SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL ACCOUNTS— 1
A-01-01 OF
PERPETUAL RECONCILIATION 2

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 JAN 95

 POLICY REFERENCE
 All balance sheet accounts are reconciled on perpetual basis.

 Every balance sheet account must be reconciled atleast once in three months.
Also, during Quarterly and final closing of accounts.

 PROCEDURE
 Each unit must have a chart of accounts showing against balance sheet Account :

 It is the responsibility of the Unit Finance Head (UFH) to issue the accounts
reconciliation schedule. The schedule must be distributed to all the officials and
supervisors involved in accounts reconciliations as well as to Unit Head (UH).

 The UFH shall report to UH, by 15 th of the following month, actual

reconciliation accomplished vis-a-vis reconciliation plan. Should there be any
shortfall in reconciliation exercise, UH to review the status with UFH
immediately and initiate actions for unreconciled items with specific target
dates.
 Confirmation of balances :

 Third party balances are confirmed and reconciled on a perpetual basis.

 “A” Class customers and suppliers are identified on the basis of the value of
prior year’s transactions. “A” Class parties are those whose transaction value
accounts for not less than 70% of the value of total transactions of the year.
Reconciliation of “A” class party accounts must be done atleast once in 6
months.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL ACCOUNTS— 2
A-01-01 OF
PERPETUAL RECONCILIATION 2

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
 01 JUNE 2000 01 JUNE 2000 01 JAN 95

REFERENCE
 Following accounts must be reconciled :

 bank accounts- Daily

 advance accounts-Weekly

 debtors and creditors control accounts-Perpectual

 salaries and wages payable account - Monthly

 statutory dues.- Monthly

CHAIRMAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL BANK ACCOUNTS 1
B-01-01 OF
3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 JAN 95
 REFERENCE

 POLICY

 Minimum number of bank accounts are operated at each of the Units.

 Separate bank accounts are maintained for collections and working funds.

 Bank accounts are operated on joint signatory system.

 TYPES OF BANK ACCOUNTS

The Company maintains two types of bank accounts, viz., Collection

Accounts and Working Accounts.

 Collection Account

This account is used only for depositing funds/customer collections. As

per existing arrangements, such deposits are to be made only for
outstation cheques not covered by Citibank banking arrangements.

Funds deposited are transferred to corporate bank account at Chennai.

 Working Account

Unit’s fund requirements are met through this account. Sourcing of fund is
through transfers from Corporate/Corporate instructions which are meant
for operational requirements.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL BANK ACCOUNTS 2
B-01-01 OF
3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 JAN 95

REFERENCE

 Joint Signatory System

 As a policy, bank accounts are operated on “joint signatory” system. Under this
system, two signatories are required to operate the bank account.

 Signatories are categoriesed into :

 Group I - consisting of officials who do not have direct responsibility to operate

the bank account.
 Group II - consisting of finance officials.

 Bank Accounts
ANNEXURE 1
 For opening and closing of bank accounts, and for changes in authorised
Read with
signatories a formal request must be made.
Procedure
No.A-02-01
 The request must follow the steps mentioned below :

 Location Head makes Request.

 Divisional Finance Head vets Request.

 Divisional Director Recommends.

 Executive Director-Finance approves and forwards to Company Secretary for

obtaining the approval of the Committee of Directors (Banking).

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL BANK ACCOUNTS 3
B-01-01 OF
3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 JAN 95

REFERENCE

 Inoperative Accounts

 Inoperative Account is defined as an account without any transaction in

preceding 12 months. Such an account must not be kept alive without written
approval of Ex. Director-Finance.

 The responsibility for taking appropriate action with regard to the inoperative
accounts rests with the Unit Finance Head.

 General

 Unit Finance Head must maintain up-to-date record of

 Bank accounts of the Unit.

 Authorised signatories for each of the bank accounts.

 Standing instructions, if any, with regard to each bank account.

 As part of year-end statutory accounts closing exercise. Unit Finance Head must
obtain bank confirmation of the authorised signatories and Standing Instructions
relating to each bank account.

CHAIRMAN

Procedure No. B-01-01 Annexure 1

REQUEST FOR BANK ACCOUNT/AUTHORISED SIGNATORIES

Date :
LOCATION : DIVISION :

BANK ACCOUNT

1. Action proposed : Open / Close Bank Account

2. Type of Bank Account : Current / Savings / Other (specify)

3. Category of Account : Collection / Working Account

4. Bank Name and Address :

5. Purpose of New Account /

Reasons for Closure :

AUTHORISED SIGNATORIES

1. Names of Signatories :

Present Proposed
Name Designation Name Designation
 Group I

Group II

2. Reasons for change :

REQUEST / VETTING / APPROVAL

Requested by Vetted by Approved by

(Location Head) (Unit Fin.Head) (Unit Director ) (Ex.Director-Finance)

Date : Date : Date : Date :

COMMITTEE OF DIRECTORS (BANKING) RESOLUTION NO. :

Date :

(Company Secretary )
Date :

NUFAIKA DISTRIBUTORS LTD.

SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL CASH -- 1
C-01-01 OF
COLLECTIONS 2

EFFECTIVE FROM EDITION NO.1 REPLACES EDITION NO.1

PROCEDURES
25 AUG 2008 25 AUG 2008

REFERENCE

1. Definition

 Collections are receipts of money from customers for goods supplied and/or
services rendered.

2. General

 Collections may consist of receipts by way of :

 Cash

 Cheque / bank draft

 Inward TTs

3. Cash

 Receipt of cash may be treated as collection for the accounting period, provided
 that the cash is received on or before the last working day of the same accounting
period.

 Cash Receipt must be prepared on the same day of the physical receipt of cash.

4. Cheques and Drafts

 4.1. Receipt

 Receipts by way of cheques and drafts may be treated as collection for the
accounting period, provided that :

 The date of the cheque/draft is not later than the date on which it is receipted.
Accordingly, post-dated instruments must not be treated as collection.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CASH -- 2
C-01-01 OF
COLLECTIONS 2

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
25 AUG 2008 25 AUG 2008

REFERENCE
 The cheque/draft is received and banked not later than the first working day of the
following accounting period.

 As a general policy, no outstation cheques must be accepted from local customer

.

 4.1.1. Depositing For Collection

 The cheque/draft must be banked for collection either on the date of receipt or the
first working day following immediately thereafter.

4.2. Dishonoured Instruments

 Cheques and drafts which are dishonoured should be treated as negative

collections. Such negative collections should be recorded as soon as intimation
of dishonour is received in writing.

 Bank charges for dishonoured instruments should be recovered from the payer.

GENERAL MANAGER
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL CASH -- 1
C-01-02 OF
HANDLING & DISBURSEMENTS 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
25 AUG 2008 25 AUG 2008

REFERENCE
1.0. CASH RECONCILIATION

 The Cashier should print the Daily Cash Book (DCB) from ERP and ensure that
ANNEXURE I
the physical cash tallies with the balance as per the DCB after closing cash,
every day.
 In the case of disagreement the cashier should intimate the Unit Finance Head &
then to review & resolve the differences with the voucher entry clerk in order to
print the corrected copy.

 DCB should be signed by the Cashier and the Unit Finance Head on its
preparation.

2.0. CASH KEYS

 Cash Box or Physical cash must be always kept in a safe.

 Cash key distribution should be as under :

Cashier Finance Head Location Head

 Cash Box Original - Duplicate

 Safe (with two key First key Second key Duplicate set
combination)

 Almirah (with one key) - Original Duplicate

 The duplicate keys will be wax-sealed in an envelope with the Cashier’s

 signature across the seal and handed over to the Location Head. This process
should be followed whenever the above set is used in emergency conditions.

3.0. HAND-OVER & TAKE-OVER OF CASH

 In case the Cashier proceeds on leave, the cash can be handed over to another
person nominated by Unit Finance Head, and it should be documented on DCB
and signed by both the Cashier and the person taking over the cash.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CASH -- 2
C-01-02 OF
HANDLING & DISBURSEMENTS 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
25 AUG 2008 25 AUG 2008

REFERENCE
 Similarly on return of the Cashier from leave, the hand-over & take-over of cash
should be signed by both on DCB.

 In case of short absence of the Cashier during the day, an amount not exceeding
Tsh.200,000/- can be handed over by the Cashier, for emergency needs, to a
person nominated by the Unit Finance Head, which must be accounted for by the
said nominated person on the Cashier’s return.

4.0. HANDLING OF CASH

 Under no circumstances cash can be handled by two persons simultaneously and

it must be handled only by a single person.

5.0. VERIFICATION OF CASH

 An independent person should verify the physical cash and ensure the accuracy
of the balance as per the DCB, atleast once a week and document the same on
the DCB.

6.0. PREPARATION OF PETTY CASH PAYMENT VOUCHER

 Unposted Petty Cash vouchers must be generated out of ERP by the voucher
entry clerk & to sign as ‘Prepared by ‘.All relevant supporting to be attached
with vouchers before forwarding it to unit Finance Head for verification.

 After verifying,the voucher to be sent for General Manager’s approval.

 All approved vouchers will be sent to Unit Finance Head for posting in ERP & to
affix ‘POSTED DT….’.The GM’s approval date & ERP posting date should be
same.

 Then to forward it to the cashier for disbursement & to affix ‘PAID’ stamp &
sign by the cashier & to file it serially by date.
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL CASH -- 3
C-01-02 OF
HANDLING & DISBURSEMENTS 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 JAN 95

REFERENCE
7.0 PREPARATION OF CASH RECEIPT VOUCHERS

 Petty Cash Receipts (PCR) must be ERP generated & numbered.

 They must be prepared by the Cashier and authorised by the Unit Finance Head
or an independent person nominated by the Unit Finance Head.

 In case of cancellation, the cancelled PCR must be retained alongwith the other
PCTsh.

8.0 IMPREST CASH WITH OTHER EMPLOYEES

 As a general policy, imprest system should be avoided.

 If, for unavoidable reasons, imprest is required, it shall have the approval of
General Manager or in his/her absence approving authority is Unit Finance
Head.All imprest payments to be approved on ERP vouchers & the same to
reversed when the imprest is settled.The petty cash voucher made against
imprest must contain the imprest advance voucher reference.

 Imprest amount will be need based and must not exceed Tsh.300,000/-. The
fixation of the limit will be the responsibility of General Manager.

 Reimbursement of imprest cash can be made only on settlement, and the

settlement needs to be done within 7 working days of the date of receipt of
imprest cash.

9.0. CASH DISBURSEMENTS

 As a general policy, cash payments in excess of Tsh.500,000/- in value must be

avoided and made only by account payee cheque.
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL CASH -- 4
C-01-02 OF
HANDLING & DISBURSEMENTS 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 JAN 95

REFERENCE

 The practice of affixing `Paid Stamp’ on credit bills and crossing them out
should be introduced, if not already in vogue. If a credit bill is enclosed with the
voucher, there should be a clear stamped money receipt under the receiving
Company seal.

 No cash payment shall be made to parties/suppliers where a credit system of

settling through cheque is in vogue.

 Cash payment for engagement of casual/contract labour shall have the prior
approval of the Personnel Department. The person authorising the payment shall
ensure this aspect.

CHAIRMAN

Procedure No. C-01-02 ANNEXURE I

DAILY CASH RECONCILIATION STATEMENT

Date :
Receipt/Voucher Ref. Tsh.
From To No. of Docs.
A. Cash Book Summary

Opening Balance

Add : Receipts during the day ------------------

Less : Payments during the day ------------------

 Closing Balance ------------------
B. Physical Cash

Comprising :

Cash Tsh.
500 x
100 x
50 x
20 x
10 x
5x
2x
1x

Coins

IOUs
----------------------
Total
----------------------
C. Details of IOU
Date IOU No. Amount Taken By

D. Memo :

Unclaimed Wages : No. of Packets :

Total Amount :

Cashier Unit Finance Head

SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL CREDITORS -- 1
C-02-01 OF
INTEREST BEARING 1
CREDITORS

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 DEC 94

REFERENCE

 DEFINITION

 Interest bearing creditors are another form of borrowing. They consist of all
arrangements under which extended credit is given to the Company at an interest
charge.

 GUIDE LINES
 As a general policy, the Company does not accept interest bearing credit for its
purchases.

 Acceptance of interest bearing credit will need the prior written approval of the
Executive Director-Finance.

 Where interest bearing credit is accepted, (i.e., after obtaining the necessary
approval from the Executive Director-Finance), the outstanding amount should
not be shown as part of Trade CreditoTsh. Such amount should be treated as
short term borrowings.

 In the monthly Comshare Management Accounts, interest bearing credits must

be reported in Capital Employed Trend statement (page 3) as ‘Other’ borrowings
(line 11).

CHAIRMAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CONTRACTS -- 1
C-03-01 OF
PROVISION FOR JOB LOSSES 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 JAN 1995

REFERENCE

1.0. PRINCIPLE

 The Company’s Accounting Policy with regard to inventory is that it is valued at

the lower of cost or net realisable value.

 In this context, net realisable value means the value that the inventory will
realise when utilised and sold in the normal course of business.

 It follows, where a job or contract is expected to make a gross loss, then a job
loss provision has to be set up for the expected gross loss in order to reduce the
inventories in respect thereof to their net realisable value.
2.0. CALCULATION OF JOB LOSS PROVISIONS

 A job loss provision shall be made in respect of the estimated gross loss on any
job or contract.

 In this context, gross loss means the estimated sales realisation of the job or
contract, less the estimated works costs and direct charges in respect thereof. In
this regard :

 Sales realisation means :

Tsh.
Net selling price as per contract

Add/(Less) : PVC (Note 1)

Less : LD or penalty (Note 1) ( )

-----------
Sales Realisation
-----------

Note 1 : PVC, LD or Penalty amounts to be calculated as per contract

terms with realistic projections where necessary.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CONTRACTS -- 2
C-03-01 OF
PROVISION FOR JOB LOSSES 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 JAN 1995

REFERENCE

 Works cost means estimated factory costs, e.g.

Tsh.
Materials
Sub-contract
Direct Labour
Factory Overheads
------------
Works Cost
------------

Note :: Realistic projections will have to be made to arrive at estimated

actual works costs.

 Direct charges cover all direct costs to be incurred for the job or contract. The
applicable element of costs could be :

Tsh.
 Packing
Freight
Insurance
Installation & Commissioning
-----------
Total - Direct Cost ::
-----------

Note :: The element of costs to be considered in direct costs will depend

upon contract terms and conditions.

Hence, Job Loss = Sales Realisation - Works Cost - Direct Cost, when
the net amount is negative, it is a case of job loss.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CONTRACTS -- 3
C-03-01 OF
PROVISION FOR JOB LOSSES 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 JAN 1995

REFERENCE

3.0. CREATION AND APPLICATION OF JOB LOSS PROVISIONS

 A provision for job loss shall be set up as soon as it can be foreseen that a
job or contract will result in a gross loss. Hence, the job loss provision will
be charged to the Profit & Loss Account in the accounting period when it
was first anticipated that the job or contract will result in a gross loss.

 The amount to be provided shall correspond with the amount computed as

per 2.0. above.

 The gross loss amount will stand revised over the initial estimate with the latest
data. The initial provisions shall get adjusted with the latest estimates of gross
loss.

 The job loss provision, so set up for a particular job, may be applied immediately
on its execution. Thus when the job or contract is booked as sale, it follows
actual gross loss is charged to Profit & Loss Account automatically, then the
provision in respect thereof shall be simultaneously applied as a credit to the
 Profit & Loss Account. Hence, as a rule, the job loss provision in respect of a job
or contract will be applied in the accounting month in which the actual gross loss
is taken in the Accounts.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CONTRACTS -- 4
C-03-01 OF
PROVISION FOR JOB LOSSES 4

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 JAN 1995

REFERENCE

4.0. SEPARATION OF JOB LOSS PROVISIONS

 Jobs and contracts in hand shall be reviewed individually and a separate job loss
provision shall be set up. Hence, each job loss provision will be identified with a
particular job or contract.

 No netting or aggregating of jobs or contracts is allowed for the purpose of job

loss provisions. Such netting off of expected losses on some jobs against expected
profits from some others will distort job loss provision and hence strictly
prohibited.

5.0. REVIEW OF JOBS AND CONTRACTS IN HAND

 All jobs and contracts in hand shall be reviewed regularly in a systematic

manner.

 For the purpose of these reviews, new or revised estimates shall be prepared of
the projected gross profits or losses in respect of the jobs or contracts under
review.

 If these reviews reveal that a job or contract is likely to result in a gross loss,
then a job loss provision shall be made immediately for the estimated amount of
such loss.

CHAIRMAN
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL DEBTORS - PROVISION FOR 1
D-01-02 OF
BAD & DOUBTFUL DEBTS 3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 20 MAY 1995

REFERENCE

1.0. POLICIES

 Adequate Provision for Bad and Doubtful Debts is created in the Company’s
books of accounts to reflect the intrinsic worth of its trade collectibles.

 Provision amount is adjusted monthly to reflect the status of collectible debt.

2.0. PROVISION FOR TRADE DEBTORS

 When the certainty of realizing a trade debt is doubtful, suitable provision is

created in books to reflect the diminution in the intrinsic value of the asset.
Such diminution of the intrinsic worth of a debt could be caused by its
being overdue or some other factor (s). Normally, the longer a debt is
overdue, the greater is the uncertainty associated with its realization.

3.0. BAD AND DOUBTFUL DEBTS

 Bad Debt is one where the possibility of realisation is low. Doubtful debt is one
which has some uncertainty associated with its realization. Therefore, the
difference between bad debt and doubtful debts is the degree of uncertainty in
realization of the debt.

 In the conventional accounting parlance the amount of diminution recorded in

books relating to bad debts is referred to as Provision for Bad Debts. The
diminution amount relating to doubtful debts is referred to as Reserve for
Doubtful Debts. However, for the Company’s purposes, such distinction will
be ignored and all diminutions will be referred as ‘Provisions’.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DEBTORS - PROVISION FOR 2
BAD & DOUBTFUL DEBTS D-01-02 OF
3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 20 MAY 1995

REFERENCE

4.0. TYPES OF PROVISIONS

 There will be two types of provisions for trade debts :

1) Specific Provision

2) General Provision

 SPECIFIC PROVISION

 Specific Provision is created with reference to a particular outstanding debt.

 Specific Provision is created due to the extreme uncertainty associated with the
particular debt.

 Debts which are written off for statutory purposes, but retained in Management
Accounts will be treated as having Specific Provisions.

 GENERAL PROVISION

 General Provision is created with reference to the overdue nature of the debt.

 The quantum of provision is related to and increased with the period for which the
debt is overdue, i.e., remains unpaid after it contractually becomes due.

5.0. CREATION AND APPLICATION OF SPECIFIC PROVISION

 The Authority levels and procedure to be followed for the creation of specific Procedure
debt are same as in the case of Bad Debts Write-Off. No.D-01-03

 Specific Provision must not remain in statutory books or Management Accounts

beyond one financial year subsequent to the year in which it is created. The
Specific Provision must be either Applied or Released not later than March of the
subsequent year.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DEBTORS - PROVISION FOR 3
D-01-02 OF
BAD & DOUBTFUL DEBTS 3
 EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1
PROCEDURES
01 APRIL 1998 01 JUNE 2000 20 MAY 1995

REFERENCE
6.0. CREATION OF GENERAL PROVISION

 General Provision is created on the basis of Aging of overdue debts.

 Provision amounts must be as follows :

Debt Overdue (Months) Amount of Provision

> 6 - < 12 25% of Debt Amount
> 12 - < 24 75% of Debt Amount
> 24 100% of Debt Amount

 For calculation of General Provision, the enclosed format should be used which ANNEXURE - I
will act as a check list also.

 The amount of provision, calculated as above, will then be compared with the
opening provision. If current calculated amount of provision is higher than the
opening provision, additional provision has to be set up by charging to Profit &
Loss Account and if otherwise, a release to Profit & Loss Account.

 For the purpose of Management Accounts, the release during the fiscal year will
be shown as a negative addition to the extent they are created during the year.
The balance will be shown as a release.

7.0. RESPONSIBILITY FOR CREATING / APPLYING / RELEASING

PROVISIONS FOR BAD AND DOUBTFUL DEBTS

 The primary responsibility for creation/application/release of Provision for Bad

and Doubtful Debts rests with the concerned Financial Controller.

 Creation of Specific Provisions/Application of Provisions will be subject to the

stipulated administrative control procedures.

 Financial Controller takes actions on the basis of recommendation of the

Commercial Head/Regional Sales Manager of the Product.

CHAIRMAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DEBTORS -- 1
D-01-03 OF
BAD DEBTS WRITE-OFF 3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 20 JAN 1995

REFERENCE
1.0. POLICY

 Following a formal review, debts which are considered ‘bad’, i.e., having remote
chance of recovery, must be promptly written off from the books. Such action
must be taken to (a) ensure that the Company’s books reflect the real worth of
debtors, and (b) claim tax relief.

2.0. WRITE-OFF OF BAD DEBTS

 Since the act represents an extreme and ultimate step, writing off of a debt must
be subjected to rigorous prior administrative scrutiny and approvals.
Annexure I
 When it is proposed to write off a debt, a formal Debt Write-off Request (DWR)
must be submitted.

 Separate DWRs must be submitted for each product group.

 The DWR must follow the sequential steps enumerated below for
proposal, recommendation, approval, and accounting :

Step Description of Step Authority

I Propose Product/Sales Manager

II Recommend Group Commercial/Marketing
Head
III Vet Unit Financial Controller
IV Vet/Approval Unit Director
V Vet Executive Director-Finance
VI Approval Joint Managing Director/
Managing Director
VII Accounting Unit Finance Head of Location
Accounting for Debtors

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DEBTORS -- 2
D-01-03 OF
BAD DEBTS WRITE-OFF 3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 20 JAN 1995

3.0. PREPARATION OF DWR AND POST-APPROVAL DISTRIBUTION

 DWR must be prepared in quadruplicate.

 Original and the first two copies must be forwarded for processing; the third
copy must be retained by the Proposer as office copy.
 After approval, DWR copies must be distributed by the Divisional Financial
Controller as follows :

 Original - Unit Finance Head of the location

where the debtors are accounted for.

 Duplicate - Product/Sales Manager

 Triplicate -. Commercial

 Quadruplicate - Retained by Divisional Financial Controller

as office copy

4.0. AUTHORITY LIMITS FOR DWR APPROVAL

Authority Single Invoice/Debit

Note Amount

Unit Director Upto Tsh./-

Joint Managing Director/ Above Tsh./-

Managing Director

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DEBTORS -- 3
D-01-03 OF
BAD DEBTS WRITE-OFF 3

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 20 JAN 1995

REFERENCE

5.0. ACCOUNTING

 Debt write-off must be through issuance of credit notes.

 All debts that are written off must be charged to Profit and Loss Account under
 the account head ‘Bad Debts’. They must not be netted off against sales in
management and statutory accounts.

 The bad debt amount must not be directly set off against the provision amount.
This procedure is required to keep a financial record of bad debts written off.

 Under current sales tax rules, credit notes that are issued within six months from
the date of the related invoices may be reduced from the taxable sales. This is
applicable only for filing sales tax returns.

CHAIRMAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DISHONOURED PAYMENTS -- 1
D-02-01 OF
BOUNCED CHEQUES ETC. 3

EFFECTIVE FROM EDITION NO.3 REPLACES EDITION NO.2

PROCEDURES
01 JUNE 2000 01 JUNE 2000 10 JAN 1995

REFERENCE

1.0. RE-PRESENTATION OF DISHONOURED INSTRUMENT

 When a cheque or any other instrument is returned unpaid for lack of funds, it
will not be re-presented for payment, either automatically or at the request of the
customer. The customer to be asked to make good through a Demand Draft.

2.0. BANK CHARGES

 Customer must make good of actual expenses incurred by the Company as a

consequence of the dishonoured payment.

3.0. STOPPAGE OF DELIVERIES

 The Company will notify the customer in writing and withhold all further
supplies to the customer until restitution is made for the dishonoured
payment and bank charges.

 The Company’s notice to the customer must specify that supplies are
withheld on account of dishonoured payment and no liability will devolve on the
Company for any consequential loss suffered by the customer.

4.0. CHANGE OF TERMS OF SALE

If the customer’s payments are dishonoured three times in a period of

twelve months, the terms of sale will be compulsorily changed, as follows :

A. Credit Period

The customer will not be allowed any credit period.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DISHONOURED PAYMENTS -- 2
D-02-01 OF
BOUNCED CHEQUES ETC. 3

EFFECTIVE FROM EDITION NO.3 REPLACES EDITION NO.2

PROCEDURES
01 JUNE 2000 01 JUNE 2000 10 JAN 1995

REFERENCE

B. Payment Terms

Payment will be only through any of the following modes :

 Advance payment or payment against proforma invoice must be

against bank draft. If payment is by cheque, actions will be taken only
after realisation of the cheque.

 Payment against proforma invoice

 Irrevocable letter of credit

C. Further Modification of Terms of Sale

Any modification which restitutes the original terms of sale or confers

more advantageous terms on the customer than those stated above,
shall not be made within a period of 12 months from the month in
 which the original terms of sale were revoked.

Any agreement, in favour of terms not in line with what has been stated
above, must have the prior written approval of the Joint Managing
Director/Managing Director, as applicable.

5.0. DEALER AGREEMENTS

The above conditions should be incorporated in the agreements being

executed with the dealeTsh.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DISHONOURED PAYMENTS -- 3
D-02-01 OF
BOUNCED CHEQUES ETC. 3

EFFECTIVE FROM EDITION NO.3 REPLACES EDITION NO.2

PROCEDURES
01 JUNE 2000 01 JUNE 2000 10 JAN 1995

REFERENCE

6.0 ACCOUNTING FOR BANK CHARGES

 On receipt of the dishonoured instrument, the concerned Unit must promptly

raise a debit note on the customer for the value of the dishonoured instrument plus
all bank charges.

Correspondingly, a provision must be created under Provision - Bank

Charges Recoverable for an amount equal to the bank charges.

As and when the bank charges are recovered from the customer, a similar
amount must be released from Provision - Bank Charges Recoverable
account.

 Whenever, it is assessed that the customer will not pay the bank charges, such
amount may be written off to the Profit and Loss Account. Correspondingly, a
similar amount must be applied from the Provision - Bank Charges Recoverable
account.

CHAIRMAN
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL DISCOUNT -- 1
D-03-01 OF
SALES DISCOUNTS 2

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 18 MAY 1995

REFERENCE

1.0. SALES DISCOUNTS

There are different forms of sales discounts. These discounts can be

categorized into :

Sales Related Discounts (SRDs)

Performance Related Discounts (PRDs).

2.0. SALES RELATED DISCOUNTS

 SRDs are discounts which are given to the buyer at the time of sale. Examples of
such discounts are :

Normal Discount

Additional Discount

Quantity Discount

Cash Discount

SRDs are related to the particular sale transaction in question and allowed
immediately.

Normal, Additional and Quantity Discounts are to be calculated on the list

prices whereas Cash Discount will be calculated on selling price net of
above discounts.
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL DISCOUNT -- 2
D-03-01 OF
SALES DISCOUNTS 2

EFFECTIVE FROM EDITION NO.2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 18 MAY 1995

REFERENCE

3.0. PERFORMANCE RELATED DISCOUNTS

PRDs are contingent upon customer performance. These discounts are

allowed only after the conclusion of agreed performance(s) by the
customer. Following are examples of PRD :

Early Payment Discount

Prompt Payment Discount

Quarterly / Annual Off-take Discount

PRDs shall be calculated on selling price after adjustment of all SRDs.

4.0. ACCOUNTING TREATMENT

SRDs - SRDs are sales affecting discounts. Therefore, these are to be

reduced from the sales value.

PRDs - These are treated as items of selling expenditure and hence not
to be reduced from the sale value.

CHAIRMAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL PRICE VARIATION CLAUSE 1
P-07-01 OF
(PVC) 2
 EFFECTIVE FROM EDITION NO.1 REPLACES EDITION NO.
PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE

 PRICE VARIATION CLAUSE (PVC)

 Price Variation Clause determines the impact of variation in input cost between a
base date and contractual delivery date and its effect on selling price. This is
applicable for products generally with prolonged lead time for manufacture and
delivery from the date of price submission (base date)/award of contract.

 IEEMA has developed formulae for various electrical equipments. These are
intended to be equitable and are accepted by industry and utilities.

 Incorporation of PVC in POs is dependent on tender terms and conditions.

 SCOPE

This policy applies to PVC in relation to orders received for supply by GAI.

 PROCEDURE

 As a rule, PVC bills must be raised simultaneously with the main bill and excise
paid.

 PVC bills must be raised upto contractual delivery month. Exception to this is
permitted only in cases where written confirmation from the customers are
available. It is to be noted, mere extension of delivery date is not a
confirmation for payment of PVC for the extended period.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL PRICE VARIATION CLAUSE 2
P-07-01 OF
(PVC) 2

EFFECTIVE FROM EDITION OF REPLACES EDITION NO.

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL
 REFERENCE
 When the delivery is staggered as per purchase order and actual delivery is
delayed either for whole or part quantities, care must be taken to raise PVC bills
on the basis of supply schedule given in purchase order matching with the
sequence of actual despatches. This is illustrated as under :
In Nos.
Delivery Schedule Actual Remarks
per P.O. Despatches
PVC Applicable for :
April’97 2 - - --
May’97 5 3 2 Nos. at April’97
1 No. at May’97
July’97 3 7 4 Nos. at May’97
3 “ at July’97
Aug’97 6 4 4 “ at Aug’97
Sept’97 - - - --
Oct’97 - 2 2 “ at Aug’97
---------- ------------
Total : 16 16
---------- ------------
 A supplementary PVC bill should be raised on getting customer’s written
clearance for PVC beyond contractual delivery date.

 In case, it is considered prudent to raise PVC Bill upto actual delivery month in
ANNEXURE 1
anticipation of customer’s acceptance of PVC for the extended period, it can be
done against specific written approval from Financial Controller and Unit
Director. For such cases, Financial Controller will be responsible for setting up
specific provision for differential sales value (i.e. difference in PVC between
contractual month and actual delivery month) plus ED and Sales Tax thereon.
The provision will be written back once written clearance is received from the
customer.

CHAIRMAN

Procedure No. P-07-01 ANNEXURE - I

AUTHORISATION FOR RAISING PVC BILL

Approval for raising PVC Bill upto actual delivery month where customer’s written confirmation is still
awaited.

Date :

1. Customer

2. Item

3. Delivery Month Qty. PVC (Tsh.’000)

Each Total
- Contractual
 - Actual

- Excess/(Shortfall)

- ED
- Sales Tax

Total

4. Reasons for raising PVC Bill upto actual delivery month.

Proposed By : Vetted By : Approved By :

GM-Marketing Fin. Controller Unit Director

Date :

Confirmation of creating Provision -

Date Financial Controller

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL DISCOUNTING OF LETTER OF 1
D-04-01 OF
CREDITS (L/CS) 2

EFFECTIVE FROM EDITION NO. 1 OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE
1.0. POLICY

 The decision to discount inland L/Cs opened by our customers is vested with
Corporate Finance. Hence, the present guideline must not be misconstrued in
favour of decentralisation of L/C discounting.

2.0. GUIDELINES FOR INLAND LETTER OF CREDITS

The undernoted guidelines are intended to facilitate easy discounting of

L/Cs opened in our favour by our customeTsh. It is desirable that all
 concerned at Regions/Commercial Deptt.s, understand the requirements
fully and adhere to it. The requirements are :

2.1. L/C Conditions

 L/C terms, must be unrestrictive. This means that L/C should not have terms
whereby there is restriction on negotiation with a particular bank or branch of a
bank . This will provide us flexibility in selecting the bank willing to offer us the
most competitive discounting rate.

 The payment must be due after the agreed credit period reckoned from the date of
despatch. No other conditions to be attached to this clause which might dilute the
agreed credit period.

SUBJECT PROCEDURE PAGE

NUMBER

FINANCE DISCOUNTING OF LETTER OF 2

D-04-01 OF
MANUAL CREDITS (L/CS) 2

EFFECTIVE FROM EDITION NO. 1 OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE
 The L/C should contain a reimbursement clause which means that if all
documentation as per L/C is met, any local branch of the L/C opening
bank should pay to the discounting bank on the due date. This will ensure
that we do not suffer any interest on account of transit delay while
remitting proceeds from the opening bank to discounting bank.

 L/Cs to have barest minimum conditions for easy and faster compliance. More
conditions might mean more discrepancies with resultant delays.

 The usance period should not exceed 90 days since the discounting bank will not
be able to get refinance for bills longer than 90 days. Hence, bills with longer
tenor become unattractive from discounting bank’s point of view and either they
may not agree to discounting such L/Cs or the discounting rate may be quite high
when compared to L/Cs which are less than 90 days.

2.2. Preparation of Documents

 The description of material written on the invoice must exactly match with
description on L/C. Again, the particulars of the invoice must exactly
match with purchase ordeTsh.

 Similar care must be taken for preparation of other documents, e.g.;

Packing list, LRs, etc. by ensuring that these are proper and complete in all
respects and as per L/C requirement.

 The bill of exchange drawn under the L/C need not always be accepted by the
customer. Only if the L/C is explicit on this account it needs to be done.
Otherwise it is sufficient if the bill is just drawn and signed by us. This is as per
UCP 500.

K. VASUDEVAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL FIXED ASSET -- 1
F-01-01 OF
DEPRECIATION 6

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 DEC 1994

REFERENCE

1.0. DEFINITION

1.1. FIXED ASSET

 Fixed Assets comprise items of all types, whether movable or immovable,

acquired or created by the Company to be used in the business as
working equipment or for activities allied to those specific to the Company
e.g., social works, personnel housing, etc.

 The costs to be included as Fixed Assets comprise, in addition to the acquisition

cost, customs expenses, erection and installation expenses and architects’ fees in
the case of construction.

 Document costs, transfer fees, fees or commission are not to be included as Fixed
Assets; these expenses are revenue and shall be written off during the year of
expenditure.

 Wherever Excise Duty is available as Modvat credit, such Excise Duty must not
be included in Fixed Asset Cost.

1.2. DEPRECIATION

Depreciation is defined as a “loss in the intrinsic value of an asset due to

wear and tear and/or passage of time”.
 It is the policy of the Company to depreciate with full value for assets
costing below Tsh.5000/- in the year of acquisition. This provision does not
include Furniture and Fixtures.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL FIXED ASSET -- 2
F-01-01 OF
DEPRECIATION 6

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 DEC 1994

REFERENCE

2.0. DEPRECIATION - CALCULATION METHODS

There are three set of depreciation calculations practised in our Company

to meet different objectives. These are :

2.1. STRAIGHT LINE METHOD (SLM)

 Depreciation calculated under SLM is used for both statutory accounts and
Company’s internal accounts i.e. Management Accounts.

 Fixed assets with value below Tsh.5000/- is fully depreciated in the year of
acquisition and not charged directly to the Profit & Loss Account as
revenue expenditure.

 No shift allowance is considered.

 The calculations will have to be done at Unit level and to be audited by the
Company’s statutory auditoTsh.

2.2. DEPRECIATION FOR MANAGERIAL REMUNERATION

 Section 349 (4)(K) of Companies Act 1956 provides that in computing the net
profits, depreciation should be deducted to the extent specified in Sec.350.
Section 350 prescribes that depreciation should be calculated on the written down
value of the assets at the rates specified in Schedule XIV. The SLM is not
permissible for the purposes of Section 350.

 Extra Shift Allowance is allowed against Plant & Machinery.

 The calculations will have to be done at Unit level and to be audited by the
Company’s statutory auditoTsh.
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL FIXED ASSET -- 3
F-01-01 OF
DEPRECIATION 6

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 DEC 1994

REFERENCE

2.3. FISCAL DEPRECIATION

Depreciation is calculated on WDV and at rates specified in the Finance

Act of the related Financial Year. This depreciation is used for computing
Company’s tax liability as well as effecting tax payment.

Extra Shift Allowance is not available.

The computation is done at Corporate Finance and the Units are NOT
required to make any computation to this effect.

3.0. DEPRECIATION CHARGE

3.1. NEW FIXED ASSETS

 Depreciation charge is calculated in principle at pre-determined rates, using the

duration (i.ed. estimated useful life of the asset) as specified. Annexure I

 At the end of useful life, the remaining value of the asset will be zero.

 For assets acquired during the year, depreciation is calculated from the beginning
of the month following the month in which the asset is ready for use or put to
normal use.

 For assets disposed off or scrapped during the year, depreciation is calculated
until the end of the month, preceding the disposal / transfer of the asset.

 The above applies to all fixed assets with a value equal to, or in excess of
Tsh.5000.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL FIXED ASSET -- 4
F-01-01 OF
DEPRECIATION 6
 EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1
PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 DEC 1994

REFERENCE

3.2. SECOND HAND PURCHASES

The expected useful life has to be decided case by case basis. However,
the expected useful life of the asset will not exceed those listed in
Annexure I.

3.3. COMPUTER SYSTEMS

 SOFTWARE

 Software provided by third parties that is intended for internal use and having an
estimated life longer than the write-off periods referred to below can be
capitalised:

 a) Software costing under Tsh.100 K is to be amortised over no more than 1

year.

 b) Software costing more than Tsh.100 K is to be amortized :

- Over not more than 5 years for industrial use,

- Over not more than 3 years for management use.

 c) All customisation and training costs must be treated as revenue expenditure.

 FIRMWARE

 Firmware represents the computer software that is necessary to run applications

software on the computer hardware. Firmware is usually supplied by the
manufacturer as part of the computer installation. The leading examples of
firmware are :

- Operating Systems - UNIX

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL FIXED ASSET -- 5
F-01-01 OF
DEPRECIATION 6

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
 01 APRIL 1998 01 JUNE 2000 01 DEC 1994

REFERENCE

- Relational Data Base Management System (RDBMS) - Oracle, Foxbase

plus etc.

- Communications System - Ethernet

 If the cost of such firmware exceeds Tsh.100 K then it may be capitalised and
depreciated at the same rate as the computer hardware.

3.4. GENERAL GUIDELINES

 Land is not to be depreciated where the cost can be separately identified.

 Leasehold assets are to be depreciated over the length of the lease or in line with
Annexure I whichever is shorter.

 Test Equipment and tooling are to be included under Industrial Tools.

3.5. DEPRECIATION - MANAGERIAL REMUNERATION

 Depreciation charge is calculated at rates specified in Schedule XIV on WDV of Annexure I

the respective assets.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL FIXED ASSET -- 6
F-01-01 OF
DEPRECIATION 6

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 01 DEC 1994
REFERENCE
 The calculations of the extra depreciation for double shift working or for triple
shift working shall be made separately in the proportion which the number of
days for which the Unit worked double shift or triple shift as the case may be,
bears to the normal number of working days during the year. This is illustrated
below :
Assumption :
 Cost/WDV of the Machine : Tsh.550 K
Depreciation rate : See Annexure I
Actual days worked : Single Shift 45
: Double Shift 230
: Triple Shift 25
Normal working days : 300

Depreciation of the Asset = WDV x DR x ADW

NWD
Depreciation =550 x13.91% x45 + 550 x 20.87% x 230 + 550x 27.82% x 25
----- ------ ----
300 300 300
----- ------- -----
= 11.48 + 88.0 + 12.75
= 112.23

Where WDV - Written Down Value of Assets

DR - Depreciation Rate in %age
ADW - Actual Days Worked for double or triple shifts
NWD - Normal Working Days

 The items of machinery or plant which has been specifically excepted by

inscription of the letters “NESD” (meaning “no extra shift depreciation”) against
it per Schedule XIV and also in respect of the following items of machinery and
plant to which the general rate of depreciation (i.e., 13.91%) applies:-
Accounting/Calculating Machines
Air Conditioning Machinery
Electrical Machinery, such as, Transformer, Switchgear and other
Stationery Plant, Wiring and Fan installations.

CHAIRMAN

Procedure No. F-01-01 ANNEXURE - 1

Depreciation Rates

Basic Statutory/Mgt. Accounts Managerial Remuneration

Straight Line (Ref.Sec.350 &
Sec.XIV:Companies Act)
%
% Life WDV
(in years)
Building - Factory 4 25 10.00
- Non-factory 4 25 5.00
- Residential & Guest House 2.5 40 5.00
Building Services (include. Elec. 10 10 13.91
installation)
Machine Tools/Plant & Machinery 10 10 13.91
20.87
27.82
Furniture & Fixture 15 6.7 18.10
Office Equipment 20 5 13.91
Industrial Tools 33.33 3 13.91
Laboratory Equipment 20 5 13.91
Handling Equipment 10 10 13.91
All road vehicles 25 4 25.89
Computer Hardware 33.33 3 40.00

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL FIXED ASSETS -- 1
F-01-02 OF
CONTROL 4

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 20 JAN 1995

REFERENCE
1.0. GENERAL

 No fixed asset - machinery, furniture, vehicle, etc. - can be purchased unless the PROC.NO. C-07-01
proposal is routed through the Capital Expenditure Procedure.

2.0. ASSET TRANSFERS

 Duly prepared and approved, Asset Transfer Form (ATF) in 4 copies must ANNEXURE I
precede physical transfer of an asset from one place to another, either
within the same location or to an outside location.

 The responsibility for preparation of the ATF lies with the transferor department.

 The transferor department must obtain the acknowledgement on all 4 copies of

the ATF from the transferee department and thereafter distribute the 4 sets as
 under :

 original copy - Accounts Dept.

 first copy - to be retained by the Transferor Dept.
 second copy - Transferee Dept.
 third copy - Order Placing Dept.

3.0. WRITE-OFF / SALE

 Generally, no fixed asset can be written off or sold or otherwise disposed off
without the MD’s formal approval.

 However, for assets whose written-down value is not in excess of Tsh.10000, and
which have been in operation for atleast 5 years, the disposal may be sanctioned
by the Jt. Managing Director concerned, and the MD being subsequently advised
of the same.
ANNEXURE II
 The write-off proposal shall be made in standard form; it shall be prepared in
triplicate by the department initiating the write-off request.

SUBJECT PROCEDURE PAGE

NUMBER

FIXED ASSETS -- 2
F-01-02 OF
FINANCE CONTROL
MANUAL 4

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 20 JAN 1995

REFERENCE
 Accounts Department shall fill in the necessary cost and other details before
forwarding the same to the MD.

 After MD’s approval, the form with the MD’s approval thereon shall be returned
to Accounts Department, who will retain one copy and distribute the other two to
the initiating department and the order placing department.

4.0. PHYSICAL VERIFICATION

 Annual Physical verification of assets may be carried out by each department at

any time convenient to it. The most suitable time however, will be immediately
on receipt of inventory outputs by Accounts Department in April/May each year.

Suggested broad steps for Physical Verification are :

 The Unit Head must issue a circular highlighting scope of the verification work,
responsibilities, time schedule, etc. The scope should include physical
verification of assets lying with Sub-Contrctors/Vendors and at Employees’
residence.

 Asset Verification Slips (VS) should be systems generated in the prescribed

 format. ANNEXURE III

 Each section In-charge should be given VSs pertaining to their

respective sections.

 The Section In-charge should complete the VS after physical verification of the
assets. He should deposit the VSs to Accounts Deptt. after getting it authorised
by his superior. However should there be any discrepancy, the same must
beresolved and if required help of Accounts Deptt. to be sought for.

 Accounts/Systems to key-in the verified data and bring out exception list for
further necessary actions.

 The entire course of verification and reconciliation must be completed in a time

bound programme, as specified in Unit Head’s circular.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL FIXED ASSETS -- 3
F-01-02 OF
CONTROL 4

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 20 JAN 1995

REFERENCE

On the above lines, Physical Verification shall be carried out for Assets
with Sub-Contractors/Vendors and Company OfficeTsh. For assets with
Sub-Contractors /Vendors, the responsibility will be of Materials Manager
whereas for assets at Company Officers’ residence, the Unit Chief - HR
shall have the responsibility.

5.0. OUTPUTS BY ACCOUNTS DEPARTMENT

 On closing of Accounts each year, Accounts Department must prepare :

 A detailed asset inventory for each type of asset (machinery, furniture, etc.)
showing the department, asset code, description, year of capitalisation, original
cost showing w.d.v., of each asset in existence at the end of the year.

 List of assets capitalised during the year.

 List of assets sold/written off during the year.

 List of assets which needs to be written off/scrapped.

 List of assets transferred from one department/location to another during the year.

 List of idle assets or assets involving low utilisation.

 The overall reconciliation showing the opening asset values, plus purchases,
minus sale and write off, equalling the closing asset value.
 Accounts Department must send one copy of the statements mentioned above to
the department/location concerned for the latter’s information and records. On
receipt of the same, the department/location shall verify the statements, and in
case of any error take up the matter with Accounts Department for corrections.

Procedure No. F-01-02 Annexure I

Division :
ASSET TRANSFER FORM Serial No. :
Date :

Sl. No. Asset Code No. Asset Description Asset Type

1
2
3
4
5
6
7
8
9
10

Transferor Department Transferee Department

Name Name

Division Location Cost Centre Division Location Cost Centre

Transfer Authorised by : Asset Received by :

Date Date

Records
Updated Signature

Date
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL FIXED ASSETS -- 4
F-01-02 OF
CONTROL 4

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 20 JAN 1995

REFERENCE

 Declaration by Sub-contractors:

All sub-contractors, in possession of Company assets must make a

declaration in writing, every six months (i.e. on 30th September and 31st
March every year) covering:

 Details of assets held by them

 Physical condition of the assets

 Whether insured or not

On receipt of declaration, the Unit should take the following actions:

 Carry out reconciliation with accounting records and take care of the exceptions.

 Arrange for insurance cover, if not arranged by the sub-contractoTsh.

Annexure IV
6.0. FIXED ASSETS REGISTER

 All locations must maintain a Fixed Asset Register in the prescribed format.

7.0. STANDARD FORMS

 The Asset Transfer Forms and Write - off Requests will be printed by the
Accounts Department and sets thereof will be available to all divisions/
departments/branches on request.

CHAIRMAN

Procedure No. F-01-02 ANNEXURE - III

 ASSET VERIFICATION SLIP

1. Historical data

Asset Code Description Qty:

Tsh. ‘000
Year of Purchase: Original Cost:

Department Location WDV :

2. Verification data

Physical condition : In good working condition

Working but requires frequent maintenance

Under breakdown. Irreparable and hence to be scrapped

Any other (specify)

Not found. Transferred to

3. Utilisation : State the extent of utilisation of the equipment in percentage of normal working houTsh.

4. Shift Working : Machine is working in shift, such as :

Single : Day : Double : Days : Triple : Days :

Verified By :

Section In-charge Deptt. Head Accounts Deptt.

Date :

Note: This verification slip is also to be used for verification of assets lying Sub-Contractors or
Company Officers’ residence. In such situation, the name of the Sub-Contractors or Company
Officer will be written against `Location’.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL INVENTORY -- 1
I-01-04 OF
STOCK-TAKE TIME TABLE 2

EFFECTIVE FROM EDITION NO. 3 REPLACES EDITION NO.2

PROCEDURES
01 JUNE 2000 01 JUNE 2000 10 JAN 1995
 REFERENCE

1.0. TIME SCHEDULE FOR STOCK TAKES

In order to have a consistent policy on mid-year and year-end stock-

takes, the following time table must be implemented at all units of the
Company, viz., Works and Branches :

 Physical inventory shall be taken as of end status of the following dates :

Raw Material 31 October

& &
Sub-contractor Materials 28 February

Work in Progress 31 October

& &
Finished Goods 31 March

 Stock-takes shall be scheduled on the first working day of the unit after
the above dates.

 The above mid-year and year-end stock takes are in addition to the
perpetual inventory exercise and special stock-takes, if any.

 Results of stock-take, after valuation of stock differences, shall be

communicated to the Corporate Financial Controller not later than 30th
of the following month.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL INVENTORY -- 2
I-01-04 OF
STOCK-TAKE TIME TABLE 2

EFFECTIVE FROM EDITION NO. 3 REPLACES EDITION NO.2

PROCEDURES
01 JUNE 2000 01 JUNE 2000 10 JAN 1995

REFERENCE
2.0. IMPLEMENTATION OF TIME TABLE

In order to make the stock-take meaningful, the following steps should be

taken :

 Detailed instructions for stock-take must be issued by the Unit Head atleast two
weeks prior to stock-take.

 Responsibilities for various actions must be identified with specific officials.

 Stock-take must be completed in the shortest possible time.

 Zero hour (i.e. no movement of stocks) must be created during the period of
stock take. In case, it is essential to carry on a few transactions, it must be
properly documented and must have the authorisation of the Unit Finance
Head or his nominated person who should personally monitor and control
such instances..

CHAIRMAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL IMPORT/EXPORT -- 1
I-04-01 OF
GUIDELINES 3

EFFECTIVE FROM EDITION NO. 1 OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE

1.0. POLICY

 The policy of the Company is to comply with all RBI/other statutory

regulations.

 The Units to institute adequate controls to ensure all regulatory

requirements are complied with.
 All agency commission payments to be disbursed from Corporate.

 Forward Cover for all imports and exports are a must.

2.0. PROCEDURE

2.1. Exports

 Each Unit shall identify a person to look after exports and that such person
shall be totally accountable and responsible for all export transactions of
the unit including correctness and completeness of export documentation
in its entirety. The name of the person must be communicated to General
Manager-Taxation by the Unit Head.

 The Units must not obtain GR forms directly from their bankers locally and
instead these are to be obtained from General Manager-Taxation.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL IMPORT/EXPORT -- 2
I-04-01 OF
GUIDELINES 3

EFFECTIVE FROM EDITION NO. 1 OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE

 The units must report the month-end outstandings in the prescribed format to
reach the General Manager-Taxation by 7th of the following month. The
outstanding statement must be supported with the following documents :
Annexure I
 Copy of the outstanding statement of the concerned bank through which the
documents are routed.

 Copy of Invoice, copy of GR, copy of Shipping documents, etc.

 Utilisation of GR Forms will be monitored and controlled by General Manager-

Taxation.

2.2. Agency Commission

 Agency commission will be paid from Corporate Office. GM-Taxation will track Annexure II
this from the GTsh. Claims for Agency Commission must be sent by the units to
GM - Taxation in the prescribed format.

2.3. Imports

 Bills of Entry (Exchange Control Copy) to be submitted within 3 months from

date of remittance to the Bank through whom remittance is made. This is
applicable where payment is on D/P basis (i.e., Documents against payment).
Where payment is on D/A terms (i.e., Documents against acceptance wherein
payment will be made after a specified period), bill of entry to be submitted to
Bank before effecting the payment

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL IMPORT/EXPORT -- 3
I-04-01 OF
GUIDELINES 3

EFFECTIVE FROM EDITION NO. 1 OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE

2.4. Forward Cover

Annexure III
1. Forward cover for all imports (both direct and LC imports) across the
Company, shall be arranged by Corporate Office. For this, the units
should forward their requests to GM-Taxation in the prescribed format.

2. Local banks have since been advised not to issue any Forward Cover at
Unit’s requests.

3. a.. Annexure III to be sent by fax. This would help to take necessary covers
immediately at best possible rates.

b. For both Import and Export, a copy of the Purchase Order alongwith a
copy of the amendment, if any may be sent to us by courier, since
currently as per RBI Guidelines, every forward cover is to be backed by a
trade transaction.

4. Once the Cover is taken, in case there is amendment to the Purchase

 Order, please keep us informed about the change, in case the same
relates to payment terms/delivery period.

K. VASUDEVAN

FINANCE SUBJECT PROCEDURE PAGE

NUMBER
MANUAL
RETENTION MONEY 1
R-04-01 OF
1

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 APRIL 1998 01 JUNE 2000 25 MAY 1995

REFERENCE
1.0. DEFINITION

 Retention Money is the amount withheld by the customer while settling dues
for the supplies made and services rendered by the contractor.

 Retention Money is withheld by the customer as per contractual conditions.

 Retention Money is withheld for the purpose of ensuring satisfactory contractual

performance by the contract, or including proper rendering of account relating to
the free supplies made to the contractor.

2.0. CONTROL

 Debtors Ledger should be designed in a manner so that it clearly reflects

invoice-wise retention money. The intention is to segregate retention dues
from other unpaid amounts.

 All documents relating to retention dues must be systematically preserved

for future reference in the event any clarification or justification needed by
the customer or for pursuing a legal case.

 Retention dues are to be reviewed periodically, atleast once in a quarter. On

completion of contracts, these must be converted into regular debts.

3.0. ACCOUNTING FOR RETENTION MONEY

 Retention Money dues must be recorded under a specific account head

‘Retention” and included in the accounts under the head ‘Trade Debtors’.

 Retention Money does not become one until the full completion of the Contract.

K.VASUDEVAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL VACATION PAY 1
V-01-01
 OF
2
EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1
PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 DEC 1994
REFERENCE

1.0. DEFINITION

Vacation Pay in this context is the liability to the Company in respect of

encashable leave.

2.0. VACATION PAY LIABILITY

The cost of Vacation Pay liability should be worked out keeping the
following in mind :

 Leave days should be limited to the number of days which the employee
can encash while in service or by resignation/retirement/death.

 Encashable Leave Days :

- Unionised Personnel : per terms of wage agreement
- Non-Unionised Personnel : 60 days

 Only those elements of salary and allowances which are considered for
encashment shall be included. For example, HRA and Conveyance
allowance shall not be included in encashable leave salary.

 The vacation pay shall be worked out separately for unionised and non-
unionised employees. Typical cost elements to be considered are :

 Basic Salary/Wage
 Dearness Allowance
 Any other - to be specified

 The formulae to be used in determining the accrued liability are as under:

 Hourly Rated Employees

Vacation Pay = HR x 8 x NDLE

Where HR = Hourly Rate
8 = 8 Hours/Day
NDLE = No. Of eligible days for vacation pay or leave
encashment

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL VACATION PAY 2
V-01-01 OF
2

EFFECTIVE FROM EDITION NO. 2 REPLACES EDITION NO.1

PROCEDURES
01 JUNE 2000 01 JUNE 2000 01 DEC 1994
 Daily Rated Employees

Vacation Pay = DR x NDLE

Where DR = Daily Rate
NDLE = Same as above

 Monthly Rated Employees

12
Vacation Pay = MS x ----------------------- x NDLE
NSWDY + NPHY

Where, MS = Monthly Salary

NSWDY = Number of scheduled working days in the year
NPHY = Number of paid holidays in the year
NDLE = Same as above

 The vacation pay shall be worked out for the accumulated leave days at
the current levels of salary/wage plus other allowances payable to the
employees during the leave period.

 Units should accrue the cost of vacation pay at the time of interim closing
as well as at the year end.

3.0. PAYMENT

When an employee leaves the service of the Company, only salary for the
unutilised leave period will be paid. Allowances such as HRA, PF, etc., shall
not be paid.

However, when an employee takes earned leave while in service, all such
charges are paid for the leave period in addition to his salary.

CHAIRMAN

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CASH MANAGEMENT 1
C-01-04 OF
6

EFFECTIVE FROM EDITION OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL
REFERENCE
1.0. OBJECTIVE

 The main objective of cash management is to effectively meet the disbursement

needs of the Company at reduced interest cost, by ensuring :

 Prompt visibility of collections in Company’s Chennai Account

irrespective of place of collections.

 Swapping of day end balances in Working Accounts of the Units with

Citibank N.A. with our Chennai Account.

2.0. PROCEDURE
 As per arrangements agreed with Citibank N.A., all collections must be routed
ANNEXURE I
through Citibank except for the cheques drawn on locations not covered by Citibank
(refer Annexure I). Such cheques, not conforming to Locations in Annexure I, will
be deposited in Collection Account with other banks.

2.1. Collection Procedure : Citibank

Though the procedure is already in operation but this structured instruction is

expected to ensure better understanding of the system and enhance operational
efficiency.

 Specimen Format : Citiclear

This form is to be used only by Mumbai, Delhi, Chennai and Calcutta

ANNEXURE 1I
Regional Offices and that too only for cheques drawn on any bank located in these
metropolis. High-value cheques (cheques above Re.1 lakh and drawn on certain
Branches only), should be deposited with Citibank by 10.30 A.M so that credit shall
be available to us on the same day. The deposit slips should have the legend “HIGH-
VALUE” on the top of the deposit slip. Example : Calcutta Regional Office can
deposit under this format only local cheques drawn on any bank located in Calcutta.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CASH MANAGEMENT 2
C-01-04 OF
6

EFFECTIVE FROM EDITION OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE
 Specimen Format : Citispeed

This is meant for cheques issued in any of the banks located in the cities,
where we have Branch Offices/Resident representatives and hence to be
used by the following Offices only, i.e., for local cheques in these towns :
ANNEXURE III
Ahmedabad Bangalore Bhubaneshwar Chandigarh
Cochin Coimbatore Guwahati Jaipur
Kanpur Lucknow Nagpur Jamshedpur
Secunderabad Baroda Patna Indore
Varanasi Vizag Pune Raipur
Jabalpur

Example : Cochin Branch Office can deposit cheques issued on any bank
and deposit within Cochin only.

 Specimen Format : Citicheck

 This form is to be used for all upcountry cheques received by the Branch
and Regional Offices. However, these cheques should have to be drawn on
banks located in any one of the towns as per the list enclosed. If a cheque
received is not drawn on a bank located in a location mentioned in this list, ANNEXURE IV
it must not be deposited with Citibank. ANNEXURE I

Citicheck facility should not be used where the cheque is drawn on a

location where the Company has a Regional/Branch Office/Resident
representative. In such cases the cheques should be sent to that particular
location for depositing locally.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CASH MANAGEMENT 3
C-01-04 OF
6

EFFECTIVE FROM EDITION OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE
2.2. Collection Procedure : Other Banks

Each Region or Branch will have only one collection account with any of
the three banks, such as PNB or Canara or Grindlays Bank for depositing
collection cheques not covered by Citi.

Corporate Finance will circulate from time to time, the modalities of fund
transfer to Chennai Branch of the respective collecting banks. The
modalities will cover frequency of transfers as well as requirements for
holding of any minimum balance, if agreed with such banks.

In case a cheque is dishonoured, the collecting bank is required to return

the original instrument, stating the reasons therefor. Otherwise, the
collecting bank is obliged to credit our account within a reasonable time.
For any significant delay to credit our account, the Unit Finance Head
must take up the matter with the collecting bank with intimation to GM-
Taxation. If the default continues, the issue must be taken up with the local
RBI Office for resolving the matter at the earliest.

3.0. DISBURSEMENT PROCEDURE

3.1. Citibank N.A.

The arrangement stands as follows :

Each Works in Calcutta e.g. AEIW, PW and SLW will have separate
working accounts with Citibank. Similarly, all Regions, EHVand PLW will
have separate working accounts with Citibank.
Each of the Works/Regions stated above will effect payments within fund
transfers effected by Corporate Finance. They are not authorised to overdraw under
any circumstances.
 SUBJECT PROCEDURE PAGE
NUMBER
FINANCE
MANUAL CASH MANAGEMENT 4
C-01-04 OF
6

EFFECTIVE FROM EDITION OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE

Weekly statements will be delivered to respective Regions or Works by

Citibank. In case, the discrepancy is not resolved within 10 days, please
refer it to Citibank, Chennai at the address given below together with a
copy to General Manager-Taxation for his immediate action.

Citibank N.A.
766, Anna Salai,
V Floor, Tower 1, Shakti Towers,
Chennai 600 002

3.2. Other banks

The other Works not covered in 3.1 above shall have their working
accounts as under :

Naini Works - Punjab National Bank

Coimbatore Works - Punjab National Bank
Distribution Transformers Limited - Syndicate Bank

3.3. Additional Working Accounts

In addition to these main working accounts, the respective Units can have
additional working accounts with banks which Unit Finance Head will
decide (in consultation with General Manager-Taxation) for the purpose of
statutory payments.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CASH MANAGEMENT 5
C-01-04 OF
6
 EFFECTIVE FROM EDITION OF REPLACES EDITION OF
PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE
4.0. SWEEP ARRANGEMENTS - CITIBANK

4.1. Background

The balance lying in the Citibank working account at all locations are
transferred to the main (Corporate) account at the end of the day by a debit in the
Unit account and a credit in the main account. Next day morning, these amounts are
transferred back to the respective accounts by a debit in the main account and a
credit in the location account. This is referred to as ‘sweep arrangement’. Since
Corporate Account is an overdraft account and the account maintained by locations
are current accounts such a “sweep in” from current accounts to overdraft account at
the end of the day results in reduced overdraft balance and accordingly reduced
interest charge for the Company. This facility is available only with Citibank.

4.2. Sweep Exceptions

There are two circumstances under which there may be a debit balance as per
bank statement at the end of a day.
1. When Citibank - Chennai is closed and Citibank at other locations are
working. In such a case, balances lying in the locations on the day before holiday
will be swept into the main account. There will not be a
sweep out from main account to the accounts at various locations on
the day when Chennai is closed. Because of this, locations will have to
start with a ‘nil’ balance. The debits made to their account during the
day will not be swept into the main account as Chennai is closed.

SUBJECT PROCEDURE PAGE

NUMBER
FINANCE
MANUAL CASH MANAGEMENT 6
C-01-04 OF
6

EFFECTIVE FROM EDITION OF REPLACES EDITION OF

PROCEDURES
01 JUNE 2000 01 JUNE 2000 NIL

REFERENCE
 2. Sweep-in from the locations to the main account is made by Citibank
everyday by 4 P.M. Any debits made to the account after 4 P.M., say
for a belated request for a demand draft, will not be swept into the
main account.

In both these cases, interest will be charged by the bank to the respective
account.

4.3. Sweep Responsibility

ANNEXURE - V

Sweep errors have an effect on interest. This interest is debited by

Citibank under the head ‘charges’ at the beginning of every month at the
locations. This charge is subsequently transferred to main account as per
arrangement with Citibank. Interest debit arising on account of sweet
exceptions as mentioned above will have to be borne by the Company.
For interest debits arising on account of sweep errors, refund has to be
claimed, responsibility of which rests with Corporate.

Before 7th of every month, locations will have to send a statement to

Corporate to enable the Corporate claim refund from Citibank, if
applicable.

CHAIRMAN

Procedure No. C-01-04 ANNEXURE - V

SWEEP ERRORS - EFFECTS ON INTEREST

Unit : Account No. :

Date of Debit Balance Amount of Debit Rate of Interest Interest

Balance (Tsh.)` (Tsh.)
(Tsh.)
Total

Prepared by : Works/Regional Accountant :

Date Date :

Note : This statement is due in CFS by 7th of the following month.