different accountings

8/6/2019 Different Accountings

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DuPont Analysis

DuPont Analysis, or DuPont Identity, offers a moredetailed analysis when evaluating the return-on-

Investment (ROI) of a company.

The measure was conceived by the DuPont

Corporation in the 1920s to evaluate profitability,operating efficiency and leverage, all within the ROE

analysis.

Many financial analysts believe that the DuPontAnalysis provides an excellent snapshot of a

company’s financial strength.



Traditional ROE v. DuPont Analysis

• The return-on-equity measure is widely used byinvestors to determine how efficiently a companyis using its money.

• There are two ways of calculating ROE:•

The traditional approach and the DuPont formula.• Under the traditional formula, the company’s netprofit after taxes for the past 12 months is dividedby shareholder equity. As this approach fails toaccount for the effect of borrowed funds, the

DuPont Analysis formula was developed to linkthe use of debt to the outcome.



• The idea behind the more detailed DuPont

Analysis is that companies that demonstratea higher ROE with minimal debt can expandwithout large capital outlays, allowing itsowners to access cash generated by the

business for consumption or re-investment.

• In other words, two companies can have thesame ROE, yet one may be much more

efficient.



• Dupont Analysis is an approach to analyse the

firm by evaluating inter relationships among

many of the performance measures.

• In the Dupont Analysis we try to find out whatare the factors/drivers that are causing the

profits to move up. By identifying these

factors/drivers we can concentrate on them and

improve our efficiency.



comparative analysis

• Definition• It is an Item by item comparison of two or more

comparable alternatives, processes, products,qualifications, sets of data, systems, etc.

• In accounting, for example, changes in afinancial statement's items over severalaccounting periods may be presented together to detect the emerging trends in the firm's

operations and results.



• Comparative Performance - Comparison betweensimilar firms.

• These ratios are calculated by dividing a (group of)account balance(s), taken from the balance sheet and /or the income statement, by another, for example :

– Net income / equity = return on equity (ROE)

– Net income / total assets = return on assets (ROA)

– Stock price / earnings per share = P/E ratioComparing financial ratios is merely one way of

conducting financial analysis.



Inter firm and intra firm comparision

• Inter means different and intra means with

in the company or departments. It helps

in:-

• a) It identifies specific areas of in business

which may need managerial attention

• b) It provides information to management

on a uniform basis.



Trend Analysis

• An aspect of technical analysis that tries to

predict the future movement of a stock

based on past data. Trend analysis is

based on the idea that what has

happened in the past gives traders an

idea of what will happen in the future.

There are three main types of trends:

short-, intermediate- and long-term.



• Trend analysis is a form of comparativeanalysis that is often employed to identify

current and future movements of anindustry or group of firms.

• The process may involve comparing past

and current financial ratios as they relatedto various institutions in order to projecthow long the current trend will continue.

• This type of information is extremely

helpful to investors who wish to make themost from their investments.



Inflation Accounting• Inflation Accounting is a financial reporting

procedure which records the consequences of inflation on the financial statements that acompany prepares and publishes at the end of the financial year. The Inflation Accounting solution allows you to adjust your accounts for

inflation.

• Inflation Accounting is also referred to as thePrice Level Accounting.

• One of the most important and basic principles of the accounting process is known as 'TheMeasuring Unit Principle'. The standard of measurement is the currency which is the mostrelevant one in the economy.



• The changes in the purchasing power is notdeemed important to be considered. Theassumption is that the value of the currencyis fixed.

Inflation accounting is a term describing a range

of accounting systems designed to correctproblems arising from historical cost accountingin the presence of inflation.

The impact of inflation on business can be

bifurcated into two parts like

1. Impact on costs and revenue2. Impact on assets and liabilities.



Human Resource Accounting

• Human Resource Accounting is a method tomeasure the effectiveness of personnelmanagement activities and the use of people inan organization.

• There are two approaches to HRA. They are asfollows:

• 1. Cost approach:- Cost approach is also calledhuman resource cost accounting method or

model.• Under this there are two important model:

• a) Acquisition cost model

• b) Replacement cost model



• This method measures the organization’s investment inemployees using the five parameters:

• recruiting, acquisition; formal training and, familiarization;informal training, Informal familiarization; experience; anddevelopment.

• The costs were amortized over the expected working lives of individuals and unamortized costs (for example, when anindividual left the firm) were written off.

2. Value approach :- Under the value approach there are threeimportant approaches. They are:-

a) Present value of future earnings method.b) Discounted future wage model

c) Competitive bidding model

It is an economic valuation of employees based on the presentvalue of future earnings, adjusted for the probability of

employees’ death/separation/retirement. This method helps indetermining what an employee’s future contribution is worthtoday.



Social Accounting

Social accounting is a method by which abusiness seeks to place a value on the impacton society of its operations.

This might include the following impacts on theenvironment: waste; the effect on society of thepackaging it produces; and how much fuel ituses in its company cars.

It can also include the effect on the localcommunity who might have to live in the shadowof its premises, and how it engages with thecommunity, its customers and workforce.



• Social accounting (also known as social and

environmental accounting, corporate social

reporting, corporate social responsibilityreporting, non-financial reporting, or

sustainability accounting) is the process of

communicating the social and environmental

effects of organizations' economic actions toparticular interest groups within society and to

society at large.

• Many companies now prepare social accounting

reports and appendices to their annual reportand accounts as a matter of routine.

•



• Social accounting emphasises the notion

of corporate accountability.

• D. Crowther defines social accounting in

this sense as "an approach to reporting a

firm’s activities which stresses the need

for the identification of socially relevantbehavior, the determination of those to

whom the company is accountable for its

social performance and the developmentof appropriate measures and reporting

techniques.”



• Social accounting, a largely normative concept,seeks to broaden the scope of accounting in thesense that it should:

• concern itself with more than only economic events;• not be exclusively expressed in financial terms;

• be accountable to a broader group of stakeholders;

• broaden its purpose beyond reporting financialsuccess.

• The purpose of social accounting can beapproached from two different angles, namely for accountability purposes and management control

purposes.



• Accountability

• Social accounting for accountability purposes isdesigned to support and facilitate the pursuit of

society's objectives. Society is seen to profit fromimplementing a social and environmentalapproach to accounting in a number of ways,e.g.:

• Honoring stakeholders' rights of information;• Balancing corporate power with corporate

responsibility;

• Increasing transparency of corporate activity;

• Identifying social and environmental costs of economic success.



• Management control :- Social accounting for thepurpose of management control is designed tosupport and facilitate the achievement of an

organization's own objectives. • Organizations are seen to benefit from implementing

social accounting practices in a number of ways.

• Increased information for decision-making;• More accurate product or service costing;

• Enhanced image management and Public Relations;

• Identification of social responsibilities;

• Identification of market development opportunities;

• Maintaining legitimacy.



Computerised accounting

• The purpose of accounting is to provide information

used in decision making. Accounting may be viewedas a system (a process) that converts data intouseful information.

• Information processes include:

• Recording• Maintaining• Reporting

• This is where a computerized accounting helpssimplify, integrate, and streamline all the businessprocesses, cost-effectively and easily.



Salient Features of

Computerized accounting • 1. Fast, Powerful, Simple and Integrated

• 2. Complete Visibility

Computerized accountings giving the companysufficient time to plan, increase the customer base,

and enhance customer satisfaction.• 3. Enhanced User Experience

• 4. Accuracy, Speed 5. Scalability

• Computerized accounting adapts to the current and

future needs of the business, irrespective of its size or style.



• 6. Power

•Computerized accounting has the ability tohandle huge volumes of transactions

without compromising on speed or

efficiency.

• 7. For Improved Business Performance

• 8. Quick Decision Making

• 9. Complete Reliability

different accountings

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