Conversion of a private limited company to a public limited company
Both a private company limited by shares and an unlimited company with a share capital may re-register as a plc., but a company without a share capital cannot do so.
A private company must pass a special resolution that it be so re-registered and deliver a copy of the resolution together with an application form to the Registrar. The resolution must also:
#alter the company's memorandum so that it states that the company is to be a public limited company,
#increase its share capital to the statutory minimum of £50,000,
#make any other alterations to the memorandum so that it conforms to that required for a public limited company,
#make any required alterations to the articles of association of the company.
The private company if it does not already have sufficient issued share capital must issue £50,000 in shares a minimum of 25% part paid.
Conversion of a public limited company to a private limited company
In some jurisdictions a public limited company may re-register as a private limited company or private unlimited company at any time with few formalities.
A court may also order a public company to re-register as private on approving a 'minute of reduction' of share capital which results in the issued share capital falling below the statutory minimum. In such a case the court will also specify alterations to the company's memorandum and articles. A special resolution to re-register is not require
Tuesday 6 September 2011
Thursday 25 August 2011
Drawing
Drawing
A drawing is the amount of cash drawn out by a sole proprietorship and by partners of a partnership,. The drawing amount reduces capital in a sole proprietorship and a partnership. It is nontaxable for income tax purposes.
A drawing is the amount of cash drawn out by a sole proprietorship and by partners of a partnership,. The drawing amount reduces capital in a sole proprietorship and a partnership. It is nontaxable for income tax purposes.
Capital
Definition of Capital
In simple word, capital means that amount or asset which is invested in business by businessman or owner of business. When the business is closed, after paying outside creditors, balance amount will be his capital which he can obtain.
When a person starts any business or profession, he brings some money in cash and some other assets like building, furniture and machinery. These will be his capital. Suppose, you want to start your accounting tuition center in your town, for this you have started it with $ 2000 dollars. You are using also your room for tuition work. So, your $ 2000 and your room will be the capital of your profession and it will be shown in the liability side of your profession’s balance sheet.
Friday 5 August 2011
Accepted Accounting Principles (GAAP)
Accounting Assumptions, Principles, and Constraints:
Now, let’s backtrack a little to a short review of accounting theory to consider a few concepts useful to the process of extracting meaning from financial statements. All the accounting rules behind Generally Accepted Accounting Principles (GAAP) may seem overly complicated but they can be understood mostly as a complex give and take between the following accounting assumptions, principles, and constraints (Keiso, Weygandt, & Warfield, 2002). By the way, these concepts underpinning how financial statements are constructed really help unite the themes of most MBA-level financial accounting courses.
Accounting Assumptions
Economic Entity – the financial statements assume that we are dealing with a single organization, but this gets tricky when we want to slice and dice the financial statements to understand what is happening with a particular product or division within the organization.
Going Concern or Continuing Operations – we assume that the economic entity has a meaningful past and future for purposes of recording costs of assets and inventory, and decision making based on those costs in the present.
Monetary Unit – we keep score with money and we typically ignore inflation and deflation of currencies; the value and unit of currency is assumed to be stable, unless we are transacting with international divisions that use other currencies besides the U.S. Dollar.
Accounting Periods –we assume that it makes sense to have monthly, quarterly, and annual accounting periods where we stop to assemble financial statements. Fiscal years sometimes don’t align with calendar years.
Accounting Principles
Historical Costs – assets (and liabilities) are typically reported at the historical cost and then adjusted with fair market value when the needs of reporting require it. However, the cost of an asset 10 years ago does not reflect what it is worth to another buyer or the cost of replacement.
Revenue Recognition – we record revenues when they are realized (i.e., we become aware) and earned (i.e., we do or ship something). This is one of challenges that accrual-based accounting is trying to solve. Just because we received cash from a sales order doesn’t mean that we did everything we had to do to earn the revenue or ship the product. Also, we may have sold something but not received cash.
Matching Expenses to Revenues – we match expenses to the revenues, so recorded profit in the income statement is based on the best fit of revenues and expenses. This is another feature of accrual-based accounting; expenses are aligned with associated revenues in the same or future accounting period. For example, most fixed expenses for buildings and equipment must be depreciated to align the expense with the revenue that was earned.
Full Disclosure – in general, accountants record and report every bit of information in the numbers and footnotes of financial statements that fairly represent the activities of the business entity in that accounting period. That is fine and dandy but for decision-making we want to leave out or add things that are relevant to the decision we are making.
Accounting Constraints
Cost and Benefit Paradox – there is a very real cost to recording and reporting accounting information. Hence, some potentially important events relevant to a business may not be disclosed because it was too expensive or cumbersome to gather the data. We must read between the lines of financial statements and add information to which we have access in order to make the best decisions.
Materiality – small financial events are not as important large financial events to the typical, reasonable reader of financial statements. That makes sense but our decision making process may be different from the typical user of financial statements as understood by the accounting folks; some small financial event may not be disclosed even though it is very relevant to our decision.
Industry Practice – one size does not fit all when reporting financial activities. Some industries have peculiar products/services or have special ways of distributing the products/services to customers, so we cannot understand an Internet retailer the same way we would analyze and automobile manufacturer.
Conservatism – to avoid investor misinterpretation of assets and income, accountants choose accounting methods that do not overstate what the business owns or the profits achieved. Again, this is an important consideration for financial reporting, but we need to modify the notion somewhat to make decisions about the business between accounting periods.
Reference
Keiso, D, Weygandt, J, & Warfield, T. (2002). Intermediate Accounting, 11th Ed. New York, New York: John Wiley & Sons.
Now, let’s backtrack a little to a short review of accounting theory to consider a few concepts useful to the process of extracting meaning from financial statements. All the accounting rules behind Generally Accepted Accounting Principles (GAAP) may seem overly complicated but they can be understood mostly as a complex give and take between the following accounting assumptions, principles, and constraints (Keiso, Weygandt, & Warfield, 2002). By the way, these concepts underpinning how financial statements are constructed really help unite the themes of most MBA-level financial accounting courses.
Accounting Assumptions
Economic Entity – the financial statements assume that we are dealing with a single organization, but this gets tricky when we want to slice and dice the financial statements to understand what is happening with a particular product or division within the organization.
Going Concern or Continuing Operations – we assume that the economic entity has a meaningful past and future for purposes of recording costs of assets and inventory, and decision making based on those costs in the present.
Monetary Unit – we keep score with money and we typically ignore inflation and deflation of currencies; the value and unit of currency is assumed to be stable, unless we are transacting with international divisions that use other currencies besides the U.S. Dollar.
Accounting Periods –we assume that it makes sense to have monthly, quarterly, and annual accounting periods where we stop to assemble financial statements. Fiscal years sometimes don’t align with calendar years.
Accounting Principles
Historical Costs – assets (and liabilities) are typically reported at the historical cost and then adjusted with fair market value when the needs of reporting require it. However, the cost of an asset 10 years ago does not reflect what it is worth to another buyer or the cost of replacement.
Revenue Recognition – we record revenues when they are realized (i.e., we become aware) and earned (i.e., we do or ship something). This is one of challenges that accrual-based accounting is trying to solve. Just because we received cash from a sales order doesn’t mean that we did everything we had to do to earn the revenue or ship the product. Also, we may have sold something but not received cash.
Matching Expenses to Revenues – we match expenses to the revenues, so recorded profit in the income statement is based on the best fit of revenues and expenses. This is another feature of accrual-based accounting; expenses are aligned with associated revenues in the same or future accounting period. For example, most fixed expenses for buildings and equipment must be depreciated to align the expense with the revenue that was earned.
Full Disclosure – in general, accountants record and report every bit of information in the numbers and footnotes of financial statements that fairly represent the activities of the business entity in that accounting period. That is fine and dandy but for decision-making we want to leave out or add things that are relevant to the decision we are making.
Accounting Constraints
Cost and Benefit Paradox – there is a very real cost to recording and reporting accounting information. Hence, some potentially important events relevant to a business may not be disclosed because it was too expensive or cumbersome to gather the data. We must read between the lines of financial statements and add information to which we have access in order to make the best decisions.
Materiality – small financial events are not as important large financial events to the typical, reasonable reader of financial statements. That makes sense but our decision making process may be different from the typical user of financial statements as understood by the accounting folks; some small financial event may not be disclosed even though it is very relevant to our decision.
Industry Practice – one size does not fit all when reporting financial activities. Some industries have peculiar products/services or have special ways of distributing the products/services to customers, so we cannot understand an Internet retailer the same way we would analyze and automobile manufacturer.
Conservatism – to avoid investor misinterpretation of assets and income, accountants choose accounting methods that do not overstate what the business owns or the profits achieved. Again, this is an important consideration for financial reporting, but we need to modify the notion somewhat to make decisions about the business between accounting periods.
Reference
Keiso, D, Weygandt, J, & Warfield, T. (2002). Intermediate Accounting, 11th Ed. New York, New York: John Wiley & Sons.
Sunday 24 July 2011
Accrued @ Terakru
Definition
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 of accounts include, among others, accounts payable, accounts receivable, goodwill, deferred tax liability and future interest expense.
Unfortunately, the term accrual is also often used as an abbreviation for the terms accrued expense and accrued revenue that share the common name word, but they have the opposite economic / accounting characteristics.
# Accrued revenue: Revenue is recognized before cash is received.
# Accrued expense: Expense is recognized before cash is paid out.
Accrued revenue (or accrued assets) is an asset, such as unpaid proceeds from a delivery of goods or services, when such income is earned and a related revenue item is recognized, while cash is to be received in a latter period, when the amount is deducted from accrued revenues.
In the rental industry, there are specialized revenue accruals for rental income which crosses month end boundaries. These are normally utilized by rental companies who charge in arrears, based on an anniversary of a contract date. For example a rental contract which began on 15 January, being invoiced on a recurring monthly basis will not generate its first invoice until 14 February. Therefore at the end of the January financial period an accrual must be raised for 16 days worth of the monthly charge. This may be a simple pro-rata basis (e.g. 16/31 of the monthly charge) or may be more complex if only week days are being charged or a standardized month is being used (e.g. 28 days, 30 days etc.).
Accrued expense, in contrast, is a liability with an uncertain timing or amount, but where the uncertainty is not significant enough to qualify it as a provision. An example is a pending obligation to pay for goods or services received from a counterpart, while cash is to be paid out in a latter accounting period when the amount is deducted from accrued expenses.
Wednesday 20 July 2011
Inventories / Stok / Inventory
Definition of Inventory
A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold. These are considered liquid assets, since they can be converted into cash quite easily. There are various means of valuing these assets, but to be conservative the lowest value is usually used in financial statements.
Bank
What is Bank?
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:
A central bank circulates money on behalf of a government and acts as its monetary authority by implementing monetary policy, which regulates the money supply.
A commercial bank accepts deposits and pools those funds to provide credit, either directly by lending, or indirectly by investing through the capital markets. Within the global financial markets, these institutions connect market participants with capital deficits (borrowers) to market participants with capital surpluses (investors and lenders) by transferring funds from those parties who have surplus funds to invest (financial assets) to those parties who borrow funds to invest in real assets.
List of bank in Malaysia
1) Affin Bank Berhad
2) Alliance Bank Berhad
3) AmBank Berhad
4) CIMB Bank Berhad
5) Hong Leong Bank Berhad
6) Malayan Banking Berhad (Maybank)
7) Public Bank Berhad
8) RHB Bank Berhad
9) Bank Simpanan Nasional
10) Bank Islam
11) Agro Bank
12) Tabung Haji
13) Bank Rakyat
14) Bank Muamalat
15) Bank Negara
Foreign Bank in Malaysia
1) Citibank Berhad
2) HSBC Bank Malaysia Berhad
3) Oversea-Chinese Banking Corporation (OCBC Bank Malaysia Berhad)
4) Standard Chartered Bank Malaysia Berhad (StanChart)
5) The Bank of Nova Scotia Berhad (Scotiabank)
6) The Royal Bank of Scotland Berhad (RBS)
7) United Overseas Bank Malaysia Berhad (UOB)
18 Islamic banks (local & foreign)
1) Asian Finance Bank Berhad
2) Alliance Islamic Bank Berhad
3) Asian Finance Bank (M) Berhad
4) Bank Islam Malaysia Berhad
5) Bank Muamalat Malaysia Berhad
6) Hong Leong Islamic Banking Berhad
7) CIMB Islamic Bank Berhad
8) RHB Islamic Bank Berhad
9) AmIslamic Bank Berhad
10) Affin Islamic Bank Berhad
11) Al Rajhi Banking & Investment Corporation (Malaysia) Berhad
12) Kuwait Finance House (Malaysia) Berhad
13) Maybank Islamic Berhad
14) Public Islamic Bank Berhad
15) HSBC Amanah Malaysia Berhad
16) OCBC Al-Amin Bank Berhad
17) Standard Chartered Saadiq Berhad
18) Unicorn International Islamic Bank Malaysia Berhad
Development Financial Institutions (Government-owned banks)
1)Agro Bank Malaysia Berhad
2)Bank Kerjasama Rakyat Malaysia Berhad (Bank Rakyat)
3)Bank Simpanan Nasional Berhad
4)Export-Import Bank of Malaysia Berhad (Exim Bank)
5)Bank Perusahaan Kecil & Sederhana Berhad ((Small Medium Enterprise) SME Bank Berhad)
6)Sabah Development Bank Berhad (SDB)
7)Sabah Credit Corporation Berhad
8)Lembaga Tabung Haji
9)Credit Guarantee Corporation Malaysia Berhad (CGC)
10)Malaysian Industrial Development Finance Berhad (MIDF)
11)Bank Pembangunan Malaysia Berhad (BPMB) (The development bank of Malaysia)
Malaysian Credit Cards Issuers
1) Affin Bank Berhad
2) Alliance Bank Berhad
3) Al-Rajhi Bank (i)
4) AmBank Berhad
5) Bank Islam Malaysia Berhad (i)
6) Bank Simpanan Nasional (i)
7) CIMB Bank Berhad
8) Citibank Berhad
9) EON Bank Berhad
10) Hong Leong Bank Berhad
11) HSBC Bank (Malaysia) Berhad
12) Malayan Banking Berhad (Maybank / MalayBank)
13) OCBC Bank Berhad
14) Public Bank Berhad
15) RHB Bank Berhad
16) Standard Chartered Bank (Malaysia) Berhad
17) United Overseas Bank Malaysia Berhad
18) AEON Credit Services (M) Berhad
19) MBF Cards Sdn Bhd
Malaysia Debit Cards Issuers
1)Al-Rajhi Islamic Bank
2)Affin Bank
3)Affin Islamic
4)Alliance Bank
5)AmBank
6)Bank Islam
7)Bank Rakyat
8)Bank Simpanan Nasional
9)Bank Muamalat
10)CIMB Bank
11)Citibank
12)EON Bank
13)Hong Leong Bank
14)MAYBANK
15)Public Bank
16)RHB Bank
17)Standard Chartered Bank
18)United Overseas Bank
19)OCBC Bank
20)Kuwait Finance House
Cash / Tunai
Sources from wikipedia
In common language cash refers to money in the physical form of currency, such as banknotes and coins.
In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately (as in the case of money market accounts). Cash is seen either as a reserve for payments, in case of a structural or incidental negative cash flow or as a way to avoid a downturn on financial markets.
Cash management
Cash management is important for any new or growing business, and here are some tips to aid your company in the collection, concentration, and disbursement of cash.
Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. The goal is to manage the cash balances of an enterprise in such a way as to maximize the availability of cash not invested in fixed assets or inventories and to do so in such a way as to avoid the risk of insolvency. Factors monitored as a part of cash management include a company's level of liquidity, its management of cash balances, and its short-term investment strategies.
In some ways, managing cash flow is the most important job of business managers. If at any time a company fails to pay an obligation when it is due because of the lack of cash, the company is insolvent. Insolvency is the primary reason firms go bankrupt. Obviously, the prospect of such a dire consequence should compel companies to manage their cash with care. Moreover, efficient cash management means more than just preventing bankruptcy. It improves the profitability and reduces the risk to which the firm is exposed.
Cash management is particularly important for new and growing businesses. Cash flow can be a problem even when a small business has numerous clients, offers a product superior to that offered by its competitors, and enjoys a sterling reputation in its industry. Companies suffering from cash flow problems have no margin of safety in case of unanticipated expenses. They also may experience trouble in finding the funds for innovation or expansion. It is, somewhat ironically, easier to borrow money when you have money. Finally, poor cash flow makes it difficult to hire and retain good employees.
It is only natural that major business expenses are incurred in the production of goods or the provision of services. In most cases, a business incurs such expenses before the corresponding payment is received from customers. In addition, employee salaries and other expenses drain considerable funds from most businesses. These factors make effective cash management an essential part of any business's financial planning. Cash is the lifeblood of a business. Managing it efficiently is essential for success.
When cash is received in exchange for products or services rendered, many small business owners, intent on growing their company and tamping down debt, spend most or all of these funds. But while such priorities are laudable, they should leave room for businesses to absorb lean financial times down the line. The key to successful cash management, therefore, lies in tabulating realistic projections, monitoring collections and disbursements, establishing effective billing and collection measures, and adhering to budgetary restrictions.
Creditors/ Account Payable/ Pemiutang
What is CREDITOR?
Creditor is an entity (person or institution) that extends credit by giving another entity permission to borrow money if it is paid back at a later date. Creditors can be classified as either "personal" or "real". Those people who loan money to friends or family are personal creditors. Real creditors (i.e. a bank or finance company) have legal contracts with the borrower granting the lender the right to claim any of the debtor's real assets (e.g. real estate or car) if he or she fails to pay back the loan.
Meaning of Creditor (Wikipedia)
A creditor is a party (e.g. person, organization, company, or government) that has a claim to the services of a second party. It is a person or institution to whom money is owed. [1] The first party, in general, has provided some property or service to the second party under the assumption (usually enforced by contract) that the second party will return an equivalent property or service. The second party is frequently called a debtor or borrower. The first party is the creditor, which is the lender of property, service or money.
The term creditor is frequently used in the financial world, especially in reference to short term loans, long term bonds, and mortgage loans. In law, a person who has a money judgment entered in their favor by a court is called a judgement creditor.
The term creditor derives from the notion of credit. In modern America, credit refers to a rating which indicates the likelihood a borrower will pay back his or her loan. In earlier times, credit also referred to reputation or trustworthiness.
Thursday 7 July 2011
Debtors / Account Receivables / Penghutang
Definition
A company or individual who owes money. If the debt is in the form of a loan from a financial institution, the debtor is referred to as a borrower. If the debt is in the form of securities, such as bonds, the debtor is referred to as an issuer.
Wednesday 6 July 2011
Goodwill
Definition of goodwill
Goodwill is an accounting concept meaning the value of an entity over and above the value of its assets. The term was originally used in accounting to express the intangible but quantifiable "prudent value" of an ongoing business beyond its assets, resulting perhaps from the reputation the firm enjoyed with its clients.
Accounting for goodwill
Buyer may be willing to pay more for a business as a going concern because of:
# Good location
# Good customer relations
# Good reputation
# Well-known products
# Experienced and efficient employees and management team
# Good relation with suppliers
Formula to calculate goodwill :
Goodwill = Selling price – (Assets – Liabilities)
OR
Goodwill = Selling price as a going concern – Fair value of separate net assets
Type of Goodwill
a) Inherit Goodwill
#Goodwill generated internally because of the above advantages Inherent goodwill is only an estimation.
#Therefore, it should not be brought into the books, and no accounting entry is required
b)Purchased Goodwill
#It is the goodwill generated during the acquisition of a business
#It is the difference between the selling price of a business as a going concern and the total value of its separable net assets
#It can be treated as an intangible fixed asset.
#Some companies may write it off immediately against reserves, or amortized through the profit and loss account over its useful economic life
Wednesday 15 June 2011
Accountancy
The principles of accountancy are applied to business entities in three divisions of practical art, named accounting,bookkeeping , and auditing.
Accountancy is defined by the Oxford English Dictionary (OED) as "the profession or duties of an accountant".
Accounting is defined by the American Institute of Certified Public Accountants (AICPA) as "the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."
Accounting is thousands of years old; the earliest accounting records, which date back more than 7,000 years, were found in Mesopotamia (Assyrians). The people of that time relied on primitive accounting methods to record the growth of crops and herds. Accounting evolved, improving over the years and advancing as business advanced.
Early accounts served mainly to assist the memory of the businessperson and the audience for the account was the proprietor or record keeper alone. Cruder forms of accounting were inadequate for the problems created by a business entity involving multiple investor, so double-entry bookkeeping first emerged in northern Italy in the 14th century. The trading ventures began to require more capital than a single individual was able to invest.
The development of joint stock companies created wider audiences for accounts, as investors without firsthand knowledge of their operations relied on accounts to provide the requisite information.This development resulted in a split of accounting systems for internal (example management accounting) and external (Example financial accounting) purposes, and subsequently also in accounting and disclosure regulations and a growing need for independent attenstation of external accounts by auditors.
Today, accounting is called "the language of business" because it is the vehicle for reporting financial information about a business entity to many different groups of people. Accounting that concentrates on reporting to people inside the business entity is called management accounting and is used to provide information to employees, managers, owner-manager and auditors.
Management accounting is concerned primarily with providing a basis for making management or operating decisions. Accounting that provides information to people outside the business entity is called financial accounting and provides information to present and potential shareholders, creditors such as banks or vendors, financial analysts, economists, and government agencies. Because these users have different needs, the presentation of financial accounts is very structured and subject to many more rules than management accounting.
The body of rules that governs financial accounting in a given jurisdiction is called Generally Accepted Accounting Principles, or GAAP. Other rules include International Financial Reporting Standards, or IFRS or US GAAP.
Monday 13 June 2011
Term in Accounting
Term atau terma yang digunakan dalam akaun ini memang banyak sekali. Kadang kala terma ini amat sukar untuk difahami. Kamus biasa yang menterjemahkan maksud suatu perkataan tidak boleh diguna pakai dalam akaun. Tetapi "you all" boleh merujuk kepada "accounting dictionary" which you can find in the url http://www.ventureline.com/accounting-glossary/
Di web ini, ia dapat menterjemah maksud dengan tepat bagi setiap terma-terma dalam akaun. Oleh itu saya mencadangkan para pelajar merujuk kepada web ini untuk memahami dengan lebih mendalam mengenai akaun.
Terma-terma yang biasanya kita jumpa dalam akaun adalah "goods, goodwill, debtors,creditors,cash,bank, inventories, accrued, capital, drawing, liabilities, equities, non-current assets, current asset, cash flow, bank reconciliation, equity, absorbtion, depreciation, acid test ratio and etc."
Di web ini, ia dapat menterjemah maksud dengan tepat bagi setiap terma-terma dalam akaun. Oleh itu saya mencadangkan para pelajar merujuk kepada web ini untuk memahami dengan lebih mendalam mengenai akaun.
Terma-terma yang biasanya kita jumpa dalam akaun adalah "goods, goodwill, debtors,creditors,cash,bank, inventories, accrued, capital, drawing, liabilities, equities, non-current assets, current asset, cash flow, bank reconciliation, equity, absorbtion, depreciation, acid test ratio and etc."
Thursday 9 June 2011
What is Accounting?
The systematic, recording, reporting, and analysis of financial transactions of a business. The person in charge of accounting is known as an accountant and this individual is typically required to follow a set of rules and regulations, such as the Generally Accepted Accounting Principles. Accounting allows a company to analyze the financial performance of the business and look at statistics such as net profit.
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