Accounting Economics And Business 11 Nov

ACCOUNTING, ECONOMICS & BUSINESS AFTERSCHO☺OL

– DEVELOPING CHANGE MAKERS CENTRE FOR SOCIAL ENTREPRENEURSHIP PGPSE PROGRAMME – World’ Most Comprehensive programme in social entrepreneurship & spiritual entrepreneurship OPEN FOR ALL FREE FOR ALL

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

ACCOUNTING, ECONOMICS & BUSINESS Dr. T.K. Jain.

AFTERSCHO☺OL Centre for social entrepreneurship Bikaner M: 9414430763 [email protected] www.afterschool.tk, www.afterschoool.tk www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

WHAT IS GRESHAM’S LAW? • Bad currency will throw out good currency from circulation.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What are the functions of money? • • • •

Store of value Exchange value Security Measurement

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Draw production possibility curve with the following information . . • There are 2 goods – one from 0 to 5 and another from 30 to 0. if we increase production of first from 2 units to 4 units, what is the opportunity cost? • It is 14 units of 2nd item. www.afterschoool.tk

0

1

2

3

4

5

30

28

24

18

10

0

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

There are two types of products, what is the opportunity cost of producing 10 units of first unit instead of 0 units?

• Answer 5 units of second unit. • If we have 30 units of first and 45 units of second unit, would you go for it? • Solution: No as we can get 30 + 75 so why should we go for 30+45. answer. www.afterschoool.tk

0

105

10

100

20

90

30

75

40

55

50

30

60

0

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solve the following? • Sudha quit her job at a private company where she earned Rs. 2,90,000 a year. She withdrew Rs. 4,00,000 in a savings account that earned 10% interest annually to buy a second hand mini bus to commune passenger between Cannaught Place and Noida. There arc 1000 passengers who will pay Rs. 4000 a year each for commuter services; Rs. 2800 from each passenger goes for petrol, maintenance, depreciation etc. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Find opportunity cost of Sudha? • The opportunity cost of Sudha is : Rs. 2,90,000 which she was getting in a company.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is the accounting cost of Sudha? • • • •

The cost is : Interest : Rs. 40000 Plus petrol / diesel / other expenses @ 2800 per pessenger (this is variable expneses = as it depends on route etc.) • 2800*1000 = 28,00,000 answer. • Income = 4000*1000 • =4000000 answer. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is the economic cost of Sudha? • Economic cost = opportunity cost + accounting cost • = 290000 +2800000 answer.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What should a developing economy do ? • It should initially promote heavy industries – because they can help in providing infrastructure, basic facilities, services etc. thus they will create a base for rapid industrialisation • It should initially build infrastructure so that FDI flows in and industries are set up thus employment generation takes place. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

In the previous PPC (production possibility curve) if production of second unit is increased from 10 to 24, what is the opportunity cost? • Two units of first units.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

We make DahiBada and cost structure is as under? Qty

TC

FC

0

100

10

210

20

300

30

400

40

540

50

790

60

1060

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VC

AVC

AFC

MC

TC

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

If price of DahiBada is Rs. 14 each, what is the best output? Qty

TC

FC

VC

AVC

AFC

MC

TC

TR

Profit

0

100

0

-100

10

210

140

-70

20

300

280

-20

30

400

420

20

40

540

560

20

50

790

700

-90

60

1060

840

-220

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • The best output is at 30 unit and 40 unit level. We may explore further and the best out put may be at 35.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is VC when 60 DahiBada are made? • VC = TC – FC • =1060 – 100 • =960

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

A contracts with B to buy jewellery made of pearls whereas in fact it IS made of imitation pearls of no value. B knows that A is mistaken and takes no steps to correct the error. NOW A wants to cancel the contract on the basis of fraud. what should he do? www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • There is no proof that B had committed fraud. He didn’t give any false information. Let the buyer beware – and therefore it was the duty of A to inquire about the product.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

what is AFC? • Average fixed Cost • = Total fixed cost / total number of units manufactured • Suppose total fixed cost is Rs. 500, and we have made 200 units, the AFC is 2.5 • If suppose we make 500 units AFC will come down to only Re. 1. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

If this is the cost schedule, what is the AFC & AVC when we make 6 units?

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • Fixed cost = 240 • 240/6 = 40 per unit. (AFC) • AVC = TotalVariable cost / Total no. of units • Variable cost = TC – FC • =690 – 240 = 450 • AVC = 450 / 6 = 75 per unit answer. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What will happen if utility obtained in first unit is 10, 2nd unit 7, 3rd unit 3, and 4th unit = -4. show total utility

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

In the previous question, how many units will the consumer consume and what will be his total utility? • The consumer will consumer 3 units and his total utility will be 20. (the consumer will not use fourth unit). Marginal utility will be 3 at that time.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

When do you find marginal return diminishing?

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units

TC

0

240

1

330

2

410

3

480

4

540

5

610

6

690 AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution

units

TC

0

240

1

330

90

2

410

80

3

480

70

4

540

60

5

610

70

6

690

80

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MC

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution … • As in the previous graph we can see that the marginal cost (MC) is reducing initially - but it starts increasing when we make 5th unit. Marginal returns decrease when MC starts increasing. Thus marginal returns start decreasing from 5th unit. Answer.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What do you understand by equilibrium of a firm? Explain your answer. • The firm is said to be in equilibrium when MR = MC. There are different market conditions like perfect market, monopoly or monopolistic competition, in each of these conditions the equilibrium is when MR = MC and MC curve cuts from below. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Example: EQUILIBRIUM OF THE FIRM

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Clarify the statement that a firm is a price taker under perfect competition but not so in monopoly or monopolistic competition. Give reasons for your answer. • In perfect market, the prices are determined purely by industry and not by individual firm. The firm has no role in price decision. There are very large number of firms and no firm can alone www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS influence price.

Illustration . .as we can see in the graph below : (there are different firms, each trying to match industry..

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Detailed explanation • Perfect market is the market condition where the aggregate demand and aggregate supply decide the price. Purely the market forces work (all the goods are homogenous) and they determine price, which has to be followed by the firms.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Graph of perfect market.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Explain the concept of optimum output. Under what conditions is it achieved by a firm ? • Optimum output can be achieved in the long run. In short run the firm can only vary only one factor = labour. It cannot change the other factor of production. Thus in short run only one factor is variable. • MC curve of the firm is also taken as supply curve AFTERSCHO☺OL's for the firm. www.afterschoool.tk MATERIAL FOR PGPSE PARTICIPANTS

Solution • Optimum output is achieved when the firm is having MC = MR and has minimum cost of production. It is the condition when the firm is able to use its resources to the best. Conditions: • MR = MC • The factors of production can be adjusted to have the best utilisation of factors of production. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Graph

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What will happen if prices increase and income of the people also increase. Presently you are at 1.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • If price increase, demand should fall, however, income also increase therefore demand curve will again increase thus demand curve will remain constant. Supply curve will remain as it is (as there is no information about cost or supply). We will remain at 1. • Answer. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Explain the determination of long term equilibrium of a firm under perfect competition. Show, inter alia, that it will produce at the least possible average cost of production. • In the long run, no firm is able to earn super normal profit. The MR= AR and at this point MR = MC (equilibrium) and in long run MC = AC (at the point of equilibrium) – no firm earning profit / loss. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Graph…

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month. After some time, he raises the price to Rs. 15 per pen. Following the price rise: • Only 60 pens were sold every month. • The number of refills bought went down from 200 to 150. • The number of ink pen customers bought went up from 90 to 180 per month. The Cross elasticity of monthly demand for refills when the price of gel pen increase from Rs. 10 to Rs.15 is equal to: www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • • • • • •

Change in demand / change in price Change in demand = = 50/200 *100 = 25% Change in price = 5/10*100 = 50% Thus solution = 25/50 = - .5 answer. (it is always negative)

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

The cross elasticity of monthly demand for ink pen when the price of gel pen increases from Rs.10 to Rs. 15 is equal to: • • • • • •

Change in demand / change in price Change in demand = = 90/90 *100 = 100% Change in price = 5/10*100 = 50% Thus solution = 100/50 = 2 answer. (it is always positive)

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

ABOUT AFTERSCHO☺OL Afterschoool conducts three year integrated PGPSE (after class 12th along with IAS / CA / CS) and 18 month PGPSE (Post Graduate Programme in Social Entrepreneurship) along with preparation for CS / CFP / CFA /CMA / FRM. This course is also available online also. It also conducts workshops on social entrepreneurship in schools and colleges all over India – start social entrepreneurship club in your institution today with the help from afterschoool and help us in developing society.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Why such a programme? • To promote people to take up entrepreneurship and help develop the society • To enable people to take up franchising and other such options to start a business / social development project • To enable people to take up social development as their mission • To enable people to promote spirituality and positive thinking in the world www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Who are our supporters? • Afterschoolians, our past beneficiaries, entrepreneurs and social entrepreneurs are supporting us. • You can also support us – not necessarily by money – but by being promotor of our concept and our ideas.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

About AFTERSCHO☺OL PGPSE – the best programme for developing great entrepreneurs • • • • •

Most flexible, adaptive but rigorous programme Available in distance learning mode Case study focused- latest cases Industry oriented practical curriculum Designed to make you entrepreneurs – not just an employee • Option to take up part time job – so earn while you learn • The only absolutely free course on internet www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Workshops from AFTERSCHO☺OL • • • • • • • • •

IIF, Delhi CIPS, Jaipur ICSI Hyderabad Branch Gyan Vihar, Jaipur Apex Institute of Management, Jaipur Aravali Institute of Management, Jodhpur Xavier Institute of Management, Bhubaneshwar Pacific Institute, Udaipur Engineering College, Hyderabad

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Flexible Specialisations: • • • • • • • • • •

Spiritualising business and society Rural development and transformation HRD and Education, Social Development NGO and voluntary work Investment analysis,microfinance and inclusion Retail sector, BPO, KPO Accounting & Information system (with CA / CS /CMA) Hospital management and Health care Hospitality sector and culture and heritage Other sectors of high growth, high technology and social relevance

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Salient features: • The only programme of its kind (in the whole world) • No publicity and low profile course • For those who want to achieve success in life – not just a degree • Flexible – you may stay for a month and continue the rest of the education by distance mode. / you may attend weekend classes • Scholarships for those from poor economic background • Latest and constantly changing curriculum – keeping pace with the time • Placement for those who are interested • Admissions open throughout the year • Latest and most advanced technologies, books and study material www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Components • • • • • • • • • • • • • •

Pedagogy curriculum and approach based on IIM Ahmedabad and ISB Hyderabad (the founder is alumnus from IIMA & ISB Hyderabad) Meditation, spiritualisation, and self development EsGotitial softwares for business Business plan, Research projects Participation in conferences / seminars Workshops on leadership, team building etc. Written submissions of research projects/articles / papers Interview of entrepreneurs, writing biographies of entrepreneurs Editing of journals / newsletters Consultancy / research projects Assignments, communication skill workshops Participation in conferences and seminars Group discussions, mock interviews, self development diaryng Mind Power Training & writing workshop (by Dr. T.K.Jain)

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Pedagogy • • • • • • • • •

Case analysis, Articles from Harvard Business Review Quiz, seminars, workshops, games, Visits to entrepreneurs and industrial visits PreGotitations, Latest audio-visuals Group discussions and group projects Periodic self assessment Mentoring and counselling Study exchange programme (with institutions out of India) • Rural development / Social welfare projects www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Branches • AFTERSCHO☺OL will shortly open its branches in important cities in India including Delhi, Kota, Mumbai, Gurgaon and other important cities. Afterschooolians will be responsible for managing and developing these branches – and for promoting social entrepreneurs.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Case Studies • We want to write case studies on social entrepreneurs, first generation entrepreneurs, ethical entrepreneurs. Please help us in this process. Help us to be in touch with entrepreneurs, so that we may develop entrepreneurs.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Basic values at AFTERSCHO☺OL • • • • • •

Share to learn more Interact to develop yourself Fear is your worst enemy Make mistakes to learn Study & discuss in a group Criticism is the healthy route to mutual support and help • Ask fundamental questions : why, when, how & where? • Embrace change – and compete with yourself only www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

www.afterschoool.tk social entrepreneurship for better society

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS