Steps Involved In Establishing Business - Class 9 Elements Of Business - Extra Questions

What is the meaning of direct incentive in a sole proprietorship business?

In a sole proprietorship firm, there is a direct relationship between the efforts and reward which means if the proprietor puts extra effort then profit increases and proprietor gets extra income. So proprietor is always motivated to work extra to get extra reward.


Explain the merits of the sole proprietorship?

The merits of the sole proprietorship are:
1) Easy formation:- It can be easily established and closed as there is no need to observe any legal formalities.
2) Quick Decision:- A sole trader take the all the decisions regarding the business which is time efficient as he is not required to consult anyone else.
3) Secrecy:- All the secrets are confined to the owner. They are not shared with anyone else.


What is the meaning of single ownership in a sole proprietorship?

Sole Proprietorship refers to a business unit where a single person is solely responsible for providing the capital, for bearing the risk and for the management of a business.
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 funds.


What is the maximum number of partners allowed in partnership business?

The Partnership Act does not lay down any limit on maximum number of partners in a partnership firm. But, according to section 464, Rule 10 of The Companies Miscellaneous Rules, 2014, the maximum number of partners in any firm shall be 100.


Answer the following questions in one or two sentences each:
How is the dissolution of partnership firm easy?

Partnership firms are the firms which are carried on by two or more people who mutually come to an agreement either verbal or written to carry out a business by contributing appropriate capital and share profits in a prescribed ratio. 
It is easy to dissolve a partnership firm as it does not require the permission of any law for dissolution. 
The firm can be dissolved if all the partners agree to dissolve the firm. 


Answer the following questions:
Mention any four merits of sole trading concerns.

The trading concern that is owned and managed by a single person is called sole trading concerns.  
In this firm, a single person carries on all the business activities including finance and management. 
Four merits of a sole trading concern are :-
1. Quick decision making 
2. No share in profits 
3. No incorporation cost 
4. Can be easily dissolved 


The concern that is owned and managed by a single person is called __________.

The concern that is owned and managed by a single person is called sole proprietorship.  
The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. 
It simply refers to a person who owns the business and is personally responsible for its debts.


Mention any four limitations of sole trading concerns.

The trading concern that is owned and managed by a single person is called sole trading concerns.  
In this firm, a single person carries on all the business activities including finance and management. 
Limitations of a sole trading concern are :-
1. No separate legal entity
2. Less capital 
3. One person manages everything 
4. Difficult to expand.


Answer the following questions:
Who are the different types of partners?

Partnership firms are the firms which are carried on by two or more people who mutually come to an agreement either verbal or written to carry out a business by contributing appropriate capital and share profits in a prescribed ratio. 
The different types of partners are:-
1. Active partners 
2. Dormant partners 
3. Nominal partners 
4. Partners by estoppel 
5. Partners in profits only
6. Minor Partners


Answer the following questions:
Mention any four merits of partnership firms.

Partnership firms are the firms which are carried on by two or more people who mutually come to an agreement either verbal or written to carry out a business by contributing appropriate capital and share profits in a prescribed ratio. 
The merits of a partnership are : 
1. Abundant Capital.
2. More Managerial skills.
3. The firm is not affected by the dead or retirement of any one partner. 
4. Easy incorporation process.


Answer the following questions:
Mention any four demerits of partnerships firms.

Partnership firms are the firms which are carried on by two or more people who mutually come to an agreement either verbal or written to carry out a business by contributing appropriate capital and share profits in a prescribed ratio. 
The demerits of a partnership firm are: 
1. Share in equity. 
2. Mutual distrust between the partners. 
3. No separate legal entity.  
4. Difference of opinions between the partners. 


Match the Groups:

The correct matches of the following groups are:
Qualities of heart - Based on personality and nature of the person
Qualities of head - Based on education and knowledge of a person
Personal secretary - Busy person
Lions club - Non-profit association
Institutional secretary - government department


Make comparative study of forms of business organisations.

There are mainly 5 forms of business organizations. 
1. Sole proprietorship- The concern that is owned and managed by a single person is called sole proprietorship.  In this firm, a single person carries on all the business activities including finance and management.
2. Partnership - Partnership is the firms which are carried on by two or more people who mutually come to an agreement either verbal or written to carry out a business by contributing appropriate capital and share profits in a prescribed ratio. 
3. Hindu undivided family- Hindu undivided family business is the business concerns ( small, medium, or large scale) which are run by the members of a joint family. Usually, the head of the family is also the head of the concern run by the family.
4. Cooperative society- Cooperative society is an autonomous group of persons or group of associations who united voluntarily to meet their common economic, social, and cultural needs.
5. Joint-stock company - A joint-stock company is a business entity regarded as an artificial person where the funds for running the business is raised through issuing shares to the public and the shares of the company's stock can be bought and sold by shareholders.


Distinguish : 
Secretary of a Co-operative Society and Personal Secretary. 

Co-operative society:
  1. Qualifcations : He has to posses a diploma/ degree like GDC&A
  2. Appointment : He is appointed by managing committee of a co-operative society.
  3. Status : He has a legal status 
  4. Position: He is an employee of the society.

Personal secretary 
  1. Qualifcations : No prescribed qualifactions for personal secretary
  2. Appointed : By lawyer, doctors, businessmen etc
  3. Status : No legal status 
  4. Position : Personal assistance of his boss.


Distinguish between the following: 
Company Secretary and Secretary of a Co-operative Society. 

Company secretary :
  1. Qualifications : Company secretary is appointed by the Board of Directors of Company. 
  2. Company secretary is appointed by the Board of Directors of Company. 
  3. Company secretary is the chief executive officer of the company. 

Secretary of co-operative society :
  1. Qualifications : He possesses a Diploma/Degree like GDC&A.
  2. He is appointed by managing committee of co-operative society. 
  3. He is the member of the society.


Distinguish between the following:
Joint Stock Company and Partnership Firm.

Sr. NoBasis of DifferencePartnership FirmJoint Stock Company
1.MeaningTwo or More persons come together for some business activity & agree to share profit & loss is called partnership firmIt is a voluntary association of individuals for profit having capital divided into transferable shares, the ownership which is the condition of membership
2.MembershipPartnership firm owned by two or more and maximum 10 in banking and 20 in other firmsIn private limited company minimum of number of members are 2 and the maximum numbers are 50. In a public limited company, minimum numbers are 7 and no maximum number limit
3.FormationFormation is simple and less costly. only a partnership deed is required. Registration is optional [ except in Maharashtra ]Formation involves many complicated legal formalities. Therefore it is costly legal formalities. Therefore it is tremendously time-consuming
4.LiabilityThe liability of partners is unlimited.Liability of every shareholder is limited to the extent of the unpaid amount on shares held by him
5.ActThe partnership is controlled under partnership Act, 1932Joint stock company is controlled under the Indian Companies Act, 1956


Distinguish between the following:
Joint Stock Company and Sole trading Concern.

The difference between sole trading and Joint-stock company are as follows:-
  1. In sole trading concern one individual is responsible for the management and ownership of business while in a Joint-stock company, there is a separation of ownership and management. 
  2. In sole trading, profit remains in the hands of the single individual while in a Joint-stock company, Profit is distributed among the shareholders in the form of dividends.
  3. In sole trading concern, there is the only owner, while in a Joint-stock company there is a minimum 2, and maximum no limit.
  4. In sole trading concern liability of the owner is unlimited, while in a Joint-stock company there is limited liability.
  5. In sole trading concern existence of business depends on the existence of the owner while in a joint-stock company is stable due to separate legal existence.
  6. In sole trading, there is no separate legal existence while in Joint-stock company there is separate legal existence.
  7. In sole trading, only owner gets all the profits while in Joint-stock sharing of profit depends on a number of shares.


Write short answers for the following:
What are the features of partnership firm?

A partnership is a relationship between two or more people who have agreed to share the profits of the business carried on by all or any of them acting for all.
The following are the features of partnership firm are as follows:-
  1. Formation:- The partnership firm of business is governed by the Indian Partnership, Act 1932. It comes into existence by a legal agreement between the partners (Partnership deed) In this agreement, the term and conditions of partners, the ratio of sharing of profit and losses are specified.
  2. Liability:- The liability of all the members of a partnership firm is unlimited. The partners are individually and collectively liable to pay back the debts of the firm. At the time of loss if the firm's assets are not sufficient to pay back the debts then the creditors can have a claim over the personal property of the partners also.
  3. Risk Bearing:- The partners of the partnership firm share the profit of the firm. They may specify in the agreement. In case no ratio is specified in the agreement then the profit is divided equally among all the members.
  4. Decision Making:- All the partners are allowed to manage the partnership firm. They may specify the work area of each partner in the partnership deed also. Generally, day-to-day management is carried on by one or two partners whereas for crucial decisions all the partners are consulted.


Answer is Yes or No:
(a) The sole proprietor is the exclusive master of his business.
(b) The liability of a sole proprietor is limited.
(c) A sole proprietorship has no legal existence apart from its owner.
(d) Sole proprietorship is the oldest form of business organisation. 
(e) It is difficult to set up a sole proprietorship. 

(a) Yes. 
(b) No. The liability of a sole proprietor is unlimited. 
(c) Yes. 
(d) Yes. 
(e) No. It is very easy to set up a sole proprietorship. 


Under how many heads the duties of Company Secretary can be grouped?

The duties of company secretary can be grouped under the following heads:
1. Statutory duties
2. Duties towards directors
3. Duties toward shareholders 
4. Duties towards public
5. Duties towards the office and the staff.


Match List I with List II and select the correct answer using the codes given below the lists.

The correct answers have been matched.


Write short note on the following:
Types of partners.

The different types of Partners -
  1. Active Partner
    The partner who has invested more in partnership business and directly involves in business activities is called an active partner. They take all responsibility of business, he/she bears unlimited liability, share the profit of business and devote their full time to the business. For the full-time involvement, active partners receive remuneration and for the investment, he will receive the share of profits.

  2. Sleeping Partner
    The partners who have invested money but don’t get involved in the business activity is called a sleeping partner. A sleeping partner bears the loss of business, has unlimited liability and takes all other responsibility as like active partner but he/she is not directly involved in business activities.

  3. Nominal Partner
    The partner who has not invested money but nominated as a partner is called nominal partner. He/ she doesn't bear any risk or loss of business. It is a special kind of partners who is nominated as a partner because of his reputation in society.

  4. Quasi Partner
    The partner who is retired from business but the investment is not returned is called quasi-partner. This partner is neither liable for business activity nor has right over the profit of business after retirement.

  5. Limited Partner
    The partner whose liability is limited to his investment only is called limited liability. As the active partner, limited liability partner shares profit, invest money and participate in business but the difference is that limited partners do not have unlimited liability as an active partner.

  6. Minor Partner
    The partner below the age of 16 years age is called minor partner. They are not allowed to sign the legal document of business because of this he can be a partner only under the guardianship of another partner.

  7. Sub Partner
    The partner who shares the profit of business with other partners is called sub-partners. It has co-investment (joint investment) with other partners. This is made with mutual agreement and understanding with other partners. There profits and loss of business are shares by sub-partners according to agreements made internally by partners.

  8. Incoming Partner
    The partners who are going to enter in business is called incoming partners. The incoming partner is required to pay the premium amount to be a partner of the existing business. The agreement between existence partners is required to enter a new partner.

  9. Outgoing Partner
    The partner who is going to retire from business is called an outgoing partner. The outgoing partner can retire from the business by making an agreement with other partners. He can retire by selling his share to other partners or outside parties in the consent of existing partner. The outgoing partner is not liable for future liabilities of the partnership.

  10. Holding out - Estoppel Partners
    The partner who represents himself as a partner but does not invest money in business is called holding out or estoppel partners. He is a partner only in the eye of law or creditors. This partner doesn't share profits and does not bear loss as well. Therefore, he has no liability of the business.

  11. Secret Partners
    A Partners who invest money in the business and shares profit and losses but doesn't like to be disclosed as a partner in front of the public is called secret partners. He provides all necessary helps assistant to business indirectly.


Answer the following question:
Define Joint Stock Company and explain its feature.   

A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.

Features of a Joint Stock Company

1] Artificial Legal Person

A company is a legal entity that has been created by the statues of law. Like a natural person, it can do certain things, like own property in its name, enter into a contract, borrow and lend money, sue or be sued etc. It has also been granted certain rights by the law which it enjoys through its board of directors.

However, not all laws/rights/duties apply to a company. It exists only in the law and not in any physical form. So we call it an artificial legal person.

2] Separate Legal Entity

Unlike a proprietorship or partnership, the legal identity of a company and its members are separate. As soon as the joint stock company is incorporated it has its own distinct legal identity. So a member of the company is not liable for the company. And similarly, the company will not depend on any of its members for any business activities.

3] Incorporation

For a company to be recognized as a separate legal entity and for it to come into existence, it has to be incorporated. Not registering a joint stock company is not an option. Without incorporation, a company simply does not exist.

4] Perpetual Succession

The joint stock company is born out of the law, so the only way for the company to end is by the functioning of law. So the life of a company is in no way related to the life of its members. Members or shareholders of a company keep changing, but this does not affect the company’s life.

5] Limited Liability

This is one of the major points of difference between a company and a sole proprietorship and partnership. The liability of the shareholders of a company is limited. The personal assets of a member cannot be liquidated to repay the debts of a company.

A shareholders liability is limited to the amount of unpaid share capital. If his shares are fully paid then he has no liability. The amount of the debt has no bearing on this. Only the companies assets can be sold off to repay its own debt. The members cannot be made to pay up.

6] Common Seal

A company is an artificial person. So its day-to-day functions are conducted by the board of directors. So when a company enters any contract or signs an agreement, the approval is indicated via a common seal. A common seal is engraved seal with the company’s name on it.

So no document is legally binding on the company until and unless it has a common seal along with the signatures of the directors.

7] Transferability of Shares

In a joint stock company, the ownership is divided into transferable units known as shares. In case of a public company the shares can be transferred freely, there are almost no restrictions. And in a public company, there are some restrictions, but the transfer cannot be prohibited.



What are the different types of short term financial assistance provided by the commercial banks to business houses?

The different types of financial assistance provided by the commercial banks to the business houses are:
1. Pre- production finance.
2. Post- production finance.
3. Finance against deferred payment.


Long Answer Type Questions:
Explain the meaning and characteristics of Business.

 Business is defined as an organised economic activity, wherein the exchange of goods and services takes place, for adequate consideration. It is nothing but a method of making money, from commercial transactions. It includes all those activities whose sole aim is to make available the desired goods and services to the society, in an effective manner. It is a systematic attempt of the businesspersons to produce goods and services, and sell them at the market, to reap the reward, by way of profit. Profit plays a pivotal role, as all the business activities are directed towards it, because it works an incentive to the entrepreneurs, for their efforts, and thus, necessary for every business.
Characteristics of business:
In order to appreciate how business activity is different from other activities in society, the nature of business or its fundamental character must be explained in terms of its distinguishing characteristics, which are as follows:
  1. An economic activity: Business is considered to be an economic activity because it is undertaken with the object of earning money or livelihood and not because of love, affection, sympathy or any other sentimental reason.
  2. Production or procurement of goods and services: Before goods are offered to people for consumption they must be either produced or procured by business enterprises. Thus, every business enterprise either manufactures the goods it deals in or it acquires them from producers, to be further sold to consumers or users. Goods may consist of consumable items of daily use such as sugar, ghee, pen, notebook, etc. or capital goods like machinery, furniture, etc. Services may include facilities offered to consumers in the form of transportation, banking, electricity, etc.
  3. Sale or exchange of goods and services for the satisfaction of human needs: Directly or indirectly, business involves transfer or exchange of goods and services for value. If goods are produced not for the purpose of sale but say for internal consumption, it cannot be called a business activity. Cooking food at home for the family is not business, but cooking food and selling it to others in a restaurant is business. Thus, one essential characteristic of business is that there should be sale or exchange of goods or services between the seller and the buyer.
  4. Dealings in goods and services on a regular basis: Business involves dealings in goods or services on a regular basis. One single transaction of sale or purchase, therefore, does not constitute business. Thus, for example, if a person sells his/her domestic radio set even at a profit, it will not be considered a business activity. But if he/she sells radio sets regularly either through a shop or from his/her residence, it will be regarded as a business activity.
  5. Profit earning: One of the main purpose of business is to earn income by way of profit. No business can survive for long without earning profit. That is why businessmen make all possible efforts to maximise profits, by increasing the volume of sales or reducing costs. 
  6. Uncertainty of return:Refers the lack of knowledge relating to the amount of money that the business is going to earn in a given period. Every business invests money (capital) to run its activities with the objective of earning profit. But it is not certain as to what amount of profit will be earned. Also, there is always a possibility of losses being incurred, in spite of the best efforts put into the business.
  7.  Element of risk: Risk is the uncertainty associated with an exposure to loss. It is caused by some unfavourable or undesirable event. The risks are related with certain factors like changes in consumer tastes and fashions, changes in methods of production, strike or lockout in the work place, increased competition in the market, fire, theft, accidents, natural calamities, etc. No business can altogether do away with risks.


'One man show' type of business organization.

A sole proprietorship business organization is a 'One man show' type of organization. A sole proprietor single handedly manages such an organization. He is the sole decision maker and thus, alone bears the risk of the business. He only bears the profit or loss of the business.


What is the liability of Karta in Joint Hindu Family Business?

Kartas Liabilities :-
Karta has vast powers same time his position is fiduciary and has lot of responsibilities and liabilities.

1) Liable to maintain:- Karta is responsible to maintain all the members of joint family. If he improperly excludes any member from maintenance, he can be sued for maintenance and also arrears of maintenance.

2) Liability to render accounts:- As long as family remains joint, Karta is not supposed to keep accounts, but when partition takes place at that time he is liable to account for family property. If any of the coparcener is not satisfied with his account can institute a suit against Karta to discover the truth and to know any misappropriation is made by Karta.

3) Liability to recover debts due to the family:- Kartas should realize all debts due to the family with in reasonable time but should not allow them to bar by limitation.

4) Liability to spend reasonably:- As Karta of joint family has control over the income and expenditure of the family, he is custodian of surplus income. However he should spend family funds reasonably and for the purpose of the family.

5) Liability not to alienate coparcenary property:- Unless it is for benefit of family, estate or for necessity Karta cannot alienate joint family property without the consent of all the coparceners.

6) Liable not to start new business:- Unless adult coparceners of the family expressly or impliedly consents, Karta cannot start a new business.


Name the enterprise which is the result of partnership between two companies. Why do two companies join together to work as one enterprise?

The enterprise which is the result of partnership between two companies is known as Joint Venture. Eg: Hero Honda(hero an indian company and honda a japanese company)    
The benefits of a Joint Venture are:
  • Expenses and costs are shared by the companies.
  • The initial start-up capital can be borne by both the companies thus lowering the financial burden placed on them.
  • If both companies belong to different countries or marketplaces in general, it helps in new market penetration and widens the distribution network.
  • Both the companies gain from the technology and services already in use by the companies, This eliminates the hassle of adapting and learning new technologies.
  • The companies are free to carry on their own business after the need of the Joint Venture is fulfilled. This means that there is flexibility in operations.
  • The customers can use each other's customer base in order to market the products of the Joint Venture.


Abdul is a single owner of a shoe manufacturing business. His business was suffering from continuous losses. To revive his business and to expand, he took a loan of 20 lakhs from 'Progressive Finance Co.' In spite of starting new range of products and great effort by Abdul, business continued to suffer losses. This resulted in the declining assets and mounting debts. Abdul started defaulting on his repayment schedule. Finance company served him final notice to repay the loan and settle the account. He proposed the finance company to take over the business assets and clear their dues. Finance company took over the assets of the business in part settlement of their dues as the assets were not sufficient to settle the debts and they claimed the remaining amount from Abdul from his personal assets. Abdul refused to do so on the ground that loan was taken for the business and not by him for personal use.
Name the form of business organization followed by Abdul.
Is the finance company justified in asking for remaining amount from Abdul's personal assets? justify your answer by giving suitable feature of the business organization. 

(i)- Sole proprietorship-The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.
(ii) Unlimited liability: Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company.


"One man control is the best in the world if that man is big enough to manage everything." Explain the statement.

It is right to say that one man control is the best in the world if that man is big enough to manage everything because of the following reasons.
Advantages of Sole Proprietorship-
1. Ease of Formation - Starting a sole proprietorship is much easier and less expensive than beginning a corporation. Some states enable sole proprietorships to be shaped without the double taxation requirements affecting most corporations. The proprietorship will be named after the proprietor, or a fictitious title can be utilized to support the enterprise’s advertising.
2. Employment - The spouse of a sole proprietor can be employed without being formally declared as a worker. Spouses may also begin a sole proprietorship, although legal responsibility can be solely assumed by one particular person.
3. Decision Making - Management over all enterprise choices falls to the proprietor. The proprietor may also totally change the sole proprietorship at any time he or she deems necessary.


 Which form of organisation is considered to be the simplest form of organisation?

A sole proprietorship, also known as the sole trader, individual entrepreneurship or proprietorship, is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. The owner is in direct control of all elements and is legally accountable for the finances of such business and this may include debts, loans, loss, etc.


Explain whether the liability of a sole proprietor is limited to the extent of his share in business. 

The liability of a sole proprietor is not limited to the extent of his share in business. The biggest downside to operate a business is that a sole proprietor is the solely responsible for liability. If your business incurs debts that it cannot pay from the profits, you are personally liable and responsible for payment. Creditors may sue you personally to satisfy the debt. The opposite is also true. If you have personal debts that are unpaid, a creditor may go after your business profits or assets to satisfy the debt. Along with liability for debts, as a sole proprietor you also have personal liability for any torts, or injuries, that occur as a result of any acts or omissions of your business. 


Teachers of your school formed a society to buy land and construct flats for its members. Identify this form of business.

The literal meaning of co-operative is working together with others for a common purpose. A co-operative society is an autonomous body of people united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.
The Co-operative Principles under which a co-operative society operates and carries out its business are :-
  • Voluntary and open membership.
  • Democratic control, one member one vote.
  • Autonomy and independence.
  • Promoting economic activities.
  • Promoting education and information technology.
  • Co-operation among co-operatives.
  • Concern for the social and ecological environment.


Name the industries which provide support service to other industries.

Tertiary are the indutries which provide services to primary and secondary industries. Eg : banking, warehousing, transportation etc are the examples of tertiary industries.


Name the following:
(a) A person who lends his name and goodwill to benefit a partnership firm.
(b) A business organization with the least legal formalities.
(c) An organization where members associate together to promote mutual goals and welfare of consumers.
(d) A type of industry to which manufacturing battery operated cars, belongs to. 

(a) Nominal Partner- A person who neither has ownership rights or active involvement in the firm's affairs, but has a strong interest in the success of the partnership firm. Often a well known, well-connected individual whose association lends credibility and recognition to the firm is suited to the role of a nominal partner.
(b) Sole Proprietorship- The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts. 
(c) Cooperative organisation- A cooperative is a private business organization that is owned and controlled by the people who use its products, supplies or services. Although cooperatives vary in type and membership size, all were formed to meet the specific objectives of members, and are structured to adapt to member's changing needs.
(d) Joint Stock Company Forms of Business Organisations - it is a business organisation that is owned jointly by all its shareholders. All the shareholders own a certain amount of stock in the company, which is represented by their shares.


What is a key difference between reservation buying and auction buying?

Answer
- Reservation buying is done automatically while the auction is done manually.
- Reservation buying is done manually, while auction purchasing is done through Google agent.
- Reservation buying incorporates hard-to-offer stock, while auction purchasing does not.
- Reservation buying implies pre-bundled lineups, while auction buying is for singular impressions.


In which business ,pan of the proprietor is considered as the pan of the business organisation?

Answer
In this article, we look at the types of documents required for obtaining business or company PAN card in India. ... Hence, the PAN of the proprietor is the PAN of a proprietorship firm. ... The documents required for obtaining partnership firm or LLP PAN Card


What is risk? how do you distinguish between systematic and unsystematic risk?

Answer:
Risk is anything which can give you success or even make you fall down, but it is in your own risk.
Systematic risk is what which is taken by proper planning or discussion. While unsystematic risk is what which is taken by improper planning.


Profit does not have to be shared. Which type of business organization portrays the above characteristic?

Profit does not have to be shared in a sole proprietorship form of business. In this form of organization, the whole business is owned, managed, and controlled by a single individual who bears all the risks and is the only recipient of all the profits.


Write short note on the following:
Conditions of valid allotment.

Ans. Company needs to follow certain conditions while allotting the shares which can be classiffied as 
(1) Statutory 
(2) General. 
Over and above the conditions stated by the Act, company should observe the following conditions. 
(1) Proper Authority: Only & only Boa. of Directors or Allotment Committee formed for the purpose is authorized to easy it on. 
(2) Allotment against application: Shares can be allotted only if there was an application for it. 
(3) Allotment not in contravention of any law: Allotment be in purview of not only the companies Act but also other relevant act and should not be violating any law in any way like Contract Act Sales of Goods Act FEMA etc. 
(4) Reasonable time: Allotment should happen within given period of time or else the applicant can reject it 
(5) Communication: Allotment or otherwise be communicated to the applicant in writing. 
(6) Absolute and unconditional: It must adhere to terms stated in prospectus and application and not be conditional by any ways. 


Explain the features of a sole proprietorship?

The features of a sole proprietorship are as follows:- 
1) Single Ownership:- Proprietor is the sole owner of all the assets and resources of the business.
2) No separate legal entity:- The business has no separate existence from that of the proprietor. 
3) No legal formalities:- No legal formalities are required to establish, manage and dissolve such a business organization.
4) Control and management:- The proprietor has full power to control and manage such business organization.
5)Unlimited liability:- The liability of the owner is unlimited. In case the assets of the business are not sufficient to meet its debts the personal property of the owner can be used for paying debts.
6)Suitable for some special form of business:- It is suitable in areas of personalized services and small-scale activities like agriculture, bakery, beauty parlor, etc.


Explain the features of Partnership.

The features of partnership are as follows:-
1) Two or more partners:- A Partnership needs a minimum number of two partners and a maximum of 50.
2) Agreement:- It is an outcome of an oral or written agreement.
3) Profit motive and sharing of profit:- Main characteristic of a partnership is to earn profit in business and distribute it among the partners.
4) Decision-making and control:- Every partner has a right to participate in management and decision making.
5) Unlimited liability: All partners have unlimited liability jointly as well as severally.
6) Agency: Every partner is an agent of the firm and all other partners.


Explain the limitations of Partnership.

Limitations of partnership are as follows:
1. Limited Resources: As there is a restriction on the number of partners so capital contributed by them is also limited.
2. Unlimited liability: The joint and several liability of all partners is unlimited.
3. Lack of continuity: Partnership comes to an end with the death, retirement, insolvency, or lunacy of any of its partners.
4. Lack of harmony: Because of more people, there can be the difference of opinion which leads to discarding and lack of coordination.


Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organization. Why?

Despite limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organization because of the following advantages:-
  1. Quick Decision
  2. Confidentiality 
  3. Direct Incentive 
  4. Sense of Accomplishment 
  5. Easy to Form and Dissolve


How much is the life of a sole proprietorship business?

The sole proprietorship business is owned and controlled by one person, so death, insanity, imprisonment, physical ailment, or bankruptcy of the proprietor (owner) affects the business and can lead to its closure. So, the life of Sole proprietorship is uncertain or not ascertainable.


What is the meaning of a 'sense of accomplishment' in a sole proprietorship?

Since, the proprietor in a sole proprietorship is the sole owner and the manager of the business, it is implied that the efforts put in by him is for his own good. Working for oneself provides a sense of personal fulfillment. Success in business not only contributes to self satisfaction, but also instills in the individual a sense of accomplishment and confidence.


In which form of organisation, is a trade agreement made by one owner binding on other?

A trade agreement can be made by one owner on behalf of the others in a partnership form of organization. The Indian Partnership Act 1932, defines partnership as the relation between persons who have agreed to share the profits and losses of a business carried on by all or any one of them acting for all. The decision-making and control of the day-to-day activities are divided among the partners.


Explain the merits of Partnership.

The merits of a partnership are as follows:
1. Ease of formation and closure - It can be easily formed and closed with only a few legal formalities.
2. Large financial resources - There are more funds as capital is contributed by all the of partners.
3. Balance decision - As all important decisions are taken jointly by partners, they are appropriate and balanced.
4. Sharing of risk - Risks get distributed among partners which reduces burden and stress on each individual partner.
5. Secrecy - The accounts of the partnership firms is not presented before the public and is not required to published. So, business affairs kept a secret.


What is the meaning of unlimited liability in a sole proprietorship?

In a sole proprietorship firm, the proprietor is personally liable for all the debts of the business. In case of business loss, if the business assets are not sufficient to meet all business liabilities, then the proprietor may have to apply his personal assets to pay off the business liabilities.


What is the meaning of mutual agency in a partnership?

Every partner is the owner as well as the agent of the firm and other partners. The acts of one partner are binding on other partners. Each partner has the right to participate in the management of the company and to engage into contracts with other parties. Any contract signed by one partner binds the other partners as well. Partnership business can be carried on by all the partners or by any of them acting on behalf of the all of them.


Essay Type Questions:
Discuss the comparative study of the forms of organisation.

There are mainly 5 forms of business organizations. 

1. Sole proprietorship- The concern that is owned and managed by a single person is called sole proprietorship.  In this firm, a single person carries on all the business activities including finance and management.

2. Partnership - Partnership is the firms that are carried on by two or more people who mutually come to an agreement either verbal or written to carry out a business by contributing appropriate capital and share profits in a prescribed ratio. 

3. Hindu undivided family- Hindu undivided family business is the business concerns ( small, medium, or large scale) which are run by the members of a joint family. Usually, the head of the family is also the head of the concern run by the family.

4. Cooperative society- Cooperative society is an autonomous group of persons or group of associations who united voluntarily to meet their common economic, social, and cultural needs.

5. Joint-stock company - A joint-stock company is a business entity regarded as an artificial person where the funds for running the business is raised through issuing shares to the public and the shares of the company's stock can be bought and sold by shareholders. 



Class 9 Elements Of Business Extra Questions