1st PUC Business Studies Model Question Paper 2 with Answers

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

Time: 3.15 Hours
Max Marks: 100

Instructions to candidates:

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

Part – 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 )

Question 1.
What is economic activity?
Economic activities are those by which we earn our livelihood.

Question 2.
Give any one type of Business Organisation.
Co-operative Society.

Question 3.
Mention any one features of global enterprise.
Huge capital resources.

Question 4.
Expand DTH.
Direct to Home.

KSEEB Solutions

Question 5.
The payment machines most suitable to E-business is
(a) Cash on delivery
(b) Cheque
(c) Cr and Dr Cards
(d) e-cash
(d) e-cash.

Question 6.
Write any one important type of pollutions.
Land pollution.

Question 7.
A prospectus is issued by
(a) A private company
(b) A public company seeking investment from public
(c) A public enterprise
(d) A public company
(d) A public company.

Question 8.
Expand SEBI.
Securities and Exchange Board of India.

Question 9.
In which years, the MSMED At was enacted?
June 16, 2006 the MSMED Act was enacted.

Question 10.
What is internal Trade?
It means exchange of goods and services within the geographical boundaries.

KSEEB Solutions

Question 11.
What is export trade?
It refers to the sale of goods to the other countries.

Question 12.
Name any one document of Export Business.
Export Invoice.

Section – B

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

Question 13.
What is business?
Business is an economic activity, which involves production or procurement of goods and services, with the main objectives is earning profit.

Question 14.
State any two merits of sole proprietary organisation.

  1. Easy of formation and closure.
  2. Quick decision making.

Question 15.
Give the meaning of Joint Ventures?
It refers to two or more companies joining together forming a single business is called joint venture.

KSEEB Solutions

Question 16.
Mention any two types of Banks

  1. Central Bank.
  2. Commercial Bank.

Question 17.
State any two limitations of E-business.

  1. Less Security.
  2. Dependent on internet.

Question 18.
What is business ethics?
Business ethics is defined as a set of moral standards which the society experts from the business man.

Question 19.
Name any two steps in the formation of company.

  1. Promotion stage.
  2. Incorporation stage.

Question 20.
What are debentures?
The companies can raise long term funds by issuing document that carry assured rate of return for investors is called debentures.

KSEEB Solutions

Question 21.
Write any two rights of preference share holders.

  1. Payment of dividend.
  2. Repayment of capital.

Question 22.
State any two features of wholesaler.

  1. The wholesaler purchases goods in large quantities from different manufacturers and resells to the retailers.
  2. Wholesalers serve as an important link between manufacturers and retailers.

Question 23.
Define International Business.
According to Michael R. Czinkota, “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”.

Question 24.
Name any two commodity boards.

  1. Coffee Board.
  2. Tea Board.

Section – C

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

Question 25.
Explain the any four auxiliaries to trade.
1. Transport and communication: Transport removes the hindrances of place. Transport facilitates through road, rail or coastal shipping facilitate movement of raw material to the place of production and the finished products from factories to the place of consumption.

2. Banking and finance: Business activities cannot be undertaken unless funds are available for acquiring assets and meeting the day-to-day expenses. Necessary funds can be obtained by businessmen from a bank. Thus, banking helps business activities to overcome the problem of finance.

3. Insurance: The risk of loss or damage to the factory building, machinery, furniture, goods held in stock or goods in course of transport due to theft, fire, accidents, etc. is removed by insurance of goods.

4. Warehousing: Usually, goods are not sold or consumed immediately after production. They are held in stock to be available as and when required. Special arrangement must be made for storage of goods to prevent loss or damage.

KSEEB Solutions

Question 26.
Explain any four characteristics of departmental undertaking.

  1. Formation: These enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself.
  2. Control: The administration of these undertakings is directly under the control of concerned ministry or minister.
  3. Capital: The required capital is provided by the government in the annual budget.
  4. Income: The income of these departments should be deposited daily into government treasury.
  5. Management: The employees of the enterprise are government servants and they are headed by Indian Administrative Service (IAS) officers and civil servants who are transferable from one ministry to another.

Question 27.
Explain four types of banks.
1. Commercial Banks: Commercial banks are institutions dealing in money. These are governed by Indian Banking Regulation Act 1949 and according to it banking means accepting deposits of money from the public for the purpose of lending or investment.

2. Cooperative Banks: Cooperative Banks are governed by the provisions of State Cooperative Societies Act and meant essentially for providing cheap credit to their members. It is an important source of rural credit i.e., agricultural financing in India.

3. Specialized Banks: Specialized banks are foreign exchange banks, industrial banks, development banks, export-import banks catering to specific needs of these unique activities. These banks provide financial aid to industries, heavy turnkey projects and foreign trade.

4. Central Bank: The Central bank of any country supervises controls and regulates the activities of all the commercial banks of that country. It also acts as a government banker. It controls and coordinates currency and credit policies of any country.

Question 28.
Distinguish between traditional business and E-business.

Point of differences Traditional E – Business
1. Formation Difficult Simple
2. Physical presence Required Not required
3. Cost of setting High Low
4. Operating cost High Low
5. Nature of contract with supplier and customer Indirect Direct
6. Opportunity for inter personal touch More Less
7. Level of going global Less More

KSEEB Solutions

Question 29.
Explain any four steps that business enterprise should be taken to protect the environment.
Five measure to control environment pollution are:

  1. Definite commitment by top management of enterprise to create, maintain and develop work culture for environmental protection and pollution prevention.
  2. Complying with laws and regulations enacted by the government for prevention of pollution.
  3. Participation in government programmes relating to management of hazardous substance, plantation of trees and checking deforestation.
  4. Ensuring that commitment to environmental protection is shared throughout the enterprise by all divisions and employees.
  5. Arranging educational workshop and training materials to share technical information and experience with suppliers, dealers and customers to get them actively involved in pollution control programmes.

Question 30.
Explain the social responsibility of business towards
(a) Shareholders
(b) Consumer
Social responsibility of business towards shareholders:

  • A fair rate of dividend should be regularly paid by the business enterprises to their owners.
  • Management techniques should be effective and efficient so that the net present value of the business is maximized.
  • Owners should be given the right to participate in the affairs of the enterprise.
  • The tendency towards the growth of ‘Oligarchic management’ should he arrested.
  • The owners should be given the full information regarding the working of the company. In other words, accurate and comprehensive reports have to be supplied.
  • Financial information has to be disclosed and doubts have to be clarified.
  • Chairman and directors of the company should be easily accessible to the owner.

Social responsibility of business towards consumer:

  • Ensuring availability of products in the right quantity, at the right place and at the right time.
  • Maintaining the quality of the goods, increasing the quality to maximum extent so as to complete with any international product.
  • Charging reasonable prices to its products.
  • Correct weights and measures have to be used.
  • The company must provide after sale service for maintenance of goods.
  • The business firms should avoid restrictive trade practices and see that full justice is done to the amount that is spent by a consumer.
  • Constant investigation and discovery of growing wants of consumers, giving importance for research and development of new products that satisfy their wants.
  • Taking all such measures which promote consumer satisfaction, interest and welfare.

KSEEB Solutions

Question 31.
What are the four merits of equity share as a sources of business finance.
From Shareholders Point of View:

  • The equity shareholders are the owners of the company.
  • It is suitable for those who want to take risk for higher return.
  • The value of equity shares goes up in the stock market with the increase in profits of the concern.
  • Equity shares can be easily sold in the stock market.
  • The liability is limited to the nominal value of shares.
  • Equity shareholders have a say in the management of a company as they are conferred voting rights.

From Management Point of View:

  • A company can raise capital by issuing equity shares without creating any charge on its fixed assets.
  • The capital raised by issuing equity shares is not required to be paid back during the lifetime of the company. It will be paid back only when the company is winding up.
  • There is no binding on the company to pay dividend on equity shares. The company may declare dividend only if there is enough profits.
  • If a company raises more capital by issuing equity shares, it leads to greater confidence among the creditors.

Question 32.
Explain any four financial needs of a business.

  1. To purchase fixed assets: Every type of business needs some fixed assets like land and building, furniture, machinery, etc. A large amount of money is required for purchase of these assets.
  2. To meet day-to-day expenses: After establishment of a business, funds are needed to carry out day-to-day operations.
  3. To fund business growth: Growth of business may include expansion of existing line of business as well as adding new lines. To finance such growth, one needs more funds.
  4. To bridge the time gap between production and sales: The amount spent on production is realized only when sales are made. Normally, there is a time gap between production and sales and also between sales and realization of cash. Hence during this interval, expenses continue to be incurred, for which funds are required.
  5. To meet contingencies: Funds are always required to meet the ups and downs of business and for some unforeseen problems.

Question 33.
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. Small scale sector lacks the creditworthiness and collateral required to raise capital from the capital markets or financial institutions and hence they depend on local money lenders who charge high interest rates.

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

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

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

KSEEB Solutions

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

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

Section – D

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

Question 35.
Explain the features of Sole Proprietorship.
Advantages of Sole Proprietorship:

1. Quick decision making: A sole proprietor enjoys considerable degree of freedom in making business decisions. Further, the decision making is prompt because there is no need to consult others.

2. Confidentiality of information: Sole decision making authority enables the proprietor to keep all the information related to business operation confidential and maintain secrecy.

3. Direct incentive: The need to share profits does not arise as he/she is the single owner. This provides maximum incentive to the sole trader to work hard.

4. Sense of accomplishment: There is a personal satisfaction involved in working for oneself. The knowledge that one is responsible for the success of the business not only contributes to self-satisfaction but also instills in the individual a sense of accomplishment and confidence in ones abilities.

Limitations of sole proprietorship:

1. Limited resources: Resources of a sole proprietor are limited to his/her personal savings and borrowings from others. Banks and other lending institutions may hesitate to extend a long term loan to a sole proprietor.

2. Limited life of a business concern: In the eyes of the law the proprietorship and the owner are considered one and the same. Death, insolvency or illness of a proprietor affects the business and can lead to its closure.

3. Unlimited liability: If the business fails, the creditors can recover their dues not merely from the business assets, but also from the personal assets of the proprietor. A poor decision or an unfavorable circumstance can create serious financial burden on the owners.

4. Limited managerial ability: The owner has to assume the responsibility of varied managerial tasks such as purchasing, selling, financing, etc. It is rare to find an individual who excels in all these areas. Thus, decision making may not be balanced in all the cases.

5. Competition of big industries: Now-a-days in a modern world demands are more. To full fill those numerous demands big industries were formed. By producing goods in large scale, supply them at low rates and also provide other number of facilities. As such sole trading concern unable to complete with them.

KSEEB Solutions

Question 36.
Explain the merits & demerits of partnership.

  • 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 comes to an end in the event of death, lunacy or retirement of any partner. Even otherwise, it can discontinue its business at the will of the partners. At any time, they may take a decision to end their relationship.
  • Lack of public confidence: There is no governmental supervision over the affairs of the business of a partnership and publishing accounts is also not necessary. Hence, public may not have full confidence in them.
  • Unlimited liability: The liability of each partner is not limited to the amount invested but his private property is also liable to pay the business obligations.

Question 37.
Explain briefly the 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.

KSEEB Solutions

Question 38.
What are retained earnings? Explain.
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 in involve any explicit cost in the form of interest, dividend or flotation 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 ¡n the market price of the equity shares of a company.


  • Excessive ploughing back may cause dissatisfaction amongst the shareholders as they would get lower dividends.
  • It is an uncertain source of funds as the profits of business are fluctuating.
  • The opportunity cost associated with these funds is not recognized by many firms. This may lead to sub-optimal use of the funds.

Question 39.
Explain merits and limitations of super market.

  • Central location: The super markets are generally located in the heart of the city. As a result, these are easily accessible to large number of people staying in the surrounding localities.
  • Wide selection: Super markets keep a wide variety of goods of different designs, colour, etc. which enables the buyers to make better selection.
  • No bad debts: As generally the sales are made on cash basis, there are no bad debts in super markets.
  • Benefits of being large scale: A super market is a large scale retailing store. It enjoys all the benefits of large scale buying and selling because of which its operating costs are lower.
  • One roof, low cost: Super markets offer a wide variety of products at low cost, under one roof. These outlets are, therefore, not only convenient but also economical to the buyers for making their purchases.


  • No credit: Super markets sell their products on cash basis only. No credit facilities are made available to the buyers. This restricts the purchasing power of buyers from such markets.
  • No personal attention: Super markets work on the principle of self-service. The customers. therefore, don’t get any personal attention. As a result, such commodities that require personal attention by sales people cannot be handled effectively in super markets.
  • Mishandling of goods: Some customers handle the goods kept in the shelf carelessly. This may raise costs in super markets.
  • high overhead expenses: Super market incurs high overhead expenses. As a result these have not been able to create low price appeal among the customers.
  • Huge capital requirement: Establishing and running a super market requires huge investment. The turnover of a store should be high so that the overheads are kept under reasonable level. This can be possible in bigger towns but not in small towns.

Section – E

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

Question 41.
You are planning to start a new business. Make a list of any five factors you consider while selecting a suitable form of business organization.
The five factor that should be considered while selecting a suitable form of business organisation are:

  1. Cost
  2. Liability
  3. Continuity
  4. Management ability
  5. Degree of control
  6. Capital consideration
  7. Nature of business.

KSEEB Solutions

Question 42.
As a businessman having concern for environment protection, suggest any five measures to control environment pollution.
Five measure to control environment pollution are:

  • Definite commitment by top management of enterprise to create, maintain and develop work culture for environmental protection and pollution prevention.
  • Complying with laws and regulations enacted by the government for prevention of pollution.
  • Participation in government programmes relating to management of hazardous substance, plantation of trees and checking deforestation.
  • Ensuring that commitment to environmental protection is shared throughout the enterprise by all divisions and employees.
  • Arranging educational workshop and training materials to share technical information and experience with suppliers, dealers and customers to get them actively involved in pollution control programmes.

Question 43.
Mention any five foreign trade promotion measures and schemes undertaken by the Government of India to boost up foreign trade.
Five foreign trade promotion measures and schemes undertaken by Government of India to boost up foreign trade are:

  1. Duty drawback scheme.
  2. Advance licence scheme.
  3. Exemption from payment of sales taxes.
  4. Export promotion capital goods scheme.
  5. Export finance at concessional rates of interest.
  6. Export of services.
  7. Export processing zones.
  8. 100 percent export oriented unit.
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