- Differentiate between Preliminary and Operating Expenses?
Definition:- Preliminary expenses are those expenses which are incurred in business before incorporation and commencement of business, like statuary fees ,company logo, survey report, project report etc are called preliminary expenses. In case of company we can say that all type of expenses which spent by promoters of company called preliminary expenses.
In simple words preliminary expenses has covers all expenses before incorporation of business ,if any expenses has spent after commencement or incorporation of business doesn’t considered preliminary expenses.
Examples of preliminary expenses:-
- Expenses to promoters of company.
- Expenses paid for incorporation of company.
- Printing expenses of Memorandum of association& Articles of association
- Payment to survey report, project report.
- Stamp duty fees paid.
- Any expenses paid to take the business into existence.
Accounting treatment of preliminary expenses: - Preliminary expenses gives long term benefit so it is treated as intangible assets and shown in balance sheet under miscellaneous assets:-
- When preliminary expenses are incurred /paid:-
Preliminary expense (Current Assets) A/c Dr.
To Cash/Bank A/c
- When part of preliminary expenses are considered as indirect expense:-
Preliminary Expenses written off A/c Dr.
To preliminary expenses A/c
- Charge of preliminary expenses:-
Profit & Loss A/c Dr.
To preliminary expenses A/c
Deduction of preliminary expenses according to Income Tax U/s 35D:- only Indian company and a resident Indian can claim deduction of preliminary expenses. Deduction of preliminary expenses are given in 5 equal installment beginning with the previous year of commencement of business or previous year in which the extension of undertaking is completed or new unit commences production or operation.
Amount for deduction:-In case of all the assessee besides of company can take amount of 5% of project and company assesese can claim as below:-
- 5 % of the cost of project or
- 5% of the capital employed in the business of the company
Whichever is beneficial to the company.
An operating expense, operating expenditure, operational expense, operational expenditure or Opex is an ongoing cost for running a product, business, or system. Its counterpart, a capital expenditure (Capex), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a photocopier involves Capex, and the annual paper, toner, power and maintenance costs represents Opex. For larger systems like businesses, Opex may also include the cost of workers and facility expenses such as rent and utilities.
In business, an operating expense is a day-to-day expense such as sales and administration, or research & development, as opposed to production, costs, and pricing. In short, this is the money the business spends in order to turn inventory into throughput.
On an income statement, "operating expenses" is the sum of a business´s operating expenses for a period of time, such as a month or year.
In throughput accounting, the cost accounting aspect of the theory of constraints (TOC), operating expense is the money spent turning inventory into throughput. In TOC, operating expense is limited to costs that vary strictly with the quantity produced, like raw materials and purchased components. Everything else is a fixed cost, including labour (unless there is a regular and significant chance that workers will not work a full-time week when they report on their first day).
In a real estate context, operating expenses include costs associated with the operation and maintenance of an income-producing property.
Operating expenses include:
- accounting expenses
- license fees
- maintenance and repairs, such as snow removal, trash removal, janitorial service, pest control, and lawn care
- office expenses
- attorney fees and legal fees
- utilities, such as telephone
- property management, including a resident manager
- property taxes
- travel and vehicle expenses
Travel expenses are defined as those incurred in the event of travel required for professional purposes.
For this purpose, “travel” is defined as the simultaneous absence from the residence and from the regular place of employment. It is prompted by professional or company purposes and likely does not concern the traveler’s private life, or concerns it only to a small degree. Travel expenses include travel costs and fares, accommodation expenses, and so-called additional expenses for meals.
- leasing commissions
- salary and wages
- Pre-operative expenses before operation /establishment start preliminary introductory, preparatory expenses after establishment. Preliminary Exp, which are incurred at the initial level i.e for the formation of Co etc. Preoperative Exp, which are incurred during the period of up to where the Business Process are became in Operation.
Preliminary expenses are expenses incurred before the incorporation of business, but preoperative expenses are those expenses incurred after the incorporation of the business but before the start of business operations or production
- Compute the amount of gross profit and sales if opening stock is Rs. 60,000, Closing stock is Rs. 100,000, stock turnover is 8 times and goods are sold at a profit of 20% on sales.
- State the meaning and significance of following ratios:- (a). Investment-Coverage Ratio and (ii). Price-earning ratio
What is the ´Interest Coverage Ratio´
The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest on outstanding debt. The interest coverage ratio may be calculated by dividing a company´s earnings before interest and taxes (EBIT) during a given period by the amount a company must pay in interest on its debts during the same period.
The method for calculating interest coverage ratio may be represented with the following formula:
Interest Coverage Ratio
Interest coverage ratio is also often called “times interest earned.”
BREAKING DOWN ´Interest Coverage Ratio´
Essentially, the interest coverage ratio measures how many times over a company could pay its current interest payment with its available earnings. In other words, it measures the margin of safety a company has for paying interest during a given period, which a company needs in order to survive future (and perhaps unforeseeable) financial hardship should it arise. A company’s ability to meet its interest obligations is an aspect of a company’s solvency, and is thus a very important factor in the return for shareholders.
To provide an example of how to calculate interest coverage ratio, suppose that a company’s earnings during a given quarter are $625,000 and that it has debts upon which it is liable for payments of $30,000 every month. To calculate the interest coverage ratio here, one would need to convert the monthly interest payments into quarterly payments by multiplying them by three. The interest coverage ratio for the company is then 6.94 [$625,000 / ($30,000 x 3) = $625,000 / $90,000 = 6.94].
Staying above water with paying interest is a critical and ongoing concern for any company. As soon as a company struggles with this, it may have to borrow further or dip into its cash, which is much better used to invest in capital assets or held as reserves for emergencies.
The lower a company’s interest coverage ratio is, the more its debt expenses burden the company. When a company´s interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. 1.5 is generally considered to be a bare minimum acceptable ratio for a company and a tipping point below which lenders will likely refuse to lend the company more money, as the company’s risk for default is too high.
Moreover, an interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy its interest expenses. If a company’s ratio is below 1, it will likely need to spend some of its cash reserves in order to meet the difference or borrow more, which will be difficult for reasons stated above. Otherwise, even if earnings are low for a single month, the company risks falling into bankruptcy.
Generally, an interest coverage ratio of 2.5 is often considered to be a warning sign, indicating that the company should be careful not to dip further.
Even though it creates debt and interest, borrowing has the potential to positively affect a company’s profitability through the development of capital assets according to the cost-benefit analysis. But a company must also be smart in its borrowing. Because interest affects a company’s profitability as well, a company should only take a loan if it knows it will have a good handle on its interest payments for years to come. A good interest coverage ratio would serve as a good indicator of this circumstance, and potentially as an indicator of the company’s ability to pay off the debt itself as well. Large corporations, however, may often have both high interest coverage ratios and very large borrowings. With the ability to pay off large interest payments on a regular basis, large companies may continue to borrow without much worry.
Businesses may often survive for a very long time while only paying off their interest payments and not the debt itself. Yet, this is often considered a dangerous practice, particularly if the company is relatively small and thus has low revenue compared to larger companies. Moreover, paying off the debt helps pay off interest down the road, as with reduced debt the interest rate may be adjusted as well.
Uses of ´Interest Coverage Ratio´
While looking at a single interest coverage ratio may tell a good deal about a company’s current financial position, analyzing interest coverage ratios over time will often give a much clearer picture about a company’s position and trajectory. By analyzing interest coverage ratios on a quarterly basis for the past five years, for example, trends may emerge and give an investor a much better idea of whether a low current interest coverage ratio is improving or worsening, or if a high current interest coverage ratio is stable. The ratio may also be used to compare the ability of different companies to pay off their interest, which can help when making an investment decision.
Generally, stability in interest coverage ratios is one of the most important things to look for when analyzing the interest coverage ratio in this way. A declining interest coverage ratio is often something for investors to be wary of, as it indicates that a company may be unable to pay its debts in the future.
Overall, interest coverage ratio is a very good assessment of a company’s short-term financial health. While making future projections by analyzing a company’s interest coverage ratio history may be a good way of assessing an investment opportunity, it is difficult to accurately predict a company’s long-term financial health with any ratio or metric.
Variations of ´Interest Coverage Ratio´
There are a couple of somewhat common variations of interest coverage ratio that are important to consider before studying the ratios of companies. These variations come from alterations to EBIT in the numerator of interest coverage ratio calculations.
One such variation uses earnings before interest, taxes, depreciation and amortization (EBITDA) instead of EBIT in calculating the interest coverage ratio. Because this variation excludes depreciation and amortization, the numerator in calculations using EBITDA will often be higher than those using EBIT. Because the interest expense will be the same in both cases, calculations using EBITDA will produce a higher interest coverage ratio than calculations using EBIT will.
Another variation uses earnings before interest after taxes (EBIAT) instead of EBIT in interest coverage ratio calculations. This has the effect of deducting tax expenses from the numerator in an attempt to render a more accurate picture of a company’s ability to pay its interest expenses. Because taxes are an important financial element to consider, for a clearer picture of a company’s ability to cover its interest expenses one might use EBIAT in calculating interest coverage ratios instead of EBIT.
All of these variations of calculating the interest coverage ratio use interest expenses in the denominator. Generally speaking, these three variants increase in conservatism, with those using EBITDA being the most liberal, those using EBIT being more conservative, and those using EBI being the most stringent.
Limitations of ´Interest Coverage Ratio´
Like any metric attempting to gauge the efficiency of a business, the interest coverage ratio comes with a set of limitations that are important for any investor to consider before using it.
For one, it is important to note that interest coverage is highly variable, both when measuring companies in different industries and even when measuring companies within the same industry. For established companies in certain industries, like a utility company, an interest coverage ratio of 2 is often an acceptable standard. Even though this is a low number, a well-established utility will likely have very consistent production and revenue, particularly due to government regulations, so even with a relatively low interest coverage ratio it may be able to reliably cover its interest payments. Other industries, like many kinds of manufacturing, are much more volatile and may often have a higher minimum acceptable interest coverage ratio, like 3. These kinds of companies generally see greater fluctuation in business. For example, during the recession of 2008, car sales dropped substantially, hurting the auto manufacturing industry. A workers’ strike is another example of an unexpected event that may hurt interest coverage ratios. Because these industries are more prone to these fluctuations, they must rely on a greater ability to cover their interest in order to account for periods of low earnings. Because of wide variations like these, when comparing companies’ interest coverage ratios one should be sure to only compare companies in the same industry, and ideally when the companies have similar business models and revenue numbers as well.
While all debt is important to take into account when calculating the interest coverage ratio, companies may choose to isolate or exclude certain types of debt in their interest coverage ratio calculations. As such, when considering a company’s self-published interest coverage ratio, one should try to determine if all debts were included, or should otherwise calculate interest coverage ratio independently.
The price-earnings ratio (P/E Ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings.
The price-earnings ratio can be calculated as:
Market Value per Share / Earnings per Share
For example, suppose that a company is currently trading at $43 a share and its earnings over the last 12 months were $1.95 per share. The P/E ratio for the stock could then be calculated as 43/1.95, or 22.05.
EPS is most often derived from the last four quarters. This form of the price-earnings ratio is called trailing P/E, which may be calculated by subtracting a company’s share value at the beginning of the 12-month period from its value at the period’s end, adjusting for stock splits if there have been any. Sometimes, price-earnings can also be taken from analysts’ estimates of earnings expected during the next four quarters. This form of price-earnings is also called projected or forward P/E. A third, less common variation uses the sum of the last two actual quarters and the estimates of the next two quarters.
The price-earnings ratio is also sometimes known as the price multiple or the earnings multiple.
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BREAKING DOWN ´Price-Earnings Ratio - P/E Ratio´
In essence, the price-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings. This is why the P/E is sometimes referred to as the multiple because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.
In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. A low P/E can indicate either that a company may currently be undervalued or that the company is doing exceptionally well relative to its past trends. When a company has no earnings or is posting losses, in both cases P/E will be expressed as “N/A.” Though it is possible to calculate a negative P/E, this is not the common convention.
The price-earnings ratio can also be seen as a means of standardizing the value of one dollar of earnings throughout the stock market. In theory, by taking the median of P/E ratios over a period of several years, one could formulate something of a standardized P/E ratio, which could then be seen as a benchmark and used to indicate whether or not a stock is worth buying.
Limitations of ´Price-Earnings Ratio - P/E Ratio´
Like any other metric designed to inform investors as to whether or not a stock is worth buying, the price-earnings ratio comes with a few important limitations that are important to take into account, as investors may often be led to believe that there is one single metric that will provide complete insight into an investment decision, which is virtually never the case.
One primary limitation of using P/E ratios emerges when comparing P/E ratios of different companies. Valuations and growth rates of companies may often vary wildly between sectors due both to the differing ways companies earn money and to the differing timelines during which companies earn that money. As such, one should only use P/E as a comparative tool when considering companies within the same sector, as this kind of comparison is the only kind that will yield productive insight. Comparing the P/E ratios of a telecommunications company and an energy company, for example, may lead one to believe that one is clearly the superior investment, but this is not a reliable assumption.
An individual company’s P/E ratio is much more meaningful when taken alongside P/E ratios of other companies within the same sector. For example, an energy company may have a high P/E ratio, but this may reflect a trend within the sector rather than one merely within the individual company. An individual company’s high P/E ratio, for example, would be less cause for concern when the entire sector has high P/E ratios.
Moreover, because a company’s debt can affect both the prices of shares and the company’s earnings, leverage can skew P/E ratios as well. For example, suppose there are two similar companies that differ primarily in the amount of debt they take on. The one with more debt will likely have a lower P/E value than the one with less debt. However, if business is good, the one with more debt stands to see higher earnings because of the risks it has taken.
Another important limitation of price-earnings ratios is one that lies within the formula for calculating P/E itself. Accurate and unbiased presentations of P/E ratios rely on accurate inputs of the market value of shares and of accurate earnings per share estimates. While the market determines the value of shares and, as such, that information is available from a wide variety of reliable sources, this is less so for earnings, which are often reported by companies themselves and thus are more easily manipulated. Since earnings are an important input in calculating P/E, adjusting them can affect P/E as well.
- The Debt-Equity ratio if a company is 1:2 which of the following transaction would increase decrease or not change the ratio: (a). Purchased fixed assets for Rs. 10,000 on long term deferred payment basis. (ii). Issued new equity shares of Rs. 50,000 and (iii). Paymsne of Rs. 20,000 of final dividend already declared.
- Take and imaginary figures and draw a Cash Flow Statement?
This is a common saying in the business world. It is also true, because cash is the lifeblood of the business. Without it, you can´t pay bills, you can´t expand the business by purchasing assets. You can´t pay employees. As the business owner, you couldn´t even pay yourself!
The cash flow statement is a statement (report) of flows (both in and out of the business) of cash.
The cash flow statement is a key accounting report. One could show the most fantastic performance according to the income statement, with huge profits, and yet have nothing left in the bank. In this situation the business would not survive. How could this occur? It could occur if all your sales have been made on credit. And it could occur if additionally you weren´t monitoring the cash flows of your business.
In real life this extreme situation would rarely occur, but this example serves to explain that the cash situation of a business is key. And the cash flow statement, which shows us what the business has been doing with its cash - provides vital information. So yes, cash is king - in the business world and even in accounting.
Cash Flow Statement Format
Okay, so before any more explanations, here´s the format of the cash flow statement itself:
Cash can flow in two directions – either coming in to your business or going out. Cash coming in to your business is shown as positive amounts, whereas cash going out from your business are shown as negative amounts (in parentheses).
Dividends are cash payouts to people who have bought shares in a company. It is similar to drawings in a small business in that the owner is getting a payout (drawings is the owner withdrawing some of the cash that he first put in the business).
Proceeds means cash received.
The statement is divided into four parts. The first is the cash flows relating to your operations – the core activities of your business.
This includes cash receipts (cash received) from your customers, cash paid to suppliers and employees, interest received or paid and tax paid.
The second section is the cash flow from investing activities. Investing (in the context of the cash flow statement) means the spending of cash on non-current assets. For example, one could be spending cash on computer equipment, on vehicles, or even on a building one purchased.ve
Thus investing activities mainly involves cash outflows for a business. We also include cash inflows in this section relating to the sale of a non-current asset that we have already invested in. Thus, the cash received this year from selling equipment that was originally bought (invested in) three years ago, would also be included in this section.
As investing activities mainly deal with cash outflows (buying non-current assets), the total of this section is usually a negative.
Purchases of assets are put under two different categories: additions or replacements.
Additions means purchases of additional assets in order to expand the business.
Replacements do not involve expansion but rather refer to an asset being purchased to replace an old or obsolete (no longer used) asset.ave
Cash flow from financing activities is the third section. Financing is the source of the cash that we will be using to invest in non-current assets. It is where we get cash from. Thus financing activities mainly involves cash inflows for a business.
Financing can come from the owner (owners’ equity) or from liabilities (loans). We also include cash outflows in this section that relate to financing that we originally obtained. Thus the repayment of a loan (in part or in full) falls under financing activities (as a cash outflow), as the loan served as finance for the business originally.
Similarly, drawings (or dividends for a corporation) may also be placed under this section, although it can also be placed under the operating activities section if the business so chooses.
As financing activities mainly deal with cash inflows (receiving cash from shareholders or lenders), the total of this section is usually a positive for cash flow.
The final section comprises the net cash increase or decrease for the period and the cash balance at the beginning and end of the period.
Creating a Cash Flow Statement
The cash flow statement would be drawn up from records of one´s cash and bank account. So one would look over the bank T-account and possibly the cash receipts journal and cash payments journal (if needed).
The cash flow statement for George’s Catering (the example we have been using throughout) would look as follows:
Remember, the cash flow statement shows flows of cash, not income and expenses.
Whereas income could be on cash or on credit, cash receipts from customers would only be cash.
Our accounting equation for George’s Catering looked as follows at the end of the period:
The closing balance of the bank account corresponds to the answer we calculated in our cash flow statement.
Just like the income statement and balance sheet, the cash flow statement can also be drawn up in budget form and later compared to actual figures. These budgeted figures would be drawn up based on actual figures from past years, but taking into account any expected future changes in cash flows. The budgeted figures for the cash inflows and outflows (and the way these figures were obtained) would be explained or justified in additional notes to this statement.
By the way, and just as a final note, do not confuse the cash flow statement with a cash budget. These are two completely different thing
- Define the concept of Internal Reconstruction and provide accounting treatment for final settlement after reconstruction?
Re-construction is a process of re- organization of acompany. It takes place when the financial position of the company is not good due to overvaluation of assets, accumulated losses etc. It is re-organization with a view to run the company efficiently in the future. It involves writing off accumulated losses, fictitious assets and overvaluation of assets out of the sacrifice of the shareholders viz. shareholders, debenture holders and creditors so as to give a realistic view of financial position of the company.
Need for Internal Reconstruction:
Internal Reconstruction is necessary due to the following reasons:
- Final statements not True &Fair:
When the company is making heavy losses, the financial statement do not show true and fair view of the state of affairs of the company.
The asset side of the balance sheet of a company may have intangible assets, fictitious assets, accumulated losses, deferred revenue expenditure etc. The real assets are shown at a high value. Due to losses adequate depreciation may not be provided, stock may be valued at a higher rate. No provision may be made for bad and doubtful debts.
The Company may have secured and unsecured loans which may be repaid. It may become overdue Interest on loan may be in arrears. Creditors may be long overdue. Preference dividend on preference shares may be in arrears over a long period.
Capital of a company is lost due to drastic fall in the value of assets. It is not represented by the by the real value of assets.
Due to continuous losses, basic structure of the company gets damaged. The pillars on which the super structure is based become weak and the company may collapse at any time. Hence the company has to be placed on strong foundation in order to ensure stability in future.
A term used to describe the drastic formal changes in a company’s capital structure as a result of certain circumstances. There are two types of reconstruction.
When a company has no power to operate his own business due to heavy loss and it sells his all business to a new company. It will be external reconstruction.
Internal Reconstruction means to do every action for bringing the company out of losses. If a company is suffering heavy losses, company can use the provision 94 of Indian Company law 1956 and reduce its capital
PROVISIONS OF COMPANY LAW
Alteration of share capital
- Increase of Authorized Capital-
There should be a provision in the MOA and AOA for increasing share capital. In case there is no provision in the MOA and AOA, the company must change them.
The company is required to give a notice to the Registrar as regards this resolution within 30 days of its passing.
Alteration of share capital beyond the authorized does not require permission of the court.
Sanction of the SEBI Is necessary if the shares to be offered are more than the certain value.
Board resolution is necessary to effect alteration.
Consideration of shares-
There must be a specific provisions for the consideration of the A/A.
Board resolution must be passed to convene a general meeting of a shareholder.
An ordinary resolution passed by the general meeting is necessary to undertake consolidation.
Notice of consolidation of shares must be sent to the Registrar of companies within one month.
AOA must make a provision for sub-division of shares.
Resolution passed by general meeting is necessary.
A notice is to be sent to the Registrar of company.
- Conversion of shares into stock-
- Only fully paid up shares can be converted into stocks.
- A/A must provide for conversion.
- Resolution at general meeting is necessary.
- Permission of stock exchange is necessary if the shares arelisted with a stock exchange.
- A notice to be sent to the Registrar of Companies.
- Cancellation of shares
A Company must be authorized by it’s a/A to effect the change.
A resolution passed an extra ordinary general meeting must sanction such a change.
- What are the statutory books and statistical books required to be maintained by a company?
The Companies Act, 2013 (the Act) and the rules made there under (“the Rules”) lays down that every Company incorporated under the Act has to maintain Statutory Registers (“the Registers”).
The Registers need to maintained and updated eventually and should be kept at the Registered Office of the Company. Some of the Registers are required to be kept open for inspection by Directors, Members, Creditors and by other persons. A Company is required to provide the extracts from the Registers, if demanded by Directors, Members, Creditors and by other persons on payment of specified fees.
Statutory Books are the official records kept by the company relating to all legal and statutory matters.
A company’s statutory books are usually kept at the registered office of the company. The books should be available to the general public for inspection during reasonable office hours.
The typical contents of a company’s statutory book are:
* the register of shareholders
* the register of company directors and secretaries
* the register of company directors’ interests
* the register of charges
* The register of interests in shares if the company is a PLC.
Confirmation Statement (formerly known as Annual Return)
A company’s confirmation statement must be filed annually with the Registrar of Companies. Non-compliance will render the company liable to dissolution with liabilities subsequent to the dissolution being the responsibility of the directors.
In order for us to deal with your confirmation statement you will be required to purchase the confirmation statement service located on Penalties
The Companies Act 1985 provides for the Registrar of Companies to charge penalties and fines:
* £100-£5,000 penalty for late filing of accounts (the amount depends on the status of the company and the degree of lateness)
* £5,000 maximum fine for failure to submit accounts
* £5,000 maximum fine for failure to file the confirmation statement
* £5,000 maximum fine for failure to hold an AGM
* £5,000 maximum fine for failure to notify any changes of officer, etc.
How we can help
As part of our service to client companies, we undertake on receipt of written instructions to keep the company’s statutory records up-to-date before submitting them to the Registrar of Companies.
According to the Companies Act, a company has to maintain several types of Books and Registers. Books are often classified as Statutory Books and Statistical Books. Statistical Books refer to Books of Account and such other Record Books like an Inventory. Statutory Books are those which are necessary to observe legal formalities of a company including Registers.
It is the duty of the Company Secretary to prepare and maintain the Statutory Books.
Generally the Statutory Books (including Registers) are:
(2) Index of Members.
(3) Register of Directors.
(4) Register of Debenture-holders.
(5) Register of Mortgages and Charges.
(6) Register of Directors’ Shareholdings.
(7) Register of Contracts in which Directors is interested.
(8) Minute Books:
(b) Of Members’ Meetings;
I Of Different Committees’ Meetings, etc.,
(9) A File of Annual Returns.
(10) Register of Fixed Deposits.
(11) Register of Company’s Investments in companies in the same group, etc. Besides these, there shall be sets of Books of Account.
There are some other books which are maintained by big companies:
- Application and Allotment Book,
(b) Register of Transfers,
I Seal Book,
(d) Directors’ Attendance Book,
I Call Book,
(f) Agenda Book,
(g) Share Certificate Book,
(h) Dividend Book,
(i) Register of Share Warrants,
(j) Log Book, etc. Such Books are also known as Optional Books.
The Statutory Books are open to inspection by any member of the company as well as by the Registrar of Companies. The Company Secretary has to facilitate inspection as and when required.
- Difference between Profit and Loss Account and Profit and Loss Appropriation Account?
Profit and loss account is a statement that shows the quantum of surplus funds available to thr entity at the end of a financial period.
Whereas profit and loss appropriation account gives you details about how the surplus that is shown in the profit and loss account is going to be spent.
Profit and loss account is a standalone statement and the profit and loss appropriation account is an extension of the former.
Profit and loss account is mandatory for all entities- partnerships, companies etc while the appropriation account is usually prepared only by partnership firms.
P&L appropriation account usually gives details about how the surplus money is going to be spent- I mean how much of it goes to each partner, how much is to be invested in capital expenditure, how much to be used as earmarked reserves etc.
The profit-and-loss appropriation account is much different from the original profit-and-loss account. Once the first account has been created, the business must choose what to do with any extra earnings the business has created (as long as there is not a loss). Some money will be transferred into new investments and business growth accounts. Some will be used for bonuses. A portion of earnings will be distributed as dividends to the shareholders. The appropriation account shows what portion of earnings will be used for each of these activities.
Uses of Appropriation Account
The appropriation account is used within the business to tally earnings and match earnings to predetermined strategies for spending profit, but it has an important purpose outside the company as well. Investors can look at the appropriation account and see at a glance how much money the company is making and what kind of a dividend to expect, as well as how much of the company profit will be used for business growth, important factors when making an investment decision.
Profit and loss appropriation accounts are necessary for businesses, especially partnerships, because they help account for the expenditures and income that are included in profit and loss statements. These accounts should not be confused with the typical profit and loss account, but rather seen as an extension of it. Whereas the former is more general in nature, the profit and loss appropriation account is far more specific.
Profit and Loss Account
The profit and loss account serves the purpose of showing how much a company has available, in terms of surplus funds, at the end of a specific accounting period. These accounts do not necessarily provide a specific answer as to how funds will be spent. However, they do provide an idea of what money is available for distribution among partners or for the purpose of being held in a reserve account until the decision has been made regarding how to spend the surplus. If no surplus exists, the statement indicates the losses for the accounting period.
The profit and loss appropriation account should be treated as a separate account from the profit and loss account. The appropriation account is designed to provide an indication of how profit transferred from the profit and loss account is spent. Appropriations are generally placed into one of four broad categories: funds designated for removal by partners, capital reserves, reserves earmarked to improve capital and surplus funds to be carried into the next accounting period.
The profit and loss appropriation account is set up like other general ledgers. It usually consists of a debit column and a credit column. The debits include items such as the funds that are transferred back to the general profit and loss account at the end of the accounting period. Other debits include money put in the general company reserve accounts, accounts designated for dividend payments and payments made on items such as income taxes.
When funds are added to the profit and loss appropriation account, these are designated as a credit in the records. The primary entry in the account comes in the form of the surplus money transferred to the account from the profit and loss account at the end of the previous accounting period. Net profit at the end of the current year is also added to this account. Other credits may include money taken from the general reserve or any other account in which a surplus can be designated for a specific purpose in the profit and loss appropriation account.
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Canada based company PUDO announces that effective February 29, 2016 it has completed a vertical short form amalgamation (the "Amalgamation") with its wholly-owned subsidiary My Courier Depot Inc. ("MCD") in order to reduce internal administration and financial reporting costs. Pursuant to the Amalgamation, all of the issued and outstanding shares of MCD will be cancelled and the assets, obligations and liabilities of MCD will be assumed by PUDO. No securities of PUDO will be issued in connection with the Amalgamation and the share capital of PUDO will remain unchanged. The Amalgamation will not have any significant effect on the business and operations of PUDO.
About PUDO Inc.
PUDO is the last mile delivery solution for parcel pick-up and drop-off services, ensuring reliable and secure delivery where you want it, when you want it. Using easily-accessible PUDO Point™ locations such as convenience stores, gas stations and grocery stores with extended hours, PUDO members, participating e-commerce retail consumers, businesses and a home-based workforce can now pick-up their parcels anytime, including evenings and weekends. PUDO eliminates the frustration of missed deliveries and gives control over parcel pick-up and delivery back to its members. With user-friendly technology, free membership and thousands of PUDO Point™ locations across Canada and the U.S., PUDO is changing the parcel delivery model in North America. PUDO was named one of the top 20 most innovative public technology companies by the Canadian Innovation Exchange in 2015.
This press release contains forward-looking statements. The use of any of the words "anticipate", "believe", "expect", "plan", "intend", "can", "will", "should", and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including but not limited to expectations and assumptions concerning the receipt of required regulatory approval. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
- What the case is all about? Provide the brief summary?
On February 28, 2016, PUDO Inc. completed a vertical short-form amalgamation pursuant to the Business Corporations Act (Ontario) with its wholly-owned subsidiary, My Courier Depot Inc. ("MCD”). Pursuant to the Amalgamation, all of the issued and outstanding shares of MCD were cancelled and the assets, obligations and liabilities of MCD were assumed by PUDO. No securities of PUDO were issued in connection with the Amalgamation and the share capital of PUDO was unchanged. The amalgamation of PUDO and MCD has been undertaken in order to simplify the corporate structure of PUDO and to reduce administrative costs. The Amalgamation will not have any significant effect on the business and operations of PUDO. PUDO Inc. formerly “Grandview Gold Inc.” Management’s Discussion & Analysis For the year ended February 29, 2016 Discussion dated: June 3, 2016 Page | 4 MCD is incorporated under the Ontario Business Corporations Act on December 16, 2013 and domiciled in Canada. PUDO’s registered office is situated at 400 Brunel Road, Mississauga, Ontario, Canada, L4Z 2C2. PUDO’s principal activity is providing E-commerce shipment services through collaboration with specific online retailers for delivery of their products and working with national and international courier companies to provide alternate drop-off and pickup options of packages. PUDO Inc. (formerly "Grandview Gold Inc.) was a gold exploration company focused on exploring and developing gold properties in gold camps of North and South America. The Company was incorporated under the laws of the Province of Ontario. To date, the Company has not earned significant revenues from gold exploration and was considered to be in the exploration and evaluation stage.
- Why no securities of PUDO will be issued in connection with the Amalgamation and the share capital of PUDO will remain unchanged. Comment?
Through the Company’s PUDO Point network, made up of community based businesses such as convenience stores and gas stations, the Company will provide area residents, students, home based work professionals, the e-commerce industry and courier companies with the only national and neutral last mile delivery solution. How It Works: All recipients are notified electronically when a shipment arrives for them to pick up. For the online shopper, purchases made through a Company affiliated E-tailer allow the use of a PUDO address free of cost. This option will be provided at check out and PUDO membership is not required. For any other personal or business use of a PUDO Point address, membership is required. Membership is free and allows the member the use of a PUDO Point address as their ship to address whenever they have a need. Known as our pay as you go service, for a small fee of $3.00 for shipments weighing up to 10 lbs., or $5.00 if over 10 lbs. (but not over 30 lbs.), the member can select the PUDO Point address of their choice to receive any other courier or postal delivery. This includes online purchases made through any non-affiliated E-tailer. The fee is paid at time of pick up. For couriers, the Company allows selected couriers the use of PUDO Point addresses as first time delivery points or pick up points for failed residential delivery attempts. The Company has developed a "SuperApp" which was rolled out in September 2015 to all dealers. It easily handles the challenges of a dealer’s busy check-out counter. One scan of the barcode does it all – fast and simple! The SuperApp provides accurate live data on every scan, improving accounting and reporting functions to our dealers. It also provides signature capture to our partnered couriers like Canpar. The SuperApp also provides us with additional revenue information from our partner couriers so that we have the ability to provide special reporting to our dealers. e.g. data collection of how much someone PUDO Inc. formerly “Grandview Gold Inc.” Management’s Discussion & Analysis For the year ended February 29, 2016 Discussion dated: June 3, 2016 Page | 7 spends in store when they pick up package. For corporate customers, the SuperApp sends email notification and details to the customer that the shipment is ready for pick up on which can also be attached a direct marketing message on behalf of the retailer or other vendors. Highlights On October 1, 2015, PUDO announced a marketing and sales agreement with Canpar Courier. The partnership is for a term of five years, with an option to renew for an additional five years. Benefits of the Partnership Supports and connects the rapidly growing PUDO network· Allows for parcel consolidation on retail returns resulting in up to 30% savings· Savings on deliveries of online purchases of 10% to 50% for retailers· Time efficiency for drivers· Cost savings for fleet gas and maintenance· Additional recurring revenue stream for PUDO· On October 8, 2015, PUDO announced the appointment of Matthew McDonough as Vice President, Network Development, Parcel and Courier, effective immediately. On October 27, 2015, PUDO announced a strategic partnership with Winks-affiliated convenience stores to create an additional 620 PUDO Point locations across Western Canada. On October 29, 2015 PUDO announced a new strategic partnership with TNT Express Canada to become the preferred international carrier effective December 1, 2015. This arrangement with TNT creates additional convenience and an average savings of 25% or more on international shipping for PUDO members using PUDO Point locations. On November 9, 2015, PUDO announced a new agreement with Hasty Market convenience stores to create additional PUDO Point locations in the Greater Toronto Area and across Ontario. On December 8, 2015, PUDO announced a new three-year partnership with Quickie Convenient Stores Corp. to created additional PUDO Point locations across Eastern Ontario and Quebec. On December 17, 2015, PUDO announced that it entered into a strategic partnership with the AATAC, a national association for U.S. convenience store owners to help build the PUDO Point network in the U.S. On December 29, 2015 PUDO announced a new three-year partnership with Little Short Stop Stores to create additional PUDO Point locations in Kitchener, Waterloo, Cambridge, and Guelph. PUDO also announced a new three-year agreement with Avondale Food Stores to create additional PUDO Point locations in the Niagara and Hamilton regions. On March 3, 2016, PUDO acquired certain assets and assumed certain liabilities from 640624 N.B. LTD. (o/a Kinek) a New Brunswick-based corporation involved in the operation of an international network of alternative delivery locations that accept and store packages. In consideration for the transfer of the business, PUDO issued 116,745 common shares to Kinek at a deemed price of $3.15 CAD per share for a total cost of $368,068. Pursuant to the terms of the agreement, Kinek has the right to nominate one director to the board of directors of PUDO for the ensuing year. Acquisition of the Kinek network adds approximately 109 operating parcel pick up and drop off locations with approximately 179,000 users to the PUDO network in the U.S. and Canada. The Kinek locations have been renamed PUDO. KinekPoints PUDO Inc. formerly “Grandview Gold Inc.” Management’s Discussion & Analysis For the year ended February 29, 2016 Discussion dated: June 3, 2016 Page | 8 receive and store parcels for their customers´ convenience until they are picked up. By shipping to one of Kinek´s many border KinekPoints, Canadians can order from U.S. companies that may not ship to Canada, have access to free shipping, larger product selection and at lower prices.
- What are your views about Press Release? How it looks as a forward-looking statement.
When it comes to measuring the success of your press releases, it’s often a bit tricky, but there are numerous metrics you can look at. From counting how many reporters actually covered the story to seeing how many interactions it received to monitoring traffic to your website, there are countless useful figures you can use to gauge the value of your press release. However, there is one press release metric that I find to be a little misleading and slightly overrated – page views.
Vector modern numeric scoreboard set.Look, I get my page views are an enamoring statistic. You want a lot of people to see your press release and read your story. After all, if nobody reads your story, how are you going to get your message out? You need eyes on your story, there’s no doubt about it. But the problem is that page views don’t tell the full story.
Let’s say you distribute a press release and it gets 5,000 views. Pretty good, right? That’s 5,000 people who were exposed to your brand and your message. Not too shabby. But here’s the thing. How many of those 5,000 viewers are part of your target audience?
See, the real way to get value out of a press release is to get your story in front of your target audience. If the story is product-driven, you want current and potential customer to be viewing the press release. If it’s more about your financials, you’ll want those views to be coming from investors.
And that’s why page views come up short as a useful metric. It tells you how many people are looking at your story but not who is looking at your press release. For all you know, you could be completely missing the mark with your distribution, and your press releases could be getting those views from people with no interest in your company or products. Heck, those page views might even be coming from spambots.
So, rather than focusing just on the page views your press releases get, try to dig deeper to determine how effective your press releases really are. That means looking at how much traffic your stories are driving to your website, how those visitors behave on your website, how many shares your stories get, how effective they are at reaching your audience, and so on. This is the kind of information that will help you calculate the real ROI of your press releases.
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