CMAE Bulletin July2024

CMA E-Bulletin
STUDENT
VOL 09 I NO. 07 I JULY 2024
An Initiative of Directorate of Studies

About the Institute
T
he Institute of Cost Accountants of India (ICMAI) is a statutory body set up under an Act of
Parliament in the year 1959. The Institute as a part of its obligation, regulates the profession of Cost
and Management Accountancy, enrols students for its courses, provides coaching facilities to the
students, organizes professional development programmes for the members and undertakes research
programmes in the eld of Cost and Management Accountancy. The Institute pursues the vision of cost
competitiveness, cost management, efcient use of resources and structured approach to cost accounting
as the key drivers of the profession. In today’s world, the profession of conventional accounting and
auditing has taken a back seat and cost and management accountants increasingly contributing towards
the management of scarce resources like funds, land and apply strategic decisions. This has opened up
further scope and tremendous opportunities for cost accountants in India and abroad.
The Institute is headquartered in Kolkata having four Regional Councils at Kolkata, Delhi, Mumbai and
Chennai, 117 Chapters in India and 11 Overseas Centres. The Institute is the largest Cost & Management
Accounting body in the world with about 1,00,000 qualied CMAs and over 5,00,000 students pursuing the
CMA Course. The Institute is a founder member of International Federation of Accountants (IFAC),
Confederation of Asian and Pacic Accountants (CAPA) and South Asian Federation of Accountants
(SAFA). The Institute is also an Associate Member of ASEAN Federation of Accountants (AFA) and member
in the Council of International Integrated Reporting Council (IIRC), UK.
Vision Statement
“The Institute of Cost Accountants of India would be the preferred source of resources
and professionals for the nancial leadership of enterprises globally.”
Mission Statement
“The CMA Professionals would ethically drive enterprises globally by creating value
to stakeholders in the socio-economic context through competencies drawn
from the integration of strategy, management and accounting.”
Institute Motto
From ignorance, lead me to truth
From darkness, lead me to light
From death, lead me to immortality
Peace, Peace, Peace
Disclaimer:
Copyright of this CMA Student E-Bulletin is reserved by the Institute of Cost Accountants of India and prior permission from the
Institute is necessary for reproduction of the whole or any part thereof. The write ups published in good faith on the basis of
declaration furnished by the authors.
Copyright © 2024 by The Institute of Cost Accountants of India

CMA E-Bulletin
STUDENT
An Initiative of Directorate of Studies

CONTENTS
CMA E-Bulletin
STUDENT
Chief Patron
CMA Bibhuti Bhusan Nayak, President, ICMAI
CMA E-Bulletin
STUDENT
Patron An Initiative of Directorate of Studies
CMA T.C.A. Srinivasa Prasad, Vice President, ICMAI
Editorial Board Members

CMA Vinayaranjan P.
CMA Neeraj Dhananjay Joshi
CMA Manoj Kumar Anand
CMA Navneet Kumar Jain
CMA Avijit Goswami
CMA (Dr.) V. Murali
ii - President’s Communique
CMA (Dr.) Ashish P. Thatte
The Institute of Cost Accountants of India
Chief Editor
iii - Vice President’s Communique
CMA (Dr.) Kaushik Banerjee, Secretary, ICMAI
Managing Editor
iv - Chairman’s Communique
CMA (Dr.) Debaprosanna Nandy, Additional Secretary,
Secretary, Training & Educational Facilities Committee
Training & Educational Facilities Committee
Editorial Team
01 - 18 - CMA Foundation Course
CMA Avijit Mondal, Joint Director (Studies)
Syllabus 2022
CMA Samarpita Ghosal, Sr. Officer (Studies)
(Paper 1 - 4)
CMA Susmita Ghosh, Sr. Officer (Studies)
19 - 60 - CMA Intermediate Course

Editorial Office
Syllabus 2022
Group I (Paper 5 - 8) & Group II (Paper 9 - 12)
CMA Bhawan
12, Sudder Street, KolKata - 700016
61 - 106 - CMA Final Course
studies.ebulletin@icmai.in
Syllabus 2022
Group III (Paper 13-16) & Group IV (Paper 17-19)
Electives (Paper 20A - 20C)
www.icmai.in CMA Student E-Bulletin - July 2024 i

PRESIDENT’S
COMMUNIQUE
G
Dear Students,
reetings to all of you, the vibrant I would also like to take this opportunity to
and dynamic future of the cost and congratulate all the students who have excelled
management accounting profession! in their examinations and professional endeavors.
I am filled with immense pride Your achievements are a testament to your hard
and optimism for the remarkable strides we have work and the quality of education provided by the
collectively made as an Institute and as a community ICMAI. Keep pushing boundaries and striving for
dedicated to excellence. excellence; your success is our greatest reward.
The journey of becoming a Cost & Management As we move forward, I urge you to stay curious,
Accountant is a rigorous yet rewarding one, stay resilient, and never lose sight of your goals. The
and I am continually inspired by the dedication road to success is paved with continuous learning
and hard work each one of you exhibits. Your and unwavering determination. Remember, the
commitment to mastering the intricacies of cost and ICMAI is here to support you every step of the way.
management accounting not only fortifies your own I extend my heartfelt best wishes to all of you. May
career prospects but also enhances the integrity and your journey be filled with knowledge, growth, and
capability of our profession as a whole. success. Let us continue to uphold the values of
In today’s fast-paced and ever-evolving business integrity, excellence, and innovation that define our
environment, adaptability is key. The ICMAI is esteemed profession.
committed to equipping you with the tools and Warm regards,
knowledge necessary to thrive in this dynamic
landscape. Our curriculum is continuously updated
to reflect the latest trends, technologies, and
methodologies in the field of cost management.
CMA Bibhuti Bhusan Nayak
We are embracing digital transformation and
incorporating data analytics, AI, and machine President, ICMAI
learning into our learning modules to ensure that
you are well-prepared for the future.
ii CMA Student E-Bulletin - July 2024 www.icmai.in

VICE PRESIDENT’S
COMMUNIQUE
I
Dear Students,
t is with great pleasure and pride that I address collaborations and exchange programs. These
you through this issue of the CMA Student initiatives provide you with exposure to global best
E-Bulletin. As the Vice President of ICMAI, practices and diverse perspectives, enriching your
I am honored to witness the remarkable professional outlook.
dedication, resilience, and ambition that each of you As you progress through your studies, remember
brings to our prestigious institute. that you are not alone on this journey. The ICMAI
The field of cost and management accounting is community is here to support you every step of the
constantly evolving, and as aspiring professionals, way. Whether it is through mentorship programs,
you are at the forefront of this dynamic journey. Our academic support, or career counseling, we are
primary goal at ICMAI is to empower you with the dedicated to ensuring your success.
knowledge, skills, and opportunities necessary to I would like to extend my heartfelt congratulations
excel in your careers and contribute meaningfully to all students who have achieved academic
to the profession. and professional milestones. Your hard work,
We are living in an era where technological perseverance, and commitment are truly
advancements are reshaping industries. At ICMAI, commendable. Celebrate these achievements, for
we are committed to integrating these advancements they are the foundation upon which your future
into our curriculum to provide you with a cutting- successes will be built.
edge education. Our focus on digital literacy, data As you continue your journey with ICMAI, I
analytics, and strategic management ensures that encourage you to remain curious, stay motivated,
you are well-equipped to navigate the complexities and embrace the opportunities that come your way.
of modern business environments. The future of the cost and management accounting
In addition to technical proficiency, we emphasize profession is bright, and I have no doubt that each of
you will play a pivotal role in shaping it.
the importance of holistic development. Our
programs are designed to enhance not only your I wish you all the very best in your studies and future
analytical and problem-solving skills but also your endeavors. Let us continue to strive for excellence,
leadership, communication, and interpersonal uphold the values of integrity and professionalism,
abilities. Through workshops, seminars, and and work together to elevate the standards of our
interactive sessions, we aim to shape you into well- esteemed profession.
rounded professionals ready to take on leadership Warm regards,
roles.
The globalization of economies presents both
challenges and opportunities. To prepare you for a CMA T.C.A. Srinivasa Prasad
global career, we are strengthening our international Vice President, ICMAI
www.icmai.in CMA Student E-Bulletin - July 2024 iii

CHAIRMAN’S
COMMUNIQUE
I
insights and opportunities to apply your knowledge
Dear Students,
in real-world scenarios. Through internships, live
t gives me immense pleasure to connect with projects, and guest lectures, you can gain practical
you through the July 2024 issue of the CMA experience and understand the nuances of the
Student E-Bulletin. As the Chairman of the industry. These collaborations also open doors to
Training & Educational Facilities Committee networking opportunities that can be instrumental
of ICMAI, I am excited to share the latest in your career growth.
developments and initiatives that aim to enhance
At ICMAI, we believe in the holistic development
your learning experience and professional growth.
of our students. Alongside academic excellence,
At ICMAI, our commitment to excellence in we emphasize the importance of soft skills such
education and training remains unwavering. We as communication, leadership, and teamwork.
continuously strive to provide you with the best Our comprehensive training programs include
resources, state-of-the-art facilities, and cutting- workshops and seminars focused on developing
edge training programs that will prepare you to excel these essential skills, ensuring that you are well-
in the field of cost and management accounting. rounded professionals ready to take on leadership
Your success is our primary motivation, and we are roles.
dedicated to supporting you every step of the way.
I am confident that the initiatives and programs we
In today’s digital age, leveraging technology to have implemented will significantly enhance your
facilitate learning is paramount. We have introduced learning experience and prepare you for a successful
several innovative learning platforms to ensure that career. I encourage you to take full advantage of
you have access to high-quality education regardless these opportunities and remain dedicated to your
of your location. Our online classes, interactive goals.
webinars, and virtual workshops provide you with
I extend my best wishes to all of you. Your hard
the flexibility to learn at your own pace while
work, determination, and passion are the driving
maintaining the highest standards of education.
forces behind our efforts. Let us continue to work
In addition to theoretical knowledge, practical skills together to achieve excellence and elevate the
are crucial for your professional development. standards of the cost and management accounting
We have designed a variety of skill development profession.
programs that focus on real-world applications and
Warm regards,
industry-relevant practices. These programs include
case studies, simulation exercises, and hands-
on training sessions that bridge the gap between
academic knowledge and practical implementation. CMA Vinayranjan P.
Our collaborations with leading organizations Chairman, Training & Educational Facilities
and industry experts provide you with invaluable Committee, ICMAI
iv CMA Student E-Bulletin - July 2024 www.icmai.in
VOL 09 I NO. 07
FOUNDATION
CMA
FOUNDATION
COURSE
Syllabus 2022
www.icmai.in CMA Student E-Bulletin - July 2024 1

FOUNDATION VOL 09 I NO. 07
Topic
Fundamentals of
Business Laws -
Module 1 :
Introduction
Business
Communication -
FOUNDATION
Module 5:
Business Paper-1
Communication
Fundamentals of
Business Laws and
Business
Communication
(FBLC)
2 CMA Student E-Bulletin - July 2024 www.icmai.in

VOL 09 I NO. 07
FOUNDATION
SECTION – A: FUNDAMENTALS OF BUSINESS LAWS
State True or False: 5. Under Article ______ of the Constitution of India,

1950, The Supreme Court of India and the High
1. Sessions Court is the lowest court to approach for Court of each state under Article _____ of the
criminal matters. Constitution of India, 1950 have the powers to
initiate action for contempt of Court.
2. Money Bill is introduced in Lok Sabha.
6. Some states are provided with Legislative ________
3. Any Elected Minister can pass an ordinance.
and Legislative __________, both.
4. There is no punishment for Contempt of Court.
7. Article ____ of the Indian Constitution illustrates
5. The Supreme Court of India was established by about recourse in situations of inconsistency
Britishers. between laws made by Parliament and laws made
by the Legislatures of States.
6. We can approach the Court for violation of our
Fundamental Rights. 8. An appeal against orders of subordinate courts in
both ________ and _________ matters lies with
7. The International Court of Justice is the highest
the High Court.
court in the hierarchy of Indian Judicial System.
9. The Supreme Court of India, under Article
8. The President of India and the Governor of a State
________can review its own orders or judgments.
can pass an Ordinance.
10. Article ______ of Constitution of India,
9. Executive Magistrates have responsibilities only
1950 empowers all High Courts to practice
related to the judicial system.
superintendence over all the courts or tribunals
10. Only acts passed by the Parliament of India or State within its territorial jurisdiction.
Legislature are the laws.
11. Case laws are _________ precedents.
Fill in the Blanks: 12. The _________ can decide disputes between the
Government of India and one or more states.
1. Law is a ______ of rules. 13. An ordinance is law, that can be brought into place
2. The need for empowering authorities to frame by the __________for the whole of India or any
_________ working at the grass-root level. territory within and/or the ___________ of any
state for the concerned territory in case of any
3. The Part ___ provides for provisions for the exigency.
Panchayat Raj system.
14. Article _____ of the Constitution of India states
4. Mr. ____________ was the head of the drafting that The Parliament for the Union shall be headed
committee of the Constitution of India, 1950. by the President and shall have two house.
ANSWER:
State True or False:

1 2 3 4 5 6 7 8 9 10
F T F F F T F T F F
Fill in the Blanks:

1 Set 5 129, 215 9 137 13 President, Governor
2 Regulation 6 Council and Assembly 10 227 14 79
3 IX 7 254 11 Judicial
4 B. R. Ambedkar 8 Civil & Criminal 12 The Supreme Court of India

SECTION – B: BUSINESS COMMUNICATION

1. Mr. A and Mr. B belong to two distinct cultural d) Integration
backgrounds. Mr. B believes that his culture is
superior compared to the culture of Mr. A. This
4. Which of the following is not an example of a
phenomenon is known as __________.
physical communication barrier?
a) Defiance
a) Telephonic Disturbances
b) Ethnocentrism
b) Distance
c) Denial
c) Background noises
d) None of the above
d) Language
2. _____________ stage at which members learn

5. Excessive usage of technical jargons and double
to accept each other’s culture however they still
meaning words are what type of barrier?
remain devoted to their own respective cultures
a) Sematic Barriers
a) Adoption
b) Psychological Barriers
b) Integration
c) Physical Barriers
c) Denial
d) None of the above
d) Minimization
6. Information overload is when Listener gets

3. Recognizing the different types of cultures, the
___________________.
similarities and differences between them without
being judgmental is called ____________. a) inadequate information
a) Acceptance b) too much information
b) Cultural Sensitivity c) adequate information
c) Adoption d) irrelevant information
ANSWER:
State True or False:

1 2 3 4 5 6
b a b d a b

VOL 09 I NO. 07
FOUNDATION
Topic
Fundamentals
of Financial
Accounting -
Module 1:
Accounting
Fundamentals
Fundamentals of FOUNDATION
Cost Accounting -
Paper-2
Module 4:
Fundamentals of Fundamentals of
Cost Accounting Financial and Cost
Accounting (FFCA)

1. What are the four frameworks of Accounting ? c. Assets - Liabilities = Equity

a. Social , Environmental , Regulatory , d. Assets = Liabilities + Equity
Conceptual
b. Cultural , Legal , Institutional , Conceptual
7. What is the accounting principle that states an
c. Economic , Political , Historical , Conceptual entity will continue operations for the foreseeable
future?
d. Financial , Environmental , Institutional ,
Conceptual a. Cost Principle
b. Going Concern Principle
2. Which type of expenditure is for long-term benefits c. Matching Principle
to the Business ?
d. Prudence Principle
a. Capital expenditure
b. Trading expenditure
8. What is the formula for calculating straight line
c. Revenue expenditure depreciation?
d. Operational expenditure a. Cost of Asset x Rate of Depreciation
b. Cost of Asset / Rate of Depreciation
3. The ……………………. Is a document that lists c. Cost of Asset - Salvage Value / Estimated
the names , account numbers , and balances of the Useful Life
General Ledger Accounts.
d. Cost of Asset / Estimated Useful Life
a. Trial Balance
b. Chart of Accounts
9. Which of the following is not a type of ledger
c. Balance Sheet account used in accounting?
d. Income Statement a. Personal Ledger
b. Private Ledger
4. What is the first step in accounting cycle? c. Nominal Ledger
a. Preparation of Final Accounts d. General Ledger
b. Recording transactions in Journal
c. Ledger posting 10. Which type of ledger contains all the nominal
accounts of a business?
d. Preparing Bank Reconciliation Statement
a. General Ledger
b. Personal Ledger
5. Which Book of original entry records credit
purchase transactions? c. Private Ledger
a. Cash Book d. Nominal Ledger
b. Purchase Day Book
c. Sales Day Book 11. Which of these is an example of a revenue
expenditure?
d. Miscellaneous Purchases Book
a. Money spent on repairs to the building
b. Money paid for the addition to land
6. What is the formula for the accounting equation?
c. Money spent on new equipment
a. Assets + Liabilities = Equity
d. Money spent on salaries and wages
b. Assets = Liabilities - Equity

VOL 09 I NO. 07
FOUNDATION
12. What is the accounting principle that requires the 17. Which of the following transactions appear in the
matching of revenues with the expenses incurred to trial balance?
generate those revenues? a. Adjusting Entries
a. Conservatism Principle b. Closing Entries
b. Matching Principle c. Opening Entries
d. All of the Above
c. Cost Principle
d. Completeness Principle 18. Which accounting convention requires the business
to follow a set of ethical principles and norms in its
accounting practices?
13. What is the formula used to calculate the net profit
a. Convention of Consistency
before taxes?
b. Convention of Materiality
a. Gross Profit + Expenses
c. Convention of Disclosure
b. Gross Profit – Expenses
d. Convention of Ethics
c. Revenues – Expenses
d. Revenues + Expenses 19. What is the process of transferring entries from the
Journal to the Ledger called?
a. Posting
14. What is the accounting principle that states that all
b. Recording
expenses must be recorded in the period when they
were incurred, regardless of when the payment was c. Adjusting
made? d. Journalizing
a. Going Concern Principle
20. What is the accounting principle that states that
b. Accrual Principle
assets should be recorded at the price they were
c. Consistency Principle acquired, regardless of their current market value?
d. Prudence Principle a. Conservatism Principle

b. Cost Principle
c. Matching Principle
15. Which of the following is an example of a current
d. Completeness Principle
asset?
a. Accounts Receivable 21. Which of the following is an example of a long-
b. Buildings term liability?
c. Land a. Accounts Receivable

b. Rent Payable
d. Patents
c. Mortgage Payable
d. Wages
16. What is the purpose of the closing entries made
during the accounting cycle? 22. Which of the following is not an application of cost
a. To record various adjusting entries accounting?
a. Control of costs
b. To transfer balances from temporary accounts
b. Measurement of financial performance
to permanent accounts
c. Planning and budgeting
c. To record all transactions of the business
d. Communicating financial information to
d. To balance general ledger accounts external parties

23. Which of the following is an example of a cost 27. Which of the following is true regarding variable
centre? costs?
a. Sales department a. They remain constant irrespective of the level
of production.
b. Marketing department
b. They change proportionately with the level of
c. Human resources department
production.
d. Production department
c. They do not change with the level of production.
d. They cannot be controlled through cost
24. Which of the following is not an example of a direct management techniques.
cost?
a. Wages paid to workers 28. Which of the following is true regarding cost
drivers?
b. Depreciation of machinery
a. They are factors that cause costs to increase.
c. Raw material consumed
b. They have no impact on the overall cost of a
d. Direct labour cost
product.
c. They are not important for decision-making.
25. Which of the following is true about cost-volume-
d. They are not related to the cost of any product.
profit (CVP) analysis?
a. It is not useful for decision-making.
29. Which of the following is true about the
b. It helps in determining the impact of changes in classification of costs?
production volume on profitability.
a. It helps in determining the selling price of a
c. It is not relevant for cost control purposes. product.
d. It is not useful for determining the selling price b. It is not relevant for cost control purposes.
of a product.
c. It is not useful for decision-making.
d. It helps in identifying cost behaviour.
26. Which of the following is true about cost-volume-
profit (CVP) analysis?
30. Which of the following is not a method of cost
a. It is not useful for decision-making.
ascertainment?
b. It helps in determining the impact of changes in
a. Historical costing
production volume on profitability.
b. Marginal costing
c. It is not relevant for cost control purposes.
c. Standard costing
d. It is not useful for determining the selling price
of a product. d. Absorption costing
ANSWER
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
b a a b b d b d b d d b c b a
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
b d d a a c d d b b b b a d b

VOL 09 I NO. 07
FOUNDATION
Topic
Fundamentals
of Business
Mathematics -
Module 1:
Arithmetic
Fundamentals of
Business Statistics FOUNDATION
Module 4: Paper-3
Statistical
Representation of Fundamentals
Data of Business
Mathematics and
Statistics (FBMS)

In this issue we will carry out MCQs on Arithmetic & 7. Using the properties of proportion, solve the
Statistical Representation of Data – refer Module 1 and 341 y3+3y
following equation for y, given =
Module 4 of Study guide. 91 3y2+1
(a) 14
1 1 1 (b) 11
1. If , , are in AP then
b+c c+a a+b
(c) 12
(a) b2 - a2 = c2 - b2
(d) 10
(b) 2b = a + c
(c) a + b + c = 0
8. When the number 418 in decreased in the ratio of
(d) b2 = ac 19: 16, the new number is
an+1+bn+1 (a) 352
2. If arithmetic mean of a & b is then n is
an+bn (b) 325
(a) 1
(c) 496
(b) -1
(d) 469
(c) 0
(d) Infinity 9. A class consists of 48 male students and 23 female
students. Find the ratio of female students to total
3. If 16th term of the series X, 3.5, 3.25, 3……is zero, strength of the class.
then sum of 1st 16 term of the series is
(a) 23: 48
(a) 90
(b) 48: 23
(b) 30
(c) 48: 71
(c) -30
(d) 23: 71
(d) 0
10. Find out the compound value of `28,950, interest

4. If a2 + b2, ab + bc and b2 + c2 are in GP then which
rate being 12.5% per annum compounded
one of the following is correct
continuously for 8 years.
(a) b2 = ac
(a) 76,895
(b) (a+b)2 = (b + c)(c + a) (b) 74,695
(c) a2 = bc (c) 78,695
(d) abc = 1 (d) 77,995
5. If (1 + 1 + 3 + 5 + upto k terms) - tk = 0, then tk is 11. Find the effective rate of interest to the nominal rate
equal to of 8% payable monthly.
(a) k2 - 2k + 2 (a) 8.30%
(b) k2 (b) 8.20%
(c) 8.10%
(c) 2k2 - 5k + 3
(d) 8.00%
(d) k
12. Annuity is -
6. If X:Y = 4:5, find (3X+5Y):(7X-2Y)
(a) increasing stream of cash flows.
(a) 37 :18
(b) Decreasing stream of perpetual cash flows.
(b) 18 :37 (c) Level stream of perpetual cash flows.
(c) 11 :34 (d) Level stream of cash flows occurring for a
(d) 31 :12 fixed period of time.

VOL 09 I NO. 07
FOUNDATION
13. A Quantitative characteristic is known as 19. Pie-diagram is used for
(a) An attribute (a) Comparing different components and their
relation to the table
(b) A discrete variable
(b) Representing qualitative data in a circle
(c) A continuous variable
(c) Representing quantitative data in circle
(d) None of above
(d) b or c
14. Annual income of a person is

20. Weights are generally called –
(a) An attribute
(a) Range
(b) A discrete variable
(b) Mean
(c) A continuous variable
(c) Frequencies
(d) a or c (d) Mode
15. The quickest method to collect primary data is 21. Length of a class is
(a) Personal interview (a) The difference between the UCB and LCB of
(b) Indirect interview that class
(c) Telephone interview (b) The difference between the UCL and LCL of
that class
(d) By observation
(c) a or b
(d) Both a and b
16. The mode of presentation of data are
(a) Textual, tabulation and diagrammatic 22. (Class frequency)/(Width of the class) is defined as
(b) Tabular, internal and external (a) Frequency density
(c) Textual, tabular and internal (b) Frequency distribution
(d) Tabular, textual and external (c) Both
(d) None
17. For tabulation, ‘caption’ is
(a) The upper part of the table 23. An area diagram is
(b) The lower part of the table (a) Histogram
(c) The main part of the table (b) Frequency polygon
(d) The upper part of a table that describes the (c) Ogive
column and sub-column (d) None
18. “Stub” of table is the 24. Most of the commonly used frequency curves are
(a) Left part of the table describing the columns (a) Mixed
(b) Right part of the table describing the columns (b) Inverted J-shaped
(c) Right part of the table describing the rows (c) U-shaped
(d) Left part of the table describing the rows (d) Bell-shaped

25. The distribution of profits of a company follows (b) 6

(a) J-shaped (c) 68
(b) U-shaped (d) 87
(c) Bell-shaped frequency curve
(d) Any of these 28. Which one of the following is an exclusive series?
(a) 10-15, 15-20, 20-25……..
26. Cost of sugar in a month under the heads Raw- (b) 3-4, 4-5, 7-8…….
materials, Labour, direct production and others
(c) 20-22, 23-25, 26-28…….
were 12, 20, 35 and 23 units respectively. What
is the difference between the central angles for (d) None of the above
the largest and smallest components of the cost of
sugar?
29. Graphs of frequency distribution is
(a) 72o
(a) For developing inclusive series data
(b) 48o
(b) Comparative analysis
(c) 56o
(c) For developing exclusive series data
(d) 92o
(d) For ascertaining mid-values of a class
27. The number of accidents for seven days in a locality

are given below: 30. Relative frequency is associated with which of the
following?
C 0 1 2 3 4 5 6
(a) Mid value of a class
Frequency 15 19 22 31 9 3 2
(b) Ratio of total frequency
What is the number of cases when 3 or less accident
occurred? (c) Exclusive series data
(a) 56 (d) Inclusive series data
ANSWER
1 a 1 1 1 1 b - a c-b
= = - By simplifying we get = Or, b2 - a2 = c2 - b2. Hence the result.
c+a b+c a+b c+a b+c b+a
2 c a+b an+1+bn+1 an a
= n n . We get an = bn Or, n = 1 Or, ( )n = 1 Or, (ab-1)n = (ab-1)0
2 a +b b b
3 b d = -0.25; 1st term is 3.75; S16 =
16
(3.75+0)
2
4 a We have (ab+bc)2 = (a2 + b2)(b2 + c2). Hence the result.

5 a (1+1+3+5+upto k terms) - tk = 0. So tk = (1+1+3+5+upto k terms) Or, tK = 1+(1+3+5+upto k - 1
terms) and the bracketed portion is an AP
6 a X :Y = 4 : 5, find (3X+5Y) : (7X-2Y)
(3*4 + 5*5) : (7*4-2*5)
(12+25) : (28-10)
37:18

VOL 09 I NO. 07
FOUNDATION
ANSWER
7 b 341
=
y3+3y
91 3y2+1
341 + 91 (y3+3y)+(3y2+1)
=
341 - 91 (y3+3y)-(3y2+1)
216 (y+1)3
=
125 (y-1)
(y+1)3 63
=
(y-1)3 53
(y+1) 6
=
(y-1) 5
5*(y+1) = 6*(y-1)
5y+5 = 6y-6
6y-5y = 5+6
Y = 11
8 a 418 decreased in 19:16
418/19*16 = 352
9 d Male Students – 48, Female students – 23,
Total strength of the class : Male students + Female students
Total strength: (48+23) = 71 students.
Ratio of female students to Total strength : 23 : 71

10 c P = 28950, r = 12.50% p.a. or 0.125, n = 8
A = P*e(r* n)
A = 28950*e(0.125* 8)
A = 28950*e1
A = 28950*e (e = 2.7183)
A = 28950*2.7183 = 78,694.79 or 78,695 (Approx.)

11 a r = (1+
0.08 1*12
) -1
12
r = (1+ 0.00667)12 - 1
r = 1.0066712 - 1
r = 1.08299 - 1
r = 0.08299 or 8.299% = 8.30% (Approx.)

12 d Annuity is level stream of cash flows occurring for a fixed period of time.
13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
b b c a d d a c a a a d c d d a b b
Suggestions:
The study guide needs to be read thoroughly. Supplementary readings could be made from other resources. In
this issue MCQs are based on basic concepts developed in the respective modules/sub modules of the study guide.
Students should try to solve individual questions with concepts developed from guide book to understand the correct
answer of each question. Formula used here are all covered in study guide. Brief solutions are given as keys for
arithmetic portion.
Best Wishes.

VOL 09 I NO. 07
FOUNDATION
Topic
Fundamentals of
Business Economics -
Module 1: Basic
Concepts
Fundamentals of
Management - FOUNDATION
Module 5: Paper-4
Fundamentals of
Management Fundamentals of
Business Economics
and Management
(FBEM)

TIPS ON
BUSINESS ECONOMICS AND MANAGEMENT
FOR THE MONTH OF JULY 2024
K
ING of Portugal organized a second 3. An improvement in production technology leads to a
expedition with 13 ships under the
A. Leftward shift in the PPC
command of Pedro A. Cabral. Cabral
accidentally discovered Brazil on the way B. Rightward shift in the PPC
to India. He carried gold and other valuable trade
C. No change in PPC
goods. Cabral was unable to do business with the local
Calicut merchants. He and his men were finally driven D. None of the above
out after local Muslims rioted and killed many of his 4. In a free market economy the problem of allocation
men. Cabral had success at another Indian city, Cochin is solved by the
and returned to Portugal with a valuable cargo of spices.
Thus Portuguese had successfully opened up a new A. Profit mechanism
trade route to India. The enclave of Goa, on the west B. Consumption mechanism
coast of India, was annexed by Portugal in 1510, and
remained in Portuguese control until it was retaken by C. Market mechanism
force by the Indian Govt. in 1961. D. None of the above
Not to be outdone by the Portuguese, England’s Queen 5. Given that price elasticity of demand for x, is unity.
Elizabeth, under pressure from the powerful British When p= `4, Q = 300. What will be Q when p = `3?
mercantile establishment, created the East India Trading
Company on Dec.31, 1600. 12 years later, four British A. 400
galleons defeated the Portuguese at a naval battle, thus B. 500
gaining good graces of the Mughal Emperor Jahangir.
Fortunately for the British, Jahangir was an alcoholic C. 1000
and He signed over trading concessions to the British D. None of the above
during one of His many drinking binges. So long for
today. The history will be continued. 6. Suppose the demand curve is X = 10 – 3P. What
will be the price elasticity of demand when P= (5/3)
MOCK TEST A. Elasticity = 5
B. Elasticity = 1
I. Choose the correct answer:
C. Elasticity = 0.5
1. Who was the proponent of the welfare definition of D. None of the above
economics?
7. The demand for a commodity which can be put to a
A. Marshall variety of uses will be
B. Pigou A. Relatively elastic
C. Robbins B. Relatively inelastic
D. Samuelson C. Unitary elastic

D. None of the above
2. Main economic problems faced by any society
include 8. The demand for durable goods usually remains
A. What to produce A. Relatively elastic
B. How to produce B. Relatively inelastic
C. For whom to produce C. Unitary elastic

D. All of these

VOL 09 I NO. 07
FOUNDATION
9. The mid-point of a linear demand curve shows a 16. SMC is equal to the
price elasticity of demand which is
A. Change in LMC
A. Relatively elastic
B. Change in TFC
B. Relatively inelastic
C. Change in TVC
C. Unit elastic
D. Perfectly inelastic
17. In the long run, the external economies of scale are
10. Movement along any demand curve shows enjoyed by
A. Change in demand A. An industry
B. Change in quantity demanded B. A firm
C. Contraction in demand C. Both of them
D. None of the above D. None of the above
11. If the price of a complementary good rises, the 18. Kinked demand curve is related to
demand curve shifts to the
A. Monopoly market
A. Leftward direction
B. Oligopoly market
B. Rightward direction
C. Monopolistic competition
C. Upward direction
19. The Fisher’s equation in the Quantity theory of
12. When there is decreasing returns to a variable money is
factor, then
A. MV = PT
A. AP=MP
B. MP = VT
B. AP<MP
C. MT = PV
C. AP>MP
20. The name of the Central Bank of India is
13. The law of variable proportion explains the shape of
A. CENTRAL BANK OF INDIA
A. AFC curve
B. BANK OF INDIA
B. LAC curve
C. RESERVE BANK OF INDIA
C. SAC curve
14. The total cost function is given by C=100+15Q- 21. In order to control inflation the central bank should
6Qsquare+Qcube. What will be the total fixed cost? A. Sell bonds in the open market
A. 100 B. Lower the bank rate
B. 15 C. Purchase bonds in the open market
C. 6 D. None of the above
D. None of the above 22. Which is embodied in all the functions of
15. The short-run total cost management?
A. Cannot be zero A. Planning
B. Can be zero B. Control
C. Both A and B C. Organizing
D. None of the above D. Co-ordination

23. A manager has to exhibit the style of leadership 27. Horizontal communication is also known as
depending on the
A. Written communication
A. Situation
B. Lateral communication
B. Performance
C. Verbal communication
C. Time
D. Period
28. Which communication creates a record of evidence?
24. Operational planning is
A. Formal
A. Long term planning
B. Verbal
B. Short term planning
C. Written
C. Medium term planning
D. All of the above
D. Annual planning
25. Which of the following is not a part of staffing? 29. Supervisory directly controls the activities in a
A. Recruitment A. Board
B. Selection B. Committee
C. Training C. Team
D. Publicity D. Group
26. Filtering means 30. Maslow’s model is formulated in terms of
A. Hiding some meaning A. Wants
B. Disclose the information B. Rewards
C. Sending the message C. Human needs
D. None of the above D. Goals
ANSWER
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
A D B C A B A B C B A C C A A
16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
C B B A C A D A B D A B C D C
So friends!!
I hope you have enjoyed the Mock test. There are a couple of questions based on mathematics. Do not
worry. They are very simple. Economics of today involves lots of higher mathematics. So you can not avoid
mathematics totally. It will be helpful if you go through the “straight line” chapter of co-ordinate geometry. So
long for today!!
Wish you all the best.

VOL 09 I NO. 07
INTERMEDIATE
CMA
INTERMEDIATE
COURSE
Syllabus 2022

INTERMEDIATE VOL 09 I NO. 07
Topic
Module 2:
Indian Contracts
Act, 1872
INTERMEDIATE
Group I - Paper-5
Business Laws and

Ethics (BLE)

VOL 09 I NO. 07
INTERMEDIATE
BUSINESS LAWS AND ETHICS
I
t is expected that you - the students prepare a does not, so for as regards the agent, take effect before
time-table with time allotted for each subject it becomes known to him, or, so far as regards third
and read, write, revise and recapitulate all that persons, before it becomes known to them.
you keep on reading. The first important point is
Examples:
that you must read the Bare Act and the Sections and
start asking questions to yourself and find your own a) X directs Y to sell goods for him, and agrees to give
answers. In this issue we shall deal with Indian Contract Y 8% commission on the price fetched by the goods.
Act, mainly two special type of contract as per Indian X afterwards, by letter, revokes Y’s authority. Y,
Contract Act, 1872. after the letter is sent, but before he receives it, sells
Special Contract: Laws of Agency the goods for ₹100.The sale is binding on X and Y is
entitled to ₹8 as his commission;
Chapter ten of the Indian Contract Act deals with Agency.
Section 182 provides that an ‘agent’ is a person employed b) A, at Kolkata, by letter directs B to sell for him
to do any act for another or to represent another in some cotton lying in a warehouse in Mumbai, and
dealing with the third person. Some significant concepts afterwards, by letter, revokes his authority to sell,
associated with Laws of agency are enumerated below. and directs B to send the cotton to Kolkata. B, after
receiving the second letter, enters in to a contract
1. Termination of Agency with P, who knows the first letter, but not of the
Section 201 provides for the termination of agency. An second, for the sale to him of the cotton. P pays B
agency is terminated by the principal- the money, with which B absconds. P’s payment is
good as against A.
► revoking his authority; or
c) A directs B, his agent, to pay certain money to C. A
► by the agent renouncing the business of the agency; or’
dies and D takes out probate to his will. B, after A’s
► by the business of the agency being completed; or death, but before hearing of it, pays the money to C.
► by either the principal or agent dying or becoming The payment is good as against D, the executor.
of unsound mind; or 2. Revocation of agent’s authority
► by the principal being adjudicated an insolvent Section 203 provides for the revocation of agent’s
under the provisions of any act for the time being in authority. The principal may, save as is otherwise
force for the relief of insolvent debtors. provided by Section 202, revoke the authority given
Section 202 provides that where the agent has himself an to his agent at any time before the authority has been
interest in the property which forms the subject matter exercised so as to bind the principal. Section 204
of the agency, the agency cannot, in the absence of an provides that the principal cannot revoke the authority
express contract, be terminated to the prejudice of such given to his agent after the authority has been partly
interest. exercised, so far as regards such acts and obligations as
arise from acts already done in the agency.
Examples:
Examples:
a) A gives authority to B to sell A’s land and to pay
himself, out of the proceeds, the debts due to him. A a) A authorizes B to buy 1,000 bales of cotton on
cannot revoke his authority, nor can it be terminated account of A, and to pay for it out of A’s moneys
by his insanity or death; remaining in B’s hands. B buys 1,000 bales of cotton
in his own name, so as to make himself personally
b) A consigns1000 bales of cotton to B, who has made
liable for the price. A cannot revoke B’s authority
advances to him on such cotton, and desires B to
so far as regards payment for the cotton.
sell the cotton and to repay himself out the price,
the amount of his own advances. A cannot revoke b) A authorizes B to buy 1,000 bales of cotton on
the authority nor is it terminated by his insanity or account of A, and to pay for it out of A’s moneys
death. remaining in B’s hands. B buys 1,000 bales of
cotton in A’s name, and so as not to render himself
Section 208 provides as to the time at which the agent’s
personally liable for the price. A can revoke B’s
authority is terminated as to agent and as to third
persons. The termination of the authority of an agent authority to pay for the cotton.

3. Compensation Section 216 provides that if an agent, without the

Section 205 provides for the provision of compensation knowledge of his principal, deals in the businesses of
for revocation by principal or renunciation by agent. the agency on his own account instead of on account
When there is an express or implied contract that the of his principal, the principal is entitled to claim from
agency should be continued for any period of time, the agent any benefit which may have resulted to him
the principal must make compensation to the agent, vfrom the transaction.
or the agent to the principal, as the case may be, for
any previous revocation or renunciation of the agency Example:
without sufficient cause.
A direct B, his agent, to buy a certain house for him. B
4. Rights of principal
tells A that it cannot be bought, and buys the house for
The rights of principal are described in Sections 215 himself. A may, on discovering that B has bought the
and 216.
house, compel him to sell it to A at the price he gave
Section 215 provides that if an agent deals on his own for it.
account in the business of the agency, without first
obtaining the consent of the principal and acquainting 5. Agent’s right and obligation
him with all material circumstances which have come The rights of agents are depicted in Section 217 to 219
to his own knowledge on the subject, the principal may
repudiate the transaction, if the case shows, either that Section 217 provides that an agent may, retain, out of
any material fact has been dishonestly concealed from any sums received on account of the principal in the
him by the agent, or that the dealings of the agent have business of the agency, all moneys due to himself in
been disadvantageous to him.
respect of advances made or expenses properly incurred
Examples:
by him in conducting such business and also such
a) A directs B to sell A’s estate. B buys the estate for remuneration as may be payable to him for acting as
himself in the name of C. A, on discovering that B
agent.
has bought the estate for himself, may repudiate
the sale, if he can show that B has dishonestly Section 218 provides that subject to such deductions,
concealed any material act, or that the sale has the agent is bound to pay to his principal all sums
been disadvantageous to him;
received on his account;
b) A directs B, to sell A’s estate. B on looking over
the estate before selling it, finds a mine on the Section 219 provides that in the absence of any special
estate which is unknown to A. B informs A that he contract, payment for the performance of any act is not
wishes to buy the estate for himself, but conceals due to the agent until the completion of such act, but an
the discovery of the mine. A allows B to buy,
agent may detain moneys received by him on account of
in ignorance of the existence of the mine. A, on
discovering that B knew of the mine at the time he goods sold, although the whole of the goods consigned
bought the estate, may either repudiate or adopt the to him for sale may not have been sold, or although the
sale at his option. sale may not be actually complete.

VOL 09 I NO. 07
INTERMEDIATE
Topic
Module 1:
Accounting
Fundamentals
INTERMEDIATE
Group I - Paper-6
Financial
Accounting (FA)

Bank Reconciliation Statement
A
Bank Reconciliation Statement (BRS) between the company’s records and the bank’s
is a document that matches the cash records, such as incorrect entries or omissions.
balance on a company’s balance sheet
o Prevents Mistakes: Helps prevent errors in
to the corresponding amount on its bank
financial statements by ensuring that the cash
statement. The purpose is to ensure the accuracy of
financial records and to identify any discrepancies. book and bank statement balances match.
Steps to Prepare a Bank Reconciliation Statement 2. Fraud Prevention and Detection
1. Compare the opening balances: Ensure the o Identifies Unauthorized Transactions: Helps
opening balance of the cash book matches the bank spot unauthorized or fraudulent transactions
statement. by comparing the bank statement with the
company’s cash book.
2. Check deposits and withdrawals: Verify that
all deposits and withdrawals are recorded in both o Mitigates Risk of Embezzlement: Regular
records. reconciliation reduces the risk of internal fraud
or embezzlement.
3. Identify outstanding checks: List all checks
issued but not yet cleared. 3. Effective Cash Management
4. Identify deposits in transit: List all deposits o Accurate Cash Position: Provides an accurate
recorded in the cash book but not yet credited by picture of the company’s cash position, helping
the bank. in effective cash flow management.
5. Adjust for bank errors: Note any errors made by o Informed Decision-Making: Enables better
the bank and adjust accordingly. decision-making regarding cash requirements
and investments.
6. Adjust for company errors: Correct any errors
made in the company’s records. 4. Improves Internal Control
7. Prepare the reconciliation statement: Start with o Accountability: Enhances accountability
the bank statement balance, add deposits in transit, by ensuring that all transactions are properly
deduct outstanding checks, and adjust for any errors recorded and reconciled.
to arrive at the adjusted cash book balance.
o Operational Efficiency: Streamlines financial
Key Concepts processes and improves operational efficiency
by maintaining up-to-date records.
• Cash Book: Records all cash transactions.
• Bank Statement: Issued by the bank, showing all 5. Compliance and Auditing
transactions in the bank account. o Regulatory Compliance: Helps comply
• Outstanding Checks: Checks that have been with regulatory requirements by maintaining
issued but not yet cleared by the bank. accurate financial records.
• Deposits in Transit: Deposits recorded in the o Audit Trail: Provides a clear audit trail for
company’s books but not yet credited by the bank. external auditors, simplifying the auditing
process.
• Bank Errors: Mistakes made by the bank in
recording transactions. 6. Prepares for Financial Reporting
• Company Errors: Mistakes made by the o Accurate Financial Statements: Ensures

company in recording transactions. that financial statements accurately reflect the
company’s financial position.
Importance of Bank Reconciliation Statement
o Transparency: Enhances transparency and
1. Ensures Accuracy of Financial Records
reliability of financial information provided to
o Detection of Errors: Identifies discrepancies stakeholders.

VOL 09 I NO. 07
INTERMEDIATE
A Bank Reconciliation Statement is crucial for • Deposits in transit: `2,000
maintaining the integrity and accuracy of a company’s
• Bank error (overcharge): `100
financial records. It plays a vital role in error detection,
fraud prevention, effective cash management, improving • Company error (under-recorded withdrawal): ` 400
internal controls, ensuring compliance, and preparing
Bank Reconciliation Statement
accurate financial statements. Regular reconciliation
helps businesses maintain accurate records, make Particulars Amount
informed decisions, and provide transparent financial
Balance as per bank statement `10,000
information to stakeholders.
Add: Deposits in transit `2,000
Example
Less: Outstanding checks `1,500
Suppose the bank statement shows a balance of `10,000,
Add: Bank error `100
while the cash book shows `9,500. After comparing the
two, you identify the following: Less: Company error `400
Adjusted cash book balance `10,200
• Outstanding checks: `1,500
Depreciation and Amortisation

Depreciation and amortization are accounting methods • Depreciation Method: The chosen method of
used to allocate the cost of tangible and intangible assets calculating depreciation expense.
over their useful lives. These methods help in matching
Methods:
the cost of assets with the revenue they generate over
time. • Straight-Line Method
Depreciation • Declining Balance Method
Depreciation is an accounting method used to allocate • Units of Production Method
the cost of a tangible asset over its useful life. This
• Sum-of-the-Years-Digits Method
systematic allocation helps reflect the usage, wear and
tear, or obsolescence of the asset in the company’s Example:
financial statements. 1. A company purchases a piece of machinery for
Objectives of Depreciation $15,000. The machinery has an estimated useful life
of 5 years and a salvage value of $3,000. Calculate
• Match Expenses with Revenue: Ensures that
the annual depreciation expense using the straight-
the cost of an asset is matched with the revenue it
line method.
generates over time.
Depreciation Expense = Cost − Salvage Value /
• Reflect True Asset Value: Provides a more
Useful Life
accurate representation of an asset’s value on the
balance sheet. Depreciation Expense = 15,000 − 3,000 / 5 =
12,000 / 5 = 2,400
• Financial Planning: Helps in planning for the
replacement of assets by spreading their cost over 2. An asset is purchased for `25,000 with no salvage
their useful life. value and a useful life of 4 years. Calculate the
depreciation expense for the first two years using
Factors Affecting Depreciation
the double declining balance method.
• Cost of the Asset: The initial purchase price and
Depreciation Rate = 100%/ Useful Life×2 = 100%
any additional costs necessary to prepare the asset
/ 4×2 = 50%
for use.
First Year:
• Useful Life: The estimated period over which the
asset will be productive. Depreciation Expense =
Book Value at Beginning of Year × Depreciation Rate
• Residual Value (Salvage Value): The estimated
value of the asset at the end of its useful life. Depreciation Expense = 25,000×50% = 12,500

Second Year: • Copyrights: Exclusive rights to reproduce and sell

artistic or literary work.
Book Value at Beginning of Second Year = Cost −
Accumulated Depreciation • Trademarks: Rights to use a symbol, name, or
logo.
Book Value = 25,000 − 12,500 = 12,500
• Franchise Agreements: Rights to operate a
Depreciation Expense = 12,500 × 50% = 6,250
business using another company’s name and
The depreciation expenses are `12,500 for the first year systems.
and `6,250 for the second year.
• Goodwill: The value of a company’s brand name,
customer relationships, etc.
Amortisation
Amortization Methods
Amortization is the process of spreading the cost of
an intangible asset over its useful life. This accounting • Straight-Line Method:
method ensures that the expense related to the intangible
• Units of Production Method
asset is matched with the revenue it generates over time.
Impact of Amortization
Objectives of Amortization
• Financial Statements: Reduces net income on the
• Expense Allocation: Spreads the cost of intangible
income statement and the book value of intangible
assets over their useful lives.
assets on the balance sheet.
• Financial Accuracy: Reflects the decline in value
• Taxation: Amortization expense is deductible for
of intangible assets over time.
tax purposes, reducing taxable income.
• Revenue Matching: Matches the cost of intangible
Example:
assets with the revenue they help generate.
A company acquires a copyright for ` 1,00,000 with a
Intangible Assets Subject to Amortization
useful life of 20 years and no residual value.
• Patents: Exclusive rights to produce or sell an
Amortization Expense = 1,00,000/20 = ` 5,000 per year
invention.
Questions:
3. What should be done if the bank statement shows
an overcharge?
1. What is the main purpose of a Bank Reconciliation
Statement? a) Record the overcharge in the cash book
a) To prepare financial statements b) Ignore the overcharge
b) To match the company’s cash book with the c) Adjust the bank statement
bank statement
d) Add the overcharge to the bank reconciliation
c) To record all cash transactions statement
d) To reconcile outstanding invoices
4. An outstanding check is:
2. Which of the following is an example of a deposit a) A check recorded in the cash book but not yet
in transit? cleared by the bank
a) A check issued but not yet cleared b) A check that has been cleared by the bank but
not recorded in the cash book
b) A bank charge not recorded in the cash book
c) A check that has been issued and cleared
c) A deposit made but not yet credited by the bank
d) A check that has been cancelled
d) A loan repayment

VOL 09 I NO. 07
INTERMEDIATE
5. If the bank reconciliation statement shows an 8. How is accumulated depreciation reported in the
adjusted cash book balance higher than the bank financial statements?
statement balance, which of the following might be
a) As an expense on the income statement
true?
a) There are outstanding checks b) As a contra asset on the balance sheet
b) There are deposits in transit c) As a liability on the balance sheet
c) The bank has made an error d) As a revenue on the income statement
d) The company has made an error

9. What is the primary purpose of amortization?
6. What is the primary purpose of depreciation? a) To allocate the cost of an intangible asset over
its useful life
a) To allocate the cost of an asset over its useful
life b) To increase the value of an intangible asset
over time
b) To increase the value of an asset over time
c) To match the revenue with the expenses in the
c) To match the revenue with the expenses in the
same period
same period
d) Both a and c
d) Both a and c
7. Which depreciation method allocates an equal 10. Which of the following is an example of an
amount of expense each year? intangible asset that would be amortized?
a) Declining Balance Method a) Building
b) Straight-Line Method b) Equipment
c) Units of Production Method c) Patent

d) Sum-of-the-Years-Digits Method d) Land
ANSWER
1 2 3 4 5 6 7 8 9 10
b c d a b d b b d c

Topic
Module 2:
Heads of Income
INTERMEDIATE
Group I - Paper-7A
Direct Taxation (DT)

VOL 09 I NO. 07
INTERMEDIATE
Overview of Salaries – Part I
1. Salary means any payment by the employer to Completed year of service ignores any fraction
employee. of the year.
2. Basis of charge: Salary is chargeable to tax either c. Gratuity received after death of employee is
on ‘due’ basis or on ‘receipt’ basis, whichever is exempted.
earlier.
9. Leave Salary Encashment
3. Basic Salary: Fully taxable in all cases.
a. Leave salary during continuation of service is
4. Dearness Allowance (DA) or Dearness Pay (DP): fully taxable in hands of all employees.
Fully taxable in all cases.
b. Leave salary received by Government
5. Fees: Fully taxable in all cases. employee is fully exempted.
6. Commission: Fully Taxable. • Leave salary received by non-Government

employee shall be exempted to the minimum
7. Bonus: Contractual bonus is taxable as bonus
of the following:
whereas voluntary bonus is taxable as perquisite.
(a) Actual amount received as leave salary
8. Gratuity
(b) ₹ 25,00,000/-
a. Gratuity received during continuation of
service is fully taxable in the hands of all (c) 10 × Average salary p.m.
employees.
(d) [{(1 × completed year of service) – leave
b. Gratuity received at the time of termination actually taken in terms of month} ×
of service by Government employee is fully average salary p.m.]
exempted.
Completed year of service ignores any fraction
• Gratuity received at the time of termination of the year.
of service by non–government employee,
c. Leave salary paid to the legal heir of deceased
covered by the Payment of Gratuity Act shall
employee is not taxable as salary.
be exempted to the minimum of the following
10. Pension [Sec. 17(1)(ii)]
(a) Actual Gratuity received
• Uncommuted pension is fully taxable in the
(b) ₹ 20,00,000; and
hands of all employees
(c) 15/26 × Completed year of service ×
• Commuted pension received by a Government
Salary p.m.
employee is fully exempt from tax.
Completed year of service consider any
• Commuted pension received by an employee
fraction in excess of 6 months.
who also received gratuity: 1/3 of total pension
• Gratuity received at the time of termination commuted shall be exempted.
of service by non-government employee not
• Commuted pension received by an employee
covered under the Payment of Gratuity Act
who does not receive gratuity: ½ of total
shall be exempted to the minimum of the
pension commuted shall be exempted.
following:
11. Voluntary Retirement Compensation:
(a) Actual Gratuity received;
Compensation received at the time of voluntary
(b) ₹ 20,00,000; and retirement shall be exempted to the minimum of
the following
(c) 1/2 × Completed year of service ×
Average Salary p.m. (a) Actual amount received as per guidelines; or

(b) ₹ 5,00,000 provided following conditions are (d) Retiring employee is not employed
satisfied – in another company or concern
(i) Compensation is not received from belonging to the same management
Individual, HUF or Firm. (e) Compensation does not exceed - 3
(ii) Voluntary Retirement Scheme (VRS) months salary for each completed year
framed in accordance with prescribed of service; or salary for balance month
guidelines i.e. of service left. Benefit under 10(10C)
(a) Scheme must be applicable to all can be claimed once in the life of
employees who have either completed assessee.
age of 40 years or has completed 10
12. Annuity [Sec. 17(1)(ii)]: Fully taxable
years of service
13. Salary received in lieu of notice period: Fully
(b) Scheme must be framed to reduce the
number of employees taxable
(c) Vacancy caused is not to be filled up 14. Profits in lieu of salary [Sec. 17(3)]: Fully taxable
ALLOWANCES
15. House rent allowance (HRA): Minimum of the (a) ₹ 300 per month per child (to the maximum of
following is exempted from tax: two children)
(a) Actual HRA received (b) Actual amount received
(b) 50%/40% of salary 20. Truck Driver’s Allowance: Minimum of the

following shall be exempted:
(c) Rent Paid – 10% of Salary
(a) 70% of allowance
16. City Compensatory Allowance/Tiffin Allowance/
Medical Allowance/Servant Allowance: Fully (b) ₹ 10,000 p.m.
taxable.
21. Allowance to Government employees outside
17. Entertainment Allowance: Fully taxable, India: As per sec. 10(7), any allowance or perquisite
irrespective of actual expenditure incurred. allowed outside India by the Government to an
Government employee can claim deduction u/s Indian citizen for rendering services outside India
16(ii) is wholly exempt from tax.
18. Children Education Allowance: Minimum of the 22. Any other allowance for which there is no specific
following is exempted – provision shall be fully taxable.
(a) ₹ 100 per month per child (to the maximum of 23. In case of following allowances deduction is
two children) allowed to the extent of actual expenditure:
Travel or transfer Allowance, Daily Allowance,
(b) Actual amount received.
Conveyance Allowance, Helper / Assistant
19. Children Hostel Allowance: Minimum of the Allowance, Professional Development Allowance/
following is exempted – Research Allowance, Uniform Allowance

VOL 09 I NO. 07
INTERMEDIATE
24. Allowance [Old Regime -vs.- Default Regime]
Taxability
Sec. Particulars
Old Regime New Regime
10(13A) House Rent Allowance Amount received by the employee in No exemption
excess of specified limits will be taxable.
10(14)(i) Special allowance or benefit,
not being in the nature of a
perquisite, specifically granted
to meet expenses wholly,
necessarily and exclusively
incurred in the performance
of the duties of an office or
employment of profit. Following
allowances are covered
Cat A i. Actual allowance received; or
a. Travel or Tour or ii. Actual amount spent for the purpose,

Transfer Allowance
1
- whichever is less would be exempt

b. Daily Allowance
c. Conveyance Allowance
Cat B i. Actual allowance received; or No Exemption
d. Helper Allowance ii. Actual amount spent for the purpose,
e. Uniform Allowance - whichever is less would be exempt
f.Research or Training
Allowance
10(14)(ii) Special allowances granted to Amount received by the employee in Partial exemption
the assessee either to meet his excess of specified limits [specified under is available only in
personal expenses at the place rule 2BB(2)] will be taxable. respect of transport
where the duties of his office allowance to employee
Taxpoint: Deduction is available
or employment of profit are who is blind / deaf and
irrespective of actual expenditure
ordinarily performed by him or dumb / orthopaedically
at the place where he ordinarily handicapped
resides or to compensate him for
the increased cost of living E.g.,
City Compensatory Allowance,
Tiffin Allowance, Medical
Allowance, Servant Allowance,
Transport Allowance, etc.
1 Allowance granted to meet the cost of travel on transfer includes any sum paid in connection with transfer, packing and transportation of
personal effects on such transfer.

Topic
Module 4:
Concept of Indirect
Taxes
INTERMEDIATE
Group I - Paper-7B
Indirect Taxation
(IDT)

VOL 09 I NO. 07
Concept of Indirect Tax
INTERMEDIATE
I
n a Welfare State, the Government takes primary the economic burden of the tax (such as the consumer).
responsibility for the welfare of its citizens, as in Here are some key points about indirect taxes:
matters of health care, education, employment,  Tax on goods and services: Indirect tax is levied
infrastructure, social security and other at the time of supply or manufacture or purchase or
development needs. To facilitate these, Government sale or import or export of goods. Further, it is also
needs revenue. Taxation is the primary source of levied on supply.
revenue to the Government for incurring such public  Burden: Tax, being indirect tax paid by the seller,
welfare expenditure. In other words, Government is shall be recovered by the seller from the buyer.
taking taxes from the public through its one hand and Thus, one can say that burden of indirect tax is
through another hand; it incurs welfare expenditure for shifted from seller to buyer and ultimately borne by
public at large. However, no one enjoys handing over consumers of such goods or services.
his hard-earned money to the government to pay taxes.
 Inflationary in nature: Cost of goods and services
Thus, taxes are compulsory or enforced contribution to
increases due to levy of indirect tax thus indirect
the Government revenue by public. The government
taxes promote inflation.
may levy taxes on income, business profits or wealth
or add it to the cost of some goods, services, and  Social welfare: It is useful tool to promote social
transactions. welfare by checking the consumption of harmful
goods or sin goods through higher rate of tax.
 Wider Tax Base: Majority of goods and services
are liable to indirect tax with very low threshold
limits, so tax base is much wider in case of indirect
tax in compare to direct tax.
 Regressive in Nature: All persons (rich or poor)
will bear equal wrath of tax on goods or service
consumed by them irrespective of their ability.
In other words, indirect tax does not create any
difference between rich and poor. Poor people are
Type of Taxation also required to pay equal percentage of tax on
certain goods and service of mass consumption.
There are two types of taxes: Direct Tax and Indirect Thus, it may increase the disparities between rich
Tax. Tax, of which incidence and impact fall on the and poor.
same person, is known as Direct Tax, such as Income
 No pinch: Seller (the person on which indirect tax
Tax. On the other hand, tax, of which incidence and
is levied) does not perceive a direct pinch of tax as
impact fall on two different persons, is known as
it is recovered by him from the buyer and then he is
Indirect Tax, such as GST, etc. It means, in the case of
paying to the Government. On the other hand, since
Direct Tax, tax is recovered directly from the assessee,
it is inbuilt in the price of the goods, the ultimate
who ultimately bears such taxes, whereas in the case of
payer (i.e., buyer) pay it without knowing that he is
Indirect Tax, tax is recovered from the assessee, who
paying any tax to the Government.
passes such burden to another person & is ultimately
borne by consumers of such goods or services.  Examples of Indirect Taxes in India:
• Goods and Services Tax (GST): A
comprehensive indirect tax on the manufacture,
sale, and consumption of goods and services
Direct tax: Progressive in Indirect Tax: Regressive throughout India, replacing multiple indirect
nature in nature taxes like VAT, excise duty, and service tax3.
• Customs Duty: Levied on goods imported into
Features of Indirect Taxes India, aimed at protecting domestic industries
and generating revenue.
Indirect taxes are taxes that are levied on goods and
services rather than on income or profits. These taxes • Excise Duty: Previously levied on the
are collected by an intermediary (such as a retailer or manufacture of goods within India, now largely
manufacturer) from the person who ultimately bears subsumed under GST.

Comparison Chart
Basis Direct Tax Indirect Tax

Meaning Direct tax is referred to as the tax, levied Indirect Tax is referred to as the tax, levied on a person
on person’s income and wealth and is who consumes the goods and services and is paid
paid directly to the government. indirectly to the government.
Nature Progressive in nature i.e., higher tax is Regressive in nature i.e., all persons will bear equal
levied on a person earning higher income wrath of tax on goods or service consumed by them
and vice versa. irrespective of their ability.
Incidence and Falls on the same person. Assessee, Falls on different person. Tax is recovered from the
Impact himself bears such taxes. Thus, it pinches assessee, who passes such burden to another person.
the taxpayer. Thus, it does not pinch the taxpayer.
Example Income Tax GST, Custom Duty
Evasion Tax evasion is possible Tax evasion is hardly possible because it is included in
the price of the goods and services.
Inflation Direct tax helps in reducing the inflation. Cost of goods and services increases due to levy of
indirect tax thus indirect taxes promote inflation.
However, sometimes it is useful tool to promote social
welfare by checking the consumption of harmful goods
or sin goods through higher rate of tax.
Imposition and Imposed on and collected from the same Imposed on and collected from consumers of goods
collection person and services but paid and deposited by the assessee.
Burden Cannot be shifted Can be shifted
Event Taxable income of the assessee Supply of goods and services
Conclusion
Indirect taxes play a crucial role in the revenue generation of governments worldwide. They are embedded in the prices
of goods and services, making them less visible to consumers but impactful on their purchasing power. Understanding
the concept and implications of indirect taxes is essential for both consumers and businesses.

VOL 09 I NO. 07
INTERMEDIATE
Topic
Module 2:
Cost Ascertainment
– Elements of Cost
INTERMEDIATE
Group I - Paper-8
Cost Accounting
(CA)

VOL 09 I NO. 07
M
COST ACCOUNTING
INTERMEDIATE
aterials is the basic items which is 1) Perpetual inventory system and continuous stock
required for the purpose of production verification.
and / or rendering services . it is a major 2) ABC analysis.
part of current assets as well as working
3) Stock turnover analysis.
capital of a business. In most of the developing countries,
about 50% to 75% of total capital is generally invested 4) Setting – up various levels of stocks.
in material items. The average investment in material 5) Codification.
varies from industry to industry. Hence control must 6) Determining the Economic Ordering Quantity
be exercised during the time of purchase, storage and (EOQ)
utilization of materials. Almost in every examination
7) Establishment a Budget system.
one or more questions may be set from this chapter.
specially in the area of Stores Pricing, EOQ Levels 8) Standardization.
of stock and stock valuation. students feel difficulty 9) Use of control ratios.
in the areas like treatment of Return and Shortage of 10) Computerization.
Stores, determination of impact on profit under different 11) Simplification through variety reduction.
methods of valuation, pricing issues etc. thorough
treatment of subject – material will help the students 12) Application of quantitative techniques, operation
to improve their confidence level and proficiency research for demand forecasting.
in dealing with different situations. The students 13) Review of slow and non-moving items.
should be clear about the distinction between material 14) Provisioning and provisioning and purchase
control and inventory control. like all other functions procedure.
purchasing is an important function of management. 15) Reporting. Etc.
in big manufacturing organizations separate purchase
departments are being set for conducting purchases. Fixation of Stock Levels –
Top management lays down the purchase policy and
In stores different level of stock may be maintained. the
accordingly, necessary purchases are made by the
level of stock can be classified into four different levels:
purchase department.
maximum Level, Minimum Level, Reordering Level.,
It is the independent function of the purchase Average Stock Level.
department to decide:- What to purchase?, When to
By solving the following problem, the concept of
purchase?, where to purchase?, How to purchase?.
When all purchases are made under the control of a different stock levels will be clear:
purchaser or chief purchaser who ranks level with the
top management, the buying is to Centralized. but if PROBLEM:
the buying function is performed by other respective Calculate Maximum Level, Minimum Level and
managers, including the chief purchaser, it is said Reorder Level from the following data –
to be decentralized. The decision for centralized or
Re-order Quantity : 1200 units.
decentralized purchase will depend on, type and
quality of material required, location of the production Re-order period : 4 to 6 weeks’
centers, policy of the firm and urgency of purchasing Maximum Consumption : 300units per week.
items. In order to make scientific control and optimum Minimum Consumption : 200units per week
level of inventory, different levels of stocks are fixed,
Normal Consumption : 250 units per week.
which are:- reorder level, Maximum Level, Minimum
Level, Danger Level and average Level. There are
various methods of pricing the materials issued in cost SOLUTION:
accounting. The choice mostly depends on the nature of Re-order Level = Maximum Consumption x
materials used and the condition of the business itself. Maximum Reorder period
The principal methods used in costing for pricing stores = 300units x 6 weeks = 1800 units.
issues are:- Cost price method, Average Cost Price
Method, Market price Method, Notional price Method Minimum Stock Level = Re-order Stock Level --
etc. the Cost price method includes: FIFO, LIFO, NIFO, (Normal Consumption x Normal Reorder period)
HIFO, FILO and Base stock price. = 1800 units –{ 250 x (4+6)/2
The various tools and techniques commonly used for = 1800 – 1250 units
inventory control are :-- = 550 units .

VOL 09 I NO. 07
INTERMEDIATE
Maximum Level = Re-order level + Re-ordering Cost of labour turnover is treated as an overhead
Quantity -- (Minimum Consumption x Minimum Re- expense and should be charged directly to production.
order period) = 1800units + 1200 units – (200 x 4) units
Job Evaluation and Merit Rating:
= 3000 – 800 units.
Job evaluation represents an effort to determine the
= 2200 units. relative value of every job. The evaluation may be
-------------------------------------------------------- achieved through the assignments of points or the use
of some other systematic rating method for essential
job requirements, such as skill,experience and
Labour Cost represents the related cost of converting responsibility.
raw materials into finished products. It represents an
important item of total cost. labour cost relates to human Merit rating , on the other hand , refers to the evaluation
behavior , hence most sensitive . so labour cost not only of merit of an employee in terms of the requirements of
means wages but also includes cost of recruitment and the job . It is actually the evaluation of the performance
training cost of idle time , cost of labour turnover , cost of an employee. In merit rating , the personal qualities
of overtime and shift work , cost of labour inefficiency, of an individual are taken into account.
cost of wastage and spoilage etc. Controlling of labour Idle time:
cost is the most important function of administrative
management . It is not like material which can be stored Idle time refers to such a time for which wages are paid
for future. If the day”s labour is not utilized efficiently without any production. It is the difference between the
on the same day , idle time will occur with a loss to the time as per attendance records and the time booked for
department concerned. Again , if the management takes different jobs or workorders. The idle time may arise
any action without recognizing the human element , it mainly due to two causes: i) Normal causes and ii)
may result to strike or close down of the business. So Abnormal causes. Cost of Normal Idle Time , which
it is a difficult task for for the management to exercise is uncontrollable should be charged to the job or
control over labour cost. There are various techniques workorder at an inflated rate . cost of Abnormal Idle
for effective control labour costs : Time should not be includrd in production cost but
should be charged to Costing Profit and Loss A/c.
1) Planning of production
2) Budget of labour forces . Overtime:
3) Standardization of labour cost and labour hours . If a worker spends more time over and above the normal
4) Labour performance reports. workimg hours , it is known as overtime . generally rate
of overtime is higher than the normal rate . the extra
5) Time booking through automatic time recorder. payment required to be paid for Overtime work is
6) Suitable system of wages payment coupled with known as overtime premium .
various incentive schemes.
Idle Facilities:
Direct Labour Cost And Indirect Labour Cost :
It is that cost which can be identified with and allocated It means the Plant and Machinary facilities available for
to cost centres or cost units. Thus direct labour cost has utilization but which are not used fully due to normal or
a linear relationship with the volume of production. It abnormal reasons. This generally arises due to market
forms part of prime cost. On the other hand labour cost constraint or defective management policy .
which cannot be apportioned to or absorbed by cost Idle Capasity and Excess Capasity:
centres or cost units is indirect labour cost. Thus those
labours who are not directly engaged in altering the The term Idle capacity refers to temporary idleness
composition or condition of the product provide various becose of shortage of production due to lack of orders
types of services . they are helpers , maintenance or any other causes. Excess capacity responses the
personnel etc. indirect labour is a part of overhead. surplus capasityy over what can be expected to be
utilized at present due to unbalanced machines and
Labour Turnover : equipmentswithin the departments,
Labour turnover may be defined as the rate of change
in composition of the labour fource of an organization Suggestions:
during a specified period . labour turnover is a peculiar Generally , the questions from this chapter have been
problem of industry and leads to high cost and low set relating to the method of remuneration . the cost of
productivity . Thus, Labour Turnover = No of workers normal idle time should be considered as part of cost of
leaving in a particular period / Avg no of workers product or service. A number of short notes are set in
employed during the period. the examination from this part of chapter.

Topic
Module 2:
Operations INTERMEDIATE
Planning
Group II - Paper-9
Operations
Management
and Strategic
Management
(OMSM)

VOL 09 I NO. 07
INTERMEDIATE
Operations Management
In this issue let us discuss few numerical problems on operational planning with basic EOQ to complex EOQ model.
Refer sub Module 2.7 of the guide book.
Question 1.
Annual Demand 2000 units (Constant). Purchase price p.u. `10 p.u. Holding Cost `2.40 p.u. Ordering cost `150 per
order. Compute EOQ by graphical method as well as by formula.
Answer:
Order Q Average No of orders Ordering cost Holding Cost Total

100 50 20 3000 120 3120
200 100 10 1500 240 1740
300 150 6.666666667 1000 360 1360
400 200 5 750 480 1230
500 250 4 600 600 1200
600 300 3.333333333 500 720 1220
700 350 2.857142857 428.5714286 840 1268.571
800 400 2.5 375 960 1335
900 450 2.222222222 333.3333333 1080 1413.333
1000 500 2 300 1200 1500
1200 600 1.666666667 250 1440 1690
1400 700 1.428571429 214.2857143 1680 1894.286
1600 800 1.25 187.5 1920 2107.5
1800 900 1.111111111 166.6666667 2160 2326.667
2000 1000 1 150 2400 2550
EOQ = 2DO = 2 × 2000 × 150 = 500

√ h √ h
EOQ is the ordering quantity at which total cost comprising Ordering cost and holding cost is at its minimum. More
order quantities push up the holding cost but pull down the ordering cost. EOQ occurs at the point of trade-off between
these two costs as depicted in the following fig:

Question 2.
In Q1, say total working days in the year is 250 days and lead time (time from the date placing the order to date of
receipt of order) is 15 days (Constant), then what will be reorder point?
Answer:
No. of working days = 250
Lead time = 15 days
So, with an annual demand of 2000, per day demand = 2000 / 250 = 8
So, deamdn for 15 days = 15 * 8 = 120
So, when stock level is at 120, place for recorder.
Question 3.
Refer Q1. Compute optimum interval between two consecutive orders.
Answer:
Optimum interval between two consecutive orders = EOQ / D
2000 can complete 1 year.
So, 500 can complete 500/2000 = 0.25 years.
Question 4.
Refer Q1. Compute Annual total variable inventory cost.
Answer:
Annual total variable inventory cost = TC = Q/2*h+D/Q*O
or TC = SQRT (2DOh)
or SQRT (2DOic)
SQRT (2×2000×150×2.4) = 1200
Question 5. EOQ with price break (Single)

Refer Q1. Suppose the supplier informs that if the order size is at least 800 units then a discounted price of `9.80 per
unit will be offered. Do you accept the offer?
Answer:
EOQ with price break (Single)
In the previous problme Cost P.U. is ` 9.80 prvided 800 units are pruchased at a time
at 500: Total annual cost = 500/2*2.4+2000/500*150+2000*10 = 21200
at 800: Total annual cost = 800/2*2.4+2000/800*150+2000*9.8= 20935
Go for 800.

VOL 09 I NO. 07
INTERMEDIATE
Since the cost at minimum order quantity 800 and above is lower than the cost at EOQ of 500 units, we must give order
at 800 units. The above shown curve shows a sizeable drop in the cost due to the price discount at a quantity of 800
units. At this level the total cost is lower than the total cost corresponding to 500 units.
Question 6. EOQ with price break (Multiple), with holding cost is given in ` per unit.
Refer Q5. The supplier now offers the following price schedule instead of a single price break:
Quantity Price per unit

less than 300 10
300<=Q< 600 9.9
600<=Q< 1000 9.7
1000<=Q< 1500 9.5
Q>= 1500 9.4
At what level do you order to minimize the cost?

Answer:
This is a problem with multiple price break but with constant holding cost given in ` per unit.
Considering discount given at different quantity levels the total cost at different levels is calculated and shown in the
following table:
Category Unit Cost Order Quantity Holding Cost Ordering Cost Purchase Cost Total
1 10 100 120 3000 20000 23120
2 10 200 240 1500 20000 21740
3 9.9 300 360 1000 19800 21160
4 9.9 400 480 750 19800 21030
5 9.9 500 600 600 19800 21000
6 9.7 600 720 500 19400 20620
7 9.7 700 840 428.5714286 19400 20668.57
8 9.7 800 960 375 19400 20735
9 9.7 900 1080 333.3333333 19400 20813.33
10 9.5 1000 1200 300 19000 20500
11 9.5 1100 1320 272.7272727 19000 20592.73
12 9.5 1200 1440 250 19000 20690
13 9.5 1300 1560 230.7692308 19000 20790.77
14 9.5 1400 1680 214.2857143 19000 20894.29
15 9.4 1500 1800 200 18800 20800
(Blue at EOQ and Reds at different price breaks)
Clearly the total cost is minimum at a quantity of 1000 units and not at EOQ of 500 units. The inventory decision then
is that to minimize the total cost , we should order 1000 units every time.

Question 7. EOQ with price break (Multiple), with holding cost is given in (%) age.
Consider the following problem:
Annual Demand 8000
Ordering cost 180/order
Holding cost 10%
Price breaks are:
Lot size Unit price
1-999 Rs.22
1000-1499 Rs.20
1500-1999 Rs.19
2000 & above Rs.18.5
At what level do you order to minimize the cost?
Answer:
Step1: Total Cost
find EOQ with lowest price 18.5
2000/2*0.1*18.5+8000/2000*180+8000*18.5
EOQ = SQRT(2DO/ic) = 1247.700588 Not feasible 150570 Selected as minimum
Step2:
find EOQ with next lowest price 19 1500/2*0.1*19+8000/1500*180+8000*19
EOQ = SQRT(2DO/ic) = 1231.174023 Not feasible 154385
Step3:
find EOQ with next lowest price 20 1200/2*0.1*20+8000/1200*180+8000*20
EOQ = SQRT(2DO/ic) = 1200 Feasible 161200

If feasibility does not come in step 3 then we have to coninue finding EOQ at next level.
At feasibility we compute total cost . Then at every price level next to this feasibilty level i.e at 1500 and 2000 level

VOL 09 I NO. 07
INTERMEDIATE
Question 8.
Till now we have assumed that EOQ is supplied at a single lot. Means 500 units in Q1 is supplied in a single lot. But
assume supply is made in lots @ 50 units/day. Then refer Q 1 and compute maximum stock build up. Also compute the
time required to supply the whole EQQ. Assume 250 working days in a year.
Answer:
The computation is shown in the following table:
Assuming 2000 annual demand and 250 working days, then
demand rate per day 2000/250 = 8
Then EOQ = SQRT((2 D O/ h)(p/(p-d))) where d =8 and p =50
So EOQ= SQRT(2*2000*150/2.4)*(50/50-8)= 545.5447256
and total inventory cost SQRT((2 D O H)(1-d/p)) 1099.818
in one day stock build up is = no of units supplied - no of units consumed = 50-8 -42
to supply total 545.545 units @ 50 units/day total time required 545.545/50 = 10.9109 days
So maximum stock build up = 10.91*42 = 458.22
Key formulae used in this issue are:

1. EOQ = 2DO where D = annual Demand in units, O ordering Cost `/unit, h = holding cost in `/unit;
√ h
2. Reorder level = (Consumption per day) × (Lead time in Days)
3. Holding cost in %: Holding Cost (`) = (Cost/unit) × (%age rate)
4. Optimal Interval between two orders = EOQ/D
5. Annual Total Variable Inventory cost = Total of Ordering and Holding Cost = √ 2DOh
Or when holding is given in % age = √ 2DOic
6. When D is given in `: EOQ = 2DO
√ i
7. EOQ with supply made in lots---“p” indicates rates of supply and “d” indicates consumption per day
EOQ = 2DO = p
√ h √p-d
& Total variable inventory cost = Total of Ordering and Holding Cost = √ 2DOh 1- d
p√
Suggestions:
This issue is based on basic EOQ management with an objective to make foundation for further study on
designing operation schedule. The problems are just indicative type from which maximum benefits could be reached
and applied while studying operations & production management in the curriculum. Guide book on the paper 9-
Operations Management & Strategic Management along with reference books needs to be thoroughly consulted.
Best Wishes.

Topic
Module 1:
Accounting for Shares
and Debentures
Module 6:
Basic Concepts of INTERMEDIATE
Auditing
Group II - Paper-10
Corporate
Accounting and
Auditing (CAA)

VOL 09 I NO. 07
INTERMEDIATE
Section A: Corporate Accounting
Topic: Buyback of Shares
• Multiple Choice Questions back
1. The buy back of equity shares in any financial year C. 15 days from the last date of completion of buy
should not exceed back
A. 20% of the total paid-up equity share capital in D. 7 days from the last date of completion of buy
that financial year back
B. 25% of the total paid-up equity share capital in 6. The offer for buy back shall remain open for a
that financial year period of
C. 25% of the total called-up equity share capital A. not less than 10 days and not exceeding 20
in that financial year days from the date of despatch of the letter of
offer
D. 20% of the total paid-up equity share capital
plus free reserves of that financial year B. not less than 15 days and not exceeding 20
days from the date of despatch of the letter of
2. In which of the following cases, the special
offer
resolution will not be required for buyback?
C. not less than 15 days and not exceeding 30
A. 20% of total equity share capital plus free
reserve of the company
offer
B. 15% of total equity share capital plus free
D. not less than 20 days and not exceeding 30
C. 10% of total equity share capital plus free offer
Answer Keys:
D. none of the above
1-B; 2-C; 3-C; 4-C;5-D; 6-C
3. After buy back debt-equity ratio should not exceed
A. 1 : 1
• Comprehensive Problem
B. 1 : 2
A Ltd. wants to buy back 150000 equity shares of ` 10
C. 2 : 1 each at a price of ` 20 each on 01.04.2021. The buy back
is allowed in its articles of association and the company
D. 3 : 4
has obtained necessary approval from the shareholders.
4. Every buy back shall be completed within a period The company has sufficient bank balance to make the
of payment for buy back of shares.
A. 8 months from the date of passing of the special The following information is available as on 31.03.21:
resolution `
B. 4 months from the date of passing of the special 75,00,000
Equity Share Capital (` 10 each fully pa
resolution
id)
C. 1 year from the date of passing of the special General Reserve 90,00,000
resolution
Dividend Equalization Reserve 15,00,000
D. 1 month from the date of passing of the special Balance of Profit and Loss (Cr.) 7,50,000
resolution
10% Debentures (` 100 each) 11,250,000
5. Shares bought back shall be extinguished and Bank Loan 60,00,000
physically destroyed within
Current Liabilities 99,00,000
A. 10 days from the last date of completion of buy
a. Determine whether the proposed buyback is
back
permissible considering the relevant provisions of
B. 5 days from the last date of completion of buy Companies Act 2013 in this respect.

b. Pass necessary journal entries in the books of the Since the revised Debt-equity ratio is lower than 2:1,
company to give effect of the process, if the plan is the proposed buyback is permissible.
found to be in place.
Journal Entry
Solution
Date Particular Dr (`) Cr. (`)
The proposed buyback is permissible as all the tests are
satisfied. 1.4.2021 Equity Share 1000000
Capital A/C
Workings:
General Reserve
Amount of buyback = 150000 shares at `20 each = 1000000
A/C
`30,00,000
To Equity Share-
1. Shares Outstanding Test: Max. Permissible Limit = holders A/C 2000000
25% of Outstanding Shares
(Being
Particulars cancellation of
Total number of shares outstanding 7,50,000 shares bought
back and premium
25% of the shares outstanding 1,87,500
on buyback
Since the proposed buyback (150000 shares) is lower provided out of
than the maximum limit, it is permissible. General Reserve)
2. Resource Test: Max. Permissible Limit = 25% of 1.4.2021 Equity Share- 3000000
Paid-up Capital plus Free Reserves holders A/C
Particulars To Bank A/C
3000000
Equity share capital (`) 75,00,000 (Being buyback of
Free Reserve (`) (General Reserve + 150000 shares of
DER +P/L) 1,12,50,000 ` 10 each at ` 20
Paid up Capital plus Free Reserves (`) per share.)
1,87,50,000
25% of Paid-up Capital plus Free 1.4.2021 General Reserve 1000000
Reserves (`) 46,87,500 A/C
Since, the amount of proposed buyback is lower To Capital

1000000
than 25% of Paid-up Capital plus Free Reserves, it is redemption
permissible. Reserve A/C
3. Debt Equity Ratio Test: Debt after buyback cannot (Being nominal
exceed twice the paid up capital plus free reserves. value of shares
bought back
Particulars transferred to
Total Debt (`) (11250000 + CRR)
6000000 + 9900000) 27150000
Paid up capital after buy-
back (7500000 – 150000
11250000
x 10)
Free reserves
1500000
Less. Premium on buyback
(150000 x 10) 1500000 6000000
Less. Transfer to Capital
redemption reserve 8250000
Paid up capital + Free Re-
serve after buyback 14250000
Debt Equity ratio =
27150000 : 14250000 1.91:1

VOL 09 I NO. 07
INTERMEDIATE
Section B: Auditing
Topic: Basic Concepts of Auditing
• Multiple Choice Questions • Comprehensive Question and Answer

1. Which of the following is/are statutory book(s) of a Question:
company?
What do you mean by Audit Planning? Discuss its
A. Register of charges advantages.
B. Register of Members Answer:
C. Register of debenture holders Meaning of Audit Planning
D. All of the above Audit planning is a process of deciding in advance
what is to be done, who is to do it, how it is to be
2. Test checking requires application of ___________.
done and when it is to be done by the auditor in order
A. mathematical theory to have efficient and effective completion of work.
Audit planning can be done only when, the auditor is
B. sampling theory
having knowledge of the business of the client. It helps
C. geometry theory in accomplishment of objectives of audit and enables
D. stakeholder theory the auditor to cover different aspects of audit work
in a systematic manner within a preset time frame. It
3. Which of the following is not an objective of audit enhances the quality of audit work. Audit plans should
planning? cover knowledge about client’s accounting systems and
A. Allocation of work policies, internal control procedures and coordinating
the work to be performed. Plans should be flexible
B. manage time so that they can be developed or revised as and when
C. ensure that no important matter is left required by the auditor.
D. increase in audit fees Advantages of Audit Planning
4. ___________is conducted with a particular object 1. Accomplishment of Objectives: Audit plan ensures
in view, viz. to know financial position, earning that it provides right means to accomplish audit
capacity, prove fraud, invest capital, etc. objectives. Further it also ensures that appropriate
attention is devoted to important areas of audit.
A. Auditing
2. Identification of Problems: A well drawn and
B. Accounting established audit plan helps in identifying potential
C. Investigation problems.
D. Sampling 3. Timely Completion of Work: It ensures that work

is completed properly within the specified time and
5. Audit working papers are the property of no important area is left out. It also ensures that all
A. the client important areas of management receive attention.
B. the auditor 4. Facilitates Coordination: It facilitates coordination
of the audit work done by auditors and other
C. the government experts.
D. the audit clerks 5. Better Audit Work: It helps in improving the
Answer Keys: quality of audit work and provides promptness and
perfection in audit performance.
1-D; 2-B; 3-D; 4-C; 5-B

Topic
Module 4:
Sources of Finance and
Cost of Capital
Module 8:
Introduction to Data INTERMEDIATE
Science for Business
Decision-making Group II - Paper-11
Financial
Management and
Business Data
Analytics (FMDA)

VOL 09 I NO. 07
INTERMEDIATE
Subject: Financial Management and Business Data Analytics
Financial Management
Cost of Capital
C
ost of capital is the minimum rate of return that a firm must earn on its investments so as to leave market
price of its. It is also referred to as cut-off rate, target rate, hurdle rate, required rate of return and so on.
In calculating the cost of capital, the focus is on long-term funds. The specific costs have to be calculated
for (i) long-term debt (including debentures); (ii) preference shares; (iii) equity capital; and (iv) retained
earnings.
Example
XYZ Ltd. has on its books the following amounts and specific costs of each type of capital.
Type of capital Book value (`) Market value (`) Specific costs (%)
Debt 4,00,000 3,80,000 5
Preference 1,00,000 1,10,000 8
Equity 6,00,000 15
12,00,000
Retained earnings 2,00,000 13
Total 13,00,000 16,90,000
You are requested to determine the weighted average cost of capital using (a) Book value weights and, (b) Market value
weights. How are they different?
Answer:
(a) Calculation of weighted average cost of capital using book value weights:
Type of capital Book value (`) (BV) Specific costs (%) (k) Total Costs = (BV × k) (`)
Debt 4,00,000 5 20,000
Preference 1,00,000 8 8,000
Equity 6,00,000 15 90,000
Retained earnings 2,00,000 13 26,000
Total 13,00,000 1,44,000
Weighted average cost of capital (ko) = ` 1,44,000 × 100 = 11.1%
` 13,00,000
(b) Calculation of weighted average cost of capital using market value weights
Type of capital Market value (`) Specific costs (%) (k) Total Costs = (BV × k) (`)
Debt 3,80,000 5 19,000
Preference 1,10,000 8 8,800
Equity 9,00,000 15 1,35,000
Retained earnings 3,00,000 13 39,000
Total 16,90,000 2,01,800
Weighted average cost of capital (ko) = ` 2,01,800 ×100 = 11.9%
` 16,90,000
Note 1: The total market value of equity shares and retained earnings is apportioned three-fourths and one-four
respectively on the basis of their book values.
Capital Asset Pricing Model Approach (CAPM)

The CAPM explains the behaviour of security prices and provides a mechanism whereby investors could assess the
impact of proposed security investment on their overall portfolio risk and return.

VOL 09 I NO. 07
The basic assumptions of CAPM are: (b) The face value of equity shares is lower than
INTERMEDIATE
(a) the efficiency of the security markets and the face values of debentures in most cases
(b) investor preferences. (c) Equity shares do not provide a fixed dividend
rate
The efficient market assumption implies that
(d) Equity shares are not easily saleable
(i) all investors have common (homogeneous)
expectations regarding the expected returns, Answer: (a)
variances and correlation of returns among all
securities; 2. If cost of debt is 8%, cost of equity is 13.9%, tax
rate is 40% and capital structure is debt = 40% and
(ii) all investors have the same information about equity = 60%, then weighted average cost of capital
securities;
will be:
(iii) there are no restrictions on investments;
(a) 11.54%
(iv) there are no taxes;
(b) 6.924%
(v) there are no transaction costs; and
(c) 10.26%
(vi) no single investor can affect market price
significantly. (d) 8.204%
CAPM describes the relationship between the required Answer (c)
rate of return, or the cost of equity capital. It is shown
3. The required rate of return is 16%. Management is
below:
anticipating 8% growth rate. The company expects
Ke = Rf + b (Km – Rf) to pay dividend of `5 per share at the end of coming
Where year. On this basis, at which price should the equity
share be sold by the company?
Ke = cost of equity capital
(a) `60.20
Rf = the rate of return required on a risk-free asset/
security/investment (b) `62.50
Km = the required rate of return on the market portfolio (c) `64.30
of assets that can be viewed as the average rate of return
on all assets. (d) `61.70
b = the beta coefficient Answer: (b)
Example 2 4. The preference shares of LM Ltd. pay an annual
From the following information, determine the cost of dividend of `6.50 a share and sells for `48 per
equity capital using the CAPM approach. share. What is the cost of preference share?
(a) Required rate of return on risk-free security 8%. (a) 9.19%

(b) Required rate of return on market portfolio of (b) 7.38%
investment is 13%.
(c) 13.54%
(c) The firm’s beta is 1.6.
(d) 9.46%
Answer:
Answer (c)
Ke = Rf + b (Km – Rf)
5. P/E ratio is
Ke = 0.08 + 1.6(0.13 – 0.08) = 16.0%
(a) Profitability ratio
(b) Turnover ratio
Multiple Choice Questions
(c) Liquid ratio
1. The cost of equity share capital is greater than the
cost of debt because __________. (d) Market test ratio
(a) Equity shares carry a higher risk than debts Answer (d)

VOL 09 I NO. 07
Data Analytics
INTERMEDIATE
(Data Analysis and Modelling)
Introduction to Data Science for Business Decision- 3. Highly paid jobs & career opportunities: As
making data scientist, one can earn good salary and other
benefits from the organisation.
Data science combines math and statistics, specialized
programming, advanced analytics, artificial intelligence 4. Hiring benefits: It has made it comparatively
(AI) and machine learning with specific subject matter easier to sort data and look for best of candidates
expertise to uncover actionable insights hidden in an for an organization.
organization’s data. These insights can be used to guide
decision making and strategic planning. (Source: IBM)
Data measurements scales
Data science is the domain of study that deals with vast
volumes of data using modern tools and techniques to The most widely used classification of measurement
find unseen patterns, derive meaningful information, scales are: (a) nominal scale; (b) ordinal scale; (c)
and make business decisions. interval scale; and (d) ratio scale.
(a) Nominal scale: Nominal scales are
used for labeling variables, without
any quantitative value. “Nominal” scales could
simply be called “labels.” Nominal scales provide
convenient ways of keeping track of people, objects
and events. One cannot do much with the numbers
involved.
(b) Ordinal scale: The ordinal scale places events in
order, but there is no attempt to make the intervals
of the scale equal in terms of some rule. Rank
orders represent ordinal scales and are frequently
used in research relating to qualitative phenomena.
They do not specify how much better or worse a
stock is at a specific price compared to one with a
lower price. For example, the top 10 stocks by P/E
ratio.
Source:https://www.devopsschool.com/blog/what- (c) Interval scale: A scale which represents quantity

is-data-science-advantages-and-disadvantages-of- and has equal units but for which zero represents
data-science/ simply an additional point of measurement is
an interval scale. The Fahrenheit scale is a clear
Advantages of Data Science example of the interval scale of measurement. Thus,
1. Multiple job options: It has given rise to a large 60-degree Fahrenheit or -10 degrees Fahrenheit are
number of career opportunities in its various fields. interval data.
Some of them are Data Scientist, Data Analyst, (d) Ratio scale: The ratio scale possesses all
Research Analyst, Business Analyst, Analytics characteristics of the nominal, ordinal, and interval
Manager, Big Data Engineer, etc. scales. It is the most informative scale as it tends
2. Business benefits: It helps organizations knowing to describe the order and number of the object
how and when their products sell best and that’s between the values of the scale. The most common
why the products are delivered always to the right examples of this scale are height, money, age,
place and right time. Faster and better decisions are weight etc. With respect to market research, the
taken by the organization to improve efficiency and common examples that are observed are sales,
earn higher profits. price, number of customers, market share etc.

Topic
Module 1:
Introduction to
Management
Accounting
Module 2: INTERMEDIATE
Activity Based
Costing Group II - Paper-12
Management
Accounting (MA)

VOL 09 I NO. 07
INTERMEDIATE
Module 1: Introduction to Management Accounting
1. Introduction to Accounting Management accounting has several key features:

Accounting is the systematic process of recording, • No statutory requirement: Unlike financial
reporting, and analyzing financial transactions. accounting, there are no legal requirements for
This process is critical for businesses as it helps management accounting.
stakeholders—including employees, shareholders,
creditors, and regulatory agencies—make informed • Focus on future predictions: It provides
decisions. Accounting has been aptly described as information that helps in forecasting and planning.
the “language of business,” underscoring its role in • Quantitative and qualitative information:
facilitating communication within and outside the Management accounting uses both types of
organization. The need for accounting information information to provide a comprehensive view of
varies among users; for instance, owners are interested the business.
in profitability and financial strength, management
requires data for internal decision-making, creditors Several tools and techniques are commonly used
look at the company’s financial position, and regulatory in management accounting, including budgeting,
bodies focus on compliance. cost-volume-profit analysis, variance analysis, and
performance measurement. Budgeting involves
The three main branches of accounting are financial
planning future business activities in monetary terms,
accounting, management accounting, and cost
helping managers allocate resources efficiently. Cost-
accounting. Each serves a distinct purpose and caters
volume-profit analysis examines the relationship
to different users.
between costs, revenue, and profit at different levels of
2. Financial Accounting production and sales. Variance analysis compares actual
Financial accounting is primarily concerned with performance with planned performance to identify and
recording financial transactions and preparing financial understand deviations. Performance measurement
statements for external users. Its main objective is to involves assessing the efficiency and effectiveness of
provide a clear picture of the financial performance and business operations.
position of a business to stakeholders such as investors, 4. Cost Accounting
creditors, and regulatory agencies. Financial accounting
adheres to standardized principles and guidelines, Cost accounting is mainly concerned with determining
namely the Generally Accepted Accounting Principles the costs of products or services and assisting in cost
(GAAP) or the International Financial Reporting control and cost reduction. It provides detailed cost
Standards (IFRS). information that helps management plan and control
business activities. The main objectives of cost
The core financial statements include the Income accounting are cost ascertainment, cost control, and
Statement, Balance Sheet, Cash Flow Statement, cost reduction.
and the Statement of Changes in Equity. The Income
Statement shows the company’s revenue and expenses, Key principles of cost accounting include cost
resulting in net profit or loss. The Balance Sheet allocation, absorption costing, and marginal costing.
provides a snapshot of the company’s assets, liabilities, Cost allocation involves distributing costs among
and equity at a specific point in time. The Cash Flow different departments or products. Absorption costing
Statement tracks the inflows and outflows of cash, includes both fixed and variable costs in the cost of
helping stakeholders understand the liquidity position. production, while marginal costing considers only
The Statement of Changes in Equity outlines changes in variable costs.
the company’s equity over a reporting period. Cost accounting methods include standard costing,
activity-based costing (ABC), job costing, and
3. Management Accounting
process costing. Standard costing involves comparing
Management accounting focuses on providing actual costs with predetermined standards to identify
information for internal decision-making. Unlike variances. ABC assigns costs to products or services
financial accounting, which looks at historical data, based on the activities required for their production.
management accounting is forward-looking and Job costing calculates costs for specific jobs or batches,
emphasizes planning, controlling, and evaluating making it suitable for industries with customized
business operations. It helps managers make informed production. Process costing is used in industries with
decisions by providing relevant financial and non- continuous production processes, such as chemicals or
financial information. food processing.

5. Differences Between Financial and Management 7. Strategic Cost Management

Accounting
Strategic cost management aligns cost management
While financial and management accounting are both practices with the overall business strategy. It focuses
essential for business operations, they serve different on long-term cost efficiency and involves techniques
purposes and audiences. Financial accounting is such as Value Chain Analysis, Target Costing, and Life
primarily for external reporting, providing historical Cycle Costing.
data that complies with regulatory standards like
• Value Chain Analysis: This technique examines
GAAP or IFRS. It focuses on summarizing the financial
all activities involved in delivering a product or
performance and position of the business through
service, identifying areas where value can be added
standardized financial statements.
or costs can be reduced.
In contrast, management accounting is for internal
• Target Costing: Target costing starts with
use, providing information to help managers make
determining the desired profit margin and market
informed decisions about the future. It includes both
price, then works backward to identify the
quantitative and qualitative data, focusing on areas such
maximum allowable cost for a product.
as budgeting, forecasting, and performance evaluation.
Unlike financial accounting, management accounting • Life Cycle Costing: This approach considers the
does not have statutory requirements, giving it flexibility total cost of ownership over the product’s life cycle,
in how information is presented and used. from development to disposal, helping managers
make decisions that minimize costs over the long
6. Contemporary Techniques in Management
term.
Accounting
8. Role of Management Accountants
Management accounting has evolved to include
contemporary techniques that address the complexities Management accountants play a crucial role in business
of modern business environments. Some of these operations. They are responsible for preparing and
techniques include Activity-Based Costing (ABC), monitoring budgets, conducting financial analysis and
the Balanced Scorecard, Just in Time (JIT), and Total forecasting, and measuring performance. Their skills and
Quality Management (TQM). competencies include analytical skills, communication
skills, and technical accounting knowledge.
• Activity-Based Costing (ABC): ABC assigns
Management accountants help in formulating business
costs to products or services based on the activities
strategies, making informed decisions, and ensuring
required for their production. This method provides
that resources are used efficiently.
a more accurate cost per product by identifying and
assigning costs to specific activities. 9. Ethical Considerations in Management Accounting
• Balanced Scorecard: This tool includes multiple Ethics is a critical aspect of management accounting.
perspectives—financial, customer, internal business Ethical conduct ensures the accuracy and honesty
processes, and learning and growth. It provides of financial reporting, maintaining public trust and
a balanced view of organizational performance, credibility. Management accountants are expected to
helping managers align business activities with adhere to a code of ethics that includes principles of
strategic goals. integrity, objectivity, confidentiality, and professional
competence. Ethical behavior is essential for
• Just in Time (JIT): JIT focuses on reducing waste
maintaining the credibility of the accounting profession
and improving efficiency by receiving goods only
and the trust of stakeholders.
as they are needed in the production process. This
technique minimizes inventory costs and enhances In conclusion, management accounting is an essential
product quality. tool for internal decision-making, providing relevant
• Total Quality Management (TQM): TQM financial and non-financial information that helps
emphasizes continuous improvement in all aspects managers plan, control, and evaluate business operations.
of the business by involving all employees in It complements financial and cost accounting, offering
the process. It focuses on customer satisfaction, a comprehensive view of the business’s financial health
process improvement, and reducing defects. and guiding strategic decisions for future growth.

VOL 09 I NO. 07
INTERMEDIATE
Multiple Choice Questions 7. Which tool is commonly used in management
accounting?
1. Which of the following is the primary purpose of a) Statutory Audit

management accounting? b) Financial Reporting Standards
a) Preparing financial statements for external c) Cost-Volume-Profit Analysis
users d) External Auditing
b) Classifying financial transactions
8. Which of the following is not a characteristic of
c) Assisting management in decision-making cost accounting?
d) Recording past financial transactions a) Quantitative measurement
2. Which branch of accounting primarily focuses on b) Predictive analysis
providing information for external users? c) Focus on cost control
a) Cost Accounting d) Cost ascertainment
b) Management Accounting 9. Which accounting type has a broader scope in
terms of information provided?
c) Financial Accounting
a) Financial Accounting
d) Internal Accounting
b) Management Accounting
3. What is the main emphasis of cost accounting?
c) Cost Accounting
a) Decision-making
d) External Accounting
b) Cost ascertainment and cost control
10. Management accounting does not include which of
c) Financial reporting the following?
d) Market analysis a) Cost data
4. Which accounting type is mandatory by law for b) Financial data
companies? c) Qualitative information
a) Cost Accounting d) Legal compliance data
b) Management Accounting 11. Which of the following focuses on the preparation
of financial reports for potential investors?
c) Financial Accounting
a) Management Accounting
d) Internal Accounting
b) Financial Accounting
5. Management accounting information is mainly
used by: c) Cost Accounting
a) Investors d) Internal Accounting
b) Government agencies 12. Management accounting helps managers in:

a) External reporting
c) Management
b) Legal compliance
d) Creditors
c) Cost reduction only
6. The scope of management accounting is:
d) Decision-making and strategy formulation
a) Narrower than cost accounting
13. Which of the following best describes cost
b) Broader than financial accounting accounting?
c) Focused only on cost control a) Recording all financial transactions
d) Limited to external reporting b) Allocating costs to products or services

c) Preparing tax returns Answers:

d) Auditing financial statement
MCQs Answer
14. The balanced scorecard includes perspectives such
as financial, customer, internal business processes, 1. c
and _______. 2. c
a) Market conditions 3. b
b) Innovation and learning 4. c
c) Government regulations 5. c
d) Competitive analysis 6. b
7. c
Fill in the Blanks 8. b
1. The three branches of accounting are financial 9. b
accounting, cost accounting, and______________
accounting. 10. d
2. ___ ___________accounting provides information 11. b

for internal users to make better decisions. 12. d
3. Management accounting information can be both 13. b
________ ___ and qualitative.
14. b
4. Financial accounting is primarily concerned with the
preparation of financial reports for ____________
users. Fill in the blanks Answers
5. ___ _____costing includes both fixed and variable 1. Management
costs in the cost of production.
2. Management
3. Quantitative
True/False
4. External
1. Management accounting is concerned with
providing information to external users. 5. Absorption
2. Financial accounting focuses on future planning

and decision making. True/False
3. The balanced scorecard is a contemporary 1. False
management accounting technique.
2. False
4. Cost accounting is narrower in scope compared to
management accounting. 3. True
5. Total Quality Management (TQM) is a traditional 4. True

management accounting technique. 5. False

VOL 09 I NO. 07
INTERMEDIATE
Module 2: Activity Based Costing (ABC)
A
Concept Difference between Activity Based Costing and
Traditional Absorption Costing
BC assigns cost to activities based on their
use of resources. It then assigns cost to cost Activity Based Costing Traditional Absorption
objects, such as products or customers, Costing
based on their use of activities. ABC can 1. Overheads are related 1. Overheads are related
track the flow of activities in organization by creating to activities and grouped to cost centers/
a link between the activity (resource consumption) and into activity cost pools. departments.
the cost object. 2. Costs are related to 2 Costs are related to
activities and hence are cost centers and hence
CIMA defines ‘Activity Based Costing’ as “an approach more realistic. not realistic of cost
to the costing and monitoring of activities which involves behaviour.
tracing resource consumption and costing final outputs. 3. Activity–wise cost 3. Time (Hours) are
Resources are assigned to activities, and activities to drivers are determined. assumed to be the only
cost objects based on consumption estimates. The latter cost driver governing
utilize cost drivers to attach activity costs to outputs.” costs in all departments.
4. Activity–wise recovery 4. Either multiple
Advantages of Activity Based Costing rates are determined and overhead recovery rates
The main advantages of using Activity Based Costing there is no concept of a (for each department) or a
single overhead recovery single overhead recovery
are:
rate. rate may be determined
• More accurate costing of products/services. for absorbing overheads.
5. Cost are assigned 5. Costs are assigned
• Overhead allocation is done on logical basis. to cost objects, e.g. to Cost Units i.e. to
• It enables better pricing policies by supplying customers, products, products, or jobs or hours.
services, departments,
accurate cost information.
etc.
• Utilizes unit cost rather than just total cost 6. Essential activities 6. Cost Centers/
can be simplified and departments cannot be
• Help to identify non-value-added activities which unnecessary activities eliminated. Hence, not
facilitates cost reduction. can be eliminated. suitable for cost control.
• It is helpful to the organizations with multiple Thus, the corresponding
costs are also reduced/
products. minimized. Hence ABC
• It highlights problem areas which require attention aids cost control.
of the management.
Stages and flow of costs in ABC
Limitations of Activity Based Costing
The different stages in ABC calculations are listed
The main limitations using Activity Based Costing are: below:
• It is more expensive, particularly in comparison 1. Identify the different activities within the
with traditional costing system. organization
• It is not helpful to the small organizations. 2. Relate the overheads to the activities
• It may not be applied to organizations with limited 3. Support activities are then spread across the primary
products. activities
• Selection of the most suitable cost driver may not 4. Determine the activity cost drivers
be easy/ may be difficult or complicated. 5. Calculate activity cost driver rates

Basic components of ABC - resource drivers and (i) Resource Cost Driver: It is a measure of the
cost drivers quantity of resources consumed by an activity.
a) Activity: Activity, here, refers to an event that It is used to assign the cost of a resource to an
incurs cost. activity or cost pool.
b) Cost Object: It is an item for which cost (ii) Activity Cost Driver: It is a measure of the
measurement is required e.g. a product or a frequency and intensity of demand, placed on
customer. activities by cost objects. It is used to assign
c) Cost Driver: It is a factor that causes a change in activity costs to cost objects.
the cost of an activity. e) Cost Pool: It represents a group of various
d) There are two categories of cost driver. individual cost items.

VOL 09 I NO. 07
INTERMEDIATE
Examples of Cost Pools and Drivers b) Direct materials
Activity Cost Pools Related Cost Drivers c) Sales revenue

Ordering and Receiving Number of purchase d) Profit margin
Materials cost orders
6. ABC helps in identifying:
Setting up machines’ costs Number of set-ups
a) Non-value-added activities
Machining costs Machine hours
Assembling costs Number of parts b) Fixed manufacturing costs
Inspecting and testing costs Number of tests c) Direct labor costs
Painting costs Number of parts d) Variable selling expenses
Supervising Costs Direct labour hours 7. ABC can be particularly useful in industries where:
a) Overhead costs are a small proportion of total
Multiple Choice Questions costs
b) There is a single product line
1. Cost attribution to cost units on the basis of benefit
received from indirect activities, such as ordering, c) Overhead costs are a significant proportion of
setting-up, assuring quality is known as total costs
a) Allocation d) Products have identical resource usage
b) Activity-based costing 8. Which of the following is not a step in the ABC
process?
c) Always better control
a) Assigning costs to cost objects
d) Absorption
b) Calculating the overhead rate
2. In activity-based costing, the allocation basis used
for applying costs to services or products is called c) Identifying activities
a) Cost driver d) Assigning costs to activities
b) Cost object 9. In ABC, an “activity” is defined as:
c) Allocation a) A process that generates revenue
d) Applicator b) Any event that consumes resources
3. Which system of costing encourages managers to c) An expense related to sales
identify which activities are value-added activities? d) A department within the organization
a) Standard Costing 10. Which statement about ABC is true?
b) Activity-based Costing a) ABC does not account for indirect costs
c) Uniform Costing b) ABC is less accurate than traditional costing
d) Direct Costing methods
4. What is the primary benefit of using ABC over c) ABC only applies to manufacturing industries
traditional costing methods? d) ABC assigns costs based on actual usage of
a) Simplicity in implementation resources
b) Increased focus on labor costs 11. One of the disadvantages of ABC is:
c) More accurate product costing a) It is easy to implement
d) Reduced need for accounting systems b) It provides less detailed information
5. Which of the following would be an example of an c) It can be time-consuming and costly to
activity cost pool in ABC? implement
a) Machine setups d) It does not allocate costs accurately

12. A company using ABC will generally: True and False
a) Ignore non-manufacturing costs 1. Batch-related activities, such as setting up a machine

or processing a purchase order, are performed each
b) Use a single overhead rate for all products time a batch of goods is produced.
c) Use multiple cost drivers 2. Activity Cost Driver is a measure of the quantity of
resources consumed by an activity.
d) Allocate costs based on direct labor hours only 3. Traditional Costing System analysis will itemize
13. A company has identified the following activities the costs of each plant, and correctly allocate these
costs to the activities conducted within them.
and cost drivers: Activity A with a cost of ₹750,000
4. An ABC analysis reveals all of the costs associated
and 1,000 machine hours, Activity B with a cost of
with a product, and so is useful for determining the
₹375,000 and 500 setups. What is the cost driver minimum price that should be charged.
rate for Activity A? 5. ABC cannot be used in conjunction with customer
a) ₹750 per machine hour profitability analysis (CPA) to determine more
accurately the profit earned by serving particular
b) ₹1500 per machine hour customers.
Answer
c) ₹3750 per machine hour
1. True
d) ₹7500 per machine hour
2. False
14. A product requires 3 setups, 200 machine hours,
3. False
and 5 quality inspections. If the cost per setup is
4. True
₹7,500, the cost per machine hour is ₹375, and the
5. False
cost per inspection is ₹3,750, what is the total cost
assigned to the product? Fill in the blanks
a) ₹93,750 1. Different products utilize different number of
resources, which is not recognized in ____________
b) ₹97,500 system.
c) ₹1,01,250 2. ___________________ system assumes that
activities are responsible for the incurrence of costs
d) ₹1,16,250 and products creates the demand for activities.
15. A company has overhead costs of ₹6,000,000 for 3. The concept of ABC was first defined in the late
an activity driven by 1,200 machine hours. If a 1980s by_______________________.
product requires 100 machine hours, how much 4. The ___________ is used to determine what causes
the cost of each activity (e.g. machine hours;
overhead cost will be allocated to this product?
number of dispatch orders).
a) ₹400,000 5. ________________ activities are performed each
time a unit of the product or service is produced.
b) ₹500,000
Answer
c) ₹600,000
1. traditional costing
d) ₹700,000 2. Activity-Based Costing
Answer: 3. Robert Kaplan and William Burns
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 4. cost driver
b a b c a a c b b d c c a d b 5. Unit-level

VOL 09 I NO. 07
FINAL
CMA
FINAL
COURSE
Syllabus 2022

FINAL VOL 09 I NO. 07
Topic
Module 1:
The Companies Act,
2013
FINAL
Group III - Paper-13
Corporate and
Economic Laws
(CEL)

VOL 09 I NO. 07
Competition Act- an overview

Case study on formation of a company
FINAL
M
ohan and Shyam along with other c) 200
four friends decide to start a business
d) 500.
of running an old age home with
commercial objective. They have plans
to raise fund, both equity and loan from known people.
3. Which of the following is correct in relation to the
Shyam feels that since this is a charitable purpose, they
situation above?
may register as non profit company (section 8) and
claim tax benefit. The six friends will take profits from a) They will not get NPO licence because it is for
the company apart from taking monthly remuneration gain.
since they will be working full time for the business. b) They can form NPO (section 8) Company.
Rajesh, another friend opines that since they want to
gain out of the venture, partnership law will apply. c) They can register an NGO.
d) In every case the company will get tax
Multiple Choice Question exemption.
1. Whose opinion was that partnership law will apply 4. If they go for partnership, what is the maximum
is correct? number of partners they may have.
a) Mohan, a) 10,
b) Shyam, b) 20,
c) Rajesh, c) 30,
d) None. d) 50.
2. If they form a private limited company, they can

Answers:
issue shares to how many ______ persons.
a) 50 1 2 3 4
b) 100 c) Rajesh c)200 a) d) 50

Topic
Module 1:
Investment
Decisions, Project
Planning and
Control
FINAL
Strategic Financial
Management (SFM)

VOL 09 I NO. 07
Paper 14: Strategic Financial Management
FINAL
Topic: Investment Decisions, Project Planning and Control
• Multiple Choice Questions Project Initial Investment NPV PI
(` crore) (` crore)
1. Which of the following investment avenues has the W 6.00 1.80 1.30
least risk associated with it?
X 3.00 0.60 1.20
A. Corporate Fixed Deposits
Y 2.00 0.50 1.25
B. Deposits in commercial banks Z 2.50 1.50 1.60
C. Public Provident Fund Which investment projects should be selected?
D. Non-convertible zero coupon bonds A. Project W in full and X in part
B. Project Z in full and W in part
Solution:
C. Project W in full and Z in part
The correct option is (C) Public Provident Fund
D. Project Z and Y in full and X in part
Justification: Solution:
The other three are subject to only capital adequacy Correct Option is (B)
norms and the funds can be invested freely to fetch Justification:
returns commensurate with the risk. PPF is required
Project Z in full and W in part
to invest only in specified risk free securities.
All 4 projects have positive NPV. So, PI is the
2. Z Ltd. invests ` 20 lacs in a project with life 5 years selection criteria. Higher the PI, greater is the return
and no salvage value. Tax rate is 50% and straight- for every rupee of investment. Z has highest and W
line depreciation is used. The uniform expected has 2nd highest PI. So, option B is selected.
cash flows after tax and before depreciation shield
4. Duhita Ltd. intends to buy an equipment. Quotes
are:
are obtained for two different makes A and B as
Year end 1 2 3 4 5 given below:
Cash flows after tax 4 5 6 6 7 Equipment Cost (` Million) Estimate life
(` lacs) Type (years)
The payback period is A 4.5 10
A. 3 years B 6.00 15
Ignoring the operations and maintenance costs
B. 3 years and 11 months
which will be almost the same for A and B, which
C. 2 years and 11 months one would be chapter? The company’s cost of
D. 2 years and 6 months capital is 10% [Given: PVIFA (10%, 10 yrs.) =
6.1446 and PVIFA (10%, 15 years) = 7.6061]
Solution: A. A will be cheaper
The correct option is (C) 2 years and 11 months. B. B will be cheaper
Justification: C. Cost will be the same
D. They are not comparable and therefore nothing
CFAT, depn shield = 6,7,8,8,9 For years 1,2,3,4,5. can be said about which is cheaper.
Cumulative cash flows = 6, 13, 21, 29, 38
Solution:
Pay back = 2 years + 7/8 × 12 = 2 +10.5 = 2 years Correct Option is - (A) Make A will be cheaper
and 11 months
Justification:
3. A company has ` 7 crore available for investment. Equivalent annual cost of Make – A = 45,00,000 ÷
It has evaluated its options and has found that only 6.1446 = ` 7,32,350
four investment projects given below have positive
Equivalent annual cost of Make – B = 60,00,000 ÷
NPV. All these investments are divisible and get
7.6061 = ` 7,88,841
proportional NPVs.

VOL 09 I NO. 07
• Comprehensive Problem
FINAL
Problem 1
R Ltd., a profitable company is considering the purchase of a new machine for `75,00,000. The machine’s useful
life is 5 years, with annual maintenance, insurance and administration costs of ` 12 lacs. Depreciation is over its
life on straight line basis, considering zero scrap value. The tax rate is 30%. R Ltd. has a capital structure of 60%
debt and 40% equity. Cost of debt before tax is 8% and the cost of equity is 12%. R Ltd. is interested in leasing out
this machine to a lessee ‘L’ on year-end annual lease rents and R will have to maintain the equipment at the costs
stated above. What should be the lease rents to be billed to ‘L’ for the lease proposal to break-even if:
(i) R Ltd. acquires the machine from its total finance pool.
(ii) R Ltd. uses a bank borrowing specifically for this purpose at 10% interest rate on outstanding principal at the
beginning of each year, with year-end instalments comprising `15 lacs towards principal and balance towards
interest for the year?
Present calculations to the nearest rupee.
Solution:
Depreciation per annum = `75/5 = `15 lacs; tax shield = 0.3 × 15 = `4.5 lacs
Capital: 60% debt at 8% before tax = 5.6% after tax; 40% equity = 12%
Weighted average cost of capital after tax = 0.6 × 5.6 + 0.4 × 12 = 3.36 + 4.8 = 8.16%
After tax cost of bank loan = 10% (1 – 0.3) = 7%.
Annual Cash cost = `12 lacs before tax = `8.4 lacs after tax.
Annual cash cost after tax and depreciation shield = ` (8,40,000 – 4,50,000) = `3,90,000.
(i) If the funding is out of the general finance pool, discount rate to be used = WACC = 8.16%.
End of year Factor Cash (`) Inflows/(outflows) PV of cash flows

0 PV1 (75,00,000) (75,00,000)
1-5 Annuity factor 8.16%, 5 years = 3.976 (3,90,000) (15,50,640)
90,50,640
P.V. of After-tax lease rents to break even = ` 90,50,640
After tax annual lease rentals = 90,50,640/3.976 = `22,76,318
Annual billable lease rents = 22,76,318/70% = `32,51,883
(ii) This is a lease v/s borrow decision applicable to the lessor. The break-even lease rents should cover the after-
tax cost of specific borrowing. The applicable discount rate = 7%.
End of Outstanding Interest After tax Principal Cash PV factor PV of

year principal interest payments outflow outflows
0 75,00,000
1 60,00,000 7,50,000 5,25,000 15,00,000 20,25,000 0.935 18,93,375
2 45,00,000 6,00,000 4,20,000 15,00,000 19,20,000 0.873 16,76,160
3 30,00,000 4,50,000 3,15,000 15,00,000 18,15,000 0.816 14,81,040
4 15,00,000 3,00,000 2,10,000 15,00,000 17,10,000 0.763 13,04,730
5 0 1,50,000 1,05,000 15,00,000 16,05,000 0.713 11,44,365
74,99,670
Total outflows including maintenance, etc = 3,90,000 x annuity factor 7%, 5 years + 74,99,670 = 390000 ×
4.10 + 7499670 = 15,99,000 + 74,99,670 = `90,98,670

VOL 09 I NO. 07
FINAL
After tax annual lease rentals to break even = 90,98,670/4.10 = `22,19,188
Billable lease rentals = 22,19,188/0.7 = ` 31,70,269
Problem 2
A company has to replace its machine with either machine EM or LM. The following details are given:
Particulars EM LM
Purchase price (`) 20,00,000 10,00,000
Scrap value at the end of its life (`) 3,00,000 3,00,000
Life (no. of years) 12 6
Overhauling due at the end of year 8 4
Overhauling cost (`) 4,00,000 2,00,000
Annual repair cost (`) 2,00,000 2,80,000
If LM is chosen, it has to be replaced by another LM machine at the end of the 6th year at `12,00,000. Ignore
depreciation and taxes. Use a discount rate of 10% p.a. with annual rests. Present annual pre-discounted cash flows
for each machine, then apply the PV or annuity factors and show computations to the nearest rupee. Compare the
equivalent annual cash flows for the machines. Which machine should the company choose based on NPV?
Solution:
Machine EM
Year Cash flows Factor PV

0 - 20,00,000 1 - 20,00,000
1-12 - 2,00,000 6.814 - 13,62,800
8 - 4,00,000 0.467 -1,86,800
12 + 3,00,000 0.319 + 95,700
NPV - 34,53,900
Machine LM
Year Cash flows Factor PV

0 -10,00,000 1 -10,00,000
1-12 -2,80,000 6.814 -19,07,920
4 -2,00,000 0.683 - 1,36,600
10 -2,00,000 0.386 -77,200
6 +3,00,000 -12,00,000 0.564 -5,07,600
12 +3,00,000 0.319 +95,700
NPV -35,33,620
Equivalent annual cash flows:
Machine EM: -34,53,900/12 = - 2,87,825
Machine LM: -35,33,620/12 = - 2,94,468
So, Machine EM is better.

Topic
Module 1:
Assessment
of Income and
Computation of Tax FINAL
Liability of Various
Entities Group III - Paper-15
Direct Tax Laws

and International
Taxation (DIT)

VOL 09 I NO. 07
Non-Resident: Computation on a Presumptive Basis
FINAL
Specific sections of the Income Tax Act govern the computation of income on a presumptive basis for non-residents
in India. These provisions simplify the tax calculation for non-residents engaged in certain business activities. Here
are the key sections and their implications:
Section 44B: Shipping Business
Applicable to All non-resident assesse

Condition Assessee must be engaged in the business of operation of ships.
Income taxable under the head “Profits & gains of business or profession” from such business shall
be estimated at 7.5% of the amount being aggregate of the following:
1. The amount paid or payable (whether in or out of India) to the assessee (or to any person on his
Estimated
behalf) on account of the carriage of passengers, livestock, mail or goods shipped at any port in
income
India; and
2. The amount received or deemed to be received in India by or on behalf of the assessee on

account of the carriage of passengers, livestock, mail or goods shipped at any port outside India.
Notes: The amount paid or payable or received or deemed to be received, as the case may be, shall also include
demurrage charges or handling charges or any other amount of similar nature.
Let’s go through an example of how presumptive income is calculated for a non-resident engaged in the shipping
business u/s 44B of the Income Tax Act.
Example: Non-Resident Shipping Business
Scenario:
– A non-resident shipping company earns income from the carriage of goods from an Indian port.
– The total amount paid or payable for the carriage of goods is ₹10,00,00,000.
Step-by-Step Calculation:
– Determine the Specified Sum:
The specified sum is the total amount paid or payable for the carriage of goods from an Indian port.
In this case, the specified sum is ₹10,00,00,000.
– Calculate Presumptive Income:
Under section 44B, the presumptive income is 7.5% of the specified sum.
Presumptive Income = 7.5% of ₹10,00,00,000
Presumptive Income = ₹ 75,00,000
– Tax Liability:
The presumptive income of ₹ 75,00,000 will be considered as the taxable income for the non-resident shipping
company.
The company will then be taxed on this presumptive income according to the applicable tax rates.
This simplified method helps non-residents avoid the complexities of maintaining detailed books of accounts and
audits, providing a straightforward way to calculate their taxable income.

VOL 09 I NO. 07
Section 44BB: Exploration of Mineral Oils

FINAL
Applicable to Non-resident assessee

Assessee must be engaged in the business of -
• Providing services or facilities in connection with; or
• Supplying plant1 and machinery on hire, used or to be used in,
Conditions – the prospecting for, or extraction or production of, mineral oils2.
1.
Plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used
for the purpose of the said business
2.
Mineral oil includes petroleum and natural gas.
A sum equal to 10% of the aggregate of the following amount shall be deemed to be the profits and
gains of such business chargeable to tax -
• The amount paid or payable (whether in or out of India) to the assessee (or to any person on
his behalf) on account of the provision of services and facilities in connection with, or supply
Estimated of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or
income production of, mineral oils in India; and
• The amount received or deemed to be received in India by or on behalf of the assessee on
account of the provision of services and facilities in connection with, or supply of plant and
machinery on hire used, or to be used, in the prospecting for, or extraction or production of,
mineral oils outside India.
An assessee may claim lower profits and gains if he keeps and maintains books of account as per
Assessee may
sec. 44AA and gets his accounts audited and furnishes the report u/s 44AB and thereupon the
claim lower
Assessing Officer shall proceed to make an assessment of the total income of the assessee u/s 143(3)
profit
& determine the sum payable by, or refundable to, the assessee
Benefit of unabsorbed depreciation and brought forward loss shall not be allowed to the assessee for
Taxpoint
such previous year
Section 44BBA: Operation of Aircraft
Applicable to All non-resident assessee.
Condition Assessee must be engaged in the business of operation of aircraft.

Income of such business shall be estimated at 5% of the aggregate of the following -
• The amount paid or payable (whether in or out of India) to the assessee (or to any person on his
Estimated
behalf) on account of the carriage of passengers, livestock, mail or goods from any place in India; and
income
• The amount received or deemed to be received in India by or on behalf of the assessee on
account of the carriage of passengers, livestock, mail or goods from any place outside India.

VOL 09 I NO. 07
Section 44BBB: Foreign Companies in Turnkey Projects
FINAL
Applicable to A foreign company
The assessee must be engaged in the business of -
• civil construction; or
• erection of plant or machinery or testing or commissioning thereof,
Condition
– in connection with a turnkey power project approved by the Central Government in this
behalf.
Approval issued by the Department of Power in the Ministry of Energy shall be deemed to be the
approval of the Central Government for this section.
Income of such business shall be estimated at 10% of the amount paid or payable (whether in or out
Estimated
of India) to the said assessee (or to any person on his behalf) on account of such civil construction,
income
erection, testing or commissioning.
An assessee may claim lower profits and gains if he keeps and maintain books of account as per sec.
Assessee may
44AA and gets his accounts audited and furnishes the report u/s 44AB and thereupon the Assessing
claim lower
Officer shall proceed to make an assessment of the total income of the assessee u/s 143(3) and
profit
determine the sum payable by, or refundable to, the assessee.
Benefit of unabsorbed depreciation and brought forward loss shall not be allowed to the assessee for
Taxpoint
such previous year
Benefits of Presumptive Taxation

• Simplified Compliance: Non-residents can benefit from simplified tax compliance as they are not required to
maintain detailed books of accounts.
• Reduced Administrative Burden: The presumptive taxation scheme reduces the administrative burden and
costs associated with maintaining and auditing accounts.
• Certainty in Tax Liability: Non-residents have certainty regarding their tax liability, which is calculated as a
fixed percentage of their gross receipts or specified sums.
Conclusion
The presumptive taxation scheme for non-residents under Sections 44B, 44BB, 44BBA, and 44BBB provides
a straightforward method for calculating taxable income. This scheme is particularly beneficial for non-residents
engaged in shipping, mineral oil exploration, aircraft operation, and turnkey projects, as it simplifies compliance and
provides certainty in tax liability.

Topic
Module 1:
Introduction to
Strategic Cost
Management
FINAL
Strategic Cost
Management (SCM)

VOL 09 I NO. 07
Unveiling the Value Chain

01.00 Value Use value may be construed as the fundamental for
FINAL
any item, because without use value the item can have
By dictionary definition, ‘value’ is defined as: ‘the
neither exchange value nor esteem value. Any attempt
amount of money that can be received in exchange of to improve the value of a product must consider two
something’. The term value, in a commercial context, elements. The first element is the utility of the product,
refers to economic worth, which may reflect: i.e. the use value. The second element relates to the
(i) Use value value of ownership, i.e. esteem value.
The concept can, better, be explained by the price
(ii) Cost value
discrimination being practiced in relation to a luxury
(iii) Exchange value, or car and a basic small car. From the use point of view
both the cars fulfil the same function, viz. both of them
(iv) Esteem value.
offer safe economical travel (use value); but the luxury
‘Use Value’ reflects the intrinsic value. It is the measure car has a greater esteem value and hence priced at a
of properties, qualities and features which make the phenomenal value.
product or service useful for the consumer. Use value, Another example could be the exorbitantly priced gold-
therefore, is the functional worth of a product or service. plated ball pen in comparison to a disposable pen. Even
though the use value for both the pens is nearly the
same, the factor of esteem value enables a privileged
pricing for gold-plated ball pen.
Everything said, from a customer perspective, ‘Value is
the price paid for a product, process, material or service
required to perform a specific function in an efficient
way’
02.00 Value Creation
Manufacturing companies create value by acquiring
raw materials and converting them into useful products
(i.e. finished goods). In the process, manufacturers incur
conversion costs such as factory costs, administrative
costs, selling costs, and distribution costs.
Similarly, retailers create value by bringing together
a range of products and present them in a way that is
convenient to customers, sometimes supported by
services such as trial rooms or personal shopper advice.
In the process, retailers incur service costs such as
‘Cost Value’ is the sum of all costs incurred in producing procurement costs, storage costs, administrative costs,
the product or rendering a service. Cost value, thus, is and sales support costs.
the sum of raw material cost, labour cost, and overheads
expended to produce the product or service. ‘Exchange Adding further, insurance companies create value by
Value’ in a conventional sense, refers to the price that a offering policies to customers that are underwritten by
purchaser is willing to offer for the product or service, larger re-insurance policies. Here, they are packaging
these larger policies in a customer-friendly way, and
the price being dependent upon the satisfaction level
distributing them to a mass audience. In the process,
that is derived from the product or service.
insurance companies incur insuring costs such as
‘Esteem Value’ is the measure of properties, features, reinsurance costs, claim costs, and administrative costs.
attractiveness of graphic packaging and the like which
The onerous learning is that value is created by
increases sales appeal or which attracts customers producing goods or rendering services. Entrepreneurs
and create in them a strong desire to own the product. are benefited if the ‘value created’ is greater than the
“Esteem value”, hence, is the price paid by the buyer or ‘costs incurred’. In other words, the value that is
the cost incurred by the manufacturer beyond the use created by a company as reduced by the costs incurred
value. In other words, “Esteem value” reflects the aura is the profit margin. Expressed as a formula the equation
of ownership. would read as:

VOL 09 I NO. 07
(Value Created – Cost of Creating that Value) = Profit 04.00 Elements in Porter’s Value Chain
Margin
FINAL
Rather than looking at departments or accounting cost

categories, Porter’s Value Chain focuses on systems
that depict as to how inputs are changed into the
outputs. Using this viewpoint, Porter described a chain
of activities common to all businesses, and he divided
them into:
(i) Primary Activities, and
(ii) Support Activities.
04.01 Primary Activities

The more value an organization creates, the more
profitable it is likely to be. As more and more value Primary activities relate directly to the physical creation,
is provided to the customers, competitive advantage sale, maintenance and support of a product or service.
creeps in. Understanding how a company creates value, They consist of the following:
and looking for ways to add more value, are critical
 Inbound Logistics: These are all the processes
elements in developing a competitive strategy.
relating to receiving, storing, and distributing the
In this context, worth recalling is the fundamental inputs internally. The supplier relationships are a
assumption of Activity Based Costing which scripts.
key factor in creating value here.
“Products consume activities and Activities consume
costs”. The implied reading is that value creation runs  Operations: These are the transformation activities
through a process of activities and that ‘Activities that change inputs into outputs that are sold to
propel Value Creation’. customers. Here, operational systems create value.
03.00 Porter’s Value Chain  Outbound Logistics: These activities deliver the
product or service to the customer. These are the
Developed by Michael Porter in 1985 and used
throughout the world, the value chain is a powerful things like collection, storage, and distributing the
tool for disaggregating a company into its strategically outputs. They may be internal or external to the
relevant activities in order to focus on the sources of organization.
competitive advantage; that is, the specific activities  Marketing and Sales: These are the processes that
that result in lower costs or higher prices.
are used to persuade clients to purchase from the
A company’s value chain is typically part of a larger firm instead of its competitors. The benefits being
value system that includes companies either upstream offered, and how well they are communicated to the
(suppliers) or downstream (distribution channels), or customers, are sources of value here.
both. This perspective about how value is created forces
managers to consider and see each activity not just as a  Service: These are the activities relating to
cost, but as a step that has to add some increment of maintaining the value of the product or service to
value to the finished product or service. customers, once it has been purchased.
Thus, the value chain is a set of activities that an 04.02 Support Activities
organization carries out to create value for its customers.
Support activities support the primary functions stated
Porter proposed a general-purpose value chain that
above. Each support, or secondary, activity can play a
companies can use to examine all of their activities, and
role in each primary activity. For example, procurement
see how they are connected. The way in which value-
chain-activities are performed determines costs and supports operations with certain activities, but it also
affects profits. supports marketing and sales with other activities.

VOL 09 I NO. 07
 Procurement (Purchasing): This is what the Simply stated, Value Chain Analysis is the process
organization does to get the resources it needs of observing and evaluating each business activity
FINAL
to operate. This includes finding vendors and involved in the creation of a finished product or service.
negotiating best prices. The purpose of value chain analysis is to find areas of
improvement within the value chain that will increase a
 Human Resource Management: This is how
company’s competitive advantage.
well a company recruits, hires, trains, motivates,
rewards, and retains its workers. People are a Conducting a value chain analysis prompts a firm to
significant source of value, and businesses can consider how each step adds or subtracts value from its
create a clear advantage with good HR practices. final product or service. This, in turn, can help it realize
some form of competitive advantage, such as:
 Technological Development: These activities
relate to managing and processing information, • Cost reduction, by making each activity in the value
as well as protecting a company’s knowledge chain more efficient and, therefore, less expensive.
base. Minimizing information technology costs,
• Product differentiation, by investing more time
staying current with technological advances, and
and resources into activities like research and
maintaining technical excellence are sources of
development, design, or marketing that can help the
value creation.
product stand out.
 Infrastructure: These are a company’s support
Typically, increasing the performance of one of the
systems, and the functions that allow it to maintain
four secondary activities shall benefit at least one of the
daily operations. Accounting, legal, administrative,
primary activities.
and general management are examples of necessary
infrastructure that businesses can use to their 06.00 Example of Apple
advantage.
06.01 Apple’s Primary Activities
1. Inbound logistics: Apple’s inbound supply chain
is enormous. Its top 200 suppliers provide the
company with 98% of procurement expenditures
for materials, manufacturing and product assembly.
These suppliers are held to strict quality standards
by means of a Specially Designed Procurement
Companies use these primary and support activities Program. Every year, the list of suppliers is
as “building blocks” to create a valuable products or revisited. Suppliers that meet Apple’s standards and
services. Noteworthy is the fact that Porter’s value provide a more competitive product are added to
chain is a generic model and can be modified as may be the list to ensure optimization of their value chain.
needed by the situation and circumstances.
2. Operations: Apple takes advantage of lower
05.00 Value Chain Analysis (VCA) labour and raw material costs in Japan and China.
Value chain analysis (VCA) is a process where a Outsourcing helps them keep overall manufacturing
firm identifies its primary and support activities that costs low.
add value to its final product and then analyse these 3. Outbound logistics: Apple’s business model
activities to reduce costs or increase differentiation. allows the customers to purchase its products
Value chain analysis relies on the basic economic online and from the company’s stores. Because
principle of advantage - companies are best served the company has hundreds of retail stores, it can
by operating in sectors where they have a relative capitalize on keeping any retail margins made
productive advantage compared to their competitors. through Apple sales. Brand name recognition also
Simultaneously, companies should ask themselves means that non-Apple outlets stock the products in
where they can deliver the best value to their customers. large numbers.

VOL 09 I NO. 07
4. Marketing and sales: Apple’s marketing and powerful processes a business can undertake. The
sales efforts are identifiable for its design, quality details involved in the analysis can uncover where the
FINAL
and innovation. Apple reflects its perceived value company spends its money, how well the operations are
not only in the cost of its products but also in its working and how the company can outmanoeuvre its
advertising. competitors.
5. Service: Most products sold by Apple are initially 08.00 Terms to Master
covered by a 1-year warranty and 90 days of support
Value: Value is the price paid for a product, process,
from staff. They also staff their stores with trained
material or service required to perform a specific
Apple technicians who offer guided, interacted
function in an efficient way.
demos to customers.
Value Chain: Value chain is a set of activities that an
06.02 Apple’s Support Activities
organization carries out to create value for its customers.
1 Research and development: Apple invests
Primary Activities of Porter’s Value Chain: Primary
heavily in research and development into products
activities of Porter’s value chain relate directly to the
that can maintain Apple’s competitive advantage.
physical creation, sale, maintenance and support of a
The investment paid off: for example, in 2020, the
product or service.
company released 28 new or refreshed products
onto the market. Support Activities of Porter’s Value Chain: Support
activities of Porter’s value chain support the primary
2 Human Resource Management: Apple is known
functions. Each support activity can play a role in each
for recruiting top candidates and even poaching
primary activity.
talent from other companies to get the best people
working for them. Value Chain Analysis: Value Chain Analysis is the
process of observing and evaluating each business
07.00 Quick Take
activity involved in the creation of a finished product
Conducting a value chain analysis is one of the most or service.

VOL 09 I NO. 07
FINAL
Topic
Cost and
Management Audit
FINAL
Group IV - Paper-17
Cost and
Management Audit
(CMAD)

VOL 09 I NO. 07
COST AND MANAGEMENT AUDIT

FINAL
A. Multiple Choice Questions: C. To eliminate the need for organizations to

document their internal controls.
1. What is the role of documentation in the internal D. To reduce the complexity of internal control
control process ? for smaller entities.
A. Documentation is optional and not required for 5. A number of checks & controls exercised in a
effective internal control. business to ensure its efficient working is known as:
B. Documentation is necessary to provide A. Internal check.
evidence of the effectiveness of internal
control. B. Internal control.
C. Documentation should be minimal to avoid C. C Internal audit.

unnecessary complexity. D. Interim check.
D. Documentation is only required for Ans. : Internal check
organizations that have experienced a material
weakness
B. Management Reporting Issues and Analysis
Ans : B
2. Which of the following is a limitation of internal A large manufacturing entity used to import raw
control ? materials for its operation and the same discharged in
dockside area. Subsequently, based on daily production
A. Controls are subject to human error and
target the same shipped to Plant through loaders and
management override.
dumper trucks. The Unit Management is concerned
B. Internal control can provide absolute assurance about high stock discrepancy and consumption variance
of achieving objectives. against Bill Of Materials ( BOM) with resultant write
C. The framework eliminates the need for ongoing offs.
monitoring of controls. You have recently joined the Company’s Management
D. The framework is not adaptable to the size and Audit Department and management requested you
complexity of the organization. to review the entire movement, storage process of
imported Raw Materials and report the matter with
Ans : A suggestion, if any, to tighten the controls for pre-
3. Which of the following is NOT a component of empting the possibility of such high losses.
internal control according to the 2013 Framework? Report
A. Control Environment 1. Absence of policy guideline to inventorize bulk
B. Risk Assessment materials and adjustment of short/excess stock
in Books
C. Control Activities
Observation:
D. Financial Reporting
• Difference between Bill of Lading and Shore
Ans: D
Receipt quantity exists for all the vessels. Both the
4. What is the primary purpose of the Internal quantities are estimated as per draft survey.
Control?
• Random weighment is carried out after discharge
A. To provide a comprehensive guide for by vessels for all bulk materials. Acknowledgement
organizations to assess the effectiveness of of receipt is based on ‘draft survey’ carried out.
their internal control systems.
• During 2022- 2023, short receipt of nett 245 mt.(`
B. To introduce revolutionary changes to the 2.5 Crores) of MOP ( Fine and Granular ) was
internal control process. noticed .
VOL 09 I NO. 07
• Conservative principle of ‘lower between • Lower between Bill of Lading and Shore receipt
Bill of Lading and Shore receipt quantity ‘ to be acknowledged as receipt unless the goods are
FINAL
acknowledgement as receipt was not followed raised based on full weighment.
in respect of vessel named ‘ Bright Bulker’ for • Maximum lag for raising Goods Receipt after
MOP. Goods receipt raised for 10470 mt.( Bill of completion of discharge by vessel to be defined
Lading quantity) against Shore receipt of 10265 mt. in standard operational procedure ( SOP ) and
Differential (excess ) value for inventorizing works followed for receipting entry.
out to ` 2.1 Crores ( 205 mt.)
• Policy of stock recording to bring accuracy and
• Shortage of MOP (Fine/Granular ) stock worth adjustment of difference need to be specified.
`33.5 Lacs ( 326 mt.) reported on 31.03.2023 after
physical verification and the same was not adjusted
in Books. The financial value is provided for. 2. Possibility of moving materials to
unauthorized destination due to non-
• As on 31.03.2023, difference between book stock (
weighment of trucks/dumpers deployed for
` ‘Nil’ ) and physical stock of Sulphur worth ` 1.81 shipment of Company material at dock-site
Cr. (3727.71 mt.) was adjusted in Books. Sulphur
is kept in the open yard at Dock-site (near berth Observation:
No.5 discharge point and enclosed area opposite to • Dumpers, trucks, pay-loaders are used for shifting
Berth No.5) and at Factory. Possibility of excess bulk materials discharged at various berths to
Sulphur over book stock could be due to absorption highway go-downs and Dock-site storages for
of moisture, water etc., contamination and/or short Sulphur, Rock, PAP and KCL go-down.
shipment to Factory.
• Bulk materials discharged at different berths are
• Goods receipts are raised after completion of shifted to dock-site go-downs without weighment.
discharge from vessels. Verification of 9 MOP,14 Covers in vehicles are also not used to minimize the
Rock,3 Sulphur vessels that discharged material handling loss.
between 01.04.2022 to 31.03.2023, delay in raising • Vehicles are allowed to load material without any
goods receipt of over 7 days (highest 23 days lag) ‘Token/slip’ with permission for loading. As per
from the date of discharge was noticed in 20 the prevalent system, empty and loaded vehicles are
cases. During the period of lag in raising Goods weighed at Dock-site weighbridge for ensuring
Receipt, materials remained unaccounted. shipment/movement of material.
• Vessel-wise receipt and stock record to be • Front side of all go-downs are open. Vehicular
maintained for all bulk material and issue to be movement to and from loading points and go-downs
made out of the same till the stock exhausts. Book directly without routing through weighbridge
stock and stock as per vessel-wise stock card is possible. Hence, possibility of shipment to
need to be reconciled as and when stock comes to destinations other than company locations can’t be
‘nil’ or situation of accurate measurement. Stock ruled out.
adjustment, if any, need to be carried out based on Recommendation:
the difference between book stock and such vessel-
wise stock cards. • Loading permit tokens in five copies to be issued
from weighbridge to loading point supervisor,
Recommendation: vehicle ( 2 copies ), receiving point . While taking
tare weight a copy to be surrendered to weighbridge.
• Goods Receipt need to raised based on actual A copy to be surrendered by vehicle and loading
weighment of materials. supervisor on completion of loading/weighment.
• Vessel-wise parallel stock cards need to be • One copy of loading permit to be handed over to
maintained and on completion of consumption of Company designated unloading point for cross
the entire material pertaining to previous vessel, the verification/acknowledgement of receipt.
discrepancy if any need to be adjusted in Books. • Weighment slips to be tallied with the loading
permit token at the end of each shift.

VOL 09 I NO. 07
3. Non-weighment of material at Plant while • During 2022-2023 shipment cost worth `38 Cr.
FINAL
receipting for consumption were incurred for shifting material from one
location to another in dock-site/highway go-downs.
Observation:
• As per prevalent SAP configuration, only two
• Loaded vehicle of Rock, Sulphur and Murates locations (dock-site and plant) are mapped. All
Of Potash weighed at Dock-site/ highway weigh highway go-downs and others shown under third
bridges before shipment to plant. However, no party location. In the absence of such location-
weighment for the said materials being carried out wise configuration, intra location transfers are not
while receipting at Factory for consumption. directly verifiable.
• The Tankers carrying Phosphoric Acid are sealed at • Multiple locations used for storage at dock-site
dock-site after weighment and seals broken at plant (Sulphur kept near Berth 15 conveyor and open
at the time of unloading at Factory Tank. yard opposite to berth no.15) also not mapped in
• M/s. Count engaged for taking dip measurement SAP separately.
of Phosphoric Acid at Dock-site also engaged for • Bill for material movement for such intra location
unloading at Factory. transfers are paid against certification by dock-site
in-charge based on log book maintained by the
Recommendation: transporter. In the absence of tracking and cognition
• Weigh bridge at Factory need to be geared up to through SAP the possibility for higher than actual
cross verify the weight of material delivered at transfer and billing for the same can’t be ruled out.
Factory with that of dock-site weighment slips. • Stock of UTA go-down as on 31.03.2023 stood at
• Service for M/s. Count to supervise both dip 519 mt. and subsequent transfer to another 3P go-
measurement and unloading need to be restricted down (M/s. Pioneer) for making soda slurry not
to one (either dock-site or factory) for establishing booked as inter location transfer till June 2023.
proper internal control.
Recommendation:
4. Non-tracking of intra location movements
Observation : • All storage locations need to be configured in SAP
and inter locational movements need to be traced
• Cost incurred for creation of go-down space to
accordingly immediately on movements.
accept the incoming vessel, shipment to dock-site
and highway go-downs are inventorised. Other • All handling/shipments bills for secondary
inter location movements are booked as secondary movements need to be passed based on the quantity
shipment cost. booked under SAP relevant movement code.

VOL 09 I NO. 07
FINAL
Topic
Module 1:
Specific Accounting
Standards
Module 2:
Valuation of Shares
FINAL
Group IV - Paper-18
Corporate Financial
Reporting (CFR)

VOL 09 I NO. 07
Ind AS 16: Property, Plant and Equipment (PPE)

FINAL
Let us have an overview of the accounting of Fixed (vi) if the asset is acquired in exchange of
Assets of a company complying with the Companies another asset, purchase price is the fair
Act 2013 and Indian Accounting Standards. Accounting value of the assed acquired or the asset
of Fixed Assets is governed by Ind AS 16: Property, given up (the carrying amount of the asset
Plant and Equipment (PPE). Accounting involves: given up when neither of the fair values is
1. Recognition reliably measured).
2. Measurement, (b) Costs directly attributable to bringing the asset
3. Recording and Presentation, and to its location and in the condition so as to
4. Disclosure. make it available for its intended use—
1. Recognition
(i) employee cost
(a) The tangible items that fulfil both the following
(ii) cost of preparing the site
conditions are recognized as property, plant
and equipment: (iii) freight and delivery cost
(i) are held for use in the production or supply of (iv) installation and assembly cost
goods or services, for rental to others, or for
administrative purposes, and (v) costs during the test run
(ii) are expected to be used during more than one (vi) Professional fees (Architects fees)
period. (c) Dismantling cost—
(b) The cost of an item of property, plant and (i) The estimated dismantling cost at present
equipment shall be recognised as an asset if, value.
and only if:
(ii) Estimated cost of removing the item and
(i) it is probable that future economic benefits
restorating site at present value.
associated with the item will flow to the entity;
and (d) Elements of costs not included:
(ii) the cost of the item can be measured (i) Administration and general overhead.
reliably.
(ii) Advertising and promotion cost of a new
2. Measurement product.
(I) Initial measurement: (iii) Cost of relocating
Property Plant and Equipment are initially (iv) Initial losses when asset is operating at low
measured at cost. The elements of costs are: level
(a) Purchase Price— (v) Incidental cost not directly related to
(i) trade discount and rebate are deducted installation.
(ii) duties and non-refundable taxes are added (II) Subsequent measurement:
(iii) cash discount not subtracted Subsequently, Property Plant and Equipment
are measured at carrying amount which is
(iv) GST not added
(a) Cost less depreciation less impairment loss, or
(v) only cash price to be recognized; if interest
element is included in the price, that should (b) Revalued amount less post revaluation
be subtracted (unless capitalized as per Ind depreciation and post revaluation impairment
AS 23). loss.

VOL 09 I NO. 07
(c) Addition of all capital expenditure to (a) or (b) Methods of depreciation are:
FINAL
(i) expenditure which enhances the revenue (i) The straight lime method: Annual depreciation
generating capacity amount = Depreciable amount/ No. of years of
useful life. It is a constant amount.
(ii) cost of replacements
(ii) The reducing (diminishing) balance method:
(iii) major inspection and overhauling expenses Annual depreciation is calculated at a fixed
3. Recording and Presentation percentage on the carrying amount. The carrying
amount is getting reduced over the years and at
(a) Whenever an item of PPE is recognized any the end of useful life of the asset it becomes equal
of the following accounts is debited initially at to the estimated residual value. Here the annual
cost: depreciation amount is reducing over the years.
(i) Land (iii) The units of production method: Annual
(ii) Land and building depreciation amount = (Annual production units/
Life time production units) × Depreciable amount.
(iii) Machinery
(e) Impairment Loss: It is dealt in Ind AS 36
(iv) Ships
Impairment Loss = Carrying amount less
(v) Aircraft
recoverable amount
(vi) Motor vehicles
Recoverable amount is the higher of the fair value
(vii)Furniture and future of asset less cost to sell and the value in use. Fair
(viii)Office equipment and value is defined in Ind AS 113. It is the exit value in
an orderly transaction between market participants.
(ix) Bearer plants.
Value in use is the entity specific value. It is the
(b) Subsequently, depreciation on the asset and present value of all expected future cash flows from
impairment loss for the asset, if any, is charged the asset.
to Profit and Loss account and in the balance
(f) Presentation:
sheet cost less depreciation less impairment
loss is carried. (i) PPE appears under non-current assets in the
balance sheet.
(c) Subsequently, the asset may be revalued and
(ii) Revaluation profit/Loss is accounted through
(i) Revaluation loss is charged to P&L (to revaluation surplus a/c or P&L a/c.
revaluation surplus to the extent it already
exists) (iii) Depreciation and impairment loss are
accounted through P&L a/c.
(ii) Revaluation profit is credited to revaluation
surplus (to P&L to reverse a revaluation (g) Derecognition: The carrying amount of an
loss charged to P&L before) item of property, plant and equipment shall be
derecognised:
Revalued amount less post revaluation
(i) on disposal; or
depreciation and post revaluation
impairment loss. (ii) when no future economic benefits are expected
from its use or disposal.
(d) Depreciation:
The gain or loss arising from the derecognition of an
Depreciation is the systematic allocation of the item of property, plant and equipment shall be included
depreciable amount of an asset over its useful in profit or loss when the item is derecognised
life. Depreciable amount is the cost of an asset
or other amount substituted for cost, less its The gain or loss arising from the derecognition of
residual value. The revalued amount or fair an item of property, plant and equipment shall be
value on exchange is one such other amount determined as the difference between the net disposal
substituted for cost. proceeds, if any, and the carrying amount of the item.

VOL 09 I NO. 07
4. Disclosure: The financial statements shall make (iv) increases or decreases resulting from
necessary disclosures as required in the Ind AS- 16. revaluations
FINAL
The financial statements shall disclose, for each (v) impairment losses recognised in profit or
class of property, plant and equipment: loss in accordance with Ind AS 36;
a) the measurement bases used for determining (vi) impairment losses reversed in profit or loss
the gross carrying amount; in accordance with Ind AS 36;
b) the depreciation methods used;
The financial statements shall also disclose:
c) the useful lives or the depreciation rates used;
(a) the existence and amounts of restrictions on title,
d) the gross carrying amount and the accumulated
and property, plant and equipment pledged as
depreciation (aggregated with accumulated
security for liabilities;
impairment losses) at the beginning and end of
the period; and (b) the amount of expenditures recognised in the
e) a reconciliation of the carrying amount at the carrying amount of an item of property, plant and
beginning and end of the period showing: equipment in the course of its construction;
(i) additions; (c) the amount of contractual commitments for the

(ii) assets classified as held for sale or included acquisition of property, plant and equipment; and
in a disposal group classified as held for (d) if it is not disclosed separately in the statement
sale in accordance with Ind AS 105 and of profit and loss, the amount of compensation
other disposals; from third parties for items of property, plant and
(iii) acquisitions through business equipment that were impaired, lost or given up that
combinations; is included in profit or loss.
Valuation of Shares based on Discounted Cash Flow (DCF) model

Valuation of Shares based on Discounted Cash Flow (ii) to apply appropriate rate of discounting
(DCF) model
(3) Computation of value per share = Value of Equity/
It indicates the fair market value of a equity share based No. of equity shares
on the value of cash flows that the business is expected
Value of Equity = (3A) Value of the business less
to earn in future. This method involves the estimation
value of Debt Capital or (3B) aggregate of future
of Net Operating Profits Adjusted Tax (NOPAT) for
Free Cash flows to Equity discounted at its present
the projected period, the business’s requirement of
worth.
reinvestment in terms of capital expenditure and
incremental working capital and appropriate cost of (4) Value of business = Aggregate of future Free Cash
capital that reflects the risks of the corresponding return. flows to Firm discounted at its present worth.
(1) Merits of DCF model: (5) Let us see how free cash flows are computed so that
(i) Cash flows are unaffected by any differences future free cash flows can be projected.
of accounting policies, principles, conventions Free Cash Flows are of two types: (A) Free Cash
and methods. Flows to the Firm (FCFF) and (B) Free Cash Flows
(ii) It provides the intrinsic or economic value to the Equity (FCFE)
unaffected by market forces. (5A)FCFF = CF – Capex (Capex means capital
(2) De-merits of DCF model: expenditures made within the business for
It is difficult expansion, replacement etc.)
(i) to estimate future cash flows, and (5B)FCFE {Free Cash Flow to the Equity} = FCFE

VOL 09 I NO. 07
= Net Income – Increase in non-cash WC – Net continuing value is measured at period 0. In that
Capex + Net Debt Issue case
FINAL
Or, FCFE = FCFF – Interest net of tax + Net Debt Value of business = V0 = Continuing Value = FCFF/k
Issued (at constant cash flows assumption)
(5C)Cash Flows (CF) = NOPAT + Depreciation, And V0 = FCFF1/(k – g) [at constant growth rate of
amortisation, impairment etc. (non-cash expenses cash flows assumption)
charged against profits) +(-) Decrease (Increase) in (4D) When there is ‘n’ period of projected free cash
non-cash working capital flows, continuing value is measured at period tn. In that
case
6. Net Operating Profits Adjusted Tax (NOPAT) =
EBIT*(1- t) Value of business = V0 = ∑DFCFF (for the years 1 to n)
+ TVn discounted for ‘n’ years (for the cash flows from
Where, EBIT (Earnings Before Interest and Tax) is tn+1 to infinity)
Net Operating Profits,
(3A) Value of Equity = Value of business – Value of
t = Tax Rate = Tax expenses/Earning Before Tax Debt Capital
(EBT) (3B) Value of Equity (Ve) = Aggregate of future Free
Interest net of tax = Interest*(1 – t) Cash flows to Equity (FCFE) discounted at its present
worth. Here k = cost of equity.
(7) Terminal Value or continuing value: As business is
a going concern, at the end of the limited period for (8) Illustrative examples of Discounted Cash Flow
which future cash flows (CF, FCFF or FCFE) are (DCF) model:
projected, the terminal value has to be computed Problem 1.
by aggregating the discounted cash flows from that Yr 2018 2019 2020 2021 2022 ….
moment till infinity. Thus, Terminal Value = ∑DCF FCFF (`) 500 600 700 800 800 continued at 800
commencing from the end of projection period
(a) Find value of the business on 01-01-2021, given
continued up to infinity.
that WACC = 10% and Cost of Equity = 15%.
(7A)Two assumptions are made for finding terminal (b) Find value of the business on 01-01-2020, given
value for business valuation: that WACC = 10% and Cost of Equity = 15%.
a. There is an infinite series of cash flows (FCFF (c) Find value of the business on 01-01-2019, given
or FCFE) that WACC = 10% and Cost of Equity = 15%.
b. Free cash flows are either (a) constant or (b) Solution:
growing at a constant rate (a) From the date of valuation all future free cash flows
(4) Value of business = Aggregate of future Free Cash are constant at ` 800. Thus, in accordance with
flows to Firm discounted at its present worth = para (4A) the formula of Continuing value is V0 =
∑DFCFF (for the period future free cash flows are FCFF1/k = V1-1-21 = CF2021/WACC = 800/10% = `
projected) + Terminal Value (Continuing Value) 8000
discounted at its present worth (b) From the date of valuation future cash flows for
2020 is projected at Rs 700 and at the end of the
(4A)Terminal Value (Continuing Value) at constant free
projection period on 01-01-2021 we may apply the
cash flows assumption = TVn = FCFF(n+1)/k, where,
formula of Terminal Value which we already found
k is WACC.
in part (a) at ` 8000. Thus, business value is
WACC is Weighted Average Cost of Capital V1-1-20 = 700/(1.1) + (800/.1)/(1.1) [DCF for 2020 +
(4B)Terminal Value (Continuing Value) at constant PV of the Terminal Value] = 7909
growth rate of free cash flows to firm assumption (c) From the date of valuation future cash flows for 2019
= TVn = FCFF(n+1)/(k – g), where, k is WACC and g and 2020 are projected at Rs 600 and Rs 700 and
is the growth rate at the end of the projection period on 01-01-2021
we may apply the formula of Terminal Value which
(4C)If there is no period of projected cash flows, we already found in part (a) at ` 8000. Thus, in

VOL 09 I NO. 07
accordance with para 1.6.2 the formula of business Find:

FINAL
value is (a) NOPAT

V1-1-19 = 600/(1.1) 700/(1.1) + (800/.1)/(1.1) [ DCF
2 2
(b) CF
for 2019 and 2020 + PV of the Terminal Value] =
(c) FCFF
7736 (Approx.)
(d) Value of business based on FCFF at constant FCFF
Workings: (in `)
assumption
2021 (e) Value of business when growth rate is 5% based on
onwards FCFF
01-01-2019 2019 2020
continued (f) Value per share based on FCFF when constant
to infinity growth rate is 5%.
CF 600 700 800
(g) Value per share based on FCFE when constant
Terminal 8000 growth rate is 5%.
Value (TV)
Solution: (amount in ` Lakh)
DCF of 545.45455
2019 (a) NOPAT = EBIT*(1 – t) = 700*(1 - 0.25) = 525
DCF 578.5124 (b) CF = NOPAT + Depreciation - Increase in non-cash
of 2020 working capital = 525 + 120 – 100 = 545
PV of TV 6611.5702 (c) FCFF = CF – Capex = 545 – 180 = 365
V01-01-2019 7735.5372 (d) Value of business based on FCFF
Problem 2. Value of business = V0 = Continuing Value =
FCFF/wacc (at constant cash flows assumption) =
Forthcoming Year 1 ` Lakh 365/0.1 = 3650
Data provided: (e) Value of business = V0 = Continuing Value = FCFF/
EBIT 700 (k – g) = 365/(0.10 – 0.05) = 365/ 0.05 = 7300
Depreciation 120 (f) Value per share based on FCFF when constant
Capex 180 growth rate is …..5%
Interest 60 V0 = 7300;
Increase in non-cash working capital 100 Equity = V0 – Debt Capital = 7300 – 3000 = 4300
Debt Capital 3000 No. of equity shares = 50 lakhs
Further information: Value per share = 4300/50 = ` 86
(f) FCFE = FCFF – Interest net of tax + Net Debt Issued
Tax rate = t 25%
= 365 – 80*(1 – 0.25) + (140 - 90) = 355
WACC 10%
Value of equity = FCFE/ (Ke – g) = 355/(.125 -.05) =
Cost of Equity 12.5% 355/0.075 = 4733.33
No of equity shares 5000000
Value per share = Equity/ n = 4733.33/50 = `91.67.

VOL 09 I NO. 07
FINAL
Topic
Module 1:
Supply under GST -
A Refresh
FINAL
Group IV - Paper-19
Indirect Tax Laws
and Practice (ITLP)

VOL 09 I NO. 07
Supply Under GST

FINAL
The taxable event in GST is supply of goods or services or both. Various taxable events like manufacture, sale, rendering
of service, purchase, entry into a territory of State etc. have been done away with in favour of just one taxable event i.e.,
supply. Thus, it is very important to understand the meaning of supply. The GST law provides an inclusive definition
of “supply”
The taxable event in GST is supply of goods or services or both. Various taxable events like manufacture, sale, rendering
of service, purchase, entry into a territory of state etc. have been done away with in favour of just one event i.e. supply.
The constitution defines “Goods and Services Tax” as any tax on supply of goods, or services or both, except for taxes
on the supply of alcoholic liquor for human consumption.
The meaning and scope of supply under GST can be understood in terms of the following six parameters, which can
be adopted to characterize a transaction as supply:
1. Supply of goods or services. Supply of anything other than goods or services does not attract GST
2. Supply should be made for a consideration
3. Supply should be made in the course or furtherance of business
4. Supply should be made by a taxable person
5. Supply should be a taxable supply
6. Supply should be made within the taxable territory
While these six parameters describe the concept of supply, there are a few exceptions to the requirement of supply
being made for a consideration and in the course or furtherance of business. Any transaction involving supply of
goods or services without consideration is not a supply, barring few exceptions, in which a transaction is deemed to
be a supply even without consideration. Further, import of services for a consideration, whether or not in the course or
furtherance of business is treated as supply.

VOL 09 I NO. 07
Supply of Goods or Services or Both Further, when there is barter of goods of services,
FINAL
the same activity constitutes supply as well as a
Goods as well as services have been defined in the
consideration. When a barber cuts hair in exchange for
GST Law. The securities are excluded from the
a painting, hair cut is a supply of services by the barber.
definition of goods as well as of services. Money is
It is a consideration for the painting received.
also excluded from the definition of goods as well
as services, however, activities relating to the use of However, there are exceptions to the requirement of
money or its conversion by cash or by any other mode, ‘Consideration’ as a pre-condition for a supply to be
from one form, currency or denomination, to another called a supply as per GST. As per schedule to the
form, currency or denomination for which a separate CGST Act, 2017, activities as mentioned below shall be
consideration is charged are included in services. treated as supply even if made without consideration:
Schedule II to the CGST Act, 2017 lists a few activities 1. Permanent transfer or disposal of business assets
which are to be treated as supply of goods or supply where input tax credit has been availed on such
of services. For instance, any transfer of title in goods assets.
would be a supply of goods, whereas any transfer
2. Supply of goods or services or both between related
of right in goods without transfer of title would be
persons or between distinct persons as specified in
considered as services.
section 25, when made in the course or furtherance
Further Schedule III to the CGST Act, 2017 spells out of business. However, gifts not exceeding ₹ 50,000
activities which shall be treated as neither supply of in value in a financial year by an employer to an
goods nor supply of services or outside the scope of employee shall not be treated as supply of goods or
GST. This includes: services or both.
a. Services by an employee to the employer in the 3. Supply of goods— (a) by a principal to his agent
course of or in relation to his employment. where the agent undertakes to supply such goods
on behalf of the principal; or (b) by an agent to his
b. Services of funeral, burial, crematorium or
principal where the agent undertakes to receive
mortuary including transportation of the deceased.
such goods on behalf of the principal.
c. Sale of land and sale of building where the entire
4. Import of services by a taxable person from a related
consideration has been received after the completion
person or from any of his other establishments
certificate is issued or after its first occupation.
outside India, in the course or furtherance of
d. Few Actionable claims business.
Supply in the Course or Furtherance of Business

Supply for Consideration
GST is essentially a tax only on commercial
Consideration has specifically been defined in the transactions. Hence, only those supplies that are in
CGST Act, 2017. It can be in money or in kind. Any the course or furtherance of business qualify as supply
subsidy given by the Central Government or a State under GST. Hence, any supplies made by an individual
Government is not considered as consideration. It in his personal capacity do not come under the ambit of
is immaterial whether the payment is made by the GST unless they fall within the definition of business
recipient or by any other person. as defined in the Act. Sale of goods or service even as a
vocation is a supply under GST.
A deposit given in respect of the supply of goods or
services or both shall not be considered as payment However, there is one exception to this ‘Course or
made for such supply unless the supplier applies such Furtherance of Business’ rule i.e., import of services for
deposit as consideration for the said supply. a consideration.

VOL 09 I NO. 07
Supply by a Taxable Person Taxable Supply

FINAL
A supply to attract GST should be made by a taxable For a supply to attract GST, the supply must be taxable.
person. Hence, a supply between two non-taxable Taxable supply has been broadly defined and means any
persons does not constitute supply under GST. A supply of goods or services or both which, is leviable to
“taxable person” is a person who is registered or liable
tax under the Act. Exemptions may be provided to the
to be registered under section 22 or section 24. Hence,
even an unregistered person who is liable to be registered specified goods or services or to a specified category of
is a taxable person. Similarly, a person not liable to be persons/entities making supply.
registered but has taken voluntary registration and got
Supply in the Taxable Territory
himself registered is also a taxable person.
For a supply to attract GST, the place of supply should
It should be noted that GST in India is State-centric.
Hence, a person making supplies from different States be in India. The place of supply of any goods or services
needs to take separate registration in each State. Further, is determined based on Sections 10, 11, 12 and 13 of the
the person may take more than one registration within IGST Act 2017.
a State if the person has multiple business verticals. A
person who has obtained or is required to obtain more In summary, supply under GST encompasses a wide
than one registration, whether in one State or Union range of transactions, and its correct interpretation is
territory or more than one State or Union territory crucial for businesses to comply with GST regulations
shall, in respect of each such registration, be treated and ensure smooth operations. By understanding
as distinct persons for the purposes of GST. Hence, a the scope and implications of supply, businesses can
supply between these entities constitutes supply under
navigate the GST landscape more efficiently
GST.

VOL 09 I NO. 07
FINAL
Topic
Module 1:
Introduction to
Performance
Management
ELECTIVES
Module 5: Paper-20A
Fundamentals of
Business Valuation Strategic
Performance
Management and
Business
Valuation (SPMBV)

VOL 09 I NO. 07
Module 1 : Performance Measurement, Evaluation

and Improvement Tools
FINAL
P
erformance management, in its most refined to overhaul its performance management system by
form, is a systematic process that engages integrating advanced performance management tools.
employees in improving organisational
The first step in this transformation was the
effectiveness in the accomplishment of the
implementation of a goal-setting framework based on
company’s mission and objectives. As a continuous
the Objectives and Key Results (OKR) methodology.
process, it encompasses the setting of objectives, the
This framework facilitated the alignment of individual
assessment of progress, and the provision of ongoing
objectives with the company’s strategic goals, ensuring
coaching and feedback to ensure that employees meet
that every employee’s efforts contributed to the broader
their objectives and career goals. The quintessence of
organisational mission. The OKR methodology also
performance management is the cultivation of a high-
introduced a structured yet flexible approach to setting
performance culture in which individuals and teams
and tracking goals, making it easier for managers and
assume responsibility for the continuous improvement
employees to stay focused and motivated.
of business processes and their own skills and
contributions. To complement the OKR framework, A2A Corporation
adopted a continuous performance management system.
Performance management comprises a range of
This system replaced the traditional annual performance
activities, including goal setting, continuous progress
review with regular check-ins and real-time feedback.
review, regular feedback, employee development, and
Employees and managers engaged in monthly one-on-
performance appraisals. A meticulously structured
one meetings to discuss progress, address challenges,
performance management system ensures that
and adjust goals as necessary. This shift to continuous
employees’ activities and outputs are harmonised with
feedback fostered a more dynamic and responsive
the organisation’s goals. The primary aim is to enhance
work environment, enabling employees to make timely
both individual and organisational performance through
adjustments and improvements.
alignment, measurement, and improvement.
In addition to the continuous performance management
Effective performance management necessitates clear
system, A2A Corporation integrated a comprehensive
communication regarding expectations, continuous
performance appraisal tool. This tool utilised
feedback on performance, and collaborative goal setting.
360-degree feedback, gathering input from peers,
It should be a holistic process that integrates various
subordinates, and supervisors to provide a well-rounded
functions, such as human resources, training, and
view of an employee’s performance. The 360-degree
development, into a seamless and strategic framework.
feedback process helped identify strengths and areas
This integration ensures that performance management
for development, promoting a culture of transparency
is not merely a series of disjointed activities but a
and accountability.
coherent strategy that drives organisational success.
Recognising the importance of professional
Performance management systems are designed to
development, A2A Corporation also implemented
create a culture in which employees are empowered
a learning management system (LMS) to support
to take responsibility for their own development and
employee growth. The LMS offered a wide range of
performance. This empowerment is achieved through
training modules, from technical skills to leadership
regular and constructive feedback, opportunities for
development, enabling employees to enhance their
professional development, and a transparent appraisal
capabilities and advance their careers. By linking
process that rewards high performance and addresses
the LMS with the performance management system,
areas for improvement.
the company ensured that training opportunities
Case Study: Implementing Performance were aligned with individual performance goals and
Management Tools at A2A Corporation organisational needs.
A2A Corporation, a multinational technology firm, The final piece of the performance management overhaul
faced significant challenges in aligning its rapidly was the introduction of a sophisticated analytics
expanding workforce with its strategic goals. Despite its platform. This platform provided managers with real-
innovative products and market presence, the company time data on employee performance, engagement,
struggled with inconsistent performance across its and development. By leveraging advanced analytics,
global offices. In response, the leadership decided managers could identify trends, predict potential issues,

VOL 09 I NO. 07
and make informed decisions to support their teams The case of A2A Corporation illustrates the profound
effectively. The analytics platform also facilitated impact that advanced performance management tools
FINAL
the measurement of the impact of the performance can have on organisational success. By implementing a
management initiatives, allowing the company to refine holistic performance management system that integrates
its approach continuously. goal setting, continuous feedback, comprehensive
appraisals, professional development, and advanced
The results of these initiatives were transformative.
analytics, the company was able to align its workforce
Within a year of implementing the new performance
with its strategic objectives, enhance employee
management tools, A2A Corporation reported a
engagement, and drive performance improvements
significant improvement in employee engagement and
across the organisation. This case study serves as a
productivity. The alignment of individual goals with the
testament to the power of a well-structured performance
company’s strategic objectives resulted in more focused
management system in fostering a high-performance
and motivated employees. The continuous feedback
culture and achieving business excellence.
and appraisal processes fostered a culture of openness
and accountability, while the LMS and analytics The transformation at A2A Corporation underscores the
platform supported ongoing development and informed importance of strategic and thoughtful implementation
decision-making. of performance management tools. By fostering clear
communication, regular feedback, and continuous
One notable success story was the performance
development, organisations can create an environment
turnaround in A2A Corporation’s European office.
where employees are motivated and equipped to perform
Previously plagued by low morale and high turnover,
at their best. The success seen in A2A Corporation’s
the office experienced a dramatic improvement
European office exemplifies how targeted performance
following the implementation of the new performance
management initiatives can turn around struggling
management tools. The European team embraced the
divisions and boost overall company performance.
OKR framework, setting ambitious yet achievable
goals that aligned with the company’s strategic Ultimately, the integration of these advanced tools
vision. Regular check-ins and 360-degree feedback not only enhances individual performance but also
sessions helped identify and address issues promptly, propels the organisation towards achieving its long-
while targeted training programmes through the LMS term goals. Companies aiming for sustained growth
enhanced employees’ skills and confidence. As a result, and competitiveness must consider investing in robust
the office not only achieved its performance targets but performance management systems that drive continuous
also became one of the top-performing regions within improvement and align individual contributions with
the company the overarching organisational mission.

VOL 09 I NO. 07
Module 1 : Performance Measurement, Evaluation

FINAL
and Improvement Tools
B
usiness valuation is a critical process that better understanding of the company’s financial health
involves determining the economic value of a and market position.
business or company. It is an essential aspect
of the financial and strategic management Step 1: Financial Analysis
of companies, serving as a cornerstone for various The valuation process began with a detailed financial
activities such as mergers and acquisitions, investment analysis. This involved examining ABC Manufacturing’s
analysis, financial reporting, and strategic planning. historical financial statements, including the balance
The process of business valuation requires a thorough sheet, income statement, and cash flow statement. Key
understanding of the company’s operations, industry financial metrics such as revenue growth, profitability
conditions, and the broader economic environment. ratios, liquidity ratios, and debt levels were analyzed.
Valuation is more than just a financial exercise; The company had shown consistent revenue growth
it encompasses understanding the qualitative and over the past five years, with a compound annual
quantitative aspects of a business. The quantitative side growth rate (CAGR) of 8%. Profit margins had also
involves analyzing financial statements, cash flows, and improved, indicating efficient cost management and
market conditions. The qualitative side, on the other strong operational performance.
hand, considers the company’s competitive positioning,
Step 2: Market Approach
management quality, brand value, and other intangible
assets. The integration of these elements provides a The next step was to apply the market approach,
comprehensive view of a company’s worth. which involved comparing ABC Manufacturing to
similar companies in the automotive parts industry.
The necessity of business valuation extends across
This required identifying comparable companies and
different scenarios. For investors, it helps in making
analyzing their valuation multiples, such as the price-
informed investment decisions. For owners, it aids in
to-earnings (P/E) ratio, enterprise value-to-EBITDA
understanding the value of their equity and in planning
(EV/EBITDA) ratio, and price-to-sales (P/S) ratio. By
for future growth or sale. For stakeholders, it ensures
selecting a peer group of publicly traded companies
transparency and fairness, especially in transactions
with similar size and business models, the valuation
involving changes in ownership or control. Business
team was able to estimate a range of valuation multiples.
valuation is not a one-size-fits-all process; it involves
various methods and approaches tailored to the specific For instance, if the average EV/EBITDA multiple
context and purpose of the valuation. for comparable companies was 7x, and ABC
Manufacturing’s EBITDA was $10 million, the implied
Among the common methods used in business valuation
enterprise value would be $70 million. The market
are the market approach, the income approach, and the
approach provided a benchmark, allowing the valuation
asset-based approach. Each of these methods offers
team to assess how the market values similar companies
unique insights and relies on different sets of data
and to apply these insights to ABC Manufacturing.
and assumptions. The market approach compares the
business to similar companies that have been sold Step 3: Income Approach
recently. The income approach focuses on the present The income approach, specifically the discounted cash
value of future cash flows generated by the business. flow (DCF) method, was then employed to value ABC
The asset-based approach evaluates the net asset value Manufacturing. This method involved projecting the
of the company’s assets and liabilities. A thorough company’s future cash flows and discounting them
understanding of these methods is crucial for accurately to their present value using an appropriate discount
assessing the value of a business. rate. The valuation team developed detailed financial
Case Study: Business Valuation of ABC projections for the next five years, considering factors
Manufacturing Inc. such as expected revenue growth, profit margins, capital
expenditures, and working capital requirements.
ABC Manufacturing Inc., a mid-sized manufacturing
company specializing in automotive parts, sought to The discount rate, often referred to as the weighted
undergo a comprehensive business valuation. The average cost of capital (WACC), was calculated to
company’s management decided to initiate this process reflect the company’s cost of equity and debt. For
to explore potential acquisition offers and to gain a ABC Manufacturing, the WACC was determined to

VOL 09 I NO. 07
be 10%, based on its capital structure and industry risk Manufacturing Inc. was approximately $85 million. This
FINAL
profile. Using the DCF method, the present value of comprehensive valuation provided the management and
the projected cash flows was calculated, yielding an potential investors with a well-rounded understanding
estimated intrinsic value for the company. of the company’s worth, supporting informed decision-
making regarding acquisition offers and strategic
Step 4: Asset-Based Approach
planning.
To complement the market and income approaches,
The fundamentals of business valuation are rooted in
the asset-based approach was also considered. This
a thorough and multi-faceted analysis of a company’s
method involved evaluating the net asset value (NAV)
financial health, market position, and future potential.
of ABC Manufacturing’s assets and liabilities. The
The case study of ABC Manufacturing Inc. highlights
company’s balance sheet was scrutinized to identify the
the importance of using a combination of valuation
fair market value of its tangible and intangible assets.
methods to gain a comprehensive understanding of a
Tangible assets included machinery, equipment, and
business’s value. By applying the market, income, and
inventory, while intangible assets encompassed patents,
asset-based approaches, the valuation process captures
trademarks, and goodwill.
different dimensions of value, providing a balanced and
The valuation team adjusted the book values of these informed assessment.
assets to reflect their current market value. For instance,
The financial analysis sets the foundation by evaluating
if the book value of machinery was $5 million but its
historical performance and current financial health.
market value was assessed at $6 million, an adjustment
The market approach benchmarks the company against
was made. Similarly, liabilities were assessed at their fair
its peers, offering insights into market perceptions
market value. The net asset value was then calculated
and relative value. The income approach focuses on
by subtracting the total liabilities from the total adjusted
future cash flow potential, providing an intrinsic value
assets. The asset-based approach provided a floor value
based on discounted future earnings. The asset-based
for ABC Manufacturing, ensuring that the valuation did
approach ensures that the valuation reflects the tangible
not fall below the net asset value of its assets.
and intangible assets’ worth, establishing a floor value.
Step 5: Reconciliation and Conclusion
Effective business valuation requires not only financial
The final step in the valuation process was to reconcile acumen but also strategic insight. Understanding the
the values obtained from the market, income, and asset- qualitative aspects of a business, such as its competitive
based approaches. Each method provided a different positioning, management quality, and growth prospects,
perspective on ABC Manufacturing’s value, and the is crucial in providing a holistic valuation. Moreover,
reconciliation involved weighing these perspectives the reconciliation of different valuation methods
to arrive at a comprehensive valuation. The market ensures that the final valuation is robust and reflective
approach indicated a valuation range based on of the business’s true worth.
comparable companies, the income approach provided
In today’s dynamic business environment, accurate
an intrinsic value based on future cash flows, and the
and comprehensive business valuation is indispensable
asset-based approach offered a baseline value based on
for making informed investment decisions, facilitating
net assets.
mergers and acquisitions, and guiding strategic
The reconciliation process involved considering the planning. Companies, investors, and stakeholders must
strengths and limitations of each method. For example, recognize the value of a thorough valuation process and
the market approach was useful for understanding how leverage it to navigate the complexities of the financial
similar companies were valued in the market, but it landscape. The case of ABC Manufacturing Inc. serves
was subject to market conditions and the availability as a testament to the power of a well-executed business
of comparable data. The income approach was robust valuation in driving strategic success and achieving
in capturing the company’s future cash flow potential, long-term business objectives.
but it required accurate forecasting and an appropriate
Ultimately, the integration of these valuation
discount rate. The asset-based approach provided a
fundamentals enables organisations to make strategic
conservative estimate of the company’s value but might
decisions with confidence, ensuring that they are well-
not fully capture the value of intangible assets and
positioned to capitalise on opportunities and mitigate
future growth potential.
risks. As businesses continue to evolve, the principles
After thorough analysis and reconciliation, the of business valuation will remain a vital tool in the
valuation team concluded that the fair value of ABC pursuit of financial excellence and sustainable growth.

Topic
Module 3:
Credit Risk and
Liquidity Risk
Module 8: ELECTIVES
Managing Risk in
Insurance Business Paper-20B
Risk Management
In Banking and
Insurance (RMBI)

VOL 09 I NO. 07
Asset Liability Management is a Risk Management Tool in Banks
FINAL
B
ecause the business of banking involves  ALM involves Planning, Directing and Controlling
the identifying, measuring, accepting the flow, mix, cost and yield of the consolidated
and managing the risk, the heart of bank funds of bank.
financial management is risk management.  Assesses various asset mixes, funding combinations,
One of the most important risk-management functions price volume relations and their implications on
in banking is Asset Liability Management (ALM). Liquidity, Income and Capital ratio.
Asset Liability Management is concerned with strategic  Planning procedure which accounts for all assets
balance sheet management involving risks caused by and liabilities of a bank by rate, amount and
changes in interest rates, exchange rate, credit risk and maturity.
the liquidity position of a bank. With profit becoming Significance Of Asset Liability Management:
a key-factor, it has now become imperative for a bank
Some of the reasons for growing significance of Asset
to move away from partial asset management (Credit
Liability Management are:
and Non-Performing Asset) and partial liability
management, towards an integrated balance sheet a) Volatility: Deregulation of financial system
management where all the components of balance sheet changed the dynamics of financial markets. The
and its different maturity mix will be looked at from the vagaries of such free economic environment are
profit angle of the bank. reflected in interest rate structures, money supply
and the overall credit position of the market, the
Asset Liability Management (ALM) is the act of exchange rates and price levels.
planning, acquiring, and directing the flow of funds
b) Product Innovation: The second reason
through an organisation. The ultimate objective of this
for growing importance of ALM is the rapid
process is to generate adequate/stable earnings and to
innovations taking place in the financial products
steadily build an organisation’s equity over time, while
of the bank. While there were some innovations
taking reasonable and measured business risks.
that came as passing fads, others have received
In brief ALM: tremendous response. In several cases, the same
 Concerned with strategic balance sheet product has been repeated with certain differences
management. and offered by various banks (normally called as
old wine in new bottle). Whatever may be features
 Match between assets and liabilities in Balance of the products, most of them have an impact on the
Sheet. risk profile of the bank thereby enhancing the need
 Risks like credit, market, liquidity, interest etc. for ALM. For example, Flexi-deposit facility.
stem from mismatch between Assets & Liabilities. c) Regulatory Environment: At the international
level, Bank for International Settlements (BIS)
 ALM is not to avoid risk but to manage risk
provides a framework for banks to tackle the
sustaining profitability.
market risks that may arise due to rate fluctuations
 Periodic monitoring of risk exposures involving and excessive credit risk. Central Banks in various
collecting and analysing information. countries (including Reserve Bank of India) have
 Ability to anticipate, forecast and to act so as to issued frameworks and guidelines for banks to
maximise bank’s business to profit. develop Asset Liability Management policies.
d) Management Recognition: All the above-
 Altering Assets & Liabilities portfolio in a dynamic
mentioned aspects forced bank managements to
way to manage risks.
give a serious thought to effective management
 Involves judgement and decision making. of assets and liabilities. The managements have

VOL 09 I NO. 07
realised that it is just not sufficient to have a very A brief description of these parameters is given
FINAL
good franchise for credit disbursement, nor is it below:

enough to have just a very good retail deposit base.
Net Interest Income (NII):
In addition to these, a bank should be in a position
to relate and link the asset side with the liability The impact of volatility on the short-term profit is
side. And this calls for efficient asset-liability measured by Net Interest Income.
management. Net Interest Income = Interest Income – Interest
There is an increasing awareness in the top management Expenses.
that banking is now a different game altogether since all In order to stabilise short-term profits; banks have to
risks of the game have changed. minimise fluctuations in the NII.
Purpose and Objectives of Asset Liability Net Interest Margin (NIM):
Management:
Net Interest Margin is defined as net interest income
An effective Asset Liability Management technique divided by average total assets.
aims to manage the volume, mix, maturity, rate
Net Interest Margin (NIM) = Net Interest Income/
sensitivity, quality and liquidity of assets and liabilities
Average total Assets.
as a whole so as to attain a predetermined acceptable
risk/reward ratio. Thus, the purpose of Asset Liability Net Interest Margin can be viewed as the ‘Spread’ on
Management is to enhance the asset quality; quantify earning assets.
the risks associated with the assets and liabilities and
The net income of banks comes mostly from the
further manage them. Such a process will involve the
spreads maintained between total interest income
following steps:
and total interest expense. The higher the spread, the
 Reviewing the interest rate structure and comparing more will be the NIM. There exists a direct correlation
the same to the interest/product pricing of both between risks and return. As a result, greater spreads
liquidity assets and liabilities. only imply enhanced risk exposure. But since any
business is conducted with the objective of making
 Examining the loan and investment portfolios in
profits and achieving higher profitability is the target, it
the light of the foreign exchange risk and liquidity
is the management of risks and not risk elimination, that
risk that might arise.
holds the key to success.
 Examining the credit risk and contingency risk
Economic Equity Ratio:
that may originate either due to rate fluctuations or
otherwise and assess the quality of assets. The ratio of the shareholders’ funds to the total assets
measures the shifts in the ratio of owned funds to total
 Reviewing the actual performance against the
funds. This fact assesses the sustenance capacity of the
projections made and analysing the reasons for any
bank.
effect on the spreads.
Objectives of ALM:
The Asset Liability Management techniques so designed
to manage various risks, primarily aim to stabilise the At macro-level, Asset Liability Management leads to
short-term profits, long-term earnings and long-term the formulation of critical business policies, efficient
substance/quality of the bank. The parameters that are allocation of capital and designing of products with
selected for the purpose of stabilising Asset Liability appropriate pricing strategies. And at micro-level the
Management of banks are: objectives of Asset Liability Management are two folds.
It aims at profitability through price matching while
 Net Interest Income (NII).
ensuring liquidity by means of maturity matching.
 Net Interest Margin (NIM).
 Price Matching basically aims to maintain
 Economic Equity Ratio. spreads by ensuring that the deployment of liabilities

VOL 09 I NO. 07
will be at a rate higher than the costs. This exercise Liability side Management will include:
would indicate whether the institution is in a position  Liability Management.
FINAL
to benefit from rising interest rates by having a positive  Reserve Position Management.
gap (assets > liabilities) or whether it is in a position to
 Long-Term Management (Notes and Debentures).
benefit from declining interest rates by a negative gap
 Capital Management.
(liabilities > assets).
Stage 2
 Liquidity is ensured by grouping the assets/
Income-Expense Functions
liabilities based on their maturing profiles. The
Profit = Interest Income – Interest expense – Provision
gap is then assessed to identify future financing
for loan loss + Non-interest revenue – Non-interest
requirements. However, there are often maturity
expense – Taxes
mismatches, which may to a certain extent affect
Banks are required to formulate policies to achieve
the expected results.
following objectives of Asset Liability Management:
ALM as Co-Ordinated Balance Sheet Management:  Spread Management.
The asset liability management function can be viewed  Loan Quality.
in terms of two-stage approach to balance sheet financial  Generating fee income and service charges.
management as follows:
 Control of non-interest operating expenses.
Stage 1  Tax Management.
Specific Balance Sheet Management Functions  Capital Adequacy.
Asset side Management will include: In a nutshell, ALM is the process of aligning a bank’s
assets and liabilities to minimise risks and maximise
 Reserve position management.
profitability. This involves meticulous planning,
 Liquidity management. continuous monitoring, and adaptive strategies.
The goal is to ensure that a bank’s sources of funds
 Investment/Security Management.
(liabilities) are appropriately matched with its uses of
 Loan Management. funds (assets), considering factors like interest rates,
 Fixed-Assets Management. liquidity, credit quality, and regulatory requirements.
Risk Management for Insurance Companies

Risk management in the insurance business is a bit of a market, operational, liquidity risks, etc.” Given this wide
head-scratcher. On one hand, insurance companies are variety of concerns, there is a tremendous opportunity
selling what many people consider to be a risk mitigation. for risk management in insurance companies to make a
On the other, insurance companies themselves face a positive impact.
variety of risks they need to mitigate.
How Enterprise Risk Management could help:
Insurance companies can “self-insure,” or purchase
 Risk management involves identifying, assessing,
coverage from a reinsurer, but this doesn’t ensure all of
and mitigating risk. The beauty of a well-
the company’s risk is accounted for.
implemented risk management program is that
How Can Insurance Companies Benefit from Risk it’s built on a foundation of standardized risk
Management? assessments to help companies prioritize their risk
based on its potential impact. Naturally, this process
According to a study by the National Association of
will surface risks that will impact the business’s
Insurance Commissioners (NAIC), core risks in the
core competencies.
insurance business include “underwriting, credit,
VOL 09 I NO. 07
 For an Insurance Company, service would Mitigation Options:

FINAL
inevitably come to the forefront of a risk assessment.  Conduct intuitive and objective IT risk assessments.
To address this risk, the insurance company could
take steps to integrate incident management and  Align policies and procedures to best-practice
risk management. Most companies have a way to frameworks and regulations.
track incidents like customer complaints, but many  Take a holistic approach to managing IT risk by
do not have a way of categorizing, prioritizing, and engaging departments across the enterprise.
escalating incidents across teams. Risk management
Example #3: Product or Service Issues:
in the risk insurance business helps centralize and
identify trends in customer feedback. When customers feel that their product did not meet
expectations, challenges and risks are inevitable. So
 From there, insurance companies can implement
how do you prevent those risks from materializing into
controls to address those trends, such as hiring
a more serious offense like a lawsuit?
more customer service reps to resolve long wait
times or implementing call screenings to identify Mitigation Options:
less-than-helpful interactions.
 Invest in professional liability insurance.
Examples of Risk Management in the Insurance
 Implement ERM software into your organization to
Sector: prevent negligence claims.
Depending on emerging threats, professionals in the  Conduct vendor due diligence to prevent third party
insurance sector face a wide variety of risks. Some providers from producing products or services that
examples of what those risks might be (and what to do don’t meet your organization’s standards.
about them):
Example #4: Human Capital Costs:
Example #1: Property Damage:
Employees pose a significant amount of risk to any
Insurance companies are often concerned with business. Human needs and how they make decisions
protecting their clients’ physical assets, including their can directly impact a company’s wellbeing.
brick-and-mortar properties. While natural disasters Mitigation Options:
and other events may not destroy property entirely, they
 Invest in workers’ compensation insurance.
always pose a significant threat to a business’ ability to
 Focus on protecting your organization from liability
operate normally.
claims by investing in enterprise risk management
Mitigation Options: software.
 Invest inadequate insurance coverage.  Conduct mid-year reviews (at the minimum) to
determine where to invest more time and where to
 Implement strategic controls for prevention.
scale back resources.
 Develop a foolproof Business Continuity Plan The insurance industry will likely face a changing
that is proactively communicated with your entire regulatory landscape in the years ahead. Multiple
organization. regulatory influences at the state, international levels
continue to present significant challenges for the
Example #2: Data Breaches:
industry; the effect on insurance companies remains
There’s no question that businesses are relying more on uncertain, and how to classify insurance companies as
technology today than ever before, meaning everyone is systemically important financial institutions (SIFIs) still
more susceptible to the risks associated with technology. requires clarification. Risk management for insurance
Cybersecurity threats and ransomware attacks in recent companies enables insurance companies to succeed
years have skyrocketed, and data hacks have impacted among this uncertainty by anticipating and addressing a
businesses of all industries and sizes. wide variety of change before risks materialize.

VOL 09 I NO. 07
a) What Role does Insurance play in a Risk d) What is a Reinsurance Contract? How is it
helpful as a Risk Management? Examine for an
FINAL
Management Plan?
Insurance Company.
A company’s risk management approach is
Reinsurance is a risk transfer mechanism where
typically designed to prioritize the organization’s
under an insurance company passes on the risk
most significant risks, identify the potential impact
on an insurance policy to another entity called
of those risks and develop strategies to mitigate or
Reinsurer for a consideration under a Reinsurance
eliminate them. This creates an insurance policy in
treaty (contract).
the event that they occur.
Under reinsurance one direct insurance company
b) What Risk Management Techniques are used in (also called Ceding company) transfers (cedes)
Insurance? part of the risk to another insurance company
(called Reinsurer). This helps in reducing the
One example of a popular insurance risk
liability of the direct insurer to a large extent. If
management technique is a reserve fund. A reserve
there is no reinsurance, it could result in a dent in
fund is created by using a percentage of all the the financial position of an insurance company,
premiums being collected. The fund will be used to especially when a natural calamity happens. Some
pay out claims on behalf of people who have been of the global reinsurance companies who have
impacted by an event. opened reinsurance offices in India include Swiss
Re., Munich Re., RGA, Hannover Re. etc. The
c) What is the difference between Risk Management
Indian Reinsurer is GIC Re. (General Insurance
and Insurance?
Corporation of India). Reinsurers have their
Risk management is a proactive process of planning teams which comprise of competent technical
and providing for a variety of risks, such as professionals who are experts in Actuarial, Claims,
financial losses, reputational damage or operational Underwriting etc. Reinsurers take a proportion of
disruptions. It can be compared to insuring against the premium paid by the Policyholder and promises
damages or losses that might occur in the future by to pay the proportionate amount of any claims
taking preventive action now. insured under the Policy.
Treaty reinsurance represents a contract between the
In contrast, insurance is an economic agreement
ceding insurance company and the reinsurer who agrees
between two parties where one party agrees to pay to accept the risks of a predetermined class of policies
for damages from specified events below certain over a period of time. When insurance companies
thresholds at predetermined intervals in exchange underwrite a new policy, they agree to take on additional
for periodic payment by the other party. risk in exchange for a premium.

Topic
Entrepreneurship
and Startup
ELECTIVES
Paper-20C
Entrepreneurship
and Start Up (ENTS)

VOL 09 I NO. 07
Paper 20C : Entrepreneurship and Startup

Entrepreneurial Mindset
FINAL
A
n entrepreneurial mindset refers to a your business will be a wild success. It is true that
particular way of thinking and approaching success is wonderful, but failure is where growth
opportunities, challenges, and decision- and change happen. The key to learning from failure
making. It encompasses a set of beliefs, is to actually learn and embrace your mistakes so
thought processes, and skills that enable individuals they make your better, not break you. Do your best
to identify and create opportunities, take calculated to remove the emotion from mistakes you make as
risks, and persist in the face of setbacks. People with an entrepreneur so you can logically explore how to
an entrepreneurial mindset will often foster innovation, better yourself and your company.
resourcefulness, and adaptability, allowing them to
navigate the complex world of business. These are 6. Risk-Taking: Successful entrepreneurs know that
mentioned below: taking risks is an inherent part of business. Assess
risks carefully, weigh the potential rewards, and
1. Positive Attitude: A positive attitude and outlook make informed decisions. Start with small risks and
are a must for successful entrepreneurs. The gradually increase your risk tolerance.
entrepreneurial mind is characterized with the
ability to observe, digest, analyze, and execute on 7. Seek Continuous Learning: Stay updated with the
big ideas differently and uniquely. Whether it is latest industry trends, technologies, and business
new products or new processes. The mindset of strategies. Read books, attend workshops, and
the head of the company sets the tone for the rest enroll in entrepreneurial education programs to
of the company and influences corporate culture. expand your knowledge and skills.
Negative thoughts undermine forward motion and 8. Network and Collaborate: Build a strong
the progress of the company, not to mention the network of like-minded individuals, mentors, and
management’s ability to lead staff and motivate industry experts. Engage in networking events, join
employees. professional organizations, and seek opportunities
2. Creativity: Business owners with the for collaboration. Learning from others’ experiences
characteristics for an entrepreneurial mindset ask and perspectives can significantly contribute to
the “what ifs” that drive inquisitiveness. Think of your entrepreneurial growth.
Steve Jobs and the iPhone. Edison and the light bulb. Deep Tech startups
The Wright Brothers and the airplane. Each of these
ground-breaking inventions would not have come Deep technology (deep tech) or hard tech is a
to fruition were it not for healthy doses of creative classification of organization, or more typically startup
gumption. Even if you are not in a “creative” company, with the expressed objective of providing
industry, creativity is needed for entrepreneurial technology solutions based on substantial scientific or
success. The mind of an entrepreneur is always engineering challenges. Due to their disruptive nature,
looking for novel ideas and innovations. they have the potential to solve India’s most pressing
societal issues. Deep tech fields like AI, advanced
3. Persuasive Communication Ability: While some
materials, blockchain, biotechnology, robotics, drones,
people are more naturally persuasive than others,
photonics and quantum computing are moving more
persuasive communication skills can be learned and
and more quickly from early research to market
practiced. Learning to communicate and present
applications.
your ideas will make you a better entrepreneur—no
matter what your industry is. Characteristics of Deep Tech:
4. Intrinsic Motivation and Drive: One of the (a) Impact: The deep tech innovations are very
top entrepreneurial characteristics is intrinsic radical and disrupt an existing market or develop
motivation, which means you are self-motivated a new one. Innovations based on deep tech often
as opposed to looking to others to push you to do change lives, economies, and societies.
things or hold you accountable. Those who own (b) Time & Scale: The time required for deep
their own businesses are incredibly motivated to technology to develop the technology and reach
succeed. market-ready maturity is way more than shallow
5. Tenacity and an Ability to Learn from Failure: technology development (like mobile apps and
When you are starting a business, you expect that websites).

VOL 09 I NO. 07
(c) Capital: Deep tech often requires a lot of early-stage funding for research and development, prototyping, validating
hypothesis, and technology development.
FINAL
(Source: https://www.drishtiias.com/daily-updates/daily-news-analysis/india-s-ambitious-push-for-deep-tech)

VOL 09 I NO. 07
Case Study: Rise and Fall of Byju’s Byju Raveendran, the CEO of BYJU’s, holds
approximately 25% of the company’s stakes, while
FINAL
Rise
Divya Gokulnath and the management team possess
BYJU took birth in 2011 as Think and Learn Pvt. around 4% stakes.
Ltd by teacher and engineer Byju Raveendran with
(Source: https://startuptalky.com/byjus-learning-app-
just 25 students. A decade later, it became one of India’s
success-story/)
most valued startups, disrupting the edtech industry.
It started by offering content for school students and Fall
ventured into test preparation. Its flagship product,
BYJU’S - The Learning App, was launched in India Fall Of Byju’s: From $22 Billion To
in 2015 and reached more than 100 million registered Less Than $3 Billion In A Year
students around the world, with 6.5 million annual
paying subscribers. BYJU’S faced challenges on multiple fronts. Marketing
expenses, constituting 32% of total costs, raised
More than 10,000 employees working across the globe
eyebrows. Allegations of forceful sales tactics, pushing
including a content and research team of 2500 plus
loans for course purchases, damaged the company’s
people who are highly qualified educators and learning
reputation. BYJU’S acquisitions brought not only users
science wizards who developed the curriculum after
but also losses from the acquired companies. Byju’s
conducting extensive research in BYJU’s.
is currently facing disputes with investors who are
Byju’s business incorporates a subscription-based unhappy with the company’s performance. The Rise
model. This generates recurring revenue as customers and Fall of Byju’s is a complex story and is more a
periodically pay a fee for exclusive access to specific sophisticated case than you think. There have also been
products or services. legal cases related to non-payment of dues with the
BCCI (Indian cricket sponsorship) and Code.org (US
In 2016, BYJU’s became the first Asian company to subsidiary). An FIR was also filed against Byju’s for
receive funding from the Chan-Zuckerberg Initiative, alleged misleading information in their curriculum.
a philanthropic initiative by Facebook founder
Accounting practices also raised concerns. Revenue
Mark Zuckerberg and his wife Priscilla Chan. It was recognition methods inflated their balance sheet,
back in 2018 when BYJU’s turned into a unicorn, creating an illusion of exponential growth. A massive
becoming the first Indian edtech company to join the $1.2 billion Term Loan B, despite low-interest rates,
prestigious unicorn club of Indian startups. became a ticking time bomb. Defaulting on loan
repayments in June 2023 added to BYJU’S woes.
During the funding round in March 2022, BYJU’s
successfully concluded a round worth $800 million. Reports suggested that Byju’s faced a sudden setback in
Notable investors, including Sumeru Ventures, Vitruvian June 2023, as Dutch-listed investor Prosus NV slashed
Partners, and BlackRock, infused $400 million, while the startup’s valuation by more than 75% from its
the founder of BYJU’s, Byju Raveendran, contributed 2022 peak of $22 billion. Administrative and cash flow
the remaining $400 million. However, the closing of woes compounded, leading to a significant workforce
this funding round faced challenges in July 2022 when reduction. Allegations of financial mismanagement and
Sumeru and Oxshott did not transfer their due amount aggressive marketing tactics tarnished the company’s
of $250 million, citing macroeconomic reasons. image, contributing to its downfall.

VOL 09 I NO. 07
Several employees made many allegations against the Multiple Choice Questions
FINAL
company. Some reports also published.

1. Which of the following is not a characteristic of
(a) Long Work Hours: Reports suggest employees entrepreneurial mindset?
are pressured to work beyond 72 hours a week,
(a) Creativity
exceeding legal limits and impacting work-life
balance. (b) Risk taking
(c) Dominating tendency
(b) Discouraged leave and breaks: Some employees
claim they are denied lunch breaks, time off, and (d) Continuous learning
even after-office leave if specific targets still need
Answer (c)
to be met.
2. Which of the following is /are not the causes of
(c) Unresponsive HR: Allegations suggest the HR failure of BYJU’s?
department discourages complaints and may
(a) Poor corporate governance
not effectively address employee concerns.
(b) Neglect compliance practices
(Source: https://www.9toolkit.in/factors-behind-the-
rise -and-fall-of-byjuss-a-case-study/) (c) Financial mismanagement
(d) Technology failure
The company is also facing legal cases related to
non-payment of dues with the BCCI (Indian cricket Answer (d)
sponsorship) and Code.org (US subsidiary).
3. Which of the following is a revenue business model
In April 2023, Indian authorities conducted a raid on of BYJU’s?
the Bengaluru office of the firm, suspecting violations (a) Subscription-based business model
of foreign exchange laws. In addition to denying any
(b) Direct selling business model
wrongdoing, the company assured its employees of full
compliance with the laws. In May, the company faced a (c) Franchise business model
lawsuit from lenders in a US court, alleging defaults on
(d) Digital marketing model
payments and breaches of the loan agreement, including
significant delays in releasing financial statements. Answer (a)
Byju’s denied the accusations of fund diversion through 4. Entrepreneurship is the attitude of mind to
its US-based subsidiary, Alpha. In June, following
the alleged non-payment of an interest installment of (a) Seek opportunities
nearly $40 million, Byju’s counter sued the lenders (b) Take calculated risks
for harassment and initiated a new round of layoffs,
(c) Derive benefits by setting up a venture
resulting in the termination of around a thousand
employees. The company faced further challenges (d) All of the above
as its auditors, Deloitte Haskins and Sells, resigned Answer: (d)
citing the delayed submission of financial statements,
hindering their ability to assess the company’s accounts. 5. What important legal issues is Byju’s facing?
Subsequently, three board members resigned, leaving (a) Non-payment of dues with the BCCI
CEO Byju Raveendran, his wife Divya Gokulnath, and
(b) Acquisition of companies
brother Riju Raveendran as the remaining members on
the board. (c) Unresponsive HR practices
(Source: https://www.bbc.com/news/world-asia-india- (d) Long working hours

66126095) Answer (a)

VOL 09 I NO. 07
Invitation to Contribute Articles for

CMA Student E-Bulletin - Showcasing Your Expertise!
FINAL
Dear CMA Student,
W
e are excited to extend an invitation to you to contribute an article for the
CMA Student E-Bulletin, our esteemed monthly e-journal exclusively crafted
for CMA students. This platform, managed by the Directorate of Studies
at ICMAI, aims to provide a space for your insights, experiences and knowledge-
sharing within the CMA community.
Submission Guidelines:
~ Article Length: Please prepare articles ranging between 1200 to 1500 words.
~ Topic: The articles can cover a wide spectrum of subjects, including but not
limited to advancements in finance, industry insights, case studies, personal
experiences and emerging trends in the field.
~ Originality: We encourage you to share your unique perspectives and
experiences. Ensure that your submission has not been published elsewhere.
Submission Deadline: We kindly request you to submit your article by 20th of the
previous month of publication. This will allow us ample time to review and prepare
the upcoming issues of the CMA Student E-Bulletin.
Submission Process: Please send your article to studies.ebulletin@icmai.in with

the subject line “CMA Student E-Bulletin Submission - [Your Name, Registration
No.]”. Include a brief author bio and a high-resolution photograph to be featured
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Recognition and Rewards: Selected articles will be featured prominently in the

CMA Student E-Bulletin, providing you with a valuable platform to showcase your
expertise. Additionally, authors of published articles will be acknowledged and the
top contributors may be eligible for special recognition and rewards.
We believe that your unique insights and experiences will contribute significantly
to the enrichment of the CMA Student E-Bulletin. Your participation will not only
enhance your visibility within the CMA community but also foster a culture of
knowledge-sharing and collaboration.
Best Regards,
Team DoS
E-mail – studies.ebulletin@icmai.in

THE INSTITUTE OF
COST ACCOUNTANTS OF INDIA
Statutory Body under an Act of Parliament
www.icmai.in
NEW
IT INITIATIVE
TO PROVIDE
CMA
ENHANCED FACILITIES TO
STUDENTS
A login feature has been integrated into the ONLINE REGISTRATION APPLICATION SYSTEM
enabling students to access various services through their accounts.
To utilize this feature, students need to create a login account by verifying their email address through an OTP
sent to their registered email ID. Once the email ID is veriﬁed, it becomes the user ID and students can set their
password during the account creation process.
The introduced system enables students to:
Register online Check the status Request Request changes Convert from
for Foundation, of their online Conversion from in Oral / Postal Provisional to
Intermediate & applications Old Syllabus to Coaching and opt Regular status
Final Courses New Syllabus for Chapter-to-
Chapter
Conversion
Additional services for students will be seamlessly incorporated in the near future.
Behind every successful business decision, there is always a CMA

VOL 09 I NO. 07
FINAL


CMA Prospectus - 2024
VOL 09 I NO. 07
Annexure - V Annexure - V
SKILLS TRAINING PROGRAMME
FINAL
SKILLS TRAINING PROGRAMME
Skills Training Modules Hours/Days Delivery Mode
Skills Training Modules Hours/Days Delivery Mode Level
Tally ERP/Zoho/ERP Next/ERP etc. 40 hrs. Online In
Tally ERP/Zoho/ERP Next/ERP etc. 40 hrs. Online Intermediate
Communication & Soft Skills 20 hrs. Online In
Communication & Soft Skills 20 Sheets,
MS-Office/Google Docs, hrs. Online Intermediate
40 hrs. Hybrid In
MS-Office/Google Docs,Slides/Open
Sheets, Office
40 hrs. Hybrid Intermediate
Slides/Open Office E-Filing 20 hrs. Hybrid In
E-Filing 20 hrs. Hybrid Intermediate
Intermediate Skills Training 120 hrs.
Intermediate Skills Training 120 hrs.
SAP/ORACLE/MS Dynamics/Any ERP 60 hrs. Online/Hybrid
SAP/ORACLE/MS Dynamics/Any ERP 60 hrs. Online/Hybrid Final
Business Analytics/Data Analytics 20 hrs. Online
Business Analytics/Data Analytics 20 hrs. Online Final
Final Skills Training 80 hrs
Final Skills Training 80 hrs
Note:
Note: 1. Students who have applied for both/remaining group(s) shall only receive SAP/ERP lo
1. Students who have appliedregistered mail id; while
for both/remaining students
group(s) who
shall have
only paidSAP/ERP
receive total course
loginfees/2
in their instalment (irre
nd
registered mail id; whileapplication)

students whoare eligible
have to attend
paid total courseother Skills
fees/2 nd Training(irrespective
instalment Programs/IOTP for a particula
of exam
2. Oral students shall be served by the respective Regions/ Chapters/
application) are eligible to attend other Skills Training Programs/IOTP for a particular term CMASCs in Physi
Postal students shall be served by the DOS through Online Mode
2. Oral students shall be served by the respective Regions/ Chapters/ CMASCs in Physical Mode and
Postal students shall be served by the DOS through Online Mode
www.icmai.in www.icmai.in CMA Student E-Bulletin - July 2024

The Institute of Cost 111
Accountant
www.icmai.in The Institute of Cost Accountants of India 113
CMA Prospectus - 2024
Annexure - VI
VOL 09 I NO. 07
Annexure - VI ORIENTED TRAINING PROGRAMME (IOTP)

INDUSTRY
FINAL
INDUSTRY ORIENTED TRAINING PROGRAMME (IOTP)

Module – I: Practical Skills
1. Practical Knowledge on Accounts and Cost &
7 Days How to develop Works Register and
Fixed Asset Register
Module – I: Practical Skills 7 Days How to develop Works Register and
Other Audits • Receivable Management
1. Practical Knowledge on Accounts and Cost & Fixed Asset Register
1A. Process of Finalization of Accounts
Other Audits •
• Payable Management
Receivable Management
1A. Process of• Finalization
Process of of
finalization
Accounts of Accounts w.r.t. AS,• • Management
Payable Debtors Management
IAS & other Regulations • Management
Creditors Management etc.
• Process of finalization of Accounts w.r.t. AS, • Debtors
IAS & other Regulations
1B. Practical Knowledge on Cost & Other Audits • Creditors Management etc.
5. Practical Knowledge on Project Management
1B. Practical • How to maintain
Knowledge on Cost & Cost Records
Other Audits & Project Financing and Digital Financial
• maintain
Preparation 5. Practical Knowledge on Project Management
• How to Cost of Cost Audit Report
Records Services
& Project Financing and Digital Financial
• Compliances of Cost
• Preparation of Cost Audit Report Audit Services 5A. Project Management & Project Financing
• Different types
• Compliances of Cost Audit of Audit Compliances 5A. Project5B. Digital Financial
Management Services
& Project Financing
• Different types of Audit Compliances • Application
5B. Digital Financial Servicesoriented knowledge on AI, BI &
2. Practical Knowledge on Direct and Indirect
• FinTech
Application oriented knowledge on AI, BI &
Taxation
2. Practical Knowledge on Direct and Indirect
FinTech
Taxation • Tax Planning – Head Wise/ Transaction 6. Risk Management
• Tax PlanningWise/ Organization
– Head Wise
Wise/ Transaction 6. Risk Management
6A. Investment & Portfolio Management
Wise/ •Organization Wise Tax Return
Filing of Income 6B. Risk Management in BFSI Sector
6A. Investment & Portfolio Management
• Filing•of Income Tax Return
TDS Management 6B. Risk Management in BFSI Sector
• TDS Management
• GST Compliances 7. MIS Report
• GST Compliances
• GST Assessment & Procedure 7. MIS Report• Manufacturing Sector
• GST Assessment & Procedure • Manufacturing
• PowerSector
Sector
• GST Return
• Inventory Valuation
• GST Return • Power•Sector Steel Sector
• Inventory Valuation • Steel Sector
• Education Sector
3. Practical Knowledge on Formation of a • Education Sector
• Healthcare Sector
3. Practical Knowledge
Company andon Formation
Contract of a
Management • Healthcare Sector
Company3A. andFormation
Contract Management
of a Company and allied works Module – II: Soft Skills 3 Days
3A. Formation • Formation of and
of a Company allied works
a Company Module – II: Soft Skills 3 Days
1. Communication Skill
• Formation of a Company 1. Communication Skill
• Compliance to ROC 2. Interview Skill
• Compliance to ROC
• Preparation of Notice/Agenda/Minutes 2. Interview Skill
of the 3. Presentation Skill
• Preparation of Notice/Agenda/Minutes of the
Meeting 3. Presentation Skill
Meeting 4. Group Discussion
• MOU/Joint Venture 4. Group Discussion
• MOU/Joint Venture 5. Panel Discussion with Industry Professionals
5. Panel Discussion with Industry Professionals
3B. Contract Management
3B. Contract Management
• Preparation of Tender Documents
• Preparation of Tender Documents
• Tendering Process
• Tendering Process
• Preparation of Work Order
• Preparation of Work Order
4. Practical Approach on Working Capital

4. Practical Approach on Working Capital
ManagementManagement
• Cash •Management
Cash Management
• Inventory
• Inventory ManagementManagement
How to How to
design Bindesign
Cards,Bin Cards,
Stores Stores Ledger
Ledger
and Bill ofand Bill of Materials
Materials
112 114 114Institute

The
CMA Student TheofInstitute
E-BulletinCost of Cost Accountants
- JulyAccountants
2024 of India of India www.icmai.in
www.icmai.in
www.icmai.in
VOL 09 I NO. 07
FINAL
` p.m. ` p.m. ` p.m. ` p.m. ` p.m. ` p.m. ` p.m. ` p.m. ` p.m.


VOL 09 I NO. 07
FINAL


VOL 09 I NO. 07
ICMAI
FINAL
THE INSTITUTE OF
COST ACCOUNTANTS OF INDIA
(Statutory Body under an Act of Parliament)
CMA
www.icmai.in
Campus
Placement
Initiatives
2024
Campus Placement Statistics
ffered Highe
nt O st C
me TC
a ce P.A
Pl .
324 `19.7
Av
e
ra
eCg
Plac
Dec
TC P
`10.0
em
2023 2023- 1847
.A.
e
2024
ntO
pp
ort
ni u
tie
s
(Data as on 10-07-2024)
Career Counselling & Placement Committee

placement@icmai.in / cpt@icmai.in / Headquarters:
career-counselling@icmai.in CMA Bhawan, 12, Sudder Street, Kolkata - 700016
+91 94323 82747 / 98308 86751 / Delhi Office:
Å 98748 57118 CMA Bhawan, 3, Institutional Area, Lodhi Road, New Delhi - 110003

VOL 09 I NO. 07
Forthcoming Campus Placement Drive

FINAL
for June 2024 Batch
T
he Institute has a vibrant Placement Electronics Limited, Prism Johnson Limited, CEAT
Cell to facilitate the placements for all Ltd, Genpact, Schneider Electric, Narayana Health,
deserving candidates. It works round JMS Mining Pvt Ltd, AFCONS Infrastructure Ltd,
the clock to facilitate the placement Capgemini and many other prominent and reputed
opportunities for both qualified and semi-qualified organisations participated in the Campus Placement
CMAs. The Placement Directorate works closely with programmes of the Institute.
Corporate Sector to groom students as per industry
The Placement Directorate conducts 12-days Pre-
requirements. Industry is always on the lookout for
Placement Orientation Program to transform the
students with sound academic background, who are
budding Cost Accountants more industry friendly,
vibrant, knowledgeable, energetic, attentive, fast
skilled and marketable. The various components of
learners, adaptive, good communicator and ready
to accept challenges. The Institute is committed to the Pre-Placement Orientation Training Programs
offer best talent for corporates. include sessions on presentation skills, group
discussion skills, debate skills, interviews skills &
The Institute of Cost Accountants of India (ICMAI)
mock interviews, contemporary issues, professional
organises Campus Placement Programme aiming
tit-bits, etc. Company-specific orientation program
at fostering strong connections between ICMAI
is also conducted for the target students prior to all
and industry partners, providing maximum
the placement drives organized by the Institute. The
employment opportunities for newly qualified
forthcoming 12 days Pre-Placement Orientation
CMAs. This programme offers a unique opportunity
Programme for the newly qualified CMAs of June
for corporate houses to review student profiles,
2024 batch will be organized at 12 locations viz.
conduct interviews, and select candidates who best
Kolkata, Mumbai, Delhi, Chennai, Ahmedabad,
meet their recruitment needs.
Jaipur, Pune, Hyderabad, Bangalore, Bhubaneswar,
The Campus Placement Programme saw participation Vijayawada, Surat – South Gujarat Chapter in the
from a diverse range of sectors, including PSUs,
month of September 2024 (tentatively).
MNCs, and other corporations from Banking
& Insurance, Retail, Manufacturing, FMCG, The Campus Placement Programme for the newly
Information Technology, Chemicals, Education, qualified CMAs of June 2024 batch will be held from
Hotels, Automobiles, Electronics, Power sectors. the month of September – October 2024 (tentatively)
at Kolkata, Delhi, Mumbai and Chennai and other
GAIL (India) Limited, EdCIL Limited, ONGC
places as desired by the recruiting organisations.
Videsh Limited, NBCC (India) Ltd, ITC Limited,
Nestle Limited, Accenture Solutions LLP, Vedanta We wish to express our advance congratulations
Limited, Reliance Limited – JIO, TVS Motor to the budding CMAs of June 2024 batch and also
Company, Ford Motor Pvt Ltd., Tata Motors, wish to inform further to contact with the Career
Tata Projects Ltd, Kalpataru Power Transmission Counselling and Placement Committee for joining
Limited, RSM Astute Consulting Pvt. Ltd., TVS the forthcoming Campus Placement drives…!!!

VOL 09 I NO. 07
ICMAI
FINAL
The Institute of
Cost Accountants of India Knowledge Partner
Statutory Body under an Act of Parliament
DIRECTORATE OF STUDIES
in association with
CAREER COUNSELLING & PLACEMENT COMMITTEE AND CAT DIRECTORATE
CMA
NYCO 2024
NATIONAL
YOUTH
COMMERCE
OLYMPIAD
Unveil Your Innate Management Accounting Skills
NYCO
CATEGORY REGISTRATION STARTS 1st Rank - `1,00,000

th
16 August 2024 2nd Rank - `50,000
A Class VIII - X
3rd Rank - `20,000
Class XI - XII / NYCO 2024 ONLINE EXAM (Under each category)
B Pursuing CMA Foundation / CAT th
Sunday, 17 November 2024 Consolation Prize of `500 for
Pursuing Graduation / Next 100 Participants from each category
C CMA Inter / CMA Final REGISTRATION FEE: `50 Digital Certicate of Participation for All
Registration Closes: 15th October, 2024
ICMAI invites students from all over India to register for the CMA National Youth Commerce Olympiad (NYCO 2024). The aim of organizing NYCO 2024
is to unearth hidden Management Accounting talents and ignite a deep appreciation for the subject among young minds.
CMA Bibhuti Bhusan Nayak CMA TCA Srinivasa Prasad CMA Vinayranjan P. CMA Rajendra Singh Bhati
President, ICMAI Vice President, ICMAI Chairman - TEF and CC & Chairman - Committee for https://eicmai.in/nyco/
Placement Committee, ICMAI Accounting Technicians & PR, ICMAI
www.icmai.in Behind every successful business decision, there is always a CMA nyco2024@icmai.in

Headquarters
CMA Bhawan, 12, Sudder Street, Kolkata - 700016
Ph: 033-40364777/40364722/40364726
Delhi Office
CMA Bhawan, 3, Institutional Area, Lodhi Road, New Delhi - 110003
Ph: 011-24622156/24622157/24622158
studies@icmai.in

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CMA E-Bulletin

VOL 09 I NO. 07 I JULY 2024

An Initiative of Directorate of Studies

Copyright © 2024 by The Institute of Cost Accountants of India

VOL 09 I NO. 07 I JULY 2024

An Initiative of Directorate of Studies

VOL 09 I NO. 07 I JULY 2024

VOL 09 I NO. 07 I JULY 2024

Patron An Initiative of Directorate of Studies

CMA T.C.A. Srinivasa Prasad, Vice President, ICMAI

Editorial Board Members

19 - 60 - CMA Intermediate Course

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ii CMA Student E-Bulletin - July 2024 www.icmai.in

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SECTION – B: BUSINESS COMMUNICATION

2. _____________ stage at which members learn

6. Information overload is when Listener gets

State True or False:

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1. What are the four frameworks of Accounting ? c. Assets - Liabilities = Equity

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d. Prudence Principle a. Conservatism Principle

c. Land a. Accounts Receivable

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10. Find out the compound value of `28,950, interest

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14. Annual income of a person is

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25. The distribution of profits of a company follows (b) 6

27. The number of accidents for seven days in a locality

(a) 56 (d) Inclusive series data

4 a We have (ab+bc)2 = (a2 + b2)(b2 + c2). Hence the result.

(3*4 + 5*5) : (7*4-2*5)

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Total strength of the class : Male students + Female students

Total strength: (48+23) = 71 students.

Ratio of female students to Total strength : 23 : 71

A = 28950*2.7183 = 78,694.79 or 78,695 (Approx.)

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r = 0.08299 or 8.299% = 8.30% (Approx.)

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C. Robbins B. Relatively inelastic

D. Samuelson C. Unitary elastic

B. How to produce B. Relatively inelastic

C. For whom to produce C. Unitary elastic

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A. Cannot be zero A. Planning

B. Can be zero B. Control

C. Both A and B C. Organizing

(34 + 55) : (74-25)

So EOQ= SQRT(22000150/2.4)*(50/50-8)= 545.5447256