The word synergy is commonly used in merger and acquisition. Finical benefits are achieved through merger of companies. Concept of synergy is the value and performance of individual companies is less than the value and performance of merged companies. By cross disciplinary workgroups, companies achieve synergies between departments.The main goal is to improve financial performances. Business merger is to form a business which is capable of producing more revenue than they produce individually. Significant cost reduction can be achieved by streamline their process.Synergies effectiveness may take time; typically it takes 2 to 3 years. This period is called the “phase ... Read More

The terms used in Merger & Acquisition are explained below −Acquirer − It is someone who purchases a company.Acquisition − A company (1) taking control over another company (2) by purchasing more than 50% shares in company (2).Amalgamation: − Combining two companies into a single company.Asset deal − Acquirer buys only assets of selected companies.Backward integration − Acquires purchases of Ancillaries Company of its own product.Bootstrap effect − Bad reason to merge.Cash considerations − Part of purchase price is given in the form of cash.Compensation manipulation − Bad reason to mergeConglomerate − Merge of unrelated units.Debt issuance fees − Charges ... Read More

The major differences between a passbook and a cash book are as follows −PassbookPassbook is the book which is issued by the concerned bank, which contains the details of account holder(s) and information related to the transactions (deposits and withdrawals) of the holder(s).These are prepared by banks. In this book, all the deposits of the holder are shown on the credit side and the withdrawals of the holder are shown on the debit side.Preparing these books is compulsory.Cheque issued to the creditor is recorded when the amount is paid by the bank. Cheque deposited for collection is recorded on the ... Read More

Errors in trial balance are classified into two types namely, errors disclosed and errors not disclosed. Errors disclosed and errors not disclosed are again subdivided into several types.Following diagram shows the classification of errors in trial balance −Classification of errors based on natureThe classification of errors in trial balance which is based on nature is explained below:Error of omissionError of complete omissionError of partial omissionError of commissionError of recording in book of original entryWrongly totaling of subsidiary bookError in balancing ledger accountsError of posting − This is further classified as follows −Posting to the wrong side, but on the correct ... Read More

Trail balance is worksheet which consists of all ledger balances and columned them as debit and credit. Later these debit and credit columns are equaled. Trail balance ensures entries are mathematically proven. It is prepared at end of reporting period and repeated for every period.To understand trail balance once should understand following conceptsDouble entry systemJournalLedgerThe steps which are followed to prepare the trial balance are as follows −Step 1 − Prepare a columnar table which consists of four columns namely account number in column 1, account name in column 2, debit in column 3 and credit in column 4.Step 2 ... Read More

Petty cash is nothing but small amount of cash that kept for minor expenses like office supplies, reimbursing employee, and payment for catered lunch etc. In big companies or in larger companies each department has its own petty cash. The main advantage of having petty fund it is convenient and quick to use. Main disadvantage of having Petty cash is it can be theft, misuse and these funds are monitored periodically.Sometimes there is confusion between cash in hand and petty cash. Petty cash refers to money (specifically) whereas cash on hand is accessible cash of business.There are three stages in ... Read More

Triple column cash books have three columns on both the debit and credit side of the cash book. These cash books record cash transactions, bank transactions and discounts. Both cash and bank transactions of column cash books are balanced and totaled periodically; discount column of triple column cash books is only totaled, but not balanced.Separate accounts are maintained in the general ledger for discount allowed and received. Discount column on the debit side represents a discount given to customers during a period.Discount allowed is an expense and this column on the credit side represents discount from suppliers during a period. ... Read More

Revenue receipts are those through which, the funds are generated from business core activities and results in increase in total revenue. These are shown in the profit and loss account and not in the balance sheet. These funds are generated from sale of goods or by providing services to others. Revenue receipts are recurring in nature.These have no effect on assets/liabilities of a company. These are the important sources of business to survive for longer periods. The benefits through revenue receipts are enjoyed in the current accounting period only.Revenue receipts include the following −Sale of any inventory.Income generated from service ... Read More

Capital expenditures are the funds used by the company to improve, purchase or maintain the company’s long term assets. With these funds, the company improves its efficiency or increases the capacity. Long term assets include property, equipment, infrastructure etc.Types of capital expenditures include the following −Expenses incurred in maintaining the present level of operations.Expenses incurred in increasing their present capacity for the future.ImportanceThe importance of capital expenditures is explained below −They have long-term effects.They are difficult to reverse or they are irreversible.Very expensive for some sectors/companies like manufacturing, utilities etc.Depreciation.ChallengesThe challenges involved with regards to the capital expenditures are as ... Read More

Capital receipts are a receipt, which creates a liability or decreases the assets of an organization or any business. They increase the total capital of the company.These can be debt receipts and non-debt receipts. These are shown in the balance sheet rather than the income statement. This is done because; the money/funds are generated from non-operating business activities. Capital receipts are non-recurring in nature.Debt capital receipts are the receipts, which does not incur any future repayment for the government. Some of the examples are disinvestments, loan and advances recovery etc.Non-debt capital receipts are the receipts, which are repaid by the ... Read More