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Finance Management Articles
Page 66 of 96
Define the terms acquisition, takeover, merger and amalgamation
The terms acquisition, takeover, merger and amalgamation are explained below −AcquisitionAcquisition is a purchase of more than 50% shares/stake of another company.Payments can be made in either cash or stock or by both.Friendly approaches or hostile approaches are used in acquisition.Friendly approach means Boards of directors support the acquisition.Hostile approach means Boards of directors will not support the acquisition.TakeoverTakeover is transfer/control interest of a company either by friendly or hostile approach.Generally, takeover is done by bigger companies.It can be done in straight, ownership capture, revival and bailout.MergerUpon approval of management and shareholders (in case of public companies), two companies combine ...
Read MoreWhat are the advantages and disadvantages of mergers?
Merger is nothing but an agreement between two or more organizations or companies to form as a one company or organization.The main objective of merger is to gain more market share or to enter into new market areas or sectors and maximize their profits. It also helps companies to restructure their business units according to market changes.Merger helps companies to sustain market changes and go for more customer base.Types of mergersThe types of mergers are explained below −Horizontal Merger − If one company merges with another company or companies which have indirect competition in terms of product lines/markets is called ...
Read MoreDifferentiate between mergers and acquisitions
The main objective of both merger and acquisitions are the same, that is to restructure their corporate order. That means both are involved in joining two or more than two business entities to restructure their corporate structure according to changes in market or in their sector.MergerMerger involves combining an individual organization to give rise to a new business unit or entity. In merger, a new entity, name, ownership, employees (combination of organizations) and management will form. The benefit in the merger is mutual that means merger organizations will have certain benefits.The main objective of merger is to expand their present ...
Read MoreDefine the components of financial management
Following are the components of financial management −AgreementThis is the agreement between the donor (who donates the funds) and the receiver (who accepts the funds). Mostly, the receiver may be an organization or a company.This document is very important for the accounting department.It contains deliverables (quantity and quality of deliverables), budget breakup (allocated funds for specific activities), deadlines, period of reporting, funds schedule, demarcation of both financial and non-financial aid.Transactions and accountsFinances are through bank accounts and transactions.It consists of bank accounts (opening an account), signatories, wherein depending on the board, one can have one or more than one signatories, ...
Read MoreWhat are the different branches of accounting?
The different branches of accounting are explained below −Financial accountingRecords daily transactions and gives the financial picture of business.Preparation of trial balances, profit and loss accounts and balance sheets.Creditors, financial institutions, banks, etc., use this type of accounts.Cost accountingRecord, present and do the analysis of manufacturing costs.With the help of this account, management can control the production cost and prices.Forecast by analysing actual cost to budget cost.Management accountingGives information about business administration.Budgeting, cost analysis, decision making.AuditingPrepares tax reports using financial statements.External − Financial statements are scrutinized by external/independent parties.Internal − Focuses on the companies' internal structure.Tax accountingPrepares and files various ...
Read MoreCompute the correct cash book balance
ProblemXYZ Enterprise Company has a pass book balance of Rs. 58700/- and cash book balance of Rs.68500/- as on 31st march 2014. Compute the correct cash book balance for the transactions and prepare a reconciliation statement.The transactions are as follows −Cheque issued (personal account) of enterprise debited to firm's account of Rs.3500/-Cheque deposited and yet to collect by bank of Rs.1900/-Cheque deposited and collected from bank and not recorded in cash books of Rs.3800/-Customer cheque dishonored Rs.1800/-Bank direct payments of Rs.4200/-Cheque issued and yet to present for payments of Rs.12000/-Customer deposited Rs.2000/- into bankDiscounted bill is dishonored when presented on ...
Read MoreState the methods to prepare a bank reconciliation statement
ProblemAn enterprise company has an Rs.85700/- as passbook balance and Rs.95800/- as cash book balance as on 31st march 2004.The transactions are as follows −Cheque issued (personal account) of enterprise debited to firm’s account of Rs.5000/-Cheque deposited and yet to collect by bank of Rs.2500/-Cheque deposited and collected from bank and not recorded in cash books of Rs.4800/-Customer cheque dishonored Rs.2300/-Bank direct payments of Rs.3200/-Cheque issued and yet to present for payments of Rs.8500/-Customer deposited Rs.1500/- into bankDiscounted bill is dishonored, when presented on maturity Rs.9500/-Bank charges Rs.250/-Dividends and interest (collection) by bank Rs.2800/-SolutionThe bank reconciliation statement before adjusting cash ...
Read MoreExplain the steps involved in preparing a bank reconciliation statement
Following are the steps involved in preparing bank reconciliation statement (BRS) −Step 1 − Compare the opening balances of cash books and bank statements for any difference. The differences may arise due to uncredited cheques from before. Identify them and tick on bank statements. Now, opening balances are agreed.Step 2 − Now, compare the debit side of the cash book and the debit side of the bank statement and vice versa and tick on items that appear in both cash book and bank statement.Step 3 − Now, check for items that are not ticked on the bank statement (debit side) ...
Read MoreWhat are items in the cash book but not in the passbook and vice versa?
Following items will appear in cash book but not in bank pass book −Cheques which are issued, but not debited in the bank.In cash books, entries for cheques issued are recorded immediately (reduces bank balances in books). The reason for not appearing in the passbook may be the cheque, which is in under clearance or the payee did not submit it to the bank.Cheques that are deposited, but not credited by the bank.In cash books, firms immediately record the transactions (increases the balance in books).The reason for not appearing in the passbook may be that the bank is yet to ...
Read MoreHow are the same transactions entered in the passbook and cash book?
On March 1st − Mr. T opened a current account with ABC Bank with balance of Rs.100000/-On March 4th − T paid to Mr. N of Rs.5000/- by cheque.On March 9th − T received an amount of Rs. 10000/- from Mr. U by cheque and deposited it in the bank.On March 11th − Withdraw amount of Rs.3500/- for office use.On March 12th − Paid rent of Rs.8000/- by cheque.On March 17th − Bank charges of Rs.350/- is debited.On March 23rd − Paid Rs.2500/- to Mr. G by cheque.SolutionThe transactions entered in cash book and pass book respectively are as follows ...
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