NOTES OF ECONOMICS

Q) Question 1 to 4 are present here

Q) 5 has 4 subquestions :

6) Write short notes on :

    a) Break even point

    b) Margin of Safety

    c) Variable Cost

    d) Fixed Cost

    e) Angle of Incidence

    f) Profit Volume Ratio

    g) Contribution

Q 7) Accounting

Q 8) Advantages of Accounting

Q 9) It has 2 subquestions :

    a) Functions of Accounting

    b) Limitations of Accounting

Q 10) Distinguish between the following :

    a) Financial and Management Accounting

    b) Trading account and profit and loss account

    c) Gross profit and net profit

    d) Trading account and manufacturing account

    e) Variable cost and fixed cost

    f) Cost account vs financial account

Q 11) How your financial position gets affected by the financial ratios, and discuss about the various financial ratios to be kept in mind while running a business?

Q 12) It has two subsections :

Q 13) It has 2 subquestions :

    a) Public Private Partnership

    b) Can PPP overcome the deficient supply of pure public and merit goods?

    Ans : Merit Goods include goods which are provided by both government and private sectors. They are goods which depend on product consumption directly. People using those need to pay for it, and they get exhausted too often due to high consumption. They are available for personal consumption and to only a certain section of the society. For example, the construction of buildings of hospitals and schools, and their maintainance.
    Pure public goods on the other hand are meant to be provided to one all regardless of who pays for it. They are made available by the government to the common public and are meant for mass consumption. Examples may be defence system, waste Management system, legal system, and street lighting.
    PPP or 3P is responsible in incrementing the usage and availability of the pure public goods and merit goods. The taxpayers pay for their construction, and the private actors, businessmen, corporate industrialists invest in them, as a result the goods get available for all in no time, and the monetary expense for its availability gets dealt with smoothly. Also since expenses gets managed by the big firm, the scope of innovation and efficiency improves. The provision of incentives improves competition.

Q 14) It has 2 subquestions :

    a) Depreciation

    b) Factors on which depreciation depends

Q 15) It has 4 subquestions :

    a) Budget

    b) Objectives of budget are :

      1. To get more economic use of capital.
      2. To prevent waste and reduce expenses.
      3. To facilitate various departments to operate efficiently and economically.
      4. To coordinate the activities of various departments.
      5. To plan and control the income & expenditure of the firm.
      6. To fix the responsibilities in different departments.
      7. To ensure the availability of working capital.
      8. To ensure the matching of sales with production.

    c) Advantages of a Budget Manual:

      1. It acts as a guide book of all departments involved in the budgeting process.
      2. Less confusion will occur if answers to questions can be obtained from the manual.
      3. It will be easier to resolve any difference between two departments when there are written instructions in the budget manual.
      4. Reliance on memory is eliminated when a procedure is given in writing.
      5. Clear instructions in budget manual will save time of the superiors as juniors will not ask for approval time and again.
      6. It will reduce training time of the employees as oral instructions are supplemented with written procedures.

    d) Limitations of Budgeting :

    While budgeting performs many functions and has many advantages that are vital to an organization; it has certain limitations which require careful consideration.
      1. Planning, budgeting, or forecasting is not an exact science; it uses approximations and judgement which may not be cent per cent accu­rate. At best, a budget is an estimate; no one knows precisely what will happen in the future.
      2. The success and utility of budgeting depends on the cooperation and participation of all members of management. All persons should direct their efforts according to the plan. Moreover, the top management should adhere to the budget and provide cooperation.
      3. A budget is only a tool, and it neither eliminates nor takes over the place of management. A budget cannot be substituted for manage­ment but should only be used by the management for accomplishing managerial functions. Executives generally feel ‘circled in’ by a budget and its related figures. They fail to understand that the budget is meant to provide detailed information, goals, and targets which may help them in achieving the company objectives.
      4. It takes time to establish an efficient budgeting process. Also, some­times too much is expected from a budget and in case expectations are not fulfilled, the blame is put on the budget. An efficient budgeting programme requires that the responsible persons should understand the philosophy, objectives, and essentials of budgeting.
      5. Excessive emphasis on budgeting may result in attempts by lower level of management and employees to buck the system by provid­ing inaccurate estimates of future costs and revenues.

Q 16) Types of cost

Q 17) Ratio analysis and its advantages and disadvantages