MBA at a Research business school versus MBA at a teaching business school

Research business schools attract and retain accomplished researchers as faculty. Practically all faculty members will have earned doctorates in business or a related discipline, and the emphasis for the faculty is their quality and quantity of research. The research productivity of the faculty is important in that it helps establish the reputation and name recognition of the business school and the program. Furthermore, research productivity influences the public rankings of business schools. Research business schools will typically have a well-established PhD program, and in some cases PhD candidates will teach some of the foundation module courses.

Teaching business schools attract and retain accomplished teachers as faculty, and the emphasis for the faculty members is their ability to effectively teach and advise students. While the teaching effectiveness of a business school only minimally influences its international reputation and ranking, it does provide additional opportunities for students to interact with faculty. Additionally, faculty may have a keener interest in student learning, rather than their own research agenda. In the vast majority of teaching schools, the faculty member will teach all of the classes (not PhD candidates).

Faculty in teaching business schools will also have clearly defined research expectations and most faculty members will have earned a doctorate in business or a related discipline and have successful publication records. Many also have extensive industry experience and all are good instructors.

Which should you choose? Either type of business school will offer a quality MBA experience. Research business schools are often located in Canada's largest cities, afford greater access to government and Canada's largest corporations, and will offer a fast-paced metropolitan environment. Teaching business schools are often located in smaller centres throughout Canada, offering a slower-paced living experience and a more intimate community environment.

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Top 10 reasons to take an MBA in canada

Top 10 reasons to take an MBA will be slightly different for different students, since everyone has their own career and personal goals. Below are some of the most often-cited reasons for taking an MBA.

1. Career advancement

2. Career change

3. Networking and making business/industry contacts

4. Increase earnings/ future salary

5. Recognized, world-wide respected degree

6. Flexible study options (full-time, part-time, online/distance)

7. Huge choice of MBA specializations

8. Access to and opportunity to learn from experts in the field

9. A secure future

10. Personal challenge

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All MBA programs in canada

• Asper School of Business University of Manitoba)
• Centre for Innovative Management Athabasca University)
• College of Management and Economics University of Guelph
• DeGroote School of Business McMaster University
• Desautels Faculty of Management McGill University
• Division of Graduate Studies and Research Royal Military College
• École des sciences de la gestion (ESG) Québec a Montreal (UQAM)Edwards School of Business University of Saskatchewan
• Edwards School of Business University of Saskatchewan
• Faculté d’administrationUniversité de Sherbrooke Université de Sherbrooke
• Faculté d'administration Université de Moncton
• Faculty of Business University of New Brunswick (Saint John)
• Faculty of Business University of Victoria
• Faculty of Business Administration Simon Fraser University
• Faculty of Business Administration Université Laval
• Faculty of Business Administration University of New Brunswick (Fredericton)
• Faculty of Business and Management University Canada West
• Faculty of Management Royal Roads University
• Faculty of Management Vancouver Island University
• Haskayne School of Business University of Calgary
• Hautes Etudes Commerciales Hautes Etudes Commerciales (HEC Montréal)
• Kenneth Levene Graduate School of Business University of Regina

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History of MBA schools in canada

The history of the establishment of MBA schools in Canada

Established in 1948, the MBA degree exists not only to provide individuals with the qualifications to advance their respective careers but also to help meet the needs of Business for specialized individuals well-versed in the abilities to manage in the modern business world. In addition, the introduction of the MBA program has provided the impetus for greater integration between schools and the business world. In fact, not only are former business people increasingly teaching business education but most schools have ongoing, direct dialogue with Business to develop new courses and programs and transform and/or expand existing ones to ensure they are relevant to the needs of the Business. For the latter's purpose, some educational institutions, like Simon Fraser University, have even formed permanent school-corporate committees.

As a result of the conclusions reached at this meeting, Canada's first executive, the Management Training Course, and MBA programs were officially launched in 1948 at UWO, and the first MBA degree was awarded two years later.
Following the success of the MBA program, Canada's fist doctorate program in business administration was offered in 1961, also at UWO. By the late 1970s, every major provincial urban centre in Canada had at least one institution with an MBA degree offering.

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History of MBA schools in canada

Originally, MBA programs were 2 years in duration with the first year devoted to the teaching of a core of business fundamentals and the second year focussing on education in either general management or in an area of concentration as chosen by the student. However, by the late 1970s to early 1980s, there was increasing dissatisfaction, especially on the part of the business community, with two aspects of the MBA programs being offered. Firstly, there was objection to the tendency to educate students in the theoretical knowledge of business while ignoring the teaching of its practical applications; that is, the curriculum was divorced from reality. Secondly, business education was criticized as being crude and amateurish because it was individuals with little or no direct experience and/or formal education in business who were primarily teaching it. Thus, beginning in the late 1970s, graduate business education increasingly blended theoretical with practical knowledge, including, in rare cases, the introduction of cooperative learning. Moreover, the standards of business education were improved by requiring future instructors to have at least an extensive, formal business education, with preference awarded to those with direct business experience. As a result of the latter, it is common today for post-secondary business educators to be former business people and entrepreneurs who not only teach the required curriculum but also divulge personal knowledge and advice accrued during their respective careers. As the business world has continued to change, so to has the form and content of MBA programs. For example, while the traditional 2-year MBA program still exists at the dawn of the 21st century, since the mid-1990s industry- and sector-specific MBA degrees have been offered, and programs have moved beyond simply teaching business fundamentals and disciplines and into developing students' "soft" skills such as analytical, communication, leadership, broadly defined, interpersonal, networking, and teamwork abilities.

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History of MBA schools in canada

Establishment of the Canadian MBA Degree Program

Following the recommendations made by Canada's foremost Corporate Executive Officers (CEOs) and presidents regarding the desirability and feasibility of founding graduate-level business management education, the MBA degree was established in Canada in September of 1948.

Prior to 1948, management education in Canada consisted of individual and Continuing Education courses and non-degree programs. As the structure of the corporation became more complex, in large part due to the introduction of new business and labour management practices, and as the global economy became stabilized following World War II, Canada's business community increasingly required highly specialized, well-educated managers capable of operating in this new environment. Thus, there was growing belief among Business in the desirability for training programs that could turn out the type of business administrators, executives, and managers that were needed in and by the corporate world. Believing that Business should specialize in business and schools should focus on education, the corporate world logically, in its view, saw these new programs as something that should be within the domain of institutions of higher learning. Therefore, in 1948, at the University of Western Ontario (UWO), a meeting of Canada's 100 premier CEOs and presidents convened to discuss if and how business education could be expanded and enhanced particularly through the founding of MBA, executive, and doctorate programs. As a result of the conclusions reached at this meeting, Canada's first executive, the Management Training Course, and MBA programs were officially launched in 1948 at UWO, and the first MBA degree was awarded two years later.
Following the success of the MBA program, Canada's fist doctorate program in business administration commenced in 1961, also at UWO. Based on the UWO model, MBA programs began to be established in post-secondary institutions across Canada; by the late 1970s, every major provincial urban centre in Canada had at least one institution with an MBA degree offering.

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Top mba subject in uk

The MBA is the world’s most popular postgraduate degree. Each year around 90,000 MBAs graduate in the US and around 10,000 in the UK. So what do all these MBA students learn? Here’s a typical list of subjects:

• Marketing
• Accounting
• Organisational Behaviour
• Quantitative Analysis
• Finance
• Operations
• Economics
• Strategy
• Management

Some of the course also offer additional courses relative to their specialisms for example in retail, construction or finance. While subjects such as organisational behaviour are of less immediate use to an entrepreneur marketing, finance, quantitative analysis, strategy, economics and finance all offer skills and knowledge that is immediately applicable to most entrepreneurial businesses.

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Top MBA subject in uk

The MBA is the world’s most popular postgraduate degree. Each year around 90,000 MBAs graduate in the US and around 10,000 in the UK. So what do all these MBA students learn? Here’s a typical list of subjects:

• Marketing
• Accounting
• Organisational Behaviour
• Quantitative Analysis
• Finance
• Operations
• Economics
• Strategy
• Management

Some of the course also offer additional courses relative to their specialisms for example in retail, construction or finance. While subjects such as organisational behaviour are of less immediate use to an entrepreneur marketing, finance, quantitative analysis, strategy, economics and finance all offer skills and knowledge that is immediately applicable to most entrepreneurial businesses.

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MBA tuition fee, living cost and expenses in uk

MBA in UK has lots of financial benefits:

• Most universities in UK offer a One-year MBA
• Access to National Health Centre; which is free for students registered on courses of six months or longer
• Free school education for registered dependent children

Expenses (In Pound Sterling) (approx.)

	Average Tuition Fee	Average Living Costs	Total costs per year
Medium-cost Universities	9,000 - 12,000	6,000	15,000 - 18,000
High-cost Universities	12,000 - 18,000	6,000	18,000 - 24,000
Low-cost Private Colleges	5,000	5,000	10,000

For all the cost data above,

• Fees given are averages
• All costs are given in Pound Sterling
• Living costs include accommodation, Energy bills, food etc.
• Costs are according to 1999 session

Note: The approximate currency exchange rate is:

1 UK Pound = US Dollars 1.75
Indian Rupees 80
Pakistani Rupees 106
Bangladesh Taka 106
Nigerian Naira 235
Euro 1.45

There are many small and private colleges, especially around London that offer low cost MBA programmes to international students. Many of these colleges have university affiliated MBA degree programme. These colleges offer a low-cost alternative to international students.

Please note that these colleges do not have university like campuses and do not offer the same quality of infrastructure, facilities and faculty as the bigger universities.

These are the average living expenses. Many international students manage to live in as less as 4000 pounds a year. Most students prefer off-campus accommodation which they share with other international students, thus saving housing costs to a big extent.

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MBA Application Procedure

1. Academic Record - Transcripts & Marksheets

Full details of your education including your course subjects and grades are required in the applications. Transcripts or official records of your previous academic qualifications are crucial for your application.

Students applying for admission are required to submit an official transcript from each college or university that they have attended after secondary school with complete details of the subjects, credits involved and other details like correspondence courses, diplomas etc. Most universities ask for the transcript to be sealed in an envelope and signed and attested across the seal by the registrar. This procedure is to be done for each and every college that you have attended. Some universities may ask for more than one transcript but most require only one.

Academic documents required include:

- Class X / 'A' Levels / Secondary School Marksheets & Certificate
- Class XII / 'O' Levels / High School Marksheets & Certificate
- Bachelor Degree Transcripts & Degree Certificate
- Transcripts & Certificates of any other programs that you may have attended.

If the originals are not in English, copies and a good English translation must be enclosed. If your undergraduate qualification or university is unknown to the admissions tutor, the British Council would be able to advise.

2. Standardized Tests Score Reports
2.
IELTS : For most courses and universities, International students are required to take IELTS (International English Language Test) which is regularly administered by the British Council. Some universities may accept TOEFL as an alternative. You need to send your IELTS or TOEFL score report with your application package.

Note : Some Universities may waive IELTS if you have been studying in English medium throughout and they are convinced that you are proficient in English.

GMAT : For most management courses, International students are required to take GMAT (Graduate Management Admission Test). You need to send your GMAT score report with your application package.

3. Work History - Resume

Most MBA programs require at least a few years of work experience for admission. Most UK Business Schools are pretty strict about this.

A detailed Résumé is an important part of your application. It should include all information of professional work experience along with the details like positions held, achievements and range of work.

4. Letter of Recommendation

Letters of reference or recommendation letters play a very important part in your admission to a good MBA program. A recommendation letter is a signed statement from a person who knows you well professionally or has taught you in a subject that is related to the course you are applying to. It should list your positive and negative qualities, strengths and other such information.

The author or teacher must indicate his position, how long he/she has known the applicant and in what capacity. He/she should briefly discuss the need, importance and usefulness of the study the applicant proposes to undertake.

Authors are usually asked to rank applicants in their letters of recommendation, which helps admission officers to interpret the academic credentials of foreign students. Students should obtain letters of recommendation (often on the prescribed forms sent by the institutions) from teachers who know them as a person as well as a student. You may like to request your author to give concrete examples that may show your qualities and help your case.

Many universities have their own format and questions that have to be answered by the person who is giving the letter of recommendation on your behalf. Letters, which do not give enough information, can jeopardize a candidate’s chances of selection.

Note : Even if not mentioned, it is advisable to include at least two letters of recommendation in your applications as they increase your chances of getting admissions.


5. Application Essays / Statement of Purpose

The personal application essays, and/or statement of purpose, also play a very important role in the process of evaluating your application for admission to the MBA program. It gives the admission committee assessing your application their most significant impression of you as an individual.

A personal statement should include reasons for choosing this particular course, your area of interest, the suitability of your education and experiential background for this course and your personal and present future goals.

Most business schools have a set of questions that they would like the students to answer. These include questions about your achievements, leadership activities and the reasons for seeking an MBA.

We recommend you to spend as much time as possible in this part of your application as this could make or break your application.

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MBA Application Procedure

This section explains the process of applying to UK universities for an MBA program.

Application Requirements & Documents Required:

1. Academic Record - Transcripts & Marksheets
2. Standardized Tests Score Reports
3. Work Experience Details - Resume
4. Letter of Recommendation
5. Application Essays / Statement of Purpose

Send enquiries at least 12 months before the proposed date of admission. There are two ways to get application forms.

1. Requesting Application Forms : You can request application forms from the universities website. Most universities have a form on their website which can be completed online to request application material.

2. Agents/Representatives : You can contact agents and representatives of the business school you are interested in. Most of the universities have representatives in many countries. These agents will give you the application forms and will guide you in the application process as well.
3. Downloading from the university website : Many universities have a downloadable and ready to print version of their application form on the net. These can be used for applying just as regular forms

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MBA programes

Eligibility

Bachelor Degree:

Most UK universities accept the three-year graduation system for entry into the MBA programme. So, if you have a three-year bachelor degree like Bachelor of Arts (BA), Bachelor of Commerce (BCom) or Bachelor of Science (BSc), this is acceptable as it is considered equivalent to a British Bachelor (Ordinary) Degree.

However, some universities may require an Honours degree. This is usually equivalent to B.Com. (H), B.Sc. (H) or afour year degree course like B.E.

For most good Universities, a good first degree from a leading university in India or its equivalent is essential.

There are some universities that accept students for the MBA without a bachelor degree if they have considerable work experience and significant professional achievements.

AMBA Accredited MBA Programs:

All AMBA accredited MBA programmes require a minimum of three years of full-time work experience.

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What is the Best Small Business Accounting Software

By now you probably realize that the accounting software you use for your business is a critical part to tracking the success of your business. Whether you are currently running a small business, or starting one up, you want to consider what program would work best for your business. What is the best small business accounting software out there in today's market? Let's look at some guidelines that will help you decide which software will work best for you.
Is It Cost Effective?
The biggest questions most small business owners pose when it comes to purchasing software is "Is it worth it?" Does it make sense for your particular business to pay 'x' amount of dollars for accounting software, when the owner only takes home 'x' amount of dollars a year? Well, contrary to what you may think, there are some great solutions in today's market where you can obtain accounting software for about $100-$150. It is becoming more and more affordable for small business owners to run their business with good, affordable accounting software.
Is It Simple and Easy to Use?
As you shop around for software it is important that you look at how easy the software is to use in real life applications. Sure, it may look great as a demo for some XYZ Company, but will it work for you? You don't want to get stuck with software that will take you weeks, or even months, to master. What kind of support is there with the software packages you are looking at? This is an important part of learning the software. Do they have support available to walk you through and to help you better understand the applications and how to get around. Some software programs charge quite a bit of money to train you on their software. Some use modules, which break up the different cycles of accounting into separate programs, which I have found makes it more confusing and difficult to use. The key here is simplification. You want something that is simple.
Does It Have All the Information You Need To Run Your Business Accounting?
You want software that will provide the tools for you to create the reports necessary for you to keep track of your businesses performance, prepare for taxes, payroll, accounts payable, accounts receivables and invoicing, and inventory control. Again, it should be simple and easy to create these things and navigate. Some programs get you the information, but it is a little more difficult to obtain, or even manipulate to look at different aspects of different reports.
All in all, in today's world it is critical that your small business utilizes the best accounting software available so that you can run your business effectively and efficiently. It is important that you stay informed at all times as to how your business is performing so that you can make any course corrections, improve cash flow, and make adjustments to your business model to out perform your competition. The best accounting software is available for you, but it is something unique to your situation and needs. Thus, you will want to take into consideration these three components as you search for the software that will help you control your business.

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8 Things to Know Before Selling Your Accounting Practice8 Things to Know Before Selling Your Accounting Practice

Understand why you are selling the practice. Buyer's want to know that you are committed to the sale and not just testing the waters. I would say one of this is one of the most common questions buyers ask and for good reason.
2. Have a plan for after the practice closes and the deal is done. Will you be helping the new buyer with transiting the client base or are you headed to sunny Florida. This will affect the purchase price as the buyers will be looking for support and guidance in the beginning.
3. Understand the purchase price and what you are asking for the practice. Selling your accounting practice is simple supply and demand economics. Price too high and it won't sell, price too low and you could leave some money on the table.
4. Understand your debt obligations and leases. Make sure you are up to date on all payroll taxes, debts, etc. Buyers will want to know what liabilities they will be taking over such as a copy lease, rent, etc.
5. Provide employee records and policies if available. This will instill confidence that your practice is running as a well oiled machine and organized.
6. Identify key employees. Make sure the buyer understands which employees are vital to the success of the practice once it is sold. Also, do the key employee(s) have non-compete agreements in place?
7. Keep organized financial records. This is fairly obvious, but make sure your financials are up to date and "clean." Make sure that all non discretionary expense are taken out or identified. This will help add back cash flow to the bottom-line but may not be accepted by the lender. Kind of a double edge sword.
8. Keep an open mind. You may have decided exactly what and how much you want for the business. An open mind will help in getting the deal closed. You may or may not get the exact price and terms you are looking for but if the deal closes that is end result you were seeking. A little flexibility can help the deal run smoothly for both sides in the end.

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Diversified Funds - Gain More Profit

Financial institutions today have come up with a wide range of financial services and packages that help in managing risk. Examples of these financial institutions are the different banks found worldwide, insurance companies, and other similar financial companies.
Diversified funds is one of the demands that these banks offer for its clients put aside funds that are in form of investments to different financial instruments that will relatively generate income and profit.
The concept of diversified funds lays solely on the idea that each and every investor should invest in different financial instruments. Needless to say, this means that no investor should put their eggs in one basket; thus the term diversification funds.
These investment options come in different forms such as savings accounts, mutual funds, equity funds, and time deposits. In terms of other financial institutions such as insurance companies, they have different kinds of investment tools such as insurance packages and bank assurance investments.
Diversified funds allow you to invest your money on many things, making you earn more profit. These funds come in two types namely horizontal and vertical diversifications. Horizontal diversification lets you invest your money in similar investments while vertical diversification deals with investing in all kinds of securities.
One thing to take into consideration is the credibility of the financial institution any investor plans to diversify their investments in. This means that investors should choose institutions that are trustworthy and hold a wide portfolio that one can trust with their money. In order to find the ideal financial institution, you should take your time knowing and researching about them.

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Accounting Procedures of Non-Trading concern

Like trading organization, non-trading concerns also maintain some usual books of account like, journal, ledger cash books, trial balance etc. However, it is difficult to keep full set of books by a small organization. Therefore, most of the non-trading organization, prepare cash book only before the preparations of final accounts. These organizations have to prepare the final accounts more or less similar to that of trading organization by following double entry book keeping systems to answer on the following three points.

1. What is the summary of the cash transactions of particulars period?
2. Is the income of the year sufficient to meet the expenditures?
3. What is the financial position of the organization?

The final accounts of non-trading concerns are as follows:

• Receipts and Payments Account.
• Income and Expenditure Account.
• Balance Sheet.

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Receipts and Payments Account

According to J. R. Batliboi, "A Receipt and Payment Account is summary of actual cash receipts and payments extracted form the cash book covering a particular period."

From the above definition, it can be concluded that receipts and payments account is summary of cash transactions. It is prepared on the basis of cash book. It also records the banking transactions. It starts with opening balance of cash and bank. All the cash or cheque receipts are entered on the debit side where as all incomes through cash or cheques are credited. It ends with closing balance. It records all the cash transactions whether they relate to current, past or coming year and whether they are of capital or revenue nature. However, it fails to record the outstanding amount of incomes and expenditure. It is generally prepared to find out the closing balance of cash. Receipts and Payments is the basis of preparing Income and Expenditure Account.

Features of Receipts and Payments Accounts:

1. It is a summary of cash book where the cash and bank transactions are grouped, classified and analyzed under suitable heading.
2. It begins with opening balance and ends with closing balance of cash and bank.
3. All the cash and cheque receipts are recorded on the debit side where all cash and cheques payments are recorded on the credit side.
4. It does not records non-cash items like depreciation, outstanding expenses and incomes, prepaid expenses etc. Only actual receipts and payments are entered.
5. All the cash receipts and payments relating to current, past and coming years are entered in it.
6. All the cash receipts and payments whether they are capital or revenue nature, are recorded in it.

Limitations of Receipts and Payments Account:

1. It does not show profit and loss of the organization.
2. It does not disclose the positions of assets and liabilities other than cash and bank.
3. It fails to distinguish between capital and revenue payment and receipts.
4. It does not follow "accrual concept" of accounting as a result it does not show the outstanding incomes and expenses, prepaid expenses, depreciation or appreciation of fixed assets etc.

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Provision for Discount on Debtors

Discount is allowed to debtors if they make quick and prompt payment. At the end of the accounting year, there may be certain debtors to be allowed discount which is an expected loss. to meet such discount, a provision is created form the profit of current year which is called provision for discount on debtors.

Note: New provisions for discount on debtor is to be calculated on the good debtors because discount is allowed to good debtor but not to bad and doubtful debts.

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Non-Trading Concern

Non-trading concerns are also called as non-trading institutions or organizations which are established for rendering services to the society or its members. Their aim is not to earn profit but to promote and to provide the recreational facilities in the field of sports, are and culture, education, health etc.

Examples of non-trading concerns are:

• Educational institutions as colleges, schools.
• Clubs as Lion Club.
• Societies as Red Cross Society.
• Charitable hospitals.
• Unions as trade union, labour unions.
• Libraries, hostels.
• Associations etc.

Features of Non-trading organization;

1. The main aim of such organization is not to earn profit but to render services to the society or its members.
2. Non-trading organization may have excess of income over expenditures (surplus) but they are not distributable among the members; the surplus (profit) is used for the strengthening the organizational goal.
3. Most of the transactions are dealt with cash rather than credit.
4. The main sources of income of such organizations may be subscription from members, donation from general public, grants from other government etc.
5. They do not prepare Trading and Profit and Loss Account.

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Provision for Bad and Doubtful Debts

Doubtful debt denotes the amount of debtors which may not be recoverable. It is an expected loss. To meet such loss, some amount set aside as provisions which is called provision for doubtful debts. It is calculated a fixed percentage of sundry debtors. While posting it, provision for bad or doubtful debt is shown on the debit of profit and loss account and also shown as a deduction from debtor on the assets side of the balance sheet.
 

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Provision for Bad and Doubtful Debts

Doubtful debt denotes the amount of debtors which may not be recoverable. It is an expected loss. To meet such loss, some amount set aside as provisions which is called provision for doubtful debts. It is calculated a fixed percentage of sundry debtors. While posting it, provision for bad or doubtful debt is shown on the debit of profit and loss account and also shown as a deduction from debtor on the assets side of the balance sheet.
 

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Provisions

Provision refers to the setting aside of certain amount  to meet some contingencies which may be expected but not yet incurred. In other words, provision usually means any amount written of or retained by way of providing depreciation, renewal or diminution in the value of assets. It is a charge to the profit and loss account. Some examples of provision are as:

1. Provision for bad and doubtful debt.
2. Provision for discount on debtors.
3. Provision for taxation.
4. Provision for depreciation.
5. Provision for repairs and renewals etc.

Provisions are either shown as deductions from assets in the balance sheet or on the liability side of balance sheet. When provision is no longer required, it is treated as a profit.

Features:

1. Provisions are made for expected contingencies.
2. It is a charge to the profit and loss account.
3. They are always made for a specific purpose.

Importance:

1. To ascertain the true net profit or loss.
2. To know the true financial position of the business.
3. To cover the loss in value of assets.

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Secret Reserves

Secret reserve is created to strengthen the financial position of the firm without disclosing reserves to the public. They are not shown in the balance sheet. Such reserves are usually maintained by banks, insurance companies etc. Generally, it is created by showing lower profit than what actual is. It may be done in any of the following ways:

1. By undervaluing the closing stock.
2. By providing excessive depreciation.
3. By overvaluing liabilities.
4. By making excessive provisions or losses.

Advantages:

1. It helps to strengthen the financial position of business.
2. It helps to meet the exceptional losses.

Disadvantages:

1. Profit shown by the financial statement is not accurate.
2. True financial position of the business can not be disclosed.

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Dividend Equilization Fund

It is created for maintaining equal dividend over years. In other words, sometime a company may not have sufficient profit to distribute as dividend. At that time, the company can utilize such fund.

Advantages:

1. It helps to distribute same rate of dividend even there is loss in the business.
2. Due to the uniformity of dividend over years, the market value of shares does not fluctuate abnormally.

Disadvantages:

1. Creation of dividend equilization fund reduces the amount of divisible profit.
2. Small organization having poor financial position may not be able to create such fund.

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Reserve for Redemption of Liabilities

The firm requires to manage big amount to redeem long term liabilities like debentures. Thus, a reserve is created out of profit for the redemption of liabilities which is called reserve for redemption of liabilities.

Advantages:

1. Loan can be repaid in specific date which increases the creditability of the business.
2. It helps to avoid the financial crises of repaying liabilities.

Disadvantages:

1. It reduces the amount of divisible profit of shareholders.

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Research and Development Fund

This fund is also created out of profit. It is a specific  reserve which is created to meet heavy expenditures of research and development of new product in the market. In this perfect competition business world, all most all the businesses require to spend for research of new product.

Advantages:

1. It helps to research and develop the new product.
2. It helps to earn good profit due to the invention of new and better product in the market.

Disadvantages:

1. It reduces the divisible profits of the shareholders.
2. Small organization having poor financial position may not be able to create such fund.

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Sinking Fund

Sinking fund is a specific reserve set aside for redemption of a long term debt or the replacement of a wasting assets. The distinct feature of sinking fund is that the amount of it is invested in outside securities to earn the interest. The investment is collected before the use of specific purpose.

Advantages of sinking fund:

• There will be no problem of collecting funds for the purchases of new assets.
• Sinking fund is also created to repay the long term loan, therefore company will not face the problem of managing fund from outsiders.
• It can be invested in outside securities which will increase sum of reserve.

Disadvantages of sinking fund:

• A big amount of divisible profit is utilized for sinking fund.
• The fund may not fulfill its purpose if the invested amount has not been collected in time.

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Revenue Reserve

Revenue reserve are created out of revenue profit. Revenue profits refer to the profit that is earned by operating the business. Profit on sales of goods, discount received etc. are revenue profits. There are two types of revenue reserves:

1. General Reserve
2. Specific Reserve

General Reserve:

A general reserve is also known as "Free Reserve" which is created only when there is a  profit or when the management desires to create. This reserve is created by setting aside a prat of the profits in order to strengthen the general financial position of the business. The aim of creating such reserve is not a specific purposes.

• To meet unknown future losses.
• To expand the business as additional working capital.
• To equalize rate of dividend over years in case of joint stock company.
• To strengthen the financial position of the business.

Specific Reserve:

These reserves are created for specific or definite purposes. It must be created even there is loss. Generally, the followings are some purposes of creating specific reserves.

• To equalize  the dividend over years - Dividend Equalization Reserve.
• To meet the repayment of debentures - Debenture Redemption Reserve.
• To provide funds for the replacement of assets - Reserve for Replacement of Assets.

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Reserve and types of Reserve

The term 'reserve' denotes something kept for future use. In accounting sense, it denotes the amount set aside out of profit for the purpose of strengthening the financial position of the business. It is created for meeting unknown liability or loss in the future. Thus, it is not an expenses or loss in real sense.

According to William Pickles,"Reserves mean the amounts set aside out of profits and other surpluses, which are not earmarked in any way to meet any particular liability, known to exist on the date of the balance sheet".

Features of Reserves:

1. It is created for meeting unknown liability or losses.
2. It is created out of net profits.
3. It is not created compulsorily.
4. It is a part of undistributed profit, so it is shown in balance sheet until is is used.

Objectives of Reserves:

• It works as an additional capital for the expansion of business through internal resources.
• It strengthens the financial position of business.
• It helps to meet any unknown liabilities, looses or contingencies in the future.
• It provides funds for the repayment of debentures, preference share capital.
• It helps to equalize in the rate of dividend in case of company.

Types of Reserves

1. Capital Reserve
2. Revenue Reserve

1. Capital Reserve:

Capital reserves are those reserves, which are not created out of operating profit. In other words, these reserves are created out of capital profits. Profit on sale or revaluation on fixed assets is capital profit, which are generally not available for distribution among the shareholders of the company. The following are some examples of capital profits, which are the sources of creating capital profits which are the sources of creating capital reserves.

• Profit on sale of revaluation of fixed assets.
• Profit on repayment of debentures.
• Profit earned through the issue of shares at premium.
• Profit earned through forfeiture and re-issue of shares.
• Profit on the purchase of running business etc.

Utilization of Capital Reserves:

• To meet future capital losses
• To issue as fully paid bonus shares
• To strengthen the financial position of the business.

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Objectives for providing depreciation

1. For the replacement of assets: The fund equal to the amount of the depreciation is created which will remain in the firm. After the expiry of the life of asset, the same fund can be utilized to replace the new asset.
2. For the determination of true profit or loss: Depreciation is also an expense like repair and maintenance which must be included in profit and loss account to ascertain the correct profit or loss of a business for the year.
3. For the presentation of assets in the balance sheet at their proper value: Depreciation must be charged to each fixed asset for the true and fair presentation of assets in the balance sheet. The depreciation is deducted from the cost or book value of assets each year.
4. For the determination of correct cost of production: Correct cost of production can not be ascertained if the depreciation is not charged to the fixed assets. Thus, it is necessary to include amount of depreciation in the calculation of cost of each product.

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Factors affecting the amount of Depreciation

a) Original cost of the assets: Original cost includes the purchase price of the asset plus freight and installation expenses. Depreciation is charged on cost of asset so, it is found as:

Cost of Asset = Purchase price + Freight (Transportation expenses) + Installation (erection) expenses

b) Estimated working life of the asset: All the fixed assets have their working life which can be estimated but not predetermined. After this period, the assets will be worthless or scrap. The working life of asset plays vital role in the determination of depreciable amount.

c) Scrap value: Scrap value is also called as salvage or residual or terminal value which means to the value that will be realized by selling the asset after the expiry of the estimated working life. Such amount must be deducted in cost of assets in the calculation of depreciation.

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Causes of Depreciation

1. Wears and Tears: The value of an asset declines due to its constant use in the business. Generally, fixed assets are depreciated due to wear and tears which means reduction in the efficiency and value of an asset caused from vibration, friction, accident, movement, erosion etc.
2. Innovation: Due to the development of science and technology, the new and improved automatic machines may be invented. Such invention reduces in the value of old and existing machinery.
3. Expiry of Time: The value of some assets like patent right, copy-right, lease hold property etc. decrease with the passage of time. The right of such assets is predetermined for certain duration. After its expiry, there is no value even it is not used.
4. Exhaustion: The value of some assets like mines and quarries go on declining with the continuous use.
5. Fall in market price: Another reason of depreciation is permanent fall in the price of an asset. The value of asset reduces as the market price of an asset continuously goes on declining.

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Additional notes while prepaing Final Accounts & Depreciation

1. Any reserves or fund account given in the in the trial balance should be shown in the balance sheet only.
2. Any transfer to Employees Provident Fund and other Staff Welfare Fund like pension fund should be debited to P/L account as a charge to profit rather than an appropriation and shown in the balance sheet as "Provision".
3. Declaration of dividend at a certain percentage should be calculated on the paid up capital.
4. Premium paid on redemption of preference share should be written off against the existing share premium account. In its absence, the profit and loss account should be debited.
5. Investment should be shown at cost price.
6. Interest on investment should be calculated on face value of investment.
7. No dividend is paid on calls in advance and call-in-arrears.
8. In case of the transfer of amount from reserve or funds to P/: appropriation account i.e., withdrawl of reserve, should be shown in credit side of P/L Appropriation Account.
9. In case of preference and equity shares, only proposal to pay dividend on preference shares is made before making any proposal for equity dividend.
10. Provision for tax of current year may be shown in P/L Appropriation Account.
11. Tax paid in the current year represents either tax paid of previous year or advance (prepaid) tax paid of current year.
12. Finished goods must always be valued at the lowest of the cost, or replacement or market price. However, raw materials and stores are valued at cost price.
13. Domestic and household expenses of proprietor as rent for the dwelling house, drawing etc, are not debited to the profit and loss account and they should be debited to the capital account.
14. Income tax paid by the proprietor on his income is also his private expense and should not be debited to the profit and loss account and should be debited to capital account. (The treatment is different in case of the final account of company). 

 

1. Depreciation

The non-trading fixed assets of a business like land, building, machinery, furniture etc. may be get depreciated in value due to various reasons. In other words, the value of such assets reduces each year due to use. Such gradual ad permanent reduction in the value of the assets due to wear and tear or from any other causes is called Depreciation. The word depreciation is derived from a Latin work 'Depretium' which is composed of two words 'De' and 'Pretium', where 'De' denotes decrease and 'Pretium' denotes price. Thus, the word depreciation means decrease in the price. It indicates a fail in the value of an asset which is a loss or an expense for a business and shown in the debit side of profit and loss account. It must be deducted from the respective assets in the balance sheet.

According to J.R. Batliboi,"Depreciation means permanent decline in the value of assets due to wear and tear or from any other cause."
According to R.G. Williams,"Depreciation may be dfined as a gradual deterioration in value of assets due to use."

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Marshalling of Assets and Liabilities

The arrangement of assets and liabilities in the balance sheet is known as marshalling of assets and liabilities. The marshalling of assets and liabilities can be done either in order of liquidity or in order of permanency.

In order of liquidity, liquid assets and current liabilities are shown first in the balance sheet. But in order of permanency, those assets and liabilities which are permanent nature are shown first. 

List of Important Adjustments

1. Outstanding Expenses
2. Prepaid Expenses
3. Accrued Income
4. Advance Income
5. Closing Stock
6. Depreciation on Fixed Assets
7. Interest on Capital
8. Interest on Drawing
9. Bad Debts
10. Provision for Bad Debts
11. Provision for Discount on Debtors
12. Provision for Discount on Creditors
13. Goods Lost by Accident
14. Drawing in Goods
15. Goods used in Business
16. Interest on Loan
17. Commission Payable to Managers
18. Taxation

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Notes on preparing Balance Sheet

• All the real and personal accounts having debit balances (given in debit side of trial balances) should be shown on the asset side of balance sheet.
• All the real and personal accounts having credit balances (given in credit side of trial balances) should be shown on the liability side of balance sheet.

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Liability side of Balance Sheet

Capital:

It is the amount of money invested by the businessman into the business. Net profit earned increases the amount of capital whereas net loss and drawing decrease the capital.

Long term liabilities:
Those liabilities which are spend after long period say after 5 or 10 years are called long term liabilities. Examples of such liabilities are:

• Bank loan
• Debentures
• Bonds
• Mortgage

Current liabilities:
These liabilities are to be repaid within a short period usually within an accounting year such as;

• Creditors
• Bills payable
• Bank overdraft
• Outstanding expenses
• Provision for dividend and taxation
• Advance income
• Short term loan.

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Fictitious Assets

Such assets are nominal in nature and do not have real value. They are either the past accumulated losses or expenses incurred once in the life of a business. Some examples are,

• Preliminary expenses
• Discount or loss on issue of shares and debentures
• Deferred revenue expenditure e.g. advertisement expenses
• Brokerage and share underwriting commission
• Debit balance of profit and loss account.

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Current Assets

Those assets which can be converted into cash through the normal course of business within a short time ordinarily in an accounting year. Some examples are:

• Cash in hand
• Cash at bank
• Bills receivables
• Debtors
• Closing stock
• Prepaid expenses
• Short term investment
• Accrued income etc.

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Fixed assets

Those assets which are of a relatively permanent nature used in operation of business. They are for earning income but not for resale like;

• Land and building
• Plant and machinery
• Furniture and fixture
• Lease holds and freehold
• Motor vehicles
• Goodwill
• Patent
• Trademark etc.

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Importance of Balance Sheet

1. It shows the financial position of the organization for a certain period by showing details about capital, assets and liabilities.
2. It helps to test the liquidity position of the organization by providing necessary infomation for the calculation of liquidity ratios.
3. It also helps to know solvency position i.e., long term loan paying ability of a firm.
4. It shows capital structure i.e. the position of owner's capital, shareholder's capital and borrowed capital of a firm.

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Items of credit side of Profit and Loss Account

1. Gross profit transferred from trading account.
2. Various incomes: Discount received, commission received, rent received, interest received, bad debt recovered, commission received etc.

After entering all the expenses and incomes in the debit and credit side of profit and loss account respectively, net profit is found on the debit side of profit and loss account if credit total figure is greater than debit total. But it will be net loss if the debit total is heavier than the credit total.

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Balance Sheet

Balance sheet is also known as the statement of assets and liabilities, which shows the financial position of the organization at a given date of accounting period. It is the last part of final accounts to be prepared with the help of trial balance after the preparation of profit and loss account.

According to Freeman,"A balance sheet is an item wise list of assets, liabilities and proprietorship of a business at a certain date."

Features of Balance Sheet:

1. It shows the financial position of the business on a particular date.
2. It gives the knowledge of assets and liabilities.
3. It is a statement but not an account like trading and profit and loss account.
4. Total figure of assets side is always equal to the total figure of liability side.

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Items of debit side of Profit & Loss Account

1. Gross loss transferred from trading.
2. Office and administrative expenses: Office salaries, office rent, office lighting, printing and stationery, legal charges, general expenses, audit fees, insurance, postage etc.
3. Financial expenses: Interest on loan, discount allowed, bank charges, interest on capital etc.
4. Selling expenses: Salesman salaries and commission, advertising, brokerage commission, free samples, bad debts, traveling expenses etc.
5. Distribution expenses: Carriage outwards, warehouse expenses, warehouse rent and insurance, delivery van expenses, packing expenses etc.
6. Other items: Depreciation on fixed assets, provision for bad debts, repairs and renewable etc.

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Profit and Loss Account

After the preparation of the Trading account, Profit and Loss Account is prepared. Profit and Loss account is taken as the second part of the final account. It is prepared to calculate the net profit or loss of the business made during a certain period. Profit and loss account contains all expenses or losses and incomes or gains that have not been dealt with while preparing the trading account.

According to Prof. Carter,''A profit and loss account is an account into which all gains and losses are collected, in order to ascertain the excess of gains over the losses or vice-versa.

Importance of Profit and Loss Account:
- It helps to determine the net profit or net loss made by a business during a year.
- It helps to determine the ratio between the indirect expenses and net profit.
- It is helpful to calculate the ratio between net profit and gross profit.

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Items shown on the Credit side of Trading Account

1. Sales and sales return: Sales refers cash or credit sale of trading goods. It is credited to trading account. Sales return is deducted from the sales figure to get net sales. Sales of fixed assets are ignored.
2. Closing stock: It denotes the goods in hand with the firm at the end of the accounting period. Closing stock also may include raw material or work-in-progress or finish goods. Generally, closing stock is given outside the trial balance which must be shown on the credit side of trading account and on the asset side of balance sheet. However, it is entered only in credit side of trading account if it is given inside the trial balance. Closing stock is valued at cost or market price which ever is lower in case of both prices.

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Items in Debit side of Trading Account

1. Opening Stock: Closing stock of the previous year becomes the opening stock of the current year which is available on the opening day of new accounting period. However, there will no opening stock in case of newly opened business. It is available in the trial balance that must be debited to the trading account. Opening stock may include the raw materials, work-in-progress as well as finished goods.

2. Purchases and Purchases Returns: Purchases of raw materials or resale goods made during the year are debited to trading account. Both cash and credit purchases are taken into consideration. Purchase returns are deducted from purchases to find out the figure of net purchases.

3. Purchase expenses: All the expenses that are incurred to bring the goods or materials upto warehouses are purchase expenses that are debited to trading account. Carriage inward, cartage, freight inwards, dock charges, clearing charges etc. are some purchase expenses.

4. Manufacturing Expenses: All the expenses relating to the manufacture of goods are manufacturing expenses which are debited trading account. Wages payable to workers engaged in the production of goods and the factory expenses incurred in the operation of factory like, factory lighting, heating, insurance, rent, power, coal, fuel, gas, water etc are examples of manufacturing expenses.

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Need or Importance of Trading Account

Some of the objectives of preparing Trading account are as follows:

1. To determine the cost of production which helps to calculate the gross profit or loss of trading activities.
2. To assemble all the direct expenses of bringing the goods in saleable condition.
3. To ascertain the performance of different years of business through the gross profit ratio which is calculated by dividing the gross profit by sales.
4. To help to calculate the ratio of cost of goods sold to sales which is helpful in the fixation of price of the products.
   

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Trading Account

Trading account is the first part of the final accounts which is prepared to calculate the gross profit or loss of buying, manufacturing and selling of trading goods for a certain period. Gross profit if the difference between sales and cost of goods sold. If the amount of sales of goods is higher than the cost of goods sold, there is a gross profit. Reversibly, if sales figure is smaller the difference is gross loss. In the words of J.R. Batliboi, "The trading account shows the results of buying and selling of goods therefore, it does not include any items of operating expenses but transactions in goods are included."

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Preparation of Final Accounts

The final accounts include trading account, profit and loss account and balance sheet. They are prepared normally with the help of trial balance. Sometime, ledger balances and additional information may be given. While preparing final accounts, we need to mind the relation of trial balance with final account.

1. Debit items of trial balance generally appear either on the debit side of trading or profit and loss account or on the assets side of the balance sheet.
2. Credit items of trial balance generally appear either on the credit side of the trading or profit and loss account or on the liability side of the balance sheet.
   

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Introduction to Final Accounts

After the completion of preparing Trial Balance, Final Accounts are prepared to ascertain the net result i.e. profit or loss and the financial position of the business. In other words, a business can find out the profit or loss made by the business through the final accounts. They are prepared at the close of the accounting period with the help of trial balance. It is the final step of accounting circle which includes:

1. Trading Account.
2. Profit and Loss Account.
3. Balance Sheet.

In case of manufacturing concern, a separate manufacturing account must be prepared before preparing trading account. Final accounts are prepared mainly for following two objectives.

1. To ascertain the net result i.e. profit or loss made by the business firm during the accounting period.
2. To know the financial position of the business i.e. assets and liabilities of the business as on given date.

The net result of the business operation is disclosed by the profit and loss account and the financial position of the business is shown by the balance sheet.

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Generally used Terms in Accounting

Journal Entry, Ledger, Trial Balance, Trading Account, Manufacturing Account, Profit and Loss Account, Gross Profit or Loss, Net Profit or Loss, Profit and Loss Appropriation Account, Balance Sheet, Current Assets, Fixed Assets, Fictitious Assets, Investment, Current Liabilities, Permanent Liabilities, Marshalling of Assets and Liabilities, Liquidity, Permanency, Final Account, Closing Stock, Outstanding Expenses, Prepaid, Depreciation, Bad Debts, Provision for Bad Debts, Provision for Discount, Drawing, Accrued Income, Interest on Capital, Interest on Drawing etc........

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Revenue Loss

Revenue losses are those losses which are occurred during the normal course of business activities. They are shown on the debit side of Profit and Loss Account. The some example of revenue losses are as follows:

• Loss on sale of trading goods.
• Loss on leakage or theft of goods.
• Loss on goods lost by fire etc.
  

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Capital Loss

Capital losses are those losses which are incurred at the sale of fixed assets. It also consists the losses on raising capital. Such losses are shown on asset side in the balance sheet. The some example of capital losses may be as follows:

• Loss on sale of machinery at lower price than its book value.
• Loss or discount on issue of shares.
• Loss or discount on issue of debentures.
  

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Revenue Profit

Revenue profit are those profit which is generated by the activities of day to day business operation since the main target of a business is to earn such revenue profits. Such profit is shown in Profit and Loss Account. The following are the some example of revenue profits:

• Profit earned on the sale of trading goods.
• Commission earned.
• Income from investment.
• Discount received etc.
  

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Capital Profit

Capital profits are those profits which are earned by selling fixed assets or issuing shares or debentures. They should be transferred to capital reserve account, which appear in the balance sheet as liability. The some example of capital profits are as follows:

• Income earned by selling fixed assets in more value than its book value.
• Income earned by issuing shares or debentures at premium.
• Income earned by forfeiting the shares.
  

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Revenue Receipt

Revenue receipts are generated in the day to day operation of business. A big portion of revenue receipts is occupied by the amount obtained from the regular sales of trading goods or services. The following are the some example of revenue receipts:

• Amount received from sale of trading goods.
• Amount received from sale of services.
• Interest received.
• Commission, discount received.
• Rent received etc.

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Capital Receipts

Those receipts which are generated in the form of capital is called capital receipts. It denotes the amount received by a firm from the owner or from outsiders like creditors, debenture holders as a loan. It also includes the amount received from the sale of fixed assets.

Some examples of capital revenue are as follows:

• Amount received by issuing shares and debentures.
• Amount received from owner as additional capital or share capital.
• Bank loan.
• Loan from others financial institutions or persons.
• Amount received by selling fixed assets.
  

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Deferred Revenue Expenditure:

Deferred revenue expenditure is also called as capitalized expenditure. The benefits of some revenue expenditures may be consumed for several years which are called deferred revenue expenditure. Only a part of it is considered as revenue expenditure and debited to profit and loss account. The remaining amount is put as an asset in the balance sheet.

Some Deferred Revenue Expenditure are as follows:

• Preliminary expenses.
• Share underwriting commission.
• Discount on issue of shares and debentures.
• Cost of heavy advertisement.
  

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Revenue Expenditure

Those expenditure which are done to operate the business are revenue expenditures. The benefit of such expenses is to utilized in an accounting period. Nature of revenue is repetitive and may incur so many time during the business life. The examples of revenue expenditures are as follows.

1. Expenditures incurred in the normal course of business:

• Rent, wages, salaries, advertising, legal expense, taxes, insurance premium, fuel, water, lighting, heating, bank charges, telephone, postage, stationery etc.
• Interest, commission, discount, depreciation, bad debts etc.

2. Expenditures incurred to purchase raw materials or resale goods:

• Cost of trading (resale) goods.
• Cost of raw material.
• Consumable stores.

3. Expenditure incurred to maintain fixed assets for working condition:

• Repairs and renewals of fixed assets.
• Replacement of fixed assets.

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Capital Expenditure

Capital expenditure is done to acquire the fixed assets. Such fixed assets is acquired for the benefits for more than one accounting year. These expenditure help to earn income, which are shown in the assets side of the balance sheet.

According to Kohler,"Capital Expenditure is an expenditure intended to benefit future periods, in contrast to a revenue expenditure, which benefits a current period, an addition to a capital asset. The term is generally restricted to expenditures that add fixed assets units or that have the effect of increasing the capacity, efficiency, life span or economy of operation of an existing fixed asset."

The some example of capital expenditures are as follows:

1. Expenditure done for acquiring fixed assets:

• Purchase of land building, plant and machinery.
• Purchase of furniture and fixtures.
• Purchase of trade marks, patents, goodwill, copyrights, patterns and designs.
  

2. Expenditures incurred for putting an old asset in working condition:

• Cost of erection of plant and machinery.
• Cost of repairing (huge amount) fixed assets.
• Cost of installation of new assets.

3. Expenditure incurred on an existing asset in the improvement or extension of the business:

• Addition of land, building, machinery etc.
• Extension of existing fixed assets.
• Cost of increasing capacity of fixed asset.

4. Expenditure spent on raising the capital:

• Share underwriting commission.
• Discount or loss on issue of shares or debentures.

5. Expenditures incurred for the establishment of an organization:

• Registration fees.
• Legal and consultancy fees.
• Advertisement expenses.

6. Expenditure incurred for research, development and inventions.

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