The document discusses the verification and valuation of various assets and liabilities. It defines verification as examining the existence and ownership of assets, while valuation determines their current worth. Some key points:
- Current assets include cash, debtors, prepaid expenses and stock. Fixed assets include land, buildings, plant and equipment. Intangible assets lack physical existence but can be realized, like goodwill.
- Verification includes examining documents like deeds and agreements to validate ownership and values. Valuation methods consider depreciation, market values, and accounting standards.
- Contingent assets and liabilities may arise in future and are disclosed in footnotes rather than accounted for. Events after the balance sheet may require
Valuation of shares, nature of shares, factors affecting shares, need for valuation of shares, method of valuation of shares, net asset based method, yield based method, fair value method
This presentation is on Credit rating agencies in India. here I presents it's origin, importants, benefits, objectives, need and about different rating agencies.
Valuation of shares, nature of shares, factors affecting shares, need for valuation of shares, method of valuation of shares, net asset based method, yield based method, fair value method
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Verification and valuation of assets presentation by Syed Ali Gohar Shah 21/1...Syed Ali Gohar Shah Shah
This presentation was assigned by Respected Teacher SIR ATTA HUSSAIN SHAH and was presented by SYED ALI GOHAR SHAH In SINDH UNIVERSITY MIRPURKHAS CAMPUS. On the date of Monday 21/10/2019.
The Balance SheetA balance sheet is the financial statement that.docxmattinsonjanel
The Balance Sheet
A balance sheet is the financial statement that reports a firm’s financial condition at a specific time. As highlighted in the sample balance sheet in Figure 17.5 (for our hypothetical vegetarian restaurant Very Vegetarian introduced in Chapter 13), assets are listed in a separate column from liabilities and owners’ (or stockholders’) equity. The assets are equal to, or balanced with, the liabilities and owners’ (or stockholders’) equity. The balance sheet is that simple.
figure 17.5: SAMPLE VERY VEGETARIAN BALANCE SHEET
Current assets: Items that can be converted to cash within one year.
Fixed assets: Items such as land, buildings, and equipment that are relatively permanent.
Intangible assets: Items of value such as patents and copyrights that don’t have a physical form.
Current liabilities: Payments that are due in one year or less.
Long-term liabilities: Payments not due for one year or longer.
Owner’s equity: The value of what stockholders own in a firm (also called stockholder’s equity).
balance sheet
Financial statement that reports a firm’s financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owners’ equity.
Let’s say you want to know what your financial condition is at a given time. Maybe you want to buy a house or car and therefore need to calculate your available resources. One of the best measuring sticks is your balance sheet. First, add up everything you own—cash, property, and money owed you. These are your assets. Subtract from that the money you owe others—credit card debt, IOUs, car loan, and student loan. These are your liabilities. The resulting figure is your net worth, or equity. This is fundamentally what companies do in preparing a balance sheet: they follow the procedures set in the fundamental accounting equation. In that preparation, it’s important to follow generally accepted accounting principles (GAAP).
Since it’s critical that you understand the financial information on the balance sheet, let’s take a closer look at what is in a business’s asset account and what is in its liabilities and owners’ equity accounts.
Classifying Assets
Assets are economic resources (things of value) owned by a firm. Assets include productive, tangible items such as equipment, buildings, land, furniture, and motor vehicles that help generate income, as well as intangible items with value like patents, trademarks, copyrights, and goodwill. Goodwill represents the value attached to factors such as a firm’s reputation, location, and superior products. Goodwill is included on a balance sheet when one firm acquires another and pays more for it than the value of its tangible assets. Intangible assets like brand names can be among the firm’s most valuable resources. Think of the value of brand names such as Starbucks, Coca-Cola, McDonald’s, and Apple. Not all companies, however, list intangible assets on their balance sheets.
assets
Economic resources (things of val ...
Basic of business and commerce
Business: The term business has been taken from word busyness which means being busy. It refers to organized efforts of an enterprise to produce and supply consumers with goods and services for a profit.
It refers to any human productive and economic activity which lead to earning profit.
Business Activity = Production + Distribution of goods and services for earning profit.
Production refers to producing/manufacturing/converting raw material into semi-finished & finished products. Mainly this activity takes place in industry/factory.
Distribution= Refers to the placement or delivery of products to customers/ consumers.
Business studies is an academic subject taught in schools and at a university level in many countries. Its study combines elements of accountancy, finance, marketing, organizational studies and operations.
Summary of Market Structures
Market structure is the interconnected characteristics of a market, such as the number and relative strength of buyers and sellers, degree of freedom in determining the price, level and forms of competition, the extent of product differentiation and ease of entry into and exit from the market
Monopolistic Competition
Definition: Monopolistic competition is the market structure where a large number of firms that produce differentiated products which are close substitutes for each other.
In other words, large sellers selling the products that are similar, but not identical and compete with each other on other factors besides price
The monopolistic competition combines elements of both monopoly and competition. Since each firm sells a differentiated product, it has some control over the price at which it sells its output.
Monopoly Competition
Monopoly (from the greek “mónos”, single, and “polein”, to sell) is a form of the market structure of imperfect competition, mainly characterized by the existence of a sole seller and many buyers. This kind of market is normally associated with the entry and exit barriers.
In economics, a monopoly refers to a firm which has a product without any substitute in the market. Therefore, for all practical purposes, it is a single-firm industry.
A monopoly is a firm that supplies all of the output in a market.
Perfect Competition
Market structure is the interconnected characteristics of a market, such as the number and relative strength of buyers and sellers, degree of freedom in determining the price, level and forms of competition, extent of product differentiation and ease of entry into and exit from the market
Market & Market Structure
“Market is an area or atmosphere of potential exchange”
~Philip Kotler
“Market is not a geographical meeting place but as any getting together of buyers and sellers, in person, by mail, telephone, telegraph and Internet or any other means of communication”
~ Prof. Mitchel
The input of Elasticity in Decision Making
The concept of price elasticity of demand has important practical applications in managerial decision-making.
Uses of price elasticity can be pointed out as below:
Price fixation
Price discrimination
Public utility pricing etc....
Elasticity of Supply
The elasticity of supply can be defined as “the degree (measure) of responsiveness in quantity supplied to a change in price”.
It is also defined as the percentage change in quantity supplied divided by percentage change in price.
It represents the rate of change in quantity supplied due to a change in its own price.
Elasticity of supply can be defined as “the degree (measure) of responsiveness in quantity supplied to a change in price”.
It is also defined as the percentage change in quantity supplied divided by percentage change in price.
It represents the rate of change in quantity supplied due to a change in it’s own price.
Cross Price Elasticity of Demand
The cross elasticity of demand measures the responsiveness of the quantity demanded a good to a change in the price of another good.
If the cross elasticity is negative, the commodities are compliments.
If the cross elasticity is positive, the commodities are said to be substitutes.
Income Elasticity of Demand
Income is an important variable affecting the demand for a good.
When there is a change in the level of income of a consumer, there is a change in the quantity demanded of a good, other factors remaining the same.
Elasticity of Demand
Law of demand explains the directions of changes in demand. A fall in price leads to an increase in quantity demanded and vice versa.
But it does not tell us the rate at which demand changes to change in price.
The concept of elasticity of demand was introduced by Marshall.
This concept explains the relationship between a change in price and the consequent change in quantity demanded.
Nutshell, it shows the rate at which changes in demand take place.
Market Equilibrium
Equilibrium is a situation in which opposing forces balance each other. Equilibrium in a market occurs when the price balances the plans of buyers and sellers.
The equilibrium price is the price at which the quantity demanded equals the quantity supplied.
The equilibrium quantity is the quantity bought and sold at the equilibrium price.
Price regulates buying and selling plans.
Price adjusts when plans don’t match.
Supply and its concept
If a firm supplies a good or service, then the firm
1. Has the resources and the technology to produce it,
2. Can profit from producing it, and
3. Has made a definite plan to produce and sell it.
Resources and technology determine what it is possible to produce. Supply reflects a decision about which technologically feasible items to produce.
The quantity supplied of a good or service is the amount that producers plan to sell during a given time period at a particular price.
Determinants of demand
The demand for a product is influenced by a number of factors. Determinants of demand (also called factors affecting demand) are the factors which cause the demand curve to shift.
Exceptions to the Law of Demand
A normal demand curve falls downward from left to right. The basic feature of the demand curve is negative sloping
But sometimes the demand curve may slope upward from left to right. In other words, it may have a positively inclined curve.
These phenomena may due to:
Giffen paradox
Veblen or Demonstration effect.
Ignorance.
Speculative Effect.
Fear of Shortage.
Necessaries
Brand Loyalty
Festival, Marriage etc.
The slope of the demand curve
The demand curve generally slopes downward from left to right.
It has a negative slope because of the two important variables price and quantity work in the opposite direction.
The fundamental reasons for the demand curve to slope downward are as follows:
Law of Diminishing Marginal Utility
Law of Equi-Marginal Utility
Income Effect
Substitution Effect
Demand
In economics “Demand” means the quantity of goods and services which a person can purchase with a requisite amount of money.
“Demand means the various quantities of goods that would be purchased per time period at different prices in a given market.
Islamic Economic System
Islam is a complete code of life. It is not only concerned with the spiritual upliftment of human beings, it is equally concerned about their material and physical well-being. Islam guides its followers in financial and economic matters, in social and political affairs, and also in moral and personal spheres of human life.
"Whatever is in the heavens and the earth belongs to Allah." (2:284)
Allah is the owner of the whole universe. It is in this capacity that He has allowed us to own theblessings of this world by saying,
"He has created for you whatever that is in the earth."(2:29)
However, Islam also wants to prevent the excessive accumulation of wealth in the hands of a few peopleso the society may not fall into two classes: one is overstuffing, while the other is starving.
The Qur'an justifies the concept of tax by saying:
"...so that (the wealth) may not become a monopoly of the rich among you." (59:7)
Islam has prohibited
Usury (Riba), Interest
Hoarding
Speculation
Insurance
Overtrading
Sale without possession (Calf in the womb, Fishes in Ponds etc.)
Securing profits by exploiting the immoral desires of people etc.
Socialism:
Collective ownership and democratic control of the material means of production by the workers and the people
Socialism is a term applied to an economic system in which property is held in common and not individually, and relationships are governed by a political hierarchy. Common ownership doesn't mean decisions are made collectively, however. Instead, individuals in positions of authority make decisions in the name of the collective group.
Socialists argue that socialism would allow for wealth to be distributed based on how much one contributes to society, as opposed to how much capital one holds.
Mixed Economy
Any economy in which private corporate enterprises and public sector enterprises exist side-by-side, and decisions taken through market mechanism are supplemented by some form of partial planning, is to be described as a mixed economy.
This system overcomes the disadvantages of both the market and planned economic systems.
Provides a clear demarcation of the boundaries of the public sector and private sector so that the core sector and strategic sectors are invariably in the public sector.
The government intervenes to prevent undue concentration of economic power and monopolistic and restrictive trade practices
The rights of the individual are respected and protected subject only to the requirements of public law and order and morality
Instructions for Submissions thorugh G- Classroom.pptxJheel Barad
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Welcome to TechSoup New Member Orientation and Q&A (May 2024).pdfTechSoup
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Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
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How to Make a Field invisible in Odoo 17Celine George
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He discussed the concept of quality improvement, emphasizing its applicability to various aspects of life, including personal, project, and program improvements. He defined quality as doing the right thing at the right time in the right way to achieve the best possible results and discussed the concept of the "gap" between what we know and what we do, and how this gap represents the areas we need to improve. He explained the scientific approach to quality improvement, which involves systematic performance analysis, testing and learning, and implementing change ideas. He also highlighted the importance of client focus and a team approach to quality improvement.
The Indian economy is classified into different sectors to simplify the analysis and understanding of economic activities. For Class 10, it's essential to grasp the sectors of the Indian economy, understand their characteristics, and recognize their importance. This guide will provide detailed notes on the Sectors of the Indian Economy Class 10, using specific long-tail keywords to enhance comprehension.
For more information, visit-www.vavaclasses.com
We all have good and bad thoughts from time to time and situation to situation. We are bombarded daily with spiraling thoughts(both negative and positive) creating all-consuming feel , making us difficult to manage with associated suffering. Good thoughts are like our Mob Signal (Positive thought) amidst noise(negative thought) in the atmosphere. Negative thoughts like noise outweigh positive thoughts. These thoughts often create unwanted confusion, trouble, stress and frustration in our mind as well as chaos in our physical world. Negative thoughts are also known as “distorted thinking”.
3. Objectives
Introduction
Verification and Valuation
Difference between Verification and Valuation
Relationship between Verification and Valuation
Classification of Assets
Window Dressing
Verification and Valuation of Assets
4. Introduction
One of most important duties of an Auditor is audit of
accounts of a concern, to verify the assets & liabilities
appearing in the balance sheet of business concern.
5. Verification
Verification of Assets is a enquiry into title
(ownership), existence, possession, Classification
and verify that assets are free from charge or not.
6. Advantages Of Verification
It display true and
actual position of
Balance Sheet
Proper recording of
Assets & Liabilities
Avoid manipulation of
accounts
7. Valuation
Meaning determine the current worth of something.
Determining the value of the assets shown in the Balance
Sheet on the basis of generally accepted accounting
principles.
If valuation of assets is not correct, than the financial
statements (B.S & P&L a/c ) can not be correct.
Valuation is primary duty of Company officials.
8. Difference Between Verification & Valuation
Verification is a final
work.
Verification is the work
of Auditor.
Verification is made at
the end of the year.
Valuation is the initial
work and it need to
verification.
Valuation is the work of
concerned authority or
board (Company)
Valuation is made
throughout the year
9. Relationship Between Verification and Valuation
Valuation of assets is the part of verification, without
proper valuation of assets, verification is not possible.
Verification includes apart from (except) valuation “the
examination of ownership right, the existence of the
assets in business & its freeness from any mortgage”.
Verification and valuation of assets are almost
interdependent.
Verification and valuation of assets is a combined
process by which the position of different assets
appearing in the balance sheet is examined.
10. Window Dressing
The fraud through manipulation of accounts is known as window
dressing because accounts are manipulated to show a wrong picture
of the profit or loss of the business and its financial affairs.
It is action taken to improve the appearance of a company’s
financial statements .
It may also be used when a company want to impress a lender for
qualify of a loan.
Example:
Income of previous year may be recorded in the current year.
Showing short term liabilities as long term liabilities.
12. Fictitious Assets
No physically existence
No realizable value but represents actual cash
expenditure.
The purpose of creating a fictitious assets is to
account for expenses those incurred at the time of
commencement.
i.e. Preliminary Expenses, discount on issue of
shares.
Fictitious assets are written off as soon as possible
from earnings of the company.
13. Intangible Assets
Intangible assets are those assets which have no
physical existence.
Can be realize
They does not shows in the balance sheet until
purchased
Example:
o Goodwill
o Patent rights
o Copyrights
o Trademarks
14.
15. Intangible Assets Fictitious Assets
The intangible assets can
be realize.
The intangible assets also
don’t posses physical
existence like intangible
asset.
Goodwill does not appear
in the balance sheet
except when it is actually
purchased.
The fictitious can not be
realize.
Fictitious assets are
deferred revenue (future
revenue) expenditure
whose benefit is derived
over long period of time
The fictitious assets
appear in balance sheet.
Difference Between Intangible and Fictitious
Assets
16. Fixed Assets
Assets which are purchased for long term use for the
purpose of producing or providing goods or service
and not for sale in the normal course of business
Not easily converted into cash.
Examples:
Land & buildings
Equipment.
Fixtures and Furniture
Plant and Machinery
17.
18. Land & Building
Classified in two types
Freehold Property
Leasehold Property
Freehold Property:
A property which is free from hold
(possession/Rights) .
This means that the property you are buying is
free from the hold of any body besides the owner.
That's why the owner enjoys complete ownership.
19. Cont.
Leasehold Property:
The property which is on lease (rent).
The property (plot/flat/villa/mall/factories) which is
leased by the landlord for a certain period of time to the
lessee (tenant / leaseholder / renter / occupant /
dweller).
The (tenant) have been given the right to use during that
specified time by the landlord.
Generally, the lease varies from 30 to even 99 years (in
case of long term leases).
The ownership of the property returns to the landlord
when the lease comes to an end.
20. Verification of Freehold Property
Auditor verify the title deed first of all.
He should check that land is in the name of
the client.
Note the area covered
If deed is deposited as mortgage than auditor obtain
certificate for verification.
21. Valuation of Freehold Property
The cost of buildings should be depreciated at
appropriate value, depending upon the quality of their
structure and the use, which is being made of them.
The auditor has to see the basis of revaluation & confirm
that same method has been used in past.
Ensure that depreciation charged on building only not on
land (but in some cases depreciation can be charged on
land, in case of Location, structure & Quality).
22. Verification of Leasehold Property
Auditor examined the lease agreement / deed for
find out the amount of premium paid for period &
other term. i.e. lease period, maintenance,
insurance etc.
Note the area covered
Also confirm the write-off the
legal expense incurred for lease.
Auditor should note down the
condition of lease check the
properly physically if possible
23. Valuation of Leasehold Property
The value of lease checked from lease deed.
Valuation of property depend on the type of the property,
its structure and durability, on the situation size, shape,
outlook , width of roadways the quality of materials used
in the construction and present days prices of material.
Auditor check if any maintains with reference (Bills) also
check physically if possible.
24. Hire Purchase System
Meaning: The hire-purchase system is a system under which the
purchase price is paid in a number of installments. As soon as the
contract is entered into and the first installment is paid the hire-
purchase acquires possession (not the ownership) of the goods.
After the payment of the final installment, the hire-purchaser becomes
the full fledged owner of the goods. So long as he does not become the
owner, the installments paid by him are considered to be the payment
for hire. In case the hire-purchase fails to pay any particular
installment, the seller or vendor can the away the goods, and the
installment already paid become forfeited.
25. Verification of Assets purchase under Hire
Purchase
The hire purchase agreement should be inspected in
order to find out the term and conditions of
purchase.
After the payment of the final installment, the
purchaser becomes the full fledged (with complete
control) owner of the goods
26. Valuation of Assets purchase under Hire Purchase
The auditor should see the hire purchase deed and
determine the price of asset.
The calculation of the annual depreciation should be
based on the cash price of the asset and not on the
total installment value.
27. Verification and Valuation of Investment
Investment:
Money committed or property acquired for future
income.
The investment classified as under
a) Quoted Investment
b) Unquoted Investment
28. Cont.
Quoted Investment:
A company is said to be "listed", or "quoted”,
If its shares can be traded on a stock exchange.
i.e. Public Limited Companies .
29. Cont.
Unquoted Investment
A company is said to be “unlisted", or “unquoted” stocks that are
not listed on an stock exchange and so have no publicly stated ( price.
Investment which is difficult to value e.g. shares which have no stock
exchange listing
i.e. Private Company etc.
30. Verification of Quoted Investment
Check of authorization for the purchase of the investment. e.g. review of appropriate
board minute book (book which record the conclusion of meeting).
Vouch the purchase to brokers contract note and share certificate to the cash
payment
Examine the Share certificate to ensure that the type of security and number of
share agrees with investment account and that the share is held in the company with
its name.
Use a share information service to determine the dividend which should have been
received during the year.
Check that the investments are properly classified for Company Act disclosure
purposes.
31. Valuation of Quoted Investment
The auditor should satisfy himself that the
investment has been valued in the financial
statement in accordance with recognized
accounting policies and practices and relevant
statutory requirements.
The auditor should examine whether in
computing the cost of investment, expenditure incurred on account of
transfer fees stamp duty, brokerage etc is included in the cost of
investments.
32. Verification of Unquoted Investment
Study the Memorandum of Association as an authority for such
investment.
Where investments are in large numbers, the auditor should obtain the
schedule of securities certified by a senior officer of the company.
Obtain the schedule of investment comprises for information about the
names of the securities / investment, date of their acquisition, nominal/
face value, cost price, book value paid up value market value, rates of
interest applicable, dates of interest due, tax deduction, etc. at the date
of balance sheet.
33. Valuation of Unquoted Investment
The auditor should examine the method adopted by
the organization for determining the market value of
such securities he should examine whether the
method of valuation of securities such as by entity is
one of the recognized methods of valuation of
securities. Such as breakup value method,
capitalization of yield method, yield to maturity
method etc.
34. Verification of Contingent Assets
A contingent asset is a possible asset which arise from future due to
occurrence of events that are not under an organizational control.
Examples:
Receiving of bad debts
Refund of octroi (duty) paid for goods, which have been sent out later.
Uncalled share capital of company (uncalled share capital refers to the
amount of the nominal value of a share which is unpaid and has not
been called up by the company).
35. Bank Overdraft
Overdraft is an extension of credit from a lending
institution when an account reaches zero.
An overdraft allows the individual to continue
withdrawing money even if the account has no funds
in it. Basically the bank allows a set amount of
money.
36. Verification of Overdraft
The auditor should see Memorandum of association
for borrowing power and limitation of company.
He should examine the term and condition of
overdraft from the agreement between bank and
company.
The auditor should examine the interest on overdraft
has been paid or not.
Confirm & check the amount limit sanctioned by
bank
Check if any security was offered as terms of
agreement
37. Proposed Divided
It is a way in which a company shares its profit to its
shareholder.
It is given in percentage of the value of the share.
It is declared in Company’s general meeting from
that day its became as liability.
38. Verification of Proposed Divided
Examine special provisions in the Memorandum or Article of
Association in respect of payment of dividends.
Ascertain that it does not included unpaid (unclaimed) dividends,
which must be excluded from it and shown separately.
See that the amount of proposed dividend recommended by the board
that must stated in the balance sheet.
39. Contingent Liabilities
Obligation which arises from future event.
It is not to record contingent liabilities in the books
of account.
A reference is made to them by way of a footnote to
the balance sheet.
Examples:
Guarantees
Pending labor disputes
40. Verification f Contingent Liabilities
Auditor should see that unknown and known such
liabilities are record into account on the date of
balance sheet.
He should verify that such liabilities are shown on
the balance sheet by foot note.
Auditor should obtain certificate from the
responsible officer (Accountant/Bookkeeper) that all
known liabilities been taken into account.
Auditor should also check that sufficiently reserve
has been allocated for such liability which is likely to
result in a loss.
41. Event occurring after the Balance Sheet
Financial events that occur after the date of the
balance sheet, but before the date that the balance
sheet are issued.
Events
Adjusting Events
Non-Adjusting Events
42. Adjusting Events
Those events that provide further evidence about the
existed at the end of reporting is called adjustment
event.
Example:
A loss on a trade receivable account which is
confirmed by the insolvency of a customer which
occurs after the balance sheet date.
A fraud during the accounting period is detected
after the balance sheet date but before the approval .
43. Non-Adjusting Events
Those events that provide that reflect the end of
reporting period.
Examples:
A decline in market value of investment between the
balance sheet date and the date on which the
financial statement are approved.
44. Prior Period and Extraordinary Item and Change in
Accounting Policies
Prior (past) Period:
The financial accounting term prior period
adjustment refers to either a correction to a existing
period’s financial statement.
Prior period generally used in association with
adjustments made in the revenue or expenses of the
current accounting year to reflect a new accounting
policy or error corrections.
45. Extraordinary Item
These are income statement item that are
unusual in nature and infrequent in occurrence.
Example:
Loss from an earthquake and loss from a country
taking over a company’s oil refinery.
46. Accounting Policies:
Accounting policy are the specific principles,
bases convention rules and practice applied by an
entity in presenting financial statements.
Change in accounting policies
According to IAS8 The International Accounting
Standard code has power to select and change
accounting policy, accounting for change in
estimates reflecting correction of prior period.