Why Every Manager Should Learn Basic Accounting?

A key skill a business manager must learn is basic accounting. Understanding accounting will give you a better understanding of how your organisation works. This has many benefits as it gives you greater control and confidence over your budgets and your own destiny. As they say money makes the world go around and accounting ensures that money is controlled in a way that it enables business and commerce to happen. Accounting is necessary to track all the different financial transactions that happen within an organisation whether it is a small shop or a Fortune 500 company. The transactions can be formalised into financial reports for analysis. Accounting provides a framework that monitors and controls the financial health of an organisation. Through accounting methods and reporting management can make decisions on whether there is potential to expand or cut back. Accounting can also provide financial reports that can be used by top management and shareholders to determine the profitability and worth of an organisation. This can be determined by analysing the company's assets and liabilities. These two components are the foundation that accounting is built upon. As a manager you should have at the very least a basic understanding of each.

Assets The term assets refers to something that has value. There are many different types of assets that a company can own such as cash, property, machinery, stock or accounts receivable which represents debtors who owe the company money. Assets are divided up into two categories as follows:

Current assets Current assets represent assets that can be converted into cash quickly. These types of assets can also be referred to as liquid assets. A company should always have a reserve or back up of current assets in case a crisis occurs. If a major bill needs to be paid urgently then, current assets can be converted into cash quickly to pay it off. Fixed assets These are assets that cannot be converted in to cash quickly. Fixed assets include equipment and machinery.

Liabilities Liabilities are accounting terminology to mean that your company owes money. Liabilities can come in different forms that include bank loans, mortgages, and business expenses. As with assets there are also current and fixed liabilities. Current liabilities are categorised as having to be settled or paid within one year for example, a short term loan or accrued expensed are current liabilities. Long term liabilities require settlement after one year. These can include long term loans such as a mortgage on a factory building.

Identify typical users of financial reports?

There are many users /parties interested in the accounts of a company /organization. These include the following: The owners / shareholders The directors / managers The employees The creditors, i.e. suppliers of goods on credit The tax authorities Lenders, such as banks or other financial institutions Government

News Report Bonus shares come to the rescue of investors

A) Explain Bonus shares come to the rescue.. The term basically means that companies gave bonus issues to investors who already had shares of the respective companies. The issues were given as per some ratio for eg. 1:5 , i.e. for every 1 share of the company held by the investor the investor will get 5 more shares. This step improved the conditions of the investors among the volatile market conditions as they got additional shares of the company so that they get benefited in long term.

B) Benefits of Bonus Shares Issuance of bonus shares benefits long term investors. Usually, investors who buy securities after such announcements tend to gain very minimal in short run. If you had purchased 100 shares in reliance on Oct 6, 2006 at price of Rs. 1175/- and continued to hold till date you would now gain on announcement of bonus shares. If you receive 100 bonus shares, your avg. price will be 117500/200 = Rs. 587.50. Even if the current market price of Rs. 2100 was to become half to Rs. 1150 you would still have a profit of (1150 - 587.50) Rs. 562.50 per share. A simple example 1) Till Yesterday some XYZ stock quote was 100 rupees and the total number stocks of the company are 200. 2) Today with 1:1 bonus issue, the stock divides as 2 for 1. So the stock price will be 50 rupees but the number of stocks will increase up to 400. 3) In this case you have flexibility to keep some amount of shares and sell some. 4) Many times companies gives dividend based on the volume of stocks not the stock price, in this case you will be benefited. 5) With increasing number of stocks there will be more trading in the stock which is always good cause the whole stock market is about trading.