Last year campus is well above expectation than CA campus.
So this is where everyone expect the same in ICWA this year too.
Will they can produce the same effect to this year is might possible as per them.
For results :
Sunday, September 13, 2009
ICWA result release
ICWA which is about cost and work accountants of India releases their result recently about passed candidates.
Wednesday, September 2, 2009
Accounting Standards - India
Friday, August 28, 2009
Account Studies
A accounting student must be well developed in the phase of their accounting standards very much.
Most often about inventory valuation is one of the importance thing to note down.
Mostly in studies give full potential atleast half an hour a day to make you groom higher.
Friday, August 14, 2009
Budgetary control:
Budgetary control:
Introduction:
Budget is a plan of action expressed in quantitative manner which related to future period. It is always expressed in terms of money and quantity.
CIMA defines Budget as “A plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure, and the capital to be employed. May be drawn up showing incremental effects on former budgeted or actual figures, or be compiled by zero-based budgeting”.
It helps the management about its objectives to achieve, how the plans to be adopted, whether individual plans fit in the overall organizational objective.
In CIMA (
“Budgetary control is the establishment of budgets relating to responsibilities of executives to the requirement 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 revision.”
Budgets and Forecasts.
A forecast is a prediction of what is going to happen as a result of a given set of circumstances. A budget is an approved plan of action expressed in figures relating to a specified period of time.
Advantages:
1) It helps the management to plan the functions before the action occurs.
2) There will be good co-ordination and participation between the management.
3) All functional heads are get into responsible to make plans with the plans of other departments.
4) It demands the most economical use of labour, materials, facilities and capital.
5) It helps the management to face the changes in business conditions.
6) It helps to understand the problems of co-workers.
Thursday, August 13, 2009
Material Cost Variance Problems - Standard costing
The standard cost of a compound mixture is as under:
30% of material A at Rs.25 per ton. 70% of material B at Rs.35 per ton.
A standard loss of 10% is expected in production. The following actual cost data is given for the period.
290 tons material A at a cost of Rs.20 per ton.
210 tons material B at a cost of Rs.25 per ton.
The weight produced is 400 ton.
Find Material variances
| Actual cost of material used | Stanadard cost material used | Standard cost of material, if it had been used in standard proportions. | |||
| 290*20 = | 5800 | 290*25 = | 7250 | 30% of 500 * 25 = | 3750 |
| 210*25 = | 5250 | 210*35 = | 7350 | 70% of 500 * 35 = | 12250 |
| | 11050 | | 14600 | | 16000 |
| Standard cost of output. | |
| | |
| | |
| 3200/90*400= | 14222 |
| Standard cost of output | ||
| Standard Mix | Standard rate | Standard cost |
| 30 | 25 | 750 |
| 70 | 35 | 2450 |
| -10 | LOSS | |
| 90 | | 3200 |
| | | |
| Material price variance | 14600-11050= | 3550 |
| Material mix variance | 16000-14600= | 1400 |
| Material yield variance | 14222-16000= | -1778 |
| Material cost variance | 14222-11050= | 3172 |
Wednesday, August 12, 2009
Total Quality Management:
Total Quality Management:
CIMA has defined TQM as “Continuous improvement in quality, productivity and effectiveness obtained by establishing management responsibility for process as well as output. In TQM, every process has an identified process owner and every person in an entity operates within a process and contributes to its improvement”.
TQM initiates total quality cost programme., they are as follows:
(a) Prevention cost which is incurred in preventing of producing the product that do not conform to specification.
(b) Appraisal cost is incurred for detecting the individual product which do not conform to specification.
(c) Internal failure cost which is incurred before non-conforming product moves to customers.
(d) External failure cost which is incurred in detecting the non-conforming products after passing to customers.
Backflush Accounting (Backflush costing).
Backflush Accounting (Backflush costing).
Definition:
CIMA defines it as “cost accounting system, which focuses on the output of an organization and then works back to attribute costs to stock and cost of sales”.
Traditional costing systems use sequential tracking, i.e., costing methods are synchronized with physical sequences of purchases and production.
Backflush costing is the reversal of traditional costing, where traditional costing flow from accounting of inputs to outputs but backflush starts accounting only from outputs and then works back to apply manufacturing costs to units sold and to inventories. In this, cost of inventories are at the time of sale only. Costs are then flushed back through the accounting system. It is attractive for low inventory companies which results from JIT.
It eliminates WIP account. There are reason for justification, they are as follows.
i) To remove incentive for managers to produce for inventory.
ii) To increase the focus of the managers on plant-wide goal rather than on individual sub-unit goals.
Difficulties of Backflush costing:
i) It does not strictly adhere to generally accepted accounting principles of external reporting.
ii) Absence of audit trails leads to critics.
iii) It does not pinpoint the use of resources at each step of the production process.
iv) It is suitable only for JIT production system with virtually no direct material inventory and minimum WIP inventories. It is less feasible otherwise.
Tuesday, August 11, 2009
Average collection period:
Average collection period:
It is the average amount of time needed to collect accounts receivable.
Debtors receivables turnover:
Debtors receivables turnover:
It shows the relationship between credit sales and debtors of a firm.
It is sometimes difficult for the analyst to identify credit sales, average debtors and average bills receivable. Mainly to ascertain opening and closing details to identify average of it feels difficult in certain cases. To avoid difficulty of above cases, the alternative method is to calculate the debtors turnover in terms of the relationship between total sales and closing balance of debtors.
Receivables Turnover Ratio:
Receivables Turnover Ratio:
It helps to identify how quick the receivables or debtors are converted into cash. It helps to test the liquidity of the debtors of a firm. It is closely related to average collection period.
The liquidity of a firm’s receivables can be examined in two ways:
Monday, August 3, 2009
Inventory( or Stock) Turnover Ratio:
Inventory( or Stock) Turnover Ratio:
It is to identify how fast the inventory moves out or sold. It measures the activity/ liquidity of inventory of a firm. It indicates the number of times inventory is replaced during the year. We can compute in two ways. One is the way to calculate dividing the cost of goods sold by the average inventory and the other is replaced by sales instead of cost of goods sold and instead of average inventory take the closing inventory. Average inventory is calculated on the basis are as follows.
Taking from January to January of opening inventory add them and divided by thirteen will be resulted to industry average.
Activity Ratios:
Activity Ratios:
Activity ratios measure the speed with which various accounts/ assets are converted into sales or cash. They are concerned with measuring the efficiency in asset management.
The efficiency with which assets are used would be reflected in the speed and rapidity with which assets are converted into sales. The greater is the rate of turnover or conversion, the more efficient is the utilization of assets, other things being equal. Turnover is the primary mode for measuring the extent of efficient employment of assets by relating the assets to sales. According to assets, the activity ratio changes. The various types of ratios are as follows.
(1) Inventory Turnover Ratio.
(2) Receivables Turnover Ratio.
(3) Asset Turnover Ratio.
Sunday, August 2, 2009
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Saturday, August 1, 2009
Price Earnings Ratio:
Price Earnings Ratio:
It is closely related to earnings yield/earnings price ratio.
It is the ratio computed by dividing the market price of shares by EPS.
It measures the amount investors are willing to pay for each rupee of earnings; the higher the ratios, the larger the investors confidence in the firm’s future.
Earnings and Dividend Yield:
Earnings and Dividend Yield:
It is closely related to EPS and DPS. While the EPS and DPS is based on the book value per share, the yield is expressed to terms of the market value per share.
Earnings yield may be defined as the ratio of earnings per share to the market value per ordinary share. Similarly, Dividend yield may be defined by dividing the cash dividends per share by the market value per share.
Dividend Pay-out Ratio:
Dividend Pay-out Ratio:
It measures the proportion of dividends paid to earnings available to shareholders.
It measures the relationship between the earnings belonging to the ordinary shareholders and the dividend paid to them.
It shows what percentage of net profits after taxes and preference dividend is paid out as dividend to the equity-holders.
Dividend Per Share:
Dividend Per Share:
It is the dividends paid to equity shareholders on a per share basis.
DPS is the net distributed profit belonging to the ordinary shareholders divided by the number of ordinary shares outstanding.
Price-to-Book Value Ratio:
Price-to-Book Value Ratio:
It measures the relationship between market price of equity share with book value per share.
Book Value Per Share:
Book Value Per Share:
It represents the equity/claim of the equity shareholder on a per share basis.
It is computed by dividing networth by the number of equity shares outstanding.
Cash Earnings Per Share:
Cash Earnings Per Share:
It is determined that the cash flow from business operations is divided by the number of equity shares outstanding.
Cash flow from operations added by non cash expenses, such as depreciation, amortization to net profits available to equity owners.
Sunday, July 26, 2009
Earnings Per Share:
Earnings Per Share:
It is the amount that a shareholder get for every shares on the profit available to the equity shareholders on a per share basis.
It is calculated by dividing the profits available to the equity shareholders by the number of outstanding shares.
EPS is most widely used in estimation of firm’s value and performance.
EPS is a measure of profitability of a firm.
It helps to compare with past performance, comparison with other firms and comparing with the industry average.
Return on Ordinary Shareholders’ Equity (Net worth):
Return on Ordinary Shareholders’ Equity (Net worth):
It measures the return on the total equity funds of ordinary shareholders.
Preference shareholders are also the owners of firm, but equity shareholders are real owners who bears all risk, participate in management and are entitled to all the profits remaining after all outside claims including preference dividends are met in full.
It is calculated by dividing the profits after taxes and preference dividend by the average equity of the ordinary shareholders.
It helps to judge the firm has earned
a satisfactory return for its equity-holders or not.
It helps to compare with past results, inter-firm comparison, comparison with the overall industry average.
Return on Total Shareholders’ Equity:
Return on Total Shareholders’ Equity:
It is measured by dividing the net profits after taxes(but before preference dividend) by the average total shareholders’ equity.
Shareholders’ equity includes here as follows:
(i) Preference share capital,
(ii) Ordinary shareholders equity consisting of
(a) Equity share capital,
(b) Share premium, and
(c) Reserves and surplus less accumulated losses.
It helps to compare the relative performance and strength of the firm to other firms.
Return on Shareholders’ Equity:
Return on Shareholders’ Equity:
The relationship between return and the shareholders’ equity or owners’ funds.
It measures the return on the owners investment in the firm.
The shareholders of a firm fall into 2 categories:
Preference Shareholders,
Equity shareholders.
Preference shareholders will give preference right over dividends first than to the equity shareholders.
Return on shareholders’ equity classified into:
(1) Rate of return on
(i) Total shareholders’ equity,
(ii) Equity of ordinary shareholders.
(3) Dividends per share,
(5) Dividends and Earnings yield,
(6) Price-earnings ratio,
(8) Book value per share,
(9) Price-to-book value per share.
Friday, July 24, 2009
Return on capital employed:
Return on capital employed:
ROCE is the second type of ROI. It is the relationship between the profits and capital employed.
The term capital employed refers to long-term funds supplied by the lenders and owners of the firm.
There are 2 ways. First, non-current liabilities(long-term liabilities) plus owners’ equity.
Alternatively, its equivalent to net working capital plus fixed assets.
Second, it is equal to long-term funds minus investments made outside firm.
It is to estimate how efficient the long-term funds have been used?
If the ratio is higher, the more efficient is the use of capital employed.
Return on assets:
Return on assets:
Profitability ratio is measured in terms of the relationship between n
et profits and assets.
ROA can be called as profit-to-asset ratio.
Profit and assets defined in different approaches on the bas
is of purpose and intent of the calculation of ratio.
Net profit may be defined as,
(i) Net profit after taxes,
(ii) Net profit after taxes plus interest,
(iii) Net profit after taxes plus interest minus tax savi
ngs.
Assets may be defined as,
(i) Total assets,
(ii) Fixed assets,
(iii) Tangible assets.
Wednesday, July 22, 2009
Profitability Ratios Related to Investments:
Profitability Ratios Related to Investments:
Return on Investments(ROI):
It is computed by relating the profits of a firm to its investments. Such ratios are popularly termed as ROI. There are three different concepts of investments for computation:
Assets,
Capital employed,
Shareholders’ equity,
They are
(2) Return on capital employed,
(3) Return on shareholders’ equity.
Tuesday, July 21, 2009
Material cost variance
Material Cost Variance.
It represents the difference between actual cost of material used and standard cost of material specified for output achieved. Material cost variance arises due to variation in prices and usage of materials. Difference b
etween (actual quantity of materials used x actual rate) and (standard quantity of material required for the specified output x standard rate) will be material cost variance.
Material Price Variance.
It is the difference occurred between actual price paid and standard price specified for the material which leads to material cost variance. It is not controllable but it gives information for the purpose of planning and decision-making. It helps in making decision to increase the price of product, use of substitute materials.
Material Usage or Volume variance.
It is also called quantity variance. It is part of cost variance occurred due to difference between actual quantity used and standard quantity specified for output.
It helps to identify whether the materials are used in proper manner. A debit balance of material usage variance indicates that material used was in excess of standard requirements. Credit balance shows will show savings in the use of material.
Material usage variance consists of (a) Material mix variance, (b) Material yield variance.
Material Mix Variance.
The variance is that part of material usage variance which is due to difference between actual composition of mix and standard composition of mixing the different types of materials. Short supply is the most common reason for this variance.
Material Yield Variance.
In certain cases, output depends on input of material. In this circumstances, if 10% of input material in course of normal loss of production. Then, 90% of total input of material will be expected output. If actual yield obtained happens to be different from the standard yield specified, there will be a yield variance. Thus material yield variance is that portion of material usage variance, which due to difference between actual yield obtained and standard yield specified.
Expenses Ratio
Expenses ratio:
It is calculated by dividing expenses by sales.
“Expenses” includes:
(1) Cost of goods sold,
(2) Administrative expenses,
(3) Selling and distribution expenses,
(4) Financial expenses but doesn’t include taxes, dividends and extra-ordinary losses due to theft of goods, goods destroyed by fire etc.,
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