Category: Commerce Notes PPT

For any nation across the world, an underdeveloped economy can be a major concern. It reflects the financial capability, status of citizens, their living and health conditions, and similar other things that are closely associated with the economy. This article will be of help to those who wish to know about this aspect of the economy. When someone refers to this term, it means that they are referring to the per capita income and low level of the standard of living of that particular area/ place. 

 

What is an Underdeveloped Economy?

The economy plays a fundamental role in every nation. There have been several countries including India which have righteously recovered from the image of the underdeveloped country by removing the problem of the underdeveloped economy in the country. Without clearing the concept of an underdeveloped economy, an individual cannot understand the struggle and hardships that occur along with this crisis. 

 

The common characteristics of this form of the economy are low living standard and per capita income, high rate of unemployment, excessive population growth, lack of capital and advanced infrastructure, and lack of education. These are the key features that can separate the economy into two parts which are developed and underdeveloped.

 

Difference Between Developed and Underdeveloped Economy

The economies that have high per capita income and support a high standard of living are referred to as developed economy and, on the other hand, economies that have low per capita income resulting in a low standard of living is referred to as underdeveloped economy. 

In such an economy there is a lower rate of poverty incidence, service and industrial sectors are thriving. There are a sufficient amount of resources and technological advancement supporting a high rate of production. Most importantly, there is a minor gap between the poor and the rich. 

There is a significant amount of poverty and the primary sector like agriculture is in a leading position. The resources in this form of the economy are not judiciously utilised and there is a high rate of dependency on traditional approaches which results in a low rate of production. Most importantly, there is a significant amount of difference between the rich and the poor. In such an economy, the state or the country fails to meet the necessary standard of living for the major section of a population. This leads to materialistic deprivation, misery, hunger, deterioration of health and overall living standard. 

 

Understanding the Concept of Underdevelopment

While talking about what is an underdeveloped economy, it is first important to understand the concept of underdevelopment. It is a relative concept as it compares the quality of life through the economy that creates the difference between a developed population and an underdeveloped population. The concept refers to the sustenance of absolute poverty which refers to the kind of poverty, where people are unable to fulfil their basic needs, like, food, clothing, shelter and similar things as such. There is a constant struggle among people to survive. 

 

Thus the meaning of absolute poverty is equivalent to the meaning of an underdeveloped economy. Some of the common characteristics of the underdeveloped economy are low per capita income, economic inequalities, the slow growth rate of per capita, low-productivity labour and lower level of living, rudimentary techniques of production, low rate of capital formation, lack of resource utilization and similar things as such. 

 

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We all know that a joint venture is a contract between two or more parties to carry on a specific business for a set period of time. It is jointly controlled by all joint venture partners, and profits and losses are divided according to the agreed ratio. It also comes to an end when the time limit expires or the specific goal is achieved. Co-venturers are the partners involved in a Joint Venture. In this article, you will understand memorandum joint ventures, their importance, and samples. Let’s look at how to make a memorandum Joint Venture A/c. 

A memorandum joint venture account is a type of venture to determine the profit or loss of a joint venture. The co-ventures are paying their expenses which are debited from their Account and profit made by the co-ventures is credited in the respective co-ventures name. The memorandum of joint venture account is an agreement when two or more parties who are called co-ventures join together to execute a business for a limited period of time. A Joint venture memorandum account is managed jointly by all the parties to the joint venture. The profits and losses earned in this agreement are shared as per the specified ratio.

How to Maintain Memorandum Joint Venture

Step 1 – In this case, the Co-venturers can maintain the records separately, and there are different books of accounts for the joint venture. This can be done in the following two ways:

1. Put the records of all the transactions

2. Put the records of own Co-ventures transactions. 

So, the co-venturers keep the record of their transactions only, so we make the Memorandum Joint Venture Account. 

In this case, each co-venturer of the joint Account records only his transactions.

Joint Venture Memorandum Account

Each co-venture opens a ‘Joint Venture’ with their AccountAccount. Each of them then debits all the income, losses, profits, and expenses from the joint venture to this AccountAccount. However, we cannot estimate the profit or loss from the venture from this AccountAccount. We prepare ‘Memorandum Joint Venture A/c’ for estimating the profit or loss of the Joint venture. 

Each co-venturer sends a regular statement of their transactions as per the joint venture to the other co-venturers involved in the joint venture.

This final statement helps in the preparation of the Memorandum Joint Venture A/c. We call it a memorandum Account because this Account is not a part of the double-entry system. 

Importance of Memorandum Account

The important features of the Memorandum joint venture account are:

• Each co-venturer has only one personal account named Joint Venture account in his book (Name of other co-venturer). In his books of accounts, the other co-venturer will follow the same procedure.

• Each co-venturer will open only one personal account, irrespective of the fact that the other co-venturers are present. In the case of joint ventures of 4 people, A, B, C, and D, A will open only one personal account in his books, named Joint venture with B, C, and D.

• Only the transactions that are done by him, will be recorded in his book; transactions performed by other co-venturers will be ignored.

• A combination account named “memorandum joint venture account” will be opened in addition to the above personal account.

• A memorandum account is just a combination of personal accounts that each co-venturer has opened. The personal account’s debit side will be transferred to the memorandum account, and the personal account’s credit side will be transferred to the credit side of the memorandum account.

• Transactions between co-venturers, such as cash received or paid from one co-venturer to another, will be ignored when a memorandum account is prepared.

• The profit or loss of the particular business will be represented by the balance of the memorandum joint venture account. Furthermore, the profit or loss will be transferred to each co venturer’s profit-sharing ratio.

Sample Memorandum of Understanding for Joint Venture

Suppose there are two Co-venturer, A and B. 

1. A Co-venturer will open his account in his book, and it will be titled: Joint Venture with A Account, which is a personal account. It does not show the profit or loss of a Joint Venture. A Co-venturer debits the Account with his expense and credits the Account when he receives income. 

2. In this case, only A records only his transactions. No account can be incurred etc. by the other co-venturer B.

Journal entries made in the books of one party say, Mr. A and the other Co-Venturer Mr. B.

The above is a personal account. It does not display any profit or loss of the Joint Venture. To get the profit or loss of Joint Venture, we have to prepare a Memorandum Joint Venture Account. To prepare a Memorandum Joint Venture Account, one co-venturer A will have to send another co-venturer B a copy of the Account kept by him.

Based on the copy of the Account and his Account, Memorandum Joint Venture is prepared. In short, the Memorandum Joint Venture Account is just a collection of Joint Venture Accounts prepared by all the co-venturers.

Performance Appraisal and Modern Methods of Performance Appraisal

Performance appraisal refers to the methodical assessment of the employees’ performances, with proper identification of their abilities and channelizing them towards better productivity and development. This review of the performances is done to bring out the strengths and weaknesses of employees to use them effectively in the future.
The modern methods of performance appraisal are stated below: 

• Assessment Centre Method

• Behaviorally Anchored Rating Scale (BARS) Method

• Human Resource Accounting Method

• Psychological Appraisal Method

• Management by Objectives

• 360 Degree Method

• 720 Degree Method

A Detailed Analysis of the Modern Techniques of Performance Appraisal

Assessment Centre Method: 

As a part of the Assessment Centre Method, employees’ performances are evaluated to bring out their potentiality, further allowing a systematic placement in key departments. The interpersonal abilities, intellectuality, career setting goals, motivation and the ability to plan and organize are determined through this process.

Behaviorally Anchored Rating Scale (BARS) Method: 

BARS method helps in determining the key areas in the performance of an employee, suggesting areas of improvement to build the steps to achieve goals. As a part of the performance management, employees have a predefined behaviour recorded with the organization for effective performance. This method of appraisal analyzes the present behaviour of an employee in comparison with the predefined one. This makes the employees aware of their deviations and required improvements.

Human Resource Accounting Method: 

This method takes employees as assets evaluating their performance in monetary terms. Performance appraisal is analyzed based on the cost incurred and contributions provided by the employees, where contribution should remain higher than the expenditure incurred on the employees.

Psychological Appraisal Method: 

As a part of this method, psychological tests are conducted to determine the prospects of the employees instead of their past work analysis.

Management by Objectives: 

The MBO method originally proposed by Peter Drucker is implemented for setting goals for ultimate success. Setting smart enough goals can analyze the performances in line with the predetermined goals for better productivity. Douglas McGregor added to the concept defining the confined reach of the traditional methods setting goals examples for the organization as a whole.

360 Degree Method: 

In the 360 Degree Method, an employee’s performance evaluation surveys are conducted on colleagues, managers, subordinates and customers keeping their identities anonymous.

720 Degree Method: 

This system includes a synchronized method of appraisal where a 360-degree appraisal is combined with in-time feedback followed by further evaluation for setting goals smart and achieving them.

What is a SMART Goal? 

The characteristics of a SMART goal are:

S- Specific

M- Measurable

A- Achievable

R- Relevant

T- Time-Bound

In all modern methods of performance appraisal, setting goals is essentially done keeping SMART elements in mind. Why should this be limited to the professional field? Setting goals in life should also be done giving SMART elements the topmost priority. Only then, one can achieve them and learn from them effectively. 

Steps in Goal Setting

Setting goals is important. The following are the various steps in setting goals:

• Mutual discussion and agreement between the management with the employees bringing out the best suitable roles for the employees. 

• By setting goals smartly, employees define their objectives for the following year or a span of certain years.

• The employee consults with the manager on devising the plans.

• The manager at regular intervals evaluates the progress of performance of the employees.

• Evaluating the outcomes after the predefined time period in accordance with the organizational goals.

• The appraisal is followed by a new plan of action defining the steps to achieve goals.

Limitations of Goal Setting

Setting goals for employees examples require setting goals in life in line with their organizational goals. However, there are limitations of goal setting in organizations as discussed below:

• Such steps to achieve goals can be applied only in organizations bringing out definite outcomes. This is not applicable in the case of blue-collar workers.

• It is a time-consuming procedure requiring patience and effective coordination, without which hindrances might occur.

• This is better applied only in the case of executives in the high levels who have established better communications with the low-level ones in devising new ideas and plans.

• Setting goals is not a favourite for the operator workers who refrain from taking up initiatives.

Nature of Business- Definition, Concept

The word Business is derived from ‘bus- ness,’ for example keeping oneself busy with either work, yet it is substantially more than being occupied.

To have a superior comprehension of what a business is:

The whole sole purpose of the economic activity nature of a business is maximising wealth agenda

The service or goods incurred in a business creatures utility, that is, the conversion of product in a consumable form. Time utility occurs when the making of the services or goods are available when there is a need for them. Finally, place utility occurs when there is an availability of the services or goods wherever required, for the consumers.

Any endeavour requires a store contingent upon the size and its sort.

It is identified with assembling and offering merchandise available to be purchased or providing food administrations. 

The underlying rationale of a finance manager is making a benefit out of his endeavour.

It is worried about the fulfilment of the client’s requests and needs.

There are significantly two gatherings included, the client and the product.

It has some social duties, such as making openings for work, managing authorised items and so forth.

Importance of Business

Business is an independent work that opens the door for an individual to become self-reliant and ace his thoughts. It isn’t just gainful to the proprietor yet additionally affects society. 

It is the way to income age for the entrepreneur since it acquires benefit and ends up being a wellspring of pay for the proprietor. 

It is fundamental for the financial development of a nation since high income implies a higher duty assortment.

• Improves Standard of Living:

A country with more modern units and organisations experience a higher pace of business and better expectations for everyday comforts.

It includes conceptualising and age of groundbreaking thoughts which opens up the path for development.

It is a drawn-out cycle which requires the human asset to work effectively. Consequently, it makes openings for work.

Business Risks

Business risk can be characterised as vulnerabilities or startling functions, which are out of hand. In basic words, we can say business hazard implies an opportunity of causing misfortunes or less benefit than anticipated. The financial specialists can’t constrain these elements, and these can bring about a decrease in service or can likewise prompt trouble.

 

Causes of Business Risk

Natural Causes

Natural causes of risk occur due to natural calamities like cyclones, flooding, earthquakes, and other natural disasters that can lead to the loss of properties and lives. For example, a delivery bike is on its way to deliver the good order made by a customer but is met with a storm along the way, leading to an accident. To escape natural causes, businesses need to take out comprehensive insurance coverage to manage every loss incurred.

 

Human Causes

Human causes are identified with an opportunity of misfortune because of individuals or representatives of the association. The deceptive nature of representatives can bring serious mishaps for business. For example, the workers may release a business mystery to a contender and may submit misrepresentation likewise bring substantial troubles by wastage of assets.

The representatives may hamper the creation by going on strikes, riots and so on. This cause can likewise prompt substantial loss of business condition. There can be value variances in the market; there can be an adjustment in style, taste, inclinations, and requests of clients.

 

Monetary Causes

Monetary causes are identified with an opportunity of misfortune because of progress in the market. There can be an adjustment in the level of rivalry. All these directly affect the profit of the business.

Indeed, even change in Government strategy influences the business a great deal. For instance, in 1971, when the Janata government came to control the Coca-Cola Company, numerous other unfamiliar organisations were sent back to India.

 

Economic Causes

Economic causes involve situations like a growing increase in the prices of raw materials or labour costs, or the ever-increasing rise in the interest rates for borrowing, and competition.

 

Types of Business Risk

The business risk can be classified into two significant classifications: 

Insurable Risk

The dangers which can be recuperated are called insurable dangers. The misfortunes which can be made acceptable or misfortunes for which organisation can get pay from the insurance agency are called Insurable Risks. By and large, the common and physical dangers are insurable.

Non-insurable Risks

The dangers for which no security is accessible are called Non-insurable hazards. The finance managers can’t get paid for an adjustment sought after or misfortune because of carelessness or thoughtlessness of representatives.

Introduction to Note Making

In the world full of knowledge, we are always puzzled with how to remember all the information that we come across. Every single information cannot be remembered. Also, when we come across a lot of information, the main extract is lost sometimes. That is why we need to note down some of the knowledge and information briefly. Hence, note making is one of the most convenient ways for everyone. We should filter the main messages and information from the source and then write a note on that topic. 

You can go through some note writing samples to get various useful note making tips. Therefore, start to implement great strategies and follow the proper way of note-making.

Format Of Note Making

Note making follows a fixed and particular format. Refer to some note making samples to know the good note-making formats. Here is one of the best formats of note-making.

• Heading: Like every article, note-making should also have a title related to the topic.

• Subheadings: In note-making, the main points can be portrayed very well by adding subheadings.

• Points: Note the subheadings. Note making samples include points to highlight the principal themes of the note.

• Keywords: Keywords are the backbone of any article. In note-making, keywords help to ensure a clear understanding of the topic.

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Strategies Of Note Making

While making a note, you should be careful about your writing style, and you should have a strategy to write a note accurately. You may follow writing notes tips.

• Title: Before starting note-making, go through the source material twice or thrice to have a good understanding of the topic. Then select a suitable title because the title of the note makes the first impression.

• Content: While writing the body, focus on the content you are adding in. Try to put as much information as you can. Never add your beats in a note.

• Readability: Include subheadings, bullet points, numberings to make it good to read. Do not use unnecessary, confusing elements. Try to maintain a particular font style and size.

Advantages Of Note Making

There are some advantages of note-making, and these are as follows.

• Personalized: Notes made by a person make it unique, and the writer is free to personalize it.

• Reversible: We can write notes on a descriptive article to compress it. However, from a note, we can write a brief description as well.

• Alternate: With time, you can make changes in your notes conveniently.

• Quick Learning: Notes help us to absorb a topic faster.

Procedure Of Note Making

• First, go through the topic again and again.

• Highlight the important parts you want to mention in the note.

• Make a rough note and organize them correctly.

• Use the correct format of note-making, by referring to some note-making samples.

• Do not miss out on the main extract of the source material.

Writing Notes Tips

Here are some common tips for writing notes. 

• Do not use any sentence as a title.

• Avoid less important information.

• Give brief, specific, and to the point description.

• Do not lose the main message.

• Do not put your own opinions.

• Add abbreviations, proper indentation, and logical sequences.

• Design the note with your style with colours and symbols.

• Put clear and straight-forward points.

Notes Writing Work From Home

Note writing is a trending job, in the era of digital marketing. You do not have to go to any office on your working days. It is available on various online platforms. You can join this job from your home as it is a work from home job.

Solved Examples

Q. Make a note on the given passage with a suitable title.

Nowadays, online classes are a new process of learning. It creates a virtual environment for learning without traditional coursework. Online classes do not compromise with the academic requirements and learner’s demands. It also includes fee savings, career flexibility, less stress, and a vast network.

Solution:

Importance of Online Classes

• New learning process.

• Virtual environment.

• Academic requirements, learner’s demand.

• Fee savings, career flexibility, less stress, increasing connections.

Did You Know?

In the era of this fast-paced lifestyle, we all are bound by tight schedules. There are a lot of things to do for us such as study, part-time jobs, extracurricular activities, and practice some hobbies for relaxation. To properly maintain our daily routine along with extra activities, we should make notes. Writing notes can help you to balance your work life and personal life properly. You will be able to tackle your busy schedule easily.

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The journal entry is recorded at the beginning of an accounting period for opening the books of accounts. It supports bringing forth the balances in the ledger accounts and is called the opening entry. The opening entry for the ledger account is based on the opening balance sheet. 

The various assets, liabilities, and capital that appear in the balance sheet of the previous accounting period are then brought forward in the books of a present accounting period known as an opening entry. 

What is an Opening Entry?

A business first decides to use the double-entry bookkeeping system, then it needs to record an opening entry in the ledger using the general journal. 

The opening of a firm will vary from business to business, this depends on the inclusion of contents of the opening balance sheet. 

The opening entries are those entries that are being represented in the balance sheet, this is the amount that is brought forward at the beginning of an accounting period from the end of the previous accounting year. The opening balance consists of the assets, capital & liabilities of the company that is being brought from the previous year’s Balance sheet. Check out the official website of or download the app for a comprehensive and easy to understand explanation. 

In a going concern type, the closing balance of the previous accounting period becomes the opening balance for the beginning of the next accounting year. The opening balance is then transferred to new ledger books for the new accounting period. While in most organizations, prefer a new ledger for transferring the opening entry. This balance appears on the credit or debit side of the ledger. 

An opening entry, in the books of account, is the initial entry that is used to record the financial transactions which occur at the start of an organization. The contents of the opening entry will typically include the initial cash flow for the firm, which is the funding of the business. 

Opening Entry Example 

On 1st January 2016, IP’s assets and liabilities are 

Assets: Cash in Hand Rs. 8,000, Cash at Bank Rs. 18,000, Stock Rs. 5,000, Account Receivable Rs. 6,000; Building Rs. 800,000, Investment Rs. 42,000; Furniture Rs 50,000.

Liabilities: Accounts Payable 80,000, Loan A/c Rs 120,000

Pass on Opening Journal Entry.

Solution:

Tally Opening Balance Entry

We can alter the opening balances of ledgers to zero by enabling the option of Zero Opening Balance. 

To set the opening balances of ledgers under group: 

1. Go to Gateway of Tally then, Accounts Info. After this click Ledgers, then go to Multiple Ledgers, then press Alter.

2. Select the relevant group (example, ‘Sundry Debtors’) from the List of Group. The Multi Ledger Alteration screen appears as shown below in the image

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3. Press Z: Zero Op Bal to set the opening balances of the ledgers to nil/zero. 

Opening Entries for New Business and Running Business

When a new business is first commenced, the assets and liabilities introduced into the business are required to be incorporated in the books of accounts by an opening entry that is being passed through the general journal by debiting the assets and crediting the liabilities brought in and also crediting the capital account with the excess of assets over liabilities. 

While, in the case of running a business, the opening entry is necessary at the beginning of a new accounting period when the new books of accounts are introduced to record the balance of assets, liabilities, and capital brought forward from the previous accounting period.

Opening Entry in Accountancy

Whenever we start a business or firm we record transactions to maintain records. We do our first entry in a ledger and that first entry done by institutions is called an opening entry or opening statement.

The contents of the opening entry generally include the initial funding as well as any initial debts incurred and assets obtained by the firm.

All firms maintain records and they are called ledgers in accountancy. The ledger records ball transactions carried by the firm. The entry in the ledger is made under single entry or double entry. The merger is divided into two parts where debits and credits of a firm are mentioned. The ledger should be balanced by the end of the  accounting year. This is also called bookkeeping in accountancy.

In continual business, the closing balance of the previous accounting period is an opening balance for the next year that is the current accounting period.

The opening entry of any firm differs based on the business and the opening entry can be either on the debit or credit side of a ledger.

Passing Opening Entry

As the accounting period starts the accountant of a particular firm passes a journal entry that contains all the details of the firm like the opening balance of all assets and liabilities including the capital.

Assets have a debit balance and therefore, assets are put on the debit side of the opening entry, while liabilities have a credit balance and are therefore credited in the opening entry.

A journal entry consists of : 

• Assets A/c 

• Liabilities A/c

• Capital A/c

If the assets exceed all the liabilities, the excess value will be regarded as a value of capital and will be shown as a credit in the opening entry, and if the liabilities overrun the value of the assets, then it will be debited in the opening entry.