LAW OF VARIABLE PROPORTIONS

Thye producvtion function shows thje maximum quantity of the output that can be produced per unit time for each set of alternative inputs, given the best available production technology avialble. In the short run at least one of factor of production remains fixed. Fir instance , in the case of an agriculture production function, various alternative commodidties of labour or capital per unit of time may be used in realtion a fixed amount of land. The total product curve increases rate first until the point inflection, after which it starts incresing at a decreasing rate, reches its maximum and then starts decling. The average product labour is then obtailed from toal product divided by the number of units of labour / Capital used. The marginal product of labour represents the change in TP per unit change in the quantity of labour capital used.

The shapes of curve determines the shape of the AP and MP curves. The APl at anypoint on the TPl curve is given by trhe slope of the straight line from the origin to that point on the TP curve. The AP curve usually first rises , reaches a maximum , and then falls, but remains positive as long as the TP is positive. The MPl is equal to the slop of the TP curve, reflecting the change in output due to a unit change in inout betweem the two points. The MP curve is also rise first, reches a maximum and then delines. The MP becomes zero when the TP is maximum. This is the law od dimnishing returns.

If labour is factor input considered , the relationship between the APL and MPL curves can be used to define the three stages of production. Stage I starts from the point where the APl is maximum tot he point where the APL maximum tot he point where the MPL is zero.

DEMAND ANALYSIS AND FORECASTING

Demand is crucial fr the survival of any business enterprises. A firm's own profit and or sales depend mainly upon the demand for its product. A management's decision on production, advertising, cist collenction, pricing inventory holdings, etc.all requires an anlysis of demand. Demand anlysis attempts to identify and measure the factors that determine sales, on the basis of which alternative methods of manuplating or managing demand can be worked out. Demand forcating attempts to estimate the expecterd future demand for a product, which helps to plan production better. In this context, it is important to understand the types and determinants of demand and their relative importance Demand is broadly classified is :

• Demand for consumersgoods and producers goods.
• Demand for perishable and durable goods.
• Derived and automomous demands.
• Firm and industry demands, and
• Demand by total market and by market segments.

THEORY OF DEMAND

The theory and anlysis of demand provides several useful insights for business decision making. Demand for a commodity is defined as the quanity a consumer is willing to purchase at the prevalling price, given sufficient purchasibng power or income for that purpose. As against the demand of an individual consumer or house hold, the manager of a firm may consider the market demand which is the aggeregation of demand levels of all the consumers at a given price.

CASH TO CURRENT ASSET RATIO

Effeicient management of the inflow and outflow of cash palys a curial role in the overall performence of a business. Cash is the most liquid form od\f assets which safeguards the security intrest of a business. Cash including bank balance plays a vital role in the total networking capital. The ratio of cash to working capital significance the proportion of cash to the total net working capital and can be calculated by dividing the cash including bank balance by the working capital.

Cash to Working Capital Ratio = Cash / Working Capital

Cash is not an end in itself, it is a means to achieve the end. Therefore, only a required amount of cash is necessary to meet day to day operations. a higer proportion of cash may lead to shrinkage of profits due to idleness of resources of a firm.

CURRENT RATIO

The mosrt widely used measure of liquid position of an enterprise is the current ratio. The ratio os the firm's current assets to current liabilities. It is calculatd by dividing current assets by current liabilities:

Current ratio = Current assets / Current Liabilities

The current assets of a firm represent those assets which can be in the ordinary couse of business, converted in to cash wiht in a short period of time, normally mot exceeding one year and include cash and bank balance, marketable securitties, debtors net of provision for bad and doubtful debts, bills receivable and pre-paid expences.

The current liabilities defines as liabilities which are short-term maturing oboligations to be meet, as originally contemplated, wiht in a year, consist of treade creditors, bills payable , bank credit, provison for taxation, dividends payable and outstyanding expences.

Current assets shouid be twice of the current liabilites. If the current assets are two times of the current liabilities, there will be do no adverse effect on business operations when the payment of current liabilitie is made. If the ratio is less than 2, difficultly may be experienced in the payment of current liabilitiew and day to day operations of the business may suffer.

If the ratio is higer than 2, it is vety comfortable for the creditors but, for the concern, it indicates idle funds and lack of enthusiasm for work.

CAPITAL STRUCTURE OR LEVERAGE RATIOS

Finaincial strength the soundness of the financial resources of an organisations to perform its operations in the long run. The parties associated with the organisation are intrested in knowing the financial strenth of the organisations. Financial strength is directly associated with the operational ability of the organisations and its efficient management of resources. The financial strength analysis can be made with the help of the following ratios :

• Debt - Equity Ratio
• Capital Gearing Ratio
• Financial Leverage
• Proprietery Ratio and
• Intrest Coverage

CASH FLOW ANALYSIS

While funds flow anlysis studies the reasons for the changes in working capital by anlysing the souces and application of funds, cash flow analysis paya attentions to changes in cash position that has taken place between two accounting periods. These reasons are not available in the traditional a statement known as a cash flow statement. A cash flow statewment summarises the change in cash position os the concern. Transaction which increase the cash position of the concern are labelled as "inflows" of cash and those which decreases the cash position as " out flows " of cash.

FUNDS FLOW ANALYSIS

The purpose of this analysis is to go beyond an behind the information contained in the financial statements. Income statement tells the quantum or profit earned or loss suffered for a particular accounting year. Balance sheet gives the assets and liabilities position as on a particular date. But im an accounting year a number of financial transactions take a place which have a bearing on the performence of the concdrn but which are not revealed by the financial statements. For E.g: A concern collect finance throug various sources and uses them for various purposes. But these details couid not be known from the financila traditional statements.

Funds flow analysis gives an opening in this respect. All the more, funds flow analysis gives an opening in this respect. If there is an increase on working capital what resulted in the increase and if there is a decrease in working capital what caused the decreases, etc. will be made available through funds flow analysis.

RATIO ANALYSIS

Of all the tools of finanacial anlysis available with a financial anlyst the most important and the most widely used is ratio analysis. Simply started ratio anlysis is an analysis of financial statements done with the help of ratios. A ratio expresses the relationship that exists between two numbers and in financial statement anlysis a ratio shows the relationship between two interrelated accounting figures.

The accounting figures may be taken from the balance shhet and the resulting ratio is called a balance shhet ratio. But if both the figures are taken from profit and loss account ratio. Composite ratio is that which is calculated by taking one figure from profit and loss account and the other figure from balance sheet. A detailed discucssion on ratio analysis is made in the pages to come.

ACCOUNTS PAYABLES OUTSOURCING

Most financial organizations spenda large part of their financial budget on processing Accounts Payables. This is due to the largeky manual effort required to enter invoices in to the accounting system and, if applicable, match those invoices to purchase orders and receipts.

While AccountsPayable is critical to ensure that authorised invoices are paid accurately, it is often not managed to world-class standards due to the time and expences required to implement best practices.

ISs your organizations untilizing Accounts Payable best practices to stay in control? If you can answer YES to the following questions, you are :

• We know how many invoices we receive on a monthly basis ?
• We have definesd and well-docimented business rules for matching invoice to PO's and receipts and approval levels that are followed explicitily by managers and Accounts Payable staff ?
• We catch all duplicates invoices and have very small tolerance for invoices that do not match the PO or receipt ?
• We know the number and dollar value of outourcing invoices (liabilities) befor they are approved ot matched ?
• We know how many of our invoives do not match the PO or receipt and why ?
• We know which of our managers have invoices in their inboxes waiting for approval and their dollar value ?
• We have images of all invoices and can look them up on the web to reduce the volume of phone calls to our staff ?
• Let our vendors llok up invoice informations and payment status on the web to reduce the volume of phone calls to our staff ?

LARGE RETAILER

One of the Largest retailer in its industry, with stores dispersed around the southwest, was facing growth challenges as it continued the consolidation of its industry. The client had plans to add over 150 stores with in 5 years, yet suffered from a lack of accurate and timely financial and operational information due to poor processes and systems. Management recognized that a better information was needed to understand where its strategies were working or not working.

Most importantly, the client was spending valuable management its time handling back office issues and personnel instead of accounting outsourcing and manage its back office. New process were we developed in all areas including daily cash and accounts payable accounting. Comprensive business rules were developed to handle all ecpections and IQ Back office's proprietry and imaging solution was employed to rapidly resove issues with store managers and head quarters.

IQ back office is also implementing a management dashboard and data warehouse to allow to client management to understand what is happening with their business in real-time along every dimension of the business. The client was able to eliminate their accounting department and has saved significantly in its back office costs. Most importantly, client management can now focus on its business, armed with meaningful financial and operationa informations to ensure they make the right decision to grow quickly and profitably.

LARGE DISTRIBUTOR

A Large impoter and distributor of stone, glass, ceramics and peweter was growing very rapidly. It had grown from a small to a mid-sized firm in just a few years. As a result , its internal accounting infraturer had not keep pace. It had an old accounting system with poor reporting capabilities and couid not genet\rate accurate or timely fifnacial statements or operational management information.

Management was basically flying blind,making assimptions about sales, margins and pricing. Additionally, its staff had grown and it had a poor payroll solution for hourly, high-turnover employees. IQ Backoffice worked with the client and external vendors to implement a new accounting system and a new payroll solution. IQ Back office also designed and implemented new business processes for Accounts paybles, Billing, Accounts Receivables, Cash applocation and reporting. We developed comprehensive business rules for processing accounting transactions, as well as closing the books and producing the financial and operational reporting.

We also implemented IQ Backoffice technoligy to allow management, who traveled frequently overseas, to be able to review and approve financial transactions over our secure, web-based application.

AUDITS OF ACCOUNTS PAYABLES

Auditor often focus on the exixtence of approved invoices, expence reports, and other supporting documentation to support checks that were cut. The presence of a confirmation or statement from the suppliers is a reasonable proof the existance of the account. It is not uncommon for some of this documentation to be lost or misfiled by the time the audit rolls around. An auditor may decide to expand the sample size in such situations.

Auditors typically prepare an ageing structure of accounts payable for a better understanding of outstading debts over certain periods ( 30,60,90 days, etc). Such structure are helpful in the correct presentation of the balance sheet as of year end.

ACCOUNTS PAYABLES

Accounts payable is a file or account that contain money that aperson or company owes to suppliers, but has not paid yet. when you receive an invoice you add it to the file, and then you remove it when you pay. Thus, Account paybles is a form credit that suppliers offer to their purchases by allowing them to apy for a product or service after it has already been received.

The profession is unregulated, though there are internation standard setting bodies, an example of which is the INTERNATIONS ACCOUNTS PAYABLE PROFESSIONALS (IAPP). an assiciation of more than 5000 members in the United States, Cananda, and U K.

" Account payable is a strategic, value - added accounting fucntion that performs the primary non-payroll disbursement function in an organisation. As such, the AP operation plays a critical role in the financial cycle of the organisations. AP enables an organisation to the accomplish by bringing a systematic, disciplaned approach to evaluate and improve the effectiveness of the entire payable process. In addition to the traditional AP activities where by liabilities to third party entries (suppliers, vendors,taxing authorities) are recognized and paid based on the credit policies agreed to between the company and its supplies.AP departments have taken on much wider roles including fraud prevetion, cost reduction, workflow system solution, cashflow management system, internal controls and vendors financing".

BANK RECONCILIATION

A company's general ledger account cash contains a record of the transactions (checks writen, receipt from customers etc) that involve its checking account. The bank also creartes a record of the companys checking account when it processes the companys checks, depositrs, service charges and other items. Soon after each month ends the bank usually mails a bank statement to the company. The bank statement lists the activity in the bank acount during the recent month as well as the balnces in the bank account.

When the company receives its bank statement, the company shouid verify that the amounts on the bank statement are consistent or compitable with the amounts in the companys Cash account in its Generel Ledger and vice versa. This process of confirming the amounts is referred to as "RECONSILING THE BANK STATEMENT, BANK STATEMENT RECONCILIATION, BANK RECONCILIATION, or doing Bank.rec" The benefit of reconciling the bank statement is knowing that the amount of cash reported by the company is consistent with the amount of cash shown in the bank's records.

After you adjust the balance per bank to be the true balance and after you adjust the balance per books to also be the same true balance, you have reconsiled the bank statements. Most accountants wouid sinply say that you have done the bank reconciliation or the bank rec.

KINDS OF ACCOUNTS

All the accounting heads used in an organigational accounting system are divided in to 3 kinds/types.

1. PERSONAL ACCOUNT
2. NOMINAL ACCOUNT
3. REAL ACCOUNT

PERSONAL ACCOUNT : The elements or accounts which represent persons and organigations.

NOMINAL ACCOUNT : The elements are accounts which represent expences, losses, incomes, gains.

REAL ACCOUNT : The elements or aaccounts ehich represent assets. In the initial stages of lwearning accounting, we can assume real account to be those related to tangible aspects.

AN ACCOUNT SHOUID BE ONE OF THE THREE :

Any elements are or accounts used in an organigational accounting system shouid be one these. Thus, we can say that if an account is not real or persoanl it shouid be a nominal account.

Therefore we may also interpret.

• Nominal account as, the accounts other than Personal and Real accounts.
• Real accounts as, The accounts other than Personal and Nominal accounts.
• Personal accounts as, the accounts other than Real and Nominal accounts.

EXPENCES ACCOUNTS

Most companies have a seperate account for each type of expences they incur. Your company probably incurs pretty much the same expences month after month, so once they are established, the expences accounts won't very much form month to month. Typical exp[ences accounts include.

• Salaries and Wages
• Telephone Expences
• Electric Utilities charges
• Repairs
• Maintanence
• Depreciation
• Intrest
• Rent
• General Expences

INCOME ACCOUINTS

If you have several lines of business, y0u'll probably want to establish an inocme account for each. In that way, you can identify exactly where your income is comnig form. Adding them together yields total revenues.

Typical income accounts wouid be

• Sales revenue form product A
• Sales revenue form product B ( and so on for each product you want tot track)
• Intrest Income
• Income from sale of assets
• Consulting income.

Most companies have only a few income accounts. Thats really the way you want it. Too many accounts are a burden for the accounting department and probably don'y tell mangement what it wants to know. NEvertheless, if there a source of income yu want to track, creat an account for it in the chart of accounts and use it.

INCOME AND EXPENCES

In the chart of accounts (usually after the owners equity section) come the income and expences accounts. Most companies want to keep track of just where they get income and where it goes, and these accounts tell you.

A final reminder: For income accounts, use credits to increase them and debits decrease them. For expences accounts, use debit to increase them and credits to decrease them.

ASSETS AND LIABILITIES

Balance sheet accounts are the assets and liabilities. When we set up your chart of accounts, Thera will be seperate sections and numbering schemes for the assets and liabilities that make upo the balance sheet.

A quick reminder: Increases assets with a debit and decreases them with a credit. Increases liabilities with a credit and decreasedx them with a debit.

Simply stateted, asssts are those things of value that your company owns. The cash in your bank account is an asset. So is the compnay car you drive. Assets are the objects, rights and claims owned by and having value for the firm. Since your company has right to yhe future collection of miney, accounts receivable are an asset - probably a major asset, at that. The machienary on your production floor is also as asset. If your form owns real estate or the other tabgible property, those are considered assets as well. If you were a bank, the loans you make wouid be considered assets since they represnt of right future collections.

Generally the value of intangible aseets in whatever both parties agree to when the assets are created. In the case of patent, the values is often linked to its development costs. Goodwill is often the difference between the purchases price of a company andf the value of the assets acquired.

INCOME STATEMENT

Income statement is preffered to determine the operational position of he concern. It is a statement of revenues earned and the expences incured for earning that revenues. Excess of revenues over ecpenditure is profit and if the expenditure is more than the inocme, there is a loss. The income statement is prepared for a perticaular period., generally a year.

When income statement is prepared for the year ending 31st December 2008, then all revenues and expenditures falling due in the year will be taken into account irrespective of their receipt or payment in the scene outstanding incomes and expences are also included.

The income statement may be prepared in different forms. Manufacturing account is prepared find out the cost of production, in the form of trading account to determine gross profit or gross loss and a profit a profit and loss account to determine net profit and net loass. A statement of reatined earnings may also be prepared to show the distrubution of Profits.

RETAINED EARNINGS

The term "Owners equity" refers to the claims of the business (share holders) against the assets of the firm. IT consist of two elements :

• Paid up share capital, The iontital amount of funds invested by the share holders.
• Reatained earnings/reserves and surplus representing undistributed profits.

The statements of changes in owners equity simply shows be opening balance of each owners equity account, the reasons for increases and decreases in each , and its ending balance. However in most cases, the only item in owenrs equity account that changes significantly is retained earnings and hence the statement of changes in owners equity becomes merely a statement of retained earnings.

A statement of retained earnings is also known as aprofit and loss appropriation account or income Disposal statement. As name suggest it shows appropriations of earnings. The pravious year balance is forst brought forward. The net profit during the side, appropriations like interm dividend paid, praposed dividend and preference and funds.

TYPES OF FINANCIAL STATEMENTS

There are 2 basic financial statements:

1. The position statements or the balance sheet.

2. The income statement or the Profit and Loass account However, Generally Accepted Accounting Principles (GAAP) specify that a full fledged set of financial statements must included:

• A Balance sheet
• An Income Statement
• A Statement of charges in owners account, and
• A Statement of changes in financial position.

MEANING AND CONCEPT OF FINANCIAL ANALYSIS

The term " financial analysis" also known as analysis interpretatin of financial statements refers to the process fo determining financial strengths and weakness of the firm by establishing stategic relationship betweent he items of the balance sheet, profit and loss account and other operative data.
"Financial Statement analysis is largely a study the relationship among the various financial factors in business as discovered by a single set of statements and a study of the trend of these factors as shown in a series of statements" --- Mysers.

ADVANTAGES OF COST ACCOUNTING

The short comings of financial accounting are the advantage of the cost accounting. However, the extent of advantages obtained will depend upon the effeiciency with which cost sustem is installed and also the extent to whih the management is prepared to accept the costing system. The principal advantages of cost accounting are :

1. It reveals profitable and unprofitable activities.

2. It helps in cost control by identyfing the sorces of losses, wastages and inefficiences and fixing the responsibilitities for cost control.

3. It enables measurement of efficiency and to maintain and improve efficiency in alla reas of operartions.

4. It helps in decision making. It provides required data management tot ake decisions on various matters. To replace labour with machine or old old machine with anew one etc.

5. It helps inventory control, with the opeeration of perpetual inventory control system in place, helps in eliminating wastages and ineffeciency in purchase of raw materials.

6. It helps in formulation of policies. Cost accounting provides such information which enables the management of formulate production and pricing policies.

7. It guides in fixing selling price under various conditions.

8. It helps in cost reduction by introducing cost reduction programs.

9. It provides information which helps in estimates and preparation tenders.

10.It provides the use of budgets and enables the management to eliminate ineffeciencies.

COST CONCEPT

The scope of the term cost is extremely broad and general. It is therefore, not easy to define or explain this term. Cost Accountanta, economist and others develop this concept of cost accounting to their needs. This, concept shouid therefore be studied in relation to its purposeand use. In the light of this time the term cost used with references to cost accounting are presented as under. Cost units are usually the unitsa of physical measurements like number, width, area, volume, length, time and value, The following example helps in understanding cost unit.

2007 EXAMINATION PAPERS

1. Is tender an offer ?
2. Distinguish between contract of Indemnity and contract of Gurantee ?
3. Explain Factor ?
4. Define " Complaint" inder Consumer Protection Act ?
5. What are minuters of the meeting ?
6. Define Manufacturing Process ?
7. Define "Out of Employement" ?
8.Central Pollution Control Board ?
9. Explain Sickness Benefit?
10. Write about "Works Committe" ?
11. Explain Lockout in a public Utility Service ?
12. Cancellation of registration of trade union ?

2007 BUSINESS LAW EXAMINATION PAPER

1. (a) Define the term contract and explain the essential of a valid contract ?
(b) An auctioneer in a newspaper that auction of office furniture wouid be held at delhi. B a broker of bombay reached Delhi on the appointed date and time. But the auctioneer with drew all the firniture from the auction. The broker sued him for the loss of time and expences. will he succed ?

2. (a) Dewscribe the position of principal and agent in relation tot hird parties ?
(b) C offers to sell to D a painting which C knows is a good copy of a well known masterpieces. D think that the painting is a original one and that C must be unaware of this, immediately accepts D's is offer. Does this result in a contract ?

3. (a) When does the property in the commodity passes to the buyer especially in the case of specific goods ?
(b) A Delivers a gold necklace to B on "Sales returns" basis. It is agreed between A & B that property is not to pass to B until he has paid the price for the necklase. with out paying the price, B sells the necklace to C. Does C get a good title to the neclace ?

4. (a) What is " Doctrine of Indoor Management"? Explain the exceptions to the Doctrine ?
(b) Under the articles, the directors of a Co. had power to borrow up to Rs. 10,000 with out the concent of the general meeting. The directors themselves lent Rs. 35,000 to the company with out such consent and took debetures. IS the company liable for Rs 35,000 ?

5. (a) Explain in detail the "Welfare" provisions of the Factories Act ?
(b) In wives of three work men are employed in a textile factory to work in place of their husbands for about half an hour everyday after 7p.m., while the latter take meals brought by them. Discuss if there is a violation of any provisions of the Factories Act 1948 ?

6. (a) How a court of Enquiry is constituted ? Explain itrs duties and powers ?
(b) A workman, on completion of the day's work, was going home on the way he was injured by an accident, with out any fault or negligence on his part. Is the employer liable to pay compenstion ?

TYPES OF FINANCE

1. BUSINESSS FINANCE
2. DIRECT FINANCE
3. INDIRECT FINANCE
4. PUBLIC FINANCE
5. PRIVETE FINANCE
6. CORPORATE FINANCE
7. FINANCE IN RELATION TO OTHER ALLIED DISCIPLINES

FUNCTION OF FINANCE

According to paul. Hasings "Finance is the management of the money affairs of a company. It includes determining what has to be paid for and when raisings the money on the best terms available, and devoting the available fundsto the best uses. Kennetch Midgely and ronald burns state : "Finance is the process of or organising the flow of funds so that a business can carry out objectives in the most efficient manner and meet its obiligations as they fall due".

Finance squeezes the most out of every available rupee. To get the best out of the avaialable funds is the major task of the finance, and the finance manager performs this task mst effectively if he is to be successful. In the words of Mr. A.L.Kingshott, " Finance is the common denominatior for a vast of range corporate objectives, and the major part of any corporate plan must be expressed in financial terms".

The description of finance may be applied to money management provided that following three objectives are properly noted :

Many activities assiciated with finance such as saving, payment of things, giving or getting credit, do not necessarly require the use of money. In the first place, the conduct of internatinal trade has been facilized. The development of the [ecunairy unit in the various commercial nations has given rise to an international denominator of values. The pecunairy unit makes possibles a fairy accurate directing of capital to those parts of the world where it will be most productive.

ACCOUNTS BASIC TERMS AND CONCEPTS

DEBIT AND CREDITS : These are the backbone of any accounting system. Understand how debits and credits work and you'll understand the whole system. Every accounting entry in the general ledger contains both a debit and credit. Further, all debit must equal all credits. if they don't the entry out of balance. Out of balance entires throw your balance sheet out of balance.

The accounting system must have a mechanism to ensure that all entries balance. Most automated accounting system won't let you enter an out of balance entry they'll just beep at you untill you fix you error.

Depending on what the type of account you are dealing with, a debit or credit will either increase or decrease the account balance.

INCOME STATEMENTS : " An income statements, otherwise known as a profit and loss account statement, is a summary of company's profit or loss during any one given period of time, such as a month, three month, or one year."

BALANCE SHEET : A balance sheet is a snap shot of a business. Financial condition of a specific moment in time, usually at the close of ac accounting period. A balance sheet compramise assets, liabilities, and owners or stockholders equity.

DEPRECIATION :The concept of depreciation is really petty simple. For example let's say you purchase a truck for your business. The truck losses value the minute you drive it out of the dealership. The truck is considered an operational asset in running your business.

INVENTORY ACCOUNTING : Inventory Accounting may sound like a huge undertaking but in reality, it is quite straight forward and easy to understand. you start with inventory you have an hand. No matter when you sell product, the value of your inventory will remain constant based on accepted rational methods of inventory accounting.

RETAINED EARNINGS

The term retained earnings means the accumlated excees of earnings over losses and dividends. The statement of retained earnings is generally included with almost any set of financial statements although it is not concidered to be one of the major financial statements.

A typical statement if retained earnings starts with the opening balances of retained earnings, the net income for the period as an addition, the dividends as a deduction, and ends with the closing balances of retained earnings.

The statement may be prepared and shown on a seperate sheet or included at the bottom of the income statement. The balance shown by the income statement is transferred to the balances through the statement of retained earnings after making necessary appropriations.

This statement thus links the income statement to the retained earnings item on the balnces sheet. This statement can be prapared "T" shape also when it is called as "profit and loss appropriation account". Illustration "F" gives the statementof retained earnings.

THE FINAL ACCOUNT

The primary objective of any business concern is to earn income. Ascertainment of the periodic income of a business enterprises is perhaps the important objective of the accounting process. This objective is achieved by the preparation of profit and loss account or the income statement. Profit and loss account is the generally concidered to be greatest and interest and importence to end users of accounting information.

The profit and loss account enables all considered to find out whether the business operations have been profitable or not during a particular period usually the profit and loss account is accompained by the balance sheet as on the last date of the accounting period for which the profit and loss account is prepared. A balance sheet shows the financial position of a business enterprises as of a specified moment of time.

It contains a list of the assets, the liabilities and the capital of the business entity as of a specified date, usually at he close of the last day of a month or a year. While the profit and loss account is categorized as a flew report, the balance sheet is categorized as a ststus report (as on particular date).

FEATURES OF TALLY

• Accounting with out any account codes.

• Maintains complete range of Books of Accounts. Final Account like Balance sheet, Profit and Loss Account Statements, Cash and fund flows, Trial Balance and others.

• Provides option to post stock value from inventory directly to Balance sheet and profit and Loss a/c as per the valuation method specified by user. This greatly simplifiles the procedure and one gets the Final accounts which is in true with the stock statements of the Inventory System.

• Provides Multiple Reports in diverse formats.

• Various options for intrests calculations.

• Allows accounts of multiple companies simultaneously.

• Multiple currencies in the same transactions and viewing all reports in one or more currency.

• Unlimited budgets and periods, user definable security levels for access control and audit capabilities to track malafide changes.

• Allows import and export of data fromor to other systems.

• Online help.

• Backup and Restore of Data.

• Facilities printing of cheques etc.
  

INTRODUCTION TO TALLY PACKAGE

Today an increasingly large of companies have adopted mechnized accounting. the mail reasons for this development are that :

1. The size of firms have become very large resulting in manifold increase accounting data to be collected and processed.
2. The requirements of modern management which want detailed analysts in the many ways, of the accounting and statistical for the efficient discharge of their duties.
3. Collection of statistics not only for the form's own use but also for submissions to various official authorities.

In the context, the use of computer in accounting is worth mentioning. Late 80's and early 90's was an era of Financial Accounting Software. many software developers offered seperate financial and inventory software to take care of the needs of the concerns but users wanted a single that will take care of production and inventory management.

They waned a single software where if an invoice is entered. That will update accounts as wee as inventory informations. here Tally comes in handy.

Tally is one of the acclaimed accounting. software which large user base in india abroad, which is continuosly growing. There is good potential for tally professionals even in small towns. Tally which is a vast software covers a lot of areas f0or various types of industries and is loaded with options. So, every organizations need a hardcore Tally professionals to exploit its full capabilities and functionally to implement Tally. Tally which is a financial and Inventory Management Sysytem is developed in india using Tally Develoment languages tally has been created by Pentronics (P) Limited, Bangalore.

CLOSING ENTRIES

Periodically, usually at the end of the accounting period, all revenue and expences account balances are trasnferred to an account called income summary or Profit and Loss account and are then said to be closed. The balances in the Profit and Loss account, which is the net income or net loss for the period, is then transferred to the capital account and thus the profit and loss account is also closed.

In the case of corporation the net income ot net loss is transferred earnings account which is apart of owners equity. The entries which are passed for transferring these accounts are called as closing entries. Because of the periodic closing of revenue and expences account, they are called as temparaory or nominal accounts.

On the other hand, the assets, liabilities and owener's equity accounts the balances of which are shown on the balance sheet and are carried forward from year to year are called as permanent or real accounts.

In our example sales account and interest account are revenues, and purchases account and and salaries account expences. Purchases account is and expences because the entire goods have been sold out in the accounting period itself and hence they become cost of goods sold out.

This aspects would become more clear when the reader proceeds to the lessons on profit and loss account.

THE TRIAL BALANCE

The trial Balance is simply a list of the account names and their balance as of a given moment of time with debit of time with debit balance in one column and credit balances in another column. It is prepared to ensure that the mechanics of the recording posting of the transaction have been carried out accurately.

If the recording and posting have been accurate then the debit total and credit total in the Trial balance must tally thereby evidencing that in equality of debits and credits has been maintained. In this connection it is but proper to caution that mere agrements of the debit and credit total in the Trial balance is not conclusive prrof of correct recording and posting.

There are amny errors which may not efect the agreement of Trial Balance like total ommission of a transaction, posting the right amount on the right side but of a wrong account etc.

THE LEDGER

A ledger is a set of account. It contains all the accounts of a specific business enterprises. It may be kept in any of the following two forms :

• Bound ledger and
• Loose Leaf ledger

A bound ledger is kept in the form of book which contain all the accounts. These days it is common to keep the ledger in the form of loose - leaf cards. This helps in posting transaction particularly when mechanized system of accounting is used.

ACCOUNTING KEYWORDS

ACCOUNTING : Language of business.

FINANCIAL ACCOUNTING : Concerned with recording of transaction business enerprises and the periodic preparation of various reports from such records.

MANAGEMENT ACCOUNTING : Accounting for internal management needs.

COST ACCOUNTING : Accounting for determination and control of costs.

ACCOUNTING PRINCIPLES : The body of doctrines commonlyassociated with the theory and procedure of accounting.

ACCOUNTING CONCEPT : Accounting postulates i.e. necessary assumptions or conditions upon which accounting is based.

ACCOUNTING CONVENTIONS : Conventions signfies the customes or traditions which serve as a guide to the preparation of accounting statements.

ACCOUNTING STANDARDS : Standards to be b=observed in the presentation of financial statements.

DEBIT AND CREDIT

The left hand side of any account is called the debit side and the right side is called credit side. Amounts on the left hand side of an account, regardless of the title of the account are called debits and the amount enters on the right side of an account are called credits. To debit (Dr) an account means to make an entry on the left hand side of an account and to credit (Cr) an accounbt means to make an entry on the right hand side. The words debit and credit have no other meaning in accounting, though in common balance: Debit has negative connoation, while credit has positive connoation.

Double entry system of recording business transaction in universally followed. In this system for each transaction the debit amount ,ust equal the credit amount. If not, the recording of transaction is incorrect. The equality of debits and credits is maintained in accounting simply by specifying that the left side to be used for recording decreases. The right side of liability and capital account is to be used to recording decreases. The account balances when thet are totaled, will thern confirm to the equations :

• Assets = Liabilities + Owners's Equity
• Debit = Credits.
  

WHAT IS THE ACCOUNT ?

The transaction that take place in a business enterprise during a specific period may effect increases and decreases in assets, liabilities, capital, revenues and expences items. To make upto date information available when needed and to be able to prepare timely periodic financial statements. It is necessary to maintain be seperate record for each item. They type of records devoted exclusively to record increases and decreases in cash, another one to records increases and decreases in supplies, a third one on Machioanry, etc. They type of record that is traditionally used for this purpose is called as account. Thus an account is a statement wherein information relating to an item or a group of similar items are accumlated. The simplest form of an account has three parts.

• A title which gives the name of the item recorded in the account.
• A space for recording increases in the amount of the item.
• A space for recording decreases in the amount as a "T" account because of its similarly to the letter "T" as illustrated below:

LEFT SIDE RIGHT SIDE
( Debit Side ) ( Credit Side )

THE PROFESSION OF ACCOUNTING

Accountency can very well be viewed as a profession with stature comparable to that of law or medicine or engineering. The rapadi development of accounting theory and techniques especially after the late thirties of 2th centuary has been accompained by an expansion of the career opportunities in accounitng and an increasing number of professionally trained accountants. Among the factors contributing to this growth has been the increase in number, size and complexly of business enterprises. The impositions of new and clearingly complex and taxes and other governmental restriction on business operations. Coming of the nature of accouting function, it is not doubt a service function. The chief accounting department holds a staff position which a quite in contra distinction to the roles played by productions or marketing executives who told line authority. The role of the accountant is advicory in character. Although accounting is a staff function performed by professionals with in an organizations.

The ultimately responsibility for the generation of accouting information, whether financial or managerial, rests wuith management. That is why one of the top officers of many business is the financial controllers. The controlles is the person responsible for satisfying either managers demand for management accounting information and for complying with the regulatory demands of financial reporting. With these ends in view, the controller employees accounting professionals employed in a particular business firm are said to be engaged in private accounting. Besides these, there are also accountants who render accounting service on a fee basis through staff accountants employed by them. Theses accountants are said to be enaged in public accounting.

ACCOUNTING TYPES OF INFORMATION CATEGORIES

OPERATING INFORMATION :Operating information we mean the information which is required to conduct the day to day activities. Examples of operating informatin are : Amount of wages paid and payable to employees, information about the stock of finished goods available for sale and each one's cost and selling price, information about amounts owed to and owing by the business enterprises, information about stock of raw materials, spare parts and accessories and so on. By far, the largest quantity of accounting information provides the raw data (input) for financial accounting, management accounting and cost accounting.

FINANCIAL ACCOUNTING: Financial accounting information is intendent both for owners and managers and also for the use of individules and agencies external to the business. The accounting ic concerned with the recording of transaction for a business enterprises and the periodic preparation of various reports from such records. The records may be for general purpose or for a special purpose. A detailed account of the function of financial accounting has been given earlier in this lesson.

MANAGEMENT ACCOUNTING: Management accounting employees both historical and estimated data in assisting management in daily operations and in planning for future operations. it deals with specific problems that confront enterprise managers at various organizational levels. The management accountant is frequently concerned with identyfying alternative courses of action and then helping to select the best one. For e.g the accountancy may help the finance manager in preparing plans for future financing or may help the sales managers in determing the selling price to be fixed on anew product by providing suitable data. Generally management accounting information is used in 3 important management suggestions.

1) Control
2) Co-ordination
3) Planning

Marginal costing is an important technique of management accounting which provides multi dimension that facilities decision making.

COST ACCOUNTING : The industrial revolution in England posed a challenge to the development of accounting as a toll of industrial management. This necessetated the development of costing techniques as a guides to management action. Cost accounting emphasizes the determination and the control of costs. It is concerned primarly with the cost of manufacturing processes. In addition, one of the principal functions of cost accounting is to assemble and interpert cost data, both actual and prospective. for the use of management in controlling current operation and in planning for the future.

All of the activities described above are related to accounting and in all of them the focus is on providing accounting information to enable decision to be made. More about cost accounting can be gained.

ACCOUNTING CONCEPTS

1) BUSINESS ENTITY CONCEPT

2) GOING CONCERN CONCEPT

3) MONEY MEASUREMENT CONCEPT

4) COST CONCEPT

5) DUAL ASPECT CONCEPT ( double entry system)

6) ACCOUNT PERIOD CONCEPT

7) PERIODIC MATCHING

SPECIALLISED ACCOUNTING FIELDS

1) TAX ACCOUNTING

2) INTERNATIONAL ACCOUNTING

3) SOCIAL RESPONSIBILITY ACCOUNTING

4) INFLATION ACCOUNTING

5) HUMAN RESOURCES ACCOUNTING

DEFINITION OF ACCOUNTING

" The process of identifying, measuring and communicating economics information to permit informed judgement and decision by users of the information. This may be considered as a good definition because of its focus on accounting as an aid to decision making".


" Accounting is the art of recording, classifying and summarizing, in a significant manner and in terms of money, transaction and events which are in part at least, of a financial character and interpreting the result there of".


"Accounting is a service society, its function is to provide quantitative information, primarly financial in nature, about economics entities that is useful in making economics decision, in making reasoned choices among alternative courses of action".

BOOK KEEPING AND ACCOUNTING

Book-Keeping is that branch of knowledge which tells us how to keep a record of business transaction. It is considered as an art recording systematically the various types of transaction that occur in a business concern in the books of accounts.
According to Spicer and pegler, " Book-keeping is the art of recording all money transaction, so that the financial option of an undertaking and its relation to both its properties and to outside persons can be readily ascertained". Accounting is a term which refers to a syatematic study of the principles and methods. Accountency and book-keeping are related terms. The former relates to the theoritical study and the latter refers to the practical work.

EVOLUTION OF ACCOUNTING

Accounting is as old as money itself. It has evolved, as have medicines, law and most other fields fo human activity in reponse tot hesocial and economics needs of society. People in all civilizations have maintained various types of records of business acitvities. The oldest known are clay tablet records of the payment of wages in Babylonia around 600 B.C. Accounting was practiced in india 24 centuries ago as is clear from KAutilya's book " Arthsastrs" which clearly indicates the existense and need of propeer accounting and audit.

For the most part, early accounting dealt only withlimnited aspects of the financial operatons of private of governal enterprises. Complete accounting system for an enterprises which came to be called " Double Entry System" was developed in italy in the 15th Centuary. The first known description of the system was published there in 1494 by a Franciscan monk by the name Luca pacioli. The expanded business operations intiated by the industrial Revolution required increasingly large amounts of money which in turn resulted in the development of the corporations from of organizations. As corporations became larger. An increaing number of individual and institutions looked to accountants to provide economics information about these enterprises.

ACCOUNTING METHODS

When set up Payables you choose a primary accounting method. In the payables Options window you can also choose a secoindary accounting method. The accounting method determises types of accounting ectries paybles creats. For each accounting method, cash or accural, you choose a set of books in which you will account for transaction. Set up payable to create accounting method.

CASH BASIS ACCOUNTING : You account only for payments, and do not ecord liability information for invoices. The payment accounting entries typically debit your expences or asset account and credit your cash r cash clearing account. When you creating account entries, Payables might also create for discount taken and foreign currency exchange gains or loss. Payables uses the payment dater as the accounting date for your expences and cash journal entries.

ACCURAL BASIS ACCOUNTING : You create accounting entries for invoicee and payments the invoice accounting entries generally debit your expences or asset account and credit your liability account. For prepayments, Payables creates accounting entries the debit your prepayment account and credit your liability acount.

For prepayment applicatons, payables creates accountoing entries that debit your liability account and credit your prepayment account. Accounting entries typically debit the liability account and credit the cash rcash clearing account.Payables might also creat accounting entries for discount taken and foreign currency exchange gain or loss.

COMBINED BASIS ACCOUNTING: You maintain one set of books fr cash accounting and another for accural basis of accounting. Invoice distributions are recorded in accural set of books and payment didtributions are recorded in cash and accural set of books.

PAYABLE OPTIONS

Use the payable options from to enter set up and defaults for Oracle Payables us follows:

1) Acounting

2) Currency

3) Expences Report

4) Interest

5) Invoice

6) Invoice Tax

7) Matching

8) Payment

9) Supplier

10) Withholding Tax ( see withholding Tax Invoice)

11) Tax Name Defaults

FINANCIAL OPTIONS

Finanacial option is nainly concerned how oracle payables is integrated with purchasing, Asset and Human Resources. You can define defaults from this window to simply supplier entry, Requisition entry, purchase order entry, invoice entry, and automatic payments. Although you only need to define these options and defaults once, you can updatethem at any time.
If youchange an option and it is used as a default value else were in the system, it will only be used as a default for subsequent transaction. you can required to enter defaults for the Accounting Financial Options in the accounting region.
If you do not useencumbarence accounting or budgetary control, you do not need to enter defaults in the encumbarence region. If you do not alsohave oracle purchasing installed. You do not need to enter defaults the supplier-purchasing region. If you do not have Oracle Human Resources installed you are not requried to enter defaults int he Human Resources region. If you enterprise does noe not need to record a VAT registration number, and if you don't use recoverable tax, you don't need to enmter defaults the tax registration.
IF pucashing the only Orqcle application installed at youe site, you are only required to enter information in the following regions. Accountg and supplier purchasing you define your tax defaults in the tax region. IF oracleAssets is the only product you use, you are only required to enter information in the following regions. Supplie, Human resouces, and Accounting.

DATA PROCESSING

Data Processing services are aimed to help you manage your business effectively by systematically organizing your data infomarion coming form devices sources. We convert a large volumes of data in to electronics format and anyother format as per your requirement. We can provide with data in different file format like MS word, MS excel, PDF, Word pefect. IF required we inter connect data so that is easilyavailable to youat the click a button making things more convinent for you.

They have efficiency to provide you with customies serivice that are accurate and of high level matching the ecpect industry standards. We also understand the importence of your sencetive and industry critical data. your data is secure with us and you can be sure of no disclouser.

Programeers and operators with knowledge and experiencing of working in different industries and with the latest technology avialable. Data Processing and other back office service from the foundation for any organigation to move a head and gain competetive edge. Our team has the capability to help you with the overall development with your organization.

MIS REPORTING

MIS Reports form and integral part of nay organigation. Each employee maintains a report of the tasks that have been conducted during the course of the day r of the week. This helps discern the productivity of an employee of a department and organigation as a whole. Reports r dominant base that help in talking some critical decision.

MIS Information r MIS Reporting we provide you with a centralized report management application to save all the required reports in a common place. Spreassheets are created accordingly encompassing all the requires details. The format created in such an easy to use format to help inculate the habit of everyday reporting. IF all the reports of an organigati0n are managed well, it can help you with insightful decision.

It is not that always that people from both the shifts are able to meet and discuss their progress. MIS Reporting service will help u centralise the report system. Being the industry for so may years have helped us understand various industryies and their requirement. we aim to help make your business and process more efficent and avoiding unwanted problems.

WHAT IS MIS

MIS means Management Information System. A MIS is planed system of the collecting, processing, storing and dissesmating data in the form of information needed to carry out function of Management. A Marketing information system consist of people, equipment, and proscedures to gather sort anlyze and accurate information to marketing decision makers.