Accounting Policies of Mehul Colours Ltd. Company

Mar 31, 2024

2. SIGNIFICANT ACCOUNTING POLICIES :

a) Basis of Accounting:

The financial statements have been prepared to comply in all material respects with the
prescribed accounting standards under Section 133 of the Companies Act, 2015 (“the Act”)
read with Rule 7 of the Companies (Accounts) Rules, 2015 and other relevant provisions of
the Act to the extent notified. The financial statements have been prepared- under the
historical cost convention on an accrual basis. The accounting policies have been
consistently applied by the Company and are consistent with those used in the previous
year.

The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent liabilities at the date of the
financial statements and the results of operations during the reporting period. Although
these estimates are based upon management’s best knowledge of current events and actions,
actual results could differ from these estimates.

b) Use of estimates :

The presentation of financial statements requires the management of the Company to make
estimates and assumptions that affect the reported balances of assets and liabilities,
revenues and expenses and disclosures relating to the contingent liabilities as at the date of
the financial statements. Management believes that the estimates used in the preparation of
the financial statements are prudent and reasonable, future results could differ, the
differences between the actual results and the estimates are recognized in the period in
which the results are known / materialise.

c) Property^-, Plant and Equipment - Tangible Assets :

Property, Plant and Equipments are slated at cost of acquisition plus incidental expenses,
less accumulated depreciation amortization.

Costs include all expenses incurred to bring the asset to its present location and condition.
Fixed assets are further adjusted by the amount of GST Credit wherever applicable.

Subsequent expenditure related to an item of tangible asset is added to its book value
only if it increases the further benefits from the existing asset beyond its previously
assessed standard of performance. All other expenses on existing fixed assets, including
day to day repair and maintenance expenditure are charged to the statement of profit and
loss for the period during which such expenses are incurred.

Intangible Assets

Intangible Assets that the Company controls and from which it expects future economic
benefits, are capitalised upon acquisition and measured initially ;

(a) , for assets acquired in a business combination, at fair value on the date of acquisition,

(b) . for separately acquired assets, at cost comprising the purchase price (including import

duties and non-refundable taxes) and directly attributable costs to prepare the asset tot
its intended use.

Internally generated assets for which the cost is clearly identifiable are capitalised at cost,

d) Depreciation :

Depreciation of these assets commences when the assets are ready for their intended use
which is generally on commissioning. Items of property, plant and equipment are
depreciated in a manner that amortizes the cost (or other amount substituted for cost) of the
assets after commissioning, less its residual value, over their useful lives as specified in
Schedule II of the Companies Act, 2013 on a written down value basis.

e) Investments:

Non-Current Invests Are Values at Cost.

1) Impairment of Asset:

The Company reviews the carrying values of tangible and intangible assets for any possible
impairment at each balance sheet date. Impairment loss, if any, is recognised in the year in
which impairment takes place.

g) Revenue Recognition :

i) Sale of goods are recognised when the risk and rewards of ownership of the products are
passed on to the customers which is generally on dispatch of goods.

ii) Sales are accounted net of Goods and Service Tax and net of returns.

iii) Interest Income is recognised on accrual basis.

iv) Capital Gain is Recognised on Sale of Invests /Fixed Assets

h) Employee Retirement Benefits :

Short-term employee benefits

All employee benefits payable wholly within twelve months of rendering the service are
classified as short term employee benefits. Benefits such as salaries, wages. Performance
incentives, paid annual leave, bonus etc. recognised as actual amounts due in period in
which the employee renders the related services.

Retirement Benefits

No provision has been made for gratuity payable. Gratuity payable to staff and workers is
recognized as and when incurred. Contributions to Provident Fund and/or Family Pension
are charged to the Statement of Profit & Loss as incurred.

i) Taxation :

Current tax is determined as the amount of tax payable to the taxation authorities in respect
of taxable income for the period.

Deferred tax is recognized, subject to the consideration of prudence, on timing differences
being the difference between taxable income and accounting income that originate in one
period and are capable of reversal in one or more subsequent periods. Deferred tax in
respect of unabsorbed depreciation and carry forward of losses is recognized and carried
forward only to the extent that there is virtual certainty that the assets will be realized in
future.

j) Foreign Currency Transaction :

Foreign currency transactions arc accounted in the books of account at the exchange rates
prevailing on the date of transaction.

The difference between the rate at which foreign currency transactions are accounted and
the rate at which they are paid is recognized in the statement ot profit and loss.

Accounts receivables / payables at the end of the year are valued at closing rate and foreign
exchange difference is recognised in the statement of profit & loss.

I) Inventories:

Inventories are comprising of Raw Materials & Finished Goods. They are valued at cost.
Cost comprises expenditure incurred in the normal course of business in bringing such
inventories to their present location and condition and includes, where applicable,
appropriate overheads based on normal level of activity.