What is a Bank

Definition: A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers that have capital deficits to customers with capital surpluses. Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as: conducting current accounts for his customers, paying  cheques drawn on him, and collecting cheques for his customers.

Basics: Banks are highly regulated in most countries. Most banks operate under a system known as fractional reserve banking where they hold only a small reserve of the funds deposited and lend out the rest for profit. They are generally subject to minimum capital requirements which are based on an international set of capital standards, known as the Basel Accord.

History: Banking in the modern sense of the word can be traced to medieval and early Renaissance Italy, to the rich cities in the north like Florence, Venice and Genoa. The Bardi and Peruzzi families dominated banking in 14th century Florence, establishing branches in many other parts of Europe. One of the most famous Italian banks was the Medici Bank, set up by Giovanni di Bicci de' Medici in 1397. The earliest known state deposit bank, Banco di San Giorgio (Bank of St. George), was founded in 1407 at Genoa, Italy.

Banking Products:

—  Retail banking

—  Checking account

—  Savings account

—  Money market account

—  Certificate of deposit (CD)

—  Individual retirement account (IRA)

—  Credit card

—  Debit card

—  Mortgage

—  Home loan

—  Mutual fund

—  Personal loan

—  Time deposits

—  ATM card

—  Business (or commercial/investment) banking

—  Business loan

—  Capital raising

—  Project finance

—  Risk management

—  Term loan

—  Cash Management Services (Lock box, Remote Deposit Capture, Merchant Processing)

ADVANCES AND GUARANTEES

Advances

Sanctioning advances to its customers in different forms is one of the basic functions of a bank

Forms of advances can be broadly categorized into the following:

   a) Loans, overdraft and cash credit;

   b) Bills purchased and discounted.

Loans

Loans are advances that are allowed for a specific purpose and generally the period for payment is fixed. A loan is granted in a lump sum which is payable either by installments or in lump sum with or without interest or any charges. Generally loans are sanctioned to those borrowers who have a fixed source of income or who is capable of repaying the whole debit amount.

Overdraft

Overdraft is a kind of advance that is allowed against a current account. This current account must be operated by a cheque. There are limitations as to the amount of money and the drawing time in case of an overdraft. The borrower is allowed to draw money as many times as his convenience satisfies but he cannot exceed the agreed limit. 

Cash credit

This type pf advance is generally made to industrialists and agricultural people etc. The agreement in this case is such that the limit of credit will go up with the increased production and will go down with the decrease in production. This privilege is provided by the bank on taking the possession of the goods or products in the storage. However, the ownership remains with the borrower. 

Bills purchased and discounted

By this type of grant the bank allows the advance payment under a bill of exchange before the time of its maturity. In this case, when the person draws money under the bill, the bank becomes the holder of the bill for value and gets absolute title to it.

Guarantees

A guarantee contract is made in order to safeguard the payment of an advance or loan made by the bank to a borrower. In case the borrower fails to repay the lent amount and his personal security is not sufficient, an additional security in the form of guarantee is sought by the bank from a third person. The guarantor gives personal undertaking to the bank for the payment of debt.

Statutory definition:

   A contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default. (Sec: 126, Contract Act, 1872)

Kinds of Guarantee:

   a) Specific Guarantee;

   b) Continuing Guarantee.

Specific Guarantee:

   A guarantee is given in respect of a single transaction undertaken by the principal debt.

Continuing Guarantee:

   A guarantee is given in respect of a series of transactions. However, the amount up to which the guarantor will be liable.

What is Defamation

The law of defamation protects people against untrue

statements that could damage their reputation, and is

probably the single most important area of law for any

journalist to know about. One of the reasons for this is that defamation can affect journalists in any field of work. If you work, for example, for a trade magazine or in the women’s press, it’s quite possible that you will never need to think

about court reporting or official secrets after you’ve passed

your law exams. But almost every kind of journalist, on

almost every kind of publication, has the potential to

defame someone, and some of the most high-profile

defamation cases have involved quite small publications.

The second reason why defamation is such an important part of the law for journalists is that being successfully sued for it can be very expensive. Damages in defamation cases are usually decided by juries; as a result, they are very unpredictable, and can be extremely high. One

careless piece of research or unchecked statement could end up costing a publisher tens of thousands of pounds in damages – sometimes even hundreds of thousands – and as much again, sometimes more, in legal fees. Big national papers can absorb such losses (though decreasing circulations mean even they find it difficult), but for smaller magazines, losing a libel case can be disastrous. The magazine Living Marxism was actually forced into liquidation after being order to pay damages of £375,000 in a libel case in 2000. Because of this, most publishers are very nervous of libel actions. One result of this is that, faced with a threat of libel, even where the

journalist believes that the story is legally sound,

many publishers will choose not to run it, or to water it down. In this way the threat of a libel action can be used to prevent publication of stories that really ought to be

brought to the public’s attention. Similarly, many

publishers, faced with a complaint about a story that has

already been published, will back down, print an apology and if necessary, agree to pay some compensation, rather than allow the case to go to court and risk huge legal costs

and possibly damages. In fact most libel claims are settled out of court, and court hearings are rare. None of this means that journalists should be so scared of being sued that we never write anything that upsets anyone, but it does mean that every journalist needs to understand

thoroughly the basic rules of this area of the law – not just

so that you know what not to write or say, but because defamation law does give some protection to press

freedom, and by knowing the rules, you can often safely

say more than you might imagine. Many newspapers

and magazines publish potentially defamatory material every day but by making sure that what they print is covered by one of several defenses to defamation, they can do so safely.

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.

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 18^th century, is also not true. Some cost accounting principles were found in application as early as the 14^th century. Some authorities suggest that, the present-day cost accounting procedure was established before the end of the 19^th 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.

2. 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.

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

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

5. 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.

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

         =========END=========

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

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

The duty of care.

Negligence is the most important tort in modern law. It concerns breach of a legal duty to take care, with the result that damage is caused to the claimant. Just a few examples of the type of case which might be brought in negligence are people injured in a car accident who sue the driver,businesses which lose money because an accountant fails to advise them properly, or patients who sue doctors when medical treatment goes wrong.Torts other than negligence are normally identified by the particular interest of the claimant that they protect. For example, nuisance protects against interference with the claimant’s use

and enjoyment of land, while defamation protects against damage to reputation. By contrast,negligence protects against three different types of harm :

personal injury;

damage to property;

economic loss.

In practice, the rules of the tort may differ according to which type of harm has been suffered, but

all of them are protected by negligence.

The tort of negligence has three main elements:

the defendant must owe the claimant a duty of care;

the defendant must breach that duty of care;

that failure must cause damage to the claimant.

Negligence is essentially concerned with compensating people who have suffered damage as a result of the carelessness of others, but the law does not provide a remedy for everyone who suffers in this way. One of the main ways in which access to compensation is restricted is through the doctrine of the duty of care. Essentially, this is a legal concept which dictates the circumstances in which one party will be liable to another in negligence: if the law says you do not have a duty of care towards the person (or organisation) you have caused damage to, you will not be liable to that party in negligence, no matter how serious the damage.

It is interesting to note that in the vast majority of ordinary tort cases which pass through the court system, it will usually be clear that the defendant does owe the claimant a duty of care, and what the courts will be looking at is whether the claimant can prove that the defendant breached that duty – for example, in most of the road accident cases that courts hear every year, it is already established that road users owe a duty to other road users, and the issues for the court will generally revolve around what the defendant actually did and what damage was caused. Yet flick through the pages of this or any other law book, and you soon see that duty of care occupies an amount of space which seems disproportionate to its importance in real-life tort cases. This is because when it comes to the kinds of cases which reach the higher courts and therefore the pages of law books, duty of care arises frequently, and that in turn is because of its power to affect the whole shape of negligence law. Every time a potential new duty of care is accepted (or ruled out), that has implications for the numbers of tort cases being brought in the future, the types of situations it can play a part in, and therefore the role which the tort system plays in society.

As a result, the law in this field has caused the courts considerable problems as they have often found themselves torn between doing justice in an individual case, and preventing a vast increase in the number of future cases. We can analyse the development of the law on duties of care in three main stages: the original neighbor principle as established in Donoghue v Stevenson(1932); a two-stage test set down in Anns v Merton London Borough (1978), which greatly widened the potential for liability in negligence; and a retreat from this widening following the case of Murphy v Brent-wood District Council (1990). Although much of the following section describes historical development, it is worth taking time to get to know the background, as this will help you make sense of the reasoning in many later cases.