The Institute of Chartered Accountants of India (Setup by an Act … · Jaydeep Shah & WICASA...

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Baroda Branch of WICASA

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Organized by :

Board of Studies - The Institute of

Chartered Accountants of India

Lead me from Darkness to Light

The Institute of Chartered Accountants of India(Setup by an Act of Parliament)

BARODA BRANCH OF

WESTERN INDIA CHARTERED ACCOUNTANTS

STUDENTS ASSOCIATION OF

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

(WICASA)

VOL. VI JULY 2012l

TheInsightTheInsight

“Leveraging Strength, Catalyzing Tomorrow”

e-NewsLettere-NewsLetter

e-NewsLetter“Leveraging Strength, Catalyzing Tomorrow”


of The Institute of


VOL. VI JULY 2012l “Nothing ventured, nothing gained.”

PRINTED AND PUBLISHED BY

Designed at

“ICAI Bhawan”, Kalali-Tandalja Road, Atladra, Vadodara - 390 012.

Telefax : +91 (265) 2680593, 2681115 E-mail: [email protected] Web : www.baroda-icai.org

Multiprints, 30/B, Gandhi Oil Mill Compound,

Near BIDC, Gorwa, Vadodara - 390 016.

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

WESTERN INDIA CHARTERED ACCOUNTANTS STUDENTS

ASSOCIATION

BARODA BRANCH OF WICASA

ICAI Bhawan, Post Box No. 7100, Indraprastha Marg,

New Delhi - 110002. Tel. : +91 (11) 39893989

E-mail : [email protected] Website : www.icai.org

ICAI Bhawan, 27, Cuffe Parade, Post Box No. 6081, Colaba,

Mumbai - 400 005. Tel. : +91 (22) 39893989

Email : [email protected] Website : www.wirc-icai.org

“ICAI Bhawan”, Kalali-Tandalja Road, Atladra, Vadodara - 390 012.

Telefax : +91 (265) 2681115, 2680593

E-mail: [email protected] Web : www.baroda-icai.org

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Managing Committee Members

CA. Ashish Parikh Chairman 9825231545

Mr. Sharukh Pathan Vice Chairman 8905094384

Ms. Hiral Jethva Secretary 9714778552

Mr. Mehul Thakkar Treasurer 8905564940

CA. Nayan Kothari Ex-officio 9824433445

Mr. Kanji Hadiya Member 9687969764

Mr. Mohd.Atiq Qureshi Member 9998570095

Mr. Dipesh Thakkar Member 9898940652

CA. Ashish Parikh Editor

Mr. Mohd.Atiq Qureshi Joint Editor

Ms. Hiral Jethva Member

Editorial Board

DISCLAIMER :

WICASA COMMUNITY :

STUDENTS’ STUDY CIRCLE :

BRAIN TRUST SESSION :

SPORTS ACTIVITIES:

WICASA HELPLINE :

The views and opinion expressed or implied in the Newsletter are those of the

authors/contributors and do not necessarily reflect those of ICAI. Unsolicited articles and

transparencies are sent at the owner's risk and the publisher accepts no liability for loss or

damage. Material in this publication may not be reproduced, whether in part or in whole, without

the consent of ICAI.

Students are requested to kindly send article / paper of interest to [email protected].

The same may be published in the newsletter subject to availability of space & editing.

Be a part of the “WICASA Baroda” now also on FACEBOOK Community. Exchange views and

news. Be updated about forthcoming events of WICASA.

Join now .... where in students can exchange knowledge with the help of group discussion.

Contact Mr.Kanji Hadiya-9687969764

Join now… where a group of students can discuss on predetermine questions and moderator

(from CA fraternity) will elaborate the discussion and conclude. Contact Ms. Hiral Jethva-

9714778552

Join now…where in students can participate in Indoor-Outdoor games for overall development.

Contact Mr. Dipesh Thakkar-9898940652

Students are invited to send their feedback suggestions or grievances to

[email protected] or contact Mr. Sharukh Pathan-8905094384, Mr. Mehul Thakkar-

8905564940

Dear Students,

It gives me great pleasure to note the commemoration of

our “25th All India CA Students’ Conference” being

organized by the Board of studies, ICAI and hosted by

Baroda Branch of WICASA of the WIRC of ICAI on 6th & 7th

July 2012 at Baroda.

The theme of the conference is “Tamso Ma Jyotirgamaya –

Lead me from Darkness to Light” The two-day Conference

aims at putting light on a variety of subjects in way provide

an aid to whole of CA Students fraternity in gaining

expertise on diverse subjects that a Chartered Accountant

undertakes in his day to day practice.

This conference is being organized in which students from

different parts of the nation have registered & will give

them a common platform to explore their aptitude and to

exchange views.

I am very glad to announce that we got 1200+ participants

for the conference & we have to stop registration before 10

days of the commencement of the Conference. All the

Students are working day & night sincerely from last 2

months for the success of Conference. I am thankful to all

of them.

I wish “All the Best” to all the participants for the grand

success of this mega event.

Eager to see you on the days of Conference.

Regards,

CA. Ashish Parikh

Chairman’sCommunication

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of The Institute of


VOL. VI JULY 2012l “Whatever happens, take responsibility”

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25 ALL INDIA CA STUDENTS' CONFERENCETH

Contact :

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For Registration & further details contact :

* Confirmation Awaited

BARODA BRANCH OF WIRC OF ICAI, ICAI Bhawan, Kalali- Tandalja Road, Tandalja, Baroda - 390 012 Gujarat, India.

Ph. 0265- 2681115, 2680593 E-mail : [email protected] Web : www.baroda-icai.org

Program Details

Past Events : MayDATE NAME OF EVENT ATTEN.TYPE OF EVENT

05/06/2012 ITT Batch Commencement of "98th ITT Batch" for PCC/IPCE Students 38

08/06/2012 Interaction with President Meeting with President CA. Jaydeep Shah & WICASA Chairperson Shruti Shah 250+

08/06/2012 Meeting WICASA Committee Meeting with President CA. Jaydeep Shah &

WICASA Shruti Shah 7

11/06/2012 Oreintation Batch Commencement of "34th Orientation Batch" 51

16/06/2012 Meeting All Committee Meeting for "25th All India CA Students Conference" 75+

17/06/2012 Meeting Meeting with Ahmedabad branch of WIRC of ICAI 3

18/06/2012 G.M.C.S Commencement of "34th G.M.C.S. Batch" 51

23/06/2012 Banking A/c scheme for NRI Study Circle Meeting by Udit Patadiya 7

30/06/2012 Meeting WICASA Committee Meeting with CA. Ajay Wadhwa 13

30/06/2012 Meeting WICASA Committee Meeting with CA. Madhukar Hireganga -

BOS Vice- Chairman 13

Chairperson



of The Institute of


VOL. VI JULY 2012l “Creativity Is Like Electricity.”4

General Tips To Overcome An InterviewContributed by : CA Final StudentVishal Mochi,

TYPICAL QUESTIONS THAT AN INTERVIEWER WOULD ASK

1. Tell me about you

2. Why Should We Employ You?

3. Do You Have Offers From Other Companies?

4. What Salary Are You Expecting?

The most often asked question in interviews. You need to

have a short statement prepared in your mind. Be careful

that it does not sound rehearsed. Limit it to work/Study-

related items unless instructed otherwise. Talk about

things you have done well at your college and how you

wanted to perform in the first job.

For this question, your answer should list out strengths

that you feel are relevant to the job. Given below are

some answers which could help you with your answers.

However, structure them to suit your requirements.

I have good co-ordination skills.

Good analytical skills.

I can persuade people to see my point of view, and get the

work done.

My greatest asset is my ability to motivate people.

Even during emergencies, I do not loose my cool.

I have good entrepreneurial skills.

I have consistently met my deadlines and targets.

Can say “no” to people when required to do so!

I am very co-operative with my sub-ordinates, and would

like to see them grow.

I am a good team player.

I am very flexible, and have the ability to work hard under

difficult work conditions.

I have the experience and knowledge relevant to this job.

(Here, give appropriate details and examples)

This is of course a difficult question to answer. Obviously,

you must have applied to other companies if you are

looking for a job or would have some offers from other

companies already. Therefore, do not lie that you have

not. However, you are on thin ice here! The interviewer

could be checking your honesty. On the other hand,

he/she may also be trying to find out how focused you

are - are you applying randomly, or is there a well-

planned strategy?

Whatever your answer, it should match your career goals.

Try not to get into salary details early in the interview. If

pressed, you could say that it all depends on the job, and

would like to talk about it after a job offer. Say this in a

convincing tone. In case you are asked this question in

your latter interviews, give a direct answer. Do not sound

apologetic while quoting the figure you have in mind.

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SALARY EXPECTATIONS:

1. How much do you expect?

2. How much do you think you are worth?

3. What kind of a culture are you comfortable with?

4. Which is more important to you-salary, perks or growth

opportunities?

5. What do you know about our company?

6. Why should we choose you over someone else?

7. Your qualifications are excellent, but you may be

overqualified for the position we have to offer?

QUESTIONS YOU SHOULD ASK:

If you have done your homework, you would know how

much other people in similar jobs are paid. Quote the

range upfront.

Work out how much you should be paid, given the market

value of the job and your skills. If you can bring some

extra skills to the table, do not hesitate to ask for more

than the market value.

It is better to be frank about your preferences. Your

interviewer will get a clear idea about your expectations.

This one will reveal the real you. So be sure what you are

going to say. Above all, be true to yourself. If you think this

is a negotiation move, then say clearly that you will never

sell yourself short.

Do not give your opinions about the company. Stick to

reported facts that you have gathered from newspapers

and so on. Talk about the product portfolio, size, income,

and market perceptions of the company. Also it is better

to refer details about each company before going for the

i n t e r v i e w f r o m F r e s h e r s w o r l d . c o m o r

PlacementWeek.com

Talk clearly about problems that you have solved in your

College/Project Team and highlight the quality required.

Point out that more experience can never be a drawback.

If you are multi-skilled, then highlight the fact that a

company on the fast-track needs multi-skilled people. It

needs people within different departments to work

together. Also emphasize that the company's future

growth will be an exponential function of your

experience.

Interviewers usually round off by giving you an opportunity to

ask questions. Treat it like a welcome opportunity.

You could ask questions like.

Tell me about your company.

Now that I have outlined my career goals, do you think

you can offer me the opportunities I need?

What kind of training and learning can I expect in your

company?

Describe the work culture and the management style of

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of The Institute of


VOL. VI JULY 2012l “Happiness depends upon ourselves”5

your company?

What is the long-term vision of your company?

As a fresher, current position and status can impact the

way you are interviewed. Fresh Out of College

The basis on which you will be judged is your academic

background, family background, and interests.

If looking for your first job, ensure that your previous

experience, even if it is part-time, is noticed.

Mention projects or responsibilities you may have

undertaken. This will indicate your area of aptitude.

You should be willing to put in regular hours, in line with

the company's policies. The interviewer needs to know

whether you can be punctual and put in full-time work.

In case you have applied for the post of management

trainee, you should display an ability to adapt, and

indicate all-round interests. Moreover, you should have

good interpersonal skills.

You should be enthusiastic to learn, and show

commitment towards the organization, as the company

will be spending a lot on your training.

a) Copies of your resumes.

b) References and letters of recommendations.

There is a common saying that minds are made up within

the first 5 minutes of an interview. So keep in mind these

important first impression indicators. Walk in the door as

if you already work there carry yourself as though you

feel perfectly comfortable with the situation. Arrive on

time or a little early. In the waiting area, politely tell the

receptionist who you are meeting and in a friendly way,

ask where you should sit. Take slow, deep breaths to help

you remain calm and focused. When introduced to the

interviewer, have a firm, but not painful, handshake.

Smile. Have good posture when sitting or standing.

Introduce yourself in a relaxed, confident manner. Have a

well-groomed, professional appearance. Project a

feeling of confidence. Bring extra copies of your resume,

some thing to write on and something to write with.

Mr. A, is having a new idea of irrigation system but no one is

ready to finance his project. The reason behind that is:

• The System is very new and it is having a dark picture that

whether traditional farmers will accept the system or

not?

• Uncertainty about revenue generation.

• Financing the project means in this case financing the

research for new system development?

Traditional financiers are not ready to finance him due to the

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Bring with you :

First Impressions :

Contributed by : CA Final StudentAbhishek Shah,

VENTURE CAPITAL-THE CONCEPT

above mentioned reasons. Now what should Mr. A do?

Should he quit his new idea? No, here the concept of

venture capital comes in the picture.

Dictionary meaning of venture is risky undertaking. Venture

capital is a risky capital and having great amount of

uncertainty regarding recovery of principle. The capital is

invested in equity or debt securities of young companies

promoted by technocrats and entrepreneur who attempt to

break new path. It is a financial source for new, high risk, high

profit potential products as the projects belong to unknown

and new segments or technologies.

The venture capital industry understood globally as

“independently managed, dedicated pools of capital that

focus on equity or equity-linked investments in privately held,

high-growth companies” (“The Venture Capital Cycle”,

Gompers and Lerner, 1999).

With capital financing, the venture capitalist acquires an

agreed proportion of the equity of the company in return for

the funding. Equity finance offers the significant advantage of

having no interest charges. As it is owner’s capital financing

that seeks a return through long-term capital investment

rather regular interest payments.

Venture capitalist invests in owner’s capital, and that capital is

highly risky. Venture capitalist assumes higher risk by

financing equity capital. That is why venture capitalists must

have analytical and selection of that projects which truly

compensate the exposed risk taken by them. Therefore, by

investing in a business they typically require a seat on the

company's board of directors, and usually do not take day-to-

day control. Rather, the professional venture capitalists act as

mentors.

India is the developing country having yearly growth rate

approx. at the rate of 8.5% to 9%.Every emerging country

need technological development to expand its growth rate

and having independency in technology. Such country also

needs entrepreneur to create new market, to have modern

technocrat ancillary industry, and have successful

industrialist.

In light of this to promote innovation, enterprise and

conversion of scientific technology and knowledge based

ideas into commercial production, it is very important to

promote venture capital activity in India. Our country has

tremendous potential for growth of knowledge-based

industries. Entrepreneur with innovative ideas is also needed

for sustainable growth of India.

Such Entrepreneurs have to face hardship for getting finance

from traditional sources. Venture Capitalist is the persons

who fill gape by financing such projects.

Meaning:

Venture Capital Concept in India



of The Institute of


VOL. VI JULY 2012l “Nothing recedes like success.”6

In 1973, a committee on Development of Small and Medium Enterprises highlighted the need to foster venture capital as a

source of funding new entrepreneurs and technology. Thereafter some public sector funds were set-up but the activity of

venture capital did not gather momentum as the thrust was on high-technology projects funded on a purely financial rather

than a holistic basis.

Later, a study was undertaken by the World Bank to examine the possibility of developing venture capital in the private sector,

based on which the Government of India took a policy initiative and announced guidelines for venture capital funds (VCFs) in

India in 1988. However, these guidelines restricted setting up of VCFs by the banks or the financial institutions only.

Internationally, the trend favored venture capital being supplied by smaller-scale, entrepreneurial venture financiers willing to

take high risk in the expectation of high returns, a trend that has continued in this decade. The Government of India issued

guidelines in September 1995 for overseas venture capital investment in India and as a part of its mandate to regulate and to

develop the Indian capital markets, Securities and Exchange Board of India (SEBI) framed SEBI (Venture Capital Funds)

Regulations, 1996.

Any company or trust or a body corporate proposing to carry on any activity as a venture capital fund shall make an application

to the Board for grant of a certificate.

• An application for grant of certificate shall be made to the Board in Form A.

• Application fess is of Rs. 1,00,000 and non-refundable fees is of Rs.10,00,000

• The fees specified above shall be payable by bank draft in favors of “The Securities and Exchange Board of India” at

Mumbai.

Its main objective, the carrying on of the activity of a venture capital fund

in Association

It is prohibited by its memorandum and articles of association from

making an invitation to the public to subscribe to its securities

Its director or principal officer or employee is not involved in any litigation

connected with the securities market which may have an adverse bearing

on the business of the applicant

Its director, principal officer or employee or trustee in case of trust has

not at any time been convicted of any offence involving moral turpitude or

any economic offence

And is a fit and proper person

The certificate granted under regulation subject to the following conditions, namely:--

• The venture capital fund shall abide by the provisions of the Act and these regulations;

• The venture capital fund shall carry on only the activity of venture capital fund;

• The venture capital fund shall forthwith inform the Board in writing if any information or particulars previously submitted

to the Board are found to be false or misleading in any material particular or if there is any change in the information

already submitted.

• A venture capital fund may raise monies from any investor whether

• Indian,

• Foreign or

• non-resident Indian and

SEBI (Venture Capital Funds) Regulation, 1996

MEANING

REGISTRATION

ELIGIBILITY CRITERIA

Criteria A company A Trust

CONDITION OF CERTIFICATE

INVESTMENT CONDITIONS AND RESTRICTION

Memorandum of Trust Deed

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The Board may require the applicant to furnish such further information as it may consider necessary



of The Institute of


VOL. VI JULY 2012l “Be Curious, not judge mental.”7

• by way of issue of units

• No venture capital fund shall accept any investment from

any investor, which is less than Rs. 5, 00,000.

• The above minimum investment amount condition shall

not apply to investors who are

• Employees or the principal officer or directors of the

venture capital fund, or directors of the trustee company

or trustees where the venture capital fund has been

established as a trust;

• The employees of the fund manager or asset

Management Company.

• Each scheme launched or fund set up by a venture capital

fund shall have firm commitment from the investors for

contribution of an amount of at least Rs. 5 crores before

the start of operations by the venture capital fund.

• Venture Capital fund may invest in Securities of foreign

companies subject to guidelines given by RBI and SEBI.

• Venture capital fund should not invest in the equity

shares of any company or institution providing financial

services

• Investment restriction made in other venture capital

fund :

Minimum

investment given

Maximum

investment given

Not more than 25% should invest in one Venture Capital Fund

Investment in proposed security can be made by way of

subscribing

• Shares

• Debt or debt instrument of such fund in which fund has

already made investment by way of equity, preferential

allotment, subject to lock-in period of 1 Year.

Venture Capital Fund shall be entitled to get its units listed on

any recognized stock exchange only after the expiry of three

years from the date of the issuance of units by the venture

capital fund.

A venture capital fund can receive money for investment in

the venture capital fund only through private placement of its

units. Venture capital fund cannot issue any advertisement or

offer document to public for inviting money.

Every venture capital fund is required to maintain records

for a period of 8 years.

Restrictions on investment in other venture capital fund:

Venture

Capital Fund Listed

Prohibition on Listing

GENERAL OBLIGATION AND RESPONSIBILITY

MAINTENANCE OF BOOKS AND RECORDS

Proposed(to)/ Unlisted

Not Specifically 66.67%

33.33% Not Specifically

Way to understand Accounting in PracticeContributed by : CA Final Student, LudhianaJatin Pal,

At one end introduction of Corporate Governance,

mandatory application of well-conceived and stringent

Accounting Standards one after another and growing

regulatory role of SEBI in India and at the other end the

colossal accounting fraud, auditor-auditee collusion and

window dressing of accounts under camouflaged wording of

audit report have put the accounting profession on the cross

road of creative accounting.

This sort of accounting is the need of corporate. Company

management may adopt various methods to dress up

financial statements to show improved performance. In

respect of profit & loss account, the accounting risk is

usually the overstatement of income or understatement

of expenses. For the balance sheet, it may exist in three

areas, the correct valuation of company’s assets, accounting

for all liabilities and over of understatement for net worth.

The effect of creative accounting may defeat the purpose

of presentation of “true and Fair” financial statements.

You may at best

get a quicker promotion in your job or a couple of millions

increase in the fees as an auditor! Not at all …..Never. Above

all reality can be deferred, but it can never be denied. If we

introspect minutely, we would agree and appreciate that the

accounting profession is growing and glorifying in passage of

time by perceptible improvement of accounting standards

and related regulations, consciousness and alertness among

the intellectuals and investors fraternity. And this is the

reason why the recent scams have come to lime light so soon,

even if, maneuvered so shrewdly by so called top notch world

class companies and audit firms.

No theory of accounting standards or related regulatory

mechanism can ensure true and fair accounts unless the

accountants and the management at the helm of affairs of the

company are committed and sincere on the issue. Further, the

management of the company of which accounts are true, fair

and transparent is in a better position to take suitable

managerial decision for remedy of past errors as well as

future growth.

which all associated with accounts of

a company either directly or indirectly - accountants,

management, investors, banks, financial institutions, stock

exchanges, SEBI etc. should closely monitor. These are very

simple to understand but can offer a reasonable level of

confidence about the fidelity and fairness of accounts and

efficiency of operation. By this you can satisfy the wants to

society.

What is creative accounting?

Do you want to accept creative accounting?

Few areas of accounts -

It is a novel nomenclature used

for the concept of maintaining accounts to give all possible

illegal and dubious benefits to the entirety.



of The Institute of


VOL. VI JULY 2012l “Aim for the highest.”8

GROWTH OF SALES VS. EARNINGS:

SALES VS. DEBTORS:

CAPITALIZATION OF EXPENSES:

MATCHING CONCEPT :

DEBTORS AND INVENTORY:

RETURN ON CAPITAL EMPLOYED:

CASH FLOW STATEMENT

There should be some parity in growth rate between sales

and earnings otherwise it should be thoroughly analyzed. It

is prudent to compare the topline growth of an enterprise

with that of the industry in which the enterprise operates.

This would indicate whether the enterprise is

outperforming its competitors or lagging behind. All inter-

divisional sales including sales to associate, parent or

subsidiary companies should be excluded while evaluating

the performance.

A perpetual monitoring is necessary

between sales and debtors to find out whether there is any

efforts to push the sales while remaining slack on collection

or allowing more liberal credit terms than warranted. One

should find out the 'Debtors Days' or 'Collection Period'

which represents the average number of days’ credit

customers takes before paying off their accounts. The

formula for calculation is : Debtors / Sales *365 .

All major capital expenditures need to be analyzed to find

out whether they really refer to acquisition of assets having

utility over a period of time or just an effort to capitalize

revenue expenditure.

Both revenue and related expenditure should be booked in

the same period. For example, income from annual

maintenance contract and expenses for maintaining such

service should relate to same period.

These two items should always be analyzed with age-wise

break-up to indicate their realizable value. Debtors

outstanding for more than 6 months needs microscopic

view since generally speaking the longest credit period

allowed in industry is 6 months. Inventory level should be

reviewed with respect to lead time for procurement and

manufacturing cycle. In case of industry like electronics ,

telecom etc. where the rate of obsolescence is very high due

to rapid technical change, value of inventory should be

closely evaluated.

ROCE is expressed as the profit before interest and tax

(PBIT) as percentage of total capital Employed (CE) which

includes all long term funds i.e. shareholders' funds plus

long term borrowings. This ratio offers a first hand clue

whether the company is able to generate adequate return

to service its debts and offer suitable return to its

shareholders. To have better understanding, ROCE for last

few years of the company as well as that of other companies

in the same industry should be analyzed.

“Cash is King" - is the cliché in the modern finance world.

The interesting fact is that how much manipulation or

fabrication one may do in accounts, he cannot hide position

of cash - which is the ultimate source of survival and

growth of any organization. Cash Flow Statement is now a

mandatory statement in all Annual Reports. Of this report,

the segment called cash flow from operating activity is the

most important one. Cash flow is calculated by adding back

net profits of the company non-cash expenditure like

depreciation and amortization of intangible and deferred

revenue expenditure and followed by adjustment for

movement of working capital i.e. increase or decrease in

debtors, inventory and debtors. Any mismatch in cash

generation vis-à-vis sales increase or negative cash

generation should be the first and foremost area to be

scrutinized to see whether the business is on the right track. It

is the cash management which can make a company survive

or bankrupt.

Contingent liabilities which do not figure in the Balance Sheet

are expressed in form of a note to the accounts. These are

based more on perception of the management. Auditors

should thoroughly analyze these cases and express their frank

and candid opinions as far as possible. Similarly, investors and

other external agencies should go through the same to have a

feeling of extreme scenario in case of worst eventualities.

Lastly, where as an accountant should pledge to per-form

without fear and favor, the corporate management should

ensure sound and impartial internal control system, periodic

affirmation of corporate code of con-duct and increased

vigilance by audit committee. Last but not least, an auditor

should not hesitate to qualify the accounts, if the company is

unable or unwilling to prepare financial statements, which

give a true and fair view.

IMPACT OF CONTINGENT LIABILITY:

What do the numbers on the bottom of the

Cheque represent?Contributed by: (CA. Final Student)Vaibhav Thakkar

I. Cheque Number:

ii. MICR Code:

• The first set of numbers represents the Cheque number. It

is a six digit number.

• It stands for Magnetic Ink Character Recognition.

• This number helps a bank to recognize the bank and

branch that issued the Cheque.

• The Cheque are sorted through a Cheque reading machine

which uses this number to identify the bank and branch a

Cheque belongs to. This makes the process faster.

• The MICR number is a nine digit number, which consists of

three parts-



of The Institute of


VOL. VI JULY 2012l “Talent works, genius creates.”9

a) City Code: The first three digits represent the city code and

are same as the first three digit of the PIN code of that city.

e.g., a bank in Vadodara will have first three digits of MICR

code as 390 (since PIN code for Vadodara starts with 390)

b) Bank Code: The next three digits represent the bank code.

Every bank has a unique code assigned to it. For e.g., ICICI

bank’s code is 229, for HDFC it is 240 and so on.

c) Branch Code: The last three digits represent the branch

code.

• The third set of six digit numbers represents your account

number maintained by the Reserve Bank of India (RBI).

• The number helps in Cheque processing when it goes to

RBI for clearance.

• The last two digits tell whether a Cheque is a local Cheque

our payable at par Cheque.

• 29, 30 31 represents payable at par Cheque, while 09, 10

and 11 represents local Cheque.

These numbers are written in a different font style with a

special ink usually iron oxide that contains magnetic material

so that it can be recognized by Magnetic Character Ink Reader

and also if it is stamped.

iii. Bank account Number:

iv. Transaction ID:

One More Interesting Thing…

Currency Carrying limits in FEMAContributed by: (CA. Final Student)Jatin Pal

PRELUDE -The draconian law enshrined in Foreign Exchange

Regulation Act, 1973 comes to an end through Foreign Exchange

Management Act, 1999 (Commonly Known as FEMA) which was

made effective from 1st June , 2000. It’s the Central Government

who made rules and regulations to make FEMA operationalized,

Notifications, Directions, Circulars etc. issued by Reserve Bank of

India. FEMA Act extends to the whole of India and apply to all

branches, offices and agencies outside India owned or controlled

by a person resident in India. It is also applicable to any

contravention committed outside India by any person to whom

this act is applicable. Offices of FEMA

Which means Delhi have 7 Sub- Zonal Offices and 5 Fields

Units, Similarly Bombay have their own 7 Sub- Zonal Offices

and 5 Fields Units.

In every country 2 types of foreign exchange transactions are

there

One is Trade &

Second is Non-trade, the thrust of FEMA is more on arranging

and managing these transactions rather than imposing

restrictions and regulating them the way a watchdog does. In

the era of liberalization as we are on the global platform,

Rules and Regulations framed under FEMA are being relaxed

from time to time to incorporate greater freedom so far as

the conduct of foreign exchange transactions both by

residents and non- residents is concerned. Authorised

Dealers, the conduit between the Reserve bank and the

public in general, are vested with increased delegatory

powers so that cross-border trade, investments, remittances

etc. are conducted more cordially and smoothly.

Classified either as capital or current account transactions.

When you enter in to a foreign transaction and your

Assets/Liabilities including contingent liabilities, does not alter,

then it is a current account transaction. Section 5 of FEMA allows

a person resident in India to buy or sell foreign exchange for any

current account transaction except for those transactions for

which withdrawal of foreign exchange has been prohibited by

Central Government.

Reserve Bank authorized dealers under Section 10(1) of FEMA,

1999, to do transactions. They are –

-Authorised Dealer (AD) Category-I bank

-AD Category-II. Full-Fledged Money Changers (FFMCs) are also

permitted to release exchange for business and private visits.

(For list of Ads is available on www.rbi.org.in).

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Transactions involving foreign exchange have been–

FEMA Head-office in New Delhi (Headed By a Director)

5 Zonal Offices (Headed By Deputy Directors)

Delhi Bombay Calcutta Madras Jalandhar

Each Zone further divided in to 7 Sub-Zonal Offices

( Headed by the Assistant Directors)

&

5 Fields units (Headed by the Chief Enforcement Officers)



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VOL. VI JULY 2012l “Wisdom begins in wonder.”10

Reason for going Abroad- Maximum Amount Allowed

Withdrawal Period :

Payment Mode :

Surrender of foreign currency :

Usage of Cards :

Carrying Indian currency :

Foreign currency to India :

Export of gifts :

1. For tourism (Other Than Nepal and/or Bhutan) - Aggregrate amount of USD 10,000 for any one financial

year, on self-declaration basis, irrespective of the

number of visits undertaken during the year.*

*You can avail this facility, even you are availing facility while visiting foreign for employment or immigration or studies.

2. For Tourism to Nepal and/or Bhutan A resident Indian is allowed to take INR of denomination

of Rs.100 or lesser denomination to Nepal and Bhutan

without limit.

3. For Business Trip (other than to Nepal and/or Bhutan) USD 25,000 per visit**

**Business Visits means visits in connection with attending of an international conference, seminar, specialised training, study

tour, apprentice training, etc.

If you want release of foreign exchange exceeding USD 25,000 for business travel abroad (other than to Nepal and Bhutan),

irrespective of the period of stay, requires prior permission from the Reserve Bank.

4. For Business Trip (To Nepal and/or Bhutan) No release of foreign exchange is admissible

5. For Medical Treatment USD 100,000 or its equivalent***

*** AD Category-I banks and AD Category-II, may release foreign exchange up to USD 100,000 or its equivalent to resident

Indians for medical treatment abroad on self-declaration basis, without insisting on any estimate from a hospital/doctor in

India/abroad. A person visiting abroad for medical treatment can obtain foreign exchange exceeding the above limit, provided

the request is supported by an estimate from a hospital/doctor in India/abroad.

An amount up to USD 25,000 is allowed for maintenance expenses of a patient going abroad for medical treatment or check-up

abroad, or to a person for accompanying as attendant to a patient going abroad for medical treatment/check-up.

The amount of USD 25,000 allowed to the patient going abroad is in addition to the limit of USD 100,000 mentioned above.

6. For Studies USD100000 or the estimate received from the

institution abroad, per academic year, whichever is

higher.

Student can avail this from AD Category-I bank and AD Category-II.

7. For Employment USD 100,000 on the basis of self-declaration

You can withdraw Permissible foreign exchange 60 days in advance. In case it is not possible to use the foreign

exchange within the period of 60 days, it should be immediately surrendered to an authorized person. However, residents are free to

retain foreign exchange up to USD 2,000, in the specified manner.

The value of foreign currency which we want to carry if, it is upto Rs. 50000 , then you can pay that in Cash. If, the

value of foreign currrency is more than Rs. 50000, entire payment should be made by way of a crossed cheque/banker’s cheque/pay

order/demand draft/debit card/credit card/prepaid card only.

When you return from a foreign trip, travellers are required to surrender unspent foreign exchange

held in the form of currency notes and travellers cheques within 180 days of return. However, they are free to retain foreign exchange

up to USD 2,000, in the specified manner. You can hold foreign coins without any limit.

Holder of International Credit Cards (ICCs)/ATMs/Debit Cards can use it for travel abroad in connection with various

purposes and for making personal payments like subscription to foreign journals, internet subscription, etc. If the person has a foreign

currency account in India or with a bank overseas, he/she can even obtain ICCs of overseas banks and reputed agencies.

In India, Residents are free to take outside India (other than to Nepal and Bhutan) currency notes of

Government of India and Reserve Bank of India notes up to an amount not exceeding Rs. 7,500 per person. They may take or send

outside India (other than to Nepal and Bhutan) commemorative coins not exceeding two coins each.

A resident of India, who has gone out of India on a temporary visit, may bring into India at the time of his return from any place outside

India (other than Nepal and Bhutan), currency notes of Government of India and Reserve Bank of India notes up to an amount not

exceeding Rs. 7,500.

A person coming into India from abroad can bring with him foreign exchange without any limit. However, if

the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD

10,000 or its equivalent and/or the value of foreign currency alone exceeds USD 5,000 or its equivalent, it should be declared to the

Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.

A person resident in India is free to send (export) any gift article of value not eaxceeding Rs. 5, 00,000 provided export



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VOL. VI JULY 2012l “Powerful Dreams Inspire Powerful Action”11

of that item is not prohibited under the extant Foreign Trade

Policy and the exporter submits a declaration that goods of gift

are not more than Rs. 5, 00,000 in value. Export of goods or

services up to Rs. 5, 00,000 may be made without furnishing the

declaration in Form GR/SDF/PP/SOFTEX, as the case may be.

Revised Schedule VI

EXPLANATION OF

CURRENT ASSETS/LIABILITIESContributed by: (CA. Final Student)Mohd. Atiq Qureshi

The above bifurcation of assets and liabilities between current

and non-current would require major reclassification in Balance

Sheets of all companies and would have impact on the current

ratio. Some of such instances of reclassifications are as under:-

1) Presently even the current maturities to long term debt are

shown as part of long term debt and only disclosure of

amount due to be repaid within one year is made. However,

as per Revised Schedule VI current maturities to long term

debt would be depicted as “Other Current Liabilities”.

2) As per old schedule VI interest accrued and due on long term

loans were shown as part of long term loans but in Revised

Schedule VI the same is shown as Current Liabilities.

3) Currently all loans and advances (except capital advances)

are shown under Current Assets & Loans and Advances but

now onwards the same need to be bifurcated between

current and non-current, accordingly the sub heading of long

term loans and advances has been introduced in Revised

Schedule VI.

4) The provisions also need to be bifurcated among long term

and short term, the latter one being classified as current, and

former being classified as non-current e.g. employee related

provisions ; accordingly sub heading of long term provisions

has been introduced. Under old Schedule VI all provisions

were being shown under Current Liabilities and Provisions.

5) Under old Schedule VI the trade receivables (Debtors) / trade

payables (creditors) were always shown as Current, but in

revised Schedule VI, these can also be shown as Non-Current.

It appears that where the credit is offered on deferred credit

basis or the payment is not expected to be received from

debtors within normal operating cycle/ 12 months from

reporting period, the same need to be disclosed as Non-

Current.

For understanding the above definitions let us apply the same in

following cases

As on 31st March, 2011, a property developer has

inventories of residential units which it expects to sell in three

years. Historically similar residential units have been sold in

three years. As of 31st March, 2012, should the inventories of

residential units be classified as current or non-current assets?

EXAMPLES OF CURRENT ASSETS/LIABILITIES

Question 1 :

Solution:

Question 2 :

Solution:

Open issues for SEBI

(a) Half yearly results:

(b) Annual audited yearly results:

a) View 1:

b) View 2:

Assets shall be classified as current when it satisfies

any of the four criteria. Since the inventories of residential units

in the given case, satisfy the given requirement i.e. it is expected

to be realized in, or is intended for sell or consumption in, the

entity’s normal operating cycle, the residential units should be

classified as Current Assets.

A primary school require a deposit to be paid upon

enrolment in the school, should the student leave the school,

this deposit is refundable within three months, However based

on historical evidence the majority of students enrolling to

primary school continue with school and receive the deposit

back at the end of six year period. How should the deposits be

classified?

The deposit shall be classified as current liabilities.

Despite the historical evidence that indicates that the majority of

deposits are only repaid at the end of six years period, the

deposits are payable on three month notice. Revised Schedule VI

states that a liability should be classified as current when the

entity does not have an unconditional right to defer settlement

of the liability for at least twelve months after the reporting date.

Therefore, the deposits should be classified as Current Liabilities.

1) The Balance Sheet format prescribed under Clause 41 of the

Listing Agreement, which is on the lines of existing Schedule

VI, will now be inconsistent with the Revised Schedule VI

Balance Sheet format.

Based on the above guidance, we are of the following views

on the issues raised:

Clause 41(V)(h) prescribes a format for presentation of

Balance Sheet items at the end of half year.

Though the clause specifically acknowledges that the

format drawn from Schedule VI it does not allow automatic

amendment in case of any change/revision in Schedule VI.

Until new format is prescribed by SEBI, companies will have

to continue to present Half-yearly Balance Sheet in old

format.

Clause 41(V)(h) does not refer to any format for annual

audited balance sheet.

Two views seem possible until clause 41 is amended:

Company can use the format used in its annual

financial statements, i.e., as per the revised Schedule VI.

Company should use the same format of balance

sheet items in its half-yearly and annual audited results.

As per the exposure draft of guidance note on Revised

Schedule VI, this should be in the format of Revised

Schedule VI. SEBI should take immediate steps to align the

formats with New Schedule VI.

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e-NewsLetter


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VOL. VI JULY 2012l “Knowledge speaks, but wisdom listens”12

“Leveraging Strength, Catalyzing Tomorrow”

GlimpseJune 2012

Meeting with MOC for 25th All India

CA Students' Conference (02.06.2012)

CA. Jaydeep Shah (ICAI President)CA Shruti Shah (Chairperson WICASA, WIRC)

CA Ashish Parikh (Chairman WICASA, Baroda )(08.06.2012)

WICASA Committee Meeting withCA Jaydeep Shah (ICAI President)

CA. Ashish Parikh (Chairman WICASA Baroda)at ICAI Bhawan Ahmedabad (17.06.2012)

Chairman WICASA Baroda Met withWICASA Ahmedabad (17.06.2012)

Study Circle Meeting (Udit Patadiya)(23.06.2012)

WICASA Committee Meeting withCA. Madhukar Hireganga -

BOS Vice- Chairman (30.06.2012)

CA. Ashish Parikh (WICASA Chairman)CA. Pradeep Agrawal (Branch Chairman)

with CA. Madhukar Hireganga -BOS Vice- Chairman (30.06.2012)

CA. Jaydeep Shah at ICAI Bhawan Baroda

(08.06.2012)

CA. Jaydeep Shah(Students Interaction with ICAI President)

(08.06.2012)

The Institute of Chartered Accountants of India (Setup by an Act … · Jaydeep Shah & WICASA...

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