Category: Commerce Notes PPT

Intermediaries are the middlemen between any two parties that are partaking in a transaction. These middlemen act as the bridge between them and help in exchanging necessary information towards fulfilling the objective of a common goal.

In a stock market, or business, or any traditional marketplace, these intermediaries act as the connecting links between the producers and consumers. They facilitate intermediate action or transactions between those parties.

To understand their functions in the marketplace and the role they play in providing a common platform to the players, one has to understand the types of Intermediaries. Depending on the type of intermediary, their functions are also predefined. You should also note that there can be intermediaries at various levels of a supply or distribution chain. Hence, these levels could be a parameter to decide the roles of an intermediary.

Who are Intermediaries in a Stock Market?

An intermediary in a stock market is a person or an organization which helps people to invest their money in various company stocks. A person involved in such intermediary activities is usually called a fund manager. 

Generally, among the types of Intermediaries in stock market, it can be one of the following –

• Underwriter: As the name implies, underwriters are entities directly associated with a company or an organization. Their primary function is to manage people and talk to them regarding investment in multiple schemes or so.

In India, for instance, an insurance company can be an underwriter. It charges a certain fee for providing you with insurance services under certain terms and conditions.

• Merchant bankers: These are institutions that extend funds to a company in place of loans and share the ownership of that particular company. So, they gain a right to have a say in the corporate affairs of that organization where they have invested.

Hence, merchant bankers become a link between large organizations and external markets. For instance, in India, State Bank of India, ICICI Bank, Punjab National Bank are some of the merchant bankers.

Also, these types of Intermediaries invest in bonds, derivatives, mutual funds, etc to make more money out of their investments.

• Debenture Trustees: These personnel are registered with the Securities and Exchange Board of India (or SEBI) and function based on the rules cited in SEBI Guidelines, 1993. These personnel are monitored by SEBI on their functions of creating security, complaints redressal, interest payments and debenture redemption.

They act as the connecting links between debenture holders and the organization or company whose debentures have been purchased by those holders.

• Stockbroker: Such brokers are part of the stock market as they assist in trading of securities. Although they charge a specific fee for facilitating such trading, their work is more effective than others. One of the most viable reasons behind such efficiency is their knowledge of the stock market. 

A trader lacks such knowledge and is likely to end up buying or selling securities at a higher price than it should be. In such conditions, an intermediator can help in linking the stock exchanges and traders rightfully.

 

What are the Types of Intermediaries?

Based on the functions and areas the intermediaries perform their tasks, they are divided into specific categories, that are listed below –

1. Agents and Brokers: These are personnel who are directly associated with the organization or stock exchanges. They function to link the buyer and sellers. Agents and brokers also handle the necessary paperwork.

2. Distributors: They are appointed by the manufacturing company directly and act as a link between the wholesalers and the company itself. For instance, businessmen purchase from the company and distribute it to the wholesalers for further selling.

3. Retailers: These are the connecting links between the consumers and wholesalers. Their job is to purchase goods from wholesalers and sell it to the end-customers.

4. Resellers and Wholesalers: Wholesalers purchase from distributors and sell it to multiple retailers. They buy goods in bulk and sell them after that to other businesses or retailers. 

Among the types of intermediaries, agents and brokers are the first of their kind and people generally consider them as the only kind of intermediaries.

 

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The Financial Intermediaries’ Role

The distinctiveness of financial intermediaries such as banks and insurance companies is the cause for their all-pervasive nature. As previously stated, banks frequently act as “intermediaries” between individuals who have resources and those who seek them. Financial intermediaries, such as banks, are asset-based or fee-based, depending on the type of service they provide and the type of clientele they serve. Institutions such as banks and insurance companies are asset-based financial intermediaries, whereas fee-based financial intermediaries charge a fee Portfolio management and syndication services are provided through intermediaries.

Recent Developments

Recent trends in the evolution of financial intermediaries, particularly in the developing world, have demonstrated that these institutions can play a critical role in poverty reduction and other debt reduction programmes. Some measures, such as reaching out to the people with microcredit, have improved the economic well-being of formerly marginalized groups of the population.

Furthermore, financial intermediaries such as banks are maturing into “financial hyper marts,” or umbrella institutions that cater to the complete demands of both investors and borrowers.

Financial intermediaries play an important role in today’s global economy. They are the “lubricants” that enable the economy to function. Due to the increased complexity of financial transactions, financial intermediaries must constantly reinvent themselves and respond to new needs.

the investors’ different portfolios and needs Financial intermediaries bear a large amount of responsibility for both borrowers and lenders. The name “intermediary” implies that these institutions are critical to the economy’s operation, and they, along with the monetary authorities, must ensure that credit reaches the poor without harming investors’ interests. This is one of the most significant issues they face.

Units of Production Depreciation Method

Depreciation refers to the decrease in the assets value because of the effect of time, wear and tear, obsolescence because of advancements in technology, etc. Depreciation also comprises amortization. The Units of Production Depreciation Method, also known as the Units of Output Method, plays an important role to determine the charges on the assets depreciation.

Units of Production Depreciation Formula

The method to charge depreciation on the assets depends on the number of units that are produced throughout the year. The criteria to provide depreciation is the total estimated cost of the production. This is applied when the total equivalent units of production are equal to the value of the asset. Hence, during the years when there is a higher usage of the asset, the depreciation amount is high. Plants and machinery are some of the common assets on which this method is implemented.  

Consider, for example, that a given machine has a total capacity for producing 10,00,000 meters cloth during its lifetime. Then in this case it is essential to follow the units of production depreciation method. 

The total depreciation amount for a year is determined when the total depreciable amount of the asset is divided by the estimated total production multiplied by the units. This figure is then multiplied by the total number of units that have been produced in the year.

The Units of Production Method Formula is given by

Annual Depreciation = Depreciable Value x [frac{text{Units produced during the year}}{text{Estimated total production}}]

The Depreciable value = Original cost – Scrap value

Solved Example to Calculate Units Of Production Depreciation

Example:

A textile company bought machinery for ₹2,00,000 on the 1st of January that has an approximate 10 years of useful life and about ₹20,000 estimated residential value. The asset is sold by the firm at its residential value during the end of 10th year. The expected production units of the machinery is 15,000 during the course of its useful life. The current production pattern of the machinery is:

Determine the Total Amount of Depreciation with the Help of the Units of Production Method. Pass the Required Entries of the Journal and Prepare the Machinery A/c.

Solution:

Calculation of Depreciation With the Help of the Units of Production Method:

Depreciable Value = Original cost – Scrap value 

                                  = 2,00,000 – 20,000 

                                  = 1,80,000

The Units of Production Method Formula is given by

Annual Depreciation= Depreciable Value х (Units produced During the Year)/(Estimated Total Production)

Journal Entry in the Books of the Textiles Industry is as Follows:

Communication

Communication is a process of exchanging ideas, behaviour, signals, emotions and feelings through speech, thoughts, ideas, information, etc. This process includes a sender, a receiver, a message and a channel. The sender encodes a message and sends it to the receiver through a channel or a medium. The receiver decodes the message after receiving it and then responds to the message. This process goes on until the communication is complete.

This process can be depicted through the following image:

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Types of Communication

The understanding of different categories of communication enhances professional and personal relationships, resolves misconceptions and misunderstandings, contributes to a successful business and happy personal life. The broad categories of communication are:

1. Verbal 

When words and language are used to deliver the message, it is called verbal communication. Oral and written communication are types of verbal communication.

2. Non-verbal 

Messages sent without using words such as through body language, paralanguage, aesthetic communication, appearance, symbols, etc is called non-verbal communication.

3. Visual 

Communication through colour, illustration, graphic design, drawing, typography, signs or electronic resources, etc. is known as visual communication. This type of communication reinforces written communication.

4. Formal

Formal communication is the ones that follow specific rules, conventions and principles to decipher the message. 

5. Informal

Informal communication is casual, unofficial and friendly communication which does not follow any chain of command, formalities, systems, processes or rules.

Written Communication Meaning

Written communication plays a vital role as it is the documentary proof for any communication. It can be referred again and again and anytime in the future whenever required. Written communication is normally in the form of Bulletins, Emails, Memos, Instant messages, Reports, Job Descriptions, Employee manuals, Internet websites, Letters, Proposals, Telegrams, Fax, Postcards, Contracts, Advertisement, Brochures, etc.

Effective Written Communication

From the first cry of the baby until the last breath of the person, communication is as essential as breathing. The written communication is often marred by obscurity, partial understanding, misconceptions, misunderstandings and confusion. Thus, while interacting with others, several aspects of effective written communication should be kept in mind. 

Some of The Basic Effective Written Communication Strategies Are Discussed Below

1. Clear

The purpose of the message should be clearly stated in the written communication. The language should be kept simple. Also, convoluted and long sentences are not preferred and recommended. Separate bulleted paragraphs and points make grasping of the message easier for the reader.

2. Concise

Brevity is the essence of effective written communication skills. Always avoid using long, highly elaborative details, irrelevant words or adjectives. Repetitions should also be avoided.

3. Concrete

Abstract ideas and thoughts always lead to misinterpretation. So always ensure that your written communication is based on facts and figures and has sufficient detail to support your message and has a focus on the main message.

4. Coherent

Coherence in written communication implies a logical bridge between paragraphs, sentences and words. The key to coherent and effective written communication is easy to understand, sequentially organized and logically presented data and information. Every aspect of the content should be relevant, interconnected and should have a flow of information.

5. Complete

A complete written communication implies delivering all the data, facts and information as required based on the recipient’s attitude and intellect. It aims at building a company’s reputation and decision making.

6. Courteous

A major aspect of effective written communication is that it should be honest, open, respectful, considerate and polite. Ensure that the message or words used are not offensive and do not have any hidden negative tone.

7. Focus and Attention

There can be many distractions while having communication. Due to these distractions, one may miss important points or cues in written communication. So, It is imperative to keep the focus and attention for effective communication.

8. Emotional Awareness and Control

Intense emotions can undermine a person’s capacity for rational decision making. Keeping in mind the state of emotions of yourself and others while communicating makes the interaction smooth and the process of communication flowing.

Limitation of Written Communication

When not to use written communication is also a point of pondering. It cannot be the case always that written communication would be conveyed appropriately, or the receiver would correctly decipher the same. Following are some of the situations when not to use written communication:

• When transmitting short messages, written communication becomes more expensive and takes longer to transmit

• Written communication does not have any scope of amendments once dispatched

• Written communication can never be used to clear misconceptions and confusion

• For informal communication written communication cannot be preferred

Conclusion

A virtuous and satisfactory written communication when it conveys the purpose of writing to the reader in the best possible way and the reader reads it willingly, with interest, and does not feel that his time is wasted.

An accounting period is defined as the established time period during which the accounting functions are performed. The functions are aggregated and analyzed in the same calendar or the fiscal year. 

The calculation of the accounting period is important as this forms the base for the investors to invest in a particular business. The concept is necessary as this will help the investors to analyze the financial performance of the business based on the financial report of a fixed accounting period.

An accounting period is rightly known as the time frame. In this time frame, a business prepares its own financial statements and reports the financial performance and position of its business to the external or the interested stakeholders. 

The accounting Period is generally after every three, six, or twelve months. The accounting period maximum times coincides with the business’s fiscal year. There are other business entities that follow the accounting period of three or six months.

In the internal system, the accounting period is considered to be a month or for a quarter while externally the accounting period is for a period of twelve months. The International Financial Reporting Standards (IFRS) allows a 52-week period which is known as the fiscal year, instead of a full year, as the accounting period.

What are the Types of Accounting Period?

Calendar Year

Generally, the accounting period follows this Gregorian calendar year which consists of twelve months. The month starts from January 1 to December 31. The accounting period follows this natural sequence of these 12 months.

Fiscal Year

The fiscal year is an annual period that does not end on December 31. The International Financial Reporting Standards (IFRS) generally allows 52 weeks as the accounting period. There are companies that follow the 52 or 53 weeks fiscal calendar that help with financial tracking and reporting.

The Internal Revenue Service (IRS) allows the taxpayers to either use the calendar year or the fiscal year for reporting their tax.

If a business wants to change from a calendar year to a fiscal year, they need to be permitted by the IRS.

4–4–5 Calendar Year

This is the most common calendar structure for especially in the retail and manufacturing industries. In the 4–4–5 calendar, a particular year is divided into 4 quarters. With each quarter having thirteen weeks that are grouped into one 5-week month and the other two 4-week months.

This information is quite important for business owners, investors, creditors and government agencies. The time period assumption provides the stakeholders with reliable and relevant financial information to make their reliable business decisions in a timely manner.

The choice of this accounting period depends on the business requirements and circumstances that might be complex to warrant other accounting periods. Hence, all businesses are allowed to define as many periods as they require as long as they meet the legal requirements.

What is the Accounting Period Concept?

The corporation compiles and arranges its financial activity during the accounting period. At the end of the accounting period, the accounting cycle is used to compile financial statements. The accounting period is the length of time it takes for a business’s accounting cycle to be completed. Because the accounting cycle captures all transactions across time and reports them in the form of financials, one accounting cycle equals one accounting period. The cycle starts with the financial books at the start of each financial period with reversing entries and ends with year-end closing entries at the end of that period. Businesses must prepare financial statements before the start of the next accounting period to complete this cycle.

What is the Significance of an Accounting Period?

The accounting period allows the business owner to see the business from a different perspective. Their continued profitability and other business decisions keep them informed. Firms use the concept of periodicity to do this. For business owners, investors, creditors,and government authorities, this information is critical. 

The period assumption allows stakeholders to make timely business decisions by providing them with reliable and relevant financial data. This accounting period is chosen based on the business needs and conditions, which may be too complicated to warrant other accounting periods. As a result, all businesses are free to define as many periods as they need as long as they comply with the law.

Advantages

The following are some of the advantages and benefits to financial statement users: It can be used to show a company’s financial situation over a set period. It can be used to compare financial data from two or more periods. This approach aids the organization in establishing a formal period during which the books must be closed. The notion is important for investors because it allows them to compare the trends of financial results over time.

Disadvantages

If the matching principle is not followed, it may not be useful. When comparing outcomes from one period to the next, the factual causes for the differences are ignored. If the tax period is different, two separate accounts must be kept. 

Delegation of authority and responsibilities is commonly referred to as decentralization, in which the organization is divided into different sections and departments to help the organization grow scientifically and with a purpose of direction, resulting in harmony in relationships and a healthy environment, which is typically absent in centralized systems of organization. The term “decentralization” refers to the dispersal of power, and it is the process of assigning specific responsibilities to subordinates. When such a responsibility is delegated to subordinates, it is always accompanied by an appropriate authority, which is also empowered to the executive and other lower-level assistants. As a result, decentralization refers to the assignment of responsibility and delegation of management to various executives and other subordinates at lower levels to make the lower level more accountable and capable of doing the task committed to them.

Advantages of Decentralization

1. Distribution of the Executive’s Burden

The decentralized setup allows the executive to share his burden with others at a lower level, freeing him to focus on more pressing and critical tasks that require his full attention. This smoothens the job, speeds it up, provides a friendly atmosphere, improves comprehension, and fosters team spirit among all individuals who work for the company.

2. Greater efficiency and output

Because the responsibility comes with authority and power, everyone entrusted with it takes great care to fulfill it to the best of his ability. This level of attention and caution and the enthusiasm they approach their work to ensure greater efficiency and productivity.

3. Expansion Facility

It allows for further corporate expansion because the decentralized setup frees up top management personnel from routine and other responsibilities, focusing on fresh thinking and ideas. This provides for plane expansion to be achieved with little difficulty. The development of modern business houses directly results from the decentralized organizational framework.

4. It breeds innovation and flexibility.

More creative individuals can make their thoughts and be encouraged to develop and develop out-of-the-box solutions because there is less bureaucracy and obstacles to the open flow of ideas. Aside from that, those in specialized or local departments have a greater awareness of their work and the market’s unique needs and challenges, allowing them to deliver appropriate solutions to react to changes in their area or market more quickly.

Disadvantages of Decentralization

Despite the benefits of decentralization, there are specific difficulties in applying it to all circumstances and under all conditions. The actual hurdles to decentralization are as follows:

1. Issues with Coordination

Decentralization allows for the management of highly competent individuals to be carried out by highly skilled individuals. Because of the fragility of their financial holdings, it is probable that such individuals will be unable to come to an agreement.

2. Factors from Outside

Decentralization exacerbates the problem of inter-unit coordination.

3. Increase the cost of administration

Decentralization isn’t always possible. External forces, such as widespread strikes, make this difficult.

4. Operational costs are high

It computes the authoritative expenses on the basis of the assumption that well-paid administrators must be selected for the position.

An article writing is a kind of writing that is written to reach a massive audience with the help of the press. In the case of article writing, the press refers to publishing houses of newspapers, magazines, journals, etc. Writing a newspaper article, or writing a magazine article is not easy. It requires a lot of research and writing skills. It is written in such a way that it can inform the masses about a certain topic. The main aim of the writer here is to bring some difference in the world by changing the views of the people through article writing.

Types of Article Writing

There are various types of article writings. These are writing a newspaper article, writing a magazine article, SEO article writing, online article writing, freelance article writing, and many more.

There are divisions among these articles also. Some of the articles, like online article writing, freelance article writing, can be descriptive, or narrative that depends upon the writer and the client for whom the writer works. There are a few types of article writing that most people know about. It includes narrative and descriptive types but there are many more types other than these two. These are persuasive article writing and expository article writing.

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The most important among the types of article writings is SEO article writing. It has gained huge demand for this new generation. SEO article writing is nothing but the search engine optimization of the article that is written. The question that may arise here is how can one ensure that one’s article has achieved its goal.

To answer this question, one will have to do some research on the internet. There are several ways in which one can use most of the search engine optimization techniques. First, among them is to use keywords. Keywords refer to important words of the article that could be used several times in a paragraph or in the article to highlight the importance of the word. By doing this, the reader will be able to see the particular article among the first few results, when he searches for that category of articles in the search engines.

There are also many other options that are discussed below.

One must be consistent with using the keywords. The keywords must relate to the topic of the article; if it is not relevant to the topic, the keyword will not be considered to be effective.

While writing a news article, or any other article for that matter, one must ensure that there are no grammatical errors.

The authenticity of the article must be checked before it is uploaded on an online platform.

These are the minimum things that should be considered before one can improve one’s article writing skills. Though, in the case of writing a news article, the content of the article is of utmost importance. One should keep the content original and present it creatively.

On the internet, there are many article-writing examples available. It helps the writer who is writing an article for the first time, to understand the concept better. There is also an article writing example given below. Readers can refer to that example as well for a better understanding of the format of article writing.

Tips for Article Writing

Let us get to understand some of the points that you shall remember while attempting a topic of the writing section. 

For any given topic, you shall first be able to understand it clearly. You should be able to draw related inferences for everything that comes to your mind. Usually, in this step, your brain is flooded with a lot of thoughts and your job is to be able to identify and filter them based on your requirements. Attempting such questions without planning is never a good idea because your content will not be organised unless you organise the flow of the content. Hence, the best way before getting started with such questions is to make sure that you have a clearer picture of what the question is asking you and this way, you will be able to deliver captivating content. 

Before starting the writing part, one should arrange the pointers in the correct sequence. It should be a logical sequence keeping in mind the objectives. Cross-checking each point whether it is relevant and needed to complete the content is again another point to be considered. Preparation of an outline is important as well as useful as it helps us know what to do next and how much is left. You should be careful while preparing an outline as it should contain all the topics and that too in the correct sequence.

Revisiting all the points by reading them again is one of the important tasks for a well-written part. While revisiting you might come across some of the content which is not required, so one should leave the unnecessary points which are making the content lengthy without adding quality and relevance to the content. Then, logically rearrange the points so that the important points come first in the sequence and others follow. 

Now after keeping all the above-mentioned things in mind, start writing. With a strong and relevant introduction one should start, followed by the correct sequence of the points adding a necessary explanation. To the point information without unnecessary elaboration always adds perfection to content.

Last but not the least, an important aspect to be considered is proofreading. Before the final submission of content, you should go through the complete content once more. Again edit the unnecessary ones and complete them. After completing the entire process your content is ready.

Other important tips that can be used to produce a good piece of writing content are mentioned below. Students shall consider referring to them whenever they plan to conquer questions of such kinds. 

Solved Examples

1. What is the Format of Article Writing?

Ans: The format of article writing is very easy and simple. One has to follow a few instructions to understand the format of the article writing.

Write a brief introduction in a paragraph.

Write a body of two to three paragraphs, including all the main content and points of the topic in these paragraphs.

Write a short conclusion of the article.

There is a picture attached below to give the readers a better view of the format of the article writing.

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Did You Know?

Articles almost connect their readers with the content within a very short time. It is like a direct conversation with the reader.

The main aspect of article writing that attracts its readers is the content. The content must be interesting, else no one will read it.

The article must be simple and to the point. It must not be too complicated. If it is complicated, the readers will lose interest.