Accounting Policies of Chadha Papers Ltd. Company

Mar 31, 2005

A. ACCOUNTING CONCEPTS

The company follows mercantile system of accounting, recognizing income and expenditure on accrual basis. The accounts are prepared on historical cost basis and as a going concern. Accounting policies are consistent with generally accepted accounting principles.

B. FIXED ASSETS

Fixed assets are stated at cost less the accumulated depreciation. The cost of assets is inclusive of Freight, duties, taxes etc. except excise duty levied thereon which has been reduced from the cost of respective assets.

C. DEPRECIATION

Depreciation has been calculated on straight line method at the rates given in schedule XIV to the companies Act,1956 Depreciation on additions during the year has been provided on pro rata basis with reference to the date on which assets is put to use. Depreciation on plant & machinery has been provided by applying rate applicable to continuous process plant.

D. REVENUE RECOGNITION

Revenue from sale of good is recognised upon passing of title of goods to the customers which generally coincides with the delivery. Sales include sales value of goods, Excise duty, cess & Education cess there on. Other incomes are accounted for on accrual basis.

E. INVENTORIES

Inventories are valued on the basis given below:

(i) Raw material, chemicals, packing materials and stores & spares parts are valued at lower of cost & net realisable value. Cost is computed by applying yearly average cost.

(ii) Stock in process is valued at estimated cost.

(iii) Finished goods are valued at cost or market price, which ever is lower.

F. STORES & SPARES

Stores & Spares consumed includes tools and implements.

G. INVESTMENTS

Long term Investments are stated at cost less permanent diminution in value of such investments (if any).

H. INSURANCE CLAIMS

Insurance claims are accounted for when the measurability and the collectability is established with reasonable certainty.

I. FORIEGN CURRENCY TRANSACTIONS.

All transactions related to import of waste paper, chemicals and spares have been accounted for at the rate debited by bankers of the company.

Monetary assets and liabilities related to foreign currency transaction remaining unsettled at the year end are translated at the rate the payment is made subsequently.

J. BORORROWING COSTS

Borrowing cost specifically identified to the acquisition or construction of a qualifying asset is capitalized as part of such asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to profit & Loss account.

K. PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS

Provisions involving substantial degree of estimation in measurement are recognized when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent assets are neither recognized nor disclosed in the financial statements. Contingent liabilities, if material, are disclosed by way of notes.

L. EXPORT INCENTIVES

Credits against Duty Entitlement pass book is accounted for at the time the company becomes eligible to receive entitlements.

M. GRATUITY AND LEAVE ENCASHMENT

Gratuity is provided as per acturial valuation. Leave encashment provision is made for unutilized leave due to employees at the end of the year.

N. DEFERRED TAX

Provisions for current tax is made as per the provisions of the Income Tax Act 1961. Deferred tax liability/ Assets resulting from Timing difference between book and taxable profits is accounted for considering the tax rate and laws that have been substantively been enacted by the balance sheet date. Deferred Tax Assets is recognized and carried forward only to the extent that there is reasonable certainty that the assets will be realized in future.

O. RESIDUARY

Accounting policies not specifically mentioned are consistent with generally accepted accounting practices.