Effective Annual Rate Explanation

I have already explain effective annual rate or EAR in yesterday content APR vs EAR. But, I have studied more resource and ready to explain it with more simple way.

EAR is just like a compound interest rate. We know that Compound interest is excess of amount over principal.

Compound interest = Amount - Principal.

We also know that we compound interest is also calculated on principal + old interest. For example if compound interest is 10% on $ 100 loan which is given for two years. At that time, we will calculate first year

First year interest = 100 X 10/100 X 1 =Rs. 10

Second year interest = ( 100+10) X 10/100 X 1 = 11

----------------------------------------------------------
Total compound interest is = $ 21

=======================================

Or

Amount = Principal ( 1+ R/100 ) ^ t 

Or

Amount = Principal ( 1 + R/ 100) ^ first year X  ( 1+ R / 100) ^ Second year X ........... No. of years

Amount = 100 ( 1+10/100)^2 = 121

Total Compound Interest = Amount - Principal

Total Compound Interest = 121 - 100 = $ 21

Now, are apply same in Effective annual percentage rate.

A credit card company has given loan of $ 1 for one year. This loan is given on the basis 0.6274% interest rate daily basis. Calculate its  Effective annual rate. Now can calculate total amount with following way

First Day Amount = $ 1

Second Day Amount = $ 1 ( 1 + 0.6274 / 100 )^ 1

Third day Amount = $ 1 ( 1+0.6274 / 100 ) ^ 1  X  ( 1 + 0.6274 / 100 )^ 1

Forth day Amount = $ 1  ( 1+0.6274 / 100 ) ^ 3

Like this 365th day Amount = $ 1  ( 1+0.6274 / 100 ) ^ 365

or

Like this 365th day Amount =  $ 1.257

Compound Interest or Effective Annual Rate = Amount - Principal  = $ 1.257 - $ 1 = $ 0.257 or 25.7%

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Power of Truth and Honesty

In our notice board, we have mentioned our motto. Truth and honesty are our motto because we have realized its power. These two words have given us what we wanted.  So, we want to share its power with you. For this, we are taking some important quotes of great personalities from http://www.thepoweroftruth.com/truth_quotes.html

1. Light is Truth

“The Light is more than some abstract, unknowable energy force. Light is Truth. If Light is truth, then darkness must be lies."


- Renee Bledsoe, Addiction Alchemy

We can  see anything in the existence of light When evening comes, our power decreases and we feel tired. After rest in dark night, we feel happy in the light of sun. Like this, we start to speak lie, it makes us blind. At that time, can not decide what is wrong and what is right? For this, I explain a small story. One day Angel of God has decided to make rich to a person who speak lie everyday. That person was coming just after  speaking lie in court. Judge had trusted on his testimony. For this, he got some money as bribe. That person was very happy. Now, he was returning to his home. Angel of God was seeing him.He had made billions of Dollars Gold coins and threw on the road. When that person reached on that road, he did not see below but he saw a blind person who was crossing the road. That person thought, "He is very powerful, he can speak lie and judge trusted on his tongue. Now, he can also walk by closing eyes." So, he closed his eyes and walked on these billions of dollars Gold coins. But he felt all these gold coins as stones of road because he had closed his eyes. He crossed both gold coin and road. His hands were empty. He was dead by accident. God told his Angel that I love truth because it is light. Because that person spoke lie every time. It is just like darkness. So, he did not see your gift (your thrown billions dollars gold coins). Never gift again to such bad guys.

2. Always tell the Truth. That way, you don’t have to remember what you said

By speaking truth, you need not remember anything. Truth will increase your remembering power. When you will speak lie. You have to remember this lie because next time, you have to use same lie for other person. If you start to worship of truth like worship of God, it will make you so powerful. You will become more intelligent by speaking truth in daily life.

3. The biggest consequence to telling a lie is, it leads you to telling another one

Lie is just like net. Only for once and forever applies on lie. If you speak lie once, you can not get rid from it. So, better is never speak it. Honesty can help you to speak truth. If you are honest, you can never become greedy. Lie is always spoken due to greed or fear. But truth is always spoken due to honesty or fearless.

4. Who lies for you will lie against you

If anybody speaks truth for you, he will always speak truth against you but benefits will be your in both side. But a person who speaks lie for you, will become cheater. For getting some more money, he can speak lie against you. So, identify the power of truth and create relationship only with truthful and honest peoples.

5. Honesty is the first chapter in the book of wisdom

Honesty is the first chapter in the book of wisdom. ~ Thomas Jefferson

Why did Thomas Jefferson say these words. He can also say dishonesty is the first chapter in the books of wisdom. There is big need of thinking on this sentence. Will you appoint a dishonest person? No, why? Because he robbed your everything. If you will appoint a dishonest person as your company's accountant. He will show false losses and will take all your business cash. If you will appoint a dishonest salesman, he will cheat you and will deal for his personal benefits. He will carry your customer by taking the benefits of your loopholes and will become your next competitor.  If you will appoint a dishonest

6. The Truth is more important than the facts

The Truth is more important than the facts. ~ Frank Lloyd Wright

In window dressing, I have told you that we can add or deduct facts in our accounting information. So, facts are not important. One of major drawback of legal laws that it sees the facts and evidence. But, it should see the real truth.

7. Rule of Universe 

Truth and honesty is the rule of universe. You can go any part of the word. You will deal on the basis of truth and honesty. For example, you go to UK for traveling. You live in the hotel for 10 days. After 10 days, you have to pay its fees. You can not refuse to pay the bill because it is the truth that you lived for 10 days. It is the honesty of hotel manager to get only actual fees for living 10 days. Life can become more easy if every person starts to speak truth and lives with honesty. But, I am very sad to see the people who are living  their life with dishonesty and lie. 

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APR Vs EAR

APR and EAR are both annual interest rate which is used for calculation of annual interest on a loan. Full form of APR is annual percentage rate and EAR is effective annual percentage rate. But there are following differences between APR and EAR.

1. Calculation Method

APR is calculated by using simple interest rate formula. For this, we need total interest payment, principal amount and time in years. But for calculating EAR, we need to calculate compound interest rate. After this, we also need to add different fees in calculated compound interest rate.

2. Cost of Borrowing 

Because in APR, we do not add different fees, so, it is just nominal cost of borrowing which we have to pay in simple annual interest after calculation of APR. In EAR, we have to pay service charges, late fee and origination fees.

3. Example 

Example of APR

A bank issued loan of $ 100 for 7 months with simple annual interest of 15%. This simple annual interest rate will be APR.

Example of EAR

A bank issued loan of $ 100 for 6 months at 5%  per month plus $10 fees per month. If we convert 5% per month and $ 10 fees per month into annual interest rate, it will be annual percentage rate.

4. Formula of Calculation of APR and EAR

Basic Formula of calculation of APR



Basic Formula of calculation of EAR



The effective interest rate is calculated as if compounded annually. The effective rate is calculated in the following way, where r is the effective annual rate, i the nominal rate, and n the number of compounding periods per year (for example, 12 for monthly compounding):



If the monthly interest rate j is known and remains constant throughout the year, the effective annual rate can be calculated as follows:



Wikipedia References : APR and EAR 

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Year in Review 2011

Some Developments in 2011

Just 3 day are far from new year 2012. Now, this is correct time to review 2011 in Accounting Education. In 2011, we learned lots of things from all of you online community. We also took many steps for Accounting Education's development. Some of progressive works are reviewed by us with following way.

1. Development of Accounting Resource 

In 2011, we developed our accounting resource and added classes in it. Now, you can not only find accounting resources but also learn all the topics relating to your class or course.

2. Full Solution On Your Email Address 

By taking one step forward of our duty, we have made a good system. With this, we can easily provide full solution on your email address before publishing it online.

3. Facebook Network

In 2011, we have used facebook social networking more effectively. We connected and talk lots of persons. Recently, we have launched Accounting Education's page in Google+ the modern social networking site. Some of you, also want to share their knowledge. This is very good feedback from you. You can send your new accounting information at our email vinod@svtuition.org. After reviewing it, it may be published in Accounting Education.

4. Recruitment

In 2011, we have started to expand accounting education by recruiting employees. Still, we recruited 3 part-time employees for editing, publishing and office assistance.We have also recruited one camera-man for video tutorials. In future, our planning is more development on self-hosting space with more advance online tools. For this, we will always welcome to young and intelligent candidates in our organisation.

5. Welfare Activities  

From Accounting Education's welfare fund, we have started lots of welfare activities. All these welfare activities aim is to help poor and needy community of society. We are feeling happiness, because we are achieving our targets with our small efforts.

Thanks for your interest for reading Accounting Education  throughout 2011 and for your support of the Accounting Education. I hope, your support will be in 2012 with us. 

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What is Net Profit Margin

Net profit margin may be defined as net profit ratio. It tells us, the amount of net profit out of every $ 100 sales. It may be 10% or 20% or any. It is different from gross margin because in net profit margin, we take only net profit instead of gross profit. After calculating net profit margin, we compare it with gross margin for checking whether our all indirect expenses are under control or not.

Following is the formula of Net Profit Margin :

=  Net Profit / Sales or Revenue from Services X 100

For example, if sales is $ 1000 and cost of goods sold is $ 100  and other operating  expenses are $ 600. Calculate Net Profit margin.

=   Net Profit / Sales X 100

= Sales - Cost of goods sold - operating expenses / sales X 100

= 1000 - 100 - 600 / 1000 X 100 = 30%

Benefits of Calculating Net Profit Margin 

1. We calculate net profit margin for making future price policy. We can decrease this margin for reducing our product prices. With this, we can increase our sales.

2. After calculating our net profit margin, we can compare it with our competitors. With this, we can defeat our competitors in pricing war.

3. Net profit margin is also useful for study the performance of company. After calculating net profit margin with past accounting figures, we analyze whether it is OK for surviving our business or not.

4. Sometime net profit margin is used for marketing purpose also. If we sell 5 products who have different prices. We can change each product's price but keeping same overall net profit margin as per our marketing strategy.

Net Profit Margin Vs Markup

Net profit margin is not markup. Markup is just way to calculate selling price on the basis of product cost. In markup, we can include both gross profit, net profit and other indirect expenses. But in net profit margin, we use just net profit and net sales.

Related : Reason of Losses 

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Money Multiplier

Money Multiplier Simple Definition

In simple words, money multiplier is ratio of actual and initial deposit and reserve ratio. Money multiplier is used in banks. For example, a depositor comes and deposited Rs. 100 in bank, bank's reserve rate is 10%. Now, bank will calculate Rs. 10 as reserve and rest Rs. 90 will issue as loan. This process will continue under fractional reserve banking. But before this, bank will be interested to know his capacity to increase deposit with initial deposit amount of Rs. 100 which we can calculate through money multiplier formula

Money Multiplier (M) = Actual and Initial Deposit Amount / Reserve Ratio 

=  Rs. 100 / 10% or = 100/0.10 = Rs. 1000

Bank can get deposit of different persons through first deposit of Rs. 100. Rs. 1000 is 10 times of Rs. 100. For this, bank can get idea of his future power.

We also know Money multiplier as reverse of reserve rate. For example, we can say 10% rate is 1/10.

Money multiplier = total initial deposit amount / reserve rate

Now we can also say = 1/ reserve rate

= 1/1/10 = 10 which is just equal to the result which we calculated in above example.

Effect of Money Multiplier in Expanding the Money Supply

Money multiplier's calculation is on the basis of reserve ratio, if reserve ratio will be less, bank will have more power to supply money in market through loan. If reserve ratio will be very high. It is just like ban for bank to give more and more money as loan. For example, if rate of reserve increase as is reached at 50%. At that time, money multiplier will be just Rs. 200 which is just 2 times of initial deposit of money. Due to this effect bank will not issue more loan.

Related : Money Laundering

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Profit and Gains from Business and Profession as Per Income Tax Law

Profit and gains from business and profession is taxable as per income tax law 1961. But way of calculating net profit in IT law is different from accounting. As per income tax law, all expenses are not allowed as deduction in profit and loss account. Following are main expenses and losses which are allowed and will be debited in profit and loss account for calculating profit and gains from business and profession.

Profit and Loss Account As per Income Tax Law

	Expenses As per Income Tax Law			Incomes as Per Income Tax Laws
	Expenses Net Profit	XXXX  XXXX		Incomes	XXXX

Expenses As per Income Tax Law

1. Depreciation ( Section 32 ) 


As per section 32 of Income tax law, depreciation will be debited with the rates which are allowed in the law and updated ever year in finance bill. There are also other rules which an assessee should remember:

(a) Rates of Depreciation 

For assessment year 2011-2012, following are the depreciation rates. With these rates, you have to calculate depreciation and you can deduct same amount for calculating net profit taxable as per income tax law.

	Fixed Assets	Rate of Depreciation
	(A) Tangible Assets
	1. Furniture	10%
	2. Computer	60%
	3. Building
	Residential Building	5%
	Non-Residential Building	10%
	4. Motor Vehicle	15%
	5. Machinery	10%
	Fan	Same
	Inverter	Same
	Water Pump Machine	Same
	Air Boiler	Same
	Other Machines	Same
	6. Books	60%
	7. Annual Publication	100%
	(B) Intangible Assets	25%
	Know-how, trade-mark, copyright, patents, goodwill etc.

(b) Method of Depreciation

As per income tax law, we have to apply written down value method for calculating depreciation instead of fixed installment method.

(c) Time 

 If we have used assets for 180 days or more, full year depreciation will be allowed, otherwise 1/2 year depreciation will be allowed.

(d) Not Allowable Depreciation

Depreciation is not allowed on land and after sale of any fixed asset.

2. Rent

If you are doing business or profession  on rented building, its actual rent is allowed. If some part of building, you are using for personal use, its rent will not be allowed.

3. Salaries of Employees 

All your employees' actual salary is allowed as expense of your business.

4. Repair of Business Assets 

If you pay for repair of different business assets, its cost will be allowed as expenses

5.  Sales Promotion and Advertising Expenses 

If you pay for sales promotion and advertising of your business's products, its cost will be allowed as expenses.

6. General Office and Administration Expenses 

All general office and administration expenses are allowed for deduction as expenses under income tax law. In this, we can include Internet bill, telephone and mobile bill, petrol bill, stationery and printing expenses etc.

7. Other Business expenses 

All revenue nature business expenses except capital expenses, personal expenses, legal expenses for getting property or long term fixed assets, penalties, unrecognized donations and advance paid of income tax.

{Important Note : After calculating net profit from one business or profession, we will calculate our other businesses and professions net profits. Suppose, we have 10 businesses. If we have suffered net loss in any business, it will be adjusted from other businesses' net profits before calculating taxable net profits. For example, you have gained Rs. 20,00,000 in 9 business but in 10th business, you have suffered loss of Rs. 40,00,000. At that time, your net loss will as Rs. 20,00,000 for income tax return purpose}

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Fractional Reserve Banking in India

In India, reserve bank controls the flow of money in economy. It also protects the fund of depositors. So, it fixes the reserves ratio which every bank has to keep in cash form out of total funds deposited. So, fractional reserve banking is just part of total deposit of customer of bank which will be in liquid form. Rest of deposited money is used by bank for issuing different loans. Main aim of fractional reserve is to available cash for depositors. Sometime, depositors may need money. At that time, bank can easily return him his money without any delay.

Fractional Reserve Banking System in India

In India, bank has to calculate some reserve out total deposited money. Suppose, it is 10%. Suppose one person deposit Rs. 100. At that time, bank keeps cash as reserve Rs. 10 and issue Rs. 90 to A party. But A party will not withdraw the money at the same time. Bank keeps its 10% as reserve and gives loan to B party. It means, bank reserves Rs. 9 and give loan of Rs. 81. B also did not withdraw the money. At that time, bank keeps its 10% reserve and gives loan to C party. Like this whole fractional reserve banking system works.

From above chart, we can understand the system of fractional reserve banking system in India. We are seeing that there is no new money is being created but new deposit money is being created through loans. Up to reaching Rs. 72.90 loan to C, bank XYZ has increased his deposited money of Rs. 100 up to Rs. 243.90. I have just showed the detail of one customer. If there are 100,000 customer of a bank, you can see big number of deposit  after its multiplication.

Risk under Fractional Reserve Banking 

In fractional reserve banking, bank can only face risk of liquidity, if depositor withdraw the money from bank's estimated reserve. Due to this, central bank estimates reserve ratio more scientifically for protecting the interest of depositors of bank.

Criticism of fractional-reserve banking

In this system, we are seeing, if new person gets loan at that time, bank's deposit will increase and he gets more power to give debt to other. Suppose, if there is no more person who is interested to get loan at that time, bank's movement will slow. It means, money supply depends only on the persons who are interested to get loan. But, it is my personal thought, it is not strong system. In my life, I did not take Rs. 1 loan from any bank. If 10% will increase people like me, it may be risky for the life of banks. Because, banks are playing game through fractional reserve which emphasizes to become debtor. All the advertisements promote to take loan. But for me becoming debtor as becoming dead body. As per my theory, bank should stop fractional reserve banking system. It should work as security guard of our money. Bank should take interest for deposit our money as security guard. At that time, bank's employees will not leave their work and same time, bank will stop to pay expenses for advertisement of loan. When loan will stop, every person will do new project with their hard earned money which he got from labour and then he will use this money as capital. At that time, balance will be in the economy. 


Related : Balance Sheet of A Bank 

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Answer of Past Pending Comments

Today, I saw some pending comments  in my computer hard-disk when I opened it. Due to my personal reason, I could not give answer. So, today, I am trying to answer to all these pending past comments.

Comment:- 1. Sir, I'm an accountant of construction and contracting company in Qatar. My doubt is how can i record the income and expenses of each project in Tally whether it by cost center or job costing? and i didn't see any differences between the two in tally. I cannot allocate the purchase to different projects to get the complete report and I am not using the manufacturing account also.My tally is ERP 9  v3. Please comment on this.. Thank you

Ans. Dear, job costing is just method of calculation cost which you read in cost accounting. Cost center can be used in this calculation also. I know manufacturing and construction is two different project. Did you make cost center correctly? Sometime, there may be sub-projects. Did you keep under main cost center or not? Try with some practice, you will surely allocate your all purchase in different projects otherwise call me at +91-1762-500250. I will check your problem through teamviewer from 1st Jan. 2012.

Comment:- 2. Please help me, I don't have knowledge Inventory control in tally erp 9. so how to implement inventory in Tally.ERP 9, so guide me?

Ans. Inventory control is the part of financial management. With this, we optimize the cost and quantity for our production. In tally, we can record all inventory in tally. We can also see each any every activity after recording the transaction of purchasing or selling. On this basis, we can take our future decisions relating to buying new raw material or not.

Comment:- 3. Dear sir, I am omkar presently working as account assistant from Hyderabad. I am working with tally. I know how to enter the transactions in tally. I don't know how to prepare the Profit and loss account, balance sheet. Recently I have joined the company. There I created a company maintain the records.
Some doubts regarding the tally. By transaction doubt is how to enter properly.


We prepare the sale bill of Rs.85000/- including 14.5% VAT to A.. where received the cheque for amount of rs. 85000. from A.


But actually the net bill of Rs. 51000/-including 14.5% vat to A. We submit sales as 85000/ including 14.5% vat. we return back cash of 34000/- to B . Actually the deal with B to sell goods to A.


In tally Difference in opening balance was shown in balance sheet. how to rectify the difference in opening balance.


with regards,
OMKAR


Ans. First part of your question is relating to the fundamental concepts of accounting. Many times, I told tips to learn profit and loss account and prepare balance sheet of company. Just search in this site, you can find the answer. Second question relating to tally.erp 9. Output VAT is just tax on the quantity which you sold to customer. You have two customer. Just go to the alter mode of tally and change the value for A. After this pass the new voucher entry of sales and VAT for B customer.

Comment:- 4. What  is journal entry,  muthu sent a cheque of rs 3950 in full settlement of rs 4000?

Ans. Muthu is our creditor, we send cheque for paying his net amount. By paying to Muthu, our liability will decrease. So, Muthu account will be debited. By paying through cheque, our asset will also decrease. So, bank account will credit.  We did not pay Rs. 4000. We just pay net amount of Rs. 3950. It means we will gain the earning through discount received. So, you can pass the simple journal entry. Muthu account Dr.  4000 and Bank account Cr. 3950  and Discount account Cr. 50.

Comment:- 5 This is a very condescending article. As a parent of a "retarded" child, I find this whole article to be disgusting. Do NOT refer to them as retarded, there is a very negative aura associated with that word in the world. They are mentally challenged, or mentally deficient, or mentally compromised, or even developmentally slowed or stunted. Please be very aware that the term retarded is generally unkind to these children. Another thing to consider, mental disability covers a broad range of symptoms and conditions. To lump all these children together and label them as mentally retarded and assume a set of hints might apply to all of them is ridiculous and somewhat discriminatory. It equates to saying all white people are slow, all black people are lazy, or all Asians are good at math.


By Anonymous on How to Teach Mentally Retarded Children on 12/5/11


Ans. Thanks for feedback of this content. I can understand your feeling. My feeling is also same as your feeling. Problem is of words but our aim is same. I promise to you, in future, I will also adopt the word mentally challenged instead of mentally retarded, if I publish any content relating to this topic. 

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Du-Pont Control Chart

In ratio analysis, Du-Pont Control Chart shows the relationship of net profit margin ratio and total investment turnover ratio for calculating return on total investment ratio (ROI). If company wants to increase return on investment (ROI), it has to concentrate to increase net profit margin and total investment turnover ratio.

Following is its screenshoot :

Du-Pont Chart

We measure any organisation's performance on the basis of its return on investment. But it is affected from lots of factors.

(A) If return on investment rate is good, it is due to effective use of our total investment. Our total investment may be in fixed assets and in current assets. We invest this money through our long term capital and working capital. If we use both resources best way, our total sales will increase and then our total net profit will increase. This will increase our return on investment.

(B) If we have learned the techniques to control our expenses and promoted our sales with innovative methods, at that time this sales will increase our net profit and total investment. Our total worth will increase, if sales will increase.

We should calculate all three ratios. We should analyze our company's performance on the basis of Du-Pont Control Chart. In this control, we have to control our total expenses and total book value of our all assets. We we will control these two things, its direct effect will be on our ROI. It will grow. 

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How to Secure Net Banking

Net banking is the first choice of young generation like me who spend more than 12 hours online daily. They want to operate their all bank accounts through net banking because with this, they can transfer money to other party through online. They can also check all past bank transactions detail online. You know that all net banking is secured with your login id and password. If it will be compromised or used by third party. Your money may transfer to third party. Following are its main reasons.

1. Every year lots of students do B.Tech in computer engineering. Do you think, all do their duty with honesty by using their knowledge and skills? No, there is very low number who believe in honesty and truth. They use their skills in hacking. Through hacking, they can hack any other party's computer, website or whole account.
There may be lots of other reasons of hacking work. Some are to become rich in short period. So, they start to follow wrong side.

2. Some are affected from society's action. For example, a student wants to become teacher after B.Tech in computer engineering but when he went to college for teaching post. College's administrator has made him marketing executive. Now, he started to speak lie to the parents of new students that he came from a college which is very great.

(a) There are lots of great teachers in it. By admitting this college, your children will be shine. Your children's educational progress will be with fast rate after admission in this college.

(b) Big companies are doing compus placement in this college. After getting degree from this college, your children will get placement of big annual package.

When he gets training from employer and starts to speak lie every day. One day, he thinks that society had made him bad person. When I can speak lie, then what is problem to hack online because, I am already expert in this field. So, he makes hacking as his single profession.

Now, I am writing the way for good person like you who earns their money by hard work, by honest, by truth , by selfless help to others. I do not want that hackers hack your money. Following are its main steps

1st Step : Share Truth and Honesty in Society

If you are employer of any employee, never guide him to speak lie. If you are the owner of mobile, never speak lie because what you will give to society, society will return to you in 10 times. If a college administrator wants to get more and more students for business purpose, he or she should never trains their employees to speak lie regarding the qualities of such college. Like this, every business should be operated with honesty and truth because these are the two powers which can make you super and famous life-long.

2nd Step : To Protect from Spam Emails 

For getting your net banking password and id. Spammer and hackers sends you spam emails. For this, they use following way.

(A) They send you email and ask id and password of your net banking account. Never reply this email. Because no bank ask you to reply by giving your id and password of your net banking.

(B) Sometime, they make false email id by using false hosting. Never trust on the email even its hosting same as your bank's hosting. For example today one cheater hacker wants to hack my PNB online bank account through sending me spam email. It is showing

From:	"Punjab National Bank"

admin.secure@netpnb.com

from this email id, I think this is official email from my PNB Bank. But it was spam because after this, I went to the official website of PNB by searching it in Google. After discussing this matter to the free toll no. 18001802222 . They told me, it can be easily possible. Hackers can make any email id. So, delete this email and never reply. Spammer can use the logo of your bank and send you attach file. Never open it.

I know a,b and c of hosting and domain name which I learned from this online work. I tried to open the attach website page which opened in my attach file and clicked on submit button  without writing password and id. It  opened in any other webpage which was not of official site of my bank. It was clear, someone did best to hack my id and password and then tried to transfer all my fund deposited in PNB. After this, I changed my password without any taking of risk. But, I personally suggest you to never open any attach file and contact immediately by going to official website or call on free toll nos.

(C) One more important proof, I got. When I tried to forward to complaint department by forwarding option. It is showing error. It means, hackers do not want to forward this. Following is its screenshot.

3rd Step : To Protect Your Computer from Virus 


If any virus went to your computer, it is very easy to hack your computer. At that time, they have more power  to capture your browser. At that time, when you open the official site of your bank, it may be possible, this site may be artificial and forward you to other site. So, please see Official address and verify it with your notebook. If there is any other never write your id and password for operating your net banking.

4th Step : To Learn Online Security from Google 

Google is an IT company. Time to time, it publishes new ways to protect id and password of any account online. So, you should spend your time to learn Online Security tips from Google instead of just wasting your time in Games and Chatting.

Related : Do Cyber Crime Law Course with B.Com.

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We will Start Free Accounting Help through TeamViewer Software from 1st Jan. 2012

You know, we are providing free accounting, education and finance help through new notes, through email, through solution, through phones and through Live Google Talk. But, it will be very excited news for you that we are starting free accounting help through Teamviewer from 1st Jan. 2012.

Teamviewer is great software in which I can share my computer with you and you can share your computer with me. I or you can see everything what is happening in other computer. We can also operate other side's computer by using other computer's mouse and keyboard through remote control. For this, we have to share Teamviewer id and password. With Teamviewer, we will give free accounting  help to you  in following area.

1. You are operating any accounting software like Tally and others and you need our free help physically on the computer. We are ready to help free of cost. For this, you will call us at +91-01762-500250 or email us at vinod@svtuition.org  and give us your Teamviewer id and password. After this, we will teach you physically. Today, I tested Teamviewer by solving accounting problem. He saw my computer physically with each actions. Following is its screenshoot.

2. Suppose, you are solving difficult accounting problem. But your answer is not matching. You will just call or email at same nos. and we see where is your mistake through Teamviewer Network. 

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How to Record Shares Purchase and Sales Transactions in Tally.ERP 9

You may invest your money in share market. This investment may be for short period and for long period. To record shares as long term investment is very easy. You just pass the entry of payment. But when you deem shares investment as your short period investment, at that time, you have to follow its complete procedure. For this record, I am using Tally.ERP 9 software. I will teach you to record of shares transactions with following example:

You have bought Shares of following companies on 1st Dec. 2011.

Shares of Reliance Company =  1000 shares at Rs. 100 each.

Shares of Tata Company = 200 shares at Rs. 50 each

Shares of Vepro Company = 2000 shares at Rs. 2 each

{ Note: These are the imaginary figures}

You have sold shares of following companies on 3rd Dec. 2011


Shares of Reliance Company =  500 shares at Rs. 100 each.


Now, in tally, we follow following steps :

1st Step : To Create Unit of Measures

We are measuring these shares in nos., so we will have to create unit of measures by going to inventory info.

2nd Step : To Create Stock items

You are dealing with three companies. So, you will create three stock items in inventory info. If you will deal with more companies, you can create more stock items. You can easily create short stock items for reliance shares, you can create R Shares etc.

3rd Step : To Create  Group of Investment in Shares

Just go to group from accounting info and then create investment in shares group. under investment.

4th Step : To Create Ledger Purchase of Shares Account 

In 4th step, you have to create ledger of purchase of shares account by going to account info and then ledger and then creation. This account will be under investment in shares group which we already have made in third step.

5th Step : To Create Ledger of Sales of Shares Account 

This ledger account is also created under investment in shares.

5th Step : To Create Ledger Account of Broker

This ledger account will be created under sundry creditor.

6th Step : To Create Ledger Account of  Your Bank 

This ledger account will be created under bank account.

7th Step : To Pass the Voucher Entry of Purchase of Shares of Companies

Just choose journal voucher and pass the following voucher entry

Shares in Companies Account Dr.

Broker Account

8th Step : To pass the Voucher Entry of Sales of Shares of Companies

9th Step : See Balance Sheet

In this balance sheet, you will see investment of shares and also it will be shown in current asset as closing stock which will be adjusted with the profit and loss account in liability side of balance sheet. So, don't worry about this.

{Important : 50 CAs took a meeting on this point. They decided that this way of showing the balance sheet is best because they are all devotees of Income Tax Department and  if you deal in shares, it means it is just like product for you. If you will get any profit or loss on the sales of any company's share it will automatically be shown in profit and loss account. }

Liability side, we are opening balance in profit and loss account as Rs. 114000. This is just like opening stock of shares like any other product. But because we sell some reliance shares, so closing stock is showing Rs. 64000.

10th Step : See Stock of Shares Summary

This share stock summary will give you idea what shares stock have in your business. So, you can make better planning for future buying or selling of shares.

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Most Popular Accounting Solutions from 2011

Today is 19th Dec. 2011 and just 12 days far from 2012 New Year. In 2011 up to this time, we published about 91 solutions of your problems.

First of all, we regret to inform that we did not give some solutions in this period because either some problems' solutions have already been written by us or these were the general questions which we already included in accounting resources or we could not see them or some were most confidential. I hope, you will pardon us for this sin.

We are grateful to you for your interest in our not-for-profit organisation. You spent your worthy time to write these questions and submitted in our ask a question database in the our website. In future, we promise to you that we will again see your all written questions in past and will provide the suitable solution as soon as possible. So, please forget this matter and enjoy reading of our most popular accounting solutions which have been written during 2011.

1.		Why is Accounting Difficult
2.		Journal Entries of Project Contracts
3.		Reasons of Not Receiving Accounting Education's Updates
4.		Account Preparation of Different Projects
5.		Cost of Goods Sold Solution
6.		Cash Flow Problem and Solution
7.		Calculate Owner's Capital
8.		Which is better NPV or IRR
9.		Solution of Online Accounting Degree
10.		What is Difference between Cash and Capital
11.		How to Shift from Marketing to Finance
12.		MFC Vs MBA
13.		Easiest Process of eTDS
14.		Appraisal of a Project
15.		NPV Problem and Solution
16.		Accounting for Beginners
17.		Depreciation Problems and Answers
18.		Is Uniform Costing Same as Batch costing in Cost Accounting
19.		How to Start Own Accounting Firm
20.		Accounting of Advance

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Ratio of Current Assets to Shareholders Funds

Ratio of current assets to shareholders funds is the relationship between all current assets and shareholder's funds. For example, our total current assets are $ 1,00,000 and our total shareholder funds are $ 4,00,000. At that time, this ratio will be

= Current assets / shareholders' funds X 100

= 1,00,000/ 4,00,000 X 100 = 25%

This ratio tells us, how much money of shareholders did company's management  invest in current assets. Shareholder can get both items from current balance sheet. It is not wrong to invest shareholders money in current assets. But after a limit, it is not good to invest in short term or current assets because

(A) Current assets provides use short term profit but our commitment for shareholders are to provide earning long period.

(b) If we keep current assets in cash in hand, at that time, this cash will not generate any profit. At that time, it will be risky for company to suffer cost of equity capital.

(c) Some current assets are debtors and bill receivables. More investment of shareholder fund in these assets are risky because there is not any security of these assets. So, if any account manager sees current assets to shareholders funds ratio at very high rate, he or she should go to deep by calculating sundry debtors to shareholders fund ratio to know the exact % of shareholders funds which has been invested in debtors. Debtors who will not pay us, may easily becomes bad debtors and this loss will not company but this loss will be of shareholders. With this, money of shareholders will decrease. Result you can see in the share market. Rate of share market will decrease.

Related : Analysis of Long Term Solvency

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Which is More Powerful Money or Knowledge

Today, my friend shared me wonderful matter. He told me that he was going to school. In bus, he was thinking that money is a dead thing. There is no soul in it. There are no hands. There are no legs. There is no tongue of it. But whole world is dancing on its gesture. Every knowledgeable persons' thoughts are selling for money. Every part of knowledge is for getting money. From this, it seems that money is more powerful than knowledge.

My experience is both in money and in knowledge. I gain the knowledge of money matter and share. So, At this point, I told my friend that money can never become powerful than knowledge. For this, I gave some reasons which I am sharing with you.

1. # Money is nothing. It is just the way of converting one thing into other. There are two types of person who are using it. One those are good. Second those are very bad. knowledge do not do partiality with any person. If a bad person comes to knowledge. Knowledge gives him opportunity to learn everything. Bad person uses it for bad purpose. Good person uses  it for good purposes. Bad persons sells their knowledge for cheating others with money. Good persons voluntarily provide knowledge for good purpose or with money. So, knowledge has more quality than money.

(A) If a bad person is interested to know more and more bad things. His  curiosity increases and one day, he will be interested to know good things. But when a bad person is not interested to get knowledge and start to play the game of money for bad purpose. At that time, this money becomes poison. Millions of people are affected from this. So, we should always pray to God that he should give us knowledge not money. 


(B) If a good person is interested to know more and more good things. In the end, he reaches to God in this life. He starts to help other by any way. Money is just his source of his help. But, with his  good knowledge, he takes other good person's help. With his knowledge, he gets the free help of doctors for free treatment of poor. He gets the free help of blood donors. He gets the free help from capitalist for orphan children. He gets the free help of advocates. He gets free help of architecture for making orphan house. So, without paying money, he gets all resources on the basis of knowledge. So, this sense, your knowledge is more powerful than money. 


(C) Yesterday, one of my friend came in to my house. He needed some donation money from me because one of his private friend teacher's son had inured. Injury was in head. So, he needed my money help. You know that my area is of accounting. So, I have also pre-planned budget for my all expenses. In this budget, I have already donated the money what I can donate. But, in my food budget, there was still some money. From my knowledge, I estimated, if I take one time fast for some days, I can easily give some donation money to my friend for treatment of head injury of his friend's son. So, I decided to take money from my food budget and gave him. Now, from few days, I am on one time fast. I am feeling very satisfaction because my knowledge is giving me chance to help others at any cost. But, if I just follow the money and money and money can demote me from my aim of life. So, from this point of view, I can say that knowledge is more powerful than money. Money makes us money minded. But knowledge makes us to help other needy selfless. 


2. # One more wonderful reason, I have realized in my life. Suppose, a person is earning Rs. 10,000 money in a month. He eats just 4 bread in day and 4 in night. Suppose, earning increases and reaches up to Rs. 1,00,000 per month. At that time, he will eat just 4 bread in day and 4 in night. Suppose, he promotes and his earning money per month reaches at 1000,000,000,000 or Rs. 1 billion, at that time, he will eat just 4 bread in a day and 4 in night. So, his knowledge will teach him that there is not any his right to store all extra money. He should donate for other needed persons with 10,000 hands. With this knowledge, society can gain. At that time, this knowledge will surely defeat to money. 

3. # If there are two ways, one side where you will get knowledge. Second side where you will get money. I will say leave the second way where you will get money because money is slave of knowledge and knowledge is king of money. Knowledge is not any product which can buy in the market. Suppose, I want to learn music. This is great knowledge. I can hire teachers of music top-class but will I become expert in music just hiring music teacher. No and Never. I first leave the ego of money. Second, I have to attend their classes. At that time, I can earn millions of dollars. But, I have to sacrifice all these millions of dollars. I have money, I can hired top-class doctors for saving my life. They can do their duty but they can not save without the consent of god. When I know this truth that God is more powerful than whole world's doctors, at that time, I will start to pray God. In brief, I can say knowledge is helpful to reach that supreme power who is giving us billions of money in the form of free air, water, sun and other wonderful things. When, we will reach to him. We will start to love with him. At that time, we will leave the taste of money. For example, you have a cup of milk. You have added one spoon of sugar. After this, you drink it. Then you have to drink other 2 cup of milk. In  second cup, you have added 10 spoon of sugar. After this, you drink second cup of milk. In third cup, you have added just one spoon of sugar. After this, you drink third cup of milk. You will feel, in third cup, there is not any sweetness. Why? Reason behind this is that you have increased 10 times sweetness by adding 10 spoon of sugar. So, you will feel nothing sweetness with one sugar spoon. Like this, in this world, when we came, we feel sweetness of money. But, when we learn true knowledge. Its taste will be 10 times more than money taste. So, again when we get the taste of money after getting the taste of true knowledge, we feel nothing in the taste of money. On this basis, we can say that knowledge is more powerful than money. 

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MCA Accounts Notes

This is Mahesh. I am from ANDHRA PRADESH I am studying in MCA under of JNTU UNIVERSITY.
We  have attached a new subject i.e., ACCOUNTS AND FINANCIAL MANAGEMENTS. Our syllabus is the follow link

http://www.pvpsiddhartha.ac.in/syllabus_07_08/mca_%202006_%20syllabus/semesterI/afm.doc 

Please provide us all notes of our MCA Accounts.

PLZ HELP ME"

Mahesh from India

Mahesh! I can understand your problem. I copied all the syllabus of JNTU university and started to write notes relating to MCA Accounts. Some of them, I have written and published. You can read these notes at here. In future, I will add more notes in it. So, please bookmark this page.  

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Cash Budget Problem and Solution

In my cash disbursement schedule of my cash budget, the purchases which are 80% of sales, are incurred in the month the sales are made. These goods are paid 30% in cash and 70% within 30 days. The part that confuses me is the 'within 30 days'. My other questions said goods are paid 30 days after. So when its within 30 days is the payment period considered cash and we're paying 100% in the month? Thanks

Lynn from Canada

Lynn! Cash budget is just estimation of cash payment and receipt of cash. But when you act upon on this cash budget, it will become the part of your accounting. In first cash, if you have paid 70% of total purchase within 30 days. It means, 100% payment in that month. Suppose, you are closing your financial year. Purchase of goods is also your direct expenses. So, in case within 30 days payment, purchase expenses will be added our that financial year as expense not o/s expense. If it will be paid 30 days after, we will show 70% of goods  purchase expenses as O/s expenses. On side, it will be added in our income and expenditure account for knowing net profit and other side, we will show 70% of goods purchase expenses as sundry creditor in the liability side of balance sheet. This accounting will be the part of accrual base accounting. If you are interested to know the difference between the accrual based accounting and cash based accounting, you should read this at here.

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NPV Problem and Solution

Lexington Auto Parts Co. is considering installation of a *CIM system as part of its implementation of a JIT (Just-In-Time) philosophy. Cathie Rupp, company president, is convinced that the new system is necessary, but she needs the numbers to convince the board of directors. This is a major move for the company, and approval at board level is required.

Destiny Rupp, Cathie’s daughter, has been assigned the task of justifying the investment. She is a business school graduate and understands the use of NPV for capital budgeting decisions. To identify relevant costs, she developed the following information.

LA Parts Co. produces a variety of small automobile components and sells them to auto manufacturers. It has a 40% market share, with the following condensed results expected for 2007:

Sales 12,000,000
Cost of goods sold
Variable 4,000,000
Fixed 4,300,000 8,300,000

Selling and administrative expenses

Variable 2,000,000
Fixed 400,000 2,400,000
Operating income 1,300,000

Installation of the CIM system will cost $5,000,000, and the company expects the system to have a useful life of 6 years with no salvage value. Installation will occur at the beginning of 2008. In 2008, the training costs for personnel will exceed any cost savings by $400,000. In years 2009 through 2013, variable cost of goods sold will decrease by 35%, an annual savings of $1,400,000. There will be no savings in fixed cost of goods sold – it will increase by the amount of the straight line depreciation on the new system. Selling and administrative expenses will not be affected. The required rate of return will be 12%. Assume that all cash flows occur at the end of the year, except the initial investment, which occurs at the beginning of 2008.

Required:

(a) Suppose that Destiny Rupp assumes that production and sales would continue for the next 6 years as they are expected in 2007 in the absence of investment in the CIM. Compute the NPV of investing in the CIM.

(b) Now suppose Destiny predicts that it will be difficult to compete without installing the CIM. She has undertaken market research that estimates a drop in market share of 3 percentage points a year starting in 2008 in the absence of investment in the CIM. Her study also showed that the total market sales level will stay the same, and she does not expect market prices to change. Compute the NPV of investing in the CIM.

(c) Prepare a memo from Destiny Rupp to the board of directors of LA Parts Co. In the memo, explain why the analysis in part (b) is appropriate and why analyses such as that in part (a) cause companies to under-invest in high technology projects. Include an explanation of qualitative factors that are not included in the NPV calculation.

*Computer-Integrated Manufacturing systems: Systems that use computer-aided design, computer-aided manufacturing, robots, and computer-controlled machines.

Alya from Malaysia (12/3/2011 1:31:35)

Alya! This is only one project, rule of thumb of accepting on the basis of NPV. If NPV is good and positive, you should accept the project. If NPV is negative, you should reject this project. So, we calculate NPV by taking your rate of return as cut off rate.

 (a) Suppose that Destiny Rupp assumes that production and sales would continue for the next 6 years as they are expected in 2007 in the absence of investment in the CIM. Compute the NPV of investing in the CIM.

	Amount in $	Present Value of 1 $ @12% (Discount Factor)		Present Value of Cash Flows
(A) Cash Outflow
Investment in 2008 ( Beginning)	5000000	Not applicable		5000000
Employees' training Cost (End of 2008)	400000	0.89286		357144
Total Present Value of Cash Out Flow				5357144
(B) Revenue ( Cash inflow )
Net Profit before Depreciation and After Tax (See working note
2008 2009 2010 2011 2012 2013	1,300,000 2,700,000 2,700,000 2,700,000 2,700,000 2,700,000	0.89286 0.79719 0.71178 0.63552 0.56743 0.50663		1160718 2152413 1921806 1715904 1532061 1367901
Total Present Value of Cash inflows				9850803
Net Present Value (B) - (A)				4493659

Important Note :  In part (b), if market share will down due to absence of this technology, we will calculate same on reduction of sales. total sales X 3/40. If we use this technology, we can receive this as cash inflow which we already show in first part. So, no need to calculate extra NPV. But, it is point which we tell to board of directors. In C part, you should other ways to analyze of a project. We also see company's current budget.

Working Note for Calculation of Net Profit before Depreciation and After Tax

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