POM Updates – 07-06-2008

Attendees :- 192

Truly speaking, I am not really sure of the pace with which this is done in the class. More than a few buzz words, I have not seen much progess. But my counter thought to this is may be, Marketing is a language of Jargons and it is better taught this way… The jury is still out…

The key things covered so far

1. Marketing Product : – Technical, Functional, Emotional :- Maps to Competition

2. Marketing Universe :- Target audience, This is dependent on the Marketing Product. e.g. if the product is Status, then the Universe is HIG, if the product is “Safety/Health”, the target audience is MIG, Mothers, Elder People etc

3. Marketing Objective :- Clearly defined objective to market the product or a super set

4. Assortment Level Competition :- Similar need based items prioritized by the needs of the end user

5. Value:- The Marketing value of the product (There are trade offs between the market and value for ny given produc)

Case Study : – Maharaja Dishwasher :- Reason for failure (Marketing Objective was not appropriate, they should have marketed the Kitchen instead of the Dishwasher)

Brand Image < Company Image < Country Image (In that order). This is with respect to some discussion around why market a brand viz-a-viz a Company name.

The lighter side of Satellite Education

A little bit of fun won’t hurt a thing… Indeed… The folks who attend the sessions across various centres have made the classes a bit lighter, with some help from the professors.

Ram Kumar Kakani generally keeps the classes alive with his swift one-liners, “girl friend” jabs, awarding negative marks, or be it quoting from bollywood movies.

As with Marketing, the folks in the session keep it alive with their comments on the chat board. Though am not a proponent of using the chat sessions for personal use, I could not help smiling/laughing at some of the comments/suggestions. A case in point would be the jabs at a fellow student on the cement industry, Maya being relentless in asking her questions (Serious business, yet quite funny), Rakesh (campaigning the cause of the students), while Shirish is the Class Bachao Activist constantly raising the red flag on the “XLRI Studio”.

While having fun, some things to consider seriously,

1. Hughes is working constantly to improve the QoS, a few issues like “Echo” are due to the individual setting on the person’s mic volume (while you initiate a session). Rather than creating a brouhaha about “Echo” look at your settings first, before raising the red flag.

2. Too much abuse if I may, of the chat room will result in some crackdown at a later point in time. So let us use it more for class related discussions

3. Can we please stop all the hi’s/hello’s/any one from xxx questions in the room? If we want to get to get to know each other, there are other forums like the Orkut site (from KG), Nigam’s journals etc.

Just my thoughts! No offence meant! Ciao.

MAC – Management Accounting Session 2/3 – 05/25/2008

Date :- 25-May-2008

Attendees : 195 (dropped to 192 during the later stages :))

Session Summary :- Balance Sheet, Assets, Liabilities, Personal Example, Types of Assets, Types of Liabilities, Owner’s Equity, Class Questions, Balance Sheet Exercise (8 Step Problem), Split up of Owner’s Equity, Standard Format/Vertical Format, Formulations between Asset/Liability/OE

Misc on a lighter vein :- Maa (Asset), Pet me Laath (On book download) 🙂

Balance Sheet (Class Defn) – Position Statement at a point in time. Statement of what you Own vs Owe.

Kapil’s case (Fellow Student) – Asset, Liability, OE build up.

ASSETS = LIABILITY + OWNER’S EQUITY

Owner’s Equity is also known as Book value worth or Residual Value as it is residual in nature.

Types of Business Transactions (Pertaining to the above equation)

1. Asset Increases, Cash Decreases – E.g. Usage of Cash to buy an Asset (e.g. Buy a Computer paying Cash)
2. Asset Increases, Liability Increases – E.g. Take a loan to buy an Asset
3. Asset Decreases, Liability Decreases – E.g. Pay a loan using Cash
4. Asset Increases, No change in Liability – OE Increases and vice verca

Assets are classified into

1. Current Assets :- Cash, Checks at hand, Bank balances, Marketable Securities, Trade receivables, Inventory, Employee Loans/Advances
2. Fixed Assets :- Land, Plant/Machinery, Vehicles, Computers/Fixtures/Furniture, Buildings
3. Other Assets :- Long Term Investments – 5/10 Yr timeframe, Intangibles (Deferred Revenue Expenditure, Loyalties)

In a few cases a Fixed asset can be a current asset. e.g. Furniture for a Furniture Maker, Car for a Car Dealer.

Liabilities are classified into

1. Current Liability :- Working Capital Loan, Supplier Credit, Accounts Payable, Salary (Till it is paid), Other Payables, Advances from Customers, Overdrafts
2. Long Term Liability :- Loans from Investors, Equipment Credit, Unsecured Loans, Pensions/Gratuities

Owner’s Equity – (Asset – Liabilities), still reported under Liabilities as it is owed to Owners, Share holders

1. Share Capital/Initial Capital
2. Reserves/Surplus – Post the first yr of operations, the amount/profit accrued less the Initial Capital

Reserves are classified into 1. Retained Earnings (General, Investments, Dividend etc) 2. Capital Reserves – 1 Time Event (Selling an Asset, e.g. Finolex Industries selling its land in Chinchwad, Pune as a 1 time event and recorded in the Balance Sheet as a Capital Reserve)

Class Questions and Answers

1. What is a Deferred Revenue Expenditure? Can we have some examples?

Deferred Revenue Expenditure is a classification of Asset, though it is an expenditure incurred by the Enterprise to create a long term value for the company. Examples include 1. Advertisements for a new product launch 2. VRS Scheme offered by companies 3. Listing cost (Brokerage, Underwriting costs)

Added Masala :- In case, the DRE does not pay out in the long run (for e.g. the Product being launched is pulled off, it will be written off the balance sheet)

2. Can you give us an example of a case where the Liability increases and the OE reduces with the Asset being retained as is?

For e.g A fine incurred during an accident. Till the cash is paid, L decreases, once the cash is paid, Asset reduces bringing the OE down.

3. Convention to be followed while writing a balance sheet?

A|L or L|A

Purely a convention. Former is US based, while the later is UK based.

We will follow A|L, and a few other conventions followed are

1. List assets from more liquid to less liquid – Current, Fixed and Other in that Order

2. List liabilities from more liquid to less liquid – Current, Limited and OE in that order

Class Exercise – 8 Step Transaction building up the balance sheet.

Other Notes – Sundry Creditors (Accounts Payable), Sundry Debtors (Accounts Receivable)

Some Formulae

Working Capital/Net Current Assets = CA – CL (Current Asset – Liability)

WC + FA + OA = LTL + OE

CA + FA + OA = LL + CL +(SC + RE)

First month of business

CA + FA + OA = LL + CL + (SC + (SALES – EXPENSES))

Further Months

CA + FA + OA = LL + CL + (SC + RE + (SALES – EXPENSES))

Pls do the assignments as requested by the Professor and be ready for next week.

Happy Tallying the balance sheet!

Update from Rohit – MAC

Folks

Pls check your group email on the updates from Rohit. The note has the details on the slides for the sessions attended, student resources (http://highered. mcgraw-hill. com/sites/ 0070666911/ student_view0/ index.html), (http://www.kakani. net/). The slides have been uploaded to AIS.

The summary on sessions 2/3 will be updated in this blog later today.

MAC – Management Accounting Session 1 – 24/05/2008

Attendees :- 195

Professor :- Prof. Ram Kumar Kakani

Summary :- Accounting Definition, Types of Accounting, Determining Value of an Asset, Founding Ideas, Concepts, Standards, Types of Companies, Difference between Types of Accounting.

Accouting – Accounting is a process of Identifying, Measuring, Recording and Reporting of economic events represnted via a common denominator of a monetory transaction.

Types of Accounting

Enterprise Accounting, Government Accounting, Social Accounting

Enterprise Accounting further classified as Financial Accounting and Management Accounting.

Founding Ideas :- Capital Maintenance, Productive Capital, Profit Generation (Motive Force of any Business)

Accounting is generally expressed as a set of concepts, standards, postulates and principles.

Valuation of an Asset can be done via

1. Historical Value – Used for Reporting/Accounting

2. Replacement Value

3. Net Realisable Value

4. Present Value

The conceptual basis of accounting was explained using the courier and grading examples.  The key concepts binding accounting are

1. Business Entity Concept

2. Infinite Time Concept

3. Conservatism

4. Accurate

5. Matching Concept/Realization Concept

6. Timeliness of Reporting

7. Materiability of Accounting – feasibility to account

 Types of Companies

Sole Propertiership – Maximum control, Maximum Liability (Pan shop)

Partnership – Maximum Control, Maximum Liability (Audit Firms, Accountancy firms)

Joint Stock Companies – Minimum Control, Limited Liability (Real Estate Chains)

More to come….

Confirmation of Payment and Information on the Course Inauguration

I have got confirmation from XLRI on the receipt of the first installtion of payment. Please note on a formal online inauguration of the programme is scheduled on 20th May’08. Log in to the XLRI web site for PGCBM for more details.