ACCOUNTING AND VALUATION

SUBMITTED BY :
GOURAV, PRIYWARTH,SNEHA,SONIKA
 CONTENT
• OFFICE ADMINISTRATION
 FINNACIAL PLANNING
• SERVICE TAX
• CASH RECEIPTS AND DISBURSEMENTS METHOD OF
ACCOUNTING
• ACCOUNTING METHOD
• TAX
• SERVICE TAX
• EMD PAMENT
• RETENTION MONEY
• SECURITY DEPOSIT
• MOBILIZATION FUND
 OFFICE ADMINISTARTION
Office administration is a set of day to day activities that are related to
• Determine goals
• Business operation
• Administrative and organizational task (like management of human
resources, budgets & records , supervising support workers,)
• Financial planning( check cash flow and maintaining accounts),
• Compile factual and numerical data
• Office procedures,
• Deal with clients(in architectural office)
• Strategic Project planning ( in architectural office),
• Record keeping,
• Maintaining discipline and tidiness in office,
 FINANCIAL PLANNING
Financial planning
• Financial planning is the task of determining how a business will
afford to achieve its strategic goals and objectives. Usually, a
company creates a Financial Plan immediately after the vision and
objectives have been set. The Financial Plan describes each of the
activities, resources, equipment and materials that are needed to
achieve these objectives, as well as the timeframes involved.

The Financial Planning activity involves the following tasks:

• Assess the business environment
• Confirm the business vision and objectives
• Identify the types of resources needed to achieve these objectives
• Quantify the amount of resource (labor, equipment, materials)
 FINANCIAL PLANNING
• Calculate the total cost of each type of resource
• Summarize the costs to create a budget
• Identify any risks and issues with the budget set
• Performing Financial Planning is critical to the success of any
organization. It provides the Business Plan strictly, by confirming that
the objectives set are achievable from a financial point of view. It also
helps the CEO to set financial targets for the organization, and reward
staff for meeting objectives within the budget set.
• Determination of amount of finance needed by an enterprise to carry
out its operations smoothly.
• Determination of sources of funds,
• Determination of suitable policies for proper utilization and
administration of funds.
 ROLE OF FINANCIAL PLANNING
The role of financial planning includes three categories:-

• Strategic role of financial management

• Objectives of financial management
• The planning cycle
• When drafting a financial plan, the company should
establish the planning horizon, which is the time period of
the plan, whether it be on a short-term (usually 12 months)
or long-term (2–5 years) basis. Also, the individual projects
and investment proposals of each operational unit within
the company should be totaled and treated as one large
project. This process is called aggregation.
 OBJECTIVES OF FINANCIAL PLANNING
• # To ensure availability of funds whenever these are required:
• # To see that firm does not raise resources unnecessarily:

IMPORTANCE OF FINANCIAL PLANNING:

• # It Facilitates Collection of Optimum Funds:
• # It Helps in Fixing the Most Appropriate Capital Structure:
• # Helps in Investing Finance in Right Projects:
• # Helps in Operational Activities:
• # Base for Financial Control:
• # Helps in Proper Utilizations of Finance:
• # Helps in Avoiding Business Shocks and Surprises:
• # Link between Investment and Financing Decisions:
• # Helps in Coordination:
• # It Links Present with Future:
 CASH RECEIPTS AND DISBURSEMENTS
METHOD OF ACCOUNTING
• Generally, architects and landscape architects are permitted to select
the cash or accrual methods of accounting. They are not permitted to
use the completed contract method of accounting or the percentage-
of-completion method of accounting.
• Generally, the "cash method" of accounting is an acceptable method
of accounting. However, there are limitations on when this method
can be used.
• The general rule requires an item to be included in income (whether
in the form of cash, property or services) in the taxable year when
actually or constructively received and permits a deduction for an
expense in the taxable year when paid. However, if an expenditure
results in the creation of an asset having a useful life which extends
substantially beyond the close of such taxable year, such expenditure
may not be deductible, or may be deductible only in part, for the
taxable year in which made.
• Income may be actually or constructively received. If the taxpayer
receives a check from a customer in Year 1 but does not deposit or
cash it until Year 2, it is included in income in Year 1, when actually
received. Constructive receipt occurs when the taxpayer has the
unrestricted access to income that has been earned

ACCOUNTING METHOD
• Architectural firms need to have good records due to possible
litigation; but more importantly, they need to know the status and
profitability of each job that they work on to make good business
decisions. Therefore, the job files and other records are normally well
kept. Missing or incomplete job files are strong indicators of possible
unreported income, which would require an expansion of the audit
• In India, Professional tax is imposed by various states. It is imposed
on business owners, working individuals, merchants and people
carrying out various occupations.
 TAX
A fee charged ("levied") by a government on a product, income, or
activity. If tax is levied directly on personal or corporate income, then
it is a direct tax. If tax is levied on the price of a good or service, then
it is called an indirect tax. The purpose of taxation is to FINANCE
government expenditure. One of the most important uses of taxes is
to finance public goods and services, such as street lighting and street
cleaning. Since public goods and services do not allow a non-payer to
be excluded, or allow exclusion by a consumer, there cannot be a
market in the good or service, and so they need to be provided by
the government or a quasi-government agency, which tend to finance
themselves largely through taxes.
 SERVICE TAX
Service Tax is a form of indirect tax imposed on specified services
called "taxable services". Service tax cannot be levied on any service
which is not included in the list of taxable services. Over the past
few years, service tax been expanded to cover new services. The
objective behind levying service tax is to reduce the degree of
intensity of taxation on manufacturing and trade without forcing the
government to compromise on the revenue needs. The intention of
the government is to gradually increase the list of taxable services
until most services fall within the scope of service tax. For the
purpose of levying service tax, the value of any taxable service
should be the gross amount charged by the service provider for the
service rendered by him.
 EMD (EARNEST MONEY DEPOSIT)
PAYMENT
Earnest money is paid on the basis of certain terms and
condition.with the remainder due at a particular time. If the
contract is breachedby failure to pay, then the earnest payme
nt is kept by the recipient as pre-
determined (liquidated) or committed damages
For contractors whose EMD have been forfeited , (A
penalty for a fault or mistake that involves losing) hey are
not eligible to participate for the period of one Year from the
date of tender opening.
 RETENTION MONEY :
• Retention is an important aspect of managing a construction project. ... The money
held back is the retention, typically 5-10% of the total contract Cost on a
construction job, The owner will receive invoices each month from architects,
engineers, and the general contractor. The contractor should show the amount of
work completed, and then request payment for only 90-95% of that amount. The
money held back is the retention, typically 5-10% of the total contract price. (There
are often two levels of retention on a project. The owner, will withhold retention
from the general contractor. The general contractor, in turn, withholds retention
from each of his subcontractors.)
• When a contractor completes a project there are usually a few items that need
fixing. These items are compiled into a list called a punch list. To get retention
release, contractors have to complete their punch list as well.
• In other words, retention is a tool that allows a project owner to withhold some
payment to contractors until the entire project is complete and a certificate of
completion or certificate of occupancy has been granted by the local authorities.
Once this completion has been granted, the owner typically has 30 days to release
retention amount to the contractor.
 SECURITY DEPOSIT
A security deposit is a sum of money held in trust either as an initial
part-payment in a construction process in addition to the EMD paid
earlier by contractor. As this amount is quite heavy and as the
construction is also under way for completion, the security deposit is
normally collected in the form of Retention money from all stage
payments made to the contractor. The same is to be released after
the completion of the project by the owner.

MOBILIZATION FUND
Construction firms are always faced with the huge burden of securing
funds for executing works on contracts. The concept of mobilizing
advance payment is an important mechanism. Used to overcome
contractors financial problems.
Mobilization is a monetary payment made by the owner to contractor
for initial expenditures in respect of site mobilization & a fair
proportion of job preliminaries.
 VALUATION
Business Value of a Firm
• In management, business value is an informal term that
includes all forms of value that determine the health and well-
being of the firm in the long run.
• Business value expands concept of value of the firm beyond
economic value (also known as economic profit, economic
value added, and shareholder value) to include other forms of
value such as employee value, customer value, supplier value,
channel partner value, managerial value, and societal value.
• Many of these forms of value are not directly measured in
monetary terms.
 COMPONENTS OF BUSINESS VALUE
• Shareholder Value
• Customer Value
• Employee Knowledge
• Supplier Value
• Managerial Value
• Societal Value
• Channel Partner Value
 CRITICAL FACTORS IN VALUING AN
ARCHITECTURAL FIRM
• The value of an Architectural Firm lies in its
FUTURE operating cash flows. Historical
operating cash flows are only relevant if they
are indicative of what future operating cash
flows might be.
• Arriving at a value for an Architectural Firm
requires assessing the business RISKS
associated with an Architectural Firm
achieving future operating cash flows.
 BUSINESS GROWTH STAGES
14

12

10

8
Valuation
6 Business Risks

0
Small Size Mid Size Large
 NEEDS OF A FIRM AT VARIOUS
STAGES
Small Firm – Entrepreneurial Stage
• Personal Relationships - Customers, Suppliers,
Employees, Landlords.
• Reliance on Referral Sources for Business.
• Personal Know How - Operations, Marketing
& Administration
Mid Sized Firm – Managerial Stage
• Contractual Relationships -Customers,
Suppliers, Employees, Landlords.
• Formalized Organizational Structure and
Management Information System.
• Trained Work Force and Defined Work
Procedures.
BUSINESS VALUATION PROCESS
Level of Value – Depends Upon the
Buyer (Purpose)
 Levels of Value Buyer (Purpose)

Strategic
Buyers Strategic Value
•Outside Sale or Merger to a
Third-Party
(ADD on)
Synergistic and/or
Emotional Premium

Control Value • Outside Sale or Merger to a Third

Party (Stand Alone)
Minority and Marketability •Inside Sale to Family, Other Owners,
Discount Key Employees.
Financial Minority Interest •Transfers to Family or Others by Gift
Buyers Value (lifetime) or Bequest (at death)
Lack of Business Discount

Liquidation
Outside or Inside Sale
Value
THANK YOU 