Category: Commerce Notes PPT

The three terms – Business, Profession and Employment though may seem synonyms to each other, but in a real sense, their meanings are wide apart from each other. The three terms are the basic way to earn a living for an individual. People working around the globe are engaged in either of the three terms.

 

Knowing each of these terms well and analyzing its difference by chalking a whole table of the three has been done here in this section. Students studying the business studies subject must study this enthusiastically.  

 

Difference between Business, Profession and Employment

Before delving into the comparison study, we must first know distinctively what each term means. 

 

What is Business?

Business refers to the economic activities, which are connected with the production or the purchase or sale of goods or supply of services with the main objective of earning profit. People engaged in business earn income in the form of profit they make out of their venture. Examples: Grocery Shop, Hair Salons are examples of Businesses. 

 

Business is the act of making one’s living or making money by producing or buying and selling products. This is any activity or enterprise which is entered into for profit. This does not mean it is a company, a corporation, a partnership, or has any formal organizational structure, but this can range from a roadside peddler to the General Motor. 

 

There can be four kinds of business organizations according to the law, which are Sole Proprietorship, Corporation, LLC (Limited Liability Company), and Partnership. In a sole proprietorship, a Business name won’t separate the business entity from the owner; this means that the owner of the business is responsible and is liable for debts incurred in his own business. If the business acquires debts, the creditors can go after the owner’s personal possessions and have their dues in return. A business structure does not attract corporate tax rates. The proprietor of the business is personally taxed on all income from the business. Hence, due to all the reasons mentioned above, the proprietary form of business is discouraged (mainly due to the risk involved), the person should try to make the company public as soon as possible. There is no educational or technical entry barrier in existence in order to become a successful business owner. There are many successful examples of businessmen who have completed their formal education.

 

Some examples of businesses: fishing, mining, manufacturing industries, Grocery Shop, Hair Salon, Medicine Shop etc are some of the huge types of business. 

 

What is Profession?

The profession includes the activities, which is a requisite of special knowledge and skill which is to be applied by individuals in their occupation. These activities are generally subject to the guidelines or codes of conduct laid down by the professional bodies. People who are engaged in professions are known as professionals.

 

Examples of Professionals: Doctors, Chartered Accountants etc.

 

A profession is neither a trade nor an industry, which is delved with three professions: divinity, medicine and law. They are called the “learned professions”. 

 

What is Employment?

Employment is the occupation in which people work for others and get remuneration in return. Those who are employed by others are known as employees, and these employees are hired by the employers. 

 

Example: Any person working for others on a salary basis such as an Accountant, Sales Manager or Peon etc.

 

Employment is a relationship between two working parties who usually is based on contract and is paid for, here one party, which may be a corporation, (either profit or non-profit organization) or any other entity is an employer and the other is working in accordance with the employer is the employee. 

 

Employees work in return for their payment. This payment may be in the form of an hourly wage by a piece worker or by an annual salary worker. This happens depending on the type of work an employee is assigned for. Also, employees in many sectors get bonuses, stock options; these are all part of their contractual relationship among the employee and employment, which they receive in addition to their payment.  

 

The difference between the three terms can be explained with the following chart given below: 

 

Discussion on the Inter-Relationship between Business, Profession and Employment

Although, all these three activities are distinguished from each other, mainly on the account of factors of investment and risk. Yet one cannot forget the important role played by all the three of them in the existence of others.

 

A business can only thrive and become successful if the role of professional experts and employees is correctly completed. 

 

Professionals of various types like consulting engineers, management consultants, financial consultants, legal experts, doctors, architects, chartered accountants, cost accountants and others are retained by business identities to deal with a variety of complicated technical problems that the modern big-scale business firms have to deal with. And As the large-scale business requires a huge number of specialists and the number of expert knowledge in modern businesses, In such circumstances, businesses will need skillful management consultants to stay up-float. Economic institutions of recognized importance (mainly the big and successful businesses), provides employment to many peoples and is now the livelihood of those employed by the company. 

 

The prosperity and success of a business depend, not merely on the sales done and the resources of businessmen, but are equally determined by the availability of the right type of employees that have a positive attitude towards the work. Thus, while business provides employment opportunities to people, the employees provide the organized and devoted effort which is a necessity for any business firm to get the best results out of their investment. 

 

Without the business, the word “employment” also loses all its meaning, and thus both of these terminologies highly depend on each other, the disappearance of one will be an existential threat for the other.

Entrepreneurship studying is a recent trend in the career that has been initiated by the Government itself owing to the importance of this element in an economy. Today we study about ‘Entrepreneurship’ to know its character, instilled behavioral pattern, wants and wishes, their growing strategy and their action in building their empire in industries. In Entrepreneurship, the students are enlightened about the practicality of to-day’s business ideas, a modern lifestyle adopted by an entrepreneur in regard to taking risk and responsibility of the business. 

What is Entrepreneurship? What are its Characteristics? Is the main base of our discussion in this content.  

Concept of Entrepreneurship

Entrepreneurship can be defined as the creation or the acquiring of value. Entrepreneurship can also be viewed as “change” which includes other values other than simply economic ones.

The constricted definitions of Entrepreneurship talks about the process of designing, launching, and running a new business that actually starts as a small business. Entrepreneurship can also be defined as – the capacity and the willingness to develop, organize and to manage a business.  

The people who start and create a business with a new model, in a view to solve a societal problem they are referred to as entrepreneurs. The discussed definitions of entrepreneurship specifically focus on the launching and taking over the business with high risks involved in launching.

Characteristics of Entrepreneurship

Digging deeper in the definition of Entrepreneurship, leads us to the characteristics of Entrepreneurship which means an Entrepreneur can be identified with definite sets of characters built in him/her.

First, to talk about this inbuilt character, an Entrepreneur should be Creative. He should take the initiation of innovating something which is out of the box.

Next, his lifestyle should be filled with Professionalism, an Entrepreneurs manners and behavior with his fellow team mates or employees should be of a quality, they should possess the touch of professionalism in their attitude. This also leads to self-discipline, which will encourage the entrepreneurs to achieve their high goals.   

Risk Taking, this is an important character which is must for an entrepreneur to develop within himself. This character comes, when he gets the self-confidence triggering in himself. A good entrepreneur will always take risks in ventures after methodically analyzing them.

Features of Entrepreneurship

All the success not always happens to every individual who dreams to be an entrepreneur. They fail in the journey to be an entrepreneur due to lack of entrepreneurial features in him. Entrepreneurial features are a must to be a successful entrepreneur. 

Important Features That Distinct An Entrepreneur Are As Follows

1. Tenacity – In simple words tenacity means the power of ‘not giving up’. An entrepreneur with his new business model may fall a thousand times, but these mere failures do not block their vision to check what is missing and why they fail, they work on it even a thousand times and then successfully pitch his brand-new business model in the industry. They do not take ‘no’ as an answer. They work incessantly until they achieve their goal.

2. Passion – Passion is often regarded as a driving force. An entrepreneur is ever passionate about his dream. It is not just the passion of mere making of money, but is a passion of solving a societal problem with their business idea and model. Without a high degree of passion, it is not possible to stay motivated.

3. Risk Taking – Entrepreneurs are never hesitant to take risk, this does not mean they are reckless, rather they analyse method studying in their investment before they take a risk. ‘High risk cultivates higher profit’ this is the mantra that an entrepreneur always follows.

List any Four Characteristics of Entrepreneurship

Famous entrepreneurs discuss about four key characteristics that entrepreneurs possess:

1. Ambition and Self Confidence

2. Willingness to take a leap of faith

3. Ability to learn from mistakes

4. Trust in and respect for the team

Ambition – An entrepreneur is highly ambitious. They see a problem and then they engage in an activity to solve the problem, this mental state is never changing in them.

Faith – That faith in self that the problem is worth solving and he has been placed right to solve it is the enormous leap of faith. It is the confidence about his own work.

Learning from Mistakes – Entrepreneurs do not repent and wail over mistakes or the times when they fail, rather than the mistakes as they analyze their mistakes and see what was missing. They gather the understanding of their mistake, where they lacked and again start their work not from the scratch but now from a lot of experience.

Work Together – Entrepreneurs work in a team. They make the team and lead it. He takes mutual help and harmoniously works in the team, they beautifully collaborate the team and destine them to work for his own idea.

Characteristics of Entrepreneurship Development    

To run a business successfully, an entrepreneur needs to develop certain characters in them. Certain traits that must be developed and always polish in themselves are as follows –

1. Self confidence

2. Risk taking ability

3. Decision making ability

4. Competitive 

5. Intelligent

6. Visualization

7. Emotional Tolerance

8. Patience

Thus, these were the concepts and characteristics of an entrepreneur that we learn in this discussion.

‘Leader’ is a popularly used term that we are quite familiar with. In simple terms, a leader is an individual that guides and takes control over others. However, the term is quite complex in different contexts. For instance, when you define a leader in the field of management, it is an individual who possesses certain qualities of managing and guiding a group of people for accomplishing a specific objective. A leader can train these individuals and help them reach one step closer to their objectives and goals. There is a myriad of organizing and guiding elements in the forms of distinguishing leadership theories and models. Let’s discover everything you need to know about the contingency approach to leadership. 

An Overview on Contingency Theory of Leadership 

The contingency theory of leadership is a distinctive and impressive approach to defining the success of a leader. It suggests that every leader doesn’t necessarily need to be dependent on his capabilities to succeed entirely. There is a wide range of aspects concerning the company culture, work environment, and even employees that maximally influence a manager’s potential to succeed while leading a group of people. Contingency theories thus define an individual’s ability to succeed in his role. This model was introduced by Fiedler. Thus, the name originated as ‘Fiedler Contingency Model of Leadership’. 

Contingency Model Of Leadership- Looking back at the History 

The contingency approach to leadership was first introduced in 1958 by Fred Fielder. He believes that success isn’t directly interlinked with an individual’s abilities. It is correlated with two essential factors- a manager’s skill sets and the control of a circumstance. He thus suggested that the skills and capabilities of a manager are always constant while the situation keeps altering. Therefore, the potential is contingent on the manager’s skills linking the situation and not adapting to it. A leader will thus boost his potential and work much more efficiently if his skills and abilities match the situation and work environment. 

Characteristics of Contingency Theory 

Let’s discover some prime characteristics of contingency theory to learn more about the contingency model of leadership. 

• Leadership takes into account the existence of a team of followers as it is the very necessity for the working of a leader. Leadership cannot be practised without this set of followers. 

• The form of leadership differs from the end objective and the situations of the work environment. 

• Leadership is defined as the mere ability that can be enhanced with expertise and experience. 

• Leadership impacts the beliefs, behaviour, and even the nature of the employees. 

• Leadership is encountered when trying to accomplish the same goal with several subordinates or a group of people that help through the process.

Qualities that Shape a Leader 

Every leader should possess certain skills to excel in the contingency theory of leadership. Now that you’ve understood what is contingency theory of leadership, here are some qualities that can help you become a successful leader. 

A leader should be honest and possess integrity for his followers to respect and follow him. Subordinates will not follow you if you aren’t honest with them. Leaders should carry pride in following their core beliefs. You must thus undergo a moral path while working and leading their employees. 

Additionally, leaders should also possess enough stamina. Along with the ability to be honest with your employees, you should also have the stamina to work. The leader should also be physically stable and fit. He should have the physical endurance to deal with things in the workplace. This accounts as an essential quality for boosting the performance of you and your employees. 

Expertise and experience are two prime factors that a leader should possess. He should understand the core objectives of your company’s project and should have the intelligence to take further measures on it. Knowledge and intelligence can thus help improve the expertise of your employees as well as become more efficient. 

A leader should be empathetic towards his subordinates. He should ensure establishing a healthy and empathetic relationship with his subordinates. Your subordinates will thus be courageous and even dedicated to following you. 

A very vital quality that every leader must possess is confidence. A leader should have the ability to gain the respect of his employees. He should be able to accomplish trust, among others. The leader should possess essential skills of confidence and efficiency so that they can showcase to their employees why they are the ideal leaders. 

A leader should essentially have the ability to engage with his subordinates. He should be able to communicate with his subordinates and help them understand what their project model is. He should have the ability to share the techniques and strategies that will help your team come one step closer to accomplishing their end objective. 

Cost centre and profit centre are integral to business success, even though those function differently with a different set of objectives.

Let us find out more about these!

What is the Cost Centre?

A cost centre is a department or sub-unit in an organisation that focuses on costs incurred by it. Its function involves controlling and reducing high costs that may be incurred by a company.  

For instance, a customer service centre would not directly generate revenue or profit for an organisation but helps in controlling costs which may arise from unmitigated customer complaints and grievances. 

It must be noted in this regard, that the cost centre itself incurs a cost, but it enables a profit centre to generate more revenue and profit.

It may be measured by comparing standard costs against targeted costs. It will help to understand how, or to what extent targets are met. 

There exists a difference between cost centre and cost unit. Cost unit is necessarily measured in terms of service or product unit. On the contrary, the cost centre is a division within a company.

Importance of Cost Centre 

• Cost centres, even though they do not directly generate revenue, play a critical role in business success. In the absence of cost centres, there will be no research and development, marketing department, or customer service department. Without R&D, a company will not be able to innovate on its service or product. 

• Lack of marketing department will impede customer awareness, adversely affecting its sales. 

Types of Cost Centre 

1. Service Cost Centres 

Service cost centres extend support to profit centres so that the latter can function efficiently. The Human Resources department is an example of service cost centres. The HR department is intricately connected to the sales department. 

2. Production Cost Centres 

These centres directly enable the processes of production. For instance, an assembly line is held as a product cost centre. It ensures seamless production. 

What is the Profit Centre?

A profit centre is that department in a company that engages in the generation of profit and revenue, and also takes into account the costs associated with it.

For instance, a sales department is directly related to profit generation of a company. It also determines revenue projections. 

Profit centre does not operate in silos but backed by cost centres. 

There are multiple ways of measuring the performance of a profit centre. One of the most popular methods is to compare between profit and budget.

Importance of Profit Centre 

• A profit centre is crucial for an organisation or a company because its primary function is to generate profit. It also helps in the computation of investment returns.

• As measures adopted by profit centres lead to profits and revenue, it also helps in efficient decision-making. Activities that are most likely to increase costs are done away with. A profit centre also has a role to play in budgetary control. 

Types of Profit Centre 

1. Intra-Organisational Department 

Departments of such profit centres are located within a company. For instance, a sales division as a department exists within a company. It is the most important profit centre in any organisation. 

2. Strategic Unit of a Larger Organisation 

For a multi-national corporation or larger corporates, there are strategic sub-units located outside the entity. For instance, in the case of a large hotel chain, a restaurant will act as a strategic unit profit centre.

Cost Centre vs Profit Centre 

The difference between cost centre and profit centre is discussed below. 

If you want to know more about the difference between cost centre and profit centre, then you can refer to our study materials. Moreover, you can seek guidance for other topics included in senior secondary Commerce with our online learning programmes. It will help you to enhance your understanding and knowledge. Install the app now!

An accounting expression starts with ‘Debit’ and ‘Credit’. You might be wondering what is debit and credit? Also, this is intriguing enough why is it that if we debit some accounts, it makes them go up while when some other sets of accounts get debited, it goes down?  More importantly, how is this important for any business? In a nutshell, recording all the money flowing into the account is the basis of debit while recording all the money flowing out of the account is the basis of credit.

In this context, we will delve deep into the discussion of debit and credit in accounting, know its effect in the accounting transaction of a business, know the rules engaging debit and credit, journal entries in effect to it. 

Debit and Credit in Accounting

Debit and Credit are the two accounting tools. Business transactions are to be recorded and hence, two accounts, which are debit and credit, get facilitated. These are the events that carry a monetary impact on the financial system. While keeping an account of this transaction, these accounting tools, debit, and credit, come into play. Whenever accounting transactions take place, it majorly affects these two accounts. 

‘In balance’ is such an accounting transaction where the total of the debit and credit matches or is equal. In contrast, if the debt is not equal to the credit, creating a financial statement will be a problem.

The business transaction is separated into accounts while doing the bookkeeping. The commonly affected accounts are- 

• Assets 

• Expenses 

• Liabilities 

• Equity 

• Revenue

Different Effects of Debit and Credit are as Follows

In effect, a debit increases an expense account in the income statement and a credit decreases it. Liabilities, revenues, and equity accounts have a natural credit balance. If the debit is applied to any of these accounts, the account balance will be decreased.

Difference between Debit and Credit

It is quite amusing that debits and credits are equal yet opposite entries. A debit increases an account. Now to increase that particular account, we simply credit it. However, we use this opposite treatment to get the desired result. 

A left-sided entry is headed with debit. It increases an asset or expenses account or decreases equity liability or revenue accounts. For example, ‘Purchase of a new computer’. Here, the asset gained (computer) is to be notified on the left side of the asset account.

Whilst the right side is marked by the credit entry, it either increases equity, liability or revenue accounts or decreases an asset or expense account. In the ‘Purchase of a new computer’, the expense (payment for the computer) is credited on the right side of this expense account.

Given below is a comparison chart to have a thorough understanding of the difference between the concept of debit and credit.

Rules for Debit and Credit

The golden rules of accountancy govern the rule of debit and credit. Before we examine further, we should know the three famous golden rules of accountancy:

• First: Debit what comes in and credit what goes out.

• Second: Debit all expenses and credit all incomes and gains.

• Third: Debit the Receiver, Credit the giver.

To compress, the debit is ‘Dr’ and credit is ‘Cr’. So, a ledger account, also known as a T-account, consists of two sides. As talked about earlier, the right-hand side (Cr) records credit transactions and the left-hand side (Dr) records the debit transaction.

Suppose we purchase machinery for the cash, this transaction will increase the machinery and decrease cash because machinery comes in and cash goes out of the business. Further, this increase in machinery and the decrease in cash are to be recorded in the machinery account and cash account respectively. This recording will also be detailed in the ledger account. 

On which side does the increase or decrease of the accounts appear? This is answered by studying the ‘normal balance of accounts’ and ‘rules of debit and credit.’ Understanding the normal balance will accelerate the learning of the rules.

The normal balance of all assets and expenditures accounts is always debit. We shall record the increment of this account on the debit side. If we need to decrease the account, we will record it on the credit side.

Next, the normal balance of all the liabilities and equity (or capital) accounts is always credit. To increase the account, we will record it on the credit side, and to decrease the account, we will record it on the debit side.

It only follows the opposing force or the vice versa factor.

A level-up concept, Contra Accounts, is only opposite to the relevant accounts. The normal balance can be both debit or credit. Here, to neutralize this, a contra account is used. To recall, the utmost rule of debit and credit is that total debits equal total credit which applies to all the totalled accounts.

Accounting Journal Entries 

In an accounting journal entry, we find a company’s debit and credit balances. The journal entry consists of several recordings, which either have to be a debit or a credit.

Below is a list of basic five journal entries, we will straight away delve into it-

1. Manav started the business with cash Rs. 50,000

Bank A/C……….Dr.  50,000

To Capital A/C   50,000

2. Bought goods from Rita Rs. 800

Purchase A/C…..Dr. 800

To Rita A/C        800

3. Sold goods to Mr Nayak at Rs. 10,000

Mr Nayak A/C…..Dr. 10,000

To Sales A/C         10,000

4. Paid wages Rs. 50

Wages A/C………..Dr. 50

To Bank A/C        50

5. Carriage outwards Rs.60

Carriage Outwards A/C…..Dr.60

To bank A/C       60

Be it economic or noneconomic, we keep and make records of any transaction and this is the root meaning of journal entries which is represented above.

Debit and Credit Examples

This study is incomplete without the citing of examples. For practical application, the hereinafter examples will be worthy to understand the basal of debit and credit. 

Examples- 

The following transactions are related to a trading business:

 

1. Started business with cash Rs. 1,50,000.

•   Accounts involved – A cash account and Capital account 

•   Nature of the account – Asset and Equity

•   Increase/Decrease – Both will increase

2. Furniture purchased for cash Rs. 10,000

• Accounts involved- Furniture account and cash account

• Nature of the account- Asset and Asset

• Increase/Decrease – Asset account will increase and cash account will decrease

3. Purchased goods for cash Rs. 1000

• Accounts Involved – Purchase account and cash account.

• Nature of the account- Expense and Asset.

• Increase/Decrease- Increase in expense account and decrease in the cash account.

To wrap up the two sides, Debit and Credit indicate destination and source respectively. 

The Source of monetary benefit is credited and the destination account is debited. The concept of debit and credit is much of an interest for an accounting student as it is the base for overall commerce study.

There were only a few public enterprises in India when the country gained independence. These were departmental undertakings and were related to the Post, Telegraphs, Railways, and Defense Production. With the passing time, economists and the government worked hard to increase the development of public sector enterprises in India. Learn how the country observed an evolution of the public enterprise landscape. 

Foundation of Public Sector undertakings in India

In the era of British Colonialism, there were few public sector units in India, namely, Defense Production, Railways, Post, and Telegraph. The role of Defense Production was to ensure that the nation maintained a strictly guarded border, Railways helped in the transport of resources, and Post and Telegraph were crucial for functional and strategic reasons. 

However, after independence, Jawaharlal Lal Nehru, the first Prime Minister of India laid the foundations of public enterprises in India. Josip Broz Tito and Abdel Gamal Naseer supported the Prime Minister in their decision. The total investment in 1951 in the public sector was less than half a billion Euros. In today’s time, there are about 247 enterprises with a growing investment of around 130 billion Euros. 

The above picture describes how rapidly public enterprise businesses are expanding in the country.

The substantial contribution that government enterprises in India make to the resources of the Central Government serves as one of the major reasons for their evolution. 

What is the Importance of the Public Sector in India?

• India is a country with a varied geographical spread, and hence public sector enterprises ensure that there is a balance in the regional investment. There are several regions where public sector enterprises in India require concessions and incentives to persuade them to operate. It ensures that multiple industries grow and flourish in various parts of the nation. 

• Combined controls of public enterprises in India ensure proper economic functioning along with effective scales of economics. 

• In comparison to the private sector, employees can receive a fair deal in the public sector. It employs nearly 1.9 million people as compared with the private sector employing nearly 0.9 million people. Thus, the development of public enterprises in India benefits consumers as well as employees.

• The importance of public corporations can be seen from the fact that public enterprises account for nearly 20% of India’s GDP. It is because the sector enhances export earnings as well as import substitution by paying dividends to the government. 

Role of Public Sector Enterprises In-Country Development

The public sector initiated several jobs to tackle the problem of unemployment in the nation. It has contributed a lot towards the improvements in working conditions, as well as in the living conditions of workers. The public sector enterprises in India have taken the lead to initiate development in the strategic sectors that provide externalities to the economy. It has arranged a robust and wide base for self-reliance in the field of maintenance, technical know-how, machinery, cultured industrial plans, and more in the country. 

Public sector undertakings in India have located their different branches in the various parts of the nation. By bringing about a comprehensive change in the socio-economic life of workers, public enterprises have settled certain facilities. 

Initiatives are taken to improve the performance of the Public Sector in India

Public enterprises are crucial for the Indian economy as the rate of return on capital investment is very low. That is why the Government took various steps to enhance the overall performance of the public sector liberalization and to enhance the portfolio as well as performance, the Indian Government announced an Industrial Policy in July 1991. Liberalization, Privatization, and Globalization of the Indian economy were explicitly stressed. 

• In July 1997, nine central public enterprises, namely BPCL, BHEL, HPCL, GAIL, SAIL, IOC, ONGC, MTNL, and NTPC, were identified as ‘Navratnas’. All these enterprises got sovereignty for capital investment, raised capital from domestic or international markets, and entered into joint ventures.

• Further in October 1947, the Indian Government identified 45 Miniratnas as public enterprises in India and granted an allocation of financial power. 

• Over many years, the Indian Government stressed on stimulating the loss-making enterprises. BIFR, Board for Industrial and Financial Reconstruction helps them to prepare appropriate renewal packages.

• The Government of India created a Board for Reconstruction of Public Enterprises. It aims to offer advice on proposals of restructuring loss-making sector units along with those for closure. 

• The expansion of the public sector in India aims to fulfill the national goals such as a reduction in income inequalities, removal of poverty, and more. It not only promotes research and development but also contributes to promoting export and foreign exchange earnings in India.