GALGOTIA’S INSTITUTE OF MANAGEMENT

&TECHNOLOGY

SUMMER TRAINING PROJECT REPORT

“Capital expenditure and it’s accounting process”

Submitted in partial fulfillment of the requirement for the award of the

degree of Master of Business Administration

UNDER THE GUIDANCE OF:

Mr. Sandeep Sharma

SUBMITTED BY:
GAURAV KUMAR
[MBA III SEM]

1
 PREFACE
As an essential and obligatory part of my course which I have undergone 4

weeks of complete summer training at HEINZ INDIA Pvt. Ltd, ALIGARH.

This training helped me in getting knowledge in to business environment.

I got the practical knowledge about HEINZ INDIA Pvt.Ltd, on

how the work is done in the company and I have tried my best to give all the

possible information regarding the history of HEINZ.

In this Project Report I have also mentioned about the operation

of manufacturing unit of the company and also showed the functions of

various departments respectively. I indeed also tried to put some light to the

facilities, responsibilities, etc which is provided by the company regarding its

workers’ for their welfare services.

I also gave some of my efforts in realizing the importance of

training programmes for employees and other workers and how helpful it can

be for their welfare.

This Project Report overall gives the information which not only

serves the comprehensive knowledge base but also helps the reader in

understanding the fundamentals related to the subject.

2
 ACKNOWLEDGEMENT

I would like to avail this opportunity to express my deep sense of gratitude

and indebt ness to all those who have helped and encourage me towards the
successful completion of my project.

Firstly I thank to God almighty for his loving providence over me.

I am grateful to Mr. Rajesh Sharma (H.R. MANAGER) to allow me for

training at Heinz India Pvt. Ltd.

I am also thankful to my supervisor for guiding me the right project and help
a lot throughout my research period.

I thank the entire respondent who have extended their co-operation and
helped me to complete my study.

I also like to thank my family and friend who have been my strength and
inspiration throughout my training period. I thank them for their constant
support and encouragement.

I am grateful to all of them.

3
 GALGOTIA’S INSTIUTE OF MANAGEMENT &

TECHNOLOGY

…We are different

Vision:

'To earn recognition as a world class shaper of management professionals'

Mission

'To prepare and produce competent, passionate and market centric professionals and

managers of human emotions, business operations and global quality'

GIMT is a symbol of the vision of our Founder the group strongly believes in (Service)

and (Relationship). GIMT also realize the economic importance of service and

relationship sectors in the Indian and global economy and therefore, has chosen to follow

the model of service relationship excellence in its teaching curriculum.

Vision : GIMT has chosen to follow on the ‘Niche and Sunrise Sectors of India’ that

require specially trained executives for better service and relationships.

Value: The business school benefits its students to become more competent and ready for

their destined professions.

Vector: GIMT directs its resources towards creating SMART MBA with triple

specialization.

Vitality: GIMT aims to bring a new vitality to the existing technical programs at campus

at GREATER NOIDA with cultural exchange, activities and plans for the academic,

social and leadership development of students and faculty.

4
 The purpose Summer Internship of GALGOTIA INSTITUTE OF

MANAGEMENT & TECHNOLOGY (GIMT) for a minimum time of 8 weeks is to

connect better theory and practice.

5
 DECLARATION

I, Gaurav kumar a bonafide student of Galgotia’s institute of management

& technology Gr. Noida , hereby declare that I have undergone the summer
training at Heinz India Pvt.Ltd. under the supervision of Mr. Sandeep
Sharma on and from 1st July 2009.

I also want to declare that the present project report is based on the above
mentioned summer training and is my original work.
The content of this project report has not been submitted to any other
university or either in part or in full for the award of any degree ,diploma or
fellowship.

Further I assign the right to the university , subject to the permission from
the organization concerned , use the information and the content of this
project report to develop the cases ,case lets ,case leads and for use in
teaching .

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 TABLE OF CONTENT

 INTRODUCTION

 GLAXO TO HEINZ

 THE NEW HEINZ

 INTRODUCTION TO FINANCE

 OBJECTIVES OF THE STUDY

 CAPITAL EXPENDITURE (CAPEX)

 ACCOUNTING FOR FIXED ASSETS

 DEPRECIATION

 FINANCE DEPARTMENT

 RESEARCH METHODOLOGY

 LIMITATIONS

 CONCLUSION

 RECOMMANDATION AND SUGGESTION

 BIBLIOGRAPHY

7
INTRODUCTION

8
 INTRODUCTION OF HEINZ INTERNATIONAL

HEINZ international company is one of the American paradigms. It began shortly after
the civil war, in a family garden near Pittsburgh Pennsylvania. In the year 1869, its
founder HENRY JOHN HEINZ was a pioneer in food processing and product marketing.
He was a remarkable man, an energetic entrepreneurial boy from a pastor and a village
near Pittsburgh, who was not only a business genius, but also a man of high morals,
principles and personal rectitude, setting a new standard for the entire world.
H.J HEINZ Company is well known player in FMGC category. It stands second in the
world among food product companies next to nestle. It has been certified by ISO-9000.
HEINZ is the company known as ‘a good place to work’ since 1869 and is still known by
this name. Heinz follows ‘good food manufacturing practices’.
1994 was a significant year in the life of the H.J.HEINZ Company. It marked the 125th
anniversary of the company. It also marked HEINZ in the mid 1990’s - vigorous and ‘full
of beans’ - both executing today’s strategies and forging those that would become the
foundation of Heinz in the 21st century, the Heinz of tomorrow.
The H.J.HEINZ Company is constantly looking forward into the future and backward into
the past. By US standards, the Heinz Company at 125 is also one of the dwindling
numbers of surviving companies. Fewer and fewer companies, since the take over days of
the 1980’s, still bear the name of their founder. By any standard, it is a remarkable feat. A
distinguished and successful company, genuinely loved by the citizens of its hometown,
as well as by the loyal employees and customers around the globe, its brand name has
increased in stature and value over years, as has its reputation for world class employees.
HENRY JOHN was different; he treated its factory as his mother’s spotless kitchen,
giving importance to hygiene and cleanliness. He insisted on the best ingredients and
clear jars to display the purity of Heinz product. He also treated his employees as though
they were members of his family.
Of course, like any family, Heinz has had its ups and downs. At successful and less-
successful ventures, inspired ideas lucky accidents, missed opportunity, fiascos and funny
stories.

9
Heinz corporate office of HEINZ INDIA PVT LTD is situated at Mumbai.
As succeeding generations sustained the company and maintained its public following
throughout a period of enormous social, political and economic upheaval, the constancy
of Heinz proved a great comfort in time of depression and world war. A global economy
is emerging, uneven but inexorable. In the course of its 125 years, Heinz has grown from
an American dream to a global brand. That achievement is treatment to the universal
appeal of the Heinz ideal - pure food and healthful, affordable nutrition. It is also a tribute
to the tenacity and inventiveness of the world. As a new generation of customers enters a
widening world market place, the appeal of the Heinz ideal remains unceasingly durable
and filled with promise.
In September 1993, at the annual meeting O’RELLY amplified the strategies and shared
the good news to shareholders. A new Heinz had emerged, poised for substantial growth
in 1990’s and beyond.

10
GLAXO TO HEINZ

11
 HISTORY OF CHANGING NAME FROM GLAXO TO HEINZ

The GLAXO INDIA LTD was incorporated in India on November, 1924 as an agency
house for distributing. The well known baby food ‘GLACTO’ of a British co. which was
recognized internationally as one of the leading manufacturers of the research based
pharmaceuticals and food products.

In the early 1990’s Glaxo was going in losses in the manufacturing of food products all
over the world. Glaxo was asked to close all its food products over the entire globe.
However, Aligarh plant was running in profits so it did not want to close the unit and
hence asked the headquarters at Britain to permit her to continue the production. The
headquarters agreed on a condition to continue the food product after changing the name
so Glaxo India Ltd remained as Glaxo Laboratories India Ltd [GLINDIA].

This change in name caused a negative effect on sales of pharmaceutical product so

GLINDIA inquired from the Headquarters again to allow using the old name Glaxo India
Ltd. The permission was granted.
But due to competition in food product market Glaxo India ltd thought that as the
headquarters is not facilitating R and D program regarding food products so it would
become difficult in the near future to survive in the growing stiff competition. Therefore
Glaxo India Ltd thought that they should sell their Aligarh plant at the time when it is
making profits so that good value could be earned from it.

Ultimately in1994 Glaxo India ltd took a decision to sell its food products manufacturing
unit in Aligarh. Heinz India private ltd took over from Glaxo India ltd, in October 1984,
as Glaxo had decided to concentrate only on pharmaceuticals.

12
Heinz India private ltd by 1999 has become ‘Deemed Public co.’ as it has crossed the
average annual turnover of Rs. 10 crores for three consecutive years. A limit set by
company’s act, 1956 which permits a co. to omit writing the word ‘private’ in its name.
So Heinz India private ltd was renamed as Heinz India ltd, and again renames the co.
Heinz India ltd.

13
THE NEW HEINZ

14
 THE NEW HEINZ

In February 1992, a world wide growth forum attended by the company’s top 35
managers, O’RELLY and his senior advisor presented the improvement in the market
share and profit and implement radical change. A revolutionary idea emerged to replace
the company’s decentralized purchasing system with a centralized negotiable strategy.
Leveraging the company’s global strength made an eminent financial sense as it would
save the company’s millions over the next decade.
Procurement of key material was centralized. In the area of marketing, Heinz began to
challenge the conventional wisdom about media spending. Taking a more fixable and
timely approach to trade, consumer and point of purchase promotion as well as media
buys, affiliated aimed to move their marketing dollar towards consumer promotion self-
pricing. Heinz, already enjoying $2 billion business in the European community, targeted
further growth.
During 1992 and 1993, O’RELLY and senior management hammered out new reasonable
and demanding goals for each affiliate and successfully led the company out of the
complacency and mentality that inevitably accompanies two decades of unparalleled
financial growth and profitability.
In October 1992, with an eye on the dynamic Asia pacific Market Heinz made its largest
offshore acquisition, Purchasing Wattles Limited in New Zealand for $300 million. An
excellent complement to existing Heinz operation in Australia, Japan and China,
significantly strengthened its presence in this fast growing region of world.

CHAIRMEN’S FOUR IMPERATIVES

 Drive Profitable Growth

 Remove the Clutter
 Squeeze out Cost
 Measure and Recognize Performance

15
HEINZ VISION

 Delivering high quality products.

 Adhering to standard.
 Be a company with strong and motivated workforce.
 Satisfying customers needs.
 To become renounced in commercial and social sector.

HEINZ PREMIER VALUES

 Passion
 Risk tolerance
 Excellence
 Motivation
 Innovation
 Empowerment
 Respect

CULTURE

World’s second largest FMCG company, Heinz has a conducive environment which not
only integrates and motivates all the employees towards achieving high standard but also
makes sufficient room for everybody’s growth. People are a value asset as at Heinz, main
emphasis is on the task. Efforts are made towards satisfying the customers and expanding
the market share. A good blend of behavior and skill development programs provides
stimulus for growth and career development. Over the years Heinz has concentrated on
developing internal relationship so that external relationships are enhanced.

16
HEINZ: A CONTEMPORARY GLOBAL PLAYER

Heinz today is a global player in the food business specialized in providing processed
food products and nutritional services. Heinz is famous in over 200 countries. It is well
balanced geographically with above 43 percent of its same coming from non U.S.
operations with business and territories, has employees approximately plus thousands of
part time workers during seasonal peaks. In fruit business the brand’s dominance is sure.
It stands for quality.

ALIGARH FACTORY A BRIEF INSIGHT

 Heinz took from Glaxo on 1st October 1994.

 They continue with the same brand name.
 It now manufactures Complan and Glucon-D at Aligarh unit. Sampriti ghee being
a by product.
 Third party manufactures rest Nycil and biscuits Complan, and Glucon-D also.
 Factory is located 10 kms away from Aligarh city at a place known as
Manzoorgarhi.
 Factory has an area of 41.7 acres. One-third of the area is vacant and rest has
permanent infrastructure.
 Main office is situated in Mumbai.
 There is no interface of outside unions. It has its three manufacturing units located
at Bangalore.
 Milk collected from its centre, bulk supplier and private contractors.
 Heinz has collected 80000-90000 tones of milk/annum costing, around Rs.90-100
crores.
 Its total holding capacity is 4 lakh litres.
 In flush session (April-July) the milk collection is 4 lakh litres per day.
 The factory is connected both by roadways and railways.

17
 It has a turnover of Rs. 468 crores.
 Heinz has only one trade union H.S.A (Heinz Staff Association).
For security purpose, Heinz has divided the whole into different zones as follows:

Zone Department
A Administration block, MPO office, analytical lab, godown nos. 17 officers
colony, area new boundary well.
B Engineering office, stores, workshop platforms, and generator house, old and
new boiler.
C Production department, old lab, sprays drier no.1 and no.2, factory stores.
D R.P.U.1, 2, 3 all eastern wing godown and acid stores.
E Change and rest rooms, dispensary, fumigation godown, guest house.

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PRODUCT RANGE OF HEINZ INDIA PVT. LTD.
HEINZ is ranked as a second largest food company in the world. It has many products in
the world market. In India it offers 6 products;

1. Instant Energy Drink

  Glucon-D [plain]
 Glucon-D [orange]
 Glucon-D [mango]
 Glucon-D [lime]
Glucon-D is manufactured at Aligarh plant.

19
 2. Energy Rich Health Drink

Vitamin rich under the brand name of Complan is available in following three flavors;
 Natural
 Chocolate
 Mango
Complan is manufactured in Aligarh plant.

3. Ghee

As a by product of milk is manufactured under

the brand name of Sampriti. It is manufactured at
Aligarh.

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4. Prickly Heat Powder

Prickly heat powder is prepared in the brand name of Nycil. This

is available in following three fragrances:
 Plain
 Sandal
 Lavender
Nycil is manufactured by third party.

5. Heinz ketchup
Recently Heinz has come up with
new product Heinz Ketchup.
Although Heinz is primarily a
ketchup manufacturing company,
this is new first ever ketchup
produced by Heinz for India
market.
Heinz ketchup is manufactured in
Bangalore.

6. Complan Crunch Timer

 Milk cream
 Chocolate
These two flavors are available in these biscuits.
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22
FUNCTION OF VARIOUS DEPARTMENTS IN THE COMPANY

1. FINANCE DEPARTMENT
It is connected with the accounts and budgets preparation. Its function is:
 Funds management and budgetary control.
 Purchases and sales accounts control.
 Statutory and audit compliance.
 Wages administration.
 Variance analysis and information technology.
 Revenue budgeting and sending it to the main corporate office.

2. PRODUCTION DEPARTMENT
Its functions are:
(A)- Processing Area
 To conduct the dairy activities effectively.
 To separate fat from milk for the preparation of ghee.
 To dry up the skimmed milk for the preparation of complan.
(B)- R.P.U
This unit is setup for the purpose of packing the products.

3. PERSONNEL DEPARTMENT
Its functions are:
 Selection and recruitment of employees.
 Maintaining the personnel record.
 Provision of training, promotion and job rotation.
 Maintaining the record of temporary causal, contract and apprentice
workmen.

23
 4. F.S.U
Heinz has a wide range of products, which are mainly the food products. The co. has
F.S.U., which mainly looks after safe delivery of the goods to the customer’s since the
factory is located far away from the city.
 Cleaning the production units, machines, godown and other places in the
factory.
 Pest control and infestation control.
 To provide fumigation to the raw material and packed products.
 Maintaining temperature for different goods.
 Maintaining accounts for incoming outgoing materials.

5. ENGINEERING DEPARTMENT
Its main functions are:
 To help in the operation and maintenance of various equipment used in
production process.
 To provide effluent treatment and pollution control.

6. TRANSPORT DEPARTMENT
Basically transport department is the part of engineering department. The chief
functions are as follows:
 To provide tankers for carrying milk from milk collection centers.
 Provision for transportation of raw material and finished product to the
distributors.
 Provision of contract based conveyance facility to the employees.

7. QUALITY ASSURANCE DEPARTMENT

24
As the name suggests quality is not just an accident, it is a collective work of
intelligent people with a team of well trained and experienced people in quality
assurance department.
Quality policy:

Heinz India private ltd. Is committed to:

1. Procurement, development, production, and marketing of safe clean wholesome
food of high quality, keeping focus on needs of customer by establishing and
maintaining proper facilities necessary for controlled production consistency in a
controlled manner, so as to ensure that customer confidence is generated and
maintained consistently.
2. Establishing and maintaining appropriate operating and monitoring procedures
necessary for controlled appropriate production. Establishing and maintaining
training programmed so that every person responsible for product integrity and
safe guarding quality environments competent to carry out his responsibility.
3. Achieving high safety, occupation health and environment standards establishing
interval review procedure to ensure compliance of applicable laws and regulations.
Its main functions are:
 Maintenance of quality assurance department and lab equipment.
 To conduct quality assurance test of raw materials and packing
materials.

8. MILK PROCUREMENT UNIT

Its main functions are:
 Collection of milk from various collecting centers.
 To conduct milk purity test.
 To provide storage and refrigeration to the milk.
 Safe transportation of milk collecting centers to the company.

9. PURCHASE DEPARTMENT
Its main functions are:
25
  Material procurement.
 Asking for quotations and their evaluation.
 Order to the suppliers and procurement of order.

10. PLANNING & STORES DEPARMENT

Its main functions are:
 Ensure storage of material under hygienic conditions and meet good food
manufacturing practices standards.
 Ensure compliance of ISO norms.
 Ensure safe unloading of stock and no discrepancy with ledger balance.

11. SAFETY DEPARTMENT

For the purpose of providing safety to the company:
 Every department in the company has been equipped with fire.
 Extinguishing and first aid boxes. At the time of any contingency, the security
officers appointed for different zones perform there responsibilities.
There main functions are:
 Safety of employee and company’s property.
 Companies own staff is engaged for security.
 Controlling and guarding the movement of guards at the gate.
 Security alert around the factory boundary wall area.

26
INTRODUCTION TO
FINANCE

27
INTRODUCTION OF FINANCE

Finance is a circulatory system of the economic body of a firm. The term finance is a
broader sense, finance is not money alone, it course future payment also.
In an organization composed of number of separate activities, each working for its own
end but simultaneously making a contribution to the system as a whole, some force is
necessary to bring about direction and coordination of economic activity to facilitate its
smooth operation.
Finance management is the agent that produces this result. Finance management is viewed
as an integral part of overall management rather than as a staff especially concerned with
the fund raising operation only. Though all the important financial decisions are made by
the top management, the financial executive is deeply involved in this process. His main
responsibility is to provide all the necessary accounting information, analysis and discuss
the various alternatives and to suggest suitable solutions.
His responsibilities lie in the following sphere of finance function:
FINANCE FORCASTING: - It is the chief responsibility of financial executive to make a
sound financial forecast and then plan for achievements. He sees that the sufficient supply
of cash is available at the proper time for the smooth flow of firm’s activities. He tries for
an efficient flow of firms activities. Experience financial crisis and differ its payments.
RAISING OF NESSARY FUNDS:- Another major responsibility of financial management
is to supply adequate funds to the firm for its various operations. A cost benefit analysis
of various alternative sources must be made before raising funds from any particular
source. If the company decides to raise the needed funds by the means of security issues,
the finance manager has to arrange the issue of prospect for the floatation of issues.
Where the company decides to borrow money from financial institutions including
commercial banks and special financial corporations, the finance manager has to negotiate
with the authorities.
ALLOCATIONS OF FUNDS: - In allocating the funds, consideration must be given to the
factors such as immediate requirement, management of assets, profit prospects and overall
28
management plans. The finance manager has to ensure proper utilization of cash funds by
taking such steps as to help in speeding up the cash inflow on one hand and slowing cash
outflow on the other hand.
ALLOCATING INCOME:- Income can be retained for financing expansion of business or
may be utilized for retiring outstanding debt or it may be distributed to the owners as
dividend as to return of capital.
DISPOSITION OF PROFIT:- The proper disposition of profit is also an important
responsibility of financial management.
Regarding the allocation of net profit after payment of taxes, a typical firm may be said to
have two choices:
1. To pay dividend to shareholders as a return upon their investment and,
2. To retain earnings for the expansion of business. The financial manager balance
the expectation of investors and the need of retained earning to acquire additional
assets.
Heinz India private ltd. Aligarh is the man manufacturing unit. The stock is transferred
from Aligarh plant to Varanasi, Ghaziabad and Unnao (near Lucknow). Unnao is known
as Suklagang, Delhi branch of Heinz India private ltd deals with the operation regarding
sales. It prepares monthly sales report regarding three locations (Varanasi, Ghaziabad
and Suklagang). This report is checked at Aligarh factory. The central sales tax rule,
1975 prescribes use of various forms for the purpose of central sales tax 1956. If the
goods are send to outside U.P. than “form c” is taken by the company. It is the
responsibility of a/c’s department to receive form c. if form is received then 2% sales
charges is taken by the company otherwise 10% is charged. “Form f” is for transfer
otherwise than by sales. “Form 31” is only for purchase of material. If the purchase is
more than 10 lakhs then form 31 also include entry tax.

29
 ASPECTS OF FINANCE

“Money is all about” goes the famous saying. This is also said about finance that money is
the life blood of any company and the company also fails without money. It is very
important that finance department work very efficiently. Thus it can be said that success
of any organization largely depends upon the optimum utilization of funds. The main
finance department of Heinz is in Mumbai. Aligarh factory has a finance department
which handles the daily affairs of the factory.
Finance and accounts department is the backbone of any organization. Almost all kinds of
business activities directly or indirectly, involve the acquisition and use of funds. For
example: promotion of employees in production is clearly a responsibility of the
production department but it requires payment of wages & salaries and other benefits and
thus involves finance department. Similarly buying a new machine or replacing an old
machine for the purpose of productive capacity affect the flow of funds.
The accounts department at Aligarh factory also controls the computer department.
Coding is the soul of computer output to avoid this problem, the new technique has been
developed which is called “coding is defined in numbers as well as in alphabets”. It can
be either in numeric value or in alphabetical only. It can also be a combination of alphabet
and numeric value.
Different companies use different type of coding structure. The coding structure of the
company is defined as per their own convenience and the requirement of company.
Computer is an electronic device and it is unable to understand the “HUMAN
LANGUAGE”. In order to overcome this problem we use the language, which can be
understood by computers, which is called coding.

30
 FINANCE DEPARTMENT

Plant controller

Assistant manager finance

Account Account Account Account

officer officer officer officer

Section Section
head head

Clerical Clerical
staff staff

31
OBJECTIVES OF THE
STUDY

32
 OBJECTIVES OF THE STUDY

 To study the procedure of identifying the needs of fixed assets, purchasing and
installing to get output of the capital expenditure.
 To review the process of Accounting for fixed assets in Company.
 To study the legal aspects related to the fixed assets investment.
 To study the depreciation aspects of fixed assets and its impact on the production,
in payment of taxes and in maintaining the profit of the company.
 To study the role of different departments of the company regarding the capital
expenditure.

33
 CAPITAL
EXPENDITURE

34
 CAPITAL EXPENDITURE (CAPEX)

Every business needs funds for two purposes – for its establishment and to carry out its
day to day operations and expenditure. Long-term funds are required to create production
facilities through purchase of fixed assets such as plant and machinery, land and
building, furniture etc.
The investment in these assets represents that part of firm’s capital which is blocked on a
permanent or fixed basis and is called fixed capital. Thus the requirement & investment
of funds for these fixed assets of any company is called capital expenditure i.e.
“CAPEX”. On the other hand funds are also needed for short-term purpose – for the
purchase of raw material, payment of wages and other day-to-day expenses etc. These
funds are known as working capital.
For the proper and appropriate allocation of funds there is a need of capital budgeting for
any firm. A capital expenditure may also be defined as an expenditure whose benefits are
going to be received over a long period of time i.e. more than one year.
In simple words we can say that capital expenditure is an expenditure incurred on
acquiring or improving the fixed assets, the benefit of which are expected to be received
over the number of years. The examples of capital expenditure are: -
 Cost of acquisition of permanent assets as land and building, plant and
machinery, goodwill etc.
 Cost of addition, expansion, improvement of alteration in the fixed assets.
 Cost of replacement of permanent assets.
 Research and development project cost etc.
In Heinz India private limited Aligarh, the capital expenditure is done through the
proper capital budgeting for the planning and control of capital expenditure.
Company’s board of directors and different departments such as engineering
department, purchase department, R&D department and finance department of the
company decides about capital expenditure whether or not to invest money into a
particular long term project whose benefits are going to be realized over a period of
time, more than one year.

35
 The process of capital expenditure starts from the following ways:-

 Identification of needs for the plant where capital expenditure

would be needed to achieve the company’s objective.

 Needed items are classified in “Capital Appropriation Request”

(CAR) format, which is basically generated by engineering department
of the company.

 Approval of CAR is done by different authorities such as concern

managers, Assistant Manager Project, Manager Quality Assurance and
General Manager Operations. It depends upon the amount of the fixed
assets.

The table showing below:

36
Management Managin Vice Vice General Grade Grade Grade
g president manager
Grades directors / preside 1 2 3
nt
directors
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Purchase Order Over
Capital items 2000000 2000000 200000 2000000 200000 ××× ×××
0 0
Coded items 3000000 3000000 300000 3000000 300000 750000 500000
0 0
Affiliated 3000000 3000000 300000 3000000 150000 750000 500000
purchase 0 0
Non-coded 500000 500000 500000 500000 500000 100000 50000
Marketing 3000000 3000000 300000 3000000 300000 75000 ×××
0 0
Services 1000000 1000000 750000 300000 150000 75000 ×××
(branches)
Services (others) 500000 500000 500000 500000 500000 100000 50000
Advance Over 5000000 250000 1000000 500000 ××× ×××
payment 5000000 0
Cash payment Over 20000 20000 20000 20000 10000 5000
20000
Traveling Over 100000 100000 50000 30000 10000 ×××
expenses
100000
Inventory Over 200000 200000 200000 25000 10000 5000
adjustments 200000
200000 200000 200000 ×× × ××× ×××
Branches 200000

Factory
Credit notes Over
Customer claims 200000 200000 100000 100000 25000 ××× ×××
Sales Return 200000 200000 200000 200000 ×× × ××× ×××
Material services 200000 200000 100000 100000 25000 10000 ×××

37
 Process of CAR Approval for Purchasing of Fixed Assets

Engineering/user Identification
department of needs

Generating the CAR and

its approval by assigned
authorities

Purchase requisition
(PR)

Asking for
Purchase department
quotations and
their evaluation

Freezing the specification

Purchase order
(PO)

Quality Finance
Supplier/vendor
Verification department

38
The Capital Appropriation Request (CAR) form contains the following things:-

1. Appropriation no.
2. currency
3. Request date
4. department/location
5. Project no.
6. Project title
7. Purpose : purchase/lease
8. Lease payment per year
9. Lease terms
10. Present value of lease payment: discounted at
11. Category
12. Latest approval data
13. Commencement data
14. Completion data
15. Budgeted amount
16. Original request
17. Supplemental request
18. Total project
19. Classification of items
20. Expenditure
• capitalized
• expanded
• others
• totals
21. Total purchase
22. Leased equipment
23. Total lease
24. Total request
25. Memo: capitalized interest

39
26. Change in working capital
27. Net profit after tax
28. Return on investment
29. Project IRR
30. Current business plan ROIC
31. Paybacks (purchase only) from commencement of spend to start up
operations in yrs.
32. Advantage of owing (lease only)
33. Description of proposal.
34. Space for approval by different authorities of company.

40
FORMAT OF CAR

41
 PURCHASE REQUISITION (PR)

“It is the statement contains specification of the items what the user wants.” After the
approval of CAR (capital appropriation request) for required fixed assets, the next step is
to generate the purchase requisition (PR) by engineering or user department and this PR is
sent to the purchase department for further process. Purchase requisition contains the
specific coded number which is created by the user/engineering department. This coded
PR no. has information such as name of items, its quality and its cost which is expected
by the engineering department. It should not be disclosed to vendor in any way.

42
 PURCHASE DEPARTMENT

 Collect the purchase requisition (PR) from engineering or user department.

 Raise the Tender/Quotation for required items in PR.

 Analysis of the quotation.

 Prepare the statement for selected vendor’s quotation.

 Placing the order through the purchase order.

43
 PURCHASE ORDER (PO)

“It is the binding agreement between both the parties. Both the parties are obliged to
follow the contents mentioned in it by the purchase department.”
Purchase order is basically prepared on the basis of minimum three quotations collect
from different vendors.
For example: -
Heinz, in the case of fixed asset in general.
 Price includes excise duty and cess @ 14.42%.
 Technical specification and scope of supply as per its condition.
 Payment terms: 20%advance with PO, 70% at the time of dispatch after
inspection of your factory, balance 10% on successful installation.
Commissioning and submission of a bank guarantee from a reputed three star
rated bank valid for 10% of PO value.
 Warranty: one year from the date of commissioning.
 Delivery time: min 7 months from the date of P.O. for the supply of fixed
assets.
 Liquidated damages clauses: min 0.5% and penalty upto a max. of P.O value.

44
 Characteristics & classification of P.O. according to its SAP no.

In SAP, the company opts the different specified number, from which digit the sap
no. starts, with the help of this specific digit we can recognize the specific assets
or goods as under follows:-

Categories of items Specific digit starts in the sap no.

Raw material and packing 1………..

Imported materials 2………..

Engineering spares 3………..

Consumable material 5………..

Services 6………..

Capital expenditure (CAPEX) 7………..

45
ACCOUNTING FOR
FIXED ASSETS

ACCOUNTING FOR FIXED ASSETS

46
 [Under Accounting Standard – AS-10]

Fixed Assets in Financial Statement:

 Fixed assets shall be shown in financial statement either at historical cost or
revalued price.
 What is historical cost? The historical cost of acquired fixed assets consists of the
following:
 Purchase price
 Import duties and other non-refundable taxes.
 Any directly attributable cost of bringing the assets to the working condition for its
intended use like:
• Site preparation
• Delivery and handling cost
• Installation cost
• Professional fee (i.e., fees of engineers and architects)
• Expenditure incurred on start up and commission of the project including
the expenditure on test runs less income by sales of products.
• Administrative and other general overheads (such as construction/
acquisition/ installation of the fixed assets).
• Amount of Govt. grants received/ receivable against fixed assets should be
deducted from the cost of fixed assets.
• Loss/ gain or deferred payment on foreign currency liability.
• Price adjustment, changes in duties or similar factors.
 Revalued Price:
When a fixed asset is revalued, an entire class of assets should be revalued or the
selection of assets for revaluation should be made on a systematic basis. Those are
following:
• By re-stating the gross book value and accumulated depreciation.
• By re-stating net book value adding there in the net increase on account of
revaluation.

47
 • Maximum amount of revaluation – Revaluation of fixed assets should be
restricted to the net recoverable amount of fixed assets.
Improvements and Repair
There are two accounting treatments of cost of improvement and repair. These
accounting treatments depend upon the following conditions:
 After the improvement and repairs, expected future benefits from fixed assets do not
change. The expenses of improvement and repairs are charged to profit and loss
account.
 After the improvement and repairs, expected future benefits from fixed assets will
increase beyond the previously assessed standard performance. These expenses on
improvements and repair are included in the gross book value of fixed assets.
 Addition or extension of capital nature to an existing asset:
• If integral part of existing asset – it is generally added to gross book value
of existing assets.
• If separate identity and capable to be used after the disposal of existing asset
– it is accounted for separately.
Retirement and Disposals:
• Fixed assets are deleted from the financial statement either on disposal or
if an expected economic benefit is over.
• Gains or losses arising on disposal are generally recognized in profit and
loss account.
 Capitalization of exchange differences incurred on fixed assets related borrowing:
Instruction contained in part-I of schedule-VI of the Companies Act, 1956 regarding
adjustment of exchange difference in carrying amount of the fixed assets due to
change in the rate of exchange of fixed assets linked liability denominated in
foreign exchange has been superseded by issue of companies (Accounting
Standards) Rules, 2006.
Therefore, AS-11 will apply and such exchange difference shall be recognized in
profit and loss account and will not be capitalized with the cost of fixed assets.
 Treatment of CENVAT Credit on capital goods (Fixed Assets):

48
• Accounting for fixed assets issued by the ICAI, requires that only non-
refundable taxes and duties in respect of the fixed asset should be included in
the cost of that fixed asset.
• Cenvetable excise duty can be considered as a refundable tax. Therefore
CENVAT credit of such duty should be reduced from the purchase cost of
capital goods concerned and recognized as a separate asset.
• The CENVAT Credit in respect of capital goods is allowed for an amount
not exceeding 50% of the duty paid on such capital goods in the financial year
in which the goods are received in factory and the balance will be allowed in
the subsequent year(s).
• The amount of CENVAT credit taken in the financial year, in which goods
are received, should be debited to an appropriate account, say “CENVAT
Receivable (Capital Goods) Account” and balance may be debited in another
appropriate account say “CENVAT Credit Deferred Account”.
• In the subsequent financial year(s), when the balance CENVAT credit is
availed of the appropriate adjustment for the same should be made, i.e.,
amount of “CENVAT Credit Deferred Account” with a corresponding debit
too CENVAT Credit Receivable (capital goods) Account”.
• On actual utilization, the account will be adjusted in the excise duty on the
final products. Accordingly, the purchase cost of the capital goods would be
net of the specified duty on capital goods. The unadjusted balance standing in
the MODVAT Credit receivable (Capital goods) account, if any should be
shown on the asset side under the head “Advances”.

49
DEPRECIATION

50
 DEPRECIATION

“Depreciation may be defined as the measure of the exhausion of the effective life of
an Assets from any cause during a given period.”
Depreciation is a permanent, continuing and gradual shrinkage in the value of fixed
assets. With the exception of land most fixed assets have united useful life as they are
subject to depreciation, depreciation is the distribution of total cost of assets over its
useful life.
From the above definition it is clear that the term depreciation means gradually
reduction in the value of an assets. This gradually reduction in the value of an assets
may be due to its constant use, change in the market value of an assets , depletion in
the quantity of an assets (as in the case of mines ) or new inventions or discoveries.

51
 CAUSES OF DEPRECIATION
The main causes of depreciation in the value of fixed assests are as follows:
1- Wear and Tear:- Constant use of an assets reduces its value
and this reduction in value is termed as Depreciation. Even the best repairs may
not be able to keep the assets ready for use for a long time, after sometime the
assets does not remain fit for use. Thus, constant use of an assets bring reductior in
its value.
2- Depletion of Assets: Some Assets due to their nature are
reduced in value because of taking out the content or the material out of them.
Examples of such assets are coal mines, Iron ore, Oil wells etc.
3- Effluxion of Time: Value of some assets is reduced due to
passage of time. Patents and Trade marks are some examples of such assets . The
life of such assets is fixed for a set number of years and with the passage of time,
the value of such assets is reduced to ‘Zero’.
4- Obsolescence: Some assets are discarded due to innovations,
inventions, change in technology etc. For example, due to invention a workable
existing machine may have to be replaced by the new machine. Such a loss on
account of new invention or technological upgradation is termed as loss on
accounts to obsolescence.
5- Accident: Sometimes the value of the assets is very much
reduced due to accidents. Their working capacity is also much reduced and
therefore, it does not remain profitable to use them.
6- Permanent Fall in the Market Value: Sometimes the
market value of some assets falls permanently and therefore, their value is to be
reduced in the books of accounts.
On the basis of the above causes, it may be concluded that depreciation is the decrease or
depletion in the value of an assets due to wear and tear, exhaustion, exposures to the
elements, obsolescence, lapse of time and accidents.

52
 Objectives & Importance of charging Depreciation

• Determination of True Profits:- The capital expenditure on acquisition of

fixed assets is a periodic cost and on operating charge on this account must be
charged to the profits during the life of the assets in order to calculate true profits.
Like other business expenses, depreciation is also charged in respect of the service
rendered by an assets in earning revenues. Thus, depreciation must be charged as
an operating cost from the year’s current revenue for the use of an assets in that
year so that correct profits may be ascertained.

• Presentation of True Financial Position:- Another important objective of

providing depreciation is to present a true statement of affairs of the business by
showing assets in the balance sheet at their real value. The assets get depreciated
in their values over a period of time on account of various reasons. In order to
disclose the true financial position of the business, it is necessary to show the
various assets at their depreciated or real values in the balance sheet.

• Replacement of Assets:- The main objective of providing depreciation is to

keep the firm’s capital intact so that an useless assets can be replaced after the
expiry of its service life without any additional capital requirement.

• Ascertainment of Cost of Production:- In order to ascertain the exact cost of

production, it is necessary that depreciation on assets be considered as a cost item
like other cost such as wages, salaries, rent etc.

• Reduction in Tax Liability:- Depreciation is an admissible deduction under

the Income Tax Act and hence reduces the tax liability of the enterprise.
Obviously, by charging depreciation of the profit and loss account the taxable
profits of the enterprise are reduced.

• Marginal Significance of Depreciation in Capital Investment

Decisions:- Depreciation is of particular significance to the management of an
enterprise in taking decisions relating to Income measurement and the impact of

53
 Inflation, and Investment of capital. The net Income earned by a company is
determined by charging the operating costs against the revenue of the period.

Depreciation is an important part of the operating cost of the business. Since

operating cost are important for business decisions, the management has to take into
account the impact of depreciation on the business income. During inflation period,
depreciation charged on historical cost of assets will be lower than what is desirable.
In order to ensure that the reported income is correct and adequate funds are available
for replacement of assets, the management has to make necessary adjustments to
restate depreciation and income in terms of replacement cost of the assets. Income tax
provision has the strongest effect on depreciation policy pursued by the management
of the company.

In respect of capital or investment decisions which are made on the basis of rate of
return. The management carefully considers the amount of chargeable depreciation as
it affects the probable cash inflow from a particular investment project on account of
savings in tax liability to the extent of depreciation charged. Thus, depreciation is of
particular significance to the management in taking capital investment decisions also.

Factors Affecting the Amount of Depreciation

The Following are the three important factors which should be considered for
determining the amount of depreciation to be charged to the profit and loss Accounts
in respect of a particular fixed Assets.
• Historical cost or other amount in place of historical cost like revalued amount,

• Estimated useful life of depreciated assets,

• Estimated residual / scrap value of depreciable assets.

54
 Methods of Depreciation

There are many methods which are used for charging depreciation in respect of
depreciable assets of an enterprise. The Accounting Standard No.6, issued by the
Institute of Chartered Accountants of India lays down that “the depreciable assets
should be allocated on a systematic basis to each accounting period during the useful
life of the assets.” This accounting Standard, however does not mention any particular
methods for arriving at the amount of depreciation. But it does insist that once a
methods is selected, it should be consistently used and not changed as and when by
the management. If management wants to change the methods of depreciation once
used in the previous years due to some reason or the other, i.e, for the compliance of
the accounting standard or for making the financial statement more appropriate then
the “unamortized depreciable amount” should be charged to revenue over the
remaining useful life of the assets. Further the fact of such change should be expressed
in terms of money and be disclosed properly in the final accounts.
There are two important methods of depreciation. They are
1- Straight Line Method (SLM),

2- Written Down Value Method (WDVM).

1. Straight Line Method:

According to this method, depreciation is charged evenly every year throughout the
useful life of the asset. The uniform annual amount of depreciation is determined as
follows:

Depreciation = (Original cost of fixed assets) – (estimated scrap value)

estimated useful life of the asset

55
 • SLM is very suitable for assets like leasehold properties patents etc. which get
depreciated with the passage of time.

• It does not take into account the impact of seasonal fluctuations, inflation, and
depression on the replacement cost of the assets.

2- Written Down Value Method :

According to this method, depreciation is charged on the book value of the assets
each year, with the result that the amount of depreciation goes on decreasing every
year.
• The formula for calculating the rate of depreciation under this method is as
follows:

 Net Salvage Value 

Rate of Depreciati on = 1 − ×100
Acquisitio n Cost 
n

 
Where , n= no. of year of useful life of the asset.
• This method suit to plant and machinery in which addition , extensions and repair
take place frequently.

56
 Legal Aspects of Depreciation

 According to Income Tax Act 1961 under sec. 32 the following legal aspects are
as follow:

• Income tax says for charging the depreciation on fixed assets in four categories:

(i) Building

(ii) Plant and machinery

(iii) Furniture and fittings

(iv) Intangible assets

 Provided further that where an asset referred to in clause (i) or clause (ii) for
clause (ii)(a), as the case may be, is acquired by the assessee during the previous
year and is put to use for the purposes of business or profession for a period of less
than one hundred and eighty days in that previous year, the deduction under this
sub-section in respect of such asset shall be restricted to fifty per cent of the
amount calculated at the percentage prescribed for an asset under clause (i) or
clause (ii).

 Provided also that, in respect of the previous year relevant to the assessment year
commencing on the 1st day of April, 1991, the deduction in relation to any block of
assets under this clause shall, in the case of a company, be restricted to seventy-
five percent of the amount calculated at the percentage, on the written down value
for such assets, prescribed under this Act immediately before the commencement
of the taxation laws (Amendment) Act, 1991.

 Provided that no deduction shall be allowed in respect of

(A) any machinery or plant which, before its installation by the assessee, was used
either within or outside India by any other person; or

57
(B) Any machinery or plant installed in any office premises or any residential
accommodation, including accommodation in the nature of a guest-house; or

(C) Any office appliances or road transport vehicles; or

(D) Any machinery or plant, the whole of the actual cost of which is allowed as a
deduction (whether by way of depreciation or otherwise) in computing the
income chargeable under the head profits and gains of business or profession of
any one previous year.

 Provided that if a plant is ready to use then it would be treated as capitalized.

 Provided that if plant is ready to use but does not start due to certain legal or other
factors then the depreciation should be exempted.

58
 FINANCE
DEPARTMENT

59
 FINANCE DEPARTMENT

“Finance is the Life Blood of Every Organization”

 For smooth running of the various business operations adequate supply
of funds at the appropriate time is very essential. Owing to improper funds whole
of the organization could suffer.
 Thus to manage the financial matters of the company a finance
department is required which controls and regulates the flow of funds to different
department as and when required. While preparing a budget the requirements of
all the departments is taken into consideration. Specific tasks are assigned to each
department and accordingly funds are allocated.
 Heinz being an MNC (multinational company which is US based)
follows different accounting policies as required. In US countries it uses USGAP
(United States General Accounting Principles) while in India it follows IGAP
(Indian General Accounting Principles).
 Finance department plays main role in CAPEX (Capital Expenditure).
All the CAPEX are checked and analyzed and also plays the role of payment of
final stage. Thus, all the activity moving around the finance department with the
following significant role such as:

• Capital management and budgetary control,

• Purchase and sales account control,

• Statutory and audit compliance,

• Wages administration,

• Take part in approval of CAPEX,

• Checking the proper documents and invoice of the supplier,

• Estimation of taxes,

• Analysis of cost of capital expenditure and their output,

• Payment for all kinds of purchases and expenditures.

60
 SAP as Recording Tool in the Company:
System Analysis and Process (SAP) is ERP (Entrepreneur Resource Planning)
software package, while Heinz India Private Limited is full-computerized company and it
use SAP as recoding tool for all the information and data with specified SAP number.
SAP was developed in 2000 in Heinz India Private Limited, Aligarh. The
Company used its 40B version. It is monitored and controlled by head quarter in Mumbai.
Advantages of SAP:
 Full data available.
 Visibility
 Online
 Nothing is deleted only edit.
 Quick Response.
 Reduction of paper work.
 Easy operating.

Material SAP Entry

Goods Receivable Note

Eng. Stores 103
(GRN)

Goods Acceptance Note

Q.. verefication 105
(GAN)

User Department Rejected Goods/Material 124

Finance Department

Example of SAP Entry:

61
103:
Material supplies by vendor to company is check for the quantity at the time of
receiving of goods by stores department and makes goods receivable note (GRN) and
make an entry in SAP system of the received material / assets and it provided a code in
SAP as 103.
105:
After receiving the material it provided to Q.A. department to check the quality of
received goods according to the standard of the company and then makes a goods
acceptance note (GAN) and makes an entry in SAP with code 105 and Rejected goods
which has not standard quality has coded in SAP with 124.
The Excise Credit also provided to the goods/material in SAP with 105 at the time
of making GAN.
Entry Pattern of Accounts in the Company:
All the entries of accounts of the company are processed through MIRO. MIRO is
a transaction by which all the entries are to be made in the SAP.
Transaction Pattern in MIRO is as follows:
User/Engineering Department
• WIP (work in progress) → Dr.
• GR/IR → Cr.
• Basic Excise Duty → Dr.
• Aligarh Cenvat Clearing → Cr.
↓
Finance Department
• GR/IR → Dr.
• Aligarh Cenvat Clearing → Dr.
• Vendor → Cr.
↓
Final Stage (Ready to Use)
• Assets (e.g. Turbine) → Dr.
• WIP → Cr.

Note:-

62
In SAP System the entry pattern of accounting is done with the symbol of Negative (−)
and positive (+) for credit and debit respectively; it defined as follows:- Credit (Cr.)
→ (−)
Debit (Dr.) → (+)

63
 PAYMENT SYSTEM

• Check the entry in SAP by Purchase department, factory store and quality
assurance department.

• Match with invoice which is given by vendor with all details about delivered
items,

• Check the details like tax code ,address , vendor name , delivery address ,
originality of invoice ,purchase order number and date ,

• If the payment amount is less than purchase order amount then finance manager
allows for payment of this invoice,

• And if the invoice payment amount is more than purchase order amount then
finance manager does not allow for payment of this invoice,

• Finance manger take decision about payment on credit period or without credit
period means on discount,

• Individually and proper check-up of all entries by finance manager in detail before
clearing a payment,

• Finance manager has the right to retain some amount of payment (about 10%)
according to the company policy at the time of payment in the company’s bank as
security money for provided fixed assets.

64
DEPARTMENTS RELATED WITH PAYMENT SYSTEM

Engineering/ User Department

Planning Department

Purchase Department

Factory Store

Quality Verification Department

Finance Department

Payment

65
 INVOICE

It is a legal document or a type of bill for any company which is provided by

supplier/vendor for getting payment of delivered items /fixed assets. It is a slip for the
payment with credit and cash both, and contains the cost /rate of materials. Its
characteristic are:-

1. It should be original entries should be correct & clearly mention.

2. Send by the vendor who delivered the goods.

3. It should have following contents:-

• Vendor’s name

• Invoice number

• Purchase order number

• Date of delivery

• Name of items with their quantity and rates (price)

• Delivery place

• Including taxes

• Information about advance amount of payment

• Information about retentions amount

• Total amount for payment

• Terms and conditions signed by vendor

66
 TAXES

In the case of CAPEX (Capital Expenditure) mainly two types of taxes involved such as:-
1- Sales Tax
2- Excise duty
1 - Sales Tax

Sales Tax

Local Sales Tax (LST) Central sales tax (CST)

i.e.VAT
4% to 12.5% 2% to 12.5%

Local State Tax:

Transaction of goods within one state: Its minimum range is 4% and maximum
12.5% of the sales & purchase .VAT (Value Added Tax) is the example of LST.

67
Central Sales Tax:
It applies on transaction of goods in between two or more states. Its minimum
percentage is 2% and maximum is 12.5%.
2- Excise Duty:
A manufacture or producer of final product is liable to pay the excise duty to
Government. And he is also allowed to take CENVAT credit with regard to the excise
duty paid by him on fixed assets, raw materials spare parts and other components etc.
• Excise duty rate is 14% plus 3% education cess. i.e. about 14.42%of total amount .

68
 MODE OF PAYMENTS

• After verifying the invoice /bill, the finance manger has the right to make
payment with different mode of payment, generally payment through at
PAR Cheque.

• According to Income Tax Act under section 40(a) (3) the payment through
cash should not be more than Rs 20000/-.

Mode of
payments

Traditional Modern
techniques techniques

Cheque Bill of
Cash exchange EFT RTGS

1. Cash :-

• Cash payment means direct payment in monitory terms.

• Cash payment is avoided in Heinz India Pvt .Ltd .Aligarh

• But still use @ 2%

• In less amount payment

• Urgent payment

69
2. Cheque :-
• Cheque is a bill of exchange drawn on a specified banker and payable on demand
(section 6 of Negotiable Instrument)

• 90% payment is done by cheque in Heinz India PVT.LTD., Aligarh

3.Bill of Exchange:-
• A bill of exchange is an instrument in writing containing an unconditional order,
signed by the maker ,directing a certain person to pay a certain sum of money only
to , or to order of , a certain person or to the bearer of the instrument (under
section 5 of Negotiable Instrument)

• Generally it is not used for making any payment in Heinz India PVT.LTD.,
Aligarh.

4. EFT (Electronic fund Transfer):

• It is a modern technique by which money is sent from one bank to another bank
with the help of internet in a short period of time.

• This technique is implemented by Heinz India PVT.LTD.

• It is a easy and secured way of transferring money.

• Less time consuming.

• In this way we send the information of payment to bank and bank transfer the
money in vendor’s account directly.

5. RTGS (Real Time Gross Settlement):-

• It is same like EFT but having a small difference – it is used when the company’s bank
and vendor’s bank both are different, then a reputed bank acts as a mediator in between
two banks and help in transferring money. This process is called RTGS.

• Company makes payment all over India by the help of this new technology.

70
 RESEARCH
METHODOLOGY

71
 RESEARCH METHODOLOGY

• This study is related to expenditure which is incurred by the company on the fixed
assets. It cover all the aspects related with the sales & purchase of these assets.

• Research methodology is a way to find out the information and results

systematically with the help of research design.

• Research Design of the study is Descriptive, because this study is about describing
and explaining the data which is collected by the different employees related with
the process. The main objective of my research study is to find out the impact of
CAPEX (Capital Expenditure) on the production and infrastructure of the company
and also to know about the working pattern of the company with its business
environment.

• So our research design is the type of non-probabilistic sampling, in which we

collect the information from different department such as engineering, purchase
stores and finance department. Thus we also called it as purposive sampling in
which we collect data according to our purpose regarding CAPEX.

• This is a case base study about a particular case of Heinz India Pvt ltd. which is
related with capital expenditure.

• Type of data used is secondary in nature which is collected from the published
sources like company publications, annual reports etc. useful for capital
expenditure.

72
Method of Data Collection:
• The success of any study, survey and analysis depends upon a definite procedure
that is followed in collection of data.

• Mainly data or collected information are of two types:-

1-Primary data
2-Secondary data
• Primary data are those which we collected the first time directly from the lot ,
while my topic of study on CAPEX, therefore there is no any need to collect the
primary data because on the CAPEX company provided the information of
secondary type from different departments.

• Primary data is obtained through the observation, interviews and discussion with
officer of Heinz India PVT.LTD., Aligarh.

• Secondary data is derived from the published and unpublished sources, like
company publication, policy of company, annual reports, and annual plans and
from other useful document related with capital expenditure.

73
LIMITATIONS

LIMITATIONS
74
 The data required for the study is confidential in nature. Hence, any
modification in the data cannot be overruled.
 Paucity of time is one of the major limitation of the study.
 Analysis of the data is based on response given by the employees of the
company. Hence, any biasness in the response cannot be overruled.
 No primary data is collected for the study. Hence, reliability of the result
are limited to the secondary data only.

75
CONCLUSION

76
 CONCLUSION

“As goods things must come to an end so has my project report…”

After six weeks of sincere efforts I have compiled this project report. In this report I have

covered the aspects of “Fixed Assets Accounting” that are being practiced at Heinz India

Pvt Ltd. (Aligarh factory). After doing my research work I have arrived at the conclusion

that at Heinz the employees are more than just satisfied and they think high of the

management and its practices. Heinz India PVT. LTD. Aligarh is one the leading FMCG

(Fast Moving Consuming Goods) companies in the world .The company consists of latest

technology to maintain best quality products and is careful about the consumer

satisfaction . It has a solid finance position.

I have thoroughly examined all the aspects regarding the purchase of fixed assets,

installation and taken steps for ready to use and also concerned about the payment system,

taxation process and the mode of payments for the CAPEX.

• The company has kept proper book of account as required by law.

• Its works are fully computerized with proper networking and its transaction are

done through the SAP system.

• The CAPEX of the company done in the following manner-

i. Planning & identification of CAPEX.

ii. Appraisal and approval of the required fixed assets.

iii. Implementation.

iv. Review and control of the fixed assets.

77
• Payment for the CAPEX is decided by the board of directors according to its
importance for the company.

• The company maintains proper records showing full particulars, including

qualitative details and situation for fixed assets.

• The company has calculated the depreciation according to the Company Act 1956
for fixed assets (schedule 13) and Income Tax Act 1961(under section 32), to
maintain in the tax payment with getting CENVAT credit.

• The company reduces the cost of production and maximizes the profit through
applying capital expenditure on recent technology and machinery.

• To analyze the life of fixed assets and its working performance and compare with
the standard performance to find out its efficiency.

• Heinz India PVT.LTD. Aligarh, adopts the proper capital budgeting which
involves the planning and control of capital expenditure for the long term
investment whose benefits are to be realized over a period of time longer than one
year.

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RECOMMANDATION
AND
SUGGESTION

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 RECOMMENDATION/ SUGGESTIONS

• There are many factors, financial as well as non-financial which influence the
capital expenditure decision. The profitability is one of the main factors along with
others that should be analyzed at the time of CAPEX.

• Sometimes a capital expenditure has to be made due to certain emotional and

intangible factors such as safety and welfare of workers, prestigious project; social
welfare goodwill of the firm etc. In these cases company should be careful and
take appropriate steps after analysing the importance of fixed assets.

• Take care about the legal aspects about the CAPEX which could influence the
projects of the company that could lead to the losses.

• As the capital expenditure generally requires large fund, the availability of funds is
an important factor, so that should be arranged with proper capital budgeting, and
also calculate the pay-back period of the project.

• To make availability of funds for alternative fixed assets at the time of any
urgency such as breakdown of some plant & machinery, fire accidents etc.

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BIBLIOGRAPHY

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 BIBLIOGRAPHY

• Company Records & Manual.

• Income Tax Act 1961(section 32)

• Company Act 1956 for Fixed Assets (schedule 103)

• Data from the Past Records of the Company.

• Accounting Standards (AS 6 and AS10)

• Khan and Jain – Financial Management

• Company Web sites:

www.heinzindia.com
www.heinz.in.co
• Other Web Sites:

www.incometaxindia.gov.in
www.icai.org
• Personal interaction with-

Mr. Praveen Kumar (Account officer, Finance Department)

Mr. Avdhesh Meena (Assistant Manger Project, Engineering Department)
Mr. Sanjay Singhal (Manager, Purchase Department)
Mr. Rehman (Assistant Finance Department)
Mr. Suresh Gupta (Assistant, Stores Department)
Mr. Shyam Sunder (Senior Assistant, HR Department)
Mr. Raghuveer Singh Chauhan (Production Department)

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