MUSINGS

This is provided for under Section 35 of the Act, which states that “In the absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity, without in such endorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonour by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonor, provided due notice of dishonour has been given to, or received by, such endorser as hereinafter provided. Every endorser after dishonour is liable as upon an instrument payable on demand." Before moving on further, it is pertinent to study Section 15 of the Act in relevance to the term ‘endorsement’ and also to define an ‘endorser’. As per Section 15 of the Act, which defines endorsement, “When the marker or holder of an negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, one ...

So what essentially is a negotiable instrument? A negotiable instrument is any transferable document which satisfies certain conditions. These instruments pass freely from hand to hand and thus form an integral form part this modern businesses instruments. It also has to be noted that in our country, the law relating to negotiable instruments, is governed by the Negotiable Instruments Act 1881. This Negotiable Instruments Act, does not in specific define what a negotiable instrument is, it merely states that a negotiable instrument means “a promissory note, bill of exchange or cheque payable either to the bearer."  [ 1 ]   Section 13 of the Act  [ 2 ]  , does not indicate the characteristics of a negotiable instrument but only states that three instruments-cheque, bill of exchange and a promissory note, are negotiable instruments.  [ 3 ]   Thus these three instruments are therefore negotiable instruments as per the statute. But it has to be noted ...

The Profit/volume ratio, which is also called the ‘contribution ratio’ or ‘marginal ratio’, expresses the relation of contribution to sales and can be expressed as under: P/V Ratio = Contribution/Sales Since Contribution = Sales – Variable Cost = Fixed Cost + Profit, P/V ratio can also be expressed as: P/V Ratio = Sales – Variable cost/Sales i.e. S – V/S or, P/V Ratio = Fixed Cost + Profit/Sales i.e. F + P/S or, P/V Ratio = Change in profit or Contribution/Change in Sales This ratio can also be shown in the form of percentage by multiplying by 100. Thus, if selling price of a product is Rs. 20 and variable cost is Rs. 15 per unit, then P/V Ratio = 20 – 15/20 × 100 = 5/20 × 100 = 25% The P/V ratio, which establishes the relationship between contribution and sales, is of vital importance for studying the profitability of operations of a business. It reveals the effect on profit of changes in the volume. In the above example, for every Rs. 100 sales, Contributio...

Different types of Costs in Cost Accounting One can understand the  cost accounting  properly only after knowing various types of cost. Hence, the understanding of types of cost enables proper application of cost accounting principles. Therefore, certain types of cost are briefly explained below. 1. Historical Cost It is the post mortem of cost, which is already incurred. This type of cost reports the past events. If the time lag between the cost incurred time and reporting time is very short, quality decision may be taken. If not so, these costs are irrelevant for decision-making. 2. Future Cost These types of costs are expected and incurred in the days to come. 3. Replacement Cost Replacement cost is the cost required to replaced any existing asset at present. 4. Standard Cost Standard cost is a scientifically predetermined cost, which is arrived at assuming a specific level of efficiency in material utilization, labor and indirect expenses. 5. Estimate...