Accounting cycle by christopher j skousen. #ca#account#cycle
Cash Flow Statement
Cash flow statement is concerened with the flow of cash in and out of the organisation. The statement captures both operating results and accompanying changes in the balance sheet. The analysis of the statement is done majorly to determine the short term viability of the organisation to pay the bills. International Accounting Standard 7 (IAS 7) is the standard that deals with cash flow statements. Few of the stakeholders that are interested in the cash flow statement are: 1) Accounting Personnel 2) Potential lenders and creditors 3) Potential Investors 4) Shareholders The cash flow statement has been devided into three components, i.e., cash flow from operations, cash flow from investments and cash flow from financing activities. Operating activies include those activities that are issential to run the organisation, i.e., purchasing raw material, building inventory, advertising etc. Investing activies on the other hand include purchase and sale of asstes, loans given etc. While financing activities include inflows and outflows related to the investors such as banks and shareholders. Outflows majorly include the interest and dividend given. There are two methods of preparing the cash flow statement, i.e., Direct Method and Indirect Method. Under Direct Method, statement reports gross cash receipts and payments. There are certain reportings that are done as per the nature of the transaction which cannot be always defined. On the other hand, Indirect Method uses Net-Income as the starting point and then the adjustments are made from the same. An increase in an asset account is subtracted from net income, and an increase in a liability account is added back to net income. This method converts accrual-basis net income (or loss) into cash flow by using a series of additions and deductions. Apart from this, while prepairing the cash flow statement there are certain rules which one needs to follow and should be clearly understood. Thank You
RATIO ANALYSIS A ratio is a relationship between two numerical values representing something. In case of accounting, a ratio is a relationship between two factors of accountancy. For eg.: Current Ratio= Current Assets/Current Laibilities. Ratio Analysis is a quantitative analysis of information cantained in the financial statements of an organisation. The analysis of ratios is basically done to to evaluate various aspects of the organisations operating and financial performances such as its liquidity, profitability, returns to investment etc. Also the trend of these ratios is analyised to determine if they are growing or falling over period. The ratios are even compared across companies in the same sector and even cross sector to compare these sectors. Hence, ratio analysis is the cornerstone to fundamental analysis. While there are several financial ratios, most investors are familiar with the key ratios namely current ratios, debt to equity ratio, sales turnover ratio, dividend payout ratio, returns to investment ratio etc. For a specific ratio, most companies have values that fall within a certain range. A company whose ratio falls outside the range may be regarded as grossly undervalued or overvalued, depending on the ratio. For example, if the average P/E ratio of all companies in the S&P 500 index is 20, with the majority of companies having a P/E between 15 and 25, a stock with a single-digit P/E would be considered undervalued, while one with a P/E of 50 would be considered overvalued. Of course, this ratio would typically only be considered as a starting point, with further analysis required to identify if these stocks are really as undervalued or overvalued as the P/E ratios suggest. As well, ratios are usually only comparable across companies in the same sector, since an acceptable ratio in one industry may be regarded as too high in another. For example, companies in sectors such as utilities typically have a high debt-equity ratio, but a similar ratio for a technology company may be regarded as unsustainably high. Ratio analysis can provide an early warning of a potential improvement or deterioration in a company’s financial situation or performance. Analysts engage in extensive number-crunching of the financial data in a company’s quarterly financial reports for any such hints. Successful companies generally have solid ratios in all areas, and any hints of weakness in one area may spark a significant sell-off in the stock. Certain ratios are closely scrutinized because of their relevance to a certain sector, as for instance inventory turnover for the retail sector and days sales outstanding (DSOs) for technology companies.
Types of Invoices required under GST
As per the GST law provisions, a person who is registered under GST is required to issue an invoice/voucher at various points of transactions in the course of business. The nature of these invoices and their requirement is explained below :- Tax Invoice – Every registered person who is liable to charge GST on its outward supplies would be required to issue a tax invoice to its recipients and mention his GSTIN along with details of goods and services supplied by him; Bill of Supply – A registered person who is not required to charge GST on its outward supplies , i.e., he has opted to pay GST under composition scheme or is making supplies of exempted goods or services or is making supplies to an SEZ unit or exporting under Bond, would be required to issue a bill of supply, in place of a tax invoice; Receipt Voucher- On receipt of any advance by a registered person, he will be required to issue a receipt voucher to the recipient on the date of receipt of advance; Refund Voucher- Where an advance has been received against which supplies have not been made by the supplier, refund voucher will be issued by the supplier to the recipient along with the details of supplies and amount refunded; Payment Voucher- If any supply has been received from an unregistered person, then the receiver would be liable to issue a payment voucher to the supplier on the date of payment to supplier, with details of goods/services received by him; Credit Note- Where in respect of a supply, the amount charged in the previous issued tax invoice is found to exceed the value of supply of goods or services, or the goods are returned by the recipient or the goods are found to be deficient from the amount charged, then the supplier shall issue a Credit Note to the recipient with details of excess amount charged; Debit Note- Where in respect of a supply, the amount charged in the previous issued tax invoice is found to be less than the value of supply of goods or services, then the supplier shall issue a Debit Note to the recipient with details of additional amount to be charged. The formats of these invoices/vouchers have been prepared considering all the relevant provisions under GST and it is advisable to display all the details as mentioned in the link above. However, the taxpayers can customize the formats as per their business requirements and convenience, keeping all the required details intact.
Dear Patrons CBEC has issued the final accounts and record rules. Every registered person under the GST law would be required to maintain its accounts and records as follows: · Keep and maintain, at his principal place of business, as mentioned in the certificate of registration, account of— a) production or manufacture of goods b) inward and outward supply of goods or services or both c) stock of goods d) input tax credit availed e) output tax payable and paid f) goods or services imported and exported g) supplies attracting payment of tax on reverse charge h) along with relevant documents including invoices, bill of supply, delivery challans, credit notes, debit notes, receipt vouchers, payment vouchers, refund vouchers and e-way bills · Maintain account of stock in respect of goods received and supplied by him, such as opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and balance of stock including raw material, finished goods, scrap and wastage thereof. · Maintain separate account of advances received, advances given and adjustments made thereto. · Maintain an account containing details of tax payable (including tax payable under reverse charge), tax collected and paid at source, input tax, input tax credit claimed together with a register of tax invoice, credit notes, debit notes, delivery challan issued or received. · Keep particulars of name and complete address of suppliers/ customers to/from he has received/supplied taxable goods or services. · Keep particulars of complete address of the premises where goods are stored including goods stored during transit along with particulars of the stock stored. · Books of account shall be kept at the principal place of business and books of account relating to additional place of business mentioned in his certificate of registration and such books of account shall include any electronic form of data stored on any electronic device. · Any entry in registers, accounts and documents shall not be erased, effaced or overwritten other than those of clerical nature. · Incorrect entry shall be scored out under attestation and correct entry shall be recorded and where the registers and other documents are maintained electronically, a log of every entry edited or deleted shall be maintained. · Volume of books of account maintained manually by the registered person shall be serially numbered. · Registered person manufacturing goods shall maintain monthly production accounts, showing quantitative details of raw materials or services used in the manufacture and quantitative details of the goods so manufactured including the waste and by products. · Registered person supplying services shall maintain the accounts showing quantitative details of goods used in the provision of services, details of input services utilized and the services supplied. · Registered person executing works contract shall keep separate accounts for works contract showing - a) the names and addresses of the persons on whose behalf the works contract is executed b) description, value and quantity (wherever applicable) of goods or services received c) description, value and quantity (wherever applicable) of goods or services utilized d) details of payment received in respect of each works contract e) the names and addresses of suppliers from whom he received goods or services · Accounts and records to be retained until the expiry of seventy-two months from the due date of furnishing of annual return for the year pertaining to such accounts and records · Proper electronic back-up of records shall be maintained and preserved that, in the event of destruction of such records due to accidents or natural causes, the information can be restored within reasonable period of time · Any person engaged in the business of transporting goods shall maintain records of goods transported, delivered and goods stored in transit by him along with GSTIN of the registered consignor and consignee for each of his branches. · Every owner or operator of a warehouse or godown shall maintain books of accounts with respect to the period for which particular goods remain in the warehouse, including the particulars relating to dispatch, movement, receipt, and disposal of such goods Non-compliances · Incase any taxable goods are found to be stored at any place(s) other than those declared without the cover of any valid documents, the proper officer shall determine the amount of tax payable on such goods as if such goods have been supplied by the registered person. This will also attract interest and penalty, as applicable.
Valuation Rules under GST
Dear Patrons, The GST Council has finalised Valuation Rules and the related provisions for determination of value of supply under GST regime. GST would normally be payable on the ‘transaction value’, which is the price actually paid or payable for supply of goods and/or services where the supplier and the recipient are not related and price is the sole consideration of supply. Inclusions: Value of supply shall also include: Taxes other than GST Expenses incurred by recipient in relation to supply Incidental expenses charged at the time of or before the supply. E.g. packing charges Interest, penalty etc. for late payment of consideration Subsidies directly linked to the price excluding subsidies provided by Central and State Government Exclusions : Discounts given before or at the time of supply and duly recorded in the invoice shall not be included in the value of supply. Post-supply discounts shall be excluded from the value of supply provided: it is identified at the time of agreement linked to the relevant invoice ITC attributable to the discount has been reversed by the recipient of supply When the supply of goods and/or services is for a consideration not wholly in money or when the supplier and the recipient are related, then the value of supply shall be determined in accordance with Valuation Rules prescribed under GST which are as follows: Where consideration is not wholly in money: Open market value Sum total of money consideration and further equivalent amount Value of supply of goods/services of like kind and quality 110% of cost Reasonable value Supply of goods and/or services between distinct or related persons: Open market value Value of supply of goods/services of like kind and quality 110% of cost Reasonable value Supply of goods through agent: Open market value or 90% of the price charged for goods of like kind and quality by the recipient to its customer 110% of cost Reasonable value Supply of services in case of pure agent: Expenditure or costs incurred by the supplier as a pure agent of recipient of services shall be excluded from value of supply subject to prescribed conditions.
Valuation of Supplies under GST
Valuation of Supply GST will be levied on the value of supply. In other words to levy GST, correct value of supply is required. What can be part of the value of supply or what does not form part of the value of supply is very important to levy GST. Definitely determination of value of supply is not so easy but I will try to cover all the valuation rules with practical example to make it easy. Relevant provision for determination of Value of Supply Section 15 of the Central Goods & Service Tax Act and Valuation Rule 27 to 35 Meaning: In general meaning, Value of Supply means consideration charged for the supply from recipient. Example: Mr. X is selling a product for Rs. 1,000 to Mr. B. In this example value of supply will be consideration charged i.e. Rs. 1,000. Definition: The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and theprice is the sole consideration for the supply. [Section 15(1)]. We need to understand four important terms involved in the definition. Transaction Value: – Transaction value is the consideration charged from the recipient for supply. Consideration in relation to the supply of goods or services or both includes–– (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; Price actually paid or payable: – It means the consideration paid or to be paid by the supplier for the supply. Condition-1: Supplier and Recipient of the supply are not related: Supplier and recipient should not be related party. Definition of related party is as below: Persons shall be deemed to be “related persons” if Such persons are officers or directors of one another businesses; Such persons are legally recognized partners in business; Such persons are employer and employee; Any person directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting stock or shares of both of them One of them directly or indirectly controls the other; Both of them are directly or indirectly controlled by a third person; Together they directly or indirectly control a third person; or They are members of the same family. Condition-2: Price is the sole consideration: Price will be sole consideration if it is on the arm length price. It means if the price charged which is equivalent to Open Market Value or Fair Market Value then the same will be sole consideration. One important aspect is that both the conditions will apply simultaneously. It means if only one condition is dissatisfied then the actual consideration will be value of supply. If the above conditions are not satisfied then value of supply will be determined with the help of valuation rules. Example: Mr. A is selling a product to Mr. B for Rs. 12,000. Open market value of the product is 24,000. Mr. A & Mr. B is unrelated parties. In this case Value of supply will be Rs. 12,000 as single condition is satisfied. Suppose Mr. A & Mr. B is related parties. Then both the conditions are dissatisfied. Hence valuation rule will apply and Value of supply will be Rs. 24,000 for levy of GST. Inclusions & Exclusions from the value of supply: Inclusion in Value of Supply [Section 15(2)]:Exclusion from Value of Supply [Section 15(3)]: ♠ Any taxes, duties, cesses, fees & charges levied under any law other than GST law if charged separately by the supplier; ♠ Any Amount -Liable to Pay – Supplier -Incurred By – Recipient and -Not included in the price actually paid or payable for the supply ♠ Incidental expenses i.e. Packing & Commission etc. ♠ Interest, Late Fee or Penalty for delayed payment. ♠Subsidies provided by State or Central Government ♠ Discount given before or at the time of supply through invoice. ♠ Discount given after the supply through credit note but -Such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices
Cash Flow Statement
Introduction to Cash Flow Statements.
L&T Annual Report Findings
Findings from annual report of L&T
Cash less Economy
Challanges in making india a cashless economy.
AADHAAR made mandatory
he UIDAI will soon evolve a process for authorised employees of banks, post offices and the government to biometrically sign off Aadhaar enrolment and updation form collection, as the process of applying for the 12-digit identifier moves into such premises. The move is aimed at addressing the security concerns around collection of biometric and other information, Ajay Bhushan Pandey, CEO of the Aadhaar-issuing body, the Unique Identification Authority of India (UIDAI), told . < ..
Ratios of Ambuja Cement
Ratios explained by actual data.