How Business Operate

Table of Contents
Introduction................................................................................................................................3

Task 2: Business Function.........................................................................................................4

1) Importance of Accounting for business success................................................................5

2) Function of Human Resource Department.......................................................................5

3) Key features of employment legislation............................................................................6

Task 3: Accounting workshop...................................................................................................7

Information on the profit and loss account............................................................................7

Task 4: Team..............................................................................................................................9

Member’s role within a team.................................................................................................9

Stages of team development.................................................................................................10

Motivational Theories..........................................................................................................10

Types of Leadership.............................................................................................................12

Conclusion................................................................................................................................13

References................................................................................................................................14
Introduction

To analyze how business operates, at first need to know what is business? Any legal,

financial activities directed to earn profit is known as business. To earn profit it is essential to

know how a business can be operated properly. In order to know how a business operates,

some factors will help to understand it properly. This task will discuss about how

environmental factors affect business, what is the function of the business, how accounting

will help to take decision, what is the function of human resource department and key

employment legislation. This will also discuss about the profit and loss account, team, role of

team member, team development, leadership style, motivational theories. Customer is the

most important part of an organisation; it will discuss about what happen if the customer is

satisfied and dissatisfied and the importance of customer profiling.

Task 2: Business Function

The process which is followed by the organisation to accomplish a portion of the mission

regularly is known business function. (Thompson, 2011)

Figure: Business Function

Source: SlideShare
1) Importance of Accounting for business success

Accounting is the process of measuring, recording, processing and communicating relevant

information to the interested user. ‘Larrimore, Burkhauser and Armour (2013)’

Importance of accounting:

Accounting importance in planning: Planning is the process by which organisation decide

what to do in the future. Planning include procurement planning, cash planning, sales

planning. Accounting helps to set this plan properly.

Accounting importance in Budgeting: By budgeting organisation determine revenue and

expense for a specified period of time. Accounting helps to set a proper budget by providing

historical information.

Accounting importance in monitoring: By monitoring organisation compare actual result

with estimated result and take measure to solve. Accounting helps in the monitoring process

by helping to compare the result.

2) Function of Human Resource Department

Man power is one of the key elements of an organisation. Without using these elements

properly an organisation cannot achieve its goal. ‘Merriman (2017)’

Function of human resource department:

Recruitment: Recruitment is the process by which freshers are added to the organisations.

This process includes advertising, source candidates, screening, taking interviews and finally

hiring.
Safety: Safety is one the main concern for every organisation. Under Occupational Safety

and Health Act 1970, every employer needs to ensure the safety of the employee.

Employee relation: Establishing relationship between employee and employer is very

important to achieve success. It helps to strengthening employee-employer relationship.

Compensation and benefit: Giving employee a proper compensation is very important for

employee satisfaction. Satisfied employee led the organisation to success.

Compliance: Every organisation needs to obey the rules and regulation of labour act. If any

organisation fails to copy with rules and regulation then it may be result in workplace

conflict.

Training and development: To increase employee skill there is no alternative of training.

Training wills the employee of the organisation to work efficiently and effectively.

3) Key features of employment legislation

Employee legislation in UK are categorised in three major areas. Those are:

Employment right: Every employee should have the right of employment. There should be

no discrimination.

Equalities and discrimination: Equalities should be maintained in every stage of the

organisation. Organisation tries to eliminate discrimination.

Health and Safety: Under Occupational Safety and Health Act 1970, every employer need to

ensure safety factor of the employee.

Task 3: Accounting workshop

The process of determining which accounting method to use to solve the problem of the

organisation is called accounting workshop. ‘Warren (2012)’

Information on the profit and loss account

Every organisation want to know about the financial position of the organisation after

specific period of time in order to determine whether the organisation make profit or not.

‘Marginean, Mihaltan and Todea (2015)’ Information includes in the profit and loss accounts

are:

Revenue: The total of selling price of product and service rendered is called revenue. Form

revenue sales return and discount are deducted.

Cost of goods sold: Cost of goods sold is the total cost which is used to produce the revenue

during the period. Cost of goods sold includes direct cost and overhead cost.

Gross profit/loss: Gross profit calculated by deducting cost of sold form revenue.

Operating expense: Selling and administrative expense are operating expense. Selling

expense include transportation outward, advertising expense and sales commission.

Administrative expense includes salary, insurance, depreciation etc.

Operating income/loss: Operating income calculated by deducting operating expense form

gross profit.

Other income and expense: Other income and expense includes dividend, interest income,

interest expense etc.

Income before income tax: This is the adjustment of other income and expense with

operating income/loss.
Income tax: This tax is calculated on the reported income of the organisation.

Net income: By deducting income tax form income before income tax net is calculated.

Earnings per share: Earnings per share is earning for every share. This can be calculated by

Net income after tax ÷Average Number of Common Shares

Task 4: Team

For achieving a common goal when two or more people working together is called a team.

‘WANG (2013)’

Figure: Team

Source: Humanengineers (2014)

Member’s role within a team

Every member by which a team is formulated has a certain role to play to achieve the goal of

the organisation. ‘Wageman, Gardner, and Mortensen (2012)’

Some of them are:

Shaper role: Shaper are the person who establish interpersonal communication and try to

motivate others member of the team. Shapers are normally extrovert and dynamic in nature.

Implementer role: These are the person who actually does the work. Implementer tries to

convert the idea of the team into plan.

Finisher role: Finisher is the person who controls. These people set materiality and if there is

any error try to solve it.

Coordinator role: Coordinator assigns duties to the member of the team. These people

organised work to achieve goal.

Stages of team development

In 1965 a psychologist name Bruce Tuckman indicates 5 stages of group development. Those

are:

Forming: In this the team is first introduced. Member of the group discuss about timeline,

rules goal. In this stage mostly focuses on people.

Storming: Here every team member understands the reality of the risk. Team member

personality clash happened. But when working together it is very common.

Norming: In this stage member of team started to work together, try to accept each other.

Performing: This is the stage for what the team is formed. The member of the team try

achieves the goal.

Adjourning: After achieving the goal the team is dissolved at this stage.

Motivational Theories

The ways of encouraging people in the workplace is known as motivation. This is the

common tool for the managers to get done or achieving goal. Some of the motivational

theories are:
Hertzberg’s Two Factor Theories

This theory is developed by Fredrick Hertzberg in 1950s. Hertzberg described two factors

which may influence motivation. Those are:

Hertzberg’s Motivators Factors

Satisfied Not Satisfied

Figure: Motivators Factor

Source: Author

Hertzberg’s Hygiene Factor

Not Dissatisfied Dissatisfied Dissatisfied

Figure: Hygiene Factor

Source: Author

Maslow’s hierarchy of needs

A psychologist named Abraham Maslow given this theory in 1943. In a paper which named

“A Theory of Human Motivation”. In this there are 5 levels of motivation those are:

Psychological: Psychological need include water, food and shelter.

Safety: This need includes financial and personal safety.

Belonging: Belonging is the need for relationships, family and friendship.

Esteem: In this need people want to feel confident and respected.

Self-actualisation: Self-actualisation is the desire to acquire everything what a man can

obtain.

Expectancy theory

This theory said that a man works in the basis of what they want in return. In other word

people work to fulfil their desire. ‘Miller (2010)’

Types of Leadership

Leadership is the process of directing people in order achieves a specific goal. (Devlin, 2015)

Some leadership types are:

Democratic leadership: In a democratic leadership model, leader consults with the

subordinate to take decision. In this model of leadership leader has a positive view about the

subordinate.

Autocratic leadership: In this type of leadership leader have all the power. Before taking

decision leader does not consult with subordinate and have a negative view of the

subordinate.

Laissez faire leadership: In laissez faire leadership leader give all the power to the

subordinates and remain silent.

Conclusion

The main purpose of conducting business is to earn profit. For maximizing profit it is

essential to know how business operates. For that, this study discuss about how different

types of business environment affect business, what is the importance of accounting, how

human resource department functions and what are the key employment legislations. This

also discuss about profit and loss account component, what is the role of the member in a

team, how a team can be developed, motivational theories and leadership. And finally discuss

about the importance of customer service, what happened when the customer are satisfied and

dissatisfied. To understand how business operates properly, these all factors need to be

understood.
References

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 Larrimore, J., Burkhauser, R. and Armour, P. (2013). Accounting for Income Changes over

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National Bureau of Economic Research.

Marginean, R., Mihaltan, D. and Todea, N. (2015). Structure Ratios of Profit and Loss

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Merriman, K. (2017). Valuation of Human Capital. Cham: Springer International Publishing.

Miller, B. (2010). Nice teams finish last. New York: American Management Association.

Patrascu, D. (2015). The Importance of Accounting Principles in the Accounting

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 Thompson, T. (2011). Benchmarking the finance function. Florham Park, NJ: Financial

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 Wageman, R., Gardner, H. and Mortensen, M. (2012). The changing ecology of teams: New

directions for teams research. Journal of Organizational Behavior, 33(3), pp.301-315.

 WANG, Z. (2013). Work Engagement Crossover in Teams. Advances in Psychological

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 Warren, C. (2012). Accounting workshop. [Place of publication not identified]: Thomson

Learning.