Accounting Policies of Kanchan International Ltd. Company

Mar 31, 2010

1. Basis of preparation of financial statement

The financial statements have been prepared under historical cost convention, in accordance with the generally accepted accounting principles and accounting standard referred to in section 211 (3C) of the Companies Act 1956,

2. Revenue recognition

a. The Company generally follows mercantile system of accounting and recognizes item of income and expenditure on accrual basis, except in case of significant uncertainties.

b. Sales are inclusive of excise duty export incentives but net of Trade discount and sales returns.

c. Export incentive in respect of exports made is accounted in the year of export on accrual basis.

d. Export sales are accounted on the basis of date of shipment from the factory.

3. Fixed assets.

Fixed Asset are stated at cost including taxes, freight and other incidental expenses incurred in relation to acquisition & installation of the same, net of modvat.

4. Depreciation

The depreciation is provided on fixed assets on straight-line method at the rates specified in the Schedule XIV of the Companies Act, 1956 on pro-rata basis for additions/deductions.

5. Investments

Long term investments are stated at cost. Provision for diminution in the value of long term investments is made only if such a decline is other than temporary in the opinion of the management.

6. Inventories

a. Raw materials, Stores & Spares, and Packing Materials are valued at lower of cost or net realizable value under the FIFO method.

b. Stocks in Process are valued at lower of cost or net realizable value under the FIFO method.

The cost is arrived at on full absorption basis as per Accounting Standard AS 2 - Valuation of inventories. C. Finished Goods are valued at lower of cost or net realizable value, under the FIFO method. The cost is arrived at on full absorption basis as per Accounting Standard AS 2 Valuation of inventories.

7. Retirement benefit and leave wages

a. Companys contribution to Provident Fund, Pension Scheme & Employees State Insurance Corporation Funds are charged to the Profit & Loss Account on an accrual basis.

b. Gratuity benefit payable at the time of retirement is charged to Profit & Loss Account on the basis of actuarial valuation. The company does not have any gratuity fund whether internal or maintained by an outside agency.

c. Provision for accrued leave encashment is made on accrual basis and charged to Profit & Loss Account of the year.

8. Miscellaneous expenditure

Advertisement & Publicity Expenses for promotion of products are charged to revenue over a period of three years.

9. Foreign currency transactions

Foreign Currency Loan , Current Asset and Current Liabilities outstanding at the close of financial year are revalued at the contracted and/ or appropriate exchange rates at the close of the year. The gain or loss due to decrease/increase in rupee liability on account of fluctuations in the rate of exchange is adjusted to the cost of assets if it relates to acquisition of assets, and is charged to Profit & Loss Account in other cases.

10. Taxation

a. Provisions for Current Tax are made on the assessable income at the tax rate applicable to the relevant assessment year.

b. Deferred Tax for Timing differences between the tax profit and book profit is accounted for using the tax rates and laws that have been enacted or substantially enacted as of the Balance Sheet date. Deferred tax assets are recognized to the extent there is reasonable certainty that these assets can be realized in future wherever applicable.

11. Borrowing Costs.

Borrowing cost of the company on working capital requirement is recognized as an expense in Profit & Loss Account.

12. Intangible Assets.

Specified computer softwares purchased are recognized as intangible Assets, as per the criteria specified in Accounting Standards (AS) 26th Intangible Assets and the same are amortized at par with the computers.

13. Leases

Lease rentals in respect of operating leases are charged to Profit & Loss Account as an expense.

14. Earning pershare

Earning per share is calculated by dividing net profit or loss for period, attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. There is no outstanding rights as on 31st March 2010 which can be converted in to Equity shares.

---

Mar 31, 2009

1. Basis of preparation of financial statement

The financial statements have been prepared under historical cost convention, in accordance with the generally accepted accounting principles and accounting standard referred to in section 211(3C) of the Companies Act 1956.

2. Revenue recognition

a. The Company generally follows mercantile system of accounting and recognizes item of income and expenditure on accrual basis, except in case of significant uncertainties.

b. Sales are inclusive of excise duty export incentives but net of Trade discount and sales returns.

c. Export incentive in respect of exports made is accounted in the year of export on accrual basis.

d. Export sales are accounted on the basis of date of shipment from the factory.

3. Fixed assets.

F ixed Asset are stated at cost including taxes, freight and other incidental expenses incurred in relation to acquisition & installation of the same, net of modvat.

4. Depreciation

The depreciation is provided on fixed assets on straight-line method at the rates specified in the Schedule XIV of the Companies Act, 1956 on pro-rata basis for additions/deductions.

5. Investments

Long term investments are stated at cost. Provision for diminution in the value of long term investments is made only if such a decline is other than temporary in the opinion of the management.

6. Inventories

a. Raw materials, Stores & Spares, and Packing Materials are valued at lower of cost or net realizable value under the FIFO method.

b. Stocks in Process are valued at lower of cost or net realizable value under the FIFO method. The cost is arrived at on full absorption basis as per Accounting Standard AS 2 - Valuation of inventories.

c. Finished Goods are valued at lower of cost or net realizable value, under the FIFO method. The cost is arrived at on full absorption basis as per Accounting Standard AS 2-Valuation of inventories.

7. Retirement benefit and leave wages

a. Companys contribution to Provident Fund, Pension Scheme & Employees State Insurance Corporation Funds are charged to the Profit & Loss Account on an accrual basis.

b. Gratuity benefit payable at the time of retirement is charged to Profit & Loss Account on the basis of actuarial valuation. The company does not have any gratuity fund whether internal or maintained by an outside agency.

c. Provision for accrued leave encashment is made on accrual basis and charged to Profit & Loss Account of the year.

8. Miscellaneous expenditure

Advertisement & Publicity Expenses for promotion of products are charged to revenue over a period of three years.

9. Foreign currency transactions

Foreign Currency Loan , Current Asset and Current Liabilities outstanding at the close of financial year are revalued at the contracted and/ or appropriate exchange rates at the close of the year. The gain or loss due to decrease/increase in rupee liability on account of fluctuations in the rate of exchange is adjusted to the cost of assets if it relates to acquisition of assets, and is charged to Profit & Loss Account in other cases.

10. Taxation

a. Provisions for Current Tax are made on the assessable income at the tax rate applicable to the relevant assessment year.

b. Deferred Tax for Timing differences between the tax profit and book profit is accounted for using the tax rates and laws that have been enacted or substantially enacted as of the Balance Sheet date. Deferred tax assets are recognized to the extent there is reasonable certainty that these assets can be realized in future wherever applicable.

11. Borrowing Costs.

Borrowing cost of the company on working capital requirement is recognized as an expense in Profit & Loss Account.

12. Intangible Assets.

Specified computer softwares purchased are recognized as intangible Assets, as per the criteria specified in Accounting Standards (AS) 26 " Intangible Assets and the same are amortized at par with the computers.

13. Leases

Lease rentals in respect of operating leases are charged to Profit & Loss Account as an expense.

14. Earning per share

Earning per share is calculated by dividing net profit or loss for period, attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. There is no outstanding rights as on 31 * March 2009 which can be converted in to Equity shares.

15. Bank Loan against Cash Credit

The Company has been showing the unpaid interest on bank loan against cash credit under the Current Liabilities till earlier years. It is now showed under the Secured Loans with the loan amount