The Foreign Exchange department, which is also being called as the International Banking Division, is one of the important departments of the banks operating in international market. In India also all scheduled commercial banks, both in the nationalized or non-nationalized sectors, do have Foreign Exchange departments, both at their principal offices as well as offices, in metropolitan centers. This department functions independently under the overall change of some senior executive or a senior officer well-versed in foreign exchange operations as well as in the rules and regulations in force from time to time pertaining to foreign exchange transactions advised by various government agencies. The principal function of a Foreign exchange department is to handle foreign inward remittances as well as outward remittances; buying and selling of foreign currencies, handling and forwarding of import and export documents and giving the consultancy services to the exporters and importers. Besides this, the department Continue reading
Financial Concepts
Commercial Bill – Meaning, Characteristics and Types
Bills of exchange are negotiable instruments, drawn by the seller (drawer) of the goods on the buyer (drawee) of the goods for the value of the goods delivered. These bills are known as trade bills. Trade bills are called commercial bills when they are accepted by commercial banks. If the bill is payable at a future date and the seller needs money during the currency of the bill, he may approach his bank to discount the bill. The maturity proceeds or face value of a discounted bill from the drawee is received by the bank. If the bank needs funds during the currency of bill, it can rediscount the bill that has been already discounted by it in the commercial bill rediscount market at the available market discount rate. The RBI introduced the Bills Market scheme (BMS) in 1952 and the scheme was later modified into the New Bills Market Continue reading
Importance of Financial Information to Stakeholders
In business there are two types of stakeholders that’s: internal stakeholders and external stakeholders. Internal stakeholders mean those stakeholders are dwell inside the company for examples: managers, employees, board members etc. On the other hand those stakeholders are not directly a part of a company is called external stakeholders for examples: shareholders, customers, suppliers etc. All shareholders want to see the use of their investment and thus asses the management through the financial statements. Because financial statements are very useful for businesses. Stakeholders of the company require the financial information for following reasons. To know how well the company is doing. To find company has earned more money than they spent. To get an idea about strategic and tactical plans of the management. To provide information to make decisions who make decisions about organisatoin. Avoid dissimulations and corruptions of the organisation. The usefulness of financial statements to different stakeholders is Continue reading
Advantages and Disadvantages of Historical Cost Accounting
The historical cost accounting values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition.The historical cost accounting is the situation in which accountants record revenue, expenditure and asset acquisition and disposal at historical cost: that is, the actual amounts of money, or money’s worth, received or paid to complete the transaction. Historical cost principle means that assets and liabilities are recorded at their actual historical cost. When an asset is written off, the loss is recorded as the historical cost of the asset less any accumulated depreciation. Typically, the asset would be fully depreciated and thus no loss recorded but this isn’t always the case. If the asset is sold the gain or loss is recorded as the amount received for the asset less the historical cost (net of any accumulated depreciation). In both cases, you’re using the historical cost Continue reading
Importance and Limitations of Financial Statements
Importance of Financial Statements Financial statements are the important sources of information to all the users of accounting information like; management, owners, debtors, creditors, employees, government agencies, financial analysts, etc. The following are the points which highlight the importance of financial statements: Financial statements are the summary of information relating to profitability, and resources owned by the firm. Financial statements provide the information which can be compared with those of other firms. Employees can use financial statements to demand for increment in salary and other benefits. Bankers and other financial institutions can use financial statements to make the lending decisions. Government bases on financial statements of the companies for the calculation of tax revenue from the firms. Financial statements can be used as the basis for management decision-making purpose like planning, promotion, research and development decisions etc. Existing investors can use financial statements to assess how efficiently the firm is Continue reading
Conflicts between Managers and Shareholders
Agency theory portrayed the fundamental problems in an organization that is self-interested behavior. Self interested behavior was usually direct to an unfavorable effect on any organization which was by and large for the purpose of getting highest share holder wealth. Company managers could have personal objectives that compete with the owner’s objective of maximization of shareholder wealth. Since the shareholders approved managers to administer the firm’s assets, a possible difference of interest occurred between the two groups. Self-Interested Behavior Agency theory argued that, in imperfect capital and labor markets, managers were trying to find make best use of their own values without regard for corporate shareholders. Agents have the capability to manage their own self-interest comparatively more then the best interests of the firm because of asymmetric information (e.g., managers know better than shareholders either they are talented and capable of meeting the shareholders’ objectives and vagueness. Facts of self-interested Continue reading