What is Cost object

Cost object:- Cost object is something which is assigned a separate measure of cost because management needs such cost information; for example, responsibility centers, products, projects and so on. The various production departments in a manufacturing firm also provide examples of cost objects. For example, the material handling cost pool may be allocated across the various production departments that use material handling services.

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What is Market Value

Market Value:- Market Value is the current price at which share of stock may be bought or sold. When a stock is traded on an organized stock exchange, the market price is quoted daily in the financial press. Market price is based upon a combination of factors, including investors’ expectation of future earning, dividend yield, interest rates and alternative investment opportunities, etc.

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What is Book Value

Book Value:- Book Value is the amount of net assets presented by each share of common stock. Book value may be either higher or lower than the current market value; however it may give an indication of reasonableness of the current market price.

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Preparation Of Cash Flow Statement.

Cash flow statement can be prepared under two methods:-

(i) Direct method and 

(ii) Indirect method 

We will discuss about indirect method here. In fact two methods differ only in calculating cash flows from Operating Activities.

 

Cash flows into a business under three activities:-

1. Operating Activities

2. Investing Activities and

3. Financing Activities

1. Operating Activities:- Cash comes in and goes out from operations is shown under this head. Changes in current assets and changes in current liabilities is shown here. When current assets increase it is cash outflow and When assets decrease it is cash inflow. When current liabilities increase it is cash inflow and When current liabilities decrease it is cash outflow. Any non cash expenditure like depreciation, amortization e.t.c  is added to net income.

2. Investing Activities:-  Cash comes in and goes out from investing activities is shown under this head. Examples include purchase and sale of long term assets. 

3. Financing Activities:- Cash comes in and goes out from financing activities is shown under this head.

Examples include dividend paid, Common stock issue and retire, Bond issue and retire e.t.c

A sample Cash Flow Statement



 

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Statement of Changes in Equity (Sample)

                                                                                  XYZ Company
                                                                        Statement of Changes in Equity
                                                                            For the year ended 20XX

	Share Capital	Share Premium	General Reserve	Sinking Fund	Accu. OCI	Retained Earnings
Balance b/d	X	X	X	X	X	X
Add: Net income						X
Transfer to General reserve			X			(X)
Comprehensive income					X
Balance c/d	X	X	X	X	X	X

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Difference between Recognized and Un-Recognized Provident Fund.

Recognized Provident Fund:- A Provident Fund which is recognized by an income tax commissioner is called a Recognized Provident Fund.

Un-Recognized Provident Fund:- A Provident Fund which is not recognized by an income tax commissioner is called an Un-Recognized Provident Fund.

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Difference between Contributory and Non Contributory Provident fund.

Contributory Provident Fund:- A contributory Provident Fund is one Where employee and Employer both contributes the same amount to the Provident Fund. A certain percentage is deducted from the basic salary of an employee and the same amount is deposited to the Provident Fund by the employer.

Non Contributory Provident fund:- A Non Contributory Provident fund is one where only employee contributes to his/her provident fund.

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Statement of Cash Flows (Sample)

                                       XYZ Company
                                       Statement of Cash Flows
                                       For the Year ended 20XX

Cash flows from operating activities:
Net income	XX
Adjustments to reconcile net income
Add: Depreciation on building	X
Add: Depreciation on equipment	X
Add: Amortized of bond discount	X
Add: Loss on sale of securities	X
Add: Loss on sale of equipment	X
Less: Gain on sale of marketable securities	(X)
Cash from operating activities before working capital changes
Increase in accounts receivable (net)	(X)
Decrease in inventory	X
Increase in prepaid insurance	(X)
Decrease in accounts payable	(X)
Increase in misc. expense payable	X
Decrease in un-earned revenue	(X)
Increase in tax payable	X
Decrease in deferred income tax liability	(X)
Net cash provided from operating activities	X
Cash flows from investing activities:
Sale of equipment	X
Purchase of equipment	(X)
Overhauling of equipment	(X)
Sale of marketable securities	X
Net cash used by investing activities	X
Cash flows from financing activities:
Payment of notes payable (Long-term)	(X)
Sale of treasury stock	X
Sale of common stock	X
Dividend paid	(X)
Net cash flows from financing activities	X
Net increase in cash	X
Cash at beginning of year	X
Cash at end of year	X

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Financial Statements that a company needs to disclose.

A Company needs to disclose the following Financial Statements:-

(i) Statement of Financial Position / Balance sheet.
(ii) Statement of Comprehensive Income / Income Statement.
(iii) Statement of Changes in Equity.
(iv) Statement of Cash Flows.

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Levered Firm and Unlevered Firm

Levered Firm :- A  firm that uses a percentage of debts in its capital structure to finance its business is called a Levered Firm. It uses Equity and Debts for doing business.

Unlevered Firm :- A  firm that does not use debts in its capital structure to finance its business is called an Unlevered Firm. It does not use loans for doing business. It depends on Equity funds only.

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Capital Budgeting Techniques.

The following techniques are used in Capital Budgeting :-
1) Pay Back Period (PBP).
2) Discounted Pay Back Period (DPBP).
3) Net present Value (NPV).
4) Internal Rate of Return (IRR).
5) Modified Internal Rate of Return (MIRR).
6) Profitability Index (PI).
7) Accounting / Average Rate of Return (ARR).

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What are the five R's in material management.

There are five R's in material management. Each R stand for -

i) Right Time.

ii) Right Place.

iii) Right Price.

iv) Right Quantity and

v) Right Quality.

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Types of Inventories.

For Manufacturing Business :-
Manufacturing firms purchase the raw materials and convert the raw materials into finished goods. So they have three types of inventories. Which are -

(i) Raw materials.
(ii) Work In Process. and
(iii) Finished goods.

For a Merchandising Business :-
Merchandising Firms are engaged in a business where they purchase goods and sell them again. They do only buy and sell, they do not make the product. They have only one inventory which is simply called inventories.

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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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Post Graduate Diploma (PGD) On Business Studies in Bangladesh.

Bangladesh Institute of Management (BIM) offers Post Graduate Diploma (PGD) courses on various subjects in Bangladesh, It is an Institution under Ministry of Industries. It offers Post Graduate Diploma (PGD) on:-

• Human Resource Management (PGDHRM).
• Industrial Management (PGDIM).
• Financial Management (PGDFM).
• Marketing Management (PGDMM).
• Computer Science (PGDCS).

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Some Acronym and Abbreviation in Business Studies (Bangladesh Context).

ABBD- Association of Bankers Bangladesh Limited.
ACA- Associate Chartered Accountant.
ACMA- Associate Cost and Management Accountant.
ACS- Associate Company Secretary.
BAB- Bangladesh Accreditation Board.
BDT- Bangladeshi Taka.
BO Account- Beneficiary Owners Account.
BGMEA- Bangladesh Garment Manufactures and Exporters Association.
BKMEA- Bangladesh Knitwear Manufacturers and Exporters Association.
BOI- Board Of Investment.
BSEC- Bangladesh Securities and Exchange Commission.
BEPZA- Bangladesh Export Processing Zone Authority.
BIM- Bangladesh Institute of Management.
BIBM- Bangladesh Institute of Bank Management.
BB- Bangladesh Bank.
BIWTA- Bangladesh Inland Water Transport Authority.
CDBL- Central Depository Bangladesh Limited.
CRAB- Credit Rating Agency of Bangladesh Ltd.
CSE- Chittagong Stock Exchange.
DC- Deputy Commissioner.
DSE- Dhaka Stock Exchange.
ECNEC- Executive Committee of National Economic Council.
EPZ- Export Processing Zone.
EPB- Export Promotion Bureau.
FBCCI- Federation of Bangladesh Chambers of Commerce and Industry.
FCA- Fellow Chartered Accountant.
FCMA- Fellow Cost and Management Accountant.

FCS- Fellow Company Secretary.
ICB- Investment Corporation of Bangladesh.
ICAB- Institute of Chartered Accountants of Bangladesh.
ICMAB- Institute of Cost and Management Accountants of Bangladesh.
ICSB- Institute of Chartered Secretaries of Bangladesh.
ITP- Income Tax Practitioner.
ITO- Income Tax Ordinance.
JV- Joint Venture.
MFI- Micro Finance Institution.
NBFI- Non Bank Financial Institutions.
NBR- National Board of Revenue.
NRB- Non Resident Bangladeshi.
NGO- Non Government Organization.
PPP- Public Private Partnership.
RJSC- Registrar of Joint Stock Companies.
RDCD- Rural Development and Cooperative Division.
SCB- State owned Commercial Banks.
SME- Small and Medium Enterprise.
TB- Treasury Bill.
TIN- Taxpayer's Identification Number.
VAT- Value Added Tax.
 

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Business Laws in Bangladesh.

Some of the Laws that are regulating business in Bangladesh are given below:-

• The Banking Companies Act, 1991.
• The Bills of Lading Act, 1856.
• The Bangladesh Labor Code, 2006.
• The Bangladesh Small and Cottage Industries Corporation Act, 1957.
• The Bangladesh Standards and Testing Institution Ordinance, 1985.
• The Custom Act, 1969.
• The Companies Act, 1994.
• The Contract Act, 1872.
• The Consumer-Right Protection Act, 2009.
• The Depository Act, 1999.
• The EPZ Workers Association and Industrial Relations Act, 2004.
• The Financial Institutions Act, 1993.
• The Imports Exports (Control) Act, 1950.
• The Income Tax Ordinance, 1984.
• The Money Laundering Prevention Act, 2009.
• The Negotiable Instruments Act, 1881.
• The Partnership Act, 1932.
• The Securities Act, 1920.
• The Securities and Exchange Ordinance, 1969.
• The Value Added Tax Act, 1991.

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Chartered Secretaries Education in Bangladesh.

The Institute Of Chartered Secretaries Of Bangladesh (ICSB) is the only professional body in the field of corporate sectaries education in Bangladesh. It is established under the Chartered Sectaries Act 2010. One who successfully complete the prescribed course is Preliminary called ACS and finally FCS.

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