1st PUC Business Studies Model Question Paper 2 with Answers

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Karnataka 1st PUC Business Studies Model Question Paper 2 with Answers

Time: 3.15 Hours
Max Marks: 100

Instructions to candidates:

Write the serial number of questions properly as given in the question paper while answering
Write the correct and complete answers.

Section – A

I. Answer any TEN of following questions in a word ora sentence each. While answering Multiple Choice Questions, write the serial number/alphabet of the correct choice and write the answer corresponding to it. Each question carries one mark. ( 10 × 1 = 10 )

Question 1.
Give an example of extractive industry.
Answer:
Mining, Agriculture, Fishing, Forestry, Hunting, etc.

Question 2.
The head of the joint Hindu family business is called
(a) Proprietor
(b) Director
(c) Karta
(d) Manager
Answer:
(c) Karta

Question 3.
Mention any one feature of department undertaking.
Answer:
Formation.

Question 4.
State any one type of warehouses.
Answer:
Public Warehouses.

Question 5.
HUES Expand B₂B.
Answer:
Business to Business.

Question 6.
A business enterprise must behave as a good citizen is an example of its responsibility towards,
(a) Owners
(b) Workers,
(c) Consumers
(d) Community
Answer:
(d) Community

Question 7.
Mention minimum number of members required for establishment public limited company
Answer:
Minimum number of member in public company is 7 as per Companies Act of 2013 and 1956.

Question 8.
State any one type of debenture.
Answer:
Convertible Debentures.

Question 9.
In which year was the Micro Small Medium Enterprises Development (MSMED) Act enacted?
Answer:
June 16. 2006 the MSMED act was enacted.

Question 10.
The goods not suitable tor mail order business are
(a) Those which can be graded and standardized
(b) Those which can be transported at low cost
(c) Those which have ready demand in the market
(d) Those which arc perishable and bulky
Answer:
(d) Those which are perishable and bulky

Question 11.
Mention any one advantage of joint venture.
Answer:
Increased Resources and Capacity.

Question 12.
Which of the following documente is not required In import procedu,e?
(a) Bill of loading
(b) Shipping bill
(c) Certifitate of origin
(d) Shipment advice,
Answer:
(c) Certificate of origin.

Section – B

II. Answer any ten of the following questions in two or three sentences each. Each question carries 2 marks. ( 10 × 2= 20 )

Question 13.
State any two auxiliaries to trade.
Answer:

Advertising.
Warehousing.

Question 14.
State any two features of sole proprietorship.
Answer:

Ease of formation and closure.
Unlimited liability.

Question 15.
State two merits of department undertakings.
Answer:

These undertakings facilitate the parliament to exercise effective control over their operations.
These ensure a high degree of public accountability.

Question 16.
Name any two types of telecom services.
Answer:

Cellular mobile services.
Radio paging services.

Question 17.
Give the meaning of cookies in online transactions.
Answer:
Cookies is similar to caller ID, it gives information about customer name, address phone number and previous purchase records.

Question 18.
State any two arguments for social responsibility of business.
Answer:

Public Image.
Government Regulation.

Question 19.
State any two important documents for the incorporation of a company.
Answer:

Memorandum of Association.
Articles of Association.

Question 20.
Give the meaning of retained earnings.
Answer:
A company generally doesn’t distribute all its earnings amongst the shareholder as dividends. A portion of the net earning may be retained by the business for use in future.

Question 21.
What is village industries?
Answer:
Village industry has been defined as any industry located in a rural area which produces any goods render any service with or without the use of power.

Question 22.
State any two benefits of international business.
Answer:

Earning of foreign exchange.
Prospects for higher profits.

Question 23.
State any two functions of World Trade Organisation.
Answer:

Promoting an environment that is encouraging to its member countries to come forward to WTO in mitigating their grievances.
To facilitate the optical use of world’s resources for sustainable development.

Question 24.
Name any two commodity boards established by the Government of India.
Answer:

Coffee Board.
Rubber Board.

Section – C

III. Answer any seven of the following questions in 10-12 sentences. Each question carries 4 marks. (7 × 4 = 28 )

Question 25.
Explain briefly any four characteristics of business.
Answer:

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. 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 does not constitute business.

3. 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.

4. Sale or exchange of goods and services: 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.

Question 26.
State any two merits and two limitations of statutory corporations.
Answer:
The benefits of statutory corporation are:

They enjoy independence in their functioning and a high degree of operational flexibility. They are free from undesirable government regulation and control.
Since the funds of these organisations do not come from the central budget, the govern-ment generally does not interfere in their financial matters, including their income and receipts.

Limitations:

In reality, a statutory corporation does not enjoy as much operational flexibility as stated above. All actions are subject to many rules and regulations.
Government and political interference has always been there in major decisions or where huge funds are involved.

Question 27.
What is e-banking? State any three benefits from e-banking to customer.
Answer:
E-banking or Electronic banking means conduct of banking operations through electronic means or devices such as computers, telephones, mobile phone, ATM, etc.

E-banking provides 24 hours, 365 days a year services to the customer of the bank.
It offers convenience to customers as they are not required to go to the bank’s premises.
The customer can obtain funds at anytime from ATM machines.
The credit cards and debit cards enables the customers to obtain discounts from retail outlets.
The customer can easily transfer the funds from one place to another place electronically.

Question 28.
Explain the concept of outsourcing.
Answer:
Outsourcing is the process by which a company of contracts another company to provide particular services. In other words, it refers to getting the work done through outside expert agencies.

Features of Outsourcing :

1. Outsourcing involves contracting out: Many companies have started outsourcing processes to outside expert agencies (i.e. to other organisations) on a contractual basis. The outsources charges fees for performing his services on a contract basis.

2. Generally non-core business activities are outsourced: Depending upon what business a company is in, there will be some activities that are central and critical to its basic business purpose. Other activities may be regarded as secondary or incidental to fulfilling that basic purpose. Only those activities (other activities) are outsourced to outside agencies.

3. Processes may be outsourced to a third party: The processes are outsourced to service provider (i.e. third party) who operates independently in the market and provides services to other firms too.

Question 29.
Explain briefly any four elements of business ethics.
Answer:
The various elements of business ethics are as under:

1. Top management’s commitment: Top management has a crucial role in guiding the entire organization towards ethically upright behaviour. To achieve results, the Chief Executive Officer and other higher level managers need to be openly and strongly committed to ethical conduct.

2. Publication of a code: Enterprises with effective ethics programs define the principles of conduct for the whole organization in the form of written documents which is referred to as the “code”. This involves areas such as fundamental honesty and adherence to laws; product safety and quality; health and safety in the workplace, etc.

3. Establishment of compliance mechanisms: Company must ensure that actual decisions and actions comply with the firm’s ethical standards by establishing suitable mechanisms.

4. Involving employees at all levels: Involvement of employees in ethics programs is a must as at different levels they are the ones who implement ethics policies to make ethical business a reality.

5. Measuring results: Although it is difficult to accurately measure the end results of ethics programs, the firms can certainly audit to monitor compliance with ethical standards. The top management team and other employees should then discuss the results for further course of action.

Question 30.
Explain any four clauses of Memorandum of Association.
Answer:
1. Name clause: It contains the name by which the company will be established. The approval of the proposed name is taken in advance from the Registrar of the companies.

2. Objects clause: It contains detailed description of the objects and rights of the company, for which it is being established. A company can undertake only those activities which are mentioned in the objects clause of its memorandum.

3. Capital clause: It contains the proposed authorised capital of the company. It gives the classification of the authorised capital into various types of shares, (like equity and preference shares) with their numbers and nominal value.

4. Liability clause: It contains financial limit up to which the shareholders are liable to pay off to the outsiders on the event of the company being dissolved or closed down.

Question 31.
Explain briefly any two merits and two demerits of public deposit.
Answer:
The companies can raise funds by inviting their shareholders, employees and the general public to deposit their savings with the company. To attract the public, the company usually offers a higher rate of interest than the interest on bank deposit.

The merits of public deposits are:

The procedure of obtaining deposits is simple and does not contain restrictive conditions as are generally there in a loan agreement.
Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions.

The major limitation of public deposits is as follows:

New companies generally find it difficult to raise funds through public deposits.
It is an unreliable source of finance as the public may not respond when the company needs money.

Question 32.
Distinguish between equity shares and preference shares by taking any four points.
Answer:

Question 33.
Explain any four problems faced by small business.
Answer:
1. Finance: The most serious problem faced by SSIs is that non-availability of adequate finance to carry out their operations. Small scale sector lacks the creditworthiness and collateral required to raise capital from the capital markets or financial institutions and hence they depend on local money lenders who charge high interest rates.

2. Raw materials: Another major problem of small business is the procurement of raw materials. If the required materials are not available, they have to compromise on the quality or have to pay a high price to get good quality materials. They purchase raw materials in small quantities due to lack of storage capacity and hence their bargaining power is low.

3. Managerial skills: Small business is generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many of the small business entrepreneurs possess sound technical knowledge but are less successful in marketing and may not find enough time to take care of all functional activities.

4. Less productive labour: Small business firms cannot afford to pay high salaries to their employees, which affects employee willingness to work. Thus, productivity per employee is relatively low and employee turnover is generally high. Small business organizations are unable to attract talented people because of lower remuneration. Division of labour cannot be practiced in small scale units, which results in lack of specialization and concentration.

Question 34.
Explain briefly any four services of retailers to consumers.
Answer:
Services of retailers towards customer are:

Regular availability of products: The most important service of a retailer to consumer is to maintain regular availability of various products produced by different manufacturers.
New products information: By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc. of new products to the customers.
Convenience in buying: Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers.
Wide selection: Retailers generally keep stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.

Section – D

IV. Answer any four of the following questions in 20-25 sentences each. Each question carries 8 marks. ( 4 × 8 = 32 )

Question 35.
Explain any four merits and any four demerits of partnership firm.
Answer:
Merits:

Ease of formation and closure: Like sole proprietorship, the partnership business can be formed easily without any legal formalities.
More funds: In a partnership, the capital is contributed by a number of partners. This makes it possible to raise larger amount of funds as compared to a sole proprietor and undertake additional operations when needed.
Sharing risks: The risks involved in running a partnership firm are shared by all the partners. This reduces the anxiety, burden and stress on individual partners.
Secrecy: A partnership firm is not legally required to publish its accounts and submit its reports. Hence it is able to maintain confidentiality of information relating to its operations.

Demerits:

Limited capital: Since the total number of partners cannot exceed 20, the capital to be raised is always limited. It may not be possible to start a very large business in partnership form.
Lack of continuity of business: A partnership firm comes to an end in the event of death, lunacy or retirement of any partner. Even otherwise, it can discontinue its business at the will of the partners. At any time, they may take a decision to end their relationship.
Lack of public confidence: There is no governmental supervision over the affairs of the business of a partnership and publishing accounts is also not necessary. Hence, public may not have full confidence in them.
Unlimited liability: The liability of each partner is not limited to the amount invested but his private property is also liable to pay the business obligations.

Question 36.
Explain the types of co-operative societies.
Answer:
Types of co-operative society:

(i) Consumer’s cooperative societies:

The consumer cooperative societies are formed to protect the interests of consumers.
The members comprise of consumers desirous of obtaining good quality products at reasonable prices.
The society aims at eliminating middlemen to achieve economy in operations.
It purchases goods in bulk directly from the wholesalers and sells goods to the members directly.
Profits, if any, are distributed on the basis of either their capital contributions to the society or purchases made by individual members.

(ii) Producer’s cooperative societies:

These societies are set up to protect the interest of small producers.
The members comprise of producers desirous of procuring inputs for production of goods to meet the demand of consumers.
The society aims to fight against the big capitalists and enhance the bargaining power of the small producers.
It supplies raw materials, equipment and other inputs to the members and also buys their output for sale.
Profits among the members are generally distributed on the basis of their contributions to the total pool of goods produced or sold by the society.

(iii) Marketing cooperative societies:

Such societies are established to help small producers in selling their products.
The members consist of producers who wish to obtain reasonable prices for their output.
The society aims to eliminate middlemen and improve competitive position of its members by securing a favourable market for the products.
It pools the output of individual members and performs marketing functions like transportation, warehousing, packaging, etc.
Profits are distributed according to each member’s contribution to the pool of output.

(iv) Farmer’s cooperative societies:

These societies are established to protect the interests of farmers by providing better inputs at a reasonable cost.
the members comprise of farmers who wish to jointly take up farming activities.
The aim is to gain the benefits of large scale farming and increase the productivity.
Such societies provide better quality seeds, fertilizers, machinery and other modem techniques.

(v) Credit cooperative societies:

Credit cooperative societies are established for providing easy credit on reasonable terms to the members.
The members comprise of persons who seek financial help in the form of loans.
The aim of such societies is to protect the members from the exploitation of lenders who charge high rates of interest on loans.
Such societies provide loans to members out of the amounts collected as capital and deposits from the members and charge low rates of interest.

(vi) Cooperative housing societies:

To help people with limited income to construct houses at reasonable costs.
The members of these societies consist procuring residential accommodation at lower costs.
The aim is to solve the housing problems of the members by constructing houses and giving the option of paying in installments.
These societies construct flats or provide plots to members on which the members themselves can construct the houses as per their choice.

Question 37.
Explain briefly the principles of Insurance.
Answer:
1. Principle of utmost good faith: According to this principle, the insurance contract must be signed by both parties (i.e. insurer and insured) in an absolute good faith or belief or trust. The person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance.
Example: If any person has taken a life insurance policy by hiding the fact that he is a cancer patient and later on if he dies because of cancer then Insurance Company can refuse to pay the compensation as the fact was hidden by the insured.

2. Principle of insurable interest: As per this principle, the insured must have insurable interest in the subject matter of insurance. It means insured should gain by the existence or safety and lose by the destruction of the subject matter of insurance.
Example: If a person has taken the loan against the security of a factory premises then the lender can take fire insurance policy of that factory without being the owner of the factory because he has financial interest in the factory premises.

3. Principle of indemnity: According to the principle of indemnity, an insurance contract is signed only for getting protection against unpredicted financial losses arising due to future uncertainties. Insurance contract is not made for making profit else its sole purpose is to give compensation in case of any damage or loss.
Example: A person insured a car for 5 lakhs against damage or an accident case. Due to accident he suffered a loss of 3 lakhs, then the insurance company will compensate him 3 lakhs not only the policy amount i.e., 5 lakhs as the purpose behind it is to compensate not to make profit.

4. Principle of contribution: According to this principle, the insured can claim the compensation only to the extent of actual loss either from all insurers in a proportion or from any one insurer.
Example: A person gets his house insured against fire for 50,000 with insurer A and for 25,000 with insurer B. A loss of 37,500 occurred. Then A is liable to pay 25,000 and B is liable to pay 12,500.

5. Principle of subrogation: According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer.
Example: If a person receives Rs. 1 lakh for his or her damaged stock, then the ownership of the stock will be transferred to the insurance company and the person will hold no control over the stock.

6. Principle of mitigation of loss: According to the Principle of mitigation of loss, insured
must always try his level best to minimize the loss of his insured property, in case of uncertain events like a fire outbreak or blast, etc. The insured must not neglect and behave irresponsibly during such events just because the property is insured.

Example: If a person has insured his house against fire, then, in case of fire, he or she should take all possible measures to minimise the damage to the property exactly in the manner he or she would have done in absence of the insurance.

7. Principle of Causa Proxima: Principle of Causa Proxima (a Latin phrase), or in simple English words, the Principle of Proximate (i.e. Nearest) Cause, means when a loss is caused by more than one causes, the proximate or the nearest cause should be taken into consideration to decide the liability of the insurer.

Example: If an individual suffers a loss in a fire accident, then this should already be a part of the contract in order for this person to claim the insurance amount.

Question 38.
Explain merits and limitations of commercial banks.
Answer:
Merits of commercial papers:

A commercial paper is sold on an unsecured basis and does not contain any restrictive conditions.
As it is a freely transferable instrument, it has high liquidity.
It provides more funds compared to other sources. Generally, the cost of CP to the issuing firm is lower than the cost of commercial bank loans
A commercial paper provides a continuous source of funds. This is because their maturity can be tailored to suit the requirements of the issuing firm. Further, maturing commercial paper can be repaid by selling new commercial paper.
Companies can park their excess funds in commercial paper thereby earning some good return on the same.

Limitations of commercial papers:

Only financially sound and highly rated firms can raise money through commercial papers. New and moderately rated firms are not in a position to raise funds by this method.
The size of money that can be raised through commercial paper is limited to the excess liquidity available with the suppliers of funds at a particular time.
Commercial paper is an impersonal method of financing. As such if a firm is not in a position to redeem its paper due to financial difficulties, extending the maturity of a CP is not possible.

Question 39.
Explain the role of Chamber of Commerce in promintcrnal trade in the country.
Answer:
1. Transportation or interstate movement of goods: The Chambers of Commerce and Industry help in many activities concerning interstate movement of goods which includes registration of vehicles, surface transport policies, construction of highways and roads.

2. Marketing of agro products and related issues: The associations of agriculturists and other federations play an important role in the marketing of agro products. Streamlining of local subsidies and marketing policies of organisations selling agro products are some of the areas where the Chambers of Commerce and Industry can really intervene and interact with concerned agencies like farming cooperatives.

3. Weights and measures and prevention of duplication brands: Laws relating to weights and Measures and protection of brands are necessary to protect the interest of the consumers as well as the traders. They need to be enforced strictly. The Chambers of Commerce and Industry interact with the government to formulate such laws and take action against those who violate rules and regulations.

4. Promoting sound infrastructure: A sound infrastructure like road, port, electricity, railways, etc. plays a catalytic role in promoting trade. The Chambers of Commerce and Industry in collaboration with the government needs to take up heavy investment projects.

5. Labour legislation: A simple and flexible labour legislation is helpful in running industries, maximising production and generating employment. The Chambers of Commerce and Industry and the government are constantly interacting on issues like labour laws, retrenchment, etc.

6. Octroi and other local levies: Octroi and local taxes are the important sources of revenue of the local government. These are collected on the goods and from people entering the state or the municipal limits. The government and Chambers of Commerce should ensure that their imposition is not at the cost of smooth transportation and local trade.

7. Harmonisation of sales tax structure and value added tax: The Chambers of Commerce and Industry play an important role in interacting with the government to harmonise the sales tax structure in different states.

8. Excise duty: Central excise is the chief source of the government revenue levied across states by the central government. The excise policy plays an important role in pricing mechanism and hence the associations need to interact with the government to ensure streamlining of excise duties.

Question 40.
Explain the steps to be followed in export trade to obtain excise clearance.
Answer:
1. Receipt of enquiry and sending quotations: The prospective buyer of a product sends an enquiry to different exporters requesting them to send information regarding price, quality and terms and conditions for export of goods.

2. Receipt of order or indent: In case the prospective buyer finds the export price and other terms and conditions acceptable, it places an order for the goods to be despatched. This order, also known as indent, contains a description of the goods ordered, prices to be paid, delivery terms, packing and marking details and delivery instructions.

3. Assessing importer’s creditworthiness and securing a guarantee for payments: After receipt of the indent, the exporter makes necessary enquiry about the creditworthiness of the importer. The purpose underlying the enquiry is to assess the risks of non-payment by the importer once the goods reach the import destination. To minimise such risks, most exporters demand a letter of credit from the importer.

4. Obtaining export licence: Having become assured about payments, the exporting firm initiates the steps relating to compliance of export regulations. Export of goods in India is subject to custom laws which demand that the export firm must have an export licence before it proceeds with exports.

5. Obtaining pre-shipment finance: Once a confirmed order and also a letter of credit have been received, the exporter approaches his banker for obtaining pre-shipment finance to undertake export production. Pre shipment finance is the finance that the exporter needs for procuring raw materials and other components, processing and packing of goods and transportation of goods to the port of shipment.

6. Production or procurement of goods: Having obtained the pre-shipment finance from
the bank, the exporter proceeds to get the goods ready as per the specifications of the importer. ‘

7. Pre-shipment inspection: The Government of India has initiated many steps to ensure that only good quality products are exported from the country. One such step is compulsory inspection of certain products by a competent agency as designated by the government. The government has passed Export Quality Control and Inspection Act, 1963 for this purpose.

8. Excise clearance: As per central excise tariff act, excise duty is required to be paid on the materials used in the production of goods meant for export. So if the exporter desires to produce the goods meant for export by himself, he has to pay the excise duty on the material materials used in production of goods for export and obtain export clearance from the concerned excise commissioner.
For obtaining export clearance from the concerned excise commissioner exporter has to follow following steps:

(i) The exporter has to apply, to the concerned Excise Commissioner in the region with an invoice because according to the Central Excise Tariff Act, excise duty is payable on the materials used in manufacturing goods. If the Excise Commissioner is satisfied, he may issue the excise clearance.

(ii) But in many cases the government exempts payment of excise duty or later on refunds it if the goods so manufactured are meant for exports. This is done to provide an incentive to the exporters to export more and also to make the export products more competitive in the world markets.

Section – E
(Practical Oriented Questions)

V. Answer any TWO of the following questions: ( 2 × 5 = 10 )

Question 41.
As the owner of a business unit, what risks do you face in running it?
Answer:
The risk faced by owner while running a business unit are :

Market information risk
Consumer taste and preferences risk
Government policy risk
Capital risk
Operational risk.

Question 42.
As a promoter, state five important documents to be prepared for the incorporation of a joint stock company.
Answer:
Five document to be prepared for the incorporation of a joint stock company:

Memorandum of association.
Articles of association / Statement in lien of the prospectus.
Written consent of the proposed directors.
A copy of the registrar’s letter approving the name of the company.
A statutory declaration affirming that all legal requirements for registration have been complied with.

Question 43.
Give a list of any five Institutions which support small business in India.
Answer:
Five institutions which support small business in India are:

National Bank for Agriculture and Rural Development (NABARD).
National Small Industrial Corporation (NSIC).
Small Industrial Development Bank of India (SIDBI).
Rural and Women Entrepreneurship Development (RWED).
District Industries Centres (DICs).