BUSINESS STUDIES U-2

Short Question and Answer (1/2 Marks)

Q.1. Name the head of joint Hindu family business?

Ans:- ‘Karta’

Q.2. Name an enterprise started by two or more parties?

Ans:- partnership.

Q.3. Name the form of organization found only in India?

Ans:- Joint Hindu Family or Hindu Undivided Family.

Q.4. Who is the real owner of joint stock company?

Ans:- Shareholders.

Q.5. List two merits of Sole proprietorship.

Ans:- (i) Single ownership (ii) Easy to form.

Q.6. What is the minimum number of persons required to form a cooperative society? 

Ans:- Ten (10)

Q.7. Is the registration of partnership is compulsory?

Ans:- No.

Q.8. Rahul is the only owner of his Shop. Name the form of business organization.        

Ans:- Sole proprietorship.

Q.9. Name the process by which a joint stock company is registered.

Ans:- Incorporation.

Q.10. What is the basic document prepared in partnership?

Ans:- Partnership Deed.

Q.11 What can be the maximum number of partners is partnership business?

Ans:- Twenty un other business but 10 in banking.

Q.12. What type of company which can invite the public to subscribe for the shares or debentures. 

Ans:- Public.

13. Which document is called the constitution of the company?

Ans:- Memorandum of Association.

Q.14. What do you mean by Goodwill?                              

Ans:- Goodwill: Goodwill is the value of arising from the reputation of a firm. A longterm assets categories as an intangible assets.  Q.15. What is unlimited liability?  

Ans:- When the existence or continuation of business is not affected by the coming and going of members.

Q.16. How many minimum and maximum number of members in a Private Company?

Ans:- In private company Minimum number of members is 2 and the maximum number of member is restricted to 200, As per Companies act 2013.

Q.17. How many minimum and maximum number of members in a Public Company?

Ans:- In Public Company Minimum number of members is 7 and there is no limit for maximum numbers f member.

Q.18. What is the minimum and maximum number of members in a partnership business?

Ans:- As per Companies act2013 the minimum number of member in case of partnership firm is at least two and maximum member should not more than 100.

Q.19. What do you mean by Memorandum of Association (MOA)?

Ans:- The memorandum of association is the principal document of a company . It is considered as the charter of the company .It contains the powers and objectives  of  the company .It also describes the scope of operations of the company. Q.20. What is AOA?

Ans:- Articles of association rules and regulation regarding the management of a company’s internal affairs. It defines the powers, duties and right of managers, officers and the board of directors. Generally all the companies prepare their own articles of association, and then they can select any one article of association given in table F of the companies act.

Q.21. What is prospectus?

Ans:- A public limited company , limited by shares , must issue the prospectus if it wants to make an appeal to the public to subscribe to its shares or debentures . According to the companies act, 1956, “A prospectus is any document (including any notice, circular, advertisement or other documents) that invites deposits or offers from public for the subscription or purchase of any shares or debentures of a body corporate.

Long Answer type Question:-

Q.1. What is sole proprietorship? What are its features? 

Ans:- A business owned, managed and controlled by a single individual is known as a sole proprietorship organization.

         According to J.L. Hansen, “Sole trader business is a type of business unit where one person is solely responsible for providing the capital, for bearing the risk and for the management of business.

The following are the main Features of sole proprietorship:-

1.     Single ownership:- The sole proprietorship firm is owned by a single individual only. All the capital is supplied by the single individual from his own wealth or from borrowed fund.

2.     Individual risk earning:- In sole proprietorship firm whole risk is borne by a single individual only.

3.     One man control:- The proprietor is the sole owner of the firm and has full control over it. The ownership and management lies in the hands of one person only.

4.     Small size:- The sole proprietorship firms operate on a very small scale. As all the funds are arranged by one person, total management and control lies with one person only.

5.     Freedom of Operation:- In sole proprietorship firm there is minimum government regulation. No legal formalities are required to start, manage and dissolve sole trader business.

Q.2. What are the advantages and disadvantages of sole proprietorship firm?

Ans:- The merits of sole proprietorship are as follows:-

1.     Easy to form and dissolve:- A sole proprietorship organization is easy to form. No legal formalities are involved in setting up this type of organization.   

2.     Direct incentive:- In sole proprietorship firm there is direct relation between the efforts and reward which means if proprietor puts extra efforts then profit increases and proprietor gets extra income.

3.     Flexibility:- In sole proprietorship firm all the decision are taken by the proprietor himself. He is not supposed to consult any one and waste time.

4.     Sole Beneficiary of profits:- All the profit earned by the sole proprietorship firm belong only to the proprietor himself.

5.     Independent control:- Total control of sole proprietorship firm lies in the hands of the proprietor only. He enjoys complete freedom of action.

The followings are demerits of sole proprietorship firm:- 

1.     Limited resources:- In sole proprietorship firm finance is supplied by the proprietor himself from his wealth or from borrowings.

2.     Unlimited liability:- The sole proprietor is personally liable for all the debts. In case of heavy losses the proprietor will not only lose all his business assets but he may have to sell his personal property to pay back his debts.

3.     Limited managerial skill:- In sole proprietorship firm all the activities are performed by a single individual. A single individual cannot be expert in all the field.

4.     Limited scope for expansion:- Due to limitation of capital and management the sole proprietorship business cannot be expanded to very large size. It is a suitable form for small-scale operations only.

5.     Limited life of a business:- The survival and continuity of sole proprietorship firm depends upon one person only. If the proprietor falls ill or becomes insolvent then the business may come to an end.

Q.3. Define Hindu undivided family? State the features of Hindu undivided family?
 Ans:- The business carried out by the male member of a Hindu undivided family is known as joint Hindu family business.

The following are the main features of HUF-

1.   Member by Birth:-  A person automatically becomes a member in joint Hindu family by taking birth in that family. There is no need for any agreement.

2. Number of member:- In joint Hindu family business minimum must be two members and maximum there is no limit.

3. Minor also a member:- In partnership firm, minor cannot become a partner. But in HUF business a child become a member by birth.

4.   Right:- All the member of joint Hindu family business have to right to inspect the account.

5.   Registration:- it is not compulsory for joint Hindu family business to get registration certificate as it is governed by the law act.

6. Management by Karta:- The joint Hindu family business is managed and controlled by the senior most male member of the family who is called Karta.

Q.4. What is Partnership? What are the features of partnership?

Ans:- Partnership is an association of two or more persons, who agree to carry on a business jointly and share the profit and losses.

       According to, L.H. Haney “ The relationship between persons, who agree to carry on a business in common with a view to private gain.”

The features of partnership firm are explained below:- 

1.     Membership:- There must be minimum two members to form the partnership firm. Maximum there can be 20 members. In case of banking business maximum members can be only ten.

2.     Agreement:- There must be an agreement between the partners to form a partnership can be oral or written. The document containing the agreement of partners is known as partnership Deed.

3.     Profit Sharing:- The partners of the partnership firm share the profit of the firm in the ratio specified in the agreement. In case no ratio is specified in the agreement them the profit is divided equally among all the members.

4.     Registration:- According to partnership Act 1932, it is not compulsory for a partnership firm to get itself registered. However the partnership prefers to get the partnership firm registered because there are certain advantages of registered.

5.     Time period:- The partnership firm continues till all the partners desire to continue it legally it comes to an end at the retirement or death of any one partner.

Q.5. What are the Merits and Demerits of Partnership? Explain?

Ans:- The following are the main Advantages of partnership:-

1.     Easy to form:- It is very easy to form a partnership firm, as no legal formalities are required to be completed. Even registration of partnership firm is  not compulsory according to partnership act.

2.     Risk bearing:- In sole proprietorship firm only one person has to bear the risk whereas in partnership firm all the partners share the risk in the same ratio as they share the profit.

3.     Division of work:- In partnership the partners can divide the work according to their skill and knowledge.

4.     Relationship between reward and work:- The partners try to pit more labour to earn more and more profits. There is a direct relationship between reward and work. The more they work, the more will be benefitted.

5.     More Scope for Expansion:- Compared to sole proprietorship firm, there is more scope for the expansion and growth of the firm. The partners can arrange larger funds from their own wealth as well as from their borrowings.

The followings are the main demerits/disadvantages of partnership:-

1.     Unlimited Liability:- The liability of all the partners is unlimited. In case of losses the partners will not only lose their business property but creditors can claim over their pe5snal prope5rty also to get their accounts settled.

2.     Conflicts:- The partners in partnership firm come from different backgrounds, different families, therefore, they may have differences of opinion. If partners adopt a rigid attitude then it may lead to conflict among the partners.

3.     Lack of public Confidence:- The public has less trust and faith in partnership firm because the account and annual reports of partnership firm are not published. So people do not have trust in their dealings.

4.     Time consuming:- All important decisions are taken by the consent of partners so decision making process becomes time consuming.

Q.6. What are the different types of partners?

Ans:-The followings are the types of partners are as follows:-

             i.  Active partner:- An active partner is one who takes actives part in the day-to-

day working of the business. The activates partners is participates in the management.

      ii. Sleeping partner or Dormant Partner:- A sleeping Partner is the one, who contributes capital, shares profits and contributes to the losses of the business, but does not takes part in the working of the concern.

          iii. Partner in profit:- A person may become a partner for sharing the profits only,

he contributes capital and is also liable to third parties like other partners. iv. Secret partner:- The position of a secret partner lies between active and

sleeping partner. His membership of the firm kept secret from outsider.

v. Nominal partner:- A nominal partner is one who lend his name to the firm. He does not contribute by capital nor does he share profits of the business. He is known as partners to the third parties.

vi.  Partner by holding out:- The partner who does not call himself as a partner in

the firm but who does not object when others call him as a parents in the firm.

Q.7. What are the different types of partnership?

Ans:- The following are the types/Kinds of Partnership:

1. Partnership at will:- This type of partnership is formed for indefinite period are known as partnership at will. The partnership continues up to the time the partners want it and will come to an end if they decide to dissolve it.

2. Fixed period partnership:- The partnership is formed for a specific period of time, say 2 years, 4 years, etc. the partnership will come to a end at the expory of the specified period.

3. Particular partnership:- When the partnership is started for a particular work then it is called particular partnership.

4. General partnership:- in this type of partnership the liability of members is unlimited. It means that personal properties of partners can be used to meet liabilities of the business if assets are not able to pay the business liabilities.

5. Limited partnership:- In limited partnership, the liability of at least one partner is limited while liability of other partners is unlimited. The partners with limited liability are called special partners. While those with unlimited liability are called general or active partners.

Q.8. What is partnership deed? Mention its contents.    2007, 10, 15

Ans:- Partnership deed: The document containing the terms and conditions of the partnership agreement is known as partnership deed. It a stamped paper on which the rules, regulations, and terms and constitution of partnership are written. The common contents of Partnership Deed:-
             

               a) Name of the firm

               b)   Names and address of partners

               c)   Nature and scope of business

               d) Place of business

               e)  Rights, duties and liabilities of partners

               f)   Capital contribution by each the partners.

              g)   Profit Sharing ratio of the partners.

              h)   Duration of partnership

              i)    salary and Commission of partners. 

              j)   The rate of interest payable to partners on their capital

             k)   The rate of interest to be paid by the partners on amount withdrawn by them.

 Q.9. What is the procedure for registration of the partnership firm?       

Ans: Procedure for Registration:- A partnership firm can be registered anytime, that is at the time of formation or later on whenever partners desire to get it registered. The application should contain the following information:

(i)     The name of the firm  

(ii)   The principal place of business of the firm. 

(iii)The name of any other place where firm will be carrying on the business. 

(iv) Date of admission of the partners in the firm.

(v)   Names and permanent addresses of all the partners. 

(vi) Duration of partnership firm, if any.

The application must be signed by all partners. A small amount of registration fee is also deposited along with the application. If the registrar is satisfied with the authenticity of the information he will issue a certificate of registration.

Q.10.  What are the consequences of non-registration of a Partnership?                       

Ans: An unregistered partnership firm suffers from the following limitations:

a)     A partner of an unregistered firm cannot file a case against the partnership firm.

b)    The unregistered firm cannot file a case against any of the partners.

c)     A partner of an unregistered firm cannot file a case against any other partner

of the unregistered firm.

d)    An unregistered firm cannot file a suit against any third party or outsider for

recovery of claim.

Q. 11 .What is Cooperative Society? What are its features? What are its merits and demerits? 

Ans:- A co-operative society is a voluntary association person who join together for mutual help. The aim cooperative organization is not to earn profit but service to the members. A minimum ten (10) members are required to form a cooperative society. The registration of these societies is compulsory and capital is contributed by member4 in the form of share capital. The society can also raise loans from banks.

The followings are the Salient features of cooperative societies-

i.Voluntary Association:- The cooperative society is voluntary association of persons. Any person can join the cooperative society of he/she common interest.
ii.   Equal voting right:- the cooperative societies work with democratic principal of “one man-one vote”.
iii.  Service motive:- The main motive of cooperative society is to provide service to its members and not to earn profit.
iv.  Separate legal entity:- It is compulsory for a cooperative society to get itself registered under the cooperative societies act.
v.  Distribution of surplus:- the profit of cooperative society is not distributed in the ratio of capital contributed by each member but it is distributed according to dealings of members with the society.

The Advantages of Cooperative Society are:

i.   Easy to form:- The formation of a cooperative society is very simple process. Only ten adults member having common interest are required to form it.

ii.   Continuity:- The cooperative society has a separate legal existence. Te death, insolvency or incapacity of any member does not affect the existence of society. iii. Limited liability:- The liability of members of cooperative organization is limited to the extent of their capital contribution in the cooperative organization.

iv. Support from government:- Cooperatives exemplify the democratic process. Government helps society by providing low interest rates, tax concessions, exemption from registration or some other expenses.

v.  Open membership:- Any 0person having common interest can become the member of cooperative organization. There is no restriction nr the basis of caste, religion.

      The Main disadvantages/Demerits/Limitation of Cooperative society are:

i. Limited Capital:- The Co-operative societies are generally formed by the                 economically weaker section of the society. The members can invest only a  limited capital.

ii. Inefficiency in Management:- The cooperative organization is managed by the member only. He is not professional expert and experienced so, there is lack of efficiency in management.

iii.  Conflicts among the member:- The members are from different section of society. They may have different of opinion and if any member follows rigid attitude it can led to conflict and disputes among the members.

iv.  Lack of Motivation:- In cooperative organization there is no direct link between the efforts and reward. Hence members are not to put their best efforts. There is no incentive working efficiently.

v. Excessive government control:- By providing various concessions to the societies government keeps a control over their work.  The day to day interference by the government affects the freedom of societies and has negative effects on their working.

Q.12.   What are Different types of Cooperative Societies?
Ans:-  Different Types of co-operatives Society:-
    i.  Consumers’ cooperative societies.
  ii. Cooperative Credit societies.
 iii.Cooperative Farming societies.
 iv. Producer’s cooperative societies.
 v. Cooperative Marketing societies.
 vi. Cooperative Housing societies.

Q.13.   What is Joint Stock Company? Discuss the main features of JSC?

Ans:- A joint stock company is an artificial person having separate  legal existence, perpetual succession and common seal.

         According to Justice Lindley, “Joint Stock Company is meant as an association of many persons who contribute money or money worth to a common stock and employ it for some common purpose.

The following are the main features of joint stock company:-

1.     Separate legal existence:- A company has a separate legal entity .A company can carry on business in its own name it can buy and sell assets in its own name.

2.     Artificial person:-  A company does not have a physical body like a natural human being. Its is an artificial person created by law.

3.     Registration:-It is legally compulsory for a companies act. 1956 without registration no company  can come into existence.  

4.     common seal:- Being an artificial person the company cannot sign. Therefore there is need for common seal with its name engraved on it.

5.     Transferability of shares :-The capital of the company is divided into shares . The shares of the company are freely transferable by its members.

6.     Separation of ownership and control:- The company form of business is owned by the shareholders. These shareholders elect their representatives who are called directors of the company.

7.     Limited liability:- The liability of members of the company is limited to the extent of their share capital contribution in the company.

Q.   14.What are the merits and demerits of joint stock company?

Ans:- The followings are the main advantages of joint stock company:- 

1.     Large amount of capital:- The biggest advantage of company form of business is that it can collect a large amount of capital by issuing of shares to general public.

2.     Limited liability:- The liability of members of the company is limited to the extent of their share capital contribution in the company.

3.     Growth and expansion:- In company form of business there is more scope for growth and expansion. The company has large financial resources and their rate of profit is also high.

4.     Public confidence:- General public has more trust and confidence in company as compared to partnership.

5.     Transferable of shares:- The shares of a public company are freely transferable.

The followings are the main limitation of company:- 

1.     Lack of motivation:- Company is mot managed by owners but it is managed by the professional managers. These managers get salary for their services so there is no direct relation between the efforts and reward.

2.     Delay in Decision:- In company organization all the important decisions are taken in the board meeting or after consulting various persons. So, there is delay in taking decision.

3.     Conflicts in interest:- In company various group of people are involved such as shareholders, debenture holders, employees etc. so there is conflicts among the members.

4.     Numerous regulation:- A large number of rules and regulations are framed for the working of the companies. The companies will have to follow rules even for their internal working.

Q.15.   Define prospectus? Discuss the factors that determine choice of form of organization?

Ans:- According to section 2(36) of the companies act, “A prospectus means, any document described or issued as prospectus and includes any notice, circular, advertisement or other document inviting deposits from public or purchase of any share in or debenture of a body corporate.

The following factors that determine choice of form of organization:- 

•       Nature of business:- The type of business activities is the most important factor for selecting the form of business. if the business requires personal attention and direct contact, sole proprietorship  partnership preferred.
•        Degree of control:- if the business desires complete ad independent control over the business, then he has to prefer sole proprietorship firm.
•        Legal formalities:- If businessman want to avoid legal formalities and prefer easy formation then the most suitable form is sole proprietorship and partnership.
•         Continuity of business:- If the business is to be continuity indefinitely then company form of organization will be better.
•        Limited liability:- If the entrepreneur is ready to bear all the risks of a business he may go for sole-proprietorship where liability is unlimited. In case he wants that business risk should he shared with others, partnership and company forms will be suitable.

Q.16.   Discuss are various mode of dissolution of a Partnership Firm? Explain them briefly. 

Ans:- The followings are the Modes of dissolution of a Partnership Firm:-

1.     Dissolution by consent of all the parties:- A partnership firm may be dissolved with the consent off all the partners at any point of time during its life.

2.     Mutual Agreement:- A firm may be dissolved with the consent of all the partners or in accordance with contract between them.

3.     Compulsory Dissolution:- A firm is compulsorily dissolved by insolvency of all the partners or all but one as insolvent or by the happening of any event which makes

it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership.

4.     Dissolution in case of Partnership at Will:- In case of partnership at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. The firm is dissolved from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice to all other partners.

5.     Dissolution with the intervention of the court:-   

The court may dissolve a firm on he followings ground:-

i. Partner becoming unsound mind:- if any partner becoming of unsound mind then court may dissolve the firm in any ground.

ii.  when a partner transfers the whole of  his/her interest in the firm to a third party;

iii. When the Prospect of the business has gone down substantially. 

iv. When a partner becomes permanently incapable of performing his/her duties as a partner;

Q.17.   What are the different between partnership and company?

            Ans:- The followings are the main different between partnership and company:-