Accounts Project I

Name:

Class: FY-BMS

Division: A

Roll no:

Topic: Accounting Concepts and Depreciation of Maruti-Suzuki India Limited

Introduction to Maruti-Suzuki India Limited

Maruti Suzuki India Limited (MSIL, formerly Maruti Udyog Limited), a subsidiary of Suzuki Motor Corporation of Japan, is India's largest passenger car company, accounting for over 50 per cent of the domestic car market. Their product portfolio consists of 13 brands and over 150 variants ranging from people's car Maruti 800 to stylish hatchback Ritz, A star, Swift, DZire, SX4 sedan and luxury suv Grand Vitara. At the end of March 2010, Maruti had a market share of 53.3 per cent of the Indian passenger car market (including C segment). The company sold a record 10,18,365 vehicles in 2009-10 including 1,47,575 units of exports. The company's two manufacturing facilities are located at Gurgaon and Manesar, south of New Delhi. The Manesar and Gurgaon facilities have a combined capability to produce over a million (1,000,000) passenger car units annually. Recently, the company has announced a further investment of Rs1,700 crore (Rs 17 billion) for enhancing the production capacity by 250,000 units annually. The company is listed on Bombay Stock Exchange and National Stock Exchange. The company has over 7,600 employees on its rolls. Maruti Suzuki has been ranked Indian most Trusted Brand by India's leading Business newspaper The Economic Times. This prestigious accolade comes alongside company's 10-year long pole position in customer satisfaction surveys.

Accounting Concepts in Maruti-Suzuki India Limited

Accounting concepts serve as the foundation for formulating accounting procedures and conventions and are assumptions concerning the economic environment in which accounting exists. The accounting concepts dealt with are as follows: 1. 2. 3. 4. The Business Entity concept Concept of Going Concern Cost concept Costs Attach Concept Profit and Loss Account of Maruti-Suzuki India Limited
Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Income
Operating income 20,729.40 18,066.80 14,806.40 12,197.90 11,046.30 16,339.80 909.70 471.10 738.20 389.20 -22.30 18,825.70 1,903.70 547.60 2,451.30 51.00 706.50 1,693.80 13,622.00 670.60 356.20 560.20 326.30 -19.80 15,515.50 2,551.30 456.10 3,007.40 59.60 568.20 2,379.60 11,063.70 489.80 288.40 499.90 274.50 -14.30 12,602.00 2,204.40 361.10 2,565.50 37.60 271.40 2,256.50 9,223.70 359.60 228.70 356.00 170.60 -6.70 10,331.90 1,866.00 268.10 2,134.10 20.40 285.40 1,828.30 8,508.50 273.80 196.00 369.90 150.20 -22.40 9,476.00 1,570.30 218.90 1,789.20 36.00 456.80 16.30 1,280.10
4

Expenses
Material consumed Manufacturing expenses Personnel expenses Selling expenses Adminstrative expenses Expenses capitalised Cost of sales Operating profit Other recurring income Adjusted PBDIT Financial expenses Depreciation Other write offs Adjusted PBT

Tax charges Adjusted PAT Non recurring items Other non cash adjustments Reported net profit Earnigs before appropriation Equity dividend Preference dividend Dividend tax Retained earnings

457.10 1,236.70 -55.90 37.90 1,218.70 8,244.40 101.10 17.20 8,126.10

763.30 1,616.30 37.90 76.60 1,730.80 7,368.10 144.50 24.80 7,198.80

705.30 1,551.20 -23.00 33.40 1,561.60 5,947.10 130.00 21.90 5,795.20

560.90 1,267.40 -83.70 5.40 1,189.10 4,631.20 101.10 14.20 4,515.90

446.50 833.60 -31.40 51.40 853.60 3,611.00 57.80 8.20 3,545.00

Balance Sheet of Maruti-Suzuki India Limited

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Sources of funds
Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus 144.50 9,200.40 144.50 8,270.90 144.50 6,709.40 144.50 5,308.10 144.50 4,234.30

Loan funds
Secured loans Unsecured loans Total 0.10 0.10 63.50 71.70 307.60 698.80 900.10 567.30 10,043.80 9,315.60 7,484.70 5,524.30 4,686.40

Uses of funds
Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments 8,720.60 4,649.80 4,070.80 861.30 3,173.30 7,285.30 3,988.80 3,296.50 736.30 5,180.70 6,146.80 3,487.10 2,659.70 238.90 3,409.20 4,954.60 3,259.40 1,695.20 92.00 2,051.20 5,053.10 3,179.40 1,873.70 42.10 1,516.60

Net current assets

Current assets, loans & advances Less : current liabilities & provisions 5,570.00 3,190.50 3,956.00 3,870.70 3,097.40 3,631.60 3,088.40 2,779.10 2,184.80 1,843.40
5

Total net current assets Miscellaneous expenses not written Total

Mar ' 09 1,938.40 10,043.80 3,162.20 108.70 1,901.70 2889.10

Mar ' 08 102.10 9,315.60 5,169.60 219.50 2,734.20 2889.10

Mar ' 07 1,176.90 7,484.70 3,398.10 270.40 2,094.60 2889.10

Mar ' 06 1,685.90 5,524.30 2,040.10 289.80 1,289.70 2889.10

Mar ' 05 1,254.00 4,686.40 1,505.50 200.10 893.60 2889.10

Notes:
Book value of unquoted investments Market value of quoted investments Contingent liabilities Number of equity sharesoutstanding (Lacs)

1. The Business Entity concept The business entity concept suggests that the business in terms of an accounting unit is separate from its owners. This can be seen by the fact that the companys names is Maruti-Suzuki India Limited and the Managin Director and CEOs name is Mr. Shinzo Nakanishi. 2. Concept of Going Concern This concept suggests that a business unit has an indefinite existence unless it provides specific information and strong evidence of the contrary. The fact that a business produces Profit and Loss Accounts and Balance Sheets suggests that it follows the concept of Going Concern, as can be seen above in the form of the Profit and Loss Account and Balance Sheet of Maruti-Suzuki India Limited.

3. Cost concept

The Cost Concept as the name suggests, focuses on costs of a business. The rules applied under this concept are as follows: - If a fixed cost is recorded at the price paid for it, then depreciation is provided on it. As can be seen in the form of Depreciation in the Profit and Loss Account - Goods meant for sale are taken at cost of its acquisition - The cost of selling of the goods and administration of the business is usually recorded in the Profit and Loss account, as can be seen in the form of Administration Expenses and Cost of Sales in the Profit and Loss Account. 4. Costs Attach Concept A business incurs costs at various stages and all these costs are pooled and merged together to arrive at a final/total cost. As it can be seen in the Profit and Loss Account where all the various Expenses are added to form a total.

Depreciation Policy in Maruti-Suzuki India Limited

The Depreciation Policy for Maruti-Suzuki India Limited for Plant and Machinery at 7.31% and 11.88% on single shift and double shift respectively. The change in policy has come after a change in the management. Also, Maruti has created a new management structure, dividing the organization in to six verticals. In the case of the Manesar plant of Maruti-Suzuki India Limited, the life of assets has been reduced to eight years for all the assets. And in case of Gurgaon plant, it has been reduced to eight years for majority of the
7

assets; however, in some categories it is kept at 11 years depending on the remaining estimated life. In case of dies, it has been reduced from 5 to 4 years. Therefore, there are various categories of assets where life has been reduced from existing 13 years to 8 years or 11 years and from 5 years to 4 years The Depreciation in March 2009 was Rs. 709.50 crores and the Gross block and Net block were Rs. 8720.60 crores and Rs. 4070.80 crores respectively.