Personal Finance guide

For many people, the job titles of accountant and bookkeeper are interchangeable. After all, doesn’t a bookkeeper maintain the accounts of a business by tracking accounts receivable, accounts payable, rent expense, payroll, etc.? The answer is yes, a bookkeeper does perform all of these accounting functions. So why does an accountant get paid so much more than a bookkeeper? Aren’t they one in the same?

To answer this question, we can first think back to geometry. To say that a bookkeeper is equivalent to an accountant is like saying a square is equivalent to a quadrilateral. Both are shapes with four sides. But a square is a specific type of quadrilateral with all four sides equal in length and four right angles. A quadrilateral, on the other hand, is more encompassing. A rectangle, a square and a trapezoid all are quadrilaterals. All have four sides, but it is the length of those sides and the angles between them that differentiate these shapes. The same holds true for accounting. Bookkeeping is a very specific part of accounting which looks at the tracking of money being spent and earned. We all do bookkeeping by (hopefully) balancing our checkbooks. But accounting, like a quadrilateral, is much more encompassing. Accountants use a technique called matching, which goes way beyond standard bookkeeping. Beyond basic bookkeeping, accountants must make decisions regarding the “how, when and why” of documenting a businesses finances. Matching is a principle used to allocate debits and credits to certain accounting periods and reconcile across types of financial statements. Although there are strict laws governing accounting, there is a certain amount of flexibility that allows accountants to have some control over the outcomes of their financial statements.

As a more specific example, let’s compare straight-line and double-declining balance depreciation. To oversimplify, in straight-line depreciation the cost of the equipment is divided by the number of years of its “useful life” (less the salvage cost, or final “worth,” of the equipment once it has reached the end of its useful life). This gives a depreciation amount that is the same year one as it is year ten. It is a very neat and reliable method to use, as there is no variation in the fixed amount.

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Have you become tired of doing so much accounting for your company each year? Do you get bored of doing the same thing again and again? For a small firm the accounting work is handled by the entrepreneur since there is no scope of employing a CPA to handle the accounts. Hence with the basic information on accounts the entrepreneur has to manage the balancing of accounts and searching for the errors. Along with that he has to manage the business and look at the progress of the business and what are the weaknesses so that they can be developed into the strengths. All this is bound to make the entrepreneurs go crazy. This makes accounting outsourcing a great option.

For big firms the expenses are way too much to maintain an accounts department. The condition of the business is not that great and the businesses all over the country have been experiencing perishing sales. Along with this, maintaining an entire department to handle something which does not aid the process of sales directly becomes a big problem. Big firms have bigger expenses and not maintaining a budget on these expenses have made the firms realize that they would have to incur losses.

Accounting outsourcing can be defined as a business giving all its accounting work to another firm for a payment which is far less then getting the job done within the business. This is because of the concept of economies of scale. The firms that do the business of accounting outsourcing employ expert accountants who not only manage the accounts for one company but for an entire portfolio of companies. This makes them earn a profit as well as enables the company to save on the costs of accountants.

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The question of how to get out of credit card debt has become more relevant since the global economic crisis.

Whereas, in the past, a credit card debt may have been manageable, other factors may now mean they are a dire problem in the lives of some people, for example, when a job is lost, or hours are reduced, or a business venture is suffering.

Actually, when these extra burdens do exist, credit card usage can increase through simple necessity. At the precise time when the credit card should be used less, it may be the only way to bridge the gap between income and expenses. This makes the issue of how to get out of credit card debt even more thorny.

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The credit cards Ireland has to offer are numerous. Credit cards, not just in Ireland are an extremely popular way to pay for just about everything. Credit card usage in Ireland has grown tremendously since 2000, the number of active credit cards has more than doubled from 1 million in 1997 to 2.3 million by 2007. The Irish Credit Bureau has strengthened the industry even more by creating the biggest credit agency in the country. The Bureau included just about every major financial institution reporting to it, so it is able to offer supremely reliable information.

Starting in 2009 the government has placed and annual stamp duty of €30 to be paid by consumers to be able to enjoy the use of credit cards. It is an annual duty that does not have to be paid again as long as the credit card holder doesn’t cancel an account to go to another. In order to avoid paying it a second time the individual must obtain a letter form the old credit card company stating that they already paid the duty for the year. This letter needs to be given to the new credit card company so they do not charge the duty again. Some believe this is being done to keep Ireland credit card usage under control. Although the government contends that the measure has been taken to the modern banking infrastructure stronger for all of Ireland’s occupants.

Most companies offer classic, gold and platinum credit cards to people based on their credit score supplied by the Bureau. Those who make a decent salary or are corporate clients can obtain a card with ease. Many of these banks also offer reward programs to stimulate the usage of their cards such as air miles, travel rewards and cash back. The ability to do banking online has also boost credit card usage. It has allowed people to pay for their regular bills, shop, book accommodations and even buy movie tickets from the comfort of their home computer. Banks have taken measures such as chip and PIN technology in order to protect their clients online. Also they have made secured platform to stop credit card fraud.

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Money is an intrinsic part of our life. By money we mean any commodity generally accepted in payment for goods, services, & debts. The main use of money is makes the trading process simpler & more efficient, but actually money has various uses in the modern world & various functions, such as:

1. means of payment
2. medium of exchange
3. standart of value
4. unit of account
5. store of value
6. standart of deferred payment

Money, as the medium of exchange, is used in one-half of almost all exchange. Workers exchange labour services for money. Poeple buy & sell goods in exchange for money. We accept money not to consume it directly but bacause it can subsequently be used to buy things we do wish to consume. Money is the medium through which people exchange goods & services. To see that society benefits from a medium of exchange imagine a barter economy.

A barter economy has no medium of exchange. Goods are traded directly or swapped for other goods. In a barter economy, the seller & the buyer each must want something the other has to offer. Each person is simultaneously a seller & a buyer. In order to see a film, you must hand over in exchange a good or service that the cinema manager wants. There has to be a double coincidence of wants. You have to find a cinema where the manager wants what you have to offer in exchange.

Trading is very expensive in a barter economy. People must spend a lot of time & effort finding others with whom they can make mutually satisfactory swaps. Since time & effort are scarce resources, a barter economy is wastful.

Although the crutial feature of money is its acceptance as the means of payment & medium of exchange, other functions are also in great importance. Money can also serve as a standart of value. Society considers it convenient to use a monetary unit to determine relative costs of different goods & services. In this function money appears as the unit of account, is the unit in which prices & quoted & accounts are kept.

In Russia prices are quoted in roubles, in US – dollars, in majority European countries – euros. It is usually convinient to use the units in which the medium of exchange is measured as the unit of account as well.

But let’s turn to the history & see how everything began, what is the background of money & banks.

In the past most societies used different objects as money. Some of these were valuable because they were rare & beautiful, others – because they could be eaten or used. Early forms of money like these were used to buy goods. They were also used to pay for marriages, fines & debts. But although everyday objects were extremely practical kinds of cash in many ways, they had some disadvantages too. For example, it was difficult to measure their value accurately, devide some of them into a wide range of amounts, keep some of them for a long time, use them to make financial plans for the future. For the reasons such as these, some societies began to use another kind of money, that is precious metals.

People used gold, gold bullion, as money. Those were dangerous times, & people wanted a safe place to keep their gold. So they deposited it with goldsmiths, people who worked with gold for jewellery & so on & also had a guarded vault to keep it safe in. & when people wanted some of their gold to pay for things with, they went & fetched it from goldsmith.

Two developments turned these goldsmiths into bankers. The first was that people found it a lot easier to give the seller a letter than it was to fetch some gold & then physically hand it over to him. This letter transferred some of the gold & they had at the goldsmith’s to the seller. This letter we would nowadays call a cheque. &, of course, once these letters or cheques, became acceptable as a way of paying for goods, people felt that the gold they had deposited with the goldsmith, was just as gold as gold in their own pockets. & as letters or cheques were easier to carry around than gold & a lot less dangerous, people started to say that their money holdings were what they had with them plus their deposits. So a system of deposits was started. The second development was that goldsmiths realized they had a great deal of unused gold lying in their vaults doing nothing. This development was actually of greater importance than the first.

Now let’s turn to the first bank loan & see what happened. A firm asked a goldsmith for a loan. The goldsmith realized that some of the gold in his vault could be lent to the firm, & of course he asked the firm to pay it back later with a little interest.

Continue reading ‘MONEY AND BANKING’ »

Money is one of the man’s greatest inventions, an essential tool of civilization, because every society has a money economy based on coins and paper notes. In primitive society there was a barter system which is the direct exchange of goods and services for goods and services. As the extent of specialization increases, the barter system proves very inefficient. The great disadvantage of barter is the fact that it depends upon a “double coincidence of wants”. It means that the seller and the buyer each must want something the other has to offer. Each person is simultaneously a seller and a buyer. A hunter who wants to exchange his skins for corn must find, not merely a person who wants skins, but someone who wants skin and has surplus of corn for disposal. Trading is very expensive in a barter economy. Time and energy, which could be devoted to production, is spent to laborious system of exchange.

Quite early in his history man discovered a much more convenient arrangement. The use of some commodity as a medium of exchange makes exchange triangular and removes the major difficulty of the barter system. If the commodity is generally acceptable in exchange for goods and services, it is money. A producer now exchanges his goods for money and the money can be exchanged for whatever goods and services he requires.

There are 4 general functions of money:

- Money as a medium of exchange.

- Money as a standard of value.

- Money as a store of value.

- Money as a standard of deferred payment.

Money, the medium of exchange, is used in one-half of almost all exchange. Workers exchange labor services for money. People buy and sell goods in exchange for money.

Money can also serve as a standard of value. Society considers it convenient to use a monetary unit to determine relative costs of different goods and services.

1. Money is a store of value because it can be used to make purchases in future. But money can became worthless because its real purchasing power is eroded by inflation that is why houses, stamp collections, and interest-bearing bank accounts all serve as store of value and can be exchanged to money.

Finally money can be used as a standard of deferred payment.

We can define commodity money, token money and IOU money. They are 3 kind of money. Commodity money is ordinary goods with industrial uses (gold) and consumption uses (cigarettes), which also serve as medium of exchange. A token money are usual coins and banknotes. Society enforces the use of token money by making it legal tender, usually they must be accepted as a means of payment by law. Private production is illegal. In modern economies, token money is supplemented by I Owe You (IOU) money. IOU money is a medium of exchange based on the debt of a private firm or individual. A bank deposits cheques securities are IOU money.

Continue reading ‘Money and Central Banking’ »

The contemporary trends in Banking operations and services with the help of computers are quite cheering for customer. As we find information technology invading the banking sector, only banks, which used the right technology, could come out with success. Banks are required to ‘restructure’, re-invent and reengineer themselves go meet the necessary performance improvement and get the competitive edge due to the introduction of information technology (Internet Baking) being an imperative one

Application of Information Technology

Phone banking:

1. Bank on phone, provides easy access for customers to have large businesses through telephones. Data are exchanged over the phone regarding any queries, to issue instructions on balance transfer, statement of account, cheque- book, stop payments, new schemes, interest rates etc. at any convenient time and place. Tele banking has gone a long way in providing maximum customer satisfaction within the limited infrastructure.

Automatic Teller Machines: (ATM)

1. Now, the banks provide this facility in a more sophisticated way that a customer of one bank and branch can withdraw from any other banks, at any other branch, nation wide. In developed countries, this service is provided to their blue chip client globally. This is possible only through worldwide networking and communication system.

Credit cards:

These plastic cards enable customers to spend whenever he/she wants within the prescribed limits and pay later. Debit card is a prepaid card with stored value, whereas credit card is post paid with fixed limits. It is seen that spending is higher through debit cards than with credit cards currently CITY Bank and time bank have started with Debit cards and now other banks are also following these to launch their own cards.

Electronic Funds Transfer: (EFT)

Electronic funds transfer is a system of processing and communication of payment through electronic methods. EFT assumes greater significance in the banking system as the RBI also encourages the commercial banks to adopt this technique. Normally, payments are made through cash, cheques, drafts and credit cards. The latest in this process are the debit card system, charge, digital cash, and electronic purse and so on.

SPNS- (Shared payment network system):

SPNS installed by the IBA in the city of Mumbai, enables electronic banking service like cash transactions, extended hours of banking, utility payments, cheques, point of sale facilities by the SPNS can go to any ATM linked to SPNS.

Electronic Clearing Services [ECS]:

Electronic clearing of funds from one centre to another for handling bulk transactions like salary, interest, dividend, commission etc., has dispensed the cheques. A part of electronic clearing service is computerized clearing of cheques at metropolitan centers and linking with international communication system of SWIFT. These services have contributed in a great way towards improving the customer’s services globally. ECS was introduced in India in 1996. It has made it possible for customers to get the funds next day itself.

Point of sale [POS] terminal:

Payment card at a retail location for electronic transfer of fund is called POS. The client enters his personal identification number [PIN] and confirms the amount due. Customer’s account is automatically debited with the amount of purchases and it credits the retailers account POS installed at petrol stations and large retail houses are linked to banks network.

Continue reading ‘INTERNET BANKING SERVICES IN BANKS-BOON TO CUSTOMERS’ »

Mortgage refinancing is a great way to reduce monthly payments, save money, and to avoid a foreclosure. However, many people are intimidated by the thought of refinancing a mortgage. Here are some things all homeowners can do to increase their odds of getting approved and make the whole thing much easier.

While refinancing is a pretty easy thing to do, many people are surprised at the amount of paperwork involved. There will be as much, if not more, than when you first got a home loan. There are all types of income, asset, and debt verifications which need to be made to figure out what mortgage refinancing option would be available for you. While there is a lot of paperwork involved, the process is relatively easy once you get it all together.

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Buying a home is a very important decision which needs time to think over and a lot of calculations done before finalizing a home. There are so many things to consider before you can actually pay for a home that you have liked. First there is the huge task of combing through all the homes possible for you to see and then arranging for mortgage.

If you are a first time home buyer, here are a few first time home buyer mortgage tips:

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My Real Estate Agent asked me the other day about how no cost home loan works. So, I explained that this changing market place, many of us have seen mortgage lenders advertise the “no cost” loans. This sounds really good but what is a no cost loan? And what are the benefits of this type of loan, if there is any?

First let me explain that the term of no cost loan is used in the refinancing (refi) market therefore usually seen as the “NO COST REFINANCE LOAN” . It can be used in a purchase but would take a sharp loan officer to put it together. Anyway back to the refinance (refi) it is a way that you can roll all the cost of the loan into the loan without increasing your loan balance. Say you are paying off a $199,999.99 loan you would take out a new loan for $200,000.00 (FNMA, FHLMC, GNMA requirements to round off) and you would not lose any equity in your property that you have now.

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