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Many years ago in a small Indian village, a farmer had the misfortune of owing a large sum of money to a village moneylender.

The moneylender, who was old and ugly, fancied the farmer’s beautiful daughter. So he proposed a bargain. He said he would forgo the farmer’s debt if he could marry his daughter.
Both the farmer and his daughter were horrified by the proposal. So the cunning money-lender suggested that they let providence decide the matter. He told them that he would put a black pebble and a white pebble into an empty money bag. Then the girl would have to pick one pebble from the bag.

1) If she picked the black pebble, she would become his wife and her father’s debt would be forgiven.
2) If she picked the white pebble she need not marry him and her father’s debt would still be forgiven.
3) But if she refused to pick a pebble, her father would be thrown into jail.

They were standing on a pebble strewn path in the farmer’s field. As they talked, the moneylender bent over to pick up two pebbles. As he picked them up, the sharp-eyed girl noticed that he had picked up two black pebbles and put them into the bag. He then asked the girl to pick a pebble from the bag.

Now, imagine that you were standing in the field. What would you have done if you were the girl?

If you had to advise her, what would you have told her?

Careful analysis would produce three possibilities:

1. The girl should refuse to take a pebble.
2. The girl should show that there were two black pebbles in the bag and expose the money-lender as a cheat.
3. The girl should pick a black pebble and sacrifice herself in order to save her father from his debt and imprisonment.

Take a moment to ponder over the story. The above story is used with the hope that it will make us appreciate the difference between lateral and logical thinking. The girl’s dilemma cannot be solved with traditional logical thinking. Think of the consequences if she chooses the above logical answers.

What would you recommend to the Girl to do?

Scroll down if you give up……………

..

Well, here is what she did ….

The girl put her hand into the moneybag and drew out a pebble. Without looking at it, she fumbled and let it fall onto the pebble-strewn path where it immediately became lost among all the other pebbles.

“Oh, how clumsy of me,” she said. “But never mind, if you look into the bag for the one that is left, you will be able to tell which pebble I picked.”

Since the remaining pebble is black, it must be assumed that she had picked the white one. And since the money-lender dared not admit his dishonesty, the girl changed what seemed an impossible situation into an extremely advantageous one.

MORAL OF THE STORY:

Most complex problems do have a solution. It is only that we don’t attempt to think

This is one of the questions, I picked up from professional exams in UK.

Atkins plc’s operations involve selling cars to the public through a chain of retail car showrooms. It buys most of its new vehicles directly from the manufacturer on the following terms:

• Atkins plc will pay the manufacturer for the cars on the date they are sold to a customer or six months after they are delivered to its showrooms whichever is the sooner.
• The price paid will be 80% of the retail list price as set by the manufacturer at the date that the goods are delivered.
• Atkins plc will pay the manufacturer 1·5% per month (of the cost price to Atkins plc) as a ‘display charge’ until the goods are paid for.
• Atkins plc may return the cars to the manufacturer any time up until the date the cars are due to be paid for. Atkins plc will incur the freight cost of any such returns. Atkins plc has never taken advantage of this right of return.
• The manufacturer can recall the cars or request them to be transferred to another retailer any time up until the time they are paid for by Atkins plc.

Required:

Discuss which party bears the risks and rewards in the above arrangement and come to a conclusion on how the transactions should be treated by each party.

Please discuss how do you treat in the financial statements according to Indian Accounting Standards ?

Throughput accounting (TA) is an alternative to cost accounting proposed by Eliyahu M. Goldratt. It is not based on Standard Costing or Activity Based Costing (ABC). Throughput Accounting is not costing and it does not allocate costs to products and services. It can be viewed as business intelligence for profit maximization. Conceptually throughput accounting seeks to increase the velocity at which products move through an organization by eliminiating bottlenecks within the organization.

The concept of throughput accounting

Goldratt’s alternative begins with the idea that each organization has a goal and that better decisions increase its achievement that value. The goal for a profit maximizing firm is easily stated, to increase profit, now and in the future. Throughput accounting applies to not-for-profit organizations too, but they have to develop a goal that makes sense in their individual cases.

Throughput Accounting also pays particular attention to the concept of bottlenecks in the manufacturing or servicing processes.

Throughput accounting uses three measures of income and expense:

• Throughput (T) is the rate at which the system produces “goal units.” When the goal units are money (in for-profit businesses), throughput is sales revenues less the cost of the raw materials (T = S - RM). Note that T only exists when there is a sale of the product or service. Producing materials that sit in a warehouse does not count. (”Throughput” is sometimes referred to as “Throughput Contribution” and has similarities to the concept of “Contribution” in Marginal Costing which is sales revenues less “variable” costs - “variable” being defined according to the Marginal Costing philosophy.)
• Investment (I) is the money tied up in the system. This is money associated with inventory, machinery, buildings, and other assets and liabilities. In earlier TOC documentation, the “I” was interchanged between “Inventory” and “Investment.” The preferred term is now only “investment.” Note that TOC recommends inventory be valued strictly on totally variable cost associated with creating the inventory, not with additional cost allocations from overhead.
• Operating expense (OE) is the money the system spends in generating “goal units.” For physical products, OE is all expenses except the cost of the raw materials. OE includes maintenance, utilities, rent, taxes, payroll, etc.

Organizations that wish to increase their attainment of The Goal should therefore require managers to test proposed decisions against three questions. Will the proposed change:

1. Increase Throughput? How?
2. Reduce Investment (Inventory) (money that cannot be used)? How?
3. Reduce Operating expense? How?

The answers to these questions determine the effect of proposed changes on system wide measurements:

1. Net profit (NP) = Throughput - Operating Expense = T-OE
2. Return on investment (ROI) = Net profit / Investment = NP/I
3. Productivity (P) = Throughput / Operating expense = T/OE
4. Investment turns (IT) = Throughput / Investment = T/I

Managers intent on maximizing throughput can employ TOC’s five focusing steps which allow them to move the firm toward the achievement of the goal. The five steps are as follows:

1. Identify the system’s constraints.

2. Exploit the system’s constraints.

3. Subordinate everything else to the decision made.

4. Elevate the system’s constraints.

5. Restart the process if a constraint has been broken.

Identify the constraint is to compare resource availability with resource requirements. In the Constrained Company there are four resources, Workers A-D. First consider the load placed on Worker A. As noted in the Exhibit, Product Y requires 15 minutes of Worker A’s time, while Product Z requires 10 minutes. Since the potential demand for Products Y and Z are 100 units and 50 units, respectively, total Worker A time required to manufacture both Products Y and Z is 2000 minutes ((15 minutes/unit x 100 units) + (10 minutes/unit x 50 units)). Since there are 2400 minutes available each week for each worker, Worker A is not the constraint.

Next, consider the load placed on Worker B. Again referring to the table, the total Worker B time requirement for the production of 100 units of Product Y and 50 units of Product Z is 3000 minutes. Worker B with a weekly deficiency of 600 minutes represents a constraint. Similar calculations for Workers C and D show that neither worker is a constraint. In both cases, then, resource load or time required (1750 minutes) is less than resource availability (2400 minutes).

Exploit the System’s Constraint(s). Constrained Company cannot satisfy market demand for both Products Y and Z. To move the firm toward the goal, management must exploit the constraint. Exploit means to squeeze the maximum amount of throughput out of the constraint. The constraint is the labor minutes of Worker B. The first step in exploiting the constraint is to calculate the amount of throughput for one unit of each of the two products. Throughput for Product Y is $75/unit and $120/unit for Product Z . To exploit the constraint, management must know how many minutes of constrained resource are required to get a dollar of throughput. Focusing only on Worker B, product Y throughput per minute is $5 ($75/15 minutes). For product Z, throughput per minute of Worker B time is $4 ($120/30 minutes). Given that the constraint is Worker B time, Constrained Company should manufacture 100 units of Product Y and only 30 units of Product Z. This product mix will consume all of the available minutes of Worker B’s time. Total throughput will be ($75/unit x 100) units + ($120 x 30) units = $11,100. Net profit is $1,100 ($11,100-$10,000).

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What is Identity theft?

Your identity and personal information are valuable. Criminals can find out your personal details and use them to open bank accounts and get credit cards, loans, state benefits and documents such as passports and driving licenses in your name.

How Can Your Identity Be Stolen?

Bin raiding – Fraudsters pay people to go through the rubbish you throw out, looking for bank and credit card statements, pre-approved credit offers, and tax information.

Card skimming – This usually occurs when a shop assistant or waiter, for example, gets your information by ‘skimming’ or copying your credit card information when you make a purchase. They often then sell the information to professional criminal gangs.

Internet Sites – Anybody that uses the internet will regularly be asked to share personal information to gain access to websites and buy goods. Fraudsters can combine the personal information you provide to unsecured internet sites such as your mother’s maiden name with other bits of valuable information they glean about you to obtain credit in your name

Phishing – This term describes identity theft via email. Fraudsters will send an email claiming to be from a bank, credit card company or other organisation, with which you might have a relationship, asking for urgent information.

Theft Of Wallet Or Purse – the average purse or wallet contains bank cards, credit cards and valuable identity documents including driving licenses and membership cards. Victims realise very quickly that their wallet has been stolen but often do not realise the value of the information contained within it until it is too late.

Unsolicited Contact - Phone calls claiming to be from banks asking you to update your personal information should be regarded with caution. Calling the switchboard of the company in question and asking to be put through to the person who called you will help ensure you are not playing into the hands of fraudsters

Things to look out for

You may become a victim of identity theft if:

• You have lost or had stolen important documents such as your passport or driving licence
• Post expected from your bank has not arrived or you are receiving no post at all

You may already be a victim of identity theft if:

• You identify entries on your personal credit file from organisations you do not normally deal with items have appeared on your bank or credit-card statements that you do not recognise
• you applied for a state benefit but are told that you are already claiming
• You receive bills, invoices or receipts addressed to you for goods or services you haven’t asked for you have been refused a financial service, such as a credit card or a loan, despite having a good credit history
• A mobile-phone contract has been set up in your name without your knowledge
• You have received letters from solicitors or debt collectors for debts that aren’t yours financial institutions that you do not normally deal with contact you to chase an outstanding debt.

Guidance for victims

• The first step is to report the fraud to your nearest police station.
• If you have had your wallet or purse stolen contact your bank/building society and credit card provider immediately to cancel any cards.
• Even if not all your accounts have been affected it is worth flagging the fact that you have been a victim of identity fraud to other lenders, banks etc so they can monitor your accounts more closely and ensure that the thieves do not access these too..
• Protect yourself moving forward. Invest in a confetti cut shredder and destroy all documents before recycling or binning them.

There was not much on Indentity Theft when I searched for on Internet with respect to India. Click on the links below:

Google Search1,
Google Search 2

Regards,

Santosh Puthran

Please share you thoughts, opinions and links on this subject by posting comments on the blog.

Source Websites:

http://www.identitytheft.org.uk/
http://www.stop-idfraud.co.uk/

You may also like to read

1. HDFC guidelines on phising

http://cma-expanse.blogspot.com
http://management-accountant.blogspot.com/
http://scopeofcostaccountant.blogspot.com/
http://inclusive-accounting.blogspot.com/
http://finance.groups.yahoo.com/group/CMAMumbai/

THE MAGIC MANTRA FOR ALL: - Warren Buffet

Email sent in cma_india yahoogroup by Nayana Savala

There was a one hour interview on CNBC with Warren Buffet, the second richest man in the world, and who has donated $31 billion to charity.

Here are some very interesting aspects of his life:

1) He bought his first share at age 11 and he now regrets that he started too late!

2) He bought a small farm at age 14 with savings from delivering newspapers.

3) He still lives in the same small 3 bedroom house in mid-town Omaha, that he bought after he got married 50 years ago. He says that he has everything he needs in that house. His house does not have a wall or a fence.

4) He drives his own car everywhere and does not have a driver or security people around him.

5) He never travels by private jet, although he owns the world’s largest private jet company.

6) His company, Berkshire Hathaway, owns 63 companies. He writes only one letter each year to the CEOs of these companies, giving them goals for the year. He never holds meetings or calls them on a regular basis.

7) He has given his CEO’s only two rules. Rule number 1: do not lose any of your share holder’s money. Rule number 2: Do not forget rule number 1.

He does not socialize with the high society crowd. His past time after he gets home is to make himself some pop corn and watch television.

9) Bill Gates, the world’s richest man met him for the first time only 5 years ago. Bill Gates did not think he had anything in common with Warren Buffet. So he had scheduled his meeting only for half hour. But when Gates met him, the meeting lasted for ten hours and Bill Gates
became a devotee of Warren Buffet.

10) Warren Buffet does not carry a cell phone, nor has a computer on his desk.

11) His advice to young people: Stay away from credit cards and invest in yourself.

May God Almighty Bless You With Health, Happiness and Prosperity Always.

Warren Buffett MBA Talk

I was looking for some instructor material on costing on Internet and I found one for Job Costing. This video is an informative video on Job Costing… If you get know something else, please post on this blog.

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