An offer is a kind of promise between the parties, which depends on a certain act/forbearance given. In other words, an offer is an invitation to enter into a contract with certain terms.According to the Section 2 (a) of Indian Contract Act, “An offer is defined as, when one person signifies to another about his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or business, he is said to make a proposal”.Here, Offeror/propose is a party making an offer to others.Offeree/propose is a party to whom ... Read More

Following are the essentials of valid contract −Agreement − For a valid contract, agreement is the most essential element, which consists of offer and acceptance.Two parties − Minimum two parties are required for a contract. One will offer the contract and the other will accept the contract.Free consent − Consent is said to be free consent, if it is not created by force, needless influence, cheating, misrepresentation or fault.Legal relationships − These are must for parties to be in a contract because agreements are not enforceable by law.Capacity of contract − Ability of person/party to enter into a valid contract.According ... Read More

Accounting treatment for costs is explained below −Sr.NoCost treatment1MaterialsCost of material purchased/sent to the site is charged.Cost of material unused/returned to the store is credited to the contract account.Cost of material stored (for future use) is debited to the stock account.2LabourLabour charges and their related costs are charged to the contract account.Administrative, supervisory staff, salaries, incentives are charged to particular accounts.3PlantIf a plant is hired, then hiring charges are charged to the contract account.If a plant is purchased/sent to the site, its value is charged to the contract account and value of plant returned/remaining is debited from the contract account. ... Read More

Contract costing is one of the methods of job costing and it is also called terminal costing. In this, each contract is given a number and the records are maintained separately. This method is generally used by builders, construction firms, contractors etc. The main objective of this method is to identify cost and profit of each unit separately.Chartered institute of management accountants (CIMA) defines contract costing as “That form of specific order costing, which applies where the work is undertaken as per the special requirements of customers and each order is of long term duration”.Chartered institute of management accountants (CIMA) ... Read More

The job costing procedure consists of the following aspects −Direct materials cost is calculated with the help of requisition form.Employee wages are also calculated by the payroll department with the help of tickets issued.Overhead charges are also considered.Manufacturing overheads are as follows −Direct expensesDirect labourMaterial expensesManufacturing overheads of each department.Job costing accounting procedures includes the following −InquiryOrder placing (customer studies the rates, material, quality, time to complete the order etc.)EstimationAccountants do the cost of a job by keeping in view customer requirements and choices.Order receivingCustomer places the order, if the customer is satisfied with job costs.Production orderIt is an official ... Read More

Carryover method of accounting is used when there is a merger of two or more non-profit entities into a new entity. Their assets and liabilities are merged and come into effect on the date of merger transactions.Following adjustments are required in carryover method accounting −Modifications of contracts − Alters terms and conditions of contract.Reclassifications − If companies are using different accounting methods, adjustments for consistent accounting methods are required.Intra entity transactions − If there are any prior transactions between merged companies, those are removed from merged assets, liabilities and net assets.Assets like internally developed intangible assets and other liabilities are ... Read More

In merger and acquisition, to acquire the records of the events under acquisition method consists of the following steps −Measure of tangible assets and liabilitiesAcquirer measures tangible assets and liabilities at market fair value on acquisition date (date at which he gains control). Some assets like lease, insurance contracts etc. are measured on inception date. Third party firms will do the valuation or fair market analysis.Measure of intangible assets and liabilitiesIt is a more difficult task than measuring tangible assets and liabilities because acquirers don’t have any record of most of the items in the balance sheet. If they were ... Read More

Either two or more companies merge or a company acquires another. In either of the processes, one company purchases another company asset for the union of their business. Accounts are maintained for these transactions.Accounting for merger and acquisition transactionsIdentification of business combination− To achieve some synergy form.Identification of acquirer − Governs financial and operating policies of combined business entities.Entity having greater fair value, likely to be an acquirer.Management who are dominating in deals, likely to be an acquirer.Entities who are giving up cash/other assets, likely to be acquirers.Cost of transaction measured − Fair values (at the time of acquisition) + ... Read More

A company is a business organization which is associated with persons and set up with an aim of undertaking a business. It is governed by Companies Act 2103. Whereas a corporation is a corporate body registered outside or within a nation.In simple words a company is suitable for small entities or businesses whereas a corporate is suitable for bigger entities or businesses.CorporationA corporation is a body which is incorporated inside or outside the country but excludes corporation sole or any corporation which is formed by official gazette notification by the central government.Corporation is defined in Indian companies Act 2013, section ... Read More

We can say a businessman walks in a defined path and an entrepreneur makes his own path and a businessman can follow the path defined by an entrepreneur. In general many people think that both businessman and entrepreneur have similar or same meaning but they differ in their own way.BusinessmanA businessman is a person who carries out the activities related to industrial and commercial purposes. He runs the existing business and can set up new entrants for existing business in the market. Generally businessmen go for ideas which generally make profit and huge demand in the market.Businessmen face tough competition ... Read More