The Hindu Business Line : The heady problem of heads

Head of expenditure is something that accountants often break their head about. Which explains why the determination of the head of expenditure can turn out to be a subjective exercise.

"Certain items of expenditure could be looked at from different perspectives and the appropriate head of expenditure would be determined in accordance with the approach and policy adopted in this regard," says the Institute of Chartered Accountants of India (www.icai.org) in Guidance Note on Audit of Fringe Benefits under the Income-tax Act, 1961.

An example that the publication provides is that of expenditure on providing helmets, uniforms or umbrellas to employees.

One may look at this is as amenity to the employees, while another views the same expenditure as `incurred primarily with the objective of reducing potential expenditure/loss arising from injury or illness.'

Accordingly, "the accounting head to be debited for recording such expenditure could be staff welfare or kit expenses," depending on the approach adopted.

Which of the two approaches is right? "Difficult to categorically say," concedes the Institute.

"As per generally accepted accounting principles and practices, whichever is the policy adopted, so long as it reflects the substance of transaction, the same should be accepted for the purposes of determining the appropriate head of expenditure for forming an opinion whether the same falls within the category of fringe benefits."

Recommended compulsory addition to the professionals' shelf.

Discount with caution

Pricing is one of the chapters in Start & Run an Event Planning Business, by Cindy Lemaire and Mardi Foster-Walker, from Jaico (www.jaicobooks.com).

Setting a fee for service is far more difficult than establishing the cost of a product, as there are so many variables to consider, note the authors. They discuss topics such as competitive pricing, hourly fee and daily rates, cost-plus pricing, flat fee, commission and so on.

About discount, the book cautions wannabe businessmen that they shouldn't confuse the market by frequently changing the way they charge. The authors suggest that you may, however, think of offering lower prices for fund-raiser events.

Why so? Because, "for those just starting out, fund-raiser events offer good exposure for the business as well as experience to offer to future clients."

Practical read.

Tailpiece

"Suddenly, in the middle of my call... "

"You lost the signal?"

"No, the mobile operator changed!"

http://BookPeek.blogspot.com

D. Murali