The amount saved is set aside for any of the following five purposes:
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(a) for meeting future liability or loss;
(b) for strengthening the financial position of the business;
(c) for fulfilling some specific purpose;
(d) for redeeming a liability;
(e) for replacing a wasting asset.
(f) There are two ways in which the amount available for distribution as profit can be reduced:
(1) Indirectly, i.e.. out of gross profit or by debiting profit and loss account.
(2) or, directly. i.e., out of divisible profits by debiting profit and loss appropriation account.
Profit and loss account is debited only when the object is either to meet an anticipated or future contingent liability or loss or to replace a wasting amanda urry asset. In all other cases, profit and loss appropriation account is debited.
(3) The sum that is set aside mayor may not be invested; and if invested, it may be invested inside or outside the business. This depends upon the object that is sought to be served. It is usual to invest the money outside the business when the object is to redeem a liability or to replace a wasting asset. Money may be invested outside or inside the business at one's option, if the object is to strengthen the financial position of the business.
Meaning of the terms:
1. Fund. If amount equal to the reserve is invested in outside securities, the reserve will be termed as 'Reserve Fund'.
2. Reserve. If amount set aside from profit is not invested in outside securities, it is termed as 'Reserve' .
3. Provision. If amount set aside as charge against profits or surplus to meet:
(a) Depreciation for renewal of the asset.
(b) Any known liability, the amount of which cannot be ascertained with accuracy. Provisions are generally, created by debiting the profit and loss account. Provisions are also sometimes termed as 'Specific Reserves' by the accountants. Provisions are created even when there are no profits in the business. Provisions are not surplus. They are not available for distribution amongst the proprietors or shareholders. However, provision in excess of requirement is a surplus. When any provision becomes redundant, it should be credited back to profit and loss appropriation account.
It should be noted that sums set aside to meet known liabilities, the amount of which can be determined with accuracy do not fall within the definition of a provision and should, therefore, be called as accrued liabilities. For example, outstanding rent, interest, etc. are accrued liabilities and not provisions.
Types of Provisions (Specific Reserves)
As already stated, the provisions are of following types:
(i) Provision for doubtful debts ;
(ii) Reserve for discount on debtors;
(iii) Reserve for discount on creditors;
(iv) Reserve for repairs and renewals.
General Reserve
Reserves are retained profits. They are part of the surplus. They are the amount kept aside from profits. There can be no reserves if there are no profits. Reserves are undistributed profits. They are appropriations of profits. While provisions are a pre-profit matters, reserves are a post-profit matters. One cannot talk of creating reserves, without first finding out profits. It is a good business policy to create reserves. They strengthen' the' financial position of the business. Reserves are created for different purposes. They may be for expansion of business; they may be for equalization of dividends or they may be for redemption of debentures or loans. Again, reserves may be created out of capital profits or out of revenue profits. The reserves created out of capital profits are called capital reserves, whereas, others are called revenue reserves.
Capital Reserves
Capital reserves are created out of capital profits. Capital profits are not regular trading profits. They are profits on rare transactions. Capital reserves are generally not available for distribution as dividend. They are set aside to strengthen the financial position of the business or to meet capital losses. The following are the examples of capital profits :
(i) Profit on sale of fixed' assets.
(ii) Profit prior to incorporation.
(iii) Profit on redemption of debentures.
(iv) Premium on issue of shares or debentures.
(v) Profit on forfeiture of shares.
(vii) Profit on acquisition of business.
(viii) Profit which have not been earned in the regular course of business.
Capital reserves can be utilized in the following ways:
(a) Issue of bonus shares.
(b) Writing off goodwill.
(c) Writing off preliminary expenses.
(d) Writing off shares/debentures issue expenses.
(e) Writing off losses prior to incorporation.
Revenue Reserve
Revenue reserves are created out of revenue profits. They are available for distribution as dividend. Revenue reserves are of two types-those immediately so available for distribution and those not immediately so available.
(a) General reserve
This reserve is created by setting aside revenue profits. The object is to strengthen the general financial position of the business. It is not for a specific purpose. It is a free reserve. It acts as a safety cushion against all unforeseen contingencies in the future. It is immediately available for distribution as dividend profit.
(b) Specific reserve
This too is created by setting aside revenue profits. But it is for a specific purpose. This is not immediately available for distribution. For example, reserve created for redemption of debentures. During the period of liability, this reserve is not available for distribution. It becomes a general reserve on the redemption of debentures. Similarly, a reserve may be created for
equalization of dividend.
Sales Manager; Reporting to the vice president of Marketing.
Job Objective
The primary objective is to get maximum volume of sales through effective development and execution of sales programs and sales policies for the products sold by the division.
Responsibilities and Duties.
The sales manager is concerned with following job objectives:-
Sales Program.
The sales manager designs detailed sales program to improve the competitive positions reduce selling and other distribution expenses and achieve established sales goals.
The sales manager reviews and approves sales policies, sales static's and pricing policies for all the products to ensure profitability.
Organization
The sales manager prepares an effective plan for the organization in which all the activities are carried out for the members of the sales organization which makes it easy for the sales members to peruse and get the results on time.
The sales manager provides leadership both to immediate subordinates and all levels of sales organization in establishing a sound basis for each individual's self development and in making certain that rewards are in line with the responsibilities and performance.
Sales force management.
The sales manager discovers promising sources for the recruitment of new sales personnel and sets standards for the selection of the most promising new personnel from among recruits.
The sale manager provides training to new personnel so as to achieve high level performance in the shortest period of time and prepares them for possible future promotions.
The sales manager ensures the sales force are properly motivated, so as to achieve optimum sales performance.
The sale manager establishes a system of supervision that controls waste and inefficiency and points sales efforts into the most profitable channels.
Relations
The sales manager develops effective working relations with other departmental heads and the general manager so that sales developments can be translated into courses of action.
The sales manager develops relations with the key accounts that provide maximum long term participation in their available business.
The sales manager develops and maintains effective working relation ships with sales ,trainings and other key personnel in the employ of customers in order to ensure that the cooperation is beneficial to both the parties.
Communication
The sale manager keeps the higher heads of their organization informed about the sales results and future plans of action and operation.
The sale persons keeps a track of overall departmental sales activities,objectives,results, and problems and keeps sales manager informed about the same.
Control
The sales manager keeps lesion with production manager so that the rate of production is geared as closely as possible to actual sales needs.
The sales manager reviews and approves sales and expense budgets and evaluates periodically the performance of all sales activities in relation to budget and sales goals and corrects the same as and when required.
The sales manager 's performance is considered satisfactory when the
- Profit contribution of the sales department is in line with the plan.
- The details of the sales plan are in writing and acceptable to marketing management.
- The turnover is satisfactory.
Mohd. Younus Rathore