Accounts Project: Maruti-Suzuki Depreciation

7/28/2019 Accounts Project: Maruti-Suzuki Depreciation

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Accounts Project I

Name:

Class: FY-BMS

Division: A

Roll no:

Topic: Accounting Concepts and Depreciation ofMaruti-SuzukiIndia Limited


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Introduction to Maruti-Suzuki India Limited

Maruti Suzuki India Limited (MSIL, formerly Maruti Udyog Limited), asubsidiary 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 prestigiousaccolade comes alongside company's 10-year long pole position in

customer satisfaction surveys.
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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.The Business Entity concept2.

Concept of Going Concern

3.Cost concept4.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

ExpensesMaterial consumed 16,339.80 13,622.00 11,063.70 9,223.70 8,508.50

Manufacturing expenses 909.70 670.60 489.80 359.60 273.80

Personnel expenses 471.10 356.20 288.40 228.70 196.00

Selling expenses 738.20 560.20 499.90 356.00 369.90

Adminstrative expenses 389.20 326.30 274.50 170.60 150.20

Expenses capitalised -22.30 -19.80 -14.30 -6.70 -22.40

Cost of sales 18,825.70 15,515.50 12,602.00 10,331.90 9,476.00

Operating profit 1,903.70 2,551.30 2,204.40 1,866.00 1,570.30

Other recurring income 547.60 456.10 361.10 268.10 218.90

Adjusted PBDIT 2,451.30 3,007.40 2,565.50 2,134.10 1,789.20

Financial expenses 51.00 59.60 37.60 20.40 36.00

Depreciation 706.50 568.20 271.40 285.40 456.80

Other write offs - - - - 16.30

Adjusted PBT 1,693.80 2,379.60 2,256.50 1,828.30 1,280.10


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Balance Sheet of Maruti-Suzuki India Limited


Sources of funds

Owner's fund

Equity share capital 144.50 144.50 144.50 144.50 144.50

Share application money - - - - -

Preference share capital - - - - -

Reserves & surplus 9,200.40 8,270.90 6,709.40 5,308.10 4,234.30

Loan funds

Secured loans 0.10 0.10 63.50 71.70 307.60

Unsecured loans 698.80 900.10 567.30 - -

Total 10,043.80 9,315.60 7,484.70 5,524.30 4,686.40

Uses of funds

Fixed assets

Gross block 8,720.60 7,285.30 6,146.80 4,954.60 5,053.10

Less : revaluation reserve - - - - -

Less : accumulated depreciation 4,649.80 3,988.80 3,487.10 3,259.40 3,179.40

Net block 4,070.80 3,296.50 2,659.70 1,695.20 1,873.70Capital work-in-progress 861.30 736.30 238.90 92.00 42.10

Investments 3,173.30 5,180.70 3,409.20 2,051.20 1,516.60

Net current assets

Current assets, loans & advances 5,570.00 3,190.50 3,956.00 3,870.70 3,097.40

Less : current liabilities & provisions 3,631.60 3,088.40 2,779.10 2,184.80 1,843.40

Tax charges 457.10 763.30 705.30 560.90 446.50

Adjusted PAT 1,236.70 1,616.30 1,551.20 1,267.40 833.60

Non recurring items -55.90 37.90 -23.00 -83.70 -31.40

Other non cash adjustments 37.90 76.60 33.40 5.40 51.40

Reported net profit 1,218.70 1,730.80 1,561.60 1,189.10 853.60Earnigs before appropriation 8,244.40 7,368.10 5,947.10 4,631.20 3,611.00

Equity dividend 101.10 144.50 130.00 101.10 57.80

Preference dividend - - - - -

Dividend tax 17.20 24.80 21.90 14.20 8.20

Retained earnings 8,126.10 7,198.80 5,795.20 4,515.90 3,545.00


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Total net current assets 1,938.40 102.10 1,176.90 1,685.90 1,254.00

Miscellaneous expenses not written - - - - -

Total 10,043.80 9,315.60 7,484.70 5,524.30 4,686.40

Notes:Book value of unquoted investments 3,162.20 5,169.60 3,398.10 2,040.10 1,505.50

Market value of quoted investments 108.70 219.50 270.40 289.80 200.10

Contingent liabilities 1,901.70 2,734.20 2,094.60 1,289.70 893.60

Number of equity sharesoutstanding (Lacs) 2889.10 2889.10 2889.10 2889.10 2889.10

1.The Business Entity conceptThe business entity concept suggests that the business in terms of anaccounting 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 ConcernThis concept suggests that a business unit has an indefinite existence

unless it provides specific information and strong evidence of thecontrary. 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


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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 depreciationis provided on it. As can be seen in the form of Depreciation in theProfit 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 ConceptA 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


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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.

Documents

Accounts Project: Maruti-Suzuki Depreciation