Sunday, December 6, 2009
Share
In financial markets, a share is a unit of account for various financial instruments including stocks (ordinary or preferential), and investments in limited partnerships, and REITs. The common feature of all these is equity participation (limited in the case of preference shares).
The term stocks in the plural is often used as a synonym for shares. Traditionalist demands that the plural stocks be used only when referring to stock of more than one company are rarely heard nowadays.
Shareholders and dividends
The income received from shares is called a dividend, and a person owning shares is called a shareholder.
Valuation
Shares are valued according to various principles in different markets, but a basic premise is that a share is worth the price at which a transaction would be likely to occur were the shares to be sold. The liquidity of markets is a major consideration as to whether a share is able to be sold at any given time. An actual sale transaction of shares between buyer and seller is usually considered to provide the best prima-facie market indicator as to the 'true value' of shares at that particular moment.
Tax treatment
Tax treatment of dividends varies between territories. For instance, in India, dividends are tax free in the hands of the shareholder, but the company paying the dividend has to pay dividend distribution tax at 12.5%. There is also the concept of a deemed dividend, which is not tax free. Further, Indian tax laws include provisions to stop dividend stripping.
Share certificates
Investors were given share certificates as evidence of their ownership of shares but certificates are not always issued nowadays. Instead, the ownership may be recorded electronically by a system such as CREST.
Different Types of Shares
The different types of shares are:
Blue chip stocks: These are companies with solid foundations and which have decades and centuries of history. These are low growth companies. But these will give you a stabilized return. These have consistent dividend paying history. These companies are diversified into various sectors and hence are good bets to invest for the long term. The Dow 30 consists of most of these stocks. These companies have lower and stabilized growth but they are safer bets over the long term to park your money and can give surprising compound annual returns over the long term.
Growth stocks: These are in great flavour. These are companies which show high growth in their turn over as well as share price. These companies are in the buzzing sectors of the economy. Generally these are not as old as the blue chip ones. These are very expensive in terms of the price to earning multiple as compared to the other stabilized companies. They can have huge ups and down in their stock price in a few trading sessions due to the large trader interests. All the blue chip stocks go through this phase before stabilizing. Negative news related to these companies can set back the price of these stocks by a vast amount.
Speculative stocks:
These are companies with no real fundamental logic. Their stock prices defy the conventional logic. The stock price of these types of companies rises and fall a lot during single trading sessions. The stock prices of these companies are controlled by the huge manipulation in buying and selling of shares rather than by the fundamentals. These types of stocks are very risky and are great money losers. You need to avoid such stocks. This category of stocks consists of stocks priced below 5$.
Range bound shares: The price of these shares doesn't fall or rise too much. These basically remain range bound within 10% range. These types of companies have stagnant growth in profits. These are fundamentally stable companies with no real thrust in profits. These stocks are used in trading on technical basis. These stocks are used by traders to buy at the lower support of the range and are sold off by the traders at the higher end of the range. Thus making a decent profit of 5% to 10% every 5 to 10 days.
Different types of people invest in different types of stocks. You can earn by investing in any of these types of stocks, you just need to find out which type suits your needs.
Reference: ezinearticles.com
The term stocks in the plural is often used as a synonym for shares. Traditionalist demands that the plural stocks be used only when referring to stock of more than one company are rarely heard nowadays.
Shareholders and dividends
The income received from shares is called a dividend, and a person owning shares is called a shareholder.
Valuation
Shares are valued according to various principles in different markets, but a basic premise is that a share is worth the price at which a transaction would be likely to occur were the shares to be sold. The liquidity of markets is a major consideration as to whether a share is able to be sold at any given time. An actual sale transaction of shares between buyer and seller is usually considered to provide the best prima-facie market indicator as to the 'true value' of shares at that particular moment.
Tax treatment
Tax treatment of dividends varies between territories. For instance, in India, dividends are tax free in the hands of the shareholder, but the company paying the dividend has to pay dividend distribution tax at 12.5%. There is also the concept of a deemed dividend, which is not tax free. Further, Indian tax laws include provisions to stop dividend stripping.
Share certificates
Investors were given share certificates as evidence of their ownership of shares but certificates are not always issued nowadays. Instead, the ownership may be recorded electronically by a system such as CREST.
Different Types of Shares
The different types of shares are:
Blue chip stocks: These are companies with solid foundations and which have decades and centuries of history. These are low growth companies. But these will give you a stabilized return. These have consistent dividend paying history. These companies are diversified into various sectors and hence are good bets to invest for the long term. The Dow 30 consists of most of these stocks. These companies have lower and stabilized growth but they are safer bets over the long term to park your money and can give surprising compound annual returns over the long term.
Growth stocks: These are in great flavour. These are companies which show high growth in their turn over as well as share price. These companies are in the buzzing sectors of the economy. Generally these are not as old as the blue chip ones. These are very expensive in terms of the price to earning multiple as compared to the other stabilized companies. They can have huge ups and down in their stock price in a few trading sessions due to the large trader interests. All the blue chip stocks go through this phase before stabilizing. Negative news related to these companies can set back the price of these stocks by a vast amount.
Speculative stocks:
These are companies with no real fundamental logic. Their stock prices defy the conventional logic. The stock price of these types of companies rises and fall a lot during single trading sessions. The stock prices of these companies are controlled by the huge manipulation in buying and selling of shares rather than by the fundamentals. These types of stocks are very risky and are great money losers. You need to avoid such stocks. This category of stocks consists of stocks priced below 5$.
Range bound shares: The price of these shares doesn't fall or rise too much. These basically remain range bound within 10% range. These types of companies have stagnant growth in profits. These are fundamentally stable companies with no real thrust in profits. These stocks are used in trading on technical basis. These stocks are used by traders to buy at the lower support of the range and are sold off by the traders at the higher end of the range. Thus making a decent profit of 5% to 10% every 5 to 10 days.
Different types of people invest in different types of stocks. You can earn by investing in any of these types of stocks, you just need to find out which type suits your needs.
Reference: ezinearticles.com
Saturday, December 5, 2009
Final Accounting Adjustments
CLOSING STOCK
Adjustments in final accounts are the process of recording all those items which have not been including in the trial balance.
The items that typically require adjustments at the time of preparation of final accounts are
•Closing Stocks: Closing stock is the stock of goods that remain unsold at the end of the trading period.
JOURNAL ENTRIES FOR OUTSTANDING EXPENSES
•Outstanding Expenses or Unpaid Expenses: These are the expenses that have been incurred during a particular trading period, but not paid by the end of that period.
GOODS TAKEN OVER BY PROPRIETOR FOR PERSONAL USE
When some of the stock is withdrawn from the business by the proprietor for his personal use, the cost of such goods will be deducted from the purchases and will be added with the drawings of the proprietor.
GOODS DISTRIBUTED AS FREE SAMPLES
This is one kind of advertisement. When goods are distributed to the prospective customers as free samples, an expense is incurred (known as advertisement expense) and there is an usual reduction from the stock of goods.
Adjustments in final accounts are the process of recording all those items which have not been including in the trial balance.
The items that typically require adjustments at the time of preparation of final accounts are
•Closing Stocks: Closing stock is the stock of goods that remain unsold at the end of the trading period.
JOURNAL ENTRIES FOR OUTSTANDING EXPENSES
•Outstanding Expenses or Unpaid Expenses: These are the expenses that have been incurred during a particular trading period, but not paid by the end of that period.
GOODS TAKEN OVER BY PROPRIETOR FOR PERSONAL USE
When some of the stock is withdrawn from the business by the proprietor for his personal use, the cost of such goods will be deducted from the purchases and will be added with the drawings of the proprietor.
GOODS DISTRIBUTED AS FREE SAMPLES
This is one kind of advertisement. When goods are distributed to the prospective customers as free samples, an expense is incurred (known as advertisement expense) and there is an usual reduction from the stock of goods.
Credit Cards, Debit Cards, Stop payment order
Credit Card: Nowadays sales through Credit Cards are a very common feature. Credit Cards are issued by different banks like Citi Bank, Standard Chartered Bank, State Bank of India, Canara Bank, and others Presently available most popular Credit Cards are - Visa Card, Master Card, American Express Card, and others.
Debit Card: A Debit Card is similar in appearance to a Credit Card and is offered in a similar way in payment for goods and services.
The Main difference is that in the case of a Debit Card such payment is debited to the holders Bank account is exactly the same way as a cheque.
Stop payment Order: Sometimes cheques are lost or stolen. The account holder of the lost or stolen cheque should issue a payment order to the bank stating the details of the cheque (e.g. cheque no., date, amount, etc). After issuing the stop payment order, the original entry should be cancelled by reversing the entry.
Debit Card: A Debit Card is similar in appearance to a Credit Card and is offered in a similar way in payment for goods and services.
The Main difference is that in the case of a Debit Card such payment is debited to the holders Bank account is exactly the same way as a cheque.
Stop payment Order: Sometimes cheques are lost or stolen. The account holder of the lost or stolen cheque should issue a payment order to the bank stating the details of the cheque (e.g. cheque no., date, amount, etc). After issuing the stop payment order, the original entry should be cancelled by reversing the entry.
BANK RECONCILIATION STATEMENT
NEED FOR BANK RECONCILIATION:
1.Cheques issued but not yet presented for payment.
2.Cheques paid into the bank but not yet collected.
3.Direct debit made by the bank on behalf of the customer.
4.Amount directly deposited in the bank account.
5.Interest and dividends collected by the bank.
6.Direct payments made by the bank on behalf of customers.
7.Cheques deposited/ bills discounted dishonored.
8.Errors committed in recording transactions by the organization.
9.Errors committed in recording transaction by the bank.
PERFORMA OF BANK RECONCILIATION STATEMENT
To prepare a bank reconciliation statement, the bank balance as per the cash book and the bank statement as on a particular day are required along with details of both the books. If the two balances differ, the entries in both the books are compared and the items on accounts has which the difference has arisen are ascertained with the respective amount involved so that the bank reconciliation statement can be prepared.
1.Cheques issued but not yet presented for payment.
2.Cheques paid into the bank but not yet collected.
3.Direct debit made by the bank on behalf of the customer.
4.Amount directly deposited in the bank account.
5.Interest and dividends collected by the bank.
6.Direct payments made by the bank on behalf of customers.
7.Cheques deposited/ bills discounted dishonored.
8.Errors committed in recording transactions by the organization.
9.Errors committed in recording transaction by the bank.
PERFORMA OF BANK RECONCILIATION STATEMENT
To prepare a bank reconciliation statement, the bank balance as per the cash book and the bank statement as on a particular day are required along with details of both the books. If the two balances differ, the entries in both the books are compared and the items on accounts has which the difference has arisen are ascertained with the respective amount involved so that the bank reconciliation statement can be prepared.
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