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COST AND FACTORY ACCOUNTING SYSTEM
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COST AND FACTORY ACCOUNTING
Updated up to
MAR 2015
Regional Training Centre (ER)
EM Block, Sector-V, Salt Lake,
Kolkata-700 091
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INDEX
Subject
Page No.
CHAPTER-I
Labour Accounting
3 - 56
CHAPTER-II
Material Accounting
57 - 96
CHAPTER-III
Cost Accounting
97 - 158
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CHAPTER-1
INDUSTRIAL EMPLOYEES IN ORDNANCE & ORDNANCE
EQUIPMENT FACTORY: PAYMENT & ACCOUNTING
Introduction
Classification of workers
The employees in Ordnance and Ordnance Equipment Factories who are
employed for production and maintenance jobs are called Industrial
Workers and are classified as:Semi-Skilled
Skilled
Highly Skilled – Grade II
Highly Skilled – Grade I
Master Craftsman
Semi-Skilled workers in Ordnance/Ordnance Equipment Factories are of
two type’s viz. Semi-Skilled Tradesmen and Semi-Skilled Labours. The
tradesmen who are having adequate trade training are recruited in the
semi skilled grade on probation against the available vacancies in skilled
grade and after successful completion of probation period and passing of
the requisite trade test they are placed as skilled workers. Such
placement in the skilled grade after putting in the specific length of
service in the Semi-Skilled grade should not be treated as promotion/upgradation for the purpose of their future financial up-gradations.
([Auth:- MOD ID, 11(5)/99-D (Civ-I) dt 30-10-2001]
The semi skilled labours are basically unskilled and do not have any
trade training. Such semi-skilled labours must pass necessary trade test
for the Semi-skilled grade to be entitled for appearing the trade test of
the skilled grade and further advancement in the hierarchy of the artisan
cadre. These Semiskilled labours are mainly the erstwhile Group "D"
unskilled labours and NIEs transferred / redesignated as IEs.
As per Government of India, Ministry of Defence No. 11(5)/2009 D
(Civ-I) dated:14/06/2010 (Annexure– I), the artisan cadre of the
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industrial workers have been classified w.e.f. 01-01-2006 into four
grades viz, Skilled, Highly Skilled Grade II, Highly Skilled grade I and
Master Craftsman. With the issue of the above order of the Ministry of
Defence the post of Master Craftsman which was previously within the
strength of Highly Skilled grade, has become part of the hierarchy of the
artisan cadre w.e.f. 01-01-2006 and the movement of Highly Skilled
Grade I to the grade of Master Craftsman has become a promotional
movement.
The composition of Industrial employees in each Ordnance & Ordnance
Equipment Factory has been framed out keeping in view the pattern of
production or the jobs to be performed for production of particular types
of items, assigned to the particular factory. These jobs have been
grouped trade-wise as Black smith, carpenters, Electrician etc. and the
percentage of workers under each grade viz. skilled, highly skilled etc.
are notified under Govt. Orders issued from time to time. As per
Government of India, Ministry of Defence letter dated 14/06/2010, 45%
of the sanctioned post in artisan cadre may be granted the grade of
Skilled workers, 25% of the remaining 55% may be granted the grade of
Master Craftsman and the remaining posts may be divided in the ratio of
50:50 as Highly Skilled worker grade – II and Highly Skilled worker
grade -I.
Under the Factories Act 1948, no adult worker is required to work in a
Factory for more than 48 hours in any week. The total normal working
hours in a week in the Ordnance and Ordnance Equipment Factories
have, however, been fixed at 44 3/4 hours excluding intervals for recess.
The difference of 3 1/4 hours i.e. complement of 48 hours is known as
Saturday bonus, as dealt with later. The General Managers have full
discretion in respect of fixing the working hours for week days and
Saturdays and in prescribing the opening and closing hours and time for
recess.
In Ordnance Factories, wages payments are compiled under various
elements as determined based on two system of labour remuneration,
viz. (1) based on time i.e. attendance and (2) based on quantity
produced. While the former is known as Day Work System, the latter is
Piece Work System.
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Procedure of mustering daily attendance
The Wage cycle (calendar month) begins with recording of attendance
on daily basis which is known as mustering. At present two types of
attendance recording system are in vogue in the Ord. & Ord. Equipment
Factories viz. (1) Manual Recording System (2) EARS (Electronic
Attendance Recording System).
(1) Manual Recording system
The gate of the factory is opened about half an hour before the time
fixed for commencement of work in the factory and is closed at the fixed
time. During this interval the workmen get in, remove their tickets from
the ticket boards placed near the gate and deposit them in their
respective shops. Soon after the factory gate is closed, the gate office or
labour bureau prepares separately for each shop a list (for purpose of
mustering) showing the ticket nos. that have not been removed from the
ticket boards. At the same time, after shops have commenced work, the
shops examine the tickets deposited by the workmen and also take
attendance by personal counting ensuring that the persons not
present/absent as shown in the report are actually absent. Thereafter the
shops prepare a 'Casualty Memo' or 'Presentee Memo' whichever is
convenient. The report is signed by the JWM or by the Head of Shop and
sent direct to the Accounts Office.
The late comers are allowed inside the factory after 1/4, 1/2, 3/4 and 1
hour from opening time. The late comers are required to deposit their
tickets in the respective boxes at the gate specifically provided for the
purpose to record the particular hour at which a late comer is admitted or
their numbers are noted on this account by a representative of the gate
office (or the labour bureau) who is deputed at the gate specially for this
purpose. The Labour Bureau or the gate office prepares the memo for
these men and one copy of the memo is supplied to the Accounts Office.
The main attendance record of the worker is maintained by the Factory
Labour Bureau and is known as 'Muster Roll'.
The Muster Roll is maintained in a separate monthly volume for each
shop in the factory. The 'Column' for the day against IEs who are absent
according to the tickets not removed or list ('Casualty Memo') prepared
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there-from are marked 'A' or ‘LP’ in the Muster Roll (A stands for
‘Absent’ and LP stand for ‘Leave with pay' i.e. sanctioned leave).
A normal working day excluding Saturday comprises of 8 (eight) hours.
The working hour is divided into four equal parts. Hence eight hours
work in a day represent 4 X 8 = 32 quarters for every quarter hour the
numerator is one. Thus the attendance of the late comers will be marked
short to the extent they are late i.e. 31/32, 30/32, 29/32, 28/32
accordingly as they are late by 1/4, 1/2, 3/4 and 1 hour respectively,
others being marked '1'.
IEs who take short leave are granted 'Leave passes'. Leave passes
granted to IEs on the previous day, overtime memos, copies of order
granting leave with or without pay are collected and 'the previous day’s
attendance marked up in accordance with them. Part leave is generally
granted in terms of quarter of an hour, absence for which is normally
booked as absence for 1/32 of a day. Deduction for absence during part
of a day including Saturdays shall, in the case of Industrial employees to
whom the payment of Wages Act 1936 is applicable, be calculated at the
rate of 1/32 of a normal days pay, for each quarter hour’s absence from
the normal period of that day.
If an IE is absent for the whole Saturday he is not entitled for the benefit
of Saturday bonus but if he is present for part of a day his attendance
will be marked as under:Present on Saturday
For hours
>0
1
2
3
4
5
6
1
Booking of attendance
/32 + No. of Qtr. (Max. 3)
17/32
21/32
25/32
29/32
1- 1/32
1-5/32
The extra hours i.e. 13/32 hours is called 'Saturday Bonus'.
The effect of grant of Saturday bonus is to increase the period of normal
attendance by 3 1/4 hours per week.
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In the case of shift workers having 7 1/2 hours effective working on
week days and 7 ¼ hours on Saturday marking should be made as
follows :-
Present for hours
>0
½
1-1/2
2-1/2
3-1/2
4-1/2
5-1/2
6-1/2
7-1/2
Booking on weekdays
2/32
4/32
8/32
12/32
16/32
20/32
24/32
28/32
1
Booking on Saturdays
3/32
5/32
9/32
13/32
17/32
21/32
25/32
29/32
1-1/32
The late attendance of workers due to late running/cancellation of
local/shuttle trains may be condoned up to a maximum limit of three
hours by the GM of the factory if he is satisfied that the late Attendance
is solely due to late running of trains. When the late attendance is
condoned, the workers will not be penalised in the matter of wages for
un-worked time. Marking of the attendance in muster rolls will,
however, be done with reference to the actual time of attendance of the
workers. The condo nation of late attendance will be notified through
Factory Orders. If any overtime is worked by the affected personnel on
the date of late attendance, the overtime wages will be reduced by the
proportionate wages calculated on single time rate in respect of late
attendance condoned, if any, on that particular date. For this purpose a
certificate will be furnished by the GM in all claims of overtime.
Suitable symbols will be used for noting different kinds of leave, idle
time due to various causes and periods of absence in the muster. The
symbols will be adopted by the factory in consultation with the Accounts
Office.
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Overtime attendance is marked on the basis of 1/32 of a day for each
quarter hour of overtime irrespective of whether it is on week day,
Saturday or Holiday. Overtime memos are prepared in the case of casual
overtime when the shop or section is not working systematic overtime as
a whole. After the close of each week, the progressive total of each
man's attendance for the month is also shown by the Labour Bureau in
the muster roll. On the day following the close of the month, the muster
roll will be sent to the Accounts Office by the Labour Bureau after
entering therein the total monthly attendance in respect of each worker
for the completion of the same as regards wages payable to each
workman.
Note - As a general rule, the industrial employees will not be allowed to
go out of the factory for lunch along with their section tickets. In respect
of certain factories e.g. A.F. Kirkee, H.E.Fy., Kirkee and Cordite
Factory, Aruvankadu in a very limited number of deserving cases
industrial employees may, however, be permitted by the G.M. to leave
the factory premises for lunch. In such cases, late attendance after lunch
shall not be permitted beyond 15 minutes. An I.E. coming late in excess
of 15 minutes will not be admitted in the factory for the rest of the day
and he will be treated as on unauthorized absence from the place of
work, for which disciplinary action may be taken on the merits of each
case at the discretion of the G.M. in addition to the normal deduction of
wages. Casualty report in respect of late attendance and non-attendance
of I.Es after lunch period will be furnished to the Accounts Office in the
same manner as in the case of late attendance at the opening hour on the
same day.
Attendance IEs working in the detachments
Marking of attendance in respect of industrial employees working in the
detachments mentioned below, where the procedure prescribed above
cannot be strictly adhered to, being located at a considerable distance
from the factory proper is to be regulated in the manner indicated
below:(i) Kataya Chat Pumping Station, Filter plant and similar places of work
under OF Katni
(a) Registers should be maintained at the workshops with direction to the
I.Es to sign or affix thumb impression as the case may be on these
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registers in the presence of incharge shift as and when they attend duty
shifts.
(b) These registers should be sent daily to the Section for preparation of
casualty reports.
(c) The casualty report will be forwarded by the Section to the Gate
Section.
(ii) Power Station, Kateri and catchment area at Cordite Factory,
Aruvankadu
Attendance of I.Es who report directly at Power Station, Kateri should
be supervised by a NGO who is permanently stationed at the site. Daily
mustering should be completed with reference to absentee numbers
indicated over phone and casualty reports prepared daily should be
submitted to Accounts Officer once in three days.
Note-1- As regards men detailed at catchment area their casualty should
be ascertained over phone at the opening hour of the factory, provision
for an attendance register at the work spot should also be made. The
attendance register should be sent once in three days to the factory for
checking the casualty already ascertained over phone and reporting
discrepancy, if any, to the Accounts Officer.
(2) Electronic Attendance Recording System
Apart from manual attendance, Ordnance Factories have introduced
Electronic Attendance recording System. At the gate office machines
have been installed where Access Control Cards are used by the IEs to
record their timing of entry and exit from factory. This information
along with other relevant information is used to generate the daily
attendance of an IE. Under this system late/ short attendance is recorded
in minutes.
Personal Information of IEs
The Labour Bureau will furnish the Accounts Office with daily
Statement showing:
(i) Entertainment and discharge of workers.
(ii) Alteration of rates of pay and any other facts connected with worker
which may affect their earnings such as promotion, suspension, transfer
etc. A formal change statement (supported by relevant Factory Orders
where necessary) confirming the daily reports from the Labour Bureau,
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should reach the Accounts Office not later than the first working day of
the month following that to which it relates.
The Labour Bureau maintains service records for workman.
The Accounts Office maintains attendance record showing, names, ticket
numbers, trades, grades and rates of pay of industrial employees.
Separate records should be prepared for the various shops or sections
showing ticket numbers serially like muster rolls for day workers, individual piece workers and various piece worker gangs separately. On
receipt of the muster rolls from the Labour Bureau, the entries for the
day will be checked with reference to presentee statement or casualty
memos received from the Gate Office. The previous day's attendance
will be checked with reference to leave passes, overtime memos etc.
received from shops/sections. Any discrepancy noticed will be reported
to the Labour Bureau through discrepancy reports and alterations in the
muster rolls will be made and attested by the Factory authority.
Wage Payment
In Ordnance Factories, wages payments are compiled under various
elements as determined based on two system of labour remuneration,
viz. (1) based on time i.e. attendance and (2) based on quantity
produced. While the former is known as Day Work System, the latter is
Piece Work System. Those who work under Day Work System are
known as Day Worker and those under Piece Work System are known as
Piece Worker. The Piece workers are further subdivided in two
categories viz. Individual Piece worker and Gang Piece worker who
work in a gang.
Different element of Wages entitled to Industrial Employees
Wages payable to Industrial employees for any wage period will
include (I) Duty pay at basic monthly rate (for day workers) based on
attendance or Duty pay at basic monthly rate and an element of
profit (for piece workers) calculated on the basis of output (Piece
Work Card) and input hours.
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The IEs are placed in a running Pay Band and Grade Pay
according to their Grades i.e. Skilled, Semi Skilled etc. which
constitutes their basic monthly rate of Pay. The IEs are entitled to
yearly increment on basic pay.
Apart from Duty Pay, Personal Pay and Special Pay (e.g. for
Promoting Small family norms) will be admissible as notified in
Govt. orders and Guarantee Pay to Piece Workers where
admissible.
(II) Allowances like Dearness Allowance, House Rent
Allowance, Transport allowance, Hill Area Allowance,
Scheduled/ Tribal Allowance, Deputation (Duty) Allowan ce,
Children Education Allowance, Remote Locality Allowance,
Project Allowance, Night Shift Allowance, at the prescribed rates
as laid down by the Govt. under different rules.
(III) Incentive Bonus (for Maintenance workers only),
Overtime Bonus, Night Shift Bonus,
(IV) Idle Time Pay, Leave Pay, Holiday Pay, Injury Pay and
Segregation Pay
Calculation of elements of Wage
(I) Duty Pay
(a) Duty pay at basic monthly rate is also called Time Wages in
respect of DAY WORKERS. This is because the day workers are
paid on time basis without regard to output. The pay for a day
should be assumed at Basic monthly pay (BP+GP) /N-(S+H) (where 'N'
represents the number of days in a month, 'S' represents number of
Sundays in a month and 'H' represents number of closed paid holidays in
that month). No separate payment for any closed holiday is made. For
the purpose of calculating duty pay of a month, this formula should be
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multiplied by the number of days actually attended i.e. excluding
Sundays and paid holiday. Thus Duty Pay for a month will be:
(Band Pay + Grade Pay) x Number of Days present
N-(S+H)
(b) The pay for a day for PIECE WORKERS is assumed at Basic
monthly pay (BP+GP)/(N-S) . They are eligible for payment of paid
holidays separately in addition to Duty Pay and Piece Work profit. Thus
Duty Pay for a month will be:
(i) (Band Pay + Grade Pay) x Number of Days present
(N-S)
& Holiday Pay will be:
(ii) (Band Pay + Grade Pay) x Number of Paid Holidays falling in that month
(N-S)
IEs who work partly as piece workers and partly as day workers during
a wage period, will be paid proportionate Duty Pay and PW Profit for
the period they are put on piece work and time wages calculated at the
rate of (BP + GP) /(N-S) for the period he works as a day worker. In
addition, payment for closed paid holiday, if any falling within the wage
period will be made to him separately as in the case of a piece worker.
Note- The period of strike/token strike resorted to by industrial
employees is to be regarded as 'Dies-non'. It neither counts as service nor
as break in service. Unless otherwise stated no pay and allowances will
be admissible to workers for the period they are on strike/token strike
etc. Deduction of wages on account of periods of strike for a part of a
day will be made as under:
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For Day Workers:
BP+DA+ Other Allowance x
N-(S+H)
For Piece Workers:
Period of Strike (Dies non Period) in hour
Normal working hours per day
BP++DA+ Other Allowance x Period of Strike (Dies non Period) in hour
N-S
Normal working hours per day
Day Work Cards
Day Workers, who are paid by attendance, the Shops prepare Day Work
Cards showing the ticket number of the worker, the Work Order and
Warrant Number and the time spent on the job. Normally one card is
prepared for each week showing the various jobs and job times for a
worker.
Piece Work Card:
As the remuneration of Piece Workers is based on quantity produced, the
output of a piece worker is recorded on a document known as Piece
Work Card. These piece work cards contain the Ticket No., the shop to
which the IPW or GPW belongs, details of the work completed like
Work Order, Warrant etc., Number of articles produced and accepted,
the operations and the hours authorised against each operation. Separate
PW Cards are maintained for IPW and GPW in document no. 18 and 19
respectively.
The information contained in priced PW and DW Cards are used
for Cost Accounting purpose.
Piece Work Earnings:
Piece work cards are received in the Accounts Office from the factory in
batches as and when work is completed. The piece work cards are then
priced by the LAO by multiplying the hours authorised against each
operation/unit by the operation/units completed and accepted after
carrying out due Audit Checks. Total output hours is worked out by
adding the hours of all priced PW Cards pertaining to the month
separately for each IPW and Gang.
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In case of Piece Worker (both IPW and GPW) the input hour is
calculated as
No. of days present in month (excluding Saturday & Sunday) x 8
+
(No. of Saturdays present x 4 ¾)
+
(OT Hours Worked – Late Hours if any)
Profit % is worked out as under:
Output (PW Card) Hours – Input Hours x 100
Input Hours
In case of gang piece worker the total input hours of the gang is arrived
at by adding the input hour of each individual worker of gang and the
output hour is calculated as the total hours on the basis of the PW Card.
The profit % of the gang is calculated as
(1.25 x Gang Output Hours (PW Card Hours) – Gang Input Hours
X
100
Gang Input Hours
Note:
Piece work rate will be correlated to the minimum of the pay band- 1 +
Grade Pay Rs 1900 i.e. Rs 5200 +Rs 1900 = Rs7100 for all
category/grades of workers deployed on piece work system. The
difference between the actual basic pay of a worker and Rs 7100 shall be
paid to him as a separate element as "Incremental Pay". The manufacture
warrants will be issued in terms of time as against in terms of rate per
unit under the previous system (excluding 25% built in incentive).
However for preparation of wage roll of piece workers and labour
costing output hours will be reckoned as Standard Man Hours (SMH) +
25% built in incentive. Hence, for computation of Piece Work Profit,
output hours will be (1.25 x SMH or Card Hours).
Authority Govt. of India Min of Def, Dept. of Def Prod No. 46(2)/2013- D (estt/NG) Dated
4th March 2014.
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Thus notional time wage of an individual is worked out as under
7100 x Number of Days Present
(N – S)
+
7100 x Total OT Hours worked
200
Amount of profit is calculated as under
Notional time wage X Percentage of Profit
100
(subject to a maximum of 75)
Thus Piece Work earning = Notional Time Wages + Profit
If a worker works partly as day worker and partly as piece worker
during a wage period, he will be considered as piece worker for the
entire wage period and will be entitled to holiday pay for the holiday(s)
falling within the wage period; irrespective of whether the holidays is
in the part when he is a day worker or piece worker.
In Ordnance Parachute Factory, Kanpur the workmen employed on the
manufacture/repair of man dropping parachutes on day work basis are
entitled to a bonus at the rate of 25 per cent of their pay with effect from
1-4-1965 for the actual number of hours engaged on the
manufacture/repair of parachutes.
The bonus will be booked to the same outturn work order to which the
pay is booked and will also be included as an element of direct labour
cost in the relevant estimate.
Special Pay
Small Family Allowance
IEs, who, have undergone necessary medical treatment to
maintain small family and have followed the conditions stipulated
under rules, are entitled to small family allowance when so
ordered by the General Manager. Small Family Allowance is an
allowance admitted at the rate as stipulated in the Govt. Order. It
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being a type of allowance no other allowance is admissible on the
amount.
Guarantee pay
Guarantee pay is admissible to industrial employees of unskilled, semiskilled and skilled grade when their piece work earnings during the
period of their duty falls below the actual basic time wages applicable
for that period.
Note-
(II) Allowances like DA, HRA etc.
Dearness Allowance
The rates and conditions etc. for the grant of dearness allowance are
contained in
Govt. orders issued from time to time.
The rates of dearness allowance will be determined with reference to the
pay of the individual concerned. Pay means the basic monthly rate of
pay (Band Pay + Grade Pay) and not the actual piece work or day work
earnings.
Dearness allowance during leave will be based on the rate of pay on
which leave salary has actually been drawn. Therefore, when leave on
medical certificate on half pay is drawn, pay for determining the rate of
dearness allowance will mean half of the basic monthly rate of pay
drawn for the leave period.
Dearness allowance is admissible for the number of days an industrial
employee is on duty or on leave with pay or paid holiday in the case of
piece workers.
Leave with pay includes injury etc. for which pay is drawn. Dearness
allowance will be admitted for complete days irrespective of attendance
for part of a day.
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No dearness allowance is admissible for leave without pay and unpaid
holidays. It is not also admissible when paid holidays fall within a period
of leave without pay.
Calculation of dearness allowance for broken periods of a month will be
made exactly in the same manner as calculation of pay for a broken
period of a month.
Formula for calculation of DA:
Rate for the Month = (BP + GP) x DA%
DA for Day Workers =Rate for the Month x Attendance + LP Days
N – (S+H)
DA for Piece Workers = Rate for the Month x (Attendance + LP Days+HP Days)
N –S
Where 'N' stands for the number of days in a month, 'S' for Sundays and
HP stands for Paid Holidays. LP stands for Leave with Pay and HP
stands for Paid Holiday. A worker is, therefore, eligible for full dearness
allowance if he remains present during all the working days in a month.
But if he is employed for any days more in addition to the normal
working days of the month, he will not be eligible for any extra dearness
allowance for these days.
Note: - In case of Half Pay leave, pay for determining the DA amount
will mean half of (BP+GP).
House Rent Allowance
The rates and conditions etc. for the grant of House Rent Allowance are
contained in the Govt. orders issued from time to time.
Payment of House Rent Allowance involves.
(a) Determination of the eligibility to draw these allowances.
(b) Determination of the rate of allowance.
(c) Determination of the number of the days for which the allowance are
payable
(d) Calculation of the amount of allowance due.
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The rates of house rent allowance will be determined with reference to
Band Pay plus Grade Pay where applicable. Those in occupation of
Govt. quarters as well as those debarred from drawing the allowance are
not eligible for the House Rent Allowance. List of Industrial employees
eligible for the allowance is indicated monthly in the muster roll along
with other certificates under the signature of the officer competent to
sign such certificates.
House Rent Allowance is admissible for the number of days an industrial
employee is on duty or on leave or paid holidays. The allowance during
leave period including leave without pay may be granted for a period of
40 days at the same rate at which the individuals were in receipt of
before proceeding on leave. The limit of 40 days shall be extended to
180 days in the case of employees suffering from T.B/Cancer/other
ailments during leave taken on medical certificates. Sanction of the
Ministry of Defence is necessary for payment of these allowances
beyond the period of 180 days.
Calculation of House rent allowances for broken periods of a month will
be made exactly in the same manner as calculation of pay or dearness
allowance for broken periods of a month.
Formula for calculation of HRA
Rate for the month = (BP+GP) x HRA %
HRA for Day Workers =
Rate for the month x
N-(S+H)
{attendance + (LP days+half pay Leave days +EOL days)}
HRA for Piece Workers =
Rate for the month x { attendance +(LP days Half pay Leave days +EOL days+
N-S
paid holiday days)}
Note: LP days, Half Pay Leave days, EOL days sanctioned for
the month only to be taken for calculation.
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Transport Allowance
Industrial Employees like other Central Govt. employees are entitled to
Transport Allowance at the rates laid down in Govt. Orders. DA will be
admissible on TA at the prevailing rate.
Transport Allowance will not be admissible if an employee is
absent from duty for full calendar month(s) due to leave, training,
tour etc. (w.e.f. 22.2.2002). If the absence does not cover any
calendar month in full, the allowance will be drawn in full for the
month. While on training, allowance will be drawn if no transport
facility/TA/DA is available for the training. For tours during
training and for training abroad covering the whole calendar
month, no allowance will be admissible. For field duty, if one gets
road mileage, DA, or free transport for the whole month, he will
not be entitled for Transport Allowance for that month. For
vacational period covering a whole month, allowance will not be
drawn. For a tour covering the whole calendar month, no
allowance will be given for the month. Special dispensation
allowed in case of HRA w.r.t. classification of cities is not allowed
for this allowance
The allowance will not be admissible to employees under
suspension. Where suspension period covers a calendar month
partially, Transport Allowance for that month shall be
proportionately reduced. W.e.f. 1.9.2008, blind and orthopedically
handicapped employees (including employees suffering from
spinal deformity generally known as hunchback disability') shall
receive this allowance at double the normal rate, but not less than
Rs. 1000+DA per month.
Child Care Allowance
Women with disabilities shall be paid a special allowance for child
care. The allowance shall be payable from the time of the child’s
birth till the child is two years old. It shall be payable fo r a
maximum of two children. Disability means a person having a
minimum disability of 40% as elaborated in Ministry of Welfare’s
notification No. 16-18/97-NI.I dated 01.06.2001. The rate of Child
Care Allowance is Rs.1000 per month.
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Note: The rate of allowance will automatically increase by 25%
every time the DA in the revised pay structure goes up by 50%.
Hill Area /Bad Climate Allowance
IEs posted in stations situated at a height of 1000 meters or more
above the sea level are eligible to Special Compensatory (Hill
Area) Allowance at the rates specified by Govt. Orders.
Scheduled/Tribal Area Allowance
Scheduled/Tribal Area Allowance is granted to IEs posted in the notified
Tribal Areas.
Deputation(Duty) Allowance
Deputation (Duty) Allowance is admissible to IEs while on deputation.
Children Educational Allowance
Consequent upon the decisions taken by the Government on the
recommendations made by the sixth central pay commission and in
supersession of all earlier orders on the subject of Children Educational
Allowances & hostel subsidy, Industrial Employees are entitled for
Children Education Allowance reimbursement or hostel subsidy for
maximum of two children in terms of DOPT OM No. 12011/03/2008Estt. (Allowance) dt 02-09-2008 (Annexure – ‘M’) subject to fulfillment
of conditions stipulated therein and as amended from time to time.
Insurance Scheme
The Group Insurance scheme, 1980 as contained in Annexure to
Ministry of Finance OM. No. F.15(3)/78-WIP dated 31-10-1980 and as
amended from time to time, is equally applicable to Industrial employees
and recovery of monthly subscription will be made from the wages of
the Industrial employees as per the provisions of the said scheme.
Remote Locality Allowance
Special Compensatory (Remote Locality) Allowance is granted to IEs in
specified remote localities.
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Project Allowance
Project Allowance is granted to compensate the employees for the
lack of amenities such as school, markets, housing and dispensaries at
the places of construction of major projects. Employees of those
Departments whose offices have been located in the project area not
specifically for the project work shall be allowed Project Allowance at
50% of the prescribed rates. No project allowance is available if the
project is located at a place where CCA and/or HRA (whether under
general or special orders) or any other special compensatory
allowances are admissible. Since HRA is now admissible for
unclassified places also, project allowance will be paid to the
employees in such places, if the rate of project allowance is more than
the rate of HRA. However, they will not be entitled to any CCA
and/or HRA or any other special compensatory allowance .'
Night Duty Allowance (NDA)/ Night Shift Allowance (NSA)
Industrial employees working on night shifts are eligible for Night Duty
allowance on the basis of weight age of 10 minutes for every hour of
night duty performed between 22.00 hours and 6.00 hours at the rates
specified in the Government orders issued from time to time. For
calculation of weight age, duty for less than half an hour shall be ignored
and duty for half an hour and more but less than 1 hour shall be reckoned
as one full hour. The rounding off of fractions of an hour shall be made
with reference to the actual hours of night duty performed in a month
(i.e. wage period and not on daily basis). Night duty allowance will not
be admissible during overtime hours if any falling within the night duty
hours. The allowance will not be treated as 'Pay' for purpose of piece
work earnings or for other allowances admissible to the employees.
Note - In the muster rolls, the period of night shift indicating the time of
commencement and closing of such a shift in respect of workers on night
duty should be specifically indicated by the factory. The net hour of
work between 22.00 hrs. and 6.00 hrs. performed by the workers daily
during the normal hours of night shift duty ( i.e. after excluding the
period of recess, shift leave, overtime etc. during that period) which
hours qualify for night duty allowance should be shown separately in
muster roll and progressive weekly and monthly total carried over as
done in the case of normal booking of attendance.
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Formula for calculation of NDA/NSA
P+DA+(CCA or HCA or TRB)/1170 x NDA/NSA hrs where P stands
for Notional Basic pay as per 4 CPC (as on 31.08.08) + DA @ 148% on
P + (CCA or HCA or TRB) as per 4 CPC rate (as on 31.12.95)
Where CCA = Compensatory (City) Allowance, HCA = Hill
Compensatory Allowance and TRB = Tribal Allowance
(III) Incentive Bonus, Overtime Bonus & Night Shift Bonus
Incentive Bonus
Incentive Bonus to the Day Workers of the Ordnance and Ordnance
Equipment Factories, who are employed on maintenance work, will be
paid at the rates and subject to the conditions enumerated below:(i) Incentive bonus will be paid to all maintenance workers other than
unskilled workers employed on maintenance work within the factory
premises.
(ii) Workers attached to production sections will be paid bonus at 50 per
cent of piece work profit % earned by the piece workers of the relevant
production sections. Workers not attached to production sections will be
paid incentive bonus at 50 per cent of the average piece work profit %
earned by the piece workers in the whole factory
(iii) Maintenance workers in Production Section where P.W. does not
exist are also eligible to incentive bonus @ 50 per cent of average P.W.
profits % of the Factory as a whole.
The following categories of workers other than unskilled workers who
are partly employed on maintenance work will also be entitled to
payment of incentive bonus at 50 per cent of average piece work profit
% earned by the piece workers in the whole factory.
(a) Workers employed in gas plants, steam generating plants,
compressed air supply plants and plants supplying industrial water.
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(b) Workers employed in maintenance of electrical power supply
including power line maintenance.
(c) If any of the above plants catering to industrial requirements are
installed outside the factory premises for any technical reasons the
workmen employed therein will be deemed to be employed within the
factory premises for the purpose of payment of incentive bonus.
(d) Battery/Lister truck drivers and mobile crane drivers, tractor drivers,
loco drivers and driver’s crane (electric overhead) who are employed on
internal transport system of factories.
(e) Workers employed in Sewage Treatment Plant.
(f) Points man attached to Mechanical Transport handling equipment
sections on Internal Transport System of the Factories.
The General Manager will select a team of workers to be employed on
maintenance work attached to the production section or nonproductive/service sections. The names of such maintenance workers
other than un-skilled workers indicating the section in which they are to
be employed/ actually employed and the periods for which they are
actually employed on maintenance work will be notified in factory order
every month.
For the purpose of calculation of Incentive Bonus to Maintenance
Workers following formula is to be applied:
Total Time Wages x ½ of PW profit percentage where
Total Time Wages=
7100
N – (S+H)
x No of days Present + 7100 x Total OT Hours
200
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Overtime Bonus.
Overtime
Any work done under proper orders outside the normal working hours or
on a Sunday or a paid holiday will be treated as overtime. Orders for
working overtime are required to be issued strictly in conformity with
the provisions under Sections 51 to 56 of the Factories Act as modified
by exempting rules.
If on a Sunday for which a compensatory off is arranged within three
days immediately before or after that Sunday it will be treated as work
done on a normal working day and not as a overtime work. If the
compensatory off is granted within three days immediately before the
Sunday, it will for the purpose of calculating weekly hours of work be
included in the preceding week. In cases where work done on Sunday is
not treated as work done on a normal day, work done on Sunday should
be treated as overtime and taken into account in computing the total
hours for overtime irrespective of whether compensatory off is given or
not.
Payment of overtime under departmental rules will arise when a
workman works beyond the normal working hours of
Ordnance/Ordnance Equipment Factories which has been fixed at 44-3/4
hours per week i.e. 8 hours on all week days and 4-3/4 hours on
Saturdays. Payment under section 59 of the Factories Act, 1948 arises
for work done beyond 9 hours a day or 48 hours in a week. The total of
the overtime worked in a week should be divided into overtime hours
under Factories Act and departmental overtime.
In all cases where overtime is admissible to a worker both under the
provisions of the Factories Act and under departmental rules, the
overtime will be calculated as under:(i) For work in excess of normal working hours and up to 9 hours on any
working day or 48 hours in a week, overtime will be paid at the rates
prescribed in the Departmental Rules. For calculating overtime pay
under this item, basic pay, dearness-allowance, special pay, personal
pay, pension (to the extent taken into account for the fixation of pay in
the case of re-employed pensioners) will be taken into account.
(ii) For work in excess of 9 hours on any day or 48 hours in a week
overtime will be paid at the rates prescribed in the Factories Act. For
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calculating overtime under this item, the expression basic wages entitled
to be used in Section 59(3) of the Factories Act includes basic wages and
dearness allowance.
Note – CEA, Bonus, wages for O.T. work etc. are not to be included.
Both for computing actual work performed and the normal working
hours for purpose of Departmental rules, lunch break and periods of rest
will be excluded. Similarly, for purpose of calculation under 'Factories
Act' periods of lunch break and rest will be excluded for computing
actual work performed. The number of hours for which Saturday bonus
is paid without actual work being performed will not reckon for the
purpose of computing normal working hours. The split up between hours
of overtime under departmental overtime and Factories Act may be done
by ascertaining the ‘hours of overtime under Factories Act’ in the first
instance. The difference between the total hours of overtime and
overtime under Factories Act will be overtime under Departmental
Rules.
Thus if a worker works for 54 hours in a week:
Overtime under Factories Act is 54 - 48=06 hours
Total overtime hours is 54 - 44 3/4=9 ¼. Overtime under Departmental
Rules is 9 1/4 - 6=3 ¼ i.e. the difference between 48 and 44 3/4 hours.
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Calculation of Over Time
Under Departmental Rules for Day Workers ( For overtime work
between 8 hrs and 9 hours on any day or between 443/4 hrs and 48
hrs in a week))
OT PAY =
P +DA
200
for every hour of overtime work between 8
hours and 9 hours on any day or between
44¾ hours and 48 hours in a week.
Under Fys. Act for Day Workers
O T Pay
2(P+DA)
for Hours of work beyond 9 hours a day or 48 Hours a
200
week
Under Fys. Act for Piece Workers
O T Pay
P/200 x (Total OT Hrs. – OTB Hrs.) +
P x Hours of work beyond 9 hours a day or 48 Hours a week
200
O T Bonus
P + 1/4P + 2D x Hours of work beyond 9 hours a day or 48 Hours a
200
week
For calculation of PW Profits, OT Pay for the entire OT period
irrespective of Deptt. Rules and under Factories Act is taken into
account for calculation of Notional Time wages (refer Piece Work
Earnings above).
Note: Here P stands for correlated pay as per 6th CPC , P stands for Rs
7100 ( i.e. 5400+1900) D stands for DA on P at applicable rate .
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Note
For Cost Accounting purposes, overtime allowance is spilt up into
overtime pay (Pay element based on basic pay for the OT period)
and overtime bonus, extra payment over and above the OT Pay
Calculation of OT hours will be done on weekly basis or daily basis
whichever is beneficial to the workers. Therefore if a worker is absent on
Saturday and the number of hours is 10 hours per day on week days then
the hours worked is 50 in a week. Calculation of overtime hours has to
be done on daily basis being more beneficial i.e. beyond 8 hours and
upto 9 hours i.e. 1 hour under Departmental Rules and beyond 9 hours
under Factories Act.
Departmental overtime @ 1 hour per day = 5 hrs. for 5 days.
Overtime hours under Factories Act @ 1 = 5 hrs. hour per day for 5 days
Total OT hour @ 2 hours per day for 5 days = 10hrs.
Note - Piece workers who are put on day work for part of a wage period
are to be paid O.T.A. under departmental rules also, as admissible to the
day workers for the period he is on day work.
Night Shift Bonus (NSB)
A night shift represents the hours worked between the termination of the
day shift and the normal opening hours of the next day. The piece
workers who perform overtime work under Departmental Rules in the
night shift will be paid an extra half hour pay termed as 'Night shift
bonus' calculated at the hourly rate of 1/200 of the monthly basic pay
plus dearness allowance, special pay, personal pay, pension (to the
extent taken into account for fixation of pay in the case of reemployment pensioners) and City Compensatory Allowance for every
hour of systematic overtime under Departmental Rules worked on the
Night shift in addition to their piece work earnings. This element is not
admissible to day workers.
Formula for calculation of NSB
(BANDPAY+GRADEPAY+DA)/200 x ½ of OT Hrs under Dept. Rules
during Night Shift
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(IV) Idle Time Pay, Leave Pay, Holiday Pay, Injury
Pay etc.
Idle Time Pay
Idle time payment may be made under certain specified condition to the
workmen temporarily rendered surplus for reasons of such nature as
specified below and who cannot be provided with a suitable alternative
employment in the normal manner.
1. High Atmospheric humidity hindering certain operations in explosive
factories or unfavourable weather conditions hindering specialized
optical work depending on sun light.
2. Plants furnace and transport break-downs, inspection & repairs.
3. Temporary shortage of material.
4. Failure of power supply.
5. Temporary shortage of work in highly specialised section such as
instrument repair and optical sections.
Such Idle time may be ordered by the General Manager of the factory for
the first six working days in respect of any workman. The arrangement
will, if necessary, be continued beyond six days under the authority of
the Ordnances Factory Board.
Idle time payment for causes other than those enumerated above should
be covered by separate Govt. sanction. The Idle time payment will not
be admissible on the occasion when it is due to wrongful action or
misconduct of the employees making it impracticable to employ certain
classes of workmen.
A workman failing to report at the time directed will be liable to be
deprived on his idle time pay from the time of last reporting to the time
of next reporting unless his failure to report at the due time is excused by
the General Manager. In excusing such cases, the GM will follow the
same principles as are used while granting leave retrospectively when it
is not applied for before commencement.
Payment for idle time is intended to cover instance where work is
interrupted for an appreciable period. It is not intended to cover short
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periods of one or less hour of stoppage of work which may be
considered incidental to the manufacturing process.
The actual expenditure on account of idle time should be worked out by
the Accounts Officer based on the data furnished by the management.
When sanction of the DGOF or Govt. of India is necessary application
for the covering sanction should be sent by the General Manager to the
DGOF through the usual accounts channel as soon as possible after the
close of the month in which it is incurred but not later than the end of the
next month.
Whenever there is any idle time beyond the first six working days, in
respect of any workmen the Accounts Office should look for the
approval of DGOF for such continuation of idle time payment.
Regarding the attendance of those workmen who will be permitted to
stay out for any day/days, the General Manager should furnish a list of
such personnel giving inter-alia the date/dates fixed for their report at
factory to the Accounts Office. They should be marked as I.T in the
acquittance roll since they are neither present nor absent. The date/dates
or reporting should be carefully watched by the accounts Office with
reference to the list received from the management.
Leave Pay
Earned Leave
Industrial Employees are entitled to Earned Leave with wages
either under Factories Act or Departmental Rules viz. Civilian in
Defence Services (Industrial Employee) Leave Rules whichever is
beneficial. An IE is, therefore, required to exercise option under
which rule he desires to be guided as per MoD OM
No.20(2)/82/D(Civ-II) dt 03.06.1983 and No. 11(1)/2001 /D(CivII) dt 05.08.2005.
CDS (IE) leave rules (Departmental Rules)
Under Departmental Rules, after the issue of DOPT OM dated 20 07-1998 enhancing the entitlement of leave from slab system, an
IE is entitled to 30 days EL for each completed year of service
During this period he is entitled to Leave Pay where "Pay" or "Full
Pay" means (a) monthly rate of pay for Day Workers and (b)
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assigned monthly rate of pay for piece-worker which shall not
include piece work profit.
Leave under Factories Act
Under section 79 of Factories Act, an IE is entitled to leave @ 1
(one) day for every 20 days of work done on minimum of 240 days
of work during the previous calendar year and as per Sec-80 of Fys
Act an IE is entitled to Leave Wages at the rate equal to the daily
average of his total full time earnings for the days on which the
worker actually worked during the month immediately preceding
his leave, exclusive of any overtime and bonus but inclusive of
dearness allowance and cash equivalent of other advantages.
For computation of 240 days, all kinds of leave with full pay and (a)
days of lay-off, (b) Maternity leave in the case of female workers (c)
E.L. availed in the previous year are to be treated as period of duty
No leave shall be earned for the period of idle time under section 79 of
the Factories Act.
When an I.E is granted leave under Factories Act he is entitled for profit
on EL. This will be calculated as follows:
PW profit of last month X No. of days of EL (this month)
Total working days of last month (Duty & OT days)
[AUTHORITY: PCA(Fys), Kolkata Circular No. Pay/Tech-II/04 dated
13.11.03]
Note:1. The G.M. will publish Factory Orders notifying all kinds of leave
granted to IES every month and furnish a copy of each Factory
Order to the Accounts Office. The Factory Order should specify
whether the leave is granted under Factories Act or under CDS
(IE) leave rules 1954
2. The G.M. should ensure that the leave applied for and received by
the Management by the 24th of a month is sanctioned according to
rules and factory Orders issued so that payment for leave period is
made along with the wages for that month.
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3. While for the purpose of leave under Factories Act, the provision
of grant of leave for not more than 3 spells will apply for leave
under the Departmental Rules contained in CDS (IE) Leave Rules
1954, there will be no such limit regarding number of spells.
4. No leave shall be earned for the period of idle time, under Sec. 79
of the Factories Act, but idle time for portion of a day will be
treated as work for the entire day for purpose of earning leave
under the Act.
5. Leave entitlement of an industrial employee who is superannuated
or dies or discharged on medical grounds during the course of a
calendar year will be calculated proportionately for the period of
service rendered during the year subject to the overall limit of 120
days. The employee or his heirs will be entitled to the wages in
lieu of this leave.
6. All kinds of leave granted to IEs should be notified in Factory
Orders. Leave accounts should be maintained in the form
prescribed.
7. The total service referred to in Rule 4(A) of the CDS(IE) Leave
Rules 1954 refers only to industrial service and will not include
service in non-industrial posts.
8. The under mentioned periods will count as duty for earning leave
under section 79 of the Factories Act.
(i)
Period spent for reservists training with Armed Forces.
(ii) Period spent on training in U.K. at Govt. expense.
(iii) Period spent on duty with Territorial Army/Home
Guard.
9. An absence without leave of an industrial employee cannot be left
unregularised if he is permitted to resume duties after his absence.
If the person concerned was permitted to resume duty but the
G.M. of the Factory concerned is not satisfied with the
explanation for absence, he may take suitable disciplinary action
against him but the period of absence if not exceeding three
months, will have to be covered by grant of E.L. without pay.
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10.When an Industrial Employee on appointment/transfer/promotion
etc. is appointed as a Non Industrial Employee. He may be
allowed to carry forward the balance of leave which includes both
EL and HPL at his credit on the date of such appointment/
transfer/promotion etc. The leave so carried forward shall first be
exhausted before the leave earned for service in NIE Estt. is
availed of. Leave salary for the period of leave carried forward
shall be as would have been admissible had he taken the leave on
the industrial estt. A separate account of leave so carried forward
shall be maintained in a subsidiary leave account.
Encashment of leave
Industrial employees shall also be entitled to encashment of leave and
shall now get maximum accumulation of full pay leave/annual leave
with wages up to a period of 300 days. Leave entitlement of an industrial
Employee who is superannuated or dies or is discharged on medical
ground during the course of a calendar year will be calculated
proportionately for the period of service rendered during the year subject
to the overall limit of 300 days. The employee or his heirs will be
entitled to the wages in lieu of this leave. The period falling short of 300
days is to be covered by encashment of HPL {authority: DOPT OM
No.12012/3/2009-Estt(L) dated 28/12/2012}
Industrial employees
governed under Departmental Rules are entitled for encashment of leave
under the same circumstances as for industrial employees under
Factories Act, 1948.
Leave Encashment at the time of availing LTC
Leave encashment for 10 days earned leave can be availed at the time of
LTC, subject to following conditions the total leave so encashed during
the entire career shall not exceed 60 days in the aggregate;
Note
Leave encashment on LTC shall be allowed without any linkage to
the number of days and the nature of leave availed. A balance of at
least 30 days of EL is still available to his credit, after availing leave and
leave encashment. The period of leave en-cashed shall not be deducted
from the quantum of leave that can be en-cashed at the time of
superannuation.
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Casual Leave
Casual leave on full pay may be granted up to 8 days in a calendar year
and the unutilized leave will lapse at the end of the calendar year.
Sundays and holidays falling in between the periods of leave will not be
taken into account for calculating the period of Casual Leave availed of.
Casual leave cannot be combined with any other leave.
Note 1-- An IE joining service in the middle of a year may be granted
the full period of 8 days' casual leave or any portion thereof by the
authority, competent to sanction such leave at his discretion taking into
account the circumstances of the case.
Inoculation leave
Leave on full pay for inoculation owing to prevalence of plague may be
granted up to 2 days on any one occasion, when they are inoculated
under the orders of competent authority.
Terminal Leave
Full pay leave admissible under Rule 6 of CDS (IEs) Leave Rules 1954
may be granted at the discretion of the sanctioning authority on the
termination of service on account of retrenchment or abolition of the
posts or in the case of resignation due to ill-health or other compelling
circumstances beyond an individual's control subject to the condition
that the leave does not extend beyond the date of superannuation. In all
cases, however, where any notice of termination of service is necessary,
the leave should be so granted as to cover the notice period as far as
possible. It is necessary to extend the temporary post to cover the period
of leave granted to a Govt. servant at the end of the temporary
employment. The above provision is not applicable to apprentices and
person in non-continuous employment.
Terminal leave will not be admissible in the following instances:(i) Where the employee concerned has been dismissed or removed from
service (This rule will not apply to persons whose services may have to
be dispensed with as a matter of administrative convenience, an
alternative to the initiation of disciplinary proceedings against them) or
(ii) Where the employee concerned resigns his post of his own volition.
In case of resignation which is not due to reason of ill health or other
reasons beyond the individual's control, sanctioning authority may at his
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discretion allow half the amount of full pay leave which the individual
can avail of at a time.
Hospital Leave/Injury pay
Hospital leave may be granted to industrial employees whose duties
involve the handling of dangerous machinery, explosives materials,
poisonous drug and the like, or the performance of hazardous tasks while
under medical treatment in a hospital or otherwise for illness or injury, if
such illness or injury is directly due to risks incurred in the course of
duties. Hospital leave shall be granted on the production of medical
certificate from an authorised medical attendant. Hospital leave may be
granted for such period as the authority granting it, may consider
necessary and leave Salary for Hospital leave shall be calculated as :(i) Equal to leave salary while on earned leave, for the first 120
days on any
period of such leave and
(ii) Equal to leave salary during half pay leave for the remaining
period of
any such leave.
Hospital leave shall not be debited against the leave account and may be
combined with any other kind of leave admissible except casual leave,
provided the total period after such combination does not exceed 28
months. The period of leave will be such as may be certified by the
authorised medical attendant to be necessary. The certificate of a
superior officer not below the rank of a gazetted officer that the injury
was directly due to risks incurred in the course of duties may be accepted
for the purpose. But the amount of leave will be restricted to that
recommended by the authorised medical attendant. The Hospital leave
will commence from the date of the accident. Duty pay allowed for the
number of hours actually worked on the day of the accident will be
deducted from the leave salary for the day of the accident. Payment to an
industrial employee on account of personal injury caused by accident
arising out of and in the course of his employment will be made in
accordance with the provisions in the Workmen's Compensation Act
1923. The injury leave allowance payable should not be deducted from
the compensation under Workmen's Compensation Act 1923. However,
it is permissible to deduct from the leave allowance under the said article
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the amount of any compensation only under sec.4(i)(d) of the Act and
not any lump sum compensation that may be payable under clause(a) to
(c) of Section 4(i) of the said Act.
Payment of Hospital leave will be made for the number of working days
including paid holidays but excluding Sundays in the case of piece
workers and working days excluding paid holidays and Sundays in the
case of day workers.
A Register for payment of injury pay will be maintained in Accounts
office to record all payments made to industrial employees.
Court Attendance Rules
Industrial employees who are granted leave for attending court as
witness on behalf of Govt. or as juries and where under local rule cannot
claim remuneration from the State authorities concerned are entitled to
normal wages which they would get had they not been precluded by
order of the court from attending their normal duties. In admitting leave
(which with allowance due will be equal to normal wages exclusive of
profits) the certificate from the court regarding attendance of the
individual concerned will be looked for in audit. The G.M. is allowed
discretionary powers to grant short leave without pay on two occasions
for not more than 2 hours in a month, in recognised genuine cases. In
very exceptional and emergent cases only short /petty leave without pay
for more than two occasions or for more than 2 hours on any one
occasion may be granted at the discretion of the G.M.
Special Casual Leave
Special Casual Leave on full pay up to the maximum of 14 days may be
granted to industrial employees for attending the course of instruction,
training etc, in the Territorial Army. Special casual leave on full pay on
other occasions mentioned below may be granted to the extent and
subject to the conditions mentioned in the Govt. Orders issued from time
to time.
(a) Participation in the sporting events and tournaments of National or
International importance.
(b) Participation in the Inter-Ministerial or Inter-Departmental
tournaments.
(c) Participation in cultural activities.
(d)Representatives of Unions/ Federations/ Associations to attend
meetings/ conference.
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(e) Undergoing I.U.C.D. insertions.
(f) Undergoing non-puerperal Tubectomy operation.
(g) Under going sterilisation operation.
(h) For the period spent by ex-servicemen boarded out of service and reemployed as civilians for appearing before medical survey Board.
Special Leave with wages for obtaining medical treatment during
working hours The time spent by workers for receiving medical
treatment during working hours will be treated as under:(i) In case of injuries/sickness arising out of work.
(a) The time spent in dispensary/Ambulance room within the factory
premises will be treated as duty.
(b) The time spent in dispensary/hospital outside the factory premises
will be treated as special leave with wages.
(ii) In case of injuries/sickness not arising out of work. The time spent
up to a limit of 2 hours at a time will be treated as special leave with
wages. The concession will be limited to two occasions in a month. The
period of absence will be from the time the workers leave work spot till
he returns to duty at work spot. Workers who do not join duty prior to
their proceeding to receive medical attendance and workers who are not
in a position to return to duty within the stipulated time limit of 2 hours
as well as those who do not return duty before the closing of working
hours will not be entitled to receive the benefit of the concession given
above. The question whether the injury/sickness arose out of work or
otherwise will be decided on the basis of the report of the Medical
Officers on duty at the dispensary etc. where the worker receives the
treatment.
Maternity Leave
Absence from duty in connection with motherhood may be granted on
full pay for a maximum period of 180 days in all cases to the female
Industrial employees (including apprentice) with less than two surviving
children. Maternity Leave is not debited to the leave account and may be
combined with any other kind of leave except Casual Leave. Maternity
leave may be granted in case of miscarriage including abortion (abortion
induced under the Medical Termination of Pregnancy Act, 1971 should
also be considered as a case of abortion). In such case Leave should
not exceed 45 days and should be supported by a medical certificate
from an authorised Medical Attendant or a Registered Medical
Practitioner.
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Paternity Leave
Absence from duty may be granted on full pay (based on last pay drawn)
for a period of 15 days during wife's confinement. Male Govt. servant
with less than two surviving children and Apprentices are eligible for
such kind of leave. It cannot be debited to the leave account and may be
combined with any other kind of leave except casual leave.
Child Care Leave
Women employees having minor children may be granted Child Care
Leave by an authority competent to grant leave, for a maximum period
of two years (i.e. 730 days) during their entire service for taking care of
up to two eldest surviving children whether for rearing or to look after
any of their needs like examination, sickness, etc. Child Care Leave
shall not be admissible if the child is eighteen years of age or older.
During the period of such leave, the women employees shall be paid
leave salary equal to the pay drawn immediately before proceeding on
leave. It may be availed of in more than one spell. Child Care Leave
shall not be debited against the leave account.
Child Care Leave may also be allowed for the third year as leave
not due (without production of medical certificate). It may be
combined with leave of the kind due and admissible.
The leave cannot be demanded as a matter of right.' Employee
cannot proceed on CCL without prior approval by leave
sanctioning authority. Holiday(s) in between CCL will be coun ted
as CCL.CCL can be availed only if the employee has no Earned
Leave.'
Child Adoption Leave
If a female employee with less than two surviving children adopts a
child of less than 1 year she will be entitled to 180 days Child Adoption
Leave. For the Child Adoption Leave period, salary drawn immediately
before proceeding on leave shall be paid. In continuation of child
adoption leave she may avail leave of any kind due and admissible, for a
period upto one year or till the child is one year old, whichever is earlier.
Even leave not due and commuted leave upto 60 days without
production of M.C. is admissible.
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Calculation of leave pay
Calculation of leave pay will be made in the same way as is done in
respect of duty pay viz. under the formula P/N-(S+H) in the case of day
workers and P/(N-S) in the case of piece workers when the leave is
granted under departmental Rules. Sundays and holidays falling within
the spell of leave will form part of the leave but for purpose of payment
of leave allowance Sundays and holidays will be excluded in the case of
day workers. And Sundays only in the case of PWs. Pay for the purpose
of leave allowance under the departmental Rules both in respect of day
workers and piece workers should be taken as pay on the date preceding
that on which leave commences. Calculation of leave under Factories
Act should be made with reference to Section 80 of the Factories Act.
According to this, a worker granted leave under Section 79 of the
Factories Act shall be paid at a rate equal to the daily average of his total
full time earnings of immediate preceding month for the day in which he
worked.
Leave on half pay
Half pay leave will be granted as follows:
(a) At the rate of 20 days per year on completion of each years service.
(b) Half pay leave can be accumulated at the rate of 20 days per year
without limit.
(c) Half pay leave may be commuted without any ceiling subject to
production of medical certificate. In that case twice the amount of such
leave shall be debited against the half pay leave due.
(d) Half pay leave may be availed without restriction.
During the leave on half pay, an employee will be paid leave salary at
half the rate of pay drawn immediately before proceeding on leave.
Advance Credit of HPL is admissible in two installments and 10 days
each on the first day of January and July of every calendar year.
[Authy: M of D Corr. No.11 (2)/86/D (Civ-II) dt.10-6-88].
Extra-ordinary Leave
Except in case of an employee in permanent employment the duration of
EOL on any one occasion shall not exceed the following limit:
(a) Three months.
(b) Six months in cases where a Govt. servant has completed one year
continuous service on the expiry of the leave of the kind due and
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admissible, and the request for the leave is supported by a Medical
Certificate.
(c) Twenty four months where the leave is required for the purpose of
prosecuting studies certified to be in public interest, provided the Govt.
servant has completed three years continuous service on the date of
expiry of leave of the kind due and admissible under rule.
(d) No IE, other than permanent shall be granted leave of any kind for a
continuous period exceeding five years.
(i) The authority empowered to grant leave may commute
retrospectively:(a) Period of absence without leave into extraordinary leave.
(b) Extra-ordinary leave granted into leave of a different kind, if the
latter type of leave was admissible at the time extra-ordinary leave was
granted. All leave except extra-ordinary leave taken otherwise than on
medical certificate shall count for increments in the post in which he was
working at the time of proceeding on such leave provided it is certified
that he would have continued to hold the post but for going on leave.
Holiday Pay
The industrial employees are entitled to Holiday pay for Holidays
declared as paid holiday every year by the establishments themselves on
the basis of the guidelines issued by the Govt. from time to time.
Holiday pay for piece workers is to be calculated based on the formula
(P/N - S) X no of paid holidays where P represents basic monthly rate of
pay (Band Pay + Grade Pay) where 'N' represents the number of days in
a month and 'S' represents the number of Sundays in the month. Holiday
pay is paid separately. Holiday pay is not, however, admissible to them
when the paid holidays fall within the period of leave without pay. It is
not also admissible separately as an element of wages to the piece
workers when the paid holidays fall within a spell of leave with pay/half
pay in which case the entire period will be treated as leave with pay/half
pay as the case may be and paid accordingly. Holiday pay is however,
admissible for any paid holiday which may be suffixed or prefixed to
leave.
In the case of day workers, when paid holidays fall within a spell of
leave with pay/half pay, while the entire period will be treated as leave,
no payment of leave salary will be made for the paid holidays within the
period of such leave.
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Injury pay
IEs are entitled to injury pay for the period spent in hospital when
authorised by the General Manager for any accident while on duty.
This amount is calculated on the basis of basic rate of monthly
wage, depending on whether he is a DW or PW. This amount
however will be deducted from the compensation, if any, paid under
workmen compensation Act. All allowance like DA, HRA and TA
are also admissible on the pay.
Subsistence Allowance (while under suspension)
In the matter of grant of subsistence allowance and grant of pay and
allowance on reinstatement, industrial employees are treated on par with
non-industrial Employees with effect from 10-6-63. Subsistence
allowance will therefore be granted to the IEs under the provisions of
Article 193 Civil Service regulations.
The elements of pay described so far constitute the gross entitlement
in respect of the Industrial Employees. However, certain Govt. and
Non Govt. deductions are effected from the gross earnings to arrive
at the net pay admissible.
Govt. Deductions under Various Heads
General Provided Fund (GPF)
GPF deduction is compulsory for all pension-able industrial employees
appointed prior to 1.1.2004. An account is maintained in the name of
each subscriber, which is credited by his subscriptions, interest thereon
and recoveries of advances, and debited by advances and withdrawals.
The IES shall contribute a part of his salary every month to the fund.
Minimum - 6% of the emoluments rounded off to the next higher rupee
and Maximum - equal to his total emoluments. `Emoluments' for this
purpose means, pay, leave salary, or subsistence grant, if any (but does
not include dearness allowance) as on 31st March of the preceding year
or on the date the employee joins the fund. The employee should
intimate the amount of his monthly subscription for each year, which
shall be deducted from his salary every month.
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New Pension Scheme (NPS)
IEs joining service on or after 01.01.2004 are covered under the New
Pension Scheme. In their case, no deduction on account of contribution
towards GPF is made nor are they covered by the existing pension rules.
Deduction is made @10% of Basic pay (Band pay + grade pay) plus DA
thereon every month towards contribution to NPS. The Government
makes equal contribution every month. The amount is invested in
Various Funds by a Nodal Agency (National Securities Depository Ltd.
(NSDL). For the purpose of accounting, a unique identification number
(PRAN) is allotted to the employees. It is the responsibility of the
employer to deduct contribution from the employees and deposit the
amount with the Nodal Agency along with Govt. contribution.
Central Government Employees Group Insurance Scheme
CGEGIS)
The scheme is compulsory and applicable to all Industrial Employees.
Deduction on this account is made as per rates applicable to different
categories of employees.
Hospital stoppages
In cases where hospital stoppages are recoverable, hospital stoppage
rolls will be prepared and sent by the Medical Authorities to the Audit
Officer (Disbursing Officer in the case of Industrial Employees) for
effecting recovery from the pay bill of the individuals concerned. The
recovery in respect of industrial employees will be effected through their
acquittance rolls and the credit there-for accounted for in the relevant
disbursement certificates. While verifying the details of the disbursement
certificates, the recovery for hospital stoppages should be checked by the
Accounts Office with the relevant hospital stoppage rolls.
In cases where no pecuniary benefit accrued to an IE being on leave
without pay, no recovery for hospital stoppage is to be made.
Recovery of Loans & Advances
In addition to the deductions mentioned above, recoveries are also
made from the wages of IEs in installments on account of certain Loans
and Advances made to them e.g. Advance from GPF, House Building
Advance, Motor Cycle Advance , Festival Advance etc.
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Recovery of Excess/Over Payments
Excess/Over Payments of certain elements like TA/LTC advance, Pay
& Allowances etc. are recovered from the wages of IEs.
Apart for the deductions/recoveries mentioned above, certain non
Govt. deductions like Cooperative deduction, Union Subscription
etc. are also made from the net wages.
Supplementary Payments
Apart from regular wages, payments are also made to the IEs through
supplementary bills. Such payments include any belated payment (i.e.
unpaid amount due to under calculation of elements of wages for the
previous months) and payments on account of regularization of leave,
arrears on account of fixation of pay on promotion, DA etc.
Productivity Linked Bonus(PLB)
IEs working in Ordnance & Ordnance Equipment Factories are eligible
for PLB. The bonus is announced every year by the Government in
terms of number of days. Bonus should not exceed the bonus payable
on emoluments of Rs.3500 (Emoluments for this purpose, means Basic
Pay (BP + GP) + Personal Pay + Special Pay + Special Allowance +
Deputation (Duty) Allowance + Training Allowance + Dearness
Allowance). The amount of bonus shall be calculated on the basis of
average emoluments or Rs.3500, whichever is lower.
Formula for calculation of PLB
Average Emoluments (Maximum Rs.3500) x No. of Days
30
Last Pay Certificates
In the event of transfer of industrial employees from one factory to
another or to some other establishment, no formal last pay certificates
are required to be issued. A statement showing the rate of pay, the date
up to which the individual is paid, outstanding demands, if any, and
monthly piecework/daily work earnings for the three complete calendar
months preceding the month of transfer should be prepared by the
management and submitted to
the local Accounts Officer for
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verification and countersignature. One copy thereof, after countersignature, is forwarded by the Accounts Officer of the transferring
formation to the other Accounts Officer.
Agreement Form of Labour
The Accounts Office will make out an agreement form of labour
in prescribed format in duplicate in which the total amount passed for
payment will be entered section-wise. This will be forwarded to the
General Manager of the Factory, who will return one copy duly
completed to show the amount actually paid, un-disbursed wages, fines,
licence fee etc. recovered, income tax, provident fund recoveries and
other deductions. All supporting schedules and documents will also be
forwarded along with the agreement form of labour so as to reach the
Accounts Office by 10th of the second month following that to which
the transaction pertains.
Financial Accounting of Labour Charges
The Pay Head of Industrial Employees is 01/805/03. To have detailed
idea of expenditure, unit controls have been allotted for overtime pay,
Educational assistance etc. This pay head will be charged with the entire
amount while paying any advance or adjusting any debit/credit
accounted for in the disbursement certificate. Similarly, the pay heads
will be credited (as minus charge) with the entire amount while adjusting
any treasury receipts for amounts deposited against the advance drawn.
It is evident, therefore, (with reference to the entries in the disbursement
certificate) that the amount of unclaimed `wages is not charged to the
pay head in the financial accounts although the same is fully charged in
the Cost Accounts. The difference between the cost and financial
accounts thus represented by the unclaimed wages is treated as
'Outstanding Liability'.
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SUBJECT: Labour costing in Ordnance Factories: Levy of DOPpercentage, Esc-percentage and DA-percentage on Labour Cost.
Ref: PCA (Fys) important circular no. PR/VI/502/PW Corr/VIII dated 12.06.2007
and subsequent amendment vide even no. dated 20.07.2007
Consequent on implementation of 6th CPC following guidelines on
the above subject, in super cession of this office circular no. cited above are issued:
Card Value:
PW cards would be priced on the basis of average of minimum of the
Vth CPC pay of the 1st April. This will be the ‘card value’ (say ‘A’)
Difference of Pay (DOP) percentage:
There will be a difference between actual amount paid to the
individual based on the minimum of scale of pay and 50% DP thereon as per Vth
CPC i.e. (PW time wage + OT pay + PW profit). The difference between the actual
amount thus paid and the value of the card (‘+’ or ‘-‘) may be worked out (say ‘B’).
Section wise percentage of ‘B’ over ‘A’ would be worked out corrected up to fourth
place after decimal. This becomes the Difference of Pay percentage (say ‘P’).
Escalation Pay Percentage:
Total amount paid on the basis of actual basic pay i.e. (Band pay +
Grade Pay) as per VIth CPCof each worker of the section less amount of time wage
calculated on the basis of minimum of scale of pay including DP @ 50% as per Vth
CPC may be called escalation of wage (say ‘C’). A percentage of ‘C’ may be
calculated on the basis of the formula as under:
(i)
Escalation Pay ( C ) = Actual basic pay i.e. (Band pay + Grade pay) as
per VIth CPC – Time wage as per minimum of scale of pay based on Vth
CPC + 50% DP.
(ii)
Percentage of Escalation Pay (say ‘E’) = C X 100/ A X (1+P/100)
DA Percentage:
DA percentage may be worked out every month for each section of
the factory based on the actual amount paid on that account i.e. DA, HRA, Transport
Allowance (TA), Hill Compensatory Allowance (HCA), Tribal Allowances etc as
per wage bill and levied concurrently like DOP % and Escalation Pay %.
Thus, DA percentage would be worked by the formula as under:
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% of DA =
Amt. Of DA, HRA, TA, HCA & Tribal Allowance etc including
arrears on these which pertain to the year of accounts, if any, paid
during month.
-----------------------------------------------------------------------------------AX (1 + P/100) (1 + E/100) +LP+HP (for PW) +TW&OT pay + LP
(for DW)
The percentage thus worked out will be intimated to the concerned
section every month similar to DOP % & ESC % to levy while preparation of the
monthly labour abstract for all work order and warrants excepting those which are
exempted from lavy of DA.
The estimate however will be priced on the basis of DOP, ESC and
DA as above of immediately preceding month in which it is priced. Where estimate
is priced in half yearly basis average of above factors for last six months need to be
taken for pricing.
C of A (Fys) has seen.
----Sd----Asstt. Controller of Accounts
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SUMMARY
1. Daily working hours of an Ordnance Factory are 8 hours without
recesses & lunch break.
2. The factory gate will open half an hour before the time fixed for
commencement of work and will be closed just at the time of
commencement.
3. The procedure of attendance for the latecomers will be made
indicating late by 15 minutes; 30 minutes; 45 minutes and 1 hour
4. Since the Ordnance Factories is working 44 3/4 hours weekly
instead of 48 hours, booking of attendance of the Industrial
Employees on Saturday will be made as under:
Present on Saturday for hours
Booking of attendance
0
1
2
3
4
4 3/4 (Full present)
13/32
17/32
21/32
25/32
29/32
I
5. On receipt from Labour Bureau, the Muster Roll will be
audited/checked with reference to Presently Memo/ Late Memo/
Casualty Memo/ Leave Passes/ Overtime Memo etc by Accounts
Office daily.
6. Calculation of element of wages:
For Day Workers
Sl
1
2
3
4
5
Elements
Time Wages
Formula
[(Basic Rate of Pay)/ (N - (S + H)}] X No of days present
[(Basic Rate of Pay)/ (N - (S + H)}] X No of days on
Leave Pay
sanctioned leave
Overtime Pay
[Basic Rate of Pay/200] X No of hours on Overtime work
[(Basic Rate of Pay + 2 (DA+HRA+CCA+TA+SFA))/200]
Overtime Bonus
X No of OT Bonus hours admissible
On the basis of weightage of 10 minutes for night duty
Night Duty
performed between 22.00 hours to 6.00 hrs excluding the
Allowance
hours of overtime and recess is falling between the time at
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a prescribed rate.
6
DA/HRA/CCA As per Govt. orders on the subject
50% of profit earned by the Production Section or 50% of
7
Incentive Bonus average profit earned by all Production Sections of the
Factory, as the case may be.
For Piece Workers
Sl
Formula
[ (Minimum of scale of Pay)/ {N - S )] X No of days
Time Wages
present
[Minimum of scale of Pay/200] X No of hours on Overtime
Overtime Pay
work
The above two elements are not being paid separately but required for arriving
out Piece Work Earning only
Piece Work
[Time Wages + Overtime Pay] + Profit%(subject to
1
Earnings
maximum 75%) on [Time Wages + Overtime Pay]
Profit% = [(Output Hours on basis of PW Cards) / (Input Hours)] X 100
[(Actual monthly basic rate of pay - Minimum scale of
2
Incremental Pay
pay)/ (N-S)] X Number of days present during the month
[ (Basic Rate of Pay)/ {N - S}] X No of days on sanctioned
3
Leave Pay
leave
[ (Basic Rate of Pay)/ {N - S)] X No of Holidays days
4
Holiday Pay
during a month
[{Basic Rate of Pay +'/4 of Basic Rate of Pay + 2
5
Overtime Bonus (DA+HRA+CCA+TA+ SFA)}/200] X No of OT Bonus
hours admissible
On the basis of weightage of 10 minutes for night duty
Night Duty
performed between 22.00 hours to 6.00 hrs excluding the
6
Allowance
hours of overtime and recess falling between the times at a
prescribed rate.
DA/HRA/CCA As per Govt. orders on the subject
7
7.
8.
Elements
The accuracy of the preparation of Wage Roll is to be ensured
before release of payment.
The Agreement Form of Labour, in duplicate, will show the
section wise total payment passed through Master Roll will be
sent to Factory management by Accounts Office. One copy
indicating amount of various recoveries made along with un
disbursed wages would be returned back from Factory
management to Accounts Office by 10th of the 2hhd month
following to which transaction pertains.
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9.
10.
Monthly Disbursement Certificate showing amount both in
Payment and Receipt will be prepared by the Factory management
for audit in Accounts Office for facilitating of preparation of
financial Punching Medium - Class II against the amount of
requisition drawn during the moth by Factory management.
Financial accounting would be reflected through month's 0002
against Pay Head of Industrial Employees and the amount would
be reconciled through Cost Accounting Tabulation through
Labour Abstract for the month prepared on the basis of PW/DW
Cards, Allocation Sheets, Cost Punching Media etc.
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SELF-ASSESSMENT QUIZ
There are 15 Questions carrying equal mark. One mark will also be deducted
for each wrong answer
Total 30 Marks
[Tick the appropriate Box, you have selected as a correct answer. Once ticking
need not to be scored out or any new answer is not permissible, as a fresh
ticking for seems to be right answer]
Q1.
Working hours of an Ordnance Factory in a day is:
A
7 '/z hrs
Q2.
Q3.
B
8 hrs including
recess
&
Lunch break
C
9 hrs
D
8 hrs with
lunch break
E
8 hrs
excluding
Recess
&
Lunch break
Attendance of a latecomer Industrial Employee by 45 minutes will be
marked:
A
B
C
D
E
31/32
29/32
A
28/32
30/32
Audit of Muster Roll is being conducted in Accounts Office:
A
B
C
D
E
Fortnightly
Monthly
Daily
Weekly
End of the
month
Q4.
Q5.
Weekly working hours in an Ordnance Factory is:
A
B
C
D
44 hrs
50 hrs
48 hrs
46 hrs
E
44 3/4 hrs
Booking of attendance for present on Saturday for one hour is marked:
A
29/32
B
21/32
C
25/32
D
17/32
E
I
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Q6.
Day Workers are those:
A
Who work in the
Day time only
Q7.
B
Who are being
paid with
reference to
output
B
Maximum of
the scale of pay
D
[(P+2d)/200] X No of
OT
Bonus
hours
admissible
C
Average of scale
of pay
D
Minimum of the
scale of pay
Maximum profit% admissible to a Piece Worker during a wage period is:
A
80
Q10.
C
[Basic Rate of
Pay/200] X No
of OT hours
worked
What Pay is to be determining for calculation of the amount of Overtime
allowance admissible to a Piece Worker?
A
Own basic pay
Q9.
D
Answer given in A, B &
C are not correct
Which one of the answer is not found correct for calculation of amount for
(1) Time Wages, (2) Overtime Pay & (3) Overtime Bonus admissible to a
Day Worker?
A
B
[(Basic Rate of [(Basic Rate of
Pay)/ (N-S)] X No Pay)/ {Nof days present
(S+H)}] X No
of days present
Q8.
C
Who are being
paid with
reference to their
attendance
B
70
C
75
D
None of A, B & C
Which classes of Day Workers are not entitled to Incentive Bonus?
A
Highly Skilled
B
Un skilled
C
Skilled
D
Semi Skilled
E
Master craft man
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Q11. Incentive Bonus payable to a maintenance worker deployed in the Estate area
will calculate on the basis of:
A
50% of profit
earned in the
Estate
Q12.
B
45% of
profit earned
by
Maintenance
section
C
50% of
profit earned
by the
Production
section
D
50% of average
profit earned by
the sections
E
No answer given
in A, B, C & D is
correct
Agreement Form of Labour duly completed would be forwarded by the
General Manager to the Accounts Office by
A
Last day of the
respective
month
B
10th of the
1st month
following
C
D
First week of Last week of
the 2nd
the1st month
month
E
10th of the 2nd
month following
Q13. Which answer is correct? The Receipt side of Disbursement Certificate shows
A
Amount received
on ECR
B
Net payment
payable
C
Actual payment
Disbursed
D
Deduction made
Q. 14. Which item does not reflect in the Payment side of Disbursement Certificate?
A
Deduction made
B
Total amount
passed in Master
Roll
C
D
Any receipt for
Net payment payable
un -disbursed
wages remitted by
money Order
Q15. Which is not the primary document for Cost Accounting of Labour?
A
PW Cards
B
DW Cards
C
Financial
Punching
Medium
D
Allocation Sheets
E
Cost Punching
Medium
Now Turn Over Sheet
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ANSWERS TO QUIZ
QUESTION NO
1
ANSWER
E
QUESTION NO
9
ANSWER
C
2
B
10
B
3
C
11
D
4
E
12
E
5
D
13
A
6
C
14
C
7
A
15
C
8
D
ASSESS YOURSELF
Store less than 15 marks:
Need to revisit chapter again
Score between 15 to 20 marks:
Well done!
Score 20 Plus (+):
Wow! You are genius.
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OFFICE OF THE PRINCIPAL CONTROLLER OF ACCOUNTS (FACTORIES)
10-A, SHAHEED KHUDIRAM BOSE ROAD, KOLKATA-700001
PART-I OFFICE ORDER NO-AT/05
DATED: 08-05-2008
SUBJECT: - Inclusion of Transport Allowance (TA) for the purpose of calculating
Overtime Allowance under the Factories Act. 1948--- Clarificationregarding.
--------------------------O-------------------------
A copy of Ministry of Defence /D (Civ-II) letter no F.No-14/1/2000-D
(Civ-II) dated 26-03-2008 on the above subject received under CGDA, New Delhi
letter no-AT/II/2010/OTA/V dtd. 23-04-2008 is reproduced below for information,
guidance and necessary action.
Ministry of Defence OM of even no dated the 12th July 2000 mentioned in the
Ministry’s letter dt.26-03-2008 was circulated vide this office part-I Office Order No.
AT/18 dt. 27-09-2000.
Asst. Controller of Accounts (Fys)
No. Pay/Tech-II/73/Genl. Dated 08-05-2008
------------------------------------------------------Distribution as per standard list
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F.No. 14/1/2000-D (Civ-II)
Government of India
Ministry of Defence
………..
Sena Bhawan, New Delhi
The 26th March 2008
OFFICE MEMORANDUM
Subject: -
Inclusion of Transport Allowance (TA) for the purpose of
calculating Overtime Allowance under the Factories Act,
1948-clarification regarding
The matter regarding inclusion of Transport Allowance (TA) for
the purpose of calculating Overtime Allowance under Factories Act,
1948 has been considered in consultation with the Ministry of Labour
and Employment. It has now been decided by the Ministry of Labour
and Employment vide their O.M.No. Z-16025/81/2007-ISH.II dated the
19th November 2007 that wages are remuneration for work. While the
transport allowance are compensatory allowance which is reimbursed
and hence may not be taken into account for' calculating OTA under the
Factories Act, 1948.
2.
This issues in Supersession of decision of Ministry of Labour,
circulated vide Ministry of Defence O.M of even number dated the 12 th
July 2000. However, as advised by Ministry of Law and Justice vide
their diary No.0159/08/LA dated 12.2.08 no recovers shall be made on
account of Overtime Allowance already paid in terms of O.M of even
number dated the 12th July 2000. This issues with the concurrence of
Defence (Fin/AG/PB) vide their I.D.No.86/AG/PB dated 14.3.2008.
(M.S. Sharma)
Under Secretary
AG/Org.4 (Civ)(a)
NHQ/CP Dte.
Air HQrs./PC-
DGNCC
D (B&C)
OFB, Kolkata
D(R&D)
CGHQrs.
D (Fy.II)
5
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D (Mov)
Copy to:
1.
2.
3.
4.
5.
6.
D (QA)
D (Civ-I)
Defence (Fin/AG/PB)
CGDA
General Secretary, All India Defence Employees Federation, 70
Market Road, Kirkee, Pune-411003.
General Secretary, All India Defence Employees Workers
Federation, 25/19, No.6, 6th Street, Vaishnavi Nagar, RCC Post,
Chennai 600109.
General Secretary, Bharatiya Pratiraksha Mazdoor Sangh
(BPMS), 2 Navin Market, Kanpur-208001.
General Secretary, Confederation of Defence Recognized
Associations, 96 Defence Apartments, G-17, Paschim Vihar,
Rohtak Road, Delhi-87.
Copy also to:
All Staff Side Members JCM
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CHAPTER-II
MATERIAL ACCOUNTING
OBJECTIVE
A thorough reading of this Chapter you will come to know:  Material Planning Sheets (MP Sheets).
 Store Holder Inability Sheets (SHIS).
 Different types of Tenders.
 Tender Purchase Committee.
 Post Audit of Supply Order.
 Delegation of Financial powers to General Managers.
 Types of Receipts & Issues of Stores & their accounting.
 How payment made is linked with material received.
 Priced Store Account & Priced Store Ledger.
 Procedure for IFD transactions & Stores in Transit.
 Sale Accounting Procedure.
 Reserve Stock Pile Item.
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INTRODUCTION
Material Costs constitute the most controllable costs in the Ordnance
Factories set up. Labour Costs are relatively fixed, as the labour force is
permanent and on scales determined centrally by the Government. It
does not normally vary, though in times of heavy workload, overtime
can increase its cost somewhat. But this impact is compensated by
increase in value of production, thereby resulting in the per unit cost
being relatively stable, even lower at times. But material cost can
directly impact on the overall cost per unit.
Material management consists of
(1)
Purchase at the optimum prices.
This involves purchases at the
 Right Time, i.e. when the prices are just right. This is especially
true of commodities like Steel, Copper etc. which are cyclical in
nature as far as prices are concerned also, it must be ensured that
the purchases do not result is an abnormally large idle inventory.
 Right Sizes: Today, CNC machines optimize cutting sections
from a large sheet. Thus, in making garments, for example, they
layout the patterns so that minimum wastage is there. Buying the
cloth
in
right
width
can
maximize
economy.
Similar
considerations hold for purchase of Steel or Copper sheets.
 Right Quality: Specifications must be just appropriate; neither
too poor nor too rich (why?).
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 Right Prices: This comes about by ensuring that adequate
competition is there among reliable suppliers. This is the main
role of the Finance Reps. In the factors above are not important for
them; it is only that responsibility for those is shared by the
executive authorities equally.
(2)
Timing the purchase.
Inventory of materials held in store represent non-value adding costs.
Ideally, no inventory should be held. But in the real world, this results in
situations where some material goes out of stock, resulting in entire
production grinding to a stop, even though salaries, fixed expenses etc.
are being incurred. Hence, some inventory is necessary to be held.
Scientific formulae are there which give the maximum, minimum and reorder levels of inventory. For critical stores, "insurance" stockpiles also
should be there.
(3)
Developing the right vendors and sources.
Since the size of the minimum idle inventory depends upon the lead time
(i.e. time taken for supplies to come), having capable and reliable
suppliers is very important. In an open tender, though very low rates are
sometimes realized, the reliability of vendors is open to question. In an
effort to secure orders, vendors sometimes over extend themselves and
cannot fulfill the orders. It is important to realize that seemingly lower
price can have disastrous consequences for production if the vendor is
not reliable. Vendor development is thus a very important aspect of the
procurement process. Vendor development can be achieved by
aggressive registration, pre-qualification, encouraging new vendors
through trial orders, progressively increasing in size etc.
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Once the materials are purchased, the role of maintaining proper
accounts begins. It is the job of the Accounts Office to ensure that:
1)
All materials paid for are actually received and accounted for in
the Factories. Anomalies in this show up as “Outstanding Assets”
and “Outstanding Liabilities”, which must be constantly
monitored and linked, to bring them to zero. Only then would this
objective be realized. This process would also ensure that pricing
errors are rectified in time.
2)
All issues from the store are accounted for properly and in time.
Priced Store Account (PSA) is a macro account generated by the
computer, which gives the overall amounts for a month. Priced
Store Ledger (PSL) is a detailed, item wise account. Both these
accounts will not give the right picture if all Demand Notes,
Return Notes floated in a month are accounted for.
3)
All issues are charged to appropriate manufacturing warrants.
Costs will be distorted if there is a mistake and these are charged
to the wrong warrants or to the wrong code heads. Material
Abstracts must, therefore, be comprehensive (i.e. cover all issues
etc.) and correctly posted so that Cost Cards reflect the reality.
Wrong depiction in Cost Cards would obviously lead to wrong
interpretation and wrong managerial actions.
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AUDIT OF MATERIAL PLANNING SHEET AND SHIS
Material Planning Sheet
i) Prior to Computerization of Factories – This is a report generated
by the DPS and OFB on the basis of input data received from Factories
concerned regarding opening balance of Stock, Estimates for materials
requirement, punched cards containing information relating to primary
documents related to Stores- Receipt Voucher, issue Vouchers, Demand
Notes, Return Notes, Adjustments Vouchers. Based on these inputs and
4 yearly production programme computerized Material Planning sheets
were prepared by OFB and sent to each factories at the beginning of the
4 years for subsequent action of provisioning.
Objective: - Objective of this report is that it can become an essential
tool for preparation of material budget at the Boards level as also it can
be used as a control mechanism for verifying the necessity for
procurement of any item.
Essentials: –
(i)
Standardization of product code (10 digits). First two-digit
vocabulary section, next three-digit factory unit code and
last five digits serial number of folios.
(ii) Standardization of item code for all materials in the Factory
level.
(iii) Preparation of standard estimates for articles produced in
the Factory.
(iv) Work out output- consumption ratio of the raw materials to
the ultimate furnished product.
(v) Opening balance, drawal, purchase information.
Methodology for establishing Output- consumption ratio –
Let us consider a Factory is producing a final product A by assembly of
three components A1, A2, A3. Each of this has two-sub component
represented by A11, A12, A21, A22, A31, and A32. Each of subcomponent for its manufacture needs three raw material represented by
A111,
A112,A113,A121,A122,A123,A211,A212,A213,A221,A222,A223,A311,A312,A313,
A321, A322, A323..
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Thus it is identified that for production of Store A18, different raw
materials are necessary.
Let for production of item of A, the number of component needed for
A1, A2, A3.ie.2, 3, 2 respectively.
For production 1 article of A1, say number of A11 & A12 required after 3
& 4; same also for A2 & A3. Then the number of articles of subcomponents required for production of 1 number of A is A11  6, A12 
8, A21  9, A22  12, A31  6, A32  8.
If the raw materials requirement for production of each sub-component
if in the ratio of1: 2:3 then the raw material requirement for production
of 1 number of A will be A111 6
A 321  8
A11212
A121  8
A 211  9
A221  12
A 311  6
A122 16
A212 18 A222 24 A312
A322
16
A11318 A123 24
A213  A223
 36
18 A322
24
12
A313
This cascade diagram is as follows Actual requirement of raw material for the next year production is
worked as A111
A121
A 211
A112
A312
A 123
A122
A221
A 311
A
321
(Qty of Production Planned) x
A113
A322
A212
A222
A322
A213
A313
A313
The same Principal is followed for each item of final product say B, C
…
Now the total requirement of raw material A111 is calculated as.
A111 required for item A + A111 required for item B + A111 required for item
C.
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ii) After computerization of Factories: - The vocabulary number is
allotted by OFB and 1 year in advance production plans are intimated to
GMs.
GMs with the same principal workout material requirement on both
direct &indirect material and arrive at the value of material requirement.
This becomes the basis for projection of budget estimate to OFB.
After clearance of budget by OFB at the time of procurement of an
article of raw material a MP Sheet for that article is enclosed for audit of
requirement. These sheets contain the following information.
(i)
Item Code (ii) Item Description (iii) MP Sheet No. & Date
(iv) Required For production of items (OFB Vocabulary
code) (v) Production Plan for the item (vi) Estimate number
(vii) Output –consumption ratio (viii) Total Qty required
(ix) Qty required for next six months (x) Qty on stock (xi)
Qty for which order has already been placed (dues) (xii) Net
quantity required.
Audit of MP Sheet- At the time of taking action against any proposal
for procurement the MP Sheet is to be audited to justify the need. While
doing that it is to be ensured that there is a control mechanism for
detecting the progress of MP Sheet once prepared through the system.
 M P Sheet should be numbered.
 There should not be any blank number without the knowledge of
Audit.
 M P Sheet prepared on any article must be reflected with the
status in
 Subsequent M P Sheet on the same article.
 There should be proper control mechanism to ensure that M P
Sheet is not, Prepared for original raw material at the same item
for the alternative item.
 Balance in hand is shown correctly.
 Dues bin are shown correctly.
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Advantage of System
It has more relation to the coming year’s production plan than on the
previous year’s history.
Any change in the estimates affected by revision in estimate can be
promptly reflected in the provisioning action.
Disadvantage of System
Audit never feels comfortable, as the Output- consumption ratio worked
out by computers is not visible.
If suitable checks are not in built into the system may lead to overprovisioning.
Ordnance Factories do not have specific production plan, it goes on
changing.
SHIS – The full form is Store Holder Inability Sheet. The name itself
specifies that in same is prepared by the store holder while proposing for
any procurement. This can be merely termed as Store Holder’s proposed
justification for procurement. It contains stock in hand, dues, average
consumption, liabilities in sight and hence requirement to meet this
liabilities. SHIS for cases valuing less than Rs. 1, 00,000 may not be
vetted by LAO. The requirement for next six month is calculated on the
basis of the formula.
6 x Total consumption during the last 24 months
24
Audit of SHIS
SHIS when received in Accounts Office is to be verified by the section
to establish.
The SHIS is not duplicated.
Qty of stock in hand is shown correctly in the inability sheet.
Average monthly consumption noted on the SHIS is correct.
Figures of dues shown in the SHIS are correct
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Comparison between MP Sheet & SHIS
M P Sheet
SHIS
1) Prepared on the basis of future 1) Prepared on the basis past
plan
experience consumption.
2) Can take care of any change in
the tune of production associated
with revision of estimate.
3) The figure Output–consumption
rate shown cannot be audited.
4)
Pro-active
action
on
provisioning can be taken
2) No scope for estimating such
changes.
3) All the figures appearing are
auditable.
4) Only action can be taken when
the stock goes beyond ordinary
level.
5) Faster process but need more 5) Slow process but completely
control on the system.
structured.
6) No audit % has been fixed yet.
6) % of audit is laid down in
manual.
Post Audit of Supply Order with particular reference to TPCs.
After receipt of SHIS duly vetted by LAO, PV Section of Factory
initiates procurement action. The system of tendering resorted to are (i)
Open Tender, (ii) Limited Tender and (iii) Single Tender.
Open Tender – Open or Advertised Tender is resorted to where the
value is large, sufficient time is available for finalization of tender and
where competition is considered necessary.
Limited Tender – This method is used where the demand is very
urgent, likely sources are known and advertisement is not expected to
widen competition. Issue of TE is restricted to the registered, established
and successful suppliers of past repute on the approval of the Chairman
of the appropriate TPC and Finance Member.
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Single Tender – Issued for items of propriety nature where it is
definitely known that there is only source of supply.
Tenders received in response to TEs are opened on due dates of opening
in the presence of the tenderers or their authorized representatives. Then
the Comparative Statement of Tenders (CST) is prepared. Based on the
price quoted, level of TPC is decided below.
**Please see Annexure attached (in pdf file)
Tender Purchase Committee:
Prior to formation of OF Board, Tender Purchase Committee was
introduced in DGOF Organization including Ordnance Factories vide
Govt. of India, Ministry of Defence (Deptt of Supplies) O.M. No.F.7
(67)/73-DS dated 20/2/1978. In the said O.M. amongst others it was
stated that for tender enquiries, opening of tender etc. DGOF should
follow DGS&D procedure. In Ordnance Factories organization
Competent Financial Authority is the Chairman of the TPC and is a part
of the TPC (OFB Order No.2/BS dated 19/23-5-1979 & OF Board
Secretariat Note No.18/FIN/BS dt. 18/4/2002. In the Board Order
bearing No.472/BS dated 8/8/2013 delegating higher power to various
authorities it has been stipulated that the powers of TPC are concurrent
with the delegated powers of the Chairman of the TPC. After setting up
of the Ordnance Factory Board, four tier TPC was structured for the first
time vide OF Board, Fin. Divn. No.246/II/79/OFB dt. 27/2/1980 this has
been amended time to time.
These are the Factory level TPC. T
here are separate levels of TPC in Ordnance Factory Board level. TPC
recommends the placement of order on the basis of deliberations made
and duly considering the following factors:
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(i)
Whether the Ordnance Factories have got the capacity to
manufacture the item and if so, the justification for purchase
from outside.
(ii) The most economic price consistent with quality and
conforming to specification.
(iii) Last purchase price and the justification for higher rate, if any.
(iv) Delivery schedule vis–a-vis rate of consumption.
(v) Reliability of the Firm based on past performance.
(vi) Whether the competition is adequate in case of LTE.
(vii) Unusual Terms and Conditions, if any, made by the tenderer.
In addition to above, the role of Finance Member is to bring in financial
expertise in the decision making Finance Member brings out financial
implications and repercussions of exercise of any financial power and
availability of alternatives if any.
When the decision is arrived at, a minute of TPC is made and gets signed
by all the Members of TPC.
Based on the recommendation of the TPC, Provision (PV) Section places
the Supply Order in the prescribed standard Forms on the Firm
recommended by the TPC. Thereafter, the Supply Order along with
Tenders, CST and all other concerned documents are received in the
Accounts Office for post audit.
Following points are seen during audit of Supply Order: (i)
That the purchase is authorized.
(ii) Quantity ordered and specification conforms to the
requirement as shown in the SHIS and as recommended by the
TPC.
(iii) Utmost publicity is given.
(iv) Adequacy or otherwise of competition, whether all the past
successful suppliers have been included in TE.
(v) Whether the lowest offer has been accepted and if not, whether
the justification for accepting the offer other than lowest is
noted on the CST.
(vi) Rates accepted compare favourably with LPR.
(vii) Rates, taxes and duties have been clearly and separately
indicated.
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(viii) Terms and date of delivery have been clearly specified and are
in conformity with rate of consumption.
(ix) In case of Single Tender, PAC is enclosed.
(x) Successful tenderer is in the approved list and has not been
black listed.
(xi) Preference as to price, if any, is covered under existing orders.
(xii) Debitable Head of Account is clearly indicated.
(xiii) Amount of Security Deposit is clearly indicated and if waived,
the orders of CFA.
(xiv) Whether the Firm has asked for advance payment.
(xv) Standard Forms are used with adequate risk purchase and
arbitration clauses.
GOVT OF INDIA
MINISTRY OF DEFENCE
10-A, S. K. BOSE ROAD
KOLKATA –700001
Order No. 400/ BS
Dated: 06 September 2000.
Subject: - Delegation of Financial powers to General Managers and other officers of
the Ordnance Factories
In accordance with the “Note” in Annexure to GOI, Ministry of Defence,
Dept.of Defence Production and Supplies, New Delhi letter No.PC-1 to 2(2)/96/D
(Fy-1)/99/D (Prod) dated 30/11/99 issued with the concurrence of Integrated Finance
(MOD), the Chairman and DGOF, in consultation with Member (Finance) has been
authorized to decide the extent of delegation of powers to General Managers and
other functionaries based on functional requirement.
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Pursuant to the above, Ordnance Factory Board has approved the delegation
of enhanced financial powers to General Managers and others as indicated in
Annexure –1 to this letter with immediate effect subject to the guidelines listed in
Annexure – II. These orders will supersede all previous orders on the subject in
respect of the items mentioned in the Annexure-1. The areas not covered in this letter
would be regulated in accordance to Board Secretariat No.353/ BS dated 12-07-88.
Whether the existing powers of the GMs are higher, the same higher powers will
continue.
The extant orders on procurement as laid down in Material Management,
Financial regulations and the CVC guidelines issued from time to time are to be
strictly followed. Special care may be taken to ensure that the high value investments
conform generally to the guidelines issued by the MOD (Enclosed at Annexure –III
for ready reference).
All powers will be exercised by the Competent Authority in consultation with
local Finance and Accounts and will be strictly subject to availability of funds.
This issue with the concurrence vides Financial
Division UO. No
1133/FNM –II dated 25/08/2000
Enclo: 09
Sd/(AnilKumar)
Secretary
Ordnance Factory Board
All General Managers
Ordnance Factorie
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DIFFERENT TYPES OF RECEIPTS & ISSUES:
HOW ACCOUNTED FOR
This write up is meant to apprise the trainees the system/ procedure
followed and documents used in Stores Accounting in the Ordnance
Factories. The accounting of Stores must be given considerable
importance as more than two-third of the cost of production in Ordnance
Factories is accounted for by the cost of material.
Materials in Ordnance Factories are classified under two Major Heads:(i) Materials on Store Charge.
(ii) Materials on Production Charge.
TYPE OF RECEIPTS
Raw materials are obtained by the Factories by one of the following
means: (i) Foreign Purchase.
(ii) Central Purchase through a Central Authority.
(iii) Local Purchase by the General Manager of Factories.
(iv) Supplies from other factories.
(v) Supplies from other branches of Defence Department
(vi) Supplies from departments other than Defence.
Apart from the above the following internal transactions of the Factories
are also accounted for as receipt.
(i)
(ii)
(iii)
(iv)
(v)
Receipt from the production of own Factory.
Receipts from the returns to the Store Section of surplus
materials, waste etc
Receipts from surpluses found at Stock taking in the Factories.
Receipt on account of transfers from Capital assets
Miscellaneous receipts from sources other than above as estate
produce etc.
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TYPE OF ISSUES
Material is issued by the Store Section of the Factory for the following
purposes:
(i)
Issues to manufacturing Shops.
(ii) Issues to other Factories.
(iii) Issues on payment to other Govt. Departments etc.
(iv) Issues to other branches of Defence Department.
(v) Issues on account of Sale by auction.
Beside the above the following transactions of the factory are also
accounted for as issues.
(i)
Loss of Stores-in-Transit.
(ii) Loss of Stores on Charge.
(iii) Loss of Stores due to causes other than above.
(iv) Transfers to Capital.
(v) Miscellaneous.
ACCOUNTING OF RECEIPTS & ISSUES OF STORES
M.I.S. is prepared for almost all receipts in the Factory. The MIS is
converted in to a receipt voucher by allotting a No. of the respective
Series to which the Store pertains. Issues from the factory godown or
Stores to Shops/ Sections are done through Demand Notes. Any returns
of such stores to godown are done through return notes. Issues to any
other concern are done through Issue Vouchers.
All the primary documents i.e. Receipts Vouchers Issue Vouchers,
Demand Note, Return Note etc. are sent to Accounts Office through
EDP duly allotted Sl. Nos. On receipt of these primary documents in the
Accounts Office these are entered in to Schedules for different classes of
documents (viz. Schedule of Receipt Voucher, Schedule of Issue
Voucher etc.)
These documents are then priced in the Accounts Office as follows: (i) MIS/ CRV (Local Purchase)  Price quoted on Supply order
(ii) Department other than Defence  Price quoted on the Issue
Receipt from other Ord. Fys.
Vr. of the supplying deptt.
(iii) Other branches of Defence  Stock Book or priced vocabulary rates
(iv) Own Fy. Manufacture
 At actual cost of production.
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PRICING OF ISSUE DOCUMENTS
(i) D/ Notes and R/ Notes  Monthly Average Ledger Rate.
(ii) Sale Voucher  At Sale rate.
(iii) Loss Statement
(Other than transit  Average Ledger Rate
(iv) Loss of Sores- in – transit  Rate at Which connected receipt
Voucher is priced
(v) Payment Issue  (i) Average Ledger Rate (ii) Plus 5%
Addl. Charges plus 5% addl. On (i) + (ii)
The receipt and issue vouchers after pricing are entered in to the monthly
Priced Store Account (PSA) under different Codes for different sources
of receipts and issues. Similarly, the value of Demand and Return Notes
is entered in the PSA to arrive at the net receipt and net issue. Thereafter,
these are added with the closing balance of the previous month to arrive
at the total raw – material inventory at the end of the month.
Receipt and Issue Vouchers are thereafter sent to Material Ledger
Section for posting in the Priced Store Ledger (PSL) maintained and
operated jointly by the Provision Section of the Factory and Material
Ledger Section of the Accounts Office Demand and Return Notes are
received by Material Ledger Section directly from Factory and after
pricing on the basis of Average Ledger Rate are posted in the PSL. The
Receipt Vouchers are required to be posted in the PSL first and then the
Demand and Return Notes.
Every month control total of the PSL (Volume wise) is required to be
reconciled with the closing balance of the PSA. At the end of the
financial year, the extracted balance of each item of the PSL must agree
with the closing balance of the consolidated PSA for the year.
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HOW THE PAYMENT MADE IS LINKED WITH MATERIAL
RECEIVED.
In the case of all Stores for which payments are made/ book debits are
received / priced copies of issue vouchers are furnished, hundred percent
linking has to be done. Linking consists of two parts. :
(i) Linking payments with receipt vouchers. Unlinked items represent
payments made for which receipt vouchers are awaited. These are
called ‘Outstanding Assets.
(ii) Linking of Receipt Vouchers with “Payment made”. Where the
unlinked vouchers represent” Stores received “for which payments
are to be made. These are called “Outstanding Liabilities.”
Through the medium of linking registers maintained in the Material
Section of Accounts Office for each category of receipt–FP, CP, LP, IFD
etc. it is ensured that all stores invoiced to the factory and all Stores for
which payment has been made have been received and accounted for.
This is done by posting the details of bills/ invoices and receipt / issue
vouchers in the linking registers.
WHAT IS PSA-PSL
A priced Store Account detailing the receipt and Issue transactions from
stock in each month under the various heads specified in Forms IAF
(FAC) –15 for Receipt and IAF (FAC)- 16 for issues is prepared by
Material Section every month after generation of Computerised PSA
report for the concerned month and submitted to the Costing Section by
15th of the month following for the purpose of posting in Principal
Ledger.
PSL generated every month from Computer details item code wise
(concerned for the material dealt with) transactions of all receipts and
issues showing UOQ (Unit of Quantity), Opening Balance, details of
Receipt Voucher, Return Note or Adjustment Receipt Vouchers for
receipt transactions and Demand Notes, Issue Voucher or Adjustment
issue Voucher for issue transactions, m.a.rate, closing balance etc. Work
order No., Warrant Nos. is given for the materials drawn on DN or
returned on RN are shown against the concerned transaction.
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At the end of the year a Consolidated PSA and PSL are also generated
through Computer containing all transactions pertaining to the year.
HOW PSA –PSL IS PREPARED
For preparation and maintenance of PSA/ PSL one itemmast.dbf file be
is maintained in Computer showing stock position of every material
indexed item codewise, value of stock etc. The file has 50 fields like
Record Code, Factory Code, UOQ, Bin Qty., PSL Qty., Moving Average
(MA) Rate, Value of Stock, Description, PSA Code etc. For the purpose
of pricing of receipt vouchers other than I.F.D.a Supply order Master or
SOMASTER. dbf file is also maintained having 51 fields like Record
Code, Fy Code, SONO, SODT, item code, UOQ, Ord Qty., Due date,
Bas rate, SOVAal, TPCC dt (TPC Clearing date), PR Rate (Pricing
Rate), EDPer, CDPer, Disper (Discount Per), LD etc. For pricing of
Receipt Vouchers pertaining to IFD a file called IFDRATE. Dbf is
maintained keeping rates of different items of material from OFB list or
Issue Vrs. Received from Consignor factory, a file called IFDLINK.dbf
is also maintained having details of Issue Vouchers received from
Consignor. Besides these files IFDMaster, Vendor master, Security
Deposit Master (SDMASTER) are also maintained in Inventory
Package.
RECEIPT VOUCHER & ISSUE VOUCHER
Receipt Vouchers (IAFZ- 2096) is prepared by Factory for stores to be
brought in charge of Factory Stock. For Stores received from outside
Factory, a material inward slip is prepared to show full particulars of
stores and the result of their examination by the Inspection section.
Accordingly no separate receipt voucher is prepared for the same where
MIS is prepared. Receipt Voucher No. is given on the MIS. Receipt
Voucher or MIS is received in M Sec. Of AO and watched through
Priced Store Schedule for continuity. At the end of the month after
checking all Receipt Vouchers are received in AO as per skeleton list
same are handed over to EDP Section for Data entry. Similarly IFD
receipt vouchers are also sent to EDP section for same purpose.
Likewise, Issue Vouchers received from the factory are also entered in
the schedule of vouchers to watch continuity and sent to EDP section at
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the end of the month. Receipt Adjustment Vrs, (If any) is also forwarded
to EDP Section.
DEMAND NOTES & RETURN NOTES
Demand and Return Notes received from Factory are entered in serial
nos. in the register of schedule of demand and return notes [IAF (Fac37)] to watch the receipt of all Demand and Return Notes issued by the
factory. All DN/RN received by M section thus scheduled are dispatched
to EDP section by 5th of the following month.
DATA ENTRY
All the data pertaining to Receipt Voucher, Issue Voucher DN/RN are
entered in the respective file and a checklist is generated to examine that
there is no error in the entry or duplication or Missing of voucher is
there. Special attention is paid to see that the UDQ, PSACD entered is
correct. In some factories data are captured from factory source.
PRICING OF RECEIPT VOUCHERS
For pricing of Rt. Vrs. Other than IFD Rt. Pricing (SO) bar of Update
menu is selected. In case of any error, re-pricing may also be done in the
system after revising the necessary entry.
Similarly for IFD Rt.Vrs. We select interactive receipt voucher Pricing
(IFD) option of Update menu pad of main menu.
Before pricing of Rt. Vrs. New folios for new items of materials are to
be appended in item master file.
Pricing of Demand & Return Note and Issue Vouchers are made through
system w.r.t. Average Ledger Rate (ALR i.e. V1+V2/Q1+Q2)
For any Rt.Vr.Adjustment data entry is made in a file called RTAJ file giving
previous value, Original Value, Difference of Value, previous voucher No. etc. After
running a programme PSL check the system automatically creates a file for Issue
Adjustment of concerned DN/RN.
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VALIDATION OF DOCUMENT CHECK
PSL ENTRY AND validation checks option in ‘Transaction Menu’ pad
of Main Menu is selected for Validation Check. On selection of the same
‘File Type’ option is chosen and appropriate file type out of Receipt
Issue, Adjustment & Skeleton is checked for validation. Output report
ERRREP, TXT is generated for taking corrective action.
PSL - CHECK
PSL entry and Validation Checks option in Transaction menu pad of
Main menu is selected. On selection of this option File Type, PSL Check
& exit option is activated. PSL check is selected and Invsys asks for
concerned Receipt Transaction, DN/RN/Issue Transaction file and
Adjustment file name (ISSADJFL) and year month of PSL. Entering the
same PSL is checked. Rejected Transactions are found out through a
report ERRFLTXT. The reasons for rejection of such documents are
scrutinized and corrective action is taken.
BPLN CHECK
The system verifies the sequence of documents with reference to the Bin
Page Line Number. The BPLN maintained in the Master is taken as the
1st number after which transaction sequence is checked. A message
comes while checking PSL “Document Missing” is indicative of a
sequence no. that is not available in the transaction file. The document
that is missing can be traced out from Bin Card w.r.t. the BPLN.
PSL- UPDATE
PSD Update menu of Update Menu pad of main menu is selected for the
same, Invsys then asks for year &month of PSL and whether Binder
wise Ledger Report necessary. On entering the same Opening Balance of
PSL for the month is shown on the screen. This OB should be checked
with CB of earlier month. Then an option comes in the screen whether to
allow Unorthodox Balance. If ‘NO’ is selected rejected issue
transactions in PSL check is separately kept in a temporary file. If ‘YES’
are selected system prices all transaction with ALR. Unorthodox
Balance is looked into later by user.
A report called Moving Average Rate Variation Report of PSL module
of Report menu is generated to see whether MA Rate in respect of any
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item varies more than +/- 10%. This is indicative of possible errors in
pricing of Rt. Vr. And merit checking before further processing.
All PSL Update is completed the output report PSLREP.TXT is
generated.
PSA GENERATION
For generation of PSA M-Section of AO examines a report on Priced
Issue Voucher generated by Computer and prepares “Adjustment for
PSA only which will have no effect on the closing balances computed in
the PSL process but require a change while exhibiting the figures code wise in the PSA. Such adjustment may arise because PSA code used
earlier for transaction was erroneous and needs correction or where
Profit/ Loss on sale requires shown separately
IN CASE OF LOSS ON SALE
Difference between book value and sale value  Plus to Loss Code
(Issue) Loss occurring in transaction  Minus to Sale Code (Issue)
IN CASE OF PROFIT ON SALE
Difference between Sale value and Book value  Plus to Sale Code
(Issue) Profit occurring in transaction  Plus to Profit Code (Rt)
Necessary data entry for adjustment for PSA only is made in PSAADJ
file then PSA option of PSL submenu of Report menu is selected for
PSA generation. Invsys asks certain information like month and year of
last PSL month and year of PSL, Receipts upto the end of last month and
whether we wish to add adjustment for PSA only etc. on entering this
information last CB of PSA comes in the screen. After verification of the
same with last months report ‘Entry’ key is pressed for PSA creation.
Output report PSAREP, TXT is generated.
IFD Transaction in Ord. Fys
The full form of IFD is Inter Factory Demand. There are various sources
of receipt of material in the Factory which are : (i) Trade sources.(ii)
Receipt from other Factories,(iii) Receipt from non military Department
or from other Defence establishments etc. So IFD transaction is one of
the sources of procurement of material in Ordnance Factories.
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Procedure
On planning of yearly Production of a Factory, the Factory will prepare
requirement of material for the planned production activities. Then they
will try to ascertain the source from where the material to be procured.
As per the existing rule they should first try to get the material from
sister Factories and then from trade source to maintain the quality of
Production .So on ascertainment of material, which can be procured
from sister Factory. They will float demand to other Factories. The
document prepared for placing demand is IFD –Inter Factory Demand.
Two copies of the IFD will be received in Accounts Office of the
Intending Factory. Who after post audit will pass on one copy to,
Indentee Factory Accounts Office for record & watch the supply. So,
IFD is a type of extract or may be called as authority for undertaking
production in the supplying factory.
Types of IFD transactions
There are two types of IFD supply: (1) supply from Production, (2)
Supply from stock. So Issue Voucher serial will accordingly vary with
series of “P” or “S” as the case may be.
Placing of IFD Receipt Vouchers
Receipt vouchers related to trade supply are priced with reference to
supply orders. But in case of IFD transactions the only source of
evaluated document are Issue Vouchers received from Accounts Office
of supplying factory. So receipt vouchers are priced with reference to
price Issue vouchers of the supplying Factory. Factory management of
recipient is quoting issue voucher no, date & supplying factory
concerned to link the issue value and price the Receipt vouchers
correctly.
Linking of IFD transaction
On receipt of Issue vouchers from supplying factory are noted in a
Register Factory wise with Issue Voucher no., Date, Quantities, &
Value. So according the quoting of factory & issue Vouchers No. on
Receipt Vouchers the receipt transaction can be linked easily and clear
the out-standings at Receipt sources. The issuing factory is also sending
an ID list monthly & then yearly from which the correctness of posting
can easily be ascertained & corrected. The unlinked items will be
considered as SIT- (Stores in Transit).
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STORES IN TRANSIT (SIT)
A yearly statement of IFD transaction is prepared by the Accounts office
of recipant Factory in the following Format:
ADD
Stores in transit
on 1st April
Stores received
from other Fys
during the year
as per ID list
LESS
Stores for which
Receipt
Vouchers
Prepared
Stores in transit
on 31st March
Stock
Prod
Stock
Prod
Stock
Prod
Stock
Prod
(i)
(ii)
(iii)
(iv)
Various types of errors and increase of SIT
As per instruction or rule Receipt Vouchers on IFD transactions are
required to be prepared but following types of problems are normally
seen.
i)
Non receipt of Issue voucher at management end.
ii)
Back loaded material returned on regular voucher.
iii) Discrepancies in quantities and delay in settlement.
iv) Delayed action for keeping stock holding at lower side.
v)
Wrong documentation by supplying factory & delay in
settlement.
Asset / Liabilities on IFD transaction
As per system outlined in linking inter factory transactions there much
not be unlinked items but in actual the picture is quite different. The
major reasons for arising of such situation are stated in previous Para. So
the unlinked items are supposed to be asset at the end of a year, i.e.
material issued but not yet Accounted for and no liabilities should arise.
In exceptional cases liabilities also arises when Issue vouchers are not
received at Accounts Offices but on the basis of copy of issue voucher
with the Railway Receipt the factory management prepares Receipt
vouchers In SIT however only net asset is being shown.
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Store Accounts
SNo Dr. side
Amt
Cr. Side
1
To store in hand as on 1st April
1
2
To cost of stores taken on
Charge during the year.
To stores received from Def.
Department
2
4
(a) To transfer for capital
A/C
(b) To transfer for stock
pile
4
5
5
6
7
By issue on payment
By misc. issues
8
To stores received from own
Fy manufacture
To IFD stores
To profit on scale of stores (a)
Normal (b) Abnormal
To surplus at stock taking
By stores issued to
1. Army
2. Navy
3. AF
4. Other Def. Department
a) By
stores
transferred
to
capital A/C.
b) By
stores
transferred to stock
pile
By stores issued to other Fys
8
9
To other adjustments
9
By actual Losses
a) Loss of scale of stores
(i) Normal, (ii) Abnormal
b) Loss of stores on charge
i) Theft/Fraud or neglect
ii) Deficiency in actual balance
not due to theft/fraud etc.
iii) Other causes
By other adjustment
10
To Misc Receipt
10 By closing Balances as on 3lst
March.
3
6
7
3
(a) By stores issued to shop
less return
(b) By issue to NMD for
Prod. Of army
By sale of stores.
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The store A/C is actually the exhibition of position of stock holding of a
Fy. On beginning 7 closing of a year with exhibition of various receipts
sources & issues to various parties including sales. The best way of
compiling of stores A/C is compilations of PSA (Rt & Issue) first and
from therefore compiles the store A/c.
AUDIT OF SALE AND ACCOUNTING OF SALE PROCEEDS
In the Ordnance Factories surplus stores and waste stores are sold
through auction. The entire mechanism of sales is controlled by the
Factory management as well as Accounts authorities jointly.
Such stores, which are sold to external agencies, are categorized under
following broad head
1)
Waste product
2)
Scrap
3)
Surplus Stores
4)
Obsolete Stores
WASTE PRODUCT: The stores which are beyond economical repair
and which cannot be utilized in any alternate way are categorized as
waste product viz. Coal dust, ashes, metal residues etc.
SCRAP: The item scrap means stores beyond economical repair
unserviceable waste stores, which have been utilized and have served
their purpose and have been condemned under proper authority to be of
no use except as scrap.
SURPLUS STORES: This are stores which can not be utilized against
present for anticipated requirement over a period to be determine on the
merit of each case or which are liable to deteriorate by the time they
could be used in the normal course of events.
OBSOLETE STORES: These are the stores, which have been declared
surplus due to obsolescence. Such store usually arises due to sudden
cancellation of orders by the indentor for specific job order, which is
unique and cannot be utilized otherwise.
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STEPS OF DISPOSAL
Having determined the surpluses they will be disposed of by transfer to
other factories, defence services, priority indentors and/or by sell to
private parties. A reserve/guiding price for such stores will be fixed
which are usually at book value plus the packing and incidental charges
incurred plus 5% of the sale value. In case of transfer of surplus stores
and waste products to any priority indentors free of charge 2% of the
book value of the stores should be levied for the incidental charges to
cover packing, loading, cartage charges etc. Such incidental charges will
not be recovered if arrangements are made by the priority indentors.
Reserve prices are fix by the factory management with the concurrence
of LAO. If there is any disagreement meeting factory management and
LAO the case should be referred to DGOF for decision. Reserve price
should be fixed not more than 2 days before the auction. The above price
should made known to the auction supervisor of the date of auction
itself, half an hour before the auction. All concerned officers including
Accounting Officers connected with the fixation of reserve price and the
auction supervisor must treat such price as strictly confidential.
The Accounts representative deputed to attain the auction should note
description of store, quantity, rates of highest bidder in accounts copy of
the auction list and should sign the factory copy for surplus with
supporting document. He should intimate the details to the concerned
CDA. Similar action will be taken on receipt of auctioneer's commission
bill.
A sale register and a sale account is operated and is audited with
supporting details. The sell account receipt the CDA concern for stores
sold in auction by DGS&D and sale release order receipt from factory
management will be checked in respect of quantity, value, purchases etc.
The -correctness of amount booked in the CCO-2 will be verified for
sale value, sales tax, excise duty with reference to the register and
adjustment should be carried out immediately.
On receipt of approval full details are noted in the Sales Register, MRO
received for Security Deposit is adjusted and noted in the Security
Deposit Register, MRO received for sale value is adjusted for sale value,
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sales tax etc. after verification of monthly statement. The MROs are
forwarded to Accounts Section of the Office of the PCA (Fys) in the
normal manner. Action to pay dues on account of sales tax/excise duty to
the relevant authorities should be taken on receipt of contingent bill from
the factory. All the sale proceeds will be reflected in the Cash
Compilation Statement viz. Deduct head under "Revenue Expenditure"
for realization on account of "Sale of Scrap" and revenue head for
receipts for realization on account of sale of surplus stores.
In the case of stores disposed by DGS&D, credit for sale proceeds are
passed on by the PAO concerned to the CDA concerned depending on
the location of auction. The credits are compiled to the final factory head
of account and the sale accounts are forwarded to Store Section, who
allocated the amount to the respective factories and forward the sales
account to the concerned Accounts Officer for linking. On receipt, the
sale accounts are linked by the A.O.
RESERVE STOCK PILE ITEM
Strategic items of stores while are very difficult to procure in case of
failure of normal supplies are classified as Stork Pile Items. A reserve of
such stores is built up separately from working stock in order to meet the
demands of future production in case of failure of normal supplies.
ACCOUNTING OF STOCK PILE ITEMS
All expenditure for stockpile items will be meet from major head 130A Defence Capital Outlay. This is a capital head and though stockpile
items are purchased from capital head, they differ from capital assets, as
they are stores items intended for future production.
The following accounting procedure is followed:
The factory will maintain a separate Bin Card for each of these items. A
separate Store Ledger known as Capital Store Ledger should be
maintained by the ledger group of Accounts Office. This ledger like the
Priced Store Ledger will also be located in the Provision Section in order
to afford facilities of quick reference to the management.
A separate series of vouchers under R series will be operated upon in
each and every transaction.
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The value of Stock Pile Items should be reconciled with the figures of
CCO-2 through a linking register.
Separate Schedule for R series Receipt and Issue vouchers will be
maintained.
No depreciation will be charged, no Priced Store Account need be
prepared monthly a subsidiary Account to Capital Asset Account viz.
Capital Asset Account - Stock Pile should be maintained in the Principal
Ledger.
UTILISATION OF STOCK PILE ITEM
No Stock-Pile items should be used by factories without prior approval
of the OFB/DGOF. As and when reserve material are required to be used
in production, they are to be first transferred to stock ledger and then
issued on demand notes as usual. The transfer of materials from and to
the reserve stock and working stock should be made only on transfer
voucher (IAFZ-2096). The turnover of reserve items, if and when
ordered from time to time by the OFB/DGOF should like – wise be
made on transfer voucher.
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SUMMARY
1) MP Sheet is a computerized report generated on the basis of input
data received from Factories regarding opening balance of stock,
estimates for material requirement, punched cards containing
information relating to primary documents of stores viz. Receipt
Vouchers, Issue Vouchers, Demand Notes, Return Notes,
Adjustment Vouchers. This is an essential tool for preparation of
material budget and can be used as a control for verifying the
necessity for procurement of any item.
2) Store Holder Inability Sheet is prepared by the Store Holder while
proposing for justification of any procurement. It contains Stock
in Hand, Dues, Average Consumption, Liabilities in sight and
requirement to meet the liabilities. The requirement for next 6
months is calculated as under:
(Total consumption during last 12 months / 12) X 6
3) After receipt of SHIS, duly vetted by LAO, Factory management
will initiate procurement action through tendering viz. Open
Tender, Limited Tender and Single Tender as the case may be.
Open Tender (Advertised Tender) is resorted to where the value is
large, sufficient time is available for finalization of tender and
where competition
(a) Tenders received in response to Tender Enquiries
(TEs) are opened on due date of opening in the
presence of the tenderers or their authorized
representatives and a Comparative Statement of
Tenders (CST) is prepared. Based on the price
quoted, level of Tender Purchase Committee (TPC)
is decided
Level-I
GM
Chairman
AGM/Jt. GM in Charge of Procurement
Member
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Other concerned Officers including QC
Member
CF&A (Fys)/JCF&A (Fys)
Member
(b) Level-II
AGM/Jt. GM in Charge of Procurement
Chairman
Other concerned Officers including QC
Member
JCF&A (Fys)/DCF&A (Fys)/ACF&A (Fys)
Member
(c) Level-III
Dy. GM in Charge of Procurement
Chairman
Other concerned Officers including QC
Member
DCF&A (Fys)/ACF&A (Fys)/AO (Fys)
Member
(d) Level-IV
Works Manager in Charge of Procurement
Chairman
Other concerned Officers including QC
Member
Accounts Officer (Fys)
Member
5. Raw materials are obtained from the following sources
a) Foreign Purchase (FP)
b) Central Purchase (CP)
c) Local Purchase (LP)
d) Supplies from other sister Factories (IFD)
e) Supplies from other branch of Defence Department (OMD)
f) Supplies from departments other than Defence (NMD)
g) Receipt from production of own Factory
h) Receipts from the returns to the Store Section of surplus materials,
waste etc. (through Return Notes)
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i) Receipt from surplus found at Stock Taking in the Factories
(through CRVs)
j) Receipt on account of transfer from Capital Assets
k) Miscellaneous receipts from sources other than above.
6.
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
Issues of material by the Store Section are as under
Issues to Shops of the Factory (through Demand Note)
Issues to other sister Factories (through Issue Vouchers)
Issues on payment to other
Issues to other branches of Defence Department (through Issue
Vouchers)
Issue on account of Sale by auction (through Issue Vouchers)
Loss of Store-in-Transit (through Expenses Vouchers)
Loss of Stores on Charge (through CIVs)
Loss of stores due to causes other than above
Transfer to Capital (Issue Vouchers)
Miscellaneous issues
7. Methods of pricing of Receipt & Issue Vouchers
RECEIPT VOUCHERS:
For Local Purchase of Stores
As per Supply Order Rate
For Central Purchase of Stores
As per AT Rate
For Foreign Purchase of Stores
As per Invoice Rate and Bill of
Entry
Department other than Defence Priced quoted on Issue Vouchers
Receipt from Other Ord. Factories
Priced quoted on Issue Vouchers
Receipt from other Def. Department Stock Book or Priced
Vocabulary Rate
Receipt from own Fy. Manufacture
Actual Cost of Production
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ISSUE VOUCHERS
Demand/Return Notes
Average Ledger Rate
Issue Vouchers
Average Ledger Rate
Sale Vouchers
Sale Rate
Loss Statement
Average Ledger Rate (other
than Transit)
Loss of Store in Transit
Rate at which connected
Receipt Voucher was priced
Payment Issues
(i) Average Ledger Rate
Plus (ii) 5% Addl. Charges
plus 5% of addl. Charges
on (i) & (ii)
8. Linking payments with Receipt Vouchers. Unlinked items represent
payments made for which Receipt Vouchers are awaited. These are
called “Outstanding Assets”.
Linking of Receipt Vouchers with “Payment Made”. Where the unlinked
vouchers represent "Store Received" for which payments are to be made.
These are called “Outstanding Liabilities”.
Outstanding Assets & Liabilities will be controlled through a Linking
Registers maintained under each headings viz., LP, CP, FP, IFD, OMD,
and NMD etc.
9. PSA - A Priced Store Account detailing the all transactions made from
stock in each month under the various heads for Receipt and Issue is
prepared by Material Section and submitted to Costing Section by 15th
of the month following to which it relates for the purpose of posting in
Principal Ledger.
The PSL under each ledger folio shows Opening Balance of store,
details of store receipt during a month through Receipt Vouchers, Return
Notes or Adjustment Receipt Vouchers; details of Issues made from
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stock through Issue Vouchers, Demand Notes, Adjustment Issue
Vouchers and Closing balance of the store at the end of the month.
10.IFD Transaction: On planning of yearly Production of a Ordnance
Factory, the Factory Management will prepare requirement of material
for the planned production activities and they would first try to get the
material from sister Factories and then from trade sources to maintain
the quality of production. Accordingly, they will float demand for the
material to other sister Factories. If the sister Factory is capable to
supply the material it is known as IFD Transaction.
11. On receipt of Issue Vouchers from supplying Factory are noted in a
Register Factory wise with Issue Voucher No. & date, Quantity &
Value. The issuing factory will also send a monthly ID List for all stores
issued by them to Indenting Factory. The unlinked items will be
considered as Stores - in - Transit (SIT).
12. Surplus and waste stores are sold through auction. The stores are
categorized as
 Waste product
 Scrap
 Surplus stores
 Obsolete stores
Having determined the surpluses the Factory Management will disposed
off the same by transfer to other Factories, Defence Services, priority
Indentors and/or by sell to private parties through auction. A Reserve
Guiding Price for all the above stores will be fixed before auctioning
with the concurrence with the LAO.
13. Reserve Stock Pile Item: Strategic items of stores, which are very
difficult to procure in case of failure of normal supplies, are classified as
Stock Pile Items. A reserve of such stores is built up separately from
working stock to meet the demands of future production in case of
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failure of normal supplies. The stock Pile items are procured from
Capital Head and a separate Bin Card is being maintained for these types
of stores. A separate Store Ledger known as Capital Store Ledger is also
being maintained for these kind of stores. Receipt & Issues of Reserve
Stock Pile Items are being carried out through “R” series of vouchers.
Although the stores are being procured under Capital Head of Accounts
but no depreciation will be charged against these stores.
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SELFASSESSMENT QUIZ
There are 15 Questions carrying equal mark. One mark will also be
deducted for each wrong answer.
Total 30 Marks
[Tick the appropriate Box, you have selected as a correct answer. Once
ticking need not to be scored out or any new answer is not permissible,
as a fresh ticking for seems to be right answer]
Q1. Auditing requirement of a MP Sheets which information does not
match to be reflected in the MP Sheet?
A
B
C
Output
Qty required Warrant
consumption for next six Number
ratio
months
Q2.
E
MP
Sheet Estimate
Number & Number
date
Which item does not contain in a Store Holder Inability Sheet:
A
Dues
Q3.
D
B
Stock in
Hand
C
Average
consumption
D
Liabilities
E
Quantity of
Store drawn
for
production
D
Where the
demand is
very urgent
and likely
sources are
known
E
When it is a
non
proprietary
nature
of
item
but
only
one
When the Open Tender will be floated
A
Where the
demand is
very urgent
and likely
sources are
not known
B
Where the
value is
large&
sufficient
time is
available
C
When it is
proprietary
nature of
item and
there is only
source of
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supply exists
Q4.
A CST was prepared for a stores valuing Rs. 30,000/- and placed
to TPC for approval. Which level of TPC is required in this case?
A
Level-IV
Q5.
B
Level-II
C
Level-III
D
No TPC
B
C
From estate From Trade
produce
D
From UK
E
From COD
Which item does not pertain a Issue from Stock
A
B
C
To other Ord. To Production To Loan
Factory
Section
Q7.
E
Level-I
Which items unmatched as a receipt of stores in a Factory
A
From Loan
Q6.
source
of
supply exists
D
To Capital
Choose the correct answer as given below at A, B, C, D, E, F, G
and filled in the boxes Methods of Pricing of stores received from
the following sources
A. Average Ledger Rate
B. AT Rate
C. Rate quoted in the SO
D. Invoice Rate
E. Vocabulary Rate
F. Priced quoted on the Issue Voucher
G. Actual Cost of Production
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Sl.No. Stores Received in an Ordnance Facto from
the Answer
following sources
1
Received from COD, Delhi Cantt.
E
2
Received from M/s Auto Parts of India Limited,
C
Gurgaon, Hariyana
3
G
4
Received from Production under `41' series of Work
Order
Received from DGS&D
5
Received from M/s. XXXX of France
D
6
Received from Vehicle Factory, Jabalpur
F
Q8.
Against the pricing of Issue documents from store certain answer
has given in the box "X". If you don't agree the answer given in
the box "X", please give the correct answer under the box "Y"
quoting only A or B or C or D
PRICING OF
BOX "X"
Payment Issue (A) At Sale Rate
BOX "Y"
D
Return Note
(B) Rate at which Receipt Voucher is
priced
Sale Voucher
(C) Monthly average Ledger Rate
Loss of Stores- (D) (Average Ledger Rate + 5%
in-Transit
Addl.Charges) + 5% on (Average Ledger
Rate + 5% Addl. Charges)
Q9.
B
C
A
B
Which item(s) would not be taken in to account while preparing
Priced Store Account (for both Receipt & Issue transactions)
A
Receipt
Voucher
B
Red
Demand
C
Demand
Note
D
Issue
Voucher
E
Material
Inward Slip
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"S" Series
Note
"S" Series
(MIS)
Q10. Which is not correct as a Chairman of TPC in a Ordnance Factory
A
TPC LEVELIII
Jt. GM in
Charge
B
TPC LEVELI
GM
C
D
TPC LEVEL TPC LEVEL –
IV
II
Works Manager AGM/ Jt. GM in
in Charge
Charge
Q11. Which series of Voucher is required to be prepare for issue of
Reserve Stock Pile Stores
A
"N" Series
B
"S" Series
C
"R" Series
D
"P" Series
E
"M" Series
Q12. Which is/are not the Primary Store document for preparation of
Material Abstract?
A
Demand Note
B
Red Return
Note
C
Issue Voucher
D
Return Note
Q13. Which section of the Factory Management will open a ledger folio
number of any store?
A
R&E
B
MCO
C
WO
D
PV
Q14. Which does not indicate a unorthodox balances in Store cum
Provision Ledger
A
Plus Qty
&
Minus
Value
B
Minus
Qty&
Nil
Value
C
Nil Qty
& Plus
Value
D
E
Plus Qty Plus Qty
& Nil
& Plus
Value
Value
F
Minus
Qty&
Plus
Value
G
Minus
Qty&
Minus
Value
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Q15. Requirement of store for next 6 months will be calculated by the
Store holder in Store Holder Inability Sheet as:
A
Monthly
consumption
X6
B
C
D
(Total
(Last quarterly Qty required for each
consumption
consumption)
item of manufacture
during last 12 X 2
X No of article
months /12) X
required
to
be
6
manufactured
for
coming 6 months
Now Turn Over Sheet
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ANSWERS TO QUIZ
Question
No
1
2
3
4
5
6
7
Correct
Answer
C
E
B
D
A
C
Sl. No. 1 – E
S1. No. 2 - C
Sl. No. 3 - G
Sl. No. 4 - B
Sl. No. 5 - D
Sl. No. 6 – F
8
Payment Issue D
Return Note - C
Sale Voucher - A
Loss of SIT - B
Question
No
9
10
11
12
13
14
15
Correct
Answer
E
A
C
B&C
D
E
B
ASSESS YOURSELF
Score less than 15 marks:
Need to revisit Chapter again
Score between 15 to 20 marks:
Well done!
Score 20 Plus (+):
Wow! You are genius
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CHAPTER-III
COST ACCOUNTING
OBJECTIVE
After completing this Chapter you will be able to understand:
 Types of Extracts.
 What is a Warrant?
 Work Orders & its purpose.
 Standard Estimates - their pricing & re-pricing system.
 Cost Card - What does it contain?
 Posting of actual figures from various tabulations in the Cost
Card.
 Semi - Concept, Necessity, Pricing & final treatment in Cost
Accounting.
 Working out of abnormal rejection cost
 Arriving out Cost of Production and analysis of variances.
 Overheads Accounting - Definition, Classification, Collection,
War Insurance Charge
 Allocation and apportionment of Overheads: Step Ladder System.
 Fixation of Budgeted Overheads; Central Budget Committee &
Shop Budget Committee.
 Reconciliation between Financial Accounts & Cost Accounts: Principal Ledger - Purpose.
 Capital Assets
EXTRACTS
An Extract is the authority for the manufacture of an article in a Factory.
It is issued by OFB to enable the Factory to undertake manufacture in
respect of all out turn Work Orders and certain Indirect Service Work
Orders. One Extract is placed for one Work Order. Copies of all Extracts
as well as amendments relating thereto will be received in the Accounts
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Office direct from OFB or through the Finance Division, OFB, if they
relate to Army, Navy, Air Force, MES or Stock Orders.
CLASSES OF EXTRACTS
Extracts are divided into the following classes:
Class I
Class II
Class III
Class IV
Class V
For Army Orders
and miscellaneous
services like repairs for Navy and Air Force
For Payment Services
For Inter Factory Demands
For Stock
For Capital Services
Open Extracts
Before the commencement of each financial year, open extracts for
various services pertaining to all classes of extracts are issued to the
Factories by the OFB.
An open Extract is a general authority for Factories to carry out
miscellaneous and petty services falling under Classes I, IV and V for
which specific sanction of the OFB is not required in each individual
case.
An Open Extracts allotted for Class II, the General Manager can carry
out work of Payment Services in each case up to the limit of his financial
power without asking separate Extracts to the OFB. Similarly, a
Class III Open Extract is sufficient authority for a Factory to undertake
manufacture, repair or other work for sister Ordnance Factories on
receipt of an Inter Factory Demand (IFD) received from other Ordnance
Factories without further reference to the OFB.
WARRANT
It is an authority for undertaking manufacture of an article by the
Productive Shop/Section. It is issued by the General Manager of the
Factory. Work Office of the Factory issued Warrant to the respective
Manufacturing Sections to undertake the job. It contains Material to be
used and operation wise Trade/Grade of labour to be employed to
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complete the article to be manufactured. A Warrant Number is of five
digits, e.g. 0000/0, where the fifth digit denotes as under:
0 for Main Warrant Number
1 for Extra Labour demployed as per NRR
2 for Extra Material drawn as per NRM
3 for Replacement Warrant for excess rejection
4 for Additional number of the existing warrant
Duration of Warrants
Normal duration of Warrants for work other than Capital Works (New or
Repair) is Six months only. Approval for further extension may be
obtained from DGOF
Action Taken by Accounts Office on receipt of Warrant
A warrant is received by Costing Section of Accounts Office & issued
by Works Office of the Ordnance Factory. A warrant contains two parts:
 Manufacturing Warrant
 Material Warrant
Manufacturing Warrant contains the following:
 Original Authority for doing the work i.e. Extract
Number
 A Relevant Estimate Number
 Description of the Work
 SWO Number
 Quantity of work to be done
 Operation to be performed
 Trade & Grade of Labourer to be employed
 Time required for operation
 Hourly Rate of the operator
 Total amount of Basic labour required
Material Warrant contains the following:
 Nomenclature of the materials required for the product
to be manufactured
 Ledger Folio Number of the material
 Unit of the material e.g. Kg, Litre, Meter etc. in codified
number
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 Quantity of material required
 Remarks
Costing Section, on receipt the Warrant, will enter in the Warrant
Register and open Cost Card as well as Production Ledger Card of the
item to be manufactured. The manufacturing part of the warrant will be
then forwarded to Labour Section for checking and payment of Piece
Work / Day Work Cards & posting of primary documents on it.
Similarly, Material Warrant will be sent to Material Section [Ledger
Group) for checking the admissibility of the material drawn/return as per
given in the Warrant & finally posting of Primary documents i.e.
Demand Notes & Return Notes etc. on it. Costing Section will also
watch the completion of the Warrant through Warrant Register.
No Cost Card as well as Production Ledger Card will be open for
Indirect Series of Work Orders.
On completion of a Warrant, Costing Section will call back Accounts
Copy of the Warrant from Material and Labour Section respectively and
pair with the completed Shop copy. These will be attached with the
relevant Cost Card for scrutiny of variances and arrive out the Cost of
Production as well as actual Unit Cost of the Product.
Work Orders
A Work Order is a codified list consisting of nine digits and represents
for which service is to be rendered by its first two digits, nomenclature
of the subject store to be manufactured by next five digits and last two
digits will indicate the code number, of the shop/section who will
undertake the manufacture. Where a operations is passed through
various shop/section for completion of the manufacture the last two
digits in the case will be 00.
Work Order Serial
01
For Fixed Charges
02
For Variable Charges
03
For Process Material
04
For Capital Services
05
For Repairs & Conversion
06
For Cost of Packing
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08
10
11
12
13
40
41
50
51
60
70
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
96
For Conversion of Timber
For Manufacture for Stock of article other than Standard
Packages and Component of Out turn Orders
For Manufacture of articles for Stock for eventual
utilization in issue to Trade
For Manufacture for Stock of Standard Packages
For Manufacture for Stock of Components of another
Orders including Ammunition
For Manufacture of Components for Except Orders
For Manufacture of PPL Items
For Educational Orders
For Expenditure for NCC Organization
For Development Orders
For Issues/Services to Inter Factory Demand
For Payment Services to private Civil Inventors
For Payment Services to members of permanent
Establishment
For Payment Services to all Central Govt. departments
except MHA
For Payment Services to State Govt. and Union Territories
(other than State Police)
For Services to Foreign Governments
For Services to Air Force
For Services to Navy
For Services to R&D Organisation
For Services to Inspection Organization
For Services to MES
For Services to Army
For Services for presentation purposes to MOD
For Services to other Defence Departments
For Services to MHA
For Services to PSU & Autonomous Bodies
For Services to State Police/ State Police of Union
Territory
In the above Series of Work Orders, the "01" and "02" Series are known
as Indirect Series of Work Orders. Rest of the Work Orders represents
Direct Series of Work Orders.
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PRICING OF ESTIMATES.COST ABSTRACT AND
SEMI-PRICING
Pricing of Estimates
In Branch Accounts Offices it is the primary duty of the Accounts
Office to ascertain the cost of the materials/items produced in the
Factory. This job is being dealt with in the costing system of the Branch
Accounts Offices.
To ascertain the expected requirement of labour and material
operation for a particular item of production is called Estimation.
Therefore from the central point of view in utilization of material and
labour, Estimates are playing a vital role. In Ordnance Factories for each
item of product an estimate of the item is prepared by the Management
wherein how much material is to be processed for production of 1 or 100
items is shown with scraps to be recovered and how much will be loss in
process. In labour side they will exhibit labour operation details in each
section through which the material will pass to convert it to a finished
good. It will show the item required for each operation and total rate for
the operation and total rate for the operation (total time X hourly rate)
On receipt of these estimates in the Local Branch Accounts Office
for pricing and post audit the ‘Labour Section’ will verify the labour
operations and rates with reference to the original sheets of piece work
rates viz. data cards, operations sheets, rate forms etc., as the case may
be. The Labour and Material estimates will thereafter be sent to the
costing section for entering on the costing package maintained in the
computer system for pricing and posting in the cost card for warrant
quantity as and when opened with reference to warrant released by the
respective Ordnance Factory Management. Similarly, the material
portion will also be verified by with the ‘Material Section’ and sent to
costing section for pricing through package and posting in the cost card
for warrant quantity. Labour estimate print out should be given to the
Labour section and material estimate print out handed over to Material
section for record. Variable and Fixed rates at annual budgeted rate are
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levied by the system at the time of pricing. The Priced Estimate Report
containing summary of the value under labour and materials, variable
and fixed overheads, showing the minimum and maximum rate of
estimate with reference to rejection will then be forwarded to the
respective Ordnance Factory as required, retaining a copy for use in the
account office (601D)
When a new item is proposed to be produced in a Factory
Provisional Estimate is prepared. On standardization of the item the
Estimate also standardized after minor modification as per actual
requirement.
On standardization of Estimate, the Estimate plays an important
role in controlling the expenditure as on the basis of these Estimates
provision of labour and material operation is made in Warrants (Material
Warrant & Manufacturing Warrants respectively) which is the limitation
of the labour employment or drawal of material for the Batch
Production.
The priced estimates forwarded by the BAOs is treated as
financial vetting of estimates by the BAO. Any amendment to these
vetted estimates by the factory should again be submitted to the BAO for
audit and re-vetting before the amended hours are used in production /
material is authorized for drawl through demand notes. BAO before
vetting the revised estimates should verify, with reference to data
available with them, whether the increase / decrease is at par with the
actuals of the pattern of utilization in the earlier warrants. Any change in
estimate by the factory IED section can be done only with preconcurrence by costing section of LAO. The concordance list shall be
prepared viz-a-vis previous estimates by the IED and when agreed by
costing section based on sound justification will be frozen and no
changes thereafter are permitted unilaterally by the IED section. (601E)
POINTS TO BE NOTED
Whenever the PW profit % exceeds 50% the BAO should forward the
list of related labour estimates to the factory to review the authorization
with a request to downwardly revise the SMH requirement for the
connected operations of the estimates. A monthly list of profit %
exceeding 50% may be generated from the wage roll package and sent to
costing section in soft and hard copy. Thereafter the costing section may
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take up the same with IED Section for remedial action. Periodical
reminders and follow up action through ULMC etc may be done. (601e)
COST CARDS
Each Warrant against a certain Work Order is a authority for
undertaking production of a batch. Against each Warrant a Cost Card is
opened in Accounts Office to watch production of a batch.
Information available in the Cost Cards
(1) Authority for Production i.e. Extract No. or IFD No.
(2) Work Order No and Warrant No.
(3) Quantity Ordered.
(4) Estimate No(s).
Source of Postings
(1) Labour Abstract: All piece work cards, day work cards, allocation
sheets and the labour punching media pertaining to a month are sent to
the E.D.P. Section of the Accounts Office for the preparation of labour
abstract through Costing Package. While forwarding these documents,
the Labour Section also intimates control totals of each kind of
document pertaining to each section. The Labour Abstract is prepared
section-wise showing each work order and warrant the amount of labour
booked. Charges shown in the labour abstract are inclusive of all
elements of pay as mentioned in Para 200A and 200B above. A top sheet
is also prepared for each section showing the total charges booked
against each work order series (01, 02, 70, 90, etc. series) and also the
grand total for the section. (229)
.
Material Abstract is prepared / printed from the primary documents
called Demand Notes and Return Notes.
Transfer voucher, Allocation Abstract, Component Abstracts.
Component Abstracts are prepared through costing package from Red
demand note and Return Notes. (624)
When a Cost Card is opened the monthly expenditure against the
warrant from Labour and Material Abstract is posted Section-wise. On
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taking the labour payment for full quantity ordered against a Warrant.
On such declaration the Accounts Office will undertake closing of the
said Cost Card. They will prepare Estimated Cost of the Warrant with
reference to the Estimate and review the drawal of material and labour
operation taken to identify the variation, if any, with reasons. They
should also scrutinize whether any extra material is drawn or any extra
operation is taken. This scrutiny is to be exercised with reference to
provision of Warrant.
The staffs concerned then record the reasons for variation in the
Cost Card and sent it to Factory Management for their information.
Semi Concept
In the process of Production it is not expected that all the items placed
on pipeline will be completed within the running financial year i.e.
within 31st . March of a year. So the question of ascertainment of cost of
the item in pipelines i.e. incomplete articles and No. Since completed
against the Warrants not declared closed by the Management within the
financial year arise. On 31st March the Management will take the stock
taking at each Shop floor to identify the items still on pipeline and will
record in a Statement called Semi Statement and forwarded the same to
the Accounts Office for evaluation. Accounts Office will verify the
correctness of the record and will get it modified by them if any wrong is
detected. Then the Accounts Office will evaluate the Semis well before
the closing of the accounts of the year, with reference to drawal position
and labour payment taken and will segregate thus arrived at cost of the
incomplete items to be shown as Unfinished semi. An example is shown
below:
W.O
Wt No.0011010
Section
01
02
Total
Value
of
Completed
Articles
Value of
Unfinished
semi
Quantity ordered
Quantity accepted
Labour
100
100
Material
5000
VOH
300
200
FOH
200
100
Total
5600
400
200
150
5000
3000
500
300
300
150
6000
3600
50
2000
200
150
2400
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Cost Abstract:
Cost Abstract is the codified printout of primary documents. It is printed
monthly showing the Work Order, Warrant No nature of document etc.
Nature of Cost Tabulation:
It is printed from PW Cards, DW Cards, Allocation Sheet, Labour
Punching Medium I, II, and III. It also shows Sections in which cost
occurs.
Material Abstracts:
It is printed from Demand Notes and Return Notes, Adjustment
vouchers. Against each entry document no nature of document are also
shown. Return Notes are exhibited as minus.
T V Abstracts:
When the cost is transferred from one Work Order to another Work
Order, the same is exhibited in this abstract
Subsidiary Abstract:
SVC-Sectional Variable Charges, It is printed from collection of figures
from Labour, Material Abstracts and also from Overhead Allocation
against 02 Series of Work Orders.
SFC-Sectional Fixed Charges, It is equally printed in respect of 01
Series of Work Orders.
Master Cost Cards (MCC)
It is a Work Order summary of tabulation printed quarterly from above
three main Abstracts.
PRINCIPLES OF
ACCOUNTING
COST
ACCOUNTING:
OVERHEADS
Definition: Overhead Charges constitute a Class of Cost, which cannot
be directly charged to the Product. To arrive at a true Cost of the Product
it is essential that a proper system of accounting of charges incurred by
the Service Sections or by the Production Section itself in the shape of
supervision, security, welfare, power, steam water are collected and
distributed to the Products) of the Shop. Service Charges of the above
nature, which are common to all the Production Sections but cannot be
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charged directly to the output of that Section/Shop, are called Indirect
Charges or Overheads.
Classification of Overhead Expenses: Under the existing system,
Overhead Charges arising in Ordnance and Ordnance Equipment
Factories are classified into Variable and Fixed categories, the former
being recovered in full against Production and the latter at predetermined
percentages after deduction of the War Insurance Charges and certain
expenditure which are kept out of Production Cost.
In Cost Accounting, Overhead expenses, which are in sympathy
with the load of the Factory, are classified as `Variable' and these
expenses, the magnitude of which would depend upon policy decision
and generally remain constant irrespective of the load/volume of
Production are classified as ‘Fixed’ Charges.
Item of expenditure classified as Fixed and Variable are detailed
in ‘01’ & ‘02’ Series of the Syllabus of Work Orders respectively. At
present there are 55 Work Orders under ‘01’ Series and 26 Work Orders
under `02' Series.
The fixed overhead expenses comprise of items of expenditure
relating to the pay and allowances of staff and officers of the factory
other than those treated as Variable, cost of various training schemes,
repairs and maintenance of buildings, roads, railway sidings and
electrical installations, depreciation of buildings, machinery and assets
other than machinery, social overheads such as estate dispensary,
conservancy, road lighting, factory school, Labour Welfare Fund,
Central Administration of both factory and Accounts, pay and
allowances of Accounts Office etc. The expenses pertaining to fixed
overheads are booked to ‘01’ series of work order. (530)
Collection of Overhead Expenses: The first step in the accounting
and allocation of Overheads is their Departmentalization. The Overhead
expenses (whether Variable or Fixed) pertaining to each Manufacturing
Centre (Cost Centre) are collected together so that the Overhead Charges
for each Shop may be charged to the output of that particular Shop or
Cost Centre. The Overhead expenses incurred for a Shop may be
incurred either by that Shop or by other Shops on its behalf as service
rendered with a view to collecting together both these types of
expenditure, last two digits of `01' & `02' Series of Work Order numbers
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are used to indicate the Manufacturing Centre/Shop for which
expenditure is incurred.
The shop or centre in a factory may be ‘productive’, ‘service’
(non-productive) or both. The total variable overhead expenditure for the
factory plus such proportion of the fixed expenditure as is chargeable to
the output, has to be charged to the outturn of the factory. To this end,
and with a view to obtain correct allocation of costs, the overhead
expenditure pertaining to any productive shop/cost centre in any cost
period is to be charged to the production of that shop during the period.
It is at the same time necessary that the overhead expenditure for the
same period pertaining to the service sections should also be charged to
the cost of outturn of the factory. For this purpose, the overhead
expenses of the ‘Service Sections’ are allocated to the “Production
Sections” in proportion to the service rendered by the former to the latter
(or any other suitable basis) and added to the overhead expenses of the
latter in accordance with the instructions issued by the Principal
Controller of Accounts (Factories) from time to time. (540)
Estimation and Fixation of Overhead Percentages: The Variable and
Fixed charges are levied as rate per SMH on direct labour hour. These
overhead rate per SMH vary from shop to shop. The overhead rate per
SMH to be levied are to be pre-determined for each financial year based
on the assessment of direct labour hours, variable charges, fixed charges
for the different shops/cost centres of the factory.
Before the commencement of the financial year, the anticipated
expenditure for the ensuing financial year against the various indirect
work orders under ‘01’ and ‘02’ series should be worked out, based on
the past actuals, taking into consideration the anticipated changes on
account of production programme for the ensuing year. Similarly a
realistic estimate of the production of principal items expected from
various production shop/cost centres should be drawn up on the basis of
orders existing as well as other known factors. The anticipated output
from the different sections should preferably be drawn on the monthly
basis. Having worked the anticipated output for different sections, steps
should be taken to find out the direct labour hours requirement for each
quarter of different sections/ cost centres from standard estimates,
manufacturing warrants S.W.O.Ds etc. The direct labour hours so
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arrived at will be used as reference point for working out variable/fixed
overhead rate per SMH. The anticipated variable/fixed overhead for the
purpose of charging to
the Cost of Individual jobs in an equitable manner, a rate is worked out,
separately for each production section/Cost Centre using the formula
given below:
Total Variable/Fixed Charges (including share of service
section) of the Production Section
-------------------------------------------------------------------------Total Production Man Hour or Standard Man Hour (SMH)
=
Variable/Fixed
Overhead Rate
(per SMH)
A suitable percentage should be added for Ad-hoc orders based on
past performance of shop/ cost centre and anticipated feeding of such
orders, to the section during the quarter. A suitable adjustment should be
made for factors such as unexpected hold up, delay in procurement of
materials etc. The entire forecast should be on realistic basis taking into
account the capacity of these sections, process involved and other similar
factors having a bearing on the output of the factory/section/cost centre.
To the direct labour hours so arrived at, suitable percentage should be
added for taking into account the latest actual and possible future trends.
The formula for assessment of man-hours required for Production
(i) Standard man-hours for the production of Principal Items of
manufacture during the year as per standard Estimates.
(ii) Add Standard man-hours required for non Principal Items by
applying ratio, which the direct labour content of the principal items bear
to that of non-principal item.
(iii) Add/Deduct Standard man-hours employed on increase in/decrease
in semi-manufacture.
(iv) Total man-hour for Direct Labour will be total of (i), (ii) and (iii).
(v) Add estimated man-hours required for indirect labour to be assessed
either on the basis of the ratio of number of men on indirect labour as
furnished against item 1 (b) and 1(a) of the Financial Activities
Report/or on the basis of rates of Basic Direct Labour minus the Piece
Work Profit to Basic Indirect Labour.
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(vi) Add 15 per cent of the total of (iv) and (v) to cater for estimated
absenteeism.
(vii)Total man-hours required for Direct and Indirect-Labour (iv) + (v) +
(vi).
Levy of Overhead Charges: The accounting of Variable Overhead
Expenses involves:
(i) The collection of actual variable expenditure for each shop or cost
centre monthly for each costing
period.
(ii) The charging to each job executed during the period i.e. a month, its
proportion of variable
overhead charges by levying the appropriate rate per SMH fixed by the
Central Budget Committee on
Direct Labour hours.
The actual variable overhead expenditure is compiled in IAF (Fac)-102.
The expenditure under '01' and '02' Series of Work Order are allocated to
the various jobs by changing predetermined percentages on 'Direct
Labour. These percentages vary from Shop to Shop. The difference
between the actual expenditure and those levied at predetermined
percentages is called Unabsorbed Fixed and Variable Charges. If the
actual are more than the amount levied, then there is under absorption. If
the levied amount is more than the actual, then there is over absorption.
These under/over absorption should not exceed (+) or (-) 5%. If so, the
difference should be charged to the production by relying it overall the
work orders in proportion to the value of Direct Labour.
Variable Charges - Distribution of: The Variable Charges are to be
estimated for each quarter of the year separately Shop wise and Work
Order wise and thereafter aggregated for the year as a whole. As a result,
budget figure for each quarter will be available against which actual
should be compared and analyzed after estimating the Variable Charges
of each Section, the percentage as decided by the Management and
Accounts Officer are distributed/charged from one Service Section to
another Service/Production Section.
Accounting of Variable Overhead Expenses: Accounting of Variable
Overhead Expenses involves two phases viz. (I) collection of actual
variable expenditure for each Shop or Cost Centre monthly for each
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Costing Period and (ii) charging to each job executed during the Costing
Period. After the collection of Variable Charges the amount thereof
chargeable to Production i.e. the leviable amount is to be
determined.(For this purpose, the items of expenditure, such as abnormal
losses/profits on sale of surplus stores, losses relating to surplus stock,
etc. are deducted from the actual Variable Charges).
Budgetary Control of Variable Overhead: The expenditure on items
of variable overheads of a Factory fluctuates from period to period not
necessarily in direct proportion to the volume of production but largely
so, and in sympathy with it. Methods of control have, therefore, to be
instituted with a view to enabling the Management to judge that such
expenditure is not proceeding at a rate unwarranted by the load of the
factory. For this purpose, a comparison of the ratio of indirect labour to
direct labour from month to month will be greatly helpful in as much as
the fluctuation of indirect labour will be mainly due to the fluctuation of
variable overheads (the fixed overheads remaining more or less
undisturbed). Attempts should be made to locate the particular items of
variable charges fluctuating abnormally i.e. not at par with the
fluctuation of the load. This can be done by scrutiny of the variable
overhead statements of the periods involved. Again comparison of the
different elements of cost i.e. labour, material, variable overheads and
fixed overheads through suitable graph charts for different periods will
reveal the abnormal fluctuation in any particular class of cost not
compatible with the other elements. Attempts to go deep into the
primary documents should therefore be made in order to determine the
reasons for abnormal fluctuations and to suggest to the Management the
remedial measures thereof. In this connection instructions issued by PC
of A (Fys) from time to time should be carefully followed (575A)
War Insurance Charges: The maximum installed capacity of a Factory
to meet the requirement of the Services in times of War is assessed on
the basis of working 2 Shifts of 10 hours each per day for 25 days per
month in the case of Batch Operation Plants and 3 Shifts of 8 hours per
day for 22 days per month in case of Continuous Chemical Process
Plants. This is the peak load of a factory. The normal capacity of a
factory is based on the Datum load. Datum load is 45% /40% each of the
items of production at peak load for general Engineering
factories/process factories. Thus under the normal circumstances the
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fixed overheads incurred will be for the war requirement whereas the
capacity utilized will not (531)
. Before the commencement of the accounting year therefore, the surplus
of all the elements of fixed overheads which are being maintained at war
requirement and which are over and above what will be required for the
year’s production programme should be identified with reference to the
installed capacity and the cost of these assessed separately. When the
actual load is poor, say 60 per cent of full single shift load, although the
fixed charges were expected to remain the same, only 60 per cent of the
fixed charges would be recovered. The cost of balance 40% should be
treated as war Insurance charges and deducted from the estimated
fixed overhead charge’s of the factory for the year
In the present scenario, the war insurance charges are not applied while
calculating the fixed charges and the total capacity of a factory is utilized
in production of the items manufactured.
In the new system rate of levy of fixed and variable overheads (FOH
&VOH) are worked out “per SMH” (Standard Man Hour) of deployment
into direct production jobs (i.e. booked to Direct Series of Work Order).
Hours of deployment of Day Workers into production job will also form
part of SMH. In case of deployment of Contract Labour in production
jobs (expenditure debitable to 805/11), hours of deployment of Contract
Labour in production jobs also needs to be considered as SMH for
determination of VOH & FOH rate per SMH for each production
section. (532,533)
Accounting and levy of Fixed Overhead Expenses:
The Direct Labour Hour (Production Man Hour or Standard Man Hour) for the
ensuing year will be estimated on the basis of production programme. The fixed
charges comprise of certain item of expenditure which is directly accounted for
under ‘01’ series through primary document such as indirect material booked
through Demand Note/Return Note, indirect labour booked through Day Work
Cards/Allocation sheets. However certain elements of fixed charges are not booked
through primary documents such as Pay and Allowances, Depreciation, losses,
profits etc.. In order that these latter charges may also be compiled under the relevant
work orders, certain adjustments through allocation sheet are required to be made
every month. The intention is that the total figures booked under 01 series, (whether
the expenditure incurred is booked initially in the primary cost Accounting Record or
in the primary financial accounting records) should represent the total of the fixed
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Services for OFB will be charged to this work order directly through these records
and no other document will be prepared.
Pay and Allowances of Clerical and other Staff, NGOs, Officers etc
(i) Pay and Allowances of Clerical and other Staff, NGOs, Officers etc(ii) Central Administration (Fys) and Central Administration (Accounts)
These amounts communicated annually by the Principal Controller of Accounts
(Factories) should be debited through the allocation sheet at the rate of 1/12th month,
subject to readjustment of revision of estimate. The Annual Accounts Section of the
Office of the PC of A (Fys) works out the figures on the following basis:
Expenditure on the OFB Directorate including Addl. DGOF (OEF) HQrs [Addl.
DGOF (HVF) HQrs] is classified as (a) Effective Charges representing pay and
allowances and other miscellaneous charges and (b) Non-effective Charges Superannuation charges and Government contribution to Provident Fund. The total
of (a) and (b) is then distributed over factories on the basis of direct labour incurred
by each factory and intimated to the Accounts Offices for adjustment through
allocation sheets.
Expenditure on the PC of A (Fys), Main Office (excluding that of Railway Section)
less 12.5% to cover expenditure incurred on audit and accounts work of allied
inspectorates, R&D Establishment is apportioned first between (i) accounts and (ii)
internal check (44 % and 56 % respectively). The cost of EDP Section attached to
the main office is then added with the Accounts cost. The total of both (i) accounts
and (ii) internal check is then distributed over factories on the basis of Pay and
Allowances of the Branch Accounts Offices and intimated to Accounts offices for
adjustment through allocation sheets.
Incidental and Miscellaneous Expenses: All expenditure on Incidental and
Miscellaneous charges will be booked to the fixed charges .
Superannuation charges should be calculated based on the rates/percentage for
various categories intimated from time to time. The amount of superannuation
charges debitable to the overheads of the factories during a year on account or
pensionable establishments employed in the factories and in the Accounts Offices
should be worked out separately and allocated monthly. Superannuation charges are
to be calculated for temporary personnel who are eligible for pension (i.e. IEs,
N.I.Es, N.G.Os & G.Os) monthly, with reference to the posts actually held from time
to time.
Government matching contribution towards of New Pension Scheme to be booked
in fixed charges.
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The expenditure on maintenance of industrial and office buildings provided
exclusively for the Technical Development Establishment which are situated in the
factory are booked in the books of the M.E.S. The maintenance expenditure of
buildings which are partly used by factory and partly by the Technical Development
Establishment are booked in the books of the factories. Maintenance work of all
buildings, whether partly or fully used by the Technical Development Establishment,
will be carried out from the factory budget. Full maintenance charges for building
used exclusively and pro-rata charges for building used partly by the Technical
Development Establishment will be debited against the M.E.S. by the Accounts
Officer.
Training Expenses incurred other than by OFIL (Ordnance Factories Institute of
Learning) but by the Factory itself to be collected by the Branch AO concerned and
to be reflected against appropriate work order in Indirect Expenditure Statement.
Such expenditure where necessary to be distributed amongst the beneficiary factories
as per percentages intimated by the PCA(Fys), Kolkata.
Miscellaneous Indirect Service for other Factories and formations. In the case of
two or more factories having common Estate the Accounts Office of the factory
incurring the expenditure apportions the charges on suitable basis to other factories
and formation. While the total expenditure is booked to the appropriate indirect work
order, credit is taken against this order. The total cost of medical establishment will
be compiled viz. Estate dispensary and Hospital (including Hygiene Cell) etc. in the
factory to which Medical Establishment is attached. Proportionate cost will be
compiled and the amount will be intimated to the Accounts Office of the other
factory on whose behalf the expenditure is incurred. All adjustments should be
carried out through allocation sheets.
OFB has created/setup twelve autonomous ODCs by restructuring the existing
Research and Development (R&D) setup. For the purpose of accumulation of
expenditure and accounting as per code heads allotted by PCA (Fys) Accounts
Section, each ODC and each R&D Project will be treated/reckoned as separate cost
centre.
OFB issues extracts authorizing factories to undertake R&D project for
development based on the proposals of ODC. On receipt of Extract for ODC the
concerned Factory prepares separate estimate for each R&D project undertaken by
ODC. The expenditure incurred against each R&D project undertaken by ODC will
be booked to work order 01/00057/00 by the Local Accounts Office of the factory to
which ODC is attached. Total expenditure booked to Work Order 01/00057/00
during a month will be relieved by contra crediting to Work Order 01/20141/00.
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Basis of Allocation of charges which cannot be definitely allocated to any
particular section
There are certain items of fixed charges which cannot be definitely allocated to any
particular section, but which are common to the factory. The total expenditure for
each such item of the factory should be allocated to the sections on some predetermined basis which should be approved by the G.M. of the factory. Some items
of this type are mentioned below and against each is shown, the basis which may be
adopted to allocate it to the various sections/cost centres. The list is not exhaustive
and it is also probable that local conditions may warrant the use of an alternative
basis which would give a more equitable allocation of the charges even for the items
included therein. In such cases, the local Accounts Officer should arrive at a suitable
basis in consultation with the management.
Basis
Number of workmen in
each section
Description
Conservancy, road lighting and maintenance Estate
Revenue & expenditure Miscellaneous in direct services
for other factories/ formations
Number of employees in
Unclaimed Wages lapsed Accident prevention Rates, rents
each section
& Taxes, recovered from occupants of factory quarters.
On the basis of Direct
Departmental experiments Manufacture, up keep of
Labour in section.
samples etc. Factory School.
In proportion to the Capital value of Maintenance of Buildings, Roads etc
Buildings
On the basis of the salaries of staff in Superannuation Charges
each section
‘Direct’ Labour
Pay of clerks etc.
Gazetted Officers and NGOs
Peons, orderlies and messengers
After the posting of the fixed charges section/cost Centre wise, a step-ladder will be
prepared for allocating the charges of services sections to production sections. The
percentages or factors of allocation to each productive shop will be fixed, in
consultation with the Management of the factory and should represent fairly the
relations between the value of the service rendered by service section and production
activities of the factory.
Ascertainment of the actual fixed charges
The Sectional Fixed charges (SFC) statement is generated from data of labour,
material and transfer voucher abstracts, sectional variable charges statements and
component abstracts. The sectional fixed charges statement shows the monthly
expenditure incurred under ‘01’ series work orders for the shop concerned, whether
in the shop itself or in other shops.
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The difference between the chargeable fixed charges and the actual levied amount
should be shown- as under/over absorbed fixed charges provided the same does not
exceed ±5% of the chargeable amount. If it or the difference exceeds 5%, the
difference will be charged to production by re-levying the difference over all the
work orders in proportion to the value of direct labour.
SEMI STATEMENT – PRICING
At the end of each financial year, the actual Stock will be taken by
the Factory of the unused materials and part finished works of all
running warrants. Full list is made showing the stage of manufacture
against each item, quantity of materials drawn against warrant but found
either in part finished conditions or unused. The Statement will also
show `the Extract Number, Work Order Number & Warrant Number.
The Semi Statement will be verified with reference to
Manufacture and Material Warrants, Warrant Registers, Cost Cards and
Production Ledger Cards as to establish the correctness of the quantity
shown therein and the discrepancies found in the Semi Statements would
be sorted out jointly by the Accounts representative with the Factory
Management within 15th April.
The evaluation of Work in Progress should be completed by the
end of April.
When no article have been found completed in a particular
Warrant, the whole expenditure appeared in the relevant Cost Card will
represent the amount of Work in Progress of the Warrant. The Semi
Statement will show the amount incurred against such Warrant and need
not to be valued separately.
The total value of the Semi manufacture under each Work Order
and Warrant will be posted in an Abstract and will be credited in the
relevant Cost Card under each element of Cost. A Master Summary will
also be prepared showing the value of the Work in Progress under each
element of cost Work Order wise.
Total value of the Semi Statement for all the Warrants against
each Work Order will represent the value of Work in Progress of that
particular series of Work Order. Thus the total value of Semi as on 31st
March will be credited to the Work in Progress Account by debiting The
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Balance Account and thereby exhibiting the balance as "Assets" in the
“Statement of Assets & Liabilities” of the Factory.
In the following year, this asset will represent Work in Progress as
on 1st. April of the year.
CHECK EXERCISED BY THE ACCOUNTS OFFICE
1. Costing Section: Scrutiny with reference to Warrant Register to
ensure that all incomplete Warrants have been included
2. Material Section: Verify with reference to the posting in the
relevant Material Warrants that the quantities of Material shown
are correct and the Materials were priced at the same rate in which
corresponding Demand/Return Notes on bulk drawal were priced.
3. Labour Section: Verify with reference to the posting in the
relevant Manufacturing Warrants that the operation shown as
performed are correct and pricing of these operations are at correct
rates.
4. Costing Section: Final scrutiny with reference to the Cost Cards
and Production Ledger Cards and will levy DA and Overheads
percentages for preparation of Abstract of Semi in respect of each
Work Order and Warrant for working out the Cost of Production.
COST CARD - OPENING AND CLOSING
Cost Card by Warrants will be maintained manually in the local
Accounts Office in prescribed Proforma. For this purpose Cost Card will
be opened immediately a Warrant is issued. Particulars regarding Extract
No., Quantity ordered, Work Order/Warrant No., Nomenclature of the
item to be manufactured and element wise Estimated Cost will be filled
in. Opening of the Cost Card will be authorised by the Section Officer.
In the case of Warrants which are carried forward from the previous
year, opening value of the semi under the different element of cost as
well as the estimated cost of items will be filled in.
POSTING IN THE COST CARD
Posting in the Cost Card will be done by the Auditor concerned of
Costing Section from the following monthly Abstracts received from
EDP Centre:
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




Material Abstract
Labour Abstract
Overheads Abstract
Transfer Voucher Abstract
Component Abstract
Closing of Cost Card
When Warrants will be declared
Costing Section from the following monthly Abstracts received from EDP Centre:





Material Abstract
Labour Abstract
Overheads Abstract
Transfer Voucher Abstract
Component Abstract
Closing of Cost Card
When Warrants will be declared completed, a list showing the
names of Warrants along with completed Shop copies will be received in
Accounts Office. Costing Section will called for the Accounts copies
both Manufacturing as well as Material Warrants duly filled in from
Labour and Material Sections respectively and paired with the completed
Shop copies and tagged up with the relevant Cost Card for taking
necessary action to close them.
To ascertain the actual Cost of Product as well as unit element of
Cost and Unit cost of product it is very much essential to close a Cost
Card. Moreover, any variation in element of cost should be critically
analysed while closing a Cost Card so that the same could be taken into
the notice of Factory Management to take remedial action for future
production of the article.
In the case of Warrants running from the previous year it should
be ensured that the Cost Card has been debited with opening semi, if
any. Replacement warrant and Warrants for Tools & Gauges
manufacture on the parent Work Order with sub numbers will similarly
be annexed with respective Cost Card and all enclosed to the Cost Card
for the parent Work Order. It should be ensured that the details of all
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expenditure recorded against a Warrant should be available when a
Warrant is finally closed, no matter how long a Warrant has been
running. The original Cost Card of the past year/years in regard to a
warrant closed in the current year should be available.
The class of cost wise expenditure debited to the Work Order
during a year by section and month separately and the class of cost wise
value of the opening semi, if any, will be cross totaled and reconciled.
The total figures under each element of cost appearing in the Cost Cards
for replacement and tool and gauge warrant will be brought forward and
debited separately to the cost card for the parent work order. All the
debits viz. The opening semi expenditure during the year, cost of
replacement, tool and gauges charges by class of cost will be crosstotaled and reconciled.
It is also to be determined whether any avoidable rejection has
occurred in the warrant. The amount of avoidable rejection will be
calculated and deducted from the expenditure recorded in the Cost Card.
This amount will be excluded from Production Account of the Factory.
Comparison of Actual Cost and Estimated Cost
The element wise actual cost of a product may vary from its estimated
cost. If the variation is more than (+/-) 10%, the reasons for variation
should be done critically.
Generally variation may occur due to following reasons:
Variation in Labour Cost
Due to
 Change in DA%
 Rejections
 Replacement
 Performance of more or less operations
 Wrong preparation of Piece Work Cards
 Wrong pricing of Piece Work Cards
 Deployment of other Trade/Grade of Labour as well as Day
Worker instead of Piece worker
 Changes in method of manufacture
 Wrong posting in Cost Card
 Wrong assessment of Semi
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 Use of NRRs
Variation in Material Cost
Due to
 Rejection and Replacement
 Change in Average Ledger Rates
 Wrong preparation of Demand/Return Notes
 Wrong pricing of Demand/Return Notes
 Wrong pricing/posting of Transfer Vouchers
 Wrong assessment of Semi
 Costly materials drawn
 In lieu material drawn
 Material drawn through NRMs
Variation in Overheads Cost
Due to




Variation in labour cost as explained above
Variation of percentages of overheads
Wrong posting in Cost Card
Wrong assessment of Semi
Analysis of Expenditure and Elements of Cost
The expenditure incurred in manufacture is classified under three
main categories viz.
(a) Wages paid to Industrial Workers
(b) Materials
And
(c) Other Expenses
In relation to Product Costs, the expenditure falling under the
above three categories are further classified as DIRECT and INDIRECT
expenditure.
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For the purpose of Costing, Wages are analyzed into DIRECT
LABOUR Cost and INDIRECT LABOUR Cost
Similarly, Materials are analyzed into DIRECT MATERIAL Cost
and INDIRECT MATERIAL Cost.
Other Expenses, the bulk of which represents Salaries paid to
Supervisory Staff and Administrative Personnel fall under the category
of INDIRECT Expenditure
Indirect Labour, Indirect Material and other Indirect Expenses
together constitute the Overhead Expenditure of the Factory.
While the Direct Labour Expenditure and Direct Material
Expenditure incurred in the manufacture of each product can be
measured accurately and charged direct to each, job, the Overhead
Expenditure representing the cost of various production and
administrative services incidental to Production can not be charged
directly to each job such expenditure being common to all production
activity is apportioned to the cost of each job as equitable as possible
following certain well recognized cost accounting principles
By means of the above type of analysis, the cost of each article
manufactured in the Factory is compiled under three elements of Cost
viz. (i) Direct Labour, (ii) Direct Material and (iii) Overheads.
Abnormal Resection in Manufacture
For the purpose of ensuring effective cost control and cost comparison, the cost of
any abnormal rejection in manufacture is treated as an item not chargeable to the
normal cost of production of an article and is, therefore, shown as a separate item in
the Production Account
The regularization of abnormal rejection beyond maximum ceiling by loss
statement should be related to a period which covers a reasonable volume of
production. The period should normally be 3 months for short cycle products and 6
months for long cycled ones.
The cost of rejection upto the maximum percentage as authorized in the
standard estimate will be included in the cost of production and that beyond the
maximum percentage provided in the estimate shall be excluded from production
account and regularized as loss, cases of avoidable rejections have been broadly
categorized into three types as follows :-
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(a) Where an item involved manufacture of various components and assembly and
the estimates provide different percentage of allowance for rejection for different
components and one manufacture warrant is issued to cover complete production of
batch, avoidable losses should be determined component wise, and the total amount
for the warrant regularized on one loss statement.
(b) Production consists of Casting or Forging and Machining thereof and the
estimates provide for rejection allowance at casting/forging stage and the machining
stage. In cases where independent warrants for casting/forging and machining are
being issued, the losses will be dealt with independently without linking the
warrants viz. casting/forging losses will be separate and the machining losses will be
separate and will be regularized if they exceed the allowable percentage in such
cases. In case only one warrant is issued, the case for loss will arise only if the
overall rejection exceeds the allowance percentage for the quantity processed in a
batch e.g. if the overall allowable rejection percentage is 16 at casting stage and 12 at
machining stage, there will be a case for regularization only if the rejection exceed
28% of the quantity processed in a batch.
(c) Production of a component is planned stage wise, there being a separate warrant
for each stage. In such cases not only the various warrants for a particular stage but
all stages for a particular component shall be combined for practical convenience.
Where production is in big quantities, 6 months may be considered as period for
grouping and reckoning the loss, but if the production is small, loss shall be
determined for the year as a whole. The Ordnance Factory Board will decide the
period of grouping.
(d) There will generally be a large number of warrants, at the end of each financial
year, where only a part of the quantity ordered on the warrant is completed. For the
purpose of production accounts, the cost of completed quantity of each such warrant
will be worked out by including the cost of actual rejections upto the quantity at the
maximum prescribed percentage of unavoidable rejections, if any, merged with the
work in progress (un-finished semi) and carried over to the next year. On such part
completed warrants, regularization action, if any, will be progressed separately.
(f) For purpose of regularization of losses on adhoc orders for which no estimate
exist, the normal rule as provided for in F.R. Part I will be followed. If the loss is
categorized as unavoidable, the certificate of unavoidability of rejection loss in
manufacture under Rule 169 FR Part I will however be issued by O.F.B.
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(g) All avoidable rejection losses requiring regularization will be categorized as store
losses. The consolidated figure of such losses formally written off should be
reflected in the Appropriation Account for the year.
(h) Each case of loss due to rejection beyond unavoidable rejection percentage will
be examined on its merit and categorized as due to theft, fraud or neglect or not due
to theft, fraud or neglect in accordance with the procedure laid down in Rule 162 FR
Part I.
(i) The delegation of financial powers for regularization of abnormal losses as
prescribed vide part
(ii) above should be viewed as supplementary to the financial powers of various
authorities, as prescribed in Rule 162 FR Pt. I and wherever the value of the
avoidable loss to be written off by such competent authority irrespective of the
actual percentage of rejections.
679A. Calculation of rejection percentage in production process and assessment of
percentage and value of rejection (Production Loss Statement) is detailed below:
i)The process means the quantity processed for manufacture of product irrespective
of ordered quantity. The total process quantity is ordered quantity plus normal
rejection plus abnormal rejection (if any).
(ii) As per OFB Circular No. 278/SRB/OSW /P(c)/99 dated 03-03-1999, it was
clearly mentioned that shop is authorized to draw only upto quantity of finished item
for which warrant is issued. If any rejection occurs during the production process, the
required quantity of material to replenish such rejected quantity can be drawn on the
basis of a certificate obtained from quality control section.
iii)To avoid confusion only processed quantity is considered in the present guideline.
A. Rejection losses not due to theft, fraud or neglect
1. General Manager:
Upto an additional 50 % of unavoidable rejection percentage catered in
the standard estimates subject
to:
a. Rs.10 lakhs where there is no negligence.
b. Rs.2 lakhs where there is negligence.
2. DDG/ Operative Division:
Upto an additional 75 % of unavoidable rejection percentage catered in
the standard estimates subject
to:
a. Rs. 25 lakhs where there is no negligence.
bRs. 10 lakhs where there is negligence.
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3. Ordnance Factory Board:
Upto an additional 100 % of unavoidable rejection percentage catered in the standard
estimates
subject to:
a. Rs.50 lakhs where there is no negligence.
b. Rs.20 lakhs where there is negligence.
All the above with the concurrence of LAO.
All other cases will require the sanction of the Govt. of India.
CLASSIFICATION OF CAPITAL
Capital Assets in a factory are classified under three main heads:
i) Building
ii) Machinery
iii) Other items
The items falling under Building are;
(a) Industrial Building i.e. Building within the four walls of the FY
whether used for Production or Non-production purposes any factory
sections (except offices) outside factory walls.
(b) Non-industrial Building i.e. office outside the Fy. Perimeter wall,
Hospitals/ M. I. Room, Staff Club etc., and
(c) Residential Buildings
Machinery
Machinery (including air-cooling plants), Steam lunch barges,
Locomotives, Railway Wagon, Station Wagon, Motor lorries, Weighing
machine, Sewing machines, Furnaces
Other items
Other items are water or gas lines, openly visible lines filter units (filter
plant for water supplies) incinerators, railway lines and railway sidings
(if installed and or maintained by Fys), Tube wells, Remington
Accounting Machines etc., Lands, and Roads. Drains, Telephones
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Chimneys, Electrical installation, Leveling site, Jetties, Steel furniture &
fitting, Computer etc
BLOCK REGISTER
The Accounts of Capital Assets in the Fys are maintained in two Block
Registers on IAF (FAC) 77 by Accounts offices, One for Building items
and other for Machinery items.
Block Register shows:
1)
2)
3)
4)
5)
6)
The original purchase value.
1st. Year Depreciation
Opening balance of the Book Value of the Capital Assets.
Addition during the year.
Reduction during the year, including Annual Depreciation
The closing depreciated book value at the end of the year.
Accounting of Machinery/items
The value of machinery items purchase from funds provided under
Capital will be directly booked against the appropriate minor head for
capital and to facilitate this relevant vouchers (which will be assigned
numbers in the ‘M’’ series) etc. will be endorsed accordingly by the
executive. In cases where this is not possible, they will be compiled to
the head for stores, taken to stock and subsequently transferred to
‘capital’ Head by contra minus debit to the appropriate head and draws
on demand notes on “Capital Work Orders’ under 04 series. They are
subsequently taken on the block register on the authority of Capital
Services Voucher numbered in ‘M’ series.
In respect of machinery items which are financed from the Renewals
Reserve fund, necessary debits will be adjusted by the PCA (Fys) against
Capital Head. These are not passed through stock but are taken in Block
Registers through ‘M’ series vouchers. The relevant receipt voucher
should be duly linked with the disbursement voucher through the
medium of a linking register. The register is maintained in two parts:
Part I of the register will be maintained in the following proforma: -
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Sl. Bill No.
Nomenclature Amount Rt. Value Different
No. disbursement of stores
Vr.
between
Vr. No. etc.
No.
Col.
&
4&6
Date
1
2
3
4
5
6
7
No. &
date of
adjustment
Vr
8
In part II of the register, linking of the Receipt Vouchers with the
corresponding debits/payment is made. Register will maintain in the
following proforma and submitted to the A.O. in the 10th of each month
Sl. Rt. Nomenclature Amount Bill No.
Value Different
No Vr. of stores
disbursement
between
No.
Vr. No. etc.
Col.
&
4&6
Date
No. &
date of
adjustment
Vr
While pricing the ‘M’ series Voucher customs duty at tariff rate will be
included if debits have not been received. Suitable linking registers
should be maintained for ensuring that the debits are properly linked and
that details are called for in respect of outstanding items. Article borne in
the inventory lists of shops, when required to be shows in the block
registers will be transferred, direct on regular voucher bearing issue
vouchers in the inventory series and receipt number in Capital, series
Pricing of ‘M’ Series Vouchers
Machines, etc. purchased locally are valued at purchase cost plus freight
and/or other charges incurred. Machines etc. obtained from England will
be priced by the local Accounts Office with reference to the Invoices
and Bills of Entries for customs duty or extracts there from furnished to
should be ensured that the monthly total as per schedule of Capital
Series Vouchers agrees with the month’s total in the linking register
them monthly by the Stores Section of the Main Office. For this purpose,
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the sterling value in the invoices will be converted at the average rate of
exchange. In regard to purchases from foreign sources, pricing should be
done with reference to the various contracts, letters of credit issued, debit
intimation received etc. The average rate of exchange of the currencies
should be adopted for converting into rupee value.
Adjustment of the cost of Departmental Works
The labour charges incurred in connection with Capital Works carried
out departmentally will in the first instance be charged to the detailed
head ‘Pay and Allowances of Staff’ in the financial accounts and
subsequently debited to the relevant detailed head under ‘Capital’ by
minus debit to ‘Pay and Allowance of Staff’. Similarly overhead charges
and value of materials drawn for such Capital works will be debited to
“Capital by operating the deduct ‘Revenue Head’. The adjustment
should be carried out monthly from the figures booked in the labour
material and overhead abstracts for the previous month, after proper
scrutiny. For this purpose, a Punching Medium for transferring these
amounts from Revenue Head of Capital Head will be made out.
Block Register
The accounts of Capital Assets in the factories are maintained in two
Block Registers on IAF (Fac) 77 by Accounts Office. One for Building
items and the other for Machinery items. While the Block Register for
Machineries will show only the Book Value of the Machinery, a
complete record of accounts of the Building items of the factory will be
maintained showing the depreciated value of the Buildings at the yearend. Block Register for Machineries will continue to show only the
Book Value as it should remain in perpetuity whereas Block Register for
Building and other items etc. will show: (i) The original purchase value
(ii) First year’s depreciation charges
(iii) Opening balance of the book value of Capital Assets other than
Plant & Machineries
(depreciated book value in the case of depreciable items)
(iv) Additions during the year.
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(v) Reduction during the year (including the annual depreciation) and
(vi) The closing depreciated book value at the end of the year.
‘
In the new computerized system and milieu the Block register is
prepared and maintained through package. The program will be run in
the month of April every year i.e. after closure of the financial year.
After closing the Annual Capital Account a printout of Block register
generated through package will be taken and kept for record as a Block
Register.
Important areas of Concern
Issues to Army, Navy and AF and other departments are made by
debiting the issue codes of Army, Navy and AF etc by Contra -Credit to
Fy. Code head. Separate codes have been provided for identifying the
nature of stores issued both on the Fy and Army side. It is observed that
Br. AOs are not correctly debiting/crediting the appropriate issue code
though such mistakes are on the decline. Most care must be exercised
while preparing PMs for issue transactions to avoid any mistakes since
the amount compiled in such PMs are in crores and any error is viewed
seriously. The detailed codes are given in the CS No. 41/98 issued to
classification handbook, Defence Services.
COST COMPILATION
The cost of each article manufactured in the factory is compiled
under three elements of cost
(i)
(ii)
(i)
Direct Labour
Direct Material
Overheads
Orders for production are placed on the shops in the shape of
manufacture and material warrant in the shape of batch or quantity. The
warrant along with the standard estimates forms the main instrument for
control over utilisation of labour and material on an individual job or
batch. This also forms the basis for compilation of cost.
Warrant is the authority for utilisation of labour and drawal of
materials. Expenditure incurred under the elements of cost viz. Labour,
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wise. Cost Cards by warrants will be maintained in the Local Accounts
Office. Cost Cards will be opened immediately a warrant is issued.
Particulars regarding Extract Number, Quantity ordered Work Order /
Warrant Number, nomenclature of material and estimated cost under
different elements of cost will be filled in. Postings are made on the Cost
Cards warrant-wise from Labour, Material and Transfer Voucher
Abstracts and Component Abstracts wherever applicable.
Accounting of Labour Charges
The primary cost accounting documents used for the collection of
labour expenditure by jobs and various indirect work orders are as
mentioned below:
(i)
(ii)
(ii)
(iii)
Piece Work Card
Day Work Card
Allocation Sheet
Labour Punching Media
Piece Work Cards
PW cards are prepared on completion of production and certified
as accepted by shops for claiming payment.
The PW Cards show: (1)
(2)
(3)
(4)
(5)
Ticket No of Piece worker or gang piece work No.
The W.O. and Wt. No.
Description of work performed
Quantity accepted
Operation hours admissible
The PW cards are initially priced on average hourly rate of the Fy
and the difference between Actual Wages paid and card value is levied
through DOP and increment percentage.
Day work Cards
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For Day Workers who are paid by attendance the Shops prepare.
DW Cards showing T. No. of workers, W.O., Warrant and time spent on
job.
Normally one card is prepared for each week. For workers who
are continuously engaged on the same job throughout the month, the
shops prepare a monthly allocation sheet instead of DW cards.
Labour Punching Media
For booking payment pertaining to leave pay holiday pay,
Overtime Bonus, Dearness and other allowances in Cost Accounts the
AO prepares Labour PM showing Section Code No., WO No and total
amount. All these PM relate to indirect work orders only. A file
containing piece work card and Day work and Labour PM is generated
by the wage roll package which is used as an input by the Costing
Package to generate Labour Abstract, SVC, and SFC.
Accounting of Material
Primary Documents: - Demand Notes, Return Notes, Receipt
Vouchers, Issue Vouchers and Transfer Vouchers. The stores authorized
for drawal as per material abstract are drawn on Demand Note and any
excess stores returned through Return Notes. The Demand and Return
Notes of a month after validation and pricing are posted in PSL and a
file containing DN/RN generated by Inventory package. This file is used
as an input for generating material abstract using the costing package.
The material abstract is a tabulation in which the expenditure
incurred against each WO and Wt. is shown Demand/Return Note-wise
and also the net total against each WO/Wt. The net expenditure for each
warrant is posted in Cost Card pertaining to concerned warrant.
Overhead Expenses
Overhead expenditure may be defined as expenditure, which are
not directly related to production but are expended for providing various
facilities and services incidental to production.
These are indirect expenditure and comprised of expenditure on
account of indirect material, indirect labour and other charges. Since
such cost cannot be directly allocated to production these are
apportioned on a fixed percentage. As such, at the beginning of the
financial year sub-budget committee fixes VOH and FOH leviable for
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each section. This percentage is levied on direct labour while generating
Labour Abstract.
Closing of Cost Cards
The list of warrants completed during a month is received by the
costing section and necessary action is taken to close the Cost Cards.
The unit cost of production will be worked out under each element of
cost.
At the close of the financial year the total cost so arrived under
different series of work order constitute the total cost of production for
the factory. This cost is compared with the estimates separately provided
for each W.O. (element-wise) and the variation beyond 10% under each
element is suitable explained. Apart from this cost arrived at as per cost
compilation is compared with Financial Compilation and reconciled as
per procedure laid down in Chapter-X of O.M. Pt - VI Vol. II.
PRODUCTION ACCOUNT
Production Account –
(i)
(ii)
(iii)
(iv)
is a ledger account compiled by Branch Accounts Officer(s)
and consolidated by PCA (Fys), Kolkata.
Figures under Debit and Credit items are compiled by
taking into account the various transactions of revenue
expenditure and revenue receipts affecting cost of
production of articles produced during a financial year.
Is debited with the value of opening unfinished semi (WIP),
direct labour, Direct Stores and Overhead Charges.
Is credited with certain relief to Overhead charges viz. Rent,
Rates, Electricity and Water Charges recoverable,
Unclaimed Wages lapsed, Sale proceeds of machinery,
closing value of unfinished semi (WIP), Cost of avoidable
rejection (KOP) and Cost of Production.
Note:
(i)
(ii)
Certain transactions which are not revenue in nature viz.
Book Value of Discarded Assets, Sale proceeds of
machineries etc. are also accounted under Production A/c
but impact of which are finally kept out of production.
Certain profit and losses not generated out of the production
process viz. Profit/Loss on Sale of Surplus, Obsolete Stores;
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Stockpile items etc. are also initially accounted under
Overhead element of Production A/c but kept finally out of
Production Cost.
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Documents/ Information required for Compilation of Production
Account –
Sl
No
1
Name of document
Un finished Shop Semi
Statements
showing Work
Order, Warrant-wise details of shown
for the quantities lying as unfinished
condition as on 31St March.
2
Inspection Notes/ Production Vouchers
(P. Vr)
3
Production Estimates
4
Shop copy and Accounts copy of
Warrants (both Material and
Manufacture).
5
Cost Abstracts viz. Labour with
Overhead Abstract Material Abstract
T.V. Abstract
(including
Foundry/ Process T.V. or allocations
Master Cost Card Tabulation (M.C.C.)
6
Manufacturing A/c- Statement "B"
7
Priced Store Account (PSA) -
8
Cash Compilation (CC02)
Remarks
Semi Statements are prepared by Fy and priced by
LAO after reconciling with the relevant cost and PL Card. Semi
value are to be worked out series-wise and Labour payment and
material element-wise.
Prepared and submitted by Fy. Accounted through Production Ledger
(P.L.) Card by LAO. COP is worked out on the quantities passed in
inspection. Value of Avoidable Rejection is calculated taking into
account rejection quantities appeared in P.L. Card (duly reconciled
with concerned warrant) and deducting the permissible quantity as
per NR% provided in the ESTT/ warrant.
Prepared by Fy and priced by LAO taking into account the updated
rates.
Wts. Are floated by Fy transactions is posted both by Fy & LAO.
After completion, Shop copies of completed Wts are received from
Fy. By LAO. Posting into the Cost Card and P.L. Card are required to
be verified with the postings made in Wts.
Cost Abstracts are generated in EDP by LAO based on the primary
documents received from Fy. (Viz. PW/DW Card, Material
Demand/Return Notes Transfer Vrs. etc.) and some documents
generated by LAO viz. (Labour Cost Punching Mediums, Overhead
Allocations, Foundry/Process T.V./Allocation) etc.
Compiled
by
LAO
monthly showing Rent, Rates,
Electricity and Water Charges etc. recoverable, recovered etc.
Compiled by LAO monthly summarizing the receipt and issue
transaction of material category (PSA Code) wise took place during
the month.
One summary is also prepared showing value of Opening Stock of
material, value of total receipts and issues of material and value of
closing stock of material as on the closing day of the month.
Compiled by PCA (Fys), Kolkata showing Fin. Code wise
Expenditure/Receipt. A statement showing major (important) items
appearing under Dr/Cr. entries visa-a-vies source of receipt of input
data item-wise are shown in Annexure - A enclosed.
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PRODUCTION ACCOUNT
ANNEXURE– ‘A’
Debit Item
Sl.
N.
1
Particulars
Work-in- Progress
1.4.
2
Direct Labour
3
Direct Stores
4
Overhead Charges
(A) Supervision Charges
As on
Source of Figure
Remarks
Should be equal to the value of
work-in-progress on 31st March
shown against Cr.item
3
of Previous year's
Production Account (Closing
balance of previous year to be
brought forward as opening
WIP)
Total
value
of
labour
expenditure
(other
than
expenditure of 01 & 02 series)
appeared in Labour and
T.V.
Abstracts pertaining to the year
of account.
Figure should also agree with the opening
value of WIP shown in work-in-progress
A/c of Principal Ledger.
Total
Figure should agree with the Total direct
material expenditure shown in Debit side
of work-in-progress A/c of Principal
Ledger.
value of
Material costs booked
under Direct series (i.e. other
than 01 and 02 series) as
tabulated
in
the
summary
of
Material and T.V. Abstract for
the year.
Total expenditure incurred on
account of Pay & Allowances
etc. in respect of employees
and
officers
(other than
IEs)
and booked under class of cost
14
against `01' series work order.
Figure should agree with the total Direct
Labour expenditure shown in the Debit
side of work-in progress A/c of Principal
Ledger.
Figure should agree with the supervision
charges shown in the debit side of
Overhead expenses A/c of Principal
Ledger.
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(B)
Transportation
Charges
(C)
Miscellaneous
Charges
(a)Contingent
Charges
Total expenditure
appeared in CCO-2 under
Financial code808/02
(amount should also be
booked under
CostW.O.01/00030/00).
This figure should
normally agree with that
shown against W.O.
01/00037/00 Incidental
&
Misc.
Exp. (less amount charged
direct).
(b)
Cost of
DGOF
(i)
Effective
Charges
(ii) Non-effective
Charges
Figure intimated by the
PCA (Fys) and appeared
under cost W.O.
01/00027/00
(c)
DAD
Charges
(i) Accounts
(ii)
Internal
Check
Figures should agree with
the Share intimated by
PCA (Fys), Kolkata on
account of Central
Administration (Accounts)
plus Expenditure of
Local Accounts
Office (percentage of
distribution
Set accounts of Internal
check is 80% & 20%)
As worked out by LAO in
superannuation charges
Register adopting the rates
intimated by PCA (Fys)
Kolkata.
(d)
Superannuation
Charges
Figure should agree with the
transportation charges shown is
Debit side of Overhead Expenses
A/c of Principal Ledger
Figure should agree with the
relevant item appeared under Dr.
side of O.H. Exp. A/c in P.L.
-Do
Figure should agree with the
amount shown against W.O.
01/00028/00 (Central
Administration (Fys))
and01/00029/00 (Fy. Account
Office.
Figure should agree with the
amount booked under cost W.O.
01/00013/00
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(f)
Indirect
Summarized net figure of
This figure should agree with the
Labour
Labour expenditure
total labour Expenditure appeared
appeared against '01' and
in IE Statt.
'02' series in Labour
Abstract and T.V. Abstract
(i.e. Dr. - Cr. W.O.)
(g)
Indirect
Summarized net value of
This figure should also agree with
Stores
Material expenditure
the total amount appeared under
appeared against '01'& '02' Material Column of IE Statt.
series work order in
Material Abstract & T. V.
(i.e. Dr. - Cr.
W.O.)
Note: -Total of Indirect
and Direct Stores
should agree with Cr.
item 1(a) & 1(b) of
Store A/c.
(D) Depreciation
Charges
(a) Depreciation
(b) Book Value
of Discarded
Assets
As worked out and
calculated by LAO in the
Capital Block Register
(Sum of depreciation
amount of all capital assets
other than
land).
Depreciation to be
worked out
adopting Straight Line
Method.
Figure should agree with the
amount booked under cost W.O.
01/00018/00 for other
items01/00019/00 for
Building01/00034/00 for
Machinery01/10034/00
Figure should agree with the
amount appeared
under cost
W.0.01/00050/00
Sum of book value lying
in Capital Block Register
in respect of items
sold/discarded as on the
date of sale transaction.
Note - Amount shown
against 4(D) (a) &
4(D)(b) should agree
with the amount
appeared under cost
W.O. No. 01/00050/00
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(F) Losses:
Amount appeared in PSA Amount should agree with losses
(a)
Surplus
Against PSA Issue code
Stores
76
- do -77
(b)
Obsolete
-do- 78 & 79
Stores
(c) Waste &
-do- 70 to 74
Scrap
-do- 68 to 69
(d) Loss of
Stores on
Charges
(e)Others losses
on Stores
(H)
OverAmount of FOH levied
Amount should agree with the
absorbed FOH
(based on pre-determined
summary of IE statement (01
percentages) in
series)
excess of leviable FOH [
i.e. incurred FOH (Dr. Cr. W.O.) less KOP less
watt insurance charges if
any]
(I)
OverAmount of VOH levied
Amount should agree with the
absorbed VOH
(based on predetermined
summary of IE statement (02
percentages) in
series).
excess of leviable VOH
[i.e. Incurred VOH (Dr. Cr W.O.) less KOP
amount.
Note: - Over/under absorption both for VOH and FOH must be within ±
5% limit. If actual exceeds 5% limit, course of Re-levy to be taken
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CREDIT ITEMS
Sl Particulars
Sources of Figure
No
1 Relief of Overhead Charges
(a) Misc. Credit –
(i)
Rent
Recoverable
&
Rates Amount compiled in Manufacturing
A/c Statt. B. Amount should also be
booked
under
Cost
W.O.
01/00125/00
(ii) Elec. & Water Charges Amount compiled in Manufacturing
recoverable
A/c Statt. B. Amount should also be
booked
under
Cost
W.O.
02/00117/00
(iii) Unclaimed Wages AS intimated by Fy. Management
Lapsed
Amount to be booked under W.O.
01/00140/00
(iv) Sale proceeds of Amount worked out by AO with the
Machinery
entries of sale Reqr. Of Machinery
items.
Amount recovered should be
compiled
under
Fin.
Code
01/922/35 (deduct code).
Amount should also be booked
under 01/00151/00
(d) Profit on sale of
Amount appeared in PSA against
(i) Surplus Stores
Rt. Code.
(ii) Obsolete Stores
PSA Rt code 21, 25, 119 PSA Rt.
(iii) Waste and Scrap
Code 22
PSA Rt. Code 23, 24
Amount of profit to be booked
under W.O. 01/00131/00
(g) Care & Custody of Amount booked under
Stock
cost W.O. 01/00046/00
Remarks
Figure should agree
with Cr. item of OH
Exp. A/c in) principal
Ledger.
-do-
-do-
-do-
-do
Fig. Should agree
with concerned Cr.
item of OR Exp. A/c
in Principal Ledger
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2
3
4
5
6
7
Deptt. Stores utilized on
Indirect work orders
Sum of process and Foundry
Materials booked under'01'
and '02' series W.Os appeared
against class of cost 22, 28
etc.
Work-in-progress as on 31St
March
Fig. Should agree
with the amount
posted against Dr.
item of Misc. charges
A/c of Principal
Ledger.
Fig. Should agree
with the closing WIP
value shown in workin-progress A/c of
principal ledger.
Sum of WIP value worked by LAO
for all the Cost Cards inclusive of
process/Foundry WIP. Fig. Should
agree with the sum total of semi
Statt. Prepared by Fy and priced by
LAO.
Under
absorbed
fixed Excess of leviable FOH over levied Amount should be
charges
amount.
agreed
with
the
summary of IE Statt.
(01 series).
Under absorbed variable Excess of leviable VOH over levied Amount should agree
charges
amount.
with the summary of
IE Statt. (02 series)
Cost of Production
Sum of cost of production worked
out by LAO for all the articles Amount should agree
completed during the year. Figures with sum of Cr. Item
should agree with total COP of all 2 to 6 of WIP A/c
the Cost Cards. Amount
(showing
indentor
Should agree with the grand total of wise
cost
of
COP shown in 10A and 10B Statt. production).
Showing cost of outturn.
Cost of
(KOP)
Rejection
Sum of cost of Avoidable Rejection
worked out for all the warrants/Cost
Cards involving excess rejection
(i.e. in excess of normal rejection
percentage)
Fig. Should agree
with the amount
shown in Cr. side of
WIP A/c or Dr. side
of P&L A/c in
principal ledger.
Note - Cost of rejection (KOP) is required to be worked out by LAO on
receipt of completed Wts. From Fy where quantity shown as rejected
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(reconciled with P.L. card) exceeds normal rejection provided in
Wt./Estt.
An idea about Principal Ledger maintained in the
Branch Accounts Office of Ordnance Factories
Principal Ledger is maintained out side all financial accounts by the
concerned Accounts Officers for the purpose of preparing the
consolidated Manufacturing Accounts viz. Production Accounts,
Finished Stock Accounts and Capital Accounts and arriving at the cost
of Production of articles manufactured in the factory.
The different heads in the principal ledger are so arranged as to provide
information required for the compilation of the consolidated
Manufacturing Account and also for effecting reconciliations of the
figures compiled in Cost Accounts.
The following heads of Accounts (Total 30) are at present maintained in
the Principal Ledger: 1.
2.
3.
4.
5
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
Custom Duty A/c.
Stores Cash Purchase A/c.
Stores Supplied by other Factories A/c.
Transportation Charges Account.
Stores A/c.
Sale of Stores (Surplus obsolete & Waste) A/c.
Issue of Stores on Payment A/c.
Wages A/c.
Supervision Charges A/c.
Misc. Charges A/c.
Misc. Credit A/c.
Overhead Exp. A/c.
Work-in-Progress A/c.
Rent, Rates, Water and Electricity charges Recoverable A/c.
Payment Services A/c.
Manufacture for Own Fy. Stock A/c.
Services to other Fys.A/c.
Services for Capital Asset A/c.
Manufacture for the Army A/c.
Profit and Loss A/c.
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21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Capital Assets A/c.
Proforma Capital Asset A/c.
Capital Assets Stock Pile A/c.
Cash Ledger A/c.
Preliminary Exp. A/c.
Deferred Revenue Exp. A/c.
O/s Asset A/c.
O/s Liabilities A/c.
Capital Outlay A/c.
Balance A/c.
Posting into Principal Ledger are generally made month wise, For which
transactions are first need to be journalized based on the data available
from the following documents compiled monthly.
i) Priced Store A/c (Showing For better appreciation copy of
Issues and Receipts of PSA for 4/91 in r/o M & S. Fy Stores)
and Journal Entries there of
ii) Cash compilation (Showing Copy of Summary Sheet of 0002
Receipts and Expenditure for 4/91 in r/o M & S. Fy., and
compiled) Journal Entries prepared
iii) Cost tabulation
iv) Manufacturing A/c -Statement A & B.
Specimen posting of figure / data under Dr. and Cr. entries of various
ledger accounts based on the Journal entries prepared.
In addition to the postings made based on the monthly documents, some
postings have also to be done annually in respect of transactions like
Superannuation Charges (Cost debit), Cost of free ration etc. to D.S.C.
Share of Central Administration charges both for Fy and Accounts, Cost
of unpaid telegrams, Share of Cost of Ordnance Factory News etc.
Information /data on such transactions can only be made available at the
year-end.
Principal Ledger is required to be closed annually. For which balances
of each head of account (other than Balance A/c.) are struck at the year
end and transferred directly or finally through Subsidiary account(s) to
the Balance A/c. Dr. balances of Balance A/c. represent Assets while
Credit balances exhibit liabilities of the Factory as on the closing day of
the year and sum of all such Dr. entries should tally with sum of all the
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Cr. entries of Balance A/c. Such agreement of totals of Dr. and Cr. side
of Balance A/c. proves the arithmetical accuracy of postings made into
various heads of accounts of Principal Ledger.
Reconciliation of Cost and Financial Accounts
Vouchers, through which financial transaction takes place, are classified
in accordance with the budget heads they pertain to and a consolidation
of such financial compilations with details are sent monthly to each
Branch Accounts Office. These transactions are journalized by Dr. or Cr.
to Capital Outlay A/c. and posted in the Principal Ledger.
On the other hand, expenditure on labour, Material and other charges
compiled to Cost of Manufacture through Cost documents like D.W. and
P.W. Cards. Demand/Return Notes, Allocation Sheets etc. are all posted
in Principal Ledger to the debit credit of the respective Subsidiary
accounts like Wages accounts, Store A/c, Supervision charges A/c. Misc.
charges A/c. etc. to be finally transferred to the Work-in-Progress A/c.
and there from to the Capital Outlay A/c.
Thus figures from both ends are finally booked to Capital outlay A/c.
and the fact that all expenditure which has appeared in financial
compilation has been incorporated in Cost Accounts is automatically
verged by Capital Outlay A/c. which balances to itself.
Computerised Wage Packages
1. In 1997 it was decided that such Accounts Office in Factory
Organisation should have own Computer center. Accounting function of
the Accounts offices would be done using those computers. Accordingly
three phase actions were taken up (i) Setting up EDP Centre at each
branch Accounts Office (ii) In house development of three Accounting
packages - Wage, Inventory, Costing (iii) In house development of
manpower in computer.
By 1998 the computer centers were set up and software packages were
developed by the three Nodal team for implementation. The packages
are at different stages of implementation in different offices.
2. Wage Package: - This package aimed at standardization in the
process of calculation of wage of Industrial Employees working in
Ordnance Factories within the framework of rules on the subject.
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2.2 For implementation of package; the following master database are
to be created at the beginning and subsequently are to be maintained.
They are (i) IE Master (ii) Leave Master (iii) Deduction Master (iv)
Code Master (v) Warrant Master.
2.2.1 IE Master: - This master contains personal information about
each Industrial Employee, which has bearing in calculation of his
entitlement. Some field like, home state, bank name, bank A/c no. are
also provided to expand the scope of the package to audit of LTC bills;
payment by Cheque etc. The main source of creation of this master is the
service book of individual employee. In case Factory management has
already created Personal Information System in magnetic media; data
from that source may be captured in the IE Master database format. The
same should be audited 100% with reference to Service book before
implementation of the package. Few cardinal fields which need special
attentions are DOB (date of birth), IE - Type (1 for on strength; 0 for out
of strength) Fund-AC No (Fund Account Number) CGEGIS.Dt (date of
entry to CGEGIS), Prs-Scl-cd (Present Scale Code). Basic-Pay, Spl-Pay,
Per-Pay, DNI (Date of next increment) Ph-handcd (Physical handicap
Code), HRA-Adv (HRA admissibility), R/A-Adm (Risk allowance
admissibility)
2.2.2 Code Master (codefl.dbf) This master is created by the package
development team where every aspect like, scale, grade, trade,
educational qualification, state, town, Factory, penalty type, earning
code, deduction, penalty ground etc., have been codified. Further
maintenance scope has been left with the implementation centers to suit
their local requirements. This master is used by the program in each of
its validation stages.
2.2.3 Leave Master: - This master is to capture the balance of leave by
direct data entry from the leave balance register maintained by Factory.
Subsequent maintenance of this master will be done through the
package. The initial figures entered into the master are subject to 100%
audit by Internal Audit while audit of service book. Status of audit is
also to be captured.
2.2.4 Warrant Master: - This master is created by transfer of data from
costing package. The intention was that wage package can even run on
stand alone PC.
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2.2.5 Deduction Master: - This master is designed to capture details of
advances paid to IE and subsequent recoveries thereafter. This master
may take the place of maintenance of demand register both for long term
& short term advances. The master may be created by transfer of data
from Factory management (as prior to computerization recoveries were
made by Factory Management). Correctness of the entries may be
verified with reference to Demand register maintained by Accounts
Office.
2.3 The following are the transaction files created by Accounts Office
every month on the basis of source documents received as shown.
(A) (i) Prom-dbf (ii) Penal.dbf (iii) Smp.dbf (iv) Rdtout.dbf
(v) Fojoin.dbf
- Factory order issued during the month.
(B) PIC.dbf - Periodical Increment Certificate.
(C) AttFy.dbf - Monthly Acquitance Roll.
(D) Cardtrans.dbf - OPW / GPW Card.
(E) Gangdtts.dbf - Gang transfer memo of Section.
(F) Levtms.dbf - Leave Factory Order
(G) Syatt.dbf - SARS.
2.4 Other than IPW / GPW Card details other informations are
received in Accounts office in hard copy. As such IPW / GPW Card
details can be captured by transfer of data from Factory computer but
other informations are to be captured by direct data entry.
2.5 The activity in the EDP Centre for calculation of wage may be
divided into three parts. (i) Pre-payment week activity (ii) Payment week
activity (iii) Post payment week activity
2.5.1 (a) Prepayment Week Activity:- During this period the
transaction data base needed for maintenance of Master as mentioned in
A & F of para 2.3 are created and validated. Corresponding Master are
updated with the validated transaction.
2.5.2 (b) Payment Week Activity: - On the first day of the month the
changed status of personal Information System in comparison to last
month’s status is generated and handed over to manual group for
checking and authentication. Once this is audited the entitlement audit is
complete and processing of rate of each element of wage is started.
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During this period transaction details as mentioned in B.C.D.E.G of para
2.3 are captured, validated and processed.
Outputs generated during this period are profit statement. Profit
summary, pay slip, pay bill, earning summary, recovery summary
2.5.3 (c) Post Payment Week Activity: - During this week transaction
details for SARS & Cost PM are captured, validated and processed.
Different master like, Demand Master, History Master are updated
during this period. Outputs generated during this period are recovery
schedule, supplementary payment bills (not related to current wage
period), and generation of different MIS.
2.6 Validation Checks are provided in two different stages. In the data
entry screen validation checks are provided for each field and in case of
any invalid entry the cursor is not allowed to proceed with out proper
validation; the reason for invalidation are also displayed in the screen.
Batch validation programs are also provided in the package to validate
data, which is captured by transfer of data from other computer.
2.6.1 Nature of validations is of two types (i) by exact matching (ii) by
range matching. When the exact valid value of any field can be
predicated as per manual the nature of validation checks provided is
exact matching. As for example in the data entry screen of PIC, the
values in each field can be exactly predicted hence validated with the
corresponding value in the IE Master. Same is the case of validation of
PW Card with warrant. There are cases where the exact value is not
known like, OT hour, OTB hour, NSA hour, NSB hours etc. In those
cases a logical range check has been provided. The purpose of the range
check in the validation is to avoid skip of key during data entry. In those
cases the accuracy in the input can only be ensured by 100% auditing of
check Iist.The check list of Factory orders, attendance, supplementary
attendance, cards, and deduction will fall under this category. The
package does not allow to process record unless the file is made free
from error.
2.7 The main objectives of the package are (i) to be make accurate
payment is IEs with least possible time (ii) to furnish necessary
management information regarding payment (iii) to create necessary
database of payment for further (iv) to standardize the whole work.
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2.8 After implementation of the package the time for processing of
data has been reduced and in many factories the data of date of payment
to IEs have been advanced. Many non standard practices have been
removed. After implementation of the package the Accounts Offices
now have necessary tools to control the amount of requisition to GMs.
2.9 In the manual system many control audit was not feasible because
of shortage of manpower. As machine has now taken care of the major
strain of calculation the available manpower can now be directed
towards management audit i.e. necessity audit or adequacy audit. As the
package is now standardized necessary system audit package can be
developed.
2.10.1 DO’s: i) After creation of master the same to be 100% audited with
reference to authenticated hard copy e.g. Service Book in case of
IE Master.
ii) After creation of transaction file the same to be validated and
checklist printed and reconciled.
iii) EDP should process data in transaction file only after the same
is authenticated as correct Audit Section.
iv) Change PIS output to be printed each month and 100°6 audited
with reference to Factory Orders.
v) Before authorization of payment it is to be ensured that hours
shown in the earning summary tallies with the checklist total as
amended; change pay output exhibits the same information as is
generated by change PIS.
2.10.2 Don’ts:
i)
Correction in master by directly using it.
ii)
Make shortcut by avoiding validation loops to save time.
Limitation: - Wage package so developed has the following
Shortcomings - No provision has been made for calculation of
productivity link bonus.
No provision has been made for fixation of pay and calculation of arrear.
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No provision has been made for calculation of pay on more than one rate
of pay or more than one entitlement which takes place due to promotion
in the middle of month or occupation / vacation of quarter in the middle
of the month.
Inventory Package
The package was developed with an aim to provide reliable, accurate
and timely information on material available in the factory. This
standardized package will become the most effective tool for material
management and will be the guiding tool for Finance representative in
the TPC.
The Inventory Package is divided into number of module (a) Supply
Order module (b) Inter Factory Demand module ( c) Priced store ledger
module (d) Assets and Liabilities module. The modules are not totally
independent.
For implementation of the package, the following master databases are
to be created at the beginning and are to be subsequently maintained.
They are (1) Itemmast.dbf (Stock item master file) (2) SOMaster.dbf
(Supply Order master) (3) Vendmast.dbf (Vendor Master) (4)
SDMaster.dbf (Security deposit master) (5) LiabMast.dbf (Outstanding
liability file for Store transactions) (6) Assetmas.dbf (Outstanding Store
Asset master) (7) IFD Mast.dbf (Inter Factory Demand Master (8)
IFDRate.dbf (IFD rate master) (9) Codemast.dbf (Details Codes)
Itemmast.dbf: - This master is maintained item code wise. All
informations available in the priced store cum provisioning ledger are
also available here except the details of transactions. This master on a
cut off date to be created by transfer of data from Factory computer to
avoid duplicate data entry. The balances, average ledger rates, last
transaction data. Bin page line numbers are to 100 % audited with
reference to manually maintained PSL before actual switch over.
In the manual system MCO division of the factory were making the
initial entries in the PSL sheet before entering into the folder. In the
present set up Factory EDP is opening new record in the Item master on
the basis of information furnished by MCO division. As no print out of
such transactions are available in Accounts Office; the only way to
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maintain the master is to collect data from the Factory on the new folios
opened during a month and append the same in the Master.
S.O.Master.dbf: - This master is maintained for capturing supply order
details. The master may be initially created by transfer of data from
factory master. The same to be 100% audited with reference to supply
orders maintained by Accounts Office.
For subsequent maintenance of the master the new S.O.details may be
captured from Factory database and after necessary audit validation with
reference to hard copy of SO received in Accounts office may be
appended in the master. Any revision in the existing S.O. may, however,
be carried out by using the screen of the package.
Vendmast.dbf: - This master is maintained to codify information about
the vendors. This master may be created by transfer of data from factory
management. Its subsequent maintenance may be carried out by using
screen of the package.
SDMaster.dbf: - This master contains all no information about the
scrutiny deposits held by the Accounts Office. The master can be created
by data entry from security deposit register maintained by Accounts
Office. Subsequent maintenance can also be done by direct data entry.
Liabmast.dbf: - This master contains details of outstanding liabilities.
Master can be created by data entry from the Liability register
maintained by Accounts Office. Subsequent maintenance however can
be done using program.
Assetmas.dbf: - This master contains details of outstanding assets. The
Master can be created by data entry from the Asset register maintained
manually. Every month the details of bills passed are to capture.
IFDmast.dbf: - This master contains details of the IFDs placed by the
Factory on other factories. This master can be created by data entry from
the IFD register maintenance manually.
IFDrate.dbf: - This master contains details of rates of IFD items on the
basis of which receipt vouchers of the factory are to be priced. This
master is created on the basis of OFB rate list.
The transaction files IFDRTVr.dbf, Rtvrfl.dbf, files IFDRTVr.dbf,
Rlvrfl.dbf. Ofrfl.dbf, dnrnfl.dbf, issvrfl.dbf, nominal dbf, are created
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every month by transfer of data from Fy. Management. The data so
received are to be validated by using validation programs in the module.
The outputs are subject to 100% audit with reference to hard copy of
documents before processing in the package.
The receipt vouchers when received in the EDP Section are validated
and priced using S.O.module (IFD module for items of Inter Factory
demand). Demand notes and issue vouchers are validated and priced
using priced store ledger module. At the end of the month PSL and PSA
are generated with various important management reports dike Slow
moving Non-moving report, obsolete scrap waste report, unpriced
receipt voucher listing report, store in transit report.
Bills of contractors as and when passed are also entered in the Asset
master and by using Asset & Liability linking module the outstanding
assets and liabilities report, balance sheet etc., are generated.
Nature of validation provided are validation with exact clause in Item
Code, Unit of Quantity, PSA Code, S.O.Number, SO date, SO serial
number, IFD number, IFD date, Bin quality BPLN.
The package allows to process data from a file containing error records
only the error results are not processed.
The main objective of the package is to correct accounting of stores with
minimum lead-time and standardise the principal of accounting.
After implementation of the package the lead-time for preparation of
PSA has been reduced Branch Accounts Offices are in a better position
to render management information.
Still there is a lead-time of 15 to 45 days in reflection of documents in
the Accounts. Factory Management is very critical on this issue. The
proposal for updation of PSL once in a week is under consideration. This
will enable to reduce the lead-time. Linking of assets with liabilities can
not be 100°x6 implemented as (i) details of very old outstanding assets
and liabilities are not available (ii) MIS number is not available in case
of advance payment (iii) In case of Spl. Payment Adjustment bills are
not prepared by the Factory Management.
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SUMMARY
l. Extract is a authority to undertake work by the General Manager. It is
issued by the DGOF. There are five classes of Extracts viz. Class- I for
issues to Army; Class- II for Payment Services; Class- III for Inter
Factory Demand; Class- IV for Manufacture of Stock and Class- V for
Capital Works.
2. Warrant is a authority for the Shop to undertake manufacture. A
warrant is in two parts. One for booking of labour known as
Manufacturing Warrant and other is for drawal of material for the
manufacture, which is called as Material Warrant. Warrant shows Work
Order No., Warrant No, Quantity to be manufactured, Section/Sections
who will undertake manufacture, Nomenclature of article to be
manufactured and date of issue of the Warrant. Life of a warrant is 6
months and may be extended by the GM for up to one year only.
3. Work Order bears 9 digits. First two digit denotes for whom the
service to be rendered, next five digit indicate the nomenclature of the
subject store to be manufactured and last two digit shows Code No of the
Section who will undertake the job. The series of Work Order start from
“O1” to “96”. Both “01” & “02” series denote Indirect Expenses
whereas rest of all series pertains to different Direct Series of Work.
4. Standard Estimate is prepared for the articles of repetitive nature are
required to be manufactured with proper time and motion study to assess
the estimated labour man hour for each operation with trade/grade wise
of Industrial employees for the job and also actual quantity of each kind
of raw material required to be utilized to complete the manufacture.
Rejection percentages are also provided in the standard estimate. The
pricing is being done by Accounts Office on the receipt of the Estimate.
The estimates are being re-priced half yearly.
5. As and when Warrants pertaining to Direct Series are received
Accounts Office on verification opens two Cards viz. Cost Card and
Production Ledger Card for the item to be manufactured against the
Warrant. All the information in the cages of the top of both Cost Card &
PL Card is being filled by the Accounts Office. Actual expenditure on
the warrant as and when incurred is being posted to ascertain the cost of
the product and analysis of variances, if any for information and
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corrective action for future production by the Factory management.
Expenditure incurred through monthly Labour Abstract is posted as a
cost of direct labour under class of cost 11. Similarly, Material cost are
posted under class of 20, 21 & 22 [PPL items, Material drawn through
Demand Notes and Red Demand Notes respectively] through monthly
Material Abstract and Component Abstract, as the case may be. Both the
levied cost in respect of Variable Charges and Fixed Charges are posted
in the specified cages from monthly Labour Abstract.
6. Semi are two types. One is known as Unfinished Semi [Work-inProgress] and other is called Finished Semi [Article completed and
inspected but not issued to the indentor as on 31t March of the year].
Cost of Unfinished Semi are those where the article has manufactured
but awaited inspection or unused material already drawn or partly used
labour and material on the Shop floor lying as on 31" March of the year.
So, the ascertainment of cost of semi is required to arrive out the actual
cost of production during the year against a particular Work Order and
Warrant also.
7. Normal rejection percentages has been allowed in the standard
estimate as well as in the respective warrant also. If the rejected quantity
is beyond the permissible quantity on manufacture it is called as
abnormal rejection and the cost of abnormal rejection is required to
assess for determine the actual cost of production of the article. The cost
of abnormal rejection will be treated as "Store Loss" and will be
regularized accordingly.
8. When the Warrant will be completed the actual cost under each
element will be ascertain by cross totaling the Card and it will be
compared with reference to each element of cost as priced / re-priced in
its standard estimate for analyzing the variances. Variances up to 10%
are permissible.
9. Overhead Cost: It is a class of cost, which cannot be directly charged
to a product. These type of cost is incurred either by the respective
manufacturing shops directly or by the other maintenance sections in the
shape of service render. Few examples are Supervision, Security,
Welfare, Power, Steam, Water, Cost of lubricant, Cotton waste, sundry
shop etc. etc. Overhead Charges are two types viz. Variable Overhead
and Fixed Overhead. Cost of variable overhead are those which vary
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with the sympathy of the load of the Factory but not in direct proportion
whereas Fixed Overheads does not vary with the sympathy of the load of
Factory but mainly remains constant.
10. Ordnance Factories in the country have been established to undertake
manufacture of Arms and Ammunitions for the Armed Forces to meet
the War requirement. During the peace time full capacity of installed
Plant & machineries and man power may not required to be utilized for
achieving the targeted production. Thus, the cost of excess capacity of
plant & machinery and man powers in the peace time is called as "War
Insurance Cost" and deducted from the estimated Fixed Overheads likely
to be incurred during that period while fixing the budgeted FOH% of a
year.
11. Central Budget Committee meeting is convened to fix the overheads
percentages for the Production Sections to arrive out the budgeted
VOH% and FOH% required to be levied for the Production Section
during a year. Sections of a Factory can be Production,
Service/Maintenance and also mixed in nature. So, a Step Ladder
System is used for departmental allocation of overhead expenses and
distribution of expenses of both Service and mixed sections to
Production Section.
12. Principal Ledger is maintained in addition to Financial Accounts by
the Accounts Office for the purpose of preparation of consolidated
Manufacturing Accounts viz. Production Account, Finished Account and
Capital Account and to arrive at the Cost of Production of article
manufactured during a year by the Factory. The different heads in the
Principal Ledger are so arranged as to provide information required for
the compilation of consolidated Manufacturing Account and also
reconciliation of the figures compiled in Cost Account. Posting in the
Ledger is being done monthly from PSA, H Form 9, H Form 10, 0002
etc. Certain expenditure is also being posted in the respective head of
Account annually. The Principal Ledger is required to be closed
annually.
13. Production Account: This account is debited with value of opening
unfinished semi (WIP) as on 1' April of the year, Direct Labour, Direct,
Direct Material and Overhead Charges and the account is credited with
Relief to Overhead, Unclaimed Wages lapsed, Sale Proceeds, Closing
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value of Unfinished Semi (WIP) as on 31t March of the year, Cost of
Avoidable Rejection (Kept out of Production) and Cost of Production.
14. Finished Stock Account: This Account is debited with value of
opening Finished semi as on l' April of the year, Cost of Production
during the year and credited with Cost of issues made during the year
and Closing Finished Semi as on 31" March of the year.
15. Capital Assets are classified under Building, Machinery and Other
items. There are taken on charge on Block Register under "B" series
Receipt Vouchers for buildings and "M" series for machineries items.
These assets are depreciated from year to year. Life of a building has
been fixed as 60 years. Annual depreciation is calculated under this
formula
Yearly Depreciation of an Assets = (Original Value MINUS Residual
Value) / No of life of the Assets.
The cost of the depreciation is charged to Production as overhead
expenses of the Factory.
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SELFASSESSMENT QUIZ
There are I5 Questions carrying equal marks. One mark will also be
deducted for each wrong answer.
Total 30 Marks
(Tick the appropriate Box, you have selected as a correct answer.
Once ticking need not to be scored out or any new answer is not
permissible, as a fresh ticking for seems to be right answer)
Q1.
How many types of Extract are used in Ordnance Factories?
A
One
Q2.
B
GM of the
Factory
E
Three
C
DGOF
D
E
Comdt.COD, HQ, Eastern
Jabalpur
Command
B
Class-I
C
Class-III
D
Class-IV
E
Class-II
Warrant is a codified list. Haw many digits it contains?
A
Five
Q5.
D
Five
Which Class of Extract will be issue for manufacturing of
Wooden Box to Permanent Employees of Ordnance Factory on
payment?
A
Class-V
Q4.
C
Two
Extract for manufacture of 50 Nos of L 70 Machine Gun to COD,
Jabalpur is issued by:
A
PCA (Fs),
Kolkata
Q3.
B
Four
B
One
C
Three
D
Two
E
Four
Which series of Work Order will be allotted by the GM, Vehicle
Fy., Jabalpur to undertake manufacture of "Stallon" vehicle as
demanded by GM, Gun Carriage Fy., Jabalpur?
A
90
B
70
C
82
D
40
E
02
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Q6.
Which item does not provide in the Standard Estimate:
A
B
C
D
Quantity of raw Required hours Ledger
Folio 10% rejection
material
for Trade/Grade No.
of
the allowed in the
required
wise in each material
man hour
operation
Q7.
Re-pricing of Standard Estimate is done:
A
Monthly
Q8.
B
Fortnightly
D
Half-yearly
A Cost Card is opened for the warrant received in Accounts Office
for the following series of Work Order. Which answer is not
correct?
A
90
Q9.
C
Quarterly
B
89
C
04
D
02
E
40
Expenditure is posted on the respective cages of the Cost Card
from the following Tabulation given in A, B, C D & E. If you
disagree please chose your answer.
A
Material
Abstract
B
SVC
C
Transfer Voucher
Abstract
D
Labour
Abstract
E
Component
Abstract
Q10. From the following data which amount represent the levied Fixed
Overhead of the Product:
Direct Labour
Direct Material
VOH
FOH
Rs.5, 000/Rs.15, 000/Rs.10, 000/300%
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A
5,000/-
B
10,000/-
C
15,000/-
D
20,000/-
Q11. From the following data which one represents abnormal rejected
quantity?
Quantity ordered
100 Nos.
Quantity manufactured 110 Nos.
Quantity rejected
15 Nos.
Quantity accepted
95 Nos.
Rejection percentage allowed: 10
A
5
B
10
C
15
D
20
Q12. From the following data select the correct answer for the Unit
Cost of Production of an article manufactured in an Ordnance
Factory.
Quantity Accepted
Basic Labour
Direct Labour
Direct Material
VOH %
FOH %
Scrap Returned
A
Rs. 129.50
200 Nos.
Rs. 1,000
Rs. 1,500
Rs. 20,000
200
100
Rs. 500
B
Rs. 130.00
C
Rs. 128.50
D
Rs. 127.50
Q13. Whole posting in the Principal Ledger which item of expenditure
does not appear in the Financial Account of the Factory?
A
Pay &
Allowances of
Industrial
Employees
B
Superannuation
Charges
C
Transportation
Charges
incurred
D
Store purchase
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Q14. Which item of expenditure does not show in the Debit Side of
"Production Account" of the Factory?
A
B
C
D
E
F
G
Direct Transportation Work in Direct Cost of Superannu- Over
Labour Charges
Progress Stores Rejection ation
Absorbed
as on l"
(KOP)
Charges
VOH
April
Q15. Which item of expenditure does not show in the Credit Side of
"Finished Stock Account" of the Factory?
A
Issues to
Army
B
Finished
Semi as
on31"
March
C
D
Cost of
Issues to
Production other Sister
Fys.
E
Issues
to MES
F
Issues to
Navy
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ANSWERS TO QUIZ
Question
Correct
Question
Correct
No
Answer
No
Answer
1
D
9
B
2
C
10
C
3
E
11
A
4
A
12
D
5
B
13
B
6
D
14
E
7
D
15
C
8
D
ASSESS YOURSELF
Score less than 15 marks:
Need to revisit Chapter again
Score between 15 to 20 marks: Well done!
Score 20 (Plus) +:
Wow! You are genius
270109mchm
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