Illustration 1. Jivandeep Ltd. had made a right issue in 2010. In the offer document to its members, it had projected a surplus of * 40 crores during the accounting year to be ended on 31st March 2012. The draft results for the year prepared on the hitherto followed accounting policies and presented for perusal of the Board of Directors showed a deficit of 10 crores. The Board, in consultation with the Managing Director, decided on the following: (0) Value year-end inventory at works cost (50 crores) instead of the hitherto method of valuation of inventory at Prime Cost R 30 crores). (ii) Provide depreciation for the year on straight line basis or account of substantial additions in gross block during the year, instead of on the Reducing Balance Method, which had been hitherto adopted. As a consequence, the charge for depreciation at 27 crores is lower than the amount of 45 crones - which would have been provided had the old method been followed-by 18 crores. (ii) Not to provide for "after-sales expenses" during the warranty period. Till the last year, provision at 2% on sales used to be made under the concept of "matching of cost against revenue" and actual expenses used to be charged against the provision. The Board now decided to account for expenses as and when actually incurred. Sales during the year total to 600 crores. 2.4 I FINANCIAL ACCOUNTING (iv) Provide for permanent fall in the value of investment-which fall had taken place over the past 5 years-the provision being 10 crores. As chief accountant of the company, you are asked by the Managing Director to draft the Notes on Accounts for inclusion in the annual report for 2011-2012