Function of Accounting Department

Sometime, we think that  accounting department and finance department are two side of same coin. But this is not correct. In big organisation or corporate, accounting department is totally different from finance department. All accounting information is maintained in accounting department and with these available accounting information, finance department plans and control the funds. To know functions of accounting department in detail please read following content.

Routine Functions of Accounting Department  1.

There are lots of routine functions which accounting department has to do. To record the transaction on the basis of invoice, bills and vouchers, keep bills and vouchers in safe place after including them in files, to pay the creditors and employees, to collect and monitor debtors, to reconcile the bank statements with his company's bank account.

   To Prepare Interim Financial Statements  2.

For different departments decisions, accounting departments prepare interim financial statements. In these interim financial statements, we can includes trial balance, revenue statement and balance sheet. Often these statements are prepared after three months.

  To Prepare Annual Financial Statements  3.

To prepare annual financial statements is important work of accounting department because after auditing, it becomes proof in court and large number of decisions are affected from this. So, it is duty of chief accountant of this department to see

* whether it is prepared according to the current provisions of company law or not?

* Whether all errors are corrected or not?

* Whether all the adjustments are done or not?

* Whether every other things relating to accounting standards are OK or not?


  Security of Accounts  4.

After making of accounts on computer and Internet or online mode, to secure the confidential accounting information is also main duty of accounting department. With unethical use of hacking, it may be possible that hackers can hack accounting information by breaking your password. For solution of this, accountant should learn security control. You can learn this at here.

  Inventory Management  5.

If any company is doing work in the area of manufacturing, then it is the duty of accounting department to manage inventory. For this,

1. # Accounting department should classify each units. Unit may be kg., or gram or any other.  For learning inventory management, you should learn our list of units of measurements of accounting for inventory at here.

2. #  Accounting department should also make stock groups.

3. # Accounting department should also keep stock items under stock categories.

4. # Accounting department should also maintain the multiple godowns also.

5. #  Transfer of different raw material cost should be record in production of finished product.

6. #  To maintain inventory books like group summary, stock transfer, physical stock register, movement analysis and ageing analysis.

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What are Interim Financial Statements?

Interim financial statements refer to profit and loss account and balance sheet which are made and presented  for an accounting period of less than one year, such as quarterly or monthly. After using the automation process of making financial statement, we can obtain financial statements after every transaction's record. Interim financial statements are normally  prepared after every three months. For accurate interim financial statements, accountant should evaluate inventory correctly and also reconcile the bank balance with company's record.

Interim Financial Statements Vs Annual Financial Statements

 Both interim and annual financial statements are the technique to check performance, solvency and financial position of company. But in many cases to study company's interim financial statements are more important than annual financial statements. If you are investment research analyst, interim financial statements are big weapon for you to analyze the company.  With monthly interim financial statements, we can estimate future months' performance of company. We can also compare current interim financial statements with previous year financial statement for taking decisions.

Interim Financial Statements Example

 the unaudited interim consolidated financial statements of National Bank of Canada for the first quarter ended January 31, 2011.

Interim  Financial Position  Statement

Interim Revenue Statement

Restates Interim Financial Statements

It is rule, if there is any mistake in preparing interim financial statements, it must be restated before making annual financial statements. Its latest example can be watched in Stem Cell Therapeutics Corp.

Stem Cell Therapeutics Corp. (TSX VENTURE:SSS) announced today that it has restated its unaudited interim consolidated financial statements for the quarter ended September 30, 2010 and will file the restated Financial Statements on SEDAR on February 25, 2011. Upon review it was determined that, as a result of a calculation error, the non-cash expense for stock options was originally overstated by $133,000 and accrued expenses for the period were understated by $63,000, for a net decrease of Net Loss of $70,000. Link

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Working Papers in Auditing

Working papers in auditing or audit working papers are the written private materials which an auditor prepares for each audit. He describes the accounting information the accounting information which he receives from his client. We can includes following things in working papers in auditing.

1) Copies of past Trial balances
2) Bank reconciliation statement
3) Communication letters between auditor and clients
4) Communication letters with debtors and creditors of clients
5) Correspondence between client and banks
6) Old Audit reports

Functions of Working papers in Auditing

1. # Helpful in making genuine audit report

Working papers are used for making genuine audit report. Without knowing the reality of different facts which are written in working papers, auditor can not make audit report which shows accurate view of company's financial statements.

2. # Uses as Evidence

Sometime, any party may behave like a neglect person, at that time, these working papers will become the evidence of reported facts.

3. # Direction to Auditing Procedure

Working papers are also good guide to direct the audit procedure. If auditor wants to do audit work step by step, he should collect all working papers which are required for auditing and set it according to the steps of auditing. Doing this, auditing work may be easy.

4. # Check the Weakness of Internal Control

With the help of this tool, auditor can check the weak points of internal control and suggest to improve it.

 Online Store of Working papers in Auditing

In many advance countries, big auditing firms make online store for keeping safe all the audit working papers which they obtain from different clients. For this, they use cloud computing and data warehouse techniques.

Rules Apply on Audit Working Papers in India

ICAI has made some rules for governing form and contents of working papers in auditing. Auditing and Assurance Standard -3 (AAS-3)  and Standard on Audit (SA) 230 have following rules for audit working papers.

1. In Audit Planning, auditor should include all working papers for taking steps.

2.  In auditing, for controlling quality, working papers must be obtained from authorised person.

3.  An auditor can keep audit working papers for 10 years.

4. The auditor should document discussions of significant matters with management and others on a timely basis. If the auditor has identified information.

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Pardeep Dhingra Founder of CFP Course in India



Pardeep Dhingra

 Today, I am introducing you the great personality in the field of finance. He has more than 10 years experience in the field of Finance, Insurance and Banking. Moreover, he is also one of my best friends. I know him from my college time. His name is Pardeep Dhingra. He has succeeded in the field of finance with his talent and skills. I am very inspired from positive way of thinking. These days, he is director of an Indian financial education company who provides platform for Indian students to stand and become economically independent. For this, he provides skills through their Certified Financial Planner (CFP) Course. After this, Indian students can do their practice for providing their professional services for making planning of company's resources, loans,  insurance and real estate etc.

Video Interview of Pardeep Dhingra

By seeing, this video interview, you can understand this CFP course which he and his company is operating and its benefits to you. You can also create social  and professional network with Pardeep Dhingra through linkedin  or you can join this course by contacting him at his email id pardeep.dhingra9000@gmail.com

( Discussed Topics : Introduction, History of his company, Course detail and its benefits to Indian Students )

Related : Story Behind Re-alive Svtuition.org

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Sensitive Analysis in Finance



Sensitive Analysis Infographics

 Sensitive analysis in finance is the part of capital budgeting decisions. In sensitive analysis, we study  uncertainty  in different variable factors of business. We also analyze its effect on our different decision models. Suppose, if our investment budget increases 20% due to unknown factors, we see in sensitive analysis, what will be its affect on our NPV. It is simple example of sensitive analysis but there are many other factors like output, sales and profit which are observed for analysis its effect on on our decision models. We can use mathematical tools, excel, statistics for sensitive analysis.

Sensitive analysis in finance is also useful technique to measure uncertainty  due to errors of measurement, absence of information and poor understanding. In finance, inputs are sources of fund and out may be production, sales and profit after utilization of fund. Sensitive analysis is totally associate input and output. One side, it optimize the resources distribution by using best alternative and other side, it also detects important criteria of output.  

Related : Cs Accounting Notes

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7 Steps to Teach Financial Responsibility

As accounting teacher, it should also your informal duty to teach financial responsibility to your students with formal teaching of accounting and finance subjects. Your students should aware with their financial duties and responsibilities. Students should know the inflow of cash and how to save it and how to use it. They should also know what will happen on him and on nation if they will not fufill their financial responsibilities.

I made following steps for teaching financial responsibility

1st Step : Teach Vicious Circle of Poverty Correctly

Finance and economics are related concepts. Vicious Circle of Poverty, you will read in economics. But past explanation is totally wrong. In past, it was told that a poor will become more poor because he has no resources. He will invest his low resources and again he will become more poor and he will live always in poverty.

Now, it should be explain in following way

In India, no person is poor. But  it is big consiperacy of developed countries to show Indian poor through its changes in Indian economics education. They have brought  the concept of vicious circle of poverty of India. In our sense, vicious circle means how to make Indian poor through

 Convertibility of Rupee : Actually, with this our currency is devalued in world market. Our natural resources are more and costly than other countries natural resources. But after devaluation of our currency, we get less amount if we trade products in world market. So, we capture in poverty.

Now it is our financial responsibility to say "Be Indian and Buy Indian" and use it practically for coming out of vicious circle of poverty. With this, we have to love our Indian producers' products and must prefer it than buying foreign countries products.

You can also use this for your country also as " Support Your Country and Buy Your Country's producer's products". Few years ago, Brazil's teaching department did this compulsory by acting this in formal education system. Now there is also " be Brazilian and buy Brazilian."

2nd Step : Teach Budget

Budget is financial estimation of earning and expenditure. In personal finance, if student will learn it they can avoid useless expenses and enhance their part time earning. They can also utilized this fund for future development.

3rd Step : Teach Present Value of Money

Present value of money is today money's value which is more important what will we receive after 1 year. It is totally related to your financial responsibility. Before buying anything, try to compare its present profit with present investment. Always future profit will less than present profit.

4th Step : Teach Dangers of Buying from Foreign Country

When we buy anything from foreign country, our money goes to other country. Suppose, we buy one cold drink  from USA. Suppose its cost is Rs. 2 and its price is Rs. 12. Our Rs. 10 will go to USA. It is used by USA for developing USA. Now, if you buy same cold drink from India. Same manufacture will get Rs. 10 and deposit it in Indian bank and this fund is used for loans to unemployed Indians at very low rate of interest. Thus, we will indirectly support to develop India. Not all but all zero technology products must not be bought from foreign countries.

5th Step : Teach Basics of Finance

In basics of finance, we can include, money, cash, fund, saving, earning and banks. Before teaching financial responsibility, you should watch this at here.

6th Step : Teach the features of Money

There are lots of features. For fulfilling financial responsibility, you should know all the futures of money. You can read at here.

7th Step: Teach Financial Self- Independence

As a teacher, you should teach to your students that it is better to do small work under control than taking big loan through credit card or others.

(a)  If you will not able to repay your debt. You will feel tension. With this tension, you will face dangerous diseases.

(b)  With this dangerous disease, your family will feel sadness and take loan for your treatment.
(c) For giving loan to your parent, govt. of India will take loan.

(d)  If Govt. of India will not repay loan. Creditor of Foreign country will sell India in world market. When India will sell in world market. All Indian's financial independence will be controlled by creditors of foreign countries. After this, we will treat as slave.

So, it is my personal request, you must understand this carefully. Ok

Related : How to Teach Financial Literacy

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Most Difficult Journal Entries

After deeply study accounting, anybody may be able to make most difficult journal entries. Actually, journal entries are not difficult but to understand the transactions  may be difficult for you. When students see the journal entries of difficult transactions, they think that these journal entries are most difficult to solve. So, they don't face with difficulties. This is not good.

Today, I searched my all old accounting books and saw the difficult accounting questions which I could not understand due to difficult journal entries. It was my habit that when any question could not be solved by me, I marked  Not on that question, that is the reason, I can easily find the question which were most difficult for me.

Before study the solution of  most difficult journal entries, please learn to pass the difficult journal entries with advance tips of Prof. Augustins at here.

Following are some examples of most difficult transactions and its journal entries. Its analysis is done on the basis of rules of double entry system:

1. A machinery of Rs. 4000 was sold for Rs. 5200. Depreciation provision to date was Rs. 400; and commission paid to selling agent was Rs. 320 and wages paid to the worker for removing the machine was Rs. 50.

(a) What comes in business will be debited


→ Cash from sale of machinery comes, so, cash account will be debited.
→ Depreciation Provision is the loss of business, but we will debited for calculating net machinery cost.

Depreciation Account Dr. 400

Machinery Account Cr. 400

With this cost of  machinery will be 4000 -400 = 3600

→ Commission paid to sale agent is also selling expenses but relating to this capital item sale. So, it will also debit.

→ Wages is also expenses of business and it will be debit.

Commission Account Dr. 320
Wages Account Dr. 50

To Cash Account Cr. 370

Now, its effect on net cash proceeds from sale of machinery = 5200 - 320 -50 = 4830

(b) What goes from business, machinery goes from business, so machinery account will credit.
→ Net profit from this transaction will also credit.

Journal Entry

Cash Account Debit 4830

Machinery Account Credit 3600
Profit and Loss Account 1230

* Calculation of net profit from this deal

net cost of machinery = 4000 - 400 = 3600
Net Sale proceed = 5200 - 320 - 50 = 4830
-------------------------------------------------
Net profit from sale of machinery = Rs. 1230
-------------------------------------------------

its Wrong Combined Entry

2. Goods amounting to Rs. 75 were sold to Mohan for cash. It was correctly recorded in the cash book but was wrongly credited to Mohan's account also.

(Note: This is rectify entry and you must remember what entry should be done? But what entry has been passed? and in rectification procedure, how to rectify it so that past mistake's effect can be adjusted. )

Its Correct entry should be

Cash Account Dr. 75

Sale Account Cr. 75

Wrong entry was passed

Cash Account Dr. 75

Mohan Account Cr. 75

Rectify Entry should be passed

Mohan Account Dr. 75  ( With this, we cancel the credit amount relating to Mohan Account)

Sale Account Cr. 75  ( With this, sale account shows correct balance)

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Related : Journal Entries Example

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Effective Cost Per Thousand Impressions ( Simplified )

In online advertising area, effective cost per thousand impression is also know as eCPM. After discussion in different online forums, I knew it deeply. So, today, I am trying to explain it in very simple form.
In simple words, effective cost per thousand impressions (eCPM) is that  amount  you can expect to earn online  for every 1000 impressions shown on your site. In other words, this amount will be payable by your advertiser for showing his ads in your website. Many advertising companies like AdSense, yahoo ads and chitika ads companies have different rules to calculate this cost. Because it affects directly to the online publisher's earning, so, we should  know different factors which affects it.

Factors Affecting eCPM

1st Factor of eCPM : Nature of Product or Service

Advertising company decides different ads different eCPM. Suppose, if you are writing content relating to Gold, your eCPM will high than the content of food products of Cat.

2nd Factor of eCPM : Source and Quantity of Online Traffic

If you are international source of online traffic, eCPM will high instead of local online traffic. No. of page impressions will also affect eCPM. Page impressions are different from site visitor. A single visitor may visit more than 10 to 20 pages. If bounce rate is 50%, then 500 visitors will decide your site's ads cost because 500 visitors will views 1000 pages. So, more visits and more page impression means more eCPM and more online earning.

Mathew Carpenter Arevalo explained its factors in simple words in following video:

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Seignorage Term has been Changed

I have already told the meaning of seigniorage term. It means earning of government for issuing new notes. It is the indirect way for collecting money without telling public. In public finance, this is done due to increase of fiscal deficit. But now Indian Financial Media has changed seignorage term with new simple term. It means inflation tax.

Why is Seignorage being Used as Inflation Tax

Suppose, govt. makes a Rs. 500 notes by paying just Rs. 100 total cost and earns Rs. 400 from public. So, to attach tax word with inflation is most suited instead of saying seignorage it. I always say it as to rob public because there is no any provision of any Indian Law to get money through this hidden tax.

Provision of Inflation Tax in Budget 2011

 In FY11's budget, the central govt. will get money 0.3% of total GDP. Suppose if India's GDP is at US$1.3 trillion, it means central govt. will get revenue of its 0.3% through inflation tax. This will also useful for govt. to reduce fiscal deficit. After this, govt. will cover fiscal deficit by issuing new notes' cost.

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How to Teach Mentally Retarded Daughter

Problem

Dear Sir,

My daughter is 10 years old. But she understand very little. How can i taught my daughter pls suggest me the ways. i shall be very grateful to you.

Thanks and regards

( Name has not been shown due to privacy )
Solution :

Dear, I think you read the content " How to Teach Mentally Retarded Children?" before writing this question. I can understand your feeling as father. You want to take my help for getting different ways to teach mentally retarded daughter. First of all, please read my content "How to Treat Mentally Retardation?"

According to my thought, " A father can teach mentally retarded daughter better than a teacher of mentally retarded school. Main reason of this : i) Father will attend personally to teach his without taking tension of her nonsense. ii) Father will free from mentally retarded organisation's obligation. Let me explain. Suppose you are teacher and you are teaching in IIM, Ahmedabad. You want to teach your students in Garden because your new thinking opens in that natural environment. But, you organisation will stop to do this due to rules to teach in classroom. It means your teaching freedom is controlled by business motive. Same may be happened with your daughter also. So, you can teach by your own innovative teaching methodology. iii) I know a person in my local area who has mentally retarded daughter. He taught her and know her daughter's behaviour is better. Today, I met him and he has assured me to tell some past 5 years experience to teach her daughter by developing new techniques of behaviour modification. As soon as he will tell me, I will publish update for your help.

1st Way : Start to Develop Special Lessons Plans :

Due Mental retardation, a developmental disability, your daughter's intellectual function is not working properly, For teaching her, you must start to develop special lessons plans by following a few simple steps.


(a) In first lesson plan, you have to set a concrete, measurable goal for your daughter. The goal needs to be very simple, such as learning to perform a basic task. Suppose you have to teach about how to eat apple. Talk its process and practically show her how to perform it. But take full attention and don't give knife in her hand. Just take an apple and wash it with water and eat it. Now, help her to eat same apple with same style. Like this small activity, you have to teach to stand and walk.

(b) Continue practice, you will get result. Integrate repetition into teaching. If you are teaching to throw the ball, teach this several times in a day. With practice, they will master this task.

(c) Concentrate on one goal at a time. For example, if your goal is to teach a mentally challenged person how to dress themselves or how to use utensils, focus on accomplishing that one thing, before moving on to something else. Assigning too many goals at the same time can cause frustration and confusion, resulting in the individual refusing to cooperate.

2nd Way : Learn Patience Before Teaching Your Daughter :

i) In Ramayan, Shri Ram learned patience to face difficulties when he had gone to forest for 14 years.

Persons who are mentally disabled learn at a slower pace and it takes a longer period of time for them to grasp the concept of what you are trying to teach them. Getting angry with them just because they don't move along at the speed you prefer will only produce discouragement and be counterproductive to what you want to achieve.

3rd Way : Create a Good Learning Environment for Your Daughter :

It may be that sometime, your daughter will react like violent way. At that time, you need special care. Create a good learning environment for your daughter. Face her with love without any reaction. Environment is big roll to teach anybody. You can take help of your other family members also.


4th Way : Give Reward for Every Small Reform

If you see your daughter is learning something new. Give reward her by carrying her to picnic or giving any gift. This helps elevate her self-esteem.
1

5th Way : Sing, Dance and Use other Fun Techniques

According to new researches, " Fun techniques are very useful for open the veins of brain where blood does not circulate. To laugh in fun mood may make your daughter happy. At that time, your daughter may increase her IQ.

In End, my best wishes are always with your daughter!!

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Successful Child Entrepreneurs in India

First of all, I want to tell you, why am I writing this content?

Today, I discussed the question with my friends, "How can anybody get success?" The theme of this discussion was freedom. It means if anybody works with full freedom in any field, he or she will surely get success in that field. After coming discussion, I thought whether this applies on child and for this I did little search on Net, YouTube and other online newspapers and found many stories successful child entrepreneurs in India who achieved success in very small age just with doing work freely. Some of them, I am sharing with you.  This content will also motivate parents that if they want to see their children successful in the life, they should allow to do some creative work freely. Who knows, he may be next Indian Nobel Laureate after Dr.Rajendra Pachauri. After reading this, children can know that small age is not restriction for becoming successful entrepreneur.

1st Successful Child Entrepreneur : Neha Gupta

Leading off our overview of young entrepreneurs is Neha Gupta, a 13-year-old girl  who started Empower Orphans when she was just 9 years old. Since then, the nonprofit has raised $30,000 for orphans in India thanks to Gupta's fundraising activities: selling handmade greeting cards and wine charms. With a goal of raising $20,000 in 2010, Gupta is well on her way to a successful career in philanthropy.

Overview : Neha Gupta is example for children, if they will start to think and do for poor children of India, they will get success in life. 


2nd Successful Child Entrepreneur :  Anshul Samar

 Anshul Samar, now 14, started a gaming company in 2008 to market a role-playing card game that teaches chemistry. After clearing $1 million in revenue in his first year, Samar won a $25,000 grant and is now working to raise $100,000 in venture capital for his company, Elementeo.

Overview : God gives same brain to everybody, some uses it for bad works like playing card games for gambling  and waste the money. But Anshul Samar is example for all children how to use bad things for good purpose like spreading education.

3rd Successful Child Entrepreneur : Abeer

Abeer, a young cute boy from Madhyapradesh (India) stepped into the world of Music at a tender age & mesmerized the world with his brilliant, sparkling voice & magical presence on the stage.He was nicknamed PENDULUM in this program.

Overview : To sing bad song is harmful for developing good character. But on the other side, when a child sings a great old singer's song with sweet voice, it will give relax and enjoy to anybody. This is the reason, Abeer succeeded in small age. It is good example for all those who want to become professional singer at small age.



Related : Successful Women Entrepreneurs in India

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Accounting Answers - Part 1




Question - 1. What are the effects of creating provision for doubtful debts on the balance sheet ?

yumna

Answer # Balance sheet is the list of capital nature items. Means one side, we show assets and other side, we show liabilities and its total will always be equal. If any concern creates provision for doubtful debts, it will decrease the total amount of debtors. If we do n't deduct it from debtors, it will increase our current liabilities. Any way, we can show it in balance sheet but its aim is to bring correct value of working capital. Creating of provision for doubtful debts also affects balance sheet indirectly via profit and loss account. Net new increase in provision or estimation of loss due to not receiving money will show in profit and loss account as loss. Profit will reduce and same will add in the liability side of balance sheet. Indirectly shareholders will also affected if company estimates more % of provision for doubtful debts than previous year.

Question - 2. How can i get my saving account balance information on my mobile phone?

Dharmraj Rathod

 
Answer #  Just Go to ATM and add your mobile no. in ATM machine. After this, you will receive automatically updates. If you are using mobile banking via Internet on mobile, then you will can update it but you can use your secure password one time. See update of RBI.


Question - 3. Respected sir, i like know that i am completed my m.com and persuing cfa from icfai.....sir, is their any scope for.........cfa from icfai-tripura.......replay....soon. thankyou

  

sunny

Answer # This is the first question which has come from Tripura state's student. Dear Sunny, to learn anything from any course never goes to waste. It may be possible that you have to struggle even after CFA or any other professional course. I think, we should not measure learning in the form of how much will we earn after particular degree or course. But we should compare whether our skills has been increased after particular degree or course. If not, it means it is waste of our time. So, think this way! My best wishes are always with you!

Question.- 4 I long to know about the basics of TDS. What is TDS? Who is eligible to submit TDS? What are the next steps?

ROLGY JOSEPH

Answer :  Basics of TDS : Actually, it was the scheme to rob Indians by English Govt. When India was slave of UK, at that time, English Govt. was introduced Income tax act 1860 for getting 50% to 70% tax on income of Indians and for carrying it UK. When good Indian businessmen resisted this robbery, English Govt. started to collect the tax from  the source of earning. So, they introduced new section in Income tax act 1860 and its name was Tax deducted at source. Means with this section, employer and other persons who were responsible to pay money, will pay tax of their employee and creditors.  Same law and its provision TDS  is still in India with the new name Indian Income Tax Act 1961. Same way, robbery is continue under law and they teach young commerce students how to rob with English Govt. style. Section 192 to 206C are made for this purpose. As a teacher, I teach you that you should understand this law only to change it not to follow it. It is my own desire that Govt. of India must close this English law. For working, Government should do work like non profit organisation and should  take  only donation. If Indian Govt. will do best, I am ready to pay Rs. 1 in donation form.

Meaning of TDS : Tax deducted at source. Some earning like salary, dividend, interest on securities and some other incomes are under these TDS provisions.

Eligible to submit TDS : The person who is responsible to pay money to other.


Question - 5. hello sir,
as a M.C.A graduate, i searched for a job, now i worked as a s/w developer in a small concern,now i got selected as TDL developer, just started learning tally of my own, any way i am getting something from tally, but how can i get thorough knowledge in accounts, in tally,
suggestions plz.....

thamarai selvan

Answer # Tally is accounting software which is made by Indian Tally solution company and very popular in India. It is good you have interest to learn this nice software. If you want to learning tally software, you have to learn accounting more deeply. Tally software has been made by 50 Chartered Accountant's team. So, there are many advance tool in it for making you career in professional accountant.


Question - 6 How to clear net exam????????? is it true that few people cn clear the net exam of computer science???????? wht are my chances of clearing the exam???????

suruchi

Answer : # Before answering your question, I want to ask, why do you want to clear net exam? If you want to real teacher, you need not to clear UGC NET. If you want to become guest of Govt. of India in the form of govt. lecturer, then I am tellling  you the way of this. Get post graduation degree with 55%, second give UGC NET exam. which is conducted by UGC in every six month. Yes, because govt. wants to make guest to very few people. Your chance can be calculated with probability rule. There are many factors affects it like number of vacant seats in colleges, number of colleges, your qualifying marks under UGC rules. Learn also Real Education Part 1 and Real Education Part 2 for becoming real teacher instead of becoming guest of Govt. by clearing UGC NET.

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Costing System

Cost System as Tool

After discussing cost classification in CS accounting notes, we are now discussing about costing system. Cost system is one of its topics. Cost system is the branch of cost accounting which is made for achieving the objectives of cost accounting. We know that cost accounting is to calculate and control of cost. But you think which tool of cost accounting is used for these tasks? Its answer is costing system. Now we define it.

Definition of Costing System

Costing system is that system in which we calculate different cost with different methods and also monitor cost for reducing wastage and misuse of resources.

Explanation of Costing System

We put in plain words costing system with human body’s digestion system. In this world, everything is copied from God’s original system. God has made the system for flying of birds. This system is copied by scientists and have made airplane. We see in human body’s digestion system that God made our 40 feet big intestine to grind the food for making blood. But animal’s digestion system is different from human digestion system. Same thing applies one different type of products. According to the nature of products different costing systems were developed. After study the pdf file of Yaping Ning, we get theme that costing system's historical development is based on development of product market, production technology and demand for control.

  If there is any production in which we can separate one product from other product, Specific order costing can give better result. Suppose, we receive order of 500 tables. If we have already calculated unit cost of per table under specific order costing system, we will take one minute to calculate the cost of 500 tables. If next day we receive the order of 648 tables, we can again calculate cost by multiply unit cost with numbers of units ( read more example of specific order costing system at here). But other sides, if we are working in production area in which goods are produced in large quantities and homogeneous nature in a continuous process, at that time, we have to use process costing system. Goods which are transferred from earlier process will be raw material of second process and some new cost will be added till for reaching it to finished product.


Type of Costing System

1. Tradition Costing System

Specific Order costing, batch costing and process costing is under tradition costing system.

2. Activity Base Costing System

Activity base costing system is the modern way to calculate and reduce operating the cost in which we find key activities and its cost drivers.

Installation of a Good Costing System

For installation of a good costing system, we should study following factors.

1. # Manufacturing methods and process

(Simple or complex)

2. # Size of company

(Big or small)

3. # Nature of products

(Different or same)

4. # Management control needs

(Direct or indirect)

5. # Nature of raw materials

(Perishable or durable)

6. # Comparability

(Need of compare or not)

7. # Organization structure

(Functional or traditional)

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Accounting Education's Fans in Facebook Crossed 500

Today, Accounting Education's fans list in face book crossed 500. Africa is on the first number who did like accounting education in facebook and India is on the second number. For me, you all are the member of our Accounting Education. I am also thankful to all of you for breaking all the narrow limits of caste, race and religion and nation and liked accounting education for free place of learning something good and knowledgeable.

I talked with many of our face book fans. They know me more deeply but still I met them first time. They feel me as their family member. I am also heartily thankful for your love. This love gives me inspiration to write something new in accounting education. I know,  to explain knowledge is difficult work but only after seeing your increasing response and feedback, I have succeeded to explain accounting knowledge more simple way without any language limitation. Accounting Education is opened more than 100 countries, it means it is the place where you meet without physically seeing to other your classmates.

You can feel that it is that school where more than 100 countries students come and learn different lessons of accounting like you. In accounting education, you can feel confidence that you are not alone.

 So, join Accounting Education by like it in facebook.

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Cost Classification

We can classify the cost into 3 main parts. This classification will only apply on the production area. Now we explain each part.

Ist : Direct Material Cost

Direct material cost comes in the first part of cost classification. Its cost is also important for calculation of prime cost of any product. Raw material is the main source of any finished product. So, it may be 70% to 90% of total cost of production.

Example of Direct Material Cost :  Cost for buying plywood, wooden battens, fabric for the seat and the back, nails, screws, glue ( Used in the production of furniture )

2nd : Direct Labour Cost

Direct labor cost also the part of cost classification. Without use of labor, we can not convert raw material into finished product. Like direct material cost, labor cost is also important for calculating the prime cost of production. What % of total cost will be the labour cost? It depends only the nature of production. If nature of production need large numbers of processes, then we need large labor and cost may be very high % of total cost.

Direct Labor Cost Example : Cost for sawyers, drillers, assemblers, painters, polishers, upholsterers ( Used in Production of furniture )
3rd : Overhead

Overhead may be indirect material, factory overheads and other overheads. These do not effect production directly but without this production may be delay. Suppose, you want to produce cable in night, at that time, you need light for doing production activities. So, you have to pay more bill for supply of electricity in night also. If we add direct labor cost into factory cost, it will be conversion cost. It is only to know but we always interested to calculate production cost.

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Tutorial of Subsidiary Company

Today, after buying my new digital pen, I made a small video tutorial of subsidiary company which you can see below. In this tutorial, I tried to make you understand the concept of subsidiary company and its contribution for making of consolidated balance sheet of holding company.



What is Subsidiary Company

Subsidiary company is that company which is controlled by any other company. If any company invested his money to buy other company's shares and has bought 51% or more shares or share capital, then that company can become holding or parent company. The company whose shares are bought, will be subsidiary company.

Explanation with example:

I am showing following example, with this, you can understand what is subsidiary company and what is holding company.

Consolidated balance sheet  of Holding Company Vs Subsidiary Company's Balance Sheet

Subsidiary company's balance sheet's assets and liabilities will become the part of consolidated balance sheet of holding company.

1. All the liabilities of subsidiary company will be added in the consolidated balance sheet of subsidiary company. But Share capital of subsidiary company in holding company will not shown in the consolidated balance sheet in the books of holding company. Because, this share capital automatically adjust with the amount of the investment of holding company in to subsidiary company .

2. Add all the assets of subsidiary company with the assets of holding company. But Investment of holding company in Subsidiary company will not shown in consolidated balance sheet because, investment in subsidiary company will automatically adjust with the amount of share capital of subsidiary company in holding company.

3. Add minority interest in liability side. First of all we should know what minority interest is. Minority interest is the shareholder but there is not holding company’s shareholder. So, when holding company shows consolidated balance sheet, it is the duty of accountant to show minority interest in the liability side of consolidated balance sheet.

We can calculate minority interest with following formula

Total share capital of Subsidiary company = XXXXX

Less Investment of Holding company in to subsidiary company = - XXXX
------------------------------------------------------------------------

Add proportionate share of the subsidiary company‘s profit and
Reserves or increase in the value of assets + XXXX
-----------------------------------------------------------------------------


Less proportionate share of the subsidiary company’s loss and decrease
In the value of total assets of company - XXXXX
------------------------------------------------------------------------------
Value of Minority Interest XXXXX
-------------------------------------------------------------------------------

4. All common transaction between holding company and subsidiary company will not show in the consolidated balance.

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Buyback of Shares

Buyback of shares means to buy own shares by company. By learning this term, you will think, is it foolish and stupid way to repay the fund which company has received in the form of share capital? No one returns fund after receiving. Simply, there is no logic of buyback of shares, but you will feel wonder after reading  this recent news.

Unum which is an insurance company  plans $1 billion buyback of shares. See its ref. at here. From reading of this news, you will be find that buyback of shares is the way to improve financial condition of company. One side by buying own shares, it shows company's investment and other side it also increases earning per share.

Moreover, in India, there are 77 A , 77 AA and 77 B provisions of Indian company act 1956 deal only with buyback of shares. SEBI regulations also lights on this matter. We find also it as useful tool for company because company can easily increase his ERP by just decreasing the numbers of shares. We know that ERP is ratio of  ( profit after interest and pref. dividend / No. of equity shares ) To decrease the number of shares by buyback of shares means to increase ERP. If we study above example, then

1. #  Unum Company wants to effective use of his capital reserves with buyback because all 1$ billion stock will be bought through its capital reserves. ( Note : But in India, it is not possible because company can use only free reserves for this purpose. )

2.  # This technique is also use to improve the market value of per share. ( Read last line of news : Unum's stock closed at $25.14 Wednesday, down 50 cents from the previous day's close. In after hours trading and following the earnings announcement, Unum's stock was up 8 cents)

How to Buyback of Equity shares :

1st Step : Pass special resolution

It is the first step, just call all shareholders and pass special resolution for buyback. Be aware whether AOA allows this or not.

2nd Step : Fix maximum limit of buyback of shares

Maximum limit of buyback of shares is 25% of paid up equity share capital and free reserves.

3rd Step : Fix the time limit of buyback of shares

Time should be given to shareholders for accepting the offer. It must be between 15 and 30 days of notice of buyback.

4th Step : Filling of declaration of solvency before buyback in newspaper

Before buyback, company should filling of declaration of solvency in newspaper.

5th Step : Use Only free reserves and securities premium for buyback of shares

Company can use only free reserves and securities premium for buyback of shares.

6th Step : Record buyback of shares in register of bought back.

All bought back shares must be recorded in special register and should keep in registered office of company.

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