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Types of Accounting Information

Types of Accounting Information
Types of accounting information may be classified into four categories: Operating information Financial accounting information Management accounting information and Cost accounting information 1. Operating Information: This is the kind of  information which is required to conduct the day-to-day activities. Examples of operating information are: Amount of wages paid and payable to employees Information about the stock of finished goods available for sale and Each one’s cost and selling price Information about amounts owed to and owing by the business enterprise Information about stock of raw materials, spare parts and accessories and so on. By far, the largest quantity of accounting information provides the raw data (input) for financial accounting, management accounting and cost accounting.    Spend Wisely   The Ultimate Startup Guide for Entrepreneurs   2. Financial Accounting: Financial accounting information is meant both for owners and managers and also for the use of individuals and agencies external to the business. This accounting is concerned with the recording of transactions for a business enterprise and the periodic preparation of various reports from such records. The records may be for general purpose or for a special purpose.   Focus on the Long Term    3. Management Accounting: Management accounting makes use of  both historical and estimated data in assisting management in daily operations and in planning for future operations. It deals with specific problems that is faced by enterprise managers at various organizational levels. The management accountant is often concerned with finding alternative courses of action and then helping to select the best one. For e.g. The accountant may help the finance manager in preparing plans for future financing or may help the sales manager in deciding the selling price to be fixed on a new product by providing suitable data.     Generally management accounting information is used in three important management functions: Control Co-ordination and Planning 4. Marginal costing is an important technique of management accounting which provides multi dimensional information that helps in  decision making.   Specialised Accounting Fields A number of specialized fields in accounting also have evolved besides financial accounting. Management accounting and cost accounting are the result of rapid technological advances and enhanced economic growth. The most important among them are explained below:   1. Tax Accounting: Tax accounting is all about the filing of tax returns and the consideration of the tax implications of proposed business transactions or alternative courses of action. Accountants specializing in this branch of accounting are familiar with the tax laws affecting their employer or clients and are up to date on administrative regulations and court decisions on tax cases.     2. International Accounting: This accounting is concerned with the special issues associated with the international trade of multinational business organizations or MNC’s. Accountants specializing in this area must be familiar with the influences that custom, law and taxation of various countries bring to bear on international operations and accounting principles.   3.Social Responsibility Accounting: This branch is the newest field of accounting and is the most difficult to describe. Social responsibility accounting is so called because it not only measures the economic effects of business decisions but also their social effects, which have previously been considered to be immeasurable. Social accounting is also known as social accounting and auditing, social and environmental accounting, corporate social reporting, corporate social responsibility reporting, non-financial reporting or accounting.   Benefits of Social Accounting   4. Inflation Accounting: Inflation accounting is a term describing a range of accounting models designed to correct problems arising from historical cost accounting in the presence of highinflation and hyperinflation. Inflation accounting is used in countries experiencing high inflation or hyperinflation.   5. Human Resources Accounting: Human resource accounting is the process...
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Advantages and Limitations of Ratio Analysis

Advantages and Limitations of Ratio Analysis
What are the advantages and limitations of ratio analysis? Advantages: It is an important and useful tool to determine the efficiency with which working capital is being managed in a business organization. It is a ‘health test‘ for a business firm in that it can gauge whether the firm is financially healthy or not. It aids the management of business concern in evaluating its financial position and performance efficiency. It clearly shows the trend of changes in the market position (upward, downward or static), as it covers a number of previous accounting (financial) periods. The progress or downfall of a firm is clearly indicated by this analysis. It assists in preparing financial estimates for the future (financial forecasting). It facilitates the task of managerial control to a great extent. It helps the credit suppliers and investors in deciding upon a business firm as a potential investment outlet or desirable debtor. Ideal or Standard ratios can be established which can be used as reference points of comparison for a firm’s progress over a period of time. It communicates important information with relation to financial strength, earning capacity, debt (borrowing) capacity, liquidity position, capacity to meet fixed commitments, solvency, capital gearing, working capital management, future prospects etc. of a business concern. This analysis is also useful for bench marking purpose- to compare the working result and efficiency of performance of a business enterprise with that of other firms engaged in the same industry (inter-firm comparison). It helps the management to discharge their basic functions of planning, coordinating, controlling etc. It serves as an instrument for testing management efficiency too. It acts as a useful tool for deciding on certain policy matters. Limitations: Accounting ratios calculated based on ratio analysis will be correct only if the accounting data on which they are based are correct. It is only an analysis of past financial data. In certain cases ratio analysis might prove to be misleading with regard to profits. Continuous fluctuation in price levels ( or, purchasing power of money) seriously affect the validity or comparison of accounting ratios calculated for different accounting periods and make such comparisons very difficult. Comparisons become difficult also on account of difference in the definition of several financial (accounting) terms like gross profit, operating profit, net profit etc. There is lot of diversity in practice as regards to the measurement of ratios. Different firms use different accounting methods and the validity of comparison is severely affected by window dressing in the basic financial statements. A single ratio will not be able to convey much information. This analysis only gives part of the total information required for proper decision-making. This should not be taken as a substitute for sound judgement.  It should not be overlooked that business problems cannot be solved mechanically through ratio analysis or other types of financial analysis. Follow ManagementGuru Net’s board Accounting – Financial and Management Accounting on...
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Capital Budgeting and Capital Accounting Systems

Capital Budgeting and Capital Accounting Systems
Capital Budgeting and Capital Accounting Systems  These internal accounting systems facilitate and support decision-makers in assessing potential investments with respect to cost effectiveness. The purpose of capital accounting systems support decision-makers in monitoring and planning liquidity. What is Capital Budgeting? Capital budgeting is the planning process used to determine whether an organization’s long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth the funding of cash through the firm’s capitalization structure. Capital budgeting systems is a framework that support management in making decisions in the context of capital investment decisions. In particular, capital budgeting systems help to determine whether or not a capital investment will earn back the original expenditure  and in addition provide a reasonable return. This type of decisions usually entails large amounts of organizational resources at risk and, at the same time, affects the future development of the organization . Capital budgeting systems usually focus on capital investment decisions that cover many years. This discriminates capital budgeting systems from income determination and planning which usually focus on the current period. Capital investment decisions usually encompass cash inflows and outflows that accrue at different points in time which are usually answered by adding accrued interest of discounting of cash-flows. Capital budgeting process consists of six steps: Project Generation Estimation Of Cash-Flows Progress Through The Organization Analysis And Selection Of Projects Authorization Of Expenditures And Post-Audit Investigations.  In the step of (1) project generation, potential investments are chosen for which in step (2) potential cash-flows are estimated. In step (3), i.e., progress through the organization,  certain projects require approval of top-management. In step (4),  analysis and selection of projects, the selected projects are assessed with respect to the fact that cash inflows and outflows usually realize at different points in time. In Step (5), authorization of expenditures, captures the final decision (usually made by top management) on whether or not to invest into the selected project. Finally, in step (6) captures a post-audit investigation, i.e., after a certain period of time actual results might be gained which potentially provide input for control purposes. Capital budgeting systems particularly support management in step (4), i.e., the analysis and selection of projects. Capital accounting systems support management in planning and controlling liquidity. Courtesy: S. Leitner, Information Quality and Management Accounting, Lecture Notes in Economics and Mathematical...
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Top 50 HR Quotes

Top 50 HR Quotes
Popular HR Quotes by Industry Experts and Management Scholars 1. “Great Vision Without Great People Is Irrelevant.” -Jim Collins, Good To Great 2. “Human Resources Isn’t A Thing We Do. It’s The Thing That Runs Our Business.” -Steve Wynn, Wynn Las Vegas 3. “You Need To Have A Collaborative Hiring Process.” -Steve Jobs, Apple 4. “You Can’t Teach Employees To Smile. They Have To Smile Before You Hire Them.” -Arte Nathan, Wynn Las Vegas 5. “Never Hire Someone Who Knows Less Than You Do About What He’s Hired To Do.” -Malcolm Forbes, Forbes 6. “When Hiring Key Employees, There Are Only Two Qualities To Look For: Judgement And Taste. Almost Everything Else Can Be Bought By The Yard.” John W. Gardner 7. “Recently, I Was Asked If I Was Going To Fire An Employee Who Made A Mistake That Cost The Company $600,000. No, I Replied, I Just Spent $600,000 Training Him. Why Would I Want Somebody To Hire His Experience?” -Thomas John Watson Sr., Ibm 8. “It’s More Than Just Selling Pizzas. It’s Being A Good Fit For The Community. We Hire Based On The Betterment Of The Community As Much As Anything.” -Mark Starr, David’s Pizza. 9. “You Can Have The Best Strategy And The Best Building In The World, But If You Don’t Have The Hearts And Minds Of The People Who Work With You, None Of It Comes To Life.” -Renee West, Luxor And Excalibur Hotel 10. “I am convinced that nothing we do is more important than hiring and developing people. At the end of the day you bet on people, not on strategies.” -Lawrence Bossidy, Ge CURRENT TRENDS IN HRD 11. “Do Not Hire A Man Who Does Your Work For Money, But Him Who Does It For The Love Of It.” -Henry David Thoreau, Life Without Principle 12. “If You Think Hiring Professionals Is Expensive, Try Hiring Amateurs” -Anonymous 13. “The Key For Us, Number One, Has Always Been Hiring Very Smart People.” -Bill Gates, Microsoft 14. “Time Spent On Hiring Is Time Well Spent.” -Robert Half 15. “I Hire People Brighter Than Me And Then I Get Out Of Their Way” -Lee Iacocca, Ford  16. “You Cannot Push Anyone Up The Ladder Unless He Is Willing To Climb.” -Andrew Carnegie 17. “Management Is Nothing More Than Motivating Other People.” -Lee Iacocca, Ford  18. “There Are Few, If Any, Jobs In Which Ability Alone Is Sufficient. Needed, Also, Are Loyalty, Sincerity, Enthusiasm And Team Play.” -William B. Given, Jr. 19. “When People Go To Work, They Shouldn’t Have To Leave Their Hearts At Home.” -Betty Bender 20. “One Machine Can Do The Work Of Fifty Ordinary Men. No Machine Can Do The Work Of One Extraordinary Man.” -Elbert Hubbard 21. “To Find Joy In Work Is To Discover The Fountain Of Youth.” -Pearl S. Buck 22. “One Of The Symptoms Of An Approaching Nervous Breakdown Is The Belief That One’s Work Is Terribly Important.” -Bertrand Russell 23. “Opportunity Is Missed By Most People Because It Is Dressed In Overalls And Looks Like Work.”  -Thomas A. Edison 24. “Far And Away The Best Prize That Life Offers Is The Chance To Work Hard At Work Worth Doing.” -Theodore Roosevelt 25. ”Being Busy Does Not Always Mean Real Work. The Object Of All Work Is Production Or Accomplishment And To Either Of These Ends There Must Be Forethought, System, Planning, Intelligence, And Honest Purpose, As Well As Perspiration. Seeming To Do Is Not Doing.” -Thomas A. Edison 26. “Going To Work For A Large Company Is Like Getting On A Train. Are You Going Sixty Miles An Hour Or Is The Train Going Sixty Miles An Hour And You’re Just Sitting Still?” -J. Paul Getty 27. ”When...
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Organizational Climate

Organizational Climate
Organizational Climate – An Analogy Organizational climate is a measure of the feel of the internal environment of an organization which is perceived by an outsider and/or an employee according to their business with the organization. Organizational climate has a great effect on employees’ behavior. If the climate of an organization is open and friendly, employees feel relaxed and if it is very formal, then such a comfort level may not be felt. Climate for an organization is somewhat like personality for a person. “Just as every individual has a personality that makes him/her unique, an organization has a climate that clearly distinguishes its personality from other organizations. Human religionists introduced the concept of organizational climate in the late 1940’s. Now this has become a very useful metaphor for thinking about and describing the social aspects of a firm. Some definitions: “A set of characteristics that describe an organization and that i. Distinguish one organization from another ii. Are relatively enduring over a period of time and iii. Influence the behavior of people in the organization.” – Forehand and Gilmber “A mutually agreed internal (or molar) environmental description of an organization’s practices and procedures.” – Benjamin Schneider (1975) “A relatively ending quality of the internal environment that is experienced by the members, which influences their behavior and can describe in terms of values of a particular set of characteristics of the organization.” – Renato Tagiuri (1968) Features: It is an abstract and intangible concept. But it exercises a significant impact on the behavior and performance of organization members. It is the perceived aspect of organization’s internal environment. It refers to the relatively enduring characteristics which remain stable over a period of time. It gives a distinct identity to organization and differentiates it from others. It is a total expression of what the organization is. It is the summary perception which people have about organizations. It is a multi-dimensional concept. It consists of all organizational factors – authority pattern, leadership pattern, communication pattern, control etc.  Elements of Organizational Climate: Individual Autonomy: The extent to which employees are entrusted with to make decisions, the degree to which they are free to manage themselves and have the freedom to exercise their responsibility come under the purview of individual autonomy. Position Structure: It means the extent of direct supervision, formalization and centralization in an organization. Reward Orientation: The degree to which an organization rewards individuals for hard work or achievement. It will be high when an organization orients people to perform better and rewards them for doing so. Task Orientation: If the outlook of the top management is task oriented, the employees will have to speed up the pace of work to please their bosses. Relations Orientation or Consideration: Here the climate is conducive and supportive where the managers are relations-oriented while dealing with their sub-ordinates. The needs and aspirations of the workers will be given due importance resulting in enhanced team spirit. Job Satisfaction: The workers feel happy if the jobs are designed to allow the worker to use their innovative skills. Morale: Morale represents a composite of feelings, attitude and sentiments of organizational members towards the organization, superiors and fellow workers. If it is high, there will be an atmosphere of co-operation and if it is low, there will be conflicts and poor co-operation among the workers. They will also feel dis-oriented in their work. Control: The control systems may be either rigid or flexible. An impersonal or bureaucratic atmosphere is seen in the former situation where the scope of self-regulation will be minimum. DOWNLOAD THE PDF...
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