Characteristics of Diversified Farming

Characteristics of Diversified Farming

Characteristics of diversified farming have been briefly explained below. These characteristics include the cultivation of cash crops, use of technology, limited profitability, labor employment and access to credit facilities.

1.   Cash Corps Cultivation

First characteristic of diversified farming is cultivation of Cash crops like vegetable, tobacco etc. in subsistence farming only few staple are cultivated for family use. Thus we can say that diversified farming is a profit based farming, while subsistence farming was need based farming.

2.   Diversification of Risk

Diversification of risk associated with staple product failure is another important characteristic of diversified farming. In diversification farming farmer can bear the losses incurred in a particular cultivation, because they have chance to earn profit in other corp. cultivation (risk is diversified).

3.   Use of Technology & Fertilizers

Second characteristic of diversified farming is use of technology and fertilizer in the farming. Tractor and other basic machinery are used in diversified farming tractor, it is to be noted that high capital investment is not feature of diversified farming.

4.   Profits

Profitability is another characteristic of diversified farming. However, these profits are lower than corporate farming. Thus profitability is important aspect to divide farming into different categories.

a)    Subsistence farming- no profit objectives.

b)   Diversified farming – limited profitability objectives.

c)    Corporate farming- profit maximization is objective.

5.   Labor is employed

Another important characteristic of diversified farming is the employment of labour during the whole year. We know that in subsistence farming labour was employed only during the season of cultivation.

6.   Access to Credit Facilities

Another key characteristic of diversified farming is access to credit facilities. In subsistence farming the farmer were not interested to take credit from the market.

7.   Step to Corporate Farming

Diversified farming is said to be first step toward corporate farming.

We have briefly explained the characteristics of diversified farming. These characteristics clearly indicate that diversified farming is quite different from the subsistence and corporate farming.

Characteristics of Corporate Farming

Characteristics of Corporate Farming

Characteristics of corporate farming have been briefly explained below. These characteristics include production of various corps, capital investment, use of premium quality fertilizer, profit maximization etc.

1.   Range of Corps

First characteristic of corporate farming is cultivation of range of products. In corporate farming a range of crops are produced. These corps includes the staple corps (wheat, rice etc) and cash corps (Vegetable, Tobacco etc).

2.   Capital Investment

Second characteristic of corporate farming is huge investment in the business of farming. Advanced machinery is used in corporate farming to improve productivity & efficiency.

3.   Premium Fertilizers & biological techniques.

One of the important characteristics of corporate farming is use of premium quality fertilizer and biological techniques in farming. This type of farming heavily rely on the improved seeds.

4.   Economies of Scale

Third important characteristic of corporate farming is Economies of scale. Large output result in economies of scale. This is one of the fundamental characteristic of corporate farming.

5.   Big Farms

One of the important characteristic of corporate farming is use of big farms for the cultivation to attain economies of scale. It is to be noted that large farms can only be acquired by a corporate entity.

6.   Organized Business

Corporate Farming is managed as organized business. Professional manager and agriculture expert is part of management team. All decisions are made by the professional in professional manner. Organized management is a key characteristic of corporate farming.

7.   High profitability

Reasonable profit or high profit from the farming is another important characteristic of corporate farming. Profitability is one of the important characteristic of corporate farming.

8.   Products are properly marketed

In corporate farming marketing of product is an important aspect, because marketing has direct linkage with profitability. Products are sold at right place and at right price. Product marketing is another important characteristic of corporate farming.

Business

Business

An entity or commercial organization is established to earn profit is known as business or business entity. There are two important factors in business definition i.e. separate entity and profit earning. These concepts have been explained below

Business Entity

Business is a separate entity, and therefore affair of business should not be mix with personal affair of the owner, otherwise financial performance of the business cannot be judged. 

Business profit                                                          

Core objective of every business is profit earning, thus any activity is carried out for a nonprofit objective cannot be regarded as business. A school established for a profit earning objective is a business, but a school established with a core objective for promoting literacy is not a business.

Types of business

Business can be broadly classified into three Types i.e. trading business, manufacturing business, and service provision.

1.   Trading Business

In Trading business , goods are purchased and resold on profit. This is very common business practice, and we can observe this practice in our markets. All shops in the market doing the trading activities. Shopkeeper purchase goods from distributor or manufacturing unit and resale those goods to the customers at profit. Characteristics of trading business are

§  Easier to start the business (this is the reasons many people are doing).

§  Free Financing available (you can buy goods on credit).

§  Low or limited Risk. (You buy only those goods which can be sold in market).

2.    Manufacturing Business

In manufacturing business goods are manufactured and sold in the market. In manufacturing business raw material is purchase from market, raw material is converted into finished goods by applying some process, and finally finished goods are sold in market.

§  Huge investment is required.

§  High risk of damaged or spoilage goods.

§  Skilled labour is required.

§  Experience of manufacturing is required.

3.    Service Provision Business

Many businesses are established for service provision. Examples of such business are law firms, air conditioning repairing firms, hospital for profit etc. Characteristics of service industry are

§  Perish ability (Service cannot be stored).

§  Intangibility (Service can be felt only).

§  Heterogeneity (Service cannot be standard).

Types of Business organizations

Types of business organization or way of doing business can be classified into sole proprietor ship, partnership and companies. These business organizations have been explained below;

1.    Sole Proprietorship

Sole proprietorship is a business owned by a single person. The sole proprietorship has advantages like decision making power in one hand, no profit sharing with others, easy to setup and limited regulatory and documentation formalities. There are also some limitations of sole proprietorship like difficulty in arranging fund, unlimited liability etc. 

Characteristics of Sole proprietorship are listed below

§  Managed by single person.

§  All profit is shared by single owner.

§  Decision making by owner.

§  Difficult to arrange financing

§  Unlimited liability (Owner is personally liable).

2.    Partnership

A partnership is an extension of sole proprietorship. The business is owned & managed by few people.  Partners normally share profit in proportion to their investment or as per partnership agreement. Like sole proprietorship liability is unlimited for the partners. Partnership concept is popular for medium size of business. Basic purpose of creating partnership is to provide more capital to business.

Characteristics of Partnership are listed below

§  Few owner share profit.

§  Liability is unlimited like sole proprietorship.

§  More Financing is available.

§  Some legal formalities.

§  No succession (Cease to exist on death of partner)

3.    Company

Company is a legal entity and has limited liability. In company shareholder and company are twp different legal persons, therefore shareholder have limited responsibility (up to paid up capital). Main advantages of company are limited liability, more financing options, and succession. Disadvantages of company includes is profit sharing among a number of shareholders, shareholder are not in control of business, and many legal formalities. 

Characteristics of a company are listed below

§  Liability is limited.

§  Separate legal entity.

§  Profit shared by many shareholders.

§  Decision making are in hand of board of director.

§  Subject to many formalities.

Advantages of business

There are number of advantages of doing own business, some of these advantages has been listed below;

§  You are the boss (Give you independence).

§  Income will grow at great speed than salary.

§  Plan your life more effectively.

§  You are the decision maker (You Can introduce creativity and innovation).

§  Reward for hard work (You can earn more profit for more work).

Disadvantages of Business

There are number of disadvantages of doing own business.Theses disadvantages have been listed below;

§  Profit are not Guaranteed.

§  You need investment.

§  Small business will give you small profits.

§  Huge losses can ruin your life.

§  A lot of management skills are required.

Off Shore Companies

 Off Shore Companies

Off shore companies are those companies which are set outside the jurisdiction of a country. There are number of purposes for setting an off shore company.  Purposes of off shore companies have been explained below

1.    Tax Relief

Offshore companies are normally set up in tax heaven, where there is either no tax or very low tax rate on income. Therefore some counties encourage or allow establishing of off shore companies by keeping the tax rate nil or very low. Thus investment is attracted by providing tax relief to the investors.

2.    Concealment of identity

Off shore companies may be used to conceal the identity of the investors. The information of off shore companies is normally not available to general public. Moreover, these companies are operated by paid director, thus the actual beneficiaries (shareholder or owner) are not known to the world.

3.    Concealment Source of Income

Off company May works as a middle company, first money are transferred to this company and then money transferred to some other business or for personal use. Therefore off shore company may be used to conceal the original source of income.

4.    Black Money Utilization

Limited information are required to set up an off shore companies, similarly limited information available about off shore companies to the world, Thus black money may be invested in these off shore companies and later on this money is transferred back as white money earned by the off shore company.

5.    Easy to Set Up.

There are limited legal formalities for setting up off shore companies, while setting a normal corporate business or company is an extensive process and involves many legal formalities and disclosure are required.

Shares Issue Accounting

Shares Issue Accounting

Shares issue increases the equity of the company. The share issue may be classified into

•  Issue at Nominal Price
•  Issue at Premium
• Issue at Discount

Nominal price of share are decided by regulator, while issue price of share is decided by the company, which may be lower (Issue at Discount) or higher than nominal price (Premium Issue). This concept has been explained with examples

1.    Issue of Share at Nominal Price

Shares are issued at nominal price (face value of share). 1000 Share issue @ nominal price of 10 Rupees each will be recorded as under.

Date	Particulars	Dr.	Cr.
	Cash	10,000
	Share Capital		10,0000

 

2.    Issue of Share at Premium Price

When shares are issued at higher price than nominal price, then such issue is called premium issue. Main reason of issuing share price at premium is market value of shares. 1000 shares issued for 12,000 and each share have nominal price of 12.

Date	Particulars	Dr.	Cr.
	Cash	12,000
	Share Capital		10,0000
	Share Premium		2,0000

3.    Issue of Share at Discounted Price

When Share is issued at price lower than nominal price, then such issue is called share price issue at discount. Main reason of issuing share at discount is lower market price of share than nominal price. For example 1000 Share having nominal value of 10 are issued at 8 Rs.

Date	Particulars	Dr.	Cr.
	Cash A/c	8,000
	Discount A/c	2,000
	Share Capital A/c		10,000

Financial Reporting Requirements in Pakistan

Financial Reporting Requirements in Pakistan

Financial reporting requirement are defined by the companies ordinance 1984. The fourth and fifth schedule of companies defines the financial reporting requirements.

§  4^th Seclude (Small Sized , Medium Sized and public entity)

§  5^th Schedule (Listed and Large Scale organization).