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COACHING CLASSES FOR COMMERCE STUDENTS

2012-02-08T08:21:00.002+05:00

COACHING CLASSES FOR ICMAP STAGE 1 FA, ECONOMICS, STAGE 2 COST ACCOUNTING, MATHS & STATS, STAGE 3 FA & APPRAISAL, STAGE 4 AFA.JOIN NOW KHALID AZIZ0322-3385752KARACHI.COACHING CLASSES FOR O/A LEVEL ACCOUNTSCONCEPTUAL LEARNINGCOMPLETE PAST PAPERSCONTACT:KHALID AZIZ0322-3385752KARACHICOACHING CLASSES FOR MA-ECONOMICS EXTERNAL STUDENTSPREVIOUS & FINALKHALID AZIZ0322-3385752CA MODULE A,B,C,DKHALID AZIZ0322-3385752

Transfer pricing

2012-01-13T08:23:00.001+05:00

Transfer pricing is a popular topic in management accounting. It is concerned with the pricewhen one department (the selling department) provides goods or services to anotherdepartment (the buying department). That is, one department generates revenue from thesales of goods or services and the other department incurs expenses from the purchases ofgoods or services. Transfer pricing is closely related to responsibility accounting in whicheach department is responsible for its cost, revenue, expense or investment return dependingon the type of centre it is. Thus, transfer pricing effectiveness is essential to the success ofthe overall company. The related key issue is the determination of a transfer price whichbrings goal congruence to the company, and to the buying and the selling departments, as allparties want to make a profit.A department like the sales department which purchases goods and services may comparethe prices of similar products in the external market before making its purchasing decision. Ifexternal prices are more attractive than internal prices, it may purchase from outside ratherthan from an internal department like the production department. Similarly, the productiondepartment may refer to prices of similar products before it decides to sell to the salesdepartment since selling to the external market may be more attractive. This is the basic ideaof market-based transfer prices.Market-based transfer prices generally result in optimal decisions provided that there is aperfectly competitive market for the intermediate product being transferred and there isminimal interdependence between subunits. Also, there are no additional costs or benefitsfrom buying or selling to the external market instead of selling the items internally.In cost-based transfer pricing, the transfer price is decided by the cost of goods or servicesconcerned. The cost calculation formula may involve variable costs, fixed costs, full costs orsome other variation. Cost-based transfer pricing models are appropriate when market pricesare not available or are inappropriate or are even costly to get. This could be the case whenthe intermediate product being sold is unique or differs from the products available externally.In fact, many companies use transfer prices based on full cost or full cost plus a markup toapproximate market price.The use of cost-based transfer prices can result in sub-optimal decisions because thefull-cost transfer price is higher than the external product price, so the departmental operating2profit is maximized by purchasing the product externally. However, purchasing the productfrom external sources results in a lower total company profit because the other divisions stillincur fixed costs included in the full-cost transfer price, and the external price is higher thanthe variable cost of producing the product.Cost calculation is also somewhat subjective. Dual pricing is used to describe the situation inwhich the selling and buying departments use different transfer pricing methods. For example,the selling department may use full cost pricing while the buying department may use marketpricing.Another common transfer pricing method is the negotiated transfer price. In this method,departments negotiate between themselves to arrive at a transfer price. Quite often thisinvolves some form of bargaining. For example, a powerful department may be able to get abetter price from a small department.Consider the following example. Suppose AAT is a company producing chairs. Thecompany’s production department produces 100,000 chairs a year and its annual capacity is150,000. The variable cost of each chair is $300 and the annual fixed cost for the productionplant is $9,000,000. The chair can be sold for $400 in the open market.Within the company, the administration department plans to buy 50,000 chairs at $280 fromthe production department, but the production department refuses this order as the offeredprice is below the variable cost, as can be seen by calculating the contribution margin:.Sales price $280Variable cost ($300)Contribution margin ($20)The minimum transfer price should therefore equal the variable or incremental costs incurredby the transferring department plus the opportunity costs resulting from transferring theproducts or service internally instead of selling them to external customers.Transfer price >= variable cost per unit + unit contribution margin on lost salesUnused capacity within the selling department affects the opportunity cost of an internaltransfer. If there is unused capacity within the selling department, no opportunity costs areinvolved in an internal transfer price. The transfer price will likely be in the lower range,covering only the variable cost involved in the production of the product but not the fixed cost,3because the fixed cost will be incurred regardless of the production volume. The transferprice must be great than or equal to $300 or otherwise the selling department (in this case,the production department) incurs a loss.If there is limited capacity, say 100,000 chairs, acceptance of the order from theadministration department means that the production department needs to reduce itsproduction volume from 100,000 to 50,000 chairs. The unit contribution is $100 ($400 - $300).An ideal transfer price is at least equal to the variable cost per unit + unit contribution marginon lost sales = $300 + $100 = $400.Back to the unlimited capacity case, the administration department’s manager thinks that theorder could bring the fixed cost per desk from $90 to $60. In addition, it also takes theproduction department to its maximum capacity of 150,000. This case can be strengthenedby the fact that the department is able to sell the chair at $420 though an additional cost of$100 per chair is incurred.From the company’s perspective, the transfer price of $280 is acceptable because the overallprofit of the company is increased by $1,000,000 [50,000 chairs x ($420 - $300 - $100)]. Apossible way to solve this situation is to either a dual pricing system to allow the productiondepartment to gain the market transfer price and to allow the administration department topay a cost-based price. Another solution is to have the two departments to negotiate anagreed transfer price.In another example, PBE Ltd is a chain store cake business. It produces cakes and it has twodepartments: the production department and the sales department. The variable costs of theproduction and sales departments are $3 and $10 respectively, and the fixed costs $2 and$12. Due to refrigeration issues, the sales department has a daily capacity of 40,000 cakes; itusually purchases 25,000 cakes from the production department and 15,000 cakes fromother vendors for $20 each.Now, if the formula of 180% of variable cost is used as the transfer price from the productiondepartment to the sales department, the transfer price between departments is $5.40 ($3 x180%). If management decides to use another formula, 110% of the full cost, the transferprice would become $5.5 [($3+$2) x110%]. This is a good deal as the price is much lowerthan the price of $20 paid to external vendor.4Now assume that 200 cakes are transferred from the production department to the salesdepartment at a transfer price of $6 per cake. The sales department sells the 200 cakes at aprice of $40 each to customers. This would bring the profit of both divisions up to $2,600.Per unit Production Per unit SalesRevenue $6 $1,200 $40 $8,000Expenses -Variable 3 600 16 3,200Fixed 2 400 12 2,400Profit 200 2,400Many factors affect transfer pricing. Management efforts, especially between thedepartmental and senior level; departmental performance; and autonomy all need to be takeninto consideration as well as calculations.Transfer prices often have tax issues when the intermediate product is being sold ortransferred between departments operating under different tax jurisdictions. The company’stotal profit will be maximized when the transfer price results in the departments with thelowest tax rate realizing the largest profits. Many tax regulatory bodies restrict companies“shifting” profit from locations with higher tax rates to locations with lower tax rates. Thuscompanies need to be aware of the impact of tax rates and transfer prices on total companyprofits.

Decentralization, Segment Reporting and Transfer Pricing:PART 1

2012-01-10T09:16:00.001+05:00

Decentralization and Segment Reporting:When an organization grows beyond a few people, it becomes impossible for the top manager to make decisions about everything.Managers have to delegate decisions to some degree to those who are at lower levels in the organization. However the degree to which decisions are delegated varies from organization to organization.Decentralization in Organizations:A decentralized organization is one in which decision making is not confined to a few top executives but rather is throughout the organization, with managers at various levels making key operating decisions relating to their sphere of responsibility. Decentralization is a matter of degree, since all organizations are decentralized to some extent out of necessity. At one extreme, a strongly decentralized organization is one in which even the lowest-level managers and employees are empowered to make decisions. At the other extreme, in a strongly decentralized organization, lower-level managers have little freedom to make decisions. Although most organizations fall somewhere between these two extremes, there is a pronounced trend toward more and more decentralization.Advantages/Benefits of Decentralization:Decentralization has many advantages/benefits, including:Top management is relieved of much day-to-day problem solving and is left free to concentrate on strategy, on higher level decision making, and coordinating activities.Decentralization provides lower level managers with vital experience in making decisions. Without such experience, they would be ill-prepared to make decisions when they are promoted into higher level positions.Added responsibility and decision making authority often result in increased job satisfaction. Responsibility and the authority, that goes with it makes the job more interesting and provides greater incentives for people to put out their best efforts.Lower level managers generally have more detailed and up to date information about local conditions than top managers. Therefore the decisions of lower level management are often based on better information.It is difficult to evaluate a manager's performance if the manager is not given much latitude in what he or she can do.Disadvantages of Decentralization:Decentralization has four major disadvantages:Lower level managers may make decisions without fully understanding the "big picture." While top level managers typically have less detailed information about local operations than the lower level managers, they usually have more information about the company as a whole and should have a better understanding of the company's strategy.In a truly decentralized organization, there may be a lack of coordination among autonomous managers. This problem can be reduced by clearly defining the company's strategy and communicating it effectively throughout the organization.Lower-level managers may have objectives that are different from the objectives of the entire organization. For example, some managers may be more interested in increasing the sizes of their departments than in increasing the profits of the company. To some degree, this problem can be overcome by designing performance evaluation system that motivate managers to make decisions that are in the best interests of the organization.In a strongly decentralized organization, it may be more difficult to effectively spread innovative ideas. Someone in one part of the organization may have a traffic idea that would benefit other parts of the organizations, but without strong central direction the idea may not be shared with, and adopted by other parts of the organization.Definition and Explanation of Segment:A segment is a part or activity of an organization about which managers would like cost, revenue or profit data. Examples of segments include divisions of a company, sales territories, individual stores, service centers, manufacturing plants, marketing departments, individual customers and product lines.Effective decentralization requires segment reporting. In addition to the companywide income statement, reports are needed for individual segments of the organizations. These segmented income statements are useful in analyzing the profitability of segments and measuring the performance of segment managers. These reports have been discussed in more detail on our segment reporting and profitability analysis page.Cost, profit and investment centers:Decentralized companies typically categorize their business segments into cost centers, profit centers, and investment centers--depending on the responsibility of the segment managers of the segment.Cost center:A cost center is a business segment whose manager has control over costs but not over revenue or investment funds. Service departments such as accounting, finance, general administration, legal, personnel and so on, are usually considered to be cost centers. In addition, manufacturing facilities are often considered to be cost centers. The managers of cost centers are usually expected to minimize the costs while providing the level of services or the amount of products demanded by the other parts of the organization. For example, the manager of a production facility would be evaluated at least in part by comparing actual costs to how much costs should have been for the actual number of good units produced during the period. Standard costing and variance analysis page deals this evaluation of the performance of cost centers in detail.Profit center:A profit center is any business segment whose manager has control over both cost and revenue. Like a cost center, a profit center generally does not have control over investment funds. Profit center managers are often evaluated by comparing actual profit to targeted or budgeted profit. Segmented income statements should be used to evaluate the performance of profit center managers.Investment center:An investment center is any segment of an organization whose manager has control over cost, revenue and investments in operating assets. Investment centers are usually evaluated using return on investment or residual income measures.Responsibility Center:Responsibility center is broadly defined as any part of an organization whose manager has control over cost, revenue, or investment funds. Cost centers, profit centers and investment centers are all known as responsibility centers.

O-LEVEL'S HUB: Accounting concepts and conventions

2012-01-07T21:27:00.000+05:00

O-LEVEL'S HUB: Accounting concepts and conventions

Steps to the Accounting Cycle

2012-01-04T10:25:00.002+05:00

Steps to the Accounting CycleThe term, accounting cycle, refers to the steps involved in accounting for all of the business activities during an accounting period.These steps are repeated each reporting period.There are ten steps to the accounting cycle. We will go through each one in detail later. But let’s review the basics. Step one begins with analyze transactions. Step two – journalize. Step three – Post. Step four – prepare unadjusted trial balance. Step five – adjust. Step six – prepare adjusted trial balance. Seven – prepare financial statements. Step eight – close. Step nine – Prepare a post-closing trial balance and Step Ten – Reverse.It’s important that you realize when the steps occur. Steps 1 through 3 occur often throughout the accounting time period.Steps four through 10 occur only at the end of the accounting period.The accounting process begins with analyzing transactions. The company first looks at the source documents which describe the transactions and events. Source documents can be either hard copy or electronic. Some examples of source documents include bank statements, checks, and purchase orders.After analyzing the transactions, events and source documents, the company is now ready to complete step 2, journalize. When the company journalizes the accountant applies the rules of double-entry accounting. Remember that double-entry accounting means that each transaction must be recorded in at least two accounts or that the debits must equal the credits.After applying the rules of debits and credits, the accountant should then record the transactions in a journal, or journalize. A journal is a complete record of each transaction. It’s easy to remember, because journal entry has the word journal in it!The third step in the accounting cycle is to post. This sounds complicated but it’s actually very easy. Posting involves transferring information from the journal to the ledger. A ledger is simply a collection of all accounts – it shows all of the number detail about a company’s accounts.In this posting example, notice how the journal entry that includes a debit to cash and credit to common stock is posted to the ledger with a debit of $25,000 in the cash account and a credit of $25,000 in the common stock account. When we post, we are simply transferring the debits and credits from the journal to the ledger.To verify that the companies debits equals the credits, an unadjusted trial balance is prepared. A trial balance is a list of all accounts and their balances at a point in time. This is the fourth step of theaccounting cycle. The information used in a trial balance comes from the ledger. The account balances from the ledger is used to create the trial balance. We call this trial balance an unadjusted trial balance because it is prepared before the adjusting entries.Here’s an example of the trial balance, notice how the account balances are listed in the appropriate debit and credit column. The purpose of the trial balance is to verify that the debits equal the credits. It does not guarantee that no errors were made.The fifth step in the accounting cycle is to prepare adjusting entries. Adjusting entries involve bringing an asset or liability account balance to its proper amount and updating the corresponding revenue or expense account.Adjusting entries are recorded in the general journal and then posted to the ledger. All adjusting entries are made at the end of the accounting time period.After the adjusting entries have been posted, the accountant prepares another trial balance. This trial balance is called the adjusted trial balance because it is prepared AFTER the adjusting entries.This trial balance is used to verify that the debits equal the credits and also is used to prepare the financial statements.Now that the adjusted trial balance has been prepared the next step is to prepare the financial statements.The financial statements must be prepared in a very specific order. The order for the financial statements is: income statement, statement of retained earnings, balance sheet, and then statement of cash flows.This order is important because information provided in the income statement is used in the statement of retained earnings, and information from the statement of retained earnings is used in the balance sheet.Step eight in the accounting cycle is to prepare the closing entries. Closing entries are prepared after the financial statements are completed. The purpose of closing entries is to prepare the accounts for recording transactions and events for the next period. The accountant is now getting the books ready for next year!Step nine, and for many companies the last step in the accounting cycle, is to prepare a post-closing trial balance.A post-closing trial balance should only contain the debit and credit balance for permanent accounts, because these are the only accounts that are remaining after the closing process.Once again the purpose of this trial balance is to ensure that the debits equal the credits and that all temporary accounts have a zero balance.For many companies this is the last step in the accounting cycle, the company is now ready to start the new accounting period.However, some companies, complete one more step in the accounting cycle, step 10, or reversing entries.Reversing entries are optional. These entries reverse certain adjustments in the next period.For most of you, reversing entries will not be covered by your accounting instructor.We have now gone through and discussed each of the steps to the accounting cycle. Remember, that there are ten steps to the accounting cycle.Step one begins with analyze transactions. Step two – journalize. Step three – Post. Step four – prepare unadjusted trial balance. Step five – adjust. Step six – prepare adjusted trial balance. Seven – prepare financial statements. Step eight – close. Step nine – Prepare a post-closing trial balance and Step Ten – Reverse.

ATTENTION ICMAP STUDENTS SOLVED CORRESPONDENCE ASSIGNMENTS OF STAGE 3-6 ARE AVAILABLE.

2011-12-26T11:05:00.002+05:00

ATTENTION ICMAP STUDENTS SOLVED CORRESPONDENCE ASSIGNMENTS OF STAGE 3-6 ARE AVAILABLE. CONTACT 0322-3385752

What is a Term Finance Certificate (TFC)

2011-12-26T09:29:00.001+05:00

What is a Term Finance Certificate (TFC)A corporate debt instrument issued by companies to generate short and medium-term funds.Corporate TFCs offer institutional investors, in particular retirement funds and insurance companies, with a viable high yield alternative to the National Saving Schemes (NSS) and bank deposits.TFCs are also an essential complement to risk free, lower yielding government bonds such as PIB.TFCs can be issued both as a fixed or floating rate instrument and may have a call or put option.TFC RatingA TFC must be rated before issuance.The rating reflects, the credit risk of The TFC, i.e. the issuer’s ability and commitment to repay scheduled TFC payments.Currently two rating agencies PACRA and JCR-VIS are operating in Pakistan.Income/Return structure of TFCLike bonds, TFCs are structured to provide regular income in the form of coupons.Unlike a generic bond, a TFCs principal may gradually be redeemed over the tenor of the instrument.TFCs are exempt from Capital gain tax. However, coupons payments are subject to income tax.* Invest only in listed scrips and carries a minimum BBB rating.Salient features of TFCRedeemable capitalMonitored by TrusteeReturn on investment may be fixed or floating

Types and Classification of Bill of Exchange:

2011-12-22T08:34:00.001+05:00

Types of Bill of Exchange on the Basis of Period:On the basis of period bills are of two types:Demand billsTerm billsDemand Bills of Exchange:There is no fixed date for the payment of such bill. They become payable at ay time, when they are presented before payee by the holder.Tem Bills of Exchange:These bills are payable after specified period of time. The period after which these bill become due for payment is called tenor.Types of Bill of Exchange on the Basis of Object:On the basis of purpose of writing the bills, the bills can be classified as:Trade BillsAccommodation BillsTrade Bills:These bills are drawn and accepted against the sale and purchase of goods on credit. These are drawn by the seller (creditor) and accepted by the buyer (debtor).Accommodation Bills:Such bills do not involve any sale and purchase of goods, rather they are drawn without any consideration. The purpose of such bills is to help one party or both the parties financially.Classification of Bills of Exchange:The bills can be classified into two classes given as under:Inland Bill:These bills are drawn in a country upon person living in the same country or made payable in the same country. Both drawer and the drawee reside in the same country.Foreign Bills:These bills are drawn in one country and accepted and payable in another country, e.g. a bill drawn in England and accepted and payable in India.Accounting Treatment of Bill of Exchange:In business concerns, numerous bills of exchange are drawn and accepted. Special journals are used to record bills of exchange, called bill receivable journal and bill payable journal. From these two journals the totals are posted to bills receivable account and bills payable account respectively.Every bill has two different aspects. To the drawer who has sold goods and wants to be paid for them, it is a bill receivable, he hopes to receive money on the due date. Such bills are recorded in the bills receivable journal. It is a sort of asset for the drawer and as good as money. To the acceptor of the bill, who has bought goods on credit and has agreed to honor the bill on the due date, it is a bill payable. The acceptor must arrange in due course the funds available to honor the bill when it falls due. Such bills are recorded in the bills payable journal.Explanation with an Example:We can understand the accounting of bills of exchange with the help of an example. Let us suppose, Mr X is a manufacturer of shoes and Mr. Y is a retail trader of shoes. Mr. Y (the buyer) wishes to buy shoes from the manufacturer but has no money. He is agreed to accept a bill of exchange for 90 days, if goods are sold to him on credit basis. So both the parties agreed. Mr. X supplies goods to Mr. Y worth $10,000 for a 90 days credit and draws upon him a bill for the full value of goods for 90 days on 1st Jan. 2005.The illustration given above can be summarized below:

here are three transactions which have taken place:Mr. X sold goods to Mr. Y worth $10,000 on credit basis.Mr. X drew a bill of exchange on Mr. Y for 90 days for $10,000.On the due date the bill was presented to Mr. Y and he honored the bill (met his obligation on the due date)Journal Entries:Now we shall see how these transactions are recorded in journal of Mr. X and Mr. Y.Mr. X's JournalTransaction No.1Mr. X sold goods to Mr. Y for $10,000 on credit. The journal entry is:1st Jan.2005 Y A/c Dr. Sales A/c(Goods sold on credit) 10,000 10,000Transaction No. 2Mr. Y drew a bill on Mr. X for 90 days. The journal entry is:1st Jan.2005 Bill receivable A/c Dr. Y A/c (Acceptance received from Mr. Y) 10,000 10,000Transaction No. 3On the due date acceptor honors the bill. The journal entry is:4 April.2005 Cash/Bank A/c Dr. Bill receivable A/c (Received cash on presentation of bill) 10,000 10,000Mr. Y's JournalTransaction No.1Bought goods from Mr. X for $ 10,000. The journal entry is:1st Jan.2005 Purchases A/c Dr. X A/c(Goods purchased on credit) 10,000 10,000Transaction No. 2Acceptance given to Mr. X instead of paying him cash. The journal entry is:1st Jan.2005 X A/c Dr. Bill payable A/c (Acceptance given to Mr. X) 10,000 10,000Transaction No. 3Acceptance is met (paid of due date). The journal entry is:4 April.2005 Bill payable A/c Dr. Cash A/c (Acceptance is paid in cash) 10,000 10,000Different Uses of a Bill of Exchange:In the above illustration, we just discussed only one use of a bill of exchange i.e., the drawer retained the bill with himself till due date and then presented to the acceptor, who honored the bill (paid cash to the drawer). Every drawer or receiver of a bill has three options for him.He can retain the bill till the due date. (As discussed above).He can send the bill to his bank for collection. Bank will present the bill before drawee on due date and will collect the amount for drawer. View accounting treatment for this option on "Bill of Exchange Sent to Bank for Collection" pageHe can endorse the bill to one of his creditors in settlement of his own debts. View accounting treatment for this option on "Endorsement of Bill of Exchange" pageHe can discount it with his bank if he is in need of money and cannot wait till the due date. View accounting treatment for this option on "Discounting of a Bill of Exchange" pageIn the same way every acceptor has four possibilities.He may pay the amount of bill on presentation. (As discussed above).He may refuse to honor the bill. It is called dishonor of a bill of exchange. Read Dishonor of Bill of ExchangeHe may request the drawer to renew the bill (extending the period of payment). Read Renewal of Bill of ExchangeHe may get the bill retired. (paying his obligation before the due date). Read Retiring a Bill of Exchange Under Rebate.

B.COM REGULAR 2011 EXAMS, KARACHI UNIVERSITY DATE SHEET

2011-12-17T21:37:00.002+05:00

UN-OFFICIAL DATE SHEET B.COM KARACHI UNIVERSITY EXAMS 2011

2011-12-17T09:12:00.003+05:00

24/12/2011 ISLAMIAT PART 1
26/12/2011 ADV ACCOUNTING PART 2
28/12/2011 STATISTICS PART 1
29/12/2011 B.COMM PART 2
30/12/2011 I.T.B PART 1
31/12/2011 MANAGEMENT PART 2
02/01/2012 ACCOUNTING PART 1
03/01/2012 ECO OF PAKISTAN PART 2
04/01/2012 ENGLISH PART 1
05/01/2012 BUSINESS LAW PART 2
06/01/2012 PAK STUDIES PART 1
07/01/2012 OPTIONAL PART 2
09/01/2012 ECONOMICS PART 1

Accounting for Bills of Exchange

2011-12-16T08:27:00.003+05:00

No business wants to sell goods on credit to his customers who may prove unable or unwilling to pay their debts. Today, however, in every field of retail trade it appears that sales and profits can be increased by selling goods on credit basis. The manufacturers and the wholesalers sell goods mostly on credit. Credit is a very powerful instrument to promote sales, so most of the business transactions, in most business concerns, are carried on credit basis. A bill of exchange is a method of payment used between businessmen which has certain advantages over other methods of payment.Definition and Explanation of Bill of Exchange:"An unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to the bearer".You should keep in mind the following points to understand the definition:The person who writes out the order to pay is called the drawer.The person upon whom the bill of exchange is drawn (who is ordered to pay) is called the drawee.The drawee may "accept" the bill. This is a special use of the word accept because it means that he accepts to pay the amount payable expressed in the bill, i.e. if he accepts the obligation to pay he writes "accepted" across the face of the bill and signs it. From that time on he is know as the "acceptor" of the bill and has absolute liability to honor the bill on the due date.The amount of money must be mentioned clearly. For example, I cannot make out a bill requiring someone to pay the value of my car or house. That is an uncertain sum. It must say "five thousand dollars or ten thousand dollars" etc.The time must be fixed or at least be determinable. For example, "sixty days after date" is quite easily determinable. If the bill is made out on first July, it will be 29th august.The person who is entitled to receive the money from the acceptor is called the "payee". It is usually the drawer who is supplying goods to the value of the bill, and wants to be paid for them. If the drawer decides, the bill can be made payable to someone else by endorsing it. That is why the definition says, to pay..... to, or the the order of, a specified person.A bill can be made payable to a bearer, but it is risky, since any finder of the bill or any thief, can claim the money from the acceptor.Format of Bill of Exchange:Now read the definition again and see the format of the bill of exchange below:

Important Points:This bill is drawn by the peter & Co., so the drawer of the bill is peter & Co.The bill is drawn upon William & Co., so they are drawee of the bill. They have not yet accepted the bill, and so are not liable to pay it at maturity.The bill is an unconditional order in writing. It says "pay ten thousand dollars to Peter & Co." it does not say "provided you are in funds". It just says "pay!".It is addressed by one person (Peter & Co.) to another (William & Co.) and is signed by the person giving it (Peter & Co.).The date is easily determinable it is 90 days after first July, which is 29 September, 20....The sum of money is very certain, ten thousand US dollars.The bill is payable to, or to the order of, Peter & Co.How a Bill of Exchange Works?A person who wants to purchase goods but has no money, may agree to accept a bill of exchange drawn upon him at some future date for the value of the goods he wants to purchase. For example, Mr. B (a retail trader) wishes to purchase furniture from a furniture manufacturer (Mr. A) but has no money. Mr. A is agreed to sell furniture for a 90 days credit worth $10,000.The drawer (Mr. A) draws a bill for $10,000 on the customer (Mr. B), the drawee, who accepts it (thus becoming the acceptor of the bill) and returns it to the drawer. The drawer delivers the furniture and has a 90 days bill for $10,000.He can keep the bill till due date and present it on the due date before the acceptor.When a drawee (the acceptor) acknowledges the obligation in the bill he is bound by law to honor the bill on the due date. If he is a reputable person the bill is as good as money, and any bank will discount it. There are special kinds of banks which do this job and they are called discount houses. What do the discount houses do? They cash the bill by giving the drawer the present value of the bill.Present Value = Face value of the bill - Interest at agreed rate for the time the bank has to waitSo the drawer who discounts the bill with the bank gets less than the face value. On the due date the bank will present the bill to the acceptor, who honors it by paying the full value. The bank has earned the amount of interest it deducted when it discounted the bill.Where does the acceptor get the money to honor the bill? The answer is that he was given 90 days to sell the goods at profit, and therefore, he is liable to honor the bill. Now it is hoped that you will be able to follow what is happening in the following diagrams:

You can understand the figure above with the help of the following notes:Business activities cannot proceed because the retail trader (Mr. B) has nothing to sell and has no money to buy goods.We need a system by which retailer can purchase goods without paying for them at the moment and which enables the manufacturer (Mr. A) to be paid immediately.Since a bill of exchange from a reputable trader is almost as good as money, it will be acceptable to banks. They have plenty of money to lend out to reliable customers so, they will advance money to the holder of bills of exchange.Now look at the following figure and note how bill of exchange can increase the business activities.

The result is that a bill of exchange is a useful instrument to increase business activities, and is beneficial to all the parties.

Introduction to cash flow statement:

2011-12-14T09:03:00.001+05:00

Three major financial statements are ordinarily required for external reports―an income statement, a balance sheet, and a statement of cash flows. The purpose of the statement of cash flow is to highlight the major activities that directly and indirectly impact cash flows and hence affect the overall cash balance. Managers focus on cash for a very good reason―without sufficient cash balance at the right time, a company may miss golden opportunities or may even fall into bankruptcy. The cash flow statement answers questions that cannot be answered by the income statement and a balance sheet. For example a statement of cash flows can be used to answer questions like where did the company get the cash to pay dividend of nearly $140 million in a year in which, according to income statement, it lost more than $1 billion? To answer such questions, familiarity with the statement of cash flows is required.Tag CloudBusiness Opportunity Accounting Jobs Government Jobs Internet Marketing Accountant Get the cashThe statement of cash flows is a valuable analytical tool for managers as well as for investors and creditors, although managers tend to be more concerned with forecasted statements of cash flows that are prepared as a part of the budgeting process. The statement of cash flows can be used to answer crucial questions such as the following:Is the company generating sufficient positive cash flows from its ongoing operations to remain viable?Will the company be able to repay its debts?Will the company be able to pay its usual dividends?Why is there a difference between net income and net cash flow for the year?To what extent will the company have to borrow money in order to make needed investments?For the statement of cash flows to be useful to managers and others, it is important that companies employ a common definition of cash. It is also important that a statement be constructed using consistent guidelines for identifying activities that are sources of cash and uses of cash. The proper definition of cash and the guidelines to use in identifying sources are discussed in coming paragraphs.Definition of Cash:In preparing a statement of cash flows, the term cash is broadly defined to include both cash and cash equivalents. Cash equivalents consist of short term, highly liquid investments such as treasury bills, commercial paper, and money market funds that are made solely for the purpose of generating a return on temporary idle funds. Instead of simply holding cash, most companies invest their excess cash reserves in these types of interest bearing assets that can be easily converted into cash. These short term liquid investments are usually included in marketable securities on the balance sheet. Since such assets are equivalent to cash, they are included with cash in preparing a statement of cash flowsSections of cash flow statement:The cash flow statement is usually divided into three sections: Operating, investing and financing activities.

Operating Activities:Operating activities involve the cash effects of transactions that enter into the determination of net income, such as cash receipts from sales of goods and services and cash payments to suppliers and employees for acquisition of inventory and expensesInvesting Activities:Investing activities generally involve long term assets and include (a) making and collecting loans (b) acquiring and disposing of investments and productive long lived assets.Financing Activities:Financing activities involve liability and stock holder's equity items and include obtaining cash from creditors and repaying the amounts borrowed and obtaining capital from owners and providing them with a return on, and a return of, their investment. Below is the typical classification of of cash receipts and payments according to operating, investing and financing activities.Operating Activities:Cash inflows:From sales of goods or services.From return on loans (interest) and on equity securities. dividendsCash outflows:To suppliers for inventories.To employees for services.To government for taxes.To lenders for interest.To others for expenses. Income Statement Items Investing Activities:Cash inflow:From sale of property, plant and equipment.From sale of debt or equity securities of other entities.From collection of principles on loans to other entities.Cash Outflows:To purchase property, plant and equipment.To purchase debt or equity securities of other entities.To make loans to other entities. Generally Long Term Asset ItemsGenerally Long term Liability and Equity ItemsFinancing Activities:Cash inflows:From sale of equity securities.From issuance of debt ( bonds and notes ).Cash outflows:To stock holders as dividendsTo redeem long term debt or reacquire capital stock.

Some cash flow relating to investing or financing activities are classified as operating activities. For example, receipts of investment income ( interest and dividend ) and payment of interest to lenders are classified as operating activities. Conversely, some cash flows relating to operating activities are classified as investing or financing activities. For example, the cash received from the sale of property plant and equipment at a gain, although reported in the income statement, is classified as an investing activity, and effects of the related gain would not be included in net cash flow from operating activities. Likewise a gain or loss on the payment of debt would generally be part of the cash out flow related to the repayment of the amount borrowed, and therefore it is financing activity.Format of the cash flow statement:The three activities discussed in preceding paragraphs constitute the general format of the statement of cash flows. The cash flows from operating activities section always appears first, followed by the investing section and then financing activities section. The individual inflows and outflows from investing and financing activities are reported separately. That is, they are reported gross, not netted against one another. Thus, cash outflows from the purchasing of property is reported separately from the cash inflow the sale of property. Similarly, the cash inflow from the issuance of debt is reported separately from the cash outflow from its retirement. The net increase or decrease in cash reported during the period should reconcile the beginning and ending cash balances as reported in the comparative balance sheets.The Skelton cash flow statement is presented as follows: This is also called cash flow statement pro forma. Company Name Cash Flow Statement Format Period Covered Cash Flows From Operating Activities:Net incomeAdjustment to reconcile net income to net cash provided by operating activities:(List of individual items)Net cash flows from operating activities.Cash Flows From Investing Activities:(List of individual inflows and outflows)Net cash provided (used) by operating activitiesCash Flows from Financing Activities:(List of individual inflows and outflows)Net cash provided (used) by financing activitiesNet increase (decrease) in cashCash at beginning of periodCash at the end of period

The purpose of the statement of cash flows is to highlight the major activities that directly and indirectly impact cash flows and hence affect the overall cash balance. Managers focus on cash for a very good reason―without sufficient cash balance at the right time, a company may miss golden opportunities or may even fall into bankruptcy.The cash flow statement answers questions that cannot be answered by the income statement and a balance sheet. For example a statement of cash flows can be used to answer questions like where did the company get the cash to pay dividend of nearly $140 million in a year in which, according to income statement, it lost more than $1 billion? To answer such questions, familiarity with the statement of cash flows is required.The cash flow statement is a valuable analytical tool for managers as well as for investors and creditors, although managers tend to be more concerned with forecasted statements of cash flows that are prepared as a part of the budgeting process.cash flow statement can be used to answer crucial questions such as the following:Is the company generating sufficient positive cash flows from its ongoing operations to remain viable?Will the company be able to repay its debts?Will the company be able to pay its usual dividends?Why is there a difference between net income and net cash flow for the year?To what extent will the company have to borrow money in order to make needed investments?

CRASH CLASSES B.COM KARACHI UNIVERSITY 2011

2011-12-12T22:00:00.001+05:00

Maslow's Theory of Motivation - Hierarchy of Needs

2011-11-30T08:52:00.002+05:00

In 1943, Dr. Abraham Maslow 's article "A Theory of Human Motivation" appeared in Psychological Review, which were further expanded upon in his book: Toward a Psychology of Being In this article, Abraham H. Maslow attempted to formulate a needs-based framework of human motivation and based upon his clinical experiences with people, rather than as did the prior psychology theories of his day from authors such as Freud and B.F. Skinner, which were largely theoretical or based upon animal behavior. From this theory of motivation, modern leaders and executive managers find means of motivation for the purposes of employee and workforce management. Abraham Maslow's book Motivation and Personality (1954), formally introduced the Hierarchy of Needs.

The basis of Maslow's motivation theory is that human beings are motivated by unsatisfied needs, and that certain lower factors need to be satisfied before higher needs can be satisfied. According to Maslow, there are general types of needs (physiological, survival, safety, love, and esteem) that must be satisfied before a person can act unselfishly. He called these needs "deficiency needs." As long as we are motivated to satisfy these cravings, we are moving towards growth, toward self-actualization. Satisfying needs is healthy, while preventing gratification makes us sick or act evilly.

As a result, for adequate workplace motivation, it is important that leadership understands the needs active for individual employee motivation. In this manner, Maslow's model indicates that fundamental, lower-order needs like safety and physiological requirements have to be satisfied in order to pursue higher-level motivators along the lines of self-fulfillment. As depicted in the following hierarchical diagram, sometimes called 'Maslow's Needs Pyramid' or 'Maslow's Needs Triangle', after a need is satisfied, it stops acting as a motivator and the next need one rank higher starts to motivate as it attain psychological precedence.

Self-Actualization

Esteem Needs

Social Needs

Safety Needs

Physiological Needs

Self-Actualization

Self-actualization is the summit of Maslow's motivation theory. It is about the quest of reaching one's full potential as a person. Unlike lower level needs, this need is never fully satisfied; as one grows psychologically there are always new opportunities to continue to grow.

Self-actualized people tend to have motivators such as:

Truth
Justice
Wisdom
Meaning
Self-actualized persons have frequent occurrences of peak experiences, which are energized moments of profound happiness and harmony. According to Maslow, only a small percentage of the population reaches the level of self-actualization.

Esteem Needs

After a person feels that they "belong", the urge to attain a degree of importance emerges. Esteem needs can be categorized as external motivators and internal motivators.

Internally motivating esteem needs are those such as self-esteem, accomplishment, and self respect. External esteem needs are those such as reputation and recognition.

Some examples of esteem needs are:

Recognition (external motivator)
Attention (external motivator)
Social Status (external motivator)
Accomplishment (internal motivator)
Self-respect (internal motivator)
Maslow later improved his model to add a layer in between self-actualization and esteem needs: the need for aesthetics and knowledge.

Social Needs

Once a person has met the lower level physiological and safety needs, higher level motivators awaken. The first level of higher level needs are social needs. Social needs are those related to interaction with others and may include:

Friendship
Belonging to a group
Giving and receiving love
Safety Needs

Once physiological needs are met, one's attention turns to safety and security in order to be free from the threat of physical and emotional harm. Such needs might be fulfilled by:

Living in a safe area
Medical insurance
Job security
Financial reserves
According to the Maslow hierarchy, if a person feels threatened, needs further up the pyramid will not receive attention until that need has been resolved.

Physiological Needs

Physiological needs are those required to sustain life, such as:

Air
Water
Food
Sleep
According to this theory, if these fundamental needs are not satisfied, then one will surely be motivated to satisfy them. Higher needs such as social needs and esteem are not recognized until one satisfies the needs basic to existence.

Applying Maslow's Needs Hierarchy - Business Management Implications

If Maslow's theory is true, there are some very important leadership implications to enhance workplace motivation, and you don't need a masters in applied psychology, for it to be evident. There are employee motivation opportunities by motivating each employee through their style of management, compensation plans, role definition, and company activities.

Physiological Motivation: Provide ample breaks for lunch and recuperation and pay salaries that allow workers to buy life's essentials.
Safety Needs: Provide a working environment which is safe, relative job security, and freedom from threats.
Social Needs: Generate a feeling of acceptance, belonging, and community by reinforcing team dynamics.
Esteem Motivators: Recognize achievements, assign important projects, and provide status to make employees feel valued and appreciated.
Self-Actualization: Offer challenging and meaningful work assignments which enable innovation, creativity, and progress according to long-term goals.
Remember, everyone is not motivated by same needs. At various points in their lives and careers, various employees will be motivated by completely different needs. It is imperative that you recognize each employee's needs currently being pursued. In order to motivate their employees, leadership must be understand the current level of needs at which the employee finds themselves, and leverage needs for workplace motivation.

Maslow's Theory - Limitations and Criticism

Though Maslow's hierarchy makes sense intuitively, little evidence supports its strict hierarchy. Actually, recent research challenges the order that the needs are imposed by Maslow's pyramid. As an example, in some cultures, social needs are placed more fundamentally than any others. Further, Maslow's hierarchy fails to explain the "starving artist" scenario, in which the aesthetic neglects their physical needs to pursuit of aesthetic or spiritual goals. Additionally, little evidence suggests that people satisfy exclusively one motivating need at a time, other than situations where needs conflict.

While scientific support fails to reinforce Maslow's hierarchy, his thery is very popular, being the introductory motivation theory for many students and managers, worldwide. To handle a number of the issues of present in the Needs Hierarchy, Clayton Alderfer devised the ERG theory, a consistent needs-based model that aligns more accurately with scientific research.

B.COM: Motivation in theory - Herzberg two factor theory

2011-11-29T08:44:00.000+05:00

B.COM: Motivation in theory - Herzberg two factor theory

B.COM: B.COM REGULAR EXAMS FROM 24TH DECEMBER 2011

2011-11-19T21:45:00.000+05:00

B.COM: B.COM REGULAR EXAMS FROM 24TH DECEMBER 2011

B.COM: Agriculture Problems in Pakistan And Their Solutions

2011-11-11T22:31:00.000+05:00

B.COM: Agriculture Problems in Pakistan And Their Solutions

Post-Keynesian Economics

2011-10-31T14:10:00.000+05:00

Post-Keynesian EconomicsPost-Keynesian economics is a school of economic thought with its origins in The General Theory of John Maynard Keynes, although its subsequent development was influenced to a large degree by Michał Kalecki, Joan Robinson, Nicholas Kaldor and Paul Davidson. Keynes' biographer Lord Skidelsky writes that the post-Keynesian school has remained closest to the spirit of Keynes' work, particularly in his monetary theory and in rejecting the neutrality of money.IntroductionPost-Keynesian economists maintain that Keynes' theory was seriously misrepresented by the two other principle Keynesian schools: neo-Keynesian economics which was orthodox in the 1950s and 60s - and by New Keynesian economics, which together with various strands of neoclassical economics has been dominant in mainstream macroeconomics since the 1980s. Post-Keynesian economics can be seen as an attempt to rebuild economic theory in the light of Keynes's ideas and insights. However even in the early years in the late 1940s post-Keynesians such as Joan Robinson sought to distance themselves from Keynes himself, as well as from the then emergent neo-Keynesianism. Some post-Keynesians took an even more progressive view than Keynes with greater emphases on worker friendly policies and re-distribution. Robinson, Paul Davidson and Hyman Minsky were notable for emphasising the effects on the economy of the practical differences between different types of investments in contrast to Keynes more abstract treatment.A feature of post-Keynesian economics is the principle of effective demand, that demand matters in the long as well as the short run, so that a competitive market economy has no natural or automatic tendency towards full employment. Contrary to a view often expressed, the theoretical basis of this market failure is not rigid or sticky prices or wages (as in New Keynesian economics, which is best regarded as a modified form of neoclassical economics[citation needed]). Many post-Keynesians reject the IS/LM model of John Hicks, which was very influential in neo-Keynesian economics.The positive contribution of post-Keynesian economics has extended beyond the theory of aggregate employment to theories of income distribution, growth, trade and development in which demand plays a key role, whereas in neoclassical economics these are determined by the supply side alone. In the field of monetary theory, post-Keynesian economists were among the first to emphasise that the money supply responds to the demand for bank credit, so that the central bank can choose either the quantity of money or the interest rate but not both at the same time. This view has largely been incorporated into monetary policy, which now targets the interest rate as an instrument, rather than the quantity of money. In the field of finance, Hyman Minsky put forward a theory of financial crisis based on financial fragility, which has recently received renewed attention. StrandsThere are a number of strands to post-Keynesian theory with different emphases. Joan Robinson regarded as superior to Keynes’s Michal Kalecki’s theory of effective demand, based on a class division between workers and capitalists and imperfect competition. She also led the critique of the use of aggregate production functions based on homogeneous capital – the Cambridge capital controversy – winning the argument but not the battle. Much of Nicholas Kaldor’s work was based on the ideas of increasing returns to scale, path dependency, and the key differences between the primary and industrial sectors. Paul Davidson follows Keynes closely in placing time and uncertainty at the centre of theory, from which flow the nature of money and of a monetary economy. Monetary circuit theory, originally developed in continental Europe, places particular emphasis on the distinctive role of money as means of payment. Each of these strands continues to see further development by later generations of economists, although the school of thought has been marginalized within the academic profession.Current workJournalsMuch post-Keynesian research is published in the Journal of Post Keynesian Economics (founded by Sidney Weintraub and Paul Davidson), the Cambridge Journal of Economics, the Review of Political Economy and the Journal of Economic Issues (JEI).UKThere is also a UK academic association, the Post Keynesian Economics Study Group (PKSG).USKansas City SchoolIn America, there is a center of post-Keynesian work at the University of Missouri – Kansas City, dubbed "The Kansas City School", together with the Center for Full Employment and Price Stability, which run a Post Keynesian Conference and Post Keynesian Summer School, together with a group blog, Economic Perspectives from Kansas City. Their research emphasis includes Neo-Chartalism, job guarantee programs, and economic policy.Major post-Keynesian economistsMain article: List of Post-Keynesian economistsSee also: Category:Post-Keynesian economistsMajor post-Keynesian economists of the first and second generation after Keynes include:• Victoria Chick• Paul Davidson• Alfred Eichner• Geoff Harcourt• Nicholas Kaldor• Michał Kalecki• Hyman Minsky• Basil Moore• Luigi Pasinetti• Joan Robinson• G. L. S. Shackle• Anthony Thirlwall• Sidney Weintraub• Jan Kregel• L.Randall Wray• Frederic S. Lee• Fernando Cardim de Carvalho Post-Keynesian theories• Job guarantee, from the Kansas City School• Monetary circuit theory, often associated with post-Keynesian economics• Neo-Chartalism, another post-Keynesian theory of moneySee also• Keynesian economics• New Keynesian economicsNotes1. ^ There is semantic dispute as to whether there should be a hyphen between Post and Keynesian. The American journal of the same name does not use the hyphen despite its grammatical correctness, and the objection to its use dates back to Paul Samuelson's claim to be a Post-Keynesian. However Harcourt 2006 uses the hyphen, following Joan Robinson's original use of the phrase.2. ^ Skidelsky 2009, p. 423. ^ Financial markets, money and the real world, by Paul Davidson, pp. 88–894. ^ Hayes 20085. ^ Arestis 19966. ^ For a general introduction see Holt 20017. ^ Kaldor 19808. ^ Minsky 19759. ^ Robinson 197410. ^ Pasinetti 200711. ^ Harcourt 2006, Pasinetti 200712. ^ Davidson 2007Post Keynesian Economics (1970s-80s)What is post keynesian economicsThanks to Samuelson's reconciliation, today neoclassical economics is known as microeconomics and Keynesian economics has become largely known as macroeconomics the twin pillars of mainstream or orthodox economic thought. However, because this reconciliation clearly disavowed many of Keynes's original ideas that were not held to be compatible with neoclassical economics, many critics have sought to revive some of them and to combine them with theories of scholars such as Michael Kalecki, Joan Robinson, and Piero Sraffa to form a new school of economic thought known as "post-Keynesian Economics" (see Eicher, 1979).Post-Keynesians are highly concerned with short-term economic growth as induced by aggregate demand and, unlike neo-classical economists, are concerned with real world variables that exist in a very concrete historical situation. For them, the adjustment process of the economy to equilibrium conditions is not so "automatic" as neoclassical economist's claimed because it largely depends on the economic agent's interpretation of both the past and expectations for the future all in the midst of a decision making setting involving complex interdependencies and unforeseen factors. As a result of these beliefs, post-Keynesians essentially deny relevance of conventional equilibrium analysis. Moreover, reliance on the role of uncertainty has created some problems for post-Keynesians because it has made it nearly impossible for them to devise any viable theory for long-term growth. It has further prevented them from developing a formal economic model that they all agree upon.According to Professor J. A. Kregel (1976), one of the most distinguished post-Keynesian economists, "post-Keynesian theory can be viewed as an attempt to analyze various different economic problems, e.g., capital accumulation, income distribution, etc., through the methodology of Keynes." Keynes's methodology, then, was to confront "the analysis of an uncertain world was in terms of alternative specifications about effects of uncertainty and disappointment."Using this approach while adopting theories of both Keynes and Kalecki, post-Keynesians have analyzed the relationship between income distribution and economic growth. One of the most significant conclusions of post-Keynesian economics is that for a given level of investment and an economy at equilibrium where savings equals investment, the lower the capitalist's propensity to save, the higher will be their share of national income and the lower will be the worker's share. This assertion is significant because it contradicts the claim by neoclassical economists that capitalists enjoyed a high income due to the pain that is necessary for them to save.This result of the post-Keynesians is founded in their belief that saving is passively linked to changes in level of income, and investment is highly correlated with capitalists' expectations for the future. If optimistic, investment increases, growth occurs, and capitalists' share of income increases as well. As their income rises, capitalists save more bringing savings back in line to a new level of Keynesian equilibrium where savings and investment equate. What this means is that if capitalists are frugal (i.e. save more), or if they are abstemious (i.e. abstain from consuming), they lower their share of the national income. This, of course, directly violates Nassau Senior's assertion that the high income of capitalists was morally justified by their painful abstinence of personal consumption and willful propensity to reinvest their profits into the growth of capital.Another area where post-Keynesians have divergent economic thought from orthodoxy has to do with their belief in the endogenity of money. For them, post-Keynesians stress the fact that real commodity and labor flows are expressed in the economy as monetary flows. They also assume that money possesses a negligible elasticity of substitution with any other medium of exchange and therefore has the unique capacity to be able to be used by financial institutions as a tool to mitigate the effects of exogenous economic system shocks.

how-to-rectify-errors-in-financial-accounts

2011-10-20T07:40:00.000+05:00

how-to-rectify-errors-in-financial-accounts

B.COM: NEW DATES FOR SUBMISSION OF B.COM REGULAR EXAMINATION FORMS 2011

2011-10-19T08:47:00.000+05:00

B.COM: NEW DATES FOR SUBMISSION OF B.COM REGULAR EXAMINATION FORMS 2011

AMALGAMATION PRACTICE EXERCISES

2011-10-17T08:07:00.000+05:00

AMALGAMATION OF THE FIRMS

1. A and B each carrying on business as a sole trader decided to combine as on January 1,2002 when their individual Balance Sheets were as follows.
A B A B
Creditors 30,000 25,000 Cash 14,000 8,000
Bank Overdraft 20,000 15,000 Debtors 50,000 40,000
Capital 62,000 31,000 Stock 18,000 11,000
Machinery 20,000 12,000
National war
_______ ______ Bonds 10,000 -____
1,12,000 71,000 1,12,000 71,000 _

The following revaluations were to be made before the firms were amalgamated:
(a) A provision of 5% is to be made against debtors.
(b) Stock was to be reduced in case of A by 10% and in case of B by 5%.
(c) Machinery is to be reduced by 20%.
(d) Each partner is to be credited with goodwill of Rs.20,000.
(e) The bank overdraft of B is to be paid off by him.
(f) National war bonds of A were not take over.

B should introduce cash to make his capital equal of that of A.
You are required to pass the necessary journal entries to close the books of A and B and the opening entries in the books of the new firm. Prepare also the Balance Sheet of the new firm.

2. M/S A and Co., having A and B as equal partners, decided to amalgamate with C and Co., have C and D as equal partners on the following terms and condition:
1. The new firm to take investments at 10% depreciation, land at Rs.80,000, premises at Rs.45,000, machinery at Rs.9,000 and to take over only the trade liabilities of both the firms, the debtors being taken over at book value including provision.
2. The new firm to pay Rs.12,000 to each firm for Goodwill.
3. Typewriters at the written off value of Rs.800, belonging to C and Co., and not appearing in the B/S was also not taken over by the new firm.
4. It was also agreed that the furniture belonging to both the firms be not taken over by the firm.
5. All the four partners in the new firm to bring in Rs.1,60,000 as capital in equal shares.
The following were the Balance Sheets of both the firms on the date of amalgamation;
Balance Sheets
Liabilities A & Co,. C & Co,. Assets A & Co, C & Co,.
Rs. Rs Rs. Rs
Sundry Creditors 20,000 10,000 Cash at Bank 15,000 8,000
Bills Payable 5,000 Investment 10,000 8,000
Bank Overdraft 2,000 10,000 Rs.
A’s Loan 6,000 Debtors 10,000

Capitals: Less: Provision 1,000
A 35,000 9,000 8,000
B 22,000 Furniture 12,000 6,000
C 36,000 Premises 30,000
D 20,000 Land 50,000
General Reserve 8,000 3,000 Machinery 15,000
Investment Goodwill 9,000
Fluctuation Fund 2,000 1,000 _______ _______
1,00,000 80,000 1,00,000 80,000_

Pass journal entries in the books of both the firms and prepare a Balance sheet of the new firm.

3. Following were the Balance Sheets of two firms M/s R and S and M/s X and Y as on 31st December, 2001:
M/s R and S
Rs. Rs.
Creditor 3,000 Stock 50,000
Bills payable 6,000 Debtors 30,000
Capitals: 50,000 Premises 20,000
R 50,000 Plant and Machinery 5,000
S 50,000 Bank 1,500
Furniture 500
_______ Investment 2,000
1,09,000 1,09,000

M/s X and Y
Rs. Rs.
Creditor 25,000 Stock 75,000
Bank C/d 10,300 Debtors 45,000
X’s Capitals: 52,500 Plant and Machinery 20,000
Y’s Capitals 52,500 __ Furniture 300____
1,40,300 1,40,300

The two firms decided to amalgamate their respective business from 1st January 2002. For this purpose it was agreed that the premises and plant and machinery belonging to R&S should be taken over by the new firm at Rs.25,000 and Rs.10,000 respectively. X & Y to be credited with Rs.5,000 for certain patent rights they possessed which became the property of the partnership and which were not included in their Balance Sheet. All the other assets were taken over at the values stated in the respective Balance sheets except the investment belonging to R and S which were not take over. Both firms undertook to discharge their own liabilities.

Prepare ledger accounts in the books of the old firms and Balances Sheet of the new firm.

4. Following were the Balance Sheets as at 31st December, 2001 of two firms M/s P & Q and M/s R &S.

P & Q R & S P & Q R & S
Rs. Rs Rs. Rs
Creditors 3,000 25,000 Stock 50,000 75,000
Bills Payable 6,000 - Debtors 30,000 45,000
Bank Overdraft - 10,300 Premises 20,000 - Capitals: Plant and Machinery 5,000 20,000
P 50,000 Bank 1,500 -
Q 50,000 Furniture 500 300
R - 52,500 Defence Bonds 2,000 - S - 52,500 _______ _______
1,09,000 1,40,300 1,09,000 1,40,300

The two firms decided to amalgamate their business from 1st January 2002. For this purpose it was agreed that the premises and plant and machinery belonging to P&Q taken over by the new firm at Rs.25,000 and Rs.10,000 respectively. R & S were to be credited with Rs.5,000 at the value of certain patent rights they possessed which became the property of the partnership and which were not included in their Balance Sheet. All the other assets were taken over a book values. Both firms undertook to discharge their own liabilities and it was agreed that P&Q should introduce cash to make their capital equal to that of R&S
Pass incorporating entries in the books of the new firm and prepare also the Balances Sheet of the new firm.

Branch Accounting. Theory & Practice Exercises

2011-10-12T14:08:00.001+05:00

Objectives of Branch Accounting

The main object of keeping branch accounts is dependent on the nature of the business and specific need of a particular branch. The objectives of keeping the branch accounts acceptable to all business are (i) To know the profit or loss of each branch separately. (ii) To ascertain the financial position of each branch on a particular date. (ii) To know the cash and goods requirements of the various branches (iv) To evaluated the progress and performance of each branch. (v) To calculate commission for payment to the managers, if based on profits of branch. (v) To know the profitability of each branch and type of business for expansion of the business. (vii) To give concrete suggestions for the improvement in the working of the various branches (viii) To meet the requirements of specific enactments as all branches of a company must keep the accounts for audit purposes.

Treatment of Certain Branch Transactions

1. Branch expenses paid by the branch out of petty cash: Such expenses will be deducted from the branch cash and at the close reduced balance of cash will be shown on the credit side of the branch account as such expenses need not be shown in the branch account.

2. Depreciation of fixed assets: This is not shown in the branch account. But the closing balance of the fixed assets will be shown on the credit side of the branch account after deduction of the amount of depreciation.

3. Credit sale, bad debts, sales returns, allowances and discount allowed pertaining to branch as these are not direct transactions between branch and head office: These items are pertaining to the debtors account and will not be shown in the branch account. However, these items will be taken into consideration while ascertaining the amount of opening or closing balance of debtors or amount received from debtors, which are shown in the branch account.

4. Goods in transit: Goods in transit is the difference between goods sent by head office and received by the branch. Such goods will be shown either on the both sides of the branch account or will be ignored totally while preparing the branch accounts.

Invoice Price Method
When the goods are sent by the head office to the branch at invoice price i.e., cost plus some percentage of profit, the branch manager is required to sell the goods at invoice price only. Goods are marked on invoice price to achieve the following objectives:
(i) In order to keep secret from the branch manager the cost price of the goods and profit made, so that the branch manager many not start a rival and competitive business with the concern; and
(ii) In order to have effective control on stock i.e, stock at any time must be equal to opening stock plus goods received from head office minus sales made at the branch.

I Debtors System

A. When goods are sent to branch at cost

1. From the following particulars relating to Delhi Branch for the year ending 31st march 2001, prepare branch account in the head office books:
Balance as on 1-4-2000 Rs Rs
Stock at the branch 15000 Credit sales during 2001-01 228000
Debtors at the branch 30000 Cheques sent to branch
Petty cash at the branch 300 during the year:
goods sent to branch during the year: 252000 for salaries 9000
Remittance from the branch for rent and taxes 1500
for cash sales 60000 For Petty cash 1100 11600
received from debtor 210000 270000 Balance as on 31-12-2001
Goods returned by the branch 2000 Stock at the Branch on 25000
Petty cash 200
Debtors 48000

2.Sincere Brothers of Delhi opened a branch at Kanpur on January 2000. From the following figures prepare kanpur Branch accounts in the book of sincere brothers for the year ending December 31, 2000&2001.
2000 2001
Goods sent to kanpure Branch 100000 120000
Expenses paid by the head office
Rent 1200 1200
Salaries 6000 6000
Advertisement 600 800
Cash sales at branch 120000 165000
Remittance received from the branch 160500
Remittance made on December 30,still in transit 4000
Expenses paid by the branch:
Carriage 200 250
Petty expenses 300 400
Stock on December 31 20000 30000
Petty cash in hand 200

B. When goods are sent to branch at invoice price

3. A head office in madras has a branch in Delhi to which goods are invoiced by the head office at cost plus 25%. All cash received by the branch is daily remitted to head office. Form the following particulars; show how the branch Account will appear in the H.O. books. Entries are to be made at invoice price

Rs
Stock on January 1,2001(at invoice Price) 62500
Debtors on 1-1-2001 60000
Goods Supplied by H.O.(at invoice Price) 200000
Cash sales 80000
Cash received from customers 147500
Goods returned to the head office(at invoice Price) 12000
Cheques received from the H.O.
Wages and Salaries 55000
Rent, Rates and Taxes 15000
Sundry Expenses 2550 72550
Stock on 31-12-2001(at invoice Price) 75000
Debtors on 31-12-2001 112500
Liability for Petty expenses 550

4. Unique shoe stores have an old established branch at Kanpur. Goods are invoiced to the branch at 20% profit on invoice price; the branch having been instructed to send all cash daily to the Head Office. All expenses are paid by the Head Office except petty expenses which are met by the branch manager. From the following the Head Office, i.e. Unique Shoe Stores:
Rs
Stock on January 1,2001(at invoice Price) 15000
Sundry Debtors on January 1,2001 9000
Cash in hand on January 1,2001 4000
Office furniture on January 1, 2001 1200
goods Supplied by Head Office (invoice Price) 80000
Goods returned to Head Office 1000
Goods returned by debtors 480
Debtors at the end 8220
Cash sales 50000
Credit sales 30000
Discount allowed 300
Expense Paid by Head Office
Rent 1200
Salary 2400
Stationery and Printing 300 3900
Petty Expenses paid by branch Manager 280
Stockon31-12-2001(invoice Price) 14000
Provide depreciation on furniture @ 10%p.a.

5. X Company has a branch at Delhi. Goods are invoiced from Head Office at cost plus 33.1/3%. Find out profit at the branch according to debtors system.
Opening balances:
Debtors 10000
Petty cash 1000
furniture 2000
Stock(I.P.) 8000
Cash send by Head Office for Petty expenses 2000
Branch expenses and losses
Freight and advertisement 5600
Bad Debts 50
Depreciation on furniture 80
Petty Expenses 1500
Sales
Cash 50000
Credit 36000
Goods Return by Debtors 800
Goods return by branch to Head Office 2000
Cash received from Debtors 20000
Stock at the end at I.P. 7800
Goods invoice by Head Office during the year 88000

6. X and co. of Delhi has a branch at Madras. Goods are sent by the head office at invoice price which is at a profit of 20% on invoice price. All expenses of the branch are paid by the head office. From the following particulars, prepare branch account in the head office books when goods are shown at invoice price:
Rs Rs
Opening balance Goods Returned by Branch at invoice price 300
Stock at invoice Price 11000 Credit sales 22800
Petty cash 100
goods sent to branch at invoice price 20000 Balance at the end:
expenses made by Head Office Stock at invoice price 13000
Rent 600 Debtors at the end 2000
Wages 200 Petty Cash(including miscellaneous income Rs. 25 not remitted) 125
Salary etc. 900 Bad debts 300
Remittances made to head office Allowances to customer 500
Cash sales 2650 Goods returned by customers 700
Cash collected from Debtors 21000

7. Jain Bros. had a branch at Calcutta. Goods are invoiced to the Branch at cost plus 25%. Branch is instructed to deposit cash every day in the head office account in the bank. All expenses are paid by the branch manager. From the following particulars, prepare branch account in the book of head office:
Rs Rs
Stock on 1-1-2001 2500 Furniture purchased by the branch manager 1200
Stock on 31-12-2001 3000 Goods invoiced from the head office 18200
Sundry Debtors on 1-1-2001 1400 Expenses paid by the head office 1640
Sundry Debtors on 31-12-2001 1800 Expenses paid by the branch 120
Cash sales for the year 10800 Head Office sent cash to purchase safe for the branch 1300
Credit sales for the year 7000
Cash remitted to the head office 15000

II Final Account system

8. A Delhi merchant has a branch at Madras to which he charges but the goods at cost plus 25%. The Madras branch keeps its own sales ledger and remits all cash received to the Head Office every day. All expenses are paid from the Head Office the Transactions for the branch during the year 1995 were as follows:
Rs Rs
Stock(1-1-2001) at I.P. 11000 Returns Inwards 500
Debtors(1-1-2001) 100 Cheques sent to branch
Petty Cash(1-1-2001) 100 Rent 600
Cash sales 2650 Wages 200
Credit sales 23950 Salary and other Expenses 900
Goods sent to branch at I.P. 20000 Stock(31-12-2001) at I.P. 13000
Collection on ledger accounts 21000 Debtors(31-12-2001) at I.P. 2000
Goods returned to H.O. at I.P. 300 Petty Cash(31-12-2001) including miscellaneous income Rs. 25
Bad Debts 300 not remitted 125
Allowances to customers 250

Prepare the branch trading and profit & loss account and Branch account for the year ending 31-12-2001

9. Mamta & Co of Hyderabad has a branch at karnool. Goods are invoiced to branches at cost plus 20%. The expenses of the branch are paid from Hyderabad. From the information supplied by the branch prepare trading & profit & loss a/c of the branch for the year ending 31-3-2001 & show the account of the branch as it would appear in the books of the head office:

Opening stock I.P 24,000
Closing stock I.P 18,000
Credit sales 41,000
Cash sales 17,500
Sundry debtors on 31-3-2001 8,500
Goods received from head office 34,000
Goods in transit from H.O as on 31-3-2001 3,500
Expenses paid by the H.O for the branch 10,000
Cash received from debtors 35,000

Independent Branches – Incorporation Enteries

10. A and CO. Limited having its head office at Delhi with branches at Lucknow and Allahabad closes its annual accounts on 31st December, when the following transactions have taken place:

(a) Remittances of Rs. 4500 made by Lucknow branch to its Head Office on 30th December, received by Head Office 5th January(next year).
(b) Goods valuing Rs. 2200 despatched by Allahabad branch on 27th December under instructions form the head office and received by the Lucknow branch on 30th December.
(c) Depreciation amounting to Rs. 1100 on Lucknow branch fixed assets when accounts of such assets are maintained at the Head Office.
(d) Goods worth Rs. 9000 despatched by Head Office to Allahabad branch on 30th December, received by that branch on 7th January (next year).
(e) Lucknow branch paid Rs. 400 dividend to a local shareholder on behalf of the Head Office.
(f) A sum of Rs. 600 being arrears of call money was received by the Allahabad branch from a shareholder in November but was not communicated to the Head Office till 3rd January(next year).
(g) Lucknow branch draw a bill receivable for Rs. 5000 on Allahabad branch which sends its acceptance.
Pass adjusting journal entries in the books of Head Office.

11. Give Journal entries for incorporation of Delhi Branch accounts in the head office and show the branch account in Head Office books after incorporating therein the assets and liabilities.
The trial balance as on 31st December, 2001 is as under:

Dr Cr
Manufacturing Expenses 10000
Salaries 10000
Wages 40000
Cash in hand 2000
Purchases 80000
Goods received from H.O. 15000
Rent 4000
General expenses 5000
Sales 150000
Purchases returns 1000
Opening stock 30000
discount earned 1000
Debtors 15000
Creditors 5000
H.O. account 54000
211000 211000

Closing stock at branch Rs. 30000. Deprecation is to be provided on branch Machinery of Rs. 50000 @ 20 Per cent Branch Furniture of Rs. 3000 @ 15 per cent. Rent outstanding is Rs. 500

12. The Trail Balance of the Madras branch of a company as on 31st March 1995 was as under:
Stock on 1-1-1994 6000
Furniture 2400
Sundry Debtors and Creditors 5600
Goods received from Head Office 16000
Established expenses 2200
Cash at Bank 1400
Cash in Hand 400
Head Office Account 11000
Sales 22800
34000 34000
Stock on 31st March 1995 Rs. 4600.
Prepare Branch Profit and Loss Account and Branch Account in the Account in the books and give the journal entries in the Head Office Books for incorporating the assets and liabilities of the Madras Branch.

13. Following is the Trial Balance of Bangalore Branch as on 31-3-1995:
Rs. Rs.
Furniture 1400
Cash at Bank and on hand 1780
Office expenses 470
Rent 960
Debtors and creditors 3700 1850
Salaries 1500
Gods supplied to Head Office 6000
Sales 38000
Goods received from Head Office 8000
Purchase 18800
Stock, 1St July 1994 6000
Head Office Account 3240
45850 45850
Closing stock was valued at Rs.2700. The Branch Account in the Head Office books on 31-3-1995 stood at Rs.460 (Dr). Goods worth Rs. 2500 sent by Head Office to Branch and remittance of Rs. 1200 sent by Branch to Head Office were in transit.
You are required to incorporate the above trial balance of the Branch in Head Office and give the Bangalore Branch account appearing finally in the Bombay Head Office books

PARTNERSHIP ACCOUNTS – PIECEMEAL DISTRIBUTION

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So, far we have assumed that all the assets are realized immediately on the date of dissolution and the accounts of all the partners and the creditors are settled on the same date.
But this assumption is unrealistic in nature, because normally the process of realizing the assets takes a long time and cash is distributed as and when it is realized. In such a case to avoid unpleasant consequences the assets realized are distributed in such way that the unpaid balance of capitals of each partners is left in their profit sharing ratio.

On a gradual realisation of assets, the cash is distributed in the following order:

1. The debts of the firm to the third parties (outside liabilities) must be paid first.
2. After the creditors, have been paid off, the amount due to a partners as loan should be paid. When the loans are due to more than one partner the cash available should be distributed proportionately.
3. After the payment of outside liabilities and loans due to the partners, the capitals of the partner are paid.

There are two methods for distribution of cash under Piecemeal distribution:

1. PROPORTIONATE CAPITAL METHOD

If the capitals of the partners are in the ratio of their profit sharing arrangement, then each of them is paid out according to his capital ratio at each distribution. If the capitals of the partners are not in the profit sharing ratio then the first cash available (after making payment of outside liabilities and loans due to the partners) for distribution amongst the partners should be paid to those partners whose capitals are more than their profit sharing ratio so as to bring their capitals to their profit sharing levels. After this the cash available is distributed amongst all partners according to their profit sharing ratio.

The unpaid balance of capital accounts will represent loss on realisation and this loss will be exactly in their profit sharing ratio.

2. MAXIMUM LOSS METHOD

An alternative method of piecemeal distribution amongst partner is to calculate the maximum possible loss on every realisation after the outside liabilities and the partners loan has been paid. The amount available for distribution amongst partners is compared with the total amount of capital payable to the partners and the maximum loss is ascertained on the assumption that in future assets will not realize any amount. The maximum possible loss so ascertained is deducted from the capital balances of the partners in their profit and loss sharing ratio and the balance left in the capital account after deducting the maximum possible loss will be the amount payable to the partner.

If a partner’s share of maximum possible loss is more than the amount standing to the credit of his capital account, he should be treated as insolvent and his deficiency should be debited to the capital accounts of the solvent partners in the proportion of their capitals which stood on the dissolution date as stated under the Garner V/s. Murray Rule. The amount standing to the credit of the partners after debiting their share of maximum loss and their share of insolvent partners deficiency will be equal to the cash available for the distribution amongst the partners.

This process of maximum possible loss is repeated on each realisation till all the assets are disposed.

HOLDING COMPANIES

2011-10-07T09:05:00.000+05:00

Introduction

An important development of recent times in the business world is the combining of independent business units into a group or an economic unit. A company may acquire either the whole or majority of shares of another company so as to have a controlling interest in such a company or companies. The controlling company is known as Holding or Parent Company and the company controlled is known as Subsidiary Company.

Meaning of Holding Company

Section 4 of the Companies Act, 1956 defines a holding company. According to this section, one company can become the holding company of another in any of the following three ways:
1. By holding more than 50% of nominal value of the equity shares of the other company ie the holding company holds the majority of voting power in the subsidiary company.
2.By controlling the composition of the Board of Directors of the other company so that the holding company is able to appoint or remove the directors of the subsidiary company.
3. By controlling a holding company which controls another subsidiary or subsidiaries. For example, if B Ltd is a Subsidiary of C Ltd & C Ltd is a subsidiary of A Ltd then B Ltd is also deemed to be a subsidiary of A Ltd.

Purpose

The purpose of getting the control over another company may be to gain advantages such as:-
1. To eliminate of competition.
2. To enjoy the economies of large scale of production.
3. To achieve an assured market for the product of the company.
4. To ensure a smooth supply of raw materials.

Accounts

Under section 212 of the Companies Act, 1956 the following must be attached to the Balance Sheet of a holding company:
1. A copy of the Balance Sheet of the Subsidiary or Subsidiaries.
2. A copy of the Profit & Loss Account.
3. A copy of the Report of its Board of Directors.
4. A copy of the Report of the Auditors.
a. A statement of the holding company’s interest in the subsidiary.
b. The profits of the subsidiary so far as they concern the holding company.

Consolidation of Balance Sheet & Profit & Loss Account

In England, the holding company is required to present, in addition to its normal Balance Sheet, a Consolidated Balance Sheet covering the holding company & its subsidiaries & Consolidated Profit & Loss Account.
In India, the law does not compel a holding company to prepare a consolidated Balance Sheet & Profit & Loss Account. It is only for convenience that these statements are prepared.
Shareholders of a holding company are interested in knowing the affairs of the subsidiary company as part of their money given to the holding company is invested in subsidiary company. So it becomes safe for directors of the holding company to disclose to the shareholders of the holding company the extent to which they are entitled to the net assets of the subsidiary company. By way of consolidated Balance Sheet, the investments of the holding company in the subsidiary company are replaced by assets.
Consolidation of Balance Sheet & Profit & Loss Account means the combining of the separate Balance Sheet & the separate Profit & Loss Accounts of the Holding company & its subsidiary company or companies into Single Balance Sheet & a Single Profit & Loss Account.
The purpose of a Consolidated Balance Sheet & Profit & Loss Account is to show the Financial position & Operating results of a group consisting of a holding company & one or more subsidiaries. The consolidated statement are reports of notional accounting entity which subsist on the view that the holding & subsidiary companies are to be treated as one economic unit. The Financial position & Operating results reported through the consolidated statements are portrayed from the interest of the members of the holding company.

Wholly owned subsidiary company

When all the shares of a subsidiary company are held or owned by the holding company, the subsidiary company is known as a wholly owned subsidiary company.

Partly owned subsidiary company

When a majority of shares, but not all the shares of a subsidiary company are owned by the holding company, the subsidiary company is known as a partly owned subsidiary company.

Elimination of Investments

Where a holding company holds all the shares of a subsidiary or its assets belong to the holding company, which is also liable for all its debts. In other words, the investment by the holding company in the shares of subsidiary company represents excess of assets over liabilities or capital.
While preparing the consolidated balance sheet it is necessary to eliminate investment & its complement of the paid up capital of subsidiary company. Holding company’s investment which its subsidiary’s capital, which in turn is equal to the excess of assets over liabilities of the subsidiary, become internal items in the consolidated balance sheet. Hence, the two are cancelled against each other & substituted by the assets & liabilities of the subsidiary.

Pre Acquisition Period

Pre acquisition period is the period which falls on or before the date on which the shares of the subsidiary company are acquired by the holding company.

Post Acquisition Period

Post acquisition period is the which falls on after the date on which the shares of the subsidiary company are acquired by the holding company.

Profits

The profit of the subsidiary may be divide into
1.Capital profit
2.Revenue profit

Pre & Post Acquisition of Profits

a. General Reserve & Profit & Loss Account (credit balance) appearing in the books of the subsidiary company on the date of acquisition are treated as pre – acquisition profits. Since, they were not earned by the holding company in the ordinary course of business they are capitalized & set off against the purchase price of the shares.
b. A pre – acquisition loss appearing in the books of the subsidiary company is treated as a capital loss & debited to goodwill account.
c. Post acquisition profits or losses are those that are made or suffered by a subsidiary company after its shares have been purchased by the holding company. Revenue profits are added to the profits of the holding company if it acquires all the shares of the subsidiary company or to extent of its share holding in the subsidiary company. A post acquisition loss is treated as a revenue loss & deducted from the profits of the holding company.
d. If the date of acquisition is during the course of the year it becomes necessary to make an estimate of pre acquisition & post acquisition periods on time basis so as to apportion profits.

Cost of Control

In practice the holding company may pay more or less than the net worth of the subsidiary company. If the holding company feels that a company the shares of which it wants to acquire enjoys considerable reputation or exceptionary favourable factor it may pay more than the paid up value of shares or net assets.
The excess of acquisition price over net assets represents goodwill or cost of control. If on the other hand the acquisition price is less than the paid up value of shares the difference is again to the holding company & is known as capital reserve.

Minority Interest

When some of the shares in the subsidiary are held by outside shareholders they will be entitled to a proportionate share in the assets and liabilities of that company. The shares of the outsider in the subsidiary is called minority interest.
In the consolidated balance sheet all the assets and liabilities of the subsidiary are consolidated with assets and liabilities of the holding company and the minority interest representing the interest of the outsider in the subsidiary is shown as a liability.

Revaluation of Assets and Liabilities

At the time of acquiring shares in a subsidiary it is usual for the holding company to revalue the assets and liabilities of the subsidiary in order to arrive at a fair price to be paid for the shares.
If the altered values are not taken in the books of subsidiary it is necessary to bring the assets and liabilities into the consolidated balance sheet at the altered values. The difference between the book values and revised values should be adjusted after ascertaining the share of the outsiders.
Where the assets are shown in the consolidated balance sheet at the increase values depreciation provision should be increased and such increase should be deducted from capital reserve and minority interest.
If on the other hand the assets are brought in at reduced value depreciation value should be reduced and such reduction should be added to capital reserve and minority interest.

Treatment of Unrealized Profits

An unrealized inter-company profits exist where the company still holds (at the date of consolidation) stocks sold to it by the other company at a profit.
It is considered that only the holding company share of unrealized profit should be eliminated since for the minority shareholders the profit is nothing but a realized profit. Stock reserve is created whether the goods are sold by the holding company to the subsidiary and vice versa. The amount of unrealized profit (stock reserve) is deducted from the stock on the asset side and also the profit and loss account on the liability side of the consolidated balance sheet.

Example: A subsidiary sells goods to the holding company goods worth Rs 30,000 on which the subsidiary company made 20% profit on selling price (holding company share holds 3000 out of 4000 shares)

Unrealized profit = 20% of 30,000 = 6,000
Holding company’s share = ¾ *6,000 = 4,500.

Inter-Company Balances

1. Internal Debts
When loans are advanced to the subsidiary company by the holding and vice versa the same will appear on the asset side of the lending company’s balance sheet and on the liability side of the borrowing company’s balance sheet.
These being inter-company items they should be eliminated from the consolidated balance sheet.

2.Bills of Exchange
Bills drawn by the holding company on its subsidiary and vice versa appearing as bills payable in one balance sheet and bills recevieables on the other, cancel each other.
However bills discounted cannot get cancelled because of the liability in respect
of bills payable by the accepting company and a contingent liability in the company getting the bills discounted.
a. The company discounting the bill will include the proceeds of the bills in its bank balance and will appear as a note to show the contingent liability.
b. In the consolidated balance sheet the total of bills discounted appear as bills payable representing actual liabilities.

3.Debentures
Debentures issued by one of the companies in the group and held as investment
by another in the same group gets cancelled in the consolidated balance sheet and should be eliminated.

4.Contingent Liability
Contingent liability which may or may not materalise into liabilities are shown in the usual way by appending a footnote in the individual balance sheet. For the purpose of consolidation the treatment depends upon whether they are internal or external.
External contingent liability between the company in the group and a third party continue to appear by way footnote.
Internal contingent liability between holding and subsidiary are eliminated without being shown in the consolidated balance sheet.

Dividends paid by Subsidiary Company

(no adjustments need be made in the books of subsidiary company)

Books of Holding Company
1.if the dividends has been paid out of pre-acquisition profits the dividends should be credited by the holding company to investment account but not profit and loss account.
2.on the other hand if the holding company has credited the dividend to profit and loss account then the dividend should be debited to profit and loss account and credited to the investment account.
3.if the dividend has been paid by subsidiary company out of post - acquisition profits the same should be credited by the holding company to its profit and loss account. If it has already credited the dividend to profit and loss account then no adjustment is required.

Dividends declared by the subsidiary company but not paid will appear as a liability in the balance sheet of the subsidiary company. In the consolidated balance sheet the proportion of unpaid dividend attributable to the holding company will be deducted from liability of subsidiary company & the balance payable to the outside shareholders will appear as a liability of the group.
Any interim dividend paid during the accounting period by the subsidiary company to the holding company should be added to the balance of profit & loss account of the holding company & deducted from the balance of profit & loss account of the subsidiary company if the adjustments has not taken place.

Bonus Shares

When a company issues bonus shares out of its accumulated profits it is necessary to distinguish between pre & post acquisition profits utilized for this purpose. In case bonus shares are issued out of pre – acquisition profits no adjustments are necessary for preparing the consolidated balance sheet because in such a case the holding company’s share of such profits gets reduced & the paid up value of the shares held by it will increase. As such the amount of goodwill remains the same.
Bonus shares issued out of post acquisition profits will reduce the holding company’s share in revenue profits & increase the paid up value of the shares held. Consequently, the amount of goodwill gets reduced.

ENRON Scandal Summary

2011-09-26T07:15:00.000+05:00

An ENRON Scandal Summary

The ENRON Scandal is considered to be one of the most notorious within American history; an ENRON scandalsummary of events is considered by many historians and economists alike to have been an unofficial blueprint for a case study on White Collar Crime – White Collar Crime is defined as non-violent, financially-based criminal activity typically undertaken within a setting in which its participants retain advanced education with regard to employment that is considered to be prestigious. The following took place in the midst of the ENRON Scandal:

ENRON Scandal Summary: The Deregulation of ENRON

While the term regulation within a commercial and corporate setting typically applied to the government’s ability to regulate and authorize commercial activity and behavior with regard to individual businesses, the ENRON executives applied for – and were subsequently granted – government deregulation. As a result of this declaration of deregulation, ENRON executives were permitted to maintain agency over the earnings reports that were released to investors and employees alike.

This agency allowed for ENRON’s earning reports to be extremely skewed in nature – losses were not illustrated in their entirety, prompting more and more investments on the part of investors wishing to partake in what seemed like a profitable company

ENRON Scandal Summary: Misrepresentation

By misrepresenting earnings reports while continuing to enjoy the revenue provided by the investors not privy to the true financial condition of ENRON, the executives of ENRON embezzled funds funneling in from investments while reporting fraudulent earnings to those investors; this not only proliferated more investments from current stockholders, but also attracted new investors desiring the enjoy the apparent financial gains enjoyed by the ENRON corporation.

ENRON Scandal Summary: Fraudulent Energy Crisis

In the year 2000, subsequent to the discovery of the crimes listed in the above ENRON Scandal Summary, ENRON had announced that there was a critical circumstance within California with regard to the supply of Natural Gas. Due to the fact the ENRON was a then-widely respected corporation, the general populace were not wary about the validity of these statements.

However, upon retroactive review, many historians and economists suspect that the ENRON executives manufactured this crisis in preparation of the discovery of the fraud they had committed – although the executives of ENRON were enjoying the funds rendered from investments, the corporation itself was approaching bankruptcy.

ENRON Scandal Summary: Embezzlement

An ENRON Scandal Summary of the acts of Embezzlement undertaken by ENRON Executives may be defined as the criminal activity involving the unlawful and unethical attainment of monies and funding by employees; typically, funds that are embezzled are intended for company use in lieu of personal use. While the ENRON executives were pocketing the investment funds from unsuspecting investors, those funds were being stolen from the company, which resulted in the bankruptcy of the company.

ENRON Scandal Summary: Losses and Consequences

Due to the actions of the ENRON executives, the ENRON Company went bankrupt. The loss sustained by investors exceeded $70 billion. Furthermore, these actions cost both trustees and employees upwards of $2 billion; this total is considered to be a result of misappropriated investments, pension funds, stock options, and savings plans – as a result of the government regulation and the limited liability status of the ENRON Corporation, only a small amount of the money lost was ever returned.

Business SWOT Analysis - Threats is an Opportunity

2011-09-22T16:59:00.000+05:00

SWOT Analysis is an abbreviation for Strengths; Weaknesses; Opportunities and Threats. In the application of four factors of SWOT, proper understanding of the differences between them would bring about maximum benefits.

The Four SWOT Factors are also known as the Internal and External Factors. The Internal factors consist of Strengths and Weaknesses, whereas the External Factors consist of Opportunities and Threats.

In normal practice, the four SWOT factors can be clearly categorised based on the findings. Below are some examples:-

Strengths:

Strong financials
vast customer base
positive cash flow
Weaknesses:

long delivery lead time
high inventory
inconsistent quality
Opportunities

export incentives
acceptance of middle east countries
Good relations with trade ministry
Threats

escalating of cost
product substitition
computer virus attack by year 2000

As case study: Every Threats is an Opportunity ?
Every Threats is indeed an opportunity! Take for example: Before Y2K millennium, there was a global threat that the computer system may go burst on the 1st day of year 2000. This Threat was clearly beyond anyones' control, and it was inevitable. During that time, all organizations had 2 choices ie. Do something to overcome the computer threats or do nothing and wait for the worst to happen.

Most big and medium size organizations in Malaysia I contacted chosen to pay a high cost to work on an "enhanced" computer system that supposedly can overcome the computer threats. How did this Y2K threats taken as an opportunity? In fact, those organizations who did something to the computer system took the opportunity to upgrade or enhance their computer system to improve their inventory system while overcome the possible computer threats.

With this example of Threats, you can actually flip the Threats the other way round and turn it into an Opportunity.

7 Important Principles of Total Quality Management

2011-09-17T08:02:00.000+05:00

TQM is a set of management practices throughout the organization, geared to ensure the organization consistently meets or exceeds customer requirements. TQM places strong focus on process measurement and controls as means of continuous improvement.

Before reading more about TQM, it might be helpful to quickly review the major forms of quality management in an organization.

Total Quality Management (TQM) is an approach that organizations use to improve their internal processes and increase customer satisfaction. When it is properly implemented, this style of management can lead to decreased costs related to corrective or preventative maintenance, better overall performance, and an increased number of happy and loyal customers.

However, TQM is not something that happens overnight. While there are a number of software solutions that will help organizations quickly start to implement a quality management system, there are some underlying philosophies that the company must integrate throughout every department of the company and at every level of management. Whatever other resources you use, you should adopt these seven important principles of Total Quality Management as a foundation for all your activities.

1. Quality can and must be managed

Many companies have wallowed in a repetitive cycle of chaos and customer complaints. They believe that their operations are simply too large to effectively manage the level of quality. The first step in the TQM process, then, is to realize there is a problem and that it can be controlled.

2. Processes, not people, are the problem

If your process is causing problems, it won’t matter how many times you hire new employees or how many training sessions you put them through. Correct the process and then train your people on these new procedures.

3. Don’t treat symptoms, look for the cure

If you just patch over the underlying problems in the process, you will never be able to fully reach your potential. If, for example, your shipping department is falling behind, you may find that it is because of holdups in manufacturing. Go for the source to correct the problem.

4. Every employee is responsible for quality

Everyone in the company, from the workers on the line to the upper management, must realize that they have an important part to play in ensuring high levels of quality in their products and services. Everyone has a customer to delight, and they must all step up and take responsibility for them.

5. Quality must be measurable

A quality management system is only effective when you can quantify the results. You need to see how the process is implemented and if it is having the desired effect. This will help you set your goals for the future and ensure that every department is working toward the same result.

6. Quality improvements must be continuous

Total Quality Management is not something that can be done once and then forgotten. It’s not a management “phase” that will end after a problem has been corrected. Real improvements must occur frequently and continually in order to increase customer satisfaction and loyalty.

7. Quality is a long-term investment

Quality management is not a quick fix. You can purchase QMS software that will help you get things started, but you should understand that real results won’t occur immediately. TQM is a long-term investment, and it is designed to help you find long-term success.

Before you start looking for any kind of quality management software, it is important to make sure you are capable of implementing these fundamental principles throughout the company. This kind of management style can be a huge culture change in some companies, and sometimes the shift can come with some growing pains, but if you build on a foundation of quality principles, you will be equipped to make this change and start working toward real long-term success.

RISK ANALYSIS TECHNIQUES

2011-09-12T08:30:00.000+05:00

The risk analysis process provides the foundation for the entire recovery planning effort

There may be some terminology and definition differences related to risk analysis, risk assessment and business impact analysis. Although several definitions are possible and can overlap, for purposes of this article, please consider the following definitions:
•A risk analysis involves identifying the most probable threats to an organization and analyzing the related vulnerabilities of the organization to these threats.
•A risk assessment involves evaluating existing physical and environmental security and controls, and assessing their adequacy relative to the potential threats of the organization.
•A business impact analysis involves identifying the critical business functions within the organization and determining the impact of not performing the business function beyond the maximum acceptable outage. Types of criteria that can be used to evaluate the impact include: customer service, internal operations, legal/statutory and financial.
Most businesses depend heavily on technology and automated systems, and their disruption for even a few days could cause severe financial loss and threaten survival. The continued operations of an organization depend on management’s awareness of potential disasters, their ability to develop a plan to minimize disruptions of mission critical functions, and the capability to recover operations expediently and successfully. The risk analysis process provides the foundation for the entire recovery planning effort.
A primary objective of business recovery planning is to protect the organization in the event that all or part of its operations and/or computer services are rendered unusable. Each functional area of the organization should be analyzed to determine the potential risk and impact related to various disaster threats

RISK ANALYSIS PROCESS

Regardless of the prevention techniques employed, possible threats that could arise inside or outside the organization need to be assessed. Although the exact nature of potential disasters or their resulting consequences are difficult to determine, it is beneficial to perform a comprehensive risk assessment of all threats that can realistically occur to the organization. Regardless of the type of threat, the goals of business recovery planning are to ensure the safety of customers, employees and other personnel during and following a disaster.
The relative probability of a disaster occurring should be determined. Items to consider in determining the probability of a specific disaster should include, but not be limited to: geographic location, topography of the area, proximity to major sources of power, bodies of water and airports, degree of accessibility to facilities within the organization, history of local utility companies in providing uninterrupted services, history of the area’s susceptibility to natural threats, proximity to major highways which transport hazardous waste and combustible products.
Potential exposures may be classified as natural, technical, or human threats. Examples include:
Natural Threats: internal flooding, external flooding, internal fire, external fire, seismic activity, high winds, snow and ice storms, volcanic eruption, tornado, hurricane, epidemic, tidal wave, typhoon.
Technical Threats: power failure/fluctuation, heating, ventilation or air conditioning failure, malfunction or failure of CPU, failure of system software, failure of application software, telecommunications failure, gas leaks, communications failure, nuclear fallout.
Human Threats: robbery, bomb threats, embezzlement, extortion, burglary, vandalism, terrorism, civil disorder, chemical spill, sabotage, explosion, war, biological contamination, radiation contamination, hazardous waste, vehicle crash, airport proximity, work stoppage (Internal/External), computer crime.
All locations and facilities should be included in the risk analysis. Rather than attempting to determine exact probabilities of each disaster, a general relational rating system of high, medium and low can be used initially to identify the probability of the threat occurring.
The risk analysis also should determine the impact of each type of potential threat on various functions or departments within the organization. The functions or departments will vary by type of organization.
The planning process should identify and measure the likelihood of all potential risks and the impact on the organization if that threat occurred. To do this, each department should be analyzed separately. Although the main computer system may be the single greatest risk, it is not the only important concern. Even in the most automated organizations, some departments may not be computerized or automated at all. In fully automated departments, important records remain outside the system, such as legal files, PC data, software stored on diskettes, or supporting documentation for data entry.
The impact can be rated as: 0= No impact or interruption in operations, 1= Noticeable impact, interruption in operations for up to 8 hours, 2= Damage to equipment and/or facilities, interruption in operations for 8 - 48 hours, 3= Major damage to the equipment and/or facilities, interruption in operations for more than 48 hours. All main office and/or computer center functions must be relocated.
Certain assumptions may be necessary to uniformly apply ratings to each potential threat. Following are typical assumptions that can be used during the risk assessment process:
1. Although impact ratings could range between 1 and 3 for any facility given a specific set of circumstances, ratings applied should reflect anticipated, likely or expected impact on each area.
2. Each potential threat should be assumed to be “localized” to the facility being rated.
3. Although one potential threat could lead to another potential threat (e.g., a hurricane could spawn tornados), no domino effect should be assumed.
4. If the result of the threat would not warrant movement to an alternate site(s), the impact should be rated no higher than a “2.”
5. The risk assessment should be performed by facility.
To measure the potential risks, a weighted point rating system can be used. Each level of probability can be assigned points as follows:

Probability Points
High 10
Medium 5
Low 1

To obtain a weighted risk rating, probability points should be multiplied by the highest impact rating for each facility. For example, if the probability of hurricanes is high (10 points) and the impact rating to a facility is “3” (indicating that a move to alternate facilities would be required), then the weighted risk factor is 30 (10 x 3). Based on this rating method, threats that pose the greatest risk (e.g., 15 points and above) can be identified.
Considerations in analyzing risk include:
1. Investigating the frequency of particular types of disasters (often versus seldom).

2. Determining the degree of predictability of the disaster.

3. Analyzing the speed of onset of the disaster (sudden versus gradual).

4. Determining the amount of forewarning associated with the disaster.

5. Estimating the duration of the disaster.

6. Considering the impact of a disaster based on two scenarios;
a. Vital records are destroyed
b. Vital records are not destroyed.

7. Identifying the consequences of a disaster, such as;
a. Personnel availability
b. Personal injuries
c. Loss of operating capability
d. Loss of assets
e. Facility damage.

8. Determining the existing and required redundancy levels throughout the organization to accommodate critical systems and functions, including;
a. Hardware
b. Information
c. Communication
d. Personnel
e. Services.

9. Estimating potential dollar loss;
a. Increased operating costs
b. Loss of business opportunities
c. Loss of financial management capa- bility
d. Loss of assets
e. Negative media coverage
f. Loss of stockholder confidence
g. Loss of goodwill
h. Loss of income
i. Loss of competitive edge
j. Legal actions.

10. Estimating potential losses for each business function based on the financial and service impact, and the length of time the organization can operate without this business function. The impact of a disaster related to a business function depends on the type of outage that occurs and the time that elapses before normal operations can be resumed.

11. Determining the cost of contingency planning.

DISASTER PREVENTION

Because a goal of business recovery planning is to ensure the safety of personnel and assets during and following a disaster, a critical aspect of the risk analysis process is to identify the preparedness and preventive measures in place at any point in time. Once the potential areas of high exposure to the organization are identified, additional preventative measures can be considered for implementation.
Disaster prevention and preparedness begins at the top of an organization. The attitude of senior management toward security and prevention should permeate the entire organization. Therefore, management’s support of disaster planning can focus attention on good security and prevention techniques and better prepare the organization for the unwelcome and unwanted.
Disaster prevention techniques include two categories: procedural prevention and physical prevention.
Procedural prevention relates to activities performed on a day-to-day, month-to-month, or annual basis, relating to security and recovery. Procedural prevention begins with assigning responsibility for overall security of the organization to an individual with adequate competence and authority to meet the challenges. The objective of procedural prevention is to define activities necessary to prevent various types of disasters and ensure that these activities are performed regularly.
Physical prevention and preparedness for disaster begins when a site is constructed. It includes special requirements for building construction, as well as fire protection for various equipment components. Special considerations include: computer area, fire detection and extinguishing systems, record(s) protection, air conditioning, heating and ventilation, electrical supply and UPS systems, emergency procedures, vault storage area(s), archival systems

SECURITY AND CONTROL CONSIDERATIONS

Security and controls refer to all the measures adopted within an organization to safeguard assets, ensure the accuracy and reliability of records, and encourage operational efficiency and adherence to prescribed procedures. The system of internal controls also includes the measures adopted to safeguard the computer system.
The nature of internal controls is such that certain control procedures are necessary for a proper execution of other control procedures. This interdependence of control procedures may be significant because certain control objectives that appear to have been achieved may, in fact, not have been achieved because of weaknesses in other control procedures upon which they depend.
Concern over this interdependence of control procedures may be greater with a computerized system than with a manual system because computer operations often have a greater concentration of functions, and certain manual control procedures may depend on automated control procedures, even though that dependence is not readily apparent. Adequate computer internal controls are a vital aspect of an automated system.
Security is an increasing concern because computer systems are increasingly complex. Particular security concerns result from the proliferation of PCs, local area networking, and on-line systems that allow more access to the mainframe and departmental computers. Modern technology provides computer thieves with powerful new electronic safecracking tools.
Computer internal controls are especially important because computer processing can circumvent traditional security and control techniques. There are two types of computer control techniques: (1) general controls that affect all computer systems, and (2) application controls that are unique to specific applications.
Important areas of concern related to general computer internal controls include: organization controls, systems development and maintenance controls, documentation controls, access controls, data and procedural controls, physical security, password security systems, communications security.
Application controls are security techniques that are unique to a specific computer application system. Application controls are classified as: input controls, processing controls, output controls.

INSURANCE CONSIDERATIONS

Adequate insurance coverage is a key consideration when developing a business recovery plan and performing a risk analysis. Having a disaster plan and testing it regularly may not, in itself, lower insurance rates in all circumstances.
However, a good plan can reduce risks and address many concerns of the underwriter, in addition to affecting the cost or availability of the insurance.
Most insurance agencies specializing in business interruption coverage can provide the organization with an estimate of anticipated business interruption costs. Many organizations that have experienced a disaster indicate that their costs were significantly higher than expected in sustaining temporary operations during recovery.
Most business interruption coverages include lost revenues following a disaster. Extra expense coverage includes all additional expenses until normal operations can be resumed. However, coverages differ in the definition of resumption of services. As a part of the risk analysis, these coverages should be discussed in detail with the insurer to determine their adequacy.
To provide adequate proof of loss to an insurance company, the organization may need to contract with a public adjuster who may charge between three and ten percent of recovered assets for the adjustment fee. Asset records become extremely important as the adjustment process takes place.
Types of insurance coverages to be considered may include: computer hardware replacement, extra expense coverage, business interruption coverage, valuable paper and records coverage, errors and omissions coverage, fidelity coverage, media transportation coverage.
With estimates of the costs of these coverages, management can make reasonable decisions on the type and amount of insurance to carry.
These estimates also allow management to determine to what extent the organization should self-insure against certain losses.

RECORDS

Records can be classified in one of the three following categories: vital records, important records, and useful records.
Vital records are irreplaceable. Important records can be obtained or reproduced at considerable expense and only after considerable delay. Useful records would cause inconvenience if lost, but can be replaced without considerable expense.
Vital and important records should be duplicated and stored in an area protected from fire or its effects.
Records kept in the computer room should be minimized and should be stored in closed metal files or cabinets. Records stored outside the computer room should be in fire-resistant file cabinets with fire resistance of at least two hours.
Protection of records also depends on the particular threat that is present. An important consideration is the speed of onset and the amount of time available to act. This could range from gathering papers hastily and exiting quickly to an orderly securing of documents in a vault. Identifying records and information is most critical for ensuring the continuity of operations.
A systematic approach to records management is also an important part of the risk analysis process and business recovery planning. Additional benefits include: reduced storage costs, expedited service, federal and state statutory compliance.
Records should not be retained only as proof of financial transactions, but also to verify compliance with legal and statutory requirements. In addition, businesses must satisfy retention requirements as an organization and employer. These records are used for independent examination and verification of sound business practices.
Federal and state requirements for records retention must be analyzed. Each organization should have its legal counsel approve its own retention schedule. As well as retaining records, the organization should be aware of the specific record salvage procedures to follow for different types of media after a disaster.

CONCLUSION

The risk analysis process is an important aspect of business recovery planning. The probability of a disaster occurring in an organization is highly uncertain. Organizations should also develop written, comprehensive business recovery plans that address all the critical operations and functions of the business.
The plan should include documented and tested procedures, which, if followed, will ensure the ongoing availability of critical resources and continuity of operations.
A business recovery plan, however, is similar to liability insurance. It provides a certain level of comfort in knowing that if a major catastrophe occurs, it will not result in financial disaster for the organization.
Insurance, by itself, does not provide the means to ensure continuity of the organization’s operations, and may not compensate for the incalculable loss of business during the interruption or the business that never returns .

Moving toward zero inventory

2011-09-09T07:24:00.000+05:00

With the widespread adoption of technologically advanced planning software and supply-chain communications, the zero-inventory door has opened wider than ever. So why are many distributors and manufacturers still finding it difficult to reach their inventory-management goals?

The concept of zero inventory has been around since the 1980s, and it's simple: Pare your inventory to a minimum and boost your profit margins by eliminating the need for warehousing and other associated expenses. Recent technological advances have made it easier (at least in theory) to execute a zero-inventory strategy.

At the fore is the development and widespread adoption of nimble, sophisticated software systems such as manufacturing resource planning (MRP II), enterprise resource planning (ERP), and advanced planning and scheduling (APS) systems, as well as dedicated supply-chain management software systems. These systems offer manufacturers greater functionality. For example, they can calculate resource-limited schedules, track orders of raw materials and monitor shop-floor production. They also can elevate both the visibility and transparency of internal order-fulfillment and manufacturing processes.

A second key technological advance - the development of more-robust security systems - also enables organizations to provide a high level of transparency and insight into inventory-management processes. Manufacturers can grant suppliers access to their planning software, typically via the Internet, with confidence that only appropriate, designated information will be viewed.

As a result of these developments, when a customer places an order, suppliers can immediately see that the manufacturer needs additional raw materials. Or, if a customer cancels an order, suppliers can immediately stop their activity. This increased level of responsiveness and awareness creates better cash flow and increased profitability. It also fosters less adversarial, more partnership-oriented relationships between suppliers and manufacturers. As a result of these technological advances, manufacturers can be more responsive to both their suppliers and their customers - that is, of course, if they follow through with everything else it takes to effectively move toward zero inventory.

Zero inventory: Pie in the sky?
Even after embracing MRP, ERP, APS or other technologies, many companies haven't even scratched the surface when it comes to reaching zero inventory, inventory-management experts agree. That maybe because the concept of zero inventory is an unreachable, theoretical ideal.

Steven A. Melnyk, professor of production and operations management in the Eli Broad Graduate School of Management at Michigan State University, prefers to speak of "lean" rather than "zero" inventory. This shift in nomenclature is just the beginning of a systematic approach that Melnyk says any business can use to reduce inventory in a productive, ong-lasting way.

"Inventory is not the problem; it is a symptom," says Melnyk, a widely recognized authority and consultant on supply-chain management. "Inventory is the result of waste and variance. The way to reduce inventory is simple: You get rid of waste and you reduce variance."

Such an approach sounds basic, but many companies aren't willing to do what it takes.

"Instead, they jump around from program to program, trying to slash inventory here and there, like a dieter trying to lose weight," Melnyk says. "Just as a dieter can't realistically expect to stop eating for a day, jump on a scale, and magically hit his weight-loss goals, a company can't take a few superficial steps and significantly reduce inventory."

Indeed, experts agree that most companies striving for zero inventory must fundamentally change their manufacturing and handling processes. That requires going well beyond simply investing in the latest software to making key operational changes in order to make real progress.

Low-hanging fruit
"If you attack from the right perspective, there's lots of stuff you can do to reduce inventory," Melnyk says. "This is low-hanging fruit."

Melnyk offers the following tips to get started slashing inventory:

Revisit your customer base. Ensure you understand who your critical customers are and what they value. Then communicate that data throughout your organization so your employees can focus on creating value for key customers instead of trying to satisfy everyone - an unfocused approach that can lead to unnecessary inventory.

Examine your processes and establish a baseline. Before you can address problems,you have to recognize them. Consider the surprising experience of an engine manufacturer. An internal audit revealed that one component of the company's engines stayed in its system for 1,500 hours, traveled four miles, was touched by 106 people and passed through 122 steps - of which only 27 changed or added value to the component.

Identify your company's critical processes. Focus on critical processes to quickly identify which parts of your overall system most significantly affect inventory, then begin to make necessary changes. Critical processes include bottlenecks or constraints in your system, processes visible to your customers (your customer will judge you on the basis of process), unique core competencies or skills, the process withthe highest amount of variance, or the process that requires the most resources.

One proven strategy for improving inventory management is a "kaizen event." In a kaizen event, a small team gathers for perhaps several days to focus exclusively on revamping a process. By changing the process, you can reduce the need for inventory. Once you improve one inventory-management process, you can move on to another.

Staying focused
Like most management efforts, controlling inventory requires ongoing commitment.

"Really successful companies understand the basics and master them," Melnyk says. "They keep doing the simple things right, all the time. They understand that you need inventory - you can't ever get away from it. But you have to manage it intelligently."

Experts recommend the following tips to distributors and manufacturers zeroing in on inventory management:

Develop a lean infrastructure. Establish a program, place someone in charge of it and be sure senior managers support it.

Recognize and reward successes. Publicize your successes and the people who helped achieve them to underscore their importance.

Share information. If some parts of your organization become more adept than others at minimizing inventories, they should spread best practices across the company.

Be patient. Give employees enough time to install, learn and become proficient with new inventory-management systems.

Zero inventory may be wishful thinking, but embracing new technology and processes to manage your inventory more efficiently could move you much closer to that ideal.

EID MUBARAK TO ALL

2011-08-30T21:13:00.001+05:00

Accounting scandals

2011-08-30T04:50:00.002+05:00

Accounting scandals, or corporate accounting scandals, are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations. Such misdeeds typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the cooperation of officials in other corporations or affiliates.
In public companies, this type of "creative accounting" can amount to fraud and investigations are typically launched by government oversight agencies, such as the Securities and Exchange Commission (SEC) in the United States.
Scandals are often only the 'tip of the iceberg'. They represent the visible catastrophic failures. Note that much abuse can be completely legal or quasi legal.
For example, in the domain of privatization and takeovers :
It is fairly easy for a top executive to reduce the price of his/her company's stock - due to information asymmetry. The executive can accelerate accounting of expected expenses, delay accounting of expected revenue, engage in off balance sheet transactions to make the company's profitability appear temporarily poorer, or simply promote and report severely conservative (eg. pessimistic) estimates of future earnings. Such seemingly adverse earnings news will be likely to (at least temporarily) reduce share price. (This is again due to information asymmetries since it is more common for top executives to do everything they can to window dress their company's earnings forecasts). There are typically very few legal risks to being 'too conservative' in one's accounting and earnings estimates.
A reduced share price makes a company an easier takeover target. When the company gets bought out (or taken private) - at a dramatically lower price - the takeover artist gains a windfall from the former top executive's actions to surreptitiously reduce share price. This can represent tens of billions of dollars (questionably) transferred from previous shareholders to the takeover artist. The former top executive is then rewarded with a golden handshake for presiding over the firesale that can sometimes be in the hundreds of millions of dollars for one or two years of work. (This is nevertheless an excellent bargain for the takeover artist, who will tend to benefit from developing a reputation of being very generous to parting top executives).
Similar issues occur when a publicly held asset or non-profit organization undergoes privatization. Top executives often reap tremendous monetary benefits when a government owned or non-profit entity is sold to private hands. Just as in the example above, they can facilitate this process by making the entity appear to be in financial crisis - this reduces the sale price (to the profit of the purchaser), and makes non-profits and governments more likely to sell. It can also contribute to a public perception that private entities are more efficiently run reinforcing the political will to sell off public assets. Again, due to asymmetric information, policy makers and the general public see a government owned firm that was a financial 'disaster' - miraculously turned around by the private sector (and typically resold) within a few years.

Notable outcomes

The Enron scandal turned in the indictment and criminal conviction of one of the Big Five auditor Arthur Andersen on June 15, 2002. Although the conviction was overturned on May 31, 2005 by the Supreme Court of the United States, the firm ceased performing audits and is currently unwinding its business operations.
On July 9, 2002 George W. Bush gave a speech about recent accounting scandals that had been uncovered. In spite of its stern tone, the speech did not focus on establishing new policy, but instead focused on actually enforcing current laws, which include holding CEOs and directors personally responsible for accountancy fraud.
In July, 2002, WorldCom filed for bankruptcy protection, in what was considered the largest corporate insolvency ever at the time.
These scandals reignited the debate over the relative merits of US GAAP, which takes a "rules-based" approach to accounting, versus International Accounting Standards and UK GAAP, which takes a "principles-based" approach. The Financial Accounting Standards Board announced that it intends to introduce more principles-based standards. More radical means of accounting reform have been proposed, but so far have very little support. The debate itself, however, overlooks the difficulties of classifying any system of knowledge, including accounting, as rules-based or principles-based.This also led to the establishment of Sarbanes-Oxley.
On a lighter note, the 2002 Ig Nobel Prize in Economics went to the CEOs of those companies involved in the corporate accounting scandals of that year for "adapting the mathematical concept of imaginary numbers for use in the business world".
In 2003, Nortel made a big contribution to this list of scandals by incorrectly reporting a one cent per share earnings directly after their massive layoff period. They used this money to pay the top 43 managers of the company. The SEC and the Ontario securities commission eventually settled civil action with Nortel. However, a separate civil action will be taken up against top Nortel executives including Dunn, Beatty, Gollogly, Pahapill and Hamilton. These proceedings have been postponed pending criminal proceedings in Canada.
In 2005, after a scandal on insurance and mutual funds the year before, AIG was investigated for accounting fraud. The company already lost over 45 billion US dollars worth of market capitalisation because of the scandal. Investigations also discovered over a billion US dollars worth of errors in accounting transactions. The New York Attorney General's investigation led to a $1.6 billion fine for AIG and criminal charges for some of its executives. CEO Maurice R. "Hank" Greenberg was forced to step down and is still fighting civil charges being pursued by New York state.

B.COM: MARKET TERMINOLOGIES

2011-08-26T22:15:00.001+05:00

B.COM: MARKET TERMINOLOGIES

2011-08-26T22:15:00.000+05:00

B.COM: MARKET TERMINOLOGIES

Khula’ is not regarded as a talaaq even if the word talaaq is used

2011-08-26T12:23:00.000+05:00

Khula’ is not regarded as a talaaq even if the word talaaq is used
(English)
لا يعد الخلع طلاقا ولو مع التلفظ بالطلاق
( إنجليزي )

Sheikh Muhammad Salih Al-Munajjid
محمد صالح المنجد

http://www.islamqa.com

“My question is regarding khula. I have gotten khula from my husband in front of shaikh and two witnesses. After 6 months we decided to get back together and got married with a new marriage contract. Then again after about two years I asked for khula and it has been about 10 months now since then. We do have one child together, inshallah his dad told me he promises Allah and me that he wouldn't give me a hard time like he did before. So for Allah's sake and my son I am willing to marry him again. My question is since I had khula done twice (this would be our "third" marriage contract if we got married again). I was just wondering if it’s OK in Islam for us to get married again. Does this count as three divorces? if not does it count as divorce at all? Please advise us as to what has to be done”.
Praise be to Allaah.
Khula’ is not regarded as a talaaq even if the word talaaq is used, according to the more correct opinion.
This may be explained as follows:
1. If khula’ takes place without using the word talaaq, and is not intended as a talaaq, then it is an annulment (of the marriage contract) according to a number of scholars. This is the view of al-Shaafa’i in his old madhhab, and it is the view of the Hanbalis. The fact that it is an annulment means that it is not counted as a talaaq. The one who separated from his wife by khula’ twice may go back to her with a new marriage contract, and it is not counted as a talaaq at all.
An example of that is if the husband said, “I separated from my wife by khula’ in return for such-and-such an amount of money” or “I annulled her marriage in return for such and such.”
2. But if the khula’ involved the word talaaq, such as saying “I divorce (talaqtu) my wife in return for such-and-such an amount of money”, then it is a talaaq according to the majority of scholars. See al-Mawsoo'ah al-Fiqhiyyah (19/237).
Some of the scholars are of the view that this is also an annulment and is not counted as a talaaq, even if the word talaaq is used. This was narrated from Ibn ‘Abbaas (may Allaah be pleased with him) and was the view favoured by Shaikh al-Islam Ibn Taymiyah, who said: It is the stated view of Imam Ahmad and his oldest companions. See: al-Insaaf (8/393).
Shaikh Ibn ‘Uthaymeen (may Allaah have mercy on him) said: But the more correct view is that khula’ is not talaaq, even if the actual word talaaq is used. This is indicated by the Holy Qur’aan. Allaah, may He be glorified and exalted, said (interpretation of the meaning):
“The divorce is twice, after that, either you retain her on reasonable terms or release her with kindness…” [al-Baqarah 2:229] i.e., within the first two times, either keep her or let her go, it is up to you.
“… And it is not lawful for you (men) to take back (from your wives) any of your Mahr (bridal-money given by the husband to his wife at the time of marriage) which you have given them, except when both parties fear that they would be unable to keep the limits ordained by Allaah (e.g. to deal with each other on a fair basis). Then if you fear that they would not be able to keep the limits ordained by Allaah, then there is no sin on either of them if she gives back (the Mahr or a part of it) for her Al-Khul‘(divorce)” [al-Baqarah 2:229]
So this is a separation on the basis of giving back (all or part of the mahr). Then Allaah, may He be glorified and exalted, says:
“And if he has divorced her (the third time), then she is not lawful unto him thereafter until she has married another husband…” [al-Baqarah 2:230].
If we count khula’ as a talaaq, then these words “And if he has divorced her…” would refer to a fourth talaaq, and this is contrary to scholarly consensus. The words “If he has divorced her…” mean a third divorce, “...then she is not lawful unto him thereafter until she has married another husband…”
The evidence in the verse is clear. Hence Ibn ‘Abbaas (may Allaah be pleased with him) was of the view that any separation in which compensation is paid is khula’ and not talaaq, even if the word talaaq is used. This is the correct view. End quote from al-Sharh al-Mumti’ (12/467-470).
And he (may Allaah have mercy on him) said:
Every wording that points to a separation in return for compensation is khula’, even if the word talaaq is used, such as saying for example, “I divorce (talaqtu) my wife in return for compensation of one thousand riyals.” We say: this is khula’, and this is what was narrated from Ibn ‘Abbaas (may Allaah have mercy on him), that everything in which compensation is involved is not talaaq. ‘Abd-Allaah ibn al-Imam Ahmad said: My father thought the same about khula’ as Ibn ‘Abbaas (may Allaah be pleased with him) did, i.e., it is an annulment, no matter what wording is used, and it does not count as a talaaq.
An important issue stems from this: if a man divorces his wife (talaaq) on two separate occasions, then khula’ takes place using the word talaaq, then according to the view of those who say that khula’ using the word talaaq counts as talaaq, she is irrevocably divorced from him, and she is not permissible for him until she has been married to someone else.
According to the view of those who say that khula’ is an annulment even if the word talaaq is used, she becomes permissible for him with a new marriage contract even during the ‘iddah. This view is more correct.
But nevertheless we advise those who write down the khula’ not to use the word talaaq when recording it, rather they should say “he separated from his wife by khula’ in return for compensation of such and such value”, because most judges in our country, and I think even in other countries, believe that if khula’ occurs using the word talaaq, it is counted as talaaq, and this may be detrimental to the woman, because if it is a final talaaq she will become irrevocably divorced, and if it is not the final talaaq it will still be counted against him. End quote from al-Sharh al-Mumti’ (12/450).
Based on this, if you want to go back to your husband, then it is essential to have a new marriage contract and no talaaq is counted against you.
And Allaah knows best.

Evolution of Tax Culture in Pakistan

2011-08-26T11:44:00.001+05:00

It was more than 70 years ago that Schumpeter used the term “Tax Culture” in his celebrated article “Economic and Sociology of the Income Tax”.
Schumpeterian view point is that “Tax Culture is an expression of human spirituality and creativity”. Some work on “Tax Culture” can also be found as undertaken by Armin Spitaler (1954) and he does have his own perspective while defining this term. Similarly Tax Culture can be found with the writings of other economists like Pausch (1992), Hartmann and Harbner (1997).

According to Spitalar’s insight “Taxation is influenced by economic, social, cultural, historical, geographical, psychological and further differences prevailing in the individual countries and their societies”. Alfons Pausch understands the Tax Culture of the country as being connected with the personalities, determining the evolution of tax system.

However, the most authoritative work on this term and topic in recent times has come to limelight of a German Scholar, Birger Nerre of University of Hamburg. According to him, the topic of Tax Culture appears precisely at the intersection of the disciplines, economics, sociology and history. In this article as surfaced in the year 2001 naming “The Concept of Tax Culture”, he defines and elaborates the term of Tax Culture by saying: “A country-specific tax culture is the entirety of all relevant formal and informal institutions connected with the national tax system and its practical execution, which are historically embedded within the country’s culture, including the dependencies and ties caused by their ongoing interaction”.

The phenomenon of Tax doesn’t exist in vacuum or otherwise it isn’t something that is abstract. This is rather very much concrete which is rooted in the very fiber of the society or what Birger Nerre calls it that there is an embeddedness of Tax Culture. Moreover, the Tax Culture of a country or community isn’t the outcome of any single factor and the definitions which outlined such restrictive and narrow approaches have worn out over time. Now this has commonly shared understanding among the browsers of this topic that Tax Culture is the sum total emerging out of: 1. Tradition of Taxation, 2. Interaction of Actors including Politicians, Academics, Tax Officials, Taxpayers, Tax Experts and 3. The Cultural Values like “Honesty, “Justice”, and “Sense of Duty” etc.

This three pronged agglomeration tends to make out the tax culture of a particular country and this interplay has been vividly explained by Mr. Birger Nerre in the instant figure representation. The arrows indicate interaction between different groups of players as well as between the members of one and the same group. The author of this representation has shown the direct interaction among all the groups / actors except between the “taxpayers” and “academics” on the analogy that he was not sure about the existence of any (Direct) relationship between these two groups. However, with particular social milieu of Pakistan, you would concur with my observation that the role of “tax experts” is relatively more crucial and pivotal demanding more solicitation as without their active participation, concurrence and authentication, any formulation of opinion or code and any execution of programme of action would doom its failure.

While talking about “tax”, we are of course divulging on something which is intensely “disliked”. This is not only the case with Pakistan and Pakistani Taxpayers but this syndrome is very much there in rest of the parts of the world including country like U.S. While reading the paper on the “New Hope for the Future Delivering on Pakistan’s Economic Reform” this “disliking” of the tax by the Americans was even acknowledged and conceded by Mr. Thomas W. Simons, Jr. Former U.S. Ambassador to Pakistan.

Georgi Boss (1999) Minister for Taxes & Duties of the Russian Federation remarked that “There is not any country where people are happy to pay taxes but they do pay taxes because of their tax culture”. However Economic strategy Minister German Graf (2000) is very apt when he states that he fully understands that “a tax culture can’t be inculcated in one year”.

Going into the inner causation of this phenomenon, Dr. Ignacio Ruiz Jarabo, in his paper presented at the 33rd General Assembly of Inter – American Centre of Tax Administration (CIAT), explicitly stated that there are factors that render difficult the social acceptance of the tax system, beginning with the fact that the relationships between the tax administration and the citizen are marked with a certain level of tension and conflict.

According to him, this marked tension and conflict are due to the fact that taxes are economic burdens of an obligatory nature from which the taxpayer does not drive a direct, personal and immediate benefit.

At this juncture, I would like to borrow the words of Mr. Alain Zenner, Government Commissioner of Belgium who’s very frank and direct in saying “… the tax administrations too often give me the impression as if they would only have one important task and that is: taxation ! … taxation is often seen as a divine mission, an ideal that would justify all means. (However) … this can last no longer! The mission of the tax administration is not to tax at all costs, but to recover the fair tax. From there the need to redefine the values that should be complied with by the tax administration in the exercise of its duties.”

Before proceeding further, this would be advantageous to have a cursory analysis of historical developments in to the formal efforts for the codification of the taxation laws. First of all, I would like to put the case of Income Tax and 1860 is the crucial year when the colonial forces promulgated the first Income Tax Act. This was very much patterned after the scheme of taxation observed in United Kingdom; however, talking in the perspective of sub-continent, this was a deliberate effort to end the budgetary deficit which followed the war of independence of 1857.

This very Act lasted five years when this had to be completely withdrawn followed by a Vacuum period of two years when there was no Income Tax Law in force. However, this was re-enforced with a new title of The License Tax Act 1867 and this would be for the interest of the participants that income earned more than Rs. 200 per annum was made taxable at the rate of 2 per cent. Subsequently developments gave rise to a new Income Tax Act in 1886 which in turn had to give way to the substituted Income Tax Act of 1918 and during the intervening period only one major amendment was made in the year 1903.

Certain difficulties emanated out of this latest legislation, where upon Income Tax Act 1922 was promulgated and the same was adopted by our country after winning independence in the year 1947. This very Act remained very much in the field to be replaced only by the Income Tax Ordinance 1979. Between 1922 and 1979, as many as 71 amendment acts were passed by the legislators. Here comes the most controversial code of Income Tax Ordinance 2001 and this is very unique feature of this piece of legislation that before the date of its enforcement, the government made as many as 322 changes in it through Finance Ordinance 2002. The controversies over it run through the areas of typographical errors, drafting blunders, legal lacunas, inconsistencies, conceptual fallacies / dichotomies so on and so forth.

The excise laws goes back to the year 1934 when a compendium was drafted which agglomerated more than ten separate excise acts which had grown up piecemeal over many years. Another useful effort was made in the year 1944 when a consolidated and single enactment saw the light of the day and which still holds the field in the excise laws to be called as the Central Excise Act, 1944.

The custom laws, which in common parlance, is also termed as the “Law of Notifications” due to the rapidity and frequency of repeated notifications. This branch of law has been on the statute books for more than a century. The Sea Customs Act was enacted in 1878. It covered sea side of the country. Import and export through land routes were dealt under the Land Customs Act, 1924 whereas the air traffic was governed by the rules framed under the Air Ship Act, 1911. The current Customs Act 1969 consolidated all such laws on the subject into one statute.

Last but not the least is sales tax which according to its contribution in the total revenue qua the remaining taxes surpasses the all. According to Govt. of India Act 1935, as adopted for Pakistan on independence, sales tax was a provincial subject. As the exigency of the situation demanded, the federal government enacted law called the Pakistan General Sales Tax Act 1948 by virtue of which the sales tax became a central subject. Again this would be information for the distinguished participants that according to this act, every dealer with an annual turn over of more than Rs. 5,000 was amenable for assessment.

This created resentment among the dealers where upon a sales tax committee was appointed by the government and on its recommendations, the Sales Tax Act 1951 was adopted. As against the levy of sales tax at multiple stages as was the case with the former Act, instead the latter law accommodated the demand of the traders to levy the sales tax only at one stage. In order to fashion the sales tax in accordance with the changed economic and social realities, a need was strongly felt over time to re-enact this branch of the law where upon the instant Sales Tax Act 1990 came into being. Progression of the sales tax into Pakistan’s key revenue earner is more than manifest from the recent statistics released by the CBR.

While talking about the state of taxes in our country, I would quote the data collected by the Chamber of Commerce & Industry, Karachi in the year 1996, it was found that there were 79 taxes in all, in Pakistan – 20 federal, 21 provincial, 14 municiple and 24 others. This is again a stark reality that the major chunk of the effectees belongs to the poor class. Let us see how Mr. Shaukat Aziz, the highest economic manager in the country enumerates this malady “a society where a large segment of the population, particularly the poor, bears the greater burden of cost of governance while a small group of influential rent seekers reap its benefits is bound to promote upheavals.” Far from suffering from a culture of tax evasion, as somebody quotes it, Pakistanis, particularly the poor are the most indirectly taxed people in the world.

Let’s go into some observations regarding the Evolution of Pakistani’s Tax System as made in the famous report of Mr. Shahid Hussain, Chairman of The Task Force on Tax Administration (2000).

First, legal and administrative changes are frequent and ad hoc. Taxpayers have insufficient knowledge of their obligations and tax collectors have substantial discretion.

Second, major tax policy changes are not accompanied by adequate changes in administrative framework.

Third, the relationship between the taxpayer and tax collector is largely adversal.

Fourth, organization, business processes, systems, facilities and budget have not kept pace with the growing demands on tax administration.

Fifth, the management of human resources is severely deficient. Most tax officials are not paid a living wage; nobody is paid a middle class wage. For most, honesty is an impossible proposition. Most of the 33000 persons employed in the tax administration are in lower ranks with low productivity and are a drag on the system.

In particular case of Pakistan, we inherited the legal system of the colonial era and the tax code is no exception in any way. We will have to appreciate that the colonial masters promulgated such fiscal and tax laws which were better suited to their own vested interests. They extracted maximum out of the minimum from the local populace for furthering their imperialistic designs. However, after winning independence, this was an uphill task to refashion and remodel the taxation laws according to our own peculiar socio – economic and politico, religio – cultural circumstances. Although various efforts were made and multiple commissions and task forces were constituted but I’m sorry to say, that all these exercises could not be channelised for the greater aim of enacting a true and workable tax code sensitive to the genuine objective conditions of the local population particularly that of the poor class. Despite of recent additions of withholding, presumptive, capital value and turnover taxes, the situation has not improved.

There are certain salient features of our Tax Culture and without their proper appreciation and understandings, I’m afraid; we would remain yearning for the quest of maximum revenue collection but without the actualization of the insurmountable targets.

This is also heart burning that while formulating tax code in our country, the experts and legislators either have not taken due care of the sensitivities of our cultural norms or otherwise they have completely ignored this vital aspect of social reality. Due to this very reason, the tax code could not ingrain in the attitudes and behaviour patterns of the taxpayers or in other words what the Birger Nerre called it the process of the “embeddedness of the tax culture” could not be realized. The recent prominent example of not taking care of the sensitivities of local population of Pakistan can be found in the very enactment of Income Tax Ordinance 2001 which as the saying goes has been enacted by a foreigner who was oblivion of the socio economic and political, religio-cultural realities of the land and its populace. Now the question arises, what are those realities which need to be understood while enacting any code or formulating any policy in the corridors of tax administration. Now I try to give a brief account of those features and I would say that the list is not complete however this would give an understanding for giving due accommodation to the socio economic and politico, religio-cultural sensitivities very much pervasive in our society.

(1) Tax Illiteracy

This is very much known that according to official statistics, the literacy rate in our country is not more than 36% and in this figuration there are those people who can merely read or write their names. When this is the state of literacy in our country, we can very well judge that to what extent our population or otherwise the taxpayers would be equipped with the proper understandings and education of our tax code. While talking about the evolution of tax culture of our country, we’ll have to launch a mass campaign of tax literacy.

(2) Complexity of the Tax Code

Keeping the overall low level of literacy among the population aside, the problem of proper understanding of the tax code due to its intricacy and complexity becomes enormous and manifold. A very little effort has yet been made to simplify the tax code for its easy grasp and smooth application. The prevalent legislation on taxation is so much complex and difficult that even the tax experts take great pains for its due comprehension what to talk about the commoners who happened to come across with the same. A concerted effort with a strong will is abundantly needed to simplify the tax code. For this, we all of us being the stake holders in the existing tax milieu should share our responsibility for evolving and proliferating a shorter, easier and simpler tax code. Writing of texts of law is indeed a difficult task. This is to be conceded that whatever may be the efforts to simplify the statute, its complexity can’t be altogether abated, but serious efforts should be continued to ease down its tone and texture.

(3) Warding off Foreign Dictation

As we’re mostly dependent on foreign loans for the survival of our economy and even for the running of our day to day state business, we’ve to take heavy loans. These donor states and institutions always dole out these loans with a certain package of “prerequisites and conditionalities”. We being the recipient country have to surrender, sorry to say, a limb of our sovereignty and have to make compromises against the interest of our already marginalized population. So much so the donors impose on us greater burdens to be shifted on the already vulnerable taxpayers who have been destined to become at their tether end. This would be an appeal to the people at the helm of affairs to ward off the foreign pressures, to the maximum possible extent, if not altogether, in order to safeguard the paramount interest of the local population.

(4) Mis-declaration of Income

Honest declaration of income is all the more pivotal when we talk about Income Tax liability. I must concede and realize it to the respectable participants that we as a nation have not been loyal enough to expose what we own and what we have. I’m talking about the growing tendency among the taxpayers regarding concealment of their true income and mis-declaration on their part while tendering their “returns”. Mr. Vakeel Ahmad Khan, the Member Direct Taxes, Central Board of Revenue is very right when he says that it is simply not possible for the Government to reduce the tax rates in the current scenario where the declaration of actual income isn’t the norm of the day. Two pronged measures occur to my mind for grappling with the deviant culture of mis-declaration of income, one which I rate very high and above the other is the nurturing of moral obligation among us for being true in our affairs qua the country and of course qua the tax department, the other which I would talk in some detail under a separate head note is the true enforcement of laws to disdain the tax evaders. Our tax culture should be based on trust, fairness and mutual respect.

(5) Broadening the Base of Taxpaying population

Again I would talk about Income Tax and moot the point which you’re very well cognizant of is it that the total number of income taxpayers in our country approximately makes up one million. This figure speaks itself that how there is only a meager segment of population presently in the tax net while there is a more significant strata among population which is beyond and out of the tax net. According to the statistics of CBR, 36% people in the opulent areas do not contribute to the national exchequer. So many tax surveys have been conducted and many amnesty schemes have been introduced to “grab” and “lure” the non taxpaying community but Mr. Chairman, your Honour being the head of the CBR would concur that the required targets have yet to see the light of the day. To remain out of the tax net is the ignominious feature of our tax culture. There may be many causes behind this phenomenon, some might have been noticed and many may not, but this is crying need of the day to address the same to tackle with and arrest the tax evading culture. Improvement in the collection of taxes is so crucial that government can’t and should not wait, nor will half measures do. Widening tax net will allow reduction in tax rates, without reducing revenue.

(6) Rampant Corruption in the Tax Administration

The melody of corruption is a much talked of subject in these days. This isn’t restricted within any circumscribed boundaries or any specific class of people. Since the tax institutions is part of and linked with the other institutions, it isn’t immune from the negative effects permeating in those others. I would not let myself to raise eyebrows against any specific person or any particular segment; however, I would be failing in my duty if I do not concede that many of us have not been able to clean their Augean stables to transform a cleaner and transparent tax culture. Encouragement and flourishment of tax culture can only take place through the removal of gray areas and discretionary powers presently used with impunity by taxation officers. Removal of corruption will ensure wise and prudent expenditure of collected revenue, which will encourage and mobilize new taxpayers who are hesitant to contribute and continue to remain outside the tax net.

(7) Mistrust and Misgivings about use of Tax Money

On the one hand there is very insignificant population which is in the tax net while on the other, there is a feeling of mistrust and obscurity among the taxpaying community against the government as to the fact that the funds generated out of their taxes are not properly used rather they are mishandled and so to say are bungled. In this background, many taxpayers don’t feel the moral obligations to fulfill their part of institutional contract between the state and its citizens as long as the state doesn’t fulfill its part in a proper way. The values of integrity, trust, respect, commitment to service, teamwork, personal responsibility and continuous improvement should be upheld.

(8) De jure Taxation and De facto Taxation

By de jure taxation I mean the tax system and the tax code as it stands and exists which is likely to be observed and implemented in the community while by the de facto taxation I amplify the tax system and the tax organism as it is practiced and followed. I see a visible gap between these two systems of taxation as one is aspired and the other is in vogue. We should solicit means and should carve out ways to bridge the gap existing between two systems of tax administration and tax code. The sooner this dichotomy is resolved, the better it would be for the introduction of a transparent and true tax culture in our country. The basic principle of taxation, viz equity, certainty, convenience, economy and simplicity had been ignored prior to enacting tax laws.

(9) Restoration of the Self esteem of the Taxpayer

The instances are not infrequent when the taxpayers have been harassed or blackmailed by the personnel of the tax machinery. This leads to the feelings of hatred and avoidance on the part of taxpayers and this attitude has its resultant repercussions on the state interest of maximum revenue generation. According to rough estimates 73% of the tax is collected through the mechanism of withholding tax while 13% is voluntarily paid by the assesses with the returns and 14% of the total tax revenue is collected by the tax machinery working under the aegis of CBR. Mr. Chairman, frankly I’m not after your coveted slot but can we dare ask that if this is only that 14% for which is a much extended tax bureaucracy is engaged and again this is the area where most complaints regarding harassment and abuse of power are emanating . Mr. Chairman, I would very respectfully submit that now the taxpayers have started questioning the raison deter of this very large establishment, when the income tax contribution towards the total revenue from all sources is 16% which is inclusive of income tax deducted at source. Furthermore, about 80% of the total income tax is paid by 1, 000 multinational companies.

(10) Apprehension of Tax Evaders

Although I solicit that taxpayers should have an independent environment where they could act and pay their taxes without any fear or coercion, however, by this I do not mean that the taxpayers should be let escort free not to be answerable to the tax administration. I would add that over the period of time, many deviants and tax defrauders and hobnobbing and colluding with the tax collecting personnel and the “middleman” to completely evade from the tax net or otherwise to pay minimum tax although they should pay higher taxes according to the quantum of their income/assets. The existing cultural realities and social attitudes do warrant for taking a very stringent action against these delinquents and deviants. The machinery of the state should come into play with full force against them for bringing them to book. The CBR should come out to liaise with various departments of the federal and provincial governments, contact private and public institutions, tap banking sources both at home and abroad, and obtain information from newspapers, advertisements, informants and third parties on taxpayer’s incomes, expenditures, bank accounts, properties, assets and investments.

(11) Certainty of Tax Code / Legislation

I’ve no hesitation in saying that this has been the common characteristic of our tax culture that there happen frequent and haphazard changes in the tax code of the country. Mr. Chairman, let me say who’s here who doesn’t understand the vagaries of the phenomenon of SROs. Even the substantive and procedural parts of the tax legislation have continually been in the throes of repealing and amendments. My humble request on this eventful occasion would be to the legislators and the policy makers that please give some semblance of permanence and perpetuity to the tax code. It is quite apparent that income tax law has not been enacted with clear objectives and on long term basis. Moreover, there are abrupt and periodical amendments, which adversely affect the tax collection and business community.

(12) Automation of Tax Machinery

A culture isn’t straight jacket nor is it a water-tight compartment not to allow fresh intakes. Similar is the case of Tax Culture. We should always be open ended to give due room to the fresh ideas and to the modern technology. To be more precise, I’m talking about equipping the tax administration with the latest automation and reaping full benefits of the recent age of Information Technology. I appreciate and understand the constraint of our scarce resources but I would stand for the conviction and you would agree with me that we will have to leave no stone unturned for harnessing the best available modern automation infrastructure to meet the challenges of the day.

(13) Advertising

Advertising is a persuasion technique that can greatly support the articulation and development of tax culture. Tax Administration should have an aggressive communication policy to achieve the voluntary acceptance of taxes. I believe that the campaign for promoting and developing the tax culture through advertising can remove the inhibitions and persuade the citizens to promptly pay their taxes. Careful use of contents and message can obliterate the irritants and can further promote the tax consciousness among masses. It is obligatory to reinforce in the message, the norms, values and strengths that govern the tax system, focusing and centering attention on the concepts of transparency, efficiency, effectiveness, modernization, simplification, honesty, professionalism, ethics and service. I believe that the information campaign may instill in the taxpayers the spirit for paying their taxes voluntarily. The best way to promote tax culture in the people is to convince them that the revenue generated out of their taxes is being used by the Government honestly and for the greater welfare of the society. The mass media can further build a strong public opinion for the denouncement of those who happen to evade taxes. Only thus it will be possible to generate a true interaction between the different social sectors and the tax administration.

The culture can’t be changed only in a year or in a few years-that is what we’ve to do by promoting a new tax culture but of course we should tread on the right path not being disillusioned from achieving the object of a prosperous and bright future. I hope that the theory of tax culture will be able to lower the gap between pure theoretical economic fiction and cultural reality, particularly in the sphere of taxation.

COST & MANAGEMENT ACCOUNTANTS: ACTIVITY BASED COSTING

2011-08-24T07:48:00.000+05:00

COST & MANAGEMENT ACCOUNTANTS: ACTIVITY BASED COSTING

COST & MANAGEMENT ACCOUNTANTS: Balanced Scorecard

2011-08-21T22:47:00.000+05:00

COST & MANAGEMENT ACCOUNTANTS: Balanced Scorecard

7 key skills of a project manager

2011-08-18T17:37:00.000+05:00

Before discussing what the key skills for a project manager might be we really need to define what we mean by project management. A definition of project management would be the planning, organizing and then management of the resources required to complete a specific task. The essential point here is that the aims and objectives for the accomplishment of the task will be highly focused requiring you to fully understand these seven key skills.

1. Analysis

Using Project management software will help you to be more efficient at your job.

More correctly referred to as impact analysis a key skill required toward the final stages of a project is the ability to analyse the impact of changes brought about by the project. Exactly the same as the well known ‘ripple effect‘ you must never underestimate the knock-on changes and effect that a major project can bring about. Being able to analyse and then manage these is yet another skill you need to master. Changes to the specification of a project after it has begun are all too easily overlooked and you will need to constantly revisit your impact analysis to incorporate them. Amongst other things any change to the specification could affect your previous analysis regarding legal, health, safety, and marketing or personnel issues. However, the ultimate reason for doing the analysis is – how the change will affect the end-date for the project? Project management is a complex task and the bigger the project, the more complex it becomes. You must be able to keep track of progress on the project from all the various sections of it that are on-going. This can be done on paper, but in all reality you need to learn and understand how to make the most out of one of the many pieces of project management software that are available. Using an IT based project management system will also help you to adjust timelines and priorities as the project develops.

2. Communication

Effective project planning underpins all project management.

If you can’t communicate, I’m sorry but you’ll never become an effective and successful project management. Any manager, but especially the project manager, has to understand that although you’re charged with ensuring the successful completion of a project – you’ll be dealing with a multiplicity of people and companies that you have to bring together in order to achieve the projects aims and objectives. If you don’t communicate effectively, either in speech, writing or presentations you won’t provide the information that your workers need to fulfill their jobs; be that in sharing knowledge, discussing ideas, providing solutions or making an executive decision.

3. Budgeting

Even if you have a team of accountants looking after the day-to-day running of the projects finances, understanding how to use a budget yourself is another essential project management skill to posses. The three key stages to a budget are preparing it, writing it and monitoring it. whilst your finance department may well be ostensibly charged with doing these things for you – as project manager you have the ultimate responsibility for the budget and need to be able to understand what you are being told about the budget. Unless your own background is in accounting you will feel obliged to accept what you’re told, if you don’t take the time to learn some basic budgeting skills. You will need these as at time you will need to know how to rationally and logically challenge budget over-runs that you become aware of as well as be able to sensibly monitor the budget as the project progresses.

4. Teamwork

Effective teamwork - will help you to manage your project most effectively.

The essence of any good project manager is to be a good team leader and, if necessary, be a good team player. Whilst decisions will remain your responsibility, that’s not to say that you shouldn’t encourage input from others or be prepared to work with them to help them achieve their goals too. Furthermore, by building a culture of teamwork into all aspects of the project, you will engender high self-esteem within all of the workers, meaning that they feel personally involved in ensuring the success of the project.

5. Intelligence

This doesn’t mean to say that you have to have a string of letters after your name as intelligence isn’t something you can learn. However, intelligence is something you can improve on and develop, so the more you study the chances are the more you’ll increase your intelligence. In the context of project management intelligence can be considered to be your ability to have a clear vision of all aspects of the project whilst at any one time being able to keenly focus onto a specific aspect of it. Put another way, just having the big picture will not help when you have a decision to make on a specific matter. You won’t always have the time to spend hours researching and re-reading material in order to make the decision at the time it is needed.

6. Calmness
It is almost inevitable that at times your job will be stressful, if not highly stressful. Being able to work calmly under such conditions is an absolute pre-requisite for a successful project manager. A key point to reducing your stress levels is your ability to move on from a setback. If something goes wrong or not according to plan, don’t waste time worrying about who’s fault it might have been or get involved in a cycle of what could have been different, that can come later in your project evaluation. Instead, move swiftly on to solving the problem or rectifying the situation.

7. Time

The Project Management Life Cycle.

Quite simply – are you a good time manager? Understanding the life-cycle for project management will help you to understand how to apply the key skill of time management to it. Your time management and you ability to organize yourself and others are vitally important. Time management is much more than simply allocating portions of time to certain jobs. You need to analyze exactly what it is you’re spending your time on and how important are those tasks and portions of time to the successful completion of the project. For example, you could easily spend up to an hour a day just reading emails. This is a task you can delegate to your PA, get them to be the person that sorts the important from the not so important, telling you what needs dealing with immediate and what can be left until later. That hour you’ve saved – you can use inspecting a part of the project checking on progress or quality etc. You should apply this time management philosophy to most things you do; do I need to attend that meeting or can I delegate someone else? Remember, you are the project manager, you are primarily there to do the strategic planning, overall monitoring and be creative and innovative in solving problems – not micro-manage everything

COST & MANAGEMENT ACCOUNTANTS: Project Management Life Cycle

2011-08-16T16:43:00.000+05:00

COST & MANAGEMENT ACCOUNTANTS: Project Management Life Cycle

IQRA STUDY CENTRE - IAS 36

2011-08-15T04:43:00.000+05:00

IQRA STUDY CENTRE - IAS 36

IQRA STUDY CENTRE - COACHING CLASSES FOR PROFESSIONAL STUDENTS

2011-08-05T18:20:00.000+05:00

IQRA STUDY CENTRE - COACHING CLASSES FOR PROFESSIONAL STUDENTS

EXEMPTIONS AWARDED BY ICAP TO VARIOUS DEGREE, CERTIFICATE HOLDERS

2011-08-04T18:48:00.000+05:00

For Other Professional Qualifications
All candidates seeking exemptions are required to apply on the prescribed Exemption form alongwith the fee and supporting documents / certificates as mentioned on the form to the Directorate of Examinations before the prescribed date of submission of Examination forms.
No exemptions shall be given from any ICAP examination or paper(s) thereof to any individual, Professional Accountancy Institution or body or University unless such request:

Is received from the Certificate awarding body;
The said body is making the request on a reciprocal basis; and
The request is subjected to a detailed evaluation procedure to be laid down by ICAP and made transparent.
As per conditions mentioned in Para above, the under mentioned specific exemptions as approved by the Council of ICAP are presently available:

The examination and the training prescribed by the following Chartered Accountancy Institutes will be treated as equivalent to the examinations and training prescribed under the Chartered Accountants Bye-Laws 1983 for the purpose of membership of ICAP:
The Institute of Chartered Accountants in England & Wales (ICAEW);
The Institute of Chartered Accountants in Ireland (ICAI);
The Institute of Chartered Accountants in Scotland (ICAS);
The Institute of Chartered Accountants in Australia (ICAA);
The Canadian Institute of Chartered Accountants (CICA).
Provided that if such members desire to start practice as Chartered Accountants, they will have to pass the papers of “Advanced Taxation” and “Corporate Laws” of the Final Examinations.
Provided also that such members desire to start practice as Chartered Accountant or Management Consultant, he shall do so if his training comprises of atleast two years training with training organization in practice or has undergone further training with training organization in practice so as to complete the aggregate training of two years with training organizations in practice.

Under the Council’s Directive 1.14 dated December 31, 2010 the candidates who have successfully completed all examinations of specified accountancy bodies will be eligible for exemption as follows:

i. Association of Chartered Certified Accountants (ACCA)

ICAP Modules
Papers Exempted
Additional Condition

Pre-Entry Proficiency Test
-

A
Functional English
-

A
Quantitative Methods
-

B
Introduction to Financial Accounting
-

C
Financial Accounting
-

C
Taxation
Exemption will be granted to only those candidates who have passed F6 Taxation (Pakistan variant)

D
Cost Accounting
-

D
Auditing
Exemption will be granted to only those candidates who have passed F8 Audit and Assurance; and P7 Advanced Audit and Assurance

II. Chartered Institute of Management Accountants (CIMA)

ICAP Module
Papers Exempted

Pre-Entry Proficiency Test

A
Functional English

A
Quantitative Methods

B
Introduction to Economics & Finance

B
Introduction to Financial Accounting

C
Financial Accounting

D
Cost Accounting

III.Institute of Cost and Management Accountants of Pakistan (ICMAP)

ICAP Module
Papers Exempted

Pre-Entry Proficiency Test

A
Functional English

A
Quantitative Methods

B
Introduction to Economics & Finance

B
Introduction to Financial Accounting

B
Mercantile Law

C
Financial Accounting

C
Taxation

C
Business Communication & Behavioural Studies

D
Company Law

D
Cost Accounting

D
Information Technology

IV.American Institute of Certified Public Accountants (AICPA)

Candidates who have successfully completed all examinations of American Institute of Certified Public Accountants (AICPA) will be dealt with on case to case basis. Such candidates are advised to complete the prescribed exemption form and submit it alongwith copies of certificates, copies of syllabus certified by AICPA for evaluation.

V. Pakistan Institute of Public Finance Accountants (PIPFA)

Candidates who have successfully completed all examinations of Pakistan Institute of Public Finance Accountants (PIPFA) under the Private Sector Scheme and Syllabi will be exempted from the under mentioned entrance test and examinations of ICAP:

Pre-Entry Proficiency Test (PPT);
Foundation Examinations: All papers of Module A & B

Those candidates who hold graduation degree in addition to the above qualifications may join training at training organizations upon obtaining exemptions from above mentioned paper(s). Such candidates will undergo a continuous training period of 3 years in training organizations. However, if they are unable to pass their Module E and F examinations in first attempt, their training period shall be extended to 3.5 years. Such candidates will attempt their examinations after completing the prescribed eligibility period for trainee students.

Those candidates who do not hold a graduation degree will have to pass the remaining subjects of Foundation & Intermediate Examinations (Module A to D) for being eligible to register as a trainee student

IQRA STUDY CENTRE - EXEMPTIONS AWARDED BY ICSP TO VARIOUS DEGREE, CERTIFICATE HOLDERS

2011-08-03T12:58:00.000+05:00

IQRA STUDY CENTRE - EXEMPTIONS AWARDED BY ICSP TO VARIOUS DEGREE, CERTIFICATE HOLDERS

Methods of Costing By-Products: PART 4

2011-08-02T09:45:00.002+05:00

The accepted methods for costing by-products fall into two categories:

Category 1:
A joint production cost is not allocated to the by product. Any revenue resulting from sales of the by product is credited either to income or to cost of the main product. In some cases, costs subsequent to split-off point may be offset against the by-product revenue. For inventory costing, any independent value may be assigned to the by product. The methods most commonly used in industry are:

Method 1: Recognition of Gross Revenue
Method 2: Recognition of Net Revenue
Method 3: Replacement cost method

Category 2:

Some portion of the joint production cost is allocated to the by product. Inventory costs are based on this allocated cost plus any subsequent processing cost. In this category, the following method is used:

Method 4: Market value method or reversal cost method

Recognition of Gross Revenue Method--By Products Costing:

This method is typical non-cost procedure in which the final inventory cost of the main product is overstated to the extent that some of the cost belongs to the by product.

However this shortcoming is somewhat removed in procedure 4 (by product revenue deducted from the production cost), although a sales value rather than a cost is deducted from the production cost of the main product.

By-Product Revenue as Other Income
By-Product Revenue as Additional Sales Revenue
By Product Revenue as a Deduction from the Cost of Goods Sold
By Product Revenue deducted from Production Cost
1.By-Product Revenue as Other Income:
To explain this procedure the following example is presented:

Example:
Sales (Main Product, 10,000 units @ $2) $20,000
Cost of goods sold:
Beginning inventory (1,000 units @ $1.5) $1,500
Total production cost (11,000 units @ $1.5) $16,500
-------
Cost of goods avail able for sale $18,000
Ending inventory (2,000 units @ $1.5) $3,000
-------
$15,000
--------
Gross profit 5,000
Marketing and administrative expenses $2,000
--------
Operating income $3,000
Other income: Revenue from sale of by-product $1,500
--------
Income before income tax $4,500
=====

2. By-Product Revenue as Additional Sales Revenue:
In this case, the income statement above would show the $1,500 revenue from sales of the by product as an addition to sales of the main product. As a result, total sales revenue would be $21,500, and gross profit and operating income would increase accordingly. All other figures would remain the same.

3. By Product Revenue as a Deduction from the Cost of Goods Sold:
In this case, $1,500 revenue from the by product would be deducted from the $15,000 cost of goods sold figure, thereby reducing the cost and increasing the gross profit and operating income. The income before income tax remains at $4,500.

4. By Product Revenue deducted from Production Cost:
In this case, the $1,500 revenue from by-product sales is deducted from the $16,500 total production cost, giving a new production cost of $15,000. This revised cost results in a new average unit cost of $1.3625 for the main product. The final inventory will consequently be $2,725 instead of $3,000. The income statement would appear as follows:

Sales (Main Product, 10,000 units @ $2) $20,000

Cost of goods sold:
Beginning inventory (1,000 units @ $1.35) $1,350
Total production cost (11,000 units @ $1.5) $16,500
Revenue from sale of by product $1,500
---------
Net production cost $15,000
Cost of goods available for sale 12000units @1.3625 average cost
$16350
Ending inventory (2,000 units @ $1.3625) $2,725
-------
$13,625
----------
Gross profit $6,375
Marketing and administrative expenses $2,000
----------
Operating income $4,375
======

The preceding method required no complicated journal entries. The revenue received from by product sales is debited to cash or accounts receivable. In the first three cases, income from sales of by product is credited; in the fourth case, the production cost of the main product is credited.

Characteristics of Joint Products and Joint Cost:PART 3

2011-07-30T00:21:00.002+05:00

Many products or services are linked together by physical relationships which necessitate simultaneous production. To the point of split-off or to the point where these several products emerge as individual units, the cost of the products forms a homogeneous whole.

The classic example of joint products is found in the meat packing industry, where various cuts of meet and numerous by products are processed from one original carcass with one lump-sum cost. An other example of joint products manufacturing is the production of gasoline, where the derivation of gasoline inevitably results in the production of such items as naphtha, kerosene, and distillate fuel oils. Other examples of joint products manufacturing are the simultaneous production of various grads of glue and the processing of soybeans into oil and meal. Joint product costing is also found in industries that must grade raw materials before it is processed. Tobacco manufacturers (except in cases where graded tobacco is purchased) and virtually all fruit and vegetables canners face the problem of grading. In fact, such manufacturers have a dual problem of joint cost allocation:

Materials cost is applicable to all grades
Subsequent manufacturing costs are incurred simultaneously for all the different grads.
The chief characteristic of the joint cost is the fact that the cost of these several different products is incurred in an indivisible sum for all products, rather than in individual amounts for each product. The total production cost of multiple products involves both joint cost and separate, individual products cost. These separable product costs are identifiably with the individual product and, generally, need no allocation. However, the joint production cost requires allocation or assignment to the individual products.

Definition and Explanation of By Products:
The term "by product" is generally used to denote one or more products of relatively small total value that are produced simultaneously with a product of greater total value. The product with the greater value, commonly called the "main product", is usually produced in greater quantities than the by products. Ordinarily, the manufacturer has only limited control over the quantity of the by product that comes into existence. However, the introduction of more advanced engineering methods, such as in the petroleum industry, has permitted greater control over the quantity of residual products. In fact, one company, which formerly paid a trucker to haul away and dump certain waste materials, discovered that the waste was valuable as fertilizer, and this by product is now an additional source of income for the entire industry.

Nature of By-Products:
The accounting treatment of by-products necessitates a reasonably complete knowledge of the technological factors underlying their manufacture, since the origins of by products may vary. By-products arising from the cleansing of the main product, such as gas and tar from coke manufacture, generally have a residual value. In some cases, the by product is left over scrap or waste, such as sawdust in lumber mills. In other cases, the by product may not be the result of any manufacturing process but may arise from preparing raw materials before they are used in the manufacture of the main product. The separation of cotton seed from cotton, cores and seeds from apples, and shells from coca beans are examples of this type of product.

By product can be classified into the following two groups according to their marketable condition at the split-off point:

Those sold in their original form without need of further processing.
Those which require further processing in order to be saleable.

Recognition of Gross Revenue Method--By Products Costing:

This method is typical non-cost procedure in which the final inventory cost of the main product is overstated to the extent that some of the cost belongs to the by product.

However this shortcoming is somewhat removed in procedure 4 (by product revenue deducted from the production cost), although a sales value rather than a cost is deducted from the production cost of the main product.

1.By-Product Revenue as Other Income:
To explain this procedure the following example is presented:

Example:
Sales (Main Product, 10,000 units @ $2) $20,000
Cost of goods sold:
Beginning inventory (1,000 units @ $1.5) $1,500
Total production cost (11,000 units @ $1.5) $16,500
-------
Cost of goods avail able for sale $18,000
Ending inventory (2,000 units @ $1.5) $3,000
-------
$15,000
--------
Gross profit 5,000
Marketing and administrative expenses $2,000
--------
Operating income $3,000
Other income: Revenue from sale of by-product $1,500
--------
Income before income tax $4,500
=====

2. By-Product Revenue as Additional Sales Revenue:
In this case, the income statement above would show the $1,500 revenue from sales of the by product as an addition to sales of the main product. As a result, total sales revenue would be $21,500, and gross profit and operating income would increase accordingly. All other figures would remain the same.

3. By Product Revenue as a Deduction from the Cost of Goods Sold:
In this case, $1,500 revenue from the by product would be deducted from the $15,000 cost of goods sold figure, thereby reducing the cost and increasing the gross profit and operating income. The income before income tax remains at $4,500.

4. By Product Revenue deducted from Production Cost:
In this case, the $1,500 revenue from by-product sales is deducted from the $16,500 total production cost, giving a new production cost of $15,000. This revised cost results in a new average unit cost of $1.3625 for the main product. The final inventory will consequently be $2,725 instead of $3,000. The income statement would appear as follows:

Sales (Main Product, 10,000 units @ $2) $20,000

Cost of goods sold:
Beginning inventory (1,000 units @ $1.35) $1,350
Total production cost (11,000 units @ $1.5) $16,500
Revenue from sale of by product $1,500
---------
Net production cost $15,000
Cost of goods available for sale 12000units @1.3625 average cost
$16350
Ending inventory (2,000 units @ $1.3625) $2,725
-------
$13,625
----------
Gross profit $6,375
Marketing and administrative expenses $2,000
----------
Operating income $4,375
======

The preceding method required no complicated journal entries. The revenue received from by product sales is debited to cash or accounts receivable. In the first three cases, income from sales of by product is credited; in the fourth case, the production cost of the main product is credited.

Joint Products and Joint Product Cost PART 2

2011-07-28T18:15:00.002+05:00

CRASH CLASSE OF CA MODULE D
COST ACCOUNTING
FOR STUDENTS IN KARACHI
0322-3385752

Definition and Explanation of Joint Products:

Joint products are produced simultaneously by a common process or series of processes, with each product processing more than a nominal value in the form in which it is produced. The definition emphasizes the point that the manufacturing process creates products in a definite quantitative relationship. An increase in one product's output will bring about an increase in the quantity of the other products, or vice versa, but not necessarily in the same proportion.

Definition and explanation of Joint Product Cost:
A joint product cost cay be defined as that cost which arises from the common processing or manufacturing of products produced from a common raw material. Whenever two or more different products are created from a single cost factor, a joint product cost results. A joint cost is incurred prior to the point at which separately identifiable products emerge from the same process.

Example:
For example, the production of coke, for which coal is the original raw material. In addition to coke as its major product, the process produces sulfate of ammonia, light oil, crude tar and gas. The greater quantity of gas is not sold but is used to fire the coke ovens and the boilers in the power plant. The coke ovens are the split-off point for cost assignments. The cost of each product consists of a pro rata share of the joint cost plus any separable or subsequent costs incurred in order to put the products into saleable condition.

COKE AND ITS ASSOCIATED PRODUCTS

COAL
(ORIGINAL RAW MATERIAL) → COKE OVEN
(SPLIT-OFF POINT) → COKE
(MAJOR PRODUCT) Plus Separable cost
→ COKE

→ SULFATE OF AMMONIA Plus Separable cost
→ SULFATE OF AMMONIA
→ LIGHT OIL Plus Separable cost
→ BENZOL
→ CRUDE TAR Plus Separable cost
→ TAR
→ COKE OVEN GAS Plus Separable cost
→ GAS

Characteristics of Joint Products and Joint Cost:

Many products or services are linked together by physical relationships which necessitate simultaneous production. To the point of split-off or to the point where these several products emerge as individual units, the cost of the products forms a homogeneous whole.

The classic example of joint products is found in the meat packing industry, where various cuts of meet and numerous by products are processed from one original carcass with one lump-sum cost. An other example of joint products manufacturing is the production of gasoline, where the derivation of gasoline inevitably results in the production of such items as naphtha, kerosene, and distillate fuel oils. Other examples of joint products manufacturing are the simultaneous production of various grads of glue and the processing of soybeans into oil and meal. Joint product costing is also found in industries that must grade raw materials before it is processed. Tobacco manufacturers (except in cases where graded tobacco is purchased) and virtually all fruit and vegetables canners face the problem of grading. In fact, such manufacturers have a dual problem of joint cost allocation:

Materials cost is applicable to all grades
Subsequent manufacturing costs are incurred simultaneously for all the different grads.
The chief characteristic of the joint cost is the fact that the cost of these several different products is incurred in an indivisible sum for all products, rather than in individual amounts for each product. The total production cost of multiple products involves both joint cost and separate, individual products cost. These separable product costs are identifiably with the individual product and, generally, need no allocation. However, the joint production cost requires allocation or assignment to the individual products.

COACHING CLASSES FOR FIA-ACCA STUDENTS IN KARACHI

2011-07-28T10:42:00.000+05:00

FA1 Recording Financial Transactions

MA1 Management Information

FA2 Maintaining Financial Records

MA2 Managing Costs and Finance

FAB Accountant in Business

FFA Financial Accounting

FMA Management Accounting

FAU Foundations in Audit

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By Products and Joint Products PART 1

2011-07-27T22:39:00.001+05:00

CRASH CLASSES OF CA MODULE D
COST ACCOUNTING FOR STUDENTS IN KARACHI.
0322-3385752

Many industrial concerns are confronted with the difficult and often rather complicated problem of assigning costs to their by-products and joint products. Chemical companies, coke manufacturers, refineries, flour mills, coal mines, lumber mills, gas companies, dairies, canners, meat packers, and many others produce in their manufacturing or conversion processes a multitude of products to which some cost must be assigned. Assignment of costs of these various products enhances equitable inventory costing for income determination and financial statement purposes. An even more important aspect of by product and joint product costing is that it furnishes management with data for use in planning maximum profit potentials and evaluating actual profit performance.

Difficulties / Problems in Costing by Products and Joint Products:

By products and joint products are difficult to cost because a true joint cost is indivisible. For example, an ore might contain both lead and Zink. In the raw state, these minerals are joint products, and until they are separated by reduction of the ore, the cost of finding mining, and processing is a joint cost; neither lead nor Zink can be produced without the other prior to the split-off point.

The cost accumulated to the split-off point must be born by the difference between the selling price and the cost to complete and sale each mineral after the split-off point.

joint costs are frequently confused with common costs. However, there is a significant difference between the two: a joint cost is indivisible and common costs are divisible. Common costs are allocable among products or service. Because each of the products or services could have been obtained separately. Therefore, any shared costs of obtaining them can be allocated on the basis of relative usage of common facilities. For example, the cost of fuel or power may be allocated to products on the basis of production volumes or metered usage. The indivisibility characteristics of a joint cost is not always easy to comprehend, since in some cases a joint cost can be divided among joint products in accordance with a common cost causing characteristic. However the result of such a division is of limited use to management for decision making.

Because of the indivisibility of a joint cost, cost allocation and apportionment procedures used for establishing the unit cost of a product are far from perfect and are, indeed, quite arbitrary. The costing of joint products and by products highlights the problem of assigning costs to products whose origin, use of equipment, share of raw materials, share of labor costs, and share of other facilities cannot truly be determined. Whatever methods of allocation are employed, the total profit or loss figure is not affected--provided there are no beginning or ending inventories--by allocation costs to the joint products or by products, since these costs are recombined in the final income statement. However, a joint cost is ordinarily allocated to the products on some acceptable basis to determine product costs needed for inventory carrying costs. For this reason, there is an effect on periodic income, because different amounts may be allocated to inventories of the numerous joint products or by products under various allocation methods. In addition, product costs may be required for such special purposes as justifying selling prices before governmental regularity bodies. However, the validity of splitting a joint cost to determine fair regulated prices for joint products has been questioned by both accountants and economists.

Service Department Costing:

2011-07-27T13:10:00.002+05:00

Difference between service department and operating department:

Most of the large organizations have both operating departments and service departments. The central purpose of the organization are carried out in the operating department. In contrast, service departments do not directly engage in operating activities. Instead, they provide services or assistance to the operating departments. Examples of operating departments include the surgery departments at hospitals, geography departments at universities, the marketing departments insurance companies, and production departments at manufacturing companies like Mitsubishi, Hewlett-Packard. Examples of service departments include Cafeteria, Internal Auditing, Human Resources, Cost Accounting, and Purchasing.

The costs incurred by service departments are usually allocated to the operating departments, and from the operating departments to the products and services. Many service departments also provide services to other service departments within organization. The cafeteria department, for example, provides food for all employees, including those assigned to other service departments. In return cafeteria department may receive services from other service departments such as from custodial services or personnel. Services provided between service departments are known as interdepartmental services or reciprocal services.

Several different methods are used to allocate costs of service departments to operating departments. Regardless of the allocation method that is ultimately selected, an allocation base must be selected for each service department.

Selecting Allocation Base:
Costs are ordinarily assigned to products and services by using a two stage process. In first stage, service department and other costs are allocated to operating departments. In second stage, the costs that have been assigned to operating departments are allocated to products and services. Here we will focus on the first stage, in which service department costs are allocated to operating departments.

In the first stage, service department costs are allocated to operating departments by using a unique allocation base for each service department. The allocation base that is used to allocate a particular service department's costs should "drive" those costs. For example, the number of meals served would commonly be used as the allocation base for cafeteria costs because the costs incurred in the cafeteria are driven to a large extent by the number of meals served. Ideally the total cost incurred in the service department should be directly proportional to the allocation base. If the allocation base increases or decreases by 10%, the service department cost should increase or decrease by 10% as well. Managers also often argue that an allocation base should reflect as accurately as possible the benefits that the various departments receive from the service department.

For example the most managers would argue that square feet building space occupied by each department should be used as the allocation base for janitorial services because both the benefits and costs of janitorial services tend to be proportional to the amount of space occupied by a department. A given service department's cost may be allocated using more than allocation base (see examples below). For example, data processing costs may be allocated on the basis of CPU minutes for mainframe computers and on the basis of number of personal computers used in each operating department.

In addition to explanation of how to select an allocation base, another critical factor should not be overlooked. The allocation base should be clear and straightforward and easily understood by the managers to whom the costs are being allocated.

Direct Method of Cost Allocation-Service Department Costing:

Definition:
Direct method is a cost allocation method under which any of the allocation base attributable to the service departments themselves is ignored; only the amount of the allocation base attributable to the operating departments is used in the allocation.

Explanation:
The direct method is the simplest of the three cost allocation methods. It ignores reciprocal or interdepartmental services (services provided by a service department to another service department) and allocates all costs of service departments directly to operating departments. Even if a service department (such as personnel department) provides a large amount of service to another service department (such as the cafeteria department), no allocations are made between the two departments. Rather all costs are are directly allocated to the operating departments, bypassing the other service departments. Hence the term direct method.

Example:
To provide an example of the direct method, consider Mountain View Hospital, which has two service departments and two operating departments as shown below:
Description
Service Department
Operating Department
Total

Hospital Administration Custodial Services Laboratory Daily Patient Care
Departmental costs before allocation
Employee hours
Space occupied square feet $360,000
12,000
10,000 $90,000
6,000
200 $261,000
18,000
5000 $689,000
30,000
45,000 $1,400,000
66,000
60,200

Hospital administration costs will be allocated on the basis of employee-hours and Custodial Services costs will be allocated on the basis of square feet occupied.
The direct method of allocating the hospital's service department costs to the operating departments is shown below:Description
Service Department
Operating Department
Total

Hospital Administration Custodial Services Laboratory Daily Patient Care
Departmental costs before allocation
Allocation:

Hospital administration costs (18/48, 30/48)*

Custodial service department costs (5/50, 45/50)**

Total costs allocation
$360,000

(360,000)

-----------
$0
======
$90,000

(90,000)
----------
$0
=====
$261,000

135,000

9,000
-----------
$405,000
======
$689,000

225,000

81,000
----------
$995,000
=======
$1,400,000

1,400,000
=======

*Based on the employee-hours in the two operating departments, which are 18,000 hours + 30,000 hours = 48,000 hours
**Based on the space occupied by the two operating departments, which is 5,000 square feet + 45,000 square feet = 50,000 square feet

Several things should be carefully noted in this example. First, even though both the hospital administration department and custodial services department have recorded employee-hours. These employee hors are ignored when allocating service department costs using direct method. Under the direct method, any of the allocation base attributable to the service departments themselves is ignored; only the amount of the allocation base attributable to the operating departments is used in the allocation. Note that the same rules used when allocating the costs of the custodial services department. Even though the Hospital Administration and Custodial Service departments occupy some space, this is ignored when the custodial services costs are allocated. Finally, note that after all allocations have been completed, all of the departmental costs are contained in the two operating departments. These costs will be used to prepare overhead rates for purpose of costing products and services produced in the operating departments.

Advantages and Disadvantages of Direct Method:
Although the direct method is simple , it is less accurate than the other methods since it ignored interdepartmental services. This can lead to distorted product and service costs. Even so, many organizations use the direct method because of its simplicity.

Step Method of Cost Allocation:
Definition:
Step method is the method of allocating service department's costs to other service departments, as well as to operating departments, in a sequential manner. The sequence typically starts with the service department that provides the greatest amount of service to other departments.

Explanation:
Unlike the direct method, the step method provides for allocation of a service department's costs to other service departments, as well as to operating departments. The step method is sequential. The sequence typically begins with to department that provides the greatest amount of service to other service departments. After its costs have been allocated, the process continues, step by step, ending with the department that provides the least amount of services to other service departments.

Example:
To provide an example of the step method, consider Mountain View Hospital, which has two service departments and two operating departments as shown below:
Description
Service Department
Operating Department
Total

Hospital Administration Custodial Services Laboratory Daily Patient Care
Departmental costs before allocation
Employee hours
Space occupied square feet $360,000
12,000
10,000 $90,000
6,000
200 $261,000
18,000
5000 $689,000
30,000
45,000 $1,400,000
66,000
60,200

Hospital administration costs will be allocated on the basis of employee-hours and Custodial Services costs will be allocated on the basis of square feet occupied.
The step method of allocating the hospital's service department costs to the operating departments is shown below:
Description
Service Department
Operating Department
Total

Hospital Administration Custodial Services Laboratory Daily Patient Care
Departmental costs before allocation
Allocation:

Hospital administration costs (6/54, 18/54, 30/54)*

Custodial service department costs (5/50, 45/50)**

Total costs allocation
$360,000

(360,000)

-----------
$0
======
$90,000

40,000

(130,000)
----------
$0
=====
$261,000

120,000

13,000
-----------
$394,000
======
$689,000

200,000

117,000
----------
$1,006,000
=======
$1,400,000

1,400,000
=======

*Based on the employee-hours in custodial services the two operating departments, which are 6,000 hours + 18,000 hours + 30,00 hours = 54,000 hours
**Based on the space occupied by the two operating departments, which is 5,000 square feet + 45,000 square feet = 50,000 square feet

Example shows the treatment of step method of cost allocation. Note the following three key points about these allocations.

First, under the allocation heading in the solution you see two allocations, or steps. In the first step, the costs of hospital administration are allocated to another service department (Custodial Services) as well as to the operating departments. In contrast to the direct method, the allocation base for Hospital Administration costs now includes the employee hours for custodial services as well as for the operating departments. However, the allocation base still excludes the employee-hours for Hospital Administration itself. In both the direct and step methods, any amount of the allocation base attributable to the service department whose cost is being allocated is always ignored.
Second, looking again on the example, note that in the second step under the allocation heading, the cost of custodial services is allocated to the two operating departments, and non of the cost is allocated to Hospital Administration even though Hospital Administration occupies space in the building. In the step method, any amount of the allocation base that is attributable to a service department whose cost has already been allocated is ignored. After a service department's cost have been allocated, costs of other service departments are not reallocated back to it.
Third, not that the cost of Custodial Services allocated to other departments in the second step ($130,000) in example, includes the costs of Hospital Administration that were allocated to Custodial Services in the first step.

Reciprocal Method of Cost Allocation-Service Department Costing:
Definition:
Reciprocal method is a method of allocating service department costs to other departments that gives full recognition to interdepartmental services.

Explanation:
The reciprocal method gives full recognition to interdepartmental services. Under the step method, only partial recognition of interdepartmental services is possible. The step method always allocates costs forward never backward. The reciprocal method, by contrast, allocates service department costs in both directions. The reciprocal allocation requires the use of simultaneous equations. This method is also known as algebraic method and simultaneous equations method.

Under this method the true cost of the service departments are computed first with the help of simultaneous equations and these are then distributed to producing departments on the basis of given percentage or ratio. Remember that true cost of the service department means the cost of the service department which includes original cost of the department plus the share of the other service department. The main advantage of this method is to have an accurate distribution in a single step in the distribution summary.

Example:
A company has two service and two producing departments. The two service departments serve not only to producing departments but also to each other. The departmental estimates for the next year are as follows.

Producing departments:
A
B
Service departments:
X
Y

50,000
40,000

10,000
8,800

The service departments costs are to be distributed as under:
Cost of X : 50% to A, 40% to B, and 10% to Y
Cost of Y : 40% to A, 40% to B, and 20% to X

Required:
Transfer the service departments costs to each other and to producing departments.

Solution:
Now we solve the given illustration first using the simultaneous equation method as follows:

Original costs of service departments:

X = Rs.10,000
Y = Rs. 8,800

After getting the share from distribution of service departments:

X = Rs. 10,000 + 20% Y
Y = Rs. 8,800 + 10% X

By putting the value of Y in equation (1)

X = Rs. 10,000 + 20%(Rs.8,800 + 10%X)
X = Rs. 10,000 + 1760 + 0.2X
X – 0.02X = Rs. 10,000 + Rs.1,760
0.98X = Rs. 11,760
X = 11760 / 0.98
= Rs. 12,000

By putting the value of X in equation (2)

Y = Rs. 8,800 + 10%(Rs. 12000)
Y = Rs. 8,800 + Rs. Rs. 1,200
= Rs. 10,000

Distribution Summary

Department
Producing Service

Original costs
Distribution of service department costs:
X
Y

Total departmental overheads
A
Rs
50,000
6,000
4,000
-------
60,000
=====
B
Rs
40,000
4,800
4,000
------
48,800
=====
X
Rs
10,000
(12,000)
2,000
-------
Nil
=====
Y
Rs
8,800
1,200
(10,000)
-------
Nil
=====

Use of Reciprocal Method:
This method is rarely used in practice for two reasons. First, the computations are relatively complex. Although the complexity issue could be overcome by use of computers, there is no evidence that computers have made the reciprocal method more popular. Second, the step method usually provides results that are a reasonable approximation of the results that the reciprocal method would provide. Thus, companies have little motivation to use the more complex reciprocal method.

COACHING CLASSES FOR FIA STUDENTS

2011-07-26T22:44:00.000+05:00

Pricing Products and Services

2011-07-26T10:44:00.001+05:00

Pricing is not a problem for some businesses. They make products or provide a service that is in competition with others, identical products or services for which a market price already exists. Customers will not pay more that this price, and there is no reason to charge less. Under these circumstances, the company simply charges the prevailing market price. Markets for basic raw materials such as farm products and minerals follow this pattern.

Here we are concerned with the more common situation in which a company is faced with the problem of setting its own prices. Clearly, the pricing decision can be critical. If the price is too high, customers will avoid purchasing the company's products. If the price is set too low, the company's costs may not be covered.

the usual approach in pricing is to mark up cost. A product's markup is the difference between its selling price and its cost. The markup is usually expressed as a percentage of cost. This approach is called cost plus pricing because the predetermined markup percentage is applied to the cost base to determine a target selling price.

Selling price = Cost + (Markup × Cost)

For example, if a company uses a markup of 50%, to the costs of its products to determine the selling price. If a product costs $10, then it would charge $15 for the products.

Two key issues must be addressed when the cost plus approach to pricing is used. First, What cost should be used? Second, how should the markup be determined? Several alternatives approaches are considered here, starting with the generally favored by economists.

Price Elasticity of Demand--Economists' Approach to Pricing:

If a company raises the price of a product, unit sales ordinarily falls. Because of this, pricing is a delicate balancing act in which the benefits of higher revenues per unit are traded off against the lower volume that results from charging higher prices. The sensitivity of unit sales to changes in prices is called the price elasticity of demand. Click here to read full article.

Absorption Costing Approach to Cost Plus Pricing:

The absorption costing approach to cost plus pricing differs from the economists' approach (price elasticity of demand) both in what costs are marked up and in how markup is determined. Under the absorption costing approach to cost plus pricing, the cost base is the absorption costing unit product cost rather than variable costing. Click here to read full article.

Target Costing:

Target costing is the process of determining the maximum allowable cost for a new product and then developing a prototype that can be profitably made for that maximum target cost figure. Click here to read full article.

Time and Material Pricing in Service Companies:

Some companies--particularly in service industries-- use a variation of cost plus pricing called time and material pricing. Under this method, two pricing rates are established--one based on direct labor time and other based on the cost of direct materials used

Definition and Explanation of Time and Materials Pricing:
Some companies--particularly in service industries-- use a variation of cost plus pricing called time and material pricing. Under this method, two pricing rates are established--one based on direct labor time and other based on the cost of direct materials used. This pricing method is used in repair shops, in printing shops, and by many professionals such as physicians and dentists. The time and material rates are usually market determined. In other words, the rates are determined by the interplay of supply and demand and by competitive conditions in the industry. However, some companies set the rates using a process similar to the process followed in the absorption costing approach to cost plus pricing. In this case, the rates include allowances for selling, general and administrative expenses; other direct and indirect costs; and a desired profit. This page will show how the rates might be set using the cost-plus approach.

Time Component:
The time component is typically expressed as a rate per hour of labor. The rate is computed by adding together three elements:

The direct costs of the employee, including salary and fringe benefits.
A pro rata allowance for selling, general, and administrative expenses of the organization.
An allowance for a desired profit per hour of employee time.
In some organizations (such as a repair shop), the same hourly rate will be charged regardless of which employee actually works on the job; in other organizations, the rate may vary by employee. For example, in a public accounting firm, the rate charged for a new assistant accountant's time will generally be less than the rate charged for an experienced senior accountant or for a partner.

Material Component:
The material component is determined by adding a material loading charge to the invoice price of any materials used on the job. The material loading charge is designed to cover the costs of ordering, handling, and carrying materials in stock, plus a profit margin on the materials themselves.

Example of Time and Material Pricing:
To provide a numerical example of time and material pricing, consider the following:

Quality Auto Shop uses time and material pricing for all of its repair work. The following costs have been budgeted for the coming year:

Repairs Parts
Mechanics' wages $300,000
Service manager--salary 40,000
Parts manager--salary $36,000
Clerical assistant--salary 18,000 15,000
Retirement and insurance--16% of salary and wages 57,280 8,160
Supplies 720 540
Utilities 36,000 20,800
Property taxes 8,400 1,900
Depreciation 91,600 37,600
Invoice cost of parts used 400,000

Total budgeted cost

The company expects to bill customers for 24,000 hours of repair time. A profit of $7 per hour of repair time is considered to be feasible, given the competitive conditions in the market. For parts, the competitive markup on the invoice cost of parts used is 15%.

The following schedule shows the calculation of the billing rate and the material loading charge to be used over the next year.

TIME AND MATERIALS PRICING

Time Component: Repairs Parts: Material Loading Charge
Total Per Hour* Total Percent**
Cost of mechanics' time:
Mechanics' wages $300,000
Retirement and insurance (16% of wages) 48,000
--------
Total cost 348,000 $14.5
For repairs--other cost of repair service. For parts--cost of ordering handling, and storing parts:
Repairs service manager--salary 40,000
Parts manager salary $36,000
Clerical assistant salary 18,000 15,000
Retirement and insurance (16% of salaries) 9,280 8,160
Supplies 720 540
Utilities 36,000 20,800
Property taxes 8,400 1,900
Depreciation 91,600 37,600
-------- ---------
Total cost 204,000 8.50 120,000 30%
-------- --------
Desired profit:
24,000 hours × $7per hour 168,000 7.00
15% × $400,000 60,000 15%
------- ------- ------- -------
Total amount to be billed $720,000 $30.00 $180,000 45%
====== ===== ====== ====
*Based on 24,000 hours
**Based on $400,000 invoice cost of parts. The charge for ordering, handling, and storing parts, for example, is computed as follows: $120,000 cost / $400,000 invoice cost = 30%

Note that the billing rate, or time component, is $30 per hour of repair time and the material loading charge is 45% of the invoice cost of parts used. Using these rates, a repair job that requires 4.5 hours of mechanics time and $200 in parts would be billed as follows:

Labor time: 4.5 hours $30 per hour $135
Parts used:
Invoice cost $200
Material loading charge: 45% $200 90 290
-------- ------
Total price of the job $425
=====

Rather than using labor hours as the basis for calculating the time rate, a machine shop, a printing shop, or a similar organization might use machine-hours.

This method of setting prices is a variation of the absorption costing approach. As such, it is not surprising that is suffers from the same problem. Customers may not be willing to pay the rates that have been computed. If actual business is less that the forecasted 24,000 hours and $400,000 worth of parts, the profit objectives will not be met and the company may not even break even.

Dunya Classifieds

2011-07-26T00:50:00.000+05:00

Dunya Classifieds

ATTENTION COMMERCE STUDENTS

2011-07-13T11:35:00.000+05:00

Dunya Classifieds

Double Entry System of Bookkeeping:

2011-07-07T20:51:00.000+05:00

The double entry system of bookkeeping owes its origin to an Italian merchant named Lucas Pacioli who wrote the first book on double entry bookkeeping entitled "Decomputis et Scripturis". It was published in Venice in 1544. All modern methods of accounting are simply adaptation of the system invented by that ancient pioneer.

Definition and Explanation:
The double entry theory of bookkeeping can be defined as the system of recording transactions having two fundamental aspects - one involving the receiving of a benefit and the other to giving the benefit - in the same set of books.

In this theory, as the two fold aspects of each transaction are recorded, the name "double entry" has been given to this system.

Every transaction involves two fold aspects e.g., an aspect of receiving and an aspect of giving. One who receives is a debtor (Dr) and one who gives is a creditor (Cr). Under the double entry system, both the aspects of giving and receiving are recorded in terms of accounts. The account which receives the benefit is debited and the account which gives the benefit is credited. It is the ultimate result of this system that every debit must have corresponding credit and vice versa and on any particular day the total of the debit entries and the credit entries on the various accounts must be equal.

Advantages of Double Entry System:
The main advantages of double entry theory of book keeping are as follows:

Trial balance can be drawn up on any day to prove the arithmetical accuracy of record.

The nominal sides of transactions being recorded: it is possible to prepare Trading and Profit and Loss Account from which the Gross Profit and Net Profit made by the business during a particular period can be easily ascertained.

As all personal accounts of debtors and creditors as well as real accounts are kept, it is possible to prepare Balance Sheet.

The transactions being recorded in the most scientific and systematic way gives the most reliable information of business.

It prevents fraud by rendering any alteration in any account more difficult.

It enables the trader to compare the different items, such as sales, purchases, opening stock and closing stock of one period with similar items of preceding period and the trader may thus know whether his business is progressing or not.

Disadvantages of Double Entry System:
The following are the main disadvantages of this system:

This system requires the maintenance of a number of books of accounts which is not practical in small concerns.

The system is costly because a number of records are to be maintained.

There is no guarantee of absolute accuracy of the books of accounts inspite of agreement of the trial balance.

COACHING CLASSES FOR O/ A LEVELS STUDENTS

2011-07-05T18:53:00.000+05:00

COACHING CLASSES FOR O/ A LEVELS STUDENTS...ACCOUNTS. ECONOMICS & URDU......KHALID AZIZ 0322-3385752

COACHING CLASSES FOR COMMERCE STUDENTS

2011-06-30T16:11:00.001+05:00

COACHING CLASSES (FINANCIAL & COST ACCOUNTING , ECONOMICS) AVAILABLE FOR STUDENTS OF

ICMAP STAGE 1,2 & 3

ICAP MODULE B & D

PIPFA

B.COM (ALL IMP SUBJECTS)

MBA

BBA

O/A LEVEL

CAT

ACCA

GUESS PAPERS FOR MA ECONOMICS EXTERNAL EXAMS 2010 ALSO AVAILABLE.

KHALID AZIZ
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COACHING CLASSES
ACCOUNTING OF ICMAP 1,2,3,4
CA.MOD A,B,C,D
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ACCA F1,F2,F3,F5,F8,P1,P7
ACCOUNTING O/A LEVEL
BBA
MBA
B.COM & M.COM
MICRO ECONOMICS & STATISTICS OF MA-ECONOMICS

EDUCATION IS OUR NATION'S SWORD

Definition and Explanation of Bookkeeping & Important Bookkeeping Terms:

2011-06-28T20:05:00.002+05:00

ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.

CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN

The work book or books mean books of accounts and keeping implies maintaining in proper form and order. Thus bookkeeping may be defined as the art of recording business transactions in books in a regular and systematic manner. It has been defined by different experts as:

"The science and art of correctly recording in books of accounts all those business transactions that result in the transfer of money's worth."

"The art and science of recording business transactions in such a systematic way as a trader may know the result of his trade at the end of a certain period and may also prove the accuracy of such record."

"The science and art of correctly recording business dealings in a set of books with a view to having a permanent record of transactions and the financial result thereof."

It should be noted from the above definitions that bookkeeping primarily deals in the art of recording transactions in books.

ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.

CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN

Important Bookkeeping Terms:

Before attempting to learn the art or science of bookkeeping it will be better to clarify some of the terms that will have to be used again and again.

Transaction:
Any dealing between two persons or things in a transaction. It may relate to purchase and sale of goods, receipt and payment of cash and rendering of services by one party to another. Transaction is of two kinds - cash transaction and credit transaction. When cash is paid or received as a result of an exchange, the transaction is said to be a cash transaction. When the payment or receipt of cash is postponed for future date, this transaction is said to be credit transaction.

Business:
It includes any activity undertaken for the purpose of earning profit e.g., banking business, and insurance business, a merchant business etc., etc.

Proprietor:
He is the owner of a business. He invests capital in it, gives his time and attention to it. He is entitled to receive the profit or bear loss arising out of it.

Drawings:
The cash or goods taken away by the proprietor from the business for his personal use are called has drawings.

Purchases:
Goods purchased are called purchases. When the goods purchased for cash they are called cash purchases but if they are purchased for which payment will have to be made at some future date it is known as credit purchases.

Purchases Returns:
If goods purchased are found defective or unsatisfactory, they are sometimes returned to the persons from whom they were purchased or to suppliers are called purchases returns or returns outwards.

Sales:
Goods sold are called sales. When goods are sold for cash they are called cash sales, but when they are sold without having received payment, they are credit sales.

Sales Returns:
If a person to whom goods have been sold finds that they are defective or unsatisfactory and returns them, are called sales returns or returns inwards.

Trade Discount:
It is rebate or allowance from the scheduled price granted by the seller to the buyer. Trade discount is usually granted in the following circumstances:
(a) When selling to a fellow trader.
(b) When the buyer is an old customer.
(c) When sales are made in bulk.
(d) As a custom of trade.

Cash Discount:
It is deduction or allowance allowed by creditor to a debtor. If a person pays his debit before the due date of payment the recipient may grant him an allowance for doing so. This allowance is known as cash discount

Commission:
It is a form of remuneration for services rendered by one person to another.

Expenditure:
An expenditure takes place when assets or service is acquired.

Expense:
It means an expenditure whose benefit is finished or enjoyed immediately such as salaries, rent etc. Difference between expense and expenditure is that the benefit of the former is consumed by the business in present whereas in latter case benefit will be available for future activities of the business.

Account:
A summarized record of transactions relating to person or thing is called an account.

Debtor (Account Receivable):
A person who owes money to another is a debtor. When we say that we owe Mr. Rahim $200, we mean that we have received from Mr. Rahim $200 which we have to repay. We stand as debtor to Mr. Rahim for $200. It is also termed as accounts receivable.

Creditor (Accounts Payable):
A person who pays out something or to whom money is owing is a creditor. It is also termed as accounts payable.

Assets:
These are the things of value possessed by a trader such as building, land, machinery, furniture, etc.

Liabilities:
They are the debt due by a business to its proprietor and others.

Voucher:
Any written evidence in support of a business transaction is called a voucher. When a ream of paper is bought from a stationer, he gives a cash memo. The cash memo is a voucher for the payment. When wages for the month are paid to the peon, receipt is taken from him. The receipt serves as a voucher for the payment.

Goods (Merchandise):
It includes all merchandise commodities which are purchased by the business for selling.

Stock (Inventory):
Goods or merchandise on hand, that is goods remaining unsold, is called stock, stock in trade, or inventory.

Equity:
A claim which can be enforced against the assets of the firm is called equity. In other words, the rights to properties are called equities. Equities are of two types: the right of creditors and the right of owners. The equities of creditors represent debts of the business and are called liabilities. The equities of the owner is called capital, proprietorship or owner's equity.

ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.

CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN

IQRA STUDY CENTRE - What is Accounting VI

2011-06-13T16:35:00.000+05:00

IQRA STUDY CENTRE - What is Accounting VI

IQRA STUDY CENTRE - KARACHI UNIVERSITY HAS ANNOUNCED RESULT OF B.COM REGULAR 2010

2011-06-10T17:53:00.000+05:00

IQRA STUDY CENTRE - KARACHI UNIVERSITY HAS ANNOUNCED RESULT OF B.COM REGULAR 2010

IQRA STUDY CENTRE - WHAT IS ACCOUNTING V

2011-05-30T12:57:00.000+05:00

IQRA STUDY CENTRE - WHAT IS ACCOUNTING V

MA ECONOMICS: Measures of Variation

2011-05-30T08:27:00.000+05:00

MA ECONOMICS: Measures of Variation

IQRA STUDY CENTRE - what is accounting IV

2011-05-15T14:35:00.000+05:00

IQRA STUDY CENTRE - what is accounting IV

Rewards That The Accountant Can Provide A Company Operator

2011-05-12T11:33:00.000+05:00

MA ECONOMICS EXTERNAL COACHING CLASSES.
MICRO ECONOMICS, STATISTICS & MACRO ECONOMICS.
GUESS PAPERS AND NOTES ARE AVAILABLE, PAST PAPERS FROM 1996 ALSO AVAILABLE.
0322-3385752

According to some scientific studies the quantity of single professionals carries on growing. Unlike the past, whenever poor organizing along with a insufficient management techniques caused the disappointment associated with businesses, business people nowadays are located being assembling clubs that improve effectiveness and supply help with regard to growth of their particular company. There are several important participants, including an accountant that need to become area of the overall staff.

Here are 5 ways an accountant can make a difference inside the performance of the enterprise.

Trustworthy Expert. Working a company entails coping with issues relating to financial situation and also producing decisions which may be challenging. Entrepreneurs have to have a expert which will listen to concerns within self-assurance. Anyone needs to offer dependable expert opinions in addition to comments that's impartial. Regarding have confidence in, reliability and integrity, business people use an accountant.

Smart Lawyer. Each day business people encounter intricate choices. It is necessary that proprietors have a individual that has the capacity to information these by means of these kinds of rocky routes. To prevent the dog owner coming from building a severe mistake in the monetary globe, the actual accountant offers advice upon concerns including lucrative prices designs, expense decisions, as well as tax concerns in addition to assets planning and economic forecasting.

Team Member. The skills of an accountant are usually diverse and their particular encounters broad. They can aid businesses with a route of much better efficiency. Most of the specialists could have each general company knowledge in addition to specialize in specific kinds of organizations and also industries. As a member of the c's, the actual accountant can offer expertise and also knowledge towards the organization so as bottom reinforce the particular supervision, marketing and also authorized goals. As the accountant helps owners regarding starting businesses, the accountant may supply assistance with regard to planning, investigation as well as progression of the business.

ECONOMICS OF ICMAP, ICAP, MA-ECONOMICS, B.COM.
FINANCIAL ACCOUNTING OF ICMAP STAGE 1,3,4 ICAP MODULE B, B.COM, BBA, MBA & PIPFA.
COST ACCOUNTING OF ICMAP STAGE 2,3 ICAP MODULE D, BBA, MBA & PIPFA.

CONTACT:
0322-3385752
R-1173,ALNOOR SOCIETY, BLOCK 19,F.B.AREA, KARACHI, PAKISTAN.

Connection. Using the large numbers of jobs required of economic owners they often times have a problem remaining abreast of regulations regarding finances. Any time changes happen which get a new company, the particular accountant will be the person that will serve both because interpreter and also sharer regarding regulatory info. The particular accountant works together with the owner so that you can develop a policy for finances that will both fulfill the existing challenges as well as result in the company to grow within profitability.

Link. The actual accountant maintains his / her finger around the heartbeat with the organization to monitor health. Certainly one of their main tasks is to make sure that funds runs are sufficient. The an accounting firm perform to construct interactions and rehearse equipment to evaluate the time from the proprietors to be able to start to see the business increase.

MA ECONOMICS EXTERNAL COACHING CLASSES.
MICRO ECONOMICS, STATISTICS & MACRO ECONOMICS.
GUESS PAPERS AND NOTES ARE AVAILABLE. PAST PAPERS FROM 1996 ALSO AVAILABLE.
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IQRA STUDY CENTRE - What is Accounting III

2011-05-12T08:41:00.000+05:00

IQRA STUDY CENTRE - What is Accounting III

Oligopoly

2011-05-11T08:32:00.002+05:00

MA ECONOMICS EXTERNAL COACHING CLASSES.
MICRO ECONOMICS, STATISTICS & MACRO ECONOMICS.
GUESS PAPERS AND NOTES ARE AVAILABLE
0322-3385752

An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high. Firms within an oligopoly produce branded products (advertising and marketing is an important feature of competition within such markets) and there are also barriers to entry.
Another important characteristic of an oligopoly is interdependence between firms. This means that each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions. This creates uncertainty in such markets - which economists seek to model through the use of game theory.
Game theory may be applied in situations in which decision makers must take into account the reasoning of other decision makers. It has been used, for example, to determine the formation of political coalitions or business conglomerates, the optimum price at which to sell products or services, the best site for a manufacturing plant, and even the behaviour of certain species in the struggle for survival.
The ongoing interdependence between businesses can lead to implicit and explicit collusion between the major firms in the market. Collusion occurs when businesses agree to act as if they were in a monopoly position
Mergers

• While many oligopolies have emerged through the growth of dominant firms in a certain industry, many have also emerged through mergers.
o Ex.steel, airlines, banking, and entertainment industries
• Merging of two or more competing firms is beneficial in that it may increase their market share significantly, and thus achieve greater economies of scale. In this way, competition can also be reduced.
• Firms may also merge hoping to achieve monopoly power.
• The larger firm that results from a merger would have greater control over market supply and price than a few smaller firms.

The Four Firm Concentration Ratio

• Is the scale that determines whether a industry is monopolistic competition or oligopoly. If the combination of market share of the four largest firm in a single industry is equal or greater than 40%, the industry is consider as oligopoly.
• A concentration ratio reveals the percentage of total output produced and sold by the industry's largest firms

MA ECONOMICS EXTERNAL COACHING CLASSES.
MICRO ECONOMICS, STATISTICS & MACRO ECONOMICS.
GUESS PAPERS AND NOTES ARE AVAILABLE
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Herfindahl Index (Herfindahl-Hirschman Index or HHI,)

• The HHI measures of the number and size of firms in ratio to the industry. It serves as an indicator of the amount of competition within a market. It is defined as the sum of the squares of the market shares of each individual firm
•

Main Characteristic:
(See the text book for a complete list of features. These are the essential elements.)

Few firms:
1. Each firm is a large enough part of the market that the behaviour of one firm has a large impact on the demand curve of the others.
2. The result is that the firms do not have stable demand curves. If Pepsi changes its price, Coka Cola’s demand curve shifts.
3. As a result the method of finding the profit maximising output by comparing the firm’s costs to the firm’s demand curve is complicated or unworkable. Pepsi can decide on its best price and output, but then Coke will react and change its price or output. That will shift Pepsi’s demand curve, changing its best strategy and so one and so on.

The ordinary model of the firm is less applicable, because the demand curve of one firm depends on the behaviour of other firms. If Pepsi introduces a price cut, the Coke will lose large numbers of customers. The price of a substitute will have changed

If Pepsi raises its price, Coke’s demand curve shifts out. Coke won’t mind, but Pepsi will very likely find the quantity it sells falls very sharply. If Pepsi lowers its price, it will likely win many customers from Coke and have a very large increase in total revenue. Coke’s demand curve will shift in sharply and Coke will be very unhappy.
Coke is very unlike to stand by and let Pepsi undercut its price. If Pepsi insists on reducing its price, Coke will very like have to match the cut. When Coke matches Pepsi’s price, the other things equal assumption doesn’t hold. Pepsi’s price reduction causes an equally large change in price by Coke, and Pepsi’s demand will not increase nearly so much.

Common Behaviours:
1. Fix prices and act like a monopolist.
a. In some nations, can sign a contract and form a cartel that sets a price and assigns an output to each firm.
b. It may be profitable for some firm to ‘cheat’ and try to sell a larger quantity, even at a lower price. So cartels are unstable.
2. Enter into competition which results in relatively low prices. Depending on the nature of the market for the product, expenditures on advertising, packaging and product development may be high.
3. Compete on quality, advertising, packaging or other non-price characteristics.
a. This behaviour avoids the tendency of price competition to reduce profits.
b. It has proved to be a more stable behaviour than cartels.
c. Free trade increased price competition in automobiles and many other commodities.
Game theory:
A method of analysing behaviour in an oligopoly. It plots out the strategies of firms. Each firm plots out its best behaviour, depending on what the other firm does. It’s like two people arrested for a crime. If neither confesses they both go free. But the first one to confess receives a sentence of 3 months. The other receives a sentence of 3 years. Most likely they will each rush to be first to confess. They would be better off if both kept quiet, but that strategy requires a very high degree of trust. – Now if the mafia lurks in the background and promises to shoot whoever confesses, they will keep quiet.

In oligopoly the ‘confess’ strategy may be to cut prices. The first to cut prices will make the big gains in the market. The one who maintains a fixed price will take a large loss. So, if there is no equivalent to the ‘mafia’ both will rush to cut prices. However, there may be something like the ‘mafia’ to prevent price cutting. The biggest, strongest, lowest cost firm may be able to really hurt a smaller, weaker firm by cutting prices in its home market, or by maintaining a low price until the weak firm goes bankrupt. It is costly even for the big firm, but may discourage the small firm from even thinking about cutting prices.
Main Point:

Oligopolistic behaviour is complex – and lots of fun.

Each firm behaviour regarding price, quantity, advertising, or product development influences the other firm’s profitability.

As a result, firms can not make a decision without influencing the demand curve of its rivals. As a result, the rivals most desirable choice changes. They will respond, perhaps retaliate is a better word.

A firm must consider the reaction of its rivals when it chooses its behaviours.

In a static, well established business with good understanding among the firms, they may behave like a monopoly.

In a more dynamic industry, firms are likely to want to make sure they keep their share of the dynamic market growing.

In any case, some young scalawag with a new low cost firm may upset the apple cart. If it has a substantially superior product, or substantially lower costs, then it may be able to cut prices or just expand sales and encroach on other firms and be safe from retaliation.

MA ECONOMICS EXTERNAL COACHING CLASSES.
MICRO ECONOMICS, STATISTICS & MACRO ECONOMICS.
GUESS PAPERS AND NOTES ARE AVAILABLE
0322-3385752

IQRA STUDY CENTRE - What is accounting II

2011-05-10T08:51:00.000+05:00

IQRA STUDY CENTRE - What is accounting II

IQRA STUDY CENTRE - WHAT IS ACCOUNTING I

2011-05-09T08:56:00.000+05:00

IQRA STUDY CENTRE - WHAT IS ACCOUNTING I

IQRA STUDY CENTRE - INTERMEDIATE GENERAL AND COMMERCE PRIVATE EXAMS FROM 21ST JUNE.

2011-05-08T12:22:00.000+05:00

IQRA STUDY CENTRE - INTERMEDIATE GENERAL AND COMMERCE PRIVATE EXAMS FROM 21ST JUNE.

IQRA STUDY CENTRE - Accruals and Deferrals

2011-05-06T19:14:00.000+05:00

IQRA STUDY CENTRE - Accruals and Deferrals

IQRA STUDY CENTRE - BANK RECONCILIATION STATEMENT

2011-05-01T22:34:00.000+05:00

IQRA STUDY CENTRE - BANK RECONCILIATION STATEMENT

IQRA STUDY CENTRE - DATE SHEET/SCHEDULE OF INTERMEDIATE EXAMS KARACHI

2011-04-28T08:04:00.000+05:00

IQRA STUDY CENTRE - DATE SHEET/SCHEDULE OF INTERMEDIATE EXAMS KARACHI

IQRA STUDY CENTRE - MARGINAL COSTING

2011-04-27T21:48:00.000+05:00

IQRA STUDY CENTRE - MARGINAL COSTING

IQRA STUDY CENTRE - Classical_Monetary_Theory

2011-04-25T08:23:00.000+05:00

IQRA STUDY CENTRE - Classical_Monetary_Theory

IQRA STUDY CENTRE - Monetary and fiscal policy in a closed economy

2011-04-23T11:19:00.000+05:00

IQRA STUDY CENTRE - Monetary and fiscal policy in a closed economy

IQRA STUDY CENTRE - FINANCIAL ACCOUNTING

2011-04-16T07:55:00.000+05:00

IQRA STUDY CENTRE - FINANCIAL ACCOUNTING

FRESH COACHING CLASSES OF MA ECONOMICS EXTERNAL,KARACHI UNIVERSITY

2011-04-15T12:51:00.001+05:00

FRESH COACHING CLASSES OF MA ECONOMICS EXTERNAL KU

MICRO ECONOMICS
STATISTICS
MACRO ECONOMICS

CONTACT:

KHALID AZIZ
0322-3385752

IQRA STUDY CENTRE - DATES OF SUBMISSION OF EXAMINATION FORMS MA-EXTERNAL KARACHI UNIVERSITY

2011-04-13T07:34:00.000+05:00

IQRA STUDY CENTRE - DATES OF SUBMISSION OF EXAMINATION FORMS MA-EXTERNAL KARACHI UNIVERSITY

IQRA STUDY CENTRE - ADMISSIONS OF B.COM REGULAR & PRIVATE 2011

2011-04-11T20:33:00.000+05:00

IQRA STUDY CENTRE - ADMISSIONS OF B.COM REGULAR & PRIVATE 2011

IQRA STUDY CENTRE - COACHING CLASSES FOR COMMERCE STUDENTS

2011-04-11T20:24:00.000+05:00

IQRA STUDY CENTRE - COACHING CLASSES FOR COMMERCE STUDENTS

IQRA STUDY CENTRE - Inflation

2011-04-11T10:17:00.000+05:00

IQRA STUDY CENTRE - Inflation

IQRA STUDY CENTRE - COACHING CLASSES OF MA EXTERNAL ECONOMICS KU

2011-04-09T10:27:00.000+05:00

IQRA STUDY CENTRE - COACHING CLASSES OF MA EXTERNAL ECONOMICS KU

IQRA STUDY CENTRE - GOING CONCERN

2011-04-06T11:00:00.000+05:00

IQRA STUDY CENTRE - GOING CONCERN

Khalid's Site - Classical Economics

2011-04-05T07:46:00.000+05:00

Khalid's Site - Classical Economics

Khalid's Site - MA ECONOMICS EXTERNAL FINAL RESULT ANNOUNCED

2011-04-04T10:57:00.000+05:00

Khalid's Site - MA ECONOMICS EXTERNAL FINAL RESULT ANNOUNCED

Khalid's Site - Phillips Curve

2011-04-01T11:13:00.000+05:00

Khalid's Site - Phillips Curve

Khalid's Site - Introduction to Law

2011-03-31T10:59:00.000+05:00

Khalid's Site - Introduction to Law

Khalid's Site - Capital Budgeting

2011-03-29T08:31:00.000+05:00

Khalid's Site - Capital Budgeting

Khalid's Site - COACHING CLASSES OF MA EXTERNAL ECONOMICS KU

2011-03-28T10:28:00.000+05:00

Khalid's Site - COACHING CLASSES OF MA EXTERNAL ECONOMICS KU

MA ECONOMICS EXTERNAL KARACHI UNIVERSITY.COACHING CLASSES

2011-03-25T08:44:00.002+05:00

MA ECONOMICS EXTERNAL KARACHI UNIVERSITY

COACHING CLASSES

PREVIOUS

MICRO ECONOMICS
ADVANCED STATISTICS FOR ECONOMICS

FINAL

MACRO ECONOMICS

JOIN NOW

KHALID AZIZ

0322-3385752
0300-2540827

R-1173-ALNOOR SOCIETY, BLOCK 19, F.B.AREA KARACHI NEAR POWER HOUSE.