A COMPARATIVE STUDY OF

THE ACCOUNTING SYSTEMS

OF TWO COMPANIES

Submitted by:

Priya Gandhi 07115

Nooh Khushal 07104
Kunal Shah 07081
Nirav Desai 07099
Kumar Jasapara 07079
Namrata Lamba 07093

A report submitted to the Institute in partial fulfilment of the

requirement for the award of PGeMBA for the year 2007-08 under
the guidance of:

Prof. L.N. Chopde

MET AMDC

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 CERTIFICATE
This is to certify that the project titled ‘A Comparative Study of the
Accounting Systems of Two Companies’ is based on the original
study conducted by:

Priya Gandhi 07115

Nooh Khushal 07104
Kunal Shah 07081
Nirav Desai 07099
Kumar Jasapara 07079
Namrata Lamba 07093

under my guidance & this had not formed a basis for the award of
any other degree of this institute.

Place: MUMBAI
Date: 5th DECEMBER,2007
Faculty’s signature

Institute

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 CERTIFICATE FROM THE
ORGANISATION

This is to certify that

Ms. Priya Gandhi

Mr. Nooh Khushal
Mr. Kunal Shah
Mr. Nirav Desai
Mr. Kumar Jasapara
Ms. Namrata Lamba

have successfully completed a study on ‘A Comparative Study of

the Accounting Systems of Two Companies’ & has submitted the
project report on the same.
The study conducted was satisfactory. We wish them all the best.

Signature of the officer

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 ACKNOWLEDGEMENT

We are profoundly thankful to Mr. Ankit Doshi of Delloite

and the staff at Tata Motors and KEC International Limited
who have co-operated with us in a great context and
answered all our questions. It was very kind of them that
they devoted us some of their time to lend such systematic
information for the project.

We also thank our Professor Prof. L.N. CHOPDE for giving us

such interesting topic for project & also for his help in
understanding the topic thoroughly.

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TABLE OF CONTENTS

Sr. No. Chapter Name

1. Preface

2. A Brief About the 2 Companies

3. Books of Accounts Maintained by the Company

4. Flow of Preparation of Accounts

5. Period of Posting

6. Accounting Software Used

7. Various Accounting Policies Followed

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 PREFACE
Comparative Study of Accounting System of Tata
Motors Limited and KEC International Limited

As per the Companies Act,1956 and the Accounting Standards, all the
Companies –public as well as private limited- have to follow the Mercantile
system of accounting.

As part of the project we have studied the accounting system and the general
accounting policies followed by KEC International Limited and Tata Motors
Limited. As per the guidelines given for the project we have taken the 2
companies from different sectors so as to comprehensively study their
accounting systems.

A Brief About the 2 Companies :

KEC International Limited::
KEC International is one of the largest Power Transmission EPC
companies in the world. KEC has made an indelible mark on the world
map by constantly and consistently re-engineering itself to retain it's
position of leadership in the areas of quality, technology, capacity and
capability.

Tata Motors Limited::

Tata Motors' product range covers passenger cars, multi-utility vehicles
as well as light, medium and heavy commercial vehicles for goods and
passenger transport. Seven out of 10 medium and heavy commercial
vehicles in India bear the trusted Tata mark.

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The Following information about the accounting systems and
procedures followed by both the companies are as on 31 st
March,2007.

Books of Accounts maintained by the Companies ::

The list of books maintained by KEC International Limited are as

under:-

1. Cash Books
2. Bank Books and Journal
3. Main Journals
4. Sales Registers
5. Debtors' Ledgers
6. Purchase Registers
7. Creditors' Ledgers
8. General Ledgers
9. Fixed Assets Registers
10. Inventory records
11. Payroll records
12. Excise records

Except for Excise records at two locations and Inventory records at some of the
locations, the above books of account are maintained in Computer Systems.

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The list of books maintained by Tata Motors Limited are as under:-
1. Cash Book
2. Bank Book
3. Petty Cash Book
4. Purchase bill Register
5. Hundi inward register
6. Demands payable listing
7. Fixed Asset Register
8. Stock ledger / record
9. General Ledgers
10. Journal Register
11. Insurance claim register
12. PLA & RG23A / RG23C register
13. Local bills register
14. Trial balance
15. Register of fixed deposits
16. Loan deposit & call deposits
17. Rent Master file
18. Sales register
19. Travel advance / expense register
20. Duty drawback claims registers
21. Advance register
22. Hire Purchase & loan contracts register
23. Investment register
24. Sales tax register
25. Debit note / credit note register
26. Service tax register
27. GIN register
28. Payroll register
29. Monthly production reports
30. Works order register
31. Outward hundi register
32. Debtors Ledger
33. Despatch register
34. Contracts register

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Flow of Preparation of financial books and statements :
Both the companies follow the same sequence in preparing the financial
statement. The sequence of activities is as follows –

First the respective journal entries are posted in the journal book and then the
corresponding entries are made in the respective ledger accounts in the ledger
book.

Then the ledger accounts are balanced. A Trial Balance is prepared and the
balances of the ledger accounts are transferred to this trial balance.

From here on the next step is to prepare the Profit and Loss A/C. And then finally
the Balance sheet is made.

Period of posting the transactions and records :-

KEC International Limited::

The entries are posted or the balance are transferred from one book to other on
the basis of Batch Order. The company follows the batch order method. Here the posting
is done on completion of each batch order. And the accounting period is of One year from
April to March.

Tata Motors Limited ::

In tata motors the posting is done on a weekly basis. The entries are posted on a week-to-
week basis i.e. it is done every week. And the accounting period is of One year from April
to March.

Accounting softwares used by the company :-

KEC International Limited uses ‘JD Edwards ERP’ software for its accounting
purpose.

Tata Motors Limited uses ‘SAP R3’ software for its accounting purpose.

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Number of Employees :-
KEC International Limited has 1671 employees.

Tata Motors Limited has around 22000 employees.

Some of the Policies followed by the 2 Companies :

Basis of preparation of Financial Statements :-

KEC International Limited::

The accounts have been prepared on historical cost convention. The Company
follows the accrual basis of accounting. The Financial Statements are prepared in
accordance with the accounting standards as applicable.

Tata Motors Limited ::

As Tata Motors Limited is a subsidiary of the Tata group so its financial statement
are prepared on following basis-

The financial statements of the Company and its subsidiary companies have been
combined on a line-by-line basis by adding together like items of assets, liabilities,
income and expenses. The intra-group balances and intra-group transactions and
unrealised profits or losses have been fully eliminated.

The financial statements of the Group together have been prepared in accordance
with the Accounting Standards issued by the Institute of Chartered Accountants of
India, and other generally accepted accounting principles.

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Revenue Recognition :

For KEC International Limited::

a)Sales and Services are recognised on delivery. Sales exclude sales tax and are
after adjustments in respect of earlier years.

b)Revenue from erection contracts entered into on or after 1st April, 2003 is
recognised based on the stage of completion determined with reference to the
costs incurred on contracts and their estimated total costs. Revenue from other
erection contracts is recognised on the percentage of completion method- as soon
as services are rendered.

c)Provision for foreseeable losses/ construction contingencies on erection

contracts is made on the basis of technical assessments of costs to be incurred and
revenue to be accounted for.

For Tata Motors Limited ::

a)The Company recognizes revenues on the sale of products when the products are
delivered to the dealer/customer or when delivered to the carrier or exports sales,
which is when risks and rewards of ownership pass to the dealer/customer.

b)The Company recognizes revenues on the sale of products when the products are
delivered to the dealer/customer or when delivered to the carrier or exports sales,
which is when risks and rewards of ownership pass to the dealer/customer.

c)The Company recognizes revenues on the sale of products when the products are
delivered to the dealer/customer or when delivered to the carrier or exports sales,
which is when risks and rewards of ownership pass to the dealer/customer.

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How Inventory is treated in these 2 companies?

KEC International Limited::

Raw materials, work-in-process, and finished goods are valued at the lower of cost
and net realisable value (NRV). Stores and erection material are valued at cost.
Cost of purchased material is determined on the weighted average basis. Cost of
Tools and Dies is amortised over its estimated useful life. Scrap is valued at net
realisable value.

Cost of work-in-process and finished goods includes material cost, labour cost, and
manufacturing overheads absorbed on the basis of normal capacity of production.

Tata Motors Limited ::

Inventories of raw materials and components, work-in-progress and stock-in-trade
are valued at the lower of cost and net realisable value. Cost is ascertained on a
moving weighted average / monthly moving weighted average basis. The cost of
work-in-progress and finished goods is determined on full absorption cost basis.

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Recording of Fixed Assets :-
KEC International Limited::

Fixed assets are stated at cost of acquisition or construction net of impairment loss
less accumulated depreciation. Cost comprises of purchase/ acquisition price,
import duties, taxes and any directly attributed cost of bringing the asset to its
working condition for its intended use. Financing cost on borrowings for
acquisition or construction of fixed assets, for the period upto the date of
acquisition of fixed assets or when the assets are ready to be put in use/ the date
of commencement of commercial production, is included in the cost of fixed
assets. Assessment of indication of impairment of an asset is made at the year-end
and impairment loss, if any, is recognised.

Tata Motors Limited ::

a)Fixed Asstes are stated at cost of acquisition or construction less accumulated

depreciation / amortisation.

b)Product development cost incurred on new vehicle platforms, variants on

existing platforms and new vehicle aggregates are recognised as Intangible Assets
(included under Fixed Assets) and amortised over a period of thirty six months to
sixty months.

c)Software not exceeding Rs. 25,000 and product development costs relating to
minor product enhancement, facelifts and upgrades cost are charged off to Profit
and Loss Account as and when incurred.

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Treatment of TAXES on Income :-

KEC International Limited::

The procedure adopted by KEC International Limited is as under-

Current tax is determined as the amount of tax payable in respect of estimated

taxable income for the period. Deferred tax is recognised, subject to the
consideration of prudence, on timing differences resulting from the recognition of
items in the financial statements and in estimating current income tax provision.
The carrying amount of deferred tax asset/liability is reviewed at each balance
sheet date.

Tata Motors Limited ::

The procedure adopted by Tata Motors Limited is as under-

Current tax is the amount of tax payable on the taxable income for the year as
determined in accordance with the provisions of the Income - Tax Act1961. Current
tax includes Fringe benefit tax.

Deferred tax is recognised, 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 assets in respect of unabsorbed depreciation and carry forward of

losses are recognised if there is virtual certainty that there will be sufficient future
taxable income available to realise such losses.

- The End -

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