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DR. VIKAS GUPTA
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A business organisation is also a socialunit. It uses the societys resources andproduces goods and services for which
the society is the ultimate consumer.Thus, a business unit owes its veryexistence to the society. It is, therefore,
necessary that a business shouldoperate within the overall parametersdetermined by the society.
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Similarly, the society is also to see thatsuch business activities should beundertaken which are beneficial to the
society as a whole. Keeping thisobjective in view, the Governments, bothin free and controlled economies enactsuch appropriate legislation for
regulating growth and development ofbusiness which they consider necessaryin the overall national interest.
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The basic philosophy behind thisarrangement is that all sectors of theeconomy, public or private, small or big,
should work for the overall good of thesociety.
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The concept of social cost benefit is nowincreasingly applied to the private sectoralso. The private sector also uses the
resources of the society and, therefore,it has moral responsibility to undertakeonly such projects which are socially
desirable.
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It should, while analysing capitalexpenditure proposals, keep in view thesocial contribution aspect. In other
words, besides commercial viability ofthe project, it should also see theassociated cost and benefits to the
society.
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The concept of social cost benefit hasnow started taking practical shape. ThePlanning Commission has already
decided that in future the feasibilitystudies for the public sector projects willinclude an analysis of the social rate of
return.
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Measurement of social costbenefit
The following are some of the indicators/criteria which can be used for measuringthe social costs and benefits associated
with the projects. Employment potential
Capital output ratio
Value added per unit of capital
Savings in foreign exchange
Cost benefit ratio
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Social accounting
Social accounting is concerned with themeasurement and disclosure of costsand benefits to the social as a result of
operating activities of a businessenterprise. Thus, social accountingmeasures social costs and social
benefits as a result of business activitiesfor communication to various groupsboth within and outside the business.
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Objective of social accounting
Measurement of net social contribution:social accounting aims at identifying and
measuring the periodic net socialcontribution of a firm. This includes theaggregate of net benefits to the
companys employees, to thecommunity and to the general people.
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Balance between firms strategies andsocial priorities: social accounting helpsin determining whether the firms
strategies and polices are consistentwith the legitimate individual aspirationsand also with the overall priorities of the
community and the society.
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Communication of information: socialaccounting aims to make availableinformation of a firms goals, policies,
programme, contribution to social goalsetc. To all segments of the society.
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Reporting of social cost benefitinformation
Social statement approach: according to thisapproach, two statements are prepared (i)Social Income Statement and (ii) SocialBalance Sheet. The social income statementprovides information according to socialbenefits and costs to employees, localcommunity and the general public. Socialbalance sheet portrays social investment ofcapital nature (i.e., social assets) viz.Township, roads, buildings, hospitals, schools,clubs, etc. On the assets side and theorganisations equity and social equity on theliabilities side.
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Operating statement approach:according to this approach, a firmpresents only the positive and negative
aspects of social activities as a result ofbusiness operations. The positiveaspects are broadly termed as socialbenefits
while negative aspects aretermed as socialcosts.
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Narrative approach: in case of thisapproach, disclosure regarding socialcost and social benefits is made in a
narrative and not in a quantitative form.The firm generally highlights the positiveaspects of its social activities.
Goal oriented approach: according tothis approach, the firm prepares of itssocial and economic goals or objectives.
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Pictorial approach: social activitiesundertaken by an enterprise arepresented in the form of pictures. The
annual reports contain photographs ofschool, hospital, club, Public Parkestablished and/or maintained by thefirm.
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Examples
Social benefits to staff:
Medical facility
Training programme
Concessional transport, water supply Educational facilities for children of staff
members
Social costs to staff: Extra work put in by staff and officers for
drought relief
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Social benefits to community:
Environmental improvements
Generation of job opportunities
Municipal taxes
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