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Monday, August 18, 2014

Principles of Marketing - Product, Its Features and Types

Meaning and Definition of Product
In a narrow sense, a product is a set of tangible physical attributes assembled in an identifiable form. Each product carries a name, such as car, iron, building etc. But in marketing, a product is anything which can satisfy a need, want or desire of consumers and can be offered in an exchange process. Hence, a product can be commodity, service, idea or a combination of all these.

When buyers purchase a product, they decide to buy after considering both tangible and intangible attributes of the product for example a car is a tangible product but its after sales service, durability, colour, manufactures reputation etc. are intangible part of product. Good products are key to market success and therefore products should be produced as per the needs and wants of target market.

In the words of W. Anderson, “A product is a set of tangible and intangible attributes including packaging, colour, price, quality and brand plus the services and reputation of the seller. A product may be a tangible goods, service, place, person or idea” “A product should be considered as a bundle of utilities consisting of various product features and accompanying services”.

In the words of Philip Kotler, “A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objectives, services, person, places, organisation and ideas”.

Characteristics of a Product

Principles of Marketing - Marketing Environment

A variety of environmental forces influence a company’s marketing system. Some of them are controllable while some others are uncontrollable. It is the responsibility of the marketing manager to change the company’s policies along with the changing environment.
According to Philip Kotler, “A company’s marketing environment consists of the internal factors & forces, which affect the company’s ability to develop & maintain successful transactions & relationships with the company’s target customers”.
The Environmental Factors may be classified as:

1.       Internal Factor
2.       External Factor
External Factors may be further classified into:
a)      External Micro Factors &
b)      External Macro Factors

1. Internal Environmental Factors: A Company’s marketing system is influenced by its capabilities regarding production, financial & other factors. Hence, the marketing management/manager must take into consideration these departments before finalizing marketing decisions. The Research & Development Department, the Personnel Department, the Accounting Department also have an impact on the Marketing Department. It is the responsibility of a manager to company-ordinate all department by setting up unified objectives.

Principles of Marketing - Product Planning and Development

Product Planning and Development
Product planning is the initial step of the overall marketing programme. In the competitive business world, producers try to produce products which can be nearer to consumer expectation. The pressure of competition forces the producers to replace the existing products by developing new consumers’ suitable and friendly products. Product planning covers all activities which enable producers and middle men to determine what should constitute a company’s line of products. Product development covers the technical activities of product research, production and design. The well attempt effort of product development increases the scope to satisfy the needs of the customers.
The product planning and development cover the following decision making area:
(I) What products should be produced?
(II) Expansion of product line.
(III) Determine the new use of its products.
(IV) What brand, package and label are used for different products?
(V) What should be quantity of its production?
(VI) Pricing policy etc.

Principles of Marketing - Market Segmentation

Marketing Segmentation
A market consists of large number of individual customers who differ in terms of their needs, preferences and buying capacity. Therefore, it becomes necessary to divide the total market into different segments or homogeneous customer groups. Such division is called market segmentation. They may have uniformity in employment patterns, educational qualifications, economic status, preferences, etc. Market segmentation enables the entrepreneur to match his marketing efforts to the requirements of the target market. Instead of wasting his efforts in trying to sell to all types of customers, a small scale unit can focus its efforts on the segment most appropriate to its market. It is defined as “The strategy of dividing the market in order to consume them”.
According to Philip Kotler, “It is the subdividing of market into homogenous subsets of consumers where any subset may be selected as a market target to be reached with distinct Marketing Mix”
According to Philip Kotler, market segmentation means "the act of dividing a market into distinct groups of buyers who might require separate products and/or marketing mixes."
According to William J. Stanton, "Market segmentation in the process of dividing the total heterogeneous market for a good or service into several segments. Each of which tends to be homogeneous in all significant aspects."

Principles of Marketing - Channels of Distribution

Channels of Distribution
One of the important problems of marketing is the distribution of goods & services to the right place, person & the right time. Manufacturers often find it difficult to decide about the effective distribution system. The channel of distributions refers to the group of intermediaries, which perform the distribution functions. A channel of distribution is an organised net-work or a system of agencies and institutions which, in combination, perform all the activities required to link producers with users and users with producers to accomplish the marketing task.
According to Philip Kotler, “The distribution is the set of all firms & individuals that assist in the transferring the little of goods & services as they move from producers to customers.”
According to Richard Buskirk, “Channel of distribution is that system of financial organization by which a producer sends his products to the hands of consumers.”
According to Cundiff and Still, “Channels of distribution are those marketing nets through which the producer flow the products toward the market.”

Functions (Role) of the Channels of Distribution
The following are the main function of the channel of distribution:

Sunday, August 17, 2014

Principles of Marketing - Wholesaler and Retailer

Retailer and His Functions
Retailer is one whose business is to sell to consumers a wide variety of goods that are assembled at his premises as per the needs of final users. The term retail signifies sale for final consumption rather than for resale or for further processing. A retailer is the last link between the final user and the wholesaler or the manufacturers.
In the words of Professor William Staton,”Retailing includes all activities directly related to the sale of goods and services to the ultimate consumers for personal or non-business use”
Thus, retailer is that merchant intermediary who buys goods from preceding channel members in small assorted lots and sells them in the lot requirements of final users.

Functions of Retailers:
Retailers as the last link in the chain of distribution, performs good many functions of marketing. Of all these following are the most significant ones.
1. Buying and assembling: Retailer has to assemble products from different manufacturers and wholesalers as he has to keep wide variety of stock of products market the varied and small requirements of large number of customers. This assembling possible through the prices of buying. Buying is a continuous process involving selection and the most economical and dependable sources of supply.

Principles of Marketing - Brand Name and Trade Mark

Brand Name
A brand is define as a name, term, sign, symbol or special design or some combinations of these elements that is intended to identify the goods or services of one seller or a group of sellers. A brand differentiates these products from those of competitors. A brand in short is an identifier of the seller or the maker. A brand name consists of words, letters and / or numbers that can be vocalized. A brand mark is the visual representation of the brand like a symbol, design, distinctive colouring or lettering.

In the opinion of American Marketing Association, Brand is a name, position, symbol or design or their combination by which the products and services of a seller or different sellers are recognized and are differentiated from the products and services of competition.

In the views of Lapland, The 'brand' can be defined as any indication, symbol, letter or letters which indicate the origin or the ownership of any product and differentiate the product from its variety, and don't grant the same right to others for using them for the similar object.

Characteristic of a good brand name

Principles of Marketing - Pricing, Methods and Factors Affecting Pricing Decisions

Price and Pricing
Price is defined as the amount we pay for goods or a service or an idea. Price is the only element in the marketing mix of a firm that generates revenue. All other elements generates only cost. Price is a matter of importance to both seller & buyer in the market place. Only when a buyer & a seller agree on price, we can have exchange of goods and services leading to transfer of ownership.
The term ― Price need not be confused with the term ― Pricing. Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors. 

Objectives of Pricing
A business firm will have a number of objectives in the area of pricing. These objectives can be short term or long term or primary objectives:-
(i) Profit maximization in the short term.
(ii) Profit optimization in the long term.

Principles of Marketing - Consumer Behaviour, Features, Importance and Factors affecting it

Consumer Behaviour
Behaviour is a mirror in which everyone shows his or her image. Behaviour is the process of responding to a thing or event. Consumer behavior is to do with the activities of individual in obtaining and using the good and services. The term consumer behaviour is defined as the behaviour that consumer display in searching for, purchasing using, evaluating and disposing of products and services that they expect will satisfy their needs.
In the words of Kotler,”Consumer   behaviour   is   the   study   of   how   people   buy,   what they buy, when they buy and why they buy.”
In the words of Solomon,” Consumer behaviour is the study of the processes involved when individuals or groups select, purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires”
In the words of Professor Bearden and Associates,”Consumer behaviour is the mental and emotional process and the physical activities of people who purchase and use goods and services to satisfy needs and wants.”

Characteristics of consumer behavior are:

Friday, August 15, 2014

AHSEC - 12: Reconstitution of Partnership (Admission, Retirement and Death of a Partner) Important Questions for Feb' 2018 Exam

Unit – 3: Reconstitution of Partnership (Admission, Retirement and Death of a Partner)
Q.1. What do you mean by “Reconstitution of a Partnership Firm? Under what situations it takes place?          2012
Ans: Reconstitution of Partnership: Reconstitution of a partnership refers to a situation when there is a change in the existing partnership agreement. A Partnership agreement is an agreement between two or more persons for carrying out various business activities. In case of reconstitution, a new partnership agreement is formed to replace the old partnership agreement. It means the firm continues to exist and the only change will take place in existing partnership agreement.  Thus, reconstitution of a partnership takes place in each of the following cases:
a)      Admission of a partner
b)      Retirement of a partner
c)       Death of a partner
d)      Change on profit sharing ratio
Q.2. When and Why revaluation of Assets and Liabilities are done in Partnership Business?      2013
Ans: When? Revaluation of Assets and Liabilities takes place in each of the following cases:
a)      Admission of a partner
b)      Retirement of a partner
c)       Death of a partner
d)      Change on profit sharing ratio

AHSEC - 12: Issue and Redemption of Debentures Important Questions for Feb' 2018 Exam

Unit – 6: Accounting for Debentures (Issue and Redemption)
Q.1. What do you mean by “Debentures”? Mention its features. What are its advantages and disadvantages? 2007, 2013, 2015, 2017
Ans: Meaning of Debentures: According to Sec. 2 (30) of the companies Act, 2013, debentures include “debenture stock, bonds and any other securities of a company evidencing a debt, whether constituting a charge on the assets of the company or not.
Debentures are debt instruments issued by a joint stock company. Amounts collected by way of debentures form part of the loan capital of a company. They are repayable after a fixed period. Debenture holders get interest on their debentures. They are creditors of the company. They do not get dividend. Only shareholders get dividend.
The characteristics of debentures can be summarised as follows:                             2017
a)      Debentures are debt instruments.
b)      Interest is payable on debentures at a fixed rate irrespective of the profit earned by the business.
c)       In the event of winding up of the company the debenture holders are treated as creditors and given priority in repayment of their money.
d)      Debenture holders normally do not have representation in the Board of the company.
Advantages of debentures
a)      Less Costly: It involves less cost to the firm than the equity financing.
b)      Long Term Source of Fund: Debentures provide Funds to the company for a long period.

Management Accounting - Difference

Standard Cost and Estimated Cost
Estimates are predetermined costs which are based on historical data and are often not very scientifically determined.  They usually compiled from loosely gathered information and therefore, they are unsafe to use them as a tool for measuring performance.  Standard costs are a predetermined cost which aims at what the cost should be rather then what it will be.  Both the standard costs and estimated costs are used to determine price in advance and their purpose is to control cost.  But, there are certain differences between these two costs as stated below:

The following are some of the important differences between standard cost and estimated cost:
Standard Cost
Estimated Cost
a.      Emphasis
Standard cost emphasizes as what the cost ‘should   be’ in a given set of situations.
Estimated cost emphasizes on what the cost ‘will be’.
b.      Basis for calculation
Standard costs are planned costs which are determined by technical experts after considering   levels of efficiency and production.
Estimated costs are determined by taking into consideration the historical data as the basis and adjusting it to future trends.
c.       Efficiency measurement
It is used as a devise for measuring efficiency
It cannot be used as a devise to determine efficiency.  It only determines expected costs.
d.      Cost control
Standard costs serve the purpose of cost control
Estimated costs do not serve the purpose of cost control.
e.      Part of cost accounting
Standard costing is part of cost accounting process
Estimated costs are statistical in nature and may not become a part of accounting.
f.        Technique of cost accounting
It is a technique developed and recognised by management and academicians.
It is just an estimate and not a technique
g.       Applicability
It can be used where standard costing is in operation
It may be used in any concern operating on a historical cost system.

Budgetary Control and Standard Costing
Both standard costing and budgetary control achieve the same objective of maximum efficiency and cost reduction by establishing predetermined standards, comparing actual performance with the predetermined standards and taking corrective measures, where necessary. Thus, although both are useful tools to the management in controlling costs, they differ in the following respects:

Budgetary Control
Standard Costing
Budgetary control deals with the operations of a department of business as a whole.
Standard costing is applied to manufacturing of a product, process or processes or providing a service.
 It is extensive in its application, as it deals with the operation of department or business as a Whole.
It is intensive, as it is applied to manufacturing of a product or providing a service.
Budgets are prepared for sales, production, cash etc.
It is determined by classifying recording and allocating expenses to cost unit.
It is a part of financial account, a projection of all financial accounts.
It is a part of cost account, a projection of all cost accounts.
Control is exercised by taking into account budgets and actual. Variances are not revealed through accounts.
Variances are revealed through difference accounts.
Budgeting can be applied in parts.
It cannot be applied in parts.
It is more expensive and broad in nature, as it relates to production, sales, finance etc.
It is not expensive because it relates to only elements of cost.
Budgets can be operated with standards.
This system cannot be operated without budgets.

Management Accounting - Introduction of Standard Costing

Essentials or Preliminaries before Setting Standard:
While setting standard cost for operations, process or product, the following Preliminaries must be gone through:
a.      There must be Standard Committee, similar to Budget Committee, in which Purchase Manager, Personnel Manger, and Production Manager are represented. The Cost Accountant coordinates the functions of the Standard Committee.

b.      Study the existing costing system, cost records and forms in use. If necessary, review the existing system.

c.       A technical survey of the existing methods of production should be undertaken so that accurate and reliable standards can be established.

d.      Determine the type of standard to be used.

e.       Fix standard for each element of cost.

f.        Determine standard costs for each product.

g.      Fix the responsibility for setting standards.

Management Accounting - Standard Costing: Meaning, Advantages and Limitations

Introduction – Standard Costing:
Cost control is a basic objective of cost accountancy. Standard costing is the most powerful system ever invented for cost control. Historical costing or actual costing is nothing but, a record of what happened in the past. It does not provide any ‘Norms’ or ‘Yardsticks’ for cost control. The actual costs lose their relevance after that particular accounting period. But, it is necessary to plan the costs, to determine what should be the cost of a product or service. It the actual costs do not conform to what the costs should be, the reasons for the change should be assessed and appropriate action should be initiated to eliminate the causes.


Standard: According to Prof. Eric L.Kohler, “Standard is a desired attainable objective, a performance, a goal, a model”. Standard may be used to a predetermined rate or a predetermined amount or a predetermined cost.

Standard Cost: Standard cost is predetermined cost or forecast estimate of cost. I.C.M.A. Terminology defines Standard Cost as, “a predetermined cost, which is calculated from management standards of efficient operations and the relevant necessary expenditure. It may be used as a basis for price-fixing and for cost control through variance analysis”. The other names for standard costs are predetermined costs, budgeted costs, projected costs, model costs, measured costs, specifications costs etc. Standard cost is a predetermined estimate of cost to manufacture a single unit or a number of units of a product during a future period. Actual costs are compared with these standard costs.

Management Accounting - Variance Analysis

Variance and Variance analysis
Control is a very important function of management. Through control, management ensures that performance of the organisation conforms to its plans and objectives. Analysis of variances is helpful in controlling the performance and achieving the profits that have been planned.

The deviation of the actual cost or profit or sales from the standard cost or profit or sales is known as “Variance”. When actual cost is less than standard cost or actual profit is better than standard profit it is known as favourable variance and such a variance is usually a sign of efficiency of the organisation. On the other hand, when actual cost is more than the standard cost or actual profit or turnover is less than standard profit or turnover it is called unfavourable or adverse variance and is usually an indicator of inefficiency of the organisation. Variance of different items of cost provide the key to cost control because they disclose whether and to what extent standards set have been achieved.

Variance analysis is the process of analysing variance by sub-dividing the total variance in such a way that management can assign responsibility for off standard performance. It, thus, involves the measurement of the deviation of actual performance from the intended performance. That is, variance analysis is a tool to measure performances and based on the principle of management by exception. In variance analysis, the attention of management is drawn not only to the monetary value of unfavourable and favourable managerial performance but also to the responsibility and causes for the same.

Management Accounting - Fixed and Flexible Budget

Fixed Budget and Flexible Budget
Flexible Budget: A flexible budget is defined as “a budget which, by recognizing the difference between fixed, semi-variable and variable cost is designed to change in relation to the level of activity attained”. Flexible budgets represent the amount of expense that is reasonably necessary to achieve each level of output specified. In other words, the allowances given under flexibility budgetary control system serve as standards of what costs should be at each level of output.
Fixed Budget:  A fixed budget, on the other hand is a budget which is designed to remain unchanged irrespective of the level of activity actually attained. In a fixed budgetary control, budgets are prepared for one level of activity whereas in a flexibility budgetary control system, a series of budgets are prepared one for each level of alternative production levels or volumes.

Fixed Budget
Flexible Budget
It does not change with actual volume of activity achieved. Thus it is known as rigid or inflexible budget.
It can be recasted on the basis of activity level to be achieved. Thus it is not rigid.
It operates on one level of activity and under one set of conditions. It assumes that there will be no change in the prevailing conditions, which is unrealistic.
It consists of various budgets for different levels of activity.
Here as all costs like - fixed, variable and semi-variable are related to only one level of activity. So variance analysis does not give useful information.
Here analysis of variance provides useful information as each cost is analysed according to its behaviour.

If the budgeted and actual activity levels differ significantly, then the aspects like cost ascertainment and price fixation do not give a correct picture.
Flexible budgeting at different levels of activity facilitates the ascertainment of cost, fixation of selling price and tendering of quotations.
Comparison of actual performance with budgeted targets will be meaningless specially when there is a difference between the two activity levels.
It provides a meaningful basis of comparison of the actual performance with the budgeted targets.

Management Accounting - Essentials of Effective Budgeting

Essentials of Effective Budgeting:
A budgetary control system can prove successful only when certain conditions and attitudes exist, absence of which will negate to a large extent the value of a budget system in any business. Such conditions and attitudes which are essential for effective budgeting are as follows:
a)      Support of Top Management: If the budget system is to be successful, it must be fully supported by every member of the management and the impetus and direction must come from the very top management. No control system can be effective unless the organisation is convinced that the top management considers the system to be import.
b)      Participation by Responsible Executives: Those entrusted with the performance of the budgets should participate in the process of setting the budget figures. This will ensure proper implementation of budget programmes.
c)       Reasonable Goals: The budget figures should be realistic and represent reasonably attainable goals. The responsible executives should agree that the budget goals are reasonable and attainable.
d)      Clearly Defined Organisation: In order to derive maximum benefits from the budget system, well defined responsibility centers should be built up within the organisation. The controllable costs for each responsibility centres should be separately shown.
e)      Continuous Budget Education: The best way to ensure the active interest of the responsible supervisors is continuous budget education in respect of objectives, potentials & techniques of budgeting. This may be accomplished through written manuals, meetings etc., whereby preparation of budgets, actual results achieved etc., may be discussed.

Management Accounting - Advantages and Limitations of Budgetary Control

Advantages of Budgetary Control:
A budget is a blue print of a plan expressed in quantitative terms. Budgeting is technique for formulating budgets. Budgetary Control, on the other hand, refers to the principles, procedures and practices of achieving given objectives through budgets. Here are the some Advantages of Budgetary Control:
a)      Maximization of Profit: The budgetary control aims at the maximization of profits of the enterprise. To achieve this aim, a proper planning and co-ordination of different functions is undertaken. There is proper control over various capital and revenue expenditures. The resources are put to the best possible use.
 b)      Efficiency: It enables the management to conduct its business activities in an efficient manner. Effective utilization of scarce resources, i.e. men, material, machinery, methods and money - is made possible.
 c)       Specific Aims: The plans, policies and goals are decided by the top management. All efforts are put together to reach the common goal of the organization. Every department is given a target to be achieved. The efforts are directed towards achieving come specific aims. If there is no definite aim then the efforts will be wasted in pursuing different aims.
d)      Performance evaluation: It provides a yardstick for measuring and evaluating the performance of individuals and their departments.

e)      Economy: The planning of expenditure will be systematic and there will be economy in spending. The finances will be put to optimum use. The benefits derived for the concern will ultimately extend to industry and then to national economy. The national resources will be used economically and wastage will be eliminated.