Pooja Nahar

Difference among Perfect Competition, Monopoly and Monopolistic Competition

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Perfect CompetitionMonopolyMonopolistic Competition
There is large number of buyers and large number of sellers (i.e. firms in industry).Only singer seller is available, no difference between firm and industry.There is large number of buyers and sellers (i.e. firms in industry).
Firms can freely enter and exit the market.There are strong barriers to entry.Firms can freely enter and exit the market.
Firms are price takers.Monopoly is a price maker (full control over price).Some control over price.
Homogeneous (identical) products are available in perfect competition which are perfect substitutes. No close substitutes.Differentiated products which are close substitutes, but not perfect substitutes.
As the name suggest, perfect competition, Competition among firms is perfect.No competition.Imperfect competition.
In such type of market, price is equal to marginal cost.In monopoly, price is higher than marginal cost.In this market, price is higher than marginal cost.
There is Infinitely elastic demand curve is seen in perfect competition.There is downward sloping and highly inelastic demand curve in monopoly.There is downward sloping and more elastic demand curve in monopolistic competition.
Under perfect competition, MR and AR represented by the same curve.Under monopoly, MR starts at the same point as AR.Under monopolistic competition, MR starts at the same point as AR.
There is no supernormal profits in the long run.There is supernormal profits both in the short run and long run.There is no supernormal profits in the long run.
There is no consumer exploitation.consumers can be exploited. Consumers are influenced through competition i.e. price and non price.

The First Schedule to the Finance Act

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The First Schedule to the Finance Act contains four parts which specify the rates of tax

SchedulePartParticulars
First ScheduleIRates of tax for current Assessment Year
First ScheduleIIRates of TDS for the current Financial Year
First ScheduleIIIRates of Income Tax for Income Chargeable to tax under the head “Salaries” & advance tax
First ScheduleIVRules for determining/computing net agricultural income.

DEFINITION AND FEATURES OF PARTNERSHIP

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Partnership | Features of Partnership | Clauses In a Partnership Deed

a sole proprietor may not able to deal with with the financial and managerial demands of the present day business world. If there will be two or more person (individuals) may easily pool their financial and nonfinancial resources to carry on a business.

Section 4 of the Partnership Act, 1932 says, “Partnership is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all.”

Features of a partnership :-

  • Existence of an agreement– the relation of partnership arises from contract between parties and not from status as it happens in case of HUF (Hindu Undivided Family) and formal or written agreement is not necessary to create a partnership.
  • Sharing of profit – Indian Partnership Act, 1932 does not insist upon sharing of losses, the persons must agree to share the profits of the business. Because partner has the right to share the profits of the business.
  • Business – A partnership can exist only in business. Section 2 (b) of Indian Partnership Act, 1932 states that business includes every trade, occupation and profession.
  • Mutual agency – means business is to be carried on by all or any of them acting for all. If the person carrying on the business acts not only for himself but for others then relationship of principals and agents will exist.
  • Minor as a partner – A minor can be partner in partnership firm, but can be admitted to share profit only.

Note :- Minimum partners can be 2 and the maximum number of partners in partnership are 50. Rule 10 of Companies (incorporation) Rules 2014 specifies the maximum limit.

Clauses In a Partnership Deed

  • Name of the firm and the partners.
  • Amount of capital to be contributed by each partner.
  • Commencement and duration of business
  • Drawings limit and the timings of drawings.
  • Rate of interest on capital
  • Rate of interest on loan given to the firm by partners.
  • Rate of interest on drawings.
  • Profit or losses sharing ration.
  • Salary to partners.
  • Any variations in the mutual rights and duties of partners.
  • Method of valuation of goodwill.
  • Procedure of retiring partners and the method of payment of his dues.
  • Basis of the determination of the executors of a deceased partner and the method of payment;
  • Treatment of losses arising out of the insolvency of a partner;
  • Procedure for settlement of disputes among partners;
  • Preparation of accounts and their audit.

Difference Between Consignment and Sale

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ConsignmentSale
Ownership of the goods remains with the consignor till they are sold by the consignee.Ownership of the goods transfers with the transfer of goods from the seller to the buyer.
The consignee can return the unsold goods to the consignor.Goods sold are the property of the buyer and
can be returned only if the seller agrees.
Consignor bears the loss of goods.Buyer will bear the loss after the transfer of goods, if any.
Principal and agent relationship exists between the consignor and the consignee.Creditor and a debtor relationship exists between the seller and the buyer.
Expenses incurred by the consignee to receive the
goods are borne by the consignor unless there is any other agreement.		Expenses incurred by the buyer are borne
by the buyer itself after the transfer of goods.

Consignment Accounts

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Consignment Accounts:- Consign means to send. In accounting, consignment account deals with the situation where one person sends goods to another person on the basis that the goods will be sold on behalf of and at the risk of the former.

Important Points:-

  • The party which sends the goods is called consignor.
  • The party to whom goods are sent is called consignee.
  • The relationship between consignor and consignee is of principal and agent.
  • The ownership of the goods, i.e., the property in the goods, remains with the consignor or the principal the agent or the consignee does not become their owner even though goods are in his possession.
  • On sale, the buyer will become the owner.
  • The consignor does not send an invoice to the consignee but sends only a proforma invoice. Proforma invoice is only means to convey information to the consignee regarding particulars of the goods sent.
  • The consignee receives a commission for his work on the basis of gross sale.
  • For ordinary commission, the consignee is not responsible for any bad debt.
  • , In case of del-credere commission, the consignee is responsible for bad debts . Del-credere commission is calculated on total sales, not merely on credit sales until and unless agreed.
  • The consignee recovers all expenses incurred by him on the consignment from the consignor. However this can be changed by agreement between the two parties.
  • The consignee to give an advance to the consignor in the form of cash or a bill of
  • exchange. It is adjusted against the sale proceeds of the goods.
  • Periodically, the consignees a statement called Account Sales sends to the consignor. It contains sales made by the consignee, the expenses incurred on behalf of the consignor, the commission earned by the consignee and the balance due to the consignor.

Difference between Partnership Firm and an Limited Liability Partnership

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Sr. NoPartnership FirmLLP
1.Indian Partnership Act, 1932 is applicable.The Limited Liability Partnership Act, 2008 is applicable.
2.Registration is optional.Registration is compulsory with ROC.
3.It is not a Body Corporate.It is a Body Corporate.
4.It is created by an Agreement.It is created by Law.
5. Partnership is not a Separate Legal Entity.It is a Separate Legal Entity.
6.It doesn’t have perpetual succession.It has perpetual succession.
7.Minimum 2 and maximum 50 partners are required for formation of Partnership.Minimum 2 partners are required but no maximum limit.
8.Partners are severally and jointly liable for actions of other partners and the firm and their liability extends to personal assets mean to say that unlimited liability of partners.Partners/members’ liability is Limited to the extent of their contribution towards LLP except in case of intentional fraud or wrongful act of omission or commission by a partner.
9. Partners are the agents of each other and of the firm.Partners are agents of the firm only and not of other partners
10.Firm cannot own any assets. The partners own the assets of the firm.The LLP can own assets.

Share Capital & its types

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Finance is the lifeblood of a company, without it company cannot survive. Finance can be raised by issuing shares and debentures. In fact, shares and debentures are financial instruments which help in arranging funds for the company.

Share Capital– share includes stock in the share capital of a company.
The share capital of a company is divided into small units having a certain face value. Each such unit is termed as share.
When these shares (either in part or whole) are allotted to various persons, on the date of allotment, they become shareholders of the company.

Types of Share Capital:- Broadly, there are two types of share capital of a company limited by shares:

  1. Preference share capital :-

preference share capital as instruments which have preferential right to dividend payment (absolute/fixed or ad-valorem/ %) and preferential repayment during winding up of the company.

Preference shareholders enjoy preferential rights in the matter of :

(a) Payment of dividend &
(b) Repayment of capital

2. Equity share capital :-

means all share capital which is not preference share capital. It indicates ownership in a company.

(a) Equity shareholders have voting rights.

(b) Differential rights to dividend.


Differences between Tax Planning, Tax Avoidance and Tax Evasion

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Tax PlanningTax AvoidanceTax Evasion
it is method of reduce taxes by using maximum benefit of deductions, exemptions, rebates etc. for minimizing tax liability.It is method of reduce taxes by finding out loopholes in the law.It is method of reduce taxes by dishonest means.
It is fully within the framework of law.It complies with the legal language of the law but not the spirit of the lawIt is clearly violation of law and unethical in nature.
This concept is accepted by the Judiciary in
India.		This concept can be considered heinous to tax evasion. Government brings amendment to curb such practices and to plug the loopholesIt is wholly illegal & prohibited.
It is within the language and
spirit of law. So, penalty and prosecution can be.		penalties and prosecution can be against the person engaged in it.stringent penalties and prosecution can be against the person engaged in it.
It is futuristic in nature, i.e., it aims to minimize the tax liability of the upcoming years.It is also futuristic in nature.It aims to evade the
payment of tax after the
tax has arisen.

Tax Planning, Tax Evasion and Tax Avoidance OR Methods of reducing taxes-

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Tax Planning :- is an arrangement in such a way that assessee takes advantage of all tax exemptions, deductions, concessions, rebates, allowances and other reliefs or benefits permitted under the Act without violating the legal provisions so that the burden of taxation on the assessee is reduced to the minimum.

Tax Evasion :- it refers to the reduction of tax liability by illegal or fraudulent means.

In this case, taxpayer tries to reduce tax liability and pays less tax than he is legally obligated to pay by hiding income or information from the tax authorities.

An assessee guilty of tax evasion is punishable under the relevant laws with fines and penalties ranging from 100% to 300% of tax evaded.

Examples–

• Misrepresentation or suppression of facts.
• Fail to record investments in accounting records. Recording of any false entry in books of account.
• Don’t have record of any receipt in books of account.
• Failure to report any international transaction.

  • omission of material facts in assessments.
  • using fake documents to claim deductions/exemptions.

Tax Avoidance :- by using variety of methods or technically satisfying the requirement of law, to eliminate or reduce tax burden.

Examples–

  • Transfer money to their parents who are not earning up to Rs. 2.5 lakhs, if they are below 60 years of age, up to Rs. 3 lakhs in case the parents are above 60 years of age, and up to Rs. 5 lakhs in case the parents are above 80 years of age.
  • Taking loans from relatives and friends since gift tax does not apply on the same and the loan may be paid back with a nominal interest rate.