Value Added

Value-Added Statements Puttu Guru Prasad [email protected] INC GUNTUR

Need of value-added statements 

The activities of a company have not only economic impact but also social impact on the users of information. Since a company makes use of community-owned assets such as roads, railways and other infrastructural facilities and also concessions provided by the state, it is accountable to the society. A value added statement forms part of social responsibility reporting

Definition of VA  Addition

of wealth made by the organization with the efforts of management and employees using capital is called value addition. VA is measured as a difference between the sales and cost of material and services purchased from out side. That is value added equals pre-tax profits plus labor, depreciation and interest

Approaches for computation of value-added  Additive

approach:- in this approach, all the items that create value such as wages and salaries, interest, depreciation, rent , rates and insurance, employee benefits, other overhead expenses and profit before tax all added up to give the sum of value-added

Approaches for computation of value-added 

Subtractive approach:- in this approach, the following items such as raw materials, boughtin components, sub-contracted processing, consumable stores, loose tools, repairs and maintenance of the plant and equipment and other bought-in-services are deducted from the sales revenue. To this, the increase or decrease in labor and relevant overhead in stocks and work-in-progress are added or deducted as the case may be.

Gross & Net Value Added  Gross

Value-added:- is arrived at by deducting from sales revenue and any other direct income and investment income, the cost of all materials and services and other extraordinary expenses.  Net value-added:- net value-added is derived by deducting depreciation from the gross value-added