How to Make More Money From Your Blog

 

Blogging Is a Multi-Million-Dollar Sector Now.

Micro-blogging through mobile phones are presently representing the most rapid means of communication to various people.

Learn How to Make Money From Your Blog

There are many tricks people use to make money from their blogs. Google defeats them all by introducing new policies. Don't think that you can last for long by using tricks. At the same time remember that traffic to your blog can produce you a lot of money. First of all, you need to know how to market your blogs. By joining blogging communities and make friendship with other bloggers can increase the traffic.

Subscribe Blogs: Another way of increasing the traffic is to subscribe to blogs of other bloggers. When you subscribe to other bloggers, they are obliged to subscribe to yours. By networking with conventional bloggers, you can increase the traffic of your blog.

Updating your blogs frequently can increase traffic. No one will visit an inactive blog. So it is significant to update your blogs with new blog entries.

Make friendship with other bloggers. Many experienced bloggers can counsel you on the path of blogging. They may have made many trials and errors. You don't have to do the same to learn the valuable lessons of blogging. Nothing but seek experienced bloggers about their experience and tips. They can convey to you a lot of information about blogging.

Don't Mistake Blogging for work. It is an act of sharing information and knowledge. You may share about yourself and your life stories which are of some interest to your readers. Many are attracted to life stories like how you deal with your friends and relatives, how you overcome your problems, and difficulties, etc. You may also share the interesting moments of life like laughable incidents, and jokes, etc. There are many reasons for youngsters attracted to blogging. Money, fame, socializing with new people are some of the attractive factors which force youngsters to start blogging.

Diary Writing: Old fashion of writing a diary daily is changed to blogging nowadays as you cannot expect someone to come and read your diary. Youngsters gave new meaning to Diary writing by transforming it into blogging. They don't care about money. Over a long period, they may start making money from the increased traffic. For some, writing is a passion. Spare some moments of your day for recording the things that happened during the day. It would be a new way of writing a diary.

Money: I find that Steve Pavlina, a notable blogger received a lot of money from blogging than his business. Ultimately he abandoned his game developing industry. You may google his name and read more about him. That is another factor that persuaded me to start blogging. He used to discuss odd subjects. His life stories are extremely interesting and many people following him. You can find the statistics in his blog.

Fame: Another factor of attraction is fame. Steve has many fans and he is acclaimed. Who does not want fame and prestige in the society? By blogging you can become famous. After reading the blogs of Steve, I was touched by his popularity and fame. That helped me to start my journey of blogging. His blog is the story of the changed life of a youngster.

Escape from addiction: Blogging habits or writing habits can help you to change some negative habits of your life as it changed me from wasting my time and energy. It helped me to escape from evil thoughts that were constantly following me. I was used to think a lot of matters in my brain and get tensed by it. Earlier I have been addicted to thinking evil about the people around me. When I started writing, when I focused my attention on exchanging new information with my readers, it helped me from the old bad habit of entertaining evil thoughts. I remember that someone somewhere said, "A bad habit can only be replaced with a pleasant habit."That means for changing a bad habit. You need to focus on a new good habit.

Sharpen your skills: When you start to blog, you will understand the need of sharpening your thoughts, language, and writing skills. You read more books, search more blogs to get new ideas and themes. Ultimately it will help you sharpen your skills and ability to write. By doing your research about the subject, you are writing about, you acquire great knowledge in your respective area of specialization and will become a pioneer in the area of your interest. Also, you'll get great insights from the comments written by your readers. Ultimately the knowledge is another factor that prompts you to write more.

Work from Home: Many loggers find it easy to work-from-home and be your own boss. There is no obligation for you to commence your work at 9 am and work through till 6 pm. You can start your work as early or late as possible and continue as per your convenience. There is no boss or servant relationship in blogging. You will be the boss of your work while generating enough money for sustaining in this world. You can rest as much as you want. You may go for a vacation of a month or two. Even though you are away, your blogs will be generating money for you. Isn't it amazing?

Stop googling phrases like "how to make money online", there is a possibility of you to end up in losing more money online. It is not as easy as many of us think. It takes time and effort. Get rich slow. But do it steadily. Over a period of time, you will be making money online. Good content and value for the reading time are the keys to success and scale in traffic.

The best policy is to stop focusing on "making more money." Instead, put your time and energy into creating and delivering real value. Creating means making use of your knowledge and creativity for the benefit of others. Once you create, you need to deliver it to the potential readers who in turn give you the value for the content. Undoubtedly money and fame shall follow you all the days of your life if you put your energy and focus into creating and delivering real value to the work you do.

How to Make Money From Your Blog?

How to make money from your blog?

Making money from a blog? It could be an unexpected surprise. (If you are not familiar with the blog and making money using your blog). Regardless, a lot of people are making money from their blog posts. Clever people maintain their own website/blog site to keep with them, all the income they generate from their work. (for that you have to invest and take the risk) If you are not in the full-time business of blogging, you can start with HubPages or Blogger.com or some other sites which provide you a platform to blog and make money. There are lots of ways to make money online. The best and first preference is Google AdSense.

I don't know what level of expertise you possess in blogging. My suggestion is that, if you are not an expert in blogging, just start to do that with independent sites like bloggers or HubPages and you will get a remarkably good experience in a very few days/months/years (it depends on your desire to learn/win). My suggestion is that does not afraid of the mistakes you make. Just be afraid of the opportunity you miss every day you pass by, not making money and not utilizing the opportunity to acquire new things. Let me repeat it, Be fearful of the missing opportunity and time. As the days go by, you are missing your opportunity. Do whatever you can undertake to publish an article in a day. Hubpages is an excellent site where you can ask questions in the forum about your problems. You will get an instant answer in the forum. I also suggest you visit old forum posts to get to know more about hubbing.

There are pitfalls and setbacks in the way, but you have to push yourself ahead to succeed in the race. As the child starts to walk, it falls many times. But the child never gives up his wish to walk. He tries again and again. In the end, he/she will succeed. You may confront an identical situation in your startup. Don't lose heart. Just try to walk. Do it every day. Do it at every opportunity.

Learning cycling is a challenging task. But once you learned it, it will be effortless for you to do it. You will forget very soon the exhausting days when you started to learn. Who cares about your writing? Very few will be recognizing you. Out of the very few will be concerned about your writing. Put every effort to improve your writing.

Once you have put the system on the track, it will run by itself. You don't have to worry about it. It will generate money for you for the years to come. What a fantastic idea! But very few comprehend it and implement it.

Wish you all the best in your blogging career.

Creating Opportunity

Another step is to invite more visitors to your hub. That is the exclusive way to creating enough page views. Ultimately, we can turn these page views into dollars. If you provide a quality hub, people will return to your blog. Therefore make a quality blog. Next visit other bloggers or hubbers and post a comment in their hubs. They will notice you.


Once I read in the blog of a young millionaire Mr. Adam Khoo. He stated that if success is not following you, you have to follow the success. If you are not getting an opportunity, he advises that create an opportunity for yourself. That is what he performed. Initially, he conducted coaching programs in the churches free of cost. He convinced the church people to arrange free coaching programs. Once he was established in the coaching industry, he started to charge for his coaching. That is what we require to do. By commenting on other hubbers hubs, we are presenting an opportunity for them to follow and explore us and discover our hubs. Next we would be able to turn them into cash.

If I post a fan mail for a hubber, surely, he would be puzzled to identify who I am and possibly explore my hubs. If there is something attractive in my hub he will share it with his friends. That is what is creating an opportunity for ourselves.

Wish you all the best in your blogging career.

Foot Note

Blogging is a multi-million-dollar sector now. There are a number of reasons why people may consider launching a blog. To express their thoughts and opinions, to promote or market a product, to help others, or to help yourself. These are some of the more general reasons why people from all over the world are launching their very own blogs, every single day. Many are ventured out to blog and gain a decent income through their writings. They offer advertisement in their blogs. Many prominent bloggers endorse products and make money by recommending those products. Principally they earn a part of the sales proceeds from the advertiser.


Nowadays blogging is a source of instant information online. It can be utilized as a faster communication medium for local events. Blogging becomes an unavoidable part of human life now. Micro-blogging through mobile phones are presently representing the most rapid means of communication to various people. Details of recently happened earth quick in Pakistan and Delhi and other gulf countries are instantly come into the micro-blogging sites way before it reached the traditional media like TV and Newspapers.

What is Human Resource Planning

 

In an organization, there are requirements for different kinds of personnel like skilled, unskilled, technical, non-technical, administrative, clerical, and professionals at various levels of the organization.

Human Resource Planning.

Human Resource Planning is concerned with the determination of the size and composition of personnel needed by the organization over a specific future period. It includes the formulation of relevant policies, programs, and strategies for achieving such requirements in an efficient manner. This is the first step in the staffing function.

The primary objective of human resource planning is to determine the quality, the quantity of personnel needed, and determine the cost or prepare a budget for the continuous and smooth function of the organization. In an organization, there are requirements for different kinds of personnel like skilled, unskilled, technical, non-technical, administrative, clerical, and professionals at various levels of the organization. Qualification and experience of each employee must be pre-determined. The selection of the right workforce will provide maximum utility and satisfaction to the organization. It also helps from the surplus and shortage of staff.

Objectives of Human Resource Planning:

1. To eliminate problems arising from surplus or deficits of manpower
2. To help in obtaining and retaining the quality and quantity of manpower
3. To ensure the best use of manpower resources.
4. To ensure qualified people are in the team for performing various tasks.

There are different steps involved in Human Resource Planning. First of all prepares a chart of present employees with data like skill, age, experience, qualification, position, cost, etc. (for an existing organization) If it is a new organization determine the amount of work and positions to be created and qualification of the intended employees and cost as per market. This will help to forecast the future need for human resources and can plan accordingly. Subsequent plans for expansion of the organization, technology changes, and reforms must also be taken into consideration while planning for human resources.

Possible promotion, transfer, retirement, and termination of employees must also be taken into consideration while doing human resource planning. The current employment market and other opportunities/external factors are also taken into consideration while.

Steps in Human Resource Planning

1. Determination of organizational requirements.
2. Determination of skills and expertise required to achieve the organizational and departmental objectives
3. Determination of the additional human resource requirements in the near future.
4. Developing action plans to meet the future human resource needs.

By doing a job analysis, you may determine the qualification, expertise, skills, and experience required for the various categories of jobs.

Job analysis includes:

1. Identification of each job in terms of duties and responsibilities
2. Determination of the nature of work and work conditions
3. Determination of the requirements as to the abilities and skills prescribed for the person holding it.
4. Determination of remuneration/package

Job description: refer to a narration of the duties and activities to be performed in a job, the relationship of the job with other jobs, the equipment and tools involved, the nature of supervision, working conditions and hazards of the job, and other related aspects of the job. All Major categories of jobs have to be described clearly and correctly in order to determine the qualifications and skills required.

Job Specification: is a document containing the minimum level of qualifications, skills, physical, and other abilities, experience, judgment, and attributes required for performing a job well. It sets forth the qualities required for performing the job.

To find the right person for the job, job description, and job specification helps the Human Resource Department to find out the right candidates for the job. It also helps in determining the appropriate remuneration, training, and orientation of employees.

Staffing and Importance of the Staffing Function

 

Shaping the job position, determining the structure of activities and to find out the right type of individuals to fill in the various job positions are comes under the term staffing.

What is staffing?

One of the most important managerial function is staffing. Shaping the job position, determining the structure of activities and to find out the right type of individuals to fill in the various job positions are comes under the term staffing. Major staffing activities consists of human resource planning, selection, recruitment, placement, orientation, training, development, fixation of remuneration, performance appraisal, promotion, transfers and allocation of job etc.

Definition of Staffing

Staffing may be defined as the managerial function of employing and developing human resources for carrying out various managerial and non managerial activities in the organisation. The activities of staffing is concerned with acquiring, attracting and activating the human resources for achieving organisational goals. It also involves the upgrading the usefulness and quality of the members of the organisation with a view to get higher performance from them. Most of these activities are performed by the human resources management department.

The managers are responsible for the staffing decisions and initiatives. At the same time the personal management or human resources management department will help the managers with expert advisory service and administrative service of staffing. Maintaining and retaining its employees is a continues process and managers are responsible for doing this as part of their job. Due to the chances of retirement, transfer, promotion and inclusion of new offices or additional work etc., managers must keep track of it and fill the vacancies on time to avoid lack of trained employees which may affect the function of the organization. Also it is important to see that each employ is getting enough work to do during the working time. Lack of work may result in loss to the organization. At the same time overload on employees may affect the health of the employee and quality of work. A well balanced allocation of work is also important.

Importance of the Staffing Function

Without people, organizations cannot function. To achieve the objectives of organization, there must be people who will be working for the organization. Without people organizations cannot move a bit. It shows the importance of staffing. The functions of organizing, planning, directing and control will not possible without managers and other members of the organization. The effectiveness of managerial function depends on the efficiency with which staffing function is done. To take the full advantage and opportunities of growth, it is important to hire, retain and develop the right quantity and quality of staff. An organization is said to be strong only if the employees of the organization are strong in their skills and ability to do the things and to get things done.

Human resource is the most valuable asset of an organization as it makes distinct advantages over other organizations. If the human resource of an organization is poor, there is no use of other resources like finance, machinery etc. Even if you have availability of better resources like, financial, regional and technical resources, lack of human resource which can efficiently use other resources may fail the business.

It is the staffing function which brings life into an organization and makes it functioning. Quality of an organization is depend on the quality of its staff. High remuneration, perquisites, security of job are some of the factors which attract the right talent. It is also important to preserve and develop the right talent for the benefit of the organization. Otherwise it will become a liability for the organization.

The staffing process consists of:

1. Human resources planning,
2. Selection,
3. Recruitment,
4. Placement and orientation,
5. Training and development,
6. Promotion,
7. Transfer,
8. Remuneration,
9. Performance evaluation etc.

Perpetual Inventory System

 

What is the Perpetual Inventory system?

What is the Perpetual Inventory system?

The Perpetual Inventory System is a method of recording store balances after each receipt and issue to enable regular checks and prevent the need for work shutdown during stocktaking. This system is maintained through the use of bin cards and the stores ledger, which document the physical movement of stock during material receipts and issues, while also reflecting the balance in the stores.

To ensure the accuracy of perpetual inventory records, a continuous stocktaking program includes physical verification of the stores. It is advisable to count and compare the number of items with the bin cards or stores ledger on a daily basis or at frequent intervals.

Under normal circumstances, the recorded stock should align with the actual stock of materials. However, discrepancies may arise due to the following reasons:

Unavoidable causes:

• Climatic conditions leading to deterioration (such as moisture absorption)
• Shrinkage and evaporation
• Losses resulting from accidents or fires
• Losses occurring when breaking up bulk materials, as in the case of sawing wood

Avoidable causes:

• Errors in posting or calculating receipts, issues, or balances on bin cards or the store ledger
• Pilferage and breakages
• Entering transactions in the wrong bin card or the wrong stores ledger.

Advantages of the Perpetual Inventory System:

1. Easy Preparation of Financial Statements: With the closing stock readily available from the bin cards or stores ledger, it becomes convenient to prepare monthly and quarterly profit and loss statements as well as balance sheets without the need for physical inventory checks on all items.

2. Detailed and Reliable Checks: The perpetual inventory system allows for a more thorough and reliable verification process. This ensures greater accuracy in tracking inventory levels and reduces the chances of errors or discrepancies.

3. Eliminates Year-End Interruption: By eliminating the need for physical checking of all store items at the end of the year, the perpetual inventory system avoids disruptions to production. This saves time and resources that would otherwise be spent on extensive stocktaking procedures.

4. Promotes Discipline and Carefulness: Implementing this method has a positive effect on staff morale, as it encourages discipline and carefulness. It serves as a deterrent against dishonest actions and promotes responsible handling of inventory.

5. Efficient Stock Management: The perpetual inventory system enables the comparison of actual stocks with authorized minimum and maximum levels. This helps to maintain inventory within prescribed limits, preventing the storage of excessive stock and the tying up of working capital beyond the target.

6. Reliable Stock Figures: The systematic and unhurried approach to recording and continuous stock taking in this method results in more reliable stock figures. Accuracy is prioritized, minimizing errors and ensuring the integrity of the inventory data.

7. Prompt Detection of Discrepancies: The perpetual inventory system facilitates the prompt identification of discrepancies and errors. This allows for timely remedial action to be taken, preventing their recurrence in the future.

8. Insurance Purposes: Stock figures are readily available for insurance purposes, providing accurate and up-to-date information for coverage assessment and claims processing.

9. Identification of Obsolete and Surplus Materials: The perpetual inventory system makes it easier to identify obsolete, slow-moving, and surplus materials. This enables swift remedial actions to be taken, such as selling off excess inventory or adjusting procurement strategies.

10. Cross Checking and Internal Auditing: The bin cards and stores ledger serve as cross-checking tools for each other. Errors are promptly detected as they occur, enhancing the system's internal auditing capabilities for effective inventory management.

Inventory Turnover Ratio

The inventory turnover ratio is a control technique used to manage inventory effectively. This ratio expresses the relationship between the cost of material consumed and the average inventory held during a specific period. By calculating the inventory turnover ratio, we can determine if inventory is fast-moving or slow-moving. In the case of slow-moving inventory, we can reduce purchases, while for fast-moving inventory, we can increase the quantity purchased. A low ratio indicates the accumulation of obsolete stock, poor purchasing decisions, or excessive inventory levels. Conversely, a high ratio indicates fast-moving stock and a lower investment in inventory.

The formula to calculate the inventory turnover ratio is as follows:

Inventory Turnover Ratio = Cost of Material Consumed during the period ÷ Cost of Average Stock Held During the Period

The average stock can be calculated by adding the opening and closing stock values, then dividing the sum by two:

Average Stock = (Opening Stock + Closing Stock) ÷ 2

The inventory turnover ratio serves as an indicator of inventory management efficiency or inefficiency. It is beneficial for organizations to compare the turnover of different types and grades of materials to identify slow-moving stock, minimizing capital tied up in undesirable inventory.

Types of Motivation

 

Extrinsic motivation is the motivation that comes from outside factors like benefit of wages, medical reimbursement, fringe benefits etc. They are generally associated with financial or material benefits.

Types of motivation

Motivation can be classified on the following basis.

1. Negative or positive motivation
2. Financial or Non-financial
3. Extrinsic and intrinsic


Positive motivation:

Positive motivation is a process though which attaining the organizational goal by influencing the employees behavior through recognition and appreciation of employees efforts and contribution. Motivated for a reward or an appreciation can be treated as a positive motivation. An example of positive motivation is that students studying to get a play station from his father for achieving higher grade in the school.

Examples of positive motivations are - taking interest in subordinates benefits, appreciation and credit for work done, delegating the authority and responsibility of subordinates etc.

Negative Motivation:

On the other hand Negative motivation is the process of influencing the employees behavior by giving warnings or imparting a sense of fear in the mind of employees, which he has to suffer for lack of good performance. The process is that, if an employee fails in achieving the desired results, he should be punished by demotion or termination.

Negative motivation is based upon fear i.e. demotion, lay off, punishment etc. Fear of punishment or insult in front of co-workers may bring behavioral changes. But it is to be kept in mind that, Poor performance and lower productivity could be the result of negative motivation even though it controls the misbehavior and contributed towards the positive performance.

Extrinsic motivation is the motivation that comes from outside factors like benefit of wages, medical reimbursement, fringe benefits etc. They are generally associated with financial or material benefits. Extrinsic motivation drives one to do things for tangible rewards or compulsion, rather than for the fun of doing it.

Intrinsic motivation is the motivation which comes from doing the work itself. Intrinsic motivation occur on the job and provide satisfaction during the performance of work itself. Intrinsic or internal motivation include recognition, authority, participation, status etc. The reward of intrinsic motivation is the pleasure in doing the work rather than working towards an external reward. Intrinsic motivation drives one to do things for the fun/pleasure of doing it rather than the tangible rewards or pressure.

Financial Motivation

Money plays an important role in motivation. To motivate the workers, management generally make use of financial incentives like bonus, retirement benefits, wages and salaries, medical reimbursement etc. However, such incentives may not always prove to be motivating factor. To keep the workers with the organization, in many cases, management may have to increase the financial incentives regularly. To attract and maintain good workforce, organizations have to maintain attractive wages and salaries. These monitory rewards should be competitive between various enterprises to attract good workforce.

Money plays a significant role in satisfying physiological and security needs of the employees. So, money is a real motivating factor till the physiological and security needs are met. Therefore, management can use financial incentive for motivation. Money also helps in satisfying the social needs of employees to some extent because money is often recognized as a symbol of status, power and respect.

Besides, money is an important means of achieving a 'minimum standard of living' although this 'minimum' has the tendency to go up as people become more affluent. But this should not lead one to conclude that money will always be a motivating factor to all people. After a certain stage, to some people, importance of money may be reduced and non-financial rewards may become more important.

Money provides for the satisfaction of physiological and safety needs only which have been called hygienic factors by Herzberg. Hygienic factors include wages and salaries and other fringe benefits. The presence of these factors at a satisfactory level prevents job dissatisfaction. According to Herzberg, in order to motivate the employees, it is necessary to provide for the satisfaction of ego and social and self actualization needs.

But these needs are present generally in the case of employees in the higher positions, who get higher monetary rewards and are not motivated by increased monetary benefits. In case of employees at the operative levels, money certainly plays a significant role in motivating them because their survival and safety depend on it.

It is to be noted that money is not the only motivator and it is not always a motivator. Management should, therefore, establish a motivational system which is efficient in helping different kinds of human needs. On the job, by helping themselves to develop in different areas of work can increase the satisfaction of employees. Recognition, job enlargement, participative management, status symbols and making the job challenging are some of the other non-financial incentives which also motivate employees.

Non-Financial Motivation

When the physiological and security needs are satisfied with the help of money, money stops to be a motivating force. So money is regarded as a maintenance factor. Employees have other needs like status and recognition in society. When survival needs are satisfied by money, people look for satisfying their ego needs. They want to achieve something in their lives. In order to motivate the employees, management may use the following non-financial incentives.

1. Praise or appreciation of work done: Since it satisfies one's ego needs, recognition of satisfactory performance acts as a non-financial incentive. Sometimes, appreciation of work done is more effective than any other incentive. It should be done with great care because praising an incompetent employee creates resentment among competent employees.

2. Competition: If there is healthy competition among individual employees or between groups of employees, It leads them to achieve their group goal or personal goals,. Therefore, competition acts as a non-financial incentive.

3. Rating of performance: Knowledge of rating of the work accomplished leads to employee satisfaction. The production workers normally do not have contact with the consumers. A worker would be happy to know about the response from the consumer. A worker gets satisfaction by knowing the comments of a satisfied consumer. So rating of performance by consumers or by the higher officials of the organization would be a great motivator for employees.

4. Workers' participation in management: By participating workers in making decisions will be a strong motivator for employees. It gives them psychological satisfaction that their voice is heard. Participation in management provides for two-way communication and so imbibes a sense of importance.

5. Opportunity for growth: Opportunity for growth is another kind of incentive. If the employees are provided with opportunities for their advancement and growth and the development of their personality, they feel very much satisfied and become more committed to organizational goals.

6. Suggestion System: It is an incentive which satisfies some needs of an employee. Many organizations provides a platform for suggestions as it improves the working procedure and reduce waste and cost of production. Some organizations make use of cash awards for useful suggestions. They sometimes publish the worker's name with his photograph in the company magazine. This motivates the employees to be in search for something which may be of great use to the organization.

This con

Functions of Money

 

Functions of Money

The functions of money can be categorized into three groups:

1. Primary function,
2. Secondary function, and
3. contingent functions.

Within the primary function, there are two key roles of money:

1. Medium of exchange: Money serves as a widely accepted means for facilitating transactions and exchanging goods and services.
2. Measure of value: Money provides a standardized unit of measurement for determining the worth or value of goods, services, and assets.

Primary Functions of Money

Primary Functions of Money:

Money serves two primary functions: as a medium of exchange and as a measure of value.

Money as a Medium of Exchange:

The function of money as a common medium of exchange facilitates the buying and selling of goods and services. This function effectively solves the problems associated with a barter system. It is the most important and unique function of money, which distinguishes it from near-money assets. Money divides the exchange process into two parts: sale and purchase.

Money as a Measure of Value:

Money acts as an instrument for measuring the value of goods and services in terms of their monetary worth. Without money, measuring the value of goods and services for the purpose of exchange would be tedious. The market offers thousands of goods, and it would be extremely difficult to exchange them without a common medium for valuing them. If one person wants to offer their product to different people, they would need to keep thousands of values for their single product to effectively conduct their business. Money resolves this problem by serving as a common medium. With the introduction of money, a trader needs to assign only one value to each of their goods and services. Additionally, it is worth noting that different goods are measured in different physical units, such as liters, kilograms, meters, etc. The comparison of the value of goods with different physical units becomes possible when you know the monetary value of each item.

Knowing the monetary value of goods allows for the comparison of goods in different regions or at different times. The use of money prices also aids in estimating national income by aggregating the values of a wide variety of goods and services that are measured in different physical units.

However, money's role as a measure of value can only be satisfactory when its own value (i.e., purchasing power) remains stable over time. The continuous rise in the general level of prices worldwide has made money a poor measure of value.

Secondary Functions of Money

The secondary functions of money are as follows:

1. Money as a standard of deferred payments
2. Money as a store of value
3. Money as a means of transferring purchasing power

The secondary functions of money are as follows:

1. Money as a Standard of Deferred Payments: Money not only facilitates current transactions of goods and services but also credit transactions. It enables credit transactions when goods are exchanged for future payments. Nowadays, deferred payments have become a part of our lives, such as loan installments, pension contributions, insurance premiums, etc. Money can serve as an effective standard for deferred payments. However, for this purpose, the value of money should remain stable. If prices experience sharp increases or decreases, resulting in significant fluctuations in the value of money, it would render money a poor standard for deferred payments.

2. Money as a Store of Value: We can store a portion of our present earnings in the form of money to be used in the future. Money represents generalized purchasing power and is a highly liquid asset. It maintains stability in value and is useful for purchasing goods and services to satisfy future needs. Additionally, money can be stored for a longer period and requires less space compared to other goods. Therefore, accumulating wealth in the form of money is convenient, as it can be easily converted into any desired asset at any time. Money serves as a bridge from the present to the future, as saving money today allows us to shift our purchasing power from the present to the future.

3. Money as a Means of Transferring Purchasing Power: Money is the most convenient form for transferring value from one person to another and from one place to another. It is lightweight, high in value, and occupies less space compared to other goods. Furthermore, money is universally accepted regardless of location. For instance, transferring thousands of kilograms of food grains would be time-consuming, expensive, and prone to wastage. On the other hand, transferring the value of that same quantity of food grains in the form of money is less costly and can be easily done through a check or bank draft. Hence, money acts as a means of transferring purchasing power.

Contingent Functions of Money

The contingent functions of money can be classified as follows:

1. Distribution of National Income
2. Basis of credit system
3. Maximization of utility and profits
4. Money imparts liquidity and uniformity to assets

Contingent Functions:

1. Distribution of National Income: In the modern world, people come together to establish business organizations where they contribute their money, efforts, skills, and space, among other things. When these organizations generate profits, it is crucial to distribute the income among the individuals according to their respective contributions. Money plays a significant role in facilitating the distribution of national income among those involved in its production. This income is divided and distributed in the form of rent, wages, salaries, interest, and remuneration. Determining and remunerating those who have contributed machinery, property, or materials can be challenging, but it becomes easier by assigning monetary value to such assets and distributing income proportionately. Thus, money aids in the distribution of national output among the contributors.

2. Basis of Credit System: The present-day money, including coins, currency notes, cheques, and bank drafts, represents a promise to pay. The modern economy relies on this promise to pay. One area of a bank's function is to receive money from depositors and lend it to individuals or businesses in need of funds for their operations or purchases. Banks charge a fixed or variable rate of interest for this service, and depositors earn interest on their deposits. Therefore, money serves as the foundation of the credit system.

3. Maximization of Utility and Profits: Farmers who engage in agriculture and focus on producing one or two types of crops in large quantities can enhance their utility by selling their harvest for cash. Money allows them to satisfy various needs and desires, while holding onto food grains limits their utility. Similarly, producers of goods can calculate production costs in terms of money value and set profitable selling prices, enabling them to maximize their profits. Hence, another function of money is the maximization of utility and profits.

4. Money Imparts Liquidity and Uniformity to Assets: Money provides a convenient form for holding wealth since it can be used to purchase any asset at any time. Likewise, assets can be converted into money. Therefore, money is the most liquid form of asset. Additionally, money enables the calculation of a person's wealth by determining the monetary value of their properties and possessions. By calculating the money value of all assets, the total wealth of an individual or a country can be ascertained. Thus, another function of money is providing liquidity and uniformity to assets.

Understanding Intermediate Product, Final Product, Depreciation, Gross Value Added and Net Value Added

 

Understanding Intermediate Products and Final Products: Implications for National Income Calculation

It is important for you to understand the meanings of the terms "intermediate products" and "final product."

Intermediate products are some of the final products of a production unit that could serve as raw materials for another production unit. For instance, to a farmer, wheat is considered their final product. However, for a flour mill, wheat is an intermediate product or raw material for their production. The flour mill purchases wheat from the farmer, grinds it, and sells it in the market. The baker then buys flour from the miller, bakes it, and sells the bread to the end consumer.

The farmer's finished product is wheat, with a cost of Rs. 500. The miller buys it, grinds it, and sells it at a cost of Rs. 600. The baker buys it, grinds it, and sells it at a cost of Rs. 800.

When considering the output of all these processes in the national income, there is a chance of a double or triple effect on the national income. The value of wheat, Rs. 500, serves as the intermediate product of the miller. The miller adds a value of Rs. 100 to the intermediate product. The value of flour, Rs. 600, serves as the intermediate product of the baker. The baker adds a value of Rs. 200 to the Rs. 600 product, and the value of bread is Rs. 800.

The total national income of the above production process is Rs. 800, not the sum of the three stages of production, which would be Rs. 500 + Rs. 600 + Rs. 800 = Rs. 1900. There is an element of double counting in the total output of Rs. 1900, once for the value of wheat, Rs. 500, and once for the value of flour, Rs. 600. By ignoring the value of intermediate goods, we can avoid this double counting.

National income is the total value of the final product, which is Rs. 800. In other words, national income is the sum total of value added to a product during the production process. For example, the national income is calculated as the value added by the farmer, Rs. 500, plus the value added by the miller, Rs. 100, plus the value added by the baker, Rs. 200, which equals Rs. 800. It is not the total output of the three processes, which would be Rs. 1900.

Goods purchased for resale are treated as intermediate goods. Electricity, lubricants, packing materials, and other consumables used by the baker and miller are also treated as intermediate goods. Intermediate goods are used as inputs in the production of other goods or services. They can also be treated as partially finished goods. Intermediate goods are either consumed or transformed beyond recognition in the production process.

A clear understanding of the difference between intermediate products and final products is important to accurately calculate the national income.

Final products are products that are intended for consumption or investment, not for resale or further production. They include capital goods such as machines, furniture and fittings, transport vehicles, and household purchases. Sugar purchased for household use is treated as a finished good, whereas sugar purchased by the baker for making biscuits is considered an intermediate product.

You may be wondering whether you can classify capital goods as final products or intermediate goods since these machines are used for further production, and normal wear and tear reduces their value after several years of use. The answer is that we will discuss the provision for depreciation, which takes care of depreciation in the value-added section below.

Value added during the production process is another term you need to understand. Let us consider the example given above. By producing wheat, the farmer adds a value of Rs. 500. This value includes the farmer's effort in tilling the ground, irrigation expenses, labor costs, fertilizers, etc. The miller adds a value of Rs. 100, assuming they have no other expenses. They purchase the wheat for Rs. 500 and sell the flour for Rs. 600. The mill's output is Rs. 600, and the miller's contribution is Rs. 100.

We can calculate the value added by using the following formula:

Value added = Value of output - Value of intermediate cost

= 600 - 500 = Rs. 100

We can refer to the value added by the miller as "Gross Value Added at Market Price," which is Rs. 100.

To fully understand the effects of value added, we need to know about the following terms:

• Gross value added and Net value added
• Market price and Factor Cost.

Gross Value Added and Net Value Added

In the process of production, fixed capital assets such as buildings and machines are essential. However, these assets have a limited lifespan. Machines installed in a factory, for example, may run for a specific period before needing replacement, typically after 10 or 15 years of use. As a result, a certain amount of wear and tear, known as consumption of fixed capital or depreciation, occurs each year. To account for this depreciation, firms establish a provision for depreciation account and allocate an amount equal to the depreciation incurred during the year. Over the course of 10 or 15 years, the funds accumulated in the provision for depreciation account can be utilized to replace the machines.

For instance, let's consider a machine valued at Rs. 10,000 with a lifespan of 10 years. The annual depreciation of the machine would be Rs. 10,000/10 = Rs. 1,000. At the end of the first year, the depreciation would be Rs. 1,000, resulting in a machine value of Rs. 9,000. The firm sets aside a provision of Rs. 1,000 in the provision for depreciation account to account for this depreciation. By the end of the second year, the depreciation would amount to Rs. 1,000, and the machine's value would be Rs. 8,000. An amount of Rs. 1,000 would once again be allocated to the provision for depreciation account to compensate for the consumption of the fixed asset. As the value of the machines decreases, the provision for depreciation increases. After 10 years, the provision for depreciation account would hold Rs. 10,000, which can be used to replace the old machine with a new one. This method compensates for the consumption of fixed capital.

The consumption of fixed assets, or depreciation, can be determined by subtracting the consumption of fixed capital from the gross value added, resulting in the net value added. In other words, if we exclude the consumption of fixed capital from the value added, we obtain the gross value added.

Therefore, Net Value Added = Gross Value Added - Consumption of Fixed Capital or Net Value Added = Gross Value Added - Depreciation.

Differentiating Market Price and Factor Cost

The distinction between market price and factor cost lies in indirect taxes and subsidies.

Net Value Added at Market Price = Net Value Added at Factor Cost + Indirect Taxes - Subsidies or Net Value Added at Factor Cost = Net Value Added at Market Price - Indirect Taxes + Subsidies.

Indirect Taxes: Market price refers to the net amount paid by consumers. A portion of this amount is collected by the government as taxes. This means that the total amount received from consumers is not entirely available for distribution among the factors of production, as a portion is paid in taxes. Taxes imposed by the government are passed on to buyers by sellers.

Subsidies: Subsidies are financial assistance provided by the government to production units to sell products at lower prices. When the government aims to promote the production of certain goods, it offers financial support to producers. Subsidies enable producers to offer products in the market at subsidized prices.