Description
compares two motorcycle companies Bajaj and Hero honda and compares them on Depreciation, Inventory Evaluation, Revenue recognition
Analysis of Bajaj and Hero Honda based on accounting policies.
Bajaj Auto and Hero Honda
Category Bajaj Auto Fixed Assets: Leasehold land is amortized over the period of the lease. Depreciation on all other assets is Hero Honda Fixed Assets Leasehold land has been amortized over the period of lease. Assets covered under employee benefit schemes are amortized over a period of 5 years. Assets costing up to Rs 5000 each are fully depreciated in the year of purchase.
Depreciation
calculated by taking the purchase or acquisition price of an asset subtracted by the salvage value divided by the total productive years the asset can be reasonably expected to benefit the company.
Intangible assets: Costs of technical know-how acquired is amortized over a period of 6 years. Technical know-how developed by the company, post research stage is an intangible asset and is amortized over its estimated life
Depreciation of all assets is
calculated by taking the purchase or acquisition price of an asset subtracted by the salvage value divided by the total productive years the asset can be reasonably expected to benefit the company.
It is charged on a pro-rata basis at the straight line method rates prescribed in schedule XIV to the Companies Act, 1956. Intangible assets are amortized over a period of 5 years.
Inventory Evaluation
Cost of inventories =
Cost of purchases + Cost of conversion + Cost incurred in bringing the inventories to location
Finished goods are valued as material cost + labor + manufacturing overheads + excise duty.
Finished stocks and Spare parts are valued at net realizable value
Raw materials and components, finished goods and work in progress
Machinery spares that are key components specific to machinery are capitalized with the cost of the asset. Machinery spares and maintenance are treated as expense in the year of purchase. Raw materials and components are valued at cost calculated on weighted average basis.
are valued at net realizable value or cost : Lower value taken
Raw materials and components are valued at weighted average cost. Materials in transit are valued at actual cost
Revenue recognition
Domestic sales are accounted when dispatch from the point of sale takes place. Export sales are recognized on the date of the receipt and recorded at the relevant exchange rates prevailing on the date of transaction.
Goods Sale is recognized at the point of dispatch of finished goods to the customers. Income from Services provided is recognized when the services are actually rendered.
Comparison of accounting policies of companies
Inventory Evaluation Both Bajaj Auto and Hero Honda have similar policies Raw Materials Calculated on Weighted Average Basis Depreciation and Amortization – Similar Policies applied In the case of intangible assets, Bajaj auto amortizes in a period of 6 years and for selfdeveloped assets, the period is 3 years. In the case of Hero Honda the period is 5 years Revenue recognition Both accounted sales where finished goods are dispatched.
doc_273457193.docx
compares two motorcycle companies Bajaj and Hero honda and compares them on Depreciation, Inventory Evaluation, Revenue recognition
Analysis of Bajaj and Hero Honda based on accounting policies.
Bajaj Auto and Hero Honda
Category Bajaj Auto Fixed Assets: Leasehold land is amortized over the period of the lease. Depreciation on all other assets is Hero Honda Fixed Assets Leasehold land has been amortized over the period of lease. Assets covered under employee benefit schemes are amortized over a period of 5 years. Assets costing up to Rs 5000 each are fully depreciated in the year of purchase.
Depreciation
calculated by taking the purchase or acquisition price of an asset subtracted by the salvage value divided by the total productive years the asset can be reasonably expected to benefit the company.
Intangible assets: Costs of technical know-how acquired is amortized over a period of 6 years. Technical know-how developed by the company, post research stage is an intangible asset and is amortized over its estimated life
Depreciation of all assets is
calculated by taking the purchase or acquisition price of an asset subtracted by the salvage value divided by the total productive years the asset can be reasonably expected to benefit the company.
It is charged on a pro-rata basis at the straight line method rates prescribed in schedule XIV to the Companies Act, 1956. Intangible assets are amortized over a period of 5 years.
Inventory Evaluation
Cost of inventories =
Cost of purchases + Cost of conversion + Cost incurred in bringing the inventories to location
Finished goods are valued as material cost + labor + manufacturing overheads + excise duty.
Finished stocks and Spare parts are valued at net realizable value
Raw materials and components, finished goods and work in progress
Machinery spares that are key components specific to machinery are capitalized with the cost of the asset. Machinery spares and maintenance are treated as expense in the year of purchase. Raw materials and components are valued at cost calculated on weighted average basis.
are valued at net realizable value or cost : Lower value taken
Raw materials and components are valued at weighted average cost. Materials in transit are valued at actual cost
Revenue recognition
Domestic sales are accounted when dispatch from the point of sale takes place. Export sales are recognized on the date of the receipt and recorded at the relevant exchange rates prevailing on the date of transaction.
Goods Sale is recognized at the point of dispatch of finished goods to the customers. Income from Services provided is recognized when the services are actually rendered.
Comparison of accounting policies of companies
Inventory Evaluation Both Bajaj Auto and Hero Honda have similar policies Raw Materials Calculated on Weighted Average Basis Depreciation and Amortization – Similar Policies applied In the case of intangible assets, Bajaj auto amortizes in a period of 6 years and for selfdeveloped assets, the period is 3 years. In the case of Hero Honda the period is 5 years Revenue recognition Both accounted sales where finished goods are dispatched.
doc_273457193.docx