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Accounting Policies of Shree Mahaganga Sugar Mills Ltd. Company

Mar 31, 2009

1. Basis of Accounting:

The financial statements are prepared under historical cost convention in accordance with the generally accepted accounting principles except as stated otherwise.

2. Fixed Assets and depreciation:

a) Fixed assets (except office computer) are stated at the cost of acquisition. Office computers are stated at cost less depreciation. Advances given for purchase of fixed assets are shown underCWIP.

b) Depreciation of office computer is provided using written down value method at the rates prescribed under schedule XIV to the Companies Act, 1956.

3. Inventories :

Inventories are valued at lower of cost or net realizable value. Cost is determined on first - in - first- out basis.

4. Revenue Recognition :

a) Depreciation on fixed assets (other than office computer) is provided actual use instead of accrual basis as per the schedule XIV of the companies Act, 1956.

b) Interest and Penalties under the Income Tax Act, 1961 is accounted on cash basis.

c) All other income and expenses are accounted on accrual basis.

d) Sales and purchase are accounted for net of returns

5. Investments:

Investments are carried at cost.

6. Amortization:

a) Technical know how is amortised over a period of five years.

b) New project expenses and shares issue expenses are amortized over a period often years.

7. Income Tax:

Provision is made for income tax annually based on tax liability computed after considering tax allowances and exemptions and is sufficient to meet the current income tax liability.

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