Category: Commerce Notes PPT

Incentives can be said as a strategy of the company to encourage the employees to work better. With the attraction of the incentives, the employees achieve the organizational goal in the process. The incentives can be in monetary form or non-monetary form. They are nothing but a push to the employees to make them work harder with efficiency.

In this context itself we will delve further on the topic of ‘Incentive’. It includes the true meaning, types of incentives and its usefulness to the employees in our discussion.

Incentive Meaning

An incentive is such a factor that motivates or has a driving force upon someone to do something or behave in a certain way of fulfilling the task. In a company, human decision is affected by two major types of incentives – Intrinsic and Extrinsic Incentives. 

Intrinsic incentives motivate a person to do something based on their own self-interest or own desires, this is void of any outside pressure. While, extrinsic incentives are the ones which are motivated by rewards like the increase in payment for achieving a certain result or avoiding the disciplinary actions punishments for not doing any wrong. Or not being criticised is another extrinsic motivation. 

Some examples of extrinsic incentives are appreciation letters, monetary bonuses, or even withholding a pay for less work done. While the intrinsic motivation is learning a new language to be able to speak in the foreign countries.

In Personnel Economics, incentives are the most studied area where the HRM team evaluates and analyses the investment scheme done by the firm to its employees.

Financial Incentives

A financial incentive deals with money, which is given by the company, or organization to encourage certain behaviors or actions of the employees. This financial incentive or monetary benefit, motivates certain positive behaviors or actions. A financial incentive may also be a monetary benefit that a company offers its customers or employees. 

The term ‘incentive’ may mean also to encourage members to cooperate or to provide information. In a financial incentive, money is offered to encourage actions or behaviors that would not be possible without these incentives. The law dictionary states the exact definition of the term: “A benefit given to customers or companies to get them to do something they normally wouldn’t. It is money offered to get them to try something new. The event might not have happened without the incentive.”

Financial Incentive Programs are also held that encourages great productivity among the employees. Financial Incentives can be in the form of – Stock Options, Profit Sharing, Raises, Bonuses and Commissions 

Monetary Incentives

Monetary Incentives are used by employers to motivate employees towards meeting their targets. As Money is the symbol of power, status and respect, monetary incentives play a big role in satisfying the social–security of the employees and physiological needs of a person. But monetary incentives seize to be an incentive when the psychological and security needs are satisfied. 

This is to be understood by the business owners that monetary incentives are only the mere motivators that encourage the employees to meet their goals but this does not guarantee quality out-come nor it guarantees loyalty and dedication of work by the employees.

Some Monetary Incentives Are As Follows: 

1. Piece Rates

2. Pay Rise

3. Bonuses

4. Sharing profit

5. Contests 

Incentives for Employees

For an employee incentive is an object, item of value, that is pleasured by him. This incentive is achieved by acting in predetermined actions. Incentive motivates the employees to work and achieve the goals, they follow the direction of the employer for achieving the target and this is pushed by the incentives only. There are four kinds of incentives available for the employees are –

1. Compensation – Incentives such as raises or bonuses. These are basically the monetary incentives.

2. Recognition – Popularity at work gained due to appreciation of quality work will feed the ego of an employee. 

3. Rewards – Such as gifts, monetary awards, or items such as gift certificates.

4. Appreciation – Social parties of work place, family events paid by the company, ice cream socials and sponsored sports team 

Incentive Motivation 

Being motivated is totally a human behavior, this will depend from employees to employees. This is basically the human behavior that responds to various kinds of motivation. Incentive is a way to keep the employees motivated and through which they can achieve the target of the company. 

Interestingly, there is a whole theory about the Incentive Motivation which is known as – Incentive Motivation Theory.

The theory of Incentive Motivation tells that people get motivated with the driving force of the incentives that they receive by working hard in order to achieve their target. Incentive Motivation makes the people believe that if they work in a determined way, they will gain reward while if they work in an opposite way, they will attract punishments. 

Thus, Incentives can be both negative and positive as well. It all depends upon the policy of the HR team of the company.

An Introduction

Ancient India was prospering in every sector of life. However once the British stepped on the Indian soil, the state of the Indian economy started deteriorating. Every sector of India for example agricultural, Industrial, etc. were exploited. The country failed to produce enough food for people due to declining soil fertility. Even the few industries that India had couldn’t manage the economy.  

The infrastructure was failing and the British rulers were only concerned about their profits. The world war further depleted whatever resources were left. The struggle of the Indians for Independence meant ignoring every other aspect of life. It was the policies of the colonial government that proved to be the final nail in the coffin of the Indian economy.   

The British decentralized the long functioning cloth production industry of pre-colonial India. This led to the industrial revolution. The revolution started because Indians were forced to import British goods. The Indian industries during British rule started to crumble.

The Pre-Colonial Industrial Sector in India

The Indian cloth manufacturing industry or the handicraft industry was the first industry in India and well established before the British Empire rose in India. The Indian cloth industry was in demand across the world and also highly regarded. The Indian craftsman was applauded for their work across the world. The Indian textile industry was an important urban handicraft industry and the articles made from silk, cotton, and wool were popular both in India and outside the country. These were exported to international countries, and people loved these clothes.

Along with the cloth industry, Indians also started to craft objects. The Indian craftsman was known for his work in the metal industry, marble work, stone carvings, leather and tanning industry as well shipbuilding. The industries gained popularity and let Indians make a name for them on the world map. The British, however, tried to dominate and made sure that the popularity of India and its craftsmanship were killed. This continued till the industrial sector on the eve of independence.

Industrial Sector under British Rule

When the British set foot in India, they were looking to crush the industrial phase of India, which at that time was booming. They started to take charge of the clothing industry and also tried to cripple the work of the artisans. The British made a plan to decentralize these industries which were in their flourishing stage. The British tried to achieve two things with decentralization.

• The export volume from India was made dominant. The raw materials from India were exported directly to Britain. Now where India was once the exporter of manufactured handicraft items, they were now reduced to just being an exporter of raw materials.

• Since India was exporting most of its raw materials, there was now very less supply to meet the demand for finished goods in India. Thus India had to turn to the British to meet their daily demands.

With no raw materials to make finished goods along with the dependency on the British for finished goods, it also gave birth to large-scale unemployment among the Indians. The colonials, to erase this unemployment, employed the Indians to work in the tea, indigo, jute, and coffee plantations that were owned by the colonials completely. Imports from Britain now met the increase in local demand at the same time. The state of the industrial sector in India was shattered.

• The decay of the handicraft industry was caused because of the misrule by the British in India. It led to a decline in the Indian handicraft industry. To destroy the Indian handicraft industry, the British had a discriminatory tariff where they allowed free export of the raw material from India to Britain and free import of finished goods from Britain to India. However, for the handicraft products that were exported from India, there was heavy-duty on the export.

• The finished goods made in Britain were machine-made, and these were better in quality as well as cheaper than the Indian handicraft products. This caused many to shut their business in India.

• The British also introduced railways in India during this time that helped to expand their market of industrial goods that were very low priced. This caused a fall in demand for the higher-priced handicraft goods and thus was the downfall of the Indian handicraft industry.

All this led to a drain in Indian wealth. The foreign trade through the British period was because of the large export surplus. The surplus came at a cost and affected the Indian economy. Many essential commodities, like kerosene and food grains, were not available in the domestic market. Also, the surplus was not used for any developmental activity in the country. It was only used to set up and maintain the administrative work of the British.

In the second half of the nineteenth century, India started a modern industry though it was at a very slow pace. If you want to name the three industries started in the 19th century in India, then these were the jute, cotton textile and iron and steel industries. The cotton industry was now confined to the west of India, and this was controlled by the Indians. The jute textile industry was operated in the eastern part of India in Bengal, and this was controlled by the British. There were other industries too that were born after the Second World War. These were the cement, paper, iron, and steel industry. It was here that in 1907 the Tata iron and steel company or TISCO was incorporated.

Other Factors

There was a dearth in the capital good industries in India. These are the industries that produce machines. The machines are then used to make consumer goods. The capital goods industry is essential in any country for manufacturing. There were some establishments in some units, but there remained a void in the textile industry because of the slow development in India.

Along with the crush in the capital goods industries in India, there were also operational issues in the public sector. This included power generation, railways, ports, communications, and other departments. One can see the sorry state that the Indian industry sectors were going through under the British Raj.

The colonials, on the other hand, took full advantage of the rich geographical diversity of India. They set up many industries like coffee, jute, and tea plantations. The exploitation done by the British was seen in every sector in India. However, the industrial sector was the one that was the most affected.

Agriculture

The British forced Indian farmers to produce cash crops such as Indigo. It was bought from the farmers at cheaper rates and exported to Britain. Cultivating Indigo led to a decline in soil fertility. The administrators were not interested in growing food products in India. The agricultural sector of India was surviving miserably. Lack of technology and dependency on rains for irrigation made the condition even worse. Poor food production made the population of India malnourished and weak. 

Employment

Poor economy, low employment rate, and poverty form a vicious cycle that is difficult to break. The condition of the economy of India at the time of independence was not good. It was almost on the verge of collapsing. This coupled with the years of exploitation, two world wars and a sudden government change made the condition of the people living in India even worse. 

The unemployment rate was extremely high. In every sector, there was a dearth of opportunity and a thousand people willing to work. The agricultural sector was not very advanced and was failing miserably. This led to a decline in job prospects in the industrial sector as well. There was a lack of educated population and even the few people that had degrees, found it difficult to get some work.  

Life Expectancy of People

People of any State are considered as a natural resource of that nation. Therefore it is necessary to maintain the health of the people. It is also important to provide education and employment opportunities so that they can prove beneficial to their motherland. India’s population at the eve of independence reflected the economic state of the country.

The majority of people were not educated. The illiteracy rate was very high. The health care facilities were also not readily available. This coupled with various other factors led to a high mortality rate. A country where people are illiterate and unhealthy reflects poorly on the world map.  

India was once known as a golden bird. However, it was soon exploited by the British rulers. India under English rule failed to do good in any sector. The agriculture sector was performing poorly. Low rainfall and poor irrigation system were some of the factors that contributed to it.  There weren’t many industries established in India at that time. People did not focus on education much. All this coupled with unsound infrastructure led to a steep decline in the economy of India. Apart from this, the second world war also destroyed the Indian economy. Therefore we can safely conclude that the state of the Indian Economy on the Eve of Independence was horrible.

Different insurance companies in the world are in constant competition with one another. They are always in a lifelong battle to outdo one another. For that purpose, they are coming up with new facilities and offers every time. Such insurance policies are important for several businesses in the world, as they continuously face different issues like losses due to fire or other natural calamities, theft, robbery, etc. Most insurance companies provide insurance in the form of written documents, although there are options for receiving notifications in the form of schemes, premiums, and policies. All these forms of notifications are called insurance correspondence.

What is Insurance? 

Before getting into the different types of insurance correspondence, it is essential to know about insurance. Insurance is considered as a form of protection against any loss or risk. Mostly the financial aspect of the government is considered in insurances. The insurance is a form of risk coverage contract between an insurer and an applicant. The applicant has to pay a premium at a rate determined by him from the different schemes made available to them by the insurer. In return, the insurer pays compensation according to the insurance scheme. Any written information related to the insurance is called the insurance correspondence.

Insurance- The Seven Principles 

There are seven principles related to insurance. They are:

1. Indemnity Principle

According to this principle, the insurance is not related to any profit. The insurer has to pay the entire amount, as mentioned in the insurance plan to the applicant.

2. Faith

Both the insurer and the insured must have complete faith in each other. Both the parties must disclose correct, clear, and complete information as required for the insurance process. 

3. Insurable Interest Principle

The insurance process must have a clear and complete statement with respect to the object being insured.

4. Contribution Principle

This principle says that in the case of any losses, the insured is eligible for claiming compensation equal to the loss amount. 

5. Loss Minimization Principle

The main motto of this principle is that the insured must take all responsibility to prevent the risk from occurring.

6. Subrogation Principle

According to the subrogation principle, once the insured is compensated for the loss, the ownership rights related to the lost property is transferred to the insurer.

7. Causa Proxima Principle

The main theme of this principle is that if there is more than one underlying principle for the loss, then the one most relevant to the case is considered.

Insurance Types

On a broader aspect, insurance is of two types- life insurance and general insurance. The different types of life insurance schemes are as follows.

Money-back Policy

Money-back policies provide financial returns during cases of death or critical illness. Such a policy provides a return after a certain number of years from the start of the policy. This process continues until the end of the policy. It is different from the general insurance policies because the general ones provide financial returns upon completion of the policy.

Term Life

Term Life is the life insurance policy that is provided to the insured upon his or her death during the term of the policy. The financial return in a ‘term life’ insurance policy depends on the premiums paid by the insured during the policy term. Such insurance policies are directed not only towards the financial security of the family but also in securing the child’s future like education, marriage, etc.  

Pension Plan

Pension plans are those insurance policies whose premium is being paid during the working years of an insured, but the financial returns are being provided after his or her retirement. Such a plan was policy to support any individual after retirement. The pension returns are generally enough to support the individual for the rest of life.

Unit-linked Insurance Plan

The unit-linked insurance plan had the provisions for the investor to perform both insurance and investment in an integrated manner. The amount paid as premium by the policyholder is divided into two parts- one part is used to cover the insurance policy while the rest part is being used as investments for debt or equity securities. Such investments made in the equity and debt policies are being made in a similar way to mutual funds.

The Different Types of General Insurance Policies are as Follows.

Health Insurance

The health insurance policies cover any medical assistance required for the treatment of specific diseases. It covers hospital expenses, doctor’s support, medical bills, and any cost incurred during any surgeries. 

Travel Insurance

The travel insurance policies cover flight insurances in the case of an emergency, accidental death, or dismemberment during any travel, loss of luggage, emergency medical evacuation during an unnatural scenario, etc. The insurance money is paid to the nominee in the case of the death of the insured.

Motor Insurance

The motor insurance policy is applicable to cover the cost incurred due to damage to any motor vehicle.

Home Insurance

Home insurance policies provide financial coverages to any damage cost to home property.

Fire Insurance

Fire insurance policies provide financial coverage to any damage caused due to fire.

Insurance Correspondence Types

The following are the types of insurance correspondences.

Renewal of Policy

Renewal of policy refers to the continuation of any policy beyond its term, and it might include changes in the existing scheme.

Null and Void 

If the insured fails to pay a few premia, then the policy becomes null and void. The insured will not get the benefits at the time of any mishap.

Reporting Loss

In the case of any losses, a detailed report is required during the insurance application process. It must mention in detail about the loss, reasons behind it, the amount estimated for compensation, etc.

What are the Features of Insurance Correspondence? 

For any insurance correspondence, the application letter must be concise, clear, and mention all the important points. The insured must maintain a polite tone in the letter without using abbreviations or slangs. 

A company is a voluntary group of people who contribute money for a common purpose that may be profit or non-profit in nature. It is a separate legal entity. The money thus contributed, is called the share capital of the company, and the contributors are called the investors or the shareholders. Indian Companies Act, 2013 administers all companies and provides guidelines for them to follow.

Company accounts are a condensed summary of all sorts of financial activities of the company that it has committed in a period of twelve months. Company accounts include all sorts of financial statements ranging from the financial Balance Sheets, the Profit and Loss Statement to the Cash Flow Statement. The contributions done by the actual investors of the company which are always paid in advance are shown as calls in advance. This amount which is received as calls in advance is usually shown as credits in accounts because the amount is received in excess of what the company actually needs.

Calls in Arrears in Balance Sheet 

Calls in the Arrears Account appear in the Notes to Accounts on Share Capital to the Balance Sheet. It is shown as a deduction from the amount of ‘Subscribed but not fully paid-up’ under ‘Subscribed Capital’. The amount is called paid-up capital. Though the interest is chargeable in calls in arrears, according to the provisions of the Articles of the company, the directors of the company do have the right to waive off the interest on calls in arrears.

 

Calls in Advance in Balance Sheet

The meaning of calls in advance is that the excess amount received by the company exceeds what has been called up. They appear separately, in the Balance Sheet as the company’s liability. The company retains such an amount to make the shares fully paid. Once this amount is transferred to the relevant accounts the calls in advance are closed.

It comes under the heading ‘Current Liabilities’ till the calls are made and the amount becomes payable by the shareholder.

 

Calls in Arrears Journal Entry

In case of any default, the amount is called as Calls in arrears and a separate Calls in Arrears Account has to be opened, to make the call in arrears entry. An interest of 5% p.a. is charged on all such calls in arrears until the amount is repaid. And, finally, the total is brought to the balance sheet as a deduction from the Called up Capital.

 

Call in Advance Journal Entry

At times, the company’s shareholder pays a portion or full of the amount due on the shares held in advance. It is an important fact that calls in advance never form a part of the share capital, even though it is being paid by the shareholders. An authorized company can accept calls in advance from its shareholders but the amount of call in advance in the journal entry cannot be credited to the capital amount. Call in advance needs to be credited to the calls in the advance account. 

 

Interest on Calls in Advance

The amount received as calls in advance is written as a liability and the company is liable to pay interest from the date of receipt till the date that the call gets due for payment. A rate of 6% p.a. interest is charged on these calls in advance meaning the articles of the company authorized for the same. This interest has to be paid to the shareholder even when the company does not earn a profit.

As the issue of debentures introduction, it is a debt instrument that organisations issue for investors to raise capital. Therefore, it is mainly an asset class that serves the long-term capital requirements of a company. Besides, it carries an extended period of maturity at a fixed rate of interest payable periodically such as quarterly, semi-annually, or annually. 

For instance, let’s assume that a company ABC issues bonds worth Rs.1,000 in the secondary trading market. Therefore, bondholders have a legal claim to Rs.1,000 worth of ABC’s assets. However, in case of debentures, holders lack the legal ownership of ABC’s assets.

It is primarily due to the fact that debentures are not backed by assets. As a result, creditworthiness coupled with the appropriate market rating generate the confidence of 

investors in this debt instrument. 

What are Debentures? 

Moving on to the definition of debentures, it is a category of corporate debt that is not supported by collateral. As a result, the companies that issue debentures do not have to pledge their assets to fulfil their capital requirements. On top of that, the trust of the issuer is an important element in its financial validity in the market. 

Apart from business organisations, governments also use debentures to fund their infrastructure initiatives. As these organisations do not pledge their assets during debenture issue, traders can earn higher profits from their transactions. Consequently, debentures are traded in the debt market through a network of investment brokers. 

Besides, investors receive debentures in the form of official certification from the issuing organisation. Therefore, these corporations are legally obligated to repay the principal amount invested by an individual after a stipulated period. In addition, the interest that accrues on the principal amount is fixed. Therefore, debentures are an investment avenue that is often referred to as ‘fixed cost bearing capital’. 

For example, suppose an investor Mr. Jones purchases a debenture with a face value of Rs.50,000. The rate of interest applicable is 10% per annum for 5 years. Therefore, Mr. Jones will receive a fixed interest payment of Rs.5,000 every year. 

However, the issue of debentures showcases a wide range of features that separate it from other categories of security. 

Test Your Knowledge 

Consider that the face values of two debentures are Rs.100 each. Debenture A is available at a market price of Rs.85. On the other hand, Debenture B has a market price of Rs.120. Figure out which debenture is discounted and which one is a premium.

What are the Features of Debentures? 

The most prevailing and prominent features of debentures include the following pointers – 

• Redeemable and Irredeemable Debentures – These two types of debentures differ on the degree of time involved in the repayment process. First of all, redeemable debentures make sure that issuing corporations fulfil their repayment obligations to holders. Therefore, the investors are eligible to receive the principal amount combined with the interest portion after a pre-determined period of time. 

On the other hand, the companies that issue irredeemable debentures have no legal obligation to pay the principal amount to holders. However, they must pay the interest on the face value of the debenture as specified intervals. 

• Convertibility of Debentures – A specific section of debentures have the tendency to exhibit convertibility in terms of asset class. Therefore, investors can convert their debentures into equity shares after a tenure. This category of debentures has a conversion ratio which specifies the proportion of shares in exchange of the face value of a bond. For instance, Mr. Jones is eligible to get 10 shares for a debenture with a principal value of Rs.1,000. Therefore, the convertibility ratio is 10:1. 

Contrarily, non-convertible debentures lack the option to be converted into equity shares at any points of time. Non-convertible debentures usually offer a higher rate of interest than ordinary convertible debentures. Moreover, the issue of debenture in this category is exposed to lower market risk and has an increased liquidity. 

• Rank During Liquidation – Debentures and bonds both precede shareholders in terms of receiving debt after a company goes bankrupt. For example, consider that a company ABC faces bankruptcy in the debt market. On liquidation of its assets to repay the creditors, debenture holders are at the beginning of the order. Therefore, companies issue first debentures for creditors who want to recover their sum of investment. 

However, second debentures imply that the holders case receive their repayment after other debts are taken care of.

 

• Market Value of Debentures – Even though debenture issue is at face value, it so happens that the market price often dips or rises. In case the market price is lower than the face value, the debenture is said to be discounted. However, if the market price exceeds the face value, the debenture is a premium issue. 

Therefore, keeping the features in mind will help a student understand the operations of the debt market. However, if you want a detailed insight into the interesting world of issue of debentures, visit the official website of today!

Long Reports and Short Reports: Their name justifies it all. A short report is also called a memorandum. It can be one or two pages long. However, a long report can even be a hundred or five hundred pages long, depending on the topic. While writing both these reports, one needs to follow a formal and structured format. The long reports mainly begin from a table of contents and end with an appendix.

Internal Reports: These kinds of reports stay in the organization itself and are mainly used by the employees, and people who have access to it. Not all are allowed to use their data and content.

External Reports: These reports are also called public reports. External reports serve the purpose of providing information to a mass group. This may also include sending out reports in the newspaper, and a company’s annual report, etc.

Lateral and Vertical Reports: These vary depending on the hierarchy. The reports which move upward and downward in an organization are called vertical reports. They help in managing the tasks across various levels in a company. Whereas, lateral reports are the ones that travel at the same organizational level. It helps in the coordination of a unit. 

Periodic Reports: These reports are prepared based on pre-scheduled dates and sent out accordingly. They usually help in management control. The periodic reports are prepared using computer-generated data. 

Formal and Informal Reports: A formal report is usually made for a bigger group. It has a meticulous structure with proper organization. These reports eliminate any personal data and information, including opinions. They provide deep insight and are written in a specific style. Informal reports are used less in comparison to the formal ones. They are usually short messages with a casual language. Informal reports are mostly used between a team, college peers, etc.

Informational Reports: These reports contain all the data, statistics, analyses, and facts related to a certain topic. They aim at solving actual problems with these reports. 

Proposal Reports: These reports are like a pitch, and are solution-oriented. They aim at problem-solving for a company, helping them deal with the issues better.

Functional Reports: These kinds of reports have a specific function. Almost all reports like the financial report, marketing reports, etc. are included in this type of report.