DAIBB

What is lease?

A lease is a legally enforceable contract which defines the relationship between an owner, the lesser, and a renter, the lessee. A typical lease spells out all of the terms involved in a land or merchandise rental agreement, including the length of time a lessee may use it and what condition it must be in upon return to the lesser. The amount of payments and any financial penalties for late payments may also be included in a lease contract.

Finance lease

A finance lease or capital lease is a type of lease. It is a commercial arrangement where:

the lessee (customer or borrower) will select an asset (equipment, vehicle, software);

the lessor (finance company) will purchase that asset;

the lessee will have use of that asset during the lease;

the lessee will pay a series of rentals or installments for the use of that asset;

the lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid by the lessee;

the lessee has the option to acquire ownership of the asset (e.g. paying the last rental, or bargain option purchase price);

The finance company is the legal owner of the asset during duration of the lease.

However the lessee has control over the asset providing them the benefits and risks of (economic) ownership.

An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship etc.) being leased. An operating lease is commonly used to acquire equipment on a relatively short-term basis. Thus, for example, an aircraft which has an economic life of 25 years may be leased to an airline for 5 years on an operating lease.

Advantages and disadvantages of Financial & Operating lease :

(Comparison with operating lease)

A finance lease differs from an operating lease in that:

—in a finance lease the lessee has ultimate ownership of the asset.

In an operating lease the lessee only uses the asset for the duration of the asset.

—in a finance lease the lesser will recover all or most of the cost of the equipment from the rentals paid by the lessee.

In an operating lease the lessor will have a substantial investment or residual value on completion of the lease.

—in a finance lease the lessee has the benefits and risks of economic ownership of the asset (e.g. risk of obsolescence, selling or scrapping the asset).

In an operating lease the lessor has the benefits and risks of owning the asset.

Working capital

Working capital, also known as net working capital, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.

Importance Of Working Capital In Business :

The working capital is the life-blood and nerve centre of a business firm. The sufficiency of working capital assists in raising credit standing of a business because of better terms on goods bought, lesser cost of manufacturing due to the acceptance of cash discounts, favorable rates of interest etc.

—No business can run effectively without a sufficient quantity of working capital. It is crucial to retain right level of working capital. Finance manager is required to decide the amount of accurate working capital.

—A business enterprise with ample working capital is always in a position to avail advantages of any favorable opportunity either to buy raw materials or to implement a special order or to wait for enhanced market status.

—Cash is needed to carry out day-to-day workings and buy inventories etc. The shortage of cash may badly affect the position of a business concern.

—The receivables management is related to the volume of production and sales. For escalating sales there may be a need to offer additional credit facilities. While sales may ascend but the danger of bad debts and cost involved in it may have to be considered against the benefits.

—Inventory control is also a significant constituent in working capital management. The deficiency of inventory may cause work stoppage. On the other hand, surplus inventory may result in blocking of money in stocks.

The overall success of the company depends upon its working capital position. So, it should be handled properly because it shows the efficiency and financial strength of company.

Sources and uses of Working Capital :

Sources of Working Capital :

Internal sources of working capital include Retained Earnings savings achieved through operating efficiencies and the allocation of Cash Flow from sources like Depreciation or deferred taxes to working capital. External sources include bank and other short-term borrowings, Trade Credit and term debt and Equity Financing not channeled into long-term assets.

Uses of Working Capital :

Funds invested in a company's cash, Accounts Receivable, Inventory, and other Current Assets (gross working capital); usually refers to net working capital-that is, current assets minus Current Liabilities. Working capital finances the Cash Conversion Cycle of a business-the time required to convert raw materials into finished goods, finished goods into sales, and accounts receivable into cash. These factors vary with the type of industry and the scale of production, which varies in turn with seasonality and with sales expansion and contraction.

What is social cost benefit analysis?

It refers to the study of feasibility of a project in terms of its total economic cost and total economic benefits.

it means to compare total cost wiit total benefit if we add external cost with private cost, its called total social cost if we add external benefit with private benefit, called total social benefit.

It helps in decision-making

It helps in deciding whether a particular project should go ahead or not.

It helps in comparing different projects

SCBA aids in evaluating individual projects within the planning framework which spells out national economic objectives and broad allocation of resources to various sectors.

SCBA Approaches :
According to the literature there are basically two approaches for SCBA namely UNIDO APPROACH and Little – Merles Approach

Non-business project:

The earning from any investment financing is not measured visibly is meant non-business project. This investment financing may generate huge income in the long run if we take other parameter into account.

As Jamuna Multipurpose Bridge. If we measure this by simple accounting method, it will not be viable, because returns it takes is much lower than the const incurred in building this bridge. Having built bridge, the economic and social surroundings have changed vastly as a result of which culture of people other side of the Jamuna transformed.

Social analysis is more important for undertaking a non-business project :

It is essential that the social analysis findings feeds into the project designs while the project designs also influence the analysis of the likely social impacts.

More specifically, the social analysis:

—Provides a basis to confirm the project’s rationale and accesses the project’s potential to contribute directly or indirectly to inclusiveness, equity, empowerment, and social security

—Provides an opportunity for consultative process for project designing

—Examines alternative project components or activities to enhance social development opportunities and develops measures to overcome social barriers, constraints, and risks and to address institutional weaknesses

—Prepares any necessary plans, actions, and other measures to maximize positive social development outcomes (e.g., project participation plan, gender plan) and mitigate any negative impacts (e.g., involuntary resettlement framework/plan, indigenous peoples plan), while ensuring these measures are fully reflected in the components, implementation arrangements, budget, consultant terms of reference, timeframe, assurances and other legal agreement

—Develops social targets indicators to be integrated in the project design and monitoring framework

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Q. Discuss briefly the role of Management Accounting in planning, control and decision making in a bank.

Answer : The Role of Management Accounting as follows :

Assistance in planning

The management accountant assists planning by providing information. This information may be about pricing, capital expenditure projects, product costs or competition. In the short-term planning process of budgeting, the management accountant provides information on past costs and revenues which may be used as guidance. The management accountant is also involved in the budgeting process itself.

In bank Management cannot be success without right planning. Management accounting helps management to prepare right planning in banks.

Assistance in controlling

The management accountant supplies performance reports which compare actual performance with the planned performance and which therefore highlight those activities which are not conforming to plan.

The functions of controlling to oversee the works being done according to planning. Management accounting helps in different way bank management in controlling. Such management take sudden visit, regular monitoring etc.

Assistance in decision making

The management accountant is a vital cog in the organisation’s decision making process. He or she collects and analyses data, and presents information to managers to help in the decision making.

When to take appropriate measures bank management gets information through management accounting. Making decision in timely helps bank to increase or prevent loss, classified loan, remittance etc.

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Q. Describe briefly the uses & limitations of financial statement analysis.

Uses :

Financial Statement analysis involves using the output of the standard business information system found in all businesses to judge the performance and riskiness at an instance or over time. A business may have other information systems for managers but all business must conform with generally accepted standards with their accounting statements.

There are several steps in the use of Financial Statement Analysis:

1.Understanding the basic statements

2.Inherent problems with the system

3.Use of ratio analysis

4.Interpreting the analysis

5.Using the analysis

As example, Ratio Analysis :

You may be able to discover facts and trends about the risk and profitability of a company and also something about the quality and efficiency of the management by examining the financial statements. This process is called ratio analysis and is not perfect nor does it give definitive answers but it can serve as an early warning or alarm system to alert owners, lenders and managers to general problems. It is very common in everyday use.

Limitations

Many things can impact the calculation of ratios and make comparisons difficult. The limitations include:

The use of estimates in allocating costs to each period. The ratios will be as accurate as the estimates.

The cost principle is used to prepare financial statements. Financial data is not adjusted for price changes or inflation/deflation.

Companies have a choice of accounting methods (for example, inventory LIFO vs FIFO and depreciation methods). These differences impact ratios and make it difficult to compare companies using different methods.

Companies may have different fiscal year ends making comparison difficult if the industry is cyclical.

Diversified companies are difficult to classify for comparison purposes.

Financial statement analysis does not provide answers to all the users' questions. In fact, it usually generates more questions!

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Q. Describe briefly the uses & limitations of financial statement analysis.

Uses :

There are several steps in the use of Financial Statement Analysis:

1.Understanding the basic statements

2.Inherent problems with the system

3.Use of ratio analysis

4.Interpreting the analysis

5.Using the analysis

As example, Ratio Analysis :

Limitations

Many things can impact the calculation of ratios and make comparisons difficult. The limitations include:

The use of estimates in allocating costs to each period. The ratios will be as accurate as the estimates.

The cost principle is used to prepare financial statements. Financial data is not adjusted for price changes or inflation/deflation.

Companies may have different fiscal year ends making comparison difficult if the industry is cyclical.

Diversified companies are difficult to classify for comparison purposes.

Financial statement analysis does not provide answers to all the users' questions. In fact, it usually generates more questions!

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Q. Discuss briefly the role of Management Accounting in planning, control and decision making in a bank.

Answer : The Role of Management Accounting as follows :

Assistance in planning

In bank Management cannot be success without right planning. Management accounting helps management to prepare right planning in banks.

Assistance in controlling

The management accountant supplies performance reports which compare actual performance with the planned performance and which therefore highlight those activities which are not conforming to plan.

Assistance in decision making

The management accountant is a vital cog in the organisation’s decision making process. He or she collects and analyses data, and presents information to managers to help in the decision making.

When to take appropriate measures bank management gets information through management accounting. Making decision in timely helps bank to increase or prevent loss, classified loan, remittance etc.

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Q. Distinguish between Financial accounting and Managerial accounting?

Answer:

Managerial Accounting : According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its Resource (economics)resources. Management accounting also comprises the preparation of financial reports for non management groups such as shareholder's, creditor's, regulatory agencies and tax authorities"

Financial Accounting : Financial Accounting is the process of summarizing financial data taken from an organization's accounting records and publishing in the form of annual (or more frequent) reports for the benefit of people outside the organization.

Financial Accounting	Managerial Accounting
Reports to those outside the organization owners, lenders, tax authorities and regulators.	Reports to those inside the organization for planning, directing and motivating, controlling and performance evaluation.
Emphasis is on summaries of financial consequences of past activities.	Emphasis is on decisions affecting the future.
Objectivity and verifiability of data are emphasized.	Relevance of items relating to decision making is emphasized.
Precision of information is required.	Timeliness of information is required.
Only summarized data for the entire organization is prepared.	Detailed segment reports about departments, products, customers, and employees are prepared.
Must follow generally accepted accounting principles (GAAP).	Need not follow generally accepted accounting principles (GAAP).
Mandatory for external reports.	Not mandatory.
There are no legal requirements for an organization to use management accounting.	Limited companies must, by law prepare financial accounts.
Management accounting information may be monetary or alternatively non monetary.	Most financial accounting information is of a monetary nature.
Management accounting has no specified format. There are no specific statements which should be produced.	Financial accounts are supposed to be produced in accordance with a specified format by IAS or law.

Q. What is the difference between cost and expense?

Answer:

Cost : Cost is the cash or cash equivalent value sacrificed for goods and/or services that are expected to bring current and/or future benefits to the entity.

Expense : In common usage, an expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense.

In accounting, expense has a very specific meaning. It is an outflow of cash or other valuable assets from a person or company to another person or company. This outflow of cash is generally one side of a trade for products or services that have equal or better current or future value to the buyer than to the seller. Technically, an expense is an event in which an asset is used up or a liability is incurred. In terms of the accounting equation, expenses reduce owners' equity. The International Accounting Standards Board defines expenses as

...decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.

Difference between cost and expense :

A cost might be an expense or it might be an asset. An expense is a cost that has expired or was necessary in order to earn revenues. We hope the following three examples will illustrate the difference between a cost and an expense.

A company has a cost of $6,000 for property insurance covering the next six months. Initially the cost of $6,000 is reported as the current asset Prepaid Insurance. However, in each of the following six months, the company will report Insurance Expense of $1,000—the amount that is expiring each month. The unexpired portion of the cost will continue to be reported as the asset Prepaid Insurance.

The cost of equipment used in manufacturing is initially reported as the long lived asset Equipment. However, in each accounting period the company will report part of the asset’s cost as Depreciation Expense.

A retailer’s purchase of merchandise is initially reported as the current asset Inventory. When the merchandise is sold, the cost of the merchandise sold is removed from Inventory and is reported on the income statement as the expense entitled Cost of Goods Sold.

The matching principle guides accountants as to when a cost will be reported as an expense.

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Q. Cost classification.
Basis of Cost Classification	Types of cost
01.Time of incurrence	1.Historical cost (The cost which already recorded) 2.Replacement cost (machinery replacement) 3.Budgeted cost
02.Reaction to change in activity -cost activity -cost driver -cost behavior	1.Variable cost 2.Fixed cost 3.Mixed cost 4.Steps cost
03.On the basis of financial statement	1.Un expired cost 2.Expired cost 3.Product cost 4.Period cost 5.Prime cost (all direct cost is prime cost) 6.Conversion cost (raw material as finished goods cost is conversion cost)
04.Impact on decision making	1.Relevant cost 2.Opportunity cost 3.Sunk cost 4.Direct cost (which can be trace easily) 5.Indirect cost 6.Controllable cost 7.Non controllable 8.Different cost

Q. Cost classification.
Basis of Cost Classification	Types of cost
01.Time of incurrence	1.Historical cost (The cost which already recorded) 2.Replacement cost (machinery replacement) 3.Budgeted cost
02.Reaction to change in activity -cost activity -cost driver -cost behavior	1.Variable cost 2.Fixed cost 3.Mixed cost 4.Steps cost
03.On the basis of financial statement	1.Un expired cost 2.Expired cost 3.Product cost 4.Period cost 5.Prime cost (all direct cost is prime cost) 6.Conversion cost (raw material as finished goods cost is conversion cost)
04.Impact on decision making	1.Relevant cost 2.Opportunity cost 3.Sunk cost 4.Direct cost (which can be trace easily) 5.Indirect cost 6.Controllable cost 7.Non controllable 8.Different cost

What is the functions of Managers?

Managers just don't go out and haphazardly perform their responsibilities. Good managers discover how to master five basic functions: planning, organizing, staffing, leading, and controlling.

Planning: This step involves mapping out exactly how to achieve a particular goal. Say, for example, that the organization's goal is to improve company sales. The manager first needs to decide which steps are necessary to accomplish that goal. These steps may include increasing advertising, inventory, and sales staff. These necessary steps are developed into a plan. When the plan is in place, the manager can follow it to accomplish the goal of improving company sales.

Organizing: After a plan is in place, a manager needs to organize her team and materials according to her plan. Assigning work and granting authority are two important elements of organizing.

Staffing: After a manager discerns his area's needs, he may decide to beef up his staffing by recruiting, selecting, training, and developing employees. A manager in a large organization often works with the company's human resources department to accomplish this goal.

Leading: A manager needs to do more than just plan, organize, and staff her team to achieve a goal. She must also lead. Leading involves motivating, communicating, guiding, and encouraging. It requires the manager to coach, assist, and problem solve with employees.

Controlling: After the other elements are in place, a manager's job is not finished. He needs to continuously check results against goals and take any corrective actions necessary to make sure that his area's plans remain on track.

Basic functions of management

Management operates through various functions, often classified as planning, organizing, leading/motivating, and controlling.

Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next 5 years, etc.) and generating plans for action.

Organizing: (Implementation) making optimum use of the resources required to enable the successful carrying out of plans.

Staffing: Job Analyzing, recruitment, and hiring individuals for appropriate jobs.

Leading: Determining what needs to be done in a situation and getting people to do it.

Controlling: Monitoring, checking progress against plans, which may need modification based on feedback.

Motivating: the process of stimulating an individual to take action that will accomplish a desired goal.

What is the functions of Managers?

Managers just don't go out and haphazardly perform their responsibilities. Good managers discover how to master five basic functions: planning, organizing, staffing, leading, and controlling.

Organizing: After a plan is in place, a manager needs to organize her team and materials according to her plan. Assigning work and granting authority are two important elements of organizing.

Basic functions of management

Management operates through various functions, often classified as planning, organizing, leading/motivating, and controlling.

Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next 5 years, etc.) and generating plans for action.

Organizing: (Implementation) making optimum use of the resources required to enable the successful carrying out of plans.

Staffing: Job Analyzing, recruitment, and hiring individuals for appropriate jobs.

Leading: Determining what needs to be done in a situation and getting people to do it.

Controlling: Monitoring, checking progress against plans, which may need modification based on feedback.

Motivating: the process of stimulating an individual to take action that will accomplish a desired goal.

Q: Define management accounting. What arc the objectives of management accounting''

Answer:

According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of, financial reports for non-management groups such as shareholders, creditors, regulatory agencies and tax authorities" (CIMA Official Terminology).

The American institute of Certified Public Accouritants(AICPA) stales that management accounting as practice extends to the following three areas:

· Strategic Management--Advancing the role of the management accountant as a

· strategic partner in the organization.

· Performance Management—Deve1oping the practice of business decision-making and managing the performance of the organization.

Risk Management -Contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the oroallization.

The role/objective of Management Accounting:

The activities management accountants provide inclusive of forecasting and planning, performing variance analysis, reviewing and monitoring costs inherent in the business are ones that have dual accuntability to both finance and the business team.

The role of management accountinting planning, control, and decision making can be discussed below:

Listed below are the primary tasks/services performed by management accountants. The degree of complexity relative to these activities are dependent on the experience level and abilities of any individual.

1.Variance Analysis

2.Rate & Volume Analysis

3.Business Metrics Development

4.Price Modeling

5. Product profitability.

6. Geographic Vs. Industry or Client segment Reporting .

7. Sales Management Scorecards

8. Cost Analysis

9. Cost Benefit Analysis

10. Cost-Volume-Profit Analysis

11. Life cycle cost analysis

12. Client Profitability Analysis

13. IT Cost Transparency

14 Capital Budgeting

15. Buy vs. Lease Analysis

16. Strategic Planning

17. Strategic Management Advise

18. Internal Financial Presentation and Communication.

19. Sales and Financial Forecasting

20. Annual Budgeting.

21. Cost Allocation

22 Resource Allocation and Utilization

Q. Discuss the usefulness and assumptions of Break Even Analysis.

Ans:

Usefulness of Break Even Analysis:

Such analysis allows the firm to determine at what level of operations it will break even (earn zero profit) and to explore the relationship between volume, costs, and profits. It helps the management that at current costs of products how many number of units must be sold to at least recover the cost of producing the product.
For Example: if you spend $200 on producing a product and selling price is $20 then you must sale 10 units to at least recover the cost of product.

It also helps the management to determine how much of units to be sold to get desired profit on product. For example: if in the above example you want to earn $20 profit then add it to it's cost of $200 and it will become $220 now you need to earn profit of this $20 you need to sale 11 items of product.

Assumptions of Break Even Analysis:

•It assumes that everything produced is sold whereas it is often the case that not all output will be sold.

•It assumes that all of the output is sold at the same price - often a business will have to lower its price in order to increase its sales.

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Q. Define Margin of Safety and discus its implication.

Ans:

Margin of Safety:

The margin of safety is the excess of budgeted (or actual) sales over the break-even volume sales. It states the amount by which sales can drop before losses begin to be incurred. The higher the margin of safety, the lower the risk of not breaking even. The formula for its calculation is:

Margin of Safety=Total budgeted (or actual) sales – Break-even sales.

The margin of safety can also be expressed in percentage form. This percentage is obtained by dividing the margin of safety in dollar terms by total sales:

Margin of safety percentage = Margin of safety in dollars ÷ Total budgeted (or actual) sales.

Implication : A company can fix his production target calculating margin of safety. To avoid stock out position by calculating margin of safety helps company what will be production target and it also helps to prevent loss.

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Math :

Q. IMPORTANCE OF FINANCIAL STATEMENT ANALYSIS

Ans: All financial statements are essentially historically historical documents. They tell what has happened during a particular period of time. However most users of financial statements are concerned about what will happen in the future. Stockholders are concerned with future earnings and dividends. Creditors are concerned with the company's future ability to repay its debts. Managers are concerned with the company's ability to finance future expansion. Despite the fact that financial statements are historical documents, they can still provide valuable information bearing on all of these concerns.

Financial statement analysis involves careful selection of data from financial statements for the primary purpose of forecasting the financial health of the company. This is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios.

Managers are also widely concerned with the financial ratios. First the ratios provide indicators of how well the company and its business units are performing. Some of these ratios would ordinarily be used in a balanced scorecard approach. The specific ratios selected depend on the company's strategy. For example a company that wants to emphasize responsiveness to customers may closely monitor the inventory turnover ratio. Since managers must report to shareholders and may wish to raise funds from external sources, managers must pay attention to the financial ratios used by external inventories to evaluate the company's investment potential and creditworthiness.

Although financial statement analysis is a highly useful tool, it has two limitations. These two limitations involve the comparability of financial data between companies and the need to look beyond ratios. Comparison of one company with another can provide valuable clues about the financial health of an organization. Unfortunately, differences in accounting methods between companies sometime makes it difficult to compare the companies' financial data.

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Q. Distinguish between a cash flow statement and cash budget.

Ans: Cash Flow Statement :

A cash flow statement documents the amount of incoming and outgoing cash (and its equivalents). Only cash sales are recorded in a cash flow statement – all future sales (including those made on credit) are not declared. The biggest bulk of your cash flow is usually from your core operations. Document the movement of your receivables and payables, inventory and depreciation.

A cash flow statement can help you forecast future cash flow and budgets, and also give your investors a clear picture of your company’s financial health.

Cash Budget :

The cash budget is composed of four major sections:

1.The receipts section

2.The disbursements section

3.The cash excess or deficiency section

4.The financing section

The receipts section consists of a listing of all of the cash inflows, except for financing, expected during the budget period. Generally, the major source of receipts will be from sales.

The disbursements section consists of all cash payments that are planned for the budget period. These payments will include raw material purchases, direct labor payments, manufacturing overhead costs, and so on, as contained in their respective budgets.

If there is a cash deficiency during any budget period, the company will need to borrow funds. If there is a cash excess during any budget period, funds borrowed in previous periods can be repaid or the excess funds can be invested.

The financing section details the borrowings and repayments projected to take place during the budget period. It also includes interest payments that will be due on money borrowed.

Generally speaking, the cash budget should be broken down into time periods that are as short as feasible.

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Q. What the purpose of a statement of Cash Flows. How does it differ from a balance sheet and an income statement.

Ans: Purpose of cash flow statement is :

1.provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances

2.provide additional information for evaluating changes in assets, liabilities and equity

3.improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods

4.indicate the amount, timing and probability of future cash flows

differ from a balance sheet and an income statement :

Cash Flow Statement just shows the cash inflow and outflows in current financial year in the business.

Balance Sheet shows the overall business position at any given day of financial year from starting day of the business.

An income statement is a report that shows how much revenue a company earned over a specific time period (usually for a year or some portion of a year). An income statement also shows the costs and expenses associated with earning that revenue. The literal “bottom line” of the statement usually shows the company’s net earnings or losses. This tells you how much the company earned or lost over the period.

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Math :

Q.Diffentiate between investing activities and financing activities of a company from the point of view of a cash flow statement.

Ans: The cash flow statement is partitioned into three segments, namely: cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities.

Investing activities

Examples of Investing activities are

•Purchase of an asset

•Assets can be land, building,equipment marketable securities,

•Loans made to suppliers or customers

Financing activities

Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement.

Under IAS 7, financing cash flows include:

•Proceeds from issuing shares

•Proceeds from issuing short-term or long-term debt

•Payments of dividends

•Payments for repurchase of company shares

•Repayment of debt principal, including capital leases

•For non-profit organizations, receipts of donor-restricted cash that is limited to long-term purposes

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Math :

Question: What is break even point?

Answer:

The break even point for a product is the point where total revenue received equals the total costs associated with the sale of teh product (TR= TC). Abreak-even point is typically calculated in order fro business to determine if it would be profitable to sell a proposed product, as opposed to attempting to modify an existing product instead so it can be made lucrative. Break even analysis can also be used to analyse thepotential profitability of an expenditure in a sales-based business.

break even point (for output)=fixed cost / contribution per unit.

Contribution (p.u) = Selling price (p.u)- variable cost (p.u).

break even point (for sales) = fixed cost/contribution (p.u) * sp (pu).

450,000 100,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000

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‡UKwbK¨vj m¤¢vebv : G As‡k cÖKíwUi D‡Ïk¨ I cwiKíbv, Drcv`b ¶gZv I Drcv`b cwiKíbv Kiv nq| KuvPvgv‡ji e¨envi I Drm Ges Drcv`b cÖwµqv D‡jL _v‡K| Avg`vbxK…Z I ¯’vbxqfv‡e e¨eüZ hš¿vs‡ki eY©bv, hš¿cvwZ ¯’vcb I msi¶Y wKfv‡e Kiv n‡e Zv ejv nq| BDwUwjwU A_©vr M¨vm, we`y¨r I cvwbmn R¡vjvbx I LyPbv hš¿vs‡ki eY©bvI D‡jL _v‡K| G‡Z cwi‡ek `~lY I AveR©bv wb®‹vkb wKfv‡e Ki‡Z n‡e ZvI we‡ePbvq †bqv nq|

gv‡K©wUs m¤¢vebv : cÖK‡íi gva¨‡g Drcvw`Z c‡Y¨i evRvi Pvwn`v, evRviRvZ ¯’vbxqfv‡e bvwK ˆe‡`wkK evRv‡i n‡e, c‡Y¨i ¸YMZ gvb wba©viY, g~j¨ wba©viYmn mieivn c×wZ hvPvB Kiv nq|

wdbvwÝqvj m¤¢vebv : ‡cÖvdvB‡ji G As‡k cÖ‡R‡±i jvfRbKZv hvPvB Kiv nq| A_©vr cÖK‡í wewb‡qvM jvfRbK n‡e wKbv, Avw_©K we‡ePbvq cÖKíwU myweavRbK wKbv Zv hvPvB Kiv nq| †eªK B‡fb G¨vbvjvBwmm, IRR wbY©qmn Ab¨vb¨ Dcv‡q wdbvwÝqvj m¤¢vebv hvPvB Kiv n‡q _v‡K|

A_©‰bwZK m¤¢vebv : mvgvwRKfv‡e cÖKíwU wK Dbœqb ev cwieZ©b Avb‡e, KZ †jv‡Ki Kg©ms¯’vb n‡e Ñ Zv‡`i Avq wKiƒc e„w× cv‡e m‡e©vcwi †`‡ki wRwWwcÑ†Z wK cÖfve †dj‡e Zv hvPvB KivB n‡”Q A_©‰bwZK m¤¢vebv|

mwVK cÖ‡R± ‡cÖvdvBj cÖ¯‘Z bv Kiv I g~j¨vqb bv Kiv wkí i“Mœ nIqvi KviY:

Dc‡ii Av‡jvPbv n‡Z Avgiv ej‡Z cvwi †h, hw` cÖK‡íi †UKwbK¨vj m¤¢vebv mwVKfv‡e wbiƒcY Kiv bv nq Zvn‡j cÖKíwU i“Mœ n‡Z eva¨| GQvov D³ cÖK‡íi Rb¨ cÖ‡qvRbxq `¶ I cÖwkw¶Z Rbej Gi Afve †i‡L ‡cÖvdvBj cÖ¯‘Z Ki‡j cÖKíwU ‡ewkw`b mPj ivLv m¤¢e nq bv Ñ d‡j wkí i“Mœ n‡Z eva¨|

KZ UvKv wKfv‡e wewb‡qvM Ki‡j jvf n‡e Ñ wiUvY© wVKgZ Avm‡e wKbv Zv A_©vr wdbvwÝqvj m¤¢vebv hw` wVKgZ bv Ki‰j wkí i“Mœ n‡Z eva¨| wk‡í Drcv`‡bi †¶‡Î †eªK B‡fb G¨vbvjvBwmm, IRR wbY©q wVKfv‡e bv n‡j G Ae¯’v m„wó nq|

A_©‰bwZK g~j¨vqb : hw` †Kvb wkí ¯’vcb jvfRbK wKš‘ Zv cwi‡ekMZfv‡e ¶wZi KviY A_©vr cwi‡ek `ylY I Rb¯^v‡¯’¨i Rb¨ ûgwK ¯^iƒc nq Zvn‡j wkíwU miKvi eÜ K‡i w`‡Z eva¨ nq G‡ZI wkí i“Mœ n‡q c‡o| †hgb cwjw_b wkí, bKj †h †Kvb cY¨ Drcv`b BZ¨vw` jvfRbK n‡jI AvBbMZfv‡e ‰ea bq, d‡j G ai‡Yi wkí ¯’vc‡bi Rb¨ †cÖvdvBj ˆZix Kiv n‡j wkí i“Mœ n‡Z eva¨ n‡e|

cÖk : cÖ‡R± †cÖvdvBj wK? wkí i“Mœ nIqvi KviY nj mwVK cÖ‡R± ‡cÖvdvBj cÖ¯‘Z bv Kiv I mwVK cÖ‡R± g~j¨vqb bv KivÓ e¨vL¨v Ki“b|

DËi :

GKwU cÖK‡íi ‡cÖvdvB‡j mvaviYZ wb‡gœv³ welqvejxi Z_¨ mwbœ‡ewkZ _v‡K| †hgb Ñ

mwVK cÖ‡R± ‡cÖvdvBj cÖ¯‘Z bv Kiv I g~j¨vqb bv Kiv wkí i“Mœ nIqvi KviY:

Budget and Budgetary Control

A budget has been defined as a financial and/or quantitative statement prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective. A budget is, therefore, a plan of expected achievement based on the most efficient operating standards in effect or in prospect at the time it is established, against which actual accomplishment is regularly compared. In short, it may be considered as a guide.

Budgetary Control is a system of planning and controlling costs. It has been defined as the establishment of budgets relating to responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results either to secure by individual action the objective of that policy or to provide a basis for its revision._- Thus, the following steps are involved in Budgetary Control :

1. Establishment of Budgets : Targets or budgets are fixed for each function relating to the responsibilities of individual executives. The functional budgets are then co-ordinatc-d with each other so that an overall budget for the firm may be prepared.

2. Measurement of actual performance.

3. Comparison of actual performance with budgeted performance to develop deviation or variances : Actual data are compared with fixed budgets or adjusted budgets. Comparison with fixed budgets may not serve any useful purpose. The other alternative is the flexible budgetary control which is discussed later on.

4. Analysis of the causes of variations and reporting for 'motivating the right people to take the right action at the right time.' For detailed analysis, Budgetary Control with Standard Costing is an ideal combination.

It should be emphasized that control implies a constant watch fulness on all phases of the firm activity. This may be done daily, weekly, monthly, quarterly, or even yearly. In short, Budgetary Control follows the principle of 'management by exceptions'.

The Objectives of Budgetary Control

From the functional standpoint, a system of Budgetary Control will serve the following purposes:

1. Planning.

2. Co-ordination, and

3. Control.

Some of the objectives of budgeting are detailed below :

1. Combining the ideas of all levels of management in the preparation of different functional budgets.

2. Co-ordinating all the activities of the concern.

3. Helping to centralise control and decentralise responsibilities.

4. Planning and controlling income and expenditure so that maximum profitability is achieved.

5. Acting as a guide for management decisions.

6. Providing a yardstick against which actual results ate compared.

7. Pointing out the areas where management action is necessary to remedy a situation.

S. Helping to appraise capital expenditure and also providing sufficient working capital.

Advantages and Disadvantages of Budgetary control :

Budgetary control is a tool in the hands of management to make plans, promote co-ordination and ensure control. It helps detecting weaknesses in operations, and wastages thereby reducing cost and promoting efficiency. Some of the oft-mentioned advantages are mentioned below.

1. Budgetary control provides a valuable guidance to management in severa: management functions, such as price fixation, selection of profitable investment opportunities and so on.

2. Budgets act as yardsticks (physical or financial) against which actuals are compared and necessary corrective or preventive actions are taken. This promotes efficiency and facilitates 'management by exceptions'.

3. The process of formulating various budgets calls for interdepartmental and intra-departmental co-ordination. Thus, it seeks to ensure co-ordination among various activities, departments and individuals.

4. It attempts to fix up responsibility in order to ensure proper control on the activities of the firm e.g. the purchase manager will be held responsible for variation in the cost of materials procured due to unfavourable price, the production control manager, for excess consumption of the same and so on. Thus, Budgetary Control helps to centralise control and decentralise responsibilities.

Budgetary Control also suffers from certain limitations. These are mentioned below.

1. There may be resistance from the individuals to budgeting as budgeting points out efficiency or inefficiency of individuals and fixes up responsibility as far as possible. The system emphasises `top-down' instead of 'bottom-up' participation. Lack of co-operation and co-ordination will make effective implementation of Budgetary Control difficult.

2. Detailed analysis of 'deviations' or 'variances' cannot be made according to all possible originating causes. Therefore, fixing up responsibility may be frustrated in the absence of detailed analysis of variances. This, in turn, affects adversely the control function as it cannot be exercised unless responsibility is pinpointed.

Performance Budgeting :

The conventional budgeting emphasises upon the financial aspects and does not generally take into account the physical aspects or performance. As a result, control of the performance in terms of physical units and the related costs cannot be achieved. Performance budgeting, which was evolved in the United States' during 1920's, seeks to overcome this limitation.

Performance budgeting provides a meaningful relationship between estimated inputs and expected outputs as an integral part of the budgeting system. 'A performance budget is one which presents We purposes and objectives for which funds are required, the costs of the programmes proposed for achieving those objectives, and quantitative data measuring the accomplishments and work performed under each programme'. Thus, performance budgeting is a technique of presenting budgets for costs and revenues in terms of functions, programmes and activities and correlating the physical and financial aspects of the individual items comprising the budget. Thenecessary steps' in performance budgeting are as follows

1. Establishment of goals, objectives and policies.

2. Formulation of programmes for the achievement of goals, and objectives.

3. Execution of the budget in terms of responsibility and

achievement of targets as far as possible within the given time and cost elements.

4. A systematic process of evaluation and appraisal for control as well as updating the budget.

An essential adjunct to the performance budgeting is an adequate `information system' for performance reporting.

Effectiveness

Performance budgeting is extremely useful in planning and controlling limited resources. Accordingly, it has been put to use by the private and public sector firms as well as by many Government departments. It has been established that performance budgeting is equally helpful both in profit and non-profit-making organisations.' Its effectiveness can be summarised as follows :

1. It ensures progress towards long-term objectives.

2. It correlates the physical and financial aspects of programmes and activities.

3. It facili^ttates.bu-iget review and decision-making at all levels of management.

4: It facilitates more effective performance audit.

5. It helps to measure progress in time bound objectives so that timely remedial action may be taken.

Causes of hadustrial sickness

In India, some industrial units are born sick, sickness is thrust upon some while others become sick due to a number of causes.

Lack of planning _andimperfect project formulation give birth to a sick unit Choice of a product without analysing the market, improper site selection,tardy implementation of the project, etc., are other causes. Sickness is thrust upon some industrial units due to change in Government policy, overspending on essentials, absence of control on borrowings, dishonest practices on the part of management, etc. There may be many other causes that are' responsible for industrial sickness. The causes for sickness in industrial units may vary from unit to unit. But the various common causes may be grouped under two categories

(a) External, and

(b) Internal.

(a) External causes : These incluie the following

(i) Market constraints :

Recessionary trend

Sudden drop in demand

Administered price control, etc.

(ii) Supply constraints

Power shortage

Shortage of raw materials (key items)

Shortage of adequate fund, etc.

(iii) Socio-political constraints

Government policy

Political interference

Poor industrial relations, etc.

(b) Intemai causes : Included in this group are:

Inappropriate management practices :

Absence of long range planning

Uneconomic pricing policy (when prices are not administered by the Government)

Wrong product-mix

Faulty production programme

Uneconomic design

Poor inventory management

Poor credit management

Faulty or absence of monitoring system

Inadequate cost control, etc.

Lack of managerial effectiveness

Low productivity

Unutilised capacity (also may be due to external factors) Poor sales effort

Lack of planning for product development and / or product diversification

Low quality of product

Unproductive expenditure

Lack of well-defined organisation structure, etc.

Lack of integrity

Dishonesty of officers and employees

Diversion of funds

An illustrative list is attempted above. In reality, a combination of factors would normally be responsible for sickness in industrial units and therefore attributing sickness to any particular cause may not be correct. There have been a number of studies to actually ascertain the various causes of sickness in Bangladesh in different industries.

* Management Accounting is helpful in decision making ?

Ans. According to the chartered Institute of management Accounts (CIMA), Management Accounting in the process of identification measurement, accumulation, analysis, Preparation, interpretation and communication of information on used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non-management groups such as shareholders, creditors, regulatory agarics and tax authorities. The management accountant is a vital cog in the organization’s decision making process. He or she collects and analysis date and presents information to managers to help in the decision making.

When to take appropriate measures bank management gets information through management accounting . Making decision in timely helps bank to increase or prevent loss, classified loan, remittance etc. Management Accounting covers various area such as variance Analysis, cost Benefit Analysis, TT cost Transparency, Capital Budgeting, Annual Budgeting, cost Allocation etc. Which helps in decision making. So we can say that management Accounting is helpful in decision making.

* Management Accounting in beneficial for banking operation-comments?

Ans. Banks play an important role in the financial system and the economy. Management Accounting is beneficial for banking operation. The role of management accounting in banking sector as follows.

Assistance in Planning

The management accounting assists planning by providing information. This information may be about pricing, capital expenditure projects, product costs or competitions. In the short-term planning process of budgeting, the management accountant provides information on past costs and revenues which may be used as guidance. In Bank management cannot be success without right planning management accounting helps management to prepare right planning in banks.

Assistance in controlling :

The management accountant supplies performance reports which compare actual performance with the planned performance and which therefore highlight those activities Which are not conforming to plan. The functions of controlling to oversee the works done according to planning. Management accounting helps in different way to bank management to controlling. Such management take sudden visit, regular monitoring etc.

Assistance is decision making :

The management accountant is a vital cog in the organizations decision making process. He or she collects and analysis data, and present information to managers to help the decision making. When to take appropriate measures bank management gets information through management accounting. making decision in timely helps bank to increase or prevent loss, classified loan, remittance etc.

DAIBB

Thursday, June 9, 2016

Arif-Q-MA

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