Chapter 1 Business, trade and Commerce

SECTION—A(One mark questions)

1.What is Economic activity?
Ans:- Any activity is undertaken with the object of earning money or livelihood
is called Economic Activity.
s
2.Mention any one type of economic activity.
Ans:-Business is one type of economic activity.

3.State any one characteristic of Business.

Ans:- Dealings in goods and services on a regular basis is one characteristic of
Business.

4.Name the economic activity in which people are rewarded with salary or wage
for their work.
Ans:- Employment is an economic activity in which people are rewarded with
salary or wage for their work.

5.What type of economic activity is the work of a chartered accountant?

Ans:-Profession.

6.Give an example for Extractive industry.

Ans:- Mining is an example for Extractive industry.

7.Give an example for Genetic industry.

Ans:- poultry farms is an example for Genetic industry.

8.Give an example for Manufacturing industry.

Ans:- oil refinery Industry an example for Manufacturing industry.

9.What is Analytical industry?

Ans:- Analytical industry which analyses and separates different elements from
the same materials as in the case of oil refinery.,

10.What is Synthetical industry?

Ans:- Synthetical industry which combines various ingredients into a new
product as in the case of cement.,

11.Give an example for processing industry.

Ans;-Sugar Industry is an example for processing industry.
12.What is Assembling industry?
Ans:- Assembling industry which, assembles different component parts to make
a new product as in the case of television, car, computer, etc.,

13.What is Construction industry?

Ans;- Industries are involved in the construction of buildings, dams,, bridges,
roads as well as tunnels and canals are called Construction industry.

14.Name the industry which provides support services to other industries.

Ans;- Tertiary industries which provides support services to other industries.

15.State a branch of Commerce.

Ans;- (i) trade and (ii) auxiliaries to trade are the branch of Commerce.

16.What is Trade?
Ans;- Buying and selling of goods is termed as trade.

17.State any one auxiliary to trade.

Ans;- Banking and Finance is one of auxiliary to trade.

18.Name the auxiliary to trade which provides protection against business risk.
Ans:- Insurance will provides protection against business risk.

19.State an objective of Business.

Ans:- Market standing is one of the objective of Business.

20.State any one characteristic of Business risk.

Ans:- Uncertainties is one of the characteristic of Business risk.

21.State any one cause of Business risk.

Ans:- Natural causes is oneof the causes of Business risk.

SECTION—A (Multiple choices One Mark Questions:)

1.Which of the following does not characterize business activity?

(a)Productions of goods and services (b)Presence of risk
(c)Sale or exchange of goods and services (d)Salary or wages
Ans:- (d)Salary or wages

2.Which of the broad categories of industries covers oil refinery and sugar
mills?
(a)Primary (b)Secondary (c)Tertiary (d)None of the above
Ans:- b)Secondary
3.Which of the following cannot be classified as an auxiliary to trade?
(a)Mining (b)Insurance (c)Warehousing (d)Transport
Ans:- (a)Mining

4.The occupation in which people work for others and get remunerated in return
is known as
(a)Business (b)Employment(c)Profession(d)None of the above
Ans:- (b)Employment

5.The industry which provide support services to other industries are known as
(a)Primary industries(b)Secondary industries(c)Commercial
industries(d)Tertiary industries
Ans:-( d)Tertiary industries

6.Which of the following cannot be classified as an objective of business?

(a)Investment (b)Productivity (c)Innovation (d)Profit earning
Ans:- (a)Investment

7.Business risk is not likely to arise due to

(a)Changes in Government Policy (b)Good Management(c)Employee
dishonesty
(d)Power failure.
Ans:- (b)Good Management

SECTION—B (Two marks questions)

1.What is Business?
Ans:- Business refers to an occupation in which people regularly engage in
activities related to purchase, production and/or sale of goods and services with
a view to earning profits.

2.State any two types of Economic activities.

Ans:- (i) Business, (ii) Profession are the two types of Economic activities.

3.State any two characteristics of Business.

Ans;- Two characteristics of Business are
(i)It is an economic activity:(ii) It Dealings in goods and services on a regular
basis.

4.How is business different from profession?

Ans:- Provision of goods and services to the public for earning profit is called
Business whereas rendering of personalised expert services to the public and
received professional fees are called Profession.
5.What is Employment?
Ans:- Employment refers to the occupation in which people work for others and
get remunerated in return.

6.What is Industry?
Ans:- Industry refers to economic activities which are connected with
conversion of resources into useful goods.

7.What is Extractive industry?

Ans;- Industries which are extract or draw out products from natural sources are
called Extractive industry. They supply some basic raw materials that are
mostly products of geographical or natural environment.

8.Give the meaning of Genetic industry.

Ans:- Industries which are engaged in breeding plants and animals for their use
in further reproduction are called Genetic industry.

9.What is manufacturing industry?

Ans:- Industries which are engaged in producing goods through processing of
raw materials and thus creating form utilities are called manufacturing industry.

10.What is commerce?
Ans;- All activities involving the removal of hindrances in the process of
exchange of goods and services are called commerce.

11.State the two types of activities of commerce.

Ans:- (i) Trade and (ii) Auxiliaries to trade are two types of activities of
commerce.

12.What are Auxiliaries to trade?

Ans:- Activities which are meant for assisting trade are known as auxiliaries to
trade.

13.State any two auxiliaries to trade.

Ans;- (i) Transport and Communication: and (ii) Banking and Finance: are
regarded as two types of auxiliaries to trade.

14.State any two objectives of Business.

Ans;- (a) Market standing and (b) Innovation are two objectives of Business.

15.What is Business risk?

Ans;- Possibility of inadequate profits or even losses due to uncertainties or
unexpected events are called Business risk.
16.Mention any two characteristics of Business risks.
Ans:- Two characteristics of Business risks are
(i)Business risks arise due to uncertainties
(ii) Risk is an essential part of every business

17.Mention any two causes of Business risks.

Ans:- Natural causes like flood, earthquake, lightning, heavy rains and Human
causes like dishonesty, carelessness or negligence of employees are two causes
of Business risks.

18.State any two factors to be considered while starting a business.

Ans:- (i)Selection of line of business and (ii) Size of the firm are two factors to
be considered while starting a business.

Chapter 2 Forms of Business Organisation

SECTION—A(One Mark Questions)

1.Name any one form of Business Organisation.

Ans:- Partnership is one form of Business Organisation

2.Give the meaning of Sole Proprietorship.

Ans:- Any business organisation which is owned, managed and controlled by an
individual are called Sole Proprietorship.

3.Give an example for Sole Proprietorship.

Ans;- Beauty parlours an example for Sole Proprietorship.

4.State the nature of liability of a Sole Proprietor.

Ans:- Liability of a Sole Proprietor is Unlimited.

5.Name the form of business organisation which is found only in India?

Ans:- Joint Hindu Family form of business organisation which is found only in India.

6.In which country only do you find Hindu Undivided Family Business?
Ans;- Joint Hindu family business is a specific form of business organisation found only
in
India.

7.Which Law governs Hindu Undivided Family in India?

Ans:- It is governed by the Hindu Succession Act, 1956.

8.Give the meaning of Hindu Undivided Family.

Ans:- It refers to a form of organisation wherein the business is owned and carried on
by
the members of the Hindu Undivided Family (HUF).

9.Who is the head of Hindu Undivided Family Business?

Ans;-Karta is the head of Hindu Undivided Family Business

10.Who is Karta?
Ans:- Karta is the eldest member of the H U F.

11.Who are co-parceners?

Ans;- All members have equal ownership right over the property of an ancestor and
they are known as co-parceners.

12.State the nature of liability of Karta.

Ans:-Karta’s liability is Unlimited.

13.State the nature of liability of co-parceners.

Ans;- co-parceners liability is Limited.

14.State the minimum number of persons required to set up a partnership.

Ans;- The minimum number of members needed to start a partnership firm is two(2).

15.Which Act governs partnership business in India?

Ans:- The partnership form of business organisation is governed by the Indian
Partnership Act, 1932.

16.Who is a Minor Partner?

Ans:-Minor Partner is one who has not attend age of 18 years.

17.State any one consequence of Non-Registration of Partnership firm.

Ans:- One consequence of Non-Registration of Partnership firm are the firm cannot file
a suit against third
parties.
18.State any one type of Partnership.
Ans;- General Partnership is one type of Partnership.

19.Which Act governs Co-operative Societies in India?

Ans;- Cooperative Societies Act 1912 will governs Co-operative Societies in India.

20.State the minimum number of persons required to form a co-operative society.

Ans;- The minimum number of persons required to form a co-operative society is
Ten(10).

21.State the nature of liability of the members of co-operative societies.

Ans;- Liability of the members of co-operative societies is Limited.
22.State the main objective of co-operative societies.
Ans;- Service is the main objective of co-operative societies.

23.State the voting principle in co-operative societies.

Ans;- ‘one man one vote’ is the voting principle in co-operative societies.

24.Mention any one type of co-operative societies.

Ans;- Consumer’s cooperative societies is one type of co-operative societies.

25. Which Act governs the Joint Stock Companies in India?

Ans;- The companies Act, 2013 (earlier The Companies Act, 1956)will governs the
Joint Stock Companies in India.

26.State any one type of Joint Stock Companies.

Ans;- Private Company is one type of Joint Stock Companies.

27.Mention the minimum number of members in a private company.

Ans;- The minimum number of members in a private company is Two(2).

28.Mention the maximum number of members in a private company.

Ans;- The maximum number of members in a private company is TWO
HUNDRED(200).

29.Mention the minimum number of members in a public company.

Ans;-The minimum number of members in a public company is Seven(7).

30.Mention the maximum number of members in a public company.

Ans:- The maximum number of members in a public company is Unlimited.

31.Name the type of company in which its shares are freely transferable.
Ans;- public company’s shares are freely transferable.

32.Which type of company restricts the free transferability of its shares?

Ans:- private company restricts the free transferability of its shares.

33.State any one feature of public company.

Ans;- It has a minimum of 7 members and no limit on maximum members.

34.State any one feature of private company.

Ans;-It does not invite public to subscribe to its share capital.

SECTION---A (Multiple choices One Mark Questions)

1.Profits do not have to be shared. This statement referrers to

(a) Partnership (b) Joint Hindu family business (c) Sole Proprietorship (d) Company
Ans:- (c) Sole Proprietorship
2.The Head of the Joint Hindu family business is called
(a) Proprietor (b) Director (c) Karta (d) Manager
Ans:- (c) Karta

3.Karta in a Joint Hindu family business has

(a) Limited liability (b) Unlimited liability (c) No liability for debts (d) Joint liability
Ans:- (b) Unlimited liability

4.A Partner whose association with the firm is unknown to the general public is called
(a) Active partner (b)Sleeping partner (c)Nominal partner (d)Secret partner
Ans:- (d)Secret partner

5.In a cooperative society the principle followed is

(a) One share one vote (b) One man one vote (c) No vote (d) Multiple votes
Ans:- (b) One man one vote

6.Provision of residential accommodation to the members at reasonable rates is the objective

of
(a) Producers’ cooperative (b) Consumers’ cooperative
(c) Housing cooperative (d) Credit cooperative
Ans;- (c) Housing cooperative

7.The structure in which there is separation of ownership and management is called

(a) Sole proprietorship (b) Partnership (c) Company (d) All the above business organisations
Ans;- (c) Company

8.The capital of a company is divided into a number of parts each one of which is called
(a) Dividend (b) Profit (c) Interest (d) Shares
Ans:- (d) Share

9.Minimum numbers of members to form a private company is

(a) Two (b) Three (c) Five (d) Seven
Ans:- (a) Two

10.Minimum number of members to form a public company is

(a) Five (b) Seven (c) Twelve (d) Twenty one
Ans:- (b) Seven

11. In joint stock company Board of Directors is selected by

(a) General Public (b) Government agencies (c) Shareholders (d) Employees
Ans:- (c) Shareholders

SECTION—B (Two Marks Questions)

1.State any two merits of Sole Proprietary Organisation.

Ans;-(i) Ease of formation and closure (ii) Quick decision making are two merits of Sole
Proprietary
Organisation.
2.Specify any two demerits of Sole Proprietary Organisation.
Ans:- (i) Limited resources and (ii) Unlimited liability are two demerits of Sole Proprietary
Organisation.

3.Give the meaning of Hindu Undivided Family business.

Ans;- It refers to a form of organisation wherein the business is owned and carried on by the
members of the Hindu Undivided Family (HUF).

4.Define Partnership.
Ans:- The Indian Partnership Act, 1932 defines partnership as “the relation between persons
who have
agreed to share the profit of the business carried on by all or any one of them acting for all.”

5.Who is an Active Partner?

Ans: An active partner is one who contributes capital, participates in the management of the
firm, shares its
profits and losses, and is liable to an unlimited extent to the creditors of the firm.

6.Who is a Sleeping Partner?

Ans:- Partners who do not take part in the day to day activities of the business are called
sleeping partners. A sleeping partner, however, contributes capital to the firm, shares its profits
and losses, and has unlimited liability.

7.Who is a Nominal Partner?

Ans;- A nominal partner is one who allows the use of his/her name by a firm, but does not
contribute to its capital. But his/her liability is unlimited.

8.Who is a Partner by Estoppel?

Ans:- A person is considered a partner by estoppels if, through his/her own initiative, conduct
or behavior, he/she gives an impression to others that he/she is a partner of the firm. His/her
liability also unlimited.

9.Compare active partner with partner by estoppel by taking capital contribution and sharing
of profits and losses as bases.
Ans:-Active Partner will contribute Capital as well as sharing profits and losses of the business
whereas Partner by estoppels do not contribute capital as well as do not share profits or losses
of the business.

10. Give the meaning of Partnership Deed.

Ans;- The written agreement which specifies the terms and conditions that govern the
partnership is called the partnership deed.

11. State any two contents of Partnership Deed.

Ans:- Two contents of Partnership Deed are
(i) Name of firm (ii) Nature of business and location of business.

12. What is Particular Partnership?

Ans;-When a partnership is formed for a particular venture or objectives it is called “Particular
Partnership.”
13. What is Partnership at Will?
Ans:-Where no provision is made in the contract between the partners for the duration of their
partnership, the partnership is called “Partnership at will”.

14. What is General Partnership?

Ans;-The partners whose liability is unlimited are called “General Partnership”.

15. Give the meaning of unlimited liability.

Ans:- If personal assets of the partners may be used for repaying debts in case the business
assets are insufficient are called as Unlimited Liability.

16. State any two consequences of Non-Registration of partnership firm.

Ans:- Two consequences of Non-Registration of partnership firm are
(b) The firm cannot file a suit against third parties, and
(c) The firm cannot file a case against the partners.

17. Give the meaning of Co-operative Societies.

Ans:- The cooperative society is a voluntary association of persons, who join together with the
motive of welfare of the members.

18. State the minimum and maximum number of members in Co-operatives.

Ans;-Minimum members to form a Co-operatives is Ten(10) Maximum members in Co-
operatives are unlimited.

19. State any two types of Co-operative Societies.

Ans;- Two types of Co-operative Societies are
(i) Consumers’ Co-operative Societies (ii) Producers’ Co-operative Societies.

20. Give the meaning of Consumers’ Co-operative Societies.

Ans:- The consumer cooperative societies are formed to protect the interests of consumers. The
members comprise of consumers desirous of obtaining good quality products at reasonable
prices.

21. Give the meaning of Producers’ Co-operative Societies.

Ans:- These societies are set up to protect the interest of small producers. The members
comprise of producers desirous of procuring inputs for production of goods to meet the
demands of consumers. The society aims to fight against the big capitalists and enhance the
bargaining power of the small producers.

22. Give the meaning of Housing Co-operative Societies.

Ans:- Cooperative housing societies are established to help people with limited income to
construct houses at reasonable costs. The members of these societies consist of people who are
desirous of procuring residential accommodation at lower costs.

23. Give the meaning of Marketing Co-operative Societies.

Ans:- These societies are established to help small producers in selling their products. The
members consist of producers who wish to obtain reasonable prices for their output.
24. Give the meaning of Farmers’ Co-operative Societies.
Ans;- These societies are established to protect the interests of farmers by providing better
inputs at a reasonable cost. The members comprise of farmers who wish to jointly take up
farming activities.

25. Give the meaning of Credit Co-operative Societies.

Ans;- Credit cooperative societies are established for providing easy credit on reasonable terms
to the members. The members comprise of persons who seek financial help in the form of
loans.

26. State any two advantages of Co-operative Societies.

Ans:- Two advantages of Co-operative Societies are
(i)The liability of members of a cooperative society is limited to the extent of their capital
contribution.
(ii)The member of a co-opertative society have equal vote in the management.

27. State any two limitations of Co-operative Societies.

Ans;- Two limitations of Co-operative Societies are
(i)It suffers from inadequate capital.
(ii) Disputes among the members of a co-operative society leads to the collapse of the co-
operative society.

28. Give the meaning of a Joint Stock Company.

Ans;- A company can be described as an artificial person having a separate legal entity,
perpetual succession and a common seal.

29. Define Joint Stock Company.

Ans;- According to Prof.Haney “Joint stock company is a voluntary association of individuals
for profit, having a capital divided into transferable shares, the ownership of which is the
condition of membership.”

30. State any two features of a private company.

Ans;- Two features of a private company are
(i) It restricts the right of members to transfer its shares.
(ii) It does not invite public to subscribe to its share capital.

31. State any two features of a public company.

Ans:- Two features of a public company are
(i) It has no restriction on transfer of shares.
(ii) It invite public to subscribe to its share capital.

32. State the minimum and maximum number of members in a public company.
Ans;- Public company has a minimum of 7 members and no limit on maximum members;

33. State the minimum and maximum number of members in a private company
Ans:- Private company has a minimum of 2 and a maximum of 200 members.

34. State any two differences between public and private companies.
Ans;- Two differences between public and private companies are
(i) Private company restricts the right of members to transfer its shares whereas Public
company does not restricts the right of members to transfer its shares.
(ii) Private company does not invite public to subscribe to its share capital whereas Public
company invite public to subscribe to its share capital.

35. State any two merits of Joint Stock Company.

Ans:- Two merits of Joint Stock Company are
(i)Liability of the shareholders is limited.
(ii)It has a continuous existence(perpetual succession).

36. State any two limitations of Joint Stock Company.

Ans;- Two limitations of Joint Stock Company are
(i)Formation of Joint Stock Company are difficult.
(ii) Secrecy about the operations of company cannot be possible.

Chapter 7 Formation of a Company

SECTION-A(One Mark Questions)

1. Who are promoters?

Ans : When any person or a group of persons or even a company who have discovered
an opportunity, proceeds to form a company, then, they are said to be the promoters of
the company.

2. State any type of feasibility studies conducted by promoters in the promotion of a

company.
Ans: (a) Technical feasibility (b) Financial feasibility

3. Which type of company issues prospectus?

Ans: A Public Limited Company issues prospectus.

4. Which is the main document for a Joint Stock Company?

Ans: Memorandum of Association is the main document for a Joint Stock Company.

5. State the minimum number of members who sign Memorandum of Association in

case of a public company.
Ans: Seven(7) is the minimum number of members who sign Memorandum of
Association in case of a public company.

6. State the minimum number of members who sign Memorandum of Association in

case of a private company.
Ans: Two (2) is the minimum number of members who sign Memorandum of
Association in case of a private company.
7. Directors of which type of company have to subscribe for qualification shares?
Ans: Directors of Public Limited company have to subscribe for qualification shares.

8. Expand SEBI.
Ans: Securities and Exchange Board of India.

9. At what stage a private company can commence its business?

Ans: At Incorporation or Registration stage, a private company can commence its
business.

SECTION-A(Multiple choices One Mark Questions) ( ANSWERS IN BOLD

LETTERS)

1. Application for the approval of name of a company is to be made to

(a) SEBI
(b) Registrar of companies
(c) Govt. of India
(d) Govt. of the state in which the company is to be registered

2. A proposed name of the company is considered undesirable if

(a) It is identical with the name of an existing company
(b) It resembles closely with the name of an existing company
(c) It is an emblem of Government of India, United Nations, etc.
(d) In case of any of the above

3. A prospectus is issued by
(a) A private company
(b) A public Limited company seeking investment from public
(c) A public enterprise
(d) A Government company

SECTION-B(Two Marks Questions)

1. State any two important documents for the incorporation of a company.

Ans: 1. Memorandum of Association
2. Articles of Association.

2. State any two functions of promoters.

Ans: (i) Identification of business opportunity
(ii) Feasibility studies
3. Name any two stages in the formation of a Company.
Ans: 1.Promotion Stage.
2. Incorporation Stage.

4. What is Memorandum of Association?

Ans: Memorandum of Association is the most important document as it defines the
objectives of the company. It also defines the relationship of the company with
outsiders.

5. Name any two clauses of Memorandum of Association.

Ans: 1. Name Clause.
2. Objects Clause

6. Give the meaning of Liability clause of Memorandum of Association.

Ans: This clause limits the liability of the members to the amount unpaid on the
shares owned by them.

7. Give the meaning of Qualification shares.

Ans: It is the minimum number of shares to be subscribed for by the persons who
want to become the directors of the company so as to ensure that they have stake in
the company.

8. What is Articles of Association?

Ans: : Articles of Association are the rules regarding internal management of a
company. These rules are subsidiary to the Memorandum of Association and hence,
should not contradict or exceed anything stated in the Memorandum of Association.

9. What is ‘Prospectus’?
Ans: A prospectus is ‘any document described or issued as a prospectus including
any notice, circular, advertisement or other document inviting deposits from the
public or inviting offers from the public for the subscription.

10. Give the meaning of Minimum Subscription.

Ans: It refers to the minimum number of shares to be subscribed by the public before
the companies going ahead with the allotment of shares. As per SEBI guidelines, it is
90% of the issue size.