Category: Commerce Notes PPT

Import trade is the process of importing goods and services from another country. A country import good in following situations 

1. They can’t manufacture/ produce goods. 

2. They have a deficit of raw material to produce. 

3. The technology/process is inefficient and costly. 

Understanding Import Trade 

Before delving deep into the concept of Import trade, you need to get familiar with and understand several other terms. Have a look. 

• Trade – Trading is a process which involves the exchange of goods or services from one entity to another in exchange for something worth the cost (usually money). 

• International trade – In the international trading process, goods, services, or capitals are exchanged between international borders or territories depending upon the demand and supply. Such trades contribute to a considerable share of GDP (gross domestic product). 

• Import – It is a process of receiving goods and services from another country.  

• Export – It is a process of delivering goods and services to another country.

• Balance of trade (BOT) – It is the difference in monetary value between export and import trade figures of a country.  

Task for you: What are some of the goods that India exports to other countries? Also, name some of India’s most commonly imported goods?

Trade Examples – 

Countries have to depend on trades for certain goods which their country has a deficit of. For example, India gets its crude oil from Middle-East countries like Iraq, Saudi Arabia. Similarly, almost half of the electronic goods imported to India are from China. 

However, if a country’s import value exceeds the export value, then it is said to have a negative balance of trade (BOT) which shows a deficit of trading. 

Questions to Learn 

Q 1: What are Objectives of Import Trade?

Answer: 

A country opts for import trading to achieve following objectives –

• To meet their demand for products and services. 

• Growth in industrialisation. 

• Improved living standard. 

• Overcome difficult situations like natural calamities. 

Procedure of Import Trade 

A country has to follow the procedure mentioned below for import trade. 

1. Trade Enquiry 

In this step, a country that needs imported goods sends a query to exporter countries requesting them to disclose information regarding price, quality, terms and conditions, etc. for goods. In return, exporters send the details in the form of quotations. 

2. Getting an Import License 

It is vital to procure an import license first to proceed.  

3. Obtain Foreign Exchange 

The exporter country asks to pay for import goods in foreign exchange which is governed by RBI. 

4. Placing Order 

After the above steps, the importer country needs to place an order mentioning the quantity of purchase. 

5. Arranging a Letter of Credit 

The importer country needs to send the letter of credit from their concerned bank to the overseas supplier. 

6. Arranging Finance 

The importer needs to arrange funds in foreign currency before the shipment arrives. 

7. Acquiring Shipping Documents 

Once the exporter ships a consignment, they send a shipping document to the importer mentioning all the necessary details. These usually include – 

• Invoice number 

• Date of arrival 

• Name of the ship and date 

• Export destination 

• Classification of commodities and quantity, etc. 

8. Goods Arrival & Release of Goods 

The goods are dispatched by the exporter after seeking clearance from customs before they cross Indian borders. Here, the importer needs to arrange the unloading charges, import duty, custom duty etc. for the clearance. 

This gives you an overview of the import trading and its procedure which a country has to deal with. Furthermore, you can learn in detail the trade in meaning by following the study materials available at our website. Don’t forget to install ’s app! 

Limited Liability Partnership or LLP has become very popular for the past few years. Let’s learn more about it. We shall focus on the elements required and the process and steps involved in the LLP registration process in this article. The guidelines we are going to discuss below comes from the Limited Liability Partnership Act (LLP Act), 2008.

Elements Essential for the Incorporation of an LLP

In India, the given elements are necessary for LLP incorporation according to the LLP Act, 2008:

• To electronically submit the completed document of Incorporation in the format prescribed with the Registrar.

•  To have 2 partners at least- individuals or body corporate

• To have an office registered in India for to and fro communications.

• To have appointed two individuals at least as designated partners and one of them has to be a resident of India. The partners stay responsible for getting everything done as deemed necessary by the LLP.

• To have the Ministry of Corporate Affairs (MCA) allotted DPIN or Designated Partner Identification Number for each of the designated partners.

• To have an agreement between the designated partners or between the designated partners and the LLP. In the absence of such an agreement, the provisions under Schedule 1 of the LLP Act, 2008 would apply.

• To have a unique name for the LLP. It should not be a name that is already being used by another LLP or a Company or a Partnership firm. The name needs to be distinct.

Process for the Incorporation of an LLP 

The following components are needed in the LLP incorporation procedure.

• Deciding partners and designated partners.

• Obtaining the Digital Signature Certificates (DSCs) and the Digital Partner Identification Numbers (DPINs).

• Checking the availability and registering a unique name of the LLP. The applicant is allowed to indicate up to 6 choices of names.

• Drafting the agreement for the LLP.

• Filing of the necessary documents electronically.

• Applying for and issuing the Certificate of Incorporation along with the Limited Liability Partnership Identification Number (LLPIN). 

An LLP agreement constitutes the following:

• Name of the Limited Liability Partnership.

• Names and respective addresses of the partners and the designated partners.

• The forms of the contributions and the respective interests on the contributions.

• The ratio of profits to be shared amongst the partners.

• The remunerations of the respective partners.

• The rights and duties of the respective partners.

• The business proposed.

• The rules for the governance of the LLP.

Steps for the Incorporation of an LLP

1. Reserving the name for the LLP: The applicant first files the e-Form 1 to check the availability of the name and then register the name of the LLP. Once the name gets approved by the Ministry, it is reserved for the applicant for a duration of 90 days. If the LLP fails to be incorporated within the given frame of time, they let go of the reservation and make it available for other applicants.

2. Incorporating a new LLP: After the reservation of the name for the LLP, the applicant has to file e-Form 2 for the incorporation of the LLP. It carries all the details of the LLP proposed, plus all the details of the partners and the designated partners.

3. The partners and the designated partners have to give their consent to act in the respective decided roles.

4. Filing of the LLP Agreement has to be done with the Registrar in e-Form 3 within 30 days from the incorporation of the LLP. Execution of the LLP Agreement is mandatory as per Section 23 of the LLP Act, 2008.

5. The LLP Incorporation process is complete after obtaining the approval of the LLP Agreement.

Industrialization of a country means to include manufacturing industries apart from agricultural industries to develop the country. A country that is only based on agriculture cannot develop as much as an industrialized country can. In fact, both are the pillars that bear the responsibility of improving and maintaining a stable economy for the country. Though industrialization has its own disadvantages affecting the environment and health of the people without proper industrialization, the country remains underdeveloped. It provides all the necessary elements for strengthening the economy of the country with its technological progress. Industrialization in India started in 1854 with the first cotton mill in Bombay. Since then India has always moved forward in its industry setup and thus making it a developing country from an underdeveloped one.

The economy plays a significant role in the growth of every country across the world. It is the economy that determines and separates the developed country from the underdeveloped country. The economy of the developed nation depends mainly on the industrial sector while the underdeveloped countries’ economy mainly depends on the agricultural sector. To revive the economic status, industrialization plays an instrumental role in bringing the economical shift in numerous countries across the globe and the same shift occurred with industrialization in India. 

 

History of industrialization in India

During the colonial period, India followed the non-industrial model as a developing country. However, a significant number of Indians took this model as a hindrance towards growth and they opined that only industrialization could maximize the economic growth of the country. After independence, India’s first Prime Minister Jawaharlal Nehru employed the tool of industrialization to eradicate poverty from the country. 

 

With the introduction of industrialization, there was a significant amount of growth through the flow of internal and external economies that pushed the country towards self-sufficiency. Further, the government realized that the potential of exports and agriculture was limited and hence taxation occurred based on the terms of trade. Heavy industry of the country was given attention by emphasizing import substitution.

 

The introduction of industrialization in India could only be catalyzed through the implication of a centralized and planned economy. The administrative control occurred with the foundation of The Industries Act 1951 which focused on the development and regulation of the industry.

 

While there were numerous East Asian countries building strong private sectors through the intervention of the state, India during the same period was focusing on state regulation over important industries. In the mid-19th century, industrialization in India went through two major shifts which were rural electrification and activism of the state in subsiding new seeds and fertilizers. 

 

By the end of 1970, India was self-sufficient in grains with the success of the green revolution. Some of the major changes that occurred during this period were regulation on prices, nationalized banks, trade restrictions and squeezing of the foreign investment.

 

In the late 19th Century, economic reforms were launched to promote a competitive economy. The promotion of a competitive economy opened the door for foreign investment and trade. There was also a considerable amount of reduction in the use of import licenses and tariffs that encouraged the idea of global integration. Such changes enabled import-export trade to carry out business operations without the requirement of permit or license.

 

Ownership Pattern and Role of Industry 

The progress of industrialization since the year 1951 has been the most important feature of economic development in India. This could be understood through the commodity composition of India’s foreign trade. 

 

On one hand, the import of manufactured goods has been greatly minimized while on the other hand, import of India’s engineering goods has been maximized. Industrialization also brought the growth of managerial and technical skills which increased the efficacy in operations. There are three categories of ownership patterns which are followed by every industry as per their objective. These three categories of ownership have been discussed below:

1. Corporate Sector – Various forms of corporate companies fall under this sector which is further subdivided into the public corporate sector and private corporate sector. In the public corporate sector, there are public corporations and governmental departmental enterprises. Whereas, in the private sector there are both public and private limited companies.

2. Non-Corporate Sector – This sector involves the industrial units i.e. the units in which the owners are either partners or sole proprietor and HUFs ( Hindu Undivided Families)

3. Others – These industries include village industries units like manufacturing of khadi, sugar mills and similar other industries as such.

Thus, it can be stated that the role of the industry since industrialization had a major impact on the Indian economy.

 

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The act in which information is transferred from one person, group, or place to another is known as the act of communication. In every communication, there is one sender, one receiver, and a message. However, this transmission of information from sender to the recipient is affected by many factors which include, cultural situations, our emotions, our location, and the medium which is used to communicate. Communication in an organization involves internal communications which include messaging around an organization, employee training modules, interpersonal communications between employees, and external communication which includes customer feedback.

Internal Communication

When a piece of information is transmitted within the organization, internal communication takes place. It is the lifeline of business that usually occurs between an employee and the employer or among employees. 

Internal communication includes sharing of ideas, knowledge, information, and beliefs between the members of the company. It can either be formal or informal and is dependent upon the persons who are communicating. However, while communicating with the head of the company the language should be strictly formal. Some of the examples of common internal communication are company blogs, group meetings, inquiries of employees, staff communication, and so on.

Internal Communication- Importance

Some of the importance of internal communications are listed below-

1. The easy attainment of goals.

2. Increased productivity.

3. Fast response.

4. Fast-decision making.

5. Reduction of day-to-day conflicts among employees.

External Communication

When a piece of information is transferred between two organizations, external communication takes place. It usually occurs between an entity and another person exterior to the company and this exterior person may be a dealer, a client, customer, government official, and so on. Another example of external communication is customer feedback. With the help of effective external communication, an organization can improve its image rather than investing a lot of time and money. 

Some of the examples of external communication may include response to the customers, advertisement of a business, press conference, brochures, feedbacks, print media, and so on.

External Communication- Importance

Some of the importance of external communications are listed below-

1. Reaction of risks of mistakes.

2. Helps to promote the organization.

3. A favourable image of the organization is presented.

4. Helps in advertising the organization.

5. Easy communication about the information of products and services.

More About the Topic

Communication is the pillar on which organizational success depends. There are mainly 2 kinds of communication that happen in a corporate environmrnt, and they are internal and external communication. The main difference between internal and external communication lies in the audience to which the message is delivered, and both forms of communication support different business goals. Both internal and external corporate communication are significant resources for the business.

Let us understand this with an internal and external communication example. Suppose you need to convey an important idea to your project manager. There would be some internal communication tools that you would employ in achieving this. Now, if the same idea is to be used to pitch for your company in some other firm, there would be different means and methods used for presenting this information. This is where the difference between internal and external communication comes into play.

What is Internal Communication?

The exchange of information between members of an organization or different parts (or departments) of an organization comes under the internal communication umbrella. The different means used to transmit this information could be emails, phone, personal contact, intranet, or other modern employee communication platforms. Internal communication helps employees of an organization perform their work effectively and gives them a clear sense of the organization’s mission. 

There are 5 Types of Internal Communication

• Vertical – This happens between employees present at different hierarchical positions in the company.
• Horizontal – This happens between employees present at the same hierarchical positions in the company.
• Downward – This internal communication happens from managers, leaders, or executive directors to their assistance or other employees.
• Upward – This is the communication from employees and assistants to their managers or leaders.
• Diagonal – There are situations when vertical (either upward or downward) channels need to be filled. This is where diagonal communication happens.

Internal communication could also be categorized as informal or formal internal communication.

Different Ways of Internal Communication

The different means of internal communications are:

What is External Communication?

External communication encompasses interaction within the company as well as with the outside environment like customers, vendors, clients, investors, government agencies, society, etc. These are mostly documented pieces of information. External communication happens between organizations and the outside world daily. The two broad categories of external communication are:

• Formal External Communication – This kind of communication is the first step in creating an image of the company and brand awareness. Various media like letters, reports, web pages, or presentations are used to showcase a favorable image of the organization. It is also used to provide information about the company’s products and services.

• Informal External Communication – The organization does not directly regulate this kind of communication. It mostly happens when employees talk about their organization and its quality to other people outside the company. Employees are daily absorbing tons of information about the company. When these employees with in-depth information about the company speak about it to the outside world, it forms a channel for external communication.

Different Ways of External Communication 

The ways in which external information can transpire within and outside the organization are:

• Print and broadcast media.

• Pamphlets.

• Press conference.

• Annual reports and letters.

• Business meetings.

• External electronic communication like emails, phones, etc.

Comparison Between Internal and External Corporate Communication 

Here is a table outlining the key differences between internal and external corporate communication.

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The process of accounting can be deemed as a pretty tiring one. There are thousands of transactions that tend to happen in a company and that too in a single year. So, naturally, the process of journalizing every single one of those transactions can be quite a bothersome process for some people. So, to make things a little bit simpler, some companies always go for a better approach known as subsidiary books. These books are made for recording the transactions which have a similar nature and type. The order for recording the transactions is chronological. In the chapter introduction to subsidiary books notes, students can learn what the process is and how important it is for bookkeeping.

 

What Exactly Are Subsidiary Books?

 In the Subsidiary Books Introduction, it can be said that Subsidiary Books are basically the books that are made for the original entry. When a business is running its normal course, many transactions are related to cash, purchases, or sales. So, the transactions which tend to have a similar type or nature are recorded by the people in a single place and that is known as the subsidiary book. 

Subsidiary books save a lot of time. Not to mention that a lot of effort is saved too. Clerical work can take up a lot of time for some people and this saves them that effort and time. Instead of having a journal of every single entry, these transactions are carefully recorded in the subsidiary books in an easier manner. Subsidiary books can also be considered as some sub-journals that are meant for recording just a single type of financial transaction. When it comes to the introduction of subsidiary books, students can put their faith in our notes because these notes are created after thorough research and reading. 

Different Types of Subsidiary Books 

Here in the subsidiary books introduction, we are going to mention some of the types of subsidiary books that students need to know about. 

• Cask Book: The book that holds all the records of payments and receipts of different transactions of cash.

• Purchase Book: The book that holds all the different records of credit purchases and returns of the company goods.

• Sales Book: The book that holds all the different records of credit sales regarding the company goods. 

• Sales Return Book: The book that holds the records of different credit sales and returns of the company goods. 

• Bills Receivable Book: The book that holds the records of all the different bills that are still receivable. 

• Bills Payable Book: The book that holds all the records of different bills that are still payable. 

• Journal Proper: The book that holds the records of all the different transactions that are not present in all of the books which have been mentioned above. 

The Advantages of Having Subsidiary Books 

After learning more about the introduction of subsidiary books, it is now time for students to focus on the advantages of having subsidiary books for sure.

One of the main advantages of subsidiary books is that it tends to save a lot of effort and clerical time. First of all, there is simply not any need to provide narrations or keep journals of all the transactions. So, the time taken for completing every single transaction is significantly reduced. Also, with the use of different subsidiary books, different processes of accounting can be considered. 

Another one of the main benefits of having subsidiary books is that in place of having a single journal, there are now several such books. So, the resulting labour or the work done by the people can also be divided and hence efficiency is improved. 

In case a single person is tasked to maintain a single subsidiary book every single year for a long period, that person will gain a lot of knowledge about the books for sure. So, they can become a certain type of specialist in the preparation of that subsidiary book.

•  Referencing Become Easier

We all know that the transactions of different types are kept in different subsidiary books. So, when you are searching for a particular type of subsidiary book, it becomes really easy to find which one is where. Hence, the searching of information becomes a lot easier which in turn makes the process of referencing a bit easier too. 

In certain cases, the trial balance doesn’t add up or match the results. In such cases, the locating of errors becomes a lot easier because there are separate books for different transactions. So, detection of fraud is also pretty easy too.

A joint venture refers to a kind of arrangement wherein two or more than two parties agree for pooling their resources for carrying a transaction or a specific task. This can be either a business activity or a fresh project. In a joint venture, every member is responsible for the costs, profits and losses that are associated with it. However, the venture would be an entity distinct from the participants.

Joint Venture Accounting with Separate Books

Joint venture accounting can be carried out in either of the two methods as follows:

1.When the separate set of books are maintained

2..When the separate set of books are not maintained

When the separate set of books are maintained, the following kinds of accounts are formed:

1.Joint Bank Account

2.Joint Venture Account

3.Co-venturers Account

1. Joint Bank Account

The co-ventures have a separate bank account for the transactions related to their venture. They would make primary contributions to this bank account, but the account can be operated jointly. All the expenses are made from this bank account and the collections or sales from the transactions made are deposited to this joint bank account.

However, in case the co-ventures make collections or payments directly, their personal accounts would be debited or credited for the transactions carried out. When the venture is completed, the joint bank account gets closed and the balance is paid to the co-ventures.

2. Joint Venture Account

A joint venture account is created to measure the profits of the venture. It is debited with the expenses of the venture and credited with the collections and sales. The excessive balance of the credit side over the debit side determines the venture profits and vice versa. Profits and losses are then transferred to the accounts of the co-ventures according to their profit-sharing ratios. 

3. Co-Venturers’ Accounts

The personal accounts of the ventures are maintained for keeping a record of their contributions towards goods, cash, etc. The expenditures and the payments that are directly paid and received by the co-ventures get recorded in the co-venturer’s accounts. The loss and profit made on the venture is then transferred to the account in the ratio of the profit-sharing. Also, this account gets closed when the venture is completed.

Journal Entries when the Separate Set of Books are Maintained

Solved Example

Example:

Anjali and Bina decide to enter a joint venture for making a film for the government. The government decides to pay Rs.2,00,000. Anjali contributes Rs.20,000 while Bina contributes Rs.30,000 and these amounts get deposited to the joint bank account. The payments that were made from this account are:

Purchase of equipment- 12,000

Hiring of equipment-       10,000

Wages-                               90,000

Material-                            20,000

Office expenses-               10,000

Anjali also paid Rs. 4,000 as the licensing fee. When the film was completed it was found defective and the government deduced Rs. 20,000. Bina took the equipment at a cost of Rs. 4,000. Separate books of accounts were managed for both the accounts in this joint venture and the profits were divided in the ratio 2:3 for Anjali and Bina respectively. Make the necessary ledger accounts.

Solution:

Joint Bank A/c:

Joint Venture A/c:

Anjali’s A/c:

Bina’s A/c: