Category: Commerce Notes PPT

The business world and its study are constantly changing, now it has gone to a phase where the term ‘entrepreneurship’ is given much of a weightage. This is not an age-old term while the concept is not new. This term coins the business individuals in a more focused way. The benefits of entrepreneurship are now given limelight and thus nations across the world are trying to produce entrepreneurs who will make a difference in the future.

In this context, we are going to know the benefits of entrepreneurship, why the world has seen and is keen to observe such a chance of vast improvement in this subject we are yet to know.

Who are Entrepreneurs?

Entrepreneurs are self-motivated individuals who strive to do something new and unique on their own. By identifying opportunities, arranging the necessary resources, and taking in all the risks in the business, entrepreneurs fulfill customer needs and create employment opportunities for themselves and the people around them.

Entrepreneurship is the process of establishing those ideas in the form of business by introducing new goods, services, and technologies to the market. Entrepreneurship is not just another form of business; it is considered a driving force of our society and the nation’s economy. Entrepreneurship not just benefits the entrepreneur himself; it also contributes to the overall development of the organization and the economy.  Entrepreneurship is an emerging form of business and involves a lot of risk-taking.

Benefits of being Entrepreneurs

The benefits of entrepreneurship are never-ending. Some of the reasons for people to choose entrepreneurship and its benefits are discussed below:

They are their own bosses, unlike offices and organizations which require work to be done from a specific time and place. Entrepreneurs have the free will to work in a flexible schedule from any location as preferred. They tailor their work depending upon their lifestyle and other commitments.

Entrepreneurship requires a lot of managerial skills such as decision making and being able to do so confidently boost their self-esteem. Entrepreneurs are those who inspire people to do business on their own and confidently pursue their passion in a certain way. They are people with good leadership qualities and a vision. The ability to be able to create a product and fulfill a certain customer need with the use of individual ideas, talent, and resources creates a huge sense of satisfaction and is very fulfilling.

One of the biggest benefits of being an entrepreneur is you get to wear various hats and get to learn many things. These learnings are not just limited to your own industry but about marketing, managing money, handling people, dealing with risks, getting the work done in the most effective way, etc. It enables one to explore and figure out how to do things even if they don’t know much about it.

Despite taking on all the risk, entrepreneurs more often than not stand a high chance of profitability as such upon fulfilling customers’ needs. Entrepreneurs reap good profits and create wealth for themselves and also related businesses. Establishing a new business involves arranging resources from the existing market. This allows other existing entrepreneurs to earn profits.

One of the driving factors of entrepreneurship is the increased needs of customers for variety and luxury in goods and services. This motivates the entrepreneurs to introduce unique need-based products. It could be electronics, clothing, automobiles, or other products. Increasing the use of such new products in return improves the standard of living of the consumer.

When like-minded entrepreneurs get together to coordinate physical, human, and financial resources and direct them towards the achievement of objectives through managerial skills, businesses are developed. Although entrepreneurship is a business run by one person or the innovator, it involves a lot of factors and the use of resources which results in the creation of organizations.  Further, these organizations are built from the scratch with a number of skilled people working together.  This creates a lot of job opportunities.

Entrepreneurship enables new markets to develop in the form of goods, services, and technology. It paves ways of generating wealth; these higher earnings contribute to increased national income and tax revenues. It promotes innovation, self-reliance and generates employment opportunities.

The new products and services innovated by the entrepreneurs encourage consumers to adapt to new trends and technology. It breaks away from the dependency upon traditional ways of using products/services. They help the consumers in having an open mind which results in better morale, the standard of living, and quality of life. It increases the foreign exchange revenue with large-scale exports of the produced goods and services.

Being the first one to introduce something new into the market in the form of good service or technology allows the entrepreneurs to create demand and trust in the market. This results in becoming the one being looked up to in the industry as an innovator. Be it any industry, as long as the entrepreneur wishes, he can continue to innovate and introduce new products in the market just by continuously looking for opportunities and capitalizing on them.

What are the Key Characteristics of Entrepreneurs?

Entrepreneurs are different than usual people. Their mindset is somewhat different which makes them capable of the tag ‘Entrepreneur’

Below are some key characteristics of entrepreneurs which enable them to reap all the benefits of being in the industry they are in:

Did You know?

• There are 582 million entrepreneurs in the world.

• The main reason why businesses fail is because of no access to proper markets

• Studies have shown that middle-aged men become the most successful entrepreneurs. 

• 90% of the new American billionaires are entrepreneurs who developed themselves.

All the laws which pertain to how, what and why of how businesses are legally allowed to and supposed to function are encompassed by what is business law. Business law meaning includes contract laws, manufacturing and sales laws, and also hiring practices and ethics. In simple words, it refers to and pertains to the legal laws of business and commerce in the public as well as the private sector. Note that it is also known as commercial law and corporate law, due to its nature of regulating these worlds of business.

Significance of Business Law

Business law is an important aspect of law in general because, without the same, the corporate sector, manufacturing sector, and retail sector would be in tyranny. The aim of putting business and law together is to maintain safe and functional working spaces for all individuals involved in the business, whether they’re running it or working for the people running it.

Types of Business Law

There are several types of business law that are recognised and followed by countries the world over. Some of these include the types of business law sections that follow.

1. Contract Law

A contract is any document that creates a sort of legal obligation between the parties that sign it. Contracts refer to those employee contracts, sale of goods contracts, lease contracts, etc.

2. Employment Law

Employment law is where it is imperative for business and law to meet. These laws enforce the rules and regulations that govern employee-employer relationships. These cover when, how and for how much and how long employees should work.

3. Labour Law

Labour law also indicates the appropriate relationship between employee and employer, and also pay grades and the like. However, an additional element to labour laws is the relationship of the union with the employer and employee.

4. Intellectual Property Law

Intellectual property refers to the intangible products of the working of the human mind or intellect, which are under the sole ownership of a single entity, such as an individual or company. The validation of this ownership is provided by intellectual property law, which incorporates trademarks, patents, trade secrets, and copyrights.

5. Securities Law

Securities refer to assets like shares in the stock market and other sources of capital growth and accumulation. Securities law prohibits businesspersons from conducting fraudulent activities taking place in the securities market. This is the business law section that penalizes securities fraud, such as insider trading. It is, thus, also called Capital Markets Law.

6. Tax Law

In terms of business law, taxation refers to taxes charged upon companies in the commercial sector. It is the obligation of all companies (except a few tax-exempt small-time companies) to pay their taxes on time, failure to follow through which will be a violation of corporate tax laws.

Business Laws in India

Let us now take a look at some of the important business laws in India. In the Indian context, there are several business law sections of major importance to the country’s commercial sector. Here are some Indian business law notes that you will find helpful.

Indian Contract Act of 1872

The Indian Contract Act governs the working of contract laws in our country. Some of its requirements for contract laws are:

Sale of Goods Act 1930

The transfer of ownership of a tangible, immovable commodity between a buyer and a seller for a decided amount of money warrants a sale of goods contract, whose specifics are governed by the Sale of Goods Act of 1930.

Indian Partnership Act 1932

A partnership in business refers to when two or more business entities come together to create a new venture together. The investment and profits are split evenly between the involved parties. The Indian Partnership Act provides the laws under which partnerships in India can function.

Limited Liability Partnership Act 2008

This Act is differentiated from the IAP of 1932. A Limited Liability Partnership is a separate legal entity, which continues with its business as is, even if a partnership dissolves, only suffering the liability as mentioned in the contract.

Companies Act 2013

This is the ultimate business law, which oversees and provides the rules pertaining to each aspect of creation as well as dissolution of companies established in India.

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

What is Carriage Inwards?

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

What is Carriage Outwards?

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

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

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

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

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

Solved Examples

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

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

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

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

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

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

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

Do You Know?

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

Introduction To Effective Communication

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

Essentials For Effective Communication

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

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

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

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

• Have fluent English writing skills.

• The writing must be clear and to the point.

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

• The letter should be brief and easy to understand.

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

What Is Effective Communication?

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

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

[Image to be added Soon]

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

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

• The message should be correct both grammatically and ethically.

• The message should not be incomplete.

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

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

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

Attributes Of Communication

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

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

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

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

Solved Examples 

Q. How is communication-related to effective communication?

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

Q. Are women more talkative than men?

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

Did You Know?

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

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

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

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

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

Types of Collocations

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

• adverb + adjective: completely satisfied 

• adjective + noun: excruciating pain 

• noun + noun: a surge of anger 

• noun + verb: lions roar 

• verb + noun: commit suicide 

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

• verb + adverb: wave frantically 

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

More About the Topic

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

What is Collocation?

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

 

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

 

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

 

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

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

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

• To assist in embellishing the English language.

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

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

Types of Collocations

Verb Collocations

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

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

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

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

Adjective Collocations

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

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

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

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

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

Noun Collocations

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

Business Collocations

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

 

Some of the Important Business Collocations are as follows.

• Security Blanket

• Cash Flow

• Opinion Poll

• Make Money

• Forgive a Debt

• Counterfeit Money

• Key in a PIN

• Annual Turnover

• Go Bankrupt

• Cease to Trade

• Hard-earned Money

• Deposit a Check

• Close a Deal

• Open an Account

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

Understanding the Sinking Fund Method

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

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

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

Solved Example on Sinking Fund Method

An example is illustrated to further explain the method:

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

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

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

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

Sinking Fund Method Formula

The formula for sinking fund:

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

• P is the Periodic contribution to the sinking fund,

• R is the annualized rate of interest.

• n is the No. of years.

• m is the No. of payments per year.