[Commerce Class Notes] on Total Quality Management Pdf for Exam

An organizations’ success often depends upon the quality of goods and services they provide. Quality is one of the primary factors a customer considers while purchasing the product or service. It is the quality that gives organizations an edge in the market.  In various cases, it has been observed that the importance of quality is something that goes a long way in creating a brand. One of the key things to note when discussing quality is that it is not just limited to products, it is rather applicable to all management and service sectors. It applies to planning, organizing, controlling, etc. These also require quality standards.

Total Quality Management is a continuous process of detecting and reducing or eliminating errors, streamlining the process of management, improving the customer experience and ensuring that employees are up to mark with the training of the product or service. It focuses on ensuring that internal guidelines and process standards are established and are being followed as the quality is reflective of both internal and industry standards.

Total Quality Management (TQM) was developed by American management consultants like Edward Deming and Joseph Juran. Their research helped Japanese industries rebuild their economy after World War II.  While this was mostly applicable in the manufacturing sector, its principles were eventually applied to all industries and sectors. Unlike earlier times where there used to be one quality department for all sectors, today we have independent quality departments and standards set. Some of which are recognized and widely referred to such as the ISO standards.

Principles of Total Quality Management

Total Quality Management strives to ensure all associated employees work towards the common goals of improving product or service quality as well as improving the procedures that are in place for production. This helps an organization improve its internal functioning and customer satisfaction. Below are some basic principles of Total Quality Management:

Management of Quality is Possible

Quality is one factor which is totally in control of the organization or enterprise producing the goods or service. Unlike external factors, quality is something an organization manages. While we know that quality is a manageable aspect, this fact changes when large scale production comes into the picture. However, having or adapting to an efficient process helps an organization manage quality without compromise.

Processes are the Problem, not People

When people understand what to do, how to do and obtain feedback on their performance, they fully strive to work for the organization’s progress and benefits. When this is not working, management must not focus on hiring more people rather analyze where the problem is lying and correct the process and ensure all employees are well trained with the processes or standards set forth.

Look for the Cure instead of Treating Symptoms

Often when processes are looked at, short term goals are paid more attention to rather than long term goals. The actual problem is addressed at a later stage or gets ignored. Managers should instead look at the problem and identify the root cause of it and implement corrective measures in the process by removing the source of the problem itself.

Each Employee is Responsible for Quality Management

Total Quality Management or TQM is a collective effort of the entire organization in making sure the quality standards are met. Structures, systems and technology by themselves do not provide quality; it is the employees who take full responsibility and follow the standards with integrity. The greater the involvement of people, the greater the customer satisfaction will be.

Quality Improvements must keep Happening

Quality management is a continual improvement process and a permanent process that happens all the time. The International Organization for Standardization (ISO) 9000 series of standards believe that organizations can continually improve their performance. Continued improvement in quality and general standards helps achieve a benchmark in the market and return earns rewards in the form of increased goodwill by word of mouth and increased demand for the product or service. 

Quality is Measurable

TQM recognizes quality as measurable and believes it can be quantified in terms of statistical data. This data is used to support quality efforts in simplification of a process and bringing product variation. The quality can be improved if we are aware and clear about where we stand and what are the quality goals we aspire to achieve.

Customer Satisfaction

Bringing the best of what really matters to the customer should be the primary objective of the organization while setting quality standards. Customer satisfaction doesn’t only limit to external customers, it also applies to internal colleagues to whom a certain good, services or information is provided. There is a traditional belief or point of view which says ‘Customer is the King’ and processes and products must be established with one thing in mind that is customer satisfaction. In order to succeed in global competition, companies have started to adapt to the attitude of delighting the customer.

[Commerce Class Notes] on Types of Banking Pdf for Exam

Having a good functioning banking system is one of the main facets of a developing country like ours. In India, we have numerous banks and types of banks where we can easily do our needful money transactions. The varied types of banking in the spectrum help and satisfy the needs of each sector of the country. There are banks for different sectors, one bank funds the local entrepreneurs, while another bank capitalizes the bug venture capitalist, while there are other sets of banks that work for the benefit of the agricultural sector.

Thus, we see, there are different types of banking in India, but before we move on to determine the various types of banking, let us refresh our memories about some basic concepts.

What is Banking?

The concept of banking encompasses such an industry that covers credit, cash, and various other financial transactions.

Bank meaning relates to such a financial institution that works in extending credit to its customers as well as storing their deposits. These deposits are further used by banks to grant loans to customers. It offers multiple services including saving accounts, checking of balances, and providing certificates of deposits, among others.

First, we will learn about the types of ‘bank accounts being maintained.

Types of Bank Accounts 

The major types of bank accounts are –

The facilities of savings account are only for savings purposes, and a bank is liable to pay interest on the funds which are deposited in the account. In India, the rate of interest for savings accounts ranges from anywhere between 4% to 7%.

The current account mainly contains liquid deposits that are utilized for business purposes and not for savings or investments. No interest is paid on such an amount, and there are no maturity periods as well due to the continuous nature of the account.

A particular sum of money is deposited in a fixed deposit account for a given duration. If a deposit is taken out before the maturity date, penalties will be imposed. Fixed deposits enjoy higher interest rates. The interest rate is subjected to variation from bank to bank and also periodic revisions.

In the case of a recurring deposit account, a deposit will have to be made by the account holder at regular intervals for a specified period. The bank will have to pay the relevant rate of interest when the amount is repaid after the fixed period.

Now that we have refreshed our memories let us start with the topic at hand.

Types of Banking 

The types of banks in India can be divided into the following categories –

  1. Central Bank 

The central bank in this country is the Reserve Bank of India (RBI) which acts as the apex body for regulating and monitoring all other banks in the country. It also acts as a banker to the government in certain situations. RBI is instrumental in laying down the repo rate, reverse repo rate, cash reserve ratio, and statutory liquidity ratio.

  1. Commercial Bank 

Commercial banks perform the function for the public in terms of accepting profits or extending loans. These loans act as investments of the commercial banks intending to earn profit. Examples of commercial banks in India are the State Bank of India, United Bank of India, ICICI Bank, HDFC Bank, etc.

  1. Specialized Bank 

Specialized banks are formed with the specific goals of catering to a particular industry or sector. It may focus on export and import or provide financial services to some specific industries. An example of a specialized bank in India is Export-Import Bank.

  1. Cooperative Bank 

Cooperative banks in India are established under the State Cooperative Societies Act, providing easy credit to the members of the cooperative banks. One of the core functions of cooperative banks is to provide financial resources to the rural population at large. Examples of cooperative banks in India are – New India Cooperative Bank Limited, Ahmedabad Mercantile Co-operative Bank Ltd.

What are the Types of Commercial Banks?

There are four types of commercial banks in India. Those are –

  1. Public Sector Banks 

Commercial banks in India where the government holds majority stakes in the bank (that is more than 50%) fall under the category of public sector banks.

Examples of public sector banks in India are – Bank of Baroda, Canara Bank, Punjab National Bank, etc.

  1. Private Sector Banks 

Commercial banks in India in which higher equity stakes are held by individual shareholders as opposed to the government fall under the category of private sector banks.

Apart from the shareholding structure, both public sector and private sector banks offer the same set of services. The aspects on which those are different involve charges that are imposed as well as the duration and description of the services that are provided.

Examples of such financial institutions in India are – HDFC Bank, Axis Bank, IndusInd Bank, ICICI Bank, etc.

  1. Small Finance Banks 

The objective of Small Finance Banks in India is to provide financial inclusion to less privileged sections of the economy, which ordinarily fails to gain access to financial institutions. Small Finance banks cover small and micro business units, marginal and small farmers, and various entities in the unorganized sector.

Examples of Small Finance Banks in India are – Janalakshmi Small Finance Bank, Equitas Small Finance Bank, Ujjivan Small Finance Bank, etc. 

  1. Regional Rural Banks 

Regional Rural Banks in India have very specific mandates such as granting loans to marginal and small farmers cooperative societies, agricultural labourers along small entrepreneurs and artisans among others.

These banks were established according to the recommendations of the Narsimha Committee on Rural Credit. Examples of Regional Rural Banks in India – Kerala Gramin Bank, Pragathi Krishna Gramin Bank, etc.

Commercial Banks and Its Functions

The major functions of commercial banks include the following –

One of the primary functions of commercial banks is to accept deposits from their customers, which can be both individuals or business entities. The deposits may be in the form of time deposits, savings deposits, and current deposits.

The deposits that are taken by the commercial banks are further invested by way of granting loans to their customers. Banks derive profits in this manner. However, the lending of funds may take different forms such as cash credit, advances, discounting bills, overdraft, etc.

Fund remittance, or money transfer in general vernacular, is also done by these commercial banks. Funds can be transferred in various modes such as IMPS, NEFT, RTGS, draft pay orders, etc., for specified commissions.

Cheque facilities provided by commercial banks also help in drawing funds. Money can be withdrawn both by the owner and the payee. The bearer cheques can be cashed immediately, but the crossed cheques can only be deposited in the account of the payee.

Banks provide general utility services too. For instance, traveller cheques are issued, locker facilities provide for safe custody, and facilities of credit and debit card services.

Commercial banks may also serve the role of agents to their customers by way of various services. Services may include a collection of cheques, drafts, and bills, insurance premium payment, trustee or executor or customers’ estate, etc.

What is e-Banking?

Electronic banking or e-banking engages electronic mediums enabling customers to access their funds. It does away with the need of the customer to visit the bank premises for a transaction.

With greater penetration of the internet, it has become easier for customers to avail the facilities of e-banking. E-banking has become convenient for both bankers and customers. Banks have to bear reduced transaction costs and also significantly less margin for human error. The fixed costs also lessen considerably.

Customers enjoy greater access round the clock and do not have to visit bank premises. It helps to save both time and money for the customer. It also removes geographical distance in the case of certain banking transactions.

Types of e-Banking

Both financial and non-financial transactions can take place over the internet. Customers can engage in various transactions such as remitting funds, checking balance and account statements, and also paying utility bills, among others.

Automated Teller Machine (ATM) is a computerized electronic device that allows customers to withdraw funds, change Personal Identification Numbers, and (in some cases) also deposit funds. It does away with the need for any human interface.

Mobile banking app is an online portal of a bank, similar to internet banking. The app may be downloaded on iOS or Android and can be accessed to avail of the banking services. Apart from usual services, it can also be used to locate the ATM nearest to the customer.

Debit cards allow customers to access funds directly from the bank account. In such a case, the transaction amount is directly deducted from the account. One can use a debit card for shopping online, paying at POS outlets, and also withdrawing cash from ATMs.

The banking landscape in India is undergoing major changes lately, which is bound to have far-reaching effects on the sector. To test your knowledge, find out answers to the following questions.

Bonus Round – Multiple Choice Questions

  1. Which of the following Banks have the Largest number of branches right after the State Bank of India?

  1. Canara Bank 

  2. Punjab National Bank 

  3. Bank of Baroda 

  4. Indian Bank

  1. Which of the Following Entities Decides the Bank Rate?

  1. Government of India 

  2. Reserve Bank of India 

  3. Securities and Exchange Board of India 

  4. State Bank of India

  1. Where is the Reserve Bank of India head Office Located?

  1. Kolkata 

  2. Dehradun 

  3. New Delhi

  4. Mumbai

  1. Which Nodal Institution Solely Focuses on the Aspect of Refinancing for Agriculture and Rural Development in India?

  1. NABARD 

  2. SIDBI

  3. RBI 

  4. SEBI

  1. Which of the Following Commercial Banks has Merged with the Bank of Baroda?

  1. Indian Bank and Dena Bank 

  2. Andhra Bank and UCO Bank 

  3. Dena Bank and Vijaya Bank

  4. Vijaya Bank and Corporation Bank

From more articles on this topic, you can search the online platform of . Install the app on your preferred device now and get access to best-in-class study materials 24/7.

[Commerce Class Notes] on Types of Market Structure Pdf for Exam

What does Market Structure Mean?

Market structure means how firms are differentiated and categorized based on the type of goods they sell (homogeneous/heterogeneous) and how their functions and operations are affected by external factors and elements. Market structure makes it easier to understand the different characteristics of diverse markets. In this article, we will discuss the four different types of market structures namely perfect competition, monopolistic competition, monopoly, and oligopoly.

 

Types of Market Structure

The four different types of market structure are discussed below:

  1. Perfect Competition Market Structure: In a perfectly competitive market, the forces of supply and demand determine the number of goods and services produced as well as market prices set by the companies in the market.

  2. Monopolistic Competition Market Structure: Unlike perfect competition, monopolistic competition does not assume the lowest possible cost of production. That little difference in the definition leaves room for huge differences in how the companies operate in the market. The companies under a monopolistic competition structure sell very similar products with slight differences they use as the basis of their marketing and advertising.

  3. Monopoly Competition Market Structure: Monopolies and completely competitive markets sit at either end of market structure extremes. However, both minimize cost and maximize profit. Where there are many competitors in perfect competition, in monopolistic markets, there’s just one supplier. High barriers to entry into the monopoly market leave a “mono-” or lone company standing so there is no price competition. The supplier is the price-maker, setting a price that increases profits.

  4. Oligopoly Competition Market structure: Not all companies aim to sit as a single building in a city. Oligopolies have companies that collaborate, or work together, to limit competition and dominate a different market or industry. The companies under oligopoly market structures can be small or large. However, the most powerful firms often have patents, finance, physical resources which control over raw materials that create barriers to entry for new firms.

Types of Market Structure Examples

The examples of four different types of market structure are discussed below:

Perfect Competition Examples

 

Monopolistic Competition Examples

  • Restaurants

  • Hairdressers

  • Clothing

  • TV programs

 

Monopoly Competition Examples

 

Oligopoly Competition Examples

  • Steel industry

  • Aluminum 

  • Film

  • Television

  • Cell phone

  • Gas

Characteristics of Types of Market Structure

The different characteristics of four types of market structure are as follows:

Perfect Competition

  • Under perfect competition, there are a large number of buyers and sellers in the market.

  • Uner competition, the firms have no control over the price. They have to sell the products at a price predetermined by the industry.

  • Under perfect competition, firms are free to exit and enter the market at any point in time. This means that there is no obstruction for a new firm to produce a similar product produced by the existing firms in the market

  • Under perfect competition, firms can’t charge high prices as both sellers and buyers have perfect knowledge about the goods and their prices.

  • Under perfect competition, The products offered by different firms are homogeneous. This implies that buyers do not have any basis to prefer the goods of one seller over the goods of another seller. The goods are similar in terms of quality, size, packing, etc.

Monopoly Competition

  • Under Monopoly competition, there is only one firm producing the product. Being a single firm, there is complete control over the supply and price of the product.

  • There is no substitute for the products produced by monopolistic firms.

  • Under Monopoly competition, there is a strong barrier for the other firms to enter the market. Also, once a monopoly firm starts producing the product, no other firms produce the same.

  • Being a single seller of the product, the monopolistic firm has full control over the price of the product.

  • The monopolist firm can sell different quantities of a similar product to a consumer at different prices or the same quantity to different consumers at different prices by judging the standard of living of the consumer.

Monopolistic Competition

  • Under monopolistic competition, a large number of firms sell closely related products.

  • Product Differentiation is an important characteristic of Monopolistic Competition. This differentiation could be based on quality, packaging, color, etc. For example, you must have seen different brands of shampoos. Even if they look different and have different fragrances, the product has the same use.

  • Under monopolistic competition, firms spend large amounts of money on advertisements of their product to attract more and more customers. Every firm tries to promote its product through an advertisement for which it bears some extra cost over and above its cost of production. 

  • Under Monopolistic Competition, firms compete with each other without changing prices. They may initiate different program schemes, gift schemes, or promotional schemes Thus, firms compete in every possible way to attract a large number of customers and gain maximum possible market share.

Oligopoly Competition

  • In the oligopoly market, once prices of the products are fixed by the firms it is normally not changeable. Hence, the price of the products is rigid.

  • As there are very few firms in the oligopoly market, there is a tendency among them to collaborate to avoid competition. They secretly meet each other to negotiate price and quantity. The aim behind this is to maximize profit.

  • In the oligopoly market, selling costs such as advertisement, promotion, sales, etc to sell the product are determined by the firms.

  • Interdependence is an important feature of the oligopoly market. As the number of firms in this market is few, any strategy regarding the change in price, output, or quality of a product depends on the rival’s reaction to its success. Thus, the success of a price reduction policy by one company) will depend on the reaction of its rival. For example, if the company decides to lower the price per bottle from Rs 12 to Rs 10, the effect of this step on demand for Pepsi will depend on the counter-strategy of the other company i.e. Coke. If Coke decides to lower the price from Rs 12 per bottle to Rs. 8 per bottle, demand for Pepsi may decrease even below its initial level.

Comparison of Types of Market Structure

Points of Comparison

Perfect Competition

Monopolistic Competition

Oligopoly

Monopoly

Number of firms in the market

Many

Many, but lesser than perfect competition

Few

One

Product Characteristics

Homogeneous

Differentiated

Differentiated

Single

Barriers To Entry

None

Slight

High

Very High

Firms Ability To Control Price

None

Slight

Slight

High

Examples

Farm products such as corns and wheat

Retail stores specifically clothing centers

Steel, airlines, automobiles, aircraft manufacturers 

Utilities such as water, gas, cable television, etc

[Commerce Class Notes] on Use of Statistical Tools Pdf for Exam

Statistics give research work credibility and authority. If there are two research articles – one without statistics and the other that backs each claim with statistical analysis, people would give importance to the latter. Furthermore, Descriptive Statistics can tell you a lot of information without using too many words. Oftentimes, researchers cannot see a simple truth from a given data. It is only after statistical analysis, they can conclude the given data. Creating a statistical analysis, however, is quite hard. This is where the usage of statistical tools comes in. Statistical tools used in research can help the researchers back their claim, make sense of a large set of data, graphically visualise the complex data or explain a lot of things within a short amount of time.

Important Statistical Tools Used in Research

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As said, mere text-based analysis of a certain economic aspect is quite limiting. A reader has to read the entire analysis to understand what a researcher wants to say. With the help of statistical tools, you can represent data in a concise yet detailed manner. Statistical can also help in revealing more information from the data. Furthermore, you can use statistical tools to make your data collection work easier.

There are broadly two categories of statistical tools:

  • Traditional tools

  • Software based tools

Traditional tools are those statistical tools used in research that are not any computer program. Usually, these tools use Arithmetic, logic, permutation and combination etc to present and organise data. There are many such statistical tools. Some of the important ones are:

  1. Central Tendency: Mean, Median, Mode

Mean is the summation of all the numbers in a dataset divided by the total number of values. We use this to find a middle point. This is useful when the data-set has numbers that are not too far from each other.

When the data-set has numbers that are too far away from each other, we use the median to find a middle point. To find a median we arrange the numbers in a data-set in ascending order. And then, we just pick the exact middle number as the Median.

Finally, Mode is the most frequently occurring value in a set of observations.

  1. Standard Deviation

Standard Deviation is, as the name suggests, used to find what numbers in the data-set deviate from the ‘standard.’ Suppose you want to find which pupils in your class have weights that are greater and lower than the ‘standard’ weight. You can find that using the Standard Deviation.

Method – First, you find the average weight of the students in your class. Then you subtract the mean from each of the students’ weights separately. Now, square the numbers that you get after subtraction. Then find the average of these squared numbers. What you get is Variance. Now, if you find the square root of the variance you will get the Standard Deviation. So now, you have a standard against which you can measure which students are undernourished and which students are overweight.

  1. Statistical Control Charts

  1. Process Control Charts

Suppose it takes 10 minutes for the morning assembly to complete in your school. Some day it takes 12 minutes, someday it takes 7 minutes. But over time if you collect the data and average it, you get a 10 minute average assembly time.

Now, to make a Statistical Process Control Chart, you first mark the average time (i.e 10 mins) as the middle point and draw a line. Now you set three-sigma limits based on the variation of the time it takes to complete the assembly. Thus you get an upper threshold and a lower threshold of the time limit. If someday one of your classmates feels sick in between the morning assembly prayer, your teachers would come and help him. So that the day the variation in time to complete the assembly will not be within the threshold. And in the process control chart, this will be depicted as a spike.

Process Control Chart is a nice way to identify normal variation and abnormal variation. This will help us identify the abnormal variation so that we make sure that the abnormal variation never happens again and the process remains within control.

  1. Statistical Quality Control Charts

The Statistical Quality Control Chart is by and large similar to the Process ControlChart. The only difference is that it is used by the QC personnel. For example, a battery manufacturer can see if the quantity of nickel-cadmium is more or less the same in each of the units. Statistical Quality control methods are used to keep the quality of products within the accepted range.

  1. Histogram and Bar Chart

Suppose you want to know how many of your classmates ( not who) have a height between 4ft and 5ft  and how many classmates have a height of more than 5ft. What you would use to statistically present the data is a Histogram.

When you want to know exactly which friends have how much heights, you use a bar chart – showing their names and height.

(Note: Both are represented with the help of bars)

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There are countless other traditional statistical tools that you will come across if you keep on learning Statistics.

Software Based Tools

Today, we have much software that helps visualise and analyse large data-set within a short period of time. You can use these tools to analyze descriptive statistics.

SPSS

IBM’s SPSS is an easy to use Statistical tool that you can use to analyse data easily. The software is quite intuitive and the learning curve is not as steep as that of MS Excel. Broadly speaking, there are two basic categories – Variable View and Data View. In the variable view, you type in the variables (serial number, gender, the question asked, age and so on). After you finish, you go to the Data View and type in the data against the variable (serial number = 1, age = 5 and so on). Now based on the data SPSS will show you various statistical figures and charts like histogram, bar chart, pie chart, median, mean etc. SPSS analyze the given data and spit out statistical graphics and discoveries quite easily. Analyzing data in SPSS is quite straightforward – much of the heavy lifting is done by the software itself.

Excel Statistics

Microsoft’s Excel is another excellent tool for statisticians. However, SPSS is more useful to statisticians. Excel is used more as a data storage software. However, the Excel formulas can be of great value to the researchers. Using the Excel formula, the statisticians can predict the future trend of an event or process. You can also use Excel to create various charts. However, for descriptive statistics, Excel is not as good as SPSS. Sometimes Excel can give inaccurate results when it comes to Statistical analysis.

Did You Know?

IBM paid US[$] 1.2 billion to buy SPSS!

[Commerce Class Notes] on Life Insurance, Fire Insurance and Marine Insurance – Meaning, Explanation and FAQs Pdf for Exam

is the leader in the field of digital education in India and we have been pursuing to push boundaries and bring quality education with ease to all sections of students in India. brings to you a detailed explanation on the topic of insurance and its various types which shall be beneficial to all students.

 

Introduction to Insurance

Insurance is one of the most important safety nets that is being used by individuals and property owners in the modern world. Insurance is basically a bond scheme that you sign with a bank or your insurance provider where the insurance provider promises to pay you a certain amount in case of an emergency or as such a situation arises when you are required to pay a large sum of money to anyone. In return for this, you have to pay a monthly premium to the banks which are charged as per your package and requirements. This way the respective banks earn collectively from all the people who have registered for the insurance scheme and in return they pay the amounts to those people who claim insurance amount when they require it.

Types of Insurance

There are various types of insurance schemes that are present in the market and available for people to get themselves insured. The three most prominent insurance schemes are:

Life Insurance- Life Insurance is the most widely used insurance scheme which is enrolled by people. In this scheme, a person ensures his own life and in case of his natural death or death by accident, the family of the insured person receives the insurance amount.

Fire Insurance- Fire Insurance is the type of insurance in which a person insures his property and in case of damage to his property in a fire accident the insurance provider provides the amount to the person to cover for damages for his property.

Marine Insurance – Marine Insurance refers to a contract of indemnity where the insurance provider covers the losses of ships, cargo, etc by which goods are transferred, acquired, or held between the points of origin and the final destination. 

[Commerce Class Notes] on Accounting Process Pdf for Exam

Accounting or accountancy is significant to understand for anyone who owns a business or seeking a career in commerce-related fields. Accountancy is of crucial importance in commerce as it deals with measuring, processing, and analyzing financial information in a firm. It is rightly called the “language of business.” 

This crucial field has several subfields that deal with various aspects of the finances of a company.

Accountancy is an important subject for all commerce students.  Students may find a few topics from accountancy difficult to comprehend as they are new to the subject and still getting a hang of it. Students may get overwhelmed by the amount of information that they need to learn and process to excel in the subject. Therefore, brings you all the information you need to know about the accounting process. You will also read about different types of accounting processes and their workings.   

So if you are someone who is desiring to understand the basics of accounting processes or a student who wishes to understand various aspects of accountancy, then this article is for you.

‘s expert accounts professionals have gathered all the important information regarding the process of accounting and summed it up in an easy-to-understand manner for its readers.

History of Accounting

Accountancy is not a new field that has been recently developed. This subject has been used in its most basic form since ancient civilizations. Research shows that the first forms of accounting can be traced to the Mesopotamian civilization. Egyptians and Babylonians are said to be the first ones to develop auditing systems. Also, research in the earliest Roman Empire reveals that the Roman Government had access to detailed financial information.

Talking about India, it is well known that during the Mauryan Empire, Chanakya wrote a manuscript that was quite similar to a financial management book. Chanakya has also been credited to write a book named “Arthashastra” that contains detailed accounts of bookkeeping for a state.

In addition to these, one can easily find that all the earliest forms of civilization developed some form of accounting techniques to maintain records and go over their finances.

Therefore it can be safely said that the modern professional accounting that we see today is a product of the evolution of centuries-old traditions, needs, and thought about managing finances.

 

What is the Accounting Process?

Accounting is a process that helps in recording the financial transactions which are necessary for the business. This process includes summarizing, analyzing and reporting the transactions to give an overview to the agencies, regulators and tax collection entities. The financial statements that are used in accounting are in a concise summary format. Financial transactions which occurred over an accounting period summarizes the company’s operations, the financial position and also the cash flows.

How Accounting Works?

Accounting is one of the most prior functions for almost any kind of business which may be handled by a bookkeeper or by an accountant at a small firm, or even by a sizable finance department with a dozen of employees at larger companies. The reports that are generated by various streams of accounting like cost accounting and managerial accounting are invaluable in helping the management to make an informed business decision. 

Types of Accounting

Financial Accounting

This accounting refers to the processes that are used to estimate the interim and annual financial statements. These results in all the financial transactions which occur during the accounting period. They are summarized into a balance sheet, an income statement, and a cash flow statement.

Managerial Accounting 

Managerial Accounting uses the same data as financial accounting. In managerial accounting, an accountant generally generates monthly and also the quarterly reports that a business’s management team can implement the same to devise decisions about how the business should operate 

Cost Accounting

Cost accounting helps the business to make decisions about costing. More importantly, cost accounting considers all of the costs related to producing a product

Accounting Process Steps

The accounting is processed into three separate types of transactions which were used to record the business transactions. The information is then recorded into financial statements. The transactions are:

  1. The First Step: to ensure that the entries are reversed from the previous period.

  2. The Second Step: comprises the steps which are needed to record the individual business transactions in the accounting records.

  3. The Third Step: is the period-end processing that is required to close the books and produce the financial statements.

First Step

Is to verify that all the transactions are designated as reversing entries in the preceding periods which have actually been reversed. Doing this will ensure that the transactions are not recorded twice in the same period. These transactions are generally tagged as being the reversing entries in the accounting software.

Second Step

The second step consists of further four steps:

  1. Identifying the transaction. 

  2. Preparing the document. 

  3. Identifying the accounts.

  4. Recording the transaction

The above-mentioned four steps are part of an accounting process that is used to record the individual business transactions in the accounting records.

Third Step

In this last step, the final recording is done:

  1. Prepare Trial Balance – The trial balance lists the balance left in all the accounts. The total of all the debit in the trial balance equals the total of all the credit, while in contrast to this, there is an error in the entry of the original transactions which must be researched and corrected.

  2. Adjust the Trial Balance – This may be required to adjust the trial balance, correct the errors or create the allowances.

  3. Prepare an Adjusted Trial Balance – This is an original trial balance, plus or minus and other such adjustments are to be subsequently made.

  4. Prepare Financial Statements – The financial statements are then adjusted from the trial balance. The asset, liability, and shareholders’ equity items are recorded in the balance sheet. 

  5. Close the Period – For closing the period, the shifting of the balances is done in the revenue and expense accounts into the retained earning account.