FOUNDATION COURSE NOTES

Unit – 1
Definition • Systems of Accounting • Functions of Accounting • Basis of
Accounting • Classification of Accounts • Golden Rules of Accounting •
Examples • Books of Accounts – Manual Vs Software

Definition :
According to the American Institute of Certified Public Accountants
“Accounting is the art of recording, classifying and summarising in a significant
manner and in terms of money, transactions and events which are in part, at
least of a financial character and interpreting the results thereof ”

Systems of Accounting :
The accounting system is what a company employs to record and manage its
financial or accounting records, including income and expenses. It is guided by
a set of accounting guidelines and procedures that help generate accurate
financial documents, which are a ready reference for internal and external
stakeholders to make effective business and investment decisions.

Types of Accounting Software

Choosing an accounting system depends on your budget, preferences and
business size. The four main types of financial software systems include:
• Single-entry systems
• Double-entry systems
• Manual accounting systems
• Computerized accounting systems

Functions of accounting :
1. Accounting helps in the maintenance of bookkeeping and record
keeping.
2. Accounting helps collect and store financial information, transactions
happening within the organization, and financial activities happening in
the organization.
3. It helps track several financial information daily or monthly.
 4. It helps create and document financial history from day to the latest
period.
5. It helps in the formulation of comprehensive financial policy for the
business.
6. It is also utilized in the preparation of budgets and financial projections.
7. It also helps to reconciliation information between two sources of
financial systems.
8. The accounted information can be shared with the external stakeholders
with the intent of business planning and growth.
9. Accounting does not focus on the activities of capital budgeting.
10. It also helps in audit functions and curbs the internal weakness as it
makes the systems accountable.
11. A business or an organization can prepare and work on several journals to
maintain different accounts.
12. A comprehensive accounting system ensures that the accounts of
corporate expenses do not get mixed with the personal accounts of vice
presidents or managers. Such instances are generally referred to as red
flags.

Basis of accounting :
1.10 Bases of Accounting
There are three bases of accounting in common usage, namely
(i) Cash basis
(ii) Accrual or mercantile basis
(iii) Mixed or hybrid basis.

(i) Cash basis

Under cash basis of accounting, actual cash receipts and actual cash payments
are recorded. In this basis, revenue is recognised when cash is received and
expenses are recognised when cash is paid. Credit transactions are not recorded
till cash is actually received or paid. Under this basis,
(a) Any income received
(b) Any expenditure
(c) Any asset purchased for which cash is paid
(d) Any liability paid during the accounting period whether related to the past,
present or future is taken into account.

(ii) Accrual or mercantile basis

Under accrual basis of accounting, the revenue whether received or not, but has
been earned or accrued during the accounting period and expenses incurred
whether paid or not are recorded. In other words, revenue is recognised when it
is earned or accrued and expenses are recognised when these are incurred.
Under this basis,
(a) Any income earned whether received or not
(b) Any expenditure incurred whether paid or not
(c) Any asset purchased whether cash is paid or not
(d) Any liability incurred whether paid or not during the accounting period is
recorded.
Under section 128(1) of the Indian Companies Act, 2013, all the companies are
required to maintain the books of accounts according to the accrual basis of
accounting.

(iii) Hybrid or mixed basis

This basis is a combination of cash basis and accrual basis of accounting.
Under mixed basis of accounting, both cash basis and accrual basis are
followed. Revenues and assets are generally recorded on cash basis whereas
expenses and liabilities are generally taken on accrual basis.

Classification of accounting :
the classification of accounts is important. We can classify the accounts as per
the traditional classification under the following heads:

I. Personal Accounts
We further classify these as:

13. Natural Personal Accounts

14. Artificial Personal Accounts
15. Representative Personal Accounts
Let us study these accounts in detail.

16. Natural Personal Accounts: Natural Persons are human beings.

Therefore, we include the accounts belonging to them under this head. For
instance, Debtors, Creditors, Capital A/c, Drawings A/c, etc.
17. Artificial Personal Accounts: Artificial persons are not human beings but
can act and work like humans. They have a separate identity in the eyes of
 law and are capable to enter into agreements. These include H.U.F,
partnership firms, insurance companies, co-operative societies, companies,
municipal corporations, hospitals, banks, government bodies, etc. For
example, Bank of Baroda, Oriental Insurance Co,
18. Representative Personal Accounts: These accounts represent the
accounts of natural or artificial persons. When the expenses become
outstanding or pre-paid and incomes become accrued or unearned, they fall
under this category. For example, Outstanding Salary A/c, Pre-paid Rent
A/c, Accrued Interest A/c, Unearned Brokerage A/c, etc.
Accounting as an Information System

II. Impersonal Accounts

Impersonal Accounts are further classified as:

19. Real Accounts

20. Nominal Accounts
Let us now understand these accounts in detail.

21. Real Accounts: These are the accounts of all the assets and liabilities of
the organization. We do not close these accounts at the end of the
accounting year and appear in the Balance Sheet. Thus, we carry forward
the balances of these accounts to the next accounting year. Therefore, we
can also say that these are permanent accounts. We can further classify
these into:
22. Tangible Real Account: It consists of assets, properties or possessions
that can be touched, seen and measured. For example, Plant A/c, Furniture
and Fixtures A/c, Cash A/c, etc.
23. Intangible Real Account: It consists of assets or possessions that cannot
be touched, seen and measured but possess a monetary value and thus can
be purchased and sold also. For example, Goodwill, Patents, Copyrights,
etc.
24. Nominal Accounts: Nominal Accounts are the accounts relating to the
expenses, losses, incomes, and gains. These are temporary accounts and
thus we need to transfer their balances to Trading and Profit and Loss A/c
at the end of the accounting year. Therefore, these accounts have no
balance to be carried forward next year as they are closed.

Golden Rules of Accounting :

Books of accounts :
Journal is sub classified into the following −
• Purchase Day book − Original book of entry which records credit
purchases is called purchase book/purchase day book.
• Sales Day book − Records the details of credit sales by businessmen.
• Return Inward book − It records returned goods by customer or goods
returned to dealer/supplier by customer. It is also called a sales return
book.
• Return outward book − It records goods returned to the supplier. This is
also called a purchase return book.
• General journal − Records entries which do not fit in other books or
miscellaneous transactions (credit).
• Cash book − This book records only cash receipts and payments related
to cash.
Ledger is sub classified into the following −
 • Cash book − only cash related receipts and payments are recorded.
• General ledger − All business financial transactions.
• Debtor ledger − Provides information about the credit sales (related to
customers).
• Creditor ledger − Provides information about the credit purchases
(related to sellers).

Manual Vs Software

Unit – 2

Financial Statements – Meaning and contents • Reporting –Different types of

accounting - introductions to corporate accounting - Cost Accounting –
Management Accounting

FINANCIAL STATEMENTS ▪
A financial statement is a document that shows the financial activities of a
business. It’s your financial record of any and all transactions the business has
done during a set accounting period.
 ▪ They are very useful because they provide evidence of your income and
expenditure. This is vital in the event of an audit by a government agency. It
also helps you keep accurate records for tax.
▪ However, financial statements are not just for tax purposes. Reviewing them
often is also a key way to take the temperature of your business.

Different Types of Financial Statements:

Balance sheet Income statement-

P&L A/C
Cash Flow Statement-
Operating, Investing and Financial Activities

CONTENT OF FINANCIAL STATEMENT

1. A balance sheet or statement of financial position, reports on a company's

assets, liabilities, and owners equity at a given point in time.
2. An income statement—or profit and loss report (P&L report), or statement of
comprehensive income, or statement of revenue & expense—reports on a
company's income, expenses, and profits over a stated period. A profit and loss
statement provides information on the operation of the enterprise. These include
sales and the various expenses incurred during the stated period.
3. A statement of changes in equity or statement of equity, or statement of
retained earnings, reports on the changes in equity of the company over a stated
period.
4. A cash flow statement reports on a company's cash flow activities,
particularly its operating, investing and financing activities over a stated period.
▪ Notably, a balance sheet represents a single point in time, whereas the income
statement, the statement of changes in equity, and the cash flow statement each
represent activities over a stated period.
▪ For large corporations, these statements may be complex and may include an
extensive set of footnotes to the financial statements and management
discussion and analysis

REPORTING
▪ Reporting in accounting refers to the process of creating financial statements
that summarize the financial transactions of a business over a specific period.
These statements are used to provide information about the financial health of
the business to its stakeholders, including investors, creditors, and management.
▪ There are several types of accounting reports, including:
1. Balance Sheet: A balance sheet is a financial statement that provides a
snapshot of a company’s financial position at a specific point in time. It shows
the company’s assets, liabilities, and equity
2. Income Statement: An income statement is a financial statement that shows a
company’s revenues and expenses over a specific period. It helps to determine
the profitability of the business
3. Cash Flow Statement: A cash flow statement is a financial statement that
shows how much cash is coming in and going out of a business over a specific
period. It helps to determine the liquidity of the business
4. General Ledger: A general ledger is a record-keeping system that contains all
of the accounts used by a company to record its financial transactions. It
provides a complete record of all financial transactions for the company
5. Profit and Loss Statement: A profit and loss statement is also known as an
income statement. It shows the revenues and expenses of a company over a
specific period and helps to determine the profitability of the business
6. Trial Balance: A trial balance is a report that lists all of the accounts in the
general ledger along with their balances. It is used to ensure that debits and
credits are equal in all accounts.

Different types of accounting :

Financial accounting :
Financial accounting is the systematic procedure of recording, classifying,
summarizing, analyzing, and reporting business transactions. The primary
objective is to reveal the profits and losses of a business. Financial accounting
provides a true and fair evaluation of a business. It, therefore, safeguards the
interests of stakeholders.
• Financial accounting includes bookkeeping, classification, and
interpretation of business transactions. The profitability and financial
position of a firm are ascertained.
• It represents revenue, expenses, assets, liabilities, and equity in respective
financial statements, i.e., income statements, cash flow statements, and
balance sheets.
• This information serves as the basis for many critical decisions. The data
is used accordingly by managers, shareholders, creditors, lenders, and
investors.
• Financial accounting is governed and regulated by the Generally
Accepted Accounting Principles (GAAP) in the US.

Managerial accounting :

Managerial accounting is the practice of identifying, measuring, analyzing,

interpreting, and communicating financial information to managers for the
pursuit of an organization's goals.
Managerial accounting differs from financial accounting because the intended
purpose of managerial accounting is to assist users internal to the company in
making well-informed business decisions.

• Managerial accounting involves the presentation of financial information

for internal purposes to be used by management in making key business
decisions.
• Techniques used by managerial accountants are not dictated by
accounting standards, unlike financial accounting.
• The presentation of managerial accounting data can be modified to meet
the specific needs of its end-user.
• Managerial accounting encompasses many facets of accounting,
including product costing, budgeting, forecasting, and various financial
analysis.
• This differs from financial accounting, which produces and disseminates
official financial statements for public consumption that conform to
prevailing accounting standards.

Cost accounting :

Cost Accounting is a business practice in which we record, examine,

summarize, and study the company’s cost spent on any process, service, product
or anything else in the organization. This helps the organization in cost
controlling and making strategic planning and decision on improving cost
efficiency. Such financial statements and ledgers give the management visibility
on their cost information. Management gets the idea where they have to control
the cost and where they have to increase more, which helps in creating a vision
and future plan. There are different types of cost accounting such as marginal
costing, activity-based costing, standard cost accounting, lean accounting.

Features of Cost Accounting

• It is a sub-field in accounting. It is the process of accounting for costs
• Provides data to management for decision making and budgeting for the
future
• It helps to establish certain standard costs and budgets.
• provides costing data that helps in fixing prices of goods and services
• Is also a great tool to figure out the efficiency of a unit or a process. It can
disclose wastage of time and resources
Auditor accounting :

The main goal of auditing is to make sure that a company’s financial statements
are accurate and are following regulatory guidelines. Auditing also gives
investors, creditors, and other stakeholders reasonable assurance that they can
rely on a company and its integrity.
Now, it’s important to note that auditing doesn’t provide a complete guarantee
that every digit recorded in a company’s financial reports is accurate. Auditors
work within a specific, reasonable margin of error known as materiality. The
volume of materiality depends on the size of the company and its reported
revenue and expenses.

Tax accounting :

Tax accounting is a structure of accounting methodologies that focuses on taxes

instead of the annual audited financial statements of companies. The Income
Tax Act, 1961 defines specific ICDS similar to notified Indian accounting
standards(AS).Tax accounting is the way to account for taxation purpose. Tax
accounting intends to enable the tracking of funds (inflow and outflow)
connected with individuals and entities.

Forensics accounting :

Forensic accounting is the branch of accounting that deals with the detection
and prevention of financial crimes. As a forensic accountant, you'll use your
competencies in accounting, auditing, and investigative techniques to detect and
analyze cases of fraud and other financial crimes.

A study in 2020 by the Association of Certified Fraud Examiners found that the
median fraud by business owners and executives is $600,000.[1] In this guide,
learn more about how forensic accountants use their investigatory and analytical
skills to identify different types of financial crime.

Government accounting :
Governmental accounting is the managing and budgeting of public revenue. It
accounts for activities, programs, and other liabilities. The government is
accountable to its citizens and taxpayers. Governmental accounting checks if
the revenue from taxpayers, municipal bondholders, and businesses is utilized
responsibly for the betterment of the community.
• Government accounting plays a crucial role in handling the government’s
financial affairs and provides accurate information related to the
government’s financial practices.
• The Government Accounting Standards Board (GASB) and the Federal
Accounting Standards Advisory Board (FASAB) are private, non-
governmental organizations. They are responsible for ensuring standards
of financial reporting.
• There is a distinction between government and private accounting. The
government has fiscal accountability toward all stakeholders. The
government is expected to be honest and diligent with the funds used.

Corporate accounting :
What is Corporate Accounting?
Corporate Accounting is a special branch of accounting which deals with
accounting for companies, preparation of their final accounts and cash flow
statements, analysis and interpretation of companies’s financial results and
accounting for specific events like amalgamation, absorption, preparation of
consolidated balance sheets.

Importance of Corporate Accounting

Corporate accounting is critical to the successful functioning of a business.
• Registered businesses are required by law to disclose their finances to the
concerned regulatory body – in India, this would be SEBI or the
Securities & Exchange Bureau.
• Corporate accountants help businesses maintain these financial
statements according to the compliances and laws of the land.
• Corporate accounting helps businesses communicate important financial
information to stakeholders.
• It forms the base for management accounting, which helps managers
make well-informed decisions for the business.

UNIT – 3
Overview of business laws – Company Law – Commercial Law – Industrial law

Business law :

Business law is the law that oversees commercial matters such as contracts,
intellectual properties, laws of corporations and other business-related
transactions. In a business environment, these laws ensure that business
operations such as starting a business, managing, selling and closing business
deals are conducted professionally.

Company law :

Prof. Haney defines a company “as an artificial person created by law, having
separate entities, with a perpetual succession and common seal”.

Salient Features of a company under Company Law

Incorporated Association means it must be registered under present
Companies Act, 2013 or previous Indian Companies Act, 1956 and others.

Separate Legal Entity: It means an independent person who acquires such

rights and powers as a human being. Every company, whether private limited or
public limited, must be registered and get its own legal identity. And there are
veils between the company & its members.

Perpetual Succession: Perpetual means ‘forever’. So that Once a company is

created by process of law it can be ended only by the process of law. Members
of a company may transfer their shares, and the name of the transferee is
entered in the register a member may die, then his successor occupies his place,
same in the case of Insolvency. This character of the company is called
perpetual succession.

Common Seal: It is nothing but an official signature of a company just like a

stamp. Company seal is affixed on the document of the company. It can be used
as evidence to sue in court.

Limited Liability: Liabilities of members in a company are always limited upto

their shares in the company. Here liability means a legal responsibility or
obligation to do a thing or to refrain from doing something.

Separate Property: A company can hold property, acquire, sell, lease,

mortgage, gift or otherwise transfer a property in its own name because of its
legal identity. It simply means that a company can be transferor or a transferee
of the property.

Company can sue or can be sued: A company is a legal person who can file a
suit against another and against whom a suit can be filed in his name. Any one
can sue the company and the company can also sue others.

Commercial law :

Commercial law is the law of business, trade, and commerce, covering a wide
range of topics and issues. It regulates contracts, companies, partnerships,
insolvency, tax, shipping, competition, and more, affecting both domestic and
international transactions. It is based on common law principles, statutes, and
international conventions, some of which have been codified in the Uniform
Commercial Code in the US. It helps to protect the rights and interests of parties
involved in commercial activities, and to resolve disputes and conflicts that may
arise.

It also shapes and adapts to the changing needs and challenges of the global
economy, such as e-commerce, intellectual property, consumer protection, and
environmental regulation. It is a dynamic and diverse field of law that offers
many opportunities and challenges for legal practitioners and business
professionals.

Industrial law :

Industrial law, also known as labor law, encompasses the legal framework that
governs the relationship between employers, employees, and labor
organizations. It regulates various aspects such as employment contracts,
working conditions, wages, and dispute resolution. Understanding industrial law
is crucial for both employers and employees to ensure compliance and protect
their rights.

Industrial law applies to all sectors and industries, covering both private and
public organizations. It governs employment relationships, irrespective of the
size of the business. From multinational corporations to small enterprises,
compliance with industrial law is essential to maintain fair and equitable
working conditions for employees.
 UNIT – 4

Communication-meaning-definition-types-process-Barriers to communication

COMMUNICATION :

Meaning :

The English word ‘communication’ is derived from the Latin communis, which
means common sense. The word communication means sharing the same ideas.
In other words, the transmission and interaction of facts, ideas, opinions, feelings
or attitudes. Communication is the essence of management. The basic function of
management (planning, planning, staffing, supervision and management) cannot
be done effectively without effective communication.

Communication is a two-way process which involves transferring of information

or messages from one person or group to another. This process goes on and
includes a minimum of one sender and receiver to pass on the messages. These
messages can either be any ideas, imagination, emotions, or thoughts.

Definition :
Types of Communication
Verbal Communication and Non-Communication

• Verbal communication:
Communication occurs through verbal, verbal or written communication that
conveys or conveys a message to others is called oral communication. Verbal
communication is the use of language to convey information verbally or in sign
[Link] communication is important because it works well. It can be
helpful to support verbal Non-verbal communication Any non-verbal
communication, spoken words, conversation and written language is called.

• Non-verbal communication:
It occurs with signs, symbols, colors, touches, body or facial features.
Insignificant communication is using body language, body language and facial
expressions to convey information to others. It can be used both intentionally and
deliberately. For example, you may have a smile on your face when you hear an
idea or a piece of interesting or exciting information. Open communication is
helpful when you are trying to understand the thoughts and feelings of others.

Mode Of Communication
• Formal Communication:
Formal Communication refers to communication that takes place through legal
channels in an organization. That kind of communication takes place between
managers or employees of the same class or between high and low and vice versa.
It may be oral or written but a complete record of that communication is kept in
the organization.

• Informal Communication:
Informal communication is defined as any communication that occurs outside of
the official channels of communication. Informal communication is often referred
to as the ‘vine’ as it spreads throughout the organization and on all sides
regardless of the level of authority.

Process of communication :
Sender
The process of communication starts with the sender. This is the entity that will
use the means of communication to share her thoughts. The sender starts the
communication cycle by deciding to convey her thoughts and chooses the
format to use.

The sender manages her thoughts, seeks clarity and decides what exactly she
wants to put forth. The sender needs to gather the required information and
relevant ideas in order to communicate. For example, a writer begins with an
idea and transforms it into a book.

Encoding
Encoding is the step in the process of communication where the sender decides
how she wants to convey her thoughts. Selecting the right words, associated
symbols in verbal communication or gestures, tones and sounds in nonverbal
communication are ways of encoding a thought.

To make encoding easier, it is imperative to know who is the receiver. For

example, Ruskin Bond writes clean and short sentences that invoke visuals to
instill wonder among his readers, children

Message
A message is formed after the sender decides what she wants to put forth and
how she wants to convey it. It’s also known as encoding. The nature of the
message can change depending on the medium you use and the audience for
which it is meant. Always remember that for communication to be successful, it
is important that the listener or reader understands the message.

Decoding
No matter how well the message is crafted (or encoded), it will fail to make an
impact if the receiver does not possess the tools to decode the message. For
instance, a nine-year-old may not understand the point of Harari’s book.

While growing up, we also build the ability to decode various messages. Even if
the word ‘beautiful’ has one meaning in all the dictionaries, globally, it would
undoubtedly mean something different to different people. We decode any
message by our own mechanisms, thoughts, memories and create our own
meaning.

Receiver
The process of communication is incomplete without a receiver to ‘lend an ear’.
Whenever a sender writes, or says or sings or expresses anything, it’s meant to
be read, or experienced. The receiver is a crucial part of this process.

The receiver gathers the information presented or broadcasted by the sender and
begins to understand it. We take turns between being a sender and being a
receiver. You are a receiver when you watch a movie, and a sender when you
tell your friends how the movie was.

Feedback
The process of communication is a long one. Communication does not stop
after a thought or idea is expressed or a sentence or a word is uttered. It creates
ripples through time, like a stone slung in a peaceful lake. Feedback is one of
the last stages of communication.

After a message is encoded, sent over a medium received, and decoded, there is
a need for the communication to keep moving. Through feedback, the receiver
becomes the sender, broadcasting the views about the information received.

Another important aspect that is present in this cycle is noise. This refers to the
obstructions people face while following the entire communication process.
This can mean actual physical noise, preoccupying thoughts of the sender or the
receiver, and barriers such as language, comfort, and cognitive precision.

Barriers To Effective Communication

The process of communication has multiple barriers. The intended communique
will often be disturbed and distorted leading to a condition of misunderstanding
and failure of communication. The Barriers to effective communication could
be of many types like linguistic, psychological, emotional, physical, and cultural
etc. We will see all of these types in detail below.

Linguistic Barriers
The language barrier is one of the main barriers that limit effective
communication. Language is the most commonly employed tool of
communication. The fact that each major region has its own language is one of
the Barriers to effective communication. Sometimes even a thick dialect may
render the communication ineffective.

As per some estimates, the dialects of every two regions changes within a few
kilometers. Even in the same workplace, different employees will have different
linguistic skills. As a result, the communication channels that span across the
organization would be affected by this.

Thus keeping this barrier in mind, different considerations have to be made for
different employees. Some of them are very proficient in a certain language and
others will be ok with these languages.
Psychological Barriers
There are various mental and psychological issues that may be barriers to
effective communication. Some people have stage fear, speech disorders,
phobia, depression etc. All of these conditions are very difficult to manage
sometimes and will most certainly limit the ease of communication.

Emotional Barriers
The emotional IQ of a person determines the ease and comfort with which they
can communicate. A person who is emotionally mature will be able to
communicate effectively. On the other hand, people who let their emotions take
over will face certain difficulties.

A perfect mixture of emotions and facts is necessary for effective

communication. Emotions like anger, frustration, humour, can blur the decision-
making capacities of a person and thus limit the effectiveness of their
communication.

Physical Barriers to Communication

They are the most obvious barriers to effective communication. These barriers
are mostly easily removable in principle at least. They include barriers like
noise, closed doors, faulty equipment used for communication, closed cabins,
etc. Sometimes, in a large office, the physical separation between various
employees combined with faulty equipment may result in severe barriers to
effective communication.

Cultural Barriers of Communication

As the world is getting more and more globalized, any large office may have
people from several parts of the world. Different cultures have a different
meaning for several basic values of society. Dressing, Religions or lack of them,
food, drinks, pets, and the general behaviour will change drastically from one
culture to another.

Hence it is a must that we must take these different cultures into account while
communication. This is what we call being culturally appropriate. In many
multinational companies, special courses are offered at the orientation stages
that let people know about other cultures and how to be courteous and tolerant
of others.
Organisational Structure Barriers
As we saw there are many methods of communication at an organizational
level. Each of these methods has its own problems and constraints that may
become barriers to effective communication. Most of these barriers arise
because of misinformation or lack of appropriate transparency available to the
employees.

Attitude Barriers
Certain people like to be left alone. They are the introverts or just people who
are not very social. Others like to be social or sometimes extra clingy! Both
these cases could become a barrier to communication. Some people have
attitude issues, like huge ego and inconsiderate behaviours.

UNIT – 5

Management-definition-types- functions of business management- Skills for an

Entrepreneur– qualities of an entrepreneur.

MANAGEMENT :

DEFINITION :

“ MANAGEMENT IS THE MULTIPURPOSE ORGAN THAT

MANAGES BUSINESS , MANAGES MANAGER , MANAGES WORKES
AND WORKS’’ - [Link]

MEANING :

Management is a art of getting things done with and through others .

FUNCTONS OF BUSINESS MANAGEMENT :

Five Functions of Management

1. Planning
Planning is future-oriented and determines an organization’s direction. It is a
rational and systematic way of making decisions today that will affect the future
of the company. It is a kind of organized foresight as well as corrective
hindsight. It involves predicting of the future as well as attempting to control the
events. It involves the ability to foresee the effects of current actions in the long
run in the future.
Peter Drucker has defined planning as follows:
“Planning is the continuous process of making present entrepreneurial
decisions systematically and with best possible knowledge of their futurity,
organizing systematically the efforts needed to carry out these decisions and
measuring the results of these decisions against the expectations through
organized and systematic feedback”.
An effective planning program incorporates the effect of both external as well
as internal factors. The external factors are shortages of resources; both capital
and material, general economic trend as far as interest rates and inflation are
concerned, dynamic technological advancements, increased governmental
regulation regarding community interests, unstable international political
environments, etc.
The internal factors that affect planning are limited growth opportunities due to
saturation requiring diversification, changing patterns of the workforce, more
complex organizational structures, decentralization, etc
2. Organizing
Organizing requires a formal structure of authority and the direction and flow of
such authority through which work subdivisions are defined, arranged and
coordinated so that each part
relates to the other part in a united and coherent manner so as to attain the
prescribed objectives.
According to Henry Fayol, “To organize a business is to provide it with
everything useful or its functioning i.e. raw material, tools, capital and
personnel’s”.
3. Staffing
Staffing is the function of hiring and retaining a suitable work-force for the
enterprise both at managerial as well as non-managerial levels. It involves the
process of recruiting, training, developing, compensating and evaluating
employees and maintaining this workforce with proper incentives and
motivations. Since the human element is the most vital factor in the process of
management, it is important to recruit the right personnel.
According to Kootz & O’Donnell, “Managerial function of staffing involves
manning the organization structure through the proper and effective
selection, appraisal & development of personnel to fill the roles designed in
the structure”.
This function is even more critically important since people differ in their
intelligence, knowledge, skills, experience, physical condition, age and
attitudes, and this complicates the function. Hence, management must
understand, in addition to the technical and operational competence, the
sociological and psychological structure of the workforce.
4. Directing
The directing function is concerned with leadership, communication,
motivation, and supervision so that the employees perform their activities in the
most efficient manner possible, in order to achieve the desired goals.
The leadership element involves issuing of instructions and guiding the
subordinates about procedures and methods.
The communication must be open both ways so that the information can be
passed on to the subordinates and the feedback received from them.
Motivation is very important since highly motivated people show excellent
performance with less direction from superiors.
Supervising subordinates would lead to continuous progress reports as well as
assure the superiors that the directions are being properly carried out.
5. Controlling
The function of control consists of those activities that are undertaken to ensure
that the events do not deviate from the pre-arranged plans. The activities consist
of establishing standards for work performance, measuring performance and
comparing it to these set standards and taking corrective actions as and when
needed, to correct any deviations.
According to Koontz & O’Donnell, “Controlling is the measurement &
correction of performance activities of subordinates in order to make sure
that the enterprise objectives and plans desired to obtain them as being
accomplished”.
SKILLS OF ENTREPRENEUR :
1. Curiosity
Successful entrepreneurs have a distinct personality trait that sets them apart
from other organizational leaders: a sense of curiosity. An entrepreneur's ability
to remain curious allows them to continuously seek new opportunities. Rather
than settling for what they think they know, entrepreneurs ask challenging
questions and explore different avenues.

This is validated in the online course Entrepreneurship Essentials, where

entrepreneurship is described as a “process of discovery." Without curiosity,
entrepreneurs can’t achieve their main objective: discovering new opportunities.

The drive they have to continuously ask questions and challenge the status quo
can lead them to valuable discoveries easily overlooked by other business
professionals.

2. Willingness to Experiment
Along with curiosity, entrepreneurs require an understanding of structured
experimentation, such as design thinking. With each new opportunity, an
entrepreneur must run tests to determine if it’s worthwhile to pursue.

For example, if you have an idea for a new product or service that fulfills an
underserved demand, you’ll have to ensure customers are willing to pay for it
and it meets their needs. To do so, you’ll need to conduct thorough market
research and run meaningful tests to validate your idea and determine its
potential.

3. Adaptability
Entrepreneurship is an iterative process, and new challenges and opportunities
present themselves at every turn. It’s nearly impossible to be prepared for every
scenario, but successful business leaders must be adaptable.

This is especially true for entrepreneurs who need to evaluate situations and
remain flexible to ensure their business keeps moving forward, no matter what
unexpected changes occur.

4. Decisiveness
To be successful, an entrepreneur has to make difficult decisions and stand by
them. As a leader, they’re responsible for guiding the trajectory of their
business, including every aspect from funding and strategy to resource
allocation.
Being decisive doesn’t always mean being correct. Entrepreneurs need the
confidence to make challenging decisions and see them through to the end. If
the outcome turns out to be less than favorable, the decision to take corrective
action is just as important.

Check out our video on the characteristics of successful entrepreneurs below,

and subscribe to our YouTube channel for more explainer content!

5. Self-Awareness
A great entrepreneur is aware of their strengths and weaknesses. Rather than
letting shortcomings hold them back, they build well-rounded teams that
complement their abilities.

In many cases, it’s the entrepreneurial team, rather than an individual, that
drives a business venture toward success. When starting your own business, it’s
critical to surround yourself with teammates who have complementary talents
and contribute to a common goal.

6. Risk Tolerance
Entrepreneurship is often associated with risk. While it’s true that launching a
venture requires an entrepreneur to take risks, they also need to take steps to
minimize it.

While many things can go wrong when launching a new venture, many things
can go right. According to Entrepreneurship Essentials, entrepreneurs who
actively manage the relationship between risk and reward position their
companies to “benefit from the upside.”

Successful entrepreneurs are comfortable with encountering some level of risk

to reap the rewards of their efforts; however, their risk tolerance is tightly
related to their efforts to mitigate it.

7. Comfort with Failure

In addition to risk-management and calculated decision-making,
entrepreneurship requires a certain level of comfort with failure.
“Of startups that have more than one employee, 70 percent survive at least two
years, half last at least five years, and a quarter last 15 years,” says Harvard
Business School Professor William Sahlman in Entrepreneurship Essentials.
“Even then, only a small fraction of the survivors get to be significant
employers.”

The reasons for failure are vast and encompass everything from a lack of
business scalability to low product-market fit. While many of these risks can be
avoided, some are inevitable.

Despite this, entrepreneurs must prepare themselves for, and be comfortable

with, failure. Rather than let fear hold them back, they maintain a positive
attitude to allow the possibility of success to propel them forward.

8. Persistence
While many successful entrepreneurs are comfortable with the possibility of
failing, it doesn’t mean they give up easily. Rather, they see failure as an
opportunity to learn and grow.

Throughout the entrepreneurial process, many hypotheses turn out to be wrong,

and some ventures fail altogether. Part of what makes an entrepreneur
successful is their willingness to learn from mistakes, ask questions, and persist
until they reach their goal.

9. Innovative Thinking
Innovation often goes hand-in-hand with entrepreneurship. While innovation in
business can be defined as an idea that’s both novel and useful, it doesn’t
always involve creating an entirely new product or service. Some of the most
successful startups have taken existing products or services and drastically
improved them to meet the changing needs of the market.

Although innovation doesn’t come naturally to every entrepreneur, it’s a type of

strategic mindset that can be cultivated. By developing your problem-solving
skills, you’ll be well-equipped to spot innovative opportunities and position
your venture for success.
10. Long-Term Focus
Most people associate entrepreneurship with starting a business. While the early
stages of launching a venture, such as securing funding, are critical to its
success, the process doesn’t end once the business is operational.

According to Entrepreneurship Essentials, “it’s easy to start a business, but hard

to grow a sustainable and substantial one. Some of the greatest opportunities in
history were discovered well after a venture launched.”

Entrepreneurship is a long-term endeavor, and entrepreneurs must focus on the

process from beginning to end to ensure long-term success.

QUALITES OF AN ENTREPRENEUR :

1. Disciplined
Successful entrepreneurs are focused on making their businesses work. They
eliminate all hindrances and distractions to their goals and outline tactics to
accomplish them. They focus on the day-to-day operations of their business
without disregarding their long-term goals.

Entrepreneurs have a plan in place and look to follow the plan. Sometimes this
means looking internally for help, or externally. One of the biggest hinderances
many entrepreneurs face is writing plans, proposals, etc. Finding a professional
business plan writing service can be essential to an entrepreneur and their
business. Ultimately, successful entrepreneurs are disciplined enough to take
steps every day toward the achievement of their goals and objectives.

2. Confident
One quality of a successful entrepreneur that people quickly notice is their
confidence. The founder of Twibi Digital Marketing Agency says entrepreneurs
don’t ask questions about whether they can succeed or whether they are worthy
of success. They are confident with the knowledge that they will make their
businesses succeed. They exude that confidence in everything they do.

3. Open Minded
Entrepreneurs realize that every event and situation is a business opportunity.
Ideas are constantly being generated about workflows and efficiency, people
skills and potential new businesses. They are constantly looking for new ways
to improve the current systems and processes. Entrepreneurs have an uncanny
ability to envision a product that will solve a problem, even though it may not
currently seem possible. They have the ability to look at everything around
them and focus it toward their goals.

4. Self-starter
Self-starters tend to be more successful because of their innate ability to manage
their time and control their performance. If something needs to be done,
entrepreneurs know they should start it themselves. They set project parameters
and are proactive, not waiting for someone to give them permission.
Entrepreneurs look for solutions, like Inc and Go, to make starting their
business less complicated and other processes that can reduce complications in
the workplace.

5. Competitive
Many companies are formed because an entrepreneur knows that they can do a
job better than another. Mizzou Football site is a great example of being
competitive with specific domain. They need to win at the sports they play and
need to win at the businesses that they create. An entrepreneur will highlight
their own company’s track record of success. To excel in business,
entrepreneurs have the ability to explore all of their options and remain
aggressive in pursuing their goals. They are willing to accept any challenges
that may come their way in order to excel even more.

6. Creative
A successful entrepreneur is creative and always looks at the big picture. Their
creativity and vision often lead to the invention and discovery of new things.
These traits require an entrepreneur to take their ideas and dreams into a
physical form. One facet of creativity is being able to make connections
between seemingly unrelated events or situations. Entrepreneurs often come up
with solutions which are the synthesis of other items. They will repurpose
products to market them to new industries. They must also be willing to step
outside their comfort zone in order for their ideas to come to fruition.
Sometimes these inventions result in new technologies and advancements that
can create breakthroughs in industries.

7. Determined
Entrepreneurs look at defeat as an opportunity for success. They are determined
to make all of their endeavors succeed, so they will try and try again until it
does. Successful entrepreneurs do not believe that something cannot be done.
Therefore, one quality of a successful entrepreneur is determination. They
possess the determination to persevere through all of the ups and downs of
business in order to achieve their goals and dreams.

8. Strong people skills

Entrepreneurs use strong communication skills to sell products and motivate
employees. Most successful entrepreneurs know how to motivate their
employees so the business grows overall. They are very good at highlighting the
benefits of any situation and coaching others to their success.

9. Strong work ethic

Highly-successful entrepreneurs are always willing to put in the necessary
effort. They are leaders that set a strong example to others, especially in the
sense of urgency and responsibility. The successful entrepreneur will often be
the first person to arrive at the office and the last one to leave.

Will Hatton, serial entrepreneur, and the man behind The Broke Backpacker
travel blog, attributes his biggest wins to his strong work ethic. “Most people
are lazy, give up after a few months, or never truly commit to the hard work. Be
patient with your journey, and have concrete goals to reach for – you’ll set
yourself far, far ahead of the pack.

They will come in on their days off to make sure that an outcome meets their
expectations. Their mind is constantly on their work, whether they are in or out
of the workplace.

10. Passion
One of the most important qualities of a successful entrepreneur is passion.
They genuinely love their work. They are willing to put in those extra hours to
make the business succeed because there is a joy their business gives which
goes beyond the money. The successful entrepreneur will always be reading and
researching ways to make the business better. They are willing to put in their
time and effort to learn new techniques or applications in order to stay ahead of
their competitors. They make sure that they are always learning new things
about their industry to keep abreast of new developments and be as efficient as
possible.

Successful entrepreneurs want to see what the view is like at the top of the
business mountain. Once they see it, they want to go further. They know how to
talk to their employees, and their businesses soar as a result.