Category: Commerce Notes PPT

Coordination refers to the synthesis and integration of all the operations involved in a business to reach a predefined goal. In an organization, coordination is achieved through proper management and synchronization of the various departments directing the process as a whole towards set objectives. Effective coordination in an organization includes coordination of the internal as well as the external factors. There are various types of coordination in management and techniques of coordination. 

Coordination increases the productivity and efficiency in an organization, brings organizational dynamics at both the micro as well as macro levels to defined synchrony, and ensures that the intra-organizational and inter-organizational groups have their roles connected effectively while developing trustworthiness within competing groups at the same time. This also ensures the organizational objectives and tasks to get clarified and established. The main types of coordination in management are discussed below.

Types of Coordination in Management

Broadly, coordination in management can be divided into two types- internal and external coordination. 

Internal Coordination

Internal Coordination is aimed at building a strong bond between the executives, the managers, the departments, the divisions, all the branches and the workers or the employees. This establishes an integration of organizational activities. Coordination examples or types for internal coordination are as follows:

Vertical Coordination: Vertical coordination includes the coordination of tasks from superiors to the subordinates and vice versa. A coordination example can be stated as the coordination of a particular task from a sales manager to his supervisors. This will also facilitate ensured work synchrony from the supervisors with the manager.

Horizontal Coordination: Horizontal coordination builds strong relationships among same rank holding employees. This ensures better performance with increased productivity. Coordination examples can include those among the managers, the supervisors or the co-employees.

External Coordination

External coordination is aimed at establishing connections between the employees in a business organization with people outside of the organization. Such relationships provide a better comprehension of the outside world, in the process providing an analysis of the marketing agencies, the public, the customers at various levels, the competing organizations, the agencies of the government and the financial institutions. Public Relations Officers (PROs) play the most significant role in such cases building relationships between the organizations and the people outside of it.

It can thus be noted that as a part of internal coordination, employees report vertically to the supervisors as well as the subordinates, and horizontally with the coworkers or colleagues. As a part of external coordination, relationships are established between the organization and the outsiders. Both internal and external coordination is equally important for the successful running of an organization. 

Coordination in Various Managerial Operations

Coordination in various managerial operations can be achieved through the following strategic actions: 

• Planning: Coordination in planning makes managers frame plans in the most effective order, analyzing what to include and what not to. Planning with coordination eases the procedure with the help of mutual discussion and constant exchange of ideas building productivity.

• Organizing: Immense coordination is required as a part of organizing for the performance of business operations, directed towards a synchronized approach towards the fulfilment of organizational objectives.

• Staffing: Coordination in staffing ensures the placement of the right people in the right jobs. It specifies the staff requirements helping the management to recruit skilled employees with the required qualifications.

• Directing: Subordinates on receiving orders and instructions work accordingly, only with proper coordination and integration. As a part of coordination in directing, managers are focused on building a coordinating environment in the organization.

• Controlling: Coordination ensures a controlled working structure in an organization. It makes the management ensure that the established standards are recognized and met with the actual performance.

Therefore, these are the types of coordination, explained with the help of appropriate coordination examples. Coordination is an important tool for establishing a healthy work environment in an organization. The management should aim for it and train its officials accordingly.

The stake of ownership of a shareholder in a company is represented by shares. A shareholder’s portion of the interest is equally proportional to the portion of the sum paid towards the entire capital owed to the company.

It could be segregated under two broad classifications-

1. Ordinary Equity Shares

2. Preference Shares

Shares

The term ‘Share’ represents a share in the company’s capital, including the stock capital. According to subsection 84 of section 2 of the Companies Act, 2013, it is an instrument to gauge the shareholder’s interest in the assets of a company. Here we will understand the two major types such as the ordinary share and the preferential share. 

We shall further take up some of the statements and statutes that drawn up around them.

The privileges and the responsibilities of a shareholder are dictated by the Memorandum and Articles of Association of a company. According to the provisions of the Companies Act 2013, a shareholder must also possess some contractual privileges and some other privileges.

The share or debenture or any other entitlements of any of the associates of the company is declared to be transferable by Section 44 of the Companies Act, 2013. They are movable in the way specified in the Articles of the company. The numbering of each share is ratified by Section 45. Every share possesses a unique number. However, the rule is not applicable in case of individual holding rights to receive benefits on a share held by a third party. 

Kinds of Share Capital

The share capital of a company is classified into two types broadly, as per Section 43 of the Companies Act, 2013.

1. Equity Share Capital

2. Preferential Share Capital

Equity Share Capital

Equity share capital constitutes the total sum of money pitched in by the investors and owners of a company for the capital of the company. The other names for it are simply ‘equity’ or ‘share capital’ or ‘equity share’. The equity share capital of a company is calculated by multiplying the number of equity with the face-value of each share. They are of two types:

1. Equity share with rights to vote.

2. Equity share with differential rights to dividends, voting and the likes, according to the regulations.

Tata Motors launched equity with differential voting rights in 2008 called the ‘A’ equity share. The regulation said-

1. There was only one voting right with every 10 ‘A’ equity.

2. It had more dividend than the ordinary share by 5 percentage points.

The ‘A’ equity traded at a discounted price to ordinary shares with total rights to vote, due to the difference in the rights to vote.

Preferential Share Capital

Preference or Preferential Share Capital raised through issuing preference shares carry preferential rights for:

1. Payment of Dividend: Calculated at a fixed rate of dividend which might or might not be subjected to the payment of income taxes.

2. Repayment of Capital: Comes with preferential rights to claim assets and avail profits of any fixed premium or premium on any fixed scale during liquidation or repayment of the paid-up capital, regulated by The Memorandum or Articles of the company.

Deeming of Share Capital as Preference Capital

A deeming provision of the share capital is created by an explanation under section 43, according to which, share capital shall be deemed to be preference capital if it has both or either of the following two characteristics:

1. Along with the preferential rights in the Dividend, the share capital has the right to fully or partially participate with capital that doesn’t have any right to participate in the preferential rights in the Dividend.

2. If getting liquidated, in addition to the preference rights in repayment, the share capital is entitled to fully or partially participate with other capital which doesn’t have any preferential rights in the remaining surplus amount after having repaid the total capital.

However, the Memorandum or Articles of Associates of private companies could dictate if Section 43 is pertinent.

A financial institution is a type of a company doing business that deals with all sorts of monetary and financial transactions such as currency exchange, loans, deposits and investments. There is a wide spectrum of financial services actually held and that is trust companies, brokerage firms, insurance companies, investment dealers and banks. Everybody who lives in a developed economy is a dire need for these financial services. 

In this article, we will go over the 

• definition of financial institution

• the types of financial institution

•  the features of  financial institution 

• GIC Definition 

• The GIC functions

Types of Financial Institutions 

1. Commercial Bank 

A financial institution that offers different checking account services, takes official business, personal, helps to mortgage loans, accepts deposits and offers some financial instruments like certificates of deposits and saving accounts for business and for individuals is known as a Commercial Bank. Unlike an investment Bank, a commercial bank is where people do their banking activities. Commercial Banks are commonly known for helping its account holder with Savings account, loans, mortgages and loans for commercial customers like retail. These banks also help in creating different methods of payments like wire transfer, currency exchange and credit facilities.

2. Investment Banks

Investment banks are much different from commercial banks as they provide a whole host of services that cater to facilitate different business operations like equity offering and capital expenditure financing that offer Initial public offerings. Most of the services provided are for investors in brokerage services that help facilitate trading exchanges, acquisitions, help manage mergers and various other corporate structuring services.

3. Insurance Companies 

There are different non-banking financial institutions and one the most common and familiar is insurance companies. These companies offer services to different corporations or individuals by providing insurance. They can use this insurance to protect themselves against financial risk in an unexpected accident through these secured insurance products. It is essential for corporations and individuals to protect their assets to help in their economic growth in the long run.

4. Brokerage Firms 

These firms specialize in various investment services that include mainly two things that are financial advisory and wealth management. These firms also provide ways to invest in assets such as bonds and stocks that can help individuals grow their wealth and help them diversify their portfolios, such as private equity investments and hedge funds.  These firms include Investment companies and brokerages that deal in the exchange-traded fund and mutual funds.

 Features of  Financial Institutions 

1. The licensing framework is usually 90 days( 3 months)

2. Companies issue shares to get more investments and financial institutions help with that by providing collection services and underwritings.

3. Providing guarantee is a key element when it comes to business and these financial institutions help them guarantee that. 

4. After the year 2000, a lot of financial institutions started offering its payments through offline and online mode.

5. Financial Institutions are a major contributor to financial leasing 

6. They also provide a lot of financial lending services like financing of commercial transactions or helping with personal credits

7. Financial Institutions aren’t allowed to take loans from the general public by using their palpable funds or deposits.

GIC Definition 

The General Insurance Corporation is a government-funded Financial Institution. Its main speciality is that it is the only company in India that deals with sole reinsurance before the Indian market has opened in 2016 for foreign participation. After the year  2016, a lot of the foreign participants came from countries like France, Germany and Switzerland. Under the GINA (General Insurance Business Act ) of 1972, it existed under that.

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A lot of companies have started to invest in debentures and shares from the corporate sector under GIC. But there was a restriction where the investment could not exceed five per cent of the total subscribed capital from a single company. The GIC also provides facilities such as underwriting of new debenture and shares.

GIC Functions 

1. The financial asset cannot be purchased under GIC but only the service can be bought. 

2. Some of its major services include providing insurance against certain calamities like personal sickness, loss of a physical asset and any accident. 

3. Since the nationalisation of the GIC, there were around 100 companies in the market. 

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!