Surplus & Investment of Surplus
Surplus is, when a business have excess of cash inflows over cash outflows because of large amount of cash generated from operations or sale of fixed assets
Business have to invest surplus funds but it should be kept in mind that the surplus is temporary or permanent. Temporary surplus may be invested until it is ensure [...]
Cash and Cash Flows
Money in terms of notes, bills, currency and coins is called cash. Also includes current accounts, deposits etc.
Cash Flows: It is the money that is flowing into the business and out of the business. OR A term which shows the receipt and payments of cash.
It is a measure of a company’s financial health.
Deficit: When cash [...]
Cost Volume Profit (CVP) Analysis
It is a method to determine the relationship between change in activity level, total sales revenue, expenses and profit. OR a method that deals with how profits and costs change with a change in volume.
Objective of CVP analysis:
Establish the financial results when specified level of activity or volume changes. To establish this management need to [...]
Working Capital Management:
Working capital is the capital available for day to day transactions/operations of an organization. It ensures that a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. Working capital management involves management of cash, stock, amount receivables from debtors, amount payable to creditors.
Working capital= Current assets-Current liabilities
Current [...]
Financial management:
Financial Management can be defined as the management of the finance of a business in order to achieve financial objectives.
The key point of financial management of a business are:
• Create wealth
• Generate cash
• Provide an adequate return on investment
There are 3 key elements in [...]
Relevant Cost for Decision making:
Quantifiable future cost or benifit that must be considered in making a particular decision.
Following are the cost that are relevant for decision making
Past or Sunk Cost is cost that has been incurred in past and is irrelevant for decision making because we cannot change the past.
Committed Cost is cost that has to be incurred regardless [...]
Overheads:
Resources consumed or lost in completing a process and which cannot be traced directly to the cost of the product.
Overheads are indirect costs. Overheads are total of:
1) Indirect materials (e:g nails in a chair, gum used in table )
2) Indirect labour (e:g supervisor, storekeeper)
3) Indirect expenses (e:g rent, machine running expense)
Overheads can be categorized into:
Production Overheads
Non-production overheads
Production [...]
Intoduction to Partnership
Partnership is an agreement between two or more individuals in which they agree to share business risks and rewards.
Terms of Partnership:
While setting out partnership agreement following terms are to be consider:
Capital:
A fixed amount injected into the business by each individual partner. There is a mutual consent of each partner that how much capital is to [...]
Accounting Concepts
While making accounting statements a clear objective is that accounts reflect true and fair view. The true and fair view is applied to ensuring business activites are carring out properly. to ensure this application there are certain concepts and conventions which helps that accounts are maintained accuratley. Different accounting concepts are as follows:
The Entity [...]
Accruals & Prepayments
Accrual:
Accruals concept states that income and expenses must be recorded in the accounting records and reported in the financial statements of the period to which they relate.
Accruals are accrued expenses, they have not yet been paid for. Accruals are current liabilities.
Prepayment:
The payment of a debt in full before it is due. OR Payments which have [...]