Category: Commerce Notes PPT

Carriage refers to the cost of transporting goods into a business from a supplier and the cost of transporting goods from a business to its customers. The amount of transportation expense settled by the purchaser of the goods is called Carriage Inwards. The cost incurred by the seller of goods to deliver the goods sold to customers is called Carriage Outwards. The amount of Carriage Outward is posted in the Profit and Loss Account as an indirect expense and the amount of Carriage Inward in Trading Account as a direct expense. Since both the amounts are registered as expenses, they are recorded as debit balances.

What is Carriage Inwards?

If you are looking to understand “what is carriage inwards?”, then it is quite simple. It is the handling and shipping charges or the transport cost which a company or an individual incurs when there is a purchase of the goods or raw materials. It refers to the expense that is incurred to bring the purchased goods into the premises of the business or to the required location. Carriage inward is a nominal account, and it is also known as transportation-in or freight-in. It is evaluated as a direct expense and Carriage inward in trading account reflects on the debit side of it. This is the fundamental answer to “what is carriage inwards?”

What is Carriage Outwards?

Now we know about carriage inwards, the next question comes is, what is carriage outwards? The exact opposite of carriage inwards is termed carriage outwards that is it refers to the handling and shipping costs that a company incurs while transporting the goods to a client. In the income statement, the cost of carriage outwards usually occurs within the cost of goods sold. Carriage outward is an example of overhead, and it is treated as an indirect expense. Carriage outwards can also be called freight-out or transportation-out. 

What is the Accounting Impact and Profitability Impact of Both Carriage Inwards and Carriage Outwards?

The carriage inward in trading accounts is accounted for in the books of accounts of the buyer, while the carriage outwards is accounted for in the books of the accounts of the seller. The carriage inward in the trading account is debited, while the carriage outwards is debited to the profit and loss account. 

The gross profitability of the buyer is impacted by the occurrence of carriage inwards, while the net profitability of the seller is impacted by the occurrence of carriage outwards. 

With the above-mentioned definitions, we can now understand the difference between carriage inwards and carriage outwards.

Solved Examples

Q1. Mention the major difference between carriage inwards and carriage outwards. 

There are numerous differences between carriage inwards and carriage outwards. Both of the terms are opposite of each other, and their functions differ at several levels such as: 

• The carriage inward refers to the transport or freight cost which the buyer incurs on the purchase of goods or raw materials, while the carriage outward refers to the cost of transport or freight which the seller incurs while delivering or shipping the goods sold by it. 

• When we talk about what is carriage outwards?, it is the carriage outward is incurred on the inventory of the seller while the carriage inward is acquired on purchase of capital goods, raw materials etc. 

• The seller incurs the carriage outwards at the time of sale or delivery of goods, while a buyer incurs the carriage inwards during the time of purchase. 

• Carriage inwards is a direct expense while the carriage outwards is vice-versa. That is, it is an indirect expense. 

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The difference between carriage inwards and carriage outwards is demonstrated in the above image. One can easily spot that both are opposite of each other and goes vice-versa. The carriage inwards is the inventory or the cost of sales, while the carriage onwards is the selling cost. Both the terms have several differences. The carriage inwards can be taken as the transportation cost which occurs while transferring the goods from the location of the supplier to the location of the buyer, whereas the carriage outwards is the opposite of this. The carriage outwards is borne during the sale of goods, while the other one occurs during the purchase of goods. 

Do You Know?

Carriage means shipping or transport expenses. It is the cost of transporting or shipping goods from a supplier to a business and the transportation cost of goods to the customers from a business. Another term used in accounting is the “Railage inwards”. The term is British, and it is defined as the transportation cost by a train (rail). In simpler terms, it refers to the expense of transporting goods to your desired business location through a train. 

Introduction To Effective Communication

In business terms, business correspondence and reporting refer to the exchange of information between different departments, authorities, and hierarchies in written format to ensure effective communication within an organization. One has to report all the necessary information to ensure effective communication within the business. There are several characteristics or features of communication that should be followed to achieve an effective communication system. You may ask what is effective communication or how can you achieve effective communication. To answer this, you will have to keep in mind a few points, a good communicator, essentials of effective communication, and attributes of communication.

Essentials For Effective Communication

This is a list that one should follow to achieve effective communication.

1. An Excellent Communicator: The communicator is entrusted with the job of transferring the message with clearly written instructions without any complications.

2. Formal Writing: The written document must follow the formal writing pattern. It is imperative as it is written for an official purpose.

3. Qualities of a Good Communicator: A communicator must have the following qualities.

• Have fluent English writing skills.

• The writing must be clear and to the point.

• A communicator should include all the essential pointers in a letter.

• The letter should be brief and easy to understand.

If one possesses all these qualities then, one is a good communicator. Though there are various other points that are essential for effective communication, yet these three points are of utmost importance to begin effective communication.

What Is Effective Communication?

To answer this question of what is effective communication, it is crucial to understand the terms ‘effective’ and ‘communication’. The term ‘effective’ means it gives the desired or the intended result for a particular task. The word ‘communication’ refers to transferring information from one person to another by verbal or written mode. So, effective communication altogether relates to the action of transmitting information within a stipulated time from one person to the other.

The question of what is effective communication is also answered with a pictorial representation below.

[Image to be added Soon]

To achieve successful and effective communication, it is essential to understand the characteristics of effective communication. These are listed as follows.

• It should have a clear message and not be twisty or challenging to understand.

• The message should be correct both grammatically and ethically.

• The message should not be incomplete.

• Effective communication should always be precise and to the point. It should not comprise a lot of other information. The message should be short and clear.

• The message should be reliable and devoid of any false claims. 

Among the various important aspects of effective communication, these are a few basic ones.

Attributes Of Communication

These attributes of communication pave the way for the characteristics of successful communication.

• Listening: If a person is a good listener, then, definitely he will be able to communicate his thoughts in writing successfully.

• Positive Attitude: A positive attitude plays an essential role in successful and effective communication, as it impresses the reader and makes the letter compelling.

• Fairness: Last but not the least point, is fairness. One should never lie about the information under any circumstances. One should disclose all the details related to the business and present a true and fair picture in front of the concerned person.

Solved Examples 

Q. How is communication-related to effective communication?

Ans. Communication is related to every human activity, starting from expressing one’s ideas to conveying one’s emotions, it is all done through effective communication.

Q. Are women more talkative than men?

Ans. Though it is a common belief that women are more talkative than men, the evidence, however, is inconclusive. A recent study shows that women say about 13000 more words per day than men, while another research found no substantial difference in the numbers. 

Did You Know?

• Communication plays an essential role in one’s personal, social, and corporate life.

• Effective communication helps to develop better relationships, cultures, communication skills, etc. among people.

• The first-ever communication that took place between humans was physical gestures, cave paintings, and other forms of art.

• Communication is the key to success. In the absence of effective communication, one might fail to achieve the desired result due to a lack of clarity.

A collocation is a term where two or more words often go well together. These combinations will just sound right to people whose native language is English because they use them all the time in their regular conversations. On the other hand, the reality is that these combinations may be unnatural and just sound wrong grammatically but will definitely make you feel confident about how you convey things.

Types of Collocations

There are several different types of collocation made from various combinations of a verb, noun, adjective, etc in the English language. Some of the most common types are:

• adverb + adjective: completely satisfied 

• adjective + noun: excruciating pain 

• noun + noun: a surge of anger 

• noun + verb: lions roar 

• verb + noun: commit suicide 

• verb + expression with a preposition by its side: burst into tears 

• verb + adverb: wave frantically 

Even though sometimes, it may not feel so common to use these combinations of words, it will be highly effective in conveying your message in a more appropriate sense. Collocation refers to a group of two or more words that usually go together and are found in pairs or in small phrases. Even though it is possible to use other word combinations, understanding collocations will definitely help English learners improve their fluency and communication skills because they are words that usually go together. There might be hard and quick rules in terms of grammar why some of these words belong together, or there may be no rules at all; the words are just that way because of regular colloquial use.

More About the Topic

The most vital part of any language is “vocabulary”, that is why, while learning any language, we give greater importance to learning and understanding the vocabulary. As we are covering most of the vocabulary in the business world and business corresponding to accounting, today, we will focus mainly on collocation, different types of collocations, and their examples. The basics of collocations in English grammar and the significance of various types of collocations are discussed here. 

What is Collocation?

Collocation is a grouping of familiar words that seem to belong together because of their continual use and thus creating a coherent meaning. Suppose, it is said heavy rain instead of big or strong rain conveys the implication that it is raining heavily.

 

‘Strong rain’ or ‘big rain’ offers the same meaning, in the collocation example mentioned above. Also, both of them are grammatically correct, but the utilization of big rain or strong rain will sound outlandish. Thus, we use heavy rain for better English.

 

There are various examples where we use a specific set or group of words to make it sound a natural fit. Collocation can also be defined as a group of words that are expected to be together. Some more instances of collocations are ‘to do homework’, ‘to make the bed’, ‘to take a risk’, etc.

 

Besides the above-stated reasons, there are other reasons as well for using collocations. These are discussed as follows.

• To make the use of the English language straightforward and exciting.

• To assist in sticking to a pre-decided and proper structure of the English language, as it follows a particular order.

• To assist in embellishing the English language.

• To make better use of words or groups of words by conferring it in a more understandable form.

• To improve the use of the English language, and facilitate its innovation.

Types of Collocations

Verb Collocations

Verb collocations are those types of collocations that are used extensively and tend to involve a verb + noun phrase in the day to day situations. Here are the examples of these words so you can interpret them in a better way. In every instance, the verb has other meanings as well, but the outcome of combining it with the other words is a verb collocation. 

1. Pay a Bill: I refuse to pay a bill if I am not satisfied with the service.

2. Come Prepared: Come prepared to the school tomorrow, since you have a presentation.

3. To Find a Replacement: Indian team requires to find a replacement for Sachin as early as possible.

Adjective Collocations

When you add adjectives with nouns and adverbs, it forms adjective collocations. Here are a few examples of adjective collocations.

1. Deep: Deep feeling, deep holes, deep trouble, deep sleep.

2. Heavy: Heavy rainfall, a heavy drinker, heavy snow, heavy traffic.

3. Strong:  Strong smell, strong body, strong sense, strong denial.

4. Big: Big disappointment, big failure, big mistake, big surprise.

Noun Collocations

In Noun collocations, a verb and a noun can be used to form a group of words. Service industry, tea leaves, dogs bark, water flows, paper flutters, blurred vision, critical analysis.

Business Collocations

Most of the time, collocations are critical in several types of businesses and work scenes. There are multiple ways in which you can make a collocation with the help of verbs, nouns, adjectives, and adverbs. They can be mixed with keywords and a business expression can be made. 

 

Some of the Important Business Collocations are as follows.

• Security Blanket

• Cash Flow

• Opinion Poll

• Make Money

• Forgive a Debt

• Counterfeit Money

• Key in a PIN

• Annual Turnover

• Go Bankrupt

• Cease to Trade

• Hard-earned Money

• Deposit a Check

• Close a Deal

• Open an Account

The sinking fund method is a technique, where an asset is depreciated while generating enough money to replace it at the end of its own useful life. As depreciation charges are incurred to reflect the asset’s value, the same matching amount of cash is also to be reinvested. These funds sit in a sinking fund account and generate the interest. We will chalk the details further to know about the sinking fund method in detail. In the sections, the prevailing concept of sinking funds is to be enunciated.

Understanding the Sinking Fund Method

Many companies use depreciation to expense an asset over time, not only just in the period that it was purchased. The depreciation here has stretched out the cost of the assets over many different accounting periods. This enables the companies to benefit from them without deducting the full cost from the net income.

One disadvantage of depreciation is to determine how much to expense. For companies who want to put the money aside to purchase a replacement asset upon the full depreciation of the old one, here the sinking fund method may be a good option to be used.

Under the sinking fund method, the amount of the money is to be added to the asset-replacement fund each year. After this, the calculation is done to determine the cost which is to be replaced by the asset. The calculation is also required for the number of years the asset is expected to last, for the expected rate of return on the investment, as well as for the potential earnings from the effects of the compounding interest.

Solved Example on Sinking Fund Method

An example is illustrated to further explain the method:

ABC Ltd. issues Rs. 100,000 of the bond to start a new store. Since the issuance, ABC Ltd. created a fund by regularly depositing Rs. 1,000 in it to pay off the principal.

Now, ABC Ltd. plans to repurchase 50 percent of its Rs. 100,000 outstanding bonds in the open market in the current year to lower the principal balance which it will owe at the maturity period. Since the interest rates increase and decrease over time, the price of the bonds might as well increase or decrease. Obviously, ABC Ltd. doesn’t want to purchase the bonds for more than their face value, so the company included a sinking fund provision in the original issuance.

This meant that the company can either purchase the bonds back at random for the market price or the face value, whichever is lower. Thus, ABC Ltd. chooses any bonds to repurchase based on their serial numbers. While purchasing the bonds, it will lower the outstanding principal. There can be limitations on the amount or percent of bond issues which can be repurchased per the fund provisions.

After ABC Ltd. recalls the bonds, it will have effectively lowered the outstanding principal to Rs. 50,000. Thus, it spread the principal payments over a period of time to nullify the effect of a large principal payment on the date of maturity.

Sinking Fund Method Formula

The formula for sinking fund:

Sinking Fund, A= [(1+(r/m) n*m-1] / (r/m) * P

• P is the Periodic contribution to the sinking fund,

• R is the annualized rate of interest.

• n is the No. of years.

• m is the No. of payments per year.

To satisfy unlimited wants people purchase goods and services at a given price. But what to do in the case if the goods and services bought are found to be in bad quality or overcharged or measured less in quantity etc. In such situations. the consumers, instead of getting satisfaction, often feel cheated by the sellers who have sold the goods and services. Here, consumer awareness plays a significant role.

Consumer awareness is nothing but an act of making sure the buyer or consumers are aware of the information about products, goods, services, and consumer’s rights. Consumer awareness is important so that buyers can make the right decision and make the right choice at the right time. In this article, we will discuss consumer awareness, and consumer rights in detail.

Why There is a Need for Consumer Awareness?

The need for educating consumers about product quality and product price is significant and should not be ignored. The advancement of technology and emergence of sophisticated gadgets in the market and aggressive marketing strategies in the era of globalization has not only given a wide choice to consumers but also do not defend them with a plenitude of problems associated with such rapid changes.

There is an urgent and increasing necessity to educate and motivate the consumer to be attentive about the product’s quality, and also the possible deficiencies in the services of the growing sector of public utilities.

In short, the consumer should be educated with respect to his rights as a consumer. He should be educated enough so that he is able to protect himself from any wrongful act on the part of the trader. In order to help consumers to be in such a state, there is a need to provide reliable and exhaustive information, which they can access without much effort and expense. Considering these issues, the Government of India and the State Government have made an effort to introduce a dispute redressal mechanism by means of the Consumer Protection Act. Apart from this, a lot more has to be done in the area of creating awareness. A suitable remedy should be suggested wherever there is a need. This becomes more significant in the rural areas, where there is widespread illiteracy.

Let us now discuss six different types of consumer rights which help consumers to protect themselves from any scams or fraud.

Six Consumer Rights: Everyone should be aware of

Right to Safety

Right to safety is a basic right that helps consumers to be protected against the marketing of such goods and services which are hazardous to life and property. Consumption of goods or services which are not up to the mark can have adverse effects on the consumer’s health and safety. In order to protect the consumer’s interest, they have a right to receive high- quality and reliable goods. For instance- Household goods like LPG cylinders if not sealed properly can cause immense damage to life and property, Stale food items can cause harm to buyer’s health, Low-quality cosmetics can cause similar harms.

Right to Be Informed

The consumer has a right to receive information about the quality, quantity, potency, standard, and price of the goods or services.This will not merely help him to make well- informed and thought decisions but also prevent himself from falling prey to high-pressure selling techniques. The right to information is used to shield consumers from deceptive advertising, misleading labels and packaging, high prices, etc.

Right to Choose

This right permits consumers to choose among a wide variety of goods and services without being forced to do so. In case of monopolies, the right to be assured of satisfactory goods and services at fair and reasonably priced.   It also includes the right to basic goods and services. The right to choose can be better employed in a competitive market where a wide range of goods and services are available at a competitive price.

Right to Be Heard

The above three rights are useless if there is no proper authority to listen to customer grievances. If a buyer is dissatisfied with the product or service, then one has the right to file a complaint against it in a consumer court and it has to be addressed within a set time frame. For instance, if a consumer buys an electronic Item and it starts malfunctioning, a consumer has all rights to take appropriate action by returning or replacing it. 

Right to Seek Redressal

This right states that If a consumer is not satisfied with a particular purchase, he has the right to get the product replaced, or even he can demand a refund for the product. The consumer may even ask for compensation in case a product or service causes severe harm to them.

Right to Customer Education

A consumer must be aware of his rights and responsibilities provided by the authorities regarding marketing practices. The consumer has all the authority to gain knowledge about his rights as a buyer. Lack of Consumer awareness is the most important issue our government should pay heed to resolve.

What is the Responsibility of a Consumer?

The consumer has a certain responsibility to perform as an aware consumer can bring changes in the society and would help other consumers to fight against the unfair practices or be aware of it. Following are the important responsibilities of a consumer which they should carry out.

• They should know their rights under the consumer protection act and should practice the same in case of need.

• They should have sufficient knowledge about the product they are buying. They should act as a cautious customer while purchasing any product.

• A consumer can file a complaint if a product is found to be false or not satisfactory.

• The consumer can demand a cash memo while making a purchase.

• The consumer should verify the standard mark that has been introduced for the reliability of the quality of the product like ISI or Hallmark, etc.

Consumer Awareness in India

Consumer awareness campaign- Jago Grahak Jago is the most important and successful campaign which has shielded consumers against marketing malpractices and has successfully redressed consumer complaints. The campaign Jago Grahak Jago was started in 2005 by the Department of Consumer Affairs under the Ministry of Consumer and Public Distributions by the Government of India.

The Slogan “ Jago Grahak Jago”  means wake up consumers has now become very popular in almost every household. The Government of India used several different channels to create awareness among consumers. Following is the list of the channels used by the Government to meet the objectives of the “Jago Grahak Jago” awareness program.

• Media Advertisements

• Video Campaign

• Posters

• Printing

• Audio Campaigns

Conclusion

At last, it is concluded that consumer awareness means being aware of having the knowledge about the several consumer production laws, rectified techniques, and consumer rights which include the right to protection of health and safety from goods and services that consumers purchase, right to be informed about the price, quality, quantity, potency, and standard of goods.

“Excess of anything isn’t healthy” this phrase rightly describes the necessity of controlling inflation. When a country faces acute inflation, there is a high-interest rate and thus people cannot take up economic and costly projects thus eventually a whole set of people suffer from inflation. 

In this context we will learn what are the dominating factors that lead to this situation, what are the controlling techniques of inflation, and how does the RBI or the government of India maintain the inflation rate in India.

 

Monetary Policy to Curb Inflation

Inflation can be controlled by a contractionary monetary policy is one common method of managing inflation. A contractionary policy aims to reduce the supply of money within an economy by lowering the prices of bonds and rising interest rates. Thus, consumption falls, prices fall and inflation slows down.

A contractionary monetary policy is one common method of managing inflation. A contractionary policy aims to reduce the supply of money within an economy by lowering the prices of bonds and rising interest rates. Thus, consumption falls, prices fall and inflation slows down.

Methods to Control Inflation

The Central Bank and/or the government normally monitor inflation. Monetary policy is the key policy employed (changing interest rates). There are however several instruments to manage inflation in theory, including:

• Monetary Policy: Higher interest rates decrease the economy’s demand, resulting in lower economic growth and lower inflation.

• Money supply management claims that there is a near correlation between money supply and inflation, so inflation can be regulated by regulating the money supply.

• Supply-side policies are policies designed to boost the economy’s productivity and efficiency, placing downward pressure on long-term costs.

• Fiscal Policy: A higher rate of income tax could reduce spending, demand, and inflationary pressures through fiscal policy.

• Price limits may, in principle, help alleviate inflationary pressures by attempting to regulate wages. Nonetheless, apart from the 1970s, it was scarcely used.

What are the Measures to Check Inflation?

Inflation is an economic phenomenon that is used year after year to characterize rising prices for goods and services. This caused the consumer’s buying power to decline because the rate of wage and income growth does not keep up with the rate of inflation.

Inflation management is not an easy mission, however. The rise in prices is due to several factors, such as aggregate demand, increased cash supply, etc. We need a lot of steps working in tandem to contain inflation.

Fiscal Measure to Control Inflation

Government spending, public borrowing, and taxes comprise the Fiscal Policies to Combat Inflation. The Keynesian economists often referred to as “Fiscal,” argue that due to an excess of aggregate demand over aggregate supply, demand-pull inflation is induced.  Owing to spending by individuals, companies, and the government, aggregate demand rises (usually excessive spending by the government). This rise in demand due to the government or household spending can be effectively regulated by fiscal policies. Fiscal policy and fiscal initiatives are thus effective weapons of demand-pull inflation management.

If the key trigger behind demand-pull inflation is government spending, then it can be regulated by reducing public expenditure. The public demand for goods and services declines with a decline in public spending, along with a decrease in private income and consumption expenditure. In cases where demand increases due to an increase in private spending, the most effective way to manage inflation is by taxing profits. The taxation of private income decreases the disposable income in question, and also reduces consumer spending. This has the effect of reducing aggregate demand.

In the event of a very high persistent inflation rate, both such steps may be taken simultaneously by the government to contain inflation. In the case of a decrease in public spending, the rate of taxes on private income is increased to keep demand under control. This form of policy of concurrently using both measures is called the “Surplus Budgeting Policy,” which notes that “the government should spend less than tax revenue”.

Monetary Measures to Control Inflation

Monetary interventions are aimed at reducing revenue from money.

(a) Management of Credit:

Monetary policy is one of the essential monetary interventions. A variety of strategies are employed by the country’s central bank to regulate the quantity and quality of credit. To that end, bank rates are raised, securities are sold on the open market, the reserve ratio is raised and a range of selective credit management steps are taken, such as raising margin thresholds and controlling consumer credit. When inflation is due to cost-push variables, monetary policy will not be effective in managing inflation. Due to demand-pull variables, monetary policy can only be effective in managing inflation.

(b) Currency Demonetisation:

One of the monetary steps is to demonetize higher-denomination currencies. Such a step is typically taken when the country has a surplus of black currency.

(c) New Currency Issuance:

The problem of a new currency in place of the old currency is the most drastic monetary measure. Under this process, one new note is exchanged for several old currency notes. Likewise, the value of bank deposits is set accordingly. Such a measure is introduced when the issue of notes is excessive and hyperinflation occurs in the region. It is a measure that is very successful. But it is wrong because it affects the tiny depositors the most.