Concept of Surcharge in Income Tax
Surcharge is an additional Tax which is charged on Tax payable at specified Percentage.
Rate
of Surcharge: -
For Resident as well as Non-resident Individual, Hindu
Undivided Family (HUF), Artificial Juridical Person (AJP), Association of Persons
(AOP), Body of Individuals (AOP): -
·
If
Net Taxable Income is up to Rs. 50 Lakhs – No Surcharge
·
If
Net Taxable Income is above Rs. 50 Lakhs up to Rs. 1Crore – 10%
·
If
Net Taxable Income is above Rs. 1 Crore up to Rs. 2 Crore – 15%
·
If
Net Taxable Income is above Rs. 2 Crore up to Rs. 5 Crore – 25%
·
If
Net Taxable Income is above Rs, 5 Crore – 37%
Exceptions: -
·
For
Income chargeable u/s 68, 69, 69A, 69B, 69C and 69D (Deemed Incomes) rate of
Surcharge is at the rate of 25% always.
·
Maximum
rate of surcharge on Tax Payables on Income chargeable under Sec 111A, Sec 112A
and Sec 115AD is 15%. If Net Taxable Income (including such Incomes) of Assesses
exceeds Rs. 2 Crores but Net Taxable Income (excluding such Incomes) doesn’t exceed
Rs. 2 Crores than Maximum rate of Surcharge is 15%.
For Domestic Company: -
·
If
Net Taxable Income is up to Rs. 1 Crore – No Surcharge
·
If
Net Taxable Income is above Rs. 1 Crore up to Rs. 10 Crores – 7%
·
If
Net Taxable Income is above Rs. 10 Crore – 12%
Exceptions: -
·
Companies
opting for benefit of Sec 115BAA and Sec 115BAB than Rate of Surcharge is always
10% irrespective of Income (i.e. Rate of Surcharge is 10% form Rs. 1)
For Foreign Company: -
·
If
Net Taxable Income is up to Rs. 1 Crore – No Surcharge
·
If
Net Taxable Income is above Rs. 1 Crore up to Rs. 10 Crores – 2%
·
If
Net Taxable Income is above Rs. 10 Crore – 5%
For Partnership Firm (including Limited Liability
Partnership -LLP), Local Authority, Corporative Society: -
·
If
Net Taxable Income is up to Rs. 1 Crore – No Surcharge
·
If
Net Taxable Income is above Rs. 1 Crore – 12%
Exceptions: -
·
Cooperative
Societies opting for benefit of Sec 115BAD than Rate of Surcharge is always 10%
irrespective of Income (i.e. Rate of Surcharge is 10% form Rs. 1)
Note: - Marginal Relief of additional Tax (before
Health and Education Cess) exceeding additional Income is provided to all
assesses if Additional Tax Liability arise due to surcharge exceeds Income
earned over limit when surcharge is applicable.
Validity and Extension of E -Way Bill
E – Way Bill (Electronic Way Bill) is a document needs to be generated before movement of Consignment of Goods commences if Consignment Limit exceeds Rs. 50000 ( However Threshold limit of E-way Bill in some states exceeding Rs. 50000). For Calculation of Threshold limit GST Charged on Supply will be included but Value of Exempted Supply shall be excluded.
Validity of E – Way Bill
For Normal Cargo: -
• For Distance up to 100 Km – Valid for One Day
• For Every 100 Km or Part thereof beyond 100 Km: - Valid for Additional One Day for Every 100 Km or Part thereof.
For Over Dimensional Cargo: -
• For Distance up to 20 Km – Valid for One Day
• For Every 20 Km or Part thereof beyond 20 Km: - Valid for Additional One Day for Every 20 Km or Part thereof.
Extension of E – Way Bill
Validity of E – Way Bill can be extended 8 Hours before Expiry of validity or 8 Hours after Expiry of Validity.
Cancellation of E – Way Bill
E – Way Bill can be cancelled within 24 Hours of generation if any mistake or incorrect entry in E- Way Bill, Provided that E – Way Bill has not been verified by Officer(s) in transit.
Validity of E – Way Bill
For Normal Cargo: -
• For Distance up to 100 Km – Valid for One Day
• For Every 100 Km or Part thereof beyond 100 Km: - Valid for Additional One Day for Every 100 Km or Part thereof.
For Over Dimensional Cargo: -
• For Distance up to 20 Km – Valid for One Day
• For Every 20 Km or Part thereof beyond 20 Km: - Valid for Additional One Day for Every 20 Km or Part thereof.
Extension of E – Way Bill
Validity of E – Way Bill can be extended 8 Hours before Expiry of validity or 8 Hours after Expiry of Validity.
Cancellation of E – Way Bill
E – Way Bill can be cancelled within 24 Hours of generation if any mistake or incorrect entry in E- Way Bill, Provided that E – Way Bill has not been verified by Officer(s) in transit.
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Treatment of Sales Promotion Schemes under GST
Free Samples and Gifts: - As Per sec 7 (1) (a) Supply includes all forms of Supply of Goods or Service or both as Sale, Transfer, Barter, Exchange, License, Rental, Lease or Disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. However, as per Schedule I of CGST Act 2017 following Activities to be treated as Supply even made without Consideration: -
• Permanent transfer or disposal of business assets where Input Tax Credit has been availed on such assets.
• Supply of Goods or Service or both between related persons or distinct person as specified in Sec 25, made in the course or furtherance of Business. Provided Gift by Employer to Employer value not exceeding Rs. 50000 in a financial year shall not be treated as Supply of Goods or Service or both.
• Supply of Goods by a Principal to his agent where the agent undertakes to supply such Goods on the behalf the Principal or Supply of Goods by an Agent to his Principal where the agent undertakes to receive such Goods on behalf of the Principal.
• Import of Service by a Taxable Person from a Related Person or from any of his other establishments outside India, in the Course or Furtherance of Business.
Therefore Sample which are supplied free of Cost (Without Consideration) does not qualify as Supply except Activities Covered under Schedule I of CGST Act 2017.
As Per Sec 17(5) (h) of CGST Act 2017 Input Tax Credit (ITC) shall not be available in respect of Goods, Lost, Stolen, Destroyed, Written off or disposed of by way of Free Gifts or Free Samples etc. Thus, no Input Tax Credit (ITC) is not available to Supplier on Inputs, Input Service and Capital Goods to the extend they are used in relation to Free Gifts or Free Sample distributed without any consideration. However, where Activity of Supply of Gifts or Free Sample treated as Supply on account of Provisions contained in Schedule I of CGST Act 2017, supplier would be eligible to avail Input Tax Credit (ITC).
Buy one get one free: - Where Goods supplied under Offer as ‘Buy One, Get One Free’ or under other similar offer than such Supply will be treated as Composite or Mixed Supply under Sec 8 of CSGT Act 2017, therefore it will be treated as Supply of Two Goods for the Price of one. Taxability of such Supply will depend upon type of Supply (i.e. Composite Supply or Mixed Supply). Input Tax Credit (ITC) shall be available to the Supplier for Inputs, Input Service and Capital Goods used in relation to Supply of Goods or Service or both as part of such Offer.
As Per Sec 8 of CGST Act 2017 -
Composite Supply means Supply consisting of two or more supplies of Goods or Service or Both, which are Naturally Bundled and supplied in conjunction with each other in ordinary course of Business, one of which is a Principal Supply. Tax Liability shall be at the rate of Principal Supply. Example: - Charger Supplied with Mobile Phone.
Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both which are not naturally bundled and can be supplied independently but still supplied together. In other words, Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both made in conjunction with each other by a Taxable Person for a single Price where such supply does not constitute a Composite Supply.
Discounts including ‘Buy more, save more’ offer: - Where Supplier offers like Buy two or Get 20% off, 30% Discount on Purchase of RS.10000 or more and Get 1% Additional Discount on Purchase of 20000 Quantity or more in a year, in such case Discount offered by supplies to customers including staggered discount under such schemes shall be excluded from the Value of Supply determined under sec 15(3) of CGST Act 2017, including the reversal of Input Tax Credit (ITC) by the recipient of Supply attributable to Discount on the basis of documents(s) issued by the Supplier. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
Secondary Discount:- As Per Sec 34(1) of CGST Act 2017, where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or here the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.
As per clarification vide Circular No. 92/11/2019-GST Financial/Commercial Credit Note can be issued by Supplier even if the conditions of Sec 15(3)(b) of CGST Act 2017 are not satisfied (i.e. credit note(s) can be issued as a commercial transaction between the two contracting parties). Value of Supply shall not include any discount by way of issuance of Credit Note(s) as Secondary Discount or by any other means except in cases where provisions of Sec 15(3) (b) of CGST Act 2017 are satisfied. However, there will be no Impact on Availability of Input Tax Credit (ITC) in the Hands of Supplier in case of Secondary Discount, i.e. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
• Permanent transfer or disposal of business assets where Input Tax Credit has been availed on such assets.
• Supply of Goods or Service or both between related persons or distinct person as specified in Sec 25, made in the course or furtherance of Business. Provided Gift by Employer to Employer value not exceeding Rs. 50000 in a financial year shall not be treated as Supply of Goods or Service or both.
• Supply of Goods by a Principal to his agent where the agent undertakes to supply such Goods on the behalf the Principal or Supply of Goods by an Agent to his Principal where the agent undertakes to receive such Goods on behalf of the Principal.
• Import of Service by a Taxable Person from a Related Person or from any of his other establishments outside India, in the Course or Furtherance of Business.
Therefore Sample which are supplied free of Cost (Without Consideration) does not qualify as Supply except Activities Covered under Schedule I of CGST Act 2017.
As Per Sec 17(5) (h) of CGST Act 2017 Input Tax Credit (ITC) shall not be available in respect of Goods, Lost, Stolen, Destroyed, Written off or disposed of by way of Free Gifts or Free Samples etc. Thus, no Input Tax Credit (ITC) is not available to Supplier on Inputs, Input Service and Capital Goods to the extend they are used in relation to Free Gifts or Free Sample distributed without any consideration. However, where Activity of Supply of Gifts or Free Sample treated as Supply on account of Provisions contained in Schedule I of CGST Act 2017, supplier would be eligible to avail Input Tax Credit (ITC).
Buy one get one free: - Where Goods supplied under Offer as ‘Buy One, Get One Free’ or under other similar offer than such Supply will be treated as Composite or Mixed Supply under Sec 8 of CSGT Act 2017, therefore it will be treated as Supply of Two Goods for the Price of one. Taxability of such Supply will depend upon type of Supply (i.e. Composite Supply or Mixed Supply). Input Tax Credit (ITC) shall be available to the Supplier for Inputs, Input Service and Capital Goods used in relation to Supply of Goods or Service or both as part of such Offer.
As Per Sec 8 of CGST Act 2017 -
Composite Supply means Supply consisting of two or more supplies of Goods or Service or Both, which are Naturally Bundled and supplied in conjunction with each other in ordinary course of Business, one of which is a Principal Supply. Tax Liability shall be at the rate of Principal Supply. Example: - Charger Supplied with Mobile Phone.
Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both which are not naturally bundled and can be supplied independently but still supplied together. In other words, Mixed Supply means Supply consisting of two or more supplies of Goods or Service or Both made in conjunction with each other by a Taxable Person for a single Price where such supply does not constitute a Composite Supply.
Discounts including ‘Buy more, save more’ offer: - Where Supplier offers like Buy two or Get 20% off, 30% Discount on Purchase of RS.10000 or more and Get 1% Additional Discount on Purchase of 20000 Quantity or more in a year, in such case Discount offered by supplies to customers including staggered discount under such schemes shall be excluded from the Value of Supply determined under sec 15(3) of CGST Act 2017, including the reversal of Input Tax Credit (ITC) by the recipient of Supply attributable to Discount on the basis of documents(s) issued by the Supplier. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
Secondary Discount:- As Per Sec 34(1) of CGST Act 2017, where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or here the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed.
As per clarification vide Circular No. 92/11/2019-GST Financial/Commercial Credit Note can be issued by Supplier even if the conditions of Sec 15(3)(b) of CGST Act 2017 are not satisfied (i.e. credit note(s) can be issued as a commercial transaction between the two contracting parties). Value of Supply shall not include any discount by way of issuance of Credit Note(s) as Secondary Discount or by any other means except in cases where provisions of Sec 15(3) (b) of CGST Act 2017 are satisfied. However, there will be no Impact on Availability of Input Tax Credit (ITC) in the Hands of Supplier in case of Secondary Discount, i.e. Supplier shall be entitled to avail the Input Tax Credit (ITC) for such Inputs, Input Services and Capital Goods used in relation to Supply of Goods or Service or both on such Discount.
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Who are not eligible to opt for Composition Scheme?
- Supplier of Services except (a registered person whose aggregate turnover in the preceding financial year did not exceed Rs. 50 Lakh may opt to pay tax in composition at the rate of 3%CGST and 3%SGST/UTGST in lieu of the tax payable by him under sec 9(1) of CGST Act or Persons engaged in Restaurant Services)
- Supplier of Goods which are not leviable to tax.
- Supplier of Inter-State Outward Supplies of Goods.
- Persons supplying Goods through an Electronic Commerce Operators (ECO) who is required to collect Tax at Source under section 52.
- Manufacturer of Ice-cream, Pan Masala and tobacco.
Note: -
There is no restriction on Composition Suppler to receive Inter-State Inward
Supplies of Goods as also make Inter-State Inward and Outward Supply of
Service.
Different types of Costs in CA Final AMA
Opportunity Cost: - Opportunity Cost refers to the Value of Benefits scarified/forgone when one course of action is chosen, in preference to an alternative.
For Example: -
• The opportunity cost of using a machine to produce a particular product is the earnings foregone that would have been possible if the machine was used to produce other products.
• The opportunity cost of funds invested in a business is the interest that could have been earned by investing the funds in bank deposit.
• The opportunity cost of one’s time is the salary which he would have earned by his profession.
Notional Cost: - Cost used in product evaluation, decision making and performance measurement to reflect the use of resources that have no actual (Observable) cost.
For example: - Notional interest for internally generated funds on notional rent for use of space.
Avoidable Cost: - Avoidable costs are cost that can be skipped if the decision on activity in consideration will not been taken up.
Historical Cost: - Cost that has been already incurred in the past is called historical cost.
For Example: - Amount invested in purchase of machinery.
Sunk Cost: - Costs which have been incurred by a decision made in past and cannot be changed by any decision made in the future and do not play any role in decision making process are known as sunk costs.
All sunk costs are irrelevant for decision making but all irrelevant cost may not be sunk cost.
Out of Pocket cost: - Out of the Pocket Cost is that portion of costs which involves payments to outsiders i.e. it gives rise to cash expenditure as opposed to such costs as depreciation, which do not involve any cash expenditure. Such costs are relevant for price fixation during recession or when make or buy decisions are to be made.
Discretionary cost: - Discretionary Costs are the costs which can be changed with the discretion of a manager or appropriate decision making authority.
For Example: - Maintenance, Research and Development, Employees Training, Advertisement etc.
Committed Cost: - Committed costs are the cost which cannot be changed during the budgeted period.
For Example: -Depreciation on Assets, Lease Rentals or other Contractual Cost etc.
Engineered Costs: - Engineered costs results from a defined mathematical relationship with the cost object and resources consumed to produce an output.
Differential cost: - Differential Cost (Incremental or Decremental Cost) is the difference in total cost that will arise from the selection of one alternative instead of another.
Period Cost: - Cost relating to a time period rather than to the output of products or services. Period cost is charged to expense in the period incurred. This type of cost is not included within the cost of goods sold on the income statement. This type of expenses is generally included within the selling and administrative expenses.
For Example: - Depreciation Expenses, Commission, Advertisement Expenses, Sales Expenses etc.
Shut Down Cost: - When an organization suspends its manufacturing, certain fixed expenses can be avoided and certain extra fixed expenses may be incurred depending upon the nature of the industry. By closing down the manufacturing, the organization will save variable cost of production as well as some discretionary fixed costs. This particular discretionary cost is known as shut-down cost.
Inventoriable Cost: - Costs that are considered as part of merchandise and considered as asset when these are incurred and these costs become cost of goods sold when the final output is sold. In other words inventoriable costs are cost of purchase plus cost expended to make final product in saleable condition. For a manufacturer, cost of raw material issued to production plus labour cost plus manufacturing overheads are inventoriable cost.
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For Example: -
• The opportunity cost of using a machine to produce a particular product is the earnings foregone that would have been possible if the machine was used to produce other products.
• The opportunity cost of funds invested in a business is the interest that could have been earned by investing the funds in bank deposit.
• The opportunity cost of one’s time is the salary which he would have earned by his profession.
Notional Cost: - Cost used in product evaluation, decision making and performance measurement to reflect the use of resources that have no actual (Observable) cost.
For example: - Notional interest for internally generated funds on notional rent for use of space.
Avoidable Cost: - Avoidable costs are cost that can be skipped if the decision on activity in consideration will not been taken up.
Historical Cost: - Cost that has been already incurred in the past is called historical cost.
For Example: - Amount invested in purchase of machinery.
Sunk Cost: - Costs which have been incurred by a decision made in past and cannot be changed by any decision made in the future and do not play any role in decision making process are known as sunk costs.
All sunk costs are irrelevant for decision making but all irrelevant cost may not be sunk cost.
Out of Pocket cost: - Out of the Pocket Cost is that portion of costs which involves payments to outsiders i.e. it gives rise to cash expenditure as opposed to such costs as depreciation, which do not involve any cash expenditure. Such costs are relevant for price fixation during recession or when make or buy decisions are to be made.
Discretionary cost: - Discretionary Costs are the costs which can be changed with the discretion of a manager or appropriate decision making authority.
For Example: - Maintenance, Research and Development, Employees Training, Advertisement etc.
Committed Cost: - Committed costs are the cost which cannot be changed during the budgeted period.
For Example: -Depreciation on Assets, Lease Rentals or other Contractual Cost etc.
Engineered Costs: - Engineered costs results from a defined mathematical relationship with the cost object and resources consumed to produce an output.
Differential cost: - Differential Cost (Incremental or Decremental Cost) is the difference in total cost that will arise from the selection of one alternative instead of another.
Period Cost: - Cost relating to a time period rather than to the output of products or services. Period cost is charged to expense in the period incurred. This type of cost is not included within the cost of goods sold on the income statement. This type of expenses is generally included within the selling and administrative expenses.
For Example: - Depreciation Expenses, Commission, Advertisement Expenses, Sales Expenses etc.
Shut Down Cost: - When an organization suspends its manufacturing, certain fixed expenses can be avoided and certain extra fixed expenses may be incurred depending upon the nature of the industry. By closing down the manufacturing, the organization will save variable cost of production as well as some discretionary fixed costs. This particular discretionary cost is known as shut-down cost.
Inventoriable Cost: - Costs that are considered as part of merchandise and considered as asset when these are incurred and these costs become cost of goods sold when the final output is sold. In other words inventoriable costs are cost of purchase plus cost expended to make final product in saleable condition. For a manufacturer, cost of raw material issued to production plus labour cost plus manufacturing overheads are inventoriable cost.
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Important Concepts in GST
1. Complete Analysis of EWAYBILL
2. Activities to be treated as Supply even if made Without Consideration
3. Reverse Charge Mechanism (RCM) Under GST
4. Composition Scheme under GST
5. Interest Rates under GST
6. Negative List under GST
7. Utilization of Credit from Input Tax Credit
8. Utilization of Cash from Electronic Cash Ledger
9. Important Abbreviations used in GST
10.Annual Return in Goods and Service Tax
2. Activities to be treated as Supply even if made Without Consideration
3. Reverse Charge Mechanism (RCM) Under GST
4. Composition Scheme under GST
5. Interest Rates under GST
6. Negative List under GST
7. Utilization of Credit from Input Tax Credit
8. Utilization of Cash from Electronic Cash Ledger
9. Important Abbreviations used in GST
10.Annual Return in Goods and Service Tax
Calculation of Value of Exponential - (Power of e)
Step for Calculation of Value of Exponential - eX
Step I: Calculate the Value of X
Step II :- If Value of X is in simple number form (I.e. not in Power Form) then simply multiply 2.71828 by power times.
For Example: - Value X= 7 then Value of e7 = (2.71828) 7 = 1096.63.
Step III : - If Value of X is in Power Form than Calculate Value (2.71828)X by Using Dirty Power Formula.
Dirty Power Formula (A1/N)
Steps for Calculation
Step I: - √ 12 Times
Step II: - - 1
Step III: - Divide by N
Step IV: - + 1
Step V: - 12 Times * and Equal to
Example: -
Calculate Value of 2331/11
Solution: -
Steps
|
Calculation
|
Value
|
I
|
12 Times √ 233
|
1.00133170586
|
II
|
-1
|
.00133170586
|
III
|
Divide by 11
|
.00012106416
|
IV
|
+ 1
|
1.00012106416
|
V
|
12 Times * and =
|
1.64189122272
|
Important Technical Terms those should be used in CA Final Audit Examination
In CA Final Advance Auditing and Professional Ethics Paper use of Technical Terms is very Important. Students who use Proper Technical Terms at Proper Place will get good marks in CA Final Advance Auditing and Professional Ethics Paper. So. Students are advised to use more and more Technical Terms and words in CA Final Advance Auditing and Professional Ethics Paper.
Important Technical Terms: -
Reasonable Assurance, Material Misstatement, Professional Scepticism, Professional Judgement, Sufficient and Appropriate Audit Evidence, Vigilant Attitude, Inherent Limitations, Persuasive, Audit Risk, Inherent Risk, Control Risk, Detection Risk,Engagement Letter, Financial Reporting Framework, Adequate Accounting Records, Skillaas and Competence, Delegation, Direction, Monitoring, Review,Supervision, Quality Control Procedure, Quality Control Policies, Audit Procedure, Risk of Material Misstatement, Conclusion, Intentional Mistake, Deception, Fraudulent Financial Reporting, Misappropriation of Assets, Emezzing Receipts, Fictitious Transaction, Legal and Regulatory Framework, Law and Regulations, Compliance, Strategic Direction, Prevailing, Attestation, Ensure, Evaluate, Express, Review, Assurance,Engagement, Significant, Assertion, Consideration, Confirmation, Ascertain, Integrity, Defalcation, Objective etc.
Important Technical Terms: -
Reasonable Assurance, Material Misstatement, Professional Scepticism, Professional Judgement, Sufficient and Appropriate Audit Evidence, Vigilant Attitude, Inherent Limitations, Persuasive, Audit Risk, Inherent Risk, Control Risk, Detection Risk,Engagement Letter, Financial Reporting Framework, Adequate Accounting Records, Skillaas and Competence, Delegation, Direction, Monitoring, Review,Supervision, Quality Control Procedure, Quality Control Policies, Audit Procedure, Risk of Material Misstatement, Conclusion, Intentional Mistake, Deception, Fraudulent Financial Reporting, Misappropriation of Assets, Emezzing Receipts, Fictitious Transaction, Legal and Regulatory Framework, Law and Regulations, Compliance, Strategic Direction, Prevailing, Attestation, Ensure, Evaluate, Express, Review, Assurance,Engagement, Significant, Assertion, Consideration, Confirmation, Ascertain, Integrity, Defalcation, Objective etc.
Fundamental Concept of Transfer Pricing - CA Final AMA
Transfer Pricing means Price charged by One Department to another Department on Inter qqDepartmental Transfer/Sale of Goods or Services. Each Department will be treated as Seperate Profit Centre even if not mentioned in Question.
Minimum Price to be Charged by Transferring Department: -
If Transferring Department have Spare Capacity (i.e. Demand of Product or Service is less than Production Capacity of Transferring Department): - In such Transferring Department wiling to transfer at Cost ( at Variable Cost).
If Transferring Department doesn't have Spare Capacity : - In such case Transferring Department will charge Variable Cost plus Opportunity Cost ( i.e Loss of Profit Due Inter Departmental Transfer) or we can say at Market Price. Maximum Price that Transferee is willing to pay:- Transferee willing to pay Maximum Price of Goods or Service Not More than Market Price plus Savings Due to Inter House or Inter Department less any additional Cost to be incurred by Transferee due to In house Purchase.
Example:-
XYZ Ltd has 2 Department M and N. Department N Produce Product D which Requires Raw Material C which Produced by Department M. Department M have Production Capacity of 1000 Units and Department N Requires 600 Units of Raw Material. Variable Cost to Produce Per Unit of C is Rs. 40 and Market Price of Per Unit of C is Rs. 60.
1. What will Department M will Charge from Department N if Market Demand of Product C is :-
a) 1000
b) 400
c) 800
2. What will be the Maximum Price will Department N willing to Pay Department if
a) If Department N will Save Rs. 5 Per Unit of C on Transportation Cost.
b) If Department N have to incurre Rs. 10 Per Unit of C on Modification.
Solutions:-
1. a) Department M will Charge Market Price from Department N as M Department has No Spare Capacity.
1. b) Department M will Charge Variable Cost from Department N as Spare Capacity.
1. c) Department M will Charge Market Price for 400 Units and Variable Cost for 200 Units
2. a) Department N can Pay Maximum Price Per Unit is Rs. 65 i.e. Market Price plus Savings in Cost
2. b) Department N can Pay Maximum Price Per Unit is Rs. 50 i.e. Market Price minus Additional Cost to be incurred.
Minimum Price to be Charged by Transferring Department: -
If Transferring Department have Spare Capacity (i.e. Demand of Product or Service is less than Production Capacity of Transferring Department): - In such Transferring Department wiling to transfer at Cost ( at Variable Cost).
If Transferring Department doesn't have Spare Capacity : - In such case Transferring Department will charge Variable Cost plus Opportunity Cost ( i.e Loss of Profit Due Inter Departmental Transfer) or we can say at Market Price. Maximum Price that Transferee is willing to pay:- Transferee willing to pay Maximum Price of Goods or Service Not More than Market Price plus Savings Due to Inter House or Inter Department less any additional Cost to be incurred by Transferee due to In house Purchase.
Example:-
XYZ Ltd has 2 Department M and N. Department N Produce Product D which Requires Raw Material C which Produced by Department M. Department M have Production Capacity of 1000 Units and Department N Requires 600 Units of Raw Material. Variable Cost to Produce Per Unit of C is Rs. 40 and Market Price of Per Unit of C is Rs. 60.
1. What will Department M will Charge from Department N if Market Demand of Product C is :-
a) 1000
b) 400
c) 800
2. What will be the Maximum Price will Department N willing to Pay Department if
a) If Department N will Save Rs. 5 Per Unit of C on Transportation Cost.
b) If Department N have to incurre Rs. 10 Per Unit of C on Modification.
Solutions:-
1. a) Department M will Charge Market Price from Department N as M Department has No Spare Capacity.
1. b) Department M will Charge Variable Cost from Department N as Spare Capacity.
1. c) Department M will Charge Market Price for 400 Units and Variable Cost for 200 Units
2. a) Department N can Pay Maximum Price Per Unit is Rs. 65 i.e. Market Price plus Savings in Cost
2. b) Department N can Pay Maximum Price Per Unit is Rs. 50 i.e. Market Price minus Additional Cost to be incurred.
Shortcut to Calculate Value of Log and Anti Log
Steps to Calculate Value of Log:-
Step I :- Under Root Value by 19 Times
Step II :- Subtract 1
Step III :- Multiply by 227695
Steps to Calculate Value of Anti Log
Step I :- Divide the Value by 227695
Step II :- Add 1
Step III :- Multiply and Equal to 19 Times
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Step I :- Under Root Value by 19 Times
Step II :- Subtract 1
Step III :- Multiply by 227695
Steps to Calculate Value of Anti Log
Step I :- Divide the Value by 227695
Step II :- Add 1
Step III :- Multiply and Equal to 19 Times
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Standard Costing - Labour Variances - CA Final AMA
Labour Variances
Labour Cost Variance
Labour Cost Variance = Standard Cost – Actual Cost
Or
Labour Cost Variance = [(SH x SR) – (AH x AR)]
Labour Cost Variance = Labour Rate variance + Labour Ideal Time Variance + Labour Efficiency Variance
Labour Rate Variance
Labour Rate Variance = Standard Cost of Actual Time – Actual Cost
Or
Labour Rate variance = [(SR – AR) x AH]
Or
Labour Rate Variance = [(SR x AR) – (AR x AH)]
Ideal Time Variance
Ideal Time Variance = Standard Rate per Hour x Ideal Hour
Labour Efficiency Variance
Labour Efficiency Variance = Standard Cost of Standard Time for Actual Production – Standard Cost of Actual Time
Or
Labour Efficiency Variance = [(SH – AH) x SR]
Or
Labour Efficiency Variance = [(SH x SR) – (AH x SR)]
Labour Efficiency Variance = Labour Mix Variance + Labour Yield Variance
Labour Mix Variance (Gang Variance)
Labour Mix Variance = Standard Cost of Actual Time worked in Standard Proportion – Standard Cost of Actual Time Worked
Or
Labour Mix Variance = [(RSH – AH)] x SR]
Or
Labour Mix Variance = [(RSH x SR) – (AH x SR)]
Labour Yield Variance (Sub – Efficiency Variance)
Labour Yield variance = Standard Cost of Standard Time for Actual Production – Standard Cost of Actual Time worked in Standard Production
Or
Labour Yield Variance = [(SH – RSH) x SR]
Or
Labour Yield Variance = [(SH x SR) – (RSH x SR)]
Where,
SH = Standard Hours (Expected Time for Actual Output)
SR = Standard Rate
AH = Actual Hour
AR = Actual Rate
RSH = Actual Time worked in Proportion of Standard Time
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Labour Cost Variance
Labour Cost Variance = Standard Cost – Actual Cost
Or
Labour Cost Variance = [(SH x SR) – (AH x AR)]
Labour Cost Variance = Labour Rate variance + Labour Ideal Time Variance + Labour Efficiency Variance
Labour Rate Variance
Labour Rate Variance = Standard Cost of Actual Time – Actual Cost
Or
Labour Rate variance = [(SR – AR) x AH]
Or
Labour Rate Variance = [(SR x AR) – (AR x AH)]
Ideal Time Variance
Ideal Time Variance = Standard Rate per Hour x Ideal Hour
Labour Efficiency Variance
Labour Efficiency Variance = Standard Cost of Standard Time for Actual Production – Standard Cost of Actual Time
Or
Labour Efficiency Variance = [(SH – AH) x SR]
Or
Labour Efficiency Variance = [(SH x SR) – (AH x SR)]
Labour Efficiency Variance = Labour Mix Variance + Labour Yield Variance
Labour Mix Variance (Gang Variance)
Labour Mix Variance = Standard Cost of Actual Time worked in Standard Proportion – Standard Cost of Actual Time Worked
Or
Labour Mix Variance = [(RSH – AH)] x SR]
Or
Labour Mix Variance = [(RSH x SR) – (AH x SR)]
Labour Yield Variance (Sub – Efficiency Variance)
Labour Yield variance = Standard Cost of Standard Time for Actual Production – Standard Cost of Actual Time worked in Standard Production
Or
Labour Yield Variance = [(SH – RSH) x SR]
Or
Labour Yield Variance = [(SH x SR) – (RSH x SR)]
Where,
SH = Standard Hours (Expected Time for Actual Output)
SR = Standard Rate
AH = Actual Hour
AR = Actual Rate
RSH = Actual Time worked in Proportion of Standard Time
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Standard Costing – Material Variances - CA Final AMA
Material Variances
Material Cost Variance
Material Cost Variance = Standard Cost – Actual Cost
Or
Material Cost Variance = [(SQ x SP) – (AQ x AP)]
Material Cost Variance = Material Price variance + Material Usages Variance
Material Price Variance
Material Price Variance = Standard Cost of Actual Quantity – Actual Cost
Or
Material Price variance = [(SP – AP) x AQ]
Or
Material Price Variance = [(SP x AQ) – (AP x AQ)]
Material Usages Variance
Material Usages Variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Quantity
Or
Material Usage Variance = [(SQ – AQ) x SP]
Or
Material Usage Variance = [(SQ x SP) – (AQ x SP)]
Material Usages Variance = Material Mix Variance + Material Yield Variance
Material Mix Variance
Material Mix Variance = Standard Cost of Actual Quantity in Standard Proportion – Standard Cost of Actual Quantity
Or
Material Mix Variance = [(RSQ – AQ)] x SP]
Or
Material Mix Variance = [(RSQ x SP) – (AQ x SP)]
Material Yield Variance
Material Yield variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Production – Standard Cost of Actual Quantity in Standard Production
Or
Material Yield Variance = [(SQ – RSQ) x SP]
Or
Material Yield Variance = [(SQ x SP) – (RSQ x SP)]
Where,
SQ = Standard Quantity
SP = Standard Price
AQ = Actual Quantity
AP = Actual Price
RSQ = Actual Quantity in Proportion of Standard Quantity
Import Points to be considered in Material Variances
I. Material Price Variance is calculated at point of consumption unless otherwise mentioned in question to be calculated at the point of purchase. In such case Actual Quantity Purchased should be taken.
II. When opening stock is given in question then FIFO method should be used for stock while calculating variance at point of consumption.
III. Opening stock should be taken at standard price unless otherwise mentioned in question.
IV. In Batch Costing Input per Batch is equal for both Standard Quantity and Actual Quantity i.e. Standard Quantity = Actual Quantity.
V. If there is Work in Progress (WIP) then equivalent quantity of material used should be taken. In case of FIFO method cost for stock should be taken for remaining material to be used.
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Material Cost Variance
Material Cost Variance = Standard Cost – Actual Cost
Or
Material Cost Variance = [(SQ x SP) – (AQ x AP)]
Material Cost Variance = Material Price variance + Material Usages Variance
Material Price Variance
Material Price Variance = Standard Cost of Actual Quantity – Actual Cost
Or
Material Price variance = [(SP – AP) x AQ]
Or
Material Price Variance = [(SP x AQ) – (AP x AQ)]
Material Usages Variance
Material Usages Variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Quantity
Or
Material Usage Variance = [(SQ – AQ) x SP]
Or
Material Usage Variance = [(SQ x SP) – (AQ x SP)]
Material Usages Variance = Material Mix Variance + Material Yield Variance
Material Mix Variance
Material Mix Variance = Standard Cost of Actual Quantity in Standard Proportion – Standard Cost of Actual Quantity
Or
Material Mix Variance = [(RSQ – AQ)] x SP]
Or
Material Mix Variance = [(RSQ x SP) – (AQ x SP)]
Material Yield Variance
Material Yield variance = Standard Cost of Standard Quantity for Actual Production – Standard Cost of Actual Production – Standard Cost of Actual Quantity in Standard Production
Or
Material Yield Variance = [(SQ – RSQ) x SP]
Or
Material Yield Variance = [(SQ x SP) – (RSQ x SP)]
Where,
SQ = Standard Quantity
SP = Standard Price
AQ = Actual Quantity
AP = Actual Price
RSQ = Actual Quantity in Proportion of Standard Quantity
Import Points to be considered in Material Variances
I. Material Price Variance is calculated at point of consumption unless otherwise mentioned in question to be calculated at the point of purchase. In such case Actual Quantity Purchased should be taken.
II. When opening stock is given in question then FIFO method should be used for stock while calculating variance at point of consumption.
III. Opening stock should be taken at standard price unless otherwise mentioned in question.
IV. In Batch Costing Input per Batch is equal for both Standard Quantity and Actual Quantity i.e. Standard Quantity = Actual Quantity.
V. If there is Work in Progress (WIP) then equivalent quantity of material used should be taken. In case of FIFO method cost for stock should be taken for remaining material to be used.
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Portfolio Management - CA Final SFM
Portfolio
Management is concerned with effective management of Investment in securities
selection & reshuffling of securities to optimize returns to suite the
objectives of an investor.
Objectives of
Portfolio Management
Security/Safety of
Principal amount
Stability of Income
Capital Growth
Marketability
Liquidity
Diversification
Favorable Tax
Status
Basic Formulas
in Standard Deviation
S.
No.
|
Name
of Formula
|
Formula
|
Remarks
|
|
1.
|
Standard
Deviation
(Based
on Historical Data)
|
σx =
|
√ (∑d2x)/n
|
Where
d2x = (X – Average Return)
Average
Return = (∑x1 + x2 + ……….xn)/n
|
2.
|
Standard
Deviation
(Based
on Probable Data)
|
σx =
|
√ (∑Pd2x)
|
Where,
P is probability
|
3.
|
Variance
|
=
|
σ2
|
|
4.
|
Coefficient
of Variation
|
=
|
σ
E(R)
Or
σ .
Average
Return
|
In
words,
Standard
Deviation
Expected
Return
Or
Standard
Deviation
Average
return
|
5.
|
Range
|
=
|
Highest
Return – Lowest Expected Return
|
|
Selection of
Best Portfolio
|
||||
Return of
Portfolio
E(RP) =
E(RA) x WA + E(RB) x WB + ………
Where,
E(RP) =
Expected Return From Portfolio
E(RA) =
Expected Return from Security A
WA =
Weight of Security of A
When 2 Securities
in Portfolio
σP = √(σA2
wA2 + σB2 wB2
+ 2 σAσBwAwB x r)
or
σP = √(σA2
wA2 + σB2 wB2
+ 2 wAwB x COV(A,B))
When 3 Securities
in Portfolio
σP = √(σA2
wA2 + σB2 wB2
+ σC2 wC2 + 2 σAσBwAwB
x r + + 2 σAσCwAwC x r + + 2 σCσBwCwB
x r)
or
σP = √(σ2 wA2
+ σ2 wB2 + 2 wAwB x COV(A,B)
+ 2 wBwC x COV(B,C) + 2 wAwc
x COV(A,c) )
r(A,B) =
COV(A,B)/ σAσB
COV(A,B)
= (∑dA x dB)/n
or ∑dA x dB
x P
If r = 1, then
σP = σAwA
+ σBwB
If r = -1, then
σP = σAwA
- σBwB
Beta of Security
(Sensitivity of Portfolio Means Beta of Portfolio)
β = (Change in security Return)/(Change in Market Return)
or
β = (COV(S,M))/ σM2
or
β = r(S,M) x (σS/ σM)
Beta of Portfolio
βP = βAWA + βBWB
+ ………………..
Overall Beta/Beta of Firm/Assets
If No Tax
βo = βE x [E/(E + D)] + βD
x [D/(E + D)]
If nothing is mentioned about βD then βD
= 0
If Tax
βo = βE x [E/{E + D(1- tax rate)}]
+ β D[{D(1 – tax rate)}/{E + D(1 – tax rate)}]
βo = βE x [E/{E + D(1- tax rate)}]
+ 0
βE = βo x [E + D(1-tax rate)/E
Where,
βo = Overall Beta = βU (Beta Unlevered)
βE = Beta of Equity = βL (Beta
Levered)
βD = Beta of Debt
E = Equity
D = Debt
SML (Security
Market Line) Equation
Re = Rf + β(Rm – Rf)
Sharp Ratio
(Market Risk Premium)
Sharp Ratio = (RP – Rf)/σP
Alpha
Alpha = E(R) – CAPM
If Alpha is positive then stock is
undervalued and if alpha is negative then stock is overvalued and if Alpha = 0
then fairly valued.
Characteristic
Line (CL)
Y = a + bx
Y= Return from Stock
A = Intersect
B = Beta
X = return from stock if return from
market is zero
Capital Market
Line (CML)
σP = σMwm
+ σRfwRf
E(RP) = Rf + σP[(Rm
– RF)/ σm)
Wm = σP/ σm
Arbitrage
Pricing Theory (APT)
E(RP) =
Rf + β1(Rm – Rf) + β2(Rm
– Rf) + β3(Rm – Rf) + …………………
Where,
β1
= Beta of factor 1
β2 =
Beta of Factor 2
β3 =
Beta of factor 3
If Factor Risk
Premium or (Rm – Rf) is not defined then ,
FRP = (Actual Value – Expected Value)
RM or RS
= [(Dividend + Capital Gain)*100]/Initial Investment
Weight of
Security when r is other than 1 & -1
WA = (σB2 – COV(A,B))/
σA2 + σB2
– 2 COV(A,B)
WB = 1 - WA
If Investment amount is specified then
weighted average should be taken.
Total Risk (σS2)
= Systematic Risk (βS2 x σm2) + Unsystematic Risk (Random
Error)
r2 = (Systematic
Risk)/(Total Risk)
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