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Website: - www.dcetbschool.com
CONTENTS
Preface
Declaration ,
Acknowledgement
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Section-1
Vision
Mission
Company objectives
HAL customer
Organizational chart
Financial highlights
Product details
Services
Division
3
Section-2
Research objective
Research methodology
Research design
Sampling
Conclusion
Limitation
Suggestion
Annexure
Questionnaire
Bibliography
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PREFACE
This project report embodies the result of summer training in partial fulfillment
of M.B.A. . It was a great opportunity to me to work with such a flagship
organization. Management of Hindustan Aeronautics Limited, Lucknow Division
has given me this golden opportunity to get familiar with the organization and its
functioning. Since the duration of summer training was short so it become
difficult to cover each and every aspect in detail but I tried my level best to give
due consideration to all important aspect related to my study. This study
provided me practical exposure of the functioning of accounts and finance
department. The information so gathered for the presentation of this report is
collected by the personal contact with the concerned person of different
department.
The project report is merely concerned with the study of different functions,
which are dealt by account department. In the course of study I became aware of
the concepts, which are used in H.A.L., while dealing with costing and pricing
related matters. The cost and costing system that prevails in HAL is different
from the system that followed by other organizations.
The project report incorporates the procedure and flow of work applied by
different sections of the account department and how these sections are linked.
Although these sections are separate and perform there separate operations but
these are interrelated with each other.
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DECLERATION
the topic (Different function of finance and account department with special
reference to capital budget). For the partial fulfillment of the requirement for
training project report on the above mentioned topic which is my original work
Place: LUCKNOW
ARVIND SINGH
Date:
6
ACKNOWLEGEMENT
I am grateful to Mr. D.R. Nahak, Sr. Manager (Finance) under whose expert
guidance this training was completed.I am thankful to Mr. S.A.Z. Rizwi
(Manager Cost & Material Accounts), and I wish to express my deep sense of
gratitude to Mr. S.K. Singh, Mr. G.R.B. Saxena of Costing Department who
inspired, guided and gave there valuable suggestions.
ARVIND SINGH
MBA 3rd Semester
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HISTORY OF THE COMPANY
Hindustan Aeronautics Limited (HAL) came into existence on 1st October 1964.
The Company was formed by the merger of Hindustan Aircraft Limited with
Aeronautics India Limited and Aircraft Manufacturing Depot, Kanpur.
The Company traces its roots to the pioneering efforts of an industrialist with
extraordinary vision, the late Seth Walchand Hirachand, who set up Hindustan
Aircraft Limited at Bangalore in association with the erstwhile princely State of
Mysore in December 1940. The Government of India became a shareholder in
March 1941 and took over the Management in 1942.
Today, HAL has 19 Production Units and 9 Research and Design Centres in 7
locations in India. The Company has an impressive product track record - 12
types of aircraft manufactured with in-house R & D and 14 types produced
under license. HAL has manufactured over 3550 aircraft, 3600 engines and
overhauled over 8150 aircraft and 27300 engines.
HAL has been successful in numerous R & D programs developed for both
Defence and Civil Aviation sectors. HAL has made substantial progress in its
current projects:
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• Various military and civil upgrades.
Dhruv was delivered to the Indian Army, Navy, Air Force and the Coast Guard
in March 2002, in the very first year of its production, a unique achievement.
HAL has played a significant role for India's space programs by participating in
the manufacture of structures for Satellite Launch Vehicles like
Apart from these seven, other major diversification projects are Industrial
Marine Gas Turbine and Airport Services. Several Co-production and Joint
Ventures with international participation are under consideration.
HAL's supplies / services are mainly to Indian Defence Services, Coast Guards
and Border Security Forces. Transport Aircraft and Helicopters have also been
supplied to Airlines as well as State Governments of India. The Company has
also achieved a foothold in export in more than 30 countries, having
demonstrated its quality and price competitiveness.
HAL has won several International & National Awards for achievements in
R&D, Technology, Managerial Performance, Exports, Energy Conservation,
Quality and Fulfillment of Social Responsibilities.
• At the National level, HAL won the "GOLD TROPHY" for excellence in
Public Sector
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• Management, instituted by the Standing Conference of Public Enterprises
(SCOPE).
The Company scaled new heights in the financial year 2006-07 with a turnover of
Rs.7, 783.61 Crores
Vision
meet the current and future challenges. This will be driven by core values of the
MISSION
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" To become a globally competitive aerospace industry while working as an
instrument for achieving self-reliance in design, manufacture and maintenance of
aerospace defense equipment and diversifying to related areas, managing the
business on commercial lines in a climate of growing professional competence ".
VALUES
• Customer Satisfaction
We believe that our success depends on our ability to continually reduce the cost
and shorten the delivery period of our products and services. We will achieve this
by eliminating waste in all activities and continuously improving all processes in
every area of our work.
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H. A. L. believe in striving for improvement in every activity involved in our
business by pursuing and encouraging risk-taking, experimentation and learning
at all levels within the company with a view to achieving excellence and
competitiveness.
H. A. L. values their people. We will treat each other with dignity and respect
and strive for individual growth and realization of everyone's full potential.
• Integrity
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COMPANY OBJECTIVES
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To promote a Culture of Achievement and Excellence with emphasis on
HAL Customer
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• Israel Aircraft Industries, • Indian Coast Guard
Israel • Indian Navy
• Messier Dowty Ltd., UK • Indian Space Research Organization
• Mistubishi Heavy • Jet Airways
Industries, Japan • Kudremukh Iron ore Company ltd.
• MOOG, USA • NALCO
• Namibian Air Force, • Oil & Natural Gas Corporation Ltd.
Namibia • Ordnance Factories
• Peruvian Air Force , Peru • Reliance Industries
• Rolls Royce Plc, UK
• Royal Air Force, Oman • United Breweries
• Royal Malaysian Air
Force, Malaysia
• Royal Nepal Army, Nepal
• Royal Thai Air Force,
Thailand
• Smiths Industries, UK
• Snecma, France
• Strongfield Technologies,
UK
• The Boeing Aircraft
Company, USA
• Transworld Aviation,
UAE
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Organisational Chart
Chairman
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17
18
19
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Hindustan Aeronautics Limited (HAL) has cruised past the Rs.10, 000 crore
mark for the first time with a sales turnover of Rs.10, 373 crores during the
Financial Year 2008-09. The profit of the Company (Profit before Tax) soared to
Rs.2, 335 crores.
Growth over
Particulars 2007-08 2008-09
Previous Year
Sales 8625 10373 20.27%
VOP 8791 11811 34.35%
Profit before
2164 2335 7.90%
tax
Profit after tax 1632 1740 6.62%
Gross Block 2255 2638 16.98%
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The Financial highlight Of the Performance During 2008-09 Are:-
(Rs in
crore)
Appropriation
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Total sales of the company
Dividend paid by the company on equity shares during the year and the previous
year: (Rs. in
crore)
2008-09 2007-08
Number of
p a r tic u la r s
Shares Dividend Dividend Dividend Total out- Dividend Total outflow
per including
per share amount Tax (Rs. flow
Dividend Tax
of Rs.10/- (Rs. cr.) cr.) (Rs. cr.) share
First Interim 4.00 48.20 8.19 56.39 4.00 56.39
12,05,00,000
Dividend
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Distribution of surplus
2007 - 08 2008 - 09
Financial Ratios
Sales Per Employee 2512989 2978973
Value Added Per Employee 1196600 1198926
PBT to Sales 25.09 22.51
PBIT to Capital Employed 48.55 39.48
PAT to Net Worth 49.06 37.53
Debt Equity Ratio 0.00038 0.00030
Earnings Per Share 135.43 144.39
Dividend as %age of Equity 317.49 337.86
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Lucknow Division
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international companies are interested to join hands with it for future
projects.
• The Division has also made steady progress in the area of Export.
• Microprocessor Controller
Pneumatics and Oxygen System, Cold Air Unit, Water Extractors, Valve -
various types
• Ejection System
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Booster Pumps, Main and Reheat Fuel Systems, Nozzle Actuators
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Repairs, Major Servicing And Supply Of Spares of lucknow division
The Division carries out Repair and Overhaul of Accessories, with minimum
turn-around-time. Site Repair facilities are offered by the Division by deputing
team of expert Engineers / Technicians.
Military Aircraft
• MiG Series
• Jaguar
• Mirage-2000
• Sea - Harrier
• AN-32
• Kiran MK- I / MK- II
• HPT - 32
• SU-30 MKI
Civil Aircraft
• Dornier-22B
• AVRO HS-748
Helicopters
• Chetak (Alouette)
• Cheetah (Lama)
• ALH (IAF / NAVY / COAST GUARD / CIVIL)
Sub-contract Capabilities
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Division has embarked upon selecting and creating a strong base of suppliers for
outsourcing precision components, tooling and test equipment. This is required
to handle higher loads of existing and new projects being undertaken in the
division.
Vendors are selected as per the corporate guidelines, pursuing a vendor approval
process. Applicant Organization with established facilities & capabilities,
willingness to learn and excel in producing aeronautical level of quality product
and with financial strength and preferably with DGAQA approval stand a good
chance in becoming part of the aeronautical industrial expanse.
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Research Objective
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Research Methodology
In every step of life resources are always scarce. In the same way, Business
organizations are also facing such type of problems. In this respect every
organization wishes to use available resources in an optimum manner. Capital
Budgeting is a technique which helps in solving the same aspects of such
phenomenon. This study is basically emphasizing on the Capital Budgeting of
H.A.L. Lucknow and tries to find out ways of optimum utilization of financial
resources with the help of Capital budgeting technique.
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DIFFERENT SECTIONS IN THE ACCOUNTS
DEPARTMENT IN HAL LUCKNOW DIVISION
1. BILLS PAYABLE
a) INLAND BILLS
b) FOREIGN BILLS
c) SERVICES & CIVIL WORKS
2. PAYROLL
3. BILLS RECEIVABLE
4. CASH OFFICE
5. MATERIAL ACCOUNTS
6. BOOK KEEPING
7. FINANCE
8. PROVIDENT FUND
9. TIME OFFICE
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FINANCE & ACCOUNTS DEPARTMENT
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BILLS PAYABLE SECTIONS
OBJECTIVES:-
To regulate the payment of suppliers and service providers as per the terms
and conditions of the purchase order/ agreement.
To ensure that the payment of different parties are made promptly so that
supplies and services to the division are maintain uninterruptedly in
furthering the objects of the organization.
To ensure that all statutory deductions e.g. - T.D.S. etc., are made from the
bills of suppliers/ service providers and deposited timely with the appropriate
authority Bill
Payable section is divided his work into three parts these are :-
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BILLS PAYABLE (INLAND)
FUNCTIONS :-
Flow of Work :-
1. All the P.O. received is first entered in the P.O. Register before putting
the same in a separate file.
2. If the P.O. stipulates for payment of Advance to vendor, an Advance
payment is given.
3. After receipt of the goods, suppliers invoice duly linked with relevant
R.D.R are received from the Purchase Department which are scrutinized with
reference to relevant P.O. and then passed for payment after making
adjustments for Advance Payments.
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4. Already made Remittance vouchers are prepared based on the passed
invoices and are forwarded to cash section for issuance of Cheque.
5. In respect of P.O. where payment is stipulated as “Through Bank” the
BPT section after intimation from the Bank through Purchase Department,
makes entry in the Register and after checking the documents with the P.O.
passes the Invoice
and sends the remittance Voucher to the Cash section to arrange payment
and collection of Documents from the Bank by the Purchase Department.
6. In respect of Local purchase made on ”Cheque against Delivery basis” the
Performa invoice is linked with the relevant P.O. and the payment is
authorized and Remittance voucher is sent to the Cash section for making
payment.
7. Pending the receipt of R.D.R. from transit in respect of material received
but not taken on charge due to delay in inspection / commissioning / rejections
the payments made to suppliers as Advance on receipt of goods through
Bank Documents / Cheque against delivery basis are put in G.I.T. i.e. Goods
in Transit Account at the year-end.
8. In respect of that P.O. where material has been received but the payment
has not been released, the appropriate liability is provided for at the year-end
so as to account for all expenses.
9. Follow up with I.M.M Department for release of R.D.R. in respect of those
PO’s. Where Advance payment has been made so as to clear Advances.
10. In respect of rejected materials, follow-up is to be made with I.M.M.
Department to get those rejected materials replaced from the vendor so as to
clear G.I.T.
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FLOW CHART OF BILLS PAYABLE (INLAND)
Start
Yes No
Does P.O.
Stipulates for payment
Of Advance
R.D.R. received by purchase
Advance payment is given to
Department
Vendors
& scrutinized with purchase order
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BILLS PAYABLE (FOREIGN)
FUNCTIONS :-
FLOW OF WORK :-
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maturity of L.C. the Bank Adjustment Voucher is prepared on the basis of
Bank Advice and send to the Cash Section for Adjustment. Particulars of
payment are also noted in the relevant P.O.
3. Where Purchase terms provide for “Documents through Bank” the Bills
Payable section after checking the documents with the Purchase Order passes
the invoice and issues Letter of Authority to the Bank for arranging payment.
4. All the Contractual payments in respect of Royalty, Licence fee &
Technical Assistance fees are made as per the Licence / Collaboration
Agreement after obtaining Foreign Exchange release from the Ministry, R.B.I
and Producing N.O.C.
from the Income Tax Department.
5. Bills of entry received from the IMM Department are entered in the
register to record value of goods assessed, correct and the amount of duty
paid to ensure that the duty levied is inventory accounts correctly. A copy of
B/E is sent to the Bank for forwarding the same to RBI.
6. After receipt of Goods the Store department sends the RDR to the
foreign bills for pricing and making necessary accounting.
7. Pending the pricing of R.D.R., the payments maid to foreign Vendors
through L.C. / Sight Draft is put temporarily in Goods In Transit Account
8. In respect to Material dispatched by the vendor against P.O. raised by
us, the liability is provided in our Books of Accounts if payments have not
been made for such supplies.
9. Follow-ups with I.M.M. Department for timely release of R.D.R. so as
to clear the G.I.T.
10. Co-ordination with the I.M.M. for replacement of rejected material so
as to clear G.I.T.
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BILL PAYABLE (SERVICES)
FUNCTIONS:-
FLOW OF WORK:-
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account payment bills in suitable percentage in relation to the progress of
work so as to recover all sums advanced by the time 80% of the contract is
completed.
2. Material advances to the extent of 75% of the value of materials
brought by contractors and lying at the site are given on certification of
engineer-in-charge and are recovered from running/ final bills.
3. In respect of running bills the works account section links the bill,
submitted by contractors duly certified by engineer- in- charge, with the
contract / acceptance letter/ work order etc. and arranges payment after
deducting Income tax, balance security deposit and other advances if any and
retaining the prescribed percentage of bill
towards the retention money. However where the contractor has given
Bank Guarantee toward retention money no deduction is to be made on this
account.
4. Similarly, the final bill submitted by the contractor is checked with the
measurement book and the gross amount payable is determined. The amount
settled against running bills, advances if any, penalty for delay in completion
of work, recovery toward consumption of material, T.D.S. etc. is deducted
from the gross amount payable. One half of the security deposit refundable to
the contractor is retained as defect liability deposit.
5. Capitalization of the Buildings and other capital works is done on
receipt of the completion certificate and final bills and the classification of the
building is done in accordance with the rules in force.
6. Payment of bills for services e.g. Electricity, Telephone, Water etc.
received from plant Maintenance Dep’t. / Concerned users duly verified by
them and approved by the competent authority are made.
7. Payment in respect of other services received by the company is made
after the competent authority duly approves it.
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PAYROLL SECTION
OBJECTIVE:-
The main objective of this section is to regulate the salaries and wages of the
employees.
1. To regulate Salaries and Wages of all employees as per terms of
employment.
2. To regulate payment of welfare facilities extended by the management e.g.
L.T.C., Medical, Interest subsidy, School fee etc.
3. This section also regulated with the payment of T.A, C.A., D.A, L.T.C,
medical reimbursement etc.
4. A part from this, they also make arrangement for interest, subsidy &
housing loans.
5. Payment and recovery of various natures of advances such as TA, LTC
advance, C.A., and timely adjustment thereof.
6. To ensure timely remittance of amounts recovered from employees to
various agencies like LTC, UPICA, and HDFC etc.
7. To ensure that all-statutory deductions like TDS and 12% PF etc are made
from the salaries of the employees and deposited timely with the appropriate
authority.
8. To ensure proper accounting is done as per the requirement of the statute
and corporate office guidelines.
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9. To adhere to the provisions laid down in the Personnel Manual relevant to
the above functions.
FUNCTIONS :-
2. The payroll record is updated from time to time entering therein increment
drawn, promotion, transfers etc.
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5. The computer department prints the payroll in duplicate in which one copy
is maintained in the payroll section for record purpose and the original copy is
distributed to the employees concerned.
7. Remittance of Recoveries
Various recoveries made from employees in respect of LIC premium, HDFC
loan, Income Tax etc are remitted to the various agencies within the stipulated
date by means of cheque.
9. Accounting Procedures
Monthly payroll Journal entry is made both for supervisory and non-
supervisory personnel and sent to book keeping section for adoption.
For payments made to persons from other divisions, proper accounting is
done to ensure that necessary advice is raised to the concerned division.
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10. To make payments to ex-employees towards final settlement of their
dues.
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CALCULATION OF INCREMENT%
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Grade No. of Increment rate Product
employees
As on 1-4-08
1 Scale 1 ----- ----- -----
2 Group A ----- ----- -----
3 Scale 3 ----- ----- -----
4 Group B ----- ----- -----
5 Scale 5 ----- ----- -----
6 Group C ----- ----- -----
7 Group D ----- ----- -----
8 Group E ----- ----- -----
9 Group F ----- ----- -----
10 Scale 10 ----- ----- -----
Grand Total
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OBJECTIVES:-
4. To ensure that all statutory payments e.g. Sales Tax, Excise duty, Customs
duty is recovered from the customer and is deposited timely with the
appropriate authority.
5. Beside this B/R Section also provide details of budget section for
compilation of sales orders, firm/ forecast task, I.D.T.O. for budget
estimates, revised estimates, F.C. estimates etc. It also collect sales tax
from customer and deposited the same.
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FLOW OF WORK:
Start
Stop
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Beside this B.R.S. also provide details of budget section for compilation of sales
orders, firm/ forecast task, I.D.T.O. for budget estimates, revised estimates, F.C.
estimates etc. It also collect sales tax from customer and deposited the same.
Bills receivable section prepare and render to I.A.F. in respect of the following
activities, these are:-
a) Manufacturing activity.
b) Repair overhaul.
c) Supply of spares against R.M.S. orders.
d) Differed Revenue expenditure.
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FORMAT OF BILLS REGISTER
SI. no. date Order date Party Value of Advance S.Debtors Pay scale total
no. name Item tax
CUSTOMER ADDRESS :-
AUTHORITY ORDER NO. :-
TERMS OF PAYMENT :-
ADVANCE COLLECTED :-
CONSIGNEE :-
SPECIAL INSTRUCTION :-
SL. No. REF/ Part no.Qty Unit price Total cost PR- SI No.
ordered (Rs.) (Rs.)
FORMAT OF INVOICE
Particulars Sl.
/ no. DA Year Qty. Rate Amount
Part No. No.
Day No. Day- Party Division S.I.T. IFD Civil Rep/Oh RMS ArmyNavy
Sl. No. Date (New (Air
items) Force)
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FUNCTIONS :-
The following are the functions of Bills Receivable section:
1. Preparation and rendering of Invoices to I.A.F. in respect of the following
activities in accordance with the Guidelines laid down in the Government
letter dated 30th Sept.,97 :
a) Manufacturing Activity
b) Repair and Overhaul
c) Supply of Spares against R.M.S. Orders
d) Deferred Revenue Expenditure
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o Supplies and Services rendered to Civil Customers.
o Supplies against R.M.S. Orders from Army, Navy.
To submit invoice for reimbursement of Royalty from Air Force and setup
sales for these Claims and create Claims Receivable.
To follow up with AO (DAD) and other customers for collecting the payment
against the Invoices raised.
To collect Sales Tax from the customers and deposit the same.
To compile Sales Tax returns and submit the same to IMM Department for
onward submission to Sales tax Authorities for Assessment
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CASH SECTION
Cash section deals with receipts and payment of cash and cheques. Accounting of
all cash or bank transactions is done as per the guidelines provided by corporate
office. This section ensures timely drawl of cash from bank to cater to the daily
needs of cash vouchers.
OBJECTIVES :-
1. To ensure timely and accurate receipts and payments of cash and cheques.
4. To ensure timely drawl of cash from bank to cater to the daily needs of
payments of cash vouchers.
FUNCTIONS:-
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computer through online system. The cash office in turn after proper
identification makes the payment through cash teller.
5. Entries are made every day on the basis of cash credit vouchers are
remittance vouchers and the cash balance are arrived at which is certified by
the in charge of cash office.
FLOW OF WORK:-
All amount are received are recorded in a receipt register by section and send to
the cash office accompanied by the cash credit vouchers. Likewise cash credit
vouchers for cash remittance made by employee toward repayment of advances,
bus/ train passes, canteen receipt etc. are sending by the respective section of the
account department. After receipt of cash/ cheque etc cashier initials in the
receipt register in acknowledgement and issue official’s receipts for cash/ cheque
received.
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In respect of out station cheques etc. where collection charges are leaved by the
bank, adjustment vouchers are prepared and accounted in respect of such
charges based on the bank advice.
Payment of employees and others in cash is maid on the basis of cash vouchers
issued by various accounting sections after proper identification. Entries in the
cash book are made every day on the basis of these paid cash vouchers.
Remittance vouchers are made by the various accounting sections for payment to
suppliers, contractors and other and sent to cash office for writing cheques. The
cheques are written/ typed by the cash office and the officers authorized to sign
the cheques, sign the same. The cheques are then send to purchase department
for collection of documents or dispatched directly to the parties.
Entries in the cash/ bank book are maid daily on the basis of the remittance
vouchers in respect of which cheque is issued.
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MATERIAL ACCOUNTING SECTION
OBJECTIVES:-
To ensure that all the receipts and issues of materials from stores are recorded
and accounted for properly.
1. To ensure that all the receipts and issues of materials from stores are
recorded and accounted for properly.
2. To ensure that all non moving/ slow moving materials are identifies as
surplus by I.M.M. and a suitable redundancy provision is maid against them
and are disposed off.
3. To ensure that Bin Card balances are reconciled with the material ledger
balances in co-ordination with I.M.M. and the balances of material ledgers
tallies with the general ledger.
FUNCTIONS :-
1. To send the priced R.D.R. received from Bills Payable section to E.D.P.
for punching in the Batch Mode and thus all the Receipts are recorded and
control is exercised over all the Purchases Value-wise.
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2. To generate exception list for missing R.D.R. and getting it resolved with
Bills Payable Sections.
3. All the materials drawn excess when returned are credited to stores
through Stores Return voucher.
4. The E.D.P. after processing of all M.R./ Issue Vouchers prints the
Material Issue Analysis Statements monthly indicated :-
a) The cost of materials drawn against various Job Orders, Expense
accounts;
c) The cost of tools issued to various tool cribs from Main Tool Stores;
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g) A list of materials not moved for over 5 years is given by E.D.P. which
is reviewed by Stores / concerned programming department Materials not
required for production or for other purposes are identified and suitable
action is taken by I.M.M. for finding their usage in other Divisions or is
auctioned.
YES NO
Are all the
Receipts recorded its
purchase value wise
Stop
1. Commercial Store.
2. Raw Material.
3. Jaguar’s parts.
4. Russian project.
5. Western project.
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PERFORMA FOR R.D.R
P.O Ins Qty. A
P Qty. Qty. Qty. Bin Purchas
. Dec Sort Over Re acc Loc Val
name ad rev Rej Bal. rate
no. m stock u
FUNCTIONS :-
2. Preparation of Trial balance, Profit & loss A/C and Balance sheet.
Accounts are computerized and are drawn for every quarter as on 30th June,
30th September, 31st December and Final Accounts as on 31st March of every
financial year.
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3. Maintenance of Fixed Asset Register and depreciation schedule.
o For all capital items purchases, RDR are furnished by the bills payable
section like wise details of assets like buildings etc. Capitalized are also
furnished by civil works section to the book keeping section. The
maintenance of Asset ledger is computerized in which the details like date
of purchase, nature of item, P.O. No. location of asset etc are recorded.
Journal Voucher
62
J.V. No. J.V. Nos.
Account Control
Debit Credit Sectional Sr. Book keeping
No. Adjustment A/c
No. Section
63
Net Exp.
Profit for the year
Profit for Tax
Profit after Tax
FLOW OF WORK :-
All departments send their records to book keeping and Accounting entries. They
collect and feed the data in computer. Firstly they prepare J.V. and ledger of
each every particular like purchase, cash etc. Then they prepare P/L A/c or
Income and Expenditure A/c. At last this section deals with the Balance Sheet of
the company to know the financial position of company.
64
Data Collection Methods
The complete data has been collected from primary and secondary sources.
with labor welfare officer, members of staff of HAL, few trainee officials and
workers. Through discussions many fine details were touched and discussed
upon.
with the topic were referred to. This was done with a view to gain thorough
The facts and information were backed up by the written data and records to
safe guard against ambiguous and vague information. The whole study had been
65
H.A.L Accessories Lucknow Division
Balance Sheet as on 31st March
66
Particulars Schedule Amount Amount
Source of funds:-
Shareholder Funds
Capital 1
Reserve & Surplus 2
Loan funds 3
Secured loan
Unsecured loan
Different liability (net) 4
Application of Funds:-
Fixed Assets
Gross Block 5
Less:- Depreciation 6
Net block 7
Special tools & 8
Equipments
Investment 9
Current Assets, Loans & Advances
Inventories 10
Sundry Debtors 11
Cash & Bank Balance 12
Loan & Balances 13
Less:- Current liabilities & Provisions
Liabilities 14
Provisions 14
Net C.A.
Miscellaneous Expenditure 15
FINANCE SECTION
OBJECTIVES:-
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1. To ensure that the financial discipline is maintained in the Division.
2. To ensure that all expenditure is incurred with due regard to principles of
financial propriety.
3. To ensure that financial proposals are routed to the competent authority as
per delegation /sub-delegation of powers so as to ensure compliance of the
provisions of the Companies Act, the Memorandum and Articles of Association
of the company and the relevant rules & regulations of the company and the
guidelines issued by the company.
4. To ensure that the funds are available in the Approved Capital &
Performance Budget so as to cover the relevant proposals.
5. To submit MIS reports to corporate office monthly.
FUNCTIONS:-
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PROVIDENT FUND SECTION
This section ensures the timely collection of provident fund money from members
every month. The money so collected from employees is invested in approved
securities. Employee provident fund came into existence in year 1952. Provident
fund trust deals all the functioning of this department. Trust holds its rules and
regulations for the proper functioning.
OBJECTIVES :-
FUNCTIONS :-
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5. Interest is credited to the account of each member at such rate as may be
determined by the Board of Trustees, taking into account the income of the
Trust during each Financial Year.
6. To maintain Family Pension Account of each member and remittance to
RPFC at the stipulated dates and file monthly and yearly returns.
7. To remit the account of Provident Fund deduction for contractual / casual
workers by cheque to RPFC and file the return in respect of the same.
8. To distribute the Annual Statement of Provident Fund to all the members in
the format prescribed by RPFC.
9. To make final payment of Provident Fund due to a member on his
retirement / resignation or to the nominee in the case of death of a member
as per rules.
10. To maintain accounts of Provident Fund Transactions and get audited by
the Statutory Auditors of the company and approved by the Board of
Trustees.
11. To file the monthly returns in the prescribed formats and submit to RPFC
by 25th of each month in respect of Provident Fund and Family Pension
Fund.
12. To forward Insurance Claims to LIC Bangalore in respect of decreased
members.
Board of Trustees:-
Subject to the provision here after contained the fund shall vest in and be
administered by a “Board of Trustee” consisting the TEN Members. These
members are called “Board Members”. Five Representatives of the member of
fund are elected by recognized union and rest five representatives are elected by
management itself, in these five members one shall be Chairman, one shall be
Secretary, acting jointly on behalf of the board of trusty operate on account of
the fund with bank and discharge, receive or otherwise dispose of, as may be
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necessary government promissory notes, interest, warrant etc. relating to fund
and shall on behalf of the board reassign to members in accordance with the
rules. Timely meeting are held which the member of fund deal. This trust deals
all the functioning of this department.
Contribution:-
Employers Share:
12% of the Pay (Basic pay + D.A. + Family Planning Increment + Non Practicing
Allowances + Service Weightage Pay, as the case may be) 8.33% out of the
employer share of the contribution to the P.F. Account (the pay for this purpose
being limited to Rs. 6500/- P.M.) is paid into the employees pension fund for the
purpose of employees pension scheme.
Employee’s share:
Interest:
Interest shall be credited to the account of each member at the rate decided by
the concerned PF trust.
Loans and advances (Refundable as well as Non Refundable) can be taken from
the P.F. Account for specified purposes.
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Recovery period for refundable loans is maximum 48 months, along with interest,
which includes 1.5% service charges.
The employee’s pension scheme 1995, introduced by the government of India for
provident fund subscribers is in operation in the company. 8.33% of the
employer’s share of contribution to the PF account (pay for this purpose being
limited
Legal reports are passed to the regional provident fund commission because of
certain legal bindings. Trust record audit is been done by R.P.F.C. and by C.A.’s
time
to time. Timely report send to the department of R.P.F.C. and the timely visit of
inspectors is held by R.P.F.C. by checking the proper functioning of the
department. Under pension scheme 1995 approximate Rs. 542/- month is send to
R.P.F.C. In cases like retirement, ceases are referred to R.P.F.C. evaluates the
cases and decides the amount to be paid to the employees as pension.
These funds that are collected by the department are invited in government
securities (RBI and state government securities) and government bonds (IDBI,
ICICI etc.). Interest that is gained by this process is equally distributed amongst
the employees of HAL.
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TIME OFFICE SECTION
OBJECTIVES :-
FUNCTIONS:-
1. To issue leave cards for the calendar year to the employees/ officers of the
division.
2. To maintain leave ledger P.B. No. (Permanent Batch Number) wise for all
the personnel. Credit is given to each account according to his entitlement
as per the guidelines laid down by the corporate office and the posting is
done simultaneously from the attendance report received from the
concerned department.
3. To verify the application of vacation leave (V.L.) encashment and advice
accordingly to payroll section.
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4. To make calculation for payment of attendance bones to group-A to group-
D employees.
5. To make calculations for provisions for vacation leave to be accounted for
in the final accounts.
6. To verify the applications for advance vacation leave approved through
concerned department and making adjustment thereof in subsequent time
period.
7. To maintain night duty roaster of officers deputed on night duty and to
ensure that time off claimed in lieu of such duty is not availed beyond 90
days.
8. To verify the time offs claims in lieu of extra work done/ Sunday duty/
sports duty scouts duty etc.
9. To advice the payroll section for payment of ex-gratia in accident cases.
10. To provide data to payroll section for payment of single wages in lieu of
work done on general holidays and double wages in lieu of work done on
National holidays.
11. To provide data for gratuity payment in case of final settlement.
12. To provide data to payroll section for deduction of time loss on the basis of
late arrival report received from security department.
LEAVE:-
Vacation Leave: Employees who are born on the regular rolls of the company
are eligible for vacation leave at the rate of 2.5 days for every 30 days of service.
Vacation leave can be accumulated up to 300 days for executives and up to 240
days for non-supervisory staff. There is a provision of encashment of vacation
leave. The minimum encashment vacation leave is ten days.
The maximum number of days of cashable vacation leave will be one half of the
vacation leave at credit of the employees on the date of encashment. Leave
encashment will be allowed only once during a calendar year. The encashment
will be at the rate of basic pay (including service Weightage pay in respect of
workman and
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special pay and personal pay, if any, which are counted as pay for all purpose) +
dearness allowance drawn at the time of encashment.
Casual leave: Employees who are born on regular rolls of the company are
eligible for 12 days of casual leaves in a calendar year. Casual leaves can be
availed up to a maximum of 8 working days at a stretch, subject to the same
being sanctioned. Casual leave can be availed for half a day also.
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8. Cary forward of leave by management trainees/ executive trainees/
technical trainees.
Sales Analysis:-
It is prepared after information supplied by B/R section and customer service
department after mutual co-ordination. It is based on the analysis regarding
Manufacture sales, Spares, Repair & Overhaul task, Development sales,
miscellaneous sales, IDTO sales, Export sales, etc. So altogether it consists of all
information regarding ordered contracts. It consists of all details with terms and
conditions, specifications, price, etc.
Cash Flow:-
Cash flow statement’s information is provided by cash section. It contains
information regarding total receipts and their different sources as well as total
expenditures under main heads. In addition to it, it serves as a cash budget. Also
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it states probable receipts ad expenditures in future succeeding three months.
Income sources may be receipts from IAF, Non-IAF and expenditure contains
both capital expenditure as well as revenue expenditures.
Revenue Expenses:-
A statement separately for all revenue expenses which are minutely bifurcated is
prepared containing information as actual and estimated expenditure under
cumulative heads.
Financial Highlights:-
Financial highlights with respect to sales, value of production, profit, values
added in terms of different heads are shown to make at a glance evaluation of
major responsible, productive components of organization.
An Inventory Report:-
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It is also submitted according to Goods in Transit, Stores, Work in Progress,
Stock in Trade with remarks from commercial and store department by
inspection.
OBJECTIVE :-
FUNCTIONS :-
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5. To get the W.I.P. statement as on 31st March from E.D.P. for all Mfg.
components, sub-assembly W.I.P., Assembly W.I.P. for Physical verification
by the concerned production shops.
6. To ensure that the valuation of W.I.P. has been done correctly keeping in
view the percentage of completion of the Job.
7. To keep track of S.I.T. transactions with different Divisions.
8. To keep record of all I.D.T.O. received and issued.
9. To send debit advices to other Divisions for items dispatched against
I.D.T.O received from them.
10. To accept the debit raised by other Divisions for items received by the
Division in respect of requirements raised by us through I.D.T.O.
11. To evaluate P.C. Memo for S.I.T. Issues, Russian consumption for
overhaul and Amortization of D.R.E.
12. To work out the cost of sales and to reconcile the same with the Design
Department for various customer Financed Projects.
13. To work out the Royalty payable to different Licensors as per the License
Agreement.
14. To Liaise with AO (DAD) for verification of claims in respect of Labour
booking on production and D.R.E. items and other issues like wage arrears,
idle hours etc.
15. To prepare Fixed Price Quotation / Price Catalogue for the different items
manufactured / repaired / overhauled / serviced / supplied by the Division and
to get the same approved by the AOQ.
16. To submit quotations in respect of enquiries received from Non-I.A.F. and
Civil customers.
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Computation of M.H.R.
Calculation of L.T.B.
It is a document which provides for the assembly of details cost of centre or a cost
unit. The Cost Sheet is a periodical document of cost designed to show the total
cost and cost per unit of product.
DEFINITION OF COST
Labor Cost:
The labor cost in HAL is further broadly classified into these under mentioned
four heads-
i) Production overhead cost- POH
ii) Production overhead cost (others) – POH others.
iii) Non production overheads- NPOH.
iv) Inter service rendered/ received on work orders.
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that remain relatively constant regardless of the volume of production such as
depreciation, maintenance of factory building and the cost of factory
management and administration, variable production overheads are those
indirect cost of production that vary directly or nearly directive with the volume
of production.
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Material Cost:
This represents the value of material drawn on work orders for carrying out
production including those relating of sales and tooling. The material are drawn
from the holding stores against a material requisition voucher indicating the
work order number against which the material are drawn, where common
materials are drawn on a single work order, the same should be apportioned to
production work orders on a rational basis.
Differed Revenue Expenditure
Differed Revenue Expenditure is treated as one of the elements of cost of HAL.
DRE expenditure will include the expenses related to following items:-
1) Specialists Salaries and expenses.
2) Foreign technician fees.
3) License Fees.
4) Foreign Training charges.
5) Documentation.
6) Blue Printing.
7) Collaboration Charges.
8) Pre- production Expenses.
9) Royalty.
10) Static/ long term expenses.
11) Project Management expenses.
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Illustrative lists of such income/ expenses, which are purely of financial
nature, are listed below:-
Charges received on IFD sales Schedule
Profit on sales of fixed assets (Schedule 17)
Provision on longer required (Schedule 17)
Expenses on VRS (Schedule 20)
All write Offs including write off of tooling, fixed assets, stores, (Schedule 21)
bad & doubtful debts, surplus stores, storage & rejection and
other write offs.
Liquidated damage, penalties (Schedule 21)
Charges paid to IFD jobs (Schedule 21A)
Provision for replacement and future charges (Schedule 22)
Provision for bad debts (Schedule 22)
Provision for claims (Schedule 22)
Provision for WIP & SIT (Schedule 22)
COMPUTATION OF COST
Direct Material + Direct labor + Direct Expenses = Prime Cost
Ind Mat + Ind Labor + Other Ind Cost Overheads = Works Overheads
Prime Cost + Work Overheads = Factory Cost
Factory Cost + Office & administrative Overhead = Office Cost
Office Cost + Selling & Distribution Overhead = Total Cost
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COMPUTATION OF NET AVAILABLE HOURS
S. Particulars Unit Submitted Submitte
No. for 06-07 d for 07-
08
1 Direct Labor Strength
1.1 Strength as on 1st Apr. No. _______ _______
1.2 Strength as on 1st Mar. No. _______ _______
_______ _______
1.3 Average Strength No. _______ _______
1.4 Less: Direct labor sent to other No. _______ _______
division
1.5 Add: Direct labor sent from other No. _______ _______
division
Net Average strength No.
2 Total average available hours Hrs. _______ _______
3 Hours spent on indirect works/ Lost _______ _______
3.1 Indirect Department Hrs. _______ _______
3.2 Short shift Hrs. _______ _______
3.3 Absenteeism Hrs. _______ _______
3.4 Standing Order _______ _______
a) Avoidable Hrs. _______ _______
b) Unavoidable Hrs. _______ _______
c) Working Standing orders Hrs. _______ _______
D & D others
Total
3.5 Training & welfare Hrs. _______ _______
4 Non available Hours Hrs. _______ _______
5 Add: Extra Hours From others Hrs. _______ _______
Divisions
Total available hours Hrs.
6 Breakup of total available hours _______ _______
6.1 Manufacture Hrs. _______ _______
6.2 R&D Hrs. _______ _______
6.3 Outstanding Jobs Hrs. _______ _______
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6.4 Idle Hours Hrs. _______ _______
Total Hrs.
Methods of Costing:-
The principle in every type of costing is same but the methods of analyzing and
presenting the costs differ with the nature of business. There are two basic
methods of costing. There are-
(A) Specific order costing
(B) Operation costing
Under this method each contract, job or batch is identified as a cost unit
and the formal mechanism to ascertain the cost of the cost unit is suitably
designed.
1. Job Costing:
In this method each job being quite different from the other is treated as
an independent cost unit. A specific number is given to each job to distinguish it
from the other and costs are ascertained in respect of each job represented as a
job order, production order or work order.
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2. Batch Costing:
Where orders or jobs are arranged in different batches after taking into
account the convenience of producing articles, batch costing is employed thus in
this method, the cost of a group of products is ascertained. The unit of cost is a
batch or group of identical product instead of a single job order or contract.
3. Contract Costing:
Contract Costing does not in principle differs from job costing. A contract
is a big job while a job is a small contract. The term is usually applied where at
different sites large-scale contracts are carried out.
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The costs of different sections of production are combined after finding out the
cost of each and every part manufactured. The system of ascertaining costs in
this way is applicable where a product comprises con many is applicable where a
product comprises of many assembled parts.
There are other methods of costing which are Absorption Costing, Uniform
costing, marginal, Output Costing, and Direct Costing, Departmental costing,
Component etc.
HAL follows this system of costing in accounting. For every work in production
shop job order is issued whether it is work of manufacturing a component for
repairs and overhauls or for assembling or testing the equipments, separate job
order is issued or each and every task.
HAL specify the code no. for each job that mentioned which project or task
performed under which job order.
1 2 3 4 5 6 7 8 9 10 11
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II and III digit contains project code like:
IV, V, VI digit comprises with assembly code under each project code; assemblies
being produced have been assigned 3 digit code.
From the beginning HAL has used different types of pricing methods in unlike
periods like upto 1981, Cost plus pricing policy, In 1982-88 Fixed Cost Quotation,
In 1988-94, Fixed piece or cost whichever is less is used and in 1998 & onwards
Fixed Price Quotation (FPQ) is used as pricing policy of HAL.
Currently, pricing policy of HAL is based on Fixed Price Quotation (FPQ)
system.
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FORMAT OF PRICING CATALOGUE:-
Part NamesMtr. Mtr. Total Actua Labour Break Total Total Unit
no. Cost Cost Mtr. l Cost up break up cost price
(B) (M) Cost hours Rs.410.75 cost profit
NPOH/
POH
5.5% /
10%
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The price system of HAL is based on FPQ...P.C. of HAL comprises with part no.,
nomenclature, material cost of import and indigenous goods, total material cost,
hours @ 6% of efficiency, Labour Cost i.e. proportionate of escalation rate of
previous year and current year, break up cost included material cost and labour
cost and excluded non productive hours and then we find out total break up
profit which is 5.5% on non productive hours and 10% of break up cost and at
last we calculate total profit and unit cost.
Unit Cost= Total Profit + Total Cost
Computation of M.H.R.
It is computed by taking into account the total budgeted expenses and budgeted
production. It is calculated by dividing the total expenses of division by total
direct labour hours of all direct departments.
Calculation of M.H.R.
90
3.5 Net Other Expenses (1+2-3)
4 Depreciation
5 Provision for contingencies increase
redundancies
6 Interdivisional expenses
6.1 Debit
6.2 Less:- Credit for transfers
Sub Total (6.1+6.2)
7 Gross divisional
expenses(3.5+4+5+6)
8 Less:- Misc. Income
9 Other Income
Net divisional expenses(7.8)
II MD’s Office Expenses
III Corporate Office expenses
IV Net conversion cost(I+II+III)
V Net available hours
VI M.H.R. (IV / V)
VII Interest on Fixed Capital
VIII Interest on W.C.
IX Net conversion cost
X M.H.R. (IX / V)
Computation of D.R.E.
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It is differed revenue expenditure. Expenses it includes all expenses in respect of
Fixtures, non Standard equipments, Training equipments, Project management
expenses etc.
The costing section of HAL kept all records in regarding to DRE. The balance of
revenue items should be closed in that year but some balances are not closed. It
should be opening balance of next year i.e. DRE.
Bills of Material:
Format of BOM
HAL LUCKNOW DIVISION
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_______ _______
1.3 Average Strength No. _______ _______
1.4 Less: Direct labor sent to other No. _______ _______
division
1.5 Add: Direct labor sent from other No. _______ _______
division
Net Average strength No.
2) Total average available hours Hrs. _______ _______
3) Hours spent on indirect works/ Lost _______ _______
time hours
3.1 Indirect Department Hrs. _______ _______
3.2 Short shift Hrs. _______ _______
3.3 Absenteeism Hrs. _______ _______
3.4 Standing Order _______ _______
a) Avoidable Hrs. _______ _______
b) Unavoidable Hrs. _______ _______
c) Working Standing orders Hrs. _______ _______
D & D others
Total
3.5 Training & welfare Hrs. _______ _______
4) Non available Hours Hrs. _______ _______
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BUDGETARY CONTROL
94
In addition, it is a type of budget follow up, which performs to watch as it has,
has been used properly and accordingly improvement is done. In this way by this
type of system it provides base for future budgets lying.
This function serving well in this manner in HAL and organization is giving
emphasis by actively participation of corporate executives. Their review,
discussions and report collections serving the purpose well.
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Purchase
Requisition
Vendor
Returns
Purchase department Acknowledgement
Issue of P.O. to vendor Accounting dept.
Copy
Accounting Dept. use
Ships material
Receiving Dept. Invoice P.O.,
Send invoices
material ledger account. R.D.R. payment
File copy approved
Inspection dept.
Makes distribution
to own files
according dept.
material.
Material dept.
Storekeeper stores
material in proper
location.
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Budget
System
BUDGET SECTION
OBJECTIVES :-
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1. To layout a comprehensive plan of action expressed in financial and
physical terms and to achieve the targets of the company against the available
resources.
2. It is a tool in the hands of the management to establish goals, objectives,
and targets of the company and measure the performance against the above
targets.
3. To ensure that overall control over expenditure, it is necessary that all
expenditures (except that of contingent nature) is authorized through the
budget approval.
For its effective operation, management must know what are its resources, where
it wants to go, what it wants to achieve, whether operations are going on
according to the plan set & such other things which are to be considered. So for
this purpose it is also required that plans are laid down into verifiable terms i.e.
quantitative terms and for that necessary guidelines with target period for
achievement are set. It is called a type of budget. In this manner Budget can be
defined as:
In this way, a budget serves as the guiding path for the prosperity of an
organization. The movement must be accordingly done so that it gives optimum
result with less effort.
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The period of budget is April to March. The budget is divided in three
part:
1. Current year - Revised estimates i.e.
R.E.
2. Budget year - Budget estimates i.e.
B.E.
(Next year)
3. Forecast year - Forecast estimates i.e.
F.C.
(Next to Budget year)
To ensure that capital facility is made available in time to suit the
production requirement. The proposal under each subhead is classified under
three- P& M, Civil works and others.
All important budgets after approval of the board are broken into
monthly budgets.
To ensure that capital facility is made available in time to meet the
production requirement. The proposals are classified under three categories
i.e. plant & machinery, civil works & others.
Presenting estimates and expenditures in terms of function, programmes
activities and project with their financial and physical aspects closely
interwoven.
The targets set are critically reviewed from the point of view of
availability of resources and their optimal utilization and to achieve cost
reduction.
Analysis of variances and to find out the reasons of such variances and
take suitable remedial measures.
All important budgets like production, sales, profit & loss, working capital
etc after approval of the Board are broken into monthly budgets to ensure
uniform production from month to month.
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The Budgets are broadly classified into two categories
Capital Budget Performance Budget
1. New projects 1. Order status
2. Existing project 2. Production budget
3. Improvement & Rationalisation 3. Sales budget
4. Replacement 4. Purchase budget
5. Welfare budget 5. Foreign Exchange
6. Design & Development 6. Manpower budget
7. Information & Technology. 7. Training budget
8. Profit & loss budget
9. Welfare budget
10. Overhead budget
11. Ways & means budget
12. Projected Balance Sheet
CAPITAL BUDGET:-
It is the most important budget which is heavily loaded with funds as due to high
& long term investment. This budget is related to the capital item i.e. items which
are to be used for long period to the betterment of the organization for many
task’s accomplishment. Such as investments in plant and machinery, building,
Roads, vehicles etc.
So in this way it is a long term budget. In this type of budget, management’s duty
also increases as it is a base for all activities. It involves huge capital outlays
projects and long term commitments. It affects decisions over a period of year. It
involves large risks and uncertainties. So in this budget, its preparation is handed
over to senior and experienced executives. It serves following purposes:-
1. Helps to evaluate capital expenditures proposals.
2. Helps to formulate other organizational budget.
3. Helps to consider the best proposals according to which first priority be
granted.
4. Helps to control capital expenditure I.e. utilization in effective manner.
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5. Helps a systematic procedure for appraising profitability performance of
the company.
Generally top executives of the Corporate and operational level take initiation of
proposals of capital expenditure as per requirements. It is generally concerned
department and project in charge that feel its need. Here in capital budget is laid
down under following heads :
• New projects
• Existing project
• Improvement & Rationalisation
• Replacement
• Welfare budget
• Design & Development
• Information & Technology
PERFORMANCE BUDGET:-
This budget is also termed as Revenue budget but due to misconceptions, which
might be taken by others it is names as performance budget. This budget can be
recognized as the type of budget related to different fields which directly and
indirectly affect profitability. But try to serve its purpose basically by incurring
small expenditure and benefits are realized generally at short period of time but
some exceptional cases are there. This type of budget contains different types of
budgets which are explained below:-
Order Status:-
This budget is related to the order pending to order. There are some items which
are too needed later on and earlier not included in budget approval but due to its
later need, sections are obtained and order is raised through P.O. & gets verified
by different department. So these orders status is recognized under this budget.
Generally there is also relaxation where in financial approval is not needed to
taken which is for capital item upto Rs.20,000/- and revenue item up to Rs.
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50,000/-. The rest of order’s value is judged by commercial and verified by
finance.
Purchase Budget:-
This budget is prepared to calculate expected purchases to be made and also
payments pending regarding. These types of budgets are prepared after the
information data submitted by bills payable, purchase department & also finance
department. Its value is generally calculated after the FPQ given be costing
section.
Sales Budget:-
This budget is prepared after the information supplied by customer service
department and bills receivable section which is ultimately responsible for
dispatching the sales order to words order and bill realization respectively. So in
this way expected sale is prepared. Actually these both budgets i.e. purchase and
sales are inter-related as one affects automatically other’s need. Generally it is
calculated be sales order.
Production Budget:-
As we can understand what this budget stands for. It takes into consideration the
production to be done in the budget period. For its preparation mainly
production department on the basis of work order received, gives its information
to the budget section. It is also concerned with keeping sufficient inventory
requirement. Production budget is generally calculated as
Budget sales + Desired closing inventory – Opening inventory
So in this way, it is totally based on sales budget and desired inventory
levels. It also shows unit wise cost. By keeping balance between sales budget
and production budget, idle capacity can be avoided. It is a basis for
preparation of material, labor and factory overhead budget. It also takes into
consideration the cost of carrying out production plans and programs. Here
in scientific management has also to play a significant role.
Manpower Budget:-
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This budget is prepared out of the requirement for direct and indirect work
force, to carry out budget plan. Human Resource Department with the help of
other department judges mainly its equipments and sections mainly machine
shop. It takes into consideration the new appointments, their forecasted
grade/scale, and retirement. Payroll has to play an important role here in for
calculating dues to be paid. It also takes into consideration the provident fund
and other consideration. As contingency exists too much under this budget due to
deaths, accidents and sudden resignation so every time there is exceed in
expenditure from the budgeted figure. So in these cases adjustments are made
from time to time. It also calculates recruitment and selection expenditure.
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There are some facilities that are availed by only employees so accordingly
classification is done.
Ways & Means Budget:-
This budget defines the ways to spend money and means to gather money. It
means where from the finance can be generated and where there is need to spend
that collected fund. It is generally defined in broad heads as public debts, loans,
Government grants, payments from customer mainly IAF and others. In this
way, it is to be taken into consideration that wherein we have to spend basically.
It is mainly in capital items, revenue expenditure, communication facility, etc. In
this way, it studies deeply into the matter.
DRE Budget:-
Deferred Revenue Expenditure is those which are not fully realized as per their
expenditure in that year itself but a certain proportion are written off every year
and as per charged to the subject matter. Under its head there are various types
of expenditures such as royalties, technical fee, training expenditure, foreign
tours regarding seminars, licensing, documentation charges, etc. different
department’s requirement and corporate office’s judgment plays an important
role in it.
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RESEARCH DESIGN
105
Data Collection Methods
authors were studies. Special write ups and journals and HAL manuals dealing
with the topic were referred to. These were done with a view to gain thorough
106
SIGNIFICANCE FOR ORGANIZATION
PERFORMANCE EVALUATION
Generally here in production and sales report plays a major role and main
emphasis is given on it. It decides basically following things:-
Productivity
Growth
Profitability
As there are major aspects which helps to know about an organization’s position.
Here invariance analysis is also made to know that how much distraction has
occurred and whether it is controllable or not. As this is the major function
which is to be performed by budget section. Generally 5 % contingency is taken
into consideration so that significant performance can’t be outshined.
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COST BENEFIT ANALYSIS OF DIFFERENT PROJECT
• Cost Incurred
• Benefit Achieved
It is made to find out the benefits achieved in term of profit (money) by selling
the products and making comparison with that of cost incurred to make the
product. For this purpose, element wise cost is computed in respect of
(1) Material consumed
(2) Labour spent / consumed
(3) Other overheads.
Following are some examples given for cost incurred for a particular product and
benefit achieved against the sale of the product.
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Participation of Lucknow Division in Totality
(Rs. in Lakhs)
Name Profit
Material Labour Other Total Selling
Sr.No. of the % of
consumed Consumed Overheads Cost Price
Project Cost
1. Chetak 190 169 63 422 10% 464
2. GSE 112 99 37 248 71/2% 266
3. Rigs 101 90 34 225 10% 247
4. HPT-32 137 122 45 304 10% 334
5. Jaguar 234 208 78 520 10% 572
6. Kiran 58 51 19 128 71/2% 137
7. MIG 411 366 137 914 10% 1005
8. SU-30 1958 1740 652 4350 10% 4785
9. ALH 18 16 6 40 10% 44
10. Dornier 142 126 47 315 10% 346
6000
5000
4000
Material consumed
3000 Labour Consumed
2000 Other Overheads
Total Cost
1000
Profit % of Cost
0 Selling Price
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The position of generation of internal resources and its utilisation is as under:
(Rs. in Lakh)
Internal Actual RE BE
Resource 05-06 06-07 07-08
Profit 5817.97 6051.16 6197.05
B) Utilisation
Replacement of GOI 874.8 684.8 915.51
Loan, Term/other Loans
110
S.No. Descrition Sanction Commitment Deficit Description Sanction Commitment Surplus
Value Value Value Value
Frequency
1 Distortion 0.60 2.10 1.50 Meter 0.60 0.26 0.34
Meter
2 LCR 1.00 1.07 0.07 DVA Meter 1.00 0.68 0.32
Bridge
3 Multi Meter 0.46 Light Meter 1.20 0.88 0.32
4 digit 1.00 1.46
Power
4 Meter 5.00 6.92 1.95 Insulation 2.00 0.94 1.06
Resistance
Tester
Digital
5 Inverter 6.00 7.70 1.70 Multimeter 3.00 2.82 0.18
for AC
Supply
6 AC for 7.00 9.20 2.20 Digital CRO 6.00
clean room 4.92 4.08
Choke
7 cleaning 2.50 2.77 Gauge
M/C 0.27 Calibration M/C 6.00 1.57 4.43
Digital 3.50 9.21
pressure Automatic
8 Indicator 0.71 power factor 7.00 5.76 4.24
9 Electronic 5.00 5.20 Stabilizer for
Height 100 KVA-3
Gauge 0.20 Phase 5.50 4.87 0.63
10 Misc. 5.00 5.34 0.34
Measuring
Inst.
Total 36.60 45.97 9.37 Total 32.30 22.70 9.60
2 Cabin Fin 0.9 It is required for providing fresh air in cabins & conference hall.
3 Ceiling Fan 5.4 It is required for providing fresh air in cabins & conference hall.
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Exhaust fan 18
4 Inch 0.9 It is required for provided in new area of SU 30 projects.
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SAMPLING
Respondents were drawn using random tables and sample size chosen was :-
15 Executives.
* 50 employees
35 Workers.
QUESTIONNAIRE CONSTRUCTION:
2) Trainees (employees).
DATA ANALYSIS
113
Q1. ARE YOU AWARE OF BUDGET?
(A)YES (B) NO
35 TOTAL
30
YES
25
20
TOTAL
15
YES NO
10
NO
5
0
EXECUTIVES WORKERS
YES 10 25
NO 5 10
TOTAL 15 35
YES NO TOTAL
114
(A) STRONGLY DISAGREE (B) DISAGREE (C) AGREE
(D) STRONGLY AGREE
35
30
25
20
15
10
5
0
EXECUTIVE WORKERS
STRONGLY 2 7
DISAGREE
DISAGREE 3 7
AGREE 4 16
STRONGLY 6
AGREE
TOTAL 15 35
STRONGLY DISAGREE DISAGREE
AGREE
Q3. WHICH STRONGLY
BUDGET TECHNIQUE IS MORE USEFUL IN HAL? AGREE
TOTAL
(A) CAPITAL BUDGET (B) PERFORMANCE BUDGET
115
TOTAL
TOTAL
TOTAL
PERFORMANC
PERFORMANC
E BUDGET PERFORMANCE
E BUDGET
BUDGET
CAPITAL
BUDGET
CAPITAL
BUDGET
CAPITAL BUDGET
EXECUTIVES WORKERS
Q4. OBJECTIVE OF BUDGETRY CONTROL IS PLANNING FOR FURTURE
BY SETTING UP VARIOUS BUDGETS
116
(A)STRONGLY DISAGREE (B) DISAGREE (C) AGREE (D)
STONGLY AGREE
100%
80%
60%
40%
20%
0%
EXECUTIV
WORKERS
ES
TOTAL 15 35
STONGLY 8 15
AGREE
AGREE 3 12
DISAGREE 2 5
STRONGLY 2 3
DISAGREE
STRONGLY DISAGREE DISAGREE
AGREE STONGLY AGREE
TOTAL
Q5. BUDGETING IS A PART OF MANAGEMENT PROCESS.
(A)YES (B) NO
117
40
35
30
25
YES
20 NO
TOTAL
15
10
0
EXECUTIVE WORKERS
118
(A) Yes (B) No
EXECUTIVES
WORKERS
LONG TERM
SHORT TERM
BOTH A AND B
NONE
119
(A) STRONGLY DISAGREE (B) DISAGREE (C) AGREE
(D) STRONGLY AGREE
120
(A) Yes (B) No
35
30
25
20
15
10
5 NO
0
YES
EXECUTIVES
WORKERS
YES NO
121
(A)STRONGLY DISAGREE (B) DISAGREE (C)
AGREE (D) STRONGLY AGREE
20
18
16
14
12
10
8
6
4
2
0
EXECUTIVES WORKERS
STRONGLY 1 1
DISAGREE
DISAGREE 2 2
AGREE 4 12
STRONGLY 8 20
AGREE
STRONGLY DISAGREE DISAGREE
AGREE STRONGLY AGREE
FINDINGS
122
1. The beginning of H.A.L. can be traced to the year 1940 when the Late S.W.
Hirachand set up a company called Hindustan Aircraft Limited, Bangalore.
2. Today, H.A.L. has 14-production division/ unit. Seven at Bangalore and one
each at Nasik, Koraput, Kanpur, Lucknow, Korwa, Hyderabad and
Barrackpore.
3. These centers are engaged in the design & development of Combat Aircraft,
Helicopters, Aero engines, Test Beds, Aircraft Communication & Navigation
system and Accessories of Mechanical & fuel system & instruments.
4. the financial highlights of 2006-07 is as follows:
Sales 7783 Crores
Profit before Tax 1744 Crores
Profit after Tax 1149 Crores
Gross after Tax 2081 Crores
5. Steps involved in Capital Budgeting are:
a) Idea generation
b) Cash Flow estimation
c) Cost- Benefit Analysis
d) Authorization & Further Security
e) Control & Review Procedure
6. In case of Customer financed Projects, funds are provided by the parties
other than IAF. For eg, Navy, Coast guard or Border Security Forces. H.A.L.
has to work for them.
7. The term loan or other Government loan which is provided to H.A.L. by
IAF is at very minimum rate of interest i.e. 2-3%.
8. Only 40% of Internal Resources are available for funding capital
expenditure and Rest 60% is used in provisions & Reserves.
9. H.A.L. invests 60% in the form of securities.
10. The share of H.A.L. is 45%. The share of Government is 51% and the rest
4% share are taken by Tata Steel.
11. While purchasing any machines H.AL. adopt pay back period in order to
know the period in which total cost of the machines can be recovered.
123
12. Replacement cost involves cost of machine and the processing charges which
include labour overhead and installation charges.
13. HAL has no big competitor in the whole market. i.e. means H.A.L. has
monopoly in the field of aircraft industry.
14. HAL is listed amongst the top ten public sector units in the country.
15. Main customer of HAL is IAF; ADA is one other customer of HAL. Ratio
between IAF and other customers is 87:13 approx.
16. All standards related to production more or less depend upon direct
workers.
17. Pricing policy which is adopted by HAL is based on FPQ. 10% profit is
taken on total cost, which is fixed price of the company.
18. Production depends upon the direct and indirect workers.
19. Efficiency of direct workers is calculated 66%. Earlier it is used to be
75%. It is decreased by 9%. It is one of the causes of increasing of MHR.
20. Establishing of rapport direct and indirect workers is very well.
21. Company is performing its responsibilities by providing employment to
4000 people in their division itself.
22. Tight security is made to avoid any kind of distortion. Without entry pass
no outsider can enter into the premises of factory.
CONCLUSION
124
As H.A.L. has number of projects, which need huge investment so it also used
appraisal method like pay-back period method for evaluating the capital
expenditure proposals. But as pay-back period method does not consider the time
value of money so it must adopt discounted cash flow techniques which consider
the time value of money. Pay – back period method does not able to tell post pay-
back profitability. These factors can only be judged by net-present value method
or internal rate of return method.
The topic undertaken for study was too wide to be studied in detail & in all
aspects. Duration of the summer training was limited and the sample size was
restricted to accessories division Lucknow only. The data so collected to write this
report is the result of direct personal accounts department. This study not only
makes me familiar with big organization like HAL, but also provided me the
practical view that how the financial functions and theories are applicable in an
organization.
HAL is listed among top ten public sector units which are running in profit. Its
main customer is IAF; its other customers are ADA and other civil customers,
Navy, Air Force and Coast Guard etc.
Budget and budgetary control system is a wide area to cover. The method of
budgeting is differs from industry to industry on the basis of requirements. In
HAL budgeting system, the period considered for budgeting is the financial year
from April to March. It lays a comprehensive plan of action expressed plan of
action expressed in
125
The budget is classified into 2 categories for convenience Capital and
Performance. It is ensured that capital facility is made available in time to suit
production requirement. Estimates and expenditures are presented physical and
financial aspects. Approval of Board is required to break the budget into monthly
budget to ensure uniform production from month to month. In the context of
HAL, budgeting system that is prevailing can be said to be an effective one of the
organization.
SUGGESTIONS
126
1) Before preparation of capital Budget, the records documents available in
2) Year wise records showing the value of the capital items with the gross
3) The source of supply with the details of Purchase Orders and dealers. If
4) No. of years which the total value of the capital items to be depreciated,
should be indicated against each item on the basic of type of the capital items.
maintenance, then history book should be maintained with the details of date
6) Two Registers i.e. one for purchase of plant / machineries from foreign
vendors and other for Indigenous source should be maintained to know the
to pay.
127
9) The exchange rate applied in case of anticipated foreign sources for
10) Lead time for receiving raw materials from suppliers is more, it should be
reduced.
11) Many employees are very qualified and well endorsed with valuable ideas;
12) Intranet facility should be frequently used so as to save money and time.
13) The system of company should be elastic and capable of adopting changes.
14) While preparing capital budget Present Value of money should be taken.
same level.
16) Promotion criteria should not only be based on seniority basis. It should
17) The company should try to set orders from other customers other than
permanent customers so that company could get economy of scale and reduce
BIBLIOGRAPHY
128
1) Annual Report of H.A.L. Lucknow.
7) Financial websites
• www.hal-india.com
• www.hindubusiness.com
• www.mag-india.com
• www.domail-b.com
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ANNEXURE
QUESTIONNAIRE
PH.NO…………………………
Mobile No. ………………………………………
ADDRESS ……………………………………………………………………
..………………………………………………………………….
…………….……………………………………………………..
130
(A)STRONGLY DISAGREE (B) DISAGREE (C) AGREE (D)
STONGLY AGREE
(A)YES (B) NO
131
Q12. IF YOU WANT TO GIVE ANY SUGGESTION IN MAKING CAPITAL
BUDGET MORE EFFECTIVE?
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Dear Respondent,
Date:
Place: (Signature)
132
LIST OF ABBREVIATION
133
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