2) What are accounting concepts? Why are they used in Accounting?

-> Accounting concepts are basically a set of accounting rules which are used or which should be
followed when dealing with company’s financial statements and accounts.
Accounting concepts are widely used in order to track and maintain record of financial transactions
of an entity to the outside world. Analysis of accounting information provides valuable information
and insights to managers for planning, controlling and sound decision-making.

8) What happens when Accounting Standards are weak?

-> If the Accounting Standards are weak there will be no transparent information of financial
statements. This will result in information asymmetry and therefore the global economic structure
might collapse. Weak Accounting Standards might increase unethical business practices, it will also
harm a company’s reputation rendering no credibility and thus may deemed to be useless. So a
Global Accounting standards is very much required to increase credibility and flexibility.

MINI CASE STUDIES

3)

a)Amar is an ambitious person and he wants a fast track business. The best suitable business for him
would be in the Healthcare Industry as this industry is niche and there is dearth of good medical
facilities in a country like India.

Akbar is a person who wants to be self-reliant in every possible way. I believe that he should set up a
iron ore manufacturing plant. There is a scarcity of Iron ore production in India. The refining process
is not updated due to obsolete technological implementation. He can very well innovate in this area.

Anthony is a person who is more of person who loves to work as a team. Matrimonial Sites and
event organisers is the area in which he should try as this field requires ardent participation of
people and team work.

Amarpreet is a person who is more caring, loving and emphatic as he is a doctor. I believe he is best
suited for an NGO which functions constantly for the betterment of the society.

b) I strongly believe that the type of business being taken up shouldn’t influence the type of
business entity. Both must be kept separate. The concept of business entity lies on the fact that the
entity is separate and distinct from the owners and the entity is only liable to the owners. The
enterprise or the business should be liable to only the extent the amount of capital which is invested
in the firm. For eg. If I am a teacher and I want to set up a tuition business privately I should maintain
a separate record of all the transactions which will be involved through the coaching classes. So, the
entity should not be mixed.

c) The factors which are essential when one wants to decide the type of business entity are
 *Tax treatment- The tax treatment must be lenient enough for the business to thrive. The
government must set the tax structure accordingly in order to favour small, medium and large size
businesses.

* Ability to raise capital is also one of the most important aspects. The capital raised is prone to
significant regulation and raising capital requires a lot of flexibility. So the business entity must be
aware of the conditions regarding raising capital.

* Separation of ownership and management is another important aspect. Sole proprietorships

leave the owner vulnerable to being held personally responsible if there is any fault in management
decisions.

* Limited Liability protection is essential for to protect the personal assignments from potential
business liabilities.

5) I tend to differ from Koya’s loss calculation as he thought his down payment investment of Rs.
2,85,000 as loss and he believed that he recovered Rs. 7490 through savings. Difference between the
two transactions is Rs. 2,77,510 which koya consides his loss. The amount given as down payment is
the capital expenditure which helped generating revenue which he used for daily expenses and
savings. SO, despite paying EMI and daily expenses he made profit and saved money.

Assets = Liabilities + Equity

TATA SAFARI Mortgage Downpayment
7,85,000 5,00,000 2,85,000

Purchased Tata Safari of around Rs.7,85,000, Rs.2,85,000 paid from his savings as Capex, Rs.5,00,000
as mortgages which he paid EMI of Rs. 18,000 for 36 months which cost total of Rs.6,48,000

Expenses Amount in Rs. Revenue Amount in Rs.

Groceries 48,725 Income 4,48,000
Clothes 2,850
Books and fee 850
Uniform 2,785
Food 18,000
Saree 1,250
Diesel 1,57,500
Domestic expenses 11,000
EMI 1,98,000
Total 4,40,510 4,48,000-Profit

As the entity is sole proprietorship the profit retained by Koya is the money he saves in the Bank.
Regulatory Requirements
India’s stock market regulator, The Securities and Exchanges Board of India (SEBI) unveiled a
regulatory sandbox framework. So the concept is of Regulatory sandbox is that it is a live testing
environment in which any new product or services which is developed is tested in a controlled
environment for some period of time with some specific datasets. The Business Entities which
wants to test their products must go through a registration process in order to be able to test their
products and release in the market. So as we can see that SEBI is the one which regulates the
market and brings in new rules and regulations so as to improve the market performance, remove
biases, efficient execution, information symmetry and helps in making the processes transparent.