40 Hadith on the Qur'an

Chapter: The Magnificence, Grandeur and Superiority of the Qur'an

1. The Prophet Muhammad (s.a.w) said, "The superiority of the speech of Allah compared to all other speech is like the superiority of Allah over His creation."
Source: Tirmidhee no. 2926 - [Hasan]

2. The Prophet Muhammad (s.a.w) said, "Every Prophet was given miracles because of which people believed, but what I have been given is Divine Inspiration which Allah has revealed to me. So I hope that my followers will outnumber the followers of the other Prophets on the Day of Resurrection."
Source: Bukhari no. 4981, Muslim no. 152 - [Sahih]

The Prophet Muhammad (s.a.w) said, "Indeed Allah, through this Book, raises some peoples and lowers others."
Source: Muslim no. 996 - [Sahih] 

Chapter: The Level of Prophethood

3. The Prophet Muhammad (s.a.w) said, "Whoever recites the Qur'an secures knowledge of prophethood within his ribs [bosom], though Divine Revelation is not sent upon him. It does not befit one endowed with the Qur'an that he should be indignant with those in anger, nor should he indulge in any act of ignorance with those who are ignorant, while the Speech of Allah is there in his chest."
Source: Hakim, Targhib wa Tarhib no. 2/301 - [Sahih]

The Prophet Muhammad (s.a.w) said, "You will not come back to Allah with anything better than that which came from Him, i.e. the Qur'an."
Source: Mastadrik al-Hakim no. 2077 - [Sahih]

Chapter: Most Precise and Accurate

4. The Prophet Muhammad (s.a.w) said, "The most accurate and truthful speech is the Book of Allah [swt]"
Source: Nisa'i no. 1578 - [Sahih]

The Prophet Muhammad (s.a.w) said, Allah [swt] said, "I have sent you [O Prophet] in order to put you to test and put those to test through you. And I sent the Book to you which cannot be washed away by water, so that you may recite it while in the state of wakefulness and sleep.
Source: Hadith Qudsi, Muslim no. 2865a - [Sahih]

Chapter: The Qur'an is Pure and Undistorted

Ibn Abbas said, "How can you ask the people of the Scriptures about their Books while you have Allah's Book [the Qur'an] which is the most recent of the Books revealed by Allah, and you read it in its pure undistorted form?"
Source: Bukhari no. 7522 - [Sahih]

Chapter: Reciting the Qur'an is a Light for You

The Prophet Muhammad (s.a.w) said, "It is imperative for you to have Taqwa [fear/consciousness of Allah] for this is the accumulation of all good. And upon you is Jihad in the path of Allah for it is the monasticism of the Muslims. [Finally]...upon you is the Remembrance of Allah and the recitation of His Book, for it is light for you on earth and [a means by which] you will be mentioned in the Heavens."
Source: Targhib wa-Tarhib no. 4/24, Jami as-Sagheer no. 5495 - [Sahih]

Chapter: Having doubt in the Qur'an is Kufr

5. The Prophet Muhammad (s.a.w) said, "...Having doubt in the Qur'an is [kufr] disbelief...."
Source: Abu Dawud no. 4603 - [Ha-san]

Chapter: The Qur'an - an Intercessor

The Prophet Muhammad (s.a.w) said, "Fasting and the Qur'an will intercede for the slave on the Day of Judgement. Fasting will say, 'O My Lord! I prevented him from food and desires, so accept my intercession for him.' And the Qur'an will say, 'I prevented him from sleep during the night, so accept my intercession for him.' ....thus they will intercede."
Source: Musnad Ahmad no. 6337 - [Sahih]

Chapter: The Qur'an as your Leader - guides you to Paradise. Placing behind your back leads to Hell

6. The Prophet Muhammad (s.a.w) said, "The Qur'an is an intercessor and it's intercession is accepted and its plea is believed. Whoever makes it lead him - it leads him to Paradise and whomsoever places it behind him [the result will be] he is dragged to the Fire."
Source: Ibn Hibban no. 124, - [Sahih]

Chapter: The Qur'an is a Proof/Evidence in your Favour or against You

The Prophet Muhammad (s.a.w) said, "Cleanliness is half of faith and Alhamdulillah [Praise be to Allah] fills the scale, and Subhan Allah [Glory be to Allah] and Alhamdulillah [Praise be to Allah] fill up what is be-tween the heavens and the earth, and prayer is a light, and charity is proof [of one's faith] and patience is a brightness and the Qur'an is a proof on your behalf or against you."
Source: Muslim no. 223 - [Sahih]

Chapter: Ramadhan: The Month of Various Revelations

The Prophet Muhammad (s.a.w) said, "The Suhuf [scrolls] of Ibrahim were revealed on the 1st night of Ramadhan. The Torah was revealed on the 6th of Ramadhan. The Injeel [Gopel] was revealed on the 13th of Ramadhan. The Zabur on the 18th of Ramadhan. And the Qur'an on the 24th of Ramadhan"
Source: Jami as-Sagheer, Suyuti no. 2734 - [Hasan]

Chapter: The Best amongst the Muslims

7. The Prophet Muhammad (s.a.w) said, "The best of you are those who learn the Qur'an and teach it"
Source: Bukhari no. 5027, Tirmidhee no. 2909 - [Sahih]

8. The Prophet Muhammad (s.a.w) said, "Allah has His own people among mankind." They said: "O Messenger of Allah, who are they?" He said: "The people of the Qur'an, the people of Allah and those who are closest to Him'"
Source: Ibn Majah no. 215 - [Hasan]

Jabir ibn Abdullah said, "Allah's Messenger shrouded every two martyrs of Uhud in one piece of cloth and then he would ask, "Which of them knew more Qur'an?" When one of them was pointed out he would put him first in the grave"
Source: Bukhari no. 1347 - [Sahih]

Abdullah ibn Masood said, "The bearer of the Qur'an should be known by his night when the people are sleeping; by his day when people are awake; by his sadness when people are joyous; by his weeping when people are laughing."
Source: Nawawi in Tibyan al-Adab fi Hamalatul Qur'an

The Prophet Muhammad (s.a.w) said, "If anyone prays at night reciting regularly ten verses, he will not be recorded among the negligent [ghafileen]; if anyone prays at night and recites a hundred verses, he will be recorded among those who are devout [qaniteen] to Allah; and if any-one prays at night reciting one thousand verses, he will be receive an immeasurable amount of reward."
Source: Abu Dawud no. 1398 - [Sahih]

Chapter: Amongst all the Creation - Whose Faith is most astounding?

9. The Messenger of Allah said, "Whose Faith [Iman] amongst the various creations astounds you?" They [the Companions] said, "The Angels" He said, "The Angels - Why would they not Faith [when they are with their Lord]" They [then] said, "The Prophets" He said, "The Prophets receive revelation so how would they not believe?" They [then] said, "[Us] the Companions" He said, "The Companions whom are with the Prophets - so how would they not believe? - However the Faith of people which is amazing and astounding is those who come after you who find Books which has written in them revelation [the Qur'an] - and hence they believe in it and obey and follow it - they are the ones whose Faith is [truly] astounding."
Source: Bazzar no. 3/318, Silsilah Ahadeeth as-Saheehah no. 3215 - [Sahih]

Chapter: Legislation/Judgement belongs to Allah 

10. The Messenger of Allah sent Mu'adh to Yemen, so He said: "How will you judge?" He said: "I will judge according to what is in Allah's Book." He said, "If it is not in Allah's Book?" He said: "Then with the Sunnah of the Messenger of Allah "He said: "If it is not in the Sunnah of Messenger of Allah ?" He said: "I will endeavour to make Ijtihad [exert effort to make the correct judgement]." He said: "All praise is due to Allah, the One Who made the messenger of the Messenger of Allah suitable."
Source: Tirmidhee no. 1327 

Chapter: In-fighting when Leaders do not Rule by the Qur'an

The Messenger of Allah said, "O Muhajirun, there are five things with which you will be tested, and I seek refuge with Allah lest you live to see them: Immorality never appears among a people to such an ex-tent that they commit it openly, but plagues and diseases that were never known among the predecessors will spread among them. They do not cheat in weights and measures but they will be stricken with famine, severe calamity and the oppression of their rulers. They do not withhold the Zakah of their wealth, but rain will be withheld from the sky, and were it not for the animals, no rain would fall on them. They do not break their covenant with Allah and His Messenger, but Allah will enable their enemies to over-power them and take some of what is in their hands. Unless their leaders rule according to the Book of Allah and seek all good from that which Allah has revealed, Allah will cause them to fight one another."
Source: Ibn Majah no. 4019 - [Sahih]

Chapter: Importance of Studying and Teaching the Qur'an

11. The Prophet Muhammad (s.a.w) said, "This Qur'an is the Banquet of Allah. Learn as much as you can from His banquet. This Qur'an is the Rope of Allah, and it is the clear Light and [the effective and beneficial] Healing. It is a protection for the one who clings to it and a rescue for the one who follows it. It is not crooked and so puts things straight. It does not deviate so as to be blamed. Its wonders do not cease. It does not wear out with much repetition. So recite it for Allah will reward you for the recitation of every letter...." [Also Abdullah ibn Masud said, 'This Qur'an is the Banquet of Allah. Whoever enters it is safe.']
Source: Hakim no. 1/555, Darimi - [Sahih]

Qurtubi in his introduction to his tafsir quotes an explanation to this hadeeth as, '[the Banquet] is a metaphor. The Qur'an is likened to something Allah has prepared for people. They have good and benefits in it. Then He has invited them to it"

12. The Prophet Muhammad (s.a.w) said, "...A group of people do not gather in a house amongst the Houses of Allah [i.e. Masjid] reciting the Book of Allah and studying it between themselves - except that tranquillity descends upon them, they are enveloped by mercy and surrounded by the angels - and Allah mentions them with those with Him. [i.e. the higher angels]
Source: Muslim no. 9/1023, Abu Dawud no. 1455 - [Sahih]

Qurtubi quotes a saying in his tafsir, "The metaphor of those who recite the Qur'an without knowing its tafsir [explanation] is that of some people to whom a letter comes from their king at night when they have no lamp. They are alarmed, not knowing what the letter contains. The metaphor of the one who knows the tafsir [explanation] is that of a man who brings them a lamp so that they can read what the letter says."

The Prophet Muhammad (s.a.w) said, "Whoever teaches one verse of the Book of Allah Al-mighty, he will be rewarded [every time] it is recited."
Source: Silsilah Ahadeeth as-Saheehah no. 1335 - [Sahih]

Chapter: Parents Honoured due to a Child's Relationship with the Qur'an

13. The Prophet Muhammad (s.a.w) said, "Whoever recited the Qur'an, studied it, and acted according to what it contains; on the Day of Judgment his parents will be dressed with a crown of light, its brightness is like that of the sun. And his parents will be adorned with two bracelets, of which the whole world is not equivalent to them [in worth]. So they will say, 'Why are we being adorned with these?' It will be said, 'This is because of your child taking [the recitation, teaching and acting upon] the Qur'an."
Source: Hakim, Targhib wa Tarhib - [Sahih]

Chapter: A Warning Not to Learn the Qur'an From...

14. The Prophet Muhammad (s.a.w) said, "Learn [study] the Qur'an, and ask Allah [swt] to grant you Paradise by it, before when there comes people who learn it and ask by it, the worldy pleasures. Indeed, the Qur'an is learnt by three types of people:
- A man who shows off by it
- A man who eats by it [money, dunyah]
- A man who recites it for the sake of Allah [swt]."
Source: Baihaqi, Shu'b al-Iman no. 2405 - [Sahih]

15. The Prophet Muhammad (s.a.w) said, "Read the Qur'an and act by it. And do not abandon it, do not exceed its limits, do not eat with it [i.e. money] and do not seek more by using it."
Source: Variation quoted by Nawawi in Tibyan, Sahih al-Jami no. 1168 - [Sahih]

Chapter: A Warning to those who Misuse the Qur'an and have an Incorrect/Corrupt Intention

16. The Prophet Muhammad (s.a.w) said, "[on the Day of Judgement]...and a man who acquired knowledge and taught others, and read Qur'an. He will be brought, and Allah will re-mind him of His blessings, and he will acknowledge them. He [swt] will say, 'What did you do with them?' He will say, 'I acquired knowledge and taught others, and read the Qur'an for Your sake.' He [swt] will say, 'You are lying. You acquired knowledge so that it would be said that you were a scholar; and you read Qur'an so that it would be said that you were a Reciter, and it was said.' Then He will order that he be dragged on his face and thrown into the Fire."
Source: Muslim no. 1905a - [Sahih]

Chapter: A Warning to those who interpret the Qur'an Insincerely - without Knowledge and merely following their personal views

17. The Prophet Muhammad (s.a.w) said, "Whoever says [something] about the Qur'an without knowledge, then let him take his seat in the Fire."
Source: Tirmidhee no. 2950 - [Ha-san]

The Prophet Muhammad (s.a.w) said, "And whoever says [some-thing] about the Qur'an according to his [own] opinion, then let him take his seat in the Fire."
Source: Tirmidhee no. 2951 - [Ha-san]

Chapter: Argumentation

The Prophet Muhammad (s.a.w) said, "Do not argue in the Qur'an [meaning do not op-pose/argue against what the Qur'an says] for in this arguing is Disbelief"
Source: Jami as-Sagheer no. 9739 - [Sahih]

The Prophet Muhammad (s.a.w) said, "Do not argue using the Qur'an [i.e. in a dispute with one another]. [The negative result would be] you would deny the Book of Allah by using [one ayat] against another [ayat]. I swear by Allah indeed the Believer if he is argued against with the Qur'an he [out of respect] will loose [not continue the argument]...indeed the hypocrite, if he argues using the Qur'an, he will win [the argument because the Believer will not argue back]
Source: Silsilah Ahadeeth as-Saheehah no. 3447 - [Sahih]

The Prophet Muhammad (s.a.w) said, "Indeed what I fear most for you all is that a man recites the Qur'an until you can see the effects on his face [enlightened] and he will be like a shield for Islam by the permission of Allah, then he detaches himself [from the Qur'an], he 'threw' it behind himself and he rushed upon his neighbour with the sword and he will accuse him of Shirk [polytheism]"
One of the companions said "O Prophet of Allah which of them will be the polytheist, the accuser or the one accused? He said, "The accuser."
Source: Ibn Hibban no. 81 - [Sahih]

Chapter: Taddabbur [Pondering] on the Deep Meanings of the Qur'an

Hasan al-Basri [one of the Tabi'een] said, "There was not revealed a [single] Ayat from the Qur'an except that it has a Dhahir [an apparent] and Batin [inner] and every letter has a value [measure] - and for every value is an ending."
Source: Baghawi, Sharh us Sunnah no. 1/214

Abdullah ibn Masood, the Companion, said, "When you intend to acquire knowledge, deeply study the Qur'an for in it lies the [principles] of knowledge of the ancients and future generations."
Source: Ghazali, Kitab Adab Tilawat ul Qur'an

Hasan ibn Ali said, "The people before you considered the Qur'an to be correspondence from their Lord, so they would ponder it by night and perform it by day."
Source: Nawawi, Tibyan fi Adab Hamalatul Qur'an

Aishah said, "The Prophet spent the night [in prayer] with [a single verse] Ayah from the Qur'an."
Source: Tirmidhee no. 448 - [Sahih]

Ibn Taymiyah said, "Whoever contemplates [tadabbur] upon the Qur'an [with the condition] of seeking guidance from it, [then] the path of truth will be made clear."
Source: Aqeedah tul Wasityah

Chapter: Etiquettes and Virtues of Reciting the Qur'an

18. The Prophet Muhammad (s.a.w) said, "Allah listens more attentively to a man with a beautiful voice who recites Qur'an out loud than the master of a singing slave-girl listens to his slave."
Source: Ibn Majah no. 1340, Ibn Hibban no. 754 - [Sahih - according to Ibn Hibban, Suyuti and Ibn Taymiyah]

19. The Prophet Muhammad (s.a.w) said, "Beautify the Qur'an with your voices for indeed the nice voice in-creases the beauty of the Qur'an"
Source: Baihaqi - Shu'bul Iman no. 2/868 - [Sahih]

20. The Prophet Muhammad (s.a.w) said, "Whoever recites a letter from Allah's Book, then he receives the reward from it, and the reward of ten the like of it. I do not say that Alif Lam Mim is a letter, but Alif is a letter, Lam is a letter and Mim is a letter."
Source: Tirmidhee no. 2910 - [Ha-san]

The Prophet Muhammad (s.a.w) said, "The one who does not recite the Qur'an in a melodious manner is not from us"
Source: Bukhari no. 7527 - [Sahih]

21. The Prophet Muhammad (s.a.w) said, "...Recite the Qur'an in [your houses]. For the inhabit-ants of the heavens see them like people on earth see the stars."
Source: Syar Alam an-Nubalah, Dhahabi no. 8/29, Silsilah Ahadeeth as-Saheehah no. 3112 - [Sahih]

22. The Prophet Muhammad (s.a.w) said, "Purify [clean] your mouths with the siwak [tooth-stick] for indeed it [the mouth] is the pathway of the Qur'an."
Source: Baihaqi - Shu'bul Iman no. 2/862 - [Sahih]

The Prophet Muhammad (s.a.w) said, "The one who recites the Qur'an loudly is like one who gives charity openly, and the one who recites the Qur'an silently is like the one who gives charity in secret."
Source: an-Nisa'i no. 1663, - [Hasan]

23. The Prophet Muhammad (s.a.w) said, "Indeed the best of people who recite is one whom when you hear his recitation you can see that he Fears Allah."
Source: Hiyatul Awliyah no. 4/21 - [Sahih]

The Prophet Muhammad (s.a.w) said, "The parable of the believer who recites the Qur'an is that of a sweet citrus fruit, its fragrance is nice and its taste is nice. The parable of the believer who does not recite the Qur'an is that of a date, it has no smell but its taste is sweet. The parable of the hypocrite who recites the Qur'an is that of basil, its fragrance is nice but its taste is bitter. The parable of the hypocrite who does not recite the Qur'an is that of the colocynth [bitter desert fruit], its smell is better and its taste is bitter."
Source: Tirmidhee no. 2865 - [Sahih]

The Prophet Muhammad (s.a.w) said, "And recite the Qur'an in the early dawn. Verily the recitation of the Qur'an in the early dawn is ever witnessed [17:78]." The Prophet said, "It is witnessed by the angels of the night and the angels of the day."
Source: Tirmidhee no. 3135 - [Sahih]

24. Abdullah ibn Amr says, Allah's Messenger said to me, "Recite the whole Qur'an in a month." I said, "But I have the power [to do more than that]." Allah's Messenger said, "Then finish the recitation of the Qur'an in seven days, and do not finish it in less than this period."
Source: Bukhari no. 5054 - [Sahih]

The Prophet Muhammad (s.a.w) said, "Envy is not justified but in case of two persons only: one who, having been given [knowledge of] the Qur'an by Allah, recites it during the night and day [and also acts upon it] and a man who, having been given wealth by God, spends it during the night and the day [for the welfare of others seeking the pleasure of their Lord]."
Source: Muslim no. 815a - [Sahih]

Chapter: Disturbing others whilst reciting the Qur'an

25. The Prophet Muhammad (s.a.w) said, "When someone is in Salah [prayer] then they are in deep conversation with their Lord Almighty so you should see if anyone is engaged in this deep conversation with their Lord [i.e. Salah] and do not make your voices loud one over the other in your recitation [of the Qur'an]."
Source: Musnad Ahmad no. 7/188 - - [Hasan]

Chapter: The Prophet Muhammad (s.a.w)'s Relationship with the Qur'an

26. Bar'a said, "I heard the Prophet reciting Surat at-Tin waz Zaitun [95: By the Fig and the Olive] in the Isha prayer and I have never heard anybody with a better voice or recitation than his."
Source: Bukhari no. 7546 - [Sahih]

In describing the Prophet's recitation of the Qur'an, one of the companions said, "He [the Prophet] would extend his voice appropriately and clearly [every letter would be pronounced properly] - [Abu Dawud no. 1465 - [Sahih]
The Prophet Muhammad (s.a.w) said, "Allah does not listen so attentively to anything as He listens to the recitation of the Qur'an by a Prophet who re-cites it well with a melodious and audible voice."
Source: Muslim no. 793b - [Sahih]

27. "One of the Companions said, "I saw the Messenger of Allah and he was praying - his chest sounded like boiling water due to [him] crying."
Source: Ibn Hibban no. 753 - [Sahih]

28. Abdullah ibn Masud said, "The Messenger of Allah asked me to recite the Qur'an." He said "Messenger of Allah, [how] should I recite to you whereas it has been sent down to you? He [the Prophet] said, "I desire to hear it from some-one else." "So I recited Surat an-Nisa [4] till I reached the verse: "How then shall it be when We shall bring from every people a witness and bring you against them as a witness?" [4:41]. I lifted my head or a person touched me in my side, and so I lifted my head and saw his tears falling [from the Prophet's eyes].
Source: Muslim no. 800a - [Sahih]

Chapter: The Prophetic Character

29. Someone asked Aishah, Mother of the Believers, "Tell me about the character of the Messenger of Allah " She said, "Do you not read the Qur'an?" I said: "Yes." Upon this she said: "The character of the Messenger of Allah was the Qur'an. "He said: "I felt inclined to get up and not ask anything [further] till death [due to the answer being so profound]"
Source: Muslim no. 746a, an-Nisa'i no. 1601, - [Sahih]

Chapter: Virtue of the Memorizers [hufadh] of the Qur'an

30. The Prophet Muhammad (s.a.w) said, "It shall be said to the Companion of the Qur'an, 'Recite [of what you have memorized] and rise up, recite [melodiously] as you would recite in the world. For indeed your rank shall be at the last Ayah [verse] you recite."
Source: Tirmidhee no. 2914 - [Ha-san]


The Prophet Muhammad (s.a.w) said, "The one who learns the Qur'an is like the owner of a hobbled camel. If he pays attention to it, he will keep it, but if he releases it, it will go away."
Source: Bukhari no. 5031 - [Sahih]

31. The Prophet Muhammad (s.a.w) said, "It is a bad thing that some of you say, 'I have forgotten such-and-such verse of the Qur'an,' for indeed, he has been caused [by Allah] to forget it. So you must keep on reciting the Qur'an because it escapes from the hearts of men faster than camel do."
Source: Bukhari no. 5032 - [Sahih]

Abdullah ibn Masood, the Companion said, "It was difficult for us to memorise the words of the Qur'an but easy for us to act by them. After us will be people for whom it is easy to memorise the Qur'an, but hard to act by it."

Chapter: Not using Memorized Ayat in the Prayer causes forgetfulness

32. The Prophet Muhammad (s.a.w) said, "When the Companion of the Qur'an performs Salah, re-citing it by night and day, he retains it and if he doesn't [use it in] Salah he forgets."
Source: Silsilah Ahadeeth as-Saheehah no. 597 - [Sahih]

Chapter: Holding on to the Qur'an - Never go Astray

33. The Prophet Muhammad (s.a.w) said, "...And I have left you two heavy [important issues]: The first of them is the Book of Allah. In it is the Guidance and the Light. Whoever holds firmly to it and takes from it he [then] is upon the Guidance. Whoever errs with respect to it goes astray. So take from the Book of Allah Almighty and hold firmly to it. [the second thing] is Ahl - Bayti [My Family - included wives, children, son-in law etc] I remind you by Allah with regard to My Family, I re-mind you by Allah with regard to My Family.
Source: Muslim, Ryadh as-Saliheen no. 346, - [Sahih]

34. The Prophet Muhammad (s.a.w) said, "I leave be-hind for you, that by which if you stick firmly to you will never go astray, the Book of Allah and the Sunnah of His Prophet."
Source: Targhib wa Tarhib 1/61 [Sahih]

35. The Prophet Muhammad (s.a.w) said, "Indeed this Qur'an is a rope - one end of it is in the Hand of Allah and the other end is in your hands. So hold firmly to it [the result would be] that you would never go astray and never be destroyed [no matter what the circumstance]."
Source: Ibn Hibban no. 122 - [Sa-hih]

Chapter: The role of the Qur'an in times of Fitnah [tribulation] and confusion

36. Ali said I heard the Messenger of Allah says, 'Fit-nah will certainly come.' I asked what is the way out O Messenger of Allah? He replied, 'The Book of Allah [swt] is the way, for it contains in-formation of what happened before you, news of what will come after you and a decision regarding matters that will occur among you....It is deciscive [fasl] and not a joke [hazl]. Whoever leaves leaves it, is a tyrant and Allah [swt] will break him, and if anyone seeks guidance else-where [other than the Qur'an] Allah will lead him astray. It is the rope of Allah [swt], the wise reminder, the straight path, whims would not deviate it nor the tongue become confused, and the scholars cannot be fully satisfied [i.e. still more to explore]. It is not worn down by repetition nor do its wonders ever cease......He who quotes it speaks the truth, he who acts according to it is rewarded, he who judges ac-cording to it is just, and he who invites people to it [i.e. the Qur'an] is [himself] guided to the Straight Path....'
Source: Tirmidhee no. 2906 [Da'eef - the chain is weak but the meaning is Saheeh -scholars comment that this is more likely the statement of Ali and not the Prophet]

Chapter: A Time will come when People will loose the Understanding of the Qur'an

37. On the authority of Ziyad ibn Lubayd the Prophet said, '....and knowledge will go [or disappear].' He said, 'O Messenger of Allah how will knowledge leave [disappear] whilst we read the Qur'an and our children read the Qur'an and they will make their children read it till the Day of Judgement.' He said, 'May your Mother loose you I thought your one of the men of understanding of Madinah. Don't you see these Jews and Christians reading their Torah and Gospel but they don't practice anything of it.'
Source: Ibn Majah no. 4048 - [Sahih]

38. The Prophet Muhammad (s.a.w) said, "There will come a time on the people when there will remain nothing of the Islam except its [ism] name and nothing will remain of the Qur'an except its [rasm] outward form. Their masjids will be full of people/very well built but will be empty of guidance. Their scholars will be the most evil under the heavens; from them [fitnah] turmoil will emanate from them and to them will it re-turn."
Source: Baihaqi, Shu'bul Iman no. 2/788
Narrated Abdullah, that he heard a man reciting a Qur'anic Verse which he had heard the Prophet reciting in a different way. So he took that man to the Prophet [and told him the story]. The Prophet said, "Both of you are reciting in a correct way, so carry on reciting." The Prophet further added, "The nations which were before you were destroyed [by Allah] be-cause they differed."
Source: Bukhari no. 5062 - [Sahih]

39. The Prophet Muhammad (s.a.w) said, "When you adorn [deco-rate] your Masajid and ornament your Qur'an, then you will perish."
Source: Jami as-Saghir no. 658 - [Hasan]

40. The Prophet Muhammad (s.a.w) said, "The majority of the Hypocrites of this Ummah [Muslims] will be its readers [i.e. those who read the Qur'an and not act according to it]."
Source: Musnad Ahmad no. 10/123 - [Sahih]

Dua's from the Qur'an

• "Our Lord, accept [this] from us. Indeed You are the Hearing, the Knowing." [2:127]
• "Our Lord, give us in this world [that which is] good and in the Hereafter [that which is] good and protect us from the punishment of the Fire." [2:201]
• "Our Lord, pour upon us patience and plant firmly our feet and give us victory over the disbelieving people." [2:250]
• "Our Lord, do not impose blame upon us if we have forgotten or erred. Our Lord, and lay not upon us a burden like that which You laid upon those before us. Our Lord, and burden us not with that which we have no ability to bear. And pardon us; and forgive us; and have mercy upon us. You are our protector, so give us victory over the disbelieving people." [2:286]
• "Our Lord, let not our hearts deviate after You have guided us and grant us from Yourself mercy. Indeed, You are the Bestower." [3:8]
• "Our Lord, indeed we have believed, so forgive us our sins and protect us from the punishment of the Fire," [3:16]
• "Our Lord, we have believed in what You revealed and have followed the messenger so register us among the witnesses [to truth]." [3:53]
• "Our Lord, forgive us our sins and the excess [committed] in our affairs and plant firmly our feet and give us victory over the disbelieving people." [3:147]
• "Our Lord, You did not create this [heavens and earth] aimlessly; exalted are You [above such a thing]; then protect us from the punishment of the Fire." [3:191]
• "Our Lord, indeed we have heard a caller calling to faith, [saying], 'Believe in your Lord,' and we have believed. Our Lord, so forgive us our sins and remove from us our misdeeds and cause us to die with the righteous." [3:193]
• "Our Lord, take us out of this city of oppressive people and appoint for us from Yourself a protector and appoint for us from Yourself a helper?" [4:75]
• "Our Lord, we have wronged ourselves, and if You do not forgive us and have mercy upon us, we will surely be among the losers." [7:23]
• "Our Lord, accept [this] from us. Indeed You are the Hearing, the Knowing." [2:127]
• "Our Lord, do not place us with the wrongdoing people."[7:47]
• "Our Lord, decide between us and our people in truth, and You are the best of those who give decision" [7:89]
• "My Lord, make me an establisher of prayer, and [many]from my descendants. Our Lord, and accept my supplication." [14:40]
• "Our Lord, forgive me and my parents and the believers the Day the account is established." [14:41]
• "Our Lord, grant us from Yourself mercy and prepare for us from our affair right guidance." [18:10]
• "Our Lord, avert from us the punishment of Hell. Indeed, its punishment is ever adhering." [25:65]
• "Our Lord, grant us from among our wives and offspring comfort to our eyes and make us an example for the righteous." [25:74]
• "Our Lord, You have encompassed all things in mercy and knowledge, so forgive those who have repented and followed Your way and protect them from the punishment of Hellfire." [40:7]
• "Our Lord, and admit them to gardens of perpetual residence which You have promised them and whoever was righteous among their fathers, their spouses and their offspring. Indeed, it is You who is the Exalted in Might, the Wise. And protect them from the evil consequences [of their deeds].And he whom You protect from evil consequences that Day - You will have given him mercy. And that is the great attainment." [40:8-9]
• "Our Lord, forgive us and our brothers who preceded us in faith and put not in our hearts [any] resentment toward those who have believed. Our Lord, indeed You are Kind and Merciful." [59:10]
• "Our Lord, upon You we have relied, and to You we have returned, and to You is the destination."[60:4]
• "My Lord, enable me to be grateful for Your favour which You have bestowed upon me and upon my parents and to work righteousness of which You will approve and make righteous for me my offspring. Indeed, I have repented to You, and indeed, I am of the Muslims." [46:15]
• "My Lord, I seek refuge in You from the incitements of the devils. And I seek refuge in You, my Lord, lest they be present with me."[23:97-98]
• "My Lord, have mercy upon them [my parents] as they brought me up [when I was] small." [17:24]
• "My Lord, forgive and have mercy, and You are the best of the merciful." [23:118]
• "My Lord, increase me in knowledge." [20:114]

1st Year Principles of Commerce Notes Ch# 14

Export

Discuss the Procedure of Export

The procedure of export trade is as follows:


1. RECEIVING THE ORDER

The first stage in the export trade is the receipt of an order from a foreign merchant. the order directs the exporter to forward certain goods. The order should give the necessary instructions, such as marks, number, mode of forwarding, insurance, quantity, quality, size etc and also the prices which the importer is ready to pay for the commodities.


2. EXPORT LICENSE

It is required to be taken by the exporter from the Chief Controller of exports and imports. Export license is a permission from the government for the export of certain goods. The export license helps the government in regulating and controlling the exports of a country.


3. WRITING TO THE IMPORTER FOR THE LETTER OF CREDIT

Before the exporter arranges for the shipment of goods, he asks the importer to open L/C in his favour with the bank. L/C is a security given by the issuing banker that the exporter will be paid for the goods exported by him. It authorizes the exporter to draw bills of exchange on the banker for receiving payment and the bank permits their honour.


4. ASSEMBLING THE GOODS

When L/C has been opened, the exporter will proceed to collect the goods. He will send the order to his warehouse for the goods for packing. If the goods are not in stock, he will purchase them from the local markets. The goods must be according to the order and all conditions should be duty followed.


5.PACKING AND MARKING THE GOODS

Packing is an important part of the export procedure and should receive due attention. Any instruction given by the importer bust be strictly observed. The measurements should be marked on the outside. In some cases gross weights are also indicated on the package.


6. APPOINTMENT OF A FORWARDING AGENT

The services of a forwarding agent can be taken for forwarding the goods. The forwarding agents are paid a certain commission and they undertake all the custom formalities on behalf of the exporter.


7. OBTAINING SHIPPING ORDERS

Shipping order is received from a shipping company by an application. In the application, the full particulars of commodities with the port of destination are given. The shipping company, carry the goods to the port of destination at a certain shipping order.


8. CUSTOM FORMALITIES

In export trade the following custom formalities are undertaken:

A) SHIPPING BILL

The shipping bill is a form containing the detailed description of goods such as marks, numbers, quantity, quality, country of destination and the name of the ship. It is available from the custom office and is filled up by the agent for paying the export duty. This form enables the custom officials to calculate the amount of duty.


B) DOCK DUES FORM

It is available from the lending and shipping office. It is filled up by the exporter or his agent by the payment because back authorities render some services regarding the export of the commodity.


9. LOADING THE GOODS AND GETTING MATE RECEIPT

After paying custom duty and dock charges, the exporter makes arrangement for loading them on the ship. The packages as they are received on the ship are counted and their packing is carefully examined. The captain at the ship then issues the receipt for the goods received and this receipt is called a mate receipt. A mate receipt is said to be claim, when it contains low, adverse remarks, regarding the goods. It is said to be dirty when it contains certain remarks regarding their defective packing.


10. BILL OF LADING

The exporter, after receiving the mate receipt presents it to the shipping company and obtains in exchange a document called Bill of Lading. The Bill of Lading can be transferred freely and it performs three functions:

1. It is an official receipt of the goods, placed on board the ship.

2. It is a contract to carry goods to the port of destination.

3. Its holder is entitled to take delivery of goods by presenting it on the port of destination.


11. MARINE INSURANCE POLICY

Certain goods are required to be insured before they are dispatched to a foreign country. Goods are insured with a marine insurance company and the policy is sent by the exporter to the importer.


12. CERTIFICATE OF ORIGIN

This is the certificate which shows the origin of the commodities being exported. That shows the origin of the country in which they were manufactured. Due to special trade agreements between certain countries goods sent from one country to another generally receives preferential treatment in respect of the import duties. Certificate of origin is obtained by the exporter for being sent to the importer, so that he must be able to get advantage of preference in import duty.


13. PREPARATION OF INVOICE

The exporter having shipped and having gone through all the formalities is now in a position to prepare the invoices. the invoice contains a detailed description of the goods shipped and the charges incurred.


14. RECEIVING PAYMENTS

The exporter generally receives payments by drawing a bill of exchange upon the bank where the importer has opened a letter of credit. He also attaches with it the necessary documents such as Invoice, Bill of Lading, Marine Insurance Policy, Certificate of Origin etc. When all these documents are sent with the Bill of Exchange, it is called documentary of Bill Exchange.

1st Year Principles of Commerce Notes Ch# 13

Marketing

DEFINITION OF MARKETING

The term market and marketing are often very really used in ordinary since but it has different meaning in commerce. marketing includes business activities involved in the flow of goods and service from production to consumption.

Mr. C.C Knight says: “ Marketing embraces all those efforts made in the discovery of consumers actual and potential requirement for the commodities and service and the steps taken fro securing their adequate distributing”

According to Prof. Hall “ the word marketing describes number of association activities which move towards a common objectives: the determination of consumer demand for sale and distribution of goods and services”

In simple words all those business activities which effect the transfer of ownership of goods and services and provide for there physical distribution come within the scope of marketing. Marketing activities may be divided into two main groups;

1.those which effect the transfer of title of the goods 2. those which are involved in the physical distribution of goods from one place to another.

Market creates time, place and possession utility. It is for their creation that study is becoming more and more important every day.


NATURE AND SCOPE

Marketing is a very comprehensive term and include all efforts to

1. discover the present and potential requirement of consumer.

2. the evolution of the product which would satisfy those requirements.

3. all the effective methods of production distribution

4. all the efforts to improve and modify the products.

FUNCTION OF MARKET

Marketing function can be defined as fundamental activities or services carried out in the marketing process. These functions are performed by manufactures, marketers, wholesalers etc. However the functions are as follow.


BUYING:

Buying is an important marketing function for everyone connected with the distribution and consumptions of good. Generally the wholesaler buy from the manufactures, the retailers from the wholesalers and consumer from the retailers. The performance of this function involves the activities relating to determination of needs, selection of proper source of supply, date of shipment etc. the function also considers the quality of goods with prospects of high profit.


Selling:

The second important function is to arrange for the sale of goods. Selling involves a a wide Varity of task. These include the discovery of customers, introducing them with the available goods and encouraging them to purchase them to purchase goods. Selling add possession utility to commodities. Sometimes selling is a specialized function as in case of brokers auctioneers and other sales agent who don’t handle the goods at all but merely serves as a connection link between buyer and sellers.


Advertising:

The age of competition compels the seller to be alert in the creation of demands for their goods through auxiliaries like advertisement and salesmanship. The main objective is to draw attention of a large number of people to the products and to convince them of the excellence of the product. As a result the number of consumers increases. Without publicity the goods may not be noticed and marketing may come to stand still.


Transportation:

It creates place utility. In order to have goods must be transported from one place to another. To a very great extent the marketing system is built up upon economical and effective transportation. For the distribution of goods over a wide area, effective transportation must be available. and it should be adequate to meet the normal demands. Therefore, the efficiency of marketing depends upon quick and cheap means of transportation. With the increase in the distance between the producer and consumer the importance of transportation has further been increased.


Storage and warehouses:

Storage of good is an another important function of marketing. In many lines of business goods are produced considerably in advance of their consumption. Storing creates the utility. Because marketers often maintain extensive inventories, the consumers desire to buy is satisfied without waiting.


Standardization and grading:

It determines the form and classifies goods according to their quality. The producer standardize his goods according to the requirement of the market. It saves the time of consumers in selecting the goods. Consumer relay upon manufacturers that their goods are of uniform quality and of standard measure and size.

By grading we mean that actual sorting out the commodities according to established specification relating to size , quality , color , weight etc. Graded products facilitate buying and selling and the elements of risk is also reduced .


Financing:

It consist of the supply and management of money of money and credit. A considerable amount of time elapse between the production and the sale of good, during that period finance is required at every step. The whole marketing mechanism is based upon financing. The retailers demand credit from the wholesalers , the wholesalers from the producers and the producers from the banks and finance companies.


Risk taking:

The mere act of owning goods carries with it the burden of assuming certain risks in connection with them. Some of the risks involved relate to physical deterioration theft, damage , waste, change in demand or supply or price. It is possible to minimize some of these risk through shifting them to insurance company.


Packing:

Protecting goods from breakage, spoilage and leakage while they are being transported or stored is another important function of marketing process. Considerable efforts and research has been carried out in this fields as packing represents a vital and expensive activity.


Branding:

It is applicable to all identifying marks by which a manufacturer or wholesaler identifies his products. The brand enable the purchaser to know what he is buying.


Recording:

A considerable amount of recording is recording in order to know who made the purchase, the amount of investors. Therefore it is an important function.


Sampling:

In order to show goods to distant customers the producer has to adopt the prospect of sampling of the goods. It denoted the selection of apart of commodity from a bulk in such a way that it would be representative enough to render a correct idea about the commodity ti recipient of the sample.


Having Market Information:

It is important function and it is extremely helpful to both the consumer and the manufacturer. As markets for various articles are widening the importance of research and information in increasing. Producers are made aware of coming trends because marketers inform them of changes in consumers want supply and demand and the new market development, position of the computtors etc.


Salesmanship:

The chief objective of this stage of marketing process is to bring a potential buyer into contact with the seller. Thus this is also an important marketing function.

1st Year Principles of Commerce Notes Ch# 12

Retail Trade

INTRODUCTION 

It fulfills the requirements of the final consumer by placing the goods at his disposal for final consumption. it is the link between the wholesaler and final consumers. The retailers provide an opportunity of choices to final consumers amongst the variety of product kept by the retailer. He can also buy the goods in small quantities nearest to his door in accordance with his requirements
FUNCTION OF RETAILERS 

1. the retailers supply goods at the very door of consumers. The consumer need not to go far to purchase the good because retailers are situated at very little distance. He may bring the goods with himself or he may leave them with the retailers to be delivered at his place as soon as possible.
2. the greatest advantage of retailer is the stored goods and sell them in small quantities when the consumer requires. He thus relieves the consumers from the necessity of storing goods which may of them cannot do for the lack of resources.
3. he tries to study the taste of the consumers and keeps the goods likely be in demand. He again keep wholesale merchants in touch with changing fashion and tastes and thus enables those goods to be produced which are really in demand.
4. he keeps the large variety of goods manufactured by different manufacturer with a view to enable his consumer good choice and selection.
5. if the customer is dissatisfied by the good the retailers quite willingly makes good the complain.
6. he adopts diverse methods for reaching the customers. His beautiful display and scientific advertisement are very educative.


SMALL SCALE RETAILING

1. HOUSE TO HOUSE RETAILERS:
They are those who wander house to house selling their goods. Hawker and peddlers go into street, and different parts of the city in an effect to sell their goods. These person requires little capital and need no shop.

2. PART-TIME RETAILERS:
They are not regular retailers. They only sell goods from door to door in their spare time. they sometimes deal only in the seasonal goods and as soon as the season is over they stop selling the goods.

3. ORDINARY SHOPKEEPERS:
A large volume of retail trade is conducted by ordinary shopkeepers. They may be divided into small and big according to their scale of operations. Small shopkeepers require little capital and are established in lanes , unimportant streets. Big shopkeepers commands considerable capital and make shop in the most frequent areas in the heart of the city. Shop may be general or specialized. A general shop is the one where numerous varieties of goods of every day use are sold. A specialized shop on the other hand, is specialized in the sale of certain articles only for example fountain pens, jewelers shop.
LARGE SCALE RETAILING 

Now days, as the production of goods is done on large scale , the flow of good in the market is huge and varied. The distribution is also to be done on large scale. The flow of good in market is huge and varied. The distribution is also on large scale so as to reap the higher profits avoiding competition from small organization. When retailers purchase goods on large scale they save much as they can get many advantages from the wholesalers and manufacturers. Beside they can accumulate variety of commodities and thus attract the buyers. The large scale retailers are discussed as follows;
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1. DEPARTMENTAL STORES
Such stores requires investment of huge capital and involves considerable risk. The special features of this store is that they try to sell almost every considerable commodity of commerce, almost from an apple to an airplane. The store is divided into number of departments , suitated into the same roof, each department specializing in commodities of the nature. That is why it is known as the departmental store. it is thus an combination of large number of specialized shops, under unitary control. An attempt is thus made to supply to the customer all that he requires from this very place so that he may not require to visit any other shop.

ADVANTAGES 
The advantages of running a departmental stores are as follow;
1. The central side of departmental store gives it more advantages over a small scale retail store.
2. It provides efficient service to the customers like saving of time, car parking, telephone etc.
3. Such stores often create a demand for a commodity. A customer is sometimes induced to purchase other things also when finds them nicely placed in various section of store.
4. The price in departmental stores are less than in retailers shops because of the economy of large scale buying.
5. One department advertises for the other department.

DISADVANTAGES
1. The elaborated service provided by the store tends to increase overhead expenses.
2. The location of such stores ia sway from population residential areas. It is difficult for the large scale retailers enterprises ie departmental store to take away the share of profit of the small retailers because they are located in central parts of the city and the people living in the suburbs and the other parts may not be served.

2. MULTIPLE SHOP/ CHAIN STORE
Sometimes the manufacturer himself wants to eliminate all the intermediateries and reach consumers directly. This he does by opening multiple shops. Shops are opened in various parts of big cities and in all important cities in province or country. These shops are mean to sell only those goods in which the producer or manufacturer is interested. The range of commodities kept and sold is thus very narrow. The advantages accruing as a result of specialization are those of economy in buying together with speedy and larger turn over at lower price eg BATA shoe manufacturing company whose multiple shops are spread all over the big cities of Pakistan.

ADVANTAGES
The multiple shop system enjoys all the advantages which normally accrue to large scale enterprise namely , economies of buying in larger quantities, centralized and highly sufficient control and experts advertising of firm’s special lines. In addition to these there are the following advantages particular to multiple shops;
1. Shortages of stock at any branch may be made up by transfer from one branch to another.
2. A speedy turnover of stock is attain and be accentuated by studying sales figures to discover which of the goods are slow moving and then concentrating advertising effort on these items only.
3. As a result of speedy turnover, multiple shops are able to run their business at slightly lower cost than the other types.
4. As sales are made on cash basis , there are no bad debts and no expense of maintaining a large clerical staff.
5. The multiple stop benefits also from the fact that numerous branches can cater easily and efficiently for customers at comparatively short distance from their residence. The total number of its customers is larger than that of a single store or departmental store.
6. Each branch in itself is an advertisement for other branches and so long as the goods sold are of good quality in relation to the price, there is no limit to the number of branches that an efficient concern my control

LIMITATION
Multiple shops suffer two limitation. Firstly they have to meet heavy expenses. Much of the difference between their buying and selling prices is absorbed by high rents of big promises in busy streets, with rules proportionately higher and by provision for writing off the initial cost of new shop fronts and new equipment and by the maintenance of poorly paying branches in places where the trade is not enough. Secondly many managers and staff do not, without constant supervision, take the same interest in their duties as the proprietors would be.

3. MAIL ORDER BUSINESS

In mail order business goods are sold and delivered through the post and not across the counter. From buyers point of view, it may be describe as shopping by post. Payment is made by several methods, varying with the type of stores and customers standing. If the customer has an account, the goods are charged against it. If he is unknown the goods are supplied either on “ cash with order” basis or the goods are sent through the post office on cash on delivery basis. In later case the VPP( value payable post) system is utilized.
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ADVANTAGES
1. Expenses and expensive shop, fronts etc. Are eliminated.
2. The sales in direct touch with the buyers and therefore it is generally to know the demands of customers more easily.
3. Advertising may be more effectively carried out since the results may be checked up with fair accuracy.
4. The actual selling is reduced to routine the work being performed by low grade workers and hence cheaper labour.
The sales appeal may be designed by experts and is not dependent upon the capacity of individual salesman. The customer buys sitting at his home and therefore saves himself from botherations of different types.

DISADVANTAGES
1. The small retailer is still able to compete with mail order house in most lines and ho has “convincing appeal” in his varied shook.
2. All retail shops have the advantage of enabling customer to see and examine goods but mail order business may not provide the facility to their customer’s ordinal.
3. Heavy expenses on advertising increase the cost to the customer as compared with normal retailers.
4. Publicity through advertisement also include quality of goods; the wordings of advertisement often create confusion and also sometimes mislead the customer.
5. The sales appeal is stereotyped and may not be easily altered.
6. It is not easy to find causes of failure to affect sales nor is it easy to get the orders.

1st Year Principles of Commerce Notes Ch# 11

Finance

Introduction

It is necessary for a businessman to plan financial aspect in the early stage of starting any new business and it should not be left to chance. From the starting and to any later expansion in the firm’s business, finance plays a very important role in purchasing aspects and to meet the expenses if necessary for carrying on the business affairs. The financial needs of business are assessed by the size and the nature of work. For a large business, financial needs are high as compared to a small business. For example, the joint stock companies require large amount of funds whereas sole proprietorship and the partnership business require small amount of funds. Finance can be obtained through two major resources owners’ capital and borrowed money. The requirements of funds depend upon utilization that is how much funds will be needed for circulating and fixed capital. The capital credit obtained from any financial institution is known as borrowed money. Funds which are required to purchase any asset and to meet the expenses from the initial stages to the extension of any business is known as finance.


Kinds of Finance

Long Term Finance

Long term finance is that part of capital which is required by a business enterprise to finance its blocked or fixed assets such as land buildings, machinery and other appliances of permanent nature. In the established undertakings, it is required for extending the scale production and for the renewal and replacement of the fixed assets, or for taking the advantages of new discoveries. Thus, it is needed for considerable period of time, usually for 10 or more years and hence it involves a high cost due to higher amount of interest.

SOURCES OF LONG TERM FINANCE:

The following are the various sources of obtaining long term finance.

1. SHARES:

The initial capital is obtained by a new concern by floating shares. Shares represent equal portion into which the capital of a company is divided. Shares may be issued directly by the company or through the under writers. Selling of shares is the most important method of securing fixed capital and the contributors are the general public.


2. BONDS AND DEBENTURES:

To raise sufficient capital and to draw the attraction of those people who don’t find interest in investment, debentures are issued b y a company. Debenture is a promissory note for the repayment of money borrowed and the payment of interest at fixed rates. The contributor is again the general public.


3. GOVERNMENT LOANS:

The state aid in the form of guarantee of dividend of new companies, taking of securities, plays a definite role in the financing of industries. In our country, industrial-finance Corporation was established to give long term loans.


4. FINANCING INSTITUTIONS:

In Pakistan there are the following institutions from which different industries can take their finance for long periods:

A- PICIC:

This corporation aims at stimulating promotion of new industries, the expansion of the existing ones and the furnishing of the technical know-how as to increase production.

B- IDBP:

This bank was setup to provide credit and other facilities for the development of industries. Other institutions are NDFC, BEL, investment trusts, insurance companies and commercial banks.


5. PUBLIC DEPOSITS:

An enterprise can raise finance by the acceptance of deposits from the public directly for fixed terms and at fixed rate of interest. This method is however, dangerous and has declined in importance in recent years.


6. PLOUGHING BANK OF EARNINGS:

This is very easy method of financing and is available to only Established enterprises.re-investment of a part of the profits is an ideal means of financing, expansion and improvements.


Short Term Finance

A common problem of every business is financing day –to –day operations. Normally business finances these items out of the receipts from sales, but some times the firms financing is needed. It is required for pour hasting raw materials, additional inventory etc. for meeting purposes’ .it is required for short period ,generally foe one year .it is needs because of the fact that the stock is to kept ready before it is actually consumed.

Sources of Short Term Finance

The main sources of obtaining short–term loans are as following:


1. Commercial Banks

Finances are acquired from banks by means of loans, discounts overdrafts etc. they provide short term finance in the shape of discounting bills, granting loans and accepting bills on behalf of their customers.


2. Commercial Credit Houses

These institutions provide short term finance against mortgage of property or promissory notes.


3.Proprietor‘s Personals Funds

This is an important source of financing a small business. The proprietors themselves supply the capital of the business from their own pockets. But in large scale undertakings, this source is insufficient.


4. Borrowings from Friends and Relatives

Sometimes business is also finance by taking loans from friends and relatives. Finance from this source is very limited and uncertain.


5. Public Deposits

Some units accept deposits from the public from short period on attractive rates of interest and utilize the funds for their currents financial requirements.


6. Indigenous Bankers

There are large number of money lenders i.e. Mahajan, Sahukar, Shroff in the country who provide considerable sums for the business, though at a high rate of interest.


7. Land Mortgagment

The financial institutions give loans on short–terms to he business man or industrialists on the security of land and bearable.


Foreign Exchange Banks

These banks also provide short term funds. They mainly provide finance to the foreign business undertaking of their nationality.


9. Unsecured Loans

This type of financing includes:

A) Promissory Notes:

They are the legal instruments used in advancing banks loans. It is the major source of the short–term finance.

b) Commercial Drafts:

A draft is an instruments made by one person ordering the second person to pay a sun of money to a specified individual on sight or at a future date. Secured loans: There are times when short term financing may be accompanied by collaterals, which gives the lender the right to seize certain property if the borrower does not replay the loan.


10. Secured Loans

There are times when short term financing may be accompanied by collaterals, which gives the lender the right to seize certain property if the borrower does not repay the load.

1st Year Principles of Commerce Notes Ch# 10

Filing

Introduction

A system of arranging o r preserving documents received and copies of letters issued in a proper way is known as filing system. Such a preservation of all the letters and documents enables the businessman to have ready reference as and when needed. Business concerned, big or small, carry correspondence wit a number of customers or clients. Such correspondence forms a permanents record of what has happened between the businessman and the customer. Reference of the previous correspondence is to be made for carrying any business activity and also forming new policies to make a business a successful one. There fore a copy of incoming and outgoing letters is to be preserved and arranged in a systematic way so that they may be easily available with out any lose of time. This whole process is known as Filling.


Essentials of A Good Filing System

For an efficient filling system it is necessary to have the following qualities:


1. Simplicity

The filling system should be quite easy and simple so that every one in the office and use it with out any technical knowledge. It would be so simple that even an inexperienced employee can use it.


2.Safety

The preservation of the letters is the foremost object of filling system. The letter should be kept in a lock or other device to prevent unauthorized persons to approach the correspondence


3. Elasticity

With the development of business some times it becomes necessary to alter the filling system. Therefore it is essential that filling system should be elastic


4.Minimum space

The space occupied by a filling system should be as small as possible


5.Cheapness and Economy

To avoid any financial pressure the system of filling should be cheap and economical in proportion to the size of business.


6.Rapidity of Reference

Filling of letters should be easy in order to trace the required letter with out any loss of time


7.Suitability

Again the system of filling must suit the requirements of the business in connection with which it is used.The requirements of each business house vary according to the nature and extent of its business and the actual system of filling best suited to it varies accordingly.


8.Rapidity of Filling

The system should be such that the papers could be filled rapidly with out any loss o time


9.Accessibility

The records should be kept in a place and in a manner easily accessible to all. otherwise there is bound to be a waste of time in making references.

Various Systems of Filling Letters

I. Wire Filling

2. Pigeon Hole Filling System

3. Flat or Horizontal Filling System

4. Vertical or Upright Filling System


I. Wire Filling

In this system of filling a hard and thick steel wire is used. The wire is fixed on a small round wooden base and has a sharp point. in this thick wire all the letters are pushed and the wire is hung. it is usually used in small business houses.


II.Pigeon Hole Filling System


This system requires a wooden almirah containing 24 compartments like pigeon holes. There is usually a shutter in the front of the almirah to protect the letters. each compartment is labeled with one letter of alphabet. the last compartment bears the label of X,Y and Z. this is very old system of filling letters.


III. Flat or Horizontal Filling System


In this system in an iron almirah, the card board files are flatly, or horizontally kept in a number of holes duly alpha bated . this is a very popular and scientific system of filling letters. this system is a great advancement over pigeon hole system. It is known as flat filling system because of the fact that the letters filled under it are kept in a flat position files are specially designed for use in this system and their different makes are available in the market. The available files can be grouped into the following classes


1.The Cardboard File

It is a primitive form of filling. under this system either the cardboard covers or drawers of specially made cabinets are used, as files .the letters are put upon the cardboard and fastened with the help of a clip.


2.The Box File

This is also not in much use. Here wooden boxes are used as files .the letters are kept flat inside the box in an alphabetic or numerical order. It is used in very small business houses .


3.The Arch Files

This is the most popular form of flat files. A businessman generally keeps a number of flat files according to the volume of correspondence and the system and the system of classification he adopts. If the volume is small , one file may be sufficient ,but if it is large one file may be used for containing the correspondence of a single individual and there will be as many files as correspondents . the letters are arranged date wise. these files may be kept just like books or hung on the walls, or they may be kept in shape of drawers fitted in a cabinet.


4.The Shannon Files

The Shannon file is the best known system of flat filling .this form consists of a filling cabinet containing many compartments in accordance with the requirements of the business .each drawers contains index sheets below which the letters are filled.


SPECIAL FEATURES OF A HORIZONTAL FILLING SYSTEM

Whatever the make of the flat files, they possess the following special features which should be carefully noted

1. The files keep the letters in a flat position and contain a device for fastening the letter s

2. Each file consist of alphabetical index cards which are made of loose stiff sheets .

3. The letter are placed date wise, with the latest letter date on the top.

4 All the letters contained in the file are carefully fattened together.

5 The file may be hang on the wall , or kept in the shape of the drawer in a cabinet or made to stand like a book.

6 When a file is full , the letter are removed to be transferred in binding cases.


ADVANTAGES OF HORIZONTAL FILLING SYSTEM:

1 The letter filed cannot get out of order or cannot be misplaced or lost as they are fixed on the arches.

2 If at any time , the letter of a particular correspondent is to be removed , it can be done without disturbing the order of other letters.

3 A file drawer may be dropped accidently, but there is no fear of mixing the letters.

DISADVANTAGES OF A HORIZONTAL FILLING SYSTEM :

1 Since the letters are fastened together , inconvenience is felt filling or taking out a letter.

2 The relative slowness is getting access to the letters as they have to be re-shuffled and turned forward and backward to find the required letter is inconvenient.

3 It is absolutely necessary to punch the papers , which makes the system time consuming.

4 Trouble is involved in re –organizing the cabinet to maintain an increasing volume of correspondence.


IV. VERTICAL OR UPRIGHT FILLING SYSTEM

A still further advancement the art of filling letters is the vertical filling system . It is the most leading method of filling suited to a large concern having innumerable correspondence . The system is called vertical because the letters are kept in a vertical position . It requires a cabinet with deep drawers , folders and guide cards . In this system the letters remain unfastened.


WORKING OF THE VERTICAL SYSTEM:

The following are the things which are needed for the proper maintenance of the vertical filling system.


1.FILLING CABINET:

This cabinet contains drawers which are made of wood or steel . The requirement of drawer depends upon the volume of correspondence and nature of the business. Cabinets with locks also provide safety.


2. FOLDER:

A folder is made of strong paper and is folded in the middle so that the letters can be easily arranged in it. They are usually placed date wise. On the projection edge of the folder is written the correspondent’s name, subject etc.


3. GUIDE CARDS:

Small groups are made in each drawer by sheets having in a tab. These tabs are marked alphabetically, geographically or numerically. The folder are kept behind them according to the mark on the tab.


4. ARRANGEMENT OF THE FOLDERS IN THE DRAWERS:

The folders containing the correspondence are arranged in the drawers either alphabetically, geographically or numerically. The most common is the numerical arrangement , but sometimes alphabetical arrangement is also preferred thus they may be arranged in the following order:-

a. NUMERICAL ARRANGEMENT:

Each folder is giving a certain number which is put down on the raised portion of its back. If a folder holds the letter of the single correspondents then all the papers will also carry the same number as that of the folder. If a folder contains documents related to more than one correspondents then the decimal system will be applied e.g if the folder carries a no. 53 then the correspondents will be numbered as 53-1, 53-2 etc. folders are bearing numbers like 10, 20, 50 and so on inserted in the proper places so that they indicate the position of the various folder of different numbers.

b. ALPHABETICAL ARRANGEMENT:

In this folder contains the name of the correspondents on the raised back portion and not the number. Each guide card indicate the initial letters of the correspondents e.g. the letters to and from Mubarak Ali, Mahmud Ahmed etc will be placed together and their position will be indicate by the guide card bearing the letter ‘M’. The folders are arranged one after the another according to the first vowel occurring in the correspondents name. t he advantage of this system is that it does not need a separate index but it posses the disadvantage of causing conclusion between the customers bearing same names.

c. GEOGRAPHICAL ARRANGEMENT:

This is merely a variation of either the alphabetical or numerical systems adopted geographically to meet the requirements of a particular business. One may allot each drawer for correspondence in each province, and guide cards may be put indicating each town. Traders having flourishing foreign trade and big merchants usually adopt this arrangements.

d. SUBJECT ARRANGEMENT:

Where the subjects are of more importance than the name of correspondents it is useful to file all papers behind alphabetically arranged subjects guides using tabbed folders for sub- divisions of the subject or individual correspondents.


5. ABSENT OR OUT GUIDES: These are cards with ruled columns. When a folder is removed for reference the filing clerk puts an out guide in its place and enters in the ruled columns the particulars of the folder removed.


ADVANTAGES OF THE VERTICAL FILING SYSTEM:


1. SPEED OF LOCATION: Speed of location is possible as the system combines admirably with the visible system of indexing. They can be traced out quickly without must effort.

2. CONVENIENCE AND CHEAPNESS: The vertical filing system has the advantages of handling a large volume of correspondence more conveniently and cheaply.

3. EASY REMOVAL OF DOCUMENTS: Access to the folders and to the documents is simple and that is why the removal of documents is easy.

4. FLEXIBILITY: This system is more adaptable in increasing the correspondence.

5. TIME SAVER: The papers need not be punched under this system, therefore it is a time in this respect.

6. NO FEAR OF MIXING: Since the correspondence of one individual is quite separate from others, therefore there is no fear of mixing up of the correspondence.


DISADVANTAGES OF VERTICAL FILING SYSTEM:

1. DANGER OF LOSING: Since the letter are left lose in the vertical system therefore, there is danger of losing them.

2. INSECURITY: This system has no security and in case a letter is dropped, it upsets the whole order.

3. LARGE SPACE: This system requires a large space as compared to the flat files.

1st Year Principles of Commerce Notes Ch# 09

Indexing

Introduction:

Index is simply a list arranged alphabetically showing the required reference. An index to file may be set out in the form of a bound or loose leaf book whereas a separate page or group of pages is allotted to every letter of the alphabet, the field no. being entered against each name. Thus indexing is a system through which the location of the records may be found easily. It may be placed near to the records or may be kept apart from the records or the records themselves may be so arranged as to be self indexing eg . 1 index of a book (apart from the records) and 2. Telephone directory (self- indexing).
Indexing Equipment

VERTICAL CARD INDEX:

There are number of card in it and each card deals with one item of the index. On the top edge of the card, reference heading is written. On the remaining part of the card, the location of the item is written, where the self- indexing system is in use, the remaining part of the card contains the record itself. These cards are arranged vertically in a drawer or tray in such a way that they can be used very conveniently for reference to make the function or finding the reference more easily, tabbed guide cards may be inserted at required intervals.


STRIP INDEX:

It is consisted of frame into which strips of shout paper or card can be fitted in any required order and subsequently withdrawn and rearranged whenever changes are to be made. Each strip is devoted on one item of not more than two or three lines. Frames can be made up in various forms to suit different purposes; they can be fixed to the wall made up in book form or where a large number is necessary arranged on a rotary stand which is easily turned to give reference to any desired portion of the index.


VISIBLE CARD INDEX:

This is an index which offers the ready visibility of the strip index and also the additional record space provided by the vertical card index. It consists of series of cards, arranged so as to overlap leaving a strip of each card exposed. This exposed edge is used for the reference heading, the remaining part of the card is readily available for record purpose. The trays in which these cards are kept are fitted with devices which enable the cards to be held in position and yet permit individual cards to be written upon withdrawn replaced or rearranged as may bar required. The trays of cards are usually kept in cabinet but as in the case of the strip index frames can be arranged in book form when they make an easily portable record.

VISIBLE BOOKS:

Overlapping visible index records can also be kept in book form. A viable book consist of a loose leaf binder in which paper pages are arranged in a similar formation the cards in visible card index.

WHEEL INDEX:

This is a form of vertical card index in which the cards are arranged about the circumference of wheel set in a cabinet or desk. Thousand of such cards can be attached to one wheel and as many as six wheels set up within the reach of one clerk seated at his desk.

STAGGED CARD INDEX:

This is an arrangement of the vertical card index which has been developed to give easier reference to headings. Cards are arranged in groups and overlapped so that the reference headings on the cutaway concern of a whole group can be seen at once. This system of indexing is sometimes applied to ledger cards to facilitate the extraction of accounts for posting.

SLOTTE CARDS:

The cards are punched with holes along one or more edge, each hole represents a classification or figure in code number. Written information is recorded by hand or typewriting in the centre of the card. The information in term of which it is required to deselected or sort can be recorded along the edge of card by cutting the appropriate holes into slots. Once they have been prepared the card may be filed in trays in any order. To select the card for a particular classification batch of several hundred cards is removed from the tray and a long needle is passed through the holes representing the class required. When the needle is lifted the cards which have been slotted at these holes fall out so separate themselves from the remainder.

1st Year Principles of Commerce Notes Ch# 08

Inflow and Outflow of Paper

Introduction

Correspondence is of great importance in modern times. Almost each business transaction involves exchange of papers of different kinds and other material, letters orders samples, cheques drafts, bills , government instruction through circulars and official letters invoices and so on. It is therefore imperative that the correspondence department must be vigilant and efficient in disposal off the letters and maintaining the accurate and complete records of all the papers concerning the commercial transactions.

The correspondence in commercials office had been divided into two categories.

1. Inflow or inward correspondence.

2. Outflow or outward correspondence. Inflow and outflow of papers are guided by the individual requirements and environment or business location and the type of business. They are discussed as below.


INFLOW OF PAPER

1. OPENING OF LETTER:

This letters are usually opened in the presence of the general manger of some responsible officer who by quick glance over each letter assertions whether it deals with matters of routine or required any special notice to be taken. He is particularly watchful of letters which contain a discordant note or complain. Care has to be taken to see that the contents of the letters are properly emptied before the outside covers are thrown away. If the letters is addressed by human name or is marked privateer it is not opened but is handed over to the person concerned. Remittances received are sent to the cashier for entry in cash book. All the cheques received are crossed and endorsed before being sent to the bank for collection and credit to account.


2. STAMPING AND SORTING THE LETTER:

The letters are then sorted out and marked with the date and time of their receipt noted on each of them; this is done with a view to prevent laziness and irresponsibility on the part of the staff in dealing with the letters. They are then sorted out bin batched according to their nature and each is handed over the person entrusted with the dealing letters of that type. Sometimes each letters is impressed with an identification mark indicating the department which it belongs to. The officers are thus enabled to ensue that prompt action is taken on all the letters by each department and filing is up to date and correct. The letters may also then be numbered for quick reference in the office n, if a numerical system of reference is maintained.


3. ENTRY IN LETTER RECEIVED BOOKS:

The letters received are briefly recorded in a let ter received book. It records a date of receipt the name of the sender, and the subject of the letter , the departments to which they have been handed over , the manner of their disposal and the reference through which they have been disposed off.

4. PREPARATION OF REPLIES:

The concern department then deals with the letters take any action necessary upon them and draft replies which are forward to officers, for correction and approval, along with the letter to which they are replies. When the draft is approved the officer sends it to the typist and also initials in the last column of the letters received book to indicate that the letter has been dealt with. Officers my also dictate letter to the typist who may take them down in shorthand and then final letter to be dispatched.
OUTFLOW OF PAPER

It means all those letters invoices, documents etc which are being sent from the office. The outflow paper includes the replies of the letters received by the office as well as the original correspondence done by the office. The outflow correspondence passes through the following stages.


1. REPLY OF LETTER RECEIVED:

The outgoing letters must be prepared with promptness and accuracy and they must be politely worded. They have been described as the silent ambassadors of the business concerns and as such they must have an up to date finish to capture the imagination of the reader. A typewritten letter makes a better impression on the addresses than a hand written letter, since the former is better to look and can be read more easily.


2. THE COPYING OF LETTERS:

It is very essential to have a copy of the letter sent on record for future reference. In case of any dispute this copy would be quite helpful in settling the same. The copy can be obtained by a carbon, press copying machine and in many other ways.


3. THE DUPLICATING OF LETTERS:

The circular letters are to be sent to a large number of firms. In such cases hundreds of copies of the same letter are needed. When these copies are prepared by the help of a machine the same is known as duplicating machines in use which help in the preparation of these copies.


4. FILING OF LETTERS:

The letters received and the replies of the letters sent or a copy of the original letter is to be then filed properly. The files are to be arranged in a systematic manner so that the previous correspondence when required may be found out quickly and easily.

5. DISPATCH OF LETTERS:

The work of sending the letters away from the office is given over to a dispatch clerk. In sending away the letters, he must be very prompt and must also look to the postal requirements in connection with letters which are to be sent through the post office. Neat folding of letters, seeing that the letters are properly addressed and accompanied by the relative enclosures, and making sure that all letters are properly signed by the officers concerned, are matters which the dispatch clerk must look to. He is also required to send away all the telegrams from the office.


6. ENTRY IN A POSTAGE BOOK:

A brief record of all the outflow of papers is kept in a postage book which also serves the purpose of a letter outward book. The dispatch clerk is usually given an advance which he uses to buy postage stamps of various denominations. He uses the postage book to maintain an account of the money advanced to him the postage stamps used by him in dispatching letters.


7. USE OF PEON BOOK:

Some letters are to be sent to the local businessman. These letters are not sent through post but through a peon duty entered in a peon book. The dispatch clerk before sending letters will sort out all those letters separately which are to be send to the local businessman. He will then make entries of all such letters in the peon book and hand over the same to the peon who will personally deliver these letters to the addresses concerned and obtain their signatures to the peon book maintains a complete record of all the letters sent locally.