Is costing paper a complicated one? Why because most of the CA PCC & Final students are facing problem either by way of conceptual understanding of the problem or by way time management (completing all the questions within 3 hours)
What is there in a costing paper, after all some additions, subtractions, multiplications & division. Yes of course some time square roots too.
Is it really that much difficult paper?
Students may say ´hmm'.. come & write a CA exam then u will know costing is better or bitter paper!!!"
Ok no violence between us….. let us see how to prepare for costing paper for the forthcoming CA exams to score more marks.
Either PCC or Final, the weightage given for the costing theory is 40 marks. Failure in costing is mainly because students don't concentrate much on theory. Without studying costing theory possibility of clearing costing paper is very very remote. Even though I am starting in a pessimistic manner it is the fact. If you are strong in costing theory, minimum you can score 60 marks. All theory questions are direct questions and all the questions are available in our Institute Study material itself and unlike income tax or law paper there are no amendment in costing theory .
Studying theory alone is not important you have to understand properly. On the top of it mere understanding alone is not important, you should remember it. Unless otherwise you remember, recollect & write few points in the examination you won't get marks. Systematic/ planned study is important to remember all the points.
"Failure to plan is equal to planning to fail". Planning is important, at the same time execution is still more important. If you spend absolute one and half hours per day with full concentration for three months you can finish the PCC/Final costing paper very easily. Refer one book, reading more than one book is not advisable. How many books you read is not important, how many time you revise one particular book is more important.
Practical problems should be worked out at least once as if you are taking up your final examination, instead of auditing the questions with solutions by way of ticks. Improve your analytical skills. Practice makes perfection and unless otherwise there is adequate practice nothing will come. While working out the problems avoid writing "K" for thousands and "L" for lakhs because you don't have the privilege to write likes that in examinations. To put zero takes one second and each and ever second counts in an examination. If you put K or L in exam then examiner will award a big "O". Attend all the questions; don't skip any questions in the exam. The attempt may be failure but you should not fail in attempting any of the questions.
WINNERS NEVER QUIT
&
QUITTERS NEVER WIN
WISH YOU ALL THE VERY BEST & DO WELL……
CA.K.HARIHARAN
Faculty member of ICAI
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Saturday, January 31, 2009
Saturday, January 24, 2009
Ques-10
10) A’ stands surety for ‘B’ for any amount which ‘C’ may lend to B from time to time during the
next three months subject to a maximum of Rs. 50,000. One month later A revokes the guarantee,when C had lent to B Rs. 5,000. Referring to the provisions of the Indian Contract Act, 1872 decide whether ‘A’ is discharged from all the liabilities to ‘C’ for any subsequent loan. What would be your answer in case ‘B’ makes a default in paying back to ‘C’ the money already borrowed i.e. Rs.5,000?
The problem as asked in the question is based on the provisions of the Indian Contract Act 1872, as contained in Section 130 relating to the revocation of a continuing guarantee as to future transactions which can be done mainly in the following two ways:1. By Notice: A continuing guarantee may at any time be revoked by the surety as to future transactions, by notice to the creditor. 2. By death of surety: The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions. (Section 131). The liability of the surety for previous transactions however remains. Thus applying the above provisions in the given case, A is discharged from all the liabilities to C for any subsequent loan. Answer in the second case would differ i.e. A Is liable to C for Rs. 5,000 on default of B since the loan was taken before the notice of revocation was given to C.
next three months subject to a maximum of Rs. 50,000. One month later A revokes the guarantee,when C had lent to B Rs. 5,000. Referring to the provisions of the Indian Contract Act, 1872 decide whether ‘A’ is discharged from all the liabilities to ‘C’ for any subsequent loan. What would be your answer in case ‘B’ makes a default in paying back to ‘C’ the money already borrowed i.e. Rs.5,000?
The problem as asked in the question is based on the provisions of the Indian Contract Act 1872, as contained in Section 130 relating to the revocation of a continuing guarantee as to future transactions which can be done mainly in the following two ways:1. By Notice: A continuing guarantee may at any time be revoked by the surety as to future transactions, by notice to the creditor. 2. By death of surety: The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions. (Section 131). The liability of the surety for previous transactions however remains. Thus applying the above provisions in the given case, A is discharged from all the liabilities to C for any subsequent loan. Answer in the second case would differ i.e. A Is liable to C for Rs. 5,000 on default of B since the loan was taken before the notice of revocation was given to C.
Ques-9
9) What does the term ‘bank guarantee’ mean?
A bank guarantee is a commercial instrument in the nature of a contract, intended between two parties, to secure compliance with the contract. It is an off-shoot of the main contract between two parties. A bank gaurantee is a guarantee made by a bank on behalf of a customer (usually an established corporate customer) should it fail to deliver the payment, essentially making the bank a co-signer for one of its customer's purchases.
A bank guarantee is a commercial instrument in the nature of a contract, intended between two parties, to secure compliance with the contract. It is an off-shoot of the main contract between two parties. A bank gaurantee is a guarantee made by a bank on behalf of a customer (usually an established corporate customer) should it fail to deliver the payment, essentially making the bank a co-signer for one of its customer's purchases.
Ques-8
8) How do bank guarantees help in commercial contracts?
Guarantees are important instruments used to minimize the risks that are involved in commercial contracts. For the enforcement of ordinary guarantees, as construed dependence of the guarantee on the main contract may lead to unnecessary disputes and litigation, arising from the main contract. These disputes may have a material effect on the guarantee, thereby blocking funds in litigation. Hence, there was a need for an innovative instrument which would enable the guarantee to serve its original purpose; namely, providing a form of security.The bank guarantee is one such innovative financial instrument whereby, if the beneficiary perceives that there has been a breach of contract by the other party, he can encash the guarantee and avail of the amount immediately, without having to undergo the hassles of litigation. Thus, the relevance of a bank guarantee achieves relevance.
Guarantees are important instruments used to minimize the risks that are involved in commercial contracts. For the enforcement of ordinary guarantees, as construed dependence of the guarantee on the main contract may lead to unnecessary disputes and litigation, arising from the main contract. These disputes may have a material effect on the guarantee, thereby blocking funds in litigation. Hence, there was a need for an innovative instrument which would enable the guarantee to serve its original purpose; namely, providing a form of security.The bank guarantee is one such innovative financial instrument whereby, if the beneficiary perceives that there has been a breach of contract by the other party, he can encash the guarantee and avail of the amount immediately, without having to undergo the hassles of litigation. Thus, the relevance of a bank guarantee achieves relevance.
Ques-7
7) How can a beneficiary restrain the invocation of a bank gaurantee?
The invocation of a bank guarantee by the beneficiary can be restrained by an injunction under the Civil Procedure Code, 1908, or the Specific Relief Act, 1963. However, the normal considerations, which apply in granting an injunction, will not apply in cases of a bank guarantee.Courts are usually reluctant to grant an injunction against a bank guarantee. If a bank guarantee has to be restrained, it has to satisfy the following conditions: Fraud; Irretrievable injustice or injury
Ques-6
6) Can the invocation of a bank guarantee be prevented by initiating arbitration proceedings?
If the bank guarantee is unconditional, arbitration proceedings would in no way affect the enforcement of the guarantee. This is because an unconditional bank guarantee is independent of the main contract which refers disputes to arbitration. However, if the bank guarantee includes a clause to the effect that it could not be invoked prior to the decision of the arbitrators, such a bank guarantee, which is conditional, cannot be invoked and an injunction can be granted.
If the bank guarantee is unconditional, arbitration proceedings would in no way affect the enforcement of the guarantee. This is because an unconditional bank guarantee is independent of the main contract which refers disputes to arbitration. However, if the bank guarantee includes a clause to the effect that it could not be invoked prior to the decision of the arbitrators, such a bank guarantee, which is conditional, cannot be invoked and an injunction can be granted.
Ques-5
5) What are the difference between bank gaurantee and ususal gaurantee?
Following are some points of difference between a bank guarantee and a usual guarantee:
A usual guarantee is governed by Sec. 126 of the Indian Contract Act, 1872. A bank guarantee is not directly governed by Sec. 126. An ordinary guarantee is a tri-partite (3 parties) agreement involving the surety, the debtor and the creditor.But a bank guarantee is a contract involving two parties i.e. the bank and the beneficiary.
In an ordinary guarantee, the contract between the surety and the creditor arises as a subsidiary to the contract between the creditor and the principal debtor. The bank guarantee is independent of the main contract. In an ordinary guarantee, the inter se disputes between the debtor and the creditor have a material effect upon the surety's liability. However, the bank guarantee is independent of the disputes, arising ex contractu (arising out of the contract). An ordinary guarantee does not have any time limit before which the debt has to be claimed. Bank guarantees generally have a specific time within which they are functional.
Following are some points of difference between a bank guarantee and a usual guarantee:
A usual guarantee is governed by Sec. 126 of the Indian Contract Act, 1872. A bank guarantee is not directly governed by Sec. 126. An ordinary guarantee is a tri-partite (3 parties) agreement involving the surety, the debtor and the creditor.But a bank guarantee is a contract involving two parties i.e. the bank and the beneficiary.
In an ordinary guarantee, the contract between the surety and the creditor arises as a subsidiary to the contract between the creditor and the principal debtor. The bank guarantee is independent of the main contract. In an ordinary guarantee, the inter se disputes between the debtor and the creditor have a material effect upon the surety's liability. However, the bank guarantee is independent of the disputes, arising ex contractu (arising out of the contract). An ordinary guarantee does not have any time limit before which the debt has to be claimed. Bank guarantees generally have a specific time within which they are functional.
Ques-4
4) A contracts with B for a fixed price to construct a house for B within a stipulated time. B would
supply the necessary material to be used in the construction/ C guarantee A’s performance
of the contract. B does not supply the material as per the agreement. IS C discharged fromhis liability?
The surely is discharged by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Failure to supply the necessary material by B (i.e., the creditor) amounts to an omission on the part of the creditor resulting in discharge of A (i.e., the principal debtor), and consequently, C (i.e., the surety) is discharged.
supply the necessary material to be used in the construction/ C guarantee A’s performance
of the contract. B does not supply the material as per the agreement. IS C discharged fromhis liability?
The surely is discharged by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Failure to supply the necessary material by B (i.e., the creditor) amounts to an omission on the part of the creditor resulting in discharge of A (i.e., the principal debtor), and consequently, C (i.e., the surety) is discharged.
Ques-3
3) C, the holder of an over due bill of exchange drawn by A as surety for B, and accepted by B,contract with X to give time to B, Is A discharged from his liability?
Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surely is not discharged. Accordingly, A is not discharged from his liability.
Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surely is not discharged. Accordingly, A is not discharged from his liability.
Ques-2
2) A hires a carriage enough of B and agrees to pay Rs. 500 as hire charges. The carriage is unsafe,though B is unaware of it. A is injured and claims compensation for injuries suffered by
him. B refuses to pay. Discuss the liability of B.
In case of a non-gratuitous bailment, the bailor is liable to disclose all the faults whether known to him or not. Accordingly, the bailor shall be liable for damages for any loss caused to the bailee whether or not he was aware of the faults. In the the given case the hire of carriage of B by A amounts to non-gratuitous bailment. Therefore, it was the duty of B to disclose to A that the carriage was unsafe. It is immaterial as to whether or not B was aware of the fact that the carriage was unsafe. A is entitled to claim compensation from B.
him. B refuses to pay. Discuss the liability of B.
In case of a non-gratuitous bailment, the bailor is liable to disclose all the faults whether known to him or not. Accordingly, the bailor shall be liable for damages for any loss caused to the bailee whether or not he was aware of the faults. In the the given case the hire of carriage of B by A amounts to non-gratuitous bailment. Therefore, it was the duty of B to disclose to A that the carriage was unsafe. It is immaterial as to whether or not B was aware of the fact that the carriage was unsafe. A is entitled to claim compensation from B.
Ques-1
1) Mr. Ahuja of Delhi engaged Mr. Singh as his agent to buy a house in West Extension area. Mr.
Singh bought a house for Rs. 20 lakhs in the name of a nominee and then purchased it
himself for Rs.24 lakhs. He then sold the same house to Mr. Ahuja for Rs 26 lakhs. Mr.
Ahuja later comes to know the mischief of Mr. Singh and tries to recover the excess amount
paid to Mr. Singh. Is he entitled to recover any amount from Mr. Singh? If so, how much
explain.
contract, if any material facts were dishonestly concealed by the agent or the dealings of the agent on his own account have been disadvantageous to the principal. Agent can not make any secret profit out of the business of agency. If the agent deals on his own account without disclosing it to the principal, the principal is entitled to claim from the agent any benefit received by him, out of such transaction. Mr. Ahuja engages Mr. Singh as his agent for purchase of a house. Mr. Singh purchases a house in the name of the nominee and then purchases the same house on behalf of Mr. Ahuja (his principal), thus making a profit of Rs. 4 lakhs. However, he does not disclose these facts
Singh bought a house for Rs. 20 lakhs in the name of a nominee and then purchased it
himself for Rs.24 lakhs. He then sold the same house to Mr. Ahuja for Rs 26 lakhs. Mr.
Ahuja later comes to know the mischief of Mr. Singh and tries to recover the excess amount
paid to Mr. Singh. Is he entitled to recover any amount from Mr. Singh? If so, how much
explain.
contract, if any material facts were dishonestly concealed by the agent or the dealings of the agent on his own account have been disadvantageous to the principal. Agent can not make any secret profit out of the business of agency. If the agent deals on his own account without disclosing it to the principal, the principal is entitled to claim from the agent any benefit received by him, out of such transaction. Mr. Ahuja engages Mr. Singh as his agent for purchase of a house. Mr. Singh purchases a house in the name of the nominee and then purchases the same house on behalf of Mr. Ahuja (his principal), thus making a profit of Rs. 4 lakhs. However, he does not disclose these facts
Friday, January 23, 2009
Section 80CCD
Deduction in respect of contribution to pension scheme of Central Government
[Section 80CCD]
(i) A “New Restructured Defined Contribution Pension System” applicable to new entrants to
Government service has been introduced. As per the scheme, it is mandatory for persons
entering the service of the Central Government on or after 1st January, 2004, to contribute ten
per cent. of salary every month towards their pension account. A matching contribution is
required to be made by the Government to the said account.
(ii) To give effect to the new pension scheme of the Central Government, a new section
80CCD has been inserted.
(iii) This section provides a deduction for the amount paid or deposited by an employee in his
pension account subject to a maximum of 10% of his salary.
(iv) The contribution made by the Central Government in the previous year to the said
account of an employee, is allowed as a deduction in computation of the total income of the
assessee. However, the deduction is restricted to 10% of the employee’s salary.
(v) The benefit of deduction under this section is currently available only to individuals
employed by the Central Government on or after 1.1.2004.
(vi) This deduction is now extended also to individuals employed by any other employer on or
after 1.1.2004.
(vii) The entire employer’s contribution would be included in the salary of the employee.
However, deduction under section 80CCD would be restricted to 10% of salary.
(viii) Further, the amount standing to the credit of the assessee in the pension account (for
which deduction has already been claimed by him under this section) and accretions to such
account, shall be taxed as income in the year in which such amounts are received by the
assessee or his nominee on -
(a) closure of the account or
(b) his opting out of the said scheme or
(c) receipt of pension from the annuity plan purchased or taken on such closure or opting
out.
(ix) No deduction will be allowed under section 80C from A.Y.2006-07 in respect of amounts
paid or deposited by the assessee, for which deduction has been allowed under section
80CCD(1).
Section 80CCC
Deduction in respect of contribution to certain pension funds [Section 80CCC]
(i) Where an assessee, being an individual, has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of LIC of India or any other insurer for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall be allowed a deduction in the computation of his total income.
(ii) For this purpose, the interest or bonus accrued or credited to the assessees account shall not be reckoned as contribution.
(iii) The maximum permissible deduction is Rs.1,00,000 (However, the overall limit of Rs.1,00,000 prescribed in section 80CCE will continue to be applicable i.e. the maximum permissible deduction under sections 80C, 80CCC and 80CCD put together is Rs.1,00,000).
(iv) Where any amount standing to the credit of the assessee in a fund referred to in clause (23AAB) of section 10 in respect of which a deduction has been allowed, together with interest or bonus accrued or credited to the assessees account is received by the assessee or his nominee on account of the surrender of the annuity plan in any previous year or as pension received from the annuity plan, such amount will be deemed to be the income of the assessee or the nominee in that previous year in which such withdrawal is made or pension is received. It will be chargeable to tax as income of that previous year.
(v) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a deduction under section 80C shall not be allowed with reference to such amount.
(i) Where an assessee, being an individual, has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of LIC of India or any other insurer for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall be allowed a deduction in the computation of his total income.
(ii) For this purpose, the interest or bonus accrued or credited to the assessees account shall not be reckoned as contribution.
(iii) The maximum permissible deduction is Rs.1,00,000 (However, the overall limit of Rs.1,00,000 prescribed in section 80CCE will continue to be applicable i.e. the maximum permissible deduction under sections 80C, 80CCC and 80CCD put together is Rs.1,00,000).
(iv) Where any amount standing to the credit of the assessee in a fund referred to in clause (23AAB) of section 10 in respect of which a deduction has been allowed, together with interest or bonus accrued or credited to the assessees account is received by the assessee or his nominee on account of the surrender of the annuity plan in any previous year or as pension received from the annuity plan, such amount will be deemed to be the income of the assessee or the nominee in that previous year in which such withdrawal is made or pension is received. It will be chargeable to tax as income of that previous year.
(v) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a deduction under section 80C shall not be allowed with reference to such amount.
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