Time table

Group	Subject	Day	Time	Number of hours	Total hours
1	Financial Accounting	Mon, Tue	9:00 AM – 12:00 PM	2 hours	4 hours
1	Applied Direct Taxes	Wed & Thu	9:00 AM – 12:00 PM	2 hours	4 hours
2	Cost & Management Accounting	Fri & Sat	9:00 AM – 12:00 PM	2 hours	4 hours
2	Applied Indirect Taxes	Sunday	2:00 PM – 4:00 PM	2hours	2 hours
Total hours per week					14 hours

Self test OM & IS June 2nd

So No	Chapter	Question	Source	Time Taken	Remarks
1	1	A shaft 1,000 mm. in length is being machined on a lathe. If the spindle executes 500 r.p.m. and the feed is 0.20 mm. per revolution, how long will it take the cutter to pass down the entire length of the shaft?	At the end of Study Material	-	-
2	1	Find the machining cost of a M. S. bar on a lathe from the following data: R. P. M. of the Job = 500. Feed of tool per revolution of job = 0.5 mm. Depth of cut = 2 mm. Diameter of raw material = 60 mm. Diameter of finished job = 40 mm. Length of Job = 1000 mm. Machining cost = Rs. 3 per hour.	At the end of Study Material	-	-
3	1	A shaft 500 mm. in diameter and 1 metre long is to be turned at a speed of 280 r.p.m. If the feed is 0.25 mm. per revolution, calculate the time taken for one pass of the cutter.	At the end of Study Material	-	-
4	1	A company is planning to undertake the production of medical testing equipments has to decide on the location of the plant. Three locations are being considered, namely, A, B and C. The fixed costs of three locations are estimated to be Rs. 300 Lakhs, 500 Lakhs and 250 Lakhs respectively. The variable costs are Rs. 3000, Rs. 2000 and Rs. 3500 per unit respectively. The average sales price of the equipment is Rs. 7000 per unit. Find (i) The range of annual production/sales volume for which each location is most suitable. (ii) Select the best location, if the sales volume is of 18,000 units.	At the end of Study Material	-	-

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OM & IS 1.0 Surface Treatment

Surface-treating processes are chemical or mechanical in nature and alter the surface characteristics of the
metal.
Eleven Types of surface treatment are briefly described below:
1) Anodizing: It is an electro-chemical process which gives a slight anticorrosion protection and improves
the appearance of the product. Unlike other types of surface treatment, this does not increase the
dimensions of the object. This gives a better finish. It is used in case of utensils, household appliances
etc.
2) Enamelling: It is a process that bakes on a white, brittle protection finish.
3) Galvanising: It is a hot-dip process which provides an anti-rust zinc coating. Zinc is used for this
purpose. This makes the surface of the metal anti-corrosive and gives a better finish.

4) Honing: It is an abrading operation for hole finishing done by a tool fitted with a bonded abrasive
stone.
5) Lapping: It is a surface smoothing operation by hand or machine.
6) Painting: It will yield protective coating and better appearance.
7) Plastic coating: This process is more durable than painting.
8) Plating: It is an electrolytic process. This can be done with the help of silver, chromium, cadmium,
nickel and copper. Plating provides anticorrosive finish.
9) Shot Blasting: Small shots usually in the form of iron balls are made to blast on the metal required for
making it resistance to wear and tear, remove the stresses and hardness.
10) Shot penning: It is air blasting the small shots against the metal surface in order to increase the hardness
of surface.
11) Tumbling: Castings are tumbled in a tumbling barrel together with an abrasive substance. The friction
created in this way will clean the surface.
Other surface treating processes may be such as:
• Buffing etc.
• Polishing,
• Power brushing,
• Sandblasting,
• Washing,
• Waxing

oM & IS 1.0 Welding Process:

Welding is a process of joining similar metals by the application of heat, with or without application of
pressure and addition of filler material.
“Welding consists of fusing metals together while they are in the plastic or molten state.” Gas and Electric
arc are used for the purpose of heat. Electrodes are used for filling in and reinforcement. There are 8
welding processes as mentioned below:
• Arc welding
• Brazing
• Flow welding
• Forge welding
• Gas welding
• Induction welding
• Resistance welding
• Thermit welding

OM & IS 1.0 Metal Working Processes:

Metal working processes involve operations on metals like cast iron, steel, brass, bronze, aluminium, etc,
with the help of machine tools like lathe, shaper, miller, grinder, planner, etc.
The following are the metal working processes:
• Finishing, plating, honing, galvanizing, anodising.
• Forming, casting, forging, hot-rolling, extruding.
• Heat treatment, hardening, tempering, annealing, normalising.
• Joining, welding, soldering, brazing, riveting.
• Machining, milling, plaining, shaping, grinding.
Metal working processes can be described as under:
Casting: A casting may be defined as a molten material that has been poured into a prepared cavity and
allowed to solidify. Casting may be classified as:
Sand Casting: It is used mainly for steel and iron and it can also be used for brass, aluminium, bronze,
copper etc. and relatively large amount of metal is to be removed.

Features of Sand Casting:
• Clay and water act as a bond.
• Compressed moist sand is used.
• Less costly.
• More machining of finished goods is required.
• More weight.
There are two methods of sand casting:
Green Sand Moulding and Dry Sand Moulding.
Green sand Moulding utilises a mould made of compressed moist sand. This method is not suitable for
large and heavy castings. In case of Dry sand Casting, the mould surfaces are given refractory coating and
are dried before the mould is closed for pouring. This method is useful for large and heavy castings.
Centrifugal Casting: The molten metal is poured into a hollow cylindrical mould, which is spinning and
the centrifugal force causes the liquid metal to flow to the outside of the mould and to remain there. Then
it is allowed to cool.
Die Casting: The dies are expensive but the advantage is that no finish machining is required in many
cases. This is limited to low melting point alloys.
Investment Casting: Machining the part made out of an alloy is very difficult and in such cases, the
investment casting is used.
Permanent Mould Casting: This is developed to avoid the above disadvantage. The advantages are smoother
finish, higher mechanical properties, good dimensional uniformity and ease of adaptability to automatic
high production. But this is having high initial cost of tooling and the size of casting is also limited by the
mould making equipment.
Plaster Mould Casting: Only one casting is made and then mould is destroyed. The advantages of plaster
are the superior surface finish, improved metal characteristics and good dimensional accuracy. But the
disadvantage is that the mould is destroyed each time.
Forming: Forming processes are those which accomplish the rough sizing or shaping of manufactured
articles. Any cutting tool which produces a desired contour on the work piece comes under forming process.
Heat Treatment: It is a process of heating and cooling metals in order to obtain certain desired properties.
Then the right combination of hardness and toughness is achieved for enabling the cutting tools to be able
to successfully machine other metals. In addition to hardness and toughness, this process will improve
heat and corrosion resistance and relieve stresses. The various types of heat treatment processes are briefly
discussed below:
1) Annealing: It refers to the heating and cooling operations which are usually applied to induce softening.
Annealing softens overly hard, overly brittle part, through heating, short of critical point, followed by
gradual cooling. Thus it relieves further the brittleness introduced by “hardening” and reduces metal
electricity slightly.
2) Case Hardening: This process involves two operations. The first is a carburizing process where carbon
is added to the outer surface by heating low carbon steel. The second operation is heat treatment of
the carburized parts so that the outer surface becomes hard.

3) Hardening Steel: Hardening is the process of heating a metal to the decalescence point, soaking it for
a considerable time to allow thorough penetration of the heat in the metal structure and then suddenly
quenching it in cold liquid.
4) Normalising: Normalising is the process, in which parts are allowed to cool in still air at room
temperature.
5) Quenching: Quenching is the process of rapidly cooling the metal from a high temperature. Rapid
cooling is required for obtaining high strength and hardness and the purpose is to harden steel so that
it can withstand wear and tear.
6) Tempering: Heat treatment should relieve stress as stated above. But after quenching, the metal is
hard and brittle. It requires reheating. Tempering is the process of reheating which will reduce the
brittleness and soften the steel.

(OM & IS ) 1.0 Fabrication Process

Fabrication (metal) Wikipedia


Fabrication is the process of forming, casting, machining and welding of metals.

A fabricating process modifies the physical characteristics of materials with the help of certain labour or
machine operations. It is generally applied in metal working industries. The fabricating process involves
changing the shape of materials and connecting the parts. Fabrication work involves several operations
like forging, gas welding, flame-cutting, etc.

Classification of Fabrication processes:


(A) Fabrication process concerning Iron Smelting: Metals are widely used for fabrication purposes in
most of the modern industries. Various metals like iron have-to be smelted to get them in virgin form.
Iron is obtained in free state as oxide and it is smelted in a Blast Furnace with the help of coke and
limestone.
(B) Fabrication Process concerning Making of Steel: Steel making involves re-melting the pig iron and
processing the molten iron to reduce the carbon content. Several other metals are then added to give
physical characteristics to the iron. This process is used in manufacturing high grade alloy steel because
of the improved control.
(C) Fabrication Process concerning Rolling of Steel: In this process, liquid steel is cast into ingots. These
rectangular pyramids are then rolled into blooms which square section lengths of steel. Blooms are
further heated and rolled into billets of smaller cross-section, which are then converted into various
fabricated lengths like beams, angles, rods, flats, sheets, plates, etc.
(D) Fabrication of Steel: The fabrication requirements are designed based and depends upon the
complexity of the process. It is done when steel materials are to be shaped in different forms.

OM & IS

Subject	OM & IS (Operation Management and Information System)
Study Note 1	Overview of Production Process
Index	Overview of Production Process
	1.0 Fabrication Process Metal working process, Forming, Heat treatment, Welding, Surface treatment

Capital and Revenue Losses

While ascertaining profit, revenue losses are differentiated from capital losses, just as revenue
profits are distinguished from capital profits. Revenue losses arise from the normal course of
business by selling the merchantable at a price less than its purchase price or cost of goods sold
or where there is a declining in the current value of inventories. Capital losses may result from
the sale of assets, other than inventory for less than written down value or the diminution or
elimination of assets other than as the result of use or sale (flood, fire, etc.) or in connection
with raising capital of the business (issue of shares at a discount) or on the settlement of iabilities
for a consideration more than its book value (debenture issued at par but redeemed at a premium).
Treatment of capital losses are same as that of capital profits. Capital losses arising out
of sale of fixed assets generally appear in the Profit and Loss Account (being deducted from
the net profit). But other capital losses are adjusted against the credit balance of capital profits.
Where the capital losses are substantial, the treatment is different. These losses are generally
shown on the balance sheet as fictitious assets and the common practice is to spread that over
a number of accounting years as a charge against revenue profits till the amount is fully exhausted.

Capital and Revenue Profits

While ascertaining the trading profit of a business for a particular period, a proper distinction
is to be made between capital and revenue profits. If profit arises out of an ordinary nature,
being the outcome of the ordinary function and object of the business, it is termed as ‘revenue
profit’. But, when a profit arises out of a casual and non-recurring transaction, it is termed as
capital profit. Revenue profit arises out of the sale of the merchandise that the business deals
in.
Generally, capital profits arise out of the sale of assets other than inventory at a price more than
its book value or in connection with the raising of capital or at the time of purchasing an
existing business. For example, if an asset, whose book value is Rs 5,000 on the date of sale, is
sold for Rs 6,000—Rs 1,000 will be considered as capital profit. Likewise, issue of shares at a
premium is also a capital profit. Revenue profits are distributed to the owners of the business
or transferred to General Reserve Account, being shown in the balance sheet as a retained
earning. Capital profits are generally capitalised-transferred to a capital reserve account which
can only be utilised for setting off capital losses in future. Capital profits of a small amount
(arising out of selling of one asset) is taken to the Profit and Loss Account and added with the
revenue profit-applying the concept of materiality.

Capital and Revenue Receipts

A receipt of money may be of a capital or revenue nature. A clear distinction, therefore,
should be made between Capital receipts and revenue receipts.

A receipt of money is considered as capital receipt when a contribution is made by the proprietor
towards the capital of the business or a contribution of capital to the business by someone
outside the business. Capital receipts do not have any effect on the profits earned or losses
incurred during the course of a year. Capital receipts can take one or more of the following
forms:
Additional capital introduced by the proprietor; by partners, in case of partnership firm, by
issuing fresh shares, in case of a company; and, by selling assets, previously not intended for
resale.
A receipt of money is considered as revenue receipt when it is received from customers for
goods supplied or fees received for services rendered in the ordinary course of business, which
is a result of the firm’s activity in the current period. Receipts of money in the revenue nature
increase the profits or decrease the losses of a business and must be set against the revenue
expenses in order to ascertain the profit for the period.

The following are the points of distinction between capital receipts and revenue receipts

Capital Receipts	Revenue Receipts
1. Capital receipts are not available for distri bution as profits	1. Revenue receipts are available for distri distribution as profits only after deducting revenue expenses.
2. Capital receipts cannot be utilised for creating a reserve fund.	2. Revenue receipts can be utilised for creating a reserve fund after deducting revenue expenses.
3. A business can survive without any accounting period.	3. The survival of a business mainly de capital receipts during an pends on the revenue  receipts during an accounting period.
4. Capital receipts are the sources for creating capital reserves.	4. Revenue receipts are the sources for  creating revenue reserves.

Deferred Revenue Expenditures

Deferred revenue expenditures represent certain types of assets whose usefulness does not
expire in the year of their occurrence but generally expires in the near future. These types of
expenditures are carried forward and are written off in future accounting periods. Sometimes,
we make some revenue expenditure but it eventually becomes a capital asset (generally of an
intangible nature). If one undertake substantial repairs to the existing building, the deterioration
of the premises may be avoided. We may employ our own employees to do that work and
pay them at prevailing wage-rate, which is of a revenue nature. If this expenditure is treated as
a revenue expenditure and the current year’s-profit is charged with these expenses, we should
be making the current year absorb the entire expenses, the benefit of which will be enjoyed for
a number of accounting years. To overcome this difficulty, the entire expenditure is capitalised
and is added to the asset account. Another example is an insurance policy. A business can pay
insurance premium in advance, say, for a 3 year period. The right does not expire in the accounting
period in which it is paid but will expire within a fairly short period of time (3 years).
Only a portion of the total premium paid should be treated as a revenue expenditure (portion
pertaining to the current period) and the balance should be carried forward as an asset to be
written off in subsequent years.

Replacement of Fixed Assets

The above rules of capital and revenue expenditure do not hold good when an existing asset is
replaced for another. If an asset is replaced with a similar kind of asset, the expenditure incurred
is treated as Revenue Expenditure. For example, if a set of weighing machines in a shop
becomes defective and is replaced with a similar set, the cost of replacement should be treated
as revenue expenditure and it should be charged to the Profit and Loss Account. However, if
an asset is replaced with an asset which is superior than the previous one, the expense is partly
capital and partly revenue. For example, if a manual typewriter costing Rs 5,000 is replaced
with an electronic typewriter costing Rs 15,000, then Rs 5,000 will be revenue expenditure and
the excess value of the new typewriter over the old one, Rs 10,000 will be capital expenditure.

Some examples of revenue expenditure

(1) Salaries and wages paid to the employees; (2) Rent and rates for the factory or office
premises; (3) Depreciation on plant and machinery; (4) Consumable stores; (5) Inventory of
raw materials, work-in-progress and finished goods; (6) Insurance premium; (7) Taxes and
legal expenses; and (8) Miscellaneous expenses.

Rules for Determining Revenue Expenditure

Any expenditure which cannot be recognised as capital expenditure can be termed as revenue
expenditure. A revenue expenditure temporarily influences only the profit earning capacity of
the business. An expenditure is recognised as revenue when it is incurred for the following
purposes:
Expenditure for day-to-day conduct of the business, the benefits of which last less than one
year. Examples are wages of workmen, interest on borrowed capital, rent, selling expenses,
and so on.
Expenditure on consumable items, on goods and services for resale either in their original or
improved form. Examples are purchases of raw materials, office stationery, and the like. At the
end of the year, there may be some revenue items (stock, stationery, etc.) still in hand. These
are generally passed over to the next year though they were acquired in the previous year.
Expenditures incurred for maintaining fixed assets in working order. For example, repairs,
renewals and depreciation.

Some examples of capital expenditure:

(1) Purchase of land, building, machinery or furniture; (2) Cost of leasehold land and building;
(3) Cost of purchased goodwill; (4) Preliminary expenditures; (5) Cost of additions or extensions
to existing assets; (6) Cost of overhauling second-hand machines; (7) Expenditure on
putting an asset into working condition; and (8) Cost incurred for increasing the earning capacity
of a business.

Rules for Determining Capital Expenditure

An expenditure can be recognised as capital if it is incurred for the following purposes:
An expenditure incurred for the purpose of acquiring long term assets (useful life is at least
more than one accounting period) for use in business to earn profits and not meant for resale,
will be treated as a capital expenditure. For example, if a second hand motor car dealer buys a
piece of furniture with a view to use it in business; it will be a capital expenditure. But if he
buys second hand motor cars, it will be a revenue expenditure because he deals in second hand
motor cars.
When an expenditure is incurred to improve the present condition of a machine or putting an
old asset into working condition, it is recognised as a capital expenditure. The expenditure is
capitalised and added to the cost of the asset. Likewise, any expenditure incurred to put an
asset into working condition is also a capital expenditure.
For example, if one buys a machine for Rs 5,00,000 and pays Rs 20,000 as transportation charges
and Rs 40,000 as installation charges, the total cost of the machine comes upto Rs 5,60,000.
Similarly, if a building is purchased for Rs 1,00,000 and Rs 5,000 is spent on registration and
stamp duty, the capital expenditure on the building stands at Rs 1,05,000.
If an expenditure is incurred, to increase earning capacity of a business will be considered as of
capital nature. For example, expenditure incurred for shifting ‘the ‘factory for easy supply of
raw materials. Here, the cost of such shifting will be a capital expenditure.
Preliminary expenses incurred before the commencement of business is considered capital
expenditure. For example, legal charges paid for drafting the memorandum and articles of
association of a company or brokerage paid to brokers, or commission paid to underwriters for
raising capital.
Thus, one useful way of recognising an expenditure as capital is to see that the business will
own something which qualifies as an asset at the end of the accounting period.

The accounting treatment of capital and revenue expenditure are as under:

Revenue expenditures are charged as an expense against profit in the year they are incurred or
recognised. Capital expenditures are capitalised-added to an asset account.
The following are the points of distinction between capital expenditure and revenue expenditure:

Capital Expenditure	Revenue Expenditure
1. Capital expenditures are incurred.	1. Revenue expenditures are incurred for more than one accounting for a particular accounting period. period.
2. Capital expenditure are of	2. Revenue expenditures are of non-recurring nature. recurring nature.
3. All capital expenditures eventually	3. Revenue expenditures are not generally become revenue expenditures. capital expenditures.
4. Capital expenditures are not	4. All revenue expenditures are matched matched with capital receipts. with revenue receipts.
5. Capital expenditures are incurred	5. Revenue expenditures are incurred before or after the commencement always after the commencement of of the business. the business.