M.Phil in commerce

I have done my M.Com with 65% from CCS University. My question is CCS University offer the course of
M. Phil in commerce yes or not???? and if yes what is the process of admission ????? and private student can also do the M.Phil???????? plz rply as soon as possible.

Pallavi Sharma from India

Sorry, Pallavi Sharma, I recently checked from CCS Uni. Meerut and found there is not any course of M.Phil in Commerce. But you can do PhD in Commerce. For more, you can read at here. If you are interested in M.Phil, you can do same from kurukshetra university or search any other university near to your location.

Yes, private student can  also do the M.Phil but these days there is tight merit for admission in M.Phil. because seats available are very less.  So, you can check your rank after apply for this.

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Self Balancing Ledger ( Simplified )

These days, accounting software has become so advance. With this, when different person will pass different entries, these entries will record in ledgers and accounting software automatically self balanced without any error.  Self balance means to complete double aspect of any transaction. Two accounts must be affected with a single transaction with in a ledger. OK.  Self balancing ledger's theory  has been  included in CA- IPCC exam., so I am sharing this topic with  students in very simple words.

What is self balancing ledgers? 


Self balancing ledgers is system in which two or more ledgers are balanced through making general or nominal  ledger.

Importance and Basics of Self Balancing Ledgers

Suppose, a big company has 10,000 customers. They buy from company, they pays their credit buying, they return goods and do many more transaction with our company. Just making one ledger is not enough to record all the transactions. So, different persons are appointed to maintain the accounts of customers. Like this, we also deal with our suppliers or creditors. These creditors may be 20000. We may have also other transactions with other parties. So, to record all transactions, we make three ledgers.

(A) Debtor Ledgers for recording all transactions of our customers.

In this ledgers, we have all customers account. For example

i) Ram account

ii) Sham account

iii) Sita account

iii) Gita account

iv) Sima account

v) Vinod account

................

...................

so we have 10,000 name of customer accounts

in which debit side we showed opening balance of each account, credit sale and credit side we show cash received, discount allowed, bad debts and closing balance. But we did not keep sale account, cash account, discount account because all these accounts will keep in General Ledger. It means in Debtor ledger we just complete 50% of Double Entry System.

Now, in this ledger, we will open a account and its name is General Ledger Adjustment Account, this account  will be just opposite of total debtors account for completing 50% of double entry system. Suppose we have counted that we have to take Rs. 1,00,000 from ram, sham, sita, gita and other 10,000 debtors. It means we already debit this account in each debtor account but in General ledger adjustment account, we credit by writing balance b/d with Rs. 100,000. Like this, we total credit sale, cash received and other other and will show opposite side of General Ledger account. Only after this, our ledger will become double entry system. In your text books, all individual debtors account are not shown. Due to this, you may be in confusion. Now, relax. Understand why we have made General Ledger Account just opposite of Total Debtors account in Debtors Ledger. By following entries, we records

For Credit sale, 

Debtor ledger adjustment account Dr.

General Ledger adjustment account Cr.

For Cash received, bad debts, discount allowed

General ledger adjustment account Dr.

Debtor ledger adjustment account Cr.

(B) Creditor Ledgers for recording all transactions of our suppliers.

In creditors ledgers, we only maintain each and every creditor account like sohan account, mohan account, Rohan account, Vijay account and other our 20000 creditors account. We record their their opening balance, credit purchase in the credit side of individual creditor account and in the debit side, we show cash paid and closing balance payable to each creditor. But we do not make credit purchase account, cash account and other accounts related to each creditor account. So, these creditors accounts' credit  balance in trail balance show more  and trail balance will not be matched. For matching, we open one more account in creditor ledger and its name is general ledger adjustment account.

For making General Ledger Adjustment account, we will pass following journal entries

For credit purchase

General Ledger Adjustment Account Dr.

Creditor ledger adjustment account Cr.

For cash paid to creditors, discount received

Creditor ledger Adjustment account Dr.

General Ledger Adjustment account Cr.

(C) General Ledger for recording all transactions except relating to debtors or creditors.

General Ledger is made for recording and showing all the accounts except debtors and creditors account. Due to not showing debtors and creditor accounts in it, our General Ledger will not fulfill with double entry system. For completing it under double entry system, we will make two more account in it. One is debtor ledger adjustment account and other is creditor ledger adjustment account.

For Credit sale, 

General  ledger adjustment account Dr.

Debtor Ledger adjustment account Cr.

For Cash received, bad debts, discount allowed

Debtor ledger adjustment account Dr.

General ledger adjustment account Cr. 

For Credit Purchase 

General Ledger Adjustment Account Dr.

Creditor Ledger Adjustment Account Cr.

For cash paid to creditor, discount received 

Creditor Ledger Adjustment Account Dr.

General Ledger Adjustment Account Cr. 

Related : CA- IPCC Accounting Notes 

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Which is better NPV or IRR

The net present value (NPV) is a DCF technique that explicitly recognizes the time value of money. The internal rate of return (IRR) method is another DCF technique, which takes account of the magnitude and timing of cash flows.

No doubt the NPV and IRR are the methods for evaluating the profitability of a project. But, my question is

"Why is NPV method considered perhaps the best method for evaluating the profitability of a project? Are there any difficulties associates with this method".

I am very glad to say that was a great surprised on that day when I received some texts from you through Google Talk. I really enjoyed the whole conversations. Thanks Sir for your kindly help in Financial Management topics.

Riyaj Shah from India

Riyaj Shah ! Yes, I know last time conversation with you in which you told me that you are doing MBA. Ask a question is also a part of conversation with you and other students. Now, come to your question. NPV is the excess of net present value of our profit on project over present value of our investment. In other word, it shows net cash inflows at present value. But IRR is a rate of profit where present value of total profit from project will equal to the present value of cost of project. It means both are important for analyzing the project. But, if results are opposite by using both NPV and IRR, at that time, it is better to follow NPV instead of IRR because if we use NPV, it will help us to increase shareholder's wealth at present value. So, positive NPV is best tool and very easy to calculate.  Few months ago, I did compare both NPV and IRR an found NPV better. 

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Eligibility Criteria for Lecturership in Education College

Dear Sir,

I have passed B.ed with First class from Mumbai University in the year 2005-06. I am at present pursuing M.ed from RTM Nagpur University. I would like to know the eligibility criteria for lecturership in an Education college. To be specific, is M.Sc or M.A a prerequisite along with M.ed and NET/SLET (Maharashtra) cleared?

Thanking you.

regards,

Sheetal from India

 Sheetal ! If you want to become Government Lecturer in India, you need to clear UGC NET/SLET(Maharashtra) but you need not to clear M.Sc. or M.A. because M.Ed is also postgraduate degree, if you will get 55% or more in it, you can apply for UGC NET Test. Only, after this, you will be elegible for lecturership in an Govt. education college. If you want to see the syllabus of UGC NET in Education after M.ED, you can download at here.

If you want to contract base, then you need not to clear UGC NET but every year, your contract of lecturership will renew. Many education make compulsory to clear UGC NET with M.ED, so better is to clear UGC NET as soon as possible. My Best of Luck are with you. 

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Add me in Your Educational Circles with Google+

You just Open your Google+ with your Gmail id and password and at here, you can see me. Right side of my profile, you see the button Add to Circles. Carry your mouse on it and you see different circles. Create Educational Circle and select this. After this, I will come to your circle.

Now, if you want to video conferencing with me, in Google plus, there is a option in the right side and its name is Hangout, through this, you can invite me, if you want any solution of your problem.

Google+ project explores hangout in small and simple tutorial, you can also learn from this. I have shown this video below. Watch it and learn, "how to do video conferencing with hangout?"

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PhD in Income Tax - Solution of Commerce Lecturer's Problem

dear sir,
I am a commerce lecturer working in a leading private institution. I am teaching income tax for the past 7 years. and I have wide knowledge about income tax. My problem is now, I need to do PhD in income tax. Is it possible? Because of changing scenario in Indian income tax, whether is it possible to do? If I do, Which area of Income Tax i have to Select? Please guide me sir.

GEETHA P from India

Geetha P! I feel happy to know that you want to increase your education. I think, you did M.Com. and income tax law is one of its subject. So, you can do PhD in commerce and select income tax as your specialization. For, this, you have to check specialization topic in different universities of India because as per my knowledge, Income tax is not included in the specialization topic of PhD commerce in many Indian Universities. If you do not find any university, you can do Phd in Taxation law after LLM. For this, you have the specialization in Taxation law in your LLM. Now, you have to decide, what to do?

One more question, you have asked me "Because of changing scenario in Indian income tax, whether is it possible to do?" and on this question, my answer is yes. In this world, everything is changing, even way of teaching has totally different. PhD is just deep research of any problem and provide its solution in current scenario. If current scenario will change, new researcher will come and will improve your research. In today income tax law, there are lots of problems like you have to choose and research on it. On the basis of practical research, you have to submit PhD thesis.

Related : New Amendments Relating to PhD in India

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Financial Reporting for Mutual Fund

Financial reporting for mutual fund is the part of CA-final's topic " Financial reporting for Financial Institutions". Because mutual fund is the fund which is set up under trust. So, all the company who work for management of mutual fund, it is necessary to maintain the accounts of investors and to show financial reports for  better control on mutual funds.

In simple words, suppose, I invested in one unit of mutual fund. Now it is the duty of mutual fund trust to tell me what total amount of mutual fund, it has invested?, what is it earned in the form of dividend, interest and capital gain? What amount will it give to us in the form of earning? What is the net asset value of this mutual fund? What do balance sheet and revenue account explain about the financial position and performance? All these questions' answer, we will get from financial reporting of Mutual Fund.

As per the SEBI's Mutual Fund Regulation 1996

It is the duty of mutual fund trustee company, sponsor and asset management company to show the financial reporting, so that its investor can know what is the financial position and performance of fund under mutual fund. 

Following things should be in Financial Reporting for mutual funds.

1. Net Asset Valuation (NAV)

2. Balance sheet of Mutual Fund

In the balance sheet of mutual fund, assets and liabilities are shown. All the assets and liabilities are shown on the basis of scheme. For this we can take Kotak Mahindra Mutual fund's Old balance sheet in which you will see all assets and liabilities have been classified on the basis of schemes.

3. Revenue Account

Revenue account shows the income and expenditure of mutual fund trust. It should also make scheme wise. In this revenue account, transfer of reserve and dividend distribution must be shown.

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Accounting for Hire Purchase

Hire purchase is an agreement between two parties in which one party purchase any asset from other party. Because he has no money to pay, so he pays per month hire charges. Vendor has the possession of asset. When buyer pays total price of assets in the form of hire charges, then asset is transferred to its purchaser. Vendor may  also transfer asset before last payment of installment on his own risk. If buyer will become defaulter, vendor has right to get his asset from hire purchaser.

Accounting Methods for Hire Purchase Transaction 

For accounting point of view both hire purchase and  instalment payment system are same. Before accounting, we should know following things

a) Cash price is that price which will be paid if any asset is purchased on cash without installment.


b) Hire price = cash price + interest for risk of giving asset on instalment.

c) Down payment = Payment at the beginning of deal of hire purchase.
There are four methods of accounting for hire purchase.

1st Method : Cash Price Method 

Under cash price method, we are deal hire purchase transactions just like normal transactions. When transactions or event happen, we record them.

Journal Entries in the books of Purchaser

a) For buying assets on hire purchase

Asset on hire purchase account Dr.

Vendor account Cr.

b) For paying the down payment to vendor

Vendor account Dr

Cash/ bank

c) When Interest is Due on unpaid installments

Interest on Hire Purchase account Dr.

Vendor Account Cr.

d) For Instalment Payment  ( Interest payment will be also included in it)

Vendor Account Dr

Cash / Bank account Cr

e) For transferring interest to profit and loss account 

Profit and Loss account Dr.

Interest on hire purchase account Cr.

f) For depreciation charge

Depreciation account Dr.

Assets on hire purchase account Dr.

g) If Asset is returned

Hire Vendor account Dr.

Asset  on hire purchase account Cr.

In the books of Hire Vendor

a) For giving assets on hire

Hire purchaser account Dr.

H.P. Sale Cr.

b) For down payment received

Bank account Dr.

H.P. Sales Cr.

c) For Interest receivable

Hire purchaser account Dr.

Interest account Cr.

d) For installment due

Installment due account Dr.

H.P. Sales Cr.

e) For installment received

Bank account Dr.

Hire purchaser account Cr.

f) For installment not due at the year

Hire purchase stock account Dr.

Trading account Cr.

g) For stock reserve 

Stock Reserve account Dr.

Hire purchase stock account Cr.


Disclosure in balance sheet

Current Assets

Hire purchase debtor XXXX

2nd Method  Interest Suspense Method

In this method, we open interest suspense account. All the interest which is not paid on hire purchase asset will go to  interest suspense account. When interest will become due, interest account will be debit and interest suspense account will credit.

following entries will pass in the books of hire buyer

a) For transferring total interest payable on hire purchase deal

Interest suspense account Dr.

Hire purchase account Cr.

b) When interest is due 

interest account Dr.

interest suspense account Cr.

all other entries will be same as first method.

In the books of hire vendor

a) For transferring total interest payable to interest suspense account

hire purchaser account Dr..

interest suspense account Cr.

b) when interest is due

interest suspense account Dr.

interest account Cr.

all journal entries will be same of first method

Disclosure in the balance sheet

Current Assets

Hire purchase debtors

Less balance in interest suspense account


3rd Method :  Trading Method

In this method, the hire purchase trading account is prepared in the book of vendor of asset in the form of hire purchase system.

4th Method : Stock and Debtor Method

In this method, hire purchase stock, hire purchase debtor and hire purchase adjustment account are maintained. Following entries will pass in the books of vendor

a) When goods are sold on hire purchase

hire purchase stock account Dr. ( Hire purchase price)

stock account Cr. ( Actual cost of sale of goods )

hire purchase adjustment account Cr. ( difference between hire purchase price and actual cost )

b)When installments become due for payment

hire purchase debtors account Dr.

hire purchase stock account Cr.

c) When cash is received

Cash account Dr.

Hire purchase debtor account Cr.

d) stock reserve account on opening stock

stock reserve account Dr.

hire purchase adjustment account Cr.

e) Stock reserve on closing stock

Hire purchase adjustment account Dr.

Stock reserve account Cr.

{Important Note : This topic will also continue in future with explaining some examples. So, be alert for this topic.}

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How to Finance a New Business

Recently, I met to my friend's relative who is young and want to start a new business of computer hardware. But not have enough security for getting finance from bank, he is facing difficultly to start his new business. Like my friend's relative, there are lots of middle class youths who are interested to start their new business but they are facing the problem of finance. At that time following some tips may be helpful to them.

1. Contact to Your Friends and Relatives for Financial Help

For getting finance, you can contact with your friend. You can also offer to make them sleeping partner. A good friend will come forward to help you. Your relative may also give you the loan for starting business. Request them by asking personally to them.

2. Finance Yourself

You can also give finance to your business. Apply for work in any company. Delay your business plan for one or two. When you have enough money, use this money as capital for your business.

3. Contact NGO

Some NGO are supporting for starting new business. They do not take interest on given loan. You can contact to these NGOs.

4. Start to Provide Services in Starting

If you start to provide services instead of selling of stock, your initial cost will decrease. Suppose, you have not money to buy and sell the computer parts. You can start by repairing computer and laptop. For this, you need some equipment and a rental shop in market area. When you will get service fee, use this money for buying some stock also.

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Hedge Accounting

Hedge accounting has been included in financial reporting subject of CA- Final. Before learning hedge accounting with simple way, we should know about hedge or hedging. Hedge or hedging may be any investment which is done for protecting the company from future risk. Hedge may be used in All financial instruments and derivatives like financial futures, options and swaps. In hedge, we also may do agreement for buying the asset in future date but at current price. We do these type of contract because we forecast that prices in future date will increase.

As a accountant, for recording and accounting treatment transactions relating to hedge, you will divide transaction on basis of two type of hedge.

1. Fair Value Hedge 

Illustration: 1. Assume that on April 1, 2008, Hayward Co. purchases 100 shares of Sonoma stock at a market price of $100 per share. Hayward does not intend to
actively trade this investment. It consequently classifies the Sonoma investment as available-for-sale. Prepare the journal entry that Hayward makes on April 1, 2008 to record this investment.

Available-for-Sale securities Dr.  10,000


Cash Cr.  10,000


Illustration: 2  The value of Sonoma shares increases to $125 per share during 2008. Prepare the journal entry that Hayward makes on December 31, 2008, to recognize the gain.

Security Fair Value Adjustment (AFS) Dr.  2,500


Unrealized Holding Gain or Loss—Equity  Cr. 2,500

Illustration:3. Hayward is exposed to the risk that the price of the Sonoma stock will decline. To hedge this risk, on January 2, 2009, Hayward purchases a put option on 100 shares of Sonoma stock and designates the option as a fair value hedge. This put option (which expires in two years)
gives Hayward the option to sell Sonoma shares at a price of $125. What entry is required on January 2, 2009 to recognize the put option?

A memorandum entry only. Since the exercise price equals the current market price, no journal entry is necessary. Because this is just option offer. So, it will go to off balance sheet.

Illustration:4 At December 31, 2009, the price of the Sonoma shares has declined to $120 per share. Hayward records the following entry for the Sonoma investment.

Unrealized Holding Gain or Loss—Income Dr. 500


Security Fair Value Adjustment (AFS) Cr.    500

What journal entry would Hayward record on Dec. 31, 2009, to recognize the increase in value of the put option?


Put Option Dr. 500


Unrealized Holding Gain or Loss—Income Cr.    500

2. Cash Flow Hedge

Illustration: In September 2008 Allied Can Co. anticipates purchasing 1,000 metric tons of aluminum in January 2009. Allied wants to hedge the risk that it might pay higher prices for inventory in January 2009. Allied enters into an aluminum futures contract that gives Allied the right and the obligation to purchase 1,000 metric tons of aluminum for $1,550 per ton. This contract price is good until the contract expires in January 2009. The underlying for this derivative is the price of aluminum. If the price of aluminum rises above $1,550, the value of the futures contract to Allied increases.

Allied enters into the futures contract on September 1, 2008. Assume that the price to be paid today for inventory to be delivered in January—the spot price—equals the contract price.

At December 31, 2008, the price for January delivery of aluminum increases to $1,575 per metric ton. What journal entry would Allied make to record the increase in the value of the futures contract.


Futures contract 25,000


Unrealized Holding Gain or Loss—Equity 25,000
([$1,575 - $1,550] x 1,000 tons)

In January 2009, Allied purchases 1,000 metric tons of aluminum for $1,575 and makes the following entry ($1,575 x 1,000 tons = 1,575,000).

Aluminum inventory Dr. 1,575,000


Cash Cr. 1,575,000

At the same time, Allied makes final settlement on the futures contract and records the following entry.

Cash Dr. 25,000


Futures contract Cr. ($1,575,000-$1,550,000) 25,000

 If you make any cash flow reserve, you can show this in liability side. If any advance amount is given for buying the asset in future date, it will be shown in the asset side.

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Review of Investment Contents

1. Sharing investment protection strategies as U.S. default deadline looms


Todd Hutchinson wrote this content and expressed his views regarding Aug. Debt Ceiling by FED in 2 Aug. Good but he did not give the best solution for investment protection.


2. Pacific Global Investment Management Company Launches New Website

Thanks for information. Investors are always interested to know investment strategy. If you make this new website to help investor my providing him updated market information, that is good.

3. Why Airbnb May Be Worth A $112 M Investment

Full form of AIRBNB is air bed and breakfast. It means a company who will make a small room on the tree and it will give other for money. For this project, they have estimated cost of $ 112M and so need of $ 112m investment. Writer's given reasons are wonderful and writer compare his content with eBay website.

4. Brazil Petrobras Plans Divestments To Aid Investment Financing - CEO

Given way of supporting other project is not new. In India, many Govt. company sell their share for getting huge money for completing big project. Same thing is being done by Brazil Petrobras.

5. Gates Says $ 5 Billion Education Investment Was a ‘Learning’ Experience

Alas! What are doing Indian Billionaire? If a USA Billionaire can invest this big investment in education sector, why can Indian billionaire not invest for Indian education development?

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How to Use Google Plus Social Network for Education

Recently, Google has launched Google+. Yesterday, I joined Google+. After its quick tour, I realized that it is wonderful and amazing tool for better social networking for education. We all teacher can take following benefits for our online education purpose.

1. To Create Students Circle

As online teacher, I am always interested that who is my student and what course is he or she doing? Now, to classify all my students in Google+ on the basis of their course is very easy. I will first check the profile of my students and then include them in my circle. If some of my students are doing CPA, I can easily make a circle "MY CPA STUDENTS GOOGLE+", If some of my students are doing MBA, I can make a other circle "MY MBA STUDENTS GOOGLE+", like this, I can make so many circle and adds related students in it. After this, I will give some updates and tips which may be helpful to them.

2. To Take Live Class of Students

As online teacher, I am always interested to take live online class of my students. Now, Google+ has solved my problem by making video conferencing tool in the form of hangout. It is very nice because with this, I can invite my different circle. Suppose, I have to teach CPA students, I will start hangout. After this google+ will carry me to video conferencing page where I will invite only my CPA Circle and when they join, I will give them teaching instruction. That is so easy. So, come and join Google+ and add me in your circle for getting free education at here and take enjoy of above two benefits.

Related : Video Tutorial of Google+ for Education

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What did I study in my M.Com?

I had studied many subject in my M.Com which helped me in my profession. To study all the subject is very necessary because every subject has roots in your specialize subject. You never become specialize in any subject, if you do not have basic knowledge of all subjects of commerce. Here, I am mentioning what I studied in my M.Com. All following subjects, I have studied within two years. Some of subjects were in one book like market management and market research. Now, these days, you can buy each subject's book and study more deeply than me.

1. Direct Tax Laws

2. E-Commerce

3. Corporate Financial Accounting

4. Project Management

5. Business Environment

6. Financial Institutional Markets

7. Advertising and Sales Management

8. Accounting for Management Decisions

9. Economic Analysis

10. Security Analysis and Portfolio Management

11. Business Policy

12. Project Planning and Control


13. Market Research


14. Market Management

15. Company Law and Auditing

16. International Marketing

17. Advance Financial Management

18. Management Concepts and Organizational Behavior

19. Computer Application in Business

20. Managerial Economics

21. Personnel Management

22. Corporate Tax Planning and Management

23. Statistical Analysis

24. Strategic Management

25. Higher Accounts

Related : Subject Detail in B.Com.

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Please Guide Me

Hi! I am Mahesh Deshmukh. I am in M.Com II and recently got work as postal assistant & getting Rs. 14000 in hand salary. I am also planning 4 NET and SLET. If you have the notes pls send it on my email id. Please guide me as to books how 2 prepare etc. I am really scared of my future. I am now 22. So I fear that if i leave this work in such confusing situation then nothing will remain in my hand. but at the same time I realise that this work is too risky there is very less chance of growth. so sometime I am planning to leave it & go 4 NET . My friend told me to go for both NET/ SLET & leave this work. What is your opinion? my financial position is nice. Should I leave this work & go for NET and one groups in dec 11. I don't know how but I feel that somewhere I am going wrong. if I fails this time then my family members will blame me a lot. Does age matters in our life? please guide me Reply on this id

Mahesh Deshmukh from India

Mahesh Deshmukh! Both UGC NET and your current work is important for developing your skills. We clear UGC NET not only for becoming Govt. Lecturer but by learning deeply the contents of UGC NET exam. we learn teaching, higher education, reasoning, higher education, communication and IT. When we do work in any organisation, we also learn many new things which are important for best judgement for life. So, it is my opinion, you should not leave your duty. If you have passion in teaching, to clear UGC NET may be good option for you.

You can do both things by proper management of your time. Make a good timetable for this. Your duty is of 8 hours. I think you are working in your city. Maximum 2 hours, I can add in 8 hours in which you can not study. Now, still you have 6 hours. Maximum use of 6 hours will give you the success in UGC NET. It is just one day paper. If you daily studied 4 to 5 hours for 4 to 5 months, you can easily clear UGC NET. It is plus point that your financial position is sound. But, I want to say that we do not do our duty in the organisation for making money but we do our duty for learning in practical environment. If you feel enjoy your duty, if your boss is not dictator, If you feel happy to help through his duty, if your skills increase from your duty, never resign from your duty.

* I have some past UGC Accounting Paper's solution, you can study in this site.

* Yes, age is very important for choosing any profession. So, your target should be clear.

* No, need to scared from your future. Never Take tension of your future. Future is very uncertain. So, be honest for your present duty.

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How to Calculate Expatriate Taxes

Expatriate is that person who has been sent to other country for doing duty by employer. Suppose, Krishanan was working in a MNC as accountant in the state of Kerala. One year ago, he had been sent to MNC's UAE Branch. Now, Krishanan will be expatriate. Everything is ok. But one of important question, how to calculate expatriate taxes. It may be legal issue for two countries. So, we are telling some tips which may be useful for you.

1. If you are Citizen of USA and as Expatriate working in abroad


As per the Internal Revenue Code of IRS, all the citizen of USA who are working any other country have to pay income tax to USA Govt. He can get deduction of only $91,500 of earned income from foreign country from U.S. Income Taxation for 2010. If he does not file expatriation form 8854, then he is responsible to pay the penalty of $ 10,000. If expatriate has paid tax in foreign country, he can get tax credit from USA Govt. The tax also applies to green card holders who abandon U.S. permanent residence

2. If you are Citizen of Indian and as Expatriate working in abroad

If you are citizen of India and living abroad for working purpose as expatriate, you tax will be calculated on the basis of rules and regulation of Indian Income Tax Act 1961. According to this law, there is not compulsory to pay tax to Indian Citizen who are working outside. As Indian citizen your tax liability to Indian Govt. is calculated on the basis of your resident status.

(A) Remuneration from an employer is not taxable if the expatriate does not live in India exceed 90 days.

(B) For other income, his income is taxable in India, if he lived in India for 182 days. or 60 days during the year and 365 days during preceding four years.

3. If you are Citizen of UK and as Expatriate working in abroad

India was slave of UK in past. Even after Indian Independence, we can not leave our mental slavery. That is the reason almost all laws had been copied from UK Laws. If a person is citizen of UK and you live in UK for 183 days, your tax will be payable in UK. Additionally, if you go and work abroad for more than one year, you must not be back in the UK for more than 91 days, on average, in any 365 day period, for the duration of your time abroad.

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Accounts from Incomplete Records

"Accounts from Incomplete records" is the good topic of CA-IPCC's accounting subject. Practical questions are important for CA-IPCC because in past papers, practical questions have been asked by examiners. But without theoretical understanding, you can not solve practical problem, so, we are explaining its theoretical part here.

First of we define accounts from incomplete records:

Accounts from incomplete records is the system in which we convert single entry system into double entry system. As per accounting rules, single entry system can only show incomplete records because accountant (who follows this single entry system) do not records the expenses and revenue. He just record total cash and credit. It means, it is very difficult to know the profit or loss of such business because we can not make profit and loss account in single entry system. For converting incomplete records into complete records with double entry system, we need current year's profit or loss.

  After knowing profit or loss, we will pass opening entries in next year and record all transactions with double entry system.

So, For calculating profit or loss from incomplete accounts we will follow following steps

Steps of Ascertainment of Profit by Capital Comparison

1st Step : To Know Opening and Closing Capital

If we compare opening and closing capital, we can know profit. Suppose, Ram started his business with He did not maintain his records but at the end, he was It means he earned profit in one year.

Simple formula of profit = Closing Capital - Opening Capital 

But, if we do not information of his opening and closing capital, we can get this information by making statement of Affairs. This statement of affairs is just like opening and closing balance sheet. We will write fixed and current assets in its asset side and fixed and current liabilities in its liabilities side. Difference will be the capital figure.

How to find the assets and liabilities figure. From his cash and bank pass book, we can know his cash and bank balance. We also get the figure of his taken loan and purchase amount of fixed assets from his personal diary. Little deep investigation, we can know all the figures which we need for making opening and closing statement of Affairs.

2nd Step : To Know Profit or Loss 

Now, we have both opening capital and closing capital figures. We compare each other.

One more thing you remember that you also adjust your fresh capital and drawing. Drawing will add in closing capital and fresh capital will deduct from closing capital.

Why?

Because when we withdraw money for personal use. Our capital is decreased. This decrease is not of loss of business. So, we can know exact business loss by adding it. When we bring fresh capital in the business, our capital is increased. This increase is not of net profit of business. So, we deduct it to know exact net profit of business. Ok.

	Closing Capital	XXXX
	Add Drawing	XXXX
	Balance	------------ XXXX
	Less Fresh Capital	XXXX
	Less Opening Capital	XXXX
	Net Profit or Net Loss of Business	XXXX

Related : Profit or Loss  from Incomplete Records Practical Question

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Profit or Loss from Incomplete Records Practical Question

From Assets and liabilities and other information of incomplete accounts, calculate net profit or net loss of Mr. Y's business.

Assets

31-12-2009 and 31-12-2010

building 100000
furniture 50000
stock 120000 and 270000
cash at bank 70000 and 85000
cash in hand 1200 and 3200

Liabilities

Loan 100000 and 80000
sundry creditors 40000 and 70000

Decide to depreciation building by 2.5% and furniture b 10%. One life insurance policy of the proprietor was matured during the period and the amount of 40000 has been retained in the business. Proprietor took @ 2000 per month for meeting family expenses.

Liabilities	31-12-2009	31-12-2010	Assets	31-12-2009	31-12-2010
Capital ( Balancing figure	241200	440700	Building	100000
Loans	100000	80000	Machinery	50000	97500
Bank overdrafts	nil	nil	Furniture	120000	45000
Sundry Creditors	40000	70000	Other Fixed Assets	nil	nil
Bill Payable	nil	nil	Stock	120000	270000
			Sundry Debtors	40000	90000
			B/R	nil	nil
			Loan and Advances	nil	nil
			Cash and Bank	71200	88200
	381200	590700		381200	590700

Amount received from Life insurance policy has been used in business, so it is fresh capital. Personal expenses will be drawing. For calculating profit or loss of business of Mr. Y, following statement will be made.

	Closing  Capital	440700
	Add Drawing	+ 24000
	Balance	------------  464700
	Less Fresh Capital	- 40000
	Less Opening Capital	- 241200
	Net Profit or Net Loss of Business	183500

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5 Best Tips to Improve Balance Sheet

When you ask the question, "How to Improve Balance Sheet?" It means, you understood that your balance sheet is showing your company's weak financial health. Now, your work is to strong company's financial health by improving the balance sheet. That is the reason you come to learn the steps to improve the balance sheet. To improve the balance sheet, I am writing 5 best tips which may be help to reach on the way where your balance sheet will improve.

1st Tip : Repay your Old Loans

Every day is the new way for your company. Your company has become habitual to take more and more loan without paying old loan. That is the reason, no more loan, your company will get because your balance sheet is clear explaining that your company's all assets have no capacity to repay. But, I am telling again to you to repay your loan.

How????

a) Go to your friend companies and request. If your friend is true, he will help you.

b) Request to your creditor to reduce the total amount of loan.

c) Request to employee to sacrifice one day salary.

d) You also think any other way to repay loan.

If any one trick will use, your balance sheet will not show excess outside liabilities.

2nd Tip : Increase Cash Operating Profit

For doing every activity, we need money or cash. Your suppliers are not giving you goods on credit because your creditors conversion period is very high. Why? because you have not working capital in cash. Be serious on this point. Track and analysis the ageing reports of debtors. Try to make debtors conversion period too small. Reduce your some expenses. It will increase your surplus cash. Timely payment to creditors will helpful to get more stock on credit and your balance sheet will improve.

3rd Tip : Diversify the Investment

Some bad investment may be default and your balance sheet will become one major risk of your company's liquidation. Because you give your all capital in the form of loan and that loan become default. Your balance sheet is showing this point clear. Now, you have to follow good strategy. One side you have to win your shareholders' trust. Other side, your new investment decision will be more care. Good profit from diversified investment projects will reduce the loss of default loan investment. And one day, there will not any list of default loan because you and your shareholder have developed the power to consume this.

4th Tip : Be Specialize of Off Balance Sheet

I am not saying to become hacker for cheating with others. But you would listen the word ethical hacker. Like this, you have not specialize to hide your certain assets or liabilities through off balance sheet technique but you have to optimize your balance sheet with this technique.

5th Tip : Use the Trick of $1.2 million mansion for $10K

It means to increase the value of dead asset. Suppose, your company has one building in the balance sheet whose value is is just $ 10, 000 but your company has to pay $ 1 million to the public as per the balance sheet. But you are still interested to improve your balance sheet. You will follow trick of $ 1.2 million mansion for $ 10 K. It does not mean that you are cheating in the selling of your building but you have to find opportunity. Right time, right customer and mentioning of right quality of your building may be biggest factor to inflate your building's value. Suppose, you get opportunity for selling your building with $ 1.2 million. With this, you can repay your loan and your balance sheet will show surplus which will increase your capital. Everything is possible, but you have to struggle in right direction with right thinking.

Related : Balance Sheet Analysis

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Nigerian Fiscal Policy

Dear Vinod Sir, I want to know Nigerian fiscal policy. What is this? And how can I evaluate critically the objectives of the Nigerian fiscal policy?

Ogunnubi Morufat from Nigeria

Nigerian fiscal policy means the fiscal policy of the country of Nigeria. Nigeria is located in the West Africa comprising 36 states. For, development of Nigeria, it is the duty of the Govt. of Nigeria to make a good fiscal policy. Fiscal policy is the part of public finance. Under Nigerian fiscal policy, Govt. collects money from his different sources. After this, it is utilized for welfare and development expenditures. Nigerian Govt. tax policy and expenditure policy will be under fiscal policy.

I am not the native of Nigeria, but as internet savvy, I am trying to evaluate critically the objectives of the Nigerian fiscal policy for you. First of all. I collected some of financial data of Nigeria which is showing following things

1. # Main source of earning of Govt. of Nigeria is petroleum. 80% of earning of Nigerian govt. is from petrol production and export. Nigeria's anticipated revenue from petroleum is about $52.2 billion.

Earning of Nigeria is good but it is dependent on one source of earning which is not good. In future, when petrol will decrease, it will be more difficult for Nigeria to survive. So, from today, Govt. of Nigeria has to work hard to research new sources of earning.

2. # Health, health care, and general living conditions in Nigeria are poor.

This is one of very sad information for me. Why are health conditions of Nigeria so poor. Is Govt. of Nigeria no money to open hospitals for Nigeria peoples. Or Govt. is not interested in it. What so ever, but one thing is clear, if Nigerian people will start to care health themselves, there is no need to invest money in hospitals. From my 31st years, I am living very healthy in India without any problem due to following rules, you can learn all these rules.

a) Never eat meat, non-veg. or eggs.

b) Never drink alcohol.

c) Never drink tea. Always drink milk.

d) Pray of God day and night.

e) Come to help to needy and helpless.

3. Education is in a state of neglect.

It is also sad news. Govt. of Nigeria should create good provision not only free education but compulsory attendance of students of Nigeria. To provide technical education is good way to empower Nigerian peoples. If educated Nigerian will start NGO for providing education to poor community, they can also reduce the expenditures of education in Nigeria.


3. Nigeria's human rights record remains poor and government officials at all levels continue to commit serious abuses.

This is not the problem of Nigeria but it is the problem of human being. It is easy to learn bad things. But it is difficult to learn good things. Govt. officials who commit serious abuse should be given hard punishment.

4. Nigeria is home to a substantial network of organized crime, active especially in drug trafficking.

This information shows that Govt. is not providing good money in its budget for reducing all these things. Special crime branch should be organized for reducing these things.

5. As a result of corruption 80 percent of energy revenues benefit only 1 percent of the population.

This is another critical point which is against the objective of fiscal policy of Nigeria.

6. About 57 percent of the population lives on less than US$1 per day.

I think, above points affect this point. When people will become educated, they can earn US $ 1000 in day.

7. In 2005 Nigeria’s central government had expenditures of US$13.54 billion but revenues of only US$12.86 billion, resulting in a budget deficit of 5 percent.

This is the good sign of Govt. budget. No need to get loan for this budget deficit.

8. In 2005, Nigeria imported about US$26 billion of goods.

Nigeria should produce its necessary things. After this, it can save money from imported goods and give employment to its people.


9. In recent years, Nigeria has expanded its trade relations with other developing countries such as India. Nigeria is the largest African crude oil supplier to India — it annually exports 400,000 oil barrels per day to India valued at US$10 billion annually.

India will always support to Nigeria what we can do because we believe, live and to be live.

10. Conclusion

There is lots of plus and minus points of Nigerian fiscal policy but Govt. should not forget that it is accountable for public of Nigeria. Govt. of Nigeria should do his duty with honesty and dedication. After this, Nigeria can develop.

Related : Economy of Malaysia 2010

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Effect of Reverse Repo Rate

Dear Sir/Madam,

I am a continuous reader of accountant education. This site is really helpful. Sir, I have a doubt how does increase in reverse repo rate forces banks to increase its interest rates. Increase in reverse repo rates helps bank to earn more then why banks increase in interest rates of commercial loans at the same time.

Waiting to hear from you,


Libin Jacob. from India

Libin Jacob! You have asked good question. You know that reverse repo rate is that rate at which RBI gets loan. If RBI increases this reverse repo rate, it means RBI wants to contraction of credit. How is it possible with reverse repo rate. When RBI gets loan from banks at high rate of interest, more and more banks will supply to central bank because it is safe and earning is more. Effect of this will on financial market. Supply of money in financial market will decrease. In economics, it is simple rule, if supply is limited and demand increases, price of product will increase. Bank has lots of demand but due to limitation of supply, bank increases interest rate. That is the reason. But its positive effect will on credit. Due to decrease in the supply of credit in the market, inflation rate will decrease.

Now, I explain, how will price of product will decrease. People can buy the product even the prices increase, if they have money. Loan is also source of money. People get loan and buy their products. With increasing reverse repo rate, loan is transfer to central bank. Now, people will have to pay more interest on limited loan. They will not get loan at high interest. Due to this, they will not buy the goods when prices increases. When businessmen's products will not sell, they have to decrease prices. When prices will decrease inflation will under control.

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Never Give up: Inspirational and Educational Video

 Today, I saw an inspirational and educational video and want to share with my students and friends with its review. This is the video of fight between zebra and lion. I am seeing this fight as the weak point and plus point of a student. In this video, Zebra had come for drinking water from a canal but a lion had captured him. Now, you and me think two result of this fight.



1st Zebra will lose his courage.

or

2nd Zebra will not lose his courage.

But what did we saw in the video. Zebra kept his patience and did not lose his courage. By finding a good opportunity, he tried his best attack to drown the lion. Even, he was so many injuries. Even, he was tired. After this, he ran fast and won the fight.

Now, as teacher, I am trying to apply this on student. When a student faced any problem, his weak point and plus point give him following two suggestion.

1st He should lose his courage because he has no power to solve that problem. 

Or 

2nd He should not lose his courage but he should find good opportunity to solve his problems. 

Now, it is on student, what decision will he take? But it is my suggestion that he should be a Zebra of this video.

Fight for yourself using every drop of blood from your body. 

After this, you win your weak points and solve your all problems.

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Investment for Retirement

Investment for retirement is the part of your retirement planning. Before investment for retirement, you have to think. How much have you to invest? When have you to take decision for this? Where have you to invest?

How much have you to invest?

Total amount of investment for retirement depends on your total earning in a month. If you have made a perfect family budget, it will tell you, how much can you save in a month? Some of saving, you can not invest because you reserve for future emergency. After deducting cash reserves, you can invest balance savings in good retirement plans.

When have you to take decision for investment?

It is not intelligence to take decision of investment just before 5 or 6 years of retirement. After retirement, your earning power will reduce; you need long term investment for getting same earning for your retirement time. Young age is the best age for investment for retirement.

Where have you to invest?

There are lots of investments alternatives in which you can invest for your retirement. For this, you have to make equilibrium of risk and return on investment. General philosophy of business is more risk more return. But, you should remember, this is not investment for business, this is the investment for retirement. You should give first preference to safe investment. You may know that there are lots of business investment in which you can earn Rs. 1,00,000 in one hour and loss Rs. 10,00,000 in one hour. No need to invest in such business. Following may be best option for you

1st Insurance Pension Schemes

You can invest your money for retirement in insurance sector. This sector will give you double benefit. One side, it will cover your risk of life. Other side, it will give you return.

2nd Mutual Fund Schemes

Mutual fund schemes may be good for you because its return will higher than insurance plans. If you calculate your monthly expenditure with inflation growth rate is more than what return will you receive from insurance, you can also invest your some money in mutual fund schemes. Learn list of mutual funds of USA in which you can invest your money.

3rd Investment in Stocks

If you know some finance, you should not invest your all saving in one scheme. It may be very risk. You can diversify your all investment and some of its part; you can invest in the stock of very good companies. These companies work in the business and will give you high return in the form of dividend. You can also adopt it as short term investment plans and also get earning from its selling deal.

4th Investment in Govt. Bonds for Tax Saving

Tax saving bonds or govt. bonds will increase your earning. With this earning, your potentiality to increase money at the time of retirement will rise.

You should also make your financial portfolio. If you see imbalance of your investment, you can rebalance your portfolio. Serious analysis of your financial health, you can adjust your money from one investment scheme to other investment scheme.

Related : 3 Tips for Investing Money

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How to Get Promotion in Company

Today, I met one of my old student. He told me that he did not get promotion in the company from long time.

According to my student 

I am accountant in that company from long time but I think there is no chance to get promotion in this company. I am living this company and I will try to other company.

What I gave advice to my student, I am sharing my advice with you. 

I told to my student that your promotion is just one step far from you. When you think negative, your promotion will be 2 step from you. When you think to leave the company, your promotion will be 3 step from you. Never think like this. I do not say that you should not try other company for getting promotion but to leave one company before getting promotion is not good decision. Never think only money every time. Ok, your salary is less but if you are enjoy your life in this company, it may be your plus point in this company. Your negative thinking is the biggest barrier in your way. Win this by positive thinking. For this, I am giving some tips.

1st Tip : duty is  real pray of MY GOD

What is the meaning of promotion for me? Working in company is just like working in the temple. My duty in company is my real pray of my God. If there is the power in my pray, God will surely be happy and he will promote me. If I did not get promotion, it means, there is some mistake in my duty, it means, I am not doing my duty with full of my heart. From next tomorrow, I will start to do my duty with  full of my heart.

2nd Tip : cry in higher voice  that I hate my NEGATIVE THINKING 

Cry, cry and cry in higher voice that I hate my negative thinking. Get out from my mind, you have not right to sit in my mind for one second because

( A) You're making me weak. 

 ( B) You are wasting my time. 


( C) You are single barrier of my quick promotion.


( D ) Why have you come in my mind?


( E ) Get out, other wise, I will kill you. 


Cry these words upto going out of your negative thinking from your mind. 


3rd Tip : do extra ordinary for YOUR COMPANY


This world is the world of selfish. But, you never should become selfish. Always think to do extra ordinary for your company. Give your more time, give your more hard work for company's promotion. Your identity is with your company's identity. Company is the part of your family. How can you become selfish by getting promotion without doing extra ordinary work for company's promotion? Get up and make plan for quick promotion of company. Your work never waste and it will be  the steps for your promotion. Remember my advice and never throw my advice from second ear after listening from first ear. 


4th Tip :  think, night is VERY FAR


Why have you become so lazy? Why are you seeing watch after a while? Think, night is very far. You have still chance of promotion. You  are still young. You  have still quality. You are  not going to sleep. You have full strength. Your  indolence can not defeat you. You will get your promotion in company by defeating your indolence. You are still super power and you will not become so sleepy by seeing night so close. 



Related : What is Success According to You?

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Debenture Redemption Reserve Account

Debenture redemption reserve account or sinking fund account or debenture redemption fund account are same. It means to create some reserve out of profit for repaying the amount of debenture. Company will transfer this reserve to debenture redemption reserve account. According to new amendment of Indian company law 1956, to create debenture redemption reserve is compulsory. After issue of debentures, company will start to deposit some % of its net profit to debenture redemption reserve account. With this, we can protect debenture holders' money. Company may invest this money in secured and profitable projects. Debenture redemption reserve account is liability account of company.

Proforma of this account is given below:

  

                           Debenture Redemption Reserve Account 

	Dr.			Cr.
	Balance c/d		End of first year	Profit and loss appropriation account
	balance c/d		end of second year and subsequent  years	balance b/d interest on sinking fund investment a/c Profit and loss appropriation account
	Loss on sale of sinking fund investment a/c Debenture a/c ( Loss on cancellation of own debentures) General Reserve a/c		time when debentures art to be  redeemed	Balance b/d Profit on sale of sinking fund investment a/c Debenture a/c ( Profit on cancellation) interest on sinking fund investment a/c

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Methods of Redemption of Debentures

 When a company gets loan, company issues debentures. Company gets this loan through debentures for a fixed time. After that fixed time, company will return the money of debentures to debenture holders. The refund of money to debenture holders is called redemption of debentures. Following are the various methods of redemption of debentures giving accounting treatment.

1st Method of Redemption of Debentures - Redemption Out of Profit

In this method, we repay the money of debentures out of profit. Now, understand, how is it possible? Suppose, you have estimated that you will get $ 1,00,0000 profit in march 2011 and in same month, you have to redeem $ 10,000 debentures. Now, one side, you will pay $ 10000 through your cash or bank account and other side, you will deduct same $ 10000 from your profit and loss account by making redemption reserve account. Following entry will be passed :

A) Transfer of Profit to debenture redemption reserve account 

Profit and loss appropriation account Dr. 10000

Debentures Redemption account Cr. 10000

B) Redemption of Debentures 

Debentures account Dr. 10000

Bank account Cr. 10000

2nd Method of Redemption of Debentures - Redemption Out of Capital

It means we directly repay the debentures out of capital. We just pass following entry after repay of debentures by cheque.

Debentures account Dr.

Bank account Cr.

This entry's effect on our capital and it will reduce by same amount. There is no need to transfer of profit to redemption reserves in this method.

3rd Method of Redemption of Debentures - Redemption by Conversion

Company can also redeem the old debentures by conversion these into new debentures or equity or pref. shares. At that time, we will pass following entry

Old Debentures account Dr.

New Debentures account Cr

or

Equity Share capital account Cr.

or

Pref. Share capital account Cr.

4th Method of Redemption of Debentures - Redemption by Buying Own Debentures

In this method, directors go to debenture market and for redemption of debentures, they have bought own debentures. For this, following entry will be passed.

Own Debenture or investment in own debentures account Dr.

Bank account Cr.

Investment in own debentures account or simply own debentures account will be shown on the assets side of the balance sheet. Debentures will continue to be shown on the liabilities side of the balance sheet. Here, it is assumed that the debentures are purchased immediately after the payment of interest.

As and when the company wants to cancel investment in own debentures, the following entry is done.

Debentures account Dr.

Loss on redemption of debentures account Dr.

Own debentures account Cr.

Profit on redemption of debentures account Cr.


5th Method of Redemption of Debentures - Redemption by Making Provision

In this method, we create provision for redemption of debentures when we issue debentures. To making provision for redemption is good method to repay the amount of debenture on the time. We keep a small amount of provision and invest in good scheme. At the time of redemption, we liquidate our provision and repay the amount of debentures, it has two sub-methods.

(A) Sinking Fund for Redemption Method

(B) Insurance Policy Method

In this method, we invest provision for redemption of debentures in insurance company, we pay premium of insurance annual. When we have to redeem the debentures, we collect all the money of insurance policy. After this, we repay the debenture amount.

Following entry will be passed in this method

First year


a) For amount of premium appropriated from profit and loss account

profit and loss account appropriated account Dr.

debenture redemption fund account Cr.

b) For amount of premium paid to insurance company

Debenture redemption fund policy account Dr.

bank account Cr.

( Note : these entries will be passed every year including the last year also )

The following entries will also be passed at the end of the specific period on realization of the policy:

a) For the amount received from insurance company

bank account Dr.

debenture redemption fund policy account Cr.

b) For the balance of debenture redemption fund policy account, excess amount received is transferred to debenture redemption fund account.

Debenture redemption fund policy account Dr.

debenture redemption fund account Cr.

c) For amount paid to debentures

debentures account Dr.

bank Cr.

d) For balance of debenture redemption fund account transferred to general reserve 

debentures redemption fund account Dr

general reserve account Cr.

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Problem Relating to Borrowing in International Capital Market

How can a company increase its share price through borrowing in the international capital market? and how can a company reduce cost of capital through borrowing in the international capital market?

Timothy Onyebujoh from Nigeria ( Date : 7/14/2011 and Time 6:47:13 )

Timothy Onyebujoh! Like international stock market, there is also international bond or debt market from where you can buy or sell debt. To increase the share price through borrowing in the international capital market is just part of the techniques of increasing share price. For this, you have to understand your company's capital structure and financial leverage first. In simple words, if your company is generating high ROI, you can get more and more cheap loan by anywhere in the world. After paying small fixed interest to debenture holders, your existing shareholders will enjoy high earning on their investment. So, it will lead to increase share price in the stock market.

On the other side, if you are interested to reduce the cost of capital with borrowing in the international capital market, you should learn weighted cost of capital, if you are lucky to get cheap loan in the international capital market, it will be low cost of debt which will reduce overall weighted average cost of capital.


 

In above picture, you are seeing that debenture is the part of capital structure of capital and its cost is $ 10 per debenture which is almost equal to the cost of equity share capital. But, suppose, your company gets cheap loan @ $ 5 per debenture in international capital market, it will surely reduce weighted average cost of capital.

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