User talk:Ali Zaheer Haideri

Accountancy

Accountancy (profession)[1] or accounting (methodology) is the measurement, statement or provision of assurance about financial information primarily used by managers, investors, tax authorities and other decision makers to make resource allocation decisions within companies, organizations, and public agencies. The terms derive from the use of financial accounts. Accounting is the discipline of measuring, communicating and interpreting financial activity. Accounting is also widely referred to as the "language of business".[2] Financial accounting is one branch of accounting and historically has involved processes by which financial information about a business is recorded, classified, summarized, interpreted, and communicated; for public companies, this information is generally publicly-accessible. By contrast management accounting information is used within an organization and is usually confidential and accessible only to a small group, mostly decision-makers. Tax Accounting is the accounting needed to comply with jurisdictional tax regulations. Practitioners of accountancy are known as accountants. There are many professional bodies for accountants throughout the world. Many allow their members to use titles indicating their membership or qualification level. Examples are Chartered Certified Accountant (ACCA or FCCA), Chartered Accountant (FCA, CA or ACA), Management Accountant (ACMA, FCMA or AICWA), Certified Public Accountant (CPA) and Certified General Accountant (CGA or FCGA). Auditing is a related but separate discipline, with two sub-disciplines: internal auditing and external auditing. External auditing is the process whereby an independent auditor examines an organization’s financial statements and accounting records in order to express an opinion as to the truth and fairness of the statements and the accountant's adherence to Generally Accepted Accounting Principles (GAAP), or International Financial Reporting Standards (IFRS), in all material respects. Internal auditing aims at providing information for management usage, and is typically carried out by auditors employed by the company, and sometimes by external service providers. Accounting/accountancy attempts to create accurate financial reports that are useful to managers, regulators, and other stakeholders such as shareholders, creditors, or owners. The day-to-day record-keeping involved in this process is known as bookkeeping. Accounting scholarship is the academic discipline which studies accounting/accountancy.

Modern accounting Accounting is the process of identifying, measuring and communicating economic information so a user of the information may make informed economic judgments and decisions based on it. Accounting is the degree of measurement of financial transactions which are transfers of legal property rights made under contractual relationships. Non-financial transactions are specifically excluded due to conservatism and materiality principles. At the heart of modern financial accounting is the double-entry bookkeeping system. This system involves making at least two entries for every transaction: a debit in one account, and a corresponding credit in another account. The sum of all debits should always equal the sum of all credits, providing a simple way to check for errors. This system was first used in medieval Europe, although claims have been made that the system dates back to Ancient Rome or Greece. According to critics of standard accounting practices, it has changed little since. Accounting reform measures of some kind have been taken in each generation to attempt to keep bookkeeping relevant to capital assets or production capacity. However, these have not changed the basic principles, which are supposed to be independent of economics as such. In recent times, the divergence of accounting from economic principles has resulted in controversial reforms to make financial reports more indicative of economic reality. History of accounting Early history Accountancy's infancy dates back to the earliest days of human agriculture and civilization (the Sumerians in Mesopotamia), when the need to maintain accurate records of the quantities and relative values of agricultural products first arose. Simple accounting is mentioned in the Christian Bible (New Testament) in the Book of Matthew, in the Parable of the Talents [3]. The Islamic Quran also mentions simple accounting for trade and credit arrangements [4]). Twelfth-century A.D. Arab writer Ibn Taymiyyah mentioned in his book Hisba (literally, "verification" or "calculation") detailed accounting systems used by Muslims as early as in the mid-seventh century A.D. These accounting practices were influenced by the Roman and the Persian civilizations that Muslims interacted with. The most detailed example Ibn Taymiyyah provides of a complex governmental accounting system is the Divan of Umar, the second Caliph of Islam, in which all revenues and disbursements were recorded. The Divan of Umar has been described in detail by various Islamic historians and was used by Muslim rulers in the Middle East with modifications and enhancements until the fall of the Ottoman Empire.                       Luca Pacioli and the birth of modern accountancy

Painting of Luca Pacioli, attributed to Jacopo de' Barbari Luca Pacioli (1445 - 1517), also known as Friar Luca dal Borgo, is credited for the "birth" of accounting. His Summa de arithmetica, geometrica, proportioni ET proportionalita (Summa on arithmetic, geometry, proportions and proportionality, Venice 1494), was a textbook for use in the abbaco schools of northern Italy, where the sons of merchants and craftsmen were educated. It was a compendium of the mathematical knowledge of his time, and includes the first printed description of the method of keeping accounts that Venetian merchants used at that time, known as the double-entry accounting system. Although Pacioli codified rather than invented this system, he is widely regarded as the "Father of Accounting". The system he published included most of the accounting cycle as we know it today. He described the use of journals and ledgers, and warned that a person should not go to sleep at night until the debits equalled the credits! His ledger had accounts for assets (including receivables and inventories), liabilities, capital, income, and expenses — the account categories that are reported on an organisation's balance sheet and income statement, respectively. He demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. His treatise also touches on a wide range of related topics from accounting ethics to cost accounting.

Post-Pacioli The first known book in the English language on accounting was published in London, England by John Gouge (or Gough) in 1543. It is described as A Profitable Treatyce called the Instrument or Boke to learn to know the good order of the kepyng of the famouse reconynge, called in Latin, Dare and Habere, and, in English, debtor and Creditor. A short book of instructions was also published in 1588 by John Mellis of Southwark, England, in which he says, "I am but the renuer and reviver of an ancient old copies printed here in London the 14 of August 1543: collected, published, made, and set forth by one Hugh Oldcastle, Schoolmaster, who, as reappeared by his treatise, then taught Arithmetics, and this booke in Saint Ollaves parish in Marko Lane." Mellis refers to the fact that the principle of accounts he explains (which is a simple system of double entry) is "after the former of Venice". A book described as The Merchants Mirrour, or directions for the perfect ordering and keeping of his accounts formed by way of Debitor and Creditor, after the (so termed) Italian manner, by Richard Dafforne, accountant, published in 1635, contains many references to early books on the science of accountancy. In a chapter in this book, headed "Opinion of Book-keeping's Antiquity," the author states, on the authority of another writer, that the form of book-keeping referred to had then been in use in Italy about two hundred years, "but that the same, or one in many parts very like this, was used in the time of Julius Caesar, and in Rome long before." He gives quotations of Latin book-keeping terms in use in ancient times, and refers to "ex Oratione Ciceronis pro Roscio Comaedo"; and he adds: "That the one side of their booke was used for Debitor, the other for Creditor, is manifest in a certain place, Naturalis Historiae Plinii, lib. 2, cap. 7, where hee, speaking of Fortune, saith thus: Huic Omnia Expensa. Huic Omnia Feruntur accepta et in tota Ratione mortalium sola. Utramque Paginam facit." An early Dutch writer appears to have suggested that double-entry book-keeping was even in existence among the Greeks, pointing to scientific accountancy having been invented in remote times. There were several editions of Richard Dafforne's book - the second edition in 1636, the third in 1656, and another in 1684. The book is a very complete treatise on scientific accountancy, beautifully prepared and containing elaborate explanations. The numerous editions tend to prove that the science was highly appreciated in the 17th century. From this time on, there has been a continuous supply of literature on the subject, many of the authors styling themselves accountants and teachers of the art, and thus proving that the professional accountant was then known and employed. Accountancy qualifications and regulation Main article: Accountant The expectations for qualification in the profession of accounting vary between different jurisdictions and countries. Accountants may be certified by a variety of organizations or bodies, such as the Association of Accounting Technicians (AAT),[5] British qualified accountancy bodies including the Chartered Institute of Management Accountants (CIMA), Association of Chartered Certified Accountants (ACCA) and Institute of Chartered Accountants, and are recognized by titles such as Chartered Management Accountant (ACMA or FCMA) Chartered Certified Accountant (ACCA or FCCA) and Chartered Accountant (UK, Australia, New Zealand, Canada, India, Pakistan, South Africa, Ghana), Certified Public Accountant (Ireland, Japan, US, Singapore, Hong Kong, the Philippines), Certified Management Accountant (Canada, U.S.), Certified General Accountant (Canada), or Certified Practicing Accountant (Australia). Some Commonwealth countries (Australia and Canada) often recognize both the certified and chartered accounting bodies. The majority of "public" accountants in New Zealand and Canada are Chartered Accountants; however, Certified General Accountants are also authorized by legislation to practice public accounting and auditing in all Canadian provinces, except Ontario and Quebec, as of 2005. There is, however, no legal requirement for an accountant to be a paid-up member of one of the many Institutes and other bodies which are effectively a form of professional trade union. The "Big Four" accountancy firms The "Big Four auditors" are the largest multinational accountancy firms. •	PricewaterhouseCoopers •	Ernst & Young •	KPMG •	Deloitte Touche Tohmatsu These firms are associations of the partnerships in each country rather than having the classical structure of holding company and subsidiaries, but each has an international 'umbrella' organization for coordination (technically known as a Swiss Verein). Before the Enron and other accounting scandals in the United States, there were five large firms and were called the Big Five: Arthur Andersen, PricewaterhouseCoopers, KPMG, Deloitte Touche Tohmatsu and Ernst & Young. On June 15, 2002, Arthur Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron. Nancy Temple (Andersen Legal Dept.) and David Duncan (Lead Partner for the Enron account) were cited as the responsible managers in this scandal as they had given the order to shred relevant documents. Since the U.S. Securities and Exchange Commission does not allow convicted felons to audit public companies, the firm agreed to surrender its licenses and its right to practice before the SEC on August 31, 2002. A plurality of Arthur Andersen joined KPMG in the US and Deloitte & Touche outside of the US. Historically, there had also been groupings referred to as the "Big Six" (Arthur Andersen, plus Coopers & Lybrand before its merger with Price Waterhouse) and the "Big Eight" (Ernst and Young prior to their merger were Ernst & Whinney and Arthur Young and Deloitte & Touche was formed by the merger of Deloitte, Haskins and Sells with the firm Touche Ross). Enron turned out to be only the first of a series of accounting scandals that enveloped the accounting industry in 2002. This is likely to have far-reaching consequences for the U.S. accounting industry. Application of International Accounting Standards originating in International Accounting Standards Board headquartered in London and bearing more resemblance to UK than current US practices is often advocated by those who note the relative stability of the UK accounting system (which reformed itself after scandals in the late 1980s and early 1990s). Accounting reform of a far more comprehensive sort is advocated by those who see issues with capitalism or economics, and seek ecological or social accountability. Bodies and organizations Accounting standard-setting bodies •	International o	International Accounting Standards Board •	United States o	Financial Accounting Standards Board (FASB) o	AICPA Accounting Principles Board (APB) o	AICPA Committee on Accounting Procedure o	American Institute of Certified Public Accountants (AICPA) o	U.S. Securities and Exchange Commission o	Governmental Accounting Standards Board (GASB) o	Federal Accounting Standards Advisory Board (FASAB) •	Germany: Accounting Standards Committee of Germany (ASCG, in German: DRSC)[6] •	Australia o	Institute of Chartered Accountants in Australia •	Canada o	Accounting Standards Board "AcSB" •	Ghana o	Institute of Chartered Accountants of Ghana •	Hong Kong (see Accountancy in Hong Kong) o	Hong Kong Institute of Certified Public Accountants (HKICPA) •	India o	Institute of Chartered Accountants of India •	Malaysia o	Malaysian Accounting Standards Board[7] o	Malaysian Institute of Accountants •	Nigeria o	Institute of Chartered Accountants of Nigeria (ICAN) •	New Zealand o	Accounting Standards Review Board[8] o	New Zealand Institute of Chartered Accountants •	Ireland o	Institute of Chartered Accountants in Ireland •	South Africa o	South African Institute of Chartered Accountants (SAICA) •	United Kingdom o	Accounting Standards Board •	Iran o	Accounting Standards Board •	Pakistan o	Institute of Chartered Accountants of Pakistan (ICAP) Professional organizations •	o	American Institute of Certified Public Accountants (AICPA) o	Association of Accounting Technicians (AAT) o	Association of Chartered Certified Accountants (ACCA) o	Association of National Accountants of Nigeria (ANAN) o	Canadian Institute of Chartered Accountants (CICA) o	Certified General Accountants Association of Canada (CGA) o	Guild of Industrial,Commercial and Institutional Accountants, Canada (ICIA) o	Chartered Institute of Cost & Management Accountants (CICMA) o	Chartered Institute of Management Accountants (CIMA) o	Chartered Institute of Public Finance and Accountancy (CIPFA) o	CPA Australia[9] o	German CPA Society (GCPAS)[10] o	Hong Kong Institute of Certified Public Accountants o	Institute of Chartered Accountants in Australia o	Institute of Chartered Accountants in England and Wales (ICAEW) o	Institute of Chartered Accountants in Ireland (ICAI) o	Institute of Chartered Accountants of India o	Institute of Chartered Accountants of Nigeria (ICAN) o	Institute of Chartered Accountants of Pakistan (ICAP) o	Institute of Chartered Accountants of Scotland (ICAS) o	Institute of Cost & Management Accountants of Pakistan (ICMAP) o	International Federation of Accountants o	Malaysian Institute of Accountants o	New Zealand Institute of Chartered Accountants o	Ordre des Experts Comptables de Tunisie[11] o	Philippine Institute of Certified Public Accountants o	South African Institute of Chartered Accountants (SAICA) Government agencies Government agencies enforce the securities laws. Public companies must file financial reports with these government agencies. •	United States o	U.S. Securities and Exchange Commission (SEC) (for public companies) o	Federal Reserve (for banks) •	Germany o	German Federal Financial Supervisory Authority (BaFin)[12] •	India o	Reserve Bank of India (for banks) o	Securities & Exchange Board of India (SEBI)[13](for public companies) •	Pakistan o	State Bank of Pakistan (for Banks) o	Securities and exchange commission of Pakistan (for Public Companies including Banks) Oversight boards (regulators for the accounting industry) Oversight boards are new, private-sector non-profit organizations that were set up after the Enron scandal to oversee the auditors of public companies. •	United States o	Public Company Accounting Oversight Board - public companies •	Germany o	German Auditor Oversight Commission (AOC, in German: APAK)[14] Auditing standards-setting bodies •	International o	International Auditing and Assurance Standards Board[15] •	United States o	Public Company Accounting Oversight Board - public companies o	American Institute of Certified Public Accountants - general o	Government Accountability Office - recipients of federal grants o	Information Systems Audit and Control Association (ISACA) (Information System Auditing Guideline) •	Germany o	German Institute of Certified Public Accountants (IDW)[16] •	Australia o	AUASB - Auditing & Assurance Standards Board •	Hong Kong (see Accountancy in Hong Kong) o	Hong Kong Institute of Certified Public Accountants (HKICPA) (formerly known as Hong Kong Society of Accountants (HKSA)) •	South Africa o	Public Accountants and Auditors Board - public companies •	United Kingdom o	Auditing Practices Board •	India o	Auditing & Assurance Standards Board •	Pakistan o	Institute of Chartered Accountants of Pakistan Topics in accounting See list of accounting topics for complete listing. Auditing •	Assurance services •	Audit •	Information technology audit •	Internal audit Accountancy methods and fields •	Lean accounting •	Cost accounting •	Cash-basis and accrual-basis accounting •	Financial accountancy •	Fund Accounting •	Internal and external accountancy •	Management accounting •	Project accounting •	Positive accounting •	Environmental accounting •	Tax accounting Accounting Principles Accounting principles, rules of conduct and action are described by various terms such as concepts, conventions, tenets, assumptions, axioms and postulates. Accounting concepts •	Entity concept •	Dual aspect concept •	Going concern concept •	Accounting period concept •	Money measurement concept •	Historical Cost concept •	Periodic matching of cost and revenue concept •	Verifiable objective evidence concept •	Realization concept •	Accounting methods (includes a discussion on the concept of accruals) •	Understandability •	Relevance •	Reliability •	Comparability •	Accrual Accounting conventions •	Convention of disclosure •	Convention of materiality •	Convention of consistency •	Convention of conservatism Tools for accounting •	Desktop software •	Online accounting sites Types of accountancy The following list is intended to give some idea of the breadth and scope of the accountancy profession: •	lean accounting •	auditing •	bookkeeping •	chartered accountant •	cost accounting •	management accounting •	financial accounting •	forensic accounting •	taxation advice •	public accountancy •	internal accountancy •	external accountancy

Lean Accounting
Lean accounting Lean accounting is accounting for the lean enterprise. It seeks to move from traditional cost accounting to a system that measures and motivates good business practices in the lean enterprise. Applying lean principles to accounting can be part of this system. Principles of lean accounting Measure Those in operations have long argued that accounting does not accurately reflect the positive gains made through lean initiatives. For example, a reduction in inventory, cycle time, or new found capacity by shop floor personnel is either not accurately reflected or understood. The problem comes when business strategy is made with wrong or misguided metrics. Motivate In addition to the gap between accounting and lean gains, traditional accounting practices often motivate wrong behaviors in the lean enterprise. These wrong behaviors typically involve achieving local optimums at the expense of overall company profitability. For instance, attempts to meet machine efficiency measures may motivate shift production to create needless inventory. See also •	Management accounting •	Throughput accounting

Auditing
Audit

The most general definition of an audit is an evaluation of a person, organization, system, process, project or product. Audits are performed to ascertain the validity and reliability of information, and also provide an assessment of a system's internal control. The goal of an audit is to express an opinion on the person/organization/system etc. under evaluation based on work done on a test basis. Due to practical constraints, an audit seeks to provide only reasonable assurance that the statements are free from material error. Hence, statistical sampling is often adopted in audits. In the case of financial audits, a set of financial statements are said to be true and fair when they are free of material misstatements - a concept influenced by both quantitative and qualitative factors. Traditionally audits were mainly associated with gaining information about financial systems and the financial records of a company or a business (see financial audit). However recently auditing has begun to include other information about the system, such as information about environmental performance. As a result there are now professions that conduct environmental audits. In financial accounting, an audit is an independent assessment of the fairness by which a company's financial statements are presented by its management. It is performed by competent, independent and objective person or persons, known as auditors or accountants, who then issue an Auditor's report on the results of the audit. Such systems must adhere to generally accepted standards set by governing bodies that regulate businesses. It simply provides assurance for third parties or external users that such statements present 'fairly' a company's financial condition and results of operations.

Financial audit Main article: Financial audit Quality audits Main article: Quality audit Quality audits are performed to verify the effectiveness of a quality management system. This is part of a certification such as ISO 9001. Integrated audits In the US, audits of publicly-listed companies are governed by rules laid down by the Public Company Accounting Oversight Board (PCAOB). Such an audit is called an Integrated Audit, and auditors have the additional responsibilities of expressing opinions on management's assessment of the firm's internal control, and on the effectiveness of internal control over financial reporting based on their (the auditors') own assessment. These requirements are consistent with Section 404 of the 2002 Sarbanes-Oxley Act. Types of auditors There are two types of auditors: •	Internal auditor- is employees of a company hired to assess and evaluate its system of internal control. To maintain independence, they present their reports directly to the Board of Directors or to Top Management. They provide functional operation to the concern. Internal Auditors are employees of the company so that they can easily find out the frauds and any mishappening. •	External auditor is independent staff assigned by an auditing firm to assess and evaluate financial statements of their clients or to perform other agreed upon evaluations. Most external auditors are employed by accounting firms for annual engagements. They are called upon from the out side of the company. Major auditing firms The four largest accounting firms in the world are collectively referred to as the Big Four. They are as follows: 1.	PricewaterhouseCoopers, also known as PwC 2.	Ernst & Young, also known as E&Y 3.	KPMG, formerly known as Klynveld Peat Marwick Goerdeler 4.	Deloitte Touche Tohmatsu, also known as Deloitte There are many other audit firms competing with the big four for major audit engagements. Competition has intensified in response to independence issues and other legislative requirements introduced as a consequence of the Arthur Andersen Scandal. In the US and Australia, these firms are referred to as "mid-tier". Some of these include: McGladrey & Pullen, PKF, Pitcher Partners, Johnson Lambert & Co. LLP, Beard Miller Company LLP (bmc), BDO Seidman, and UHY firm. In the UK the medium sized firms are also referred to as mid-tier. Many of these firms are international and increasingly are competing for work against the Big Four, especially following the recent large auditing scandals. Auditing firms around the world While the four major audit firms listed above provide audit services to the largest corporations in America, audit firms around the world are also in partnership with the Big Four. Since corporations held offices in other parts of the world, they tend to be audited by affiliates of the Big Four to maintain consistency and uniformity in their application of auditing standards

Book-keeping
Bookkeeping Bookkeeping (also book-keeping or book keeping) is the recording of all financial transactions undertaken by an individual or organization. The organization may be a business, a charitable organization or even a local sports club. Bookkeeping is "keeping records of what is bought, sold, owed, and owned; what money comes in, what goes out, and what is left." [1] A financial transaction is any event that involves money. Individual and family bookkeeping involves keeping track of income and expenses in a cash account record, checking account register, or savings account passbook. Individuals who borrow or lend money also track how much they owe to others or are owed from others. Bookkeeping may be performed using paper and a pen or pencil. With increasing complexity in tax regulations and to minimize calculation errors, many organizations use accounting software to assist in bookkeeping. Two common bookkeeping methods used by businesses and other organizations are the single-entry bookkeeping system and the double-entry bookkeeping system. Single-entry bookkeeping uses only income and expense accounts, recorded primarily in a "Revenue and Expense Journal". Single-entry bookkeeping is adequate for many small businesses. Double-entry bookkeeping requires posting (recording) each transaction twice, using debits and credits.[2] A bookkeeper (or book-keeper), sometimes called an accounting clerk in the United States, is a person who records the day-to-day financial transactions of an organization.[3] A bookkeeper is usually responsible for writing up the "daybooks". The daybooks consist of purchase, sales, receipts and payments. The bookkeeper is responsible for ensuring that all transactions are recorded in the correct daybook, suppliers ledger, customer ledger and general ledger. The bookkeeper brings the books to the trial balance stage. An accountant may prepare the profit and loss statement and balance sheet using the trial balance and ledgers prepared by the bookkeeper. Single account bookkeeping Simple bookkeeping for individuals and families involves recording income, expenses and current balance in a cash record book or a checking account register.

Sample checking account register (United States, 2003) [4] ¤AD-Automatic Deposit ¤AP-Automatic Payment ¤ATM-Teller Machine ¤DC-Debit Card NUMBER OR CODE	DATE	TRANSACTION DESCRIPTION	PAYMENT AMOUNT	 / 	FEE	DEPOSIT AMOUNT	BALANCE balance forward							1331	85 AD	3/15	paycheck					1823	56	3155	41 AP	3/26	electricity	104	31					3051	10 704	3/26	car registration	58	50					2992	60 ATM	3/30	cash withdrawal	100	00		1.00			2891	60 DC	4/2	groceries	127	35					2764	25

Single-entry bookkeeping The primary bookkeeping record in single-entry bookkeeping is the Revenue and Expense Journal, which is similar to a checking account register but allocates the income and expenses to various income and expense accounts. Separate account records are maintained for petty cash, accounts payable and receivable, and other relevant transactions such as inventory and travel expenses.

No. Date	Description	Revenue	Expense	Sales	Sales Tax	Services	Inventory	Advert. Freight	Office Suppl	Misc 7/13	Balance forward	1,826.00	835.00	1,218.00	98.00	510.00	295.00	245.00	150.00	83.50	61.50 1041	7/13	Printer- Advert flyers		450.00					450.00 1042	7/13	Wholesaler - inventory		380.00				380.00 1043	7/16	office supplies		92.50							92.50 --	7/17	bank deposit	1,232.00 - Taxable sales			400.00	32.00 - Out-of-state sales			165.00 - Resale			370.00 - Service sales					265.00 bank	7/19	bank charge		23.40								23.40 1044	7/19	petty cash		100.00								100.00 TOTALS	3058.00	1,880.90	2,153.00	130.00	775.00	675.00	695.00	150.00	176.00	184.90 Sample revenue and expense journal for single-entry bookkeeping [5] Double-entry bookkeeping Main article: double-entry bookkeeping system Computerized bookkeeping Computerized bookkeeping removes many of the "books" that are used to record transactions and enforces double entry bookkeeping. Computer software increases the speed at which bookkeeping can be performed. Online bookkeeping Online bookkeeping allows source documents and data to reside in web-based applications which allow remote access for bookkeepers and accountants. Typically, a company scans its business documents and uploads them to a secure location or into an online bookkeeping application on a regular basis. This allows the bookkeeper to work remotely with these documents to update the books. Users of this technology include •	Mobile employees scanning and sending in their receipts and bills while on the road to get reimbursed more quickly. •	Organizations with multiple offices centralizing their accounting department and having the documents sent to this location online.

Chartered Accounting (CA)
Chartered Accountant Chartered Accountant (CA) is the title used by members of certain professional accountancy associations in the British Commonwealth countries and Ireland. The term chartered comes from the Royal Charter granted to the world's first professional body of accountants upon their establishment in 1854[1]. Chartered Accountants work in all fields of business and finance. Some are engaged in public practice work, others work in the private sector and some are employed by government bodies. United Kingdom In the UK, there are no licenses requirements for an individual to describe himself/herself or to practice as an accountant but a Chartered Accountant must be a member of one of the following organizations: •	the Institute of Chartered Accountants in England & Wales (ICAEW) (designator letters ACA or FCA); •	the Institute of Chartered Accountants of Scotland (ICAS) (designators letters CA); •	the Institute of Chartered Accountants in Ireland (ICAI) (which is a UK body as it operates in Northern Ireland, designator letters ACA or FCA); To make matter slightly complex, there is another chartered accountancy body called Chartered Certified Accountant, which has exactly the same legal entitlement and responsibility as a "Chartered Accountant". Chartered Certified Accountants are represented by •	The Association of Chartered Certified Accountants (ACCA) Due to the existence of several major chartered accountancy bodies, in the UK, "Chartered Accountant", legally speaking, refers only to member of ICAEW, ICAS or ICAI, while members of ACCA are called Chartered Certified Accountant or Certified Accountant. Each of these bodies admits members only after passing examinations and undergoing a period of relevant work experience. Once admitted, members are expected to comply with ethical guidelines and gain appropriate continuing professional experience. Chartered Accountants (or/and Chartered Certified Accountants) who engage in public practice work (i.e. selling services to the public rather than acting as an employee) must gain a "practicing certificate" by meeting further requirements such as purchasing adequate insurance and undergoing regular inspections. Chartered Accountants holding "practicing certificates" may also become "Registered Auditors", providing they can demonstrate the necessary professional ability in that area. A Registered Auditor is able to perform statutory audits in accordance with the Companies Act 1985. Further restrictions apply to accountants who carry out insolvency work. Republic of Ireland In the Republic of Ireland, Chartered Accountants are generally members of the Institute of Chartered Accountants in Ireland and use the designator letters ACA or FCA. Chartered Accountants may also be members of the Institute of Chartered Accountants in England and Wales or the Institute of Chartered Accountants of Scotland. EU accountants Under the Mutual Recognition Directive, EEA and Swiss nationals holding a professional qualification can become members of the equivalent bodies in another member state. They must, however, pass an aptitude test in understanding local conditions (which for accountants will include local tax and company law variations). The local title is however not available for use if the professional does not choose to join the local professional body. For example a holder of the French 'expert computable' qualification could practice as an accountant in England without taking a local test but could only describe him/herself as "Expert Computable (France)" not "Chartered Accountant". Within the EEA, only the UK and Ireland have bodies that issue the Chartered Accountant title. Australia Chartered Accountants in Australia belong to the Institute of Chartered Accountants of Australia and use the designator letters CA. Some senior members of the Institute may be elected Fellows and use the letters FCA. New Zealand In New Zealand, Chartered Accountants belong to the New Zealand Institute of Chartered Accountants and use the designator letters CA. Some senior members may be elected Fellows and use the letters FCA. There is also a mid-tier qualification called Associate Chartered Accountant with the designator letters ACA. Associate Chartered Accountants are not eligible to hold a Certificate of Public Practice and therefore cannot offer services to the public. Canada In Canada, Chartered Accountants must be members of the Canadian Institute of Chartered Accountants (CICA). However, CICA membership must be held alongside membership of at least one CA institute (or order in French) of a Canadian province or territory. It is not possible to join the CICA directly. Auditing rights are regulated by provincial governments. In British Columbia, the Business Corporations Act (which had replaced the longstanding Company Act) provides that only CAs, CGAs (Certified General Accountants), or anyone who has been granted an accounting licence by the provincial regulatory body may audit public companies. In Prince Edward Island, only qualified CAs and CGAs can perform public accounting and auditing in accordance with the Public Accounting and Auditing Act. In all other provinces, except Quebec and Ontario (detailed below), only qualified CAs, CGAs, and CMAs (Certified Management Accountants) may audit public companies. Historically Quebec and Ontario only allowed CAs to audit public companies. However, CGAs and CMAs can audit a selected list of public bodies in Quebec. In 2004, the Ontario government passed legislation that would enable CAs, CGAs and CMAs to practice public accounting under a reconstituted Public Accountants Council. Only qualified CGAs, CMAs and CAs can be eligible for public accounting licenses. In Quebec, the situation is currently under review and challenge based on the Agreement of Internal Trade (AIT). In August 2005, the AIT issued a report recommending Quebec to change its legislation by opening public auditing to qualified accountants who are not CAs. The size of the accounting bodies varies across Canada. In Ontario and Quebec, CA is larger than CGA or CMA; however CGA is the fastest growing amongst the three bodies. In Manitoba and British Columbia, CGA is the largest accounting body. Canadian Chartered Accountants use the designator letters CA. However, a Canadian CA who is a member of a different institute/order to that of the province or territory in which he resides may face a restriction on using designator letters in that province or territory. It is however normally straightforward to transfer membership from one provincial institute to another. The Canadian CA is one of the few accounting destinations that can be transferred to an American CPA.

South Africa In South Africa only one accounting body manages the designation CA (SA) {Chartered Accountant (South Africa)} namely SAICA (South African Institute of Chartered Accountants). A separate registration is needed for Chartered Accountants wishing to act as Auditors, namely RA (Registered Auditor). The RA Designation are controlled by IRBA (Independent Regulatory Board For Auditors), previously known as PAAB (Public Accountants and Auditors Board.). The public are often mistaken by thinking that all Chartered Accountants may act as Auditors. Since TOPP (Training outside Public Practice) originated, a great number of members earned the designation Chartered Accountant with no knowledge or experience in Auditing. These Chartered Accountants specialize in financial management and almost exclusively act as financial directors or managers for large corporations. To attain a CA (SA) qualification one must complete 3 years of 'articles' experience. That is one must work for a registered training office for that period. Article clerks who switch employers during this period have those 3 years extended by 6 months. After completing a relevant degree, normally a bachelors in accounting, and completing a CTA (Certificate for Theory in Accounting), part one (QE) and part two (PPE) of the qualifying exams must be completed before finally qualifying as a CA (SA). A discussion forum for Chartered Accountancy (SA) could assist for anyone who has relevant questions to ask. CA Forum - a discussion for Chartered Accountancy in South Africa India In India, the profession of chartered accountancy is regulated by the Institute of Chartered Accountants of India which was founded under the Chartered Accountants Act of 1949. The ICAI is responsible for examinations and licensing of it members. Members are awarded the C.A. (Chartered Accountants) designation. The Chartered Accountants Act, 1949 was passed on May 1. The term Chartered Accountant came to be used in place of Indian Registered Accountants. So the term "Chartered" does not relate to Royal Charter as in case in UK or Australia as there is no Royal Charter in the Republic of India. A person shall be awarded the [C.A.] after passing the relevant examinations and completion of three and a half years of article ship training (apprenticeship)[2]. This is to ensure that trainees have a mix of theoretical and practical training before they become members. Statutory Audit under the Companies Act, 1956 and Tax Audit under the Income-Tax Act, 1961 can be carried out only by Chartered Accountants holding a Certificate of Practice. The ICAI has also entered into Mutual Recognition Agreements with several overseas accounting bodies. E.g. the CECA with Singapore. The Institute is in process for opening up with various other countries and governments. Pakistan Institute of Chartered Accountants of Pakistan (ICAP) was established on July 1, 1959 to regulate the profession of accountancy in the Country. It is a statutory autonomous body established under the Chartered Accountants Ordinance 1961.With the significant growth in the profession, the CA Ordinance and Bye-Laws were revised in 1983. In view of globalization of the accountancy profession, the Institute is in the process of updating the Ordinance and Bye-Laws once again. The head office of the Institute is in Clifton, Karachi in its own premises. The Institute also has regional offices at Lahore and Islamabad. The ICAP is a member of International Federation of Accountants (IFAC), International Accounting Standards Board (IASB), Confederation of an Asian & Pacific Accountants (CAPA) and South Asian Federation of Accountants (SAFA). Brief History of the Institute The accountancy profession in this subcontinent originated with the concepts of limited liability and statutory audit which were introduced in the subcontinent with the promulgation of the Companies Acts in 1850 and 1857. However, the accountancy profession took some discernible shape in early part of the current century and in 1920 the Government of India formed an Indian Accountancy Board to advise the government on the conduct and development of this profession. The Auditor's Certificate Rules were published in 1932 whereby government authorities sought to regulate the accountancy profession. When Pakistan came in existence in 1947, the 1932 Auditors Certificate Rules were adopted temporarily. In 1950 a new set of Auditor's Certificate Rules mainly based on the old rules, was published for regulating the profession in Pakistan. A person who satisfied the conditions laid down regarding practical training and theoretical knowledge could have his name placed on the register maintained by the Ministry of Commerce and was entitled to use the designation Registered Accountant". The Companies act in force allowed only a Registered Accountant to act as the auditor of a public company. In 1952 the Registered Accountants formed a body known as the Pakistan Institute of Accountants to look after their interest and to take up with the Ministry of Commerce matters affecting the profession. The Government began to realize that the accountancy profession was growing in importance and in June 1959 the Department of Accountancy was set up in the Ministry of Commerce with a Controller of Accountancy to deal with the profession instead of a Section Officer. In 1961 The Institute of Chartered Accountants of Pakistan was formed as a statutory autonomous body. Sri Lanka Chartered Accountants in Sri Lanka belong to the Institute of Chartered Accountants of Sri Lanka and use the designator letters ACA. Some senior members of the Institute may be elected Fellows and use the letters FCA

Cost Accounting
Cost accounting In management accounting, cost accounting is the process of tracking, recording and analyzing costs associated with the products or activities of an organization. Managers use cost accounting to support decision making to reduce a company's costs and improve its profitability. As a form of management accounting, cost accounting need not follow standards such as GAAP, because its primary use is for internal managers, rather than external users, and what to compute is instead decided pragmatically. Costs are measured in units of nominal currency by convention. Cost accounting can be viewed as translating the Supply Chain (the series of events in the production process that, in concert, result in a product) into financial values. There are at least four approaches: •	Standardized Cost Accounting •	Activity-based Costing •	Throughput Accounting •	Marginal Costing / Cost-Volume-Profit Analysis Classical Cost Elements are: 1.	Raw Materials 2.	Labor 3.	Indirect Expenses / Overhead Origins Cost accounting has long been used to help managers understand the costs of running a business. Modern cost accounting originated during the industrial revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions. In the early industrial age, most of the costs incurred by a business were what modern accountants call "variable costs" because they varied directly with the amount of production. Money was spent on labor, raw materials, power to run a factory, etc. in direct proportion to production. Managers could simply total the variable costs for a product and use this as a rough guide for decision-making processes. Some costs tend to remain the same even during busy periods, unlike variable costs which rise and fall with volume of work. Over time, the importance of these "fixed costs" has become more important to managers. Examples of fixed costs include the depreciation of plant and equipment, and the cost of departments such as maintenance, tooling, production control, purchasing, quality control, storage and handling, plant supervision and engineering. In the early twentieth century, these costs were of little importance to most businesses. However, in the twenty-first century, these costs are often more important than the variable cost of a product, and allocating them to a broad range of products can lead to bad decision making. Managers must understand fixed costs in order to make decisions about products and pricing. For example: A company produced railway coaches and had only one product. To make each coach, the company needed to purchase $60 of raw materials and components, and pay 6 laborers $40 each. Therefore, total variable cost for each coach was $300. Knowing that making a coach required spending $300; managers knew they couldn't sell below that price without losing money on each coach. Any price above $300 became a contribution to the fixed costs of the company. If the fixed costs were, say, $1000 per month for rent, insurance and owner's salary, the company could therefore sell 5 coaches per month for a total of $3000 (priced at $600 each), or 10 coaches for a total of $4500 (priced at $450 each), and make a profit of $500 in both cases. Standard Cost Accounting In modern cost accounting, the concept of recording historical costs was taken further, by allocating the company's fixed costs over a given period of time to the items produced during that period, and recording the result as the total cost of production. This allowed the full cost of products that were not sold in the period they were produced to be recorded in inventory using a variety of complex accounting methods, which was consistent with the principles of GAAP. It also essentially enabled managers to ignore the fixed costs, and look at the results of each period in relation to the "standard cost" for any given product. For example: if the railway coach company normally produced 40 coaches per month, and the fixed costs were still $1000/month, then each coach could be said to incur an overhead of $25 ($1000/40). Adding this to the variable costs of $300 per coach produced a full cost of $325 per coach. This method tended to slightly distort the resulting unit cost, but in mass-production industries that made one product line, and where the fixed costs were relatively low, the distortion was very minor. For example: if the railway coach company made 100 coaches one month, then the unit cost would become $310 per coach ($300 + ($1000/100)). If the next month the company made 50 coaches, then the unit cost = $320 per coach ($300 + ($1000/50)), a relatively minor difference. An important part of standard cost accounting is a variance analysis which breaks down the variation between actual cost and standard costs into various components (volume variation, material cost variation, labor cost variation, etc.) so managers can understand why costs were different from what was planned and take appropriate action to correct the situation. Weaknesses of Standard Cost Accounting for Management Decision Making As time went on, standard cost accounting lost its usefulness for management decision making due to a variety of reasons: •	The practice of paying workers on a 'set-piece' basis changed in favor of paying on an hourly rate. •	Modern companies tend to have relatively low truly variable costs (primarily raw material, commissions or casual workers) and very high fixed costs (worker salaries, engineering costs, quality control, etc.). •	Equipment has become more complex and specialized and may be a very significant proportion of total costs. •	Changes in the level of full cost inventory create swings in profitability that are difficult to explain or understand. An increase in inventory can "absorb" costs of production and increase profits, while a decrease in inventory level will decrease profits. •	Organizations with a wide range of products or services have processes which are common to several finished items, making cost allocation irrelevant or misleading. As a result of the above, using standard cost accounting to analyze management decisions can distort the unit cost figures in ways that can lead managers to make decisions that do not reduce costs or maximize profits. For this reason, managers often use the terms "direct costs" and "indirect costs" to replace the standard costing, to better reflect the way allocation of overhead is actually calculated. Indirect costs (often large) are usually allocated in proportion to labor cost, other direct costs, or some physical resource utilization. For example: If the railway coach company now paid its workforce a fixed monthly rate of $8,000 (total) and its other fixed costs had risen to $2,600/month, the total fixed costs would then be $10,600/month. The unit cost to make 40 coaches per month would still be $325 per coach ($60 material + ($10,600/40)), but producing 100 coaches would result in a unit cost of $166 per coach ($60 + ($10, 600/100)), provided the company had the capacity to increase production to that level. Managers using the standard cost for 40 coaches per month would likely reject an order for 100 coaches (to be produced in one month) if the selling price was only $300 per unit, seeing that it would result in a loss of $25 per unit. If they analyzed the fixed vs. variable cost distinction, they would see clearly that filling this order would result in a contribution to fixed costs of $240 per coach ($300 selling price less $60 materials) and would result in a net profit for the month of $13,400 (($240 x 100) - 10,600). The Development of Throughput Accounting Main article: Throughput accounting As business became more complex and began producing a greater variety of products, the use of cost accounting to make decisions to maximize profitability came under question. Management circles became increasingly aware of the Theory of Constraints in the 1980s, and began to understand that "every production process has a limiting factor" somewhere in the chain of production. As business management learned to identify the constraints, they increasingly adopted throughput accounting to manage them and "maximize the throughput dollars" (or other currency) from each unit of constrained resource. For example: The railway coach company was offered a contract to make 15 open-topped streetcars each month, using a design which included ornate brass foundry work, but very little of the metalwork needed to produce a covered rail coach. The buyer offered to pay $280 per streetcar. The company had a firm order for 40 rail coaches each month for $350 per unit. The company accountant determined that the cost of operating the foundry vs. the metalwork shop each month was as follows: Overhead Cost by Department	Total Cost	Hours Available per month	Cost per hour Foundry	$ 7,300.00	160	$45.63 Metal shop	$ 3,300.00	160	$20.63 Total	$10,600.00	320	$33.13 The company was at full capacity making 40 rail coaches each month. And since the foundry was expensive to operate, and purchasing brass as a raw material for the streetcars was expensive, the accountant determined that the company would lose money on any streetcars it built. He showed an analysis of the estimated product costs based on standard cost accounting and recommended that the company decline to build any streetcars.

Standard Cost Accounting Analysis	Streetcars	Rail coach Monthly Demand	15	40 Price	$280	$350 Foundry Time (hrs)	3.0	2.0 Metalwork Time (hrs)	1.5	4.0 Total Time	4.5	6.0 Foundry Cost	$136.88	$ 91.25 Metalwork Cost	$ 30.94	$ 82.50 Raw Material Cost	$120.00	$ 60.00 Total Cost	$287.81	$233.75 Profit per Unit	$ (7.81)	$116.25

However, the company's operations manager knew that recent investment in automated foundry equipment had created idle time for workers in that department. The constraint on production of the rail coaches was the metalwork shop. She made an analysis of profit and loss if the company took the contract using throughput accounting to determine the profitability of products by calculating "throughput" (revenue less variable cost) in the metal shop.

Throughput Cost Accounting Analysis	Decline Contract	Take Contract Coaches Produced	40	34 Streetcars Produced	0	15 Foundry Hours	80	113 Metal shop Hours	160	159 Coach Revenue	$14,000	$11,900 Streetcar Revenue	$ 0	$ 4,200 Coach Raw Material Cost	$(2,400)	$(2,040) Streetcar Raw Material Cost	$ 0	$(1,800) Throughput Value	$11,600	$12,260 Overhead Expense	$(10,600)	$(10,600) Profit	$1,000	$1,660

After the presentations from the company accountant and the operations manager, the president understood that the metal shop capacity was limiting the company's profitability. The company could make only 40 rail coaches per month. But by taking the contract for the streetcars, the company could make nearly all the railway coaches ordered, and also meet all the demand for streetcars. The result would increase throughput in the metal shop from $6.25 to $10.38 per hour of available time, and increase profitability by 66 percent. Activity-based costing Main article: Activity-based costing Activity-based costing (ABC) is a system for assigning costs to products based on the activities they require. In this case, activities are those regular actions performed inside a company. "Talking with customer regarding invoice questions" is an example of an activity performed inside most companies. Accountants assign 100% of each employee's time to the different activities performed inside a company (many will use surveys to have the workers themselves assign their time to the different activities). The accountant then can determine the total cost spent on each activity by summing up the percentage of each worker's salary spent on that activity. A company can use the resulting activity cost data to determine where to focus their operational improvement efforts. For example, a job based manufacturer may find that a high percentage of their workers are spending their time trying to figure out a hastily written customer order. Via ABC, the accountants now have a currency amount that will be associated with the activity of "Researching Customer Work Order Specifications". Senior management can now decide how much focus or money to budget for the resolutions of this process deficiency. Activity-based management includes (but is not restricted to) the use of activity-based costing to manage a business. Marginal Costing See also: Cost-Volume-Profit Analysis See also: Marginal cost This method is used particularly for short-term decision-making. Its principal tenets are: •	Revenue (per product) - Variable Costs (per product) = Contribution (per product) •	Total Contribution - Total Fixed Costs = Total Profit or (Total Loss) Thus it does not attempt to allocate fixed costs in an arbitrary manner to different products. The short-term objective is to maximize contribution per unit. If constraints exist on resources, then Managerial Accounting dictates that marginal cost analysis be employed to maximize contribution per unit of the constrained resource (see Development of Throughput Accounting, above).

Enviromental Accounting
Environmental accounting

Environmental accounting can be considered either a subset or superset of accounting proper, because it aims to incorporate both economic and environmental information. It can operate at the company level or at the level of the national economy via links to the National Accounts of countries [1] (among other things, the National Accounts produce the estimates of Gross Domestic Product otherwise known as GDP). Environmental Accounting is a growing field that identifies resource use, measures and communicates costs of a company’s or national economy actual or potential impact on the environment. Costs can include costs to clean up or remediate contaminated sites, environmental fines, penalties and taxes, purchase of pollution prevention technologies and waste management costs. An environmental accounting system is composed of environmentally differentiated conventional accounting and ecological accounting. Environmentally differentiated accounting measures impacts of the natural environment on a company in monetary terms. Ecological accounting measures the impact a company has on the environment, but in physical units (e.g. kilograms of waste produced, kilojoules of energy consumed) rather than in monetary units. Why environmental accounting? There are several reasons why businesses may consider adopting environmental accounting as part of their accounting system. 1.	Possible significant reduction or elimination of environmental costs 2.	Environmental costs and benefits may be overlooked or hidden in overhead accounts 3.	Possible revenue generation may offset environmental costs (e.g. transfer of pollution allowances) 4.	Improved environmental performance which may have a positive impact on human health and business success 5.	May result in more accurate costing or pricing of products and more environmentally desired processes 6.	Possible competitive advantages as customers may prefer environmentally friendly products and services 7.	Can support the development and running of an overall environmental management system, which may be required by regulation for some types of businesses. [2] Different environmental accounting disciplines Environmental accounting can be broken down in to three disciplines: Global Environmental Accounting, National Environmental Accounting and Corporate Environmental Accounting. Corporate Environmental Accounting can be further sub-divided in to Environmental Management Accounting and Environmental Financial Accounting. Global Environmental Accounting Global environmental accounting is an accounting methodology that deals with energetic, ecology and economics at a global scale. The earth is the system of interest with the input, sequestration, and dissipation of solar energy - which constitute its energy budget (Odum 1996, Tennenbaum 1988). National Environmental Accounting National environmental accounting is an accounting approach that deals with economics on a national level. National environmental accounting is a macroeconomic measure that looks at the use of natural resources and the impacts of national policies on the environment. [3] [4]. Internationally environmental accounting has been formalized into the System of Integrated Environmental and Economic Accounting, known as SEEA [5]. SEEA grows out of the System of National Accounts. The SEEA records the flows of raw materials (water, energy, minerals, wood, etc.) from the environment to the economy, the exchanges of these materials within the economy and the returns of wastes and pollutants to the environment. Also recorded are the prices or shadow prices for these materials as are environment protection expenditures. SEEA is used by 49 countries around the world [6]. Corporate Environmental Accounting In contrast to national environmental accounting, corporate environmental accounting focuses on the cost structure and environmental performance of a company. [7] Environmental management accounting Environmental management accounting is used by companies to make internal business strategy decisions. It can be defined as: “…the identification, collection, analysis, and use of two types of information for internal decision making: 1) Physical information on the use, flows and fates of energy, water and materials (including wastes) and 2) Monetary information on environmentally related costs, earnings and savings.” [8] As part of an Environmental Management Accounting (EMA) Project in the State of Victoria, Australia, four case studies were undertaken in 2002 involving a school (Methodist Ladies College, Perth), plastics manufacturing company (Cormack Manufacturing Pty Ltd, Sydney), provider of office services (a service division of AMP, Australia wide) and wool processing (GH Michell & Sons Pty Ltd, Adelaide). Four major accounting professionals and firms were involved in the project; KPMG (Melbourne), Price Waterhouse Coopers (Sydney), Professor Craig Deegan, RMIT University (Melbourne) and BDO Consultants Pty Ltd (Perth). In February 2003, John Thwaites, The Victorian Minister for the Environment launched the report which summarised the results of the studies; Environmental Management Accounting: An Introduction and Case Studies (Adobe PDF file, 446KB). These studies were also supported by the Department of Environment and Heritage of the Australian Federal Government, and appear to have applied some of the principles outlined in The United Nations Division for Sustainable Development publication Environmental Management Accounting Procedures and Principles (2001) Environmental financial accounting Environmental financial accounting is used to provide information needed by external stakeholders on a company’s financial status. This type of accounting allows companies to prepare financial reports for investors, lenders and other interested parties.[9] Examples of environmental accounting systems Emisoft's TEAMS - Total Environmental Accounting and Management System Green Accounting for Indian States Project

Financial Accounting
Financial accountancy

Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. The fundamental need for financial accounting is to reduce principal-agent problem by measuring and monitoring agents' performance and reporting the results to interested users. Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company. Managerial accounting provides accounting information to help managers make decisions to manage the business. Financial accountancy is governed by both local and international accounting standards. Basic accounting concepts Financial accountants produce financial statements based on Generally Accepted Accounting Principles (GAAP) of a respective country. Financial accounting serves following purposes: •	producing general purpose financial statements •	provision of information used by management of a business entity for decision making, planning and performance evaluation •	for meeting regulatory requirements FRS 5 & SSAP 2 & fundamental accounting concepts •	Understanding the fundamental accounting concepts Graphic definition The accounting equation (Assets = Liabilities + Owners' Equity) and financial statements are the main topics of financial accounting. The trial balance which is usually prepared using the Double-entry accounting system forms the basis for preparing the financial statements. All the figures in the trial balance are rearranged to prepare a profit & loss statement and balance sheet. There are certain accounting standards that determine the format for these accounts (SSAP, FRS, IFS). The financial statements will display the income and expenditure for the company and a summary of the assets, liabilities, and shareholders or owners’ equity of the company on the date the accounts were prepared to. Assets, Expenses, and Withdrawals have normal debit balances (when you debit these types of accounts you add to them)...remember the word AWED which represents the first letter of each type of account. Liabilities, Revenues, and Capital have normal credit balances (when you credit these you add to them). Or 0 = Dr Assets                           Cr Owners' Equity                 Cr Liabilities .      _____________________________/\____________________________       .          .      /    Cr Retained Earnings (profit)         Cr Common Stock  \. .   _________________/\_______________________________                      Cr Revenue. .     \________________________/  \______________________________________________________/       Increased by debits           increased by credits

Crediting a credit Thus -> account increases its absolute value (balance) Debiting a debit

Debiting a credit Thus -> account decreases its absolute value (balance) Crediting a debit When you do the same thing to an account as its normal balance it increases; when you do the opposite, it will decrease. Much like signs in math: two positive numbers are added and two negative numbers are also added. It is only when you have one positive and one negative (opposites) that you will subtract. Meaning of the accounting equation The value of a company can be understood simply as the useful assets that ownership of a company entitles one to claim. This value is known as Owners' Equity. Some assets of a company, however, cannot be claimed as equity by the owners of a company because other people have legal claim to them - for example if the company has borrowed money from the bank. The value of a resource claimable by a non-owner is called a liability. All of the Assets of a company can be claimed by someone, whether owner or not, so the sum of a company's equity and its liabilities must equal the value of its Assets. Thus the accounting equation describes what portion of a company's assets can be claimed by the owners. Various account types are classified as 'credit' or 'debit' depending on the role they play in the accounting equation. Assets = Liabilities + Equity or Assets - Liabilities - Equity = 0 Another way of stating it is: Equity = Assets - Liabilities Which can be interpreted as: "Equity is what is left if all assets have been sold and all liabilities have been paid".

Forensic Accounting
Forensic accounting Forensic Accounting is the specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that Forensic Accountants generally have to work. Forensic Accountants also referred to as Forensic Auditors or Investigative Auditors, often have to give expert evidence at the eventual trial. All of the larger accounting firms, as well as many medium-sized and boutique firms, have specialist Forensic Accounting departments. Within these groups, there may be further sub-specializations: some Forensic Accountants may, for example, just specialize in insurance claims, personal injury claims, fraud, construction, or royalty audits. Categories and Examples Engagements relating to civil disputes may fall into several categories: calculating and quantifying losses and economic damages, whether suffered through tort or breach of contract; disagreements relating to company acquisitions—perhaps earn outs or breaches of warranties; and business valuation. Forensic Accountants often assist in professional negligence claims where they are assessing and commenting on the work of other professionals. Engagements relating to criminal matters typically arise in the aftermath of fraud. They frequently involve the assessment of accounting systems and accounts presentation—in essence assessing if the numbers reflect reality. Three public high-profile examples of cases in which Forensic Accounting has been essential to revealing possible illegal activities are the Los Gatos Union Elementary School District Audit, The Compton Community College School District Audit, and The City of Cape Coral Utilities Expansion Review. In all of these cases, Forensic Auditing coupled with investigative procedures produced evidence that fraud or misappropriation of funds may have occurred. See external links below for the FCMAT audits. Forensic Accountants Forensic Accountants may be involved in recovering proceeds of crime and in relation to confiscation proceedings concerning actual or assumed proceeds of crime or money laundering. In the United Kingdom, relevant legislation is contained in the Proceeds of Crime Act 2002. In India there is a separate breed of forensic accountants called as Certified Forensic Accounting Professionals. Some Forensic Accountants are also Certified Fraud Examiners and/or Certified Public Accountants. Forensic Accountants utilize an understanding of business information and financial reporting systems, accounting and auditing standards and procedures, evidence gathering and investigative techniques, and litigation processes and procedures to perform their work. Forensic Accountants are also increasingly playing more proactive risk reduction roles by designing and performing extended procedures as part of the statutory audit, acting as advisers to audit committees, fraud deterrence engagements, and assisting in investment analyst research. Licensure Requirements As Forensic Accounting occasionally falls within the scope of Private Investigation, some states require specialized certifications and licenses to work within the field. But in most cases, accountants can perform Forensic audits without a private investigator license

Management Accounting
Management accounting Management accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis in making informed business decisions that would allow them to be better equipped in their management and control functions. In contrast to financial accountancy information, management accounting information is: •	usually confidential and used by management, instead of publicly reported; •	forward-looking, instead of historical; •	Pragmatically computed, instead of complying with accounting standards. This is because of the different emphasis: management accounting information is used within an organization, typically for decision-making. Definition According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non management groups such as shareholders, creditors, regulatory agencies and tax authorities" (CIMA Official Terminology)

The American Institute of Certified Public Accountants(AICPA) states that management accounting practice extends to the following three areas:
 * Strategic Management—Advancing the role of the management accountant as a strategic partner in the organization.
 * Performance Management—developing the practice of business decision-making and managing the performance of the organization.
 * Risk Management—contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.

The Institute of Certified Management Accountants (ICMA), state "A management accountant applies his or her professional knowledge and skill in the preparation and presentation of financial and other decision oriented information in such a way as to assist management in the formulation of policies and in the planning and control of the operation of the undertaking. Management Accountants therefore are seen as the "value-creators" amongst the accountants. They are much more interested in forward looking and taking decisions that will affect the future of the organization, than in the historical recording and compliance (scorekeeping) aspects of the profession. Management accounting knowledge and experience can therefore be obtained from varied fields and functions within an organization, such as information management, treasury, efficiency auditing, marketing, valuation, pricing, logistics, etc." Aims 1.	Formulating strategies; 2.	Planning and constructing business activities; 3.	Helps in making decision; 4.	Optimal use of resources; 5.	Supporting financial reports preparation; and 6.	Safeguarding asset Traditional vs. innovative management accounting practices In the late 1980s, accounting practitioners and educators were heavily criticized on the grounds that management accounting practices (and, even more so, the curriculum taught to accounting students) had changed little over the preceding 60 years, despite radical changes in the business environment. Professional accounting institutes, perhaps fearing that management accountants would increasingly be seen as superfluous in business organizations, subsequently devoted considerable resources to the development of a more innovative skills set for management accountants. The distinction between ‘traditional’ and ‘innovative’ management accounting practices can be illustrated by reference to cost control techniques. Cost accounting is a central method in management accounting, and traditionally, management accountants’ principal technique was variance analysis, which is a systematic approach to the comparison of the actual and budgeted costs of the raw materials and labor used during a production period. While some form of variance analysis is still used by most manufacturing firms, it nowadays tends to be used in conjunction with innovative techniques such as life cycle cost analysis and activity-based costing, which are designed with specific aspects of the modern business environment in mind. Lifecycle costing recognizes that managers’ ability to influence the cost of manufacturing a product is at its greatest when the product is still at the design stage of its product lifecycle (i.e., before the design has been finalized and production commenced), since small changes to the product design may lead to significant savings in the cost of manufacturing the product. Activity-based costing (ABC) recognizes that, in modern factories, most manufacturing costs are determined by the amount of ‘activities’ (e.g., the number of production runs per month, and the amount of production equipment idle time) and that the key to effective cost control is therefore optimizing the efficiency of these activities. Activity-based accounting is also known as Cause and Effect accounting. Both lifecycle costing and activity-based costing recognize that, in the typical modern factory, the avoidance of disruptive events (such as machine breakdowns and quality control failures) is of far greater importance than (for example) reducing the costs of raw materials. Activity-based costing also deemphasizes direct labor as a cost driver and concentrates instead on activities that drive costs, such as the provision of a service or the production of a product component. Role of Management Accountants within the Corporation Consistent with other roles in today's corporation, management accountants have a dual reporting relationship. As a strategic partner and provider of decision based financial information, management accountants are responsible to the business management team while at the same time also have reporting relationships and responsibilities to the corporation's finance organization. The activities management accountants provide inclusive of forecasting and planning, performing variance analysis, reviewing and monitoring costs inherent in the business are ones that have dual accountability to both finance and the business team. Examples of tasks where accountability may be more meaningful to the business management team vs. the corporate finance department are the development of business driver metrics, sales management score carding, and client profitability analysis. Conversely, the preparation of certain financial reports, reconciliations of the financial data to source systems, risk and regulatory reporting will be more useful to the corporate finance team as they are charged with aggregating certain financial information from all segments of the corporation. One widely held view of the progression of the accounting and finance career path is that financial accounting is a stepping stone to management accounting. Consistent with the notion of value creation, management accountants help drive the success of the business while strict financial accounting is more of a compliance and historical endeavor. An alternative view of management accounting A very rarely expressed alternative view of management accounting is that it is neither a neutral or benign influence in organizations, rather a mechanism for management control through surveillance. This view locates management accounting specifically in the context of management control theory. Specific Concepts Throughput accounting The most significant recent direction in managerial accounting is throughput accounting, which recognizes the interdependencies of modern production processes and provide managers with a tool that will allow them to measure the contribution per unit of constrained resource for any given product, customer or supplier. (For a detailed description of Throughput Accounting, see cost accounting). Lean accounting (accounting for lean enterprise) In the mid to late 1990s several books were written about accounting in the lean enterprise (companies implementing elements of the Toyota Production System). The term lean accounting was coined during that period. These books contest that traditional accounting methods are better suited for mass production and do not support or measure good business practices in just in time manufacturing and services. The movement reached a tipping point during the 2005 Lean Accounting Summit in Dearborn, MI. 320 individuals attended and discussed the merits of a new approach to accounting in the lean enterprise. 520 individuals attended the 2nd annual conference in 2006. Transfer Pricing Management accounting is an applied discipline used in various industries. The specific functions and principles followed can vary based on the industry. Management accounting principles in banking are specialized but do have some common fundamental concepts used whether the industry is manufacturing based or service oriented. For example, transfer pricing is a concept used in manufacturing but is also applied in banking. It is a fundamental principle used in assigning value and revenue attribution to the various business units. Essentially, transfer pricing in banking is the method of assigning the interest rate risk of the bank to the various funding sources and uses of the enterprise. Thus, the bank's corporate treasury department will assign funding charges to the business units for their use of the bank's resources when they make loans to clients. The treasury department will also assign funding credit or business units who bring in deposits (resources) to the bank. Although the funds transfer pricing process is primarily applicable to the loans and deposits of the various banking units, this proactive is applied to all assets and liabilities of the business segment. Once transfer pricing is applied and any other management accounting entries or adjustments are posted to the ledger (which are usually memo accounts and are not included in the legal entity results), the business units are able to produce segment financial results which are used by both internal and external users to evaluate performance.

Resources and Continuous Learning There are a variety of ways to keep current and continue to build the knowledge base in the field of management accounting. Certified Management Accountants are required to achieve continuing education hours every year, similar to a Certified Public Accountant. A company may also have research and training materials available for use in a corporate owned library. This is more common in larger "Fortune 500" companies who have the resources to fund this type of training medium. There are also numerous publications and on-line articles and blogs available. The Institute of Management Accounting (IMA) site http://www.imanet.org/publications_maq.asp is one such source which includes the Management Accounting Quarterly publication.

Management Accounting Tasks/ Services Provided Listed below are the primary tasks/ services performed by management accountants. The degrees of complexity relative to these activities are dependant on the experience level and abilities of any one individual. •	Variance Analysis •	Rate & Volume Analysis •	Business Metrics Development •	Price Modeling •	Product Profitability •	Geographic vs. Industry or Client Segment Reporting •	Sales Management Scorecards •	Cost Analysis •	Cost Benefit Analysis •	Client Profitability Analysis •	Capital Budgeting •	Buy vs. Lease Analysis •	Strategic Planning •	Strategic Management Advise •	Internal Financial Presentation and Communication •	Sales and Financial Forecasting •	Annual Budgeting •	Cost Allocation •	Resource Allocation and Utilization

Related qualifications •	There are several related professional qualifications in the field of accountancy including: o	Management Accountancy Qualifications 	CIMA 	ICMA 	CMA 	Institute of Cost and Works Accountants of India 	AAFM •	o	Other Professional Accountancy Qualifications 	Chartered Certified Accountant, (ACCA) 	Chartered Accountant, (CA) 	Certified Public Accountant, (CPA) 	American Institute of Certified Public Accountants 	Certified Practicing Accountant (CPA Australia) See also Cost accounting •	Cost accounting •	Standard costing •	Cost-Volume-Profit Analysis •	Activity-based costing •	Life cycle cost analysis Methods •	Lean accounting •	Throughput accounting •	Transfer pricing Misc •	Budgetary control •	Inventory control •	Investment appraisal •	Pricing decision •	Newsoul Lapaix

Positive Accounting
Positive accounting Positive accounting is the branch of academic research in accounting that seeks to explain and predict actual accounting practices. These contrasts with normative accounting, that seeks to derive and prescribe "optimal" accounting standards. Positive accounting can be associated with the contractual view of the firm.[1][2] The firm is viewed as “a nexus of contracts” and accounting one tool to facilitate the formation and performance of contracts. Under this view, accounting practices evolve to mitigate contracting costs by establishing ex ante agreement among varying parties. For example, positive accounting postulates that conservatism in accounting –in this sense defined conditionally as requiring lower (higher) standards of verifiability to recognize losses (gains)– has origins in contract markets, including managerial compensation contracts and lender debt contracts. As an example, absent conservatism, managerial compensation agreements may reward managers based on current reports that later evidence indicate were unwarranted. The contractual view of positive accounting puts it in tension with value relevance studies in accounting: the latter contend that accounting’s primary role is to value the firm, and thus practices like conservatism are sub-optimal. The value relevance school emphasizes the usefulness of accounting information to equity investors in contrast to its usefulness in contracting exercises. Positive accounting emerged with empirical studies that proliferated in accounting in the late 1960s. It was organized as an academic school of thought of discipline by the work of Ross Watts and Jerold Zimmerman (in 1978 and 1986) at the William E. Simon School of Business Administration at the University of Rochester, and by the founding of the Journal of Accounting and Economics in 1979. When published, the pioneering articles were greeted with considerable criticism.

Project Accounting
Project accounting Project accounting (sometimes referred to as job cost accounting) is the practice of creating financial reports specifically designed to track the financial progress of projects, which can then be used by managers to aid project management. Standard accounting is primarily aimed at monitoring financial progress of organizational elements (geographical or functional departments, divisions and the enterprise as a whole) over defined time periods (typically weeks, months, quarters and years). Projects differ in that they frequently cross organizational boundaries, may last for anything from a few days or weeks to a number of years, during which time budgets may also be revised many times. They may also be one of a number of projects that make up a larger overall project or program. Consequently, in a project management environment costs (both direct and overhead) and revenues are also allocated to projects, which may be subdivided into a work breakdown structure, and grouped together into project hierarchies. Project accounting permits reporting at any such level that has been defined, and often allows comparison with historical as well as current budgets. Project accounting is commonly use at government contractors, where the ability to account for costs by contract (and sometimes contract line item, or CLIN) is usually a requirement for interim payments. Percentage-of-completion is frequently independently assessed by a project manager. Funding advances and actual-to-budget cost variances are calculated using the project budget adjusted to percent-of-completion. Where labor costs are a significant portion of overall project cost, it is usually necessary for employees to fill out a timesheet in order to generate the data to allocate project costs. The capital budget processes of corporations and governments are chiefly concerned with major investment projects that typically have upfront costs and longer term benefits. Investment go / no-go decisions are largely based on net present value assessments. Project accounting of the costs and benefits can provide crucially important feedback on the quality of these important decisions. An interesting specialized form of project accounting is production accounting, which tracks the costs of individual movie and television episode film production costs. A movie studio will employ production accounting to track the costs of its many separate projects

Tax Accounting
Tax accounting Tax accounting refers to accounting for tax purposes. Universally, there comes up a difference between tax profits and book profits - tax authorities often ask for additional adjustments to book profits and these are captured in "tax accounting". USA The Internal Revenue Code governs the application of tax accounting in the United States of America. Section 446 sets the basic rules for tax accounting. Tax accounting under section 446(a) emphasizes consistency for a tax accounting method with references to the applied financial accounting to determine the proper method. So the taxpayer must choose a tax accounting method using their financial accounting method as a reference point. Types of tax accounting methods Proper accounting methods are found in section 446(c)(1) to (4) which permits cash, accrual, and other methods approved by the IRS including combinations. After choosing a tax accounting method, under section 446(b) the Secretary of the Treasury has wide discretion to re-compute the taxable income of the taxpayer by changing the accounting method to be used by the taxpayer in order to clearly reflect the taxpayer's income. If the taxpayer engages in more than one business then it may use a different method for each business according to section 446(d). Tax accounting method changes If the taxpayer wants to change their tax accounting method, section 446(e) requires the taxpayer to acquire the consent of the Secretary of the Treasury. There are two kinds of changes, one where you must receive a letter of approval from the Secretary of the Treasury. Another type of change comes from a series of more routine changes each of which is an automatic change. To get the automatic change the taxpayer must fill out a form and return it to the Secretary of the Treasury. The taxpayer can adopt another method if the taxpayer files a tax return using that method for two consecutive years. This is different from changing a tax accounting method under the release of the Secretary of the Treasury because in the case of adopting another method the IRS may assess fines and reallocate taxable income. If the taxpayer wants to return to the previous method the taxpayer must ask for permission from the Secretary following the 446(e) procedure. If the taxpayer fails to request a change of method of accounting then according to section 446(f) the taxpayer does so at their own peril by exposure to penalties.

TAX
Tax A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state (for example, secessionist movements or revolutionary movements). Taxes are also imposed by many sub national entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labor equivalent (often but not always unpaid). A tax may be defined as a "pecuniary burden laid upon individuals or property to support the government […] a payment exacted by legislative authority."[1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name of toll, tribute, tall age, gable, impost, duty, custom, excise, subsidy, aid, supply, or other name."[1] In modern taxation systems, taxes are levied in money, but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty's Revenue and Customs (HMRC) in the UK. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration)[2] may be imposed on the non-paying entity or individual. Purposes and effects Funds provided by taxation have been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), public works, social engineering, and the operation of government itself. Most modern governments also use taxes to fund welfare and public services. These services can include education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities. Colonial and moderning states have also used cash taxes to draw or force reluctant subsistence producers into cash economies. Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign and military aid, to influence the macroeconomic performance of the economy (the government's strategy for doing this is called its fiscal policy - see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive. A country's tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden--who will pay taxes and how much they will pay--and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing the tax system, these choices reflect the type of community which the public wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may be more of a reflection on the values of those in power. The resource collected from the public through taxation is always greater than the amount which can be used by the government. The difference is called compliance cost, and includes for example the labor cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism rehabilitation centers, is called hypothecation. This practice is often disliked by finance ministers, since it reduces their freedom of action. Some economic theorists consider the concept to be intellectually dishonest since (in reality) money is fungible. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls. Some economists, especially neo-classical economists, argue that all taxation creates market distortion and results in economic inefficiency. They have therefore sought to identify the kind of tax system that would minimize this distortion. Also, one of every government's most fundamental duties is to administer possession and use of land in the geographic area over which it is sovereign, and it is considered economically efficient for government to recover for public purposes the additional value it creates by providing this unique service. Since governments also resolve commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify a sales tax or value added tax. Others (e.g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be a matter of voluntary private contracts. The Four "R"s Taxation has four main purposes or effects: Revenue, Redistribution, Reprising, and Representation.[3] The main purpose is revenue: taxes raise money to spend on roads, schools and hospitals, and on more indirect government functions like good regulation or justice systems. This is the most widely known function.[3] A second is redistribution. Normally, this means transferring wealth from the richer sections of society to poorer sections, and this function is widely accepted in most democracies, although the extent to which this should happen is always controversial.[3] A third purpose of taxation is reprising. Taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and many people advocate policies such as implementing a carbon tax.[3] A fourth, consequential effect of taxation in its historical setting has been representation.[3] The American revolutionary slogan "no taxation without representation" implied this: rulers’ tax citizens, and citizens demand accountability from their rulers as the other part of this bargain. Several studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects.[4][5] Proportional, progressive, and regressive Main articles: Proportional tax, Progressive tax, and Regressive tax An important feature of tax systems is the percentage of the tax burden as it relates to income or consumption. The terms progressive, regressive, and proportional are used to describe the way the rate progresses from low to high, from high to low, or proportionally. The terms describe a distribution effect, which can be applied to any type of tax system (income or consumption) that meets the definition. A progressive tax is a tax imposed so that the effective tax rate increases as the amount to which the rate is applied increases. The opposite of a progressive tax is a regressive tax, where the effective tax rate decreases as the amount to which the rate is applied increases. In between is a proportional tax, where the effective tax rate is fixed as the amount to which the rate is applied increases. The terms can also be used to apply meaning to the taxation of select consumption, such as a tax on luxury goods and the exemption of basic necessities may be described as having progressive effects as it increases a tax burden on high end consumption and decreases a tax burden on low end consumption.[6][7][8] Direct and Indirect Main articles: Direct tax and Indirect tax Taxes are sometimes referred to as direct tax or indirect tax. The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. In economics, direct taxes refer to those taxes that are collected from the people or organizations on whom they are ostensibly imposed. For example, income taxes are collected from the person who earns the income. By contrast, indirect taxes are collected from someone other than the person ostensibly responsible for paying the taxes. In law, the terms may have different meanings. In U.S. constitutional law, for instance, direct taxes refer to poll taxes and property taxes, which are based on simple existence or ownership. Indirect taxes are imposed on rights, privileges, and activities. Thus, a tax on the sale of property would be considered an indirect tax, whereas the tax on simply owning the property itself would be a direct tax. The distinction can be subtle between direct and indirect taxation, but can be important under the law. Tax burden Main article: Tax incidence Diagram illustrating taxes effect Law establishes from whom a tax is collected. In many countries, taxes are imposed on business (such as corporate taxes or portions of payroll taxes). However, who ultimately pays the tax (the tax "burden") is determined by the marketplace as taxes become embedded into production costs. Depending on how quantities supplied and demanded vary with price (the "elasticity" of supply and demand), a tax can be absorbed by the seller (in the form of lower pre-tax prices), or by the buyer (in the form of higher post-tax prices). If the elasticity of supply is low, more of the tax will be paid by the supplier. If the elasticity of demand is low, more will be paid by the customer. And contrariwise for the cases where those elastic ties are high. If the seller is a competitive firm, the tax burden flows back to the factors of production depending on the elastic ties thereof; this includes workers (in the form of lower wages), capital investors (in the form of loss to shareholders), landowners (in the form of lower rents) and entrepreneurs (in the form of lower wages of superintendence). To illustrate this relationship, suppose the market price of a product is US$1.00, and that a $0.50 tax is imposed on the product that, by law, is to be collected from the seller. If the product is a luxury (in the economic sense of the term), a greater portion of the tax will be absorbed by the seller. For example, the seller might drop the price of the product to $0.70 so that, after adding in the tax, the buyer pays a total of $1.20, or $0.20 more than he did before the $0.50 tax was imposed. In this example, the buyer has paid $0.20 of the $0.50 tax (in the form of a post-tax price) and the seller has paid the remaining $0.30 (in the form of a lower pre-tax price).[9]

Morality According to many political views, activities funded by taxes can be beneficial to society and progressive taxation can be used in modern nation-states to the benefit of the majority of the population and social development.[10] Most arguments about taxation revolve around the degree and method of taxation and associated government spending, not taxation itself.[citation needed] Some people, however, argue that compulsory taxation itself is inherently immoral, regarding it as theft of property by the government.[11] Government theft Because payment of tax is usually compulsory and enforced by the police and justice system, some capitalist political philosophies view taxation by force as institutionalized violence equivalent to theft, accusing the government of levying taxes via coercive means. Individualist anarchists, anarcho-capitalists, and some libertarians see taxation as government aggression (see Zero Aggression Principle). The libertarian writer Jason C. Reeher echoed the sentiments of Murray Rothbard on these grounds; in criticizing his local school district's relatively small property tax increase, Reeher said that "(t)he thief who steals the least is still a thief."[Verification needed] Under this view, taxes are paid individually and therefore, to be considered voluntary, in any meaningful way, should be levied only with the consent of the individual. Some libertarians[attribution needed] recommend a minimal level of taxation in order to maximize the protection of liberty, while others prefer market alternatives such as private defense agencies, arbitration agencies or voluntary contributions. Others claim that the examples where taxation and the state function of civil protection has collapsed and replaced by private defense agencies (such as in countries like Somalia), the results have been largely positive.[12] Democratic defense One counter-argument is that in a democracy, because the government is the party performing the act of imposing taxes, society as a whole decides how the tax system should be organized. The American Revolution's "No taxation without representation" slogan implied this view. The same argument could be made from a monarchist perspective: since the King embodies the nation, the nation as a whole decides how the tax system should be organized. Similar arguments can be made to justify taxation under any form of government, including dictatorships and oligarchies. According to Ludwig von Mises, "society as a whole" should not make such decisions, due to methodological individualism.[13] Under this view, the moral stature of an act, such as enslavement or theft is not contingent upon its legality or popularity, but rather its morality. Thomas Jefferson argued that, "A direct democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine."[14]

Land Tax defense Advocates of land value taxation argue that sovereign rights over the products of labour and capital do not apply to land. John Locke wrote in Essay on Civil Government (1690) that: "When the sacredness of property is talked of, it should be remembered that any such sacredness does not belong in the same degree to landed property." Henry George elaborated this to claim: "Here are two simple principles, both of which are self-evident: I.--Which all men have equal rights to the use and enjoyment of the elements provided by Nature. II.--which each man has an exclusive right to the use and enjoyment of what is produced by his own labor" (Protection or Free Trade, 1886). Justification Defenders of taxation argue that taxation of business is justified on the grounds that the commercial activity necessarily involves use of publicly established and maintained economic infrastructure, and that businesses are in effect charged for this use.[citation needed] Compulsory taxation of individuals, such as income tax, is argued to be justified on similar grounds, including territorial sovereignty, and the social contract. A libertarian response is that government services used by people are either already paid for directly or are services that ought to be provided by a free market. Such taxes, they argue, are a way for the rulers to exploit the people. History Taxation levels Egyptian peasants seized for non-payment of taxes. (Pyramid Age) The first known system of taxation was in Ancient Egypt around 3000 BC - 2800 BC in the first dynasty of the Old Kingdom.[15] Records from the time document that the pharaoh would conduct a biennial tour of the kingdom, collecting tax revenues from the people. Early taxation is also described in the Bible. In Genesis (chapter 47, verse 24 - the New International Version), it states "But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children." Joseph was telling the people of Egypt how to divide their crop, providing a portion to the Pharaoh. A share (20%) of the crop was the tax. While not money, the idea is the same. Quite a few records of government tax collection in Europe since at least the 17th century is still available today. But taxation levels are hard to compare to the size and flow of the economy since production numbers are not as readily available. Government expenditures and revenue in France during the 17th century went from about 24.30 million livres in 1600-10 to about 126.86 million livres in 1650-59 to about 117.99 million livres in 1700-10 when government debt had reached 1.6 billion livres. In 1780-89 it reached 421.50 million livres. [16] Taxation as a percentage of production of final goods may have reached 15% - 20% during the 17th century in places like France, the Netherlands, and Scandinavia. During the war-filled years of the eighteenth and early nineteenth century, tax rates in Europe increased dramatically as war became more expensive and governments became more centralized and adept at gathering taxes. This increase was greatest in England, Peter Mathias and Patrick O'Brien found that the tax burden increased by 85% over this period. Another study confirmed this number, finding that per capita tax revenues had grown almost sixfold over the eighteenth century, but that steady economic growth had made the real burden on each individual only double over this period before the industrial revolution. Average tax rates were higher in Britain than France the years before the French Revolution, twice in per capita income comparison, but they were mostly placed on international trade. In France, taxes were lower but the burden was mainly on landowners, individuals, and internal trade and thus created far more resentment.[17] Taxation as a percentage of GDP in 2003 was 56.1% in Denmark, 54.5% in France, 49.0% in the Euro area, 42.6% in the United Kingdom, 35.7% in the United States, 35.2% in The Republic of Ireland, and among all OECD members an average of 40.7%.[18][19] Forms of taxation In monetary economies prior to fiat banking, a critical form of taxation was seigniorage, the tax on the creation of money. Other obsolete forms of taxation include: •	Scutage - paid in lieu of military service; strictly speaking a commutation of a non-tax obligation rather than a tax as such, but functioning as a tax in practice •	Tallage - a tax on feudal dependents •	Tithe - a tax-like payment (one tenth of one's earnings or agricultural produce), paid to the Church (and thus too specific to be a tax in strict technical terms). This should not be confused with the modern practice of the same name which is normally voluntary, although churches have sought it forcefully at times. •	Aids - During feudal times Aids was a type of tax or due paid by a vassal to his lord. •	Danegeld - medieval land tax originally rose to pay off raiding Danes and later used to fund military expenditures. •	Carucage - tax which replaced the danegeld in England. •	Tax Farming - the principle of assigning the responsibility for tax revenue collection to private citizens or groups. Some principalities taxed windows, doors, or cabinets to reduce consumption of imported glass and hardware. Armoires, hutches, and wardrobes were employed to evade taxes on doors and cabinets. In extraordinary circumstances, taxes are also used to enforce public policy like congestion charge (to cut road traffic and encourage public transport) in London. In Tsarist Russia, taxes were clamped on beards. Today, one of the most complicated taxation-systems worldwide is in Germany. Three quarters of the world's taxation-literature refers to the German system. There are 118 laws, 185 forms, and 96,000 regulations, spending €3.7 billion to collect the income tax. Today, governments of advanced economies of EU, North America, and others rely more on direct taxes, while those of developing economies of India, Africa, and others rely more on indirect taxes. Tax rates Main article: Tax rate Taxes are most often levied as a percentage, called the tax rate. An important distinction when talking about tax rates is to distinguish between the marginal rate and the effective (average) rate. The effective rate is the total tax paid divided by the total amount the tax is paid on, while the marginal rate is the rate paid on the next dollar of income earned. For example, if income is taxed on a formula of 5% from US$0 up to $50,000, 10% from $50,000 to $100,000, and 15% over $100,000, a taxpayer with income of $175,000 would pay a total of $18,750 in taxes. Tax calculation ((0.05*50,000) + (0.10*50,000) + (0.15*75,000)) = 18,750 The "effective rate" would be 10.7%: (18,750/175,000) = 0.107 The "marginal rate" would be 15%. Economics of taxation In economic terms, taxation transfers wealth from households or businesses to the government of a nation. The side-effects of taxation and theories about how best to tax are an important subject in microeconomics. Taxation is almost never a simple transfer of wealth. Economic theories of taxation approach the question of how to minimise the loss of economic welfare through taxation and also discuss how a nation can perform redistribution of wealth in the most efficient manner.

Deadweight costs of taxation For goods supplied in a perfectly competitive market, tax reduces economic efficiency, by introducing a deadweight cost. In a perfect market, the price of a particular economic good adjusts to make sure that all trades which benefit both the buyer and the seller of a good occur. After introducing a tax, the price received by the buyer is less than the cost to the seller. This means that fewer trades occur and that the individuals or businesses involved gain less from participating in the market. This destroys value, and is known as the 'deadweight cost of taxation'. The deadweight cost is dependent on the elasticity of supply and demand for a good. Most taxes — including income tax and sales tax — can have significant deadweight costs. The only way to avoid deadweight costs in an economy which is generally competitive is to find taxes which do not change economic incentives, known as a lump sum tax. To do so is very difficult: the closest approximations are a poll tax paid by all adults regardless of their choices, or a windfall tax which is entirely unanticipated and so cannot affect decisions. The easiest method of getting the benefits of a lump sum tax is to refrain from doing the opposite, and to avoid instituting schemes like the voucher privatizations of Eastern Europe or the British baby bonds, which give every citizen an equal payment from the State.[citation needed] Double dividend taxes In some cases where the economy is not perfectly competitive, the existence of a tax can increase economic efficiency. If there is a negative externality associated with a good, meaning that it has negative effects not felt by the consumer, then the free market will trade too much of that good. By putting a tax on the good, the government can increase overall welfare as well as raising revenue in taxation. This is known as a 'double dividend'. There are a wide range of goods where there is, or is claimed to be, a negative externality. Polluting fuels (like petrol), goods which incur public healthcare costs (such as alcohol or tobacco), and charges for existing 'free' public goods (like congestion charging) all offer the possibility of a double dividend. This type of tax is a Pigovian tax, sometimes colloquially known as a 'sin tax'. It is worthwhile noting that taxation is not necessarily the only, or the best, method of dealing with negative externalities. Optimal taxation theory Most governments need revenue which exceeds that which can be provided by non-distortion taxes or through taxes which give a double dividend. Optimal taxation theory is the branch of economics that considers how taxes can be structured to give the least deadweight costs, or to give the best outcomes in terms of social welfare. Ramsey optimal taxation deals with minimizing deadweight costs. Because deadweight costs are related to the elasticity of supply and demand for a good, it follows that putting the highest tax rates on the goods for which there is most inelastic supply and demand will result in the least overall deadweight costs. Some economists have sought to integrate optimal tax theory with the social welfare function, which is the economic expression of the idea that equality is valuable to a greater or lesser extent. If individuals experience diminishing returns from income, then the optimum distribution of income for society involves a progressive income tax. Mirrlees optimal income tax is a detailed theoretical model of the optimum progressive income tax along these lines. Over the last years the validity of the theory of optimal taxation was discussed by many political economists. Canegrati (2007) demonstrated that if we move from the assumption that governments do not maximize the welfare of society but the probability of winning elections, in equilibrium tax rates are lower for the most powerful groups of society (and not for the poorest as in the optimal theory of direct taxation developed by Atkinson and Stiglitz). Transparency and simplicity Another concern is that the complicated tax codes of developed economies offer perverse economic incentives. The more details of tax policy there are, the more opportunities for legal tax avoidance and illegal tax evasion; these not only result in lost revenue, but involve additional deadweight costs: for instance, payments made for tax advice are essentially deadweight costs because they add no wealth to the economy. Perverse incentives also occur because of non-taxable 'hidden' transactions; for instance, a sale from one company to another might be liable for sales tax, but if the same goods were shipped from one branch of a corporation to another, no tax would be payable. To address these issues, economists often suggest simple and transparent tax structures which avoid providing loopholes. Sales tax, for instance, can be replaced with a value added tax which disregards intermediate transactions. Economics of tax incidence Economic theory suggests that the economic effect of tax does not necessarily fall at the point where it is legally levied. For instance, a tax on employment paid by employers will impact on the employee, at least in the long run. The greatest share of the tax burden tends to fall on the most inelastic factor involved - the part of the transaction which is affected least by a change in price. So, for instance, a tax on wages in a town will (at least in the long run) affect property-owners in that area.

Costs of compliance Although governments must spend money on tax collection activities, some of the costs, particularly for keeping records and filling out forms, are borne by businesses and by private individuals. These are collectively called costs of compliance. More complex tax systems tend to have higher costs of compliance. This fact can be used as the basis for practical or moral arguments in favor of tax simplification (see, for example, FairTax), or tax elimination (in addition to moral arguments described above). Types of taxes The Organization for Economic Co-operation and Development (OECD) publishes perhaps the most comprehensive analysis of worldwide tax systems. In order to do this it has created a comprehensive categorization of all taxes in all regimes which it covers:[20] Ad valorem Main article: Ad valorem An ad valorem tax is one where the tax base is the value of a good, service, or property. Sales taxes, tariffs, property taxes, inheritance taxes, and value added taxes are different types of ad valorem tax. An ad valorem tax is typically imposed at the time of a transaction (sales tax or value added tax (VAT)) but it may be imposed on an annual basis (property tax) or in connection with another significant event (inheritance tax or tariffs). An alternative to ad valorem taxation is an excise tax, where the tax base is the quantity of something, regardless of its price. For example, in the United Kingdom, a tax is collected on the sale of alcoholic drinks that is calculated by volume and beverage type, rather than the price of the drink. Environment Affecting Tax This includes natural resources consumption tax, GreenHouse gas tax (Carbon tax, "sulfuric tax", etc), and others. See Ecotax, Gas-guzzler, and Polluter pays principle for more information. Capital gains tax Main article: Capital gains tax A capital gains tax is the tax levied on the profit released upon the sale of a capital asset. In many cases, the amount of a capital gain is treated as income and subject to the marginal rate of income tax. However, in an inflationary environment, capital gains may be to some extent illusory: if prices in general have doubled in five years, then selling an asset for twice the price it was purchased for five years earlier represents no gain at all. Partly to compensate for such changes in the value of money over time, some jurisdictions, such as the United States, give a favorable capital gains tax rate based on the length of holding. European jurisdictions have a similar rate reduction to nil on certain property transactions that qualify for the participation exemption. In Canada, 50% of the gain is taxable income. In India, Short Term Capital Gains Tax (arising before 1 year) is 10% flat rate of the gains and Long Term Capital Gains Tax is nil for stocks & mutual fund units held 1 year or more and 20% for any other assets held 3 years or more. If such a tax is levied on inherited property, it can act as a de facto probate or inheritance tax. Consumption tax Main article: Consumption tax A consumption tax is a tax on non-investment spending, and can be implemented by means of a sales tax or by modifying an income tax to allow for unlimited deductions for investment or savings. Corporation tax Main article: Corporate tax Corporate tax refers to a direct tax levied by various jurisdictions on the profits made by companies or associations and often includes capital gains of a company. Earnings are generally considered gross revenue less expenses. Corporate expenses that relate to capital expenditures are usually deducted in full (for example, trucks are fully deductible in the Canadian tax system, while a corporate sports car is only partly deductible). They are often deducted over the useful life of the asset purchase. Generally, industrialized countries also use a regressive rate of tax upon corporate income. See also: Excess profits tax, Windfall profits tax Excises Main article: Excise Unlike an ad valorem, an excise is not a function of the value of the product being taxed. Excise taxes are based on the quantity, not the value, of product purchased. For example, in the United States, the Federal government imposes an excise tax of 18.4 cents per US gallon (4.86¢/L) of gasoline, while state governments levy an additional 8 to 28 cents per US gallon. Excises on particular commodities are frequently hypothecated. For example, a fuel excise (use tax) is often used to pay for public transportation, especially roads and bridges and for the protection of the environment. A special form of hypothecation arises where an excise is used to compensate a party to a transaction for alleged uncontrollable abuse; for example, a blank media tax is a tax on recordable media such as CD-Rs, whose proceeds are typically allocated to copyright holders. Critics charge that such taxes blindly tax those who make legitimate and illegitimate usages of the products; for instance, a person or corporation using CD-R's for data archival should not have to subsidize the producers of popular music. Excises (or exemptions from them) are also used to modify consumption patterns (social engineering). For example, a high excise is used to discourage alcohol consumption, relative to other goods. This may be combined with hypothecation if the proceeds are then used to pay for the costs of treating illness caused by alcohol abuse. Similar taxes may exist on tobacco, pornography, etc., and they may be collectively referred to as "sin taxes". A carbon tax is a tax on the consumption of carbon-based non-renewable fuels, such as petrol, diesel-fuel, jet fuels, and natural gas. The object is to reduce the release of carbon into the atmosphere. In the United Kingdom, vehicle excise duty is an annual tax on vehicle ownership. Income tax Main article: Income Tax Income Tax rates by Country based on OECD 2005 data.[21] An income tax is a tax levied on the financial income of persons, corporations, or other legal entities. Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate tax, corporate income tax, or corporation tax. Individual income taxes often tax the total income of the individual (with some deductions permitted), while corporate income taxes often tax net income (the difference between gross receipts, expenses, and additional write-offs). The "tax net" refers to the types of payment that are taxed, which included personal earnings (wages), capital gains, and business income. The rates for different types of income may vary and some may not be taxed at all. Capital gains may be taxed when realized (e.g. when shares are sold) or when incurred (e.g. when shares appreciate in value). Business income may only be taxed if it is significant or based on the manner in which it is paid. Some types of income, such as interest on bank savings, may be considered as personal earnings (similar to wages) or as a realized property gain (similar to selling shares). In some tax systems, personal earnings may be strictly defined where labor, skill, or investment is required (e.g. wages); in others, they may be defined broadly to include windfalls (e.g. gambling wins). Personal income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another. For example, a loss on the stock market may be deducted against taxes paid on wages. Other tax systems may isolate the loss, such that business losses can only be deducted against business tax by carrying forward the loss to later tax years. Inheritance tax Main article: Inheritance tax Inheritance tax, estate tax, and death tax or duty is the names given to various taxes which arise on the death of an individual. In United States tax law; there is a distinction between an estate tax and an inheritance tax: the former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate. However, this distinction does not apply in other jurisdictions; for example, if using this terminology UK inheritance tax would be an estate tax. See also: Allodial, Pigovian tax, Estate tax (United States), Inheritance Tax (United Kingdom). Poll tax Main article: Poll tax A poll tax, also called a per capita tax, or capitation tax, is a tax that levies a set amount per individual. One of the earliest taxes mentioned in the Bible of a half-shekel per annum from each adult Jew (Ex. 30:11-16) was a form of poll tax. Poll taxes are administratively cheap because they are easy to compute and collect and difficult to cheat. Economists have considered poll taxes economically efficient because people are presumed to be in fixed supply. However, poll taxes are very unpopular because poorer people pay a higher proportion of their income than richer people. In addition, the supply of people is in fact not fixed over time: on average, couples will choose to have fewer children if a poll tax is imposed [citation needed]. The introduction of a poll tax in medieval England was the primary cause of the 1381 Peasants' Revolt, and in England and Wales in 1990 the change from a progressive local taxation based on property values to a single-rate form of taxation regardless of ability to pay (the Community Charge, but more popularly referred to as the Poll Tax).

Property tax Main article: Property tax A property tax is a tax imposed on property by reason of its ownership. A property tax is usually levied on the value of property owned. There are three species of property: land, improvements to land (immovable man-made things, e.g. buildings) and personal property (movable things). Real estate or realty is the combination of land and improvements to land. Property taxes may be charged on a recurrent basis (e.g., yearly). A common type of property tax is an annual charge on the ownership of real estate, where the tax base is the estimated value of the property. For a period of over 150 years from 1695 a window tax was levied in England, with the result that one can still see listed buildings with windows bricked up in order to save their owners money. A similar tax on hearths existed in France and elsewhere, with similar results. The two most common types of event driven property taxes are stamp duty, charged upon change of ownership, and inheritance tax, which is imposed in many countries on the estates of the deceased. In contrast with a tax on real estate (land and buildings), a land value tax is levied only on the unimproved value of the land ("land" in this instance may mean either the economic term, i.e., all natural resources, or the natural resources associated with specific areas of the earth's surface: "lots" or "land parcels"). When real estate is held by a higher government unit or some other entity not subject to taxation by the local government, the taxing authority may receive a payment in lieu of taxes to compensate it for some or all of the foregone tax revenue. In many jurisdictions (including many American states), there is a general tax levied periodically on residents who own personal property (personality) within the jurisdiction. Vehicle and boat registration fees are subsets of this kind of tax. The tax is often designed with blanket coverage and large exceptions for things like food and clothing. Household goods are often exempt when kept or used within the household.[citation needed] Any otherwise non-exempt object can lose its exemption if regularly kept outside the household.[citation needed] Thus, tax collectors often monitor newspaper articles for stories about wealthy people who have lent art to museums for public display, because the artworks have then become subject to personal property tax.[citation needed] If an artwork had to be sent to another state for some touch-ups, it may have become subject to personal property tax in that state as well.[citation needed] Retirement tax Some countries with social security systems, which provide income to retired workers, fund those systems with specific dedicated taxes. These often differ from comprehensive income taxes in that they are levied only on specific sources of income, generally wages and salary (in which case they are called payroll taxes). A further difference is that the total amount of the taxes paid by or on behalf of a worker is typically considered in the calculation of the retirement benefits to which that worker is entitled. Examples of retirement taxes include the FICA tax, a payroll tax that is collected from employers and employees in the United States to fund the country's Social Security system; and the National Insurance Contributions (NICs) collected from employers and employees in the United Kingdom to fund the country's national insurance system. These taxes are sometimes regressive in their immediate effect. For example, in the United States, each worker, whatever his or her income, pays at the same rate up to a specified cap, but income over the cap is not taxed. A further regressive feature is that such taxes often exclude investment earnings and other forms of income that are more likely to be received by the wealthy. The regressive effect is somewhat offset, however, by the eventual benefit payments, which typically replace a higher percentage of a lower-paid worker's pre-retirement income. Sales tax Main article: Sales tax Sales taxes are a form of excise levied when a commodity is sold to its final consumer. Retail organizations contend that such taxes discourage retail sales. The question of whether they are generally progressive or regressive is a subject of much current debate. People with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to be regressive. It is therefore common to exempt food, utilities and other necessities from sales taxes, since poor people spend a higher proportion of their incomes on these commodities, so such exemptions would make the tax more progressive. This is the classic "You pay for what you spend" tax, as only those who spend money on non-exempt (i.e. luxury) items pay the tax. A small number of US states rely entirely on sales taxes for state revenue, as those states do not levy a state income tax. Such states tend to have a moderate to large amount of tourism or inter-state travel that occurs within their borders, allowing the state to benefit from taxes from people the state would otherwise not tax. In this way, the state is able to reduce the tax burden on its citizens. The US states that do not levy a state income tax are Alaska, Tennessee, Florida, Nevada, South Dakota, Texas,[22] Washington state, and Wyoming. Additionally, New Hampshire and Tennessee levy state income taxes only on dividends and interest income. Of the above states, only Alaska and New Hampshire do not levy a state sales tax. Additional information can be obtained at the Federation of Tax Administrators website. In the United States, there is a growing movement for the replacement of all federal payroll and income taxes (both corporate and personal) with a national retail sales tax and monthly tax rebate to households of citizens and legal resident aliens. The tax proposal is named FairTax. In Canada, the federal sales tax is called the Goods and Services tax (GST) and now stands at 5%. The provinces of British Columbia, Saskatchewan, Manitoba, Ontario and Prince Edward Island also have a provincial sales tax [PST]. The provinces of Nova Scotia, New Brunswick, and Newfoundland & Labrador have harmonized their provincial sales taxes with the GST - Harmonized Sales Tax [HST]. The province of Quebec collects the Quebec Sales Tax [QST] which is based on the GST with certain differences. Most businesses can claim back the GST, HST and QST they pay, and so effectively it is the final consumer who pays the tax. Tariffs Main article: Tariff An import or export tariff (also called customs duty or impost) is a charge for the movement of goods through a political border. Tariffs discourage trade, and they may be used by governments to protect domestic industries. A proportion of tariff revenues is often hypothecated to pay government to maintain a navy or border police. The classic ways of cheating a tariff are smuggling or declaring a false value of goods. Tax, tariff and trade rules in modern times are usually set together because of their common impact on industrial policy, investment policy, and agricultural policy. A trade bloc is a group of allied countries agreeing to minimize or eliminate tariffs against trade with each other, and possibly to impose protective tariffs on imports from outside the bloc. A customs union has a common external tariff, and, according to an agreed formula, the participating countries share the revenues from tariffs on goods entering the customs union. Toll Main articles: Toll road, Toll bridge, and Toll tunnel A toll is a tax or fee charged to travel via a road, bridge, tunnel or other route. Historically tolls have been used to pay for state bridge, road and tunnel projects. They have also been used in privately constructed transport links. The toll is likely to be a fixed charge, possibly graduated for vehicle type, or for distance on long routes. Shunpike is the practice of finding another route to avoid payment of tolls. In some situations where tolls were increased or felt to be unreasonably high, informal shunpike by individuals escalated into a form of boycott by regular users, with the goal of applying the financial stress of lost toll revenue to the authority determining the levy. Transfer tax Main article: Transfer tax Historically, in many countries, a contract needed to have a stamp affixed to make it valid. The charge for the stamp was either a fixed amount or a percentage of the value of the transaction. In most countries the stamp has been abolished but stamp duty remains. Stamp duty is levied in the UK on the purchase of shares and securities, the issue of bearer instruments, and certain partnership transactions. Its modern derivatives, stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions involving securities and land. Stamp duty has the effect of discouraging speculative purchases of assets by decreasing liquidity. In the US transfer tax is often charged by the state or local government and (in the case of real property transfers) can be tied to the recording of the deed or other transfer documents. Taxes on currency transactions are known as Tobin taxes. See also: Stamp duty Value Added Tax / Goods and Services Tax Main article: Value added tax A value added tax (VAT), also known as 'Goods and Services Tax' (G.S.T), or 'Impuesto Indirecto sobre la Prestacion de Servicios' (I.S.I.), Single Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax to every operation that creates value. To give an example, sheet steel is imported by a machine manufacturer. That manufacturer will pay the VAT on the purchase price, remitting that amount to the government. The manufacturer will then transform the steel into a machine, selling the machine for a higher price to a wholesale distributor. The manufacturer will collect the VAT on the higher price, but will remit to the government only the excess related to the "value added" (the price over the cost of the sheet steel). The wholesale distributor will then continue the process, charging the retail distributor the VAT on the entire price to the retailer, but remitting only the amount related to the distribution mark-up to the government. The last VAT amount is paid by the eventual retail customer who cannot recover any of the previously paid VAT. For a VAT and sales tax of identical rates, the total tax paid is the same, but it is paid at differing points in the process. VAT is usually administrated by requiring the company to complete a VAT return, giving details of VAT it has been charged (referred to as input tax) and VAT it has charged to others (referred to as output tax). The difference between output tax and input tax is payable to the Local Tax Authority. If input tax is greater than output tax the company can claim back money from the Local Tax Authority. VAT was historically used to counter evasion in a sales tax or excise. By collecting the tax at each production level, the theory is that the entire economy helps in the enforcement. However, forged invoices and similar evasion methods have demonstrated that there are always those who will attempt to evade taxation. Economic theorists have argued that the collection process of VAT minimizes the market distortion resulting from the tax, compared to a sales tax. However, VAT is held by some to discourage production.

Wealth (net worth) tax Main article: Wealth tax Some countries' governments will require declaration of the tax payers' balance sheet (assets and liabilities), and from that exact a tax on net worth (assets minus liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a certain level. The tax is in place for both "natural" and in some cases legal "persons". •	Tax fraud •	Tax Freedom Day •	Tax incentive •	Tax incidence •	Tax law •	Tax policy •	Tax resistance •	Tax shelter •	Tax haven •	Voluntary taxation •	Wealth tax •	Zero Aggression Principle By country or region •	Tax rates around the world •	List of countries by tax revenue as percentage of GDP •	Taxation in Australia •	Taxation in Canada •	Taxation in Colombia •	Taxation in France •	Taxation in Germany •	Taxation in Hong Kong •	Taxation in India •	Taxation in Indonesia •	Taxation in the Netherlands •	Taxation in New Zealand •	Taxation in the Republic of Ireland •	Taxation in Russia •	Taxation in Singapore •	Taxation in the United Kingdom •	Taxation in the United States •	Taxation in the European Union