represents standard manhours notionally required to achieve the

total physical production for any year and Y represents the total
manhours (including overtime hours) actually put in by all
categories of eligible employees. This formula ensures
determination of productivity as distinct from production.
(b) The year 1977-78 will be taken as the base year and X/Y as 100.
Quantum of bonus payable:
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%.
8. The formula enunciated in the Scheme will be applied for the
performance relating to the financial year 1979-80 and the bonus payable
for the productivity achieved in 1979-80 will be computed on that basis.
9. The Scheme will be reviewed after reviewing its working for three
years.
10. The grant of Productivity Linked Bonus is intended to provide
substantial motivation towards achieving higher productivity by way of
increased output by the employees and improved quality of service. The
Government hopes that the employees will devote and dedicate
themselves by greater vigour and energy than heretofore in the service of
the nation.
Changes in the scheme
Admissibility
Productivity Linked Bonus is admissible at present to all non-Gazetted
employees without any pay limit.
Quantum of Bonus
Every year PLB is granted as equivalent to emoluments for certain number
of days for the relevant financial year.
Emoluments
'Emoluments' include basic pay, special pay, personal pay, stagnation
increment, deputation (duty allowance), dearness allowance, special
allowance and training allowance paid to faculty members of training
institutions. (Other allowances not included).
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

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if the period of suspension is regularized as duty.
Average Emoluments
Quantum of PLB for the number of days declared every year to be
calculated on the average emoluments drawn for the financial year, i.e.
emoluments for April to March next.
Pro rata PLB
If the employee leaves service on resignation/retirement etc. during the
year, pro rata PLB to be calculated for the number of days in service.
Rounding off
The amount of PLB calculated to be rounded to the nearest rupee.

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
more workers
Before the expiry of the 10th day
following the last day of the wage
period
If the factory employs less
than 1000 workers
Before the expiry of the 7th day
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.
Absentee Payment Register
The factory in a register called Absentee Payment Register will record
particulars of all absentees. This will be regularly audited every month by
the Accounts and ensure that the entries recorded therein are agreed as
per the disbursement certificate.
Absentees on the date of payment of wages are paid on the absentees'
payment day.
Agreement Form of Labour (AFL)
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.
Disbursement Certificate (DC)
The Factory prepares a monthly Disbursement Certificate for IEs who are

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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.

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.
How Materials are issued to the Shops:
Storeholders will not issue any Materials for use in the Factory without
Material Demand Note signed by the person authorised to requisition such
stores.
Separate Material Demand Notes will be prepared for each description of
material for each job.
The Material Demand Notes will be prepared in duplicate and submitted to
the Storeholder with Material Warrant on the authority of which the
Materials are requisitioned.
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.
Alteration to Demand Note:
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
actually issued. He will attest the correction and enter the altered quantity
only in the relative Material Warrant.
Return of stores to the Storeholder:
Any defective or surplus Material will be returned to the Storeholder on

- 37 -
Material Return Notes prepared in duplicate and the Material Warrant
concerned. The Storeholder will enter the No. assigned to the Material
Return Note and the stores in the Material Warrant and will return the
Material Warrant to the returning Section and pass on the receipted copy
of the Material Return Note to the Accounts Office after making necessary
entries in the Bin Card.
Alteration to Return Notes:
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.
Inspection of Returned Stores:
Where necessary, Materials returned to the stores will be examined under
administrative arrangement for sentence as to the category viz.
serviceable, repairable or unserviceable under which the stores will be
taken on stores charge. Defective Materials will be kept separate pending
sentence.
Scrap-How returned to Stores:
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.
Scrap that cannot be allocated to any particular warrant will be returned
on Work Order 02/00358/00.
Manufactured Stores-Accounting of:
All manufactured products (including components) will be handed over to
the charge of the Storeholder together with necessary copies of
Inspection Note (or Departmental advice) and supported by production
vouchers, if necessary. One copy of Inspection Note will be furnished to
the Accounts Office duly signed. Stores intended for stock will be brought
on to the Bin Card and the supporting production voucher will be allotted
a stores series receipt voucher number.
Stores- Issue of:
No Materials will be supplied from a Factory to Military or Non-Military
Government Departments except on the authority of the DGOF, a copy of
whose order will be sent to the Accounts Office. Materials may, however,
be issued from one Factory to another on the authority of the General
Manager of the Factory endorsed on Inter-Factory Demands (IFD) in
duplicate. In the case of all such supplies the required number of copies
of proper issue vouchers will be prepared by the Storeholder for pricing by
the Accounts Office. 3 copies of these vouchers will be sent to the
consignee who will return one copy duly receipted. The receipted copy

- 38 -
will be passed on the Accounts Office to note and for raising debits where
necessary.
Stores which are ordinarily manufactured in Factory will not be issued
direct from stock. They will be drawn on Demand Notes to the Work Order
concerned and issues treated in the same way as issues from
manufacture.
Demand and Return of Manufactured Components for
purpose of assembly:
In Factories working on the Except System components manufactured in
the Factory are drawn for the purpose of assembly on Red Material
Demand Notes and corresponding entries are made in Material Warrant in
Red Ink. Red Return Notes are utilised for return of manufactured
components to the components store.
Red Return Notes are also utilised for return of surplus components drawn
on Red Demand Notes, to component stores.
Stock taking of Semi-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.
(This write up has been prepared on the basis of
"Factory Regulations" issued in the year 1969)

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.

- 39 -
(1) Fixed Overhead Expenses
(2) Variable Overhead Expenses -comprising of:
(a) Power and Machinery Charges
(b) Non-productive charges
(c) Store indirect charges.
Variable Overhead Expenses:
Variable Overhead Expenses comprise items of overhead expenditure,
which generally vary in sympathy with the load on the Factory, though not
necessarily in direct proportion. The Variable Overhead Expenses are
detailed under the 02 series of the syllabus of Work Orders Part I.
Fixed Overhead Expenses:
The Fixed Overhead Expenses are items of Overhead Expenditure which
do not mainly depend on the volume of manufacture (load) but generally
remain constant irrespective of the load involved. The items, which fall
under fixed overhead expenses, are detailed under the 01 series of the
Syllabus of Work Orders Part I.
Overhead Expenses-Nature of:
Overhead expenses, whether fixed or variable, may be incurred either in
the form of labour or in the form of material or both. There are also
certain miscellaneous items of overhead expenses which, however, do not
come under either of these two categories and are, therefore, classified as
"Other Miscellaneous Charges".
Overhead Expenses-Departmentalization of:
For the purpose of allocating overheads the first step is their
departmentalization. In other words, the overhead expenses whether
fixed or variable pertaining to each Shop or Group of Shops in the Factory
are collected together so that overhead charges for each Shop may be
charged off to the output of that particular Section or group of Sections.
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.
Overhead Expenses-Allocation of:
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.

- 40 -
Variable Overhead Expenses:
Variable Overheads of any Shop comprise of-
(1) Items of expenditure, which relates to repair, maintenance and
running of machinery and Machinery Charges.
(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
are debitable only to jobs which have been processed on the
Machines while NP Charges are debitable to all jobs done in a
particular Shop.
(3) Another item of variable overhead expenses is "Stores Indirect
Charges" which comprise of charges incurred in connection with
store keeping and other allied items.
Variable Overhead Expenses-Allocation of:
Statements of Shop Indirect Expenditure are prepared each month for
different Shops showing the total expenditure incurred in the Shops or on
their behalf. The order in which these statements are prepared depend
upon the services received by a Shop from other Shop, the one that
receives the least service being the first one for which the expenditure
statement is prepared followed by other Sections.
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.
The variable expenditure of Service Section, for which no cost statement
is prepared, are transferred to the Productive Sections quarterly through
the step-ladder statement. The expenditure of each service included in the
stepladder is allocated to other sections on a pre-determined basis with
the concurrence of Factory Management.
The servicing Sections in the stepladder statement shall be arranged on
the left-hand side and Production Sections on the right hand side. The
Service Section which generally receive the least service from other
Sections should be placed first. The Section, which receives the next least
service from other sections, should be placed next and so on.
Power, Steam and Gas Cost Statement:
These statements will be separately prepared by the Accounts Officer
every month for each type of cost for the purpose of allocating these to
the Productive Sections. The General Manager will furnish all information
required by the Accounts Officers in this connection to facilitate the
preparation of these statements correctly.

- 41 -
Rate of Levy of N.P. and P.M. Charges-Fixation of:
At the beginning of each quarter the Accounts Officer in consultation with
the General Manager will determine the rate of N.P. and P.M. charges
separately. At the time of working out these percentages the production
programme for the quarter, the budget of variable charges and the
under/over absorbed charges for the previous quarter, are taken into
consideration. These rates are fixed as a percentage of total direct labour
(both hand and machine for the N.P. charges and as a percentage of
direct machine labour only for the P.M. charges).
The concurrence of the General Manager of the Factory to these charges
should normally be obtained by the Accounts Officer.
Store Indirect Charges -How compiled and allocated:
The variable overhead expenditure relating to Stores Section of a Factory
is not allocated to Productive Sections on the basis applicable to N.P. and
P.M. Charges. The total variable charges relating to Stores Section are
collected on a special form and are allocated as a percentage which the
expenditure bears to the net total value of material demanded on direct
work orders and certain indirect work orders. S.I. charges are charged to
production as a percentage on the net value of materials drawn on each
job.
S.I. charges pertaining to 'Emergency reserves', 'Stock-pile Items' and
'Assessed Surpluses' will be estimated by the General Manager in
consultation with their Accounts Officer taking into account the probable
expenditure in the shape of labour, material etc. on the store-keeping of
these items. S.I. charges thus calculated will be kept out of cost of
production.
'Emergency reserves' for this purpose will be those reserves of
components, semi-manufactured articles as may be required to be
maintained in the Factories to enable them to reach the desired level of
output expected in an emergency.
In addition to the above, S.I. charges pertaining to the stock of stores
required for emergency purposes as distinct from surplus stores and
Stock-piles will also be reduced from the total S.I. charges incurred in
factory.
Variable Overhead Expenses-Importance of:
Variable Overhead Expenditure forms an important part of cost accounting
and the individuals entrusted with the task of determining quarterly
percentage of N.P., P.M. and S.I. charges should have a complete
understanding of each manufacturing shop. A close and careful study of
actual statistics is absolutely necessary.
Fixed Overhead Expenses-Collection of:
The collection of actual charges under fixed overhead expenses is done
from various documents furnished to the Accounts Office. The fixed
charges of a Factory comprise various items of expenditure. Some of

- 42 -
these charges are directly accounted for in the Work Orders under 0-1
series but many other charges are compiled through allocation sheets. For
this purpose the General Managers are required to furnish to the Accounts
Officer information regarding staff strength etc. sectionwise from time to
time.
Fixed Overhead Expenses-Allocation of:
The allocation of fixed overhead charges to the various jobs is done on
the system known as "Stabilised On-cost System". Since Ordnance
Factories have to maintain equipment and staff for war emergency in
excess of their requirements for peace load a satisfactory distribution of
the fixed overhead charges cannot be obtained under the normal cost
accounting system. It has been ascertained that the total amount of fixed
charges which the Factories may incur during peace time can be absorbed
in full by the production in the Factories at a pre-determined load known
as the Datum load. The load is stated to 45% of the war load in the
Factories (40% for CFA).
Stabilised on Cost-Information required for
The factory will furnish-
(i) The quantity of each item of production in the Factory at full war
load.
(ii) A statement showing the number of Officers, Staff and workmen
in each category that would exist at Datum load distributed
section by section.
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.
Control of Variable Expenditure:
The expenditure on items of variable overhead generally fluctuates from
time to time largely with the load. To exercise control of the variable
expenditure the General Manager is furnished certain data by the
Accounts Officer. With a view to make full utilization of these statistics
General Managers have to maintain suitable records in order that such
expenditure may not go out of control. The following data is prepared
every month by the Accounts Office and furnished to the General
Managers for scrutiny and control purposes.
(1) Statement of Shop Charges
(2) Power, Electric, Steam and Gas statements
(3) Financial Activities Report
(4) Ratio of Direct to Indirect Labour

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Budget Committees:
With a view to exercise proper control on the indirect expenditure in
various Production Shops in the Factories it has been decided that
separate Budget Committees should be formed in each Factory. The main
functions of these Committees will be as follows:
(a) Central Budget Committee: This Committee will prepare budget of
direct expenditure (0-1 & 0-2 Work Orders) for each Shop either quarterly
or half yearly with reference to the load as already maintained and
intimate the same to the respective Divisional Officers and the Section
Budget Committee. It will then be for the:
(b) Section Budget Committees to watch that expenditure does not
exceed the budgeted demand. The Section Committees will by careful
analysis of all items of indirect expenditure incurred in the Production
Shop month by month or for any convenient period devise suitable means
for controlling the expenditure and variations thereto.
Factory Accounting
69

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.
Receipt of Stores & Accounting:
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.
A priced store ledger is maintained by the Accounts Office in which all
receipts and issue showing quantity and value are posted for each item of
store in a separate folio and the balance shown after each transaction.
Pricing of receipt vouchers
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

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as receipts in the store ledgers. Such receipts are priced at the actual cost
of manufacture.
Scraps arising in production and surplus materials if any, are returned to
stores on return notes. These are accounted for as receipts in the store
ledger and priced at the latest ledger rates for the items.
Issue accounting and control:
Materials are issued by the stores section to shops only against authorised
requisitions called Demand Notes.
In regard to petty casual work or minor internal factory services or repairs
and maintenance or for departmental store orders, the planning
department releases Supplementary Work Order Drafts (SWOD). The
SWOD serves the combined purpose of an estimate and the
manufacture/material Warrant. Materials are drawn by the shops on the
authority of the SWODs.
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.
Materials issued to outside consignees are supported by issue voucher
quoting reference to the demand against which such issues are made.
Pricing of Demand Notes:
Average Ledger Rate:
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.
Quantity
(Nos.)
Value
(Rs.)
Rate
(Rs.)
Balance in a ledger folio 500 1000 2.00
Receipt 1000 2500
1500 3500 2.33
(new rate)
Issues are thus priced at the latest (Weighted) average rate.
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.

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Plant and Machinery
Definition:
(1) The expenditure on purchase/acquisition/manufacture and erection of
Plant & Machinery is capitalized and depreciated on Straight Line
Method. Cost of manufacture of machinery etc. carried out for
supplies to others should not, however, be capitalised.
(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:
(a) The expenditure on provision of Plant and Machinery should
be categorised as pertaining to New Capital as follows:
(i) If the purchase/provision is due to an increase in
productive capacity caused by increase in the numbers
of the Army or scales of issue;
(ii) If it is an addition due to introduction of an entirely
new form of warfare or due to make up deficiency in
capacity to meet normal requirements as also to
establish indigenous production of those items which
are at present imported etc.; and
(iii) If it is on account of provision of safety devices of an
expansive type ordered by Factory Inspection etc.
(b) The expenditure should be treated as pertaining to Renewals/
Replacements in the following instances:
(i) Renewals/Replacements of like for like items or those
involving improvements in methods of operation of
manufacture, and
(ii) all expenditure involving betterment in some form or
other including modernizing of obsolescent items.
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.
(ii) All additions to or reduction (including transfers from one shop to
the other in the same Factory) will be supported by relevant
vouchers and a copy of each of such voucher should be
forwarded to the 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

- 46 -
each shop or section. The Accounts Office will audit these lists.
Writing of Capital Assets of small value:
When an item of capital asset has depreciated to Rs. 500 or below or an
amount equal to the first year's depreciation at the normal peace rate
whichever is less, or estimated residual value, in the case of items
depreciated on Straight Line Method, it shall be written off and kept at Nil
value in the Block Register until finally disposed of by sail, break-up or
otherwise.

Capital Account
MACRO - LEVEL
In ordnance and Ordnance Equipment Factories like Revenue Expenditure
Capital Expenditure is also maintained/accounted for, preparation of
Capital account. These accounts like various accounts are recorded in the
Principal Ledger to facilitate preparation of statement of Assets and
Liabilities and also capital Asset account.
Capital Assets are broadly divided into (1) Plant and Machinery (2)
Building (3) Other items (4) Tools costing 10,000/- and above.
1 Machinery Items Machinery (including air-cooling plants)
weighing machines, Furnaces, Railway lines
etc.
2 Building Items Include Buildings, Lands, roads, Water
reservoir etc.
3 Other Items Include Telephones, Telephone mains etc.
4 Tools Items Tools costing 10,000/- above are to be created
as capital assets. Life will be assessed
technically with reference to net cost.
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.
What are RR items?
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.
What are NC items?
Whenever due to change of production techniques or beginning of new
production or project, new kind of machinery is necessary. These items
are categorized as NC items.
Procurement
Machines are normally procured under LP, CP, EP and occasionally
through IFD.

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Procurement through LP (Local purchase)
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.
(b) In the case of NC items justification for purchase giving special
attention to the fact that the purchase does not introduce a new
practice or in case of new projects whether the same have been
duly sanctioned and are within the authorized scale.
Once the demand is concurred in by the accounts Office the
factory will proceed with the usual of purchase such as calling
Tender Enquiries, preparation of CST (Comparative Statement of
Tenders) and placing of Supply Orders etc. The payment for the
purchase is made by accounts through LP Bills submitted by
Factory and the Amount is compiled under respective Code
Head. The items when received are accounted for by Factory by
preparing 'M' series Receipt Vouchers
Central Purchase and Foreign Purchase
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
(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.
Accounting of Capital Items
The following documents are required for accounting of capital Assets:
1. 'M' Series Receipt Vouchers
2. Block Register
3. Depreciation Charges Registers
4. Schedule of M & B series vouchers
5. Transfer Vouchers of Machinery
6. Issue Vouchers of Machinery
7. Linking Register ( Assets and Liabilities Register)
'M' series Receipt Vouchers:
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:
(a) Description of Machine
(b) Supply Order/Indent through which procured.
(c) Name of the supply order.
(d) Demand No. against which procured.

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(e) Register No. allotted to machine.
(f) Section in which installed.
(g) The financial code to which the machine id debitable.
'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.
(a) The grant from which the machine is procured
(b) Register No. of machine/building
(c) Name of Supplier
(d) Voucher No. and date on which brought on charge
(e) Original value
(f) Yearly depreciation and
(g) Book value of machine after March- of the respective year after
charging depreciation
Depreciation Charges Register
Depreciation Charge register is used to calculate the monthly depreciation
of the Machine. It contains the following information.
(1) Reg. No.
(2) Book Value
(3) Rate of depreciation
(4) Months from April to March.
(and under each month depicting sub. Columns as active - idle -
amount)
(5) Total depreciation as last column.
Schedule of M & B Series Vouchers
This schedule is used to watch the continuity of vouchers prepared by the
factory. The Register contains the following details
1. Sl. No.
2. Rt.Vrs.No.
3. Reqd. No. of Machine
4. AT, No. & Date
5. Total
Sub.Columns:
EP, CP, LP, CD, Frt, Stock, Other Expenses, OMD
The details are posted under each head as above and the total tallied
under each head, with the final total.
Transfer Voucher of Machinery
To record the transfer of the machinery from one section to another, a
transfer voucher is prepared and the same is posted in Block Register.

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Issue Voucher of Machinery
When Machine is transferred to another factory or sold through auction,
issue voucher is prepared. The issue voucher is posted in the Block
Register.
Linking Register
As soon as the payment is made by accounts Office through locally or as
and when the paid DVs or debit notes are received in Accounts or when
the amounts appear in CC02 (cash Compilation) these amounts along with
the details are extended in the asset side of the Linking Register. The
Asset side shows the following information :
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
When a Receipt Voucher is received against an amount in the Asset
Register, the item is treated as cleared. Otherwise the item remain
outstanding.
When the amount appears in CCO2 the Liability can be treated as
cleared. It may also happen that no payment particulars have been
received and only Receipt Voucher has been received from Management.
In such a case the item will be taken in the Liability side to the register
and the same treated as outstanding Liability and carried forward to the
subsequent year.
Depreciation-Calculation
In case of plant and machinery life of machine considered as 20 years,
and therefore the total value of machine after deducting residual value
equal to one years depreciation is spread over the number of years of

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assessed life of the machine. For example:
The value of machine : 20,000
1st year depreciation 5% (-) : 1000
----------
: 19,000
Yearly depreciation :19000/20
: 950
Monthly despeciation : 950/12
: 79.10
A machine is depreciation based on number of shifts machine worked
during the month. Accordingly depreciation is charged as per the following
rates:
Between 0 to 12 shift : half the normal rate
Between 13 to 37 shift : Normal rate
Between 38 to 62 shift : one and half time of normal Rate
62 and above : double the normal rate
The above details are furnished by the Mgt. In a statement called active
and idle statement, in respect of each section.
Charging of depreciation
The Depreciation Charge is considered as an item of overhead
expenditure and charge to production accordingly.
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.
1. Opening Balance showing the outstanding liability (previous Year)
2. Store received during the year
3. Outstanding asset at the close of the year
1. Opening Balance showing the outstanding asset…. in the beginning
of the year.
2. Payments made during the year
3. Outstanding liability at the close of the financial year.
The above information is incorporated in the statement of assets and
liabilities prepared along with the production account.
In addition to the above. Main Capital account is also prepared in the
following lines.
Opening Balance
Net Capital from the previous year's Capital plus stores received during
the year under LP, CP, EP, (RR and NC)
Minus depreciation and issue etc. and the closing Balance: which is carried
forward to the next year.
Building
According to revised work procedure for an original work, it has to be
routed through four stages as follows:
(1) Acceptance of necessity

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(2) Administrative approval
(3) Appropriation account
(4) Technical Sanction
When the administrative approval is received in AO, AO concurs the same.
The same is noted in administrative approval Register.
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'.
Depreciation of machinery is charged as fixed overheads in production.
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
Financial Authorities. The cost of the above Capital Series is chargeable to
NC grant or RR grant as required vides the Special enforcement in the
extract.
Payment of Bills
After the Supply Order in question is post-audited, Factory submits Bills
for payment along with the original copy of the supply order. These bills
when received in Accounts are linked with the entry made in the supply
order register. The Bills are then checked with reference to the office copy
of the supply order regarding its rate and other terms and conditions. The
Amount passed for payment is then entered in the Bill Register, Allotment
and Expenditure Register. IT register, Supply order Register, Spot
Payment Register (in case of Spot Payments) and the page number of the
IT Register & Item No. of bill Register are entered on the reverse side of
the Bills. Name of the party, name of Bank and Amount is also entered
therein and initialed by Auditors, SO (A) and AO/ACA/I/C/DCA ETC.
simultaneously entries are also made on the reverse side of the Supply
Order (office copy) so as to avoid any double payment in this regard.
The Amount so paid entered in this Asset Register and linked with the
Receipt Voucher as already explained earlier.
Sale Account Register
Whenever old Machines are sold on auction, Management prepares Sale
Account and the same along with auction catalogue, MRO etc are

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submitted to Accounts. From the above particulars, the sale account
maintained by the Accounts Office is completed. The sale a/c Register
gives the following information.
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
9. Remarks, showing MRO No. & TE No.
Segregation of RR and NC items: New procedure for
Accounting RR items :
W.e.f. 19 06.91, new accounting procedure has been formulated for
accounting of machines procured from RR grant. The Salient features are
as under.
(1) The RR Fund will be transferred from consolidated fund of India.
On a annual basis
(2) Capital Assets of block - charge will only include items created
out of NC grant. No depreciated will be charged for such plant
and machinery and the same will be kept on its original value
through out.
(3) Separate allotment is made each year against RR final for
incurring expenditure against replacement of machines.
(4) A separate Performa block register will be maintained for items
of P & M procured from RR Fund. The depreciation in value for
each year shall be exhibited with no reduction in original value.
(5) Depreciation will be computed based on the period for which the
machine is expected to be in use and not on usage basis.
(6) There will be no booking against booking of idle machinery
(01/0002/1/00) which will stand deleted henceforth.
(7) A separate linking register will be maintained to record all the RR
Assets for which payments have been made during the year but
remains unlinked for want of Receipt Vouchers. This register is
795.66x cv subject to audit.
(8) A new code head is to be operated for booking expenditure
under RR viz. 813/01 instead of 822/31 hitherto operated for
both RR and NC.
The procedure is effective from the financial year 1990-91.

Miscellaneous
Cost Cards-How opened and dealt with:
The Accounts Office will maintain a Cost Card for every separate job on

- 53 -
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.
Production Cost- How determined:
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.
List of completed Warrants-Despatch to Accounts
Office:
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.
Process Cost Statements:
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.
Accounts Statistics, Preparation and submission of:
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

- 54 -
request for information is refused and the reasons therefor.
Charges kept out of Production:
The following types of expenditure may be kept out of Production
accounts:
(1) Expenditure on account of idle time payment paid to workmen of
all types in Ordnance Factories rendered surplus due to
reduction of workload.
(2) Unavoidable variable charges pertaining to Sections that have
been rendered idle due to reduction in load.
(3) Any other expenditure which is not legitimately chargeable to
Production Accounts of any year with the concurrence of
Associate Finance and Audit Authorities.
Cost Control
Cost control has been defined as "The guidance and regulation by
executive action of the cost of operating and undertaking."
The following are the different steps to achieve cost control.
(1) Set up targets for expenses
(2) Measure the actual expenses from time to time
(3) Compare the actuals with the target and find out the difference
(4) Analyse the difference and find out the responsible persons
(5) Take corrective steps to eliminate the difference.
There are two main systems of cost control viz. Budgetary Control and
Standard Costing.

13. GENERAL FINANCIAL RULES 1963

INTRODUCTION

General Financial Rules 1963 are compilation of executive

instructions. They were first compiled in1937 by bringing together at
one place the general provisions in the Book of Financial Powers, the
Civil Accounts Code and various other orders and instructions of a
general financial nature. These were subsequently revised and updated
in 1963. These executive instructions are applicable in all Central
Government Departments with exceptions as provided in the
compilation itself. The Department may, however, issue departmental
instructions, procedures, etc. to supplement the GFRs. In the matter of

- 55 -
receipt, custody and disbursement of government moneys, the GFRs
are Supplementary to the Treasury Rules and the Receipt and Payment
Rules.

CONTENTS
The GFRs, 1963 contain executive instructions of the Central
Government relating to:
• Essential conditions governing expenditure from public
funds.
• Cannons of financial propriety.
• General principles to be followed while concluding
contract
• Powers to sanction
• Budgets to sanction
• Budget, grant and appropriation
• Establishment matters relating to alterations in the
strength of the office date of birth etc.
• Contingent and miscellaneous expenditure
• Provision for purchase of Stores
• Grants-in-aid, loans etc.
Advances to the Govt. servants.

REVENUE AND RECEIPTS

The various provisions of GFRs pertaining to revenue and receipts
listed as follows:-
• All Govt. moneys shall be brought into Government accounts without
delay. Government moneys include not only the due of the Govt. but
also moneys received for deposit, remittance or otherwise.

- 56 -
• Govt. moneys will be credited to the head(s) of account as per the
provisions of the Account Code, the Central Treasury Rules, the
Receipt and Payments Rules or such other general or special orders
as may be issued by the Government.
• It is the duty of the Controlling Officer to ensure that all moneys due
to Government are regularly and promptly assessed, collected and
credited to the Consolidated Fund or the Public Account..
• Departments concerned shall lay down detailed rule /procedures for
assessment, collection, remission and abandonment of revenue.
• No Government due shall be left outstanding without sufficient
reason. If such moneys are irrecoverable. orders of the competent
authority shall be obtained for their adjustment.
• No money shall be credited as revenue by debit to a suspense head
unless it is specially authorised by the competent authority.
• A credit to Govt. account as revenue must follow actual realization.
Such credit should not precede actual realisation.
• The Controlling Officer responsible for the collection of revenue shall
keep the Finance Ministry fully informed of the progress of collection
of revenue under his control. He shall also keep the Finance Ministry
informed of all important variations in such collections as compared
with the budget estimates.
• Every authority which has powers to impose fines shall ensure that
money (fine) is realised.

EXPENDITURE AND PAYMENT OF MONEYS

The GFRs provide essential conditions which must be satisfied

while incurring expenditure from public moneys These are

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• Sanction of the competent authority must be obtained before
incurring expenditure or entering into any liability.
• Expenditure should be within the limits of the authorised grants of
appropriation.
• Expenditure must be in public interest and upon objects for which
the fund was provided.
• Apart from satisfying these conditions every officer incurring or
authorising expenditure must observe the following standards of
finance propriety.

CANNONS OF FINANCIAL PROPRIETY

1 Every officer is expected to exercise the same vigilance

in respect of expenditure incurred from public moneys as
a person or ordinary prudence would exercise in respect
of his own money
[Catch word:
VIGILANCE]
2 The expenditure should not be prima facie more than
the occasion demands.
[Catch word:
ECONOMY]
3 No authority should exercise its powers of sanctioning
expenditure to pass an order which will be directly or
indirectly to its own
[Catch word:
MORALITY]
4 Expenditure from public moneys should not be incurred
for the benefit of a particular person or a section of the

- 58 -
 people, unless-
(1) a claim for the amount could be enforced in a court
of law.
OR
(2) The expenditure is in pursuance of a recognised
policy or custom,
[Catch word:
EQUALITY]

5 The amount of allowances granted to meet expenditure of

a particular type should be so regulated that the
allowances are not on the whole a Source of profit to the
recipients.
[Catch word: ECONOMY &
MORALITY]

6 The responsibility and accountability of every authority

delegated with financial powers to procure any item or
service on Government account is total and indivisible.
Government expects that the authority concerned will have
the public interest uppermost in its mind while making a
procurement decision. The responsibility is not discharged
merely by the selection of the cheapest offer but must
conform to the following yardsticks of financial propriety:
1) Whether the offers have been invited in accordance with
rules and after allowing a fair and reasonable procedure in the
prevailing circumstances.
2) Whether the authority is satisfied that the selected offer will
adequately meet the requirement for which it is being procured.

- 59 -
 3) Whether the price on offer is reasonable and consistent with
the quality required.
4) Above all, whether the offer being accepted in the most on
appropriate one taking all relevant factors into account and in
keeping with the standards of financial propriety.
7) Wherever called far, the concerned authority must place on
record in precise terms, the considerations which weighed with it
while taking the procurement decision.
[Catch word: ACCOUNTABILITY or
COMMERCLAL]

MANUAL OF COST ACCOUNTING IN THE ORDNANCE AND

ORDNANCE EQUIPMENT FACTORIES.

Day Workers.

i) For Day workers the basic wages are calculated for each month on the
basis of actual attendance for the month according to the following
formula.

P
-------------------- x (Number of days present)
N - (S + H)

P represents the monthly rate of pay of the worker.

N the number of days in a calendar month.

S represents the number of Sunday in the month and

H the number of paid holidays, if any, during the month.

No separate payment becomes due in respect of paid holidays because

the monthly rate is reduced to the daily rate in the above formula taking the
number of working days only into account. Deductions for absence for part of
day are made at 1/8th of a day’s pay for each hour of absence. The minimum
unit of time for which deductions are made is 15 minutes or ¼ hour.

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Piece Workers :

(ii) In the case of piece workers the amount earned by each piece worker on
the various items of work completed by him during the month at the rates
xed by the Management is paid to him.

Individual piece worker and Gang piece worker.

(iii) Piece workers are divided into two categories viz., Individual Piece
Worker and (ii) Gang (group) Piece Workers. A number of piece
worker is formed into a piece work gang and is employed collectively on
various repeat items of production. The collective piece work earnings
of each gang are calculated for the month with reference to the number of
articles completed by the gang and the piece work rates applicable to
each item of production. The total earnings of a gang are thereafter
distributed between the members of the gang in proportion to the nominal
(notional) time wages of each member of the gang based on his rate of pay
and his attendance during the month.

Piece work Total piece work earning

Earnings of each = of the gang Time wages of
member --------------------------- x each member
Total time wages of the
gang.

(iv) As an exception to the above rules in the tailoring shops of Clothing

Factory, Shahjahanpur and other Tailoring Factories )Ordnance
Parachute Factory, Kanpur, Ordnance Equipment Factory, Kanpur and
Clothing Factory, Avadi) the piece work earnings of a gang are distributed
amongst the different men in the gang based on their attendance during the
month.

Piece work Total piece work earnings

Earnings of each = of the gang Attendance of
member --------------------------- x each member
Total attendance of the
gang.

(v) Pay in respect of each paid holiday, is separately calculated and paid to
piece workers according to the formula P for each paid holiday
where

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 ------
N-S

P. represents the monthly rare of pay of the worker.

N. the number of days in the calendar month and
S. the number of Sundays in that month

Overtime payments under factories Act.

For work beyond 9 hours a day or 48 hours in week, payment is

admissible at twice the rate of pay plus all allowances.

The extra payment over and above the ordinary rate is called bonus.
For Piece Workers, basic pay is taken as pay + 25% of pay (incentive
element). Thus the extra payment in addition to Piece Work earnings is

(Pay + ¼ pay + Twice Allowances )

----------------------------------------------------
200 Per hour

N.B. Allowances mean - Allowance, Additional Dearness Allowance,

City Compensatory Allowance House Rent Allowance.

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 Solved Examples

Calculation of overtime wages

A ‘worker’ worked in one of the Ordnance Factories in general shift from 8.00
am to 6.00 pm with one hour lunch break in accordance with the provisions of
the Factories Act, 1948 on all the six working days (from Monday to Saturday)
in the week for 4 weeks in a month. He is entitled to receive overtime wages
under the Factories Act, 1948 and under the Departmental Rules. Calculate the
overtime wages payable to him on account of the aforesaid working taking into
account his Basic Pay as Rs. 5000, DA as Rs. 2000, CCA as Rs. 100, Transport
Allowance as Rs. 100 and HRA as Rs. 1500?
Computation of working hours in a week is as follows:
The total hours from 8.00 a.m. to 6.00 p.m. are 10
Lunch break on each day is 1 hour. This is not working hour.
So the working hours on a day are 10-1 =9 hours.
As the individual worked in the same pattern for six days in a week, the total
working hours in a week are 9 x 6 =54 hours.
Computation of overtime hours is as follows:
The normal/prescribed working hours for Ordnance Factories are 44 ¾ hours in
a week at the rate of 8 hours per day for 5 days from Monday to Friday and 4
¾ hours on Saturday. [ x 8) + (1 x 4 3/4)] = 40 + 4 3/4 = 44 hours.
So the overtime hours are = 54 - 44 ¾ = 9 1/4 hours.
Computation of overtime hours under the Factories Act, 1948 is as
follows:
Work in excess of (9 hours on any day or 48 hours in any week) is treated as
overtime under the Factories Act, 1948.
As we have adopted the week basis calculation (which is beneficial to the
‘worker’), the overtime under the Factories Act is work in excess of 48 hours,
i.e., 54-48 = 6 hours.
Computation of overtime hours under the Departmental Rules is as
follows:
Overtime under the Departmental Rules is work in excess of 8 hours; but up to
9 hours on any day from Monday to Friday and work in excess of 4 ¾ hours;
but up to 9 hours on Saturday.
OR

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Work in excess of 44 ¾ hours, but up to 48 hours in any week.
Out of the total overtime of 9 1/4 hours, 6 hours have been accounted towards
overtime under the Factories Act. Rest of the overtime hours is 3 1/4 hours.
We get the figure of 3 1/4 hours by another method also. Work in excess of 44
¾ hours, but up to 48 hours in a week are overtime hours under the
Departmental Rules. These hours are 48 — 44 ¾ = 3 1/ hours.
Total overtime for 4 weeks:
Overtime for one week is 9 ¼ hours. So for 4 weeks it is 4 x 9 1/4 =37 hours
Total overtime under the Factories Act for 4 weeks:
Overtime under the Factories Act for one week is 6 hours. So for 4 weeks it is
6x
4 = 24 hours.
Total overtime under the Departmental Rules for 4 weeks:
Overtime under the Departmental Rules for 1 week is 3 1/4 hours. So for 4
weeks it is 4 x 3 1/4 = 13 hours.
In other words, the total overtime has been split into two parts viz. (a)
Overtime under the Factories Act (24 hours for 4 weeks) and (b) Overtime
under the Departmental Rules (13 hours for 4 weeks) for the purpose of
payment at different rates.
Overtimes wages under the Departmental Rules:
Overtime wages under the Dept. Rules are paid at normal Time Rate. Time
Rate is computed by the formula:
Basic Pay + DA + CCA
------------------------------
200
200 is taken as the average working hours in a month for the purpose of this
calculation. Other allowances are not included for computation of Time Rate.
The above rate is for one hour of overtime under the Dept. Rules. So the
overtime
wages payable under the Dept. Rules in this case is:
Basic Pay + DA + CCA
-------------------------------- x13
200
= 5000+2000+100

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 ---------------------------- x13
200
= Rs. 461.50
Overtime wages under the Factories Act, 1948
As per Section 59 of the Factories Act, 1948, wages for overtime under the Act
is payable at double (twice) the ordinary rate of wages.
Ordinary rate of wages will mean Pay and all Allowances in this case.
= Basic Pay + DA + I-IRA + CCA + Transport Allowance
------------------------------------------------------------------------
200
Double (twice) the ordinary rate will mean:
= 2 (BP + DA + HRA + CCA + Tra Allo)
------------------------------------------------------
200
OR
= BP÷DA+HRA+CCA+TraAllo
100
Therefore the overtime wages payable in this case under the Act is:
= BP+DA+HRA+CCA+TraAllo
---------------------------------------------- x24
100
= 5000 + 2000 + 1500 + 100 + 100
-------------------------------------------- x24
100
= Rs. 2088.00
Example II
A ‘worker’ worked in one of the Ordnance Factories in general shift from 8.00
am to 5.30 pm with one hour lunch break in accordance with the provisions of
the Factories Act, 1948 on all the six working days (from Monday to Saturday)
in the week for 4 weeks in a month. He is entitled to receive overtime wages
under the Factories Act, 1948 and under the Departmental Rules. Compute the
overtime hours under these heads?

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Computation of working hours in a week is as follows:
The total hours from 8.00 a.m. to 5.30 p.m. are 9.5 hours
Lunch break on each day is 1 hour. This is not working hour.
So the working hours on a day are 9.5-1 = 8.5 hours.
As the individual worked in the same pattern for six days in a week, the total
working hours in a week are 8.5 x 6 = 51 hours.
Computation of overtime hours is as follows:
The normal/prescribed working hours for Ordnance Factories are 44 3/4 hours
in a week at the rate of 8 hours per day for 5 days from Monday to Friday and
4 ¾ hours on Saturday. [ x 8) + (1 x 4 3/4)] = 44 ¾ hours.
So the overtime hours are = 51 - 44 ¾ 6 1/4 hours.
Computation of overtime hours under the Factories Act, 1948 is as
follows:
Work in excess of 9 hours on any day or 48 hours in any week is treated as
overtime under the Factories Act, 1948.
As we have adopted the week basis calculation (which is beneficial to the
‘worker’), the overtime under the Factories Act is work in excess of 48 hours
i.e., 51-48 = 3 hours.
Computation of overtime hours under the Departmental Rules is as
follows:
Overtime under the Departmental Rules is work in excess of 8 hours, but up to
9 hours on any day from Monday to Friday and work in excess of 4 3/4 hours,
but up to 9 hours on Saturday
Or
Work in excess of 44 ¾ hours, but up to 48 hours in any week.
Out of the total overtime of 6 ¼ hours, 3 hours have been accounted towards
overtime under the Factories Act. Rest of the overtime hours is 3 1/4 hours.
We get the figure of 3 1/4 hours by another method also. Work in excess of 44
¾ hours, but up to 48 hours in a week are overtime hours under the
Departmental Rules. These hours are 48 — 44 ¾ = 3 1/ hours.
Total overtime for 4 weeks:
Overtime for one week is 6 1/4 hours. So for 4 weeks it is 4 x 6 ¼ = 25 hours
Total overtime under the Factories Act for 4 weeks:

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Overtime under the Factories Act for 1 week is 3 hours. So for 4 weeks it is 4 x
3 =12 hours.
Total overtime under the Departmental Rules for 4 weeks:
Overtime under the Departmental Rules for 1 week is 3 ¼ hours. So for 4
weeks it is 4 x 3 1/4 =13 hours.

Example III
Hours worked by a ‘worker’ in a week are shown below: Compute the
overtime?

Days Mon Wed Tue Thu Fri Sat Total

Hours 10 10 8 8 8 4¾ 48 ¾

Total O.T. is 48 ¾ - 44 ¾ + 4 hours. Overtime can be computed as shown

below.
Days Mon Wed Tue Thu Fri Sat Total
Hours 10 10 8 8 8 4¾ 48 ¾

Total Overtime* 2 2 0 0 0 0 4

O.T. under the 1 1 0 0 0 0 2

Act.**
O.T.-Dept. Rules 1 1 0 0 0 0 2

* Work in excess of prescribed working hours.

** Work in excess of 9 hours on any day
*** Work in excess of prescribed working hours, but up to 9 hours on any day.
This computation is beneficial to the worker and hence it should be adopted.
Example IV
Hours worked by a ‘worker’ in a week are shown below. Compute the
overtime under the Act and Rules?

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Days Mon Wed Tue Thu Fri Sat Total
Hours 10 10 10 0 8 4¾ 42 ¾

Days Mon Wed Tue Thu Fri Sat Total

Hours 10 10 10 0 8 4¾ 42 ¾

Total Overtime* 2 2 2 0 0 0 6

O.T. under the Act.** 1 1 1 0 0 0 3

O.T.-under Dept. Rules 1 1 1 0 0 0 3

* Work in excess of prescribed working hours.

** Work in excess of 9 hours on any day
*** Work in excess of prescribed working hours, but up to 9 hours on any day.
Calculation of Piecework profit (individual piecework)
Example 1:
(a) In a month of 31 days including 4 Sundays, a worker worked at the rate of 9
hours per day on all the working days on piecework. Calculate the input hours
in respect of him?
Solution:
Total days in the month : 31
Sundays : 04
Working days : 31- 04 = 27
Hours per day worked on piecework : 09
Total hours worked on piecework : 27 x 9 = 243
(Input hours)

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(b) In the same month he produced the following items which were
inspected and accepted. Calculate his output hours?
Sl. Item Rate in hours Numbers
per Number produced.
1 A 5 8
2 B 6 20
3 C 8 15
4 D 10 15

Solution:
Sl. Item Rate in Numbers Output
hours per produced. hours
Number (b) (a) x (b)
(a)
1 A 5 8 40
2 B 6 20 120
3 C 8 15 120
4 D 10 15 150
Total 430

(c) Calculate the profit hours and the amount of profit if the minimum of
the pay scale of the worker was Rs. 4000.
Solution:
(1) Input hours : 243
(2) Output hours : 430
(3) Profit : 430 -243 =187
(4) % of Profit : (187/243) x 100
76.95
But profit is not allowed more than 75 of the input hours
Profit admissible : 243 x 75%
:182 hours
Profit amount : (4000/195) x 182 hours

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 Rs. 3733
Note:
(a) Piecework is calculated on the minimum of the pay scale of the
pieceworker.
(b) 195 is taken as the average working hours in the month
Calculation of Piecework profit (gang piecework)
Example 1:
(a) In a month of 31 days including 4 Sundays, four workers, M, N, 0 and P
worked at the rate of 9 hours per day on all the working days on
piecework subject to the fact that M had availed 2 days leave and P had
availed 1 days leave. Calculate the input hours in respect of them?
Solution:
Total days in the month : 31
Sundays : 04
Working days : 31- 04 = 27
Input hours:
Sl. Item Rate in hours per Numbers produced.
Number
M 25 9 225
N 27 9 243
O 27 9 243
P 26 9 234
Total 945

(b) In the same month they produced the following items which were inspected
and accepted. Calculate their (gang’s) output hours?
Sl. Item Rate in hours Numbers
per Number produced.
1 A 10 40
2 B 15 30
3 C 20 25
4 D 10 20

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Solutions :
Sl. Item Rate in Numbers Output
hours per produced. hours
Number
1 A 10 40 400
2 B 15 30 450
3 C 20 25 500
4 D 10 20 200
Total 1550

(C) Calculate the profit hours and the amount of profit if the minimum of the
pay scale of the first two workers was Rs. 4000 and other two workers was
3050.
Solution:
(1) Input hours of the gang : 945
(2) Output hours of the gang :1550
(3) Profit :1550-945 = 605
(4) % of Profit : 605/945 %
:64
(d) Calculate the Share of Profit of each worker
Share of Profit
Name of worker Input hours Share of Profit
M 225 144.00
N 243 155.52
O 243 155.52
P 234 149.76
TOTAL 945 605

Share of Profit is calculated at 64% of the input hours of each worker. Else, it
may be calculated at the ratio of their input hours.

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Name of Share of Profit Min. of pay Profit Amount
worker
M 144.00 4000 2953.85
N 155.52 4000 3190.15
O 155.52 3050 2432.49
P 149.76 3050 2342.40

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