Category: Commerce Notes PPT

The goods when they are sold to the customer, they are immediately treated as sales and the revenue is recognized therein. However, when the goods are sold on approval basis or return basis, then the accounting treatment will be different. The sale is then recorded only when the goods are approved by the buyer, these are the goods which are sent casually. Now we will discuss the treatment for Goods that are sent casually in our prevailing section. We will know the details about the concept vividly.

Understanding the Concept

The goods when are sent casually, include a few transactions, the goods that are sent on approval or on return basis are treated as ordinary sales by the side of the seller. In a specified time limit the goods are required to be accepted and if they are not returned then no entry will be passed in that regard. We will treat the goods as sold for which the entry is being passed before. While, if the goods are being rejected or returned or no intimation is received within the specified time limit, then the entry to reverse the sales is required to be passed.

Apart from this, if the goods are still lying with the buyer or the receiver of the goods at the end of the accounting year and the specified time limit is set to expire, then they are treated as closing stock. The entry for sales that are made earlier is cancelled and then they are recorded at the cost price. When the goods are returned by the customer after a specified time limit then no entry is passed.

Treatment for Goods Sent Casually

The journal entries for the goods that are sent casually are required to be entered to facilitate the company in a process which will be useful to them. The basic journal entries used for the recording purpose are as follows:

1. The Goods Sent on Approval

Debtors A/C………. Dr

To Sales A/C 

(bring goods that are sent on approval)

2. Goods When Accepted at the Invoice Price.

No entry.

3. When Goods are Accepted at a Price Which is Higher than the Invoice Price

Debtors A/C………… Dr

To Sales A/C 

(The difference of the sale price is recorded)

4. When Goods are Accepted at a Price Which is Lower than the Invoice Price

Sales A/C……… Dr

To Debtors A/C

(The difference in the sale price recorded)

5. Goods Which are Rejected or Returned Within the Specified Time Limit

Sales A/C………. Dr

To Debtors A/C

(Goods which are recorded as sales is now reversed)

6. The Specified Time Limit is Yet to Expire and the Goods are Lying with the Customers on Year End

Sales A/C………. Dr

To Debtors A/C

(Entry of sales made earlier and reversed at the invoice price)

7. The Goods Sent on Approval or on Return Basis as the Closing Stock

Goods sent on Approval A/C…. Dr

To Trading A/C

(Goods are sent on approval and are recorded as closing stock at cost or at market price whichever is lower)

Goods Sent on Approval Basis before (GST)

Goods Sent on Approval Basis Returned within 6 months from the GST being implemented 

The goods being sent on approval for a maximum six months before the appointed day are rejected and returned to the seller on or after the 1st July then nil tax will be payable. The goods should be returned within these six months from the appointed day

The period of 6 months is to be extended for a maximum of 2 months if only there is sufficient cause.

If the Goods Are Returned after 6 months

GST is to be paid by the person who is returning the goods, meaning the buyer after 6 months if those goods are liable to tax under the GST Act

The seller is required to pay GST on the goods returned after the 6 months.

Human Development Index (HDI) is a tool to measure a country’s development based upon its economic and social measurements. The tool was developed to lay down the fact that a country’s overall development is not only assessed based on its economic growth but also assessed based on its people and their capabilities.

Both social and economic dimensions of a country consider the health of the people, their education capabilities, their standard of living, and Gross National Income (GNI) per capita.

Human Development Index is calculated through the normal indices of each of the above three factors. Human Development Index is the mean of these indices. HDI is also used to question a country’s national policy and compare the countries with similar GNI per capita to question why the human development of these countries are different despite having similar Gross National Income (GNI) per capita.

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What Is the Human Development Index?

Human Development Index or HDI integrates the significant social and economic aspects of a country to assess the overall development of a country. HDI generally uses the three dimensions of the development of a country’s population that include their education, their standard of living, and the health of the people based on which country’s development is assessed.

In the year 1990, the human development index was first used by the Pakistani Economist Mahbub Ul Haq. The index is further used by the United Nation Development Program to rank countries and is considered as one of the best tools to assess the country’s development on the basis of its economic and social measurements.

Indicators of the Human Development Index

The three indicators or factors that represent the different aspects of life include the following:

Longevity: The human’s longevity is measured by life expectancy at birth. The life expectancy at birth means how many years a newly born person is expected to survive in this world. This indicated the element of health in the Human Development Index. 

Education: It is measured by the expected years of schooling life of a child at the school entry age and the mean years of schooling of the adult population.

Mean years of schooling: 

It determines the average number of years of total schooling adults (aged 25 years and above) have received. 

Expected Years of Schooling:

It estimates the number of years of schooling that a child of school entrance age can expect to get if the present age- specific enrollment rates survive through the child’s life by country.

Standard of Living: The standard of living of people is measured by Gross National Income per capita adjusted for the price level of the country.

Importance of Human Development Index

The importance of the human development index is that it is an essential indicator of the overall socio-economic conditions of a nation and its residents. Since it takes into account various parameters to determine the development of those areas, it is an effective way to evaluate the performance of every nation.

Consequently, after the survey, every country is awarded a rank by the United Nations Development Programme annually. A higher rank is allocated to the one that has performed well in all or most of the parameters. Likewise, nations that have not fared well in all or most of the parameters attain a lower rank. As a result, HDI acts as a measuring tool that helps in gauging socio-economic conditions of nations every year and also keeps track of the same.

What Are The Consequences And Implications of the Human Development Index?

The HDI is used to show the attention of policy-makers, the media, and non-governmental organizations, and to change the approach from general economic statistics to human outcomes. It was launched to re-estate that people and their proficiency should be the ultimate guidelines for determining the country’s development, not economic growth.

The Human Development Index is also used to diagnose  the alternatives of national policy and to find out how two countries with the similar level of income per person can have different human development outcomes. For example, two different countries may have similar incomes per person but have different life expectancy and literacy levels, such that one of the countries has a much higher HDI than the other. These dissimilarities encourage debate on government policies concerning health and education to determine what can be attained in one country is beyond the reach of the other country.

The HDI is also used to represent the discrepancy within countries, across genders, between states or provinces, across ethnicities, and other socioeconomic groupings. Promoting contradictions in such a way has raised the national debate in many countries.

Limitations of the Human Development Index

Despite the communist idea behind the concept of the human development index, the statistical measure is largely simplified. The present version of the HDI calculation considers only a few factors that affect the development of a country.

To come up with a more accurate analysis of a country’s development, other factors such as employment opportunities, empowerment movement, and feeling of security should be considered in index calculations.

Income determination is a crucial part of every individual’s life; people often plan to spend a certain amount and end up either more or less than that. A decision like this is a crucial part of any economy; it helps countries to manage revenues and expenses.

Ex-ante and Ex-post are two concepts of income decision, and it plays a significant role in the financial planning of any country. In this regard, one takes the help of macroeconomics to understand the variable and find an accurate result.

Income Determination

Macroeconomics deals with various factors of an economy, and one essential element is income. Income affects both sides, i.e. demand-side and total national output. The theoretical models of macroeconomics provide the necessary insight in this regard. It helps to comprehend one variable on other factors of an economy.

Macroeconomics has developed such theoretical models where it considers one variable at a time as constant. Resultantly, it aids in identifying the effects of other elements, and how to proceed in future. Moreover, these models provide a perception of unemployment, rise of prices, growth rate, etc.

This process is typical to any theoretical exercise, and it is known as ‘ceteris paribus’. It is a Latin phrase that means ‘other things remaining equal’.

Ex-Ante and Ex-Post – Brief Idea

Ex-ante and Ex-post are two Latin words used to predict the return against security. Moreover, when transcribed from Latin, Ex-ante means ‘before the event’. It provides predictions of a specific future event like a potential turnover of a company. Since it is impossible to predict such instances that include several variables, the predictions of Ex-ante are often inaccurate.

On the other hand, Ex-post stands for ‘after the event’, which means looking at an event after it is complete. Moreover, Ex-post offers an analysis of the results of any occasion and encourages critical analysis and learning from it. Therefore, one can predict the outcome of a similar situation in the future and prepare for its outcome. Typically, companies analyse different situations to comprehend the possibility of making a profit or a loss on a specific investment.

What is Ex-Ante?

As mentioned above, Ex-ante stands for ‘before the event’. Companies use this concept to predict the estimated return on a particular investment after a specific period. In layman’s terms, it offers an early prediction of an event, before it occurs. Therefore, the outcome is uncertain here.

Now, companies ascertain an Ex-ante value to this outcome and later compare it against the real result to observe the difference.

For instance, during a merger, analysts predict the expected synergies of this event. It can be alterations in terms of share prices, estimated earning, and others. After a period, they evaluate the outcome of this merger against their estimated Ex-ante value to find whether it is a success or not.

Furthermore, the prediction of Ex-ante is uncertain, and it can involve a single product or service, or a unit of a company, or the entire business. The outcome of this event serves as the base of comparison with the actual result.

For instance, RBI makes an ex-ante prediction that recession will hit the Indian economy and increases the rate of interest accordingly. Since this prediction is not on the basis of actual data, it is difficult to say whether it is right or not.

Moreover, if a recession hits the Indian economy, then this increase in interest rate will be viewed as a mistake. On the contrary, if the Indian economy remains stable, then this decision will be a well-judged one.

What is Ex-Post?

Ex-post meaning is ‘after the event’. It stands in contrast to Ex-ante. Investors use this concept to predict the return on investment based on its previous performance. Unlike ex-ante, here, the prediction is based on actual data instead of estimation. Here, investors gauge the performance of security on its previous performance to make a decision.

Investors use readily available ex-post data to understand the performance and capabilities of an investment. It also includes forecasts and projections of market shocks that it has recorded previously. The ex-post value of an investment derives by subtracting its previous price paid by investors from its current market value.

Moreover, experts then analyse this value to understand the price fluctuation and make a future prediction based on that. Also, the comparison between the ex-post value and predicted return then determines the precision of the risk assessment method used for this purpose.

Ex-Ante and Ex-Post are two essential concepts of modern economics, especially income determination method. It helps investors, companies, and individuals to comprehend market trends and predict a favourable outcome.

Students can learn more about these two concepts via online learning platforms like . Along with study materials, students can also access live online classes and doubt clearing sessions to improve their preparations further.

It is strongly recommended that all partnerships under limited liabilities should enter into the LLP agreement to achieve enhanced clarity and certainty over the business relationships and the members. With such an agreement, the legislation will be able to impose certain rules over the obligations and rights of the members. As a basic rule, no member under the agreement can be expelled for any reason, and all the profits should be shared equally between the members. Keep reading to know more about the Indian partnership act LLP agreement. 

Even if a particular member has invested significantly, the profits must be shared equally. This type of written agreement promotes a massive opportunity to the members for varying, or excluding the default position imposed by law. Let us take a detailed look at the chapter.

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LLP Agreements

LLP contracts can terminate and resolve many costly disputes when it comes to business operations under a community. An LLP agreement with a standard document can be used on establishing a new business as an LLP. It is also applicable while transferring a partnership business to an LLP. The partnership deed LLP keeps track of all the records of the clauses and terms agreed between the members of LLP. It is a crucial part of the internal workings of LLP. The LLP deed covers the entire concept including expulsion from the agreement, admission of new members, management and decision making, profit sharing, and retirement from the agreement. 

LLP Agreement India is written between the partners coming under the agreement terms. It is very helpful in establishing the rights of duty in terms of the performing partners toward each other along with the LLP itself. It is compulsory to exclude the file of the agreement within a month of LLP incorporation. LLP deed format forms the base of smooth performing limited liability partnership. It helps in defining the outlook and the concepts required for decision making, leaving or existing partners, and changing the roles.

Contents of LLP Agreements

A draft copy of the LLP agreement must be provided to all the members. It helps in the successful functioning of the LLP. As LLP is not a company, the provisions of a typical company are not applicable in the case of LLP. Therefore, the contents must be clear and address the issues of corporate structures. These include:

• Name of the LLP

• Date of agreement and the parties included

• Introductory provisions

• Statement of background

• Method of contribution

• Partner’s contribution

• LLP bank arrangements and record-keeping

• Capital and current account

• Distribution and Allocation

• Disassociation of partners

• Issue of a partner’s rights

• Cross-purchase and redemption of rights

• Partnership rights of sales and transfers

• Partner’s rights to records

• Partner’s voting and meeting

• General Provisions and arbitration

• Fiduciary and management duties

Companies in this agreement can develop a customized draft llp agreement in India only after careful study of the LLP Act & Rules.

What are the Provisions in Absence of an LLP Agreement? 

Students who want to know – what is LLP agreement must also have an insight into the provisions required or imposed in the absence of an LLP agreement. A typical LLP contract must be put in place with a written LLP agreement among the members. However, in the absence of an agreement, the provisions include:

• All partners must agree to share the profits and losses equally.

• Partners will be insured for any personal payment made in the general course of business or any action taken to preserve the assets of the business.

• Partners should reimburse the LLP in the case of loss or any fraudulent act.

• Through an LLP contract, all members forming the LLP can take part in the management tasks.

• Partnership deed LLP states, when a new partner is entering or taking admission, permission from all the partners is required.

• None of the partners is entitled to salary for the managerial roles for the LLP.

• In case of any issue, the matter will be resolved through a vote from all the partners, and the majority should pass a stern resolution. However, in the case of changing the nature of a business, all the partners must show their consent.

• In a typical LLP deed, the partners will not be able to force out a specific partner unless there is a written agreement between the partners.

Business owners often resort to public borrowing to meet capital deficit or for expansion purposes. Now, there are several means through which company owners can generate funds. Notably, the issue of debenture is arguably one of the best ways of generating some money for the company. 

Both debenture holders and company owners tend to benefit through the issue of debentures. To elaborate, the company owners can raise the required amount of capital, while debenture holders generate income in the form of debenture interest.

Before we dive straight into the meaning of debenture interest, we should become familiar with the fundamental concept of debentures first. It would help us to gain a more precise idea of the concept and all its aspects.

What is Debenture?

A debenture is an unsecured debt instrument. Typically, it is a certificate which is issued by a company as an acknowledgement that it owes money to its holder. It is issued to the public through a prospectus which is quite to the issue of shares.

The fact that there is no collateral involved with debentures, their holders are heavily dependent on the reputation and creditworthiness of the issuer.  Like mentioned earlier, the primary purpose of issuing debenture is to raise the required funding or capital for business-oriented reasons. For investors, debentures are deemed to be low-risk investment options that help to generate substantial returns. Debenture can be defined as an unsecured debt unit. It is a certificate that is issued by a company where it states that it owes money to the owner of the debenture. This is issued to the public by a prospectus. There is no collateral included in the debentures and the holders of the debentures are dependent on the reputation of the company that issues the debenture. Debentures are mainly issued so that fundings can be raised or the capital required is obtained for business-related reasons. The investors see debentures as a low-risk investment that can help them to get substantial returns too.  

 

Debenture interest can be defined as the money the owner of the debenture is supposed to earn after they invest money in the debenture of the company. If the company wants collateral security then the owners would not get any interest on the amount they have invested. It is paid at a rate that is fixed on the face value. Interest is a charge on the company that issues a debenture and the interest must be paid irrespective of the status of revenue. According to the Income Tax Act of 1961, the companies that issue debentures have to deduct TDS on interest at a rate of interest specified. In simple terms, interest can be defined as an award where all the holders of the debentures receive the interest for investing in the company’s debentures. The company is the one that pays the interest at a regular period which is previously set by the interest rate in the face value.

Test Your Knowledge: Who are debenture holders?

1. Company Owner

2. Creditor

3. Debtor

4. Promoter

Types of Debenture

As per the Companies Act, 2013, a company cannot issue debentures that accompany voting rights. Other than that, companies can issue the following debentures –

1. On the Basis of Security

i. Secured debentures

ii. Unsecured debentures

2. On the Basis of Convertibility

i. Convertible debentures

ii. Non-convertible debentures

3. On the Basis of Priority 

i. First mortgage debentures

ii. Second mortgage debentures

4. On the Basis of Negotiability

i. Bearer debentures

ii. Registered debentures

5. On the Basis of Permanence 

i. Redeemable debentures

ii. Irredeemable or perpetual debentures

Test Your Knowledge: A debenture whose principal amount is not paid by the issuing company only at the time of liquidation is known as:

1. Redeemable Debentures

2. Non-convertible Debentures

3. Bearer Debentures

4. Irredeemable Debentures

 

What is Interest in Reserved Debenture?

Debenture interest can be explained as the capital which debenture holders are entitled to earn for investing their money in the said company’s debenture. However, if a company tends to issue debenture as collateral security, the holders would not receive any interest on their investment.

Typically, interest on debentures is paid at a fixed rate on their face value systematically. It must be noted that such an interest is a charge on debenture issuing company’s profit and must be paid to the holders, irrespective of the revenue status.

As per Income Tax Act, 1961, debenture issuing companies are required to deduct TDS on interest on debentures at a specified rate of interest. However, such a tax is imposed only if the payable interest amount exceeds the mentioned limit. The tax thus collected is deposited to the income tax authorities by the denture issuing company.

Test Your Knowledge: Interest paid on debenture is:

1. Appropriation of Profits

2. Charge Against Profit

3. Transferred to General Reserve

4. Transferred to the Account of Sinking Fund

On that note, let’s check out how debenture interest is treated in the books of accounts.

 

Accounting Treatment of Interest on Debenture

This is how debenture interest is treated in accounting in a different situation.

A. In Case Interest is Due and the Tax on It is ignored – Interest Paid Journal Entry 

B. In Case Interest on Debenture is Due and TDS is levied – TDS Payable Journal Entry

C. In Case of Payment of Interest on Debenture – Interest Payable Journal Entry

 

D. In Case of Deposition of TDS – TDS Payable Journal Entry

 

E. Transferring Interest to the Statement of Profit and Loss at Year-End

 

Test Your Knowledge: What is the nature of a debenture application account?

1. Personal account

2. Real account

3. Nominal account

4. None of these

Task For You: Pass a journal entry for TDS deducted.

Do you want to gain a more detailed insight into debenture interest and related topics? Check out ’s latest study solutions and improve your knowledge of those concepts effectively. You can also try our free online classes and strengthen your understanding of accountancy to a great extent.

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The term Cyberspace seemed to have originated from a Science fiction movie. However, in the 21st century, it has become an integral part of our lives. Let us learn what Cyberspace is, the importance of laws to determine Cybersecurity in the introduction of Cyberspace.

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What is Cyberspace Definition?

The best way to define Cyberspace is the virtual and dynamic space created by the machine clones.

According to the Cyberspace definition, it is a web consisting of consumer computers, electronics and communication networks by which the consumer is connected to the world. 

Cyberspace History

The word Cyberspace first made its appearance in Wiliam Gibson’s Science fiction book Necromancer. The book described an online world filled with computers and associated societal elements. In that book, the author described Cyberspace as a 3D virtual landscape created by a network of computers. Although it looks like a physical space, it is generated by a computer, representing abstract data.  

After the publication of the book, the word Cyberspace became a mainstay in many English dictionaries. The New Oxford Dictionary of English provides Cyberspace definition as the notional environment used by the people to communicate over networks of the computer. 

As per the Cyberspace meaning, Cyberspace is a virtual space with no mass, gravity or boundaries. It is the interconnected space between networks of computer systems.

Bits and Bytes- Zeroes and ones are used to define Cyberspace.  It is a dynamic environment where these values change continuously. It can also be defined as the imaginary location where two parties can converse.

If we look into the Cyberspace meaning, it is not a physical space but a digital medium. The differences between a physical world and Cyberspace are as follows:

Cyberspace vs. the Physical World

Cyberspace can be compared to a human brain where the network of computers represent the innumerable neurons and the connections between them. Therefore, it can be considered as a link between the physical and the infinite world.

Cyber Laws and Cyber Security

In order to ensure that humans do not misuse Cyber technologies, Cyber laws are generated. The overall idea of Cyberlaw is to stop any person from violating the rights of other persons in Cyberspace. Any kind of violation of Cyber rights is considered to be a Cyberspace violation and is deemed punishable under Cyber Laws.  

It is important to note that since Cyberspace does not belong to the physical world, the physical laws do not apply to Cyberspace crime. A separate set of Cyber laws are formulated by the government to provide Cybersecurity to Cyber users. Such Cyber laws are needed to monitor and prevent any immoral or illegal activities of humans. Some

of the common Cyberspace violation activities include hacking, theft, money laundering, terrorism, piracy, etc. Hackers can get hold of any internet account through the Domain Name Server (DNS), phishing, IP address, etc. to get entry into the computer system of any person and steal the data, or introduce computer bugs and render the system ineffective. 

Cyber Laws

Cyber laws encompass all the legal issues related to the communicative, distributive and transactional aspects of network-related information devices and technologies. It is different from the Property Law or any other law. Unlike property law, it is not so distinct; it is broader since it covers several areas of laws and regulations. It encapsulates the statutory, legal and constitutional provisions related to computers and the internet. Cyber laws are related to individuals and institutions that 

• Generates software and/or hardware to allow people with entry into Cyberspace, and

• Make use of their computer system to gain entry into Cyberspace.

If we go by the Cyberspace definition, Cyberlaw can be considered as a generic term related to all regulatory and legal properties of the internet. Any activities of the citizen related to or concerned with the legal aspect of Cyberspace come under the purview of Cyber laws.

To define the different arms of Cybersecurity, two main acts are considered in India. They are:

• The Indian Penal Code, 1860

• The Information Technology Act, 2000

Cyberspace

Cyberspace mainly refers to the computer which is a virtual network and is a medium electronically designed to help online communications to occur. This facilitates easy and accessible communications to occur across the world. The whole Cyberspace is composed of large computer networks which have many sub-networks. These follow the TCP or IP protocol. 

The TCP (Transmission Control Protocol) is a standard for communications that allows the application programs and other computing devices to exchange data and messages over a Cyber network. These are designed to send data across the internet which then makes sure that the sent data are successfully delivered over the networks. It is the standards that are mostly used to define the rules of the internet and are defined by the Internet Engineering Task Force or IETF. It is a very commonly used protocol and it ensures that there is an end-to-end delivery of data. 

On the other hand, Internet Protocol or IP is the protocol or method that involves sending data from one device to another using the internet. Each and every device has an IP address that is unique to it and this gives it its identity. The IP address enables communication and exchange of data to other devices across the internet. It defines how devices and their applications will exchange packages of data with each other and connected networks.  All the transfer occurs through either of the Internet Protocol Suite or protocols i.e. either TCP or IP. 

Cyberspace is that space in which users share information, interact with each other; engage in discussions or social media platforms, and many other activities. This concept was introduced by William Gibson in his book ‘Neuromancer’ which was done in 1894. Thus, this term is still widely used among everyone as it is rapidly growing and used for various purposes by an individual.