Pankaj Project

ACKNOWLEDGEMENT

I express my gratitude to all those who have directly or indirectly helped me in the completion of my pursuit .I am deeply indebted to management of LAFARGE INDIA Pvt. Ltd, ARASMETA CEMENT PLANT who found in me confidence to undertake this project. With immense pleasure I would like to offer my humble gratitude to Mr. Shiva Kumar, Vice President – LIPL-ACP a for providing me an opportunity to undergo training in their esteemed organization. I am immensely thankful to Mr.Rajnish Sinha, training coordinator, for sparing his invaluable time for my project and clarifying all my doubts personally in spite of such busy schedule and putting confidence in me and providing every kind of help which was really needed for this project. I am deeply thankful to Mr. Amardeep Singh, Sr. Finance Officer, being a source of guidance and support to me throughout this project. I am also thankful to him for sharing his knowledge and experience with me and clarifying each of the doubt I have came across while doing this project. I am also thankful to Mr.Sanjay Gupta for providing all the necessary information for getting an actual view of the organization.

Pankaj Kumar Singh MBA (IVth SEM)

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CONTENT CHAPTER-1 Introduction  Introduction to Cement Industries in India  Introduction to Lafarge  Objectives & Integrated policies of Lafarge  Lafarge in India  Award Winning Performance  Introduction to Arasmeta Cement Plant

CHAPTER-2

Introduction to Financial Department

 Accounts And Control Department  Significant Accounting Policies  Accounts Department  PF, Superannuation, EDLI, GSIL  Financial Fundamentals Of ACP  Financial Information Of Lafarge

CHAPTER-3

Cost Accounting

 Definition  Objectives  Importance  Reports Provided By Cost Accounting  Factors In Installing A Cost Accounting System  Essential Of A Good Cost Accounting System  Advantages Of A Cost Accounting System

2

 Elements Of Cost

CHAPTER-4

Cost Accounting System at ACP

CHAPTER-5

Data Collection

CHAPTER-6 Analysis and Interpretation CHAPTER-7 Suggestion CHAPTER-8 Overview of Other Departments Plant and Operation Management Dispatch or Logistic Department Information Technology

Conclusion

3

CHAPTER – 1 INTRODUCTION OF LAFARGE INTRODUCTION TO CEMENT INDUSTRIES IN INDIA The cement industries in India are well settled industries. LAFARGE, AMBUJA, CENTURY, GRASIM, ULTRATECH, TATA etc are the big names in the world of Cement Industries. Cement Industries ranks next to steel industries from the point of view of economic development of the country. Cement Industries has been working for a quite long time. The word cement is used to define any adhesive substance. It is derived from Latin word “caementum” which means stone chippings. Cement is a complex mixture of Tri-Calcium Silicate-55%-60%

Di-Calcium Silicate-15%-20% Tri-Calcium Silicate aalumino ferrite-12% Gypsum-4% and some impurities such as magnesium oxide, free lime etc Cement is finally ground powder that when mixed to water sets to hard mass. The history of cement goes back to classical GREECE and ROME. The material then used was lime and volcanic ashes that slowly reacted with lime in

4

presence of water to form a hard mass. The invention of Portland cement was attributed to Joseph Aspidine who in 1824 took out a patent for synthetic mixture of limestone and clay. The two other important developments in the history of Cement were the invention of Portland Slag cement and Portland Pozzolona Cement, commonly called as PSC and PPC respectively. The history of Portland Cement in India is dated back to 1914, when first cement plant was established at Porbandar to produce the Ordinary Cement (OPC)

The important landmarks in the history of Cement Manufacturing in India are: -

YEAR 1914

EVENTS Indian Cement Industry founded with the establishment of Indian cement at Porbandar with 1000 ton capacity

1924

Ten Companies with total capacity of 5.6 lakh tones cement started.

1925

Indian Cement Manufacturing Association C.M.A. was started.

1927 1930 1936 1951

Concrete Association of India was formed to educate public in the issue of cement through free technical advice. Cement marketing company of India was formed to promote the sales and distribution of Cement at regulated price Cement companies merge to form associated Cement Company. Indian started Institute and Directorate General of suppliers and disposals established

5

1956

Indian policy comes into force

1965

Cement Research Institute was set up. Cement Industry was one of the first Industries to be liberalized.

1982

RAYMOND LTD cement division went into production at Gopalnagar, Bilaspur

2001

VIJAYPATH SINGHANIA owner of RAYMOND LTD has sold his company to LAFARGE GROUP

CEMENT INDUSTRIES IN INDIA

DOMESTIC PLAYERS • Associated Cement Company Ltd. (ACCL) • Century Textile and Industries Ltd. (CTIL) • Grasim – UltraTech Cemco. • Gujrat Ambuja Cement Ltd. (GACL) • India Cements • Jaiprakash Associates Ltd • Madras Cements • J K Synthetics

6

FOREIGN PLAYERS • Lafarge India • Holcim • Italecementi Group

INTRODUCTION TO LAFARGE The Lafarge group is a world leader in construction material and holds leading positioning in each of its four-core business area viz. Cement, Aggregates and Concretes, Gypsum and Roofing. It operates in 75 countries and globally employs over 80000 people and generated annual sale of Rs 9372 million in the year 2005.It expertise and best practices in efficient industrial production and conservation of natural resources have been implemented around the world. The Lafarge group was set up in 1883, in southern France, between the cities of Lyon and Marseille. In 1864, the groups internationals operation received a fillip with the receipt of an order for supplying 110000 tones of Cement for the construction of Suez Canal. Between 1900 and 1914 the group expanded in France North & South America. and then in all continents. Lafarge Group, a fortune 500 French giant, is a leader in construction materials with global revenues of US$ 19 billion in 2003. The group’s Indian operations, Lafarge India Pvt. Ltd. started in November 1999,subsequent to the takeover of

7

TATA steel’s cement division. The company acquired a total capacity of 4 million tones of cement & after de-bottlenecking, currently, has a manufacturing capacity of 5million tones of cement & 3 million tones of clinker.

History of Lafarge The Lafarge story began in 1833…

1833-1914 Solid Foundation In 1833 Leon Pavin, launched an industrial lime production operation, having taken over a business acquired by his family in 1749 with the purchase of the Lafarge domain in south eastern France, an area known for generation for the quality of its limestone deposits. The company signed its first major international contract in 1864, delivering 110000 tonnes of lime for the construction of the Suez Canal. Lafarge opened its first central research laboratory in 1887, the Le Teil Laboratory, with which highly reputed scientists collaborated. In 1908, the central laboratory filed a patent for the Cement Founder calcium aluminates, obtained by fusing a mixture of bauxite and limestone. This new high alumina binder gradually established a reputation as rapid hardening cement resistant to both high temperature and corrosion. In the year until 1914, favouring a strategy of horizontal integration, the company – now the “Societe des Chaux et des ciments de Lafarge du Teil”- set about acquiring time and cement companies in all parts of France.

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1 9 1 4 - 1 9 5 5 G ro w t h o n a l l f ro n t s International development began with the opening up of North American markets. Lafarge, which had operated in Algeria over since 1866, now became the leading Portland cement producer in Algeria, and set up operation in Morocco and Tunisia. Lafarge Continued to acquire companies in mainland France. With a quarter of the domestic market, the company became established as France’s number one cement producer. In 1926, Lafarge opened its first alumnus cement plant in the United Kingdom .It diversified into Gypsum in 1931 and developed Super Blanc, new cement, in1932. By 1939, Lafarge was the leading cement producer in the France. After 1945, Lafarge gained a new lease of life with the arrival of Alfred Francois at the helm, the Marshall Plan and the post- war rebuilding boom, production doubled over the next ten years.

1 9 5 5 - 1 9 8 1 M e r g e r s , A c q u i s i t i o n s , D e v e l o p me n t s In 1956, Lafarge constructed its North American cement plant, creating Lafarge cement of North America with startup of the Richmond Plant in Canada. In 1959 Lafarge began operation in Brazil. By the end of the 1960 Lafarge Canada has become the third largest cement producer in the country, with the annual production capacity of 90,000 tonnes. In 1980, a merger agreement was signed between Lafarge and coppee as the number one cement producer in North America. The size of the group rose from 12000 to 17000 employees. 1982-1990 The conquest of Europe During the 1980s, with the construction of a single market representing more than 300 million inhabitants the group chose to expand its business in Europe. Lafarge turned to Germany, raising its stake in Portland Zementwerk at Wossingen to 83%. Through the purchase of Swiss company, cementia in 1989, the group

9

acquired interests in Ashland (Spain), Aslan(Turkey) and Perlmooser (Austria). The followed investment in Eastern Europe, East Germany, the Czech Republic (1991), then Poland ,Romania, Russia and Ukraine. The agreement with the East Germany cement producer, Karsdorf, came even before German reunification had been mooted.

1992-2003 Lafarge becomes world leader in building materials 1994 saw Lafarge take a foothold in China. Today, all four of the groups division operates there have been developments throughout Asia (1998: Indonesia and the Philippines; 1999 India and South Korea). The group’s expansion in Poland began in 1995 with the acquisition of a 75% stake in Kujaway. Within six years, 4 entities representing all four divisions were active in the country. Lafarge acquired Redland in 1997, positioning itself more strongly in Aggregates and Concrete and gaining entry into Roofing market. Thanks to acquisition of Warren in Canada in 2000, Lafarge became one of the leading Aggregates producers in North America. Lafarge focused on its main four divisions, and divested its specialty product business, which became Masteries. Lafarge was the first industrial group to conclude a partnership agreement with WWF (World Wildlife Fund for nature). In 2001, following the acquisition of Blue Circle, Lafarge became the world’s leading cement producer. Numerous acquisition and joint venture in all four divisions and one every continent, Particularly Asia has continued to consolidate its world leadership position. In July 2001, Lafarge was introduced onto the New York Stock Exchange (NYSE).

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OBJECTIVES AND INTEGRATED POLICIES OF LAFARGE Objectives of Lafarge India Pvt. Ltd. To bring the profitability of our recently acquired operations to the highest level by using # Our global know-how # Our benchmarking capability # Our continuing efforts in reducing the cost base and improving efficiencies. # Our experienced management Team # Introduce new ready mix products with higher value added # To continue exploring acquisition in Cement and Aggregates. #To strengthen further our concrete tiles leadership and increase our presence in clay tile.

Integrated policy •

Quality

•

Environment

•

Occupational health and safety

Lafarge India Pvt. Ltd. affirms its commitment towards customer satisfaction, environmental protection, healthy and safe work environment for all concern and shall endeavor to –

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•

Produce clinker and cement exceeding the applicable standard to satisfy the customer needs

•

Comply with all applicable legal and other requirement

•

Provide the necessary resource and training to all employees in conducting their work and enhancing their skill

•

Regularly set and review objectives and targets for continual improvement in quality, productivity, work environment

& health and safety

performance •

Prevention or control of pollution and occupational health and safety hazards

•

Institute Management Systems of international repute and continual improve their effectiveness

•

Communicate the necessary information to the stakeholders.

Responsibilities To anticipate and meet customer needs – •

Create a perceived difference and be the supplier of choice.

•

Serve our customer better by knowing them better.

•

Contribute to the development and progress of the construction industries

To enhance the value of shareholders investment and gain their trust. •

To provide shareholders with the competitive return on their investment.

•

To provide them with the clear information.

•

To respect the interest of companies partner and minority shareholders

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To make the employees the heart of the company•

To base legitimate authority on the ability to contribute to the company s success.

•

To develop mutual respect and trust.

•

To provide employees with equitable compensation and fulfilling professional environment.

To gain from increasing diversity•

To make company’s cultural diversity an asset.

•

To delegate responsibility with accountability and control

•

To develop an effective cross operational management approach

•

To make the use of synergies and share know-how.

To respect common interest •

To participate the life of communities where company operates

•

To operate responsibility towards the environment.

•

To be guided by principles of integrity, openness and respect in company commitments.

Environmental Policy •

Sparing use of natural resources

•

Environmental know-how and expertise

•

Following pre determined environmental standards

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•

Innovative products

•

Training and evolution

LAFARGE IN INDIA

Lafarge India Pvt Ltd commenced operation in India by acquisition of TISCO’s cement plants in 1999, and later in January 2001 further acquired cement business of Raymond Limited. Now the Lafarge India CEO, Uday Khanna .The eastern India operation center is in Kolkata while head office in Mumbai.

PLANTS IN INDIA A brief description of Lafarge India’s existence facilities is as belowLocation

Sonadih

Jojobera Arasmeta

Facilities Clinkerisation unit Cement grinding unit Cement grinding unit Clinkerisation unit Cement grinding unit

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Rated capacities 1.4 MTPA of clinker 0.4 MTPA of OPC 43 Grade 3.0 MTPA of PSC & PPC 1.6 MTPA of clinker 1.6 MTPA of PPC

GROUP DIVISION Different divisions in the group are as under –

CEMENTLafarge manufactures and supplies wide variety of Cement and Hydraulic binder to all those involved in the construction industries viz. building and public works contractor, builders, whole sellers, prefabricated concrete manufacturers, ready mix concrete producers, specifies etc. In addition to qualities of stability, strength and durability Lafarge cement is highly adaptable to a wide range of applications, such as aggressive environment, rapid applications architectural consideration and technical constraints.

AGGREGATES & CONCRETES Lafarge also manufactures a wide variety of concrete, including standard Concretes and specially concretes, which offer specific advantage in terms of ease of application, economic utilization, strength or appearance. Aggregates are used alone or in conjunction with a binder in building, civil engineering and public works. Lafarge is the second largest manufacturer of Aggregates and concrete in the world.

ROOFING The group manufactures wide variety of roofing material, including concrete, metal and clay roof tiles to meet a wide range of consumer requirements. It is the world’s largest manufacturer of roofing materials. In Germany, Lafarge introduce

15

new product such as our star surface, concrete tiles with a smoother surface. Concrete, clay and metal roof tiles product ranges, roof system components and chimney systems.

GYPSUM

Lafarge also manufactures a wide variety of gypsum product like Blocks, Plaster boards, Sprayable plasters, wall boards and plaster coating for variety of customers requirements. It is 3rd largest manufacturer of gypsum products in the world. Plaster board systems, Gypsum blocks and sprayable plaster intended for construction, finishing in new building and renovation.

SALES BY DIVISION As stated earlier that the Lafarge has been divided into 4 different groups. The coverage of their market in the world is shown below-

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Gypsum 9% Roofing 11% Cement 47%

Aggregates & Concrete 33%

The above graphics clearly shows the sales of each group in % of the sales of their products in the world. As shown that it nearly sales 47% of cement, 33% of aggregate and concrete,11% of roofing,9% of gypsum.

PRODUCT –LAFARGE CEMENT

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Lafarge India offers four exclusive productsPortland Slag Cement (PSC) available in the markets of West Bengal, Bihar, Orissa and the Northeastern states. Portland Pozzolana Cement (PPC) available in the markets of West Bengal, Bihar, Orissa and the Northeastern states. Ordinary Portland Cement (OPC), 43 grade available in the market of Madhya Pradesh, Chattisgarh, and Vidharba (Maharashtra) Clinker, available in the Indian states of West Bengal, Bihar and Andhra Pradesh is exported to Bangladesh and Nepal.

MARKET OF LAFARGE The Lafarge India covers a large area in the world. The cement and the products are very popular in the world. These products are demanded in the different

18

region of the world. The graph below shows the overall detail of the region of the world where there are sold.

Market in India The world of the Lafarge in India begins with the acquisition of some of the cement plant such as TISCO and RAYMOND in the years 1999 and 2001.Lafarge India has covered a wide region of the Indian market within a small period. The eastern region and some parts of Maharashtra etc.were quickly within the range of the Lafarge. The market region of Lafarge India is shown below.

PRESENCE IN INDIA

La fa rg ee ,,Ara sm ee ta La fa rg Ara sm ta Clinke r 1.6 MT Clinker- 1.6MT Ce m ee nt Ce m nt--1.6 1.6MT MT J A S

La fa rg ee Jo ,Jo bb ee ra (GU) La fa rg , jo jo ra (GU) Ce m e nt 3.0 MT Cement - 3.0MT

La fa rg ee ,,So nn aa dd ih La fa rg So ih Clinke r 1.2 MT Clinker- 1.2MT Ce m ee nt Ce m nt--0.4 0.4MT MT

LEADER IN EASTERN INDIA MARKET The company has a strong focus on the eastern India market and has emerged as a major player in the region with a 20% market share. It sells its product in the

19

states of Jharkhand, Bihar, North East, West Bengal, Orissa, and Chhattisgarh. Lafarge has established good brand equity and has thus been able to command a premium in price over its competitors.

LAFARGE GROUP

Cement

Aggregate s& Concrete

Roofing

Gypsum

World wide position

No. 1

No. 2

No.1

No.3

Sales in Rs. (Crores)

27,953

20,503

16,665

14,079

No. of plants / Manufacturing Sites

106 plants and 20 Grinding plants

1700

200

68

LAFARGE GROUP

No. of countries where operating-75 No. of Employees-77000

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MARKET SIZE & SHARE

Assam & North Eastern 1.9 states MT

Biha r 4.4 MT 17.7%

Market Share - Eastern India

Jharkhan d 2.7 MT 29.9% J Chhattisgar h 3.5 MT A 18.3% S

22.4% West Bengal 6.8 MT 17.3%

Orissa 4.4 MT 11.2%

AWARD WINNING PERFORMANCE YEAR AFTER YEAR YEAR 1987.88

AWARD Best energy efficiency in Indian cement industry Best productivity performance in cement industry

1988.89

Best energy efficiency in Indian cement industry productivity performance in cement industry

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1989.90

2nd Best productivity performance in cement industry

1990.91

Best productivity performance in cement industry 3rd Best energy efficiency in Indian cement industry

1992.93

Best energy efficiency in Indian cement industry

1995

British Safety Council Award

1997

National Energy Conservation Award

1997-98

Mine Environment & Minerals Conservation Award National Productivity Award

2001

National Energy Conservation Award

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ARASMETA CEMENT PLANT

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Plant Location

Vill. Arasmeta, District - Janjgir

Total Land Area

Chhattisgarh, India 860.5 Hect.(2125 Acres)

Land Area (Factory)

82.5 Hect. (203.8 Acres)

Land Area (Colony)

43 Hect. (106 Acres)

Land Area( Mines ) No of Employees

735 Hect. (1816 Acres) 650

Specific Power Consumption

77 KWH / MT Packed Cement(PPC)

Maximum Temperature

48 o C

Minimum Temperature

8 oC

Relative Humidity

80 % Max.

Rain Fall

1000mm Avg.

Northern Latitude

21o55' to 22o00'

Estern Longitude

82o15' to 82o25'

Arasmeta cement plant is one of the units established by Lafarge group in India.The Arasmeta cement unit is both clinkerisation and grinding unit.

HISTORY The taking over of the Raymond cement plant by the Lafarge group formed the Arasmeta cement plant.The arasmeta cement plant came into existence in the year 22nd january 2001.Arasmeta Cement plant is one of the profit earning units of the Lafarge group.All the formalities in respect of the transfer of the cement division Raymond India ltd.to Lafarge India ltd.were completed with the signing of

24

agreement between Mr. K.V Ganeshan, COO Lafarge India Pvt. Ltd.and Mr.A.D Khatri, V.P. Raymonds. Arasmeta cement mainly produces PPC cement.

Causes of Establishment. ACP was established here because of the following reasons. •

Availability of raw materials.

•

Facility of transport.

•

Fulfillment of water.

•

Nearness to Market.

•

Sufficient Supply of Labour.

•

Nearness of sources of fuel and power.

FACILITIES The Arasmeta Cement Plant is both the Clinkerisation unit and Cement Grinding unit. It produces 1.6 MTPA of clinker per year and 1.6 MTPA of Portland Pozzolana Cement and now they have started the new product named as Lafarge Concreto Cement in the market.

Position of land LAND GOVERNMENT LAND DIRECT PURCHASE BY COMPANY ACQUISITION

In ACRES 620.52 798.00 235.48

Quality

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Arasmeta cement plant has received following certificates ⇒ ISO 9001-2001 ⇒ EMS 14000 ⇒ OHSAS 18000

CHAPTER – 2 INTRODUCTION TO FINANCE DEPARMENT OF ACP

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INTODUCTION TO FINANCIAL DEPARTMENT OF LAFARGE (ACP) ACCOUNTS AND CONTROL DEPARTMENT -An Overview As the nomenclature of the Department denotes, the objectives are two fold – “Accounts” related and “Control” related. a) Accounts:

Every Company & Business Organization needs to assess its

financial transaction and performance. For that it is essential that financial transactions are identified and recorded properly in a systematic way as per Generally Accepted Accounting Principles. It provides various reports and up to date information like •

Total Income & Expenditures, nature wise, period wise, etc.

•

Customer & Creditor Balances.

•

Capital & Fixed Assets, Investments.

No management decision can be taken unless there is proper Accounting & Book Keeping. It also helps to discharge tax obligations and other statutory obligations properly and timely. b) Budgetary Control: After capturing data and records, it is essential that Various Cost and Production parameters are analyzed. Reasoning for variance with respect to Budgets & Forecasts are documented. Adverse variances are reported to Plant & EOO. c) Payment Control: All payments are released after the transaction passes successfully through related controls.

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SIGNIFICANT ACCOUNTING POLICIES

1. Accounting methodology The Lafarge India Pvt. Ltd. Follows the mercantile system of accounting and recognizes income and expenditure on accrual basis. The accounts are prepared on historical cost basis as a going concern. Accounting policies not referred to otherwise are consistent with generally accepted as accounting principles.

2. Use of estimates. The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of the assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reported period.

3. Revenue recognition. i)

Sales are recognized when goods are supplied and invoiced.

ii)

Revenue is recognized only when it is reasonably certain that the ultimate collection will be made.

4. Preliminary expenses. Preliminaries expenses are amortized in five equal annual installments.

5. Fixed assets. Fixed assets are valued at cost of acquisition or construction. They are stated at historical costs.

6. Valuation of inventories

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i)

Stores, spares parts and other supplies are valued at weighted average cost or net realizable value, which ever is low.

ii)

Raw materials are valued at monthly weighted average cost or net realizable value, which ever is low. The cost includes purchased price as well as incidental expenses.

iii)

Work in progress is valued at absorption cost or net realizable value which ever is low.

iv)

Finished goods are valued at cost or net realizable value which ever is low. Cost includes freight and excise duty paid/provided for on finished goods.

7. Investments. i)

Current investments are valued at cost or fair/ market value which ever is low.

ii)

Long-term investments are shown at cost. However, when there is decline, other than temporary, in the value of a long term investment the carrying amount of such investment is reduced to recognize the decline.

8. Taxes on income Current tax is measured at the amount expected to be paid to / recovered from the revenue authorities using applicable tax rates and laws. The deferred tax for timing difference between the book and tax profits for the year is accounted for in accordance with the accounting standard (AS22) Accounting for taxes on income issued by the Institute of Chartered Accountants of India using the tax rates and the laws that have been enacted or substantively enacted as of the balance sheet date.

9. Provisions Contingent Liabilities and Contingent Assets

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Provisions involving substantial degree of estimation in measurements are recognized when there is present obligation as results of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent assets are neither recognized nor disclosed in the financial statements. Source

–Lafarge

Annual Financial statement

ACCOUNTS DEPARTMENT The Accounts and Control Department at the Plant Level is headed by Senior Manager – Plant Accounts & Control and he reports Administratively to Plant Manager and Functionally to Vice President - Accounts & Control. a) Financial Accounting: General Accounting ● Raw Material Accounting ● Stores Accounting ● Contractor Accounting ● Accounting entries ● Trial Balance

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Control ●

Inter Unit Account reconciliation

●

Record keeping-documentary evidence for each transactions

●

Preparation of Account Reviews

●

Reconciliation between GL and P&I module

●

Reconciliation of Cenvat (Excise & Service Tax)

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

Accounts Payable ●

Raw Material Bills processing & Payment

●

Stores Bills processing & Payment

●

Contractor Bills processing & Payment

●

Import Material & Services Bills processing

●

Issue of Sales Tax declaration forms

●

Maintenance of JDE vendor address book for LIPL

●

Preparation of Landed Cost Rule (LCR) for LIPL

●

Statutory Payments

●

Other Direct Bills processing & Payments

●

Maintenance of Vendor invoices

●

TA Bills Processing & payment

●

Inward & Outwards Freight Bills processing & Payment

●

Raising of Debit notes / Recoveries

•

TDS deduction from vendor & Payment to Govt A/c

Control ●

Receiving confirmations from venders

●

Reconciliation of balance between parties & our books

●

Integrity Report Generation from System

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●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

Reporting ●

Filing of E-TDS Quarterly returns

Pay Roll ●

Processing of payroll

●

Processing of Full & Final settlement

●

Incorporation of Income Tax changes

●

Preparation of Salary Budget

●

Calculation of Income Tax

●

Calculation of Superannuation & Gratuity & reporting

Payment ●

TDS payment

●

Professional Tax payment

●

Payment of Salary & Wages and other allowances

Control ●

Analysis between Budget & Actual

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

Reporting ●

Filing of E-TDS Quarterly returns

●

Professional Tax returns

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Treasury

●

Maintenance of Manual Cash & Bank Books

●

Maintenance of CNCC Account (for ACP & SCP)

●

Cash Receipt & Payment

●

Payment Group Generation & Payment

●

Bank Draft Purchase statement

●

Record keeping for Bank Guarantees & FDR

●

Daily Physical Verification of Cash & Reconciliation

●

Bank reconciliation statement

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

●

Monthly Cash Forecast

b) Management Accounting: Reporting & MIS ●

Capex Reporting

●

Monthly Plant Cost

●

Stock Valuation Report

●

MIS Recordings

●

Quantitative Details

●

Fortnightly Cost Forecast

●

Clinker Cost to JCP

●

Capex Status to Plant

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

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(2) Fixed Assets ●

Maintenance of Fixed Assets module in JDE

●

Capitalization of Fixed Assets

●

Running of Depreciation calculation module

●

Depreciation checking & booking

●

Asset Physical Verification

●

Write Off of obsolete items

●

Integrity Report Generation from System

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

●

New Asset Codification Form

●

Asset Divestment Form

(3) Capex Project ●

Obtaining new Job Cost Number

●

Capitalization of expenses incurred on projects

●

EVA Analysis

●

Capex Audit

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

●

Monthly Capex status reporting

c) Taxation: ●

Maintenance of Excise Records

●

Statutory Audits

●

Departmental Audit

●

Cenvat Credit availment

●

Responding to Show cause Notices

●

Filing & Attending Appeals

●

Keeping track of modifications in Acts & Rules

●

Submission of Returns

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●

Payment of Excise & Service Tax

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

●

Payment of Entry Tax & VAT & Central Taxes

●

Compliance to Statutory Audit/ Tax Audit/ FOCUS

PF, SUPERANUATION, EDLI, GSIL ●

Maintain PF Members Eligibility Register.

●

Monthly Deduction statement to Kolkata/Mumbai for challan preparation.

●

Challan submission to Bank.

●

Submission of Monthly / Yearly Returns to Regional PF Commissioners` Office, Raipur

●

Submission Employees PF Transfer cases to Regional PF Offices

●

Submission PF Advance/ Final settlement cases

●

Statutory Provident Fund Audit both Internal/ External.

FINANCIAL FUNDAMENTALS OF ARASMETA CEMENT PLANT Sources of funds. An organization requires fund to operate its business. As some of the fund is engaged for the production activity, some fund is engaged in investment activity and others are used for the payments and some fund are locked up in providing credit facilities. So the organization looks for the fund from the outside they may be long term and short terms loan. Lafarge India Pvt. Ltd. incurs fund from various sources includes, shareholder funds and loan funds. Shareholder fund involves capital share received from investors, and reserves and surplus. Contrary to this loan funds involves secured loans as well as unsecured loans. Similarly the received capitals from various sources are used in acquiring fixed assets, investments in long term or short term sources, payment of loan and advances. Current liabilities and

35

provision are paid through these acquired sources. The data below shows the acquisition of fund and their applications of the fund.

Sources of funds

In Rs. 000's

Total

Shareholders funds 1. Capital 2. Reserves and surplus

4156963.00 2837500.00

6994463

Loan funds 1.Secured loans 2. Unsecured Loans

4323369.00 39602.00

4362971

Tax deferred

1355000.00

Grand Total

12712434

Collection of above fund is done through following sub source

FINANCIAL INFORMATION OF LAFARGE The principal financial parameters of the Lafarge group for past 4 years are as under:5 years performance

Year Sales volume PROFIT & LOSS

Unit

2

2

2004 2005 2006

002

003

KT m INR

4121

3692

4316

4555

M INR

9008

8553

1060

11234 13596

4760

ACCOUNTS

Gross sales

5

36

Less-Excise Duty

m INR

1391

1420

1733

1862

1954

Net Sales

m INR

7617

7133

8872

9372

11642

Operating profit

m INR

1367

1384

1740

1517

2414

(PBDIT) Depreciation Interest

m INR m INR

667 728

681 654

668 510

705 361

682 300

Profit Before Tax Current Tax Deferred Tax

m INR m INR m INR

27 1

49 3 240

562 45 125

451 51 (416)

1412 167 (523)

Exceptional Items Net Profit

m INR m INR

101 129

27 221

392

816

1840

Sales Volume Of last 5 Years 5000 4000 3000 Sales 2000 1000 0

1

2

3

4

5

Year Unit

2002

2003

2004

2005

2006

Sales volume KT

4121

3692

4316

4555

4760

37

BALANCE SHEET Item Net fixed Assets

Unit m

2002 1203

2003 2004 11693 11157

2005 1072

2006 10800

Net Current Assets

INR m

7 927

74

1 873

105

495

Share Capital

INR m

4157

4157

4157

4157

4157

Reserve & Surplus

INR m

2600

2600

2992

2038

3627

Loan Fund

INR m

6668

5531

4201

4303

2769

Net Worth

INR m

6366

6307

6905

6305

8534

INR Source- Lafarge Financial Statement

38

Net Profit In last 5 Years 2500 2000 1500 Profit 1000 500 0

1

2

3

4

5

Year Unit

2002

2003

2004

2005

2006

Net Profit m INR

129

221

392

816

1840

FINANCIAL RATIOS Years

Unit

Operating Profit Margin

%

15.6

16.5

17.5

14.7

19.5

Return on Capital Employed

%

5.2

5.7

9.4

7.2

17.3

Interest cover

X

0.9

1.1

2.1

2.3

5.6

Debt Equity Ratio

X

0.99

0.82

0.6

0.6

0.34

Earning Per Share

INR / Share

0.31

0.53

0.95

1.96

4.26

Cash earning per share

INR / Share

1.3

1.7

2.9

2.7

4.5

Book value per share

INR / Share

15.4

15.4

16.7

17.6

20.6

39

2002 2003 2004 2005 2006

Debt Equity Ratio Of Last 5 Years

5 4

Val ue

3 2 1 1998

2000

2002

2004

2006

2008

year

Source- Lafarge Annual Financial Statement PRODUCTION DATA FOR THE YEAR 2007 (MONTHLY BASIS)

JAN

FEB

APR 10488 5

MAY

JUN

JUL

AUG

112962

MAR 12523 5

C

103867

Duraguard

4798

112255

128221

86410

2061

0

0

0

0

0

Concreto

0

9364 12438 7

4509 12974 4

8962

17814

8819

TOTAL

108665

113847

130069

137040

PP

40

OCT 14615 3

NOV

DEC

TOTAL

76241

SEPT 10198 4

127803

115571

1341587

0

0

0

0

0

6859

0

6267

11267

6286

82508

113251

9768 12533 9

92213

86410

9157 15531 0

134089

1440659

160000.000 140000.000 120000.000 100000.000 PPC

80000.000

Duraguard Concreto

60000.000 40000.000 20000.000 0.000

JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC

CHAPTER – 3 COST ACCOUNTING

41

COST ACCOUNTING Costing is a very significant area of accounting in any production unit. In a production unit there are elements like material, labour and overheads, which are important parts of cost accounting system. There is various way of defining the cost accounting. It can be defined in following terms: Costing is “the technique and process of ascertaining costs”. Cost Accounting is “the process of accounting for cost which begins with the recording of income and expenditure or the bases on which they are calculated and ends with the preparation of periodical statements and reports for ascertaining and controlling costs”.

42

Cost Accountancy is “the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability. It includes presentation of information derived there from for the purpose of managerial decision-making.

OBJECTIVES OF COST ACCOUNTING The main objectives of Cost Accounting are as follows: 1. Ascertainment Of Cost 2. Determination Of Selling Price 3. Cost Control And Cost Reduction 4. Ascertaining The Profit Of Each Activity 5. Assisting Management In Decision-Making

IMPORTANCE OF COST ACCOUNTING Management of business concern expects from Cost Accounting detailed cost information in respect of its operations to equip their executives with relevant information required for planning, scheduling,

43

controlling and decision-making. It helps the business firm in following functions:  Control of Material cost through proper utilization and supply management.  Control of Labour cost through reduction in labour turnover and idle time.  Control of Overheads by keeping a strict check over them.  Measuring Efficiency by comparing the standard and actual outputs and costs.  Preparing Budget which help in planning in getting results.  Price Determination by help of cost of all the elements and taking profit in consideration.  Help in curtailment of loss during off-season by reducing overheads and using ideal capacity.  Helpful in Expansion by providing information of production at different levels.  Helpful in Decision-Making by providing them accurate information about production functions.

REPORTS PROVIDED BY COST ACCOUNTING There are many types of reports, which are prepared with the help of cost accounting to help the firm in taking different kinds of decisions. Some of those reports are as follows: -

44

 Cost sheets showing total cost, comparative figures for previous and current period, analysis of various elements etc.  Statements related to the consumption of materials, used in production and wastage.  Report on labour utilization regarding the production and idle time etc.  Comparisons of overheads taking the actual and budgeted figures.  Reconciliation of actual profit earned with estimated or budgeted profit.  Report on the cost of abnormal losses during production.  Expenses on research and development

FACTORS IN INSTALLING A COST ACCOUNTING SYSTEM The management, which has a habit of studying information thoroughly before making decisions, would require a cost accounting system. Before setting up a cost accounting system the under mentioned factors should be studied:  The objective of installing the system must be clear.  The system must be install in the area of business where it is most beneficial.  The installation of cost system should not need alteration or extension of firm.  The affect on different variable expenses should be considered.  The maximum amount of information should be gathered without much labour and by faithful ways.  The data collected should be able to get verified.

45

 The benefits of installing the system must be explained to the concerned persons in the organisation.

ESSENTIAL OF A GOOD COST ACCOUNTING SYSTEM  It should be tailor-made and simple.  Able to fulfill the requirement of business concern.  Data used for Cost Accounting System must be accurate.  Cooperation and coordination between different departments is essential.  The Cost of installing and operating of the system must be justified.  It should not provide any kind of unnecessary and meticulous details.  Management should have a faith in the Costing System and should provide a helping hand for its development and success.

46

ADVANTAGES OF A COST ACCOUNTING SYSTEM  Helps in identifying unprofitable activities, losses or inefficiencies in any area of working in the organisation.  By the use of techniques like cost reduction, operational research and value analysis it helps in achieving the economy in firm’s operations.  Helps in knowing the reasons for increase and decrease of profit/loss.  It provides information and data to management to serve as guides in making decisions involving financial considerations.  It provides a great help in deciding the selling price.

47

 Cost accounting provides methods, which are helpful in comparison of actual and estimated values and get the deviations.  Cost of idle capacity can be easily worked out through the cost system.  Cost comparison helps in cost control.

ELEMENTS OF COST ELEMENTS OF COST

MATERIAL COST OTHER EXPENSES DIRECT INDIRECT INDIRECT MATERIAL MATERIAL EXPENSES COST COST

LABOUR COST

DIRECT LABOUR COST

INDIRECT LABOUR COST

48

DIRECT EXPENSES

OVERHEADS

PRODUCTION DISTRIBUTION OVERHEADS OVERHEADS

ADMINISTRATION

SELLING

OVERHEADS

OVERHEADS

CHAPTER – 4 COST ACCOUNTING SYSTEM AT ACP

49

COST ACCOUNTING SYSTEM AT LAFARGE INDIA Pvt. Ltd.,ARASMETA CEMENT PLANT

As a production unit a good costing system is very essential for ARASMETA CEMENT PLANT. Company has adopted process-costing system for determining the cost of the product under reference through integrated accounting system – JD EDWARDS FINANCIALS. The company determines the cost under the following elements: -

Total cost Raw material

Labour

Overheads

In order to ascertain the cost correctly, the entire manufacturing activities both direct and indirect have been broken into cost centers based on identical processes /machinery /activity. The expenses are identified and collected at each cost center

50

level. The cost centers have been broadly identified with the following major manufacturing processes: -

Major Manufacturing Process Limestone Quarrying

Clinkerisation

Cement manufacturing

a. DIRECT- Process Cost Centers

Direct-Process Cost Centers Crushing Raw Mill Kiln

Technical Cement Mill Services CCR

Packing

Material Handling

b. DIRECT- Production Overheads Power generation

Laboratory DirectProduction overheads

General Industrial Services

Water supply

Civil Department

Elec. 51 Workshop

Mech. Workshop

c. INDIRECT – Administration Overheads (Factory)

52

Informat ion & Technol

Stores

Personn el

Rural develop ment

Account s

Sports & Welfare

VP’s office

Safety

purchas e

IndirectAdminis tration

General Adminis tration

Training

Guest / Transit houses

Environ ment Security Services Medical Services

Canteen Services

d. Administration Overheads (Corporate)

53

Town mainten ance

e. Selling and Distribution Overheads (S G & A) The different overheads are allocated in different process in the following proportions: 1. PRODUCTION OVERHEADS (except laboratory & CCR) •

Clinker

•

Cement 26%

•

Packing 13%

61%

2. LABORATORY •

Raw Mill 35%

•

Clinker

15%

•

Cement

50%

3. CCR (Central Control Room) •

Raw Mill

20%

•

Clinker

50%

•

Cement

30%

4. ADMINISTRATION OVERHEADS (FACTORY) •

Clinker

61%

•

Cement

26%

•

Packing

13%

PROCESS OF MANUFACTURE

54

A brief note regarding the process of manufacture along with flow chart covering production, utility and service department of the product. Cement grade limestone is available in the captive mines situated adjacent to the plant site.Limestone is mined and transported in Dumpers to primary Crusher.The Primary Crusher reduces its size to approximately 300 mm. The size of the stone is further reduces when it passes through secondary crusher to 25 mm. The crushed stone is stacked by a stacker in stock piles of approximately 15000 ton capacity. Limestone form stackes is reclaimed by reclaimer. The process of stacking and reclamining ensures pre-homogenizing of limestone alongwith other corrective materials e.g. Gypsum and Iron Ore are ground in ball mill or Vertical roller mill to the required fineness.The ground material is pumped to blending silo. Blending silos help in proper homogenizing of raw mix when material from blending silo is transferred to storage silo. Raw mix from storage silo is fed to Pre Heater through weight feeder.The raw mix gets heated while passing down the Pre- Heater and then into the kiln. The ground coal is fired from the outlet end of the kiln. The hot clinker obtained from the kiln passes through the cooler where it gets cooled. The clinker is again ground with Pozzolanic material ( Fly ash ) for PPC in ball mills to obtain Cement.The Cement is then transported through RBC to cement silos from where it is taken to automatic packers to pack into 50 Kgs bags whenever needed in the packing plant.The packed Cement is then dispatched either by Railway or Truck to various destinations as per the Logistics plan.

55

Limestone Quarry

Mines Workshop

Limestone Transport

Crusher

Raw Mill ( VM )

Coal Workshop Kiln Coal Workshop

Raw Mill ( BM )

Clinker Despatch

Packing & Despatch

Cement Grinding

PRODUCTION RECORDS

56

Cement Grinding

Company maintains adequate production records, showing actual hours worked and hours lost with adequate reasons for kiln, raw mill and cement.

LIMESTONE Daily reports showing quantity raised, quantity transported, quantities crushed are prepared. In the costing department, separate register is maintained for quantitative records. For the purpose of management control periodic cost statement are prepared with budgeted and actual values. The cost sheet is prepared on the monthly basis, with figures up to that month and up to that period of the year. Since the company has their own mines, limestone is not use in financial records. It is treated as production. Purchase items like Gypsum, Fly ash etc separate ledger of receipts, issue and stock are kept. The cost of receipt includes the freight, taxes etc. The total cost is known as landed cost. Consumption record is kept every month. The closing stock is valued at cost including freight, taxes and duties.

LABOUR COST It is charged to cost centers on actual department wise allocation.

STORES AND SPARES The record of receipt, issue and stock of stores and spares are kept in computers in online form. The issues are valued in weighted average method on the basis of authorized slip issued from cost centers. Consumption report is prepared item wise and cost center wise. At the year end physical stock is taken and is valued at cost same as limestone. The receipts are also recorded it as in limestone. All the items of store and spare are physically verified at the end of the year.

57

REPAIR AND MAINTENANCE These are identified with various cost centers as per actuals by analysis of bills of jobs.

DEPRECIATION Total depreciation of cement unit is computed for each asset cost center wise on the basis of Company’s Act 1956. The company follows Straight Line Method (SLM).

HEAD OFFICE AND OTHER EXPENSES Head offices expenses are charged to their respective accounts through inter unit account for the expenses incurred. All other expenses are charged to different departments on the basis of nature of expenditure.

58

59

CHAPTER – 5 DATA COLLECTION

DATA COLLECTION DATA COLLECTION:

60

The data for any project for analysis and interpretation can be collected through two methods, which are: 1. PRIMARY DATA→ Primary data is that data which is collected by the researcher himself by going to the place of happening. 2. SECONDARY DATA → Secondary data is a form of data that is collected through various indirect ways like newspapers, books, journals, periodicals, reports published by the companies, Internet etc. In my project I had used both type of methods. The information collected about the company is basically collected through the secondary data that is collected through Internet and magazines. The data about the working cost accounting system is collected from the employees of the finance department, which is a method of primary data. On the basis of this information I had done my analysis and interpretations. It helps in drawing conclusions and providing necessary suggestions. THE COST STATEMENTS OF THE ACP ARE PREPARED AS FOLLOWING: DESCRIPTION

OBJECT ACCOUNT

RESPONSE CENTER

MONTH BUDGET

ACTUAL

UPTO THAT MONTH BUDGET ACTUAL

FOR THE YEAR BUDGET

This kind of statement helps in many ways. The above statement can be used for:  To know the allocation of things to different departments  To compare the actual working with the planned figures

61

ACTUAL

 To know the current position in compare to planned targets  Help to take corrective steps if the company is lacking in any area  Help in increasing efficiency In the ACP plant cost sheets are prepared for every overhead and process. In case of my project my focus is on production area, so I basically taken the following cost sheets for my analysis of the cost system and its application at ACP:  LIMESTONE QUARRY  CRUSHER  RAW MILL  KILN  CEMENT  PACKING PROCESS  CENTRAL CONTROL ROOM  LABORATORY  ADMINISTRATION OVERHEAD (FACTORY)  PRODUCTION OVERHEAD (FACTORY) I have shown one example of the cost sheet of the one process. The cost sheet is same for all the other processes that are stated above.

COST SHEET FOR LIMESTONE QUARRY

62

DESCRIPTION

OBJECT ACCOUNT

RESPONSE CENTER

MONTH BUDGET

Opening Stock (M.T) Production (M.T) TOTAL (M.T) Consumption/Dispatch (M.T) Closing Stock (M.T) OPERATIONS: Stores & Spares Oil/ Fuel Explosives Other Spares Contractors Power Sub - Total (1) MAINTENANCE & REPAIRS: Stores & Spares Mechanical Electrical Instrumentation Others Lubricants Contractors Mechanical Electrical Instrumentation Others Sub - Total (2) Salaries & Wages Other Expenses TOTAL RAISING COST Opening Stock (M.T) Closing Stock (M.T) Cost Of Limestone Transferred Cost Of Mines Workshop Cost Of Lime Stone Transportation Cost Of Limestone Transferred KCB Total Cost Of Limestone At Crusher DEPRECIATION OTHER EXPENSES

63

ACTUAL

UPTO THAT MONTH BUDGET ACTUAL

FOR THE YEAR BUDGET

ACTUAL

CHAPTER – 6 ANALYSIS AND INTERPRETATION

ANALYSIS AND INTERPRETATION My observation is basically focused on the different cost of the process of cement production. The cost sheets which I use for this project had many type of costs. But they can be analyzed under three heads, which are as follows: •

OPERATIONS

•

MAINTENANCE AND REPAIRS

•

SALARY AND WAGES

The cost is distributed through different cost centers according to the requirement of departments in different process. The cost centers are given different codes,

64

which not only help in the allocation of the cost, but it makes it convenient in entering the value in financial software. It further helps in audit and rechecking works. The cost flow chart with the cost codes at ARASMETA CEMENT PLANT is shown in the following page. It not only helps us to study the flow of cost, but also the different heads of expenditure.

ANALYSIS As I mentioned earlier that I had analyzed ten cost sheets of those processes which are the main part of the production. The cost sheets are:  LIMESTONE QUARRY  CRUSHER  RAW MILL  KILN  CEMENT  PACKING PROCESS  CENTRAL CONTROL ROOM  LABORATORY  ADMINISTRATION OVERHEAD (FACTORY)  PRODUCTION OVERHEAD (FACTORY) On the basis of my analysis I found three major division of cost, which I mentioned above. The analysis of the cost is done with the respect of total cost of that particular process. The analysis of cost as follows: -

65

OPERATIONS BUDGETED

ACTUAL

TOTAL PROCESS COST

OPERATION COST

% TO TOTAL COST

TOTAL PROCESS COST

OPERATION COST

% TO TOTAL COST

LIMESTONE QUARRY

55334

41500

75

43687

29951

68.5

CRUSHER

75085

6063

8.08

74596

7460

10

RAWMILL

101600

69220

68.13

110532

75935

68.7

KILN

97277

70195

72.16

112678

80328

71.29

CEMENT GRINDING

198114

90795

45.83

172353

87279

50.64

PACKAGING

136345

20206

14.82

152743

19390

15.42

NAME OF PROCESS

66

PROD. OHS.

36871

1076

2.92

35979

741

ANALYSIS & INTERPRETATION 1. The figures above shows that at limestone quarry process the main component of cost is operation cost, which has 75% of total cost. The minimum being needed in production overheads. 2. It is also significant to note that in some process the actual cost is lower than the budgeted cost. In some cases it is slightly higher. 3. In case of cement grinding process the difference is high as the factors of operation like oil, fuel and power are variable in requirements. 4. Finally we can say that the operation cost is an important part in the production process as it carries maximum cost in process like limestone quarry, kiln, raw mill and cement grinding. 5. Also the organisation is able to perform its work under its estimated costs, which shows the efficiency in the working of the organisation.

67

2.06

PROD. OHS.

PACKAGING

CEMENT GRINDING

KILN

RAWMILL

CRUSHER

100 90 80 70 60 50 40 30 20 10 0

LIMESTONE QUARRY

% TO TOTAL COST

OPERATION COST % TO TOTAL COST

PROCES S

BUDGETED VALUE

MAINTENANCE AND REPAIRS

68

ACTUAL VALUE

BUDGETED NAME OF PROCESS LIMESTONE QUARRY CRUSHER RAWMILL KILN CEMENT GRINDING PACKAGING PROD. OHS. CCR LAB

ACTUAL

TOTAL PROCESS COST 55334

MAINT. & REP. COST 5842

% TO TOTAL COST 10.52

TOTAL PROCESS COST 43687

MAINT. & REP. COST 6042

% TO TOTAL COST 13.83

75085 101600 97277 198114

5489 12507 16071 10202

7.31 12.31 16.52 5.15

74596 110532 112678 172353

3782 10677 1973 10427

5.07 9.66 17.51 6.05

136345 36871 360 3885

2850 9679 360 2025

2.09 26.25 100 52.13

152743 35979 217 3622

3681 14694 217 1321

2.41 40.87 100 36.46

ANALYSIS & INTERPRETATION 1. Here we can see that the maximum percentage to total cost is required in central control room (CCR), where the whole cost is required for maintenance and repairs. 2. We can also observe that the process, which required high operation cost, had less maintenance and repairs cost. 3. In this cost we can see that except limestone quarry, kiln, cement grinding and production overheads the actual cost is less than the budgeted value. 4. From the figures we can interpret that the cost of maintenance and repair is low. It shows that the working at the plant is very smooth and controlled one. 5. Here also the company is able to check its cost according to its estimated values.

69

PRO CESS

BUDGETED VALUE

SALARY

70

ACTUAL VALUE

CCR

LAB

PROD. OHS.

PACKAGING

CEMENT GRINDING

KILN

RAWMILL

CRUSHER

100 90 80 70 60 50 40 30 20 10 0

LIMESTONE QUARRY

% TO TOTAL COST

MAINT. & REPAIR % TO TOTAL COST

NAME OF PROCESS LIMESTONE QUARRY CRUSHER RAWMILL KILN CEMENT GRINDING PACKAGING PROD. OHS. ADMIN. OHS LAB

TOTAL PROCESS COST 55334

SALARY

TOTAL PROCESS COST 43687

SALARY

7747

% TO TOTAL COST 14

7689

% TO TOTAL COST 17.6

75085 101600 97277 198114

2771 3942 11031 4675

3.69 3.88 11.34 2.36

74596 110532 112678 172353

2715 3791 11268 4550

3.64 3.43 10 2.64

136345 36871 70067 3885

8522 18878 15947 1860

6.25 51.2 22.76 47.87

152743 35979 68570 3622

9760 17511 17622 2014

6.39 48.67 25.7 55.61

ANALYSIS & INTERPRETATION 1. We can observe that salary is a main component of total cost in laboratory, administration overheads and production overheads. 2. The reason for that is at the process like limestone quarry, kiln, cement grinding and crusher we need more of labours than officers, whose wages are lower than the officers working in laboratory, administration and production departments. 3. Here we can see that the actual cost is higher than estimated one. But this usually happen because there are contract labours, whose numbers are variable at times. Also company some times provides incentives to the employees for getting better results. 4. We can interpreted that there is a difference in the actual and budgeted and actual values of wages and salary is due to change in number of employees and the extra bonuses provided by the organisation.

71

% TO TOTAL COST

100 90 80 70 60 50 40 30 20 10 0

72

BUDGETED VALUE PROCESS

ACTUAL VALUE LAB

ADMIN

PROD. OHS.

PACKAGING

CEMENT GRINDING

KILN

RAWMILL

CRUSHER

LIMESTONE QUARRY

SALARY COST % TO TOTAL COST

CHAPTER – 7 SUGGESTIONS

SUGGESTIONS

73

The cost accounting system in the Lafarge India Pvt. Ltd., Arasmeta Cement Plant is a very efficient one. We cannot suggest much to the organisation. But the system reveals some values, which need suggestion for better working at the plant. 1. The whole working is online. In case of mistake it took time for rectification. The plant should provide help to the officers to rectify the mistakes themselves. 2. On finding difference in actual and budgeted figures, the cost accounting system should generate alert to the concern departments. 3. The costs accounting systems also checks the employees’ number in the organisation and relate it to the deviations in the salary and wages. It should provide report for it. 4. The costs accounting system can be further improved, so that it can be more helpful in the process of analysis of data. 5. The costs accounting system can take some innovative steps like better wage payment system etc in improving the profits and performance of the organisation.

74

CHAPTER – 8 OVERVIEW OF OTHER DEPARTMENTS

Plant and operation Management. A. Production Management. Structure of Plant. The structure of the Lafarge India Pvt. Ltd. is continuous process layout. Here the process of the cement production is continuous. So the layout here is continuous

75

in nature. The flow of the material is continuous. The Shape for the material flow is I + U shaped.

Production Process. The Limestone, which is one of the major raw material for the production of the cement. The limestone is extracted from the mine. The mine is first drill and then with the help of the explosive it is blasted and the ores of the limestone is taken to the crusher. The ore containing the high percentage of the lime is taken to the primary crusher where it is broken into pieces. The broken pieces of the limestone are then sent to the secondary crusher where it is broken into smaller pieces. From the crusher it sent to raw mill where the limestone is mixed with gypsum and iron ore. Gypsum is added to slow down the settling of the cement and iron ore is added to provide the strength. Then the mixture is sent to the kiln where the temperature of nearly 1400 degree C is maintained and the mixture thus converted into clinker. The clinker is then sent to grinding unit where it is grind and mix with gypsum. The fine mixture of the cement is sent for packaging where it is packed and sent for the dispatch through road and railway.

B. Stores Management. Receipt Section. The receipt section as the name suggests that it keeps the data regarding the inventory that are supplied to the Lafarge for the purpose of the production. The order is sent to the operation office of the Lafarge and then the order is issued to

76

the supplier. The supplier supplies the material to the company that is recorded at the receipt section.

Issue Section. The issue section issues the material that is requested by the other department for the purpose of the production. First the requisition is issued by the department according to theirs needs, this requisition is sent to the receipt section and it is approved by the high authority and then the materials is issued to the requisite department. Finally the records are maintained.

DISPATCH OR LOGISTIC DEPARTMENT INTRODUCTION TO LOGISTIC DEPARTMENT

77

In this department of Lafarge the daily Dispatch or the sales of goods is maintained. Here the quantitative measurement of dispatch of goods is done and report is sent to the Finance Department. The functions performed by the Logistics Department are: FUNCTION OF LOGISTICS DEPARTMENT 1. The work order is issued in the name of the transporter by the Logistic department. 2. Transporters are then issued a particular code called RO. 3. According to that RO transporters deposits the paper of Truck. 4. By taking information from the papers of Truck deposits by the transporters “Delivery instruction” is prepared commonly called as DI. 5. DI includes all the relative information about the quantity of cement, Truck and the Truck Driver 6. DI is prepared and sent to the transporters. 7. The truck is kept in a queue in the Truck yard till the announcement. 8. After announcement the empty truck enters the premises of LAFARGE. 9. The empty truck is then weighted in a weighbridge. 10. After crossing the weighbridge the truck moves towards the packing plant for loading. 11. In a packing plant according to DI mentioned quantity of materials are issued and loaded in a truck / Wagon 12. Then again Loaded Truck has to pass through weighbridge where loaded quantity is checked. 13. Then in Dispatch DI is kept and Gate pass is issued. 14. Three copies of gate pass is issued one to driver, to dispatch Department &one is sent to accounts.

78

15. The whole Dispatch is summarized at 12 o’clock at night every day. Three copies of summary is prepared one is sent to Bilaspur office, one in the Accounts Department and one is kept by the Dispatch Department.

INFORMATIONTECHNOLOGY DEPARTMENT OF LAFARGE, ACP: Lafarge has wide area network (WAN), which connect all computers in the plant. It has two main server namely JDE, MAXIMO located in Malaysia. With the help of CITRIX tool it provide remote login. Finance department uses ERP and PEPS. Generally Visual basic acts as front-end and Oracle acts as backend. Network services provided by IT department are in three parts: T Drive- common to all

79

employees, anybody can access it. W Drive- specific for a given department. No other department can work upon any other department’s drive. Y Drive - specific for given employee. IT Department plays three major roles: •

To co-ordinate functioning of ERP

•

To raise call to help desk- Regional sales services, when problem cannot be handled locally.

•

To check the functioning of each computer of all department.

SAFETY DEPARTMENT

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Safety function Safety Talk: One of the major activity in safety department is conduction of safety talk .It is held daily in which all the HOD’s and plant manager participate and discuss for all the accidents. Audit: monthly audit is done for checking equipments, machines etc. It can be done internally and externally both. Safety program: It consist of following processes conducted at every first date of each month for the duration of two hours. It includes: •

Reading of Monthly prayer

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Reading of Integrated Policy

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Health and safety measures

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Discussion related to First aid injuries and accidents occurred in the month

Safety Person of the month: Every month two persons are selected to be the safety person of the month. One person is from the contractors and one is from the workmen’s working in the Lafarge. First Aid Box: First box is placed in each and every department of Lafarge. Doctor: Every Tuesday and Friday a lady doctor visit the plant for the general checkup of the lady employees. Medical claim: For the workmen the compensation for medical injury is up to 750000 and for the officers it is up to 1lakh-2lakh approx. Safety Seminars: Safety Seminars are conducted in regular intervals to enhance the awareness of the employees. Fatal Compensation: If a person because of any major accident becomes fatal then according to company’s rule every employee will help him by donating their one day’s half salary within three days. Allowances: In packinghouse where the cement is loaded all the employees are provided with dust allowance to prevent them from any hazardous effect of cement powder. This includes one and half Kg of jaggery and 600 Grams of mustard oil per month. And for working in kiln area Heat allowance in form of money is given.

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Permit to work: Only those employees or contractors are permitted to work ,by the safety department having one or all the permits given below: •

Work permit

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Height Permit

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Confined space

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Hard Permit

Safety instruments: For working in any part of the plant various safety instruments are provided to the workmen keeping in view the safety of the workers health. some of the safety instruments are : •

Helmet

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Safety shoes

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Nose mask

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Ear plug

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Goggles

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PP bags

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Hand gloves

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Safety belts

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Nets

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Apron for welding purposes

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Full screen Helmet

HUMAN RESOURCE DEPARTMENT OF LAFARGE ACP

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Human resource policies of Lafarge India Pvt. Ltd. Recruitment Policy. The applicants are required to apply for the post to main office in the Mumbai and Kolkata. Selection Policy. The applicant is interviewed by a panel and with telephonic way. The selected candidate is then sent for the placement.

Integrated policy •

Quality

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Environment

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Occupational health and safety

Lafarge India Pvt. Ltd. affirms its commitment towards customer satisfaction, environmental protection, healthy and safe work environment for all concern and shall endeavour to – •

Produce clinker and cement exceeding the applicable standard to satisfy the customer needs

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Comply with all applicable legal and other requirement

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Provide the necessary resource and training to all employees in conducting their work and enhancing their skill

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Regularly set and review objectives and targets for continual improvement in quality, productivity, work environment & health and safety performance

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Prevention or control of pollution and occupational health and safety hazards

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Institute Management Systems of international repute and continual improve their effectiveness

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Communicate the necessary information to the stakeholders.

Induction And Training. The person who is appointed in the Lafarge is trained under a schedule. For e.g. a person is from the marketing then he will be trained under the following schedule. The schedule is as under1. Plant Overview. 2. Orientation to Operation Area. 3.

Overview of Logistic.

4. Overview of Quality Assurance 5. Visit to the Marketing areas. The training for the person is first categories as under which category the person is to be trained. The category for the training is as follows•

Functional.

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General.

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Technical.

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Safety.

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BATS – Behavioral Approach Towards Safety.

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Quality.

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Behaviour.

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New Technology.

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External.

Performance Appraisal.

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Following two methods basically does the assessment of the performance of an employee in Lafarge•

Job Description. It includes the nature of the basic job done by a particular employee. It describes the basic responsibility and accountability towards the job assigned to him.

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Key Performance Indicator (KPI). It specifies area of work, weighted or importance of your work, action plan prepared, evaluation of job. In Lafarge there are some parameter on which the performance of the employee is measured. Every parameter is provided a scale from 0-10

The weightage is calculated on the following parameterPerformance Factors- It includes Planning, controlling, organising, innovating, and decision making etc. Besides this appraisal is done on the basis of project Undertaken and some unplanned achievements. Lafarge believe in 360 degree evaluation.

Internal mobility. From the above performance evaluation the score obtain is compared with the following ranks 1. Outstanding. 2. Fully Achieved. 3. Mostly Achieved. 4. Not Achieved. 5. New Assignment. As per the rank provided the internal mobility such as promotion transfer and demotion is decided.

Compensation Plan. Lafarge provides their employee a compensation with the Fixed Salary + Bonus+ PF+ Others Facilities.

Welfare Activity. Lafarge has provided many facilities to their employees under their social responsibilities•

Providing housing facilities.

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Transport Facilities for their employee by providing bus services for the employees and their family.

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Providing Medical Facilities.

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Providing Drinking Facilities.

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Women and health development program.

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Assistance to repair and construction.

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Providing School facilities.

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Safety Policy.

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Security Policy.

Environmental Policy. •

Sparing use of natural resources.

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Environmental know-how and expertise

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Following pre determined environmental standards

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Innovative products

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CONCLUSION Cost Accounting is a very important branch of financial working of any production organisation. It not only helps in comparison of actual cost and estimated cost, but also helps the firm to know his exact position of its working. The main focus of my project was to study the cost accounting system of Lafarge India Pvt. Ltd., Arasmeta Cement Plant. My overall objective is to know the working and functions of cost accounting system of the plant. During my training period with data collection and interaction with the employees of the Arasmeta Cement Plant (LIPL) I am able to know about the working of the cost accounting system. My study shows that the cost accounting system at the Arasmeta Cement Plant (LIPL) is a very efficient system. It keeps records of each and every department. It helps to analyze the data of all departments at one place. Since the system is an online one it helps in working fast. The cost accounting system at the Arasmeta Cement Plant (LIPL) not only provide the true position to the management, but also provide budgetary solutions to the organisation. All in all we can say that the cost accounting system at the Arasmeta Cement Plant (LIPL) is a system which every production unit should have for better performance. My objective of the project is fulfilled with the help of data provided and help from the employees of the Arasmeta Cement Plant (LIPL).

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