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Sunday, September 23, 2012

Dibrugarh University (M.com - Distance) - Entrepreneurship Development


2008 (August)
Paper: 104
Full Marks: 80
Time: 3 hours

Answer all questions. The questions are of equal Marks (16 Marks each).
1.       (a) Detail out the differences between entrepreneur and enterprise and entrepreneurs and managers.
Or
(b) Elaborate the literature description of entrepreneur and entrepreneurship.
2.       (a)Explain the different views on entrepreneurship put forwarded by Schumpeter, Walker and Drucker.
Or
(b) Explain the entrepreneurial competencies of an Entrepreneur.
3.       (a) Elucidate the entrepreneurial decision-making in small firms.
Or
(b) Elucidate as how to approach a lending institution for a term loan by an entrepreneur.
4.       (a) Explain the nature of enterprising activities and the various strategies and approaches for EDPs.
Or
(b) Give and imaginary module of an EDP and justify the points.
5.       (a) In the context of the status of entrepreneurship in the North-eastern Region, explain the social and institutional issues.
Or
(b) With the help of examples, explain the factors impeding the growth of entrepreneurship in the North-eastern region.

Dibrugarh University (M.com - Distance) - Entrepreneurship Development


2009 (August)
Paper: 104
Full Marks: 80
Time: 3 hours

Answer all questions. The questions are of equal value.
1.       (a) Explain the position of Entrepreneurs in small firms.
Or
(b) Bring out the differences between Entrepreneur and Entrepreneurship.
2.       (a) Show the contribution of Ronald coarse of entrepreneurial development.
Or
(b) Schumpeter, Walker and Drucker have different views on entrepreneurship. According to you, whose views are substantial for entrepreneurial development? Give your opinion.

3.       (a) Explain the process of identifying and evaluating business opportunities.
Or
(b) Explain the assistance provided by National bank for agriculture and rural development of the entrepreneurs.

4.       (a) What should be the content and coverage of Entrepreneurship Development Programmes?
Or
(b) What are the various strategies and approaches for Entrepreneurship Development Programmes?

5.       (a) Briefly explain the social and institutional issues in reference to entrepreneurship development in the North-East region.
Or
(b)Do you think entrepreneurship development shall accelerate economic development of North-eastern region? Justify with reasons.

Dirbrugarh University (M.com - Distance) - Entrepreneurship Development


2010 (August)
Paper: 104
Full Marks: 80
Time: 3 hours

Answer all questions. The questions are of equal value.
1.       (a) Explain the evaluation of term Entrepreneur and Entrepreneurship.
Or
(b) Discuss the differences between Entrepreneurs and Managers. In what way entrepreneurs are different from enterprises?

2.       (a) Discuss the different traits possessed by a competent entrepreneur.
Or
(b) Discuss at least two theories of Entrepreneurs along with the assumptions.

3.       (a) Highlight some of the issues on identifying and evaluating business opportunities.
Or
(b) Write at least two institution’s activities involving in entrepreneural assistance.

4.       (a) Write a note on the coverage of EDPs in India.
Or
(b) Explain some of the common strategies that can be adopted for EDPs in North-East of India.

5.       (a) Write a detail note on the role of entrepreneurship in economic development in the North-East.
Or
(b)Discuss some of the social and institutional issues preventing the development of entrepreneurship in North- east of India.

Dibrugarh University (M.com - Distance) - Entrepreneurship Development


2011 (August)
Paper: 104
Full Marks: 80
Time: 3 hours

Answer all questions. The questions are of equal Marks (16 Marks each)
1.       (a) Explain the position of Entrepreneurs in small firms.
Or
(b) Bring out the differences between Entrepreneur and Entrepreneurship.
2.       (a)Critically evaluate the views of entrepreneurship put forwarded by Schumpeter, Walker and Drucker.
Or
(b) With the help of case study, explain the theory of transaction cost.
3.       (a) Elucidate some effective marketing practices in small firms.
Or
(b) Explain how you will approach an institution for a term loan required for you enterprise.
4.       (a) What strategies and approach shall you attempt in conducting an EDP (Entrepreneurship Development Program)?
Or
(b) Develop a module of an EDP for a specific target group.
5.       (a) Highlight the factors impending the growth of entrepreneurship in North-East India. What measures would you like to suggest?
Or
(b) Justify with reasons as to why the growth of entrepreneurship in North-East India is staggering behind.

Sunday, September 09, 2012

Goodwill: Nature and Valuation

Goodwill
Goodwill is the value of the reputation of a firm in respect of profits expected in future over and above the normal profits.
In the words of Eric L. Kohler “Goodwill is the present value of expected future income in excess of a normal return on the investment in tangible assets.”

Reasons for Valuation of Goodwill
In case of a partnership firm, the need for valuation of goodwill may arise under the following circumstances:
(i)      When a new partner is admitted,
(ii)    When a partner retires or dies,
(iii)   When the firm is sold as a going concern,
(iv)  When there is a change in profit sharing ratio among partners,
(v)    When partnership firm is sold to a company.

Nature and Characteristics of Goodwill
(i)      It is an intangible and not a fictitious asset.
(ii)    It helps in earning more than normal profit.
(iii)   It is an attractive force which brings in customers to old place of business.
(iv)  It is composed of variety of elements.
(v)    It is difficult to ascertain the exact value of goodwill.

Factors affecting the value of Goodwill are:
(i)         Skill in Management: If the management is capable, the firm will earn good profits and that will raise the value of goodwill.
(ii)       Location Factor: If the business is located at a favourable place, resulting in good sale or in economics, the value of goodwill will be correspondingly higher.
(iii)      Favourable Contracts: Sometimes, a firm enters into long term contracts for sale and purchase of goods at favourable prices. This will also affect profits and goodwill of the firm.
(iv)     Risk Involved: When the risk is less in the business it creates more goodwill but if the risk is more, it creates less goodwill.

Types of Goodwill
Goodwill is mainly of two types:
a)      Purchased Goodwill
b)      Non-Purchased Goodwill
                Purchased Goodwill: When one business is taken over by another business, the excess of purchase consideration over its net value (assets-liabilities) is termed to as purchased Goodwill.
                Non Purchased Goodwill: Non Purchased Goodwill is an internally generated goodwill which arises because of favourable factors that a business possesses (e.g., favourable location, time factor and efficiency of management).
Methods of Valuation of Goodwill:
a)      Average profits method
b)      Super profit method
c)       Capitalisation method
d)      Annuity method

Average Profits Method: In this method, normal profits of business of a number of years are taken into account. Such profits are totaled up and their average is arrived at. The average profits are multiplied by the number year’s purchases to arrive at the value of goodwill.
For calculation of goodwill following steps are to be followed
a)      Calculate past normal profit. Past Normal Profit = Net Profit + Abnormal loss – Abnormal Gain
b)      Calculate Average normal Profit = Total Past normal profit/no of years
c)       Calculate goodwill = Average normal profit x no. of year’s purchase

Super Profit Method: Super Profits means profits earned in excess of the normal Profit, i.e., Actual Profit –Normal. Normal profits mean the profit which the firms could normally earns in a particular business.
Under this method, the following steps are to be followed for calculation of goodwill:
a)      Calculate average normal profit of business as mentioned above
b)      Calculate normal profit
c)       Calculate super profit. Super profit is the excess of average normal profit over normal profit
d)      Calculate goodwill = super profit x no. of year’s purchase

Capitalization Method: Under this method, the value of goodwill is obtained by capitalizing the average profit or super profit of the basis of normal rate.
Value of goodwill under capitalization of average profit is
                Goodwill = (Average normal profit of the business/ rate of return) – capital employed
Value of goodwill under capitalization of super profit is
Goodwill = Super profit/ rate of return

Annuity Method: Goodwill = Annuity Factor x Super Profit

Difference between Average Profits and Super Profits
Basis
Average Profits
Super Profits
1. Meaning
It is the average of the profits of the past few years.
It is the excess of average profits over normal profits.
2. Normal Profit
It need not to be calculated.
It is always required.
3. Normal rate of Profit
No function of normal rate.
Without it super profit cannot be calculated.
4. Relevance of Valuing Goodwill
It is relevant for average profits method, super profits method and capitalisation methods of valuation of goodwill
Super profit is relevant for super profit method and capitalization of super profit method of valuation of goodwill.

Partnership Accounts: Death of A Partner


Introduction
The death may come at any time. On the death of a partner, the legal heirs of the deceased partners are entitled to get the amount due to the deceased partner as per the provisions of partnership deed. On the death of a partner, the legal heirs or representatives are entitled to get the following:
a)      The amount standing to the credit to the capital account of the deceased partner
b)      Interest on capital, if provided in the partnership deed upto the date of death:
c)       Share of goodwill of the firm;
d)      Share of undistributed profit or reserves;
e)      Share of profit on the revaluation of assets and liabilities;
f)       Share of profit upto the date of death;
g)      Share of Joint Life Policy.
The following specimen of deceased partner’s capital will help to find out the amount due to the deceased partner.
Particulars
Amount
Particulars
Amount
To Balance B/d
(If there is a debit balance)
To Share in Revaluation loss
To Accumulated losses
To Drawings
To Interest on Drawings
To Profit and Loss Suspense A/c
(Share in loss upto death)
To Assets taken over
To Executors Account
(Balancing figure)

By Balance B/d
(If there is a credit balance)
By Share in Revaluation Profit
By Accumulated Profits and Reserves
By Interest on Capital
By Profit and Loss Suspense A/c
(Share In profits upto death)
By Liabilities taken over by legal heirs


Amount Due to Deceased Partner (Sec. 37 of the partnership act)
The amount due to the deceased partner is transferred to a loan account opened in the name of executor of the deceased partner and payable by the existing partners. The agreement normally provides for the interest payable on the loan and the conditions for the repayment of such loan. In the absence of any agreement, it is provided in sec. 37 of partnership act that the estate of deceased partner has the option either to claim interest on the amount due @6% p.a. or to such a share of the subsequent profits as may be attributable to the use of his share of the property of the firm.

Calculation of profit upto the date of death of a partner
If the death of a partner occurs during the year, the representatives of the deceased partner are entitled to his/her share of profits earned till the date of his/her death. Such profit is ascertained by any of the following methods:
(i) Time Basis:
(ii) Turnover or Sales Basis

(i) Time Basis: In this case, it is assumed that profit has been earned uniformly through out the year. Profit taken here is either Last year’s profit Or Average profits of last few years. For example:
The total profit of Last year is Rs. 2, 25,000 and a partner dies three months after the close of previous year, the profit of three months is Rs. 31,250 i.e. 1, 25,000 × 3/12, if the deceased partner took 2/10 share of profit, his/her share of profit till the date of death is Rs. 6,250 i.e. Rs. 31,250 × 2/10.
Again, the profits of last three years is Rs. 100000, Rs. 75000 and Rs. 125000 and partner dies three months after the close of previous year, the his share of profit upto date of death is calculated as follows:
1.       Average profit of last three years = (100000+75000+125000)/3 = 100000
2.       Profit of last three years = 100000x3/12 = 25000
3.       Deceased partner’s share of profit = 25000 x 2/10 = 5000, if the deceased partner took 2/10 share of profit.

(ii) Turnover or Sales Basis: In this method, we have to take into consideration the profit and the total sales of the last year. Thereafter the profit upto the date of death is estimated on the basis of the following formula:
(Sales upto date of death/Sales of last year) x profit of previous year
 Profit is assumed to be earned uniformly at the same rate. For example:  
A, B and C were partners in a firm sharing profits in the ratio of 2:2:1. C dies on 31st July, 2007. Sales during the previous year upto 31st march, 2007 were Rs. 6, 00,000 and profits were Rs. 150000. Sales for the current year upto 31st July were Rs. 250000. Calculate C’s share of profits upto the date of his death and pass necessary journal entry.
Here, Profit upto date of death (upto 31st July, 2007) = (250000/600000) x 150000 = 62500
And C’s Share of profit = 62500x1/5 = 12500.

Treatment of Joint Life Policy
Sometimes the partners insure their lives separately and pay the premium from the firm. This will help the continuing partners to keep their life insurance policy valid even after the death of a partner. When there are separate life insurance policies, the full amount due on the policy of deceased partner and the surrender values of the policies of the continuing partners will be credited to all partners in their profit sharing ratio. The surrender values will appear in the subsequent balance sheets. The following are the three methods of accounting treatment of joint life policies:
i. The insurance premium treated as normal business expense
When insurance premium is treated as normal business expense, the premium paid will be initially debited to the premium account and later on transferred to the profit and loss account just like any other business expense.
Journal entries
a) For payment of premium:
Joint life insurance premium account Dr.
To Cash
b) For Transfer of expense to P & L account
P & L account Dr.
To Joint Life Premium Account
c) At the time of maturity (claim due to death)
Joint Life Policy Account Dr. (full amount of insurance policy)
To All Partner’s Capital Accounts (in the profit sharing ratio)
d) For cash received
Cash / Bank account Dr.
To Joint Life Policy Account

ii. The surrender value is retained as asset.
Surrender value of an insurance policy is the amount which the insurance company will pay back to the insured if he decides to cancel the policy before maturity. The insurance company usually would not pay anything if the policy is cancelled in the first year. But thereafter, they company will agree to refund a small portion of the premium paid if the customer decides to discontinue the policy. With each payment of premium some portion it is added to the surrender value of the policy. The portion thus added into the surrender value is not considered a capital expense. Only the remaining part is written off to Profit and Loss account as expense.
Journal entries:
a. For Payment of Premium
Joint life policy account Dr.
To cash
b. For the premium above surrender value is transferred:
P & L account Dr.
To Joint Life Policy Account
c. At the time of maturity (claim due to death)
Insurance Claim Account Dr. (full value insured)
To Joint Life Policy
d. For the Claim Settlement
Bank/cash Account Dr.
To Insurance Claim
e. For Closing JLP account
JLP account Dr. (balance amount)
To All Partner’s Capital Accounts (Profit sharing ratio)

iii. Joint life policy reserve account is maintained
Under this method surrender value of Joint life policy is shown as asset (same as the second method). A joint life policy reserve equivalent to the surrender value is maintained in the books. There are three steps involved in the accounting.
Journal Entries
Step 1: Debit Join Life Policy and Credit Cash for payment of Premium
Joint Life Policy Account Dr.
To Cash
Step 2 Debit P&L Appropriation account and Credit Joint Life policy reserve to create reserve equivalent to that of policy.
P& L Appropriation Account Dr.
To Joint Life Policy Reserve Account
Step 3 Debit Joint life policy reserve and Credit Joint life policy account, to adjust the amounts in both the accounts to the actual surrender value.
Joint Life Policy Reserve Account Dr.
To Joint Life Policy Account
At the time of death of a partner the insurance related accounts are closed in the following way:
Journal Entries
1. Insurance Claim
Bank/Cash account Dr.
To Joint Life policy Account
2. Closing of Reserve
Joint Life Policy Reserve Account Dr.
To Joint Life Policy Account
3. Closing the Policy Account
Joint Life Policy Account Dr.
To All Partner’s Capital Accounts