Classification of public debt:

The public debt may be classified as under
1.    Internal and External debt:
•    Amount borrowed from within the country and the lenders may be individuals, groups, banks, non-banking companies and others companies willing to invest at higher profits. External debt is owed to the foreign government or institutions.
2.    Short-term & Long-Term debt:
•    Short-term debt is paid within 12 months e.g. treasury bills payable after 3 months, ways and means advances from central bank. They are usually taken to cure the difference between current expenditure and current revenue. Also called floating debt.
•    Long-term loans are payable after a period of more than 1 year. Also called funded debt. Example includes long-term loan. Mortgage from bank.
3.    Productive and unproductive:
•    The productive debt is expected to create assets which will yield income to sufficient to pay the principal. In other words, they are expected top pay their way: they are self liquidating. For example if government takes loan and invest to encourage education, such a loan will be proved effective and productive. Another case may be that government takes loan and establish industry for producing value added goods; this is also a productive loan. On the other hand loans raised for war do not create any asset; they are deadweight and regarded as unproductive. Funds borrowed for reconstruction after war or panics also prove expensive for an economy.


Public debt:

Public debt refers to the borrowing of the government from within the country or from abroad, from private individuals or from association of individuals or from banking or non-banking financial institution. Government borrows money in order to finance the expenditures. The need for public debt arises when there is budget deficit i.e. when expenditure of the government gets bigger than government income. Government just acting as debtor discharge the amount and pays the interest rate agreed on loan. In the world developing countries are taking loans for buying technology and especially for industrialization. The amount borrowed is invested in viable projects so that it fulfills the goals of the government and justifies the finance cost


Uses of index numbers:

1.    Adjusting Wages and prices:
- An index number of cost of living can guide us in the adjustment of wages to the chaning    prices.   
2.    Exchange Stability:
- Index number of wholesale price can guide the currency authority in stabilizing the exchange rates.

3.    Comparing the purchasing power of two currencies:
  - index number can be used to compare the purchasing power of two currencies and to fix the purchasing power of parity.

4.    Equitable Discharge of debt:
 - Index numbers can be used as a basis for an equitable discharge of contracts. i.e. borrowing and lending. When prices rise the creditor is a looser for the same amount returned to him has less purchasing power. It should be more just to ensure that the creditor is gets back the same purchasing power. If that is so, then amount of principal should be increased in proportion to the increase in prices. Similarly, when the prices fall the debtor should be given relief to pay less otherwise the burden of the debt will be increased in proportion to the fall in prices.

5.    Measuring changes in prices:-
-    The method index numbers is used fir measuring the changes in the price level. This is essential for maintaining price stability. Price stability is conductive to the maintenance of economic activities desired level.


Index Numbers

In the market the prices of the numerous commodities change on daily basis. The prices of all commodities do not move together. It may be possible that the prices of some commodities may be rising and price of some other commodities may be falling. The rate of change in prices is also different i.e. some prices may be rising faster and some may be rising slower. In order to introduce the element of uniformity the idea of general price level is introduced. This is done by means of index numbers.

Index numbers are devices for measuring the differences in the magnitude of a group of related variables. An index number is a number which indicates the price level at any given date as compared with the level of prices at some standard date called the base.


Theory of money and Prices:

In the theory of money we concerned with the determination of the value of money which has inverse relation with the general price level.. There are two main questions concerning the value of money, viz.,
1. how changes in the value of money(prices) is measured and
1. how the value of money is determined i.e. the factors governing price fluctuation.

Index numbers are used to determine the changes in the value of money


Evils of Money:

Money is facilitating us in many ways but it is not an unmixed blessing. There are many drawbacks associated with money. Money has proved dangerous in several ways.

Economic Instability:- Money is blamed for causing inflation if it is gone out of control. Hence money in the economy can affect in adverse ways. It also upsets debtor- creditor relationship when money is quikly loosing its value.

Wealth Inequalities in the economy:- Money has proved to be a very convenient tool for amassing wealth and of exploitation of the poor by the rich. It has created a yawning gap between ‘haves’ and ‘not haves’ and this only because of existence of money.

Moral depravity:- Money has weekend the moral fiber of man. The major evils in the society are only because of money. People killing others for only money, judges giving selective judgments for money, cause of theft and murder, cause of deception and betrayal. In pursuit of accumulating money we sell our belief and laws killinga the rights of others.


Money (Paper Currency & coins):

Everyone needs money in this world. Standard of living is collateral to the quantity of money you have in your hand. We need this printed paper not to have our pockets full of paper , but what we do is converting our needs ,desires, dreams and wishes to reality. You all know the importance and power of this piece of paper.

In this article I am going to tell you basic concept and definitions of money. Now we will look at the basis definitions which will clear the concept regarding money. Early scientists gave many definitions, we look at them one by one;

Robertson defined money,” Anything which is accepted in payments for goods and services & in discharge of other kind of obligations”.

In the words of Crowther,” The only essential required is general acceptability, money need not itself be valuable. It must be relativity scarce, but provided precautions are taken to keep it relatively scarce”.

“money is what money does” Walzker.

The definitions provided by Robertson and Crowther are best defining definitions and clear the concept of money that we use in our daily life


Various Debates definition of money

In the last few years there has been a issue that what is money and what is not money. There are four main schools of thought on the definition of money and money supply.

1. Conventional Approach:- The economists having this view define money only on the basis of  its function as a medium of exchange. They include in the term ‘money’ currency and demand deposites in the banks. As they think that medium of exchange is only primary function, they include only currency and demand deposits because they are perfectly liquid and are generally accepted as a medium of exchage. Hence,
  Money Stock= Currency + Demand deposits. And this is called ‘M’

Under this approach all other assets like time deposits, post office savings, bank savings etc are excluded from the definition of money.

2. Chicago Approach::- Professor Milton Freidman is leader of this school of thought. This school says that money is not only a medium of exchange but it is store of value as well. They extends money and includes other assets like time deposits and saving deposits in the banks.Hence,
Money stock= M + time deposits+ saving deposits. And this is M2

3. Gurley and Shaw Approach:- His school of thought is led by Gurley and Shaw. They emphasize the implication of velocity of circulation of money and the existence of substantial volume of liquid assets closely substitutable for money like short-term government securities, liabilities of non-banking financial institutions, time deposits in banks, post office and saving deposits etc. thus definition of money is to be broadened and includes all other assets mentioned above. 

4. Credit Approach:- This group wants to replace concept of money by general liquidity situation of the economy. They say that credit can be substituted for money without any limit. They reject all three approaches mentioned above and substitute the general liquidity position of the economy


What is important to check before going on a drive?

Drive is always very important and enjoyable but some times the drive become a bad memory and cruel experience because of only our ignorance and fault.
We think that the drive is all about only to drive the car on the road but the driving is more then that. There are some important things to check. Before seating in the car go to your car’s trunk. Check out these thinge

  • Spare Wheel with Air Pressure.
  •  Hydraulic Jack.
  • Wheel Wrench.

After checking these stuff now come to your car’s front bonnet open it and check out some important things. Most important is to check the level of engine coolant in the radiator and in its spear tank.  This is important because the car engine cannot work without coolant and will burn out if there is no sufficient Coolant in the radiator.
After that now check out the engine oil by dragging out the oil gauge form the engine and check the level is on the right point of the gauge or not if it is ok then put it back if not then put some oil and check again .After completing the oil check now check the wind shower tank if the level of water in it is low then fill it up with water to the right level. The battery of your car also want some attention, check the level of acid in your car’s battery by opening the caps one by one, if the level is low in some of the cell then fill them up by battery acid, if the battery acid is not available don’t worry, use the fresh water. You can also check the level of break fluid.
Do you think that the car is now ready for ride, No . Now sit in your car put the key in the ignition switch turn the it on ,There are some caution lights in your car’s dashboard . The light of  Power Generator, Engine Oil, Hand Break, Engine check , and some other lights but important are mentioned above. Now Turn the Key to the Ignition point (start). The Engine will start now check these lights all the lights must turn off if the functions are proper, if any of these lights not turned of then we have to check the problem. Let suppose the break light is on check out the hand break if it is tight then release the break the light will turned of, if not then there is a problem with your car’s breaks. The break fluid is low, if the fluid is on the right level then the pads of the breaks are burned out, go to your service shop by driving slowly and get the treatment for the breaks.
While driving there are some other things on which u have to keep an eye

  • Temperature Gauge
  • Fuel Gauge
  • All the Caution Lights


Creating a Webpage of your website


Benefits of statement of cashflows:

The Statement:
·         Provides a tool to evaluate liquidity, solvency and financial stability of an entity.
·         Presents detailed summary of cash inflows and outflows, the data which is not directly provided by the income statement or income statement.
·         Serves as an indicator of amount, timing and extent.
·         Facilitates the comparability as the reporting is standardized
·         Emphasizes the qualitative aspect of the profit i.e what portion of profit represents cash flows.
·         Eliminates management bi as in estimating accruals, market values, and seletion from among accounting policies.
·         Measures the ability to pay cash dividend to owners, salaries to employees and payments to suppliers.
·         Recognizes profit when it is realized and not when it is accrued.
·         Evaluate the ability to of the entity to generate its cash requirements from normal trading operations.
·         Reports the data required for computation of internal rate of return.
·         Enables to decide the users of financial statement to asses whether the expansion is financed by external funds or through cash generated from operations.  


Importance of Cash flows in evaluation of Working Capital Management:

Cash flow analysis is a helpful tool in evaluating the effectiveness with which the management has controlled the working capital. If the Chas flows from operating activities are greater than or substantially equal to the profit for the period, it may be an indication that the working capital has been managed effectively and efficiently. If the cash flows are not equal it means that working capital management needs improvement.
          For example, net profit for the period is $10 million and cash flows from operating activities are $2 million. This is an indication of poor management of working capital. The reason of shortfall may be the tying up in inventories and collection efforts of debts have been deteriorated. If same trend continues unchecked the future profits will be adversely decline. Also if the cash flows from operating activities are not adequate and the shareholders are not contributing with more funds, the entity will have to depend on the borrowings to meet its current obligations. In such a situation it is unlikely that the entity can continue to be solvent in the long run.


Statement of Cash Flows:(Introduction)

Cash flow statement is an integral part of financial statements of an entity. It represents the total changes in cash during the period. It is prepared and mandatory to show in the annual report of the any company. International Accounting Standard # 7 deals with the Statement of Cash flows and provides all necessary provisions for the preparation of cash flow statement.
During the business process an entity receives number of cash payments and made payments for the services and material to the suppliers and creditors. These are recorded in the books of accounts and in the year end related data is presented in the statement of cash flows. Cash flows arise from different activities like operations, financing and investing. The cash flows generated from activities of entity are divided in three main categories of Operations, investments and Financing. Cash flows are reported accordingly in the cash flow statement.
The following table will make easier to understand the cash flows according to activity
Transaction                                                               Activity Type
Payment to employees                                        operating activity
Purchase of Raw materials                                  operating activity
Cash sales                                                              operating 
Purchase of plant and machine                           Investing activity
Acquisition of Vehicles                                       Investing activity
Repayment of long term loan                              Financing Activity
Payments of dividends                                        Financing Activity
Causes for changes in cash flows:
Cash inflows:
                  Decrease in assets
                  Increase in liabilities
                  Increase in Shareholder`s Equity
Cash outflows:
                  Increase in assets
                  Decrease in liabilities
                  Decrease in shareholder`s equity