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Financial wisdom distilled like a single malt

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Some thoughts on Financial Independence

1) Bonds are for storing wealth and equities are for creation of wealth.

2) In my opinion, the biggest asset one can have is zero debt.

3) The greatest discipline in personal finance is living below your means.

4) As Ben Carlson says, emotions cannot be back tested. That’s why past bear market always looks like opportunities and future ones scary.

5) Early financial independence and early retirement are completely different. To me, the former is a blessing and the latter is a curse.

6) Don’t think how it would have been if you’ve started 10 years ago. Start today and visualise how you would feel 10 years from now.

7) The neighbourhood we live determines our life style & spending. Need to be careful in choosing one which matches our goals and personality.

8) Paying minimum balance regularly on credit card is the maximum sign that you’re getting into debt trap.

9) Many are long term investors till next bear market.

10) Don’t take aggressive bets. Take measured risk. Remember one blunder can push you back by a decade or more in terms of wealth.

11) Big money can be made through high savings, wise investing and lots of patience.

12) One sign of progress in individual investor’s portfolio is no churn or very less churn.

13) Trying to get rich fast is a foolproof way to lose what we have.

14) Losing opportunities is far better than losing money. Don’t invest in fads.

15) “Making as much money as quickly as possible” is not an investment strategy. Unfortunately for most of us that is the strategy.

16) Aggressive strategy cannot be a substitute for high savings. Save high and take moderate risk than saving less and taking high risk.

17) The day we realise not losing is as important as winning; we would stop blindly chasing returns.

18) Good periods are more than bad periods. By not timing, though we go through bad periods, do not miss even a single good period.

19) We’ll stop looking for quick money the moment we consider stocks as businesses and realise that our wealth grows in line with business growth.

20) There are periods of high returns, low returns, no returns and negative returns. We need to go through all these to get long term returns.

21) Listening to market forecasts is not only useless but can be very harmful too; if you start acting on them.

22) The hard truth is only around 3% of our population are in a position to aspire for financial independence. Don’t waste this rare privilege 👍

 

IGST refunds on goods exported out of India – FAQ

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Q.1 What is zero rated supply under GST?

Ans: Under GST, exports and supplies to SEZ are zero rated as per Section 16 of the IGST Act, 2017.  By  zero  rating, it is meant  that  the entire  supply  chain of  a particular supply is tax free, i.e., there is no burden of tax either on the input side or output side.

Q.2 What are the options for getting refunds for persons making zero rated supplies?

Ans: As per Section 16(3) of the IGST ACT,2017, a registered person making a zero­ rated supply is eligible to claim refund in accordance with the provisions of Section 54 of the CGST ACT 2017, under either of the following options, namely:

(i) He may supply goods or services or both under bond or letter of undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit of CGST, SGST /UTGST and IGST; or

(ii) He  may  supply  goods  or  services  or  both,  subject  to  such  conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied.

Q.3 What Is IGST refund?

Ans: The second category, mentioned above, pertains to refund of integrated tax paid for the zero-rated supplies made by suppliers who opt for the route of export on payment of integrated tax and claim refund of such tax paid. There can be two sub­ categories of such suppliers namely:

(i) Exporter of goods

(ii) Service exporters and persons making supplies to SEZ

Q.4 Who can get IGST refunds from Customs?

Ans: The registered persons who have exported goods out of India on payment of IGST are eligible to get the refund of integrated tax so paid subject to certain conditions related to filing of correct and sufficient information in both GSTN and Customs system.

Q.5 How to file application for getting IGST refund from Customs?

Ans: As per Rule 96 of the CGST Rules 2017, dealing with refund of IGST paid on goods exported out of India, the shipping bill filed by an exporter shall be deemed to be an application for  refund of integrated tax  paid on the goods exported out  of  India, 0nce both the export general manifest (EGM) and valid return in Form GSTR-3 or Form GSTR- 38, as the case may be, has been filed. Thus, once the shipping bill and the EGM is filed and a valid return is filed, the application for refund shall be considered to have been filed and refund shall be processed.

Q.6 Who would process IGST refund  claim?

Ans: The IGST refund module have been designed to have an in-built mechanism to automatically process and grant relief after validating the shipping bill data available in ICES against the GST Return data transmitted by GSTN. Manual intervention would be limited to only exceptional cases where  automatic validation becomes impossible due to some technical errors. Such exceptional cases would be only those which would be approved by the Board and the procedure in those cases would be separately laid out.

Q.7 I have filed my IGST returns but still my refund is not sanctioned?

Ans: The IGST refund would not be processed if it fails any validation at the level of either GSTN or Custom   system. Validation errors occurs due to various deficiencies  which are enumerated here-in-after.

Q.8 What are the reasons for data not being transmitted from GSTN to Customs System?

Ans: It has been observed that a number or record have not been transmitted by GSTN to the Customs system which could be on account of various errors that have occurred in the validation carried out by the GSTN. It Is understood that cases where such validations fail are on account of:

(i) Both GSTR 1/Table 6A and GSTR 3B hove not been flied for that supply or there are missing invoices in GSTR 1 for that supply.

(ii) Invoices provided In Table 6A of GSTR 1/1E arc incomplete, e.g., details of shipping bill and port number/code ore not mentioned.

(iii) IGST paid under Tobie 3.1(b) of GSTR 3B being less than total IGST claimed in Table 6A of GSTR 1/1E of the some period. The claim cannot be more than that or the amount of IGST paid.

Q.9 What steps are to be token in cases of errors mentioned above and who should be contacted in such cases?

Ans: Correction of errors need to be done In the GST return filed. Table 6A has been provided to carry out those corrections. If the exporter finds that even after the correct filing or return, their shipping bills do not reflect in Customs system (reflected In ICEGATE login of exporter), they may write to GSTN helpdesk.

Q.10 How can I find whether my refund data has been successfully transmitted by GSTN to Customs or not?

Ans: GSTN is reportedly working on a feedback/message system so as to Inform the exporters about such failed validations. At present, the Customs system does not hove any information about the reasons for which validation at GSTN has failed. However, for all those records which hove been successfully transmitted to Customs system, the report can be generated at the end of field officers. Even the exporter has the option to check the GST validation status for his shipping bills in his ICEGATE website login for all records transmitted by GSTN.

Q. 11   I have filed correct Information in GST return but still my refund Is not sanctioned?

Ans: In cases where the exporter has filed correct information in the GST returns and it gets successfully validated by the GSTN, it is thereafter transmitted electronically to the Customs system wherein the GST return data is matched with the shipping bill data. If the matching is successful, ICES processes the claim for refund and the relevant amount of IGST paid with respect to each shipping bill or bill of export is electronically credited to the exporter’s bank account as registered with the Customs authorities. But, wherever the matching fails on account of some error, the refund do not get sanctioned.

The matching between the two data sources is done at invoice level and any mis-match of the laid down parameters results in one or more of the following errors/responses:

CodeMeaning
SB000Successfully validated
SB001Invalid SB details
SB002EGM not filed
SB003GSTIN mismatch
SB004Record  already  received  and validated
SB005Invalid invoice number
SB006Gateway EGM not available

 

Q.12 What should be done for error code SB001?

Ans: This may occur due mention of wrong shipping bill number furnished in GSTR 1/Table 6A. The possible reason for such mismatch could be a clerical error made by the exporter at the time of filling of GSTR 1/Table 6A, which can be rectified by making amendments in GSTR 1 by using Form 9A. Form 9A has been made available by GSTN w.e.f. 15.12.2017 in exporter’s login at the GST common portal.

Q.13 What should be done for error code SB002?

Ans. Exporter has to approach their shipping line/airline/carrier to file the EGM  immediately.

Q.14 What should be done for error code SB003?

Ans. This error occurs when GSTIN declared in the SB does not match with the GSTIN mentioned in the corresponding GST return. In this case too, the exporter has to make necessary changes in GSTR 1 by use of amendment Form 9A. Exporters should note that there is no provision of amendment in the shipping bill once the EGM is filed.

Q.15 What should be done for error code SB004?

Ans: This error occurs due to duplicate/ repeat transmission of shipping bill-invoice record from GSTN. The previous transmission would have already been validated for IGST refund by ICES.

Q.16 What should be done for error code SB005?

Ans: This is the most common error committed by the exporters, which occurs due to mis-match of invoice number as declared in the invoice table of the shipping bill and that declared in the GSTR 1 for the same supply. This can happen due to:

  • Typographical mistake while entering data in GSTR 1 or the
  • The exporter uses two sets of invoices, one invoice for GST and another invoice for exports resulting in mismatch of invoice numbers.

After the implementation of GST, it was explained in the advisories that the details an exporter is required to enter in the “invoice” column while filing the SB pertains to the invoice issued by him compliant to GST Invoice Rules. The invoice number shall be matched with GSTN to validate exports and IGST payment. It was conveyed and reiterated that there should not be any difference between commercial invoice and GST invoice after implementation of GST since as per the GST law, IGST is to be paid on the actual transaction value of the supply between the exporter and the consignee, which should be the same as the one declared In the commercial  invoice.

If SB005 is due to a data entry mistake in GSTR 1, it can be amended in Form 9A. But any mistake in the SB cannot be amended once EGM is filed. Also, if the exporter has used a separate invoice in the SB, he cannot include that in his GSTR 1 in lieu of his GST invoice. Thus, SB005 error, as of now, cannot be corrected by any amendment either in GSTR-1 or in the Shipping Bill.

For these cases a mechanism is being considered by the Board to make the requisite corrections manually in line with the recent amendments in Rule 96 of the CGST Rules, 2017. The said mechanism is expected to be available shortly. It may, however be noted that these Interim workarounds shall only be available as a one­ time measure for the past SBs. It is advised that the exporters should take care so as not to repeat such mistakes in future and ensure that the same GST compliant export invoice is declared at both ends.

Q.17 What should be done for error code SB006?

Ans: In cases of exports through ICDs, if the gateway EGM is not filed electronically or it contains some error, response code SB006 appears. It is noticed that gateway EGM In case of many ICD shipping bills have been manually filed, leading to such refunds not being processed. While the Customs at gateway ports are pursuing this matter with the shipping lines, the exporters can also approach their shipping line to file the EGMs electronically.

Q.18 What IA the exporters’ role In case of IGST refunds?

Ans: Exporters have to ensure that only correct as well as sufficient information is filed by them in both the GSTN and the Customs system.

(i) The exporter has the option to check the GST validation status for his SBs after logging Into ICEGATE website. This report shows the response/error code for each of his SBs wherever data has been received from GSTN.

(ii)  The exporter also has the option to view the SB details relevant for IGST validation on the ICEGATE website. The exporter can view this while filing the GST returns and ensure that the details are entered accurately in the returns as well so that no mis-match occurs.

(iii) In case, the exporter’s account is not validated by PFMS, he may approach jurisdictional Customs Commissionerate with correct account details and get it updated in ICES.

(iv) If the exporter is not getting the refund due to suspension/alert on his IEC, he may clear his dues or submit e-BRC and have the suspension revoked.

Q.19 The shipping bill has been transmitted by GSTN to Customs and there is no error In the refund But still the refund has not been received in the bank account?

Ans. SB000 (Successfully Validated) is the response code which comes when all the decided parameters like GSTIN, SB number, invoice number etc. match between GSTN and Customs database. This code implies that the SB is ready for inclusion in the IGST refund scroll. Howeverit might happen that even with SB000, the SB does not appear in the refund scroll. This could be due to:

(i) The exports might have been made under bond or LUT, hence not eligible for refund.

(ii) If a shipping bill covers multiple invoices, few of the Invoices might have been successfully validated with code SB000 whereas other invoices might be containing other types of error/s

(iii) Composite rate of drawback has been claimed For that SB during the transitional period between 01.07.2017 to 09.2017, thus making the SB ineligible for IGST refund.

(iv) Where the IGST claimed amount is less than Rs. 1000/-.

In all the above cases, the scroll amount shall automatically become zero and the SBs shall not be included in the refund scroll.

There are two more reasons where the SBs will figure in the temporary IGST scroll but not in the final scroll. This could happen if there is an alert/suspension on the IEC in ICES or if the account of the IEC is not validated by PFMS.

Q.20 What is the course of action if there are multiple errors In the refund claim?

Ans.  Each such error would be required to be corrected individually in order to get refund.

Q.21 In case of errors, where should I contact for necessary action?

Ans. The following steps could be followed in case of errors in processing of refunds:

(i) When the records have not been transmitted by GSTN to Customs, exporters may contact GSTN

(ii) Wherever the error is SB002/SB006, exporter may approach their shipping line/airline/carrier to file the EGM immediately.

(iii) In cases where the temporary scroll is generated but it’s not included in the final scroll, the exporters are advised to furnish correct bank account details to the proper officer (Customs field formation) in order to update the same in ICES.

(iv) As the status of refund claims is available in ICEGATE login, in cases where the corrective action has been already taken by the exporter, he may write to ICEGATE/gateway port Customs for redressal.

(v) In general, any grievance related to the IGST refund claim may be brought to the notice of the Pr. Commissioner or Commissioner of the Customs of the gateway port for necessary action.

Common Errors and Rectification Procedures

CodeMeaningRectification
SB000Successfully   validated
SB001Invalid SB detailsAmend  GSTR-1  by   using Form 9A and fill correct SB details
SB002EGM not filedApproach   shipping  line for filing of EGM
SB003GSTIN mismatchAmend  GSTR-1  by  using Form 9A
SB004Record   already   received and validatedNo action  required
SB005Invalid Invoice NumberAmend GSTR·1 by using Form 9A and  fill  correct
SB006Gateway EGM not availableApproach shipping line or Gateway port Customs
PFMS Validation ErrorsBank account details of exporter not validated in PFMSApproach EDI section at the gateway post Customs with correct account number, bank name and branch address and IFSC Code of the branch

 

Taxable – Long Term Capital Gain on Equity Shares

Taxability on Long Term Capital Gain arising from transfer of capital asset, being an equity share in a company or a unit of an equity oriented fund or unit of a business trust.

As per the amendment given in the finance bill 2018, Long term Capital gain exemption under section 10(38) in respect of listed STT paid shares, is being withdrawn with effect from 1st April 2018.

Amendment under section 10(38) has been reproduced below for ready reference:

In clause (38), after the third proviso, the following proviso shall be inserted, namely:—“Provided also that nothing contained in this clause shall apply to any income arising from the transfer of long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, made on or after the 1st day of April, 2018.”

A new section 112A, has been introduced in Act to charge tax at 10% on long term capital gain exceeding one lakh rupees, arising from transfer of capital asset, being an equity share in a company or a unit of an equity oriented fund or unit of a business trust.

The Complete text of new inserted section 112A with Analysis has been give below:-

112A. (1) Notwithstanding anything contained in section 112, the tax payable by an assessee on his total income shall be determined in accordance with the provisions of sub-section (2), if—

(i) the total income includes any income chargeable under the head “Capital gains”;

(ii) the capital gains arise from the transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust;

(iii) securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004 has,—

(a) in a case where the long-term capital asset is in the nature of an equity share in a company, been paid on acquisition and transfer of such capital asset; or

(b) in a case where the long-term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, been paid on transfer of such capital asset.

Analysis: If above all three conditions are satisfied by the Assessee then only he will be eligible to avail the benefit of new inserted section 112A of Income Tax Act, 1961.

(2) The tax payable by the assessee on the total income referred to in sub-section (1) shall be the aggregate of—

(i) the amount of income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per cent.; and

Analysis:- Income Tax on Capital Gain arising from transfer of Capital Asset shall be calculated on an amount of Capital Gain exceeding Rs. 1,00,000 @ 10%.

Example:- Total Capital Gain = Rs.2,50,000 then in such case Tax shall be:-                 = Rs. 15,600 (Rs. 1,50,000*10% + Health and Education Cess @ 4%).

(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:

Analysis:- For the purpose of tax calculation on balance amount of total income (i.e. amount reduced by the capital gain amount as used in (i) above).

Example:-  Gross total Income = Rs. 6,00,000 (including Rs.2,50,000 as Capital Gain) then tax shall be calculated as under:

Tax on LTCG of Rs. 1,50,000 (Excluded Rs. 1,00,000) u/s 112A @ 10%

15,000

Tax on Balance Income of Rs.3,50,000:

On Income upto Rs.2,50,000                                                              Nil

On Balance Income of Rs. 1,00,000 @ 5%                                    5000

———–

20000

Add: Health and Education Cess @ 4%                                             800

———–

Tax Payable                                                                                          20,800

=======

 

Provided that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, the long-term capital gains, for the purposes of clause (i), shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax.

 

Analysis:- If Balance total income (i.e. amount as  reduced by Capital Gain) is less than the amount which not chargeable to tax i.e.Rs.2,50,000 then the benefit of Income Tax slab may be availed.

Example:-  Gross total Income = Rs. 3,50,000 (including Rs.2,50,000 as Capital Gain) then tax shall be: Nil (Since, Rs. 3,50,000 – Rs. 1,00,000 (i.e. Bal. total income) = Rs. 1,50,000, may be used against Capital gain income of Rs. 1,50,000.

 

(3) The condition specified in clause (iii) of sub-section (1) shall not apply to a transfer undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transfer is received or receivable in foreign currency.

(4) The Central Government may, by notification in the Official Gazette, specify the nature of acquisition in respect of which the provisions of sub-clause (a) of clause (iii) of sub-section (1) shall not apply.

(5) The capital gains under sub-section (1) shall be computed without giving effect to the provisions of the first and second provisos to section 48.

Analysis: inflation indexation in respect of cost of acquisitions and cost of improvement, if any, and the benefit of computation of capital gains in foreign currency in the case of a non-resident, will not be allowed.

(6) The cost of acquisition for the purposes of computing capital gains referred to in sub-section (1) in respect of the long-term capital asset acquired by the assessee before the 1st day of February, 2018, shall be deemed to be the higher of—

(i) the actual cost of acquisition of such asset; and

(ii) the lower of—

(a) the fair market value of such asset; and

(b) the full value of consideration received or accruing as a result of the transfer of the capital asset.

Analysis: Understanding on identification Cost of Acquisition for the purpose of calculation of Capital Gain:

ParticularsCase-1Case-2
Actual Cost of Acquisition100100
FMV as on 31st January, 2018120120
Full Value of Consideration130110
Deemed Cost of Acquisition120110

Note:   If any long term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, is sold on or before the 31st March, 2018 then liability of LTCG Tax shall not be arisen since the provision of section 10(38) shall continue till 31st march, 2018.

Explanation fair market value” means,—

(i) in a case, capital asset is listed then, the highest price of the capital asset quoted on such exchange on the 31st day of January, 2018: and where there is no trading in such asset on such exchange on 31st day of January, 2018, the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value;

(ii) in a case where the capital asset is a unit and is not listed on a recognised stock exchange, the net asset value of such asset as on the 31st day of January, 2018;

(7) Where the gross total income of an assessee includes any long-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains.                                      

Analysis: The benefit of deduction under chapter VIA shall be allowed from the balance gross total income as reduced by such capital gains.

(8) Where the total income of an assessee includes any long-term capital gains referred to in sub-section (1), the rebate under section 87A shall be allowed from the income-tax on the total income as reduced by tax payable on such capital gains.

Analysis: The benefit of section shall be allowed from the tax calculated on balance gross total income as reduced by such capital gains.

Direct Labour Costing Formula

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Labour Turnover
(i)                  Separation Rate Method = Number of separations ina period ÷ Average number of workers in the period x 100
(ii)                Replacement Method = Number of replacements in a period ÷ Average number of workers in the period x 100 
(iii)               Flux Rate Method = No. Of separations + No. Of replacements ÷ Average number of workers in the period x 100
No. Of separations + No. Of replacements ÷ 2 / Average of workers in the period x 100
(iv)              Equivalent Annual Turnover Rate = Turnover rate x 365 ÷ No. Of days in the relevant period x 100
(v)                Valuation of closing stock in units = cost of production ÷ units produced x No of closing stock units.  
Remuneration and Incentives
1.       Halsay wier  scheme = Time taken x howely rate +  ( Time saved x Howely rate x 30% )
2.       Barth’s variable sharing plan = Howely rate standard time x Actual time
3.       Bedeaux’s point premium system = Time taken x ( Howely rate x 75/100 x points saved x Basuc rate per hour ÷ 60 )
Incentive Plans:
4.       Halsey Plan: Total Earnings = Time taken x Hourly rate + ( Time saved x Rate x 50%)
5.       Rowan Plan: Total Earnings = Time taken x Hourly rate + Bonus
Bonus = Time saved ÷ standard time x time taken x Hourly rate.
6.       Barth Scheme = Hourly rate x Standard hours x hours worked
Obsorbtion of overhead:
1.       Overhead rate = overhead Expenses ÷ Total quantum of base selected
2.       Actual overhead rate = Actual overhead incurred during a period ÷ Actual quantum or value of the base selected
3.       Blanket overhead rate = overhead cost of the entire factory ÷ Total quantum of the base selected
4.       Preduemined overhead rate = Budgeted overhead Expenses for the period ÷ Budgeted base of the period
5.       Treatment of over / under obsorption overhead supplementary rate = Amount of over / under obsorption of overhead ÷ Total of base

  Piece Rate System:

1.       Straight Piece Rate System ( ordinary piece rate )  = No. Of units produced x Rate per piece
2.       Taylor’s differencial piece rate system: –
(a)    Output below standard output :-
Piece rate = No of units produced x (straight piece rate x 80% )
(b)   Output above standard output :-
Piece Rate = No of units produced x ( straight piece rate x 120% )
3.       Merricks multiple or Differential price :-
(a)    Output below 83% of standard output :-
Piece rate = ordinary piece rate
(b)   Output between 83% to 100% of standard output :-
Piece rate = No of units produced x ( rate per piece x 110% )
(c)    Output above 100% of standard :-
Piece rate = No of units x ( rate per piece x 120% )
4.       Gantt’s Task :-
(a)    Earnings = Standard time x Hourly  rate – ( below 100% per                  )
(b)   Earnings = ( standard time x Hourly rate) + 20% of ( standard time x Hourly rate) ( performance at 100% )

 

How to incorporate limited liability partnership

STEP WISE PROCEDURE.: for  Incorporate Limited Liability Partnership

In 2008, Ministry of Corporate Affairs brought the concept of Limited Liability Partnership.
As per the LLP Act 2008 an “LLP is defined as that business entity where having two Designated Partners is minimum requirement and such partners had their liability limited to their contribution towards the LLP
It has following below mentioned features.

1. Separate Legal entity

2. Have perpetual succession

3. Formation cost is nominal.

4. Unlimited numbers of partner.

5. Less compliance as compare to the Company.

STEP INVOLVED:

1. Obtain DPIN of all the designated partner.
2. Apply for Digital Signature Certificate of partner/designated partner of LLP/Proposed LLP.
3. File LLP 1 for Reservation of name.

Firstly download LLP 1 and start filling the details like details of applicant whether applicant is a individual or nominee of a body corporate. Enter the Designated partner identification number (DPIN) and click on prefill button. Enter the details of two proposed designated partners (One of them should be a resident in India) and mention other details too. In PART C Select name of the proposed LLP (upto 6 choices can be indicated). State the significance of the key or coined word in the proposed name in brief. Affix the s digital signature of Designated partner and file the form and pay requisite fee to MCA.

Once the name is reserved by registrar. Come on to next step:

4. Then start proceed to file LLP Form No-2 which is for “INCORPORATION OF DOCUMENT AND STATEMENT”
In LLP form -2 start fill the details like Address of registered office of the LLP, Business activities to be carried out by the LLP. Total number of designated partner, total number of partners. Mention their respective details. Total Monetary contribution and Attached Proof of address of registered office of LLP and subscribers sheet including consent. After filing the details Statement in the eform is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also digitally signed by professional.

On Submission of the form , maximum within 14 days of filing of E-form 2, Registrar will issue certificate of incorporation in Form 16.

5. DRAFT LLP AGREEMENT AND FILE FORM 3 (LLP AGREEMENT FORM).
Once Form-3 got approval, all the formalities in respect of incorporation of Limited Liability partnership is been completed.

 

How to prepare Bank Loan project report

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Project Report for Bank Loan:

  1. Basic Information required: 
  • What is the nature of Business: Manufacturing, Trading, Service, Professional  
  • What is the Constitution of Business: Proprietorship, Partnership Firm, Pvt. Ltd. Co. Public Ltd. Co, Trust etc. 
  • Existence: Whether the business is already existing or new. Depending upon the above parameters, project reports vary. Depending upon the nature of business, the requirements differ, depending upon constitution of business the Tax related issues differ and depending upon existence of the business, the projections differ. In case of existing business the projections can be prepared on the basis of past data, in case of new business such information is not readily available and projections are to be made by collecting relevant data from the prospective entrepreneur and also from the financial statements of similar business operating in the area. In case of new units, the projections are to be supported with proper data and the presumptions on which the projections are made.
  • Requirement: Requirement of any business are of two types : Capital Cost and Working capital. Capital cost includes creation of additional “Fixed Assets” i.e. Building, Machinery, Furniture, Vehicle etc. Working Capital is funds required for efficiently running any business. Generally for capital cost Banks sanction Term Loan which is repayable in installments. Working capital requirement is provided by Banks by way of Cash Credit or Overdraft facility with sub limits for Bills Discounting. Cash Credit / Overdraft / Bill discounting facilities are sanctioned for a period of one year subject to renew every year depending upon past performance. Besides this, Banks also sanction Non Fund based Limits for Bank Guarantees and Letters of Credit under which limits are fixed and these are considered as Contingent Liabilities in Banks books.
  1. Project Cost: Once the above basic information is collected next step is to arrive at the Project cost. Project Cost in case of existing business is the “Additional Cost” required for expansion of the business e.g. purchase of additional Machinery, Construction of shed / building etc. In case of new business it is the “Total cost” required to start the new business. Ex:

 

DescriptionEstimated Cost
Purchase of Plot
Construction of Building
Plant & Machinery
Equipments
Furniture & Fixtures
Electrical Installations
Preliminary Expenses in case of new business

Total of all such items represent the Project Cost.

 

  1. Sources of Funds: For incurring above expenditure, funds are to be raised through various sources. First is “Capital”e own funds, Second is “Unsecured Loans” raised from Directors of the Company or from Friends & Relatives of the Proprietor / Partners and third is “Bank Loan” which is the amount for which loan is to be requested from Bank. Generally, Banks finance maximum 75% of the “actual cost” required, remaining amount is to be contributed by the applicant through first two methods out of which capital must be more than unsecured loan. The unsecured loans raised by the applicant should not be immediately repayable for which undertaking has to be submitted stating that, the unsecured loans raised shall not be repaid during the currency of Bank Loan. This can be treated as Quasi Equity i.e. part of borrower’s contribution. On finalizing the available sources of funds, the loan amount requirement from Bank can be finalized.  In case of Working capital requirement it depends upon the Current Assets and Current Liabilities of the business / business cycle etc.

 

  1. Requirement of other information / documents:

 

  • Xerox copies of all the required permissions / licenses / registrations e.g. Company / Partnership Firm / Trust registration i.e. identity of the business, Registration under Shops & Establishments Act, SSI Registration or any other registration as per applicable rules in the respective states. License from Foods & Drugs Deptt. In case of eatable items, license related to explosives, license from Pollution Control Board etc. Approved Map and construction permission in case of construction of building / shed. GST registration, PAN card
  • Quotations for the items to be purchased preferably from the actual dealer from whom the items are to be purchased. As far as possible, there should not be much variations in quotations submitted to Bank and dealers from whom the items are purchased.
  • Income tax returns of the persons / business for last 3 years.
  • Bank statements from existing bankers, with details of repayment schedule in case of existing loans if any.
  • Details of Collateral Security proposed to be offered with approximate value.
  • List of prospective customers and arrangements for selling.
  • List of prospective sellers from whom raw material / items will be purchased.
  • Information regarding availability of raw materials / items proposed to be dealt with Govt. restrictions if any particularly in case of imported material.
  • Market study report and strategy to be adopted for achieving the projected levels particularly in case of new business.
  • Assets / Liabilities statements of persons who are going to execute the documents.
  • List of assets available / already purchased with copies of invoices.
  • Availability of infrastructure i.e. Labour, Water, Electricity, transportation with details of requirement and sources.
  • Average period of getting Credit for raw material and minimum economic quantity of purchase, average period of realizing sale proceeds.
  • Detailed manufacturing process in case of Manufacturing industry and time taken for completion of one production cycle.
  • Minimum period of keeping stock of raw material and finished goods.
  1. Detailed Project Report: This is in two parts one is brief write up and second is financial data (CMA Report) CMA stands for Credit Monitoring Arrangement wherein the past and projected financial performance of a business is compiled in a defined format with all the required financial metrics and ratios to help Bankers and Financial Analysts ascertain the financial health of a business.

 In the first part following points are to be covered:  (This is should be in brief covering all the important points: e.g.

  • Brief introduction of the business entity – constitution, activity of the business, name(s) of Proprietor, Partners, Directors, Trustees with their designations and their role in the business, Location / Address of the Regd. Office, working place and outlets where activities of the business will be carried out with name of contact persons and contact numbers.
  • Experience / Qualifications and capabilities of the owners and other related persons with their relations with the business.
  • Nature of Activity and its marketability.
  • Availability of Infrastructure like labour, water, electricity, transportation, raw material and present status.
  • Detailed information regarding various registrations, permissions, licenses with present status and expected time of completion in case of incomplete items.
  • Manufacturing process in brief in case of manufacturing units.
  • Time required for completion of the project and starting commercial production / income generation.
  • List of existing Debtors / Creditors in case of existing business and prospective clients / consumers in case of new business.
  • SWOT analysis of the business.
  • Marketing arrangements.
  • Details of Project cost and existing assets with sources of finance.
  • Present Banking arrangements with details of Accounts maintained.
  • Details of any other services which the unit can avail from the Bank e.g. Staff accounts for salary, personal loans for staff guaranteed by the unit etc.
  • Financial requirement from Bank with purpose.
  • Security proposed to be offered for the loan applied with full details and approximate value.
  • Repayment proposed by the applicant based on the CMA data with proposed moratorium period.
  • Any other relevant information may be included depending upon the business at appropriate place in this report.
  • Request for facility wise sanction of loan..
  • Attach list of documents submitted along with the proposal.

Second part consists of CMA data: In CMA data there are different parts:

In case of existing units, the data should be for current year (estimated) and past 3 years (Audited) and projections for next 5 to 7 years covering the proposed repayment period of Term loan.

  • Operating statement – Profitability statement. In CMA data the expenses are mainly grouped into following categories:
  • Raw Material consumed. (Opening stock + Purchases – Closing Stock)
  • Other Spares
  • Electricity / Power / Fuel
  • Factory / Direct wages
  • Repairs & Maintenance
  • Other overheads

Total of the above expenses plus opening stock of Stock in process and Finished goods Less closing stock of Stock in process and Finished goods is the “Total Cost of Sales”.

 All other office expenses and indirect expenses related to business excluding Interest paid on Bank loan (which is shown separately- for Cash Credit and for Term Loan) are clubbed under the head “ Selling, General &Administrative Expenses”.

 Non operating Income and Expenses are to be shown separately in the CMA data. Detailed format of “Operating Statement” generally required by Banks for CMA data is attached for reference.

  • Balance Sheet – Liabilities: Include following heads

 Current Liabilities:

  • Short Term borrowings from “Banks” with sub limit for Bills Discounting.
  • Short Term borrowings from “others”.
  • Sundry Creditors (Trade)
  • Sundry Creditors (Capital Expenditure)
  • Advance payment from Customers, dealers.
  • Provision for taxation.
  • Dividend payable in case of Companies.
  • Other Statutory liabilities payable within one year.
  • Term Loan installments payable within one year are to be treated as Current Liabilities.
  • Other Current Liabilities and provisions to be specified.
  • Term Liabilities:
  • Part of Term Loan excluding amount payable within one year.
  • Other Term liabilities (Not payable within next one year.)
  • Unsecured Loans not repayable in next one year.

 Total of Current Liabilities and Term Liabilities represent “Total Outside Liabilities”.

 Net Worth: It includes: 

  • Capital invested in the business.
  • Reserves & Surplus in case of Companies
  • Surplus / Deficit in Profit & Loss Account.

 

Sum of Current Liabilities, Term Liabilities and Net Worth is “Total Liabilities”

Balance Sheet : Assets:  includes following heads.

  • Current Assets: 
  • Cash & Bank Balances excluding Term Deposits in Banks
  • Investments in Govt. Securities
  • Investment in Bank Deposits
  • Receivables
  • Expenses receivable including Bills purchased and discounted by Banks.
  • Inventory which includes Stock of Raw Material, Spares, Stock in Process and Finished Goods.
  • Advance to suppliers for supply of Raw Materials and Spares.
  • Advance payment of Taxes
  • Other Current assets to be specified.

Sum of the above items represent “Total Current Assets”

 Fixed Assets: 

  • Gross Block of Fixed Assets Less Depreciation up to date i.e Net Block. (With detailed working of Depreciation)
  • Advance for Capital Expenditure
  • Other investments which are not “Current Assets”
  • Investments in Associates & Subsidiaries.
  • Long term loans & advances
  • Security Deposits.
  • Staff advances
  • Obsolete Stock
  • Other non-current assets to be specified.
  • Preliminary Expenses to the extent of Not written off and other intangible assets.

Sum of Current Assets and Fixed Assets is “Total Assets”

 

Total Liabilities = Total Assets (to be checked)

  

Ratio Analysis & Assessment of Bank Finance:

 From the available and projected financial statements, important ratios are to be calculated which include :

 

LIQUIDITY RATIOS
Current Ratio
Quick Ratio or Acid test Ratio
Absolute Cash Ratio
Interval Measure
CAPITAL STRUCTRE RATIOS
Equity to Total Funds Ratios
Debt Equity Ratio
Capital Gearing Ratio
Fixed Asset to Long Term Fund Ratio
Proprietary Ratios
COVERAGE RATIOS
Debt Service Coverage Ratio
Interest Coverage Ratio
Preference Dividend Coverage Ratio
TURNOVER RATIOS
Capital Turnover Ratio
Fixed Asset Turnover Ratio
Working Capital Turnover Ratio
Finished Goods or Stock Turnover ratio
WIP Turnover Ratio
Debtors Turnover ratio
Creditors Turnover ratio
PROFITABILITY RATOS BASED ON SALES
Gross Profit ratio
Operating profit Ratio
Net profit Ratio
Contribution Sales Ratio
PROFITABILITY RATOS OWNERS VIEW POINT
Return on investment (ROI) or return on capital employed
Return on Equity
Earnings Per Share
Dividend Per Share
Return On Assets
  • Cash Flow statement.
  • Sensitivity analysis

Working Capital assessment:

 Term loan component depends upon the “Project Cost”, but Assessment of Working Capital i.e. Cash Credit / Overdraft limit depends upon various parameters and calculated based on various methods of assessment of Working Capital, which is mainly related to Current Assets and Current Liabilities. It is outcome of two variables:

  • The Volume of Activity : Production and Sales
  • Required level of Current Assets (Inventory and Receivables) to enable the unit to carry on operations smoothly.

Sources of Working Capital include:

  • Own Funds
  • Bank Borrowings
  • Sundry Creditors
  • Advances from Customers
  • Deposits due in one year
  • Other Current Liabilities

Following are various methods of assessment of Working Capital:

  • Operating Cycle Method
  • Traditional Method
  • Projected Balance Sheet Method
  • Cash Budget Method
  • Projected Annual Turnover Method (Nayak Committee)

 

SEGMENTLIMITS (Rs. Cr)SUGGESTED METHOD
SSIUpto 5Traditional & Nayak Committee (PAT)
Above 5Project Balance Sheet Method
SBFAll loansTraditional & Nayak Committee (PAT)
Trade & ServicesUpto 1Traditional &  Nayak Committee (PAT)
Above 1 upto 5Projected Balance Sheet & Nayak Committee (PAT)
Above 5Projected Balance Sheet
C & I IndustrialBelow  0.25Traditional & Nayak Committee (PAT)
Above 0.25 & over upto 5Projected Balance Sheet &

Nayak Committee (PAT)

Above 5Projected Balance Sheet

 

 Operating Cycle Method:

 Time taken between cash outlay (investment) and cash realization through sale of finished goods and realization of receivables is known as “Operating Cycle”

 For Example:

Time taken for different activities is as under:

  • Stock of Raw Material in days 60
  • Stock in Process in days 10
  • Stock of Finished Goods in days 20
  • Bills Receivable in days 30

Length of Operating Cycle                               120 Days

 (i.e. 3 Cycles in a year (365/120)

 Measuring Period for Working Capital components:

  • Raw Material holding period = Stock of R.M. *365 / Annual consumption of Raw Material.
  • Stock in Process holding period = Stock in Process * 365 / Cost of Production.
  • Finished Goods holding period = Finished Goods level * 365 / Cost of Sales.
  • Receivables holding period = Receivables * 365 / Annual Gross Sales
  • Advances paid to suppliers period = Advances paid * 365 / Annual purchases.
  • Trade Creditors holding period = Trade Creditors level * 365 / Annual purchases.
  • Advances received against Sales period = Advances received * 365 / Annual Gross sales.

If Sales of the business are Rs. 2,00,000.00 and operating Expenses are Rs. 1,80,000.00, then the Working Capital required will be Rs. 60,000.00.

 (1,80,000 / 3 – Number of cycles in a year)

    As per this method Working Capital required is influenced by two factors:

  • Level of Operating Expenses
  • Length of Operating Cycle.

Reduction in either will bring down Working Capital Requirement which indicates improved efficiency in Working Capital Management.

  1. Traditional Method:

 

For example:  for unit XYZ:                      (Amount in lakhs)

Anticipated Monthly Sales                                     Rs. 200.00

Cost of Raw Material per month                            Rs.  150.00

Cost of Production per month                               Rs.  190.00

 

ItemStocking

period

WC requiredMargin (%)AmtPermissible Limit
12345

(3 * 4)

6 (3 – 5)
Raw Material30 Days15025%37113
Work in process15 Days9525%2471
Finished Goods15 Days9525%2471
Receivable30 Days190

(Cost of Production)

33%

of Sale Price)

66134

(Sale Price – Margin)

Expenses30 Days40100%40
Total570191389 (a)
Less: Advance Payment30
          Credit on purchase80
Working Capital Required460

 

If Liquid surplus in Balance Sheet at the end of last year =  50, Net Deficit = 410 (b)  (460 Minus 50). 

 

Eligible Working Capital limit under traditional method minimum of a & b = 389  say 390

  

  1. Projected Balance Sheet Method:

 

  • Proper Examination of Performance:

 

  • Profitability
  • Financial Position
  • Financial Management.

 

  • Scrutiny & Validation of Projections:

 

  • Income & Expenses
  • Changes in Financial Positions.

 

  • Acceptability of Liquidity, overall gearing efficiency of operations:

 

Assessment of Working Capital under Projected Balance Sheet Method:

                                                                                            

                                                                                                (Amt in lakhs)

Previous YearCurrent

Year

Next Year
A     Total CA7595115
B     Other CL506075
C     Working Capital Gap              (A – B)253540
D     Net Working Capital (Actual / Projected)51015
E     Assessed Ban Finance (ABF)    (C – D)202525
NWC / TCA (%)6.67%10.53%13.04%
Bank Finance / TCA (%)26.67%26.31%21.74%
S. Creditor / TCA (%)20%21.05%21.74%
Other CL / TCA (%)66.66%63.17%65.22%
Inventory to Net Sales (days)273237
Receivable to Gross Sales (days)737373
S. Creditor / Purchases (days)395061

 If

Gross Sales200225250
Sundry Creditors152025
Purchases140145150
Receivables404550
Inventory152025
  1. Cash Budget Method: This is applicable in case of Seasonal and specific industries: e.g. Sugar Industry, Ginning & Pressing, Construction activity, Information & Technology etc.

 

Cash Flow Statement:  Example

 

Month 1 2 3 4 5 6 7 8 9 10 11 12
Sales540720360360100180300360360240240450
Receipts 351 531 657 414 334 147 180 288 351 348 258 261
Cash Sales547236361018303636242445
Collections297459621378324129150252315324234216
Payments 383 536 633 356 317 172 221 314 381 338 254 311
To Creditors25237850425225270126210252252168168
Wages8110854541527455454363668
Others505075505075505075505075
Surplus/Deficit-32-5245817-25-41-26-30104-50
BF Cash10-22-27-35572476-20-50-40-36
Cum. Cash-22-27-35572476-20-50-40-36-86
Cash in Hand101010101010101010101010
Cum. Surplus

/ Deficit

-32 -37 -13 45 62 37 -4 -30 -60 -50 -46 -96

 

Limit is decided based on peak deficit projected as per Cash Flow Statement.

  1. Projected Turnover Method (Nayak Committee):

 

This method is applicable where FBWC limit is upto Rs. 500.00 lakh (Rs. 5.00 Crore)

 

Under this method Working Capital is decided as 25% of Realistic Projected Annual Turnover Less Min. 5% of turnover to be brought in by the borrowers as their contribution.

 

Computation under annual Turnover method.

 

  1. Annual Turnover as projected by Borrower
  2. Turnover as accepted by Bank
  3. Working Capital Requirement (25% of B)
  4. Minimum margin required (5% of B)
  5. Actual Margin available (CA – CL)
  6. Item C – item D
  7. Item C – item E
  8. WC Finance – F or G, whichever is less

 

Example:

                                                                             (Amt. in lakhs)

AAnnual Turnover as projected by Borrower1500
BTurnover as accepted by Bank1200
CWorking Capital Requirement (25% of B)300
DMinimum Margin required (5% of B)60
EActual Margin Available ( CA – CL)20
FItem C Minus Item D240
GItem C Minus Item E280
HWorking Capital Finance F or G whichever is Less240

 

 

Non Fund based limits e.g. Letters of Credit or Bank Guarantees : Limits are to be decided based upon genuine requirement of the unit.

 

 

Format of CMA Data:  Banks use individual formats of CMA data, however the information required is same.  One of the formats is given below:  The format may be prepared in excel sheet for easy calculations.

Operating Statement:

PARTICULARSAudAudAudEst. Proj
Years2015-162016-172017-182018-192019-20
Operating months1212121212
Operating Statement
1I. Domestic Sales
ii. Export Sales
1Total Gross Sales0.000.000.000.000.00
2Less : Excise Duty
3Net Sales (1-2)0.000.000.000.000.00
4Growth in sales0%0%0%0%
Cost of Sales
5a. Raw Material (Imported )
b. Raw material (Indigenous)
c. Stores & Spares (Imported)
d. Stores & Spares (Indigenous)
6Power & Fuel
7Direct Labour
8Repairs and maintenance
9Other Sight Expenses
10Depreciation
11Others expenses0.000.000.000.000.00
a
b
c
Sub Total0.000.000.000.000.00
12Add: Opening Stock in Process
Sub Total0.000.000.000.000.00
13Deduct : Closing Stock in Process
Cost of Production0.000.000.000.000.00
14Add: Opening Stock of Finished Goods
Sub Total0.000.000.000.000.00
15Deduct : Closing Stock Of Finished Goods
Sub Total ( Total Cost of Sales)0.000.000.000.000.00
16Gross profit0.000.000.000.000.00
Gross Profit / Sales0.00%0.00%0.00%0.00%0.00%
17Selling Expenses
18Administrative Expenses
Sub Total 0.000.000.000.000.00
19Operating Profit before interest 0.000.000.000.000.00
a. Interest on CC.
b. Interest on TL
c. Other interests
20Total Interest0.000.000.000.000.00
21Operating Profit after Interest0.000.000.000.000.00
22Add: Other non operating Income
aInterest/Dividend/Royalties etc..
bcommission
cOther income
d
Sub Total0.000.000.000.000.00
23Deduct other non operating expenses
aInterest/Dividend/Royalties etc..
bOther Expenses
cIntangibles written off
dDirectors remuneration
eExchange loss
Sub Total0.000.000.000.000.00
24Net of other non operating Income/Expenses0.000.000.000.000.00
25Profit before Tax /Loss (PBT)0.000.000.000.000.00
26Provision for Taxes
27Net Profit/Loss (PAT)0.000.000.000.000.00
28Cash Accruals0.000.000.000.000.00
29Dividend paid + IT on Dividend
30Retained Profit0.000.000.000.000.00
31Retained Cash Profits0.000.000.000.000.00
32RM Content in sales0%0%0%0%0%
33PBDIT0.000.000.000.000.00
34PBDIT/Sales0.00%0.00%0.00%0.00%0.00%
35Operating Profits/Sales0.00%0.00%0.00%0.00%0.00%
36PBT/Sales0.00%0.00%0.00%0.00%0.00%
37PAT/Sales0.00%0.00%0.00%0.00%0.00%
38Cash Accruals/ Sales0.00%0.00%0.00%0.00%0.00%
Interest on CC.
Interest on TL
Other interests
Transfer to Reserves (if any)
Depreciation adjustments

 

 

ANALYSIS OF BALANCE SHEET  –  LIABILITIES
AudAudAudEst. Proj
2015-162016-172017-182018-192019-20
LIABILITIES
Current Liabilities
1Short Term loans from Applicant Bank  including BP &BD
Short Term loans From Other banks including BP &BD
Sub Total (A)0.000.000.000.000.00
     
2Short Term Borrowings from Others
3Sundry Creditors (Trade)
4Advance Payment from Customers
5Net Provision for Taxation (if positive)
6Dividend Payable
7Other Statutory Liab. (Due within one Year)
8Overdue Term Liabilities
9Installments of term Loan/ DPGs/ Deposits/ debentures due within next year
10Other Current Liabilities & Provisions (due within one year)0.000.000.000.000.00
aSundry creditors for expenses
bProvisions
cDue against Land/Plot
dShare Application Money0.00
11Sub Total (B)0.000.000.000.000.00
12TOTAL CURRENT LIABILITIES0.000.000.000.000.00
TERM LIABILITIES
13Debentures (not maturing within one Year)
14Preference Shares (redeemable after 1 year)
14Term Loan from Bank(Less next Year Instalments)
14Term Loan from Other Banks/Inst. (Excl. Instal. due next Yr.)
15Deferred Payments Credits (Excl. Instal. due next Yr.)
16Term deposits (Excl. Instal. due next Yr.)
17Other term Liabilities0.000.000.000.000.00
aUnsecured loan
b
18TOTAL TERM LIABILITIES0.000.000.000.000.00
19TOTAL OF OUTSIDE LIABILITIES 0.000.000.000.000.00
NET WORTH
20Share Capital
21General Reserve
22Revaluation Reserve0.000.000.00 0.00
23Adjustments for previous Year costs0.00
24Other reserves (excluding Provisions)
25Others0.000.000.000.000.00
aShare Premium/Application  Account
b
c
26Surplus (+) or deficit (-) in Profit & Loss a/c0.000.000.000.00
27NET WORTH0.000.000.000.000.00
28TOTAL LIABILITIES (18+24)0.000.000.000.000.00

 

ANALYSIS OF BALANCE SHEET Continued  –  ASSETS
AudAudAudEst.Proj
2015-162016-172017-182018-192019-20
ASSETS
Current Assets
1Cash & Bank Balances
2Govt. & other Trustee securities
3Fixed Deposits with Banks
4Domestic Receivables including BP/BD
5Export Receivables including BP/BD)
6Deferred receivables(due within one year)
7Imported Raw Material
8Indigenous Raw material
9Stock in Process0.000.000.000.000.00
10Finished Goods0.000.000.000.000.00
11imported Consumables
12Indigenous consumables
a.Packing Material
13Advances to Suppliers
14Net Advance Payment of Taxes (if positive)
15Other Current Assets (specify major items)0.000.000.000.000.00
aLoans & Advances
bDeposits with clients & others
c
d
16TOTAL CURRENT ASSETS0.000.000.000.000.00
FIXED ASSETS
17Gross Block (Land & Building Machinery
18Add Capital expenditure in work-in-process
19Depreciation to Date0.000.000.000.00
20Net Block0.000.000.000.000.00
21OTHER NON CURRENT ASSETS
aInvestments in Sub. cos./ affiliates
bInvestment in Others
cAdvance to suppliers of Capital goods & Contractors
dDeferred Receivables(Maturing after a year)
eOther Non-current investments
fNon Consumable Stores & Spares
gLong outstanding dues &Other non Current Assets /dues from Directors
hDeposits
i
TOTAL OTHER NON CURRENT ASSETS0.000.000.000.000.00
22Intangible Assets
aPreliminary Expenses
bDeffered Revenue expenditures
cOther Intangibles (patents, goodwill, etc.)
d
e
23Total Intangible Assets0.000.000.000.000.00
24TOTAL ASSETS0.000.000.000.000.00
49TANGIBLE NET WORTH (TNW)0.000.000.000.000.00
50NET WORKING CAPITAL (NWC)0.000.000.000.000.00

 

Movement of TNW
Opening TNW0.000.000.000.00
Plough back of profit0.000.000.000.00
Increase in capital/reserves0.000.000.000.00
Intangibles written off0.000.000.000.00
Closing TNW0.000.000.000.000.00
Current Ratio0.000.000.000.000.00
Debt/Equity0.000.000.000.000.00
TOL/Equity0.000.000.000.000.00
Current Assets/Tangible Assets0.00%0.00%0.00%0.00%0.00%
ROCE (PBDIT incl. Other income/TTA)0.000.000.000.000.00
Inventory + Receivables as days of Net Sales00000
ADDITIONAL INFORMATION
a. Arrears of Depreciation
b. Contingent Liabilities
c. Arrears of Cumulative Dividends
d. Gratuity Liability not  Provided for
e. Disputed Custom/Excise/ Tax Liabilities
f. Other Liabilities not provided for
Check Points
Check Points2015-162016-172017-182018-192019-20
1Difference in Assets & Liabilities0.000.000.000.000.00
2Increase in cap.& reserves beyond retained profit0.000.000.000.00
3Difference in intangibles written off in balance Sheet and shown in P&L account0.000.000.000.00
4Reduction in TL is less than TL instalments  plus overdues0.000.000.000.00

 

COMPARATIVE STATEMENT OF CURRENT ASSETS & CURRENT LIABILITIES
WORKING CAPITAL / BANK BORROWING ASSESSMENTS
AudAudAudEst. Proj
2015-162016-172017-182018-192019-20
A.WORKING CAPITAL ASSESSMENT
Stock of Imported RM -Days Consumption00000
Stock of Indiginous RM – Days Consumption00000
Imported Consumables – (Days Consumption)00000
Indiginous Consumables – (Days Consumption)00000
Stock in process- (Days of  Cost of Production)00000
Finished Goods – (Days Cost of Sales)00000
Total Inventory0.000.000.000.000.00
Total Inventory/Sales (days)00000
Domestic receivables (Days Gross dom. Sales)00000
Export Receivables – (Days Exports)00000
Total Receivables0.000.000.000.000.00
Total Receivables/Gross Sales (days)00000
Creditors – (days Consumption)00000
Total Current Assets0.000.000.000.000.00
Financed by
Sundry Cr. % of Current Assets0.00%0.00%0.00%0.00%0.00%
Other Curr. Liab.% of Current Assets0.00%0.00%0.00%0.00%0.00%
Bank Finance % of Current Assets0.00%0.00%0.00%0.00%0.00%
NWC % to Current Assets0.00%0.00%0.00%0.00%0.00%
0.00%0.00%0.00%0.00%0.00%
By PBS Method2015-162016-172017-182018-192019-20
Total Current assets0.000.000.000.000.00
Other Current Liabilities0.000.000.000.000.00
Working Capital gap0.000.000.000.000.00
Net Working capital0.000.000.000.000.00
Bank Finance0.000.000.000.000.00

 

 

 Fund Flow AnalysisAudAudAudEst. Proj
 Particulars2015-162016-172017-182018-192019-20
1LONG TERM SOURCES
Profit after Tax0.000.000.000.000.00
Depreciation0.000.000.000.000.00
Intangibles written off0.000.000.000.000.00
Increase in capital and reserves0.000.000.000.000.00
Increase in Term Liability0.000.000.000.000.00
i.  Decrease in Fixed Assets0.000.000.000.000.00
ii. Decrease in Other non current assets0.000.000.000.000.00
Total Long Term Sources 0.000.000.000.000.00
2LONG TERM USES
Net Loss0.000.000.000.000.00
Increase in Intangibles0.000.000.000.000.00
Decrease in Capital .and Reserves/ Share Buybacks0.000.000.000.000.00
Decrease in Term Liabilities0.000.000.000.000.00
i.  Increase in Fixed Assets0.000.000.000.000.00
Increase in non-Current Assets0.000.000.000.000.00
iii. Increase in Intangibles
Dividend paid0.000.000.000.000.00
Total Long Term Uses0.000.000.000.000.00
Surplus/ Deficit0.000.000.000.000.00
Short Term Sources     
Increase in  Bank Borrowings0.000.000.000.000.00
Increase in other Current Liabilities0.000.000.000.000.00
Decrease in Inventory0.000.000.000.000.00
Decrease in Receivables0.000.000.000.000.00
Decrease in Cash/Deposits/Govt Sec.0.000.000.000.000.00
Decrease in Other Current Assets0.000.000.000.000.00
Total Short Term Sources0.000.000.000.000.00
Short Term Uses     
Increase in Inventory0.000.000.000.000.00
Increase in Receivables0.000.000.000.000.00
Increase in Cash/Deposits/Govt Sec.0.000.000.000.000.00
Increase  in Other Current Assets0.000.000.000.000.00
Decrease in Other Current Liab.0.000.000.000.000.00
Decrease in Bank Borrowings0.000.000.000.000.00
Total Short Term Uses0.000.000.000.000.00
Summary of fund Flow Analysis  
Long Term Sources0.000.000.000.000.00
Long Term Uses0.000.000.000.000.00
Surplus /Deficit (i-ii)0.00 0.00 0.00 0.00 0.00
Short term sources0.000.000.000.000.00
Short term uses0.000.000.000.000.00
Surplus /Deficit (iii-iv)0.00 0.00 0.00 0.00 0.00

 

CALCULATION OF BREAK EVEN LEVELS
VariableAudAudAudEst. Proj
Particulars%2015-162016-172017-182018-192019-20
BREAK EVEN POINT
Sales0.000.000.000.000.00
Variable Cost
I. Raw Material100.00%0.000.000.000.000.00
ii. Consumables100.00%0.000.000.000.000.00
iii. Direct Labour60.00%0.000.000.000.000.00
iv. Power & Fuel60.00%0.000.000.000.000.00
v. Selling Expenses20.00%0.000.000.000.000.00
vi. Other Variable Costs
Total Variable Costs0.000.000.000.000.00
Percent of Sales0%0%0%0%0%
Fixed Costs0.000.000.000.000.00
Break Even Level of Sales0.000.000.000.000.00
Percentage to Sales0%0%0%0%0%
Cash Break Even of Sales0.000.000.000.000.00
0%0%0%0%0%
 Sensitivity to BEP
When sales go down
Sales (when down by)5%0.000.000.000.000.00
Variable costs also go down by0%0.000.000.000.000.00
Contribution0.000.000.000.000.00
Fixed Costs0.000.000.000.000.00
BEP0.000.000.000.000.00
% to Sales0%0%0%0%0%
Cash Break Even of Sales0.000.000.000.000.00
% Sales0%0%0%0%0%
When RM cost goes up by5%
% can be passed on to customer
Sales will go up to0.000.000.000.000.00
Variable costs up by5%0.000.000.000.000.00
Contribution0.000.000.000.000.00
Fixed costs0.000.000.000.000.00
BEP if RM cost goes up by5%0.000.000.000.000.00
% to Sales0%0%0%0%0%
Cash Break Even of Sales0.000.000.000.000.00
% Sales0%0%0%0%0%
When Other Variable costs up by5%
% can be passed on to customer0%
Sales will go up to0.000.000.000.000.00
Other Variable Cost  up by5%0.000.000.000.000.00
Contribution0.000.000.000.000.00
Fixed Costs0.000.000.000.000.00
BEP If Variable Expn. Go up by5%0.000.000.000.000.00
% Sales0%0%0%0%0%
Cash Break Even of Sales0.000.000.000.000.00
% Sales0%0%0%0%0%

 

Sensitivity to DSCR
When Sales go down
Sales (when down by)0.050.000.000.000.000.00
Variable costs also go down by0.000.000.000.000.000.00
Fixed cost0.000.000.000.000.00
Total cost0.000.000.000.000.00
Operating Profits0.000.000.000.000.00
Depreciation & non cash charges0.000.000.000.000.00
Cash Accruals0.000.000.000.000.00
Interest on TL0.000.000.000.000.00
Repayments0.000.000.000.00
Gross DSCR0.000.000.000.000.00
Average Gross DSCR0.00    

 

When RM cost goes up by5%
% can be passed on to customer0%
Sales0.000.000.000.000.00
Variable costs sales go up to0.000.000.000.000.00
Fixed cost0.000.000.000.000.00
Total cost0.000.000.000.000.00
Operating Profits0.000.000.000.000.00
Depreciation & non cash charges0.000.000.000.000.00
Cash Accruals0.000.000.000.000.00
Interest on TL0.000.000.000.000.00
Repayments0.000.000.000.000.00
Gross DSCR0.000.000.000.000.00
Average Gross DSCR0.00

 

 

When Variable costs go up by5%
% can be passed on to customer0%
Sales0.000.000.000.000.00
Variable costs sales go up to0.000.000.000.000.00
Fixed cost0.000.000.000.000.00
Total cost0.000.000.000.000.00
Operating Profits0.000.000.000.000.00
Depreciation & non cash charges0.000.000.000.000.00
Cash Accruals0.000.000.000.000.00
Interest on TL0.000.000.000.000.00
Repayments0.000.000.000.000.00
Gross DSCR0.000.000.000.000.00
Average Gross DSCR0.00

 

ParticularsAudAudAudEst. Proj
Year2015-162016-172017-182018-192019-20
A. Balance Sheet Data
Share Capital
Share Appln. Money
Res.& Surplus Excl. Revaluation Reserve
Surplus / Deficit in P & L Account
Intangible assets
Tangible Networth (TNW)
Installment due within one year
Term Liabilities (Excl. Install)
Unsecured Loans
Capital Employed
Net Block
Non Current Assets
Current Assets  (A)
Current Liabilities   (B)
Net Working Capital   (A – B)
B. Operational Data
Gross Sales
Less : Excise / Sales Tax
Net Sales
Refund of Sales Tax
Other Income
Mfg. Expenses
Admn. & Selling Expenses
Depreciation
Interest
Profit Before Tax (PBT)
Profit After Tax (PAT)
C. Profit Ratios
NP / NS (%)
NP / Cap. Employed (%)
Inv. Turnover (Days)
Debtors Turnover (Days)
PAT / TNW (%)
Current Ratio
DER (TTL / TNW)
DER (TOL / TNW)
DSCR.0.00

 

Aud.Aud.Aud.Est. Proj.
Particulars2015-162016-172017-182018-192019-20
RATIOS
1Growth in Sales0%0%0%0%0%
2Gross profit Ratio0.00%0.00%0.00%0.00%0.00%
3PBDIT0.000.000.000.000.00
4PBDIT/sales0.00%0.00%0.00%0.00%0.00%
5Operating Profits/Sales0.00%0.00%0.00%0.00%0.00%
6PBT/Sales0.00%0.00%0.00%0.00%0.00%
7PAT/Sales0.00%0.00%0.00%0.00%0.00%
8Cash Accruals/ Sales0.00%0.00%0.00%0.00%0.00%
9Sales/Equity0.000.000.000.000.00
10Sales / TTA0.000.000.000.000.00
11Interest Coverage (Interest/PBDIT)0.00%0.00%0.00%0.00%0.00%
12PBDIT / Interest (Times)0.000.000.000.000.00
13Deferred Debt/ Equity0.000.000.000.000.00
14TOL/Equity0.000.000.000.000.00
15Current Ratio (CA / CL)0.000.000.000.000.00
16Current Ratio excluding TL Installments0.000.000.000.000.00
17CA / TTA (%)0.00%0.00%0.00%0.00%0.00%
18Inventory +Receivables as days of Net Sales00000
19Bank Borrowings/Current Assets0.00%0.00%0.00%0.00%0.00%
20RM content in sales0%0%0%0%0%
21ROCE (PBDIT incl. Other income/TTA)0.00%0.00%0.00%0.00%0.00%
 
Debt Service Coverage Ratio Calculations
Cash accruals0.000.000.000.000.00
Any cash inflow (eg. sales tax deferal,  subsidy )
Interest on TL / Deferred Loans0.000.000.000.000.00
Repayment Obligations of TL0.000.000.000.00
Repayment of other deferred Loans
Total Repayment0.000.000.000.000.00
Net Debt Service Coverage Ratio (DSCR)0.000.000.000.000.00
Gross Debt Service Coverage Ratio (DSCR)0.000.000.000.000.00
Average Net DSCR0.00    
Average Gross DSCR0.00    
Security Coverage Ratio
Net Block0.000.000.000.000.00
Term Loan outstanding (including installments)0.000.000.000.000.00
Security Cover available (NB-TL/NB)0%0%0%0%0%

 

Security cover including Collateral Security
Security Cover available ((NB+ Collateral-TL)/NB)0%0%0%0%0%

 

Key IndicatorsAudAudAudEst. Proj
2015-162016-172017-182018-192019-20
Net Sales0.000.000.000.000.00
Operating Profit0.000.000.000.000.00
(Net) Other income0.000.000.000.000.00
PBDIT/Sales0.00%0.00%0.00%0.00%0.00%
PBT/Sales0.00%0.00%0.00%0.00%0.00%
PAT0.000.000.000.000.00
PAT/Net Sales0.00%0.00%0.00%0.00%0.00%
Cash Accruals0.000.000.000.000.00
Cash Accruals/Sales0.00%0.00%0.00%0.00%0.00%
Paid up Capital (PUC)0.000.000.000.000.00
TNW0.000.000.000.000.00
Adjusted TNW (TNW-Investment in associates)0.000.000.000.000.00
TOL/TNW0.000.000.000.000.00
TOL/Adjusted TNW0.000.000.000.000.00
C/R0.000.000.000.000.00
C/R excluding T/L installments due in 1 year0.000.000.000.000.00
Net Sales / TTA (Times)0.000.000.000.000.00
PBT/TTA (%)0.00%0.00%0.00%0.00%0.00%
Operating costs/sales(%)0.00%0.00%0.00%0.00%0.00%
Bank Finance / Current Assets (%)0.00%0.00%0.00%0.00%0.00%
Inv + Rec. /N.S. (DAYS)00000
NWC / CA (%)0.00%0.00%0.00%0.00%0.00%

 

NOTE:

All information in this post are for educational purpose only, some table format are not arranged

E-Way bill – Updated

0

Meaning:

E-way bill is an electronic way bill for movement of goods which can be generated on the GSTN common portal. When an E-way bill is generated, a unique E-way bill number (EBN) is allocated and is available to supplier , recipient , transporter. E-way bill also be allowed to be generated or cancelled through SMS.

 

Condition:

Every registered person,

Movement of goods,

Consignment value> Rs.50,000.

 

When should an E-way bill be generated ?

In relation to a supply; or for reasons other than supply(say a return); or due to inward supply from an unregistered person, due to Job work

 

When to issue E-way Bill?

 Before commencement of movement of goods, Furnish information relating to the said goods in Part A of FORM GST INS-01, electronically, on the common portal.

 

Who should Generate an eWay Bill?

Registered Person – E-way bill must be generated when there is a movement of goods of more than Rs 50,000 in value to or from a Registered Person. A Registered person or the transporter may choose to generate and carry e-way bill even if the value of goods is less than Rs 50,000.

Unregistered Persons – Unregistered persons are also required to generate e-Way Bill. However, where a supply is made by an unregistered person to a registered person, the receiver will have to ensure all the compliances are met as if they were the supplier.

 

 Transporter – Transporters carrying goods by road, air, rail, etc. also need to generate e-Way Bill if the supplier has not generated an e-Way Bill.

 

Acceptance or rejection by Recipient

 

Actual Acceptance

The details of e-way bill generated shall be made available to the recipient, if registered, on the common portal, who shall communicate his acceptance or rejection of the consignment covered by the e-way bill.

 

Deemed Acceptance

Where the recipient does not communicate his acceptance or rejection within seventy two hours of the details being made available to him on the common portal, it shall be deemed that he has accepted the said details.

 List of Forms:

 

FORMDISCRIPTION
FORM GST EWB-01E-WAY BILL FORM
FORM GST EWB-02Consolidated e-way bill form to be generated by transporter.
FORM GST EWB-03Inspection report to be filled up by proper officer.
FORM GST EWB-04Form to upload details by transporter, if vehicle detained for more than 30 minutes.

 

FORM GST EWB-01• Part A Details of consignment

• Part B Transporter / Conveyance Details

FORM GST EWB-03• Part A Summary Report

• Part B Final Report

 

Table of Distance with Period

 

Sr. NO.          DISTANCEVALIDITY PERIOD
1. Less than 100 kmOne day
2.100 km or more but less than 300kmThree day

 

3.

 

300 km or more but less than 500kmFive days
4.500 km or more but less than 1000kmTen days
5.1000 km or moreFifteen days

 

Marginal Costing Formula

0

Marginal Costing equation, profit volume ratio, Break even point, Margin of safety,cost break even point,finding  the selling price, finding the profit,.

                                Marginal Costing
1Marginal Costing EquationSales – VC = FC + Profit
2ContributionSales – VC
Profit + FC
3Profit Volume RatioContribution / Sales
(In Marginal Costing,
Profit = Contribution)Change in Profit / Change in Sales
(Profit = EBIT)Change in Contribution / Change in Sales
100% – VC Ratio (PV % + VC % = 100% of Sales)
4Break Even PointTotal Revenue = Total Cost
Break Even Point(In Rupees)FC / PV Ratio
Break Even Point(In Rupees)Break Even Point * Selling Price
Break Even Point(Quantity)FC / Contribution p.u
Note:At BEP, Total Contribution = Total Fixed Cost
5Margin Of SafetyTotal Sales – Break even Sales
Margin Of Safety(In Rupees)Profit / PV Ratio
Margin Of Safety(Quantity)Profit / Contribution p.u
6Indifference Point / Cost Break Even PointTotal Sales = Total Profits
(In Rupees)Difference in FC / Difference in VCR
(In Rupees)Difference in FC / Difference in PVR
(In Quantity)Difference in FC / Difference in VC p.u
(In Quantity)Difference in FC / Difference in Contribution p.u
7Shut Down Point
(In Rupees)Avoidable FC / PV Ratio
(In Quantity)Avoidable FC / Contribution p.u
8Avoidable FCTotal FC – Min Unavoidable FC

OTHERS

1ContributionProfit + FC
2Sales(In Rupees)Contribution / PV Ratio
3ProfitContribution – FC
4ContributionSales * PVR
5Finding the Selling PriceTotal VC / VCR
6Finding the ProfitMOS * PVR
Note:Always MOS + PVR = 100%

NOTES

1VC p.u Remains Same (it Changes if units increased or decreased but not Sale Price)
2FC p.u. Varies but remains fixed in total(FC are the Period Cost hence charged off to P & L A/c in Marginal Costing)
3Point of Indifference
a)Below the POI : Choose the product having lesser FC
b)Above the POI : Choose the product having Higher FC
4BEP% + MOS% = 100% of Sales

Format of Net Worth Certificate


NET WORTH CERTIFICATE
We hereby certify below the position of Assets & Liabilities of the person mentioned hereunder as on 31.03.18
The same has been verified from the records & other details produced before us:
Name                           :
PAN                            :
Date of Birth               :
Permanent Address    :                                   Office Address:
                       
(A) Total Value of Immoveable Property:
(This includes beneficial share owned in Land, Building, Flat, Factory, Shop, House etc.)
Nature of Property
Location with Complete Address
Value at Cost ( ` In Lacs)
Flat at
Shop
Shop
Jewellery
TOTAL
(B) Total Value of Other Assets:
(This includes Cash, Bank balance, Gold, Other Jewellery, Investment in Shares/Mutual Funds/FD’s/LIC etc, Vehicles, Capital in Business etc.)
Nature of Asset
Particulars of Asset/ Complete Description
Oty.
Value at Cost ( ` In Lacs)
PPF
PPF Investment
Shares
Shares
FDR & Bank
FDR & Bank
Capital investment
TOTAL
(C) Total Liabilities:
Borrowed From
Amount & Securities offered
Purpose
O/s as on date ( ` In Lacs)
IDBI
Housing
Deposit
Rent
Repayment of H. Loan
TOTAL
(D) Net Worth: (A + B – C) = /- Lacs
(In words ___________________________________)
He/She is the Guarantor for various Borrowings by his/her friends / relatives / firm(s) / company(s) as detailed below:
Guaranteed to
For the Borrowings by
Purpose
Amount Guaranteed ( ` In Lacs)
Term Loan
Vehicles
Cash Credit
TOTAL
  For xxx ASSOCIATES
  Chartered Accountants
    
  Partner
  Membership Number:
  Date: 

 

Pearls of financial wisdom

1) Bonds are for storing wealth and equities are for creation of wealth.

2) In my opinion, the biggest asset one can have is zero debt.

3) The greatest discipline in personal finance is living below your means.

4) As Ben Carlson says, emotions cannot be back tested. That’s why past bear market always looks like opportunities and future ones scary.

5) Early financial independence and early retirement are completely different. To me, the former is a blessing and the latter is a curse.

6) Don’t think how it would have been if you’ve started 10 years ago. Start today and visualize how you would feel 10 years from now.

7) The neighborhood we live determines our life style & spending. Need to be careful in choosing one which matches our goals and personality.

8) Paying minimum balance regularly on credit card is the maximum sign that you’re getting into debt trap.

9) Many are long term investors till next bear market.

10) Don’t take aggressive bets. Take measured risk. Remember one blunder can push you back by a decade or more in terms of wealth.

11) Big money can be made through high savings, wise investing and lots of patience.

12) One sign of progress in individual investor’s portfolio is no churn or very less churn.

13) Trying to get rich fast is a foolproof way to lose what we have.

14) Losing opportunities is far better than losing money. Don’t invest in fads.

15) “Making as much money as quickly as possible” is not an investment strategy. Unfortunately for most of us that is the strategy.

16) Aggressive strategy cannot be a substitute for high savings. Save high and take moderate risk than saving less and taking high risk.

17) The day we realise not losing is as important as winning; we would stop blindly chasing returns.

18) Good periods are more than bad periods. By not timing, though we go through bad periods, do not miss even a single good period.

19) We’ll stop looking for quick money the moment we consider stocks as businesses and realise that our wealth grows in line with business growth.
20) There are periods of high returns, low returns, no returns and negative returns. We need to go through all these to get long term returns.

21) Listening to market forecasts is not only useless but can be very harmful too; if you start acting on them.

22) The hard truth is only around 3% of our population are in a position to aspire for financial independence. Don’t waste this rare privilege.