Designed to help the candidates appearing the Appendix 3, LDCE, 70% etc of Railway Accounts
Tuesday, October 11, 2022
Thursday, August 13, 2020
Management Audit
Management Audit
What is : Assessment of
competency and capability of Organization’s Management in carrying out
corporate objectives.
Purpose is: The purpose of
Management Audit is not to appraise individual Executive performance, but to
evaluate the management team as a whole.
Why conducts: Check the
effectiveness of Management team in respect to fulfils the interests of shareholders,
industrial relations with staff and uphold good reputation standards.
Who conducts: Independent consultant hired by the Company.
Scope: Narrow one
When: Conducted before mergers, restructurings,
bankruptcies, succession planning and also to identify the weaknesses in a
company management.
How long: Normally a month or two months.
Mandatory: No
Key for MCQ on Management Audit:
Conducted by an Independent consultant hired by the Company.
Scope is Narrow one.
Duration: One or Two months
*****
Monday, July 27, 2020
Functions of Management Accountant
Planning & Control
|
Reporting
|
Evaluation
|
Tax administration
|
External effects
|
Asset Protection
|
Differences between Financial Accounting and Management Accounting
SN
|
Item
|
Financial Accounting
|
Management Accounting
|
1
|
End user
|
Mostly outsiders
(Govt,
Tax bodies,
Investors etc)
|
In house Management
|
2
|
Legal obligation
|
Statutory
|
Non statutory
|
3
|
Coverage
|
Company as a whole
|
Segment wise
|
4
|
Type of Information
|
Monetary value
|
Monetary, Quantity
& Quality
|
5
|
Format
|
Standard
|
Not specified or
customised
|
6
|
Source
|
Internal
|
Internal &
External
|
7
|
Principles/flexibility
|
GAAP (Generally
Accepted
Accounting
Principles)
|
No specific ones
|
8
|
Analysis
|
Not much
|
Mostly analytical
|
9
|
Ends & Means
|
Ends in itself
|
Means to end
|
10
|
Nature
|
Objective /
Measurable
|
Subjective /
Interpretations / Personal
opinions
|
11
|
Periodicity
|
At the end of
Financial Year
|
No such period. But information may
be required at any time
|
12
|
Audit
|
Subject to
Independent Audit
|
Need not be audited
|
Wednesday, July 8, 2020
MBE - Management By Exception - for LDCE
Tuesday, June 9, 2020
SPV - Special Purpose Vehicle
SPV – Special Purpose
Vehicle
Key Takeaways
ü Separate legal entity
ü To achieve specific objectives/goals
ü Isolated from the firm
ü Can leverage future earnings to
raise funds
Salient
features
·
Definition of SPV – A
fenced organization having limited predefined purposes and a legal personality.
·
Also called as SPE – Special
Purpose Entity (in USA) or SPC – Special Purpose Corporation or FVC – Financial
Vehicle Corporation
·
A
legal entity created to fulfil single, well defined and narrow
objective/purpose.
·
Typically
used by firms to isolate the firm from financial risk
· · Primarily, a business association of persons or entities eligible to participate in the association.
·
Usually formed to raise funds from the market
by collateralizing future receivables.
·
It
is independent of members subscribing to the shares of SPV.
·
Concept: Usually, a sponsoring firm
hives off or transfers its assets or activities from the rest of the company
into an SPV. This isolation of assets is important for providing comfort to
investors. The assets or activities are distanced from the parent company;
hence the performance of the new entity will not be affected by the ups and
downs of the originating entity. The SPV will be subject to fewer risks and
thus provide greater comfort to the lenders.
·
Basically, a company can leverage future earnings to
raise funds.
Advantages:
ü Separating the risk.
ü Protected against risks like insolvency.
ü Best suited for Project financing.
Examples of SPVs in India
1.
NHSRC
- National High Speed Rail Corporation. The Company has been modelled as
‘Special Purpose Vehicle’ in the joint sector with equity participation by
Central Government through Ministry of Railways and two State Governments viz.
Government of Gujarat and Government of Maharashtra.
2.
LTMRHL
– Larsen & Toubro Metro Rail Hyderabad Limited (for Hyderabad Metro)
3.
IRSDC
- Indian Railways Station Development Corporation ltd (by RLDA & IRCON)
***
Wednesday, April 1, 2020
Cash Flow Statement - Management Accounting for LDCE
Cash Flow Statement - Management Accounting for LDCE
«
Meaning: A statement
which discloses the changes in Cash position between two periods (usually 31st
March of previous year to 31st March of current year)
« Example: A Balance sheet shows a cash balance as on 31.03.2019 at Rs. 5 lakhs, while the same position as on 31.03.2020 at Rs. 6 lakhs. That means cash inflows during the year 2019-20 is Rs.1 lakh.
« The statement also outlines the reasons for such cash inflows or cash outflows, which in turn helps to analyze the functioning of Business.
« It is an important tool in the hands of Business Management.
«
Components of Cash are 1. Cash on Hand 2.
Cash at Bank 3. Short term,
highly liquid investments that are readily convertible into cash.
Advantages:
1. Efficient in Cash Management - Helps how much cash will be available at a particular point of time to meet the day to day obligations.
2. Helps in internal financial management.
3. Discloses the movement of cash during the financial year. Understanding and analysis of what are the sources & applications of cash.
4. Past years cash flow statement is used as an estimate for next year's cash flow.
5. Shows the success / failure of cash management.
6. Comparison between two firms.
7. Analysis of relationship between profitability and net cash flow.
Limitations
1. Cash flow statement cannot serve the purpose of Profit and Loss Account. Because later covers both cash items and non cash items, whereas former covers only cash items.
2. Cash flow statement can't replace the Fund flow statement. The later one is reflecting the complete financial picture than the former one.
3. Cash balance as per Cash flow statement cannot represent the real liquid position of the firm, because of postponing of purchases & other payments.
4. Very difficult to define the term "Cash". whether the items like cheques, stamps, postal orders etc are comes under purview of cash or not.
()()()()()()
Working Capital Management Accounting for LDCE
Working Capital Management
Accounting for LDCE
1991 LDCE SCR - 5 marks
ü
Meaning: Represents the amount of funds required to
finance " the day to day activities".
ü Excess of Current Assets over Current Liabilities.
ü It should be ideal/sufficient. That means neither more nor less to the correct requirements of working capital.
ü Shortage - Difficult to manage day to day activities/payments.
ü Surplus - Capital will be blocked / unutilized.
ü So it should be sufficient to meet current obligations ( not long term obligations)
ü The difference between Gross Working Capital and Net Working Capital is "Current Liabilities". Total sum of all current assets is called Gross Working Capital. The difference between Current Assets & Current Liabilities is called Net Working capital.
&&&&
ROCE - Management Accounting for LDCE
ROCE - Management Accounting for LDCE
· Full form is Return On Capital Employed
· It is most important Ratio among all the Financial Ratios
·
ROCE = Return /Capital
Employed x 100
· Expressed in Percentage. Example Return is 200 rupees against the capital 2000 rupees employed. ROCE is 200/2000 x 100 = 10 %.
· Return = Net Profit + or - Non Trading adjustments + Interest on Long term debts + Provision for tax - Interest/Dividend from non trade investments
· Capital Employed = Equity share capital + Reserves & Surpluses + Preference share capital + Debentures & other long term loan - Misc Expenditure & loss - Non trade investments.
ROCE in Indian Railways
· Para 511 of Indian Railway Finance & Administrate Code mentions Return on Capital.
·
Return on Capital =
Percentage of Revenue Surplus/Net Receipts to Capital at charge and Investments
from Capital Fund.
· Revenue Surplus/Net Receipts = Total Revenue Receipts - Total Revenue Expenditure
· Since element of Dividends is not there (from 2017-18 onwards due to merger of Railway Budget with General Budget), the Net Receipts and the Revenue Surplus are one and same.
· Total Revenue Receipts = Gross Earnings (X, Y & Z) minus Suspense
· Total Revenue Expenditure = Gross Working Expenses ( OWE + Appropriation to DRF & Pension Fund) minus Suspense.
****