Category: Commerce Notes PPT

According to the Indian Contract Act, 1872, an offer is deemed to be completed only when it is followed by an acceptance from the party/parties to whom the offer has been made. Let’s make it more clear through acceptance meaning, examples, conditions and rules of acceptance.

Acceptance Meaning

As per the Indian Contract Act 1872, Section 2 (b), acceptance is defined as “When the person to whom the proposal has been made signifies his assent thereto, the offer is said to be accepted. Thus the proposal when accepted becomes a promise.”

 

When an offeree (person to whom the offer is made) gives his unconditional consent to the offer made to him by the offeror, it is considered as an acceptance given by the offeree. Acceptance is important for an offer to be considered complete and to become a promise. Let’s give you an example of the same.

 

Example 

A makes an offer to B for buying his house for 50 lakh. B agrees to this offer. This is called acceptance of the offer.

 

An offer before acceptance does not create any legal obligations between the parties but once the offer is accepted, it becomes a promise and it is irrevocable. This means that after acceptance is given by the offeree, it creates legal obligations between the concerned parties, with respect to the offer made. Once acceptance is given and communicated, it cannot be withdrawn or revoked. However, the offer can be revoked before acceptance is given.

 

There are two types of bill acceptances: general acceptance and qualified acceptance. When widespread acceptance is unqualified and unconditional, it is referred to as absolute acceptance.

 

General acceptance refers to surrender that is granted without qualification. A general acceptance is when someone accepts an order to pay a specific amount in full and without conditions. Unless alternative payment arrangements are made, this is a usual acceptance form.

 

To be valid as a general rule, an acceptance must be broad. When a person accepts an instrument, they qualify it by putting a condition on it.

Types of Acceptance

When acceptance is given by the offeree in a written or oral form, it is considered as an expressed acceptance of the offer.

Acceptance by some refers to when some, but not all, of the drawers, agree to the transaction. When the drawee agrees to pay the bill in installments, the bill is accepted for installment payments. This must be stated clearly at the outset of the contract.

The condition of acceptance must be stated very clearly in the agreement and must be understood immediately. Suppose a drawee wants to make a qualification during acceptance. In that case, it must be done such that the instrument holder understands what was accepted and on what qualifications it was accepted. 

Example: A makes an offer in person orally to B for buying his house for 50 lakh. B sends an email to A, giving his acceptance to the offer. This is an expressed acceptance.

If the acceptance is conveyed through the conduct/behavior/any other mannerism of the offeree, it is called an implied acceptance.

Example: A buys some products in the supermarket. This is an implied acceptance of A to pay the price that the supermarket is asking for the products. 

Conditional acceptance is also known as qualified acceptance. In this case, the offeree agrees to give his acceptance to the offer only if certain changes are made to the terms and conditions of the offer. This acceptance now becomes a counteroffer which must be then accepted by the offeror for it to become a promise. 

Example: A agrees to make the payment to B for the renovation of his house if the work is completed on the due date. 

Rules Regarding Valid Acceptance

1. Acceptance Can Only be Given by the Offeree

Acceptance of an offer can only be given by the person to whom the offer has been made. Self-acceptance meaning states that the acceptance given by the offeree only is considered valid. A third party cannot accept the offer without the knowledge of the offeree. If the offeree has authorized an agent to give the acceptance on his behalf, then the acceptance is considered valid.

Case Law: Powell vs Lee

In this case, the plaintiff had applied for the job as a headmaster and one of the school managers acted without authority, conveying to him that he had been appointed. Later, the managers decided to appoint someone else on the post. The plaintiff sued the school for a breach of contract but the verdict for the case stated that there was no contract as the manager did not have the authority to give acceptance.

2. Acceptance Must be Communicated

Acceptance must always be communicated to the offeror for the proposal or offer to become a binding contract. Before giving his acceptance, the offeree must be aware of the fact that an offer has been made to him. Acceptance cannot be communicated without the knowledge of the offer. The intent to give acceptance is not considered valid in case it is required for the acceptance to be communicated clearly. 

Example: A sends an offer letter to B for buying his house for 50 lakh. B signs the offer but does not send the letter back. In this case, acceptance has not been communicated. Hence, it is not valid.

3. Acceptance Must be Given in the Prescribed Mode

Acceptance must be given in the prescribed/specified manner that has been stated in the offer. In case a specific mode has not been mentioned, acceptance must be made in a reasonable manner that is used in the normal course of business. In cases where a specified form of giving acceptance is not stated, silence is not considered a form of acceptance.

4. It must be Unqualified and Absolute

Acceptance must be complete and unconditional. Conditional acceptance is impossible because it would be a counteroffer, nullifying the initial offer. Let’s look at an example. B accepts A’s offer to buy his cycle for $2,000/-. B says he’ll take it if A sells it for 1500/-. This does not imply that the offer has been accepted; instead, it is a counteroffer.

If no such regulated form is specified, it must be expressed ordinarily and reasonably, that is, as it would be in the ordinary course of business. It must also be expressed in a specific way. Implied acceptance can also be demonstrated through behavior, act, or other means.

On the other hand, the law does not recognize silence as a kind of acceptance. As a result, the offeror cannot state that the offer would be considered acceptable if no response is received.

An account correspondence refers to bookkeeping records that stem from the double-entry system of economic operations. The need for such a correspondence arises to ensure uniform reflection of all the account operations. By following all the instructions for using the appropriate plan for the compilation of bookkeeping records, a standardized accounts correspondence is established. There are many ways to record correspondence of accounts such as documents, account registers or other bearers of accounting information. When a correspondence of accounts is initially entered in primary documents, it is termed as an entry. Accounts correspondence can have many forms like an invoice, statement of accounts, delivery challans and many other financial transactions. To understand the nitty-gritty of correspondence of accounts, one will have to define a collection letter, which we will read in detail in this article.

What is Collection Letter 

For managing accounts receivable, bank personnel needs to communicate with their customers. A collection letter plays an important role in this communication strategy. To define a collection letter in simple terms, it is a written notification sent to a bank customer stating details of his past due payments. The first collection letter to the client is sent as soon as an invoice has gone past the due date. The tone of the collection letter changes as invoice keeps going unpaid. A payment collection letter that was sent for an invoice gone unpaid for 15 days would have a different choice of words than a letter that is sent after the payment is 90 days overdue. Collection letters become more persistent with time.

The Importance of a Collection Letter

A collection letter is like a nudge to the customer to send payment or to call them and discuss the matter. A collection letter, also known as a dunning letter, must be polite yet firm and have clear instructions on how the customer can make the overdue payments. A collection letter is an important component of any business. It is an effective way to influence a debtor to pay his or her dues and also maintain goodwill with the customer. The credit facilities that exist in the business world have given rise to collection letters and their importance cannot be overlooked. 

Credit is defined as purchasing and receiving goods and products without the need for immediate payment. The credit facilities to the buyer have helped businesses to expand hence the tradition of credit facilities has flourished. However, at the time of settlement, if the buyer does not respond, the seller needs to take the help of dunning letters. As long as credit facilities remain in the business system, collection letters would hold importance. A credit collection letter must be discreet and should not be threatening or demanding.

General Characteristics of a Collection Note 

A collection letter must include:

• the name of the original creditor and his company

• the debt collecting agency that represents the lender (if there is one)

• the full debt amount

• additional costs and fees (if any)

If the collection note is a final one (demand) or is a letter before action, it would also have the last deadline for payment. After this deadline payment is crossed, a case will be filed in court and the small claims court procedures will proceed.

A payment collection letter or debt recovery letter is usually dispatched by either the creditor or the DRA (Debt Recovery Agency). A collection note can also be sent by a debt buyer who buys default profiles from the lender who then becomes the official owner of these delinquent accounts. A debt recovery solicitor can also send a debt collection letter. 

A Collection Letter Should Be:

1. Firm but not demanding

2. Persuasive but not forceful

3. Tactful but not sarcastic

4. You-oriented

5. Polite and considerate

6. Should show concern for customer’s best interests

Collection Letter Format 

It must be considered that as an initial communication, one does not send a collection letter to contact the customer. In the preliminary phase, one would either send an email or call up the customer to let them know that an invoice due date is approaching. As soon as the payment goes overdue, the first collection letter must be sent in the following format:

• Days past due

• The amount that is due

• Mention previous attempts to collect the amount

• A summary of the customer’s account

• Instructions on what customer needs to do next

• The actual due date for payment. One must not use vague terms like “In the next 10 days” but mention the exact date when the amount was due

• Your contact details

It is a well-known fact that at least two-thirds of the national income of India is derived from the agriculture sector of the country. However, before 1947, under British rule, more than 90% of the national income relied on the Indian agriculture sector. A significant portion of the country’s population resided in rural areas where agriculture was the primary source of livelihood. 

The pre-colonised India produced primarily two crops, i.e. wheat and rice. Even if it was only two types of crops, the country’s agricultural sector was sustainable and self-sufficient. The British invasion resulted in total commercialisation of India’s agriculture industry. On the eve of independence, the once most prominent sector of this country was known to be suffering from stagnation and constant degradation.

 

It has been known that India’s warriors and freedom fighters sacrificed their lives and everything they had to earn independence from British rule. Do you remember how the Indian economy looked on Independence Day in 1947? As a result of the Colonial government’s presence and the measures and policies that they adopted, our economy was in a terrible state. Thus, back in 1947, when the British gave our country back to us, our economy was crippled and destroyed.

 

Agriculture Sector of India – Stagnation During British Rule

Indian agriculture during British rule went towards stagnation. Lack of supervision led to negligence in reforms, which were introduced to ensure development in productivity. Meanwhile, the British government continued in their trade deals, extracting more profit that inevitably led to the fall of India’s agricultural sector. 

Agriculture Sector of India – Causes of Stagnation

There are various causes for stagnation in the Indian agricultural sector during British rule. Some of these are –

Zamindari System

One of the primary reasons for the cause of stagnation in India’s agricultural sector was the zamindari system. This agricultural system was mainly practiced in Bengal, which was the then capital of British India. As per this system, the majority of the profits went tolan downers, i.e. zamindars instead of cultivators. As a result, the colonial bosses ultimately made the most income, while such farmers were not remunerated adequately. 

These zamindars, who were vassals of their colonial masters, did not help to improve the agriculture sector but only wanted to reap its benefits. Even though economic conditions were degrading gradually, zamindars did not issue any rebates on tariffs. Moreover, such tariffs had unethical rules and guidelines that did not favor cultivators. For example, if cultivators did not pay their rent on time, the colonial leaders would repeal all of their rights. 

Forced Commercialization

Even though there was a shortage of resources, the British rule insisted on widespread commercialization to bring in more profits. Their objective was to make this industry evolve and undergo ‘cultivation for sale’ from the orthodox methods of ‘cultivation for self’. 

That led to the production of crops only for sale. In India, where the majority of cultivated crops were used for self-consumption, they were then sent to markets for sale. The British also introduced the cultivation of commercial crops such as Indigo to enhance their profits. Even though Indigo is a favorable crop for a commercialized agriculture sector, it brought more harm to India as it damaged the fertility of soils in vast proportions.

Partition

India’s partition into Pakistan and Bangladesh brought in a food crisis all over India as several crop-cultivating lands were now divided. Various rice-producing agricultural lands in Punjab, India then became a part of Pakistan. 

Features of Indian Agriculture on the Eve of Independence

There are various reasons behind the decline of the agricultural sector on the eve of Independence of India. They are –

Fragmented Land Ownership

On the eve of independence, our Indian economy was known to be in an agro-state. Despite being a primary means of livelihood, India’s agriculture sector was in a rapid decline. One of the main reasons behind it being scattered was land owned by different individuals which made it even harder for cultivation.

Outdated Technology

Even after India achieved independence, old fashioned technology and outdated methods were used in its agriculture sector. Not only was there a lack of machines, which would help in minimizing human resources but also an absence of growth enhancement ingredients, such as fertilizers, etc. 

Low Productivity

Due to the absence of innovative methods and fragmented ownership of cultivated lands’ existence, the total output per hectare of lands was significantly low. So, productivity in India’s agriculture sector reached rock bottom and thus affecting its economy at a large scale.

Feud Amongst Landowners and Cultivators

Another reason behind the agriculture sector’s decline on the eve of independence was the long-lasting feud between landowners and cultivators.

Landowners never paid cultivation costs but only shared the output. Cultivators not only had to pay their landowners a particular rent but also had to bear the overall production cost. It affected cultivators’ finances substantially resulting in a continuous feud between these two sides.

Dependence on Rain

Since India’s agriculture sector lacked innovative methods and valuable equipment, it depended a lot on rainfall. High rainfall led to increased productivity, whereas little rainfall meant there would be insufficient production.

Cultivation for Self

Subsistence farming was also a significant cause for the fall of India’s agriculture sector during this period. Such an agricultural method that focused on self-consumption only instead of selling it in markets brought severe instability in India’s agriculture sector.

On the Eve of Independence (1947), the Indian economy was in a difficult state.

The Indian economy was not in a good state on the eve of independence. In order to have a better future for ourselves and future generations, we had to start from scratch and all over again. As described in class 11 of Indian Economy on the eve of Independence, the following table shows the status of each sector. 

The Agricultural Sector on the Eve of Independence 

An eve of independence, discussion of Indian economy in class 11 begins with the agricultural sector. The following points are highlighted.

• As a result of British land settlements and their government’s policy, agricultural production and productivity were low. A major contributing factor back then was the zamindari system, in which the Zamindars received all the profits instead of farmers and cultivators. Farmers were discouraged from producing more back then, which certainly led to lower yields. 

• Under British rule, irrigation systems and canals were not developed as they were dependent on monsoon rains.

• The poor level of agricultural productivity can be attributed to low technology, a lack of irrigation facilities, and inadequate fertilizer use.

• Because of this, the Indian economy’s agricultural sector was extremely weak on the eve of Independence.

The Following are the Effects of Unfair Revenue Systems like Zamindari:

• There was no improvement in the state of agriculture under the Zamindars or Colonial Government.

• It is as if farmers are tenants on their own land, always fearing the loss of their property.

• Between farmers and zamindars, there was intense social tension.

• The Indian agricultural industry was deprived of investments in terracing, flood control, drainage, and soil desalination.

 

At , we hope our discussion on “Indian Agricultural Sector on the eve of independence” will help you to fetch top marks in the Class 11 Commerce Exams. Make sure to visit our website and join in live online tutoring sessions for discussions on more such topics!

The average revenue can be defined as a measurement of revenue that is generated per unit. The Average Revenue Per Unit, also known as ARPU, is the average revenue for each user. This is the non-GAAP measure that enables the management of the company and helps the investors refine their analysis with respect to the revenue generation capability of the company and the rate of growth is also traced at each unit level. This is generally calculated as total revenue, which is divided by the number of units, number of subscribers, or number of users.

 

The Formula for Average Revenue

The average revenue formula is simple. This is essentially the revenue that is earned for each unit of the output. In other words, it’s the price of 1 unit of output. The expression for the average revenue is as follows:

[AR = frac{TR}{Q} ] 

where AR = Average Revenue, TR = Total Revenue, and Q = Quantity of commodity sold.

For instance, if the firm sells about 1000 units of the commodity, and has a total revenue of INR 10,000. Hence the average revenue is calculated as [AR = frac{10,000}{1000}] = Rs.10. 

Hence the firm or the organisation sells this commodity at Rs. 10 per unit price. 

More About Average Revenue Formula

Average revenue is defined as the measurement of the revenue that is generated per unit. ARPU abbreviated as Average Revenue Per Unit is also known as the average revenue per user. This is a non- GAAP measure that allows the management of a company, helps the investors to refine their analysis with a company’s revenue generation capability and the growth rate is also traced at the per-unit level. This is usually calculated as the total revenue that is divided by the number of units, number of users, or number of subscribers.

Average Revenue Per Unit (ARPU)

The average revenue per unit is equal to the total revenue which is divided by average units or the users in a particular period. The period’s ending date is not the measure of the date for the denominator as the number of units is vulnerable to fluctuation in the intra-period. Instead of this, the beginning of the period and the end time of the period numbers are generally averaged.

Well, the number of units or the users will not remain constant throughout the time period. This can vary somewhat from daily, as new users appear or the old users cease to take the advantage of the goods and services. Therefore, the number of units which is for a given period is estimated, for this will give the most accurate ARPU figure possible required for that period.

Uses of Average Revenue Per Unit 

This measure of ARPU is used in the telecommunications sector by Verizon, AT & T, and others. In order to track the amount of the revenue which is generated per mobile phone user of that particular sector over a period of time. In the mobile telephone industry, ARPU is calculated not only by using the revenue billed to the customer each month for user subscriptions, but also by the revenue generated from any incoming calls that are payable under the regulatory interconnection system.

Cable companies like Comcast also disclose the ARPU figures. The values of the measures that are obtained can be used internally as well as externally as a comparison from among the subscriber-based companies and to assist in the forecasting of their future service revenues that are produced from a customer base.

Average Revenue Curve

A curve that graphically represents the relation between the average revenue that is received by a firm for selling the output and the quantity of output sold by the specific firm. As average revenue is quite essentially the price of a good, the average revenue curve is also deemed as the demand curve for a particular firm’s output. The average revenue curve for a firm with no market control is a horizontal line. While the average revenue curve for a firm with market control is negatively sloped.

The curve represents the relation between the average revenue a firm receives from production and the quantity of the output which is produced. The average revenue curve reflects the degree of market control which is controlled by the firm.

For a perfectly competitive firm with no market control, the average revenue curve is only a horizontal line. For those firms with good market control, especially the monopolies, the average revenue curve is a negatively-sloped curve.

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Average Revenue Curve in a Perfectly Competitive Firm

The average revenue curve of the perfectly competitive firm is a horizontal line as it faces a perfectly elastic demand at the market which has determined its price. This is for the condition as there is a significant number of buyers and sellers trading in the market alongside with perfect information meaning that if a firm somehow wants to raise its price, the customers in the market would move to a different producer and purchase the good at their original price and the firm who raised their price would receive 0 revenue. Marginal revenue is horizontal because the increase in the revenue from producing one unit of output is equal to the price of goods, meaning that it remains constant, thus the curve is horizontal.

A book or record where certain types of transactions are recorded before recording it in the double-entry book-keeping system, and hence the prime entry. The common books of prime entry include the daybook, the cash book, and the journal. Here the information of the business transactions is recorded. 

In our discussion today, we will uphold the topic of Books of Prime Entry in the case of Accounting and its importance in the sector. This is the basis of studying accountancy which the students must be enthusiastic about.

Books of Prime Entry in Accounting

In business, there are numerous daily financial transactions. So, there is a separate book to keep the track of the receipts and payments of this transaction.

The ledger accounts in a business are the main source of information that is used to prepare financial statements. While, if a business is required to update their ledgers then each time a transaction occurs, the ledger accounts would quickly become clustered and chances of errors might be made. This would also be a very lengthy process.

To avoid all such complications, the transactions are first recorded in a book of prime entry. The main books of prime entry are:

• Sales daybook

• Purchase daybook

• Sales return daybook

• Purchases return daybook

• Bank Book

• Cash Receipts Book

• Cash Payments Book

• Petty Cash Receipts Book

• Petty Cash Payments Book

• Journal

Importance of Books of Prime Entry

Now we are quite sure that the Books of Prime Entry are very much prevalent in the business, for their advantageous characteristics. The following are the advantages of a journal:

• Provides a Chronological Record: Journal book records transactions in the occurrence of their date. Hence, it is possible to get day-to-day information.

• The Book of Prime Entry Minimizes the possibility of errors: The nature of the transaction affects the financial position of the business; this is ascertained by recording and analyzing the transaction.

• Helps to finalize the accounts: With the book of prime entry, it provides a basis for ledger posting and the ultimate draft of the Trial Balance.  

• Future references: References can be given to the financial transactions that become easy as these transactions are similar and are recorded in one journal.

• Few mistakes and can be detected easily: With the help of Prime Entry, the mistakes in the ledger accounts can be easily detected.

• Lessens the chance of business fraud, negligence, and mistakes: The Chronological recording of the financial transactions reduces the chance of business frauds, negligence, and mistakes.

• Journals are shown in clarity: Journals show all these transactions in great detail so the business is not mandated to rewrite them in detail in the ledger section, thus it keeps the ledger accounts brief and uncluttered.

• Perfect back-up of each other: If records are by chance lost then along with the ledger and the books of original entry the organization will get through. They act as a perfect backup for each other.

• Bases the control on one ground: Handling of each type of journal entry by a different member of the staff causes variation, this prevents a single person from having exclusive control on the accounting system. This leads to fraud and is difficult to make. Hence, it is more likely that errors would be identified by this system.

• Ensuring that the documents are not skipped: To ensure that the documents do not go unrecorded, the source of documents are normally copied twice with consecutive numbers and are noted in day books while recording the transactions.

The Significance of Prime Entry Books and Ledgers in both Integrated and Interlocking Accounting Systems

The term ‘ledger’ refers to a book. There are commonly three ledgers in accounting systems:

• Wages, sales, purchases, electricity, travel, advertising, rent, insurance, repairs, receivables, payables, and non-current assets are all recorded in the General or nominal ledger. Although cash and bank accounts are legally part of this ledger, they are frequently kept in a separate book due to the volume of cash and bank transactions.

• The Payables ledger (sometimes known as the creditors’ ledger or the purchase ledger) is a record of all payments made to creditors. Although the overall amount owing to suppliers is noted in the general ledger, the specifics of what is owed to whom are documented here as well. Each supplier has his or her account. The payables balance in the general ledger should match the total of the amounts owed in this ledger.

• The Receivables ledger (also known as the debtors’ ledger or the sales ledger) is a book that keeps track of money owed to you. The overall amount owed by customers is recorded in the general ledger, but the specifics of what is owed from whom are also noted here. Each credit consumer has his or her account. The total of the sums owing in this ledger should match the main ledger’s receivables balance.

These were the meaning and importance of The Book of Prime Entry.

Business services can be defined as various tasks and activities that help maintain a business, despite not delivering any tangible product. An example of a business service can be information technology which assists numerous other business services like procurement, finance, and shipping. In today’s world, most of the trades are interested in these exclusive services and cover a major part of the industry.

Business Services Characteristics

It can be classified into five characteristics:

• Intangibility: With reference to business services introduction, services do not have any physical form i.e. they can only be practiced, instead of produced.

• Inconsistency: Services do not have any consistency. They need to be exclusively done each time.

• Inseparability: Both consumption and production take place at the same time for services.

• Inventory: A person cannot stock services for future use; it has to be delivered when demanded. This is one significant difference between goods and services, as the former can be stored for later use. 

• Involvement: Customer involvement is required in providing any kind of service.

What are the kinds of Services Available?

1. Business Services

They are used by organizations to accomplish their trade activities. Banking, warehousing, marketing, inter and intra-departmental communication, etc. fall under business services.

2. Social Services

These services are given out voluntarily to promote equality and help people.

3. Personal Services

This type of service varies from person to person. It can be a tourism service, food service, etc.

A form of service known as business-to-business service takes place between trade organizations. It depicts the involvement between a wholesaler and a manufacturer, or a retailer and a wholesaler. They stand in contrast to business to consumer and business to government transactions.

For example, a car manufacturing company performs B2B transactions with a wholesaler company that sells tires, rubber hoses, and other necessary materials which are needed to build a vehicle.

Types of Business Services

Let’s take a look at some of the different business services.

1. Software Services- Technology is required almost in every field. Software services comprise a major part of it. They range from anti-viruses to various operating systems and etc. Furthermore, another department where software services are vital is banking. Nowadays, transactions have become more accessible through online banking. Hence, software services need to be upgraded to combat hacking and virus threats.

2. Consultancy Services- Consultancy services are provided by numerous organizations irrespective of their field of specialization. These services are given for business expansion projects, commercial projects, etc. Moreover, these services also help a company to comprehend the industry environment and the competition in the market.

3. Training Services- Many enterprises require these services. Though most companies are well enough to give training to their employees, they also take help from external agencies. These agencies train the employees with soft skills and other necessary requisites to work in the company.

4. Financial Services- It is one of the most important services of an organization. Financial services are taken for evaluating taxation, depreciation, valuation, and expansion. The finances of a company are looked after by the finance department, but some also require additional support from financial advisors.

5. Marketing Services- Companies call for marketing services to reach out to a broader audience by creative advertising and skillful marketing. There are specialized agencies that help with these services. These companies allow agencies to get innovative marketing ideas to receive quality work. An organization prefers investing in a third-party service provider as they present them with quick feedback and execute marketing strategies efficiently.

6. Travel Services- Many times companies need to travel to various places due to business requirements. Here, travel services come into play. These companies help with scheduling and reservation required for the journey. 

7. Security Services- This type of function is considered necessary for a company to keep its goods and products secure. Security services employ individuals to stay physically present in the office premises. It is a part of financial services where it also provides safety for fraudulent dealings. Government and banking sectors hugely avail security services.

8. Waste Management Services- Management of waste is crucial in preventing pollution. Wastewater and materials produced from a manufacturing plant must be recycled and passed carefully to minimize the leakage of toxic products that may affect the environment. Waste management services guarantee that the waste generated from a plant is less harmful or less polluting, and helps in keeping people and the environment healthy.

Apart from these, there are various personal services that individuals may opt for as an independent way to earn money. Check the below list of service business ideas:

1. Personal fitness trainer

2. Makeup artist

3. Graphic designer

4. Corporate event planner

5. Party planning services

6. Pet sitting

7. Private school application consultant

Here is a Chart that Gives a Clear Idea about the Difference in Goods and Services:

For a more comprehensive understanding of business services meaning, you can check more topics on . You can also check our app to access the collection of best-in-class coaching materials on the go.

Business and the Types of Business

Business can be defined as an activity undertaken to make profits. Any activity that produces or sells a product or a service to make profits is a business.

It can be sub-classified on the basis of ownership of the business, and they are as follows:

1. Sole Proprietorship

A business or an organization that is owned and run by a single person is called a sole proprietorship in business.

The liability for this kind of business is unlimited. The owner operates the business and runs it. The owner may hire employees.

2. Limited Liability companies(LLC)

A limited liability company is the one in which the owners and partners running the business are protected under certain legalities in case the business fails or is in any problem. This means that if a business is incurring a loss, then the owner is not directly liable to bear it.

3. Partnership

In a partnership, a business has two or more owners and the profit and loss are liable to all of them. The liability in this business partnership is unlimited. This type of business can be further divided into a general partnership, limited liability partnerships(LLC), and limited partnerships.

4. Franchise

When someone purchases the rights to run and own a small unit of business from the parent company, then it is referred to as a franchise. Mainly the food businesses are run as a franchise like McDonald’s burger etc.

5. Corporation

The corporation is a business that has limited liability and is protected under certain legalities, in fact, the corporation has a different legal personality. The corporations can be privately owned or government-owned. Some of the corporations are for-profit whereas others are listed as non-profit organizations. These types of businesses are also listed on the stock exchange to make and generate profits or to grow the organization.

6. Co-operative

In a cooperative type of business, there are decision-makers and not shareholders. This type of business is a limited liability business and can either be for-profit or non-profit. 

7. Limited Liability Partnership

In a limited liability partnership, All the partners or some have limited liability. This type of partnership can be called the hybrid of partnerships and corporations. The LLP also has certain tax liabilities as well.

 

The Components of a Business

Every business has some key components that help the business run smoothly and successfully. Listed below are five elements in every business:

1. Creating Value

The success of any business is dependent on the value that is created by it. The product or service that makes the difference in a customer’s life. The user experience of any product or service offered by the business should be value-adding. No matter how good the packaging is of a product, if the customer doesn’t like it, it’s a loss. So the key aspect of a business should be adding positive value to their target audience.

2. Marketing

The marketing of a business is as important as creating the product itself. It is attracting the target customers. Marketing allows the business to advertise their product or service such that people are aware that this kind of product or service exists. Marketing is for the long term. It helps create a brand value for the business as well as creating the demand for certain products/services.

3. Sales

When an attracted client or customer is turned into a buyer, then it is sales. Without sales, there won’t be cash inflow and business would soon run into a loss. For any business to be profitable, the sales should be happening on a consistent basis. It is telling the customer why one should buy from a particular brand or business.

4. Delivering the Value

The business doesn’t end when a certain buyer purchases the product or service. When the buyer is dissatisfied with his/her purchase, they won’t buy from the business again, and that too would mean a loss to the business, sort of negative advertising. Positive feedback from the existing clients or buyers would mean there will be more buyers in the future.

5. Finances

The foundation of any business is money. The inflow should always be higher than the outflow, only then the business is called profitable. To keep a track of investments and other funding and the return of investments a separate entity in the business is required.