Accounting Economics And Business 20 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

An asset has a useful life of 4 years. If it is depreciated by diminishing balance method. Its book value at the end of 4 year is 24% of its original cost. Hence the rate of depreciation applied is (a) 20% (b) 30% (c) 25% (d) 35%

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • Let the value of asset be X and rate of dep. Be Y • X * ((1-Y)/1 )^4 = 24/100 X • Try from options: • ((1-.3)/1)^4 = .24 • Therefore 30% is the answer.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Consignment problem • Rakhi of Bikaner sent out goods costing Rs. 45,000 to Manjari of Mumbai at cost +33 1/3%. • 1/10th of goods were lost in transit and 2/3rd of the remaining goods are sold at 20% above IP. The amount of sales value will be • (a) Rs,36,000 • (b) Rs.60,000 • (c) Rs.54,000 • (d) Rs.43,200 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • 2/3rd goods sold : 45000**90/100*2/3 = 27000 • Add margin : 9000 = 36000 • These goods were sold at 20% above IP (invoice price) so their sale price was : • 43200 answer. .

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Bad debts…. • Sundry debtors on 31st March, 2005 are Rs. 1,05,000. Further bad debts are Rs. 5,000, sales return recorded in the books Rs. 10,000. Old provision for bad debts is Rs. 4,000. Provision for doubtful debts is to be made on debtors @ 10% and also provision of discount is to be made on debtors @ 3%. What will be the amount of bad debts charged in Profit and Loss A/c after considering provisions for bad debts? • (a) Rs.2,700 • (b) Rs. 10,000 • (c) Rs.12,700 • (d) Rs. 6,000 www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • 105000 – (5000+10000) • = 90000 • We have to make provision upto 10% of debtors. So provision has to be 9000. we already have a balance of Rs. 4000. but we have incurred additional bad debt of Rs. 5000. Thus we have to make a provision of (9000-4000+5000) Rs. 10000 this year from P & L a/c. We also have to make provision of discount of 2700. answer. (so answer 12700) www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Write a note on population policy of India? • India was the first in the world to start a systematic population policy in 1952. Again National Health Policy was framed in 1983. Again National Population pOlicy was formulated in 2000. . The objectives are : • Reduced CBR (crude birth rate) • Reduce IBR (infant mortality rate) • Achieve instituitonal deliveries • Achieve 100% registration of births etc. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Industrial sickness • Industrial sickness refers to loss making units, which are not able to make payment of their liabilities. • The number of Sick units has increased manifold during last decade (from 23000 SSI Sick units to 2.5 lakh SSI Sick units and from 1400 non-SSI Sick units to more than 3300 Non-SSI Sick units. There are many reasons for sickness.. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Reasons for SICKNESS • • • • • • • •

Poor management Lack of raw material Technology (outdated) Old machineary Poor planning Competition Lack of skilled labour Etc.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Service Sector in India • The role of service sector has been improving. Today it has more than 60% share in our economy and it is growing at the fastest pace. • It includes sectors like telecom, hospitality, education, health care, tourism etc.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Role of PSUs • Public sector has played an important role in Indian economy. The government is now undertaking disinvestment of PSUs. Every year about Rs. 5000 crores are realised through PSUs. There are a large number of PSUs which are in losses. There are many Navratna units also = which are able to show impressive perforance. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Limitaitons of PSUs • 2. 3. 4. 5.

PSUs suffer from many limitations like : Intereference from government departments, officers and ministers Lack of initiative Lack of incentive to work hard and innovate Bureaucracy.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Strengths of PSUs • Give lot of support to government work for national priorities • Always prepared to sacrifice for the cause of the nation • Always prepared to keep the national objectives paramount and work for national objectives • Employment generation • Security, and national priority www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Important PSUs • • • • • • •

BHEL BEL ONGC HPCL IOC BEML BPCL

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Small scale industries … • ALL THOSE UNITS WITH INVESTMENTS IN PLANTS AND MACHINERY LESS THAN RS. 1 CRORES COME IN SSI CATEGORY. • SSI contribute to about 40% of Industrial production, 40% to exports and 6% to GDPs.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Benefits of SSI • Less investment, more flexible • Less legal hurdles, more government support (rebates, incentives etc.)

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Problems in SSI • Less investment, therefore problems in marketing, financial management etc. • Lack of professional management • Lack of support from Government sector • SSIs have limited network and limited access to international markets • Unable to compete with global brands and international marketing companies. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Methods for measuring national income? 1. Income method (add up the total income) 2. Production method (add up the total production) 3. Expenditure method (add up the total expenditure) Use any of these methods or combinations of them. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

FACTOR COST V/S MARKET PRICES? • Cost and prices are not the same. Factor cost refers to the actual cost of production. However, subsidies reduce the cost and taxation increase the cost. Thus we can say that : • Market Price – taxation + subsidies = Factor cost. • Market price reflect current prevailing prices, but factor costs refer to the actual cost. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What do you mean by accounting equation? • Capital = Assets – Liabilities

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Which of them is nominal account? • • • • • • • • • • • • •

(I) Stationery Account (U) Depreciation Account (iU) Cash Account (iv) Bank Current Account (v) Goodwill Account -(vi) Interest Account (vU) Patents and Trade Marks Account (viii) Capital Account (ix) Bank Loan Account (x) Freight Account (xi) Drawings Account (xii) Rent Account (xiii) Account of Goti, a customer

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • • • • • • • • • • • • •

(I) Stationery Account - nominal (ii) Depreciation Account - nominal (iii) Cash Account – real (iv) Bank Current Account - personal (v) Goodwill Account - - real (vi) Interest Account – nominal (vii) Patents and Trade Marks Account – real (viii) Capital Account- personal (ix) Bank Loan Account – personal (x) Freight Account – nominal (xi) Drawings Account - personal (xii) Rent Account – nominal (xiii) Account of Goti, a customer – personal

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Which of these are expenses / assets? • • • • • • •

(i) Purchasing typewriters (ii) Acquiring trade marks (Ui) Paying salaries (iv) Acquiring a lease of land for 15 years (v) PayIng Interest (vi) PurchasIng furnIture (vu) Paying coVnpsn to Injured worker8

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • • • •

(i) -Purchasing typewriters – asset (ii) Acquiring trade marks - asset (iii) Paying salaries - expense (iv) Acquiring a lease of land for 15 years asssets • (v) PayIng Interest - expenses • (vi) PurchasIng furnIture - assets • (vii) Paying compensation to Injured workers – expenses www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is the difference between financial accounting, cost accounting & management accounting? • Financial accounting helps you in recording and analysing day to day transactions as per requirements of law and it gives true and fair picture of profits and assets and liabilities. • Management acct. helps you in decision making (which is based on information provided by financial accounting). • Cost accounting helps you in ascertaining costs and in controlling costs www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solve it • • • • • • • • •

Goti is a small cloth merchant, who has not kept full double entry records. His position as on 1St January, 2007 stood as follows Cash in hand As 1 520, balance at bank Rs 13 900 stock As 25,200, sundry debtors As 9,000, furniture As 4 000 and sundry creditors As 8 620 His position on 31st December of 2007 is as follows Cash In hand As 940, balance at bank as per bank pass book As 11 860, stock Rs 33,400, sundry debtors As 12,640 furniture Rs 4 000, scooter Rs 8,000 and sundry creditors As 10,600 During the year he had withdrawn Rs 800 per month for his personal expenses and purchased a cooter for his business use for As. 8,000. A cheque for As. 2,000 issued on 29.12.2007 was presented for payment on 12.1.2008. Prepare a statement showing his trading results for the year ended 31st December, 2007 and a balance sheet as on 31st December, 2007 after a) providing 10% depreciation on furniture and 20% depreciation on cooter; (b) writing off As. 640as actual debts; and (c) making a 5% provision for likely haddebts.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Goti and Kap are partners. Goti without authority of Kap buys shares of Reliance in his own name with the money of the firm. Are the shares so purchased the property of the partners? • No. it is personal property of Goti and it will be treated as personal withdrawal by Goti and he will have to give profit to the firm. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Goods delivered on sale or return basis were pledged by the delivery. Can the original owner recover the goods from the pledgee? • Yes – as the title to the goods has not yet transferred, the original owner can recover the goods from pledgee.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

When the obligation is not probable on the amount expected to be paid to settle the liability – which cannot be measured with sufficient reliability, what is it called? • Because we are not able to measure the liability accurately and the liability is not certain also , it is called contingent liability. It is shown as a footnote to the balance www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS sheet.

Revenue is said to be realized when: • • • •

(a) Cash is received (b) Sales are made (c) Goods are manufactured (d) Cheque is realised

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

HOW WILL YOU CONSOLIDATE THE ACCOUNTS OF THE 2 COMPANIES?

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution - Prepare statement of affairs for the two years. 1 jan 2007

• Capital 45000 • (balancing figure) • Creditors 8620 •

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• • • • • •

Cash 1520 Bank 13900 Stock 25200 Furniture 4000 Debtors 9000 Total : 53620

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Statement of affairs on 31 dec. 2007 • Creditors 10600 • Capital =55000 • (balancing figure)

• • • • • • • • •

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Cash 940 Bank 11860 – 2000 = 9860 Stock 33400 Debtors 12640 - 640 – provision for debt 600 = 11400 Furniture 4000 – 400=3600 Scooter 8000-1600 = 6400 Total : 66208

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Statement of profit • Difference in capital in end and in the beginning: (55000 – 45000) = 10000 • Adjust withdrawals: • (9600 – 8000) = 1600 • =11600 answer.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solve the following • A party agrees to pay 10 lakhs to another party if first party brings to earth a star from sky, this is known as.---• (a) Contingent contract • (b) Quasi Contract • (c) lmplied contract • (d) Wagering contract • (e) Void contract • Solution : void contract. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is the full form of CRR? • Cash reserve ratio

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is SLR? • Statutory liquidity ratio

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solve the following • A person who supplies “necessaries” to a minor is entitled to be reimbursed from the personal property of the minor on the basis of : • (a) Valid contract • (b) Voidable contract • (c) Quasi contract • (d) Contingent contract • Solution • C – quasi contract www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solve it … • Fine may be made the essence of a contract by self sequent notice also. This Statement is • (a) True • (b) Partly true • (c) False • (d) Partly false www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Example of quasi contract • It is the duty of the finder of goods to trace the true owner of the goods, and if does not do so, he shall be guilty of • (a) Theft • (b) Extortion • (c) Criminal misappropriation of property • (d) None of the above • Solution • (a) www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Bank overdraft as per trial balance is Rs. I .60 crore. Bank has allowed the customer 80 % of the hypothecated goods. Hypothecation of stock has been done by the bank at 80% of the original closing stock value. What is the amount of closing stock

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • • • •

1.6 *100/80 = 2 crore is the value of hyp. Value of hyp. Is takes as 80% of stock Therefore stock is 2*100/80 = 2.5 crores Thus stock of goods is 2.5 crores. Answer.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is day to day market period? • It is a very short period, in this period the suppliers cannot change their supply, therefore supply curve is like a straight vertical line. Prices solely depend on demand. If demand increases, prices will increase and vice versa. Supply is fixed and cannot change in this period.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Why is demand curve convex to the origin? • The demand cannot touch either side of the axis because even if prices increase very much there would be some buyers at least.

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• CONVEX SHAPE

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What is equilibrium of the firm in day to day market period in perfect competition?

• During day to day period, the firm has to decide whether to sell or not. The firm cannot increase production or supply, the only decision the firm has to take is whether to sell or not. If the prices increase due to increased supply, the firm may wish to sell otherwise may not sell. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

A company purchased 3 years lease on 1st April, 2004 for Rs. 50,000. It is decided to provide for the replacement of the lease at the end of 3 years by setting up a depreciation fund. It is expected that investment will fetch at 12%. The investments are sold for Rs. 28,500.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • Let us find out the amount that will be Rs. 50000 at the end of 3 years so that we may deposit that amount every year. • A((1+rate)^n -1)/rate = 50000 • ((1.12)^3-1)/(.12*50000) = 1/annuity • Annuity = 14817.45

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution • Each year we will transfer Rs. 14817.45 in depreciation fund account and at the end of 3 years the investments will be sold in the market.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

A machine purchased on 1.4.2003 for Rs. 10 lakhs was depreciated on straight line basis over its useful life of 10 years. On 1-4-5, it was found that machine is in a good condition and will be used in the production for another 10 years. The amount of depreciation for the year 31-3-06 will be? • In the two financial 2003-4 and 2004-5 we have already provided depreciation of Rs 200000 (1 lakh each year). Now remaining value is Rs. 8 Lakhs to be depreciated in next 10 years. So we will charge dep. Of rs. 80000 only. Answer. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Goti of Kolkala sends goods costing 100000 to Pawan of Mumbai at cost + 25%. Consignor’s expenses Rs 2,000. 3/5’ of the goods were sold by consignee at 85000. Commission 2% on sales + 20% of gross sales less all commission exceeds in-voice value. amount of total commission will be: • Goods of cost Rs. 60000 were sold for 85000. general commission = 1700 • Their invoice price = 60000*1.25=75000 • Additional commission = 20/120*(10000-1700) = 1383 Total commission = 3083 ans. www.afterschoool.tk AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

FINANCIAL ANALYSIS – PREPARE THE BALANCE SHEET • • • • • • • • • • •

You are given the following figures: Current ratio 2.5 Liquid ratio 1.5 Net working capital Rs. 3,00,000 Fixed assets turnover ratio (on cost of sales) 2 tImes Average debt collection period 2 months Stock turnover ratio (cost of sales/closing stock) 6 times Gross profit ratio 20% Fixed assets/shareholders net worth 0.80 Reserve and surplus/capita! 0.50

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

SOLUTION • LIABILITIES • Equity + reserve = 900000 • (reserve is 300000 and equity 600000) • Current liabilities 200000

• • • • • • • • •

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ASSETS Current assets Debtors 250000 Cash / bank 50000 Total Liquid assets 3 lakhs Inventory = 2 lakhs Total 500000 Fixed assets 600000 TOTAL = 11 LAKHS

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Other information • Cost of Sales = 6* inventory = 12 lakhs • GP on cost of Sales 12 *25/100 = 3 lakh. • (20% on sales, therefore we take 25% on cost of sales) • Thus sales = 12+3 = 15 lakhs • Cost of sales / Fixed assets = 2 • So fixed assets are 6 lakhs www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Continued • • • • • •

Avg. Debtors / Sales * 12 = 2 Avg. Debtors = 2 * 1500000/12 =2,50,000 Fixed assets / net worth = .8 600000/Net worth = .8 Net worth = 750000

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

State, explain and critically discuss the Cambridge version of Quantity Theory of Money. • Prices depend on quantity of money. If quantity of money increases, prices will increase and vice versa. There are two popular theories : Fisher and Cambridge • Fisher = MV = PT • M= money V = velocity of money • P = prices T = volutme of items sold. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Solution …. • • • •

Cambridge: P = KR / M P = prices K = Proportion of money that people want to keep with them • R = Real resources • M = quantity of money. www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

What are the factors which determine cash deposit ratio of a bank? What are the sources of cash reserves of the banking system? • It denotes the cash that banks have to keep with themselves. Suppose deposit is Rs. 100 and CD ratio is 20%, the banks have to keep Rs. 20 with them. Higher the CD ratio, less will be credit creation. CD ratio depends on inflation, liquidity, demand of money and monetary policy etc www.afterschoool.tk

AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

How would you define money? What are alternative approaches for doing so? •

2. 3. 4. 5.

Money is defined in terms of the functions that it performs. There are 4 functions that it performs. These are : Medium of exchange Store of value Measure of value Standard for deferred payments.

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AFTERSCHO☺OL's MATERIAL FOR PGPSE PARTICIPANTS

Continued… • There are two basic approaches to defining money: 1. functional approach 2. liquidity approach • Functional approach – define money in terms of functions that it performs (the main being medium of exchange). • Liquidity approach - money is considered 100% liquid resources. Other assets are comparatively less liquid. 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