Sunday, January 12, 2025
Subscribe
Home Blog Page 5

Financial Statement Analysis & Interpretation

theinfosagar
-
0

Financial Statement Includes:

  1. Trading & Profit & Loss Account: which gives the result of year’s working.
  2. Profit & Loss Appropriation Account: which gives details about the disposal of the retained earning.
  3. Balance Sheet: which gives the financial position of the undertaking as on the accounting date.
  4.  Cash Flow Statements : Which gives the movement of money into and out of a business under various form like purchase of goods, expenses and sales.

“The most important function of financial statements is to serve those who control and direct the business and may be answered the questions, how efficiently the capital of the business is being utilized, how well credit standards are being observed, and whether the financial condition is being improved.”

The Meaning of Analysis and Interpretation

The financial statements are of much interest to number of groups of persons. Apart from the management there are other interested parties like shareholders, debenture holders, potential investors, bankers, trade creditors and legislature.

**Interpret means to put the meaning of a statement into simple terms for the benefit of a person.
** Analysis comprise resolving the statements by breaking them into simpler statements by a process or rearranging, regrouping and the calculation of ratios, interpretation is the mental process of understanding the terms of such statements and forming opinions or inferences about the financial health, profitability, efficiency and such other aspects of the understanding.

Objectives of Analysis and Interpretation

  • To evaluate the financial health of the understanding.
  • To evaluate the earning performance of the undertaking.
  • To evaluate the ability of the undertaking to pay interest, amortized debt and other outside liability.
  • To evaluate the solvency of the undertaking. By the understating of solvency of the undertaking above points can be well understand.
    • Whether current assets are sufficient to pay off the current liabilities.
    • Proportion of liquid assets (cash and book debts) to current assets.
    • Whether the debenture holders are secured by a floating charge of the currents assets.
    • Future growth of undertaking and earning.

Example: Bankers who provide short term working capital loan and medium term credit they generally look into the following matter:

  • The purpose of loan.
  • The manner in which the borrower proposes to repay the loan.
  • The capacity of company to repay as evaluated by trends of profits.
  • Banker’s position in the event of forced liquidation.
  • The quality of management.
  • History of accounts in the history.

Types of Analysis:

  1. Trend Analysis: which is made by analyzing the financial statements over a period of years. This indicates of such variable, as sales cost of production profits, assets and liabilities. For this it is better to prepare financial statements horizontally.
  2. Structural Analysis: which is made by analysis of single set of financial statements as are prepared on a particular date. Under this analysis relationship between different accounting variables is studied as for example, the ratio of net profit on sales or the ratio of current assets over current liabilities.

Tools of Financial Analysis:

  1. Comparative Balance Sheet and Income Statements
  2. Common Size Percentage: it is used for big balance sheet when it is very difficult to understand the figures. Generally Income Statement is converted into % statement on some common base. Sales figures assumed 100 and other figures are analysed on % of sales. In case of balance sheet total of assets and liabilities considered as 100 and all other figures are expressed as % of total.
  3. Trend Ratios
  4. Ratio Analysis:
    • Balance Sheet Ratio:
      • Current Ratio or Working Capital Ratio
      • Liquid Ratio or Acid Test Ratio
      • Proprietary Ratio
      • Assets Proprietorship Ratio.
    • Profit & Loss Statement Ratio
      • Gross Profit Ratio
      • Operating Ratio
      • Expenses Ratio
      • Net Profit Ratio
      • Stock Turnover Ratio
    • Balance Sheet and Profit & Loss Statement Ratio
      • Return on total resources
      • Return on Own Funds
      • Turnover of Fixed Assets
      • Turnover of Debenture
      • Earning Per Share

TDS on PURCHASE of GOOD

theinfosagar
-
0
194Q. Deduction of tax at source on payment of certain sum for purchase of goods.

Any person, being a buyer who is responsible for paying any sum to any resident (hereafter in this section referred to as the seller) for purchase of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, shall, at the time of credit of such sum to the account of the seller or at the time of payment thereof by any mode, whichever is earlier, deduct an amount equal to 0.1 per cent of such sum exceeding fifty lakh rupees as income-tax.

Important points in definition:
ApplicableTOAny person (buyer)
Who is responsible for paying to any
resident seller; for
ApplicableONPurchase of any GOODS
ApplicableWHENValue (aggregate)
exceeding Rs. 50 lakh in P.Y.
ApplicableTIMEEarlier OF
Credit into the account of the seller
or
Payment (by any mode)
ApplicableRATE0.10% (if no pan 5%)
exceeding Rs. 50 Lakh
ApplicableEXCEPTIONSection shall not apply to-
-TDS is deductible under any other section under Income Tax Act
-TCS is collectible u/s 206C except 206(1H)

Meaning of Buyer : Only for this section:

A person whose total sales, gross receipts or turnover from the business exceed Rs. 10 Crore During preceding Financial Year immediately preceding the financial year in which the purchase of good is carried out.

In Case of Difficulty : Arises in giving effect to this section

Board may, with the previous approval of the Central Govt issue guidelines for removing the difficulty.

Time of Payment:

Date of Payment of TDS : April to February – 7th of next Month

for the month of March- 30th April

Non-Compliance    PENALTY      :           30% Disallowance of value of transaction

FAQ:

Transaction Before   01/07/21      :           194Q – not apply on any sum credited or paid.

Threshold Limit                               :           shall be computed from 1st April 2021.

Not Apply on                                   :           transaction at stock exchange

                                                                        GST adjustment allowed.

Letter of Credit

theinfosagar
-
0

A letter issued by a bank to another bank as a guarantee for payments under the specified contract between the buyers and the sellers.

The issuing bank guarantees that the buyer receiving the payment from the seller in exchange for goods or services will be on time and for the correct amount.

If the seller is not able to make payment against the purchase, the bank will cover the payment amount.

Thus, the real purpose behind issue of letter of credit is to ensure successful business transactions between sellers and buyers. It is an instrument facilitating ease of doing business.

Types of Letter of Credit

There are various types of letter of credit (LC) in the trade transactions viz.

  • Commercial Letter of Credit,
  • Transferable and Non-Transferable LC,
  • Revocable and Irrevocable, Stand-by LC,
  • Confirmed  & Unconfirmed LC,
  • Revolving Letter of Credit,
  • Back to Back Letter of Credit,
  • Red Clause Letter of Credit,
  • Green Clause Letter of Credit,
  • At Sight Letter of Credit,
  • Deferred Payment Letter of Credit,

Parties to a letter of credit

  • Applicant (Purchaser/ importer)
  • Issuing bank i.e. importer’s bank which issues the LC
  • Beneficiary /Seller exporter

Simple Credit Journal Entries

theinfosagar
-
0

Credit transaction means any transaction by the terms of which the payment for business transaction is to be made at a future date.

For credit transaction we directly debit or credit in the name of person or company

Credit journal entries refer to a transaction in which the amount payable or receivable will be paid or received at a later date. E.g. Credit sales and Credit purchases.

List of Journal Entries in Video

  1. Capital introduced
  2. Withdrawal from business
  3. Purchase of Material
  4. Sale of Material
  5. Salary Payment
  6. Interest Income

2.1.  Mr. Bharat introduced Rs. 20,000/- is the business as capital

PARTICULARSDRCR
Cash A/c             
To Mr. Bharat’s Capital A/c
(Capital Introduced)		20,000.00

  20,000.00

2.2. Mr. Bharat withdrawn Rs. 1,200/- for his personal use

PARTICULARSDRCR
Drawing  A/c             
To Cash  A/c
(Amount withdrawn for personal use)		1,200.00

  1,200.00

2.3. Mr. Bharat purchased goods of Rs 10,000.00 from Ramesh on credit.

PARTICULARSDRCR
Purchase  A/c             
To Ramesh A/c
(Material purchased )		10,000.00

  10,000.00

2.4. Goods of Rs. 12,000 sold to Mr. Shyam on credit.

PARTICULARSDRCR
Shyam,s A/c             
To Sales A/c
(Material purchased )		12,000.00

  12,000.00

2.5. Salary for last month of the year of Rs. 800 paid in the next financial year.

PARTICULARSDRCR
Salary  A/c             
To Salary Payable A/c
(Salary paid )		800.00

  800.00

2.6. Interest amount of Rs. 600 for the last month of year received in next financial year.

PARTICULARSDRCR
Interest Receivable  A/c             
To interest A/c
(Salary paid )		600.00

  600.00

Simple Journal Entries

theinfosagar
-
0

Journal Entry

In the age of manual accounting system, business transactions are first noted in a Journal Book. The journal entries are punched in a journal in order by date and are then posted into the proper accounts in General Ledger.

Journal will contain of the following:

  • Date of transaction
  • Amount & account that will be debited in journal
  • amount & account that will be credited in journal
  • a short description /narration

Under computerised accounting system environment software will automatically punched business transactions into the general ledger.

List of Journal Entries in Video

  • 1. Capital introduced
  • 2. Withdrawal from Business
  • 3. Purchase of Material
  • 4. Sale of Material
  • 5. Salary Payment
  • 6. Interest Income

1.1.  Mr. Modi introduced Rs. 10000/- is the business as capital

PARTICULARSDRCR
Cash A/c             
To Mr. Modi Capital Capital A/c
(Capital Introduced)		10000.00  10000.00

1.2. Mr. Modi withdraw Rs. 600/- for his personal use

PARTICULARSDRCR
Drawing  A/c             
To Cash  A/c
(Amount withdrawn for personal use)		600.00  600.00

1.3. Mr. Modi Purchased goods for Rs. 5000/-

PARTICULARSDRCR
Purchase  A/c             
To Cash  A/c
(Material purchased )		5000.00  5000.00

1.4. Mr Modi sold material for Rs. 6000/-

PARTICULARSDRCR
Cash A/c             
To Sales A/c
(Material purchased )		6000.00  6000.00

1.5. Mr Modi paid salary of Rs. 400/- against Salary

PARTICULARSDRCR
Salary  A/c             
To Cash  A/c
(Salary paid )		400.00  400.00

1.6. Interest received Rs. 300/-

PARTICULARSDRCR
Cash  A/c             
To interest A/c
(Salary paid )		300.00  300.00

Thumb Rule for DEBIT CREDIT

theinfosagar
-
0

Firstly, you need to identify number of accounts involve in the particular transaction. After identifying account involve in business transaction, you must debit one account and must credit other account.

Any (+) Increase in Assets, Drawing, Expenses i.e. increase in [ADE] always DEBIT

Any (+) Increase in Liabilities, Capital, Income i.e. increase in [LCI] always Credit

DR. and CR. are used as short form of debit and credit.

To debit an account means to enter an amount on the left side of the journal.

To credit an account means to enter an amount on the right side of journal book.

DateParticularL.F.Amount
Dr		Amount
Cr

SBI Reduced Deposit Rate

theinfosagar
-
0

On Sunday , Mr Prime Minister of India said that huge bank deposit Rs 5000 Crore approx after demonitzation are not going to kept idle . Days after Prime Minister signalled that rates are on the way down, SBI reduced bulk deposit rates by up to 1.9 per cent on today.

Other banks may follow the way of the country’s largest bank. If such happens, it will on the path of low cost advances for new/ existing enterpneurs and on other hand  this will be a slap for interest rate arbitrator who takes the benefits of interest rate difference in International Market.

SBI has reduced interest rates on bulk deposits ranging between Rs 1-10 crore. The new rates are effective tomorrow, SBI website showed.

For 180-210 day fixed deposit will attract 1.90 per cent lower interest rate at 3.85 per cent as against the 5.75 per cent earlier. 

For fixed deposits between 1 year to 455 days, the rate has been lowered to 6 per cent from 4.25 per cent. 

For FDs between 7 days to 45 days, the new rate will be 1.25 per cent lower at 3.75 per cent. 
Earlier this month, SBI had cut fixed deposit rates for less than Rs 1 crore  by up to 0.15 per cent. 

GST Registration schedule

theinfosagar
-
0

Enrolment Schedule for your State for GST Registration

The schedule of the enrolment activation drive for states is given below. We encourage you to complete the enrolment during the specified dates. However, the window will be open till 31/01/2017 for those who miss the chance.

States Start Date End Date
Puducherry, Sikkim 08/11/2016 23/11/2016
Maharashtra, Goa, Daman and Diu, Dadra and Nagar

Haveli, Chhattisgarh

 14/11/2016 30/11/2016
Gujarat 15/11/2016 30/11/2016
Odisha, Jharkhand, Bihar, West Bengal, Madhya Pradesh,

Assam, Tripura, Meghalaya, Nagaland, Arunachal

Pradesh, Manipur, Mizoram

 30/11/2016 15/12/2016
Uttar Pradesh, Jammu and Kashmir, Delhi, Chandigarh,

Haryana, Punjab, Uttarakhand, Himachal Pradesh,

Rajasthan

 16/12/2016 31/12/2016
Kerala, Tamil Nadu, Karnataka, Telangana, Andhra

Pradesh

 01/01/2017 15/01/2017
Enrolment of Taxpayers who are registered under

Central Excise Act/ Service Tax Act but not registered under State VAT

 01/01/2017 31/01/2017
Delta All Registrants (All Groups) 01/02/2017 20/03/2017

500 and 5000 notes baned

theinfosagar
-
0

​8:34 pm: This is a chance for every citizen to take part in the fight against black money and corruption, says the prime minister.

8:32 pm: A new series of Rs. 500 currency notes and Rs. 2000 currency notes will be brought into circulation.

8:31 pm: Banks will be closed on November 9.

8:30 pm: There is no restrictions on internet banking, cash, demand draft transactions.

8:27 pm: Rs 10,000 daily cash withdrawal and Rs 20,000 weekly cash withdrawal limit

8:25 pm: There are, however, some exemptions. Government hospitals and international airports.

8:22 pm: The ATMs will not function till November 9, and in some places till November 10.

8:21 pm: People who possess Rs.500 or Rs. 1000 currency notes after December 30 can exchange it at Reserve Bank of India by providing a declaration. This is till March 31, 2017.

8:20 pm: These notes should be exchanged in banks and head post offices and sub post office within December 30, 2016, by providing a valid identity proof such as Aadhaar, PAN card or voter ID card.

8:15 pm: From midnight of November 8, 2016, Rs. 500 and Rs.1000 will cease to be legal tender. “These notes are just papers from tomorrow,” says the prime minister.
8:11 pm: Prime Minister says Rs. 500 and Rs.1000 are notes are mostly used in black money.

GST

theinfosagar
-
1

Centre Govt may propose 26% peak rate for GST

The Centre Government is likely to propose a four-tier tax structure under the GST, with a peak slab of 26 per cent. Almost 20-25 per cent of all taxable goods, including those consumed by the middle class, could come under the peak rate.The idea is to arrive at a common ground with the states that are concerned over revenue loss.A discussion paper to be presented at the three-day GST Council meet that begins on Tuesday is believed to have proposed a standard rate of 18 per cent.

Source : http://www.business-standard.com/article/economy-policy/centre-may-propose-26-peak-rate-for-gst-116101701382_1.html

1...456...15Page 5 of 15

TheInfoSagar - Discussing the changing rules and trends in the world of Finance and Business.

Company

Trending

Categories

© 2024-25, theinfosagar.com