## Knowledge in Chartered Accountancy

Accounting cycle

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.&nbsp; 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.&nbsp; 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.&nbsp;&nbsp;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

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.&nbsp; 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.&nbsp; 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&nbsp;undervalued&nbsp;or overvalued, depending on the ratio. For example, if the average&nbsp;P/E ratio&nbsp;of all companies in the S&amp;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&nbsp;overvalued&nbsp;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&nbsp;utilities&nbsp;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&rsquo;s financial situation or performance. Analysts engage in extensive number-crunching of the financial data in a company&rsquo;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&nbsp;inventory turnover&nbsp;for the retail sector and&nbsp;days sales outstanding&nbsp;(DSOs) for technology companies. &nbsp; &nbsp;

Types of Invoices required under GST

GST Insights

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. &nbsp; GST would normally be payable on the &lsquo;transaction value&rsquo;, 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&nbsp; 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

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.