1. What is Fixed Assets (Acquire to Retire Process)?
The "Acquire to Retire" process for fixed assets refers to the lifecycle
management of tangible assets (like machinery, buildings, or vehicles) that
a company uses over a long period. Here’s the detailed process:
Real-Life Example of Fixed Assets (Acquire to Retire) in Construction
Imagine a construction company that builds roads and bridges. The
company needs heavy machinery to complete projects, and these
machines go through the Acquire to Retire process.
1. Asset Acquisition (Buying the Equipment)
Example:
The company buys a bulldozer for $500,000 to use in road construction.
The bulldozer is purchased from a manufacturer.
It is recorded as a fixed asset in the company's accounting system.
2. Asset Capitalization (Recording the Asset in Books)
Example:
The bulldozer is assigned a unique asset ID and categorized under Heavy
Equipment.
Expected life: 10 years
Depreciation method: Straight-Line Depreciation
3. Depreciation & Maintenance (Using the Asset)
Example:
Each year, the bulldozer depreciates in value.
Annual depreciation expense:
$500,000 ÷ 10 years = $50,000 per year
The company also spends $10,000 per year on repairs and
maintenance.
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4. Asset Transfer (Moving Equipment Between Sites)
Example:
After completing a highway project in one city, the company transfers the
bulldozer to another construction site for a bridge project.
The financial records are updated to reflect the new location.
5. Asset Revaluation & Impairment (Adjusting the Value)
Example:
After 5 years, the bulldozer has major mechanical issues, reducing its
efficiency.
The company re-evaluates the asset and lowers its book value from
$250,000 to $180,000 due to wear and tear.
6. Asset Retirement (Selling or Scrapping the Equipment)
Example:
After 8 years, the company replaces the bulldozer with a newer model.
The bulldozer is sold to a second-hand equipment dealer for
$80,000.
The asset is removed from the company’s financial records.
2.Cash Management and Bank Reconciliation Processes
1. Cash Management
Cash Management refers to the process of handling a company’s cash
inflows and outflows to ensure liquidity, optimize cash usage, and manage
financial risks. It involves:
Cash Forecasting: Predicting future cash needs based on receivables,
payables, and expenses.
Cash Positioning: Monitoring daily cash balances across accounts.
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Fund Transfers: Moving money between bank accounts to cover payments.
Payment Processing: Managing outgoing payments like vendor invoices
and payroll.
Real-Life Example:
A retail company estimates it needs $100,000 in cash to pay suppliers next
week. The finance team checks daily cash flows and transfers $50,000 from
another bank account to meet the requirement.
Bank Reconciliation ensures that a company’s financial records
(cash book) match its bank statements. Discrepancies may arise due to
uncleared checks, bank charges, or errors.
Step 1: Compare the company’s cash book with the bank statement.
Step 2: Identify missing transactions (e.g., pending deposits, unprocessed
checks).
Step 3: Adjust for bank fees, interest, or errors.
Step 4: Prepare a bank reconciliation statement to balance records.
Real-Life Example:
A business checks its bank statement and sees a $200 service charge that
was not recorded in its cash book. The accountant updates the records and
balances the cash account.
3.Customer Relationship Management (CRM)
Customer Relationship Management (CRM) is a strategy and technology
used by businesses to manage interactions with customers and improve
relationships throughout the customer lifecycle. It helps in sales,
marketing, customer service, and support by tracking customer data
and communication.
Key Functions of CRM:
Lead & Sales Management – Tracks potential customers and helps convert
them into buyers.
Customer Service & Support – Resolves customer issues and manages
inquiries efficiently.
Marketing Automation – Sends promotional emails, personalized offers,
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and advertisements.
Customer Data Management – Stores customer information like past
purchases, preferences, and feedback.
Reporting & Analytics – Provides insights into customer behavior, sales
trends, and business performance.
Real-Life Example of CRM in Action
Retail Store CRM (Example in INR)
A clothing brand uses a CRM system to track customer purchases and offer
personalized discounts:
A customer, Ravi, buys shirts worth ₹5,000.
The CRM records his purchase history and notes his preference for
formal wear.
During the next sale, the brand sends Ravi an exclusive ₹500
discount coupon for new formal shirts.
Ravi returns and spends ₹7,000 in the store.
Result: The CRM helped increase customer retention and sales.
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