Subhash Dey'S - Business Studies-XI Exam Handbook-2024

BUSINESS STUDIES XI Exam Handbook Shree Radhey Publications (Subhash Dey)
6
for Annual Examination 2024
Unit 2 Forms of Business Organisations
2.1 Sole Proprietorship 6. Lack of business continuity: Death, insanity, imprisonment,

physical ailment or bankruptcy of the sole proprietor will have
The word ‘sole’ implies ‘only’, and “proprietor” refers to ‘owner’. a direct and detrimental effect on the business and may even
Hence, a sole proprietor is the one who is the only owner of a business. cause closure of the business.
Meaning of Sole Proprietorship Merits/Advantages
Sole proprietorship refers to a form of business organisation which is 1. Quick decision making: A sole proprietor enjoys freedom in
owned, managed and controlled by an individual who is the recipient of making business decisions. Decision-making is prompt because
all profits and bearer of all risks.
there is no need to consult others.
Suitability 2. Confidentiality of information: Sole proprietor can keep all
Sole proprietorship is a popular form of business organisation. It the information related to business operations confidential and
requires less amount of capital. It is best suited for businesses maintain secrecy.
which are carried out on a small scale (especially in their initial years
of operation) and where customers demand personalised services A sole trader is also not bound by law to publish firm’s
such as beauty parlours, hair saloons, a retail shop in a locality, etc. accounts.
Features 3. Direct incentive: A sole proprietor directly reaps the benefits
1. Ease in formation and closure of business: Hardly of her/his efforts as s/he is the sole recipient of all the profit.
any legal formalities are required to start a sole proprietary This provides her/him maximum incentive to work hard.
business, though in some cases one may require a license. 4. Sense of accomplishment: There is a personal satisfaction
Closure of the business can also be done easily. involved in working for oneself.
There is no separate law that governs sole Limitations/Shortcomings/Disadvantages
proprietorship. 1. Limited resources: Resources of a sole proprietor are limited
to his/ her personal savings and borrowings from others. Banks
2. Unlimited Liability: Sole proprietor is personally responsible and other lending institutions may hesitate to extend a long
for payment of debts in case the assets of the business are not term loan to a sole proprietor.
sufficient to meet all the debts. Even s/he has to sell her/his 2. Limited life of a business concern: The sole proprietorship
personal property to repay the debts of the business. business is owned and controlled by one person, so death,
3. Sole risk bearer and profit recipient: The risk of failure of insanity, imprisonment, physical ailment or bankruptcy of a
business is borne all alone by the sole proprietor. However, if the proprietor affects the business and can lead to its closure.
business is successful, s/he enjoys all the benefits. 3. Unlimited liability: If the business fails, the creditors can
4. Full Control: The right to run the business and make all recover their dues not merely from the business assets, but
decisions lies with the sole proprietor only. S/he can carry out also from the personal assets of the proprietor.
his plans without any interference from others. 4. Limited managerial ability: The owner has to assume the
5. No separate entity: In the eyes of the law, no distinction is responsibility of varied managerial tasks such as purchasing,
made between the sole trader and his business, as business selling, financing, etc. Thus, decision-making may not be
does not have an identity separate from the owner. balanced in all the cases.
NOTES and Sample Papers for Annual 2024 Exam BUSINESS STUDIES XI Exam Handbook
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Joint Hindu Family Business/ Hindu Undivided Family 4. Decision making and control: Decisions are generally taken
2.2 with mutual consent. The activities of a partnership firm are
(HUF) Business
managed through the joint efforts of all the partners.
Meaning 5. Continuity: Partnership is characterised by lack of continuity
Joint Hindu Family Business refers to a form of organisation wherein of business since the death, retirement, insolvency or insanity
the business is owned and carried on by the members of the Hindu
of any partner can bring an end to the business. However, the
Undivided Family. The basis of membership in the business is birth in
a particular family and three successive generations can be members
remaining partners may continue the business on the basis of
in the business. a new agreement.
The business is controlled by the head of the family who is the eldest 6. Number of Partners: The minimum number of partners
member and is called karta. All members have equal ownership right needed to start a partnership firm is 2.
over the property of an ancestor and they are known as co-parceners. According to Section 464 of the Companies Act 2013,
maximum number of partners in a partnership firm can be 100,
Gender Equality in the Joint Hindu Family a Reality subject to the number prescribed by the central government.
• According to the Hindu Succession (Amendment) Act, 2005, As per Rule 10 of The Companies (miscelleneous) Rules 2014,
the daughter of a coparcener of a Joint Hindu Family shall, by birth, at present the maximum number of members can be 50.
become a coparcener. 7. Mutual agency: Every partner is both an agent and a
• At the time of partition of such a ‘Joint Hindu Family’ the coparcenary principal. He can bind other partners through his acts and is
property shall be equally divided to all the coparceners irrespective of bound by the acts of other partners.
their gender (male or female).
Merits/Advantages
• The eldest member (male or female) of ‘Joint Hindu Family’ shall
become Karta. 1. Ease of formation and closure: A partnership firm can
• Married daughter has equal rights in property of a Joint Hindu Family. be formed easily by an agreement between the partners to
carryout the business of the firm and share risks. There is no
compulsion for registration of the firm. Closure of the firm too
Top Tip is an easy task.
HUF business is one of the oldest forms of business organisation 2. Balanced decision-making: The partners can oversee
found only in India. It is governed by the Hindu Law — the Hindu different functions according to their areas of expertise.
Succession Act, 1956. Because an individual is not forced to handle different activities,
this reduces the burden of work but also leads to fewer errors
Features
in judgements. As a consequence, decisions are likely to be
1. Formation: There should be at least two members in the more balanced.
family and ancestral property. The business does not require 3. More funds as compared to a sole proprietor: In a
any agreement as membership is by birth. partnership, the capital is contributed by a number of partners.
2. Liability: Liability of all members except the karta is limited to This makes it possible to raise larger amount of funds and
their share of co-parcenery property of the business. The karta, undertake additional operations when needed.
however, has unlimited liability. 4. Sharing of risks: The risks involved in running a partnership
3. Control: The control of the HUF business lies with the karta. firm are shared by all the partners. This reduces the anxiety,
He takes all the decisions and is authorised to manage the burden and stress on individual partners.
business. His decisions are binding on the other members. 5. Secrecy: A partnership firm is not legally required to publish
4. Continuity: The business continues even after the death of the its accounts and submit its reports. Hence, it is able to maintain
karta as the next eldest member takes up the position of karta. confidentiality of information relating to its operations.
5. Minor Members: Since membership is by birth, minors can Limitations/Disadvantages
also be members of the HUF business. 1. Unlimited liability: Partners are liable to repay debts even
2.3 Partnership: Concept, Merits and Limitations from their personal resources in case the business assets are
not sufficient to meet its debts.
Meaning of Partnership 2. Possibility of conflicts: Difference in opinion on some
The Indian Partnership Act, 1932 defines partnership as “the relation issues may lead to disputes between partners. Since decisions
between persons who have agreed to share the profit of the business of one partner are binding on other partners, an unwise
carried on by all or any one of them acting for all.”
decision by one may result in financial ruin for all others.
Features 3. Lack of continuity: Partnership may come to an end with the
1. Formation: Partnership comes into existence through a legal death, retirement, insolvency or lunacy of any partner.
agreement wherein the terms and conditions governing the 4. Lack of public confidence: A partnership firm is not legally
relationship among the partners, sharing of profits and losses required to publish its financial reports. It is, therefore,
and the manner of conducting the business are specified. difficult for the public to ascertain the true financial status of
2. Unlimited Liability: The partners of a firm have unlimited a partnership firm. As a result, the confidence of the public in
liability. Personal assets may be used for repaying debts in case partnership firms is generally low.
the business assets are insufficient. 2.4 Types of Partners
Top Tip Active Sleeping or Secret Nominal Partner by
Partners are jointly and individually liable for payment of Partner Dormant Partner Partner Estoppel
Partner
debts. Jointly, all the partners are responsible for the debts and
they contribute in proportion to their share in business and as Meaning An active A sleeping A secret A nominal Through his/her
partner takes partner does partner is partner is one own initiative,
such are liable to that extent. Individually, each partner can be actual part in not take part one whose who allows conduct or
held responsible repaying the debts of the business. carrying out in the day to association the use of his/ behaviour, s/
business day activities with the her name by a he gives an
3. Risk bearing: The partners bear the risks involved in running of the firm of the firm is firm. impression to
a business as a team. They also share losses in the same ratio on behalf business. unknown to others that s/he
of other the general is a partner of
in the event of the firm incurring losses. partners. public. the firm.
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Capital Contributes Contributes Contributes Does not Does not The written agreement which specifies the terms and
contri- capital to the capital to the capital to contribute contribute conditions that govern the partnership is called the
bution firm. firm. the firm. capital to the capital to the partnership deed.
firm. firm.
The partnership deed generally includes the following aspects:
Partici- Participates Does not Participates Does not Does not
pation in in the participate in the participate in participate in the
• Name of firm
Manage- management in the manage- the manage- management of • Nature of business and location of business
ment of the firm. management ment of the ment of the the firm. • Duration of business
of the firm. firm. firm. • Investment made by each partner
Sharing Shares Shares Shares Generally Does not share • Distribution of profits and losses
of profits and profits and profits does not profit or losses
• Duties and obligations of the partners
Profits/ losses of the losses of the and losses share profit or of the business.
Losses business. business. of the losses of the • Salaries and withdrawals of the partners
business. business. • Rules of admission, retirement and expulsion of a partner
Liability Unlimited Unlimited Unlimited Unlimited Unlimited • Interest on capital and interest on drawings
liability liability liability liability liability towards • Procedure for dissolution of the firm
towards the towards the towards the towards the the creditors of • Preparation of accounts and their auditing
creditors creditors creditors creditors the firm for the
of the firm of the firm of the firm of the firm repayments of • Method of solving disputes
for the for the for the for the the firm’s debts.
repayments repayments repayments repayments 2.7 Registration of a partnership firm
of the firm’s of the firm’s of the firm’s of the firm’s Registration of a partnership firm means the entering
debts. debts. debts. debts.
of the firm’s name, along with the relevant prescribed
Minor as a Partner particulars, in the Register of firms kept with the Registrar
• Since a minor is incompetent to enter into a valid contract with of Firms.
others, he cannot become a partner in any firm. However, a minor
can be admitted to the benefits of a partnership firm with the mutual Top Tips
consent of all other partners. Thus, a minor can share only the profits • Registration provides conclusive proof of the existence of a
and can not be asked to bear the losses. partnership firm.
• In such cases, his liability will be limited to the extent of the capital • Registration can be at the time of formation or at any time
contributed by him and in the firm. He will not be eligible to take an
during its existence.
active part in the management of the firm. However, he can if he
wishes, inspect the accounts of the firm. Is registration of a partnership firm compulsory?
• The status of a minor changes when he attains majority. In fact, on No, it is optional for a partnership firm to get registered.
attaining majority, the minor has to decide whether he would like to However, if a firm does not get registered, it is deprived of many
become a partner in the firm. He has to give a public notice of his
benefits.
decision within 6 months of attaining majority. If he fails to do so, he
will be treated as a full-fledged partner and will become liable to the
Consequences of non-registration of a firm:
debts of the firm to an unlimited extent, in the same way as other 1. A partner of an unregistered firm cannot file a suit against the
active partners are. firm or other partners,
2. The firm cannot file a suit against third parties, and
2.5 Types of Partnership 3. The firm cannot file a case against the partners.
Procedure for registration of a partnership firm
Classification on the basis of duration 1. Submission of application in the prescribed form to the Registrar
Partnership at will Particular partnership of firms. The application should contain the following particulars:
Meaning This type of partnership exists Partnership formed for the • Name of the firm
at the will of the partners. accomplishment of a particular project, • Location of the firm
say construction of a building.
• Names of other places where the firm carries on business
Duration It can continue as long as It is carried on for a specified time • The date when each partner joined the firm
the partners want and is period and is dissolved automatically
terminated when any partner when the purpose is fulfilled or when • Names and addresses of the partners
gives a notice of withdrawal the time duration expires. • Duration of partnership
from partnership to the firm. This application should be signed by all the partners.
Classification on the basis of liability 2. Deposit of required fees with the Registrar of Firms.
General Partnership Limited Partnership 3. The Registrar after approval will make an entry in the register
Liability In general partnership, the The liability of at least one
of firms and will subsequently issue a certificate of registration.
liability of partners is unlimited partner is unlimited whereas
and joint. others may have limited liability. 2.8 Cooperative Societies: Concept, Merits and Limitations
Participation Partners enjoy the right to Partners do not enjoy the Meaning of Cooperative Society
in participate in the management right to participate in the The cooperative society is a voluntary association of persons, who join
Management of the firm. management of the firm.
together with the motive of welfare of the members.
Acts binding Their acts are binding on each Their acts do not bind the firm
or not other as well as on the firm. or the other partners. Features
Registration Registration of the firm is Registration of such partnership 1. Ease of formation: The process of setting up a cooperative
optional. is compulsory. society is simple enough. The consent of minimum 10 adult
Existence The existence of the firm is Such a partnership does not persons is only required to form a cooperative society. The capital
affected by the death, lunacy, get terminated with the death, of a society is raised from its members through issue of shares.
insolvency or retirement of the lunacy or insolvency of the
partners. limited partners. 2. Voluntary membership: The membership of a cooperative
society is voluntary under the Cooperative Societies Act 1912.
2.6 Partnership Deed • Membership is open to all, irrespective of their religion,
caste, and gender.
Partnership agreement can be oral or written. Even though it
• Although procedurally a member is required to serve a
is not essential to have a written agreement, it is advisable to
notice before leaving the society, there is no compulsion to
have a written agreement as it constitutes an evidence of the
remain a member.
conditions agreed upon.
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3. Legal status: The cooperative society acquires a separate identity 4. Support from government: The cooperative society
from its members after registration. It can enter into contracts exemplifies the idea of democracy and hence finds support
and hold property in its name, sue and be sued by others. from the Government in the form of low taxes, subsidies, and
4. Limited liability: The liability of the members of a cooperative low interest rates on loans.
society is limited to the extent of the amount contributed by Limitations/Disadvantages
them as capital. 1. Limited resources: Resources of a cooperative society consists
5. Control: In a cooperative society, the power to take decisions of capital contributions of the members with limited means.
lies in the hands of an elected managing committee. The right 2. Inefficiency in management: Cooperative societies are
to vote gives the members a chance to choose the members unable to attract and employ expert managers because of
who will constitute the managing committee and this lends the their inability to pay them high salaries. The members who
cooperative society a democratic character. offer honorary services on a voluntary basis are generally not
6. Service motive: The cooperative society through its purpose professionally equipped to handle the management functions
lays emphasis on the values of mutual help and welfare. If any effectively.
surplus is generated as a result of its operations, it is distributed 3. Lack of secrecy: As a result of open discussions in the
amongst the members as dividend. meetings of members as well as disclosure obligations as per
Merits/Advantages/Benefits the Societies Act (7), it is difficult to maintain secrecy about the
1. Equality in voting status: The principle of ‘one man one operations of a cooperative society.
vote’ governs the cooperative society. Irrespective of the 4. Government control: In return of the privileges offered by
amount of capital contribution by a member, each member is the government, cooperative societies have to comply with
entitled to equal voting rights. several rules and regulations related to auditing of accounts,
2. Stable existence: Death, bankruptcy or insanity of the submission of accounts, etc.
members do not affect continuity of a cooperative society. 5. Differences of opinion: Internal quarrels arising as a result of
3. Economy in operations: The members generally offer contrary viewpoints may lead to difficulties in decision making.
honorary services to the society. As the focus is on elimination
Personal interests may start to dominate the welfare motive.
of middlemen, this helps in reducing costs.
Types of Cooperative Societies
Consumers’ coopera- Producers’ cooperative Marketing cooperative Farmers’ cooperative Credit cooperativeCooperative housing
tive societies societies societies societies societies societies
These societies are These societies are set up Such societies are estab- These societies are estab- These societies are
These societies are estab-
formed to protect the to protect the interests of lished to help small produc- lished to protect the interests established to provide easy
lished to help people with
interests of consumers. small producers. It aims ers in selling their products. of farmers by providing better credit on reasonable terms
limited income to construct
It aims at eliminating to fight against the big It aims to eliminate middle- inputs at a reasonable cost. to the members. It aims to
houses at reasonable
middlemen to achieve capitalists and enhance men and improve competi- The aim is to gain the bene- protect the members from
costs. The aim is to solve
economy in operations. the bargaining power of tive position of its members fits of large scale farming and the exploitation of lenders
the housing problems of
the small producers. by securing a favourable increase the productivity. who charge high rates of
the members and giving
market for the products. interest on loans.
the option of paying in
installments.
The members comprise The members comprise The members consist of The members comprise farm- The members comprise of The members consist of
of consumers desirous of producers desirous producers who wish to obtain ers who wish to jointly take persons who seek financial people who are desirous
of obtaining good quality of procuring inputs for reasonable prices for their up farming activities. help in the form of loans. of procuring residential
products at reasonable production of goods to output. accommodation at lower
prices. meet the demands of costs.
consumers.
It purchases goods in bulk It supplies raw materials, It pools the output of individ- Such societies provide better Such societies provide These societies construct
directly from the whole- equipment and other in- ual members and performs quality seeds, fertilisers, loans to members out of flats or provide plots to
salers and sells goods to puts to the members and marketing functions like machinery and other modern the amounts collected as members on which the
the members. Profits are also buys their output for transportation, warehousing, techniques for use in the capital and deposits from members themselves can
distributed on the basis of sale. Profits are distribut- packaging, etc., to sell the cultivation of crops. This the members; and charge construct the houses as
their capital contributions ed on the basis of their output at the best possible helps in improving the yield low rates of interest. per their choice.
or purchases made. contributions to the total price. Profits are distributed and returns to the farmers,
pool of goods produced or according to each member's and solves the problems as-
sold by the society. contribution to the pool of sociated with the farming on
output. fragmented land holdings.
2.9 Joint Stock Company: Concept, Merits and Limitations Features A SRCC LPF
1. Artificial person: A company is a creation of law and exists
Meaning of Company independent of its members. Unlike natural persons, it cannot
A company is an association of persons formed for carrying out breathe, eat, run, talk and so on.
business activities and has a legal status independent of its members. A 2. Separate legal entity: From the day of its incorporation, a
company is an artificial person having a separate legal entity, perpetual
company acquires an identity, distinct from its members. Its
succession and a common seal.
assets and liabilities are separate from those of its owners.
3. Formation: The formation of a company is a time consuming,
Top Tips expensive and complicated process. It involves the preparation
• The company form of organisation is governed by The of several documents and compliance with several legal
Companies Act, 2013. requirements. Incorporation of companies is compulsory under
• Shareholders are the owners of a company while the Board of The Companies Act 2013 or any of the previous company law.
Directors is the chief managing body elected by the shareholders. 4. Perpetual succession: A company, being a creation of the
• The capital of a company is divided into smaller parts called law, can be brought to an end only by law.
‘shares’ which can be transferred freely from one shareholder 5. Control: The management and control of the affairs of the
to another (except in a private company). company is undertaken by the Board of Directors, which
• Any document which does not carry the common seal of the appoints the top management officials for running the business.
company is not a binding on the company.
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6. Liability: The liability of the members is limited to the extent desire higher quality products at lower prices, and the
of the capital contributed by them in a company. The members shareholders want higher returns in the form of dividends.
can be asked to contribute to the loss only to the extent of the These demands pose problems in managing the company as it
unpaid amount of share held by them. often becomes difficult to satisfy such diverse interests.
7. Common seal: Every company is required to have its own
seal which acts as official signature of the company. 2.10 Types of Companies
8. Risk bearing: The risk of losses in a company is borne by Private Company
all the shareholders. All shareholders in a company have to A private company means a company which:
contribute to the debts to the extent of their shares in the (a) restricts the right of members to transfer its shares;
company’s capital. (b) has a minimum of 2 and a maximum of 200 members, excluding
Merits LP2S T the present and past employees; and
1. Limited liability: The shareholders are liable to the extent (c) does not invite public to subscribe to its securities.
of the amount unpaid on the shares held by them. Also, only
the assets of the company can be used to settle the debts, Top Tips
leaving the owner’s personal property free from any charge. • It is necessary for a private company to use the word ‘private
This reduces the degree of risk borne by an investor. limited’ after its name.
2. Transfer of interest: Shares of a public limited company can • If a private company contravenes any of the aforesaid
be sold in the market and as such can be easily converted provisions, it ceases to be a private company and loses all the
into cash. This avoids blockage of investment and presents the exemptions and privileges to which it is entitled.
company as a favourable avenue for investment purposes. Exemptions and privileges of a private limited company
3. Perpetual existence: Existence of a company is not affected as against a public limited company:
by the death, retirement, resignation, insolvency or insanity of 1. A private company can be formed by only 2 members whereas
its members as it has a separate entity from its members. 7 people are needed to form a public company.
4. Scope for expansion: As compared to the sole proprietorship 2. A private company needs to have only 2 directors as against
and partnership forms of organisation, a company has large the minimum of 3 directors in the case of a public company.
financial resources. Further, capital can be attracted from
the public as well as through loans from banks and financial The maximum number of directors for both types of
institutions. Thus there is greater scope for expansion. companies is 15.
5. Professional management: A company can afford to pay
3. There is no need to issue a prospectus as public is not invited
higher salaries to specialists and professionals. It can, therefore,
to subscribe to the shares of a private company.
employ people who are experts in their area of specialisations.
4. Allotment of shares can be done without receiving the minimum
Limitations N C2OLD
subscription.
1. Complexity in formation: The formation of a company
5. A private limited company can start business as soon as it
requires greater time, effort and extensive knowledge of legal
receives the certificate of incorporation.
requirements and the procedures involved.
6. A private company is not required to keep an index of members
2. Numerous regulations: The functioning of a company is
while the same is necessary in the case of a public company.
subject to many legal provisions and compulsions. A company
is burdened with numerous restrictions in respect of aspects Public Company
including audit, voting, filing of reports and preparation of A public company means a company which is not a private
documents, and is required to obtain various certificates from company. As per The Companies Act, 2013 a public company is
different agencies, viz., registrar, SEBI, etc. This reduces the one which:
freedom of operations of a company and takes away a lot of (i) has a minimum of 7 members and no limit on maximum members;
time, effort and money. (ii) has no restriction on transfer securities; and
3. Lack of secrecy: The Companies Act requires each public (iii) is not prohibited from inviting the public to subscribe to its
company to provide from time-to-time a lot of information to securities.
the office of the registrar of companies. Such information is A private company which is a subsidiary of a public
available to the general public also. It is, therefore, difficult to company is also treated as a public company.
maintain complete secrecy about the operations of company.
4. Delay in decision making: Companies are democratically Difference between a Public Company and Private Company
managed through the Board of Directors which is followed by Basis Public company Private company
the top management, middle management and lower level Members Minimum - 7 Minimum - 2
management. Communication as well as approval of various Maximum - unlimited Maximum - 200
proposals may cause delays not only in taking decisions but Minimum number Three Two
also in acting upon them. of directors
5. Oligarchic management: In most large sized companies, Index of members Compulsory Not compulsory
the owners have minimal influence in terms of controlling Transfer of shares No restriction Restriction on transfer
or running the business. It is so because the shareholders Invitation to public Can invite the public to Cannot invite the public
are spread all over the country and a very small percentage to subscribe to subscribe to its shares or to subscribe to its
attend the general meetings. The Board of Directors as such shares debentures securities
enjoy considerable freedom in exercising their power which One Person Company
they sometimes use even contrary to the interests of the
shareholders. Dissatisfied shareholders in such a situation have Meaning of One Person Company
One Person Company is a company with only one person as a member.
no option but to sell their shares and exit the company.
That one person will be the shareholder of the company. It avails all
6. Conflict in interests: There may be conflict of interest the benefits of a private limited company such as separate legal
amongst various stakeholders of a company. The employees, entity, protecting personal assets from business liability and perpetual
for example, may be interested in higher salaries, consumers succession.
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registration of the company. The amount of such fees shall depend
Top Tips on the authorised share capital of the company. The Registrar,
• With the implementation of The Companies Act, 2013, a single after due scrutiny, issues Certificate of Incorporation, which is
person could constitute a company, under the One Person a conclusive evidence of the legal existence of the company.
Company (OPC) concept.
• In India, in the year 2005, the JJ Irani Expert Committee Top Tip
recommended the formation of OPC. It had suggested that The certificate of incorporation may be called the birth certificate
such an entity may be provided with a simpler legal regime of the company.
through exemptions so that the small entrepreneur is not
compelled to devote considerable time, energy and resources With effect from November 1, 2000, the Registrar of
on complex legal compliance. Companies allots a CIN (Corporate Identity Number) to the
Company.
Characteristics
1. Only a natural person who is an Indian citizen and resident in III STAGE: Capital Subscription
India — A public company raising funds from the public needs to take
(a) Shall be eligible to incorporate a One Person Company; following steps for fundraising:
(b) Shall be a nominee for the sole member of a One Person (i) SEBI approval;
Company. (ii) File a copy of prospectus with the Registrar of Companies;
(iii) Appointment of brokers, bankers and underwriters etc.;
The term “resident in India” means a person who has (iv) Ensure that minimum subscription is received;
stayed in India for a period of not less than 182 days during the
(v) Application for listing of company’s securities;
immediately preceding one calendar year.
(vi) Refund/adjust excess application money received;
2. No person shall be eligible to incorporate more than a One Person (vii) Issue allotment letters to successful applicants; and
Company or become nominee in more than one such company. (viii) File return of allotment with the Registrar of Companies (ROC).
3. No minor shall become member or nominee of the One Person A public company raising funds from friends/relatives (not public)
Company or can hold share with beneficial interest. has to file a statement in lieu of prospectus with the ROC at least
4. Such Company cannot carry out Non-Banking Financial 3 days before allotment of shares and returns of allotment after
Investment activities including investment in securities of completing the allotment. As per the SEBI guidelines, minimum
anybody corporates. subcription has to be 90% of the shares to be issued to be public.
5. No such company can convert into any kind of company unless
2 years have expired from the date of incorporation of One 2.12 Functions of a Promoter/ Steps in Promotion
Person Company, except paid-up share capital is increased 1. Identification of business opportunity: The first and
beyond `50 lakh or its average annual turnover during the foremost activity of a promoter is to identify a potential
relevant period exceeds `2 crore. business idea.
2. Feasibility studies: Certain feasibility studies e.g., technical,
2.11 Stages in the Formation of a Company
financial and economic, are conducted to determine whether
the business idea can be profitably exploited.
Top Tip Only when these investigations yield positive results, the
There are two stages in the formation of a private company, promoters may decide to decide to form the company.
promotion and incorporation. A public company has to undergo • Technical feasibility: Sometimes an idea may be good but
capital subscription stage to begin operations. technically not possible to execute because the required raw
I STAGE: Promotion material or technology is not easily available.
It begins with a potential business idea. Certain feasibility • Financial feasibility: The promoters have to estimate the
studies e.g., technical, financial and economic, are conducted to fund requirements for the identified business opportunity. If
determine whether the idea can be profitably exploited. In case, the required expenditure on the project is so large that it
the investigations yield favourable results, promoters may decide cannot easily be arranged within the available sources, the
to form the company. project has to be given up.
Persons who conceive the business idea, decide to form a • Economic feasibility: Sometimes, a project is technically
company, take necessary steps for the same, and assume viable and financially feasible but not profitable. So, the
associated risks, are called promoters. business idea may have to be abondoned.
Steps in Promotion 3. Name approval: The promoters have to select the company‘s
1. Approval of company’s name is taken from the Registrar of name and submit an application to the registrar of companies
Companies for its approval.
2. Signatories to the Memorandum of Association are fixed
Sometimes another company exists with the same name
3. Certain professionals are appropriated to assist the promoters or a very similar name, in such cases the proposed name is not
4. Documents necessary for registration are prepared accepted. Therefore, three names, in order of their priority are given in
Necessary Documents the application to the Registrar of Companies.
• Memorandum of Association
• Articles of Association 4. Fixing up Signatories to the Memorandum of
• Consent of proposed directors Association: Promoters have to decide about the Signatories
• Agreement, if any, with proposed managing or whole time to the Memorandum of Association. Usually the people signing
director memorandum are also the first Directors of the Company.
• Statutory declaration 5. Appointment of professionals: Certain professionals
such as mercantile bankers, auditors etc., are appointed by
II STAGE: Incorporation
the promoters to assist them in the preparation of necessary
An application is made to the Registrar of Companies along with
documents which are required to be filed with the Registrar of
necessary documents. Necessary fees has to be paid for the
Companies.
12
6. Preparation of necessary documents: The promoter takes Position This is the main document This is a subsidiary document
up steps to prepare certain legal documents, to be submitted of the company and and is subordinate to both the
is subordinate to the Memorandum of Association and the
to the Registrar of the Companies for getting the company Companies Act. Companies Act.
registered, such as Memorandum of Association, Articles of Relationship Memorandum of Association Articles define the relationship of the
Association, Consent of proposed directors, etc. defines the relationship of members and the company.
the company with outsiders.
2.13 Memorandum of Association (MOA) Validity Acts beyond the Acts which are beyond Articles can
Memorandum of Association be ratified by the members, provided
Memorandum of Association is the most important are invalid and cannot be they do not violate the Memorandum.
document as it defines the objectives of the company. No ratified even by a unanimous
company can legally undertake activities that are not contained in vote of the members.
Necessity Every company has to file a It is not compulsory for a public
its Memorandum of Association.
Memorandum of Association. ltd. company to file Articles of
Different Clauses of the Memorandum of Association: Association. It may adopt Table F of
1. The name clause: This clause contains the name of the The Companies Act, 2013
company with which the company will be known, which has
already been approved by the Registrar of Companies. Documents (other than MOA and AOA) to be filed with
2.15
2. Registered office clause: This clause contains the name ROC for Incorporation of a Company
of the state, in which the registered office of the company is 1. Written Consent of the Proposed Directors
proposed to be situated. Apart from the Memorandum and Articles of Association, a
written consent of each director is required, confirming that
Top Tip they agree to act as director and undertake to buy and pay for
The exact address of the registered office is not required at this qualification shares, as mentioned in the Articles of Association.
stage but the same must be notified to the ROC within 30 days of
the incorporation of the company. To ensure that the directors have some stake in the proposed
company, the Articles usually have a provision requiring them
3. Objects clause: This is the most important clause of the to buy a certain number of shares. They have to pay for these shares
before the company obtains Certificate of Commencement of Business.
memorandum. It defines the purpose for which the company is
These are called Qualification Shares.
formed.
2. Agreement
Top Tip The agreement, if any, which the company proposes to enter with
A company is not legally entitled to undertake an activity, which is any individual for appointment as its Managing Director or a Whole
beyond the objects stated in this clause. Time Director or Manager is another document, which is required
to be submitted to the ROC for getting the company registered.
4. Liability clause: This clause limits the liability of the members 3. A copy of the Registrar’s letter approving the name of
to the amount unpaid on the shares owned by them. the company
5. Capital clause: This clause specifies the maximum capital 4. Statutory Declaration
which the company will be authorised to raise through the A declaration stating that all the legal requirements pertaining to
issue of shares, called authorised share capital. registration have been complied with is to be submitted to the ROC.
Top Tips Top Tip
• A company cannot issue share capital in excess of the amount This statement can be signed by: (i) an Advocate or a CA or a CS or a Cost
mentioned in this clause. Accountant who is engaged in the formation of a company, and (ii) a person
• The Memorandum of Association must be signed by at least 7 named in the Articles as a director or manager or secretary of the company.
persons in case of a public company and by 2 persons in case of
5. A notice about the exact address of the registered office
a private company.
may also be submitted along with these documents. However, if
the same is not submitted at the time of incorporation, it can
2.14 Articles of Association (AOA) be submitted within 30 days of the receipt of the certificate of
Articles of Association are the rules regarding internal incorporation.
management of a company. 6. Documentary evidence of payment of registration fees.
These rules are subsidiary to the Memorandum of Association
2.16 Position of Promoters
and hence, should not contradict or exceed anything stated in the
Memorandum of Association. Promoters are neither the agents nor the trustees of the
company.
Top Tip • They can’t be the agents as the company is yet to be
Articles of Association shall be in respective forms as specified in incorporated. Therefore, they are personally liable for
Table F, G, H, I and J in schedule I. Preliminary Contracts which are entered by them, for the
company before its incorporation, in case the same are not
The companies are free to make their own articles of ratified by the company later on.
association which may be contrary to the clauses of Table F, • Also promoters are not the trustees of the company.
G, H, I, J and in that case articles of association as adopted by the
company shall apply. Preliminary Contracts or Pre-incorporation Contracts
During the promotion of the company, promoters enter into
Difference between MOA and AOA certain contracts with third parties on behalf of the company. These
Basis of Memorandum of Articles of are called preliminary contracts. These are not legally binding on the
Difference Association (MOA) Association (AOA) company. A company after coming into existence may decide to enter
Objectives Memorandum of Association Articles of Association are rules of into fresh contracts with the same terms and conditions to honour the
defines the objects for which internal management of the company. contracts made by the promoters. Note that the company cannot ratify
the company is formed. They indicate how the objectives of a preliminary contract. A company, thus, cannot be forced to honour a
the company are to be achieved. preliminary contract. Promoters, however, remain personally liable to
third parties for preliminary contracts.
13
Promoters of a company enjoy a fiduciary position with 3. Appointment of Bankers, Brokers, Underwriters:
the company, which they must not misuse. • The application money is to be received by the bankers of
• They can make a profit only if it is disclosed but must not make the company.
any secret profits. • The brokers try to sell the shares by distributing the forms
• In the event of a non-disclosure, the company can rescind the and encouraging the public to apply for the shares.
contract and recover the purchase price paid to the promoters. • If the company is not assured of a good public response
It can also claim damages for the loss suffered due to the non- to the issue, it may appoint underwriters. Underwriters
disclosure of material information. undertake to buy the shares if these are not subscribed by
Promoters are not legally entitled to claim the expenses the public for a commission.
incurred in the promotion of the company. 4. Minimum Subscription: In order to prevent companies from
• However, the company may choose to reimburse them for the commencing business with inadequate resources, the company
pre-incorporation expenses. must receive applications for minimum 90% of the number of
• The company may also remunerate the promoters for their efforts shares issued (as per the SEBI Guidelines). Otherwise, the
by paying a lump sum amount or a commission on the purchase allotment cannot be made and the application money received
price of property purchased through them or on the shares sold. must be returned to the applicants.
• It may also allot them shares or debentures or give them an 5. Application to Stock Exchange: An application is made to at
option to purchase the securities at a future date. least one stock exchange for permission to deal in its shares
or debentures.
2.17 Effect of the Certificate of Incorporation 6. Allotment of Shares: Allotment letters are issued to the
• A company is legally born on the date printed on the successful allottees. ‘Return of allotment’, signed by a director
Certificate of Incorporation. or secretary is filed with the ROC within 30 days of allotment.
It becomes a legal entity with perpetual succession on such
date. It becomes entitled to enter into valid contracts. 2.19 Choice of form of business organisation
• Certificate of Incorporation is a conclusive evidence of Factors affecting choice of form of business organisation
the regularity of the incorporation of a company. C3D LMN
The legal situation is that once a Certificate of Incorporation has been 1. Cost and ease in setting up the organisation
issued, the company has become a legal business entity irrespective • Sole proprietorship is the most inexpensive way of starting a
of any flaw in its registration. The Certificate of Incorporation is, business.
thus, conclusive evidence of the legal existence of the company. • In case of partnership also, the advantage of less legal formalities
Examples: and lower cost is there because of limited scale of operations.
1. Documents for registration were filed on 6th January. Certificate • Companies have to be compulsorily registered. Also,
of Incorporation was issued on 8th January. But the date formation of a company involves a lengthy and expensive
mentioned on the Certificate was 6th January. It was decided legal procedure.
that the company was in existence and the contracts signed on Factor Most advantageous Least advantageous
6th January were considered valid. Cost and ease of formation Sole proprietorship Company
2. A person forged the signatures of others on the Memorandum. 2. Liability
The Incorporation was still considered valid. • In case of sole proprietorship and partnership firms, the
Thus, whatever be the deficiency in the formalities, the Certificate liability of the owners/partners is unlimited. For paying firm’s
of Incorporation once issued, is a conclusive evidence of the debt, personal assets of the owners may be used.
existence of the company. • In joint Hindu family business, only the karta has unlimited
Top Tip liability.
• In cooperative societies and companies, liability is limited
Even when a company gets registered with illegal objects, the birth
and creditors can force payment of their claims only to the
of the company cannot be questioned. The only remedy available
extent of the company’s assets.
is to wind it up. Because the Certificate of Incorporation is so
crucial, the Registrar has to go very carefully before issuing it. Factor Most advantageous Least advantageous
Liability Company Sole proprietorship
Capital Subscription Stage in the formation of a Public 3. Continuity

2.18 • The continuity of sole proprietorship and partnership firms is
Company: Steps required for raising funds from the public
A public company can raise funds from the public by means of affected by the death, insolvency or insanity of the owners.
issue of securities (shares and debentures etc.). The following • However, such factors do not affect the continuity of business
steps are required for raising funds from the public: in the case of joint hindu family business, cooperative
1. Approval from SEBI (Securities and Exchange Board societies and companies.
of India): Prior approval from SEBI is required before going Factor Most advantageous Least advantageous
ahead with raising funds from public. Continuity Company Sole proprietorship
2. Filing of Prospectus: A prospectus is an invitation to the 4. Management skills and ability
public to apply for securities (shares, debentures etc.) of the • A sole proprietor may find it difficult to have expertise in all
company or to make deposits in the company. There must not functional areas of management.
be a mis-statement in the prospectus and all material significant • In partnership and company, there is no such problem.
information must be fully disclosed. Division of work among the members allows the managers to
specialise in specific areas, leading to better decision making.
Statement in Lieu of Prospectus
A public company may not invite public to subscribe to its Factor Most advantageous Least advantageous
securities (shares, debentures etc.). Instead, it can raise the funds Managerial skills Company Sole proprietorship
through friends, relatives or some private arrangements as done by a 5. Capital considerations
private company. In such cases, there is no need to issue a prospectus. • Companies are in a better position to collect large amounts
A ‘Statement in Lieu of Prospectus’ is filed with the Registrar at least 3
of capital by issuing shares to a large number of investors.
days before making the allotment.
14
• Partnership firms also have the advantage of combined Factor Most advantageous Least advantageous
resources of all partners. Degree of control Sole proprietorship Company
• But the resources of a sole proprietor are limited. 7. Nature of business
Factor Most advantageous Least advantageous • If direct personal contact is needed with the customers such
Availability of capital Company Sole proprietorship as in the case of a grocery store, sole proprietorship is most
6. Degree of control suitable.
• If direct control over operations and absolute decision • For large manufacturing units, when direct personal contact
making power is required, sole proprietorship may be with the customer is not required, the company form of
preferred. organisation may be adopted.
• But if the owners can share control and decision making, • Similarly, in cases where services of a professional nature are
partnership or company form of organisation can be required, partnership form is much more suitable.
adopted.
2.20 Comparative Evaluation of Forms of Organisation
Basis Sole Partnership Joint Hindu family Cooperative society Company

proprietorship business
1. Formation Minimal legal Registration is optional, Less legal formalities, Registration compulsory, Registration compulsory,
formalities, easiest easy formation exemption from registration, greater legal formalities lengthy and expensive
formation easy formation formation process
2. Members Only owner Minimum: 2 At least two persons for At least 10 adults, no Minimum
Maximum: 50 division of family property, maximum limit Private Company: 2
no maximum limit Public Company: 7
Maximum
Private Company: 200
Public Company: unlimited
3. Capital Limited finance Limited but more than Ancestral property Limited Large financial resources
contribution that can be raised in case
of sole proprietorship
4. Liability Unlimited Unlimited and joint Unlimited (Karta), Limited Limited
Limited (Other members)
5. Control and Owner takes all Partners take decisions, Karta takes decisions Elected representative, Separation between
management decisions, quick consent of all partners is i.e., managing ownership and management
decision making needed committee takes
decisions
6. Continuity Unstable, business More stable but affected Stable business, continues Stable because of Stable because of separate
and owner by status of partners even if karta dies separate legal status legal status
regarded as one
Pictures and Cartoons
Based Questions
for
Annual Examination 2024
(Strictly Based on the Pictures/Cartoons
given in NCERT Book 2023-24)
Q.2
Q.3
Q.4
Competency
Based Questions with
Answers
for
Annual Examination 2024
Multiple Choice Questions
(Strictly as per CBSE Standards and
Expectations for 2024 Examination)
Assertion-Reasoning
and
Statements
Based MCQs
(Strictly as per CBSE Standards and

Expectations for 2024 Examination)
Practice Question Papers
33
10 PRACTICE QUESTION PAPERS
for
Annual 2024 Examination
(Based on CBSE Latest Examination
Pattern and New Education Policy)
Important Tips for Business Studies XI Annual 2024 Examination

 During the Reading Time, read all questions carefully. Select the Option to be answered in questions having
internal choice.
There will be Internal Choice in 2 Questions of 3 marks, 2 Questions of 4 marks and 2 Questions of 6
marks. When reading, underline the key lines with pencil which help you to write answers.
 In Competency-based Questions, before reading the whole question first you must read what is required in
the question as given in the last line(s) of the question.
 Timing is an essential ingredient of success. Business Studies XI paper is worth 80 marks and must be
completed in 180 minutes. Allowing 20 minutes revision time, this leaves 160 minutes or 2 minutes per
mark. So, do not spend 10-15 minutes on a question worth just 3 marks! Do not exceed the time you have
allocated for each question.
There are 4 types of questions in the Business Studies XI Annual Examination 2024. These are:
Types of Marks Word limit No. of Total Estimated Time
Questions Questions Marks
MCQ 1 one word to one sentence 20 20 20 min.
SA-I 3 50-75 words 4 12 30 min.
SA-II 4 About 150 words 6 24 50 min.
LA 6 About 200 words 4 24 60 min.
20 Minutes –
Revision
Total 34 80 180 min.
 Write impersonally. In other words, do not use ‘I’ or ‘We’ in your answers. For example, do not write — “I
don’t agree with the statement.” Rather you must write — “The given statement is not correct.”
 The following table shows a list of key directive words which are most likely to occur in Business Studies XI
annual examination questions. You should read these carefully and understand what each means. However,
always consider the weightage of the question. Write your answers as per the word-limit prescribed by
CBSE.
Directive Words The examine is supposed to:
Name/Identify/Which Write the name of the concept/term only
State Make clear
List/Enumerate/State Write the statements without giving heading
Explain/ Describe Give the heading and then explanation/description with reasons and examples, if
required.
Comment Give your reasoned opinions on
34
 To score 100% marks, the presentation of answers is as much important as their content.
 Write the main heading in capital letters. (Use dark and bold pen like Pilot V10)
 Underline the headings with pencil.
 Explanation/description from next line of heading.
 Attempt all parts of a question together.
 Give answer in points, as far as possible, rather than in paragraphs. Use bullets for the points.
 Leave one line space between two headings
 Attempt all questions of 3 marks, 4 marks and 6 marks from new page.
 During last 20 minutes of revision, first of all make sure that you have attempted all the questions and
written Question Number for each answer. If any question(s) left, attempt it first. Don’t leave it even if
you don’t know the proper answer. Remember that writing something is always better than leaving it at
all. Then, read your answers one by one underlining the key lines using pencil.
To conclude, it is very important for you to be well-organised and to be able to plan ahead if you are to
gain 100% marks in Business Studies XI annual Examination. Revision should be an ongoing process, not
just a last-minute activity you carry out just before a written examination. A lack of time and an inability to
understand the relevance of directive words are the most common causes of under performance.
I know examinations create a lot of anxiety among students. Everyone expects good performance. My advice to
you is:
To work hard and give your 100%.
Remember: Success will never lower its standard to accommodate you. You have to raise your standard to achieve
it. For every bird, God provides food but not in their nest.
Always believe in yourself. Don’t give up.
One thing keep in mind: You are something! Because God does not create garbage.
Always remember God.
Without Him, your all efforts are in vain! 0 0 0 0 0 0 0 = 0. But if you put 1 before these zeros, you get 1 crore
(10000000). We human beings are zeros without Him! And 1 is God!
I’ll take great pleasure in resolving any of your queries/doubts related to the subject through Whatsapp
Number 9810475716.
Finally I pray to the Supreme Divine to bestow blessing on you.
Regards
Your servant
SUBHASH DEY
B.Com. (Hons.), M.Com. (DSE), M.A. (Economics), PGDBA (Finance), B.Ed, PGD in Labour and Administrative Laws
• Author and Publisher of CBSE Books – Accountancy, Business Studies, Economics, English, Mathematics, Legal
Studies, Physical Education and Entrepreneurship
• M.Com (Delhi School of Economics)– Gold Medalist, Topper of Delhi University
• Consecutive four years’ Economics topper of Delhi University
• Resource Person and Educationist conducting Workshops/Seminars of Teachers and Students in Schools and Colleges
• Founder of ‘Shree Radhey Publications’ and ‘DEY’SEDU.COM’
63
Practice Question Paper - 10

Q.1 A government company is any company in which the paid up (a) Only (ii) (b) Only (i) and (ii)
capital held by the government is not less than: (1) (c) Only (ii) and (iii) (d) Only (iii) and (iv)
(a) 49% (b) 51% (c) 50% (d) 25% Q.7 The principal international body concerned with solving trade
problems between countries and providing a forum for multilateral
Q.2 Match the columns and choose the correct alternative: (1)
trade negotiations is: (1)
Column I Column II
(a) World Health Organisation (b) World Trade Organization
A. Bank Draft i. A short-term cash loan to a company. The
(c) World Bank (d) World International Bank
borrower is sanctioned a credit limit upto
Q.8 The term “Emerging” in Emerging Modes of business includes
which it may draw amounts from the bank.
trends. (1)
This credit limit is determined by the bank’s
(a) Digitisation
estimation of the borrower’s credit-worthiness.
B. Bank Overdraft ii. Drawn by a bank branch on another branch (b) Outsourcing
or some other bank at the place of destination. (c) Internationalisation and globalisation
The bank charges some commission in lieu of (d) All of the above
issuing. Q.9 Match the columns and choose the correct alternative: (1)
C. Cash Credits iii. The bank allows a customer to overdraw Column I Column II
his current account balance up to an agreed A. Patent i. It is a type of variety which is bred and developed
limit. The customer has to pay interest on the by farmers. This helps in conserving, improving
amount overdrawn by him. and making available plant genetic resources.
D. e-Banking iv. Automated Teller Machines (ATM) and Point B. Geographical ii. It identifies agricultural, natural or manufactured
of Sales (PoS), Electronic Data Interchange Indication products (handicrafts, industrial goods and food stuffs)
(EDI) and Credit Cards Electronic or Digital originating from a definite geographical territory.
cash and Electronic bank transfer (EFT) C. Design iii. An exclusive right granted by the Government
(a) A-iii, B-ii, C-i, D-iv (b) A-iv, B-iii, C-i, D-ii which provides the exclusive ‘right to exclude’
(c) A-ii, B-iii, C-i, D-iv (d) A-ii, B-i, C-iii, D-iv all others and prevent them from making, using,
Q.3 The Chief Executive Officer (CEO) and other higher level managers offering for sale, selling or importing the invention.
D. Plant Variety iv. It includes shape, pattern, and arrangement of
need to be openly and strongly committed to ethical conduct. They
lines or colour combination that is applied to
must give continuous leadership for developing and upholding
any article. It is a protection given to aesthetic
the values of the organisation. Which of the following elements of
appearance or eye-catching features.
business ethics is highlighted above? (1)
(a) A-iii, B-i, C-iv, D-ii (b) A-iv, B-i, C-iii, D-ii
(a) Involving employees at all levels (b) Top management commitment
(c) A-iii, B-ii, C-iv, D-i (d) A-iii, B-i, C-ii, D-iv
(c) Measuring results (d) Establishment of compliance mechanisms
Q.10 Statement I: The GST has replaced 17 indirect taxes
Q.4 The sources for raising borrowed funds include: (1)
(8 Central + 9 State levels) and 23 cesses of the Centre and
(i) Loans from commercial banks (ii) Loans from financial
the States, eliminating the need for filing multiple returns and
institutions (iii) Issue of debentures (iv) Trade credit
assessments and rationalising the tax treatment of goods and services
(v) Public deposits (vi) Retained earnings
along the supply chain from producers to consumers.
(a) (i), (ii) and (iii) (b) (i), (ii), (iii) and (iv)
Statement II: GST comprises Central GST (CGST) and the State
(c) (i), (ii), (iii), (iv) and (v) (d) All of these
GST (SGST), subsuming levies previously charged by the Central
Q.5 Which hindrance of trade is removed by the activity shown in image
and the State governments respectively.
given below: (1)
(a) Statement I is true, Statement II is false.
(b) Statement II is true, Statement I is false.
(c) Both the statements are true.
(d) Both the statements are false.(1)
Q.11 Match the columns and select the correct alternative: (1)
Forms for Articles of a Company
1. Table F A. AOA of a company limited by guarantee and having
share capital
(a) Hindrance of Persons (b) Hindrance of Place 2. Table G B. AOA of a company limited by shares
(c) Hindrance of Time (d) Hindrance of Risk 3. Table H C. AOA of a company limited by guarantee and not having
Q.6 Which of the following industry/industries is/are classified as share capital
secondary industries? (1) 4. Table I D. AOA of an unlimited company and not having share
capital
5. Table J E. AOA of an unlimited company and having share capital
(a) 1-A, 2-B, 3-C, 4-D, 5-E (b) 1-B, 2-A, 3-C, 4-D, 5-E
(c) 1-A, 2-B, 3-D, 4-C, 5-E (d) 1-B, 2-A, 3-C, 4-E, 5-D
Q.12 Match the columns and choose the correct alternative: (1)
Column I Column II
(i) (ii) A. Policy i. The person whose life is insured.
B. Assured ii. The consideration paid periodically in
instalments.
C. Insurer iii. The agreement or contract which contains
all the terms and conditions in writing.
D. Premium iv. The insurance company
(a) A-ii, B-i, C-iv ,D-iii (b) A-iii, B-iv, C-i, D-ii
(iii) (iv) (c) A-iii, B-ii, C-iv, D-i (d) A-iii, B-i, C-iv, D-ii
64
Q.13 Which of the following is a benefit of e-Commerce to Business (a) Only (ii) (b) Only (i) and (ii)
Organisations? (1) (c) Only (ii) and (iii) (d) Only (ii) and (iv)
(i) Expands the marketplace to national and international markets Q.21 Vrinda Ltd. is facing a declined in demand for its products due to
(ii) Proper time management and support business processes change in tastes and preferences of consumers as well as increased
(iii) Competitive price/discounts/waive offs competition from other producers. Lower demand results in low sales
(iv) Quick and Timely delivery (digitised products) and profits. Moreover, the shortage of raw materials in the market
(v) Small firms co-exist with big firms (win-win) shoots up its price. So the company has to pay more for buying them.
(a) Only (i) and (ii) (b) Only (i), (ii) and (iii) As a result, cost of production increases which, in turn, reduces profits
(c) Only (i), (ii) and (v) (d) Only (ii), (iii) and (v) of the company.
Q.14 Which of the following statement is not true for raising funds (a) State the concept highlighted above. (1)
through issuing preference shares? (1) (b) Explain two main causes of the concept identified. (2)
(a) Preference shares provide reasonably steady income in the form OR
of fixed rate of return and safety of investment. Identify and explain the three major categories of economic
(b) Preference shares are useful for those investors who want fixed activities. (3)
rate of return with comparatively low risk. Economic Activities
(c) It affects the control of equity shareholders over the management
as preference shareholders have voting rights.
(i) (ii) (iii)
(d) Preference capital does not create any sort of charge against the
assets of a company. Q.22 Identify and explain the types of partnership models shown in the
Q.15 Statement I: It is not compulsory to insure the goods before export. following pictures: (3)
Statement II: Bills of exchange is a document that contains the
details of the imported good.
(a) Both statements are true. (b) Both statements are false.
(c) Only Statement I is true. (d) Only Statement II is true. (1)
Q.16 Assertion (A): The exporter need not wait for the payment till the
release of money by the importer.
Reason (R): The exporter can get immediate payment from his/her
bank on the submission of documents by signing a letter of indemnity.
Kundli Manesar Expressway
(a) Both Assertion (A) and Reason (R) are true.
(b) Both Assertion (A) and Reason (R) are false. (i) (ii)
(c) Assertion (A) is true, but Reason (R) is false. Q.23 Mr. Gurudutt is a trader from Assam and a leading Supplier of
(d) Assertion (A) is false, but Reason (R) is true. (1) “Assam Tea” to wholesalers and retailers in different parts of India.
Q.17 Rajiv, an exporter sent complete information about the quality, grade, He is facing problem while communicating with his customers,
size, weight, type of packaging, etc. about the product on his enquiry. which is given as below:
Such quotation is known as ________. (1) (a) Asgar, big retailer in Mumbai, asked for a quotation for different
(a) Performa Invoice (b) Intent flavours of tea from Mr. Gurudutt. Gurudutt wants to send the
(c) Letter of Information (d) Enquiry Performa quotation as quickly as possible along with sample so that Asgar
Q.18 Arrange the following steps in the export procedure in sequential does not shift to his competitors.
order: (1) (b) Chaman, a big wholesaler in Delhi asked Mr. Gurudutt to send
(i) Excise clearance (ii) Obtaining pre-shipment finance a bag of 10 kg special. Assam tea.
(iii) Pre-shipment inspection (iv) Production or procurement of goods (c) Dholu is a customer of Mr. Gurudutt, who is making default in
(a) (ii), (iv), (i), (iii) (b) (ii), (iv), (iii), (i) payment even after three reminders. Now, Mr. Gurudutt wants
(c) (i), (ii), (iv), (iii) (d) (i), (ii), (iii), (iv) to send him a legal notice and also wants to get assured that it
Q.19 The definition used by the Government of India to describe MSME must reach him without fail.
is based on: (1) Suggest Mr. Gurudutt, with explanation, the different types of
(i) Investment in plant and machinery postal services, which he can use to communicate with different
(ii) Turnover of business customers described in the above cases (3)
(iii) Number of persons employed in business Q.24 State any three points highlighting the need for entrepreneurship
(a) Only (i) (b) Only (i) and (ii) development. (3)
(c) Only (i) and (iii) (d) All of these OR
Q.20 Which of the following industry/industries is/are classified as State any three objectives of Startup India Scheme. (3)
primary industries? (1) Q.25 Read the following and answer the questions that follow on the
basis of the same and your previous knowledge:
Have you ever thought if there were no markets, how products of different
manufacturers would reach us? We are all aware of our general provisions
store round the corner which is selling items of our daily need. But is that
enough? When we need to buy items of a specialised nature, we like to look
at bigger markets or shops with variety. Our observation tells us that there
(i) (ii) are different types of shops selling different items or specialised goods and
depending on our requirements we purchase from certain shops or markets.
In rural areas, we may have noticed people selling their goods on the streets,
these goods may range from vegetables to clothes. This is a completely
different scene from what we see in the urban areas. In our country, all
kinds of markets co-exist in harmony. With the advent of imported goods
and multinational corporations, we have shops selling these products
too. In big towns and cities, there are many retail shops selling particular
(iii) (iv) branded products only. Another aspect of all this is, how these products
65
reach the shops from the manufacturers? There must be some middlemen (iii) Name any two major exports and imports items of ancient India. (1)
doing this job. Are they really useful or do prices increase because of them? (iv) Why was the Indian subcontinent referred to as ‘Swaran Bharat and
(a) Explain any two types of small scale fixed shops retailers selling Swaran Dweep’ by the then travellers to India? (1)
particular branded products such as grocery items, soft drinks, Q.27 The vast space of the internet allows persons to globally search for
children’s garments, men’s wear, ladies shoes, toys and gifts, school potential buyers. Additionally, internet technology provides market
uniforms, etc. in big towns and cities. (2) system security to such transactions which otherwise would have
(b) Explain the services of the type of middlemen which help these been missing if the buyers and sellers were to interact in anonymity
products reach the shops from the manufacturers. (2) of one-to-one transactions? An excellent example of this is found
Q.26 Read the following and answer the questions that follow on the at eBay where consumers sell their goods and services to other
basis of the same and your previous knowledge. consumers. To make this activity more secure and robust, several
Imran, Manpreet, Joseph and Priyanka have been classmates in Class technologies have emerged. Firstly, eBay allows all the sellers and
X. After their exams are over, they happen to meet at a common friend buyers to rate one another. In this manner, future prospective
Ruchita’s house. Just when they were sharing their experiences of purchasers may see that a particular seller has sold to more than
examination days, Ruchika’s father Raghuraj Chaudhary intervenes and 2,000 customers — all of whom rate the seller as excellent. In
asks about their well-being. He also enquires about their career plans. But another example, a prospective purchaser may see a seller who has
none of them had a definite reply. Raghuraj who himself is a successful previously sold only four times and all four rate the seller poorly.
businessman tells them about business as a career opportunity. Joseph gets This type of information is helpful.
excited by the idea and says “yes, business is really good for making lots PayPal is another good example of this kind. Instead of
of money”. Raghuraj tells them that ‘there is a lot more to business than purchasing items directly from an unknown, untrusted seller;
merely money’. Business activities lead to growth and development of any the buyer can instead send the money to Pay Pal. From there,
country, he added. He further tells them that the roots of business activities PayPal notifies the seller that they will hold the money for them
can be traced back to ancient times and how trading helps in the prosperity until the goods have been shipped and accepted by the buyer.
of the Indian subcontinent. Priyanka said that they have read about the (a) Identify the emerging mode of business discussed above. State
Silk Route in their history textbooks. Raghuraj then gets busy with his its meaning. (1)
day-to-day tasks. However, the four classmates begin raising questions. The (b) Identify and explain the constituent of the emerging mode of
conversation of the four classmates focused on how trading activities were business discussed above. (3)
conducted during ancient times. How far can the roots of trading activities OR
be traced? Why was the Indian subcontinent referred to as ‘Swaran Bharat Internet is truly without boundaries. On the one hand, it allows the
and Swaran Dweep’ by the then travellers to India? What made Columbus seller an access to the global market; on the other hand, it affords to
and Vasco da Gama undertake journeys to locate India? the buyer a freedom to choose products from almost any part of the
world. It would not be an exaggeration to say that in the absence
of internet, globalisation would have been considerably restricted in
scope and speed.
Use of Internet has considerably reduced dependence on paperwork
and the attendant ‘red tape.’ You know that Maruti Udyog does
bulk of its sourcing of supplies of materials and components in a
paper less fashion. Even the government departments and regulatory
authorities are increasingly moving in this direction whereby they
allow electronic filing of returns and reports. In fact, e-commerce
tools are effecting the administrative reforms aimed at speeding up
the process of granting permissions, approvals and licences. In this
Source: Angus Maddison (2001 and 2003), The World Economy: A respect, the provisions of Information Technology Act 2000 are
Millennial Perspective, OECD, Paris; Angus Maddison, The World Economy, quite noteworthy.
Historical Statistics (a) Identify the emerging mode of business discussed above. State
The Indian economy is emerging as one of the fastest growing economies in its meaning. (1)
the world today and a preferred FDI destination. Rising incomes, savings, (b) Identify three benefits of the emerging mode of business
investment opportunities, increased domestic consumption and younger discussed above. (3)
population ensures growth for decades to come. The high growth sectors Q.28 A business can raise funds from various sources. Each of the source
have been identified, which are likely to grow at a rapid pace and the recent has unique characteristics, which must be properly understood so
initiatives of the Government of India such as ‘Make in India’, Skill India’, that the best available source of raising funds can be identified.
‘Digital India’ is expected to help the economy in terms of exports and There is not a single best source of funds for all organisations.
imports with steady and sustainable trade balance. Depending on the situation, purpose, cost and associated risk, a
choice may be made about the source to be used. For example, if a
business wants to raise funds for meeting fixed capital requirements,
long term funds may be required which can be raised in the form of
owned funds or borrowed funds.
(a) Distinguish between owners’ funds and borrowed funds. (2)
(b) Explain any two sources each of owners’ funds and borrowed
funds. (2)
Q.29 Read the following and answer the questions that follow on the
basis of the same and your previous knowledge:
The word ‘ethics’ has its origin in the Greek word ‘ethics’ meaning character;
norms, ideals or morals prevailing in a group or society. Ethics is concerned
(i) Which factors led to the dominant growth of indigenous banking with what is right and what is wrong in human behaviour judged on the
system in Indian subcontinent? (1) basis of a standard form of conduct/ ehaviour of individuals, as approved by
(ii) Name any four leading trade centres which were developed in society in a particular field of activity. Ethics may be viewed as the entire
ancient times for the import and export of goods. (1) body of moral values that society attaches to the actions of human beings.
66
Ethics can also refer to codes or other system for controlling means so that Traders dealing in wholesale trade are called wholesale traders and those
they serve human ends. Ethical standards are often enacted into laws. But dealing in retail trade are called retailers. Both retailers and wholesalers are
ethical behaviour is just and fair conduct which goes beyond observing laws important marketing intermediaries who perform very useful functions
and government regulations. It means adhering to moral principles, being in the process of exchange of goods and services between producers and
guided by particular values, and behaving in a way people ought to act. The users or ultimate consumers. Internal trade aims at equitable distribution of
set of principles called ethics may be written or unwritten codes or principles goods within a nation speedily and at reasonable cost.
governing a professional or human activity. (a) Give the meanings of the two types of Internal trade viz., (i)
Business ethics concerns itself with the relationship between business wholesale trade and (ii) retail trade. (2)
objectives, practices, and techniques and the good of society. A (b) Is custom duty or import duty levied on internal trade? (1)
businessperson behaves ethically when her or his actions are upright and (c) Explain the services of retailers to consumers. (any three) (3)
serve the interests of society. This, of course, also applies to those not in Q.32 Give the meaning and any four exemptions and privileges of the
business. The essential difference is perhaps that businesspersons by virtue type of company shown in the picture given below: (6)
of their widespread control over society’s resources have a much greater
effect on what happens in a society than persons in other areas of activity
do. Business people and politicians are expected to have higher standards
over and above other people. This is perhaps the price they pay for being
allowed to make decisions on behalf of society.
There is a growing realisation all over the world that ethics is vitally
important for every business and for the progress of any society. Ethical
business is good business. Ethical business behaviour improves public
image, earns people’s confidence and trust, and leads to greater success.
Ethics and profits go together in the long run. Ethics alone, and not
government or laws, can make a society great. An ethically responsible
enterprise develops a culture of caring for people and environment and
commands a high degree of integrity in dealing with others. Ethical activity
is indeed valuable in itself, for its own sake, because it enhances the quality
of our lives and that of the work we do. OR
(a) What is business ethics? Give a few examples. (2) Identify and explain the features of the form of organisation shown
(b) Explain any two elements of business ethics. (2) in the picture given below: (6)
OR
Read the following and answer the questions that follow on the basis of
the same and your previous knowledge:
What is the right thing to do when it comes to social responsibility? Should a
business enterprise be run for the benefit of its owners who may desire to get
as much profit as is possible or else, it needs to be responsible for serving the
interest of other sections of society such as customers, employees, suppliers,
government and community? The very concept of social responsibility
implies that it is essentially an ethical issue, since it involves the question
of what is morally right or wrong in relation to the firm’s responsibilities.
Social responsibility also has an element of voluntary action on the part of
the business person who may feel free to perform or not to perform such
responsibilities. They may also exercise their freedom for deciding the extent
to which they would like to serve various sections of society. In fact, all
business people do not feel equally responsible towards society. There has
been a debate, for some time now whether business should assume social
responsibilities or not. Some people strongly believe that a firm’s only social
responsibility is towards its owners. Some others, however, hold an opposite
view and argue that the firm has a social responsibility to serve all sections of
society who are affected by its decisions and actions.
(a) What do you understand by social responsibility of business? How is
it different from legal responsibility? (2)
(b) Justify the case of social responsibility by giving any two points. (2)
Q.30 Jass in running an artificial jewellery business on the basis of
advertisement only. She has not opened any shop and sends goods Q.33 State the meaning of borrowed funds. Discuss the concept of
to her customers through VPP. Debentures and Bonds, Loans from financial institutions and
Identify the type of retail trade highlighted above and write any commercial banks, Trade credit and Inter-corporate deposits as the
three other features also. (4) sources of borrowed funds. (6)
Q.31 Read the following and answer the questions that follow on the OR
basis of the same and your previous knowledge: State the meaning of owners’ funds. Explain three sources of owners’
Internal trade can be classified into two broad categories viz., (i) wholesale funds. (6)
trade and (ii) retail trade. Generally, for products, which are to be distributed Q.34 Discuss the process involved in securing payment for exports in
to a large number of buyers who are located over a wide geographical area, international trade. (6)
it becomes very difficult for the producers to reach all the consumers or OR
users directly. For example, if vegetable oil or bathing soap or salt produced Your firm is planning to import textile machinery from Canada.
in a factory in any part of the country are to reach millions of consumers Describe the procedure involved in importing after obtaining the
throughout the country, the help of wholesalers and retailers becomes very import licence and placing the import order or indent with the
important. exporter for supply of textile machinery. (6)
DEY’S Business Studies-XI
for AnnualEXAM HANDBOOK
Examination 2024
67
Answers for Practice Question Papers
Practice Question Paper 10

1. (b) 2. (c) 3. (b) 4. (c) 5. (c) 6. (d) 7. (b) 8. (d) 9. (c) 10. (c) 27. (a) e-business (explain)
11. (d) 12. (d) 13. (c) 14. (c) 15. (b) 16. (a) 17. (a) 18. (b) 19. (b) 20. (b) (b) C2C Commerce (explain)
21. (a) Business risk, which refers to the possibility of inadequate profits OR
or even losses due to uncertainties or unexpected events. (a) e-business (explain)
(b) Main causes of business risks are: (b) Speed, Global reach/access and Movement towards a paperless
(i) Natural causes society (explain)
(ii) Human causes 28. Refer to page 23
(iii) Economic causes (explain any two) 29. Refer to page 22
OR OR
Three major categories of economic activities are: Refer to page 21
(i) Business, which refers to an occupation in which people regularly 30. Mail order business
engage in activities related to purchase, production and/or sale of 31. Refer to page 27
goods and services with a view to earning profits by satisfying the No custom duty or import duty is levied on internal trade as goods are
needs of other people. part of domestic production and are meant for domestic consumption.
(ii) Profession, which includes those economic activities which require 32. Cooperative Societies
application of special knowledge and skills in the occupation. 34. II Option: (i) Obtaining letter of credit
(iii) Employment, which refers to the occupation in which people work (ii) Arranging for finance
for others and get remuneration (wages/salaries) in return. (iii) Receipt of shipment advice
22. (i) Public Private Partnership (PPP) (ii) Joint Venture (iv) Retirement of import documents
23. (i) Postal Service used for Asgar - Speed post (v) Arrival of goods
(ii) Postal Service used for Chaman - Parcel (vi) Customs clearance and release of goods
(iii) Postal service used for Dholu - Registered Post
25. (a) General stores and Specialty Shops (explain)
(b) Services of Wholesalers to Retailers (explain any two)
26. (i) The goods were traded both internally and to the foreign lands,
which generated surplus income. Family based workshops
(karkhanas), for manufacturing, were important components of
economic life of Indian people. This money was channelised into
further investment, and led to the dominant growth of indigenous
banking system to finance the trading activities.
(ii) Patliputra, Peshawar, Taxila, Indraprastha, Mithila, Maduram,
Surat, Ujjain, Kanchi, Mithila (any four)
(iii) Major exports items were Spices, wheat, sugar, indigo, opium,
sesame oil, cotton, etc. (any two)
Major imports were Chinese silks, linen, wine, gold, silver, copper,
etc. (any two)
(iv) Business activities led to the growth of different aids to trade such as
transportation, banking, finance and communication which grew
the prospects of trading activities. With the active contribution of
Indian traders and other merchant communities, the Indian sub-
continent was popularly called ‘Swaran Bhoomi and Swaran Deep’
in the writings of many travellers, such as Megasthenes, Faxian
(FaHien), Xuanzang (Huen Tsang), etc.

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BUSINESS STUDIES XI Exam Handbook Shree Radhey Publications (Subhash Dey)

Unit 2 Forms of Business Organisations

2.1 Sole Proprietorship 6. Lack of business continuity: Death, insanity, imprisonment,

Capital Subscription Stage in the formation of a Public 3. Continuity

2.20 Comparative Evaluation of Forms of Organisation

Basis Sole Partnership Joint Hindu family Cooperative society Company

(Strictly as per CBSE Standards and

Important Tips for Business Studies XI Annual 2024 Examination

Practice Question Paper - 10

Answers for Practice Question Papers

Practice Question Paper 10

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