1.2: SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Accounting and Preparation of Financial Statements

The financial statements of the company have been prepared and presented in accordance with Indian Generally
Accepted Accounting Principles (IGAAP) under historical cost convention unless otherwise stated and on an
accrual basis. GAAP comprises accounting standards specified under section 133 of the Act, to the extent
applicable, other pronouncements of Institute of Chartered Accountants of India, the provisions of Companies
Act, 2013.

The Company is a small and medium sized company (SMC) as defined in the Companies (Accounting Standards)
Rules, 2021 notified under the Companies Act 2013. Accordingly, the company has complied with the
Accounting Standards as applicable to a Small and Medium Sized Company.

b) Use of Estimates

The preparation of financial statements requires estimates and assumptions that affect the reported amount of
assets, liabilities, revenue and expenses during the reporting period. Although such estimates and assumptions
are made on a reasonable and prudent basis taking into account all available information, actual results could
differ from these estimates and assumptions and such differences, if arise, are recognized in the period in which
the results are crystallized.

c) Current and non-current classification

All the assets and liabilities have been classified as current or non-current as per the Company’s normal operating
cycle and other criteria set out in the Schedule III to the Companies Act, 2013.

Assets:

An asset is classified as current when it satisfies any of the following criteria:

i) It is expected to be realized in, or is intended for sale or consumption in, the Company’s normal operating
cycle;

ii) It is held primarily for the purpose of being traded;

iii) It is expected to be realized within 12 months after the reporting date; or

iv) It is cash or cash equivalent unless it is restricted from being exchanged or used to settle a liability for at
least 12 months after the reporting date.

Liabilities:

A liability is classified as current when it satisfies any of the following criteria:

i) It is expected to be settled in the Company’s normal operating cycle;

ii) It is held primarily for the purpose of being traded;

iii) It is due to be settled within 12 months after the reporting date; or

iv) The Company does not have an unconditional right to defer settlement of the liability for at least 12 months
after the reporting date. Terms of a liability that could, at the option of the counterparty, result in its
settlement by the issue of equity instruments do not affect its classification.

Current assets / liabilities include the current portion of non-current financial assets / liabilities respectively. All
other assets / liabilities are classified as non-current.

d) Operating Cycle

Based on the nature of products / activities of the Company and the normal time between acquisition of assets
and their realization in cash or cash equivalents, the Company has determined its operating cycle as 12 months
for the purpose of classification of its assets and liabilities as current and noncurrent.

e) Inventories

Inventories are valued at the lower of cost and net realizable value. Net realizable value (NRV) is the estimated
selling price in the ordinary course of the business, less the estimated costs of completion and the estimated costs
necessary to make the sale. Cost of inventories comprises all cost of purchase, cost of conversion and other costs
incurred in bringing the inventories to their present location and condition.

f) Cash Flow Statement

The cash flow from operating, investing and financing activities of the company are segregated based on the
available information. Cash flows from operating activities are reported using the indirect method, whereby
profit before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any
deferrals or accruals of past or future cash receipts or payments.

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short terms balances (with
original maturity of three months or less from date of acquisition) highly liquid investments that are readily
convertible into known amount of cash and which are subject to insignificant risk of changes in value

g) Property, plant & equipment (fixed assets), depreciation & amortization

Property, plant & equipment (Fixed assets) are carried at the cost of acquisition or construction less accumulated
depreciation. The cost of property, plant & equipment (fixed assets) includes non-refundable taxes, duties, freight
and other incidental expenses related to the acquisition and installation of the respective assets.

Subsequent expenditure related to an item of property; plant & equipment (fixed asset) is capitalized only if it
increases the future benefits from the existing assets beyond its previously assessed standards of performance.

Advances paid towards acquisition of property, plant & equipment (fixed assets) outstanding at each balance
sheet date are shown under long term loans and advances. Cost of assets not ready for intended use, as on the
balance sheet date, is shown as capital work-in-progress.

Depreciation on property, plant & equipment (fixed assets) is provided using the WDV method based on the
useful life of the assets as specified in Schedule II to the Companies Act, 2013. Depreciation is calculated on a
pro-rata basis from the date of installation till the date the assets are sold or disposed. Individual assets costing
less than Rs 5000/- are depreciated in full in the year of acquisition.

h) Intangible Assets and amortization

Intangible assets are recorded at the consideration paid for acquisition including any import duties and other
taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), and any directly
attributable expenditure in making the asset ready for its intended use. Intangible assets are amortized on a
systematic basis over the best estimate of their useful lives, commencing from the date the asset is available to
the Company for its use.

i) Revenue Recognition
Sale of goods

Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer,
recovery of the consideration is reasonably certain, the associated costs and possible return of goods can be
estimated reliably, there is no continuing management involvement with the goods and the amount of revenue
can be measured reliably.

Revenue from the sale of goods includes excise duty and is net of returns, sales tax and applicable trade discounts
and allowances.

j) Foreign Exchange Transactions and balances

Company engaged in local transaction only. So there is no requirement for Reporting of Foreign Currency.

k) Investments

Investments that are readily realizable and are intended to be held for not more than 12 months from the date, on
which such investments are made, are classified as current investments. All other investments are classified as
non-current investments.

Current investments are carried at the lower of cost and fair value. The comparison of cost and fair value is done
separately in respect of each category of investment.

Non-current investments are carried at cost less any other-than-temporary diminution in value, determined
separately for each individual investment. The reduction in the carrying amount is reversed when there is a rise
in the value of the investment or if the reasons for the reduction no longer exist. Any reduction in the carrying
amount and any reversal in such reductions are charged or credited to the statement of profit and loss.

l) Employee Benefits

Employee benefits are recognized as an expense at the undiscounted amount expected to be paid over the period
of services rendered by the employees to the Company.

m) Borrowing costs

General and specific borrowing costs directly attributable to acquisition or construction of those fixed assets
which necessarily take a substantial period of time to get ready for their intended use are capitalized. Borrowing
costs are interest and other costs incurred by the Company in connection with the borrowing of funds. All other
borrowing costs are recognized in the statement of profit and loss in the period in which they are incurred.

n) Segment Reporting

Company does not have any segment. So Segment Reporting is not applicable on company.

o) Leases

There is no such lease transaction during the year under our audit.

p) Earnings per share

The basic earnings per share (“EPS”) is computed by dividing the profit after tax for the year by the weighted
average number of equity shares outstanding during the year. For the purpose of calculating diluted earnings per
share, profit after tax for the year and the weighted average number of shares outstanding during the year are
adjusted for the effects of all dilutive potential equity shares. The dilutive potential equity shares are deemed
converted as of the beginning of the period, unless they have been issued at a later date.

q) Taxation

Current income tax expense comprises taxes on income from operations in India and in foreign jurisdictions.
Income tax payable in India is determined in accordance with the provisions of the Income Tax Act, 1961. Tax
expense relating to foreign operations is determined in accordance with tax laws applicable in countries where
such operations are domiciled.

Minimum alternative tax (MAT) paid in accordance to the tax laws, which gives rise to future economic benefits
in the form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence
that the Company will pay normal income tax after the tax holiday period. Accordingly, MAT is recognized as
an asset in the balance sheet when it is probable that the future economic benefit associated with it will flow to
the Company and the asset can be measured reliably.

Deferred tax expense or benefit is recognized on timing differences being the difference between taxable incomes
and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.
Deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.

In the event of unabsorbed depreciation and carry forward of losses, deferred tax assets are recognized only to
the extent that there is virtual certainty that sufficient future taxable income will be available to realize such
assets. In other situations, deferred tax assets are recognized only to the extent that there is reasonable certainty
that sufficient future taxable income will be available to realize these assets.

Advance taxes and provisions for current income taxes are presented in the balance sheet after off-setting
advance taxes paid and income tax provisions arising in the same tax jurisdiction and where the Company intends
to settle the asset and liability on a net basis.

The Company offsets deferred tax assets and deferred tax liabilities if it has a legally enforceable right and these
relate to taxes on income levied by the same governing taxation laws.

r) Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired.
If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable
amount of the asset or the recoverable amount of the cash generating unit to which the asset belongs is less than
its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an
impairment loss and is recognized in the statement of profit and loss. If at the balance sheet date there is an
indication that if a previously assessed impairment loss no longer exists, the recoverable amount is reassessed
and the asset is reflected at the recoverable amount subject to a maximum of amortized historical cost.