Accounting Policies of Sona Machinery Ltd. Company

Mar 31, 2025

Company''s overview and significant accounting policies for the year ended 31 March 2024 Note

1. Corporate Information:

Company was originally incorporated as a Private Limited Company under the name of “Sona Machinery Private Limited” on February 12, 2019 under the provisions of the Companies Act, 2013 with the Registrar of Companies, Delhi. Subsequently, pursuant to Special Resolution passed by the Shareholders at the Extraordinary General Meeting, held on September 21,2023, our Company was converted into a Public Limited Company and consequently the name of our Company was changed from “Sona Machinery Private Limited” to “Sona Machinery Limited” vide a fresh certificate of incorporation Consequent upon conversion to public company dated October 17, 2023, issued by the Registrar of Companies, Delhi and the company got listed on NSE(SME) portal w.e.f March 11, 2024 having CIN L29256DL2019PLC345856.

"Nature of operations:

- To carry on the business as manufactures, importers, exporters, dealers of Rice mill machinery, Dal Mill machinery, Flour mill machinery and machinery for milling of other grains and cereals etc. and to set up factories or mills for the manufacture thereof

- To carry on the business of manufacturers, wholesalers, dealers, exporters, importers of any kind of machinery, equipment and / or tools for the food processing industry and all kinds of machinery, tools, implements for all kinds of industry including agricultural, horticultural and scientific instruments of any kind.

- To engage, undertake and execute any contracts for works involving repair or use of any machinery or machine tools and to carry out any primary, secondary, ancillary or other works."

2 Significant Accounting Policies:

2.1 Basis of accounting and preparation of financial statements:

These financial statements have been prepared in accordance with the generally accepted accounting principles in India, under the historical cost convention and also on accrual basis. The Company has prepared these financial statements to comply in all material respects with the accounting standards and the relevant provisions of the Companies Act, 2013.

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.The Company has ascertained its Operating Cycle as 12 months for the purpose of current - non-current classification of assets and liabilities.

2.2 Use of estimates:

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as at the balance sheet date, the results of operation during the reported period and disclosure of contingent liabilities as on the reporting date. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable and are in their best knowledge of current event and actions. Actual results could differ from these estimates and differences between actual results and estimates are recognized in the period in which the results are known or materialize. Significant estimates used by the management in the preparation of these financial statements include provision for employee benefits, estimates of the economic useful life of plant and equipment, provision for expenses, provisioning for taxation etc.

2.3 Revenue:

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Sale of product revenue is recognized on transfer of the significant risks and rewards of ownership of the goods to the buyer and stated at values net of Goods and Services Tax (GST). Interest income is recognized on time proportion basis.

2.4 Expenses:

Expenses are accounted for on accrual basis and provisions are made for all ascertained and known liabilities and losses.

2.5 Property, plant and equipment:

Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an property, plant and equipment comprises its purchase price, any costs directly

attributable to bringing the property, plant and equipment into the location and condition necessary for it to be capable of operating in the manner intended by management.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in statement of profit and loss.

2.6 Depreciation on property, plant and equipment:

The Company provides depreciation on items of property, plant and equipment on written down value method (WDV) based on useful life specified as below.

Type of Assets	Period
Computer, Laptop, Equipments	3 Years
Electrical/ Office Equipments	5 Years
Furnitures	10 Years
Motor Vehicles	10 Years
Plant and Machinery	15 Years
Computer (Server)	6 Years
Residual value taken as 5%

Depreciation amou n t for a s s e t is the co s t of an asset less its estimated residual value. In case of impairment, depreciation is provided on revised carrying amount over its remaining useful life.

2.7 Intangible Asset:

Intangible assets comprises of application Software. Intangible assets are recognized, only if they are separately identifiable and have future economic benefits arising out of them, at cost less accumulated amortization and impairment, if any.

2.8 Amortization of Intangible assets:

Intangible assets comprises of Software & licences are amortized over the five years.

2.9 Impairment:

The management assesses the carrying amount of plant and equipment and intangible asset at each balance sheet date to determine whether there is any indication of impairment based on internal/external resources. If any such indications exist, the recoverable amount of plant and equipment and intangible asset is estimated. An impairment loss is recognized wherever the carrying amount of an plant and equipment and intangible asset exceeds its recoverable amount. The recoverable amount is the greater of the plant and equipment and intangible asset’s, net selling price and value in use. An impairment loss is recognized in the statement of profit and loss in the year in which the plant and equipment and intangible asset is recognized as impaired.

2.10 Borrowing cost:

Borrowing costs which is attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue in the year of incurrence.

2.11 Employee benefit expenses:

i) The company does not carry forward the balance of earned leave balance of employees, balance earned leave is paid to the employees according to the policy of company.

ii) Company''s contribution to Provident Fund and other Funds for the year is accounted on accrual basis and charged to the Statement of Profit & Loss for the year.

iii) Retirement benefits in the form of Gratuity are considered as defined benefit obligations and are ''

provided on the basis of the actuarial valuation as at the date of the Balance Sheet."

2.12 Leases:

Where Company is lessee, the lease payments under an operating lease are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the Company''s benefit. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.

2.13 Foreign Currency Transaction:

a) Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction.

b) Short term monetary items denominated in foreign currencies (such as cash, receivable, payable etc.) outstanding at the year end, are translated /re-converted at the year-end exchange rate unless covered by a forward contract.

c) Any gain or loss arising on settlement and / or translation of short term monitory transaction in foreign currency is accounted for in the statement of Profit and Loss.

2.14 Taxation:

Income tax:

Current tax is determined as the amount of tax payable in respect of taxable income for the period calculated as per the prevailing provisions of Income Tax Law.

Deferred Tax is calculated on timing differences, being the difference between taxable income and the accounting income that originates in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets, subject to the consideration of prudence, are recognized and carried forward only to the extent that there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

2.15 Provisions, Contingent Liabilities and Contingent Assets:

A provision is recognized when an enterprise has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates.

Contingent Liabilities are disclosed when the Company has a possible obligation or a present obligation and it is probable that a cash outflow of resources will not be required to settle the obligation.

Depending upon facts of each case and after due evaluation of relevant legal aspects, Claims not acknowledged as debts, are regarded as contingent liabilities in the accounts.

2.16 Earnings Per Share:

In determining the Earnings Per share, the company considers the net profit after tax which does not include any post tax effect of any extraordinary / exceptional item. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. Split/Bonus in face value of equity share of company has been considered as if it took place at the beginning of reporting period. There is no Antidilutive nature of instruments in during the reporting period

2.17 Cash and Bank Balances:

Cash and bank balances for the purposes of cash flow statement comprise Fixed Deposit, cash at bank, cash in hand.

2.18 Segment Reporting Business Segment

(a) The business segment has been considered as the primary segment.

(b) The Company’s primary business segments are reflected based on principal business activities, the nature of service, the differing risks and returns, the organization structure and the internal financial reporting system.

(c) The Company’s primary business includes manufacturing of equipments for Cleaning, Processing,

Polishing and Packaging of Rice, Pulses, Wheat, etc. this is the only segment as envisaged in Accounting Standard 17 ‘Segment Reporting’ therefore disclosure for Segment reporting is not applicable."

2.19 Cash flow statement

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. Cash flows from operating, investing and financing activities of the Company are segregated, accordingly.

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Mar 31, 2024

1.00 Summary of significant accounting policies

1.01 Basis of preparation of financial statements

These financial statements have been prepared in accordance with the generally accepted accounting principles in India, under the historical cost convention and also on accrual basis. The Company has prepared these financial statements to comply in all material respects with the accounting standards and the relevant provisions of the Companies Act, 2013.

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Companies Act, 2013.The Company has ascertained its Operating Cycle as 12 months for the purpose of current - non-current classification of assets and liabilities.

1.02 Use of Estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities as at the balance sheet date, the results of operation during the reported period and disclosure of contingent liabilities as on the reporting date. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable and are in their best knowledge of current event and actions. Actual results could

differ from these estimates and differences between actual results and estimates are recognized in the period in which the results are known or materialize. Significant estimates used by the management in the preparation of these financial statements include provision for employee benefits, estimates of the economic useful life of plant and equipment, provision for expenses, provisioning for taxation etc.

1.03 Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of product revenue is recognized on transfer of the significant risks and rewards of ownership of the goods to the buyer and stated at values net of Goods and Services Tax (GST).

Interest income is recognized on time proportion basis.

1.04 Expenses

Expenses are accounted for on accrual basis and provisions are made for all ascertained and known liabilities and losses.

1.05 Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an property, plant and equipment comprises its purchase price, any costs directly attributable to bringing the property, plant and equipment into the location and condition necessary for it to be capable of operating in the manner intended by management.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in statement of profit and loss.

Depreciation amount for asset is the cost of an asset less its estimated residual value. In case of impairment, depreciation is provided on revised carrying amount over its remaining useful life.

1.07 Intangible Asset

Intangible assets comprises of application Software. Intangible assets are recognized, only if they are separately identifiable and have future economic benefits arising out of them, at cost less accumulated amortization and impairment, if any.

1.08 Amortization of Intangible Assets

Intangible assets comprises of Software & licences are amortized over the five years.

1.09 Impairment

The management assesses the carrying amount of plant and equipment and intangible asset at each balance sheet date to determine whether there is any indication of impairment based on internal/external resources. If any such indications exist, the recoverable amount of plant and equipment and intangible asset is a estimated.

An impairment loss is recognized wherever the carrying amount of an plant and equipment and intangible asset exceeds its recoverable amount. The recoverable amount is the greater of the plant and equipment and intangible asset’s, net selling price and value in use. An impairment loss is recognized in the statement of profit and loss in the year in which the plant and equipment and intangible asset is recognized as impaired.

1.10 Inventories

Inventories comprising of raw materials, work in progress and finished goods are valued at lower of cost or net realizable value. Cost here represents landed cost including custom duty in case of imports and is net of duty which is cenvatable or refundable. Cost of inventories is determined on FIFO basis. Net realizable value is the estimate of the selling price in the ordinary course of business less further cost expected to be incurred for its completion and disposal.

1.11 Borrowing cost

Borrowing costs which is attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes a substantial period of time to get ready for its intended use or sale. All other borrowing costs are charged to revenue in the year of incurrence.

1.12 Employee benefit expenses:

i) The company does not carry forward the balance of earned leave balance of employees, balance earned leave is paid to the employees according to the policy of company.

ii) Company''s contribution to Provident Fund and other Funds for the year is accounted on accrual basis and charged to the Statement of Profit & Loss for the year.

iii) Retirement benefits in the form of Gratuity are considered as defined benefit obligations and are provided on the basis of the actuarial valuation as at the date of the Balance Sheet.

1.13 Leases

Where Company is lessee, the lease payments under an operating lease are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term unless another systematic basis is more representative of the time pattern of the Company''s benefit. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the statement of profit and loss.

1.14 Foreign Currency Transaction:

a) Foreign currency transactions are recorded at the exchange rates prevailing on the date of the transaction.

b) Short term monetary items denominated in foreign currencies (such as cash, receivable, payable etc.) outstanding at the year end, are translated /re-converted at the year-end exchange rate unless covered by a forward contract.

c) Any gain or loss arising on settlement and / or translation of short term monitory transaction in foreign currency is accounted for in the statement of Profit and Loss.

1.15 Taxation

Income tax:

Current tax is determined as the amount of tax payable in respect of taxable income for the period calculated as per the prevailing provisions of Income Tax Law.

Deferred Tax is calculated on timing differences, being the difference between taxable income and the accounting income that originates in one period and are capable of reversal in one or more subsequent periods.

Deferred tax assets, subject to the consideration of prudence, are recognized and carried forward only to the extent that there is virtual certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.