accounting institute in ahmedabad Archives

Posted on March 8, 2021June 19, 2023 by admin-s20

Accounting For Reserves And Surplus

Just the way we categorize our expenditures at the end of every month, various…

Just the way we categorize our expenditures at the end of every month, various business organisations include Reserves and Surplus in their balance sheet keeping their future needs as an organisation in the picture. In simple words, they are the savings of big corporates which can be used as assets during a crisis.

What Do Reserves And Surplus Mean?
Reserves
A financial accounting Reserve is a part of the shareholder’s equity except for basic share capital. A Reserve is profits that have been appropriated for a particular purpose. In accounting terminology, reserve implies the amount set aside for future activities which include buying assets, paying for bonuses or even legal settlements.

Surplus
Surplus describes the amount of an asset or resource that exceeds the portion that is actively utilised. In the budgetary context, a Surplus occurs when income earned exceeds expenses paid.
Reserves and Surplus, as the name suggests, are the accumulated profits that a company has earned and retained over time. Retained profits are the profits that are left after repaying the shareholders. General Reserves are created out of profits and kept aside for the financial strengthening of the company in bad years.

Difference Between Reserves And Surplus
Reserves are the primary amounts that are earmarked by the organisation for specific purposes. Whereas Surplus is where all the profits of the company reside.

Types Of Reserves And Surplus
Depending on their purpose there are various types of Reserves used in a balance sheet.

Capital Reserve
A Capital Reserve is the type of Reserve that is created from capital profits. Capital Reserve is maintained to prepare the company for sudden hazards like inflation, business expansion and funds for new ventures.

Cash received by selling current assets
Excess on revaluation of liabilities and assets

are a few examples of Capital Reserves.

Capital Redemption Reserve (CRR)
Capital Redemption Reserve is created when the preference shares or the capital is redeemed. It is a statutory Reserve. When a company wishes to redeem shares a Capital Redemption Reserve account is created to benefit both the creditors and employees.

A Capital Redemption Reserve comes in handy for the company on a rainy day. Several litigations are attached to this reserve such that the company can open this reserve only under certain circumstances.

Security Premium Reserve
It is the additional amount charged on the face value of any share when the shares are issued, redeemed and forfeited. Security premium account is a part of the Shareholders Fund, it refers to the difference between market value and the face value of a share.

Debenture Redemption Reserve
A Debenture is a debt security that lets the investors borrow money at a fixed rate. A Debenture Redemption Reserve must be created to protect investors from the possibility of a company defaulting.

Debentures are not backed by any kind of asset, lien or collateral. Free Reserves are those Reserves upon which the company can freely draw, Debenture Redemption Fund is one such Reserve.

Revaluation Reserve
Organisations have the freedom to construct line items for assets on the balance sheet when they believe it is a necessity for correct accounting to be presented. Revaluation Reserves are not inherently normal, but they can be used when a business assumes that the value of their assets will fluctuate after a certain time frame.

Other Reserves: Specifying Nature And Purpose

Surplus
Surplus i.e balance in statement of profit and loss disclosing allocations and appropriation such as dividend, bonus, shares and transfer to/from Reserve etc.

Accounting is a part of our daily chores, let it be a multi-crore business or the expenses of a middle-class family accounts play a vital role, here is a link to a certified accounting course in Ahmedabad that will make you a pro at finance and accounting.

Why Are Reserves And Surplus Called Liabilities?
Aren’t Reserves supposed to be good? They are money set aside for future endeavours and hazards, How is being financially safe considered a liability? Isn’t having surplus money a boon?

Well here are the answers to all your queries,

Reserves are considered on the liabilities side of a balance sheet because they are sums of money that have been set aside to be paid out on a future date. To be more precise Reserves are considered a liability keeping the peasant scenarios in mind. Reserve is considered a liability keeping all the future requirements in mind.

Reserves also represent the obligations that the form has, which makes Reserves a liability item. Reserves can be future or potential obligations to various stakeholders or future use of funds to benefit various stakeholders.

For a better understanding, we can compare Reserves to a bank, though the bank is always expected to have money, yet it is considered a liability keeping in mind that money is not for the bank but to meet up with the financial needs of their account holders.

What Is Meant By A Negative Reserve?
Negative Reserves are considered as assets, for example, the money which is due to the policyholders i.e debtors. But these are assets which may be realised or forgetting that the policyholders may withdraw, leading to a policy lapse.

To conclude, accounting at the end of the day is an asset to our lives, it is a massive ocean of its own, here is the address of an Accounting institute in Ahmedabad, they offer various Accounting Training in Ahmedabad that will turn you from a liability to an asset.

Posted on July 25, 2019 by admin-s20

The Accounting Skills You Need To Succeed

Every second person is now aspiring to be an accountant due to the unending…

accounting skills you need to succeed

Every second person is now aspiring to be an accountant due to the unending demands for the same. But they can be categorized between mediocre, good and excellent. This transition will pave your way towards your goal to excel at accounting. This transition is utmost mandatory to grade up your job position or to attract more clients. If you are still wondering what skills you can work upon to get there, don’t worry.

We shall discuss in this article the accounting skills which you must polish:

Knowledge

An accountant should possess thorough knowledge of how a particular transaction should be dealt with. If the company that he deals in wants to issue a Initial Public Offer and be listed with the National or Bombay Stock Exchange, the accountant should have in depth knowledge of how to proceed with that, what documents, bank requirements, the capital/sales requirements, etc. How is it going to affect the Balance sheet, Profit and loss and cash flows of the company?

An accountant should be aware of the Indian Accounting Principles and Standards set by the Accounting Standard Boards and should also be able to apply them in the practical situation.

Analyze

An accountant should possess great analytical skills. He should be able to calculate the position of the company by having a glance at its Balance sheet, Cash flows and Profit and loss statements. This power of analyzing the opposite party can help the company to take their decision whether or not to deal with them. Like if their Debt to Equity ratio is more than 1, it implies the company has taken more debts than its capacity and hence riskier to work with it.

Audit

Brief knowledge on audit can save the company from complications later. A visionary accountant should foresee any difficulties approaching from the perspective of an auditor so that minimum issues are raised by the auditors after the balance sheet is finalized. Any extra ordinary case shall be looked into deeply as the auditor will not spare that. And its treatment should be convincing enough for the auditor.

Working on dead lines

Accountants should be able to work on deadlines as most of the work is associated with time lines.

Vision

An accountant should be able to think strategically about a particular transaction and its affects if treated one way or the other in the long term. It most often affects the profitability of the company.

Adaptability

A lot of companies have gone global and multi-national. With that, accounting and taxation laws of the other countries are also taken into consideration. An accountant who is easily able to adapt to international laws and its treatment in India can go far in their career. Also, the local clients throw challenge with various fields they work in. Like Textiles, Pharmacy, Food, Construction, Jewelry, etc. The accountant should not be afraid but open to accepting challenges to work in different fields.

Good communication

Without good communication, one can literally land nowhere. Accountants should acquire the skill of being able to communicate verbally and non-verbally to attract, convince, interact with their clients or bosses. No one can work in isolation. Therefore, with great set of communication skills one can co-ordinate and be more organized in their field.

Organized

Since the accountant has lots to do and within set time limits, he will mess things up if his mind is not organized. He should be well aware of the dates and deadlines and should be able to prioritize work according to its urgency.

Honesty and Integrity

An accountant is looked up to for his integrity. Even the Government hires accountants for special reports in case of fraud because they trust the accountants as their profession expects them to be honest and transparent.

Convincing power

At times, deciding on how to treat a transaction may inflict a conflict within the organization or between two parties. An accountant possessing knowledge but no convincing power will be of a waste. Developing this skill will be an icing on the cake.

Accounting software

Along with Tally, a lot of new accounting software are launched for business automation and to reduce the clerical work of an accountant. Any small or large enterprise works on one or other accounting software like Zoho Books, Quickbooks, SAP, Saral, MProfit, etc. So, at least basic knowledge of the most used accounting software in the market should be gained to have an upper hand at any interview.

Your love for accountancy will enhance as and when you develop the above skills and for your career. Keep upgrading your knowledge as the past glory will just keep you where you are. You can join accounting coaching classes in Ahmedabad and attain the heights in the accounting profession.

Posted on December 20, 2018 by admin-s20

Understanding Methods of Depreciation

Generally, methods for providing depreciation are based on the formula developed on a study of…

depreciation method - Best accounting classes in ahmedabad

Generally, methods for providing depreciation are based on the formula developed on a study of the behavior of the assets over a period of years for readily computing the amount of depreciation suffered by different forms of assets. However, various accounting institutes focus on a few methods and overlook the other methods. Due to space constraint, we will explain only two most commonly used depreciation methods here.

The two methods for providing depreciation are the Straight Line Method and the Reducing Balance Method. The Straight Line Method is the most suitable and accurate method to adapt in most case. The income tax rules, however, prescribe the Reducing Balance Method except in the case of assets of an undertaking engaged in generation and distribution of power.

Straight Line Method: An equal amount is written off every year during the working life of an asset so as to reduce the cost of the asset to nil or its residual value at end of its useful life. The advantages of this method are that it is simple to apply and give accurate result results especially in the case of leases, patent and copyrights, and also in case of plant and machinery. This method is even known as Fixed Instalment Method.

Methods of Depreciation - best tally classes in ahmedabad

So, it is very simple. And it is like apportioning some expenses every year. So, no need to attend any accounting institute for this purpose.

Reducing Balance Method: Under this method, a fixed percentage of diminishing value of the asset is written off each year, so as to the asset to its break – up value at the end of its life, repairs and small renewals being charged to revenue. This method is commonly used for plants, fixtures, etc. Under this system, the annual charge for depreciation decreases from year to year, so that the earlier years suffer to the benefit of the later years. Also, under this method, the value of the asset can never be completely extinguished, which happens in the early explained Straight Line Method.

Many accounting institutes and academies stop at this juncture instead of teaching students exact formulae of arriving at the proper depreciation rate. But our accounting training in Ahmedabad focuses on every nitty-gritty of this method since this method is generally the only allowed method of calculating income tax applicable to the firm.

In this method, Depreciation goes on decreasing every year. The formula is –

best accounting classes in ahmedabad 2018-12-19

Suppose that the fixed asset purchase price is 10,000, the scrap value is 1,000, and the depreciation rate is 30%.

Using the Reducing balance method, 30% of the depreciation base (net book value minus scrap value) is calculated at the end of the previous depreciation period. Calculation of depreciation for the first three years is shown in the following table.

Understanding Methods of Depreciation - accounting classes in ahmedabad

If you have any questions related to this topic, we will be happy to revert to you or you can visit our accounting institute in Ahmedabad and attend a free demo class of depreciation accounting.

Posted on October 17, 2018 by admin-s20

Double Entry System

Double entry system of book keeping is the most popular scientific system of accounting.…

double-entry-system | Best Accounting Classes in Ahmedabad

Double entry system of book keeping is the most popular scientific system of accounting. According to it, every transaction has two-fold aspects – debit & credit and both aspects are to be recorded in the books of accounts. This system has been found of great use for recording the financial affairs for all institutions.

How Double book-keeping is helpful?
– By the use of this system the accuracy of the accounting work can be established, through the device of trial balance,
– Profit earned of loss suffered during the period can be ascertained together with details &
– The position of a firm can be ascertained.

For the conceptual clarity, one must know the basic of accounting and the reason why they are used in the way we do. Because at S20, we want things to remain simple people joining our accounting classes, tally classes or GST classes will definitely appreciate this. So, let’s understand the concept of double entry system with an example –

A person starts his business with Rs. 10,000; capital and cash are both 10,000. Transactions entered into by the firm will alter the cash balance in two ways, one will increase the cash balance and other will reduce it. Payment for goods purchased, for salaries and rent etc., will reduce it; sales of goods for cash and collection from customers will increase it.

We can change the cash balance with each transaction but this will not be easy to tally at the end of the financial year. Instead it would be better if all the transaction that lead to an increase are recorded in one column and those that reduce the cash balance in another column; then their net result can be ascertained, if we add all increases to the opening balance of cash and then deduct the total if all decreased we shall know the closing balance. In this manner, significant information will be available relating to cash.

The two columns which are referred above are put usually in the firm of an account, called the ‘T’ form.

This is illustrated below by taking imaginary figures:

Best tally classes in ahmedabad

What we have done is to put the increase of cash on the left-hand side and the increase on the right side; the closing balance has been ascertained by deducting the total of payment, Rs. 2,000 from the total of the left – hand side. Such a treatment of receipt and payment of cash is very convenient.

The proper form of an account is as follows:

The columns are self-explanatory except that the column for reference (Ref.) is meant to indicate the source where information about the entry is available.

The aforementioned outflow and inflow of cash have their specific nature in wider terms which is explained in the next article Rule of debit and credit. Your feedback on this article may be shared at [email protected]. we are known as premier accounting institute in Ahmedabad. Our flagship Executive of Commerce Course is known for its detailed coverage of accounting topics.

Posted on October 10, 2018June 19, 2023 by admin-s20

IL&FS Fiasco and Accounting Statements

Recently, the entire nation has been shocked to see that the institution of the…

Recently, the entire nation has been shocked to see that the institution of the size, scale and reputation like IL&FS has defaulted on its interest obligations.

It is noteworthy that IL&FS was considered to be one of the most reputed borrowers in India and perceived to be a Government backed institution. We have to understand that what makes such a large institution fail. There may be many reasons, but in the context of this article let us look at the accounting statements only.

Following is a summarized consolidated financial statements highlights of IL&FS in recent past.

Now we have to understand the items line by line. Because, at Super 20 Training Institute, our aim is to understand these items from a practical perspective. And you are aware that it is the best accounting institute in Ahmedabad. Many accounting institutes in Ahmedabad focus on teaching books. Rather S20 as an Accounting Training Institute has set a benchmark by focussing on such case study based practical approach in learning accounting, taxation, tally, GST etc.

It is apparent that the company was the anyways troubled one looking at the above numbers. The company was borrowing at a fast pace and this has resulted into the highest ever interest expenses being borne by the company. The company’s operating profits are decreasing on one side and on the other side the company’s interest expenses shot up drastically by 21%. The sole reason for this difference was that the company continued to borrow funds from the markets and mostly they were short-term borrowings. As you may be aware that in recent past the short-term interest rates are much higher compared to long-term interest rates. Company’s projects were mostly long-term in nature so they had to ideally raise funds from longer term papers. But the company did the contrary.

So, net if you see revenues of the firm were up by 9% in last one year. That looks quite rosy. Now if we look at the operating profits we have a doubt. Operating profits were down by -13%. That means something is seriously wrong. On rising revenues, the company had negative operating profits.

The company’s depreciation was also not in line with the expectations. It was up about 20%. There also somebody needs to dig deeper. And ultimately that has resulted into the company making cash losses as well as accounting losses. This is very alarming and fishy and only some drastic or magical steps can save this company that we can infer.

Friends, we will examine this case from a financial and accounting ratio analysis perspective in my next article. But as of now what we have understood is that the company was troubled operationally as well as financially. If you do not understand any of this topic discussed above you can approach team S20 for more clarity and understanding. You can also write to us at [email protected]. We provide people of any background a simple, effective and practical training in Accounting, Taxation, GST, Tally. You can know more about our courses at www.s20.in/courses

Posted on October 8, 2018June 19, 2023 by admin-s20

IL&FS fiasco and accounting ratios

We have a space constraint, so let us not discuss what was discusses in…

We have a space constraint, so let us not discuss what was discusses in the previous article. But you can refer my article IL&FS fiasco and accounting statements for basic understanding.

Now let us straight away understand what are accounting ratios or financial ratios as they are famously referred to.

I have produced direct ratios as calculated by me in MS Excel. If you do not know how to calculate financial ratios or how to arrive at accounting ratios you can approach Super 20 Training Institute – Ahmedabad. We provide such case based, practical and detailed understanding of various topics in our Accounting Courses, Taxation Courses, GST Courses, Tally Courses etc. at our training institute in Ahmedabad.

Now let us look at Operating Profit Margin. In FY1617, Operating Profit Margin was 49%, whereas, in FY1718, Operating Profit Margin was 39%. Such a big erosion in margins is worrisome. That means the company has some serious operating issue which needs to be looked at. Or the figures may be misleading for the previous years.

The next important accounting ratio is EBIT margin. That is Earning Before Interest and Taxes Margin. In FY1617, EBIT Margin was 42%, whereas, in FY1718, EBIT Margin was 31%. This is the significant decline. That means the company has less amount of money to meet their interest expenses.

Finally, we are staring at Net Profit Margin. In FY1617, Net Profit Margin was 1%, whereas, in FY1718, Net Profit Margin was -10%. The company was barely profitable in the previous year. Hence, everything was not ok even in FY1617 also. It was not ignored by everyone concerned with the company. And now we are staring at a big loss in FY1718. Signals were there, but they were ignored.

How default is evident from the above analysis. It is from Interest Coverage Ratio. In FY1617, the company was barely able to meet its interest obligations. On the other side, in FY1718 the interest cover was less than 1.

That means that the company did not have sufficient funds to service their interest obligations. Still, the company kept raising funds from the markets. All these funds were short-term funds basically to see the day has gone off or passed. The management was doing time pass all these days. The regulators were sleeping. The Government thought that the investors like LIC, SBI are taking care of IL&FS. LIC, SBI and other foreign investors were thinking that the management was very much able and worthy. Credit rating agencies were giving AAA rating blindly. Lenders took money from public and loaned to IL&FS thinking it is backed by the Government and anyways AAA. But it was written on the wall that IL&FS is not functioning well. And the worst came true. The institution of this size, scale and reputation are staring at bankruptcy.

Friends, these are the easy tools to analyse the company’s accounting records. Anyone, who wants to understand such topics in detail may contact us at inf[email protected]. or visit our website. We are proud to be known as the best accounting training institute in Ahmedabad. All the best.

Posted on June 11, 2018 by admin-s20

Accounting with GST – Purchase

Despite people taking accounting courses in Ahmedabad, Tally courses in Ahmedabad, GST courses in…

accounting-GST

Despite people taking accounting courses in Ahmedabad, Tally courses in Ahmedabad, GST courses in Ahmedabad, at times, we find due to clerical errors and lack of due diligence Accountants in Ahmedabad cause loss to their clients.

Hence, in our series of articles explaining accounting with GST today we will discuss purchase accounting with GST.

When we make purchase, we actually pay GST to the vendor/creditor. Under GST mechanism, we will then get credit of GST paid to the vendor. So it is very important for us to do this section very carefully.

Let us take a practical case to get accounting training / GST training in this matter.

Rittal Enterprise in Ahmedabad is a textile trading firm based at Ahmedabad. They purchase readymade shirts from Vittal Enterprise in Ahmedabad, a shirts manufacturer based at Ahmedabad.

Suppose Rittal Ahmedabad have purchased 1,000 nos. of shirts @ Rs. 500/- from Vittal Ahmedabad. Hence, total purchase value is Rs. 5,00,000/-

Now from the lookup of our GST training, we got to know that GST @ 5% is applicable on these kinds of products. Since the purchase is within state CGST @ 2.5% and SGST @ 2.5% will be applicable on this transaction. Since this is a purchase transaction these will be input GST. Input CGST Rs. 12,500/- and Input SGST Rs. 12,500/- will be paid to the vendor.

Now let us understand accounting effect in the books of Rittal Enterprise Ahmedabad:

Purchase of trading goods will always debited in the books of accounts. So, Purchase A/c Dr. Rs. 5,00,000/-. Input CGST and SGST are credits receivable hence they are debited in the books of accounts by Rs. 12,500/- each. The goods are purchased on credit hence Rittal Enterprise Ahmedabad is yet to pay to Vittal Enterprise Ahmedabad. So, Vittal Enterprise Ahmedabad is a creditor and their account need to be credited. So, final entry will look like as below:

Purchase A/c Dr. Rs. 5,25,000/-
Input CGST Dr. Rs. 12,500/-
Input SGST Dr. Rs. 12,500/-
To Vittal Ent. Cr. Rs. 5,25,000/-

Though this article has its own limitations, you can contact us for various accounting courses, GST courses, tally courses, wherein we try to cover such topics from a very practical perspective based on actual case studies. Super 20 Training Institute is proud to serve students in capacity of the best accounting training institute in Ahmedabad.

Posted on May 3, 2018 by admin-s20

Financial Accounting – Accrual Method v/s Cash Method

Friends in our today’s article we will try to understand what is financial accounting.…

Friends in our today’s article we will try to understand what is financial accounting. Well, many people try to undergo financial accounting coaching classes in Ahmedabad or may be a tally course or such other courses/training for their career enhancement. So what we do in such accounting courses/tally courses / quickbooks courses is quite deeper. But within this given space let us understand financial accounting.

So what is financial accounting? It is a specialized branch of accounting which deals with all of the company’s financial transactions. It is a process of recording, summarizing and reporting the myriad of transactions resulting from business activities for a particular time interval.

Now let us understand what various accounting training institutes, tally training institutes and software vendors like tally, quickbooks confuse us with two important terms i.e. Accrual v/s Cash. What is this? It is simply nothing but a difference of timing of recognition of revenue and expenditure. Financial accounting may be performed using either the accrual method, cash method or a combination of the two.

During the course of accounting/book keeping, accrual accounting method ensures recording transactions when the transactions have occurred/incurred and the revenue is recognizable.

Cash accounting entails recording transactions only when the cash is exchanged. Revenue is only recognized when the payment is received and expenses are only recorded when we make the actual payment. Looks simple, Right?

Both methods are used everywhere. Accrual accounting is more prevalent because most of the professional accountants generally adopt accrual method since they have generally undergone accounting courses/tally courses and they stress more on accrual accounting. Cash method is more prevalent in small businesses.

Now let us understand with an example.

We will write an accounting entry in the books of Amit Trading Corporation.

Amit Trading Corporation purchases goods from Pawan Dealers Pvt. Ltd. worth Rs. 1,05,000/- and paid Rs. 5,000/- as advance rest is payable when the goods are delivered.

In this case Amit Trading Corporation is a buyer

Now we will be able to understand the difference between accrual method and cash method of accounting.

This is just very basic things. In various tally courses/training or accounting courses at our institute we make complex concepts very straightforward, use cases to work upon them. We are one of the top accounting institute in ahmedabad.

Feel free to contact us any time. Your feedback is most welcome.

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