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Finance & Taxation

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Notes that are needed to read before you appear for an MBA exam in India.
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   FINANCE & TAXATION  IMPORTANT DEFINITIONS FINANCE The science that describes the management of money, banking, credit, investments, and assets. Finances are also described as the supplying of funds or capital. Finances are the Monetary resources and funds, especially those of a government or corporate body. FISCAL :   Relating to financial matters such as Money, Taxes, Public or Private Revenues A FISCAL AGENT :   Is a Bank engaged in the Business of collecting and disbursing public and private money DEFICIT :  A situation where : Liabilities exceed assets Expenditures exceed Incomes Imports exceed Exports Losses exceed Profits Surplus situation is an exact reverse of Deficit –  where Assets exceed liabilities, Incomes exceed expenditures, Exports exceed Imports, Profits exceed losses etc. A country is said to be in a “Trade deficit” situation when the value of its Imports are greater than the value of its exports. Conversely, a country would be said to have a “Trade Surplus” if the value of its exports is greater than the value of its imports. The value of imports and exports is based on the value of goods and services imported and/or exported.  A FISCAL YEAR Is a 12 month period not necessarily corresponding to calendar year. It is the accounting year for the state and in our country the fiscal is from 1st April of the year to 31st March of the following year A FISCAL DEFICIT   is described as the Budgetary deficit. Govt’s Total Expenditure –  Go vt’s Total receipts (less borrowings)  Please note that the borrowings by the Governments are not considered receipts for the purpose of arriving at the Fiscal deficit or Fiscal surplus as the case may be. MONITIZED DEFICIT is the part of Fiscal deficit financed by RBI by printing money. PRIMARY FISCAL DEFECIT Represents the non-interest deficit. It is Fiscal Deficit net of Interest Payments. REVENUE DEFECIT Total Revenue Expenditure –  Total revenue receipts CAPITAL EXPENDITURE Funds used by an organization to upgrade or build (create) physical assets such as property, industrial buildings or machinery & equipment Funds used to upgrade or create physical assets are Capitalized and spread over the period of “ usefulness of the asset ” and claimed as depreciation  REVENUE EXPENDITURE Funds used where the useful life is less than one year are not capitalized and are allowed as expenses in the year of expenditure, such as consumables. Such expenses are termed as “Revenue Expenditure”   BALANCE SHEET A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. Assets = Liabilities + Shareholders' Equity PROFIT AND LOSS (P&L) STATEMENT A financial statement that summarizes the revenues, costs and expenses incurred during a specific period of time - usually a fiscal quarter or a fiscal year Profit and Loss Statement is also known as Income Statement, Income and Expense Statement  and  Statement of Profit and Loss. CASH FLOW STATEMENT Statement that provides information about an entity's cash receipts and cash disbursements for a period. This statement is prepared for both the “Inflow” and the “Outflow” of cash in the given period of time.  Cash flow statement is immensely useful in planning the financial activities of an organization e.g., investments in “asset creation”, building up reserves, raising capital (as and when required), making arrangements for the availability of cash as and when required and so on. Cash flow statement applies to activities under the heads : “ Operating ” , “ Investing ”  and   “ Financing ”.  OPERATING ACTIVITIES
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