What is ERP ( Enterprise Resource Planning)

ERP is a business process management software that allows the the organisation to use set of integrated applications to manage the business and automate back office functions.

Different Methods of Capital Budgeting

When there are various Investment proposals, Capital budgeting helps us to find out the BEST Investment proposal using various techniques. They are,

1. Payback period.
2. Discounting payback period.
3.Accounting Rate of Return (ARR).
4.Net present Value (NPV).
5.Internal Rate of Return (IRR).

What is Capital Budgeting ?

When there are various Investment proposals, Capital budgeting helps us to find out the BEST Investment proposal using various techniques. They are,

1. Payback period.
2. Discounting payback period.
3.Accounting Rate of Return (ARR).
4.Net present Value (NPV).
5.Internal Rate of Return (IRR).

What is Cash flow statement

Cash flow statement is a financial statement which shows cash inflows and outflows resulting from Operating , Investing and Financial activities.

What is Letter of Credit-Meaning-Explanation

It is the bank’s guarantee that the buyer will make his payment to the seller. The bank will have to make the payment if the buyer defaults to pay. It is a deal between buyer’s bank and the seller’s bank.

What is Appreciation of Asset

Appreciation is increase in value of asset. In current economic condition the value of land and buildings are going up high so in accounting term it is known as Appreciation. This is opposite of Depreciation. This term can be used in any assets like stock, real estate etc.

Depreciation-Meaning-Explanation-Journal Entry for Depreciation

Depreciation is Decrease in value of an Tangible Asset for certain reasons like Wear and Tear, old Technology, misuse, Obsolescence etc. It is a non cash expense. The asset should be replaced once the end of their useful life is reached. There are several methods to find depreciation like Straight line method, Written down Value method, Annuity method etc.

Journal Entry For Depreciation:

1.       Depreciation a/c                             Dr                              XXX
            To Asset a/c                                                                            XXX

2.      P & L a/c                                 Dr                             XXX
            To Depreciation a/c                                                             XXX

Break Even Point (BEP) - Meaning - Explanation

It is a point at which there is No Loss or No Profit. The cost/expenses equals with revenue/gains. Anything above the BEP is gain and anything less than BEP is loss. In other words, BEP is where there is ZERO return on investment.

BEP in units  =          Fixed Cost           

                           Contribution (Per unit)

BEP in Sales  =         Fixed Cost     

                              Contribution %

Retained Earnings - Meaning and Explanation

Retained Earnings is the undistributed profit of the firm. Usually, the firm will distribute certain percent of its profit to Shareholders in the form of “Dividend” but some companies will retain some of its profit for certain reasons like  reinvestment by the management, increase the assets or reductions of liabilities. Retained Earnings are reported in the shareholders Equity section of the company’s Balance Sheet.

what is EPS ( Earning Per Share)

It is the profit of the firm per outstanding share. It is said higher the value of EPS, the more profitable is the company.

Different Methods of Calculations:

Method 1

    EPS =   Profit Available To Equity Shareholders (PAES)

                              No of outstanding shares

 Method 2

    EPS =   Market price per share (MPS)

                    Price earnings ratio (PE)

Meaning and Explanation of Liabilities

The company’s debts and obligation towards third parties are Liabilities. It shoes what it owes to others. It is recorded in left side of Balance sheet. It includes Capital, Bills payable, creditors, outstanding accounts etc

Meaning and Explanation of Asset

Any property or item that has monetary value which is owned by the business or an Individual is a Asset. It will be recorded in the Balance sheet. It can even be tangible or intangible assets. It is the resource of the company. Examples: Buildings, Furniture, stock, plant and machinery, goodwill etc

What is Credit, Meaning of Credit

All income and gains are Credit. It will increase the Liabilities and decrease the asset. . It will come under Right hand side of the Books of accounts. In abbreviated form Credit is written as “Cr”.

•              Person getting goods without paying cash is credit purchase.
•                    Person selling goods without collecting cash is credit sales.

What is Debit, Meaning of Debit

All losses and expense are Debit. It will increase the asset and decrease the liabilities. It will come under left hand side of the Books of accounts. In abbreviated form Debit is written as “Dr”

What is Balance Sheet

Balance sheet is a financial statement which records Assets and liabilities of the business. It shows the Financial position of the business for a specific period. The financial reports show the two sides of the financial situation (i.e) what it owns (Assets) and what is owes (Liabilities). Both the sides of a Balance sheet should be balanced. It is used by Accountant, Auditors, Investors etc for various purposes. It is prepared in quarterly, half yearly and yearly basis.

  Here is an example of Balance sheet:

What is Book keeping , Meaning of Book keeping

Book-keeping is that branch of knowledge which tells us how to keep a record of business transactions. It is often routine and clerical in nature. It is important to note that only those transaction related to business which can be expressed in terms of money are recorded. The activities of book-keeping include recording in the journal, posting to the ledger and balancing of accounts.

Golden Rules of Accounting

All the business transactions are recorded on the basis of the following rules.

S.No	Name of Account	Debit Aspect	Credit Aspect
1.	Personal	Debit the Receiver	Credit the giver
2.	Real	Debit what comes in	Credit what goes out
3.	Nominal	Debit all expenses and losses	Credit all incomes and gains

What is Accounting / Meaning of Accounting

Accounting means recording of all Business, Financial transactions in the BOOKS OF ACCOUNTS for an individual or for a business to calculate profit/loss. It takes Debit and Credit into consideration. The basic principle followed is "Golden Rules of Accounting"