solution model specimen paper 4 - oswal publishers€¦ · | 4 | icse model specimen papers, x (b)...

SECTION - AAnswer 1.

(a) Product Service1. Products are homogeneous, non variable

and tangible in nature. Services are heterogeneous, variable and in-tangible in nature.

2. There is a transfer of title of ownership from the buyer to seller.

There is no actual transfer of title of owner-ship from the service provider to the receiver.

(b) Advertising Publicity1. The activity of generating advertisements

of products and services to commercial-ize them is known as Advertising.

The activity of providing information about an entity, i.e., a product, an individual or a company to make it popular is known as Publicity.

2. It is the positive image that the company creates regarding the product and gener-ally under the control of the company.

It is the image that is being created by others regarding the product and generally not un-der the control of the company. It can either be positive or negative.

(c) Profit and Loss Account Income and Expenditure Account1. Profit andLossAccount ispreparedby

mercantile or trading concerns.Income and Expenditure Account is pre-pared by non- trading concerns.

2. Theobject of preparingProfit andLossAccount is prepared to determine Net Profit orNet Loss. Basis of preparationof Profit andLossAccount is Trial andBalanceandthebalanceofthisaccountistermedasNetProfitorNetLoss.

The object of preparing Income and Ex-penditure Account is to determine excess of income over expenditure or vice-versa. The basis of preparation is Receipt and Payments Account and the balance of this Account is termedassurplusordeficit.

(d) Shut down Cost Sunk Cost1. A manufacturer or an organisation may

have to suspend its operations for a pe-riod on account of some temporary dif-ficulties like shortage of raw material,non-availability of requisite labour etc.

Sunk costs are historical or past costs. These are the costs which have been created by a decision that was made in the past and can-not be changed by any decision that will be made in the future. For example, invest-ments in plant and machinery, buildings etc.

2. These are fixed costs that the companymay incur in future during shut down that will occur.

This is a historical or past cost incurred by the company.

(e) Human Relations Public Relations1. Human Relations are carried out by the

Human Resources Department of the company.

Public Relations are carried out by the Public Relations Department of the company.

Model Specimen Paper Commercial Applications

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2. Human Relations Department is re-sponsible for the staff (employee)man-agement in an organisation. Example, HRdealswithstaffingissues.

Public Relations Department comprises of all activities done to keep the public involved in the company. Example, PR(publicrelations)deals with image issues.

Answer 2. (a) The three sources from which Natural resources are derived are as follows: Water : Water is a renewable resource and water is the most abundant resource on the planet.

Approximately 72 percent of our planet is covered with water. We require daily water for survival, our food is all grown with water and our bodies themselves are mostly comprised of water. Although water is prevalent on Earth, less than 10 percent of it is drinkable.

Soil : Soil is another renewable source of natural resources that is a loose material that lies on top of the land. It is a mixture of rock, minerals, water and living and dead things , i.e., “organicmatter”. Becausesoilholdswaterandnutrients, it isan ideal place for plants to grow. Soil holds the roots and lets plants stand above the ground to collect the light they need to live and also provides shelter to a lot of living organisms.

Sunlight : Sunlight is the light and energy that comes from the Sun. When this energy reaches the earth’s surface, it is called isolation. Plants need sunlight for the process of photosynthesis and human beings and other organisms also need sunlight for their survival.

(b) Steps to be taken in the recruitment process are as follows: (1) Identifyingthehiringneedoforganisation. (2) Planningtheprocessofrecruitment. (3) Identifyingviablecandidates. (4) RecruitingofA-levelcandidates. (5) Interviewing. (6) Offeringofemployment. (7) Hiringofthecandidate. (8) On-boardingofthecandidate. (c)Ethicsisdefinedas“thatbranchofphilosophydealingwithvaluesrelatingtohumanconduct,

with respect to rightness and wrongness of certain actions and to the goodness and badness ofthemotivesandendsofsuchactions”. Bydictionarydefinitionsethicsand morality are interchangeable.Bothareconcernedwithconductthatisrightorwrong.Behaviourthatisconsidered unethical by one society or a generation may be quite acceptable to another.

(d) Qualities of a Good Salesman are as follows : (1) Knowledgeable: A good salesperson should possess sound and up-to-date knowledge

about his/her organisation and the product, produced and marketed by his/her employer. Asuccessfulsalesmanmustbeconversantwiththefirm’shistory,itsmarketposition,itssales and distribution system and policies. He/she should also clearly know about the sales organisation and distribution policies adopted by the undertaking. He/she should be familiarwith themarket, its buying pattern, trends and behaviour. He/shemusthave an in-depth knowledge of the buying habits and motives of the customers. All this informationwillbeofgreathelptothesalespersonininitiatinghissellingeffort.

(2) Communication: Good communication skills are one of the most important quality of a salesman. It is not merely the ability to speak. Communication skill is the ability to convey information to the receiver or the audience in such a way that it is understood clearly and at the same time convinced enough to purchase the product.

(e) The four Causes of Green House Effect are as follows: (1) Burning of Fossil Fuels : Themostimportantcauseofgreenhouseeffectistheburning

of fossil fuels. Fossil fuels contain carbon and when they are burnt this carbon combines with oxygen in the atmosphere to form carbon dioxide.

(2) Atmospheric Water Vapours :Atmosphericwatervapour is a significantgreenhousegas. Increased water vapour and changes in atmospheric circulation could also create changes in cloud cover.

Commercial Applications | 3 | (3) Halocarbons: Halocarbons are well known as the depleters of stratosphere ozone but

theyarealsosignificantasgreenhousechemicals.Chloroflurocarbonshave15,000timesthe impact of carbon dioxide.

(4) Hydroelectric Reservoirs and Bacterial Decomposition: Hydroelectric reservoirs and bacterialdecompositionoffloodedpeatand forestbiomassgeneratemethane,whichcontributesabout12%ofgreenhouseeffect.

Answer 3. (a) Thestatementthat it ismoredifficulttoensureuniformqualityinservicesthanincaseof

product is true.Becauseservicesdependsonthequalityof theserviceprovider, theplacewhere the service is provided and the time. It also depends on the manner in which the service is being provided, e.g., awell-equippedhospitalcangiveusbettermedicalservicecompared with a clinic. In case of standardised products, a product can be a perfect substitute for another where it is impossible for an individual to distinguish one from another. Thus, if apersonhastobuyaGilletteshavinggel,hecanpickanyonelyingatthestore.

(b) The statement that branding has no use in this cut throat competition is false. Brandingisthekeyforproductdifferentiationinthiscutthroatcompetition.Themarketerhastoconstantlyensure that his product is not lost in the crowd of competing products. The company has to constantlydevisewaysandmeansofensuringthatcustomersareabletoquicklydifferentiatehis products and recognize them on the retailer’s shelf. This is achieved through innovative packaging and branding, so that they stand out. For instance, Italian brand Ferrero’s Kinder Joystandsoutintermsofpackagingandcanbeeasilyidentified.

(c) ThestatementthatBankingisarelationshiporientedindustryistrue. Relationship banking is a strategy used by banks to strengthen loyalty of customers and provide a single point of service for a range of products and services. With the increase in the cut throat competition between thebanks,it isveryimportantfortheBankstocreatearelationshipwithitsCustomers.Acustomer of a bank may start out with a simple checking or savings account, but relationship bankinginvolvesapersonalorbusinessbankerofferingcertificatesofdeposit, safe deposit boxes, insurance, investments, credit cards, all types of loans and business services (e.g.,credit card orpayrollprocessing).Banksthatpracticerelationshipbankingtakeaconsultativeapproachwithcustomers,gettingtoknowtheirparticularsituationandneedsandadaptingtochangesintheirfinancialorbusiness.

(d) The statement that selection is a negative process is true. Selection is said to be a negative process because the number of candidates rejected is much more than that of selected. There are some stages of selection. At every stage, the qualities of candidates are tested. Number of candidates goes on reducing at each subsequent stage. It eliminates the unsuitable candidates at every step. It is the process of picking up the most competent and suitable candidates.

(e) The statement that ethics is not necessary in public relations is false. Public relations have nowbecomeavitalfunctionaffectingmanagementdecisionsandinfluencingpublicopinionin every business. Public relation functions often come across unique and challenging ethical issues. Public relation professionals have to constantly balance the needs of their employers against the public’s right to honest and fair dealing. While on one hand they have to guard their employer’s interests, on the other hand they also need to safeguard integrity and gain public trust. Ethical codes of conduct play an important role in ensuring that information and advice given out is honest, accurate and follows the principle of fairness and loyalty. It is therefore essential to use some ethics in public relations.

Answer 4. (a) A market is defined as the sum total of all the buyers and sellers in the area or

region under consideration. The area may be the countries, regions, states or cities. Differentpeoplehaveinterpretedtheterm‘market’,indifferentways.Traditionallymarketisbeingexpressedfromthepointofviewofaspecificplace,butwithtimetheconcepthasevolved like place concept, area concept and demand concept.


(b) Advertisementplaysaveryimportantroleinprofitcreation. Features of a good Advertisement: (1) Should be Simple: The advertisement should use simple language and be capable of

quick understanding. It should be such that the message can be conveyed to the target audience.

(2) Retention of Message: Agoodadvertisementmustbeabletoholdtheviewer’sattentionand must remain in his memory for some time. The viewer must be able to recall it and relate it to the advertiser’s brand or logo.

(c) The accounting cycle is the name given to the collective process of recording and processing the accounting events of a company. Accounting cycle is a step-by-step process of recording, classificationandsummarizationofeconomictransactionsofabusiness.Itgeneratesusefulfinancialinformationintheformoffinancialstatements including income statement, balance sheet,cashflowstatementandstatementofchangesinequity.

(d) Telephone Recruitment: Telephone Recruitment is a process where the interview of a prospective candidate is taking over the telephone. There are batches of viable candidates, mostlikelypassivecandidates,whoareinterestedintheposition.Butnoteverysingleoneofthemisgoingtomakeitthroughtheprocess.Thatbringsthecompanytothefirstscreeningstage of the process, the telephone interview. Ideally, the HR department has to chalk out a list of10to15verystrongcandidates,allofwhomareinterestedintheposition.Thisdecreasestime, location constraints etc.

(e) Public relations practice is the deliberate, planned and sustained effort to establish andmaintain mutual understanding between an organisation and its public.

Merits of Public Relations: (1) Credibility : Consumers today are more cautious when spending. Because PR and

advertisingareverydifferentthings,consumersarelikelytogivecredibilitytobusinesswhen they see it mentioned in the media compared to when they see on ads or billboards.

(2) Target Market :With PR, it’smuch easier to aim andfire on that targetmarket thecompany is hoping to reach. Media sources can place the information that is right up the consumers alley and give them the required information they need.

SECTION - BAnswer 5. (a) Pricingcanbedefinedastheprocessofdetermininganappropriatepricefortheproduct,or

itisanactofsettingpricefortheproduct.Pricinginvolvesanumberofdecisionsrelatedtosettingpriceofproduct.

Following are the various objectives of pricing : (1) Profits-relatedObjectives:Profithasremainedadominantobjectiveofbusinessactivities. Company’s pricing policies and strategies are aimed at following profits-related

objectives: (i) Maximum Current Profit :Oneoftheobjectivesofpricingistomaximizecurrent

profits.Thisobjective isaimedatmakingasmuchmoneyaspossible.Companytries to set itsprice in away thatmore currentprofits canbe earned.However,companycannot set itspricebeyond the limit.But, it concentratesonmaximumprofits.

(ii) Target Return on Investment: Most companies want to earn reasonable rate of return on investment.

Target return may be: (1) fixedpercentageofsales, (2) returnoninvestment,or (3) afixedrupeeamount. Company sets its pricing policies and strategies in a way that sales revenue ultimately

yields average return on total investment. For example, company decides to earn

Commercial Applications | 5 |20%returnontotalinvestmentof3crorerupees.Itmustsetpriceofproductinawaythatitcanearn60lakhrupees.

(2) Sales and market share related Objectives: The main sales-related objectives of pricing may include: (i) Sales Growth: Company’s objective is to increase sales volume. It sets its price

in such a way that more and more sales can be achieved. It is assumed that sales growthhasdirectpositiveimpactontheprofits.So,pricingdecisionsaretakeninway pricing policies are targeted to improve sales.

(ii) Target Market Share : A company aims its pricing policies at achieving or maintaining the target market share. Pricing decisions are taken in such a manner that enables the company to achieve targeted market share.

(iii) Increase in Market Share : Sometimes, price and pricing are taken as the tool to increase its market share. When company assumes that its market share is below than expected, it can raise it by appropriate pricing; pricing is aimed at improving market share.

(3) Competition-related Objectives: Competitionisapowerfulfactoraffectingmarketingperformance. Every company tries to react to the competitors by appropriate business strategies.

With reference to price, following competition-related objectives may be prioritised: (1) To Face Competition : Pricing is primarily concern with facing competition. Today’s

marketischaracterizedbytheseverecompetition.Companysetsandmodifiesitspricing policies so as to respond the competitors strongly. Many companies use price as a powerful means to react to level and intensity of competition.

(2) To Keep Competitors Away : To prevent the entry of competitors can be one of themainobjectivesofpricing.Thephase‘preventionisbetterthancure’isequallyapplicablehere.Ifcompetitorsarekeptaway,noneedtofightwiththem.

(4) Customer-related Objectives: Customers are in centre of every marketing decision. Company wants to achieve following objectives by the suitable pricing policies and

practices: (1) To Win Confidence of Customers: Customers are the target to serve. Company

setsandpractices itspricingpolicies towin the confidenceof the targetmarket.Company, by appropriate pricing policies, can establish, maintain or even strengthen theconfidenceofcustomersthatpricechargedfortheproductisreasonableone.Customers are made to feel that they are not being cheated.

(2) To Satisfy Customers: To satisfy customers is the prime objective of the entire rangeofmarketing efforts.And,pricing is no exception.Company sets, adjusts,and readjusts its pricing to satisfy its target customers. In short, a company should design pricing in such a way that results into maximum consumer satisfaction.

(5) Other Objectives: Over and above the objectives discussed so far, there are certainobjectives that company wants to achieve by pricing.

They are as under: (i) Market Penetration: This objective concerns with entering the deep into the market

to attract maximum number of customers. This objective calls for charging thelowest possible price to win price-sensitive buyers.

(ii) Promoting a New Product: To promote a new product successfully, the company sets low price for its products in the initial stage to encourage for trial and repeat buying. The sound pricing can help the company introduce a new product successfully.

(b) ThetermacidrainwasfirstusedbyRobertAngusin1872.Acidrain,whichisknownasaciddeposition, is caused by emissions of sulphur dioxide and nitrogen oxides from burning of energysourceslikefuelwood,coalandpetroleum.Naturalsourceslikevolcanoes,forestfiresand lighting strikes also add to the man-made pollution. Sulphur dioxide and nitrogen oxides


become acids when they enter the atmosphere and react with water vapour. The resulting sulphuric and nitric acids can fall as wet or dry depositions. Wet deposition includes all forms of acid precipitation such as acid rain, snow and fog. Dry deposition falls as acidic particulates or gases. About half of the acid in the atmosphere falls to earth as dry deposition. Acid rain is anextremelydestructiveformofpollutionandtheenvironmentsuffersfromitseffects.

Effects of Acid Rain : Acidraineffectstheenvironmentinseveralways: Human Health : In the atmosphere, the sulphur dioxide and nitrogen oxide emission poses

risk to respiratory health, such as lung disorders, dry coughs, asthma, headaches, eye, nose and throat irritation and impacts to the cardiovascular system.

Surface Waters : Acidic surface waters decrease the survivability of aquatic animals and in the moresevereinstanceseliminatesomeoralltypesoffishandotherorganisms.

Forests : Acid rain contributes to forest degradation by impairing trees’ growth and increasing their susceptibility to winter injury, insect infestation and drought. It also causes leaching and depletion of natural nutrients in forest soil. The leaching of nutrients from the soil makes them unavailable to plant life.

Materials : Acid rain contributes to the corrosion and deterioration of buildings and cultural objects, which decreases their value and increases costs of correcting and repairing damage.

(c) The selection of a proper advertising media involves careful consideration of many factors by a manufacturer. Advertising medium is the means of conveying a sales message. Following are the important points to be kept in mind before choosing an advertising medium:

(1) Nature of the Product: Nature of the product to be advertised has an important bearing onthemediumofadvertisement.Productsshouldbeclassifiedintotwobroadcategories–namely, consumer goods and industrial goods. Consumer goods can be advertised in newspapers, magazines, radio and television and through outer displays. Industrial goodscanbeadvertisedprofitablyinthespecialisedtrade,technicalandprofessionaljournals.

(2) Nature of the Market : Market is dynamic in nature. During the last few years markets have undergone a great change. The choice of the media requires that the advertiser keeps into account the nature of the market, the choice and preferences of consumers within that market and the cultural and related factors. If cultural factors are not taken intoconsiderationtheadvertisingmessagemayloseitsmeaningormaybackfire.

(3) Circulation of Media : Wider the reach of the selected media greater will be coverage. TV has the widest reach but it also has its cost implication. Newspapers are economical but they have limited circulation compared with TV. Magazines may also be considered but they may have smaller coverage than most newspapers.

(4) Available Funds : The cost of advertising is another important consideration to be taken into account by a manufacturer. A large-scale manufacturer having huge funds can undertakeextensiveadvertisingcampaignsbyemployingdifferentadvertisingmedia.Ontheotherhandthismaynotbepossibleforasmalllocalseller.Advertisingcostsplayan important role in determining the media used.

(5) Life of Advertisement : Thedifferentmediahavevaryinglifespansasfarasadvertisingis concerned.Outdoordisplayshavea comparatively longer life compared to thatofnewspapers, radio and television. This factor plays an important role in determining the media to be used. For consumer goods TV, newspapers may seem to be suitable while forsomeindustrialgoodstradejournalsmaybebetterchoice.

(6) Media followed by Competitors : Sellers prefer using the same media that their competitorsuse.Thisisdonewiththeobjectiveoftakingthecompetitionfightrightintothe competitor’s camp.

(7) Type of Consumer : The advertiser has to keep in mind the intended receiver or audience of the advertising, their cultural and educational sensibilities, level of their understanding,etc.Ifthisisnottakencareof,theintendedeffectofthemessagewillbelost, so medium of advertisement should be selected accordingly.

Commercial Applications | 7 |Answer 6. (a) Advantages of using eco-friendly products (i) Long-term cost savings : (1) Eco-friendly appliances typically lower the energy andutilitybills byusing less

water and power, eventually saving the money. (2) Eco-friendlyproductscomeinconvenientsizesandpackaging,makingtheproduct

smaller and/or lighter, which lowers the production costs and which can reduce their up-front cost for consumers.

(3) Eco-friendlyproductsareusuallymadewell,comewithwarranties,andlastlongerthan their cheap, non-eco-friendly counterparts.

(ii) Environmental Protection : (1) Eco-friendlyproductsmadewithpost-consumerrecycledmaterialshaveasmaller

carbon footprint, which helps keep the earth’s air and water less polluted. (2) Eco-friendlyproductsareproducedwithmaterialswhichhavelowtonoimpacton

the environment. (iii) Health benefits : There’s still a fairly heated debate ongoing about organic versus

conventionally farmed crops and why people are so afraid of chemicals in their cleaning products, utensils and processed foods. People who use organic and eco-friendly productsswearbytheresultingside-effectofbetterhealth,though.

(iv) Cost : (1) Theconstructioncostsofecofriendlyhousesrequiringlessenergyandwaterarethe

sameasastandardbuildingandsometimetheycostalittlebitmoreastheyrequirespecial materials to be built. However, regular building costs after its construction since money will always be spent on maintenance, renovation, operation or continue even demolition. This does not happen with ecofriendtly houses.

(2) This doesn’t mean that green buildings won’t need maintenance, renovation,operation or even demolition as well, but being built of natural resources all that re-doingstuffwilltakeagestilldoneastheyarenotdamagedthatfasthence,investingingreenbuildingis10timesmoreprofitablethanstandardones.

(v) Efficiency : (1) Water Efficiency: Greenbuildingsdon’tknowthemeaningof“wasted”,theyrecycle

rainwaterandgreywaterandusethemfortoiletflushingforinstance. (2) Energy Efficiency: These buildings save energy more than those built out of bricks.

They only depend on all renewable energy resources such solar power, hydro-power and wind power which are used for heat and electricity and help improve the indoor air quality.

(b) “Salesmanshipistheartofpersuadingpeopletopurchasegoodswhichwillgiveofflastingsatisfaction.”

Thesignificanceofpersonalsellingcanbeexplainedasfollowing: (1) Helps in Introducing a New Product : A salesman helps consumers by interacting with

them personally and informing them about the new products introduced in the market. He/she tells them about the utility of the product and suggests the new ways in which the new products can satisfy their needs and requirements. He/she in this way creates an urge for the new product by awakening desires in prospective customers and calling upon their possessive instincts.

(2) Informs Producers About the Market Trends: Personal selling involves direct interaction with the customers and these salespersons or the frontline employees of the organisations have the capability of including all the valuable feedback received from the consumers. Demand for various products may vary with time and these personal salesexecutivesoftenreceivethefirsthandinformationregardinganychangingpatternof need and demand in the consumer market. It helps him to understand the tastes,


reactions,habitsandattitudesofpeople.Whenthisinformationissystematicallypassedon to the producer it becomes the foundation of his marketing planning. Thus, the salesman becomes a very important link as a medium of communication between the producer and his customer.

(3) Facilitates Production on a Large Scale: Personal selling helps a business not only to secure a position in the existing market but also to explore, cultivate and create newer for its products. Salesmanship helps in creating a continuous demand and thereby increasing turnover by understanding and interpreting the needs of the market. This makes production on a large scale, feasible.

(4) Helps Build up Social Relationships and Corporate Image: Through constant interaction with customers, a salesman establishes a social relationship with them. Familiaritydevelopsintoarelationshipoftrustandconfidence.Thishelpsthefirmtodevelop a positive image in the customers’ eyes. It is this positive image that creates goodwillforthefirm,inthesociety.Thecustomers,asaresult,becomemorereceptivetothefirm’sproductsandservices.

(5) Helps Customers in Decision-making : A salesman is like a guide to the customers. Customers acknowledge the importance of a salesman because without his/her help they facethedifficulttaskofselectingasingleproductoutofalargevarietyavailableinthemarket. A salesman helps his/her customers to match the utility of a product with their needs, thus, making it easier for the customers to make the most satisfactory selection andaffectthepurchase.

(c) Basic Principles of Accounting : Basicaccountingprinciplesarethegeneralruleswhichareused as a guide in accounting and as a basis of practice. These principles are based upon logic and practical experiences obtained by the practitioners. These basic accounting principles are as follows :

(1) Realisation Principle : According to this principle, revenue is deemed to be realised or earned when the goods have been transferred or the services have been rendered to acustomer.Intherealisationofrevenue,thereceiptofcashisnotsignificant.Ifafirmsells goods in April and receives cash in June, revenue will be considered as realised in April when the goods were sold. Similarly, expenses are recognised not when the cash is paid but when the assets or services are used to produce revenue. For example, rent for January1, 2001 toMarch31, 2001, thoughunpaid,will be recognisedduring theaccountingyear2000-2001.Likewise,costofgoodslostbyfireisimmediatelyrecognisedin the year of loss.

(2) Matching Principle : The matching principle requires that revenues and any related expensesberecognisedtogetherinthesameperiod.Thus,ifthereisacauseandeffectrelationship between revenue and the expenses, record them at the same time. If there is no such relationship, then charge the cost to expense at once. This principle provides the guidelines as to how the expenses are to be matched with revenue. It requires that in determiningthenetprofit,allcostswhichareapplicabletorevenueofthatperiodshouldbe charged against that revenue. For the purpose of matching the various costs with the revenue,firstlyrevenuesshouldberecognisedandthencostsincurredforgeneratingthat revenue should be determined. The matching of costs with revenue is based on the accrual system of accounting.

(3) Complete Disclosure Principle : According to this principle, there should be complete andunderstandablereportingonthefinancialstatementsofallsignificantinformationrelatingtotheeconomicaffairsofthefirm.Tomeettherequirementsofthisprinciple,allfinancialstatementsaresupportedbyfootnotes.Forexample,changeinthemethodofdepreciation or method of valuation of stock, market value of investments and contingent liability are shown in footnotes. The Companies Act has prescribed the proforma and contents of Balance Sheet andProfit andLossAccount to ensure full disclosureof financial information. For a business, the complete disclosure principle requires a

Commercial Applications | 9 |company to provide the necessary information so that people who are accustomed to readingfinancialinformationcanmakeinformeddecisionsconcerningthecompany.

(4) Principle of Verifiable Objective : This principle requires that all transactions recorded in the books of accounts must be evidenced and supported by business documents, such as cash memos, invoices, vouchers, etc. These supporting documents provide the basis for making entries and for audit. The principle of objectivity also requires that the accounting records must be free from the personal bias of the owners and managers. For example,showinglandatitsoriginalcostof10,000(whenitwaspurchased50yearsago)isconsideredtobemorereliable,verifiableandobjectivethanshowingitatitscurrentmarketvalueof2,50,000.

(5) Dual Aspect Principle : According to this principle, every business transaction has a double (dual) effect on the business. This double effect can be recognised only byrecording both the aspects of every transaction. There are two sides of every transaction. If one account is debited, any another account must be credited and vice-versa. The systemofrecordingtransactionsonthebasisofthisprincipleisknownas‘DoubleEntrySystem’. It isdue to thisprinciple that the twosidesof theBalanceSheetarealwaysequal.

The following accounting equation will always hold good at any point of time. Assets=Liabilities+Capital OR Capital = Assets – LiabilitiesAnswer 7. (a) Aserviceisanactorperformanceofferedbyonepartytoanother.Theyareeconomicactivities

thatcreatevalueandprovidebenefitstocustomersatspecifictimesandplacesasaresultofbringing desired change.

The distinct characteristics of services are mentioned below: (1) Intangibility: Services are intangible in nature. According to Carman and Uhl, a

consumer feels that he has the right and opportunity to see, touch, hear, smell or taste the goods before they ultimately purchase them. The same is not applicable in case of services. The buyer does not possess any opportunity to touch smell, and taste the services. While selling or promoting a service one has to concentrate on the satisfaction a consumer can achieve by investing his money.

Fore.g.AnairlinesellsaflightticketfromAdestinationtoBdestination.Heretheserviceprovided by the Airline is important for satisfying customer so that he avails the same airline again.

(2) Perishability: Services cannot be produced and kept in inventory. They cannot be produced ahead of time and stocked for the periods of peak load of demand. They can only be delivered at the time of the consumption.

For e.g. if a person needs a hotel service, the hotel cannot create the service before it is being demanded by the customer, it has to be created as and when the customer requires it.

(3) Inseparability : Services are generally created or supplied simultaneously. They are inseparable. For an e.g., the entertainment industry, health experts and other professionalscreateandoffer their serviceat thesamegiven time.Servicesand theirprovidersareassociatedcloselyandthus,notseparable.DonaldCowellstates‘Goodsare produced, sold and then consumed whereas the services are sold and then produced and consumed’. Therefore inseparability is an important characteristic of services which proves challenging to service management industry.

(4) Variability: Services are not always standardized and uniform. It is often impossible to assureconsistenciesintheservicesprovidedbyasellerortostandardiseofferingsamongthesellersofthesameservicewhileitispossibletoofferconsistenciesanduniformitiesin case of products.


Fore.g.IfacustomeroptsforHotelAonday1andHotelBonthe2nddaythoughbelongingtothesameindustryHotelAwillnotprovidethesameserviceasHotelBandvice-versa.

(b) Environmentalconsciousnessoftenmeansdifferentthingstodifferentsectionsofthesociety. There are a lot of programmes or schemes established by the Government for spreading

awareness to protect the environment. EnvironmentEducation,AwarenessandTraining(EEAT) isacentralsectorSchemeof the

MinistryofEnvironment,ForestandClimateChangelaunchedduringfinancialyear1983-84. The scheme aims to promote environment awareness amongst school and college level

students to create awareness on various aspects of environment, climate change and nature and are being implemented across the county. It includes the relationship of population, industrialisation, pollution, resource allocation and depletion, conservation, transportation, technology, urban and rural planning.

The Ministry of India has been organising National Environment Awareness Campaign (NEAC)everyyearsince1986inordertospreadthemessageofenvironmentalconservationacrossthesociety.Eachyear’scampaignhasaspecifictheme.CentresofExcellencehavebeenset up by the Ministry with a view to strengthen awareness, research and training in priority areas of environmental science and management. These include the Centre of Environment Education(CEE)inAhmedabad,CPREnvironment.EducationCentre(CPREEC),Chennai,Centre forEcological Sciences (CES), Bengaluru,Centres forMiningEnvironment (CME),DhanbadandSalimAliCentreforOrnithologyandNaturalHistory,Coimbatore.TheNationalEnvironment Awareness Campaign for 2001-02 was organised by the Ministry of India with the major theme as sustainable development as well as with action oriented components on various environmental issues like keeping sources of clean, drinking water ensuring proper management of garbage, introducing non-plastic alternatives in villages, protection of trees and plantation and pesticides free agriculture.

Certain Public awareness methods help to protect the environment: For Example: THE ‘3 Rs’ : Practicingthe‘3Rs’(Reduce,ReuseandRecycle)everydayisnotonlyimportant

for a healthy environment but also a good method of waste management. Reduce/Reduction: Reduce means to lower the unnecessary consumption of a resource. A key

partofwaste‘reduction’is‘conservation’usingnaturalresourceswiselyandusinglessthanusual in order to avoid waste.

(a) Reuse:‘Reuse’meansusingmaterialsintheiroriginalforminsteadofthrowingthemawayorpass those materials on to others who could use them too. Here are some examples of reuse overandoveragainwithoutanylossofquality.Brokenorwastedglassismixedwithsand,limestone and soda ash and used to make new glass. Recycled glass also has many other commercial uses from creating decorative tiles and landscaping material to rebuilding eroded beaches.

Refuse: Sometimes refusing to use plastic bags or harmful materials is also an act, itself. If people become socially aware and influence others to refuse,more positive effect can beexpected.

(c) Central Bank Commercial Bank1. The bank that looks after the monetary

system of the country is known as Cen-tralBank.

The establishment, which provides banking services to the public, is known as Commer-cialBank.

2. It is a banker to the banks and the gov-ernment of the country.

It is the banker to the citizens of the nation.

3. TheownershipisPublic. The ownership can be either public or private.4. It has the authority toprint and issue

notes.It has no such authority of printing or issuing notes.

5. Thegoverningstatute isReserveBankofIndiaAct,1934.

ThegoverningstatuteisBankingRegulationAct,1949.

Commercial Applications | 11 |Answer 8. (a) AnIndianBankperformsavarietyoffunctionsandprovidesalotofservicestopublic.The

functions and services are as follows: (i) Primary Functions : (1) It accepts deposits: A commercial bank accepts deposits in the form of current, savings

andfixeddeposits.ItcollectsthesurpluscashbalancesoftheIndividuals,firms. Deposits are of three types: (i) Current account deposits: Such deposits are payable on demand and are, therefore,

called demand deposits. These can be withdrawn by the depositors as and when required by them. No interest is payable on these deposits. This kinds of accounts is generally maintained by business houses, companies etc.

(ii) Fixed deposits: Fixeddepositshaveafixedperiodofmaturityandarereferredtoastimedeposits.Thesearedepositsforafixedterm,i.e.,periodoftimerangingfroma few days to a few years. They carry highest rate of interest and can generally be withdrawnafterexpirationofitsfixedterm.

(iii) Savings account deposits: The basic objective of this kind of account is to save. Savings account is suitable for individuals. The amount kept in the account is generally paid on demand and also withdrawable by cheque. Interest is paid but lesser than that of Fixed Deposits.

(2) It provides loans and advances: The second major function of a commercial bank is to give loans and advances particularly to businessmen in the form of cash credit, demand loans, short-run loans, overdraft as explained under and thereby earn interest.

(i) Cash Credit: An eligible borrower is first sanctioned a credit limit and withinthat limit he is allowed to withdraw a certain amount on a given security. The withdrawing power depends upon the borrower’s current assets. Interest is charged bythebankonthedrawnorutilisedportionofcredit(loan).

(ii) Demand Loans: A loan which can be recalled on demand is called demand loan. There is no stated maturity period. The entire loan amount is paid in lump sum by crediting it to the loan account of the borrower.

(iii) Short-term Loans: Short-term loans are given against some security. The entire amount is repaid either in one instalment or in a number of instalments over the period of loan.

(ii) Secondary Functions: Apartfromtheabovementionedtwoprimary(major)functions,commercial banks perform the following secondary functions also.

(1) Discounting bills of exchange or bundles: A bill of exchange represents a promise topayafixedamountofmoneyataspecificpointoftimeinfuture.Itcanalsobeencashed earlier through discounting process of a commercial bank. Alternatively, a bill of exchange is a document acknowledging an amount of money owed in consideration of goods received.

(2) Overdraft facility : An overdraft is an advance given by allowing a customer keeping current account to overdraw his current account up to an agreed limit. Thesecurityforoverdraftisgenerallyfinancialassetslikeshares,debentures,lifeinsurance policies of the account holder, etc.

(iii)Agency functions of the bank: The bank acts as an agent of its customers and gets commission for performing agency functions as under:

(1) Transfer of funds:Itprovidesfacilityforcheapandeasyremittanceoffundsfromplace to place through demand drafts, mail transfers, telegraphic transfers, etc.

(2) Collection of funds: It collects funds through cheques, bills, bundles and demand drafts on behalf of its customers.

(3) Payments of various items: It makes payment of taxes, insurance premium, bills, etc. as per the directions of its customers.


(4) Purchase and sale of shares and securities: It buys sells and keeps in safe custody securities and shares on behalf of its customers.

(5) Collectionofdividends,interestonsharesanddebenturesismadeonbehalfofitscustomers.

(6) ActsasTrusteeandExecutorofpropertyofitscustomersonadviceofitscustomers. (7) Letters of References: It gives information about economic position of its customers

to traders and provides similar information about other traders to its customers. (b) Thegreenhouseeffectistheprocessbywhichradiationfromaplanet’satmospherewarms

the planet’s surface to a temperature above what it would be without its atmosphere. If a planet’s atmosphere contains radioactively active gases i.e., green house gases methane

(orCH4), and carbondioxide (orCO2),) theywill radiate energy in all directions. Part ofthis radiation is directed towards the surface, warming it. The intensity of the downward radiation– that is, the strengthof thegreenhouse effectwilldependon the atmosphere’stemperature and on the amount of greenhouse gases that the atmosphere contains.

Earth’s natural greenhouse effect is critical for supporting life. Human activities, mainlytheburningoffossilfuelsandclearingofforests,havestrengthenedthegreenhouseeffect,causing Global Warming. It also causes the melting of glaciers and snow from mountains, resulting in an increase in the water levels of seas and rivers, eventually increasing the risk of floods.Apartfromthis,globalwarmingitalsohasnumerousserioushealthrisksonhumanssuchasincreaseindiseaseslikeLyme,malaria,cholera,dengueandplagueetc.

Answer 9 (a) Shareholders are the key public of the organisation who invests their funds in the organization

for fetching returns. The information that needs to be studied regarding the shareholders is makeup, location,

economic status and demography of this group of public. Therefore, in order to please the shareholders of the company who represent as the ambassadors

of the Company, a detailed study regarding their location or place of residence, their income or economic status and their details like place of birth, date of birth etc. needs to be chalked out.

The company can obtain the information about its shareholders from its records. The company can organise some kind of events in which it can invite its shareholders. In such events, the requisite information regarding the demographic characteristics, economic background, likes and, dislikes, involments on social media, location and any other information can be gathered andtheirdatabasecanbedeveloped.Thisinformationcanbeusedbythecompanyforbettercommunication with the shareholders.

(b) Theinformationthatisvaluabletotheinvestorsaretheprofitsorreturnsthatthecompanyisfetchingordividendbeingdeclaredbythecompanyontheprofitsearnedfromthefundsthatthey are investing in the Company. Sometimes the Investors are also interested in information relatedtotheBrandcreation,imageoftheproductsoftheCompanyinthemarketorconsumersetc. The investors may also show interest in appointment of key personnel’s if any and also new policies being implemented by the Company.

(c) Thecommunicationmediathataremoreeffectiveforbuildingpublicrelationsare: (1) Press release : Press release is one of the oldest and most effective PR tools. It is

information communicated through the regular TV or/and radio programmes, newspapers, magazines and other types of mainstream media. It has a greater impact than advertising.

(2) E-mail : Public relations practitioners now use e-mails to communicate with their audience as this is faster, more reliable and in tune with changing times. It is convenient because multimedia messages can also be sent through e-mails.

(3) Websites/Blogs : A two-way communication is possible with modern digital tools like blogs and communication. These are vital tools that provide an indispensable in reaching out to websites. All organisations, whether small or large maintain their websites andblogs to reach out to the audience. Blogs are also likeminiwebpagesallowing an informal two-way the society

Commercial Applications | 13 | (4) Social media marketing: Information technology plays actual role for the practitioners

of public relation. In this 21st century social media is a very important and suitable method for reaching the target audience. Through social networking sites, like Facebook, Twitter,etc.

Answer 10. (a) HULdecidedtosell itspopularbrand‘Daldawaspromptedbytheseasonthat thebrand

wasnotgettingfitinwiththecompany’s“FocusofGrowth”.Althoughthebrandenjoyedthepremium position across India, it happened to be in a business in which growth prospects were very low because in the one hand, the market for Vanaspati became highly commodilised withlargenumberofsmallproducersandontheotherhandconsumers’consumptionpatternchangedinfavourofcheapersoyaoilandrefinedpalmoil.CheperimportsfromNepalalsoled to the prospects of Vanaspati market look weak Since the company wanted to aim at the top-end products, staying in Vanaspati business did not make sense.

(b) Thereasons forpoorsalesgrowthofHULinrecentyears includesdroughtand lowfoodgrainprices.Moreover,a sharp increase inFMCGprices sincemid90’swhichresulted inconsumers shift towards cheaper alternatives.

(c) To regain double digit growth the company should undertake a price rationalization across manyproductcategories.Theapplicationofthisstrategyhasprovedbeneficialbecausetheinitial results in the 1st quarter, have proved encouraging because the personal products business has notched up a growth of 17%.

ll



(a) Penetration Pricing Skimming Pricing1. Penetration Pricing is a pricing technique

inwhichthepricesetbythefirmislowinitially,soastoattractmoreandmorecustomers.

Skimming Pricing means a pricing strategy whereinthefirmsetshighpricefortheproductat its introduction stage so as to receive maxi-mumprofit.

2. The price is elastic and bulk quantities are sold at a low price.

The price is inelastic and small quantities are sold due to high price.

(b) Cheque Draft1. Cheque is a negotiable instrument

which contains an order to the bank, signed by the drawer, to pay a certain sumofmoneytoaspecifiedperson.

Demand Draft is a negotiable instrument used for the transfer of money from one place to an-other.

2. Cheque is Payable either to order or to bearer and there are three Parties- Drawer, Drawee, Payee.

Draft is always payable to order of a certain per-son and there are two Parties- Drawer, Payee.

(c) Real Cost Money CostReal Cost means the sacrifice, discomfortand pain involved in supplying the factors of production by their owners.

Money cost means the amount of money which a producer spends on production of a particular commodity.

(d) Recruitment Selection1. Searching prospective employees and

stimulating them to apply for jobs.Choosing the candidates having necessary qualifications,amongtheapplicants.

2. The aim is to create large pool of candi-dates. Thus, it is a positive process.

The aim is to eliminate all unsuitable candi-dates. Thus, it is negative process.

(e) Growth Maturity1. The stage of the product life cycle where

productsales,revenuesandprofitsbe-gin to grow as the product becomes more popular and accepted in the mar-ket.

The stage in the product life cycle where sales growth ultimately peaks then slows as the prod-uct reaches widespread acceptance, and compe-titionisfierce.·

2· Atthisstagemaintainingproductqual-ity and adding features or support ser-vices for the product is important.

At this stage one need to enhance product fea-tures to make it more appealing than competi-tors'.


8SOLUTION

Commercial Applications | 15 |Answer 2. (a) Parity pricing is the theory that the selling price of a product or service should ideally increase

proportionately or rather by the same amount as the increase in the prices of raw materials or inputs. The parity price is often used as a way of comparison along with the actual real price. The commodity’s average price over an immediately preceding 10-year period is often established as the parity price.

(b) Objectives of Advertising are following : (1) To Introduce New Products : Advertisement of the new product that a seller intends to

introduce in the a market is necessary so that consumers become aware of the product, itsavailability,itsbenefitsandutility,itsprice,etc.EvenestablishedbrandslikeRelianceand Coca-Cola spend a lot of money in the promotion of a new product.

(2) To Create Brand Image : Brand building is an important objective of advertising.When customers see their preferred brand regularly advertised they build up mental connectionwiththebrand.Theyestablishacloseaffinitywiththebrand.Businessfirmsvery often advertise for establishing an image for the product and creating customers’ loyalty for that product. When customers develop brand loyalty, they are not likely to switch to other brands easily. For example, the advertisements broadcasted by a mustard oil brand promote brand loyalty by focusing on how consumers prefer their brand over the others.

(c) Overdraft facility is a credit agreementmadewith a financial institution that permits anaccount holder to use or withdraw more amount than they have in their account, without exceedingaspecifiedmaximumnegativebalance.Establishinganoverdraft facilitywithabankcanhelpanindividualorsmallbusinesswithshorttermcashflowproblems,althoughthe negative balance typically needs to be repaid within a month.

(d) The Elements of Training Programme: (1) Itshouldbemandatory. (2) Itshouldbepractical. (3) Itshouldbeengaging. (4) Itshouldberegular. (5) Itshouldbeprogrammedorsystematic. (e) Global warming is referred as a gradual increase in the overall temperature of the earth’s

atmospheregenerallyattributedtothegreenhouseeffectcausedbyincreasedlevelsofcarbondioxide, CFCs, and other pollutants. Global warming is damaging the Earth’s climate as well asthephysicalenvironment.Oneofthemostvisibleeffectsofglobalwarmingcanbeseeninthe Arctic as glaciers, permafrost and sea ice are melting rapidly. Global warming is harming theenvironmentinseveralwaysincluding:Desertification,Increasedmeltingofsnowandice, Sea level rise and stronger hurricanes and cyclones.

Answer 3. (a) The statement that whenever a buy and sell takes place is market is true. According to place

concept ofmarket, to any commonperson amarketmeans a specificplacewhere buyersand sellers meet and complete transactions of goods and services in exchange of a certain price. The sellers display their goods to help the buyers to choose from. When a transaction takes place, the buyer gets both ownership and physical possession of the products once the payments are made to the seller.

(b) The statement that advertisement promotes wasteful living is false. Advertisement being a certainfieldcreatesjobopportunitiesinthemarket.Advertisementprovidesawarenesstotheconsumers to choose best amongst the alternatives. It is one of the best methods of marketing used by the companies to introduce a new product in the market.

(c) The statement that business survives forever is true. A business or company is a going concern which closes only when dissolved. A business is being carried on from one generation to anotherandacompanyisbeingstruckoffoncethecompanyisunderlossorinsolvency.

(d) The statement that training is a process of increasing knowledge and skills is true. Training is theprocessforprovidingrequiredskillstotheemployeefordoingthejobeffectively,skilfully


and qualitatively. Training of employees is not continuous, but it is periodical and given in specifiedtime.Generallytrainingwillbegivenbyanexpertorprofessionalinrelatedfieldor job. Training is required at every stage of work and for every person at work. Training programmes are also necessary in any organisation for improving the quality of work of the employees at all levels.

(e) The statement that public relations are just gimmicks is not true because the function of gimmicksistobefoolthepublicsbyattractingattentionofpeoplewhetherinapositiveornegativemanner.Butpublicrelationsrecogniseethicalconductandseektoachievemutualunderstanding with the target audience by maintaining ties and communicating information tothemonthemattersoftheirinterest.

Answer 4. (a) Customer satisfaction is a term frequently used in marketing. It is a measure of how

products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as “the number of customers, or percentage of totalcustomers, whose reported experience with a firm, its products, or its services (ratings)exceeds specified satisfaction goals. Customer satisfaction provides a leading indicator ofconsumer purchase intentions and loyalty.

(b) The themes used in advertisement are as follows: Prestige: This theme of advertising is used to advertise luxury articles among people, the

possession of which gives them a distinctive status and a feeling of pride. For example, four-wheelers, videos, refrigerator, furniture, jewellery, etc.

Comfort: The advertisements for bath products, air conditioners, fans and other household appliances generally contain this feeling of comforts. Using this approach, advertisers hope to showhowusingtheproductcouldmakeapersonlifealittleeasierormorepleasant.

(c) Reasons for using Renewable resources: Inexhaustible : This is why they’re known as renewable. Fossil fuels such as coal, oil and

gas do not replenish themselves, whereas sun, water and wind are sources of energy that is always available.

Safe: Renewable energy generation does not pose risks for people or the environment, which is an advantage with respect to the doubts expressed over the safety of nuclear energy or the concern for pollution associated with fossil fuel use.

Available everywhere: Water, wind and the sun are energy sources that are available the world over. That means that the capacity for generating enough and a variety of renewable comes from indigenous supply base for any country.

(d) Opportunitycostreferstoabenefitthatcouldhavebeenreceived,butwasgivenup,totakeanother course of action. Stated differently, an opportunity cost represents an alternativegiven up when a decision is made. This cost is, therefore, most relevant for two mutually exclusiveevents.Ininvesting,itisthedifferenceinreturnbetweenachoseninvestmentandone that is necessarily passed up.

(e) (1) Public interest at the forefront : Public interest and not personal reward should be the centraltoallpublicrelationsactivities.Factsandrealityandnotthefictionformsthebasis of a sound public relations.

(2) Effective communication : A message in public relation should reach the individuals through the mass media channels. The greater the integrity and honesty of the media, stronger is the impact the message has on the receiver.

Answer 5. (a) The types of selling are as follows: (1) Aggressive Selling : According to this type of selling the sales representative stays

highly focused and his only intention is to sell. The sales representatives indulge in such a technique that enhances the possibility of a sale of the product.

(2) Relationship building/Consultative Selling : In this type of selling the sales representative is more focused in building a relationship with the prospect by adjusting well to the kind of selling situation that enhances the chances of sales and therefore the sales process is not a onetime thing.

Commercial Applications | 17 | (3) Need-oriented Selling: In this type of selling technique the sales representative needs to

assesstheneedsofthecustomerbyaskingquestionsandfinallysatisfyingtheexistingneeds of the customer rather than creating a new one.

(4) Product-orientedSelling:Accordingtothistypeofsellingprocess,thesalesrepresentativeis more inclined towards explaining the features and benefits of the product to theprospect. This style includes a lot of product demo till the time the prospect is fully convincedaboutthebenefits.

(5) Competition-oriented Selling: In this type of selling the Sales Representative is more focused in stepping ahead of its competition and salesperson is very persistent in trying to persuade a potential customer and will do anything to close the deal.

(b) Advertising Publicity1. The activity of generating advertise-

ments of products and services to com-mercialize them is known as Advertis-ing.

The activity of providing information about an entity, i.e., a product, an individual or a company to make it popular is known as Pub-licity.

2. It is the positive image that the company creates regarding the product and gen-erally under the control of the company.

It is the image that is being created by others regarding the product and generally not un-der the control of the company. It can either be positive of negative.

3. Itisaveryexpensivemarketingtool. This is free of cost.4. Itisdonebycompanyanditsrepresent-

atives.It is done by third party.

5. Itisdonetopromotesalesofcompany’sproduct.

It is done to create awareness.

(c) ThefunctionsofCommercialBankareasfollows: (i) Itacceptsdeposits:Acommercialbankacceptsdepositsintheformofcurrent,savings

andfixeddeposits.ItcollectsthesurplusbalancesoftheIndividuals,firms. Deposits are of three types : (1) Current account deposits: Such deposits are payable on demand and are, therefore,

called demand deposits. These can be withdrawn by the depositors as and when required by them. No interest is payable on these deposits . These kinds of accounts are generally maintained by business houses, companies etc.

(2) Fixed deposits : Fixeddepositshaveafixedperiodofmaturityandare referredtoastimedeposits.Thesearedepositsforafixedterm,i.e.,periodoftimerangingfrom a few days to a few years. They carry high rate of interest and can only be withdrawnafterexpirationofitsfixedterm.

(3) Savings account deposits: The basic objective of this kind of account is to save. Savings account is suitable for individuals. The amount kept in the account is generally paid on demand and also withdrawable by cheque. Interest is paid but lesser than that of Fixed Deposits.

(ii)Itprovidesloansandadvances:Thesecondmajorfunctionofacommercialbankistogive loans and advances particularly to businessmen and thereby earns interest in the form of cash credit, demand loans and short-run loans, as explained under.

(1) Cash Credit : An eligible borrower is first sanctioned a credit limit andwithinthat limit he is allowed to withdraw a certain amount on a given security. The withdrawing power depends upon the borrower’s current assets. Interest is charged bythebankonthedrawnorutilisedportionofcredit(loan).

(2) Demand Loans : A loan which can be recalled on demand is called demand loan. There is no stated maturity period. The entire loan amount is paid in lump sum by crediting it to the loan account of the borrower.


(3) Short-term Loans: Short-term loans are given against some security. The entire amount is repaid either in one instalment or in a number of instalments over the period of loan.

(i)Commercialbanksinvesttheirsurplusfundinthreetypesofsecurities: (1)Governmentsecurities, (2)Otherapprovedsecuritiesand(3)Othersecurities.

Banksearninterestonthesesecurities.Answer 6. (a) Basic Principles of Accounting: Basicaccountingprinciplesarethegeneralruleswhichare

used as a guide in accounting and as a basis of practice. These principles are based upon logic and practical experiences obtained by the practitioners. These basic accounting principles are as follows:

(i) Realisation Principle: According to this principle, revenue is deemed to be realised or earned when the goods have been transferred or the services have been rendered to a customer. In therealisationofrevenue, thereceiptofcash isnotsignificant. Ifafirmsells goods in April and receives cash in June, revenue will be considered as realised in April when the goods were sold. Similarly, expenses are recognised not when the cash is paid but when the assets or services are used to produce revenue. For example, rentforJanuary1,2001toMarch31,2001,thoughunpaid,willberecognisedduringtheaccountingyear2000-2001.Likewise,costofgoodslostbyfireisimmediatelyrecognisedin the year of loss.

(ii) Matching Principle : The matching principle requires that revenues and any related expensesberecognisedtogetherinthesameperiod.Thus,ifthereisacause-and-effectrelationship between revenue and the expenses, record them at the same time. If there is no such relationship, then charge the cost to expense at once. This principle provides the guidelines as to how the expenses are to be matched with revenue. It requires that in determiningthenetprofit,allcostswhichareapplicabletorevenueofthatperiodshouldbe charged against that revenue. For the purpose of matching the various costs with the revenue,firstlyrevenuesshouldberecognisedandthencostsincurredforgeneratingthat revenue should be determined. The matching of costs with revenue is based on the accrual system of accounting.

(iii) Complete Disclosure Principle : According to this principle, there should be complete andunderstandablereportingonthefinancialstatementsofallsignificantinformationrelatingtotheeconomicaffairsofthefirm.Tomeettherequirementsofthisprinciple,allfinancialstatementsaresupportedbyfootnotes.Forexample,changeinthemethodofdepreciation or method of valuation of stock, market value of investments and contingent liability are shown in footnotes. The Companies Act has prescribed the proforma and contents of Balance Sheet andProfit andLossAccount to ensure full disclosureof financial information. For a business, the complete disclosure principle requires acompany to provide the necessary information so that people who are accustomed to readingfinancialinformationcanmakeinformeddecisionsconcerningthecompany.

(iv) Principle of Verifiable Objective : This principle requires that all transactions recorded in the books of accounts must be evidenced and supported by business documents, such as cash memos, invoices, vouchers, etc. These supporting documents provide the basis for making entries and for audit. The principle of objectivity also requires that the accounting records must be free from the personal bias of the owners and managers.

(v) Dual Aspect Principle : According to this principle, every business transaction has a double (dual) effect on the business. This double effect can be recognised only byrecording both the aspects of every transaction. There are two sides of every transaction. If one account is debited, any another account must be credited and vice-versa. The systemofrecordingtransactionsonthebasisofthisprincipleisknownas‘DoubleEntrySystem’. It isdue to thisprinciple that the twosidesof theBalanceSheetarealwaysequal.

Commercial Applications | 19 | The following accounting equation will always hold good at any point of time. Assets=Liabilities+Capital OR Capital=Assets–Liabilities (b) The methods used to control pollution by eco-friendly techniques are as follows: By practicing the ‘3 Rs’ (Reduce, Reuse and Recycle) every day one can not only reduce

pollution but it is also a good method of waste management. (i) Reduce/Reduction : Reduce means to lower the unnecessary consumption of a resource.

Akeypartofwaste‘reduction’is‘conservation’usingnaturalresourceswiselyandusingless than usual in order to avoid waste.

(ii) Reuse :‘Reuse’meansusingmaterialsintheiroriginalforminsteadofthrowingthemaway, or pass those materials on to others who could use them too. Here are some examplesofreuseoverandoveragainwithoutanylossofquality.Brokenorwastedglass is mixed with sand, limestone and soda ash and used to make new glass. Recycled glass also has many other commercial uses from creating decorative tiles and landscaping material to rebuilding eroded beaches.

(iii) Refuse: Sometimes refusing to use plastic bags or harmful materials is also an act itself. Ifpeoplebecomesociallyawareandinfluenceotherstorefuse,morepositiveeffectcanbe expected.

(c) Factors influencing choice of source of recruitment : Theinternalfactorsalsocalledas“endogenousfactors”arethefactorswithintheorganisation

thateffectrecruitingpersonnelintheorganisation.Theinternalforcesi.e., the factors which can be controlled by the organisation are:

(i) Recruitment Policy : The recruitment policy of the organization i.e.,recruiting from internalsourcesandexternalalsoaffecttherecruitmentprocess.Therecruitmentpolicyof an organisation specifies the objectives or recruitment and provides a frameworkfor implementation of recruitment program. It may involve organisational system to be developed for implementing recruitment programs and procedure by filling upvacancieswithbestqualifiedpeople.

(ii) Human Resource Planning : Effectivehumanresourceplanninghelpsindeterminingthegaps present in the existing manpower of the organisation. It also helps in determining thenumberofemployeestoberecruitedandwhatqualificationtheymustpossess.

(iii) Size of the Organization : Thesizeoftheorganisationaffectstherecruitmentprocess.If the organisation is planning to increase its operations and expand its business, it will think of hiring more personnel, which will handle its operations.

External Factors : (1) Supply and Demand : The availability of manpower both within and outside the

organisation is an important determinant in the recruitment process. If the company has a demand for more professionals and there is limited supply in the market for the professionals demanded by the company, then the company will have to depend upon internal sources by providing them special training and development programs.

(2) Labour Market : Employment conditions in the community where the organisation is locatedwill influence the recruiting efforts of the organisation. If there is surplus ofmanpoweratthetimeofrecruitment,eveninformalattemptsatthetimeofrecruitinglike notice boards display of the requisition or announcement in the meeting etc. will attractmorethanenoughapplicants.

(3) Goodwill / Image of the organisation : Image of the organization is another factor havingitsinfluenceontherecruitmentprocessoftheorganisation.Thiscanworkasapotential constraint for recruitment. An organisation with positive image and goodwill asanemployerfindsiteasiertoattractandretainemployeesthananorganisationwithnegativeimage.Imageofacompanyisbasedonwhatorganizationdoesandaffected


by industry. Managerial actions like good public relations, rendering public service like building roads, public parks, hospitals and schools help earn image or goodwill for organisation.

Answer 7. (a) The Chipko movement or Chipko Andolan was a forest conservation movement where

people clung onto trees to prevent them from being cut. Chipko type movements date backto1730ADwheninKhejarlivillageofRajasthan,363Bishnoissacrificedtheirlivestosavekhejritrees.InmodernIndia,itbeganin1973inUttarakhand(theninUttarPradesh)and went on to become a rallying point for many future environmental movements all over the world. It created a precedent for starting of nonviolent protest in India, and its success meant that the world immediately took notice of this non-violent movement, which was to inspire many such eco-groups by helping to slow down the rapid deforestation, expose vested interests, increase ecological awareness, and demonstrate the viability of people power. Above all, it stirred up the existing civil society in India, which began to address the issues of tribal and marginalized people. Today, beyond the eco-socialism hue, it is being seen increasingly as an eco feminism movement. Although many of its leaders were men, women werenotonlyitsbackbone,butalsoitsmainstay,becausetheyweretheonesmostaffectedbytherampantdeforestation,whichledtoalackoffirewoodandfodderaswellaswaterfordrinkingandirrigation.OvertheyearstheyalsobecameprimarystakeholdersinamajorityoftheafforestationworkthathappenedundertheChipkomovement.In1987,theChipkomovementwasawardedtheRightLivelihoodAward.

(b) Thegreenhouseeffectistheprocessbywhichradiationfromaplanet’satmospherewarmstheplanet’s surface to a temperature above what it would be without its atmosphere. If a planet’s atmosphere contains radioactively active gases i.e.,greenhousegases;methane(orCH4),andcarbondioxide(orCO2),)theywillradiateenergyinalldirections.Partofthisradiationisdirectedtowardsthesurface,warmingit.Theintensityofthedownwardradiation–thatis,thestrengthofthegreenhouseeffectwilldependontheatmosphere’stemperatureandontheamount of greenhouse gases that the atmosphere contains.

Earth’s natural greenhouse effect is critical for supporting life. Human activities, mainlytheburningoffossilfuelsandclearingofforests,havestrengthenedthegreenhouseeffect,causing Global Warming.

Greenhouseeffectcausesthemeltingofglaciersandsnowfrommountains,resultinginanincreaseinthewaterlevelsofseasandrivers,eventuallyincreasingtheriskoffloods.Apartfrom this, global warming also has numerous serious health risks on humans such as increase indiseaseslikeLyme,malaria,cholera,dengueandplague.

(c) Growth of Public Relation in Ancient India : India as a country has been through various upheavals, being invaded from outside from

various races and countries for hundreds of years. India as ideas to India as an entity have alwaysdrawnmuchenthusiasmandintrigue.JamesMillinhisbookHistoryofBritishIndia(1817)dividedthehistoryofIndiaintothreedistinctcharacteristicsviz.,Hindu,MuslimandBritishcivilizations.Notmanyagreewiththischaracterization.Theprocessofprofessionalpublicrelations,itisbelievedstartedinthepre–independenceerawhentheBritishGovernmentneeded to win over the support of the Indians towards World War-I. It was also the time when familyownedcorporatehousessuchasTataandBirla’swereemergingonthescene.

The advent of Mahatma Gandhi on the political front changed the strategy of freedom struggle in the country then on.Non–violence, Civil disobedience, Satyagraha (Insistenceon truth)were thenew strategies that neededmass support andunderstanding from theIndian perspective. Mass media, especially newspapers played a great role in disseminating information and creating a national fervor among Indians.

The British Government too, felt the need to build the public opinion and disseminateinformation to the public through the media on World War-I. It established a Central Publicity BoardunderthechairmanshipofSirStanleyReed,theeditoroftheTimesofIndia,BombaywhichwasthefirstorganisedPRset-upinthecountry.OncethewarendedtheboardwastakenoverbyCentralBureauofInformationin1921.Thisbureaufunctionedasalinkbetween

Commercial Applications | 21 |thegovernmentandthemedia.Oneofitsimportantfunctionswastoscrutinizethenegativeand critical stories on the government appearing in the media. It also acted as a major tool of feedbackforthegovernmentmachinery.ForthefirsttimeandIndian,Mr.JNatarajanofthePioneernewspaper,LucknowwasappointedasitsDeputyPrincipalInformationOfficer.In1923,theCentralBureauwasre-designatedastheDirectorateofPublicInstructionandlaterin1939,itbecametheDirectorateofInformationandBroadcasting.

Answer 8. (a) (i) Burning of Fossil Fuels:Sulphurdioxideemittedfromthecombustionof fossil fuels

like coal, petroleum, etc. and other factory combustibles are some the major causes of air pollution.Pollutionemittingfromvehiclesincludingtrucks,jeeps,cars,trains,airplanescauseimmenseamountofpollution.Werelyonthemtofulfilourdailybasicneedsoftransportation. But, there overuse is killing our environment asdangerous gases arepolluting the environment. Carbon Mono-oxide caused by improper or incomplete combustionandgenerallyemittedfromvehiclesisanothermajorpollutantalongwithNitrogenOxidesthatisproducedfrombothnaturalandmanmadeprocesses.

(ii) Agricultural activities: Ammonia is a very common by product from agriculture related activities and is one of the most hazardous gases in the atmosphere. Use of insecticides, pesticides and fertilizers in agricultural activities has grown quite a lot. They emit harmful chemicals into the air and can also cause water pollution.

(iii) Exhaust from factories and industries: Manufacturing industries release large amounts of carbon monoxide, hydrocarbons, organic compounds, and chemicals into the air thereby depleting the quality of air. Manufacturing industries can be found at every corner of the earth and there is no area that has not been affected by it. Petroleumrefineriesalsoreleasehydrocarbonsandvariousotherchemicalsthatpollutetheairandalso cause land pollution.

(iv) Mining operations: Mining is a process wherein minerals below the earth are extracted using large equipments. During the process dust and chemicals are released in the air causing massive air pollution. This is one of the reasons which are responsible for the deteriorating health conditions of workers and nearby residents.

(v) Indoor air pollution : Household cleaning products, painting supplies emit toxic chemicals in the air and cause air pollution. Have you ever noticed that once you paint walls of your house, it creates some sort of smell which makes it literally impossible for anyone to breathe?

SuspendedparticulatematterpopularbyitsacronymSPM,isanothercauseofpollution.Referringtotheparticlesafloatintheair,SPMisusuallycausedbydust,combustionetc.

(b) Banks play an important role in the economic development of the country. The supportsBanksprovidetobusinessareasfollows:

(i) Collections of Savings and Advancing Loans : Acceptance of deposit and advancing theloansisthebasicfunctionofcommercialbanks.Onthisfunction,allotherfunctionsdependaccordingly.Banksoperatedifferenttypesofaccountsfortheircustomers.

(ii) Money Transfer : Bankshave facilitated themaking of payments fromoneplace orperson to another by means of cheques, bill of exchange and drafts, instead of cash. Payment though cheques, draft is more safe and convenient, especially in case of huge payments, this facility is a great help for traders and businessmen. It really enhances the importance of banks for business community.

(iii) Encourage Savings : Banks perform an invaluable service by encouraging savingsamongthepeople.Theyinducethemtosaveforprofitableinvestmentforthemselvesand for national interest. These savings help in capital formation.

(iv) Transfer Savings into Investment : Bankstransferthesavingscollectedfromthepeopleintoinvestmentandthusincreasetheamountofeffectivecapital,whichhelpstheprocessof economic growth.


(v) Overdraft Facilities : The banks allow the overdraft facilities to their trusted customers andthushelptheminovercomingoftemporaryfinancialdifficulties.

(vi) Discounting Bill of Exchange : Importance of banks can be seen through the facility of discountingbillofexchange.Banksdiscountthebillsofexchangeofcustomersandhelpthemintheirfinancialdifficulties.Bydiscountingbillofexchange,theyareabletogetthe desired amount for investment they want.

(c) Brandingisaprocessofcreatingauniqueimageornameorlogoorsymbolorcombinationof any of these for a specific product in consumer’s mind which differentiates it fromcompetitor’sproducts.Itistheperceivedemotionalimageofacompanyandisaneffectiveway for communication between two parties-buyers and sellers. Branding represents thecorporate image.

FeaturesofBranding: (1) Itshouldbeunique/distinctive(forexample-Kodak,Mustang) (2) Itshouldbeextendable. (3) Itshouldbeeasytopronounce,identifiedandmemorized.(Forexample-Tide) (4) Itshouldgiveanideaaboutproduct’squalitiesandbenefits(Forexample-Swift,). (5) Itshouldbeeasilyconvertibleintoforeignlanguages. (6) Itshouldbecapableoflegalprotectionandregistration.Answer 9. (a) Indiaisranked14thinthisyear’sClimateChangePerformanceIndex(CCPI)2018outof56

Nations and European Union by environmental organisation German Watch. (b) Thetop3rankingsarestillunoccupiedasaccordingtothereportnoneofthecountriesareat

par with the compatible path that aims to keep the average global temperature rise well below 2degreesCelsiusandascloseaspossibleto1·5degreesCelsius.

(c) Thebottom3rankingsarebeingformedbyKorea,IranandSaudiArabiaastheyareshowingno progress or ambition in reducing their emissions and energy use.

Answer 10. (a) VideocondidnotpriceitsBazookaBrandT.Vinthemiddleofthecompetitor’spricerangeas

Videocon was driven by its pricing objectives of being perceived usas“value-for-money.” (b) Videocon was driven by its pricing objectives of being perceived as value for money. It decided

to go beyond more simplistic indicator to assess consumer television buying behaviour. Videocon considered price elasticity and analyzed demand and translated the results into pricing.Itlinkeditspricingstrategy(valueformoneywithitsoverallstrategymarketshareleadership)andproductpositioning,tocreatemarketandconsumerperceptionconsistencies.

(c) Bazooka’ssuccesswasduetothepricingstrategy(valueformoneywithitsoverallstrategymarketshareleadership)andproductpositioning,tocreatemarketandconsumerperceptionconsistenciesandindepthanalysisofpricevolumeelasticity,coupledwithfirm’smarketingstrategiesandobjectives.ThishelpedBazookatocommandamarketshareof55%withinayear of its launch.

ll

Commercial Applications | 23 |


(a) Sales Selling Process1. Sales mean the exchange of goods or

services for an agreed sum of money or credit and it will never be completed till the full payment is realized.

Selling process is the process where the seller agrees to transfer ownership of the goods to the buyer for a price, which is agreed upon by both the parties.

2. Sales is the ultimate transfer of owner-ship from seller to buyer for certain pre-determined consideration. .

Selling Process is the total process till the ac-tual sales occurs and money realised.

(b) Market Marketing1. Market is defined as an arrangement

whereby buyers and sellers meet each othertoconcludethetransaction.Basi-cally it is a set up.

Marketingisafunctionthatidentifieshumanandsocialneedsandsatisfiesthem.Basicallyit is set of processes i.e., means of creating util-ity.

2. Marketisaprocess,thatfixesthepriceof commodities through demand and supply forces.

Marketing is a process that analyses, creates, informs and delivers value to the customer.

(c) Social Advertising Commercial Advertising1. Social Advertising is for creating social

awareness and social welfare of the peo-ple.

Commercial Advertising is for creating awareness of a particular product for promot-ing sales of the Company.

2. The results of social advertising are dif-ficult to find out as it is for public atlarge.

Results of commercial advertising can be rela-tivelywell-measurable,e.g.byfindingoutthesales results of promoted product. As it is for target audiences.

(d) Recruitment Selection1. Searching prospective employees and

stimulating them to apply for jobs.Choosing the candidates having necessary qualifications,amongtheapplicants.

2. It is a positive process. As its aim is to create large pool of candidates.

It is negative process. As its aim is to elimi-nate all unsuitable candidates.

(e) Public Public Relations1. According to Public Relations and com-

munication science, publics are groups of individual people, and the public (a.k.a.thegeneralpublic)isthetotalityof such groupings.

Public relations practice is the deliberate, plannedandsustainedeffortstoestablishandmaintain mutual understanding between an organisation and its public.

2. Public is referred to a group of people i.e., society at large.

PublicRelation is tomaintain effective rela-tion or communication between the public.


12SOLUTION


Answer 2. (a) Capitalmarketsarethoseinwhichtheshares,bondsandsecuritiesofdifferentcompanies

are bought and sold. The buying and selling is done by individuals and also by banks andfinancial institutions.Thecapitalmarket ischaracterisedby thedealings in long-termfunds.Forinstance,GoldmanSachssellingbondsandsecuritiesfordifferentpubliclimitedcompanies.

(b) Sales promotion is defined as activitieswhich include advertising andpublicity aimed atstimulating consumer purchasing and selling by the dealers.

The two method of sales promotion are as follows: (i) Samples : Distribution of sample is one of the methods for promotion. Many marketers

offer freesamplesof theirproduct to theselectedpeople inorder topopularize theirproducts.Thesamplemaybedelivereddoor todoor,offered inretail storesor fairs.The sample is helpful for introducing new products such as soaps, drugs, cosmetic, perfumes, tea, etc.

(ii) Discount or price off : The discount system is also another method of consumer promotion.Consumersarebasicallyattractedtowardsthediscount.Inordertoincreasesale,manyproducersintroducepriceoffoffertotheconsumers.Underthis,theproductisofferedatapricelowerthanthenormalprice.Forexample,duringoffseason,ceilingfansandrefrigeratorsmaybeoffered30%to40%offprice.

(c) Income and Expenditure Account is a revenue accounting statement prepared by Non-Trading Concerns. The two uses of income and expenditure account are as follows:

(i) ItisequivalenttotheProfitandLossAccountdrawnupforatradingconcern.Itperformsthe same function and is compiled and constructed on precisely same principle.

(ii) It is anominal account recording losses and expenseson thedebit andgainson thecredit, normally postulating the existence of a double entry system and also calculating surplusordeficit.

(d) Two benefits of making payment by Cheques : (i) It is more convenient than carrying cash around : Cheques are easier than carrying cash

as a large amount can be drawn on a single cheque and less chances of theft as it is not liquidcashthereforedifficulttoencash.

(ii) Less chances of causing fraudulence : The cheques that are Account Payee or Crossed cheque cannot be encashed by any other person other than the drawee as such amount shallonlybetransferredtotheAccountofthedraweewhosenameiswrittenacrossthecheque. This reduces chances of fraudulence and increases security.

(e) Selection testing can cover mathematical ability, language skills, problem solving and personality,aswellasnumerousotherjob-specifictraits.Thistypeoftestisappropriateinanorganisation where quality of the candidate is an important factor for roles and responsibilities. Butithasgotdemeritsaswell.

Two demerits of selection test are as follows: (i) Testing can be expensive : If the recruitment is for a one-offposition or there are a

handfulofcandidates,testingmaynotbeacost-effectivewayofmakingadecision. (ii) Selection tests are not infallible : Some tests, especially personality tests, are not

considered reliable as they can be faked by smart candidates. If the HR Department is using selection testing as a screening tool, the department should make sure that they still use their own judgement in deciding whether a candidate will be suitable for the organisation.

Answer 3. (a) The statement that Marketing is a part of the total environment is true. The business

environmentisamarketingtermandreferstofactorsandforcesthataffectafirm’sabilitytobuild and maintain successful customer relationships.

(b) The statement that Matching of cost and revenue can reveal the true profit or loss for the period is true : The matching principle requires that revenues and any related expenses be

Commercial Applications | 25 |recognised together in the same period. This principle provides the guidelines as to how the expensesaretobematchedwithrevenue.Itrequiresthatindeterminingthenetprofit,allcosts which are applicable to revenue of that period should be charged against that revenue. Forthepurposeofmatchingthevariouscostswiththerevenue,firstlyrevenuesshouldberecognised and then costs incurred for generating that revenue should be determined. The matching of costs with revenue is based on the accrual system of accounting.

(c) The statement is true that Human Resource is the most valuable assets in an organisation : An organisation is driven and run by the people working there. In the Modern scenario people employedandworkinginafirmarenolongerconsideredasjusttheworkforce,butarethemostdynamicandsignificantresourcesofanorganisation.Theyaretheresourcesthatstepoutofthecompanyeverydayandhenceorganisationshavebeenputtingthemaximumeffortto retain the human resources. Since every operation, function or task to be executed depends uponthepotentialofhumanintellect,HRdirectlyinfluencethegrowthanddevelopmentofa company.

(d) The statement that selection is elimination is true. Selection means making a choice by preference.Thischoicebypreferenceisbasedoncomparisonbetweentwofactors:(i)Whatthejobrequiresforsuccessfulexecutionand(ii)Whattheapplicanthastooffer.Forthemostpart,thebetterthebalancebetweenthesetwofactors,thebettertheselectionworkandmorelikelytheattainmentofasatisfactoryworkingforce.

The process of selection is started with the comparison of the requirements of a job with thequalificationsoftheapplicants.Itspurposeisselectingtherightpersonfortherightjoband it also helps to improve the quantity and quality of performance. Selection is said to be a negative process because the number of candidates rejected is much more than that of selected. There are some stages of selection. At every stage, the qualities of candidates are tested. Number of candidates goes on reducing at each subsequent stage. It eliminates the unsuitable candidates at every step. It is the process of picking up the most competent and suitable candidates.

(e) The statement is true that Balance Sheet is a statement and not an Account. Balancesheet(alsoknownasthestatementoffinancialposition)isafinancialstatementthatshowsthe assets, liabilities and owner’s equity of a business at a particular date. The main purpose ofpreparingabalancesheetistodisclosethefinancialpositionofabusinessenterpriseatagiven date. While the balance sheet can be prepared at any time, it is mostly prepared at the end of the accounting period and whereas accounts are periodical in nature.

Answer 4. (a) Accountingcanbedefinedaspracticeandbodyofknowledgeconcernedprimarilywiththe

system of recording and summarizing business and financial transactions and analyzing,verifying, and reporting the results.

It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing,interpretingandcommunicatingfinancialinformation.Itrevealsprofitorlossforagivenperiod,andthevalueandnatureofafirm’sassets,liabilitiesandowners’equity.

(b) The types of training are as follows: (i) Lectures : Lecturesusuallytakeplaceinaclassroom-format.Lectureaneffectivemethod

to provide a huge amount of information to a lot of people in a short amount of time. (ii) Case studies : This method provide trainees with a chance to analyze and discuss real

workplace issues. They develop analytical and problem-solving skills and provide practical illustrations of principle or theory. They can also build a strong sense of teamwork as teams struggle together to make sense of a case.

(c) Theveryword,‘Public’isenoughtoidentifythefactthatpublicrelationsstartwithhumanbeings and end with human beings. No person can work independently in an organisation. Everyone who works in an organisation directly or indirectly depends on one another. Human beings, form the very foundation and the bedrock of this function.


There are two types of Public in organisation: (i) Internal Publics of Public Relations :InternalPublicsarepeopleemployedbyafirmor

members of an organisation and they are intimately related with the functioning of the organisation.

Internal Public involves: (1) ShareholdersorInvestors. (2) Employees (3) Suppliers (4) Distributors (5) Retailers/Dealers (6) OtherbusinessAssociation. (ii) External Publics of Public Relations: External Public are people and organisations that

areclientsdoingbusinesswithafirmoragencyorcompany. External Public involves: (1) Consumers/Customers (2) Community (3) Mass Media (4) Government (5) Financial Institutions (6) Action Groups. (7) General Publics. (d) One of the most important function of Human Resources Management is : Recruitment and Training: Recruiting and training new employees are primary responsibilities

of the human resources team. This part of the job often entails advertising open positions, interviewing and hiring candidates and setting aside hours devoted to training the newrecruits. The human resources department often publishes training materials including handbooks detailing all aspects of the job.

(e) Income and Expenditure Account: This is a revenue accounting statement prepared by the non-tradingconcerns.Thismaybedescribedasequivalent to theProfitandLossAccountdrawn up for a trading concern. It performs the same function and is compiled and constructed on precisely the same principles. It is a nominal account recording losses and expenses on the debit and gains receipts on the credit, normally postulating the existence of a double entry system.

SECTION - BAnswer 5. (a) Salespromotionreferstothoseshort-termincentivesthatencourageorattractcustomersto

buy the brand. It uses incentives that are supposed to expire after an announced period of time. The buyer stands to lose the incentive if she/he buys after the stipulated time period. Sales promotion is a type of non-personal selling that supports the advertising. All brand promotion activities which do not clearly fall into advertisings, personal selling or publicity, are included in sales promotion.

The basic role of sales promotion is : (i) Toincreasethevolumeofshorttermsalesortoclearthestockslyingforsometimeinthe

shoporstore.Someincentivesusedforthispurposeare:percent-off,specialdiscount,freegifts,freeextraquantityinthepack,threefortwooffer(takethree,payfortwo),coupons, contests etc.

(ii) Making immediatesales, clearingoverduestocks,attractingnewbuyers, launchinganewproductsquickly,catchingimpulsebuyers(whobuyonthespurofmomentwithoutplanning)andmeetingcompetitionsuccessfullyarethemajormeritsofsalespromotion.

Commercial Applications | 27 | (b) The various steps involved in the process of personal selling are as follows:

Pre-sale Preparation↓

ProspectingandLocatingPotentialBuyers

↓Creating Awareness and Demand

↓Closing the Sales

↓Additional Selling

↓Post-sales Follow-up

(i) Pre-sale Preparation: Thefirststepintheprocessofsellingiscreatingawellmotivatedand trained group of persons, who will undertake the task of selling. They must be well-acquainted with the product they are going to sell, its uses, price, quality and other relevantdetails.Beforeasalespersonmakeshis/her ‘debut’ theselleror theproducermustensurethatshe/heistrainedintheartandscienceofselling.Bigproducershavea sales training department that provides regular in-house sales training at regular intervals. The salesperson must familiarize him/her with the products, its functionalities andbenefits,usageandprice,etc.

(ii) Prospecting and Locating Potential Buyers: Prospecting means locating or searching out prospective buyers who have a requirement for the product/service as well as the purchasingpowertobeabletobuyit.Potentialcustomersmaybeidentifiedthroughexisting business directories, customer list previously compiled by the firm, tradejournals, or by purchasing databanks maintained by data mining companies etc.

(iii) Creating Awareness and Demand: Next step to be taken by a salesman is to bring the product to the notice of prospective customers in such a way that it creates an interest in them to know more about the product. A part of this job is already done by the advertisingandpromotionalcampaignsofthefirm,butatthesametime,asalespersonmustcontinuetheprocesstherebyattuninghim/herwiththeadvertisingstatementsandthepromisesmadebythefirm.Asalesmanmustactverycautiouslyandintelligentlysothathe/sheisabletoretaintheirattention.Furtherasalesmanrelatesthequalitiesand utility of the product with the needs and requirements of the prospects, thereby creating a demand for the product. A salesman may include demonstration as a part of sales technique. It helps to create interest. Approach refers to the meeting of the potential customer in person by the salesman where he makes the initial direct interaction with prospects. This is a delicate and critical stage of the sales process. The salesman needs to make a favourable impression on the prospect.

(iv) Closing the Sales :Leadingtheprospectfromonestagetoanotherfinallybringsittothestage of buying the product. A salesman has to act with intelligence and patience to close the sales, favourably. The last minute indecision on the part of prospective buyer may requirethesalesmantore-emphasizetheuniquesellingpoints(USP)oftheproductorservice. He/she should not force any decision on the prospect, but rather he/she should help the buyer to come to a decision. The sales should be closed on a friendly note.

(v) Additional Selling : While actuating sales of the product, a salesman takes up the opportunitytooffertothecustomersomethingconnectedwiththemainproduct.Forexample,while sellingshoes (themainproduct), extra laces, socks, shoepolish, shoebrush,etc.,canbeoffered.

(vi) Post-sale follow-up : It refers to the activities undertaken to ensure that the customer is satisfiedwiththeproduct/serviceandthefirm.Theseactivitiesincludeinstallationofthe


products, checking and ensuring its smooth performance, maintenance and after-sale- service. It helps to secure repeat sales, to identify additional prospects and to evaluate salesman’seffectiveness.

(c) TheReserveBankofIndiaistheCentralBank.TheCentralBankofacountryisaninstitutionthat acts as the regulator of the banking system and the money market. It regulates money supply and the credit rate in the country in close cooperation and coordination with the government. It also controls all the other banks of the country. It occupies a central position inthebankingstructureofthecountry,actingasabankforallotherbanks.Butitsoperationsarenotguidedbyprofitmotive.

The Reserve Bank of India performs various functions: (i) Note Issue : Sometimes back, the issuing of notes was the right of government.

Government was subject to whims of its executives. Therefore, ultimately, the work wasgiven to theCentralBank.Today, thecentralbankshave themonopoly to issuecurrency notes. For issuing notes, the central banks keep reserves of gold and silver and foreign securities infixedproportions to inspire confidenceamong thepeople in thepapercurrency.InIndia,theReserveBankisrequiredtomaintainaminimumreserveof200crores;outofthese115croresisingoldandthebalanceisinforeignsecurities.TheReserveBankofIndiaissuesallthecurrencynotesfrom2to100,500and2,000.TheReserveBankisvestedwiththeresponsibilityofissuingofcurrencynotesonbehalfofthegovernment.Ithastocontrolthevolumeofmoneyflowingintotheeconomy.Currencynotesissueisonetoolwithwhichitregulatestheinflow.Thisprovidesstabilitytothecountry’smonetary system.By controlling themoneyflow theCentralBankensuresthatpricesdonotgooutofcontrolwhenthereisastrongfluctuationbetweendemandand supply.

(ii) Banker, Fiscal Agent and Adviser to the Government : The central bank is the government’s bank. It acts as a banker, agent and adviser to the government. As a banker to the government, the central bank makes and receives payments on behalf ofthegovernmentattimesofnecessity.Itfloatsandmanagespublicdebtsforshortorlongperiods,onbehalfofthegovernment.Itactsasthefiscalagentofthegovernmentandadvisesthelatterinmattersrelatingtomonetaryandbankingpolicies.Thecentralbank,bydeputingaseniorbankofficerforthepurpose,actsasarepresentativeofthegovernmentininternationalconferencesonmonetaryandeconomicmatters.

(iii) Bankers’ Bank:TheCentralBankisthebankforallthecommercialbanksofthecountry.Thismeans,therelationoftheCentralBankwithotherbanksofthecountryisalmostaliketothatofabankwithitscustomers.Legallyorconventionally,commercialbankshave to keep a certain proportion of their deposits in the form of cash as reserve with the CentralBank.ThesereservesfacilitatetheCentralBanktocontroltheissueofcreditbycommercial banks and thus keep the credit system elastic.

Asabankers’bank, theCentralBankalsoprovides the facilitiesof short-term loans,discounting bills, etc., to commercial banks.

(iv) Lender of the Last Resort : The Central Bank helps commercial banks in times ofemergency. Sometimes, a large number of depositors want to withdraw their deposits from a commercial bank at the same time. Under such circumstances, the commercial bankhastoborrowfromotherbanks.Butwhentheotherbanks,duetosomedifficulty,are not be in a position to help the bank in trouble, the central bank is the lender of last resort. In situations where a commercial bank or a credit institution has an urgent financialneedandisnotinapositiontomeetitfromitsexistingmeans,itcancalluponthe central bank that readily advances the required amount to it. At this time, the central bankisthelenderofthelastresort.TheCentralBankhelpscommercialbankseitherbygranting loans or by buying their securities, thus releasing much required funds.

(v) Controller of Credit: ItisthemostimportantfunctionoftheCentralBank.AcountrycanhaveastabilisedrunningeconomyonlywhentheCentralBankofthecountryexercisesits

Commercial Applications | 29 |strict control on the credit-granting capacity of the banking structure. Commercial banks maylendtoomuchortoolittle.Theymayalsolendtowrongpartiesorforunproductivepurposes or may charge very high rate of interest. All these operations of commercial banks causefluctuations in theprice level,businessand levelof employmentdue towhich the stabilised economyof the country is greatly disturbed. TheCentral Bank,therefore, exercises control, qualitatively as well as quantitatively on the credit-granting capacity of commercial banks.

Answer 6. (a) Accounting Conventions or Modifying Principles are as follows : (i) Principle of Materiality : This principle is an exception to the principle of full disclosure.

Accordingtothisprinciple,itemshavinganinsignificanteffectorirrelevanttotheuserneednotbedisclosed.AmericanAccountingAssociationdefinesmaterialityas“Anitemshould be regarded as material if there is reason to believe that knowledge of it would influencedecisionofinformedinvestor”.Materialityofanitemdependsonitsnatureandamount.Itshouldbenotedthatwhatismaterialforonefirmmaybeimmaterialforanother.

(ii) Principle of Consistency : This principle states that accounting procedures and methods should remain consistent from one year to another. These should not be changed from yeartoyearasotherwisethenetprofitsofdifferentyearswillnotbecomparable.Forexample, a firm can choose any one of the severalmethods of depreciation. But themethod once chosen should be followed consistently year after year. However, change maybemadetoadoptimprovedtechniquesofaccounting,tokeepaccountingflexibleand to ensure better disclosure of financial information. In case a change becomesnecessary,thechangeanditseffectshouldbestatedclearly.

(iii) Principle of Conservatism or Prudence: According to this principle, record all anticipated losses but ignore all anticipated gains. Conservatism is thus, the policy of playing safe. Some examples of the application of this principle are :

(1) Closingstockisvaluedatcostpriceormarketprice,whicheverisless. (2) Provisionfordoubtfuldebtsiscreatedinanticipationofactualbaddebts. (3) Jointlifeinsurancepolicyisshownatsurrendervalueasagainstthepremiumspaid. Theprincipleofconservatismshouldbeappliedcarefully.Otherwiseitmayresultinthe

creation of secret reserves which is against the principle of full disclosure. (iv) Principle of Timeliness : Financial statements provide useful information on the basis of

which users take important decisions. If the statements contain old and late information, theyareoflittleuse.Therefore,thisprinciplestatesthatthefinancialstatementsshouldbe prepared quickly at the end of the accounting period. They should be made available to the users at the earliest possible time. To ensure timely information, the Companies Act requires companies to report quarterly results of their operations.

(v) Principle of Industry Practice : Sometimes, the nature of an industry may require departure from the basic accounting principles. These may be a long standing accounting practice in an industry. For example, a particular method of valuation of stock is prevalent inaparticularindustrymaybeprevailinginanindustry.Whilepreparingitsfinancialstatements,everyfirminthatindustrymustfollowtheprevailingaccountingpracticeofthatindustry.Otherwisetheresultsofthefirmwillnotbecomparabletothoseofotherfirms,belongingtothesameindustry.

Functions of Human Resource Management : Human Resource Management functions canbeclassifiedinfollowingthreecategories:

(1)Managerial Functions, (2)OperativeFunctions,and (3)Advisory Functions


The Managerial Functions of Human Resource Management are as follows: (1) Human Resource Planning : In this function of HRM, the number and type of employees

needed to accomplish organisational goals is determined. Research and Planning is an important part of this function, information is collected and analysed to identify currentandfuturehumanresourceneedsandtoforecastchangingvalues,attitude,andbehaviour of employees and their impact on organisation.

(2) Organising : In an organisation tasks are allocated among its members, relationships are identified,andactivitiesareintegratedtowardsacommonobjective.

(3) Directing : Activating employees at different level and making them contributemaximum to the organisation is possible through proper direction and motivation. Taping the maximum potentialities of the employees is possible through motivation and command.

(4) Controlling : After planning, organising and directing, the actual performance of employeesischecked,verified,andcomparedwiththeplans.Iftheactualperformanceis found deviated from the plan, control measures are required to be taken.

The Operative Functions of Human Resource Management are as follows: (1) Recruitment and Selection : Recruitment of candidates is the function preceding the

selection, which brings the pool of prospective candidates to the organisation so that the management can select the right candidate from this pool.

(2) Job Analysis and Design : Job analysis is the process of describing the nature of a job andspecifyingthehumanrequirementslikequalification,skills,andworkexperienceto perform that job. Job design aims at outlining and organising tasks, duties, and responsibilities into a single unit of work for the achievement of organisational objectives.

(3) Performance Appraisal : Human resource professionals are required to perform this function to ensure that the performance of employee is at acceptable level.

(4) Training and Development : This function of human resource management helps the employeestoacquireskillsandknowledgetoperformtheirjobseffectively.Traininganddevelopment programs are organised for both new and existing employees. Employees are prepared for higher level responsibilities and continuous updating with the recent market scenario through training and development.

(5) Wage and Salary Administration : Human resource management determines what is tobepaidfordifferenttypeofjobs.Humanresourcemanagementdecidesemployeescompensation.

The Advisory Functions of Human Resource Management are as follows: Human Resource Management is expert in managing human resources and so can give advice on mattersrelatedtohumanresourcesoftheorganisation.HumanResourceManagementcanofferadviceto:

(1) Advised to Top Management: Personnel manager advises the top management in formulation and evaluation of personnel programs, policies, and procedures.

(2) Advised to Departmental Heads: Personnel manager advises the heads of various departmentsonmatterssuchasmanpowerplanning,jobanalysis,jobdesign,recruitment,selection, placement, training, performance appraisal, etc.

(c) Internal Sources is the recruitment from within the organisation. Whereas the External Sources is recruitment are from outside the organisation.

The merits of using internal sources of recruitment are as follows : (i) Itistimesaving,economical,simpleandreliable. (ii) Thereisnoneedofinductiontrainingbecausethecandidatealreadyknowseverything

about the organisation, the work, the employee, the rules and regulations, etc. (iii) It motivates the employees of work hard in order to get higher jobs in the same

organisation. (iv) Itincreasesthemoraleoftheemployeesanditimprovestherelationsintheorganisation.

Commercial Applications | 31 | (v) Itreduceexecutiveturnover. (vi) Itdevelopsloyaltyandasenseofresponsibility. The demerits of using internal sources of recruitment are as follows : (1) It prevents new blood from entering the organisation.New blood brings innovative

ideas, fresh thinking and dynamism into the organisation. (2) Ithaslimitedscopebecauseitisnotpossibletofillupalltypesofvacanciesfromwithin

the organisation. (3) Thepositionofthepersonwhoispromotedortransferredwillbevacant. (4) Theremaybebiasorpartiality inpromotingor transferringpersons fromwithin the

organisation. (5) Theemployeeswhodidnotgetthepromotionmightfeeldemotivated. (6) Therightpersonmaybepromotedortransferredonlyifproperconfidentialreportsof

all employees are maintained, and this involves a lot of time, money and energy. The Merits of using external sources of recruitment are as follows : (1) Itencouragesyoungbloodwithnewideastoentertheorganisation. (2) Itofferswidescopeforselection.Thisisbecausealargenumberofsuitablecandidates

will come for the selection process. (3) Therearelesschancesofbiasorpartiality. (4) Herethereisnoneedtomaintainconfidentialrecords. The demerits of using external sources of recruitment are as follows : (1) Itisverycostly.Thisisbecauseadvertisements,test,medicalexaminationetc.,hastobe

conducted. (2) Itisverytimeconsuming.Thisisbecausetheselectionprocessisverylengthy. (3) Itmaynotdeveloployaltyamongtheexistingmanagers. (4) Theexistingmanagersmayleavetheorganisationifoutsidersaregivenhigherpost.Answer 7. (a) There are institutions which provide goods and services for the purpose of providing

socialwelfareandnotforprofitlikeschools,colleges,clubs,cooperativesocieties,libraries,hospitals,orphanages,charitabletrusts,etc.Sinceprofitisnotimplicitintheirdealings,theseinstitutionsarecallednon-tradingornon-profitorganisations.

Non-trading concerns need to maintain their accounts by the double entry system and periodically prepare their final accounts for the submission to their members andsubscribers. The institutions are answerable to the stakeholders regarding investment of the fundsandrelevantexpensesandsurplusordeficitifany,Thatiswhytheyneedtopreparefinanciastatements.

(b) A cheque is an unconditional order addressed to a banker, signed by the person who has deposited money with a banker, requesting him to pay on demand a certain sum of money only to the order of the certain person or to the bearer of the instrument.

Types of Cheques: (i) Bearer cheque : Bearerchequeisthechequewhichispaidtothecheque’sowner.This

type of cheque is normally used for a cash transaction. A bearer cheque is one, which can be encashed by anybody, who presents it to the bank for payment. In such a cheque, the word‘bearer’issuffixedafterthenameofthepayee.Bearerchequecanbetransferredfrom one person to another, without any endorsement. The bank is under no liability to ascertainthatthepaymentismadetotherightperson.Ifamanfindsabearerchequelyinginastreetandgetsitencashedatthebank,thelatterisnotliableforthewrongpayment.Thelanguageofsuchachequerunsthus:‘PaytoXorbearer’.

(ii) Order cheques : Orderchequesarethechequeswhicharewithdrawnforthepayee(thechequewithdrawnforwhoseperson).Beforewithdrawntothatpayee,bankscrosscheckthe identity of the payee. An order cheque is one, which is payable to the payee or his/herorderonly.Insuchcheques,theword‘order’issuffixedafterthenameofthepayee.


Achequeisalsoregardedasanordercheque,incasetheword‘order’or‘bearer’isnotwrittenandonlythenameofthepayeeiswritteninthecheque.Anorderchequecanbe transferred only after endorsement. The payment through an order cheque is safe. It is because the person who presents the cheque at the counter, has to prove his identity before thepayment ismade tohim/her.The responsibilityof right identification lieswith the bank. In connection with the order cheque, one point must be kept in mind thatabearerchequecanbemadeanorderchequebystrikingofftheword‘bearer’,butanorderchequecannotbemadeabearerchequebystrikingofftheword‘order’.Anorderchequecanbechangedintoabearerchequeonlybythedrawerby‘alterationsandsignature’ process. The payments of the bearer cheques and order cheques are made at thecounterofthebank.Hencetheyarecalledas‘opencheques’.

(iii) Crossed Cheque/ Account Payee Cheque : Crossed cheque is a cheque which cannot be encashed at the counter. This kind of cheque can be collected only by a bank from the drawer is bank. A cheque can be made crossed by drawing two paraller lines on the upperlefthandofthecheque.Whentheword“AccountPayee”iswritteninbetweenthe parallel lines, then the crossed cheque is called account payee cheque. The purpose of crossing the cheque is to prospect the drawn against theft, loss or foregery.

(iv) Post-dated Cheque : A cheque which bears a future date instead of an actual date and which is issued before the date it bears, is called a post-dated cheque. For example, a chequedated2nd June, 2017 if issuedon26thApril, 2017will be calledpostdatedcheque.

(v) Ante-dated Cheque : If a cheque bears an earlier date than the date of issue, it is known asanante-datedcheque.Ifachequebearingthedate10thJanuary,2018isissuedon25thFebruary, 2001, the cheque will be an ante-dated cheque.

(vi) Stale Cheque : A cheque which has become overde for payment, is called a stale cheque. As per the provision of the Negotiable Instrument Act, a cheque can be presented for paymentwithinthreemonthsfromthedate1stJanuary,2018isnotpresentedtill31stMarch2018beforethepayingbank,thechequewillbecomeastalecheque.

(c) Direct Costs : Costs which are directly or easily traceable to a product, service or job are known as direct costs. In the production of an article, materials are purchased, wages are paid to workers and certain other expenses are incurred directly. All these take an active and direct part in the manufacturing of a product and are, therefore, called direct costs. These costs have adirectrelationshipwithaproduct.Thesecostscanbedirectlyanddefinitelyidentifiedwitha particular unit of output.

Direct Costs include : (i) Direct Material : Allmaterialwhichbecomesanintegralpartofthefinishedproduct

andwhichcanbeconvenientlyassignedtospecificphysicalunitsofthefinishedproductis known as direct material or process material.

(ii) Direct Labour : Labourwhich takes an active anddirectpart in theproductionof aparticularcommodityisknownasdirectlabour.Directlabourcostsarespecificallyandconvenientlytraceabletospecificproducts.Directlabourisalsoknownasproductiveoroperating labour.

(iii) Direct Productive Expenses : These are the expenses which can be directly, conveniently andwhollyallocatedtospecificcostcentersorcostunits.Rentpaidforhireofaspecialmachine required for a particular contract, cost of defective work incurred in connection with a particular job, etc., are examples of direct expenses. These are also known as chargeable expenses.

Indirect Cost : Indirect costs refer to the expenses incurred on those items which are not directly chargeable to production. Salaries of timekeeper, storekeeper, foremen are examples of indirect costs. In the running of a particular train, cost of railway station and railwaystaffareindirectcosts.

Commercial Applications | 33 | Indirect Costs include : (i) Indirect Material : All material which is used for ancillary purposes and which cannot

be conveniently assigned to specific physical units is known as indirect material.Consumable stores, oil and waste, printing and stationery material, etc., are a few examplesofindirectmaterial.Suchmaterialmaybeusedinthefactory,officeorforthesales and distribution division.

(ii) Indirect Labour : Labour employed for the purpose of carrying out tasks incidentalto goods produced or services provided is indirect labour. Such labour does not alter the composition, construction or condition of the product. It’s contribution cannot be easilytracedtospecificunitsofoutput.Wagesofstorekeepers,timekeepers,foremen,salesmen’s salaries, directors’ fees, etc., are examples of indirect labour costs.

(iii) Indirect Expenses : These are the expenses which cannot be directly, conveniently and wholly traced to the production cost of a particular product. Rent, lighting, insurance charges, etc., are examples of indirect expenses. The distinction between the direct costs andtheindirectcostsisimportant.Biggerfirmsareoftenmultiproductfirms.

Answer 8. (a) Theproduct lifecycledescribes thestagesaproductgoes throughfrom,whenitwasfirst

thoughtofuntilitfinallyisremovedfromthemarket.Notallproductsreachthisfinalstage.Some continue to grow and others rise and fall.

The main stages of the product life cycle are: (i) Introduction : This is the stage where researching, developing and launching the product

takes place. (ii) Growth : This is the stage when sales increases at a fastest rate. (iii) Maturity : This is the stage where sales is near its highest, but the rate of growth is

slowing down due to new entrants in market or saturation. (iv) Decline : Thisisthefinalstageofthecycle,whensalesbegintodropatafasterrate.This

can be illustrated by looking at the sales during the time period of the product.

(b) TheCentralBankadoptsvariousmethodstocontrolandregulatethecreditinthecountry.

Theprincipalmethodscanbeclassifiedundertwomainheads: (i)Quantitativeand(ii)Qualitativemeasures Quantitative Credit Control Methods : (i) Bank Rate Policy : ‘Thebankrate’istherateatwhichtheCentralBankispreparedto

buyandre-discountitsfirstclassbillsandgovernmentsecuritiesheldbycommercialbanks.

When commercial banks require extra funds to give more loans to the public, they borrow fromtheCentralBank.TherateatwhichtheCentralBankgivesloanstotheborrowingcommercial banks is known as the bank rate. When the commercial banks are advanced funds by the central bank they can provide loans to the public. The rate at which the


commercial banks provide loans to the public is called the rate of interest. The Central Bankusesthetoolofbankratetocontrolvolumeofcreditinaneconomyinsuchawaythat during times of low bank rate commercial banks tend to borrow increasingly large amount of funds, thereby increasing their liquidity. Thus they increase their lending to the public. When the bank rate rises the commercial banks decrease their borrowings from the central bank because they now have to pay a higher rate of interest on their borrowing. With a decrease in their liquidity they have to reduce their public lending. In turnthepublictendstoborrowlesswheninterestraterises.TheCentralBankusesthistechniquetocontroltheflowoffundsintotheeconomybymanipulatingthebankrate.Whenthemoneymarketisflushedwithfundsinterestratesgodown.TheCentralBankby controlling the money market regulates the credit by making it cheaper or costlier.

(ii) Open Market Operations : By‘openmarketoperations’itmeansthepurchaseorsaleof the government securities or any other public securities or trade bills, etc., by the CentralBankinopenmarket.WhentheCentralBanksellsthesecuritiesheldbyitinthe open market, the money supply in the market is reduced and when the central bank purchases the securities, themoney supply in themarket is increased.Openmarketoperationsisthedirectmethodofcreditcontrolandhenceitismoreeffective,butforthesuccess of open market operations of government securities, there should be broad and active market, in short and long period, just as in the USA and UK.

(iii) Change in Cash Reserves Ratio of Commercial Banks: The commercial banks have to keepacertainpercentageoftheircashreserveswiththeCentralBank.Theraisingofthispre-decided rate or the reserve ratios by the central bank reduces the excess reserves of commercial banks for credit expansion and the lowering of the reserve ratio increases their capacity to expand credit. Thus, the central bank can exercise control on credit by making changes in minimum cash reserves of the commercial banks.

(iv) Statutory Liquid Requirements : OnthedirectionoftheReserveBankofIndia,eachcommercial bank has to maintain a liquid assets like gold and cash with itself so that the bank may repay its obligations as and when demanded by its depositors. The Reserve BankofIndiaregulatescreditbyvaryingthisratio.

Qualitative Credit Control Methods : (i) Margin Requirements : ReserveBankofIndiadirectsthecommercialbanksfromtime

to time to maintain margin requirements on its advances and loans. It may ask for extra or additional requirements to curtail the credit and or reduce the requirement in case of expansion of credit.

(ii) Credit Rationing : Sometimes the central bank puts restriction on demand requests for accommodation by the commercial banks and limits the amount of credit available to eachofthem.Thisisknownas‘creditrationing’.Thismethodisadoptedonlyduringthe time when the country faces an exceptional monetary stringency and declining gold reserve.

(iii) Moral Suasion : TheCentralBankalsoexercisesthemethodofmoralsuasionforcreditcontrol. The central bank requests and persuades the commercial banks not to grant credit for speculative and non-essential activities. Since the central bank is the symbol of financialsovereignty,theotherbankshonouritsauthority.Thismethod,assuch,provesveryeffectiveinnormalcases.

(iv) Publicity : TheCentralBankalsousesthemethodofpublicityforcreditcontrol.TheCentralBank issuesweeklyreports,periodicals, reviews thestatementsofassetsandliabilities in the form of balance sheets, etc. These publications help the commercial banks verymuch in getting the latest information about the condition of themoneymarket,publicfinance,tradeandindustryinthecountryandinadjustingtheirbankingactivities accordingly.

(c) Public relations is a thriving profession in India. There are hundreds of large and small PR consultancies in the country, employing thousands of practitioners. Most companies

Commercial Applications | 35 |are in private sector and almost all companies in the public sector have public relations departments. According to a survey conducted by the Associated Chamber of commerce andIndustryinIndia(ASSOCHAM,2012),thePRindustryinIndiaisgrowingatanannualrateof 32percent.Manybelieve thedefinitionof traditionalPRhasundergonea change.PR in its new avatar not just encompasses media relations and employee communication, but is used increasingly for strategic communication, brand building, customer relations and crisis management. From an executive function, PR is now becoming a part of the high-level management job touching upon the core values of an organisation.PR in India is fast emerging as an institution especially with its growing acceptance as a skilled and specialized profession. In the early days in India there were people who worked as Public Relation consultants but wereinrealityfixersandmanipulatorswhoindulgedinunethicalpracticestogetfavourabledecisionsfortheirclientsfromgovernmentorsemigovernmentauthorities.ThefirstAllIndiaConference of Public Relation Practitioners, therefore, found it necessary to formally adopt the International Code of Ethics and purge the home environment of all manipulators. This was an important step in the development of professionalism in Public Relations in India. The International Code of Ethics for Public Relations was adopted by the Public Relations SocietyofIndiaatthe1stAllIndiaPublicRelationsConference,NewDelhi,April21,1968.Itseekstoestablishcommunicationpatternsandchannelswhich,bypromotingthefreeflowofessential information, will make each member of the group feel and become aware of his/her own personal involvement and responsibility and of his/her solidarity with other members. It tries to ensure that each member understands the relationship between his/her profession and the public and that his/her conduct even in private will have an impact on the way in which theprofessionas awhole is appraised.Oneof themain functionsof thePublicRelationsSocietyofIndia(PRSI)istoensurethathighprofessionalstandardsaremaintained.Itintendsto implement training and research programmes that can raise the professional skills and efficiencyofIndianPRProfessionals.

Answer 9. (a) Yes, I believe that advertisement corrupts young minds because many researches suggests

that when children watch more television, they are likely to want and demand more toys or other products. It is also suggested that they may notice ads more when they watch television on their own. According to a national survey of children’s TV-watching behaviour in 2010, 72 percentreportedthattheyhadnorestrictionsontheamountoftimetheycouldwatchTVand52percent reported that they had the freedom to watch any type of content they wanted. Studies have found that children do not have the ability to sceptically view marketing messages or even identify advertisements as marketing messages until they are in their teens. This means that marketing messages can be perceived as truths, and in many cases, those messages can stay with them until they become adults. Many advertisements seen today involve dangerous stunts which children try to imitate as they do not understand the statutory warnings that come with the advertisements as mentioned in the paragraph regarding Prabal who tried to perform a dangerous stunt unable to understand the practicality or stunts being performed by experts ultimately killing himself.

(b) To ensure that Advertisements cause no harm to public, the advertisements should mantain a high level of ethical conduct. An advertisement before being publicised should have layers of tough screening, to comply with the code of ethics and laws to ensure that the ultimate end result do not cause any harm to sentiments or impact the public at large in a negative manner.

There is no law to restrict tobacco companies from promoting their brands to Africans and American, though it is in India.Similarly thealcoholic–beveragecompaniespromote theirbrands and target not only college students but underage drinkers as well. These advertisements have increased alcohol related problems. Advertisements exposing pornography is another serious issue in advertising industry today. Advertisements promoting permissiveness and objectifying women are heavily criticized in the society. Therefore, even advertising has ethical value. In today’s competitive and buyer’s market, an advertisement has to be truthful and ethical. If an advertisement is misleading, the credibility of the organisation is lost. To view the truth in advertisement, it has to be seen from the consumer’s point of view rather thanfromlegalpoint.Theadvertisingindustryhasbeenfrequentlycriticizedforputtingout


misleading or exaggerated claims in respect of product, goods and services advertised. It is also perceived as guilty of glorifying certain habits or tendencies regarded as undesirable and encouragingconsumerestculture.However,itisverydifficulttodemarcateaclearlineofdifferencebetweenwhatistrueandwhatisuntrue.Buttheadvertisementassuchisjudgedbyitsimpactandbyitsacceptancebytheconsumers.Theproductmustfulfilitsadvertisedclaims. Advertisements should be decent and not be obscene and must be practical and not something that is unreal. The makers should keeping mind the harms that might be caused bytheadvertisementbeforeputtingitacrossthepublic.

(c) Alotoffilmsnowaday’spromoteviolence,action,vulgarityetc.Filmsshouldbescreenedthoroughly before being released as it might hurt sentiments of public at large causing public unrest.Somefilmscauseseriousharmtothemindsofalotofpeoplewhoincorporatecriminalactivitiesfromthecrimescenesdepictedinthefilms.

Hereare someTips forparents should follow toprotectnegative impactoffilmson theirchildren :

(i) Explain consequences : Whatparenthasn’theard“butthere’snoblood”asanexcuseforwatching a movie or playing a video game ? Explain the true consequences of violence, and point out how unrealistic it is for people to get away with violent behaviour.

(ii) Keep an eye on the clock : Don’t let kids spend too long with virtual violence. The more timetheyspendimmersedinviolentcontent,thegreateritsimpactandinfluence.

(iii) Teach conflict resolution :Mostkidsknowthathittingsomeoneontheheadisn’tthewayto solve a disagreement, but verbal cruelty also is violence. Kids should be taught how to use their words responsibly to stand up for themselves and others without throwing a punch.

(iv) Know your kids’ media :Checkoutratings,and,whentherearenone,findoutaboutcontent.Forexample,content ina1992R-ratedmovieisnowacceptableforaPG-13.Streamingonlinevideosaren’tratedandcanshowcaseverybrutalstuff.

(v) Keep an eye on interactive media violence : There’s no way to accurately measure whether there’s more or less violence than in the past, but the pervasiveness of it in interactive forms, such as social media, online videos, and video games, is relatively new.

Answer 10. (a) IT firms are under pressure due to a lot of reasons : (i) Thereisaglobaleconomicturbulence. (ii) Thereisamarginaldeclineinhiringbecauseofincreasedautomationandefficiency. (iii) ThegrowthofIndianITservicecompaniesisimpactedbylowerdemandledbyuncertain

macroeconomic environment, lower deal sizes in digital technologies, cloud adoption and high competitive intensity from local as well as international players.

(iv) ThereisanincreasingpressureontheglobalgamingFirmstocutproductioncostsandreduce development timing.

(b) TheinherentadvantagesofIToutsourcingfirminIndiathattheBigCompaniesandGamepublishers are looking at outsourcing development of games, media and its vast developer community combined with large pool of Artists and low cost development. This has kept India at a Win-Win position and enabling it to make a mark in the space.

(c) In order to obtain major share of growth in global gaming industry, Indian IT Firms should reduce production cost and development time to earn more revenue and share in the gaming industry. India has the talent, brain, innovation, creativity and large pool of artists to maintain theirpositionintheinternationalmarket.BygrabbingtheoutsourcedglobalopportunitiesIndia can make it big at a Global level.

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Commercial Applications | 37 |


(a) Trading Concerns Non-Trading Concern1. A legal entity, which operates for earn-

ing profit for the owner, is known astrading concern.

A non-trading concern is legal entity, which operates for serving the society as a whole.

2. In a trading concern, the source of rev-enue is from the sale of goods and ser-vices.

In a non-trading concern the source of funds are contributions in the form of donation, membership fees and subscription and membership fees.

(b) Advertising Sales Promotion1. Advertising is a technique of driving

public attention towards a product orservice, through paid network.

The set of activities that spread a word about the product, brand or service to enhance sales is known as Sales promotion.

2. This is a Marketing strategy and its objective is to create brand image and boosting sales.

This is a promotional strategy and its objec-tive is to create a short term sales push.

(c) Persuasion Dialogue1. Persuasioncanbedefinedastheprocess

of generating interest of an individual toward an event, idea, object or towards anotherperson,byusingwrittenorspo-ken words or audio-visual aids like vid-eosorfilms.

Dialogue is a focused and intentional inter-action wherein participants with differingviews are given the opportunity to speak andlistentootherswhilesettingasidetheirfears and preconceptions.

2. Persuasion involves the transmission of a message, verbal or non-verbal, trans-mittedthroughanyavailablemedium.Itmay be reasonable or unreasonable, fac-tual or emotional.

A dialogue as a conversation in which peo-ple think together in relationship without anyonetakingafinalposition.Itinvolvesre-specting other’s opinions, giving free rein to our thoughts, and thinking freely.

(d) Training Development1. Training is a learning process in which

employees get an opportunity to devel-op skill, competency and knowledge as per the job requirement.

Development is an educational process which is concerned with the overall growth of the employees.

2. Training is a short term process and is job oriented.

Development is a long term process and is career oriented.


16SOLUTION


(e) Fixed Cost Variable Cost1. The cost which remains same, regardless

of the volume produced, is known as fixedcost.Fixedcostsaredefinite, theyare incurred whether the units are pro-duced or not.

The cost which changes with the change in output is considered as a variable cost. Vari-able costs are incurred only when the units are produced.

2. Fixed cost changes in unit, i.e., as the unitsproducedincreases,fixedcostperunitdecreasesandviceversa,sothefixedcost per unit is inversely proportional to the number of output produced. Fixed costs often include rent, interest on loan etc.

Variable cost remains same, per unit. Vari-able costs may include wages, utilities, ma-terials used in production, etc.

Answer 2. (a) The two physical activities in marketing are: (i) Packaging & Packing : Package means a wrapper or a container designed to enclose,

encase or contain the product. Packaging reduces the risk of spoilage, wastage, leakage, melting, evaporation, etc., in the process of transportation and storage. Packaging not only provides a protective cover to the product but also works as a silent salesman. It also furnishes useful information regarding the product, i.e., its contents, its weight, size, price, constituents, usage and necessary instruction regarding storing and using the product.

Distribution of goods from the seller to purchaser requires it to be packed appropriately in packets, bundles, containers and cases, which are called as packing. Packing is the process of putting the goods in themarket in convenient size and lots. Packing andpackaging boost the sale of the product. In this way, it becomes an important function of marketing management.

(ii) Storage : There is a wide gap between the production and actual sale of goods. Therefore, the marketing management is required to make necessary arrangements for storing therawmaterialsandfinishedgoods.Storage is theactivitypertaining toholdingofproducts from the time of their production until the time of their sale. Storage adds time utility to goods and is essential to the process of equalization, specially, for perishable goods.

(b) Tender selling is a method of sales in which the company invites the tenders from the respective buyers through an advertisement requesting the intending buyers to submit their offersofpurchaseinrespectofproductsmeantforsales.Thecompanysellstheproductstothatbuyerwhooffersthemostprofitablepriceandmeetstheircompanyconditionsregardingsale. It may so happen that the buyer may be dominantly large like the government where the customerinvitesthetendersratherthanthesellingcompany.Inthefirstsituationwherethecompany is inviting the tenders, after receiving the tenders from various parties of interest, thecompanysalesexecutiveor thesalesmansorts themoutandfinalizes the tender tobeacceptedonthebasisofprofitabilityandsuitability.Inlattercase,itisthebuyerthatselectsthe best tender that is economical and matching to his needs.

(c) Factors causing destruction of ecosystem are as follows : (i) Climate Change : Climatechangecontinuestoplayasignificantroleinthedestruction

of the ecosystem. Global warming has led to increased temperatures, sea levels and ocean acidity that disrupt an ecosystem’s natural balance.

(ii) Land Clearing : As human populations increase, so does the need to develop more land. Many ecosystems are destroyed in order to clear land for housing developments and roads, agricultural uses and raising livestock.

(d) TheCentral Bankperforms several optional functions. These are called optonal functionsbecausetheyarenotregulatoryandtheCentralBankmayormaynotperformthem.Twoofthese functions are as follows :

Commercial Applications | 39 | (i) The Central Bank studies different economic problems of the country and compiles

data and information and publishes reports and periodicals for the use of banks and the public.TheReserveBankofIndiaBulletinisoneofthem.

(ii) Itactsasanagenttointernationalinstitutions,liketheInternationalMonetaryFund,theWorldBank,etc.,onbehalfofthegovernment.

(e) ThegrowingneedforeffectivepublicrelationsinIndiaisduetothebelowmentionedreasons: (i) The complex structure of business organisations results in increasing its detachment

from its publics. The greater the detachment the more urgent becomes the need to keep in continuous touch with the mass, through various modes of communication. The rise of competition in the market which is fast assuming global proportions makes it imperative thatproducerskeepinconstanttouchwiththedifferentsegmentsofconsumersuponwhom their revenue depends, directly or indirectly.

(ii) Consumers have grownmore conscious of their rights. Consumerwatchdog groupshave come up and consumer rights laws have been enacted to protect consumers againstmalpracticesbyproducers.Thiscallsforeffectivepublicrelationstopresenttheproducers side of the story in cases where disputes regarding consumer rights arise. Now there is a growing need of maintaining a good image among the employees as well. Public relations with employees not only help the organisations to develop good rapportwiththeemployeesbutalsoatthesametimeitreflectsagoodimageamongthefutureemployeesalso.Companieswithgoodpublicrelationcampaignshasbetterchance of hiring good employees than the companies which do not indulge in public relation related activities.

Answer 3. (a) Thestatement thatBranding isamythandnot reality is true.Brand is importantbutnot

ultimate. A strong brand can make it enormously easier to sell. However, the notion that “branding”cancreateagreatbrandisamyth.It’samyththatcancostthecompanyalotofmoney,withoutgettingmuchinreturn.

(b) The statement that parity pricing is not relevant for present marketing condition is false. Underparitypricingfirmskeepsitspricesimilartothepriceleveloftheleadingfirmintheindustry. In a competitive market it is a safe policy as it avoids price war.

(c) Thestatementthattherearecertaincoststhatareneithertotallyvariablenorfullyfixedistrue.Suchcostsarecalledsemi-variablecosts.Asemi-variablecost,alsoknownasasemi-fixedcostoramixedcost,isacostcomposedofamixtureoffixedandvariablecomponents.Costsarefixedforasetlevelofproductionorconsumptionandbecomevariableafterthisproductionlevelisexceeded.Ifnoproductionoccurs,afixedcostisstillincurred.Thefixedportionofa semi-variable cost incurs repeatedly, while the variable portion occurs as a function of the activity volume.

(d) ThestatementthatCentralBankistheBanker’sBankistrue.WhenaBankneedsfundsitcanobtainloansorrediscountitsbillswiththeCentralBank.Commercialbanksarerequiredtokeep a cash reserve with the Central bank so as to maintain credit creation in the country.

(e) The statement that Advertisement increases standard of living is true. Advertising makes purchasing easier for consumers. It educates the consumers by providing knowledge about the new products or the new uses of existing products. It helps in the replacement of old habitsandtraditionsbynewandbettermethodsandgoods.It improvestheirstandardofliving.

Answer 4. (a) Aproductisanitemofferedforsale.Aproductcanbeaserviceoranitem.Everyproduct

is made at a cost and each is sold at a price. The price that can be charged depends on the market, the quality, the marketing and the segment that is targeted. Each product has a useful life after which it needs replacement, and a life cycle after which it has to be re-invented.

(b) Standardization is a framework of agreements to which all relevant parties in an industry or organisation must adhere to ensure that all processes associated with the creation of a good


or performance of a service are performed within set guidelines. This ensures that the end product has consistent quality and that any conclusions made are comparable with all other equivalent items in the same class.

(c) India’scentralbankisknownastheReserveBankofIndia(RBI).Itsroleistofosterfinancialstability and regulate India’s currency and credit. Following one the two major functions :

(i) Monetary Functions : The core function of the RBI is to set the lending rate in theeconomy. However, as the overseer of India’s monetary policy, the bank performs. Those important functions credit control.

(ii) Issuer of Currency : Although the government is the technical issuer of currency, the RBIactuallydistributes thenotesandcoins into themarketplace. Italso takes inanddestroyscurrency;inotherwords,asbillsandcoinswearout,theRBIensuresthatfreshand clean currency is in the marketplace.

(d) The VestibuleTrainingisoneofthemethodsoftraining,wherethetechnicalstaff,especiallythose who deal with the tools and machinery, are given the job education training in the workplace other than the main production plant. In other words, the Vestibule training is called, “nearthejobtraining”,whichmeansthesimulatedset-upisestablished,proximatetothemainproductionplant,whereinthetechnicalstaffarebeingtaughthowtooperatethe tools and machinery, that may be exactly similar, to what they will be using at the actual workfloor,by special trainersor thespecialists,who impart this trainingto the technicalstaff, thereby reducing theburdenon the line supervisor,whohas to supervise theentireproduction process.

(e) HumanResourceDevelopmentcanbedefinedasaprocessthroughwhichtheemployeesofthe organisation can be helped in a planned manner in order to perform various functions associated with their roles. It also emphasizes on development of organisational culture in which the superiors and subordinates can work as a team.

Advantages of HRD : (i) Itemphasizesonallarounddevelopmentoftheemployeesbydevelopingskills,attitude

and knowledge about the organisation. This helps in making the employees more competent.

(ii) HRD emphasizes on performance appraisal system throughwhich the performanceof the employees can be judged from time to time. This makes the employees more committedtowardstheirworkandmotivatesotherstoperformwell.

Answer 5. (a) Community-based conservation is a conservation movement that emerged in the 1980s

through escalating protests and subsequent dialogue with local communities affected byinternationalattemptstoprotectthebiodiversityoftheearth.Theobjectofcommunity-basedconservation is to incorporate improvement to the lives of local people while conserving areas through the creation of national parks or wildlife refuges.

The role of community in conservation practises are as follows : (i) Involvement in decision making : It is important to maintain subsidiary of decision-

making. Since local, daily decisions need to be taken at the local and community levels, Community participation involves creation of forums where issues are discussed and implemented. These help in maintaining the scale of decisions and the commitment is ensured and built at appropriate level. Local forums are the outcome of effectivecommunity participation where issues are discussed and suitably planned as well as implemented. The localized decisions making process is a reflection of communitydynamics on awareness building, which need to be built into the core of an environmental management plans.

(ii) Commitment from localities : Community participation is also one of the right ways to have the clear commitment and complete involvement of local members in order to reach the desired goals and success in joint activities of environmental management programme. Bybringingthecommunityatacommonplatforminrelationtoenvironmentisoneof

Commercial Applications | 41 |thelaunchingstepsincontinuousprocessofawarenessbuildingandattitudinalchange.Bybridging the community to aplatform it provides a rallyingpoint that canbuildcommitmentandinvolvementfromthecommunity.Linkingenvironmentalproblems,both local and global, to everyday lifestyles is critical in motivating communities and planning for action.

(iii) Optimum utilization of Resources : Community participation pools resources and diverse skills and working strategies from within the community, creating pride and ownership of a programme or project.

(iv) Monitoring & Evaluation : Community participation will ensure that checking and corrective action through monitoring/evaluation can be done by and for the community itself. The local community can ensure close vigilance through community involvement by controlling its own actions, outputs, i.e., mechanism of garbage disposal and its effects intermsofpollutionandhealthhazards.Byhavingthecommunity’sviewonenvironmental management and its commitment, it would enable and facilitate the overall environmental management by close monitoring of the environmental issues.

(b) Some people believe that advertisement is a waste of company’s money and energy. Most consumersknowwhat theyneedanddon’tpaymuchattentiononadvertisements,so theadvertisementhaslittleeffectbutcosttoomuch.

However, this is a wrong notion and advertisements have their own special use. Advertisements can send useful and opportune messages for new products and new shops.

When a new product comes into being or a new shop starts business, people can hardly know if there is not an advertisement about it. So, advertisement is necessary to propagate a new thing. It can be a useful promotion to tell all people to have a try on it. Some interesting advertisements can drive consumer demand.

Advertisementisanexpensiveandunaffordabletoolforsomecompany.Butadvertisementisnotawasteofmoneyorenergyratheraneffectivemethodofsalespromotion,anamountthathas to be paid or given up in order to get something. Though Advertisement is an expensive tool but it covers public at large and in small time and fetches big return from this investment, that is long term in nature.

(c) A cost is the sum of three groups or components—the purchase or transfer price of material, the cost of the hire of labour and the value of other disbursements made or expenditure incurred in achieving the desired product or result.

Inbusiness,costisusuallyamonetaryvaluationof(i)effort,(ii)material,(iii)resources,(iv)timeandutilitiesconsumed,(v)risksincurredand(vi)opportunityforgoneinproductionanddelivery of a good or service.All expenses are costs, but not all costs (such as thoseincurredinacquisitionofanincome-generatingasset)areexpenses.

Components of Total Cost : The total cost may be expressed in two terms : (i) Totalcostofproduction,ortotalcostofgoodsproduced. (ii) Totalcostofsalesortotalcostofgoodssold. The major components of total cost are as follows : (1) Prime Cost : It consists of three items : (i) DirectMaterial. (ii) DirectLabour. (iii) Direct Expenses. All the three direct items combined together make what is known as Prime Cost or Direct

Cost or First Cost. (2) Factory Cost : Itcomprisesoftheprimecostplusfactory(orworks)overheadsor

expenses. Factory expenses include indirect material, indirect labour and indirect factory expenses. This cost is also known as Works’ Cost or Manufacturing Cost or Production Cost.


(3) Office Cost :Itcomprisesoffactorycostplusofficeandadministrativeoverheadsorexpenses. This is also called total cost of production or total cost of goods produced.

(4) Selling and Distribution Cost : It comprises of office cost plus selling anddistribution overheads or expenses. This is also called total cost or total cost of sales, or total cost of goods sold.

Answer 6. (a) Abalancesheetisoneofthethreefundamentalfinancialstatementsandiskeytobothfinancial

modelling and accounting. The balance sheet displays the company’s total assets and how theseassetsarefinanced,througheitherdebtorequity.Itcanalsosometimesbereferredtoasastatementofnetworth,orastatementoffinancialposition.Thebalancesheetisbasedonthe fundamental equation : Assets = Liabilities + Equity

Balance sheet has the following features : (i) Itisthelaststageoffinalaccounts. (ii) Itispreparedonthelastdayofanaccountingyear. (iii) Itisnotanaccountunderthedoubleentrysystem-itisastatementonly. (iv) Ithastwosides-lefthandsideknownasliabilitysideandrighthandsideknownas

assets side. (v) Thetotalofbothsidesarealwaysequal. (vi) Thebalancesof all asset accountsand liabilityaccountsare shown in it.Noexpense

accounts and revenue accounts are shown here. (vii) Itdisclosesthefinancialpositionandsolvencyofthebusiness. (viii)Itispreparedafterthepreparationoftradingandprofitandlossaccountbecausethenet

profitornetlossofaconcernisincludedinitthroughcapitalaccount. (b) Basis for Comparison Bill of Exchange Promissory Note

Meaning Bill of Exchange is an instru-ment in writing showing the in-debtedness of a buyer towards the seller of goods.

Apromissorynote isawrittenpromise made by the debtor to pay a certain sum of money to thecreditoratafuturespecifieddate.

Definedin Section 5 ofNegotiable Instru-mentAct,1881.

Section 4 ofNegotiable Instru-mentAct,1881.

Parties Three parties, i.e. drawer, draw-ee and payee.

Two parties, i.e. drawer and payee.

In case of Dishonour Notice is necessary to be given to all the parties involved.

Notice is not necessary to be given to the maker.

Drawn by Creditor Debtor (c) As public relations is a strong medium of reaching out to the general public, some companies

often tend to twist the messages in their favour, with an aim to gain the trust of the people. Misleading information or not disclosing critical information to public can be considered asanunethicalpracticeinthedomainofpublicrelations.Forinstance,thedifferenthealthclaims made by the health drink companies or cleanliness claims made by the detergents can beconsideredasmisleadingatcertaintimes.Butagain,inanadvancedsociety,strongclaimsmade through advertisements and public relations cannot always be considered unethical unless of course the claims are challenged.

Thereareanumberofactsthatcouldbeclassifiedasunethical,rangingfromsuppressingof news to misleading the audience. Unethical public relation practices may include the following :

(i) Suppressingunfavourablenews. (ii) Misrepresentingfacts. (iii) Distortionoffactstomisleadorconfusepotentialbuyers.

Commercial Applications | 43 | (iv) Makingfalse,exaggeratedorunverifiedclaims. (v) Undercuttingacompetitor. (vi) Purportingtoservecausebutactuallyservingsomeotherinterests. (vii) Promisingresultsthatcannotbeobtainedetc.Answer 7. (a) Appraisal systems exist to improve organisational efficiency by ensuring that individuals

perform to the best of their ability, develop their potential, and earn appropriate rewards. This in turn leads to improved organisational performance. Importance of Performance appraisal are as follows:

(i) Performance Feedback : Most employees are very interested in knowing how well they are doing at present and how they can do better in the future. Theywant thisinformation to improve their performance in order to get promotions and merit pay. Proper performance feedback can improve the employee’s future performance. It also gives him satisfaction and motivation.

(ii) Employee Training and Development Decisions : Performance Appraisal information isusedtofindoutwhetheranemployeerequiresadditionaltraininganddevelopment.Deficienciesinperformancemaybeduetoinadequateknowledgeorskills.Fore.g., a professormay improvehis efficiency by attendingworkshops or seminars about hissubject.Performanceappraisalhelpsamanagertofindoutwhetherheneedsadditionaltraining for improving his current job performance. Similarly, if the performance appraisal results show that he can perform well in a higher position, then he is given training for the higher level position.

(iii)Validation of Selection Process : Performance appraisal is a means of validating both internal(promotionsandtransfers)andexternal(hiringnewemployeesfromoutside)sources. Organisations spend a lot of time and money for recruiting and selectingemployees. Various tools used in the selection process are application blanks, interviews, psychologicaltests,etc.Thesetoolsareusedtopredict(guess)thecandidate’sperformanceonthejob.Aproperperformanceappraisalfindsoutthevalidityofthevariousselectiontools and so the company can follow suitable steps for selecting employees in future.

(iv) Promotions : Performanceappraisalisawayoffindingoutwhichemployeeshouldbegiven a promotion. Past appraisals, together with other background data, will enable management to select proper persons for promotion.

(v) Transfers : Performance appraisal is also useful for taking transfer decisions. Transfers ofteninvolvechangesinjobresponsibilities,anditisimportanttofindouttheemployeeswho can take these responsibilities. Such identification of employees who can betransferred is possible through the performance appraisal.

(b) Important features of sale are as follows : (i) Two parties : For theprocess of sale to be effected theremust be twoparties in the

transaction,namelyasellerandabuyer.The‘seller’canbeasinglepersonoragroupofperson,acompany,aretailoutletonawholeetc.Likewisethebuyercanbeonepersonor a group of persons making the same purcahse decision. The ownership of goods or service has to pass from one person to anotehr.

(ii) Subject Matter is Goods or Services : The subjectmatter of a slae is goods such asmachines, electric or electrnic items, food items, stationery items, furniture, etc., or services such as transportation, healthcare and repair services.

(iii) Transfer of Ownership : In every sales transaction, ownership of goods is transferred from teh seller to the buyer. This is the very essence of the sale process. As soon as buyer pays the price for a book to the bookseller he transferers the ownership of the book to the buyer.

(iv) Price : Price means amount of money to be given in exchange for goods or services. Sales isthetransferofgoodsandservices.Butthistransferhastobeforaconsiderationthatis


quantifiableintermsofprice.Thatmeansanagreedpricehastobepaidforthetransferof ownership. However, it can also be partly in kind and partly in cash. If price is not paid in money, but in kind, then it will not be called as sales. If the transfer of goods or servicesoccursintheabsenceofexchangeofmoney,thenitisnotclassifiedas“sales”.However, if the exchange is made partly for goods and partly for a price, it will amount toa“sales”.

(c) Fundamentals of Public Relations are as follows : (i) Human Relations : Theveryword ‘Public’ is enough to identify the fact thatpublic

relations start with human beings and end with human beings. No person can work independently in an organisation. Everyone who works in an organisation directly or indirectly depends on one another. Human beings, form the very foundation and the bedrock of this function. This basic element of public relations is often overlooked and givenfartoolittleimportance.PRexecutivesmustdisplaybasicgoodmanners.APRexecutive may be very good at his/her techniques but if she/he has bad manners, all thegoodPReffortswillcometonaught.Goodmannersincludegivingimportancetothe other person. It also includes politeness, decorum, formality, etiquette, courtesy,refinement,polish,cultureandcivility.

(ii) Empathy : Empathy means to feel for the other person and to analyze his/her point of view. It means looking from his point of view and trying to understand his perception andfeelings.Thisunderstandingcreatesasatisfyingexperienceinarelationship.Beingable to empathize with your audience is critical today. Public relations is all about managingrelationshipswiththeaudienceandmore importantlytheconsumers.Onecannot build successful and lasting relationships without appreciating those who buy one’sproductsandtakeone’sservicesforthatmatter.Thecompaniesneedtoappreciateand understand the audience’s goals and objectives without trying to put their own goals on top of the priority list.

(iii) Persuasion : Persuasion can be defined as the process of generating interest of anindividualtowardanevent,idea,objectortowardsanotherperson,byusingwrittenorspokenwordsoraudio-visualaidslikevideosorfilms.Ittakestime,involvesanumberof steps and actively involves the recipients, i.e., theperson(s)whoarethetargetaudienceof those messages.

(iv) Dialogue : Dialogue is a focused and intentional interaction wherein participants with differingviews are given the opportunity to speak and listen to otherswhile settingaside their fears and preconceptions. The object of a dialogue is not to analyze things or to win an argument, or to exchange opinions. It seeks to give the opportunity to hear or understand everybody’s opinions, and to appreciate the meaning thereof. We can think of a dialogue as a conversation in which people think together in relationship without anyonetakingafinalposition.Itinvolvesrespectingother’sopinions,givingfreereintoour thoughts and thinking freely.

Answer 8. (a) In marketing, Brand promotion refers to any type of marketing communication used to

inform or persuade target audience of the relative merits of a product, service, brand or issue. The aim of promotion is to increase awareness, create interest, generate sales or create brand loyalty.

Important objectives of brand promotion are as follows : (i) Creating brand awareness : For a brand to be known by the public, it needs to raise brand

awareness.Brandawarenesscanbeachievedusingseveralways,includingpromotionalactivities.Promotionalactivitiesarebelievedtobethemostefficientwayforabrandtoraise brand awareness.

(ii) To repeat business over again by a customer : Brandpromotionplaysanactiverolenotonlyinpersuadingcustomersbutalsoturnthemintoloyalcustomers.Oneofthewaystodoitisbygivingthecustomercouponsordiscountstoattractthemtorepurchasetheproduct.

Commercial Applications | 45 | (iii) Providing information about the products of the brand : If you’re going to meet

somebody you don’t know, an introduction is needed, so that you get to know the person you’re going to come together and vice-versa. Promotional activities act as the mediathat‘introduces’thebrandandproducttothepublic.Thebrandpromotionalsogives information to prospective customers about what new product a brand is going to produce next, etc.

(iv) Increase sales : This goes without saying, every for profit organisation’s primaryobjective is to get as much revenue as possible. Promotional activities can help the brand to become visible to the public, with hopes that they will soon buy the product. For example,in2004,T.V.aChannelcreatedanadvertisementthatfeaturedveryfamousactress Nicole Kidman. The Chanel didn’t mind spending $30 million for their TVadvertisement because they believed that they would receive more than that amount in revenuelater.Brandpromotionisneededforeverybrandtohelpitselfcompeteagainstanother competitor.

(b) Recycling is a form of waste management that involves converting waste and other used materials into reusable products. Recycling helps to reduce energy usage, reduce the consumption of fresh rawmaterials, reduce air pollution andwater pollution (from landfilling)byreducingtheneedfor“conventional”wastedisposalandalsoreducesgreenhousegases emissions. Before taking the bold step of recycling, it is crucial to understand theadvantages involved in this process.

Advantages of Recycling are as follows : (i) Recycling minimizes pollution : All forms of pollution in the modern world emanate

from industrial waste. Recycling of these industrial wastes such as plastics, cans and chemicalsgoalongwaytowardsconsiderablycuttingbackonlevelsofpollutionbecausethese waste products are reused rather than just being thrown away recklessly.

(ii) Protects the environment : Thegreatbenefitofrecyclingwastematerialisthatitplaysa big part in protecting Mother Nature in the most balanced way. While many trees are cuteveryday,recycledpapermanufacturedfromspecifictreesiscontinuallyutilizedtoreduce deforestation. This classical example demonstrates that other natural resources can be recycled and made useful this way to conserve the environment.

(iii) Recycling minimizes global warming : It is perfectly true that recycling minimizes global warming and its grave impacts. During waste disposal, huge amounts of waste are combusted that lead to emission of vast greenhouse gases such as carbon dioxide, sulphur and nitrogen, which contribute to climate change and global warming. Recycling process involves minimal combustion and waste is transformed into reusable materials with zero or minimal harmful impact on the environment. The whole process of processing and manufacturing products from waste materials emits few greenhouse gasesbecausethewasterecyclingindustriesburnlittlefossilfuels.

(iv) Conserves natural resources : If the process of recycling of used and old materials was not there, it means new products would be manufactured by extraction of fresh raw materials underneath the earth through the process of mining and extraction. Recycling isasure-firewayofconservingexistingrawmaterialsandprotectingthemforfutureuse. Taking steps to conserve natural resources like minerals, water and wood ensures sustainable and optimal use.

(v) Recycling cuts down amount of waste in landfill sites : Recycling old and used materials intoreusableproductsenormouslyreducesthepossibilityofchokingof landfillsites.This is beneficial because it helpsminimize land andwater pollution since landfillscontribute mightily to environmental degradation.

(c) The primary functions of human resource development have been identified as follow: (i) Training and development : Training involves providing the employees the knowledge

and skills needed to do a particular task or job. Development involved preparing for future work responsibilities and increasing capacities of employees to perform their current


jobs. It can be said that training and development focuses on changing or improving the knowledge,skills,ability,andattitudesofindividuals.Theshapeoftrainingcanbeinthe form of employee orientation, counselling, skills and technical training programs, or management training and development programs.

(ii) Organisational development : Itisdefinedastheprocessofenhancingtheeffectivenessof an organisation and the well-being of its members through planned interventions that apply behavioural science concepts. It comprises of micro and macro changes. Micro changes are directed at individuals, small groups or teams, whereas macro changes are intendedto improve theeffectivenessof theorganisations. It canbesaid, in termsofhuman resource development, it is a change a gent that requires facilitating, consulting, advising, planning, implementing, or intervening with others to link them to changes.

(iii) Career development : It is an ongoing process by which individuals progress through a series of stages characterized by a set of issues, themes and tasks. It involves two-distinct process, career planing and career management. Career planning involves activities performed by individuals with the assistance of counsellors or others in order to assess their skills and abilities in establishing realistic career plan. Career management involves taking necessary steps to achieve that plan, and it mainly focused on what organizations can do to foster career development.

Answer 9. (a)

Attention Please250 CALL CENTRE EXECUTIVES REQUIRED

WeareagrowingMULTINATIONALBPObasedinametropolitancitythatoffersitsem-ployees best pay, food during shifts, pick-up and drop facility.

TheMODERNAGESOLUTIONSCOMPANYisaMultinationalCompanythatprovidesgreat scope of work to fresher graduates, experienced etc. and is known for the great care we take with clients and employees alike.We’re looking for 250 Business Development Executives for 3 shifts of 8 hrs. The pay range we’re offering is above Industry standard.Responsibilities :- NeedHardworkingCandidateswithGraduationandfluent inEnglishandshouldbesensitive and patient to deal with Global clients. Why Should You Apply?

l Top industry pay.l Great benefits.l Reasonable hours, 3 shifts of 8 hours eachl Opportunities for on-the-job training.

(b) Following one the suitable sources of recruitment’s : (i) Management Consultants : Management consultants are used for selecting higher-

levelstaff.Theyactasa representativeof theemployer.Theymakeall thenecessaryarrangements for recruitment and selection. In return for their services, they take a service charge or commission.

(ii) Public Advertisements : The Personnel department of a company advertises the vacancy in newspapers, the internet, etc. This advertisement gives information about the company, the job and the required qualities of the candidate. It invites applications from suitable candidates. This source is the most popular source of recruitment. This is because it gives a very wide choice. However, it is very costly and time consuming.

Commercial Applications | 47 | (iii) Campus Recruitment : The organisation conducts interviews in the campuses of

Management institutes and Engineering Colleges. Final year students, who’re soon to get graduate, are interviewed. Suitable candidates are selected by the organisation based on their academic record, communication skills, intelligence, etc. This source is used for recruitingqualified,trainedbutinexperiencedcandidates.

(iv) Recommendations : The organisation may also recruit candidates based on the recom-mendations received from existing managers or from sister companies.

(v) Deputation Personnel : The organisation may also recruit candidates who are sent on deputation by the Government or Financial institutions or by holding or subsidiary companies.

(c) As the company wants to recruit call centre representatives, their selection procedure must consists of the following procedure :

(i) Human Relations Skill Test : Theveryfirststeptheorganisationmustexecutetoselectthe candidate is to check the human skills of the person. For this case-study or situational analysis kind of tests should be given to the candidates.

(ii) Communication Test : Thishas tobeoralandwrittentests.Tochecktheproficiencyinenglishlanguage,writtentestmaybeconducted.Forcheckingoralcommunication,group discussions. Presentation etc. may be conducted.

(iii) Personal Interview : Personal interview is conducted to assess the overall personality of the candidate which includes his aspirations, objectives, strengths and weaknesses etc. Thisinterviewiscondcutedtofinanliseacandidatefortheposition.

Answer 10. (a) The difference is themethod of taking cane of their feet. The methods used by the rural

womentoprotecttheirfeetfromcrackingisbyrubbingoilorpetroleumjelly.Ontheotherside the urban upper class women takes care of their feet by regularly visiting parlours for pedicure and also by applying lotions and moisturizers. The middle class women applied cream and petroleum jelly whereas women of lower middle class houses applied oil and grease to protect their feet from drying.

(b) ThemarkettargetedbyKrakwastheyoungandworkingwomenwhodevotedgreatattentionto their looks and conscious about their beauty.

(c) The marketing strategy of Paras Pharmaceuticals was to target the young and working womenwhodevotedgreatattention to their looksandwereconsciousabout theirbeautyand therefore had less time to visit parlours etc. The advertisement was established in such away thatclaimedandmadeanappeal tocure feetwithin14daysplus itmadeawidercosmetic appeal promising a beautiful feet. Target Marketing is the strategy being used by the Company. A target market is the market a company wants to sell its products and services to, anditincludesatargetedsetofcustomersforwhomitdirectsitsmarketingefforts.Identifyingthe target market is an essential step in the development of a marketing plan and ultimately increasing the sales and revenue of the product.

ll



(a) Sales Selling Process1. Sales mean the exchange of goods or

services for an agreed sum of money or credit and it will never be completed till the full payment is realized.

Selling process is the process where the sell-er agrees to transfer ownership of the goods to the buyer for a price, which is agreed upon by both the parties.

2. Sales is the ultimate transfer of owner-ship from seller to buyer for certain pre-determined consideration.

Selling Process is the summation of the sales activities till the actual sales occurs and money is realised.

3. ActualSalesoccursafterthewholesell-ing process.

Selling process precedes the actual sales.

(b) Book Keeping Accounting1. Bookkeepingismainlyrelatedtoidenti-

fying,measuring,andrecording,finan-cial transactions.

Accounting is the process of summarizing, interpreting, and communicating financialtransactions which were classified in theledger account.

2. The objective of book keeping is to keep the records of all financial transactionsproperly and systematically.

The objective of accounting is to gauge the financialsituationandfurthercommunicatethe information to the relevant authorities.

(c) Product Service1. Products are tangible in nature. Services are intangible in nature.2. There is a transfer of title of ownership

from the seller to the buyer.There is no actual transfer of title of own-ership from the service provider to the re-ceiver.

(d) Direct Cost Indirect Cost1. Acostthatiseasilyattributabletoacost

object is known as Direct Cost.IndirectCostisdefinedasthecostthatcan-not be allocated to a particular cost object.

2. When all the direct costs are taken to-gether, they are known as prime cost. Theclassificationsofdirect cost aredi-rect material, direct labor, and direct ex-penses.

Total of all the indirect costs is called over-headsoroncost.Theclassificationsofindi-rect cost are indirect material, indirect labor and indirect overheads.

(e) Training Education1. Theprocessofinculcatingspecificskills

in a person is called training.Theoretical learning in the classroom or any institution is called education.

2. The objective is to improve performance and productivity.

The objective is to develop a sense of reason-ing and judgement.


20SOLUTION

Commercial Applications | 49 |Answer 2. (a) Two types of Marketing activities are as follows : (i) Relationship marketing : Thiscanbehighlyeffective,butitalsorequiresagreatdealof

commitment on the part of those doing the marketing. Relationship marketing occurs over a period of time, creating a long-term strategy that addresses every stage of the customer cycle. It delivers the message of the business to the customers on an ongoing basis, often requiring a daily commitment from the business. Relationship marketing activities include such practices as welcoming customers, soliciting feedback, creating customer loyalty programs, emails, thanking customers for purchases and individual meetingswithhigh-volumecustomersorinfluencers.

(ii) Online marketing : This has been the trend of the past decade. Many small businesses havefounditespeciallyeffectivebecausetheycancontroltheirmarketingbudgetwhiletargeting niche markets. Some initial online marketing strategies include pay-per-click advertising, banner advertising, e-mail marketing and search engine-optimized website content. Social networking sites have also become sources for online marketing for businessesofallsizes.SocialnetworkingmarketingsitessuchasTwitterandFacebookare very low in cost, but require a great deal of time commitment, as frequent updates contribute to greater success.

(b) Sales promotion techniques done at salesman level are : Trade allowances:shorttermincentiveofferedtoinducearetailertostockuponaproduct. Dealer loader : An incentive given to induce a retailer to purchase and display a product. Trade contest : A contest to reward retailers that sell the most quantity of the product. (c) The following are the main objectives of accounting are : (i) To maintain full and systematic records of business transactions : Accounting is

the language of business transactions. Given the limitations of human memory, the main objective of accounting is to maintain a full and systematic record of all business transactions.’

(ii) To ascertain profit or loss of the business : Business is run toearnprofits.Whetherthebusinessearnedprofitorincurredlossisascertained,bymeansofaccounting,bypreparingProfit&LossAccount or IncomeStatement.A comparisonof incomeandexpendituregiveseitherprofitorloss.

(d) (i) On the Job Training : Such training is given to make the employees proficient inperforming the operations of the job. The new entrants are trained to handle the equipmentsandrawmaterialscorrectlyandperformthejoboperationsefficiently.Oldemployees are acquainted with the latest methods of executing the jobs.

(ii) Induction Training : Induction or orientation training refers to the training given to the new employees of the organisation. The training is imparted by a competent and experienced executive, who provides knowledge about the work, tools, equipments, techniques and situational problems or total infrastructure. The objective is to make the employee aware and help them believe in the ideologies of the organisation.

(e) Advantages of Solar Energy are as follows : (i) RenewableEnergySource (ii) ReducesElectricityBills (iii) DiverseApplications (iv) LowMaintenanceCosts (v) TechnologyDevelopmentAnswer 3. (a) The statement that Marketing contributes to the economic development of the country is true.

Marketing and trade play vital roles in the economic growth and overall development of a nation. The major roles of marketing and trade in the national economy can be thought of in terms of :


(i) specialisationinactivitiesofcomparativeadvantage; (ii) enhancesresource-useefficiencyandtrade; (iii) advancesinmarketingwitheconomicgrowthetc. (b) The statement that there should be a full disclosure of accounting information is true.

For a business, the full disclosure principle requires a company to provide the necessary informationsothatpeoplewhoareaccustomedtoreadingfinancialinformationcanmakeeducated guesses and predictions. The required disclosures can be found in a number of places including the following :

(i) Thecompany’sfinancialstatements,includinganysupplementaryschedulesandnotes(orfootnotes).

(ii) Management’sDiscussionandAnalysisthatisincludedinapublicly-tradedcorporation’sannual report.

(iii) Quarterlyearningsreports,pressreleasesandothercommunications. (c) ThestatementthattheCentralBankisthelenderofthelastresortistrue.Thecentralbank

helps commercial banks in times of emergency. Sometimes, a large number of depositors want to withdraw their deposits from a commercial bank at the same time. Under such circumstances, the commercial bankwill have toborrow fromotherbanks.Butwhen theotherbanks,duetosomedifficulty,maynotbeinapositiontohelpthebankintrouble,thecentral bank comes to them as the lender of the last resort. In situations where a commercial bankoracredit institutionhasanurgentfinancialneedandisnotinapositiontomeetitfrom its existing means, it can call upon the central bank who readily advances the required amount to it. At this time, the central bank acts as the lender of the last resort. The central bank helps commercial banks either by granting loans, or by buying their securities, thereby providing the much required funds.

(d) The statement that recruitment is prerequisite of selection is true. It is the first step ofappointment. Recruitment refers to the overall process of attracting and shortlisting, thesuitable candidates for jobs (either permanent or temporary) within an organization.Recruitment can also refer to processes involved in choosing individuals for unpaid roles.

(e) The statement that Advertising is sometimes used as an instrument of cheating is true. False advertising is the use of false, misleading, or unproven information to advertise products toconsumersoradvertisingthatdoesnotdiscloseitssource.Oneformoffalseadvertisingistoclaimthataproducthasahealthbenefitorcontainsvitaminsormineralsthatitinfactdoesnot.Afalseadvertisementcanfurtherbeclassifiedasdeceptiveiftheadvertiserdeliberatelymisleads the consumer, as opposed to making an honest mistake. The types of misleading advertisingusedbycompaniesaredonebyphotoretouching,omittinginformation,hiddenfees and surcharges, etc.

Answer 4. (a) The types of selling are as follows : (i) Aggressive Selling : According to this type of selling, the sales representative stays

highly focused and his only intention is to sell. The sales representative indulges in such a technique that enhances the possibility of a sale that happens with one call.

(ii) Relationship building/Consultative Selling : In this type of selling, the sales representative is more focused on building a relationship with the prospect by adjusting well to the kind of selling situation that enhances the chances of sales.

(iii) Need-oriented Selling : In this selling technique, the sales representative needs to assess theneedsofthecustomerbyaskingquestionsandfinallysatisfyingtheexistingneedsofthe customer, rather than creating a new one.

(iv) Product-oriented Selling : According to this type of selling process, the sales representative is more inclined towards explaining the features and benefits of theproduct to the prospect. This style includes a lot of product demo till the time the prospectisfullyconvincedaboutthebenefits.

Commercial Applications | 51 | (b) Features of balance sheet (i) Prepared after the end of certain time period : A balance sheet cannot be prepared

anytime. There are certain time periods decided by the company’s management when the other entries will be ready to be placed in its sides. Usually, it is made after six months minimum. The company can choose to complete a balance sheet by maintaining the record after the end of a calendar year or an assessment year.

(ii) Understanding the available assets and liabilities : When a balance sheet is made, present assets and liabilities are categorized clearly to notify the company of their availability, such as :

(1) Fixedassets (2) Currentassets (3) Capital (4) Currentliabilities (5) Reserve&etc. (c) The two functions of commercial banks are as follows : (i) It accepts deposits : A commercial bank accepts deposits in the form of current, savings

andfixeddepositsfrombothindividualsandorganisations. (ii) It provides loans and advances : The second major function of a commercial bank is to

give loans and advances, particularly to businessmen like cash credit, demand loans, short-run loans, and overdraft facilities, etc., and thereby, earn interest.

(d) The fossil fuel is formed by natural processes, such as anaerobic decomposition of buried dead organisms, containing energy originating in ancient photosynthesis. The age of the organisms and their resulting fossil fuels is typically millions of years, and sometimes exceeds 650millionyears.Fossilfuelscontainhighpercentagesofcarbonandincludepetroleum,coal,andnaturalgas.Othercommonlyusedderivativesincludekeroseneandpropane.Fossilfuelsrange from volatile materials with low carbon to hydrogen ratios like methane, to liquids like petroleum, to non volatile materials composed of almost pure carbon, like anthracite coal. Methanecanbefoundinhydrocarbonfields,eitheralone,associatedwithoil,orintheformof methane clathrates.

(e)Theaccountthroughwhichsurplusordeficitofanon-profit-seekingconcernisascertained,is called Income and Expenditure Account. All the information necessary for preparation of thisaccountwillbeavailablefromledgeraccounts.Itsleft-handside(i.e.,Debit)recordsallrevenueexpenditure,whiletheright-handside(i.e.,Credit),recordsallrevenuesrelatingtothe current year. The balance of the account, if credit, indicates surplus, i.e.,excess of income overexpenditure.Conversely,thebalanceoftheaccount,ifdebit,indicatesdeficit,i.e., excess of expenditure over income people’s.

Answer 5. (a) Value education is the process by which people give moral values to others. It can be an

activity that can take place in any organisation, during which people are assisted by others, who may be older, kind of experienced to make people’s ethics explicit in order to assess the effectivenessofthesevaluesandassociatedbehaviourfortheirownandothers’ longtermwell-being,andtoreflectonandacquireothervaluesandbehaviourswhichtheyrecogniseasbeingmoreeffectiveforlongtermwell-beingofselfandothers.

The very purpose and main function of value education is the development of all round and well-balanced personality of the students and also to develop all dimensions of the human intellect so that children can help make the nation more democratic, cohesive, socially responsible, culturally rich and intellectually competitive. Value-education is a many sided endeavour and an activity during which young people are assisted by adults or older people in schools, family homes, clubs and religious and other organisations. Value education, is thus concerned with making morality a living concern for people.


(b) Itisimportanttodifferentiatethethreetermsandunderstandtheirrelationshipasinordertooperateeffectively,allthreeofthemarerequiredtobecoordinatedwitheachother.Salesmean the exchange of goods or services for an agreed sum of money or credit and it will never be completed till the full payment is realized. Sales is the process where the seller transfers ownership of the goods to the buyer for a price, which is agreed upon by both the parties. Henceitistheaggregateofallsalestransactionsperformedbyafirm.Salesmaybeexpressedeitherinvolume(quantity)orinamountofmoney.Forexample,withreferencetotelevisions,volumeofsalesmeans500televisionssold,withreferencetosweets,volumeofsalesmeans10 kilograms of sweets sold; in money terms sales of a commodity like wheat can be expressed as wheat sold of Rs. 1 lakh.

Sellingisasessentialtoanybusinessorganisationasbloodistoourlife.Itcanbedefinedasthe. Selling process is the total process of preparation, prospecting, pre-approach, approach, presentation, handling objections, closing sales and post-sale follow up. For example, in case of televisions, selling includes the whole process of preparing with the knowledge of the targetaudiencetotargetingtheprospectstoclosingthefinalsalesandpostsalesfollowupwith the customers.

In case of sweets, selling process includes targeting the audience according to the age group andpreferences,closingthefinalsaleswithdiscounts/extraquantity,etc.,tofinallyfollowingup whether the sweets ordered in bulk have reached and the customer’s review on the same.

In case of medicines, pharmaceutical companies prepare a target of the prospective stockists / doctors to place the order, approaching them and convincing them to prescribe or sell to finallyclosingthesalesbyprovidingbulkdiscounts,negotiatingonthecreditperiodpluspost sales follow up for the stock to be supplied .

Salesmanship is the process of assisting and persuading a prospective buyer to buy a commodity in a face-to-face situation. It involves direct and personal interaction between the salesperson and the prospective buyer. It is one of the most effective methods ofselling. Personal selling allows a company to have a human face, representing the product and allowing the customers to interact, thereby getting involveddirectly into the processof a customer’s purchasing decision. It involves persuasion of customers, winning buyer’s confidence,providinginformationandalsoaimsatmutualbenefit.

For example, in this cut throat competition , for sales of television, a salesman with exceptional skills of communication can convince a customer to buy the particular brand he is selling by gainingbuyer’sconfidence.Incaseofsweets,peopleareperceptiveandhavedifferenttastes,therefore,thesalesmanhastofindhistargetcustomertoconvincehimtotrythenewsweetbeing sold, whereas, in case of medicines, the doctors rely on the face value of the salesman to prescribe a particular brand of medicine.

Therefore, selling, salesmanship and selling are interrelated terms where a salesman sells to get sales.

(c) Technology has played a major role in the planning, provision and management of Training, Learning and Development. In the past 20 years, this has moved from the use of officeproductivity tools to draft learning content, prepared handouts and manually log training completions to the rollout of multimedia and social learning over a variety of technology platforms.Organisationsandtheiremployees,today,enjoytheflexibilityoftechnologybasedlearning. It isable tobedeveloped,deliveredandupdatedquicklyandcost effectively. Itis important that professionals working within HR are up-to-date with recent technological developments and ideas so that such people can deliver trainings in a beter way.Technology is changing at a rapid pace in today’s world and ever since the internet came about, it has grown exponentially, so it is important to keep up as much as possible with the changes that are happening. If HR people don’t keep up with the ever changing environment that technology brings,thentheyaremorethanlikelytodesign&implementthetrainingprogrammesinapoor manner.

Answer 6. (a) In marketing, distribution channel refers to the route which goods and services take to get

fromtheplaceofproductiontotheenduser.Distributionchannelsmaybeclassifiedintothefollowing categories :

Commercial Applications | 53 | Manufacture-Consumer (Direct Sale) : Here the goods pass directly from the producer to the

finalconsumer;hence,itisconsideredadirectchannel.Itiscommonincasesofservicesandspecialized goods, like jewellery. There are three alternatives in direct sale to consumers :

(i) Salethroughadvertisinganddirectmethods(mailorderselling), (ii) Salethroughtravellingsalesforce(housetohousecanvassing), (iii) Salethroughretailshopsofmanufacturer,e.g.,manufacturers’ownretailoutlets like

BataShoes. This is the shortest channel a product can follow to the market. Goods may be sold directly to

buyers, eliminating the middlemen and avoiding channel expenses. Manufacturer-Retailer-Ultimate Consumer : This channel option is preferable when buyers

are large retailers, e.g., a departmental store, discount house, chain stores, supermarket, big mail-order house or co-operative stores. The wholesaler can be bypassed in this trade route. It is also suitable when products are perishable and speed in distribution is essential. Automobiles, men’s and women’s clothing, shoes, etc., are sold directly to retailers. However, the manufacturer has to perform functions of a wholesaler such as storage, insurance, financingofinventories,andtransport.

Manufacturer-Wholesaler-Retailer-Consumer : This is a normal, regular and popular channel option used in groceries, drugs, cosmetics, toiletries, etc. This channel consists of two types of intermediaries, wholesaler and retailer. The producer supplies goods in bulk to the wholesaler who sells it in small quantities to the retailers as and when they require. In turn, the retailers sell to the consumers as per their requirements. Products that are durable and not subject to physical deterioration or fashion changes are sold through this distribution system. Wholesalers are very important here as they give advertising and sales promotion support.

Manufacturer-Agent-Wholesaler-Retailer-Consumer : In this channel, the producer uses the service of an agent or a middleman such as a sole selling agent, for the initial dispersion of goods. The agent in turn may distribute to wholesalers, who in turn sell to retailers. Many textile mills have sole agents for distribution. We may have a large national distributor, such as Voltas, acting as sole agent for many manufactures. Agent middlemen generally operate at the wholesale level. They are common in agricultural marketing.

Manufacturer-Wholesalers-Consumer/User : Wholesaler may by-pass retailer when there are large and institutional buyers, e.g., business buyers, government, consumer cooperatives, hospitals, educational institutions, business houses, etc.

(b)Thereareseveraldifferencesbetweenthebalancesheetandincomeandexpenditureaccount,which are outlined in the following points :

Income and Expenditure Account Balance sheet1. The income and expenditure statement

is an important final account of a busi-ness which shows the summarized view of revenues and expenses of a particular accounting period.

The balance sheet is a statement that shows a detailed listing of assets, liabilities, and capi-talshowingthefinancialconditionofacom-pany on a given date.

2. An income and expenditure statement is prepared for an entire accounting period.

A balance sheet is prepared on the last day of the accounting period.

3. Accounts that are transferred to the in-come and expenditure statement are closed.

Accounts that are transferred to the balance sheet are not closed.

4. Anincomestatementshowshowprofits/gains are earned and expenses/losses are incurred.

Balancesheet,ontheotherhand,showsthefinancialpositionofabusiness.

5. Itconsistsofincomeandexpenses. It consists of assets, liabilities, and capital.


(c) Thevarious factors influencing thechoiceofasourceof recruitmentcanbeclassified intointernal and external factors. Following is the explanation of both the factors.

Internal Factors : The internal factors, also called endogenous factors, are the factors within the organisation that affect the recruitment of personnel in the organisation. The internalforces, i.e., the factors which can be controlled by the organisation, are :

(i) Recruitment Policy : The recruitment policy of the organization, i.e., recruiting from internalandexternalsources,alsoaffectstherecruitmentprocess.Therecruitmentpolicyof anorganisation specifies theobjectives for recruitment andprovides a frameworkfor implementation of recruitment program. It may involve organisational system to be developed for implementing recruitment programs and procedure by filling upvacancieswithbestqualifiedpeople.

Factorsaffectingrecruitmentpolicyare: (1) Needoftheorganization. (2) Organisationalobjectives. (3) Preferredsourcesofrecruitment. (4) Governmentpoliciesonreservations. (5) Personnelpoliciesoftheorganisationanditscompetitors. (6) Recruitmentcostsandfinancialimplications. (ii) Human Resource Planning : Effectivehumanresourceplanninghelpsindeterminingthe

gaps present in the existing manpower of the organisation. It also helps in determining thenumberofemployeestoberecruitedandwhatqualificationtheymustpossess.

(iii) Size of the Organisation : Thesizeoftheorganisationaffectstherecruitmentprocess.Ifthe organisation is working on a large scale, it will need to hire more personnel in order to handle its operations.

(iv) Cost involved in recruitment : Recruitment incurs cost to the employer ; therefore, organisations try to employ that source of recruitment which will bear a lower cost of recruitment to the organisation for each candidate.

(v) Growth and Expansion : An expanding organisation will employ more personnel in order to accumulate more manpower to keep the expanded functions of its operations running.

External Factors : (1) Supply and Demand : The availability of manpower, both within and outside the

organization, is an important determinant in the recruitment process. If the company has a demand for more professionals and there is limited supply, in the market, of the professionals demanded by the company, then the company will have to depend upon internal sources by providing them special training and development programs.

(2) Labour Market : Employment conditions in the community, where the organisation is located,willinfluencetherecruitingeffortsoftheorganisation.Ifthereisasurplusofmanpoweratthetimeofrecruitment,eveninformalattemptsatthetimeofrecruitinglike notice boards, display of the requisition or announcement in the meeting, etc., will attractmorethanenoughapplicants.

(3) Goodwill / Image of the organization : Image of the organisation is another factor havingitsinfluenceontherecruitmentprocessoftheorganisation.Thiscanworkasapotential constraint for recruitment. An organisation with a positive image and goodwill asanemployerfindsiteasiertoattractandretainemployeesthananorganisationwithanegativeimage.Imageofacompanyisbasedonwhatitdoesandisaffectedbytheindustry as a whole. Managerial actions like good public relations, rendering public services like building roads, public parks, hospitals and schools, etc., help earn an image or goodwill for the organisation.

(4) Political-Social-Legal Environment : Various government regulations prohibiting discrimination in hiring and employment have direct impact on recruitment practices.

Commercial Applications | 55 |For example, the Government of India has introduced legislation for reservation in employment for scheduled castes, scheduled tribes, physically handicapped, etc. Also, trade unions play an important role in recruitment. This restricts management’s freedom to select those individuals who it believes would be the best performers. If the candidate can’t meet the criteria stipulated by the union, the union regulations can still restrict recruitment sources, forcing them to hire sub-quality personnel.

(5) Competitors : Therecruitmentpoliciesofthecompetitorsalsoaffecttherecruitmentfunctionof the organizations. To face the competition, many a times, the organisations have to change their recruitment policies according to the policies being followed by the competitors.

Answer 7 (a) Following are the various brand promotion methods conducted to keep the brand noticeable : (i) Organising Contests : To attract the consumers, various contests are organised for

consumers without having them to purchase the product and giving away gifts or prizes. (ii) Promotion on Social Media : When the brand is promoted on social media, it is not

perceivedas“aggressivelytryingtosell”,ratherasbeingabletocommunicateatamorepersonal level.

(iii) Product Giveaways : This strategy is used for promoting edibles, toiletries, foods, etc., where a small sample is given away to the consumers for free trial.

(iv) Point-of-Sale Promotion : These items are placed near the checkout counter in the store and are often purchased by consumers on impulse as they wait to be checked out.

(v) Customer Referral Incentive Programs : This is a way to bring new customers with the helpoftheexistingcustomersbyofferingsomeincentivestotheexistingcustomers.

(vi) Causes and Charity : Some percentage of the sales amount, is donated for a cause or charity, thereby, promoting the product. Charity and cause are the reasons which induce the feelings of helping in the customers.

(vii) Promotional Gifts : It is giving away of gifts which the customers can practically use, such as caps, key chains, pens, etc. This helps the brand to always remain with the customersandcreateanemotionalattachmentbetweenthetwo.

(viii)Customer Appreciation : It is organised with the objective of not selling the product orservice.It isawayofcreatingafondmemoryattachedwiththebrand.It includesorganising in-store refreshment eventswith the offer of food treats of pizza, burger,beverages,etc.Itisaneffectivewaytobringnewpotentialcustomers.

(b) All fossil fuels are non renewable, but not all non-renewable energy sources are fossil fuels. Coal, crude oil, and natural gas are all considered fossil fuels because they were formed from the buried remains of plants and animals that lived millions of years ago. Uranium ore, a solid, is mined and converted to a fuel used at nuclear power plants. Uranium is not a fossil fuel,butitisclassifiedasanonrenewablefuel.

A fossil fuel is a fuel formed by natural processes such as anaerobic decomposition of buried dead organisms containing energy originating in ancient photosynthesis. The age of the organisms and their resulting fossil fuels is typically millions of years, and sometimes exceeds 650millionyears.Fossilfuelscontainhighpercentagesofcarbonandincludepetroleum,coal,andnaturalgas.Othercommonlyusedderivativesincludekeroseneandpropane.Fossilfuelsrange from volatile materials with low carbon to hydrogen ratios like methane, to liquids like petroleum, to non volatile materials composed of almost pure carbon, like anthracite coal. Methanecanbe found inhydrocarbonfields,eitheraloneorassociatedwithoil,or in theform of methane. Therefore, since fossil fuels take millions of years to form, they are a non renewable source of energy.

(c) Public relations is an integral part of the management functions. It contributes to achieve organisational goals and demonstrates an organisational accountability which can be identifiedbymeasurableresult.Publicrelations’uniquefunctionistohelptheorganisationdevelopandmaintainrelationshipswithallofitskeypublicsandstakeholdersbyeffectivelycommunicating with these groups. Communication is key in maintaining a satisfactory, long-


term,trustingrelationshipwithpublicsandstakeholders.Inaneffectiveorganization,allthemajor functions are linked together by a common set of strategies that tie in to an overall vision of the future and an underlying set of values. In addition to reaching employees, a successful organisationmust also communicate effectivelywith its customers, its suppliers, and if itis a public/listed company, its shareholders. For each key public, a set of messages must be developedaswell asaplan to reach thepublic in themostefficientway.Public relationsprofessionals can be communication managers who organise and integrate communication activities, or they can be communication technicians who primarily write and construct messages. Managing various key publics of the organisation, whether internal or external, makes Public Relations a management function.

Answer 8 (a) An ecosystem is a complex set of relationship among the living resources, habitats and

resisdents of an area.A set of ecosystemsat theglobal level influences the climateof theearth as well. As more and more rapidly the development is taking place, it is destructing the ecosystemsatdifferentplaceswhichisinflicitingnegativeimpactontheclimate.Theemissionofexcessgreenhousegasesandchloroflurocarbonhasledtotheglobalwarning.Theglobalwarminghasresultedintothechangeofweatherpatternthearoundtheworld.Somewherethere is excess rain and somewhere there is drought. This excess emission is not only the result of wide scale air pollution generated by industries but also the result of decreasing forests cover all over world. The forests cover is shrinking due to large scale expansion of populationwhichisleadingtocuttingofthetreesforroadshoures,railtracksetc.Similaristhe destruction of water bodies, grass lands etc. Such destructions are causing disturbances in natural environment cycles which is causing change in the climate.

(b) Technology is always advancing and improving. Many new technologies are naturally more energyefficientandlesspollutingthantheonestheyreplace.Sometimes,thisisbecausetheywere designed with environmental improvement in mind. Usually, however, it is simply the resultofusingnewerandbettermaterialsandcomponents.Therefore,pollution-preventingtechnologies can be found in every area of a product’s life cycle.

Lifecycleanalysis(LCA)isneededtodetermineifaparticulartechnologyreallypolluteslessthanitsalternatives.LCAistheexaminationoftheenvironmentalimpactsofaproduct,fromitsoriginasrawmaterial,throughprocessingandproductiontouseandfinaldisposal.Thiscanbeacomplexprocess.Forexample,fluorescentlightbulbsmayseemtobelesspollutingthan incandescent light bulbs because they use much less energy. However, they actually use polluting chemicals such as mercury that are not found in incandescent light bulbs. So they use less energy, but more toxic chemicals. The choice of indicators for P2 or Pollution Prevention performanceandLCA,suchastoxicityorenergyefficiency,isimportantforevaluation

Some technologies are designed specifically for protecting the environment while alsoimproving business performance. For example, recycling technologies can help recover valuablematerialsfromwastes,cuttingmanufacturingcosts,whilealsopreventingpollution.Examples include gene-engineered plants that do not need protection using chemical insecticides and fuel cells for generating electricity. However, it is surprisingly challenging to identify such technologies. Most technologies that stop pollution were usually created to simply reduce costs and save on materials.

OneimportantandfundamentalexceptionisP2inchemicaldesign.Thousandsofchemicalsare used in industry, commerce, and daily life. Many of them have environmental impacts, from mildtoserious.Bydevelopingalternativechemicalswithbetterenvironmentalperformance,significantreductionsinpollutioncanbeobtainedthroughoutproductlifecycles.Acommonapplication of green chemistry is in the design of environmentally benign solvents. Traditional solvents such as acetone, xylene, and methylene chloride are being replaced by new chemicals designedspecificallytobelesshazardousorlesspolluting.

(c) Trainingthestaffisgoodforthecompany’sbusinessandgoodfortheworkforce.Trainingcanimprovebusinessperformance,profitandstaffmorale.Advantagesofstafftraningtothebusiness include :

Commercial Applications | 57 | (i) Thecompanychooseswhatnewskillstheworkforcegains,targetingskillstomeetthe

needs of the operation for now and in the future. (ii) Trainingthestaffcanresultinbettercustomerservice,betterworksafetypracticesand

productivity improvements. (iii) ThetrainersdemonstrationtotheworkforcethattheCompanyvaluesthemenoughto

investinthem,improvesloyaltyandstaffretention.Inturn,retentionofpersonnelisasaving to the company.

Training has many benefits for the staff : (i) Theyacquirenewskills,increasingtheircontributiontothebusinessandbuildingtheir

self-esteem. (ii) Thetrainingtheydocantakethemintootherpositionswithintheorganisation,i.e.,–

positionswithbetterprospectsand/orbetterpay. (iii) Theyareup-skilled todonewanddifferent tasks,whichkeeps themmotivatedand

fresh, (iv) Sincetheyarebeingtrainedonthecompany’stime,theyseethatthecompanyvalues

them enough to invest in them. A good company is seen as one that retrains rather than churn.

Answer 9 (a) PetroleumCompaniessell theirproductsthroughdealerswhohaveretailoutletsasfilling

stationsorpetrolpumps.ThepublicsectorunitsinPetroleumlikeIndianOilCorp.,BharatPetroleumCorp.Ltd.&HindustanPetroleumCorp.Ltd.havedifferentDealersalloverthecountry.RetailOutletsareeitherCompanyownedCompanyOperated(COCO)orCompanyownedDealerOperated(CODO)orDealerowneddealeroperated(DODO).Thegovernment’sdecisiontoallowprivatesector toenterpetroleumrefinerieshasgivenrise todemandforretailoutletsfortheseprivatesectorrefineries.Thebasicreasonforadoptingsuchchannelsis that there are companies who want to esnure quality products to its customers. There retail outletsofferotherservicestotheconsumerstoo.Anumberofretailstoresonecomingupattherefuelstationsalso.Thesecompaniesarepayingtheirattentiononthetechnologyaspectas well because modern looking pumps make consumers less suspicious and they feel they are not being cheated on quantity or quality.

(b) ThepetroleumcompanieslikeIndianOilCorp.,BharatPetroleumCorp.Ltd.&HindustanPetroleumCorp. ltd. ensurequalityproducts to its customers. For example theBPCLhasstartedacertificationcampaign,’PureforSure‘,whichguaranteesqualitypetroltoconsumerstopersuadethemtoswitchovertotheirfillingstations.Thecompanytookfullresponsibilityfortheirproductsanddecidedonacertificationprogrammeforalltheirdealers.Thisensuresqualityproductsandincreaseinsalesatretailoutlets.Thesecompaniesarepayingattentionotmodernize their outlets like improving facilities and technology like installing new machines, openingupnewretailoutlets&conveniencestoresetc.

(c) RPL is depending upon PSU oil majors to lift sizeable quantities of its product from itsJamnagarrefinery tomarket it. If IOC,BPCLandHPCLdonotcooperate, theRPLhas tomarketitsownproduct.ButifthegovernmentallowsRPLtoenterretailing,Reliancewillalso have to set-up some of its retailing infrastructure in various remote areas where sales volume is low.

Question 10 (a) The Indian corporate sector is opposing the ethics law becuase it feels that the new corporate

governance rules are too conservative and rather there is a need for tightening the existing laws instead of framing the new corporate governance rules. There is a feeling that the new legislation will end up strangulating the business community. Industrialists gathered for an AGM of CII and spoke in one voice against legislation of corporate governance. The MNCs working in the country had earlier voiced concerns over the measures suggested by the committee.


(b) AspertheobservationsoftheNareshChandraCommitteesetupbytheDept.ofCompanyAffairs (DCA), Indian companies have still some ground to cover in terms of corporategovernance’s best practises in substance. For example as per the committee’s view, theprimary responsibility of preparing accounts is with the management, the auditors cannot be absolvedoftheirresponsibilities.Asaremedy,theCommitteehasrecommendedthatatleast50%of theCompanyBoardshouldbeconstitutedby IndependentDirectorsandapersonwouldceasetobeanindependentDirectorifhe/shecontinuesontheboardformorethan9years at a stretch.

(c) The answer to this question was given by Jamshed J. Irani, Director of Tata Sons, who was of the view that new corporate governance rules could be made and held up by constitution of committees but it might not have significant impacts on improvement of CorporateGovernance in India.He further added that instituting committees to look into corporategovernance would not serve any purpose and pointed out that corporate governance could not be legislated and that it was a mindset, which could be implemented only through belief of the board. He added that the state of corporate governance in India stood much higher in comparison to the rest of the world.

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