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Sunday, November 20, 2011

Dibrugarh University - Indian Financial System 2011

1.       What do you mean by financial services? Discuss the role of financial services in economic development of India.
What do you mean financial instruments? Briefly describe the important instruments of capital market.                                                                                                     

2.       Describe the role and functions of commercial banks.
Write short notes on:
(i)      Interest rate reforms
(ii)    Cooperative banking
3.       Discuss how the RBI control the banking institution of our country.
Discuss the essential characteristics of strong money market.

4.       What do the mean by stock exchange? Discuss the role of stock exchanges in the capital market.
Discus the reform measures under – taken in Indian capital market during  the post-liberalization period.                                                                                      

5.       Write short notes (any two)
(i)      SIDBI
(ii)    Industrial development bank of india
(iii)   Assam financial corporation
 What do you mean by development bank? Discuss the role development bank in the economic  development of a country.

Dibrugarh University - Auditing 2011

1.       What are the objects of audit? Explain them fully.
What is an audit notebook? What purpose does it serve? What are the contents of an audit notebook?                                                                                                  

2.       (a) What is routine checking? Mention the advantages of this checking.

(b) “Vouching is the essence of an audit” discuss this statement.
What do you mean by verification of assets? How does it differ from valuation? Refer to one legal decision in respect of verification.
3.       State clearly the right and duties of an auditor of a company under the Indian companies Act.
What is the procedure of transfer of share? Point out the auditor’s duties in this connection. Distinguish between transfer and transmission of shares.

4.       Discus the special points arising in the audit of cooperative society.
Distinguish between audit and investigation. Explain in detail the procedure for an investigation.                                                                                                           

5.       What do you mean by qualified report? Under what circumstances as an auditor of a public company would you qualify your report? Draft a qualified report giving at least four reasons.
Distinguish between financial audit and cost audit. What are the disadvantages of financial audit and advantages of cost audit?

Thursday, November 10, 2011

Joint Venture

                A joint venture is the combination of two or more persons into a single activity. It is a form of partnership which is limited to a specific venture. It is exactly the same as partnership, with the exception that it is one of a business that is to be terminated.
                Since the business is to be terminated after completion of the venture, a firm name is not generally used. Thus the joint venture is like a temporary partnership without a firm name. it can also be said a particular partnership or partnership for a particular object.
                Features of a Joint Venture:-
i.         It is a specific partnership.
ii.       It does not entail a continuing partnership since termination is certain.
iii.      The business is dissolved after the venture is terminated.
iv.     Many accounting concepts are not applicable such as the going concern concept.
v.       Ascertainment of income is relatively simple.
vi.     It does not use a firm name generally.

                Merits of Joint Venture:              
i.         Sharing of Resources
ii.       High Profits
iii.      Low or no risk opportunities and massive leverage.

                Demerits of Joint Venture:         
i.         Short term partnership
ii.       While preparing accounts, many accounting concepts are not applicable such as the going concern concept.
iii.      Chances of loss of reputation if venture associated with wrong people.

Distinguish between the following:
                (a) Joint venture and Partnership
                (b) Consignment and Joint Venture
                (c) Consignment and Sale

(a) Difference between Partnership and Joint Venture:
Basis of Difference
Joint Venture
i.           Going Concern
It is a going concern.
It is a terminable venture.
ii.         Name
It always has a name.
It may not bear a name.
iii.       Parties
Persons carrying on business are called partners.
Persons carrying on business are called co-ventures.
iv.        Ascertainment of profit
Profits are ascertained at regular intervals, i.e., annually.
The profits are ascertained for each venture separately.

(b) Difference between Consignment and Joint Venture:
Basis of Difference
Joint Venture
i.  Parties
There are two parties i.e. the principal and the agent.
The numbers of parties are two or more where all the parties are of equal status i.e., each is principal and agent at the time like partners.
ii.         Relationship

The relationship between consignor and consignee is principal and the agent.
Co-ventures are principal as well as agent.

iii.       Term (Period):
Consignment is not confined to any specific term or period.
Joint venture is confined only to a specific venture.

iv.       Accounting Methods
Accounts are prepared only by single method.
Accounts are prepared by four methods.

The ownership of consignment is always with consignor and the agent has no right of ownership in the goods.
In case of joint venture, all the co-ventures are the joint owner.
vi.       Sharing of Profit or Loss
The profit on the consignment belongs to the principal (Consignor).
The profit or loss is shared equally by all the concerned parties, unless otherwise decided.
vii.     Account Sale
Account sale is prepared
No need to prepare account sale

(c) Difference between Consignment and Sale:
Basis of Difference
i.  Ownership
In a consignment, the ownership remains which the principal.
The ownership passes to the buyer.

ii.         Relationship

The relationship between consignor and consignee is principal and the agent and continue till terminated.
The relations between buyer and seller terminated as soon as the goods are delivered and payment is made.
iii.       Return
In a consignment, goods may be returned at any time.
In a sale, the buyer cannot return the goods unless otherwise agreed.
iv.       Payment
In case of consignment payment is due as and when goods are sold, otherwise no payment is due.
In case of sale, payment is due immediately on sale or as agreed.

v.Account Sale
Account sale is prepared.
No need to prepare account sale

Various methods of preparing Joint venture accounts.
The popular methods of preparing accounts of joint venture are as follows:-
a)      Accounts kept by one party.
b)      Accounts kept by all parties.
c)       Accounts kept by separate books.
d)      Accounts kept by Memorandum Method.
These methods of accounting records of joint venture are described briefly as follows:-
                Accounts kept by one party:       Under this method account are recorded by one Co-Venture and he is responsible for the entire accounting recording. He is given money by all Co-Ventures and he does the work for the joint venture for which he may be given commission if all are agree. In the end, he will prepare Joint Venture Account and will calculate profit or loss on joint venture.
                Accounts kept by all parties:      Under this method all the Co-Ventures maintain the accounts in their respective books relating to Joint Venture. Each venture will convey his transaction of Joint Venture to other ventures. By this information every venture will prepare its own Joint Venture Account and also the personal accounts of other ventures.
                Accounts kept by separate books: Under this method separate books are kept for the joint venture through opening of a separate bank account. Contributions by the co-venturers are deposited in this account; as far as possible payments on account of the joint venture are made out of this bank account. At the close the profit or loss is transferred to the accounts of the Co-Ventures and the amounts due to them are then paid out of the joint bank account which is then closed.
                Accounts kept by memorandum method: Under this method the profit or loss on joint venture is known with the help of Memorandum Joint Venture Account. Hence only one account is opened named as “Joint Venture with…..Account”.

Wednesday, November 09, 2011

Management Accounting

The term management accounting refers to accounting for the management. Management accounting provides necessary information to assist the management in the creation of policy and in the day-to-day operations. It enables the management to discharge all its functions i.e. planning, organization, staffing, direction and control efficiently with the help of accounting information.

“Management accounting is concerned with accounting information that is useful to management”. – R.N. Anthony.
“Management accounting is the presentation of accounting information is such a way as to assist management in the creation of policy and in the day-to-day operations of an undertaking”.- Anglo American Council of Productivity.

The objectives of management accounting are:
a)      to assist the management in promoting efficiency. Efficiency includes best possible services to the customers, investors and employees.
b)      to prepare budget covering all functions of a business (i.e. production, sales, research and finance).
c)       to analysis monetary and non-monetary transactions.
d)      to compare the actual performance with plan for identifying deviations and their causes.
e)      to interpret financial statements to enable the management to formulate future policies.
f)       to submit to the management at frequent intervals operating statements and short-term financial statements.
g)      to arrange for the systematic allocation of responsibilities.
h)      to provide a suitable organization for discharging the responsibilities. In short, the objective of management accounting is to help the management in making decisions and implementing them efficiently.

The field of management accounting is very wide. The main purpose of management accounting is to provide information to the management to perform its functions of planning directing and controlling. Management accounting includes various areas of specialization to render effective service to the management.

a)      Financial Accounting: Financial Accounting deals with financial aspects by preparation of Profit and Loss Account and Balance Sheet. Management accounting rearranges and uses the financial statements. Therefore It is closely related and connected with financial accounting.

b)      Cost Accounting: Cost accounting is an essential part of management accounting. Cost accounting, through its various techniques, reveals efficiency of various divisions, departments and products. Management accounting makes use of all this data by focusing it towards managerial decisions.

c)       Budgeting and Forecasting: Budgeting is setting targets by estimating expenditure and revenue for a given period. Forecasting is prediction of what will happen as a result of a given set of circumstances. Targets are fixed for various departments and responsibility is pinpointed for achieving the targets. Actual results are compared with preset targets and performance is evaluated.

d)      Inventory Control: This includes, planning, coordinating and control of inventory from the time of acquisition to the stage of disposal. This is done through various techniques of inventory control like stock levels, ABC and VED analysis physical stock verification, etc.

e)      Statistical Analysis: In order to make the information more useful statistical tools are applied. These tools include charts, graphs, diagrams index numbers, etc. For the purpose of forecasting, other tools such as time series regression analysis and sampling techniques are used.

f)       Analysis of Data: Financial statements are analysed and compared with past statements, compared with those of other firms and with standards set. The analysis and interpretation results in drawing reports and presentation to the management.

g)      Internal Audit: Internal audit helps the management in fixing individual responsibility for internal control.

h)      Tax Accounting: Tax liability is ascertained from income statements. Knowledge of tax provisions helps the management in meeting the tax liabilities and complying with other legislations like Sales tax, Companies Act and MRTP Act.
i)        Methods and Procedures: In includes keeping of efficient system for data processing and effective reporting of required data in time.

Main objective of management accounting is to help the management in performing its functions efficiently. The major functions of management are planning, organizing, directing and controlling. Management accounting helps the management in performing these functions effectively.

a)      Presentation of Data: Traditional Profit and Loss Account and the Balance Sheet are not analytical for decision making. Management accounting modifies and rearranges data as per the requirements for decision making through various techniques.

b)      Aid to Planning and Forecasting: Management accounting is helpful to the management in the process of planning through the techniques of budgetary control and standard costing. Forecasting is extensively used in preparing budgets and setting standards.

c)       Decision Making: Management accounting provides comparative data for analysis and interpretation for effective decision making and policy formulation.

d)      Communication of Management Policies: Management accounting conveys the policies of the management downward to the personnel effectively for proper implementation.

e)      Effective Control: Standard costing and budgetary control are integral part of management accounting. These techniques lay down targets, compare actual with standards and budgets to evaluate the performance and control the deviations.

f)       Incorporation of non-financial information: Management accounting considers both financial and non-financial information for developing alternative courses of action which leads to effective and accurate decisions.
g)      Co ordination: The targets of different departments are communicated to them and their performance is reported to the management from time to time. This continual reporting helps the management in coordinating various activities to improve the overall performance.

The advantages of management accounting are summarized below:
a)       Helps in Decision Making: Management accounting helps in decision making such as pricing, make or buy, acceptance of additional orders, selection of suitable product mix etc. These important decisions are taken with the help of marginal costing technique.

b)      Helps in Planning: Planning includes profit planning, preparation of budgets, programmes of capital investment and financing. Management accounting assists in planning through budgetary control, capital budgeting and cost-volume-profit analysis.

c)       Helps in Organizing: Management accounting uses various tools and techniques like budgeting, responsibility accounting and standard costing. A sound organizational structure is developed to facilitate the use of these techniques.

d)      Facilitates Communication: Management is provided with up-to-date information through periodical reports. These reports assist the management in the evaluation of performance and control.

e)      Helps in Co-ordinating: The functional budgets (purchase budget, sales budget, and overhead budget etc.) are integrated into one known as master budget. This facilitates clear definition of department goals and coordination of their activities.

f)       Evaluation and Control of Performance: Management accounting is a convenient tool for evaluation of performance. With the help of ratios and variance analysis, the efficiency of departments can be measured which assists management in the location of weak spots and in taking corrective actions.

g)      Interpretation of Financial Information: Management accounting presents information in a simple and purposeful manner. This facilitates quick decision making.

h)      Economic Appraisal: Management accounting includes appraisal of social and economic forces and government policies. This appraisal helps the management in assessing their impact on the business.

Management accounting suffers from the following limitations:
a)      Based on Accounting Information: Management accounting derives information from past financial accounting and cost accounting records. If the past records are not reliable, it will affect the effectiveness of management accounting.

b)      Wide scope: Management accounting has a very wide scope incorporating many disciplines. This results in inaccuracy and other practical difficulties.

c)       Costly: The installation of management accounting system requires a large organization. Hence, it is very costly and only big concerns can afford to adopt it.

d)      Evolutionary Stage: Management accounting is still in its initial stages. Tools and techniques are not fully developed. This creates doubts about the utility of management accounting.

e)      Opposition to Change: Introduction of management accounting system requires a number of changes in the organization structure, rules and regulations. This rearrangement is not generally liked by the people involved.

f)       Intuitive Decisions: Management accounting helps in scientific decision making. Yet, because of simplicity and personal factors the management has a tendency to arrive at decisions by intuition.

g)      Not an Alternative to Management: Management accounting will not replace the management and administration. It is a tool of the management. Decisions are of the management and not of the management accountant.

Cost accounting
Management accounting
i.     Purpose
The main objective of cost accounting is to ascertain and control the cost of products or services.
The function of management accounting is to provide information to management for efficiently performing the functions of planning, directing, and controlling.
ii.   Emphasis
Cost accounting is based on both historical and present data.
Management according deals with future projections on the basis of historical and present cost data.
iii. Principles
Established procedures and practices are followed in cost accounting.
No such prescribed practices are followed in Management accounting.
iv.  Data
Cost accounting uses only quantitative information.
Management accounting uses both qualitative and quantitative information.
v.    Scope
Cost accounting is concerned mainly with cost ascertainment and control.
Management accounting includes, financial accounting, cost accounting, budgeting, tax planning and reporting to management.

Financial accounting
Management accounting
i.  Objectives
The main objective of financial accounting is to supply information in the form of profit and loss account and balance sheet to outside parties like shareholders, creditors, government etc.
The main objective of management accounting is to provide information for the internal use of management.

ii.   Performance
Financial accounting is concerned with the overall performance of the business.
Management accounting is concerned with the departments or divisions. It report about the performance and profitability of each of them.

iii. Data
Financial accounting is mainly concerned with the recording of past events.
Management accounting is concerned with future plans and policies.
iv.  Nature
Financial accounting is based on measurement.
Management accounting is based on judgment.
v.    Accuracy
Accuracy is an important factor in financial accounting.
Approximations are widely used in management accounting.
vi.  Legal Compulsion
Financial accounting is compulsory for all joint stock companies.
Management accounting is optional .

vii.      Monetary transactions
Financial accounting records only those transactions which can be expressed in terms of money.
Management accounting records not only monetary transactions but also non- monetary events.
viii.    Control
Financial accounting will not reveal whether plans are properly implemented.
Management accounting will reveal the deviations of actual performance from plans. It will also indicate the causes for such deviations.

Cost accounting
Financial accounting
i.     Objectives
The main objective of cost accounting is to provide cost information to management for decision making.
The main objective of financial accounting is to prepare Profit and Loss A/c and Balance Sheet to report to owners and outsiders.

ii.   Legal Requirement
Cost accounts are maintained to fulfill the internal requirements of the management.
Financial records are maintained as per the requirement of Companies Act and Income Tax Act.

iii. Classification of Transaction
Cost accounting records and analyses expenditure in an objective manner viz., according to purpose for which costs are incurred.

Financial accounting classifies records and analyses transactions in a subjective manner i.e., according to nature of expenses.
iv.  Accounting period
Cost report are continuous process and are prepared as per the requirements of managements, may be daily, weekly, monthly, quarterly, or annually.

Financial reports are prepared annually.
v.    Nature
Cost accounts lay emphasis on both historical and predetermined costs.
Financial accounts are maintained on the basis of historical records.

vi.  Emphasis
Cost accounting lays emphasis on ascertainment of cost and cost control.
Financial accounts emphasis is laid on the recording of transactions.

vii.      Stock Valuation
In cost accounts stocks are valued at cost.
In financial accounts, stocks are valued at cost or realisable value, whichever is lesser.

viii.    Analysis of Profit and Cost
Cost accounts reveal Profit of Loss of different products, departments separately.
In financial accounts, the Profit or Loss of the entire enterprise is disclosed into.