Students can access the CBSE Sample Papers for Class 11 Business Studies with Solutions and marking scheme Set 5 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 11 Business Studies Set 5 with Solutions
Time : 3 Hours
Maximum Marks : 80
General Instructions:
- This question paper contains 34 questions.
- Answers should be brief and to the point.
- Answers to the questions carrying 3 marks may be from 50 to 75 words.
- Answers to the questions carrying 4 marks may be about 150 words.
- Answers to the questions carrying 6 marks may be about 200 words.
- Attempt all parts of the questions together.
Question 1.
Ramkrishna Agrawal is running a Jewellery showroom at a prime location in Jaipur, which he inherited from his father. His joint family consists of his three sons and a younger brother, who are also working in the same showroom. Being head of the family, Ramkrishna takes all the decisions of business, which sometimes causes conflicts among the members. He decided to open one more branch, and the business took a loan of ?1 crore from Syndicate Bank for three years. But opening of the new branch proved to be a wrong decision and the business suffered heavy losses. Due to financial crises, Ramkrishna had to pay a part of the loan amount from his self- acquired property. [1]
Which form of a business organisation does the above case indicate?
(A) Partnership
(B) Sole Proprietorship
(C) Joint Stock Company
(D) Joint Hindu Family Business
Answer:
Option (D) is correct.
Explanation: Under Joint Hindu Family business, control of the business lies in the hands of Karta. His decisions are binding on other members.
Question 2.
Which industries include activities concerned with the extraction and production of natural resources and reproduction and development of living organisms? [1]
(A) Primary
(B) Secondary
(C) Tertiary
(D) None of these
Answer:
Option (A) is correct.
Explanation: Industries that involve the extraction and production of natural resources and the reproduction and development of living organisms are categorized as primary industries. These industries are directly involved in obtaining raw materials from nature, such as mining, agriculture, forestry, fishing, and related activities. They are essential for providing the basic resources necessary for the functioning of secondary and tertiary industries.
Question 3.
Commercial paper is source of finance used by the firms. The maturity period of a commercial paper usually ranges from: [1]
(A) 20 to 40 days
(B) 60 to 90 days
(C) 120 to 365 days
(D) 90 to 364 days
Answer:
Option (D) is correct.
Explanation: Commercial paper is a short-term financial instrument used by firms to raise funds. It is typically an unsecured promissory note issued by large corporations with a high credit rating. The maturity period of a commercial paper refers to the length of time until the issuer is obligated to repay the principal amount to the investor.
In the case of commercial papers, the maturity period usually ranges from 90 to 364 days. This means that the commercial paper must be repaid within this time frame, typically less than one year
Question 4.
Which of the following alone can ensure effective ethics programme in a business enterprise? [1]
(A) Publication of a code
(B) Involvement of employees
(C) Establishment of a compliance mechanism
(D) None of them
Answer:
Option (A) is correct.
Explanation: Its means the publication of a code of ethics alone is considered sufficient to ensure an effective ethics program in a business enterprise. However, it is important to note that while publishing a code of ethics is a crucial step, it is typically not enough on its own to ensure the effectiveness of an ethics program. Other factors such as employee involvement, leadership commitment, and compliance mechanisms are also important components.
Question 5.
It is often seen that people cross the cheques at the corner. The purpose of crossing the cheques is that crossed
cheques are encashable immediately at bank counters. [1]
(A) True
(B) False
(C) Depends on the amount of the cheque
(D) Depends on the payee of the cheque
Answer:
Option (B) is correct.
Explanation: The amount mentioned in the cheques which is crossed is not encashable directly. The amount goes to the bank account.
Question 6.
This helicopter company is owned, managed and controlled by the government. It is an example of: [1]
(A) Private company
(B) Public Company
(C) Statutory corporation
(D) Government company
Answer:
Option (B) is correct.
Explanation: Public sector consists of enterprises owned, controlled and managed by the government, guided by several social, economic and political objectives to maximise public welfare.
Question 7.
A partnership deed that specifies the terms and conditions that governs the partnership is ……………… .[1]
(A) Written
(B) Oral
(C) Either written or oral
(D) None of these
Answer:
Option (A) is correct.
Explanation: A partnership deed is a written agreement which specifies the terms and conditions that govern the partnership.
Question 8.
Faulad Steel Ltd. is a multi-product company, manufacturing steel pipes in wide range for wide spectrum of application. Recently the company received a big order from an MNC for which it requires additional funds. The finance manager reported that the company is not in a position to bear extra burden of explicit cost and equity shareholders insisted not to issue more shares as it can affect their control consideration. Now, the company has only one option, i.e., ploughing back of profit. In the above case, which of the following sources of finance is most suitable? [1]
(A) Shares
(B) Debentures
(C) Retained earnings
(D) Bank loans
Answer:
Option (C) is correct
Explanation: Retained earnings do not create extra burden for the organisation. They do not create a charge on the assets of the firm.
Question 9.
Which of the following is not a compliance mechanism to ensure that actual decisions and actions comply with the firm’s ethical standards: [1]
(A) Paying attention to values and ethics in recruiting and hiring.
(B) Emphasizing on corporate ethics in training.
(C) Not conducting any performance audit.
(D) Instituting communication systems to help employees report incidents of unethical behaviour.
Answer:
Option (C) is correct.
Explanation: Conducting performance audits is a compliance mechanism that helps ensure that actual decisions and actions comply with the firm’s ethical standards. It involves assessing and evaluating the performance of individuals and departments to ensure adherence to ethical guidelines. Therefore, not conducting any performance audit would be a gap in the compliance mechanisms.
Question 10.
Read the following statements: Assertion (A) and Reason(R). Choose the correct alternative from those given below:
Assertion (A): Small scale industries can be opened anywhere without any locational constraints in the country and the benefits of industrialisation can be reaped easily.
Reasoning (R): The latent skills and talents of people can be channelled into business ideas which can be converted into reality with little or no support.
Alternatives: [1]
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true but Reason (R) is False
(D) Assertion (A) is False but Reason (R) is True
Answer:
Option (C) is correct.
Question 11.
The Companies Act encourages companies to spend ………………… percentage of their average net profit in the previous three years on CSR activities? [1]
(A) 1%
(B) 2%
(C) 3%
(D) 5%
Answer:
Option (B) is correct.
Explanation: The Companies Act encourages companies to spend 2% of their average net profit in the previous three years on CSR (Corporate Social Responsibility) activities.
Question 12.
Once the compensation is paid, the right of ownership of the damaged property passes on to the insurer, so that the insured cannot sell the damaged property to make profits. Example: If a person receives ?1 lakh for his or her damaged stock, then the ownership of the stock will be transferred to the insurance company and the person will hold no control over the stock. Which principle of Insurance is being referred here? [1]
(A) Utmost Good Faith
(B) Contribution
(C) Subrogation
(D) Mitigation
Answer:
Option (C) is correct.
Explanation: Subrogation is the principle where, after the insured has been compensated for the loss or damage, the right of ownership of the damaged property is transferred to the insurance company. This prevents the insured from selling the damaged property for profit after receiving the compensation.
Question 13.
Statement I: Public deposits are issued in foreign currency.
Statement II: Debentures create a charge on the assets of the company.
Choose the correct option from the following: [1]
(A) Statement I is true and II is false
(B) Statement II is true and I is false
(C) Both the statements are true
(D) Both the statements are false
Answer:
Option (B) is correct.
Question 14.
Malti often noticed that nuclear families where both husband and wife go to work find it difficult to cook as cleaning and cutting vegetables took a lot of time, so as an entrepreneur she started gathering information regularly and developed a new product line of selling chopped vegetables in hygienic packaging under the brand name ‘Sabjiwalaz’. She started her shop in her home space. In the beginning, she catered to the orders of customers directly but later on as demand increased, it was difficult for her to manage all the orders from that space. Her friends advised her to sell the products by opening her chain stores. This will increase her sales turnover and eventually the profits. Following her friend’s suggestion now she has expanded her business to an extent that from a small shop operating from her home, she has changed it to a chain store having its 6 branches in the city. Identify which of the following is not the service of retailers to consumers? [1]
(A) New product information
(B) After sales service
(C) Wide selection
(D) Promotion
Answer:
Option (D) is correct.
Explanation: Promotion is not typically considered a direct service provided by retailers to consumers. While retailers may engage in promotional activities to attract customers and increase sales, the primary services they offer to consumers are new product information, after-sales service, and a wide selection of products to choose from. Promotion is more focused on marketing and communication efforts to create awareness and generate interest in the retailer’s offerings.
Question 15.
Which of the following forms supplied by the customs office is filled by the importer for assessment of customs import duty:
(A) Bill of lading
(B) Bill of entry
(C) Commercial invoice
(D) DockChallan
Answer:
Option (B) is correct.
Explanation: Bill of entry is a form supplied by the customs office to the importer. It is to be filled in by the importer at the time of receiving the goods. It has to be in triplicate and is to be submitted to the customs office. The bill of entry contains information such as name and address of the importer, name of the ship, number of packages, marks on the package, description of goods, quantity and value of goods, name and address of the exporter, port of destination, and customs duty payable.
Question 16.
Statement I: Crowd funding is the pooling of resources by a group of people for a common goal.
Statement II: Bootstrapping involves using the entrepreneur’s own personal savinigs and resources.
Choose the correct option from the following: [1]
(A) Statement I is true and II is false
(B) Statement II is true and I is false
(C) Both the statements are true
(D) Both the statements are false
Answer:
Option (C) is correct.
Question 17.
Paras Manek is a successful businessman who is engaged in manufacturing auto spare parts. The products manufactured by his business enterprise Paras Manek Ltd. are sold not only in India, but also exported to various countries such as Singapore, Switzerland, China, North Korea, etc. Trudy Ltd., a Russian company wants to import auto spare parts from Paras Manek Ltd. Paras Manek Ltd. has received an enquiry regarding the goods and trade. Paras Manek Ltd. has replied to it in the form of a quotation. Finding it favourable, Trudy Ltd. has placed an order containing description of goods, price and other instructions, etc. But before exporting the goods it has to fulfil certain legal formalities like procuring export license and preparing the documents related to goods, shipment, and payment. [1]
“Paras Manek Ltd. has replied to it in the form of a quotation.” Identify the document stated here.
(A) Proforma Invoice
(B) Indent
(C) Letter of Credit
(D) Enquiry
Answer:
Option (A) is correct
Question 18.
Match the following documents given in column I with the information it contains given in column II. [1]
| Column I | Column II |
| 1. Proforma Invoice | (i) Specifies the country in which the goods were produced |
| 2. Shipping Bill | (ii) Contains all information about goods |
| 3. Export invoice | (iii) Contains information about price |
| 4. Certificate of origin | (iv) Particulars of goods being exported |
(A) 1. (ii), 2. (iv), 3. (iii), 4. (i)
(B) 1. (iv), 2. (i), 3. (ii), 4. (iii)
(C) 1. (iii), 2. (ii), 3. (i), 4. (iv)
(D) 1. (iii), 2. (iv), 3. (ii), 4. (i)
Answer:
Option (B) is correct
| Column I | Column II |
| 1. Proforma Invoice | (iv) Particulars of goods being exported |
| 2. Shipping Bill | (i) Specifies the country in which the goods were produced |
| 3. Export invoice | (ii) Contains all information about goods |
| 4. Certificate of origin | (iii) Contains information about price |
Question 19.
Which of the following is true regarding a minor as a partner: [1]
(A) Minor cannot become a partner in any firm even with the mutual consent of all other partners
(B) Minor partner7 s liability is limited to the extent of the capital contributed by him in the firm
(C) Minor partner is eligible to take an active part in the management of the firm
(D) Minor partner shares both the profits and the losses of the firm
Answer:
Option (B) is correct.
Explanation: As a minor, their liability in the partnership is limited to the extent of their capital contribution. They are not personally liable for the debts and obligations of the partnership beyond the amount they have invested. This helps protect the minor’s financial interests and limits their exposure to potential losses.
Question 20.
Registration of a co-operative society is ………………. .
(A) Optional
(B) Advisable
(C) Compulsory
(D) Preferable
Answer:
Option (C) is correct.
Explanation: Registration of a cooperative society is compulsory. This accords a separate identity to the society which is distinct from its members. The society can enter into contracts and hold property in its name, sue and be sued by others. As a result of being a separate legal entity, it is not affected by the entry or exit of its members.
Question 21.
There is a system of selling where consumers directly interact with the other consumers through electronic mode. Identify and explain this system. How in your opinion is this system beneficial to consumers? State any one limitation of such system. [3]
Answer:
This system is called C2C commerce. It provides a market for those consumers who want to deal in goods for which there is no established market. This is a system of selling where consumers directly interact with other consumers through electronic mode. This system is beneficial to those consumers who are looking for niche product from very trustworthy source like rented furniture. One limitation of this system is increased risk due to anonymity and non-traceability of parties.
Question 22.
State any three objectives of WTO. [3]
OR
In what ways is exporting a better way of entering into international markets than setting up wholly owned subsidiaries abroad. [3]
Answer:
Objectives of WTO are:
- To ensure reduction of tariffs and other trade barriers imposed by different countries
- To engage in such activities which improve the standards of living, create employment, increase income and effective demand and facilitate higher production and trade
- To facilitate the optimal use of the world’s resources for sustainable development
OR
Exporting is better way of entering into international markets than setting up wholly owned subsidiaries abroad in following ways:
- Exporting is less complex than setting up and wholly owned subsidiaries abroad.
- Exporting involves lesser time and effort as business firms are not required to invest that much time and money as is needed when they set up manufacturing plants and facilities as wholly owned subsidiary in host countries.
- Since exporting does not require much of investment in foreign countries, exposure to foreign investment risks is nil or much lower than that in establishing wholly owned subsidiary.
Question 23.
Santosh is working as a finance manager in a German Company producing remote operated high – end kitchen equipment. Considering festival demand, the company needs to increase its stock of raw material and finished goods which will require funds of ₹50 Lakhs. The directors of the company have decided to expand the business by opening one more factory in India which will require funds of ₹3 crore and 1 branch is America requiring ₹6 crores and 1 branch in Srilanka requiring ₹5 crore investment.
(i) Advise Santosh about the various sources of finance available to meet fund requirement for buying stock of raw material and finished goods.
(ii) In case the company does not want to borrow /raise capital from general public and Banks, then through
which financial instrument it can raise ₹50 lakhs for short period ? Explain it. [3]
Answer:
(i) Santosh can meet his working capital requirement for short run through following sources of finance:
(a) Trade credit,
(b) Public Deposits,
(c) Loans from Commercial Banks,
(d) Commercial Papers,
(e) Overdraft,
(f) Loans from financial institutions, etc.
(ii) Without involving general public and Banks, the option available to the German Company to meet its working capital requirement is: Intercorporate Deposit, Inter Corporate Deposit is an unsecured borrowing by a company from other corporate entities for short-term.
Question 24.
Explain any three services of a commercial bank. [4]
OR
Briefly explain any three functions performed by Insurance. [4]
Answer:
The functions of commercial Bank are:
(i) Collection of deposits: One of the basic and primary functions of commercial banks is that they accept deposits from their clients. The depositors can withdraw money from their accounts in the form of cash or through cheques and drafts.
(ii) Granting loans: Banks grant loans to industry, trade and commerce. The banks lend the money which they get in the form of deposits. The funds lent out by banks help in the development of trade and industry.
(iii) Collection of cheques and bills: Banks collect the cheques for their customers drawn on other banks. To collect cheques, banks have clearing houses. In case of local houses, the banks take no extra charges. For collecting outstation cheques, banks charge a commission. Banks also accept bills of exchange and encash those by charging a commission called discount before the maturity date.
OR
Following functions are performed by insurance:
- Providing certainty: Insurance provides certainty of payment for the risk of loss due to happening of uncertain events. There are uncertainties of happenings of time and amount of loss. Insurance provides certainty to the assured for payment compensation against such losses.
- Protection: Though Insurance can’t stop the happening of risk or event but provides protection against losses arising out of it.
- Risk sharing: The other important function of insurance is risk sharing. On the happening of a risk/event the loss is shared by all persons exposed to it. The share is obtained from every insured member by way of premium.
Question 25.
Explain the following in context of business:
(a) Fixed capital requirement
(b) Working Capital requirement [4]
OR
Explain the following sources of funds: [4]
(A) Debentures
(B) Public Deposits
Answer:
The financial requirements of a business can be categorised as follows:
(a) Fixed capital requirements: The funds that are invested in the business for a longer period of time are known as fixed capital. Such funds are usually required for starting the business and to purchase fixed assets like land, building, plant and machinery. Different business firms require different amount of fixed capital depending on various factors such as nature and size of the business, number of products produced, etc.
(b) Working capital requirements: The funds required for day-to-day operations of the business are known as working capital. Different business firms require different amounts of working capital depending upon various factors. For example, a business firm selling goods on credit or having a slow sales turnover requires more working capital as compared to a business firm selling goods on a cash basis or having a high sales turnover.
OR
(a) Debentures: Debentures are an important instrument for raising long term debt capital. A company can raise funds through issue of debentures, which bear a fixed rate of interest. The debenture issued by a company is an acknowledgment that the company has borrowed a certain amount of money, which it promises to repay at a future date.
(b) Public Deposits: The deposits that are raised by organisations directly from the public are known as public deposits. Rates of interest offered on public deposits are usually higher than that offered on bank deposits. Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. The organisation in return issues a deposit receipt as acknowledgment of the debt. Public deposits can take care of both medium and short-term financial requirements of a business.
Question 26.
Discuss any four arguments in favour of social responsibility of business. [4]
OR
Explain any 4 reasons for the need of pollution control. [4]
Answer:
Arguments for social responsibility are as follows:
(i) Justification for existence and growth: Business exists for providing goods and services to satisfy human needs. Though, profit motive is an important justification for undertaking business activity, it should be looked upon as an outcome of service to the people. In fact, the prosperity and growth of business is possible only through continuous service to society. Thus, assumption of social responsibility by business provides justifications for its existence and growth.
(ii) Long-term interest of the firm: A firm and its image stands to gain maximum profits in the long run when it has its highest goal as ‘service to society’. When increasing number of members of society — including workers, consumers, shareholders, government officials, feel that business enterprise is not serving its best interest, they will tend to withdraw their cooperation to the enterprise concerned. Therefore, it is in its own interest if a firm fulfils its social responsibility. The public image of any firm would also be improved when it supports social goals.
(iii) Avoidance of government regulation: From the point of view of a business, government regulations are undesirable because they limit freedom. Therefore, it is believed that businessmen can avoid the problem of government regulations by voluntarily assuming social responsibilities, which helps to reduce the need for new laws.
(iv) Maintenance of society: The argument here is that laws cannot be passed for all possible circumstances. People who feel that they are not getting their due from the business may resort to anti-social activities, not necessarily governed by law. This may harm the interest of business itself. Therefore, it is desirable that business enterprises should assume social responsibilities.
OR
The need of pollution control can be ascertained from the following reasons:
(i) Reduction in health hazards: Environmental pollution causes many health hazards which affect human beings adversely. Therefore, to protect the human beings from these health hazards, it is necessary to control environmental pollution.
(ii) Reduction in safety hazards: Environmental pollution causes several types of safety hazards, more particularly in the winter season, resulting in air, rail and road traffic problems. Air pollution mostly causes this problem.
(iii) Reduced risk of liability: Organisations which cause environmental pollution by releasing hazardous gases, chemicals and solid wastes are held responsible for this. Such an act attracts penal provisions too. Therefore, it is beneficial for such organisations to control pollution in order to avoid their liability which may arise because of polluting the environment.
(iv) Reduction in economic losses: Pollution control leads to reduction in economic losses for both the organisation and society. Organisations may reduce economic losses by producing lesser toxic wastes, thereby saving the cost of disposing huge wastes. Pollution control reduces economic losses of society because pollution causes damage to vegetation, land fertility, health, etc.
Question 27.
Ramesh wants to start a business unit to manufacture Khadi items. His brother suggests him to start a small-scale industrial unit in some rural area as there the government offers various incentives.
(a) State any two incentives given by the government of India for small scale industries.
(b) State any two institutions set up by the government to promote small scale industries in rural areas. [4]
Answer:
(a) The incentives provided by the government are as follows:
- Land: Developed plots are offered by every state for establishing industries.
- Power: Some states supply power at a concessional rate of 50%, while some give it free of cost during the initial years
(b) The institutional support provided by the government are as follows:
(i) National Bank for Agriculture and Rural Development (NABARD): This bank was established in the year 1982 with the main aim to promote rural development. It has designed and implemented many strategies and schemes for the development of rural business.
(ii) The Rural Small Business Development Centre (RSBDC): This centre was established by the World Association for Small and Medium Enterprises. (WASME) NABARD sponsors this centre.
Question 28.
Identify and explain the features of sole proprietorship shown in following statement sentences : [4]
(i) He can carry out his plans without any interference from others.
(ii) He receives all the business profits which become a direct reward for his risk bearing.
Answer:
(i) The feature indicated here is ‘Control’. The right to run the business and make all the decisions lies absolutely with the sole proprietor. He need not take consent of anyone else while taking decisions. He solely controls his business.
(ii) The feature shown in the sentence is ‘Sole risk bearer’ and the profit recipient. As the sole proprietor is the only owner of the business, therefore the risk of failure of business or profit earned by successfully running the business are enjoyed by him all alone.
Question 29.
Identify and explain the following e-banking services: [4]
(a) A self-service terminal which can be operated at any time.
(b) Card which allows the account holders to make payment up to the amount of credit balance available in their account.
(c) The card which permits overdraft facility.
(d) Making the payment to the merchant through Aadhar card number.
Answer:
(a) ATM (Automated Teller Machine): It is a self-service terminal which can be operated at any time i.e. 24 hours a day. To use an ATM, a client has to insert a plastic card in the machine and enter his identification code. If the code is appropriate, the machine would respond by providing cash, accepting deposits, etc.
(b) Debit card: Debit card facility is offered to the account holders to make payment up to the amount of credit balance available in their account. It is generally located in sale terminals (shop/store) which are tied up electronically to the bank computer. When the customer presents the debit card, the amount is automatically transferred from the customer’s bank account to the seller’s account.
(c) Credit card: It refers to a card which permits overdraft facility to the clients depending upon their credit worthiness. Through this the customer can purchase products by presenting the credit card. It is an important type of support service provided by the banks.
(d) Aadhaar Enabled Payment System (AEPS): Customer needs only his or her Aadhaar number to pay to any merchant. AEPS allows bank to bank transactions. It can be used to withdraw or deposit cash and send money to another Aadhar linked account with it. It uses the fingerprint as a password.
Question 30.
Ashna went to USA to study Textile design. From a very young age she has considerable interest in the clothing business. After completing her studies, she now plans to launch her own clothing line where she will deal in western tops and dresses for women and kids. She has arranged the capital for starting her firm. She wants to cater to the needs of the richer section of the society. To make her clothes unique she plans to import textile machinery from Canada.
Describe the procedure involved in importing. [4]
Answer:
To import textile machinery from Canada, the firm will have to do following procedure:
(i) The importing firm will have to gather information about the price of the machinery, terms and conditions on which the selected Canadian exporter is willing to supply the goods. It should then send the trade enquiry to the exporter. After gathering information, the exporter will prepare a quotation called proforma invoice and send it to our firm.
(ii) The importer needs to consult the Export Import (EXIM) policy to know whether the goods that he or she wants to import are subject to import licensing. If needed, he must secure an import license.
(iii) The firm needs to obtain the IEC number. For this, the firm needs to contact Directorate General Foreign Trade (DGFT) or the relevant Regional Import Export Authority. The IEC (Import Export Code) number needs to be quoted in almost all the relevant documents.
(iv) The firm must then convert domestic currency into foreign currency to make payment to the exporter.
Question 31.
(a) Explain briefly any two out of the following privileges which a private company has over public company:
(i) Number of directors
(ii) Issue of prospectus
(iii) Index of numbers
(b) Differentiate between Hindu Undivided Family Business and Partnership. [3 + 3 = 6]
OR
(a) Explain any two features of a Joint Stock company:
(i) Artificial person
(ii) Separate Legal entity
(iii) Perpetual succession
(b) Distinguish between private company and public company. [3 + 3 = 6]
Answer:
(a) (i) Number of directors: Only two directors are required in case of a private company whereas a public company requires minimum three directors.
(ii) Issue of prospectus: A private company does not invite the public to subscribe to its share capital. Hence, it doesn’t issue a prospectus.
(iii) Index of members: There is no compulsion for a private company to maintain an index of members. However, it is necessary for a public company to maintain such an index
(b)
| Basis | Hindu Undivided Family Business | Partnership |
| (i) Formation | Less legal formalities, exemption from registration, easy formation. | Registration is optional, easy formation. |
| (ii) Members | At least two persons for division of family property, no maximum limit. | The minimum number of members is two, maximum 50 partners as per Rule 10 of the companies (Misc.) Rule 2014 |
| (iii) Capital contribution | Ancestral property. | Limited capital but more than what can be raised in case of sole proprietorship. |
| (iv) Liability | Unlimited (Karta), Limited (other members). | Unlimited and joint liability. |
| (v) Control and Management | Karta takes decisions. | Partners take decisions, consent of all partners is needed. |
OR
(a) (i) Artificial person: A company is an artificial person created by law. It is a person in the sense that it can buy and sell properties, enter contracts, lend and borrow money, sue and can be sued in its own name, but like natural persons it cannot run, walk, breathe, etc.
(ii) Separate legal entity: Company takes birth on the date of its incorporation and from the date of its incorporation, it acquires a separate legal entity distinct from its members. Business assets and liabilities are separate from those of its members.
(iii) Perpetual succession: The existence of a company is not affected by the coming and going of the members. The company is created by law and the law only can bring it to an end, only when the entire legal procedure of winding up is completed.
(b)
| Basis | Private Company | Private Company | Public Company |
| (i) | Number of members | A private company can be formed with only 2 members where as maximum members can’t exceed 200. | A public company can be formed with minimum 7 members and there is no limit for maximum number of members. |
| (ii) | Number of Directors | Minimum two directors to fill quorum. | Minimum three directors are needed. |
| (iii) | Invitation to general public | Does not invite general public to subscribe to its shares, debentures and public deposits. | Does invite general public to subscribe its shares, debentures and public deposits. |
| (iv) | Transfer of shares | Does not permit transfer of shares. | Free transfer of shares is permitted. |
| (v) | Statutory meeting | No compulsion for holding statutory meeting and filing of statutory report. | It needs to hold a statutory meeting and must file a statutory report. |
| (vi) | Commencement of Business | After issue of certificate of incorporation | After issue of certificate of commencement of business |
| (vii) | Issue of prospectus | Does not invite public for subscription | Invite public for subscription by issuing prospectus |
Question 32.
State and explain briefly the steps required to raise funds from the public. [6]
OR
State the different areas where you find the following as the suitable form of public enterprise:
(i) Government Company
(ii) Statutory Corporations
(iii) Departmental Undertaking [6]
Answer:
(i) SEBI approval: The first step is to take the approval from the regulatory authority i.e., SEBI. The company has to follow all the rules and guidelines that are issued by the SEBI.
(ii) Filing of prospectus: Prospectus is a statement containing all the relevant information regarding the state of affairs of the company and showing the future prospects of the company. The purpose of prospectus is to induce the public to purchase the shares and debentures. So, the next step is to file the copy of the prospectus with the registrar of firms.
(iii) Appointment of bankers, brokers and underwriters: The banker is appointed to collect the money coming from the applications. A broker is appointed to induce the public, by creating an image in the public’s mind for the purchase of the shares and debentures. An underwriter is appointed to ensure that the issue is subscribed fully. The company appoints the bankers, brokers and underwriters and also pays charges for their services.
(iv) Minimum subscription: Minimum subscription means the minimum amount which should be subscribed by the public. According to the guidelines of SEBI, minimum subscription is 90% of the entire issue.
(v) Listing of shares: Now the company will make an application to at least one stock exchange for the purchase of the shares.
(vi) Allotment of shares: Allotment letters are issued to the successful applicants.
OR
(i) Government Company is a suitable form of organisation in public sector where:
(a) Government wants to promote and develop certain industrial and commercial enterprises in national interest.
(b) Government wants to control a company in the private sector without nationalisation.
(c) Government wants to go for collaboration with domestic and foreign enterprises of private sector.
(d) The business projects require government planning and funds.
(ii) Statutory Corporations are found most suitable form of public enterprise where:
(a) Public utility services are to be provided at reasonable rates.
(b) Government wants to develop the projects for economic development.
(c) Where government funding is required with private sectors managerial efficiency to run the enterprise on competitive lines.
(d) The government wants to promote those infrastructure areas where private sector is unwilling to invest.
(iii) Departmental Undertakings are most suitable forms of organisation in public sector where:
(a) The government wants full control over the operations of enterprise.
(b) National security is the major issue/concern.
(c) The generation of revenue for the treasury is required.
(d) The projects are to be carried on strictly according to policies and direction of the government.
Question 33.
1. “Rajneesh puts up his clothes shop every Sunday in the Sunday weekly market.”
(i) Identify the type of retailer Rajneesh is.
(ii) Briefly explain two more types of itinerant traders.
2. “While looking at the bill of clothes, Ravi noticed that a tax has been implied on the bill.” [3 + 3 = 6]
(i) Which tax is he talking about? Explain.
(ii) State three objectives of implying this tax.
Answer:
1. (i) Rajneesh is a Market Trader. They are small traders who sell their goods at different places on fixed days. For example, every Saturday or every Sunday in ‘Saturday market’ and ‘Sunday market, etc. These traders deal in a single line of goods such as toys, readymade garments, fabrics, etc. They deal in low-price, low-quality goods. Hence, they cater to the needs of the lower income group.
(ii) Two more types of itinerant retailers are:
(a) Peddlers and hawkers: These are the oldest form of retailers. They deal in non-standardised and low value goods like fruits, vegetables, ice-creams, toys, fabrics, etc., which they carry on bicycle, hand cart, cycle rickshaw or on their head. They are small traders who move from one place to another to sell their products.
(b) Cheap jacks: They are small retailers who deal in consumer items. They have shops in business localities on a temporary basis. They change their business place from one locality to another on the basis of potentiality of the area.
2. (i) He is talking about GST GST, or Goods and Services Tax, is an indirect tax imposed on the supply of goods and services. It is a multi-stage, destination-oriented tax imposed on every value addition, replacing multiple indirect taxes, including VAT, excise duty, service taxes, etc.
(ii) The objectives of GST are:
(a) To eliminate the cascading impact of taxes on production and distribution cost of goods and services.
(b) Streamlining indirect tax regime.
(c) Growth of revenue in States and Union.
(d) Reduction in transaction costs and unnecessary wastages.
(e) Elimination of the multiplicity of taxation.
Question 34.
Nazia and Shazia are partners in a firm providing counselling services. For improving the interiors of their office, they required bank loan. Razia, Nazia’s friend requested a bank manager to grant loan to Nazia’s firm, actively participating in the negotiation process for the deal. The bank extended credit to the firm for the stipulated period.
(î) State the liability of Razia.
(ii) Identify the values promoted by partnership form of organisation. [6]
Answer:
(i) Razia will be liable for repayment of such debt as if she is a partner of the firm, if Nazia’s firm is not able to repay.
(ii) Values promoted by partnership form of organisation are mutual understanding, co-operation and team spirit, risk sharing, optimum utilisation of resources for productive relationship among the partners.