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“Auditing is a systematic examination of financial statements, records and related operations to determine adherence accepted to generally accepted accounting principles management policies or stated requirements”.
In simple terms Auditing is a process of checking of the transactions of the business with its books of accounts and evidence with a view of find out the arithmetical accuracy of the accounts, the correctness and truthfulness of the transaction recorded in the books and their results thereon.
(i) The audit is a systematic examination of the books, accounts, documents and vouchers of a business organization.
(ii) The purpose of the examination of books, accounts, documents etc. is to ascertain how far they present a true and correct view of the state of affairs of a particular concern.
(iii) The auditor has to satisfy himself that the books have been drawn up properly and they give a true and fair view of the state of affairs.
(iv) Audit conducted in a haphazard manner does not serve the desired purpose.
(v) The report of the auditor is prepared for a particular financial period.
(i) Auditing helps to ascertain the systems to accounting, internal control, management of a business organization.
(ii) Auditing helps to test-check the system of the internal control of a business concern.
(iii) Auditing plays an important role in verification of the assets and liabilities of a business organization an also ensures that assets are valued properly.
(iv) To check the arithmetical accuracy of records.
(v) auditing helps to ensure that Books of Accounts are maintained according to the requirement of statue governing the business.
(vi) To ensure that the opinion covers all aspects by the professional standards.
Audit have lots of benefits, but it also have some limitations which are following -
Auditing and accountancy have a very close relationship, yet their nature and scope are quite different.” Accounting comes first. When accounts are finalized, thereafter audit works begins. Here are some diffrence between auditing and accountancy.
Basis |
Accounting |
Auditing |
1. Meaning |
Arts of recording, classifying and summary-sing transactions. |
Independent examination of financial statements. |
2. Objective |
Recording of transactions for preparation of financial statements. |
Examination of financial statements to express an opinion. |
3. Personal judgment |
No personal judgment involved. |
Personal judgment involved in various areas such as sampling. |
4. Qualification |
No specified qualification. |
Statuary Auditor must be member of ICAI. |
5. Periodicity |
Regular. |
Yearly. |
6. Appointment |
Accountant is generally appointed by the management. |
Auditor is generally appointed by the shareholders. |
7. Necessity |
Compulsory for all organizations. |
As per the statuary requirements. |
Treasury stock also known as treasury shares. When a company acquires its shares either by way of buyback or when shares are initially created but not issued to the public.
In other words, when an issuing company buys back its stock or shares on its name to hold it or resale it after some time then such shares are known as treasury shares. After the buyback of the treasury shares, the share capital of the issuing company decreases.
Meaning of some terms used in this article
1. Authorized Shares – The maximum number of shares a company allows to issue.
2. Issued shares – The total number of shares a company has ever issued.
3. Outstanding shares – The total number of shares currently held by investors.
Total number of shares issued = XXX
(-) Total number of outstanding shares = (XXX)
Number of treasury shares = XXX
We know when issuing the company acquires its shares from the open market and hold it then those shares become treasury shares or stock. Treasury shares appear at cost or par value in the shareholder's equity section of the balance sheet as a “negative figure”.
We know that,
Market capitalization = shares outstanding × price per share
Where share outstanding = the total shares of common stock issued (excluding those hold as treasury shares)
Therefore, we can say that
Market cap = [the total shares of common stock issued – treasury shares] × price per share
Hence proved, treasury shares are not included in market cap.
Treasury Stock is a contra equity item. It is not reported as an asset; rather, it is subtracted from
stockholders' equity. The presence of treasury shares will cause a difference between the number of
shares issued and the number of shares outstanding
When a corporation buys back some of its issued and outstanding stock, the transaction affects retained earnings indirectly. The cost of treasury stock must be subtracted from retained earnings, reducing amounts the company can distribute to stockholders as dividends.
The purchase of treasury stock results in a decrease in stockholders' equity. Changes in stockholders' equity and long-term liabilities are shown in the financing activities section of the statement of cash flows. The purchase of Treasury Stock will cause a decrease in cash from financing activities.
Methods of buyback of shares of stock in the USA -
1. Open market stock buyback
A company can buy back its shares own shares directly from the open market. Buyback through this method does not impose any legal obligations on a company to complete the buyback program. Thus, a company enjoys the flexibility to cancel the stock buyback program at any time. The primary advantage of the open market stock buyback is its cost-effectiveness because a company buys back its shares at the current market price and doesn't need to pay the premium.
2. Fixed-price tender offer
In the Fixed-price tender offer method, the company makes a tender offer to the shareholders of the company to buy back the shares on a fixed date and at a fixed price. The price of the tender offer almost always includes the premium relative to the current share price. Then, those shareholders who are interested in selling their stocks submit the number of shares for sale to the company.
3. Dutch auction tender offer
In a Dutch auction tender offer method, a company makes a tender offer to the shareholders of the company to buy back shares and provides them a range of possible prices, with setting the minimum bid price. Then, the shareholders make their bids by specifying the number of shares and the minimum price at which they are willing to sell their shares.
4. Direct negotiation
Under this method of buyback, a company directly approaches to one or more shareholders of a company to buyback of shares from them. For that company offers them purchase price including premium. The important benefit of the method is that a company can negotiate the purchase price directly with the shareholders.
According to the Annual report of ITC Limited, company total CSR expenditure for the financial year 2018-19 stood at Rs. 306.95 crores. Prescribed CSR expenditure is Rs. 306.55 crores for FY 2018-19.
company mainly focus on following CSR areas enhancing environmental and natural capital; supporting rural development; promoting education and vocational skills; providing preventive healthcare; providing sanitation and drinking water; creating livelihoods for people, especially those from disadvantaged sections of society, in rural and urban India; preserving and promoting traditional art and culture and promoting sports.
Recently ITC limited contributed Rs. 150 Cr. towards COVID-19.
1. Promoting Preventive Healthcare, Sanitation & Poverty Alleviation - Eradicating hunger, poverty, and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swachh Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.
2. Livelihood Enhancement - Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly, and the differently-abled and livelihood enhancement projects.
3. Economic Empowerment of Women - Promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, daycare centers, and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.
4. Ensuring Environmental Sustainability - Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.
5. Protection of National Heritage, Art & Culture - Protection of national heritage, art and culture, including restoration of buildings and sites of historical importance and works of art, setting up public libraries, promotion and development of traditional arts and handicrafts
6. Rural Development - Rural Development projects.
In financial year 2018-19
In financial year 2017-18
In financial year 2016-17
In financial year 2015-16
In financial year 2014-15
During the year 2019-2020, the Company spent Rs. 909 crore (around 2.08% of the average net profits of last three financial years) on CSR activities. As per the CSR policy of the Company, Rural Transformation, Health, Education, Environment, Arts, Heritage & Culture and Disaster Response, are the focus areas for CSR engagement. CSR initiatives of the Company under the leadership of Smt. Nita M. Ambani, Founder and Chairperson, Reliance Foundation, have touched the lives of around 3.6 crore people across India covering more than 37,000 villages and several urban locations across India.
The Reliance group supported major national campaigns like Swachhata hi Seva and Jal Shakti Abhiyan. It responded fast to national emergencies and disasters including floods and more recently, COVID-19 pandemic which has earned accolades from one and all. CSR initiatives of the Company have won several awards including Mahatma Award 2019 for Excellence in Corporate Social Responsibility. The Company was conferred with the Golden Peacock Award
The key philosophy of all CSR initiatives of RIL is guided by three core commitments of SIS:
a) S - SCALE
b) I - IMPACT
c) S - SUSTAINABILITY
To work towards bridging the developmental gap between rural 'Bharat' and urban India by improving livelihood, addressing poverty, hunger and malnutrition. Key initiatives include:
To address issues around affordability and accessibility of quality healthcare and bring about improvement in awareness and health seeking behavior in various parts of India, enabling a better living, through initiatives such as:
To work on several educational initiatives to provide quality education, training, skill enhancement for improving the quality of living and livelihood. Initiatives are aimed at:
To enable enhanced livelihood and quality of life, promote environment sustainability through various initiatives for:
To work towards preserving the rich heritage, arts and culture of India for its future generation and make conscious efforts to ensure its continuity and enhance avenues for livelihoods of traditional artisans and craftsmen. Key initiatives include:
RIL has a track record of organizing timely relief and rehabilitation of communities affected by natural calamities. To strengthen efforts in the area of Disaster Response towards establishing RIL as one of the leading organizations with the capacity to respond in a timely and impactful manner in the affected areas. Key initiatives include:
The Constitution of India has been amended by the Constitution (One Hundred and First Amendment) Act, 2016 for the purpose on GST on 8th september 2016 on desent of president. Following Articles inserted in constitution :
1. Article 246A Inserted -
2. Article 269A Inserted -
3. Article 279A Inserted -
The President shall, within 60 days from the date of commencement of the Constitution (One Hundred and First Amendment) Act, 2016, by order, constitute a Council to be called the GST Council.
4. Article 254 -
Any difference arises between law made by parliment and law made by state, than law made by parliament prevail.
The following subject matters kept outside the purview of GST. As such these are taxed under the existing laws of centre and states as the case may be -
i) Alcohol for human consumption
ii) Entertainment tax collected by local bodies
iii) Property taxes, such as stamp duty
iv) Electricity
v) Petroleum Products -
Note - Tabacco and tabacco products would be subject to GST in addition the center would have power to levy Central Excise duty on tabacco and tabacco products.
Meaning : Sole proprietorship is a form of organization in which there is only single owner of business. He himself manages and control the business.
1) Single ownership - He is sole owner of all the assets and resources of business.
2) No separate Legal Entity - Sole proprietorship has no separate existence like company. owner and business are not separate.
3) No Legal Formalities - No Legal Formalities are required to start, manage and dissolve such business organization. because registration of Sole proprietorship is not mandatory.
4) Control and management - In sole proprietary organisation, all the decisions relating to business operations are taken by one person, which makes functioning of business simple and easy.
5) Unlimited liability - The liability of owner is unlimited. In case, the assets of business are not sufficient to meet its debts, the personal property of owner can be used for paying debts.
6) Undivided Risk - The sole proprietor is the only person to whom the profits belong. There is a direct relationship between effort and reward. This motivates him to work hard and bear the risks of business
8) Secrecy - All the important informations concerning the business rests only with the owner so that no outside party can take any under advantage of it.
1) Easy Formation - It can be easily started and closed as there is no need to observe any legal formalities. It is not governed by any specific law. It is simply required that the business activity should be lawful and should comply with the rules and regulations laid down by local authorities.
2) Quick Decision - A Sole proprietor takes the decision quickly as he is not required to consult anybody about his decisions.
3) Secrecy - All the secrets are confined with the owner. They are not shared with any body, so there has full secrecy.
4) Direct motivation - There is a direct relationship between effort and reward. This motivates him to work hard and bear the risks of business
5) Personal touch - Sole proprietor can maintain personal contacts with his customers and employees. In this way, good work is possible at less cost and time.
1) Limited financial resources - Funds are limited to the owner's personal savings (i.e. his capital) and his personal assets may also be insufficient for raising loans against their security, which reduces his borrowing capacity.
2) Limited managerial ability - A sole proprietor may not be able to manage the business efficiently as he is not likely to have necessary skills regarding all aspects of the business and also due to limited financial resources sole proprietor may not afford qualified managers.
3) Unlimited liability - As the sole trader has to face the entire risk of business, so he compels him to avoid risky and bold decisions. Unlimited Liability It refers that if the business gets into difficulty and can't pay its debts, the owner of the business is hold personally liable for those debts.
4) Uncertainty - Because sole proprietor is a natural person and their has no separate entity death, insolvency, lunacy or illness of a proprietor may leads to its closure.
5) Limited scope for expansion - Due to limited capital and managerial skills, it can't expand to a large scale.
(i) Where outsiders has knowledge of irregularity.
(ii) No knowledge of MOA and AOA.
(iii) In case of Forgery.
(iv) In case of Negligence.
1. Declaration of dividend shall be authorized by AOA.
(i) Out of current year profit, or
(ii) Out of any previous year profit or accumulated profit arrived after providing depreciation
(iii) Or both (i) and (ii) , or
(iv) Out of money provided by the Central Government or a State Government for the payment of dividend;
3. Before the declaration of any dividend in any financial year, transfer such percentage of profits for that financial year as it may consider appropriate to the reserves of the company;
4. Before the declaration of dividend company shall provide depreciation to its all depreciable assets.
5. Dividend to be paid to registered shareholder only.
6. Dividend to be declared from free reserves only.
(a) As per SS-3 a company shall not declare Dividend on its equity shares in case of non-compliance of provisions relating to the acceptance of deposits under the Act, till such time the deposits accepted have been repaid with interest in accordance with the terms and conditions of the agreement entered with the depositors.
(b) A company shall also not declare any Dividend, if it has defaulted in –
(c) No Dividend shall be declared by the company during the extended time, if any, granted by the Tribunal/ Court for repayment of above liabilities.
As per section 123(1)(c) read with rule 3 of Companies (Declaration and Payment of Dividend) Rules, 2014, A company can declare dividend in absence of profits in any financial year but subject to following conditions :