RBSE Solutions for Class 11 Business Studies Chapter 2 Concept of Business

RBSE Solutions for Class 11 Business Studies Chapter 2 Concept of Business

Rajasthan Board RBSE Class 11 Business Studies Chapter 2 Concept of Business

RBSE Class 11 Business Studies Chapter 2 Textual Questions and Answers

RBSE Class 11 Business Studies Chapter 2 Multiple Choice Questions

Question 1.
Not included in auxiliaries to trade:
(a) Bank
(b) Insurance
(c) Godowns
(d) After – Sales Services
Answer:
(d) After – Sales Services

Question 2.
Innovation means:
(a) Production of new commodities
(b) Customer satisfaction
(c) Production according to consumer needs
(d) To maximise sales
Answer:
(a) Production of new commodities

Question 3.
What is included in customer creation:
(a) Providing facilities to consumers
(b) Provide goods to consumers at a reasonable price
(c) Increase in the number of customers
(d) To satisfy customers
Answer:
(c) Increase in the number of customers

Question 4.
Most important objective among business objectives is:
(a) Profit objective
(b) Service objective
(c) Human objective
(d) None of these
Answer:
(a) Profit objective

Question 5.
Following is the feature of a sole trader:
(a) Agreement
(b) Two or more than two persons
(c) Division of profits
(d) Sole ownership
Answer:
(d) Sole ownership

Question 6.
When is Partnership declared invalid:
(a) On having less than 2 persons
(b) On unlawful business
(c) Number of partners exceeding 50
(d) All of these
Answer:
(d) All of these

RBSE Class 11 Business Studies Chapter 2 Very Short Answer Type Questions

Question 1.
What do you mean by business?
Answer:
The activities performed to earn income are collectively called the business.

Question 2.
What is a sole trader?
Answer:
Sole trade is that form of business which is established by a single person. He is the owner, manager and controller of the business.

Question 3.
Explain the term Partnership.
Answer:
When two or more than two persons mutually agree to invest their capital, skill and labour in some lawful business with a common aim, it is called partnership.

Question 4.
What is a Partnership Deed?
Answer:
It is a written document including mutual rights, duties, liabilities and terms and conditions of the partners.

Question 5.
What is the Dayabhaga system?
Answer:
This system states that both male and female members of the family are allowed to be coparceners. This system prevails in West Bengal.

Question 6.
What is cooperation?
Answer:
It is a voluntary association of the individuals which is based on the ideal principle of mutual help, self – reliance, equality, democratic management and justice. The philosophy behind this is “all for each and each for all”.

Question 7.
What per cent share does government possess in a public enterprise?
Answer:
51%

Question 8.
When did LLP come into existence?
Answer:
On 1 April 2009.

Question 9.
When was Rajasthan state Cooperative Bank established?
Answer:
On 14 October 1953.

RBSE Class 11 Business Studies Chapter 2 Short Answer Type Questions

Question 1.
Explain the types of Business.
Answer:

1. Sole trade – That form of business in which a single person is the owner and controller of the business.
2. Hindu undivided family – It refers to a form of organization wherein the business is owned and carried on by the members of the Hindu undivided family (HUF).
3. Partnership – Type of business organization in which two or more people join hands to form a business and they all are risk-takers and profit takers.
4. Joint Capital Company – It was included under the Indian Company Act 1956.
5. Co-operative Institutions – It came in existence under the Cooperative Institute Act of 1912.

Public Sector:
The public sector was considered as an engine for self – reliant economic growth with distributive justice.

Question 2.
What do you mean by Innovation?
Answer:
The process of translating an idea or invention into goods or services that create value or for which customers will pay.

Question 3.
Business is a human activity. Explain.
Answer:
The business includes only those economic activities which are performed by human beings. We do not include the activities of birds and animals in business.

Question 4.
What is utility creation?
Answer:
An important characteristic of business is the creation of utility in goods so that consumers may use them. For instance, when goods are transported from the places of production to the places of consumers who ultimately use them, then place utility is created.

Question 5.
What is a partner by estoppel?
Answer:
Partners by Estoppel or Holding out – When a person is not a partner but represents or poses himself to be a partner, or knowingly permits himself to be represented as a partner, either by words on in writing or by his acts, he is called a partner by estoppel or holding out. A partner by estoppel or by holding out shall be liable to outsiders who deal with the firm on the presumption of that person is a partner in the business, even though he is not a partner. Such partners do not contribute to capital, nor do they participate in the management and also do not share profits/losses.

Question 6.
When is partnership declared invalid?
Answer:
A partnership can be declared invalid if:

1. The number of persons reduces to less than two.
2. A number of persons exceed 50.
3. If it is founded with some illegal objective.
4. It is against government policies.
5. Business is done with persons of an enemy country.
6. If the court has given the order to dissolve it, but it still remains in operation.
7. If it is against the public interest.

Question 7.
Give four characteristics of Partnership.
Answer:
(1) Unlimited Liability – In partnership, all the partners are jointly and individually liable for payment of business debts. Personal assets of the partners may be used for repaying debts in case the business assets are insufficient. Thus, the partners of a firm have unlimited liability.

(2) Formation – It was established under the Indian Partnership Act 1932 by a lawful agreement. It includes distribution of profit and loss, business operation etc. among the partners.

(3) Decision – making and Control – The activities of the partnership firm are controlled and managed through the joint efforts of all the partners. Decisions are generally taken with mutual consent.

(4) Risk bearing – The share of profit among the partners is equal to their loss sharing ratio.

Question 8.
State any four limitations of HUF.
Answer:
(1) Limited resources – The capital of the business is limited to the ancestral property. This limits the scope for expansion of the business.

(2) Unlimited Liability of Karta – The Karta is bound not only with the responsibility of decision making and management of the business, but also suffers from the risk of unlimited liability. His personal property can be used to meet business obligations

(3) The dominance of Karta – The Karta individually manages the business, which may, at times, not be acceptable to other members, resulting in conflicts among them. This may lead to a breakdown of the family unit.

(4) Limited managerial skills – Since Karta may not be able to manage every aspect of business with equal efficiency, this may result in poor profits or even loss for the organisation.

Question 9.
Mention the conditions applicable in the absence of partnership deed.
Answer:
In absence of partnership deed:

1. profit/losses to be shared equally among partners.
2. No commission, salary, the bonus will be payable.
3. No interest on capital will be paid.
4. Right to actively participate in the business.
5. 6% ROI to be paid on loans advanced by partners in addition to the capital.
6. No interest will be charged on drawings by any partner.

Question 10.
State the functions of Primary Agricultural Co-operative Credit Societies.
Answer:
Following are the functions of Primary Agricultural Co-operative Credit Societies:

1. To provide short – term, midterm credit to farmers, artisans, landless farmers, agricultural labourers and other weaker sections of the region.
2. PACs supply agricultural inputs like – seeds, fertilizers, pesticides, agricultural equipment or implements, etc.
3. PACs promote savings and banking habit among the rural public.
4. It makes available consumer goods at fair prices.
5. It provides proper guidance and advises to farmers and other members.
6. It contributes to the development of modern agriculture.

RBSE Class 11 Business Studies Chapter 2 Essay type Questions

Question 1.
What do you mean by business? Explain the salient features of the business.
Answer:
All those activities that are performed to earn income are collectively called the business. These activities are done with some objective or aim behind them.
Example:
A trader sells goods in his shop, or a factory owner produces goods in a factory.

Characteristics of Business:
(1) It is an Economic Activity – The main aim of the business is to earn a profit. A person does not start a business due to love, affection or care. It is an economic activity.

(2) Production or procurement of Goods and Services – A businessman undertakes production and distribution of goods and services to earn revenue, and in exchange of this price, he distributes the goods or services to consumers.

(3) Sale or exchange of Goods/Services – One single transaction of sale or purchase does not constitute a business. Business involves dealing in goods and services on a regular basis.

(4) Profit Earning – Every businessman, whether small or big, strives to achieve this objective. He invests capital, bears the risks or uncertainties, and endeavours to operate the business successfully. All this is done by him with an expectation of earning a profit. This way, profit is an incentive which motivates him to continue his business.

(5) Uncertainty of Return – The uncertainty of return here refers to the risk of not getting the return in a proper course of time. Risk is the result of some adverse and unwanted events. Risk is attached to every business. It cannot be separated from the business. Most common reasons that generate risks include a change in fashion, strike, fire, theft, natural disaster, etc.

(6) An element of Risk – Any business can come into existence when the person who is starting it can bear the risks behind it. Therefore, no business can be started without risk, and thus the businessman is also called risk-taker.

(7) The satisfaction of Customer – The services of a business depends upon its customers. Therefore, the main aim of every businessman is to fulfil the needs of his customers and satisfy them.

(8) Service Motto – Other than self profit motto, the aim of every business should also to provide service towards society, therefore, other than marketing, businesses also focus towards earning the goodwill of the society.

Question 2.
Explain the importance of business.
Answer:
In the modern era, business is regarded as the basis for economic progress of any nation. Business is significant from an economic and social perspective. The importance of business can be studied under the following points:
1. Optimum utilisation of Human Resources – Development of business facilitates the establishment of industries. This results in generating and increasing employment opportunities, therefore, making the best use of human resources for productive purposes.

2. Growth in Employment Sources – The pace at which the population is increasing in India, the only unlimited source of employment among people is business. The available human resources can be utilized through business only.

3. Enhancement of standard of Living – Business increases employment and income, which, in turn, increases the purchasing power of the economy. Those goods which are under – produced or not produced in the country, are imported from countries producing them under business. In this way, business increases the standard of living in society. The production of new and innovative goods is possible through the development of business. The consumption of such goods in large quantity helps in improving the standard of living of the members of the society.

4. Output Specification – To survive in this competitive era, a business needs to run accordingly. Good value and qualitative product with low cost are compulsory to make a customer satisfied and because of labour specification, the production of the material specification is been done.

5. Helpful in Creation of New Objects – As the human population is increasing day by day, the needs of people are also increasing at the same speed, hence changing their vision towards goods and services.

6. Development of Education – Complicated business processes paves the way for Vocational Education. Under Vocational Education, in this century, many innovations have taken place, like management, science, accountancy, insurance, law, etc. without which, it is nearly impossible to run any business.

7. Barometer of Economic Development – In true sense, business is the barometer of economic development of any nation. The level of development of business in a nation indicates the level of the economic prosperity of that nation. If we take a glance at the world’s economy, we will find that the prosperous and economically – strong countries like America, Britain, France, etc., have undergone economic development through business only. Keeping their needs in mind, many such institutions are finding out different and new products to keep their customers demand at pace.

Question 3.
What are the objectives of Business? Explain.
Answer:
Objectives of Business:
All the activities done by humans are done with some objective or aim behind it. Business is also a human activity, having a predetermined objective. Without an objective, planning and execution of plans become very difficult. Predetermined objectives provide direction to the businessman and the businessman endeavours to achieve them. It will not be rational to say that the sole objective of a business is earning profits, rather it is also social service.

A businessman determines the optimum mix of human objectives along with the economic objective of earning profits, keeping in mind all the situations. The objective of .business is not only to satisfy the economic interest in profit maximization but also to protect the interest of workers, consumers and other sections of society because all these are affected by business and the success of the business depends on the cooperation and support extended by them.

We can classify the objectives of business into the following categories:

1. Economic objectives
2. Social or Service objectives
3. Human objectives

1. Economic Objectives:
This objective is the primary objective of the business. Economic objectives are intended to maximise profits, accelerate the growth of the business, increase market territories by increasing the number of consumers.
From an economic point of view, a businessman has the following three objectives:

• Profit Earning
• Innovation
• Creation of Customers.

2. Social or Service Objective:
Society and business are strongly interrelated. Without society, the business doesn’t find its existence. The capital required by the business is raised from the society, the goods produced are consumed by society and businessman himself lives in society and is an integral part of society. The important objective of a business is to earn profits by considering social aspiration and social beliefs. If any business goes against society’s expectations, then its survival can be threatened. The business should work for social welfare. In today’s consumer market, where the consumer is the king of the market, the social objective holds more importance.
The important social objectives of the business are explained below:

• Best possible use of scarce resources.
• Social Welfare and Development work.
• Availability of desired quality goods.
• Charging fair and reasonable price.
• Production and supply of novel and innovative goods.
• Compliance of government rules and legislations.
• Regular Payment of government taxes.

3. Human Objectives:
In the present time, no businessman can look after entire business activities himself alone. With the increasing size of enterprises, people from outside are hired to get the work done. The capital requirements of the business are also not met by its own internal sources, and one has to depend on others for all this.

In this way, at every level of business, a businessman essentially comes across other members of society. It is an important objective of business to treat those persons coming in contact with the business, fairly. Humane behaviour is that which is expected by every person from others.
The main human objectives of the business are given below:

• Humane behaviour with workers.
• Employee welfare and improvement in working conditions.
• Fair remuneration to employees.
• Fair return to investors.
• To protect the interest of the consumers.

Question 4.
Explain clearly the economic objectives of the business.
Answer:
Every businessman does his business to receive profit only. If the business is earning a profit, then only he can properly grow and utilize the available resources and protect himself from the upcoming future uncertainties. No business can run on its own, even in the state of momentum, it requires money and the inflow of money depends upon the profit earned by the business.
From an economic point of view, a businessman has three objectives:

1. Profit Earning
2. Innovation
3. Creation of Customers

1. Profit Earning:
Every businessman, whether small or big, strives to achieve this objective. He invests capital, bears the risks and endeavours to operate the business successfully in order to:

• fulfil their physical needs.
• protect themselves against future risks and uncertainties.
• The growth of a business depends upon the profit it earns.
• For the growth and expansion of the business.
• For optimum utilization of Resources.

2. Innovation:
Innovation refers to doing work with a totally new method or with a totally new idea. Innovation can be done in 2 ways in a business. By innovation in goods and services, or by innovation in supply. In the modern era, no business can be run without innovation. A good businessman should innovate according to the changing trends and fashion, according to the needs of the customers and changing the environment to satisfy their customer needs.

3. Creation of Customers:
Production in business is easy, but in the present competitive era, maintaining the utility of products and services is very difficult. If the products and services are good, only then the customer would be attached to them and then only the business would grow.

According to Peter. F. Druker “Business has only one definition, i.e. to satisfy the customers.”

Question 5.
State the significance of Sole trade.
Answer:
1. Quick decision making – Sole trade refers to that form of business organization which is owned by a single individual, who is the recipient of all profits and bearer of all risks, and whenever he gets any profit, he takes its full benefit.

2. Secrecy – The rights of any decision is kept to himself by any sole trader. Therefore, there is a lot of secrecy maintained in this business. He doesn’t need to reveal his documents.

3. Direct Incentive – Here, only one person is the sole recipient of all the profits. This motivates the proprietor to work harder.

4. Sense of accomplishment – When the sole trader receives profit/gain because of his/her own hard work, he/she feels proud of himself and becomes satisfied.

5. Full control – In sole trade, the proprietor is the all in all of a business which he establishes and manages. As he operates the business himself, thus he has full control over the functioning and working of the business.

6. Rare information and closure – A sole trade business requires hardly any legal formality to set it up. Anybody wishing to set up sole trade can do so without spending much time. Closure of business can also be done easily.

7. Economic Scenario – Sole trader operates his business alone. He fully utilizes the resources available and tries to limit his expenses.

8. Alertness – In case of loss, the sole trader has to bear the entire loss, so he always remains alert and well – versed with the business environment and situations.

9. Individual Contact – To attract the customers, a sole trader behaves very politely and treats them with courtesy. This enables him to maintain personal contact with the customers.

10 Advantage of ancestral goodwill – As a sole trader runs the same business as his forefathers, therefore he enjoys the benefit of their goodwill.

11. Good Relation with employees – A sole trader individually gets in touch with his employees and shares their happy and sad moments. And thus, the employees work with full devotion.

12. Liberty of business – A sole trader is the only responsible person and has full liberty in every decision he takes including when to start and stop the business and make any changes that are needed to be implemented.

Question 6.
Define sole trade and throw light on its features.
Answer:
Sole trade refers to a form of business organisation which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks.

According to L.H. Haney, “The individual entrepreneurs in the form of business organisation on the head of which stands an individual as the one who is responsible, who directs its operations and who alone runs the risks of future.”

Characteristics of Sole Trader:
1. Formation and closure of business – There is no seperate rule for a sole trader. Therefore, a sole trade business requires hardly any legal formality to set it up. Anybody wishing to stop a business can easily do it individually.

2. Unlimited Liability – A sole trader has unlimited liability. And if the business faces any kind of loss and is not able to repay the loans, then he can repay them from his property too by selling his property for the same.

3. Risk Bearer and Profit Recipient – The sole trader is solely responsible for bearing the risk, as well as he is the sole profit recipient. He does not share either of the two. Therefore, he enjoys full gain for his risk-bearing.

4. Control – Insole trade, the proprietor is ‘all in all’ of a business which he establishes and manages. As he operates the business himself, thus he has full control over the functioning and working of the business.

5. No Separate Entity – Both business and businessman are not different from each other. Business is not seperate from its trader. Therefore, the businessman is held responsible for every activity

6. Lack of Business Continuity – Due to the same entity of business and its businessman, the business would discontinue on the death of the businessman, his becoming lunatic, on his becomes insolvent, etc. And the business would suffer from loss if the businessman is put behind the bars, gets sick or because of any other reason.

Question 7.
What is the partnership? State its merits and demerits.
Answer:
When two or more persons come together to fulfil a similar aim, it is called partnership. In other words, two or more than two persons mutually agree to invest their capital, skill and labour in some lawful business with an objective to share the profits therefrom, according to business agreement of partnership.

Advantages of Partnership:
1. Ease in Formation and Closure – It is very easy and simple partnership to form due to a virtue of an agreement. The registration of such a firm is also not compulsory.

2. Balanced Decision Making – The businessmen do business in their field of expertise. That helps in balancing their decisions and earn profits in return.

3. Sharing of Risks – The risks are shared equally among all the partners. In this way, no single partner has to bear all the risk.

4. Secrecy – A partnership firm does not need to publish the details of their business. Therefore, information is kept confidential in a partnership firm.

5. Individual Supervision – In partnership, the task of management is performed by partners only and therefore every employee receives individual supervision.

6. Flexible Nature – Partnership is a flexible organisation as its formation is based on agreement, and if needed, partners can jointly come together and invest in the business. Also, the business can be contracted or expanded according to the wish of the partners.

7. Merits of Specialisation – One individual cannot be an expert in everything. Different partners can perform different functions according to their area of specialisation and ability

8. Increase in working efficiency – Every partner works with full efficiency and thinks of every work as his/her own. The workers can also remain relaxed because of this, hence they do their work effectively.

9. Ease in operation – There are better efficiency and continuity in partnership than sole trading. Even if one partner gets sick and is not able to perform regular activities, then other partners can take care of the situation and hence it does not affect the continuity of the business.

Limitations of Partnership:
1. Unlimited Liability – The partners in this business are liable to repay the debts even from their personal resources in case the business is not efficient enough to meet its debts, which creates a risk to their personal property.

2. Limited Resources – The number of partners is less in partnership. Therefore, their contribution in terms of capital investment is also less. All of this may result in the limitation of business opportunities.

3. Possibility of conflicts – Partnership means a group of people involved in a business who take decisions in their own fields. This might result in personal conflict.

4. Lack of continuity – In case of either death of a partner, or he/she becoming insolvent, becoming lunatic can result in dissolving of the partnership firm. This results in its discontinuation.

5. Lack of Public confidence – A partnership is not legally required to publish its financial reports or make other related information public. So here, the partnership business lacks public faith.

6. Ban of transfer of shares – No partner can transfer his share to a third party without the consent of other partners. Therefore, the partner feels restricted.

7. Uncertain Existence – The existence of a partnership is uncertain; because in case if a partner dies, becomes lunatic or willingly separates himself from the firm, then automatically, the partnership discontinues.

8. Lack of cooperation – Partners start seeing their own interest in a partnership firm. This results at the beginning of the conflict between them.

9. Loss due to the carelessness of partners – It one member shows negligence in his work, it affects every other member including those who do their work effectively.

10. Lack of Quick Decision – All important decisions are taken by consent of partners, so decision – making process becomes time-consuming.

Question 8.
Mention the important points of Partnership Deed.
Answer:
While entering into a partnership, it is advisable to have a written agreement as it constitutes evidence of the conditions agreed upon and saves partners from litigation:
1. Name and address of the firm – Partnership name can be anything but it should not be similar to the other firms. Also, its address should be defined.

2. Scope and Structure of Trade – The firm should clearly state its each and every activity. Also, the place of that activity which would be done should be mentioned.

3. Period of the firm – The time period of the existence of the firm should be clearly mentioned in the deed.

4. Distribution of Profit and Loss – It should be clearly defined how much profit/ or loss would be shared by each partner.

5. Role and Right of Partners – What would be their Role and Rights? Allocation of activities between them? These things should be clearly stated in the deed.

6. Interest on Capital – Whether the interest on capital will be paid or not, and if paid, by what rate?

7. Interest on Drawings – What will be the rate on Interest on drawings.

8. Evaluation of goodwill – Method of valuation of the goodwill of the firm on admission, retirement or death of a partner.

9. Closing of the firm – Under what circumstances can the firm be closed?

10. Admission and Retirement Partners – According to the act, admission of a partner can be done with the consent of the partners. If any change is foreseen in this, it should be mentioned in the deed.

Question 9.
By Explaining the meaning of HUF, write its four features and merits.
Answer:
Hindu Undivided Family and Family Business/Joint Hindu Family Business:
Joint Hindu family business is a specific form of business organisation found in India only. It is one of the oldest forms of business organisation. It refers to a form of organisation, wherein the business is owned and carried on by the members of the Hindu Undivided Family (HUF). The basis of membership is taking birth in HUF and three successive generations can be members in the business. It is governed by Hindu Law.

The business is controlled by the head of the family, who is the eldest member and is called KARTA. All members have equal ownership right over the ancestral property and they are known as ‘COPARCENERS’.

Four Features of HUF:
1. Formation – To form this organisation, at least two members in a family and ancestral property inherited by them is required. The business does not require any agreement, as membership is guaranteed by birth.

2. Liability – The liability of all members except Karta is limited to their share of the co-parcenary property of the business. The Karta, however, has unlimited liability.

3. Control – Karta has full control of the business. He is the one who takes all the decisions.

4. Continuity – In case of death of Karta, the next eldest member becomes Karta of the business. Therefore, the business continues in any case. The closure can be done by any member of the family.

Four Advantages of HUF:
1. Effective Control – The Karta has an absolute decision – making power, which leads to prompt and flexible decision – making, resulting in effective control.

2. Continued Business Existence – The business continues to run and death, lunacy, illness of Karta does not threaten the existence of the business. Unless all the members of the family decide to wind it up, it continues.

3. Limited liability – The liability of all the coparceners except the Karta is limited to their share in the business and risk is well – defined and precise.

4. Increased loyalty and cooperation – Since the business is run by the family members having an equal share, the business is run smoothly with the cooperation of all.

Question 10.
Write a note on LLP.
Or
Give the meaning of LLP. State its ten features.
Answer:
LLP or Limited Liability Partnership:
To maintain pace with the fast-growing modern business and industrial world, the need for a new form of organisation was felt, which could offer the benefits of the limited company along with the main features of a partnership. This need has given birth to a new organisation in the present business world, which is called a limited liability partnership or LLP.

LLP has been introduced as an annexure of partnership. The government of India enacted the Limited Liability Partnership Act., 2008 on 12th Dec. 2006 and it became effective from April 2009.

Features of LLP:

1. It is a corporate body having separate legal existence from its members.
2. The mutual rights and duties of partners and their rights and obligations toward the firm are determined by the provisions of this act.
3. LLP is been enacted by Indian Company Act.
4. The liability of each partner will be limited to an agreed ratio.
5. Minimum two members are required and one of them should be a citizen of India.
6. The provisions of the Indian Partnership act 1932 does not apply on LLP, but the provisions of the Company Act can be applied.
7. The right to inspect for the content of LLP issues/cases is vested with the central government.
8. In LLP, the liability of each partner will be limited to an agreed ratio. No partner will be liable for the unauthorised and independent act of other partners.
9. According to the LLP Act 2008, Section 31, it is compulsory to disclose personal information.
10. The stiffness of the drawbacks of LLP and provisions of the company Act are eliminated.

Question 11.
Elucidate the different type of Partners.
Answer:
1. Active Partner – The one who takes an active part in carrying out the business of the firm. Their rights are more than the other partners.

2. Sleeping Partner – The one who only contributes capital in the firm is called sleeping partner. These are the actual partners of the firm.

3. Nominal Partner – The one who allows the use of his/her name’s goodwill by a firm, but does not contribute to its capital.

4. Partner in Profit Only – The one who contributes capital to the firm to share the profits and not the losses with the consent of other partners.

5. Holding out Partner or Partner by Estoppel – When a Partner is not an actual partner, but he represents himself to be a partner either by words or in writing. Such a partner does not contribute capital, nor does he/she participates in profit/losses.

6. Minor Partner – As pers section 30, a minor may be subjected to the benefits of an existing partnership with the consent of the partner for the time being. This type of partner is under the age of 18.

7. Incoming Partner – A new person who is admitted to a partnership firm with the consent of all the other partners is called an incoming partner.

8. Outgoing Partner – An outgoing partner is one who is separated from the partnership with the consent of all other partners. When he goes out, he has to rights on future profits, etc.

Question 12.
Explain the Co-operative Movement.
Answer:
It is quite difficult to trace when and how ‘cooperation’ originated, but it is assumed that the history of cooperation is as old as human society. It is certainly a group instinct in a man which enables him to live together, work together and help one another in time of stress and strain. In India, the concept of cooperation and cooperative activities is very old. In Indian society, the traits of cooperation could be observed in religious institutions and traditional customers, and in the social and cultural life of people.

In India, with increased capitalism and an increasing number of factories, workers condition became vulnerable. Sir Fredrick Nicholson recommended to set up Rural Credit Societies in his report submitted in 1895. At the same time, Mr Dupanex also recommended the establishment of Rural banks in his book entitled ‘People’s bank for Northern India’. These reports made the government appoint a committee under Sir Edward Law in 1901.

Their proposal became the basis of the bill which was passed into law as the Co-operative Credit Societies Act. of 1904. Amendments in the related acts are done from time to time, giving impetus to the National and State-level Co-operative Credit and Rural Banks for their expansion and efficient working. In Cooperative section, the NSDC, NABARD, IFFCO, NCHF and similar other major cooperative institutions were established by the government.

Question 13.
Describe the co-operative societies’ working in Rajasthan.
Answer:
Rajasthan has the following co-operative Banks:
1. Rajasthan State Co-operative Bank/Apex Bank:
A committee set up by Reserve Bank under the chairmanship of ‘Shri Kothari’ recommended to establish this bank for cooperative development. This bank provides economic assistance to the farmers, rural people and other needy persons by making available financial resources.

Following are the important functions performed by the bank:

1. To expand the cooperative credit system in the state.
2. To provide short – term and mid-term loans to the central co-operative bank (crop loan of Rs. 3 lakh at 7% rate of interest can be made).
3. It serves as a link between Reserve Bank, NABARD and Central Cooperative Banks of the state.
4. It maintains the financial balance between different central Co-operative banks.
5. To extend loans to non – agricultural cooperative societies in addition to agricultural cooperative credit societies.
6. It collects Bills of Exchange and cheques, etc.
7. It accepts deposits at attractive interest rate through various accounts.
8. To offer loan and an overdraft facility to the members and deposit holders.
9. Providing facility of vaults (lockers) for the safe custody of valuables.

2. Central Co-operative Bank:
These are set up at the district level. It came into existence in the year 1910 in Ajmer. These banks did not register significant growth prior to independence. After Independence, the planned economic development policy was adopted by the government. Presently, there are 29 central Co-operative banks with 429 branches and 6231 village services.

Primary Agricultural Credit Societies:
Primary agricultural credit societies epitomize the vitality and service potential of the Co-operative movement in India. These societies are the powerful medium of encouragement to thrift and savings and mobilising savings in rural areas. In Rajasthan, the number of Primary Agricultural Co-operative Credit societies is 6231.

Functions of PACs:

1. To provide short – term/mid-term credit to farmers, artisans, landless farmers, agricultural labourer and other weaker sections of the society.
2. They supply agricultural inputs like seeds, fertilizers, pesticides, etc.
3. They promote savings and banking habit among the rural public.
4. It provides proper guidance and advice to farmers and other members.
5. It makes available consumer goods at fair prices.

Question 15.
State the advantages and disadvantages of Co-operative societies.
Answer:
Co-operative societies have the following merits:
1. Equality in Voting Status – Every member, despite his/her capital investment. has equal voting rights.

2. Limited Liability – Every member has a limited amount of liability on the basis of his/her capital investment. The loan cannot be repaid from his/her own property.

3. Stable Existence – Due to its stable existence, there is no effect of death, retirement or insolvency of any partner.

4. The economy in operation – The members of the committee provide common and unpaid services, in fact, most of the members are in the committee only. This prevents bad loans too.

Limitations of Co-operative movement:
1. Limited Resources – Every member of the Co-operative movement has a limited number of, and thus has a limited amount of resources.

2. Inefficiency in management – Cooperative committee works on lesser salary and therefore they do not get good managers and the ones who provide their time to them are not professionals.

3. Lack of Secrecy – According to the co-operative Movement Act, Section 7 every subject is discussed in open and the committee has the right to make its ideas public. Therefore the secrecy is breached.

4. Government Control – Co-operative societies are provided with facilities by the government. And in return, they have to follow all the government rules. It is thus controlled by state Co-operative society. This results in a negative effect on their activities.

5. The difference of opinion – The difference of opinion in the members sometimes makes it impossible for them to come to a conclusion. Some members pay attention only to their personal Interest.

RBSE Class 11 Business Studies Chapter 2 Additional Questions and Answers

RBSE Class 11 Business Studies Chapter 2 Multiple Choice Questions

Question 1.
What is the reason behind America, Japan, Britain and France for reaching the top?
(a) Agriculture
(b) Population
(c) Animal husbandry
(d) Business
Answer:
(d) Business

Question 2.
What is the speciality of Business?
(a) It is a human activity
(b) The element of risk and courage
(c) Creation of utility
(d) All of the above
Answer:
(c) Creation of utility

Question 3.
What does not mean Business?
(a) Growth of education
(b) Lack of living standard
(c) Specialization of production
(d) Cultural growth
Answer:
(b) Lack of living standard

Question 4.
What is the primary purpose of the business?
(a) Profit purpose
(b) New innovation
(c) Satisfaction of customer
(d) All of the above
Answer:
(d) All of the above

Question 5.
“The only motive of the business is to satisfy their customer.” This has been said by –
(a) Peter F. Drucker
(b) Prof. Hene
(c) Wheeler
(d) Erik
Answer:
(a) Peter F. Drucker

Question 6.
The social motive of the business is –
(a) Profit motive
(b) Innovation
(c) Regular payment of loans
(d) Satisfaction of customers
Answer:
(c) Regular payment of loans

Question 7.
Types of Business Organisation:
(a) Sole trader
(b) Partnership
(c) Company
(d) All of the above
Answer:
(d) All of the above

Question 8.
Statutory formality can at least establish:
(a) Partnership
(b) Sole Trader
(c) Co-operative Society
(d) none of the above
Answer:
(b) Sole Trader

Question 9.
This business is a form of organization which is owned and controlled by a single person:
(a) Partnership
(b) Company
(c) Sole Trader
(d) None of the above
Answer:
(c) Sole Trader

Question 10.
Which is the oldest form of sole business?
(a) Sole trader
(b) Partnership
(c) Company
(d) Co-operative Societies
Answer:
(a) Sole trader

Question 11.
The rights of the owner in sole trader are:
(a) Unlimited
(b) limited
(c) little limited
(d) More limited
Answer:
(a) Unlimited

Question 12.
The main advantage of sole trade is –
(a) Easy formation
(b) Independence in choice
(c) quick decision
(d) All of the above
Answer:
(d) All of the above

Question 13.
The main disadvantage of sole trade is:
(a) Small size
(b) Limited capital
(c) Wrong choice
(d) All of the above
Answer:
(d) All of the above

Question 14.
The partnership came into existence:
(a) In 1949
(b) In 1956
(c) In 1932
(d) In 1872
Answer:
(c) In 1932

Question 15.
A minimum number of members, in a partnership firm, is:
(a) 7
(b) 3
(c) 2
(d) None
Answer:
(c) 2

Question 16.
According to which provision of the company Act, a partnership firm cannot have more than 50 members?
(a) Provision 2
(b) Provision 4
(c) Provision 5
(d) Provision 6
Answer:
(b) Provision 4

Question 17.
What is the liability of each partner in a partnership firm?
(a) Limited
(b) Partly limited
(c) Unlimited
(d) None of them
Answer:
(c) Unlimited

Question 18.
Registration of partnership is –
(a) Optional
(b) Compulsory
(c) Both (a) and (b)
d) None of them
Answer:
(a) Optional

Question 19.
A most important advantage of a partnership is –
(a) Easy formation
(b) Optional registration
(c) The facility in loan receiving
(d) All of the above
Answer:
(d) All of the above

Question 20.
The main disadvantage of partnership is –
(a) Unlimited rights
(b) Late decisions
(c) Limited means
(d) All of the above
Answer:
(d) All of the above

Question 21.
The pattern of which business organisation is found in India only –
(a) Sole trader
(b) Partnership
(c) Hindu Undivided Family
(d) Company
Answer:
(c) Hindu Undivided Family

Question 22.
In which state Dayabhag System is popular is HUF and family business?
(a) Rajasthan
(b) West Bengal
(c) Uttar Pradesh
(d) Tamil Nadu
Answer:
(b) West Bengal

Question 23.
A child enters into business directly after taking birth in –
(a) Sole Trader
(b) Partnership
(c) HUF
(d) Company
Answer:
(c) HUF

Question 24.
When did LLP come into existence?
(a) 2 April, 2009
(b) 1 April, 2009
(c) 2 April, 2008
(d) 1 April, 2008
Answer:
(a) 2 April, 2009

Question 25.
Which is not an advantage of LLP?
(a) Internal pliancy
(b) Limited liability
(c) Lack of privacy
(d) Statutory existence
Answer:
(c) Lack of privacy

Question 26.
Edward Law committee was established by the Indian Government –
(a) In 1901
(b) In 1904
(c) In 1912
(d) In 1932
Answer:
(a) In 1901

Question 27.
Social cooperation is the element of social cause. Who said this?
(a) M. T. Herik
(b) Sir Horek Phlanket
(c) Partnership
(d) Seligman
Answer:
(c) Partnership

Question 28.
“One for all and all for one” is the key of –
(a) Partnership
(b) Sole Trader
(c) Co – operative
(d) Public Organization
Answer:
(c) Co – operative

Question 29.
State’s first central co-operative bank was established in which city?
(a) Jaipur
(b) Ajmer
(c) Udaipur
(d) None of them
Answer:
(b) Ajmer

Question 30.
Co-operative studies and management organization (Raisem) was established in –
(a) 1994
(b) 1967
(c) 1948
(d) 1953
Answer:
(a) 1994

RBSE Class 11 Business Studies Chapter 2 Very Short Answer Type Questions

Question 1.
State different types of Business.
Answer:

• Sole Trade
• Joint Hindu Family Business
• Partnership
• Co-operative Institutions
• LLP
• Public Sector Enterprise

Question 2.
State two advantages of modern business.
Answer:

• Transport and use of innovative means.
• Advertisement.

Question 3.
Mention three uses of business from an economic point of view.
Answer:

• Profit earning.
• Innovation.
• The satisfaction of Customers.

Question 4.
Which is the oldest form of Business?
Answer:
Sole Trade.

Question 5.
What are the two main reasons for the popularity of sole trade to date?
Answer:

• Easy formation.
• Independent decision making.

Question 6.
State two advantages of Sole Trade.
Answer:

• Quick decision making.
• Secrecy.

Question 7.
State 2 disadvantages of Sole Trade.
Answer:

• Unlimited liability
• Limited credit.

Question 8.
State two features of Partnership.
Answer:

• It is made through an agreement.
• It should have a minimum of 2 persons.

Question 9.
State 2 advantages of Partnership.
Answer:

• Easy operation.
• Convenience in loan receiving.

Question 10.
State two disadvantages of Partnership.
Answer:

• Unlimited liability.
• Lack of quick decision making.

Question 11.
State two reasons for the dissolution of Partnership.
Answer:

• If Less than 2 members remain.
• If it is against government policy.

Question 12.
Describe Sleeping Partner.
Answer:
The one who contributes the capital shares profit and loss but does not take part in the day – to – day activities of the venture.

Question 13.
Under which Act does partnership come?
Answer:
Under the Indian Partnership Act. 1932.

Question 14.
At what percentage would the profit and loss be divided between the partners?
Answer:
An equal percentage.

Question 15.
When was first LLP introduced?
Answer:
On 2 April 2009.

Question 16.
What is HUF? Explain.
Answer:
A form of organization wherein the business is owned and carried on by the members of Hindu Undivided family.

Question 17.
Which Act applies to HUF and Joint Hindu Family Business?
Answer:
Hindu Succession Act, 1956.

Question 18.
What is the Mitakshara System?
Answer:
This system prevails in entire India, except West Bengal and allows only the male members to be coparceners in the business.

Question 19.
What are coparceners?
Answer:
All members have equal ownership right over the ancestral property. They are known as coparceners.

Question 20.
State two disadvantages of HUF.
Answer:

• Unlimited liability of Karta.
• Limited capital.

Question 21.
Co-operative artisans of which country was collectively joined before 3000 BC?
Answer:
Egypt.

Question 22.
When was Land Mortgage Bank of Germany established?
Answer:
In the year 1769.

Question 23.
When was the cooperative organization by 28 artisans of Rockdale established?
Answer:
In the year 1844.

Question 24.
The formation of what is discussed in the report of the Madras Government allowed by Sir Nicholson?
Answer:
‘The formation of Villagers’ Credit Committee.

Question 25.
In Uttar Pradesh, after the study of credit co-operative system by Dupernex, he suggested establishing a village bank in his book. Name the book.
Answer:
In People’s Bank for Northern India.

Question 26.
Which committee was formed by the Indian government in the year 1901?
Answer:
Edward Law Committee

Question 27.
Which committee recommended to establish cooperative societies with the help of the Indian government?
Answer:
Edward Law Committee.

Question 28.
State two points of importance of Cooperativeness.
Answer:

• Optional formation.
• Sense of Service and Cooperation.

Question 29.
State two points of importance of modern Cooperativeness.
Answer:

• Co – operativeness motivates village people community to save.
• Encouragement to small – scale and cottage industries.

Question 30.
State two limitations of Cooperativeness.
Answer:

• Weak management.
• Eligible people do not enjoy the benefit.

Question 31.
Under whose chairmanship, was the committee formed to establish apex bank in Rajasthan for governmental growth?
Answer:
Under Shri Kothari.

Question 32.
State two features of Rajasthan’s Apex banks.
Answer:

• To publicize the credit committee system.
• To provide loan to the Co-operative banks and medium – level Co-operative banks.

Question 33.
Rajasthan State’s first central Co-operative bank was established in which year?
Answer:
In 1910.

Question 34.
Where is the head office of Rajasthan state Co-operative bank situated?
Answer:
In Jaipur.

Question 35.
At present, how many central Co-operative banks are there in Rajasthan state?
Answer:
29.

Question 36.
State two functions of Primary Agricultural Credit societies.
Answer:

• To establish a sense of saving in villagers.
• To provide Cooperation in the development of modern agriculture.

Question 37.
State two plans that were implemented by Rajasthan State Cooperative Bank Limited in the year 2014 – 15.
Answer:

• Gyan Sagar Loan scheme provided a loan of Rs. 15.77 Lakh.
• Swarojgar focused card scheme, provided Loan of Rs. 15.64 Lakh.

Question 38.
Why was Land Growth Bank established in Rajasthan?
Answer:
To provide long – term loans to the farmers.

Question 39.
What amount of loan was provided under various schemes by land growth bank in the year 2014 – 15?
Answer:
Loan amounting to Rs. 25638.86 Lakh.

Question 40.
What are the activities of RAJFED?
Answer:
To increase the production of farmers and to provide them with the actual price of their production.

Question 41.
Which government committee was established to provide basic consumer goods at an appropriate price to the people of Rajasthan?
Answer:
Government consumer stores (CANFED).

Question 42.
Which all means are used by CAMPED to operate its business operations?
Answer:
Through the means of medical, marketing and civil supply.

Question 43.
Which all committees are working to provide home facilities to the weaker section of the society?
Answer:
Co-operative housing construction committee.

Question 44.
Which Institute was established to prepare the class of business steward and efficient workers?
Answer:
Co-operative Education and Management Institute (RAISE).

Question 45.
How many banks were nationalised by the Indian government in 1969?
Answer:
14 Banks.

Question 46.
To receive the honour of ‘Maharatna’ how much average business is needed every year in Public Undertaking?
Answer:
20,000 Crore.

Question 47.
At present, how many undertakings are included in Central Public sector?
Answer:
More than 250.

Question 48.
How many public undertakings were there, after Independence in the year 1951?
Answer:
Only 5.

Question 49.
Industrial Policy resolution of 1956 is classified into how many categories?
Answer:
3.

Question 50.
How much is the total market capitalisation of public sector units?
Answer:
21%.

RBSE Class 11 Business Studies Chapter 2 Short Answer Type Questions (SA – I)

Question 1.
Explain the meaning of Business.
Answer:
Business can be defined as all those human economic activities which are related to the production as well as transfer or distribution of goods and services with an objective to earn profit by maximizing social welfare.

According to L.H. Haney – “Business may be defined as human activities decided towards providing or acquiring wealth through buying and selling goods.”

Question 2.
State two features of Business.
Answer:
1. Business is an economic activity – One of the most important features of business is its economic nature because we need money to start a business, and also, the main motive behind a business is to earn money only. No one does business in order to earn love, respect or emotional attachment.

2. Uncertainty of Returns – Uncertainty is the key to any business. The cycle of profit and gain continues until its survival. Sometimes, the profit would be more than required, or it could even be vice – versa. Therefore, it cannot be calculated until the work is completely
done.

Question 3.
Why should a business focus on social objectives and society?
Answer:
Business is an integral part of society, and because of it, the resources of society are utilized. Business has some moral duty for society. Social services lead to better efficiency of the business.

Question 4.
What is the appropriate time to establish a sole trading business?
Answer:
Under the following conditions, a sole trader can be established

1. The business that requires less capital, like hair cutting saloon (barber).
2. The scope of business is less here.
3. This area requires self proficiency and also direct contact with the customers.
4. This business requires personal attention and managerial proficiency for better operation and production.
5. The business which requires the personal care of the customers like a beauty parlour.
6. The business which involves limited goods and services.

Question 5.
From the following, which businesses are appropriate for sole trading?

1. Dietary consultancy
2. Medical shop
3. Related to legal advice
4. Craft Centre
5. Internet Cafe
6. Beauty Parlour
7. Chartered Accountant firm.

Answer:
The following businesses are appropriate for sole trading.

1. Dietary allowance
2. Medical shop
3. Beauty Parlour.

As these 3 businesses do not require a lot of capital, they all require personal contacts and special knowledge, they do not require special formalities.

Question 6.
If registration is optional, then why do partnership firms want themselves to get registered? Explain.
Answer:
According to the Indian Partnership Act, 1932, registration of partnership firm is not compulsory, but optional. But the partners have to face a lot of problems and also remain deprived of lots of benefits if their firm is not registered. If the firm is not registered, then the partners of such firm cannot file any complaint against his inefficient partners and vice-versa. Due to all such reasons, a firm should always be registered.

Question 7.
Explain the partnership deed.
Answer:
There are many agreements, oral or written, during the formation of a partnership firm. A partnership deed is a written agreement which specifies the terms and conditions that govern the partnership. It includes the name of the firm, nature and location of the business, duration of business, the investment made by the partners, distribution of profit and loss, the work area of every partner, etc., and it also includes the signature of every partner.

Question 8.
Compare the situation of a minor in a partnership firm with his situation as a minor
in a Hindu Undivided Family.
Answer:
The inclusion of an individual in the business occurs due to birth in a Hindu Individual family. Therefore, a minor is also a part of such business since his/her birth. The partnership is a contract, whereas a minor cannot enter into a contract legally. Therefore, he cannot be a partner in a partnership firm. But, he can have access to a part of the profit earned with the consent of all the partners. In this case, the minor’s right would be restricted to their capital investment only.

Question 9.
State four features of Joint Hindu Family Business.
Answer:
Following are four features of Joint Hindu family business:

• The HUF business is governed by the Hindu Succession Act of 1956.
• The business is controlled by the eldest member of the family, known as Karta.
• The liability of Karta is unlimited.
• There is no maximum limit to the number of members.

Question 10.
If Karta dies in a joint Hindu family business, what happens to the business?
Answer:
The business continues to run in case of death of Karta or any other member of the family. The next eldest member takes up the position of Karta, making the business stable. The business can, however, be terminated with the mutual consent of the members on their declaration that they are no longer a part of Joint Hindu family business.

Question 11.
What do you understand by ‘Karta’ in a Joint Hindu Family Business?
Answer:
The basis of membership is birth in HUF and three successive generations can be members in the business. All members have equal ownership right over the ancestral property, but the business is controlled by the head of the family, who is the eldest member. called ‘Karta’. Their liabilities are unlimited. That means their risk is well – defined and precise.

Question 12.
State four features of limited liability partnership.
Answer:

1. It is a corporate body having a seperate legal entity.
2. The provisions of the Indian Partnership Act, 1932 does not apply on LLP, but the provisions of the Companys Act can be applied.
3. The liability of each partner will be limited to an agreed ratio.
4. The mutual rights and duties of partners and their obligations towards the firm are determined by the provisions of this act.

Question 13.
State two features of Partnership.
Answer:
(1) Voluntary Organization – Partnership is a voluntary organization, where a person can get admitted or depart any time as per his/her discretion.

(2) The law of Similarity – There is no difference between any partners on the basis of their economic status, education, sex, religion, etc. Everyone is equal here.

Question 14.
How is employment increased by partnership?
Answer:
The partnership is an economic movement due to which many people get employed. Partnership firms promote savings among villagers, and with that saving, they can make investments in the activities of production which again increases employment. People with limited means can also join hands and start a new business and employ themselves.

Question 15.
State the activities and schemes carried out by Rajasthan State Cooperative Bank Limited in the year 2014 – 2015.
Answer:

• It provided loans worth 1683054 crores to co-operative farmer credit holders.
• Provided loans worth Rs. 15.77 lakh to Gyan Sagar scheme.
• Provided loans worth Rs. 1564.04 lakh to self-employment credit card scheme.
• Personal Accident Insurance scheme – Providing Insurance cover of Rs. 3 lakhs against an annual premium of 43 only.
• Self-help group loan facility – Provided loans worth 3410 lacs to 3600 self – help groups.

Question 16.
What kind of problems was being faced by our country before independence?
Answer:
Before independence, our country was suffering from irregularity in income and employment at various levels, less economic growth and unavailability of skilled labour and various other economic problems.

RBSE Class 11 Business Studies Chapter 2 Short Answer Type Questions (SA -II)

Question 1.
Can a minor get into a partnership firm as a partner? Explain.
Answer:
The partnership is based on a contract where 2 or more than 2 persons come together to form a business, while according to Indian rules, a minor cannot enter into a contract. But, he can have access to a part of the profit earned with the consent of all the partners. In this situation, he would be subjected to the applied benefits only, also he cannot be an active partner in day to day activities. When he becomes a major, he needs to inform the other partners within 6 months whether he wants to continue being a partner or not. If he fails to provide a notice then he becomes a partner automatically and his liability gets unlimited.

Question 2.
Explain Co-operative Institutions.
Answer:
These are voluntary organisations of the people who have come together for common benefits.

According to M.T. Harrick – “Cooperation is an action of persons voluntarily united for utilising reciprocally their own abilities, resources, or both, under mutual management, for their common profits or losses.”

According to the Indian Cooperative Societies Act 1912 schedule 4(c) – “Society is one which has its objective as the promotion of the economic interest of its members in accordance with cooperative principles.”

Question 3.
How are democratic and religious absolutes idealized by cooperative committee?
Answer:
The co-operative committee selects the management committee from their own members. who manages each and every function. In this voting system, every member of the government official committee has the right to vote despite the difference in their investment. That is how a Cooperative committee represents democracy.

One doesn’t need to be majorly qualified to be a part of a government official committee. Anybody can admit or depart anytime he/she wants. It is against gender bias or bias on the basis of his/her caste, etc. No religion is given more importance and none of the members is treated badly because of his/her religion. These are against religious bias and support religious absolutes.

Question 4.
Explain “Land Development Bank”.
Answer:
To provide long term loans to farmers, Land Development Banks were established. These banks extend loans to their members against the collateral of their land. This is the most important source of long – term institutional credit for rural farmers. In Rajasthan, they have a two-tier structure. At the district level, they work as Primary Land Development Bank, and at the state level, they work as State Co-operative Land Development Bank.

Rajasthan State Cooperative Land Development Bank, which was established on 26th March 1957, is presently working with 36 Primary Land Development Banks in 33 districts, for the development of rural areas, under various schemes. State Cooperative Land Development Bank has distributed loans worth Rs. 25,638.86 lakh in the year 2014 – 15.

These banks provide long-term loans to its members for purposes like increasing productive capacity of the land, for irrigation facilities, construction of wells or ponds, for repairing wells, for purchasing land, tractors, for the cultivation of fruits, etc. They provide loans for animal husbandry also. The volume and duration of these loans are very high, but the rate of interest charged is comparatively low and there is a facility of repayment of loans in easy instalments.

Question 5.
Explain the activities of Rajasthan state Bank/Apex Bank.
Answer:
Following are the activities of Rajasthan state cooperative bank:

1. To expand the cooperative credit system in the state.
2. It serves as a link between Reserve Bank, NABARD and central cooperative banks of the state.
3. It maintains the financial balance between different central cooperative banks.
4. It collects Bills of Exchange, cheques, etc.
5. It provides the facility of lockers (vaults) for the safe custody of valuables.

Question 6.
Explain the title ‘Maharatna’ for Public Sector Undertaking.
Answer:
The major criteria of awarding status of Maharatna to a company is to have an annual net profit of over Rs. 2500 crore for 3 consequent years. The company’s net worth should be Rs. 10000 crore. The status of Maharatna enables CPSEs to have a comparative advantage to compete in the global market as a global giant.

Question 7.
“India’s first Prime minister described PSUs as Modern temples of India”. Why?
Answer:
The first PM of India described PSUs as modern temples of India which is quite relevant. In the first five year plan, 5 central PSEs were established with an investment of Rs. 29 crores and since then PSUs have been playing a strategic role in the socio-economic development of India. Today, there are more than 250 CPSEs. Their total business is 25% of GDP and their share in export income is 8%. A total of 13.9 lakh persons are working in these PSUs.

RBSE Class 11 Business Studies Chapter 2 Essay type Questions

Question 1.
“The motive of every business is to earn money.” Explain the statement.
or
Explain the role of Profit in any business.
Answer:
Every businessman runs his business with a profit motive. Profit gives the motivation to succeed. The profit helps a business to maintain its stability. The profit helps in its operation. growth and expansion. A business can only be evaluated by how much profit it has earned. According to Adam Smith – “Profit is that magic which can turn selfishness of man into useful services. Therefore, it is clear that if the business won’t earn profit then people won’t be able to get goods and services.”

Profit is counted foremost because of these reasons:
1. Profit is motivation – Every person enters into business with profit motive only. They fulfil their needs through profit only. Profit is that element which motivates the businessman for any activity. If the business has low profits, then he won’t take interest in the business and the result would be the problems that would be faced by the businessman.

2. Profit is Return of Services – Like other people, the businessman also works hard to run his/her business. Therefore, the profit is just the return of his/her hard work.

3. Profit is the Base of Exchange, The exchange of goods and services is done for mutual profit only. Therefore, the give and take in business include profit only. If there won’t be any profit than the exchange would stop and some people would have unnecessary goods, while some others might not even have the necessary goods.

4. Means of supply of Individual necessities – Everybody has to fulfil his/her family needs. These needs can only be fulfilled with the profit earned. The existence of needs proves the existence of profit.

5. Measurement of Business efficiency – The skill of any business and businessmen can be measured through profit only. If it earns a profit, then it is assumed that the business is running properly and resources are being utilized efficiently.

In a nutshell, profit is considered to be the main source of any business. Loop has stated profit as the main part of business, but some people are against this statement. According to them, profit earning is not the only motive of any business. Rather, it is only a part of the activity of the business.

Question 2.
Explain the kinds of business.
Or
Explain the types of business organizations.
Answer:
1. Sole trade – Sole trading is the oldest form of business. A sole trader manages, controls the business, bears all the risk, makes efficient efforts. In this type of business, a single individual exercises all its functions.

2. Partnership – This form of business ownership involves group ownership or joint ownership. In this form of business, two or more than 2 persons by making an agreement between them establish a business. There is no maximum limit of partners according to Indian Partnership Act of 1932, but according to the Indian Company Act, section 4, it should not exceed 50.

3. Hindu Undivided Family and Joint Hindu family Business – The business is managed and regulated by the head of the family called ‘Karta’. All the decisions are taken by Karta only. This type of business is found in India only.

4. Joint Stock Company – JSC is an artificial entity created by law providing it with a separate legal entity. Its capital is divided into shares and its member enjoy limited liability and the company can sue or can be sued by other company in its own name.

5. Co-operative Societies – This systematic development includes collective business ownership. Here, people voluntarily come together for mutual benefits with an objective to promote their economic interest by Cooperative business. Its rule is “All for one and one for All”. It comes under cooperative societies Act of 1912.

6. Public Sector Unit or PSUs – Enterprises owned, operated, managed and controlled by the government are known as Public Sector Units or PSUs. In Public Enterprises, the Central or State Government owns at least 51% or more shares. If PSUs are owned by one or more than one state governments and central government, then also the capital share (51% or more) will be the same. In 1951. the number of PSU’s in the country was only 5. Today, their number has increased to 250.

Question 3.
Why is it important to choose a pattern for any appropriate organization? Explain those events which are helpful in choosing an appropriate pattern.
Answer:
Importance of choice of the form of Organisation – Sole Trade, Joint Hindu Family Business, Partnership, Co-operative Institutions and Joint-stock company are the choices in the formation of business. These patterns can’t be appropriate for every business because all these patterns have their individual benefits. Therefore, it is compulsory to select an appropriate pattern for the business. A business might fail, in case of an inappropriate pattern. Therefore, while choosing a pattern, its nature, its shape and size, area, etc., should be considered and every situation should be clearly studied.

Helping components in a choice of the form of organization are the following:
1. Prime Cost – Sole trading requires the least investment and since the partnership is also a business that runs on a low scale, it is also less expensive in the establishment. But, due to the provision of compulsory registration of Co-operative committee and joint-stock company, their capital investment is huge. Therefore, at a lower level, sole trading and partnership are beneficial, while co-operative Institutions and JSCs are beneficial at a larger level.

2. Liability – In sole trading and partnership, the liability is unlimited, while liability is limited in case of cooperative institutes and JSC and in Hindu undivided family, the liability of only ‘Karta’ is unlimited. In this regard, the company is the most suitable option.

3. Continuity – The sole trading and partnership may dissolve in case of a partner/ trader becoming lunatic, dying or becoming insolvent, whereas there is no effect of all these on HUF, Co-operative Institutes and company. Therefore, sole trading and partnership are good for short time business, while for a longer period, Co-operative institutes, company and HUF is a good option.

4. Managerial Ability – In sole trading, the trader cannot be proficient in every field. Whereas, collective managerial skills are appropriate for the success of partnership and company.

5. Capital – The capital investment is limited in case of sole trading and partnership. While in the context of investment, the company is the best choice. The company can also apply for the loan from external sources also.

6. Control – If the control should lie in a single hand in the organization, sole trading is appropriate. But if the control can be divided then, partnership and company are also good options. In a company, the owner and business are totally different.

7. Nature of Business – If the nature of business requires a lot more direct public contact, then sole trading is the most appropriate option. If the business is of skilled nature, then the partnership is the best option. If the business is associated with manufacturing activities, then the company is the most suitable option.

8. Legal formalities – A businessman should see if he is capable of bearing the legal formalities or not. If he can, then Co-operative institutes or company can be a suitable option, because these have many legal formalities. If he can’t, then sole trading and partnership are the most suitable options.

9. Quantity of Risk – Risk also affects the choice of formation of business. If the risk is more, then Co-operative Institutes & company is the best option, since it has more members and liability is limited. But if the business involves less risk then sole trade and partnership are the most suitable options.

10. Possibilities of Future Expansion – If the possibility of future expansion is more, then partnership and company are the best suitable options, but if there is less possibility of expansion, then sole trading is the best option.

11. Tax burden – If the possibility of profit is more then from the point of view of the tax burden, the company is the most suitable option. But if the profit is in limited possible quantity then sole trade and partnership are the most suitable options.

Question 4.
“Sole trade is best among the world if the trader is skilled enough to handle all the business-related tasks and responsibilities. Elucidate this and also state its limitations.
Or
State the disadvantages of a sole trader.
Answer:
Due to various benefits, sole trade is the foremost outlay of business, because, in sole trading, the business is run by a single individual who takes care of his business, establishes its secrecy and his/her quick decision-making capacity can help in increasing the proficiency of the business. It is only possible when the trader is very skilled and the size of the business is small. There are very skilled persons present nowadays.

That is why the business of big level having more challenge is not possible to be run by a single individual. Therefore, the quote by Prof. William K. Was that “Sole trading is the most proficient business if the trader can take control of everything all by himself” is true till certain limits only. For the lower-level business, that requires less investment and that can be run by a lesser skilled person, this statement is also true, but this statement also has some limitations for that it cannot be a choice of formation for every type of business.

The limitations are:
1. Small Size – The sole trading is suitable only when the size of the business is small. There is a limit of every person to do work. A single individual alone cannot handle a largescale business. Therefore, this business should only be adopted when the size of the business is small.

2. Limited Capital – There is a limit of investment and loan of every person. He alone cannot arrange a large investment. Therefore for the type of business that requires a lot of investment, this business is not a suitable option.

3. Unlimited Liability – In sole trading, the liability of the trader is unlimited. If a business faces any loss, then his personal property can also be sold, which can make him totally insolvent. Therefore, it is not suitable in case of more risk.

4. Limited Life Span – A sole trader is not separate from his business. If the trader dies or becomes lunatic, sick etc. then the business may totally stop. Therefore, for a limited life span, this business is not a suitable option.

5. Limited Managerial Ability – Sole trade suffers from the limited managerial ability. The owner has to assume the responsibility of varied managerial tasks such as purchasing, marketing, etc. which may not be balanced in all the cases. Limited managerial capacity can hinder the growth of business activities.

Question 5.
Explain partnership and state its features.
Answer:
Partnership:
A partnership was born to eliminate the defects/disadvantages of a sole trader. It works with huge investment.
(1) Haney has given a suitable definition of partnership in simple words. According to him, “Partnership is the relationship between persons who agree to carry on a business in common, with a view to private gain.”

(2) According to the American Partnership Act – “Partnership is the association of two or more persons who carry on a business for profits as co-owners.”

(3) Indian Partnership Act, 1933, Section 4 – “The relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all.” In the end, we can say that partnership is an association of two or more persons, to carry on a business.

The partners collectively provide capital, manage the business and equally share the profit or loss of the business. The persons who enter into partnership for mutual sharing of profits are individually called partners and collectively called partnership firm and the name under which they run their business is known as ‘Name of the Firm.’ Features of Partnership

Following are the features of partnership:
1. Formation – The partnership is formed under Indian Partnership Act of 1932, with a lawful contractual agreement. It includes the relation between the partners, their share of the ratio of profit and loss, etc. The partnership is formed for attaining profit and lawful activities, not for charitable service or unlawful business activities.

2. Unlimited liability – The partners in this form of business are liable to repay the debts even from their personal resources in case the firm is not efficient to meet its debts, which creates a risk to their personal property.

3. Decision Making and Control – The activities of the partnership firm are controlled and managed through the joint effort of all partners. Decisions are generally taken by mutual consent.

4. Continuity – These is a lack of continuity in a partnership firm because if a partner dies, becomes lunatic, retires, then partnership dissolves. After that, the remaining partners can form a new partnership firm.

5. Number of Members – Partnership should at least have 2 members, for Banking, the maximum partners should be 10 and for other businesses, it should be 20.

6. Mutual agency – Partnership can be run either by all its partners or by one single partner who can run all the business. Therefore, every partner is an agent as well as the owner.

Question 6.
Explain the difference between sole trading and partnership.
Answer:
Difference between sole trading and partnership:

Question 7.
What is a Co-operative enterprise? Explain its features.
Answer:
Co-operative is a comprehensive social and economic movement having social service objective at its base. It preserves people from possible exploitation. It is registered under the cooperative committee Act, 1912.

According to M. T Harrick – “Cooperation is an action of persons voluntarily united for utilising reciprocally their own abilities, resources or both, under mutual management for their common profits or losses.”

Characteristics of Co-operativeness:
1. Voluntary membership – It is an independent universal organisation in which a person can join or leave the organization on a voluntary basis.

2. Legal Status – Its registration is compulsory. The status of the committee is isolated. Any person of any religion or sex can be a member of a cooperative committee. Also, he can, at any time, leave by giving prior notice.

3. Limited Liability – The liability of the members of the co-operative committee is limited up to their investment.

4. Control – The complexion of the committee is democratic, its members select the committee through votes, which manages and controls the business.

5. Service Motive – The objective of the cooperative committee is to help each other and serve mutual interest. Therefore, it includes a sense of service in its activities.

6. Equal Voting Rights – It works democratically on the basis of “One person one Vote”. The capital invested has no effect on a person’s voting right, and one person can only vote for one time.

7. Separate legal entity – A registered cooperative committee has a statutory identity. The committee works through its own name only. It is not affected by the incoming or outgoing of any member.

8. Mutual Cooperation – The most important feature of Co-operative committee is that it works secularly by eliminating personal discords if any. Helping each other is the ethical duty of every member.

Question 8.
State the differences between Joint Hindu family business and Partnership.
Answer:
Difference between Joint Hindu family business and partnership:


Important Questions and Answers from the Chart of Textbook

Very Short Answer Type Questions

Question 1.
In our country, enlist the types of status granted to Public Sector Units.
Answer:
Maharatna, Navratna and Miniratna.

Question 2.
State two enterprises that were awarded as ‘Maharatna’ PSU.
Answer:

• Gas Authority of India (GAIL).
• Coal India Limited. (CIL).

Question 3.
State two enterprises awarded as Navratna.
Answer:

• Bharat Petroleum Corporation Limited (BPCL).
• Power Grid Corporation of India Limited.

Question 4.
The ultimate global presence award has awarded what status to Engineers India Limited?
Answer:
Miniratna.

Question 5.
Which Public Enterprise has been granted ‘Maharatna’ for being eco – friendly?
Answer:
Steel Authority of India Limited (SAIL).

Question 6.
State two Public enterprises that were awarded as Miniratna.
Answer:

• WASCO Limited.
• Ennore Port Limited.

Question 7.
CSR’s most valuable ‘Navratna’ has been awarded to which enterprise?
Answer:
Oil India Limited.

Question 8.
In which sphere Rajasthan Electronics and Instruments has been awarded the by ‘Miniratna’ status?
Answer:
The best in R and D Innovation.

Question 9.
Name the Public enterprise awarded ‘Navratna’ in context to be the wealthiest.
Answer:
National Mineral Development Corporation Limited (NMDC).

Question 10.
Name the reason for Numaligarh Refinery Limited being awarded “Miniratna.”
Answer:
For being most Eco – friendly.

Question 11.
Name the Public enterprise that was granted ‘Maharatna’ in context to Best Global Presence Award.
Answer:
Bharat Heavy Electricals Limited (BHEL).

Question 12.
Name the Public Enterprise which won Miniratna in the sphere of fastest growth.
Answer:
Ennore Port Limited.

Short Answer Type Questions

Question 1.
Name various companies which were awarded ‘Maharatna’ for economic growth and development of the country.
Answer:

• Gas Authority of India Limited (GAIL)
• Coal India limited (CIL)
• Oil and Natural Gas Corporation (ONGC)
• Steel Authority of India Limited (SAIL)
• National Thermal Power Corporation Limited (NTPCL)
• Bharat Heavy Electronics Limited (BHEL)

Question 2.
Enlist 5 public enterprises which were awarded ‘Miniratna’.
Answer:

• WASCO Limited.
• Ennore Port Limited.
• National Hydroelectric Corporation Limited.
• ISCON International Limited.
• Housing and Urban Development Corporation Limited (HUDCO).
• Numaligarh Refinery Limited.

Question 3.
Enlist 5 Public Enterprises which were awarded ‘Navratna’.
Answer:

• Bharat Petroleum Corporation Limited (BPCL).
• Power Grid Corporation of India Limited.
• National Mineral Development Corporation Limited (NMDC).
• Oil India Limited.
• Bharat Electronics Limited.

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