The Production Funtion

POM:
            Production operation management is the study of the conversion of the inputs into outputs in any organization. It deals with manufactured goods and services.

WHY STUDY POM?
1. to develop a level of expertise in operations management graduates, since the success of all types of organizations depends on the knowledge and talent of its managers.

2. production is where the action is in most business firms. therefore, it is more exciting to share the work process and to see that real work to be done.

3. it relates to the demand and supply. any graduate from POM has more opportunity to receive job at higher salaries than any of their peers.

4. knowledge of the POM enhances the effectiveness of the accountant, the marketing manager, the financial analyst, the doctors, the engineers, and the personnel specialist.

THE PRODUCTION FUNCTION:

Every organization has a production function, just as it has any other functions like finance, accounting, marketing etc.

the production function performs the conversion of final products and services from the raw materials by using machines, capitals, technology and labor's etc.

THE PRODUCTION FUNCTION CONSISTS OF FOUR STEPS:
1. Input
2. Conversion
3. Outputs
4. Environment

Input: any product or service that is created requires some combination of materials, machine, and people. The list of inputs is almost endless for any product.

Conversion: The conversion process is the merging of  time and place and the transformation of inputs to make them more usable and accessible to customers. Usually this text will discuss the methodology of transformation.

Output: The ultimate finished product. For Physical products it is easy to recognize, but for services, such as repairs, delivery, set up, and financing are not so easy to detect.

Environment: The surroundings or the atmosphere that businesses operate, in which government laws, economic condition, social responsibilities are present.

Function of POM

The process of converting inputs into outputs requires certain functions to be performed. design function and control function are the two main areas where POM continuously performed for successful operation in an organization.

* Product Design and Development: Business organizations research laboratories and independent inventors are continuously developing new products. So innovation, research developments departments (R & D) are working in any organization to fulfill their mission.

* Facilities Location: The proper location for the organizations facilities can be one time decision when the business is formed, or it may be a frequently recurring question. the location decision may be critical to some firms and inconsequential to others. such as virgin cola. why this company has situated in gazipur?

* Capital Equipment: This work includes the determining the capital equipment needed, acquiring it at a reasonable cost installing it, providing for both routine maintenance and emergency repair, and eventually replacing it.

* Facilities layout: The layout of physical facilities has an important influence on the efficiency of a firm. layout for a manufacturing plant should follow a logical sequence so that the materials can flow smoothly through the process with minima handling.

* Work Design and measurement: Individual tasks within the production process must be designed to achieve goals of efficiency and cost. the higher the volume, the more critical the design.

* production forecast: Forecasting is necessary if a business firm is to anticipate the demand for its products. This can be based on analysis of past data consideration of current events, and educated guesses about future developments. to do this simple and complex statistical techniques are available. such as egression analysis. breakeven, economic indicators etc.

*Purchasing materials management: Materials are needed for any organization. the material input may account for as much as 80 percent of the value of the output. the purchasing function includes researching, analyzing and selecting vendors.

* Inventory Management: Once material is obtained.it must be  stored before it is processed, an intermediate stages in the process, and at the end of the process. These inventories are known as raw materials. Work in process and finished goods represents a sizable portion of a firms assets.

* Quality Control: No amount of inspection can make a bad product a good one. Quality must be designed and produced into the product.

Goals of POM:

* Effectiveness
* Efficiency
* Unit Cost
* Contribution to Profit
* Contribution to Profit
* Productivity

* Total Productivity= total of all outputs/total of all inputs
* Responsiveness
* Environmental Responsibility
 

LABOR UNION AND EMPLOYEE RELATIONS

Union:
A union is an organization of workers, acting collectively, seeking to promote and protect its mutual interests through collective bargaining.

How unions constrain managerial discretion:

* Reduction in management's power: The written labor contact specifies rules that govern key issues and generally reduce the individual manager's discretion.

* Potential for strikes: The ultimate weapon of a union in its efforts to gain concessions from management is to bring about a strike or work stoppage.

* Fear of increased cost: Union efforts to improve employee pay and working condition, increased paid holidays and benefits, provide better pension and so forth, all implies higher cost to management.

* Threats to efficiency: Unions occasionally seek to reduce productivity such as refusal to allow adoption of labor saving equipment, creation of nonessential jobs.


* Loss of employee commitment: Employees may associate themselves more with interest of the union than with their employing organization.

* Union review of HRM policies: Management has to exercise greater care in developing its HRM policies, for these policies will be under constant assessment by the union membership.


Major labor legislation:

Railway Labor Act of 1926: Provided the initial impetus to widespread collective bargaining. Although the act covers only transportation industry, it was important because workers in these industries were guaranteed the right to organize, bargain collectively with employers.

The Wagner Act 1935: The Wagner act is also known as National Labor Relation Act of 1935. This act gave employees the right to form and join unions and to engage in collective bargaining. The National Labor Relation board was given the responsibility for determining appropriate bargaining units, conducting election to determine union representation and preventing and correcting employer action that can lead to unfair labor practices.


The Taft Hartley Act 1947: The major purpose of Taft Hartley Act was to amend the Wagner act by addressing employers' concerns in terms of specifying unfair union labor practices. it addressed activities union must or must not do.

Other laws affecting labor management relations: Landrum-Griffin act of 959, executive orders 10988 and 11491, racketeer influenced and corrupt organizations act of 1970, civil service reform act of 1978.

Collective Bargaining:

The term collective bargaining typically refers to the negotiation, administration and interpretation of a written agreement between two parties that covers a specific terms the conditions of employment,
that what is expected of employees and what limits there are on management's authority.

The collective bargaining process begins when the majority of workers of an organization vote to be represented by a specific union. the national labor relations board then certifies the union. at this point, the management of the organization must recognize the union as the collective bargaining agent for all the employees of that organization. once this part of the process is completed, collective bargaining can begin. only the collective bargaining agent is authorized to raise industrial disputes and negotiate with the management.

Grievance Procedure: grievance procedure is systematic means of resolving disagreements over the collective bargaining agreement and providing assurance that the terms and conditions agreed to in negotiations are properly implemented.

Why Employees Join Union:

A variety of factors influence an employees desire to join unions for example wage, job security, chances for promotion, benefits, the treatment they receive from management, working condition.

Other factors also include employees' desire for

* better communication with management
* higher quality of management and supervision
* increased democracy in workplace
* opportunity to belong to a group where they can share experience and comradeship.

Major reasons for not joining a union are satisfactory

* Wages
* Benefits
* Job security
* Negative image of labor unions include believing unions
* have too much political influence
* Require members to go along with decisions made by union
* have leaders promoting their own self-interests
* abuse their power by calling strikes
* cause high prices
* misuse union dues and pension funds
* dissatisfaction with wages, benefits, and working conditions can quickly change negative attitude toward union


Disciplining the Problem Employees

 discipline is a condition in the organization when employees conduct themselves in accordance with the organizations rules and standards of acceptable behavior. the most frequent discipline problem can be classified as related to

* Attendance
* On the job behavior
* Dishonesty
* Outside activity


The following will be considered as misconduct resulting in disciplinary measures and or penalties:


1. Persistent insubordination;
2. Absenteeism or habitual lateness to work;
3. Unaccountable time away from the office while on duty;
4. Behavior complaints damaging company image;
5. Breach of rules contained in the HR manual;
6. Absence from work without due notice;
7. Continuous or serious lapses of responsibility and negligence of duty;
8. Ignoring safety procedure
9. Unauthorized exposure of information about company operations and confidential documents;
10.Outside criminal activities;
11. Misbehavior including physical violence and/ or bullying with employees or clients;
12. Fraud, misuse and defalcation of funds, materials company assets;
13. Accepting bribes, and material or financial advantages from any company, employee, client.
14. Working for a competing organization.

Analyze a discipline problem:

Disciplinary practices should be fair and equitable. The following nine factors have been proposed to help analyze a discipline problem.

1. Seriousness of the problem
2. Duration of the problem
3. Frequency and nature of the problem
4. Employees work history
5. Extenuating factors
6. Degree of socialization
7. History of organization discipline practices
8. Implication for other employees
9. Management backing

Administering Discipline:

Step 1: Establishment of performance requirements and work rule

*  performance requirements normally established through performance appraisal process.
*  work rules- should be relevant to successful performance of job

Step 2: Communicate performance requirements and work rules to employees

* normally through orientation and performance appraisal

Can be communicated in a variety of ways

* Manuals-Describes work rules and policies of organization.
Employees may be required to sign a document indicating they have receive and read manual.

* Orientation-Explanation of those work rules and policies by human resource department or new employee's supervisor.

* Labor contract- Contain work rules and corresponding disciplinary actions for infractions in unionized organization

* Bulletin boards, company newsletters, and memos are also commonly used to communication work rules

Step 3: Application of corrective action (discipline) when necessary

Needed when
* An employee's work performance is below expectations
* When violations of work rules have occurred

Adequate records are of utmost importance

* Investigation- Accusations must be supported by facts. Investigation must take
* Management should first discuss situation with employee
* manager should avoid arguing with employee and should administer discipline in a straightforward, calm manner.

General guidelines in administering discipline:

1. Discipline should be corrective
2. Make disciplinary action progressive
3. discipline should be immediate, provide ample warning, be consistent and be impersonal
4. administer discipline straightforward, without anger or apology and avoid arguing with employee
5. resuming pleasant relationship

Disciplinary actions available to the manager:

* Oral warning
* Written warning
* Suspension
* Demotion
* Pay cut
* Dismissal

PLANNING TOOL'S

We now look at three more basic tools for planning.

* Gantt Charts
* Analysis System
* program-me evaluation and review techniques(PERT).

All these tools can be used in forward or reverse mode, i.e. they can be used to schedule forward from a given date to find the overall completion time or back from a given end time to determine the necessary start time. they are appropriate. and useful, techniques for production planning. in the areas of jobbing or batch production, the tools can be limited in the degree of complexity that can be handled. computer based. in any case, computer based tools  can reduce the 'visibility' of what is happening operationally an important element to ensure that the manager still feels in control.

it should be noted that the aim of this module is to provide an appreciation of the  strengths and weaknesses of these techniques rather than a complete background.

GANTT CHARTS
at the start of the century an objective planning method for projects was developed by henry gant. in its basic from (figure 1.1), the horizontal divisions represent time and the vertical rows item's to be scheduled. lines, bars, brackets, shading and other devices can mark the start, duration and end of a schedule. the purpose of a gantt chart is to clarify and thus improve understanding and serve as a focus for discussion.

In manufacturing,charts are used in the following situations:
* the number of work-centers is low . its use is precluded where the numbers are large due to queuing effects and the need to keep the chart dynamic. this,in itself,becomes too big a task to make it worthwhile.

* job duration is measured in days and weeks rather than hours.
otherwise again, it becomes too difficult to reflect the dynamics of the system.

* tugs are short. otherwise the effects of queuing will add a random element into each stage, making the chart unworkable.

there are a large number of reservations with the gant technique. most concern its ability to provide a control function as the complexity of the work increases. it cannot account for hold-ups, for plans only every being 'best estimates' or for plans being undermined by murphy's law (anything that can go wrong, will go wrong). 

Schedule for jobs   M   T   W   Th   F   S   Su
Wages                           *    *
Purchases                            *      *    *
Revenue                                      *    *  *

FIGURE 1.1: A simple Grantt chart-an example chart for an accounts clerk.


The major shortcoming of a gantt chart is that does not provide a method of determine how resources may be optimally allocated. for example, if manpower could be shifted from one activity to another, the second activity might be completed in a shorter time with the first taking longer. would this might be completed in a shorter time with the first taking longer. would this benefit the company overall?this kind of 'what-if?' scenario is not feasible under gantt. also, there is no correlation between activities and cost.

PROGRAM-ME EVALUATION AND REVIEW TECHNIQUES (PERT)
PERT was developed in 1958 by booz allen & hamilton Inc. under contract to the US navy special prijects division for use in the polaris project. It aims to rectify some of the weaknesses of CPA.

CPA only considers single point values for the start and finish times of activities. but it is unlikely that the 'crystal-ball gazing' that takes place in there will be no errors. to take account of the inherent variability in activity time, a distribution is used to characterize the probability of activities finishing within a given margin before/after the estimated duration time.

the following steps are required in developing a PERT analysis. the first steps follow the same procedure needed to  carry out a PERT analysis. The first steps follow the same procedure needed to carry out a critical path analysis.

* earliest start time (EST) for the process or project.
* earliest finish time (EFT) for the process or Project.

The earliest finish time (EFT) is given by the earliest start time (EST), plus
the overall activity duration (DUR) encompassing all activities.

INTRODUCTION TO MARKETING RESEARCH

1.           Define marketing research and distinguish between problem identification and problem solving research.

2.             Describe a framework for conducting marketing research as well as the six steps of the marketing research process. 

DEFINING THE MARKETING RESEARCH PROBLEM

AND DEVELOPING AN APPROACH

1.         Understand the importance of and process used for defining the marketing research problem.

2.         Describe the tasks involved in problem definition, including discussion with decision maker(s), interview with industry experts, secondary data analysis, and qualitative research.

3.         Discuss the environmental factors affecting the definition of the research problem: past information and forecasts; resources and constraints; objectives of the decision maker; buyer behavior; legal environment; economic environment; and marketing and technological skills of the firm.

4.         Clarify the distinction between the management decision problem and the marketing research problem.

5.         Explain the structure of a well-defined marketing research problem including the broad statement and the specific components.

6.         Discuss in detail the various components of the approach: objective/theoretical framework, analytical models, research questions, hypotheses, and specification of information needed.

RESEARCH DESIGN

1.         Define research design, classify various research designs, and explain the differences between exploratory and conclusive designs.

2.         Compare and contrast the basic research designs: exploratory, descriptive, and causal.

3.         Describe the major sources of error in a research design including random sampling error and the various sources of non-sampling error.

4.         Discuss managerial aspects of coordinating research projects, particularly budgeting and scheduling.

5.         Describe the elements of a marketing research proposal and show how it addresses the steps of the marketing research process.

6.         Explain research design formulation in international marketing research.

7.         Understand the ethical issues and conflicts that arise in formulating a research design.

8.         Discuss the use of the Internet and computers in research design formulation.

EXPLORATORY RESEARCH DESIGN:

SECONDARY DATA

 

1.         Define the nature and scope of secondary data and distinguish secondary data from primary data.

2.         Analyze the advantages and disadvantages of secondary data and their uses in the various steps of the marketing research process.

3.         Evaluate secondary data using specifications, error, currency, objectives, nature, and dependability criteria.

4.         Describe in detail the different sources of secondary data including internal sources and external sources in the form of published materials, computerized databases, and syndicated services.

5.         Discuss in detail the syndicated sources of secondary data including household/consumer data obtained via surveys, purchase and media panels, and electronic scanner services, as well as, institutional data related to retailers, wholesalers, and industrial/service firms.

6.         Explain the need to use multiple sources of secondary data and describe single-source data.

7.         Discuss applications of secondary data in computer mapping.

8.         Identify and evaluate the sources of secondary data useful in international marketing research.

9.         Understand the ethical issues involved in the use of secondary data.

10.   Discuss the use of the Internet and computers in researching secondary data.

EXPLORATORY RESEARCH DESIGN:

QUALITATIVE RESEARCH

1.         Explain the difference between qualitative and quantitative research in terms of the objectives, sampling, data collection and analysis, and outcomes.

2.         Understand the various forms of qualitative research including direct procedures such as focus groups and depth interviews, and indirect methods such as projective techniques.

3.         Describe focus groups in detail with an emphasis on planning and conducting focus groups, and their advantages, disadvantages, and applications.

4.         Describe depth interview techniques in detail citing their advantages, disadvantages, and applications.

5.         Explain projective techniques in detail and compare association, completion, construction, and expressive techniques.

6.         Discuss the considerations involved in conducting qualitative research in an international setting.

7.         Understand the ethical issues involved in conducting qualitative research.

8.         Discuss the use of the Internet and computers in obtaining and analyzing qualitative data.

DESCRIPTIVE RESEARCH DESIGN:

SURVEY AND OBSERVATION

1.         Discuss and classify survey methods and describe the various telephone, personal, mail, and electronic interviewing methods.

2.         Identify the criteria for evaluating survey methods, compare the different methods, and evaluate which is best suited for a particular research project.

3.         Explain and classify the different observation methods used by marketing researchers and describe personal observation, mechanical observation, audit, content analysis, and trace analysis.

4.         Identify the criteria for evaluating observation methods, compare the different methods, and evaluate which, if any, is suited for a particular research project.

5.         Describe the relative advantages and disadvantages of observational methods and compare them to survey methods.

6.         Discuss the considerations involved in implementing surveys and observation methods in an international setting.

7.         Understand the ethical issues involved in conducting survey and observation research.

8.         Discuss the use of the Internet and computers in surveys and observation methods.

CAUSAL RESEARCH DESIGN:

EXPERIMENTATION

1.         Explain the concept of causality as defined in marketing research and distinguish between the ordinary meaning and the scientific meaning of causality.

2.         Define and differentiate the two types of validity: internal validity and external validity.

3.         Discuss the various extraneous variables that can affect the validity of results obtained through experimentation and explain how the researcher can control extraneous variables.

4.         Describe and evaluate experimental designs and the differences among pre-experimental, true experimental, quasi-experimental, and statistical designs.

5.         Compare and contrast the use of laboratory versus field experimentation and experimental versus nonexperimental designs in marketing research.

6.         Describe test marketing and its various forms: standard test market, controlled test market, and simulated test market.

7.         Understand why the internal and external validity of field experiments conducted overseas is generally lower than in the United States.

8.         Describe the ethical issues involved in conducting causal research and the role of debriefing in addressing some of these issues.

9.         Discuss the use of the Internet and computers in causal research.

MEASUREMENT AND SCALING:

FUNDAMENTALS AND COMPARATIVE SCALING

1.         Introduce the concepts of measurement and scaling and show how scaling may be considered an extension of measurement.

2.         Discuss the primary scales of measurement and differentiate nominal, ordinal, interval, and ratio scales.

3.         Classify and discuss scaling techniques as comparative and noncomparative, and describe the comparative techniques of paired comparison, rank order, constant sum, and Q-sort scaling.

4.         Discuss the considerations involved in implementing the primary scales of measurement in an international setting.

5.         Understand the ethical issues involved in selecting scales of measurement.

MEASUREMENT AND SCALING:

NONCOMPARATIVE SCALING TECHNIQUES

 

1.         Describe the non-comparative scaling techniques, distinguish between continuous and item­ized rating scales, and explain Likert, semantic differential, and Stapel scales.

2.         Discuss the decisions involved in constructing itemized rating scales with respect to the number of scale categories, balanced versus unbalanced scales, odd or even number of categories, forced versus nonforced choice, degree of verbal description, and the physical form of the scale.

3.         Discuss the criteria used for scale evaluation and explain how to assess reliability, validity, and generalizability.

4.         Discuss the considerations involved in implementing noncomparative scales in an inter­national setting.

5.         Understand the ethical issues involved in developing noncomparative scales.

6.         Explain the purpose of a questionnaire and its objectives of asking questions that the respondents can and will answer, encouraging respondents, and minimizing response error.

7.         Describe the process of designing a questionnaire, the steps involved, and guidelines that must be followed at each step.

8.         Discuss the observational form of data collection and specify the who, what, when, where, why, and way of behavior to be observed.

9.         Discuss the considerations involved in designing questionnaires for international marketing research.

10.      Understand the ethical issues involved in questionnaire design.

SAMPLING: DESIGN AND PROCEDURES

FINAL AND INITIAL SAMPLE SIZE DETERMINATION

1.             Differentiate a sample from a census and identify the conditions that favor the use of a sample versus a census.

2.             Discuss the sampling design process: definition of the target population, determination of the sampling frame, selection of sampling technique(s), determination of sample size, and execution of the sampling process.

3.             Classify sampling techniques as nonprobability and probability sampling techniques.

4.             Describe the nonprobability sampling techniques of convenience, judgmental, quota, and snowball sampling.

5.             Describe the probability sampling techniques of simple random, systematic, stratified, and cluster sampling.

6.             Identify the conditions that favor the use of nonprobability sampling versus probability sampling.

7.             Understand the sampling design process and the use of sampling techniques in international marketing research.

8.             Identify the ethical issues related to the sampling design process and the use of appropriate sampling techniques.

9.             Define the key concepts and symbols pertinent to sampling.

10.          Understand the concepts of the sampling distribution, statistical inference, and standard error.

11.          Discuss the statistical approach to determining sample size based on simple random sampling and the construction of confidence intervals.

12.          Derive the formulas to statistically determine the sample size for estimating means and proportions.

13.          Discuss the nonresponse issues in sampling and the procedures for improving response rates and adjusting for nonresponse.

14.          Understand the difficulty of statistically determining the sample size in international marketing research.

15.          Identify the ethical issues related to sample size determination, particularly the estimation of population variance.

16.          Explain the use of the Internet and computers in statistically determining the sample size.

FIELDWORK

1.             Describe the fieldwork process and explain the selection, training, and supervision of field workers, the validation of fieldwork, and the evaluation of field workers.

2.             Discuss the training of field workers in making the initial contact, asking the questions, probing, recording the answers, and terminating the interview.

3.             Discuss the supervision of field workers in terms of quality control and editing, sampling control, control of cheating, and central office control.

4.             Describe the evaluation of field workers in areas of cost and time, response rates, quality of interviewing, and the quality of data.

5.             Explain the issues related to fieldwork when conducting international marketing research.

6.             Discuss the ethical aspect of fieldwork.

7.             Illustrate the use of the Internet and computers in fieldwork.

FREQUENCY DISTRIBUTION, CROSS-TABULATION,

AND HYPOTHESIS TESTING

1.             Describe the significance of preliminary data analysis and the insights that can be obtained from such an analysis.

2.             Discuss data analysis associated with frequencies including measures of location, measures of variability, and measures of shape.

3.             Explain data analysis associated with cross-tabulations and the associated statistics: chi-square, phi coefficient, contingency coefficient, Cramer’s V, and lambda coefficient.

4.             Describe data analysis associated with parametric hypothesis testing for one sample, two independent samples, and paired samples.

5.             Understand data analysis associated with nonparametric hypothesis testing for one sample, two independent samples, and paired samples.

CORRELATION AND REGRESSION

1.             Discuss the concepts of product moment correlation, partial correlation, and part correlation, and show how they provide a foundation for regression analysis.

2.             Explain the nature and methods of bivariate regression analysis and describe the general model, estimation of parameters, standardized regression coefficient, significance testing, prediction accuracy, residual analysis, and model cross-validation.

3.             Explain the nature and methods of multiple regression analysis and the meaning of partial regression coefficients.

 4.            Describe specialized techniques used in multiple regression analysis, particularly stepwise regression, regression with dummy variables, and analysis of variance and covariance with regression.

5.             Discuss nonmetric correlation and measures such as Spearman’s rho and Kendall’s tau. 

How To Use and Apply The Debit and Credit Rules

(1) Determine the types of accounts the transactions affect-asset, liability, revenue, expense or draw account.
(2) Determine if the transaction increases or decreases the account's balance. 
(3) Apply the debit and credit rules based on the type of account and whether the balance of the account will increase or decrease.  

Simple Debit / Credit Rule:

____________________________________

• All Accounts that Normally Have a Debit Balance are Increased with a Debit by placing the amount in the Left Column of the account and Decreased with a Credit by placing the amount in the Right Column of the account.
• Assets
• Draws
• Expenses

• All Accounts that Normally have a Credit Balance are Increased with a Credit by placing the amount in the Right Column of the account and Decreased with a Debit by placing the amount in the Left Column of the account.
• Liabilities
• Owner's Equity ( Capital )
• RevenueAdditional Clarification:
• 
  
• Since Assets, Draw, and Expense Accounts normally have a Debit Balance, in order to Increase the Balance of an Asset, Draw, or Expense Account enter the amount in the Debit or Left Side Column and in order to Decrease the Balance enter the amount in the Credit or Right Side Column.
  
  
  Likewise, since Liabilities, Owner's Equity (Capital), and Revenue Accounts normally have a Credit Balance in order to Increase the Balance of a Liability, Owner's Equity, or Revenue Account the amount would be entered in the Credit or Right Side Column and the amount would be entered in the Debit or Left Side column to Decrease the Account's Balance.

   

  The Debit and Credit Rules Presented as A Table

• 
  

• Account Type	Normal Balance	Increase To Account Balance	Decrease To Account Balance	Account Example
  Property Accounts
  Asset	Debit	Debit - Left Column Of Account	Credit - Right Column Of Account	Cash, Accounts Receivable
  Property Rights Accounts
  Liability	Credit	Credit - Right Column Of Account	Debit - Left Column Of Account	Accounts Payable
  Owner's Equity	Credit	Credit - Right Column Of Account	Debit - Left Column Of Account	Owner's Capital
  Revenue	Credit	Credit - Right Column Of Account	Debit - Left Column Of Account	Sales
  Costs and Expenses	Debit	Debit - Left Column Of Account	Credit - Right Column Of Account	Rent, Utilities, Advertising
  Owner Draws	Debit	Debit - Left Column Of Account	Credit - Right Column Of Account	Owner Draws

Definitions of Debits and Credits

Debit :

________

• An entry in the financial books of a firm that increases an asset or an expense or an entry that decreases a liability, owner's equity (capital) or income.
• Also, an entry entered on the left side (column) of a journal or general ledger account.

·         Let's combine the two above definitions into one complete definition.

An entry (amount) entered on the left side (column) of a journal or general ledger account that increases an asset, draw or an expense or an entry that decreases a liability, owner's equity (capital) or revenue.

Credit:

__________

• An entry in the financial books of a firm that increases a liability, owner's equity (capital) or revenue, or an entry that decreases an asset or an expense.
• Also, an entry entered on the right side (column) of a journal or general ledger account.

·         Let's combine the two above definitions into one complete definition.
An entry (amount) entered on the right side (column) of a journal or general ledger account that increases a liability, owner's equity (capital) or revenue, or an entry that decreases an asset, draw, or an expense.

The term debit refers to the left side of an account and credit refers to the right side of an account. A debit is always entered in the left hand column of a Journal or Ledger Account and a credit is always entered in the right hand column. Debit is abbreviated Dr. and Credit is abbreviated Cr.

When you post (record) an entry in the left hand column of an account you are debiting that account. Whether the debit is an increase or decrease depends on the type of account. Likewise, when you post (record) an entry in the right hand column of an account you are crediting that account. Whether the credit is an increase or decrease depends on the type of account.

Major Types of Accounts

Assets: 
__________

·         Formal Definition: The properties used in the operation or investment activities of a business.

·         Informal Definition: All the good stuff a business has (anything with value) - The goodies.

Additional Explanation: The good stuff includes tangible and intangible stuff. Tangible stuff you can physical see and touch such as vehicles, equipment and buildings. Intangible stuff is like pieces of paper (sales invoices) representing loans to your customers where they promise to pay you later for 

At the end of a year (period), the revenue and expenses accounts (Ma's Kids) are set to zero and their balances are transferred to a permanent equity account in the Balance Sheet such as Owner's Capital (Mom) or Retained Earnings. This process is what is known as Closing The Books. Since the balances of these accounts are set to zero (closed out) at the end of a period, these accounts are sometimes referred to as temporary or nominal accounts. After closing the books for a year, the only accounts that have a balance are the Balance Sheet Accounts. That's why the Balance Sheet Accounts are also referred to as Permanent Accounts.

Of course the table is based on the Accounting Equation ( Assets = Liabilities + Owner's Equity ) which must be kept in balance and double-entry accounting, where for every debit to an account there must be an equal credit to another account. 

your services or product. Examples of assets that many individuals have are cars, houses, boats, furniture, TV's, and appliances. Some examples of business type assets are cash, accounts receivable, notes receivable, inventory, land, and equipment.

 Liabilities:

_____________

Formal Definition: Claims by creditors to the property (assets) of a business until they are paid.

Informal Definition: Other's claims to the business's good stuff. Amounts the business owes to others.

Additional Explanation: Usually one of a business's biggest liabilities (hopefully they are not past due) is to suppliers where a business has bought goods and services and charged them. This is similar to us going out and buying a TV and charging it on our credit card. Our credit card bill is a liability. Another good personal example is a home mortgage. Very few people actually own their own home. The bank has a claim against the home which is called a mortgage. This mortgage is another example of a personal liability. Some examples of business liabilities are accounts payable, notes payable, and mortgages payable.