Category: Maharashtra State Board Notes

By going through these Maharashtra State Board 12th Science Biology Notes Chapter 14 Ecosystems and Energy Flow students can recall all the concepts quickly.

Maharashtra State Board 12th Biology Notes Chapter 14 Ecosystems and Energy Flow

Introduction-

• Self-regulatory and self -sustaining structural and functional unit of biosphere.
• Consists of biotic and abiotic components.
• The term ecosystem was coined by Tansley.
• Ecosystems are of variable sizes from small pond to large ocean.
• Global ecosystem means entire biosphere.
• Two basic categories :
  (1) Terrestrial (forest, grassland, desert)
  (2) Aquatic (lakes, rivers, wetlands, estuaries)
• Also classified as natural ecosystem which is not based on any human inputs and artificial ecosystem which is dependent on man for constant inputs of energy or material.
• Dynamics of ecosystem : Input of ecosystem means productivity, transfer of energy in ecosystem is by a food chain, food web and nutrient cycling and output of ecosystem means degradation and energy loss.

Ecosystem-

1. Structure and function :

(1) Physical structure of ecosystem means the interaction of biotic and abiotic components in that ecosystem.

(2) Species composition of an ecosystem is understood by identification and enumeration of resident plant and animal species.

(3) Spatial pattern is the variation in ecosystem due to space. This is of two types, viz. stratification and zonation.

• Stratification : Vertical distribution of species of plants and animals at different levels. E.g. Trees, herbs, shrubs among plant species. Epipelagic, meso pelagic, bathypelagic and benthic among aquatic communities.
• Zonation : Horizontal distribution of plants and animals either on land or in water. E.g. Zonation in aquatic system : intertidal, littoral, sublittoral zones.
  Zonation in wetlands : Sub tidal channels, mudflats, Low marsh, high marsh

2. Functional aspects of ecosystem : Productivity, Decomposition, Nutrient cycling and Energy flow are the four functional aspects of any ecosystem.

(1) Productivity :

• Conversion of inorganic substances into organic material using solar energy by the autotrophs is called productivity. Consumption of autotrophs by heterotrophs.
• Solar energy is a must for any ecosystem for sustenance.
• Rate of generation of biomass in an ecosystem expressed as gram/sq. metre/ day.
• Gross primary productivity (GPP) : Rate of production of organic matter by photosynthesis.
• Net primary productivity (NPP) : Net
  Primary Productivity = Gross primary productivity – respiratory losses.
• NPP is available biomass which heterotrophs can use.
• Annual NPP of whole biosphere = 170 billion tons dry weight of organic matter. Ocean productivity = 55 billion tons.

Factors on which GPP depends :

• Resident plant species
• Availability of nutrients
• Photosynthetic capacity of plants
• Type of ecosystem

Secondary productivity : Rate of formation of new organic matter by consumers. This is available energy which is transferred to next trophic level.

(2) Decomposition :

• Breakdown of complex organic material and forming inorganic minerals from the dead matter is called decomposition.
• Detritus is raw material which is decomposed.

Factors regulating decomposition :

• Enough oxygen availability as it is an oxygen-requiring process.
• Chemical composition of detritus.
• Climatic factors.
• If detritus is rich in lignin and chitin the rate of decomposition rate is slower. If the detritus is rich in nitrogen and sugars the rate is faster.
• Most important factors for decomposition are temperature and soil moisture. These factors affect activities of soil microbes. In warm and moist environment decomposition is faster whereas in low temperature and in absence of oxygen, the decomposition is inhibited.

(3) Nutrient cycling : Storage and transport of nutrients.

(4) Energy flow : Flow of energy from producer to consumer in unidirectional way. Dissipation and loss of heat during energy flow is inevitable.

Energy flow –

1. The ultimate source of energy for all the globed ecosystems is sun. However, in deep sea hydrothermal ecosystem solar energy does not reach.
2.  Less than 50% of solar radiation that falls on the earth’s surface is photosynthetically active radiation (PAR). Only 2-10 % of PAR sustains the entire living world.
3. Plants and autotrophic bacteria fix solar radiant energy into complex carbohydrates while using simple inorganic materials. Plants thus are the producers that supply the energy in the form of food to consumers.
4. There is always unidirectional flow of energy ; from the sun to autotrophic producers and : then to heterotrophic consumers.
5. Second Law of thermodynamics operates for the ecosystems too. The universal tendency towards increasing disorderliness is always counteracted by producers and consumers.
6. Organisms in the ecosystem need a constant : supply of energy to survive and synthesise the : required molecules.
7. Major primary producers are herbaceous and woody plants in a terrestrial ecosystem. In an aquatic ecosystem primary producers are phytoplankton and algae.
8. Food chain/Food web : The chain or web formed due to interdependency among various organisms of the ecosystem is known as food chain.
9. Energy that is trapped into an organism keeps on flowing. Producers trap the energy and pass it further to a consumer. If the producer dies, the death of organism starts the detritus food chain/web.
10. All animals directly or indirectly depend on : plants to obtain their food. They cannot synthesise their own food so they are called ; heterotrophs or consumers.
11. Primary consumers : Consumers feeding directly on the producers are called primary consumers. For example, Herbivorous animals. Insects, birds and some mammals are herbivores or primary consumers in the terrestrial ecosystem and molluscs are primary consumers in aquatic ecosystem.
12. Secondary consumers : The animals consuming other animals are secondary consumers. For example, Carnivores. Primary carnivores are secondary consumers. Secondary consumers feed on primary consumers.
13. Tertiary consumers : Animals feeding on secondary consumers are called tertiary consumers.
    For example, in the food chain “Plant matter → Insect → Frog → Snake”, insect is primary consumer, frog is secondary consumer and snake is the tertiary consumer.
14. Food chains are of two types : Grazing food chain and detritus food chain.

(1) A simple grazing food chain (GFC) is shown as follows :

(2) The detritus food chain (DFC) is made up of decomposers. It starts with dead and decaying matter. Examples of decomposers are fungi and bacteria. Decomposers are also called heterotrophic saprotrophs. (sapro : to decompose). By degrading dead organic matter or detritus, decomposers meet their nutritional and energy requirements. Digestive enzymes of saprotrophs breakdown dead and waste materials into simple inorganic materials before their absorption which are subsequently absorbed by them.

(3) In an aquatic ecosystem energy flow occurs only through grazing food chains whereas in a terrestrial ecosystem, majority of energy flow occurs through the detritus food chain.

(4) There are interconnections between detritus i food chain and grazing food chain at some levels. Some organisms of DFC serve as prey & to the GFC animals. Some animals like cockroaches, crows, pig and mam, etc. are omnivores.

(5) The natural interconnection of food chains is called a food web.

15. Diagrammatic representations of trophic levels in an ecosystem

• At each successive trophic level, the amount of energy available goes on reducing. The trophic levels in any food chain transfer the energy when it is functioned.
• ‘10% Law’ of R. Lindermann, 1942 : The law states that ‘only 10% of the energy is transferred to each trophic level as net energy, from the previous trophic level’.
• Food chains are never in isolation, but are always interconnected to form food web for maintaining the stability of an ecosystem.

Ecological Pyramids-

1. Ecological pyramid is the expression drawn to indicate number, biomass or energy in an ecosystem.

2. The broad base and narrow apex of a pyramid rightly expresses the food or energy relationship within different trophic level. The producers or the first trophic level is shown as a base of each pyramid while the apex represents tertiary or top level consumer.

3. The three types of ecological pyramids are :

• Pyramid of number
• Pyramid of biomass and
• Pyramid of energy.

4. The calculations of energy content, biomass, or number include all organisms at that trophic level. Some organisms may occupy more than one trophic level simultaneously, e.g. A primary consumer sparrow can become secondary consumer when it feeds on insects. The trophic level thus represents a functional level and not a species as such.

5. All the pyramids, of number, of energy and biomass are upright in most of the ecosystems, i.e., producers always outnumber the consumers. Similarly biomass is more for producers than that of the herbivores. Herbivores or primary consumers outnumber carnivores. Energy at a higher trophic level is always less than energy at the lower trophic level.

6. Exceptions to pyramid structure :

• The pyramid of biomass in sea is also generally inverted as the biomass of fishes far exceeds that of phytoplankton.
• Many insects and birds thriving on a single huge tree will also show inverted pyramid of numbers.

7. When energy flows from a lower trophic level to the next trophic level, some energy is always lost as heat at each step. Therefore the pyramid of energy is always upright. It is never inverted. In the energy pyramid, the amount of energy in a given time and per unit area is shown by each bar.

8. Limitations of the ecological pyramids :

• Ecological pyramids do not take into account the same species belonging to two or more trophic levels.
• They are based on simple food chain. In nature simple food chains do not exist but all the trophic relationships are in the form of food web.
• Saprophytes play a major and vital role in the ecosystem but they are not shown in ecological pyramids.

9. C. Elton in 1927 developed the concept of ecological pyramids.

Nutrient cycles-

1. Nutrient cycling : Nutrient cycling or biogeochemical cycle is the movement of nutrient elements through various components of ecosystem.
2. Two types of nutrient cycles :

• Gaseous (nitrogen, oxygen and carbon) having reservoir in atmosphere.
• Sedimentary (Phosphorus, Sulphur) having Earth’s crust as reservoir.

3. Carbon Cycle : (Gaseous cycle)

• Five basic processes running the carbon cycle : Photos ynthesis, respiration, decomposition, sedimentation and combustion.
• Main component of all organic compounds in protoplasm is carbon.
• 49% of dry weight of organisms is carbon.
• Out of total global carbon, 71% carbon is present in oceans.
• Atmospheric Carbon dioxide regulation is done by oceanic reservoir.
• Long term storage places or sinks : Carbon which is a part of rocks and fossil fuels is called long tern storage of carbon.
• The fossil fuels from this sink when burnt, releases carbon dioxide into atmosphere.
• Elemental carbon found in seawater, atmosphere, – limestone, coal, soil and in living beings.
• Moment of carbon dioxide from atmosphere to plants is through photosynthesis.
• Carbon dioxide given out through plants and animals during respiration.
• Carbon also moves along the food chains.
• Carbon dioxide is released into atmosphere by decomposers during decomposition! process of organic matter on land and in oceans.
• Burning of fossil fuels in industries and for vehicular traffic releases carbon dioxide.
• 5.5 billion tonnes of carbon released in atmosphere, of these 3.3 billion tonnes stay in atmosphere and rest dissolves in seawater and gets deposited as calcium or magnesium carbonate compounds used for forming marine animals’ shells.
• Forest fires, volcanic activities are other natural sources releasing carbon dioxide.
• Anthropogenic activities such as deforestation and excessive burning of fossil fuel has tremendously increased amount of carbon dioxide in atmosphere.

4. Phosphorus cycle : (Sedimentary cycle)

• Phosphorus cyclically moves through hydrosphere, lithosphere and biosphere.
• It is a major constituent of biological
  membranes, nucleic acids and cellular energy transfer systems. .
• Animals require large quantities of phosphorus to make shells, bones, hooves and teeth.
• The natural reservoirs are rocks containing phosphates.
• Weathering of rocks release minute amounts of phosphates in soil solution which is needed by plants.
• Herbivores and other animals get phosphorus through plants.
• Decomposition of waste products and the dead organisms by phosphate-solubilizing bacteria release phosphorus.
• Phosphorus is always in short supply, thus acts as a limiting factor for the plant growth.
• Eutrophication : Eutrophication is the sudden influx of phosphorus in water bodies due to agricultural runoff or industrial effluents which are rich in phosphate content.
• Eutrophication causes overgrowth of algae which kills or harms the aquatic life

Ecological succession-

1. Ecological succession : The gradual and fairly predictable change in the species composition of a given area is called ecological succession. It is a community response to the environment over time.

2. All communities constantly change their composition and structure in accordance with the changing environmental conditions. This change is orderly and sequential, parallel with the changes in the physical environment.

3. Climax community : Community that is in near equilibrium with the environment after the ecological succession.
The change is sequential and environmentally regulated in climax community.

4. Process of succession involves following sequential steps :

• Nudation
• Invasion
• Ecesis
• Aggregation
• Competition and co-action
• Reaction and stabilization.

Learn This As Well :
1916, Frederic Clements published a descriptive theory of succession which is called classical ecological theory. His theory of succession had a powerful influence on ecological thought. He has given following phases of succession :

• Nudation : Nudation is disturbance. Succession begins with the development of a bare site.
• Migration : The tiny seeds or propagules arrive during this phase.
• Ecesis : Ecesis is the establishment and initial growth of vegetation.
• Competition : When vegetation becomes well-formed and established, it grows and competes with other species for space, light and nutrients.
• Reaction : Autogenic changes such as the build-up of humus affect the habitat, and one plant community replaces another during this phase.
• Stabilization : The community which is better, becomes stable forming a Climax community.

5. Some populations become more numerous, whereas some populations decline and even disappear during the succession. Newer species also colonise the areas.

6. Sere : Sere is the entire sequence of communities that successively change in a given area. Serai stages or serai communities are the individual transitional communities in this sere.

7. Following changes take place in the successive serai stages :

• Change in the diversity of species of organisms,
• Increase in the number of species and organisms,
• Increase in the total biomass.

8. Similar succession is said to have taken place in past over millions of years forming the present day global communities. Succession and evolution were the parallel processes in the past and also at the present.

9. Succession is of two types, viz. Primary succession and secondary succession.

Primary succession : It is the process that starts where no living organisms are there, e.g. bare rock, newly cooled lava, newly created pond or reservoir. The primary succession is very slow process of establishment of a new biotic community. Factors such as soil, climatic conditions, etc. The natural processes that take place for thousands of years till the new community is established.

Secondary succession : It occurs in areas where all life forms were lost that existed before. It begins in places like abandoned farmlands, burned or cut forests, lands that have been flooded, etc. Secondary succession is faster as some abiotic factors such as soil or sediment are already present there.

10. Ecological succession usually focuses on changes in vegetation. But when the vegetation changes, it in turn affects various types of animals as animals are dependent on plants for their food and shelter.

11. Therefore, with process of succession the numbers and types of animals and decomposers also show change.

12. Natural or human induced disturbances (fire, deforestation, etc.), in a normal succession pattern can convert a particular serai stage of succession to an earlier stage or create new conditions that encourage some species and eliminate other species.

13. Succession of Plants :

• Succession of plants can be of hydrarch (in wet areas) or xerarch (in very dry areas) based on the nature of the habitat.
• In hydrarch succession, successional series progress from hydric to the mesic conditions.
• In xerarch succession, successional series progress from xeric to mesic conditions.
• Both hydrarch and xerarch successions lead to mesic (medium water) conditions but neither too xeric nor too hydric.

14. Pioneer species : The species that initially invade a barren area is called pioneer species.

Ecosystem Services-

1. Ecosystem services: Ecosystem services are the products of ecosystem and processes which comprise of economic, environmental, aesthetic goods and services.
2. Millennium ecosystem assessment report 2005 as given definition of ecosystem services as follows ecosystem services is dcfincd as benefits which are obtained by people from ecosystem.
3. There are four types of ecosystem services:

4. Main important ecological services on earth without which life would not have been possible:

• FIxation of atmospheric CO₂ and release of O₂, by photosynthesis and intake of oxygen and release
  of CO₂ in respiration.
• Pollination of plants brought about by wind, water or other blotic agencies.
• MaintaIning biodiversity.

By going through these Maharashtra State Board Organisation of Commerce and Management 12th Notes Chapter 5 Emerging Modes of Business students can recall all the concepts quickly.

Maharashtra State Board Organisation of Commerce and Management 12th Notes Chapter 5 Emerging Modes of Business

→ Policy: Definite course of action followed by a business firm, government, etc. to achieve its objectives.

→ Negotiate: To deal or bargain with others as in working out the terms of a contract.

→ Registration: A process of entering the name and other relevant details like e-mail id, card details, etc. with the internet.

→ Repository: A container or place where things are deposited or stored.

→ Infrastructure: The basic facilities like roads, electricity, water, etc., that are required for the smooth running of a business, factory, etc., in particular and economy in general.

→ Marketing: The activities of a business enterprise that are connected with acquiring, maintaining and expanding markets for its products and for ensuring that its product reaches the consumers in time.

→ Recruitment: The process of searching the prospective and capable employees and encouraging them to apply for jobs in the organisation. It aims at attracting potential employees to the organisation to create a large pool for better selection.

→ Hacker: A person who is excellent at computer programming and uses computer systems illegally for private gain.

→ Off shore: Company makes contract with the foreign company in respect of outsourcing services.

→ Onshore: Company makes contract with another company of home country in respect of outsourcing services.

→ Near shore: Company makes contract with a company of neighbouring country in respect of outsourcing services.

E-Business-

Introduction: E-business is an abbreviation of electronic business. In 1997, the term e-business was first used by International Business Machines (IBM). Before that the term e-commerce was in use. E-business implies use of internet to connect people and process. International trade for goods and services started growing rapidly due to use of internet. In brief, e-business, means the use of Web, internet, intranet, extranets or some combination thereof to conduct business. E-business helps to open new door to the customers, brings closer and builds responsive relationship with partners, employees, suppliers, etc., makes new inventions and innovative ways to . add value to existing products, e-business with the help of internet and web support provide opportunities in different areas such as selling, customer relationship, product/service design, geographic expansion, etc. e-business is nothing but business on internet.

Meaning:
The electronic business i.e. e-business is originated from the two terms e-mail and e-commerce. Thus electronic business commonly referred to as ‘e-business’ or ‘an internet business’ may be defined as the application or utilisation of information and communication technologies (ICT) in support of all business activities, e-business involves purchasing and selling on internet processing orders electronically, making online payments via credit cards or debit cards, direct fund transfer handling customer services and co-operating with business partners using with technical or customer support. The term e-commerce and e-business are different. In fact, e-business includes e-commerce.

Scope of e-business:
The scope of e-business is extended to online shopping, online stock, online transactions, e-commerce and use of software. Most of the business are now aware of the advantages of e-business and are now started incorporating e-business in their policies and strategies. It facilitates direct and better communication between the consumers and business houses and makes purchasing easier for large organisations.

The scope of e-business becoming vast because almost all kinds of business functions such as production, finance, marketing, personnel administration, management functions like planning, organising, co-ordinating, controlling etc. are now carried out via computer networks. The different business and payment apps such as Phone Pay. Google Pay, Swiggy, Ola, etc. are used in e-business transactions. The various types of e-business transactions are:

Types of E-business transaction-

1. Business to Business (B2B)
2. Business to Consumer (B2C)
3. Consumer to Business (C2B)
4. Consumer to Consumer (C2C)
5. Business to Administration (B2A)
6. Consumer to Administration (C2A)

1) Business to Business (B2B): Under B2B, one business firm communicates and interacts with other business firms for different varieties and ranges of services. Example is value added services like catering and also providing manpower. It does not involve individuals.

2) Business to Consumer (B2C): Under B2C, business firms sell goods and services to the consumers. Firms use their website for various marketing activities like promotion, information, review, etc. Examples are www.flipkart.com, www.yebhi.com, etc.

3) Consumer to Business (C2B): Under C2B, the consumer posts his request with a set budget online, quote price for specific service or goods to the business. The companies review the
customers’ requirement and finalise the order. For instance, pest control service, door step food delivery, taxi services, etc.

4) Consumer to Consumer (C2C): The transactions such as buying and selling of variety of goods under C2C are between consumer and other consumers. Internet offers lot of scope for this activity. Payment modes for transactions are secured through advanced technology. The website do the job of intermediaries i.e. to match the consumers. Example of such a website is eBay.

5) Business to Administration (B2A): All transactions conducted online between business and public administration come under B2A, e.g. registration of companies, payment of taxes, obtaining various types of licences and permits, etc.

6) Consumer to Administration (C2A): All transactions conducted online between consumers (individuals) and public administration are j included in C2A. e.g. getting passport, aadhaar card, Pan card, licences, etc.

Benefits of E-business-

Internet has become fourth channel for trade. It has many advantages:

• Ease of formation: As compared to traditional business, e-business is relatively easy 5 to start and operate.
• Lower investment requirements: Investment requirements of e-business is very low in comparison to traditional business. It does not require large store and large manpower to conduct business. More contacts and effective communication can do huge business.
• Convenience: E-business of any thing can be done anytime and anywhere. It offers j convenience of 24 x 7 x 365 days a year.
• Speed: All aspects of business transactions such as buying or selling, making payments, etc. j can be done quickly and speedily at the click of mouse.
• Global access: Internet is boundryless. It allows the seller to have access to global market and also offers freedom to the buyer to choose products from any part of the world. For e-business face to face interaction between buyer and seller is not required.
• Movement towards a paperless society: Use of internet has reduced the dependence on paperwork to great extent. Recording and referencing of information has become easy.
• Government support: Government favours and supports e-business. It ensures maximum transparency.
• Easy payment: In e-business transactions, the payment is done by fund transfer, credit card, etc. Such payment can be made anytime, quickly and round the clock.

Limitations of e-business-

• Lack of personal touch: Lack of physical inspection and personal touch affect its sale adversely. The consumer cannot check the quality of product.
• Delivery time: In e-business, delivery of products is considerably delayed in comparison to traditional business. Time lag always discourages consumers to buy products online.
• Security issues: Scam and cheating through online business by the people or hackers cannot be denied. It lacks adequate security and integrity. It also disturbs the entry of potential buyers.
• Government interference: Government interference sometimes puts hurdles on its growth and expansion.
• High risk: E-business involves high risk because of absence of direct contact between the buyer and seller. In case of fraud, it is difficult to take legal action against the wrongdoer.

Online Transaction-

Meaning: Business transactions which are carried out and completed between seller and buyer with the help of internet are called online business transactions. In this, placing an order, selection of goods, execution of order, transfer of funds, etc. are completed via internet by using websites and e-mail addresses of buyer and seller.

Procedure of online Transaction: In online transaction, there are three stages, viz. pre-purchase/sale stage, actual purchase/sale stage and delivery stage.

Online transaction involves the following steps:

1) Registration: Registration is required for online transactions. One who wants to do online shopping is required to login on a website and fill relevant details with the online vendor. The customer’s email id, name, address and other details are saved by the website for future use.

2) Placing an order: The online customer or shopper can select, pick up and drop the items or things in the shopping cart. The shopping cart keeps the systematic and detail record of what items or things have been picked up and dropped in the shopping cart and the price of each. The buyer then needs to make payment.

3) Payments: The payment system, is fully secured. Payment can be made in one of the following ways:

• Cash on Delivery (COD): According to this mode of payment, after receiving physical delivery of goods at the door step, payments for the online goods ordered is effected by cash payment or by debit or credit card.
• Cheque: Under this mode of payment, the vendor collects the cheque from the customer and after realisation of the cheque, delivery of the goods is given to the buyer.
• Net banking transfer: Under this mode, the payment is made by buyer to vendor by transfer of funds through the internet. The buyer transfers the agreed purchase amount to the online vendor’s account. After receiving the amount, the vendor delivers the goods to the buyer.
• Credit or Debit Cards: The credit card or debit card is used by the cardholder for making payment of purchases online. The vendor gets the amount from the buyer through credit or debit Con’d. The amount gets immediately transferred to Vendor’s Bank Account. After the successful transfer of funds, goods are delivered by the vendor to buyer.
• Digital cash: This facility of electronic currency exists only in cyberspace. For making payment of purchases, online digital cash offers the ability to use real currency in an electronic format.

Buying Selling Process: Information relating to buying and selling is exchanged in traditional business and also in online (internet) business. In comparison to traditional, business, online business is more easier. In traditional business, time is required to visit the shop, to negotiate, to convince and the presence of buyer and seller is required for face to face interaction. So, to complete the deal lot of time is wasted. However, in online transactions all information is provided with terms and conditions and it is free from most of the problems as that of traditional business. Hence online transactions are result oriented and more easier than traditional business.

Outsourcing-

Meaning: Outsourcing is a process of an allocation of specific business processes or functions, mostly the non-core, to a specialised agency for certain monetary consideration. Usually, establishment, firms, corporate organisations, hospitals, malls, housing societies etc. outsource their non-core business areas such as security service, sanitation, household pantry, etc.

In outsourcing, the company benefits in two ways, viz. (i) It helps to reduce the company’s own cost and (ii) The company uses expertise of the specialised agencies to perform its business processes in a better way. Nowadays some functions like wedding, anniversary, birthday celebration, etc. are also outsourced to specialised agencies.

Need for Outsourcing:

• Some services require finely tuned skills which organisation cannot provide.
• Non-core business areas are outsourced to concentrate on improvement of quality of their products and services.
• Sometimes an organisation cannot handle all the functions internally.
• Some processes are required to perform once in several years.

Advantages of Outsourcing:

• Overall cost advantages: Outsourcing reduces its own overall cost. It saves cost of training, saves time and efforts on training.
• Stimulates entrepreneurship, employment and expertness: Outsourcing encourages and stimulates entrepreneurship, employment and expertness in the country from where outsourcing is done.
• Low manpower cost: Manpower through j outsourcing is available at much lower cost.
• Access to professional, expert and high quality services: The tasks are outsourced to the vendors who are specialised in their fields. They have deep knowledge, experience, specific equipment and technical expertise. They give better j performance and commit less errors.
• Emphasis on core process rather than the supporting ones: Outsourcing facilitates the organisation to spend more time to strengthen ; their core business processes. The organisations ! can easily focus their attention on improving the quality of their products and services.
• Investment requirements are reduced: When some areas of business are outsourced to specialised agencies, the parent organisation is not required to invest in latest technology, software and infrastructure. Hence investment requirement of the parent organisation is very less.
• Increased efficiency and productivity: Outsourcing increases efficiency and productivity j in the non-core area of an organisation.
• Knowledge sharing: While working in the organisation outsourced partners and employees of parent organisation share their knowledge, experience, technical expertise, etc. with each other.
• This is one of the prime advantages of outsourcing, This in turn develop both the companies and: enhance goodwill in the industry.

Disadvantages of Outsourcing:

• Lack of customer focus: An outsourced vendor may be catering to the expertise needs of several companies at a time. In such cases, he may lack focus and concentration on the parent company’s need or task. As a result, the quality of service given may not remain up to the mark.
• A threat to security and confidentiality: Outsourcing involves a risk of exposing confidential and secret information of the organisation to a third party. So, there is also danger of the misuse of company’s confidential information by the contractors.
• Dissatisfactory services: Some common problems of outsourcing include delayed (stretched) delivery and sub-standard (dissatisfactory) quality.
• Ethical issues: When some functions are outsourced to the foreign company, the unemployment problem of parent company and country gets worse. This is one of the ethical issues related to outsourcing.
• Other disadvantages: When business functions are outsourced, the parent company has to suffer disadvantages like misunderstanding of contracts, lack of communication, poor quality and delayed services.

Different Forms of Outsourcing-

Business Process Outsourcing (BPO):

Meaning: BPO implies outsourcing of peripheral or non-primary business functions of the organisation to an external organisation (service provider) to minimise cost and increase efficiency. It means to give contracts or responsibilities of specific business process to third party e.g. customer care centres of various banks.

Advantages of BPO:

• Productivity improvement: Outsourced business processes are performed by educated or skilled people more efficiently and hence productivity of the organisation improves.
• Optimum utilisation: BPO facilitates the parent organisation to utilise its available scarce resources up to their optimum level possible.
• Reduction in cost: BPO is more important to any organisation as it helps in reducing cost, increasing productivity and revenues of an organisation.
• Improved human resources: Outsourcing helps the parent organisation to get skilled and trained personnel (manpower) at low rates.

Disadvantages of BPO:

• Communication problems: The misunder¬standing and miscommunication between parent company and vendor company may lead to communication gap.
• Different time zones: Sometimes, the parent company and vendor company function in two different time zones. This may create many problems during online meeting, communication, etc.
• Loss of Control: On account of time differences and communication errors, the parent company may sometimes lose control over its project.

Knowledge Process Outsourcing (KPO)-

Meaning: KPO is form of outsourcing in which knowledge related and information related work is outsourced to third party service providers. KPO is sub segment of BPO in which outsource service provider is hired to perform particular business function and to provide expertise around it. In KPO advanced analytical and technical skills and high degree of specialist expertise are required. The processes of specialised and knowledge based are outsourced to KPO which help in value additions.
KPO may be in the same country or at an off shore location.

Advantages:

• Cost reduction: In KPO, cost reduction is possible as parent company gets professional services at a cost effective price.
• Skilled personnel: The company can easily hired skilled employees from KPO service providers.
• Reduction in unemployment: Skilled and high end services are available at lower cost, reduce unemployment and provide benefits to the economy.
• Flexibility: KPO provides flexibility in terms of Human Resource Management (HRM) and Time Management.

Disadvantages:

• Security Problem: Many a time client organisation may have to face security problems because of leakage of secret information by the service providers.
• No assurance of quality work: The character of outsourced workers and the quality of work cannot be assured.
• Time consuming: KPO is time consuming process and cannot provide quick solution to the
  company who need immediate results.
• Complication: Communication gap due to legal, cultural and language barriers may lead to complications.
• Language barrier: Language barrier creates communication problem.

Legal Process Outsourcing (LPO)-

Meaning: LPO is a form of outsourcing in which legal services ranging from drafting legal documents, performing legal research to offering legal advices are provided by law firm for certain consideration in money term. In this, in-house legal departments outsource legal work which can S be done at lesser cost. LPO has gained tremendous i ground in India in recent years. It has been giving | services like document review, legal research, writing, drafting, briefing, etc.

Advantages:

• Cost savings: Considerable cost is saved by outsourcing legal functions to specialised law firm.
• Access to high talent: Outsourcing the | legal work to law form allows the client company | to get high talent and niche expertise that does not j exist in its own company.
• Division of workload: Utilisation of external and in-house talent permits the law firm and parent organisation to divide their liabilities in response to workload and client demands. Firm’s overhead reduces due to flexible staffing.

Disadvantages:

• Problem of authenticity: The client organisation is required to share some important document with legal firms. This creates the problem of authenticity (trustworthy).
• Problem of in-depth knowledge: There may be a problem of detail or thorough knowledge of all relevant laws.
• Communication problem: The cultural and language barriers hinder effective communication between domestic organisation and international team.
• Geographical problem: LPO affects adversely by geographical distance (hurdles) between client organisation and law firms.

By going through these Maharashtra State Board Organisation of Commerce and Management 12th Notes Chapter 6 Social Responsibilities of Business students can recall all the concepts quickly.

Maharashtra State Board Organisation of Commerce and Management 12th Notes Chapter 6 Social Responsibilities of Business

→ Social Responsibility – Social Responsibility refers to all such duties and obligations of the business that are directed towards the welfare of society.

→ Legal Pc Legal responsibility refers to all such duties and obligations of the business that are prescribed by law. It may be fulfilled by mere compliance with the law.

→ Trusteeship’ – According to the principle of trusteeship that was propounded by Mahatma Gandhi, “A business must be carried out in trust, legally and morally for the benefit and welfare of the people.”

→ Fringe benefits: A benefit to employees in kind or in service, the cost of which is borne by the employer. They include profit-sharing schemes, bonuses and medical schemes, sick pay, holidays, etc.

→ Job Security: It is an assurance that an employee has about the continuity of gainful employment
for his/her work life.

→ Trade Union: An association of employees who have come together to improve their wages, hours and conditions of employment by means of collective bargaining.

→ ‘Divide and rule’ Policy: The policy of maintaining control over one’s subordinates or opponents by
encouraging dissent between them thereby preventing them from uniting in opposition.

→ Anti-Social Activ: It covers a wide range of unlawful activity that causes harm to an individual, to their community or to their environment.

→ Business Ethics: It is a code of conduct for regulating the activities of business towards society or others.

→ Moral Values: Moral values are the standards of right and wrong which govern an individual’s behaviour and choices.

→ Social Values: Social values are a set of moral principles that provides the general guidelines for social conduct. Values such as fundamental rights, patriotism, respect for human dignity, rationality, sacrifice, equality, democracy, etc. influence our behaviour in many ways.

→ Corporate Social Responsibility (C.S.R.): C.S.R in the integration of socially beneficial programmes and practices into corporation business model and culture. It aims to produce an overall positive impact on society.

→ Dumping: In International trade, the practice of a producer or supplier, usually monopolist, who sells a product at a lower price in a foreign country than in the home market.

→ Insider trading: The managerial personnel as well as top officials have access to the confidential and sensitive information of the company. These persons may misuse such information for their own or other persons’ benefits. The misuse of sensitive information may lead to fraud or rigging of the prices of shares. This is called ‘insider trading’.

→ Warranty: A written guarantee given to a purchaser that the manufacturer, dealer, etc. will make repairs or replace defective parts free of charge for a stated period of time.

→ Resources: Capital fund, tools, machinery, vehicles, power supply, employees, etc., that an enterprise uses to carry out its activities.

→ Public image: The general impression of a business organization gained and held by its own employed personnel or by and large based upon the presentation of its activities and the reputation of its products.

→ Natural calamities: A disaster or misfortune, especially one causing distress or misery produced by nature e.g. cyclones, storms, earthquakes, famine, droughts, etc.

Introduction-

A business organization depends upon society for its continued existence and growth. Different segments of society contribute to the success of a business. The business obtains its input like manpower, money, machines, materials, etc. from its environment. No organization can survive in the absence of an environment. A business organisation depends on society both for procurement of required input and also for disposal of its output. Thus, it becomes important that businesses should do something for society in return. This responsibility of business towards society is called Social Responsibility.

The concept of social responsibility is as old as our civilization. In India, it has been followed since ancient times. Philosophers like Chanakya from India and pre-Christian era philosophers in the West preached and promoted the concept of social responsibility and other ethical principles while doing business.

Concept of Social Responsibility-

Meaning:
Social responsibility is broader than legal responsibility of business. Legal responsibility may be fulfilled by mere compliance with the law but social responsibility is more than that. It is voluntary action on the part of business for the benefit of society. Thus, all the activities of business should be performed in such a manner that they will not harm any part of the society, but help to protect and contribute to the interest of the society.

Definition:
According to Howard D. Bowen, “Social Responsibility is to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.”

Need for Social Responsibility:

• Concept of Trusteeship: This concept was propounded by Mahatma Gandhi. Wealthy people who are the trustees of trusts must take care of the welfare of the people in general. Businessmen are treated as trustees of society.
• Changing expectations of society: Society’s expectations from business firms have changed from provider of goods and services to contributor towards social welfare.
• Reputation: A company which fulfils social obligations enjoys a good reputation in the society. Business should indulge in creating a favourable image and build its brand. Such a business is held in high esteem which ultimately results in increase in sales, profit, growth, etc.
• Protection of Environment: Business organisation should adopt eco-friendly practices. They should make proper use of country’s natural resources and avoid environmental degradation like pollution of water, depletion of ozone layer, etc.
• Optimum Utilisation of Resources: It is the responsibility of the business organisation to make optimum use of the resources at their disposal. Business firms should avoid wastage of resources.
• Pressure of Trade Union: It is necessary for the business organisations to understand their responsibilities towards the employees and their unions. They should avoid any conflict with them.
• Growth of Consumer Movement: Business organisation must follow fair trade practices and follow consumer oriented policies in increasing competitive market.
• Government Control: Government has enacted various laws to regulate business organisations. All these laws put moral as well legal pressure on business organisations.
• Long term self interest: Fulfilling social responsibility is in long term interest of the business organisation i.e. service to society. It can obtain support from various interest groups.
• Complexities of Social Problems: A progressive and socially aware business concern has moral obligations to help in solving social problems like discrimination at workplace, etc.
• Globalisation: In globalisation, those business organisation that have adopted good practice are influencing the entire world trade.
• Role of Media: Media can raise voice against business malpractices and exploitation of consumers. Hence, business organisation cannot ignore the social responsibilities towards different constituents of society.

Responsibility Towards Different Interest Groups-

Responsibilities Towards Owners:

• Reasonable profit: Business organisation should earn reasonable profit to bring financial stability and growth.
• Exploring business opportunities: Business should be alert to find opportunities to explore, expand, grow and diversify the business. This is very crucial for success.
• Optimum use of capital: Business organisations should use available capital carefully and efficiently by considering business risk. Management should pay attention to the safety of capital.
• Minimum wastages: Business organisations should minimise wastage of time, money, manpower, etc. to maximise profit.
• Efficient Business: Efficient and optimum use of available scarce resources by the business firm result into increase in profitability and productivity which is turn facilitates the business firm to carry on business more efficiently.
• Fair practices on stock exchanges: The business firm should avoid all types of unfair practices in relation to stock exchange such as insider trading, providing wrong and secret information, etc. It may bring unfavourable changes in share prices which lead to loss to common investors.
• Expansion and diversification: To face market competition more comfortably, business enterprises should undertake Research and Development on various projects.
• Periodic information: The business organisations should provide complete and accurate information about the financial position through reports, circulars, etc. to the owners from time to time.
• Effective use of owner’s funds: The business organisation must use owners’ fund in the best manner possible to give them short term as well as long term gains on time.
• Creating Goodwill: The management of the business enterprises should strive hard to develop and maintain good public image, respect and trust in the market.

Responsibility Towards Investors:

1) Proper conduct of meetings: The business organisations are expected to call and organise meetings of investors at regular intervals to provide information of the business. During the period of financial crisis, investors should be taken into confidence. However, in case of failure, management should explain them the factors responsible for such failure.

2) Return on investment: The business organisation are expected to give fair returns to the investors regularly on their investments in the form of interest. The business organisations are also expected to take care of investment, pay fair returns on investments and bring steady appreciation of the business.

3) Handling grievances: A company should handle the investors’ grievances properly by implementing effective methodology. All queries of other issues should be answered satisfactorily.

4) Maintain transparency : The investors supply the funds to satisfy the long term capital and working capital needs of the business. In return, all business organisations are required to maintain high degree of transparency in their operations.

5) Proper disclosure of information: The management of the business firms are expected to provide full and factual information to the investors regularly through reports, circulars, statement of profit, etc. These information of financial performance of the business must be correct. This is because prospective investors take decisions to invest in future on the basis of information so provided.

6) Maintain solvency and prestige: The business organisations are expected to maintain solvency, prestige, goodwill and sound financial position to win confidence of their investors. They should continuously strive to undertake research, innovation and expansion programme.

Responsibilities Towards Employees:

1) Job security: It is responsibility of business enterprises to provide security or guarantee of job to their employees. This will provide them mental peace and encourage them to work with full concentration and dedication. This will also help to raise employees morale and loyalty towards the organisation.

2) Fair remuneration: The business organi¬sations are expected to pay attractive salaries and other incentives like overtime allowance, bonus, etc to all employees. Remuneration should be determined according to the nature of work. The business organisation should also adopt suitable wage plans, giving increment and revision of wages from time to time.

3) Healthy and safety measures: The business enterprises are required to protect health and hygiene of employees by providing good canteen, medical and sanitation facilities, to prevent accidents. To control pollution, proper maintenance of machines and premises should be done regularly. Safety equipment such as safety shoes, hand gloves, masks, goggles, helmets, etc. should be provided to the workers.

4) Good working conditions: The business organisations must provide good working conditions like adequate lighting, ventilation, safe drinking water and take necessary steps to avoid air, sound and water pollution. They should also decide proper working hours with lunch breaks and other facilities.

5) Recognition of Trade Unions: Every employer or company must recognise the employee’s right to join and form trade union. Management should not follow ‘divide and rule’ policy. Management should solve the problems of workers through talks or negotiations with trade union. Both should agree to ban strikes and lockouts to protect their interest.

6) Education and training: The business enterprises are expected to educate the employees through guidance and training according to the nature of job. To keep employees updated with latest developments, introduction training and refresher training should be arranged at regular intervals by their employers. Training is necessary to increase efficiency and confidence of employees.

7) Workers participation in management: The business organisations must encourage the employees to participate in the management through formation of workers committee. Management should also encourage suggestion schemes, profit sharing to raise employees morale and to give them sense of belongingness.

8) Promotion and career opportunities: Every business organisation is expected to give sufficient opportunities of promotion to their talented employees. Organisation should give information regarding qualification, skill and experience needed to get promotion. This will enhance awareness among the employees.

9) Proper grievance procedure: The business organisations are expected to lay down proper grievance procedure to handle employee’s problems, complaints, queries without any delay. Investigation and necessary steps must be taken to settle their grievances.

10) Miscellaneous: The business organisations are expected: (i) to give fair treatment to all employees, (ii) to recognize, appreciate and encourage special skills of employees, (iii) to introduce code of conduct, (iv) to provide enough opportunities for meaningful work and to recognize goals, (v) to protect religious, social political rights of employees and (vi) allowing formation of informal groups.

Responsibilities Towards Consumers:

1) Good quality products: It is the respon¬sibility of business organisation to produce better quality products. For this purpose, every business unit should have quality control department to reject inferior and substandard products. In this respect, ISO is considered as the latest tool towards quality control. This ensures customer loyalty to the products.

2) Fair prices ; The business organisations must charge fair and reasonable prices for their products. Maximum Retail Price (M.R.P) inclusive of all taxes should be printed on all packed products. The customers should not be cheated by charging high prices.

3) Customer’s safety: The business organi¬sations should not sell harmful (unsafe) goods or goods that make adverse effect on the life and health of the customers.

4) Honest advertising: Advertisement conveys information of products, their facts, features, advantages, side effects, uses, etc. The business organisations must see that their advertisements are honest and do not mislead the consumers. It should not indulge in false, misleading and vulgar advertisement.

5) After sales service: The business organisations are expected to provide efficient and effective after sales service to establish good relation with the customers.

6) Research and Development: The business organisations are expected to conduct research and development to improve quality of goods and to reduce the total cost of production. They should apply for quality standards like BIS or AGMARK on their products.

7) Regular supply: The business organisation must supply goods and services to the consumers regularly. The business firms should not create artificial shortage through hoarding and black marketing.

8) Attend complaints: The business firms must attend consumers’ complaints without delay through implementation of effective grievances redressal system.

9) Training: The business firms should arrange training for their customers either free of charge or by charging nominal fees.

10) Avoid customer exploitation: The business organisation should avoid adoption of unfair trade practices and monopolistic competition to protect the interest of the consumers.

Responsibilities Towards Government:

• Timely payment of taxes: The business organisation are expected to pay various taxes such as sales tax, income tax, wealth tax, etc. levied by the government from time to time. This helps the government to take up various development projects.
• Observing rules and regulations: The business organisations are expected to comply with the various laws and regulations enacted by the government. They should observe the laws in relation to obtaining license, operation of business, price determination and production, etc. and conduct business in lawful manner.
• Earning foreign exchange: The business organisation carrying on business on large scale are expected to export their products to foreign countries to earn foreign exchange. The government needs foreign exchange to import valuables and important products.
• Economic Development: The business organisation Eire expected to give necessary co-operation to the government in balanced and rapid economic development of the country.
• Implementing socio-economic policies: The business organisation are expected to provide required co-operation and help to the government in implementation of various socio-economic programmes and policies.
• Suggestions to government: The business organisations should give suggestions to the government before framing important policies such as Industrial Policy, Import-Export Policy, Licensing Policy, etc.
• No favours: The business organisations should not give bribe or influence any government officials to get any favour for doing their work.
• Contributing to government treasury: The business organisation must give financial help to the government during emergency and occurrence of natural calamities such as earthquakes, floods, cyclones, etc.

Responsibilities Towards Community/ Society/Public in General:

• Protection of environment: In recent years, pollution has become the major problem. Industries, chemical plants, cement plants, etc. create air and water pollution. The business firms must take all possible measures to minimise or avoid pollution.
• Better and maximum use of resources: The business organisations are expected to make proper, efficient and optimum use of available scarce resources like water, fuel, land, etc.
• Reservation for weaker section: The business organisations are expected to reserve certain positions in their organisation for financially weaker sections of the society. The poor people also expect financial and other help from the business firms which must be provided regularly.
• Development of backward regions:The society expects that business organisations start their industries in backward areas to create employment opportunities, increase purchasing power among people and facilitate development of backward regions.
• Protest against anti-social activities:The business organisations should not indulge in anti¬social activities which will adversely affect the society. They should not provide any financial help to support anti-social activities. Anti-social activities such as smuggling, association with underworld people, bribing government officials, etc. should be avoided by the business organisations.
• Financial assistance: The business organi¬sations are expected to provide financial assistance and donations to the society for various social activities such as eradication of poverty and illiteracy, arranging anti-drug campaigns, anti noise pollution campaigns, etc.
• Prevent congestions: The business organi¬sations should avoid crowding of industries in cities by shifting and establishing industries in different industrial zones or location. This will minimise adverse effect on residential areas.
• Employment generation: The business organisations should generate large employment opportunities for all sections of the society through expansion and diversification programmes. This will reduce and help to solve the burning problem of unemployment, poverty, etc.

Social Responsibility towards Protection of Environment-

Business organisations are under obligation to protect and promote environment. For manufacturing goods and services business enterprises use all types of resources from the nature. Working of business organisations create imbalance in original state of nature. The development is responsible for its degradation. It is the responsibility of every business organisation to protect environment and not to create imbalance in nature. The diagram showing how business organisations influence environment is given below:

Rapid industrialisation results in environmental pollution through generation of waste and loss of bio-diversity and releasing genetically modified organisms and toxics. Through the use of natural resources the business organisation degrade the bio-physical environment.

Effect of Business on Environment:

• Air pollution: Air pollution is created by release of different types of harmful gases into the atmosphere, smokes and emissions of toxic fumes from burning of coal and vehicles.
• Water pollution: Harmful chemical fertilizers, pesticides, industrial waste, distilleries waste, e-waste, etc. when mixed with water, create water pollution.
• Sound pollution: Increase in number of industries, transportation, machinery, aeroplanes, etc. create unbearable sound pollution.
• Electronic Garbage: Wastage created from mobile, TV sets, laptops, etc. Eire not properly destroyed by many industries. Various products like lead, cadmium, chromium are called electronic garbage.

Waste prevention technique: The waste preventive techniques are summarised and called as 4 R’s i.e. Reduction, Reuse, Recycling and Recovery.

• Reduction: This preventive technique suggests that wherever possible wastage of resources should be reduced.
• Reuse: This preventive technique states that if waste is produced, wasted materials or by¬products should be reused if it is practicable and possible.
• Recycle: This preventive technique gives option that wastage that cannot be reduced or reused should be recycled.
• Recovery: This preventive technique suggests that recover energy or materials from the . waste which cannot be reduced, reused or recycled.

Business Ethics-

Concept:
The word ‘Ethic’ is originated from Greek word ‘Ethos’ which implies ‘human character and conduct’. Accordingly, the term ethics refers to the set of rules and principles that every organisation should adopt. In other words, business ethics refers to the code of conduct that business
organisations should follow while doing their business. Ethic is a branch of social science which deals with the concepts, such as right and wrong, just and unjust, proper and improper, legal and illegal, fair and unfair, good and bad, etc. in respect to human behaviour and actions.

Definitions:
According to Wheelers, “Business Ethics is an art of science of maintaining harmonious relationship with society, its various groups and institution as well as recognising the moral responsibility for right or wrong conduct of business.”

Features of Business Ethics:

• Code of conduct: Business ethics is a code of conduct which businessmen must follow while doing the business. It explains what to do and what not to do for the well-being of the society.
• Based on moral and social values: Business ethics are based on the moral and social principles which includes self control, consumer protection and welfare, services to society, fair treatment to all, etc.
• Gives protection to social groups: Business ethics provides protection to different social groups like consumers, small businessmen, employees, shareholders, creditors, government, etc.
• Provides basic framework: Business ethics provides social, economic, cultural, legal and other limits to the organisations in which they must conduct their business activities.
• Voluntary: The businessmen must accept the business ethics on their own voluntarily. Its acceptance cannot be enforced by law.
• Requires education and guidance: The businessmen should be properly educated, motivated and given guidance before implementing business ethics.
• Relative term: Business ethics differs from one business to another, from one country to another. What is considered good in one country may not be accepted in other country.
• New concept: Business ethics is a newest concept developed in recent years. It is strictly followed only in advanced countries and not in underdeveloped and developing countries.

Moral and Social Values:

Values such as fundamental rights, patriotism, human dignity, sacrifice, equality, democracy, etc. give a direction to grow and integrate our personality. Social values are considered as an important part of the culture of the society. Social values of the business form the base for social responsibilities. They provide general guidelines for social conduct. Social values are usually based on tradition, co-operation, ego, honesty, integrity, hard work, fairness, forgiveness, etc. Moral values such as not to indulge in unfair trade practices, to be honest and truthful about quality, etc. should be followed while doing the business.
Society has created rules regarding type of activities business should do and should not do. These are called business ethics.

The code of business ethics:

Do’s:

• The business should pay taxes and other charges regularly.
• They must pay fair wages, allowances and other monetary incentives to workers.
• They should ensure safety and security of their product.
• The business firms should supply quality goods as per expectations of consumers at reasonable prices.
• The business should give due respect and honour basic to rights of consumers.
• The business must use a part of profit for the well-being of the society.

Don’ts:

• The business organisation should not destroy healthy competition.
• The businessmen should not cheat or exploit customers.
• They should not create monopoly.
• They should not resort to hoardings or black marketing.
• They should not create secret or unreasonable profit.

Avoid:

• The businessmen or organisations should avoid unfair competition.
• The businessmen should avoid concentration of economic power.
• They should not make agreement with fellow businessmen for controlling production, distribution, pricing, etc.

Accept:

• The businessmen should accept principle of “service first and profit next”.
• They should accept the truth in business that “Customer is the king”.
• They should make business just, fair, human, efficient and dynamic.

Corporate Social Responsibility-

Meaning:
Corporate Social Responsibility (CSR) makes a company socially responsible and accountable. It aims to contribute to societal goals or support volunteering or ethically-oriented practices.
The Ministry of Corporate Affairs in India has notified which makes mandatory for certain companies to comply with the provisions of CSR.

Definition:
According to UNIDO (United Nations Industrial Development Organisation), “Corporate Social Responsibility is a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. ”

Scope of CSR:

(A) Applicability of CSR:

• The companies having net worth of ₹ 1500 crore or more or turnover of ₹ 1000 crore or more or net profit of ₹ 15 crore or more during any financial year shall be required to constitute a corporate social responsibility committee with effect from 1st April, 2014.
• These companies must spend, every financial year, at least 2% of the average net profit of the company made during the three immediately preceding financial years, in pursuance of its CSR policy.

(B) CSR committee:

• The CSR committee consist of four directors who shall meet at least twice in a year to discuss and review CSR activities and policy.
• The committee will recommend CSR activities, prepare budget, monitor progress, etc.

(C) CSR activities:

• Eradicating hunger and poverty
• Health care & sanitation
• Education & employment enhancing vocational skills, livelihood enhancement projects
• Reducing child mortality
• Environmental sustainability and ecological balance & conservation of natural resources
• Rural development & slum area development projects.

(D) Allocation of funds:
The company would spend not less than 2 % of average net profits of the company made during three immediately proceeding financial years.

(E) Non-compliance of CSR activities:
Penalties for non-complying the duty of CSR would attract a fine of not less than ₹ 50,000 which may extend to ₹ 25,00 000 and every officer of the company in default shall be punishable with imprisonment up to 3 years or with fine which shall not be less than ₹ 50,000 which may extend to ₹ 5,00,000 or both.

By going through these Maharashtra State Board 12th Science Biology Notes Chapter 7 Plant Growth and Mineral Nutrition students can recall all the concepts quickly.

Maharashtra State Board 12th Biology Notes Chapter 7 Plant Growth and Mineral Nutrition

Plant Growth-

1. Growth is a characteristic feature of living organisms.
2. Aspects of Growth

1. Quantitative
2. Qualitative

Quantitative: Increase in length size, volume, numbers body mass, dry weight, etc.

Qualitative

• Change in nature of growth
• Development – orderly progress
• Differentiation – complex state

3. Growth : A permanent irreversible increase in the bulk of an organism, accompanied by change in the form.

4. Growth in multicellular/vascular plants

1. Indeterminate
2. Indefinite
3. Restricted to specific regions
   Meristems -Apical, Intercalary and lateral.

5. In unicellular plants, determinate and uniform growth is observed, while in multicellular plants certain organs like leaf, flowers and fruits show determinate growth.

Phases of growth-

1. Phase of cell division/cell formation :

• Meristematic cells – thin walled cells
• Mitotic division → 2 cells → out of these one remains meristematic and other undergoes differentiation.
• Slow rate of growth – i.e. Lag phase

2. Phase of cell enlargement/cell elongation :

• Newly formed cell absorbs water and becomes turgid.
• Osmotically active cell → Turgidity leads to cell enlargement
• Synthesis of new wall material
• Accelerated pace of growth – Log phase or exponential

3. Phase of cell maturation / Cell differentiation :

• Enlarged cell become specialized
• Cells attain maturity – morphological and physiological features
• Cells get equipped to perform specific function
• Steady state, rate of growth slow down -stationary phase

Conditions for growth-

1. Physiological conditions

2. Environmental Conditions

Growth rate and types of growth –

1. Growth in plants can be measured as increase in

2. Various methods for measurement of linear growth :

• Direct method : Measurement with scale
• Horizontal microscope : Useful for measuring growth in fields.
• Auxanometer : For linear growth of shoot – 2 types – Arc auxanometer and Pfeffer’s auxanometer.
• Crescograph : Record of primary growth, information of growth per second. It is developed by Sir J. C. Bose.

3. Growth Rate/Efficiency index : Increased growth per unit time. e.g. Increase in area of leaf, size of flower, etc.
4. Absolute growth rate (AGR) : Ratio of change in cell number (dn) over time interval (dt)
i. e. AGR = \(\frac{d n}{d t}\) i.e. total growth per unit time.
5. Relative growth ratio (RGR) : AGR when divided by total number of cells present i.e. growth of given system i.e. RGR = \(\frac{\mathrm{AGR}}{n}\)i.e. ratio of growth in given time / initial growth.
6. For describing cell growth in culture AGR and RGR are useful.
7. Types of Growth

• Arithmetic
• Geometric:

Arithmetic

• Rate of growth constant hence linear curve
• e.g. elongation of root
• Mitosis of cell → 2 cells one divides further and other differentiation and maturation
• Mathematical expression Lt = L₀ + rt

Where Lt = Length at time ‘t’
L₀ = Length at time zero
r = Growth rate
t = Time of growth

Geometric:

• Rate of growth slow initially and then exponential rate. J shaped curve.
• e.g. Embro – Initial stages of zygote division
  Mitosis of cell → 2 cells
  Both cells continue to divide and
  redivide
• Mathematical expression
  W₁ = W₀e^rt

Where W₁ = Final size
W₀ = Initial size
e = base of natural log
r = Growth rate
t = time of growth.

Growth curve-

1. Graphic representation of the total growth against time is known as growth CurVe.
2. Types of Growth curve – Graphs
   
3. Growth rate is low in lag phase, faster growth rate reaching maximum in exponential or log phase and is gradually slows down in stationary phase. –
4. Sigmoid curve is obtained when rate of growth plotted against time for all three phases.
5. Grand period of growth (GPG) : The total period required for all phases (Lag, log and stationary) to occur is called grand period of growth.

Differentiation, De-differentiation, Re-differentiation-

1. Differentiation : It is the permanent change in structure and function of cells leading to maturation.

• Maturation of cells derived from apical meristems.
• Major anatomical and physiological changes occur.

2. De-differentiation : It is a process or ability where living differentiated cells regain the capacity to divide thus permanent cells become meristematic. e.g. Cork cambium, Parenchyma cells forming interfascicular cambium for secondary growth.

3. Re-differentiation : The de-differentiated cells lose their capacity to divide and mature for the specific function, e.g. Secondary xylem and secondary phloem formed from de-differentiated cambium.

Development-

• It is an orderly process of progressive changes in shape, its form and also complexity.
• In plant it includes all sequential events in its life cycle, viz. – Seed germination → Meristem → Cell division → Plasmatic growth → Cell elongation → Cell maturation → Mature cell → Senescence → Death
• Thus growth, morphogenesis, maturation and senescence are included in development.

Plasticity-

• Plasticity : It is capacity of being moulded or modelled.
• In plants, plasticity is ability to form different types of structures in response to external environmental stimuli or internal stimuli. (Intrinsic plasticity)
• Plasticity is noticed in various phases of life. e.g. different form’s of leaves in same plant – cotton, coriander, larkspur (Delphinium) i.e. heterophylly in juvenile and adult stage.
• Environmental Plasicity is observed in Butter cup (Ranunculus Flabellasis).
  Heterophylly where aquatic habitat has dissected leaves and in terrestrial habitat broadly lobed leaves.

Growth Hormones-

• Starling coined the term hormone in animal physiology.
• Growth Regulators or Growth Hormones – These are the internal factors which influence growth i.e. inhibit, promote or modify growth.
• Growth Harmones:

• Plant hormones are organic substances produced naturally that affect growth or other physiological functions at a site away from their place of production.
• To evoke the response hormones are needed in very small amount and they are mainly transported through phloem parenchyma.

6. Auxins : Term given by F.W. Went

• First isolated from human urine, while in plants synthesised in apical meristematic region.
• LAA – i.e. Indole 3 acetic acid – most common natural auxin, synthesised from amino acid Tryptophan.
• Synthetic auxins – IBA (Indole butyric acid), NAA (Naphthalene acetic acid), 2, 4-D (dichloro Phenoxy acetic acid).

Physiological effects and applications of auxins :

• Cell elongation and cell enlargement
• Apical dominance – Growing apical bud inhibits growth of lateral buds
• Stimulation of growth of root and stem
• Multiplication of cells hence utilized in tissue culture
• Formation of lateral and adventitious roots
• 2, 4-D is selective herbicide – kills dicot weeds
• Induced parthenocarpy – seedless grapes, : banana, lemon, orange
• Promote cell division and early differentiation I of vascular tissue xylem and phloem.
• Induces early rooting in cutting method of : artificial vegetative propagation.
• Foliar spray of synthetic auxins – Flowering ; induced in litchi and pineapple, prevents : early fruit drop of apple, pear and oranges, prevents formation of abscission layer.
• Increase in rate of respiration.
• Break seed dormancy and promote seed germination.

Gibberellins (GA) : Named by Yabuta and Sumuki:

• First isolated from fungus Gibberella fujikuroi by Kurasawa.
• Rice seedlings show Bakane disease with stem elongation due to this fungus infestation. ;
• Yabuta and Sumuki isolated it from fungus culture.
• Synthesised from mevalonic acid in young leaves, seeds and root, stem tips.
• GA₃ is most common and biologically active – Contains gibbeane ring.

Physiological effects and applications of Gibberellins :

• Breaking of bud dormancy, seed dormancy,
• By promoting synthesis of amylase in cereals, their seed germination can be stimulated e.g. wheat, barley.
• Increase in length of internodes thereby elongation of stem.
• Bolting in rosette plants – elongation of internodes before flowering e.g. Cabbage, beet.
• Parthenocarpy in tomato, apple, pear.
• Stimulates flowering in long day plants.
• Increase in fruit size and bunch length e.g. grapes.
• Overcomes effects of vernalization.
• Inhibition of root growth, delay senescence and abscission. .
• Production of male flowers on female plants.
• They convert genetically dwarf plants to phenotypically tall plants e.g. maize.

Cytokinin : Term coined by Letham.

• Promote cell division – Natural source – Banana flowers, apple and tomato fruits.
• Discovered by Skoog and Miller in Callus culture of Tobacco – by supplementing media with coconut milk.
• Present in herring (fish) sperm DNA – Kinetin.
• Cytokinins are derivatives of adenine, a purine base. Chemically 6-furfuryl amino purine.
• First natural cytokinin obtained by Letham from maize grain Zeatin.
• Synthetic hormone – 6 benzyl adenine.
• Important in plant tissue culture (callus) for morphogenesis.

Physiological effects and applications of cytokinin :

• Promote cell division and cell enlargement
• Promote shoot formation, buds
• Cytokinin and auxin ratio controls morphogenesis.
• Growth of lateral buds, controls apical dominance
• Delay of ageing and senescence, also abscission
• Formation of interfascicular cambium
• Breaks dormancy, promotes germination
• Reverse apical dominance effect
• Induce RNA synthesis

9. Ethylene : Denny reported effect in fruit ripening.

• Gane reported natural synthesis of this gaseous hormone in plants.
• Synthesised in roots, shoot apical meristems and fruits during ripening.
• It is an unsaturated, colourless, hydrocarbon gas
• Commercially used source – Ethephon
• Described as ripening hormone.

Physiological effects and applications of ethylene :

• Promotes ripening of fruits
• Stimulates initiation of lateral roots
• Breaks dormancy of buds and seeds.
• Acceleration of abscission activity by forming abscission layer.
• Inhibits growth of lateral buds, i.e. apical dominance.
• Retardation of flowering.
• Enhancement of senescence.
• Epinasty – Drooping of leaves and flowers e.g. Pineapple.
• Degreening effect – Stimulate activity of enzyme chlorophyllase causing loss of green colour in fruits of Banana, Citrus.

Abscissic Acid :

• Responsible for shedding of cotton balls and was named as abscisin I and II by Carns and Addicott.
• Isolated from buds of Acer that causes bud dormancy, substance named Dormin by Wareing.
• These substances were renamed abscissic acid, chemically 15 – C sesquiterpenoid – synthesised from mevalonic acid.
• Leaves, fruits, roots, seeds synthesise this.

Physiological effects and applications of ABA :

• Promote abscission of leaves – beneficial for stress – drought
• Induces dormancy in buds and seeds.
• Accelerates senescence of leaves, flowers and fruits.
• Delay of cell division, cell elongation and suppression of cambial activity – Inhibit mitosis.
• Causes efflux of K ions from guard cells and thus closure of stomata – used as
  antitranspirant.
• Stress hormone – Overcome stress by inducing dormancy, inhibiting growth thus face adverse environmental conditions.
• Inhibit flowering in long day plants and stimulate flowering in short day plants. Inhibits growth stimulated by gibberellin.

Photoperiodism-

1. Influence on Reproductive Growth –

Flowering :

1. Environmental factors
2. Nutritional factors

Environmental factors:

• Light -> Photoperiodism factors
• Temperature -> Vernalization

2. Effects of Light

Processes affected:

1. Seed germination
2. VegetatIve growth
3. PhotosynthesIs

Mode/manner/aspect:

1. Quality of light
2. Intensity of light
3. Duration of light

3. Photoperiodism – Term coined by Garner and Allard.
4. Duration of light has a major effect on flowering.
5. Response of plants to the relative length of light and dark periods with reference to flower initiation is called photoperiodism.
6. Critical photoperiod : It is that duration of photoperiod above or below which flowering occurs.

7. Classification of plants based on photoperiodism:

8. Short Day Plants (SDP) or Long night plants Winter flowering

• Show flowering when day length is shorter than the critical photoperiod.
• These plants need long uninterrupted dark period.
• Flowering in SDP is affected if the dark period is interrupted even by short duration (Flash : of light).

9. Long Day Plants (LDP) or Short night plants : Summer flowering

• Show flowering when longer duration of light than the critical photoperiod.
• These plants need short dark period.
• Flowering is observed if long dark period is interrupted by brief light exposure (flash).

10. Day neutral plants (DNP) :

• Flowering in these plants is independent of duration of light.
• No requirement of specific dark or light period.
• Flowering is observed throughout the year.

11. Phytochrome : Discovered by Hendricks and ; Borthwick.

• Pigment system in plants that receives the stimulus for photoperiodism.
• In short day plants, flowering is not observed if dark period is interrupted by brief exposure to red light of 660 nm but if it is exposed immediately to far red light of 730 nm flowering is observed.
• Proteinaceous pigments present in leaves.
• Exist in two interconvertible forms P_r and P_fr.
• P_fr absorbs far red light and it is changed to P_r and when P_r absorbs red light it is changed to P_fr (biologically active form).
• Phytochromes are situated in cell membrane of chlorophyllous cells of leaves.

12. During day time Pfr accumulates in leaves and stimulates flowering in LDP but inhibits flowering in SDP
13. During night (dark) Pfr converted to Pr ‘and stimulate flowering in SDP but inhibits flowering in LDP
14. In plants, morphogenesis is controlled by both light and phytochromes and hence it is known as photomorphogenesis.
15. Photoperiodic stimulus is chemical stimulus called florigen which is hormonal in nature and is transported through phloem.

Vernalization-

• It is influence of low temperature on flowering in plants. The term vernalization was coined by Lysenko.
• Temperature influences several physiological processes and reproductory growth i.e. flowering.
• Klippart observed low temperature or chilling treatment is responsible for stimulus of early flowering.
• The seeds or seedlings are exposed to low temperatures of 1 – 6° C for about a month’s duration.
• The shoot apical meristem receives stimulus in seedlings.
• Effective in seed stage (embryo) for annual plants. Cereals and crucifers show response to low temperature pretreatments.
• The stimulus is in the form of chemical substance which is proved by grafting experiment by Melcher. It is Vernalin.
• Devernalization : It is reversal of vernalization by high temperature treatment.

Advantages:

• Crops can be produced earlier.
• Cultivation of crop possible where they do not occur naturally.

Mineral Nutrition-

1. Minerals are required by plants for synthesis of food material, i.e. inorganic substances are raw materials.
2. Soil is chief source : Solid, inorganic materials are obtained from earth’s crust.
3. Air and water are other sources from surroundings.
4. Minerals are absorbed in dissolved form usually through roots.
5. Sources of minerals :

• Atmosphere : Carbon as Carbon dioxide, Oxygen
• Water : Hydrogen, Oxygen

6. C, H, O are non-mineral major elements, structural components.
7. Classification of minerals – Based on need

1. Essential
2. Non-Essential

Essential

• Without these life cycle of plants cannot be completed.
• Important structural and functional (physiological role)
• Their unavailability causes major deficiency symptoms. e.g. C,H,O,N,R

Non-Essential

• Not indispensable for completion of life cycle.
• Do not produce or cause major deficiency.
• Needed only at specific time during growth. E.g. Bo, SI, Al

8. Classification based on requirement – quantity

1. Mac roelements
2. Microelements

Mac roelements:

• Major elements
• Required in bulk or in large amounts
• Important role in nutrition
•  Structural componcnts
  e.g. CalcIum — Ca (cell vall)
  e.g. C, H. O. R N, K, Mg. S.

Microelements:

• Minor elements
• Required in traces or small amounts
• Role as cofactors
• Act as Catalysts, activators
  e.g. Zn, Cu, Al, SI, Mn, B.

9. Recent classification is based on their functional role, i.e. on the basis of biochemical functions.
10. Symptoms of Mineral deficiency in plants :
Any visible deviation from the normal structure and function of plant is called symptom.
11. Critical concentration : Required amount or the concentration of essential element below which plant growth is retarded or affected is called critical concentration.
12. Indication of deficiency is in the form of morphological changes. It may be related to the mobility of the element in the plant body.

13. Important symptoms visible in plants :

14. Role of Mineral Elements in Plants :

15. Toxicity of Micronutrients :
Condition of toxicity : When dry weight of tissues is reduced by 10% due to mineral ion concentration it is considered as toxic to plant.

16. Uptake of one element may be affected or inhibited by toxicity of other. For e.g. Mn competes with Fe and Mg for uptake by root system and inhibits translocation of Ca to shoot apex. It leads to deficiency of Ca, Mg and Fe.

17. Mineral salt absorption : In soil minerals exist as charged particles and mineral absorption is independent of water absorption.

18. Methods of Mineral absorption

1. Passive absorption
2. Active absorption

Passive absorption

• No expenditure of energy
• By diffusion
• Direct or indirect ion exchange
• Mass flow
• Donnan equilibrium

Active absorption:

• ExpendIture of energy
• Move against concentration gradient
• ATP energy from respiration
• Accumulation of ions in root hair

19. Donnan equilibrium : Some anions after their entry inside the cell get accumulated on inner side of cell membrane.

20. Additional cations are needed to balance these accumulated anions, thus the cation concentration becomes more as they get accumulated.

21. This transport from exterior against their own concentration gradient for either cations or anions is Donnan equilibrium, which is for neutralizing the effect of accumulated cations/ anions.

22. Active absorption : It needs ATP energy which is supplied to roots from respiration. Hence when there is scarcity of oxygen available to roots there is less absorption of minerals.

23. Mineral ions accumulated in root hair reach xylem through cortical cells and further along with water carried upwards.

24. They are assimilated in organic molecules and carried further with phloem to other parts i.e. redistribution.

25. A carrier concept, where membrane proteins of root cell membrane may pump these ions into cytoplasm is suggested.

Nitrogen Cycle –

• The cyclic movement of nitrogen between atmosphere, biosphere (organisms) and soil in natural processes is a nitrogen cycle.
• Nitrogen available to plants from the environment is inert and they need it in reactive form mainly nitrate ions to utilize in synthetic processes.
• Nitrogen is a limiting element which affects productivity.
• Through biological and physical fixation it is made available to plants.
• Nitrogen fixation : Conversion of free nitrogen into nitrogenous salts to make it available to plants is called nitrogen fixation.

Nitrogen Fixation-

Physical nitrogen fixation – Atmosphere

Industrial nitrogen fixation : Haber – Bosch process

• Urea is less toxic and it is used as fertilizer.
• About 80% of nitrogen found in human tissues originate from Haber-Bosch process.

Biological nitrogen fixation :

• High energy requiring process
• To fix each molecule of nitrogen to ammonia need is 16 ATE
• Ammonia is toxic it is converted to amino acids -> Proteins

Nitrification : e.g. different soil bacteria – aerobic forms – Chemoautotrophs

• Two step process
• Ammonia converted to nitrogen dioxide (nitrite) HNOa by Nitrosomonas and Nitrosococcus.
• Nitrite converted to Nitrate by addition of oxygen by bacteria Nitrobacter.

Symbiotic N₂ fixation : e.g. Root nodules of Fabaceae plants – Pea, Bean, Gram, Groundnut have Rhizobium bacteria in it. Rhizobium also seen in soil.

Ammonification : e.g. Decomposers – Fungi, bacteria, actinomycetes
After death and decay of living organisms, ammonia is made available to plants and other microbes.

Nitrogen assimilation :

• Soil reservoir has nitrogen in nitrate, nitrite and ammonia (NH₄^–) i.e. ammonium ion.
• Uptake of these available forms from soil by plants converts and incorporates them in amino acids, nucleic acids (DNA) like organic compounds – This is assimilation.
  • In the form of biomolecules Nitrogen moves through food chain and then to decomposers.
  • Amino acids are transported to different parts for synthesis of required proteins.

Amino acid synthesis

1. Reductive aminatlon
2. Transamination

Reductive aminatlon:

• E.g. Ammonia reacting with a Ketoglutaric acid to form glutamic acid.
• Reduction reaction

Transamination:

• Glutamic acid reacting with oxaloacetic acid (OAA) to form Aspartic acid.
• Reduction reaction 2. Transfer of amino group to other Carboxylic acid

Amidation : Process of formation of amides.

• Amino acids may incorporate ammonia to produce amides. Thus these are amino acids with two amino groups.
• In presence of ATP extra amino group is attached to acidic (-COOH) group.
  
• Amides are transported via xylem vessels.

Denitrification : e.g. Anaerobic bacteria.

• Soil nitrates are converted to nitrogen gas.
• Denitrifying bacteria thus return back nitrogen from ecosystem to atmosphere.
• 2NO₃ → 2NO₂ 2NO → N₂↑
  Nitrate → Nitrous oxide → Nitric oxide → Nitrogen gas
• e.g. Bacillus spp, Paracoccus spp, Pseudomonas denitrificans.

Sedimentation : Nitrates of soil are washed away with running water or leached deep with percolating water. Thus they get accumulated and remain in the form of sediments locked and away from free circulation.

By going through these Maharashtra State Board 12th Science Chemistry Notes Chapter 16 Green Chemistry and Nanochemistry students can recall all the concepts quickly.

Maharashtra State Board 12th Chemistry Notes Chapter 16 Green Chemistry and Nanochemistry

Green chemistry: Green chemistry is the use of chemistry for pollution prevention and it designs
the chemical products and processes that reduce or eliminate the use of generation of hazardous
substances.

Sustainable development: Sustainable development is the development that meets the needs of
the present, without compromising the ability of future generations to meet their own needs.

Twelve principles of green chemistry: Twelve principles of green chemistry were proposed by Paul T. Anastas and John Warner.

12 Principles of Green Chemistry –

1. Prevention of waste or by-products
2. Atom economy
3. Less hazardous chemical synthesis
4. Designing safer chemicals
5. Use safer solvent and auxiliaries
6. Design for energy efficiency
7. Use of renewable feedstocks
8. Reduce derivatives (Minimization of steps)
9. Use of catalysis
10. Design for degradation
11. Real-time analysis for pollution prevention
12. Safer chemistry for accident prevention

The role of Green chemistry:

• Promoting innovative chemical technology to design, manufacture, and use chemical products that eliminate the generation of hazardous chemicals.
• The capital expenditure required for the prevention of pollution is controlled by the use of green chemistry.
• Green chemistry helps to protect the presence of ozone in the stratosphere.
• Global warming (The greenhouse effect) is controlled by green chemistry.

Introduction to nanochemistry:

(i) Nanoscience: Nanoscience is the study of phenomena and manipulation of materials at atomic, molecular, and macromolecular scales where properties differ significantly from those at a larger scale.

(ii) Nanotechnology: Nanotechnology is the design, characterization, production, and application of structures, devices, and systems by controlling shape and size at the nanometer scale (1 -100 nm) (1 nm = 10^-9 m). Today from clothes to computer hard drives to DVD, CD players, and even cleaning products, nanotechnology plays a big part in the manufacturing of materials.

(iii) Nanomaterial: The nanomaterial is a material having structural components with at least one dimension in the nanometer scale that is 1-100 nm. Nanomaterials are larger than single atoms but smaller than bacteria and cells. These may be nanoparticles, nanowires, nanotubes, and thin films according to dimensions. They can be further classified as zero, one, and two nanomaterial dimensions.

(iv) Nanochemistry: It is the combination of chemistry and nanoscience. It deals with designing and synthesis of materials of nanoscale with different sizes and shape, structure and composition, and their organization into functional architectures. Nanochemistry is used in chemical, physical, material science, as well as engineering, biological and medical applications.

Characteristic features of nanoparticles: Characteristic features of nanoparticles are colour, surface area, catalytic activity, thermal properties, mechanical properties, and electrical conductivity.

Synthesis of nanomaterials: (1) Bottom-up approach (2) Top-down approach.

Wet chemical synthesis of nanomaterials: A sol-gel process is an inorganic polymerization reaction. It is generally carried out at room temperature and includes four steps: hydrolysis, polycondensation, drying, and thermal decomposition. This method is widely used to prepare oxidic materials.
The reactions involved in the sol-gel process are as follows :
MOR + H₂O → MOH + ROH (hydrolysis)
metal alkoxide
MOH + ROM → M-O-M + ROH (condensation)

Analysis or characterization of nanomaterials: The nanomaterial synthesized is analyzed using the following techniques.

Different types of nanomaterials which can be synthesized are shown in the following figures:

Applications of nanoparticles:

• Nanoparticles are used in the manufacture of scratchproof eyeglasses, transport, sunscreen, crack-resistant paints, etc.
• It is used in electronic devices like Magnetoresistive Random Access Memory (MRAM).
• Silver nanoparticles are used in water purification systems to get safe drinking water.
• It is used in medicines.
• It is used in self-cleaning materials (lotus effect).

Advantages and disadvantages of nanoparticles and nanotechnology :

Advantages:

• Revolution in electronics and computing.
• Nanotechnology makes solar power more economical and energy storage more efficient.
• Nanotechnology is used in the manufacture of smart drugs which cure life-threatening diseases faster and without side effects.

Disadvantages :

• Nanotechnology causes environmental pollution which is dangerous for living organisms.
• Nanoparticles can cause lung damage.

By going through these Maharashtra State Board Bookkeeping and Accountancy 11th Notes Chapter 9 Final Accounts of a Proprietary Concern students can recall all the concepts quickly.

Maharashtra State Board 11th Accounts Notes Chapter 9 Final Accounts of a Proprietary Concern

Meaning of Final Accounts-

Every business organisation prepares two important financial statements viz. income statements and statement of financial position to find out the result of business done in the accounting year and to find out financial position in the form of assets owned and liabilities payable to outsiders. In income statements Trading Account and Profit and Loss Accounts are prepared and in the statement of financial position Balance Sheet is prepared.

Thus, final account refers to the group of Trading Account, Profit and Loss Account and Balance Sheet. Final Accounts are prepared on the basis of trial balance and additional information called adjustments at the end of every accounting year.

Final Accounts may be defined as “the statements prepared at the end of an accounting year to disclose the financial position and performance of a business concern”.
Final Accounts include Trading Account, Profit and Loss Account and Balance Sheet.

Objectives of Final Accounts-

• To know the amount of Profit earned or loss if any suffered during the accounting period.
• To know the amount of assets and liabilities in the business on a particular date.
• To know the amount of capital in the business. ,
• To know the amount receivable from various debtors and the amount payable to various creditors.
• To know the Trading (Gross) profit, Operating (Net) profit and abnormal gains and losses.
• To enable the trader to compare the result and financial position of the business with other similar business.
• To find out or ascertain the amount of taxes, i.e. Income tax, Sales tax, Wealth tax, etc. payable to the government.
• To calculate the various ratios for the purpose of financial analysis.
• To enable the trader to take necessary policy decisions regarding future business activities.

Importance of Final Accounts-

• With the help of final accounts businessman can find out gross result, i.e. gross profit earned or gross loss suffered during the accounting period.
• Final Accounts helps to find out cost of goods sold.
• Current year’s stock can be compared with the previous year’s stock.
• Net Profit or Net Loss can be easily ascertain.
• Ratio of Net Profit to Net Sales can be easily calculated.
• Ratio of expenses to Net Sales can be ascertained.
• Comparison of actual performance with desired performance can be easily done.
• Financial position of the business can be ascertained.
• Proprietor’s equity can be ascertained.
• Facilitates the accountant to check arithmetical accuracy of the accounting records.

Trading Account-

Trading Account is a part of final accounts which is prepared on the basis of direct expenses and direct incomes of business to ascertain the gross result of the business, done in the accounting year. Preparation of Trading Account is the first step in preparation of final accounts. Trading Account is prepared by considering only direct expenses and direct incomes of the business. Expenses and incomes which have a direct connection with production are called direct expenses and direct incomes, e.g. power and fuel, cost of raw materials, wages etc. are called direct expenses, and sales proceeds are called direct incomes.

Thus, the Trading Account shows gross result of trading or business activities carried out in the particular accounting year. It is prepared with the basic objective of ascertaining how much gross profit is earned or loss suffered as a result of manufacturing goods or services or buying and selling of goods. Service industries like banks, insurance companies, medical and education institutions never prepare Trading Account. They prepare revenue account, instead of trading account. On the debit side of Trading Account, direct expenses, opening stock and purchases are recorded and on the credit side of account direct income, closing stock and sales are recorded. This account is also credited if goods are lost on account of fire or theft and goods distributed as free samples.

Debit balance of this account indicates gross loss and credit balance of this account indicates gross profit. Results shown by this account i.e. either gross profit or gross loss is carried forward to the Profit and Loss Account.

Specimen Form of Trading Account –

Equation of Gross Profit And Gross Loss –

1. Gross Profit = Net Sales – Cost of goods sold
2. Gross Loss = Cost of goods sold – Net Sales
3. Net Sales = Total Sales – Sales Returns (Return Inwards)
4. Total Sales = Cash Sales + Credit Sales
5. Cost of Goods Sold = Opening Stock + Net Purchases + Direct expenses – Unsold goods
6. Net Purchases = Total Purchases – Purchase Returns (Return Outward)
7. Total Purchases = Cash Purchases + Credit Purchases
   Unsold goods at the end of the accounting year refers to Closing Stock.

Journal Entries For Preparation of Trading A/C –

Profit And Loss Account-

Profit and Loss Account is a part of final accounts which is prepared on the basis of indirect expenses and indirect incomes of the business to ascertain the net result of the business, done in the accounting year. On completion of Trading Account, Profit and Loss Account are prepared by considering only indirect expenses and indirect incomes of the business. Expenses and incomes which have no direct relation with production and whose absence do not affect production, are called indirect expenses and indirect incomes, e.g. salaries, interest, rent, cost of stationery etc. Indirect expenses are recorded on the debit side of the Profit and Loss Account and indirect incomes are shown on the credit side of the Profit and Loss Account. Indirect expenses of business are classified as:

(i) Office expenses (they are also called administrative expenses.) (ii) Selling expenses and (iii) Distribution expenses.

Indirect incomes and gains include discount received, commission earned, interest received, rent received etc.

Debit balance of Profit and Loss Account indicates net loss incurred in the business and credit balance of Profit and Loss Account shows net profit earned in the business in the accounting year.
Net profit is then carried forward and added to the capital where net loss is adjusted in the capital account of the proprietor.

Specimen Form Of Profit And Loss Account-

Note : R.B.D.D. A/c. stands for Reserve for Bad and Doubtful Debts Account.
N/R stands for New Reserve O/R stands for Old Reserve
F/B/D stands for Further Bad Debts.

Journal Entries Relating to Profit And Loss Account-

Balance Sheet: –

An accounting statement which shows the financial position of all assets and liabilities of the business as on particular date is called the Balance Sheet. Balance Sheet is not an account but a positional statement showing financial position of a business concern as on a particular date. On the left hand side of this statement liabilities of various types are systematically recorded and on the right hand of this statement all types of business assets are shown systematically. Business liabilities include short term liabilities like sundry creditors, bank overdraft, bills payable, outstanding expenses etc. and long term liabilities like bank loan, capital, loan etc. Business assets are classified as fixed assets, tangible assets, intangible assets, current or circulating assets and fictitious assets.

According to Palmer, “The Balance Sheet is a statement at a given date showing on one side the trader’s property and possession and on the other side his liabilities.”

Features of Balance Sheet-

1. Balance Sheet is not an account but it is a statement.
2. It depicts financial position of the business as on a particular date.
3. It is prepared usually at the end of every accounting period, i.e. on 31st March every year.
4. The balances of ledger accounts which are not transferred to Trading A/c and Profit and Loss A/c are ultimately transferred to Balance Sheet.
5. Balance of Real A/cs and Personal A/cs are transferred to Balance Sheet.

Specimen Form of Balance Sheet-

Adjustments-

Additional business information provided after completion of trial balance for preparation of final accounts are known as adjustments. To get a clear view and real results of business done in the trading year, some other business information, which do not find place in the trial balance, are required to be considered, while preparing final accounts. These adjustment items are required to be given proper effects in the final accounts. For every adjustment item, double effects (i.e. debit and credit) are given in the final accounts, e.g. outstanding wages are first added to wages on the debit side of the trading account and Secondly outstanding wages are shown separately on the liability side of the balance sheet.

Some Important Adjustments And Their Double Effects Are Discussed And Shown Below-

(i) Closing Stock : Value of stock in hand at the end of the accounting period is called closing stock. If closing stock is given in the list of adjustments, the same is to be recorded twice as – 1st effect: It is to be recorded separately on the credit side of the Trading Account.
2nd effect: Same is to be shown separately on the asset side of the Balance Sheet as it is shown below.
[Note: Closing Stock is always valued at cost price or market price whichever is less.]

(ii) Outstanding Expenses : Expenses which are not paid or remains unpaid at the end of year, are called outstanding expenses, e.g. outstanding wages, outstanding rent, outstanding salaries etc. If outstanding expense is included in the trial balance, it is to be recorded only on the liability side of the Balance Sheet. If outstanding expense is given in the list of adjustments, the same is to be treated as: E.g. Outstanding Salaries.

1st effect: Add to Salary on the debit side of the Profit and Loss A/e.
2nd effect: Show separately on liability side of the Balance Sheet.

(iii) Income Receivable OR (Income earned but not received) : Income which is not received when it is due, is called as income receivable e.g. outstanding interest (receivable). If income receivable is included in trial balance, than it is to be shown only on the assets side of the Balance Sheet separately. If it is given in the adjustment list, same is to be shown as below : E.g. Interest Receivable.
1st effect: Add to interest received on the credit side of the Profit and Loss Account.
2nd effect: Show separately on the asset side of the Balance Sheet.

(iv) Expenses Paid in Advance (Prepaid Expenses) : When any expense is paid before it is due, the same is called as prepaid expense, e.g. prepaid insurance, prepaid rent etc. If it is given in the trial balance, the same is to be shown on the the assets side of the Balance Sheet. If prepaid expenses are given in the list of adjustments same is to be shown as below. E.g. Prepaid Insurance.

1st effect: Deduct prepaid insurance from the insurance premium paid in the Profit & Loss A/c on debit side.
2nd effect: Show prepaid insurance on the asset side of the Balance Sheet.

(v) Income Received in Advance : Income which is received before it is due, is called as income received in advance e.g. rent received in advance. If it is given in the trial balance, it is to be recorded on the liability side of the Balance Sheet only. If an item of income received in advance is given in the list of adjustments, the same is to be shown as below : E.g. Rent received in advance.

1st effect: Deduct rent received in advance from rent received in Profit & Loss account on credit side.
2nd effect : Show rent received in advance separately on the liability side of the Balance Sheet.

(vi) Depreciation : Depreciation means reduction in the value of fixed asset due to its continuous use, wear and tear or any other similar cause. Depreciation is charged on fixed assets like land & buildings, plant & machinery, furniture and fixtures etc. If depreciation item is provided in the trial balance it is to be debited to Profit and Loss Account only. If depreciation on fixed assets is given in the list of adjustments, the same is to be shown in final accounts as follows:
E.g. Depreciation on Plant & Machinery.

1st effect: Record depreciation separately on the debit side of Profit & Loss A/c.
2nd effect: Deduct the amount of depreciation from the related asset on asset side of the Balance Sheet.

(vii) Interest on Capital: If interest on capital is provided, it is an expense for the business and an income for the proprietor. Adjustment effects of interest on capital are given below.
1st effect: Interest on capital is to be shown on the debit side of Profit and Loss Account separately. 2nd effect: Same amount of interest is to be added to the capital of proprietor, on the liability side of the Balance Sheet.

(viii) Interest on Drawings : Interest charged on the drawings is an income to the business and an expense for the proprietor. Adjustment effects of interest on drawings are given below:
1st effect: Interest on drawings is to be shown on the credit sideof Profit and Loss Accountseparately.
2nd effect: Deduct the same amount of interest from the capital of proprietor on liability side of the Balance Sheet.

(ix) Interest on loan taken : Loan taken is a liability of the business. Interest on loan taken is an expense of the business. Adjustment effects of interest on loan taken is shown as below:

1st effect: Show interest on loan separately on the debit side of the P & L A/c.
2nd effect: Add this amount of interest to loan taken on the liability side of the Balance Sheet.

(x) Interest on loan given : Loan given is an asset of the business. Interest due on such loan is an income for the business. Two effects of interest on loan given are shown below:

1st effect: Show interest on loan separately on the credit side of the P&L A/c.
2nd effect: Add this amount of interest to loan taken on the asset side of the Balance Sheet.

(xi) Reserve for Bad and Doubtful Debts Account (R.B.D.D. A/c) : This provision is created on Sundry Debtors. In connection with this account, bad debts incurred during the year and opening balance of R.B.D.D. . A/c (or R.D.D. A/c) are given in the trial balance. Further, bad debts and closing balance of R.B.D.D. A/c (or R.D.D. A/c) are provided in the list of adjustments. Their location and adjustments effects in final accounts . are shown below:

Where: F/B/D → stands for further bad debts.
New Res. D.D. → stand for New Reserve for Doubtful Debts.
Old Res. D.D. → stand for Old Reserve for Doubtful Debts.
R.B.D.D. A/c → stand for Reserve for Bad and Doubtful Debt Account.
Adj. → stands for Adjustment & T.B. stands for Trial Balance.

If (Bad debts + F/BID + NIR) > Old Reserve, the result is to be shown on the debit side of the Profit and Loss
Account.
If Old Reserve> (BID + FIBID + NIR), the result is to be shown on credit side of Profit and Loss Account.

(xii) Reserve for Discount on Debtors A/c : It is calculated on Sundry Debtors. Accounting treatment and adjustment effects of Reserve for Discount on Debtors are same as like adjustment effects of R.B.D.D. A/c

Where: R.D.D. A/c → stands for Reserve for Discount on Debtors Account.
If (Discount + F/Discount + New Reserve) > Old Reserve, result is to be shown on debit side of Profit & Loss account.
If Old Reserve > (Discount + F/Discount + New Reserve), the result is to be shown on credit side of Profit & Loss Account.
Discount on debtors is to be carried out after completion of adjustment effects of reserve for bad and doubtful debts.

(xiii) Provision for Discount on Creditors Account: It is calculated on Sundry Creditors. Accounting treatment and adjustment effects for provision for discount on creditors are given below :

Where: R.D.C. A/c stands for Reserve for Discount on Creditors Account.
If (Discount + Further Discount + New Reserve) > Old Reserve, the result is to be shown on credit side of Profit and Loss Account.
If Old Reserve > (Discount + Further Discount + New Reserve), the result is to be shown on debit side of Profit and Loss Account.

(xiv) Goods Distributed as Free Samples : Newly established firms and even well established firms distribute samples of new product free of charge in the nearby areas to increase their sale. Adjustment effects of free samples are shown below:
1st effect: Show separately as “Goods distributed as free samples”on the credit side of Trading Account or deduct the amount of free sample from purchases on debit side of Trading Account.
2nd effect: Show separately on the debit side of Profit and Loss Account under the heading “Advertisement Account.”

(xv) Loss of Goods by Fire or Theft: Adjustment effects of goods lost by fire or theft are shown below:
(A) If goods are insured :

1st effect: Show separately, on the credit side of Trading Account, the full value of goods lost.
2nd effect: Show separately on debit side of Profit and Loss Account, the difference between value of goods lost and insurance claim receivable i.e. net loss by fire or theft.
3rd effect: Show the insurance claim admitted by the insurance company on the asset side of the Balance Sheet. This is shown as below:

(B) If goods are not insured :

1st effect: Show separately on the credit side of Trading Account the full value of goods lost by fire or theft.
2nd effect: Show separately on debit side of Profit & Loss Account the full value of goods lost by fire or theft.

This is shown as below.

By going through these Maharashtra State Board Bookkeeping and Accountancy 11th Notes Chapter 8 Rectification of Errors students can recall all the concepts quickly.

Maharashtra State Board 11th Accounts Notes Chapter 8 Rectification of Errors

Meaning of Accounting Errors-

In simple words error means mistake or omission. Accounting error refers to mistakes committed in recording business transactions in the books of accounts, carrying forward amount to next page, posting the amount on the wrong side of ledger account, failing to record transactions in the books of accounts. Omission of writing accounts in the books of accounts is also considered as accounting error. Accounting errors are committed without any intention. If mistakes are committed with some intention, it is not considered as an accounting error but is cheating or fraud.

Accounting errors if at all committed, are required to be corrected as soon as they are detected. Some accounting errors are traced out by checking or verifying the ledger accounts systematically whereas others can be found out through preparation of trial balance. When total of debit column of the trial balance does not tally with the total of credit column of trial balance, it is confirmed that some type of accounting errors have been committed in writing the accounts in the books of accounts. For instance, instead of debiting Vishwanath’s A/c. for amount paid, wrongly debited Vishwasrao’s A/c. is considered as accounting error.

Effects of Accounting Errors-

Some accounting errors if committed do not allow the total of trial balance to agree with each other. Accounting errors affect the net result and financial position of the business. They also affect the arithmetical accuracy of the business. Accounting errors may occur at any one of the following stages viz. (1) Preparation of documents (2) Preparation of Primary books (3) Preparation of ledger accounts (4) Preparation of trial balance and (5) Preparation of final accounts.

Types of Accounting Errors-

The different types of accounting errors are shown in the following chart:

Each of the above accounting errors is explained in detail:

(i) Errors of Principle : Error of principle is said to be committed if accounting entries are not made as per fundamental rules, of accountancy. Errors of principle refers to mistake committed by accountant by not following accounting principles properly. Error of principle is said to be committed when an accounting principles relating to proper distinction between capital and revenue items is violated. These errors are not disclosed by the trial balance.

Examples :

• Wages paid for installation of machinery, debited to Wages Account is an error of principle. Wages paid for installation of machinery is a capital expenditure and it supposed to be added to the cost of machinery. Correct entry for wages paid for installation of machinery is:
• Repair charges of building paid are debited to Building A/c
• Payment of rent debited to Landlord’s A/c.

(ii) Error of Commission : Errors of commission occur when incorrect entries are passed in the journal, wrong posting is done in the ledger, wrong casting is done, wrong calculations are done, mistake made in carrying forward the amount to next page etc. This type of error is disclosed by trial balance. If error of commission takes place, trial balance will not tally. Error of commission is detected by preparing a trial balance.

For instance, in credit purchase of goods worth ₹ 1,850 from M/s. Shanti General Stores is entered in the purchase book as ₹ 1,850 and in the ledger account of M/s. Shanti General Stores as ₹ 1,580. This is error ‘
of commission. In this case M/s. Shanti General Stores Account is given less debit by ₹ 270. This error is rectified by giving additional debit of ₹ 270 to M/s. Shanti General Stores Account. ‘

(iii) Errors of Omission : Errors of omission are said to occur if the accountant or clerk has failed completely  to record a particular business transaction in the books of account. In other words, if business transactions  are not at all recorded in the books of account, errors of omission are said to be committed.
For example, failure on part of the clerk to record credit sales in the sales book, is an error of omission. Error committed due to entire omission will not affect the agreement of totals of trial balance, but error committed due to partial omission will definitely affect the agreement of totals of trial balance.

(iv) Compensating Errors : Compensating error is said to be committed if error committed on one side of
ledger account compensate an error committed on the other side of some other ledger account. Errors which are committed on one side of account remove or nullify the effect of errors committed on the other side of account, is called a compensating error. This type of error may be different in nature but they are similar in amount. Compensating errors are committed exactly on opposite side of same account or different account.

Even compensating errors are committed on same side of different account, by giving over debit to one account and under debit of same amount to.other account. This type of error cannot be detected by preparing trial v balance.

For instance, if purchase book is overcast by ₹ 1,500 and sales book is also overcast by ₹ 1,500 than such ‘
errors are called compensating errors because one error removes the effect of other error. ;

Errors Affecting And Not Affecting The Trial Balance-

The classification of error on the basis of trial balance is shown in the following chart:

Trial Balance Basis:

(A) Errors not affecting the trial balance (Two sided Errors)

• Complete omission of transaction.
• Posting wrong amount on both the sides of an account.
• Posting wrong heads of account.
• Compensating Errors. BoIbhartSoIution5com
• Recording wrong amount in original books.

(B) Errors affecting the trial balance (One sided errors)

• Partial omission of a transaction.
• Posting of Wrong amount on one side of an account.
• Posting entry on wrong side of an account.
• Wrong totalling or balancing of an account.
• Omission of transferring the balance of an account to Trial Balance.

(A) Errors not affecting the trial balance (Two sided errors):

An accounting error which affects or does not affect debit side of one account as well as credit side of another account is called two sided error. This type of error cannot be detected by preparing a trial balance. These types of errors are explained below.

(i) Complete omission of a transaction: For the explanation please refer to point 3 (iii) of this chapter.

(ii) Posting or recording wrong amount on both the sides of an account: This type of error is said to be committed when accountant enters wrong amount in both affected accounts. Such error will not be disclosed by the trial balance.

This is explained as follows:

(iii) Posting to wrong head of account: This type of error is said to be committed when a transaction is recorded correctly in the original books of account, but ledger posting is done to wrong heads of account, e.g. Furniture purchased from M/s Salgaonkar is posted to Machinery A/c. In this case M/s Salgaonkar’s A/c is correctly credited but Machinery A/c is wrongly debited instead of Furniture A/c.

(iv) Compensating errors : For the detail information, refer point No. 3 (iv) from the Subject Matter.

(v) Wrong amount in the original books: This type of error is said to be committed when a transaction is wrongly recorded in the original books and is subsequently carried through to the ledger account, e.g. Sales of goods ₹ 854 on credit recorded in the sales books as ₹ 584 and subsequently posted to ledger the same wrong amount of ₹ 584. This error does not affect the trial balance.

(vi) Errors of principle :
Errors of Omission : Errors of omission are said to occur if the accountant or clerk has failed completely  to record a particular business transaction in the books of account. In other words, if business transactions  are not at all recorded in the books of account, errors of omission are said to be committed.

For example, failure on part of the clerk to record credit sales in the sales book, is an error of omission. Error committed due to entire omission will not affect the agreement of totals of trial balance, but error committed due to partial omission will definitely affect the agreement of totals of trial balance.

(vii) Recording twice : This type of error is said to be committed when transaction is recorded twice in the original book. e.g. Paid salaries ₹ 5,000 recorded twice in the cash book. Since excess debit and credit given to both the account, such error does not affect the trial balance.

(B) Errors affecting the trial balance (One sided errors)’:
Some accounting errors bring out the difference in debit total and credit total of trial balance. Such errors are called errors affecting the trial balance or one sides errors. The different types of errors affecting trial balance are explained below.

(i) Partial omission of a transaction : When a transaction is recorded correctly in the original books of accounts, but due to mistake one of the ledger accounts remains to be posted, then such a error is called error of partial omission of transaction. e.g. Cash ₹ 6,000 received from Mr. Kishor not posted to Mr. Kishor’s A/c. In this case trial balance will not agree.

(ii) Posting of wrong amount to one account: Error of posting of wrong amount to one account is said . to be omitted when wrong amount is posted to one of the ledger accounts from the original books. In
‘this case trial balance will not get tallied.

(iii) Posting on the wrong side of an account: This type of error is said to be committed when entry
is posted to wrong side of the ledger account from the original book. In this case trial balance will not agree.

(iv) Wrong totalling and balancing: When any ledger account is totalled wrongly or balanced wrongly, this type of error is said to be committed. Because of wrong totalling or wrong balancing, the trial balance will not agree.

(v) Omission of balance of an account in trial balance : If balance of any one or more account are omitted to transfer to the trial balance, this type of error get committed. As a result trial balance will not agree.

(vi) Errors of double posting to one account : When entry for accounting transaction is correctly recorded in the original book but it is posted or recorded two times in one of the ledger accounts, then such error is called error of double posting to one account.

Steps to locate Accounting errors :

The following steps are taken to locate the errors :

• Verification of trial balance: The total of debit column and credit column should be checked once again. Accounts that are grouped together and shown under one head of account should be checked minutely and carefully, e.g. Total of sundry debtors and sundry creditors.
• Verification of cash book: The total of debit column and credit column of cash book should be rechecked. Closing balance of cash and bank balance must be verified.
• Verification of ledger accounts: All the posting made to various ledger accounts must be checked once again. The total of amount column on debit side and credit side of each ledger account should be checked. Similarly balancing figures and carry forward of each ledger account should be checked once again. Any discrepancy, if noticed, it should be corrected at once.
• Verification of trial balance: After verification of ledger accounts, if difference still arises in the totals of the  trial balance, the accountant has to find out exact difference in the totals of the trial balance. This will help to locate the errors.
• The accountant should confirm whether closing balance of each ledger account is transferred to trial balance or not. There is possibility that balance of one or two accounts may be omitted or recorded twice.
• The accountant should also go through the journal to find out if any entry is passed with unequal amount specially of compound entries.
• The totals of subsidiary books such as Purchase Book, Sales book, Purchase Return book, Sales Return book etc. should be verified once again and posting to various ledger accounts there from should be verified.
• The accountant should check whether closing balances of various accounts of last year are brought forward to the respective ledger accounts correctly or not.

Suspense’Account:

Final account is prepared on the basis of the trial balance. Trial balance is supposed to be tallied then only final account can be prepared. Sometimes the trial balance does not tally eveti after repeated efforts. In such circumstances preparation of the final accounts cannot be postponed indefinitely till the errors are disclosed and rectified. In such a case difference of trial balance is usually placed or transferred to a separate account known as suspense account, and the trial balance is made to tally for the purpose of preparation of final accounts. If debit column of trial balance cast short, difference of trial balance is transferred and posted to debit side of suspense account.

Similarly if credit column of trial balance cast short, the difference of trial balance is transferred and posted to credit column of suspense account. If errors are not detected and rectified, balance of suspense account is transferred to balance sheet. Debit balance of Suspense A/c should be shown on asset side of Balance Sheet and Credit balance of Suspense account should be shown on the liabilities in suspense account. When all errors are detected, rectified and adjusted, suspense account will automatically stand balanced. Rectification of errors which affect trial balance are only adjusted in suspense account.

Rectification Entry-

An accounting entry which is drafted to cancel the effects of wrong entry and to give the correct effect of the entry is called rectification entry.

(a) Rectification of Errors of Principle : To rectify errors of principle, the following procedure is to be followed.
First draft a wrong entry of given transaction and then pass reverse entry of wrong entry. After this, draft ‘ correct entry which we are suppose to pass. Then reconcile reverse entry and correct entry so drafted, to get rectification entry. In short, ;

Reverse entry of wrong entry + Correct entry = Rectification entry

Example : Rent of ₹ 1,200 paid to land lady Mrs. Anuradha has been debited to her personal account. Rectification entry is composed by following procedure :

(b) Error of Commission : Procedure of rectification of error of commission is stated as below : Example : Paid general expenses of ₹ 18, were posted in the ledger as ₹ 81.

(c) Error of Omission: Procedure of rectification of omission is given be1ov:
Example: Credit purchase of goods worth Z 2,000 from Kishor remained to be recorded in the books of
accounts.
(i) Wrong entry: Not passed
(ii) Reverse entry: NIL

(iii) Correct entry:

Since no wrong entry is passed, correct entry is itself a rectification entry.

(d) Two-sided Errors: The procedure of rectification of two-sided errors is stated as below:
Examples: Wages ₹ 500 paid for the installation of machinery, debited to wages account.

By going through these Maharashtra State Board Book Keeping & Accountancy Notes 12th Chapter 10 Computer in Accounting students can recall all the concepts quickly.

Maharashtra State Board 12th Accounts Notes Chapter 10 Computer in Accounting

Introduction, Concept of Computerized Accounting System (CAS)-

In modern age, computer is becoming inseparable automation instrument for business as well as individual. Nowadays knowledge and operation of computer are considered as an essential thing. If a person does not know the use of computer, its usefulness is questionable. Today most of the entities – including small traders – prepare their accounts using computers. Because of computers, business entities can store, use and analyse the raw data as and when required. In modern days, it is difficult to find out a field in which computer is not used, which shows its importance.

Applications of computers for accounting has grown phenomenally, when accounts are maintained using computers raw data based on vouchers and other documents are entered into computer. Computer process such raw data. This process includes recording, storing, analysing and retrieving information. Computers can store information, analyse them and such information can be retrieved when required. However, they respond according to set of instructions given to it and such instructions are known as Programme or Software. Based on such software only, computer processes raw data and generates meaningful information or reports as and when required.

Computerized accounting system are connected through computer, network server or remote accessed device with internet. Every company or firm prepares their reports as per Generally Accepted Accounting Principles (GAPP).

Features of Computerized Accounting System-

(1) Integrated date & Information : Computerized Accounting System is developed and designed for all business activities like purchase, sales, finance, inventory, payroll and manufacturing which is user friendly, automated and integrated for such process. Dueto computerized accounting system, businessman keep their accounting records accurate, up-to-date and get information within no time. When Computerized Accounting is mixed with Management Information System (MIS) with multi-lingual and Data organization capabilities to support the company then all the business operations will be easy and cost effective.

(2) Accuracy and Speed As per the need of business, Computerized Accouting has various templates and software due to which fast and accurate data entry and transactions operations are possible which generates various information and reports quickly and automatically.

(3) Quick Decision Making : Based on information and reports generated by Computerized Accounting System, the company or firm can plan its activities, can take quick decision and can access complete and critical information of the company.

(4) Modern and Integrated : Computerized Accouting System perform functions at much higher speed than the speed of human beings which saves time and other resources. If accounts are prepared with the help of computer. Trial balance and Final accounts can be derived at any point of time within fraction of seconds.

(5) Immediate Availability of Books of Accounts : Due to Computerized Accounting System, books and registers tike Cash book, Purchase register, Sales register, Bank book, Account of Receivables and Payables are readily available at any point of time.

(6) Security: By keeping security control at various stage, data and information in Computerized
Accouting System can be kept confidential and more secured. This kind of the security is not possible in the traditional accounting system.

(7) Transparency: For the business, greater transparency is possible in the day to day business operations due to Computerized Accounting System.

(8) Grouping of Accounts : In the Computerized Accouting System grouping of Accounts is easily possible. As per the business requirements, groups like Assets, Liabilities, Income, Expenditure, etc. and their subgroups can be derived as per convenience of user.

Importance of Computerized Accounting System-

Following are the points of importance of Computerized Accounting System for the various types of business organizations, firms, companies, etc.

• Automation: Compared to manual accounting calculations, all the calculations are automatically
  done by the accounting software with minimum time and without mistakes.
• Multi-user Facilities : Computerized Accounting System with multi-user facility enables business ‘
  houses to access accounting information online or offline, inside or outside the office, .
  simultaneously. –
• Accuracy: Computers performs functions with high degree of accuracy. If hardware, software and ^
  humanware are proper, the Computerised Accouting System can assure of accurate outcome.
• Speed : Computerized Accounting software perform functions at much higher speed than the speed of human beings. If accounts are prepared with the help of computer, final accounts can be prepared in much lesser time and as per user requirements.
• Reduction in cost: Reduction in cost due to Computerized Accounting System is possible as less persons in less time can complete the work with more speed and more accuracy.
• Systematic and up-to-date records: Compterized Accounting System ensures systematic and up-to-date financial records of the business organization.
• Huge Storage Capacity: Manual accounting requires seperate books and registers to be maintained
  every year while in Computerized Accounting System records of many years can be stored in system / computer.
• Compact: The voluminous financial information can be stored in a compact way by the means of hard disk or external storage device which requires very little Space.
• Transferability / Sharing Information : Business organization can share the financial information to interested parties through pen drive or through internet.

Components of Computerized Accounting System-

(a) Hardware : Hardware comprises of electronic equipments that includes computers, hard disks, monitors, printers and the network that connects with them. Most modern accouting system require a network, the system of electronic linkages which allows many computers to the main computer or server which stores the program and data, with right communication of hardware and software, one can perform all the work on site.

(b) Software : Software is a set of instructions and programme that can direct and perform desired task as required by users. Accounting software accepts, edits and stores transactions and data and generates reports as per the requirement.

(c) Personel: Personel / Humanware is the people who dealt with computer and software and play an imortant role in effective implementation of Computerized Accounting System.

Management of a Computerized Accounting System requires careful planning of data and access to the data. Security is sought by setting passwords, codes, etc. at different stage which gives them more safety of data.

Creation of Accounting Documents-

In accounting software generally the following components are used :

• Creation of Accounting Documents : With the help of computer software, different accounting documents like cash memos, vouchers, receipts, invoices, etc. can be created / prepared.
• Recording of Transactions: Day to day business transactions can be recorded through computerized accounting software which reduces the paper work.
• Preparation of Trial balance and Financial Statements: Based on the recorded business transactions, data is transferred into ledger through software and vouchers are also prepared. From these data, Final accounts are prepared automatically.

Transactions with missing data or other critical information are not accepted by the system.

Comparision between Manual Accounting Process and Computerized Accounting Process.

Sourcing of Accounting Software-

Before acquiring accounting software, expertise of people responsible in business for accounting work is to be considered, as people are responsible for accounting and not the computers.

The choice of the accounting software would depend upon the suitability to the organisation or firm, in terms of accounting and financial needs. From this perspective available accounting packages are classified into the following categories :

(a) Ready to use
(b) Customized
(c) Tailored
(d) Free and Open Source

(a) Ready to use: Ready to use software is suitable and developed for the need of organization or firm whose volume of accounting transactions are less. Ready to use software is cost effective and relatively easier to learn. Such software have many features and low level of secrecy. This kind of the software may not have linkage benefits.

(b) Customized : As per the need of the special requirements of customer, when accounting software is developed, it is known as Customized software, which is suitable for large and medium size businesses. Customization includes modification and addition to the software contents, provision for the specified number of users and other authentication, etc. The cost of training and installation and maintenance of customized software is relatively high. Customized software can be linked to the other infromation system with proper level of secrecy.

(c) Tailored : When software are designed and developed according to the need of a customer with multi-users facility and geographically scattered locations, it is known as Tailored software. This kind of the software form an important part of organizational Management Information System (MIS). The Secrecy and authenticity checks are most important things in such software. This software needs specialized training to the users and they offer high flexibility in terms of number of users.

(d) Free and Open Source ; When small business or firm wants to use accounting software but do not have enough budget, then they try to get it from open source software available on the internet, which can be downloaded and installed from the websites.

Legal / Licensed vs Pirated Accounting Software-

As Per the business needs, one should select legal and open source accounting software from the available packages and applications in the market.

Legal Software : Full functional and safe software, can be updated as per statutory changes.
Pirated Software: Cracked software, nearly full functional, but illegal to use and risky from the data safety point of view, i.e. data can be corrupted.

Demo Software : Used for demo purpose with all major features but with a very few restrictions.

Voucher Types in Tally

By going through these Maharashtra State Board Book Keeping & Accountancy Notes 12th Chapter 8 Company Accounts – Issue of Shares students can recall all the concepts quickly.

Maharashtra State Board 12th Accounts Notes Chapter 8 Company Accounts – Issue of Shares

Share and Share Capital-

Introduction : As the volume and scale of trade and industry expanded, especially after the Industrial Revolution (i.e. around 1760), a very large unit of commercial organisation requiring large capital and greater managerial skill called joint stock company came into existence rapidly. The company fulfils its need of large amount of capital from large number of investors called shareholders. The company raises its capital in the form of shares and debentures. The capital collected through issue of shares is called “Owned Capital” and capital collected by issue of debentures is called “Borrowed Capital”.

Meaning and Definition- The owned capital of a company, when divided into a large number of small parts having equal face value is called a Share. According to Section 2(84) of the Indian Companies Act, 2013, “Share means share in the share capital of the company and includes stock except where a distinction between stock and share is expressed or implied.”

A share is a unit of measurement of the share capital of a company. For instance, a capital of ₹ 2 crore may be divided into 20 lakh shares of ₹ 10 each.

According to the provisions made under Section 86 of the Companies Act 1956, now company is authorised to issue two types of shares viz. (i) Equity Shares and (ii) Preference Shares.

(i) Equity or Ordinary Shares : The shares other than preference shares are called Equity or Ordinary Shares. In other words, an equity share is the one which has no special preferential right as to dividend or repayment of capital. They participate in the profits of the company after all preferential rights have
been satisfied. They are risk bearer and real owners of the company. They get the dividend after payment of all expenses and dividend to preference share holders. An equity shareholder has normal voting rights and a right to participate in the management.

(ii) Preference Shares : According to provisions of the Companies Act 2013, a ‘Preference Share’, is a type of share which enjoys priority or preference over equity share for the payment of dividend at a predetermined fixed rate and for repayment of capital. It means preference shareholders are paid dividend at a predetermined fixed rate before any dividend is paid to the equity shareholders. Similarly, in the case of the winding up of the company, preference share capital is refunded first.

Types of Preference Shares : The different types of preference shares are :

• Cumulative and Non-cumulative Preference Shares
• Redeemable and Irredeemable Preference Shares
• Participating and Non-participating Preference Shares
• Convertible and Non-convertible Preference Shares

Types of Share Capital-

The different types of share capital are explained below :

(1) Authorised / Registered / Nominal Capital: This is the maximum limit up to which a company is authorised to raise share capital. It is mentioned in the capital clause of the Memorandum of Association. Authorised capital is determined by considering future financial requirements of the company. It is also called ‘Registered Capital’ or ‘Nominal Capital’. It can, however, be increased subsequently by altering capital clause of the Memorandum of Association.

(2) Issued Capital: It is that part of the authorised capital which is issued or offered for subscription to the public. The company issues shares as and when it needs additional capital. Issued capital also includes the nominal value of shares issued by the company to the public for cash, bonus shares, promoters of the company and vendors other than cash. The part of the authorised capital which is not yet issued to the public is called Unissued Capital.

(3) Subscribed Share Capital: It is that part of the issued capital which the company has actually received by way of application from the public and also allotted by the Company. It is the total amount of the face value of the number of shares applied for. Subscribed share capital also covers the face value of shares issued by the company for consideration other than cash. The part of the issued capital which is not subscribed by the public is called Unsubscribed Capital.

(4) Called-up Share Capital: The company collects the capital in instalments payable on application, allotment, first call, second call, etc. Called-up share capital is that part of the subscribed capital which is demanded (called-up) by the company from the applicants of the shares. The part of the subscribed capital which is not yet called up by the company is called Uncalled Capital.

(5) Paid-up Share Capital: All the shareholders may not pay the entire amount called-up by the company. That part of the called-up capital which is actually paid by the shareholders is called paid-up share capital. It may be equal to or less than called-up share capital. The difference between called up capital and paid up capital is known as Calls-in-Arrears.

(6) Reserve Capital: According to provisions made under the Companies Act, 2013, a company may maintain reserve capital by passing a special resolution. Reserve share capital is that part of the subscribed capital which is reserved to be called-up only at the time of winding up or liquidation of the company. It is created to offer additional security to the creditors.

Treatment of Share Capital in Balance Sheet-

Types / Methods of Issue of share capital:

1. Right issue to equity shareholders (sec. 62)
2. Employee stock option scheme (sec. 62 (l)(b))
3. To Any person (sec. 62 (1) (c)):
   • Private placement of shares (sec. 42)
   • Public issue of shares
   • Sweat Equity shares (sec. 54)
4. Issue of Bonus shares to members / shareholders (sec. 63 (1))

All the above mention methods of issue of shares capital is commonly acceptable by private company and public company.

(1) Right Issue to Equity Shareholders :
Meaning: Right issue of equity shares issued by the company in which existing shareholders are given priority or right of purchasing right issue shares. And also existing shareholders may get right issue shares at discounted price.

Same accounting entries are to be passed in the books of company as those for issue of ordinary shares to the public.

(2) Employees Stock Option Scheme :
Meaning: When company issue shares to its employees at a price lower than market price for the encouragement of employees to acquire ownership in the form of shares is known as Employees stock option scheme.

New accounts like Employees Compensation Expense account, Deferred Employees Compensation Expense account, etc. are opened. Based on fair value and intrinsic value of option, Accounting value is found out.

(3) (a) Private Placement of Shares :
Meaning: Direct private offering of the company’s securities to a selected group of sophisticated investors.

• Private placement is governed through SEBI.
• It is less expensive and less time consuming process.

(b) Public Offer:
Meaning : Public offer of shares implies selling of shares which are listed on stock exchange directly to public by issue of prospectus.

Through IPO capital collected is recorded as stockholder equity in the Balance Sheet.

(c) Sweat Equity Shares :
Meaning: When equity shares are issued by a company to its directors or employees at a discount or for any consideration other than cash, for any obligation of either side etc. is known as sweat equity shares. (Section 2(88) of the companies Act, 2013)

If the consideration is not by the way of cash, then it can be carried to the Balance Sheet of the company as per accounting standards.

(4) Issue of Bonus Shares :
Meaning : When company distributed equity shares to its current shareholders as fully paid, without any charge, then it is known as bonus shares.

Amount of Bonus shares transferred from different reserve to equity share capital.

Accounting for Share Capital-

Public Issue of Shares:
This is one of the important methods of issue of shares in primary market where new and first hand securities like shares and debentures are sold. Public issue of shares implies selling shares directly to public by issue of prospectus. Under this method issuing company makes direct appeal to the public or prospective investors to buy its shares. The procedure adopted by the issuing company to subscribe its shares is stated as follows :

(1) Issue of Prospectus : Under this method, the issuing company invites the prospective investors or the public to make an offer to purchase its shares through a prospectus. The prospectus gives details of number of shares offered to the public, the face value of shares and amount to be paid on application, allotment and calls.

(2) Receipt of Application : An offer made by the prospective investors to buy the shares is called an application. According to Section 39 (2) of the Companies Act, 2013, a company must receive at least 5 % of the nominal of face value of each share applied for or such other percentage or amount as may be indicated by SEBI. While calculating the amount of application money, premium and discount should not be taken into account. The company makes its application forms available to the public through its brokers and banks. All the money received on application for shares must be deposited in a scheduled bank.

(3) Allotment of Shares : The allotment of shares means distribution to the applicants all or certain number of shares in response to their applications. A company is allowed to make allotment of shares only after receiving minimum subscription amount of 90 % of the issued amount within 60 days from the date of closure of issue. If the company accepts the applications, it issues letter of allotment to the applicants and in case of rejection of shares it issues letter of regret to the applicants and the application money is refunded to the applicants.

(4) Calls on Shares : Call on shares is a request or demand made by the company to its shareholders to pay the whole or part of unpaid balance on shares held by them. There may be 1st call and 2nd and final call. The maximum amount of call per share should not exceed 25 % of the face value of the share. For instance, if the face value of the share is ₹ 10, the amount of a call should not exceed ₹ 2.50 at a time. A minimum notice of 14 days should be issued by the company to the members for the payment of call.

Pro Forma Journal Entries for Accounting of Issue of Equity Shares :

Issue of Shares at Par, Discount and Premium :

The value or price which is fixed for each share by the company is called face value. It is specified in the Memorandum of Association of the company. The value or price at which a company decides to sell its shares is called issue price which is different from its face value. Shares may be issued by the company to the public either at par or at a premium or at a discount.

Issue of Shares at Par : Shares are said to be issued at par when they are issued at their face value.
Example : When a share of ₹ 10 is issued at ₹ 10 only, it is said to be issued at par.

Issue of Shares at a Discount : Shares are said to be issued at a discount when they are issued at a price, less than their face value.

Example : When a share of ₹ 10 is issued at ₹ 9, it is said to be issued at a discount. In this case the difference between the face value and actual selling price is called the amount of discount, i.e. ₹ 10 – ₹ 9 = ₹ 1.

Pro forma journal entry for issue of shares at a discount:

When a discount is allowed at the time of share allotment:

Note : (i) Discount on issue of shares is a capital loss to the company. Hence it is shown on the assets side of Balance Sheet under the head “Miscellaneous Expenditure” as “Discount on Issue of Shares”.
(ii) As per new provision of government Act (2013), Public issue of shares cannot be at a discount.

Issue of Shares at a Premium : Shares are said to be issued at a premium when the shareholders are required to pay a price higher than the face value of the shares. The difference between the issue price and the face value is called the premium. For example, if a share whose face value is ₹ 10 is issued by the company at ₹ 50 the share is said to be issued at a premium of ₹ 40. Section 78 of the Companies Act, 1956, provides that the premium amount collected by the company must be deposited into a separate account called Share Premium Account. It is considered as capital gain. Share premium amount must be disclosed separately in the Balance Sheet of the company.

The share premium amount should be used for the following purposes :

• Premium amount cannot be paid as dividend to a shareholders. However, premium amount may be capitalised by the company by issuing fully paid bonus shares free of charge at a pro-rata basis to the existing equity shareholders.
• The amount received as premium is required to be deposited in a separate Bank Account called Share Premium Account.
• To write off the preliminary expenses of the company.
• To write off the expenses paid, commission paid or discount allowed on any issue of shares or debentures of the company.
• To provide for the premium payable on the redemption (repayment) of the redeemable preference shares or debentures of a company.
• To buy back its own shares.

Pro Forma Journal Entries for Issue of Shares on Premium :

(1) When premium amount is called by company with application money :

(Being money received with application transferred to Share Capital A/c and Securities Premium A/c)

(2) If premium amount is called with allotment money :

(Being share allotment money and premium amount due from shareholders)

Over Subscription and Under Subscription-

Over Subscription : When a company is in receipt of shares more than those actually offered or issued to the public, the issue is said to be over-subscribed. In case of over subscription, the company allots the shares by selecting any one of the following methods :

(i) Lottery method (ii) Pro-rata method (iii) Firm allotment method and (iv) Datewise method.
In the recent era most of the companies adopt pro-rata method to allot the shares. Under pro-rata method each applicant is allotted shares in proportion to the number of shares applied for by him.
Under Subscription : When a company is in receipt of applications for shares less than those actually offered or to be issued to the public, the issue is said to be under subscribed.

Full Subscription : When a company is in receipt of applications for shares equal to those actually issued to the public, the issue is said to be fully subscribed.

Pro Forma Journal Entries for Over Subscription:

Pro-rata / Proportionate Allotment:
When the number of shares applied for, is more than the number of shares issued, then directors proportionately issued shares on the basis of total shares application received and the number of shares issued. Under this circumstances, each applicant gets the shares less than those demanded or applied by him. In other way, directors can reject certain excess applications and refund their money and can allow full shares to some applicants and make pro-rata allotment to other where excess application money received adjusted with allotment money demanded.

Journal Entries:

(Being excess application money adjusted with allotment money)

Calls-in-Advance and Calls-in-Arrears-

Calls-in-Arrears : On account of several reasons, some shareholders fail to pay allotment or call money inspite of reminders sent to them. Such unpaid instalments are called Calls-in-Arrears. It is also called Unpaid Calls. Calls-in-Arrears represent the amount due but not yet collected from shareholders.
It is deducted from the called-up capital. The balancing amount represents paid-up capital. Paid-up capital is shown in the Balance Sheet. The defaulter shareholders are required to pay interest on the unpaid call amount at the rate of 5 % per annum for the period from the due date to the date of payment of such call amount. Usually provisions made in Articles of Association empower the directors to charge interest on the amount of Calls-in-Arrears.

Pro Forma Journal Entries of Calls-in-Arrears :

(1) Entry to record calls-in-arrears :

(Being share allotment money and call money still outstanding)

(2) Interest due on calls-in-arrears :

(Being interest on unpaid calls due)

(3) Receipt of interest:

(Being interest on outstanding calls received from shareholders)

Calls-in-Advance : A company may receive the money in advance from the shareholders, on the calls yet to be made. Calls-in-Advance is accepted by the company only when Articles of Association authorise the company to do so. As per Table A’, a company is required to pay interest at the rate of 6 % per annum on the amount received in advance to the shareholders. At the end of the accounting the balance appearing in the Calls-in-Advance Account is shown in the Balance Sheet under the head ‘Share Capital’. However it is not added to share capital.

Pro Forma Journal Entries of Calls-in-Advance :

(1) Receipt of call-in-advance :

(Being amount received for Calls-in-Advance)

(2) Adjustment of calls in advance :

(Being amount of calls in advance adjusted)

(3) Interest due on calls-in-advance :

(Being interest due to shareholders)

(4) On payment of interest on the amount of calls-in-advance :

(Being interest amount paid to shareholders)

(5) Transfer of interest on calls-in-advance to Profit and Loss A/c :

(Being interest transferred to Profit and Loss A/c)

Issue of Shares for Consideration other than Cash-

Many times a company may purchase some fixed assets such as building, machinery, furniture, etc., and pay purchase consideration to the vendor partly in cash and partly in the form of fully paid equity shares. It may also take over the business of partnership firm or other company and pay purchase consideration partly or fully in the form of fully paid-up shares.

Pro Forma Journal Entries for Issue of Shares for Consideration Other than Cash :

(1) Purchase of fixed assets :

(Being assets and liabilities taken over at agreed values and balance amount payable to vendor)

(2) Purchase consideration paid to vendor :

(Being purchase consideration paid by issue of fully paid shares at premium)

Allotment / issue of Shares to Promoters :
Sometimes a company compensates its promoters for their meritorious services by issuing its shares to them without receiving any payment. The full amount of these shares is regarded on the cost of goodwill. Entry is passed just same as purchase of any asset for consideration of shares :

Accounting Treatment for-

Forfeiture of Shares:

When a shareholder fails to pay the call money or premium on the shares in spite of repeated reminders and warnings, the company forfeits the shares of such defaulters by passing an appropriate resolution in a Board Meeting. Forfeiture means the compulsory termination of membership and the confiscation (taking possession by law) of the shares of defaulting members by way of penalty for the non-payment of a fixed instalment, call or premium. The Articles of Association of a company, therefore, can empower the Board of Directors of the company to forfeit the shares in case of non-payment of call money. The amount of forfeited shares is transferred to a separate account known as Forfeited Shares Account in the books of accounts of the company. At the end of the accouting year, the balance of Forfeited Shares Account is shown on the Liabilities of Balance Sheet under the heading ‘Share Capital’.

Pro Forma Journal Entries of Forfeiture of Shares and Re-issue of Forfeiture :

1) Forfeiture of shares issued at par :

(Being shares forfeited for non-payment of 1st or 2nd or Third final call money)

2) For forfeiture of shares issued at premium :

(Being share forfeited for non-payment of lst/2nd/final call money)

3) For forfeiture of shares issued at discount:

(Being shares forfeited for non-payment of allotment / First / Second / Final call money)

4) For re-issue of forfeited shares at par :

(Being forfeited shares re-issued at par)

5) For re-issue of forfeited shares at premium :

6) For re-issue of forfeited shares at discount:

(Being forfeited shares re-issued, at discount)

7) For transfer of Share Forfeited A/c :

(Being balance in Share forfeiture A/c transferred to Capital Reserve A/c)

Re-issue of Forfeited Shares :

Forfeited shares remain in the custody of company and become the property of the company. Hence, forfeited shares can be resold by the company at any price. Usually they are sold through auction. They cannot be allotted to the public.

• The issuing company should see that loss incurred on re-issue of forfeited shares should not exceed the forfeited amount.
• If the loss incurred on re-issue of forfeited shares is less than the amount so forfeited, the surplus supposed to be transferred to ‘Capital Reserve Account’.
• If the loss incurred on re-issue of forfeited share is greater than the amount so forfeited, the deficit or loss is required to be transferred and debited to ‘Forfeited Shares Account’.
• If forfeited shares are re-issued at premium, the excess amount so received is to be credited to ‘Share Premium Account’.
• If forfeited shares originally issued at discount are re-issued at loss, the loss incurred on issue of shares originally at discount is to be debited to ‘Discount on Issue of Shares Account’ and the loss incurred on re-issue of shares is to be debited to ‘Forfeited Shares Account’.
• If the total of the amount of forfeiture and amount received on re-issue of shares exceed the face value of the shares re-issued, such surplus amount is required to be transferred to ‘Capital Reserve Account’.

By going through these Maharashtra State Board Organisation of Commerce and Management 12th Notes Chapter 3 Entrepreneurship Development students can recall all the concepts quickly.

Maharashtra State Board Organisation of Commerce and Management 12th Notes Chapter 3 Entrepreneurship Development

→ Factors of production: The basic things or inputs or resources such as land, labour, capital and entrepreneur used in the process of production to produce economic goods.

→ Risk-bearing The function of a trader to assume some non-insurable risks such as risk of deterioration in the quality of goods due to passage of time, the risk of spoilage, fall in demand due to a change in fashion, etc.

→ Finance The provision of money for a particular purpose such as capital to build a factory or to run a business, or a loan to a farmer.

→ Technology A body of information and techniques and of skills and experience, developed for the practical purposes including production and use of goods and services.

→ Raw materials: Materials acquired to manufacture a product, e.g. sugar cane is the raw material for a sugar factory.

→ Research and development: Two closely related activities in modern industry by which new products and processes are being continuously developed especially by engineers, designers and scientists.

→ Human resources: The quantity, quality, character and calibre of the people working in a business enterprise. Human resource is one of the important resources of an organisation which makes other resources active.

→ Subsidy: Money or incentive given by the government to certain producers, such as farmers, to help them to produce without loss to themselves and yet at a low price, e.g. export subsidies to encourage foreign trade.

→ Tax holidays: Tax holiday means for the purpose of growth and development the government allows certain factories or industries established in backward areas not to pay any tax to the government for a certain period, say 5 years or more.

→ Capital formation: The practice by consumers of increasing their stock of wealth by not consuming it now; instead, some of it is used to increase the supply of capital goods such as machinery and buildings needed to produce further goods.

→ Auxiliary industries: Service (tertiary) industries such as transport, insurance, bank, etc. which provide supplementary or supportive services to primary and secondary industries.

→ Service tax: A tax levied by the government on various services rendered by the individuals, firms, companies, etc.

→ Corporate tax: A tax charged by the government on the assessable profits of individual firms or a limited company during each accounting period. The rate of corporate tax directly varies with the level of profits of the company. It is as good as income tax payable by companies to the government.

→ Value Added Tax (VAT): A tax levied on a product at each stage of manufacture or distribution in proportion to the estimated increase in its ultimate sales values.

→ Excise duty: An indirect tax levied on the consumption of particular goods. It is often levied at higher rates on the goods whose consumption are injurious or harmful to health, e.g. tobacco, alcohol, etc.

→ Customs duty: A tax imposed by the government on goods imported from abroad. Customs duty is charged either in the form of a percentage of the value of the goods or as a specific duty according to the volume of the goods.

→ Demonstration method: The basic method of instructions for teaching skills type subject matter. This method is recommended for teaching a skill because it covers all the necessary steps in an effective learning order.

→ Socially disadvantaged group: A group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities.

→ Semi-finished goods: Products that have not been completely assembled or manufactured and usually sent to other departments for finishing and converting them into finished products.

→ Consumers’ education: Knowledge and necessary information given to the consumers to educate and guide them about their rights and duties, marketing procedures, quality standards, availability of credit, etc.

→ Education cess : Cess is an alternative term for a tax. The term ‘cess’ is still frequently used in a few countries including Britain and Ireland to indicate a local tax, Scotland, to indicate a land tax and India applied as a suffix to indicate a category of tax such as property cess, education cess, etc.

→ Income inequality: A considerable gap in the earnings of various sections of society. On one side we find a sizeable number of people earning say ₹ 20,000 – 30,000 per month and another class of people earning millions of rupees per month.

→ Entrepreneurship: The activity of setting up a business, taking on financial risk to earn profit.

→ Innovators: A person who introduces new methods, ideas on products.

→ Entrepreneurs: A person who sets up a business, taking on financial risk to earn profit.

→ Private enterprise: Business on industries that is managed by independent companies or private individuals.

→ Industrial Base: The part of a country or region that is involved in producing goods in large quantities in factories.

→ Freelancing: Freelancing is a self employed person who offers services, by working on several
jobs for various clients at one time.

→ Synthesis: The combination of components or elements to form a connected whole.

→ Hindrances: A thing that provides resistance, delay or obstruction to something or someone.

→ Parametry: A numerical or other measurable factor forming one of a set that defines a system or sets the condition of its operation.

→ Aggrandize: To increase the power, status of wealth. „

→ Incalculable: Too great to be calculated as estimated.

→ Pervasiv : Spreading widely throughout an area or a group of people.

→ Standardisation: The process of making something confirm to a standard.

→ Fatigue: Reduce the efficiency by prolonged activity. ‘

→ Micro finance: Micro finance is a category of financial services targeting individuals and small ‘
business.

→Socio-Economic: Relating to or concurred with the interaction of social and economic factors. –

→Capital gain: A profit from the sale of property or an investment. x

→Incubators: A place, especially with support staff and equipment, made available at low rent to new small business.

→ Greenfield Enterprise: In infrastructure, the projects on the unused lands where there is no need .
to remodel or demolish an existing structure are called greenfield enterprise/project.

→ Collateral security: Collateral security is an asset which a borrower is required to deposit with or pledge to, a lender as a condition of obtaining a loan. It can be sold off if the loan is not repaid.

→ Moratorium period: A moratorium period is a time during the loan term when the borrower is not required to make any repayment.

→ Agritourism: Tourism in which tourists stay with local people in rural areas.

Introduction-

Entrepreneurship is a full time job which requires dedication and hard work. They are innovators, producers, owners, creators, etc. They are regarded as ‘fourth factors of production’.

History –

• In the early 16th century, the term ‘Entrepreneur’ was used by Frenchman for men leading in military expeditions.
• In France, contractors or architects were called entrepreneur around 1700 AD.
• The French economist Richard Cautillon used this term for business and economic activities, in early 18th century.
• In 1848, the famous economist John Sturt Mill described ‘Entrepreneurship’ as the founding of a Private enterprise.
• In India, the industrial base of our economy was very poor at the on set of independence.

The industries were facing difficulties, like shortage of raw material, capital and marketing problems, etc. However, the Indian Government is considerably enhancing the ease of doing business.

Concept-

The concept of entrepreneur differs from industry to industry, country to country and time to time. An entrepreneur is “a person who starts a business and is willing to risk loss in order to make money”. The common words ‘businesses’ and ‘risk’ are f interrelated. If there is no real business or risk, a
person cannot be called as an entrepreneur.

• The small businessman having a grocery shop or the founder of a laundry service across the street is an entrepreneur.
• The founder of the multi-billion companies like Reliance, Tata is an entrepreneur.
• The freelancing plumber, carpenter, electrician work for himself is also an entrepreneur.

The entrepreneurs are passionate to innovate, lead, invent or pioneer with a disruptive product or technology. The size of business, its type, his age, education, success, failure does not matter for a person to become an entrepreneur. They have courage to share an idea or a product and try to make market a better place.

Definitions-

• Webster dictionary gives a definition, “An I entrepreneur is a person who starts a business and is willing to risk loss in order I to make money.”
• The Oxford Dictionary defines “an entrepreneur is a person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.”

Characteristics of an Entrepreneur-

• Intellectual Capabilities: An entrepreneur is a creative thinker with good intelligence. New innovative ideas are always floated by these people who have the ability of creative thinking.
• Future Vision: The entrepreneur has the ability of foreseeing the future market conditions. They can take appropriate decision by considering market situations and changes in market conditions. This enables them to take timely actions.
• Hard Work: Hard work is necessary in any type of venture or business activity to make it more successful. He is required to work more tediously, sincerely and seriously for long hours.
• Technical Knowledge: The entrepreneur should have adequate technical knowledge about the products, process, etc. He should also update his technical knowledge to understand latest changes take place in technology.
• Communication Skills: The entrepreneur should have good communicate skill and command over language he speaks. Good communication skill is important to convey ideas and influence customers, employees, creditors, etc.
• Highly Optimistic: To be successful, he should have positive thinking and approach in all the activities he undertakes.
• Risk- bearing capacity: He should be calculative in taking risk while facing challenges and seek more new opportunities.
• Self Confidence: He should be self confident to achieve his goals. He should keep himself motivated and confident to face various obstacles.

Qualities of a Successful Entrepreneur-

• Disciplined: An entrepreneur should have comprehensive strategies and tactics to accomplish the organisational goal. Successful entrepreneur is disciplined enough to take steps every day towards the attainment of his objectives.
• Confidence : An entrepreneur is confident with the knowledge that he will make his business succeed. He shows that confidence in everything he does.
• Open Minded: An entrepreneur has the ability to look at everything around him and realizes that every event and situation is a ‘business opportunity.’
• Self Starter: An entrepreneur is proactive, not waiting for someone to give him permission. For everything that needs to be done, he should start it himself.
• Competitive: An entrepreneur knows that he can do a job better than others. He needs to be competitive to win every game of the business.
• Creativity: An entrepreneur often comes up with solutions which are the synthesis of other items and thus find connection between unrelated events.
• Determination: An entrepreneur is determined to make all of their endeavours succeed, so will try and try again until it does. He is not backdown by defeats or not believe the something cannot be achieved.
• Strong Communication Skills: The entrepreneur has strong communication skills to sell the product and to motivate employees so as to expand and grow business.
• Strong Work Ethics: An entrepreneur’s mind is constantly on his work, whether he is in or out of the work place to ensure that an outcome meets his expectations.
• Passion: Passion to make business better is the most important quality of a successful entrepreneur. He loves his work because there is a joy that his business gives which goes beyond the money.

Functions of an Entrepreneur-

• Innovation: An entrepreneur is basically an innovator. He introduces new combinations of means of production, new products and makes changes in the existing products to satisfy his customers.
• Determination of objectives: An entrepreneur has to determine the aims and objectives of business and differentiate between primary and secondary objectives.
• Development of Markets: An entrepreneur has to find out different ways for marketing the products and services by conducting constant research to increase customers demand.
• New Technology: Everyday there is an invention of new technology in the global world. Introduction of new and advanced technology, scientific methods will always result in growth of business.
• Good Relations: Good and efficient relations between subordinates, superior and employees is necessary to maintain healthy working atmosphere in an organisation.
• Organising Funds: An entrepreneur needs to find out different financial resources because adequate and continuous finance is always necessary for every business.
• Taking Decisions: Timely and correct decisions are important and necessary for a proper business plan. He should always consider the pros and cons for taking any business decisions.

Entrepreneurship Development-

Meaning :
Entrepreneurship is a purposeful activity of an individual or a group of associated individuals undertaken to initiate, maintain and aggrandize profit by production and distribution of economic goods and services. It is a process of setting up a new organisation.

Characteristics of Entrepreneurship :

• Innovation: Entrepreneurship is an innovation in view of changing taste of consumers from time to time. Entrepreneurship focuses on the research and development to produce goods and services to satisfy the customers.
• Economic Activity: Systematically planned activities as per his skills and knowledge to satisfy the human wants and to earn a better livelihood is quality of an entrepreneur. Hence entrepreneurship is an economic activity.
• Organisation building: It is an activity place, time and form utility is considered under one roof.
• Creative Activity: Innovation and creativity in producing something new is a big challenge for the entrepreneur. It is an essential part of entrepreneurs.
• Managerial Skills and leadership : Leadership and managerial skills are the most important quality of an entrepreneur to be successful. He should lead, have more passion of doing something new than just earning profit.
• Skilful Management: With professional and skilled managers, entrepreneurship becomes a successful activity.
• Risk-Bearing: Uncertainty is the risk which cannot be insured against and is incalculable. Entrepreneurs are risk-bearing agents in production.
• Gap Filling Functions: It is the entrepreneur’s job to fill the gap or make up the deficiencies which always exists in the knowledge about the production function.

Process of Entrepreneurship Development –

(1) Training: As against traditional thought that entrepreneurs are born, modern ways thinks entrepreneurs can be made by education and training. Training is a scheme of instructions which is planned, systematic, consistent, pervasive and monitored to measure its effectiveness. It imparts knowledge of marketing of goods, production methods, consumer’s education, etc. Training teaches an entrepreneur for the latest development which can directly or indirectly affects him. By number of methods of training, efficiency of an entrepreneur can be increased.

(2) Entrepreneurship Development Programme (EBP): EDP is a device through which people with talent, entrepreneurial traits are identified, motivated to take up new industrial venture, trained in managing the unit and guided in all aspects of starting a venture/an enterprise. These programmes are designed to strengthen motive, capabilities and help to play his role efficiently.

(3) Steps in EDP:

• Arrangement of Infrastructure.
• Selection of potential entrepreneur.
• Identification of enterprise.
• Actual training program.
• Selection of training personnel.
• Selection of method of training.
• Actual training.
• Monitoring and follow-up.

(4) Objectives of EDP:

• To foster entrepreneurial growth in the country.
• Optimum use of available resources.
• Development of backward regions and improving economic status of socially disadvantaged groups.
• Generation of employment opportunities.
• Widening base for small and medium scale industries.

Recent Initiatives in Entrepreneurship Development –

Start up India :

Meaning : A start-up is defined as an entity having its headquarter in India, which was opened less than 10 years ago and has an annual turnover of less than 100 crores. Government want to encourage entrepreneurship and to promote innovations. The MUDRA Bank’s scheme, a scheme started by Government of India, in providing micro¬finance at low interest rates to low socio-economic background entrepreneurs. It was started in 2016 for economic growth and generate large scale employment. The Government has announced start¬up Indian Action Plan in following areas :

1. Simplification and Handholding : Procedure for start up will be easy and winding up will be on fast track basis.
2. Funding support and Incentives : Indirect participation by government in funding and tax exemptions will be allowed.
3. Industry – Academia Partnership and Incubation : To introduce start up Fests, pre-incubation training, set up incubators, launch programmes for students.

Objectives of Start ups :

• ₹ 10,000 crore start-up funding pool.
• Reduction in patent registration fees.
• Improved Bankruptcy Code i.e. 90 days exit window.
• Freedom from mystifying inspections for first 3 years of operation.
• Freedom from Capital Gain Tax for first 3 years of operation.
• Freedom from tax for first 3 years of operation.
• Self-glorification compliance.
• To target 5 lakh schools, and involve 10 lakh children in innovation-related programmes.
• Encourage entrepreneurship within the country.
• Promote India across the world as a start¬up hub.
• Built Start-up Oasis as Rajasthan Incubation Center.

Stand-up India-

Stand-Up India scheme for financing bank loans between ₹ 10 lakh and ₹ 1 crore to at least one SC/ST borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise.

Following points to be learned:

(1) Objectives (2) Eligibility (3) Nature of loan (4) Purpose of loan (5) Size of loan (6) Interest rate (7) Security (8) Repayment (9) Working Capital (10) Margin money.

Agro Tourism (Rural Tourism)-

Meaning: Agro tourism is a commercial enterprise at a working farm, ranch, or agricultural plant conducted for the enjoyment of visitors that generates supplement income for the owner. Agro tourism provides a chance to reconnect with land and provide ‘hands on experience’ with local food to tourists.

Definition : “Agro tourism is the idea of bringing urban residents to rural areas for leisure travel and spending”.

Maharashtra is at the forefront in developing and promoting agro tourism in India. Agritourism is an activity which brings visitors to farm. It has grown in many countries of the world like Australia, Canada, US, etc. Business planning finding land, employees, record keeping, following regulations insuring crops, preparing for rainy day and its retirement all come under ‘Farm Management’.

Activities in Agro Tourism:

• Outdoor recreation.
• Educational experiences.
• Entertainment.
• Hospitality services.
• On-farm direct sales.

Intrapreneurs –

An intrapreneur is an employee who has the authority and support of his company/employer to implement his own innovative and creative ideas. The main difference between an intrapreneur and an entrepreneur is that, the latter takes financial risk while the intrapreneur does not have to invest his capital. Such innovative ideas may earn good profit for the organisation.

Definition:
Gifford Pinchot ill, “Intrapreneurs are the dreamers who take hands-on responsibility for creating innovation of any kind, within a business.”