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Economics & Finance
Articles by Mandalika
Page 29 of 41
Explain about types of accounting and its golden rules.
There are 3 types of accountsReal account − It relates assets and liabilities; it does not include people accounts. They carry forword every year.Personal account − Connects individuals, firms and associations accounts.Nominal account − Relates all income, expenses, losses and gains accounts.Golden rules of accountingDebit the receiver, credit the giverIf a person gives something to a firm, it must be recorded as credit in the books of accounts. It is used as in personal accounts.If anything coming then Debit, if anything goes out then credit.Real accounts consist of machinery, land and building etc. debit what comes in means it will ...
Read MoreWhat is ADR in accounting?
ADR means American Depository Receipt. ADR is a certificate issued by an American Bank which states that number of shares of another country firm can be traded in U.S. markets. JPMorgan a British departmental store created first ADR in 1927. According to Securities and Exchange Commission (SEC), instead of foreign stock, ADR is more convenient because they have more protection and transparency.ADR Process includes −Domestic company already in local stock exchange sell the shares in bulk to U.S. bank and listed on U.S. exchange.After bank accepts the shares it will issue ADR to interested investor.Selling of ADR shares will be ...
Read MoreWhat is GDR in accounting?
GDR stands for Global Depository Receipts. It is an instrument in which a company in one country issues its shares or convertible bonds in another country. It is a depository receipt, where the security certificate is issued by financial intermediaries (like depository bank), purchases the security and then creates bank certificate and finally selling them in the stock exchange.Some of Indian companies who have GDRs are −Bombay DyeingAxis BankHDFCIndia bulls housing etc.Mechanism of GDR is explained below −If a firm make an agreement with overseas depository bank for purpose of issue of GDR. Then depository bank makes a custodian agreement ...
Read MoreWhat are the sources of fund in finance and accounting?
Source of finance can be simply explained as follows −Based on timeLONG TERMMEDIUM TERMSHORT TERMBASED ON TIMEEquity sharesPreference sharesTrade creditPreference sharesDebenture/BondsWC loansInternal accrualsfinancial institutesgovernmentcommercial banksFixed deposits (period of 1 year)Debentures/bondsAdvances from customersTerm loansCreditorsVenture fundinglease financePayablesAsset securitizationHire purchase financeFactoring servicesInternational financeBill discountingBased on ownership and controlOwnedBorrowedBased on ownership and controlEquity capitalLoans fromFinancial institutionsCommercial loansPreference capitalRetained earningsConvertible debenturesDebenturesVenture fund/ private equityBased on source generationInternalExternalBased on source generationEquity capitalRetained profitsPreference capitalReduction in working capitalRetained earningsSale of assetsConvertible debenturesVenture fund/private equity
Read MoreWhat are the characteristics of corporate finance?
Characteristics of corporate finance includes −Financial activity − This kind of duties are done by financial manager and consists activities like planning, raising, investing and monitoring the finance of the company.Raising the finance − It is raised through shares, debentures, bank loans etc. New companies will face difficulties to raise finance, whereas established companies can do it easily because of their reputation.Investing the finance − It will help in purchasing the fixed asset to fulfil the company objectives.Objective oriented − The main objectives are to earn maximum profits, to pay regular dividends to shareholders and to create a future growth ...
Read MoreDescribe the different types of companies in finance.
Companies in finance are classified as follows −Based on liabilities − Company limited by shares, company limited by guarantee, unlimited companies.Based on members − One-person company, private companies, and public companies.Based on control − Holding and subsidiary companies, associate companies.Based on liabilitiesCompanies limited by shares − Shareholders of company will not be paid completely to their shares, therefore, company’s liability is limited. While winding up company will be liable until they pay total amount to their shareholders.Companies limited by guarantee − this, company will be liable only to amount which is guaranteed.Unlimited companies − As name suggests, it will have ...
Read MoreDescribe the term amortisation in finance and accounting.
Amortisation means distribution of cost of intangible asset over a periods of time. Only intangible assets (assets which don’t have physical existence) are amortised, tangible assets (assets which have physical existence) can’t be amortised.Steps to record amortisation in a journal are as follows −Identify initial value of the asset.Life span of the asset.Residual value.DebitCreditAmortisation expenseXXXXAccumulated amortisationXXXXXFormula to calculate is − amortisation expenses = (initial value-residual value)/lifespanAdvantages of amortisation are −Reduces tax burdens.Firms can show higher value of an asset.Firms can show more income in financial statements.Amortising intangible assets includes −Note the starting date.Calculate initial cost.Estimate life span.Calculate amortisation value per ...
Read MoreWhat are fictitious assets in finance?
Fictitious assets are the assets which has no tangible existence, but are represented as actual cash expenditure. The main purpose is to create this account for expenses which are not placed in any account headings.In other words, fictitious means fake or not real, these are not assets at all but they show in financial statements. Expenses incurred in starting a business, goodwill, patents, trademarks, copy rights comes under expenses which cannot be placed any headings.Fictitious assets have no physical existence.No realisable value.They are amortised in one or more profitable financial years.ExamplesPromotional marketing expenses.Underwriting commission.Preliminary expenses.Discount allowed on shares.Loss incurred (issue ...
Read MoreDescribe about bank reconciliation concept in accounting & finance
Bank reconciliation concept is comparing of balance sheet with bank statement. There is no fixed date for preparing bank reconciliation so its prepared periodically to check the balances and adjustments are made, if needed.It helps in detecting errors, cash manipulations, frauds etc. One thing we have to remember is that, not always both the balances are equal.Some of the reasons are as follows −Cash and check transactions are recorded in bank statement.Outstanding checks.Bank service fees.Interest.Bank reconciliation terminology includes −Deposit in transit − It occurs when the deposit arrives at bank too late, entity not deposited in the bank. Mont end ...
Read MoreWhat is trial balance in accounting?
Trial balance is a worksheet which consists of all ledger balance in a single sheet. All ledger balances are compiled into credit and debit columns (total should match). In other way, it can also be explained by the following steps −Recording of business transaction in a journal entry.Summarise and categorise them into a ledger.Create a worksheet and make a trial balance (balances credit and debit).Purpose of trial balance is −Trail balance is the first step in preparing financial statements.If balances are not matched in trail balance, difference will be rectified and adjusted before preparing financial statements.Ensures account balances.Assists in identification ...
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