Sunday, June 30, 2013

Gift Tax

Definition of Gift Tax

Gift means presentation of something by one person to another without consideration. According to Section 2(8) of the Gift Tax Act, 1990, gift means the transfer by one person to anther of any movable or immovable property voluntarily and without consideration of any money or money’s worth. The value of gift should be the fair market value of the property transferred as determined by the Deputy Commissioner of Taxes and where such value cannot be determined, the rules prescribed in Section 5 of Gift Tax Act, 1990 will be applied.

The legal elements of Gift Tax

The following legal elements are observed in the Gift Tax Act, 1990:
               i)     Transfer of Property i.e. gift mist be transferred to the beneficiary.
              ii)     The transfer must be an existing property.
             iii)     The transfer must be voluntarily and without or with inadequate consideration in money or money’s worth.
             iv)     Minimum taxable limit of Gift is Tk, 20,000.
               v)     Gift Tax is chargeable on gifts made in income year.
             vi)     The deputy commissioner of Taxes will make assessment and determine tax liability.

           vii)     For movable gift, property should be transferred physically but for immovable gift, documentary transfer is affected.

Features of Gift
By analyzing the definition of gift, the following features are observed:

1) Transfer of property: To be gift there must be a transfer of property. Here property refers to the movable and immovable property. Transfer may also take  in the form of release discharge surrender forfeiture or abandonment of a debt, contract, actionable claim or any interest in property in favor of others.

2) Involvement of two parties: Gift must be made by one person to another person. Here person means any individual, Undivided Hindu family, company, Corporation, Association of persons, etc.

3) Existing property: Gift must be made of an existing property- either movable or immovable. any future proprietorship or expected property can not be included in the list of gift items.

4) Voluntary Transfer: Gift should be made voluntarily. Transfer of property by force or by any undue influence can not be treated as gift.

5) Without consideration: Transfer of property as gift should be made without any consideration. If any consideration is received by the downer from the Donne for transfer of property then it can be treated as gift up to the value of consideration.

Valuation of gift
According to section 5 of Gift tax act. 1990 the valuation of gift for tax purpose is done in the following ways:

1) The value of the property for the gift tax purpose would be the value that the property is likely to fetch, if sold in the open market.

2) If the gifted property is not salable, its value would be as determined according to the
rules prescribed, such as

a)     Insurance policy = Surrendered cash value at times of gift.
b)     Share in the pvt. Company= Intrinsic value attributable to share holding.
c)     Share value/proportionate value of partnership. It will be ascertained as follows:

# Excess of market value of the assets over liabilities of the firm is to be ascertained.
# Such excess / surplus value is to be allocated among the partners according to profit
Sharing ratio
# Share of above surplus plus capital provided by the partners would be the value of interest of each partners.

d) Value determined by the national board of revenue for any other gifts which are not salable in the open market.

Friday, June 28, 2013

What is Cost Accounting & It's Development ?

Meaning of Cost Accounting :

Previously, cost accounting was merely considered to be a technique for the ascertainment of costs of products or services on the basis of historical data. In course of time, due to competitive nature of the market, it was realized that ascertaining of cost is not so important as controlling costs. Hence, cost accounting started to be considered more as a technique for cost control as compared to cost ascertainment. Due to the technological developments in all fields, cost reduction has also come within the ambit of cost accounting.
Cost accounting is, thus, concerned with recording, classifying and summarizing costs for determination of costs of products or services, planning, controlling and reducing such costs and furnishing of information to management for decision making.
According to Charles T. Horngren, cost accounting is a quantitative method that accumulates, classifies, summarizes and interprets information for the following three major purposes:
§  Operational planning and control
§  Special decisions
§  Product decisions
According to the Chartered Institute of Management Accountants, London, cost accounting is the process of accounting for costs from the point at which its expenditure is incurred or committed to the establishment of the ultimate relationship with cost units. In its widest sense, it embraces the preparation of statistical data, the application of cost control methods and the ascertainment of the profitability of the activities carried out or planned.
Cost accounting, thus, provides various information to management for all sorts of decisions. It serves multiple purposes on account of which it is generally indistinguishable from management accounting or so-called internal accounting. Wilma has summarized the nature of cost accounting as “the analyzing, recording, standardizing, forecasting, comparing, reporting and recommending” and the role of a cost accountant as “a historian, news agent and prophet.” As a historian, he should be meticulously accurate and sedulously impartial. As a news agent, he should be up to date, selective and pithy. As a prophet, he should combine knowledge and experience with foresight and courage.

Development of Cost Accounting :

The common impression that cost accounting development from financial accounting during last fifty years seems to be incorrect.
The belief that cost accounting development after the rise of factory system as result of industrial revolution in England in the 18th century, is also not true. Some cost accounting principles were found in application as early as the 14th century. Some authorities suggest that, the present-day cost accounting procedure was established before the end of the 19th century. However, major developments in the subject were noticed during a quarter century before the end of the Second World War. The scientific management movement led to the development of standard efficiency. After 1945, the need for data in planning for the future was felt and cost accounting developed further.
The main causes behind the development of cost accounting system may be enumerated as below:
  1. Financial Accounting can give the net result of trading during a particular period. It cannot give (normally) the product- wise picture nor can it say that the result obtained is, what it should be.

  1. Financial Accounting does not find out the cost of the goods manufactured and hence it fails to help the most important business activities like price-fixing, price-cutting during depression, formulating market policies etc.

  1. Financial Accounting never aims at making an effort for converting a losing unit into a profitable one through cost control.

  1. Financial Accounting does not provide means for controlling different elements of cost, reduction of expenses, elimination of wastage, measurement of levels of efficiency etc.

  1. Financial Accounting presents the total cost as incurred during a period and that also, at the end of the period. It cannot present the cost incurred daily and in the absence of this day-to –day information, control becomes impossible.

  1. Financial Accounting also fails to explain properly the result with appropriate break-up.


Tuesday, June 25, 2013

International Business

Overview of International Business (IB) :
  • Definition of International Business
  • Objectives of IB
  • Usual pattern of IB
  • Modes of IB
  • Definition of Globalization
  • Drivers of globalization
  • The changing demographics of the global economy
  • Managing in the global marketplace.
International Business is all business transactions- private & governmental that involve two or more countries. Private companies undertake such transactions for profits, government may not do the same in their transaction.

Objectives of IB :
  • To expand their sales
  • To acquire resources
  • To diversify the sources of sales & supplies
  • To minimize competitive risk
 Modes of IB :
  • Merchandise Exports & Imports
  • Service exports & imports  Tourism & transportation  Performance of services Use of assets.
  • Investments :  1.Direct investment   2. Portfolio investment
Globalization refers to the shift toward a more integrated & interdependent world economy. It is a process of greater integration of national economies with the world economy.
Two key facets of globalization are :
  • The globalization of markets : The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace
  • The globalization of production : The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (labor energy, land, and capital)
 Drivers of globalization :

What is driving the move toward greater globalization?

Declining trade & investment barriers
  • International trade
  • FDI
Technological change
  • Telecommunications
  • World wide web
  • Transportation technology
  • International trade occurs when a firm exports goods or services to consumers in another country
  • Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country
Managing the global marketplace :
How managing in the global marketplace is different from managing a purely domestic business:
  • Countries are different
  • The range of problems is wider & complex
  • To work within the limits set by the govt. national & foreign and the limits set by the international organizations
  • Currency conversion