CORPORATE AND MANAGEMENT ACCOUNTING Handbook PDF

CORPORATE & MNGT
ACCOUNTING ( CMA)
HANDBOOK
CS EXECUTIVE NEW SYLLABUS
REVISE ENTIRE CMA IN JUST TWO HOUR
Faculty : Prof. RAJ AWATE ( always with U)

( 9860616258)
INSPIRE ACADEMY
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Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

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INTRODUCTION TO FINANCIAL ACCOUNTING
✓ ACCOUNTING ,ACCOUNTANCY ,BOOK-KEEPING ,ACCOUNTING CYCLE
- Accounting is the process of identifying ,measuring and communicating accounting information to

permit informed judgments and decisions by the users of accounting .
- Accountancy refers to systematic know kedge of accounting .It explains why do and how to do various
aspects of accounting .
- Book keeping is a part of accounting and concerned with maintenance of books of accounts
- An accounting cycle is a complete sequence beginning with the recording
of transaction and ending with preparation of final accounts .
- Users : Internal users of an accounting include management and employees .
External users include short-term creditors , long-term creditors, customers , tax authorities
,general public
✓ OBJECTIVES AND FUNCTIONS OF ACCOUNTING
Objectives of Accounting 1. To maintain systematic accounting records

2. To ascertain the financial position .
3. To ascertain the financial performance .
4. To communicate information to users . .
Function of Accounting 1. Measurement
2. Forecasting
3. Decision-making
4. Comparison and evaluation
5. Control in Government regulation and taxation .
✓ BRANCHES OF ACCOUNTING
Financial Accounting Financial Accounting is the process of identifying measuring and

communicating accounting information to permit informed judgments
as decisions by the users of accounting .
Cost Accounting It is the process of accounting and controlling the cost of a product
operation or function .

Management Accounting It is the application of accounting techniques for providing information
for the purpose of planning ,controlling and decision making .
Social Responsibility It is the process of identifying measuring and communicating the

Accounting social effect of business decisions to permit informed judgments as
decisions by the users of information .
Human Resource It is the process of identifying measuring and communicating the

Accounting investments made in human resources of an enterprise to permit
informed judgments as decisions by the users of accounting .
✓ Internal Liability: These represent proprietor's equity, i.e., all those amount which are entitled
to the proprietor, like Capital, Reserves and Undistributed Profits.
✓ Contingent Liability: potential obligation that could be created depending on the outcome of
an event _not recorded in books of account_disclosed a note through in the financial
statements.
✓ Fictitious Assets :are not assets at all__appear on the asset side simply because of a debit
balance in a particular account not yet written off, e.g., provision for discount to creditors,
discount on issue of shares, etc.
✓ Wasting Assets: Such assets as mines, quarries, etc., that become exhausted or reduce in
value by their working are called wasting assets.
✓ Single Entry: It is an incomplete ‘double entry system_ the first entry is made to the debit of
an account, and the second entry to the credit of second account_ usually a cash book and
personal accounts are maintained.
✓ Double entry system :invented by Luca Pacioli _Every transaction has twofold aspects, i.e.,
one party giving the benefit and the other receiving the benefit _Every transaction is divided
into two aspects, debit and credit. One account is to be debited and the other account is to be
credited _Every debit must have its corresponding and equal credit_personal and impersonal
accounts are maintained_Helps in decision-making.
✓ Accounting principle :
Fundamental Accounting Three Fundamental Accounting Assumptions as per AS-1 : 1. Going

Concern 2. Consistency 3. Accrual
Assumptions
Accounting Entity Principle Distinction is made between personal transactions and business
transactions and transactions of one business and other business entity .
Money Measurement Only those transactions which are capable of being expressed in money
Principle
are recorded .

Accounting Period The economic life of enterprise is artificially split into periodic intervals
Principle (Periodicity /Time
Period Principle ) which are known as accounting periods .
Going concern Principle It is assumed that enterprise has neither the intention nor the necessity of
liquidation or of curtailing materially the scale of its operations .
Consistency Principle Same accounting policy is followed from one accounting period to another
Prudence Principle Anticipated losses are recognized but anticipated profits are ignored .
✓ Accounting equation: whole Financial Accounting depends on Accounting Equation which

is also known as Balance Sheet Equation. The basic Accounting Equation is:
Assets = Liabilities + Owner’s equity ( capital)
✓ Accounting process
The two approaches for deciding an account are debited or credited.
(A) American Approach or Modern Approach
(B) British Approach or Traditional Approach
✓
Meaning of an Account An Account is a summary of relevant transactions at one place relating to
a particular head .
Classification of Account
(i) As per Traditional Approach Personal , Real and Nominal
(ii) As per accounting Equation Assets , capital ,Liabilities, Expense and Revenue
Approach
Origin of Debt and Credit The terms of debit and credit have their origin from the terms debito and credito
as used by lucafrapacioli .
Meaning of Debit Debt in relation to assets and expense represents an increase but in relation to
liabilities ,capital , revenue represents a decrease.
Meaning of Debit Credit in relation to assets and expense represents an decrease but in relation to
liabilities ,capital , revenue represents a increase.
Equality Every debit has an equal amount of credit .

Rules of debit and credit when Accounts are classified on Transaction Basis
Types of Accounts Rules of debit Rules of Credit
For Personal Accounts Debit the receiver Credit the giver
For Real Accounts Debit what comes in Credit what comes out
For Nominal Accounts Debit all expenses and losses Credit all Gains and profits
Rules of debit and credit when Accounts are classified on Accounting Equation Basis
Types of Accounts Rules of debit Rules of Credit
For Assets Accounts Debit the Increases Credit the Decrease
For Liabilities Accounts Debit the Decreases Credit the Increase
For Capital Accounts Debit the Decreases Credit the Increase
For Revenue Accounts Debit the Decreases Credit the Increase
For Expenses Accounts Debit the Increases Credit the Decrease
✓ JOURNAL
Meaning of Journal Journal is a book of prime entry in which transactions are recorded in
chronological order .
Meaning of Journalising Journalizing is a process of recording transaction in journal
Meaning of Journal Entry Journal entry is an entry made in journal
Advantages of Journal 1. Chronological recorded
2. Explanation of Transaction
3. Recording of both aspects.
✓ LEDGER AND POSTING
Meaning of Ledger 1. Ledger is a principal book which contains all the accounts to which transaction
recorded in the books of original entry are transferred .

2. Ledger is also called a book of final entry as ledger is the ultimate destination of
all transaction
Form of Ledger A ledger may be kept in the form of bound book , CDs or any other device
Utilities of a Ledger 1. It provides complete information about all accounts in one book .
2. It enables to ascertain what are the main items of revenues
3. It enables to ascertain what are the main items of Expenses
4. It enables to ascertain which are the assets and of what values
5. It enables to ascertain what are the liabilities and of what amounts .
6. If facilities the preparation of Final Accounts
Meaning of Posting Posting is the process of transferring the transactions recorded in the books of
original entry in the concerned account(s)
Subdivisions of Ledger
LEDGER
PERSONAL LEDGER IMPERSONAL LEDGER
Debtors' Ledger Creditors' Ledger Cash Book General Ledger
Nominal Ledger Private Ledger
✓ TYPES OF SUBSIDIARY BOOKS
Meaning Subsidiary Books (special Journal ) are the books of original entry (or prime entry
) which are used to record the specific transactions of similar nature for the first
time on the basis of source documents .Thus subsidiary Books are part of journal
Types 1. Cash Journals (i.e. Cash Book )

2. Goods journals (Purchase Book , Sales Book, Purchase Return Book , Sales
Return Book )

3. Bills Journals (Bills Receivable Book , Bills payable Book )
4. Journal Paper
✓ CASH BOOK
As special Journal Cash book is special journal which is used to record all receipts and payments for
the first time on the basis of source documents
As a Ledger Cash Book is a ledger in the sense that it serves the purpose of Cash Account .
Cash book is both journal and ledger.
TYPES OF CASHBOOK
(a) Single Column It records only Cash Receipts and Cash Payments.
(b) Cash book with It records Cash Receipts and Cash Discount Allowed on debit side and Cash
Discount Column Payments and Cash Discount Received on credit side .
(c ) Three column Cash It records Cash Receipts ,Bank Receipts ,Cash Discount Allowed on debit side
Book and Cash Payments ,Bank Payments Cash discount Allowed on debit side and
Cash payments ,Bank Payments Cash discount Received on credit side .
(d) Petty Cash Book It records the payments of Petty Cash Expenses .

ACCOUNTING FOR SHARE CAPITAL
✓ Equity share capital: i) with voting rights; orii) with differential rights as to dividend or voting
or any other right.Preference share capital: preferential right with respect to—payment of
dividend at a fixed rate,in the case of a winding up
✓ Voting rights on preference shares: If a dividend has not been paid for a period of 2 years
or more,then preferences shareholders shall have a right to vote on all the resolutions
placed before a general meeting of the company.
✓ Issue of Shares at Discount : As per companies Act 2013, a company shall not issue
shares at a discount _exception : as provided in section 54 for issue of sweat equity shares
_ Any share issued by a company at a discounted price shall be void _ Penalty for not
following : To company - fine from one lakh rupees to five lakh rupees _ Punishment to
officer in default : imprisonment upto six months or fine from one lakh rupees to five lakh
rupees, or with both.
✓ Journal entries :
1. When application money is received : Bank a/c Dr _ To Share application a/c
2. When it is transferred to share capital : Share application a/c Dr _ To Share capital
3. When allotment money becomes due: Share allotment a/c Dr _To Share capital a/c
4. When allotment money is received : Bank a/c Dr _ To share allotment a/c
5. When first call becomes due : Share first call a/c Dr _To Share capital a/c
6. When first call money is received : Bank a/c Dr _ To share first call a/c
7. When final call money becomes due: Share final call a/c Dr _To Share capital a/c
8. When final call money is received : Bank a/c Dr _ To share final call a/c
In cases of premium :
Entry 3 : Share allotment a/c Dr_ To share capital _To security premium a/c
✓ Utilisation of Security premium :

Under Section 52(2) of the Companies Act 2013, the Securities Premium Account may be
applied by the company – (a) For issue of fully paid bonus shares; (b) in writing off the
preliminary expenses (c) in writing off the expenses of, or the commission paid or discount
allowed on, any issue of shares or debentures (d) in providing for the premium payable on
the redemption of any redeemable preference shares or of any debentures (e) for the
purchase of its own shares or other securities under section 68.
Utilization of securities premium for any other purpose would be treated as reduction
of capital
The Securities Premium Account must be shown as “Securities premium reserves”
separately in the liabilities
side of the balance sheet under the head “Reserves & Surplus”
✓ interest on calls-in-advance : The amount received as calls-in-advance is a debt of the
company _the company is liable to pay interest on the amount of Calls-in-Advance at a
maximum rate of 12% p.a. _interest payable on Calls-in- Advance is a charge against the
profits of the company. interest on calls in arrear : at a rate 10% per annum. _However,
the directors have the right to waive the payment of interest on Calls-in-Arrear _The interest
on Calls-on-Arrear Account is transferred to the Profit and Loss Account at the end of the
year.
✓ Forfeiture of shares : Cancellation of shares for non-payment of money
When shares are issues at par : Share capital a/c Dr _
To Share forfeiture a/c
To calls in arrear a/c

( Share capital is debited with face value if shares are forfeited after final call
Is debited with called up value if shares forfeited before final call )
When shares are issued at premium & premium is received :

Share capital a/c Dr _
When shares are issued at premium & premium is not received :

Share capital a/c Dr
Security premium a/c Dr
✓ Re-issue of shares :
At par : Bank a/c Dr_ To share capital
At premium : Bank a/c Dr_ To share capital_ To security premium a/c
Transfer to capital reserve : Share forfeiture a/c Dr _ To capital reserve a/c
( Only for shares reissued )
✓ Payment of dividend : As per Section 51 of the Companies Act, 2013, a company may, if
so authorized by its articles, pay dividends in proportion to the amount paid-up on each
share._ Thus dividend can be paid on partly paid up shares in proportion to the amount
paid-up on each share. _ no dividend is paid on calls-in-advance
✓ Sweat equity shares : equity shares issued by a company to its directors or employees at
a discount for providing their know-how or making available rights in the nature of
intellectual property rights or value additions
✓ Bonus shares (Section 63 ) : a company may issue fully paid-up bonus shares out of : its
free reserve _ the securities premium account _ the capital redemption reserve account.
_However, no issue of bonus shares shall be made by capitalising reserves created by the
revaluation of assets.
✓ Journal entry for bonus shares :
Step 1 : On making partly paid up shares as fully paid up :
P & L a/c Dr
General reserve a/c Dr
Capital reserve a/c Dr
To share capital a/c
Step 2 : On issue of bonus shares :
P & L a/c Dr
Capital reserve a/c Dr
Secuirity premium a/c Dr
Capital redemption reserve a/c Dr
To share capital a/c
✓ Bonus shares Vs Right shares :
Bonus Shares Right Shares

Bonus shares are shares issued by a When company issues further shares to
company free of cost to its existing existing shareholder in ration of their holding
shareholders on a pro rata basis out of free such issue is known as right issue.
reserve.

In case of bonus issue there is no cash In case of right issue there is cash inflow to the
flow. company.
Bonus issue is made on the In case of right issue authorization form
recommendation of the Board and members through ordinary or special resolution
authorization from general meeting of the is necessary.
company.
Issue of bonus share does not affect the Right issue of shares affects the market value
market value of the company. of the company.
✓ Lien of shares Vs forfeiture :
Points Lien Forfeiture

Meaning Lien means to withhold the property If a shareholder fails to pay the
of another for the lawful debts. A lien, allotment money and/or calls made on
like a mortgage or pledge, is a form him / his shares are liable to be
of security. It is equitable charge on forfeited. Forfeiture of shares may be
the shares to secure any debts due said to be the compulsory termination
from member of the company. of membership by way of penalty for
non-payment of allotment and/or any
call money.
Nature Lien is a form of security for a debt. Forfeiture is a penal proceeding.
Reduction Lien never involves a reduction of Forfeiture involves reduction of capital
of Capital capital because the shares are sold if if forfeited shares are not reissued.
the member makes defaults in
payments.
Amount of In case of lien, the shareholder is In case of forfeiture noting is payable
sale entitled to receive the excess amount to shareholder.
proceeds of than the amount due.
shares
Procedure for Forfeiture of Shares

Articles of Association of the Company provide the authority to forfeit shares to the Board of
Directors.
- The Board has to give at least 14 days’ notice to the defaulting members calling upon
them to pay outstanding amount, with or without interest as the case may be, before the
specified date.
- The notice must also state that if the shareholders fail to remit the amount mentioned
therein within the stipulated period, their shares will be forfeited.
- If they still fail to pay the amount within the specified period of time, the Board of
Directors of the company may decide to forfeit such shares by passing a resolution.
✓ A company is under a legal obligation to first offer the subsequent issue of shares to its
existing equity shareholders. This right is called rights issue.
✓ Company may issue fully paid up bonus shares to its members, in any manner out of (i) its
free reserves; (ii) the securities premium account; or (iii) the capital redemption reserve
account.

✓ Sweat equity shares refers to equity shares given to the company’s employees/directors on
favourable terms in recognition of their work at a discount or consideration other than cash

BUY-BACK OF SHARES
✓ Objective :To increase promoters’ holding in the company _To increase EPS_To Achieve
or maintain a target capital structure_To increase the underlying share value_To prevent
unwelcome take-over bids_To pay back surplus cash not required by business.
✓ According to section 68(1) of the Companies Act 2013, a company may purchase its own
shares out of— (a) its free reserves; (b) the securities premium account; or (c) the proceeds
of the issue of any shares or other specified securities:
✓ Conditions for buy back: must be authorized by its articles _ a special resolution has
been passed at a general meeting of the company authorizing the buy-back _Debt equity
ratio should be 2:1_all the shares or other specified securities for buy-back are fully paid-
up_ No offer of buy-back shall be made within a period of one year from the date of the
closure of the preceding offer of buy-back_Every buy-back shall be completed within a
period of one year from the date of passing of the special resolution_Company shall
extinguish and physically destroy the shares or securities so bought back within seven days
of the last date of completion of buy-back
✓ Transfer of certain sums to capital redemption reserves account (section 69) :After
buy back, sum equal to the nominal value of the shares so purchased shall be transferred to
the capital redemption reserve account _capital redemption reserve account may be used
for issue of fully paid bonus shares.
✓ Prohibition on buy back in following circumstances: (section 70) No company shall
directly or indirectly purchase its own shares or other specified securities—
a) through any subsidiary company including its own subsidiary companies;
b) through any investment company or group of investment companies; or
c) if a default, is made by the company, in the repayment of deposits interest payment Or
payment of redemption of debentures or preference shares or payment of dividend to any
shareholder
✓ Entries for buy back :
On sale of investment : bank a/c Dr _ To investment a/c
On buy back : Share capital a/c Dr _ To Share holders a/c
On payment of money : shareholders a/c Dr _ To Bank a/c
On transferring face value to CRR : P & L a/c/ General reserve a/c Dr _ To CRR a/c

Time Schedule Summary:
Time Taken Procedure
Starting Day Obtaining:

say ‘A
• Auditors Report stating maximum amount permissible for buy-back;
• Board of Directors Affidavit regarding solvency of company for one year;
• Then holding Board meeting for considering proposal of buy-back, getting
resolution passed and determine price for such buy-back.
A+2 Issue of notice with Explanatory Statement (along with disclosures mentioned
below) to all members.
A + 23 Holding EGM and passing special resolution, if required.
A + 24 Obtaining Declaration of Solvency (verified by an affidavit in e-form SH9);

• Filing draft letter of Offer with the ROC along with declaration of Solvency and
e-form SH8;
• Filing of e-form for registration of such resolution with MCA21.
A + 44 Maximum time for dispatch of letter of offer to all members.
Within 15 days Verification of offer to be completed;

from the
Note: Offer for buy-back shall remain open to the members for a period not less
closure
than 15 days and not exceeding 30 days from the date of dispatch of letter of
of offer offer. The shares or other securities lodged shall be deemed to be accepted
unless a communication of rejection is made within twenty-one days from the
date of closure of the offer.
Immediately on Open a Special Bank Account with Schedule Bank.

Closure of offer
Within 7 days Making payment in cash to those shareholders whose offer has been accepted
from or return the share certificates to the shareholders forthwith.
completion of
Verification
Within 7 days Extinguish and physically destroy the share certificates of shares bought back.
from
completion of
Acceptance
After File requisite return in e-form SH 11 with MCA21 and a declaration signed by 2
completion of directors, one of whom shall be Managing Director, if there is one, in e-form SH
buy-back 15

EMPLOYEE STOCK OPTION SCHEME (ESOP)
✓ Employees should have an option to have an ownership stake in the company led to the
emergence of concept of Employee Stock Option Plan (ESOP).The concept of ESOP is
believed to be the brain child of Louis Kelso
✓ Objective : To provide an incentive to draw, retain and reward employees of the company_To
motivate employees to contribute to the growth and profitability of the company.
✓ Issue of Employee Stock Options by Unlisted Public Company as per provisions of
Companies Act
shall not offer shares to its employees under a scheme of employees’ stock option,
unless it complies with the following requirements, namely:-
- Sanction by Special Resolution by the shareholders
- Disclosures in the explanatory statement annexed to the notice for passing of the
resolution
- Minimum vesting period: one year between the grant of options and vesting of option.
- Forfeiture/ Refund of amount paid by employees under ESOP if the option is not
exercised by the employees within the exercise period
- The option granted to employees shall not be transferable
- Disclosures in Board of Directors Report
- The Register of Employee Stock Options shall be maintained at the registered office of
the company or such other place as the Board may decide.
ISSUE & REDEMPTION OF PREFERENCE SHARES

✓ Max period for redemption ( sec 55) : twenty years from the date of their issue
✓ Max period for redemption for infrastructural project : 20 – 30 years
✓ Redemption of preference shares : The preference shares can be redeemed only
when they are fully paid up -out of the divisible profits- or out of the proceeds of a
fresh issue of shares
✓ Capital Redemption Reserve : Where preference shares are redeemed out of profits,
a sum equal to the nominal amount of the shares so redeemed must be transferred out
of the profits of the company which would otherwise to be available for dividend to a
reserve fund called ‘Capital Redemption Reserve Account’ _The main purpose to create
CRR is to keep the capital structure of the company intact _ Other purpose to protect the
interest of creditors
✓
✓ Entries for redemption of preference shares :
1. On redemption of shares at premium :
Preference share capital a/c Dr
Premium on redemption a/c Dr
To Preference shareholders a/c
2. On payment of money : Preference shareholders a/c Dr _ To Bank a/c

3. On writing of loss / premium : Security premium or P & L a/c Dr_ To premium
on redemption
4. When redemption is made by fresh issue of shares : Bank a/c Dr _ To share

capital
5. When redemption is made out of profits :

Profit and loss a/c Dr
Dividend equiliasation a/c Dr
To Capital redemption reserve a/c
UNDERWRITING
✓ Underwriting : contract entered into by the company with persons or institutions, called
underwriter _ they get commission called as “Underwriting commission.” _ underwriters may
be individuals, partnership firms or joint stock companies.
✓ Underwriter : takes complete responsibility of shares _ if shares or debentures are not taken
up by public in full then underwriter will take shares _ receives commission_ for all shares .
Broker : takes responsibility of limited shares _ if shares or debentures are not taken up by
public in full then broker will not take shares _ receives brokerage_ only for shares taken by
public.
✓ Types of underwriting : Complete Underwriting : whole of shares is underwritten, it is said
to be complete underwriting. Partial Underwriting : only a part of the issue of shares is
underwritten _ company is treated as “Underwriter” for the remaining part of the issue.
✓ Firm Underwriting : In case of normal underwriting, underwriter takes only those shares
which are not subscribed by normal public._In firm underwriting : there is definite commitment
by the underwriter to take up a specified number of shares irrespective of the number of
shares or debentures subscribed for by the public. _so total liability = net liability ( shares not
taken by public ) + firm shares.
✓ Underwriting commission : As per section 40(6) of the Companies Act 2013, for shares,
commission should not exceed 5% of the price at which the shares are issued or the amount
or rate authorized by the Articles, whichever is less. For debentures, commission should not
exceed 2.5% of the price at which the shares are issued or the amount or rate authorized by

the Articles, whichever is less. So maximum commission for shares is 5 % and for debentures
is 2.5%.
✓ Marked or unmarked applications : Applications which have stamp of respective
underwriter are called as marked applications. _ Applications received by the company
without any stamp are called as Unmarked applications.
✓ Determination of liability of underwriters
Particulars Underwriter A Underwriter B
Gross liability
Less : Marked applications + firm shares
Less : unmarked applications ( in the ratio of
gross liability )
Less : surplus if any
Net liability
+ firm shares
Total liability
✓ Entries in underwriting :
When shares or debentures are allotted to underwriter in respect of their liability :
Underwriters A/c Dr _To share capital A/c
When commission becomes payable to underwriter :
Underwriters commission A/cDr _ To Underwriters A/c
When net amount due from underwriters on the shares or debentures is received
:Bank A/c Dr _ To Underwriters A/c
DEBENTURES
✓ Issue of debentures for cash : At par , At discount , At premium

✓ Types of Debentures
Debentures can be classified according to permanence, security, priority, convertibility and
records point of view.
(1)Permanence point of view :Redeemable debentures _Irredeemable debentures:
(2) Priority point of view : First debentures: Those debentures, which are repaid before other
debentures are paid out, are called First Debentures _Second debentures:
Those debentures, which are paid after the payment towards the First Debenture

(3) Security point of view : Naked Debentures -Those debentures which are not secured, are
called naked debentures. Mortgage Debentures -Debentures, which are secured either on a
particular asset [called fixed charge], or on the general assets of the company [called floating
charge], are called Mortgage debentures.
✓ Issue of debentures for consideration other than cash :

Asset a/c Dr _ To debentures a/c
( If there is profit then it is credites as capital reserve and if loss arises then it is debited
as goodwill a/c)
✓ Issue of debentures as collateral security : it is issue of debentures as security agaist
loan. Accounting treatment : Case 1 : when there is no entry then mention collateral
security as narration under loan .
Case 2: When there is entry : pass entry as Debenture suspense a/c Dr – To Debenture
a/c
✓ Terms of issue of debentures & entry for issue :
1. Issue at par(10) &27
2. redemption at par ( 10) :
Bank a/c (10) Dr _ To debenture a/c (10)
3. Issue at discount ( 8) & redemption at par (10) :
Bank a/c (8) Dr and Discount on issue a/c (2) Dr _ To debenture (10)
4. Issue at par (10) & redemption at premium (13) :
Bank a/c (10) Dr and loss on issue a/c (3) Dr_
To debenture a/c(10) and premium on redemption a/c (3)
5. Issue at discount (8) & redemption at premium (13) :
Bank a/c (8) Dr and Discount a/c Dr (2) loss on issue a/c (3) Dr_
To debenture a/c(10) and premium on redemption a/c (3)
✓ Redemtion of debentures :
1. Lumsum redemption : with DRR or DRF ( sinking fund)
2. Annual drawing
3. Purchase of own debentures
4. Conversion into shares
✓ Lumsum redemption :
Case 1 : When money is not invested - every year Transfer profit to Debenture
redemption reserve ( DRR)
Case 2 : When money is invested - every year Transfer profit to Debenture redemption
fund ( DRF) or sinking fund
✓ Purchase of own debentures :
Case 1 : when debentured are purchased & immediately cancelled
Debenture a/c Dr
Debenture interest a/c Dr
To bank
To profit on redemption
Case 2 : when debentured are purchased & held as investment

Own Debenture a/c Dr
Debenture interest a/c Dr
To bank
✓ Cum interest = amount including interest

Ex- interest = amount excluding interest
FINANCIAL STATEMENT INTERPRETATION
COMPANY FINAL ACCOUNTS

✓ Financial Statements represent a formal record of the financial activities of an entity.
✓ Financial statements are reports prepared and issued by company management to give
investors and creditors additional information about their company’s performance and
financial standings.
✓ The four general purpose financial statements include: Income Statement,Balance
Sheet, Statement of Stockholders Equity, Statement of Cash flow.
✓ Financial statements are prepared by transferring the account balances on the adjusted trial
balance to a set of financial statement templates.
✓ Both public and private companies issue at least 4 financial statements to attract new
investors and raise funding for expansions.
✓ Financial sheets that are issued for time periods smaller than one year are called interim
statements.
✓ The annual financial statement form is prepared once a year and cover a 12-month period of
financial performance.
✓ IAS 7 Cash flow statement sets out requirements for the presentation of the cash flow
statement and related disclosures.
✓ The listed entity shall submit a compliance certificate to the exchange duly signed by both that
is by the compliance officer of the listed entity and the authorized representative of the share
transfer agent, wherever applicable, within one month of the end of each half of the financial
year.
✓ Depreciation may be defined as the gradual reduction in the value of an asset due to wear
and tear as in the case of physical assets like building, machinery, etc., or by mere passing
of time as in the case of lease, patent and copyright.
If depreciation is not provided, the value of assets shown in Balance Sheet will not present
the true and fair value of assets.
Two methods to calculate depreciation: straight line method and written down value
method.
✓ Provision Vs reserve : Provisions is to be made in respect of a liability which is certain to be
incurred, but its accurate amount is not known. Reserves are the amount set aside out of
profits. It is an appropriation of profits and not a charge on the profits.
✓ In accordance with Section 135(5) of the 2013 Act, the Board of each company covered under
the CSR requirement needs to ensure that the company spends, in every financial year, at
least 2% of its average net profits made during the three immediately preceding financial

years in pursuance of CSR policy
✓ RELATED PARTY DISCLOSURES - IAS 24
IAS 24 Related Party Disclosures requires disclosures about transactions and outstanding
balances with an entity’s related parties.
Who are Related Parties?
A related party is a person or entity related to the entity that is preparing its financial
statements.
a) A person or a close member of that person’s family is related to a reporting entity if that
person:
• Has control or joint control over the reporting entity
• Has significant influence over the reporting entity
• Is a member of the key management personnel of the reporting entity or of a parent
of the reporting entity.
b) An entity is related to a reporting entity if any of the following conditions applies:
• The entity and the reporting entity are members of the same group.
• One entity is an associate or joint venture of the other entity.
• Both entities are joint ventures of the same party.
• The entity, or any member of a group of which it is a part, provides key management
personnel services to the reporting entity or to the parent of the reporting entity.
✓ SEGMENT REPORTING (Accounting Standard 17)

- Segment reporting is the reporting of the operating segments of a company in the
disclosures accompanying its financial statements.
- Segment reporting is required for publicly held entities, and is not required for privately
held ones.
- Segment reporting is intended to give information to investors and creditors regarding the
financial results and position of the most important operating units of a company, which
they can use as the basis for decisions related to the company.
✓ Follow these rules to determine which segments need to be reported:
- Aggregate the results of two or more segments if they have similar products, services,
processes, customers, distribution methods, and regulatory environments.
- Report a segment if it has at least 10% of the revenues, 10% of the profit or loss, or 10%
of the combined assets of the entity.
- If the total revenue of the segments you have selected under the preceding criteria
comprise less than 75% of the entity’s total revenue, then add more segments until you
reach that threshold.
✓ Case 1. A Ltd. had a reportable segment in year 02-03, but for 03-04, that reportable segment
does not meet the 10% threshold limit. Should A Ltd. continue or drop the segment for
reporting in 03-04?

Solution: A segment may have been a reportable segment in the prior period, but does not
have reportable segment in the current period, as it no longer meets the 10% threshold limit
of revenue, result or assets or other reportable segments that may account for more than 75%
of the entity’s revenue. The AS requires A Ltd. to continue the reportable segment of 02-03
also for 03-04, even though its revenue, result and assets no longer meet the 10% threshold
limit. Taking a clue about the applicability of Accounting Standards, A Ltd. would be required
to disclose for two consecutive years, and thereafter cease reporting that segment which does
not meet the threshold criteria.
✓ Case 2: A Ltd. is in one business segment, i.e., deals in food business. Also it sells entire
production in India. Is A Ltd. required to give information as required under AS 17?
Solution: If A Ltd. has neither more than one business segment nor more than one
geographical segment, segment information as per AS 17 is not required to be disclosed.
However A Ltd. should do well to disclose, since it has one business segment, segment
information as per AS 17 is not required to be disclosed. However, should company A Ltd.
have turnover spread over geographical segments, such as India, USA, UK and Asia other
than India and the threshold criteria of 10% or more is met in each of above geographical
segment, then A Ltd. will be required to give segment revenue by geographical area even
though primary business segment may not be applicable.
✓ Provision Vs reserve :
Provision Reserve
It is created for specific purpose. It is created for probable purpose,
It is charge against profit and loss account. It is appropriation of profit.
It cannot be distributed as profit. It can be distributed as profit.
It cannot be invested in securities. It can be invested in securities.
It is a matter of financial prudence. It is made because of legal necessity.
long term provisions are shown under the heading “Non- It is shown under “Reserve & Surplus”
Current Liabilities” while short term provisions are shown
under the heading “Current Liabilities”.
✓ Revised format of Balance sheet as per Schedule III ( this format is given from exam
point of view ) :
Particulars
EQUITY AN LIABILITIES
Shareholders’ funds
Share Capital
Reserves and Surplus
Non-current liabilities
Long-term borrowings
Long-term provisions

Current liabilities
Short-term borrowings
Trade Payables
Short-term provisions
ASSETS
Non-current assets
Fixed assets
Tangible assets
Intangible assets
Long-term loans and advances
Current Assets
Current investments
Inventories
Trade receivables
Cash and cash equivalents
Short-term loans and advances
Other current assets
✓ Managerial Remuneration ( Sec 197 ) :

Case 1 : In case of profit :
If there is one WTD or MD = 5 % of net profit

If there are two WTD or MD = 10 % of net profit
If there is one part time director ( NO WTD) = 3% of net profit
If there is one part time director ( there is WTD) = 1 % of net profit
Maximum permissible = 11 % of net profit
If remuneration exceeds above specified limit then company need to take permission
from central govt.
Case 2 : In case of inadequate profit or loss :

Effective capital Managerial remuneration per annum
Upto 5 crores 30 lakhs
5-100 crores 42 lakhs
100-250 crores 60 lakhs
250 crores and above 60 lakh + 0.01% of capital above 250 cr
The above limits shall be doubled if the resolution passed by the shareholders is a
special resolution

CONSOLIDATION
✓ 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.
✓ Associate Company, in relation to another company, means a company in which that other company
has a significant influence, but which is not a subsidiary company of the company having such
influence and includes a joint venture company _control of at least twenty per cent of total share
capital, or of business decisions under an agreement.
✓ Wholly Owned Subsidiary Company -A company in which all the shares with voting rights
(i.e. 100%) are owned by the holding company, it is said to be a wholly owned subsidiary
company.
✓ Partly Owned Subsidiary Company -A company in which only the majority of shares
(more than 50%) are owned by the holding company, it is said to be a party owned
subsidiary.
✓ Small Shareholder: A shareholder who is holding shares of nominal value of INR 20,000 or
such other sum as may be prescribed.
✓ Minority Shareholder: Equity holder of a firm who does not have the voting control of the
firm, by virtue of his or her below fifty percent ownership of the firm’s equity capital
✓ Cost of acquisition : Money invested in shares of subsidiary company by the holding
company is called as investment in shares & amount paid for such investment is called as
cost of acquisition. I
✓ Intrinsic value : when all the shares of subsidiary company are held by holding company
then holding company has ownership in the all net assets of the subsidiary company ( net
assets = total assets – liability = equity holders fund). Such amount realized by holding
company is called as intrinsic value.
✓ Minority interest : If all the shares are not held by holding company then net assets or equity
holder’s fund ( share capital + reserve & surplus ) of subsidiary company is divided into holding
company & outsiders. In this case, the claim of outside shareholders in the subsidiary
company is called as “Minority Interest”
✓ Cost of Control : The “excess” amount paid (more than face value or book value of shares)
by the holding company to acquire ‘controlling interest’ in the subsidiary company.
✓ Treatment of pre-acquisition profit or loss : It is divided into holding company & minority
holders in their respective proportion. Share of minority holder is added to minority interest.
And share of holding company is added to intrinsic value because it is capital profit.

✓ Treatment of pre-acquisition reserve :It is divided into holding company & minority holders
in their respective proportion. Share of minority holder is added to minority interest. And share
of holding company is added to intrinsic value.
✓ Treatment of post-acquisition profit & reserve : It is divided into holding company &
minority holders in their respective proportion. Share of minority holder is added to minority
interest. And share of holding company is added to profit & loss a/c or general reserve as it
is revenue profit. It is shown in the consolidated balance sheet under Reserve and surplus.
✓ Distribution of shareholders fund of subsidiary company into holding company &
minority holders :
Holding company Minority interest
Share capital Share capital

+Pre-acquisition profit / loss + Pre-acquisition profit / loss
+ Pre-acquisition reserve + Pre-acquisition reserve
+ Revaluation profit /loss + Revaluation profit /loss
INTRINSIC VALUE + Post- acquisition profit /loss
+ Post-acquisition reserve
MINORITY INTEREST
Post- acquisition profit /loss
+ Post-acquisition reserve
TRANSFER TO
BALANCE SHEET
Intrinsic value – cost of acquisition = goodwill or capital reserve
✓ TREATMENT OF INTERCOMPANY OWING :

Debtors Vs Creditors : When one company sells goods to other on credit then it appears
as debtors in balance sheet of selling company & appears creditors in the balance sheet
of buying company.Then, on consolidation, subtract that amount from debtors of one
company & creditors of other company.
Bills payable Vs bill receivable : When certain amount appears as bills receivable in
balance sheet of one company & appears as bills payable in the balance sheet of other
company. Then, on consolidation, subtract that amount from bills receivable of one
company &bills payable of other company.
Advance or loan : When one company gives loan to other company then it appears as
loan on asset side of lending company & liability side of borrowing company. Then
cancel that amount from balance sheet of both company on consolidation.
✓ Treatment of Un-realised profit included in unsold goods :

When one company purchases goods from other company then selling company sells
goods at cost plus profit basis. Such profit included in amount of stock is called as stock
reserve. Treatment of stock reserve depend upon following two cases :
Case 1 : When holding company sells goods to subsidiary company :
Subtract amount of stock reserve from stock of subsidiary company.
Subtract amount of stock reserve from P & L a/c of holding company which appears in
consolidated balance sheet.
Case 2 : When subsidiary company sells goods to holding company :
Subtract amount of stock reserve from stock of holding company.
Subtract amount of stock reserve from pre-acquisition profit of subsidiary company.
✓ Bonus shares :
(a) Issue of bonus shares out of capital profit (Pre-acquisition profits) : In this case
there will be no effect on accounting treatment
(b) Issue of bonus shares out of post acquisition profit : In this case, a part of the revenue
profits will get capitalized resulting in decrease of cost of control or increase in capital
reserve.
✓ Treatment of dividend received from subsidiary company :

a. When dividend is received for pre-aquisition period :
It is treated as capital income & so it reduces cost if investment by crediting to investment
a/c.
Its journal entry is as follows :Bank a/c Dr _ To investment a/c
b. When dividend is received for post-aquisition period :
It is treated as revenue income & is credited to P & L a/c.
Bank a/c Dr _ To P& L a/c

CORPORATE FINANCIAL REPORTING
✓ Value Added Statement:
This is the difference between the total value of its output and the value of the inputs of materials
and services obtained from other enterprises. The value added is seen to be due to the combined
efforts of capital, management and employees, and the statement shows how the value added
has been distributed to each of these factors.
Advantages of Value Added Statement –
- It is an alternative performance measure to profit and therefore helps in the comparison

of the performance of the company. Value added is superior performance measure
because it pays attention on inputs which are under the control of the management.
- By employing various productivity measures like value added per rupee of capital
employed, value added per rupee sales, value added per employee etc., it helps in
judging the productivity of the company.
- Resource allocation decisions are normally based on the concept of maximizing profit but
value added statement provides a better alternative by focusing on other factors rather
than just profit.
✓ The Value-Added Statement (VAS) is a voluntary disclosure and adds little information to that
contained in the income statement. It calculates total output by adding sales, changes in stock,
and other incomes, then subtracting depreciation, interest, taxation, dividends, and the
amounts paid to suppliers and employees.
✓ Economic value-added (EVA) measures the economic rather than accounting profit created
by a business after the cost of all resources including both debt and equity capital have been
taken into account.
✓ EVA = “Net Operating Profit after Taxes” - (Equity Capital X % Cost of Equity Capital)
✓ Market value-added (MVA) is the difference between the Company’s market and book value
of shares.
✓ Market Value-Added = Company’s total Market Value - Capital Invested
✓ Shareholder Value-Added (SVA) represents the economic profits generated by a business
above and beyond the minimum return required by all providers of capital.

CASH FLOW STATEMENT
✓ Financial statements generally refer to balance sheet or position statement and Statement
of Profit and Loss or income statement. a business may also prepare a statement of
retained earnings and a cash flow statement.
✓ Financial statements are prepared on the basis of (i) recorded facts; (ii) accounting
conventions; (iii) postulates; (iv) personal judgements, and (v) accounting standards and
guidance notes.
✓ A statement of changes in the financial position of a company can be found out in two ways :
(a) Working Capital Basis, i.e., Funds Flow Statement, and
(b) Cash Basis, i.e., Cash Flow Statement
✓ DISTINCTION BETWEEN FUNDS FLOW STATEMENT AND CASH FLOW STATEMENT
1. A cash flow statement is mainly dealt with changes in cash position, while a funds flow
statement is concerned with changed working capital.
2. For short-term financial analysis the cash flow statement is considered to be more useful
to management as compared to funds flow statement.
3. In the cash flow statement opening and closing balance (cash and equivalents) is given.
But a funds flow statement does not contain in opening and closing balances.
4. There is no legal requirement to prepare funds flow statement but cash flow statement is
to be prepared by every listed company as per the requirement of SEBI.
✓ Sources of Cash
✓ a)Internal Sources
Cash from operations is the main internal source. The net profit shown by the Profit and Loss
Account will have to be adjusted for non-cash items for finding out cash from operations. Some
of these items are as follows :
Depreciation
Amortization of intangible assets
Loss on sale of fixed assets
Gain from sale of fixed assets External Sources
b) The external sources of cash are :
Issue of New Shares _Raising Long-term Loans._Purchase of Plant and Machinery on
deferred payments _Short-term Borrowings-cash credit from bank _ Sale of Fixed Assets,
Investments, etc
✓ Fund flow statement also referred to as statement of “source and application of funds”
✓ Fund = Working capital = Current assets – Current liability
✓ Flow of funds include both “inflow” and “outflow”.

❖ Direct Method:This method is applicable when income statement or P & L is given.
Particulars Rs. Rs.

Cash Flow from operating activity :
Cash received from customers
Less : Cash paid to supplier
Less : Cash paid to employee
Less : Cash paid for other operating expenses
_______________________________
Cash generated from operations
Less : Tax paid ____
___________________________
Cash flow from operating activity
❖ Indirect Method :
Particulars Rs. Rs.
Net profit before tax& dividend
Add : adjustment for P & L a/c
_________________________________________
Net operating profit before working capital changes
Add :Changes for working capital
_________________________________________
Cash generated from operations
Less : Tax paid
______________________________________
Cash flow from operating activity
✓ IMP Accounts for investment activity : For purchase & sale of asset
Assets Account
To bal b/d By depreciation a/c

To profit on sale By loss on sale
To Purchase By sale
By bal c/d
Depreciation
To depreciation on assets sold By bal b/d

(asset account)
To bal c/d By current year depreciation (P & L a/c [this
amount should be taken at non – cash items
place )

ACCOUNTING STANDARD
✓ Accounting Standards (ASs) are written policy documents issued 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 objective of general purpose financial reporting is to provide financial information that is
useful to existing and potential investors, lenders and other creditors in making decisions
about providing resources to the entity.
✓ Two important characteristics of financial information relates to relevance and reliability
✓ Convergene of varied Accounting Standards with International Financial Reporting Standards
(IFRS) has gained worldwide momentum in recent years to ensure uniformity and
transparency in reporting standards.
✓ India has committed to convergence of its Indian Accounting Standards (Ind AS) with IFRS in
a phased manner beginning April 1,2016.
✓ A revised roadmap for implementation of Indian Accounting Standards (Ind AS) finalized by
the council of the ICAI (Institute of Chartered Accountants of India) and submitted to MCA
(Ministry of Corporate Affairs) for its consideration.
✓ (ICAI): The Institute of Chartered Accountants of India
(ASB): Accounting Standards Board
(IAS): International Accounting Standards
(IFRS): International Financial Reporting Standards
(IASC): International Accounting Standards Committee
(IFRIC): International Financial reporting Interpretations Committee
(IASC):International Accounting Standards Committee
(SIC): Standard Interpretations Committee
The Institute of Company Secretaries of India (ICSI)
The Institute of Chartered Accountants of India
The Institute of Cost Accountants of India
IFRS Foundation/International Accounting StandardsBoard (IASB)
International Public Sector Accounting Standards Board(IPSASB)
Financial Reporting Council (FRC) (UK)
European Financial Reporting Advisory Group (EFRAG)
Financial Accounting Standards Board (FASB
American Institute of Certified Public Accountants(AICPA)
Australian Accounting Standards Board (AASB)
The Institute of Chartered Accountants in Australia (ICAA)
Financial Reporting & Assurance Standards Canada (FRASC)
Canadian Institute of Chartered Accountants (CICA)

PART B
BASIC COST CONCEPTS
✓ Cost : Cost can be either real or imaginary. Imaginary cost are called as notional cost.
All opportunity cost are notional cost.
✓ Costing & cost accounting : Costing is just calculation cost whereas cost accounting
involves calculation of cost & keeping control on cost. cost accounting in achieving its
three basic objectives namely-cost ascertainment, cost control and cost presentation
✓ Cost Accountancy has been defined as “the application of costing and cost accounting
principles, methods and techniques to the science, art and practice of cost control and the
ascertainment of profitability. It includes the presentation of information derived there from
for the purpose of managerial decision making”.
✓ Cost accounting & financial accounting & management accounting : Costing :
determination of operational position _stock valued at cost_only internal user. Financial
accounting : financial position_stock valued at cost or market value whichever is
lower_internal & external user. Management accounting : involves both costing &
accounting _used for management control
✓ different bases of cost classification are:
(1) By time (Historical, Pre-determined).
(2) By nature or elements (Material, Labour and Overhead).
(3) By degree of traceability to the product (Direct, Indirect).
(4) Association with the product (Product, Period).
(5) By Changes in activity or volume (Fixed, Variable, Semi-variable).
(6) By function (Manufacturing, Administrative, Selling, Research and development, Pre-

production).
(7) Relationship with accounting period (Capital, Revenue).
(8) Controllability (Controllable, Non-controllable).
(9) Cost for analytical and decision-making purposes (Opportunity, Sunk, Differential, Joint,
Common,Imputed, Out-of-pocket, Marginal, Uniform, Replacement).

(10) Others (Conversion, Traceable, Normal, Avoidable, Unavoidable, Total).
✓ Historical Costs: These costs are ascertained after they are incurred. Such costs are
available only when the production of a particular thing has already been done.
Pre-determined Costs: These costs are calculated before they are incurred on the
basis of a specification of all factors affecting cost. Such costs may be:(i) Estimated costs
(ii) Standard costs
✓ Cost as per element : material, labour, expenses

✓ DM +DL +DE = prime cost IDM +IDL +IDE = overheads
✓ Production cost= Direct material + Direct wages + Direct expenses + production
overhead
Conversion cost = Direct wages + Direct expenses + production overhead
✓ Normal loss : unavoidable loss_ loss due to evaporation_ absorbed by remaining units_
due to this rate per unit increases. Abnormal loss : avoidable loss_ loss due to fire and
theft_ transferred to costing P & L a/c_ due to this rate per unit remains same
✓ Marginal cost : change in cost due to change in number of units
✓ Differential Cost: change in costs due to change in the level of activity or pattern or
method of production.
✓ Opportunity cost = income forgone due to taking another option = non real cost =
imaginary cost = notional cost.
✓ Out-of-pocket Costs: for this cash is paid _ it is relevant for decision-making,
✓ Imputed Costs: These are notional costs appearing in the cost accounts only _ also called
imaginary cost.
✓ Discretionary Costs: These are "escapable" or "avoidable" costs. These can be avoided
if a particular course of action is not chosen.
✓ Sunk Cost: It is a cost which has already been incurred or sunk in the past _ not relevant
for decision making.
✓ Committed Cost: it has been already committed by the management_not relevant for
decision-making. Committed cost :unavoidable. discretionary costs : avoidable costs.

✓ Explicit cost :They requires immediate payment of cash _also called as out of pocket
cost. Implicit cost :They do not require immediate payment of cash _also called as
economic cost or notional cost or imputed cost.
✓ Classification according to nature :- Fixed Costs, Variable Costs ,Semi-variable Costs
: Certain costs are partly fixed and partly variable _also called as ‘stepped costs’.
✓ Shut-down Costs: These are incurred even though business is shut-down, e.g. rent,
rates, depreciation. They are fixed cost.
✓ Methods of costing :Job Costing :printing press, automobile garage, repair shop, ship-
building, house building, engine and machine construction, etc. Contract Costing
:building construction. Batch Costing .Terminal Costing.Operation Costing.Process
Costing .Unit or Single-output Costing .Operating Costing :railways, road transport,
water supply undertakings, telephone services, electricity companies, hospital services,
municipal services, etc. Multiple or Composite Costing :motor cars, aeroplanes,
machine tools, type-writers, radios, cycles, sewing machines, etc. Departmental Costing
When costs are ascertained department by department, the method is called
“Departmental Costing”.
✓ Techniques of costing : Historical (or Conventional) Costing _Standard

Costing_Marginal Costing_Uniform Costing_Direct Costing_Absorption Costing_Activity
Based Costing
✓ Management accounting is an integral part of management concerned with identifying,

presenting and interpreting information used for: (a) formulating strategy; (b) planning and
controlling activities; (c) decision taking; (d) optimisin the use of resources; (e) disclosure
to shareholders and others external to the entity; (f) disclosure to employees; (g)
safeguarding assets.

COST ACCOUNTING RECORD
✓ Cost Auditor- means a Cost Accountant in practice, as defined in clause (b), who is appointed
by the Board
✓ Cost Records- means books of account relating to utilization of materials, labour and other
items of cost as applicable to the production of goods or provision of services as provided in
Section 148 of the Act and these rules;
✓ Who is liable to get cost records audited-
Every company specified in item (A) of rule 3 if overall turnover of the company from all its
product and services during the preceding financial year is rupees fifty crore or more.
✓ Explain who is liable to maintain cost records as per sec 148 of the act
For the purposes of Sub-Section (1) of Section 148 of the Act, the class of companies,
including foreign companies defined in clause (42) of Section 2 of the Act, engaged in the
production of the goods or in rendering services, having an overall turnover from all its products
and services of rupees thirty five crore or more during the immediately preceding financial year,
shall include cost records for such products or services in their books of account.
✓ CRA-1: Forms in which cost records shall be maintained
The form CRA-1 prescribes the form in which cost records shall be maintained.
✓ CRA-2: Forms of Intimation of appointment of Cost Auditor by the company to Central
Government
✓ CRA-3: Form of Cost Audit Report
✓ Annexure to Cost Audit Report
Annexure has been reclassified into Four Parts as under:
Part-A for General Information
Part-B for Manufacturing Sector

Part-C for Service Sector
Part-D Product and Service Profitability Statement, Profit
✓ CRA-4: Form for filing Cost Audit Report with the Central Government

Rule 6: Cost Audit
-(Appointment within 180 days of the

commencement of Financial Year)
The company shall inform

the Cost Auditor concerned Whichever is earlier
of his or its appointment
File a notice of such File a notice of such

appointment with a CG appointment with a CG
within a period of 30 days within a period of 180
of Board meeting in which days from the
commencement of the
such appointment is Financial year
made.
Auditor shall continue in office till the expiry of 180 days from the closure
of Financial year or till he submit the report
Casual vacancy can be filled by

BOD within 30 days
Inform the CG in CRA-2 within 30

days of such
appointment
Company within 30 days from the date of receipt of a

copy of Cost Audit Report furnished to the
CG in CRA-4

BUDGET
✓ A budget is a precise statement of the financial and quantitative implications of the

course of action that management has decided to follow in the immediate next period of
time (usually a year).
✓ Budgetary control is the establishment of budgets, relating the responsibilities of
executive to the requirements of a policy and the continuous comparison of actual with
budgeted results either to secure by individual action the objectives of that policy or to
provide a firm basis for its revision.
✓ Budget manual is a document which sets out the responsibilities of the persons
engaged in the routine of and the forms and records required for budgetary control.
✓ Budget key factor also known as limiting factor, governing factor or principal budget
means the factor which limits the size of output. It is the factor the extent whose
influence must first be assessed in order to ensure that functional budgets are capable
of fulfillment. The influencing factors are: (a) customer demand, (b) plant capacity (c)
availability of raw material, skilled labour and capital, (d) availability of accommodation
for plant, raw materials and finished goods and (e) governmental restrictions, etc.
✓ Fixed budget is a budget designed to remain unchanged irrespective of the level of
activity actually attained.
✓ A flexible budget is a budget which is designed to change in relation to the level of
activity attained.
✓ Zero base budgeting is a method of budgeting whereby all activities are re-evaluated
each time a budget is set.
✓ Performance budgeting involves evaluation of performance of an organization in the
context of both specific as well as overall objectives of the organization. Performance
budgeting lays emphasis on achievement of physical targets.
RATIO ANALYSIS
✓ Balance sheet ratios :Both numerator & denominator in these ratio are taken from balance
sheet. e.g.Current ratio ,Liquidity ratio ,Proprietorship ratio
Income statement ratios : Here, both terms are taken from income statement.
Gross profit ratio Net profit ratio Operating ratio
Mixed ratios : Here, one term is taken from balance sheet & other is taken from income
statement. E.g Stock turnover ratio,Debtors turnover ratio ,
✓ Classification according to purpose :

Profitability ratio : Gross profit ratio , Net profit ratio, Capital employed ratio
Liquidity ratio : Current ratio,Liquidity ratio
Turnover ratio : Stock turnover ratio, Debtors turnover ratio, Fixed asset turnover
Leverage ratio: Debt- equity ratio ,Capital gearing ratio ,Proprietary ratio

✓ Current ratio : = Current Assets ideal current ratio = 2 :1
Current liability
✓ Quick ratio := Quick Assets ideal quick ratio = 1:1
Quick Liability
Where, Quick Assets = Current Assets – Stock.
Quick Liability = Current liability– Bank OD

sales
✓ STR = average stock ( use this formula when gross profit is not known)
cost of sales
STR = ( use this formula when gross profit is known)
average stock
365 days
Stock velocity =Finished goods storage period = Stock Turnover ratio ( STR)
Net Credit Sales in a year

✓ Debtors’ Turnover Ratio( DTR ) = Average Stock of Debtors and Receivables
365 days or 12 months

Average Collection Period = Debtors′ turnover Ratio ( DTR )
Net Credit purchases in a year

✓ Creditors’ Turnover Ratio( CTR ) = Average of creditors and payables
365 days or 12 months

Average payment Period = Creditors′ turnover Ratio ( CTR )
Net Sales
✓ Fixed Assets Turnover Ratio =Fixed Assets
Net sales
✓ Capital Turnover Ratio =Average Capital Employed
Profit After Tax
✓ Return on Equity = Equity
Here, Equity = Equity share capital + Preference Share Capital + R & S

✓ Gross profit = Sales – COGS
✓ Operating expenses = Administration expenses + Selling & distribution expenses
✓ Operating profit = Gross profit – Operating expenses
✓ Working capital = Current asset – Current liability
✓ Capital employed = Fixed asset + Current asset – current liability
✓ Capital employed = Net worth + long term loans
✓ Net worth = Proprietor’s fund = owner’s fund =
= equity share capital + preference share capital + reserve & surplus

Net Profit after taxes Net Profit after taxes Net Profit after taxes
Return on Assets (ROA): ROA = Average Total Assets or Average Tangible Assets or Average Fixed Assets
Earnings before interest and taxes(EBIT)

Return on Capital Employed (ROCE): = Capital Employed
× 100
Net Profit after taxes−Preference dividend (if any)
Return on Equity (ROE): = Net worth × 100
equity shareholders′ fund
Net profit available to equity shareholders

Earnings per Share (EPS): Number of equity shares outstanding
Total Dividend paid to equity shareholders

Dividend per Share (DPS): = Number of equity shares outstanding
Dividend per equity share(DPS)
Dividend Payout Ratio (DP): = Earning per Share (EPS)
Market Price per Share(MPS)
Price-Earnings per Share (P/E Ratio) =
Earning per Share(EPS)

MANAGEMENT INFORMATION SYSTEM ( MIS)
✓ Importance of Reporting :
Provides Information to various levels of management_Helps in Selection of relevant
information is included_Role in Control System_Helpful in Profitable Operation _Follow the
Principle of Management by Exception
✓ The three Guiding Principles to be followed for report:

- Lower level management- more detailed report is required whereas higher level
management required summarized form of report.
- Lower level management requires report more frequently than higher level of
management. Whereas middle level management requires report more frequently as
compare to higher level management.
- Lower the level of management less should be number of reports; higher the level of
management, large should be the number report.
✓ Steps toward implementing an effective management reporting programme. These
include:
• Discovery
• Analysis
• Implementation
• Access Point
• Feedback
• In-house IT capabilities
✓ Forms of Presentation of Information
Information may be presented in the following forms: 1)Verbal (or oral) 2) Written
✓ Classification of Reports
Reports can be classified by their forms, contents and frequency as follows:
Cost Routine
or
Irregular

✓ Special Reports
Special reports are to be presented after thoroughly investigation of the problem which requires
to be scrutinized. The following matters may the covered by special reports before presenting
them to the management:
1. The effect of idle capacity on the cost of production of different products.
2. Make or buy decision.
3. Whether to replace labour by machines or not.
4. Whether to explore the new market at a selling price which is below the cost of production.
DECISION MAKING TOOLS

MARGINAL COSTING
✓ Marginal costing is the accounting system in which variable costs is charged to cost units
and fixed costs of the period are written-off in full against the aggregate contribution. Its special
value is in decision-making.This technique of costing is also known as “Variable Costing”,
“Differential Costing” or “Out-of-pocket” costing
✓ Absorption costing is a method of costing by which all direct costs and applicable
overheads are charged to products or cost centres for finding out the total cost of production.
Absorbed cost includes production cost as well as administrative and other costs. It is a
principle whereby fixed as well as variable costs are allotted to cost units, i.e. full costs are
charged to production.
✓ Sales
- Variable cost
---------------
Contribution
- Fixed cost
---------
Profit
✓ Contribution = Sales - Variable cost of sales

= Fixed cost + Profit
✓ P / v ratio = Contribution / sales * 100

= Change in profit / change in sale * 100
✓ BEP : At break-even point, there is no profit no loss.

If actual sales level is below break-even point the company will incur loss.
If actual sales level is above break-even point the company will incur profit.

B.E.P ( in units ) = Fixed cost / contribution per unit
B.E.P ( In Rs) = Fixed cost / PV ratio
✓ Actual Sales –B.E.P. sales = Margin of safety.
✓ CVP Analysis ( cost-volume-profit analysis) :

It is the analysis of three variables, viz. cost, volume and profit _As quantity increases VC
increases but FC remains same. So total cost also increases_ As quantity increases value of sale
also increases PInitially when company sells small quantity of units total cost is greater than sales.
So it incurs loss _ As it sells more & more quantity, sales exceeds total cost. So it makes profit
_Level at which there is no profit no loss is called as B.E.P. (break even point )
Analysis of cost-volume-profit involves consideration of the interplay of the following factors:
(i) Volume of sales;
(ii) Selling price;
(iii) Product mix of sales;
(iv) Variable costs per unit; and
(v) Total fixed costs.
✓ Angle of incidence : It is angle between sales line & cost line. _ Greater is the angle of
incidence, lower is the B.E.P. smaller is the angle of incidence, more is the BEP _If the break-
even point is low and angle of incidence is large, the margin of safety is large and the business
enjoys financial stability.
✓ Break-even point can be determined by the following methods:
1. Algebraic methods:
(i) Contribution Margin Approach
(ii) Equation technique
2. Graphic presentation:
(i) Break-even chart
(ii) Profit volume chart

✓ Application of Marginal Costing Technique: Marginal cost is essentially a technique of
decision-making. It is used in following fields.
1. Fixation of selling price :

2. Decision relating to the most profitable product mix :
3. Decision relating to make or buy,
4. Shut down or continue of determination or output level in period of recession of
depression
ACTIVITY BASED COSTING
✓ The Activity-Based Costing (ABC) is a costing system, which focuses on activities

performed to produce products.
✓ ABC is that costing in which costs are first traced to activities and then to products.
✓ ABC is developed due to many deficiencies of Traditional Cost systems.
✓ In traditional product costing system, costs are first traced not to activities but to an
organizational unit, such as department or plant and then to products.
Traditional system ABC system

Overheads are first related to departments Overheads are first related to activities or
cost centres (Production and Service Cost grouped into Cost Pools.
Centres)
Only two types of activities viz. Unit Level levels of activities in the manufacturing cost
Activities and Facility Level Activities are hierarchy viz. Unit Level, Batch Level,
identified. Product Level and Facility Level are
identified.
This method relates overheads to cost his method relates overheads to the causal
centres i.e. locations. It is not realistic of the factori.e. driver. Thus, it is more realistic of
behaviour of cost behaviour.
costs.
✓ Cost driver is an activity which generate cost. Costs are grouped according to what
drives them or causes them tobe incurred.
✓ A Cost Object: It is an item for which cost measurement is required e.g. Product , job or
a customer.
✓ Cost drivers type of Pure Volume, Weighted Volume, Situational, Motivational.
✓ Cost pool is created for each activity and such activities are related with each type of
product to determine the cost of such product.
✓ Stages in developed ABC system as under:
Identify resources
Identify activities
Identify cost objects
Determine resource drivers

Determine cost (activity) drivers
Assign costs to the cost objects
✓ Unit level cost: Use of indirect materials/consumables

Batch level cost: Material ordering, Inspection of Products.
Product-level cost: engineering change orders, equipment maintenance, product development

and scrap
Facility-level cost: Cost of maintaining a building or plant security oradvertisement promoting

the organization. Plant Security, Production Manager’sSalary and Maintenance of buildings.
✓ Human Resources : Facility-level

Parts management :Product-level
Purchasing :Batch-level
Quality Control Unit-level
Equipment set-up Unit-level
Training employees Facility-level
Assembly department Unit-level
Receiving department Batch-level
VALUATION OF SHARES
✓ Need for valuation of shares arises inter alia in the following circumstances:
- Assessments under the Wealth Tax Act.
- Purchase of a block of shares which may or may not give the holder thereof a controlling
interest in the company.
- Purchase of shares by employees of the company where the retention of such shares is
limited to the period of their employment.
- Formulation of schemes of amalgamation, absorption, etc.
- Acquisition of interest of dissenting shareholders under a scheme of reconstruction.
- Compensating shareholders on the acquisition of their shares by the Government under
a scheme of rationalisation.
- Conversion of shares, say, conversion of preference shares into equity.
- Advancing a loan on the security of shares.
- Resolving a deadlock in the management of a private limited company on the basis of
the controlling block of shares being given to either of the parties.
✓ Valuation by a valuer becomes necessary when:

- Shares are unquoted.

- Shares relate to private limited companies.
- The Court directs for valuation by an expert.
- Articles of Association or relevant agreements so provide.
- Large block of shares is under transfer.
- The law/applicable statue so requires.
✓ Methods of share valuation:

1)net assets methods
2) earning capacity or yield method
3) fair value method
✓ Net Asset Value Method
Step 1 : Compute Net Operating Asset ( sum all asset less external liability less Preference
Share capital )
Step 2 : Add Value of Goodwill and Non operating Assets if any (eg. Investments)
Step 3 : Divide the aggregate of Step 1 & 2 by the number of shares outstanding as at
Valuation date.
✓ Yield method :
The Various Methods under this are Dividend Capitalisation Method Earnings Capitalisation
Method & Productivity Factor Method.
Dividend Capitalisation Method
Step 1 : Ascertain Dividend per
share Step 2 : Ascertain Normal rate
of return.
Step 3 : Capitalise the Dividend per share at above normal rate of return to arrive at value per
share.
DP
S X
Value per share = 100
NRR
DPS = Dividend Per Share

NRR = Normal Rate of
Return)
2. Earnings Capitalisation Method

Step 1 : Compute Earnings Per Share (EPS).
Step 2 : Ascertain Normal Rate of Return (NRR).
Step 3 : Value per share is arrived by capitalising at NRR.
EPS X100
Value per share =
NRR
3. Productivity Factor Method
Step 1 : Computation of Productivity factor
Compute weighted average net worth of a given period.
Compute weighted average Profit After Tax (PAT) for the same period.
Compute Productivity factor
Weighted Average PAT x 100
Weighted Average Net Worth
Step 2 : Ascertain Net worth on the valuation date.
Step 3 : Compute Future Maintainable Profit (FMP).
Future Maintenance Profit = Net Worth x Productivity Factor.
Step 4 : Ascertain Adjusted FMP ie., Future Maintenance Profit as per Step 3 adjusted for
changes in business.
(eg. Change of tax rate).
Step 5 : Ascertain Normal rate of return.
Step 6 : Capitalise Adjusted FMP at NRR to arrive at value of business.
Step 7 : Add : Non operating Assets (eg. Investments) to above value of business.
Less : Preference Share Capital (if any)

Step 8 : Value per share = (Step 6 + Step 7) / Number of Shares
4. Market Price Method
Step 1 : Ascertain Earnings Per Share.
Step 2 : Ascertain from published sources the Price Earnings Multiples for similar size Company
operating in the same industry.
Step 3 : Value per share = EPS X PE Ratio.
✓ Methods of Valuing Goodwill:
Average Profits Method, Super Profits Method, Capitalisation Method & Annuity Method.
1) Average Profits Method:
Ascerain Profits of Normal year of the Business Return which shall be adjusted for
Non recurring items eg: Profit on sale of Asset
Non Operating items eg: Income from Investments
Changes in Business Condition eg: Change in Tax rates.
Computation of Average Profits
Note: Simple Average = For Fluctuating Profits
Weighted Average = For Increasing / Decreasing Profits in a trend.
Goodwill is Computed as the no. of years purchase of average profits.
Note: No. of years purchase represents the multiplication factor.

2) Super Profits Method:
Step 1 : Ascertain Normal Rate of Return (NRR) for the Industry in which the Company whose
Goodwill being valued.
Step 2 : Compute actual profits - operating profits made by the Company.
Step 3 : Compute actual capital employed - Either Terminal Capital employed or Average
Capital employed = Opening Capital Employed + Closing Capital 2 (or) = Closing Capital
employed - 1/2 the year profit
(or) = Opening Capital employed + 1/2 the year profit.
Capital employed is calculated under two approaches as follows:
Shareholders Approach :
Capital employed = Share capital + Reserves & Surplus – Miscellaneous Expenditure
Longterm funds Approach
Capital employed = Shareholder funds + Longterm borrowings.
The Capital employed ascertained as above is referred as Liabilities side approach and is to be
adjusted for the changes in values of OperatingAssets and after excluding non operating Assets.
Capital employed can alternatively be calculated under the Assets side Approach as follows:
Value of operating Assets to Business.
Less Outside Liabilities
Capital Employed = (a) - (b)
Step 4 : Compute Normal Profit ie., excess of actual profits (2) over normal profit (4)
Step 5 : Compute super profit ie., excess of actual profits (2) over
normal profit (4) Step 6 : Goodwill = No. of Years purchase x Super
Profits 3. Capitalisation Method Steps 1,2 and 3 same as in Super
profit method.

Step 4 : Compute Normal Capital employed.
Normal Capital employed = Actual Profit x 100
Normal rate of Return
Step 5 : Goodwill = Excess of Normal Capital employed over Actual Capital Employed.
VALUATION METHODS
(1) Discounted Cash Flow Model (DCF)-

This model calculates the value of an equity share as the total present value of all future
expected cash inflow _The present value is calculated by using some appropriate discount rate or
required rate of return on equity (Ke)_This is the minimum required rate of return from the
viewpoint of the prospective investor.
There can be two cases under DCF technique for valuation of an equity
(a) One Year Holding Period
(b) Multiple Years Holding Period
(2) Asset Approach-

An asset-based approach is a kind of business valuation that focuses on a company’s net
asset value (NAV), or the fair market value of its total assets minus its total liabilities, to
determine what it would cost to recreate the business.
It is further classified into:
(a) Net Asset Value- The total value of the assets of a company less its liabilities is the net asset
value. For the purpose of valuation, the usual thing to do is to divide the net assets by number
of shares to get the net assets per share.
(b) Price to book multiple Method-
The Price/Book Value Multiple of Comparable Company is arrived as follows:
a. Step 1- Weighted Average Market Price
b. Step 2- Divide by: Value per share as per Net Assets Value
c. Step 3- Price/Book Value Multiple
(3) Earning Based Model- The value of the business must be related to the profits it will earn, and
the cash it will generate in the future.

𝐍𝐞𝐭 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐈𝐧𝐜𝐨𝐦𝐞
Capitalization of Earning Method Value = 𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐑𝐚𝐭𝐞
(4) Measuring Cost of Equity –

a. Capital Asset Pricing Model (CAPM)-
The relationship between risk and return established by the security market line is called the
capital asset pricing model.
Total risk of a security comprises two components.
(i) Systematic Risk or Non-Diversifiable Risk
Systematic risk is the risk which is caused by factors beyond the control of specific company,
such as general factors in the market, GDP, inflation, interest rates, tax policy, government
policy, etc.
(ii) Unsystematic Risk or Diversifiable Risk
It is that part of total risk which is diversifiable. It is caused by factors which are within the control
of a specific company, such as management, operational efficiency, labour conditions and
financial leverage.
Uses of CAPM
It is used to determine the expected or required rate of return from a security. Two important uses of
CAPM are:
(a) In wealth management industry.
(b) In capital budgeting decision in Financial Management.
β: An Indicator of Systematic Risk- β is an indicator of systematic risk of a security.

• If a security has β< 1 then it is less responsive to changes in market returns.
• If a security has β> 1 then the security is more responsive to changes in market returns.
• A risk free asset is not responsive to changes in market returns and hence the β of a risk free
asset is always 0.
Cov (S,M)
β of a security can be calculated as β =
σM2
b. Arbitrage Pricing Theory- Arbitrage refers to the process of earning profit by taking advantage
of different pricing for the same asset.
The APT formula is:
E (rj) = rf + bj1RP1 + bj2RP2 + bj3RP3 + bj4RP4 + ... + bjnRPn
Effect of Arbitrage on the Price
To buy stock A and B the investor has to sell stock C. The buying pressure on stock A and B would
lead to increase in their prices. Conversely, selling of Stock C will result in fall in the price of stock C.
At lower price, there would be a rise in the expected return of stock C.
Arbitrage Pricing Theory Assumptions

• The theory is based on the principle of capital market efficiency, and hence assumes all
market participants trade with the intention of profit maximization.
• It assumes no arbitrage exists and if it occurs participants will engage to benefit out of it
and bring back the market to an equilibrium level.
• It assumes markets are frictionless, i.e., there are no transaction costs, no taxes, short-
selling is possible and an infinite number of securities is available.
(5) Economic Value Added
Economic value added (EVA) is a financial measure of what economists sometimes refer to as
economic profit or economic rent.
(6) Market Value Added
Market value added is the difference between the company’s market and book value of
shares.
Market Value Added = Company’s total Market Value - Capital Invested
(7) Shareholder Value Added (SVA)
Shareholder Value Added (SVA) represents the economic profits generated by a business
above and beyond the minimum return required by all providers of capital.
BEST OF LUCK FOR EXAM
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CORPORATE & MNGT

REVISE ENTIRE CMA IN JUST TWO HOUR

Faculty : Prof. RAJ AWATE ( always with U)

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

✓ ACCOUNTING ,ACCOUNTANCY ,BOOK-KEEPING ,ACCOUNTING CYCLE

- Accounting is the process of identifying ,measuring and communicating accounting information to

- An accounting cycle is a complete sequence beginning with the recording

of transaction and ending with preparation of final accounts .

- Users : Internal users of an accounting include management and employees .

✓ OBJECTIVES AND FUNCTIONS OF ACCOUNTING

Objectives of Accounting 1. To maintain systematic accounting records

Financial Accounting Financial Accounting is the process of identifying measuring and

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

Social Responsibility It is the process of identifying measuring and communicating the

Human Resource It is the process of identifying measuring and communicating the

Fundamental Accounting Three Fundamental Accounting Assumptions as per AS-1 : 1. Going

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

liquidation or of curtailing materially the scale of its operations .

✓ Accounting equation: whole Financial Accounting depends on Accounting Equation which

(i) As per Traditional Approach Personal , Real and Nominal

Equality Every debit has an equal amount of credit .

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

Types of Accounts Rules of debit Rules of Credit

For Personal Accounts Debit the receiver Credit the giver

Types of Accounts Rules of debit Rules of Credit

For Assets Accounts Debit the Increases Credit the Decrease

For Liabilities Accounts Debit the Decreases Credit the Increase

For Capital Accounts Debit the Decreases Credit the Increase

For Revenue Accounts Debit the Decreases Credit the Increase

For Expenses Accounts Debit the Increases Credit the Decrease

Meaning of Journalising Journalizing is a process of recording transaction in journal

Meaning of Journal Entry Journal entry is an entry made in journal

Advantages of Journal 1. Chronological recorded

3. Recording of both aspects.

✓ LEDGER AND POSTING

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

PERSONAL LEDGER IMPERSONAL LEDGER

Debtors' Ledger Creditors' Ledger Cash Book General Ledger

Nominal Ledger Private Ledger

✓ TYPES OF SUBSIDIARY BOOKS

Types 1. Cash Journals (i.e. Cash Book )

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

✓ Utilisation of Security premium :

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

When shares are issued at premium & premium is received :

When shares are issued at premium & premium is not received :

✓ Bonus shares Vs Right shares :

Bonus Shares Right Shares

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

✓ Lien of shares Vs forfeiture :

Points Lien Forfeiture

Procedure for Forfeiture of Shares

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

Prof. RAJ AWATE ( Faculty of CMA and Financial management FM ) 9860616258

Time Taken Procedure

Starting Day Obtaining:

A + 23 Holding EGM and passing special resolution, if required.

A + 24 Obtaining Declaration of Solvency (verified by an affidavit in e-form SH9);

A + 44 Maximum time for dispatch of letter of offer to all members.

Within 15 days Verification of offer to be completed;

Immediately on Open a Special Bank Account with Schedule Bank.