Monthly Archives: May 2013

How to Avoid Student Loan Consolidation Scams?

Considering the present day cost of education, students keen to pursue higher studies really don’t have much choice but to go for loans. Usually, they need to start paying back the borrowed money six months after having completed their education. Some students avail of loans from different sources and therefore are required to make multiple payments every month. Such students may consolidate their loans to make just one payment every month. Consolidation helps saving money and eliminates the likelihood of not paying any one loan installment. Additionally, consolidation is their only option to avoid default, should they fail to make timely payment of loans.
Here’s how to go ahead with consolidation of your students loans:
1. Talk to your present loan provider and inquire if they have any consolidation program on offer. Also ask for the rate of interest chargeable on the consolidated loans.
2. Some lenders tend to pressurize students to consolidate their loans hurriedly. It is recommended to avoid such lenders. Many of the students’ loans don’t have any specified timeframe for loan consolidation.
3.  Weigh up the rate of interest of your present loan provider against the consolidation plan for direct loans from the department of education. Do not approach companies not linked to department of education, banks or financial institutions, yet offering to consolidate student’s loans.
4. Find out if the lender is offering a grace period at the start of consolidation. If no grace period is offered, you should look for another lender.
5. All the paperwork, including filling up of forms connected with consolidation program should be completed on your own, without seeking any help from a third party.
6. When submitting online applications, make sure to use a secured website. The address must include https and not just http to ensure that the application is secure.
7. It is worth making a personal call on the local workplace of your chosen lender to check the level of customer service offered by him. In case you are not satisfied with the level of service provided, look for an alternate lender.

How to Deduct Home Mortgage Loan Interest?

Amount paid as interest towards home mortgage is deductible from taxpayers’ income and thus can substantially reduce their tax burden. Interest paid towards mortgaging the second house is also eligible for deductions.
Here’s how you can calculate the amount:
At the outset, gather all your financial statements and get pen, paper and a financial calculator.
1. Total up all the expenses you can list as deductions but ensure that the final figure is more than standard deduction as applicable in your case. Most of the listed deductions comprise of state taxes, interest on home equity loans, and interest towards mortgage, property taxes plus permissible charitable contributions. The rates for standard deductions are as follows:
For singles——————- $4300.00
For Household heads—— $6,350.00
For couples filing together– $ 7,200.00
For couples filing separately–$3,600.00
In case the sum total of your listed deductions falls below standard deduction as applicable in your case, it is recommended not to make deductions towards interest on home mortgage.
2. Collect a copy of form Schedule A. Fill up all the listed deductions. Section III of the form is for entering interest deductions.
3. In Schedule A, mention the name of Mortgage Company or the bank where you deposited mortgage interest. Also, fill in the total amount that you paid for the year for which you are paying tax.
4. In Schedule A, also include the names of other persons, if any, whom interest was paid towards mortgage loan. Also, include the amount paid over the year for which you are paying tax. It is not obligatory for individuals providing mortgage loans to provide you Form 1098.
5. In the same schedule, add the names of the institutions that provided you loan and the sum paid during year of paying tax in points to avail loan, provided that loan was availed for buying your main house. In case of loans availed for refinancing or for buying a second house, the points need to be subtracted over the span of loan and not in one go. In this case, the form 1098, containing the points that were paid by you, will be given by the lending institution.
6. Keep filling the balance of Schedule A.

How ‘Mortgage Interest Deductions’ Affect Tax Refunds?

There is little doubt that taxpayers are always on the lookout for ways that would reduce their burden of tax amount and thus get back the maximum tax refund. A majority of tax payers can claim tax deduction by way of interest paid towards mortgages. The government permits mortgage tax reduction as one of standard deductions and taxpayers must take that into account while filing their annual tax return.
Assessing the amount of refund
You are eligible for refund of income tax in case you happen to have paid more money than you were obliged to pay as tax. For instance, in case your employer deducted $8000 towards federal taxes but in fact you were to pay only $5000, you can claim and get a refund amounting to $3000. Getting a refund doesn’t imply that the government would pay you the amount, it simply indicates that you paid in excess of what you were required to pay and are getting back that excess amount now.
How deduction towards mortgage interest does affect?
While claiming deduction towards mortgage interest, you need to list your deductions that entail you giving up claims for standard deductions. Here are the rates for standard deductions for the year 2010:
For singles——————- $5,700.00
For Household heads—— $8,400.00
For couples filing together–$11,400.00
When deductions towards mortgage interest along with other deductions recorded in your claim are more than the standard tax deduction, your listing allow you save additional money on taxes payable. On enhancing your claims for deduction towards income tax, your assessable income for that year is reduced and that decreases your tax liability, leading to bigger tax refund or reduced tax bill at least.
The maximum deduction that you may claim towards interest paid on mortgage is only on the interest you paid for the first one million dollars, the figure gets reduced to half a million dollars if you are married and filing individually. How much tax you finally save is dependent on which tax bracket you fall into. The higher the tax bracket you fall into, the more is tax saving! Suppose, you were falling in tax bracket of twenty percent and subtracted $6,000 towards interest on mortgage, your refund goes up by $1,200 but if you happened to be in tax bracket of thirty percent, the figure for refund goes up to $1,800.
In case the only listed deduction in your claim is towards the interest given on mortgage, your tax refund stands to get affected only by that sum by which the interest deduction goes beyond the standard deduction. For instance, when you are entitled for standard deduction of $8,400 but you claim for $10,000 towards interest on mortgage, and no other deduction is listed, your taxable income will reduce by $1,600. Nonetheless, on listing your deductions, you become eligible for claiming all listed deduction as applicable in your case, like local and state taxes and permissible donations, allowing you to get enhanced refund.

Accounting Information Systems Explained

Accounting information systems are designed for collecting, storing, recording and processing of data to provide valuable information to decision makers of businesses. Almost all accounting information systems comprise of a number of interconnected systems, which interact to realize goals. An accounting information system may incorporate use of computers or it could just consist of pen and paper or a combination of both. Technology is used only for creating, improving and maintaining a system. Accounting information systems affect and convey the culture and strategy of the company.

An accounting information system adds value to company by facilitating it to extract data for its planned growth. Though the term “value addition” is frequently used for referring to the means and ways adopted for enhancing the value of a product, in fact it could mean making the product faster, more dependable, offering better service or product or making it as per the precise specifications of the buyer or improving its features. Value addition is achieved by carrying out a chain of activities called value chain, comprising of support activities and primary activities. The former are also called “staff activities” while the latter are called as “line” activities.

Information technology plays a very significant role in enhancing the effectiveness of the activities mentioned above. An organization can take steps to connect its value chain to those of its buyers, distributors and vendors.

Accounting information systems are designed for:

  • Collection and storage of data pertaining to agents, resources and events.
  • Transforming that data to information that the management can utilize for making decisions concerning agents, resources and events.
  • Providing sufficient controls that ensure company’s resources and data are true, reliable and accessible whenever required.

Accounting information systems form the very basis of capturing, processing and reporting of accounting information. These days it is achieved by employing computers and appropriate software. Understanding business, business practices, accounting and technology to some extent, are essentially needed for designing an effective system.

The design of subsystems needs to be such that it helps the organization in achieving maximum goals. For instance, the manufacturing department of a unit may be required to do without its goal of remaining within the prescribed budget to fulfill the company’s objective of making deliveries in time.

It is not difficult to understand that goal conflicts are bound to arise if the on-goings of one subsystem are not aligned with the goals of the organization. Unless all the subsystems are synchronized, it will be almost impossible to achieve goals.  System integration refers to minimizing of duplication of activities like recording, storing and processing. Data is not the same as information. Data means facts that have been collected and stored for processing by an information system. Businesses gather data concerning events that take place and affect the resources of business and participants of those events. Information, on the other hand is data processed and prepared for interpretation of the users. It is realized that accurate and more information helps making better decisions. At the same time, if the available information is more than what you may be able to comprehend, you’ll endure overload of information. On reaching that level of load, you are unable to take first class decisions whereas the expense for generating that information goes up.

What is an accounting system?

An accounting information system (AIS) can be defined as an arrangement of records that businesses employ for maintaining their system of accounting. The idea of having AIS is to collect data that the decision makers like investors, mangers and creditors can access for getting the desired information. The records can pertain to sales, purchase and finance.

Though all these records were maintained on paper for generations, with the coming of computers and a variety of software, now most businesses have started using computers for the purpose. When maintaining financial records on electronic medium, the steps required for accounting system are system based. For instance, using certain systems you can make direct journal entries in different ledgers, but many other systems may not offer this facility.

 “Don’t rest until debits equal credits”

Accounting has been in practice since ages. Earliest records of accounting, believed to be over seven thousand years, were discovered in Middle East.  Since generations, rulers, individuals and businesses have realized the significance of keeping an account of income and expenses. The reasons could be to know how profitable a business activity had been or to decide the rate of taxation.

The accounting systems employed during pre-historic times were very crude and devised just to keep an account of animals and crops. As businesses developed, so did the systems of accounting.

The modern system of bookkeeping follows the principle of double entry. It is of interest to know that the modern system was illustrated by an Italian, named Friar Luca, who is often referred to as the “Father of Accounting.” In fact, Friar Luca was not responsible for creating the system. He just explained the technique employed by Italian merchants while Italy was passing through Renaissance. Most of the accounting practices that we follow today were included in his system of accounting. The quote as noted above was also coined by Friar Luca.

The earliest accounting systems

It was in 1880 that machines and cash books were introduced to facilitate accounting work. The credit for inventing and selling one of the initial counting machines, m.punch cards, goes to Allegedly Hollerith, also considered as another father of accounting. Eventually, he founded a company, now known as IBM.

Modern accounting systems

Technological developments, particularly in the field of computers, leading to present day PCs, have made it feasible for ordinary folks to have access to specific systems. Yes, these days you can access accounting system which would perform all accounting procedures for you. PcPlus was the first accounting system based on DOS. These days you get highly advanced systems like e-conomic, which is Internet based to SaaS that makes use of cloud computing.

Financial Derivatives & Risk

Derivatives, also known as options, are financial instruments. Their prices depend on or are arrived at by one or added underlying asset. The most widespread derivatives are ‘call’ and ‘put’ options. A call is an option for buying as asset and a put is the option of selling an asset.
Financial derivatives can be classified into these two:
OTC–Over the counter
These are the contracts traded straightaway by two parties, with no involvement of any exchange or another mediator. Agreements for such derivatives are straightaway made between the concerned parties, as in case of a company producing construction materials and lumber. Most often these are unregulated.
ETD—Exchange traded
These contracts are traded through dedicated derivatives exchanges or exchanges. financial derivatives including futures and options fall in this category. . of the presence of numerous traders on centralized systems prevents the operators from making any manipulations. Other Kinds of Derivatives
Derivatives are of many types. Regular derivative contracts like contracts and futures are conducted via a controlled futures exchange.
Futures entail a financial agreement requiring the buyer to buy an asset like a physical product or a monetary instrument, at a specified price on a predefined future date. When you agree to purchase a futures agreement, basically, you are promising to purchase something that the seller is yet to produce and fix its cost. Whether you deal in wheat, orange juice, pork, gold or silver, when you invest in merchandise, you are trading in this market. In fact you are taking bets on the potential of the product.
A contract allowing the owner, subject to the kind of option possessed, to sell or purchase an asset at a predetermined price till a specified date. An option is traded on a controlled exchange. So the conditions of all options are formulated by the concerned exchange. The agreement is formalized in such order that original asset, date of expiry, quantity, and strike price are identified beforehand.
Hedging means measures taken by the investors to reduce their element of risk. Financial derivatives are frequently used to “hedge” an investor’s bets. On hedging an investment the investor has taken a position to balance him financially in case the value of another investment declines. For example, a person may hedge a stock by buying an option that enables him to sell that stock at an exact price. So, even when the stock loses value, he can still sell it for a predetermined price.
Like any other trading financial derivatives too leave room for speculation, which again is associated with increased risks. It works the opposite of hedging. Speculators would get hold of derivatives, connected to purchasing assets at lower prices when the futures market goes up or inversely, selling assets at higher prices when the futures are low. But if they go wrong, they are likely to lose more and hence the enhanced risk.

Accounting – Purpose Of Accounting

Purpose of Accounting

Accounting practices are necessarily followed by businesses for many reasons. Primarily, these practices focus on recording various transactions and their summarization that take place during business operations. An assortment of people studies these summaries, which are of particular interest to stakeholders of business. Stakeholders include banks and other financial institutions, stockholders, owners and even employees of the company. Accounting may be carried manually or using especially designed software.


Accounting practices need to be followed to keep a track of flow of funds, including revenue and expenses. Accountants maintain a record of financial transactions and make periodical statements that provide the needed information for taking decisions about future requirements and goals of business. Of course, business software are available that considerably reduce manual labor needed for accounting, but it is imperative for business owners and managers to understand the fundamentals of accounting system.


The basis of present day accounting is following double entry system of bookkeeping. It simply means that for every account that is debited, there has to be a corresponding credit from where the funds came in. So, finally, credits and debits should add up to give zero. If it is not so, there is definitely an error in accounting. When checking records of someone, the accountant or their associates try hard to pinpoint the discrepancy for getting accurate results.


Most of the accounting jobs in business houses are done by certified public accountants. For qualifying as a CPA, you should have finished undergraduate study with at least thirty six credit hours devoted to accounting, subsequent to which you have to pass a very taxing and competitive specialized exam. It is obligatory for accounts to ensure that the books of accounts of their patrons are maintained as per GAAP (Generally Accepted Accounting Principles (GAAP).


Businesses need to employ accountants to achieve their goal of earning increased profits and in doing so also pay all their debts and relevant expenses. Often, businesses are required to seek professional advice from accountants, especially on financial matters, for smooth operation of their business activities. For instance, the company may consider buying latest manufacturing machines to improve its production. So, the management needs to ask the accountant to find a way for buying new equipment in such a manner that it doesn’t affect making payments to workers, vendors and any debt obligations to financial institutions.


Accurate accounting services are essentially needed for the long term prospects of any business. Apart from being a legal obligation, preparation and submission of accurate balance sheet is of paramount importance for business on the whole. Unless the books of accounts are balanced, it becomes impractical to assess the financial performance of businesses. Integrity of character is among the most fundamental requirements for professionals in this field. Yes, there may be ways to pull the wool over the eyes of creditors and investors or employ misleading accounting tricks to derive short term gains, but in the long run such practices are bound to create risks that could threaten the very survival of business.

Shareholders Equity – What Comprises Common Stockholders Equity?

What Comprises Common Stockholders Equity?

Equity of common stockholders refers to that part of company’s funds that it would hand out to its common shareholders in the event of the company liquidating its assets. However, it should be understood that common shareholders get paid at the end. It simply means that first of all the company would have paid its various creditors and the amount left, if any, is distributed among-st common shareholders.

Equity of common shareholders is the share capital of the company and its reserved earnings less its treasury stock, whereas share capital represents the volume of funds that the company collected as a result of having sold its shares in the beginning. For instance, a company that sold two million shares @ $5/share, its share capital will be $10 million. Share price is not affected by the prevailing stock price of the company. Reserved earnings are included in the profit made by the company as it signifies the funds that supplemented company’s worth. Treasury stocks are those shares that the company repurchases from its shareholders, thus reducing the total amount held by its shareholders.

Assets and Liabilities

The simplest way for calculating the equity of common stockholders of accompany is to refer to its balance sheet and deduct its assets from the liabilities. The assets of accompany comprise of the property owned by it plus the sum of money it has in its books of accounts and the funds that it has to collect from others. On the other hand, the liabilities of a company comprise of its expenses, funds it needs to pay to others and long term debts, if any. For instance, a company having assets of $20 million and liabilities of $10 millions would have $10 million towards equity of common stockholders.

Equity per Share

Per share equity of common shareholders is the book value of each share and not the collective equity of common shareholders. You can find the per share equity of common shareholders by dividing the full equity by the quantity of outstanding shares. Let us say that the total outstanding shares of a company are one million, whereas the full amount of equity of shareholders is $15 million. So, in this case per share equity will be $15 million ÷ 1 million =$15/ share. You may calculate your equity by multiplying per share equity with the quantity of shares that you possess.


As already mentioned, the equity of common shareholders of a company is independent of the traded prices of a company’s shares.  Equity of common shareholders is the price which they paid for buying shares of the company and not its current market price. The price of shares sold in the market keeps fluctuating as per the expectations of the investors. The share price of a company which is likely to grow up will go up, whereas the share price of companies which are not performing well or losing sales, will go down.

Average Common Stockholders Equity

The average common stockholders equity

The difference between the assets and liabilities of a company is the equity of stockholder. The difference has a different meaning for an individual, depending on the type of business.

In case of a sole proprietorship, the business and its owner are legally indissoluble. The stockholder’s equity in such business is the individual owner’s 100 % share in the business. Since the proprietor is the sole owner, the stockholder’s equity equals the company’s total assets minus its total liabilities.

When two or more people join together in a business venture, it is called partnership. A partnership may be formed without any formal agreement, in which case the equity of owners is equally divided among the partners. In case different partners contribute varying amounts of money and expertise, a partnership agreement can be formed and stockholders’ equity divisions are done as per the respective contributions.

Corporations are not the same as partnerships or proprietorships. Those owning the corporate are known as shareholders as they posses share of the capital stock of the corporation. Stock shares may be bought from the open market as also directly from the corporation at times.


The balance sheet of a company mentions its equity, assets and liabilities. The assets comprise of the funds at company’s disposal, whereas liabilities means what it needs to payback to others. Equity means the part of company’s monetary resources which the owners are capable of claiming. Equity plus liabilities always equal assets.

Shareholders’ Equity

In case of companies, equity is frequently referred to as shareholders’ equity, which equals assets minus its liabilities or we can say it is the share capital including retained income minus the value of share buybacks. Share capital is the amount of funds poured into business by various shareholders, including preferred and common shares. Retained income is the accumulated profits of the company that it reinvested in carrying forward its business. The shares that the company buys back are known as share buybacks.

Common and Preferred Shares

Different types of shares provide different types of responsibilities and benefits to its shareholders. Basically, these can be classified as preferential or common shares. Common shares allow their holders to have a limited say in the decision making process of the company, whereas preferential shareholders have no role in decision making process but are guaranteed a predefined amount of dividend/ year.

Average Common Stockholders Equity

Equity of common shareholders is equal to the total equity of shareholders minus the preferred shareholding. Average equity of common shareholders can be calculated by adding up common shareholders’ equity at the commencement of the year and common shareholders’ equity at the end of the year and dividing the figure by two.

Sales Tax In California

Rate of Sales Tax in California Increased From January 1, 2013
With effect from January 1, 2013, the rate of basic Sales and Use tax in California stands revised as per the announcement of the California State Board of Equalization (BOE.) There is an increase of 0.25 percent, meaning the latest rate shall be 7.25+.25=7.5 percent. Therefore, suppliers of good in California will have to start charging the revised rate of tax with effect from 1st January, 2013.

At what the tax is chargeable?

The purchaser is charged tax at the time of buying. Buying is said to take place when you take possession of any article or title.

What action should I take to revise the rate of tax in my zone? 

The new revised rate of tax is applicable for all zip zones. You have nothing to do for updating your calculation of tax rate. With effect from 1st January, 2013, the relevant information contained in DaFIS will be updated automatically.

Other systems using information on rate of tax as contained in DaFIS will also start computing the revised rate of tax from 1st January, 2013 onwards. These include the Purchasing Card program (meant for charging tax on items bought from outside the state) and UCD Buy.

How would the changeover affect working of DaFIS?

Invoices from vendors and documents of purchase made in DaFIS prior to 1st January, 2013 would charge tax at the old rate.
Invoices from vendors and documents of purchase created in DaFIS on or beyond 1st January, 2013 would charge new rate of tax.
• Documents of purchases made prior to Jan 1, 2013 will compute old rate of tax but the bills from vendors prepared against such purchase documents on or later than 1st January, 2013 will compute the latest rate of tax.
As a general rule, you won’t have to modify the amount of tax computed on DaFIS document except in the following case:
In case you bought an item earlier than 1st January, 2013, meaning the purchase took place prior to 1st January, 2013, but you are giving out the VI later than 1st January, 2013, it will become necessary for you to manually alter the sum of tax on your VI to mirror the preceding rate of tax.
You will be required to incorporate a note in the VI to indicate that you made adjustment of the amount of tax because the sale took place earlier than 1st January, 2013.

What happens if the supplier seems to charge the wrong rate?

Before approaching the supplier, you should recheck the dates mentioned in the bill. It may so happen that you receive the bill later than 1st January, 2013 but in fact the sale could have taken place prior to 1st January, 2013. In such cases old rate of tax should have been charged. On realizing that the rate of tax charged by the supplier in their bill is wrong, you need to approach them to get a revised bill.

What will be the effective rate of tax with effect from 1st January, 2013 as applicable in Davis Campus and Davis city?

• The applicable rate of tax for Davis Campus shall be 7.5 percent.
• The rate of tax for Davis City will be eight percent.