Cost audit is an audit process for verifying the cost of manufacture or production of any article, on the basis of accounts as regards utilization of material or labor or other items of costs, maintained by the company. In simple words the term cost audit means a systematic and accurate verification of the cost accounts and records and checking of adherence to the objectives of the cost accounting. As per ICWA London’ “cost audit is the verification of the correctness of cost accounts and of the adherence to the cost accounting plan.” The ICWAI defines cost audit as “system of audit introduced by the government of India for the review, examination and appraisal of the cost accounting records and attendant information required to be maintained by specified industries” From above definition of cost audit, it is clear that cost audit is a systematic examination of cost accounts to verify correctness Continue reading
Business Finance Terms
Leasing – Meaning, Types, Benefits and Limitations
Leasing is understood to be a financial instrument that permits an individual or the lessee to enjoy the utility of a physical asset without possessing it or without assuming ownership of the asset. Leasing can also be defined as an arrangement between two main parties namely: the lessor or the leasing company and the person or the lessee. The customer or the lessee can rent the asset from the company for a particular period of time. The rent for leasing are always predetermined and are due after a particular fixed intervals of time and the lessee assumes the ownership of the property for the entire lease period. There is no purchase option at the expiry of the lease period. Leasing applies to equipment’s that are expensive and bulky or large. Leasing has advantage of tax exemption since the individual avoids the per annum leasing charges; also there is the advantage of avoiding Continue reading
Capital Sources for Business: Preference Shares
Preference shares are those which carry priority rights in regard to the payment of dividend and return of capital and at the same time are subject to certain limitations with regard to voting rights. The preference shareholders are entitled to receive the fixed rate of dividend out of the net profit of the company. Only after the payment of dividend at a fixed rate is made to the preference shareholders, the balance of profit will be used for paying dividend to ordinary shares. The rate of dividend on preference shares is mentioned in the prospectus. Similarly in the event of liquidation the assets remaining after payment of all debts of the company are first used for returning the capital contributed by the preference shareholders. Types of Preference Shares Cumulative and non-cumulative: In the case of cumulative preference shares, the unpaid dividend goes on accumulating until paid. The unpaid dividends Continue reading
Difference between Cash Credit and Overdraft
Cash credit is a short-term cash loan to a company. A bank provides this type of funding, but only after the required security is given to secure the loan. Once a security for repayment has been given, the business that receives the loan can continuously draw from the bank up to a certain specified amount. This type of financing is similar to a line of credit. Furthermore, cash credit is a facility to withdraw the amount from the business account even though the account may not have enough credit balance. The limit of the amount that can be withdrawn is sanctioned by the bank based on the business cycle of the client and the working capital gap and the drawing power of the client. This drawing power is determined, based on the stock and book debts statements submitted by the borrower at monthly intervals against the security by hypothecating of Continue reading
Introduction to Investments – Meaning, Objectives and Elements
Concept of Investment Investment is the employment of funds with the aim of getting return on it. In general terms, investment means the use of money in the hope of making more money. In finance, investment means the purchase of a financial product or other item of value with an expectation of favorable future returns. Investment of hard earned money is a crucial activity of every human being. Investment is the commitment of funds which have been saved from current consumption with the hope that some benefits will be received in future. Thus, it is a reward for waiting for money. Savings of the people are invested in assets depending on their risk and return demands. Investment refers to the concept of deferred consumption, which involves purchasing an asset, giving a loan or keeping funds in a bank account with the aim of generating future returns. Various investment options are Continue reading
Definition of Financial Services
As per section 65(10) of the Finance Act, 1994, “banking and financial services” means the following services provided by a banking company or a financial institution including a non banking financial company, namely; (i) financial leasing services including equipment leasing and hire-purchase by a body corporate; (ii) credit card services; (iii) merchant banking services; (iv) securities and foreign exchange (forex) broking; (v) asset management including portfolio management, all forms of fund management, pension fund management, custodial depository and trust services, but does not include cash management; (vi) advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisition and advice on corporate restructuring and strategy; and vii) provision and transfer of information and data processing. Financial services can be defined as the products and services offered by institutions like banks of various kinds for the facilitation of various financial transactions and other Continue reading