Types and Channels of Communication

There is a saying, 'the medium is the message', which tells a lot about the channel we select for the communication.

Types of communication :

1. Verbal communication : occurs with the help of words, opportunity for personal contact and two-way flow of information. These are two types :
1. Oral communication : a speaker interacts verbally with one or more listeners in order to influence their behavior in some manner. Ex : meetings, presentations, performance reviews
2. Written communication : correspondence made in writing. It can be hand written, printed or typed. This takes several forms such as letters, memos, circulars, notices, reports and email. Ex : an apology letter to a customer in response to his complaint.
2. Non-verbal communication : communication without words or any way of conveying meaning without the use of verbal language. This can have more impact than verbal communication as 'how you say' is sometimes more important than 'what you say'.

Verbal communication have some drawbacks such as the message may not be properly worded or the message is misunderstood or interpreted differently. We can avoid this by following some simple guidelines :

• Avoid words with multiple meanings
• Ensure clarity through highly specific statements
• Avoid overuse of jargon
• Avoid biased language and offensive word

Previous Topic : Business Communication Introduction
Next Topic : Characteristics of Non-Verbal Communication

Accounting Concepts, Principles, Bases and Policies

Generally Accepted Accounting Principles (GAAP)

Accounting principles are basic rules of action, which are adopted by the accountants while recording transactions and preparing and presenting financial statements. These are the doctrines associated with theory and current practices of accounting.

GAAP are accepted universally and consists of :

• Accounting Concepts : basic assumptions or conditions guiding the accountants while preparing accounting statements. There are five basic concepts of accounting :

1. Business entity concept states that the business is a separate entity and it is different from the owners or proprietors. This has legal as well as accounting implications. The business transactions of the company can be segregated from those of the owners.
2. Going concern concept states that the business is assumed to continue fairly for a long period of time and that there is no need to shut it down.
3. Money measurement concept : All transactions of a business are recorded in terms of money. Some transaction like cost of input or profit are already in terms of money, but some that cannot be monetized are ignored like brand value of a company.
4. Periodicity concept : as per going concern, a business is meant to be ongoing. But to look back on performance, take corrective actions the operating period is split into regular intervals called accounting periods.
5. Accrual concept states that expenses incurred and income earned for an accounting period must be recorded in the same period whether expenses are paid and income is actually received or not.

• Accounting Conventions : customs and traditions that guide the accountants while preparing accounting statements. There are ten types of accounting conventions :

1. Convention of income recognition : revenue is considered as being earned on the date on which it is realized, that is the date on which goods and services are transferred to customers for cash or on promise.
2. Convention of matching cost and revenue : revenue earned during a period is compared with the expenses incurred to earn that income, irrespective of whether the expense was paid or not.
3. Convention of historic cost : says that all transactions are recorded at the value at which they were incurred and all assets are recorded at the value of acquisition irrespective of market value etc. Such a value is called Historical Cost and this principle is called convention of 'Cost'.
4. Convention of full disclosure : requires a business to disclose :
1. All accounting policies adopted in preparing and presenting the financial statements.
2. Any change in accounting policies and the reasons thereof.
3. The implication(in terms of money) of the change in policies.
5. Convention of double aspect : states that every transaction has two aspects. One is the receiving aspect and the other one is the giving aspect, debit and credit.
6. Convention of modifying
7. Convention of materiality : states that the benefit derived from measuring, recording and processing a transaction must justify the cost of doing it.
8. Convention of consistency : requires that the accounting policies be same from year-to-year. This helps in easy comparison of financial data with previous data. The accounting policy can only be changes when :
1. It is justified by law
2. the new policy better reflects the financial standing or position
9. Convention of conservatism : accountants follow the rule "anticipate no profits but provide for all anticipated losses". When a loos is anticipated, sufficient provision must be made. IF a profit is anticipated, it should not be recorded until it is actually realized.

Accounting Policies : are specific accounting principles and methods of accounting adopted by a business while preparing and presenting the financial statements. Major considerations in the selection and application of accounting principles :

• Prudence
• Substance over form
• Materiality

Change in accounting policy : is recommended only if

1. If it is required by statute for compliance with an accounting standard.
2. If it is considered that the change would results in a more appropriate presentation of statements

Disclosure in case of change in accounting policies : must be done irrespective of whether the change has material effect in current period and irrespective of whether the effect of change is ascertainable.

Mandatory and Voluntary disclosures : 

The minimum disclosure a business must and should give as required by government, statutory or accounting bodies is called mandatory disclosure.

The company may decide to disclose additional information over and above the mandatory disclosure which is known as voluntary disclosure.

Previous Topic : Financial Accounting Basic Terminologies

Business Communication Introduction

Communication in simple terms is a transfer of information between people, resulting in common understanding between them.

• It is unavoidable
• It is a two-way exchange of information
• It is a process
• It involves a sender and a receiver of information
• It could be verbal or non-verbal
• It is successful when the receiver interprets the meaning in the same way as that intended by the sender.
• It is a dynamic process
• It enables understanding

Communication Process and its key elements :

• Sender or Encoder : the person who transmits a message
• Receiver or Decoder : the person who notices and decodes or attaches some meaning to a message.
• Message : any signal that triggers the response of a receiver.
• Channel : the medium or method used to deliver the message.
• Feedback : Receivers respond to messages.
• Context :
• Physical : the physical surroundings.
• Social : the relationship between the sender and receiver.
• Chronological : time related factors that could influence the communication
• Cultural : similarity of the backgrounds like age, language, nationality and gender etc. of sender and receiver.

Barriers to Communication :

A communication fails when the message received is not the same as that is sent. 'Noise' refers to these external factors that disrupt the communication and can be classified as :

• Physical : poor acoustics, disturbing sounds or information overload.
• Physiological : fatigue, hearing disability or physical illness.
• Psychological : emotions within the sender or receiver like lack of interest, fear etc.

Some other barriers to communication :

• Environmental barriers 
• Individual barriers 
• Organizational barriers 
• Channel barriers 
• Linguistic and cultural barriers 
• Semantic barriers 
• Non-verbal barriers 

Overcoming the barriers to communication :

Certain steps can be taken at both organizational level as well as individual level to overcome the barriers to communication.

Organizational action:
Some of the steps which an organization can take to overcome the barriers to effective communication are :

• Encourage feedback 
• Create a climate of openness
• Use multiple channels

Individual action:
An individual can take certain steps to overcome the barriers to effective communication. These could help improve interpersonal relationships. These are :

• Active listening
• Careful wording of messages
• Selection of appropriate channels
• Avoidance of technical language
• Right feedback

Classification of communication

Interpersonal Communication : usually involves direct face-to-face contact between the sender and receiver. Interpersonal communication classified based on number of people involved are:

• Dyadic communication : involves two people
• Group communication : involves three or more people, usually happens for decision making or problem solving.
• Public communication : involves large number of people, usually happens for information sharing.

Intrapersonal Communication : is self-communication, usually happens in analysis or clarifying ideas. It involves the following activities :

• Internal discourse : analysis, concentration and contemplation
• Vocal communication : talking loud to oneself
• Written communication : making entries in journals or diaries

Group Communication : Usually happens between three to twenty members. The basic resource of any group is its members. Hence communication is really important for creating and sustaining groups. It can be achieved in the forms :

• Verbal
• Non-verbal
• Written
• Electronic

The various factors that affect group communication are :

• Nature of task
• personalities and abilities of the members in a group
• Environmental factors

Mass Communication : the type of communication that employs some form of medium to communicate to a very large audience. The characteristics of mass communication are :

• Source
• Message
• Channel : radio, television, transmitters etc
• Audience 
• Feedback : communication is one-way, so feedback is usually minimal and delayed.
• Noise

Importance of communication in workplace : communication is very important in this age of technology. A huge amount of money is spent on training higher management in communication skills. Effective communication is more vital to job success. Effective communication can serve the following purposes :

• Greater awareness of organizational goals and teamwork
• Better employer-employee relationships
• Problem solving
• Improved performance
• Stronger link between managers and external environment

Next Topic : Types and Channels of Communication

Human Resource Management Introduction

Every organization is essentially a mixture of materiel and human resource. Human resource refers to the knowledge, ability, education, skill and training of the members of the organization.

HRM involves all management decisions and practices that directly affect or influence the people working for the organization.

A HR manager has to build an effective workforce and handle expectations of the employees to ensure maximum productivity. The actual management of human resources is the responsibility of all the managers in an organization, not the a select group of HR executives.

HRM must act as a link between top management and its employees, arrange and maintain adequate manpower inventory, develop skills and enhance productivity of manpower, ensure and enhance quality of work-life balance.

Scope of HRM :

• HRM in personnel management : involves manpower planning, hiring, training and development, induction and orientation, transfer, promotion, compensation, layoff and retrenchment and productivity.
• HRM in employee welfare : deals with working conditions and amenities at workplace.
• HRM in industrial relations : interact with labour and employee unions, address their grievances and settle disputes if any to maintain order and peace in the organization.

Functions of HRM :

1. Managerial Functions
1. Planning
2. Organizaing
3. Staffing
4. Directing
5. Controlling
2. Operative Functions
1. Employment
1. Job Analysis
2. HR Planning
3. Recruitment
4. Placement
5. Induction
2. Development
1. PErformance Appraisal
2. Training
3. Management Development
4. Career Planning and development
3. Compensation
1. Job Evaluation
2. Wage and Salary Administration
3. Incentives
4. Fringe Benefits
4. Employee Relations

Next Topic : Human Resource Management in India

Financial Accounting Basic Terminologies

1. Transaction : the transfer of money, goods or services from one person or account to another person or account. These are :
1. Cash Transactions
2. Credit Transactions
3. Paper Transactions
2. Capital : Funds brought in to start a business
3. Share : one unit of the total company's capital
4. Assets : a resource legally owned y the enterprise. Assets can be classified based on purpose :
1. Fixed Assets : resources help for use in production of goods or services and are not for resale. Ex : land, plant, machinery etc.
2. Current Assets : resources held or receivable withing the year or the company's operating cycle. These are intended to be converted into cash. Ex: stocks, bill receivable cash at bank etc.
3. Liquid Assets : those which can be easily converted into cash.
4. Fictitious Assets : those which cannot be written off during the period of their incidence. Ex: promotional expenses
5. Liability : a financial obligation of an enterprise, which when settled results in an outflow of resources. Ex: loans payable
6. Current Liability : an obligation that has to be satisfied within a year.
7. Equity :  the residual interest in the asset of the enterprise after deducting all its liabilities.
8. Joint Stock Company : the capital for this company is contributed by shareholders.
9. Goods : merchandise, commodities, products etc in which a trader deals. Goods account is divided into :
1. Purchases
2. Sales
3. Purchases return or returns outward
4. Sales returns or returns inward
5. Opending stock
6. Closing stock
10. Inventory : goods held by a business for sale or consumption in production. Ex : raw materials
11. Drawings : goods, money or any asset withdrawn by the owner for his own personal expenses.
12. Debtor : A debtor is a person who owns money to a business. Types of debtors :
1. Trade Debtor
2. Loan Debtor
3. Debtor for asset sold
4. Debtor for service rendered
13. Debt : amount due from a debtor to this business. Types of debts:
1. Good Debt
2. Bad Debt
3. Doubtful Debt
14. Creditors : a person to whom business owes money. Types of creditors :
1. Trade Creditor
2. Loan Creditor
3. Creditor for asset pyrchased
4. Expenses Creditor
15. Loss : money or woth of money given up without any benefit in return. A situation when expenses exceed th expenditure.
16. Profit : a situation where revenue earned by the business is greated then its expenses.
17. Journal : a dail record of all business transactions. The first entry into the accounting system.
18. Ledger : an account book where all transactions are grouped and all accounts are maintained. Books of final entry.
19. Narration : breif explanation of a journal entry.
20. Posting : transferring the information from journal to ledger.
21. Voucher : a document which serves as an evidence for transactions.
22. Trial Balance : a list of all ledger account balances on a given day.
23. Balance Sheet : a financial statement which shows the amount and nature of a business' assets and liabilities.

Previous Topic : Financial Accounting Introduction 
Next Topic : Accounting Concepts, Principles, Bases and Policies

Financial Accounting Introduction

Accounting is one of the oldest, structured management information system. Accounting as an information system deals with the identification, measurement and communication of economic information to enable decision making.

Accounting : is the application of various accounting principles and methods of book-keeping.

Accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the users of the information.

Book-keeping : is defined as the science and art of recording business transactions in a systematic manner in a certain set of books known as book of accounts.

Functions of book-keeping :

• Identifying the transactions and events : When goods, services or money is transferred from one person or account to another, it is called a transaction. The first step in the accounting process is to identify transaction with financial character that must be recorded in the book of accounts.
• Measuring : expressing the value of events and transactions in terms of money.
• Recording : recording of identified transactions. The book in which transactions of financial character are first recorded is called Journal.
• Classifying : grouping of transactions of similar nature. The book in which groups of similar transactions are periodically entered is called Ledger. This transfer of recorded transactions to Ledger is also called Posting.
• Summarizing : summarizing all the transactions is required to know if the business has made any profit or loss. This step prepares the income, expense, balance etc statements.
• Analyzing : establishing relationship among various items from the statements produced in above step. This helps to identify the financial strengths and weaknesses of the business.
• Interpreting : the step where end users make judgements about their finanacial positions.
• Communicating : communicating the analyzed and interpreted data in the form of financial statements of reports to users of that information.

Next Topic : Financial Accounting Basic Terminologies

Introduction to Managerial Economics

Economics affects our daily lives. Economic conditions affects businesses positively and/or negatively. Economics helps decision making.

Managerial Economics is the science that deals with the application of various economic theories, concepts, principles and techniques to business management in order to solve management and business problems.

Features :

1. Helps in decision making. Focuses on decision making process, models, variables and their relationship.
2. It is both conceptual and metric in nature.
3. Uses various economic variables like national income, inflation, deflation, trade cycles etc. to understand the business environment.
4. Gives importance to non-economic factors that affect the business like socio-political and cultural factors, technology etc.
5. Uses other related services like accounting, mathematics, statics etc to assist in decision making.

Note : It provides only the logic and methodology to arrive at solutions, no the ready-made solutions itself.

Scope :

• Objectives of a firm
• Demand Analysis & Forecasting
• Production & Cost Analysis
• Pricing decisions, policies and practices
• Profit Management
• Capital Management
• Linear programming and theory of games
• Market Structure & Conditions
• Strategic Planning
• External environment

The scope keeps growing with the growth of modern business and business environment.

Significance :

The main concern is to apply theories to find solutions to day-to-day problems faced by a business, not to study the theoretical economic concepts.

1. Provides guidance to identify key variables in decision making.
2. Helps understand various intricacies of business and managerial problems to make informed decisions.
3. Provides us the necessary skill and tools of analysis and techniques.
4. Helps become proactive and competent.

Functions of Managerial Economist :

• Decision Making
• Forward Planning

Understanding an organization

What is an organization ?

An organization is a social system of people who are structured and managed to meet some goals. Organizations are ongoing and the structure determines the relationship between the functions and positions. Structure also subdivides roles,responsibilities, and authority to carry out the tasks. Organizations are open systems which are affected by the environment outside its boundary.

• Social System
• Business is something that society creates to fulfill its needs. In an organization people come from diverse backgrounds of religion, education, gender etc. Therefore it is a social system
• Goals
• All organizations or businesses have goals. This is generally expressed through a vision and mission statement.
• Ongoing
• Businesses are designed to be forever, but some may die.
  
• Relationship
• In any organization there are workplace relations among roles like employee, supervisor, manager, CEO etc. Various levels of reporting, communication exists.
• Structure and Management
• In an organization there may be various groups of people who are responsible for specific tasks.  By creating a structure and grouping similar tasks, efficiency is achieved.
  
• Open System 
• Any business is affected by external factors, some impede business while some provide opportunities. 

Previous Topic : Organizational Process

Organizational Process

A process is a set of logically sequenced actions. Organizations achieve their goals by creating products and services in a logical sequence. This sequence is made up of

•  Vision & Mission
• A formal statement of what a business wants to be. Vision is the state one wants to be whereas mission is the way of doing it or getting there.
• How to make a Vision ?
• Core Values
• Core Purposes
• Big Hairy Audacious Goal
• Vivid Description
• Strategy
• Corporate Strategy
• In a large organization, there may be several businesses governed by a central headquarters. Each of this business can be run independently but headquarters or the governing body has plans on how each business should operate.
• Business Strategy
• Every business has a plan or business strategy for doing business.
• Functional Strategy
• Each department or system within an organization may have its own agenda or strategy aligned with business strategy.
• Structure
• Simple
• Hierarchy
• Flat
• Adhocracy
• Matrix
• Teams
• Systems
• A unit where similar functions are grouped, a logical order is created with an organized flow of information and resources. A system is mostly independent entity in an organization.
• Process
• Is a set of logically sequenced actions that produce some final output
• Jobs
• A job is set of similar activities. A group of jobs form the process.
• Tasks
• This is the most basic unit of work in an organization

Next Topic : Understanding an Organization