Single Entry and Double Entry Accounting

-
Single entry accounting/Cash accounting. This system records only cash movement of transactions and that too up to the extent of recording one aspect of the transactions. This means that only receipt or payment of cash is recorded and no separate record is maintained (about the source of receipt and payment) as to from whom the cash was received or to whom it was paid. Double entry book keeping/Commercial accounting. Double entry or commercial accounting system records both aspects of transaction i.e. receipt or payment and source of receipt or payment. It also records credit transactions i.e. recording of Electricity Bill or accruals of Salary payment etc. This concept will be explained in detail in the next lectures but for the time being it should be noted that in cash accounting date of receipt / payment of actual cash is important while in commercial accounting the date on which the expense is caused (whether paid or not) as well as the spreading of the cost of c
Post a Comment

NATURE AND TYPES OF MANAGERIAL DECISIONS

-

Nature of Managerial Decision-making:

Decision making is the act of choosing one alternative from among a set of alternatives. There are two types of decisions. Programmed decisions are those made in routine, repetitive, well-structured situations through the use of predetermined decision rules.
 
Many programmed decisions are derived from established practices and procedures or habit. Computers are an ideal tool for dealing with several kinds of complex programmed decisions. Most of the decisions made by first-line managers and many by middle managers are programmed decisions. 

Non-programmed decisions are those for which predetermined decision rules are impractical because the situations are novel and/or ill-structured.

Types of Problems and Decisions:

Managers will be faced with different types of problems and will use different types of decisions. Another dimension of problem is its structure. A problem can be well-structured or poorly structured.
1.  Well-structured problems are straightforward, familiar, and easily defined. In handling this situation, a manager can use a programmed decision,which is a repetitive decision that can be handled by a routine approach. There are three types of plans for programmed decisions.
a  A procedure is a series of interrelated sequential steps that can be used to respond to a structured problem.
b  A rule is an explicit statement that tells managers what they ought or ought not to do.
c  A policy is a guide that establishes parameters for making decisions rather than specifically stating what should or should not be done
2.  Poorly structured problems are new or unusual problems in which information is ambiguous or incomplete. These problems are best handled by a non-programmed decisionthat is a unique decision that requires a custom-made solution.

General Organizational Situations:
1.  At the higher levels of the organization, managers are dealing with poorly structured problems and using non-programmed decisions.
2.  At lower levels, managers are dealing with well-structured problems by using programmed decisions.
 
Since managers can make decisions on the basis of rationality, bounded rationality, or intuition, let us try to
understand them one by one:

Assumptions of Rationality
Managerial decision making is assumed to be rational; that is, choices that is consistent and value maximizing within specified constraints. The assumptions of rationality are summarized below.

a  These assumptions are problem clarity (the problem is clear and unambiguous); goal orientation (a single, well-defined goal is to be achieved); known options (all alternatives and consequences are known); clear preferences; constant preferences (preferences are constant and stable); no time or cost constraints; and maximum pay off.
b  The assumption of rationality is that decisions are made in the best economic interests of the
organization,not in the manager’s interests.

The assumptions of rationality can be met if:the manager is faced with a simple problem in which goals are clear and alternatives limited, in which time pressures are minimal and the cost of finding and evaluating alternatives is low, for which the organizational culture supports innovation and risk taking, and in which outcomes are concrete and measurable.
The rational model is flawed in that it does not apply to actual decision aiming for two reasons.
a.  Perfect information is not available.
b.  Manager’s values and personality factors enter into their decisions.
The rational model presents an ideal against which actual decision-making patterns can be measured

Decision-Making Styles

Managers have different styles when it comes to making decisions and solving problems. One perspective proposes that people differ along two dimensions in the way they approach decision making. One dimension is an individual’s way of thinking—rational or intuitive. The other is the individual’s tolerance for ambiguity—low or high.
 
These two dimensions lead to a two by two matrix with four different decision-making styles.
a. The directive style is one that’s characterized by low tolerance for ambiguity and a rational way of thinking.
b. The analytic style is one characterized by a high tolerance for ambiguity and a rational way of thinking.
c. The conceptual style is characterized by an intuitive way of thinking and a high tolerance for ambiguity.
d. The behavioral styleis one characterized by a low tolerance for ambiguity and an intuitive way of thinking.
 
Most managers realistically probably have a dominant style and alternate styles, with some relying almost exclusively on their dominant style and others being more flexible depending on the situation.

Comments

Post a Comment

Popular posts from this blog

RECORD KEEPING AND SOME BASIC CONCEPTS

-
Image
We can maintain a diary of transactions and note the daily transactions like sale, purchase etc. in it. Problems Faced in Maintaining Diary of Transactions • How will we come to know the income and expenses from various sources? • We only have a sheet / page on which daily transactions are listed. • We do not know which product is selling better and which is not. Available Alternate One can go through all the transactions at the end of the month and note different types of transactions on different pages. So that every page gives complete detail for a different type of transaction like sales of different products and expenses of different types now try to go through these transactions and separate transactions of different types.   But what if the number of transactions is large? Is it really possible to go through hundreds or thousands of transactions at the month end and analyse them to obtain required results.  Sales and purchase are not always for cash. Some ti
Read more

Single Entry and Double Entry Accounting

-
Single entry accounting/Cash accounting. This system records only cash movement of transactions and that too up to the extent of recording one aspect of the transactions. This means that only receipt or payment of cash is recorded and no separate record is maintained (about the source of receipt and payment) as to from whom the cash was received or to whom it was paid. Double entry book keeping/Commercial accounting. Double entry or commercial accounting system records both aspects of transaction i.e. receipt or payment and source of receipt or payment. It also records credit transactions i.e. recording of Electricity Bill or accruals of Salary payment etc. This concept will be explained in detail in the next lectures but for the time being it should be noted that in cash accounting date of receipt / payment of actual cash is important while in commercial accounting the date on which the expense is caused (whether paid or not) as well as the spreading of the cost of c
Read more

Money Measurement Concept

-
In accounting, every transaction that is worth recording is recorded in terms of money. In other words any event or item that cannot be translated in terms of money is not recorded in books of accounts.   With the passage of time, the trading volumes and types of commodities available in the market are increased and it became difficult to exchange commodity with other commodity. That is why the concept of cash / money is introduced and people started valuing all goods / services in terms of a common commodity called money. Now the price of 10 kg wheat would be Rupees 60 instead of 2 meters of cloth. Similarly, the price of 2 meters of cloth and 5 litres of milk would also be Rupees 60.
Read more