What are MIS reports and why do you prepare it?

MIS or Management Information System is a computer-based system used by most organizations worldwide for transforming data into useful information for better decisionmaking. It helps management make better plans and carefully organize business operations. Management information system is used for generating reports including inventory status reports, financial statements, performance reports etc. These reports are essential for analyzing different aspects of business. These reports also help to answer 'what-if' questions like what would be the effect on cash flows of a company if the credit term were changed for its customers etc. MIS reports also support decision-making and it helps to integrate the decision maker and the quantitative model being used. These automated systems allow managers to make decisions for smooth & successful operation of businesses. The system includes computer resources, people, and procedures used in the modern business enterprise. R

What is the difference between a contingent liability and an estimated liability?

A contingent liability is a potential liability (and a potential loss). It is dependent upon a future event occurring or not occurring. For instance, if someone files a lawsuit against ABC, ABC will have a contingent liability. The lawsuit liability is dependent upon Jay Corp losing the lawsuit. (Some lawsuits are nuisance suits and will not cause a loss and liability.) When a contingent liability and loss are probable and the amount can be estimated, an estimated amount will be recorded as a liability.

Some liabilities are not contingent liabilities but are estimated liabilities. For example, the electricity consumed, property taxes, worker compensation insurance premiums, repairs, etc. are absolutely owed because the services or goods were delivered. There is nothing contingent about these. However, the precise amounts may not be known at the time that the financial statements are prepared. Therefore, these liabilities had to be recorded by using estimated amounts. I suspect that many of the accrual-type adjusting entries involve estimated liabilities.

What is a contingent liability?

A contingent liability is a potential liability...it depends on a future event occurring or not occurring.

Contingent liabilities are liabilities that may be incurred by an entity depending on the outcome of an uncertain future event such as a court case.

A potential obligation that may be incurred depending on the outcome of a future event. A contingent liability is one where the outcome of an existing situation is uncertain, and this uncertainty will be resolved by a future event. A contingent liability is recorded in the books of accounts only if the contingency is probable and the amount of the liability can be estimated.

When to Recognize a Contingent Liability

There are three scenarios for contingent liabilities, all involving different accounting treatments. They are:

• High probability. Record a contingent liability when it is probable that the loss will occur, and you can reasonably estimate the amount of the loss. If you can only estimate a range of possible amounts, then record that amount in the range that appears to be a better estimate than any other amount; if no amount is better, then record the lowest amount in the range. “Probable” means that the future event is likely to occur. You should also describe the liability in the footnotes that accompany the financial statements.
• Medium probability. Disclose the existence of the contingent liability in the notes accompanying the financial statements if the liability is reasonably possible but not probable, or if the liability is probable, but you cannot estimate the amount. “Reasonably possible” means that the chance of the event occurring is more than remote but less than likely.
• Low probability. Do not record or disclose the contingent liability if the probability of its occurrence is remote.

GAAP requires that you report contingent liabilities as unspecified expenses on the income statement. You must disclose all contingencies that could significantly alter the company's estimated earnings. Explain any obscure or potentially misleading items in the footnotes. You should also use the footnotes to discuss any contingent liabilities incurred between the initial creation of the financial statements and publication of the final version.

Example - For example, a company may be facing a lawsuit from a rival firm for patent infringement. If the company's legal department thinks that the rival firm has a strong case, and the company estimates that the damages payable if the rival firm wins the case are $2 million, it would book a contingent liability of this amount on its balance sheet. If, on the other hand, the company's legal department is of the opinion that the lawsuit is frivolous and very unlikely to be won by the rival company, no contingent liability would be necessary.

Journal Entry

Example of a Contingent Liability

For example, ABC Company files a lawsuit against Unlucky Company for $500,000. Unlucky’s attorney feels that the suit is without merit, so Unlucky merely discloses the existence of the lawsuit in the notes accompanying its financial statements. Several months later, Unlucky’s attorney recommends that the company should settle out of court for $75,000; at this point, the liability is both probable and can be estimated, so Unlucky records a $75,000 liability. A possible entry for this transaction might be:

	Debit	Credit
Legal expense	75,000
Accrued liabilities		75,000

When Unlucky later pays ABC company in the out-of-court settlement, the final entry is:

	Debit	Credit
Accrued liabilities	75,000
Cash		75,000

Ratios

What is Cash Flow Statement?

The purpose of the cash flow statement or statement of cash flows is to provide information about a company's gross receipts and gross payments for a specified period of time.

The gross receipts and gross payments will be reported in the cash flow statement according to one of the following classifications: operating activities, investing activities, and financing activities. 

The net change from these three classifications should equal the change in a company's cash and cash equivalents during the reporting period. 

What is a suspense account?

A suspense account is an account in the general ledger in which amounts are temporarily recorded. The suspense account is used because the proper account could not be determined at the time that the transaction was recorded.

When the proper account is determined, the amount will be moved from the suspense account to the proper account.

Tally 9.0 Shortcuts

Alt+2	Duplicate Voucher
Alt+A	Add voucher / To Alter the column in columnar report
Alt+C	Create a master at a voucher screen (if it has not been already assigned a different function, as in reports like Balance Sheet, wh
Alt+D	Delete a voucher To delete Accounting or Inventory master which is not used by any voucher or elsewhere in the alteration mode. To
Alt+E	Export the report in ASCII, HTML OR XML format
Alt+I	Insert a voucher / To toggle between Item and Accounting invoice
Alt+N	To view the report in automatic columns (Multiple Columns at all reports, Trial Balance, Cash/bank books, Group Summary & Journal Reg
Alt+P	Print the report
Alt+R	Remove a line in a report
Alt+S	Bring back a line you removed using Alt+R
Alt+U	Retrieve the last line which is deleted using Alt+R
Alt+W	To view the Tally Web browser.
Alt+X	Cancel a voucher in Day Book/List of Vouchers
Alt+Y	Register Tally
Ctrl+A	Accept a form – wherever you use this key combination, that screen or report gets accepted as it is.
Ctrl+Alt+B	Check the Company Statutory details
Ctrl+G	Select Group
Alt+I	Import statutory masters
Ctrl+Q	Abandon a form – wherever you use this key combination, it quits that screen without making any changes to it.
Ctrl+Alt+R	Rewrite data for a Company
Alt+H	Help Shortcut
Alt+F2	Maintain Date for Multiple Years by changing period on Gateway of Tally / Change of Period for Setting Period
Ctrl+M	Switches to Main Area of Tally Screen
Ctrl+N	Switches to Calculator / ODBC Section of Tally Screen
Alt+R	Recalls the last narration saved for the first ledger in the voucher, irrespective of the voucher type
Ctrl+R	Repeat narration in the same voucher type irrespective of Ledger Account
Ctrl+T	Mark any voucher as Post Dated Voucher
Alt+D	Delete any voucher in Day Book/ Deleting
Alt+O	To upload the report to the webe
Alt+M	Email the report
Alt+F1	Close a Company (At All Menu Screens). View detailed Report (Report Screens). Explore a line into its details (At Almost all Screens)
Alt+F3	Select the company info menu (At Gateway of Tally Screen). Create/ alter / shut a company (At Gateway of Tally Screen)
Alt+F5	View sales and purchase register summary on a quarterly basis
Alt+F12	View the filters screen where the range of information can be specified
Alt+Z	Zoom
Ctrl+Alt+C	Copy the text from Tally (At creation and alternation screens)
Ctrl+Alt+V	To paste the text from Tally (At creation and alternation screens)
Shift+Enter	To view the next level of details and / or condense the next level of details
F2	Change the date
F4	Contra Voucher (All voucher creation and alteration screens). View list of Groups (Reports groups summary, group voucher screen, cash/ bank summary)
F5	Select Payment Voucher. Switch between Grouped and Ledger-wise Display
F6	Receipt Voucher
F7	Journal Voucher
F8	Sales Voucher
F9	Purchase Voucher
Ctrl+F9	Select Debit Note Voucher
F10	Navigate between Accounting Reports
F11	Modify Company features specific to current company only
F12	Master Configurations, which will affect all companies in same data directory.
Ctrl+L	Mark a voucher as Optional or Regular