NTA UGC NET/JRF Exam, Dec. 2020/June 2021 (Commerce) Shift-I

The generally accepted methods of accounting for price level changes are :
■ Current purchasing power method
Current purchasing power technique of accounting requires companies to keep their records and present the financial statements on conventional historical cost basis.
■ Current cost accounting Method
Current cost accounting is valuation approach, recognizes the changes in the price of individual due to the change in general price level. It includes the process of preparing and interpreting financial statement in such a way that relevant change in price is considered significantly. The assets are valued in current cost basis.

Airlines
■ In Airlines Industry price sensitivity is high

Note : In economics, price sensitivity is commonly measured using the price elasticity of demand, or the measure of the change in demand based on its price change.
■ Customers will often change the airline or even the destination for a small change in the price of the ticket. This means they are highly elastic.

Case study training method is most suitable for developing problem-solving skills.
■ The case study is a method which provides descriptive situations which stimulate trainees to make decisions. The purpose of the case method is to make trainees apply what they know, develop new ideas to manage a situation or solve a problem.

Key points :
■ Normal goods have a positive income elasticity of demand; as income rises, more goods are demanded of each price level.
■ Normal goods whose income elasticity of demand is between zero and one are typically referred to as necessity goods.
■ Inferior goods have a negative income elasticity of demand; as consumer’s income rises, they buy fewer inferior goods.
■ Luxurious goods are a type of normal goods associated with income elasticities of demand greater than one.

The conditions that a firm must meet to practice price discrimination are :
■ The firm must have some control over the price & the product
■ The markets in which products are sold must be separable
■ price elasticity of demand for the product must differ

Note : Price discrimination exists when a producer sells the exact same product to different customers at different prices.

Constituents of Integrated marketing are :
■ price
■ communications
■ products and services
■ channels

Note : According to integrated marketing concept all variables of marketing mix are dynamic in nature. If you change the product and the price, place and promotions will change. If you change one variable, the will change automatically.

Following losses are not deductible from business income :
■ Losses sustained before the business is commenced
■ Loss incurred in closing down the business
■ Loss incurred due to damage destruction etc. of capital assets
■ A loss which is not incidental to the carrying on the assessee
■ Loss due to the sale of securities and investments
■ Loss due to a capital loss and not the business loss
■ Loss caused by forfeiture of advance given for the purchase of capital assets.
■ Violation of the law is not a normal incident of trade and any expense incurred by way of penalty for infraction of laws is not allowable for deduction as business loss.
■ Trading loss due to loss of goods in transit is a normal course of business.

Factors that reduce price sensitivity are :
■ Buyers cannot store the product.
■ The product is used in conjunction with assets previously bought.
■ Part of the cost is borne by another party.
Note : price sensitivity refers to the degree or extent to which the consumer's buying behaviour varies with the change in the price of the product or services.
Influences on price sensitivity :
■ Consumers have lower price sensitive if a product or service is unique.
■ When expenses are shared consumers have less price sensitivity.
■ Consumers have less price sensitivity when the product or service is viewed as prestigious, exclusive, or possessing high quality.

Following are the components of the credit policy of a business firms :
■ Collection policy
It includes written guidelines that set the terms and conditions for making collections from Debtors.
■ Credit analysis :
It involves evaluating customers qualification or creditworthiness to which products have to sale on credit.
■ Terms of sale :
In this policy, firm is to decide condition like credit period, cash discount and discount period, Types of credit instruments for supplying of goods on credit.