Category: Management

Responsibilities Of Management

In this tutorial, we will learn about the responsibilities of management position entails, and it’s helpful to understand the scope of this role.

According to ‘Peter Drucker’ three major jobs assigned to management, they are as follows:

  • Managing a business
  • Managing managers
  • Managing workers and work

According to ‘Henry Mintzberg’ manager’s work has three phases:

  1. Interpersonal Role: Relates to contacts and dealings with other people.
  2. Informational Role: The manager must receive and transmit information so that he can develop an understanding of his organization.
  3. Decisional Role: They have four types:
  • The entrepreneur’s role by initialing change and taking risks.
  • Part of disturbance handler by taking charge whenever the organization is threatened.
  • Role of an allocator of resources.
  • We decide to negotiator’s role in dealing with situations where he has to enter into negotiations on behalf of the organization.

Management is responsible and answerable to many groups. Sometimes, the interests of these groups conflict with each other. Hence, management must conduct its affairs to be fair and equitable to all parties with a vested interest and claim on management. These interested parties are:

1. The stockholders and other investors

2. Employees

3. Consumers

4. Inter-related businesses

5. The government

 Towards Stockholders: 

The stockholders are the owners of the company who have invested capital in the organization. Their primary purpose in investing funds is to make a reasonable profit.

They are not interested in quick profits as they are in the stability, growth, and the image of the company. The company must create an image of quality and service.

The management has to inform the shareholders about the company’s financial position from time to time and all other relevant matters regarding objectives, policies, and procedures so that the stockholders can give some necessary input from time to time.

Responsibility Towards Employees: 

The responsibilities of management towards employees who put in their time and effort ore much fold. Some of these responsibilities relate to the following areas:

(a) With employment: They must be clear that the profession is meant to be mutually beneficial for the employee and the employer. The emphasis should not only be on what the employee can do for the company but also on what the company can do for the employee.

The employee contribution must be fully recognized. The employees must be assigned the right jobs as per their knowledge, experience, attitudes, and interests. Additionally, employees must be made aware of company policies, procedures, and objectives.

(b) To working conditions: The employees spend their major part of the day in the work environment. Accordingly, working conditions must be conducive to work. These working conditions refer to physical facilities which must be adequate and acceptable.

These must meet the accepted standards of cleanliness, light, heat, air conditioning, ventilation, safety, and sanitation facilities. They should also be the proper tools and machines to work.

(c) To economic security: This sense of duty, security dramatically improves the spirit of dedication to the company. Lifetime employment brings about a shared responsibility, which helps to build loyalty to the company.

The system of tenure in academic institutions after five or six years of service is designed to give the professor a sense of economic security, which should bring out dedication, sincerity, and a sense of belonging.

Some of the fringe benefits, in addition to the salary, are:

  • Life insurance
  • Medical insurance
  • Sick leave
  • Maternity leave
  • Provision for other emergencies
  • Profit-sharing plans
  • Stock options: It is a provision to buy the company’s stock shares at a lower price than the amount paid by the company at a rate lower than the amount paid by the public.
  • Pension plans and retirement benefits
  • Paid vacation
  • Free education, for workers, if necessary, and for their children.

(d) Responsibility for job satisfaction: Job satisfaction refers to the employee’s self-fulfillment and happiness at the job. The conceptual environment should be such as to enhance employee confidence and faith in the company.

The workers should be encouraged to participate in company affairs as much as possible, especially in the formulation of procedures and policies affecting them.

It would encourage a sense of belonging. Also, employee contributions should be appropriately recognized and rewarded. Other management policies include provisions for challenging opportunities, increased responsibility, promotion, and participation in the decision-making process.

 Towards Consumers: 

The customers expect a quality product at a reasonable price with guaranteed satisfaction. It is the responsibility of the management to see that the interests of the consumers are promoted.

The product’s quality can be guaranteed by offering facilities for returning the defective product, either for a refund or a new unit. Also, by providing free service to the product for a specified time, the customer’s confidence in the product’s quality can be strengthened.

The product should be simple to operate and be made readily available through proper distribution channels, and customer satisfaction should be the first rule of sales. The customer is always right, has proved to be a good policy for initiating transactions and keeping the customer.

Towards Inter-business Relations:

May all businesses purchase some supplies from vendors. All companies sell their products to other companies like distributors and wholesalers. The management’s responsibility is to maintain the inter-business relationship at a high level of ethical standards.

They should have fair trade practices regarding their prices, the quality and the quantity of the product, payment methods, time and mode of delivery, and the quality of service.

Towards Government: 

The management must operate within the legal system, adhering to all laws, including local, state, or federal laws. These laws include, but are not limited to:

(a) Paying proper taxes and paying them on time.

(b) Respecting statutes about the social environment. These may be relating to air pollution, water pollution, noise pollution, dumping of chemical wastes, respect for zoning laws, etc.

(c) Affirmative action: The management makes special provisions for hiring, training, and promoting employees belonging to such minority groups who have been discriminated against previously. This discrimination may have been based on ethnic origin, race, provincialism, or sex.

(d) Respect for anti-trust laws: A few major companies that may dominate the market for a particular product should not conspire to fix prices or create artificial shortages by hoarding and holding back the supply.

(e) Truth in advertising: That false claims should not mislead the public about the benefits of the product.

 Towards Community Interests: 

Some of these interests may be protected by the law, such as areas of air pollution and water pollution. Other benefits may be the outcome of social environments.

Some of the community interests are:

  • Providing jobs within the community. Hiring the handicaps
  • Assisting in church and school activities
  • Organizing sports tournaments and other cultural functions for the community
  • Raising funds for public events such as the opening of hospitals or other charitable activities
  • Taking an active interest in all community affairs

A superior/ manager/executive gets the rights of compliance of orders when he assigns duties and debates authority while accepting a job a subordinate incurs an obligation to perform the job successfully.

The essence of responsibility is then obligation. Liability has no meaning except as applied to a person; a building, a machine, or an animal cannot be held responsible.

Responsibility is a concomitant of authority. A person who has power has a corresponding liability for the proper exercise of authority given to him. Authority flows from a superior to a subordinate, while responsibility flows from a subordinate to a superior.

Concepts, Principles, And Conventions An Overview

In this tutorial, we will learn about concepts, principles, and conventions an overview of the world’s accountancy bodies may change any gathering to improve the quality of accounting information.

They are the theoretical base for accounting. The following areas widely accepted accounting concepts:

Entity Concept:

It states that a business enterprise is a separate identity apart from its owner. Accountants should treat books of accounts of the business distinct from the personal papers of reports as the owner. Therefore, the business transactions are recorded in the writings of business, not in the owner’s books.

Because of the concept of the amount invested by the proprietor in the company, i.e., the capital is treated as a liability, and the business has to give an interest to the owner. The owner or proprietor invested the money, which is also the risk capital he claims about the business’s profit.

Money Measurement Concept:

It states that only those transactions that package under monetary terms are to be recorded in the books of accounts. The financial value, this concept requires that those transactions alone are capable of being measured in terms of money. Sales and events which cannot be expressed in terms of payment are to be left out.

For example, the enterprise’s employees are undoubtedly the assets of the firm, but they cannot be shown in the balance sheet as they cannot be expressed in terms of money. The measuring unit of money is taken as the currency of the ruling country in which accounts are prepared, i.e., the country’s ruling currency provides a common denomination for the material objects. Now the question arises if the transactions happen across the country’s international borders, then the sales will be recorded in the ruling currency of the foreign country or the country?

The concept ignores that money is an inelastic yardstick for measurement based on the implicit assumption that the purchasing power of the money is not sufficient importance as to require adjustment.

 Periodicity concept: 

This is also called the idea of a definite accounting period. But another idea going concern concept an indefinite life of the entity is assumed. For business, it causes inconvenience in measuring performance achieved by the object in the ordinary course of business. For example, if a textile mill lasts for 100 years, it is not desirable to measure its performances as well as financial position only at the end of its life.

Therefore a small but workable fraction of time is chosen out of the infinite life. Generally, that workable fraction of time is one year. However, some organizations also take nine months or 15 months for performance appraisal of financial position. In India, we follow from 1st April to 31st March of the immediately following year.

The concept helps to differentiate between capital and revenue expenditure, differentiate between long-term liabilities and short-term liabilities. Thus, the periodicity concept facilitates in:

You are comparing financial statements of different periods.

We uniform and consistent accounting treatment for ascertaining the profit and financial position of the firm.

They are matching periodic revenues with the expenses for getting reliable results for business operations.

 Accrual Concept: 

The accrual concept, the effects of transactions, and other events recognized when they occur and not as cash or cash equivalent are received or paid. They are recorded in the accounting records and reported in financial statements of the periods to which they relate.

Financial statements are prepared on the accrual basis to inform users not only about the past events that took place in the fiscal year but also the future obligations cash soon or cash is received in the future.

To understand the concept better, let us give you some examples.

XYZ CO. sold $15000 worth goods to ABC Co. on 1st April 2016. But ABC Co. made the payment a week later.

But in the books, XYZ Co. sales are to be recorded on 1st April, not when they received payment. It happened due to the Accrual Concept.

Accrual means recognizing revenue and costs as they earned or incurred and not as money is received or paid. The accrual concept relates to the measurement of income identifying assets and liabilities.

According to the Accrual concept: Revenue- Expenses= Profit or

Cash received in the ordinary course of business- Cash paid in the ordinary course of business = Profit

Matching Concept: 

The concept talks about that all the revenue incurred in the specific period must be matched with the expenses of that time only.

It concentrates on actual inflow and outflow, which leads to adjustments of certain items like prepaid and outstanding salaries, rent, insurance, and unearned and accrued incomes.

Not every expense needs to identify its revenue or income. Some costs are directly related to the tax, and some are time-bound. E.g., selling expenses are directly related to sales, but rent and salaries were recorded on an accrual basis.

Going Concern Concept: 

The financial statements are prepared with the assumption that the business will last foreseeable future. Hence it is assumed that the company doesn’t have the intention to liquidate. Traditionally, accountants follow historical costs in the majority of cases.

The essential differentiation between goods and assets is that assets are purchased to increase the business’s productivity and remain in the market for the period, not less than five years. In contrast, products are sent or manufactured for selling purposes.

 Cost Concept: 

This concept says that the valuation of assets is to be done based on historical cost or acquisition cost, i.e., the price at which the asset is purchased. For example, XYZ Co. purchased machinery for 1, 00,000 (INR) on 1st April 2015, but on 31st March 2016, the machinery’s market value was 2, 00,000. But due to the Cost Concept, the balance sheet will reflect the mechanism at 1, 00,000 as it is the historical cost or the acquisition cost.

However, the cost concept creates a lot of distortion, too, as outlined below:

When prices go up in an inflationary situation, prices of all commodities go up on average, and acquisition cost loses relevance.

For example, land purchased on 1.1.1996 for 2000(INR) may cost 1, 00,000(INR) on 1.1.2016.

Actual cost based accountants may lose comparability. Suppose Mr. X invested 10,000 (INR) in Plant A, which produced 5,000(INR) cash inflow, and Mr. Y invested 5,00,000(INR) and got a cash inflow of 50,000(INR) during the year. Who is more efficient? Since the assets were recorded at historical cost, the results are comparable. It is a collar to point

The most valuable assets are the human resources, but they do not have acquisition cost. The cost concept fails to recognize such assets, although it is an essential asset of any organization.

Realization Concept: 

Any change in an asset will be recorded when the business realizes it. When the asset is recorded at the historical cost of 5, 00,000 (INR), and even its current prices are 15, 00,000(INR), such change is not counted unless there is undoubted that such change will materialize.

However, accountants follow a more conservative path. They add all the probable losses but do not count the future losses.

They can decrease the value of an asset if they anticipate a future decrease, but if any future increase, they ignore it. Economists consider such a concept creates value distortion. Nowadays, the revaluation of assets has become widely popular. Accountants adjust such a change in value through the creation of revaluation reserve or capital reserve.

Dual-Aspect Concept: 

The concept is the core of the double-entry book-keeping. Every transaction or event has two aspects:

  •  It increases one asset decreases another asset.
  • It raises an asset simultaneously increases liability.
  • It reduces one asset, increases another asset.
  • It falls one asset, declines a liability.

Alternatively:

  1. It increases one liability, decreases other burdens.
  2. It raises a debt, increases an asset.
  3. It reduces liability, increases additional difficulties.
  4. It declines liability, decreases an asset.

For example, a new machine is purchased paying 5,000(INR) than on the one hand; it increases the industry; on the other hand, it reduces the cash of the company.

This concept can be explained algebraically,

Equity(E) + Liabilities(L)= Assets(A)

Or

Equity(E)= Assets(A)-Liabilities(L)

Or

Equity(E)+Long Term Liabilities+ Current Liabilities = Fixed Assets +Current Assets

Or

Equity(E) + Long term Liabilities = Fixed Assets + (Current Assets – Current liabilities)

Or

Equity(E)=Fixed Assets+ Working Capital- Long term Liabilities

Whatever is received as funds are either expended- Debited to Profit & Loss Account

Or Lost- Losses to have been transferred to a capital account.

Or saved – Shown on the assets side of the Balance sheet.

Therefore, Capital + Income/Profit + Liabilities = Expenses +Net loss + Assets

Or

Capital + Income – Expenses + Net Profits= Assets-Liabilities

Since the net profit/ loss is transferred to equity, the net effect is

Equity + Liabilities = Assets.

Conservatism: 

It states that the accountant should not anticipate income and should provide for all possible losses. If an accountant should choose the method that leads to a lesser amount when there are many alternative values of an asset, due to this concept, we have the golden value cost or net realizable value, whichever is lower.

For this concept, the financial statement has the following qualitative characteristics.

  1. Prudence, i.e., judgment about the future possible losses to have been guarded as well as uncertain gains.
  2. Neutrality, i.e., financial statements, are to be made with an unbiased outlook.
  3. Faithful representation of alternative values.

 Consistency:

In financial statements, comparable accounting policies are followed consistently from one fiscal year to another; change in accounting policy is made only in certain exceptional circumstances.

It is applied when alternative methods of accounting are equally acceptable. For example, a company follows a straight-line method when specific other ways of depreciation are available and widely accessible. Changing the plan is a long process, and the accountant has to make many adjustments.

There is no hard and fast rule that an enterprise cannot change its accounting policy but under certain circumstances, only to bring the books of accounts following the issued accounting standards to comply with the provision law when under changed conditions, that the new method will reflect a more accurate and fair picture in the financial statement.

Materiality: 

It permits other concepts to be ignored if the effect is not considered material. According to it, all items which have a significant impact on the financial statement should be disclosed. Any insignificant item which will only increase the accountant’s work but will not be relevant to the users’ need should not be published in the financial statements.

For example, depreciation on small items says calculators or stationary is taken as 100% in the year of purchase though used by the company for more than a year. They are very small or nominal to be written in the balance sheet.

Identifying My Business Choice

In this tutorial, we will learn about identifying my business choice to be successful entrepreneurs, and we need to be continually innovating and looking for opportunities to grow our startups.

Swot Analysis:

“Albert S Humphrey” originates from it in the 1960s. Swot analysis is as useful as it was then. SWOT is the analysis of the company’s STRENGTH, WEAKNESS, OPPORTUNITIES, and THREATS to identify a strategic niche that the company could exploit. Swot analysis merges the external factors (environment analysis, opportunities, and threats identification) with the internal forces (company’s resources analysis, strengths, and weakness identification).

Identifying my business choice is to be successful entrepreneurs; we need to be continually innovating and looking for opportunities to grow our startups. But how do you find new opportunities to take your startup to new markets and growth levels? Here are four ways to identify more business opportunities.

SWOT analysis is critical. An entrepreneur can access the feasibility of his goals and objectives using the outcome of that analysis and identification of the company’s opportunities.

The entrepreneur who has conceived an idea in his mind would be able to evaluate whether such plans, mission, and objectives are even close to realism are in the wave of air only. If they are realistic, the entrepreneur can continue to formulate strategies.

If they are not practical, the entrepreneur should amend and modify plans and discard the same to create a new one, which has more odds of success.

There are four components of this analysis. Strengths weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors. For this reason, the SWOT analysis is sometimes called internal, external review, and the SWOT matrix is sometimes called the model.

Strength

  • What advantages does your idea have?
  • How does it serve society better than anyone else?
  • How would you use unique or lowest-cost resources to your thoughts that others can’t?
  • What would be your strengths in the market ones this idea is materialized.
  • What factors mean that you get the sale?
  • What is your innovation’s unique selling proportion (USP)?

Weakness

  • What is the further scope of improvement?
  • What are the things that need to be avoided?
  • What are people in your market likely to see as weaknesses?
  • What factors lose you sales?

Opportunities

  • What excellent opportunities can you spot about the innovative idea you have?
  • What exciting trends are you aware of?

Useful opportunities can come from such things:

  • There are changes in technology and markets on both a broad and a narrow scale.
  • There are changes in government policy related to your field.
  • There are changes in social patterns, population profiles, lifestyles, modifications, and so on.
  • There are changes in local events.

Threats

  • What obstacles are likely to be faced?
  • What are your competitors doing?
  • Are quality standards or specifications for your job products or services changing?
  • Is changing technology threatening your position?
  • How could any of your weaknesses seriously threaten your business?

When you are looking at your strengths, think about its relation to your competitors. A useful approach when looking at opportunities is to look at your advantage and to ask yourself whether these open up any excuses. Alternatively, look at your weakness and ask yourself whether you can open up opportunities by eliminating them.

Pestle Analysis: 

It stands for POLITICAL, ECONOMIC, SOCIOLOGICAL, TECHNOLOGICAL, LEGAL, and ENVIRONMENTAL.

Audit of environmental influences on the business idea to use this information to ascertain the factors affecting the likely project and thereby guiding strategic decision making in accordance.

The assumption is that the entrepreneur can audit his influencing environment and assess potential threats to his plans; it will be better placed in the market.

 It is a valuable tool for understanding risks associated with several forms of markets, growth or decline, and the position, potential, and direction for an individual business or organization. The six elements form a framework for reviewing a situation.

A summary of this type is multi-faceted about a particular business required from the technique the picture or produced would be unclear or ambiguous. A scan of the external macro-environment that is likely to influence the business idea can be expressed in the following factors:

Political Factors

  • Tax policy.
  • Employment laws.
  • Environmental regulations.
  • Trade restrictions and tariffs.
  • Political stability.
  • Government and security.
  • The rules and deregulation trend.
  •  Environment and consumer protection legislation.

Economic Factors

  • In the current project economic growth, inflation, and interest rates.
  • Exchange rates.
  • Stage of the business cycle.
  • Unemployment and labor supply.
  • Labor costs.
  • If levels of disposable income and income distribution.
  • Impact of globalization.
  • Impact of technological or other changes on the economy.

Social Factors

  • Health awareness.
  • Population growth rate.
  • Age distribution.
  • Carrier attitudes.
  • Emphasis on safety.
  • Within population health, education and social mobility, and beliefs.
  • Population employment patterns, job market freedom, and approaches to work.
  • For press attitudes, public opinion, social attitudes, and social factors.
  • Lifestyle choices and beliefs.

Technological Factors

  • R&D Activity.
  • Impact of emerging technologies, research, and development activity.
  • The internet effect, reduction in communications costs, and increased remote working.
  • Result of technology transfer.

Legal Factors

  • Licensing framework.
  • Employment laws.
  • Competition laws.
  • Foreign transaction laws.
  • Taxation laws.

Environmental Factors

  • Environmental impact.
  • Environmental legislation.
  • The energy available and costs.
  • Waste disposal.

Other Forms Of Audit

In this tutorial, we will learn about other forms of the audit through which the auditors have to certify the statement of accounts of the bank as at the closure of the financial year reveal an accurate and fair view of the bank financial position.

We think of auditing, and we tend to focus on financial audit, internal audit, or cost auditing. However, various other forms of inspections occur in the economy.

Some of these are very crucial for the existence of the organization. Some such audits are – bank audit, tax audit, insurance audit, etc.

Bank Audit: 

The vast amount of public monies handled by the banks makes it imperative that the activities of the without strangulating the spirit of entrepreneurship. Audit forms an integral and essential part of such monitoring and regulation.

The auditors have to certify the statement of accounts of the bank as at the closure of the financial year reveal an accurate and fair view of the bank financial position, adequate provision for nonperforming assets, or bad debts in the books. All expenses and income have accounted for, and profit correctly worked out.

Co-operative Society Audit:

The affairs of co-operative societies are often managed by persons who do not possess adequate managerial, technical, or accounting skills.

The independent financial auditors of co-operative societies are therefore required to report on some aspects also. The following points must in the audit of the co-operative society:

  • The auditor should go through the rules and regulations of the organization and see how far they are being followed by it.
  • We should also examine the internal check system in operation in society.
  • He should vouch for the receipt of interests and return of loans from the borrowers. Proper records must remain for this purpose.
  • He should vouch for the loans granted to the borrowers by reference to the agreements.
  • He should verify the assets and see that the stock is valued correctly.
  • He should especially verify the cash in hand and investments of such a society.
  • He should also check other management and establishment expenses.

Insurance Audit: 

The insurance audit is the examination of operations, records, and books of accounts of the insurance company. The auditor performs a check to ensure that the customer has paid the appropriate premium for the risk cover provided to him.

Government Audit: 

This audit aims to ensure that the government’s financial transactions are correctly executed under sanctions and authorities and recorded in the books of accounts. Comptroller and Auditor

General of India must audit the receipts and expenditure of the Union Government and State government. Further, the Government audit also includes the verification of government companies conducted by C&AG.

Management Audit: 

 An emerging concept of auditing, it has originated from an America management audit. It is an act of evaluation of all departments’ activities to provide appropriate suggestions to the management to help their work.

Management audit is a new concept and goes beyond the regular inspection. It is a comprehensive and critical review of all aspects of management. It is concerned with the approval of the efficiency of management. It can be said to be an expansion of the internal audit, and the idea has developed recently.

Management auditing is the future-oriented task that is evaluated on time in management, sales management, etc. The main objective of a management audit is to improve the profit earning capacity, work of management, objectives of the program, social purposes, and human resource development so that organizational goals can easily be attained.

It refers to the existence of a control system, compliance of rules and regulations, the process of managerial decisions, etc. Generally, management audit and operational audits are mandatory, but it re-commendatory certainly.

Delegation Of Authority- Principles Of Delegation

In this tutorial, we will learn about delegation of authority means the process of getting work done by others by giving them responsibility. It entails the division of workload and sharing responsibility.

It means the division of authority and powers downwards to the subordinate. It is entrusting someone else to do parts of your job—delegation of authority defined as subdivision and sub-allocation of skills to the assistants to achieve effective results.

It is the process of getting work done by others by giving them responsibility. It entails the division of workload and sharing responsibility. The degree of delegation depends upon the manager’s degree of management capabilities.

PRINCIPLES OF DELEGATION:

Clarity of delegation: 

Employees must give a distinct idea of a task assigned, the functions to perform, and perform the authority given task.

The principle of clarity delegation also implies defining in clear terms the horizontal and vertical relationships of the position of each subordinate to another place in the organization.

Responsibility cannot be delegate: 

When authority is delegated, obligations not passed down, the organization rather new responsibilities are creating at each level. According to the principle of absolute liability, the power delegated, but a manager cannot delegate responsibility and accountability.

It is responsible and accountable to his own superior for the task that he has assigned his subordinate and the act of his subordinates.

The polarity of authority and responsibility: 

Since both authority and accountability relate to the same task, it would be correct to say that they are coextensive.

Exception Principle: 

The exception being that when a junior is not able to make a decision, then he should refer them upwards for consideration by senior.

This method or plan of supervision (as of a business) under which only significant deviations from normally expected results or condition brought to the attention of a supervisor for consideration and decision

Principle of Functional definition:

All activities and tasks assigned to an individual must have a clear description of authority, duties, power, and responsibility.

Scalar Principle:

The scalar principle is a rule where an employee or subordinate reports to his or her immediate supervisor but no higher in the management chain—the line of authority from the top to the lower management level.

Principle of Unity of Command: 

Unity of command provides that an employee is responsible to only one supervisor, in turn, is accountable to only one supervisor, and so on up the organizational hierarchy.

That is true even if a group of people leads the top of the organization. Delegation can be effective only when a subordinate receives orders from one senior only.

  • Barriers to Delegation
  • Fear of loss of power
  • Certain personal attitudes
  • Lack of availability of direct.

Principle of Communication: 

An underestimated responsibility can be hazardous. A general authority can be easily misused. Accordingly, both the responsibility and power must be specified, and open communication must be continuously kept free for issuing directions and receiving feedback.

 Limits to Authority to be Well Defined: 

A manager cannot correctly delegate authority unless he fully knows what his power is. May avoid confusion in this respect; there should be written manuals and orders to indicate the limits of the body and area of operations of each manager.