Author: Mohit Gupta

Final accounts – an understanding

Final accounts – an understanding In the previous post, as shared in the  Learning & Development group, I had talked about the various forms of statements, and their variations, based on the nature of business and the applicable laws. http://faoblog.com/final-accounts-understanding-4/ There are some fundamental principles which apply to all entities in the perspective of financial accounting. Going Concern – The business entity is in business as usual mode. It indicates normal accounting. This concept states that the business is currently on-going, and will continue to be in this state for a reasonably long period of time. The enterprise will...

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Leveraging Social Media for Organizational Development

I had written an article for the the Award Winning EKAAKSHARA’s April-June 2014 Edition of the the  Learning & Development group.. This edition’s theme is “Leveraging Social Media for Organization Development”. You can download this edition from: https://www.facebook.com/groups/cop.learning.development/641681169243975/ Here is the article: —————————————————— Leveraging Social Media for Organizational Development Overview The world gets smaller day by day, thanks to the social media. A huge number of social media applications have boomeranged over the last few years like LinkedIn, Facebook, Google+, Pinterest, Tumblr, Wikipedia, YouTube, Twitter, Yelp, Flickr, Second Life, Yahoo groups, WordPress and ZoomInfo. We managed to gain a link...

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Final accounts – an understanding

Yesterday, as shared in the  Learning & Development group, I had explained the concept of the trading account and a manufacturing account. I had left you with a thought “What about income and expenditure account / the receipt and payment account?” http://faoblog.com/final-accounts-understanding-3/ Before I go on to explaining what this is all about, I will ask you another question.. Are organizations limited to only either trading or manufacturing entities? The obvious answer is no… Entities can be formed for non-business purposes, for charitable purposes, for the benefit of a group of people and for hundreds of reasons. Citing some...

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Final accounts – an understanding

Final accounts – an understanding In my last post shared in the  Learning & Development group, we saw how based on tenure of benefit, we classify the balances in four categories, which define our final accounts. There is one exception to this rule, any amount receivable or payable will always go to the balance sheet, whether short term or long term. http://faoblog.com/final-accounts-understanding-2/ Now, are financial statements are only limited to these? What about the trading or the manufacturing account? I left you with this question last week. As the culture of accounting developed, the profit and loss statement, also...

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Final accounts – an understanding

Last post on this, shared in the  Learning & Development group: http://faoblog.com/final-accounts-understanding/ So, if we split the long term and short term, we can classify the balances of our books of accounts into four distinct categories: Short term debit balances – Expenses Short term credit balances – Incomes Long term debit balances – Assets Long term credit balances – Liabilities So the short term comprises of the statement, which is the called the “Profit and Loss Account” and the long term balances go into the “Balance Sheet”. We first tabulate the short term balances in the profit & loss...

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Final accounts – an understanding

I had recently started a series in the Learning & Development group, on Final accounts – an understanding. This week, I will share the posts with you. —————————————————————————- From today, I will be starting a new series, an understanding of final accounts. I will start with the basics of what final accounts are and reach to how they would look like for big companies, various formats of the same and eventually how to do an interpretation of the same. Why are final accounts so important? Let me share my own story with you. Way back from 1994-1998, I was an...

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BPO – Catch 22

BPO – Catch 22 I have been talking to various friends and professionals, who either have their own BPOs or are running some. One key challenge that they bring out are challenges with new players, the companies from onshore attempting to squeeze rates etc. In one particular case one upcoming BPO picked up a large deal at a rate of just $700 per resource per month, which translates to approximately INR 42,000 per month. If you really talk of direct costs at the lowest levels, probably you may get a good resource at about 60-70% of that amount, but...

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Record to report / R2R – General Accounting – Cost Accounting

Record to report / R2R – General Accounting – Cost Accounting First of all, a big apology for not writing a post on the core topics of our blog for over a week. I personally had some challenges back home and also, I have a solo art exhibition coming up from 18th April – 23rd April, which is eating up a lot of my time. There will be some disruptions on FAO posts till 23rd. If I am unable to write a post, I will surely share some good article. In our last post on cost accounting, we had seen...

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Record to report / R2R – General Accounting – Cost Accounting

Record to report / R2R – General Accounting – Cost Accounting In the last post, I had left you with a thought – can the process of costing apply to service industry as well? http://faoblog.com/record-report-r2r-general-accounting-cost-accounting-2/ The short and simple answer is – absolutely yes. In my previous job, I was working for a finance BPO. There used to a detailed exercise each year, ah yes, budgeting. This exercise used to account for all financials in the previous year, and create the next financial period projection. The data which was collected was used to ascertain the fully loaded cost of each...

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Record to report / R2R – General Accounting – Cost Accounting

Record to report / R2R – General Accounting – Cost Accounting Our last post on cost accounting can be accessed from the link below: http://faoblog.com/record-report-r2r-general-accounting-cost-accounting/ What exactly is a cost accounting process? This process is a major component of normally large manufacturing units. Each unit (or factory), as it manufactures the product that it is designed for, will consume some raw material. There will be a direct cost of the products going into the manufacturing line. Then to maintain that unit, there will be some overheads, like site maintenance, transportation costs, HR costs, accountants, cleaners, a pantry maybe, insurance, and...

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Processes – Record to report / R2R – General Accounting – Consolidations

Record to report / R2R – General Accounting – Consolidations Consolidations form a big and a critical process for the CFO’s office. You saw some critical challenges in this process, which make it complex. http://faoblog.com/processes-record-report-r2r-general-accounting-consolidations-2/ So what is the process all about Each unit will need to send its trial balance and a draft final account set to the back office The back office should have a repository of all instructions, special treatment of foreign exchange differences, handling of in-transit losses, a mapping chart to equate the ledger account nomenclature differences, etc. All information received needs to be tabulated and...

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Processes – Record to report / R2R – General Accounting – Consolidations

Record to report / R2R – General Accounting – Consolidations We discussed consolidations as a back office process, and shared an example with you. http://faoblog.com/processes-record-report-r2r-general-accounting-consolidations/ Some of you may wonder why we can anticipate challenges in this process? The complexities and challenges come from a number of factors: Multiple systems – As I had mentioned in my example in the last post, migrating all entities to a common ERP / accounting system might be difficult and expensive, so the CFO’s office picks up this. Each system may have a different setup, including ledger account nomenclature. Multiple Geographies – There will...

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Processes – Record to report / R2R – General Accounting – Consolidations

Record to report / R2R – General Accounting – Consolidations So you saw various steps / activities in an accrual back office process. http://faoblog.com/processes-record-report-r2r-general-accounting-accruals-6/ Another interesting process, very close to the CFO’s operations is Consolidation. For big companies, having a large number of offices, especially spread around the globe, this becomes a colossal activity for the CFO’s office. Most of the large companies today have grown by acquisition, and a very small percentage of these have actually migrated the acquired company to its own ERP / Accounting systems. There are legacy systems, which are difficult or very expensive to migrate....

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Processes – Record to report / R2R – General Accounting – Accruals

Record to report / R2R – General Accounting – Accruals We read how accruals would be a good back office process. http://faoblog.com/processes-record-report-r2r-general-accounting-accruals-5/ What would be the steps of this process? The accounting department at each unit of the client informs the back office of each contract / requirement, along with the period, periodicity, amount / percentage / rate of accruals They also inform of the frequency of the payment They inform of period end payables / receivables The back office creates a dynamic schedule for the accruals In some cases they set up automated procedures in the ERPs They pass...

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Processes – Record to report / R2R – General Accounting – Accruals

Record to report / R2R – General Accounting – Accruals We shared some reader’s feedback on accruals. http://faoblog.com/processes-record-report-r2r-general-accounting-accruals-4/ For large organizations, there would be a lot of transactions falling into the category of accruals. Every month there would be new contracts, which may lead to accruals. An example, the business gives a contract for multiple sites for maintenance of coffee machines. Each contract is executed in a different month. Also, the payouts are quarterly, however for accounting, these need to be accrued each month. There would be a lot of such contracts. So, it will not be prudent to spend...

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Processes – Record to report / R2R – General Accounting – Accruals

  Some feedback on our posts for accruals http://faoblog.com/processes-record-report-r2r-general-accounting-accruals-3/ It is nothing but outstanding expenses, which are needed to provide in month end or year end accounts. Like that, even income also to be provided in accounts, like Interest accrued but not received etc. – By Gouri Sankar Accrued expense or income is expense which has been incurred but not yet paid or yet not earn. This is the example of Expense must be recorded in the accounting period in which it is incurred. Therefore, accrued expense must be recognized in the accounting period in which it occurs rather...

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Processes – Record to report / R2R – General Accounting – Accruals

Record to report / R2R – General Accounting – Accruals We shared an example of accrued income. http://faoblog.com/processes-record-report-r2r-general-accounting-accruals-2/ Similar to accrued Income, we are quite aware of expenses accrued but not paid…. Insurance payments are a classic example, especially for plant and machinery, paid quarterly. There would be some amount paid during a fiscal period change. Interest on unpaid EMI is another example. Here the principal and interest upto the date of close will be accrued, as it pertains to the period for which the book closure is being affected. Some businesses like an electricity company would definitely need an...

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Processes – Record to report / R2R – General Accounting – Accruals

Record to report / R2R – General Accounting – Accruals We started discussing accruals. http://faoblog.com/processes-record-report-r2r-general-accounting-accruals/ Accruals simply specify that we need to accrue certain expenses / incomes, though not incurred / received, but pertaining to the current period. A very simple example is Bank interest. Let us say, the organization has deposited a sum of money in a long term deposit account (popularly known as a Fixed Deposit Receipt account in India), say for a period of five years, and the interest has to be paid at the end of the period. The interest on this account is compounding quarterly,...

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Processes – Record to report / R2R – General Accounting – Accruals

Record to report / R2R – General Accounting – Accruals One of the subcomponents affiliated to the trial balance process is accruals. We discussed the Trial Balance in the following posts: http://faoblog.com/processes-record-report-r2r-general-accounting-trial-balance-2/ http://faoblog.com/processes-record-report-r2r-general-accounting-trial-balance/ Ideally, accruals have to be run before a trial balance is prepared. What are accruals? Wikipedia defines accruals as: Accrual (accumulation) of something is, in finance, the adding together of interest or different investments over a period of time. It holds specific meanings in accounting, where it can refer to accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These types...

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ESOPS – Employee Stock Ownership Plans – A sample plan

              I hope the understanding of the terms for ESOPs will be good with you. We covered the terms in the following posts and the  in the L & D Group: http://faoblog.com/esops-employee-stock-ownership-plans-terms-2/ http://faoblog.com/esops-employee-stock-ownership-plans-terms/ Like I had mentioned last week, I am sharing a sample plan. This is an actual plan that was awarded to me. I will keep the confidential stuff out of this, but will give the overall structure, which will help you understand how an ESOP can be configured. In 2012, I delivered a phenomenal result to my organization on the Six...

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