Tag: Role

  • Lending procedures and Role of development banks

    Lending procedures and Role of development banks

    A development bank is a “bank” established for “financing development”. They provide medium and long-term finance to the industrial and agricultural sectors. This article explains the Lending procedures and Role of development banks, and some points also highlight. They provide finance to both the private and public sectors. Also, Development banks are multipurpose financial institutions. They do term lending, investment in securities and other activities. They even promote saving and investment habit in the public.

    Here are the explain the Lending procedures and Role of development banks.

    As per banking subject, “Development banks are financial institutions established to lend (loan) finance (money) on the subsidized interest rate. Such lending is sanctioned to promote and develop important sectors like agriculture, industry, import-export, housing, and allied activities”.

    Features of development banks:

    A development bank has the following features or characteristics:

    • A development bank does not accept deposits from the public like commercial banks and other financial institutions who entirely depend upon saving mobilization.
    • It is a specialized financial institution that provides medium-term and long- term lending facilities.
    • It is a multipurpose financial institution. Besides providing financial help it undertakes promotional activities also. It helps enterprises from planning to the operational level.
    • The objective of these banks is to serve the public interest rather than earning profits.
    • Development banks react to the socio-economic needs of development.
    • It provides financial assistance to both private as well as public sector institutions.
    • The role of a development bank is of gap filler. When assistance from other sources is not sufficient then this channel helps. It does not compete with normal channels of finance.

    Objectives of Development Banks:

    A development bank has the following objectives;

    • Lay Foundations for Industrialization.
    • Meet Capital Needs.
    • Need for Promotional Activities, and.
    • Help Small and Medium Sectors.

    Functions of Development Banks:

    A development bank has the following functions;

    • Financial Gap Fillers.
    • Undertake Entrepreneurial Role.
    • Commercial Banking Business.
    • Joint Finance.
    • Refinance Facility.
    • Credit Guarantee, and.
    • Underwriting of Securities.

    Lending Procedures of Development Banks:

    Development banks follow a procedure for evaluating a proposal for a project. The basic objective is to check whether the applicant fulfills various conditions prescribed by the lending institution and the project is viable. The acceptance of a wrong proposal will result in the wastage of scarce resources.

    We also study their Role, but first Development banks have the following Lending Procedures;

    1. Project Appraisal and Eligibility of the Applicant.
    2. Technical Appraisal.
    3. Economic Viability.
    4. Assessing Commercial Aspects.
    5. Financial Feasibility.
    6. Managerial Competence.
    7. National Contribution.
    8. Balancing of Various Factors.
    9. Loan Sanction.
    10. Loan Disbursement, and.
    11. Follow up.

    Now, explain each one;

    Project Appraisal and Eligibility of Applicant:

    Every financial institution serves a particular area of activity or there are certain limits prescribed beyond which they cannot go. Before processing the application, it is important to find out whether the applicant is eligible under the norms of the institution or not.

    The second aspect which is looked into is to determine whether the enterprise has fulfilled various conditions prescribed by the government. In case some license is required from the government. It should have been taken or assurance is received from the licensing authority.

    After satisfying these preliminary issues the project is appraised by a team of technical financial and economic officers of the institutions from various discussions with the promoters and clarifications sought on various points.

    The bank institution considers financial assistance in the light of;

    • Guidelines for assistance to industries issued by the government or others concerned from time to time.
    • Guidelines issued by the bank, and.
    • Policy decisions of the Board of Directors of the bank.
    Technical Appraisal:

    A technical appraisal involves the study of:

    • Feasibility and suitability of technical process in Indian conditions.
    • Location, of the project about the availability of raw materials, power: water. labor, fuel, transport, communication facilities and the market for finished products.
    • The scale of operations and its suitability for the planned project.
    • The technical soundness of the projects.
    • Sources of purchasing plant and machinery and the reputation of suppliers, etc.
    • Arrangement for the disposal of factory effluent and use of bye products, if any.
    • The estimated cost of the project and probable selling price of the product, and.
    • The programmer for completing the project.
    Economic Viability:

    The economic appraisal will consider the national and industrial priorities of the project export potential of the product employment potential, the study of the market.

    Assessing Commercial Aspects:

    The examination of commercial aspects relates to the arrangements for the purchase of raw materials and the sale of finished products. If the concern has some arrangement for sale then the position of the party should assess.

    Financial Feasibility:

    The financial feasibility of a new and an existing concern will be assessed differently. The assessment for a new concern will involve;

    • The needs for fixed assets, working capital, and preliminary expenses will estimate to find out its needs.
    • The financing plans will be studied about capital structure, promoters’ contribution, debt-equity ratio.
    • Projected cash flow statements both during the construction and operation periods, and.
    • Projected profitability and the like dividend shortly.
    Managerial Competence:

    The success of concern depends upon the competence of management. Proper application of various policies will determine the success of an enterprise.

    Also, a lending institution would see the background, qualifications, business experience promoters and other persons associated with management.

    National Contribution:

    Besides commercial profitability, the national contribution .of the project is also taken into account. The role of the project in the national economy and its benefits to society in the form of good quality products, reasonable prices, employment generation, helpful in social infrastructure, etc. should be assessed. Development banks aim at the overall welfare of society.

    Balancing of Various Factors:

    Various factors should be balanced against each other. The circumstances of the individual project will help in weighing various factors. Some factors may be strong as their in-depth analysis should be avoided.

    In case a project is profitable, there will be no need to assess cash flow. Weaknesses located in certain areas may be offset by the good points in the other.

    Also, experienced management and sound economic outlook may compensate for some weaknesses in financial positions. The responsibility of lending the bank lies in balancing judiciously different considerations for arriving at a consensus.

    Loan Sanction:

    After the appraisal report on the project prepares by the bank’s officers, it places before the advisory committee consisting of experts drawn from various fields of the particular industry. If the advisory committee satisfies a tile proposal then it recommends the case to the Managing Director or Board of Directors along with its report. When the assistance sanctions hen a letter to this effect issues to the pay giving details of conditions.

    Loan Disbursement:

    The loan disburses after the execution of the loan agreement. The execution of documents of security or guarantee etc. should precede the disbursement of the loan. In case some property pledges to the bank then the title deeds of such property are properly scrutinized. The fulfillment of various conditions proceeding to disbursement will determine the time of paying the money to the party.

    Follow up:

    The job of a lending bank does note by disbursing the assistance. It has first to see whether the construction .of the project is as per schedule decided earlier. In case some delay is taking place in executing the plans then the reasons for it should be determined. Later during operations, the result should be properly followed. It should be seen whether the revenue earned by the concern will be sufficient to meet its obligations or not so a proper follow up by the bank will enable it to follow the progress of the unit.

    Lending procedures and Role of development banks
    Lending procedures and Role of development banks, Cheques administration hand #Pixabay.

    Role of development banks:

    Financial institutions provide means and mechanisms of transferring resources from those who have an excess of income over expenditure to those who can make productive use of the same.

    Also, commercial banks and investment institutions mobilize savings of people and channel them into productive uses. Financial institutions provide all types of assistant required infrastructural facilities Institutions e p economic persons who can take the development in the following ways.

    After Lending procedures the Development banks have the following role;

    1. Providing Funds.
    2. Infrastructural Facilities.
    3. Promotional Activities.
    4. Development of Backward Areas.
    5. Planned Development.
    6. Accelerating Industrialization, and.
    7. Employment Generation.

    Now, explain each one;

    Providing Funds:

    Underdeveloped countries have low levels of capital formation. Due to low incomes, people are not able to save sufficient funds which are needed for sensing up new units and also for expansion diversification and modernization of existing units.

    The persons who have the capability of starting a business but does not have requisite help approach to financial institutions for help. These institutions help a large number of persons for taking up some industrial activity.

    The addition of new industrial units and increasing the activities of existing units will certainly help in accelerating the pace of economic development. Financial institutions have large inventible funds which are used for productive purposes.

    Infrastructural Facilities:

    The economic development of a country links to the availability of infrastructural facilities. There is a need for roads, water, sewage, communication facilities, electricity, etc. Financial institutions prepare their investment policies by keeping national priorities in major and the institutions invest in those aims is which can help in increasing the development of the country.

    Also, the Indian industry and agriculture are facing an acute shortage of electricity. All India institutions are giving priority to invest funds in projects generating electricity. These investments will certainly increase the availability of electricity. Small entrepreneurs cannot spare funds for creating infrastructural facilities.

    To overcome this problem, institutions at the state level are developing industrial estates and provide sheds, having all facilities at easy installments. So financial institutions are helping in the creation of all those facilities which are essential for the development of a country.

    Promotional Activities:

    An entrepreneur faces many problems while setting up a new unit. One has to undertake a feasibility report, prepare project reports, complete registration formalities, seek approval from various agencies, etc. All these things require time, money and energy.

    Some people are not able to undertake this exercise or some do not even take initiative. Financial institutions are the expense and manpower resources for undertaking the exercise of starting a new unit. So these institutions take up this work on behalf of entrepreneurs.

    Some units may be set up jointly with some financial institutions and in that case, the formalities are completed collectively. Also, some units may not have come up had they not received promotional help from financial institutions. As well as, the promotional role of financial institutions helps increase the development of a country.

    Development of Backward Areas:

    Some areas remain neglected because facilities needed for setting up new units are not available here. The entrepreneurs set up new units at those places which are already developed. It causes an imbalance in the economic development of some areas.

    Also, to help the development of backward areas, financial institutions provide special assistance to entrepreneurs for setting up new units in these areas. IDBI, IFCI, ICICI give priority in assisting units set up in backward areas and even charge lower interest rates on lending.

    Such efforts certainly encourage entrepreneurs to set up new units in backward areas. The industrial units in these areas improve basic amenities and create employment opportunities. These measures will certainly help in increasing the economic development of backward areas.

    Planned Development:

    Financial institutions help in the planned development of the economy. Different institutions earmark their spheres of activities so that every business activity helps. Some institutions like SIDBI, SFCI’s especially help small scale sector while IFCI and SIDC’s finance large scale sector or extend loans above a certain limit.

    Some institutions help different segments like foreign trade, tourism, etc. In this way, financial institutions devise their roles and help the development in their way. Financial institutions also follow the development priorities set by central and state governments.

    They give preference to those industrial activities which have been specified in industrial policy statements and five-year plans. Financial institutions help in the overall development of the country.

    Accelerating Industrialization:

    The economic development of a country links to the level of industrialization there. The setting up of more industrial units will generate direct and indirect employment, make available goods and services in the country and help in increasing the standard of living.

    Also, Financial institutions provide requisite financial, managerial, technical help for setting up new units. In some areas, private entrepreneurs do not want to risk their funds or gestation period His long but the industries are needed for the development of the area.

    Financial institutions provide sufficient funds for their development. Since 1947, financial institutions have played a key role in accelerating the pace of industrialization. The country has progressed in almost all areas of economic development.

    Employment Generation:

    Financial institutions have helped both direct and indirect employment generation. They have employed many persons to man their offices. Besides office staff, institutions need the services of experts which help them in finalizing lending proposals. These institutions help in creating employment by financing new and existing industrial units.

    Also, they help in creating employment opportunities in backward areas by encouraging the setting up of units in those areas, Thus financial institutions have helped in creating new and better job opportunities.

    Reference:

    1. https://www.mbaknol.com/business-finance/lending-procedures-of-development-banks/
    2. https://www.mbaknol.com/business-finance/role-of-development-banks-in-financial-sector/
    3. Other information collecting from the internet.
  • Forensic Accounting: Definition, Concept, Need, and Practice

    Forensic Accounting: Definition, Concept, Need, and Practice

    What is Forensic Accounting? The application of accounting skills to provide quantitative financial information about matters before the courts. This article explains to Forensic Accounting definition along with their practice and also need to know about by concept. The series of accounting scandals in the early years of the 21st century led to profound changes and transition in the accounting profession, laws, and regulations. Among these developments was the emergence of forensic accounting.

    Forensic Accounting: Definition, Concept, Need, Practice, Role, and significance.

    Forensic accounting frequently uses on construction claims, financial contract disputes, environmental claims, government contract claims, and fraud investigations, among others. Professionals involved in this field are often engaged in examination and evaluation of financial evidence; the advancement and improvement of computer applications; that will aid and support the forensic accountants in analyzing and presenting financial evidence; providing services and support in legal proceedings. Also, Forensic accounting is the study of financial fraud and misconduct.

    The Association of Certified Fraud Examiners described financial accounting as;

    “A set of skills used in potential or actual civil or criminal cases, including generally accepted accounting and auditing ones; determining loss of profits, revenues, property, or damage; and assessment of internal controls, fraud, and everything else that leads to the applying of accounting knowledge to the legal system.”

    As well as, Forensic accounting is an integration of auditing, accounting, and investigative skills, and presents an accounting evaluation; that is appropriate and acceptable to the court; which will then establish the basis for discourse, debate, and the settlement of arguments.

    Definition of Forensic Accounting:

    The definition of forensic accounting is changing in response to the growing needs of corporations.

    Bologna and Lindquist had defined forensic accounting as;

    “The application of financial skills, and an investigative mentality to unresolved issues, conducted within the context of rules of evidence. As an emerging discipline, it encompasses financial expertise, fraud knowledge, and a sound knowledge and understanding of business reality and the working of the legal system.”

    According to AICPA as;

    “Forensic accounting is the application of accounting principles, theories, and discipline to facts or hypotheses at issues in a legal dispute and encompasses every branch of accounting knowledge.”

    Forensic accounting defines by Zia as,

    “The science that deals with the relation and application of finance, accounting, tax, and auditing knowledge to analyze, investigate, inquire, test and examine matters in civil law, criminal law, and jurisprudence in an attempt to obtain the truth from which to render an expert opinion.”

    Concept of Forensic Accounting:

    After definition, the principle point of forensic accounting [Are from, for a support article] is not just to see how extortion was submitted, however, to report it with the most astounding conceivable precision. As indicated by Gomide, a great Forensic accounting consolidates accounting examination furthermore requires great accounting and investigative aptitudes.

    In the talk, EFG refers to that;

    “It falls under general data or certain points, or subjects as it can sort general articulations that individuals make to portray the subject, as investigative accounting or even Forensic auditing”.

    Forensic accounting can characterize as help with a question in regards to assertions or suspicion of extortion; which are liable to include case, master assurance, and inquiry by a fitting power, and examinations of suspected misrepresentation, abnormality or indecency which could prompt common, criminal or disciplinary procedures.

    The emphasis is basically on accounting issues; however, the part of the forensic bookkeeper may stretch out to more broad examination which incorporates proof social affairs. It is a result of the way that by definition, forensic assignments are identified with a legal or semi-legal debate determination; that the Forensic specialist requires a fundamental comprehension of the material statutory and customary law, the law of confirmation and the law of methodology.

    The most skilfully led examination will be of no quality to the customer ought to the confirmation accumulated rule to forbid or the master accounting witness find to miss the mark in appreciation of the necessities of ability, believability, or autonomy.

    Why need to know about Forensic accounting? or Need for Forensic accounting.

    Forensic accounting identifies with the use of accounting ideas and systems to lawful issues. Measurable accountants for the most part research and archive money related extortion and cushy wrongdoings. The result of the measurable examination, including appraisals of misfortunes, harms, and resources would utilize as prosecution backing to lawyers and law requirement staff.

    They offer imperative help for legitimate cases in numerous regions of the law; for example, securities exchange controls, value altering plans, item risk, shareholder debate, and breaks of agreement. Forensic accounting, forensic auditing or financial forensics is the forte practice range of accounting that depicts engagements; that outcome from genuine or expected debate or suit.

    First Things:

    “Forensic” signifies “appropriate for use in a courtroom”, and it is to that standard and a potential result that legal accountants, for the most part, need to work. These accountants, additionally alluded to as Forensic examiners or investigative evaluators, frequently need to give master proof at the inevitable trial. Crumbley, D. Larry; Heitger, Lester E.; Smith, G. Stevenson (2005) All of the bigger accounting firms, and also numerous medium-sized and boutique firms, and different Police and Government organizations have pro Forensic accounting divisions.

    Inside these gatherings, there might be further sub-specializations: some forensic accountants may, for instance, simply represent considerable authority in protection claims, individual harm claims, extortion, development. Cicchella, Denise (2005). Alternately sovereignty reviews. Parr, Russell L.; Smith, Gordon V. (2010).

    Second Things:

    “While Forensic Accountants (“FAs”) typically don’t give assessments, the work performed and reports issued will frequently give answers to the how, where, what, why and who. The FAs have and are keeping on advancing as far as using innovation to help with engagements to distinguish oddities and irregularities. Remember that it is not the Forensic Accountants that decide misrepresentation, but rather the court.” Bhasin Madan(2007).

    Also, Forensic accountants have been depicting as experience evaluators, accountants, and specialists of legitimate and money related reports that are employed to investigate conceivable suspicions of false movement inside an organization; or are procured by an organization that may simply need to keep deceitful exercises from happening. They likewise give administrations in zones, for example, accounting, antitrust, harms, investigation, valuation, and general counseling.

    Third Things:

    Forensic accountants have likewise been utilized as a part of separations, protection claims, individual damage claims, fake cases, development, sovereignty reviews, and following psychological warfare by exploring monetary records. Numerous forensic accountants work intimately with law requirement faculty and legal counselors amid examinations and frequently show up as master observers amid trials.

    It is an amalgam of forensic science and accounting. Even though the instituting of the term Forensic Accounting says to go back to 1946, the practice is moderately new in Nigeria. Hopewood, A.G.(2009). The requirement for a forensic accountant has been attributed to the way that the review framework in an association has neglect to recognize certain mistakes in the administrative framework.

    Forth Things:

    Forensic Accounting is examination accounting which includes breaking down, testing, asking and looking at the common and criminal matters lastly giving an impartial and genuine report. Pretty much as forensic examinations and lab reports are requires in the court to understand the homicide and dacoit puzzles; correspondingly forensic accounting assumes a key part in following the financial fraud and clerical wrongdoings.

    Be that as it may, forensic accounting covers an extensive variety of operations of which misrepresentation examination is a little part where it is generally predominant. There are two noteworthy angles inside legal accounting hone; prosecution benefits that perceive the part of a Chartered Accountant as a specialist or expert and investigative administrations that make utilization of the Chartered Accountant’s abilities, which could prompt court declaration.

    The practice of Forensic Accounting:

    Arnoff, Norman B., and Sue C. Jacobs. (2001) had clarified the administrations rendered by the forensic accountants are in incredible interest in the accompanying territories;

    Fraud detection where employees commit Fraud:

    Where the employee enjoys fake exercises; Where the representatives are gotten to have submitted misrepresentation the forensic accountant tries to find any benefits made by them out of the assets defalcated; then take a stab at questioning them and attempting to discover the concealed truth.

    Criminal Investigation: 

    Matters identifying with money related ramifications the administrations of the forensic accountants are benefited of. The report of the accountants considers getting ready and present as proof.

    Outgoing Partner’s settlement:

    If the active accomplice is not upbeat about his settlement he can utilize a forensic accountant; who will accurately evaluate his contribution (resources) and also his liabilities effectively.

    Cases relating to professional negligence:

    Proficient carelessness cases are taken up by the forensic accountants. Non-adaptation to Generally Accepted Accounting Principles (GAAP) or rebelliousness to examining hones or moral codes of any calls; they are expected to gauge the misfortune because of such expert carelessness or deficiency in administrations.

    Arbitration service:

    Forensic accountants render assertion and intercession administrations for the business group since they experience extraordinary preparing in the region of option question determination.

    Facilitating settlement regarding the motor vehicle accident:

    As the forensic accountant is very much familiar with the complexities of laws identifying with engine vehicles; and, other applicable laws in power, his administrations get to be vital in measuring monetary misfortune when a vehicle meets with a mishap.

    Settlement of insurance claims:

    Insurance agencies connect with forensic accountants to have a precise evaluation of cases to settle. Also, policyholders look for the assistance of a legal accountant; when they have to challenge the case settlement as worked out by the insurance agencies. A legal accountant handles the cases identifying with significant misfortune arrangement, property misfortune; because of different dangers, devotion protection and different sorts of protection cases.

    Dispute settlement:

    Business firms connect with legal accountants to handle contract debate, development claims, item risk cases, and encroachment of patent and trademarks cases; obligation emerging from the break of agreements et cetera.

    Matrimonial dispute cases:

    Forensic accountants engage cases relating to matrimonial disputes wherein their part simply restricts to following, finding and assessing any type of advantage included.

    Aside from learning of accounting, law, and criminology, a forensic accountant likewise should acquaint with corporate financial management and administration. He additionally needs PC aptitudes, great correspondence and meeting abilities.

    Forensic Accounting Definition Concept Need and Practice
    Forensic Accounting: Definition, Concept, Need, and Practice. Coin Money Business #Pixabay.

    Role and significances of Forensic Accounting and fraud examiner [Are from, for a support article]:

    Forensic accounting is a legal term. It is in its simplest form application of accounting techniques and concepts in issues concerning legal matters. The requirement comes due to the high rate of white-collar crimes like embezzlement, fraudulent financials, and various other financial wrongdoings.

    As well as, Forensic Accountant calls upon to investigate various financial frauds by the employees, clients, Customers either independently; or in collusion one another and misappropriating the assets of the company.

    Forensic Accountants also help the Government in the enforcement of regulatory requirements. Many bank fraud is common with the collusion of the borrower and bank staff etc.; where the expertise of the Forensic Accountant comes in unfolding the fraud and helping the corporates nail the fraudsters.

    Also, Forensic Accountants help needs in price fixations, stock market manipulations and at times even manipulation of the financial figures by the managements to window dress; the balance sheet and profit and loss account figures to hide real facts from the stakeholders and general public; for the funds misused or misappropriated by the top management.

  • 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.
  • What is the role of Cultural Sensitivity in International Trade?

    What is the role of Cultural Sensitivity in International Trade?

    Explanation and Learn, What is the role of Cultural Sensitivity in International Trade?

    Learn What? Culture plays an important role in the life of people as it is closely associated with them. It is very necessary to understand what a culture requires and what emotions are attached to it. Different countries follow different culture and because of this, some things will be acceptable in some countries whereas the same things will appear to be rude in other countries because of cultural difference. Also Learned, What is the role of Cultural Sensitivity in International Trade?

    What is cultural sensitivity?

    Meaning: Cultural sensitivity is conscious that cultural differences are present among the people as well as cultural differences, and these differences and similarities can affect attitude, behavior and communication styles. Cultural sensitivity is often used as a synonym for cultural awareness, which refers to the ability to keep itself in someone else’s shoes. Being culturally sensitive should be able to understand why someone else thinks or feels different things from you.

    What It Matters for Trade?

    Business owners and managers have generally defined ways to do things – patterns of habits, customs and behavior patterns. In many ways it makes sense. Policies and procedures keep the business running in the right order. However, it is also common to face people from different cultural, religious and social backgrounds in the business world. These people can have different ways of doing business and communicating their thoughts. What can be normal or acceptable for a businessman to be unfavorable or unusual for someone else? When communicating with individuals from a different background, being culturally sensitive, you can become aware of their customs and beliefs and respect them.

    People who are culturally sensitive will know that the difference between the culture of different people can create differences in their relationship with respect to the way they behave, communicate etc. Hofstede defined culture as “the manner in which the mind is programmed such that it can differentiate the people of one category with those of other.” a culturally sensitive person should try to adopt the culture of another country, their traditions, their way of living, their lifestyle etc.

    Nowadays people are getting closer to each other so toleration, dialogue between people of different culture and respect towards their culture and respect for diversity becomes more important. Learning and trying to understand the customs and culture of the foreign country indicates respect for the other country and for any business relationship to be successful respect for each other is very essential.

    Many employers feel and have sensed that cross-cultural sensitivity is an important skill and proper care should be taken when dealing in and trading with the international market. In the domestic market, people will know what to do and how to do but to achieve the same motive in the different country with the same concept and then getting success by using same interpersonal professional skills is more important. Proper training should be provided should to the staff about the nature of the place, its scope, and language, values and aesthetics.

    When people are traveling from one country to another it is necessary that they do a research about the culture of the country in which they are traveling so that they can go well prepared, which can save them and people around them from an embarrassing situation. Doing business internationally means management of culture of different countries and for maintaining international business relations, people will have to deal with that countries norms, rules, values, and regulations. Overall people need to involve in the culture of different people and try to adapt to their cultural skills and style.

    The right type of knowledge for right kind of job is very essential for doing business globally. The ability to negotiate better, understanding the cultural problems and becoming an insider often give a competitive edge in the business. Managers should possess the high level of managerial skills as the relationship between various business networks depends upon the manner in which the manager interact and behave with international clients and how much capacity they are in dealing with crossing cultural boundaries. Cross-cultural training helps in improving success by trying to improve the level of personal cultural awareness and this will help in understanding the culture of other people.

    In growing business environment it becomes very essential for the firm to have culturally skilled workers having the ability to work in the international business arena. In the cross-cultural business, sector trust plays a very important role in maintaining a business relationship. Trust can conceptualize as a belief which is influenced by the way the partners behave and how much reliable they are.

    The companies should provide training to their staff for each and every situation that they are likely to face as it can also help to develop various strategies that are required for improvement of self-development process. It will enable them to see the world with a different concept through the eyes of their foreign partners. This will help them to learn how to tackle different problems faced by their foreign partners.

    In a global economy, culture plays a vital role to make any business transactions successful economically. The firm should be able to cope up with the international differences that arise from different culture and for that, the international culture has to be understood by the managers. The partners must be able to understand each other’s culture and for this, a lot of time and effort is required. By trying to understand the partner’s cultural needs and their culture they will try to solve the cultural differences and in this way, they are likely to behave in a more systematic and sensitive towards the culture. Globally, if cultures are not well understood then the chance of the firm surviving internationally is very low.

    The neglected role of Cultural Sensitivity in International Trade:

    In this globalized economy, business is growing very fast and the companies are starting to expand in international markets – advanced technology, strong capital hold, cost-benefit, political influence are some of the factors that help in the growth of the business. Increasing competition causes most of the companies to collaborate with the foreign partner. Most of the companies fail in understanding the importance of cross culture resulting in the failure of cross-border partnerships and collaboration.

    Most of the companies that plan to expand globally face two problems, first one is to identify the qualities and the attributes of a successful global manager and the second one are finding executives with those attributes. Thus executives who are given foreign responsibilities are usually selected on the basis of them having proper knowledge of their language and should have knowledge of international experience. Culture basically shows the kind of the behavior that is accepted by the society.

    Given below are some examples that show negligence of cultural sensitivity in international trade:

    • In Spain, coca cola had to withdraw its 2 liters of bottles as Spaniards did not have refrigerators having such large compartments for their storage.
    • Coca-cola, when was launched in China the name, sounded like “Cooke-Koula” which means a thirsty mouth which is full of wax naturally this was not accepted by the people and they decided to ban the product.
    • When coloring in 800*800 pixels on an India map, to show disputed Kashmir territory Microsoft colored it in eight different shades and this led to fury in India and they banned the map. The difference in green means that Kashmir is shown as Non-Indian.
    • Pepsodent wanted to sell its toothpaste in south-east Asia by advertising that it “whitens your teeth “but they found out the local there use betel nuts to blacken their teeth.
    • Gerber, a U.S. firm wanting to sell baby food in Africa, displayed a baby on the packet but soon they realize that the product had flopped as in Africa what the content is in the packet that is displayed on the product.
    • At African port of stevedores saw the internationally recognized symbol of fragile which means broken wine glass and the staff working there assumed that the box contains broken glass and they threw it inside the sea.
    • McDonald’s spent the huge amount of money on making advertisement showing Chinese customer kneeling before a McDonald’s staff asking him to accept the expired discount coupon. The ad was called off due to lack of cultural sensitivity on behalf of McDonald’s in China begging is considered to be an embarrassing and shameful act.
    • Green is the favorite color for many Muslim countries but the same color is considered as a symbol for illness in Malaysia. White is associated with death, sadness and mourn in India, China etc but the same color is brides wedding dress in English country.
    • According to Hindu culture cow is considered as divine and sacred and the Hindus see the cow as a gift given by God. When McDonald’s entered in India in 1990 it created a big problem as they use beef and the small amount of beef extract in the oil. The Hindus considered this an offense and they protested by refraining from going to McDonald’s and asking them to stop the use of beef in their food products.

    The company should basically know what is the culture of the country in which they want the deal as this will help in setting a company in that country more easily and successfully. For an international business to be successful the company should make all efforts to try to understand the culture and create awareness about their culture and in this way try to solve the cultural differences mutually. From the above examples we can see that many companies have faced failure by not trying to understand the culture of other country but trying to learn from their failure as to where they went wrong is more important.

    Thus understanding the culture of different countries help to develop and establish the business in that country. By creating general awareness and taking extra efforts to know about the culture and to take the keen interest in learning it will help in solving the cultural differences between the partners. Patience, courtesy and a little bit of curiosity will help in proper communication with each other. Due to lack of cross-cultural sensitivity, there are chances of the business failing to a great extent because what may seem to be right in one country may seem to be not acceptable in another country. So proper research has to be done when a company is planning to start a business in the new country.

    What is the role of Cultural Sensitivity in International Trade - ilearnlot
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  • Explain the Role and Responsibility of Personnel Manager!

    Explain the Role and Responsibility of Personnel Manager!

    Learn, Explain the Role and Responsibility of Personnel Manager! 

    All managers have direct responsibility for the human assets (people) in an organization and are responsible for activities and decisions concerning personnel. There is the concept of study in explaining the Role of Personnel Manager and Responsibility of Personnel Manager. In this sense, all managers are personnel managers. Still, most organizations have a separate department whose main job is to coordinate all personnel activities. Also learned, Explain the Role and Responsibility of Personnel Manager!

    There is a need for a close interaction between the personnel department which has the responsibility for the administration of personnel and line managers who have responsibility for optimizing the use of their resources, viz., physical, financial and human. The Personnel department is then required to maintain personal information systems and comply with government’s level a regulatory framework and union-management agreements. Also learn, Personnel Management: Functions, Nature, Principles, and Importance!

    Role of the Personnel Manager:

    Personnel manager is the head of the personnel department. He performs both managerial and operative functions of management.

    His role can be summarized as:

    • Personnel manager provides assistance to top management: The top management are the people who decide and frame the primary policies of the concern. All kinds of policies related to personnel or workforce can be framed out effectively by the personnel manager.
    • He advises the line manager as a staff specialist: Personnel manager acts like a staff advisor and assists the line managers in dealing with various personnel matters.
    • As a counselor: As a counselor, personnel manager attends problems and grievances of employees and guides them. He tries to solve them in best of his capacity.
    • Personnel manager acts as a mediator: He is a linking pin between management and workers.
    • He acts as a spokesman: Since he is in direct contact with the employees, he is required to act as the representative of the organization in committees appointed by the government. He represents the company in training programmes.

    Personnel manager plays following roles in most of the modern enterprises:

    1. Consultant:

    Frequent visits are paid by the employees with their problems, misunderstandings about their employees etc. to the personnel manager. He gives them proper suggestions and provides consultancy advice. These help in removing their misapprehensions, misgivings, and misunderstanding.

    1. Conscience Keeper:

    Personnel manager helps the management of his enterprise in understanding their ethical, ecological, environmental and moral obligations to their employees in particular and the government and society in general.

    1. Spokesman of the Enterprise:

    Personnel manager knows all about the internal matters of the enterprise, therefore, he is in a position to work as the spokesman of the enterprise or its representatives.

    1. Liaison Man:

    Personnel manager works as the liaison between an individual and the group as well as between the employees and the management. This provides a constant channel of communication between individuals and groups, between employees and management and between trade unions and the management. This leads to a peaceful atmosphere for the enterprise.

    1. Change Agent:

    Personnel manager advises and convinces the top management about the possibility of the existing organization’s structure becoming obsolete. He makes suggestions for organization development programmes and related matters.

    1. Problem Solver:

    Personnel manager takes initiative in making necessary long-range organizational planning for avoiding problems relating to the management of human resources.

    1. General Nature:

    Various problems which relate to one or other departments of the enterprise but escape the attention of the concerned line managers are located by the personnel manager. This helps such managers to detect in time such problems and solve them.

    Responsibilities of Personnel Manager:

    Pigors and Myres have suggested the following responsibilities of personnel manager.

    1. To advise and counsel line managers in the formulation and administering policies relating to personnel.
    2. To analyze and ascertain the organizational health of the organization with the help of records of productive efficiency, absenteeism, labor turnover, accidents, internal mobility and complaints, and grievances.
    3. To provide personnel procedures and services which are helpful to line managers in effective utilization of human efforts.
    4. To secure co-ordination of all these activities which are relevant to the efficient recruitment of employees in the organization.
    5. To ensure uniform and consistent administration of personnel policies.
    6. To ensure that employer observes the provisions of the Act relating to labor welfare.
    7. To maintain harmonious relations between labor and management.
    8. To interpret workers problems to the management.

    Explain the Role and Responsibility of Personnel Manager - ilearnlot

  • Central Banks: Objectives, Role, Operations, and Autonomy

    Central Banks: Objectives, Role, Operations, and Autonomy

    A central bank, institution, such as the Bank of England, the U.S. Federal Reserve System, or the Bank of Japan, that charges with regulating the size of a nation’s money supply, the availability, and cost of credit, and the foreign-exchange value of its currency. This article explains the Concept of Central Banks: Meaning, Objectives, Role, Operations, and Autonomy. Regulation of the availability and cost of credit may be non-selective or may design to influence the distribution of credit among competing uses.

    Learn, Explain Central Banks: Objectives, Role, Operations, and Autonomy.

    The principal objectives of a modern central bank in carrying out these functions are to maintain monetary and credit conditions conducive to a high level of employment and production, a reasonably stable level of domestic prices, and an adequate level of international reserves. The Concept of Central Banks: Meaning, Objectives of Central Banks, Role of Central Banks, Operations of Central Banks, and the Autonomy of Central Banks…all information below are;

    Objectives of Central Banks:

    The objectives of the central bank include economic growth in line with the economy’s potential to expand; a high level of employment; stable prices (that is, stability in the purchasing power of money); and moderate long-term interest rates.

    The central bank is ultimately concerned with preserving the integrity of a country’s financial institutions, combating inflation, defending the exchange rate of the country’s currency and preventing excessive unemployment.

    Role of Central Banks:

    The central bank, which is responsible for managing a country’s monetary affairs, determines the level of short-term interest rates, thereby profoundly affecting financial markets, wealth, output, employment, and prices.

    Indeed the central bank’s influents spread not only within the domestic territory of a country but even, through financial and trade linkages — to virtually every corner of the globe.

    The central bank’s main goal is low and stable inflation.

    It also seeks to promote steady growth in national output, low unemployment, and orderly financial markets. If the output is growing rapidly and inflation is rising the central bank is likely to raise interest rates, as this puts a brake on the economy and reduces inflationary pressures.

    If the economy is sluggish and business is languishing, an exactly opposite type of monetary action calls for. The central bank will lower interest rates — which is likely to boost aggregate demand, increase output and reduce unemployment.

    Through 5 steps, how the central bank affects economic activity. (1) is the change in reserves, which leads to changes in M, in (2); leading to (3), changes in interest rates and credit availability. In (4) AD change’s in response to investment and other interest-sensitive components of desired expenditure.

    In (5) changes in output, employment and general price level follow. (It should not, however, miss that fiscal policy also affects aggregate demand).

    Operations of Central Banks:

    The central bank has at its disposal several policy instruments. These can affect certain intermediate targets. These instruments are directed towards achieving the ultimate objectives of monetary policy — low inflation, rapid growth in output and low unemployment which are the signs of a healthy economy. For the sake of analysis, it is important to keep the different groups (policy instruments, intermediate targets, and ultimate objectives) separate and distinct.

    The three instruments of monetary policy are open market operations, discount rate policy and reserve-requirements policy. The pros and cons of each will discuss. In determining its monetary policy, the central bank directly manipulates these instruments or policy variables under its control. These help determine bank reserves, the money supply, and interest rates — the intermediate targets of monetary policy.

    More Things…

    In managing money, the central bank must keep its eye on a set of variables known as intermediate targets. These are economic variables that are intermediate in the transmission mechanism between monetary policy instruments and ultimate policy goals. When the central bank seeks to affect its ultimate objectives, it first changes one of its instruments, such as the discount rate.

    This change affects an intermediate variable such as interest rates, credit availability or the money supply. For maintaining sound health of the economy the central bank keeps a close watch on its intermediate targets. Ultimately monetary and fiscal policies are partners in pursuing the measure objectives of rapid growth, low unemployment, and stable prices.

    The autonomy of the Central Banks:

    In recent years there is a strong demand for central bank independence. Monetary policy independence is not necessary primarily in order to protect a ‘conservative’ central banker from the influence that a less ‘conservative’ government might seek to bring to bear, but rather to enable central bankers with a longer-term decision horizon (and/or a lower rate of time preference) to assert their authority when faced with a government with a shorter planning “horizon (and/or a higher rate of time preference).

    Then, when the government ‘by a conscious act relinquishes its power’, it does not mean that the institution to which the power of decision-making transfers has different inflation and employment prefer­ences from the population, but simply that it is operating with a longer time horizon than the government.

    Thus, the central bank may react appropriately to temporary output shocks if it thinks that such a policy can pursue without long-term disadvantages for price stability. From this standpoint, the economic rationale for indepen­dence is that it enables those deciding monetary policy to conduct their policy without being always scrutinized by the government for short-term results.

    More Things…

    The longer-term horizon in their decision-making implies that they make full allowance for the long-time lags involved in the conduct of monetary policy, i.e., its formulation and implementation.

    It is now felt that the most important aim of central bank legislation should be to create an incentive structure that guarantees a long-term time horizon of central bankers. As most politicians are characterized by rather myopic behavior, this implies, above all, that the monetary policy decisions taken in the central bank have to insulate from the general political process as far as possible.

    This explains why central bank independence is now widely regarded as a prerequisite for an effective monetary policy. The trick is to attain the appropriate balance between the need to be responsive to short-term pressures and the need to ensure that those pressures are exerted in a system that safeguards the long-term interest of the population. However, there are different definitions of central bank independence.

    Types:

    Two main types of independence are — “goal independence” and “instrument indepen­dence“. A central bank enjoys goal independence when it is free to choose its goals or, at least, free to decide the actual target values for a given goal. A central bank has instrument independence when it ‘is given control over the levers of monetary policy and allowed to use them’.

    An alternative definition distinguishes between political and economic independence. By political independence, we mean a central bank’s ability to pursue the goal of price stability unfettered by formal or informal instructions emanating from the ruling government. Independence refers to the autonomy to pursue the goal of low inflation.

    Any institutional feature that enhances the central bank’s capacity to pursue this goal will increase central bank independence. Economic independence means that a central bank has unlimited freedom to determine all monetary policy transactions that lead to changes in its operating targets.

    Central Banks Objectives Role Operations and Autonomy Image
    Central Banks: Objectives, Role, Operations, and Autonomy.

    The different notions of independence:

    Since all these definitions have both merits and shortcomings it is necessary to make a synthesis of both approaches, which distinguishes three different notions of independence.

    1. Goal independence: Goal independence requires that the government has no direct influence on the goals of monetary policy.
    2. Instrument independence: Instrument independence requires that the central bank can set its operating targets (interest rate, exchange rate) autonomously. This notion of instrument independence is identical to the concept of ‘economic independence’.
    3. Personal independence: Personal independence requires that the decision-making body of a central bank be in a position to resist formal directives as well as informal pressure from the government.

    Now, Explain;

    Goal Independence:

    The definition of the goals of the monetary policy includes not only the choice between price stability and nominal GDP but also a definition of the time horizon for their realization, the definition of concrete indices, their numerical target values and the definition of escape clauses.

    Thus, ‘goal independence’ can take various forms. It can include a framework wherein the central bank has complete freedom on all these issues, as well as a framework wherein it can decide on only some of these issues. In reality, one can find three variants of the definition of goal independence.

    In the USA monetary policy seeks to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. But ‘stable long-term interest rates’ is not compatible with the standard definition of the goals of monetary policy. Long-term interest rates are, at best, an intermediate target.

    The European Central Bank grants a somewhat more limited degree of goal independence. Similar arrangements are found in Japan and, to some extent, in Sweden.

    More Things…

    A low degree of goal independence characterizes the central bank legislation of the United Kingdom, Canada, and New Zealand. In these countries, the central bank legislation defines price stability as the main goal of monetary policy but gives the government the right to determine the concrete target values.

    The most important prediction of both theoretical and empirical kinds of literature is that a central bank should have instrument independence, but should not have goal independence.

    There are no permanent trade-offs between price stability and other macroeconomic targets. Therefore, there is no real choice that ‘elected officials’ could make for the population in the long run. In the short-term, supply shocks make it necessary to allow for deviations from a medium-term inflation target. But entrusting the government or the parliament with this decision could lead to the risk of an inflation bias.

    This leads to a possible trade-off between:
    • A more flexible response of monetary policy in the case of supply shocks, but only if the central bank overly commits to price stability, and
    • The reduced political independence of monetary policy with all the attendant risks.

    Instrument Independence:

    Instrument independence implies that a central bank can set its operating targets without any interference from the government.

    It includes three important elements:
    • Control of the short-term interest rate as the most important operating target of monetary policy.
    • Control of the exchange rate, which can uses as an additional operating target, especially in a relatively open economy, and.
    • Restrictions of central bank credits to the government, which could undermine the control over the monetary base and, thus, over short-term interest rates.

    Instrument independence constitutes an indispensable element of stability-oriented central bank legislation. Inflation targeting seems to be the most effective and it leads to the most democratically accountable policy-making when the central bank is instrument independent but not fully goal dependent.

    In most countries, monetary policy can autonomously determine interest rates. However, as in the case of goal independence, there are countries where the government can still override the central bank’s decisions.

    As far as the control over the exchange rate is concerned, there is at present no central bank that has unlimited responsibility for this target of monetary policy. Only the ECB makes a distinction between formal exchange arrangements and a policy of managed floating.

    More Things…

    The central banks in all other countries have very limited responsibilities in the field of exchange rate policy. All central bank acts assign this responsibility’ without qualifications to the government.

    The third element of instrument independence concerns the explicit limitations for central bank lending to the government. This relates exclusively to direct lending to the public sector. It is, therefore, perfectly compatible with the EC Treaty.

    By purchasing government bonds from the commercial banks as part of its open-market policy a central bank can easily bypass the prohibition on deficit financing and conduct its money market management essentially on outright open-market operations.

    In other central bank acts, no similar regulations can find. However, it is ‘conceivable that a monetary policy geared to price stability might guarantee simply by giving a politically independent central bank the power to decide of its own accord when and how much to lend to public sector borrowers’.

    But then there is always the danger of a central bank giving in to political pressure and thus promoting inflationary financing of government-expenditure.

    Personal Independence:

    Even if central bankers are granted instrument and/or goal independence, the government could try to exert some informal pressure on monetary policy. For instance, if the central bank governor could dismiss at any time, and without specific reasons at the discretion of the government, he or she would be in a rather weak position vis-a-vis the minister of finance or the head of the government.

    A strong informal influence on the central bank can also be exerted if only one person, i.e., the governor, is in charge of monetary policy decisions. In this case, it is sufficient that the government sends a depicted partisan to the top of the central bank.

    To sum up, there is an inherent inflation bias mainly due to a short-term time horizon of politicians. This calls for central bank legislation that provides central bankers with independence from politicians and with long-terms of office, which is a very efficient means of insulating central bankers from the government.

  • Environmental Education: Aim, Principles, and Concept

    Environmental Education: Aim, Principles, and Concept

    Environmental education (EE) concerns with those aspects of human behavior which are more directly related to man’s interaction with the biophysical environment and his ability to understand this interaction. The article explaining Environmental Education – with their topic Aim, Principles, and Concept. EE is a methodology in which people pick up familiarity with their surroundings and secure learning, abilities, values, experiences, and passion, all of which will empower them to act – separately and aggregately – to take care of present and future environmental issues.

    Learn and understand the Environmental Education: Aim, Principles, and Concept, deeply explain.

    One of the most glaring problems which the world faces today is environmental pollution. The man has exploited nature excessively at the cost of the environment. There is an immediate need to make people aware of environmental degradation. What is Pollution and Types of Environmental Pollution? Education and public participation may change and improve the quality of the environment.

    Explain it each one of Environmental Education (EE): Definition, Objectives of Environmental Education, Aim of Environmental Education, Principles of Environmental Education, and Concept of Environmental Education! Environmental Education in India – Concept, and Role of Environmental Education.

    Definition of Environmental education (EE):

    According to UNESCO,

    “Environmental education is a way of implementing the goals of environmental protection. It is not a separate branch of science but the lifelong interdisciplinary field of study.”

    It means education towards the protection and enhancement of the environment and education as an instrument of development for improving the quality of life of human communities.

    Objectives of Environmental Education (EE):

    The following are the objectives of environmental education:

    1] Awareness:

    To help social groups and individuals to acquire knowledge of pollution and environmental degradation.

    2] Knowledge:

    To help social groups and individuals to acquire knowledge of the environment beyond the immediate environment including the distant environment.

    3] Attitudes:

    To help social groups and individuals to acquire a set of values for environmental protection.

    4] Skills and Capacity Building:

    To help social groups and individuals to develop the skills required for making discriminations in form, shape, sound, touch, habits, and habitats. Further, to develop the ability to draw unbiased inferences and conclusions.

    5] Participation:

    To provide social groups and individuals with an opportunity to actively involve at all levels in environmental decision making.

    There are four areas of decision making:

    • Types of environmental issues on which decisions might make.
    • The physical setting of the prospective environmental decision, including its spatial scale.
    • Types of social groups and individuals who might interact in a process leading up to an environmental decision, and.
    • The time frame within which the decision must make.

    The aim of Environmental Education (EE):

    UNESCO has highlighted the following aims of environmental education:

    The aim of environmental education is clearly to show the economic, social, political and ecological interdependence of the modern world, in which decisions and actions by different countries can have international repercussions. They should, in this regard, help to develop a sense of responsibility and solidarity among countries and regions as the foundation for a new international order which will guarantee the conservation and improvement of the environment.

    The main aim of environmental education at the grass-root level is to succeed in making individuals and communities understand the complex nature of the natural and the built environments. Further, to acquire the knowledge, values, attitudes, and practical skills to participate responsibly and effectively in anticipating and solving social problems, and in the management of the quality of the environment.

    Therefore, necessary steps for environmental education are:

    • Awareness.
    • Knowledge.
    • Attitude building for motivating to protect the environment.
    • Evaluation of environmental measures, and.
    • Skill and capacity building.

    According to D.H. Meadows’, environmental educators on every continent develop materials and methods as varied as the different cultures and ecosystems on earth. He lists some key concepts which underlie all environmental education. These are food for thought, levels of being, complex systems, population growth and carrying capacity, ecologically sustainable development, socially sustainable development, knowledge, uncertainty, and sacredness.

    Guiding Principles of Environmental Education (EE):

    The Principles of Environmental Education is deeply explaining – These are as follows:

    1] Resource Principles:
    • Resource use demands long-term planning if we are to achieve truly sustainable development.
    • Rationale utilization of a renewable source is a sensible way of preserving the resources while obtaining maximum benefits from it.
    • A mode of life heavily dependent upon rapidly diminishing non­-renewable energy sources (i.e. fossil fuel) is unstable.
    2] Soil Principles:
    • The protection of soils and the maintenance of sustainable agriculture are essential factors in the survival of civilizations and settlements.
    • Soil erosion is the irreversible loss of essential resources and must prevent.
    • A vegetation cover (grass, forest) is important for the balance of nature and the conservation of soil, besides being exploitable natural resources.
    3] Wildlife Protection Principles:
    • Wildlife population is important aesthetically, biologically and economically.
    • Nature reserves and other protected wilderness areas are of value in protecting endangered species because they preserve their habitats.
    • The survival of humanity is closely linked to the survival of wildlife both being dependent on the same life-supporting systems.
    4] Environmental Management Principles:
    • Sound environmental management is beneficial to both man and the environment.
    • Management of natural resources should do rationally.
    • Elimination of wastes through recycling and the development of clean.
    • Technologies are important to modern societies to help reduce the consumption of resources.
    • Human activities and technologies influence considerably the natural environment and may affect its capacity to sustain life, including human life.
    5] Other Principles:
    • The relations between humans and their environment are mediated by their culture i.e.
    • Cultural, historical and architectural heritage are much in need of protection.
    Environmental Education Aim Principles and Concept
    Environmental Education: Aim, Principles, and Concept #Pixabay

    The Concept of Environmental Education (EE):

    Any curriculum should base on well-thought-out and clearly define concepts that one wishes the learner to acquire. Some important concepts of environmental education have interdisciplinary significance such as environmental pollution, carrying capacity, ecosystems, ecology, and conservation, etc.

    Environmental Education (EE) in India:

    The prosperity and well-being of a nation depend on the effective utilization of human and physical resources through industrialization based on science and technology. But there is a perennial controversy between development and the environment. Also, the question is whether we shall go for industrial or modernization or we shall protect the environment.

    On one hand, we know that the development of a nation depends on industrialization, and on the other hand, rapid industrial and agricultural development entails many adverse effects on the environment of the countries concerned. So we have to apply our wisdom in striking a balance between these two contradictory factors. Also, Development and the environment are concerned with global ecology. We should, therefore; clearly, know the basic concepts of environment or ecology and its relation to our developmental activities at the macro as well as micro-level.

    Basic Concept of Environmental Education:

    Everything that surrounds us and on which our life depends is our environment. Our room, our home, our village or town, our family and friends, the air we breathe, the water we drink, the sunshine and the rain – all are part of our environment. Even the environment of two individuals is different. But these environments are interrelated so closely that in a sense we all belong to the same environment.

    This interrelatedness is a matter of ecology. The term “ecology” has been deriving from the Greek word “Oikos” which means home. So, ecology is literally, the science that deals with the home conditions of all living beings. Also, Ecology deals with the interrelationships between living beings and their environment.

    Previously, in the old days, a natural balance was maintained between all living beings including men and plants. Also, They were living together in harmony and the natural setting. Human beings live in harmony with Nature including the Forest which was providing most of the necessities for living. But over recent years, due to rapid industrialization, urbanization, nature has been adversely affecting.

    Extra explain:

    The environment seriously degrades and there are imbalance and disharmony. Also, the water and air have been polluted to a great extent because of the destruction of the vast forest on the earth. Because, the forest plays an important role in the conservation of water, purification of air and supplying many useful things to human beings.

    Another disaster that is posed before us is that due to the rapid growth of urbanization. Also, the living conditions of the people in the cities and towns have been deteriorating. There is the pollution of water, air, and noise, etc. due to the rapid expansion of industries, power stations, and motor vehicles, etc. Everywhere, there is pollution. It has been proving harmful to the physical and mental health of the people.

    All the Influences on the growth of the individual constitute the environment. As well as, the environment includes several situations or experiences that influence the development of the individual. So the environment of an individual comprises all the physical and social factors around him which directly affect his living including the working conditions.

    The various environmental factors are interrelated. Also, the physical environment includes living and non-living, the geographical landmarks, topography, and climatic conditions, man-made features like buildings, roads, transport and other facilities like health, sanitation, nutrition aspects. As well as, the social environment consists of the family and community life, fairs and festivals, modes of production and supply of essential commodities.

    The various environmental factors are inter-related. We know the environment of an individual comprises all the physical and social factors. Then only the individual can survive on his earth. For this reason, our environment is to protect.

    Role of Environmental Education (EE):

    Education regards as an important instrument and means for generating proper awareness and adequate knowledge and skills regarding environmental protection. It is, therefore, felt essential to develop education about the environment, education for the environment and education through the environment.

    So as a whole, it will be environmental education.

    • They should integrate into the whole system of formal education at all levels.
    • It adopts a holistic perspective that will examine the ecological, social, cultural and other aspects of particular problems.
    • They should center on practical problems related to real life.
    • They should aim at building up a sense of values.

    However, it universally agrees that environmental education should be interdisciplinary, drawing from biological, sociological, anthropological, economic, and political and human resources. It is also agreed that a conceptual approach in teaching environmental education is the best.

    It also involves decision-making and development strategies for promoting environmental protection. As well as, it treats as a discipline in which various subjects like Zoology, Botany, Chemistry, Mathematics, and Physics are including. This makes it imperative to train specialists in environmental education for planning,’ management, development, and taking remedial measures for solving the problems.

    The NCERT developed the guidelines for the school curriculum based on the Education Commission, 1964-66. It has also prepared a resource material on the use of the environment as a basis for meaningful learning in Primary Education.

    The National Policy on Education 1986 has also given a special place of significance to education and the environment. So a great need is being felt to create awareness for the protection of the environment by redesigning the objectives, methods, and curriculum in the field of education.

  • What are the Role and Duties of the Management Accountant?

    Management Accountant is an officer who is entrusted with the Management Accounting function of an organization. He plays a significant role in the decision-making process of an organization. The organizational position of Management Accountant varies from concern to concern depending upon the pattern of the management system. He may be an executive in some concern, while a member of the Board of Directors in case of some other concern. However, he occupies a key position in the organization. In large concerns, he is responsible for the installation, development and efficient functioning of the management accounting system. He designs the framework of the financial and cost control reports that provide with the most useful data at the most appropriate time. Also Learned, Cost Accounting, What are the Role and Duties of the Management Accountant?

    Learn, Explain What are the Role and Duties of the Management Accountant?

    The Management Accountant sometimes describing as Chief Intelligence Officer because apart from top management, no one in the organization perhaps knows more about various functions of the organization than him. Tandon has explained the position of Management Accountant as follows: “The management accountant is exactly like the spokes in a wheel, connecting the rim of the wheel and the hub receiving the information. He processes the information and then returns the processed information back to where it came from”.

    #Role of Management Accountant:

    Management Accountant otherwise calls Controller, is considering to be a part of the management team since he has the responsibility for collecting vital information. Both from within and outside the company. The functions of the controller have been laid down by the Controller’s Institute of America.

    These functions are:
    • To establish, coordinate and administer, as an integral part of management, an adequate plan for the control of operations. Such a plan would provide, to the extent required in the business cost standards, expense budgets, sales forecasts, profit planning, and program for capital investment and financing. Together with the necessary procedures to effectuate the plan.
    • To compare performance with operating plan and standards and to report and interpret the results of the operation to all levels of management, and to the owners of the business. This function includes the formulation and administration of accounting policy and the compilations of statistical records and special reposts as required.
    • To consult withal segments of management responsible for policy or action conserving any phase of the operations of the business. As, it relates to the attainment of the objective, and the effectiveness of policies, organization structures, procedures.
    • The administer tax policies and procedures.
    • To supervise and coordinate the preparation of reports to Government agencies.
    • The assured fiscal protection for the assets of the business through adequate internal; control and proper insurance coverage.
    • To continuously appraise economic and social forces and government influences, and interpret their effect upon business.

    #Duties and Responsibilities of Management Accountant:

    The primary duty of Management Accountant is to help management in taking correct policy-decisions and improving the efficiency of operations. He performs a staff function and also has line authority over the accountants. If the management accountant feels that a decision likely to take by the management based on the information tendered by him shall be detrimental to the interest of the concern. He should point out this fact to the concerned management, of course, with tact, patience, firmness, and politeness. On the other hand, if the decision was taken happens to be the wrong one on account of inaccuracy. Biased and fabricated data furnished by the management accountant. He shall be held responsible for the wrong decision takes by the management.

    Controllers Institute of America has defined the following duties of Management Accountant or controller:

    • The installation and interpretation of all accounting records of the Corporative.
    • The preparation and interpretation of the financial statements and reports of the corporation.
    • Continuous audit of all accounts and records of the corporation wherever located.
    • The compilation of costs of distribution.
    • The compilation of production costs.
    • The taking and costing of all physical inventories.
    • The preparation and filing of tax returns and to the supervision of all matters relating to taxes.
    • Preparation and interpretation of all statistical records and reports of the corporation.
    • The preparation as budget director, in conjunction with other officers and department heads, of an annual budget covering all activities of the corporation of submission to the Board of Directors prior to the beginning of the fiscal year. The authority of the Controller, with respect to the veto of commitments of expenditures not authorized by the budget, shall, from time to time, fix by the board of Directors.

    Continuously;

    • The ascertainment currently that the properties of the corporation are properly and adequately insured.
    • The initiation, preparation, and issuance of standard practices relating to all accounting. Matters and procedures and the coordination of the system throughout the corporation including clerical and office methods, records, reports, and procedures.
    • The maintenance of adequate records of authorizing appropriations and determination. That all sums expend pursuant there into properly accounts for.
    • The ascertainment currently that financial transactions cover by minutes of the Board of Directors and/ or the Executive committee are properly executing and recording.
    • The maintenance of adequate records of all contracts and leases.
    • The approval for payment(and/or countersigning ) of all Cheques, promissory notes and other negotiable instruments of the corporation. Which have to sign by the treasurer or such other officers as shall have to authorize by the by-laws of the corporation or from time to time designated by the Board of Directors.
    • The examination of all warrants for the withdrawal of securities from the vaults of the corporation and the determination. That such withdrawals are made in conformity with the by-laws and /or regulations establishing from time by the Board of Directors.
    • The preparation or approval of the regulations or standard practices. Required to assure compliance with orders or regulations issued by duly constituted governmental agencies.

  • New Product Development: Definition, Planning, and Role!

    Learn, Explain New Product Development: Definition, Planning, and Role!

    Cost, time and quality are the main variables that drive customer needs. Aiming at these three variables, companies develop continuous practices and strategies to better satisfy customer requirements and to increase their own market share by a regular development of new products. There are many uncertainties and challenges which companies must face throughout the process. The use of best practices and the elimination of barriers to communication are the main concerns for the management of the NPD. Also learned, What is the Role of Group Influence in Consumer Behavior? New Product Development: Definition, Planning, and Role!

    In business and engineering, new product development (NPD) covers the complete process of bringing a new product to market. A central aspect of NPD is product design, along with various business considerations. New product development is described broadly as the transformation of a market opportunity into a product available for sale. The product can be tangible (something physical which one can touch) or intangible (like a service, experience, or belief), though sometimes services and other processes are distinguished from “products.” NPD requires an understanding of customer needs and wants, the competitive environment, and the nature of the market.

    Definition of New Product Development:

    • New Product Development is a process which is designed to develop, test and consider the viability of products which are new to the market in order to ensure the growth or survival of the organization.
    • New Product Development can be defined as the process of innovating and inventing new ideas and concepts, with a view to developing a successful new product in the anticipation of customer needs.
    • The new product development can be defined as the term used to describe the complete process of bringing a new product or service to market.

    There are two parallel paths involved in the new product development process. The first involves the idea generation, product design, and detail engineering whereas the other involves market research and marketing analysis. Basically, Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product lifecycle management where it is used to maintain or grow their market share. It is important the new product which is based on current market trends should be launched so that it can give greater benefit to the customers. At the same time, it can also help them to understand what are the needs of their customers helps to increase the sales of their business in terms of maximizing the profits.

    Planning of New Product Development:

    New product planning has been defined by the American Marketing Association as “the act of making out and supervising the search, screening, evelopment, and commercialization of new products; the modification of existing lines; and the discontinuance of marginal or unprofitable items”.  Simply stated, product planning decides the nature and other related aspects of the articles produced and sold.  Product development is a more limited term but includes the technical activities of product research, engineering and design.  Product planning and development is the result of the co-ordinated the efforts of large number of specialists – engineers, scientists, marketers, etc.  Product planning is usually described as ‘Merchandising’ and it covers both, the existing and potential products.  This activity, therefore, must deal with the proper balance between the old and the new products.

    New product planning is a very long and complex process, and it deals with changes in:

    • The kinds of goods or services offered by a marketer for various segments.
    • The number of kinds of products, or different lines, that the company offers in various segments.
    • The width of product line offered.
    • The quality levels or levels acceptable to various classes of consumers in various target markets.
    • The degree of distinctiveness.
    • Increased societal and governmental constraints.
    • The growing shortage of new product ideas in certain areas.
    • Shorter time spans between the emergence of the idea and the physical launch of the product.
    • The costliness of the new product development process.

    The following decisions are important in new product planning :

    1. Improving the existing product lines and services,
    2. Weeding out unprofitable items in the product line (simplification),
    3. Expansion of the current product line (diversification),
    4. New product development for the present customers, and
    5. New product development for new customers (diversified products).

    Role of New Product Development:

    Whatever may be the size and nature of operations of a firm, product planning and development is necessary for its survival and growth in the long-run.  Every product has a life cycle and it becomes obsolete after the completion of its life-cycle.  Therefore, it is essential to develop new products and alter or improve the existing ones to meet the often-changing requirements of customers.

    The role of new product development can be stated in terms of :
    1. Ensuring that the product mix, matches changing environmental conditions and that product obsolescence is avoided.
    2. Enabling the marketer to compete in new and developing segments of the market.
    3. Reducing the marketer’s dependence upon particular elements of the product range or vulnerable market segments.
    4. Filling excess capacity.
    5. Achieving greater long-term growth and profit.

    Introducing new product is rather difficult as it involves long-range planning.  Customers’ need should be identified, competing and substitute products should be evaluated and, above all, the strength of the company should be examined before deciding to produce a new product.  Product failure defeats the very objectives of a firm.  In a survey conducted by Booze, Allen, and Hamilton, it was revealed that firms with well-organized product planning programmes have only 40-50 percent product failures.  When this percentage is compared with the overall industry product failures (80 percent), one could easily be convinced of the need for product planning.