How to Prepare CS Executive Corporate Management Accounting

How to Prepare CS Executive Corporate Management Accounting : Lesson 1. Introduction to Financial Accounting:

In this lesson, we will throw light on the basic concepts of accounting, types of accounts, accounting principles, conventions, concepts & accounting standards, meaning of double entry system and the rules of debit & credit on which the entire concept of accounting is based. Accounting process involves identification and analysis of financial transactions.

These transactions are recorded, classified and summarised in a systematic manner to give useful information. Thus, accounting process starts with the recording of business transactions in monetary terms, in the primary books of accounts.

How to Prepare CS Executive Corporate Management Accounting : Lesson 2. Introduction to Corporate Accounting:

There is no legal obligation for sole proprietorship and partnership firm to prepare final accounts, but companies have statutory obligations to keep proper books of account and to prepare its final accounts every year in the manner as prescribed in the Companies Act. Chapter IX, Sections 128 to 138 of the Companies Act, 2013 deals with the legal provisions relating to the Accounts of Companies. Final accounts of a company consist of balance sheet as at the end of the accounting period and profit and loss account for that period. Section 129 of the Companies Act, 2013 prescribes the form and contents of balance sheet and profit and loss account of a company. Balance sheet of a company shall be prepared according to Schedule III of the Companies Act, 2013. The Schedule III sets out the minimum requirements for disclosure on the face of the Balance Sheet, and the Statement of Profit and Loss (hereinafter referred to as “Financial Statements”) and Notes. Statement of Profit & Loss of a company shall be prepared according to Part II of Schedule III of the Companies Act, 2013. Section 129(1) of the Companies Act 2013, states that the financial statements shall give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under section 133 and shall be in the form provided for different class or classes of companies in Schedule III.

How to Prepare CS Executive Corporate Management Accounting : Lesson 3. Accounting for Share Capital:

The most striking feature of a company is its ownership structure. The capital in a company is divided into small shares of fixed value. The shares of a company may be equity shares or preference shares. The objective of this lesson is to make students aware about accounting of different aspects of share capital. After studying this lesson one should be able to:

– Understand the share capital structure in the balance sheet of a company.

– Discuss the methods and accounting procedure of issue of shares.

– Specify the accounting treatment when shares are issued at par, premium and at discount.

– Explain the meaning and accounting treatment of forfeiture of shares and reissue thereof.

– Understand the accounting procedure of buy-back of shares.

– Enumerate the steps for redemption of preference shares.

– Appreciate the purpose of issuing Right shares & Bonus shares.

– Understand the accounting treatment for ESOPs, ESPS, Sweat Equity Shares.

– Understand the meaning of underwriting.

– Familiarize with various types of underwriting.

– Distinguish between marked application and unmarked applications.

– Determine the liability of underwriters.

How to Prepare CS Executive Corporate Management Accounting : Lesson 4. Accounting for Debentures:

Equity sources of financing are however not always sufficient to meet the ever growing needs of the corporate expansion and growth. Hence, corporates turn to debt financing through financial institutions, commercial banks or by issuing debt instruments either through the route of private placement or by offering the same for public subscription. Owing tax shield provided by debt instruments, the debt financing not only helps in reducing the cost of capital but also helps in designing appropriate capital structure of the company. This lesson deals with the accounting treatment of different aspects of debenture and bond especially with issue, redemption including conversion of debenture.

How to Prepare CS Executive Corporate Management Accounting : Lesson 5. Related Aspects of Company Accounts:

The objective of this lesson is to make students aware about accounting of different aspects of share capital and deals with the accounting treatment of different aspects of debenture and bond especially with issue, redemption including conversion of debenture. Understand the share capital structure in the balance sheet of a company. Discuss the methods and accounting procedure of issue of shares. Understand the accounting procedure of buy-back of shares. Understand the accounting treatment for ESOPs and ESPS. Understand the meaning of underwriting Familiarize with various types of underwriting. Distinguish between marked application and unmarked applications. Determine the liability of underwriters. State the meaning of debenture and bonds; Describe the methods for the issue of debenture for cash and for consideration other than cash; Explain the issue of debenture as a collateral security; Explain the sources and record transaction relating to redemption of debenture; Discuss the methods of redemption of debenture; Record the Sinking Fund Investment transactions; Deal with cum-interest and ex-interest, open market operations.

How to Prepare CS Executive Corporate Management Accounting : Lesson 6. Financial Statements Interpretation:

Financial statement are compilation of financial data, collected and classified in a systematic manner according to the accounting principles, to assess the financial position of an enterprise as regards to its profitability, operational efficiency, long and short – term solvency and growth potential.

These are basic and formal means through which management of an enterprise make public communication of financial information along with select quantitative details. They are structured financial representation of the financial position, performance and cash flows of an enterprise. Many users rely on the general purpose financial statements as the major source of financial information and therefore, financial statements should be prepared and presented in accordance with their requirement. That does not undermine the dependence of the general users on the information contents of the financial statements.

How to Prepare CS Executive Corporate Management Accounting : Lesson 7. Consolidation of Accounts as per Companies Act, 2013:

A holding company is one which acquires all or a majority of the equity shares of any other company called subsidiary company in order to have control over the subsidiary company. In order to understand the financial position of holding company, consolidations of accounts become very vital. After studying this lesson you will be able to:

– Understand the concept of holding company and subsidiary company.

– Familiarize the legal requirements for preparation of final accounts of holding company.

– Prepare consolidated balance sheet and statement of profit and loss.

– Make appropriate accounting adjustments required for the preparation of consolidated balance sheet.

– Understand the concept of minority interest in consolidation of accounts.

– Appreciate the treatment of pre-acquisition profits and losses of the subsidiary company. Make adjustment regarding profit and loss on revaluation of assets of subsidiary company.

– Understand the calculation of goodwill or cost of control.

– Make adjustment for inter-company unrealized profits and inter-company transactions.

– Understand the treatment of bonus issue on consolidation of accounts.

– Make adjustment on dividend received from subsidiary company

How to Prepare CS Executive Corporate Management Accounting : Lesson 8. Corporate Financial Reporting:

The Financial Report made to the management is generally known as Internal Reporting, while financial reporting made to the shareholder investors/management is known as external reporting. The internal reporting is a part of management information system and uses MIS reporting for the purpose of analysis as an aid in decision making process

The management of a corporate is ultimately responsible for the generation of accounting information. The accountability of a company has two distinct aspects – legal and social. Under legal requirements a company has to supply certain information to the various users through annual reports and under the social obligation, a company has to provide additional information to various user groups

How to Prepare CS Executive Corporate Management Accounting : Lesson 9. Cash Flow Statements:

Cash Flow Statement is considered to be a summarized statement showing sources of Cash Inflows and application of cash outflows of an enterprise during a particular period of time. It is prepared on the basis of the published data as disclosed by the Financial Statement of two different financial periods. It is an essential tool for managerial decision-making. Cash Flow reports the management Net Cash Flow (i.e. cash inflow less cash outflow or vice versa) from each activity of the enterprise as well as of the overall business of the enterprise. The management of the enterprise gets a picture of movement of cash resources from the Cash Flow Statement and can assess the stronger and weaker area of movement of cash for different activities of the business for drawing up the future planning.

How to Prepare CS Executive Corporate Management Accounting : Lesson 10. Accounting Standards (AS):

Accounting Standards (AS) are written policy documents by expert accounting body or by government or other regulatory body covering the aspects of recognition, measurement, presentation and disclosure of accounting transactions in the financial statements. The ostensible purpose of the standard setting bodies is to promote the dissemination of timely and useful financial information to investors and certain other parties having an interest in the company’s economic performance. Accounting standards reduce the accounting alternatives in the presentation of financial statements within the bounds of rationality, thereby ensuing comparability of financial statements of different enterprises.

How to Prepare CS Executive Corporate Management Accounting : Lesson 11. National and International Accounting Authorities.

It was during the early years of World War II, that the concept of cost as an independent entity made its beginning in the industrial circles of the world. Due to the prohibitive cost of defense operations, the then cult to ascertain the price of defence purchases and thus evolved the concept of
governments at war found it dif cost + contracts. This forced the contractors to submit the cost of the work to be undertaken by them, in order to be awarded the contract. 1945 brought the end of the war, and the nations ravaged by the effects of war began large-scale reconstruction of their economies through industrialisation. The end of colonialism meant that many nations gained their independence, and this process increased rapidly. The late forties and fifties can really be termed the golden era of industrialisation. The importance of cost accounting as being central to the formation of government policies provided the foundation of the rapid growth of the profession. What began as a mere exercise in estimating the cost later developed into a movement for efficiency and optimum utilisation of scarce resources. The Institute of Cost Accountants of India (erstwhile The Institute of Cost and Works Accountants of India) was first established in 1944 as a registered company under the Companies Act with the objects of promoting, regulating and developing the profession of Cost Accountancy. On 28th May, 1959, the Institute was established by a special act of Parliament, namely, the Cost and Works Accountants Act, 1959 as a statutory professional body for the regulation of the profession of cost and management accountancy. It has since been continuously contributing to the growth of the industrial and economic climate of the country. The Institute of Cost Accountants of India is the only recognized statutory professional organization and licensing body in India specializing exclusively in Cost and Management Accountancy.

How to Prepare CS Executive Corporate Management Accounting : Lesson 12. Adoption, Convergence and Interpretation of International Financial Reporting Standards (IFRS) and Accounting Standards in India

According to international accounting standard board (IASB) conceptual framework, the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors is making decisions about providing resources to the entity. Consequently, the two important characteristics of financial information that emanates from the above objective relates to relevance and reliability. According to IASB Framework for the Preparation and Presentation of Financial Statement, information is deemed to be relevant when it influences the economic decisions of users by helping them evaluate past, present or future events or confirming or correcting, their past evaluations.

Similarly to be reliable, information must represent faithfull the transactions and other events it either purports to represent or could reasonably be expected to represent.

How to Prepare CS Executive Corporate Management Accounting : Lesson 13. An Overview of Cost :

Cost is a measurement, in monetary terms, of the amount of resources used for the purpose of production of goods or rendering services. It in simple, words, means the total of all expenses. Cost is also defined as the amount of expenditure (actual or notional) incurred on or attributable to a given thing or to ascertain the cost of a given thing. Thus it is that which is given or in sacrificed to obtain something. The cost of an article consists of actual outgoings or ascertained charges incurred in its production and sale. Cost is a generic term and it is always advisable to qualify the word cost to show exactly what it meant, e.g., prime cost, factory cost, etc. Cost is also different from value as cost is measured in terms of money whereas value in terms of usefulness or utility of an article.

How to Prepare CS Executive Corporate Management Accounting : Lesson 14. Cost Accounting Records & Cost Audit under Companies Act, 2013

Cost Audit involves an examination of cost books, cost accounts, cost statements and subsidiary and prime documents with a view to satisfying the auditor that these represent true and fair view of the cost of production. This includes the examination of the appropriateness of Cost Accounting system.

Cost Audit is an innovation introduced for the first time in the world and India with a view to regulate industries on healthy and sound lines. It is for cost-effective products and services to customers, proper revenue to government’s treasury and proper returns to other stakeholders of the enterprise. India is the first country in the world introducing the legal provisions for compulsory maintenance of cost records, so that industries become cost conscious and industrial efficiency is increased for the benefit of the society as a whole. It fully conforms to the requirements of planning for ‘sustainable development’. If an enterprise is to work effectively all its assets and liabilities must be used in the most rational manner. This means that the productive areas within the control of the enterprise, its buildings, equipment, machineries etc. must be used to the maximum and this in turn presupposes the economical expenditure of circulating assets or working capital. Efficient use of productive resources for the maximum benefit to the society is an immutable law of economic development and cost accounting system, and its audit is the most significant means of ensuring the same.

How to Prepare CS Executive Corporate Management Accounting : Lesson 15. Budget, Budgeting and Budgetary Control:

The literary meaning of the word Budget is a statement of income and expenditure of a certain period. In principle, the meaning is same in the context of business also. An individual will have his own budget, a family, a local authority, state and country etc. All will have their respective budgets. So also the business concern must have its budget so as to attain their objectives. CIMA defines a budget as, “A budget is a financial and/or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective.”

Also provide types of budgets, meaning of budgetary control, concepts covered under the chapter and finally what students are going to learn.

How to Prepare CS Executive Corporate Management Accounting : Lesson 16. Ratio Analysis:

Ratio analysis is the process of determining and interpreting numerical relationships based on financial statements. A ratio is a statistical yard stick that provides a measure of the relationship between variables or figures. This relationship can be expressed as percent (cost of goods sold as a percent of sales) or as a quotient (current assets as a certain number of times the current liabilities). As ratios are simple to calculate and easy to understand there is a tendency to employ them profusely. While such statistical calculations stimulate thinking and develop understanding there is a danger of accumulation of a mass of data that obscures rather than clarifies relationships. The financial analyst has to steer a careful course. His experience and objectives of analysis help him in determining which of the ratios are more meaningful in a given situation.

How to Prepare CS Executive Corporate Management Accounting : Lesson 17. Management Reporting (Management Information Systems)

A management information system (MIS) produces information that supports the management functions of an organisation and facilitates the decision-making process. The MIS is thus an organised approach of collecting, processing, storing and disseminating data to carry out management functions. To transform data into information, processing is needed and it must be done while considering the context of a decision. Good information must have the characteristics of relevance, timeliness, accuracy, cost-effectiveness, reliability, usability, and exhaustiveness. The MIS can play a critical role in the implementation of a programme in terms of monitoring periodic progress. A well designed MIS facilitates the flow of information among various levels and enables setting up of a feedback mechanism for planning and management of a programme, project or a policy. The MIS must be simple and easy to comprehend by different stakeholders of the programme at national, sub-national and community levels, and it should provide reliable information. The information should be specific, accurate and verifiable; it should facilitate timely management decision in terms of frequency and flow of information (i.e. a two-way feedback system in a decentralised framework). The information generated by the system should be easy to access, process and use; thereby enabling a wider dissemination. Also, it should be amenable to computer software.

How to Prepare CS Executive Corporate Management Accounting : Lesson 18. Decision Making Tools:

The term ‘marginal cost’ is defined as the amount at any given volume of output by which aggregate costs are changed if the volume of output is increased or decreased by one unit. It is a variable cost of one unit of a product or a service i.e., a cost which would be avoided if that unit was not produced or provided. Marginal costing is “the ascertainment of marginal costs and of the effect on profit of changes in volume or type of output by differentiating between fixed costs and variable costs.” Several other terms in use like direct costing, contributory costing, variable costing, comparative costing, differential costing and incremental costing are used more or less synonymously with marginal costing.

It is a process whereby costs are classified into fixed and variable and with such a division so many managerial decisions are taken. The essential feature of marginal costing is division of total costs into fixed and variable, without which this could not have existed. Variable costs vary with volume of production or output, whereas fixed costs remains unchanged irrespective of changes in the volume of output. It is to be understood that unit variable cost remains same at different levels of output and total variable cost changes in direct proportion with the number of units. On the other hand, total fixed cost remains same disregard of changes in units, while there is inverse relationship between the fixed cost per unit and the number of units.

A ‘Transfer Price’ is that notional value at which goods and services are transferred between divisions in a decentralized organisation. Transfer prices are normally set for intermediate products, which are goods, and services that are supplied by the selling division to the buying division. In large organisations, each division is treated as a ‘profit center’ as a part and parcel of decentralization. Their profitability is measured by fixation of ‘transfer price’ for inter divisional transfers.

The transfer price can have impact on the division’s performance and hence lot of care is to be taken in fixation of the same. The following factors should be taken into consideration before fixing the transfer prices.

1. Transfer price should help in the accurate measurement of divisional performance.

2. It should motivate the divisional managers to maximize the profitability of their divisions.

3. Autonomy and authority of a division should be ensured.

4. Transfer Price should allow ‘Goal Congruence’ which means that the objectives of divisional managers match with those of the organisation.

How to Prepare CS Executive Corporate Management Accounting : Lesson 19. Valuation Principles & Framework:

Valuation is a very interesting topic and becomes very important in choosing investments for a portfolio, in deciding on the appropriate price to pay or receive in a takeover and in making investment, financing and dividend choices when running a business. The premise of valuation is that we can make reasonable estimates of value for most assets, and that the same fundamental principles determine the values of all types of assets, real as well as financial. Some assets are easier to value than others, the details of valuation vary from asset to asset, and the uncertainty associated with value estimates is different for different assets, but the core principles remain the same. The objective of this lesson is to get students aware about different aspects related to valuation of shares, goodwill, trademarks and other intangibles. After the end of this lesson, you will able to

– Understand the different methods of valuation of shares.

– Familiarize with the concept of fair value of shares.

– Understand the procedure of valuation of preference shares.

– Understand the meaning of intangible assets.

– Evaluate the identifiability of intangible assets.

– Explain the recognition of intangible assets.

– Appreciate the acquisition of intangible assets by way of government grants.

– Understand the treatment of internally generated goodwill.

– Conceptualize the recognition of an expense on intangible assets.

– Explain the amortization of intangible assets

– Explain the retirement and disposals of intangible assets

How to Prepare CS Executive Corporate Management Accounting : Lesson 20. Valuation of Shares, Business and Intangible Assets:

A share is the smallest unit of ownership of a company. It happens to be one of the sources by which a company raises funds from the market. The value of a share does not remain static over its life-time. Rather it changes over the period due to various circumstances. Thus, knowing the value of share at a particular point of time is of great importance.

Goodwill is an intangible fixed asset of an organisation which has to be reflected in its books of accounts on certain circumstances. For this purpose, a money value is required to be attached to this intangible asset. The process of estimating the value of goodwill using certain accepted methodologies is referred to as valuation of goodwill.

How to Prepare CS Executive Corporate Management Accounting : Lesson 21. Accounting for Share based payments (Ind AS 102)

A share-based payment is a transaction in which the entity receives goods or services either as consideration for its equity instruments or by incurring liabilities for amounts based on the price of the entity’s shares or other equity instruments of the entity.

Employee share-based payments are incentive payments to employees in form of shares. The expression employee share-based payments also include cash incentives to employees, the size of which is linked with value of shares. The payment in form of shares generally involve grant of options to employees to subscribe shares of employer’s enterprise at a concessional price, called the exercise price. The employees gain the excess of market price of share at the time of exercise over the specified exercise price. In case of employee share-based payments in form of cash incentive, the excess of market price on specified future date and a stated price is paid in cash. In either case, the value of incentive depends on increase in share value, which s the generally accepted indicator financial success of a business. By linking incentives with value of shares, the employee share-based payment plans effectively integrate personal goals of employees with that of the enterprise

How to Prepare CS Executive Corporate Management Accounting : Lesson 22. Methods of Valuation :

When valuing a company as a going concern there are three main valuation methods used by industry practitioners: (1) DCF Analysis, (2) comparable company analysis, and (3) precedent transactions. These are the most common methods of valuation used in investment banking, Equity Research , Private Equity , Corporate Development, Merger & Acquisitions , Leveraged Buyouts and most areas of finance.

Comparable company analysis (also called “trading multiples” or “peer group analysis” or “equity comps” or “public market multiples”) is a relative valuation method in which you compare the current value of a business to other similar businesses by looking at trading multiples like P/E, EV/EBITDA or other ratios. Multiples of EBITDA are the most common valuation method.

Precedent transactions analysis is another form of relative valuation where you compare the company in question to other businesses that have recently been sold or acquired in the same industry. These transaction values include the take-over premium included in the price for which they were acquired.

These values represent the en bloc value of a business. They are useful for M&A transactions, but can easily become stale-dated and no longer reflective of the current market as time passes. They are less commonly used than Comps or market trading multiples.

Discounted Cash Flow (DCF) analysis is an intrinsic value approach where an analyst forecasts the business’ unlevered cash-flow into the future and discount it back to today at the firm’s Weighted Average Cost of Capital (WACC)

A DCF analysis is performed by building a finance model in Excel and requires an extensive amount of detail and analysis. It is the most detailed of the three approaches, requires the most assumptions and often produces the highest value. However, the effort required for preparing a DCF model will also often result in the most accurate valuation. A DCF model allows the analyst to forecast value based on different scenarios, and even perform a sensitivity analysis

For larger businesses, the DCF value is commonly a sum-of-the-parts analysis, where different business units are modeled individually and added together.

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CS Executive New Syllabus Group 1 Video Lectures

CS Executive New Syllabus Group 2 Video Lectures

2. CS Executive Setting up of Business Entities Video Lectures

3. CS Executive Jurisprudence Interpretation General Laws Video Lectures

4. CS Executive New Syllabus Tax Laws Video Lectures

2. CS Executive Securities Laws Capital Markets Video Lectures

3. CS Executive Economic Business Commercial Laws Video Lectures

4. CS Executive Financial Strategic Management Video Lectures