 Namaste to all of you. Shall we start the interaction? Are you ready? Whatever you want to ask, you can respond through chat and I will try to answer it directly through the video. Which of the centers students are ready now? Yes, I am getting some response. One from Pillai college, New Panvel, another one from Madurai. Fine. During the interaction, our main purpose is to respond to your queries. So, you have already been shared with the questions, you have already been shared with the videos. I hope you have gone through the annual report of some of the companies and you have also seen some of the accounting books or some material on accounting. So, based on that, whatever the questions you have in mind, please raise the questions. We will try to answer most of the questions. One more announcement, you are, no video, one more announcement. See, your quiz is still on and quiz questions you are supposed to answer on your own. So, I do not expect you to ask them here. So, do not ask quiz questions, but other than that, you can ask me any question that will also help you to solve your quizzes. Now, how to start it? Yes, you can start. Good afternoon, sir. Yes, good afternoon. Actually, after completion of the video, we have solved that graded quiz. In that one question was there regarding the, regarding the liabilities in the balance sheet. So, in that some options are available, but one option was rent. So, we thought rent was also included in the liabilities, but that was wrong option. So, can you please explain me that rent is in, rent we can include in liability or not? As I have told you, you should not ask questions from the quiz because good that you have solved it, but there might be other students who are yet to solve it and the quiz is open till Tuesday. So, right now I will not explain any question directly which is there in the quiz. If you have any other questions, you can, you can ask. Good afternoon, sir. Yes. Myself Akshada Palsulay. Okay. You have to go back, I think. I am not able to see your face or sit on chair. Good afternoon, sir. Yeah. My question was what are non-current investment? Can you give some examples? Because you, in that topic you have only mentioned what are non-current investment. You have not gone through that topic. So, I wanted to know. Okay. Very good question. This is not a topic at such. So, I will try to explain you the asset side of the balance sheet. I think you all know that assets are resources for the business and we come, we will look at the money cycle. From the money cycle, the assets which are derived are known as current assets. I hope you know the examples like cash or like debtors. Then there are the assets which support the money cycle in the form of infrastructure. So, example is land building patents. Apart from them, when the assets company invests outside the business or outside the money cycle, that is called as an investment. As the name suggests, non-current refers to long-term investment. That is the investment which has a time horizon exceeding one year. So, this is the explanation of non-current investment. I think now some of you at least can give me the examples. Can somebody give any example through the chat? Example of a non-current investment. Anyone is able to give through chat? Okay. I will try to give. I hope you hear the news about stock markets going up and down. Have you heard the news that post budget, the stock markets are crashing? So, if you are an investor, you buy the shares of another company. That is an example of a non-current investment. So, shares is one example. Any other example can you think of? Very few people actually invest in shares, but almost all the people invest in bank deposits. So, bank deposits is another example of a non-current investment. If you have kept the money with any company as a deposit, then even the company deposit is an example of a non-current investment. Nowadays, mutual fund products are quite popular. So, people are investing in stock market through mutual funds. So, investment in mutual fund is also an example of a non-current investment. Is it clear? Similarly, some people are there to whom we save some money and afterwards like similarly like the banks also, the deposit is there. Similarly, some private agencies are there. So, those are also included in the non-current investment. As the name suggests, there are two conditions. To call it non-current, it should be an investment for more than one year. Then yes, second, it should not be related to your business. So, if any company invests in any other entity for more than one year, even if it is a private investment made in another private company, it will qualify as non-current investment. There is an example. There is a question from Medicap Institute Indore. They have stated that brand value is an example of non-current investment. Now, is it a correct example? Is brand value non-current investment? Would any center like to respond? Actually, brand value is not an example of non-current investment. So, where will brand value fall? Would someone chat under what category you would put brand value? I will try to answer. Brand value is under the heading fixed assets. Fixed assets are again of two types. So, where will you place the brand value? Tangible and intangible. Yeah, there are two types of fixed assets, tangible and intangible. So, brand value is which type of? No, actually brand value is an example of intangible fixed assets because you cannot touch it. It does not have a physical existence, but it has a value. So, brand value is an intangible fixed assets. Any other questions? Any other center also if online can answer the question? As we are from engineering, we do not know much about accounting, from science to India. And so, for engineering, what we need to know about accounting and how to proceed means in accounting there is much to learn, but particularly for engineering, what we need to know and how to proceed. Okay, a very good question and a very fundamental question. First of all, one can also ask do you need to know accounting because you are technical people, most of you are engineers. So your core job is related to technology, but what happens is when you work for any organization, let us say you work in a company. The company will be majoring your performance in terms of accounting numbers. Same way, the company's performance in turn is measured by their investors in accounting numbers. So it becomes necessary for you to understand some basic accounting. If you do not want to work for others and if you want to be entrepreneurs, actually it is a very good thing. You can start your own business, but there again for requirement of loan, you may have to approach the bankers and then bankers will ask for your balance sheet, bankers will ask for your financial data. When you approach the customer, customer may ask not only technical question, customers will also ask your financial standing, then only they will give you order. So as engineers, even if you do a corporate job, even if you go for a own enterprise, entrepreneurship or even if you join, let us say government or some non-profit organizations, there will be necessity to know some basic accounting. That is why this has been introduced in this class to corporate course and otherwise also, even if you do MBA or even if you do any other management course, this will be included as at least a small part of that particular program. Now the question is how to, second part of the question is how to proceed. Accounting is not your core area. So I am not expecting that you do regular account maintaining or regular recording of transactions that can be done by accountant. But whatever the statements which are brought in by the accounting system, it is necessary even for an engineer or for a manager to understand those statements. As I had advised you in the beginning of the course, one very good way to learn is download annual report of some company, then look at their financial statements and try to understand each and every concept. So, you should understand what does that particular item convey or Google Google to download annual report. You look at the concepts which you do not understand and try to search them. I think this is a very, very easy self-study methodology. Apart from that, there are lot of videos which are available. Even my own course of 40 hours is already there on YouTube. So, I will request you to go through the suitable courses. There are also number of books which are available. So, if you want to study a particular topic in more depth, then maybe you can go to the book. There will be also many solved questions with solutions. So, you can have a look at those solved sums. Again, you need not go too much into how the numbers are arrived, but try to ensure that you understand those numbers carefully. Fine. Thank you. So, and for your video, what we have to search on YouTube? The video is titled as management accounting. So, if you search management accounting and Varadraaj Bapad, you will get the course on financial accounting as well as cost accounting. I will add one more line. Right now, what we have discussed is some part of financial accounting, but as engineers, you are very much interested in improving the efficiency of the company. For that, you need to know the cost data. So, it will be useful if you try to understand and study the cost accounting as well. Thank you. Shree Dutta Institute. From where? Shree Dutta Institute, Anubhavish. Yes, Shree Dutta Institute students, welcome. Please ask your question. What is the difference between ADR in American depositor receipt, IDR, Indian depositor receipt? Sorry, ADR, IDR and? Please speak into the mic carefully. And ADR. Sorry. Indian depositor receipt and American depositor receipt. See, hold the mic properly in front of your mouth and then speak. What is the difference between ADR, American depositor receipt and IDR, Indian depositor receipt? Please explain with an example. Very, very advanced question, I would say. Perhaps the students from Shree Dutta Institute already know all of accounting because this is a question mainly from finance domain, much beyond the limit of our course, but I would try to explain in as much short, in less words as possible. I hope most of you know about the shares. So, suppose I am owning the shares of, let us say reliance industries, then I become the owner of reliance. Now, suppose the people from USA want to invest in shares of reliance industries, they cannot do it because these shares are listed in Indian stock exchange. So, what reliance industry does is, they come out with an issue in the American market that is known as ADR or American depository receipt. So, certain number of shares of reliance, let us say 10 lakh shares are bunched together and issued to some depository agency in USA. And then that agency issues a security known as ADR. Now, the investors from USA can invest in the ADR or American depository receipt which in turn give them ownership in the shares of an Indian company that is reliance industries limited. For those who are completely new, I know this is bit advanced topic, but since it was asked, I am just trying to explain. So, an Indian company issuing shares in the American market is known as ADR. Same way though it was not asked, if an Indian company issues shares in the global markets, then it is known as GDR or global depository receipt. Now, other way round, suppose American company or any company listed out of India wants to issue some securities in India, they come out with a mechanism known as IDR or Indian depository receipts. So, they will issue certain number of shares to an Indian market participant, then that market participant will issue ideas where we like an Indian investors can invest. Thank you. Yes, sir. We have one more question. Yes. Yes. Good afternoon. Can you please come again properly and slowly? Please hold the mic carefully and ask. I think the question is like this. I am repeating for the benefit of everyone the difference between equity shares and preference shares and which one is better. So, I would explain first of all what is meant by share capital. Now, suppose I start a company, I become the proprietor of that company. Let us say I invest my own 10 lakh rupees and start a company that becomes a capital of the company wherein I am the only person owning all the capital. I will 10 lakh say to business. So, I may invite some of my friends to be the partners in the business. Let us say there are three more people plus me. So, there are four owners, then all the four owners would have put in some money that is called as a partners capital. So, that is called as a proprietary concern. Because 3, 4, 5, 10 people come together and start a firm. That is known as a company. So, in company what happens 30, 40, 50, 100, 1001 lakh. Now to acknowledge the ownership of those owners. The owners are called as shareholders and they are issued what is known as a share certificate. So, suppose I am shareholder of the company, I have invested 10 lakhs. Some other person has invested 5 lakhs, somebody else has invested 1 lakh, somebody else has again invested 2 lakhs. All this together is called as a share capital. In that share capital, I have shares of 1 lakh. This is a typical equity share case. Now, because I have put in the money, I am willing to take risk, I have become the owner. If company earns any profit, I get the share. Unfortunately, company got lost, then I have to suffer that loss. This is a normal case known as equity share capital. I mean, which company is Uskal listing Kartiye. That means those shares are listed in stock market and then the trading is done in the stock market. So, this was about equity shares. The owners of equity share capital are the owners of the company. They get the share of profit as well as loss. Now, there is one variety of shares known as preference shares. Equity shareholders, that can come to them as a dividend. 10 percent will come as a dividend. 25 percent, 50 percent, 100 percent, but in case of preference shares, if you have a security known as 10 percent preference shares, then every year you will only get maximum of 10 percent as a dividend. Company, if 10 percent say, that profit will go to equity shareholders because they are the real owners of the company. Preference shareholders are known as quasi owners. So, their profits are restricted to 10 percent. 10 percent, I am just giving an example. If there is any loss, then they will not get any profit, but at any time equity shareholders ko paisa denese pehle, preference shareholders ko pehle 10 percent jo unko promise tha company se, that they will get. So, preference shareholder is a quasi ownership security, something in between shares and the fixed deposits. This I just explain you in terms of theory. Equity shareholders ko mai apko paach hachar example desaktao because there are more than 5,000 shares listed on Indian markets. Usme jaisi main reliance ka example diyata, usme elanti osaktaaya, crompton grooves osaktaaya, there are number of companies whose equity shareholders shares are listed. Preference shares are not at all popular. So, you do not get any very good example of preference shares. Not even 1 percent of the companies come out with preference shares because it is not a popular security. Fine. Any other question? Please switch on your mic. So, if there are any other questions from any others institute, please press the hand raise button. Press the hand raise button at the user, at the bottom of the user list. If you have any questions? No, because last time I did one core. Are there no other questions? Shall I cover some other topics? Yes, Simwagat college, Solapur, Ponderpur. Yeah, please. Hello, good afternoon sir. Yes. What is fictitious asset? Very good question. We have seen the types of asset like fixed asset, current asset, but I have never really discussed what is a fictitious asset. As the name suggests, fictitious means something which does not exist, something which is not true. So, fictitious asset which is an asset, which really is not an asset. It does not have any value at all. Now, the question is why even you have a category called as fictitious asset? The reason is there are some items which are written on the asset side of the balance sheet, but they do not have any value as an asset. That is why they are called as fictitious assets. Can anybody think of any example of a fictitious asset? Is somebody able to think of such an item? You know that the balance sheet needs to tally. Asset should be equal to liability. As such a scenario is possible because liabilities are more and assets are shrinking. So, if you have more liabilities and less assets, you will write some item on the asset side. But it does not have any real value. That is a case of fictitious asset. Now, when will it happen that liabilities are rising but assets are shrinking? This happens particularly when the company is in loss. At that time we had discussed that as the company business operates profitably, the assets go on rising. Liabilities do not rise. That is the reserves or the accumulated profits. This is a scenario of profit. Uska exactly opposite hothaya in a scenario of a loss. So, in loss scenario, what happens is companies liabilities go on increasing because unka business nahi chal raya unka payment paimpe nahi kar rahe. So, liabilities are high but the assets are yes. Now, this difference is the accumulated loss of the company sometimes written as a profit and loss account debit balance in the balance sheet asset side. Actually uski koi value nahi hai. It is not an asset in true sense. That is why it is called as a fictitious asset. Thank you. Thank you. Yeah. Any other question? Yes. Yes. AKS University, Satna. Please ask your question. Double click to do. Double click. Good afternoon sir. Yes. Satna. Good afternoon sir. Yes. My name is Abhishek Soni. Yes. And my question is what comes out under non-current assets apart of a current asset? Hello. Yeah. Please repeat non-current asset. Yes sir. My name is Abhishek Soni. Yes. Yeah. I am able to hear. Please repeat. What comes under other non-current assets apart of a current asset? Okay. I will try to answer you. First of all, non-current asset is not a part of current asset. Current assets are those assets which are less than one year. So, assets ke broadly do type hoge. Jobi less than one year hai, they are all current. Jobi more than one year hai, usme den 2-3 sub-categories hai. Ek category hai jo hamne shuru mehi explain keethi that is known as fixed assets. The next category is non-current investments. And uske bhi baad, the third is other non-current assets. Now, this is a very rare scenario because most of the assets would be considered and categorized under the head fixed assets. If you have invested outside the business, then it is investment. Now, if a particular non-current asset does not fit either as a fixed asset or as an investment, then only it will be considered under the head other non-current assets. Non-current aisle ye jaruri ek hai more than one year hai. Now, can you think of some asset which is neither fixed asset, which is neither an investment, then that will go as an other non-current asset. Do you think of any such example? Okay, I will try to explain. Anybody is answering? Koi baat nahi, I will try to answer. See, it is more than one year. So, suppose you have invested in advertising expenses, which gives you a benefit for five years, then that part which gives you immediate benefit will be put as an expenditure. Remaining part, which is going to give you benefit more than one year, that is after one year. Lekin wo fix asset bhi nahi hai, wo investment bhi nahi hai. That is why it will be categorized as other non-current asset. One more example, normally for general insurance, the insurance premium is paid for one year. But suppose you pay insurance premium for three years, usmekha one-third jo part hoga, that is for this year, that will go to profit and loss account. But remaining two years part, it is neither a fixed asset nor an investment, but it gives me benefit after one year. So, we will categorize that part of insurance premium as other non-current asset. I hope it is clear. Yeah, any other question? Okay, there is one question on chat from Pillai Institute, Panvel. It says that can we call future and option writers as part owners of the company? Once again, a very advanced question for our type of course, but I am happy that many of you are reading some finance literature. See, this is not a part of accounting. First of all, I have to explain what is future and option. I hope all of you have understood what is a share. Suppose I am a company, I issue the ownership of me in the form of shares to various owners, then they become shareholders. Now, what happens is, there are some option writers who take my shares, they hold the shares and based on their shares, they come out with another security known as option or known as future. So, these are known as derivatives. Now, there is a separate market for derivative securities. Derivative, it is called underlying security. So, based on one security or based on one scenario, some other securities are created by option writers. I know, for the first time, they are getting complicated, but because it is asked in the chat, I am just trying to explain. So, now suppose the current market price of my shares are 200 rupees. Nobody knows that after one month, what will be the market price. Now, an option writer writes an option that suppose the value of share exceeds 210, then this particular security entitles you to 50 shares. Now, suppose the value of shares falls, that is it is less than 210, but suppose my value of my shares increase to 250, and this particular option entitles the holder of the option to get the security at 210 or aaj ka bhao aaj ka yane, ek maine ke baal agar wo bhao hogaya 250, then that particular option will have a value of 40 rupees, because 250 rupees ka shares, because of that option, you are able to get at 210. I hope all are getting it. So, option is a contract, whether it has a value or no, depends on the market scenario of some future date. So, the option holders cannot be considered as owners as of today. They would become owners only if they exercised the option. Thank you. Yeah, Amruta school, you can ask the question. Good afternoon sir. Yes. We are the students of Amruta University. Yeah. My question is that. Please sit down. Okay, thank you. What can you say about financial leverage? Okay, I am happy because I have a high respect for Amruta school or Amruta university. So, thanks for asking the question. Once again a very high level question because we have not discussed this in the course. So, I think I will need to explain what is a financial leverage. We have discussed the balance sheet where I think you all know that on the liability side, on the top most, we have an item known as owner's fund. This is the money which owners have put in. Below that there is an item for non-current liabilities. These are the various loans which that particular company has taken. So, company ko do tarase capital milta hai. One is the amount which is owned by the owners or the shareholders of the company. The second is the amount which is given by the bankers or the lenders in the form of loans. So, there are two principal types of long-term capital. One is known as owned capital. The other is known as borrowed capital. Now, it is a choice of the company whether they want borrowed capital or no. There are companies we wholly operate only on owner's capital. Let us say a company raises 100 rupees. They can raise all 100 from shares and 0 from debt. Then it is called as a zero-debt company. This is company A. There is another company which is company B. Let us say they have taken 70 equity and 30 debt. There is company C which has taken 50 equity and 50 debt. Now, in these three scenarios company A, 100, 0, company B, 70, 30, company C, 50, 50. Their business is the same, their capital amount is the same. But how they have sourced it is different. Now, what I am trying to explain to you is known as capital structure of the company. These three companies A, B and C have three types of capital structures. There is a ratio known as debt-equity ratio. They have 100 equity, 0 debt. They have a debt-equity ratio of 0. The second company which has a debt-equity ratio of 30 upon 70 that is 3 by 7. Third company 50, 50. So, debt-equity ratio 50 upon 50 that is 1. Now, the third company is called as a levered company. So, 50 plus 50 they have invested 100. Now, leverage means advantage. Using your own funds, you are taking the money from banks or other lenders and trying to expand the size of the business. Hence, it is called as a leverage. Now, leverage ka e fai dhauta that company can expand the size. They also get more return because the interest on loan is fixed. Let us say interest on loan is 10 percent. Company ko fai dhauta 18 percent. Then the 8 percent extra goes to the owners. Suppose company ko fai dhauta 25 percent. Then 15 percent extra goes to the owners. Company ko fai dhauta 30 percent. But interest is only 10. The profit is 30. So, extra 20 percent goes to owners. That is why it is known as leverage. But keep in mind that leverage is a double-edged sword. Chaada fai dhauta, to you will get even more. But loss ho gaya, then the owners will lose double. Let us say company ka profit is only 3 percent. But company has to pay interest at 10 percent. That means there is a minus 7 percent difference that will come from the owners. Suppose company ko 20 percent loss ho gaya, minus 20 percent return hai. And they have to pay interest of 10 percent. That means it is a loss of 30 percent to the owners. So, leverage, suppose you are getting a loan at 10 percent, and your actual return is more than 10, then leverage gives you double profit. But if your actual return is less than 10, then leverage means you will incur even more losses. What you I mean is the owners. So, owners can either get much more profit or they can get much more loss because of leverage. This is a concept of what I tried to explain you is known as financial leverage. To measure the leverage, the ratio which is used is known as debt-equity ratio. Thank you. Thank you, sir. One. Yeah, you can ask. Thank you, sir. Hello. Good afternoon, sir. Myself Vinayak. My question was related to balance. What is the difference between a trial balance and balance sheet? Okay. Vulture Institute students, I think, very much interested in accounting. In my course, I have not explained you what is a trial balance because it is important when you prepare the accounts manually. So, if you know when the accounts were prepared manually, ledgers used to be written. There used to be account for every party or every asset or every liability. Then, would ledger balances ke kam list banayenge and that list is known as trial balance. So, we will write down all asset balances, all liabilities balances, all expenses, all incomes at one place. And we will just see whether they are telling, that means total is matching or no, that is known as a trial balance. Now, from the trial balance, you will prepare the final accounts. Those final accounts are profit and loss account and balance sheet, which we have already studied. So, all incomes and expenses are recorded in PNL account and all assets and liabilities are recorded in balance sheet. So, balance sheet is a final statement, where you will write assets and liabilities. Not only you will write, you will categorize them under certain heads. You will have owners fund, borrowed fund, asset side, you will mention the fixed assets, investments and so on. So, trial balance is a raw statement just giving the list of balances. Thank you. Good afternoon, sir. Yes. Good afternoon, sir. I am Pramod. My question is that, are liabilities of a business is good or bad for the business? What type of liability? Okay, I will try. All types of liabilities. Okay, I will try to respond. His question is, whether liabilities are good or bad? Basically, there are two types of liabilities. First type of liability is known as current liability. Now, if you are doing business, you will not pay electricity bill every day or you will not give salary every day. So, naturally, some of the expenses you will pay after a lag, apkuj din baad payment karoge, that lead to some liabilities, which are known as current liabilities. So, there is nothing good or bad. Automatically, when you do business, you will generate current liabilities. Agar current liabilities boh jada hoge, yana ap month to month salary nahi de rahe ho, do tin main baad salary de rahe ho, to employee's salary will look outstanding. O balance berthe jayega, then it is not good for the business. Apko har maina electricity bill bharana chahiye apne der do tin maina bharanai, then it will be extra outstanding electricity bill. It is not a good thing. If you pay on time, still there will be some liabilities up to one month. That is not a problem. Okay, this is about current liabilities. The second type of liabilities are known as non-current liabilities or loans which you take. Just now, I responded on the question of leverage. Ki leverage kya hota hai? These leverage comes because of these loans. Now, if you are doing a very large size business, let us say you are setting up a factory of 500 crores. Apke pas 500 crore hone ki chances bohot kam hai. So, you may have 100 or 200 crores. You will take loan for the rest of the amount. That leads to creation of a non-current liability. That means you are taking a leverage. It can become good if you can use that factory effectively, if you can earn profit enough to pay the interest on the loan. If you do not have enough money to pay the interest, then that leverage will become very risky. So, liabilities which are long-term in nature are also very much beneficial to the business. But if you cannot earn enough money to pay interest and also return their installment, then the company will be in trouble. Thank you. Good evening, sir. My question is that when we are going to merge two companies, what are the requirements for that? When you have to merge? When we are going to merge two companies, what are the requirements for that? Okay. Again a question which is not really an accounting question, because there are so many things which you have to do. Suppose there are two companies, pehle to unke managements ko agri hona padega, ki they should merge and they do business together. Then they will do technical feasibility. Ki ye dono businesses ek sath chalti, chal sakenge ki nahi. Then they have to decide the price which one company has to pay another. May I assume karam ke all these things you have already done. And now your last step oge ki accounting wise what is to be done. So, suppose A limited is going to acquire another company known as B limited. Then they will take over all the assets and liabilities of B and they will now become assets and liabilities of A. So, they will be recorded in the balance sheet of A. Ye assets and liabilities lene ke badle mein. Ako kuch dena padega hona. A may pay them in the form of shares. Then that much of equity share capital of A will increase. Or A may pay them in the form of cash. Then that much of cash of A will decrease. That you will have to record when the merger happens. Thank you. Thank you sir. Sir, one more question from this was related to whole course. If a company was failed to prepare a financial planning, then which type of problems will be that company faces? Please repeat again. If a company is failed to prepare a financial planning, then which type of problems will be faced at that time? From a practical viewpoint, it is a very important question. Although again it is not necessarily related to accounting. Now what happens is, suppose you are doing a business and you do not do financial planning properly. Several problems can happen. For example, you have taken a lot of loan. You have taken lot of loan. You have created some assets. But those assets you are not able to use properly. Or you do not have any provision to repay the loan on time. So, the problem will be that you will not be able to pay the interest on time. You will not be able to pay the installment on time. Then that bank will come and trouble you many times. They will put the penalties on you. They will charge you extra interest. You will have to bear that burden. Your financial planning will be crippled. Because that loan you will have to pay much more amount as an interest etc. So, there are problems because of non-payment of loan in time. That bank can also take action against your company and take over the assets and liabilities of your company. If you are Nirao Modi, you can take loan and run in Belgium. But that cannot be done by everybody. That happened because of the corrupt politicians who sanctioned that loan. But in normal course, your company will face lot of problems. First of all, you will have to repay the loan with some relative money. Otherwise, your company will get closed and all your dreams will go in trouble. This is for a long-term loan. Short-term may be a problem that if you do not have money on time, then you will not be able to pay salaries in time. So, all your employees will expect you to get salary on time. If you do not have salary on time, then that will demoralize your employees. They will not get salary on time like bank. But after 1 or 2 months, 3 months, etc., if you do not get salary on time, then your good employees will leave your company. They will not work here. So, you will have a lot of loss on human resources. Similarly, you will see some good opportunities. Suppose you are dealing, let us say, in agricultural commodities or particular agriculture commodities. Now, this is the right time to buy that commodity. But if you do not have financial arrangement, then you will not be able to buy that item on time. That means your cost will go up and your profitability will go down. So, you will lose on good business opportunities. A lot of such problems happen because of lack of planning. Now, suppose you are in the service industry. Many tenders leave or contact customers and customers are willing to give you order. But they will say that you do this work, but we will pay you after 2 months. So, you should have at least this much money that you can complete that work, build that party and then that party will pay you after 2 months. If you do not even have that much of money, then you will lose many contracts. Because you cannot tell the customer, give me money in advance, I will work only then. The customer will think that he does not have money to do his work. What is the guarantee that this person will complete the work? That is why you will lose number of good contracts. These are all the problems because of not having proper planning. Thank you. Thank you sir. Hello. Yes. Good afternoon sir. Yeah, good afternoon. So, has IFR has been fully implemented in India? If not, why? Again, very advanced question. Good that you are reading many things. As far as you can sit down, no need to stand up. As far as India is concerned, we have not implemented IFRs as it is. Because remember, we are a very big economy with lot of diversity and our own methods. That is why India has come out with accounting standards known as INDAS. That means Indian accounting standards which are short form of INDAS. Those INDAS are in compliance with IFRs. So, even if we implement INDAS globally, it is recognized as they are compliant with IFRs. So, our country has implemented INDAS which is step by step implemented. So, first few listed companies, then companies of large size and slowly, slowly even small companies will implement. As of now, it is implemented by listed companies, by banks and by large size companies only. Thank you. Yes. Good afternoon sir. Hello. Yes, go ahead. We can hear you. Good afternoon sir. The net worth is interpreted in various ways. Which one is best interpreted? Can you please slowly and steadily ask the question? Sir, the net worth is interpreted in various ways. Which one is best interpretation? Net worth. Yes sir. Okay. See, net worth is a synonym of owner's fund. So, it is share capital plus reserves. If it is a proprietary concern, it can be called as a proprietary capital plus reserves. Synonym for net worth is owner's fund. In the American context, it is called as owner's equity or sometimes it is just called as equity. All these are synonyms of net worth. Good afternoon sir. Yes. I have typed the question in your chat box. If you can see the question, I think it is visible to all the institutes. I have asked you, do educational institutes, private education and institute, do they fall within the purview of accounting procedures of your lecture? Does provision of educational services. Okay. I will try to answer. My query, my query is, my basic query is that we have a lot of private institutes which provide school level education as well as university level education in India. Yes. And outside your lecture, there is a major problem in the standards which government institutes offer and the standards which private institutes offer. Primarily private institutes are able to offer because they take more fees so they are able to collect a good corpus of funds and so they provide good quality education. Now my question is very basic when you see the balance sheet of an educational institute which is private in nature. My first basic query is, are they non-profit organizations or are they profit making organizations? Good question, although not an accounting question. See in India, all institutions are debarred from making any profit out of education. You cannot do any business of education. Private institutes, that is another issue, that is under the table. But on the table or as far as officially no private institute whether it is a school or a college can run as a profit making body. That is why these private institutes are registered as a trust or as an educational societies. In both the cases, these are NPO's that is non-profit organizations. Of course, accounting rules and procedures are same. Company hogi ya trust hoga tobi accounting concepts do not change. There is a slight difference in the balance sheet format. So, they make the balance sheet as per the format prescribed for the trust. And the last part of question is, does provision of educational course qualify as a service? The answer is yes, but since the school education is exempt from service tax, you do not have to pay any service tax. And higher education is also exempt if it leads to any degree or diploma. So, there is no service tax on education service, but totally private providers like private classes or coaching institutes, they are within the purview of service tax. Thank you. Sir, now that leads me to another question. When an educational institute is started initially, a private school or a college, there must be a few people coming together to form that society or trust? Yes. They would definitely be bringing in some capital to have an initial impetus to the project? Yes. That capital goes into the liability side? Yes. As the school or the college grows big, they get more students, so they get more fees. At the end of a financial year, if they are left with money in a business that would qualify as accumulated reserves and that straight away goes into the owner's fund. In this case, what happens to that accumulated reserve? Even for a trust, it is a part of owner's fund only, but instead of capital of any one person, it is called as a capital fund. What money people have put in is in the form of donation. They cannot take back that money. So, it is a capital fund and then the trust also creates various reserves. So, their owner's fund are capital fund plus various reserves that together is their owner's fund, just like a company. There is no difference. Only difference is companies pay dividend out of their profit. No educational institution can distribute their profits or reserves. The last question would be, so is the trust of society only eligible to take donations or can they seek loans also from financial institutions or for that matter private individuals? And if yes, then how do they return the loan with or without interest? They can take loans also provided they get permission from the charity commissioner. Since it is a charitable trust, they have to take permission from the charity commissioner office and then obtain the loan and they can return it with interest as per the terms of agreement of the loan. In case of a private society, from whom do they seek permission to take the loan? From charity commissioner office. No, sir. If the society, if the education society is not registered as a charitable trust, it is just registered as an educational society which intends running a school, a private school. Say for example, the Delhi Public School or the Delhi College in Indore, something like that. They are not charitable trust and so. No, no. Either you have to register as a trust or as an educational society. All of them are governed by charity commissioner's office. Thank you very much, sir. Thank you. This is that. Yes. EKS University, go ahead with your question. Yes, do not stop and ask if you are audible. Please go ahead with your question. There is a lot of delay. So, do not stop. Please go ahead and ask your question. Hello, sir. What is the basic difference between a non-current investment? As I have already explained, current assets are those assets which are intended to be held for less than one year. So, any investment which is intended to be held for less than one year is called as current investment. Example is fixed deposits for three months. Whereas some investment which is intended to be held for more than one year, like fixed deposit for two years, then that will qualify as non-current investments. Thank you. Hello, sir. Yes. Sir, what is the basic factor we should keep in mind? What is the basic factor we should keep in mind while considering analyzing any company's financial achievement? What are the basic? What are the basic? Sir, what is the basic factor which we should keep in mind while considering what is the basic factor which we should keep in mind while analyzing any company's financial achievement? See, when you are analyzing the financial statements, there are... Hello. Yes, I hope I am audible. When you are analyzing the financial statements, there are various ways you can do the analysis. One very simple way is known as horizontal analysis. That means you take P&L account or balance sheet for number of years. So, agar abhika sales is 10,000 crore. You compare with last year's sales, maybe it is 9000 crores. Uskebi last year, Hoga, 7000 crores. So, you see that last to last year, there was a jump of 2000. This year, there is a jump of only 1000. This is known as horizontal analysis. Means a particular item you are comparing with past items. There is one more analysis known as vertical analysis. In vertical analysis, if you are looking at sales, you will not just look at sales, you will look at sales and profits. Or you will look at sales and fixed assets. So, you will look at two, three items within the same period. That is why it is known as vertical analysis. Third is known as comparative analysis. You may want to compare your balance sheet or your P&L account with your peers. So, select the companies from the same industry who are the competitors. So, this is the third type of analysis. Like number of types of analysis you can do, the most popular is known as ratio analysis. So, in ratio analysis, if you want to study the profitability, instead of just looking at profit, you will do a ratio known as profit upon sales. This is known as net profit ratio. Now, that ratio then you can compare from one company to another or from one period to another. So, variety of ways you can do the analysis. Thank you. Thank you, sir. Good afternoon. Yes. Sir, under what circumstances we can create reserves in the liability sites of the balance sheet? I think this has been discussed in our video. What happens is if money cycle runs successfully, company generates profit. Profit generate only about though option say. If the owners are given the profit, it is known as payment of dividend. Now, after payment of dividend also some profit remains with the company. It is added to the liability side of the company in the form of reserves. So, profit go on building the reserves. Ulta Bioga, suppose there are losses, then it is a negative profit. So, it is reduced from the reserves. So, losses will reduce your reserves. Thank you. Thank you, sir. Sir. Yes. Sir, as a beginner, if you want to start your business, should we invest our funds or shares directly to the Bombay stock exchange or should we invest in which is stock exchange? Kerala. Please repeat. I didn't get your last part. As a beginner, if you want to start a business, should we invest our shares in the Bombay directly to the Bombay stock exchange or should we invest in Kerala stock exchange itself? Kerala. See, if you are a beginner, you cannot issue shares at all because who will buy your shares? So, if you are really a beginner as a student, if you are really asking me, you should start your small startup in the beginning. Look for the venture capital or look for angel investors. They would become the partners in the business. Then you will get, you can also get the capital from your friends and relatives who trust you. However, your company develops some name in the market after 2, 3, 4 years. Then you will have a track record to come out with the equity issue. That equity issue, mostly if it is a small company, there are some specialized platforms today on Mumbai stock exchange or on national stock exchange. There you can list your companies, but those companies are also relatively much larger than very small size firms and then if you become still big, then you can go on the regular exchanges. Thank you. We are not going to issue, we want to invest in a company as a beginner because as a beginner we want to invest in a company, so we can directly invest in a company in our local Kerala or we have to, any limitations is there to invest in Mumbai stock exchange? I thought you are trying to be an entrepreneur and you are asking me how to raise the money. If you are investors and if you want to invest your money, it is much better to invest either in national stock exchange or in Mumbai stock exchange because all stock exchange operate from all over India. From all over the world because all parts of India are connected to internet. From anywhere using your computer, you can directly access the some broker's website and that broker's website would connect you to any of the exchanges. So, it does not matter, there is no local factor involved, select a good company and then through some broker or there are lot of websites which offer you brokering services. You can operate any approach any of the exchanges. Of course, as a friend, I would advise you that you first of all go to some, let us say there are websites like moneycontrol.com. They offer you some fund wherein you can create a dummy portfolio. So, in the beginning, you create a dummy portfolio, study the market. All the companies may invest karo. Invest karo means actual paisa leke nahi, no need of money. Just out of the dummy money you invest, look for the returns. See whether your trading strategies are successful. Try to learn as students. Once you get confidence, then start putting your actual money. Thank you. Foreign investment possible? Foreign countries? No. From India you cannot directly invest abroad. Yes. Yes. Good evening sir. Yes. Good evening sir. My question is, in two years ago we are using the tax is a 5% sir. In two years ago we are using the tax is a 5%. Nowadays we are using GST which are 18%, 20%. But in which different types in GST, SGST and CGST, what is the concept of GST and which are those in accounting fiction? Actually I have not understood your first part of question. Earlier what? Yes sir. Some year back we are paying the tax is 5%. Nowadays we are paying the tax which is the GST is 18%, 28%. Okay, I got it. I will try to respond. You can sit down. First of all, this is a very wrong notion that before GST tax was 5% and now it is 18 or 28%. GST is an extremely good taxing principle under which there were 6 to 13 types of taxes earlier charged by central government, state government, then by municipal bodies. They are all merged together under one tax. Just say, if you manufacture some item, you have to pay excise duty, then the state government, you have to pay VAT, then municipal party, you have to corporation, you have to pay octra, then there would be some local taxes, there would be some luxury taxes. Now all these taxes are combined together and there is only one tax that is known as GST. Of course, income tax will remain because income tax is a direct tax but all the indirect taxes are now combined under GST. Suppose in the old regime, 20, there is 10% excise, 15% VAT, then Uskar Total Ojai got 25%. Now it will be under the 18%. So in GST mechanism, almost all the taxes have been reduced. There is no increase in the tax or not much of decrease also in the tax. It will only make the procedure simple. Earlier when you had a business, you had 4 types of inspectors. Excise duty inspector will come, sales tax person will come, this inspector will come, that inspector will come. Now all those taxes are combined under one tax that is known as GST. Whatever GST you pay, 50% will go to state government. So it becomes HGST, 50% will go to central government. But you are administered only under one authority. Hello sir. Yes. Hello sir, I am Palpatra. What is the connection between income statement and balance sheet? I think you have not seen my videos. Because all the videos are all about income statement and balance sheet. So income statement or profit and loss account gives you profit. Then that profit is transferred to balance sheet in the form of results. And the balance sheet gives you assets and liabilities as on a particular date. Thank you. My question is, what is the role of venture capital financing in business? Venture capital? Financing. I think I have just now told you that if you are a new businessman and you want to start a business, if you have a good technological idea or if you have some good product, you want to start the business. But you do not have enough money. First of all, you will use your own funds plus what money relatives will give you. But that is not enough to start the business. Then there are some specialized investors who study your business. They will study that idea. If they like that idea, then they will give you some capital that is known as venture capital. So they become partners in your business. If the business is successful, of course, they must get the share. They will be with your business for 2-3 years and after that you can get a regular investor and then they will go out by taking some extra money. That is known as venture capital. Thank you, sir. So my question is, what is the difference between financial accounting and management accounting? Financial accounting is mainly targeted to external users. So it records the transactions. Based on transactions, you can prepare financial statements for external users. While management accounting is for internal users, so various levels of management have to take variety of decisions. So you will collect the data. Not only the transactions, you will also collect other data. And using that data, you will present management accounting statements to the users. That is known as management accounting. Thank you. Thank you, sir. So we will take a break now for 10 minutes and then we will restart. We will take a break for 20 minutes and we will restart at 4 o'clock. We will restart at 4 o'clock. Thank you.