CAUSES OF INDUSTRIAL SICKNESS · Industrial sickness is an umbrella term applied to various things...
Transcript of CAUSES OF INDUSTRIAL SICKNESS · Industrial sickness is an umbrella term applied to various things...
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: I MCOM
Sub. Name: Managerial Economics Sub. Code: 18PCMMINI
Prepared By: Dr.S.RAJAM H.O.D
CAUSES OF INDUSTRIAL SICKNESS
Industrial sickness is an umbrella term applied to various things associated
with industry that make people ill and cause them to miss work. The solutions will have to be
tailored to the specific industry, and only in that way can any real effect be made on
improving the health and productivity of the industrial workforce.
The key is an aggressive work-up on the health issues for a given segment of the
industrial workforce, and usually broken down by type of work. Even as coal miners face
overpowering respiratory threats, and foundry and mill workers have to confront major
physical threats from large quantities of extremely hot materials, each facet of industrial
production has its hot-button health issues.
Industrial health managers need training and experience identifying and remediating
conditions that present major health threats to their respective workforces. Then they can
train the rest of management and can teach the workers themselves about the best way to
carry out their jobs with minimum threats to their health.
Definition
According to the criteria accepted by the Reserve Bank of India “a sick unit is one
which has reported cash loss for the year of its operation and in the judgment of the financing
bank is likely to incur cash loss for the current year as also in the following year.”
Meaning of companies
According to Companies (Second Amendment) Act, 2002
"'Sick Industrial Company' means an industrial company which has
i) The Accumulated losses in any financial year equal to 50 per cent or more of its average
net worth during four years immediately preceding such financial year; or
ii) Failed to repay its debts within any three consecutive quarters on demand made in writing
for its repayment by a creditor or creditors of such company."
Causes of Industrial sickness
The different types of industrial sickness in Small Scale Industry (SSI) fall under two
important categories. They are as follows:
External Causes
(i) General Recessionary Trend:
Sometimes a general depression hits industrial units. This is reflected in lack of
demand for industrial products in general. An overall slowdown in economic activities affects
the performance of individual projects. Improper demand estimation for the products to
project lands the industrial units in difficulties.
(ii) High Prices of Inputs:
When the costs of manufacture are high and sales realisation low, the industrial unit
cannot stand in the market. This happens when the prices of inputs such as price of fuel such
as petroleum during energy crisis goes up whereas the competitive forces keep down the
prices of the products.
(iii) Non-Availability of Raw Materials:
When the supplies of raw materials are not available regularly or in good quality, the
industrial units are bound to be in trouble. This often occurs in case of supply of imported
raw materials.
(iv) Changes in Government Policies:
The industrial sickness is also caused by certain changes in policy designs of the
government. These frequent changes affect the long-term production, financial and marketing
planning of an industrial unit. Changes in Government policies regarding imports, industrial
licensing, taxation can make viable units sick. For example, liberal import policy since 1991
has rendered many small-scale industrial units sick.
(v) Infrastructure Bottlenecks:
Often the infrastructure difficulty is responsible for industrial sickness. No industrial
unit can survive prolonged transport and power bottlenecks.
Internal Factors:
(i) Project Appraisal Deficiencies:
The industrial unit becomes sick when the unit has been launched without a
comprehensive appraisal of economic, financial and technical viabilities of the project.
(ii) Industrial Unrest and Lack of Employee Motivation:
When there is labour discontent, no industrial unit can function smoothly and
efficiently. When labour lacks motivation no good results can be expected and this results in
sickness and non-viability of several industrial units.
(iii) Wrong Choice of Technology:
If the promoters use wrong technology, results are bound to be unsatisfactory. Many
industrial units, especially in the small-scale sector, do not seek professional guidance in
installing the correct machinery and plant. If the machinery and plant installed turn out to be
defective and unsuitable, they are bound to suffer losses and become sick and non-viable.
(iv) Marketing Problems:
The industrial unit becomes sick due to product obsolescence and market saturation.
The industrial unit becomes sick when its product-mix is not attuned to the consumers’
demand.
(v) Wrong Location:
If the location of an industrial unit happens to be defective either from the point of the market
or the supply of inputs, it is bound to experience insurmountable difficulties.
(vi) Lack of Finance:
Inadequate financial arrangements or in the absence of timely financial aid an
industrial unit is bound to come to grief. It will not be able to withstand operational losses.
(vii) Improper Capital Structure:
If capital structure proves to be unsound or unsuitable especially on account of
delayed construction or operation, it will result in cost overruns or unduly large borrowing
and create financial trouble for the unit concerned.
(viii) Management Deficiencies:
The biggest cause of industrial sickness is the managerial inefficiency. Lack of
professional management or experienced management and the existence of hereditary
management is an important cause of industrial sickness. Inefficient management results in
inability to perceive things in proper perspective devoid of routine considerations. Inefficient
management is also unable to build up good team and inspire confidence for an organised
collective effort and takes autocratic and high-handed decisions.
(ix) Voluntary Sickness:
There is some sickness which is voluntarily invited by the entrepreneurs for various
motives like getting government concession or aid from financial institutions. Thus industrial
sickness cannot be attributed to any single or simple cause but may be the result of a
combination of number of allied causes.
Suggestions for Rehabilitation of Sick Units:
The rehabilitation of sick units or restoring them to normal health is a matter of great
urgency in view of the serious social, economic and political consequences of industrial
illness.
The following measures may be suggested:
(i) Cooperation between Term-Lending Institutions and Commercial Banks:
Since commercial banks provide working capital, they are in a position to know about
the working of industrial concern. But assistance from term-lending institutions is also
essential for rescue operations.
(ii) Coordination between Various Government Agencies:
All government agencies, both regulatory and promotional, must join hands to restore
sick units to health.
(iii) Full cooperation from various suppliers:
Unsecured creditors and other stakeholders, particularly from the employees, is also
essential to take the concern out of the difficulties in which it is involved.
(iv) Willing Cooperation and Clear Understanding with the Project Promoters:
Generally there is a lack of trust and confidence among the various interests concerned. It is
found that government agencies and dealing institutions are more worried about their money
and are anxious to recover them instead of curing of the health of the sick units.
(v) Checking Over-Valuation of Inventories:
The banks should verify on a regular basis the valuation of inventories both in terms
of quantity and price. This would prevent over-borrowing on the hypothecation of
inventories.
(vi) Marketing:
There should be well organised and scientific marketing by the project promoters
otherwise launching of a project will be a leap in the dark. Good marketing arrangements will
prevent industrial sickness.
(vii) Recovery of Outstanding:
Every effort should be made to realize outstanding advances so that the concern is
able to gather funds to avoid sickness.
(viii) Modernisation of Machinery:
If the sick unit is to be restored to health, old and obsolete machinery and outdated
technology should be discarded at the earliest.
(ix) Improving Labour Relations:
Restrictive labour and unreasonable trade unions are great obstacles. Improving
labour relations will go a long way in curing industrial sickness.
(x) Efficient Management:
If necessary inefficient management should be replaced, the key to industrial health
lies in alert and efficient management. The management should show a calm approach,
patience and perseverance, courage and ability to steer in bad weather.
(xi) Performance Incentives:
It is necessary to offer performance incentives to the executives and the workers to
induce them to put in their best efforts. This will be quite helpful in curing industrial sickness.
(xii) Sympathetic Government Attitude:
During periods of industrial illness the government agencies should adopt a
sympathetic and understanding attitude so that the problem is not aggravated but moves
towards a solution instead.
(xiii) Austerity and Economy:
Austerity and disciplines should be enforced at all levels. Every effort should be made
in raising funds internally through the sale of excess assets, surplus machinery, etc. Uncalled
for tours, lavish entertainments, unnecessary personal expenses should be ruthlessly cut
down.
Conclusion:
In view of the large-scale industrial sickness it would be necessary to organize a task
force consisting of competent and experienced executives in various branches of business to
go into the case and monitor recovery. Rehabilitation of sick units is not an easy and simple
affair. An all-round effort is necessary to root out the disease; first necessary step is the
identification of sick units which can be made viable through renovation, expansion, and
diversification. Units beyond recovery should be wound up.
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Subject Name: Cyber crimes and Law Subject code: 18PCM2N2
Non-major elective
Topic: Fundamental Principles of crime Class: I M.Com
Introduction:
Under United States law, the principles of a crime (or element of an offense) are one
of a set of facts that must all be proven to convict a defendant of a crime. Before a court finds
a defendant guilty of a criminal offense, the prosecution must present evidence that, even
when opposed by any evidence the defence may choose, is credible and sufficient to prove
beyond a reasonable doubt that the defendant committed each element of the particular crime
charged. The component parts that make up any particular crime vary depending on the
crime.
The basic components of an offense are listed below; generally, each element of an
offense falls into one or another of these categories. At common law, conduct could not be
considered criminal unless a defendant possessed some level of intention – purpose,
knowledge, or recklessness – with regard to both the nature of his alleged conduct and the
existence of the factual circumstances under which the law considered that conduct criminal.
However, for some legislatively enacted crimes, the most notable example being statutory
rape, a defendant need not have had any degree of belief or wilful disregard as to the
existence of certain factual circumstances (such as the age of the accuser) that rendered his
conduct criminal; such crimes are known as strict liability offenses.
Mental state (Mens rea)
Mens rea refers to the crime's mental elements of the defendant's intent. This is a
necessary element—that is, the criminal act must be voluntary or purposeful. Mens rea is the
mental intention (mental fault), or the defendant's state of mind at the time of the offense,
sometimes called the guilty mind. It stems from the ancient maxim of obscure origin, "actus
reus non facit reum nisi mens sit reas" that is translated as "the act is not guilty unless the
mind is guilty." For example, the mens rea of aggravated battery is the intention to do serious
bodily harm. Mens rea is almost always a necessary component in order to prove that a
criminal act has been committed
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Conduct (Actus reus)
All crimes require actus reus. That is, a criminal act or an unlawful omission of an act
must have occurred. A person cannot be punished for thinking criminal thoughts. This
element is based on the problem of standards of proof. How can another person's thoughts be
determined and how can criminal thoughts be differentiated from idle thoughts? Further, the
law's purview is not to punish criminal ideas but to punish those who act upon those ideas
voluntarily.
Unlike thoughts, words can be considered acts in criminal law. For example, threats,
perjury, conspiracy, and solicitation are offenses in which words can constitute the element of
actus reus. The omission of an act can also constitute the basis for criminal liability
Concurrence
In general, men's rea and actus reus must occur at the same time—that is, the criminal
intent must precede or coexist with the criminal act, or in some way activate the act. The
necessary mens rea may not continually be present until the forbidden act is committed, as
long as it activated the conduct that produced the criminal act. However, for criminal liability
to occur there must be either overt or voluntary action
Causation
Many crimes include an element that actual harm must occur—in other words,
causation must be proved. For example, homicide requires a killing, aggravated battery
requires serious bodily injury and without those respective outcomes, those respective crimes
would not be committed. A causal relationship between conduct and result is demonstrated if
the act would not have happened without direct participation of the offender. Causation is
complex to prove. The act may be a "necessary but not sufficient" cause of the criminal harm.
Intervening events may have occurred in between the act and the result. Therefore, the cause
of the act and the forbidden result must be "proximate", or near in time
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Subject Name: Executive Communication Subject code: 18PCM3E1
Major Elective
Topic: Use of charts, diagrams & tables Class: II M.Com
Introduction:
Using graphs, diagrams and charts can help your reader to get a clearer picture of your
research findings and how they compare with other data. Tables are useful when you need to
present a quantity of numerical data in an accessible format and you need to show exact
numbers.
A graph or a chart may be defined as a visual presentation of data. Businesses use
graphs and charts to help them convey information and to make sense of data. Businesses
have a wide variety of graphs and charts to choose from. They can use any of these charts and
graphs. We live in a digital era. Charts and graphs, especially charts, are the most important
tools to represent data and developing trend in various aspects.
A chart is a graphical representation of data, in which "the data is represented by
symbols, such as bars in a bar chart, lines in a line chart, or slices in a pie chart". A chart can
represent tabular numeric data, functions or some kinds of qualitative structure and provides
different info.
The term "chart" as a graphical representation of data has multiple meanings. A data
chart is a type of diagram or graph that organizes and represents a set of numerical or
qualitative data. Maps that are adorned with extra information (map surround) for a specific
purpose are often known as charts, such as a nautical chart or aeronautical chart, typically
spread over several map sheets. Other domain specific constructs are sometimes called charts,
such as the chord chart in music notation or a record chart for album popularity.
Benefits of delivering data in different graphs, charts or tables
Graphs, charts, pictorial diagrams or tables present information in a concise,
consistent and compact style. Target-audiences grasp the meaning of the data quickly.
Graphs, charts, pictorial diagrams or tables are visually more engaging than a plain
textual content. And your PPT automatically becomes more engaging with their
rightful assimilations.
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Audiences always want to draw some conclusions from the slides bearing them which
is always good to understand the core conclusion of the presentation.
Making assessment of facts becomes easier for audiences as these visual modes allow
them to compare different data and numbers.
More can be said, more facts can be accommodated and arranged in a terse manner
and that is the beauty of graphs, charts, pictorial diagrams or tables in a PPT.
They help your prospective clients make important inferences on different finer
aspects of your business on different comprehensible parameters.
Tables are useful for precise numerical data.
Line graphs are effective at showing trends over time and relationships between variables.
Bar charts/graphs are good for comparisons. The bars can be vertical or horizontal. You can
make them different colours to help the reader to differentiate the results.
Pie charts show the proportion of the whole that is taken by various parts.
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Drawings and diagrams can be used to reinforce or supplement text, or where something is
more clearly shown in diagrammatic form.
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KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE – 641 029
E-LEARNING MATERIAL
Class: II Mcom Semester: IV
Subject: Insurance and risk management Subject code: 17PCM4E2 /18PCM4E2
Prepared By: N.SRUTHI
1) Nature of insurance
The insurance has the following characteristics:
Sharing of risk:
Insurance is a device to share the financial losses which might befall on an individual
or his family on the happening of a specified event. The event may be death of a bread-
winner to the family in the case of life insurance, marine-perils in marine insurance, fire in
fire insurance and other certain events in general insurance, Ex: Theft in burglary insurance,
accident in motor insurance etc. The loss arising from these events are shared by all the
insured in the form of premium.
Co-operative device:
The most important feature of every insurance plan is the co-operation of large number
of persons who, in effect, agree to share the financial loss arising due to a particular risk
which is insured. Such a group of persons may be brought together voluntarily or through
publicity or through solicitation of the agents.
Value of risk:
The risk is evaluated before insuring to charge the amount of share of an insured called
premium or consideration. There are several methods of evaluation of risks. If there is
expectation of more loss, higher premium is charged. So, the probability of loss is calculated
at the time of insurance.
Payment at contingency:
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Payment is made at a certain contingency insured. If the contingency occurs, payment
is made. Since life insurance contract is a contract of certainty, the payment is certain. In
other insurance contracts, the contingency may or may not occur. So, if the contingency
occurs payment is paid, otherwise no amount is given to the policy-holder.
Amount of payment:
Amount of payment depends upon the value of loss occurred due to the particular
insured risk provided insurance is there up to that amount. It is immaterial in life insurance
what was the amount of loss at the time of contingency. But in the property and general
insurances, the amount of loss as well as the happening of loss, are required to be proved.
Large number of insured persons:
To spread the loss immediately, smoothly and cheaply, large number of persons should
be insured. To make the insurance cheaper, it is essential to insure large number of persons or
property because the lesser would be cost of insurance and so, the lower would be premium.
So, in order to function successfully, the insurance should be joined by a large number of
persons.
Insurance is not a gamble:
In gambling, by bidding the person exposes himself to the risk of losing, in insurance,
the insured is always opposed to risk, and will suffer loss if he is not insured. By getting
insured, a person protects himself against the risk of loss. By gambling, a person gets himself
into the risk of loss.
Insurance is not charity:
Charity is given without consideration but insurance is not possible without premium.
It provides security and safety to an individual and to the society although it is a kind of
business because in consideration of premium it guarantees the payment of loss.
2) Functions of insurance
The functions of insurance can be studied into two parts: (i) Primary functions, and (ii)
Secondary functions.
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Primary functions
(i) Insurance provides certainty: Insurance provides certainty of payment at the uncertainty
of loss. Insurance removes all the uncertainties and assures the insured with the payment of
loss. The insurer charges premium for providing the said certainty.
(ii) Insurance provides protection: Insurance provides protection against the probable
chances of loss. It guarantees the payment of loss and thus protects the assured from
sufferings. The insurance cannot check the happening of risk but can provide for losses at the
happening of the risk.
(iii) Risk sharing: The risk is uncertain. When risk takes place, the loss is shared by all the
persons who are exposed to the risk. On the basis of probability of risk, the share is obtained
from each and every insured in the form of premium.
Secondary functions
(i) Prevention of loss: The insurance joins hands with those institutions which are engaged in
preventing the losses of the society because the reduction in loss causes lesser payment to the
assured and so more saving is possible which will assist in reducing the premium.
(ii) Provides capital: The insurance provides capital to the society. The accumulated funds
are invested in productive channel. The dearth of capital of the society is minimised to a
greater extent with the help of investment of insurance.
(iii) Improves efficiency: The insurance eliminates worries and miseries of losses at death
and destruction of property. The carefree person can devote his body and soul for the better
achievements.
(iv) Helps in economic progress: The insurance by protecting the society from huge losses
of damage, destruction and death, provides an initiative to work hard for the betterment of the
masses. The next factor of economic progress, the capital, is also immensely provided by the
masses through insurance.
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KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA & M.COM
E-learning material 2018
Staff Name: Mrs.C.Goldbell Rachel
Subject: Financial Management 18PCM101 Class: M.Com
Topic: Role and Functions of a Financial Manager:
Introduction
According to Joseph Massie, “Financial management is the operational activity of a business that
is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.”
It is a general assumption that a financial manager works only in the accounts department or he
has to deal with the cash flow. In reality, he has a large number of things to cater to. Also, every
organization, public or private, needs people from the finance background.
The roles and responsibilities of a financial manager
1. Financial Analysis and Interpretation
Financial analysis is taking the financial data of the company, organizing it and analyzing it to
find the strengths of the company. This is converted into patterns and a conclusion will be driven
out of it. This helps the higher management to take wise decisions. It also helps in evaluating the
financial health of the company. It is a very tedious task, which needs to be done articulately.
2. Determining the Source of Funds
A financial manager identifies the sources of funds, especially while starting a new venture. It
involves identifying the lenders and banks that can lend money to the company. Also, it deals
with knowing your customers and target audience.
3. Investment of Funds
A financial manager conducts an in-depth study about the investment that a company should
make and the possible ROI (Return on Investment). He provides a broader selection of
investment opportunities with a lower risk. So a financial manager has to do risk analysis too.
4. Profit Planning and Control
Profit planning and control involves establishing profit goals, determining the expected sales
volume, estimating expenses, determining profit and much more. After planning profit
successfully, an organization needs to control profit. Profit control involves measuring the gap
between the estimated level and actual level of profit achieved by an organization.
5. Capital Budgeting
A financial manager determines and evaluates potential expenses or investments that are large in
nature. Such expenditure can be anything like having a new branch office or investing in a new
long-term venture.
Functions of Financial Manager
1. Estimating the requirements of funds: A business requires funds for long term purposes i.e.
investment in fixed assets and so on. A careful estimate of such funds is required to be made. An
assessment has to be made regarding requirements of working capital involving, estimation of
amount of funds blocked in current assets and that likely to be generated for short periods
through current liabilities. Forecasting the requirements of funds is done by use of techniques of
budgetary control and long range planning. Estimates of requirements of funds can be made only
if all the physical activities of the organization are forecasted.
2. Decision regarding capital structure: Once the requirements of funds are estimated, a
decision regarding various sources from where the funds would be raised is to be taken. A proper
mix of the various sources is to be worked out; each source of funds involves different issues for
consideration. The financial manager has to carefully look into the existing capital structure and
see how the various proposals of raising funds will affect it. He is to maintain a proper balance
between long and short term funds and to ensure that sufficient long-term funds are raised in
order to finance fixed assets and other long-term investments and to provide for permanent needs
of working capital.
3. Investment decision: Funds procured from different sources have to be invested in various
kinds of assets. Long term funds are used in a project for fixed and also current assets. The
investment of funds in a project is to be made after careful assessment of various projects
through capital budgeting. A part of long term funds is also to be kept for financing working
capital requirements.
4. Dividend decision: The financial manager is concerned with the decision to pay or declare
dividend. He is to assist the top management in deciding as to what amount of dividend should
be paid to the shareholders and what amount is retained by the company, it involves a large
number of considerations. Economically speaking, the amount to be retained or be paid to the
shareholders should depend on whether the company or shareholders can make a more profitable
use of resources.
5. Supply of funds to all parts of the organization or cash management: The financial
manager has to ensure that all sections of the organization are supplied with adequate funds.
Sections having excess funds contribute to the central pool for use in other sections that needs
funds. An adequate supply of cash at all points of time is absolutely essential for the smooth flow
of business operations. Even if one of the many branches is short of funds, the whole business
may be in danger, thus, cash management and cash disbursement policies are important.
6. Evaluating financial performance : Management control systems are usually based on
financial analysis, e.g. ROI (return on investment) system of divisional control. A financial
manager has to constantly review the financial performance of various units of the organization.
Analysis of the financial performance helps the management for assessing how the funds are
utilized in various divisions and what can be done to improve it.
Conclusion:
A financial manager plays a vital role as finance is the backbone of any organization. The
organization can grow by leaps and bounds, provided sound business decisions are taken at the
right time. These important decisions come from the financial manager’s desk.
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: I MCOM
Sub. Name: Global Business Environment Sub. Code: 18PCM102
Prepared By: Dr.S.RAJAM H.O.D
Social responsibility of business
Social responsibility is an ethical framework and suggests that an entity, be it
an organization or individual, has an obligation to act for the benefit of society at large.
Social responsibility is a duty every individual has to perform so as to maintain a balance
between the economy and the ecosystems. A trade-off may exist between economic
development, in the material sense, and the welfare of the society and environment, though
this has been challenged by many reports over the past decade.
DEFINITION
According to Peter F Druker, “Social responsibility requires managers to consider whether
their actions are likely to promote the public good, to advance the basic belief of society, to
contribute to its stability strength and harmony.” Social responsibility refers to the voluntary
efforts on the part of the business to contribute to the social well being.
Now let's discuss how the survival, growth and success of business are linked and dependent
on sincere execution of its social responsibilities.
1. Shareholders or investors
Social responsibility of business towards its shareholders or investors is most
important of all other obligations. If a business satisfies its funders, they are likely to invest
more money in a project. As a result, more funds will flow in and the same can be utilized to
modernize, expand and diversify the existing activities on a larger scale. Happy financiers
can fulfil the rising demand of funds needed for its growth and expansion.
2. Personnel
Social responsibility of business towards its personnel is important because they are
the wheels of an organization. Without their support, the commercial institution simply can't
function or operate.
If a business takes care of the needs of its human resource wisely, it will boost the
motivation and working spirit within an organization. A happy employee usually gives his
best to the organization in terms of quality labor and timely output than an unsatisfied one. A
pleasant working environment helps in improving the efficiency and productivity of working
people. A good remuneration policy attracts new talented professionals who can further
contribute in its growth and expansion. Thus, if personnel are satisfied, then they will work
together very hard and aid in increasing the production, sales and profit.
3. Consumers or customers
Social responsibility of business towards its consumers or customers matters a lot
from sales and profit point of view. Its success is directly dependents on their level of
satisfaction. Higher their rate of satisfaction greater is the chances to succeed.
If a business rolls out good-quality products and/or delivers better quality services that too at
reasonable prices, then it is natural to attract lots of customers. If the quality-price ratio is
maintained well and consumers get worth for their money spends, this will surely satisfy
them. In a long run, customer loyalty and retention will grow, and this will ultimately lead to
profitability.
4. Government
Social responsibility of business towards government's regulatory bodies or agencies
is quite sensitive from the license's point of view. If permission is not granted or revoked
abruptly, it can result in huge losses to an organization. Therefore, compliance in this regard
is necessary.
A business must also function within the demarcation of rules and policies as
formulated from time to time by the government of state or nation. It should respect laws and
abide by all established regulations while performing within the jurisdiction of state.
Some examples of activities a business can do in this regard:
o Licensing an organization,
o Seeking permissions wherever necessary,
o Paying fair taxes on time,
o Following labour, environmental and other laws, etc.
If laws are respected and followed, it creates goodwill of business in eyes of
authorities. Overall, if a government is satisfied it will make favourable commercial policies,
which will ultimately open new opportunities and finally benefit the organization sooner or
later.Therefore, satisfaction of government and local administrative bodies is equally
important for legal continuation of business.
5. Local community
Social responsibility of business towards the local community of its established area is
significant. This is essential for smooth functioning of its activities without any agitations or
hindrances. A business has a responsibility towards the local community besides which it is
established and operates from. Industrial activities carried out in a local-area affect the lives
of many people who reside in and around it. So, as a compensation for their hardship, an
organization must do something or other to alleviate the intensity of suffering.
As a service to the local community, a business can build:
A trust-run hospital or health centre for local patients,
A primary and secondary school for local children,
A diploma and degree college for local students,
An employment centre for recruiting skilled local people, etc.
Such activities to some-extend may satisfy the people that make local community and hence
their changes of agitations against an establishment are greatly reduced. This will ensure the
longevity of a business in a long run.
6. Environment
Social responsibility of business with respect to its surrounding environment can't be
sidelined at any cost. It must show a keen interest to safeguard and not harm the vitality of
the nature. A business must take enough care to check that its activities don't create a
negative impact on the environment. For example, dumping of industrial wastes without
proper treatment must be strictly avoided. Guidelines as stipulated in the environmental laws
must be sincerely followed. Lives of all living beings are impacted either positively or
negatively depending on how well their surrounding environment is maintained (naturally or
artificially). Humans also are no exception to this. In other words, health of an environment
influences the health of our society. Hence, environmental safety must not be an option else a
top priority of every business.
7. Public
Finally, social responsibility of business in general can also contribute to make the
lives of people a little better.
Some examples of services towards public include:
Building and maintaining devotional or spiritual places and gardens for people,
Sponsoring the education of poor meritorious students,
Organizing events for a social cause, etc.
Such philanthropic actions create a goodwill or fame for the business-organization in the
psyche of general public, which though slowly but ultimately pay off in a due course of time.
The world is recognizing the importance of social responsibility of business.
Arguments Supporting Social Responsibility
The justification for existence and growth:
The primary goal of business is to make profits as only profits can help the business
sustain and expand. Profits should only be made as a return of service to the society by
producing goods and services.
The long-term-term interest in the firm:
A firm is to gain maximum profits in the long run if it has it‟s the highest goal as service to society. As humans are social beings, when they notice that a particular corporation
is not serving its the best interest socially, they do not support the organization further.
Avoidance of government regulations:
Government is the highest authority in the nation. When a government feels that the
business is not socially responsible or is creating problems like pollution, the government
limits its freedom.
Maintenance of Society:
Business is one of the important pillars on which society survives. It is the
responsibility of business to take care of society‟s needs. Law alone can‟t help people with the issues they face. Therefore businesses contribute to the well being, peace and harmony of
society.
Availability of resources with Business:
Business enterprises have huge financial resources, very efficient managers & contacts
and thereby they can ensure that a social problem can be solved easily.
Converting problems into opportunities:
Business means risk. And turning risky situations into profits can also be related to
solving social problems.
Holding Business responsible for Social problems:
Business enterprises are responsible for many problems such as pollution,
discriminated employment, corruption, etc. It is the duty of the business to solve the problems
created by them.
Arguments against Social Responsibility
Violation of maximization of the profit motive:
This statement argues that business exists only for maximizing profits and businesses
fulfil their social responsibility best by maximizing profits by increasing efficiency and
reducing costs. They need not take up any additional obligations.
Side effects on Consumers:
Customers suffer because of the solving social problems and taking social care require
huge financial investment. As the money within the business is used in social help, the
business increases the cost of their products and services.
Lack of Social skills:
It is often stated that businessmen don‟t fully under the social problems and thus can‟t solve them efficiently.
Personal resistance:
People tend to dislike interference from businesses in their problems.
The Reality of Social Responsibility
The threat of Public Regulation:
Government agencies keep watchful eye on all the business operations. So to avoid
government action, business should behave in a responsible manner.
The pressure of Labour movement:
Labour plays an important role not only in production but also in the managerial
factors of the organization. Labour nowadays is more educated and their movements are more
powerful. „Hire and fire‟ policy no longer work. Managers now have to be more responsible while dealing with labors.
Impact of Consumer Consciousness:
In this era, consumers are well aware of the quality and price of the product.
Consumers understand their rights over the product and even in small issues; they file a suit in
consumer court.
Development of a Social standard for Business:
New social standards consider business enterprises as legitimate but with a condition,
they must also serve social needs.
Development of Business Education:
Business education has created an awareness among investors, consumers, employees,
etc and the world is more sensitive towards social issues.
The relationship between Social interest and Business Interest:
People know that social interest and business interest are complementary. This means
long-term benefits of the business.
Development of Professional and Managerial Class:
Earlier business houses only aimed at profit maximization but now professional
management and educational institution have made a new kind of managers that give similar
importance to social responsibility.
From the above seen „Realities of Social Responsibility‟ it is clear that business houses must assume social responsibility for their survival, growth, and sustainability.
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: I MCOM
Sub. Name: Human Resource Management Sub. Code: 18PCM103
Prepared By: Dr. M. Revathi Bala H.O.D
Qualities of Human Resource Manager
According to Henri Fayol, an HR manager should possess human relations skills much
more than other managerial skills. He divided the qualities needed by an HR manager into these
categories:
i. Physical-health, vigor, address;
ii. Mental-ability to understand and learn; judgment, mental vigor, and also adaptability;
iii. Moral-energy, firmness, willingness to accept, responsibility, initiative, loyalty, tact,
dignity;
iv. Educational-general acquaintance with matters not belonging exclusively to the function
performed;
v. Technical-peculiar to the function; and
vi. Experience-arising from the work.
Qualities of an HR Manager
Sympathetic Attitude
Quick Decisions
Integrity
Patience
Formal Authority
Leadership
Social Responsibility
Good Communication Skills
Sympathetic Attitude
A good personnel manager must have a humane approach to human resource problems.
Regardless of the problems faced by the employees, he must have a sympathetic attitude while
dealing with them.
Quick Decisions
He should display the ability to take quick decisions. Let’s assume that there is a conflict
between a superior and an employee in the organization. When the HR manager tries to mediate
and put an end to the conflict, he might have to make some quick decisions. He should be
mentally alert and therefore not get caught unawares.
Integrity
Being the head of the personnel or human resource department, an HR manager should
display integrity. Honesty and frankness are the hallmarks of a good human resource manager.
At no time can the employees doubt the integrity of the personnel manager.
Patience
He should be extremely patient and not someone who loses his temper easily. While
dealing with employees, it is important to be a good listener, especially when an employee is
voicing his concerns. And good listening skills require a lot of patience. Further, since
employees tend to talk to the HR manager about their problems, they can get agitated and
verbally abusive. In such situations, it is imperative that the HR manager keeps his cool and
controls the situation.
Formal Authority
He should depend on his formal authority alone. In fact, an effective HR manager earns
his informal authority of influencing people through his interpersonal skills.
Leadership
Good leadership skills are essential to guide the employees towards achieving the
organization’s objectives. He should also keep people motivated and encourage them to use their
skills for the overall good of the enterprise.
Social Responsibility
He should have a sense of social responsibility. Further, he must encourage employees to
discharge their social obligations to different segments of society. After all, a good human
resource manager isn’t only about the organization. He also needs to look at the broader human
resource element.
Good Communication Skills
Another essential quality of a human resource manager is that he must possess good
communication skills. In fact, since a major part of his role involves interacting with employees,
unions, and management, being a good communicator is a must.
1
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE – 641 029
E-LEARNING MATERIAL
Class: I Mcom Semester: I
Subject: Organizational behaviour Subject code: 18PCM104
Prepared By: N.SRUTHI
1) Types of personalities:
Traits serve as basis for classifying personalities into types. Based on the different traits
found in a person, following are the main types of personalities:
1) Introvert and extrovert personalities
2) Type A and Type B personalities
3) Judging and Perceptive personalities
Introvert personalities:
Introvert is one of the two basic orientations of people. Persons with introvert
orientation are primarily oriented to the subjective world. Such people look inward,
experience and process their thoughts and ideas within themselves. They also avoid social
contacts and initiating interaction with other group mates, withdrawn, quiet and enjoy
solitude. People with introvert personality are found more inclined to excel at tasks that
require thought and analytical skill.
Extrovert personalities:
Extroverts are just contrary to introverts. Extroverts are friendly, sociable, lively,
gregarious, aggressive and expressing their feelings and ideas openly. Accordingly, they are
more suitable and successful for the positions that require considerable interaction with
others. Sales activities, publicity departments, personal relations unit etc. are examples of
activities suitable for extroverts.
2
Validity of results showed that introvert/extrovert is applicable to only the rare extremes. The
fact remains that most of the people really tens to be neither introverts nor extroverts, but
ambiverts. That is, they are in between introversion and extroversion.
Type A personalities:
Type A people are characterised by hard-working, highly achievement oriented,
impatient, have sense of urgency, aggressive, with competitive drive etc.
Such people tend to be very productive and work very hard. In fact, they are workaholics.
Being impatient and aggressive, such people are more prone to heart attack.
Type B personalities:
Easy-going, sociable, free from urgency of time, laid-back and non-competitive are the
characteristics of Type B personalities. Such people do better on tasks involving judgements,
accuracy rather than speed and team work.
Judging personalities:
People with judging personality types like to follow a plan, make decisions and need
only that what is essential for their work. They work best when they can plan work and
follow the plan, like to get things settled, may decide things too quickly, may not notice new
things that need to be done, want only essential things needed to begin their work, tend to be
satisfied once they reach a judgement on a thing or situation or person.
Perceptive personalities:
These are the people who adapt well to change, want to know all about a job and at
times may get overcommitted. They adapt well to changing situations, do not mind leaving
things open for alterations, may have trouble making decisions, may start too many projects
and have difficulty in finishing them, want to know all about their work, tend to be curious
and welcome new information on a thing or a situation or a person.
2) Role playing
Role playing can be defined as a technique in which people are presented with a role in
model or artificial environment and they are exposed with some kind of case or situation to
exhibit their performance in the particular role.
3
Objectives of role playing:
1) To develop better understanding of the job.
2) To understand how to handle a particular situation.
3) To enable better decision making.
4) To improve interpersonal relationship.
5) To understand behavioural pattern of others.
6) To build self-confidence.
Features of role playing:
Learning by doing: It aids with practical experience and understanding.
Learning through observation and feedback: The trainee observes the situation and learns
through the feedback of the trainer. He also learns by observing the role play of other
trainees.
Learning through analysis and conceptualization: The trainee analyses the situation and
comes out with a clear understanding of the practical concept.
Benefits or outcome of role play as a training technique:
a) It helps in both cognitive and effective development of trainees and better learning by
doing.
b) It permits practice by repetition and helps in better reinforcement.
c) It also helps in improving human relation since it helps in developing empathy.
d) It helps in making people sensitive towards others.
e) It helps in better SWOT analysis of individuals and thus the feedback given helps in
identifying and overcoming the deficiencies.
f) It enables the role player to control his behaviour and enact as if he is enacting in a real life
situation.
g) It helps in bringing attitudinal changes in the employees as trainees.
******
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: I MCOM
Sub. Name: Advanced Corporate Accounting Sub. Code: 18PCM205
Prepared By: Dr.S.RAJAM H.O.D
INFLATION ACCOUNTING
Inflation accounting is a special accounting technique that can be used during periods
of high inflation whereby financial statements are adjusted according to price indexes, rather
than relying solely on a cost accounting basis. Companies operating in countries experiencing
rapid and sustained levels of inflation or hyperinflation may be required to update their
statements periodically in order to make them relevant to current economic and financial
conditions. Inflation accounting comprises a range of accounting models designed to correct
problems arising from historical cost accounting in the presence of
high inflation and hyperinflation.
Merits of Inflation Accounting:
1. Since assets are shown at current values, Balance Sheet exhibits a fair view of the financial
position of a firm.
2. Depreciation is calculated on the value of assets to the business and not on their historical
cost—a correct method. It facilitates easy replacement.
3. Profit and Loss Account will not overstate business income.
4. Inflation accounting shows current profit based on current prices.
5. Profit or loss is determined by matching the cost and the revenue at current values which
are comparable—a realistic assessment of performance.
6. Financial ratios based on figures, adjusted to current value, are more meaningful.
7. Inflation accounting gives correct information, based on current price to the workers and
shareholders. In the absence of this, workers may claim for higher wages and shareholders
too claim for higher dividends.
Demerits of Inflation Accounting:
1. The system is not acceptable to Income tax authorities.
2. Too much calculations make complications.
3. Changes in prices are a never ending process.
4. The amount of depreciation will be lower in times of deflation.
5. The profit calculated on the system of price level accounting may not be a realistic profit.
Method of Price Level Accounting
1. Current Purchasing Power Technique:
Current Purchasing Power Technique of accounting requires the companies to keep
their records and present the financial statements on conventional historical cost basis but it
further requires presentation of supplementary statements in items of current purchasing
power of currency at the end of the accounting period.
In this method the various items of financial statements, i.e. balance sheet and profit
and loss account are adjusted with the help of recognized general price index. The consumer
price index or the wholesale price index prepared by the Reserve Bank of India can be taken
for conversion of historical costs.
The main objective of this method is to take into consideration the changes in the
value of money as a result of changes in the general price levels. It helps in presenting the
financial statements in terms of a unit of measurement of constant value when both cost and
revenue have been changing due to changes in the price levels.
This technique of price level accounting has been followed by a number of companies
in Germany, Australia and U.S.A. But although this method is simple, it may be considered
as only a first step towards inflationary accounting.
Mechanism of Preparing Financial Statement under CPP Method:
(a) Conversion Technique:
Current Purchasing Power Method (CPP) requires conversion of historical figures at
current purchasing power. In this method, various items of balance sheet and profit loss
account are adjusted with the help of recognized general price index. The consumer price
index or the wholesale price index prepared by the Reserve Bank of India can be taken for
conversion of historical costs. For this purpose, historical figures must be multiplied with the
conversion factor.
(b) Mid-Period Conversion:
There are several transactions which take place throughout the year such as purchases,
sales, expenses, etc. For conversion of such items, average index of the year can be taken as
the one index for all such items. If such an average is not available, the index of the mid-year
is taken for this purpose. And, if the index of the mid year is also not available, then the
average of index at the beginning and at the end of the period may be taken.
(c) Monetary and Non-Monetary Accounts (Gain or Loss on Monetary items):
For the conversion of historical costs in terms of current purchasing power of
currency, it is useful to make a distinction between:
(a) Monetary accounts, i.e., money value items;
(b) Non-monetary accounts, i.e., real value items.
Monetary accounts are those assets and liabilities which are not subject to
reassessment of their recorded values owing to change of purchasing power of money. The
amounts of such items are fixed, by contract or otherwise in term of rupees, regardless of
change in the general price level.
It must be noted that, in the process of conversion, it is only the non monetary items
which are adjusted to the current purchasing power of money. Further, if assets and liabilities
are converted as stated above, it may be found that a loss or gain arises from the difference of
the converted total value of assets and that of liabilities. This loss or gain arises through
monetary items or money value assets and liabilities i.e., cash, debtors, receivables, creditors,
bills payable, etc., and not through real value assets and liabilities or non-monetary items.
(d) Adjustment of Cost of Sales and Inventory:
As inventory is purchased in period n and sold in (n + x) period, there is a time gap
between purchases and sales. During this time, there might be changes in the price levels.
Because of inflation, the selling prices would indicate the value realized in terms of the
increased price levels and costs which relate to the earlier periods would imply lower values.
This results in over-statement of profits which are often misleading. The same is true
is in deflation also, as current revenues are not matched with current costs. Hence, adjustment
of inventory and cost of sales is very important. This adjustment depends upon the method
adopted for the outflow of inventories, viz., first-in-first-out or last-in-first-out.
Under first-in-first out method (FIFO) cost of sales comprise the entire opening stock
and current purchases less closing stock. The closing inventory is entirely from current
purchases. But under the last-in-fist-out method (LIFO) cost of sales comprise mainly of the
current purchases and it is only when the cost of sales exceeds current purchases, opening
stock enters into cost of sales. The closing stock enters current purchases opening stock
enters into cost of sales. The closing inventory in LIFO is out of the purchases made in the
previous year.
(e) Ascertainment of Profit:
Profit under Current purchasing Power (CPP) accounting can be ascertained in two
ways:
(i) Net Change Method:
This method is based on the normal accounting concept that profit is the change in
equity during an accounting period. Under this method, the openings as well as closing
balance sheets are converted into CPP terms by using appropriate index numbers. The
difference in the balance sheet is taken as reserves after converting the equity capital also.
If equity capital is not converted, it may be taken as the balancing figure. It must be
remembered that in the closing balance sheet, the monetary items will remain unchanged.
Profit is calculated as the net change in reserves, where equity capital is also converted; and
will be equal to net change in equity, where equity is not converted.
(ii) Conversion of Income Method:
Under this method, the historical income statement is converted in CPP terms.
Purchases, sales and other expenses which are incurred throughout the year are converted at
average index. Cost of sales is adjusted as discussed in point (d) above. Depreciation can be
calculated on converted values.
2. Replacement Cost Accounting Technique:
Replacement Cost Accounting (RCA) Technique is an improvement over Current
Purchasing Power Technique (CPP). One of the major weaknesses of Current Purchasing
Power technique is that it does not take into account the individual price index related to the
particular assets of a company.
In the Replacement Cost Accounting technique the index used are those directly
relevant to the company’s particular assets and not the general price index. In this sense the
replacement cost accounting technique is considered to be a improvement over current
purchasing power technique.
But adopting the replacement cost accounting technique will mean using a number of
price indices for conversion of financial statements and it may be very difficult to find out the
relevant price index to be used in a particular case. Further, the replacement cost accounting
technique provides for an element of subjectivity and on this ground it has been criticized by
various thinkers.
Depreciation and Replacement of Fixed Assets:
Another problem posed by the price level changes (and more so by inflation) is that
how much depreciation should be charged on fixed assets.
3. Current Value Accounting Technique:
In the Current Value Accounting Technique of price level accounting all assets and
liabilities are shown in the balance sheet at their current values.
The value of the net assets at the beginning and at the end of the accounting period is
ascertained and the difference in the value in the beginning and the end is termed as profit or
loss, as the case may be. In this method also, like replacement cost accounting technique, it is
very difficult to determine relevant current values and there is an element of subjectivity in
this technique.
4. Current Cost Accounting Technique:
The British Government had appointed a committee known as Sandilands Committee
under the chairmanship of Mr. Francis C.P. Sandilands to consider and recommend the
accounting for price level changes. The committee presented its report in the year 1975 and
recommended the adoption of Current Cost Accounting Technique in place of Current
Purchasing Power of Replacement Cost Accounting Technique for price level changes.
The crux of the current cost accounting technique is the preparation of financial
statements (Balance Sheet and Profit and Loss Account) on the current values of individual
items and not on the historical or original cost.
The essential characteristics of current cost accounting technique are as follows:
1. The fixed assets are shown in the balance sheet at their current values and not on historical
costs.
2. The depreciation is charged on the current values of the fixed assets and not on original
costs.
3. Inventories or stocks are valued in the balance sheet at their current replacement costs on
the date of the balance sheet and not cost or market price whichever is lower.
4. The cost of goods sold is calculated on the basis of their replacement cost to the business
and not on their original cost.
5. The surpluses arising out of revaluation are transferred to Revaluation Reserve Account
and are not available for distribution as dividend to the shareholders.
6. In addition to the balance sheet and profit and loss account, an appropriation account and a
statement of changes is prepared.
The current cost accounting (CCA) technique has been preferred to the current purchasing
power (CPP) technique of price level accounting as it is a complete system of inflation
accounting. The financial statements prepared under this technique provide more realistic
information and make a distinction between profits earned from business operations and the
gains arising from changes in price levels.
As depreciation under CCA is provided on current cost, the method prevents overstatement of
profits and keeps the capital intact. The effect of holding monetary items in terms of gains
and losses having an impact on the finance of the business is also highlighted.
Some Important Adjustments Required under the CCA Technique:
(i) Current Cost of Sales Adjustment (COSA):
Under the CCA technique, cost of sales are to be calculated on the basis of cost of
replacing the goods at the time they are sold. The important principle is that current costs
must be matched with current revenues. As for sales are concerned, it is current revenue and
out of the costs, all operating expenses are current costs. But in case of inventories, certain
adjustments will have to be made, known as cost of sales adjustment.
Cost of sales adjustment can be calculated with the help of the following formula:
(iii) Backlog Depreciation:
Whenever an asset is devalued, the profit on revaluation is transferred to Revaluation
Reserve Account. But, the revaluation also gives rise to backlog depreciation. This backlog
depreciation should be charged to Revaluation Reserve Account.
(iv) Monetary Working Capital Adjustment (MWCA):
Working capital is that part of capital which is required to meet the day to day
expenses and for holding current assets for the normal operations of the business. It is
referred to as the excess of current assets over current liabilities. The changes in the price
levels disturb the working capital position of a concern.
CCA method requires a financing adjustment reflecting the effects of changing prices on net
monetary items, leading to a loss from holding net monetary assets or to a gain from holding
net monetary liabilities when prices are rising, and vice-versa, in order to maintain the
monetary working capital of the enterprise. This adjustment reflects the amount of additional
finance needed to maintain the same working capital due to the changes in price levels. The
method of calculating MWCA is the same as that of COSA. Symbolically.
(v) Current Cost Operating Profit:
Current cost operating profit is the profit as per historical cost accounting before
charging interest and taxation but after charging adjustments of cost of sales, depreciation and
monetary working capital.
(vi) Gearing Adjustment:
During the period of rising prices, shareholders are benefitted to the extent fixed
assets and net working capitals are financed while the amount of borrowings to be repaid
remains fixed except interest charges. In the same manner, there is a loss to the shareholders
in the period of falling prices. To adjust such profit or loss on account of borrowings,
‘gearing adjustment’ is required to be made. ‘Gearing adjustment’ is also a financing
adjustment like COSA and MWCA. This adjustment reduces the total adjustment for cost of
sales, depreciation and monetary working capital in the proportion of finance by borrowings
to the total financing.
Gearing adjustment can be calculated with the help of the following formula:
HUMAN RESOURCE ACCOUNTING
Meaning:
Human resources are considered as important assets and are different from the
physical assets. Physical assets do not have feelings and emotions, whereas human assets
are subjected to various types of feelings and emotions. In the same way, unlike physical
assets human assets never get depreciated.
Therefore, the valuations of human resources along with other assets are also required
in order to find out the total cost of an organization. In 1960s, Rensis Likert along with
other social researchers made an attempt to define the concept of human resource
accounting (HRA).
Definition:
1. The American Association of Accountants (AAA) defines HRA as follows: ‘HRA is a
process of identifying and measuring data about human resources and communicating this
information to interested parties’.
2. Flamhoitz defines HRA as ‘accounting for people as an organizational resource. It
involves measuring the costs incurred by organizations to recruit, select, hire, train, and
develop human assets. It also involves measuring the economic value of people to the
organization’.
3. According to Stephen Knauf, ‘ HRA is the measurement and quantification of human
organizational inputs such as recruiting, training, experience and commitment’.
Reasons for HRA:
1. Under conventional accounting, no information is made available about the human
resources employed in an organization, and without people the financial and physical
resources cannot be operationally effective.
2. The expenses related to the human organization are charged to current revenue instead
of being treated as investments, to be amortized over a period of time, with the result that
magnitude of net income is significantly distorted. This makes the assessment of firm and
inter-firm comparison difficult.
3. The productivity and profitability of a firm largely depends on the contribution of
human assets. Two firms having identical physical assets and operating in the same
market may have different returns due to differences in human assets. If the value of
human assets is ignored, the total valuation of the firm becomes difficult.
4. If the value of human resources is not duly reported in profit and loss account and
balance sheet, the important act of management on human assets cannot be perceived.
5. Expenses on recruitment, training, etc. are treated as expenses and written off against
revenue under conventional accounting. All expenses on human resources are to be
treated as investments, since the benefits are accrued over a period of time.
Objectives of human resource accounting
1. To provide cost value date for managerial decisions regarding acquiring, developing,
allocating and maintaining human resource so as to attain cost effective organizational
objectives.
2. To provide information for effectiveness of human resource utilization.
3. To provide information for determining the status of human asset whether it is conserved
properly; it is appreciating or depleting.
4. To assist in the development of effective human resource Management practices by
classifying the financial consequences of
Benefits of HRA:
1. The system of HRA discloses the value of human resources, which helps in proper
interpretation of return on capital employed.
2. Managerial decision-making can be improved with the help of HRA.
3. The implementation of human resource accounting clearly identifies human resources as
valuable assets, which helps in preventing misuse of human resources by the superiors as
well as the management.
4. It helps in efficient utilization of human resources and understanding the evil effects of
labour unrest on the quality of human resources.
5. This system can increase productivity because the human talent, devotion, and skills are
considered valuable assets, which can boost the morale of the employees.
6. It can assist the management for implementing best methods of wages and salary
administration.
Limitations of HRA:
1. The valuation methods have certain disadvantages as well as advantages; therefore, there is
always a bone of contention among the firms that which method is an ideal one.
2. There are no standardized procedures developed so far. So, firms are providing only as
additional information.
3. Under conventional accounting, certain standards are accepted commonly, which is not
possible under this method.
4. All the methods of accounting for human assets are based on certain assumptions, which
can go wrong at any time. For example, it is assumed that all workers continue to work with
the same organization till retirement, which is far from possible.
5. It is believed that human resources do not suffer depreciation, and in fact they always
appreciate, which can also prove otherwise in certain firms.
6. The lifespan of human resources cannot be estimated. So, the valuation seems to be
unrealistic.
Concept of Human Resource Accounting:
Thus, human resource accounting is primarily involved in measuring the various
aspects related to human asses. Its basic purpose is to facilitate the effective management of
human resources by providing information to acquiring, develop, retain, utilize, and evaluate
human resources.
Methods of Valuation of Human Assets:
There are a number of methods suggested for the valuation of human assets. Many of
these methods are based on the valuation of physical and financial assets while others take
into account human consideration. Major methods of valuation of human assets are historical
cost, replacement cost, standard cost, present value of future earnings, and expected
realizable value.
Historical Cost:
Historical cost is based on actual cost incurred on human resources. Such a cost may
be of two types – acquisition cost and learning cost. Acquisition cost is the expense incurred
on training and development. This method is very simple in its application but it does not
reflect the true value of human assets. For example, an experienced employee may not
require much training and, therefore, his value may appear to below though his real value is
much more than what is suggested by historical cost method.
Replacement Cost:
As against historical cost method which takes into account the actual cost incurred on
employees, replacement cost takes into account the national cost that may be required to
acquire a new employee to replace the present one.
In calculating the replacement cost, different types of expenses are taken into account
which may be in the form of acquisition and learning cost. Replacement cost is generally
much higher than the historical cost.
For example, Friedman has estimated that the replacement cost of an executive in
middle management level is about 1.5 to 2 times the current salary paid in that position.
Replacement cost is much better indicator of value of human assets though it may present
certain operational problems. For example, true replacement of a person may not be found
easily with whose cost the valuation is done.
Standard Cost:
Instead of using historical or replacement cost, many companies use standard cost for
the valuation of human assets just as its used for physical and financial assets. For using
standard cost, employees of an organization are categorized into different groups based on
their hierarchical positions.
Standard cost is fixed for each category of employees and their value is calculated. This
method is simple but does not take into account differences in employees put in the same
group. In many cases, these differences may be quite vital.
Acquisition Cost Method:
Under this method the costs of acquisition, namely, the costs incurred in recruitment.
Hiring and induction of employees are taken into account. The process involves capitalization
of historic costs. The cost so capitalized has to be written off over a period of time for which
the employee remains with the firm. If for some reason the employee leaves the organization
prematurely, the unamortized cost remaining in the books has to be written off against the
profit and loss account of the particular year.
Present Value of Future Earnings Method:
This model is developed by Lev and Schwartz and is popular in India. This is also
known as capitalization of salary method. Under this method the future earnings of an
employee or grades of employees are estimated up to the age of retirement and are discounted
at a rate appropriate to the person or the group in order to obtain the present value.
The model may be expresses as follows:
V = the human capital value of a person y years old
I (t) = the person’s annual earnings up to retirement
R = discount rate specific to the person
T= retirement age.
The above formula does not take into account the probability of a person dying before
retirement or leaving the organization.
Expected realizable value:
The above methods discussed so far are based on cost consideration. Therefore these
methods may provide information for record purpose but do not reflect the true value of
human assets. As against these methods.
Expected realizable value is based on the assumption. And this is true also. That there
is no direct relationship between cost incurred on an individual and his value to organization
can be defined as the present worth of the set of future services that he is expected to provide
during the period he remains in the organization.
Economic Value Method:
The economist’s concept of the value of an asset is equal to the present worth of its
estimated future economic benefits. This approach has a strong theoretical appeal.
Competitive Bidding Method:
This is also known as the opportunity cost method. Opportunity cost is defined as the
measurable value of benefits that could be obtained by choosing an alternative course of
action. In the case of HRA. Opportunity costs are determined by a process of competitive
bidding in which various divisions and departments bid for the services of various officers.
The amount of bid is added to the capital employed of the successful bidder for determining
the return on investment.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE
DEPARTMENT OF COMMERCE PA & PG
Class: I M.Com Semester –II
Sub. Name: Securities Analysis and Portfolio
Management
Sub. Code: 18PCM206
Prepared by: Dr. M. USHARANI
Factors influencing investment and Features of investment program
Introduction
Investments are assets held by an individual or an enterprise for earning income by
way of dividends, interest, and rentals or for capital appreciation, or for other benefits. The
word originates in the Latin "vestis", meaning garment, and refers to the act of putting things
(money or other claims to resources) into others' pockets.
According to Fisher and Jordan an investment is a “Commitment of funds made in the
expectation of some positive rate of return in future. If the investment is properly undertaken
the return will be commensurate with the risk the investor assumes.”
Factors influencing investment
1. Interest rates
Investment is financed either out of current savings or by borrowing. Therefore
investment is strongly influenced by interest rates. High interest rates make it more expensive
to borrow. High interest rates also give a better rate of return from keeping money in the
bank. With higher interest rates, investment has a higher opportunity cost because investor
lose out the interest payments.
2. Economic growth
Firms invest to meet future demand. If demand is falling, then firms will cut back on
investment. If economic prospects improve, then firms will increase investment as they
expect future demand to rise. There is strong empirical evidence that investment is cyclical.
In a recession, investment falls, and recovers with economic growth. Accelerator theory
states that investment depends on the rate of change of economic growth
3. Confidence
Investment is riskier than saving. Firms will only invest if they are confident about
future costs, demand and economic prospects. Confidence will be affected by economic
growth and interest rates, but also the general economic and political climate. If there is
uncertainty (e.g. political turmoil) then firms may cut back on investment decisions as they
wait to see how event unfold. Confidence is often driven by economic growth and changes in
the rate of economic growth. It is another factor that makes investment cyclical in nature.
4. Inflation
In the long-term, inflation rates can have an influence on investment. High and
variable inflation tends to create more uncertainty and confusion, with uncertainties over the
cost of investment. If inflation is high and volatile, firms will be uncertain at the final cost of
the investment, they may also fear high inflation could lead to economic uncertainty and
future downturn. Countries with a prolonged period of low and stable inflation have often
experienced higher rates of investment.
5. Productivity of capital
Long-term changes in technology can influence the attractiveness of investment. If
there is a slowdown in the rate of technological progress, firms will cut back investment as
there are lower returns on the investment.
6. Availability of finance
Another factor that can influence investment in the long-term is the level of savings.
A high level of savings enables more resources to be used for investment. With high deposits
– banks are able to lend more out. If the level of savings in the economy falls, then it limits
the amounts of funds that can be channelled into investment.
7. Wage costs
If wage costs are rising rapidly, it may create an incentive for a firm to try and boost
labour productivity, through investing in capital stock. In a period of low wage growth, firms
may be more inclined to use more labour intensive production methods.
8. Depreciation
Not all investment is driven by the economic cycle. Some investment is necessary to
replace worn out or out dated equipment. Also, investment may be required for the standard
growth of a firm. In a recession, investment will fall sharply, but not completely – firms may
continue with projects already started, and after a time, they may have to invest on less
ambitious projects. Also, even in recessions, some firms may wish to invest or start up.
9. Public sector investment
The majority of investment is driven by the private sector. But, investment also
includes public sector investment – government spending on infrastructure, schools, hospitals
and transport.
10. Government policies
Some government regulations can make investment more difficult. For example, strict
planning legislation can discourage investment. On the other hand, government subsidies/tax
breaks can encourage investment.
Features of an Investment program
1. Safety of Principal
The investor, to be certain of the safety of principal, should carefully review the
economic and industry trends before choosing the types of investment. Errors are avoidable
and, therefore, to ensure safety of principal, the investor should consider diversification of
assets.
2. Liquidity
Even investor requires a minimum liquidity in his investments to meet emergencies.
Liquidity will be ensured if the investor buys a proportion of readily saleable securities out of
his total portfolio. He may, therefore, keep a small proportion of cash, fixed deposits and
units which can be immediately made liquid investments like stocks and property or real
estate cannot ensure immediate liquidity.
3. Income Stability
Regularity of income at a consistent rate is necessary in any investment pattern. Not
only stability, it is also important to see that income is adequate after taxes. It is possible to
find out some good securities which pay practically all their earnings in dividends.
4. Appreciation and Purchasing Power Stability
Investors should balance their portfolios to fight against any purchasing power
instability. Investors should judge price level inflation, explore the possibility of gain and loss
in the investments available to them, limitations of personal and family considerations. The
investors should also try and forecast which securities will possibly appreciate.
5. Legality and Freedom from Care
All investments should be approved by law. Law relating to minors, estates, trusts,
shares and insurance be studied. Illegal securities will bring out many problems for the
investor. One way of being free from care is to invest in securities like Unit Trust of India,
Life Insurance Corporation or Savings Certificates.
6. Tangibility
Intangible securities have many times lost their value due to price level inflation,
confiscatory laws or social collapse.
Conclusion
Investment is an attempt to carefully plan, evaluate and allocate funds to various
investment outlets that offer safety of principal and excepted returns over a long time of
period. In choosing specific investments, investors will need definite ideas regarding features
which their portfolios should possess.
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: I MCOM
Sub. Name: Management of Small Enterprises Sub. Code: 18PCM207
Prepared By: Dr.S.RAJAM H.O.D
SMALL SCALE INDUSTRIES
Small scale industries are the industrial undertakings having fixed investment in plant and
machinery, whether held on ownership basis or lease basis or hire purchase basis not
exceeding Rs. 1 crore.
Definition:
The official definitions of a small scale unit are as follows:
(i) Small-Scale Industries:
These are the industrial undertakings having fixed investment in plant and machinery,
whether held on ownership basis or lease basis or hire purchase basis not exceeding Rs. 1
crore.
(ii) Ancillary Industries:
These are industrial undertakings having fixed investment in plant and machinery not
exceeding Rs. 1 crore engaged in or proposed to engage in,
(a) The manufacture of parts, components, sub-assemblies, tooling or intermediaries, or
(b) The rendering of services supplying 30 percent of their production or services as the case
may be, to other units for production of other articles.
(iii) Tiny Units:
These refer to undertakings having fixed investment in plant and machinery not
exceeding Rs. 23 lakhs. These also include undertakings providing services such as laundry,
Xeroxing, repairs and maintenance of customer equipment and machinery, hatching and
poultry etc. Located m towns with population less than 50,000.
(iv) Small-Scale Service Establishments:
These mean enterprises engaged in personal or household services in rural areas and
town with population not exceeding 50000 and having fixed investment in plant and
machinery not exceeding Rs. 25 lakhs.
(v) Household Industries:
These cover artisans skilled craftsman and technicians who can work in their own
houses if their work requires less than 300 square feet space, less than 1 Kw power, less than
5 workers and no pollution is caused. Handicrafts, toys, dolls, small plastic and paper
products electronic and electrical gadgets are some examples of these industries.
Characteristics of Small-Scale Industries:
(i) Ownership:
Ownership of small scale unit is with one individual in sole-proprietorship or it can be
with a few individuals in partnership.
(ii) Management and control:
A small-scale unit is normally a one man show and even in case of partnership the
activities are mainly carried out by the active partner and the rest are generally sleeping
partners. These units are managed in a personalised fashion. The owner is activity involved in
all the decisions concerning business.
(iii) Area of operation:
The area of operation of small units is generally localised catering to the local or
regional demand. The overall resources at the disposal of small scale units are limited and as
a result of this, it is forced to confine its activities to the local level.
(iv) Technology:
Small industries are fairly labour intensive with comparatively smaller capital
investment than the larger units. Therefore, these units are more suited for economics where
capital is scarce and there is abundant supply of labour.
(v) Gestation period:
Gestation period is that period after which teething problems are over and return on
investment starts. Gestation period of small scale unit is less as compared to large scale unit.
(vi) Flexibility:
Small scale units as compared to large scale units are more change susceptible and
highly reactive and responsive to socio-economic conditions.
They are more flexible to adopt changes like new method of production, introduction of new
products etc.
(vii) Resources:
Small scale units use local or indigenous resources and as such can be located
anywhere subject to the availability of these resources like labour and raw materials.
(viii) Dispersal of units:
Small scale units use local resources and can be dispersed over a wide territory. The
development of small scale units in rural and backward areas promotes more balanced
regional development and can prevent the influx of job seekers from rural areas to cities.
Characteristics of Small Scale Industries in India
The Most Important Characteristics of Small Scale Industries are Given below:
1. Labour intensive:
SSI is largely labour intensive and therefore, can provide employment to a large
number of people with limited capital.
2. Capital required is less and therefore economises use of capital:
The capital requirement of small enterprises, in respect of economic overheads, such
as factory buildings, building for workers and transport facilities; are much less than in large
enterprises. By promoting these industries, we can economise capital even in respect of these
overheads.
3. Short Gestation Period:
SSI has a short gestation period when compared to large seals industries. They can
provide finished goods in a shorter period and thus can be a better counteracting force for the
inflationary trends, so common in a growing economy like ours. These enterprises can thus
be profitably promoted to produce consumer goods.
4. Less imports
The large scale industries need big machines, technical knowledge and same raw
materials which have to be imported. All of these require foreign exchange. On the other
hand the SSIs do not require much imported materials and so they do not drain much of our
foreign exchange.
5. Helps in Decentralisation:
The SSIs are favoured as a means of decentralisation and counteracting urbanisation.
Large cities are overcrowded and breed many social evils. A check on the growth of slums,
pollution etc. in such cities is put by developing small enterprises in smaller places away
from cities.
6. Source of Mobilization of Savings:
People who have small resources of idle savings can put them to productive uses and
can also develop and utilize their productive ability which at present is wasted. In a
developing economy, we have to make use of every, source or skill and savings. Small
enterprises are a good means of discovering and growing talent, skill and saving.
7. Leads to Equitable Distribution of Wealth:
In case of big industries, the wealth gets concentrated in the hands of few big
industrialists. The growth of SSIs, on the other hand, provides scope for the small producers
to enjoy same lengths. It also raises the income of many people by providing them
employment.
8. Flexibility:
Small-scale industries are flexible in their operation. They adopt quickly to various
factors that play a large part in daily management. Their flexibility makes them best suited to
constantly changing environment.
9. One-man show:
A small-scale unit is generally a one-man show. It is mostly set up by individuals.
Even some small units are run by partnership firm or company; the activities are mainly
carried out by one of the partners or directors. Therefore,' they provide an outlet for
expression of the entrepreneurial spirit. As they are their own boss, the decision making
process is fast and at times more innovative.
10. Localised operation:
Small-scale industries generally restrict their operation to local areas in order to meet
the local and regional demands of the people. They cannot enlarge their business activities
due to limited resources.
11. Educational level:
The educational level of the employees of small industries is normally low or
moderate. Hardly there is any need of specialised knowledge and skill to operate and manage
the SSI.
12. Profit motive:
The owners of small industries are too much profit conscious. They always try to keep
high margins in their pricing. This is one of the reason for which the unit may lead to closure.
PROBLEMS FACED BY THE SMALL SCALE INDUSTRIES
This sector can stimulate economic activity and is entrusted with the responsibility of
realising various objectives generation of more employment opportunities with less
investment, reducing regional imbalances etc. Small scale industries are not in a position to
play their role effectively due to various constraints. The various constraints, the various
problems faced by small scale industries are as under:
(1) Finance:
Finance is one of the most important problem confronting small scale industries
Finance is the life blood of an organisation and no organisation can function proper у in the
absence of adequate funds. The scarcity of capital and inadequate availability of credit
facilities are the major causes of this problem.
Firstly, adequate funds are not available and secondly, entrepreneurs due to weak
economic base have lower credit worthiness. Neither they are having their own resources nor
are others prepared to lend them. Entrepreneurs are forced to borrow money from money
lenders at exorbitant rate of interest and this upsets all their calculations.
(2) Raw Material:
Small scale industries normally tap local sources for meeting raw material
requirements. These units have to face numerous problems like availability of inadequate
quantity, poor quality and even supply of raw material is not on regular basis. All these
factors adversely affect t e functioning of these units.
Large scale units, because of more resources, normally corner whatever raw material
that is available in the open market. Small scale units are thus forced to purchase the same
raw material from the open market at very high prices. It will lead to increase in the cost of
production thereby making their functioning unviable.
(3) Idle Capacity:
There is under utilisation of installed capacity to the extent of 40 to 50 percent in case
of small scale industries. Various causes of this under-utilisation are shortage of raw material
problem associated with funds and even availability of power. Small scale units are not fully
equipped to overcome all these problems as is the case with the rivals in the large scale
sector.
(4) Technology:
Small scale entrepreneurs are not fully exposed to the latest technology. Moreover,
they lack requisite resources to update or modernise their plant and machinery Due to
obsolete methods of production, they are confronted with the problems of less production in
inferior quality and that too at higher cost. They are in no position to compete with their
better equipped rivals operating modem large scale units.
(5) Marketing:
These small scale units are also exposed to marketing problems. They are not in a
position to get first hand information about the market i.e. about the competition, taste, liking,
disliking of the consumers and prevalent fashion.
With the result they are not in a position to upgrade their products keeping in mind
market requirements. They are producing less of inferior quality and that too at higher costs.
Therefore, in competition with better equipped large scale units they are placed in a relatively
disadvantageous position.
In order to safeguard the interests of small scale enterprises the Government of India
has reserved certain items for exclusive production in the small scale sector. Various
government agencies like Trade Fair Authority of India, State Trading Corporation and the
National Small Industries Corporation are extending helping hand to small scale sector in
selling its products both in the domestic and export markets.
(6) Infrastructure:
Infrastructure aspects adversely affect the functioning of small scale units. There is
inadequate availability of transportation, communication, power and other facilities in the
backward areas. Entrepreneurs are faced with the problem of getting power connections and
even when they are lucky enough to get these they are exposed to unscheduled long power
cuts.
Inadequate and inappropriate transportation and communication network will make
the working of various units all the more difficult. All these factors are going to adversely
affect the quantity, quality and production schedule of the enterprises operating in these
areas. Thus their operations will become uneconomical and unviable.
(7) Under Utilisation of Capacity:
Most of the small-scale units are working below full potentials or there is gross
underutilization of capacities. Large scale units are working for 24 hours a day i.e. in three
shifts of 8 hours each and are thus making best possible use of their machinery and
equipments.
On the other hand small scale units are making only 40 to 50 percent use of their
installed capacities. Various reasons attributed to this gross under- utilisation of capacities are
problems of finance, raw material, power and underdeveloped markets for their products.
(8) Project Planning:
Another important problem faced by small scale entrepreneurs is poor project
planning. These entrepreneurs do not attach much significance to viability studies i.e. both
technical and economical and plunge into entrepreneurial activity out of mere enthusiasm and
excitement.
They do not bother to study the demand aspect, marketing problems, and sources of
raw materials and even availability of proper infrastructure before starting their enterprises.
Project feasibility analysis covering all these aspects in addition to technical and financial
viability of the projects, is not at all given due weight-age. Inexperience and incomplete
documents which invariably results in delays in completing promotional formalities. Small
entrepreneurs often submit unrealistic feasibility reports and incompetent entrepreneurs do
not fully understand project details.
Moreover, due to limited financial resources they cannot afford to avail services of
project consultants. This result is poor project planning and execution. There is both time
interests of these small scale enterprises.
(9) Skilled Manpower:
A small scale unit located in a remote backward area may not have problem with
respect to unskilled workers, but skilled workers are not available there. The reason is Firstly,
skilled workers may be reluctant to work in these areas and secondly, the enterprise may not
afford to pay the wages and other facilities demanded by these workers.
Besides non-availability entrepreneurs are confronted with various other problems
like absenteeism, high labour turnover indiscipline, strike etc. These labour related problems
result in lower productivity, deterioration of quality, increase in wastages, and rise in other
overhead costs and finally adverse impact on the profitability of these small scale units.
(10) Managerial:
Managerial inadequacies pose another serious problem for small scale units. Modern
business demands vision, knowledge, skill, aptitude and whole hearted devotion. Competence
of the entrepreneur is vital for the success of any venture. An entrepreneur is a pivot around
whom the entire enterprise revolves.
Many small scale units have turned sick due to lack of managerial competence on the
part of entrepreneurs. An entrepreneur who is required to undergo training and counselling
for developing his managerial skills will add to the problems of entrepreneurs.
The small scale entrepreneurs have to encounter numerous problems relating to
overdependence on institutional agencies for funds and consultancy services, lack of credit-
worthiness, education, training, lower profitability and host of marketing and other problems.
The Government of India has initiated various schemes aimed at improving the overall
functioning of these units.
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: I M.COM Semester –II
Sub. Name: Industrial Relations and Labour Laws Sub. Code: 18PCM208
Prepared By: S. Arumugaraj
COLLECTIVE BARGAINING
Introduction
Collective bargaining is a process of negotiation between employers and a group of employees
aimed at agreements to regulate working salaries, working conditions, benefits, and other
aspects of workers' compensation and rights. The interests of the employees are commonly
presented by representatives of a trade union to which the employees belong. The collective
agreements reached by these negotiations usually set out wage scales, working hours, training,
health and safety, overtime, grievance mechanisms, and rights to participate in workplace or
company affairs.
The union may negotiate with a single employer (who is typically representing a company's
shareholders) or may negotiate with a group of businesses, depending on the country, to reach
an industry-wide agreement. A collective agreement functions as a labour contract between an
employer and one or more unions. Collective bargaining consists of the process of negotiation
between representatives of a union and employers (generally represented by management, or,
in some countries such as Austria, Sweden and the Netherlands, by an employers' organization)
in respect of the terms and conditions of employment of employees, such as wages, hours of
work, working conditions, grievance procedures, and about the rights and responsibilities of
trade unions. The parties often refer to the result of the negotiation as a collective bargaining
agreement (CBA) or as a collective employment agreement (CEA).
Definition
Beatrice Webb, a famous socialist writer and speaker, is credited with the coinage of the term
Collective Bargaining. Accordingly, collective bargaining takes place when a number of
work-people enter into negotiation as bargaining unit with an employer or groups of employers
with the object of reaching agreement on conciliations of employment for the work- people
concerned.
The National Association of Manufactures has stated that in its simplest definition.
Accordingly, the process of collective bargaining is a method by which management and
labour may explore each other‘s problems and view points, and develop a frame work of
employment relations within which both may carry on their mutual benefit.
In a workers education manual issued by the International Labour Office, collective
bargaining is defined as ―negotiations about working conditions and terms of employment between employer, a group of employers or one or more employers‘ organizations, on one hand,
and one or more representative workers‘ organizations on the other, with a view to reaching
agreement. Furthermore, it is stated to be ―the terms of an agreement that serves as a code, defining the rights and obligations of each party in their employment relations with one another;
it fixes a large number of detailed conditions of employment ; and during its validity none of the
matters it deals with care in normal circumstances give grounds for a dispute, concerning on
industrial worker‖.
J.H.Richardson: Collective bargaining takes place when a number of work people enter into a
negotiation as a bargaining unit with an employer or group of employers with the object of
reaching an agreement on working conditions of the employees. Collective bargaining is a
complex process. It involves psychology, politics and power.
Objectives:
The basic objective of collective bargaining is to arrive at an agreement between the
management and the employees determining mutually beneficial terms and conditions of
employment.
Collective bargaining has benefits not only for the present, but also for the future. The
objectives of collective bargaining are:
1. To facilitate reaching a solution that is acceptable to all the parties involves.
2. To provide an opportunity to the workers, to voice their problems on issues related to
employment.
3. To resolve all conflicts and disputes in a mutually agreeable manner.
4. To enhance the productivity of the organization by preventing strikes lock – out etc.
5. To develop a conducive atmosphere to foster good organizations relations.
6. To provide stable and peaceful organization (hospital) relations.
7. To prevent any conflict/disputes in the future through mutually signed contracts.
Advantages
1. Collective bargaining gives workers a larger voice.
When workers are individuals, then it can be difficult to negotiate with an employer. Many
nonunion workers are faced with a ―take it or leave it‖ type of offer. If an employee doesn‘t take it, then the employer will hire someone who does. Collective bargaining allows workers to
band together into larger groups, create a louder voice that can help provide one another with a
mutually beneficial outcome.
2. Collective bargaining can improve a worker‘s quality of life.
Collective bargaining agreements will usually result in a higher level of pay for a worker. There
may also be improvements in the quality and cost of worker benefits. If neither is improved, then
there is still the potential to improve the safety and working conditions that are found in the
workplace. These can all contribute to workers with a valid CBA enjoying a higher overall
quality of life.
3.Collective bargaining creates enforcement consistency.
Non-union workers are often hired in an ―at-will‖ status. Unless there is an issue with
discrimination, whistle blowing, or some other legally protected reason, a worker can be fired at
the pleasure of the employer. This means there is no real job security in such an arrangement.
Not only does collective bargaining provide this security, but it also puts everyone\ on a level
playing field. Each worker and the employer is bound by the negotiated contract.
4. Collective bargaining encourages cooperation.
Many jurisdictions require that negotiations on both sides of the aisle be done in good faith.
Both sides are compelled to negotiate with one another for the benefit of both. For employees,
there is the need to earn a fair paycheck and benefits in an environment that is safe. For
employers, there is a need to have consistent productivity and incoming revenues so the
organization can remain in business. This need for balance is what encourages cooperation.
5. Collective bargaining creates a binding result.
Both parties are bound to a collective bargaining agreement. It is a legal standard that can be
used as part of a legal defense. If one side or the other is not performing to the stipulations that
have been set forth in the contract, then they can be held responsible to them by the injured
party. This provides an extra level of security for employees and employers so they can defend
their positions.
6.Collective bargaining creates relationships.
Many unions bring in members from all over their community to become part of the bargaining
team. Employers will often do the same thing. This creates open lines of communication
between all offices and parties involved, which can create beneficial community relationships
over time. This, in turn, could be used to create political capital, perform philanthropic work, or
benefit communities in a variety of other ways.
7. Collective bargaining must represent every member of the unit.
The process of collective bargaining is not exclusionary. Every member of the bargaining unit
must be represented during the negotiation process. That means everyone has an opportunity to
have their desires heard and represented during the contract creation process. Those ideas
might be eventually rejected, but they will still be heard. In some jurisdictions, even non-union
workers have the right to be represented by the collective bargaining process as the results can
impact their employment as well.
8. Collective bargaining can be changed.
Maybe there was a bad deal that was struck. The good news is that the contract can be eventually
changed. It is extremely rare for a CBA to not have an end date. This means a list of wanted
changes can be developed over time and then negotiated into a new future contract. Sometimes
there may even be a provision to change a CBA within its operational time if both parties agree
to do so.
Disadvantages
1. Collective bargaining comes at a cost.
There are numerous costs that are often not considered when looking at the process of
negotiating a contract. Workers may be involved with the union negotiations, but may be forced
to take vacation time to do so. There is the cost of lost productivity as both parties sit down to
hammer out a deal. Many CBAs are lengthy and require time to read, which further reduces
worker availability. Employer representatives become less productive as well because they are
part of this process.
2.Collective bargaining may require a dues payment.
Many unions fund their activities by soliciting dues from their members. Some unions have an
annual flat fee for representation, while others may charge up to 2.5% (and sometimes more)
of a worker‘s salary every paycheck to generate revenues. Changes to a collective bargaining
agreement may change the structure of the dues payment. Some workers may be exempt from
this payment and still receive representation, but that tends to be an exception more than a
standard.
3. Collective bargaining requires governance duties.
Workers who are involved with the negotiating process have governance duties that are
performed outside of the regular work duties. This means parents are asked to take time away
from their children, spouses and partners spend more time away from one another, and
sometimes these duties are unpaid positions. This can cause some people to add speed to the
negotiation process, which can result in a poor contract being struck.
4. Collective bargaining may require everyone to be bound by the contract.
Even if you are a non-union worker, you might be bound by the stipulations that are in a
contract. Managers and administrators can also be bound by these contracts, even if they are
not personally benefitting from their terms and conditions. This can make it difficult for some
employees to get their work done. It can also mean that some non-union workers might find
their employment in jeopardy at the cost of unionized workers under some contracts, depending
on local laws and regulations.
5. Collective bargaining is not always a process of fair representation.
A growing trend in the United States is to force unions to represent non-union and unionized
workers equally. This means a union worker must pay dues to receive representation, but a
nonunion worker receives the same benefits without paying any dues. They can even benefit
from the deals that are struck between a union and their employee without be represented at the
table. It presents a situation where a minority can consume a majority of the available resources,
which creates the possibility of the union eventually imploding.
6. Collective bargaining highlights personal differences.
Unions operate from a group perspective, so it is quite easy for an individual perspective to get
lost in the shuffle. Individuals, however, are responsible for the negotiation process that occurs
when a collective bargaining deal is being struck. Because there is a shift from group thinking
to individualistic representation during this process, there can be differences or even divisions
that come up at the table which have never been discussed before. This can lead to feelings of
betrayal for those that are present or targeted by those differences or divisions.
7. Collective bargaining can change the workplace environment.
Unionization is a politically-charged topic for many people and has been for some time. Many
employers will actively discourage employees from taking steps to unionize. Union members
may actively encourage workers to take the steps necessary to join the union. This creates an
environment that is more than just uncomfortable. It means that the workplace might be more
focused on who is or isn‘t a union member than being productive for the employer.
8. Collective bargaining doesn‘t guarantee a good deal for either party.
There are plenty of stories about unionized workplaces that highlight poor employee conduct
and an employer‘s inability to remove problematic workers. There are also stories where a poor
CBA from the union side limited worker abilities to fight for better wages or benefits. Without
a quality negotiator and an observant supportive backing group, it is possible for one group to
create a one-sided agreement that does not balance the needs of all. The advantages and
disadvantages of collective bargaining show that it can be a beneficial practice, but it must be
one that all sides are ready to take on. If this process isn‘t taken seriously, someone can end up
with a very bad deal and that won‘t help anyone over a long-term period of time.
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KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE – 641 029
E-LEARNING MATERIAL
Class: II Bcom PA (Main & addl) Semester: IV
Subject: Cost accounting Subject code: 18UPA410
Prepared By: N.SRUTHI
Costing – an aid to management:
Planning, decision-making and control are three important functions of management.
Planning: Planning is thinking in advance ie. Looking ahead and deciding in advance what
to do, how to do it, when to do it and who is to do it. In planning, management is concerned
with laying down objectives and determining the courses of actions to be followed out of
several alternatives available to achieve those objectives. Planning is concerned with future
activity and formulates budgets to meet the objectives of the organisation.
Decision making: Since management has to make a choice of one course of action out of
several alternative courses of action available, it involves decision-making. All rational
decisions are based on accounting information like fixation of price, change in production,
introduction of new product etc.
Controlling: Controlling is that part of management activity whereby managers compare
actual performance against the planned performance, find out the deviations and take
remedial steps to remove the deviations. Immediate action should be taken to remove the
deviations to make an improvement in the performance because promptness is the essence of
effective control. Planning and controlling are interlinked with each other because a manager
cannot control unless he has planned a course of action.
Cost accounting helps management in carrying out efficiently its functions (ie. Planning,
budgeting, decision-making, organising, control, pricing and evaluation of operating
efficiency) by developing practical cost procedures that provide information useful in
controlling the operations of the business enterprise.
KONGUNADU ARTS AND SCIENCE COLLEGE(AUTONOMOUS)
COIMBATORE- 641 029
Class: III B.COM (PA) Semester –VI
Sub. Name: Major elective – II Financial
services Sub. Code: 16UPA6E2/ 18UPA6E2
Prepared By: Dr.R.Murugesan
PLAYERS IN FINANCIAL SERVICE SECTOR
Financial service
Financial service is part of financial system that provides different types of finance
through various credit instruments, financial products and services.In financial instruments, we
come across cheques, bills, promissory notes, debt instruments, letter of credit. In financial
products, we come across different types of mutual funds, extending various types of investment
opportunities. In addition, there are also products such as credit cards, debit cards, etc.
Players in financial service sector:
1. Banks
Financial service sector comes under the tertiary sector in which banks play a major role.
For the growth of financial services industry, banks are led by the central bank of the country
followed by commercial banks, co-operative banks, development banks, foreign banks, etc.
2. Hire purchase financier
Hire purchase financier is also a player in the financial service sector as he enables the
consumer to buy the product on credit basis.Hire purchase is an arrangement for buying
expensive consumer goods on credit, where the buyer makes an initial down payment, with the
balance being paid in installments plus interest. It is similar to an installment plan, except unlike
installment plans, where the buyer gets the ownership rights as soon as the contract is signed
with the seller, the ownership of the merchandise is not officially transferred to the buyer until all
the payments have been made.
Management Accounting 18UPA617
Need and Significance of Management Accounting
Management accounting is one of the important branches of accounting. Management
accounting is also known as managerial accounting. It aims to serve an organization’s
management, particularly the top management. It deals with the collection, recording,
classification, analysis, and presentation of data and information related to the quantitative
and the qualitative aspects. It deals with the financial as well as the non-financial aspects
pertaining to the activities of an organization. Management accounting provides information
which is helpful and useful in decision making, policy making, planning, budgeting,
forecasting, comparing, and evaluating managerial performance.
Management accounting is one of the important branches of accounting. Management
accounting is also known as managerial accounting. It aims to serve an organization’s
management, particularly the top management. It deals with the collection, recording,
classification, analysis, and presentation of data and information related to the quantitative
and the qualitative aspects. It deals with the financial as well as the non-financial aspects
pertaining to the activities of an organization.
Management accounting provides information which is helpful and useful in decision
making, policy making, planning, budgeting, forecasting, comparing, and evaluating
managerial performance.
Definition: Cost accounting deals with the collection, recording, classification, ascertaining,
and analysis of the information and data related to the costs of production and operations;
while management accounting deals with the collection, recording, classification, analysis,
and presentation of data and information related to the quantitative and the qualitative aspects
pertaining to the activities of an organization.
Focus: The primary focus of cost accounting is to accurately record the costs of the
transactions or activities, and present cost statements; while the primary focus of
management accounting is to help the management in decision making.
Objective: Objective of cost accounting is reducing or controlling costs; while objective of
management accounting is to help the management of the company in decision making,
planning, and controlling. In other words, effective and efficient performance of an
organization is the objective of management accounting.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA & M.COM
E-learning material 2018
Staff Name: Mrs.C.Goldbell Rachel
Subject: Entrepreneurship Development 18UPA5S3 Class: III B.Com (PA)
Topic: Role of entrepreneurship in economic development
Introduction:
Economic development essentially means a change. But, at the same time, it is very difficult to
define precisely the phrase economic development’. One should realize that the term economic
development does not convey the idea of total development of the society. It only focuses itself
on one aspect and one dimension of general development. Economic development can be defined
as a move towards even more efficient and differentiated methods of supplying people with the
requirements for survival and improvement.
The entrepreneur is the key to the creation of new enterprises that energize the economy and
rejuvenate the established enterprises that make up the economic structure. Entrepreneurs initiate
and sustain the process of economic development in the following ways:
1. Capital formation: Entrepreneurs mobilize the idle savings of the public through the issues of
industrial securities. Investment of public savings in industry results in productive utilization of
national resources. Rate of capital formation increases which is essential for rapid economic
growth. Thus, an entrepreneur is the creator of wealth.
2. Improvement in per capita income: Entrepreneurs locate and exploit opportunities. They
convert the talent and idle resources like land, labour and capital into national income and wealth
in the form of goods and services. They help to increase net national product and per capita
income in the country, which are important yardsticks for measuring economic growth.
3. Improvement in living standards: Entrepreneurs set up industries which remove scarcity of
essential commodities and introduce new products. Production of goods on mass scale and
manufacture of handicrafts, etc., in the small scale sector help to improve the standard of life of a
common man. These offer goods at lower costs and increase variety in consumption.
Subject Name: Major Elective – Human Resource Management 18UPA5E1
Class: III B.Com PA
Staff Name: Dr. M. Revathi Bala
Difference between Personnel Management and HRM
The main difference between Personnel Management and Human Resource Management
lies in their scope and orientation. While the scope of personnel management is limited
and has an inverted approach, wherein workers are viewed as tool. Here the behavior of
the worker can be manipulated as per the core competencies of the organization and are
replaced when they are worn out. On the other hand, HRM has a wider scope and
considers employees as the asset to the organization. It promotes mutuality in terms of
goals, responsibility, reward etc. theat will help in enhancing the morale of the
organizations.
Basis Personnel Management HRM
Meaning The aspect of management that
is concerned with the work force
and their relationship with the
entity is known as Personnel
Management.
The branch of management that focuses
on the most effective use of the
manpower of an entity, to achieve the
organizational goals is known as Human
Resource Management.
Approach Traditional Modern
Treatment of
manpower
Machines or Tools Asset
Type of function Routine function Strategic function
Basis of Pay Job Evaluation Performance Evaluation
Management
Role
Transactional Transformational
Subject Name: Principles of Marketing 18UPA516 Class: III B.Com PA
Topic: Need for studying consumer behaviour
Introduction
Consumer behaviour is the study of how individual customers, groups or organizations select,
buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It refers to the
actions of the consumers in the marketplace and the underlying motives for those actions.
Need
Importance of Consumer Behaviour to business managers. The main purpose behind
marketing a product is to satisfy demands and wants of the Consumers. Study of
consumer behaviour helps to achieve this purpose. To design the best possible product
or service that fully satisfies consumer's needs and demands.
It is important for marketers to study consumer behaviour. It is important for them to
know consumers as individual or groups opt for, purchase, consumer or dispose products
and services and how they share their experience to satisfy their wants or needs
The knowledge of consumer behaviour enables them to take appropriate marketing
decisions in respect of the following factors:
a. Product design/model
b. Pricing of the product
c. Promotion of the product
d. Packaging
e. Positioning
f. Place of distribution
Leads to purchase decision:
Positive consumer behaviour leads to a purchase decision. A consumer may take the
decision of buying a product on the basis of different buying motives. The purchase
decision leads to higher demand, and the sales of the marketers increase. Therefore,
marketers need to influence consumer behaviour to increase their purchases.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA & M.COM
E-learning material 2018
Staff Name: Mrs.P.GEETHA
Subject: Direct Tax 18UPA515 Class: III B.Com (PA)
Topic: Exempted Income U/S 10
EXEMPTED INCOME U/S 10
There are certain types of incomes which are fully exempt from Income tax as per section 10.
Special Allowance Exemption u/s 10(14)
In the Income tax Act, there are cetain allowances which are characterised as special allowances
and they are fully exempt from tax. Such allowances are listed below:
Allowances granted to High Court Judges
Allowance given to a UNO employee
Sumptuary allowance received by Supreme Court and High Court judge
Allowances granted to government employees who are Indian citizens, working abroad
Section 10(1) – Agriculture Income Exemption
As per section 10(1), agricultural income earned by the taxpayer in India is exempt from
tax. Any rent or revenue derived from land used for agricultural purposes or agricultural
produce to sell in the market.
Any income from farm house subject to certain satisfactory conditions specified in
section 2(1A) would be exempt.
Section 10(2) – Amount received by a member of the HUF from the income of the HUF, or
in case of impartible estate out of income of family estate
As per section 10(2), amount received out of family income, or in case of impartible
estate, amount received out of income of family estate by any member of such HUF is
exempt from tax.
Example-1. HUF earned ` 5, 00,000 during the previous year and paid tax on its income.
Mr A, a co-partner is an employee and earns a salary of ` 20,000 p.m. During the
previous year Mr A also received ` 1, 00,000 from HUF. Mr A will pay tax on his salary
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA & M.COM
E-learning material 2018
Staff Name: Mrs.C.Goldbell Rachel
Subject: Financial Management 18UPA514 Class: I M.Com
Topic: Role and Functions of a Financial Manager:
Introduction
According to Joseph Massie, “Financial management is the operational activity of a business that
is responsible for obtaining and effectively utilizing the funds necessary for efficient operations.”
It is a general assumption that a financial manager works only in the accounts department or he
has to deal with the cash flow. In reality, he has a large number of things to cater to. Also, every
organization, public or private, needs people from the finance background.
The roles and responsibilities of a financial manager
1. Financial Analysis and Interpretation
Financial analysis is taking the financial data of the company, organizing it and analyzing it to
find the strengths of the company. This is converted into patterns and a conclusion will be driven
out of it. This helps the higher management to take wise decisions. It also helps in evaluating the
financial health of the company. It is a very tedious task, which needs to be done articulately.
2. Determining the Source of Funds
A financial manager identifies the sources of funds, especially while starting a new venture. It
involves identifying the lenders and banks that can lend money to the company. Also, it deals
with knowing your customers and target audience.
3. Investment of Funds
A financial manager conducts an in-depth study about the investment that a company should
make and the possible ROI (Return on Investment). He provides a broader selection of
investment opportunities with a lower risk. So a financial manager has to do risk analysis too.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE
DEPARTMENT OF COMMERCE PA & PG
Class: III B.Com PA Semester –IV
Sub. Name: Principles of Management
Sub. Code: 18UPA412
Prepared by: Dr. M. Revathi Bala
Nature and Scope of Management
Though management was practiced ever since human being realized the need
and importance of working in groups, its development as a formal body of knowledge
is relat6ively of a recent origin. Over, the years, the study and application of
management techniques in the organisations have transformed the nature of
management. The nature or characteristics features of modern management may be
described as follows:
Nature/characteristics/features of management:
Art as well as science
Management is both art and science. It is an art in the sense of
possessing of managing skill by a person. In another sense, management is the
science because of developing certain principles or law3s which are applicable in a
place where a group of activities are coordinated.
Management is an activity
Management is the process of activity relating to the effective utilization
of available resources for production. The term ‘resources’ include men, money,
materials and machine in the organisation.
Management is a continuous process
The process of management mainly consists of planning, organizing,
directing and controlling the resources. The objectives can be achieved by using
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA & M.COM
E-learning material 2018
Staff Name: Dr.Sheeba.E
Subject: Company Law (18UPA411) Class: II B.Com (PA)
Topic: UNIT IV: Duties and liabilities of Directors
DUTIES OF DIRECTORS: A company acts through two bodies of people – its shareholders
and its board of directors. The board of directors is in charge of the management of the
company’s business; they make the strategic and operational decisions of the company and are
responsible for ensuring that the company meets its statutory obligations. Based on the principle
the directors must act with honesty, diligence, and prudence.
DUTIES UNDER THE COMPANIES ACT 2006
1. Act within powers: must act in accordance with the company’s constitution, and only
exercise your powers for the purposes for which they were given. The company’s constitution
includes its articles of association and resolutions and agreements of a constitutional nature (e.g.
shareholder or joint venture agreements).
2. Promote the success of the company: must act in the way you consider, in good faith, would
be most likely to promote the success of the company for the benefit of its members as a whole.
“Success” will generally mean a long-term increase in value but fundamentally it is up to each
director to decide, in good faith, whether it is appropriate for the company to take a particular
course of action. When considering what is most likely to promote the success of the company,
the legislation states that a director must have regard to: the likely consequences of any decision
in the long term, the interests of the company’s employees, the need to foster the company’s
business relationships with suppliers, customers and others, the impact of the company’s
operations on the community and the environment, the desirability of the company maintaining a
reputation for high standards of business conduct, the need to act fairly as between members of
the company. This list is not exhaustive but is designed to highlight areas of particular
importance to responsible business behaviour. Other relevant factors should also be properly
considered.
3. Exercise independent judgment: must exercise independent judgment and make your own
decisions. This does not prevent you from acting in accordance with the company’s constitution
or an agreement which the company has entered into.
4. Exercise reasonable care, skill and diligence: must exercise the same care, skill and
diligence that would be exercised by a reasonably diligent person with: the general knowledge,
skill and experience that may reasonably be expected of a person carrying out the same functions
as you in relation to the company the general knowledge, skill and experience that you actually
possess. The expected standard is measured against both objective and subjective yardsticks. A
director’s actual understanding and abilities may not be enough if more could reasonably be
expected of someone in his or her position.
5. Avoid conflicts of interest (a “conflict situation”): must avoid a situation in which you have,
or could have, an interest that conflicts, or may conflict, with the interests of the company. This
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: II B.COM (PA) Semester –IV
Sub. Name: Partnership Accounting Sub. Code: 17UPA408 / 18UPA409
Prepared By: S. Arumugaraj
DIVISION OF PROFIT – FIXED AND FLUCTUATING CAPITAL
Maintenance of Capital Accounts of Partners
All transactions relating to partners of the firm are recorded in the books of the firm through
their capital accounts. This includes the amount of money brought in as capital, withdrawal of
capital, share of profit, interest on capital, interest on drawings, partner’s salary, commission
to partners, etc. There are two methods by which the capital accounts of partners can be
maintained. These are: (i) fixed capital method, and (ii) fluctuating capital method. The
difference between the two lies in whether or not the transactions other than
addition/withdrawal of capital are recorded in the capital accounts of the partners.
(a) Fixed Capital Method: Under the fixed capital method, the capitals of the partners
shall remain fixed unless additional capital is introduced or a part of the capital is withdrawn
as per the agreement among the partners. All items like share of profit or loss, interest on
capital, drawings, interest on drawings, etc. are recorded in a separate accounts, called
Partner’s Current Account. The partners’ capital accounts will always show a credit balance,
which shall remain the same (fixed) year after year unless there is any addition or withdrawal
of capital.
The partners’ current account on the other hand, may show a debit or a credit balance. Thus
under this method, two accounts are maintained for each partner viz., capital account and
current account, While the partners’ capital accounts shall always appear on the liabilities
side in the balance sheet, the partners’ current account’s balance shall be shown on the
liabilities side, if they have credit balance and on the assets side, if they have debit balance.
The partner’s capital account and the current account under the fixed capital method would
appear as shown below:
Partner’s Capital Account
Date Particulars J.F. Amount Date Particulars J.F. Amount
(Rs.) (Rs.)
To Bank (permanent xxx By Balance b/d xxx
withdrawal of capital) (opening balance)
Balance c/d xxx Bank (fresh capital xxx
(closing balance) introduced)
xxx xxx
DEPARTMENT OF B.COM (PA) & M.COM
E-learning material
Staff Name: Ms.C.Goldbell Rachel
Subject: Strategic Management 18UPA3S1 Class: II B.COM (PA)
Topic: Leadership Styles and Behavioral Challenges
Effective leaders have a style or a combination of multiple styles that make them successful in
guiding and inspiring employees. Leadership styles often correlate closely with personality type.
Influence from previous mentors will also influence a person's ability and style to guide and
direct a group of individuals. Leadership is not limited to extraverted individuals, who have out-
sized personalities, even though that type of individual often rises to leadership roles, because
individuals with out-sized personalities are often effective communicators. Some leaders have
their own style that does not fit well into a specific personality type.
What Are the Traits of an Effective Leader?
Leadership is defined by the results achieved under the specific person in charge. The leader is
tasked with the challenge of gathering and molding individuals into cohesive groups that are
capable of achieving a common goal. They bring out the best in individuals and of the group
collectively, while also driving a higher level of performance than usually would be achieved.
Effective leaders drive innovation, and they encourage their people to think strategically and
creatively, while also reaching for new limits. In the world of business, an effective leader drives
higher profits, and ultimately, increases the value and bottom line of the business as a whole.
Different Types of Leadership Styles
1. Autocratic Leadership
This aggressive leadership style is based on control. The autocrat is rarely well-liked, and an
autocratic leader uses a militant-like style. The autocrat gives orders and expects prompt
execution, with little-to-no feedback or input from the worker. This leadership style can work in
a production-type environment that demands maximal output in simple, repetitive job roles. It
rarely allows for an environment in which creativity will flourish. The autocrat pushes
employees hard; often, he does not get loyalty and long-term commitments in return. High
turnover and low satisfaction is expected, in response to this leadership style. There are times
when autocratic leadership is effective, however. The military is a prime example
2. Laissez-Faire Leadership
The complete opposite of autocratic leadership is Laissez-Faire, which is understood to mean and
for do as you will or choose in French. What it means in economic terms is that it is "a doctrine
opposing governmental interference in economic affairs beyond the minimum necessary for the
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA & M.COM
E-learning material 2018
Staff Name: Mrs.C.Goldbell Rachel
Subject: Business Communication 18UPA307 Class: II B.Com (PA)
Topic: Essentials of effective business letter
Meaning of Business Letters
In these days of telecommunication, letter is still the chief method of conveying message. Letter
maintains the personal touch, serves as a record and also makes it possible to have multiple
copies, if required. Every business, big or small, has to maintain contacts with its suppliers,
customers, govt. departments etc. Activities relating to purchase such as making enquiries,
placing orders, complaints about delay in supply of goods and the like are made by letters.
In every business, letters play an important part. Through letters a business-man tries to open up
and maintain business relations, to introduce, to promote and conclude transactions. A letter
serves as a medium for buying goods, selling goods, collecting debts, earning the goodwill of the
customers and also thrashing out all the important problems.
Requisites or essentials of a good business letter:
1. Clarity:
Clear thinking and simple expression are the two important virtues of effective writing. A good
letter should show its idea directly and clearly. Each sentence should be as simple as possible.
The reader should have no difficulty in understanding what the writer means to say. When the
reader gets the same meaning from the-message as what the sender intended, it is a good letter.
2. Conciseness:
Transmission of maximum information by using minimum words should be the aim of letter-
writing. Unnecessary details and roundabout expressions should be avoided. People are busy and
Subject Name: Cyber Law 18UPA306 Class: II B.Com PA
Topic: Prevention of cyber crime
Introduction
In technically driven society, people use various devices to make life simple. Globalization
results in connecting people all around the world. The increasing access to and continuous use of
technology has radically impacted the way in which people communicate and conduct their daily
lives. The internet connects people and companies from opposite sides of the world fast, easily,
and relatively economically. Nevertheless, the internet and computer can pose some threats
which can have disparaging impact on civilizations. Cybercrime is a hazard against different
organisations and people whose computers are connected to the internet and particularly mobile
technology.
Prevention
Cybercrime is a dangerous crime involving computers or digital devices, in which a computer
can be either a target of the crime, a tool of the crime or contain evidence of the crime.
Cybercrime basically defined as any criminal activity that occurs over the Internet. There are
many examples such as fraud, malware such as viruses, identity theft and cyber stalking. In
present environment, since most information processing depends on the use of information
technology, the control, prevention and investigation of cyber activities is vital to the success of
the Organizations, Government's agencies and individuals. The procurement and maintenance of
highly skill cybercrime expert by Government and Business Enterprises cannot be exaggerated.
Earlier, cybercrime was committed mainly by individuals or small groups. Presently, it is
observed that there is highly complex cybercriminal networks bring together individuals at
global level in real time to commit crimes.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA
E-learning material 2018
Mercantile Law 18UPA203
Rights and Duties of Partners
Rights of a Partner
Section 12(a): Right to take part in the conduct of the Business
All the partners of a partnership firm have the right to take part in the business
conducted by the firm as a partnership business is a business of the partners, and their
management powers are generally coextensive. If the management power of a particular
partner is interfered with and the individual has been wrongfully precluded from
participating, the Court of Law can intervene under such circumstances. The Court can,
and will, restrain the other partner from doing so by injunction. Other remedies are a suit
for dissolution, a suit for accounts without seeking dissolution and so on for a partner
who has been wrongfully deprived of the right to participate in the management.
The previously mentioned provisions of the law will be applicable unless there is
no existing contract to the contrary among the partners. It is common to find a term in
partnership agreements that gives only a limited power of management to a specific
partner or a term that the control of the partnership will remain vested with one or more
partners to the exclusion of others. In such a case, the Court of Law would generally be
unwilling to interpose with the management with such partner (s), unless it is proven that
something was done illegally or in the breach of trust among the partners.
Section 12(c): Right to be consulted
When a difference of any sorts arises between the partners of a firm concerning
the business of the firm, it shall be decided by the views of the majority among the
partners. Every partner in the firm shall have the right to express his opinion before the
decision is made. However, there can be no changes like the business of the firm without
the consent of all the partners involved. As a routine matter, the opinion of the majority
of the partners will prevail. Although, the majority rule would not apply when there is a
change like the firm itself. In such situations, the unanimous consent of the partners is
required.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COMPA & M.COM
E-learning material 2018
Staff Name: Mrs.P.GEETHA & E.SHEEBA
Subject: Business Economics 18UPA102 Class: I B.Com (PA)
Topic: PROBLEMS IN ESTIMATING NATIONAL INCOME
UNIT - V
PROBLEMS IN ESTIMATING NATIONAL INCOME
1. Types of Goods and Services:
The kinds of goods and services which should be included in national income pose a
problem. Goods and services having money value are included in the national income but there
are goods and services which may have no corresponding flow of money payments. Services
which are performed for love, kindness and mercy and not for money have an economic value but have
no money value.
Similarly, when a housewife cooks for the family, her activity is not included in the GNP. But
when she cooks in a restaurant and gets paid, her services are included in GNP. Much of the
activity, goods and services which have money value and are considered economic in U.K. and
U.S.A. on the basis of their marketability, are treated as non- economic in India because they are
carried on in the household sector.
However, it is a general principle to exclude such household activities of housewives, home
repairs, washing, cleaning, shaving or ‘do it yourself activities from national income because of
the great practical difficulties in valuing the output resulting from these activities.
It is for this reason that any comparison of the GNP between highly developed market economy
and an under-developed economy (in which a good part of the national product remains outside
the market) is rendered useless. It is, therefore, impossible to include the value of personal
services rendered to oneself in the national product or income accounts.
e-Learning
18UPA101 - Principles of Accountancy
Accounting concepts and conventions
concepts and conventions of the business.
To make the accounting language convey the same meaning to all people, so far as
practicable and to make full meaning of it, accountants have agreed on a number of concepts,
which they try to follow. This can be shown as:
ACCOUNTING PRINCIPLES
ACCOUNTING CONCEPTS ACCOUNTING CONVENTIONS
1.Money Measurement Concept ( MMC) 1. Convention of Disclosure ( CD )
2.Business Entity Concept( BEC ) 2.Convention of Consistency ( CCy)
3.Going Concern Concept ( GCC ) 3. Convention of Materiality ( CM )
4.Cost Concept ( CC ) 4. Convention of Conservatism (CCm)
5.Dual Aspect Concept( DAC )
6.Accounting Period Concept( APC )
7.Matching Concept ( MC )
8. Realisation Concept ( RC ) 9. Accrual concept ( AC )
10. Objectivity Concept ( OC )
Accounting Concepts:
1. Business Entity concept: Accountants treat a business as distinct from the persons who
own it. Without such distinction, the affairs of the firm will be mixed up with the private
affairs of the proprietor and the true picture of the firm will not be available.
2. Money measurement concept: Accounting records only those transactions, which are
being expressed in monetary terms, though quantitative records are also kept. An event
even though important like a quarrel between the production manager and the sales
manager, will not be recorded unless its monetary effect can be measured with accuracy.
It should be remembered that money enables various things of diverse nature too be
added up together and dealt with.
Ex: Use of clerical service or use of building can be added up through monetary values.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE
DEPARTMENT OF COMMERCE PA & PG
Class: II B.Com Semester –III
Sub. Name: Introduction to Information
Technology
Sub. Code: 17UPA3A3 /
18UPA3A3
Prepared By: Dr. M. USHARANI
DATA AND INFORMATION
Introduction
The words Data and Information may look similar and many people use these words
very frequently, But both have lots of differences between them.Data are plain facts. The
word "data" is plural for "datum." When data are processed, organized, structured or
presented in a given context so as to make them useful, they are called Information.
Data
The term data is derived from Latin term ‘datum’ which refers to ‘something given’. The
concept of data is connected with scientific research, which is collected by various
organisations, government departments, institutions and non-government agencies for a
variety of reasons.
Definitions of data
“A representation of facts, concepts or instructions in a formalised manner suitablefor
communication, interpretation, or processing by humans or by automatic means”
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE- 641 029
Class: II B.COM (PA) Semester –IV
Sub. Name: Industrial Law Sub. Code: 18UPA4A4
Prepared By: Dr.R. Murugesan
THE WORKING HOURS OF ADULTS
Factories Act, 1948 is to ensure adequate safety measures and to promote the health and
safety and welfare of the workers employed in factories. The act also makes provisions regarding
employment of women and young persons (including children & adolescents), annual leave with
wages etc. The Act extended to whole of India including Jammu & Kashmir and covers all
manufacturing processes and establishments falling within the definitions of “factory” as defined
u/s 2(m) of the act. Unless otherwise provided it is also applicable to factories belonging to
Central/State Government (section 116)
The Working Hours of Adults
Weekly Hours
No adult worker shall be required or allowed to-work in a factory for more than forty-
eight hours in any week (Sec. 51).
Daily Hours
No adult worker shall be required or allowed to work in a factory for more than nine
hours in any working day. The daily maximum may be exceeded with the previous approval of
the Chief Inspector, to facilitate change of shifts.-Sec. 54.
Intervals for Rest
The periods of work of adult workers in a factory each day shall be so fixed that no
period shall exceed five hours arid that no worker shall work for more than five hours before he
has had an interval for rest of at least half an hour. The State Government or the Chief
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS),
COIMBATORE – 29.
DEPARTMENT OF B.COM. (PA) & M.COM
E-learning material 2018
Staff Name: Dr.B.DIVYA PRIYA
Subject: 18UPA619 - INDIRECT TAX Class: III B.Com (PA)
Topic: TAX AVOIDANCE AND TAX EVASION
TAX AVOIDANCE AND TAX EVASION
Introduction
Every individual or assessee in a country likes to avoid or escape from tax, also,
looks into way in which he can avoid tax. He wants to use any means for the purpose of
not paying or evading from tax. Tax Avoidance and Tax Evasion are two terms that
serves a common purpose, i.e. to reduce the amount of tax from person, firm or any legal
entity’s earnings but one difference which can be drawn from these two concepts is that
one aims to do it in a legitimate manner and other strives for an illegitimate manner.
Tax Evasion and Tax Avoidance are two techniques which are used and applied
by many people for the purpose of reducing their tax liability. These actions are
performed only after consulting an expert in the field of tax. Tax avoidance is a
completely legal procedure while Tax Evasion is considered to be crime in the whole
world. Tax Avoidance is defined as a practice of using all the legal means to pay the least
amount of tax possible. The core difference which can be ascertained from these two
concepts of taxes is that Tax evasion is a criminal offence and whereas Tax avoidance is
perfectly legal thing.
Tax Avoidance:
Any person who is able to avoid taxes is considered to be a wise guy. It is
believed Tax Avoidance is a term which signifies a situation in which a taxpayer reduces
his tax liabilities by taking advantage of the loop holes and ambiguities in the legal
provisions. Since it is not illegal, tax avoidance is some sort of a legally allowable way to
reduce the tax burden. It is not completely defined under Income Tax Act 1961. Tax
avoidance is the use of legal methods to modify an individuals’ financial situation in
order to lower the amount of income tax owed. This is generally accomplished by
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COM. PA & M.COM
E-learning material 2018
Staff Name: Dr.B.DIVYA PRIYA
Subject: 18UPA6S4 - INVESTMENT MANAGEMENT Class: III B.Com (PA)
Topic: 1) Objectives of Investment and 2) Risk and Return
1. OBJECTIVES OF INVESTMENT:
Investment means the sacrifice of current rupees for future rupees. Two different
attributes are generally involved: time and risk. The sacrifice takes place in the present
and is certain. The rewards, comes later, if at all, and the amount of the reward is
generally uncertain. In some cases, the element of time, predominates (e.g., with
government bonds). In other cases, risk is the dominant factor (e.g. with call options on
common stock). Generalized, Investment means conversion of cash or money into a
monetary asset or a claim on future money for a return.
Objectives of Investment:
The following are the objectives of investment:
1. Maximize Current Income: This objective emphasizes on current yield over other
factors. It is typical of people who must rely on investment income for part of their
entire livelihood.
2. Preservation of Capital: This is a common objective. In its purest form, it means
that the dollar value of the portfolio should not fall. This is a rather rigorous form
of this objective. However, in a more flexible form, it means investing so that the
potential for declines in the overall portfolio is within tolerable limits. In this form,
it is a common and quite logical objective.
Subject Name: Customer Relationship Management Subject code: 18UPA4S2
Topic: Need to adopt e-CRM Class: II B.Com PA
Introduction
Electronic customer relationship management (E-CRM) is the application of Internet-
based technologies such as emails, websites, chat rooms, forums and other channels to
achieve CRM objectives. It is a well-structured and coordinated process of CRM that
automates the processes in marketing, sales and customer service.
Need
An effective E-CRM increases the efficiency of the processes as well as
improves the interactions with customers and enables businesses to customize
products and services that meet the customers’ individual needs.
Electronic customer relationship management provides an avenue for
interactions between a business, its customers and its employees through Web-
based technologies. The process combines software, hardware, processes and
management’s commitments geared toward supporting enterprise-wide CRM
business strategies.
Electronic customer relationship management is motivated by easy Internet
access through various platforms and devices such as laptops, mobile devices,
desktop PCs and TV sets. It is not software, however, but rather the utilization
of Web-based technologies to interact, understand and ensure customer
satisfaction.
An effective E-CRM system tracks a customer’s history through multiple
channels in real time, creates and maintains an analytical database, and
optimizes a customer’s relation in the three aspects of attraction, expansion
and maintenance.
A typical E-CRM strategy involves collecting customer information,
transaction history and product information, click stream and contents
information. It then analyzes the customer characteristics to give a
transactional analysis consisting of the customer's profile and transactional
history, and an activity analysis consisting of exploratory activities showing
the customer's navigation, shopping cart, shopping pattern and more.
KONGUNADU ARTS AND SCIENCE COLLEGE, COIMBATORE
Class: II B.COM (PA) Semester –III
Sub. Name: Financial Accounting Sub. Code: 18UPA305
Prepared By: S. Arumugaraj
RESERVES & PROVISIONS
Provisions: There are certain expenses/losses which are related to the current accounting period but
amount of which is not known with certainty because they are not yet incurred. It is necessary
to make provision for such items for ascertaining true net profit. For example, a trader who
sells on credit basis knows that some of the debtors of the current period would default and
would not pay or would pay only partially. It is necessary to take into account such an
expected loss while calculating true and fair profit/loss according to the principle of Prudence
or Conservatism. Therefore, the trader creates a Provision for Doubtful Debts to take care of
expected loss at the time of realisation from debtors. In a similar way, Provision for repairs
and renewals may also be created to provide for expected repair and renewal of the fixed
assets. Examples of provisions are:
•Provision for depreciation;
•Provision for bad and doubtful debts;
•Provision for taxation;
•Provision for discount on debtors; and
•Provision for repairs and renewals.
It must be noted that the amount of provision for expense and loss is a charge against the
revenue of the current period. Creation of provision ensures proper matching of revenue and
expenses and hence the calculation of true profits. Provisions are created by debiting the
profit and loss account. In the balance sheet, the amount of provision may be shown either:
•By way of deduction from the concerned asset on the assets side. For example, provision for
doubtful debts is shown as deduction from the amount of sundry debtors and provision for
depreciation as a deduction from the concerned fixed assets; On the liabilities side of the
balance sheet along with current liabilities, for example provision for taxes and provision for
repairs and renewals.
Accounting Treatment for Provisions
The accounting treatment of all types of provisions is almost similar. Therefore, the
accounting treatment is explained here taking up the case of provision for doubtful debts. As
already stated that when business transaction takes place on credit basis, debtors account is
created and its balance is shown on the asset-side of the balance sheet. These debtors may be
of three types:
•Good Debtors are those from where collection of debt is certain.
•Bad Debts are those debtors from where collection of money is not possible and the amount
of credit given is a certain loss.
•Doubtful Debts are those debtors who may pay but business firm is not sure about the
collection of full amount from them. In fact, as a matter of business experience, some
percentage of such debtors are not likely to pay, hence treated as doubtful debts. To consider
this possible loss on account of non-payment by some debtors, it is a common practice (and
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE
DEPARTMENT OF COMMERCE PA & PG
Class: III B.Com Semester –VI
Sub. Name: Principles of Auditing
Sub. Code: 18UPA618
Prepared by: Dr. M. USHARANI
APPOINTMENT AND REMOVAL OF AUDITORS
Introduction
An audit means an examination of the financial reports which include a balance sheet,
statement of changes in equity, income statements, cash flow statements, and notes providing
a summary regarding significant accounting policies and such other explanatory notes which
are required to be presented in the annual report of the Company, by an independent
individual or an organization. The main objective of the audit is to provide a true and fair
view of the Financial Information presented in Annual report thereby reflecting the financial
position of the Organization of the Financial Year.
An auditor is an independent professional person who is qualified to audit a
company’s financial statements. According to International Standard on Auditing the
auditor means “The person with final responsibility for the audit. Audit firm means either the
partners of å firm providing audit services or a sole practitioner providing audit sanitizes, as
appropriate.”
Appointment of Auditors as under Section 139 of Companies Act, 2013
1. The first Auditor of a company shall be appointed by Board within 30 days from
registration of the company or otherwise by members within 90 days at an EGM, who
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
DEPARTMENT OF B.COM (PA) & M.COM
E-learning material 2018
Staff Name: Dr.Sheeba.E
Subject: Applied Cost Accounting (18PCM209) Class: II M.Com
Topic: UNIT I: COMPARISON WITH FINANCIAL AND MANAGEMENT
ACCOUNTING and UNIT- IV: FEATURES OF PROCESS COSTING
Financial accounting:
Meaning: Financial accounting is what most people think of when they envision the accountant
at work. Financial accounting is concerned with the principles, practices and systems employed
to compile transactions of an entity and present financial information for use by an entity’s
internal and external stakeholders.
Definition: Financial accounting is the process of recording, summarizing and reporting the
myriad of transactions resulting from business operations over a period of time. Financial
Accounting is an accounting system which is concerned with the preparation of financial
statement for the outside parties like creditors, shareholders, investors, suppliers, lenders,
customers, etc. It is the purest form of accounting in which proper record keeping and reporting
of financial data are done, to provide relevant and material information to its users. Financial
Accounting is based on various assumptions, principles and convention like going concern,
materiality, matching, realisation, conservatism, consistency, accrual, historical cost, etc. The
financial statement consists of a Balance Sheet, Income Statement and Cash flow statement
which are prepared as per the guidelines provided by the relevant statute. Normally, the
statements based on the financial accounting are prepared for one accounting year, to enable the
user to make comparisons regarding the financial position, profitability and performance of the
company in a specific period. Not only external parties but internal management also gets
information for forecasting, planning, and decision making.
Management accounting:
Meaning: Management accounting which is also referred as cost accounting is not a mandatory
requirement of the law. Unlike financial accounting, an entity’s accountants practice managerial
accounting in order to help its managers make business decisions that affect the entity’s future
profits and cash flows. The accountants analyze the financial aspects of the entity’s operations
and draw conclusions regarding their efficiency and effectiveness.
Definition: According to the Institute of Management Accountants (IMA): "Management
accounting is a profession that involves partnering in management decision making, devising
planning and performance management systems, and providing expertise in financial reporting
and control to assist management in the formulation and implementation of an organization's
strategy". Management Accounting, also known as Managerial Accounting is the accounting for
managers which helps the management of the organisation to formulate policies and forecasting,
planning and controlling the day to day business operations of the organisation. Both the
quantitative and qualitative information are captured and analysed by the management
accounting. The functional area of management accounting is not limited to providing a financial
or cost information only. Instead, it extracts the relevant and material information from financial
and cost accounting to assist the management in budgeting, setting goals, decision making, etc.
The accounting can be done as per the requirement of the management, i.e. weekly, monthly,
quarterly, etc. and there is no format set on the basis of which it is to be reported.
Comparison with financial and management accounting:
The key difference between financial and managerial accounting is that financial
accounting aims at providing information to parties outside the organization, whereas managerial
accounting information is aimed at helping managers within the organization make decisions.
Financial statement preparation using accounting principles is most relevant to regulatory
organizations and financial institutions. Because there are numerous accounting rules that do not
translate well into business operation management, different accounting rules and procedures are
utilized by internal management for internal business analysis.
Comparison Chart
Basis for
Comparison Financial Accounting Management Accounting
Meaning
Financial Accounting is an accounting
system that focuses on the preparation
of financial statement of an
organization to provide the financial
information to the interested parties.
The accounting system which provides
relevant information to the managers to
make policies, plans and strategies for
running the business effectively is known
as Management Accounting.
Compulsory Yes No
Information Monetary information only. Monetary and non-monetary information
Objective To provide financial information to
outsiders.
To assist the management in planning
and decision making process by
providing detailed information on various
matters.
Format Specified Not specified
Time Frame
Financial Statements are prepared at
the end of the accounting period which
is usually one year.
The reports are prepared as per the need
and requirements of the organization.
User Internal and external parties Only internal management.
Reports Summarized Reports about the
financial position of the organization
Complete and Detailed reports regarding
various information.
Publishing
and auditing
Required to be published and audited
by statutory auditors
Neither published nor audited by
statutory auditors.
Key Differences between Financial Accounting and Management Accounting: Financial
Accounting is the branch of accounting which keeps track of all the financial information of the
entity. Management Accounting is that branch of accounting which records and reports both the
financial and nonfinancial information of an entity.
1. Users of financial accounting are both the internal management of the company and the
external parties while the users of the management accounting are only the internal
management.
2. Financial accounting is to be publicly reported whereas the Management Accounting is
for the use of the organisation and hence it is very confidential.
3. Only monetary information is contained in financial accounting. As against this,
management accounting contains both monetary and non-monetary information such as
the number of workers, the quantity of raw material used and sold, etc.
4. Financial Accounting is done in the prescribed format, whereas there is no prescribed
format for the Management Accounting.
5. Financial Accounting focuses on providing information about the functioning of the
entity’s business to its users, whereas Management Accounting focuses on providing
information to help them in evaluating the performance and devising plans for the future.
6. The Financial Accounting is mainly done for a specific period, which is usually one year.
On the other hand, the management accounting is done as per the needs of the
management say quarterly, half yearly, etc.
7. Financial accounting is a must for any company for auditing purposes. On the contrary,
management accounting is voluntary, as no editing is done.
8. Financial accounting information is required to be published and audited by statutory
auditors. Unlike, management accounting, which does not require information to be
published and audited, as they are for internal use only.
Similarities
• Used by the Internal Management.
• Evaluation of Performance.
• Branch of Accounting.
• Presents the position of the entity.
Conclusion: Financial Accounting and Management Accounting are of great significance, in
fact, they help the organisation in various ways. As financial accounting is helpful in the proper
record keeping of innumerous transactions and comparison of the performance of two periods of
an entity or between the two entities, while the management accounting is helpful in analysing
the performance, making a strategy, taking an effective judgement and preparation of policies for
the future.
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UNIT- IV
FEATURES OF PROCESS COSTING
The process costing has the following features.
1. The production is carried on continuously and passing two or more processes.
2. Only homogeneous products are produced.
3. The production will be stopped if the plant and machinery is shut down for repairs.
4. The management has clearly defined process cost centers and the accumulation of costs such
as cost of material, cost of labour and overheads by the cost centre.
5. The accurate accounting records are maintained in process wise as the number of units
produced completely, the number of units partly produced and total costs incurred.
6. The finished product of one process becomes the raw material of the next process or operation
and so on until the final product is obtained.
7. Some losses may arise in all the processes due to avoidable and unavoidable reasons. Such
losses may be normal and/or abnormal.
8. Accounting treatment of normal losses and abnormal losses are studied in this method of
costing.
9. Sometimes, abnormal gain is also available in certain processes.
10. Accounting treatment of such abnormal gain is also studied in this method of costing.
11. Sometimes, goods are transferred from the process to next process at transfer price instead of
cost price.
12. The transfer price is compared with market price to know the level of efficiency or losses
occurring in a particular process.
13. All the input units cannot be converted into finished products in all the processes for a
specified period. Some may be in process. At the same time, the calculation of effective unit rate
is carried on in this method of costing. Therefore, accurate average cost is obtained.
14. Sometimes, more than one product is produced. All the products are having equal value and
importance. If so, these products are called joint product.
15. In certain cases, more than one product is produced. One product has more value and gets
more important than others. If so, more value product is main product and less value product is
by-product.
16. Main product may not require any further processing. But, by-products may require further
processing before they can be sold.
17. Both main product and by-products are valued under this method of costing.
18. Joint cost is apportioned to both main product and by-products on suitable basis.
19. A main product of one firm may be a by-product of another firm.
20. Output is uniform. Hence, the cost per unit of production can be ascertained only by
averaging the expenditure incurred during a particular period.
21. Work in progress is converted into finished products through the cost of equivalent
production.
………………………………………………………………………………………………………
M.Com
Income tax law & practice (18PCM310)
INCOME TAX AUTHORITIES
The Income Tax Act, 1961 provides for the administrative and judicial authorities for
administration of this Act. The Direct Tax Laws Act, 1987 has brought far-reaching changes in
the organizational structure. The implementation of the Act lies in the hands of these authorities.
The change in designation of certain authorities and creation of certain new posts in the structure
are the main features of amendments made by The Direct Tax Laws Act, 1987. The new features
of authorities has been properly depicted in a chart on the facing page. These authorities have
been grouped into two main wings :
(i) Administrative [ Income Tax Authorities ][ Sec. 116 ]
(a) the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963
(54 of 1963),
(b) Directors-General of Income-tax or Chief Commissioners of Income-tax,
(c) Directors of Income-tax or Commissioners of Income-tax or Commissioners of Income-tax
(Appeals),
(cc) Additional Directors of Income-tax or Additional Commissioners of Income-tax or
Additional Commissioners of Income-tax (Appeals),
(cca) Joint Directors of Income-tax or Joint Commissioners of Income-tax.
(d) Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy
Commissioners of Income-tax (Appeals),
(e) Assistant Directors of Income-tax or Assistant Commissioners of Income-tax,
(f) Income-tax Officers,
(g) Tax Recovery Officers,
(h) Inspectors of Income-tax.
(ii) Assessing Officer [ Sec. 2(7A)]
"Assessing Officer" means the Assistant Commissioner or Deputy Commissioner or Assistant
Director or Deputy Director or the Income-tax Officer who is vested with the relevant
jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of
section 120 or any other provision of this Act, and the Joint Commissioner or Joint Director who
is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of
the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;
Importance of Assessing Officer : In the organizational setup of the income tax department Assessing Officer plays a very vital
role. He is the primary authority who initiates he proceedings and is directly connected with the
public. Form the time of filing of return till the assessement is completed he plays a pivotal role .
He can start proceedings for non filing of return, imposition of penalties etc. Orders passed by
him can be challenged only on approval. The department can revise his orders only if it is proved
that there are prejudicial to the revenue and that too only by the Commissioner of Income Tax.
(iii) Appointment of Income-Tax Authorities [ Sec. 117 ]
(1) Power of Central Government : The Central Government may appoint such persons as it
thinks fit to be income-tax authorities. It kept with itself the powers to appoint authorities upto
and above rank of an Assistant Commissioner of Income-Tax [ Sec. 117 (1) ]
(2) Power of the Board and Other Higher Authorities : Subject to the rules and orders of the
Central Government regulating the conditions of service of persons in public services and posts,
the Central Government may authorize the Board, or a Director-General, a Chief Commissioner
or a Director or a Commissioner to appoint income-tax authorities below the rank of an Assistant
Commissioner or Deputy Commissioner. [ Sec. 117 (2) ]
(3) Power to appoint Executive and Ministerial Staff : Subject to the rules and orders of the
Central Government regulating the conditions of service of persons in public services and posts,
an income-tax authority authorized in this behalf by the Board may appoint such executive or
ministerial staff as may be necessary to assist it in the execution of its functions.
(iv) Control of Income-Tax Authorities [ Sec. 118 ]
The Board may, by notification in the Official Gazette, direct that any income-tax authority or
authorities specified in the notification shall be subordinate to such other income-tax authority or
authorities as may be specified in such notification.
Powers of Income Tax Authorities
1) Power relating to Discovery, Production of evidence, etc: The Assessing Officer,
The Joint Commissioner, the Chief Commissioner or the Commissioner has the powers
as are provided in a court under the code of Civil Procedure, 1908, when trying to suit for
the following matters:
(a) discovery and inspection;
(b) to enforce any person for attendance, and examining him on oath
(c) issuing commissions; and
(d) compelling the production of books of account and other document.
2) Power of Search and Seizure: Today it is not hidden from income tax authorities that
people evade tax and keep unaccounted assets. When the prosecution fails to prevent tax
evasion, the department has the to take actions like search and seizure.
3) Requisition of Books of account, etc: Where the Director or the Director-General or
Commissioner or the Chief Commissioner in consequence of information in his
possession, has reason to believe that (a), (b), or (c) as mentioned under section 132(1)
and the book of accounts or other documents or the assets have been taken under custody
by any authority or officer under any other law, then the Chief Commissioner or the
Director General or Director or Commissioner can authorize any Joint Director, Deputy
Director, Joint Commissioner, Assistant Commissioner, Assistant Director, or Income tax
Officer to require the authority to provide sue books of account, assets or any documents
to the requisitioning officer, when such officer is of the opinion that it is no longer
necessary to retain the same in his custody.
4) Power to Call for Information: The Commissioner The Assessing Officer or the
Joint Commissioner may for the purpose of this Act:
(a) can call any firm to provide him with a return of the addresses and names of partners
of the firm and their shares;
(b) can ask any Hindu Undivided Family to provide him with return of the addresses and
names of members of the family and the manager;
(c) can ask any person who is a trustee, guardian or an agent to deliver him with return of
the names of persons for or of whom he is an agent, trustee or guardian and their
addresses;
(d) can ask any person, dealer, agent or broker concerned in the management of stock or
any commodity exchange to provide a statement of the addresses and names of all the
persons to whom the Exchange or he has paid any sum related with the transfer of assets
or the exchange has received any such sum with the particulars of all such payments and
receipts;
5) Power of Survey: The term 'survey' is not defined by the Income Tax Act. According
to the meaning of dictionary 'survey' means casting of eyes or mind over something,
inspection of something, etc. An Income Tax authority can have a survey for the purpose
of this Act.
The objectives of conducting Income Tax surveys are:
• To discover new assessees;
• To collect useful information for the purpose of assessment;
• To verify that the assessee who claims not to maintain any books of accounts is in-fact
maintaining the books;
• To check whether the books are maintained, reflect the correct state of affairs.
6) Collection of Information: For the purpose of collection of information which may
be useful for any purpose, the Income tax authority can enter any building or place within
the limits of the area assigned to such authority, or any place or building occupied by any
person in respect of whom he exercises jurisdiction.
Subject Name: International Trade Subject code: 18PCM311
Topic: Advantages and disadvantages of international trade Class: II M.Com
Introduction
International trade which enable every country to specialise and to export those things
that it can produce cheaper in exchange for what others can provide at a lowest cost have
been and still are one of the basic factors promoting economic well-being and increasing
national income of every participating country. The World Trade can increase real income
and consumption two.
International Trade has many more benefits. It promotes growth and enhances
economic welfare by stimulating more efficient utilisation of factor endowments of different
regions and by enabling people to obtain goods from efficient sources of supply. Trade also
makes available to people goods which cannot be produced in their country due to various
reasons.
Small countries may gain more than large countries from world trade. This is because
a small country can specialise in the production of a single commodity without significantly
affecting its prices in the international market, but if a large country specializes in the
production of a single commodity, the significant increase in the supply would cause a fall in
its price, adversely affecting the terms of trade of the large country.
Advantages of International Trade:
Optimal use of natural resources:
o International trade helps each country to make optimum use of its natural
resources. Each country can concentrate on production of those goods for
which its resources are best suited. Wastage of resources is avoided.
Availability of all types of goods:
o It enables a country to obtain goods which it cannot produce or which it is not
producing due to higher costs, by importing from other countries at lower
costs.
Specialisation:
o Foreign trade leads to specialisation and encourages production of different
goods in different countries. Goods can be produced at a comparatively low
cost due to advantages of division of labour.
Advantages of large-scale production:
o Due to international trade, goods are produced not only for home consumption
but for export to other countries also. Nations of the world can dispose of
goods which they have in surplus in the international markets. This leads to
production at large scale and the advantages of large scale production can be
obtained by all the countries of the world.
Stability in prices:
o International trade irons out wild fluctuations in prices. It equalizes the prices
of goods throughout the world (ignoring cost of transportation, etc.)
Exchange of technical know-how and establishment of new industries:
o Underdeveloped countries can establish and develop new industries with the
machinery, equipment and technical know-how imported from developed
countries. This helps in the development of these countries and the economy
of the world at large.
Increase in efficiency:
o Due to international competition, the producers in a country attempt to
produce better quality goods and at the minimum possible cost. This increases
the efficiency and benefits to the consumers all over the world.
Development of the means of transport and communication:
o International trade requires the best means of transport and communication.
For the advantages of international trade, development in the means of
transport and communication is also made possible.
International co-operation and understanding:
o The people of different countries come in contact with each other. Commercial
intercourse amongst nations of the world encourages exchange of ideas and
culture. It creates co-operation, understanding, cordial relations amongst
various nations.
Ability to face natural calamities:
o Natural calamities such as drought, floods, famine, earthquake etc., affect the
production of a country adversely. Deficiency in the supply of goods at the
time of such natural calamities can be met by imports from other countries.
Other advantages:
o International trade helps in many other ways such as benefits to consumers,
international peace and better standard of living.
Disadvantages of International Trade:
Though foreign trade has many advantages, its dangers or disadvantages should not
be ignored.
Impediment in the Development of Home Industries:
o International trade has an adverse effect on the development of home
industries. It poses a threat to the survival of infant industries at home. Due to
foreign competition and unrestricted imports, the upcoming industries in the
country may collapse.
Economic Dependence:
o The underdeveloped countries have to depend upon the developed ones for
their economic development. Such reliance often leads to economic
exploitation. For instance, most of the underdeveloped countries in Africa and
Asia have been exploited by European countries.
Political Dependence:
o International trade often encourages subjugation and slavery. It impairs
economic independence which endangers political dependence. For example,
the Britishers came to India as traders and ultimately ruled over India for a
very long time.
Mis-utilisation of Natural Resources:
o Excessive exports may exhaust the natural resources of a country in a shorter
span of time than it would have been otherwise. This will cause economic
downfall of the country in the long run.
Import of Harmful Goods:
o Import of spurious drugs, luxury articles, etc. adversely affects the economy
and well-being of the people.
Storage of Goods:
o Sometimes the essential commodities required in a country and in short supply
are also exported to earn foreign exchange. This results in shortage of these
goods at home and causes inflation. For example, India has been exporting
sugar to earn foreign trade exchange; hence the exalting prices of sugar in the
country.
Danger to International Peace:
o International trade gives an opportunity to foreign agents to settle down in the
country which ultimately endangers its internal peace.
World Wars:
o International trade breeds rivalries amongst nations due to competition in the
foreign markets. This may eventually lead to wars and disturb world peace.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE
DEPARTMENT OF COMMERCE PA & PG
Class: II M.Com Semester –III
Sub. Name: Business Research Methods Sub. Code: 18PCM312
Prepared By: Dr. M. USHARANI
SAMPLE SIZE
Introduction
Sampling may be defined as the selection of some part of an aggregate or totality on
the basis of which a judgement or inference about the aggregate or totality is made. In other
words, it is the process of obtaining information about an entire population by examining
only a part of it. In most of the research work and surveys, the usual approach happens to be
to make generalisations or to draw inferences based on samples about the parameters of
population from which the samples are taken. The researcher quite often selects only a few
items from the universe for his study purposes. All this is done on the assumption that the
sample data will enable him to estimate the population parameters. The items so selected
constitute what is technically called a sample, their selection process or technique is called
sample design and the survey conducted on the basis of sample is described as sample survey.
Sample should be truly representative of population characteristics without any bias so that it
may result in valid and reliable conclusions.
Sampling Size
Sample size refers to the numbers of items selected from the universe to constitute a
sample. An optimum sample is one which fulfils the requirements of efficiency,
representativeness and reliability. Some sampling error may occur due to in appropriate
sample size which can be controlled by increase in sample size for high level of precision.
Therefore, the size of sample has been determined by the researcher keeping in view, the
following points:
(i)Nature of universe
Universe may be either homogenous or heterogeneous in nature. If the items of the
universe are homogenous, a small sample can serve the purpose. But if the items are
heterogeneous, a large sample would be required. Technically, this can be termed as the
dispersion factor.
(ii)Number of classes proposed
`If many class-groups (groups and sub-groups) are to be formed, a large sample would
be required because a small sample might not be able to give a reasonable number of items in
each class-group.
(iii) Nature of study
If items are to be intensively and continuously studied, the sample should be small.
For a general survey the size of the sample should be large, but a small sample is considered
appropriate in technical surveys.
(iv) Type of sampling
Sampling technique plays an important part in determining the size of the sample. A
small random sample is apt to be much superior to a larger but badly selected sample.
(v) Standard of accuracy and acceptable confidence level
If the standard of accuracy or the level of precision is to be kept high, we shall require
relatively larger sample. For doubling the accuracy for a fixed significance level, the sample
size has to be increased fourfold.
(vi) Availability of finance
In practice, size of the sample depends upon the amount of money available for the
study purposes. This factor should be kept in view while determining the size of sample for
large samples result in increasing the cost of sampling estimates.
(vii) Other considerations
Nature of units, size of the population, size of questionnaire, availability of trained
investigators, the conditions under which the sample is being conducted, the time available
for completion of the study are a few other considerations to which a researcher must pay
attention while selecting the size of the sample.
There are two alternative approaches for determining the size of the sample. The first
approach is “to specify the precision of estimation desired and then to determine the sample
size necessary to insure it” and the second approach “uses Bayesian statistics to weigh the
cost of additional information against the expected value of the additional information.”
The first approach is capable of giving a mathematical solution, and as such is a
frequently used technique of determining ‘n’. The limitation of this technique is that it does
not analyse the cost of gathering information vis-à-vis the expected value of information. The
second approach is theoretically optimal, but it is seldom used because of the difficulty
involved in measuring the value of information. Hence, we shall mainly concentrate here on
the first approach.
In determination of sample size through the approach based on precision rate and confidence
level, the researcher has to specify the precision that he wants in respect of his estimates
concerning the population parameters.
The formula to find out the sample size (n) of infinite population is given as under:
n = z².p.q
e²
where, n= sample size
z = the value of standard variate at a given confidence level and to be worked out
from table showing area under normal curve.
p= sample proportion
q= 1-p
e = given precision rate or acceptable error
When the population size is finite, the formula for sample size determination will be modified
as under:
n = z².p.q. N
e²(N-1)+ z².p.q
where, N = population
Conclusion
As a general rule, one can say that the sample must be of an optimum size i.e., it
should neither be excessively large nor too small. Technically, the sample size should be
large enough to give a confidence interval of desired width and as such the size of the sample
must be chosen by some logical process before sample is taken from the universe.
M.Com
Management Accounting (18PCM413)
DIFFERENCES BETWEEN MANAGEMENT ACCOUNTING AND FINANCIAL
ACCOUNTING
Management Accounting
Management accounting is one of the important branches of accounting. Management
accounting is also known as managerial accounting. It aims to serve an organization’s
management, particularly the top management. It deals with the collection, recording,
classification, analysis, and presentation of data and information related to the quantitative
and the qualitative aspects. It deals with the financial as well as the non-financial aspects
pertaining to the activities of an organization. Management accounting provides information
which is helpful and useful in decision making, policy making, planning, budgeting,
forecasting, comparing, and evaluating managerial performance.
Financial Accounting
Financial Accounting is the branch of accounting, which keeps the complete record of all
monetary transactions of the entity and reports them at the end of the financial period in
proper formats that increases readability of the financial statements among its users. The
users of financial information are many i.e. from internal management to outside parties.
Preparation of financial statement is the major objective of financial accounting in a specified
manner for a particular accounting period of an entity. It includes Income Statement, Balance
Sheet, and Cash Flow Statement which helps in, tracing out the performance, profitability and
financial status of an organisation during a period.
The information provided by the financial accounting is useful in making comparisons
between different organisations and analysing the results thereof, on various parameters. In
addition to this, performance and profitability of various financial periods can also be
compared easily.
Financial Accounting Management Accounting
Financial Accounting Management Accounting
Objectives The main objectives of financial
accounting are to disclose the end
results of the business, and the
financial condition of the business on
a particular date.
The main objective of managerial
accounting is to help management by
providing information that is used to plan,
set goals and evaluate these goals.
Audience Financial accounting produces
information that is used by external
parties, such as shareholders and
lenders.
Managerial accounting produces
information that is used within an
organization, by managers and employees.
Optional? It is legally required to prepare
financial accounting reports and share
them with investors.
Managerial accounting reports are not
legally required.
Segment
reporting
Pertains to the entire organization.
Certain figures may be broken out for
materially significant business units.
Pertains to individual departments in
addition to the entire organization.
Focus Financial accounting focuses on
history; reports on the prior quarter or
year.
Managerial accounting focuses on the
present and forecasts for the future.
Format Financial accounts are reported in a
specific format, so that different
organizations can be easily compared.
Format is informal and is on a per
department/company basis as needed.
Rules Rules in financial accounting are
prescribed by standards such
as GAAP or IFRS. There are legal
requirements for companies to follow
financial accounting standards.
Managerial accounting reports are only
used internally within the organization; so
they are not subject to the legal
requirements that financial accounts are.
Reporting
frequency and
duration
Defined - annually, semi-annually,
quarterly, and yearly.
As needed - daily, weekly, monthly.
Information Monetary, verifiable information. Monetary and company goal driven
information.
Differences between cost accounting and management accounting
Cost Accounting
Cost accounting is one of the branches of accounting. It deals with the collection, recording,
classification, ascertaining, and analysis of the information and data related to the costs
involved in the operations and production processes of an organization.
Cost accounting provides very important and helpful information for costing and helps in
pricing. Cost accounting has three main cost elements that are as follows:
• Material costs that are mainly classified as direct costs and indirect costs.
• Labor costs that are mainly classified as direct labor costs and indirect labor costs.
• Overhead costs such as fixed costs, office costs, selling, general and administrative costs, etc.
The main purposes of cost accounting include tracking operations and production costs, fixed
costs, and other relevant costs for a firm or organization. Such information helps the
organization in controlling and reducing the various costs, and improving its operational
performance.
Cost accounting for an organization is usually carried out by its own employees. Cost
accounting information and statements are not necessarily reported or submitted at the
financial year end.
Management Accounting
Management accounting is one of the important branches of accounting. Management
accounting is also known as managerial accounting. It aims to serve an organization’s
management, particularly the top management. It deals with the collection, recording,
classification, analysis, and presentation of data and information related to the quantitative
and the qualitative aspects. It deals with the financial as well as the non-financial aspects
pertaining to the activities of an organization.
Management accounting provides information which is helpful and useful in decision
making, policy making, planning, budgeting, forecasting, comparing, and evaluating
managerial performance.
• Definition: Cost accounting deals with the collection, recording, classification, ascertaining,
and analysis of the information and data related to the costs of production and operations;
while management accounting deals with the collection, recording, classification, analysis,
and presentation of data and information related to the quantitative and the qualitative aspects
pertaining to the activities of an organization.
• Focus: The primary focus of cost accounting is to accurately record the costs of the
transactions or activities, and present cost statements; while the primary focus of
management accounting is to help the management in decision making.
• Objective: Objective of cost accounting is reducing or controlling costs; while objective of
management accounting is to help the management of the company in decision making,
planning, and controlling. In other words, effective and efficient performance of an
organization is the objective of management accounting.
• Nature: Cost accounting is both historical and futuristic as it records historical transactions
which help in estimating future costs; but management accounting is futuristic as it is mainly
related with planning and forecasting.
• Coverage: Cost accounting covers typically the transactions, records and statements related
with costing and quantitative aspects; while management accounting mainly covers
qualitative and quantitative aspects.
• Scope: The scope of cost accounting is narrow as it is concerned with costing aspects; while
the scope of management accounting is wider comparatively as it covers financial
accounting, taxation, planning besides cost aspects in some respects.
• Level of Depth and Detail: Cost accounting takes an in-depth look at various details related
to the cost of production and operations; while management accounting generally takes a top
level view of the overall activities of an organization.
• Type of Data and Information: Cost accounting is concerned with the quantitative type of
data and information; but management accounting is concerned with both the qualitative as
well as quantitative type of data and information. It uses the information that may usually not
be expressed in terms of money.
• Sources of Data: Cost accounting obtains the data of costs from financial accounting which
help in costing work; but management accounting obtains the data from both Cost accounting
and financial accounting.
• Performed by: cost accounting is performed by a qualified cost accountant with some
statutory powers in certain cases; while management accounting is performed by
management accountants or by others in some cases.
• Status: Cost accounting is constrained in status with limited area of influence; while
management accounting has status of priority and a larger area of influence.
• Timing: Cost accounting is carried out on a somewhat regular basis; whereas management
accounting is usually carried out more as a periodic process.
• Necessity: Cost accounting is necessary for some organizations in their day-to-day
production related activities or routine operations; while management accounting is optional
in many cases and not necessary in the day-to-day operations of a firm.
• Dependence: Cost accounting does not depend on management accounting for its success and
effectiveness; but management accounting depends on cost accounting for its success and
effectiveness.
• Regulations: Cost accounting is governed by some cost accounting standards or regulations;
but management accounting is usually not governed by a specific and stringent set of
standards or regulations.
• Audit Requirement: In some cases, the statutory audit of the cost accounting reports is
needed; but the statutory audit of the management accounting reports is typically not needed.
• Report Submission: Cost accounting reports are submitted to the management of the
organization as well as some other external authorities or regulators; but management
accounting reports are submitted to the internal management of the organization.
KONGUNADU ARTS AND SCIENCE COLLEGE (AUTONOMOUS)
COIMBATORE
DEPARTMENT OF COMMERCE PA & PG
Class: II M.Com Semester –IV
Sub. Name: Customs Duty and Goods and
Service Tax
Sub. Code: 18PCM414
Prepared by: Dr. M. USHARANI
FEATURES OF DIRECT AND INDIRECT TAXES
Introduction
A tax may be defined as a "pecuniary burden laid upon individuals or property owners
to support the government, a payment exacted by legislative authority. A tax "is not a
voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative
authority". Taxes consist of direct tax or indirect tax, and may be paid in money or as its
labour equivalent (often but not always unpaid labour). India has a well-developed taxation
structure. The tax system in India is mainly a three tier system which is based between the
Central, State Governments and the local government organizations. In most cases, these
local bodies include the local councils and the municipalities. According to the Constitution
of India, the government has the right to levy taxes on individuals and organizations.
Features of Direct tax
Direct tax is a kind of charge, which is imposed directly on the taxpayer and paid
directly to the government by the persons (juristic or natural) on whom it is imposed. A direct
tax is one that cannot be shifted by the taxpayer to someone else. They are imposed on a
person’s income, wealth, expenditure, etc.
Important features
Direct Tax is a very straightforward method of taxation. Direct taxes have the following
characteristics which distinguish them from indirect methods of taxation.
1. It is imposed upon either an individual (which can include a person, or even an
individual organization or company) or else upon some sort of property (this can
include land, or even income such as wages).
2. These taxes are paid to the government directly by the person who is bearing their
burden. For example, property tax is paid by the owner of the property.
3. The burden of direct taxes cannot be shifted. This is an important feature of all direct
taxes, because it means that the taxpayer cannot shift the burden onto anyone else.
Hence if a person has to pay income tax on the income they have earned, then
they must pay this amount out of their own pocket. There is no way of shifting the
burden onto anyone else. No third person can be asked to pay the tax or bear the
burden of the tax. The person earning the income is the only person who can be asked
to bear the burden of the income tax. Hence a direct tax is often defined as one whose
burden cannot be shifted to anyone other than the taxpayer.
4. Direct taxation applies to all individuals. There is no way in which one can actively
avoid direct taxes, or consciously make decisions so as not to pay such taxes. Direct
taxes are mostly unconditional.
5. Direct taxes are mostly progressive, meaning that they are levied according to the
financial status of a person. In Income tax, people with higher incomes are charged
higher percentages of tax while those with extremely low incomes are often exempted
from tax altogether.
Features of indirect taxes
Indirect Taxes
They are imposed on goods/ services. The Immediate liability to pay is of the
manufacturer/ service provider/ seller but its burden is transferred to the ultimate consumers
of such goods/ services. The burden is transferred not in form of taxes, but, as a part of the
price of goods/ services. Example-Excise Duty, Customs Duty, Service Tax, Value-Added
Tax (VAT), Central Sales Tax (CST). Indirect Taxes are not as straightforward as direct
taxes.
Important features
They have the following characteristics which can distinguish them from direct
taxation.
• Payment and Tax Load - The service provider makes payment of indirect taxes and
this is transferred to a final consumer.
• Liability of Tax – Here the seller or service provider makes payment on indirect
taxes which are transferred to final consumer.
• Nature – Initially, indirect taxes used to have a regressive nature. Yet, now with the
coming of GST, they have become quite progressive.
• Evasion - Indirect taxes are hard to evade due to direct implementation through goods
and services.
• Investment and Saving - Most indirect taxes are largely growth-oriented since they
de-motivate the consumer and encourage savings.
• Social Coverage - The indirect tax has a much larger coverage since their charge falls
upon each individual buying products or services.
Conclusion
The biggest source of Direct Taxes in India is Income Tax. This is a tax charged from
individuals, on the amount of income that they earn. The percentage of income taxed
depends upon the level of income of the person; people who earn more have to pay a
larger portion of their earnings as income tax. The major sources of Indirect taxes in India
are from goods and service taxes. These are taxes levied on specific transactions and the
rates of the same are fixed by the government.
Subject Name: Marketing Research 18PCM415 Class: M.Com
Topic: Need for studying consumer behaviour
Introduction
Consumer behaviour is the study of how individual customers, groups or organizations select,
buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It refers to the
actions of the consumers in the marketplace and the underlying motives for those actions.
Need
Importance of Consumer Behaviour to business managers. The main purpose behind
marketing a product is to satisfy demands and wants of the Consumers. Study of
consumer behaviour helps to achieve this purpose. To design the best possible product
or service that fully satisfies consumer's needs and demands.
It is important for marketers to study consumer behaviour. It is important for them to
know consumers as individual or groups opt for, purchase, consumer or dispose products
and services and how they share their experience to satisfy their wants or needs
The knowledge of consumer behaviour enables them to take appropriate marketing
decisions in respect of the following factors:
a. Product design/model
b. Pricing of the product
c. Promotion of the product
d. Packaging
e. Positioning
f. Place of distribution
Leads to purchase decision:
Positive consumer behaviour leads to a purchase decision. A consumer may take the
decision of buying a product on the basis of different buying motives. The purchase
decision leads to higher demand, and the sales of the marketers increase. Therefore,
marketers need to influence consumer behaviour to increase their purchases.
Information on consumer behaviour is important to the marketers:
Marketers need to have a good knowledge of the consumer behaviour. They need to
study the various factors that influence the consumer behaviour of their target customers.
Consumer behavior is the study of how people respond to products and services, followed
by their marketing and selling. It’s of huge importance to managers because the focus on
consumers is the key contributor to the marketing of business practice.
Business functions like accounting, production, or finance, don’t need to factor in the
customer. Business managers, who truly understand their consumers, can come up with
better products and services and promote them more effectively.
Understanding consumer behavior is important for all companies, especially before the
launch of a product or service. If the company fails to read the customer’s mind, it may
end up in losses. Consumer behavior is usually very complex because each one has a
different attitude towards purchase, consumption and disposal of a product.
Understanding the concepts of consumer behavior helps in marketing products and
services successfully. Besides, frequent study of consumer behavior helps in several
aspects. There’s constant change in living standards, technology, fashion and trends, and
customer attitude towards a product or service also changes. Marketing of a product is
largely dependent on these factors and consumer behavior serves as a tool for marketers
to meet their sales objectives.
To understand customer behavior, marketing experts usually examine the buying decision
processes, particularly factors that trigger customers to purchase a product. A recent
study disclosed that an average shopper takes less than 20 minutes for purchasing
groceries and covers only 23% of the store area, giving managers very little time for
influencing customers. In fact, more than 58% of all purchases in a supermarket are
unplanned.
Business managers spend a lot of money and time to discover what compels customers to
take such on-spot decisions. Researchers can obtain the most valuable data on customer
buying trends through in-store surveys, and often introduce new products and services in
some select stores where they expect to reasonably test an item’s success. In this way, a
company can determine whether there’s a chance of the product to be successful when
launched, before further investing into it.
Customers adjust their purchasing behavior depending upon individual needs. On some
levels, customer choices could be quite random. Every decision to buy, has meaning
behind it, even though it may not always seem rational. Purchasing decisions could stem
from social situations, personal emotions, values, and above all, goals.
People buy for satisfying various sorts of needs that may not be solely utilitarian. These
needs could be biological or physical, for security, love and affection, to get esteem and
prestige, for self-fulfillment, and a hundred other reasons. For instance, connecting
products with a sense of belonging, has seen success for many hugely popular campaigns
like “Fly the friendly skies”, “Reach out and touch someone”, and “Gentlemen prefer
Hanes”. Such a focus may link products and services either to an attainment of belonging,
or link them with persons similar to those with whom others like to relate.
Prestige is yet another intangible need. People concerned about their status are ready to
pay for that. Products and services appealing to such a need are considered high profile.
Targeting this segment of the market means that the demand trajectory of luxury items is
usually reverse of the standard i.e. a high-status product sells better at a higher price.