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Karnataka 1st PUC Business Studies Model Question Paper 1 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 or a 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 )
What is trade?
Trade refers to buying and selling of goods is called trade.
Who is Karta?
Head of the Hindu Undivided Family Business is called Karta.
Give an example for departmental undertakings.
Which of the following is not a types of bank?
(a) Commercial Bank
(b) Co-operative Bank
(c) Central Bank
(d) Savings Bank
(d) Savings Bank.
What is e-commerce?
Conducting the business activities with the help of internet is called e-commerce.
Mention any one type of pollution.
A prospectus is issued by
(a) A private company.
(b) A public company seeking investment from public.
(c) A public enterprises.
(d) A public company.
(d) A public company.
What is business finance?
An activity of business concerned with acquisition and conservation of capital fund meeting the financial needs is called business finance.
National Bank for Agriculture and Rural Development.
“Carry needle to an aeroplane’’ this statement applies to which types of fixed shop large retailer?
Which one of the following modes of entry requires high level of risks?
(c) Contract manufacturing
(d) Joint venture.
(d) Joint venture.
Which of the following documents is not required in export procedure?
(a) Certificate of origin
(b) Certificate of inspection
(c) Mate’s receipts
(d) Bill of entry
d) Bill of entry.
Section – B
II. Answer any ten of the following questions in. two or three sentences each. Each question carries 2 marks. ( 10 × 2 = 20 )
What is commerce?
Commerce is a branch of business concerned with the distribution of goods and services.
What is partnership deed?
The written agreement which specifies the terms and conditions that govern the partnership.
State any two merits of government companies.
The merits of government companies are :
- A government company can be established by fulfilling the requirements of the Indian Companies Act. A separate Act in the Parliament is not required.
- It has a separate legal entity, apart from the government.
What is Insurance?
Insurance is a contract between two parties where one party agrees to pay to the compensation to another party against the loss which may arise due to uncertainty.
State any two benefits of e-business.
- Global reach.
What is business ethics?
Business ethics is defined as a set of moral standards which the society expects from the businessman.
What is memorandum of association?
Memorandum of association is the main document in the formation of a company and it contains the fundamental conditions.
Name any two owners fund.
- Equity shares.
- Retained earnings.
What is tax holiday?
A government incentive programme that offers a tax reduction or elimination to business is called tax holiday.
Give the meaning of super market.
Super market is a large scale retail store that sell a wide variety of products like food items and vegetables, fruits, etc. all under one roof.
Give the meaning of international business.
International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of the individuals, companies and organisations. These transactions take on various forms which are often interrelated.
What is indent?
Buyer finds the export price and other terms and conditions acceptable. It places an order for goods to be dispatched is called indent.
Section – C
III. Answer any seven of the following questions in 10-12 sentences. Each question carries 4 marks. ( 7 × 4 = 28 )
Explain briefly any four objectives of Business.
Business is an economic activity so their primary objectives are economic.
- Earning profits: One of the objectives of business is to earn profits on the capital employed. Profitability refers to profit in relation to capital investment. Every business must earn a reasonable profit which is so important for its survival and growth.
- Market standing: Market standing refers to the position of an enterprise in relation to its competitors. A business enterprise must aim at standing on stronger footing in terms of offering competitive products to its customers and serving them to their satisfaction.
Business is an economic activity which cannot be carried on in isolation; there arise the social objective of business. Important social objectives of modem businesses are:
- Providing employment: One of the important social objectives of a business is to provide employment to the society. This can be achieved by establishing new business units, expanding market, etc.
- Prevention of pollution: With the growth of industries, pollution has become a serious matter. Pollution affects the hygiene and the health of human beings and even animals. So, one of the social objectives and obligations of every business is to make efforts to prevent the pollution of air and water.
Briefly explain any four features of statutory corporation.
- Formation: Statutory corporations are set up under an Act of Parliament or state legislature. The objectives, powers, duties of these corporations are described in the act.
- Governmental control: This type of organisation is wholly owned by the state. The government has the ultimate financial responsibility (i.e. liable for all profit or loss).
- Management: The day-to-day administration is look after by Board of Directors nominated by the government.
- Financial autonomy: This type of enterprise is usually independently financed. It obtains funds by borrowings from the government or from the public and other sources. They need not to depend on budget allocation.
Briefly explain four types of warehouses.
The warehouse was initially viewed as a static unit for keeping and storing goods in a scientific and systematic manner so as to maintain their original quality, value and usefulness.
1. Private Warehouses: These are operated, owned or leased by a company handling their own goods, such as retail chain stores or multi-brand, multi-product companies. As a general rule, an efficient warehouse is planned around a material handling system in order to encourage maximum efficiency of product movement.
2. Public Warehouses: It can be used for storage of goods by traders, manufacturers or any member of the public after the payment of a storage fee or charges. The government regulates the operation of these warehouses by issuing licences for them to private parties.
3. Bonded Warehouses: These are licensed by the government to accept imported goods prior to payment of tax and customs duty. These are goods which are imported from other countries. Importers are not permitted to remove goods from the docks or the airport till customs duty is paid.
4. Government Warehouses: These warehouses are fully owned and managed by the government. The government manages them through organisations set up in the public sector.
Explain briefly the ways of payment in online transactions.
The different ways of online payment are:
1. Cash-On Delivery: As is clear from the name, payment for the goods ordered online may be made in cash at the time of physical delivery of goods.
2. Cheque: The buyer may send a cheque to the online vendor. In this case, the goods are delivered upon realisation of the cheque.
3. Net-banking transfer: The buyer may instruct his bank to electronically transfer the amount from his account to account of online vendor.
4. Debit Card or Credit Card: Popularly referred to as ‘plastic money,’ these cards are the most widely used medium for online transactions. Credit card allows its holder to make purchase on credit. Later the issuing bank transfers the amount to the online vendors account and buyers account is debited.
5. Digital Cash: This is a form of electronic currency that exists only in cyberspace. This type of currency has no real physical properties, but offers the ability to use real currency in an electronic format.
Explain briefly the different types of pollution.
The different type of pollution are:
1. Air Pollution: Air pollution refers to the presence of any unwanted gases, dust particles, etc. in the air, that can cause damage to people as well as nature.
Causes of Air Pollution:
- Emission of fumes from vehicles.
- Emission of smoke, dust and chemicals from manufacturing plants.
- Emission of gases and dust arising from atomic plants.
- Emission of smoke from oil refineries, burning of trees and plants in forests, burning of coal, etc.
Effects of Air Pollution:
- Presence of gases in air, which are not required by human beings, animals and birds, creates serious health problems. It can create diseases like asthma, cough and cold, blindness, hearing loss, skin disease, etc.
- It reduces natural visibility and irritates the eyes and respiratory tract.
- Ozone layer gets depleted because of air pollution and thereby causes gene mutation, genetic defects and skin cancer.
2. Water Pollution: Water pollution refers to contamination of water due to presence of unwanted and harmful substances thus, making water unfit for use.
Causes of Water Pollution:
- Drainage of human excreta into rivers, canals etc.
- Improper sanitation and sewage system.
- Dumping of wastes and effluents by various industrial units into the rivers and canals.
- Drainage of toxic substances like chemicals and fertilizers used in cultivation, into streams and rivers.
Effects of Water Pollution:
- It can create health hazards among human beings, animals and birds. Diseases like typhoid, jaundice, cholera, gastroenteritis, etc. are common.
- It can endanger lives of various aquatic species.
- It can lead to scarcity of drinking water as the water of rivers and canals as well as underground water get polluted.
3. Land Pollution: Land Pollution refers to dumping of useless, unwanted as well as hazardous substances on the land that degrades the quality of soil we use.
Causes of Land Pollution:
- Excessive use of fertilizers, chemicals and pesticides in cultivation.
- Disposal of solid waste of industries mines and quarries.
- Disposal of solid waste from construction of roads, buildings, etc.
- Effluents of some plants like paper, sugar, etc. which are not absorbed by soil.
- Excessive use of plastic bags, which are non-biodegradable.
Effects of Land Pollution:
- Reduces the quantum of cultivable land area.
- Causes health hazards as it contaminates the sources of food.
- Causes damage to the landscape.
- Leads to water and air pollution.
4. Noise Pollution: Noise simply means an unwanted sound that causes irritation. It is caused by modem machines and gadgets such as rail engines, loud speakers, generators, aeroplanes, vehicles, machineries, telephones, televisions, etc. Noise pollution can cause loss of hearing, headache, irritation, high blood pressure, neurological or psychological disorders, etc.
State any four differences between Memorandum of Association and Articles of Association.
Explain briefly the merits of retained earnings as sources of business finance.
Company generally does not distribute all its earnings amongst the shareholders as dividends. A portion of the net earnings may be retained in the business for use in the future. This is known as retained earnings.
- Retained earnings is a permanent source of funds available to an organisation.
- It does not involve any explicit cost in the form of interest, dividend or float at ion cost.
- As the funds are generated internally, there is a greater degree of operational freedom and flexibility.
- It enhances the capacity of the business to absorb unexpected losses.
- It may lead to increase in the market price of the equity shares of a company.
Describe different avenues for organisation to raise funds internationally.
1. Commercial Banks: Commercial banks all over the world extend foreign currency loans for business purposes. They arc an important source of financing non-trade international operations. The types of loans and services provided by banks vary from country to country.
2. International Agencies and Development Banks: A number of international agencies and development banks have emerged over the years to finance international trade and business. These bodies provide long and medium term loans and grants to promote the development of economically backward areas in the world. These bodies were set up by the Governments of developed countries of the world at national, regional and international levels for funding various projects. The more notable among them include International Finance Corporation (IFC), EXIM Bank and Asian Development Bank.
3. International Capital Markets: Modern organizations including multinational companies depend upon sizable borrowings in rupees as well as in foreign currency.
Prominent financial instruments used for this purpose are:
(i) Global Depository Receipts (GDR’s):
- Global depository receipts or certificate created by the overseas bank outside India dominated in dollars and issued to non-resident investors against the issue of ordinary shares of issuing company.
- The depository receipts are marketed in Europe and United States of America or both.
(ii) American Depository Receipts (ADR’s):
- The depository receipts which are issued by a United States of America Bank for trading only in American Stock markets are known as American Depository Receipts.
- Securities of a non-U.S. company that traded in the U.S. financial markets.
(iii) Foreign Currency Convertible Bonds (FCCB’s):
- Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. Thus, a holder of FCCB has the option of either converting them into equity shares at a predetermined price or exchange rate, or retaining the bonds.
- The FCCB’s are issued in a foreign currency and carry a fixed interest rate which is lower than the rate of any other similar non convertible debt instrument. FCCB’s are listed and traded in foreign stock exchanges.
Explain briefly any four problems faced by small business.
1. Finance: The most serious problem faced by SSIs is that non-availability of adequate finance to carry out their operations.
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.
4. Less productive labor: Small business firms cannot afford to pay high salaries to their employees, which affects employee willingness to work. Thus, productivity per employee is relative low and employee turnover is generally high.
Explain any four services of wholesalers to retailers.
Services of wholesale sellers to retailers are:
1. Availability of goods: Retailers have to maintain adequate stock of varied commodities so that they can offer variety to their customers. The wholesalers make the products of various manufacturers readily available to the retailers. This relieves the retailers of the work of collecting goods from several producers.
2. Marketing support: The wholesalers perform various marketing functions and provide Support to the retailers. They undertake advertisements and other sales promotional activities to induce customers to purchase the goods.
3. Grant of credit: The wholesalers generally extend credit facilities to their regular customers. This enables the retailers to manage their business with relatively small amount of working capital.
4. Specialized knowledge: The wholesalers specialize in one line of products and know the pulse of the market. They pass on the benefit of their specialized knowledge to the retailers. They inform the retailers about the new products. their uses, quality, prices, etc.
Section – D
IV. Answer any four of the following questions in 20-25 sentences each. Each question carries 8 marks. ( 4 × 8 = 32 )
Explain any four merits and demerits of Sole Proprietorship.
- 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.
- 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 concerns to an end in the event of death, lunacy or retirement of any partner. Even otherwise, it can discontinue its business at 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.
Explain the types of co-operative societies.
Types of co-operative society:
1. 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.
2. 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.
3. Marketing cooperative societies:
- Such societies are established to help small prices 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 favorable 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.
4. 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 modern techniques.
5. 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.
6. 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.
Explain the general principles of Insurance.
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 Proxrna (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 accent, then this should already he a part of the contract in order for this person to claim the insurance amount.
Explain the merits and limitations of debentures as a source of finance.
- It is preferred by investors who want fixed income at lesser risk.
- Debentures are fixed charge funds and do not participate in profits of the company.
- The issue of debentures is suitable in the situation when the sales and earnings are relatively stable.
- As debentures do not carry voting rights, financing through debentures does not dilute control of equity shareholders on management.
- Financing through debentures is less costly as compared to cost of preference or equity capital as the interest payment on debentures is tax deductible.
- As fixed charge instruments, debentures put a permanent burden on the earnings of a company. There is a greater risk when earnings of the company fluctuate.
- In case of redeemable debentures, the company has to make provisions for repayment on the specified date, even during periods of financial difficulty.
- Each company has certain borrowing capacity. With the issue of debentures, the capacity of a company to further borrow funds reduces.
Explain role of Chamber of Commerce and Industry Associations in the promotion of internal trade.
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, maximizing 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.
Explain the various steps involved in import procedure.
1. Trade enquiry: The importing firm approaches the export firms with the help of trade enquiry they collecting information about their export prices and terms of exports. After receiving a trade enquiry, the exporter will prepare a quotation called proforma invoice.
2. Procurement of import licence: There are certain goods that can he imported freely, while others need licensing. The importer needs to consult the Export Import (EXIM) policy in force to know whether the goods that he or she wants to import are subject to import licensing.
3. Obtaining foreign exchange: Since the supplier in the context of an import transaction resides in a foreign country he/she demands payment in a foreign currency. Payment in foreign currency involves exchange of Indian currency into foreign currency.
4. Placing order or indent: After obtaining the import licence, the importer places an import order or indent with the exporter for supply of the specified products. The import order contains information about the price, quantity size, grade and quality of goods ordered and the instructions relating to packing, shipping, ports of shipment and destination etc.
5. Arranging for finance: The importer should make arrangements in advance to pay to the exporter on arrival of goods at the port. Advanced planning for financing imports is necessary so as to avoid huge demur rages (i.e.. penalties) on the imported goods lying uncleared at the port for want of payments.
6. Obtaining letter of credit: If the payment terms agreed between the importer and the overseas supplier is a letter of credit. then the importer should obtain the letter of credit from its bank and forward it to the overseas supplier.
7. Receipt of shipment advice: After loading the goods on the vessel, the overseas supplier dispatches the shipment advice to the importer. A shipment advice contains information about the shipment of goods.
8. Retirement of import documents: Having shipped the goods, the overseas supplier prepares a set of necessary documents as per the terms of contract and letter of credit and hands it over to his or her banker for their onward transmission and negotiation to the importer in the manner as specified in the letter of credit.
9. Arrival of goods: Goods are shipped by the overseas supplier as per the contract. The person in charge of the carrier (ship or airway) informs the officer in charge at the dock or the airport about the arrival of goods in the importing country. LIC provides the document called import general manifest. Import general manifest is a document that contains the details of the imported goods.
10. Customs clearance and release of goods: All the goods imported into India have to pass through customs clearance after they cross the Indian borders. Customs clearance is a somewhat tedious process and calls for completing a number of formalities. It is, therefore, advised that importers appoint C&F agents who are well versed with such formalities and play an important role in getting the goods customs cleared.
Section – E
V. Answer any TWO of the following questions: ( 2 × 5 = 10 )
As the owner of a business unit, what risks do you face in running it?
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.
Suggest any five important sources of finance available for a business organization.
Five important sources of finance available for a business organization:
1. Owner’s fund:
- Equity shares
- Retained earnings.
2. Borrowed funds:
- Loans from banks
- Loans from financial institution
- Public deposit
- Lease financing.
Give a list of any five Institutions which support small business in India.
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)