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Bond price
A bond, whose par value is Rs. 1,000, bears a coupon rate of 12 per cent and has a maturity period of 3 years. The required rate of return on the bond is 10 per cent. What is the value of this bond?
Solution
Annual interest payable = 1,000 * 12% = 120
Principal repayment at the end of 3 years = Rs. 1,000
The value of the bond
= 120 (PVIFA 10%, 3 yrs) + Rs. 1,000 (PVIF 10%, 3 yrs)
= 120 (2.487)+1,000 (0.751)
= 298.44 + 751
= Rs. 1,049.44
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Conservation, rectifying errors, company accounts Just read definitions, mod d our general banking
2-3 Problems on discount factor
depreciation 2 prblms
ratio analysis 2 prbms
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Spot TOM ready
Cash date or Trade date
The date of the transaction, say “today” If today is 25-June-16, then Cash date is 25-June-16
Spot date
Second working day from the Cash date, or day after tomorrow 27-Jun-16
Tom date
Tom is short for “tomorrow” and is the next working day from the Cash date 26-Jun-16
Spot Rate
The rate quoted and transacted today for settlement (debit/ credit) on the Spot date Say, the rate is 55.95. This is the rate we normally see, hear and talk about.
Cash Rate
The rate applicable for settlement (debit/ credit) today itself, on the Cash date This is usually lower than the Spot Rate. Since the Spot Rate is 55.95, the Cash Rate may be 55.93. The difference between the two rates is known as the Cash-Spot rate or Cash-Spot difference.
Tom Rate
The rate quoted and transacted today for settlement (debit/ credit) tomorrow, on the Tom date This is lower than the Spot Rate, but higher than the Cash Rate. Since the Spot Rate is 55.95, the Tom Rate may be 55.94.
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Cash Book serves dual role of a ledger as well as journal.
Cash book is the account which keeps track of all the cash transactions of the business. It is a part of Ledger
Because of the enormously large amount of cash transactions in a typical business, this Cash Account is maintained as a separate book known as CASH BOOK. Cash book is also a book of original entry. Cash book consists of Cash Account and Bank Account.
Cash Account is an Asset account or Real Account and thus,
Any increase in Cash or Bank Account is debited to the account and;
Any decrease in Cash or Bank account is credited to the account.
Cash Book always shows a debit balance.
Types of Cash Book
Single Column
Double Column
Triple Column
Petty Cash Book
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(a) On issue of bill to A —
A's a/c - Dr. 10,000
To Bills Payable (Being
acceptance of bill in favour of A.) - Cr. 10,000
No entry will be passed in the books for -
(b) discounting of bill, (c) sending the bill to bank for collection, and (d) on endorsement. B is acceptor and he has to pay against the bill on due date to whoever comes to him.
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Bill receivable comes under asset or liability
Under bills of exchange, which ac Dr.
Under bills of exchange, which ac Dr.
Sales and cost of goods sold gross profit
Foreign exchange and cross currency calc
cross currency u have to add premiums and sub discount
Composite voucher
Composition, redeemable, share preferential shares
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Mr. A draws a bill on B for Rs. 10,000. It is accepted by B and returned to A. Show the entries to be passed in the books of A and B under the following circumstances:
(a) if A retains the bill;
(b) if A.discounts the bill before due date for Rs. 9,800;
(c) if A sends the bill to his bank for collection;
(d) if A endorses the bill to 'C, his creditor.
In the above problem, 'A' is the drawer and this bill is 'Bill Receivable' to him; whereas 'B' is the drawee and therefore, it is 'Bill Payable' to him. Both bill receivable and bill payable are real accounts.
Entries in the Books of A (Drawer)
(a) On receipt of bill and if the bill is retained
Bills Receivable a/c - Dr. Rs. 10,000
ToB (Being receipt of bill duly accepted by B) - Cr. Rs. 10,000
(b) When bill is discounted
Cash a/c - DR. 9,800
Discount a/c - DR. 200
To Bills Receivable (Being bill discounted with the bank) - CR. 10,000
(c) When bill is sent to the bank for collection
Bank for Bill Collection a/c - DR. 10,000
To Bills Receivable (Being bill
sent for collection) - CR. 10,000
(d) When bill is endorsed to 'C
C'sa/c - Dr. 10,000
To Bills Receivable (Being
endorsement of bill of C) - Cr. 10,000
In the Books of 'B' (Drawee)
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