UPSC Commerce Accountancy Notes

✔️  Key Differences Between FERA and FEMA ❤️ FERA ✔️FERA is an acronym for Foreign Exchange Regulation Act. ✔️It was passed by the Parliament of India in 1973. The act came into force on 1st January 1974. ✔️FERA Act was repealed by the Vajpayee government in 1998. ✔️It was enacted to regulate foreign exchange and payments in India. Its main objective was to conserve forex transactions. ✔️The rules and regulations of FERA on foreign exchange were conservative and restrictive. ✔️This act came into force when the forex position in the country was not good. ✔️Comparatively, FERA Act is lengthier as it has 81 sections. ✔️Under this act, the definition of the term ‘Authorized person’ was narrow. ✔️Under this act, the citizenship of an individual was the basis for determining his/her residential status. ✔️Under FERA, no provisions were made for IT. ✔️Violation of the provisions of FERA has been considered a criminal offence and the punishment for contravention was imprisonment. ✔️Violation of FERA was a non-compoundable offence i.e. the offence cannot be compromised. Moreover, the accused was not allowed any assistance from the lawyer. ✔️The appeals were sent to the Supreme Court. ✔️According to FERA, an individual should obtain permission from the RBI to carry out forex transactions. ❤️ FEMA ✔️FEMA is an acronym for Foreign Exchange Management Act. ✔️FEMA Act was passed by the Parliament of India in 1999 to replace the FERA. It came into force on 1st June 2000. ✔️FEMA is currently active in the country. ✔️It was enacted to remove the stringent regulations on foreign exchange and promote orderly management of foreign exchange and payments. Its main objective was to manage the forex transactions. ✔️The approach of FEMA Act toward foreign exchange is flexible. ✔️This act was introduced when the strict provisions of FERA were hampering the growth of the Indian economy. ✔️FEMA has 49 sections and is shorter than the FERA. ✔️Under this act, the definition of the term ‘Authorized person’ is broad and it has included the banks under it. ✔️Under this act, the basis for determining the residential status was that an individual should be residing in India for the past 6 months. ✔️Provisions on IT were introduced under the FEMA Act. ✔️Violation of the provisions of FEMA has been considered a civil offence and the punishment for contravention was a monetary penalty. If an individual fails to pay the penalty on time, he/she may be imprisoned. ✔️Violation of FEMA is a compoundable offence and the charges can be compromised or removed. FEMA provides the accused the right to obtain legal assistance from a lawyer. ✔️A special director and a special court were introduced under FEMA to address the appeals. ✔️Under FEMA, no such pre-approval or permission of RBI is required to carry out forex transactions.

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What are Reserves in Accounting? Reserves are part of profits or gain that has been allotted for a specific purpose. Reserves are usually set up to buy fixed assets, pay bonuses, pay an expected legal settlement, pay for repairs & maintenance and pay off debt. What are Reserves in Accounting? When an enterprise earns a profit during the end of a year, a certain part of it is retained in the trading concern to meet future exigencies, growth outlooks etc., The amount of money that is kept aside is known as Reserves in Accounting. They assist in securing the financial situation of an enterprise and can be utilised for different purposes such as stable dividend repayments, expansion, meeting contingencies, legal requirements, investments, improving the financial situation, etc., It is also termed as retained earnings. For instance – Reserve for Dividends Equalisation, General reserve, Reserve for Increased Cost of Replacement, Reserve for Expansion, etc., Inside Financial Statements It is shown on the liability side of a balance sheet (B/S) below the heading ‘Reserves and Surplus’ with capital if an enterprise suffers losses, then it is not created. Types of Reserves ➖Capital Reserve ➖Revenue Reserve What is Capital Reserve? The capital reserve is established out of capital profits and are normally not allocated as dividends to the shareholders. It cannot be established out of profits acquired from core operations of an enterprise. Examples Profit earned before an enterprise’s embodiment Premium acquired on the issue of debentures and shares Gain on re-issuance (redistribution) of forfeited shares Profit kept aside for redemption of debentures or preference shares Gain on sale of fixed assets The surfeit on revaluation of liabilities and assets Capital redemption reserve What is Revenue Reserve? Revenue reserves are established out of gains acquired from operations of an enterprise. Reserves are shown under Reserves and Surplus section on the liabilities side of a balance sheet. It can be utilised for the following : Dividend to shareholders Expansion of trading concern Balance the dividend rate

प्रमुख बैंकिंग शब्दावली :– ०देयता(liabilty)–वह जो भविष्य में बैंक द्वारा वापस करना है। ०जैसे–जमा(Deposits) –विभिन्न प्रकार की बचत/लघु बचत योजनाएं। –बैंक द्वारा लिया गया ऋण। ०संपत्ति(assets)–ऋण, निवेश आदि को प्रदर्शित करती है क्योंकि इनसे बैंक को ब्यास/धन प्राप्त होता है। ०बैंक दर–RBI जिस दर पर वाणिज्यिक बैंकों को दीर्घकालिक ऋण उपलब्ध कराता है। ०रेपो रेट–RBI जिस दर पर वाणिज्यिक बैंकों को अल्पकालिक ऋण उपलब्ध कराता है। ०रिवर्स रेपो दर- वह दर है जिस पर RBI वाणिज्यिक बैंकों से धन उधार लेता है। ०नकद आरक्षित अनुपात(CRR)–बैंकों द्वारा अपनी कुल जमा का कुछ हिस्सा RBI के पास रखना। ०वैधानिक तरलता अनुपात(SLR)–बैंकों द्वारा अपनी कुल जमा का कुछ हिस्सा अपने पास रखना। ०सीमांत स्थायी सुविधा(MSF): ०वह दर है जिस पर बैंक सरकारी प्रतिभूतियों के बदले RBI से रातोंरात धन उधार लेते हैं। ०इसकी दर रेपो रेट से अधिक होती है। ० इसे "रात्रिकालीन ऋण दर(Overnight loan rate)" कहा जाता है। ०खुले बाजार की क्रियाएं(Open Market Operations)–इसके अन्तर्गत RBI सरकारी प्रतिभूतियों का क्रय-विक्रय करता है। ०आधार दर(Base Rate)- यह वह न्यूनतम दर है जिस पर कोई बैंक अपने ग्राहकों को ऋण दे सकता है। #Prelims Facts"

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✅ Circular Flow of Income The circular flow of income is a model that describes the movement of goods, services, and money between households and firms in an economy. The model helps to explain how the various components of an economy are interconnected and how they interact with one another. The basic components of the circular flow of income model are: ➖ Households: Households are the consumers of goods and services in the economy. They receive income from firms in the form of wages, salaries, and rent, and use this income to purchase goods and services. ➖ Firms: Firms are the producers of goods and services in the economy. They receive income from the sale of goods and services to households, and use this income to pay for the factors of production, such as labor and raw materials. ➖ Markets: The markets for goods and services and the markets for factors of production are where households and firms interact. In the market for goods and services, households purchase goods and services from firms, while in the market for factors of production, firms hire labor, rent capital, and purchase raw materials from households. In the circular flow of income, the flow of goods and services from firms to households is matched by the flow of money from households to firms. The money received by firms is then used to pay for the factors of production, which are supplied by households, completing the cycle. The circular flow of income model helps to demonstrate how the various components of an economy are interdependent and how changes in one part of the economy can have an impact on the other parts. For example, an increase in household spending can result in an increase in demand for goods and services, which can lead to an increase in production and a rise in employment. Conversely, a decrease in household spending can result in a decrease in demand for goods and services, leading to a decrease in production and employment.

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