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.