates.
Piece Workers either works individually or in gangs.
(3) Trainees i.e. those who are undergoing training in skilled trades.
(Note: The term ‘workman’ is not synonymous with the term ‘worker’ used
in the Factories Act. A man is not necessarily a worker, nor is a ‘worker’
necessarily a workman. All men borne on the Industrial Establishment of
the Factories are treated as workmen. )
The Section Foreman will issue Day Work and Piece Work Cards in the
prescribed forms to workmen showing the work to be done either by an
individual or by a gang. Day work and Piece work cards may, if necessary,
be returned to the Section Officer where they may be held for safe
custody and for ready reference, but must at all times be readily
accessible to the workmen concerned. These cards will be checked by the
Section Foreman with the Manufacture Warrants.
In the case of Day workers who are continuously employed on the same
class of work no cards are necessary but a list of work orders on which
they are employed is furnished by the Section concerned, to the Accounts
Office.
Factory Accounting
42
Belated Payments:
Since rapid costing mainly depends upon the Data furnished on the Day
and Piece Work cards being made available to the Accounts Office at the
shortest possible intervals it is important that the amount of work given
out on a card should be restricted. Endeavors should be made to work on
Factory Accounting
43
a weekly basis to avoid rush of work at the end of month which delays
alike the preparation of wage bills and compilation of cost. The Factory
will pass on to the Accounts Office all the work cards for completed work
at frequent intervals in regular flow and without any delay. These intervals
will depend upon local conditions and may be fixed by the General
Manager in consultation with the Accounts Officer.
In the case of non-recurring jobs i.e. jobs for which quantities are small
and further orders are not anticipated, the piece work rates will be fixed
on the basis of estimates prepared by Rate fixers and approved by the
Divisional Officer of the Section concerned.
Whenever a new piece work rate is fixed or the existing rate is revised by
the Management, the Accounts Officer will see in post -audit whether the
new or the revised rate is financially equitable with reference to the data,
such as the rate of workman, skill required, operation time, rest intervals
and other allowances etc. which will be furnished to the Accounts Officer
by the Management.
An allowance of 25% will be added to all rates to cover Piece Work Bonus
(profit) allowed to Piece Workers.
Profit or loss is the difference between the earnings on piece work rates
and time earnings, i.e. the latter category being the wages the men would
have earned had they worked on assigned monthly rates of pay.
The Accounts Officer will maintain a register in which the profit or loss of
each man will be recorded. Abnormal cases of profit or loss would be
brought to the notice of the General Manager.
Non-recurring Rates:
or material may become necessary (over and above the provision in the
Standard Estimates). Additional Labour/Material in such cases my be
sanctioned through Non-recurring Rate Forms for the purpose of covering
some sundry job of a non-recurring nature required, such as to bring the
material to the correct size or shape or to rectify the factory forgings or
castings or for similar jobs of non-recurring nature. The use of such non-
recurring rates should be restricted to the absolute minimum and may be
resorted to only for special reasons to be recorded in writing.
(3) The difference between the actual basic pay of a worker and the
minimum of his scale of pay will be paid to him as a separate
element called ‘incremental pay’.
(4) The existing ceiling of 75% on piecework profit based upon actual
time wages of a worker as per his pay in the revised scale will
continue.
Details in Warrants
The job cards against which labour payment will be claimed will show only
the time (and no money) for the work done.
Time wages of the worker will be calculated as per the existing system.
The profit element will be calculated by multiplication of profit % with
time wages.
Factory Accounting
47
4
M of D letter No. 12(10)81/D(Project-I) dt. 6.4.84 received under OFB letter No. 834/A/A dt.
2.5.84. (MPF Order Part I No. 247 dated 27.6.84).
Factory Accounting
49
Injury Leave
As per Article 291 of CSR subordinate employees, in the absence from
work on account of injuries received under the course of their duty, may
be allowed full pay (leave) for one month and thereafter half pay (leave)
for three months.
For the persons to whom Workmen’s Compensation Act, 1923 applies, the
grant of leave under this Article shall be subject to the condition that the
leave allowance payable shall be reduced by the amount of any
compensation payable under Section 4(1) (d) of the said Act.
M of D’s decision
(iv) Since leave salary in respect of leave (other than the injury
leave under Article 291 of CSR) which is debitable to the leave
account of the workmen cannot be treated as compensation in
terms of proviso (a) to Section 4 (1) (a) of the Workmen’s
Compensation Act 1923, such leave salary should be paid to the
disabled workman.
Note: It is clarified that the injury leave allowance payable under Article
291, CSR (not being a compensation provided for in the Workmen’s
Compensation Act) should not be deducted from the compensation
payable under the Workmen’s Compensation Act. However, by virtue of
the specific provisions of Article 291, CSR, it will be legally permissible to
deduct from the leave allowance payable under the said Article the
amount of compensation payable only under Section 4 (1) (d) of the Act
and not any lump sum compensation that may be payable under clauses
(a) to (c) of Section 4 (1) of the Act.
All categories of staff who were originally entitled to the concession and
also Group ‘D’ Group ‘C’ Government servants mentioned in paragraph 2
above will be entitled to hospital leave at the revised scale provided for in
paragraph 2 above.”
It has been decided 5 that the categories of the Defence Civilian eligible for
this kind of leave (hospital leave) will be entitled to hospital leave without
any restriction on the quantum of leave. This kind of leave can be granted
for such period as is considered necessary by the authority competent to
grant it.
5
See M of D OM NO. 11(6) 67/5255/D (Civ –II) dt. 15.5.67.
Factory Accounting
52
4. The term ‘wages’ for this purpose will be and include basic pay,
special pay, dearness allowance and additional dearness allowance but will
not include any other compensatory allowance such as house rent
allowance, city compensatory allowance and Children Education allowance
etc.
7. The productivity index and the quantum of bonus payable for any
year will be calculated by the Department of Defence Production as per
the agreed formula indicated below:
(b) The year 1977-78 will be taken as the base year and X/Y as 100.
Where the value of factor X/Y in any year is identical to the base year,
bonus equivalent of 25 days wages will be admissible. Where the value is
less than 100% but more than 90% of the base year for every fall of
1.5% in productivity, bonus payable will be reduced by one day’s wages
and where the value falls below 90% no bonus whatsoever will be
payable. Where the value exceeds 100%, for every raise of 2%, extra
payment at the rate of one day’s wags will be admissible provided that the
payment for more than 25 days will become due only when the value
exceeds the index by 4%.
9. The Scheme will be reviewed after reviewing its working for three
years.
Quantum of Bonus
Emoluments
Factory Accounting
55
Maximum limit
Restricted to that admissible for the emoluments of Rs. 2500/- per month.
Suspension
Period excluded for calculation for the year, but will be taken into account
if the period of suspension is regularized as duty.
Average Emoluments
Rounding off
Payment of Wages
Under the Payment of Wages Act, 1936, the wages for any wage period
(calendar month, in case of Ordnance Factories) are payable as under:
If the factory employs 1000 or Before the expiry of the 10th day
more workers following the last day of the wage
period
If the factory employs less Before the expiry of the 7th day
than 1000 workers following the last day of the wage
period
It is due to this stipulation in the Payment of Wages Act, 1936 that the
wages to workers are paid either on 10th or 7th of every month.
AO will prepare AFL in triplicate transcribing the total amount passed for
payment. Two copies will be forwarded to Factory Management who will
return one copy duly completed by giving particulars of amount actually
paid, unpaid wages, recoveries, deductions etc. All supporting schedules
will also be forwarded along with the AFL. The due date for submission of
AFL is 10th of the second month following that to which the transaction
pertains.
The Factory prepares a monthly Disbursement Certificate for IEs who are
paid out of advances obtained from the Local Accounts Officer. The total
amount passed for payment in the Muster Rolls, recoveries made, net
amount paid and the actual amount disbursed are shown in the payment
side.
The advances received from LAO are shown in the receipt side. The
undisbursed wages are recorded on the payment side of the DC and both
sides balanced. The DC should be sent to AO on or before 10th of the
second following along with TR for the undisbursed amount.
The AO will verify the details of DC with reference to AFL, Schedules and
other documents furnished in support. Rent scheduled will also be
checked with the rent bills.
Factory Accounting
58
Accounting of Stores
Definition of Stores:
The term 'stores' include (1) Materials used in the Factory, (2)
Manufactured Products including components or processed Materials
produced in the Factory, and (3) Miscellaneous Items of trade supply e.g.
electricity and water for manufacture purpose.
Storeholders will not issue any Materials for use in the Factory without
Material Demand Note signed by the person authorised to requisition such
stores.
The latter will enter all issues of Material made by him in the Material
Warrant after verifying that the quantity demanded is within the quantity
authorised on the Material Warrant and will return one copy of the
Material Demand Note together with Material Warrant to the Demanding
Section.
The Demanding Section will return the copy of Demand Note to the
Storeholder duly receipted, who will in turn, pass it on to the Accounts
Office after the issue has been entered in the appropriate Bin Cards and a
suitable Sl. No. has been assigned.
The Storeholder may alter the quantities shown on the Material Demand
Notes if necessary in order to conform to the quantity or type of stores
Factory Accounting
59
actually issued. He will attest the correction and enter the altered quantity
only in the relative Material Warrant.
The Storeholder may, if necessary, alter the quantity shown on the Return
Notes provided the quantity actually received is less than quantity shown
on the Return Note. He will attest the corrections and will enter the
altered quantity only on the Material Warrant.
Scrap will not be allowed to accumulate in the Shops. All scrap will be
returned to the Stores with Material Return Notes in duplicate
accompanied by the relative Material Warrant, in the cases where the
scrap can be definitely allocated to a particular job. The procedure
described in Rule 25 (FAR) will be followed in such cases.
Red Return Notes are also utilised for return of surplus components drawn
on Red Demand Notes, to component stores.
At the end of every financial year actual stock will be taken by the Factory
of the un-used Material and part finished work, full lists being made of all
articles found showing the stage of manufacture each has reached and
the Extract and Work Order and Warrant against which the manufacture
has been undertaken. The lists which will be prepared separately for each
Shop will be forwarded to the Accounts Officer who will as far as
practicable verify that the quantities of un-used stock and part finished
work agree with the quantities that should exist in accordance with the
accounts received.
Semi-stores-Valuation of:
The articles on the semi-list will then be valued by the Accounts Officer in
labour and material. Where they have been made of Piece Work the
wages value given to each article will be the total piece work price of the
operation which has been performed upon it. The value of any operation
done on the day work will be estimated. Necessary additions will be made
to the wages on account of shop charges-"POWER AND MACHINERY AND
NON-PRODUCTION AND FIXED CHARGES". The value of Materials will be
worked out and "Stores Indirect" charges will be added to it.
Accounting of overheads
Overhead expenses:
While the direct labour and direct material charges are allocated to the
jobs concerned and included in the cost cards, the indirect expenditure of
the Factory is allocated in another suitable manner. The indirect
expenditure otherwise known as the Overhead Expenses is divided into
the following two classes.
come under either of these two categories and are, therefore, classified as
"Other Miscellaneous Charges".
To facilitate the collection of the expenditure under fixed and variable the
last two digits of the 01 and 02 series of Work Order Nos. are designed to
show the Shop or Group of Shops for which the expenditure is incurred.
The total variable indirect expenditure for the Factory plus such proportion
of the fixed overhead expenditure as is chargeable to the output has to be
charged to the outturn of the Factory. For this purpose the overhead
expenditure pertaining to any production shop is charged to the
production of that shop during that period. It is also necessary that the
overhead expenditure for the same period pertaining to the Service Shops
should also be charged into the cost of outturn. For this purpose the
overhead expenses for the Service Shops are allocated to the productive
shop in proportion to the service rendered by the former to the latter (or
on any other pre-determined basis) and added to the overhead expenses
of the latter by means of a step ladder.
(2) The items, which are general in character and are incurred for
the benefit not only of machine labour but also of hand labour,
are called "N.P. Charges" or Non-Productive Charges. The former
Factory Accounting
64
The full variable overhead expenses incurred by and for Service Sections
such as "Electric Power". "Steam Power", "Gas for Manufacturing Purpose"
etc. for which power cost and other cost statements are prepared, is
included in the respective Cost statements and the total cost thus arrived
at for each Section is allocated to other Productive and Non-productive
Sections in proportion to the service rendered to these Sections. The
costs, thus allocated, are again included in the NP and PM expenditure
statement of the respective Shop.
as the Datum load. The load is stated to 45% of the war load in the
Factories (40% for CFA).
(i) The quantity of each item of production in the Factory at full war
load.
The Accounts Office, from the information obtained from the Factory and
the data available in their office, estimate the fixed overhead expenses for
each shop and for the Factory as a whole at Datum load, as well as the
direct labour expenditure that will be incurred for each production section
of the Factory for producing the full quota at datum Load. The percentage
which the amount of estimated fixed overhead expense bears to the direct
labour expenditure will then be determined and this will constitute the
Stabilised-on Cost rate of fixed charges.
Budget Committees:
Accounting of Materials
Direct and Indirect Materials
For the purpose of ascertaining the cost of various articles produced in the
Factory, Materials utilized in production are classified as direct materials
and indirect materials. Material, which forms part of the finished product,
is defined as direct material. Material drawn for general shop use,
maintenance and repair services etc. are treated as indirect materials and
charged as part of the overhead charges.
Two sets of accounting records are maintained for Stores viz. Bin Cards
and Priced Stores Ledgers. The Store Holder maintains a Bin Card for each
item of store, wherein, every receipt and issue is entered, and after each
transaction, the balance is shown. Thus, the factory for all materials
maintains a continuous quantitative account. The material code number
allotted to each item is entered in the bin card.
Receipts are priced at the cost of purchase plus all incidental charges
incurred upto the point of receipt of the stores at the Factory. Thus, in the
case of imported stores, Sea freight, Customs duty and Port handling
charges and Inland freight charges are all added to the purchase price to
arrive at the cost of stores in pricing receipt vouchers.
Components, standard tools required for general shop use, packing boxes
manufactured in the Factory are also transferred to stock and accounted
as receipts in the store ledgers. Such receipts are priced at the actual cost
of manufacture.
Factory Accounting
70
Materials are issued by the stores section to shops only against authorised
requisitions called Demand Notes.
For material required for general shop use, maintenance etc. the planning
department issues "Open Warrants" on quarterly basis which constitute
the authority for the shops to draw materials on as required basis.
The demand and return notes are priced at the latest ledger rates. The
ledger rate is calculated afresh, everytime a new receipt occurs, taking
into account the balance available as the date of new receipt, as shown
below.
Material Abstract:
(iii) The demand and return notes pertaining to a month, after they are
priced and posted in the store ledger, are sent to the Electronic Data
Processing Section for preparing a material abstract. The material abstract
is a listing type of tabulation in which the expenditure incurred against
each work order and Warrant is shown demand/return note-wise and also
the net total against each work order/Warrant. The net expenditure for
each Warrant is posted in the cost card pertaining to the concerned
Warrant.
Factory Accounting
72
(2) The expenditure may be divided into two categories viz. 'New Capital
Items' and 'Renewal and Replacements'.
(3) The line of demarcation between 'New Capital Items' and 'Renewal
and Replacements' is as detailed below:
List of Assets:
(i) Each Factory will maintain lists of all assets under Plant &
Machinery. Separate lists will be maintained for the different
shops and these will be in accordance with the entries in the
Block Registers maintained by Accounts Office.
The Factory will forward the above lists annually to Accounts Office for
verification with the Block Registers maintained by Accounts Office.
(iii) Inventory lists will be maintained by the Factory for all tools and
shop plant held by the Shops, separate lists being prepared for
each shop or section. The Accounts Office will audit these lists.
Capital Account
MACRO - LEVEL
Capital Assets are broadly divided into (1) Plant and Machinery (2)
Building (3) Other items (4) Tools costing 10,000/- and above.
Capital Assets are procured from Renewal and Replacement Grant (RR)
and New Capital Grant (NC). Separate allotments are made against the
two grants each year and Expenditure incurred is booked against code
allotment is watched through a medium of Register called Register of
Sanctions and Expenditure.
When existing machinery has completed its normal life and reached to a
stage Beyond Economical Repairs (BER) the factory submits a demand to
Accounts Office for its replacement. These items are called as RR items.
Procurement
These purchases are made locally by the factory, under the powers vested
in GM, for the purpose. The factory places a demand initially and the
same submitted to accounts, which would audit the same in the following
lines.
(a) In case of RR items, the life of the machines, its book value and
other details which would justify its necessity.
Indents are placed by the factory to DGS & D (through OFB) and the
procurement of the items are arranged by DGS & D (Director General of
Supplies & Disposals). In the case of foreign purchase, procurement is
arranged by OFB directly. The paid DVS (for CP items) and Debit Notes
Factory Accounting
76
(RP items) are received in Accounts Office who would link the same with
the Receipt Vouchers prepared by the factory as and when the Machines
are received by them.
The Vouchers are prepared by the Engineering Office of the factory after
the machines are inspected and installed. Continuos serial number is given
for the same in a year. These Vouchers contain the following information:
'M' Series Vouchers are priced with reference to the Supply Order, AT
Orders Etc. and are posted in the Liability Register and also linked with
the Asset items.
Block Register
There are two types of Block Register (i) Building Block Register (ii)
Machinery Block Register. The following information is available in the
Block Register.
Factory Accounting
77
1. Sl. No.
2. Rt.Vrs.No.
3. Reqd. No. of Machine
4. AT, No. & Date
5. Total
Sub.Columns:
The details are posted under each head as above and the total tallied
under each head, with the final total.
Linking Register
Part: I
1. Sl. No.
2. Bill No.
3. Disbursement Voucher No.
4. Nomenclature of stores
5. Amount
6. Receipt Voucher No. and date
7. Value
8. Difference between column 4 & 6
9. No. and date of adjustment voucher
Part: II
1. Sl. No.
2. Rt. Voucher No. and Date
3. Nomenclature of stores
Factory Accounting
79
4. Amount
5. Bill No. Voucher No. & Date
6. Value
7. Difference between column 4 & 6
8. No. & Date of adjustment Voucher
Depreciation-Calculation
The above details are furnished by the Mgt. In a statement called active
and idle statement, in respect of each section.
Charging of depreciation
Financial Account
At the close of the financial year, to arrive at the outstanding Assets and
liabilities, a balance sheet is prepared in the following format.
Opening Balance
Net Capital from the previous year's Capital plus stores received during
the year under LP, CP, EP, (RR and NC)
Factory Accounting
81
Minus depreciation and issue etc. and the closing Balance: which is carried
forward to the next year.
Building
Civil work is carried out by MES authorities and every month MES
Expenditure Statement is received from UA GE concerned. The same
expenditure is recorded in the administrative approval for the work.
When the work is completed by MES and taken over by the factory, a 'B'
series voucher is prepared by the factory. The voucher is priced with
reference to the Expenditure recorded against the work after adding
departmental charges. The expenditure remaining unlinked is shown as
semi-works and shown as outstanding Assets.
The building has been considered as having 60 years life and accordingly
depreciation rate is worked out. The Building Block Register is also
maintained in the same format as 'Machinery Block Register'.
Building also finds a place in the capital Accounts as in the case of Plant &
Machinery.
Extracts
A Class 'V' extract is the authority for undertaking Capital services by the
factory. This is issued by DGOF (OFB) with the previous concurrence of
Factory Accounting
82
Payment of Bills
The Amount so paid entered in this Asset Register and linked with the
Receipt Voucher as already explained earlier.
1. Sl. No.
2. Ivr. No.
3. Name of the Articles
4. Qty
5. Book Value
6. Sale Value
7. Name of purchaser
8. Amount released
Factory Accounting
83
Miscellaneous
Cost Cards-How opened and dealt with:
The Accounts Office will maintain a Cost Card for every separate job on
which expenditure is incurred and in respect of which a Warrant or S.W.O.
Draft under a Syllabus Work Order is issued. Cost Cards are normally
maintained in respect of Indirect Work Orders.
The Cost Cards will be posted by the Accounts Office from various
abstracts prepared by them. The Cost Cards will be totalled on completion
of the work and cases in which the cost differs from the Standard
Estimates by more than 10% either in total or under any elements of total
cost will be reported to the General Manager for information and remarks
particularly as to whether the estimate required revision. Any other Cost
Card required by the General Manager will also be sent to him for
information.
The Cost Cards on completion will show the expenditure on the articles of
a particular description which have been completely manufactured in the
Factory during the year from which the production costs per article can be
determined.
In order to enable the Accounts Officer to close the Credit Cards for
completed Warrants, the Factory Management will furnish to the Accounts
Office by 10th of each month a list of Warrants completed during the
preceding month. The Shop's copy of the completed Material and
Manufacture Warrant will also be sent to the Accounts Office for scrutiny
and record along with this list.
The Factory will also furnish to the Accounts Office by the 15th of April
every year a list of Warrants lying uncompleted on the 31st March.
Factory Accounting
85
In the case of certain articles for which process costs are required
quarterly, half yearly or annually statements, as required and on the lines
to be settled between the General Manager and the Accounts Officer will
be prepared by the Accounts Staff and furnished to the General Manager.
In the case of yearly statements it is essential that they should be
furnished promptly after the close of the financial year.
The Accounts Office will prepare and furnish to the General Manager with
such periodical statistics as may be prescribed by the DGOF with the
concurrence of the CDA (Fys.). Any other information asked for by the
General Manager which can be furnished without inconvenience will also
be furnished by the Accounts Officer. In cases in which the Accounts
Officer considers that the information asked for by the General Managers
cannot be furnished without undue trouble and inconvenience the matter
will be referred for orders to the CDA (Fys.). who will consult the DGOF, if
necessary and inform him of the decision whenever a General Manager's
request for information is refused and the reasons therefor.
Cost Control
Factory Accounting
86
There are two main systems of cost control viz. Budgetary Control and
Standard Costing.