Online Learning through Bookmarks

Every student want to know, new idea of learning. As a teacher, I am always ready to research and bring a new technique for better learning. Yesterday, I learned bookmarking and its uses for learning purpose. All of you know, when you like any website, what do you do? Simply add it in your "my favorites." It is nothing but bookmark of that educational site. But if you have installed google toolbar, then you will see starred button in it. When you see any good page which has any learning value, just click start button on google toolbar for future reference.

Now, you can share your learned site with world. Yes, when you like and click star button for bookmarking, it will be added to your bookmark account where you can share it to the world. I shared also my learned sites with world through clicking  public option in google bookmark. You can see my public bookmarks list at here.

List of my studied topic on net

Searching of my interested topic on bookmarks search box

It has three benefits:

1st Benefit # You will reserve learned sites as database for future revision

2nd Benefit # You can share it with world. Because you have liked it, it means, it may be useful for others.

3rd Benefit # Through bookmarking search, you can search your interested topic and you can find quality result because these result are liked by many other readers who already read these websites.

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Significance of Financial Management

Significance of financial management can not be forgotten if you have to survive in business in long run. With financial management, we take the decision of taking fund from different sources and its effective use in different operations of business. If we ignore financial management and use fund without any financial planning, our risk and cost of business will increase. Except this, financial management is important for developing a strategy to enhance the efficiency of your business.

Significance of financial management can also be explained from following answers of questions :

Q: - 1. Why are fixed assets financed out of long term funds?

Ans. # A prudent financial management is helpful to make a capital structure which is sound. Our aim will reduce risk of solvency. With this management, we will buy fixed assets out of long term funds. Long term funds have to pay after 10 or 20 years. So, we can easily repay this fund out of our profit. If we will finance fixed assets out of short term fund, it may be risky because if we will not pay this fund on its maturity, we can not carry our business long and  we can not also sell our fixed asset in very short time. The result may come in the form of insolvency of business. So, we never take any solvency risk and try to understand the importance of financial management.

Q: - 2. Why do we invest in current asset at optimum level?

Ans. #  Financial management teaches us to invest money in current assets at optimum level. Both over and under investment is harmful. Main reason of this is to reduce cost and increase return on investment. Under and over investment in current asset will increase the cost and reduce return. I can explain this issue with following simple example. With this you can understand the significance of financial management. Suppose, if a company takes loan of Rs 100000 @ 10% interest rate and same amount is invested in inventory. It is not good because it can not say optimum investment in current asset. Some inventory may be scrape, some inventory may be outdated, if inventory will not sell, we have to suffer carrying cost. So, our overall cost will increase. So, analyze this investment through proper inventory and other current asset management.

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Types of Working Capital

When I already wrote types of working capital in working capital management, then why am I writing here again types of working capital. It has two reason, one is explain types of working capital more detail. Second, I want to create link in working capital management, so that when any student will be interested to know the types of working capital in detail, he or she can come here for reading and studying. So, Now, I am concentrating on types of working capital.

1. Gross working capital

Total or gross working capital is that working capital which is used for all the current assets. Total value of current assets will equal to gross working capital. In simple words, it is total cash and cash equivalent on hand. But remember, we do not account of current liabilities in gross working capital.

2. Net Working Capital

Net working capital is the excess of current assets over current liabilities.

Net Working Capital = Total Current Assets – Total Current Liabilities

This amount shows that if we deduct total current liabilities from total current assets, then balance amount can be used for repayment of long term debts at any time. It also measure of both a company's efficiency and its short-term financial health.

3. Permanent Working Capital

Permanent working capital is that amount of capital which must be in cash or current assets for continuing the activities of business. It also shows  the minimum amount of all current assets that is required at all times to ensure a minimum level of uninterrupted business operations.

4. Temporary Working Capital

Sometime, it may possible that we have to pay fixed liabilities, at that time we need working capital which is more than permanent working capital, then this excess amount will be temporary working capital. In normal working of business, we don’t need such capital.

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What is the Biggest Mistake That You’ve Made as a Accountant?

It’s time for a reader discussion thread and today’s question is:

What is the Biggest Mistake That You’ve Made as a Accountant?

What in your time as a accountant do you look back on with regret, wish you’d not done or wish you’d done differently?

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Read Best 5 Posts Out of 1500 Posts in Accounting Education

Accounting Education is a website run by me that is dedicated to helping students and accountants learn the skills of accounting, share my own experiences. I started it in September 2008 mainly because I wanted to keep a record of what I was learning about accounting. Since then I have added articles, tips, tutorials and case studies to its archives. Now, accounting education crossed 1500 posts. All contents are written after hard work. It is very difficult to select 5 best posts out of 1500 posts. So, I am selecting top 5 posts on the basis of your traffic. It means the post which users like to you read many times. I am also telling you the interesting story behind writing these posts in accounting education.

#1. Journal Entries Examples

This post was published on 12 July 2010 and more than 4500 page views is received by this post. When, I was making planning to write this post, I was interested to show the reason of debit or credit of any transaction. So, I took some transaction and explained it which was liked by readers.

#2. Working Capital Management

It was time of mid Feb. of 2010 when I was busy for making finance chart for showing it in heading links and keeping it as showpiece. At that, I deeply studied working capital management and then wrote and it got more than 3500 hits.

#3. Fiscal Policy

Fiscal policy is the part of public finance. Knowledge of public finance turns around the fiscal policy. So, I believe, you should read this.

# 4. Successful Women Entrepreneurs in India

Actually, one day, I was reading the profile of Indian woman who succeeded in his business career. I inspired from her. After this, I wrote the content successful woman entrepreneurs in India and result is your front. It must be read to those Indian women who want to stand on their own feets.

# 5. 5 Steps for Filing e-TDS Return with No Trouble

Some years ago, I learnt auditing work under a CA. There, I operated E-TDS return software. So, I was interested to mention the correct and simple of procedure of e-TDS return. All those who are interested to do tax related work should read above content.

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Dividend Policy

When we revise dividend policy in management accounting, it may be feasible that many things, you can consider and many questions may come up in your mind. Some of these questions answer, already available, so read first about dividend, types of dividend and cost of equity share capital. Now, we study different things in dividend policy through the help of content sites.

Q: - What is Dividend Policy?

Investopedia says, "The policy a company uses to decide how much it will pay out to shareholders in dividends."

Q: - What are the main determinants of dividend policy theories?

Articlesbase says," Dividend policy has 4 theories.

First theory is Residual Theory of dividend policy

The essence of the residual theory of dividend policy is that the firm will only pay dividends from residual earnings, that is, from earnings left over after all suitable (positive NPV) investment opportunities have been financed.

Second theory is Dividend Irrelevancy Theory

Dividend irrelevancy theory asserts that a firm’s dividend policy has no effect on its market value or its cost of capital. The theory of dividend irrelevancy was perhaps most elegantly argued by its chief proponents, Modigliani and Miller (usually referred to as M&M) in their seminar paper in 1961.

Third theory is the Bird-In-The-Hand Theory

Under this theory, Shareholders consider dividend payments to be more certain that future capital gains – thus a “bird in the hand is worth more than two in the bush.

Fourth theory is Dividend Signaling Theory

In practice, change in a firm’s dividend policy can be observed to have an effect on its share price – an increase in dividend producing an increasing in share price and a reduction in dividends producing a decrease in share price.

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Statement of Activities

Statement of activities is just like income statement of a company. Only different is that it is made in NGO. It is vertical report which shows shows all revenue first and then shows all expenses. Difference of revenue of will be calculated. It will be increase in net asset, we will add the net asset at the beginning of year. Total of net asset during the year and net asset at the end of year will be net asset at the end of year.

Statement of Activities Example

Following example of Activities will show you, which items will include in this statement?

One question may thing, "Why is statement of activities different from income statement?"

Because one reason is that we can not show capital in NGO, we can only show net asset and any profit will include beginning net asset. If you deeply see above statement of activity, you can find, how was money of donor spend? because revenue shows first and then expenses. It means if we earned 100% from donation. We can find in which expenses, we spent more and in which expenses, we spent less.

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How to Receive Money From Western Union

To Receive money from Western Union is one of simple way. One of my best friend is operating an NGO and he told me that he received money through Western Union. Donor just tells him a code and he gets donation fund by telling this code to his local agent of Western Union. Western Union has opened the doors for receiving money faster from foreign countries because receiving money from western union is quick, easy, and free compared to receiving money from conventional checks, as we don’t have to wait checks to arrive. Moreover Western Union exchange rate is lower than bank. So, you will learn  its simple steps here, "how can you receive money from Western Union?"

1st Step : Deposit Money and Get MTCN Code

Suppose your wife want to get money from western union, for this, just go to your western union and deposit money. After this you will get MTCN Code. MTCN means material transfer code number.

2nd Step : Send MTCN to those Who want to Receive Money From Western Union

If your wife is living in India and you are living in USA. You have to send MTCN code. This code, you can send either sms or email.

3rd Step : Visit an Agent location

Provide the Agent with the following information:

• The Money Transfer Control Number (MTCN) from your Sender's receipt is required.
• Sender's first and last names.
• City and country the money was sent from.
• The amount that was sent.
• Your first and last names, address, and telephone number.
• Simply give the Agent your identification card.

 STEP 4: Sign the Receipt

Review and sign the receipt that the Agent gives you.

 STEP 5: Receive the Money

The Agent will give you the money that was sent to you with a copy of the receipt and you are on your way.
This time, it’s only need less than 20 minutes to process! With checks? It could be more than 2 months.

Related : Sending Money Overseas Online

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Social Cost Benefit Analysis

Social Cost Benefits Analysis means to analyze the social cost and total social benefits if we accept any project. We all know that for completing the big project, we need big investment. In social cost benefit analysis (SCBA), we see whether return or benefits on this investment are more than its cost from point of view of society in which we are living.

In public investment, we analyze and compare government expenditure with total benefits to society through SCBA.

It is also good technique of financial evaluation of a project because we leave that project whose benefits to society are less than total cost which will to society because all resources are from society.

Problems which can be solved by Social Cost Benefits Analysis

1st Problem: Rationale for SCBA

a) Market imperfection :

We will not analyze social cost benefit; we can not find market imperfections. After study of market rates following factors come in to our knowledge.

i) Rationing factor : It means some of raw material prices are controlled by Govt. So, it may increase our project cost but its social benefit will go to poor community.

ii) Regulation for providing minimum wage factor: It also affects social cost and benefits of any project. Because company must have to pay this minimum wages.

iii) Foreign Exchange Regulations factor: Sometime, we have to deal at currency rate which is less than actual market rate due to regulation on FOREX. So, we should analyze this point also.

b) Externalities :

Externalities are non-cash or benefits which an organization suffer or get if it starts the project. For example, if govt. makes road near your project plant, you can get this facility without any payment. On the other side, if any other organization is polluting and spreading diseases, its cost may suffer due to absence of your employee for going to hospitals.

c) Tax and Subsidies:

Tax is payment on the earning of the project and it will reduce our overall benefits. On the other hand, if govt. gives us subsidy for operating any project, it will count for our cost benefit analysis.

2nd Problem: What is net benefit to society from a project?

With UNIDO approach, we can evaluate net benefit from any project. Formula is given below




3rd Problem: To Know the Effect of using one more Unit of Resources

With shadow price, we know the effect of using one more unit of resources on the social cost and benefits. Shadow pricing is relating to decision of project manager. Before accepting the project, we have to find the price if we have to use extra unit of resources. Suppose, we have to use one more hour of labor, what will we pay and what will its effect on social benefits.

More Resources of Analysis in Finance:
1. Fund Flow Analysis
2. Break Even Point Analysis
3. Option Analysis
4. Decision Tree Analysis
5. Investment Analysis
6. Leverage Analysis
7. Financial Analysis
8. Ratio Analysis
9. Cash flow Analysis
10. WCM Analysis

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LIC Housing Share Price Decreased After Corporate Loans Scam

Today, after opening the closing doors of LIC Housing's corporate loans scam, its share price has decreased. After  the CBI arrested its CEO in connection with an alleged housing finance racket, LIC Housing Finance, it hit the faith of its shareholders. That is the reason, you can see (- 18.32% ) reduction in share prices of these banks (Updated data).

Top Financial Newspapers are writing,

Central Bank of India, PNB, LIC and LICHF were receiving illegal gratifications from the private financial services company who were acting as mediators and facilitators for corporate loans and other facilities from financial institutions.

It means after common wealth games corruption and 2G corruption in politics, now corporate sector of India is becoming big area of corruption. What will be the benefit of getting higher education like CA and cheating with poor and middle people. Maninder Singh Johar, Director  of Central Bank of India  is a chartered accountant, then we are seeing this scam. How sad !

One side, some Indians want to develop India by investing their money in the shares of corporate sector. Other side, some Indians are making planning, "how to misuse this fund?" How sad!

{Good news -  investigating authority CBI is awaking and arresting to those who took  bribes
I think this will be helpful to bring confidence in the mind of investor that no one can easy cheat us. }      

Related : Accounting Scandal Article

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Meaning of Overstated

Overstated is that amount which is more than correct amount in the account. It is error of commission and it can rectify by passing rectify entry. For instance, If outstanding wages are wrongly written Rs. 12000 but actual outstanding wages are Rs. 10,000, then Rs. 2000 is overstated and its bad effect will be on wages account because wage account will also overstated with Rs. 2000 and our profit will reduce with Rs. 2000. So, to rectify to overstated error is must.

More Resources:
1. How to Rectify Errors?
2. Meaning of Rectification of Errors?
3. Different Types of Errors in Accounting?

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Career Guidance of Accounting

Problem

Sir,

I am an MBA in Finance and Commerce Graduate. I started my career in Marketing of Financial Instruments and Automobiles Loan. Unfortunately I met an vital accident and suggested by Doctors not to move frequently and I had to drop my career of marketing, collection and recovery of Loans which needed frequent movements on T/W and Four Wheelers.

After that I changed my career line and came in the Field of Accounting. Presently I am working as Dy Manager - F&A with a manufacturing unit. Here the products are intermediately produced and are transferred to other-units of the company, so no much activities is here and no scope of learning.

I want to excel my career and trying to change my job, but not getting proper response from Market, as I do not have much exposure in Accounting, Taxation or Finance.

So, I want to take some professional and practical training as well as guidelines from some experience persons / institute to provide wings for acceleration of my career.

So, please give me the best suggestions and oblige.

Awaiting your response.

Regards,

Solution

Dear,

           First of all, I say that life is flowing  of water and like flowing water you will have to cross different places. Means you have to face different problems, difficulties and mishappenings in life. I am happy, you have faced it and after this, you have taken very good decision. Now, you have to motivate yourself for positive thinking. You are already MBA Finance and commerce graduate.

 I think, if you study again accounting and will start to read all updates relating to accounting, soon you will feel in home at accounting and finance. Market gives response only those who are perfect to do everything relating to accounting. If you are not perfect in every work of accounting, then it is not difficult for you to rise all such qualities which need for becoming professional  in Industry. Everything is in your hand. Trust me, no accident or no anything will make you helpless, if you decide to live independent physically and  financially.

In end, I will say only, if you feel that you have deep knowledge of accounting and finance, you need not do any job in any company. You can become independent accounting and finance professional. With your accounting knowledge, you can not only help to Indian companies but through Knowledge process outsourcing, you can give your accounting services at international level. E-accounting, Investment research services and other financial consultancy services can open new doors for you. My best wishes are always with you.

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Time Table of Study

Time table of study is the main part of your study habit. Some students want to know what time, they should learn, so that they will get merit in examination. Some students may also think about which time should they study which book?  Time table of study may not be equal to every class and every subject. For example study of CA need more time for solving problems than 10+2 Commerce. So, no student can fix study time for every class.

Gold time of study is morning time. After 6 to 7 hours rest, human brain is more alert at the time of morning. So, if you have to study those learning material which your remember life time, then it must be learnt at just beginning of morning. Get up at 4:00 A.M. After fresh, you can study 4:00 A.M. to 5:00 A.M.

After one hour rest, you should take rest and refresh by drinking water or eating fruit or juice or walking in park. If examinations are near, you can fix days for each book. Suppose, your examination will have to start in next month. You have 30 days for study and revise your 5 books. After dividing 30 days with 5, you calculate 6. It means, now, you have6 days to study each subject. Open your book from beginning to end. Study it 3 hours in morning and 3 hours in evening and rest time, you should enjoy. You must leave some time for checking your progress after study. Suppose, if you study at morning time, then provide 1/2 hrs for taking your own test daily.

1/2 revision time will be the revolution of your 6 hours study time. When you spend your study money for revising, you will definitely shoot your examination target. Remember, good time table of study is helpful to shine you in the field of education.

{Know complete time table of student from morning to night at here. }

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What is the Best Definition of Profit Maximization

If anyone ask from me "What is the best definition of Profit Maximization?" I will say that it means trying to reach at highest profit level where risk can be controlled. We all know " More risk, more profit". So, definition of profit maximization also the conveys the idea of risk maximization. If we are doing best to earn highest profit at uncontrollable risk of loss of capital of business, we can't define this profit maximisation as best definition.

Profit maximization is optimum and balanced profit trend when we are keeping our bird eye on the profitability of business. At that time, we will see all risk where we are losing our capital. In company, capital represent the stakeholders equity, so, administration can just to increase profit by improving their employee's efficiency, productivity and cost reduction techniques.

We also maximize our profits by application of resources to a unique set of coordinated activities, with a defined start and finish, undertaken to meet specific objectives within defined cost and performance parameters.

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Financial Evaluation

Financial evaluation of a project is analysis of a project for checking whether project is profitable or not before taking project in hand. We also review the project by investigating its cost, risk and return. If we have lots of alternatives projects, then we select best project on the basis of financial evaluation. In simple words, we uses following tools for financial evaluating of a project.

1. Evaluate the Cost of Project

First thing which we see before take the any project from financial point of view is to evaluate the cost of project. Whether cost of project is good according to its quality or not?

2. Time Value of Investment in Money

Time value of investment in money is the importance factor which affects the decisions of financial evaluation of any capital investment because we check the profitability of project according to time. Today earned one rupee from any project is better than one rupee earned after one year because we can get interest one rupee which has earned today.

3. NPV

NPV is also good tool of financial evaluation. If we have two project and we have to choose any one best project, then we will check NPV of each project. We will accept that project whose NPV will higher. NPV means net present value. It is excess of present value of cash inflows over present value of cash outflow.

4. IRR

IRR is internal rate of return. It is that rate where the total present value of cash inflow is equal to the present value of cash outflow. So, if any project gives use this earning rate, we will accept that project.

5. Pay back period

Pay back period is not non-discounting technique of financial evaluation. In payback period, we find the total time in which our project will give use profit equal to our initial cost. If payback period of one project is less that payback period of second project, then we will select first project instead of accepting second project because less payback period will be better than longer payback period for financial evaluating of any project.

6. Risk Evaluating

We also analyze different risks relating to financial evaluation of any project. Risk may be liquidity, solvency or interest or any other. After this, we see whether we have ability to manage these risks, if not, then, we leave that project for projecting our business.

Related : Lecture of Prof. Arun Kanda on Financial Evaluation

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Response of Complaint against PNB

Today is 20th Nov. 2010 and I got one response of my complaint against PNB which I wrote to RBI's regional branch. Actually, my complaint has forwarded  to local branch of PNB where is my account. Higher authority told local bank manager to solve my problem. But my problem way totally IT.  I am satisfied from the local branch of PNB. My problem should be forward to the IT Officer at higher level and answer should be given of my problem.

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Linkedin Career Tree of Prof. Vinod Kumar

Above Linkedin Career Tree shows Prof. Vinod Kumar's  education and the work experience. The size of the circles represent the relative time spent for getting education and experience.

The tool is in  Newsweek.com which has been used  for visualizing  Prof. Vinod Kumar's education and work experience in a tree like structure.  If you want to make also your Career Tree, first of all you make your linkedin profile and then you have to import your LinkedIn profile in above newsweek.com site. After this, you can share this visualized tree in any social networking site.

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Lecture of Prof. Arun Kanda on Financial Evaluation of a Project

Prof. Arun Kanda

Prof. Arun Kanda is very intelligent professor of Department of Mechanical Engineering, IIT Delhi. Not only on expert in mechanical engineering, he has also deep knowledge of financial and project management. Today, I saw his lecture ( 54 minutes and 40 second)  on  topic "Financial Evaluation of capital Decisions." In this lecture he explains key factors which affect the decision of investment in any capital project.

Here, we are discussing , what key factors, he discussed in his factor. Prof. Arun Kanda told that for analysis of any project financially, we have to calculate NPV, IRR and also payback period. All these are the best tool for comparing different project. If NPV is higher, it means this project is more valuable for us. If  IRR is higher, that project is best for us. We also analyze the payback period. Short payback period project is better than long payback period project.

Prof. Arun Kanda also explains that cash inflow is just like revenue of each year. If we have to calculate NPV, we should know revenue after tax. For calculating revenue after tax, we have to calculate depreciation. Profit after deducting depreciation can be used for calculating tax. Then after calculating tax, we calculate profit after tax but before depreciation. Suppose, our profit is 10,000 and depreciation is Rs. 100. Balance of profit will be 9900. Now, tax is calculated on this 9900. Suppose tax rate is 10% and then tax is Rs. 990. Now we will deduct tax from the profit before depreciation.

* {Note : Depreciation is not cash outflow. So, it will not decrease cash profit amount. }

Profit after tax but before profit will be 10000 - 990 = 9010. This will be used for calculating of NPV.

Prof. Arun Kanda explains each tool of evaluating financial project in presentation form. Way of providing lecture is very nice.

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Types of Dividend

Cost of capital or Dividend is not one type but there are lots of types of dividend and as a commerce student, you should know all these types of dividend because when you will do the professional accounting work in corporate sector, you will certainly responsible to calculate dividend, its provision and at that time all these fundamentals of corporate accounting will be helpful for you for doing your practical accounting work.


 So, study following Types of Dividend in detail :

1. Interim Dividend

Dividend which is given between two annual general meeting before declaring final result of company.

2. Proposed Dividend

Total amount of dividend which is offered to existing shareholders of company.

3. Final Dividend

Final dividend is given after declaring the final result of company in the form of financial statements. Final and proposed dividend will same if interim dividend is given in trial balance and final dividend is given outside of trial balance.

4. Unclaimed Dividend

Unclaimed dividend is that dividend which declared by not claimed by a specific shareholder. Suppose, information of dividend was sent but letter was returned to company due to any reason.
It will be shown in liability side till payment of dividend  will not received by shareholder.

5. Liquid Dividend

Liquid dividend is that dividend whose payment is issued in cash or check or depositing in the account of shareholder.

6. Stock Dividend

If payment of dividend is made in the form of issuing new shares to existing shareholders.

7.  Dividend in Asset Form

If company is unable to pay dividend in cash or share form, company can pay dividend by giving any his asset as gift form. Then, this type of dividend will be asset form dividend.

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What is Final Dividend?

 When Board of directors of company declares dividend in annual general meeting after finding the real net profit position and financial position through financial statements. That declared dividend  is called final dividend. It is totally different from Interim Dividend because final dividend is based on actual profit instead of estimation of future profit.

Accounting treatment of interim dividend in final accounts of company :-

 To show in profit and loss appropriation account : If final dividend is given outside the trial balance, we will calculate it on the basis of equity shares. It will be debited to the profit and loss appropriation account after deducting interim dividend which has already shown in trial balance.

To show in balance sheet : We will also show same final dividend to the liabilities side of  balance sheet under the heading of provisions because it is just like current liabilities because next year, it will be show in the trial balance when we will pay it.

Final Dividend Problem

Adjustments outside the Trial balance

 Wholesales Traders Pvt. Ltd. company declared final dividend @ $ 5 per share after seeing its final profitability position.

Trial balance shows

interim dividend 16800

issued capital (of Rs. 10 per ) Rs. 420000

Solution

To show 420000/10 X 5 - 16800 = 193200 in profit and loss appropriation account and in the liabilities side of balance sheet as final dividend payable.

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Process Costing Problems and Solutions

Today, we taking  process costing problems in one process costing question. We will also provide its solutions for clearing the question.



Solutions of Process Costing Problems

• In this problem, we show three process for converting raw material into finished stock. It means, we have to make three process account. Process 1 account will show raw material and wages and closing stock and gross profit on closing stock and balancing figure will be transfer amount for second process

Simple formula for calculating transfer amount

Cost of  transfer = ( Raw material + Wages - Closing Stock )

Transfer price with Gross profit = Cost of transfer + Gross profit % on Cost of transfer.

• In above process 1 account, you see that there is no amount of profit of closing stock because in first process, we only buy raw material on cost. But when we transfer stock from one process to second process, we have to deduct closing stock's profit in profit column of process 2 account. Following formula will apply for calculating the profit of closing stock in process 2.

Process 2's closing stock - ( total cost column  of process 2 / total of total column of process 2 X process 2' closing stock)

4000 - 18000/2000 X 4000 = Rs. 400

Simple formula for calculating transfer amount from process 2 to 3

Cost of  transfer = ( Raw material + Wages - Closing Stock )

Transfer price with Gross profit = Cost of transfer + Gross profit % on Cost of transfer.

• Like process 2 account, we will make process 3 account and we will show profit on closing stock of third process with following way

Process 3's closing stock - ( total cost column  of process 3 / total of total column of process 3 X process 3' closing stock)

6000 - 24400/30000 X 6000 = 1120

Profit on closing stock of finished stock

3000 - 19520 /30000 X 3000 = 1048


Simple formula for calculating transfer amount from process 3 to finished stock

Cost of  transfer = ( Raw material + Wages - Closing Stock )

Transfer price with Gross profit = Cost of transfer + Gross profit % on Cost of transfer.




b) Actual realised profit can be shown as under

Process 1

apparent profit from process  2000

Less unrealised profit in
closing stock                          Nil
----------------------------------------

Actual profit (Gross) 2000
===========================

Process 2

apparent profit from process  4000

Less unrealised profit in
closing stock                          400
----------------------------------------

Actual profit (Gross) 3600
===========================

Process 3

apparent profit from process  6000

Less unrealised profit in
closing stock                          1120
-----------------------------------------

Actual profit (Gross) 4880
===========================

Finished Stock

apparent profit from process  9000

Less unrealised profit in
closing stock                          1048
----------------------------------------

Actual profit (Gross) 7952
==========================

Total Apparent profit  21000

Less total unrealised profit in closing stock 2568

-------------------------------------------------
Total actual profit (gross) 18432
=================================

c) Stock valuation for balance sheet purpose

Process 1→  2000
Process 2→ 3600
Process 3→ 4880
Finished stock → 1952
-------------------------------------------------
Total → 12432
================================

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How to Estimate the Cost of a Project

To estimate the cost of project is just like to estimate the cost of any product. But it is not so easy because a big project like construction of building may be divided in sub-projects. So, it is duty of project manager to find the cost of all sub-projects for estimating the cost of that big project.  If you estimate the cost of a project before starting any project, it will reduce your project cost and you can show estimated price of project. These days, project manager uses MS Project for estimating project cost.


1st Step : To Determine the WBS

WBS structure shows the scope of project in a simple graph and we can know all sub- projects whose cost, we have to estimate.

2st Step: To Determine the requirement of Raw material

For completing every type of project, we need raw material. What quantity will require for completing the project. To determine it will be the first step to estimate the cost of project.

3nd Step : To Determine the Market Rates of Raw Material

Go to market and check the market rates of Raw material. Suppose, if you want to make rice product and 1121 Banspati Rice’s today price is Rs. 2500 per quantal. So, before choosing best price, you must see quality and other competitor’s price.

4rd Step : To Determine the Estimated Cost of Raw Material

Just multiply estimated price of raw material with total quantity of raw material requirement.

5th Step : To Determine the Labor Cost of Project

Go to market and check the labor hour rate and also analyze the total requirement of laborers for completing the project. Calculate labor cost with following formula

= No. of laborers X Total working hours X Labor hour rate

6th Step : To Determine other Overheads

For estimating project cost, we should also determine other overheads and then add it to the estimated prime cost of project. Only after this, we can estimate the project cost.

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Work Breakdown Structure in Project Management

In project management, work breakdown structure shows  the total scope of any project in diagram form. The Work Breakdown Structure is a tree structure, which shows a subdivision components in terms of size, duration, and responsibility for completing the project.

A Work Breakown Structure is used for breaking down a project into easily manageable components, or bites. The WBS provides the foundation for project planning, cost estimation, scheduling and resource allocation. This also allows for better estimating of cost, risk, and time because you can work from the smaller tasks back up to the level of the entire project.

The psychologists say our brains can normally comprehend around 7-9 items simultaneously. A project with thousands or even dozens of tasks goes way over our ability to grasp all at once. The solution is to divide and conquer. The WBS helps break thousands of tasks into chunks that we can understand and assimilate.

A $1,000,000,000  project can simply divide into a lot of $50,000 projects. All these $50,000-$50,000 projects will be WBS of one big project.

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2 Main Mutual Funds in Bangladesh

Bangladesh is very small country in South Asia. The borders of present-day Bangladesh were established with the partition of Bengal and India in 1947. Like India, it is still a developing country. In December 2005, the Central Bank of Bangladesh projected GDP growth around 6.5%. All most all the mutual funds are created by its banks. Following are 2 Top mutual funds in Bangladesh.

1st ICB Mutual Fund - Investment Corporation of Bangladesh

In Bangladesh ICB has pioneered Mutual Funds for the sake of investors and of the capital market. ICB Mutual Funds are independent of one another. A Mutual Fund being listed is traded on the Stock Exchanges. Price of Mutual Fund certificates after IPO is determined on the Stock Exchanges through interaction of supply and demand. The market price of a Mutual Fund certificates is available in Stock exchange quotations and in newspapers.

2nd Grameen Mutual Fund - Grameen One - AIMS of Bangladesh

AIMS of Bangladesh is the Asset Manager for the Grameen Mutual Fund One, the second closed-end private mutual fund in Bangladesh, the Grameen Mutual Fund One sponsored by the Grameen Bank, founded by Nobel Laureate Professor Muhammad Yunus, regarded as the innovator of micro-credit. It was in actualization of the objectives of the visionary Professor to devise an avenue to embark in the capital markets by creating a cost-effective and dependable financial instrument for the poor clients of Grameen Bank and design a product that can bridge the vast poor with the mainstream urban economy, give them ownership in the leading enterprises, and take advantage of the growth potentials. Grameen Fund, a not-for profit venture capital financing enterprise of the Grameen family is the Trustee and the Standard Chartered Bank is the Custodian of the fund. It is listed at the Dhaka & the Chittagong Stock Exchanges.

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What Happens if You Decrease the Provision for Doubtful Debt

Above problem has been asked from Wellington, New Zealand. Before getting your answer, please read basics of provision and  provision  for doubtful debt .

Provision for doubtful debt represents the amount of estimated reserve fund  of loss due to not receiving money from debtors. This amount is deducted in balance sheet for showing correct current asset position of company. Excess of new provision over old provision will be debited to profit and loss account.  If we decrease the provision for doubtful debt from its actual estimation, then following things may happen :

1. If we keep provision for doubtful debt less than its real value, our balance sheet will not show correct current asset position.

2. If bad debts happens in reality, then less fund collected with provision for doubtful debt will not cover the loss and we may face difficulty for buying new raw material for production.

3. Provision for doubtful debt is just like reserve fund out of profit which is not distributed to shareholders of company, if we decrease it, it means we are reducing reserve fund and it will affect adversely to the working capital of company.

4. If we reduce the provision for doubtful debt after deep analysis the estimated bad debts, it will be helpful for business, because we can use maximum profit for development of business without keeping it just in reserve form. 

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Why is Singapore Cheaper than India for Buying Electronics

Singapore is famous for cheap electronics products. In these electronics products, we can include camera, TV, laptop, stereo, fridge, stove and airconditioners. Recently, my friend did my photo shoot just for fun.  Above my photo shoot has been done with a camera which has been bought from Singapore. By seeing its quality, you can definitely understand that it is from branded camera. But when my friend told me the cost of this camera, I did not trust on him. He told me that his brother sent him this camera from Singapore and its cost is just about Rs. 9000 and in India, you can buy it after paying  Rs. 30,000. It is big difference.   

After searching cheap electronics in Singapore, I found its reason which I wrote following.

1. No  import tax

2. Retail prices are controlled directly by manufacturers.

3. Carrying Cost is low.

4. Race of promotion of product in international market.

Now, I can trust on my friends words "Singapore is cheaper than India regarding electronics products."

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Process Costing

Process costing is famous topic of cost accounting. It is that method of costing which is used at that industry where production is done in step by step process. Every finished goods of one process will be the raw material of other process and production is continually operating in factory. At that time we calculate first process cost by making process account. A process account is made for every process of production.

For example

There are three process for manufacturing of biscuits it means we will make three process accounts for this. First process account's raw material cost, labor cost, direct expenses and overheads total will be credited by second process account. In other words, we will credit process second Account in process first account. Total cost of first process will bring in the debit side and other new raw material cost and other cost will be added in debit side. After making second process account, its total will also transfer to second process account and In final and third process account's total will transfer to finished stock account.

Following are main industries where we use process costing method:

1. Chemical industry
2. Soap industry
3. Clothes industry
4. Paper industry
5. Dairy Industry

In process costing, we study mainly following important matters

1. Process Loss

It is sure that some losses will happen in processing industries. These losses may be happened due to natural activities of chemical or leakage. So, for effective control, it is necessary to record all the raw materials in each process. Normal process loss will increase the cost of unit produced in any process. So, we will credited normal wastage units only (not amount) in the credit side of process account.

If there is abnormal loss which has happened due to ignorance, then we calculate value of abnormal loss and its no. of units and cost will be credited to process account.

Formula of calculating the Value of Abnormal Loss

If there is any cash received due to selling of scrap, then this will be credited to abnormal loss account and balance of abnormal loss account will be credited to costing profit and loss account. 

2. Inter - Process Profits

If transfer from one process to another process is not on cost, then to calculate of inter - process profits is very important because we will show it in process account's separated column.

With this, next process will not get benefit of previous process. This inter-process profits do not show in balance sheet. It is just for deep analysis in process accounting.

{* One important thing, you must remember that you have to deduct closing stock's profit from total profit earned in any process.}

This profit on closing stock can be calculated with following formula :

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Multiple Costing

We have discussed operation costing's two part, one is unit cost of operation and other is service costing.
Now, we discussing multiple costing. Multiple Costing is to calculate the cost of product's units which are produced after processing in different operations. When units of a product transfers from one operation to anther. Its cost is calculated and like this each operation's cost is calculated. After this, we calculate the total each operation cost.

For instance, an article passes through five hand operations as follows :

The factory works a 40 hours week and the production target is 600 dozen per week. Prepare a statement showing for each operation and in total the number of operators required, the labour cost per dozen and the total labour cost per week to produce the total target output.

If we know the cost of labour per dozen, first we have to calculate no. of operators required

Total  production target per week =  600 X 12 = 4800

If we divide it with 40 hours, we know production target per hour = 4800 /40 = 180

Now If we want to calculate No. of operator, we will make target production proportion with time

In first operation = 180 X 15 minutes/ 60 minutes = 45 operators

Total labour cost per week for first operation = 45 workers X 40 hours per week X 0.65 wage rate per hour = Rs. 1170

Total labour cost per dozen = 1170 /600 = Rs. 1.95  per dozen

Like this, we will calculate labour cost per dozen for second, third, fourth and fifth operation and then we will add all labour cost per dozen in each operation for finding total cost of labour per dozen in all operations. 

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Accounting Basics 6-Expanded Accounting Equation

In above video SusanCrosson has explained expanded accounting equation about the expanded form of Accounting Equation. We know that accounting question is Assets = Capital + Liabilities.

But if we expand it then its form will be following.

Assets = Liabilities + Stockholders Equity + Revenue - Expenses

 A = L + SHE + R - E

Now, we can find that Assets = Liabilities + stockholders equity is balance sheet  but expended accounting equation also includes result of profit and loss account in this equation by adding the excess of revenue over expenses in it.

Related : Accounting Basics 5 - Stockholders Equity

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Project Planning and its Steps

If we study CS professional programme's third paper "Financial, Treasury and Forex Management" , then you will see that I wrote nothing about its 9th topic project planning and control. So, today I am starting to write project planning in detail. Project planning is also important topic for chartered accountancy students and MBA finance students because who are studying project management.

Meaning of Project Planning

In project management, first part of its function is planning or project planning. In project planning, we have to decide in advance how to complete our project. When will we have to do work, who will do the work and how much money and time will be spent for completing any project. For this we have to take following steps:

Steps of Project Planning

1st Step : Determination of Project Objectives

Main objective of any project may be helpful to the users of that project. If you are making building, then you first determine who will use this building, design of residential building may be different from commercial building. To know and identify “what are main objective for any project” will be the first step of any successful project planning.

2nd Step : Determine the Project Resources

Main resources of project may be material, laborers and other equipments. To determine all these resources are very necessary for project planning. We also make the plan when and how much resources will be delivered for project purposes.

3rd Step : Determine the Project Schedule

With the help of MS project, project manager can make project schedule. Project schedule is the time table which is made for showing hours or days required to complete the each task or activity of project.

4th Step : Determine the Sub – Plans

It is that step of project planning in which we have to make all other sub- plans who helps main project plan. In sub –plans, we have to make HR plan, communication plan and risk management plan. In Risk management plan, we identify all risks relating to project and try to reduce by controlling all risk in advance.

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What is Project Management

Project management is that field of management which is related to making of planning, organization and controlling for completing any financial project. When we make project, we have to face many problems for completing it. All decision which is taken to solve all these problems will be the part of project management. For example, we have the project of new plant of company in Chandigarh. For this, we have to collect financial resources, we also complete the project in limited time and many other decisions, and we have to take.

Henry Gantt and Henry Fayol are two fathers of project management. Henry Gantt made Gantt chart which is used as the tool of project management and Henry foyol made the principles of project management.

According to Kevin,

" Project management includes developing a project plan, which includes defining and confirming the project goals and objectives, identifying tasks and how goals will be achieved, quantifying the resources needed, and determining budgets and timelines for completion."

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Scope of ACCA

Sir,

I want to know the scope of ACCA specially for my accounting students, i.e. international CA.

kumbhankhandelwal@yahoo.com

Dr. Kumbhan Khandelwal

Dear Dr. Kumbhan Khandelwal,

                                    We all know that ACCA (Association of Chartered Certified Accountants) is the global body for accounting professionals. Yes, we can also say it international CA. But, in India, it will better to do CA from ICAI because, ICAI is a valid authority for accounting and auditing in Indian corporate area. But, if your students want to make public accounting profession  in foreign country, you can suggest them ACCA. Many other Asian countries' students are running to ACCA due to its good environment of learning accounting and adopting high standard of accounting. Moreover its aim is to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. Both its reputation and influence are respected worldwide by employers, governments and the profession itself.

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Service Costing

Service costing is that part of operation costing which is used in all organisation who provide services instead of producing of goods. For calculating the price of each service, it is very necessary to collect all the expenses relating to that services. We make a cost sheet in which we show all the cost relating to specific service. These costs are calculated on the time basis. Following are the main organisations who provide services

1. Bus, Trucks and Rail - Transport services

2. Hosting and Domain - IT Services

3. Electricity Companies - Electricity services

5. Gas and Petrol Companies - Gas and Petrol services

Service Costing Examples

1. Salary
2. Insurance
3. Road Tax
4. Licence Fees
5. Interest on Capital
6. Repairs
7. Depreciation
8. Petrol Expenses
9. IT Service Related Cost
{*All companies who provide IT services must have to pay the expenses relating to IT services. Main examples are hosting and domain cost, cost of data server and other storage and power costs. }

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Accounting Basics 5- Stockholders Equity

In above video tutorial "Accounting Basic 5 - Stockholders Equity" which had been made by SusanCrosson, you will learn what is stockholders Equity. Here, we are explaining its brief description.

Stockholder equity is that part of capital in company which comes in the form of contributed capital, common stock and preferred stock. All these equity is external capital which is invested by external investors.

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What is Project? What are Characteristics of a Project?

Above basic question is important for MBA and CS students who are preparing project management which is also part of financial management. So, we are covering first topic "project" in project management.

Meaning of Project

Project is that planning in which we try to best under a perfect system for making product or buying any fixed asset or creating services for our customers. For example, you have to start a new business. To start a new business is a simple example of project. Either you can make its planning by yourself or you can take the help of CA. CA will make your project report and it will explain your estimated cost of fixed assets, estimated resources of earning and market area. On this basis, you can get loan for your business. With the help of project accounting, we can easily track the progress of a project. In business area there are large number of projects like Construction projects IT projects, Product development projects, RD projects, Organisation development projects, Logistics projects, Marketing projects, Community projects and Cultural projects.

Characteristics of a Project

1. any project will have a start date and end date

It is the main feature of project that it has a start date and end date. Because if we increase the time of completing of any business project, cost of project will increase. So, it is necessary to fix the time for completing any project.

2. Project For Results

All projects are made for getting some result. Projects are always completed and we get new thing after completing of project.

3. Projects differ from operations

Operations are different from project. Operations are day to day work and for this we can use operation costing but project is big plan for doing any major construction.

4. A project usually needs resources to deliver its results

With getting resources for completing project, it will be very tough to complete the project and bring result in the front of manager.

5. Major projects can be divided into subprojects

All major projects can be divided into subprojects. Suppose, you have to construct a building. For making building, you have to take subproject for digging the earth or make a structure according to the height of building.

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7 Teaching Accounting Ideas

Best ways to teach Accounting  is always the question of discussion and large number of accounting teachers and students who tell many teaching accounting ideas in this discussion and you can also find some these type discussions online. So I thought I’d summarize some of the main themes that arose in the discussion of teaching accounting ideas.

1. Accounting Examples in Accounting Teaching - Cengage writes - "87% of students say they consider step-by-step examples the most important part of teaching accounting. So, it is good teaching idea that take any accounting problem, explain its different terms and solve it step by step."

2. Always Explain Why - Shoo  writes - " This is from my own experience. My teacher kept telling me do this and that. Debit this account , Credit this one, Always keep it balanced until I thought income statement should be balanced also. Once I got rid of this teacher I started understanding accounting. I had this teacher who always tough me why these things are done.

3. Use of Twitter for Teaching Financial Accounting - Wendy Tietz writes - "This summer, I was faced with a new challenge coming up in the fall. I would be teaching financial accounting and I would have about 600 students. I mulled over how to efficiently and effectively communicate with a wide variety of students; what tools could I use? I immediately set up a Twitter account (@ACCT23020) specifically for my financial accounting students. In addition to using Twitter to send out communications to my students, students have used Twitter to ask questions.  I have had conversations with students over Twitter; it is a very fast and very efficient communication tool.  We have also used Twitter in the classroom to create backchannel for students to use to send in questions during the lecture; that backchannel is another intriguing use of Twitter in the college classroom and will be the subject of another blog posting in the future.

4. Use Web for Teaching Accounting - Geoff - "I have developed a short presentation on aspects of the open web of learning and the opportunities it creates for teachers in the UK and beyond to fully embrace the web as a platform for collaborative teaching and learning. Many of the examples and ideas were generated by discussions with and presentations given by fellow delegates at the recent Australian MoodleMoot."

5. Teach Students about Checking of Accounts - Charlotte Johnson - " Learning how to manage a checking account is a skill that can be tremendously important. Preparing students for handling their own checking account is a solid way to begin equipping them for a stable financial future. Practical exercises regarding check writing, online banking, paying bills and balancing an account can prove valuable in developing the abilities they will need to manage their accounts."

6. Antifraud Tips for Accounting Professionals - Jeff Moore - "As financial professionals, we are responsible for safeguarding employer (or client) assets. Fraud prevention is much less costly than fraud detection and investigation. The field of occupational fraud and abuse is extremely interesting...and rewarding."

7.  Teach Accounting With a Monopoly Board - W. Albrecht - " Offer the potential for students to attribute greater value to accounting information in the decision-making process. In fleshing out this idea, I came across an article in Issues in Accounting Education by Robert Kneckel, describing how he had students play Monopoly and then prepare an Income Statement and Balance Sheet at the conclusion of the game. I was intrigued by the thought of using the game, but felt that two modifications might improve the instructional effectiveness of its use.

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Option Analysis

Before knowing option analysis, you should understand what is option what is importance of different options in stock exchange. After this, you can analyze option strategies.

Like derivatives, future, swap and hedging, option is also a new invention in the field of finance. Option is a simple contract between two parties concerning the buying or selling of shares or bond or any other asset at specified price and specified date. Option conveys the right, but not the obligation, to engage in a future transaction (for example, on some underlying security or on a parcel of real property), or in a futures contract.


Option Analysis

Option Analysis is that analysis with this, we choose best option strategy for selling or buying of shares in USA stock market or European stock market. We are know that options are basically two type. One is put option and other is call option. Put option means right to sell the shares. Call option means right to buy the shares. Any one of this option will allow for taking decision. This will be found by doing option analysis.

 Option analysis cover virtually every options strategy. Many advance techniques of analysing the option strategies which are based both on technical and risk indicators such as volatility (both realized and implied), correlation, Risk/Reward, Probability and more - end-of-day or intraday data based.

Related : Investment Analysis

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1 Trillion Investment of USA in India in Next 5 Years -

After meeting with Barak Obama, it is public lecture of Mr. Manmohan Singh the prime minister of India that USA will invest 1 trillion Dollars in next 5 years. This can be just to talk in air because, today India is more strong than USA. After big recession in USA, they need investment and big fund for stabilising his economy. On the other side economy of India is more stable than USA. Today, India's weak point is corruption, consumption of luxury and useless products which are imported from USA at largest level. Due to corruption and black marketing, India's hard earned money of Rs. 70 Lakh Crores has reached in Swiss bank  and you can everything about this on google. All these resources of India are now  misusing. Otherwise, we have power to invest 10 trillion $ in USA just with in next 1 year because we have biggest market of world. Our human capital is respected all our the world. Nikesh Arora, Sanjay Jah  and many others are great human brain but working for USA.

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Government Accounting

Governmental accounting is that accounting system which is used for making the accounts of central government and state government. My father did 37 years govt. service in state govt. accounting department. From his experience, I learnt some fundamentals of government accounting. There is big difference between government accounting and private accounting. In government accounting, all accounting is done on the basis of project. This accounting provides the information whether public money is using for welfare of public or not by govt.

Aim of Government Accounting

Government functions and government accounting are not done for earning  profit but use government's limited resources for public welfare. Accountability and responsibility of government accountant is more than any private company's accountant.

Fundamentals of Government Accounting

• Make budget for estimating the cost of projects.
• Calculate and Record of Salaries, TDS of Govt. department.
• Record the actual expenses in Government department.
• Calculation of raw materials of project and its cost and record it.
• Monitoring of projects and Auditing and inspection of each government work.
• To Create all financial reports relating to financial work in government department.
• Reporting Cash Flows

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