PARTNERS’ CAPITAL AND LOAN ACCOUNTS

 PARTNERS’ CAPITAL AND LOAN ACCOUNTS

A. Methods of Maintaining Capital Accounts
The Partners’ capital accounts may be maintained by two methods, viz., Fixed Capital Method and Fluctuating Capital Method. Generally, the partnership deed mentions the method of maintaining capital accounts. If a particular method is stated in the partnership deed then the firm has to maintain the capital accounts only by that method. However, if there is no mention about the method of maintaining capital accounts in the partnership deed, the capital accounts are maintained as per the Fluctuating Capital Method.
(a) Fixed Capital Method
Under this method, for each partner two accounts are maintained. One is called the partner’s capital account and the other is called partner’s current account. Partner’s capital account is credited with the amount of capital contributed by the partner. All the adjustments regarding interest on capital, interest on drawings and share in profit or loss are recorded in the current account.
(b) Fluctuating Capital Method
Under this method, all the transactions relating to a partner are entered in only one capital account maintained for him. No current account is opened as in the Fixed Capital Method. Capital account is credited, not only with the amount contributed by him/her as capital, but other transactions, such as interest on capital, drawings and share of profits, are also recorded in the same capital account.


B. Partners’ Loan Accounts
Loans given by the partners, exclusive and independent of contributions by way of capital, are recorded in separate accounts called Partners’ Loan Accounts, keeping the Capital Accounts undisturbed.

C. Interest on Capital, Drawings and Loans from Partners
If there is an agreement to allow interest on capital, loan and drawings, interest is calculated at a rate specified in the agreement. In the absence of any such provision in the agreement, no interest will be allowed/charged on the capital and drawings and interest at the rate of 6 per cent per annum will be allowed on the partners’ loans to the firm. It may further be noted that, in the absence of any agreement to the contrary, interest to partners, on the capital account, will be paid only if there is a profit. However, interest on a loan, given by the partners, has to be allowed, irrespective of the fact that there is no profit.

GOODWILL AND METHOD OF ITS VALUATION

 GOODWILL AND METHOD OF ITS VALUATION

Goodwill is the value of an established business over and above the value represented by its tangible assets. It is the reputation that the firm has built up in the course of its business. It is also the value attached to the super profit earning capacity of a business arising from its wide connections and long standing in the business. Goodwill is the value of the good name of a firm, which attracts more customers and helps it earn more profits. It is an intangible fixed asset built up slowly by the owners of the business over a period of time and is very often recorded in the books of account. Unlike a fictitious asset, which has no realisable value, Goodwill has a realisable value and can be bought and sold in the market.
Necessity: The necessity for valuation of goodwill in a firm arises in the following cases:
1. Change in profit sharing ratio.
2. Admission of a new partner.
3. Retirement, expulsion or death of a partner
4. Sale of business
There are mainly three methods of valuation of goodwill, viz. (i) Average Profit Method
(ii) Super Profit Method
(iii) Capitalisation of Profit Method
(i) Average Profit Method
In this method, goodwill is valued on the basis of the average profits of past few years (normally abnormal increase or decrease in profit is left out). Average profit (simple or weighted), so arrived at, is multiplied by an agreed multiplier factor (called number of years’ purchase) and the amount so arrived is taken as the amount of goodwill.


(ii) Super Profit Method
Under this method, goodwill is calculated on the basis of the number of years’ purchase of Super Profits. Super Profit is the difference between the Actual Profit and the normal expected profit in the trade.

Super profit is multiplied by a certain multiplier, as in the simple average method.

 (iii) Capitalisation of Profit Method
Under this method, value of goodwill is arrived at after capitalising the normal profit at a given reasonable or normal rate of return. Profit, when divided by the normal rate of return, gives the amount, which should have been invested in the business of the firm in the form of capital. This value is compared with the net assets of the firm. The value of goodwill is the excess of capitalised value over the net assets of the firm.


ADMISSION OF A PARTNER

A new partner may be admitted into an existing partnership for the purpose of securing additional capital or additional skill or for any other purpose. When a new partner is admitted in an existing firm, the new partner will get certain benefits such as:
•     Share in the assets and liabilities of the firm.
•     Share in the profit/loss of the firm.
•     Share in the goodwill enjoyed by the firm.


All these advantages are derived by the new partner at the initial sacrifice of the old partners. Thus, at the time of admission of a new partner, the following steps are required to be taken by the firm:
1. Revaluation of assets and liabilities

2. Treatment of goodwill

3. Decision regarding amount of capital to be brought in by the new partner

4. Adjustment regarding accumulated losses and reserves

5. Capital accounts of the partner.

1. Revaluation of Assets and Liabilities
A new partner, admitted into a partnership, gets a share in the profits as well as the assets of the business. On the date of admission of the new partner, the real value of assets of the firm may be more or less than the value appearing in the books of account. This increase or decrease in value belongs entirely to the old partners and hence, has to be adjusted before the admission of the new partner. Similarly, the liabilities existing on the date of admission of the new partner may also need revision.
When the asset value increases, there is a profit and when it goes down, there is a loss. When liabilities increase, there is a loss and when liabilities decrease, there is a profit. This increase or decrease in assets and liabilities is adjusted to the accounts of the old partners through an account called the
‘Revaluation Account’ or ‘Profit and loss Adjustment Account’. The entries recorded in this account are on the principle that when there is a loss, debit profit and loss adjustment account and when there is a gain, credit profit and loss adjustment account. The difference in the two sides of this account will show either profit or loss, which is transferred to the accounts of the old partners in old profit sharing ratio.

2. Treatment of Goodwill
A. Admission of a Partner
When a new partner is admitted to partnership, adjustments of goodwill is necessary because goodwill has been built up by the old partners over a period of years for which they have worked hard and they would not like to just pass on a part of it to the new partner. The new partner also gets a share in profits of the firm from the date of his admission, which is sacrificed by the existing partners. The existing partners would not like to just pass on this benefit to the new partner without a consideration.

B. Retirement or Death of a Partner
On retirement or death of any partner, the portion of goodwill of the firm belonging to the retiring partner or the partner who died, has to be paid by the continuing/surviving partners, to the retiring partner or the heirs of the deceased partner, as the case may be. As the continuing/surviving partners gain in terms of increase in share of profits due to death/retirement of a partner, they bear this amount of goodwill paid, in the gain ratio.
                                     
3. Capital to be brought in by a New Partner
The new partner brings in capital, in addition to goodwill, to get a share in the firm’s assets, liabilities and profits. It can be in the form of cash or assets.


4. Adjustment Regarding Accumulated Losses and Reserves
Normally, the profits of the partnership are divided between the partners at the end of each year. In case, a part of the profits is kept in reserve, to take advantage of it in bad times, then the old partners would not like the newly admitted partner to share the benefit of this reserve or undistributed profits. Therefore, the said amount is divided by the old partners amongst themselves in the old profit sharing ratio.
Sometimes, losses of the earlier years are carried by the partnership under the head profit and loss account. They also belong entirely to the old partners and the new partner would definitely not bear this loss.

5. Adjustment of Capital Accounts of Partners
Sometimes, it may be decided that after the admission of a new partner, the old partners’ capitals should also be adjusted according to the new profit sharing ratio. This is because old partners’ capital balances may have changed considerably due to revaluation of assets and liabilities, transfer of reserves, adjustment of goodwill, etc. For this purpose, generally, the new partner’s capital and his share of profit are taken as the basis for calculation and the old partners’ capitals are ascertained according to the future profit sharing ratio. The amounts so arrived at are compared with the capitals standing to the credit of their capital accounts. Excess may be paid off by the firm to the old partners and deficiency, if any, may be required to be made up by them by bringing in additional cash.


RETIREMENT AND DEATH OF A PARTNER


A. Retirement of a Partner
Retirement of a partner means that the partner breaks off his/her relations with all other partners and withdraws himself/herself from the firm.
Reasons of Retirement
(a) Due to old age
(b) Retiring partner may not have faith in the future prospects of the firm or in other partners
(c) Difference of opinion with other partners
(d) Retiring partner may migrate or shift from the place of business
(e) Voluntarily decides to retire
(f) As per terms of partnership deed.
According to Section 32 of the Indian Partnership Act, 1932, a partner may retire: (a) with the consent of all the partners,
(b) in accordance with the terms of the partnership agreement, or
(c) by giving a notice to all the partners of his intention to retire, when the partnership is ‘At Will’.
In case of retirement, a retiring partner is interested in collecting his share in the various activities of the business of which he was a part owner till the date of his retirement.

B. Death of a Partner
In retirement, a partner breaks off his/her relation with the firm voluntarily, i.e. on his own. Death of a partner automatically terminates such relationship. Unlike retirement, which is on a specific convenient date mutually agreed upon with other partners, death of a partner can occur at any time during the accounting year.

C. New Profit Sharing Ratio of Continuing Partners
After retirement or death of a particular partner, the continuing partners may agree to share the profits in the same old ratio or in a new agreed ratio. The ratio in which the continuing partners gain or benefit from the share of the retiring or dead partner is called the ‘Gaining ratio’. Gaining ratio is equal to the new ratio minus the old ratio.

D. Joint Life Policy
In order to provide for the cash in contingency like the death of a partner, etc., a firm may decide to take a joint life policy on the lives of partners so that the proceeds received from the insurance company may be utilised to make payments of the dues of a deceased partner and the firm is saved from financial hardship.


SLEEPING PARTNER AND QUASI PARTNER


Sleeping Partner
In a partnership, very often, some partners agree to work while others are interested in merely investing the capital and getting a share of profits. Such partners are normally not interested in the day-to-day working of the partnership and are called sleeping partners. The other partners who work for the business of the firm are called working partners or active partners. However, it must be noted that law makes no difference between a sleeping partner and a working partner and the sleeping partner will be equally responsible to the third parties for all acts or omissions of a working partner.

Quasi or Nominal Partner
Sometimes, some prominent persons lend their names to a firm in order to allow the firm to enjoy their goodwill in furtherance of its business. Likewise, in some cases, a person’s name may be used by the partnership firm showing him/her to be a partner, whereas the person is, in fact, not a partner in the firm. In such cases, although no relationship of partnership exists, the law stops a person from disclaiming his/her status as partner vis-à-vis third parties, if he/she keeps quiet, in spite of being fully aware of the fact that his/her name is utilised as partner. Such a quasi-partnership protects the third parties who may make a non-partner liable in these circumstances.
 

Very important for JAIIB errors

 Rectification of errors

Keeping in view the nature of errors, all the errors can be classified into the following
four categories:
Errors of Commission : These are the errors which are committed due to wrong posting
of transactions, wrong totalling or wrong balancing of the accounts, wrong casting of
the subsidiary books, or wrong recording of amount in the books of original entry, etc.
For example: Raj Hans Traders paid Rs. 25,000 to Preetpal Traders (a supplier of
goods). This transaction was correctly recorded in the cashbook. But while posting to
the ledger, Preetpal’s account was debited with Rs. 2,500 only.
Errors of Omission : The errors of omission may be committed at the time of recording
the transaction in the books of original entry or while posting to the ledger. These can
be of two types: (i) error of complete omission (ii) error of partial omission When a
transaction is completely omitted from recording in the books of original record, it is an
error of complete omission. For example, credit sales to Mohan Rs. 10,000, not entered
in the sales book. When the recording of transaction is partly omitted from the books, it
is an error of partial omission. If in the above example, credit sales had been duly
recorded in the sales book but the posting from sales book to Mohan’s account has not
been made, it would be an error of partial omission.
Errors of Principle : Accounting entries are recorded as per the generally accepted
accounting principles. If any of these principles are violated or ignored, errors resulting
from such violation are known as errors of principle. For example, amount spent on
additions to the buildings should be treated as capital expenditure and must be debited
to the asset account. Instead, if this amount is debited to maintenance and repairs
account, it has been treated as a revenue expense.
Compensating Errors : When two or more errors are committed in such a way that the
net effect of these errors on the debits and credits of accounts is nil, such errors are
called compensating errors. For example, if purchases book has been overcast by Rs.
10,000 resulting in excess debit of Rs. 10,000 in purchases account and sales returns

book is undercast by Rs. 10,000 resulting in short debit to sales returns account is a
case of two errors compensating each other’s effect.
Rectification of Errors
Errors can be classified into two categories for the purpose of rectification of errors-
Rectification of Errors which do not Affect the Trial Balance
The following errors do not affect the equality of the Trial Balance totals:
Errors of Omission: A transaction is omitted completely from the books so that there is
no debit and credit entry of the transaction, e.g. Drawings of Rs. 5000 cash by the
proprietor was not recorded.
Errors of Commission: An entry is posted to the correct side of the ledger but to the
wrong account, i.e. items have been posted to the wrong account of the same class,
e.g. Payment of Rs. 1000 cash by a customer A. John was wrongly posted to the
account of another customer, B. Johan.
Errors of Principle: An entry is made in the wrong class of account, i.e. when an
expense is treated as an asset and vice versa, e.g. Repairs to building Rs. 4000 was
debited to the Building Account.
Complete Reversal of Entries: An account that should be debited is credited and vice
versa, e.g. A cheque Rs. 2000 received from Sunita was debited to the account of Sunita
and credited to the Bank Account.
Compensating Errors: Errors (or error) on one side of the ledger are compensated by an
error (or errors), e.g. The Purchases Account and Sales Account were both overcast by
Rs. 1500.
Errors of Original Entry: The original figure may be incorrectly entered although the
correct double-entry principle has been observed using this incorrect figure, e.g. Credit
sales of Rs. 9650 to Ranjit was recorded in the Sales Account and Ranjit's account as
Rs. 6950.
Rectification of Errors which Affect the Trial Balance
Errors which are revealed by the Trial Balance are those errors which cause the Trial
Balance totals to be in disagreement.
Errors in Calculation: If there is any miscalculation of the Trial Balance totals or the net
account balances, the Trial Balance will not balance, e.g. There was an error in the
calculation of the cash balance, causing the Trial Balance totals not to balance too.
Errors in Omission of One Entry: Omission of either the debit or credit entry of a
transaction will cause the totals of the Trial Balance not to agree, e.g. A cheque Rs.
5000 received for commission was debited to the Bank Account only.
Posting to the Wrong Side of An Account: Entry into the wrong side of an account will
cause one side of the ledger to be more than the other, e.g. A cheque of Rs. 8000 paid
to creditor, K. Raj was credited instead of debited to his account.
Errors in Amount: If the debit entry of a transaction differs in amount with the credit
entry, the Trial Balance will not balance, e.g. Cash Rs. 9650 received from Anand was
debited to the Cash Account as Rs. 9650 and credited to the account of Anand as Rs.
6950.
...................................................
Capital and revenue expenditure
Capital expenditures are for fixed assets, which are expected to be productive assets for
a long period of time. Revenue expenditures are for costs that are related to specific
revenue transactions or operating periods, such as the cost of goods sold or repairs and
maintenance expense.
The differences between these two types of expenditures are as follows:
Timing - Capital expenditures are charged to expense gradually via depreciation, and
over a long period of time. Revenue expenditures are charged to expense in the current
period, or shortly thereafter.
Consumption - A capital expenditure is assumed to be consumed over the useful life of
the related fixed asset.

Size - A more questionable difference is that capital expenditures tend to involve larger
monetary amounts than revenue expenditures. This is because an expenditure is only
classified as a capital expenditure if it exceeds a certain threshold value; if not, it is
automatically designated as a revenue expenditure. However, certain quite large
expenditures can still be classified as revenue expenditures, as long they are directly
associated with sale transactions or are period costs.

PPB recollected questions on 06.12.2020

  PPB recollected questions on 06.12.2020

SMA-0 Principal or interest payment not overdue for more than 30 days but account showing signs of incipient stress

SMA-1 Principal or interest payment overdue between 31-60 days

SMA-2 Principal or interest payment overdue between 61-90 days

Governor of the Reserve Bank of India – Chairperson, ex officio; (Shri Shaktikanta Das) of MPC

5 Mark's question are easy just odd one out you can manage them easily

Many questions on ethics and professionalism

One question was there on there on LC financing

Call money

Locker nomination

CRR

Conflict of interest

Penetration marketing

Minor do not want to be a partner

Basel 2 and 3,

Marketing mix,

case studies on nomination in locker accounts,

LANS,

business value,

Ethical dilemma,

pledge,

hypo, .

mortgage and assignment match the following,

numerical on NPA provision for doubtful assets.

Priority sector advances to weaker sections,

updated investment and turnover for micro industries,

diversification,

MKIS

customer banker relationship

question regarding SWITF

PMJDY

PMAPY

PMJJBY

PMSBY

Fair practice of lending

Non popular social networking site

Code of conduct for Direct Sales Agent made by?

Valuation of Mutual fund on...

Pre shipment credit

FCNR(B) is ___ form of term deposit

Data mining tools

Frauds committed by large number of customers

Call money market

Minor who doesn't want to be in partnership should do...

Business facilitator work on behalf of...

Ethical Dilemma

Increase in CRR...

type of mergers

Locker operation related

current ratio compare

Liberalized Remittance scheme related

marketing 15 question

ethics 15 questions

Cash management services related

Mutual fund scheme

NPA- D1, D2 related questions

Provisioning numerical

Priority sector related

Identify weaker section

Endorsement case study

Banking regulation act ke question

Rangarajan Committee

Narasimham committee

Classification of Assets 

Computerization in Banks 

Priority Sector – Target 

Money Market 

Marketing Ethics 

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc 

Provision of Doubtful Assets 

Banking Regulation ACT 

NPA 

General Banking – Either or Survivor 

MSME 

TNW 

Current Ratio 

SWIFT – related working DAYS 

CRILC – who developed (Ans: RBI) 

REPO RATE – Definition 

MICRO/SMALL /MEDIUM 

ISO Standards for smart cards – ISO 7816

ATM 

Weaker sections in PSL 

PMJJBY 

Mortgage 

MCLR 

PRODUCT MIX 

Ex-Officio chairman of MPC (Ans: RBI Governor)

Penalty of non-maintenance of CRR 

Debt Market 

Marketing & Product Development 

Product Life Cycle Stages 

NRLM Objective 

Letter of Credit 

Commercial Paper 

MKIS(Marketing Information System)

 Rangarajan Committee

Narasimham committee

Classification of Assets 

Computerization in Banks 

Priority Sector – Target 

Money Market 

Marketing Ethics 

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc 

Provision of Doubtful Assets 

Banking Regulation ACT 

NPA 

General Banking – Either or Survivor 

MSME 

TNW 

Current Ratio 

SWIFT – related working DAYS 

CRILC – who developed (Ans: RBI) 

REPO RATE – Definition 

MICRO/SMALL /MEDIUM 

ISO Standards for smart cards – ISO 7816

ATM 

Weaker sections in PSL 

PMJJBY 

Mortgage 

MCLR 

PRODUCT MIX 

Ex-Officio chairman of MPC (Ans: RBI Governor)

Penalty of non-maintenance of CRR 

Debt Market 

Marketing & Product Development 

Product Life Cycle Stages 

NRLM Objective 

Letter of Credit 

Commercial Paper

Business value

Ethical dilemma

Pledge, hypo, mortgage and assignment match the following

Numerical on NPA provision for doubtful assets

Priority sector advances to weaker sections

Updated investment and turnover for micro industries

Diversification

MKIS

Basel 2 and 3

Marketing Mix

Case studies on nomination in locker accounts

LAN

Questions on cheque conversion

call money market

PMJDY

Fair practice of lending

Non popular social networking site

Code of conduct for Direct Sales Agent made by?

Valuation of Mutual fund on…

Pre shipment credit

FCNR(B) is _ form of term deposit

Data mining tools

Frauds committed by large number of customers\

Call money market

Minor who doesn’t want to be in partnership should do…

Business facilitator work on behalf of…

Ethical Dilemma

Increase in CRR…

PMAPY

PMJJBY

PMSBY

Banking definition

Accept deposit purpose

Bank interest rates in marketing

Which one is not mkis

gross advance

Net working capital

Weaker section categories

Fair practice of lender 2 to 3 questions

mutual fund related 1

Rangarajan Committee

Narasimham committee

Classification of Assets

Computerization in Banks

Priority Sector – Target

Computerization in Banks

Priority Sector – Target

Money Market

Marketing Ethics

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc

Provision of Doubtful Assets

Banking Regulation ACT

NPA

General Banking – Either or Survivor

MSME

TNW

Current Ratio

SWIFT – related working DAYS

CRILC – who developed (Ans: RBI)

REPO RATE – Definition

MICRO/SMALL /MEDIUM

ISO Standards for smart cards – ISO 7816

ATM

Weaker sections in PSL

Mortgage

MCLR

PRODUCT MIX

Ex-Officio chairman of MPC (Ans: RBI Governor)

Penalty of non-maintenance of CRR

Debt Market

Marketing & Product Development

Product Life Cycle Stages

NRLM Objective

Letter of Credit

Marketing Ethics

Match the Following – Vehicle, LIC Policy, Land, Hypothecation, Pledge Etc

Provision of Doubtful Assets

Banking Regulation ACT

NPA

General Banking – Either or Survivor

MSME

TNW

Current Ratio

SWIFT – related working DAYS

CRILC – who developed (Ans: RBI)

REPO RATE – Definition

MICRO/SMALL /MEDIUM

ISO Standards for smart cards – ISO 7816

ATM

Mortgage

MCLR

Marketing & Product Development

Product Life Cycle Stages

NRLM Objective

Letter of Credit

Commercial Paper

MKIS(Marketing Information System)

Updated list of accounting standards:-

  Updated list of accounting standards:-

AFB 

Accountant Standards:-List of ICAI’s Mandatory Accounting Standards (AS 1~29)

Download PDF copy of Mandatory Accounting Standards of ICAI (as on 1 July 2017 and onwards), as under:

Description

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories (amended) *

AS 3 Cash Flow Statements

AS 4 Contingencies and Events Occurring after the Balance Sheet Date *

AS 5 Net Profit or Loss for the period,Prior Period Items and Changes in Accounting Policies

AS 6 Depreciation Accounting (withdrawn) *

AS 7 Construction Contracts (revised 2002)

AS 8 Accounting for Research and Development (withdrawn for AS 26)

AS 9 Revenue Recognition

AS 10 Accounting for Fixed Assets (amended) *

AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003) **

AS 12 Accounting for Government Grants

AS 13 Accounting for Investments (amended) *

AS 14 Accounting for Amalgamations (amended) *

AS 15 Employee Benefits (revised 2005)

AS 16 Borrowing Costs

AS 17 Segment Reporting

AS 18 Related Party Disclosures

AS 19 Leases

AS 20 Earnings Per Share

AS 21 Consolidated Financial Statements (amended) *

AS 22 Accounting for Taxes on Income

AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

AS 24 Discontinuing Operations

AS 25 Interim Financial Reporting

AS 26 Intangible Assets

AS 27 Financial Reporting of Interests in Joint Ventures

AS 28 Impairment of Assets

AS 29 Provisions,Contingent Liabilities and Contingent Assets (amended) *. List of ICAI’s Non-Mandatory Accounting Standards (AS 30~32)

ICAI has announced on 15 Nov. 2016 that ‘AS 30- Financial Instruments: Recognition and Measurement’, ‘AS 31- Financial Instruments: Presentation’, ‘AS 32- Financial Instruments: Disclosures’ stands withdrawn

CISA

  CISA (Certified Information Systems Auditor)- IT Certification Course.

The Benefits of CISA: With a CISA designation, there's no need to question your credentials. You've a CISA, so your credentials are understood.

CISA Impacts Your Career & Your Organization:
Enterprises demand IS audit professionals that possess the Knowledge & Expertise to help then identify critical issues & customize practices to support trust in & value from information systems.
The Skills & Practices that CISA promotes & evaluates are the building blocks of success in the field. Possessing the CISA demonstrates proficiency & is the basis for measurement in the profession.

CISA Certification:
- Confirms your Knowledge & Experience.
- Quantifies & Markets you expertise.
- Demonstrates that you have gained & maintained the level of Knowledge required to meet the dynamic challenges of Modern Enterpr- Demonstrates that you have gained & maintained the level of Knowledge required to meet the dynamic challenges of Modern Enterprise.
- Is globally recognized as the mark of excellence for IS Audit professional.
- Combines the achievement of passing a comprehensive exam with recognition of Work & Educational Experience, providing you with credibility in the marketplace.
- Increase you value to your organization.
- Gives you a competitive advantage over peers when seeking job growth.
- Helps you achieve a High Professional standard through ISACA's requirements for continuing Education & Conduct.

Why Employers Hire CISA:
With a growing demand for Individuals Possessing IS Audit, Control & Security Skills, CISA has become a preferred certification program by Individuals & Organizations around the WORLD.
CISA EMPLOYEES:
- Are Highly qualified, Experienced professionals.
- Provide the enterprise with a certification for IT assurance that's recognized by Multinational Clients, Lending Credibility to the enterprise.
- Are Excellent indicators of proficiency in technology controls.
- Demonstrate competence in 5 domains, including Standards & Practices; Organization & Management; Processes; Integrity, Confidentiality & Availability; & Software Development, Acquisition & Maintenance.
- Demonstrate a commitment to providing the enterprise with trust in & value from your information systems.
- Maintain ongoing professional development for successful on-the-job performance.

ANSI Accredited Certification Program PERSONAL CERTIFICATION:
CISA, CISM, CGEIT & CRISC Approved.
The ANSI (American National Standart Institure) has accredited the CISA certification program under ISO/IEC 17024:2012, General Requirements for Bodies Operating Certification Systems of Persons. ANSI a private, Non-Profit Organization, Accredits other organizations to serve as 3rd Party Product, System & Personnel Certifiers. ISACA is proud to be recognized with this International Standard of Performance..

Forex individual and operations exam differences

  IIBF certifications maximum members getting this doubt??

What is the difference between forex exchange for individuals and forex operations ??

1.Both Certifications are different

2.Foreign remittance facilities for individuals is a part of forex operations.

3. First one deals only with retail operations but in forex operations you will be learning about trade as well as trade finance

4. If you want to learn trade you can try forex operations.

Application of Altman Z Score / Bankruptcy Score Formula

  Application of Altman Z Score / Bankruptcy Score Formula

The formula is used to predict corporate defaults or bankruptcy or in academic language, financial distress position of companies.

The formula is based on discriminant analysis technique in statistical analysis.

The formula uses multiple variables from income statement and balance sheet of companies.

What’s the formula?

Formula =

Altman Z-Score = 1.2*T1 + 1.4*T2 + 3.3*T3 + 0.6*T4 + 1.0*T5

Here are the key definitions from the above formula:

T1 = Working Capital / Total Assets

This ratio measures liquid assets. The companies in trouble will usually experience shrinking liquidity.

T2 = Retained Earnings / Total Assets

This ratio calculates the overall profitability of the company. Dwindling profitability is a warning sign.

T3 = Earnings before Interest and Taxes / Total Assets

This ratio shows how productive a company is in generating earnings, relative to its size.

T4 = Market Capitalization / Total Liabilities

This ratio suggests how far the company’s assets can decline before it becomes technically insolvent (i.e., its liabilities become higher than its assets).

T5 = Sales / Total Assets

This is the asset turnover ratio and is a measure of how effectively the firm uses its assets to generate sales

Difference between Letter of Credit and Bank Guarantee

 Difference between Letter of Credit and Bank Guarantee

📣📣📣📣📣📣📣
Introduction🏙
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This two terminology looks similar but both are very different. When one wants to expand the business means beyond the national boundary or within, one needs assurance from the buyer side that after delivery of goods or services the payment will receive and this can be done by the bank only.

In short, both these terms are used while doing business or transactions with domestic or international companies.
So, both these services are facilitated by the bank but in a different way as per the need of seller party.
Letter of Credit🏙
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It is used while there is a high level of risk involves in business.It is used while doing import and export transactions with international companies.L/C is a written commitment issued by the bank or some other financial institutions for payment assurance to the seller party from buyer’s request.In L/C, the seller gets a guarantee of payment from the buyer’s banks on the due date payment will receive only if the seller meets all the conditions of deal like timely delivery etc.Banks offer a service like L/C on the basis of proof provided by the buyer’s party.If the buyer fails to make payment to the seller, the bank pays on behalf of a buyer and then the bank will recover it from a buyer anyhow.Banks will charge fees for this type of facilities.So in short, letter of credit is beneficial when product or service is delivered and payment is not done.It eliminates the financial risk involved in the business.

Types of Letter of Credit🎎
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🗼Irrevocable Letter of Credit:
It is not modified or cancelled without the concern of all the parties.
🗼Revocable Letter of Credit:
In it, the issuing bank can revoke or cancel the letter of credit any time without prior notice to the seller.
🗼Confirmed Irrevocable Letter of Credit:
In it, the confirming bank gives more assurance to seller same as issuing bank.
🗼Unconfirmed Irrevocable Letter of Credit:
In it, an advisory bank from the seller's side performs as an agent for the issuing bank without any responsibility to the seller.
🗼Revolving Letter of Credit
This type of letter is used if in case regular transactions take place and remain valid for a long term without issuing the another letter of credit.

Bank Guarantee🏙
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🏦 guarantee is a service by which bank gives a guarantee to the seller on behalf of his client for assurance of payment.
🏢So, Bank guarantee has the same function as a letter of credit but with some differences.
🏦 guarantee generally used in domestic transactions.
🏦 guarantee is beneficial when contractual obligations are not fulfilled by the other seller party.
🏦 guarantee is used in infrastructure and real estate projects to reduce risk level.
⤵Letter of Credit V/s 🎎Bank Gurantee
Basis🎟
⤵Letter of CreditBank Guarantee-DefinitionA letter of credit is an obligation by the bank to the seller if the criteria met, the bank will make payment.

🎎In bank guarantee, if the opposing party doesn’t fulfil contractual obligations the Bank will make payment.
Boundary🎟
⤵It is used internationally.
🎎It is used domestically.
Protection🎟
⤵It protects both parties but favours exporter.
🎎It also protects both but favours buyer.
Industry🎟
⤵It is used by merchants.
🎎It is used by real estate and infrastructure developer.
L/Cs are frequently used in international transactions compared with bank guarantees. When comparing the two instruments, the market for bank guarantees is much larger than that for L/Cs.

CASE STUDIES ON DOCUMENTARY CREDITS AND UCP600

 CASE STUDIES ON DOCUMENTARY CREDITS AND UCP600

CASE STUDY 1
Banks have a practice of calling for the original LC at the time of presentation of documents and
endorse any drawings on its reverse.
LC's may be made available by Acceptance / Defferred Payment / Negotiation and to be freely
available with any bank.
Is it mandatory to endorse the original LC on its reverse?
Analysis
Most LCs contain a clause indicating such a requirement.
The practice is required by SWIFT standards cat.7, for freely negotiable credits, available with any
bank.
Conclusion
What is the problem?
CASE STUDY 2
If a nominated bank does not incur a deffered payment undertaking on presentation of complying
documents and forwards them to the Issuing Bank.
Subsequently can it a purchases a deferred payment undertaking from the issuing bank and seek
protection under UCP600?
Articles 7c. UCP600
CASE STUDY 3
If a LC is confirmed and is available with the Confirming Bank and the beneficiary chooses to
present the document directly to the Issuing Bank and the Issuing Bank wrongfully dishonors.
Should the confirming bank honor the presentation given that the LC has meanwhile expired?
Article 8a. UCP600
CASE STUDY 4
A documentary credit requires all documents must to be issued in English language.
The presentation includes a Certificate of Origin bearing a Stamp / Legalisation done in another
language
Is this a discrepancy?
Issued in?
CASE STUDY 5
As per Article 38 of UCP 600, A LC can be transferred to more than one second beneficiary. This
can be done preferably when the Partial Shipments are allowed under the LC.
If the first Beneficiary is certain that he would be able to comply with article 31(b) of UCP600 (re
partial shipments – submission of multiple BLs on the same voyage), can a LC be transferred to
more than one second beneficiary even if the LC states Partial Shipment is prohibited provided
Article 38.d. UCP600
CASE STUDY 6
If the nominated bank does not accept a bill of exchange drawn on them by the beneficiary, can the
same bill of exchange be presented to the issuing bank or should they present a fresh bill of
exchange drawn on the Issuing Bank
UCP Article 7a (iv)
CASE STUDY 7
Under the documents required a LC calls for a Bill of Lading.
Bill of Lading submitted with the documents is signed by a forwarder as carrier.
Is it a discrepancy?
Article 20 UCP600
CASE STUDY 8
L/C requirement: invoices in 3 fold and Legalized by Chamber of Commerce.
Beneficiary submits invoices with only one legalized and others without being legalized.
Is it a discrepancy?
Article 17e. UCP600
CASE STUDY 9
LC calls for a Beneficiary's certificate stating the expiry date (of the product).
The certificate presented states only the month and the year of expiry.
Is it a discrepancy?
Bankers are expected to have a certain amount of general knowledge and common sense
CASE STUDY 10
The documents required in a transferable LC calls for an Inspection Certificate issued by the First
Beneficiary.
At the request of the First Beneficiary LC is transferred to a Second Beneficiary without calling for
the Inspection Certificate, which the first beneficiary undertakes to submit along with drafts and
invoices to be presented for substitution.
Has the Transferring Bank acted in aprudent manner.
Sub-article 38g of UCP600
CASE STUDY 11
A LC states the last date for shipment as 09 November 2014 and the expiry as 30 November 2014,
is silent on the period of presentation and also states ‘Stale Bills of Lading Acceptable”.
Documents presented on 01 October 2014 with the Bill of Lading dated 01 June 2014 refused by
the Issuing Bank stating Late Presentation (not presented within 21 days after the BL date as per
article 14.c UCP600)..
The negotiating Bank does not agree with the reason for refusal.
Should the Issuing Bank honour?
Rule A19.b ISBP745
Case Study 12
The documentary credit in question issued subject to UCP600 called for shipment from “ANY
NORTH EUROPEAN PORT” and the transport document required in field 46a was: “FULL SET OF
CLEAN ON BOARD BILL OF LADING”.
The Nominated Bank received a bill of lading evidencing shipment from Antwerp, which we found to
be within the scope of North Europe, since the geographical area of North Europe was not defined
in the Credit.
The Issuing Bank refused the documents arguing that Antwerp is not within the geographical area
or range stated in the Credit.
The Issuing Bank further argued that Belgium is in Western Europe and not in Northern Europe and
quoted an internet website (www.mapsofworld.com) where we could easily recheck.
Is the discrepancy cited by the issuing bank valid?
Analysis
UCP 600 sub-article 14 (a) states that a bank must examine a presentation on the basis of the
documents alone.
It is not a matter for the ICC Banking Commission to define or determine geographical areas or
ranges. The requirement in the credit is vague and clearly ambiguous.
In accordance with ISBP 745 Preliminary Considerations paragraph (v), the applicant bears the risk
of any ambiguity in its instructions to issue or amend a credit.
Furthermore, an issuing bank should ensure that any credit or amendment it issues is not
ambiguous or conflicting in its terms and conditions.
It should not be necessary to refer to external resources in order to determine relevant facts.
Conclusion
The applicant and issuing bank must bear the risk of ambiguity for failing to express specifically how
“Any North European Port‟ is to be defined.
In this case, the document is not discrepant.
Case Study 13
Under a credit issued subject to UCP600 by Bank V in country W available by negotiation and
expiring with Bank A in country N, Bank A added its confirmation. Upon presentation of complying
documents Bank A negotiated and discounted. Documents were refused by Bank V for the following
reason: “Health Certificate to be presented in 1 original and 2 copies but only presented in 1 original
plus 1 copy.”
Bank A stated that all required originals and copies were presented to them within the time limits
foreseen by the credit, but admitted to having made an operational mistake by leaving one copy of
the Health Certificate in their file and by only sending 1 original and 1 copy to Bank V.
Bank A requested Bank V to create a second copy on Bank A‟s account, or to instruct Bank A to
courier the missing copy, but Bank V did not provide agreement. In the absence of any instructions,
and after the expiry date of the credit, Bank A couriered the missing copy document to Bank V,
certifying on their letter that it was presented within the time limits of the credit. Bank V still refused
to honour the presentation.
Has the Issuing Bank the right to refuse the documents on the basis of the missing copy of the
Health Certificate, in spite of the fact that the missing copy was sent to them after the expiry date,
but with the declaration of the negotiating bank that the copy was presented within the time limits
foreseen under the LC?
Analysis
The credit was available for negotiation with the Nominated Bank and expired at their counters.
UCP 600 sub-article 6 (d) (ii) states: “The place of the bank with which the credit is available is the
place for presentation. The place for presentation under a credit available with any bank is that of
any bank. A place for presentation other than that of the issuing bank is in addition to the place of
the issuing bank.”
UCP 600 article 6 (e) states: “Except as provided in sub-article 29 (a), a presentation by or on
behalf of the beneficiary must be made on or before the expiry date.”
In accordance with UCP 600 sub-article 7 (c) an Issuing Bank undertakes to reimburse a nominated
Bank that has honoured or negotiated a complying presentation and forwarded the documents to
the Issuing Bank.
The Issuing Bank did not receive all the required documents and subsequently issued a refusal
notice. The Nominated Bank, after an exchange of correspondence with the Issuing Bank,
forwarded the missing copy document to the issuing bank certifying that it had been presented
within the time limits required by the credit.
Conclusion
The initial cited discrepancy is valid. However, upon receipt by the issuing bank of the missing copy
document, and on the basis that it also received a certification from the negotiating bank that the
document was presented within the time limits required by the credit, the issuing bank must
reimburse the confirming bank.
Cade Study 14
Under a credit issued by Bank V in country V available by negotiation and expiring with Bank A in
country N, Bank A added its confirmation. Upon presentation of complying documents Bank A
negotiated and discounted. Documents were refused by Bank V for the following reason: “Health
Certificate to be presented in 1 original and 2 copies but only presented in 1 original plus 1 copy.”
Bank A stated that all required originals and copies were presented to them within the time limits
foreseen by the credit, but admitted to having made an operational mistake by leaving one copy of
the Health Certificate in their file and by only sending 1 original and 1 copy to Bank V.
Bank A requested Bank V to create a second copy on Bank A‟s account, or to instruct Bank A to
courier the missing copy, but bank V did not provide agreement. In the absence of any instructions,
and after the expiry date of the credit, Bank A couriered the missing copy document to Bank V,
certifying on their letter that it was presented within the time limits of the credit. Bank V still refused
to honour the presentation.
Has the Issuing Bank the right to refuse the documents on the basis of the missing copy of the
Health Certificate, in spite of the fact that the missing copy was sent to them after the expiry date,
but with the declaration of the negotiating bank that the copy was presented within the time limits
foreseen under the LC?
Analysis
Although not indicated in the query, it is assumed that the credit was issued subject to UCP 600.
The credit was available for negotiation with the nominated bank and expired at their counters.
UCP 600 sub-article 6 (d) (ii) states: “The place of the bank with which the credit is available is the
place for presentation. The place for presentation under a credit available with any bank is that of
any bank. A place for presentation other than that of the issuing bank is in addition to the place of
the Issuing Bank.”
UCP 600 article 6 (e) states: “Except as provided in sub-article 29 (a), a presentation by or on
behalf of the beneficiary must be made on or before the expiry date.”
In accordance with UCP 600 sub-article 7 (c) an issuing bank undertakes to reimburse a nominated
bank that has honoured or negotiated a complying presentation and forwarded the documents to
the issuing bank.
The issuing bank did not receive all the required documents and subsequently issued a refusal
notice. The nominated bank, after an exchange of correspondence with the issuing bank, forwarded
the missing copy document to the issuing bank certifying that it had been presented within the time
limits required by the credit.
Conclusion
The initial cited discrepancy is valid. However, upon receipt by the issuing bank of the missing copy
document, and on the basis that it also received a certification from the negotiating bank that the
document was presented within the time limits required by the credit, the issuing bank must
reimburse the confirming bank.
Cade Study 15
Bank A (Issuing Bank) in country A issued a standby credit subject to UCP 600 which was advised
to the beneficiary in country B by Bank B (Advising Bank).
The beneficiary presented a demand under the credit which arrived at the counters of the Bank A
before the expiry date of the credit.
Bank A issued a notice of refusal on the third day following presentation stating one discrepancy:
“Original Standby LC Not Presented”.
There was no wording in the credit requiring presentation of the original Standby LC.
1) Is the discrepancy stated by the Bank A correct?
2) Can Bank A raise further discrepancies at a later date in respect of the one presentation made by
the beneficiary under the credit?
Analysis
1) The wording of the credit did not require the presentation of the original credit as part of the
claim. Unless the credit was issued by mail or in paper format, it is doubtful how the originality of the
document could be determined. Accordingly, unless otherwise specifically required within the terms
and conditions of a credit, there is no requirement for the original credit to be included in the
presentation.
2) UCP 600 sub-article 16 (c) states that when a bank decides to refuse or negotiate, it must give a
single notice to that effect to the presenter. UCP 600 clearly does not allow for further discrepancies
to be raised that were apparent at the time of the initial presentation, as is referred to within former
ICC Opinions R196, R328, R271 and TA764rev.
Conclusion
1) The discrepancy is not valid.
2) Additional discrepancies are not to be considered, as banks only have one opportunity to raise
discrepancies for each presentation.
Cade Study 16
Under a documentary credit subject to UCP 600 the beneficiary of the L/C presented, amongst
other documents, a charter party bill of lading (CPBL), made out in accordance with the terms and
conditions of the respective L/C, signed and stamped as shown hereafter:
According to UCP 600 sub-article 22 (a) (i), a CPBL must appear to be signed by any of the
following parties:
· the master,
· the owner,
· the charterer, or
· a named agent for any of the above.
The stamp shows, however, that the master is signing “On behalf of Owners”.
As this is a case not contemplated by UCP 600 sub-article 22 (a) (i) like the signing by a carrier or a
named agent for the carrier as indicated in Official Opinion 470/TA.775rev., we would like to know
the opinion of the ICC Banking Commission to this case, i.e. whether this is an acceptable way of
signing or not: If the answer is that it is not acceptable, whether it would be acceptable, if the name
of the owner(s) would be stated.
Analysis
UCP 600 sub-article 22 (a) (i) states that a CPBL must appear to be signed by:
· the master or a named agent for or on behalf of the master, or
· the owner or a named agent for or on behalf of the owner, or
· the charterer or a named agent for or on behalf of the charterer.
Furthermore, it states: “Any signature by the master, owner, charterer or agent must be identified as
that of the master, owner, charterer or agent.”
ISBP 745 paragraph G4 (b) states: “When the master (captain), owner or charterer signs a charter
party bill of lading, the signature of the master (captain), owner or charterer is to be identified as
“master” (“captain”), “owner” or “charterer”.
ICC Opinion 470/TA.775rev does not apply as it relates to a CPBL issued and signed by a carrier or
its agent.
The signature on the CPBL is identified as that of the master (captain). The master is signing for
and on behalf of the owner.
Conclusion
The document is acceptable.
Cade Study 17
The Documentary Credit issued subject to UCP 600 by an Issuing Bank located in country X on
behalf of an applicant also located in country X and confirmed by a Bank located in country Y
required in field 46a “documents required” amongst other the following document:
Quote Bank guarantee from international first class bank payable in country X equivalent to EUR
xxxxx [the guarantee indicates an amount] valid till xx.xx.xxxx [the guarantee indicates a fix date].
Unquote
The bank guarantee presented to the Confirming Bank is issued by a bank located in country Y and
states that it is subject to the laws of country Y. The wording of the presented guarantee shows the
applicant of the Letter of Credit as beneficiary of the guarantee. The amount and expiry date of the
guarantee are in compliance with the requirements stipulated in the Letter of Credit. The payment
undertaking of the guarantee is worded as follows:
QUOTE
We, xxx [the guarantee indicates the guaranteeing bank], hereby irrevocably undertake to
pay you [the guarantee is addressed and directed to the applicant of the Letter of Credit]
without delay on your first written demand for payment an amount up to xxx [the guarantee
indicates an amount] provided your demand for payment is simultaneously supported by (…)
UNQUOTE
The wording of the guarantee does neither contain an express indication that it is “payable in
country X” nor any express reference to country X being the place of payment.
The Confirming Bank accepted the presented guarantee but the Issuing Bank raised the following
discrepancy: “Bank Guarantee from international bank is not payable in country X.”. Please let us
have your official opinion whether and if so why the issuing bank was entitled to raise the
discrepancy by answering the following questions:
1. Is the guarantee only compliant if it either indicates expressly that it is “payable in country X” or
contains an express reference to country X being the place of payment? Or can it be argued that
the guarantee meets the requirement “payable in country X” because it is issued in favour of a
beneficiary located in country X and as it provides that payment thereunder has to be made to this
beneficiary?
2. Would the requirement “payable in country X” be met if the guarantee is made out as described
above but is not issued by a bank located in country Y but in country X?
3. Does the stipulated requirement “payable in country X” require the document checker to
determine whether the presented guarantee‟s place of payment is country X?
4. Could the confirming bank argue validly that the Letter of Credit does not stipulate that the
requirement “payable in country X” must be met by an express reference or wording in the
guarantee document (e.g. 46a: Bank guarantee from international first class bank indicating that it is
“payable in country X” equivalent to (…)”) and that this requirement may therefore be deemed as
non-documentary and not stated and thus be disregarded according to UCP 600 sub-article 14 (h)
5. Could the confirming bank argue validly that the checking of the document falls with respect to
the requirement “payable in country X” under the auspices of UCP 600 sub-article 14 (f) because
this requirement is worded in way that does not amount to a stipulation of the document‟s data
content ?
Analysis
The credit included, in field 46a of the MT700, a requirement for a guarantee to be issued by an
international first class bank payable in country X (the country of the credit issuing bank). Apart from
amount and expiry date, no other requirements were provided. The credit was confirmed by a bank
in country Y (the country of the credit beneficiary).
The actual guarantee that was presented to the confirming bank was issued by a bank in country Y,
stating that it was subject to the laws of country Y.
The guarantee contained a statement from the guarantee issuing bank that they irrevocably
undertook to pay the guarantee beneficiary (the applicant of the credit) without delay on first written
demand for payment. It did not include an explicit statement or reference that the guarantee was
payable in country X.
Whilst the Confirming Bank accepted the guarantee as a compliant document under the credit, the
Issuing Bank refused on the basis that the guarantee was not payable in country X.
In view of the fact that the beneficiary of the credit was located in country Y, it is not unusual that
they would use a bank in their own country to issue the guarantee, as was the case in this query.
The guarantee had been issued directly in favour of the beneficiary (the credit applicant) in country
X, and not via another bank in country X. It included a condition that payment would be made
against first written demand. It does not state a place for presentation. Because the guarantee did
not state a place for presentation, demands must be presented at the issuing bank. The issuing
bank is located in country Y.
Conclusion
1. The guarantee needed to clearly state that it was payable in country X. In order to achieve this, it
would have needed to be payable at the counters of a bank in country X, and not at the counters of
the guarantee issuing bank in country Y. The fact that the guarantee was issued directly in favour of
the beneficiary (credit applicant) in country X and was payable against first written demand, did not
fulfil this requirement.
2. If the guarantee had been issued by a bank in country X, this would have met the requirements of
the credit.
3. The place of payment of the guarantee was to be stated as “in country X‟ or determinable as
being within country X.
4. The requirement for the guarantee clearly related to a requirement for an actual document.
Consequently, UCP 600 sub-article 14 (h) is not applicable.
5. The condition in the credit “payable in country X‟ is a specific requirement that must be clearly
reflected in the guarantee document if it is to fulfil its function. The discrepancy raised by the issuing
bank is valid.
CASE STUDY 18
The relevant LC conditions:
1) (Under documents required): Full set of clean on-board marine bills of lading consigned to order,
blank endorsed, notify applicant and marked “freight payable as per charter party”
2) (Under other conditions): Charter Party BL acceptable
The presented BL shows:
a) “freight payable as per charter party”
b) signed by XXX Logistics Co Ltd as agent for carrier YYY Shipping Lines Ltd
c) the reverse page shows the shipper’s blank endorsement
d) reverse page also shows typical shipping contract terms & conditions (i.e. not the usual Charter
Party BL terms & conditions)
In short, the BL (front and back), other than the freight statement, does not display anything to
suggest that it is subject to a charter party contract.
Issuing Bank paid but deducted a discrepancy fee for the waived discrepancy of “Charter Party BL
signatory’s capacity not as master, owner, charterer or agent for any of the aforesaid”. Issuing
Bank’s position appears to be that, by virtue of the LC‟s BL freight requirement, the LC is actually
calling for a Charter Party BL. And because the BL does show such freight statement, the BL is to
be treated as being subject to a charter party contract, and therefore the BL must be signed in
accordance with Article 22 (a) (i).
Negotiating Bank of course disagreed and countered that the freight phrase was not enough
evidence that the BL was a Charter Party one. It argued that, save for the freight phrase; its terms &
conditions (on reverse page) were those of a conventional BL. If it is a conventional BL, then issuing
bank’s discrepancy is incorrect. It should be instead: “Conventional BL presented but contains an
indication that it is subject to a charter party”..
ANALYSIS
The credit required a marine bill of lading marked “freight payable as per charter party‟. In this
respect, the credit was badly worded. The presented bill of lading was marked “freight payable as
per charter party”.
ISBP 745 paragraph G2 (b) states: “A transport document, however named, indicating expressions
such as “freight payable as per charter party dated (with or without mentioning a date)”, or “freight
payable as per charter party”, will be an indication that it is subject to a charter party.
ISBP 745 paragraph G1 states: “When there is a requirement in a credit for the presentation of a
charter party bill of lading, or when a credit allows presentation of a charter party bill of lading and a
charter party bill of lading is presented, UCP 600 article 22 is to be applied in the examination of
that document.
Where a credit simply allows for or requires the presentation of a CPBL, a CPBL issued and signed
by a carrier or its agent is discrepant under UCP 600 sub-article 22 (a) (i).
CONCLUSION
The discrepancy raised by the issuing bank, “Charter Party BL signatory‟s capacity not as master,
owner, charterer or agent for any of the aforesaid”, is correct.
CASE STUDY 19
L/C available with Advising Bank by payment, however the Advising Bank did not act under our
nomination and has sent documents presented by the beneficiary to the Issuing Bank without
examining them (in accordance with beneficiary's request). No message was received from the
issuing bank, Advising Bank received a MT910 from their correspondent bank informing us of the
credit entry on our account and containing information in field 72: /EUR100 deducted as discr.fee/.
The documentary credit included the following clause: 'discrepancy fee of EUR 100.00 will be
deducted from the proceeds any drawing if documents are presented with discrepancies'
We have contacted issuing bank arguing that since they had not acted in accordance with UCP 600
sub-article 16 (c) (ii), quoting every single discrepancy they should be precluded from deducting
discrepancy fee.
An answer was received that their action has nothing to do with UCP 600 article 16 and that if we
want to find out about discrepancies we will have to ask for it. It seems that they are acting in line
with the conclusion of a/m Opinion. Nevertheless, we cannot agree with it.
In the opinion of the Issuing Bank and according to UCP600 sub-article 16 (a) an issuing bank
determines if a presentation does not comply. By deducting their discrepancy fee they obviously
wanted to indicate that the presented documents did not comply.
As per article UCP 600 sub-article 16 (b) issuing bank may in its sole judgment approach the
applicant for waiver, but that does not extend period of time mentioned in UCP 600 sub-article 14
(b), nor does it (in our opinion) annul the provisions of UCP 600 sub-articles 16 (c), (d), (e) and (f).
Achieving applicant's acceptance of discrepancies does not justify the action of not listing all
discrepancies, even when sending message indicating acceptance (such as in MT752).
Advising Bank is of the opinion that if Issuing Bank determines that presented documents contain
discrepancies, all discrepancies should be quoted either in separate MT734 or in MT752 within 5
working days. Otherwise they are precluded claiming that documents are discrepant (and
accordingly not allowed to deduct discrepancy fee)
ANALYSIS
A presentation of documents had been paid by the issuing bank deducting their discrepancy fee.
Prior to payment no notice of refusal has been sent nor had any information on discrepancies been
provided by the issuing bank.
When an issuing bank finds discrepancies in documents, it has two options available to it under
article 16: to provide a refusal message to the presenter in terms of sub-articles 16 (c) and (d) or, to
approach the applicant for a waiver without first providing a notice of refusal (sub-article 16 (b)).
When the option of approaching the applicant for a waiver is chosen, and such waiver is given and
accepted by the issuing bank, the practice is for the issuing bank to honour, and such honour will be
less any discrepancy fee that was stated in the credit.
When this course of action is taken, the issuing bank should provide the presenter, as part of their
payment message or in a separate communication, details of the discrepancies that were observed.
The presenter can then choose to dispute the discrepancies, therefore questioning the relevance of
the deduction representing the discrepancy fee. If the issuing bank does not provide such an
indication, the presenter may seek, and the issuing bank must provide, such details. The actions of
the issuing bank, as described in situation D, do not represent preclusion under sub-article 16 (f).
Conclusion:
The Issuing Bank is entitled to a discrepancy fee as outlined in the credit, but it should inform the
presenter of the discrepancies that were found, either in the advice of payment or in a separate
communication.
The issuing bank is not required to send a notice of refusal to the presenter if it elects to contact the
applicant for a waiver and to receive a waiver that is acceptable to it. Sub-article 16 (f) does not
apply in these circumstances.
If the covering schedule listed the discrepancies that the presenter had found, the Issuing Bank
should either advise the presenter that the documents were taken up despite the discrepancies that
had been identified by the presenter, or list the discrepancies for which the issuing bank had sought
waiver from the applicant.
It is only when an issuing bank does not indicate the discrepancies that there should be a need for
the presenter to seek such details. The default position is that an issuing bank, in order to justify a
discrepancy fee, should always indicate the discrepancies by one of the methods described above.
When an issuing bank has approached the applicant for a waiver, and received such waiver and
decided to act upon it, it does not need to send a notice of refusal in accordance with UCP 600 subarticle
16 (c) in order to be entitled to deduct a discrepancy fee when it honours a presentation. In
such circumstances, UCP 600 sub-article 16 (f) does not apply.
When a bank deducts a discrepancy fee on the basis of a “discrepancy fee clause‟ in a credit, it is
good banking practice to inform the presenter of any discrepancies that were found in the
documents, either in the advice of payment or in a separate communication. In the event they fail to
do so, this does not preclude them from providing such information subsequently.

Types of Companies

 Types of Companies

Public & Private Company: On the basis of number of members and capital, companies
may be classified into (i) Public Companies & (ii) Private Companies. As per the
Companies Act, 2013 a private company must have a minimum paid-up capital of Rs.
1.00 lakh, minimum of 2 members and a maximum of 200 members. One Person
Company is a private company with only one member. The Companies Act restricts the
rights of members of a private company to transfer its shares and also prohibits an
invitation to the public to subscribe to any shares or the debentures of the company.
A public company means a company, which is not a private company and has a minimum
paid up capital of Rs. 5.00 lacs. A private company which is a subsidiary of a public
company is deemed to be a public company. A public company must have a minimum of
7 members. A public company can issue shares to the general public and the
transferability of shares and related issues etc. are controlled by SEBI. As per the Act,
both the Private as well as Public companies can start its operations only after obtaining
Certificate of Incorporation and Certificate of Commencement of Business.
The Companies Amendment Bill, 2014 (passed by the parliament in 2015) waives the
conditions relating to the minimum amount of capital in respect of both categories of
companies i.e. private as well as public companies.
Government company: A Government company is one in which not less than 51% of
paid up share capital is held by the Government (Central / State). A subsidiary of a
Government company is also a Government company.
Advances to non-corporate clients e.g., partnership firms
It is preferable to finance partnership firms which are registered with the Registrar of
Firms of the local area. The loan account should be opened in the name of the firm and
not in the name of the individual partners irrespective of the fact that one or more of the
partners may be authorized to operate the account. Apart from collateral security, if any,
by way of personal guarantee of a third party, personal guarantee of the partners should
be obtained especially when the firm is not registered as per the Partnership Act.
Whenever changes take place in the constitution of the firm either by death, retirement,
insolvency, expulsion or inclusion of partner, a new partnership is formed. In such cases,
the limits granted to the old firm should be cancelled and credit facilities extended to the
reconstituted partnership firm after examining afresh the creditworthiness of the partners
of the firm and other relevant factors for taking a credit decision. Till the formalities
concerning reconstitution of the partnership of new firm are completed and necessary
loan documents are executed, as interim measure for the sake of continuity of business
activity, operations in the existing Bank account may be permitted only after obtaining a
stamped continuing letter of guarantee signed by all the outgoing partners as well as the
incoming partners. Where personal guarantee of third party has been obtained,
confirmation from the guarantor must also be obtained before allowing operations in the
existing account. It should be ensured that the necessary formalities are completed within
a period of two months.
Where reconstitution takes place in case of a partnership firm, which has created
equitable mortgage of immovable property of the partnership firm in favour of the Bank
for collaterally securing the loans, an agreement on prescribed proforma should be
obtained without disturbing the existing mortgage.
A minor can be a partner of a partnership firm, however he cannot be held liable
personally for any debt of the firm, so this aspect has to be kept in mind while granting
credit facilities to partnership firms.
Limited Liability Partnership (LLP)
LLP is a new corporate form designed to provide an alternative to the traditional
partnership (with unlimited liability on part of the partners) and the corporate statute
(statute based governance with limited liability on part of the shareholders). The LLP
form of business is a hybrid structure between the two, which provides the benefits of
limited liability but allows the partners the flexibility of organizing their internal structure
as a partnership based on a mutually arrived agreement. The Limited Liability Act, 2008
allows two or more persons associating for carrying on a lawful business ‘with a view to
profit’ to set up an LLP.
Hindu Undivided Family (HUF)
An HUF is represented by the head of the family, known as Karta, and the members of
the HUF are known as coparceners. Karta represents the HUF and is authorized to
transact on behalf of the HUF by virtue of age old practice sanctified by law.
With the introduction of Hindu Succession (Amendment) Act 2005, from September 6,
2005, daughters are also given the status of a coparcener.
Karta manages the HUF property on behalf of his family members. However, his powers
are limited and a charge created by him is binding on the family property only when the
loan taken by him is:
• For the purposes of the necessity of the family or,
• For the benefit of the family or,
• For repayment of a lawful antecedent debt due from the family.
Trusts
The Indian Trusts Act, 1882 defines a Trust as an obligation annexed to the ownership of
property and arising out of a confidence reposed in an accepted by the owner, or declared
and accepted by him, for the benefit of another, or of another and the owner
A Trust is formed for the benefit of certain person(s) or purpose. The Trust Deed contains
the aims and objectives of the trust. It lays down the duties and responsibilities of the
Trustees and also the restrictions/ limitations imposed on them.
Operations of Trust accounts have to be very strictly according to provisions of the Trust
deed.
Cooperative Society
While considering credit facility to a co-operative society, it is necessary to examine the
rules or bye-laws of the society, especially the terms on which it can borrow under the
relevant section of the State Co-operative Societies Act, 2002. The lending bank should
obtain a certificate from the society stating that the credit facility sought is within the
overall borrowing limit authorized by the Registrar of Co-operative Societies.

Working Capital Ratios

 Working Capital Ratios

1. Net Sales to Total Tangible Assets (times) (NS/TTA):
Indicate the company's ability to generate sales by utilising its Tangible assets. Tangible assets are total assets minus intangible assets.
Rationale: It is very important to understand - whether achievement of sales by the unit is on account of utilising tangible assets or intangible assets. As mostly, Bank finance will be given for creation of tangible assets, performance of the unit is to be gauged based on utilization of tangible assets created out of Bank finance.
2. Operating Cycle- No. of total days: (Inventory / Net Sales) + (Receivables / Gross Sales) (Days):
Operating cycle is number of days required for a unit to put cash into its operations and then getting return in the form of cash i.e., period from cash to cash.
Rationale: It indicates the time required to produce goods, sell the goods and receive cash from customers by sale of goods. Higher the days, higher may be the requirement of WC. This is useful for estimating the amount of working capital that a unit needs in order to run the business.
3. Working Capital Gap:
WC gap = Total Current Assets – Other Current Liabilities (OCL).
If we deduct Bank borrowings out of total current liabilities, we will get OCL.
Rationale: WC gap signifies the amount of current assets getting funded by current liabilities, other than Bank borrowings.
4. Bank Finance (WC Gap – NWC):
Bank Finance = WC Gap – NWC
Rationale: While calculating required amount of short term Bank finance for a unit, we have to deduct available NWC from WC gap.
5. NWC / TCA (%):
It signifies the portion of current assets getting funded by NWC. Though, there is no standard benchmark for this ratio, ideally, this ratio should be more than 25%, minimum.
Higher the ratio, better is the comfort.
6. Sundry Creditors / TCA (%):
It signifies the portion of current assets getting funded by Sundry Creditors. Though, there is no standard benchmark for this ratio, ideally, this ratio should be restricted to maximum 25%.
Lower the ratio, better is the comfort.
7. BF / TCA (%):
It signifies the portion of current assets getting funded by Bank finance (BF). Though, there is no standard benchmark for this ratio, ideally, this ratio be restricted to maximum 50%.
Lower the ratio, better is the comfort.
8. OCL (excluding Sundry Creditors) / TCA %:
It signifies the portion of current assets getting funded by OCL, other than Sundry Creditors. Ideally, this ratio should be low or nil as these liabilities generally are of the nature of Public Deposits (maturing within next 1 year), unallotted Share Application Money, Advance / Deposits from Dealers, Installments of Term Loans (becoming due within next 1 year), Statutory Liabilities, Expenses Payables, Provisions etc which are having little role in creation of current assets.
Lower the ratio, better is the comfort.
9. OCA / TCA (%):
It is the amount of Other current assets out of total current assets. It signifies whether current liabilities are utilized by the unit for creation of core current assets like cash, inventory, receivables or utilised for creation of non core current assets like Advance payments, taxes, prepaid expenses etc.
Lower the ratio, better is the comfort.

Managing Stress

 MANAGING STRESS ::

Adult life seems to be full of fun and unlimited possibilities. You can go wherever you want, do whatever you want, and never think about consequences. But when you grow up, you understand that there is nothing fun about being an adult. You have thousands of responsibilities, hundreds of daily tasks to accomplish, and the consequences are the only thing you can think about. You may live in the state of permanent stress. You have no right for a mistake. You have no time for having rest. You can’t tell someone that you cannot handle your problems. You need to be strong, you need to work hard, and you need to find a solution to every problem that appears.

Stress in Modern Life

With every year, the level of stress increases. Unfortunately, no one is surprised today when a 30-years old person has a stroke. The situation becomes worse: even children suffer from stress. They have sleep disorders, problems with concentration and nutrition, and they do not even understand that the reason for this lies in the habits of their parents and surrounding society. It seems that for the next generation stress will be the next cancer.

Still, today we can handle the stress. It requires time, attention, and effort, but the results – strong mental and physical health – are totally worth it. There are several approaches to stress management. These approaches can be divided into two large groups: something that you can do to decrease stress level at the current moment and methods that you need to introduce into your life and make them your habits.

Change Your Life to Get Rid of Stress

Of course, you cannot eliminate stress from your life for good. For our bodies, a stressful situation is everything that makes us feel uncomfortable. Your stress management will be more effective if you build stamina and make your

body and mind strong. Thus, you can prevent the negative effects of stress.

Everyone will experience stress in different aspects of their lives; it may be at work, with their family, or with their health. However, whatever might be the cause of your stressful day, it creates the same effect on your body, mood, and even on other people.

Life is full of hassles, demands, and if people don’t meet expectations or deadlines, the tendency is that our mind will be exposed to chaotic thinking and tiredness. This is how stress come out that can generally invade and ruin the enjoyment of your life. For many people, stress is a normal part of life that usually appears in everyday situations. Stress isn’t always bad; however, dealing with stress is usually not good. Mild stress can help you deal with pressure and motivate you to do your best and finish your work before the deadline.

Stress is a normal physical response to events that make you feel threatened, upset, and anxious. It may seem that there’s nothing you can do about stress. However, difficulties in dealing with this emotion may result in risk and danger to your health, physically and mentally.

Anyone experiencing stressful situation may be at risk of losing control of their emotions, which sometimes could ruin your ability to make decisions rationally. How to know if the anxiety is too much in dealing with your stress? How important is it to gain a deeper understanding about stress and what are the necessary things to do when dealing with such emotion? Feelings such as worry, and anxiety are just some of the common results of stress. Being stressed is sometimes healthy in order for a person to be alert and act. However, there are certain points in human life, where people cannot manage dealing with their stress.

Stress management effectively starts with identifying the sources of stress in your life. At first, it may not be easy as you may tend to overlook your own stressful feelings and behaviour. However, providing a solution to a problem always starts with identifying the problem or cause. The best

remedy for stress is self-examination and taking significant actions that can definitely help you lessen your worries and fears. Examples include taking a break for a few minutes to practice some deep-breathing exercises, relaxation, and entertaining yourself like going for a walk or going shopping. These are just a few examples that can usually help people ease their stressful day. In addition, if you cannot remove the stress, remove yourself. If you are not getting along with your company, it is important to slip away and find a new sanctuary to work in.

There are several negative effects of stress on your health such as an upset stomach, recurring colds, headaches and insomnia. If you are having difficulty dealing with stress, it would also be best to seek professional help from a doctor or therapist.

TIPS FOR REDUCING THE STRESS

Below are a few tips on what we can do to reduce stress in our life.

1. Healthy Nutrition

We are what we eat. If your daily meals consist of fries and other fast food, you have severe problems with nutrition. A person needs to consume not only enough calories (fast food has too many of them, causing obesity) but also enough elements and vitamins. When you consume good food, your body receives enough energy to be productive all day long and build the important connections between your blood, cells, and the nervous system.

2. Regular sports

If you suffer from stress regularly, you need to change your daily activities. The best way to get rid of stress (and prevent it) is regular sports classes. It does not matter what type of class you choose, swimming, gym or yoga, you just need to make your body move. While moving, our endocrine system starts to produce hormones helping to lower the impact of stress. Besides, if you feel stressed right here and now, you

can also use sports as the way to manage stress.

3. Meditation

If you are looking for simple ways to fight stress, then regulating your breathing can help. Our breath is a natural and most important function of life and carries vital life energy. It is a known fact that if we stop breathing for long enough, then we die. Despite this fact, most of us take our breathing for granted and rarely stop to think about it. Find out how breathing properly can help to relieve symptoms of stress and calm and relax your mind.

When we are stressed, our body responds in preparation for "fight or flight" and we suffer various symptoms such as sweating, increased pulse rate, racing heart, and fast, shallow breathing. In earlier times this was necessary for our survival when hunting or protecting ourselves. However today it is usually only our perception of danger or negative thoughts that produce this reaction, so the body has few ways to deal with the effects.

Regular attacks of stress and anxiety start to turn our fast, shallow breathing into a habit. They may decrease our ability to breathe properly and could leave us with breathing difficulties such as asthma. Often in today's society, we do little aerobic exercise and therefore we rarely breathe deeply. Our breathing simply becomes shallower than it needs to be as a matter of habit.

Just as stress and other states of mind affect our breathing, the way that we breathe affects our state of mind. When we breathe, we are taking in oxygen through the lungs to the brain and the cells in the body. Shallow breathing can affect the amount of oxygen circulating in the body. This makes us feel sluggish. The way we breathe also affects the amount of energy in our bodies. When our breathing is irregular and erratic, we are likely to feel lacking in energy.

Of course, it is not just the body that is affected by the way that we breathe but the mind also. For centuries disciplines such as yoga and meditation have involved using the breath as part of their

techniques. Use of the breath is an important part of performing yoga postures. Breathing meditation is common to calm the mind as part of preparative practices for meditation. Breathing meditation consists of watching the breath as we breathe in and out whilst trying to ignore all other distractions to the best of our ability. Concentrating on the breath has long been known to quiet and calm the mind.

In the same way as used in meditation, breathing exercises can be used to fight stress and quiet the mind and body. These are great because they are simple and free, and you can do them anywhere. Simply concentrating on our breathing whilst drawing deeper, slower breaths can help us to relieve stress and relax our minds. Breathe deeply through your nose and feel your diaphragm move. Watch the breath coming in and going out. Try to ignore all other distractions.

When you breathe, allow yourself to enjoy the experience of being a living being. Mostly we forget to do this and move through life very unconsciously. When we can quiet our minds, we can find peace and receive insights and access to our subconscious. Only when we become conscious of how we breathe, can we start to correct this.

So, to fight stress and find more energy, try watching your breath to make sure you are breathing efficiently. Get into the habit of taking deeper breaths. Improve your breathing through breathing exercises and regular aerobic exercise. Breathing properly will help you to cope with stress and improve your well-being.

Ability to calm down your mind and keep your emotions under control is precious. Regular meditations help to find out methods to remain calm and preserve a clear mind in different life situations. Meditation is the habit that will change your life even more dramatically than quitting smoking or drinking alcohol. First of all, it will help you release your hidden potential. You will be able to find answers to the questions that have been bothering you for a long time. You will be able to understand what exactly you want. You will learn how to listen to yourself and how to use this knowledge in your further life.

4. Sleep at Night

Night sleep is a key element of your strategy to prevent negative effects of the stress. At night, our bodies produce the most important hormones that help us beat stress. If you sleep in the daytime, your body cannot sufficiently perform its functions. Besides, you need to sleep at least 6 hours to give yourself time to have a rest and relax.

5. Positive Thinking

Stress ruins our mental health. To prevent that, you need to teach your mind to be strong and believe in the best outcomes. Positive thinking is an easy and effective way to enhance your mental health and make it ready to beat any complication or challenge. If you feel that you can no longer take your emotions under control, give yourself a break. Try to get rid of all negative thoughts and start thinking about positive moments. Imagine that you are sitting on the shore of the ocean, observing the waves and listening to nature. Or remember your childhood when mom’s smile made you the happiest person in the world.

6. Be Pro-Active

Lazy people suffer from stress more frequently than those who have an active life. If you have something to do, you do not have time to make up problems and think about them. Each time you notice that stress level is rising, start doing something that requires effort and concentration from you. For some people, the best solution for stress is to work with their hands. Other people prefer to delve into studying or investigation. Try different methods to understand what works perfectly for you.

Another approach that will help you beat the stress is to learn something new. However, you need to be careful with this approach. First of all, the theme should be interesting, and

secondly, you should not get irritated when you cannot cope with some new tasks

7. Do What You Like

It has been noticed that students who admire writing do not suffer from writing an essay. They do it easily in comparison to the students who do not love what they do. If you notice that everything in your life creates additional stress, change what you do. If you admire writing but work as an accountant (and you actually hate your job), quit it and give a try to writing different types of thesis statements for a magazine. If you cannot quit the job, introduce your hobbies to your life and make them more important than the things you do not like at all. Of course, it is difficult to change your approach to life in a couple of days. But you need to work on it to get rid of the stress and make your life more comfortable.

Stress should not be your friend. It should not guide you through your life and spoil its best moments. You need to take your life under control and make it better. Develop a habit to fight against stress and find the ways to eliminate it from your life. These 7 tactics will help you choose the right way to beat this problem and enhance the quality of your life.