MINOR PROJECT REPORT

OF

&
COST ACCOUNTING

SUBMITTED BY SUBMITTED TO
NITIN GARG MRS NEERU SINGH
PGDM IST YEAR STUDENT HOD FINANCE
ROLL. NO 33 I-BUSINESS INSTITUTE
KNOWLEDGE PARK-II
GREATER NOIDA
 PROJECT REPORT
ON

&
COST ACCOUNTING

INTRODUCTION
RILiance Infrastructure Ltd is not only India’s largest private sector enterprise in
power utility but also the largest private sector player in many other infrastructure
sectors of India. In the power sector we are involved in generation, transmission,
distribution and trading of electricity and constructing power plants as EPC partners.
In the infrastructure space the company is focused on roads, Urban infrastructure
which includes MRTS, Sealink and Airports, Specialty Real Estate which includes
business districts, trade towers, convention centre and SEZ which includes IT & ITES
SEZ and non IT SEZ as well as free trade zones.

Vision
To be amongst the most admired and most trusted integrated utility companies in the
world,delivering RILiable and quality products and services to all customers at
competitive costs,with international standards of customer care -thereby creating
superior value for all stakeholders.

To set new benchmarks in standards of corporate performance and governance

through the pursuit of operational and financial excellence,responsible citizenship and
profitable growth.

Mission : Excellence in Infrastructure

• To attain global best practices and become a world-class utility.

• To create world-class assets and infrastructure to provide the platform for

faster, consistent growth for India to become a major world economic power.
 • To achieve excellence in service, quality, RILiability, safety and customer
care.

• To earn the trust and confidence of all customers and stakeholders and by
exceeding their expectations, make the company a respected household name.

• To work with vigour, dedication and innovation, with total customer

satisfaction as the ultimate goal.

• To consistently achieve high growth with the highest levels of productivity.

• To be a technology driven, efficient and financially sound organization.

• To be a responsible corporate citizen, nurturing human values and concern for

society, the environment and above all, people.

• To contribute towards community development and nation building.

• To promote a work culture that fosters individual growth, team spirit and
creativity to overcome challenges and attain goals.

• To encourage ideas, talent and value systems.

• To uphold the guiding principles of trust, integrity and transparency in all

aspects of interactions and dealings

Subsidiary & Associate Companies

• BSES Kerala Power Ltd.

• BSES Rajdhani Power Ltd.

• BSES Yamuna Power Ltd.

• Reliance Energy Trading Ltd.

• Reliance Energy Transmission Ltd.

• Utility Powertech Ltd.

• North Eastern electricity Supply Company of Orissa Ltd.( NESCO)

• Western Electricity Supply Company of Orissa Ltd. ( WESCO)

• Southern Electricity Supply Company of Orissa Ltd. ( SOUTHCO)

BUSINESS INFRASTRUTURE

As the integrated power utility RIL has setup; a full fledged, Generation division
having proven expertise in designing, engineering, erection, installation,
commissioning, operations and maintenance of power projects.

The division implements project plans for in house power projects and supports
ventures undertaken by other affiliate companies.

The division is fully integrated and has in house capabilities to address every aspect of
power projects including:

• Mechanical

• Civil

• Electrical

• Instrumentation

• Environmental

The division also provides engineering consultancy to external agencies and projects.

The 941 MW Generation capacity of theDivision

comes from five projects:
• Dahanu TPS - the 2x250 MW multi fuel based thermal power station at
Dahanu near Mumbai.

• 8 MW Wind Farm Project at Jogimatti in the district of Chitradurga in

Karnataka.

• BSES Kerala Limited: The 165 MW combined cycle power station at Kochi,

Kerala.

• BSES Andhra Power Limited: The 220 MW combined cycle power plant at
Samalkot in Andhra Pradesh.

• Goa Power Station : The 48 MW naptha based combined cycle power plant
at Goa.
Careers in Reliance Infrastructure.:

Reliance Infrastructure Ltd. offer opportunities for growth that can fill a career.
Careers at Reliance Infrastructure Ltd. are built in course of our concept of forming a
team of people or individuals who are made responsible for specific functions; from
concept to development to implementation, with concomitant empowerment.

Reliance Infrastructure Ltd. provides employees seamless merging of functional roles,

to provide a sharper business focuses & groom employees for larger responsibility
across industry sector.

We believe, working smarter would mean not just doing a given job well, but also
stretching it into a mini profit-making project.

As the transition from the old HRD to the New People Management has materialized,
the HR function at Reliance Infrastructure Ltd. has begun to play a role much broader
in scope, much stronger in impact & much more permanent in effect.

HR Philosophy
The liberalization of the power sector in India has paved way for new business
opportunities and has redefined the nature of the power business.

Envisioning future and to make the power sector credit worthy and capable of funding
future investment needs, these reforms have opened arenas for new technologies.

In this new environment of opportunities, RIL with its competitive edge of resources
is playing a key role in the transformation process and aims to emerge as a world class
power utility offering uninterrupted, affordable, quality, products and services to all
customers at competitive costs, with international standards of customer care - thereby
creating superior value for all stakeholders.

To achieve this vision we at RIL believe that investment in people and their potential
is one of the greatest investments we can make. For this, we are constantly in search
of talent that can perform excellently with determination and win.
Our HR systems and policies are thereby designed to unleash the latent capability of
our people by fostering a continuous learning and performance based culture where
our people have the opportunity to grow and succeed and realize their true potential
while delivering high quality services.

To achieve these objectives our HR Policy is pivotal and aims to:

• Achieve organizational and business goals with firm belief that "Our
Employees are our Future".

• Have empowered and accountable employees to take decisions in response to

emerging challenges and opportunities in a competitive environment.

• Endeavour to make our employees "The Best" with an urge for and
commitment to excellence

Career Opportunities:
• Exposure to Latest technological know-how

• World class management practices

• Multifunctional skills

• Customer Relationship Management

• Exposure to Regulatory, Legal and Contractual aspects of business

• Fast track growth

Recruitment:
Woven into strategic planning, recruitment in Reliance Infrastructure Ltd. no longer
involves short-term vacancy or the annual ritual of Campus Recruitment. Translating
corporate strategies into a manpower plan & developing a long term programme
accordingly, Reliance Infrastructure Ltd. is tracking down people with the
combination of knowledge, experience, skills & behaviour best suited to achieving the
company’s objectives.

The focus of Recruitment:

• Attract people with multi dimensional experiences & skills
 • Induct talent with a new perspective to lead the company

• Develop a culture that attracts people to the company

• Locate people whose personalities fit the company’s values

• Devise methodologies for assessing psychological traits

• Seek out unconventional development ground for talent

• Design entry pay that competes on quality as well as quantum

• Anticipate & find people for positions proactively

Induction:
• A formal induction programme is organized for all the new employees

• A structured Induction programme is carried out for:

o Lateral Joiners

 This provides a general overview of the organisation to the new

recruits and familiarises employees with various business
processes, culture, business practices of the company

 It also covers soft skills modules like Team Building, Change

Management, and Communication etc.

o Graduate Engineer Trainees (Gets)

 All the Gets undergo a one-year induction training programme.

 The induction programme contains the following:

 Technical Training

 On the Job training

 Class room training

 Functional Training

 Managerial Skill Development

Performance Management: To ensure that the talent we have attracted can help us
achieve our goals, we create appropriate working conditions, by adopting following
steps:

• Evaluating all jobs so as to assign them to the individuals best suited for them

• Designing customized jobs, if necessary, using techniques drawn for

behavioural sciences & industrial psychology

• Creating manpower configurations to boost the ability of the individuals

• Through it all, balancing corporate & employee interests by designing

individual career paths.

Objective of our Performance Management

System (PMS):
• Create a culture of excellence that inspires every employee

• Match organizational objectives to individual aspirations

• Equip people with the skills necessary to perform their duties

• Clear growth paths for specially talented individuals

• Provide new challenges to rejuvenate plateauing careers

• Forge a partnership with people for managing their career

• Empower employees to take decisions without fear of failing

• Imbibe teamwork in all operational process

Performance Appraisal System:

• Recognition of individual performance

• Continual learning and development

• Better skills and employability

• Monetary and other rewards

• The achievement of the organization's goals

• Increased productivity and profitability

 • A motivated workforce

Training & Development :

With the changing business environment becoming more & more dynamic, a need on
a continual basis for improved domain expertise is the need of the hour. The core
function of our training department is to bridge the gap between the Changing
requirements of the job & the abilities that individuals need to perform these tasks
such as self-directed leadership, self-motivated teams & self generated creativity to
excel in their respective areas of performance.

Objective of Training & Development (T&D)

Department:
• Make learning one of the fundamental values of the company

• Commit major resources & adequate time to training

• Use training to bridge the gap with the external work

• Integrate training into initiatives for change management

• Use training as a developmental tool for individuals

• Link organizational, operational & individual training needs

• Install training systems that substitute work experience

• Ensure that training allows the staff skills to bloom

• Use retraining to continuously upgrade employees skills

• Create a system to evaluate the effectiveness of training

COST ACCOUNTING

In management accounting, cost accounting establishes budget and actual cost of

operations, processes, departments or product and the analysis of variances,
profitability or social use of funds. Managers use cost accounting to support decision-
making to cut a company's costs and improve profitability. As a form of management
accounting, cost accounting need not to follow standards such as GAAP, because its
primary use is for internal managers, rather than outside users, and what to compute is
instead decided pragmatically.

Costs are measured in units of nominal currency by convention. Cost accounting can
be viewed as translating the supply chain (the series of events in the production
process that, in concert, result in a product) into financial values.

Elements of cost
• 1. Material(Material is a very important part of business)
o A. Direct material
o B. Indirect material
• 2. Labor
o A. Direct labor

o B. Indirect labor
• 3. Overhead
o A. Indirect material
o B. Indirect labor

They are grouped further based on their functions as,

• 1. Production or works overheads

• 2. Administration overheads
• 3. Selling overheads
• 4. Distribution overheads

Classification of costs

Classification of cost means, the grouping of costs according to their common

characteristics. The important ways of classification of costs are:

• By nature or element: materials, labor, expenses

 • By functions: production, selling, distribution, administration, R&D,
development,
• As direct and indirect
• By variability: fixed, variable, semi-variable
• By controllability: controllable, uncontrollable
• By normality: normal, abnormal

Activity-based costing
Activity-based costing (ABC) is a system for assigning costs to products based on the
activities they require. In this case, activities are those regular actions performed
inside a company. "Talking with customer regarding invoice questions" is an example
of an activity inside most companies.

Accountants assign 100% of each employee's time to the different activities

performed inside a company (many will use surveys to have the workers themselves
assign their time to the different activities). The accountant then can determine the
total cost spent on each activity by summing up the percentage of each worker's salary
spent on that activity.

A company can use the resulting activity cost data to determine where to focus their
operational improvements. For example, a job-based manufacturer may find that a
high percentage of its workers are spending their time trying to figure out a hastily
written customer order. Via ABC, the accountants now have a currency amount
pegged to the activity of "Researching Customer Work Order Specifications". Senior
management can now decide how much focus or money to budget for resolving this
process deficiency. Activity-based management includes (but is not restricted to) the
use of activity-based costing to manage a business.

While ABC may be able to pinpoint the cost of each activity and resources into the
ultimate product, the process could be tedious, costly and subject to errors.

As it is a tool for a more accurate way of allocating fixed costs into product, these
fixed costs do not vary according to each month's production volume. For example, an
elimination of one product would not eliminate the overhead or even direct labor cost
assigned to it. ABC better identifies product costing in the long run, but may not be
too helpful in day-to-day decision-making.

Lean accounting
Lean accounting has developed in recent years to provide the accounting, control, and
measurement methods supporting lean manufacturing and other applications of lean
thinking such as healthcare, construction, insurance, banking, education, government,
and other industries.

There are two main thrusts for Lean Accounting. The first is the application of lean
methods to the company's accounting, control, and measurement processes. This is no
different than applying lean methods to any other processes. The objective is to
eliminate waste, free up capacity, speed up the process, eliminate errors & defects,
and make the process clear and understandable.

The second (and more important) thrust of Lean Accounting is to fundamentally

change the accounting, control, and measurement processes so they motivate lean
change & improvement, provide information that is suitable for control and decision-
making, provide an understanding of customer value, correctly assess the financial
impact of lean improvement, and are themselves simple, visual, and low-waste. Lean
Accounting does not require the traditional management accounting methods like
standard costing, activity-based costing, variance reporting, cost-plus pricing,
complex transactional control systems, and untimely & confusing financial reports.
These are replaced by:

• lean-focused performance measurements

• simple summary direct costing of the value streams
• decision-making and reporting using a box score
• financial reports that are timely and presented in "plain English" that everyone
can understand
• radical simplification and elimination of transactional control systems by
eliminating the need for them
• driving lean changes from a deep understanding of the value created for the
customers
 • eliminating traditional budgeting through monthly sales, operations, and
financial planning processes (SOFP)
• value-based pricing
• correct understanding of the financial impact of lean change

As an organization becomes more mature with lean thinking and methods, they
recognize that the combined methods of lean accounting in fact creates a lean
management system (LMS) designed to provide the planning, the operational and
financial reporting, and the motivation for change required to prosper the company's
on-going lean transformation.

Marginal costing
See also: Cost-Volume-Profit Analysis
See also: Marginal cost

This method is used particularly for short-term decision-making. Its principal tenets
are:

• Revenue (per product) - variable costs (per product) = contribution (per

product)
• Total contribution - total fixed costs = total profit or total loss)

Thus, it does not attempt to allocate fixed costs in an arbitrary manner to different
products. The short-term objective is to maximize contribution per unit. If constraints
exist on resources, then Managerial Accounting dictates that marginal cost analysis be
employed to maximize contribution per unit of the constrained resource (see
Development of throughput accounting, above).

ACCOUNTING
Accountancy is the art of communicating financial information about a business
entity to users such as shareholders and managers. The communication is generally in
the form of financial statements that show in money terms the economic resources
under the control of management. It is the branch of mathematical science that is
useful in discovering the causes of success and failure in business. The principles of
accountancy are applied to business entities in three divisions of practical art, named
accounting, bookkeeping, and auditing

Accounting is defined by the AICPA as "The art of recording, classifying, and

summarizing in a significant manner and in terms of money, transactions and events
which are, in part at least, of financial character, and interpreting the results thereof."

Accounting is thousands of years old; the earliest accounting records, which date back
more than 7,000 years, were found in the Middle East. The people of that time relied
on primitive accounting methods to record the growth of crops and herds. Accounting
evolved, improving over the years and advancing as business advanced

Early accounts served mainly to assist the memory of the businessperson and the
audience for the account was the proprietor or record keeper alone. Cruder forms of
accounting were inadequate for the problems created by a business entity involving
multiple investors, so double-entry bookkeeping first emerged in northern Italy in the
14th century, where trading ventures began to require more capital than a single
individual was able to invest. The development of joint stock companies created
wider audiences for accounts, as investors without firsthand knowledge of their
operations relied on accounts to provide the requisite information This development
resulted in a split of accounting systems for internal (i.e. management accounting) and
external (i.e. financial accounting) purposes, and subsequently also in accounting and
disclosure regulations and a growing need for independent attestation of external
accounts by auditors.

Today, accounting is called "the language of business" because it is the vehicle for
reporting financial information about a business entity to many different groups of
people. Accounting that concentrates on reporting to people inside the business entity
is called management accounting and is used to provide information to employees,
managers, owner-managers and auditors. Management accounting is concerned
primarily with providing a basis for making management or operating decisions.
Accounting that provides information to people outside the business entity is called
financial accounting and provides information to present and potential shareholders,
creditors such as banks or vendors, financial analysts, economists, and government
agencies. Because these users have different needs, the presentation of financial
accounts is very structured and subject to many more rules than management
accounting. The body of rules that governs financial accounting is called Generally
Accepted Accounting Principles, or GAAP.

BALANCE SHEET

In financial accounting, a balance sheet or statement of financial position is a

summary of the financial balances of a sole proprietorship, a business partnership or a
company. Assets, liabilities and ownership equity are listed as of a specific date, such
as the end of its financial year. A balance sheet is often described as a "snapshot of a
company's financial condition"Of the four basic financial statements, the balance
sheet is the only statement which applies to a single point in time.

A standard company balance sheet has three parts: assets, liabilities and ownership
equity. The main categories of assets are usually listed first, and typically in order of
liquidity. Assets are followed by the liabilities. The difference between the assets and
the liabilities is known as equity or the net assets or the net worth or capital of the
company and according to the accounting equation, net worth must equal assets minus
liabilities.

Another way to look at the same equation is that assets equals liabilities plus owner's
equity. Looking at the equation in this way shows how assets were financed: either by
borrowing money (liability) or by using the owner's money (owner's equity). Balance
sheets are usually presented with assets in one section and liabilities and net worth in
the other section with the two sections "balancing."

Records of the values of each account or line in the balance sheet are usually
maintained using a system of accounting known as the double-entry bookkeeping
system.

A business operating entirely in cash can measure its profits by withdrawing the entire
bank balance at the end of the period, plus any cash in hand. However, many
businesses are not paid immediately; they build up inventories of goods and they
acquire buildings and equipment. In other words: businesses have assets and so they
can not, even if they want to, immediately turn these into cash at the end of each
period. Often, these businesses owe money to suppliers and to tax authorities, and the
proprietors do not withdraw all their original capital and profits at the end of each
period. In other words businesses also have liabilities.

In financial accounting, a balance sheet or statement of financial position is a

summary of the financial balances of a sole proprietorship, a business partnership or a
company. Assets, liabilities and ownership equity are listed as of a specific date, such
as the end of its financial year. A balance sheet is often described as a "snapshot of a
company's financial condition". Of the four basic financial statements, the balance
sheet is the only statement which applies to a single point in time.

A standard company balance sheet has three parts: assets, liabilities and ownership
equity. The main categories of assets are usually listed first, and typically in order of
liquidity. Assets are followed by the liabilities. The difference between the assets and
the liabilities is known as equity or the net assets or the net worth or capital of the
company and according to the accounting equation, net worth must equal assets minus
liabilities.

Another way to look at the same equation is that assets equals liabilities plus owner's
equity. Looking at the equation in this way shows how assets were financed: either by
borrowing money (liability) or by using the owner's money (owner's equity). Balance
sheets are usually presented with assets in one section and liabilities and net worth in
the other section with the two sections "balancing."

Records of the values of each account or line in the balance sheet are usually
maintained using a system of accounting known as the double-entry bookkeeping
system.

A business operating entirely in cash can measure its profits by withdrawing the entire
bank balance at the end of the period, plus any cash in hand. However, many
businesses are not paid immediately; they build up inventories of goods and they
acquire buildings and equipment. In other words: businesses have assets and so they
can not, even if they want to, immediately turn these into cash at the end of each
period. Often, these businesses owe money to suppliers and to tax authorities, and the
proprietors do not withdraw all their original capital and profits at the end of each
period. In other words businesses also have liabilities.

In financial accounting, a balance sheet or statement of financial position is a

summary of the financial balances of a sole proprietorship, a business partnership or a
company. Assets, liabilities and ownership equity are listed as of a specific date, such
as the end of its financial year. A balance sheet is often described as a "snapshot of a
company's financial condition. Of the four basic financial statements, the balance
sheet is the only statement which applies to a single point in time.

A standard company balance sheet has three parts: assets, liabilities and ownership
equity. The main categories of assets are usually listed first, and typically in order of
liquidity. Assets are followed by the liabilities. The difference between the assets and
the liabilities is known as equity or the net assets or the net worth or capital of the
company and according to the accounting equation, net worth must equal assets minus
liabilities.

Another way to look at the same equation is that assets equals liabilities plus owner's
equity. Looking at the equation in this way shows how assets were financed: either by
borrowing money (liability) or by using the owner's money (owner's equity). Balance
sheets are usually presented with assets in one section and liabilities and net worth in
the other section with the two sections "balancing."

Records of the values of each account or line in the balance sheet are usually
maintained using a system of accounting known as the double-entry bookkeeping
system.

A business operating entirely in cash can measure its profits by withdrawing the entire
bank balance at the end of the period, plus any cash in hand. However, many
businesses are not paid immediately; they build up inventories of goods and they
acquire buildings and equipment. In other words: businesses have assets and so they
can not, even if they want to, immediately turn these into cash at the end of each
period. Often, these businesses owe money to suppliers and to tax authorities, and the
proprietors do not withdraw all their original capital and profits at the end of each
period. In other words businesses also have liabilities.
 Sample Small Business Balance Sheet

Liabilities and Amount Assets Amount

Owners' Equity
Creditor 15,000 Cash 50000

Bills payable 20,000 Stock 10,000

Debtor 10,000

Short Term Investment 10,000

35000 35000

Public Business Entities balance sheet structure

Guidelines for balance sheets of public business entities are given by the International
Accounting Standards Committee and numerous country-specific organizations.

Balance sheet account names and usage depend on the organization's country and the
type of organization. Government organizations do not generally follow standards
established for individuals or businesses.

If applicable to the business, summary values for the following items should be
included on the balance sheet:

Assets

Current assets

1. Cash and cash equivalents

2. Inventories
 3. Accounts receivable
4. Prepaid expenses for future services that will be used within a year

Fixed assets

1. Property, plant and equipment

2. Investment property, such as real estate held for investment purposes
3. Intangible assets
4. Financial assets (excluding investments accounted for using the equity
method, accounts receivables, and cash and cash equivalents)
5. Investments accounted for using the equity method
6. Biological assets, which are living plants or animals. Bearer biological assets
are plants or animals which bear agricultural produce for harvest, such as
apple trees grown to produce apples and sheep raised to produce wool.

Liabilities

1. Accounts payable
2. Provisions for warranties or court decisions
3. Financial liabilities (excluding provisions and accounts payable), such as
promissory notes and corporate bonds
4. Liabilities and assets for current tax
5. Deferred tax liabilities and deferred tax assets
6. Minority interest in equity
7. Issued capital and reserves attributable to equity holders of the Parent
company
8. Unearned revenue for services paid for by customers but not yet provided

Equity

The net assets shown by the balance sheet equals the third part of the balance sheet,
which is known as the shareholders' equity. Formally, shareholders' equity is part of
the company's liabilities: they are funds "owing" to shareholders (after payment of all
other liabilities); usually, however, "liabilities" is used in the more restrictive sense of
liabilities excluding shareholders' equity. The balance of assets and liabilities
(including shareholders' equity) is not a coincidence. Records of the values of each
account in the balance sheet are maintained using a system of accounting known as
double-entry bookkeeping. In this sense, shareholders' equity by construction must
equal assets minus liabilities, and are a residual.

1. Numbers of shares authorized, issued and fully paid, and issued but not fully
paid
2. Par value of shares
3. Reconciliation of shares outstanding at the beginning and the end of the period
4. Description of rights, preferences, and restrictions of shares
5. Treasury shares, including shares held by subsidiaries and associates
6. Shares reserved for issuance under options and contracts
7. A description of the nature and purpose of each reserve within owners' equity

Sample balance sheet structure

The following balance sheet structure is just an example. It does not show all possible
kinds of assets, equity and liabilities, but it shows the most usual ones. Because it
shows goodwill, it could be a consolidated balance sheet. Monetary values are not
shown, summary (total) rows are missing as well.

Balance Sheet of XYZ, Ltd. as of 31 December 2006

ASSETS

Current Assets
Cash and cash equivalents
Accounts receivable (debtors)
Inventories
Prepaid Expenses
Investments held for trading
Other current assets

Fixed Assets (Non-Current Assets)

Property, plant and equipment
Less : Accumulated Depreciation
Goodwill
Other intangible fixed assets
Investments in associates
Deferred tax assets

LIABILITIES and EQUITY

Creditors: amounts falling due within one year (Current Liabilities)

Accounts payable
Current income tax liabilities
Current portion of bank loans payable
Short-term provisions
Other current liabilities

Creditors: amounts falling due after more than

one year (Long-Term Liabilities)
Bank loans
Issued debt securities
Deferred tax liability
Provisions
Minority interest

Equity
Share capital
Capital reserves
Revaluation reserve
Translation reserve
Retained earnings