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1. FINANCIAL ACCOUNTING AND TAXATION

2. BUSINESS • Businesses are everywhere. They are the units that perform most of the economic activity in our economy. Businesses exist to generate a profit. The traditional definition of a business is an entity that brings together time, effort and capital in order to produce a profit. Following are the characteristics of a business: • Human Activity • Financial Nature • Profit Motive • Continuously

3. TYPE OF BUSINESS

4. WHAT IS ACCOUNTING Up to 1974, accounting was done the same way that the Egyptians did it 3,000 years before. Accounting is the art of  systematic recording, reporting, and analysis of financial transactions of a business. The person in charge of accounting is known as an accountant. WHAT IS BOOK KEEPING Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper.

5. TYPE OF ACCOUNTS

6. Real Accounts(Assets A/c) Cash, Stock, Purchase, Sales, Building, Machine, Furniture, Goodwill, Patent, Copy-Right, Trade Mark, Investments, Motor Cars etc……

7. Personal Accounts( A/c) Ram, Rajesh, X, Y, Z, Capital, Drawing, Outstanding Expenses, Prepaid Expenses, Accrued, Income, Un-accrued Incomes A/c, Debtors A/c, Creditors A/c, Bank A/c, Reliance, TATA, IMT, DMC Career Academy, Shantosh Hospital, BSNL, Railway etc.

8. Nominal Accounts Salary, Wages, Discount, Rent, Commission, Postage, Refreshment, Carriage, Depreciation, Interest, Bank Charges……….

9. BRANCHES OF ACCOUNTING

10. Financial Accounting • It is the original form of accounting. • It is mainly confined to the preparation of financial statements for the use of outsiders like creditors, banks and financial institutions etc. • The chief purpose of financial accounting is to calculate profit or loss made by the business during the year and exhibit financial position of the business as on a particular date.

11. Cost Accounting • Function of cost accounting is to ascertain the cost of the product and to help the management in the control of cost.

12. Management Accounting • It is accounting for management. • Accounting which provides necessary information to the management for discharging its functions. • It is the reproduction of financial accounts in such a way as will enable the management to take decisions and to control various business activities

13. ACCOUNTING ENTRY SYSTEM

14. Single Entry System • It means to record one side of entry. • Suppose, we sell our furniture, we have not to record furniture sale but we just record total cash received from furniture. So, in single entry accounting, we records cash, account receivables,

15. Double Entry System Invented by………………. “Lucas Pasioli” of………………………… ‘Italy’ In …………………………’1494’ [ He said that every transaction have two sides……….. ] Transactions: Receiver……..…. Giver Comes in………….….Goes Out Expenses/ Losses …. Incomes/ Gains

16. Double Entry System • In this system, both cash and credit transactions are recognized. • The double entry system was first used in Genoa, Italy around the 13th century and was further polished in Venice. • all transactions will have dual aspects (debit and credit) and that is why it’s called Double Entry System. • The word Debit comes from the Latin word "debita" (Italian "debito“).  • The word Credit comes from the Latin word "credo" (Italian "credito“).

17. What is Tally • Tally is used to store and maintain daily business transactions like purchases, sales, receipts, payments, purchase returns, sales returns, deposits and withdrawals etc. • popular FA software packages are Tally, Busy etc. • Tally is the number one financial accounting package in India and is also used abroad. • With tally you could be the owner, the financial controller, accountant, manager, auditor or anyone connected with accounts. The fundamentals behind tally are simple enough for learn accounting

18. Essential Feature

19. GROUPS • Groups are collection of Ledgers of the same nature.  Account Groups are maintained to determine the hierarchy of Ledger Accounts which is helpful in determining and presenting meaningful and compliant reports. • Choosing a correct group for a ledger account help in viewing the financial position in a better way otherwise the financial statements will not give a true and correct picture.

20. Classification of Asset

21. Tangible Asset Fixed Asset Assets that have a physical form. Tangible assets include both fixed assets, such as machinery, buildings and land, and current assets, such as inventory. Assets are property or economic resources that are expected to provide a future benefit to a business Current Asset Definition of Current Assets: assets in the form of cash (or easily convertible into cash)

22. Intangible Asset • An asset that is not physical in nature. • Corporate intellectual property (items such as patents, trademarks, copyrights, business methodologies) • Goodwill and brand recognition are all common intangible assets in today's marketplace.  • An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it stays with the company as long as the company continues operations.

23. Liability • Current liabilities— these liabilities are reasonably expected to be liquidated within a year. They usually include payables such as wages, accounts, taxes, and accounts payables, unearned revenue when adjusting entries, portions of long-term bonds to be paid this year, short-term obligations. • Long-term liabilities — these liabilities are reasonably expected not to be liquidated within a year. They usually include issued long-term bonds, notes payables, long term leases, pension obligations, and long-term product warranties.

24. Trade Discount TYPE OF DISCOUNT It is rebate or allowance from the scheduled price granted by the seller to the buyer. Trade discount is usually granted in the following circumstances: When selling to a fellow trader. When the buyer is an old customer. When sales are made in bulk. As the Custom of trade Cash Discount It is deduction or allowance allowed by creditor to a debtor. If a person pays his debit before the due date of payment the recipient may grant him an allowance for doing so. This allowance is known as cash discount

25. Primary and Subgroups

26. Pre defined Groups

27. Cash Flows • During the business cycle, you will have more money flowing in than flowing out. • This will allow you to build up cash balances with which to plug cash flow gaps, seek expansion and reassure lenders and investors about the health of your business. • Your aim must be to speed up the inflows and slow down the outflows

28. Cash Inflows Cash Flows • Payment for goods or services from your customers. • Receipt of a bank loan. • Interest on savings and investments. • Shareholder investments. • Increased bank overdrafts or loans. Cash Outflows • Purchase of stock, raw materials or tools. • Wages, rents and daily operating expenses. • Purchase of fixed assets - PCs, machinery, office furniture, etc. • Loan repayments. • Dividend payments. • Income tax, corporation tax, VAT and other taxes.

29. OVERSTATED Overstated is that amount which is more than correct amount in the account. It is error of commission and it can rectify by passing rectify entry. For instance, if outstanding wages are wrongly written Rs. 12000 but actual outstanding wages are Rs. 10,000, then Rs. 2000 is overstated and its bad effect will be on wages account because wage account will also overstated with Rs. 2000 and our profit will reduce with Rs. 2000. So, to rectify to overstated error is must.

30. What is Tax • A fee charged by a government on a product, income, or activity. • If tax is levied directly on personal or corporate income, then it is a direct tax. • If tax is levied on the price of a good or service, then it is called an indirect tax. • The purpose of taxation is to finance government expenditure. One of the most important uses of taxes is to finance public goods and services, such as street lighting and street cleaning.

31. Taxes in Tally • Value Added Tax • Tax Deducted at Source • Service tax • Tax Collected at Source • Central sales tax • Fringe benefit Tax • Excise tax

32. Value Added Tax • Value added tax is a consumption tax. • This is a simple method of multiple taxes on an individual product. • VAT system levies tax on every level of value addition to the product or goods. • This is the new system being implemented from April 1, 2005. • VAT is calculated based on Input & Output variation. • Input tax is paid on purchases. • Output tax is paid on sales. • Input credit is the excess amount of input tax over output tax

33. VAT rates • There are three main rates for Input and Output Vat tax. • 0% for Agriculture products. • 1% for Jewellery • 4% for Pharma, Computers, Soaps etc. • 12.5% for Cement, Automobile

34. Tax Deducted at Source • Tax deducted at source (TDS) is one of the modes of collecting income tax. • The buyer (deductor) deducts the tax from the payment made to the seller (deductee) and remits the tax to the Income Tax Department within the stipulated time. • The buyer makes payments (such as salary, rent, Interest on securities, dividends, insurance, commission, Professional fees, commission on brokerage, commission on lottery tickets, etc) to the seller.

35. TDS Deduction Chart Seller ( Deductee) Bills/ Services Form No.16 A Buyer (Deducter) Buyer deducts TDS and deposit to the authorized bank Files Quarterly Returns electronically in Form 26 and Form 27A Bank (Treasury) Income Tax Department

36. Electronic TDS (E-TDS) • E-TDS return is a TDS return prepared in form No.24, 26 or 27 in electronic media as per prescribed data structure in either a floppy or a CD ROM. • The floppy or CD ROM prepared should be accompanied by a signed verification in Form No.27A. As per Section 206 of Income Tax  Act all corporate and government deductors are compulsorily required to file their TDS return on electronic media.

37. Service Tax • Service tax is indirect tax on services provided. Service tax is paid by buyer of services to seller of services, who in turn, deposits the tax with the government. • Some Service Tax categories are- Advertising Agency, Cable operators, Maintenance and Repair service, Courier , Life insurance Services, Telephone services, Banking and Financial Services.

38. Credit Adjustment in Service Tax • The Service Tax paid by you on input services to your business can be adjusted to the Service Tax payable by you. This is called 'adjustment of Service Tax Credit. • If your input service (purchase) can be directly related to the output service (sale) then you can use 100% credit adjustment on the service tax payable. • If the input service is not solely used for the output service, then 20% credit adjustment is applicable.

39. What is ERP • ERP is an abbreviation for Enterprise Resource Planning. • It is principally an integration of business management practices and modern technology. • The term ERP originally referred to the way a large organization planned to use its organizational wide resources. • It is a company-wide computer software system used to manage and coordinate all the resources, information, and functions of a business from shared data stores.

40. Enterprise Resource Planning

41. Tax Collected at Source • TCS is Tax Collected at source by the seller on sale of some specified goods . • Goods are defined under section 206C of the Income Tax Act, 1961 . • Some specific goods under TCS are Tendu leaves, Timber obtained under a forest lease, Scrap, etc.

42. Exemption • A buyer who purchases specified goods for manufacturing, processing or production of goods/article or thing and not for trading, no tax would be deducted. In such cases the buyer would declare it in Form 27C to the seller. • The seller in turn would deliver one copy of Form 27C collected from buyer to Chief Commissioner/Commissioner of Income tax.

43. Central Sales Tax • This is the system being implemented from 1956. • Central state tax (CST) is Sales Tax arising from Inter-state sales (when goods sold move from one state to another). • In case of any Inter state sales between two registered dealers, a prescribed CST declaration Form must be issued to buyers/sellers. • Every dealer who effects inter-state sale is required to register with State sales tax authorities who are empowered to grant registration under CST Act. Application should be in form ‘A’. Security has to be furnished. Certificate of registration will be in form ‘B’.

44. Forms Under CST • Form C, E-I/E-II, F, G, H, I and J have been prescribed to avail concessional rate of CST. • Form C and E-I/E-II and F are required to be collected and submitted on quarterly basis.  • In case of forms H, I and J, no time limit has been prescribed. • F form is to be obtained on monthly basis

45. CST (C Form) • A Form issued by the sales tax department to the registered sales tax payer. • If Person buys any good from another registered sales tax payer and issues a C form to him. Than that other sales tax payer will not charge sales tax from him and sales tax will be collected and deposited by the c form issuer and deposited in the treasury of the govt. • If C form is lost, indemnity bond in form G is to be given and then duplicate C form can be issued.

46. Fringe Benefit Tax • Fringe benefit tax (FBT) is a tax on benefits that employees receive as a result of their employment, including those benefits provided through someone other than an employer. • Fringe benefits (perks) include most benefits given to employees in addition to their salary or wages.

47. Category of FBT • Entertainment • Festival celebrations • Gifts • Use of club facilities • Employee welfare • Use of health club, sports and similar facilities • Sales promotion, including publicity • Use of telephone • Scholarship to the children of the employees.

48. Excise Tax • An excise or excise tax (sometimes called a duty of excise or a special tax). • It is commonly understood to refer to an inland tax on the sale, or production for sale, of specific goods within a country. • Excises are distinguished from customs duties. • An excise is considered an indirect tax, meaning that the producer or seller who pays the tax to the government is expected to try to recover or shift the tax by raising the price paid by the buyer.

49. Payroll Processing • Having access to employees pay, bonus, and other special income records can be crucial for managers. • Businesses may even consider choosing a payroll service systems that offers financial advise and one that can analyze payroll records. l

50. Process of payroll