Difference between Financial Accounting vs Management Accounting - Management Duniya

Difference between Financial Accounting vs Management Accounting

 

Basis	Financial Accounting	Management Accounting
Account Principles	Financial Accounting is govern generally accepted accounting Principles	No such set of accounting principles & conventions are followed in Management Accounting
Nature	Financial Accounting is concern almost exclusively with historical records.	M.A. represents free determine as well as art information.
Scope	F.A. covers only the information which can be measure in terms of money	M.A. considered book quantitative information and also other information.
Characteristic	F.A. plays grate stress on those qualities in information which can command universal acceptability like objectives, absoluteness etc..,	M.A. emphasises those characteristics which enhance the value of information in a verity of uses like flexibility compatibility.
Objective	The main objective of F.A. is to supply information in the form of P&L and balance sheet to the external parties like share holders, creditors, bankers, investors, Govt etc..,	The main objective of M.A. is to help management in the formation of policies and plans.
Subject Matter	F.A. portrays the position of the business as whole in other words, F.A asses the results of the whole business.	M.A. deals with assessing the activities of different units departments and cost centres.
Statutory Obligation	The preparation of F.A. is statutory obligation. The financial statements are generally required to be prepared in the format described by law.	M.A. is optional; business is free to instate or not to instate a system of management accounting.
Period	F.A. are prepared for a particular period of time for ex. P& L a/c is prepared for one year.	M.A. supplies the needed information from time to time throughout the year.
Focus	F.A. reports reveal what had happened in the past.	M.A. takes in to accounts the past invents only to the extent the effect the future position.
Unit of Accounting	F.A. recognises the whole business concerns as one unit of accounts. Financial reports prepared at the end of year to highlight the operational business.	M.A. assets not only the overall position of the business concern but also the results of activities of those divisions, departments, production or sub units, which setup in the process of organisation.
Precision	The F.A. all transactions are recorded at actual amount involved and there is no room for use of approximate figures	No emphasis is given an actual figures sometimes approximate figures or consider more useful them actual figures to know the trends of the business.
Audit	Financial Statement such as P&L and Balance Sheet are subject to the registration of statutory audit under companies act India. Auditing of F.A is compulsory	M.A. cannot be auditing as it is not based on actual figures. It is possible to get management accounting audited.
Publication	Publication & circulation of financial accounts like P&L and Balance sheet are after made compulsory since these are for external parties	M.A. information is a confidential one & intended only for internal management views. Statements & reports are not meant for publication & circulation.
Communication	Promote and quick communication of information & keeping them up to date are not desired in F.A	In M.A. immediate and prompt communication of date is very much required.
Approach	F.A. deals with actual cost and revenues only	M.A requires prompt and timely reporting of facts even if they are less precise.

 

 Source: A/c Books & Notes

 

Tags: accounting, Accounting Principles, Balance, Balance sheet, Cost, finance, financial accounting, financial statements, Management, Management Accounting, Nature and Scope of Management Accounting, P&L account, scope, tax
By: Management Duniya

Classification of Accounting - Management Duniya

Classification of Accounting

Classification of Accounting:

The word accounting can be classified in to 3 categories

Financial Accounting

Cost Accounting

Management Accounting

Financial Accounting:

Financial accounting is the concerns with recording of day to day transactions. The main objective of finance accounting is to find out the profitability & to provide information about financial position of the business concern. Two principle statement of financial accounting an income and expenditure statement, (P&L a/c, Balance Sheet) accounting positional statement.

Income & expenditure statement reveals profit earned or loss & system for a given period. All revenue transactions related to accounting periods included in the statement to determine the probability of the concern. Balance sheet reveals the financial position of the business concern on a particular data or day.

Financial accounting refers to accounting information developed for the use of external parties such stock holders, suppliers, govt & regular agencies.

Source: A/c Books & Notes

Tags: Account, accountant, accounting, Accounting Management, Accounting Software, Accounting Statement, Classification of Accounting, finance, financial accounting, Management, Management Accounting, tax
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Meaning and Definition of Accounting - Management Duniya

Meaning and Definition of Accounting

Accounting is considered as a Managerial tool for planning and control. Accounting provides a rich source of information to be used as a basic of management actions & decisions.

Meaning & definition of Accounting:

Accounting has rightly being turned as language of Business. The main function of language is to serve as a means of communication. Accounting also serves this function. Accounting communication the results of business operation to parties associated with the business such as proprietors, creditors, investors, consumers, govt & other agencies. Evaluation of accounting is spread over several countries and during this period certain rules, procedures & conventions have come to be accepted as useful.

Accounting Definitions:

According to the committee on the terminology of the “American Institute of Certified Public Accounting” [AICPA]

“Accounting is the art of recording, classifying and summarising, in significant manner and in terms of money transactions and events which are, in part at least of financial character and interpreting the result thereof”

According to the” American Accounting Association” [AAA]

“The process of identifying, measuring and communicating economic information to permit informed judgement and decisions by users of the information”

Source: A/c Books & Notes

Tags: AAA, Account, accountant, accounting, Accounting Management, accounts, AICPA, Definition of Accounting, Difinition, finance, Management, Meaning
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Differences Between - Management Duniya

Differences Between

Please find below differences between:

Tags: Account, accountant, accounting, Accounting Management, Book, book keeping, Director, finance, Financial managment, Financing, keeping, Management, Member, Nominal Value, Partner, Price, Share, Share Holder, Share Price
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A Project Report on Employee Motivation Levels - Management Duniya

A Project Report on Employee Motivation Levels

A PROJECT REPORT ON EMPLOYEE MOTIVATION LEVELS  By Deepthi

Motivation is an important factor which encourages persons to give their best performance and help in reaching enterprise goals.  A strong positive motivation will enable the increased output of employee but a negative motivation will reduce their performance.

 A key element in personnel management is motivation.  According to Likert, “it is the core of management which shows that every human being given him a sense of worth in face-to-face groups which are most important to him.  A supervisor should strive to treat individuals with dignity and a recognition of their personal worth”.

 Every management tries to coordinate various factors of production in such a way that their contribution is maximum in achieving organizational goals.  The performance of non-human factors like machines, etc. will depend upon the level of technology and the competence of those who use them.  To improve the overall performance in a business it becomes essential to increase the efficiency of human beings.

The performance of persons depends upon two factors i.e.,

(i)   Ability to do a work, and

(ii)   Motivation, both these factors taken together, will increase the efficiency of human beings.  If a person does not have the capability or ability to do a work then he cannot increase his efficiency.  On the other hand, even if a person has got the ability but is not properly motivated even then this performance will be low.

Tags: A Project Report, Employee, Employee Motivation, Employee Motivation Levels, Levels, Management, Motivation, Motivation Levels, OB, on, Organisation, organisational Behaviour, Organisational Management
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Public Ltd. Company. vs Private Ltd. Company - Management Duniya

Public Ltd. Company. vs Private Ltd. Company

 

Tags: Company, Management, Private Ltd., Private Ltd. Company, Public Ltd., Public Ltd. Company
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Capital Expenditure vs Revenue Expenditure - Management Duniya

Capital Expenditure vs Revenue Expenditure

Tags: Accounting Management, Capital, Capital Expenditure, Capital Market, Expenditure, Finance Management, Indian Capital Market, Indian Capital markets, Management, Revenue Expenditure, Working Capital
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Provision vs Reserve - Management Duniya

Provision vs Reserve

 

Tags: Account, accountant, accounting, finance, Management, Provision, Reserve, Reserve Bank of India
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Share Certificate vs Share Warrant - Management Duniya

Share Certificate vs Share Warrant

 

Tags: accountant, accounting, accounts, Certificate, Company, finance, Management, Marketing, Nominal Price, Price, Share, Share Index, Share market, Share Price, tax, Warrant
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Shares vs Stocks - Management Duniya

Shares vs Stocks

 

Tags: Account, accountant, accounting, BSE, BSE 30 Sensex, Face Value, finance, index, Manangement, Nominal Value, NSE, Price, Profit, Share market, Share Price, share value, Shares, Stoacks, Stock, Stock Market, tax, Value
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Partnership vs Joint Venture - Management Duniya

Partnership vs Joint Venture

Tags: Account, accountant, accounting, Accounting Management, Balance, Balance sheet, finance, Joint, Joint Venture, Management, Partnership, Profit, Profit and Loss, Venture
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Profit & Loss A/c vs Balance Sheet - Management Duniya

Profit & Loss A/c vs Balance Sheet

 

Tags: Account, accountant, accounting, Balance, Balance sheet, Balance Sheet Analysis, Balance Sheet Concept, finance, Loss, Management, net profit, Profit, Profit and Loss, Profit and Loss account, Profit Earning Ratio, profits, profits and growth, Sheet
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Shares vs Debentures - Management Duniya

Shares vs Debentures

 

Tags: Account, accountant, accounting, Bearer Debentures, Convertible Debentures, Debentures, finance, Management, Preference shares, Redeemable Debentures, Secured Debentures, Shares, shares at a price
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Trial Balance vs Balance Sheet - Management Duniya

Trial Balance vs Balance Sheet

Tags: Account, accountant, accounting, Balance, Balance sheet, Book, book keeping, finance, Management, Trial Balance
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Journal vs Ledger - Management Duniya

Journal vs Ledger

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Company vs Firm - Management Duniya

Company vs Firm

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Absorption Costing vs Marginal Costing - Management Duniya

Absorption Costing vs Marginal Costing

 

Tags: Absorption costing, Cost, Costing, Difference, finance, financial, Management, MARGINAL COSTING, Stock, work in progress
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Problems of Leasing Companies - Management Duniya

Problems of Leasing Companies

Lack of investor confidence in leasing companies is scarcity of funds with bank & financial institutions. The leasing companies in the private sector are facing financial crunch.

Other Problems are:

Inadequate tax benefits

Absence of integrated and uniform accounting standards, comment to all leasing companies.

The import leasing is subject to various conditions such as minimum paid up capital of 1 crore and company to be listed on a recognised stock exchange.

Accounting problems are such as treatment of these assets as off balance sheet items & lease rentals on accrual basis etc.

Now the leasing is governed by transfer of property act and Indian contract act. Therefore there is a great need of specialised lease act & uniform accounting practices.

Tags: accounting, accounting practices, Accounting standards, accounts, Assets, Balance, Balance sheet, Capital, Companies, finance, financial, Financial management, Import, import leasing, Lease, Leasing, Leasing Companies, Management, of, paid, paid up capital, Problems, Problems of Leasing Companies, property, Sheet, tax
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Leasing Vs Buying Decision - Management Duniya

Leasing Vs Buying Decision

For a company to decide whether to buy any equipment or take on lease agreement, it has to compare the NPV of both leasing & buying options.

The net cost of buying is the cost of asset less the PV of tax saving s on depreciation etc. Associated with the purchase of assets NPV of leasing is the post tax PV of lease rental outflows.

NPV (Buying) < NPV (Leasing) – Better to buy.

NPV (Leasing) < NPV (Buying) – Better to go for Lease.

NPV (B) = Cost of Asset – Tax Benefits.

NPV (L) = (1-Tax)

Tags: Buying, Buying Decision, Decision, Hire, Hire Purchase, Leasing, Leasing Vs Buying Decision, Lessee, Lessor, Purchase
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Advantages to Lessor and Lessee - Management Duniya

Advantages to Lessor and Lessee

Advantages to Lessor:

Lease improves profitability due to attached tax benefits.

As a financing technique, it is more rewarding and attractive to the lessor.

It is flexible and can be opened or closed quickly.

It is also one of the marketing strategies for the manufacturers.

Lessee is an additional financial product involving ownership and risk taking for a reward in terms of rewards.

Advantages to Lessee:

It is flexible and can be adjusted through cash flows.

Leasing provides 100% finance for the cost of equipment.

Leasing preserves and improves the cash position and liquidity of the company.

It does not change the Debt equity Ratio.

It helps in tax planning and provides hedge against inflation.

Tags: Advantages, Advantages to Lessee, Advantages to Lessor, AND, Lessee, Lessor, Lessor and Lessee, to Lessor
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Advantages of Leasing - Management Duniya

Advantages of Leasing

Financial Benefits: The lessee need not pay the whole cost of Asset out rightly. The company may prefer low cash outflow at present if there is a positive difference between lease & buying.

Flexibility of Lease:  Leasing is more convenient (Operating Lease) for the assets to be used for a short period.

Risk of Obsolescence: The lessee can pass the risk of obsolescence to the lessor which is more useful in case of leasing the computer and other electronic equipment.

Need for maintenance and specialised services: In case of leasing of some equipment like aircraft, ship leasing machines etc., for the maintenance & specialised services.

Tags: Advantages, Advantages of Leasing, finance, financial, Flexibility, Hire, Hire Purchase, Leasing, Management, of, Risk, services
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Types of Financial Lease - Management Duniya

Types of Financial Lease

Leverage Lease: The lessor which is a leasing company provides the equity capital, while the banks and financial institutions provide the term loans for the purchase of leased assets. The lessee is the beneficiary of the agreement.

Sale & lease back: The Company owning an assets sells it to a leasing company and gets it back on lease from that leasing company. The freeing funds can be utilised for the other purposes by the company.

Cross border lease or International Lease: There are international leases with the lessor supplying the equipment being placed in one country and the lessee is from the other country.

Foreign to Foreign Lease:  In this case there are 3 parties the manufacturer is in one country, lessor is in one country and the lessee who is the beneficial user is in a third country.

Ex: The leasing company which is in Japan purchases the aircraft from Chinese company and lease it to African company. In this case Japanese company acts a financier to the Indian company.

Tags: cross border, finance, financial, Financial Lease, Foreign, Foreign Lease, Foreign to Foreign, Foreign to Foreign Lease, International, International Lease, Lease, lease back, Leverage, Management, of, sale, Types
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Financial Lease vs Operating Lease - Management Duniya

Financial Lease vs Operating Lease

 

Tags: financial, Financial Lease, Lease, Lease Payments, Lease Terms, Operating, Operating lease, option, Payments, Purchase Option
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Leasing - Management Duniya

Leasing

Leasing is used as a method of financing investments. A lease is a commercial arrangement, where by an employment owners or manufacturer conveys to the equipment uses, the right to use the equipment in return for rentals.

Financial Lease:

In this lease lessor transfers the risk and rewards incidental to the ownership of equipment to the lessee while but the title may not be transferred to the lesse while rentals are payable in installments. So as to cover the cost of equipment plus reasonable return on funds invested in purchase or manufacture of that equipment. The legal and de jure ownership is with lessor while the de facto ownership lies with the lesse.

 Operating Lease:

In operating lease, all risks and rewards incidental to ownership are not transferred to the lesse but involves only short term hire of the equipment with the ownership resting with the lessor. This type of leasing is prevalent in motor cars, computer equipment etc.,

Source: Books and Notes

Tags: financial, Financial Lease, Hire, Hire Purchase, Lease, Leasing, Operating lease, Purchase
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Need of Delegation of Authority - Management Duniya

Need of Delegation of Authority

Need of Delegation of Authority:

 Developing Effective Relationship:

 Delegation authority strengthens the relationship between superior & subordinates. When it is an established fact that superior can grant or with hold promotion of subordinates, the latter will behave properly. The reality is that superior can exercise his authority for achievement of his personal interest besides achieving corporate objectives. Problems of reward & discipline inevitably arise due to proper use of authority. It may cause frustration & adverse attitude among employees. Delegation of authority is essential to minimise the frustration & create favourable condition. It helps people feel certain ambivalence toward authority.

 Employees have certain needs such as social & esteem needs besides basic & safety needs.  Under social esteem needs employees develop sense of accomplishment, autonomy & professional acumen which they would like to demonstrate in the organisational functions. While delegating authority, management must see that delegates should get praise, fair treatment & approval.  If management does not provide enough independence on job, employees will see it themselves by resorting to absenteeism, unionism etc,. On the other hand delegation facilitates the employees to get adequate amount of autonomy & professional satisfaction.

 Personnel Relationship:

 Personnel relationship between superior & subordinates is needed for congenial functioning of organisation. Employees require approval of their work. Superior must value the employees individuality too so that the latter may develop the feeling that the former is always helping them. Personal relationship is developed under delegation of authority because feelings of approval & personal relationship are created by effective delegation techniques. The feeling of approval is developed in many ways under delegation process like talking active interest in subordinates, listening to their problems, praising them at outstanding performances, showing tolerance at the mistakes of employees.

 Job Oriented Relations:

Personnel relationship is aimed to get work done by the employees. The job oriented relations must be present where personal relationship is developed. Personal relationship developed for personal gain becomes suicidal unless it is accompanied with job oriented relations. Manager must have quality of job cantered & employee centred relations with the subordinates. The authority delegate takes care of job centred relationship. It initiates job performances where as personnel relations help achievement of hob performances. Employee centred relation means to achieve hob centred relationship. Job oriented for centred relations include providing information, consulting subordinates & listening suggestions. Delegation of authority permits the supervisors to give information to his employees as much as is needed for work performance.

 Fair Treatment:

The Boss’s fair treatment to subordinates provides effective performances & proper use of delegated authority. Superior demonstrates his sense of fair play by letting employees know what exactly they have to perform. The delegated authority is legitimately accepted by subordinates who are treated equally by the superior. Delegation of authority proper when favour is avoided & employees are treated as individuals. Manager should avoid giving ,ore attention to good as well as bad employees.

 Handling Mistakes:

Subordinates are given definite set of goals to be achieved by them. Treating employees as family members is welcome step of delegation. Mistakes should be realised by employees who should swear not repeat such mistakes. Forget & forgive is divine but it can be exercised only two or three times. If an employee is constantly committing by mistakes, he should be punished for that. Helping attitude of a supervisor reduces the chances of mistakes. Many managers blame others but blaming does not solve the problem & improve the employees. The diagnosis of mistake is essential rather than post mortem process. The causes of mistakes are avoided to prevent its recurrences. Mistake becomes a part of learning & training.

 Legitimacy:

Legitimised power is authority which is delegated to subordinates for effective performance. It is exercised considering background of employees, their technical skill & situations of job. The qualifications & merits of delegates are appraised before giving them power. Low qualified employees cannot exercise delegated authority properly for the development of an organisation. Competence is highly desirable than the personal behaviour. A technically skilled employee is well regarded than the highly humanised employees. Authority can be effectively delegated if the delegator has an authority on & over it.

Source: OB Books & Notes

Tags: Authority, Authority and Power, Delegation of Authority, Handling Mistakes, job, Legitimacy, Need, of, personnel, Power
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Delegation of Authority - Management Duniya

Delegation of Authority

Delegation of authority is an important function of organisational behavior. Top management cannot perform all the functions themselves. He has to take the assistance of his junior management. Department & organisational structure is created to get the work done without delegation, there would be only one department & organisation structure will be limited proper function is impossible. Delegation of authority becomes essential to get the work done effectively & smoothly. Delegation means conferring a particular assignment. A manager multiplies himself & gets results through others.

 Delegation has dual characteristics. Subordinates receive authority from the superiors but at the same time, the superior still retains all original authority. It is like imparting knowledge. Teacher share his knowledge with others but still retains the knowledge. Delegation makes every work possible as it is the key factor for the success of management. Delegation is essential for proper performances as a person cannot perform all work himself. It is required for developing subordinates. Delegation is required for depth management. Authority is the relationship between superior & subordinates. Uncertainty is removed as subordinates know specifically what to do at what place & time.

Source: OB Books & Notes

Tags: Authority, Authority and Power, Delegation, Delegation of Authority, of, Power
By: Management Duniya

Limitations of Authority - Management Duniya

Limitations of Authority

Authority is not unlimited. It should be attached with certain duties & responsibilities. Unlimited authority is an instrument of possible corruption. Specific authority is given for specific functions. Ex: Financial manager is given financial powers. He cannot enter in the areas of marketing & production. There are specific limits of authority. The top management cannot perform all the functions themselves. He cannot expect that a manager can perform all the functions. So power placed in a limited form to discharge a particular duty.

 Authority of a manager is limited as per plans, policies of the organisation. Bureaucratic organisation does not give more authority to manager. A manager is always accountable to his superior manager of authority. Similarly “Articles of Association” decides the level of authority. Social setup decides the amount of authority to be exercised by a particular manager. Law of country limits the authority to be exercised by the organisation.

Source: OB Books & Notes

Tags: Authority, Authority and Power, limitations, of, Power
By: Management Duniya

Theories of Authority - Management Duniya

Theories of Authority

 Authority is reinforced & accepted. Different authors have given different thoughts to authority. They are generally discussed as Formal authority, Acceptance & Competence & responsible Authority.

Formal Authority:

 Formal authority is legal authority granted to the manager by the organisation. Top management has maximum authority which is delegated to the lower cadre. Authority flows from higher to lower with gradual decline. Legitimate authority is formal authority. It is the Power to command where as informal authority is the capacity to command.

 Acceptance Authority:

Authority is conferred & Accepted by the employees. Authority is present only when it is accepted by groups or individuals. The manager has no authority unless subordinates accept it. Authority is the character of a communication which is accepted by others. Official communication is accepted necessarily by the employees otherwise they will be changed for disobedience. In any organisation disobedience is the denial of authority, which is not permissible. The willingness to accept the authority does not create any problem & it becomes voluntary acceptance authority that is needed for proper functioning of the organisation. Authority lies with the subordinates. Therefore, authority must be accepted by subordinates. It requires some motivation like rewards, legitimacy, social support & confidence. Authority is accepted because subordinates are asked to behave properly for better performance. They get positive & pleasant rewards in compliance of the orders & achieving the goals.

 Competence Theory:

Competence theory believes in technical competence which is conferred on the management. Seniority, education, skills & intelligence are included under competence or technical authority. It is referent or charishmatic power. Authority lies in the competence or ability of a manager. Employees consider competence of their manager as the source of authority.

 Responsible Theory:

Power without responsibility creates many problems. Responsibility is the obligation of an individual to carry out assigned activities to the best of one’s ability. It is the obligation of a person to achieve the results. It is the obligation to carry out the activities to achieve the results. Authority & responsibility is coexisting.  It is the inseparable twin of authority. Manager’s authority is the power to make & enforce decisions concerning his defined duties. His responsibility is the obligation up on him to perform these duties by using his authority. Authority without responsibility lacks ultimate purpose & responsibility without authority has a hallow ring. Manager cannot perform his duties unless he has authority to do so.  The authority commensurate with responsibility & responsibility commensurate with authority.

Source: OB Books & Notes

Tags: Authority, Authority and Power, bargaining power, of, Power, Power & Authority, Power and Authority, Theories
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Meaning of Authority - Management Duniya

Meaning of Authority

Authority is a power to influence others. All Power is not authority. Legalised Power becomes authority. It is the official & legal right to command action to enforce compliance. Herbert Simon has explained authority as the Power to make decisions which guide the reactions of others. It is the relationship between two individuals, the superior & the subordinates. The subordinates have to carry out the decisions of the supervisor who wants compliance’s of the decision. Compliance is done through persuasion, sanctions, requests, force, constraints, coercion, motivation, incentives & routinisation. When superior influences others without having official & legal command, it is the purely use of Power. Authority is institutionalised Power.

Environment of legitimacy is essential for calling power as authority. Meaningful & operational authority is socially acceptable. Right having morality is authority. Subordinates morally & legally obey the authority of superior. Subordinates acceptance is the essential feature of authority. If authority is not accepted by subordinates, friction is created in the organisation. In other words, superior has no authority unless referred & conferred by subordinates.

Source: OB Books & Notes

Tags: Authority, Authority and Power, Herbert Simon, Meaning, of, Power
By: Management Duniya

Characteristics of Power - Management Duniya

Characteristics of Power

The following are the basic characteristics of power.

Dependency Relationships:

The fundamental feature of Power is dependence. The higher the dependence of one person on you the higher is the amount of power you can exert on him. For instance, if P is the Power one person ‘X’ has on another person ‘Y’, then it tantamount to saying something as dependence (D)of ‘Y ‘on ‘X’. Symbolically P_XY = D_YX. 

 When an employee is not depending on the supervisor for receiving rewards then truely speaking, the supervisor has no power over such employee. John P Kotter assets that “ an effective managers quite often gains power by feeding others” believes that they are dependent on manager for help or not for being inflicted or hurt. Dependence may be, in fact actual or perceived. But whatever may be the dependence is leads to the creation of Power.

Power is Specific:

Another associated feature of Power is that it is specific. It is specific in the sense that it can be exercised by some people that too in some circumstances. Power cannot be exercised by all people all times. The domain of power i.e. the extent to which one has power over wide range of issues, however, is different for different people. The range may be higher in some, lower in others.

Reciprocal Relationships:

“Only supervisors or managers or top rankings of officials have Power” is misconception. Power relationships in a organisations are essentially reciprocal in nature. Power exists only in a relationship between two or more persons. It is based on the two way concept of influencing others & being influenced. True that the nature of power exercised by different people in organisation at different levels is somewhat basically different but all can have power including those in the lower rungs. Therefore, there are no specific power centres in an organisation. Moreover, power is neither completely formal nor completely in formal.

Power can expand or Contract:

Power is elastic. People, who are habituated to exercise power, try to acquire more power & expand it. As people reach higher positions the legitimate power attached to the positions also simultaneously in case sometimes die to change in a position of manager in an organisation, that is shift from the one department to another can cause contraction in power.

Source: OB Books & Notes

Tags: Authority, Characteristics, dependency, John P Kotter, of, Power, relationships
By: Management Duniya

Difference between Power & Authority - Management Duniya

Difference between Power & Authority

Tags: ability, Authority, Authority and Power, between, Difference, leadership, long lead-time, Power, right
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Base or Sources of Power - Management Duniya

Base or Sources of Power

The poser comes from a source or base it comes in particular form. It is being utilised in a specific manner. Social psychologists John French & Bertram Raven has described five bases or sources of power which are Coercive, Reward Power, Legitimate Power, Expert Power and Referent Power.

Coercive Power: In India, employees are unwilling to work on their own unless they have certain fear of punishment. It needs strong directive behaviour. Coercive power is necessary to engage effectively the labourers. Coercive power based on fear. Many illiterate employees act out of fear of negative results that might occur if they fail to comply the instructions coercive power rests on the application or threat of application of physical sanctions such as infliction of pain, generation of frustration & restriction of movement. If employees are unable & unwilling to perform; they are fire, transferred, demoted or use of force is made and so on.

Reward Power: Employees demonstrate readiness to work for achieving some reward. The superior has power to reward the outstanding performers. It is opposite of coercive power. In this case people works for getting some reward, recognition & repute. It is highly useful for improving superiors’ behaviour. It helps growth of employees which comply with the wishes or directives of seniors for getting positive benefits. Reward power is anything that other person can value ex. Money, favour, promotion, interest, friendly treatment, important information & so on. While coercive power is negative reinforcement, reward power is positive reinforcement.  For example if one can give something of positive value or avoid negative to employees, he has reward power over the employees. Managers are given several forms of reward powers such as power to increase to pay, grant promotion, praise, recognise, crate friendly atmosphere & so on. In expectancy theory, manager has power of positive valences & positive reinforcement which are perceived by employees. It is important to note that the employees or person on whom the power is exercised much value & accept this power. If employees do not accept this power of manager; it has no positive impact on the employees.

Legitimate or Position Power: Legitimate power arises because of position of the employees. Manager is in a position to induce compliance or influence behaviour of the employees by virtue of his position. It is the power which is received by the person because of the position or formal hierarchy of an organisation. Legitimate power is authority because the definition of authority is legalised & legitimised power.  The authority is well accepted by the employees. They recognise third boss as having the authority of sometimes positive & sometimes negative reinforcement. Authority to legitimate power has coercive as well as reward power by virtue of position but coercive power in its own form as describe above need not have position similarly, reward power in subtract form need not form need not have position. People exercise coercive or reward power by virtue of personality & not by virtue of position. Sometimes, these coercive & reward powers are debatable. But in case of position power, the manager is legally authorised to exercise coercive or reward power. People achieve power by being legally authoritative & are given the position to exercise the power. Higher position has power over lower position.

Expert Power: Expert power depends on knowledge & expertise if a person possesses the expertise & others recognise his expertise; the former has expert power over others.  Expert power is well rewarded by employees for their effective performance of the job. The person possessing the expert power is creditable, trust worthy & relevant. He is in a position to show sometimes tangible knowledge to others. He is required to demonstrate physically his expertise knowledge to others. Credibility, trustworthiness & relevance are the basic components of expert power. His specialisation, technical skills & other relevant knowledge are well accepted and are given credit to him by employees. He is required to guide the juniors on technical performances which are really guiding factors for development of employees. Trustworthiness depends on the reputation of being honest & straightforward. Trustworthy person can exercise expert power which is easily accepted by employees.  Relevance of time, person & energy is important for expert power. Persons having no position can effectively use expert power & influence by his expertise knowledge.

Referent Power: Referent Power depends on personal traits. It is developed out of admiration of the person. The person possessing referent power becomes model to be followed by others. Many a times, referent power holders have charishma by which large no. of persons are influenced.

Source: Various OB Books & Notes

Tags: Authority, Authority and Power, Base, Bertram Raven, of, Power, Sources
By: Management Duniya

Power - Management Duniya

Power

Power:

“Power is the capacity that ‘A’ has to influence the behaviour of ‘B’, so that ‘B’ does something he/she would not otherwise do” by  Stephen P. Robbins.

Power is a capacity to influence others. It is the potential that becomes effective for management & develops dependency relationship. It provides discretion to behave differently. Power increases potential capacity to influence others It creates dependency of the person who is being influenced by the power possessor. Managers or business leaders are given on us to manage the organisation. Dependency on other is influenced by latter’s power.  It is also observed that power holder has discretion of choices wit in the power premises. It does not provide unlimited capacity to influence others. In a business organisation, power is used to achieve organisational goal. The leader influences the employees & makes them dependent on his advice for achieving the goal. He prescribes the hob design, hob rotation, group norms, rules & regulations for attaining group goal through facilitating the employees to perform their respective jobs.

It has been observe in an organisation that leaders who understand or know how to use power are more successful than those leaders who are unwilling to use their respective power.

Source: Various OB Books & Notes

Tags: Authority, Authority and Power, Behaviour, jobs, Management, organisational Behaviour, Power
By: Management Duniya

Organisational Goals - Management Duniya

Organisational Goals

All organisations are purposeful by definition an Organisation is created deliberately to achieve one or more specified goals without goals, organisations would be purpose less and chaotic.  Goal setting specifies the proposal of the organisation & it desired future state. It is small wonder that currently management theory is enamoured with setting specified goals.

Importance of Goals:

The goal of organisations reflects the reasons for its existence. An Organisation produces and market their economic products and services. Universities provide teaching & research, govt provide welfare and security & so on without some purpose, and there is no need for the organisation goals.

Legitimacy:

Goals describe the purpose of the organisation so that people know what it stands for and will accept it existence & continuous. They help to legitimise the presence of organisation in its environment. Now the organisation can emphasise its uniqueness, identity.

Direction:

Goals guide employee work & decision making. They provide guidelines for organisational activity. They keep attention focused on common purposes. They commit persons & organisations to verifiable accomplishments.

Co ordination:

Goals keep activities on the right track goals make behaviour in organisations more rational, more coordination & thus more effective, because everyone knows the accepted goals to work towards. In setting effective goals managers to understand how they can best achieve their own goals by directing their behaviour towards the goals of the organisation.

Basis for Evaluating Performance:

Goals serve as performance standards against which actual performance may be checked. They provided a benchmark for assessment.

Acts as Motivating Force:

Goals are motivators. The setting of goals i.e. both specific as challenging leads to an increase in performance because it makes it clear to the individual what he is supposed to do. He can compare how well he is doing now versus now well he has done in the past & in some instance, how well he is performing in comparison to others.

Source: Various OB Books & Notes

Tags: co ordination, Direction, Force, Goals, Importance, Legitimacy, Motivating, Organisation, Performance
By: Management Duniya

Samuel Deep’s Classification Scheme-According to Degree of Formality - Management Duniya

Samuel Deep’s Classification Scheme-According to Degree of Formality

Samuel Deep has classified organisations on the basis of relationships. Thus we have formal & informal organisation as explained below.

Formal Organisation:

The formal organisations lays down the pattern of relationship between individuals, co-ordinations, and communication also proceeds according to the prescribed pattern. This organisation is also called a rational system as it refers to a structure of well defined hobs, each bearing a definite measure of authority, responsibility and accountability.

Informal Organisation:

Informal organisation comes in to existence because of the limitations of the formal organisation. It is also called a natural system as it represents natural grouping of people at work. Informal organisation represent relationships between individuals in the organisation based on interest, personal attitude, emotions, prejudges, likes, dislikes, etc. These relationships are not developed according to the procedures and rules and regulations laid down in the formal organisational structure. The birth of informal or social groups is a social phenomenon. Management can not eliminate the informal groups, since it does not create them.

Source: Various OB Books & Notes

Tags: Classification, Degree, Formal, Formal Oganisation, Formality, Informal, Informal Oganisation, of, Organisation, Samuel Deep, SCHEME
By: Management Duniya

Samuel Deep’s Classification Scheme - Management Duniya

Samuel Deep’s Classification Scheme

According to Samuel Deep Organisations can be differentiated according to

1. Their structure (Line & Staff functional protect types)


2. The concentration of authority (Centralised & De centralised organisations)


3. According to their objectives.


4. According to their degree of formality.

Classification according to their Objectives:

For Profit Organisation:

The organisations provide goods & services at a profit. Companies, Partnership firms, Sole proprietorship firm are organised along these lines are they generate profit for survival & continuance in the market.

Government Organisations:

The Organisations satisfy the public need for order and provide a means for people to exercise some measures of control over their environment.  Eg. Are central state govt. Undertakings, township organisations etc.

Protective Organisations:

They shield citizens form danger police, military services etc.

Service Organisations:

They act in the interest of the general public without always receiving payment in full of services rendered (voluntary organisations, consumer business etc.)

Political Organisations:

They seek to influence legislation by electing a member of their group to public, office, (Political Parties, groups & associations)

Religious Organisations:

They provide for spiritual needs of members and try to enlist, nonbelievers in to their told (churches, sects, orders etc.)  

Social Organisations:

They satisfy the needs of persons to make friendships & to have contact with others who have compatible interests (clubs, teams).

Source: From Various OB Books & Notes

Tags: Business, Classification, organisational Behaviour, organisations, Political, religious, Samuel Deep, SCHEME, Social, sociology
By: Management Duniya

BLAU & SCOTT - Management Duniya

BLAU & SCOTT

BLAU & SCOTT: It is classified on the basis of benefits.

Blau & Scott have given an organisational typology not based on the output function, but to the primary recipient of the output. This typology recognises that many parties may benefit from an organisation operation. The benefit can be defined as a change in some way or the other in recipient. Thus when a beneficially receives something from the organisation, he is being changed in some way. Thus four types of organisations emerges mutual benefit association, business organisation service organisations and common wheel organisations.

Mutual Benefits Association:

Mutual Benefit associations like trade unions, political parties, Professional bodies etc. Crop up to serve the interests of members. It is always not possible for this association to achieve the seemingly easy objectives because of two problems, membership apathy & oligarchic control, membership in mutual benefit associations may be existing initially but after sometime it becomes a monotonous feature.

Business Organisation:

Owners are the primary beneficiaries in business organisations. They are mainly concerned with maintain operating efficiently, achieving maximum gain at minimum cost. It is time that other groups like employees, customers, society etc, receive benefits simultaneously from business organisations but in the final analysis the survival of such institutions depends on how effectively the owners are rewarded for the risks undertaken.

Service Organisation:

In services organisations like, hospitals, educational institutions, social welfare agencies, etc, clients are the primary beneficiaries. In order to render effective service to the clients, the professionals looking after these organisations must emphasis two things; service is more important than observing procedures and the nature of service is to be decided by them and not by the clients.

Source: From various OB Books & Notes.

Tags: Benefits, BLAU, BLAU & SCOTT, Business, Organisation, SCOTT, service
By: Management Duniya

TALCOTT PERSON SCHEME - Management Duniya

TALCOTT PERSON SCHEME

1. TALCOTT PERSON SCHEME: It is classified on the basis of function.
   

   Society has different types of functions each of them having different characteristics and requiring different efforts on the part of the individual performing these functions. In the organisational society most of these functions are performed by social institutions, main of which take organisational form. Four types of organisations based on functions exist in the society.

   
   

   Economic Organisation:

   
   

   Economic organisations are primarily those which are concerned with adding value as used by economists. Economic activities are those that help in earning livelihood. These can be classified as business & non business activities. Business activities have three activities have three basic characteristics, profit motive, risk- bearing and creation of utilities. Such business activities may be in the form of trading, commercial, industrial & other direct services.

   
   

   Political Organisation:

   
   

   Political organisations are concerned with changing or adopting circumstances to attain valued goals. They are concerned with increasing the capacity of society or some part of it, to accomplish desired ends. Eg. Such organisations are to be maintaining peace & stability in the society. The basic problem of such organisation is to collect resources from various sources & spend them judiciously. So that the functions assigned to them are performed efficiently.

   
   

   Integrative Organisations:

   
   

   Integrative organisations such as courts, Police departments, social agencies & so on. Contribute to the efficiency with which the society operates. They are organisations for social control & maintenance. Keep things operating in desired fashions and keep out distributing influences. They are different from political organisations in the sense that the latter contribute to the effectiveness in the society, while the former contribute efficiency to the society.

   
   

   Pattern Maintenance Operations:

   
   

   Pattern maintenance organisations, such as educational institutions, theatrical groups, research institutions, clubs, churches & other religious institutions etc, are concerned with the long term issues of society’s values, pattern and knowledge, culture etc, such organisations attempt at creating value systems, furthering knowledge & making suitable pattern of life.

   
   

   Source: Some various OB Books & Notes.

 

Tags: Classification, Economic, of, operations, Organisation, PERSON, Political, SCHEME, TALCOTT, theory
By: Management Duniya

The Broader Meaning of Securitisation - Management Duniya

The Broader Meaning of Securitisation

1) Securitisation is the process of commoditisation: The basic idea is to take the outcome of this process into the market, the capital market. Thus, the result of every securitisation process, whatever might be the area to which it is applied, is to create certain instruments, which can be placed in the market.

 2) Securitisation is the process of integration and differentiation: The entity that securitises its assets first pools them together into a common hotchpot (assuming it is not one asset but several assets, as is normally the case). This process of integration then, the pool itself is broken into instruments of fixed denomination. This is the process of differentiation.

 3) Securitisation is the process of de-construction of an entity: If we think of an entity’s assets as being composed of claims to various cash flows, the process of securitisation would split apart these cash flows into different units. We classify these units, and sell these classified units to different investors as per their needs. Therefore, securitisation breaks the entity into various sub-sets.

Tags: Broader, entity, Meaning, of, Securitisation, Security
By: Management Duniya

Asset Securitisation - Management Duniya

Asset Securitisation

Let us study asset securitisation. It is a device of structured financing where an entity seeks to pool together its interest in identifiable cash flows over time. After identification it transfers the same to investors either with or without the support of further collaterals, and achieves the purpose of financing. The end-result of securitisation is financing. However, it is not “financing” per se, since the entity securitising its assets. It is not borrowing money, but selling a stream of cash flows that will otherwise accrue to it.

            Let us consider an example. A person wants to own a car to rent it to a business organization. He has to either use his own funds or obtain a loan. He is likely to get rent from the organization for utilization of his car. If He obtains a loan for purchase of the car. The loan is obligation, the car is asset, and other assets and other obligations of the person affect both obligations and assets. If he fails to repay money his other assets may be attached or if he does not pay for other loans his car may be attached. This is the case of financing and obligations under various legal provisions. For the purpose of discussion, we will call this person as an issuer (an appropriate word for him is originator but for simplicity we use the term issuer. Various terms used in securitisation will be discussed later.

            In the example studied, it is a claim to value over a period i.e. ability to generate a series of hire rentals over a period. The issuer may sell a part of the cash flow by way of hire rentals for a stipulated time to an investor and thereby raise money to buy the car. The investor is better off, because he has a claim for a cash flow, which is not affected by other obligations of the issuer. The issuer is better of because the obligation to repay the financier is taken care of by the cashflows from the car itself.

Tags: Asset, Financing, Securitisation
By: Management Duniya

Reasons why organizations go for securitisation - Management Duniya

Reasons why organizations go for securitisation

Securitisation is one way in which a company might go about financing its assets. There are generally seven reasons why companies consider securitisation:

1. to improve their return on capital, since securitisation normally requires less capital to support it than traditional on-balance sheet funding;


2. to raise finance when other forms of finance are unavailable (in a recession banks are often unwilling to lend – and during a boom, banks often cannot keep up with the demand for funds);


3. to improve return on assets – securitisation can be a cheap source of funds, but the attractiveness of securitisation for this reason depends primarily on the costs associated with alternative funding sources;


4. to diversify the sources of funding which can be accessed, so that dependence upon banking or retail sources of funds is reduced;


5. to reduce credit exposure to particular assets (for instance, if a particular class of lending becomes large in relation to the balance sheet as a whole, then securitisation can remove some of the assets from the balance sheet);


6. to match-fund certain classes of asset – mortgage assets are technically 25 year assets, a proportion of which should be funded with long term finance; securitisation normally offers the ability to raise finance with a longer maturity than is available in other funding markets;


7. to achieve a regulatory advantage, since securitisation normally removes certain risks which can cause regulators some concern, there can be a beneficial result in terms of the availability of certain forms of finance (for example, in the UK building societies consider securitisation as a means of managing the restriction on their wholesale funding abilities).

Establishing the primary rationale for the securitisation activity, is a vital part of the preparation for a securitisation transaction, since it influences the sorts of administrative tasks which need to be developed as well as the transaction structures themselves.

Tags: Assets, Balance, Balance sheet, Cost, for, go, organisations, reasons, Securitisation, Sheet, why
By: Management Duniya

Introduction and Meaning of securitisation - Management Duniya

Introduction and Meaning of securitisation

Technological advancements have changed the face of the world of finance. It is today more a world of transactions than a world of relations. Most relations have been transactionalised.

             “Transactions” mean coming together of two entities with a common purpose, whereas “relations” mean keeping together of these two entities. For example, when a bank provides a loan of a sum of money to a user, the transaction leads to a relationship: that of a lender and a borrower. However, the relationship is terminated when the loan is converted into a debenture. The relationship of being a debenture holder in the company is now capable of acquisition and termination by transactions.

Meaning of Securitisation:

             ”Securitisation” broadly implies every such process, which converts a financial relation into a transaction. History of evolution of finance, and corporate law indicate where relations are converted into transactions. Contribution of corporate laws to the world of finance, for example an ordinary share, which implies piece of ownership of the company, is amazing to note. Ownership of a company is a “relation”, packaged as a “transaction” by the creation of the ordinary share. This earliest instance of securitisation was instrumental in the growth of the corporate form of business and separation of ownership and management of organizations is one of the greatest commercial inventions of this 19^th century. Similar to the role of ordinary share, securitisation has strong role to play in economy.

            Securitisation is defined as “ the process whereby loans, receivables and other financial assets are pooled together, with their cash flows or economic values redirected to support payments on related securities”. These securities, some of which are referred to as “asset-backed securities” are issued and sold to investors principally, institutions in the public and private markets by or on behalf of issuers. The issuers use securitisation to finance their business activities. The financial assets that support payments on asset-backed securities include residential and commercial mortgage loans, as well as a wide variety of non mortgage assets such as trade receivables, credit card balances, consumer loans, lease receivables, automobile loans, and other consumer and business receivables. Although these asset types are used in some of the more prevalent forms of asset based securities, the basic concept of securitisation may be applied to any asset that has a reasonably ascertainable value, or that generates a reasonably predictable future stream of revenue. Consequently, securitisation has been extended to a diverse array of less well known assets, such as insurance receivables, obligations of shippers to railways, commercial bank loans, health care receivables, obligations of purchasers to natural gas producers, and future rights to entertainment royalty payments, among many others. Other instances of securitisation of relationships are commercial paper, which securitises a trade debt.

Tags: Assets, Credit, credit card, debt, finance, financial assets, Loans, Meaning, mortgage, mortgage assets, mortgage loans, revenue, Securities, Securitisation, Security
By: Management Duniya

A Study on Project Report on Portfolio & Risk Management - Management Duniya

A Study on Project Report on Portfolio & Risk Management

In simple language portfolio can be defined as a combination of securities that have return and risk according to their characteristic of their own.  Portfolio may or may not take on the combined characteristics of their individuals part port folio is a collection financial or real assets such as equity shares, debentures, bonds, treasury bills and property etc.

Portfolio is combination of assets or it is a collection of securities there holding these securities   are the results of the individuals preferences decision of the holders regarding risk and return and other consideration

Portfolio management  main  theme is the construction and maintenance of a collection of investment  the main theme  is portfolio management is investment of funds in different securities in which  the total risk  of the portfolio is minimized risk and expecting the more returns from the  securities  the main objective of the portfolio management  reducing the risk and increasing the return from the holder investment . Return is obviously important  in the portfolio and ultimate objective of the portfolio manager  is to achieve  expected level  return with incurring of low risk.

Tags: Management, MBA project, portfolio, Project, Project Report, Report, Risk, risk management, ROle
By: Management Duniya