About CA

What is Chartered Accountancy?

Chartered Accountancy is a term used to mean a profession as well as the course (field of study).

Chartered Accountancy - a Profession

Lawyers are engaged in the legal profession, doctors in the medical profession. Similarly chartered accountants are engaged in the chartered accountancy profession.

Accounting, Auditing (verification of accounts), Taxation are the core areas dealt with by chartered accountants. They area also capable of expert level services in the areas of General Management, Personnel Management, Financial Management, Operations Management, Human Resources Management.

Chartered Accountancy - a course

Law is a course that candidates pursue to become lawyers. Medicine is a course that aspirants to the medical profession pursue. Similarly, prospective chartered accountants pursue the chartered accountancy course.

The Chartered Accountancy course is designed and conducted by the body that regulates the profession. The course generally consists of a mix of theoretical study and practical training.

Who is a Chartered Accountant?

A Chartered Accountant (CA) is a professional accountant by virtue of his/her being a member of the professional body of accountants conducting the chartered accountancy course.

Chartered Accountants carry on professional practice as Chartered Accountants either individually or as a firm (in partnership with other chartered accountants). They may also be found working as employees/consultant in organisations. Some carry on professional practice and work as employees/consultants in organisations part time.

CA - Designation and Functions performed

Designation for these professionals » CA :: Chartered Accountant

Functions performed by Chartered Accountants only

The law places certain conditions on the performance of certain functions. Where the law requires that a particular function be performed only by a certain professional, it should be so. Such functions are what we call statutory functions.

1.	Under Sec 44 of the Income -Tax law every assessee with a gross receipts of Rs. 10 lakhs in the case of professionals and Rs. 40 Lakhs in the case of business concerns is compulsorily required to maintain accounts and get them audited by a CA.
2.	CA's services are employed by the tax department for auditing complicated cases, having large revenue potential.
3.	CA's services are employed by the Reserve Bank of India and the Comptroller and auditor general of India for conducting Statutory Audit of Banks every year.

Where the specialised knowledge of the professional would be very much crucial in performing the function, we find that they are performed only by the relevant professionals.

Functions performed by all Professional Accountants

What does Chartered mean?

Meaning

A written grant from the sovereign power of a country conferring certain rights and privileges on a person.

Chartered

Licensed, contracted, agreed.

A Chartered Accountant therefore should mean an accountant who has been conferred certain rights and privileges by the country. Why does the country have to confer special rights to an accountant? What are the functions that the chartered accountants are supposed to carry on by using these rights? These can be understood by going through the following explanation.

Common/Joint expenses - How they are met?

In/of a Joint Family —

Individuals earn. They satisfy their needs and the needs of their family members through their earnings. In case of a large family or a joint family, joint family expenses are met by contributions from the members of the family or through income from joint properties. The common needs of a family are satisfied by the contributions of the members of the family.

Each earning member bears a part of the joint expense.

In/of an Apartment Complex —

Consider the case of a number of families living in an apartment complex. Who bears the joint expenses incurred in the upkeep of the apartment premises?

The residents of each apartment contribute a certain amount as generally called service/maintenance charges to a common pool and the expenses like premises maintenance, lift maintenance, common area lighting charges etc., are met from this common pool.

This in effect amounts each apartment in the complex, bearing a part of the total expense. which trickles down to individuals or earning members sharing/bearing the joint expenses.

In/of a Street —

Consider the case of a number of houses in a street. Just like in the case of the houses in the apartment complex, the common expenses relating to the street like street lighting, road maintenance, drainage cleaning etc., are to be met by a common of pool created through contributions of the residents of the street.

All these are examples of individuals belonging to a group contributing towards the common expenses of the group. The contributions may vary depending on a number of factors like income levels, facility usage etc.

In a similar way the common expenses of

• an Area are to be met by the Residents of the Area
• a Town are to be met by Residents of the Town
• a District are to be met by Residents of the District
• a State are to be met by the Residents of the State
• a Country are to be met by the Residents of the Country

Problem in Contributing

Consider an individual who is an earning member of a family living in an apartment complex.

Apart from meeting the expenses of the family, he/she has to contribute towards the common expenses of

• the apartment complex.
• the street

Since the apartment complex lies on a street, each individual living in the complex will also have the responsibility to contribute towards the common expenses of the street on/in which the apartment is located.

• the area in which the street is located
• the town in which the area is located
• the district in which the town is located
• the state in which the district is located and
• the country in which the state is located.

The problem with the contributions is in deciding how much one should contribute towards discharging each of these responsibilities. Deciding the contribution for the common expenses of the apartment complex is possible. But beyond that it would not be possible to think in terms of contributions by individuals. Moreover, if the contribution relating to each of these is to be paid and collected separately it would be chaotic.

Contributions for common expenses - How made?

The contributions to be made by earning members are classified as (1) Local (2) State and (3) National. This idea is relevant in the Indian context.

to local governments

Each town/city/village are considered as a unit. Contributions towards the common expenses of the town/city/village are made by paying local taxes such as land revenue, house tax, education cess, water tax etc annually.

to the State Government

Contributions towards the common expenses of the state are made by paying state level taxes like sales tax, professional tax etc.

to the Central Government

Contributions towards the common expenses of the country are made by paying to the central government, taxes like income tax, excise duty, customs duty etc.

Payment of tax is a statutory obligation

Unlike in the case of a family where the obligation for individuals to contribute towards the common pool to meet the common expenses is moral, the obligation to contribute towards the common expenses of the locality, state, country is statutory.

Payment of tax is a statutory obligation on the part of individuals/organisations and not a voluntary contribution. Every legal entity has an obligation to contribute to the common pool based on his/her/its economical status and the rules laid down by law.

If you are required to pay tax, you have to. Trying to escape or not pay tax is a legal offense. However tax planning wherein you plan your activities in such a manner so as to reduce your tax burden is not a crime.

Direct Taxes

Direct tax is a tax that is collected from the persons who bear the tax burden. The burden of such a tax cannot be passed on to another person or entity. Direct taxes are collected from individuals or organisations. The various kinds of direct taxes are:

Income Tax

Individuals earn through salaries. Individuals and other entities earn through owning and dealing in properties, doing business, investments etc. Income is what is left out after meeting expenses and other allowable deductions. The current year income of the business is Rs. 10 lakhs so the organisation pays a tax of Rs. 1,50,000. An individual earns a salary income of Rs. 5 lakh and as such has to pay a tax of Rs. 80,000.

Individuals or organisations paying such tax are conscious of the fact that they are paying it for clearing their obligation. As such these taxes on incomes are called direct taxes.

Wealth Tax

An individual or organisation having wealth in excess of a certain minimum value is bound to pay wealth tax (1% of the value of the wealth in excess of Rs. 15 lakhs). Wealthy individuals or organisations have an obligation to contribute to the common pool by paying tax. Even here the individuals/organisations paying such tax are conscious of the fact that they are paying it for clearing their obligation.

Professional Tax

Professional tax is a tax in respect of a profession, trade, calling or employment. This tax is levied by state governments or local municipal bodies and is distinct from income tax. Even in this case a payer would be aware that he/she is paying tax.

Indirect Taxes

Indirect tax is a tax that is indirectly collected from the individuals/organisations bearing the burden of tax, in most cases without them being conscious that they are paying tax. It is levied on commodities and services. The burden of tax is capable of being passed on to another. The various kinds of indirect taxes are:

Sales tax

A person buying a clock for Rs. 100 (including a sales tax of Rs. 10), thinks that he/she is purchasing the clock for Rs. 100. But this is what the reality is.

The real price of the clock is Rs 90. The sales tax on it is Rs. 10. The sales man would have to say, "Sir you have to pay Rs 10 sales tax to the government, so please go to the office of the sales tax department or to a bank and pay it to the government".

Since it would be impractical to have such an arrangement, an obligation is cast on the seller to collect the sales tax on behalf of the government. That is the reason the buyer pays the seller Rs. 100 and not Rs. 90. This means that the buyer is paying Rs 90 to the shop and Rs 10 tax to the government, both of which are being collected by the seller.

The buyer is not even aware of the fact that he/she is bearing the burden of sales tax. The buyer will think that he/she is buying the clock for Rs 100. The tax is collected from the buyer indirectly through the seller.

Excise Duty

Consider the above example of a clock sold for Rs. 100 (Rs. 90 sale price + Rs. 10 sales tax).

The Rs. 90 sale price collected by the shop keeper includes
— Rs 20 (his profit) + Rs 70 (paid to the wholesaler).

Rs 70 collected by the wholesaler includes
— Rs 10 (his profit) + Rs 60 (paid to the manufacturer).

Rs 60 received by the manufacturer includes
— Rs 20 (Cost of manufacturing) + Rs 20 (Excise Duty) + Rs 10 (advertisement) + Rs 10 (Profit).

All goods manufactured are subject to excise duty at the rates prescribed. The duty is to be paid by the manufacturer on completion of manufacture. This duty is to be paid irrespective of whether the manufactured goods have been subsequently sold or not. Unlike sales tax which is borne by the buyer and collected on sale, excise duty is first borne by the manufacturer and is to be paid on completion of manufacture before sending the goods out of the place of manufacture.

The Rs 100 paid by the buyer includes "Rs 20 (manufacturing cost) + Rs 10 (advertisement cost) + Rs 10 (manufacturer profit) + Rs 10 (wholesaler profit) + Rs 10 (retailer profit) + Rs 20 (excise duty) + Rs 10 (sales tax). In paying Rs. 100 for buying the clock, the buyer has borne the excise duty also. The burden of excise duty has been passed on from the manufacturer to the wholesaler, who passes it on to the dealer who then passes it on to the ultimate buyer.

The purchase has resulted in the buyer paying a tax of Rs 30 (Rs. 10 sales tax + Rs. 20 excise duty) without being conscious of bearing such a burden. The buyer has borne and the government has collected tax indirectly.

Customs Duty

Goods imported into India are not manufactured in India and therefore a duty equivalent of excise is charged on them and is called customs duty. A person buys an imported product at a price that includes the custom duty and sales tax on it.

Who is bearing the burden of all these taxes?

In case of direct taxes, the burden is on the person paying the tax. In case of sales tax the burden is on the buyer who may or may not be aware of the tax burden he/she is taking up. In case of other indirect taxes, the person initially paying the tax is not the person bearing the burden in most cases. The burden of the tax is passed on from the payer to the buyer ultimately. Even in this case the buyer may not be aware of the fact that he/she is bearing the burden of the tax.

Every citizen (even the daily wage laborer) is a tax payer.

Governments » Revenue - Expenditure

Governments are responsible for collecting the taxes and utilising the same for meeting the common expenses. The major sources of revenue for governments are taxes. They may be direct or indirect.

Central Government

Incomes

Income tax, Excise duty (except on liquors and narcotic drugs), Custom duty, Central Sales tax, Service Tax are collected by the central government.

Expenses

The central government spends its revenue on salaries to central government employees, expenses of various central government departments, expenses on defence, science, education (central university, national institution - IIT, IIM etc), transportation (national highways) etc. It also allocates a certain amount of its common pool revenue to states as "budget allocation for states" to meet capital expenses and other needs.

State Governments

Incomes

Sales tax (except on inter state sales), excise duty on liquor and narcotics, professional tax are collected by the state governments.

Expenses

Salaries to state government employees, expenses of various departments, maintenance of facilities relating to the state government, expenses relating to roads, irrigation projects, education (university, government schools, colleges etc). It also allocates a certain amount of its expenses to local governments to meet capital and other expenses.

Local Governments

Incomes

Local governments like municipalities, panchayats collect house taxes, land revenue, education cess, etc.

Expenses

Local governments spend on sanitation, street lighting, education (municipal, panchayat schools etc), roads within towns etc.

All Governments

All governments on account of their obligation to take care of the poor and down trodden, also spend their revenue on social welfare schemes, like subsidized food, health care, housing programs etc.

Every rupee the governments' spend is Public (your) Money.

Politicians give us nothing from their own pockets. Instead they live by our money. We meet all the expenses that they are incurring. It is our money they spend lavishly.

Businesses » Government Revenue

The areas where sales tax, excise duty and customs duty arise and are collected are to a considerable extent related to business.

Income tax is paid by salaried individuals who work in organisations, as well as by business organisations themselves. The income tax paid by business organizations also forms a considerable part of the income tax collected.

Thus we can say that trade, commerce, manufacturing etc are the most important activities/areas that provide income to the governments.

Government » Verification of business accounts

Since the government derives a substantial part of its revenue/income from areas related to business it has to ensure that the accounts of business are being properly reported so as to avoid revenue loss on account of manipulations by business organisations.

For this purpose, it has to verify the accounts of businesses.

To carry on such a verification on its own, the government needs a large work force which would be impractical to employ. Since it would be practically impossible for governments to verify each and every individual businesses accounts directly through its own work force, it employs the services of professional accountants for this purpose.

Accountants are chartered by the government to check the business accounts on their behalf.

Auditing

checking, reviewing, inspecting, examining, assessing, appraising.

The CA's work on behalf of the government, audit the accounts of businesses and certify them to be proper (for which service they charge a fee to be borne by the business).

Auditing is not the only function of the CA's.

Who Charters?

Governments instead of granting the powers to (chartering) each accountant, have delegated their power to the professional body of accountants (institute of chartered accountants of India in India). The professional body conducts courses/exams to grant membership to prospective candidates. The members of the body are deemed to have been chartered by the government.

CHARTERED ACCOUNTANTS [CA's] are people who are chartered as accountants, by the professional body on behalf of the government.

Becoming a Chartered Accountant - Chartered Accountancy - Course Structure

There is only one entry level for this course. All students, irrespective of their academic qualifications have to start their pursuit of this course, at the CPT level only.

A candidate can start pursuing this course immediately after completing his/her 10th standard. However, they can appear at the first level examination only after appearing in the 10 + 2/Senior Secondary/intermediate.

CPT/CPE

Common Proficiency Test/Examination
[4 subjects arranged into 2 papers of 100 marks each.]

↓

IPCC/IPCE

Integrated Professional Competence Course/Examination
[9 subjects arranged into two groups.
4 papers of 100 marks each in Group I
and 3 Papers of 100 marks each in Group II]

+

Articleship

Practical Training
[Apprenticeship under a practicing
chartered accountant for a period of 3 years]

+

ITT

100 Hours of Information Technology Training.
To be completed before joining the final course

↓

Final

Final Academic Level
[8 subjects arranged into two groups of 4 papers
of 100 marks each.] Can appear for the first time
after two and half years of articleship

↓

GMC Course

[Compulsory General Management Course
to be completed during or after final]

↓

Associate Membership

↓

Post Qualification Courses
[Optional]

Prospects, Special Government Services for Chartered Accountants

Employment

Chartered Accountants, on account of their having completed the chartered accountancy course are considered to be candidates with knowledge, ability and intelligence. For this reason, they are the preferred lot for a lot of accounting and managerial jobs.

Financial Manager, Finance Director, Financial Controller, Chief Accountant, Cost Controller, Marketing Manager, Chief Internal Auditor, Managing Director etc., are some such jobs where people with professional accounting knowledge are sought after.

With the growing trend of back office operations, many multi national organisations having their back offices in india employ professional accountants.

Private Practice

A qualified professional can set up his/her own private practice as a practicing chartered accountant. Apart from the statutory opportunities that would be available to a chartered accountant, one can play the role of a consultant for any organisation relating to the functions of accounting, taxation, auditing, cost management etc.

All companies registered under the companies act have to appoint a practicing chartered accountant as their statutory auditor who would verify their accounts and certify them before being submitted to the registrar.

Statutory Opportunities

law places certain conditions on the performance of certain functions. Where the law requires that a particular function be performed only by certain kind of professionals, it should be so. By law, the following functions can only be performed by chartered accountants.

1.	Under Sec 44 of the Income -Tax law every assessee with a gross receipts of Rs. 10 lakhs in the case of professionals and Rs. 40 Lakhs in the case of business concerns is compulsorily required to maintain accounts and get them audited by a Chartered Accountant (CA).
2.	Chartered Accountant's (CA's) services are employed by the tax department for auditing complicated cases, having large revenue potential.
3.	Chartered Accountant's (CA's) services are employed by the Reserve Bank of India and the Comptroller and auditor general of India for conducting Statutory Audit of Banks every year.

Special Government Services

Chartered Accountancy is recognized as an equivalent of post graduate qualification in commerce by a number of universities and government bodies. Therefore, Chartered Accountants would be eligible for all the government services where a post graduation qualification in commerce is necessary.

Further Academic Pursuits for Chartered Accountants

Courses Conducted by Universities

Chartered Accountancy is recognized as equivalent to post graduate qualification in commerce by a number of universities and government bodies. Thus, bachelor degree holders who have qualified in these professional courses are eligible for registration as M. Phil and Ph. D candidates in commerce and allied disciplines.

Post Qualification Courses

The institute conducts courses for the members of the institute i.e. these courses are post qualification. Only those who have the requisite qualification to become members are eligible for getting admitted to these courses. These are courses which enable a candidate to specialise in areas related to the profession.

Conducted by ICAI

1. Information Systems Audit — ISA
2. Management Accountancy — MAC
3. Corporate Management — CM
4. Tax Management — TM
5. Computerised Accounting and Auditing Techniques — CAAT
6. Diploma in Insurance and Risk management — DIRM
7. International Trade Laws and World Trade Organisation — ITL&WTO

About the Institute - ICAI - Institute of Chartered Accountants of India

Establishment

The Institute of Chartered Accountants of India (ICAI) is a premier professional accounting body established in July 1949 under "The Chartered Accountants Act, 1949" enacted by the parliament.

Management

The institution is run/managed by the member professionals of the institute. The members of the institute elect the governing body periodically. The governing body runs the affairs of the institution. A number of committees are formed by the elected members to look after the various aspects relating to the institute and the profession.

The Chartered Accountancy profession is regulated by a council in accordance with the provisions of "The Chartered Accountants Act, 1949". The council consists of 24 elected members and 6 nominees of the central Government