Category: Commerce Notes PPT

Financial Planning includes all the activities that apply general management standards to the financial resources of a firm such as planning, directing, organizing, procurement of funds, investment, and return of the funds. In this article, students will learn about the meaning, objectives, and features of financial planning. 

Financial Planning is one of the major planning that is required to be conducted by the management. Financial Planning includes all the activities which are related to the procurement of funds, investing those funds, and the return expected from the investment done. Financial Planning also ranges from tax planning which is an important activity. This planning is very important for a business to function, in this regard we have initiated the discussion on this topic ‘Financial Planning’ which is to be studied in greater detail. The scope of this topic is vast hence for a conceptualized study this is to be referred to. 

Definition and Meaning

Financial planning is defined as a document that has records of a business owner or firm’s financial situation along with planning on the spending of money to achieve a certain goal by working by a well-devised plan. Financial planning may be made independently or by an experienced planner.

It is basically a financial budget plan, which helps organize the business and includes a set of goals that are supposed to be followed by the firm or business owner to save and spend accordingly. It helps distribute various monetary expenses such as rent, while at the same time saving some amount of money as short-term or long-term savings. 

Financial Planning is the process of estimating the capital requirement and also determining the competitive elements required for financial planning. This is a plan which has been defined as a document that contains a person’s current money situation with the long-term monetary goals, the strategies to achieve those goals on the basis of the current fund. A financial plan may be devised and drafted independently or with the assistance of a financial planner. The first step in the creation of a financial plan is to involve collecting the numbers from the web-based accounts into a document or a spreadsheet. 

This type of planning is also known as an investment plan as it manages various types of liquid and other assets that involve risk and uncertainty. Financial planning done by individuals is not as risky as they do not involve huge investment or undertaking, such as funds kept separate for college or university, estates, healthcare, or retirement.

Financial Planning in Financial Management

A financial plan is an overall evaluation of an individual’s current pay and future financial state by using the current known variables to predict the future income, asset values, and withdrawal plans. Financial Planning includes the budget which organizes the business and the individual finances and at times includes a series of steps or specific goals for spending and saving for the future. This plan distributes the future income to various types of expenses such as rent or utilities and also reserves some income for the short-term and long-term savings as well. A financial plan is sometimes referred to as an investment plan, while personal financing focuses on specific areas like risk management, estates, colleges, or retirement. 

Objectives

There two main objectives of financial planning which are given below:

• Ensuring Availability of Funds When Required: The foremost and most important objective of financial planning is to keep in check that funds are available in cases of emergency or whenever it is required for use. Sufficient funds should be available with the firms for various purposes.

• Check Unnecessary Fundraising by the Firms: Insufficient funds are just as bad as surplus funds. Idle money will only result in a loss for a firm as against investment. Therefore, proper allocation of funds is a very important part of financial planning.

The Objectives of Financial Planning are Enumerated as Follows – 

The foremost objective of financial planning is assuring that sufficient fund is available with the company for different purposes. 

Excess funding is as bad as inadequate funds. If there is a surplus amount of money, then the financial planning is to invest it in the best possible manner as keeping financial resources idle is a great loss for an organization as it will be in vain.

Features

There are a number of features of financial planning that are important for firms and individuals. These are listed below:

• Foresight: A plan made without foresight will only result in a disaster. Foresight is needed in planning for estimating risks and the need for liquid and other assets. It may not be 100% accurate but it should be able to give an estimate of the future risks.

• Flexibility: A plan made should be flexible as it will help in the future to make adjustments according to the needs. 

• Optimal Usage of Funds: A financial plan should be able to utilize idle money and assets so that they can prove to be fruitful in the future. It does not involve funds kept aside for unforeseen circumstances but the assets that could be otherwise utilized.

• Simplicity: Financial planning should be simple in terms of structure and should be able to provide a sound allocation of resources that can be easily understood even by a layman.

• Liquidity: It is also a very important aspect of financial planning which involves keeping current assets in the form of money. This will help in easy allocation and payment of various kinds like salary, fees, and other kinds.

Features of Financial Planning is Enumerated as below – 

• Simplicity: A sound financial structure must provide a simple financial structure that could be managed easily and understandable even to a layman.

• Foresight: Foresight must be used in planning to know the estimate and the need for capital which may be estimated as accurately as possible. A plan visualized without any foresight will outcast disaster for the company.

• Flexibility: Repeating the financial adjustments becomes necessary hence its flexibility is required so that it is easily adaptable

• Optimum use of Funds: Capital should not only be adequate but should also employ productive effects. A financial plan should prevent wasteful use of the capital, thus avoiding idle capacity to ensure proper utilization of funds to earn the capacity in an enterprise.

• Liquidity: Current assets are to be kept in the form of liquid cash. Cash is also required to finance purchases, to pay the daily needs like paying salaries, wages, and other incidental expenses.

Conclusion:

Financial Planning is an important aspect of the individual as well as business life. This article gives you an insight into what financial planning comprises and what are its key aspects.

What is Inflation?

Inflation or price inflation is a rise in the price level in an economy which results in a sudden drop in the purchasing power of money. It is a loss of real value in the medium of exchange. The measure of inflation is the inflation rate and is measured in percentage. The purchasing power of currency decreases as goods and services become dearer. This impacts the cost of living and gets higher. However, a certain level of inflation is required in the economy

Types of Inflation

There are different types of inflation to get an analysis of distributional and other effects of inflation. There are mainly four types of inflation. Experts say that demand-pull and cost-push are more two types of inflation not yet categorized. There are various other types of inflation like asset inflation and wage inflation. The main types of inflation are listed below by their speed levels namely:

On The Basis of Speed and Intensity

1. Creeping  

Creeping inflation is when the price rise is 3% or lower and is scheduled to rise in all coming years. This type of inflation is beneficial for the economy as it promotes demand among consumers. According to The Federal Reserve, the price rise of 2% or less benefits the economy. The consumers are prepared for the price rise and hence buy the product now to beat future higher prices.

2. Walking 

This inflation is between 3 to 10% a year. This is harmful to the economy as it heats up the cycle. People are willing to buy more and more to beat future high prices which affect supply as well. Suppliers can’t keep up the supply drive among people.

3. Galloping 

This inflation rises to 10% or more and is absolute havoc to the economy. Money loses its value very fast and businesses can’t keep up with cost and prices. Investors avoid the country, the government loses its credibility, and the economy becomes unstable. This inflation at any cost should be avoided at any cost.

4. Hyperinflation 

It is when prices skyrocket more than 50% a month and this situation is infrequent. This usually happens when the government prints money to pay for wars.

On The Basis of Causes

1. Currency Inflation 

It is caused by the printing of currency notes.

2. Credit Inflation 

Commercial banks sanction loans and advances to people in large numbers when the economy needs. This situation leads to rising in the price level

3. Deficit-induced Inflation

When expenditure exceeds revenue, the budget of the government reflects a deficit. To meet the gap, the government may ask the central bank to print additional money. Any price rise during this period is called deficit-induced inflation.

4. Demand-pull Inflation – 

An increase in demand over available output leads to this type of inflation and leads to a rise in price.

5. Cost-push Inflation – 

Inflation may arise from an overall increase in the cost of production. The cost of production rises from an increase in the prices of raw material, wages, etc. 

The above part was a brief discussion on inflation, types and causes of inflation, and how it affects the overall economy. How consumers and producers play their role when prices rise.

Inflation is contrasted by deflation, where the purchasing power of money is increased and prices of commodity decrease 

How is Inflation Measured?

The well-known indicator of inflation is the Consumer Price Index (CPI), which measures the percentage change in the prices. 

For example, We calculate inflation for a basket that has two items in it – books and childcare. The formula for calculating inflation is as below:

Inflation = Price ( year 2) – Price ( year 1 ) / Price ( year 1 ) * 100

This has certain limitations as well. These are discussed in below pointers:

1. CPI is not an indicator of the price level. It measures the rate of change of price but not the price level.

2. Quality changes over time of the products. CPI intends to only calculate pure price changes.

3. CPI measures price changes in metropolitan cities and does not cover regional, rural, or remote areas.

4. CPI does not often adjust for changes in the household spending pattern.

5. CPI does not immediately introduce new product prices as soon as the product is introduced in the market.

6. CPI does not measure the cost of living. Although it is used to measure the same but is not often categorized as an ideal indicator.

Pros and Cons of Inflation

Inflation is taken as both positive as well as negative depending upon which side one takes and how constructively the situation gets managed. 

For example, People owning tangible assets would want to sell their assets as they will get a higher price for the same. This will not go accordingly with the buyer as they would not want to buy the assets at a higher price. 

Pros:

1. It enables growth

2. Allows adjustment of wages

3. It allows adjustment of prices

Cons:

1. It creates uncertainty and lowers investment.

2. Leads to lower growth and instability

3. Reduces international competitiveness

4. Leads to recession

5. Fall in value of savings.

During the preparation of the proper and final accounts for any business or any company, there are certain theoretical assumptions of accounting made that people tend to follow pretty commonly These are known as the fundamental accounting assumptions. If there aren’t any specified assumptions other than these, then it will be assumed that these principles would be implemented in the whole process of preparing the final accounts for the company. So, here the students are going to learn about these 3 fundamental accounting assumptions which are known as Going Concern, Consistency, and Accrual.

 

What Are the Fundamental Accounting Assumptions

When it comes to the three fundamental accounting assumptions, these are just some principles or concepts which are commonly assumed to be followed during the accounting transactions. These assumptions are made according to the Accounting Standards of India. Students can rely on our notes to get some information on the chapter and the topic. Here we are going to discuss some of the important assumptions of accounting that are used by the companies.

 

1. Going Concern 

Now, this is a particular assumption that is made based on a principle that states while making certain financial statements for any particular entity, people can assume that the particular company doesn’t have any particular plans for winding up and that too in the near future. So, there is an assumption made here that no matter what happens, the company will continue to exist for a long period, quite possibly indefinitely. So, the assumption of the company going strong is one of the fundamental assumptions. Now, this assumption is particularly very important because this can allow some proper and appropriate methods of accounting for the depreciation and the fixed assets as well.

 Since there is the historical method of cost valuation involved, we can safely assume that the company will not go off business for an indefinite period. In such cases, there is a need to value the assets at the market value. However, in the case of going concerned, the increase or the decrease of these assets will not be taken into consideration for sure. That is one of the most important things that the students need to keep in mind when they are discussing the 1st fundamental accounting assumption.

 

2. Consistency 

Now, this is one particular assumption that states that unless certain things are mentioned in the accounting procedures, policies, and standards, the things which are being followed properly in the accounting field would remain the same. Hence, it means that there will be some uniformity when it comes to the financial statements for the company over time. Also, the process of comparing financial statements becomes a lot easier two. This might prove to be essential for external stakeholders and potential investors who are interested in the company. 

By having the same accounting principles and treatment, management will easily be able to draw certain conclusions regarding the company’s performance in the best way. Hence, when it comes to the entire aspect of decision-making and planning for the betterment of the company, this particular assumption is to be helpful. With the help of our notes, students can get more information on the second fundamental accounting assumption.

 

3. Accrual

This is the third fundamental accounting assumption that is made by any company or business. The students will be able to gain some insight into the topic with the help of our notes and hence can score good marks in the examinations. According to this particular assumption, the different transactions of accounting are constantly being recorded in the accounting books right when they occur. Now, this is known as the mercantile system. It is just the opposite of the cash system. According to the concept of accrual, the company’s expenditure or revenue is always recognized during the year they are realized. The accrual concept also says that the revenue can be completely recognized in the year it actually has been realized. Similarly, when we are talking about expenses, it doesn’t depend on the payment of actual cash. 

We certainly hope that our notes for the fundamental accounting assumptions can help you out in the examinations. By knowing all about the fundamental assumptions, students can do their revision and ultimately use these notes to score good marks and stay on top of the class. All these notes are carefully created after thorough research of the topics and hence can be relied upon.

Many people wonder what the team cohesion means. Group cohesiveness/Team Cohesiveness also known as Social cohesion is a degree of unity of any group. Team cohesiveness is a degree to which group members are attracted or motivated by each other. Basically, group cohesiveness is the closeness amongst the group members. It is seen that members of a highly cohesive group develop some common characteristics:

• Everyone respects each other.

• They are fully committed to the decision made by the group.

• There is good accountability amongst members.

These are some of the positive impacts of team cohesiveness that increases the overall performance of any group. Organizations consider employees as an asset because the organization is dependent on the people working there. As more and more people are involved in the complex functioning of the company, an organization faces the problem of group cohesiveness and its impact on the overall productivity of the organization as well as the in-office harmony.

If the company wants to achieve the organizational goals it is important that managers encourage all the employees to bond with their team members so that the complete team can work together towards achieving the goal. It is very important that there is a healthy conversation and relation between the team members to work efficiently. Instead of focusing on the competition, it is important that people focus on achieving the goals so that there is no unnecessary tension between the groups.

Features of Group Cohesion

Above we had defined group cohesion, Here we will talk about the features of the group cohesiveness. Group cohesiveness is the most important factor to achieve any goal in the organization. To achieve high group cohesion it is important that groups have these features to attain the organizational goals. Managers will have to check these features before forming the group to assure there is high cohesion. Here are some of the features of group cohesiveness:

• The cohesive group have fewer members.

• Members of the cohesive teams are of similar interests or backgrounds.

• It has a high degree of status within organizations.

• Members are accessible to each other to maintain easy communication.

• Each cohesive team is physically remote from other groups in the organization.

• Cooperative behavior is rewarded regularly.

• Cohesive groups have a history of past success.

Factors Affecting Group Cohesiveness

Factors that affect group cohesiveness are:

1. Similarities of Attitudes and Values:

One of the major factors affecting team cohesion is the similarity in attitudes and values among group members. It is basic human nature people enjoy and get attached to the people who have similar opinions, morals, beliefs, and code of conduct as people with the same opinions provide the same kind of social validation.

2. Size of the Group:

It is assumed that cohesiveness will decrease as the size of the group decreases. When the size of the group increases the interaction with the members becomes more difficult and hence the goal is hampered.

3. Time:

When people spend time with each other the more they will get close and hence it strengthens the degree of cohesiveness.

4. Inter Dependency:

When each member has autonomous action, the cohesiveness between the members of such a group would be less as opposed to the group whose members are doing the procedure and are relying upon each other.

5. Management Behaviour:

If we talk about factors affecting group cohesiveness then management behavior plays a major role in it. When a manager makes a close relationship with a few in groups that may cause unhealthy competition amongst members of the group. It is important that managers reward cooperative behavior so that the bond grows amongst the groups.

Importance of Group Cohesiveness 

When we talk about any organization it is important that there is team cohesion to achieve the goal. Here are the importance of group cohesiveness:

• Performance: If there is great bonding amongst the group then the performance of the group will become better. If management wants good performance it should encourage its employees towards group cohesion.

• Satisfaction: When there is group cohesion the performance will increase and hence it will bring satisfaction to the employees and they will work harder to achieve the goal.

• Assurance Pressure: When we talk about group cohesiveness characters and the behavior is the most important factor. When there is a great bonding between the group then it is assured that surely the task will be completed.

• Emotional Factors: When people work together and have strong bonding people feel emotionally attached and hence people will work with each other in harmony and achieve the goal together.

Natural resources refer to the resources that we find readily available in the natural world or nature. It refers to the water we get from the flowing rivers and seas, the wood and timber we get from trees, the oil we get from the deep reserves of our planet, the plants we get from every corner of our earth, among so many others. Natural resources hold a place in every life, whether we live in a rural or urban area, whether we live a life of wealth or poverty, whether we are daily wage labourers or CEOs of world-renowned companies.

In its essence, a natural resource is a resource that is abundantly available in nature and comes to good use by humans. Here is a list of what all we call natural resources to understand what they are:

• Oil

• Coal or natural gas

• Solar energy or sunlight

• WaterMetals like silver, gold, copper, aluminium, iron, etc.

• SaltTimber or wood

• All plants, medicinal and general

Natural Resources in India

Now that we know what natural resources are, let’s wander together: is India rich in natural resources? 

India is incredibly rich in natural resources, as our country is so vast and has so many different kinds of lands and sceneries. Now, we will explain the most important natural resources of India and where they are found in the country.

India has one of the largest reserves of coal in the entire world, falling in 4th place for the same. The states in descending order of the number of coal reserves in India are Jharkhand, Orissa, Chhattisgarh, West Bengal, and several others underneath these states.

India is also fairly rich in oil, as can be with its positioning in the world. The highest amount of reserves of crude oil in India lies in Assam, Gujarat and the Western as well as Eastern Offshores.

In India, the natural gas distribution is also fairly high – the Eastern and Western Offshores have the highest amount of natural gas reserves, as does the Coal Bed Methane. Assam and Gujarat, once again, are the two states which have the leading reserves of natural gas in the country.

Metallic minerals include iron, copper, aluminium, gold, silver, bauxite, manganese, zinc, and others. The distribution of these metals, as well as their production and sourcing, is spread out all over the country, depending on where all their belts lie. Private companies, as well as public enterprises, have taken up the production of metallic minerals.

India’s Department of Atomic Energy has been working on developing nuclear energy from the resources uranium and thorium. Nuclear energy is an incredibly important natural resource as even a little bit of nuclear power can create a big boost of power. The development of nuclear power as a natural resource adds the same as one of the very important economic resources of India.

The Role of Natural Resources in Economic Development

An abundance of natural resources in a country means that development will come a lot easier to that country than for one where there isn’t much natural resource available. There is a positive relationship between natural resources and economic development. Why are natural resources important in terms of development then?

To understand the role of natural resources in economic development, we need to understand what ‘capital’ means. Capital refers to an asset that can be used to bring about growth and development, and it can include such things as machinery, money, etc. It is with natural resources that we can create capital that will help us begin or catalyse the process of development.

Another reason why the role of natural resources in economic development is undeniable is because of this – we often equate development and urbanisation, and in both their essences, we are correct in doing so. When foreign companies like MNCs (multinational corporations) see that natural resources are abundant in a country, they choose to invest in factories and build more workplaces in such countries, bringing about the urbanisation of such areas in the process. This is how urbanisation is defined when new infrastructure comes about, and this is also how commercial towns are created.

Natural resources are simply the fundamental raw material that supplies basic substances to be manufactured. There will be technically nothing to depend on if there is no presence of natural resources. The Indian economic sector, to a big extent, relies on agriculture and raw production. But even these processes are complemented by natural resources. Big technological industries like coal mines, oil factories and all sustain as they are involved in the processing and refinement of such natural resources. These industries also add up to about 40% of total economic value. 

The optional value of nature is another topic to consider. As humans continue to use these resources lavishly, there are high chances of resources getting over and animals becoming extinct. This will leave our future generation to suffer and starve with nothing else to do. Optional value refers to the value that is placed on private willingness to preserve by maintaining or protecting the natural assets or service even if there is little or no likelihood of the individual ever using it. So, it is our duty to keep our environment saved and safe for the future.

There is something known as the aesthetic value of nature. A humongous Indian revenue comes from travel and tourism. India, being the most visually pleasing and aesthetically rich country, the aesthetic value of India is high. The preservation of natural resources is important to keep the economy growing. 

Thus, the importance of natural resources, especially in development, is essential and undeniable.

Students being the future of the country should always take care of natural resources and the environment. Missions and moments should be conducted to boost the significance of the protection of the environment. Awareness campaigns should be regularly carried out throughout the countries. Overconsumption of natural resources like coal and all not only drain the resource faculty but also causes pollution problems. So that should be also taken care of. 

Thus natural resources not only add to economic development but also to the sustainable and peaceful livelihood of people. 

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IFRS refers to the accounting policies and standards that every nation follows. The monetary situation all over the world has seen a drastic change in a recent couple of years. Currently, few transitional organizations are working in several countries to solve the situations related to IFRS convergence. Hence, there is a need to maintain the standard which can also be accepted worldwide widely. It also refers to the aim of establishing a particular set of standards that can be used by everyone nationally and internationally. 

Difference Between IFRS and Indian Accounting Standards

Various points distinguish Indian accounting standards and the IFRS. Thus, Indian accounting standard vs international accounting standard can be formulated in the following way:

• Issuing Body: The Indian Accounting standards are issued by the Institute of Chartered Accountants of India (ICAI). On the other hand, the International Financial Standards (IFRS) is issued by the International Accounting Standards Board (IASB) which is based in London.

• Constitution: The ICAI established an effective accounting standard board in the year 1977 on 21st April after recognizing that there is a need to maintain the accounting practices and policies and the IFRS convergence status. On the other side, the International Accounting Standards Board (IASB) which is based in London had begun its operation in the year 2001.

• Representation: The Indian Accounting Standards are referred to as Indian GAAP or represented in the order of AS- (). International Financial Reporting Standards are also represented as the IFRS/IAS- (). 

Thus, a broad differentiation of Indian accounting standards and IFRS is given in the above context.

IFRS Full Form in India

IFRS stands for the International Financial Reporting Standards. The term is developed by the International Accounting Standards Board (IASB). The accounting standards of India are based on the substantially converged standards that are issued by the board. 

Elaborate the Process of Issuing IFRS 

IFRS standard settings are done through

• Public meetings are held in the office in London.

• Agenda papers informing the Board.

• Decisions and discussions are then made public after the meeting is held.

• Comment letters are received on the consultation documents.

Difference Between Convergence And Adoption 

IFRS is applied in more than 100 countries worldwide which include countries like Hong Kong, South Africa, Australia, Singapore, the European Union, and others. But there still prevails confusion over the difference between convergence and adoption. However, many countries use them interchangeably. 

Adopting IFRS means that the particular country would implement it as same as the IASB and that they would follow the guidelines that are issued by the IASB. 

On the other hand, convergence with IFSR refers to the situation where both ASB and IFRS would work together by developing compatibility. 

 It is said that the increase in the number of convergences will make adoption less costly and easier. 

Challenges of Convergence with IFRS

There are a lot of challenges that are faced and they are:

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