A-B-C Analysis

Hey students...now I am going to tell you about an important concept "A-B-C Analysis"
It is a system of inventory control. It exercises discriminating control over different items of stores classified on the basis of the investment involved. Usually the items are divided into 3 categories according to their importance, namely, their value & frequency of replenishment during a period.
(i) "A" category of items consists of only a small percentage i.e. , about 10% of the total items handled by the stores but require heavy investment about 70% of inventory value, because of their high prices and heavy requirement.
(ii) "B" category of items are relatively less important; they may be 20% of the total items of material handled by stores. The percentage of investment required is about 20% of the toal investmen inventories.
(iii) "C" category of items do not require much investment; it may be about 10% of total inventory value but they are nearly 70% of the total items handled by store.
'A' category of items can be controlled effectively by using a regular system which ensures neither over stocking nor storage of materials for production.
In the case of B category of items, as the sum involved is moderate, the same degree of control applied in A category of units is in not warranted.
For C category of items, there is need of exercising constant control. In this case the objective is to economise on ordering and handling costs.
NITIN BHALLA
9873029766
9958641376

Goods & Service Tax ((GST)

Hey friends....I am back with a new concept i.e. Goods & Service Tax. Goods and Services Tax (GST) is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level. Through a tax credit mechanism, this tax is collected on value-added goods and services at each stage of sale or purchase in the supply chain. The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain. GST is likely to improve tax collections and boost India's economic development by breaking tax barriers between States and integrating India through a uniform tax rate.

Under GST, the taxation burden will be divided equitably between manufacturing and services, through a lower tax rate by increasing the tax base and minimizing exemptions.

It is expected to help build a transparent and corruption-free tax administration. GST will be is levied only at the destination point, and not at various points (from manufacturing to retail outlets). Currently, a manufacturer needs to pay tax when a finished product moves out from a factory, and it is again taxed at the retail outlet when sold.

It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.

In the GST system, both Central and State taxes will be collected at the point of sale. Both components (the Central and State GST) will be charged on the manufacturing cost. This will benefit individuals as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.

"Investment, financing & dividend decisions are all interrelated"

Hey students..lets talk about finance functions. The finance functions are divided into 3 major decisions, i.e. investment, financing & dividend decisions. It is correct to say that these decisions are inter related because the underlying objective of these 3 decisions is the same, i.e. maximisation of shareholder's wealth. Since investment, financing & dividend decisions are all interrelated, one has to consider the joint impact of these decisions on the market price of the company's share & these decisions should also be solved jointly.
The decision to invest in a new project needs the financing for the investment. The financing decision, in turn, is influnced by & influences dividend decision because retained earnings used internal financing deprive shareholders of their dividends. An efficient financial management can ensure optimal joint decisions. This is possible by evaluating each decision in relation to its effect on the shareholder's wealth.

Determination of Safety Stock

Hey students...
I am back with an important concept i.e. safety stock. Safety stock is a buffer to meet some unanticipated increase in usage. It fluctuates over a period of time. The demand for material may fluctuate & delivery of inventory may also be delayed and in such a situation the firm can face a stockout. The stock out can prove costly be affecting the smooth working of the firm. In order to protect against the stock out arising out of usage fluctuations, firms usually maintains a margin of safety i.e. safety stocks. Two costs are involved in determination of this stock i.e. opportunity cost of stock outs & the carrying costs. If a firm maintains low level of safety frequent stock outs will occur resulting into the larger opportunity costs. On the other hand, the larger quantity of safety stocks involves higher carrying costs.
The amount of safety stock is the level where the total costs, associated with safety are at a minimum.

NITIN BHALLA
09873029766
09958641376

Accounting Standard 6: Depreciation Accounting

Hey students..

I am going to tell you about the AS-6 i.e. Depreciation Accounting. Depreciation is nothing but distribution of total cost of asset over its useful life. It is a measure of wearing out, consumption or other loss of value of a depreciable asset arising from use, passage of time.

Now the question arises, "what is the meaning of depreciable assets?". Students assets should fulfill the following conditions to become "depreciable asset"

(1) which are expected to be used for more than 1 accounting period, and

(2) have a limited life, and

(3) are held for use in production of goods & services.

Now the question arises that " is this AS applicable on all depreciable assets?". Students this AS is applicable on all depreciable assets except FORESTS, PLANTATION, MINERALS, NATURAL GAS, EXPENDITURE ON DEVELOPMENT, GOODWILL & LIVE STOCK ( ANIMAL HUSBANDRY).

While calculating cost of depreciable asset cost spent in connection with its acquisition, installation, any commission paid, installation of additional item should be considered. The useful life of the depreciable asset is the period over which it is expected to be used by the enterprises. Generally useful life shorter than the actual or physical life.

For any information contact me
 Nitin Bhalla @ 9873029766, 9958641376

Ordering Costs & Carrying Costs

Hey students...in last article, we talked about EOQ, now we will discuss the concept of Ordering Costs & Carrying Costs.
#Ordering costs:
Ordering costs are the costs which are related to ordering or processing or procuring or receiving of materials.
Ordering Costs include :
1. Purchase department expenses e.g., PURCHASE DEPARTMENT employee salaries, electricity expenses, telephone bills, internet charges, rent, etc.
2. Procurement cost
3. Cost of printing, stationery, postage of PURCHASE DEPARTMENT.
4. Cost of collecting material
5. Cost of receiving material
6. Cost of bill payment e.g. preparation & sending of draft, fund transfer to supplier.
7. Cost of transit insurance.
8. Cost of inspection.
9. Cost of loading & unloading of materials from supplier's place to store room of factory.
10. Transportation cost of material from supplier's place to factory store room....,etc.

#Carrying Costs:
It involves the cost of holding, carrying & storing the inventory. It will not be incurred if inventories are not carried.
These costs include:
1. Store room rent
2. Store keeper" salary
3. Store room electricity expenses, handling cost of inventory
4. Insurance premium of inventory kept in the store room
5. Opportunity cost e.g. interest lost due to blocking of working capital, interest cost of inventory kept in the store room.
6. Breakage, spoiling, obsolescence normally happening during storage  activities.

FRIENDS JUST CONCETRATE  ON CONCEPTS...SELF STUDY IS MUCH BETTER THEN THOSE "TRAINERS" WHO DONT HAVE PROPER KNOWLDGE ABOUT YOUR SUBJECTS.

Economic Order Quantity (EOQ)

Hey friends, I am going to tell you about Economic Order Quantity (EOQ).
A decision about how much to order has great significance in inventory management. The quantity to be purchased should neither be small nor big because  costs of buying and carrying costs are very high. EOQ is the order size of the lot to be purchased which is economic viable. This is the quantity which can be purchased at minimum costs. It is the point at which carrying costs and ordering costs are equal.
If purchases are made in large quantities, carrying costs will be high & ordering costs  will be low & vice-versa.
Hence, it is necessary to determine the order quantity for which ordering and carrying cost are the minimum.
Friends my next article will be on Ordering Cost & Carrying Cost.