Tips for Blood Donation after Every Three Months

There is no benefit of education, if we do not use our knowledge for humanity. We all are educated. We all know, at the time of accident, human body needs blood. This blood can not be produced in any factory of world. It can be only voluntarily donated. Despite of this, if we don't donate our unpaid voluntary blood who will say us educated.

10/02/2001, I first time gave blood. But due to lack of motivation, I did not donate 9 years. But one day, one of my friend motivated me to donate blood. He told me that there is no security of life in these days. Donate today, what you can donate. If you think to donate after 10 years. It may be possible, you will not get any chance after 10 years. I really inspired from his words. From last year, I decided to donate blood and I am giving blood after every three months. I feel no weakness. Till today, I donated blood 5 times. So, today, I decided to write some blood donation tips which will help you donate blood successfully after every three months.

My 5th Time Blood donation on 30-09-2011

  1st Tip of Blood Donation : If you want to become regular blood donor after every three months. You should eat only vegetarian food because with eating vegetarian food, you will get sufficient level of iron which will be helpful to recover your blood fastly. Never eat meat, fish poultry because it will increase your health problems after donation of blood.

2nd Tip of Blood Donation : In second tip of regular blood donation, we talk about drinking of water. You should increase to drink water. More you will drink water, more your blood will increase. You should also drink water before and after blood donation (2 or 3 hrs before and after).

3rd Tip of Blood Donation : You should also take proper rest before and after blood donation. Never take the stress of your work. You are going for great work and god will help you to do your work. At rest time, you can listen music and feel Relax. You should drink one glass of milk or fruit juice immediately after donating.

4th Tips of Blood Donation : Always feel positive and good. You can see me as example. I never feel any weakness after blood donation. It is because, I feel positive and good.

More Resources :

(A) My Blood Donation on my 31st Birthday

(B) How to Donate Blood

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Clubbing of Income

Clubbing of income means aggregation of income. This income is used for calculating taxable income. The definition of income is different in Income Tax Law from Accounting rules. As per accounting rules, income is the revenue before deducting expenses but as per law, income means all the income of a person like income from salaries, income from house properties, income from business and profession and income from other sources. When we take the total of all these incomes, it is called clubbing of income. Main aim of clubbing of income is to stop  tax leakage and tax avoidance measures.

Income Tax Law 1961 has following provisions regarding clubbing of income.

As per section 60-69,

In following situation, Minor's total income, other persons' income will be clubbed with assessee's total income.

a) If transfer of income without transfer of asset:

If assessee tries to transfer of income without transfer of asset, at that time, income will surely be clubbed in assessee's total income.

b) Revocable transfer of assets 

If a person tries to revocable transfer of assets, his income will be added in his total income as assessee. Revocable transfer of assets means that contract in which transferor has right to re-transfer of assets.

c) Income of Spouse or Son's Wife

Sometime assessee transfers an asset other than the house property to spouse or son's wife without any amount. Income of such asset will be clubbed to assessee's total income. Suppose, Mr. A is father of Mr. B. He deposited Rs. 100,00,000 to his wife C. Now interest of this amount will be included in the income of Mr. A.

However, this section is not applicable in the following cases—

(a) if assets are transferred before marriage.
(b) if assets are transferred for adequate consideration.
(c) if assets are transferred in connection with an agreement to live apart.
(d) if on the date of accrual of income, the transferee is not spouse of the transferor.
(e) if property is transferred by the Karta of HUF, gifting co-parcenary property to his wife.
(f) the property is acquired by the spouse out of the pin money (i.e., an allowance given to the wife by her
husband for her dress and usual household expenses).

d) Income of Minor

If a minor gets income, it will be income of either father or mother's income whose income will be high. If minor is physically challenged, his income will not be included. However, a deduction — Upto `. 1,500 per minor [Sec. 10(32)] shall be allowed against such income which is clubbed in the hands of the parent

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What is Meaning of Vinod

My name is Vinod

Today, I am searching my name's meaning. My name is Vinod and Wikipedia explains my meaning. As per A Wikipedia entry states,

Vinod (Hindi: विनोद) is a male first name used in India. Vinod means Happy or Joyful in Sanskrit. In Hindi , Tamil and other Indian languages, this word is taken as such with the same meaning.Vinodhan,a common name in Tamil Nadu state in India, is a modified or evolutionary form of the name Vinod.

Now, I try to find these features in myself. 

 As per my soul voice, I want to become happy and want to keep other happy. Actually, it helps me to live life with positive way.

Vinod >> Happiness >> Positiveness

In future, as per my definition, it will be my best try to bring happiness in your life. I think this happiness will come only to research and telling you regular  inspirational contents. My motivation to you for your happiness will surely make me happy also.

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What Balance Sheets don't Tell You

Few minutes ago, Writers  (Rahul Misra and Pallavi Patil ) of The Hindu "Business Line" has published a very knowledgeable content in this newspaper. As per this content,

"About 70% of a company's actual value does not appear on the balance sheet."Link

I read this content and I satisfy from its logic. Here, I am reviewing it in simple words. 

1. # This contents tells that 95% company does not make environment sustainability and governance report. You should know what is in this report? This report tells non -financial data of using water and other resources. This report will also tells what is being done by company for these natural resources.

2. # Due to negligence of protecting natural resources and misusing without any control, corporate risks has become at large scale. Japan tsunami and earthquake are its simple examples. Now, big corporate accounting experts are thinking to include all the accounting standards and principles for showing all these corporate risks factors with balance sheet figures. Just showing financial liabilities is not sufficient because natural hazard are happening due to the corporate working. So, this should also be accountable. Billion of $ loss with human life in Japan's earthquake and tsunami are connected with misusing of natural resources of japan by its corporates.

3. # This content also hints that major accounting software players like SAP, Oracle and Microsoft are making new system in which all the non-financial data will be recorded and linked with financial data for knowing real value of company which is not being shown by company's balance sheet. They are also thinking to use eXtensible business reporting language (XBRL) 

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Internal Audit

Internal audit is the inspection of company's accounts by company's full time employees. A big organisation establishes independent department for auditing. Company pays the salary this department employees for auditing the accounts and financial statements of company. Internal audit officer checks the financial activities in the organisation. He creates good co-ordination with accounting and finance department for rectification of accounting error more fastly.

Benefits of Internal Audit 

Institute of internal auditor of USA gives following benefits of internal audit.

1. Capture Fraud relating to money 

CA audits the company accounts after one year. This is big gap between happening of money fraud and its investigation. Internal auditor can check company accounts any time without any prior notice. So, there is good change to capture fraud and save company's money lose in such future frauds.

2. Fix Accountability 

If internal auditor finds any mistake or error of accounting, he can fix the accountability of any officer or employee for this. In accounting department, there may be many sub-sections like inventory management department, debtor and creditor management department, portfolio department. Internal auditor can fix the responsible of that officer of sub-section who will did mistake originally.

3. Special Research 

Internal audit spends his time to research the tools of more security of company accounts. His research will surely reduce mistakes and company can save from fraud due to lose of security of fund and money. For example, If Internal auditor sees money counting room is very near to guest room and it is chance that someone can rob it. So, internal auditor's research may help to keep money counting room far from guest room.

4. To Check Accounting Standard

Internal auditor will check whether company accounts is following international accounting standards or not. With this checking, company account will become more consistent to international accounting standards.

5. To Check Capital Expenditure

Company's internal audit is helpful to check capital expenditure. Capital expenditure is big amount which is used for buying the fixed assets of company. Internal auditor will see whether responsible officer has bough profitable fixed asset or not. What is its cost? Is it competitive or not? 

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Accounting Equation Example

Accounting equation is the base of accounting. If you are new in learning of accounting you should learn accounting equation example. With this accounting equation example, you can clear your fundamentals in accounting. Accounting equation means that equation which tells us that assets will always be equal to the liabilities. These liabilities are of creditor's liability and owner's liability. This equation will always same in every transaction. First we explain its formula and then we prove it with example.

Formula of Accounting Equation


A = L


Total Assets = Total Liabilities 


or 


Total Assets = Total Outside liabilities + total owner's liabilities 


or 


Total Assets = Total creditor's equity + total owner's equity


 or 


Total Assets = Total creditor's equity + ( Owner's capital + total incomes - total expenses) 

 Accounting Equation Example 




1. Mohan commenced business with cash $ 30000


(A) Business of Mohan receives cash as asset, Cash asset  will be $ 30000


(B) Mohan gives this cash in the form of capital = Owner's equity will be $ 30000

Total Assets                                  =   Total Liabilities + Total Capital
Cash	30000	Total Liabilities Capital	Nil 30000
	30000		30000

2. Mohan Purchased furniture for cash  $ 10000

(A) When we bought furniture with cash, our cash will decrease with $ 10000. It means one asset will decrease.

(B) Our furniture asset will increase in business, so we add $ 10000 as furniture asset. There will no effect on liability side of accounting equation.

Total Assets                           =   Total Liabilities + Total Capital
Cash Less payment for furniture Furniture	30000 -10000	Total Liabilities Capital	Nil 30000
	20000 +10000
	30000		30000

3. Mohan Purchased Goods from Sham on credit of $ 5000

(A) With this there will no effect on cash but new goods asset will increase. This is called inventory or stock asset. So, we will show more $ 5000 in asset side of accounting equation. 

( B) With we have to pay to sham $ 5000, so he is our creditor. This will increase our liability. 

Total Assets                        =   Total Liabilities + Total Capital
Cash Furniture Inventory	20000 10000 +5000	Liability Creditor Capital	+5000 30000
	35000		35000

4. Mohan Sold goods (Cost $ 1000) at $ 2000 on credit to Sohan 

(A) Inventory asset will decrease (cost $ 1000)

( B) We have to get money of $ 2000. So, account receivable will increase with $ 2000.

(C) By this dealing we gained $ 1000. So, this will increase our initial capital.

Total Assets          =   Total Liabilities + Total Capital
Cash Furniture Inventory Less Sold Stock (Cost) Debtor	2000010000 +5000 - 1000   2000	LiabilityCreditor Capital Add Profit on sale	+5000  30000  + 1000
	36000		36000

5. Mohan sold goods ( Cost $ 3000) at $ 2000 with cash

(A) Inventory asset will decrease with cost $ 3000

(B) Cash will increase with sale of $ 2000 goods.

(C) Capital will decrease with the loss of $ 1000

Total Assets          =   Total Liabilities + Total Capital
Cash + cash sale Furniture Inventory Less Sold Stock (Cost) Debtor	20000 + 200010000 +4000 - 3000 2000	LiabilityCreditor Capital Less loss on sale	+5000 31000  -1000
	35000		35000

6. Mohan has to pay rent to landlord $ 1000 but not yet paid.

(A) Liability of rent will increase with $ 1000

(B) Capital will decrease due to expense of business with $ 1000

Total Assets          =   Total Liabilities + Total Capital
Cash  Furniture Inventory Debtor	22000 10000 +1000 2000	LiabilityCreditor O/s Rent Capital Less  rent expense	+5000 + 1000 30000  -1000
	35000		35000

7. Mohan has to receive commission of $ 1000 but not yet received.

(A) Our asset  of receivable commission will increase because we have to get $ 1000.

(B) Our capital will increase with $ 1000 because this commission is our income. Income always increases capital.

Total Assets          =   Total Liabilities + Total Capital
Cash  Furniture Inventory Debtor Commission Receivables	22000 10000 +1000 2000  +1000	LiabilityCreditor O/s Rent Capital Add commission income	+5000 + 1000 29000  +1000
	36000		36000

8. Mohan has received advance fees $ 6000  from client before providing service to him.

(A) This advance fees of $ 6000 will our liability. Because if we will not complete our service, other person has to get money from us.

(B) Cash will increase with $ 6000

Total Assets          =   Total Liabilities + Total Capital
Cash + cash of advance fee Furniture Inventory Debtor Commission Receivables	22000  + 600010000 +1000 2000  +1000	LiabilityCreditor O/s Rent Advance Fees Capital	+5000 + 1000 + 6000 30000
	42000		42000

9. Mohan has paid advance insurance of $ 7000 before due date.

(A) Cash will decrease with $ 7000

(B) A new asset of advance insurance will create with $ 7000 because we has right to get back same amount before due date of premium of insurance.

Total Assets          =   Total Liabilities + Total Capital
Cash - payment of advance insuranceFurniture Inventory Debtor Commission Receivables Advance Insurance Payment	28000  - 700010000 +1000 2000  +1000  + 7000	LiabilityCreditor O/s Rent Advance Fees Capital	+5000 + 1000 + 6000 30000
	42000		42000

10. Mohan purchased Computer  of $ 3000 with business cash for personal use. 

(A) Cash will decrease $ 3000 for payment for buying computer.

(B) Capital will decrease because he withdraws  money for personal use. No, business will get power for not paying $ 3000 capital in future to businessman Mohan.

Total Assets          =   Total Liabilities + Total Capital
Cash - payment for computer for personal useFurniture Inventory Debtor Commission Receivables Advance Insurance Payment	21000  - 300010000 +1000 2000  +1000  + 7000	LiabilityCreditor O/s Rent Advance Fees Capital Less Drawing ( Purchasing of computer for personal use)	+5000 + 1000 + 6000 30000  - 3000
	39000		39000

Related : Accounting Examples

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Certificate of Deposit

Certificate of deposit is a financial product which is bought and sold in money market. Certificate of deposit is a short term money market instrument used by banks to raise large amount of deposit from public. Every bank and financial institution can issue certificate of deposit after getting money of deposit from customers.  But it is different from public deposit because public deposit is the fund which a private and non-banking company only get.  Large number of individual and non-individual investors invest in it for getting earning. This certificate can be issued on discount. At that time, investor will pay face value minus discount for buying these certificate.

 These certificate can be issued minimum for 7 days and maximum for 12 months.  Minimum issue of CD will be Rs. 1 Lakh. In USA, minimum issue is $ 100,000. Like other shares and bonds. CD can also be transferred from one investor to other through  DEMAT account. Bank can not give loan on the basis of the security of certificate of deposit.

Certificate of Deposit Rates

In India, rate of interest which is paid on certificate of deposit is not fixed by RBI but it is fixed in open market demand and supply powers. But in USA, CD treats as fixed deposit and same rate of interest applies on it. You can find every bank's CD Rate on bankrate.com which monitor bank rates and provides updated information of interest rates.

Related : Debt Securitization

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Business Valuation Management

Business valuation management is one of important subject of  ICWAI exam. Business valuation management means to take the decisions for calculating proper value of business's asset's and liabilities. If you will read business valuation management book, you will find 26 chapter of business valuation management. All these chapters, we can include the valuation of inventory, valuation of investments, valuation of fixed assets, valuation of intangibles, valuation of company, valuation of liabilities, valuation of shares and valuation of brand etc. All these chapter's theory, you can study in your book and we will explain it in future notes. But today, we will show you the sample paper of business valuation management. This is 2010 and we have try to solve it. By reading this, you can get idea what will be asked by examiner in this paper.

PAPER-18

BUSINESS VALUATION MANAGEMENT

REVALIDATION TEST PAPER-RV/18/BVM/2010

PART A


Give Answer of following questions:


Q:- 1. What is  Intellectual Capital?

Ans. : Intellectual capital is the type of capital. In any organisation, you can see two type of capital. One is physical capital and other is intellectual capital. Intellectual capital is the sum of all assets which are intangible form. We can not touch to these assets. There are two main part of intellectual capital. One is human capital and other is intangible capital. In human capital, we can include employees skills, knowledge, expertise and experience. If our employees have these capabilities, we have this intellectual capital. With this capital, we get power to take fast decision and solve our complex problem. In intangible assets, we can include goodwill, copyrights, patents, trademark and licences. These capital will always in intangible asset form and we can calculate its financial value. We can also buy and sell these assets. A company is doing successful business in finance industry. If it will sell its business to B, then B will also pay for its 20 years goodwill.

Q:- 2 What is Brand?

Ans. : Brand is name and design of any company's product. No one can use same name or design because every brand is protected with trademark. It is the part of company's intellectual capital. It will also helpful to increase the price of product. For example, Google's trademark logo is its global brand. People can find Google's all products by seeing just its logo on it. So, its valuation is important when we sell or buy brand.

Q:- 3. What is Dividend Yield?

Ans. : If we divide dividend per share with price per share, we can calculate dividend yield ratio. It is also called dividend price ratio. We can also calculate this ratio with following formula

total dividend/ total market value of share capital





Q:- 4 What is DCF Analysis?

Ans. : DCF analysis is used for valuation of any fixed asset by using the concept of time value of money. More you can read it in our past notes at here.

Q:- 5  What is Energy Conservation?

 Ans. : Energy Conservation is revolution for saving and efficient use of energy. Our energy  resources are limited and due to inefficient use, these resources are decreasing fastly. For example, we are making our food on LPG gas which is made from petrol. Petrol is limited. If we start to create bio-gas plants and bio-gas for cooking of food, we can use petrol more efficiently. Like this, we have to use electricity more efficiently. If we  will close our fans, lights and other machines when there is no use, one side of these resources life will increase and other side our capital expenditure will also decrease.  

Q:- 6. Briefly explain the various steps in the valuation of a Brand. 

Ans. : Brand is name or design of product which is used for attracting the customers. Customers can buy that product just by seeing its logo or image. So, it is the tool to increase the sale. It increase the price of product. So, it has specific value which can be calculated with following ways:

1. # Make a consumer  research in which you have to check how do your band affect buyers' buying behavior. Your brand value will high if  more buyers are willing to pay for your company's products.

2# Use  conjoint analysis. By this analysis, it will tell you total sales due to brand. If that type of brand is on in your hand what you will pay for buying such brand. On these basis, we will calculate the value of brand.

Q:- 7. What is Human Resource Accounting? What are its benefits? Briefly discuss the two
methods of its measurement? 

Ans. :  You can read this question's answer at here.

Q:- 8.  Why do many mergers fail?

Ans. : Many mergers fail because there are many risks of loss in this type of dealing. Following are main reason of failing of mergers.


Ist Reason # Before merging the companies, mergers do not create a clear vision of their desired outcomes.

2nd Reason # Other company may be cheater. That company wants to fail to your company by contract of friendship. Do not believe on me, read the historical merger between Shiva Ji and Afzal Khan.

3rd Reason #  Companies do not think the effect on final consumer before amalgamating. Your business's main aim is to satisfy your consumer. But under the pressure of your friend company,  you can decide to increase the prices. Due to this many mergers fail.

4th Reason # Sometime personnel and other employee may against to your company. You often see when govt. company merges with Private company, employees of govt. company do not work and go for strike. Due to this, your merger may fail.

5th Reason  # Companies fail to develop new approaches to make mergers succeed.


Q:- 9. Why do companies want to measure Intellectual capital?

Ans. : I already told in the answer of first question that intellectual capital means capital in the form of skills, experience and knowledge of employees and other intangible assets. So, to measure intellectual capital means to measure the value of the skills, knowledge and experience of employees and to measure the value of other intangible assets. Following are its main reasons:

1st Reason # For promotion of employees, we need the data of value of their skills, knowledge and experience.

2nd Reason # For fixing the minimum standard of salaries and compensation.

3rd Reason # For calculating the net return of HR capital.

4th Reason # For selling the goodwill and other intangible assets of company.

{ Please wait for reading part B  of answer of the question paper 2010 of Business Valuation Management}

Related : ICWAI Online Education

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Common Size Balance Sheet Analysis

For analysis of common size balance sheet, we take two companies balance sheet. After this, we convert its all figures in the proportion of 100%. For this, we use following simple formula.

= Asset Figure of balance sheet/ Total Assets X 100
or
= Liability Figure of balance sheet/ Total Liabilities X 100

Following is the sample which is used for common size balance sheet analysis.

Common Size Balance Sheet

1st Point of Analysis : Resources of Buying Fixed Assets 

When both company's balance sheet will convert in the proportion of 100. It becomes easy to analyze it. We can see that A Ltd company has fixed asset which is 95% of its total assets but its share capital is 75% of total liabilities. It means for buying 20% more fixed assets, it has used long term loan. This is not good, if company has to pay high rate of interest and return on fixed asset is less because company will have to pay same fixed interest on loan. When we see the balance sheet of B Ltd company, we find that 60% of share capital is used for buying 60% fixed assets. This position is good because company is using its own capital without paying fixed interest to loan holders. 

2nd Point of Analysis : Working Capital 

Working capital position of B Ltd is better than A Ltd because in B Ltd, there is 10% excess of current assets  over current liabilities which can easily use for paying current liabilities and other day to day expenses. But working capital position of A Ltd is not good because company has no working capital.

3rd Point of Analysis : Current Assets 

When we go to the detail of current assets, we will check which company is using its fund for which current assets. For example B company's 40% current assets in inventory. That is not good current position because we need some cash for payment of expenses. It is not necessary, we will able to sell all our inventory in one day. Moreover, we will not get interest on over-stocking. It will only increase our cost of rent of storage.

4th Point of Analysis : Rule of Thumb 

Time to time accounting and finance experts make some rule of thumb. If both balance sheet in the % form, we can analyze on the basis of rule of thumb. For example, suppose 65% of total assets should be in fixed form. Now, we see B Ltd is good because it is near to rule of thumb. 

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How to Shift from Marketing to Finance

Respected Sir,

I am a B.com Graduate (Calcutta University and an MBA [Marketing + Finance] from EIILM Kolkata in 2010. After completing my MBA I have been working with a Pharmaceutical company as a sales executive for the past 11 months. But I would like to work in Finance industry (mainly as Financial analyst, portfolio management, etc). I want to shift from marketing to finance. Is it possible to do it? I am also planning to do ICWAI to enhance my skills in Finance.

Please suggest me the correct path to go for it and how to shift from marketing to finance. I am waiting for your reply.

Thanking you in an anticipation.

Avijit Mahajan from India 

You can easily shift from marketing to finance industry. No problem, but before shifting from marketing to finance, please rethink because this is not the matter of your like and dislike. One day, you would like to marketing and other day you would like to finance. This is not good. This is just waste of your worthy time, energy and talent. I will not guide you to shift from marketing to finance. If you think, "To sell is most difficult." What will people say?" I am salesman after MBA. What will people be think about me. I remembered, I also learned marketing.

My marketing teacher said to me, " If you want to get success in marketing, you have to get two skills, it is sure, you will be in top in next one year."

1st # As sales man, you should find 1000 qualities in your products. More quality, you will find in your product, you will find more customers. It will also increase the value of your product. Be confident. Search more and more quality of your product. Make its list. Remember it and then go to marketing. Tell this list to each of your potential customer.

2nd # Never feel shy. Marketing is your profession like finance profession. No profession is inferior. Never feel shy to talk. Your personal talk with customer is 100 times more powerful than 100 Crores advertising.  If you do not know good communication, Local and international language. Create interest to learn. More people, you talk in their language without shy, you will find more, targeted and good customers.

If  you are not suffering above problems and it may be possible that you may choose marketing by mistake.

It is general saying, " A man is Statue of mistakes."

Now, you did not delay of shifting. Join any mutual fund, insurance company, hedge fund, bank, finance company, financial educational organisation or accounting firm from bottom line. Do Firm determination that I will learn accounting and finance daily because more you will learn it, more you will perfect in it. That is simple rule in finance and accounting area.

Time is very limited. Never waste time, just for planning. You should do everything from today what you can do for becoming perfect in your new area. My best wishes are always with you.


Because you asked this question as student and it is also my order as teacher,  "Never see back after shifting from marketing to finance because eerie sees back after taking forward step and I do not want to make eerie to my student."

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Accounting Management of Health Care Organizations

In accounting management of health care organization, we records the transactions of health care organisation, makes reports and shows financial statements. First of all we make system of accounting management of health care organisation. If there is big hospital, then we may appoint many accountant who may do following duties.

1. Voucher Entries 

In this part, accountant's duty will be to pass the voucher entries of different receipts and payments transactions of  health care organisation. He will be accountable to record sale and purchase of medicine transactions, bank transactions. He will maintain purchase book, sales book, purchase return book and sales return book.

2.  Inventory  Management 

In this part, accountant will responsible only for inventory. He will record inflow and outflow of medicine inventory from store.

3. Patient Record

Patient is the main customer of health care organisation. This organisation may get fees for giving advice, for checking and for operation. A special assistant will see total fees which he recorded in fees collection register. If some payment is still pending, it must be record in pending bills detail register. One or more assistance will also record patient visit history. Accountant will also be responsible for recording all indoor patients outdoor patients. He can tell quickly the  no. of patients per Ward/bed /room. He will have also record of doctors available for consultation and will tell on the request of patient. Using computer system for this record will be helpful for fast answer.

4. Employees' Record 

In this part of accounting management of health care organisation, accountant will record basic salary of each employee, TA, DA, bonus, overtime, attendance, employee's loan and deductions of employees and employer for EPF, ESI and other.

5. Special Record and Reports

In health care organisations, there are also many special records which is maintained by its accountants. Blood  test report, operation theater record, total request to blood bank. After keeping these records, management can get all reports because the data from various modules flows will transfer to Accounts module and all your final reports like trial balance, balance sheet and income statements are produced. With these reports, management accountant will analyze and will make useful information for management of health organisation. 

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Comparative Income Statement

Comparative income statement is the part of financial statement analysis. This statement is made for analysis of company's revenue position. For making this statement, we take two years income statement. We compare its all figures. By comparing its all figures, we find increase or decrease in its all items. After this, we calculate % of increase or decrease by taking previous year as base year. It means, we divide increase or decrease figure by previous year figure. Following is the example of comparative Income statement.

We can explain and analyze of above statement with following way:

From above net sales figures, we find that our net sale has been increase by 25% but this is not sign of our revenue progress. We have to still check our cost of goods sold increase, operating expenses increase and non-operating expenses increase. From above comparative income statement, we find that we have succeeded just control our cost of goods sold but our operating and non-operating expenses has increased 100% and 200% respectively. Due to this 100% increase in gross profit has decreased up to 66% increase in net profit. 66% is also sufficient increase in net profit for retaining and distribution of dividend to our shareholders on their share capital.

Important Points for Management Accountant to Analyze Comparative Income Statement

1 # Net Profit should also analyze whether it is giving perfect return on investment. See, what was last year our return on investment and what is current year our return?

2. # Management accountant should also analyze all resources' cost with its turnover. See, what were last year our total resources' cost and revenue and what are current year total resources' cost and revenue?

Related : Comparative Balance Sheet 

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Direct IPCC after B.Com

Dear Vinod

Good morning to you,

I read you article on daily basis it is very helpful for accounting profession. I have completed M.com and B.com with 53.7% my query is, "Am I eligible for direct IPCC after B.Com?"

Please answer me

Regards

Manoj from India

Manoj! First of all thanks for reading our thoughts on accounting, finance and education. Next is sorry to say that you are not eligible for direct IPCC after B.Com because your B.Com is with 53.7%. ICAI has made central council. It is latest announcement of this council that only that B.Com candidate whose total obtained marks will be 55% or more, may give the test of IPCC directly. For other non-commerce students need 60% in their graduation. So, it is my request, if you did not completed 3 years after your B.Com, you can apply for improvement. Many year ago, one of my friend has given the test of improvement in B.Com. and gained more than 10%. If your about 2% marks will increase in B.Com improvement test, you can give IPCC directly without CPT -Test. 

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Importance of Comparative Balance Sheet

Comparative balance sheet is the part of financial analysis in management accounting. We can explain the importance of comparative balance sheet in the answer of following questions:

1. # Where did we Use our Fresh Share Capital Fund?

If any company issues new shares and get the fund. This will easily be found by preparing comparative balance sheet. Exact figure, we can find. For example, we had  $ 100000 total share capital in 2010 and $ 180000 in 2011. Now, by comparing both share capital, we find that there is 80% increase in our total share capital. But if we compare our fixed assets and suppose increase in fixed assets is 40%. At that time, we did not utilize our share capital for buying new fixed capital. There where did we use our share capital. We can not make our shareholder fool by telling that we still use all share capital money for buying fixed assets because every shareholder may have capacity to appoint CA or CPA or CFA. Company can never speak white lie. So, management of company will be responsible for balance 40% use. Next part of comparative balance sheet may give answer above question.

2# Why is Current Liabilities are more than Current Assets?

If our comparative balance sheet shows net increase in current liabilities is 300% and net increase in current assets is 100%. Difference of this will negative increase in working capital. Let me simplify this. It means liabilities have increased by 300% but we have not capacity to pay just 100% current liabilities with our current assets. Next 200% current liabilities will not get anything via cash without liquidation. So, management has to concentration on this point.

3. # Where did we use our Long Term Debt?

Sometime company gets long term debt for different needs. If we compare long term debt of 2010 and 2011 and suppose, we find that it also increase 100% and assets side, we see 200% increase of profit and loss account's debit balance. At that time, total picture of company may be clear. Company is using his share fund and long term funds in very very bad projects in which its capital and debt is sunken. So, company is increasing debt and same debt is using for covering loss but loss is still increasing fast for consuming company's debt and capital. This is worst situation of company.

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CFA Course Notes Added in Accounting Resources

We're happy to let you know about a recent improvement to the accounting resources, developed based on your requests for CFA course notes in one place. Now, when you will open accounting resource - you can study and bookmark now all CFA course notes. This will allow you to study directly topics relating to CFA instead of searching relating topics.

If you've any topic relating to CFA which has not been explained in CFA note course, please know that you can discuss this in our ask a question section.

We hope with this new feature in accounting resources, you'll be able to better understanding this course. Let us know what you think!

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Public Accounting

Auditing in India and public accounting in USA are same. In India, it is the duty of chartered accountant to check the books of accounts of company. In USA, certified public accountant does same duty. It means that both Indian CA and USA CPA have professional identity for auditing  the books of company and Attestation of financial statements.

In public accounting, CPA audits day book, ledger book and financial statement. He notes all the points which create the doubts regarding true recording of transactions,  material misstatement. He also checks adherence to the applicable generally accepted accounting principles (GAAP) in financial statements. It will become the part of his audit report. Simple words, public accounting is most dedicated and disciplined work in this field.

I remembered when I did my audit training from CA because I wanted to know auditing deeply. I spent my 9 to 10 hours just analyze the balance sheet. Auditor can find many clues of default in recording just analysis of balance sheet. Suppose, I show following proforma of balance sheet of 2010 and 2011 of XYZ corporation.

What you think after seeing this balance sheet. Just watching above balance sheet 4 or 5 minutes will give you nothing clue of anything. But after 4 or 5 hours analyzing above balance sheet's each item by checking its entries, voucher verification, double verification, checking according to the provisions of laws, there will be open many doors. Opinion of public accountant is ancillary to every interested party of company. These opinion is published in audit report with all the audited financial statements of company. Please check any sample of company's audit report in latest newspaper. 

In public accounting, sometime public accountant or auditor may be appointed for detecting, and investigating financial frauds before acquisition other company. At this time, public accountant checks again the books of accounts for finding the risk level in other company's assets, defaults in given debt or credit and so many other questions, he has to solve. Only after this, board of directors pass the resolution for buying other company. 

I think, you can conclude above discussion that public accounting is serious and challenging portfolio for your growth in profession in which you have to do your profession without caring your leaves or holidays or rest.

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How to Prepare Projected Balance Sheet

Projected balance sheet is not actual but it shows the estimation of total assets and total liabilities of any business. You may need to prepare projected balance sheet, if you have applied for bank loan of your new project or you are interested to buy new fixed assets. For preparing projected balance sheet, you can use ms excel. Following steps will be helpful for preparing projected balance sheet.

1st Step : Calculate cash in hand and cash at bank 

If you have no any book record of your cash, you can show cash in hand after checking your cash balance in business's pocket. You can check also available balance at bank. Both will be your current assets in balance sheet.

2nd Step : Calculate Fixed Assets 

See everything around you. Make the list of assets whose benefits are you taking more than one year. Check its price from cash memo or past bills. Try to calculate time of its using. If you have used it for 3 years. Its value will surely decrease due to depreciation. Charge 10% to 20%  per year on every fixed asset up to used period with any method of depreciation. Now, you will get current cost of fixed asset. Show it in the asset side of balance sheet.

3rd Step : Calculate Value of Financial Instruments 

If you invested your money in shares, bonds and other financial instruments. Write its purchase price. If it has decreased, then you can also show current market price of financial instruments.


4th Step : Calculate your Business Earning

If you have not made profit and loss account. You can just compare your all expenses and your all incomes. If  your incomes are more than your expenses, it will be your net profit. It will be transfer to liability side of balance sheet. You should only deduct expenses whose benefits, you have obtained in one year.

5th Step : Calculate Business's Liabilities

In these liabilities, you can add bank loan, secured loan and other loans. This will be added in liability side of projected balance sheet.

3rd Step : Calculate Business's Capital 

Business's capital, you can calculate by subtracting outside liabilities from total assets. This will also add in the balance sheet in liabilities side.

Following is the proforma of projected balance sheet

Related : How to Audit Balance Sheet

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How to Earn from Online Teaching

Hello Vinod,
This is Suresh. I am an M.com and MBA-Finance having 6 years industry experience and 5 yrs teaching experience in the field of Finance and accounts.
I can handle any subjects for BBM/B.com, M.com, MBA or PGDM. Kindly advise me How can I utilize my teaching skills on part time basis to earn small income. I am free on Sat and  Sun and 10am to 1pm on week days.

Thanks in advance

Suresh from India 

Suresh! like you there are lots of other young scholars who want to earn  part time income through teaching online. For this, first of all, you need students who are interested to learn from you online. You can get large number of online students if you will invest your small money in online advertising through Google AdWords  or YouTube promotion ads or mobile ads. This will be your advertising expense and you can get net income after deducting fees which you will receive from students. Second thing, you have to show your work. For this, you can make some free YouTube sample educational videos. In this, YouTube account and Face book business page, you have to show your all past educational works. If you want to get best result, you have to spend 2 to 3 hrs daily. Now, question is, how will you teach online. This will become so simple, through Google plus hangout, you can teach and deal with each student. If you do not know, how to, please read this content.   

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Mutual Fund Investing

Mutual fund investing has two meaning. One is your investment in mutual funds. Other is investment of this fund in  different financial securities. First of all, we explain it from your investment in mutual funds point of view. You can invest your money in mutual funds due to two reason. One is by investing your money in mutual funds, you can decrease your risk. Your money will go to first mutual fund managers, they are expert in this field. They will get some part of your return but they will save you from risk. Second, you will get stable return. As small investor, you can not suffer expenses of direct investments in shares and bonds. All these expenses are incurred by mutual fund company. That is the reason, you will save money. Same money will be helpful to get more return. Over last 5 years average returns from mutual funds of top performing funds is between 10% to 14%.

Now, if you have decided to invest in mutual funds, you have to select best mutual fund company. According to level of your total investment, you can choose any best mutual fund company. There will be minimum investment requirement in some mutual fund companies. That amount, you have to invest periodic or lump sum. Before investment in mutual funds, you also have to check where is it investing. If it is investing your money in high risky project. It is sure, it will affect to your investment. You can check risk from its past financial results and its volatility level.

Open ended Mutual funds' price is fixed with net asset value. A fund's net asset value or NAV will be equal to the current market value of a fund's holdings minus the fund's liabilities. This net asset value changes every day on the basis of price fluctuations. So, before investing in mutual funds, you have to decide in which type of mutual fund schemes, you have to invest. You should also learn the main categories of mutual funds. Main categories of mutual funds are value funds, growth funds, balance funds. These categories may also be made on the basis of investment of mutual funds. Some mutual funds may invest in health care field and other may invest in technology field.

Now, explain mutual fund investing from investment of mutual funds point of view. Mutual funds company tries to best to diversify big find in different projects. These mutual fund companies may invest some amount in Govt. bonds for reducing risk. For taking small risk, these companies can invest in corporate bonds. Some of their money, these can invest in high yield but risky bonds and shares.

Remember, as per SEC of USA rule, "Mutual fund shares are "redeemable." This means that when mutual fund investors want to sell their fund shares, they sell them back to the fund"

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Tips of Accounting in Excel

Excel or MS. Excel is very useful tool for accounting. So, every accountant should learn excel deeply. In YouTube, there are lots of channel for teaching ms excel,  from where you can learn many things which may be useful for your accounting work.

Today, in this content you will learn some good tips of accounting in excel.

1st Tip : Accounting Data Analysis with  Pivot Tables 

In ms excel, there is option of pivot tables in above data menu. This is very good option. By using this, you can analyze all your accounting data. Suppose, you have data of different years sales in different branches. With pivot table, you can know the amount of sale according to our requirement. Suppose, we are interested to know the sale of 2005 relating to Chandigarh branch. This table will give us the answer. Like this, you can know specific amount of sale in different branches.


Following video tutorial will be helpful to use it.




2nd Tip : Use of VLookup Function For Getting Accounting Information

Vlookup function is very good function in ms excel. With this, you can get or search many accounting information. I try to teach it with simple example. Suppose, my business is to sell Accounting DVD in different countries. I have to get money after some time. But due to changing in foreign exchange rate, it affects my net profit. So, I will use Vlookup for converting my all sale in their currency. Now, just changing the rate of foreign currency, I will succeed to know sale in foreign currency. After this, I can analyze its effect on my net profit. My following video tutorial will be helpful to you to learn it deeply.




3nd Tip : Calculation of NPV

NPV is useful in capital budgeting in management accounting. We can easily calculate NPV in excel, see a video at here which explain this calculation in simple words..

4th Tip : Calculation of Commission through Dollar Formula

In accounting, we have to calculate different sales man's commission with different commission rates on sales.  for calculating of this, we can use simple dollar formula.

following is dollar formula for calculating commission

= Select the cell of total Sales * select the rate

{Important to Note : sign of dollar will be written before selecting rate and between row no. For example selected rate cell is B9, we will write $ before B9 and after B}

5th Tip : Calculate an Future Value of Your Investment 

From accounting report, we can find the amount of investment which may be monthly basis, period of investment and interest rates. On these basis, we can calculate future value of your investment. For example, you invest $ 1000 for 10 years with 5% rate of invest. What will be the future value of your $ 1000 after 10 years.

Following formula will be used

= - FV(rate, time, investment amount,,1)

or  = - FV (0.05,10,1000,,1)

Related : Accounting Tips 

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How to Learn Accounting with Crossword Puzzles

We are always interested to teach you accounting online with more fun and enjoy. For achieving this target, we recently find one of important an educational tool and its name is crossword puzzles. Crossword puzzles are  also the best for giving online accounting test in which you will given some question. Every blank box will have the answer of your question. With some clues you have to solve all the problems.

Today, we are happy that we have succeeded to use this educational tool in Accounting Education. Now, we have started to make accounting crossword puzzles for teaching basic to advance accounting. All these puzzles, you can find and demonstrate the accounting words by just going to Online Accounting Test Section.

Following are the Steps to learn Accounting with our  Crossword Puzzles

1st  Step : Just Go to the link of Crossword Puzzle box.

2nd Step : Click on word box to start puzzle. Right side of crossword boxes, you will see the question. In this question, you will see blank space. Just below will also be a blank box. Add the answer in the box and then click OK. If your question will be correct. This word will be published in crossword puzzle. If you do not know its answer, you can click on solve button. After clicking on solve button, you can find its correct answer.

If you want to participate today in it, you can take participation at here. 

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Financial Support for MBA

Some time ago, I found query on my online support,

"I am Sri lankan. I am looking for financial support to do my MBA at Sri Lanka. My income is not enough go for MBA thats why I am seeking for financial support for this. I can provide my total MBA details registrations document for your reference if needed."

Reasons of  Support : Father has Minimum Source of Earning

Approximate Amount of Support : $ 3500

Name of Student : Harsha Buddhadasa

Name of Village or  City or distt. , State and Country  : I am Srilankan and from Galle

If any not-for-profit organisation in Sri Lanka or any other person from any other country wants to support him for his education. That organisation can contact him at Mobile or Phone no. 718166656

{ Disclaimer : Before providing him financial support, it is your duty to check all things which he or she has mentioned in above statement.

If you will give us at http://support.svtuition.org/2011/04/good.html , it will our duty to check above case and other cases which wrote by needy students at http://support.svtuition.org/ }

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What is the Impact of Capital expenditure on Working Capital Management

What is the impact of capital expenditure on working capital management for non - financial firms? How this impact can be measured? Which variables should I use to get the desire relationship? I am doing doing MS research on this topic and I need your assistance on this topic. Any valuable suggestion regarding to the topic would be appreciated.


Regards

Muhammad Imran

Ms/Mphill in Economics & Finance from Pakistan

 Muhammad Imran! You have asked me three question. I am trying to answer all these questions.

Q:- 1.  What is the impact of capital expenditure on working capital management for non - financial firms? 


Ans. : There is vast impact of capital expenditure on working capital management for non-financial firms. I explain it with simple example : Suppose, there is an educational organisation. Its chartered accountant has made its working capital management in which chartered accountant has fixed the date of getting the fees from students, paying salaries to employees and other expenditures. Now, above board of director capture in greed. They started the project of making new buildings. This is capital expenditure of that organisation. They did not make good financial planning for this construction. Due to this, they feel shortage of fund. Now, same burden will on working capital. CA is as working capital manager. What will he or she do? CA will collect some money by not paying  salaries or other expenditures and will supply money for construction. Due to this, whole salaries and other expenses will be delay.So, this is main impact of capital expenditures on working capital management.

Q:- 2. How this impact can be measured? 

Ans. : To measure this impact is very simple. Above story is real. One of my student is working as accountant in educational organisation. He did not get his salary from last 4 months. Now, he is making planning to leave this work. Like this, other employee will be leave this educational organisation. Moreover, other creditors who will not get money will sue in court against that educational organisation. That educational organisation can see its effect in future.

Q:- 3. Which variables should I use to get the desire relationship?

Ans. : Check your latest financial statements and find which particular capital expenditure is affecting working capital. Then we can create its relationship with increasing or decreasing of working capital. 

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Is Uniform Costing Same as Batch costing in Cost Accounting

"Is Uniform Costing Same as Batch costing in Cost Accounting?" question has been asked by  Adedoyin Ogunrole from Nigeria. In my words, No, uniform costing and batch costing are not same. Following are the differences between batch costing and uniform costing.

1. #   Batch costing is the part of methods of costing but uniform costing is the part of techniques of cost control.

2. # In batch costing, we find total cost of each batch production. In uniform costing, we try to use all cost accounting standards which is used in our industry.

3. # Aim of batch costing is to correct calculation of cost of a batch according to getting the order. Aim of uniform costing is to minimize the cost by adopting standard costing rules in each industry. 

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Basel II (Simplified)

Basel I and Basel II are two important rules of Basel Accords which has been made by committee on banking supervision. In these rules, main stress has been given on the strengthening of bank's capital. Now, we are discussing the three main rules of Basel II

1. Minimum capital standards rule

According to basel II, it is the duty of bank to fix minimum capital standards according to its assets and risk level. Now, for applying this first rule, every bank will be interested to calculate minimum capital. But, bank can find that its capital is based on minimum standard. It will tell its capital adequacy ratio. Capital adequacy ratio is


= capital fund/ risk weighted assets of bank X 100.

Capital Fund ={ Tier I  = Paid up capital + Disclosed Reserves + Non redeemable and non cumulative Preference Share capital + Disclosed Reserves }+ { Tier II = Provisions + Revolution Reserves + Undisclosed Reserves + Hybrid Instruments + Subordinate Debt }

CAR on Tier 1 basis must be 6% out of total CAR 9%

Risk Weighted Assets =

Bank's main assets are given loan to customers. So, its risk weight will be under following rules

a) Cash in the hand of bank = 0% Risk weight
b) Balance in Other bank = 20 % risk weight
c) Educational Loans - 75 % risk weight 
d) Retail Loans ( Maximum given loan is Rs. 5 Crores) = 75% risk weight
e) House loan ( Maximum given loan is Rs. 50 Lakh ) = 50% risk weight
f) House loan ( more than Rs. 50 Lakh ) = 75% risk weight
g) Personal Loan = 125% risk weight

As per Basel II rule, it must be 8%. As per RBI rule, it must be 9%. If this CAR is less than rule of thumb, then bank should increase its capital.

2. Supervisory review Rule 

Under this rule, every country who is member of committee on banking supervision, will have an authority who will check rule one. It is the duty of supervisory review authority to check minimum capital of each bank.

3. Market Discipline  Rule

Under this rule, market will also play important role to check the minimum capital of bank. In market, we can include interested parties of bank. These interested parties may be the customers of bank, shareholders of bank and govt. 

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Search Accounting Education with Your Voice

You see voice input in Google search engine, if you are using Google chrome browser. Today, I have added same voice input in Accounting Education's search engine. You can find it near our site's logo. Still it is on beta and if you will like it, it will be permanent. With the help of this voice input, you can use your voice for searching directly in accounting education. Suppose, you speak balance sheet after clicking the icon of voice input, your spoken words will show in this search engine and then your can search it. Like this, you can search any accounting, finance and educational terms through your voice. This is alternative option which can use our readers.

How does Your Voice get Transcribed in Plain Language

Actually, your voice will go to Google servers and then it will be converted in plain text. Time is too much short of delivering of it in plain text but you can take its benefit.

This feature is only available for Google Chrome browser. You can see voice microphone icon when you will access our site through Google chrome.

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Errors in Trial Balance

Trial balance shows mathematical correctness in the books of accounts if its debit column total matches its credit column total. If it does not match, it means there is big mathematical errors in the books of accounts or in trial balance.

1st Error : Transposition Error 

Find the difference of total of debit balances of trial balance and credit balances of trial balance. If it divides with 9, it means, we wrongly write any balance in trial balance. For example, we can write wrongly 525 as 552.

2nd Error : Mis-calculation Error

If we do not calculate any ledger balance correctly, we can see error in trial balance. Sometime, we may wrongly calculate total of any side of trial balance.

3rd Error : Duplication Error

Sometime, we can write any ledger balance two times in trial balance. At that time, our trial balance will not match. This error can easily find by watching deeply each figures of trial balance.

4th Error : Omission Error

If we forget to write any ledger balance in trial balance, at that time our trial balance will not match. Check all ledger account and see which ledger account's balance did not send to trial balance.

5th Error : Wrong Side Error 

Under this error, we wrongly write debit balance as credit balance in trial balance or credit balance as debit balance in trial balance. For finding this type error, you should divide difference with 2 and if difference figure is divided by 2, it means we have should ledger balance in wrong side.

Related : Adjusted Trial Balance 

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Steps to Write a Balance Sheet

One year ago, I wrote content, "How to Prepare a Balance Sheet of Company?" which you have liked. But all those who are beginner in accounting and doing individual small business, I am teaching some easy steps to write a balance sheet for their business not a company.

1st Step : Collect all your Assets 

You will have the past vouchers and cash memos of your assets. Prices which had been shown in these vouchers, will be the base of writing of all assets in balance sheet. If you do not charging depreciation annually, you should calculate total depreciation of all past years and deduct from voucher price of assets. Some current assets value, you should have to calculate. For example, physical quantity of inventory in the store will be the base of writing closing stock in balance sheet. If you have doubt about any debtors payment, you should deduct it in debtors as provision for doubtful debts. Some current assets, you should calculate by watching your incomes and expenses. All advance expenses whose benefits, you will get in next year, will include in current assets. All incomes which will be received in next financial year, will include in current assets. Check your bank balance and cash in your pocket, these will be current assets and add in assets side of balance sheet.

2nd Step : Write All Outside Liabilities 

Liabilities mean that amount which we have to pay outside. Check your loan register or list and its payable interest. Add it in liability side. After this, see bank overdraft amount and total amount payable to your creditor. Write it in your balance sheet's liability side. Find all outstanding expenses whose benefits, we have received but payment will be done in next financial year. These will be included in current liabilities. Find all advance incomes. We received these incomes but we did not provide service and service will be provided in next financial year. So, add it in liability side.

3rd Step : Write Capital or Goodwill 

If your total assets will be more than your total outside liabilities, it will be capital and add in liability side of balance sheet. If your total outside liabilities will be more than your total assets, it will be goodwill and add it in assets side. 

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Inspiration for Teachers

Yesterday, I was finding the video for promoting eye donation awareness but suddenly, I found the video "Power your words". This video gave me great inspiration. When this video can inspire me. obviously, It will be inspiration for teachers who thinks like me.

Now, we know what is special in it.

There was blind beggar who was begging on the street. Someone wrote on paper board near him. "I am blind, please help." People were coming and going. No one was giving him good money because people do not know the effect of blindness. But one lady came near him. He did not pay but felt sympathy with him. He changed the words. These words were, "It is beautiful day but I can not see." Now people understand his real problem they feel his situation. They starts to give big money to him.

Now, we try to apply in it in Teaching 

Teacher teaches his students. For teaching, he uses different words. His words effect greatly on the learning of  students. So, every teacher should think before speaking any word to students. Just changing his word, he can changing the classroom behavior. If any student misbehave in the classroom, his teach should not use abuse words like "rascal, get out from my class" but his words shows patience and motivation to that students. Teacher should find the real reasons of his misbehavior. I am remember when I was in 6th class. I felt difficulty in history subject. But my Kiran Madam's nice and lovely words effect on me like magic. After this, I felt enjoy history. So, if teachers will change his words, they can make difference in education.

Related : Inspiration for Students 

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Insurance Planning

Insurance is a financial product which provides the financial support to insurer and his family in case of any unfortunate accident happens. But like any other planning, we have to make its plan because it does not provide high level of profit. As a good investor, we have to think many things before making insurance planning. Following are the main consideration which you keep in mind while you are making insurance planning.

1. Type of Risks, you have to Cover through Insurance 

First of all you have to make the list of risks which you have to cover from Insurance. Single insurance policy will not helpful to cover all type of risks. To cover some risks is important than any other type of risk.


a) Risk of Life

Life is uncertain. You can say that you will die after 80 or 90 years. Next day accident will sleep you without any alert. So, this risk should give first rank. I know, all we have some dependents. They may be our parents, brothers, sisters, wife or children. Make the list of all dependent members. Calculate their current and future cost of standard of living. Suppose, today your children is consuming Rs. 10000 per month but at the time of higher education, they can consume Rs. 100000 per month. All these costs, you have to pay but due to your die before fulfilling your duty who will pay them. If you did insurance of your life,  they can survive by getting money from insurance company without any difficulty. Life insurance policy plans are best for covering these type of risks.

b) Risks of medical contingencies

Today, medical expenditure become costly. Suppose, you do not die in accident but you face major operation whose cost is Rs. 500000 who will pay this amount to you. No one but if you can take medical insurance policy, you can use the insurance policy fund for this purpose.

c) Risks to Loss of assets

Risk of loss of assets may be happened due to accident, natural mis-happenings and fire. So, ready for covering this financial loss. You can create reserve from your business or profession income for covering the risk of loss of assets .

2. Calculation  the Right Level of Risk Cover

There are many factors, you have to analyze for calculation the right level of risk cover. Every type of insurance policy may have different plans. You can choose best one in each type of insurance policy. This will be suitable for your age, your family profile, your own requirement, your total level of risk and your income level.  Concentrate on following point may be helpful :

a) Total amount of immediate financial expenses will your family face upon your death.

b) Total amount of salary is required to meet your current expenses. If we add inflation rate in it what will be total amount which will be require for your family after your death in future?

c) Total amount you want to leave behind to fund your child’s education and other purposes.

3. Insurance Planning in Old Age 

At old age, you can take insurance policy for regular donation to charity. In this insurance planning, you have to pay high amount in the form of premium. After your death, insurance company will pay donation to charitable organisation.

4. Target 

This is one of important point which should be in insurance policy. What is the target of your insurance policy. You can take insurance policy for pension, for covering financial risk of life, for saving and earning your money, for tax benefits and  for higher education for your children. Only after this, your insurance agent can give you good insurance policy. For example, one insurance company provides guaranteed high  return on the investment in its insurance plan with any risk. So, you can invest in it, if you want to earning on insurance product. 

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