SEMESTER - III

1. SEMESTER - III

3. Accounting For Public Utility & Emerging Trends

4. ACCOUNTING FOR SALE • Thesaleinaccountingmeansthecommoditiesorservicesof economical value are purchased by someone andsomeone must receive the commodities or services in goodconditionunderpaymentincashorincredit.Although the sale isconfirmed afterreceivingthecash wheninbusinesssomepartiespaycashagainstgoodsand somepartiestakegoodsandpaylaterbutin accounting theprofitisconfirmedwhenasaleoccurs andthegoods deliveredandthematterofpaymentisbetweentheseller andthepurchaser.Ifthepurchaserdoesnotpaythedebt, thesellerwilldocreditparty’s payableaccountand considersitexpenseunderdebitingbaddebt expense account.Thecommoditieswhichwere soldmaybe returned incase ofanydefectunder mutualunderstanding. Thereturnof goodsdoescontra effectonsale.Nobusinessismadewithoutasale.

5. THETYPESOF SALE CASH SALES: • Cash (debit) • Sales (Credit) (To record sales as cash) Cash increases in liquid asset accounts of the entity and sales increases in the income. CREDIT SALES: Accounts Receivable/Party name (Debit) Sales (Credit) The accounts receivable/party name account increases in liquid asset accounts and sales increases in the income. Cash sale and credit sale are both the technique of sale.

6. THE PROCEDURE OF SALE • On receiving a purchase order, the seller issue sales on receiving a purchase order, the seller issue sales to purchaserdeliver it to the place of purchaser along with the delivery order. • In case of anydefect in goods, the purchaser informs to the seller aboutthe defect under debit memorandum and seller credit theaccount of purchaser issuing him credit memorandum. • The cash sale does not require many formalities like credit sale in which the matter of givingand take is occurred on the spot and in case of warranty or guarantee of the product thecondition of sale applies either credit or on cash payment. • The credit sales are recorded under sales journal and transferred to in subsidiary ledger parties’ account under control account in general ledger account as accounts receivable;Accounts receivable (debit) Sales (Credit)

7. SALE RETURN The sale return in case of a defect in goods from purchaser reduces the amount in balance of Purchaser account in seller’s ledger. The sales return and allowance journal are for recording sales return and allowances and at the end of the month sales returns and allowances are transferred to the subsidiary ledger of parties under reference sales journal and the total amount of sales return and allowances is transferred to control account of accounts receivable; • Sales return & allowances (debit) • Accounts receivable (credit) The sale return may apply on credit sale and on cash sale as; • Sales return (debit) • Accounts receivable (credit) • Sales return (debit) • Cash (credit) The sale return is contra revenue account and reduces the sale in the income statement. Return in the sale is under question for the seller.

8. BAD DEBT EXPENSES Thecauseofbaddebtexpenseisofcreditsalewhere in thesellersellsproductstoallpartieswhereinsomepay thedebtintimeandsomepayaftertimeandsomedonotpaythedebtbecauseofmanyreasonsthusthecategory ofcustomerismadeastofinecustomers,goodcustomers,thebestcustomersandbadcustomers.Thenwecansaythebaddebtisthedebtwhich recoverablechanceisequaltonotreceiveandincaseof receivingthebaddebt,theentryofbaddebtandreversal entryaremadeas; BaddebtExpense(debt) Accountsreceivable(credit) Accountreceivable(debit) Baddebt(credit) Thebaddebtisanexpensewhichreducesgrossincomein theincomestatement.

9. CASH BOOK • A cash book is a book of primary entry. All Cash transactions are recorded in the “Cash Book”. • It also serves the purpose of a ledger account and therefore, the cash account and bank account are not maintained in the general ledger. Balances in the cash book are taken directly to the trial balance.

10. FEATURES OF CASH BOOK • All receipts are recorded in debit side • All payments are recorded in credit side • Chronological (date wise) transaction recording of all transactions. • Performs function of both journal and ledger.

11. OBJECTS OR NEED OF CASH BOOK • To find out the total cash receipts and cash payments during a given period. • To ascertain the balance of cash in hand and at bank at any time without actually counting cash and examining Bank passbook • To verify the correctness of cash in hand and bank.

12. TYPES OF CASH BOOK • Simple cash book. • Double column cash book. • Triple Column cash book. • Petty Cash book

13. SIMPLE CASH BOOK • Prepared like cash account in ledger. • All the cash receipts are entered in amount column on debit side and all cash payments are appeared on credit side of the amount column. • Cash book is closed and balanced at the end of the month.

14. SIMPLE CASH BOOK 2012Jan1 Purchasedgoodsfor cashRs.10000 Jan6 SoldgoodsforcashRs. 25000 Jan8 PaidrentRs.1000 Simplecashbook

15. Double column cash book • A cashbook with cash and discount column is called double column cashbook. • Two accounts, cash and discount are combined in this book.

16. DOUBLE COLUMN CASH BOOK • 2012 Jan 1 Paid rent Rs. 1300 • Jan 5 Paid to Ram & Co. Rs.3950 Discount Received Rs. 50 • Jan 6 Received from Gupta & Co. Rs. 9900 Discount allowed Rs. 100 Double column cash Book

17. PETTY CASH BOOK • Used to record small amount of expenses. • Like stationary, cleaning charges and postage

18. CONTRA ENTRY • Where fora singletransactionentriesaremadeonboththe sides ofcashbook.

19. FORENSIC ACCOUNTING

20. Contents • What is Forensic Accounting? • Other Terminology. • What does a Forensic Accountant do? • Types of assignments a Forensic Accountant • Typical approach to a Forensic Accounting. • Stage to Forensic Accounting. • Applications and Consequences.

21. Meaning • The integration of accounting, auditing and investigative skills yields the speciality known as Forensic Accounting. In other words: • The identification, interpretation, and communication of the evidence of economic transaction and reporting events. • Forensic accounting is the specialty practice area of accountancy that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law"

22. OTHER TERMINOLOGY ForensicAccountingencompasses both “LitigationSupport” (Forensic Audit) and “InvestigativeAccounting” (Forensic Investigation) • LitigationSupportprovidesassistanceof an accountingnatureina matterinvolvingexistingor pending litigation.It dealsprimarilywithissue related to the quantification of economic damages. An example would be a Forensic Audit of sales records to determine the quantum of rent owing under a lease agreement, which is the subject of litigation. • InvestigativeAccountingis often associated with investigations of criminal matters.The utilization of specialized investigative skills in carrying out an inquiry conducted in such a manner that the outcome will have application to a court of law. A Forensic Investigation may be grounded in accounting, medicine, engineering or some other discipline.

23. What does a Forensic Accountant do? • A Forensic Accountant is often retained to analyse, interpret, summarize and present complex financial and business related issues in a manner which is both understandable and properly supported. • Forensic Accountants can be engaged in public practice or employed by insurance companies, banks, police forces, government agencies and other organizations. • A Forensic Accountant can be of assistance in various ways, including: Investigative Accounting • Investigating and analysing financial evidence. • Review of the factual situation and provision of suggestions regarding possible courses of action. • Assistance with the protection and recovery of assets. • Co-ordination of other experts, including: • Private investigators; • Forensic document examiners; • Consulting engineers. • Assistance with the recovery of assets by way of civil action or criminal prosecution.

24. What does a Forensic Accountant do? Litigation Support • Assistance in obtaining documentation necessary to support refute a claim. • Review of the relevant documentation to form an initial assessment of the case and identify areas of loss. • Assistance with Examination for Discovery including the formulation of questions to be asked regarding the financial evidence. • Review of the opposing expert's damages report and reporting on both the strengths and weaknesses of the positions taken. • Assistance with settlement discussions and negotiations. • Attendance at trial to hear the testimony of the opposing expert and to provide assistance with cross-examination.

25. What type of Assignments does a forensic accountant do? Detailedbelow arevarious areasin whicha Forensic Accountantwilloften become involved. • CriminalInvestigations • Shareholders' and Partnership Disputes • Personal Injury Claims / Motor Vehicle Accidents • BusinessInterruption/ OtherTypesofInsurance Claims. • Business/EmployeeFraudInvestigations • MatrimonialDisputes • Business Economic Losses • ProfessionalNegligence • MediationandArbitration

26. What would be a typical approach to forensic accounting/ Stages I. Planning Stage Meet with the client • Obtain an understanding of issues at hand • Perform preliminary assessment of work to be done and prepare tentative schedule Perform a conflict check • Ensure that the firm does not have conflicts of interest Perform an initial investigation • Preliminary investigations examination of available information • Allows auditors to identify likely trouble areas and the work to be done Develop an Action Plan • It Should identify objectives to be achieved and plan audit methodology to be used

27. What would be a typical approach to forensic accounting/ Stages II. Execution Stage Obtain the relevant evidence • In depth interviews with client’s staff Examination of hard-copy & electronic information. • Electronic info is often best source for forensic auditors • Specialized computer forensic auditors are sometimes called in, depending on the audit • Off-site computers & servers, hard-copy info, etc.,are also examined Perform the analysis • Highly dependent on specifics of the engagement Often involves: calculating economic damages and sensitivity analysis, tracing of assets Prepare the report • It contains the details of the engagement, the scope, any limitations and a detailed summary of the • Findings Reports are generally confidential and often used in court proceedings Review Process & report to the client. • Identify those involved and quantify amount of fraud. Attendance at Court • Present findings to the client and court

28. Who Retains a Forensic Accountant? ForensicAccountantsare often retainedby thefollow • Lawyers; • PoliceForces; • Insurance Companies; • GovernmentRegulatory Bodies and Agencies; • Banks; • Courts;and • BusinessCommunity.

29. What Characteristics Should a Forensic Accountant Posses? • curiosity • persistence • detail-oriented • creativity • discretion • skepticism • organization • confidence • sound professional • judgement

30. Qualifications of a Forensic Accountant Most forensicaccountantshavea Bachelor’sdegreein Accountingor a relatedfield.They generally have at leastone of thefollowingdesignations: • CertifiedForensicAccountant(CFA) • CharteredAccountant(CA) • CertifiedPublicAccountant(CPA) • CertifiedManagementAccountant(CMA) • Certified Fraud Examiner (CFE) • Certified Value Analyst (CVA) • Certified in Financial Forensics (CFF) • Investigative & Forensic Accountant (IFA).

31. COST AND MANAGEMENT ACCOUNTING

32. COST CONTROLANDCOST REDUCTION

33. INTRODUCTION • One of the major concern of the enterprise is to maximize the profit, which is possible only through decreasing the cost of production. For this purpose, two efficient tools are used by the management, i.e. cost control and cost reduction. Cost Control is a technique which provides the necessary information to the management that actual costs are aligned with the budgeted costs or not. Conversely, Cost Reduction is a technique used to save the unit cost of the product without compromising its quality.

34. While cost control, regulates the action to keep the cost elements within the set limits, cost reduction refers to the actual permanent reduction in the unit cost. At this juncture, it would be desirable to know the difference between cost control and cost reduction, so read out the article.

35. COST CONTROL • Cost Control is a process which focuses on controlling the total cost through competitive analysis. It is a practice which works to maintain the actual cost in agreement with the established norms. It ensures that the cost incurred on an operation should not go beyond the pre-determined cost. • Cost Control involves a chain of functions, which starts from preparation of the budget in relation to the operation, thereafter evaluating the actual performance, next is to compute the variances between the actual cost & the budgeted cost and further, to find out the reasons for the same, finally to implement the necessary actions for correcting discrepancies.

37. COST REDUCTION • Cost Reduction is a process, aims at lowering the unit cost of a product manufactured or service rendered without affecting its quality by using new and improved methods and techniques. It ascertains substitute ways to reduce the cost of a unit. It ensures savings in per unit cost and maximisation of profits of the organisation. • Cost Reduction aims at cutting off the unnecessary expenses which occur during the production, storing, selling and distribution of the product. To identify cost reduction, the following are the major elements: • Savings in per unit cost. • No compromise with the quality of the product. • Savings are non-volatile in nature.

39. The activity of maintaining cost as per the established norms is known as cost control. The activity of decreasing per unit cost by applying new methods of production in such a way that it does not affect the quality of the product is known as cost reduction. • Cost Control focuses on decreasing the total cost while cost reduction focuses on decreasing per unit cost of a product. • Cost Control is temporary in nature. Unlike Cost Reduction which is permanent. • The process of cost control is completed when the specified target is achieved. Conversely, the process of cost reduction has no visible end as it is a continuous process that targets for eliminating wasteful expenses. • Cost Control does not guarantee quality maintenance. However, 100% quality maintenance is assured in case of cost reduction. • Cost Control is a preventive function as it ascertains the cost before its occurrence. Cost Reduction is a corrective action.

42. ASPECTS OF COST CONTROL • Planning: Initially a plan or set of targets is established in the form of budgets, standards or estimates. • Communication: The next step is to communicate the plan to those whose responsibility is to implement the plan. • Motivation: After the plan is put into action, evaluation of the performance starts. Costs are ascertained and information about achievements is collected and reputed. The fact that the costs are being reported for evaluating performance acts as a prompting force.

43. Appraisal: Comparison has to be made with the predetermined targets and actual perform­ance. Deficiencies are noted and discussion is started to overcome deficiencies. • Decision-making: Finally, the reported variances are received. Corrective actions and reme­dial measures are taken or the set of targets is revised, depending upon the administration’s understand­ing of the problem. The management and control of the resources used in most commercial organisations leaves a great deal to be desired. Waste is growing at such an enormous rate that it has spawned a new industry for recycling and extracting useful materials.

44. Materials are wasted in a number of ways such as effluents, breakage, contamination, inefficient storage, poor workmanship, low quality, pilfering and obsolescence. All these contribute to significantly increased material costs and all can be controlled by efficient working methods and effective control.