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VOL: 3, No.: 2 , February , 2018 ISSUECMA STUDENTS’CMA STUDENTS’

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STUDENTS’ E-bulletin FEBRUARY 2018, ISSUE Foundation

VOL: 3, No.: 2

CMA Manas Kumar Thakur

Be a CMA, be a Proud Indian

Chairman,Training & Education Facilities (T& EF) Committee

Message from

The Chairman


Dear Students,

'The future belongs to those who believe in the beauty of their dreams'.

'Everyday do something that will inch you closer you to be a better tomorrow' and do it

now, sometimes 'later' becomes 'never'. Push yourself because no one else is going to do

it for you. Hard work beats talent when talent doesn't work hard. Don't stop when you

are tired. Stop when you are done.

Teach me and I will forget, show me and I will learn, involve me and I will understand- I

believe in the statement, hence, the effort of monthly publication of E-bulletin. Try to

utilise the most of it. You are having Mock Test Papers (MTPs), Revisionary Test Papers

(RTPs) and few more resources will get upload shortly. The Directorate of Studies is always

trying to boost up your energy by providing your preparation related materials and

updates. Please try to grab the maximum benefit out of those. Learned academicians are

putting their efforts by preparing those and you should honour their effort too. I sincerely

acknowledge their effort for providing you a better tomorrow.

Trust yourself and strive your progress; not perfection. Remember that 'No one is perfect

that's why pencils have erasers'. Problems are not stop signs they are guidelines. Thus,

running away from your problems is a race you will never win. In the middle of difficulty,

lies opportunity. Please try to believe in 'The capacity to learn is a gift; the ability to

learn is a skill; the willingness to learn is a choice'.

The difference between ordinary and extra-ordinary is just that little 'extra'. So, stay

positive, work hard and make it happen.

You are already aware that th58 National Cost Convention of your beloved

th thInstitute is going to be held on 16 and 17 March,2018 at Vigyan Bhawan, New

Delhi. It is our collective duty to successfully make the event a mega grand event.

i

Best of luck for your future endeavours,


VOL: 3, No.: 2

CONTENTS

Knowledge Update -

Message from the Chairman -

Paper: 1, Part: I - Fundamentals of Economics and Management (FEM) - Economics -

Paper: 1, Part: II - Fundamentals of Economics and Management (FEM) - Management -

Paper: 2 - Fundamentals of Accounting (FOA) -

Paper: 3 - Fundamentals of Laws and Ethics (FLE) -

Paper: 4 - Fundamentals of Business Mathematicsand Statistics (FMS) -

Practical Advice -

Message from the Directorate of Studies -

Snapshorts -

Time Management -

Submissions -

1

i

2

5

8

13

18

26

24

27

28

29



In this section of e-bulletin we shall have a series of discussion on each of these chapters to provide a meaningful assistance to the students in preparing themselves for the examination at the short end and equip them with sufficient knowledge to deal with real life complications at the long end.


VOL: 3, No.: 2

KNOWLEDGEKNOWLEDGEKNOWLEDGEUpdateUpdateUpdate

1


VOL: 3, No.: 2


Paper : 1, Part : - IPaper : 1, Part : - I

Fundamentals of Economics & Management (FEM) - EconomicsFundamentals of Economics & Management - (FEM) Economics

Dr. Bibekananda RaychaudhiriProfessor, Guest LecturerDepartment of Commerce / FinanceUniversity of CalcuttaHe can be reached at:[email protected]

Your Preparation Quick Takes

A Fundamentals of Economics 50%B Fundamentals of Management 50%

B 50%

A 50%

2


Learning Objectives:

Studying economics, one will be able to develop the analytical skills needed to work successfully in the field, including the study of logical analysis.

Students will be able to identify and explain economic concepts and theories related to the behaviour of economic agents, markets, industry and firm structures, legal institutions, social norms, and government policies.

Students will be able to integrate theoretical knowledge with quantitative and qualitative evidence in order to explain past economic events and to formulate predictions on future ones.

Students will be able to evaluate the consequences of economic activities and institutions for individual and social welfare.


VOL: 3, No.: 2

Study notes 3 and 4 deal with the Theory of production and

Theory of cost. These involve lots of calculation which the

producer has to make in producing his product.

We start with Production function. Production function

expresses the relationship between the physical inputs

and physical output of a firm for a given state of technology.

Why physical amounts of inputs and output are being

related ? Because it is a technical relationship and the

producer needs the help of an engineer or a technical

person. You must have noticed the phrase “for a given state

of technology”. If we relate the value of inputs with the

value of output, price of inputs and price of output will

sneak in and the whole relationship will get blurred.

Because, prices of both the inputs and output will be

fluctuating and the entire picture will be vitiated. We know

that the value is calculated with the help of the following

formula:

value = quantity x price

Now let us take up the phrase ”state of technology”. What

does it mean ? To be precise what is a technique? What is

technology? Is there any difference between technique and

technology?

Technique is defined as the ratio/proportion in which two

inputs/more than two inputs are combined together to

produce one unit of the product. And technology is the

spectrum of all available techniques. For example, capital

(K) and labour(L) are used to produce a product, say X.

K and L are combined in the ratio K:L = 1:2 to produce one

unit of X. Here, K:L = 1:2 will be called the ' Technique' of

producing X. If we know a good number of different

techniques like, K:L = 3:5, K:L =4:7, K:L = 5:9 to

produce 1 unit of X, then all these techniques taken

together will be called 'Technology'.

In the short run, labour is the only variable factor of

production. The production function is represented by the

total product (TP) curve which has three stages of

production. At the end of the first stage, average product

(AP) reaches maximum and the marginal product (MP)

curve cuts the AP curve from above. This means that at the

end of the first stage AP = MP. Second stage starts when AP

starts falling along with a already falling MP which started

falling much earlier. This falling MP is due to the operation

of the law of diminishing marginal productivity ( or, the law

of variable proportions ). So, during the second stage, TP

rises but rises at a diminishing rate. At the end of the

second stage TP reaches maximum and MP becomes nil.

Stage three starts with a falling TP and MP becomes

negative.

In the long run, the production function is represented by

the isoquant map. These isoquants will be subjected to the

laws of returns to scale : increasing returns to scale,

constant returns to scale and decreasing returns to scale.

In the long run, the producer can change the scale of

production which is not possible in the short run. Change

in scale means changing all the inputs in the same

proportion. Increasing returns to scale can be explained by

an example. Suppose, all the inputs are doubled and the

production level is more than doubled, then this situation

is called increasing returns to scale. If the production level

is also doubled along with all the inputs, then the situation

is called constant returns to scale. But if the production

level is less than doubled when all the inputs have been

doubled, the situation is termed as decreasing returns to

scale.

The same laws of returns to scale can be viewed from the

cost side. Increasing returns to scale can be seen as

decreasing cost ; constant returns to scale is the same as

constant cost and decreasing returns to scale is increasing

cost phase of the long run average cost curve. In fact the U-

shape of the average cost curve is due to the operation of

these laws of returns to scale. In other words, when there is

3

ECONOMICS



VOL: 3, No.: 2

internal economies of scale we find the long run average

cost is decreasing. This phase of the long run average cost

curve is due to the operation of the increasing returns to

scale. Similarly, when there is internal diseconomies of

scale, we find the long run average cost is increasing. This

phase of the long run average cost curve is due to the

operation of the decreasing returns to scale.

When we move along the same long run average cost

curve, we experience internal economies and internal

diseconomies of scale. With external economies of scale,

the long run average cost curve shifts downward while with

external diseconomies of scale, the long run average cost

curve shift upward.

This long run average cost curve, however, is the

'Envelope' of all possible short run average cost curves.

Each short run average cost curve is attached to a particular

plant size. As the plant size increases, the short run average

cost curve would shift to the right. It indicates that the

producer is now able to produce at a much higher level

because of the fact that he is using a higher plant size. The

short run average cost curve with higher plant size will lie at

a lower level or at the same level or at a higher level

compared to the short run average cost curve with a smaller

plant size, depends on whether the production process is

subjected to increasing returns to scale or constant returns

to scale or decreasing returns to scale.

The U-shape of the short run average cost curve is the

direct effect of the operation of the law of diminishing

marginal productivity. In the short run when the number

of machines are fixed, the marginal productivity of the

variable factor of production, say, labour will be

diminishing after a certain point.

Cost is one side of the coin. The producer is interested in

profit only. In order to calculate profit, the producer needs

information on revenue. Total revenue can be calculated in

two ways:

TR = AR X Q

Or, TR = MR

Where, TR = Total Revenue, AR = Average Revenue, Q =

Output, MR = Marginal Revenue

We will be dealing with two types of market: (1) Perfectly

competitive market and (2) Imperfectly competitive

market.

Under perfect competition, the producer is a price taker

and he cannot influence the market price. Given the market

price, the producer can sell any amount he likes. But if he

tries to quote a higher price, he will not be able to sell a

single unit of the product. In such a situation, the demand

curve for the firm will be a parallel line parallel to the x-

axis, the starting point on the ordinate being the given price

level. Let the given price is Po.

So, AR = TR / Q = (Po x Q) / Q = Po

Again, MR = dTR/dQ = d(Po x Q)/dQ = Po

Therefore, AR = MR

Hence, under perfect competition, the demand curve of the

firm described above will also be the AR curve and the MR

curve, since AR is always equal to MR for the firm.

But this is not the scenario under imperfect competition.

Here, the firm is a price maker. The firm can fix up the price

of his own product. But he cannot however, fix up both the

price and the sale of his product at the same time. If he fixes

the price, the sale will be determined by the demand curve

which is downward sloping. The downward slope of the

demand curve indicates that the producer can change the

market price.

The relationship among the AR, MR and price elasticity of

demand (e) is given by

MR = AR ( 1- 1/e)

Under perfect competition, the price elasticity of demand

(e) is infinity.

Therefore, 1/e = 0. So, MR = AR

But, under imperfect competition, e is positive. Therefore,

1/e is also positive. This indicates that MR is less than AR.

This means that the MR curve will lie below the AR curve

for all levels of output.

Friends, this portion of economic theory is

slightly mathematical. So try to understand

it carefully. Please do not try to mug up. It is

very simple. If possible, try to brush up your

knowledge of the straight line chapter from

any standard book on co-ordinate

geometry. That will be helpful. Enjoy your

reading of the study notes. ‘

‘

4


VOL: 3, No.: 2



A Fundamentals of Economics 50%B Fundamentals of Management 50%

B 50%

A 50%

Paper : 1, Part : - IIPaper : 1, Part : - II

Fundamentals of Economics & Management (FEM) - ManagementFundamentals of Economics & Management - (FEM) Management

CMA (Dr.) Sumita ChakrabortyJt. Director, StudiesShe can be reached at:[email protected]

5



VOL: 3, No.: 2


Students will demonstrate their knowledge of business and management principles

Students will reveal effective written and oral communication

Students will exhibit an awareness of the global environment in which businesses operate

Students will display the ability to recognize when change is needed, adapt to change as it occurs, and lead

change

MANAGEMENT

Controlling is the function that is performed utmost carefully by every manager. Control refers to the task of ensuring, that activities are producing the preset targets or goals. Controlling is aimed at monitoring the outcome of activities, reviewing feedback information about this outcome, and if necessary takes corrective action.

Koontz and O'Donnell contend that “Managerial control implies the measurement of accomplishment against the standard, and the correction of deviations to assure attainment of objectives according to plans.”

What to Control?In any organisation or a work unit, managers have to decide in advance the area or points of activity which need to' be controlled —these are to be selected based on their importance in relation to the whole activity and desired results. This leads us to examine two concepts: critical point control and control of exception.

Critical point control: In a simple operating system, all aspects of the activity can be watched and controlled in a close manner. But as a system becomes more complex, it may not be possible or necessary or economical to control each and every aspect of the activities. In such cases controls have to be selective. A few key areas or aspects of the activity and their performance have to be identified and control attention has to be focused on them. In the area of inventory control, ABC analysis is an example of critical point control.

Control by exception: Also known as 'management by exception', the principle is widely practiced by managers in organizations. It means that managers at each level should pay attention to only exceptional and significant deviations from planned results. Only exceptional instances of off-line functioning of the system should deserve managerial attention and remedial action.

Kinds of Control:Three kinds of control systems are used by Modern organisations, namely :

(i) Historical (or) Feedback control (ii) Concurrent control and (iii) Predictive of feed forward cont

Prerequisites of an Effective Control System:Any control system should meet certain requirements in order to be effective, which are indicated below:

(1) There should be a match between the type of function and the system of control at all levels of the organisation.

(2) The control system should be sensitive enough to point out deviations from plans immediately so that corrective action can be initiated with little loss of time and before any damage is caused.

(3) The control system should be flexible and forward looking.

(4) The control system should focus on strategic and key

activity areas or points which are critical to overall

performance.

(5) The control system should enable managers to utilize their time and talent most effectively by concentrating on major or exceptional deviations from plans.

(6) The control system should be formal and objective as far as possible, in fairness to those whose performance is monitored, regulated and evaluated.

(7) The control system should be consistent with the organisational structure. It should be built into the horizontal activity relationships and vertical authority relationships.

(8) Controls are nothing more than means to certain ends. They are not ends in themselves. They should constantly focus on goals to be achieved, on values to be preserved and on interests to be promoted.

(9) The control system should be economical to operate; economy need not however be exercised at the cost of effectiveness.

(10) The control system should give due allowance to factors or variables which cannot be controlled but which affect the performance of people.

(11) The control system should be designed to measure and evaluate the diverse dimensions of performance of individuals and activity areas, giving appropriate weightage to all the relevant variables .

(12) The means adopted to achieve goals should also be kept under watch by the control system, because both means and ends are important.

(13) Finally, the control system should be understandable to those whose performance is sought to be regulated.

6



VOL: 3, No.: 2

The requirements of control should be communicated in a simple and straightforward manner to those who are to abide by the system. the organisation and its sub-systems to adapt and adjust their goals and the means of reaching them in turn with the change in the environment i.e., to maintain a sort of dynamic equilibrium.

Principles of Control:The following principles of control summaries the substantive parts of the above discussion on the controlling function:

1. Principals of assurance of objective

2. Principle of future-directed controls

3. Principle of control responsibility

4. Principle of efficiency of control

5. Principle of direct control

6. Principle of reflection of plans

7. Principle of organizational suitability

8. Principle of individuality of controls

9. Principle of standards

10. Principle of critical point control

11. Principle of exception

12. Principle of flexibility of controls

13. Principle of action.

Techniques of control:�Managers use different methods and systems to exercise control of different levels. Now, we will touch upon some of the tools and mechanisms devised by managers and others, over the years to control specific aspects of activity and performance of an enterprise or work units.

“Budgets are formal quantitative statements of the resources allocated for the execution of activities over a given period of time, and include information about projected income, expenditure and profits.”

1. Budgetary control

2. Financial statements

3. Break-even analysis

4. Management Information Systems (MIS)

5. Management audit.

Your Study material contains 'Techniques of Control” in detail. Please read it carefully to score in your examination.

7


VOL: 3, No.: 2



B 20%

A 80%

A Fundamentals of Financial Accounting 80%

B Fundamental of Accounting 20%

Paper : 2Paper : 2

Fundamentals of Accounting (FOA)Fundamentals of Accounting (FOA)

CMA (Dr.) Nibir GoswamiAssociate Professor in CommerceVidyasagar Mahavidyalaya, W.B.He can be reached at:[email protected]

8



VOL: 3, No.: 2


In order to internalize the concepts of subjects like accountancy one has to have an understanding of the learning objectives of the chapters. Try to go through the Statement of Objects and Reasons issued for every topics as it would give you a background to your study.

FUNDAMENTALS OF COST AND MANAGEMENT ACCOUNTING

1. INTRODUCTION:

In all past issues we have highlighted almost all the areas

included in the syllabus except preparation of final accounts in

section A which will be discussed in any of the next issue as the

last topic. In this issue we will throw light on the area left in the

section B – Generally Accepted Cost Accounting Principles.

(GACAP) and accounting for material cost (LIFO, FIFO AND

WEIGHTED AVERAGE COST METHOD) GACAP is prepared

by Cost Accounting Standard Board (CASB) of our institute

under the instruction by Ministry of Corporate affairs,

Government of India which will definitely supersede the

concept of cost accounting record rules.

In a nutshell GACAP contains a summary of the cost

accounting principles followed by business entities in India in

preparing and presenting cost information in the context of

general purpose cost statements for statutory reporting and

covered by cost audit. Mainly the costs that are focused under

such principles are – material cost employee cost, direct

expenses, overheads, depreciation, interest and finance

charges etc.

2. ACCOUNTING FOR MATERIAL COST:

Studies show that one rupee as the total cost of product

comprises of sixty four paisa as cost of material. Here lies the

importance of material cost control. Material cost comprises of

the invoice price, cash discount, excise duty, sales tax, octroi ,

trade discount , freight, carriage, insurance etc.

One of the major cost control tool is Economic Order Quantity

(EOQ). It is such a quantity that should be ordered so that cost

to company is minimum. Here cost means the cost of material,

carrying cost and ordering cost. Students must remember that

carrying cost does not mean the cost of transportation. It is not

carriage. It is the cost of holding the materials – e.g. warehouse

rent, insurance cost, leakage, pilferage etc. By nature the

carrying cost and ordering cost are inversely related. The more

will be carrying cost if more quantity is hold in stock purchased

lump sum. However, in that case the ordering cost will be

minimum since a big volume is purchased at a time and

number of order is very less. Therefore EOQ will be settled at a

level where carrying cost and ordering cost will be equal.

a. EOQ:

EOQ is calculated as :

A= Annual usage

O= Ordering cost per order

C= Carrying cost % x cost per unit

Example : Annual consumption 4000 kg, cost of placing an

order RS.5, Cost per unit Rs. 2 per kg and storage cost is 8%

on average inventory.

Therefore EOQ = = 500 units.

Proof :

If 500 units are ordered at a time number of orders will be

4000/500 = 8 and ordering cost will be Rs.5x8= Rs.40.

Carrying cost will be = EOQ/2x 0.08 x Rs.2 = 500/2 x 0.16 =

Rs.40.

This implies at 500 units both carrying and ordering cost are

equal.

b. PRICING OF ISSUES :

While keeping records of materials receipts and issues various

methods are followed out of which the syllabus contains FIFO,

LIFO and weighted Average Cost methods.

FIFO:

Under this method materials received first are issued first.

After the first lot of the materials purchased is over the next lot

is taken up for issue. The closing stock is valued at the latest

purchase price and thus represents the current conditions as

far as possible.

LIFO:

Under this method the materials received last is issued first. In

times of rising prices this method is considered best for

application as the current cost of materials contributes to the

cost of production.

WEIGHTED AVERAGE COST:

It is a price which is calculated by dividing the total cost of

(2AO÷C

(2×4000×5)÷0.08×2

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VOL: 3, No.: 2

materials in the stock from which the materials to be priced could be drawn by the total quantity of materials in the stock. The

average price does not change until a new receipt takes place at a different price.

EXAMPLE:

From the following transactions extracted from a manufacturing company work out consumption value of raw materials in

the month and value of closing stock as on 31.01.2018 under FIFO, LIFO and weighted average cost method.

STORES LEDGER (UNDER FIFO METHOD)

DATE RECEIPT UNITS RATE (RS) ISSUE UNITS

2018

JAN. 01 300 9.7

JAN. 03 250 9.8

JAN. 11 400

JAN.15 300 10.05

JAN.20 210

JAN.25 150 10.30

JAN.29 100

DATE RECEIPTS ISSUES BALANCE

2018 QTY RATE AMOUNT QTY RATE AMOUNT QTY RATE AMOUNT

JAN 01 300 9.7 2910 300 9.7 2910

JAN.03 250 9.8 2450 300 9.7 2910

250 9.8 2450

JAN. 11 300 9.7 2910

100 9.8 98 150 9.8 1470

JAN.15 300 10.05 3015 400 150 9.8 1470

300 10.05 3015

JAN.20 150 9.8 1470

60 10.05 603 240 10.05 2412

JAN.25 150 10.30 1545 210 240 10.05 2412

150 10.30 1545

JAN.29 100 10.05 1005 140 10.05 1407

150 10.30 1545

2952

10



VOL: 3, No.: 2

VALUE OF CLOSING STOCK = RS. 2952/-

VALUE OF CONSUMPTION OF MATERIALS = 2910+2450+3015+1545-2952 = RS.6968

STORES LEDGER (UNDER WEIGHTED AVERAGE COST METHOD)


VALUE OF CONSUMPTION OF MATERIALS = 3898+2089+1008 = RS. 6995/-

STORES LEDGER (UNDER LIFO METHOD)


QTY RATE AMOUNT QTY RATE AMOUNT QTY RATE AMOUNT

2018

JAN 01 300 9.7 2910 300 9.7 2910

JAN.03 250 9.8 2450 550 9.74545 5360

JAN. 11 400 9.74545 3898 150 9.74545 1462

JAN.15 300 10.05 3015 450 9.94889 4477

JAN.20 210 9.94889 2089 240 9.94889 2388

JAN.25 150 10.30 1545 390 10.08 3933

JAN.29 100 10.08 1008 290 10.08 2925


QTY RATE AMOUNT QTY RATE AMOUNT QTY RATE AMOUNT

2018

JAN 01 300 9.70 2910 300 9.70 2910

JAN.03 250 9.80 2450 300 9.70 2910

250 9.80 2450

JAN. 11 250 9.80 2450

150 9.70 1455 150 9.70 1455

JAN.15 300 10.05 3015 150 9.70 1455

300 10.05 3015

JAN.20 210 10.05 2111 150 9.70 1455

90 10.05 905

JAN.25 150 10.30 1545 150 9.70 1455

90 10.05 905

150 10.30 1545

11



VOL: 3, No.: 2


VALUE OF CONSUMPTION OF MATERIALS = 2910+2450+3015+1545-2875 = RS. 7045/-

NOTE :� Value of consumption is calculated as opening stock + purchase- closing stock.

� Weighted average rates are calculated as (Total Amount/ Total Quantity)

JAN.29 100 10.30 1030 150 9.70 1455

90 10.05 905

50 10.30 515

2875

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VOL: 3, No.: 2



Paper : 3Paper : 3

Fundamentals of Laws and Ethics (FLE)Fundamentals of Laws and Ethics (FLE)

CA Partha RayHe can be reached at:[email protected]

A Fundamentals of Commercial Laws 70%

B Fundamentals of Ethics 30%

B 30%

A 70%

13



VOL: 3, No.: 2


Read the Study Material minutely.

For details or if you don't understand Study Material or the section is important to identify the topic, then refer to Bare

Act, otherwise reference to Bare Act is not necessary. For Company Law, book by Avtar Singh is recommended. For

other laws Institute Study Material is sufficient.

The words used in any of the texts as mentioned above should be understood by immediate reference to the Dictionary.

The main points coming out in any of the provisions should be either underlined or written in separate copy which has to

be repeated again and again.

Theoretical knowledge should be adequate and clear before solving practical problems.

Don't write wrong English. It changes the meaning and therefore answer may be wrong even when the student's

conception is clear. Also don't make spelling mistakes.

LAW & ETHICS

In the previous issues, you have read about 'Ethics' and in the

immediately preceding issue, a set of very useful questions

and answers were laid for your reading and recapitulation.

Now, let us understand why this paper is really very

important for all of you who are aspiring to be true

professionals and are all eager to proudly proclaim aloud that

– Yes, behind every successful decision, there is a

CMA.

It is not just that this subject- Ethics , carries a weightage of

30% and scoring 25 marks from this subject is not as difficult

as it is to score from Section A subjects, the fact is that you can

start with an initial lead by completing Section B first before

concentrating on the Acts and their interpretations in Section

A. So, keeping that in mind, let us discuss a little more about

the Fundamentals of Ethics in this issue of the E-Bulletin,

with a totally new approach.

The first TIP is that you must start thinking like A

Teacher. You must start studying the subject and

raise questions to yourself and find your own

answers.

Please remember that Ethics is truly the pillar on which you, –

the would-be professionals will be expected by the society and

the world-at-large, to stand, during your professional career.

Right from the day an individual is born, the world accepts

him/her as a member of a Society, a Clan, a Culture and a

Tradition and each of those categories are governed by

respective Standards and Ethics. We may therefore, explain

that Ethics are such standards that are consistently

followed over the years depending on the

philosophy that ,that system has been following

based on the terms of right, obligations and the

benefits derived by the society depending on their

g e o g r a p h i c a l l o c a t i o n a n d d e m o g r a p h i c

characteristics.

It is known that, right after his/her birth, from the day a

person, begins to see, hear, understand and realize the

customs, beliefs, traditions and culture into which he/she is

born, he/she is told to do or not to do something, to speak or

not to speak something, to wear or not to wear certain dresses,

to eat or not to eat certain foods and vegetables or to behave in

a certain manner, etc. However, we must never be

confused but should be able to distinguish between

Morals and Ethics.

It must be appreciated that all ethical traditions and customs

are generally followed based on systematic and scientific

reasons depending on how much the individual has bonded

and established his relationship within that category where

he/she belongs or interacts with, but such reasons may not be

always known to every individual existing within that system.

Let us take an example. When you enter or pass through a

place where the environment is good, peaceful and congenial,

you tend to prolong your stay over there, but in a reverse

situation, you will definitely either avoid such place or quickly

leave that place. In the former case, the individuals gathered

there have not breached their ethics but in the latter case, the

ethics have been definitely breached and violated.

That prompts us to raise a question – should ethics be rigid or

does it need changes ? The answer is that we must remember

that ethics is something which is generally

prompted by your conscience. Ethics, helps us to

realize what is right and wrong and what we should

refrain from doing. Moreover, since the time machines

14



VOL: 3, No.: 2

keeps ticking and changes are bound to take place depending

on situations and circumstances, ethics actually guides us to

study and analyze an existing system first before showing the

path towards development and fine-tuning of an existing

system that needs a change.

Moral and Ethics , depends on how we interpret the meaning.

Morals, deal with customs and practiced principles followed

by certain groups, depending on religion, culture and

traditions. Ethics, on the other hand, lays emphasis on

character , conduct and individual behavior . What is ethically

moral, may not be morally wrong. For example, eating fish on

Saturdays may not be ethically wrong but it may be morally

wrong for certain community members.

Ethics and Morals are certain laid practices which

reminds the members of the society about their

duties and restrictions, so that those community

members stay within set acceptable limits. Breaching the

restrictions cause conflicts and disturbs human peace and

harmony between different social relationships such as –

father and son, husband and wife, between friends and

relatives and even between communities.

Ethics , demands that we follow certain disciplines ,

standard practices and conventions more than what

is prescribed by law. It all depends on how we apply and

practice ethics in our daily life and general practices.

Ethics in general life must be followed differently. Ethics in

office must not be mixed with ethics at home. For example,

watching television (TV) during working hours in office may

not be permitted but, at home it is allowed. However, playing

a TV at home while a student is studying there is ethically

wrong if it disturbs or distracts the attention of that student

there. This is called Value-based Ethics and discipline.

Ethics is linked to Principles and principles are aimed at

bringing methods, systems, procedures, orderliness,

happiness and for leading the path towards good mutual co-

existence between individuals and their way of life. These are

Social Ethics, but what the society expects from the

businessman can be called Professional Principles and

Practices.

Having understood the above, let us remember the points laid

as Guiding Principles to be followed in our daily

Public Life, with the help a Slogan –

I L hould rganize nd perate with onest eaders, S O A O H

where –

I = while discharging dutiesIntegrity

S = without personal gains and bias Selflessness

O = and transparencyOpenness

A = for decisions takenAccountability

O = and focused approachObjectivity

H = in discharging Public Duties Honestly

L = with sound principles and practices Leadership

To sum up, are both complementary and Ethics and Law

inter-related in order to link social rules, customs, regulations

and restrictions prescribed by Society through social customs

and beliefs. That is perhaps why it is said that Convention is

more than law.

Business Ethics is applicable within the periphery of a

business circle and environment. It encompasses the

behavior of individuals within business organizations, giving

top priority to Business Interests. In this context, one must

remember the 3 C's of Business Ethics , which are – a)

Compensation, b) Competency and c) Character.

One must accept and appreciate that- Ethical Business

Profit, is a reward to the businessman for – investing in

business, for generating employment, for contributing to the

growth of business at large, by abiding by the Laws of the

Land and the ethical practices followed in the trade and

business.

Ethics applies to all accepted activities of the people,

including those engaged in business. However, one must

ethically refrain from too much greed and profiteering and

from corruption at any stage. Ethics must promote

healthy practices and standards in the political,

social and economic arena for bring Value-addition

among individuals in the society at all walks of life while

maintaining good Work-Life Balance.

Business Ethics must proceed with – Skill, efficiency

and diligence.

Good Business Ethical practices must –

a) Avoid Indulgence in malpractices,

b) Help workers to work with Self-Confidence,

c) Encourage customer satisfaction and confidence,

d) Promote business,

e) Protect consumer rights,

f) Look into the interests of the Employees as well as

the Owner/Stakeholders and also

g) Enable steady growth of the organization amid of

healthy completion.

15



VOL: 3, No.: 2

Now, let us deal with the Sale of Goods Act,1930

In respect of such papers , the students are reminded that since they are taking an exam, they must first focus

on securing marks. For that, they must study the relevant Sections of the Act , write what the question wants

and then attempt to elaborate by analyzing and commenting on the interpretations of the Act.

At the very start, let us be clear that , but the contract of sale is Sale of Goods Act relate to sale and purchase of goods

regulated by the Indian Contracts Act,1872.

At the very start, we must clear our conception about the following terms – Goods, Specific Goods, Unascertained goods,

Future goods and Contingent goods.

The immediate question coming to mind is – It is clarified that is goods What are goods ? every kind of movable property

but – Actionable Claims and Money are excluded .( All things attached to the earth are not movable and are therefore not goods

under the Act. However, standing crops, grass and fruits on trees that can be separated are covered under the definition of

movable goods ).

So, the question arises – ? Actionable claims are debt or a claim for money which a person may What are Actionable Claims

have from another person, which may be recovered by suit.

So, what is Money here simply means legal tender. Money ?

Specific Goods are goods that can be clearly identified and recognized

Unspecific Goods are those goods that can be indicated by description but cannot be separately identified. For example , as

long as the bags of sugar, kept in a godown for sale, are not identified with any specific buyer, they remain Unspecified Goods. As

soon as a some bags are brought out, marked, separated and issued to a buyer, they become identifiable and become Specific

goods.

Future Goods are goods which have not yet been manufactured or produced or acquired by the seller after entering into a

contract of sale. For example, X agrees to sell Apples to Z that he will grow in his orchard in the coming fruit season. Such a

contract is for sale of future goods.

Contingent Goods, are goods that can be sold only depending on the happening of an uncertain event, called a Contingency.

For example, M enters into a contract to sell a particular watch to N if M manages to buy it from C - the current owner of the watch.

The watch here is considered - Contingent Goods.

That makes us raise a question – there is a contract of sale between a buyer and a seller , but when does the property, pass on

from the seller to the buyer in a contract for the sale of such goods ? You will find the answer in Sec.18 to 25 of the Sale

of Goods Act. You have to reply keeping in mind each type of goods .

1. where there is an unconditional contract for sale of specific goods in a deliverable state, In case of Specific Goods,

the property passes as soon as the contract is made. The time of payment or the time of delivery is not material.

2. the property is not transferred until the goods are ascertained. For In case of Unspecifed/Unascertained Goods,

example, there are bags of cement in a godown. The property gets transferred to the buyer only when the requisite

number of bags are separated ,taken out and kept aside for delivery to that buyer.

3. is very important in case of sale of Specific goods. The property passes when the parties The Intention of the Parties

to the contract intend it to pass as stated in the terms of the contract.

4. In case of sale of Specific Goods, before making the goods ready if there is something which the seller has to do ,

in a deliverable condition, the property passes only after the seller has done that thing. For example, M agrees to sell

1000 tins of milk powder to N and promises to pack them in Card Board Boxes before delivery, the property passes only

after those tins are properly packed and made ready for delivery.

16



VOL: 3, No.: 2

5. In case of Specific goods, for the purpose of where the seller has to measure, weigh or test the goods ,

ascertaining the price, the property does not pass to the buyer as long as that thing has been done and the buyer is

intimated.

6. Property in the goods is transferred to the buyer when the However, in case of goods is delivered to the carrier.

conditional delivery, the property is transferred only if that condition is fulfilled. For example if M –the seller ,sends

goods by courier to N -the buyer, the property is transferred as soon as the goods are handed over to the courier, but if

there is a condition of Cash on Delivery (COD), the property passes only after N -the buyer pays the requisite Cash before

collecting delivery of the goods.

7. Where the property in the goods is transferred only – I ) goods are sent on Approval or on Sale or Return Basis,

when the buyer informs his approval or acceptance of the goods ; II ) In another case, if the buyer does not intimate his

approval or acceptance of the goods, or his rejection of the same, but still retains those goods, the property passes after

expiry of a reasonable time.

As long as the property in the goods is not transferred

to the buyer, the goods remain at the risk of the seller.

After the ownership passes to the buyer, the goods are at

the Buyer's Risk, since Risk follows ownership.

17


VOL: 3, No.: 2



Paper : 4Paper : 4

Fundamentals of BusinessMathematics and Statistics (FBMS) Fundamentals of Business Mathematics and Statistics (FBMS)

A Fundamentals of Business Mathematics 40%

B Fundamentals of Business Statistic 60%

B 60%

A 40%

CMA Ankan K BandyopadhyayaHe can be reached at:[email protected]

18



VOL: 3, No.: 2


The central objective of Statistics is to equip students with consequently requisite quantitative skills that they can employ

and build on in flexible ways.

Statistics help to design data collection plans, analyze data appropriately and interpret and draw conclusions from

those analyses.

To provide students with the idea of statistical calculations which promotes the efficient functioning of commerce

and industry;

STATISTICS

In this issue we will discuss Correlation Analysis.

In the last issue we have studied relationship between two variables. Now Correlation analysis gives you a statistical tool which helps you to ascertain the degree to which one variable is LINEARLY related to another. Remember for only linear relationship this correlation analysis offer you help to find out degree of association. For other sorts of relationship between variables this will not. Let us recapitulate the following from January issue:

1. Is there any relationship between the yellow and green box?

2. If there is relationship what is that?

3. How much is the strength of the relationship?

Knowledge of Regression & Correlation answers these questions. Regression gives the answers of the first

two questions and Correlation gives the answer of the last one.

In this issue third question will be our topic of discussion.

Regression line is the equation that relates the two variables mathematically. Regression line showing linear relationship

between two variables is of the form:

Y= a+bX Independent Variable

Dependent Variable

a is called Y axis intercept or Y-intercept or simply intercept, b is the slope of the line. n no of items

a,b are found out by the method of least squares and the required formulae are:

What is to be

estimated?

What has actually

happened?

XY -nXYb= &a=Y - bX22

X -nX

19



VOL: 3, No.: 2

Correlation analysis is used in conjunction with regression equation to measure how well the regression equation explains the

variation of the dependent variable from estimation. Correlation itself can also be used to measure the degree of association

between two variables.

Under Correlation analysis two measures are there:

Coefficient of Determination:

The coefficient of determination is the primary way we can measure the extent or strength of the association that exists between

two variables X (Independent Variable) and Y (Dependent Variable).

Coefficient of determination is indicated as

Direct and short cut formula for are as follows:

= Variation of the Y values around the regression Line

= Variation of the Y values around their own means.

a = Y intercept.

b = Regression coefficient.

= Mean of the observed values of dependent variable.

n = Number of data points.

X = Independent variable.

Y = Dependent variable.

Illustration: The environmental protection agency is conducting a study of the relationship between age and systolic blood

pressure. A small subset of the huge data base is given below:

Find out Coefficient of determination.

Answer:

We know regression equation: Y = a+bX

Where

Coefficient of

Correlation

Coefficient of

Determination

2r

2r

Direct Indirect

2(Y - Y)2

r =1- 2(Y - Y)

2a Y+b XY -nY2

r = 22Y -nY

2

(Y - Y )

2

(Y - Y )

Y

X (Age) 30 55 60 45 40 65 50 75

Y (Blood

Pressure)

120 160 170 180 130 140 150 180

XY -nX Yb= &a=Y - bX22

X -nX

20



VOL: 3, No.: 2

This means that the variation in age explains 34.1 percent of the variation in the Blood pressure.

The coefficient of correlation is the second measure that we can use to describe how well one variable is explained by another.

Sample coefficient of correlation is denoted by:

In guide book few methods for finding out r are discussed. Here we will do recapitulation on Karl Pearson's method or

Covariance method.

Direct method:

X Y XY

3055604540655075

120160170180130140150180

36008800

102008100520091007500

13500

9003025360020251600422525005625

420 1230 66000 23500

2X

a b

52.5 153.75 102.16 0.98

X Y

X Y XY

3055604540655075

120160170180130140150180

36008800

102008100520091007500

13500

1440025600289003240016900196002250032400

1230 66000 192700

2Y

0.341

2 2a Y+b XY -nY (102.16×1230+0.98×66000-8×153.75 )2

r = =2 22 192700-8×153.75Y -nY

2r= r

(X-X)( Y - Y)r= ...............................(1)

2 2(X-X) (Y - Y )

(X-X)( Y - Y )r= ...........................................(2)

Nσ σx y

2 2(X-X) ( Y - Y )

Whereσ = andσ =x yN N

(X-X)(Y - Y )iscalledco - variance between X& Y.σ &x

N

� arestandarddeviationofseriesXandY.y

( X)( Y)XY -

Nr= .................................(3)2 2

( X) ( Y)2 2X - Y -

N N

21

y



VOL: 3, No.: 2

Illustration: Calculate the Correlation Coefficient between the height of father and son from the given data

Ans:

Height of father (In inches) 64 65 66 67 68 69 70

Height of son (Inches) 66 67 65 68 70 68 72

X Y X - Y -

64656667686970

66676568706872

-3-2-10123

-2-1-30204

62302012

9410149

41904016

469 476 25 28 34

X Y (X-X) ( Y - Y ) 2(X-X)

2(Y - Y )

(X-X) ( Y - Y ) 25r= = =0.81

2 2 (28×34)(X-X) ( Y - Y )

(X-X) ( Y - Y ) 25 25r= = = = 0.81

2 2Nσ σy 28 34(X-X) ( Y - Y )x 777 7N N

X Y XY

64656667686970

66676568706872

4224435542904556476046925040

409642254356448946244761

4900

4356448942254624490046245184

469 476 31917 31451 32402

2X

2Y

(469) (476)( X) ( Y)31917-XY -

7Nr= =2 2 2 2

( X) ( Y) (469) (476)2 2X - Y - 31451- 32402-

N N 7 7

25= = 0.81

28 34

22



VOL: 3, No.: 2

The sign of r indicate the direction of the relationship between the two variables X and Y. If an inverse relationship exists –

that is, if Y decreases as X increases – then r will fall between 0 to 1.

Suggestions:

This study note need to be read thoroughly. Supplementary readings could be made from other resources. This issue is based onStatistics for Management by Richard I Levin & Statistics- Theory, Methods & Application by Sancheti& Kapoor. Attempts here are made to discuss the topic as an aid to the guidance already given in the study guide. This writing is for updating knowledge and could be used as supplement to the study guide. Examples on objective parts on this regression part as well as on Correlation partalong with further discussions on interpretation on different coefficients will be made in next issue.Students should go thoroughly for clear conception on the subject Guide book on the paper 4- Fundamental of Business mathematics and Statistics written and issued by Institute on Syllabus -16.

“

“

23


VOL: 3, No.: 2


01.0 The Benevolent Bank

Imagine there is a bank that credits your account every

morning with Rs. 86,400/- for consumption during the day.

The basic fundamental is that the bank does not carry

forward any balance from day to day. Hence, at the end of

every evening the bank forfeits the unutilized balance. What

would you do? Draw out every rupee and use it before the

dusk, of course.

Each of one of us has such a generous bank that credits our

account every morning with 86,400 seconds (1,440 minutes

or 24 hours). Every evening it does forfeit the balance of

TIME that can't be used during the day. If you fail to use the

day's credits, it is your loss forever. There is no going back.

There is no drawing against the “tomorrow”. You must live

in the present on today's credits.

02.00 Time Management

Yesterday is history. Tomorrow is mystery. Today is a gift.

That is why it is called the present! Put this valuable gift –

called time - to prudent utilization. The technique that is

handy in this context is popularly known as Time

Management.

“Time management” is the process of organizing and

planning how to divide your time between specific

activities. Good time management enables you to work

smarter – not harder – so that you get more work done in

less time, even when time is tight and pressures are high.

Failing to manage your time damages your effectiveness

and causes stress.

It seems that there is never enough time in the day. But,

since we all get the same 24 hours, why is it that some

people achieve so much more with their time than others?

The answer lies in good time management.

03.00 Tools & Techniques

Time and Tide wait for none. Time and Tide wait for none.

There are several Time Management Tools & Techniques

that are handy for Prudent Utilization of Time. Some of the

important techniques are listed below:

1. Analyze the value of each of the activities in your

time chain and eliminate the activities that do not

add to the value

2. Prioritize the Tasks

3. Create Time Goals and adopt a 'To Do List'

4. Review, Revise and Reset the Task List

5. Learn to delegate and monitor

6. Stick to the Time Plan

04.00 Benefits

Benefits from good time management are enormous such

as:

Greater Productivity

Better Efficiency

Higher Credibility

Less Stress

Easier Goals

Enhanced Opportunities

05.00 A Demonstration

Here is a revealing demonstration by a professor that I came

across on Time Management and Priority Setting. When the

class began, the professor picked up a large empty jar and

proceeded to fill it with rocks of about 2" diameter right to

the top. He then asked the students if the jar was full? The

students agreed that it was. The professor then picked up a

…. Time Management ….…. Time Management ….…. Time Management ….

CMA (Dr.) Sreehari ChavaCost & Management Consultant,Nagpur, Maharastra.He can be reached at:[email protected]

24


VOL: 3, No.: 2


box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open areas and settled down

between the rocks. The students laughed. The professor asked his students again if the jar was full? They agreed that yes, it was.

The professor then picked up a box of sand and poured it into the jar. The sand filled up the gaps and everything else that is empty.

The students were amazed.

"Now," explained the professor, "I want you to recognize that this is your life. The rocks are the important things like your family,

your health, - anything that is so important to you that if it were lost, you would be nearly destroyed. The pebbles are the other

things in life that do matter, but on a smaller scale. The pebbles represent things like your job, house, or car. The sand is

everything else, the small stuff. Remember that if you put the sand or the pebbles into the jar first, there is no room for the rocks.

The same holds true for your life as well. If you spend all your energy and time on the small stuff and the material things, you will

never have room for the things that are truly important. Pay attention to the things that are more important in your life and spend

more time on them.”

06.00 Quick Take

Good time management requires an important shift in focus from activities to results. Being busy isn't the same as being

effective!

If opportunity doesn’t knock build a door.If opportunity doesn’t knock build a door.

25



VOL: 3, No.: 2

PRACTICALPRACTICALPRACTICALAdviceAdviceAdvice

Prac�cal support, informa�on and advice to help youget the most out of your studies.

ABOUT YOUR STUDIES - FOUNDATION COURSE

Assess Yourself

Appear For Examination

Solve Excercises given in Study Note

Read The Tips

Read Study Notes MTPs & RTPs

26



VOL: 3, No.: 2

Submission

Updation of E-Mail Address/Mobile:

Students are advised to update their E-Mail id and Mobile Numbers timely so that important communications are not missed as the same are sent through bulk mail/SMS nowadays. Student may update their E-Mail id/ Mobile Number instantly after logging into their account at www.icmai.in at request option.

Dear Students,

We are very much delighted to receive responses from all of you; for whom our effort is!We have noted your queries and your requests will definitely be carried out. Further, requesting you to go through the current edition of the bulletin. All the areas will be covered gradually. Expecting your responses further to serve you better as we believe that there is no end of excellence! One of the mails received is acknowledged below.

Please put your opinions so that we can make your e-bulletin everything that you want it to be.

All rights reserved. No part of this Bulletin may be translated or copied in any form or by any means without the prior written permission of the Institute of Cost Accountants of India.

Send your Feedback to:e-mail: [email protected]

website: http://www.icmai.in

SUBMISSIONSUBMISSIONSUBMISSION

27


VOL: 3, No.: 2

Message from

Directorate of Studies


Dear Students,

We have stepped into 2018 and with new enthusiasm for the future to come, it is also a time to reflect on the year gone by and

the beautiful moments shared with all. Express your gratitude and spare your thoughts for all who have supported you and

remember to make a new year resolution to do much better in every sphere of your life.

‘Learn from yesterday, Live for today, Hope for tomorrow’

For the smooth and flawless preparation. Directorate of Studies have provided meaningful tips which will help you to gain

sufficient knowledge about each subject.“Tips” are given in this E-bulletin by the knowledge experts for the smooth

encouragement in you preparation. We are sure that all students will definitely be benefitted by those tips and that will help

them to brush up their knowledge and also to swim across.

Take the course seriously from the very beginning but don’t be panicky. Please try to follow the general guidelines,

mentioned below; which may help you in your preparation.

Essentials for Preparation:

Conceptual understanding & Overall understanding of the subject both should be clear.

Candidates are advised to go through the study material provided by the Institute in an analytical manner.

Students Should improve basic understanding of the subject with focus on core concepts.

The Candidates are expected to give to the point answer, which is a basic pre-requisite for any professional

examination.

To strengthen the answers candidates are advised to give answer precisely and in a structured manner.

In-depth knowledge about specific terms required.

Write question numbers correctly and prominently.

Proper time management is also important while answering.

Please Note:

For your information, GST under New Syllabus has already been uploaded. Pl follow the given link:

Desired Link- Revised Contents-http://icmai.in/upload/Students/Syllabus2016/Syllabus2016_Revised_Contents.pdf

New Study Materials based on GST has been uploaded too. Please refer to that for the smooth flow of your preparation:

Intermediate Study Material-http://icmai.in/studentswebsite/Syl‐2016‐Inter.php

Final Study material-http://icmai.in/studentswebsite/Syl‐2016‐Final.php

Be Prepared and Get Success; Disclaimer:

Although due care and diligence have been taken in preparation and uploading this E-bulletin, the Institute shall not be responsible for any loss or damage, resulting from any action taken on the basis of the contents of this E-bulletin.

28



VOL: 3, No.: 2

CMA Sanjay Gupta, President of the Institute during a discussion with Mr. Jeffrey C. Thomson, President and CEO of Institute of Management Accountants [IMA] on 25th January, 2018 at CMA Bhavan, New

Delhi.

SNAPSHOTS

CMA Sanjay Gupta, President, The Institute of Cost Accountants of India extending New Year greetings with Shri

Suresh Chandra, Secretary to the Government of India, Ministry of Law & Justice.

CMA Sanjay Gupta, President of the Institute welcomes Mr. Jeffrey C. Thomson, President and CEO of Institute of

Management Accountants [IMA] on 25th January, 2018 at CMA Bhavan, New Delhi.

National seminar on GST-Jointly Organized by the Institute & Bhubaneswar Chapter, dated 27th & 28th January 2018 at Bhubaneswar, Odisha.

29

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