Which Inventory method Results tax gain when the price of raw materials is high.

Last In First Out (LIFO) is the inventory method that creates tax gain when raw material price is increasing day by day. It works in the following way :-
In LIFO we issue materials at the latest entered price, that means materials entered last should be issued first. So in that way materials at high price issued first. This will increase Cost Of Goods Sold (CGS/COGS) and decrease Gross Profit which leads to a Tax reduction.

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Some Basic Assumptions for Financial Calculations.

1 Year = 360 Days.
1 Year = 52 Weeks.
1 Year = 4 Quarter (Each 3 months makes a Quarter).
1 Year = 12 Months.

For Interest Disbursements Calculation:-
10% interest means the interest of BDT 100 is BDT 10 for One year.
Yearly means one time in a year.
Semi annual means two times in a Year.
Quarterly means four times in a year.

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What are the sources of Finance.

Generally there are two sources of finance in a business, Which are - Internal and External.

Internal Sources:-
i) Owner's Capital.
ii) Retained Earnings.
iii) Reserve and Surplus.
iv) Accrued expenses.
v) Provident Fund.

External Sources:- 
i) Loans From Commercial Banks
ii) Loans from insurance Companies.
iii) Loans from Finance Companies.
iv) Leasing Companies.
v) Bond / Debenture Issue.

 

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Items in a Balance Sheet (Sample)

                     XYZ Company
                     Balance Sheet
                    As at XX-XX-20XX

ASSETS	BDT
Non-current assets
Property, plant and equipment (Net)	X
Investment	X
Total non-current assets	X
Current assets
Inventories	X
Trade and other receivables	X
Cash and cash equivalents	X
Total current assets	XX
Total assets	XXX
EQUITY AND LIABILITIES
Capital and reserves	X
Ordinary share capital	X
Share premium	X
Revaluation reserve	X
Retained earnings	X
Total capital and reserve	XX
Non-current liabilities
Interest-bearing borrowings	X
Current liabilities
Trade and other payables	X
Provisions	X
Accruals	X
T ax liability	X
Total current liabilities	XX
Total equity and liabilities	XXX

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Income Statement Sample

This is a sample Income statement, company name and all the figures are Imaginary.

                      XYZ Company

                   Income Statement

              For the year ended 20XX 

         Particulars                               BDT               BDT

Sales ----------------------------------------------------------------- 100

Less: Sales Return------------------------------02

         Sales discount----------------------------01---------------03

Sales (Net)------------------------------------------------------------97

Less: Cost of goods sold---------------------------------------30

_________________________________________________________________

Gross Profit-----------------------------------------------------------67

Less: Operating Expenses:

        Administrative Expenses:

        Office Salaries------------------------------01

        Insurance Expense-----------------------01

        Utility Expense-----------------------------01

        Depreciation of Office Building--------01

        Depreciation of Office Furniture-------01

        Depreciation of Office Equipment-----01

        Miscellaneous Office Expense--------01

        Office supplies Expense----------------01-----------------08

        Selling and Marketing Expenses:

        Sales salaries and commissions--------01

        Depreciation on Sales equipment-------01

        Traveling Expense----------------------------01

        Advertising Expense-------------------------01

        Entertainment Expense--------------------01

        Telephone Expense--------------------------01-------------06

_____________________________________________________________________

Income from Operations:--------------------------------------53

Other Revenues and Gains:

        Dividend Income-----------------------------02

        Rent Income----------------------------------01

        Interest Income------------------------------02--------------05

______________________________________________________________________

Other Expenses and losses:

        Interest on Bonds------------------------------02

        Interest on Notes------------------------------01------------03

_______________________________________________________________________

Income before Tax:------------------------------------------------55

       Income Tax-------------------------------------------------------20

________________________________________________________________________

Net Income: ----------------------------------------------------------35

       

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Calulation of Earning Per Share (EPS).

Earning Per Share (EPS) :- EPS is calculated by the following way-

Dividing Earnings available to common stockholders by No. of Common Share outstanding.

EPS= Earnings available to common stockholders/No. of Common Share outstanding

Where,

 Earnings available to common stockholders = Net Income - dividend on Preference share.
 No. of Common Share outstanding = Total Share Issued - Treasury Shares.

Example:- XYZ a company has 1,10,000 issued common shares. During the year the company's net income is BDT 10,00,000 and pays BDT 2,00,000 as dividend on Preference shares. It has 15,000 shares as treasury stock. Calculate Earning Per Share.

Solution:-

EPS = BDT(10,00,000-2,00,000)/95,000
       = BDT 8.421

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