Tag: Nature

  • What is the top Objectives and Characteristics of Budget Control?

    Budget, Budgeting, and Budgetary Control: A budget is a blueprint of a plan expressed in quantitative terms. Budgeting is the technique for formulating budgets. Budgetary control, on the other hand, refers to the principles, procedures, and practices of achieving given objectives through budgets. So, what is the question we are going to discuss; What is the top Objectives and Characteristics of Budget Control?… Read in Hindi.

    Here are explained; Meaning, Definition, Nature, Objectives, and Characteristics of Budget Control.

    The word is given in Upper “Budget, Budgeting and Budgetary Control” Rowland and William have differentiated the three terms as: “Budgets are the individual objectives of a department, etc., whereas Budgeting may be said to be the act of building budgets. Budgetary control embraces all and in addition, includes the science of planning the budgets to effect an overall management tool for the business planning and control”.

    Meaning and Nature:

    Budgetary or Budget control is the process of determining various budgeted figures for the enterprises for the future period and then comparing the budgeted figures with the actual performance for calculating variances if any. First of all, budgets are prepared and then the actual results are recorded. The comparison of budgeted and actual figures will enable the management to find out discrepancies and take remedial measures at a proper time.

    The budgetary control is a continuous process which helps in planning and coordination. It provides a method of control too. A budget is a means and budgetary control is the end result.

    Definition:

    According to Brown and Howard,

    “Budgetary control is a system of controlling costs which includes the preparation of budgets. Coordinating the department and establishing responsibilities, comparing actual performance with the budgeted and acting upon results to achieve maximum profitability.” Wheldon characterizes budgetary control as ‘planning in advance of the various functions of a business so that the business as a whole is controlled’.

    J. Batty defines it as,

    “A system which uses budgets as a means of planning and controlling all aspects of producing and/or selling commodities and services.” Welch relates budgetary control with-day-to-day control process. According to him, ‘Budgetary control involves the use of budget and budgetary reports, throughout the period to coordinate, evaluate and control day-to-day operations in accordance with the goals specified by the budget’.

    From the above-given definitions it is clear that budgetary control involves the following:

    • The objects are set by preparing budgets.
    • The business is divided into various responsibility centers for preparing various budgets.
    • The actual figures are recorded.
    • The budgeted and actual figures are compared for studying the performance of different cost centers.
    • If actual performance is less than the budgeted norms, remedial action is taken immediately.

    Top three Objectives of Budget Control:

    The following points highlight the top three objectives of Budgetary control or Budget control. The objectives are:

    • Planning.
    • Co-Ordination, and.
    • Control.

    Now, explain;

    Planning:

    A budget is a plan of the policy to be pursued during the defined period of time to attain a given objective. The budgetary control will force management at all levels to plan in time all the activities to be done during future periods. A budget as a plan of action achieves the following purposes:

    • The action is guided by the well thought out plan because a budget is prepared after a careful study and research.
    • The budget serves as a mechanism through which management’s objectives and policies are affected.
    • It is a bridge through which communication is established between the top management and the operatives who are to implement the policies of the top management.
    • The most profitable course of action is selected from the various available alternatives.
    • A budget is a complete formulation of the policy of the undertaking to be pursued for the purpose of attaining a given objective.
    Co-Ordination:

    The budgetary control co-ordinates the various activities of the firm and secures co-operation of all concerned so that the common objective of the firm may be successfully achieved. It forces executives to think and think as a group. It coordinates the broader economic trends and the economic position of an undertaking. It is also helpful in coordinating the policies, plans, and actions. An organization without a budgetary control is like a ship sailing in a chartered sea. A budget gives direction to the business and imparts meaning and significance to its achievement by making the comparison of actual performance and budgeted performance.

    Control:

    Control consists of the action necessary to ensure that the performance of the organization conforms to the plans and objectives. Control of performance is possible with pre­determined standards which are laid down in a budget. Thus, budgetary control makes control possible by continuous comparison of actual performance with that of the budget so as to report the variations from the budget to the management of corrective action. Thus, the budgeting system integrates key managerial functions as it links top management’s planning function with the control function performed at all levels in the managerial hierarchy.

    But the efficiency of the budget as a planning and control device depends upon the activity in which it is being used. A more accurate budget can be developed for those activities where a direct relationship exists between inputs and outputs. The relationship between inputs and outputs becomes the basis for developing budgets and exercising control.

    The main objectives are stated below:

    • To determine business policies for the attainment of desired objectives during a particular period of time. It provides definite targets of performance and gives the guidance for the execution of activities and effort.
    • To ensures planning for future by setting up various budgets. The requirements and expected performance of the enterprise are anticipated.
    • To co-ordinate the activities of different departments.
    • To operate various cost centers and departments with efficiency and economy.
    • Elimination of wastes and increase in profitability.
    • To co-ordinate the activities and efforts of different departments in the enterprise so that the policies are successfully implemented.
    • To regulate the activities and efforts of people to ensure that the actual results conform to the planned results.
    • To operate various cost centers and departments with efficiency and economy.
    • To correct the deviations from the established standards, and to provide a basis for revision of policies.

    The Characteristics of Budget Control:

    The above definitions reveal the following characteristics of budgetary control:

    • Budgetary control presumes that management has made budgets for all departments/units of the enterprise and these budgets are summarised into a master budget.
    • Budgetary control needs the recording of the actual performance, its continuous comparison with the budgeted performance, and the analysis of variations in terms of causes and responsibility.
    • Budgetary control is a system suggesting suitable corrective action to prevent deviations in the future.

    The Characteristics of Good Budgeting:

    The following characteristics below are:

    • A good budgeting system should involve persons at different levels while preparing the budgets. The subordinates should not feel any imposition on them.
    • Budgetary control assumes the existence of forecasts and plans of the business enterprise.
    • There should be a proper fixation of authority and responsibility. The delegation of authority should be done in a proper way.
    • The targets of the budgets should be realistic, if the targets are difficult to be achieved then they will not enthuse the persons concerned.
    • A good system of accounting is also essential to make the budgeting successful.
    • The budgeting system should have whole-hearted support of the top management.
    • The employees should be imparted budgeting education. There should be meetings and discussions and the targets should be explained to the employees concerned.
    • A proper reporting system should be introduced, the actual results should be promptly reported so that performance appraisal is undertaken.
  • Economic Laws: Meaning Definition Features Nature

    Economic Laws: Meaning Definition Features Nature

    What does mean Economic Laws? The Generalization or Law is the establishment of a general truth based on particular observations or experiments. Which trace a causal relationship between two or more phenomena. But economic laws are statements of general tendencies or uniformities in the relationships between two or more economic phenomena. So, what is the question we going to study?

    The Concept of Economic Laws: first study their Meaning, Definition, Features, Nature, and finally Limitations.

    Meaning and definition of Economic Laws: Economic laws are nothing more than careful conclusions and inferences drawn with the help of reasoning or by the aid of observation of human and physical nature. In everyday life, we see that man is always busy satisfying his unlimited wants with limited means. In doing so, it acts upon certain principles.

    Marshall defined economic laws in these words,

    “Economic laws, or statements of economic tendencies, are those social laws, which relate to those branches of conduct in which the strength of the motives chiefly concerned can be measured by money price.”

    On the other hand, according to Robbins,

    “Economic laws are statements of uniformities about human behavior concerning the disposal of scarce means with alternative uses for the achievement of ends that are unlimited.”

    These two definitions are common in that they consider economic laws as statements of tendencies or uniformities relating to human behavior.

    Features of Economic Law:

    The following six points highlight the features of economic laws.

    Are not Commands:

    Economic laws are not orders of the state (government) and do not command. They formulate based on people’s behavior in the real world.

    Are not Exact:

    Since economic laws deal with the actions of human beings having free will. They are not as exact as the laws of the natural sciences. They are statements that are true only in general. For example, the statement that men will buy goods at the cheapest available market is true generally but not universally. A man inten­tionally pays a higher price to help a relative or a friend. But such cases form a small fraction of the total transactions of human beings.

    Economists tacitly ignore these excep­tional cases and frame them. Their laws on the expectation that men’s actions will, in the great majority of cases, follow a uniform pattern. This makes economic laws generally true, but less exact than physical laws. “Economic laws are probability laws, not exact relationships.” “Abnormal as well as normal patterns of probabilities occur in economics”, as Samuelson has commented.

    Statements of Cause and Effect: 

    Economic laws, like scientific laws, are statements of cause and effect. They attempt to state the effects that will follow from particular causes. Unfortunately, in economic affairs, many factors operate simul­taneously. And it is impossible to isolate each factor to find out its effects separately. The qualifying clause “other things remaining the same” (ceteris paribus), uses to get over this difficulty. But in economic life, other things generally do not remain the same. Hence, economic laws are never exact enough to enable accurate predictions or prophecies existing made.

    Hypothetical: 

    Economic laws are hypothetical Economic laws are also hypothetical, i.e. They are conclusions drawn from certain assumptions or hypotheses. But in this, economic laws do not differ from other scientific laws. The laws of science also start from certain hypotheses and deduce certain consequences.

    Predictions are Difficult: 

    As regards making predictions the following example may note. The simple and exact laws of gravitation enable astronomers to make accurate forecasts. But in the case of tides, the level of water depends on so many factors (e.g., the strength of the attracting force, geo­graphical features of the country, etc.) that it is impossible to forecast the level accurately. Marshall, therefore, says, “The laws of econo­mics are to compare with the laws of tides rather than with the simple and exact laws of gravitation”.

    There are the Same Physical Laws: 

    Some laws dealt with in books of economics deal with inanimate nature, e.g., the Law of Dimini­shing Returns. These laws borrow from other sciences.

    Nature of Economic Laws:

    The following Nature of Economic Laws below are;

    The nature of economic laws is that they are less exact as compared to the laws of natural sciences like Physics, Chemistry, Astronomy, etc. An economist cannot predict with surety what will happen in the future in the economic domain. He can only say what is likely to happen shortly. The reasons why economic laws are not as exact as that of natural sciences are as follows:

    First

    Natural sciences deal with the lifeless matter. While economics, we are concerned with the man who endows with the freedom of or may act in whatever manner he likes. Nobody can predict with certainty his future actions. This element of uncertainty in human behavior results in making the laws of economics less exact than the laws of natural sciences.

    Secondly

    In economics, it is very difficult to collect factual data on which economic laws are to be based. Even if the data stands collected it may change at any moment due to sudden changes in the tastes of the people or their attitudes.

    Thirdly

    Many unknown factors affect the expected course of action and thus can easily falsify economic predictions. Dr. Marshall has devoted one chapter in his famous book “Principles of Economies” to discussing the nature of economic laws. He writes, that laws of economics are to compare with the laws of tides rather than with the simple and exact law of gravitation.

    The reason for comparing the laws of economics with the laws of tides by Marshall is that the laws of tides are also not exact. The rise of tides cannot be accurately predicted. It can only say that the tide expects to rise at a certain time. It may or may not rise. Strong wind may change its direction to the opposite side. Instead of rising may fall. So is the case with the laws of economics.

    Scientific or Natural or Physical Laws: 

    Economic laws are like scientific laws which trace out a causal relationship between two or more phenomena. As in natural sciences, a definite result expects to follow from a particular cause in economics. The law of gravitation states that things coming from above must fall to the ground at a specific rate, other things being equal. But when there is a storm, the gravitational force will reduce and the law will not work properly.

    As pointed out by Marshall, “The law of gravitation is, therefore, a statement of tendencies”. Similarly, economic laws are statements of tendencies. For instance, the law of demand states that other things remain the same, a fall in price leads to an extension in demand and vice versa. Again, some economic laws are positive like scientific laws. Such as the Law of Diminishing Returns which deals with inanimate nature.

    Since economic laws are like scientific laws, they are universally valid. According to Robbins, “Economic laws describe inevitable implications. If the data they postulate are given, then the consequences they predict necessarily follow. In this sense, they are on the same footing as other scientific laws.”

    Non-Precise like the Laws of Natural Sciences:

    Despite these similarities, economic laws are not as precise and positive as the laws of natural sciences. This is because economic laws do not operate with as much certainty as scientific laws. For instance, the law of gravitation must operate whatever the conditions may be. Any object coming from above must fall to the ground. But demand will not increase with the fall in price. If there is a depression in the economy because consumers lack purchasing power.

    Therefore, according to Marshall, “There are no economic tendencies. Which act as steadily and can measure as exactly as gravitation can, and consequently. There are no laws of economics. Which can compare for precision with the law of gravitation”. Their control of experimentation in the natural sciences and the natural scientist can test scientific laws very rapidly by altering natural conditions such as temperature and pressure in their experiments in the laboratory.

    But in economics

    Controlled experiments are not possible because an economic situation is never repeated exactly at another time. Moreover, the economist has to deal with the man who acts by his tastes, habits, idiosyncrasies, etc. The entire universe or that part of it in which he carries out his research is the economist’s laboratory. As a result, predictions concerning human behavior are liable to error.

    For instance, a price rise may not lead to a contraction in demand rather it may expand it. If people fear the shortage of goods in anticipation of war. Even if demand contracts as a result of the price rise. It is not possible to predict accurately how much the demand will contract. Thus economic laws “do not necessarily apply in every individual case. They may not be reliable in the ever-changing environment of the real economy. And they are in no sense, of course, inviolable.”

    Non-predictable like the Law of Tide:

    But accurate predictions are not possible in economics alone. Even sciences like biology and meteorology cannot predict or forecast events correctly. The law of tide explains why the tide is strong at the full moon and weak at the moon’s first quarter. On this basis, it is possible to predict the exact hour when the tide will rise. But this may not happen. It may rise earlier or later than the predicted time due to some unforeseen circumstances.

    Marshall, therefore, compared the laws of economics with the laws of tides “rather than with the simple and exact law of gravitation. For the actions of men are so various and uncertain that the best statements of tendencies, which we can make in a science of human conduct, must need be inexact and faulty.”

    Behaviorist:

    Most economic laws are behaviorist, such as the law of diminishing marginal utility, the law of Equimarginal utility, the law of demand, etc., which depend upon human behavior. But the behaviorist laws of economics are not as exact as the laws of natural sciences because they are based on human tendencies which are not uniform. This is because all men are not rational beings.

    Moreover, they have to act under the existing social and legal institutions of the society in which they live. As rightly pointed out by Prof. Schumpeter: “Economic laws are much less stable than are the ‘laws’ of any physical science…and they work out differently in different institutional conditions”

    Indicative:

    Unlike scientific laws, economic laws are not assertive. Rather, they are indicative. For instance, the Law of Demand simply indicates that other things being equal, quantity demanded varies inversely with price. But it does not assert that demand must fall when price increases.

    Hypothetical:

    Prof. Seligman characterized economic laws as “essentially hypothetical” because they assume ‘other things being equal and draw conclusions from certain hypotheses. In this sense, all scientific laws are also hypothetical as they too assume the ceteris paribus clause. For instance, other things being equal, a combination of hydrogen and oxygen in the proportion of 2:1 will form water. If, however, this proportion is varied or/and the required temperature and pressure are not maintained, water will not be formed.

    Still, there is a difference between hypothetical elements present in economic laws and against scientific laws. It is more pronounced in the former because economics deals with human behavior and natural sciences with the matter. But as compared with the laws of other social sciences, the laws of economics are less hypothetical but more exact, precise, and accurate.

    This is because economies possess the measuring rod of money which is not available to other social sciences like ethics, sociology, etc. which makes economics more pragmatic and exact. Despite this, economic laws are less certain than the laws of social sciences because the value of money does not always remain constant. Rather, it changes from time to time.

    Truisms or Axioms:

    Certain generalizations in economics may state as a truism. They are like axioms and do not have any empirical content, such as ‘saving is a function of income,’ ‘human wants are numerous’, etc. Such statements are universally valid and need no proof. So they are superior to scientific laws. But all economic laws are not like axioms and hence not universally valid.

    Historico-Relative:

    On the other hand, economists of the Historical School regarded economic laws as abstractions that are historical-relative, that is economic laws have only a limited application to a given time, place, and environment.

    They have limited validity to certain historical conditions and have no relevance to the analysis of social phenomena outside that. But Robbins does not agree with this view because according to him, economic laws are not historical-relative. They are simply relative to the existence of certain conditions which assume to give. If the assumptions are consistent with one another and if the process of reasoning is logical, economic laws would be universally valid.

    But these are big “ifs”. We, therefore, agree with Prof. Peterson that economic laws “are not detailed and photographically faithful reproductions of a portrait of the real world, but are rather simplified portraits whose purpose is to make the real world intelligible.”

    Economic Laws Meaning Definition Features Nature and Limitations
    Economic Laws: Meaning, Definition, Features, Nature, and Limitations. Image credit from #Pixabay.

    Limitation of Economic Laws:

    One major drawback of economic laws is they lack generality. For example, the laws developed to explain the nature and functioning of capitalist economies do not have any relevance to socialist countries. For example, Alfred Marshall developed the laws of demand and supply which apply in a free market in the absence of government intervention. Such laws do not apply in erstwhile countries like the former Soviet Union where the price (market) system yielded place to the planning system.

    In a planned economy, the market mechanism replaces by government allocation or ra­tioning. So, the question of applying the laws of demand and supply does not arise. Thus, economic laws lack generality and are not universally applicable. Furthermore, some laws of economics which have been developed in the context of advanced industrial countries may not find application in devel­oping countries like India.

    As V. K. R. V. Rao has pointed out, the multiplier principle, as enunciated by Keynes in the context of the advanced countries of the world, does not work in developing countries like India. This is attributable to the structure of such economies. Similarly, the Quantity Theory of Money has been developed in the context of industrially advanced countries. It seeks to establish an exact, proportional relationship between money and prices.

    But, it cannot explain’ the present price situation in India.

    Here, inflation is not a purely monetary phenomenon as predicted by the Quantity Theory. These two examples make one thing clear at least — the laws and theories of economics devel­oped in the context of advanced countries cannot be applied in developing countries like India. There is a feeling among some groups of economists that, people in developing countries like India behave and respond differently from those in advanced countries.

    For example, greater self-consumption of farmers in India explains why the supply response of agricultural commodi­ties is not always favorable in the event of a rise in the price of agricultural products. It is often observed that, if the price of a particular commodity rises, farmers produce less of it to maintain the same level of income. Thus,’ they not only produce less at a higher price but generate less marketable surplus when the price rises. Thus, the marketable surplus of, say, wheat varies inversely with its price.

    But, in developed countries, it is observed that, as usual, the supply curve of agricultural output slopes upward from left to right, and the marketable surplus increases when the price rises. All these examples make it abundantly clear that most of the laws and principles of economics which have been developed in the context of advanced countries cannot be applied in developing countries like India.

  • Meaning, Definition, Nature, and Benefits of Time Management

    Meaning, Definition, Nature, and Benefits of Time Management

    What is Means of Time Management? Managing time means investing time to get what you decide you want out of life, including what you want out of the venture created. This definition assumes that the businessmen know what they want out of life-goal-oriented action. It implies that the businessmen have focused values about the venture, work, family, social activities, possessions, and themselves. Time Management refers to making the best use of time as time is always limited. And refers to managing time effectively so that the right time is allocated to the right activity. Effective time management allows individuals to assign specific time slots to activities as per their importance. So, what we discuss the topic; Meaning, Definition, Nature, and Benefits of Time Management.

    The Concept of Management is explained in Time Management: Meaning, Definition, Nature, and Benefits.

    It is rightly said, “Time and Tide wait for none”. An individual should understand the value of time for him to succeed in all aspects of life. People who waste time are the ones who fail to create an identity of their own. In this article we discuss; Meaning and Definition of Time Management, Defining the Task and Priority Setting, Nature of Time Management, Benefits of Time Management, and also, Obstacles to Effective Time Management. Time management is not a way to make you work harder and longer, but a means to help you work smarter to accomplish your work more easily and rapidly.

    Meaning and Definition of Time Management:

    Time is the most precious yet most limited resource of the businessmen. It is a unique quantity-the businessman cannot store it, rent it, hire it, or buy it. With its supply being inelastic, it is totally perishable and irreplaceable. Everything requires it and it passes at the same rate for everyone. While important throughout the life of the venture, time is particularly critical at start-up and during growth and expansion of the venture. No matter what the businessman does, today’s ration of time is 24 hours, and yesterday’s time is already history. One of the most frequently mentioned problems of businessmen is encapsulated in the phrase, “If I only had more time…” This concern is a common problem among all busy people. It seems that no one has enough time.

    Why does the problem of time management exist for the businessman? It is basically due to a lack of information and a lack of motivation. The businessman must want to manage his or her time effectively and then spend some time to acquire the information necessary to accomplish this. Effective time management starts with an understanding of some benefits that will result. Knowing the art of time management will help a businessman to become productive for anything he does. Determining the goal or purpose will help in setting up the allotted time for everything. Following a schedule is what works for many, but others may need intensive guidelines such as recording all activities including the flow of thought within a week.

    Such a technique will help in recognizing and determining the productive hours and the wasted time, as well. Paying attention to negative thoughts and engagement to unproductive activities and conversations are the usual causes, which make people fail in finishing the necessary things that they have to do in a certain time frame. Making to-do lists will also help, especially if the list will enumerate the starting and end time of every activity. It is also vital that a person gives allotted time for all the activities and meetings that will help pave the way to his success. It is also essential to plan ahead of time all activities within the day.

    In this way, there is a guarantee that everything will run smoothly, and possible delays can be easily adjusted. It will help to ask the cooperation of other people around so that disturbances will be limited. Aside from discipline, it is also vital to develop perseverance in order to get all the work done according to schedule. Procrastination also includes a cheat time, in which a person allows interruptions or breaks, which will supply and culminate another inspiration to keep things going. It will help a person to focus and concentrate by blocking distractions while at work, such as limitations in opening social networking sites. At the end of the day, it is vital to evaluate all activities that will help in identifying whether the schedule is followed according to the given goals.

    Defining the Task and Priority Setting:

    In organizational time management we can delineate the overall tasks in the form of the following:

    • Urgent and very important matters: these are organizational matters or activities that require immediate concern or decision-making. They are regarded as urgent because they basically influence the overall performance of an organization.
    • Less urgent and very important matters: these are the activities that are crucial to the organization’s performance but are dealt with over a wider range of time without any urgency.
    • Urgent and less important matters: these are activities that are not crucial to the organization but they require immediate concern. They are seen next to those activities, which are both urgent and more important.
    • Less urgent and less important matters: these are organization matters or activities that require the least attention both in urgency and importance of all the organizational activities. They are dealt with after all the above activities are executed.

    Characteristics or Nature of Time Management:

    The following Characteristics or Nature of Time Management below are:

    • Effective Planning for the Organization.
    • Set Goals and Objectives for Require.
    • Setting deadlines for work.
    • The delegation of responsibilities for management.
    • Prioritizing activities as per their Opinions, and.
    • Right time on the right activity.

    Now, Explain each one;

    • Effective Planning for the Organization: Plan your day well in advance. Prepare a To Do List or a “TASK PLAN”. Jot down the important activities that need to be done in a single day against the time that should be allocated to each activity. High Priority work should come on top followed by those which do not need much of your importance at the moment. Complete pending tasks one by one. Do not begin fresh work unless you have finished your previous task. Tick the ones you have already completed. Ensure you finish the tasks within the stipulated time frame.
    • Set Goals and Objectives for Require: Working without goals and targets in an organization would be similar to a situation where the captain of the ship loses his way in the sea. Yes, you would be lost. Set targets for yourself and make sure they are real ones and achievable.
    • Setting deadlines for work: Set deadlines for yourself and strive hard to complete tasks ahead of the deadlines. Do not wait for your superiors to ask you every time. Learn to take ownership of the work. One person who can best set the deadlines is you yourself. Ask yourself how much time needs to be devoted to a particular task and for how many days. Use a planner to mark the important dates against the set deadlines.
    • The delegation of responsibilities for management: Learn to say “NO” at the workplace. Don’t do everything on your own. There are other people as well. One should not accept something which he knows is difficult for him. The roles and responsibilities must be delegated as per interest and specialization of employees for them to finish tasks within deadlines. A person who does not have knowledge about something needs more time than someone who knows the work well.
    • Prioritizing activities as per their Opinions: Prioritize the tasks as per their importance and urgency. Know the difference between important and urgent work. Identify which tasks should be done within a day, which all should be done within a month and so on. Tasks which are most important should be done earlier.
    • Right time on the right activity: Develop the habit of doing the right thing at the right time. Work done at the wrong time is not of much use. Don’t waste a complete day on something which can be done in an hour or so. Also, keep some time separate for your personal calls or checking updates on Facebook or Twitter. After all human being is not a machine.

    Benefits of Time Management:

    The following Benefits of Time Management below are:

    • Increased Productivity: Reflects the fact that there is always enough time to accomplish the most important things. Through a conscious effort and increased focus, the businessman can determine what is most important to the success and growth of the venture and focus on those things rather than on less important or more enjoyable things; the businessman must learn to focus on the majors, not the minors.
    • Increased job satisfaction: Getting more important things done and being more successful in helping the venture grow will give the businessmen more job satisfaction.
    • Improved interpersonal relations: There will be an improvement in the esprit de corps of the venture as there are less time pressure, better results, and more job satisfaction for the businessmen. While total time spent with other individuals in the company may in fact decrease, the actual time will be of better quality as the businessmen are free to be involved with interrelations. Also, more time becomes available for the businessmen to spend with family and friends.
    • Reduced time anxiety and tension: Worry, guilt, and other emotions tend to reduce mental effectiveness and efficiency so that decision making is less effective. Effective time management reduces concerns, stress, and anxieties, allowing better decisions to be made in a shorter time.
    • Better health: All of the above benefits culminate in this. Large amounts of energy and persistence are needed for the growth as well as for the start of a venture. High energy levels and long working hours require good health. Poor control of time often leads to mental and physical fatigue, poor eating habits, and no exercise. If there is one thing the businessman needs to help the venture grow, it is good health. A good health is a by-product of good time management. On a personal level, you will certainly feel healthier, more energetic, and in a generally better mood.
    • Efficient: You will be more efficient in serving your district and will be able to support your clubs better.
    • Successful: You will achieve greater success in your very important, and highly visible, role as a Lions Leader.

    Obstacles to effective time management:

    There are a lot of things that make it difficult for us to manage our time effectively. Let’s consider some of the most common ones, and see if they apply to us:

    • Organized: Avoid keeping stacks of file and heaps of paper at your workstation. Throw what all you don’t need. Put important documents in folders. Keep the files in their respective drawers with labels on top of each file. It saves time which goes on unnecessary searching.
    • Don’t misuse time: Do not kill time by loitering or gossiping around. Concentrate on your work and finish assignments on time. Remember your organization is not paying you for playing games on computer or peeping into other’s cubicles. First, complete your work and then do whatever you feel like doing. Don’t wait till the last moment.
    • Unclear objectives: It’s hard to hit a target with your eyes closed, and it’s just as hard to accomplish something when you aren’t exactly clear about what you want to achieve.
    • Disorganization: It’s easy to see when your desk is too messy, but sometimes you have to step back and ask yourself if you are taking an organized approach in completing all of your tasks.
    • Inability to say “no”: We all want to be as helpful as we can when others need us, but this can mean taking time away from other priorities to do something we may not have planned.
    • Interruptions: Many times we are in the middle of accomplishing something really important and the telephone rings. These calls can not only take you away from your task but sometimes they interrupt your train of thought and you can’t return to where you were without retracing your steps.
    • Other interruptions: We all like to visit with others, but conversations at inappropriate times can cost us time when we have to stop what we are doing and redirect ourselves from our plans.
    • Periods of inactivity: As much as we think we are busy, there are times in our day when we are not really doing anything. Recognizing and making use of these times can have a positive effect on our efforts.
    • Too many things at once: Many of our tasks are not routines. They require concentration to detail. When we are attempting to do too many different things at one time, each individual task suffers as a result.
    • Stress and fatigue: Everyone experiences stress from time to time, and sometimes we actually operate a little better when there is some level of stress. Too much stress, on the other hand, causes our work to suffer and wears us down physically and mentally. Dealing with stress is an important part of time management.
    • All work and no play: Most successful people know how to balance work and play. When work takes over your life, you not only give your body little time to re-energize, but you may end up sacrificing the really important things in life like family and friends.

    Meaning Definition Nature and Benefits of Time Management
    Meaning, Definition, Nature, and Benefits of Time Management. Image credit from ilearnlot.com.

    Reference:

    https://www.managementstudyguide.com/time-management.htm

    https://www.ukessays.com/essays/english-language/benefits-of-time-management-english-language-essay.php

  • Meaning, Definition, Nature, Steps, Limitations of Ratio Analysis

    Meaning, Definition, Nature, Steps, Limitations of Ratio Analysis

    What is Ratio Analysis? An analysis of financial statements based on ratios knows as ratio analysis. A ratio is a mathematical relationship between two or more items taken from the financial statements. Ratio analysis is the process of computing, determining, and presenting the relationship of items. So, what we discussing is – Meaning, Definition, Nature, Steps, Limitations of Ratio Analysis. It also includes comparison and interpretation of ratios and using them as a basis for future projections. Ratio analysis is helpful to management and outsiders to diagnose the financial health of a business concern. It helps in measuring the profitability, solvency, and activity of a firm.

    The Concept of Financial Statement explains the Techniques of Ratio Analysis, and they are understood by Meaning, Definition, Nature, Steps, Limitations.

    In this article we will discuss Ratio Analysis: Meaning of Ratio Analysis, second in Definition of Ratio Analysis, third simply learn Nature and Steps of Ratio Analysis and last studying Limitations of Ratio Analysis. So, Ratio analysis is the process of examining and comparing financial information by calculating meaningful financial statement figure percentages instead of comparing line items from each financial statement.

    Meaning of Ratio Analysis:

    The company’s financial information is contained in the Balance Sheet and Profit and Loss Account. The figures contained in these statements are absolute and sometimes unconnected with one another. An absolute figure does not convey much meaning. However, it is only in the light of other information that the significance of a figure is realized. For instance, Mr. X weighs 50Kg. Is he fat? We cannot answer unless we know his age and height. Similarly, a company’s profitability cannot know unless together with the amount of profit, the capital employed is also seen.

    The relationship between these two figures expressed mathematically is called a RATIO. The ratio refers to the numerical or quantitative relationship between two variables or items. A ratio is calculated by dividing one item of the relationship with the other. The ratio analysis is one of the most useful and common methods of analyzing financial statements. As compared to other tools of financial analysis, the ratio analysis provides very useful conclusions about various aspects of the working of an enterprise. The need for ratio arises because absolute figures are often misleading.

    Absolute figures are certainly valuable but their value increases manifold if they are studied with another through ratio analysis. Ratios enable the mass of data to summarize and simplify. Ratio analysis is an instrument for the diagnosis of the financial health of an enterprise. Ratios are full of meaning and communicate the relative importance of the various items appearing in the Balance Sheet and Profit and Loss Account.

    Definition of Ratio Analysis:

    Ratio Analysis is a powerful tool for financial analysis. A ratio defines as;

    Webster’s New Collegiate Dictionary,

    “The indicated quotient of two mathematical expressions and as the relationship between two or mm thing?”

    Hunt, Williams & Donaldson,

    “The ratio analysis is an aid to management in making credit decisions, but as a mechanical substitute for thinking and judgment, it is worse than useless.”

    Ratio Analysis may define as the systematic use of ratio to interpret the financial statements so that the strength and weaknesses of a firm, as well as its historical performance and current financial condition, can determine. The term ‘ratio’ refers to the numerical or quantitative relationship between two items or variables. In financial analysis, a ratio uses as an index or yardstick for evaluating the financial position and performance of a firm.

    An accounting figure conveys meaning when it is related to some other relevant information. Therefore, ratios help to summaries the large quantities of financial data and to make a qualitative judgment about the firm’s financial performance and financial position. The accounting ratios serve any purposes, they can assist management in its basic functions like forecasting, planning, coordination, control, and communication. If they are used properly they can improve efficiency and therefore, profits.

    Nature and Steps of Ratio Analysis:

    After their meaning and definition the article following Nature of Ratio Analysis below are:

    Ratio analysis is a powerful tool for financial analysis. A ratio defines as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things”. In financial analysis, a ratio uses as an index or yardstick for evaluating the financial position and performance of a firm. Analysis of financial statements is a process of evaluating the relationship between parts of financial statements to obtain a better understanding of the firm’s position and performance.

    The financial analysis uses as a device to analyze and interpret the financial health of the enterprise. The absolute accounting figures reported in the financial statements do not provide a meaningful understanding of the performance and financial performance of a firm. An accounting figure conveys meaning when it is related to some other relevant information.

    Just like a doctor examines his patient by recording his body temperature, blood pressure, etc., before making his conclusion regarding the illness and before giving his treatment, a financial analyst analyses the financial statements with various tools of analysis before commenting upon the financial health or weaknesses of an enterprise. A ratio knows as a symptom like blood pressure, the pulse rate or the temperature of an individual. It is with the help of ratios that the financial statements can analyze more clearly and decisions are drawn from such an analysis. The point to note is that a ratio indicates a quantitative relationship, which can be, in turn, used to make a qualitative judgment. Such is the nature of all financial ratios.

    Steps in Ratio Analysis:

    The following steps below are;

    The first task of the financial analyst is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios. The second step is to compare the calculated ratios with the ratios of the same firm relating to past/with the industry ratios. This step facilitates assessing the success or failure of the firm. The third step involves interpretation, drawing of inferences and report-writing. Conclusions are drawn after comparison in the shape of the report or recommended the course of action.

    Limitations of Ratio Analysis:

    The following Limitations of Ratio Analysis below are:

    • Incorrect Accounting Data.
    • Probable Happenings in the Future.
    • Variation in Accounting Methods.
    • Price Level Changes.
    • Only One Method of Analysis.
    • No Common Standards.
    • Different Meanings Assigned.
    • Ignores Qualitative Factors, and.
    • Insignificant and Unrelated Figures.

    Now, Explain:

    Incorrect Accounting Data:

    False Results if Based on Incorrect Accounting Data. Accounting ratios can be correct only if the data (on which they are based) are correct. Sometimes, the information gives in the financial statements affects by window dressing, i.e., showing position better than what is.

    For example, if inventory values are inflating or depreciation is not charging on fixed assets, not only will one have an optimistic view of the profitability of the concern but also its financial position. So the analyst must always be on the look-out for signs of window dressing if any.

    Probable Happenings in Future:

    No Idea of Probable Happenings in the Future. Ratios are an attempt to analyze the past financial statements; so they are historical documents. Nowadays keeping in view the complexities of the business. It is important to have an idea of the probable happenings in the future.

    Variation in Accounting Methods:

    The two firms’ results are comparable with the help of accounting ratios only. If they follow the same accounting methods or bases. The comparison will become difficult if the two concerns follow the different methods of providing depreciation or valuing stock.

    Similarly, if the two firms are following two different standards and methods. An analysis by reference to the ratios would be misleading. Moreover, utilization of inbuilt facilities, availability of facilities and scale of operation would affect financial statements of different firms. A comparison of financial statements of such firms using ratios is bound to be misleading.

    Price Level Changes:

    Changes in price levels make the comparison for various years difficult. For example, the ratio of sales to total assets in 1996 would be much higher than in 1982 due to rising prices, fixed assets being shown at cost and not at market price.

    Only One Method of Analysis:

    Ratio analysis is only a beginning and gives just a fraction of the information needed for decision-making. So, to have a comprehensive analysis of financial statements, ratios should use along with other methods of analysis.

    No Common Standards:

    It is very difficult to lay down a common standard for comparison because circumstances differ from concern to concern and the nature of each industry is different. For example, a business with the current ratio of more than 2:1 might not be in a position to pay current liabilities in time because of an unfavorable distribution of current assets about liquidity. On the other hand, another business with a current ratio of even less than 2:1 might not be experiencing any difficulty in making the payment of current liabilities in time because of its favorable distribution of current assets about liquidity.

    Different Meanings Assigned:

    The different firms, to calculate the ratio, may assign different meanings. Different Meanings Assigned to the Same Term. For example, profit to calculate a ratio may take as profit before charging interest and tax or profit before tax but after interest or profit after tax and interest. This may affect the calculation of ratio in different firms and such ratio when used for comparison may lead to wrong conclusions.

    Ignores Qualitative Factors:

    Accounting ratios are tools of quantitative analysis only. But sometimes qualitative factors may surmount the quantitative aspects. The calculations derived from the ratio analysis under such circumstances may go distort.

    For example, though credit may grant to a customer based on information regarding his financial position, yet the grant of credit ultimately depends on the debtor’s character, honesty, record, and managerial ability.

    Insignificant and Unrelated Figures:

    No use if Ratios are work out for Insignificant and Unrelated Figures. Accounting ratios may work for any two insignificant and unrelated figures as the ratio of sales and investment in government securities. Such ratios may be misleading. Ratios should calculate based on cause and effect relationships. One should be clear as to what cause is and what effect is before calculating a ratio between two figures.

    Meaning Definition Nature Steps Limitations of Ratio Analysis
    Meaning, Definition, Nature, Steps, Limitations of Ratio Analysis. Image credit from #Pixabay.

  • Meaning, Nature, and Importance of Capital Expenditure Decisions

    Meaning, Nature, and Importance of Capital Expenditure Decisions

    It is the planning, evaluation, and selection of capital expenditure proposals, the benefits of which are expected to accrue over more than one accounting year. Capital expenditure decisions are just the opposite of operating expenditure decisions. Decisions involving the acquisition of machinery, vehicles, buildings, or land are examples of such decisions. So, what is discusses are: Meaning, Nature, and Importance of Capital Expenditure Decisions.

    The Concept of Capital Expenditure Decisions is explaining in Meaning, Definition, Nature, Objectives, Difficulty, and Importance.

    What is Capital Expenditure? A capital expenditure is the use of funds by a company to acquire physical assets to improve its value or increase its long-term productivity. Also known as capital expenses, capital expenditures include purchases such as buildings or warehouses, new equipment such as machinery or computers, and business vehicles. Many companies strive to maintain their historical capital expenditure levels in order to show investors that managers are investing adequately in the business.

    Much of the discussion has focused on decisions relating to near-term operations and activities. But, managers must also ponder occasional big-ticket expenditures that will impact many years to come. The decision on long-term investments is quite pivotal due to many reasons. It is a part of the duties of an entity’s key management to affect most accurate the decision with respect to the long-term investments. The question of decisions is: What is the concept of financial decisions?

    Such capital expenditure decisions relate to the construction of new facilities, large outlays for vehicles and machinery, embarking upon new product research and development, and similar items where the upfront cost is huge and the payback period will span years to come. A number of business factors combine to make business investment perhaps the most important financial management decision.

    Meaning of Capital Expenditure Decisions:

    The capital expenditure decision is the process of making decisions regarding investments in fixed assets which are not meant for sale such as land, building, plant & machinery, etc. Thus it refers to long-term planning for proposed capital expenditures and includes raising of long-term funds and their utilization. The key function of the finance manager is the selection of the most profitable project for invest­ment. This task is very crucial because any action taken by the manager in this area affects the working and profitability of the firm for many years to come.

    Definition of Capital Expenditure Decisions:

    Former is generally termed as ‘current’ expenditure and is ex­pected to result in benefits in a short period of less than a year. The latter is termed as ‘capital’ expenditure, and is expected to result in benefits in the future period of one or more years and is also known as capital budgeting decisions. Capital Expenditure Decisions Managers in all organizations periodically face major decisions that involve cash flows over several years. Decisions involving the acquisition of machinery, vehicles, buildings, or land are examples of such decisions.

    Although the tendency is to focus on the financial dimensions, such decisions are made even more complex because they usually involve a number of nonfinancial components as well. Thus, the final decision may involve consideration of architectural, engineering, marketing, regulatory, and numerous other variables.

    These types of decisions involve considerable risk because they usually involve large amounts of money and extended durations of time. In addition, capital expenditure decisions (also called capital budgeting) are usually accompanied by a number of alternatives from which to choose. Sometimes, an option that is best in the long term may be the least desirable in the near term and vice versa.

    Nature of Capital Expenditure Decisions:

    Capital expenditure decisions involve the acquisition of assets that have a long life span and which provide benefits spread over a long period of time.

    The nature of capital expenditure decisions can be explained in brief as under:

    • Irreversible Decision: Capital expenditure decisions once approved represent long-term invest­ments that cannot be reversed or withdrawn at any time. Withdrawal or reversal of such decisions may lead to considerable financial losses to the firm.
    • Maximization of Shareholder’s Wealth: It helps protect the interest of the shareholders as well as of the firm because it avoids over-investment and under-investment in fixed assets.
    • Substantial Investments: Capital expenditure decisions involve large amounts of funds. Such decisions have its effect over a long span of time.
    • Estimation of Future Cash Inflows: Preparation of capital expenditure budget involves forecast­ing of cash inflows over several years for evaluating the profitability of projects.

    Objectives of Capital Expenditure Decisions:

    Financing decisions are one of the most crucial and critical decisions of a firm as they have a significant impact on the profitability of the firm.

    There is the number of objectives of capital expenditure decisions, some of which are:

    • Cost Reduction: The existence of a firm depends on profitability, which in turn depends on the production of goods or services at a reasonable price. This is possible if over/under-investment in fixed assets is avoided.
    • Providing Contemporary Goods: Consumer tastes change every day. To satisfy the new demands from customers, either proper utilization of existing facility or installation of the latest machinery is necessary—which is not possible without proper capital expenditure decision.
    • Increasing Output: An output may be increased by utilizing the existing facility or through expansion by installing new plant and machinery.

    The Importance of Capital Expenditure Decisions:

    Here are understand about the importance of Capital expenditure and also know their Difficulty.

    The following importance is:
    • Effects in the Long Run: the consequences of capital expenditure decisions extend into the feature. The scope of current manufacture activities of a company governed largely by capital expenditures in the past. Likewise, current capital expenditure decisions provide the framework for future activities. Capital investment decisions have an enormous bearing on the basic character of a company.
    • Irreversibility: The market for used capital equipment, in general, is ill-organized. Further, for some types of capital equipment, custom-made to meet the specific requirement, the market virtually be non-existent. Once such equipment is acquired, reversal of decision may mean scrapping the capital equipment. Thus, a wrong capital investment decision cannot be reversed without incurring a substantial loss.
    • Substantial outlays: Capital expenditures usually involve substantial outlays. An integrated steel plant, for example, involves an outlay of several thousand million. Capital costs tend to increase with advanced technology.
    The following difficulty is:
    • Measurement problems: Identifying and measuring the costs and benefits of a capital expenditure proposal tends to be difficult. This is more so when a capital expenditure has a bearing o some other activities of the company like cutting into sales of some existing product or has some intangible consequences like improving the morale of workers.
    • Uncertainty: A capital expenditure decision involves costs and benefits that extend far into the future. It is impossible to predict exactly what will happen in the future. Hence, there is usually a great deal of uncertainty characterizing the costs and benefits of a capital expenditure decision.
    • Temporal Spread: The costs and benefits associated with a capital expenditure decision are spread out over a long period of time, usually 10-20 years for industrial projects and 20-50 years for infrastructural projects. Such a temporal spread creates some problems in estimating discount rates and establishing equivalence.

    Capital Expenditure Decisions Managers in all organizations periodically face major decisions that involve cash flows over several years. Decisions involving the acquisition of machinery, vehicles, buildings, or land are examples of such decisions. Other examples include decisions involving significant changes in a production process or adding a major new line of products or services to the organization’s activities.

    Decisions involving cash inflows and outflows beyond the current year are called capital-budgeting decisions. Managers encounter two types of capital-budgeting decisions. Acceptance-or-Rejection Decisions In acceptance-or-rejection decisions, managers must decide whether they should undertake a particular capital investment project. In such a decision, the required funds are available or readily obtainable, and management must decide whether the project is worthwhile.

    Meaning Nature and Importance of Capital Expenditure Decisions
    Meaning, Nature, and Importance of Capital Expenditure Decisions. Image credit from #Pixabay.

  • Financial Accounting Importance, Nature, and Limitations

    Financial Accounting Importance, Nature, and Limitations

    Financial accounting Importance, Nature, and Limitations; It is a system that collects information, processes, and reports about changes in the performance, financial status, and financial status of an entity. A person’s ability to track the financial transactions of a person’s business, during which, he knows as financial accounting skills as a result of his operation. Do you study to learn: If Yes? Then read the lot. Let’s Study Financial Accounting Importance, Nature, and Limitations.

    Every Company Current year or the end of the year want to know the financial status of the business. Financial Accounting Importance, Nature, and Limitations.

    It is done by recording, summarizing, and presenting all such financial figures in the form of financial reports or statements using standardized guidelines. Such financial statements generally include balance sheets, income details, and cash flow details; which summarize a company’s performance over time. Financial accounting skills generally do not include the ability to report the value of a company but can provide enough information for the evaluation of others.

    Definition of Financial Accounting:

    Financial Accounting concerns with providing information to external users. It refers to the preparation of general-purpose reports for use by persons outside a business enterprise, such as shareholders (existing and potential), creditors, financial analysts, labor unions, government authori­ties, and the like. Financial accounting is oriented towards the preparation of financial statements which summarise the results of operations for selected periods of time and show the financial position of the business at particular dates.

    Every entity, whether for-profit or not-for-profit; aims at creating maximum value for its stakeholders. The goal of maximum value addition best achieves; when there is a mechanism to monitor the management and the board of directors. Financial accounting helps in such monitoring by providing relevant, reliable, and timely information to the stakeholders.

    Inputs to a financial accounting system include business transactions that are supported by source documents, such as invoices, board resolutions, management memos, etc. These inputs are processed using generally accepted accounting principles (GAAP). The processed information is reported through standardized financial statements.

    Importance of Financial Accounting:

    Financial accounting is integral to companies of all sizes because it helps in the following importance below are: They are three important points.

    1. Communication of information externally.
    2. Communicate information internally, and.
    3. Comparison through analysis.
    First Point:

    This point explains Communication on information externally. The statements and reports generated by financial accounting use to communicate information about the overall health and well-being of the company to external parties. Such external users may include suppliers, banks, and leasing companies, etc. who are not part of the company but require all this information to analyze the progress of the company and compare it with their expectations.

    Second Point:

    This point explains Communicate on information internally. A company’s finance team or its employees who are interested in stock-based compensation etc. constitute the internal users of the information generated by financial accounting practices. The reports generated with the help of financial accounting skills are helpful for this purpose as well.

    Last Point:

    This point explains Comparison through analysis. Since financial accounting requires the use of standardized guidelines, the financial statements generated by all companies are comparable, providing a standard method of analysis.

    Scope and Nature of Financial Accounting:

    The following points are important to understand the scope and nature of financial accounting:

    Contents:

    The end product of the financial accounting process is the financial statements that communicate useful information to decision-makers. The financial statements reflect a combination of recorded facts, accounting conventions, and personal judgments of the preparers. There are three primary financial statements for a profit-making entity in India, viz., the Income Statement (statement of revenues, expenses, and profit), and the Balance Sheet (like the statement of assets, liabilities, and owner’s equity) and cash flow statement. The accounting information generated by financial accounting is quantitative, formal, structured, numerical, and past-oriented material.

    Accounting System:

    The accounting system includes the various techniques and procedures used by the accountant (preparer) in measuring, describing, and communicating financial data to users. Journals, ledgers, and other accounting techniques used in processing financial accounting information depend upon the concept of the double-entry system. This technique includes generally accepted accounting princi­ples (GAAP). The standard of generally accepted accounting principles includes not only broad guidelines of general application but also detailed practices and procedures.

    Measurement Unit:

    Financial accounting primarily concerns with the measurement of economic resources and obligations and changes in them. Financial accounting measures in terms of monetary units of a society in which it operates. For example, the common denominator or yardstick used for accounting measurement is the rupee in India and the dollar in the U.S.A. The assumption is that the rupee or the dollar is a useful measuring unit.

    Users of Financial Accounting Information:

    Financial accounting information intends primarily to serve external users. Some users have a direct interest in the reported information. Examples of such users are owners, credi­tors, potential owners, suppliers, management, tax authorities, employees, customers. Some users need financial accounting information to help those who have a direct interest in a business enterprise.

    Examples of such users are financial analysts and advisers, stock exchanges, financial press and reporting agencies, trade associations, labor unions. These user groups having direct/indirect interests have different objectives and diverse informational needs. The emphasis in financial accounting has been on general-purpose information which, obviously, is not intended to satisfy any specialized needs of individual users or specific user groups.

    Users or Role in Financial Accounting:

    The most basic motives or objectives of financial accounting is the preparation of general-purpose financial statements; which are financial statements meant for use by stakeholders external to the entity; who do not have any other means of getting such information, i.e. people other than the management. These stakeholders include:

    Investors and Financial Analysts:

    Investors need the information to estimate the intrinsic value of the entity and to decide whether to buy, hold, or sell the entity’s shares. Equity research analysts use financial statements to conduct their research on earnings expectations and price targets.

    Working as Employee groups:

    Employees and their representative groups interest in information about the solvency and profitability of their employers to decide about their careers, assess their bargaining power and set a target wage for themselves.

    Lead as Lenders:

    Lender’s interest in the information enables them to determine whether their loans and the interest earned on them will pay when due.

    Suppliers and other trade creditors:

    Suppliers and other creditors interest in the information that enables them to determine whether amounts owing to them will pay when due and whether the demand from the company is going to increase, decrease, or stay constant.

    One of the Customers:

    Customers want to know whether their supplier is going to continue as an entity; especially when they have a long-term involvement with that supplier. For example, Apple interests in the long-term viability of Intel because Apple uses Intel processors in its computers and if Intel ceases operations at once; Apple will suffer difficulties in meeting its own demand and will lose revenue.

    His also Governments and their agencies:

    Governments and their agency’s interest in financial accounting information for a range of purposes. For example, the tax collecting authorities, such as IRS in the USA, interest in calculating the taxable income of the tax-paying entities and finding their tax payable. Antitrust authorities, such as the Federal Trade Commission, interest in finding out whether an entity engages in monopolization.

    The governments themselves interest in the efficient allocation of resources; and, they need financial accounting information of different sectors and industries to decide on federal and state budget allocation, etc. The bureaus of statistics are interested in calculating national income, employment, and other measures.

    Also Public:

    The public interests in an entity’s contribution to the communities in which it operates; its corporate social responsibility updates; its environmental track record, etc.

    Limitations of Financial Accounting:

    Financial accounting is significant for management as it helps them to direct and control the firm activities. It also helps business management in determining appropriate managerial policies in different areas, such as production, sales, administration, and finance.

    Financial accounting suffers from the following limitations which have been responsible for the emergence of cost and manage­ment accounting:

    • Financial accounting does not provide detailed cost information for different departments, processes, products, jobs in the production divisions. Management may need information about different products, sales territories; and, sales activities which are also not available in financial accounting.
    • Financial accounting does not set up a proper system of controlling materials and supplies. Undoubtedly, if material and supplies do not control in a manufacturing concern; they will lead to losses on account of misappropriation, misutilization, scrap, defectives, etc.
    • The recording and accounting for wages and labor are not done for different jobs, processes, products, departments. This creates problems in analyzing the costs associated with different activities.
    • It is difficult to know the behavior of costs in financial accounting as expenses not classify as direct; and, indirect and therefore cannot classify as controllable and uncontrol­lable. Cost management which is the most important objective of all business enterprises; cannot achieve with the aid of financial accounting alone.
    • Financial accounting does not possess an adequate system of standards to evaluate the per­formance of departments and employees working in departments. Standards need to develop for materials, labor, and overheads so that a firm can compare the work of workers, supervisors, and executives with what should have been done in an allotted period of time.
    Other limitations:
    • Financial accounting contains historical cost information that accumulates at the end of the accounting period. The historical cost is not reliable for predicting future earnings, solvency, or overall managerial effectiveness. Historical cost information is relevant but not adequate for all purposes.
    • Financial accounting does not provide information to analyze the losses due to various factors; such as idle plant and equipment, seasonal fluctuations in the volume of business, etc. It does not help management in taking important decisions about the expansion of business, dropping of a product, alternative methods of production, improvement in product, etc.
    • Also, Financial accounting does not provide the necessary cost data to determine the price of the product being manufactured or the service being rendered to the consumers.

    Despite the above limitations, financial accounting has utility and is an important and conceptually rich area. Because of growing business complexities and advances in knowledge of human behavior and decision processes; the scope and methods of financial accounting are chang­ing. Financial accounting theory and practice will probably broaden and improve considerably in the future.

    Financial Accounting Importance Nature and Limitations
    Financial Accounting Importance, Nature, and Limitations.
  • The Project is explained in Features, Characteristics, and Objectives

    The Project is explained in Features, Characteristics, and Objectives

    A Project is an activity to make something unique. Of course, many office buildings are Built-in many respects, but each individual feature is unique in its own way. The Project is explained in Features, Characteristics, and Objectives. One person or organization involved in projects need to understand how to solve the complexity of problems through project management. In this article, we will define the word “project”, describe the key features of a project, and explain the way to separate a project from an activity.

    The Project has explained in some points Nature, Features, Characteristics, and Objectives.

    What is a Project? Meaning, Definition, and Nature.

    The project is a great opportunity for organizations and individuals to achieve their business and non-business objectives more efficiently through implementing change. Projects differ from other types of work (e.g. process, task, procedure). Meanwhile, in the broadest sense, a project is defined as a specific, finite activity that produces an observable and measurable result under certain preset requirements. Projects help us make desired changes in an organized manner and with reduced probability of failure.

    It is an attempt to implement the desired change in an environment in a controlled way. “A Project is a temporary, unique and progressive attempt or endeavor made to produce some kind of a tangible or intangible result (a unique product, service, benefit, competitive advantage, etc.). It usually includes a series of interrelated tasks that are planned for execution over a fixed period of time and within certain requirements and limitations such as cost, quality, performance, others.” By using projects we can plan and do our activities, For Example: build a garage, run a marketing campaign, develop a website, organize a party, go on vacation, graduate a university with honors, or whatever else we may wish to do.

    According to the PMBOK (Project Management Body of Knowledge), A project is defined as a “temporary endeavor with a beginning and an end and it must be used to create a unique product, service or result”. Further, it is progressively elaborated. What this definition of a project means is that projects are those activities that cannot go on indefinitely and must have a defined purpose. A project is an activity to meet the creation of a unique product or service and thus activities that are undertaken to accomplish routine activities cannot be considered projects.

    A project is defined as “A non-routine, non-repetitive one-off undertaking normally with—discrete time, financial and technical performance goals.” The definition is descriptive and, because of the endless variety of projects, most of the definitions are of this nature.

    A project can consider being any series of activities and tasks that:

    • Have a specific objective to be completed within certain specifications.
    • Have defined start and end dates.
    • Have funding limits (if applicable), and.
    • Consume resources (i.e. money, time, equipment).

    The Project is explained, Definition of a Project:

    The project starts from scratch with a definite mission, generates activities involving a variety of human and non-human resources, all directed towards the fulfillment of the mission and stops once the mission is fulfilled.

    According to the Project Management Institute, USA, “a project is a one-set, time-limited, goal-directed, major undertaking requiring the commitment of varied skills and resources”.

    It also describes a project as “a combination of human and non-human resources pooled together in a temporary organization to achieve a specific purpose”. The purpose and the set of activities which can achieve that purpose distinguish one project from another.

    “A project consists of a combination of organizational resources pulled together to create something that did not previously exist and that will provide a performance capability in the design and execution of organizational strategies.”
    “A project is a temporary process undertaken to create one or a few units of a unique output or product or service whose attributes are progressively delineated in the course of the project’s execution.”

    The Project is explained – Second point, Characteristics or Features of a Project:

    The characteristics or features of a project are as follows:

    • Objectives: A project has a fixed set of objectives. Once the objectives have been achieved, the project ceases to exist.
    • Life-cycle: A project has a life cycle reflected by growth, maturity, and decay. It has naturally a learning component.
    • Uniqueness: No two projects are exactly similar even if Die plants are exactly identical or are merely duplicated. The location, the infrastructure, the agencies, and the people make each project unique.
    • Change: A project sees many changes throughout its life while some of these changes may not have any major impact; they can be some changes which will change the entire character of course of the project.
    • Life Span: A project cannot continue endlessly. It has to come to an end. What represents the end would normally be spelled out in the set of objectives.
    • Single entity: A project is one entity and is normally entrusted to one responsibility center while the participants in the project are many.
    • Team-work: A project calls for team-work. The team again is constituted of members belonging to different disciplines, organizations, and even countries.
    • Made to order: A project is always made to the order of its customer. The customer stipulates various requirements and puts constraints within which the project must execute.
    • Unity in diversity: A project is a complex set of thousands of varieties. The varieties are in terms of technology, equipment, and materials, machinery and people, work culture and ethics. But they remain inter-related and unless this is so, they either do not belong to the project. Or will never allow the project to be completed.
    • Successive principle: What is going to happen during the life cycle of a project is not fully known at any stage. The details get finalized successively with the passage of time. More is known about a project when it enters the construction phase than what was known to say, during the detailed engineering phase.
    • Risk and uncertainty: Every project has risk and uncertainty associated with it. The degree of risk and uncertainty will depend on how a project has passed through its various life-cycle phases. An ill-defined project will have the extremely high degree of risk and uncertainly Risk and uncertainty are not part and parcel of only R and H projects there simply cannot be a project without any risk and uncertainty.
    • High level of sub-contracting: A high percentage of the work in a project is done through contractors. The more the complexity of the project, the more will be the extent of contracting. Normally around 80% of the work in a project is done through sub-contractors.

    Key of Characteristics:

    As follows from the given definition, any project can be characterized by these characteristics:

    Temporary:

    This key characteristic means that every project has a finite start and a finite end. The start is the time when the project is initiated and its concept is developed. The temporary nature of a project indicates that a project has a definite beginning and a definite end.

    The beginning is marked by the start of the project and the end is reached when the project’s objectives have been achieved or when the project is terminated for some other reason. ‘Temporary’ is also one of the characteristics distinguishing a project from normal operations. The end is reached when all objectives of the project have been met (or unmet if it’s obvious that the project cannot be completed – then it’s terminated).

    Unique Deliverable’s:

    Any project aims to produce some deliverable(s) which can be a product, service, or some another result. Every project is unique and different. This is another aspect that differentiates a project from normal operations. Deliverables should address a problem or need analyzing before project start. Repetitive elements may be present in project deliverables and activities, but there is always something different about those elements or the way in which they are combined.

    Once again, a building construction project can serve as a conceptual example. A specific structure may be designed by people who have designed other buildings, constructed by people who have built other buildings, and made from the same materials as other buildings. Yet, an individual building project brings those elements together in a unique way; A particular building of a specific design for an exact purpose using selected materials all combine to create a unique construction project.

    Progressive Elaboration:

    With the progress of a project, continuous investigation and improvement become available, and all this allows producing more accurate and comprehensive plans. This key characteristic means that the successive iterations of planning processes result in developing more effective solutions to progress and develop projects.

    Creating Output:

    Every project creates some type of product, service, or end result. These outputs are called deliverables and they are the reason projects exist and take place. Project output can be both tangible and intangible. An example of tangible project output is the building resulting from a construction project. Examples of intangible projects include new services or events.

    The Project is explained – and the Last Point, Objectives of a Project:

    The “Project” is a means to achieve a “goal”. By the completion of projects, the creative part (of the projected asset) comes to an end and, thereupon, the project-created tangible thing is used to achieve the goal. So, primarily, there is a goal aimed at by the project owner and, in order to achieve that goal, he initiates the “project”. Accordingly, before we deal with the project objectives, we would like to go through the possible objectives of the project owner.

    First Objectives, A popular expression runs:

    “Project grows out of needs or opportunities.” The project, in general, is undertaken when the need or opportunity is identified, a proposal is crystallized in form of a project, the proposal is then transformed into necessary activities to build-up the project, e.g. setting up a plant. Along with further analyses and appraisal of the project technical, financial etc. a firm decision is made about launching a project.

    At this point, the project objectives are set which becomes the ultimate philosophy for the project team. Any project decision is based upon the full evaluation of its impact upon the project objectives.

    The project, when finalized, has the following objectives:

    • It has a time-bound programme to start, execute, commission and delivery of the project;
    • It has cost-bound activities in terms of money spent or resources consumed so that total cost is within the total estimated project cost as agreed and authorized by the project owner and
    • It shall conform to the technical specifications set at the point of deciding upon the project. In others words, the delivery (of the project) shall have to be of the agreed quality.

    Second Objectives, Without Money-Making Mission:

    • There are situations where projects need to be implemented with social objectives. Primarily, these are undertaken by the government—non-industrial projects aimed towards the social benefits as, public health, irrigation, education etc. The government, being the owner of these projects, provides funds for such projects.
    • Projects are also undertaken on account of emergency and/or need of national importance e.g. defense and security. Even though such projects can be highly complex and costly phenomena as constructing an aircraft landing facility at high altitude—such projects are non-industrial and funded by the government.
    • There are projects within an industrial organization with the social objective, being necessary as per local legal regulations, e.g. Instituting facilities for health-care, education, sports etc. within a township built-up by a very large industrial organization. Influence of ‘politics’ also plays an important role in location, timing, and size of such projects.
    • There are instances where industrial organizations are aspiring to achieve and/or maintain a leading position in the trade/industry. In such a situation, the organization decides to spend some of its resources on Research and Development activities including research in finding out new products, new processes, development of existing products etc. to avail the cost benefit.

    The management of such an organization decides to go ahead for the Research and Development projects with a plan to install facilities to search for the probable product and/or process. Installation of such project includes the establishment of a laboratory with sophisticated equipment, the appointment of professionals and the supply of necessary consumables.

    In all such cases mentioned in (a) to (d) above the project is confined to budgeted costs and, obviously, no revenue/income is involved. There is a scope of deliberation on expenses involved, considering the resources available in the organization. There may be the limitation and/or deferment of the expenses under this type of project as per the decision of the management.

    The Project is explained in Features Characteristics and Objectives
    Image credit from #Pixabay.

  • Financial Accounting: Meaning, Nature, and Scope

    Financial Accounting: Meaning, Nature, and Scope

    Financial accounting is a specialized branch of accounting that keeps track of a company’s financial transactions. Define with Explain it each one Concept of Financial Accounting Discuss the topic, Financial Accounting – Meaning, Definition, Nature, Scope, and Disadvantages of Limitations. Using standardized guidelines, the transactions record, summarize, and present in a financial report or financial statements such as an income statement or a balance sheet. Companies issue financial statements on a routine schedule. The statements are considered external because they are given to people outside of the company, with the primary recipients being owners/stockholders, as well as certain lenders. It also learns Accountability in Financial Management.

    Learn, Explain Financial Accounting: Meaning, Nature, Scope, and Disadvantages. 

    If a corporation’s stock is publicly traded, however, its financial statements [Hindi] (and other financial reporting) tend to widely circulate, and information will likely reach secondary recipients such as competitors, customers, employees, labor organizations, and investment analysts. It’s important to point out that the purpose of financial accounting is not to report the value of a company. Rather, its purpose is to provide enough information for others to assess the value of a company for themselves.

    Because external financial statements are used by a variety of people in a variety of ways, financial accounting has common rules known as accounting standards and as generally accepted accounting principles (GAAP). In the U.S., the Financial Accounting Standards Board (FASB) is an organization that develops accounting standards and principles. Corporations whose stock publicly trade must also comply with the reporting requirements of the Securities and Exchange Commission (SEC), an agency of the U.S. government. The similarity between Financial and Management Accounting.

    Meaning of Financial Accounting: 

    Accounting is the process of recording, classifying, summarizing, analyzing, and interpreting the financial transactions of the business for the benefit of management and those parties who are interested in business such as shareholders, creditors, bankers, customers, employees, and government. Thus, it concerns with financial reporting and decision-making aspects of the business.

    The American Institute of Certified Public Accountants Committee on Terminology proposed in 1941 that accounting may be defined as,

    “The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions, and events which are, in part at least, of a financial character and interpreting the results thereof.”

    Financial Accounting:

    The term ‘Accounting’ unless otherwise specifically stated always refers to ‘Financial Accounting’. It is commonly carrying on in the general offices of a business. It concerns with revenues, expenses, assets, and liabilities of a business house. Also, they have the two-fold objective, viz,

    • To ascertain the profitability of the business, and
    • To know the financial position of the concern.

    Nature and Scope of Financial Accounting:

    Financial accounting is a useful tool to manage and to external users such as shareholders, potential owners, creditors, customers, employees, and government. It provides information regarding the results of its operations and the financial status of the business.

    The following are the functional areas of financial accounting:-

    1] Dealing with financial transactions:

    Accounting as a process deals only with those transactions which are measurable in terms of money. Anything which cannot be expressed in monetary terms does not form part of financial accounting however significant it is.

    2] Recording of information:

    Accounting is the art of recording financial transactions of a business concern. There is a limitation on human memory. It is not possible to remember all transactions of the business. Therefore, the information is recorded in a set of books called Journal and other subsidiary books and it is useful for management in its decision-making process.

    3] Classification of Data:

    The recorded data arrange in a manner to group the transactions of similar nature at one place so that full information of these items may collect under different heads. This is done in the book called ‘Ledger’. For example, we may have accounts called ‘Salaries’, ‘Rent’, ‘Interest’, Advertisement’, etc. To verify the arithmetical accuracy of such accounts, the trial balance prepare.

    4] Making Summaries:

    The classified information of the trial balance uses to prepare a profit and loss account and balance sheet in a manner useful to the users of accounting information. As well as, the final accounts prepare to find out the operational efficiency and financial strength of the business.

    5] Analyzing:

    It is the process of establishing the relationship between the items of the profit and loss account and the balance sheet. Also, the purpose is to identify the financial strength and weaknesses of the business. It also provides a basis for interpretation.

    6] Interpreting financial information:

    It is concerned with explaining the meaning and significance of the relationships established by the analysis. It should be useful to the users, to enable them to take correct decisions.

    7] Communicating the results:

    The profitability and financial position of the business as interpreted above communicate to the interest parties at regular intervals to assist them to make their conclusions.

    Disadvantages or Limitations of Financial Accounting:

    The concerns with the preparation of final accounts. Also, the business has become so complex that mere final accounts are not sufficient for meeting financial needs. It is like a post-mortem report. At the most, it can reveal what has happened so far, but it cannot exercise any control over the past happenings.

    The disadvantages of financial accounting are as follows:-

    1. It records only quantitative information.
    2. Records only the historical cost. The impact of future uncertainties has no place in financial accounting.
    3. It does not take into account price level changes.
    4. It provides information about the whole concern. Product-wise, process-wise, department-wise, or information of any other line of activity cannot obtain separately from financial accounting.
    5. Cost figures do not know in advance. Therefore, it is not possible to fix the price in advance. It does not provide information to increase or reduce the selling price.
    6. As there is no technique for comparing the actual performance with that of the budgeted targets, it is not possible to evaluate the performance of the business.
    7. It does not tell about the optimum or otherwise of the quantum of profit made and does not provide the ways and means to increase the profits.
    In other words;
    1. In case of loss, whether loss can reduce or convert into profit using cost control and cost reduction? It does not answer this question.
    2. Does it not reveal which departments are performing well? Which ones are incurring losses and how much is the loss in each case?
    3. It does not provide the cost of products manufactured
    4. There are no means provided by financial accounting to reduce the wastage.
    5. Can the expenses reduce which results in the reduction of product cost and if so, to what extent and how? No answer to these questions.
    6. It is not helpful to the management in taking strategic decisions like a replacement of assets, an introduction of new products, discontinuation of an existing line, expansion of capacity, etc.
    7. It provides ample scope for manipulation like overvaluation or undervaluation. This possibility of manipulation reduces reliability.
    8. It’s technical. A person not conversant with accounting has little utility of the financial accounts.

    Financial Accounting Meaning Nature and Scope

  • Personnel Management: Characteristics, Nature, and Scope!

    Personnel Management: Characteristics, Nature, and Scope!

    Explain and Learn, Personnel Management: Characteristics, Nature, and Scope! 

    Personnel management can also be defined as, that field of management which is con­cerned with the planning, organising, directing and controlling various operative functions of procurement, development, maintenance and utilisation of a labour force in such a way that objectives of company, those of personnel at all levels and those of community are achieved. The Concept of Personnel Management study is – Characteristics of Personnel Management, Nature of Personnel Management, and Scope of Personnel Management! Also learned, PDF Reader, Free Download, Personnel Management: Characteristics, Nature, and Scope!

    Personnel management can be defined as obtaining, using and maintaining a satisfied workforce. It is a significant part of management concerned with employees at work and with their relationship within the organization.

    According to Flippo, “Personnel management is the planning, organizing, compensation, integration, and maintenance of people for the purpose of contributing to organizational, individual and societal goals.”

    According to Brech, “Personnel Management is that part which is primarily concerned with the human resource of the organization.”

    Loader Loading…
    EAD Logo Taking too long?

    Reload Reload document
    | Open Open in new tab

    Download [269.88 KB]

    Characteristics of Personnel Management:

    The definitions on personnel management reveal the following characteristics:

    (i) Personnel management is a specialized branch of management and hence all the principles of general management (as well as functions of management) are applicable to personnel management.

    (ii) Personnel management is basically concerned with human resources. Personnel management advocates the ways to get best possible results by managing the scarcely available human resources effectively and efficiently.

    (iii) Personnel management is concerned with the relationship between employer and employee; between employee and employee; and among employees. By the term employee, we mean to include blue-collar as well as white-collar workers.

    (iv) Personnel management concentrates on the development of individual and group in an organization for achieving better results.

    (v) Personnel management focuses on employment planning.

     (vi) Personnel management gives adequate direction to the developmental activities—of lower-level employees as well as executives.

    (vii) Personnel management aims at providing the necessary guidance for improving performance (through performance appraisal of employees) of employees.

    (viii) Personnel management aims at maintaining good human relations.

    (ix) Above all, personnel management is concerned with recruitment, selection, training, and placement of employees within work organizations.

    (x) Personnel management provides for fair and reasonable compensation to employees.

    Thus, personnel management is an approach (an approach to deal with human beings in organisation), a point of view (regarding the personnel policies and wage administration), and a technique of thinking (as to how to motivate employees towards higher productivity) and a philosophy of management (of getting things done through people effectively and efficiently).

    Nature of Personnel Management:

    The emergence of personnel management can be attributed to the writings of human religionists who attached great significance to the human factor.

    Lawrence Apply remarked. “Management is personnel administration”.

    This view is partially true as management is concerned with the efficient and effective use of both human as well as non-human resources. Thus, personnel management is only a part of the management process. At the same time, it must be recognized that personnel management is inherent in the process of management.

    This function is performed by all the managers throughout the organization rather than by the personnel department only. If a manager is to get the best of his people, he must undertake the basic responsibility of selecting people who will work under him and to develop, motivate and guide them.

    However, he can take the help of the specialized services of the personnel department in discharging this responsibility.

    Personnel management permeates all the functional areas of management such as production management, financial management, and marketing management. That is, every manager from top to bottom, working in any department has to perform the personnel functions.

    Though the personnel department is created under the supervision of a person designated as ‘Personnel Manager’, it should not be assumed that the other managers are relieved of this responsibility.

    Personnel management is not a ‘one-shot’ function. It must be performed continuously if the organizational objectives are to be achieved smoothly. To quote G.R. Terry, “The personnel function cannot be turned on and off like water from a faucet; it cannot be practiced only one hour each day or one day a week.

    Personnel management requires a constant alertness and awareness of human relations and their importance in everyday operations.”

    The scope of Personnel Management:

    As we recall history, personnel management was basically concerned with recruitment, selection, placement of employees in organizations. Now the scope of personnel management has become wide and is concerned with organizing human resources with a view to maximize output and profits of the organisation and to develop the talent of the employees at work to the fullest possible extent securing personal satisfaction (job satisfaction of the employees) and personal satisfaction (as far as the organisation is concerned).

    In the early stage of industrialization, dominated by single-ownership concerns, owner himself used to act as a personnel manager and recruit and select the people of his choice and taste irrespective of the requirements of the job. With the advent of industrialization and the consequent developments, company type and partnership firms came into vogue broadening the scope of personnel management.

    The scope of personnel management can be seen in terms of the activities of personnel management discussed hereunder:

    (a) Employee training

    (b) Recruitment and maintenance of labor force.

    (c) Executive development

    (d) Determination of equitable wages and Salaries for laborers and employees.

    (e) Job analysis and job description

    (f) Labour welfare activities-such as education to children of the employee, recreation, sanitary conditions, etc.

    (g) Maintaining personnel records.

    (h) Maintaining sound human relations in industry.

    (i) Settlement of labor disputes.

    Personnel Management Characteristics Nature and Scope - ilearnlot

  • Personnel Management: Functions, Nature, Principles, and Importance!

    Personnel Management: Functions, Nature, Principles, and Importance!

    Explain and learn, Personnel Management: Functions, Nature, Principles, and Importance! 

    Personnel Management (staffing function of Management), also known as Human Resource Management. The concept of Personnel Management study is – Functions of Personnel Management, Nature of Personnel Management, Principles of Personnel Management, and Importance of Personnel Management. Personnel management is concerned with the proper use of human factors. Per­sonnel management may be defined as that part of the management process, which is prima­rily concerned with the human constituents of an organization. Also learned with PDF Reader, free Download, Personnel Management: Functions, Nature, Principles, and Importance!

    Personnel management can also be defined as, that field of management which is con­cerned with the planning, organising, directing and controlling various operative functions of procurement, development, maintenance and utilisation of a labour force in such a way that objectives of company, those of personnel at all levels and those of community are achieved.

    Loader Loading…
    EAD Logo Taking too long?

    Reload Reload document
    | Open Open in new tab

    Download [70.18 KB]

    Functions of Personnel Management:

    Functions of Personnel Management are of two types: 1. Managerial Functions 2. Operative Functions!

    1. Managerial Functions:

    The Managerial functions of a personnel manager involve POSDCORB (Luther Gullick) i.e., Planning, organization, staffing, directing, coordinating, reporting and budgeting of those who actually perform the operative functions of the Personnel Department.

    The following are the managerial functions (viz. planning, organizing, directing and controlling) performed by a personnel department:

    Personnel Planning:

    Planning lays down a pre-determined course to do something such as what to do, how to do, where to do, who is to do etc. A personnel manager plans in advance the trend in wages, labor market, union demands etc. Through planning, most of the future problems can be anticipated.

    Organizing:

    According to J.C. Massic, “An organization is a structure, a framework and a process by which a co-operative group of human being allocates its task among its members, identify relationships and integrates its activities towards common objectives.” The personnel manager has to design the structure of relationships among jobs, personnel, and physical factors so that the objectives of the enterprise are achieved.

    Directing:

    This function relates to guidance and stimulation of the subordinates at all levels. The personnel manager directs and motivates the employees of his department so that they work willingly and effectively for the achievement of organizational goals,

    Controlling:

    A personnel manager has to constantly watch whether there is any deviation from the planned path. Controlling is concerned with remedial actions. Continuous monitoring of the personnel policies relating to training, labor turnover, wage payments, interviewing new and separated employees etc., is the backbone of controlling.

    If deviations are unavoidable, corrective action can be planned in advance. Controlling helps the personnel manager to evaluate the performance of employees in the personnel department so far as the operating functions are concerned.

    1. Operative Functions:

    The operative functions of the Personnel Department are also called service functions. 

    These include.

    (a) Procurement function

    (b) Development

    (c) Promotion, transfer and termination function

    (d) Compensation function

    (e) Welfare function

    (f) Collective bargaining function

    (g) Miscellaneous functions.

    These functions of the Personnel Department are discussed below:

    (1) Procurement:

    It includes:

    (a) Recruitment i.e., tapping the possible sources from where prospective labor supply will come.

    (b) Getting information regarding prevailing wage rates and job requirements.

    (c) Selecting the best candidate by following a systematic selection procedure.

    (d) Maintaining the records of employees.

    (e) Introducing the new employee to the officers of the other departments such as Security Officer, Time Keeper, and Cashier etc.

    (2) Training or Development Function:

    The training of the new employees and also of those who are being promoted is the crucial function of Personnel Department. A training programme is devised for this purpose. The training increases the skills and abilities of the employees.

    The various aspects of training are:

    (a) Training to new employees, instructors, and supervisors.

    (b) Training in safety equipment and various policies of companies.

    (c) Training through improvement of education such as evening classes, films, Entertainment programmes etc.

    (d) Encouraging employees to give suggestions.

    (3) Promotion, Transfer, and Termination:

    The performance of the employees is evaluated for the purpose of making decisions concerning the employment. Merit rating is undertaken for evaluation of the performance of the employees.

    The functions of the Personnel Department in this regard are given below:

    (a) To lay down a promotion policy.

    (b) To formulate policies regarding transfer and termination.

    (c) Analysis of voluntary separations and knowing the possible causes of such separations.

    (4) Compensation:

    The employees should get adequate and equitable remuneration for the work being done by them.

    The functions of the Personnel Department concerned with fixation of fair wages is:

    (a) To evaluate jobs and determine their worth in terms of money.

    (b) To collaborate with those who formulate wage plans.

    (c) To assist in the formulation of policies regarding pension plans, profit sharing programmes, non-monetary benefits, etc.

    (d) To compare the wages of the enterprise with the industry and remove inconsistencies, if any.

    (5) Welfare Activities:

    These activities relate to the physical and social well-being of the employees and include:

    (a) Provision of medical facilities such as first aid, dispensaries, etc.

    (b) Suggesting ways and means by which accidents can be eliminated or minimized.

    (c) To make provisions for restaurants and other recreational facilities.

    (d) To apply the labor laws effectively.

    (e) To publish a plant magazine.

    (6) Collective Bargaining:

    It includes:

    (a) To assist in the negotiations which are held with the union leaders?

    (b) To know the grievances of employees and following their problems properly.

    (7) Miscellaneous:

    (a) To advise the line managers regarding administration of personnel policies.

    (b) To secure co-ordination of all personnel activities.

    (c) To have an effective communication system.

    (d) To provide good working conditions.

    Nature of Personnel Management:

    1. Personnel management includes the function of employment, development, and compensation- These functions are performed primarily by the personnel management in consultation with other departments.
    2. Personnel management is an extension of general management. It is concerned with promoting and stimulating competent workforce to make their fullest contribution to the concern.
    3. Personnel management exists to advise and assist the line managers in personnel matters. Therefore, personnel department is a staff department of an organization.
    4. Personnel management lays emphasize on action rather than making lengthy schedules, plans, work methods. The problems and grievances of people at work can be solved more effectively through rationale personnel policies.
    5. It is based on human orientation. It tries to help the workers to develop their potential fully to the concern.
    6. It also motivates the employees through its effective incentive plans so that the employees provide fullest co-operation.
    7. Personnel management deals with human resources of a concern. In the context of human resources, it manages both individuals as well as blue-collar workers.

    Principles of Personnel Management:

    Principles of personnel management help the personnel managers to conduct and direct the policies in a proper way.

    These principles are:

    1. The principle of Maximum Personnel Development:

    By this principle, the workers are developed to the maximum extent, so that their developed ability, cleverness, productivity, and efficiency can be used for the firm’s objective.

    1. The principle of Scientific Selection:

    This principle enables to have a right person for the right job.

    1. The principle of High Morale:

    Ideal wage policy should be offered to the workers so that their morale becomes high and they work with interest.

    1. The principle of Dignity of Labour:

    The labor should feel proud of their work.

    1. The principle of Team Spirit:

    Team spirit must be developed among the workers. They should work collectively with collective responsibility and should have a sense of cooperation, unity and mutual trust.

    1. The principle of Effective Communication:

    There must be effective communication be­tween the management and workers otherwise complex problems like mistrust, hatred and ill- will arise which in turn affects the production of the organization.

    1. The principle of Joint Management:

    This creates responsibility in the labor with in­creasing mutual faith and friendship. This improves the labor relations.

    1. The principle of Fair Reward:

    Labour should be given proper compensation for the work. This develops the industrial piece.

    1. The principle of Effective Utilisation of Human Resources:

    Personnel management should be developed for the effective use of the human resources. Proper training should be awarded to the personnel for their development.

    Importance of Personnel Management:

    Personnel management is important for avoiding the following consequences:

    1. To hire the wrong person for the job
    2. To experience high turnover
    3. To find your people not doing their best
    4. To waste time with useless interviews
    5. To have some of one’s employees think their salaries are unfair and inequitable relative to others in the organization.
    6. To allow a lack of training to undermine one’s department’s effectiveness.
    7. To commit any unfair labor practices.

    The acquisition of skilled, talented and motivated employees is an important part of personnel management. The acquisition phase involves recruiting, screening, selecting and placing personnel. Retaining competent individuals is also important to an organization. If qualified individuals regularly leave a company, it becomes necessary to continuously seek new personnel, which costs money and time.

    The opposite of retention is, of course, termination, an unpleasant part of any manager’s job. Occasionally, some employees must be terminated for breaking rules, failing to perform adequately or job cutbacks.

    Developing human resources involves training, educating, appraising and pre­paring personnel for present or future jobs. These activities are important for the material and psychological growth of employees. It is not possible to satisfy the need for personnel in an organization if it does not have an active employee development programme.

    For utilizing the full potential of manpower, there is need to understand both individual and organizational needs. It is also necessary to match two things: availability of different types of manpower, over time and organizational needs for such manpower. Personnel management is normally regarded as a staff function whose role is to serve the organization and help it achieve its objectives.

    Personnel Management Functions Nature Principles and Importance - ilearnlot