Tag: Human capital Management B.com Notes

Managing your money is a personal skill that benefits you throughout your life and not one that everybody learns. With money coming in and going out, with due dates and finance charges and fees attached to invoices and bills and with the overall responsibility of making the right decisions about major purchases and investments consistently.

Money in the Bank

Developing financial acumen starts with opening a bank account. Once you have a paycheck, set up direct deposit. This keeps your money secure and saves you from paying interest to cash advance companies which charge a percentage of your check.

Budgeting

One of the first building blocks of a successful personal finance plan is the ability to budget. Although it’s easy to understand, it’s also difficult to do because it requires a hard look in the mirror and a willingness to see what really stares back at you.

Budgeting requires that you analyze and, likely, change your spending habits. Instead of your money controlling you, you control your money. Develop habits to save, avoid financial crisis and maintain peace of mind.

Investing

To become financially literate, an individual must learn about key components in regards to investing. Some of the components that should be learned to ensure favorable investments are interest rates, price levels, diversification, risk mitigation, and indexes.

Borrowing

In most cases, almost every individual is required to borrow money at one point in their life. To ensure borrowing is done effectively, an understanding of interest rates, compound interest, time value of money, payment periods, and loan structure is crucial.

Taxation

Gaining knowledge about the different forms of taxation and how they impact an individual’s net income is crucial for obtaining financial literacy. Whether it be employment, investment, rental, inheritance, or unexpected, each source of income is taxed differently.

Awareness of the different income tax rates permits economic stability and increases financial performance through income management.

Personal Financial Management

The most important criteria, personal financial management, includes an entire mix of all of the components listed above.

Financial security is ensured by balancing the mix of financial components above to solidify and increase investments and savings while reducing borrowing and debt.

A Successful budget plan clearly defines:

• How to follow a monthly spending plan.
• Ways for lowering your monthly bills.
• How to handle accrued debt.
• Debt pay-off options like the snowball and avalanche methods.
• How to distinguish between short-term, medium and long-term goals.
• A breakdown of family needs.

Numerical and Communication ability

Learn about money matters

To start improving your financial literacy, the first step is to start reading everything about money matters, including investing, money management and finances. You can start with magazines and newspapers or look for books that teach financial literacy. You may also want to look for resources online as well as podcasts and webinars that teach financial literacy.

Use financial management tools

Another important step to gain financial literacy is to start using a financial management tool. There are many services available online and you can easily connect them to your checking and savings accounts, credit cards and mortgage to monitor your spending. Using these tools, you can create a budget and then monitor how effectively you’re staying within the budget.

Ask for advice

A financial advisor can answer questions about how to handle any high-interest credit cards and other debt. They can evaluate your specific situation and make recommendations for how to consolidate and manage your finances to pay off your debt.

Use your network

While there are limitless resources to help improve your financial literacy, look for resources within your own immediate network. Chances are that you have friends, family members or a CPA who can offer guidance or insight to help you improve your own financial literacy.

Learn to budget

Budgeting is a key component of financial literacy. Learning to create and manage a budget allows you to pay down or avoid debt, save money and plan for your future.

Understand credit

To use your credit effectively, you should first understand it. Some important concepts you should know about credit include:

• Why credit is important
• What information goes into your credit score
• How to improve your credit score

Part of understanding credit includes learning how to pay down high-interest credit card debt.

Create and manage a checking and savings account

Creating and managing a checking and savings account is another important step for financial literacy. These accounts will allow you to keep your money safe and make paying bills easier. It’s also important to learn to manage the account to avoid overdraft charges.

Understand debt and loans

Learning about debt and loans is another important part of financial literacy. Not all debt is created equal, so learning about the different kinds of debt, the strategies for each and what you should focus on paying down first should be a top priority.

Invest in retirement

It’s never too late to plan for your retirement. Use a tax-advantaged retirement savings plan like a Mutual Fund or CPF, PPF. Start investing 15% of your income each month to ensure you beat inflation while still leaving enough income to pay for other expenses, like a mortgage or student loan.

Understand the Risk of identity theft

Identify theft is when someone uses your personal information without your permission to commit fraud. It may involve using your name, credit card number, Social Security number or other information linked to your personal identity. The best way to prevent identity theft is to learn how to safeguard your information.

Payment advice note is a document or letter of communication sent by a customer or buyer to businesses which states that an invoice has been paid to vide cheque, NEFT, RTGS or by any means of electronic transfers etc.,

It is a letter of communication that acknowledges the seller as to which outstanding invoices have been cleared by the buyer and by what means. Therefore, a payment advice note can be very useful when it comes to matching payments to an invoice.

Today, most businesses are using accounting software to manage the books which comes with the inbuilt capability to generate various statements including payment advice. Also, managing the outstanding bills portfolio has become very simple with the help of ERP software. It allows you to know the bills which has been paid and which has been outstanding due.

Payment advice processed using accounting software helps to ensure the professional standards have been followed as receipts can be easily tracked against the invoices in real-time.

Components of payment advice

Payment advice should contain the following information:

• The date on which payment advice was drafted.
• A reference to invoice number or invoice number against which the payment has been made.
• The amount of payment against such invoice
• The method of payment such as Cheque, NEFT, RTGS etc.,

Reinstatement is the primary phase where you will have to submit all your policy documents which are decided on the duration of your policy lapse and your revival application date. Later, you need to pay the delayed premium sum along with the interest to your insurer, sometimes with a penalty, where your interest and penalty will be decided by your insurer.

Now after submitting the necessary documents and paying unpaid premiums on time will let your request for insurance policy revival to process, which is the third stage. Now you may have to submit an insurance certificate or a health statement to your insurer by carefully filling the form.

Finally, your lapsed life insurance policy starts covering your life again, but we advise you to check your new insurance policy document for any new clauses as the insurers tend to add them sometimes. So, now you have known the process of revival of life insurance policy, then why wait to restore your lapsed insurance policies and restart your coverage.

A life insurance policy is an important tool in financial planning for many of us. There are different modes of Life insurance policy payments. One of the most favored modes by many is “Regular payment” in which the policyholder makes payment to the insurance company at regular intervals of time.

These regular intervals are Monthly, Quarterly, Half-yearly and Annual, out of which the Annual mode of payment is opted by many of us. The other payment types are “Time payment” or “Limited period payment”.

For restoring the lapsed policy, you need to visit the branch and submit an application for reinstatement. Then the insurance company decides on the premium to be paid to reinstate the policy along with the other requirements to be satisfied such as medical tests etc.

Insurance companies sometimes charge interest and even levy penalties to reinstate the lapsed life insurance policies. The greater the lapsed period of time the higher would be the penalty.

In case of death of the policyholder when a policy has lapsed, if the policy has achieved life insurance without surrender value, then claims will be settled to that extent by the insurer. Id not, the policy loses all its benefits and no claims would be settled.

It is very important to note that once the life insurance policy lapses, you no longer have coverage. This means that the life insurance company will not pay the claim in the event of death.  So sooner you reinstate the lapsed policy, the better it would be for you.

• Right Premium Paying
• Understand Reinstatement
• Policy Processing
• Terms and Conditions

Steps to Considered Before Policy Lapse

Pay through ATMs: Certain insurance companies have tie-ups with banks where the banks provide you the option to pay the premiums through their ATMs. Choose auto-pay service if you opt for this, your premiums will be paid automatically through your credit card and this will reflect in the billing cycle of your card.

Electronic Clearing Service(ECS): Here you can give a standing order to the bank to deduct a particular amount towards the life insurance plan.

Check your resources: Before you opt for a policy ensure that it does not burn a hole in your pocket.

The first step includes visiting the bank and asking for a demand draft form or you can fill one through online services.

Next, you need to fill in all the necessary details such as

• Payment mode: Cheque or cash,
• Make the demand draft under whose name,
• The total amount,
• Cheque number,
• Your bank account number,
• Encashment details and
• Your signature.

You will get your demand draft once you submit the required application form along with the services charges. Every bank has its own charge structure. You need to find out the charge of the bank from which you are availing the demand draft service. You can make your demand draft either at your own bank or at any other bank.

You need to give your PAN card details if the sum total is more than Rs. 50,000

If you making a demand draft online then all you need to do is fill in all the details and then collect the demand draft at the respective branch mentioned by the bank. You will get your demand draft after 2-5 days by courier.

Features of a Demand Draft

• It can only be paid on demand.
• Under the act of the Negotiable Instruments Act, 1881, in section 85, complete information has been laid out about demand drafts.
• It shouldn’t be paid to the bearer
• There is a specific amount of charge attached to the demand draft. RBI decides services charges for demand drafts but each and every bank is free to have their own service charges.

Preparation of Demand Drafts

Demand Draft Clearing Time

Demand Draft is unlike a cheque. While a cheque takes a specified time of a day or two to get cleared, the same cannot be said for the demand draft. There are no codified rules as to how long the banks have to take in clearing the DD, which is why the time taken by each bank varies. Ideally, it takes two business days for a demand draft to be cleared.

This time can be longer in case there are any issues with the instrument. As stated earlier, Demand Drafts are executed after several scrutinise and they are technically drawn by a bank on another bank. In situations where the amount has to be transferred from one bank to another, there is a possibility of it taking longer than two days.

How to Get a Demand Draft Issued

• Visit the bank where you have your account.
• Draw cash in the name of “self”
• Ask the bank teller to give you the form needed to be filled for making the demand draft
• Fill in the details and submit the form along with the cheque.
• The teller will scrutinize all the details and once he is satisfied, he will ask you to pay a small charge for making the DD
• He will then stamp the DD and hand it over to you.

Crossed Demand Draft

In case the Demand Draft is Crossed as Account Payee, it cannot be encashed over the counter from the Bank Branch and can only be cleared by depositing in the Bank Account of the Person in whose favor the DD has been made. However, in case the Instrument is not a Crossed Demand Draft, it can be encashed without depositing in the Bank Account, by encashing it over the counter from the Bank Branch.

The main purpose of Crossing a Demand Draft is the ensure that the payment is cleared by means of an account i.e. the payment is deposited in the Bank Account of the person in whose favour the DD has been drawn. This helps in preventing wrongful payment to any person and ensures that the payment is made only to the person in whose favour the DD has been drawn and not to any person.

If the DD is not crossed, the payment would be made by the bank to the holder of the Instrument after his proper identification. And in case, it is a crossed demand draft, the payment would be made only to the Bank Account of the person.

Difference between Demand Draft and Cheque

A Cheque is signed by an Individual and therefore there are chances that the cheque may or may not clear. However, a DD is prepared by the Banker and as it is signed by a banker, the chances of default are not there.

You would have seen that many organisations when receiving payments from the public don’t accept Cheque Payments and require that payments should be made through Bank Drafts. The reason for this is that there are chances that the Cheque may get dishonoured or may not clear due to any reason whatsoever, but that is not the case with DD. In case of a DD, the Payment is to be made by the Bank who has drawn the Demand Draft and therefore the chances of the cheque not clearing are Nil.

• First, you have to write the SBI branch name from where you are depositing the amount.
• After the Branch, write down the deposit date and year separately.
• After that, fill in the account number you want to deposit the money. Squares separate the account number section. You have to write 1 number in each square.
• After filling in the account number, Fill in the Account holder’s name.
• Below that, Enter the Deposit amount in words.
• Fill the Deposit amount in numbers.
• Fill the Sum of the total amount in numbers.
• The depositor needs to sign in this Box.
• Fill in your mobile number in this section. The mobile number’s filling process is the same as the 2nd step.
• Here you need to fill in the pan card number. If your deposit amount is less than 50000, you don’t have to fill it.

How to fill Right Section of SBI Bank Deposit Slip

• First, you have to fill in the bank branch name as same as before.
• After That, mark on your account type.
• Below that, fill up the Bank Account Number in which you want to deposit the money. Filling the account number process is the same as before we discussed it.
• In the Next section, Fill the Account Holder’s Name.
• Fill the Deposit amount in numbers below that Fill the Sum of the total amount in numbers.
• In this section, enter the total deposit amount in words (If you were depositing Rs. 2000, then write “Two Thousand Only”).

Note: If you were depositing more them Rs. 50000, then you have to write the Pan Card number in the Pan card option.

A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. It is known as a term deposit or time deposit in Canada, Australia, New Zealand, India and the United States, and as a bond in the United Kingdom and for a fixed deposit is that the money cannot be withdrawn from the FD as compared to a recurring deposit or a demand deposit before maturity. Some banks may offer additional services to FD holders such as loans against FD certificates at competitive interest rates. It’s important to note that banks may offer lesser interest rates under uncertain economic conditions. The interest rate varies between 4 and 7.50 percent. The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years. These investments are safer than Post Office Schemes as they are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, DICGC guarantees amount up to ₹ 500000 per depositor per bank. They also offer income tax and wealth tax benefits.

Fixed deposits are high-interest-yielding term deposits and are offered by banks in India. The most popular form of term deposits are fixed deposits, while other forms of term deposits are recurring deposit and Flexi Fixed deposits (the latter is actually a combination of demand deposit and fixed deposit).

To compensate for the low liquidity, FDs offer higher rates of interest than saving accounts. The longest permissible term for FDs is 10 years. Generally, the longer the term of deposit, the higher is the rate of interest but a bank may offer a lower rate of interest for a longer period if it expects interest rates, at which the Central Bank of a nation lends to banks (“repo rates”), will dip in the future.

Usually in India, the interest on FDs is paid every three months from the date of the deposit (e.g. if FD a/c was opened on 15 Feb, the first interest installment would be paid on 15 May). The interest is credited to the customers’ Savings bank account or sent to them by cheque. This is a Simple FD. The customer may choose to have the interest reinvested in the FD account. In this case, the deposit is called the Cumulative FD or compound interest FD. For such deposits, the interest is paid with the invested amount on maturity of the deposit at the end of the term.

Although banks can refuse to repay FDs before the expiry of the deposit, they generally don’t. This is known as a premature withdrawal. In such cases, interest is paid at the rate applicable at the time of withdrawal. For example, a deposit is made for 5 years at 8% but is withdrawn after 2 years. If the rate applicable on the date of deposit for 2 years is 5 percent, the interest will be paid at 5 percent. Banks can charge a penalty for premature withdrawal.

Banks issue a separate receipt for every FD because each deposit is treated as a distinct contract. This receipt is known as the Fixed Deposit Receipt (FDR), which has to be surrendered to the bank at the time of renewal or encashment.

Many banks offer the facility of automatic renewal of FDs where the customers do give new instructions for the matured deposit. On the date of maturity, such deposits are renewed for a similar term as that of the original deposit at the rate prevailing on the date of renewal.

Income tax regulations require that FD maturity proceeds exceeding Rs 20,000 not to be paid in cash. Repayment of such and larger deposits has to be either by “A/c payee” crossed cheque in the name of the customer or by credit to the saving bank a/c or current a/c of the customer.

FD Receipts

As one of the most common savings and investment options used by individuals, fixed deposits are risk free and offer guaranteed returns. Fixed deposits provide investors with an interest rate that is higher than what is offered on normal savings accounts. The maturity value of a fixed deposit is based on the date of maturity chosen by the individual. Individuals opt for fixed deposits as they are not risky and also provide assured returns, even if these returns are not very high such as those provided by mutual investments and equities.

Applicants can procure Fixed Deposits by visiting their bank or even on their bank’s website as many banks have enabled the facility of providing fixed deposits online. Once applicants apply for their fixed deposit scheme and all formalities are complete, they will receive a fixed deposit receipt as an acknowledgment. This is an important document and should be kept safely.

Fixed Deposit Receipt

A Fixed Deposit Receipt (FDR) is nothing but a document provided by the bank after the applicant procures a fixed deposit scheme from their bank. This document contains details such as the individual’s name, age, address, details of the scheme chosen by them such as deposit amount, tenure and interest rate applicable on the deposit and so on.

Components and Importance of a Fixed Deposit Receipt

A Fixed Deposit Receipt contains all the details related to the deposit option procured by the individual. These details include:

• Name of the applicant
• Age of the applicant
• Account Number of the applicant
• Amount of principal that has been placed
• Rate of Interest that is applicable
• Date of Maturity
• Amount of interest that the individual will receive on maturity
• Instructions regarding maturity date such as account transfer or rollover amount.

Checklist:

Auto renewal and date of maturity: It is convenient for individuals to opt for auto renewal if they have a guaranteed salary every month as it saves on hassle and time during the next renewal. Also, date of maturity is another detail that should not be missed by individuals as this will help them plan out their financials better and also with regard to the day, they can withdraw their fixed deposit investment.

Term and interest rate offered: Although this is a basic component of the receipt and may already be known to the customer, it is important to check these details again. This has to be given priority especially when individuals are renewing their fixed deposit scheme as certain rates may be discontinued by the bank.

Penalty for Prepayment: Banks sometimes charge a penalty on their fixed deposit if prepayment has been done. For example, if a bank charges 1% as the penalty for prepayment and individuals withdraw their fixed deposit (valued at 9%) after a period of 6 months, then they will receive an interest rate of only 6%, assuming the bank provides 7% as the interest for a 6-month FD.

Nomination: The receipt must provide details of the nomination in case the individual has made one. In the event of the unfortunate death of the individual, his/her nominee will receive the proceeds of the fixed deposit.

Declaration to save TDS: Tax at source is deducted by the bank in case the income from interest is over Rs.10,000. In case an individual’s income falls into the bracket of ‘no income tax’ then declaration through Form 15G or Form 15H can be submitted and this must be mentioned in the receipt.

A passbook or bankbook is a paper book used to record bank or building society transactions on a deposit account.

A page with a pre-printed table. It has handwritten entries showing amounts of deposits and withdrawals, and the balance. Each entry has a post office date stamp.

Traditionally, a passbook is used for accounts with a low transaction volume, such as savings accounts. A bank teller or postmaster would write by hand the date and amount of the transaction and the updated balance and enter his or her initials. In the late 20th century, small dot matrix or inkjet printers were introduced that were capable of updating the passbook at the account holder’s convenience, either at an automated teller machine or a passbook printer, either in a self-serve mode, by post, or in a branch.

Credits and deposits

To add credit to an account by bringing cash to a bank in person, the account holder can fill a small credit slip or deposit slip. The total amount of each note and coin is counted and entered on the slip, along with who it is paid in by and the date. The cash and details are counted and checked by the teller at the bank, if everything is in order the deposit is credited to the account, the credit slip is then kept by the bank and the credit slip booklet is stamped with the date and then returned to the account holder. An account holder uses their passbook to record their history of transactions with their bank.

Debits and Withdrawals

Withdrawals normally required the account holder to visit the branch where the account was held, where a debit slip or withdrawal slip would be prepared and signed. If the account holder was not known to the teller, the signature on the slip and the authorities would be checked against the signature card at the branch, before money was paid out. In the 1980s, banks adopted the black light signature system for passbooks, which enabled withdrawals to be made from passbooks at a branch other than the one where an account was opened, unless prior arrangements were made to transfer the signature card to the other branch. Under this system, the passbook’s owner would sign in the back of the passbook in an invisible ink and the signing authorities would also be noted. At the paying branch, the signature on the withdrawal slip would be checked against the signature in the book, which required a special ultraviolet reader to read. Nowadays, customer verification is more likely to be by PIN and commonly from an automated teller machine.

Features of a Pass Book

A pass book resembles a lot like a ledger and all the transactions are entered by the banker. It too has a debit column and credit column to enter the deposits and withdrawals. A brief description of each transaction will be given in the descriptive column. This enables the account holder to have a clear idea of his transactions. Its main function is to act as a unquestionable record of banking transactions between the customer and the banker. If you notice any change in the entries made in your pass book, you will have to bring it to the attention of the concerned person then and there. It is considered to be the duty of the account holder to examine his pass book for any wrong entries. The bank will also not acknowledge the deposit of any sum that is not mentioned in your pass book. Hence examine your pass book and get the transactions recorded once in a while.

Loss of a Pass Book

It is the responsibility of the account holder to keep his/her pass book safely and the bank will not take the responsibility related to the loss of a pass book. When your pass book is lost, mutilated or destroyed, you can apply for a duplicate one. However, a charge of Rs. 50.00 applies in this case, even though the original pass book was issued free of cost. At certain cases, the bank may waive off the said amount if the bank believes that the depositor had no control over the pass book being lost or destroyed. It is your responsibility to immediately inform your bank regarding the missing of your pass book. You may have to fill up an application form or sign a letter of indemnity to get a duplicate one. Once you get the new pass book you can request the banker to include all the previous transactions in it but the bank may charge a nominal fee for the extra labour work involved.

Offer letter

An offer letter is a document which is given to a candidate after he has been selected for the position. The letter clearly, mentions the salary package, designation, department and other benefits that he will be entitled to, if he joins the company. Other than this, a statement of at-will employment, list of contingencies, and a confidentiality agreement. A signed offer letter doesn’t mean that you are legally bound to join the company after that. However, that may be possible in very rare circumstances.

Purpose:

• It provides information about the job role, compensation and benefits, and other conditions of employment.
• It marks the beginning of a positive employment relationship.
• It acts as a legal document.
• It sets the right expectations.

Content:

• The job title of the employee being hired.
• A brief job description of the same.
• The joining date of the new employee.
• The work time and workable schedule of the employee.
• Their place in the hierarchical structure of the team or the org.
• A brief about the leave policy and details about list of leaves.
• A breakdown of the salary and other financial benefits.
• A description of the employee benefits being given to the new joinee.
• A list and breakdown of the privacy policies that the employee is supposed to abide by.

Appointment letter

An appointment letter or employment letter is a formal letter provided in writing to a candidate joining for employment. Appointment letters are usually provided after offer letter on the first day of the candidate starting work. The appointment letter describes in length the position offered, salary, benefits, confidentiality policy, work policy, starting date, and important information about the employment. The candidate usually would receive the appointment letter on the first day after beginning employment and would return a signed copy back to the employer indicating acceptance of the appointment letter.

Content:

• Name and current address details of the organization (employer)
• Name and address of the applicant
• Name of the position (position title)
• Additional details about job duties and responsibilities of the job
• Conditions of job: whether permanent or temporary, office employee time, performing another job simultaneously.
• Monthly salary per employee’s agreed-upon salary.
• Time length of the contract.

Select a cell below or to the right of the numbers for which you want to find the smallest number.

On the Home tab, in the Editing group, click the arrow next to AutoSum Button image, click Min (calculates the smallest) or Max (calculates the largest), and then press ENTER.

If the cells are not in a contiguous row or column

To do this task, use the MIN, MAX, SMALL, or LARGE functions.

Example

Copy the following data to a blank worksheet.