accounts ppt2

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    TOPIC

    1. SALE OF GOODS AND RELATED

    INCOMES

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    Sale of product and related incomes:

    Selling is the process of transferring the ownership of goods or delivering service to customers.

    In a company, income from operations is generated fromrunning the primary business .The portion of anorganization's income that is derived from activities not related to its core operations include items as dividendincome, profits from investments, gains incurred due to

    foreign exchange, asset write-downs and other non-operating revenues.

    Total Revenue = Sales + other income.

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    REVENUE RECOGNITION

    To recognize an item is to record it into the accounting records.

    An accounting principle under generally accepted accounting principles(GAAP) that determines the specific conditions under

    which income becomes realized as revenue.

    Revenue recognition normally occurs at the time services are

    rendered or when goods are sold and delivered to a customer.The basic conditions of revenue recognition are to look for both(a) an exchange transaction, and(b) the earnings process being complete.

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    Point Of SaleIn this case revenue is recognized on the basis of sales that are

    made by the business. Sales in both forms that is cash andcredit.Recognition moment is the moment when the title to the goods

    or services passes to the customer. In this case the customer hasa legal right of ownership to the goods or services and the sellerhas a right to claim payment for the sale made or have already received the payment.Revenue is recognized without taking into account the date of payment, i.e. even if the customer will pay for the goods or

    services later after the ownership transfer date.

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    L et's analyze practical example:

    On the 11th of August company ABC signs a contract with company XYZ for the sale of goods

    (chairs). Price for one chair will be Rs.40 and totalquantity to be sold is 5 chairs. According to theagreement the chairs will be delivered to the

    warehouse of the customer (company XYZ) onthe 2nd of September and the customer willbecome legal owner of the goods on that day. Thecustomer will pay for the goods within 30 daysfrom the delivery date. When should the revenuebe recognized?

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    Unearned revenues:The basic methods companies use to create bogus profits. One

    of them is fraud in timing differences, also called cut-off fraud. It normally involves one of two basic techniques: recording revenues early and/or recording expenses and liabilities late.Probably the most common method to illegally recognizerevenue early is to accumulate more sales by:Hold the books open past the end of the accounting period.Recording revenue when services are still due.Shipping merchandise before the sale is final.

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    Overview of such a case:

    Satyam had reporting inflated revenue/margins for thelast few years and the stated cash reserves of $1.2B arenon-existent. The overall revenue impact of this fraud

    was a whopping Rs.8000 Crores ($1.66 Billion).

    The Balance Sheet carries as of September 30, 2008Inflated (non-existent) cash and bank balances of Rs.5,040 crore (as against Rs. 5361 crore reflected inthe books) An accrued interest of Rs. 376 crore which is non-existent An understated liability of Rs. 1,230 crore onaccount of funds arranged by me An over stated debtors position of Rs. 490 crore (asagainst Rs. 2651 [cr.] reflected in the books)

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    TOPIC

    1. CORPORATE DIVIDEND TAX ON

    PROPOSED DIVIDEND

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    D ividend

    Dividend: A portion of profit which is paid to the share - holders.

    Lenders are paid fixed rate of interest, whereasshareholders are paid dividend depending upon theprofits and the policy of the company.

    The Board of the Company recommends the rate of dividendbased on the profitability and policy of the Company.

    In India, currently there is no tax on dividend received by theshareholder as the company pays dividend tax.

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    D ividend distribution taxD ividend distribution tax is the tax levied by the Indian Government on companies according to the dividend paid to a company'sinvestors. As per existing tax provisions, income from dividends is taxfree in the hands of the investor.The Company is required to pay the D ividend D istribution Tax within 14 days from the date of declaration or distribution or payment

    of any dividend whichever is earlier .D ividends are distributed out of after-tax profits, tax having beenalready paid by the respective companies, and thus DD T is doubletaxation.D ividends paid by a domestic company are subjected to a tax rate of 16.995%.

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    P rofit After Tax 22.5 cr

    Dividend 2.5 cr

    Retained Earnings20 cr

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    THANK YOU!!!

    Sooner or Later, those who winare those who think they can.-Anonymous