Tag: Event Management

The apex body of the department is the Central Board of Direct Taxes (CBDT). CBDT functions as a division of the Ministry of Finance under the Department of Revenue. Its functions include formulation of policies, dealing with natters relating to levy and collection of direct taxes, and supervision of the functioning of the entire Income Tax Department. CBDT also proposes legislative changes in direct tax enactments and changes in rates and structure of taxation in tune with the policies of the Government.

The Board comprises of the Chairman and six Members. The Chairman is the co-ordinating head and each of the members has been assigned a specialized function. They are assisted by Joint Secretaries, Directors, Deputy Secretaries, Under Secretaries and ministerial staff for carrying out their day-to-day functions.

The Investigation Directorates and the Central Charges of the department, which are headed by the Directors General of Income Tax (Investigation) and the Chief Commissioners of Income Tax (Central), function under the supervisory umbrella of Member (Investigation) in the CBDT. The Chairman and other Members have been assigned territorial zones for the purpose of supervising and monitoring the work of field formations.

For the effective discharge of its functions, the CBDT is assisted by a number of attached offices known as Directorates. These directorates have been assigned specific functions like vigilance, inspection, judicial, recovery, maintenance of statistics, printing and publications, publicity, conducting of departmental examinations, imparting of training to officers and staff, etc. These functions are performed by the directorates at the all-India level.

The Chairman and members of the CBDT are selected from the Indian Revenue Service (IRS), whose members constitute the top management of the IT Department. The Chairman and every member of CBDT are responsible for exercising supervisory control over specialized functional categories at field offices of IT Department. Various functions and responsibilities of the CBDT are distributed amongst Chairman and six members, with only fundamental issues reserved for collective decision by the CBDT. The areas for collective decision by the CBDT include policy regarding discharge of statutory functions of the CBDT and of the Union Government under the various direct tax laws.

Taxation law is not only very complex as it requires specialized knowledge and expertise to implement, but also it necessitates various kinds of deterrent actions to ensure compliance by taxpayers.

• Assessment: Assessment is done to ensure correct estimation of total taxable income of an assessee (i.e. taxpayer) and it determines amount of tax to be payable by (or to be refunded to) assessee.
• Fines and Penalty: These are financial punishments for non-compliance with any specific provision of the Income-tax Act.
• Surveys: ITD can survey any business premises for physical verification of records and other valuables.
• Search and Seizure: ITD can search residential and business premises of any taxpayer to check records and valuables to ensure that no evasion of tax is taking place.
• Prosecution: Certain actions of taxpayers, for example wilful evasion of tax, are considered as criminal offence by the Income-tax Act and hence these offences result in prosecution.

Functions

• Administrative planning of the Income Tax Department.
• Act as advisor and conscience keeper of the Indian Revenue Service.
• Handle senior appointments.
• Represents the Finance Ministry at important tax-based conferences at UN and OECD.
• Transfers and postings of officers in the cadre of Chief Commissioner of Income-tax and Commissioner of Income-tax.
• Matters dealt with in the Foreign Tax and Tax Research Division, except matters under Section 80-O of the Income-tax Act, 1961.
• Ensure that the Cabinet decisions are implemented
• Advise the Finance Minister of India.
• All matters relating to Central and Regional Direct Taxes Advisory Committees and Consultative Committee of the Parliament.
• Public Grievances.
• Provide an element of continuity and stability to administration during crises.

CIT

• The existing role and functions of CIT(CO) had been defined with reference to erstwhile Regional Computer Centres (RCCs) and they were also acting as Nodal points for distribution of hardware etc. in the initial phases of Computerisation in the Department. Post consolidation of Regional Data Bases stabilized Taxnet and PDC, BCP & DR Sites becoming fully operational, redefining and recasting the role and functions of CIT (CO) had become imperative. Deliberations in the Directorate were ongoing to recast the same so as to align it in the new environment.
• Accordingly a Committee was constituted with DIT(S)-I, DIT(S)-II and DIT(5)-V as Members and CIT (CO), Kolkata as invitee. Report of the Committee deliberated on the Role and Functions of CIT( CO) in the new environment and also received inputs from field formations.
• Based on the report of the Committee, the Functions and Role of CIT(CO) were re-defined and recast so as to ensure, they were relevant and meaningful in the new environment. The same has since been approved by the Board.
• Revised role and functions of the CIT (CO) is annexed for kind information and necessary action.
• This issues with the approval of DGIT (Systems).

Assessing Officer

Tax returns that are either processed or unprocessed by CPC may need more detailed inquiry in order to be sure about the correctness of returned income and also to discover intentional/unintentional errors if any.

The process of in-depth interrogation of return of income is called ‘assessment’. An officer of the Income-tax Department who has been given this task of assessment is known as ‘Assessing Officer (AO)’. An Assessing Officer is an income tax officer who has the power to make an assessment of a taxpayer who is liable to tax under the Act.

The Assessing Officer appointed by the Central Board of Direct Tax to your return may vary depending on the size of your income/nature of your business (CBDT or Board).

Powers of assessing officer Under Section 131

The Income Tax Authorities (income tax officer / assessing officer) will have the same powers as are given to a court of law under the code of civil procedure 1908 (5 of 1908) when trying a suit in regards to the following matters –

• Discovery and inspection
• Requesting the attendance of any person, including any officer of a banking company, and examining him on oath
• Assembling the production of books of accounts and other documents
• Issuing commissions

The safety valve here is that any tax authority will not

• Take any books of accounts or other documents without recordings of his reasons for doing so.
• Keep in his custody any such books or documents for more than fifteen days (exclusive of holidays) without obtaining the approval of Chief Commissioner or Director General or Commissioner or Director.

Every business starts with a small venture and grows gradually along with power in the business. And with great power comes great responsibilities. As the business grows, demands from the customer increases, retailers tend to seek temporary systems and management for each hurdle that comes along the way, but down the line, they start to act more like a burden than a useful resource.

Retailing software or retail shop software as an integrated platform as a total management system, designed to handle all the aspects of your business is the best solution so far. On daily basis, you have a deal with sales, receipts, transactions, returns, supply chain management, stocks, inventories, customer management system and many other things, and imagining a system which can handle everything at one place is itself a miracle.

Three systems are crucial to the efficiency of retail businesses and restaurants:

• Point of Sale (POS)
• Payroll
• Human Resources

The developing and developed businesses have converted their retail software into retail management as a platform to improvise retailing along with other actions that are needed to be performed. Here’s why:

No more multi-headaches: You get to have more time to attend to your business rather than working yourself on management issues and responsibilities. It directly kills the IT maintenance issues and integration and deployability charges.

Everything on one thing: You can see real-time values of assets, sales, stocks and many other details from anywhere on a single platform in billing software for a retail shop. It helps you keep the track of what is getting purchased from your retail shop.

Paved and Polished streamlined transaction: Immediate access to prices, customer profiles and discounts creates a way to have faster checkouts and proper history of transaction made at by the customer to the cashier, decreasing waiting time of the customer.

Extensive and expandable: Customized retail POS software is the true nature for business platforms as a software. You can easily deploy new systems to new locations anywhere inside your shop or shops to be specific. Along with this, you can add any new application to your system as per your need.

Interconnected networks and smooth operations: No your all departments can have a direct view of what’s the status and can become more cooperative having a harmonized flow of events in your business.

Efficient and smart: Business is now crucially dependent on data. An integrated platform not only collects accurate data but also manages and filters it to provide anything you need, like reports of sales to inventory, while showing effects of each department on other.

Inventory at it’s best: The most important thing a retail shop is based and valued upon is its inventory. An IRMS platform will provide better details about your stock along with suggesting and notifying what to be ordered according to the sales being made.

Customers’ happiness: Faster, adaptability to advanced Payment and streamlined processing of billing will satisfy the one who is the fate of your business, your customer and his experience.

The ambassador of promotions: Discounts and gifts specific to the customer based on their profile history, new schemes for festivities, promotions etc can be planned and predicted by the software system itself, based on a variety of reports, analysed and displayed on a user interface screen with advanced features.

Your world on your fingertip: If you are a multi-channel retailer, you can have your website, e-commerce platform, orders etc on a single application along with providing you with an important asset, data of customers, which can be used for analysis of pros and cons of deployment of changes in your retailing business.

Retail communications are the internal communications between a retailer’s corporate management team, field and store employees on what tasks to perform.

Communication is an integral part of the retailer’s marketing strategy. Primarily, communication is used to inform the customers about the retailer, the merchandise and the services. It also serves as a tool for building the store image. Retail communication has moved on from the time when the retailer alone communicated with the consumers. Today, consumers can communicate or reach the organizations. Examples of this include toll free numbers, which retailers provide for customer complaints and queries. Another example is the section called Contact Us on the websites of many companies.

It is believed that every brand contact delivers an impression that can strengthen or weaken the customer view of the company. The retailer can use various platforms / channels for communication. The most common tools are:

1) Advertising

2) Sales Promotion

3) Public Relations

4) Personal Selling

5) Direct Marketing

Advertising can be defined as any paid form of non-personal presentation and communication through mass media. It is popularly believed that one of the main aims of advertising is to sell to a wide mix of consumers and also to induce repeat purchases. However, a retailer may use advertising to achieve any of the following objectives:

1) Creating awareness about a product or store

2) Communicate information in order to create a specific image in the customer’s mind in terms of the store merchandise price quality benefits etc.

3) Create a desire to want a product.

4) To communicate the store’s policy on various issues.

5) Help to identify the store with nationally advertised brands.

6) Help in repositioning the store in the mind of the consumer.

7) To increase sales of specific categories or to generate short term cash flow by way of a sale, bargain days, midnight madness etc.

8) Help reinforce the retailer’s corporate identity.

Initiatives come from HQ and into stores where the execution of revenue-driving ideas happens, but stores also send back essential feedback and insights necessary for decision-making.

1. Planning the Retail Communication Programme:

This is the first step in developing a retail communication programme. Each retailer knows that it is not only the matter of gaining profits but also to survive for a long time. Therefore, he decides about communication objective initially aimed for a large traffic flow so that store should get maximum branding and there on, a retailer tries to satisfy the consumers’ demand category-wise. Communication objectives are planned for both long and short term.

Long-Term Communication Objectives:

These objectives belong to long period, say, over one to three years or even more than that. These objectives, a retailer would not like to change in the short run as it takes years to achieve these goals but once the underlined objectives are achieved, these cannot be overcome by the competitors in the short run. Examples of long-term objectives are: (i) to create a strong brand image for the store, and (ii) to create a strong brand loyalty towards retailer. Hence, it has been said that these are not achieved overnight.

Short Term Communication Objectives:

As the name implies, these objectives keep on changing as per the market trend. For instance, during festival season, a retailer wants to attract footfall so he designs his communication strategy that lures the customer to visit the store during particular period of time, say, before Diwali or Christmas, Companies offer lucrative offers for customers.

2. To Device the Communication Strategy:

Once the communication objectives are set, a retailer studies the market situation and designs the communication strategy comprising of various constituents like advertising, sales, event management, sales promotion, e-mail promotion, personal selling, etc.

On the basis of situation analysis, a blue print of what-to-do, how-to-do is prepared, so as to achieve the communication objective? A retailer knows that one communication vehicle will not be suitable to interact with various target segments.

For example, in case one of the retailers’ stores is located in small but densely populated area where people would like to have a value for their money, so a retailer would like to communicate his store’s products as fair price, everyday low pricing (EDLP), cheap & affordable range, etc.

Similarly, in case of a store located in a posh area, a retailer would like to plan a strategy of maintaining an up market image and delivering merchandise at pricing that justifies that sort of image.

3. Preparing the Communication Budget:

All objectives and strategies of a retailer are achieved through funds only. Without funds, no strategy can take shape and will simply go flat. Therefore, it becomes imperative for a retailer to allocate budget considering the firm’s turnover and the affordability.

While planning a budget, a retailer should consider not only the short term and long term objectives but implications of investment also. For example, if a retailer spends more money on displays, ambience, interiors and exteriors, he would have shortage of funds to meet its day-to-day requirement (working capital).

4. Implementation of Communication Programme:

Implementing the communication programme is one of the critical stages of retail communication process. A retailer must understand that retail market is the fast changing market and the most dynamic place in today’s era. Therefore, even after having view of the current market trends and designing the strategy, if need arises, minor changes should be made at the implementation stage itself.

An ideal communication programme always should be flexible to amend as and when need arises. Making sincere assumptions in this regard can play vital role towards the success of communication programme.

5. Evaluating the Communication Programme:

After implementing the plan of action, a retailer must look into the result of the communication programme. Once implemented, programme starts giving results within a realistic period of time. Now a retailer should plan for the success of such communication program. If the customers are persuaded and excited, it will result in increased customer traffic as well as enhanced sales.

However, in case customers are not persuaded, they can completely reject the move taken by the retailer by not visiting the store. The reason may be competitor’s communication program which came because of your move. Sometimes, the competitors’ campaigns are so successful which don’t only minimize the impact of your move but may completely neglect your outcome. Therefore, considering a retailer must have a contingency program in place so that if one becomes unsuccessful, second program should replace the earlier one.

A Computerized Inventory Control System is the integration of sub-functions involved in the management of inventory into a single cohesive system. It is software installed on the computer systems that enables a firm to keep a check on the inventory levels by performing the automatic counting of inventories, recording withdrawals and revising the stock balance.

A computerized inventory system enables a company to monitor inventory levels in real time throughout the day. Also known as inventory management software, businesses can stay updated with inventory orders, counts and sales. A computerized inventory system can help you avoid costly mistakes, know what is and isn’t moving, get your whole team on the same page, and help you keep track of inventory from anywhere.

It is very difficult for any firm to maintain a large stock of inventories, and therefore, many firms have adopted the JIT system in terms of Minimum and Maximum limit for the stock. There is an inbuilt system for placing orders in computer systems that automatically generates a PO to the supplier when the minimum level of the stock or the reorder point is reached.

The benefits of a computerized inventory control system can be derived, when the business integrates its inventory control system with the other systems such as accounting and sales, that helps in better control of inventory levels.

In practice, when the inventory level reaches to its minimum point, the system automatically generates a purchase order, which is sent to the supplier electronically. Also, the other copy of the PO is sent to the accounting department. Once the material is received from the supplier, an inventory gets updated on the system and at the same time, the notification is sent to the accounting department, which is used against the supplier’s Invoice and the PO copy.

Thus, a computerized inventory control system has made a life of both the manufacturer and the big retailer easy, who can manage their inventories electronically without wasting much time on the manual tracking system. Also, all the documents, such as purchase order, Invoice, account statement gets automatically generated with a use of computerized inventory control system.

But however, too much reliance on the technology may be problematic in the situations of power failure and lost internet connectivity, as it may bring a system to a standstill. Also, the accuracy of inventory items inserted in the system depends on the data entry made by the person. Thus, a proper entry should be made to obtain the correct inventory levels.

Advantage

Automated Reordering and In-Stock Information

Computerized inventory informs employees and customers within seconds whether an item is in stock. Because the inventory is synced with sales, there is a running tally of what is in stock and what isn’t. This helps flag reordering needs and provides better service to customers. As inventory drops below a specific threshold, new orders are placed with vendors and tracked to let customers know when the new products will arrive.

Integration With Accounting

Many of the computerized inventory platforms integrate with accounting software to track cash flow. This makes the process of transferring inventory costs and assets between programs seamless and reduces the need for additional bookkeeping costs. Financial statements are more easily generated with shared data between inventory and bookkeeping.

Forecasting and Planning

Inventory management software does more than track where inventory is located and when to reorder it. A data collection system is used to create needed forecasting and strategic planning reports. Business owners review trends regarding which products do well in certain months or during specific cyclical seasons. Business owners use this data to plan for growth and order inventory intelligently to best utilize cash flow resources.

Disadvantage:

System Crash

One of the biggest problems with any computerized system is the potential for a system crash. A corrupt hard drive, power outages and other technical issues can result in the loss of needed data. At the least, businesses are interrupted when they are unable to access data they need. Business owners should back up data regularly to protect against data loss.

Malicious Hacks

Hackers look for any way to get company or consumer information. An inventory system connected to point-of-sale devices and accounting is a valuable resource to hack into in search of potential financial information or personal details of owners, vendors or clients. Updating firewalls and anti-virus software can mitigate this potential issue.

Reduced Physical Audits

When everything is automated, it is easy to forego time-consuming physical inventory audits. They may no longer seem necessary when the computers are doing their work. However, it is important to continue to do regular audits to identify loss such as spoilage or breakage. Audits also help business owners identify potential internal theft and manipulation of the computerized inventory system.

The Base for Carrying Financial Transactions

A savings account can be used to send and receive payments and it serves as a base for all transactions. Every transaction in a saving account can be done either by net banking, debit card, cheque or withdrawal slip. Financial transactions can also be carried out swiftly by using NEFT/RTGS/IMPS facilities.

Individual/Firm/Company

A bank may be a person, firm, or company. A banking company means a company that is in the business of banking.

Dealing in Money

The bank is a financial institution which deals with other people’s money, i.e., the money given by depositors.

Acceptance of Deposit

A bank accepts money from people in deposits that are usually repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a custodian of funds of its customers.

Giving Advances

A bank lends out the money in loans to those who require it for different purposes.

Agency and Utility Services

A bank provides various banking facilities to its customers. They include general utility services and agency services.

Payment and Withdrawal

A bank provides an easy payment and withdrawal facility to its customers in checks and drafts. It also brings bank money into circulation. This money is in the form of checks, drafts, etc.

Profit and Service Orientation

A bank is a profit-seeking institution with having service-oriented approach.

Ever-increasing

Functions Banking is an evolutionary concept. There is continuous expansion and diversification as regards the functions, services, and activities of a bank.

Connecting Link

A bank acts as a connecting link between borrowers and lenders of money. Banks collect money from those who have surplus money and give the same to those who require money.

Banking Business

A bank’s main activity should be to do banking business that should not be subsidiary to any other business.

Name Identity

A bank should always add the word “bank” to its name to enable people to know that it is a bank and deals in money.

Investment Transactions

We normally have the following two types of investments transactions:

• Cum Dividend or Cum Interest Quotations and
• Ex-Dividend or Ex-Interest Quotations

Cum Dividend or Cum Interest Quotations

Interest and dividend on the fixed investments accrued on regular interval, but payment of those are made only on fixed dates. Dividends are always paid to the persons, who are shareholder at the time of payouts. Suppose a shareholder sold his shares after keeping those shares in his hand up to ten months, then dividends on those shares will be paid to the buyer or we can say, to new shareholder.

So, a seller at the time of selling shares normally charge value of the accrued dividends up to the date of sale, and this is called ‘CUM DIVIDEND” or “CUM INTEREST”. Since, the sale price is inclusive of the value of a share and interest or dividend, therefore at the time of entry in the books of accounts, normal price of share should be booked in the investment account and the value of dividend or interest should be debited to dividend or interest account.

At the time of receiving dividend or interest, dividend or interests account will be credited, debiting cash or bank account. On the other hand, in the books of seller, normal price of the share should be credited to Investment account and the price of accrued dividend or interest should be credited to the dividend or interest account as the case may be.

Accounting Entries: It can be understand through the following table.

In the Books of Seller

x-Dividend or Ex-Interest Quotations

The buyer of shares when he is quoted ex-dividend is not entitled to receive the payment. It is the interval between the record date and the payment date during which the stock trades without its dividend. Therefore, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock.

Difference between Cum-dividend and Ex-Dividend

Major differences between them are given as:

• Cum interest or dividend prices are inclusive of the interest or dividend accrued at the date of purchase, whereas in case of the ex-dividend, prices are excluding value of the dividend or interest.
• The purchase price is higher than normal purchase price in case of Cum-dividend, whereas purchase price is the real price in case of ex-dividend.
• Nothing is payable additional in case of Cum-Interest, whereas separate amount of the dividend or interest has to be paid in case of the ex-dividend or ex-interest.

Balancing the Investment Account

Difference of debit and credit side of the investment account is Profit or Loss in case where all the investments are sold.

In case where part of the investments are sold and the balance investments stand unsold, it should be carried forward to the next accounting period and remaining balance of the two sides (debit and credit) will represent profit or loss on the sale of investment.

In case where investments are the fixed assets, then the profit or loss will be of capital revenue or capital loss and should be treated accordingly.

Equity Share Accounts

• Bonus Shares: Bonus shares are issued by the profitable companies to the existing shareholders of the company without any additional amount. Purpose of the bonus share is to capitalize reserves of the company. Only number of the shares will be added in face value column, and principle or capital column will remain unchanged.
• Right Shares: Right shares are first offered to the existing shareholders of the company as a matter of the right, hence called as right shares. As per Companies Act, right shares can be issued after two years of the establishment of a company or after one year of first issue.

Investment accounting is the management and analysis of accounts actively involved in investments. Working in this profession allows you to make business investment decisions and choose stocks, bonds and debts that are stable and profitable. Thoroughly exploring the answer to, ‘What is investment accounting?’ can help you learn more about the profession and help you determine whether it is the right career choice. In this article, we discuss what investment accounting is, explore what an investment accountant does, understand their average salary and skills and discover steps to become an investment accountant.

When researching various accounting careers, you might wonder, ‘What is investment accounting?’. Investment accounting is a specialization in the accounting field that analyses and manages investments accounts. While some manage their investments, people with large investment portfolios hire certified investment accountants. Investment accounting involves managing bonds, stocks and other investments for brokerage firms and portfolio managers. Professionals working in investment accounting field are investment accountants who monitor clients’ investments, manage debt investments and keep track of any third-party investment activities.

Common job duties for an investment accountant:

• Monitor client investments: These professionals monitor and maintain the investment of clients and businesses. They understand various rules about managing investments in a particular region.
• Manage debt investment: Debt investment is another key responsibility of investment accountants. When companies or individual wants to invest in stable and predictable options, these professionals prefer debt investments over stocks.
• Track third-party activities: A part of an investment accountant’s job role involves tracking their clients’ investments. Tracking these activities is essential because it affects a client’s financial standing.
• Prepare tax reports: Another critical job duty of an investment accountant is creating tax reports that give details about the company’s investment accounts. So, it is essential to maintain accurate records.
• Analyze investment activities: Employers expect these professionals to analyse the company’s investment activities and make proper recommendations to management personnel.
• Coordinate with others: Investment accountants coordinate and manage every aspect of the general ledger accounting. These professionals interact with other accountants and portfolio managers to manage ledger accounting.
• Ensure compliance: Many organisations rely on these accountants to process taxes and reports that comply with relevant regulations.

Employers expect these professionals who are knowledgeable in bonds, stocks and precious metals like shares and gold, among other forms of investment. It is essential to keep track of the constantly changing investment field to perform their job duties.

If the investor intends to hold an investment to its maturity date (which effectively limits this accounting method to debt instruments) and has the ability to do so, the investment is classified as held to maturity. This investment is initially recorded at cost, with amortization adjustments thereafter to reflect any premium or discount at which it was purchased. The investment may also be written down to reflect any permanent impairments. There is no ongoing adjustment to market value for this type of investment. This approach cannot be applied to equity instruments, since they have no maturity date.

Trading Security

If the investor intends to sell its investment in the short-term for a profit, the investment is classified as a trading security. This investment is initially recorded at cost. At the end of each subsequent accounting period, adjust the recorded investment to its fair value as of the end of the period. Any unrealized holding gains and losses are to be recorded in operating income. This investment can be either a debt or equity instrument.

Available for Sale

An available for sale investment cannot be categorized as a held to maturity or trading security. This investment is initially recorded at cost. At the end of each subsequent accounting period, adjust the recorded investment to its fair value as of the end of the period. Any unrealized holding gains and losses are to be recorded in other comprehensive income until they have been sold.

Equity Method

If the investor has significant operating or financial control over the investee (generally considered being at least a 20% interest), the equity method should be used. This investment is initially recorded at cost. In subsequent periods, the investor recognizes its share of the profits and losses of the investee, after intra-entity profits and losses have been deducted. Also, if the investee issues dividends to the investor, the dividends are deducted from the investor’s investment in the investee.

Realized Gains and Losses

An important concept in the accounting for investments is whether a gain or loss has been realized. A realized gain is achieved by the sale of an investment, as is a realized loss. Conversely, an unrealized gain or loss is associated with a change in the fair value of an investment that is still owned by the investor.

There are other circumstances than the outright sale of an investment that are considered realized losses. When this happens, a realized loss is recognized in the income statement and the carrying amount of the investment is written down by a corresponding amount. For example, when there is a permanent loss on a held security, the entire amount of the loss is considered a realized loss, and is written off. A permanent loss is typically related to the bankruptcy or liquidity problems of an investee.

An unrealized gain or loss is not subject to immediate taxation. This gain or loss is only recognized for tax purposes when it is realized through the sale of the underlying security. This means that there may be a difference between the tax basis of securities and their carrying amount in the accounting records of the investor, which is considered a temporary difference.

Farm final accounts can be prepared according to any of the following two methods:

1. Single Entry Method.
2. Double Entry Method.

Single Entry Method:

This method does not require maintenance of an elaborate system of accounting to ascertain the profit or loss and financial position of the business. The method requires the preparation of two statements of affairs one at the beginning of the accounting period and the other at the end of the accounting period.

The excess of assets over liabilities is the net-worth of the business. The profit or loss made by the business during a period can be ascertained by comparing the net-worth of the business on two dates, after making suitable adjustments for drawings, introduction of additional capital etc. (For more details, refer Single Entry System of Accounting).

Double Entry Method:

Accounting information contained in the accounting records may be presented in the form of an account for each type of product, for example, Wheat Account, Rice Account etc. Each Account is to be debited with opening stock, and the relevant expenses incurred, and the relevant expenses in­curred, and credited with the sale proceeds and the closing stock.

The difference between the two sides of each account shows profit or loss. The profit or loss of each such account is transferred to General Profit and Loss Account, to which common expenses of all the activities of the farm are charged so as to arrive at net profit or loss, to be transferred to Capital Account. Finally, Balance Sheet is prepared.

Farm accounting or accounting for agricultural farms is the application of accounting practices to agricultural operations. In recent years, commercial fanning has been engaging the attention of many and as a result a number of farmers are coming up. Corporate entities are entering into the farming business in a big way.

Therefore, the Institute of Cost and Works Accountant of India issued a book­let, explaining how the farm books should be kept and how the profit or loss arising from the farming operations should be ascertained. The farm accounting is a technique of using accounting data for cost and profit ascertainment of each farming activity and decision making with regard to the most profitable line of activity.

Accounting for Farms:

Transactions, relating to farming activities may be categorized into four-Cash, credit, and exchange and notional. The cash and credit transactions are recorded in normal manner as any other business transaction.

The exchange transactions, in the nature of barter, for example, exchange of animal labour for human labour, exchange of seeds for output, etc. are normally recorded at opportunity cost the price in the open market.

Notional transactions are those that take place between the members of the owner’s family and the farm, viewing the farm as an independent entity notionally. Some examples of such transactions are: use of household capital, use of land owned by the farm household, labour provided by members of the family, consumption of output by the family etc.

Profitability of Crops:

The performance of each crop shall be found out separately. The direct cost clearly identifiable with a crop shall be charged accordingly. The common cost should be suitably allocated on some accepted basis, For instance, depreciation or repairs can be divided on the basis of estimation of usage by different crops. Interest on fixed loan can be divided on the basis of length of crop season etc.

Books of Accounts:

The basic document needed is farm diary, where transactions are recorded in chronological or­der:

(1) Cash book:

As the business is carried on by families, it may not have time and resources for an elaborate system. The business is mostly carried on cash basis and therefore, by provid­ing analytical columns in the cash book, both on receipts and payments side, the accounting can be made very simple.

Analytical column cash book will help the farmer to do away with other subsidiary books and also the ledger and yet, he will obtain all the information, he needs to prepare the final accounts.

(2) Debtors and Creditors Register, to keep credit transactions.

(3) Stock Register, which shows input and output of goods, sale, wastage and balance of stock.

(4) Fixed Assets Register contains details of cost of assets, depreciation and balance of assets.

(5) Loan Register, contains record of loans, details of interest etc.

(6) Register for Notional Transactions for making a record of transactions between farm and farm household.

(7) Cost Analysis register, for keeping records of each farming activity, in order to know the profit of each activity.

Cost and Revenue:

Expenses and incomes associated with farming activities, other than agricultural activities are given below:

(A) Poultry Farm:

Expenses or Costs:

1. Costs of chicken, feed;
2. Stocks like hay, packing boxes, fuel;
3. Maintenance cost of sheds;
4. Medicines;
5. Salaries and wages.

Revenue:

1. Sale of eggs, chickens, broiler, hens;
2. Sale of poultry excretions as manures.

(B) Dairy Farms:

Expenses or costs:

1. Cattle feed and hay;
2. Cost of cultivation of feed crop, if any;
3. Insecticides;
4. Salaries and wages;
5. Cost of maintaining milk processing facilities.

Revenue:

1. Sale of milk;
2. Sale of milk products;
3. Sale of calves;
4. Sale of dairy cattle;
5. Sale of slaughtered cattle.

(C) Fisheries:

1. Cost of seed;
2. Cost of water;
3. Cost of fish feed;
4. Maintenance costs of tanks;
5. Catching expenses;
6. Depreciation of nets and other assets;
7. Salaries and wages.

Revenue:

1. Sale of fish.

Treatment of Specific Items:

1. Land Development Expenses:

A business may purchase land for cultivation. A lot of money may have to be spent by the business on cleaning, leveling the land, providing drainage, irrigation facili­ties etc. before the land can be used for cultivation. All these expenses are termed as “Land Develop­ment Expenses”, and should preferable is added to the cost of land.

2. Drawings:

A farmer or his family may consume a part of farm production.

It is recorded as:

Drawings Account    Dr.

To Crop or Milk or Poultry or Fish Account.

3. Similarly, when Farm Products are Consumed by Farm Workers it is Recorded as:

Wages Account Dr.

To Crop or Milk or Poultry or Fish Account

Apportionment Basis for Common Costs:

Seed, fertilizer, manure, pesticides, direct wages (Notional and Actual), land rent (Notional and actual) etc. can be identified crop-wise. But other costs like irrigation, services of agricultural machinery, implements or animal power depreciation, interest on capital etc. cannot be classified simply by nomenclature. Common costs of the agricultural farms are to be suitably apportioned among the crops for which such costs were incurred.

Many a time, common costs have been incurred for crop enterprises as well as livestock enterprises. Common costs should be apportioned among the crop enterprises on the basis of usage, wherever use of assets can be quantified. In other cases, length of crop season can be used.