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    Chartered Accountancy

    Chartered accountancy, if learned properly can be a rewarding way to analyze.  Formerly accounts were manual and consisted of many books, the principal being the ledger and cash book.  A debit entry was put in the name of a person buying a product and a credit entry when payment was made.  Cash outflows were a credit entry in the cash book and inflows, debit.  The total credit and debit entries were put in a trial balance which had to have equal entries in credit and debit.  The book process is now handled by computers, usually using Tally software.  An audit or security check which used to be a lengthy manual process is now done automatically.  This automatic process can be abused and company operator warned that the tax department might insist on a manual audit which is very expensive and might bankrupt the bank or company.

    When I was an articled clerk studying chartered accountancy we had boring work like checking cash and other vouchers.  These are receipts of cash and cheque it was low paid, very boring work.  This work is now computerized.  The main work of a chartered accountant is to see that the account statements of the company or bank are in order.  The CA learns a lot of other work during his training. Specifically how to analyze balance sheets. Balance sheets are a statement of the position of a company at a point of time. It is a skilled and very interesting process. The trial balance is converted into a profit and loss account which is a statement of the company’s performance or profit or loss during a given period. Company balance sheets require a specific format. The firm’s assets consist of shares, fixed assets like ownership of buildings and property, stocks or raw material, intermediaries and finished goods debtors etc. An interesting way to analyze how a company will perform is to see urban and other property held by the company. There is tremendous shortage of urban property in India and the value of urban or city property keeps increasing. Companies that have large urban property will outperform the market no matter how the company performs in business. A particularly valuable company is ITC Ltd. The company has huge urban assets and when I bought 200 shares in 1979 the urban assets had not been revalued. I gave the shares to my sister in 1981 when she got married. I bought the shares for R 4000(total). She now has 46 000 shares each worth about R 300 now. They are valued at 15million, and rising. She does not have children and has promised to return some when I get married.

    Not all companies have urban assets. Apart from profits, change in stocks and loans a company takes has to be considered while taking a decision in purchasing shares.

    While doing an accounts paper you are sometimes presented with a two year trial balance and asked to prepare the profit and loss account and balance sheet of the second year. Since the second year results are based to an extent on the first year and the first year is not given it can be confusing. You can prepare fictitious first year results and based on those do the second year.

    Chartered accountancy is a complete business course with law, computers economics and management taught.

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