Industrial Economics and Management Lab Manual

Stani Memorial College of Engineering And Technology, Phagi
Electrical Engineering
7EE9 Industrial Economics & Management Lab Manual
1
LAB MANUAL
Subject Code: 7EE9
INDUSTRIAL ECONOMICS & MANAGEMENT LAB
(IV B. Tech VII Semester EE)
Established in year 2000
DEPARTMENT OF ELECTRICAL ENGINEERING
STANI MEMORIAL COLLEGE OF ENGINEERING & TECHNOLOGY,
PHAGI, JAIPUR – 303005
Website: www.smcet.in

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Syllabus
7EE9 INDUSTRIAL ECONOMICS & MANAGEMENT
1 Money Banking and Trade: Functions of money, supply & demand for money, money price level
& inflation, black money, meaning, magnitude & consequences. Functions of Commercial banks,
banking system in India, shortcomings and improvements.. Function of RBI, monetary policy-
making, objectives and features. Sources of public revenue, principles of taxation, direct and indirect
taxes, Theory of international trade, balance of trade and payment, Foreign exchange control,
devaluation New economic policy: Liberalization, extending privatization, globalization.
2 Management Principles: Management functions, responsibilities of management to society,
development of management thought. Nature of planning, decision making, management by
objectives, Line and staff authority relationships, decentralization and delegation of authority, span
of management.
3 Production Management: Production planning and control, inventory control, quality control and
Total quality management. Tools of project management - CPM, PERT, project information
systems. Marketing functions, management of sales and advertising marketing research.
4 Human Resource Management: Function, application of industrial psychology for selection,
training and recruitment. Communication process, media channels and barriers to effective
communication, theories of motivation, leadership.
5 Finance and Account Management: Engineering Economics: Investment decision, present worth,
annual worth and rate of return methods. Payback time. Need for good cost accounting system, cost
control techniques of financial control, financial statements, financial ratios, breakeven analysis,
budgeting and budgetary control.

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EXPERIMENT NO. 1
Aim: - To study about money banking and international trade.
Apparatus required:-
Theory:-
Money: anything expressed in terms of a unit of account, with a fixed price in terms of that unit of
account, that is widely accepted in exchange for goods and services.
The functions of money:
 Medium of exchange
 Store of value (Imperfect store of value due to inflation.)
 Standard of account
 Money and Banking
What functions as money–
In the U.S.: Currency and coins in circulation plus transaction deposits held at commercial banks.
Definitions of the money supply:
•M1 = currency in circ. + transaction deposits (demand dep.)
•M2 = M1 + other highly liquid assets
The commercial banking system creates money by opening up transactions accounts (checking
accounts or demand deposits) in the process of making loans. Individual banks can only lend out
excess reserves. This process results in demand deposit expansion in the system.
Money and Banking
 Commercial Bank Reserves
1. Legal reserves: Currency in bank vaults plus bank deposits at the regional Federal
Reserve Bank (the type of assets).
2. Required reserves: Total amount of legal reserves that a bank must hold
depending on the amount of customer deposits held by the bank.
3. Excess reserves: Legal reserves -Required reserves–

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Reserve requirement ratio:
Minimum Legal Reserve / Transactions Deposits
ratio required by the banking authorities (e.g. Federal Reserve Bank or state banking authority).
•The commercial banking system money (transactions deposit) multiplier:
transactions deposits = legal reserves
times1/ res. req. ratio–
Each bank can only lend out its excess reserves, but when each bank does that transactions deposits
multiply by the money multiplier.
•Legal reserves must remain in the commercial banking system, and all banks must find borrowers
of excess res.
How does monetary policy of the FED affect real economic activity (real GDP)?
By attempting to control the legal reserves of the commercial banking system.
Monetary policy tools of the FED:
1) Changing the reserve requirement ratio
2) Changing the discount rate
3) Open market purchase and sale of government securities
International trade:
(a)India’s total merchandise trade increase over two fold from US $312 bn in FY 2007 to US $792
bn inFY 2013.
(b)Decline in exports during 2012/201 3due to declineing lobal import demand.
(c)Trade-GDP ratio increased from 32.7% in FY 2007 to 43% in FY 2013.
(c)Exports-GDP ratio increased from13.4% in FY 2007 to 16.3% in FY 2013.
(d)Share of India in world merchandise export–1.6% in2012 Rank–19(up from26th in 2007).
(e) FDI in flow into India declined to US$36.9 bn in 2012-13,as compared toUS $46.6 bn in2011 -
12,mainly due to the fall in inflows from major developed economics.
(f)FDI outflow from India also declined to US $26.9 bn in2012-13,against US $30.9 bn in2011-
12,mainly due to fall in out flows to Mauritius and Singapore.
Circuit Diagram:-

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Precaution :-
Procedure:-
Observation Table:-
Calculations:-
Result:-We have successfully studied about money banking and trade.
References:-
1. http://faculty.mercer.edu/jackson_r/Ownership/chap02.pdf
2. http://en.wikiversity.org/wiki/Topic:Master_of_Business_Administration
Viva voice Question:-
Q. 1 What is Reserve requirement ratio?
Q. 2 What is International trade?

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EXPERIMENT NO. 2
Aim:- Study about Management Principles.
Apparatus Required:-
Theory:-
The Principles of Management:-
Management principles are guidelines for the decisions and actions of managers. They were derived
through observation and analysis of events faced in actual practice.
The Principles of Management are the essential, underlying factors that form the foundations of
successful management. According to [Henri Fayol] (1841-1925) in his book General and Industrial
Management (1916), there are fourteen 'principles of management'. These can be used to initiate and
aid the processes of change, organization, decision making, skill management and the overall view
of the management function.
Division of Work:-
The specialization of the workforce according to the skills of a person , creating specific personal
and professional development within the labour force and therefore increasing productivity; leads to
specialization which increases the efficiency of labour. By separating a small part of work, the
workers speed and accuracy in its performance increases. This principle is applicable to both
technical as well as managerial work.
Authority and Responsibility:-
The issue of commands followed by responsibility for their consequences. Authority means the right
of a superior to give enhance order to his subordinates; responsibility means obligation for
performance. This principle suggests that there must be parity between authority and responsibility.
They are co-existent and go together, and are two sides of the same coin.

7
Discipline:-
Discipline refers to obedience, proper conduct in relation to others, respect of authority, etc. It is
essential for the smooth functioning of all organizations.
Unity of Command:-
This principle states that every subordinate should receive orders and be accountable to one and only
one superior. If an employee receives orders from more than one superior, it is likely to create
confusion and conflict.Unity of Command also makes it easier to fix responsibility for mistakes.
Unity of Direction:-
All those working in the same line of activity must understand and pursue the same objectives. All
related activities should be put under one group, there should be one plan of action for them, and
they should be under the control of one manager.
It seeks to ensure unity of action, focusing of efforts and coordination of strength.
Subordination of Individual Interest:-
The management must put aside personal considerations and put company objectives first. Therefore
the interests of goals of the organization must prevail over the personal interests of individuals.
Remuneration:-
Workers must be paid sufficiently as this is a chief motivation of employees and therefore greatly
influences productivity. The quantum and methods of remuneration payable should be fair,
reasonable and rewarding of effort.
The Degree of Centralization:-
The amount of power wielded with the central management depends on company size.
Centralization implies the concentration of decision making authority at the top management.
Sharing of authority with lower levels is called decentralization. The organization should strive to
achieve a proper balance.

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Scalar Chain:-
Scalar Chain refers to the chain of superiors ranging from top management to the lowest rank. The
principle suggests that there should be a clear line of authority from top to bottom linking all
managers at all levels. It is considered a chain of command. It involves a concept called a "gang
plank" using which a subordinate may contact a superior or his superior in case of an
emergency,defying the hierarchy of control.However the immediate superiors must be informed
about the matter
Order:-
Social order ensures the fluid operation of a company through authoritative procedure. Material
order ensures safety and efficiency in the workplace. Order should be acceptable and under the rules
of the company
Equity:-
Employees must be treated kindly, and justice must be enacted to ensure a just workplace. Managers
should be fair and impartial when dealing with employees.
Stability of Tenure of Personnel:-
The period of service should not be too short and employees should not be moved from positions
frequently. An employee cannot render useful service if he is removed before he becomes
accustomed to the work assigned to him.
Initiative:-
Using the initiative of employees can add strength and new ideas to an organization. Initiative on the
part of employees is a source of strength for the organization because it provides new and better
ideas. Employees are likely to take greater interest in the functioning of the organization.

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Circuit Diagram:-
Precaution:-
Procedure:-
Observation Table:-
Calculations:-
Results:- We have successfully studied about Principles of Management.
References:-
1. http://en.wikiversity.org/wiki/Principles_of_Management
2. http://www.12manage.com/methods_fayol_14_principles_of_management.html
Viva- Voice:-
Q.1 What is Scalar Chain?
Q. 2 What is The Degree of Centralization?

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EXPERIMENT NO. 3
Aim:- To study about production management.
Theory:-
Production/operations management is the process, which combines and transforms various resources
used in the production/operations subsystem of the organization into value added product/services in
a controlled manner as per the policies of the organization. Therefore, it is that part of an
organization, which is concerned with the transformation of a range of inputs into the required
(products/services) having the requisite quality level.
The set of interrelated management activities, which are involved in manufacturing certain products,
is called as production management. If the same concept is extended to services management, then
the corresponding set of management activities is called as operations management.
Concept of Production
Production function is that part of an organization, which is concerned with the transformation of a
range of inputs into the required outputs (products) having the requisite quality level.
Production is defined as “the step-by-step conversion of one form of material into another form
through chemical or mechanical process to create or enhance the utility of the product to the user.”
Thus production is a value addition process. At each stage of processing, there will be value
addition.
Edwood Buffa defines production as ‘a process by which goods and services are created’. Some
examples of production are: manufacturing custom-made products like, boilers with a specific
capacity, constructing flats, some structural fabrication works for selected customers, etc., and
manufacturing standardized products like, car, bus, motor cycle, radio, television, etc.

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Production System
The production system of an organization is that part, which produces products of an organization. It
is that activity whereby resources, flowing within a defined system, are combined and transformed in
a controlled manner to add value in accordance with the policies communicated by management.
The production system has the following characteristics:
1. Production is an organized activity, so every production system has an objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control and improve system
performance.
Production Management
Production management is a process of planning, organizing, directing and controlling the activities
of the production function. It combines and transforms various resources used in the production
subsystem of the organization into value added product in a controlled manner as per the policies of
the organization.
E.S. Buffa defines production management as, “Production management deals with decision making
related to production processes so that the resulting goods or services are produced according to
specifications, in the amount and by the schedule demanded and out of minimum cost.”
Objectives of Production Management
The objective of the production management is ‘to produce goods services of right quality and
quantity at the right time and right manufacturing cost’.
1. Right Quality:- The quality of product is established based upon the customers
needs. The right quality is not necessarily best quality. It is determined by the cost
of the product and the technical characteristics as suited to the specific
requirements.
2. Right Quantity:- The manufacturing organization should produce the products in
right number. If they are produced in excess of demand the capital will block up

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in the form of inventory and if the quantity is produced in short of demand, leads
to shortage of products.
3. Right Time:- Timeliness of delivery is one of the important parameter to judge
the effectiveness of production department. So, the production department has to
make the optimal utilization of input resources to achieve its objective.
4. Right Manufacturing Cost:- Manufacturing costs are established before the
product is actually manufactured. Hence, all attempts should be made to produce
the products at pre-established cost, so as to reduce the variation between actual
and the standard (pre-established) cost.
Operations Management
Managing operations can be enclosed in a frame of general management function. Operation
managers are concerned with planning, organizing, and controlling the activities which affect human
behavior through models.
Planning:-
Activities that establishes a course of action and guide future decision-making is planning. The
operations manager defines the objectives for the operations subsystem of the organization, and the
policies, and procedures for achieving the objectives. This stage includes clarifying the role and
focus of operations in the organization’s overall strategy. It also involves product planning, facility
designing and using the conversion process.
Organizing:-
Activities that establishes a structure of tasks and authority. Operation managers establish a structure
of roles and the flow of information within the operations subsystem. They determine the activities
required to achieve the goals and assign authority and responsibility for carrying them out.
Controlling:-
Activities that assure the actual performance in accordance with planned performance. To ensure
that the plans for the operations subsystems are accomplished, the operations manager must exercise

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control by measuring actual outputs and comparing them to planned operations management.
Controlling costs, quality, and schedules are the important functions here.
Behavior:-
Operation managers are concerned with how their efforts to plan, organize, and control affect human
behavior. They also want to know how the behavior of subordinates can affect
management’splanning, organizing, and controlling actions. Their interest lies in decision-making
behavior.
Models:-
As operation managers plan, organise, and control the conversion process, they encounter many
problems and must make many decisions. They can simplify their difficulties using models like
aggregate planning models for examining how best to use existing capacity in short-term, break even
analysis to identify break even volumes, linear programming and compute simulation for capacity
utilisation, decision tree analysis for long-term capacity problem of facility expansion, simple
median model for determining best locations of facilities etc
Circuit Diagram:-
Precaution:-
Procedure:-
Observation Table:-

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Calculations:-
Results:- We have successfully studied about production management.
References:-
1. http://en.wikiversity.org/wiki/Topic:Master_of_Business_Administration
2. http://www.12manage.com/methods_fayol_14_principles_of_management.html.
Viva- Voice:-
Q.1 What is operation management?
Q.2 What is concept of production?

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EXPERIMENT NO. 4
Aim:- To study about human resource management.
Theory:-
Human beings are social beings and hardly ever live and work in isolation. We always plan, develop
and manage our relations both consciously and unconsciously. The relations are the outcome of our
actions and depend to a great extent upon our ability to manage our actions. From childhood each
and every individual acquire knowledge and experience on understanding others and how to behave
in each and every situations in life. Later we carry forward this learning and understanding in
carrying and managing relations at our workplace. The whole context of Human Resource
Management revolves around this core matter of managing relations at work place.
Definitions of HRM:-
Human resources management (HRM) is a management function concerned with hiring, motivating
and maintaining people in an organization. It focuses on people in organizations. Human resource
management is designing management systems to ensure that human talent is used effectively and
efficiently to accomplish organizational goals.
HRM is the personnel function which is concerned with procurement, development, compensation,
integration and maintenance of the personnel of an organization for the purpose of contributing
towards the accomplishments of the organization’s objectives. Therefore, personnel management is
the planning, organizing, directing, and controlling of the performance of those operative functions.
In short Human Resource Management (HRM) can be defined as the art of procuring, developing
and maintaining competent workforce to achieve the goals of an organization in an effective and
efficient manner.
Nature of HRM:-
HRM is a management function that helps manager’s to recruit, select, train and develop members
for an organization. HRM is concerned with people’s dimension in organizations.

16
The following constitute the core of HRM
1. HRM Involves the Application of Management Functions and Principles. The functions and
principles are applied to acquiring, developing, maintaining and providing remuneration to
employees in organization.
2. Decision Relating to Employees must be Integrated. Decisions on different aspects of employees
must be consistent with other human resource (HR) decisions.
3. Decisions Made Influence the Effectiveness of an Organization. Effectiveness of an organization
will result in betterment of services to customers in the form of high quality products supplied at
reasonable costs.
4. HRM Functions are not Confined to Business Establishments Only but applicable to nonbusiness
organizations such as education, health care, recreation and like.
HRM refers to a set of programmes, functions and activities designed and carried out in order to
maximize both employee as well as organizational effectiveness
Scope of HRM:-
The scope of HRM is indeed vast. All major activities in the working life of a worker – from the
time of his or her entry into an organization until he or she leaves the organizations comes under the
purview of HRM.
The major HRM activities include HR planning, job analysis, job design, employee hiring, employee
and executive remuneration, employee motivation, employee maintenance, industrial relations and
prospects of HRM.
The scope of Human Resources Management extends to: All the decisions, strategies, factors,
principles, operations, practices, functions, activities and methods related to the management of
people as employees in any type of organization.
All the dimensions related to people in their employment relationships, and all the dynamics that
flow from it.

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Functions of HRM:-
Human Resources management has an important role to play in equipping organizations to meet the
challenges of an expanding and increasingly competitive sector. Increase in staff numbers,
contractual diversification and changes in demographic profile which compel the HR managers to
reconfigure the role and significance of human resources management.
The functions can be grouped as follows: Strategic HR Management: As a part of maintaining
organizational competitiveness, strategic planning for HR effectiveness can be increased through the
use of HR metrics and HR technology. Human resource planning (HRP) function determine the
number and type of employees needed to accomplish organizational goals.
Equal Employment Opportunity: Compliance with equal employment opportunity (EEO) laws and
regulations affects all other HR activities.
Staffing: The aim of staffing is to provide a sufficient supply of qualified individuals to fill jobs in
an organization. Job analysis, recruitment and selection are the main functions under staffing.
Workers job design and job analysis laid the foundation for staffing by identifying what diverse.
Talent Management and Development: Beginning with the orientation of new employees,talent
management and development includes different types of training. Orientation is the first step
towards helping a new employee to adjust himself to the new job and the employer
Total Rewards: Compensation in the form of pay, incentives and benefits are the rewards given to
the employees for performing organizational work. Compensation management is the method for
determining how much employees should be paid for performing certain jobs.
Risk Management and Worker Protection: HRM addresses various workplace risks to ensure
protection of workers by meeting legal requirements and being more responsive to concerns for
workplace health and safety along with disaster and recovery planning.
Employee and Labor Relations: The relationship between managers and their employees must be
handled legally and effectively. Employer and employee rights must be addressed. It is important to
develop, communicate, and update HR policies and procedures so that managers and employees
alike know what is expected.
Role of HRM:-
 To develop a thorough knowledge of corporate culture, plans and policies.
 To act as an internal change agent and consultant.
 To initiate change and act as an expert and facilitator.
 To actively involve in company’s strategy formulation.

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 To keep communication line open between the HRD function and individuals and groups
both within and outside the organization.
 To identify and evolve HRD strategies in consonance with overall business strategy.
 To facilitate the development of various organizational teams and their working relationship
with other teams and individuals.
 To try and relate people and work so that the organization objectives are achieved efficiently
and effectively.
 To diagnose problems and determine appropriate solution particularly in the human resource
areas.
 To provide co-ordination and support services for the delivery of HRD programmes and
services.
 To evaluate the impact of an HRD intervention or to conduct research so as to identify,
develop or test how HRD In general has improved individual and organizational
performance.
Circuit Diagram:-
Precaution:-
Procedure:-
Observation Table:-
Result:- We have successfully studied about human resource management.
References:-

19
1. http://www.12manage.com/methods_fayol_14_hrm.html
Viva voice Question:-
Q.1 What is function of HRM?
Q. 2 What is role of HRM?
Q. 3 What is responsibilities of HRM?

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EXPERIMENT NO. 5
Aim:- To study about finance and account management.
Theory:-
Financial accountancy is the field of accountancy concerned with the preparation of financial
statements for decision makers, such as stockholders, suppliers, banks, employees, government
agencies, owners and other stakeholders. Financial capital maintenance can be measured in either
nominal monetary units or units of constant purchasing power. The central need for financial
accounting is to reduce the various principal-agent problems, by measuring and monitoring the
agents' performance and thereafter reporting the results to interested users.
Role of Financial Accounting:-
1. Financial accounting generates some key documents, which includes profit and loss account,
patterning the method of business traded for a specific period and the balance sheet that
provides a statement, showing mode of trade in business for a specific period.
2. It records financial transactions showing both the inflows and outflows of money from sales,
wages etc.
3. Financial accounting empowers the managers and aids them in managing more efficiently by
preparing standard financial information, which includes monthly management report tracing
the costs and profits against budgets, sales and investigations of the cost.
Principles of Financial Accounting:-
Financial accounting is based on several principles known as Generally Accepted Accounting
Principles (GAAP) (Williamson 2007). These include the business entity principle, the objectivity
principle, the cost principle and the going-concern principle.

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1. Business entity principle: Every business requires to be accounted for separately by the
proprietor. Personal and business-related dealings should not be mixed.
2. Objectivity principle: The information contained in financial statements should be treated
objectively and not shadowed by personal opinion.
3. Cost principle: The information contained in financial statements requires it to be based on
costs incurred in business transactions.
4. Going-concern principle: The business will continue operating and will not close but will
realise assets and discharge liabilities in the normal course of operations
Importance of Financial Accounting:-
1. It provides legal information to stakeholders such as financial accounts in the form of
trading, profit and loss account and balance sheet.
2. It shows the mode of investment for shareholders.
3. It provides business trade credit for suppliers.
4. It notifies the risks of loan in business for banks and lenders
Benefits of Financial Accounting:-
1. Maintaining systematic records: It is a primary function of accounting to keep a proper and
chronological record of transactions and events, which provides a base for further processing
and proof for checking and verification purposes
2. Meeting legal requirements: Accounting helps to comply with the various legal requirements.
It is mandatory for joint stock companies to prepare and present their.
3. Protecting and safeguarding business assets: Records serve a dual purpose as evidence in the
event of any dispute regarding ownership title of any property or assets of the business.
4. Facilitates rational decision-making: Accounting is the key to success for any decision
making process. Managerial decisions based on facts and figures take the organisation to
heights of success.

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5. Communicating and reporting: The individual events and transactions recorded and
processed are given a concrete form to convey information to others.
Accounting Principles:-
Financial accounting is information that must be processed and reported objectively. Third parties,
who must rely on such information, have a right to be assured that the data is free from bias and
inconsistency, whether deliberate or not. For this reason, financial accounting relies on certain
standards or guides that are called 'Generally Accepted Accounting Principles'.
 Principle of regularity: Regularity can be defined as conformity to enforced rules and laws.
 Principle of consistency: This principle states that when a business has fixed a specific
method for the accounting treatment of an item, it will enter all similar items that follow, in
exactly the same way.
 Principle of sincerity: According to this principle, the accounting unit should reflect in good
faith the reality of the company's financial status.
 Principle of the permanence of methods: This principle aims at maintaining the coherence
and comparison of the financial information published by the company.
 Principle of non-compensation: One should show the full details of the financial
information and not seek to compensate a debt with an asset, revenue with an expense etc.
 Principle of prudence: This principle aims at showing the reality 'as is': one should not try to
make things look rosier than they are. Typically, revenue should be recorded only when it is
certain and a provision should be entered for an expense, which is probable.
 Principle of continuity: When stating financial information, one assumes that business will
not be interrupted. This principle mitigates the principle of prudence: assets do not have to
be accounted at their disposable value, but it is accepted that they are at their historical
value.
 Principle of periodicity: Each accounting entry should be allocated to a given period and
split accordingly if it covers several periods. If a client pre-pays a subscription (or lease,
etc.), the given revenue should be split to the entire time-span and not accounted for entirely
on the date of the transaction.

23
 Principle of full disclosure/materiality: All information and values pertaining to the financial
position of a business must be disclosed in the records.
Accounting Standards in India and International Accounting Standards:-
Accounting standards are being established both at national and international levels. However, the
diversity of accounting standards among the nations of the world has been a problem for the
globalisation of the business environment. In India, the Accounting Standards Board (ASB) was
constituted by the Institute of Chartered Accountants of India (ICAI) on 21st April 1977, which
performs the function of formulating accounting standards.
The Statements on accounting standards are issued by the Institute of Chartered Accountants of India
(ICAI) to establish standards that have to be complied with, to ensure that financial statements are
prepared in accordance with a commonly accepted accounting standard in India (India GAAP).
Accurate and reliable financial information is the lifeline of commerce and investing. Presently,
there are two sets of accounting standards that are accepted for international use namely, the U.S.,
Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting
Standards (IFRS) issued by the London-based International Accounting Standards Board (IASB).
Circuit Diagram:-
Precaution:-
Procedure:-
Observation Table:-

24
Calculations:-
Results:- We have successfully studied about finance and account management.
References:-
1. http://en.wikiversity.org/wiki/Capital_Markets
Viva- Voice:-
Q. 1 What is Accounting Principles?
Q. 2 What is Importance of Financial Accounting?
Q. 3 What is Accounting Standards in India?

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