Category: Class 11

Balbharti Maharashtra State Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 2 Trade Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 2 Trade

1. (A) Select the correct option and rewrite the sentence

Question 1.
……………. is the link between producer and retailer.
(a) Consumer
(b) Wholesaler
(c) Manufacturer
Answer:
(b) Wholesaler

Question 2.
Price charged by retailers is generally ………………..
(a) higher
(b) lower
(c) fixed
Answer:
(a) higher

Question 3.
A wholesaler invest ……………… capital in the business.
(a) small
(b) large
(c) less
Answer:
(b) large

Question 4.
Retailer is the …………….. link in the chain of distribution.
(a) first
(b) last
(c) second
Answer:
(b) last

Question 5.
Retailers supply information to the …………………. through wholesalers.
(a) manufacturer
(b) government
(c) consumers
Answer:
(a) manufacturer

Question 6.
Major items ……………… are chemicals, crude oil and petroleum products, edible oils, electronic goods, gold and silver, pearl and precious stone.
(a) exported by India
(b) not exported by India
(c) imported by India
Answer:
(c) imported by India

Question 7.
For customs clearance the ……………… is prepared by the exporter.
(a) carting order
(b) letter of credit
(c) shipping bill
Answer:
(c) shipping bill

Question 8.
……………… carry goods on their head in basket or containers.
(a) Hawkers
(b) Peddlers
(c) Cheap Jacks
Answer:
(b) Peddlers

Question 9.
………………… open their shops on market days i.e. on fixed days.
(a) Street Traders
(b) Market Traders
(c) Peddlers
Answer:
(b) Market Traders

Question 10.
……………… retailers deal in particular goods.
(a) General Stores
(b) Specialty Shop
(c) Second Hand Good Shops
Answer:
(b) Specialty Shop

Question 11.
………………… is known as self – service store.
(a) Departmental Store
(b) Super Market
(c) Multiple Store
Answer:
(b) Super Market

1. (B) Match the pairs

Question 1.

Group A	Group B
(a) Departmental store	(1) Carry goods on heads
(b) Market traders	(2) Uniform price
(c) General shops	(3) Business on market day
(d) One price shop	(4) Most common shop
(e) Peddlers	(5) Huge capital
	(6) Distribution through branches
	(7) Carry goods on carts
	(8) Sale used articles
	(9) Specialized goods
	(10) Authorized dealers

Answer:

Group A	Group B
(a) Departmental store	(5) Huge capital
(b) Market traders	(3) Business on market day
(c) General shops	(4) Most common shop
(d) One price shop	(2) Uniform price
(e) Peddlers	(1) Carry goods on heads

Question 2.

Group A	Group B
(a) Import trade	(1) First step in import
(b) Registration	(2) Goods not for own country
(c) Entrepot trade	(3) Buying goods from other country
(d) Letter of Credit	(4) No restrictions
(e) Large Turnover	(5) Selling goods to other country
	(6) Credit worthiness of importer
	(7) Recovery of dues
	(8) Wholesaler
	(9) Retailer
	(10) Credit worthiness of exporter

Answer:

Group A	Group B
(a) Import trade	(3) Buying goods from other country
(b) Registration	(1) First step in import
(c) Entrepot trade	(2) Goods not for own country
(d) Letter of Credit	(7) Recovery of dues
(e) Large Turnover	(8) Wholesaler

1. (C) Give one word/phrase/term

Question 1.
A person who move daily from place to place to sell goods.
Answer:
Itinerant retailer

Question 2.
The middleman between wholesaler and customer.
Answer:
Retailer

Question 3.
A retail shop which operates through branches.
Answer:
Chain stores

Question 4.
A shop where all goods are available at same price.
Answer:
One price shop

Question 5.
A retailer who display his goods on the load.
Answer:
Street traders

Question 6.
An order placed by an importer for the supply of certain goods.
Answer:
Indent

1. (D) State True or False

Question 1.
Wholesaler keeps large stock of goods.
Answer:
True

Question 2.
Wholesaler deals in small quantity.
Answer:
False

Question 3.
A retailer has no direct contact with consumers.
Answer:
False

Question 4.
Super market shops offer home delivery facilities to customer.
Answer:
False

Question 5.
Departmental store located out of the city.
Answer:
False

Question 6.
Customers cannot bargain in one price shop.
Answer:
True.

Question 7.
Letter of Credit is required for obtaining export license.
Answer:
True

Question 8.
Buying goods from other country is known as export trade.
Answer:
False

Question 9.
Maintaining high quality is necessary to sustain in export business.
Answer:
True

1. (E) Find the odd one.

Question 1.
Itinerant Retailers
General Stores, Hawkers, Cheap Jacks, Peddlers.
Answer:
General Stores

Question 2.
Large Scale Retailers
Departmental Stores, Chain Stores, Market Trader, One Price Shop.
Answer:
Market Trader

Question 3.
Small Scale Retailers
Specialty Shops, Second hand Goods Shops, Malls, Authorised Dealers.
Answer:
Malls

1. (F) Complete the sentences.

Question 1.
The original form of trade was ……………
Answer:
barter

Question 2.
Trade establishes a link between producers and …………….
Answer:
consumers

Question 3.
The wholesaler provides valuable services to manufacturers and ……………….
Answer:
retailers

Question 4.
The wholesaler purchases a large quantity of goods from the ………………..
Answer:
manufacturers

Question 5.
The wholesaler bears the risk of ……………… and market fluctuations.
Answer:
price

Question 6.
The wholesaler provides financial support to retailers by way of ………………. facility.
Answer:
credit

Question 7.
The retailer is the connecting link between the wholesaler and …………………..
Answer:
consumers

Question 8.
……………… is a large retail organization which mainly sells wide range of food and grocery items on the basis of ‘Self-service’.
Answer:
Super market

Question 9.
……………….. are retail stores owned by a single organization
Answer:
Chain store

Question 10.
The shop where the price of all products or goods are same is known as ……………..
Answer:
One price shop

Question 11.
A modern shopping mall is an ………………. term.
Answer:
American

Question 12.
The Letter of Credit is the safest method of payment in ………………. trade.
Answer:
foreign

1. (G) Select the correct option

Question 1.
Wholesaler deals in (small / large) quantity.
Answer:
Large

Question 2.
Departmental stores are located (in / out of) the city.
Answer:
in

Question 3.
Customer cannot bargain in (General stores / One Price shop).
Answer:
One price shop

Question 4.
Retailer operates in (global / local) market.
Answer:
local

Question 5.
Departmental store is a (large / small) scale retail shop.
Answer:
large

Question 6.
Supermarket shop requires (limited / large) capital.
Answer:
large

Question 7.
Chain stores are retail store owned by (many / single) organization.
Answer:
single

Question 8.
The shop where the price of all the product or goods are (different / same) is known as one price shop.
Answer:
same

1. (H) Answer in one sentence

Question 1.
What do you mean by internal trade?
Answer:
Trade carried on within the geographical boundaries of a country is called internal trade or domestic trade.

Question 2.
Who is known as hawkers?
Answer:
A trader who carries the goods on the back of animals or wheel cart for the purpose of selling is called an hawker.

Question 3.
What is the meaning of Peddlers?
Answer:
Mobile retailer who carry goods on their head or back and move from one place to another for selling are called Peddlers.

Question 4.
What do you mean by fixed shop retailers?
Answer:
Fixed shop retailers are those retailers who have a fixed place for their business.

Question 5.
What do you mean by small scale fixed retailers?
Answer:
Small scale fixed retailers are those who conduct their business operations on a small scale with variety of goods at a fixed place.

Question 6.
What do you mean by large scale fixed retailer?
Answer:
Large scale fixed retailers operate on large scale business at a fixed place.

Question 7.
What is departmental store?
Answer:
A departmental store is a large scale retail organisation situated in a central place in the city. It is divided into a number of small retail shops known as departments, selling different goods under one roof. .

Question 8.
What is meant by supermarket shop?
Answer:
It is a large scale retail organization which sells a wide variety of goods to customers on the basis of self service.

Question 9.
What do you mean by chain store?
Answer:
Chain store is a retail shop owned and controlled by a single organization located in different parts of the city, with a particular kind of goods.

Question 10.
What is one price shop?
Answer:
One price shops are shops where all articles are sold at one standard and fixed price.

Question 11.
What is a mall?
Answer:
A mall is a large enclosed shopping complex comprising of various stores business cinema theaters and restaurants.

1. (I) Correct the underlined word and rewrite the following sentences

Question 1.
When the trade activities are conduct between two or more countries, it is called as internal trade.
Answer:
When the trade activities are conduct between two or more countries, it is called as external trade.

Question 2.
Export trade refers to the purchase of goods and services from foreign country.
Answer:
Import trade refers to the purchase of goods and services from foreign country.

Question 3.
The price charged in departmental stores is comparatively less.
Answer:
The price charged in departmental stores is comparatively high.

Question 4.
Wholesaler requires less capital.
Answer:
Retailer requires less capital.

Question 5.
Tariff rates of various countries affect the internal trade.
Answer:
Tariff rates of various countries affect the external trade.

1. (J) Arrange in proper order

Question 1.
Retailer, Consumer, Producer, Wholesaler.
Answer:
Producer, Wholesaler, Retailer, Consumer.

Question 2.
International Market, Local Market, National Market, State Market.
Answer:
Local Market, State Market, National Market, International Market.

Question 3.
Import Stage, Pre-import Stage, Post-import Stage, Preliminary Stage.
Answer:
Preliminary Stage, Pre-import Stage, Import Stage, Post-import Stage.

2. Explain the following terms /concepts.

Question 1.
Wholesale Trade.
Answer:

1. When goods are purchased in large quantity from the manufacturers or producers for the purpose of resale to retailers, then it is called as wholesale trade.
2. The person doing wholesale business is called wholesaler.
3. Wholesaler acts as a link between manufacturer and retailer.

Question 2.
Retail Trade.
Answer:

1. When goods are sold in smaller quantities to the final consumers, then it is called as retail trade.
2. The person doing retail trade is called as retailer.

Question 3.
Foreign Trade.
Answer:

1. Trade carried on between two or more foreign countries is called foreign trade.
2. Foreign trade depends as political relations between two countries.
3. Procedure of foreign trade is complex, difficult and lengthy.
4. It consists of import trade and export trade.

Question 4.
Letter of Credit.
Answer:

1. A letter of credit is a guarantee issued by the importers bank that it will honour the payment upto certain amount of export bills to the bank of the exporter.
2. It is generally demanded by the exporter country.
3. It gives assurance to exporter country about its payment of goods exported.

Question 5.
One price shop.
Answer:

1. One price shop are shops where all the articles are sold at one standard and fixed price.
2. Such shops sells variety of goods of daily use.
3. Goods at such shops are sold at lower prices.
4. E.g. of goods sold at such shops are – watches, shampoos, household articles, crockery, etc.

Question 6.
Departmental Store.
Answer:

1. Departmental store is a large scale retail shop having different departments and sections for different type of goods in the same building.
2. It sells large variety of goods under one roof.
   E.g. Shopper stop.

Question 7.
General store.
Answer:

1. General store is a retail shop which deals in a wide variety of goods located in a residential locality.
2. Such store sells goods of daily needs like food grains, soaps, stationery, medicines, oils, biscuits, etc.
3. They provide home delivery to their customers.
4. They buy goods from the wholesalers or directly from the manufacturers.

Question 8.
Mall.
Answer:

1. A mall is a large enclosed shopping complex having various stores, restaurant, cinema hail and other business.
2. E.g. Phoenix Mall, Inorbit Mall, etc.
3. It is an American term in which one or move building from a complex.

3. Study the following case/situation and express your opinion.

1. Sonupant purchases his grocery material every month from nearest Nandulal grocery shop and he purchase wheat, rice and pulses in bulk for whole year from Gorhe and Son’s Market yard.

Question 1.
Who is wholesaler?
Answer:
Gorhe and Son’s Market yard.

Question 2.
Who is retailer?
Answer:
Nandulal grocery shop is the retailer.

Question 3.
Any one difference between wholesaler and retailer?
Answer:
Goods are sold to retailer for the purpose of sale by wholesaler.
Goods are sold to customer for consumption by the retailer.

2. Anurag is selling goods to Japan. Kavita is buying goods from USA where as Ganesh is buying raw material from South Africa and after processing it sells finished goods to Malaysia.

Question 1.
Who is exporter?
Answer:
Anurag is the exporter.

Question 2.
Who is importer?
Answer:
Kavita is an importer.

Question 3.
What is Entrepot Trade?
Answer:
Enterpot trade is re-exporting of the goods to another country, with or without processing or re-packaging, e.g. Ganesh buying raw materials from South Africa and processing it and selling it to Malaysia.

4. Distinguish between the following

Question 1.
Wholesaler and Retailer.
Answer:

	Wholesaler	Retailer
(1) Meaning	A person who conducts the wholesale trade is called as wholesaler.	A person who conducts retail trade is called as retailer.
(2) Capital/Finance	Wholesaler needs large amount of capital	Retailer needs small amount of capital.
(3) Link	It is a link between manufacturer and retailer.	It is a link between wholesaler and customers.
(4) Location	It is located in central market of the city.	It is located in various local markets in the city.
(5) Profit margin	Wholesaler works on less profit margin.	Retailer works on more profit margin.
(6) Sales of goods	Goods are sold to retailer for the purpose of resale.	Goods are sold to final customers for their consumption.
(7) Credit Facility	Wholesaler offers credit facility to retailers.	Retailer offers credit facility only to his regular customers.
(8) Prices	It sales goods at lower prices to retailers.	It sales goods at higher prices to customers.
(9) Specialisation	They are specialised in one or few line of goods.	They are specialised in variety of goods.
(10) Warehousing	Requires warehousing facilities as the stock of goods are on large scale.	He does not require separate warehousing due to small scale purchasing.
(11) Home Delivery	Wholesaler offers delivery of goods to retailers at their shops.	Retailer offers home delivery of goods to regular customers.

Question 2.
Itinerant Retailers and Non-Itinerant Retailers (Fixed shop retailers).
Answer:

	Itinerant Retailers	Non-Itinerant Retailers/ Fixed Shop Retailers
(1) Meaning	Itinerant retailers are those retailers who do not have a fixed places for their business.	Fixed shop retailers are those retailers who have a fixed place for their business.
(2) Capital	It requires limited capital.	It requires higher capital investment.
(3) Stock of Goods	They keep limited stock of goods.	They keep large stock of goods.
(4) Quality of Goods	They sell low quality goods.	They sell quality goods.
(5) Variety of Goods	They do not offer variety of goods to customers.	They offer variety of goods to customers.
(6) Prices	Prices of goods is lower due to absence of fixed cost.	Prices of goods is higher than itinerant retailers.
(7) Credit Facility	Credit facility is not given to customers.	Credit facility is given only to regular customers.
(8) Choice of Goods	Customers have no scope for choice of goods.	Customers have more scope for choice of goods.
(9) Door to Door Service	They offer door to door service to their customers.	They do not offer door to door services to their customers.
(10) After Sales Service	They do not provide after sales service to customers.	They provide after sales service to customers.
(11) Types of Goods	It deals in goods of daily need and more perishable nature.	It deals in all types of goods as per the needs of the customers.

Question 3.
General Stores and Specialty Stores.
Answer:

	General Stores	Speciality Stores
(1) Meaning	It is a shop which deals in wide variety of goods.	It is a shop which deals in specialised products of goods.
(2) Location	It is located in the residential areas of the city.	It is located in busy shopping centers of the city.
(3) Prices	Prices of goods are generally low.	Prices of goods are generally high.
(4) Sales	Goods are sold on cash basis as well as on credit basis.	Goods are sold on cash basis only.
(5) Variety of Products	Customers have limited choice of goods.	Customers have maximum choice in one line of goods.
(6) Types of Goods	Goods sold as per customers day to day need.	Specialised goods are sold to customers.
(7) Advertisement	Do not spend much expenses on advertisement.	Spend more expenses on advertisement due to specialisation.

Question 4.
Departmental Stores and Chain Stores.
Answer:

	Departmental Stores	Chain Stores
(1) Meaning	It is a large scale retail store having different departments and sections for different type of goods under a same roof.	It is a retail shop owned and controlled by a single organization located in different parts of the city.
(2) Variety of Goods	It deals with large variety of goods.	It deals with goods of a particular manufacturer only.
(3) Location	It is located at central place of city.	It is located in the residential area of the city.
(4) Capital	it requires large amount of capital.	It requires less amount of capital than Departmental store.
(5) Choice of Goods	It deals in the variety of goods and offers wide choice to customers.	It deals in particular product of goods and offer the wide choice to customers.
(6) Home Delivery	It provides home delivery to customers.	It do not provide home delivery to customers.
(7) Operation	Operations of departmental store are rigid in nature.	Operation of Chain Stores are flexible in nature.
(8) Motto	Motto of departmental store is to attract customers.	Motto of Chain Store is to approach the customers.
(9) Price	It generally charges high price.	It charges comparatively less price.
(10) Cost of operating	Cost of operating departmental store is high.	Cost of operating chain store is low.

Question 5.
Import Trade and Export Trade
Answer:

	Import Trade	Export Trade
(1) Meaning	It refers to buying of goods and services from foreign country.	It refers to sale of goods and services to foreign country.
(2) Person Involved	The person doing import trade is called importer.	The person doing export trade is called exporter.
(3) Example	India buying bananas from Sri Lanka.	India selling mangoes to Sri Lanka.
(4) Effect as Currency	It reduces foreign currency.	It increase foreign currency.
(5) Stages	It includes following stages: (a) Preliminary stage (b) Pre-shipment stage (c) Shipment stage (d) Post-shipment stage	It includes following stage: (a) Preliminary stage (b) Pre-import stage (c) Import stage (d) Post-import stage.

5. Answer in brief.

Question 1.
State any four feature of one price shop.
Answer:
Features of One Price Shop:

1. Location: One price shops are located in busy centers of the city such as busy trade centers, near railway stations, bus stops and other crowded places.
2. Variety of Goods: In one price shop, the customers are given wide scope to make selection of goods of their choice. However, the price is uniform but quality of the goods may be different.
3. Cash Sales : In this shop goods are sold on cash basis only. No credit facility is given to the customers. So there is no risk of bad debts.
4. Low Priced Articles: In one price shop, the goods are sold to customers for domestic use at lower prices e.g. stationery, cutlery, toys, plastic goods, etc.
5. Uniform Prices : All the articles of goods are sold in one price shop at the same price. The customers have no scope for bargain in this shop.
6. Business Policy: In one price shop, the policy of buying and selling of goods of all the shops are the same one.

Question 2.
State any four features of wholesalers to manufacturers.
Answer:
Services of Wholesalers to Manufacturers:

1. Provide Finance : Wholesaler provides advance to the manufacturers so they can do bulk production. Manufacturer can maintain continuous flow of production.
2. Collecting Order and Distribution of Goods : Wholesaler collects small orders of goods from the retailers then he collects the goods from manufacturer and distributes it to retailers.
3. Goods Sale on Large Scale : Wholesaler sells goods to the retailers on large scale on behalf of manufacturers.
4. Economy in Production : Large scale of production is made possible because production of goods is done continuously by the manufacturer.
5. Market Information : Wholesaler provides latest information of market condition to manufacturer. On the basis of this information manufacturer changes his production policies and regulates production activities.
6. Storage : The wholesaler provides storage facilities for the manufacturers product of goods. This helps them to fill up the time gap between production and consumption of goods.

Question 3.
Write any four services of retailers to consumers.
Answer:
1. Variety of Goods : Retailer keep different brands of goods which helps the customer to choose.

2. After Sales Services : After sales services are given for a particular period, which is known as guarantee period for costly and durable goods such as refrigerators, TV. etc. Such services create confidence in minds of consumers for further purchases.

3. Regular Supply of Goods : Retailer stocks the goods sufficiently which are required by the customers and customers purchases the goods whenever needed.

4. Credit Facilities : Retailers provides credit facility to customer which helps him to grow up sales and also it is convenient for the customers to purchase goods.

5. Home Delivery : Retailer provides home delivery service to the customers which helps him to maintains permanent relationship with the customers.

Question 4.
State any two types of small scale fixed shop retailer.
Answer:
Types of Small Scale Shop Retailers:
(i) General Store Retailer : These shops are found in residential areas and offers shopping convenience to the customers. They deal in wide variety of goods so there is scope for choice. They deal in almost all household articles and goods of daily use. They provide credit facilities and have personal relation with their customers. They have fixed place of business so the customers have faith and confidence in dealing with them.

(ii) Second Hand Goods Dealers : As the name indicates these shops deal in used or old goods and articles. They buy goods from individual and not from manufacturers or wholesalers. They repair or overhaul the items. They display them in their shops. Generally people from poor communities prefer to buy from these shops.

Question 5.
Explain preliminary stage of import procedure.
Answer:
Ist Stage : Preliminary Stage:
(1) Registration : In order to carry out import, the importer has to get himself registered with the authorities given below:

• Director General Foreign Trade (DGFT) in order to get an Import-Export Certificate Number.
• The Income Tax department to obtain Permanent Account Number.
• To carry out GST formalities.

(2) Negotiation or Trade enquiry : The importer must collect information from overseas suppliers regarding the goods he wants to import of a product. It contains details like-

• Price
• Delivery schedule,
• Credit period and
• Terms and conditions of sale, payment and delivery.

Question 6.
Explain post-shipment stage of export procedure.
Answer:
Post-shipment Stage:

1. Shipment Advice : On the dispatch of the goods, the exporter sends shipment advice to the importer. Along with it, he also sends the packaging list, commercial invoice and non-negotiable copy of loading.
2. Presentation of Documents : The necessary documents are presented to the bank for negotiation and realisation of export proceeds.
3. Realisation of Export incentive : Various incentive like duty drawbacks, refunds of GST if paid, etc. is given to the exporter by the concerned authorities.
4. Follow up : Exporter has to follow up and find out the buyers reaction on the goods he receives. This concludes the export procedure.

6. Justify the following statements

Question 1.
Wholesaler sells goods in large quantities.
Answer:

1. Wholesaler buys goods in large quantities from the manufacturer and sells it to the retailers according to their orders.
2. Thus, wholesaler sells goods in large quantities.

Question 2.
Wholesaler maintains price stability.
Answer:

1. A wholesaler is both a buyer and a seller.
2. He is in a position to maintain price stability by balancing supply and demand factors.
3. By suppling regular goods to the retailer, he solves the risk of shortage and price fluctuation is reduced. Thus, wholesaler maintains price stability.

Question 3.
Retailer provide home delivery of goods to customers.
Answer:

1. Retailer is a person who buys goods on smaller quantities.
2. Retailer provides home delivery of goods to customer at nominal cost or free of cost.
3. This helps them to improve relations with the customers and maintain permanent relations with the customers.
4. Thus, retailer provide home delivery of goods to customers.

Question 4.
Wholesaler performs various marketing functions.
Answer:

1. The wholesaler carries various marketing functions like warehousing, advertisings, sales promotion, etc. on behalf of the manufacturers.
2. They also perform various marketing functions like assembling, warehousing, transporting, grading, packing, advertising and financing.
3. These functions help the retailers and a manufacturers as they can concentrate on the production and selling activities.
4. Thus, wholesaler performs various marketing functions.

Question 5.
Authorized dealer do not have other product of other manufacturers.
Answer:

1. An authorized dealer only deals with one line of products from one manufacturers.
2. They do not have products of other manufacturers.
3. They promote the goods by providing window display, advertising and also having attractive schemes for selling the goods.
4. Thus, authorized dealer do not have other product of other manufacturers.

Question 6.
General stores are generally situated near residential areas.
Answer:

1. General stores are found in residential areas and offer shopping convenience to the customers.
2. They deal in wide variety of goods.
3. They deal with day to day useful goods.
4. Thus, general stores are generally situated near residential areas.

Question 7.
Departmental store has centralized management system.
Answer:

1. Departmental stores are generally established by joint stock companies.
2. Various departments which look like specialized shops are controlled and managed by single management.
3. The management of departmental store is centralized.
4. All departmental store is centralized.
5. All departments are independent but they are centrally owned managed are controlled.
6. Thus, departmental store has centralized management system.

Question 8.
Packing plays an important role in selling product in the supermarket.
Answer:

1. Packing plays an important role in selling products in the supermarket.
2. Goods are duly packed by giving details of quantity, quality, weight, price, contents, date of manufacturing and date of expiry.
3. This is helpful in handling the goods and also makes the goods more attractive and durable.
4. Thus, packing plays an important role in selling product in the supermarket.

Question 9.
Chain store sell a limited range of goods.
Answer:

1. Each branch of a chain store deals in the same commodity or in the same line of products.
2. This enables the store to give better guidelines to the customers.
3. Thus, chain store sell a limited range of goods.

Question 10.
There is no scope for bargaining in one price shop.
Answer:

1. The goods are priced at one price which is fixed.
2. There is a fixed and uniform price. ,
3. The price are fixed in advance, so there is no scope for bargaining.
4. Thus, there is no scope for bargaining in one price shop.

7. Answer the following

Question 1.
What are the main features of Wholesaler?
Answer:
(A) Meaning:

1. Wholesalers are those who engage themselves in wholesale trade.
2. It is concerned with the buying of goods in large quantities from producers and reselling the same in small quantities to the retailers.
3. Wholesaler is a connecting link between producers on one hand and retailers on the other.

(B) Definitions:
Philip Kotler “wholese,lling includes all activities involved in selling goods or services to those who buy for resale or for business use.

(C) Features of Wholesaler:

1. The wholesaler generally deals in one or few items of goods.
2. Wholesaler requires a large amount of capital to be invested in the business.
3. Wholesaler buys goods from the manufacturer in large scale.
4. Wholesaler sells the goods to retailers as per their requirement.
5. Wholesaler has direct contact with manufacturer.
6. Wholesaler is located in the same area for convenience of the retailer.
7. Wholesaler acts as a real risk bearer in the process of distribution,
8. Wholesaler performs various marketing functions.

Question 2.
Explain the services of retailers to wholesalers.
Answer:
Services of Retailers to Wholesalers:

1. Create demand: Retailers attracts consumers attention towards new products and arrivals in the market through personal salesmanship.
2. Helps to Distribute : Retailer helps distributing perishable goods which are having short life. He also performs assembling, grading and packing function.
3. Marketing: Retailers sometimes carry marketing function for the wholesalers i.e. handling transportation, solving shortage problems, advertise goods, etc.
4. Financing: Wholesaler collects order from customers and take advances from them. Then places order to manufacturer. Retailer collects sales proceeds from customers and passes it to the wholesaler and finally it reaches the manufacturer.
5. Attracts Consumers : Retailer makes an advertising of goods by displaying in the showroom and thus promote sales. This activity directly helps the wholesaler to sell the product.
6. Provides Information: Retailer provides information to the wholesaler regarding market and demand of goods by the customers, likes and dislikes of customers, etc.
7. Connecting Link : Retailer purchases goods from wholesaler and sells it to the customer and thus act as a middleman.
8. Increase Sales : Retailers help the wholesaler to increase his sales by buying goods from him regularly and at short intervals.

Question 3.
Explain small scale fixed shop retailers.
Answer:
Small Scale Fixed Shop Retailers:
Small scale fixed retailers usually run their business operations on a small scale and deal in limited fine of goods. Such shops are run by their owners with the help of assistants. These shops are situated in residential areas.

Types of Small Scale Shop Retailers:
(i) General Stores : These shops are found in residential areas and offers shopping convenience to the customers. They deal in wide variety of goods so there is scope for choice. They deal in almost all household articles and goods of daily use. They provide credit facilities and have personal relation with their customers. They have fixed place of business so the customers have faith and confidence in dealing with them.

(ii) Second Hand Goods Shops : As the name indicates these shops deal in used or old goods and articles. They buy goods from individual and not from manufacturers or wholesalers. They repair or overhaul the items. They display them in their shops. Generally people from poor communities prefer to buy from these shops.

(iii) Authorised Dealers : These retailers have an authorized dealership of a particular manufacturer’s goods. They sell of consumers requirement goods like T.V. sets, mobile phones, washing machine, etc.

(iv) Speciality Shops : These retailers deal in particular line of goods. They keep a wide variety of items within the same line of products. They offer goods at reasonable prices. They are popular in cities and towns. They provide wide choice to customers. Normally they carry on business on cash basis.

Question 4.
Explain the services of wholesalers.
Answer:
Wholesaler provides services to:
(A) Manufacturers and (B) Retailers
(A) Services of Wholesalers to Manufacturers:

1. Finance Assistance : Wholesaler provides advance to the manufacturers, so they can do bulk production. Thus, manufacturer can maintain continuous flow of production.
2. Collecting Order and Distribution of Goods : Wholesaler collects small orders of goods from the retailers then he collects the goods from manufacturer and distributes it to retailers.
3. Large Purchase : Wholesaler purchases goods on large scale from the manufacturers and sells it to the retailers on behalf of the manufacturers.
4. Transportation: Wholesaler sometimes carry the transportation function of manufacturer by himself. So cost and time of manufacturer is saved.
5. Risk Bearing: He takes a risk of buying goods in big quantity and storing them. This may sometimes lead him to loss.
6. Provide Market Information : Wholesaler provides latest information of market condition to manufacturer. On the basis of this information manufacturer changes his production policies and regulates production activities.
7. Marketing Function: Wholesaler carries many marketing functions like warehousing, advertising, sales promotion, etc. on behalf of manufacturer.
8. Storage : The wholesaler provides storage facilities for the products manufacture by the producers. This helps them to fill up the time gap between production and consumption of goods.

(B) Services of Wholesaler to Retailers:

1. Financial Support: Wholesaler provides credit facility, discount facility and financial assistance to their retailers.
2. Market Information : Wholesaler provides market information to retailers as he has link with various manufacturers. This information is very useful to retailers for purchase of goods.
3. Risk Bearing : Retailer holds limited stock of goods and avoids the risk of spoilage of goods. Retailer get protected from increase or decrease of prices of goods and fluctuation of demand.
4. Stock of Goods : Wholesaler stores the stock of goods for retailers, then retailer supply these goods to customers as per their demands.
5. Warehousing and Transport: Wholesaler provides the facility of storing of goods as well as transport facility to retailers. They also do home delivery of goods to retailers.
6. Regular Supply : Wholesaler assures regular supply of goods to the retailers. Risk of shortage of goods and price fluctuation is reduced.
7. Sales Promotion : Wholesaler provides promotional facility to the retailer. He advertises on behalf of retailers and this helps the retailers to increase the sales.

Question 5.
Explain the different services of retailers.
Answer:
Retailers provides services to:
(A) Customers and
(B) Wholesaler

(A) Services of Retailers to Customers:
1. Variety of Goods : Retailer keep different brands of goods which helps the customer to choose.

2. After Sales Services : After sales services are given for a particular period, which is known as guarantee period for costly and durable goods such as refrigerators, TV. etc. Such services create confidence in minds of consumers for further purchases.

3. Regular Supply of Goods : Retailer stocks the goods sufficiently which are required by the customers and customers purchases the goods whenever needed.

4. Credit Facilities : Retailers provides credit facility to customer which helps him to grow up sales and also it is convenient for the customers to purchase goods.

5. Home Delivery : Retailer provides home delivery service to the customers which helps him to maintains permanent relationship with the customers.

6. Information : Retailer is a link between manufacturer and consumer. He provides valuable information from the customers to the manufacturer so that he can modify the product as per the likes and dislikes of the customers. Corpplaints regarding defects in goods, improper functioning of the product, constant break down, etc. are passed on to the manufacturers.

7. Local Convenience : Retailers are generally located near residential areas. Hence, customers can buy the goods whenever they require.

8. Improves Standard of Living : Retailers help customers to increase their standard of living by making available all the latest types of goods produced.

9. Sale of Perishable Goods : Perishable goods like milk, meat, fish, vegetables, etc. require quick distribution. Hence, retailer provides this facility as per customers requirement.

(B) Services of Retailers to Wholesaler:

1. Create demand: Retailers attracts consumers attention towards new products and arrivals in the market through personal salesmanship.
2. Helps to Distribute : Retailer helps distributing perishable goods which are having short life. He also performs assembling, grading and packing function.
3. Marketing: Retailers sometimes carry marketing function for the wholesalers i.e. handling transportation, solving shortage problems, advertise goods, etc.
4. Financing: Wholesaler collects order from customers and take advances from them. Then places order to manufacturer. Retailer collects sales proceeds from customers and passes it to the wholesaler and finally it reaches the manufacturer.
5. Attracts Consumers : Retailer makes an advertising of goods by displaying in the showroom and thus promote sales. This activity directly helps the wholesaler to sell the product.

Question 6.
Define import trade. Explain its procedure in detail.
Answer:
Import trade refers to buying of goods and services from another country or countries i.e. a foreign country. The procedure of import trade varies from one country to another country depending upon the policy implemented in that country. Import of goods and services is controlled by the government in most of the countries. India follows the following import procedure, which is divided into four stages.

[A] Ist Stage : Preliminary Stage :
(1) Registration : In order to carry out import, the importer has to get himself registered with the authorities given below:

• Director General Foreign Trade (DGFT) in order to get an Import-Export Certificate Number.
• The Income Tax department to obtain Permanent Account Number.
• To carry out GST formalities.

(2) Negotiation or Trade enquiry : The importer must collect information from overseas suppliers regarding the goods he wants to import of a product. It contains details like-

• Price
• Delivery schedule,
• Credit period and
• Terms and conditions of sale, payment and delivery.

[B] IInd Stage : Pre-import Stage :
(i) Import License / Quota Certificate : The Export Import (EXIM) Policy of our country indicates which goods need license for import and which can be imported freely. For goods that require a license, the importer should get a quota certificate and acquire the license. At the time of importing goods, the IEC number is to be mentioned.

(ii) Foreign Exchange Clearance : The exporter has to be paid in foreign exchange by the importer as he resides in a foreign country. For this the Indian currency has to be exchanged for foreign currency. This is done by Exchange Control Department of the Reserve Bank of India (RBI). The importer has to get the foreign exchange sanctioned. For this he applies in a prescribed form to a bank authorised by RBI. After scrutiny of the documents, the necessary foreign exchange is sanctioned.

(iii) Placing an Order : Once the foreign exchange clearance is obtained from RBI the importer places an import order with the exporter for supply of goods. This order contains information on all aspects relating to the goods to be imported. These include quality, quantity, size, grade, price, packing and shipping, ports of shipment, insurance, delivery schedule and modes of payment. This order is called as indent.

(iv) Letter of Credit : If the exporter agrees to a letter of credit, then the importer obtains it from his bank and forwards it to the exporter. It minimises the risk of non-payment for the exporter. At the same time, the importer should arrange for sufficient funds to be paid on delivery of the goods.

(v) Clearing and Forwarding Agent : The importer then appoints C & F agent to look after the various customs formalities and documentation work with respect to import of goods.

(vi) Shipment Advice: Once the goods are loaded on the vessel, the exporter sends a shipment advice to the importer. This document contains details about the goods, invoice number, bill of lading and name of the vessel, the port of export and date of sailing of the vessel. This will help the importer for custom clearance and unloading of goods.

[C] IIIrd Stage : Import Stage:
(1) Receipt of Document : The importer receives the documents sent by the exporter through his bank. They are as follows Bill of Lading, Certificate of Origin, Certificate of Inspection, Packing List, Commercial Invoice, etc.

(ii) Bill of Entry : The clearing and forwarding agents, then prepare a bill of entry. This bill is presented to the dock superintendent for release of goods. The bill of entry has details like number of packages, quality of good and price of goods.

(iii) Delivery Order : For taking delivery of the goods a delivery order is needed. This is obtained from the shipping company by the C & F agent. Once this is received the freight charges are paid and goods are allowed to be unloaded from the ship.

(iv) Customer Clearance : The importer has to present the Bill of Lading, Bill of Entry and Packing List to the customer authority who will certify it and give customs clearance.

[D] IVth stage : Posts Import Stage:
Various duties have to paid in order to take the goods out of port are:

1. Port Trust Dues : The clearing and forwarding agent has to make the payment of port trust dues.
2. Customer Duty : Also paid by the clearing and forwarding agent to the custom authorities.
3. Insurance Premium : Under the FOB (Free of Board) impact, the importer has to make the payment of Insurance Premium.
4. Payment of Freight: The shipping contract will lay down the amount of freight to be paid and it has to be paid by the importer for getting clearance of goods.
5. Exporters Payment: The exporter draws a Bill of Exchange on the importer according to the terms and conditions of the contract.
6. Follow Up : It is the duty of the importer to take a follow up of the goods. If there are any discrepancies in the order or goods it has to be intimated to the exporter. Thus, the procedure of importing goods comes to an end.

Question 7.
What is export trade? Explain its procedure in detail.
Answer:
Trade between two countries is called International Trade. It can be import or export trade. Export trade refers to selling of goods and services to other country or foreign countries.

Export procedure is as follows:
There are four stages which help in simplify the export procedure.
[A] Preliminary Stage : This is the first stage which includes the following steps.
(1) Registration : The exporter gets himself registered with various authorities in order to conduct export trade like-

• Director General of Foreign Trade in order to obtain Import Export Certificate Number.
• Income Tax Authority to obtain Permanent Account Number.
• Export Promotion Council (EPC) and GST authority.

(2) Appointment of Agent: The exporters are supposed to appoint an agent in the foreign country who will look after the order or book order for the exporter.

[B] Pre-shipment Stage:

1. Receipt of Order : When the exporter receives an order he has to check the details of the order. He also check the restriction of import in the importer’s country.
2. Letter of Credit: The exporter has to obtain a letter of credit from the importer, which is used to clear the foreign exchanges and other restrictions.
3. Pre-shipment Finance : The exporter has to meet his working capital needs and for that he has to obtain the pre-shipment finance from his bankers.
4. Production of goods : If the exporter is a manufacturer, then he has to produce the goods according to the order placed by the importer, otherwise he has get the necessary goods arranged from his suppliers.
5. Packaging : Packaging plays a very important role in export business. Goods have to be packed as per the requirement of the importer and it should protect the goods in transit, preserve the quality of goods and carry out promotion of goods.
6. ECGC Cover (Export Credit and Guarantee Corporation) : In order to protect the goods and cover the credit risks, the exporter must obtain an cover of ECGC. The ECGC covers the risk upto 90%, if the importer fails to make the payment.
7. GST formalities (Goods and Service Tax): All formalities regarding GST must be complied with by the exporter.
8. Marine Insurance : For exporting the goods, it is mandatory for the exporter to take a marine insurance policy for the goods exported. This insurance is under CIF (Cost,Insurance and freight) contract.
9. Clearing and Forwarding Agents (C & F agents): The exporter has to appoint a clearing and forwarding agent to carry out the necessary formalities of customs. They are also called custom house agents.

[C] Shipment Stage:
(i) Processing of Document: The exporter prepares the shipping bill and gets all the documents processed at the customs house as required for the export of good.

(ii) Examination of Goods : The clearing and forwarding agents obtain1 a document called ‘carting order’ from the Port Trust Authorities, which allows the exporter to take the goods inside the dock area.

(iii) Loading of Goods : On examination of the goods, the ‘Customs Examiner’ issues order called ‘Let Export’ order. This is given to the clearing and forwarding agent by the ‘Customers Preventative Officer’ (CPO). The goods are then loaded on the ship and the captain of the ship issue a receipt called the ‘Mates Receipt’. Then the C & F agent obtain the Bill of Lading.

[D] Post-shipment Stage:

1. Shipment Advice : On the dispatch of the goods, the exporter sends shipment advice to the importer. Along with it, he also sends the packaging list, commercial invoice and non-negotiable copy of loading.
2. Presentation of Documents : The necessary documents are presented to the bank for negotiation and realisation of export proceeds.
3. Realisation of Export incentive : Various incentive like duty drawbacks, refunds of GST if paid, etc. is given to the exporter by the concerned authorities.
4. Follow up : Exporter has to follow up and find out the buyers reaction on the goods he receives. This concludes the export procedure.

Balbharti Maharashtra State Board Organisation of Commerce and Management 11th Textbook Solutions Chapter 1 Introduction of Commerce and Business Textbook Exercise Questions and Answers.

Maharashtra State Board 11th Organisation of Commerce and Management Solutions Chapter 1 Introduction of Commerce and Business

1. (A) Select the correct option and rewrite the sentence

Question 1.
A Lawyer is ……………..
(a) a professional person
(b) a businessman
(c) an employee
Answer:
(a) a professional person

Question 2.
Raw material is converted into finished product by…………….. industry.
(a) genetic
(b) extractive
(c) manufacturing
Answer:
(c) manufacturing

Question 3.
Actual buying and selling of goods is known as ………………..
(a) profession
(b) trade
(c) industry
Answer:
(b) trade

Question 4.
National level code of conduct is prepared for ……………….
(a) professionals
(b) businessmen
(c) employees
Answer:
(a) professionals

Question 5.
Construction of dams is an activity done under ……………….. industry.
(a) primary
(b) secondary
(c) tertiary
Answer:
(b) secondary

Question 6.
The problem of distance is solved by ………………..
(a)bank
(b) transport
(c) warehousing
Answer:
(b) transport

Question 7.
Commerce is a branch of ………………
(a) business
(b) industry
(c) trade
Answer:
(a) business

Question 8.
Return in business is called ………………
(a) fees
(b) salary
(c) profit
Answer:
(c) profit

Question 9.
A business unit depends upon ………………… for selling its output.
(a) industry
(b) society
(c) employees
Answer:
(b) society

Question 10.
Warehousing creates ……………… utility of goods.
(a) place
(b) time
(c) form
Answer:
(b) time

1. (B) Match the pairs

Question 1.

Group A	Group B
(a) Helping disabled person	(1) Social objective
(b) Genetic industry	(2) Foreign trade
(c) Local Currency	(3) Sericulture
(d) Solve social problems	(4) Non-economic activity
(e) Employment	(5) Internal trade
	(6) Mining
	(7) Profit
	(8) Economic activity
	(9) Business
	(10) Home trade

Answer:

Group A	Group B
(a) Helping disabled person	(4) Non-economic activity
(b) Genetic industry	(3) Sericulture
(c) Local Currency	(5) Internal trade
(d) Solve social problems	(1) Social objective
(e) Employment	(8) Economic activity

1. (C) Give one word, phrase or term

Question 1.
A regular activity concerned with production and distribution of goods and services for profits.
Answer:
Business activity

Question 2.
Human activities that are conducted for earning money.
Answer:
Economic activities

Question 3.
Buying and selling of goods against money or money’s worth.
Answer:
Trade

Question 4.
Activities that remove all the difficulties in trade.
Answer:
Auxiliaries to trade

Question 5.
The type of industries that creates immovable wealth.
Answer:
Construction industry

Question 6.
Name the business activity which is concerned with production of goods and services.
Answer:
Industry

Question 7.
Name the business activity which is concerned with distribution of goods and services.
Answer:
Commerce

Question 8.
The activity which provides mobility to men and material.
Answer:
Transport

Question 9.
An aid to trade which creates time utility.
Answer:
Warehousing

Question 10.
An occupation by which a person agrees to provide expert services for fees.
Answer:
Profession

1. (D) State True or False

Question 1.
Business is an economic activity.
Answer:
True

Question 2.
Every profession is practiced for earning money.
Answer:
True

Question 3.
Primary industries are concerned with nature.
Answer:
True

Question 4.
Trade includes commerce.
Answer:
False

Question 5.
Warehousing removes difficulty of time.
Answer:
True

Question 6.
Trade includes buying and selling of goods and services.
Answer:
True

Question 7.
Profit leads to increase in overall efficiency of the organisation.
Answer:
True

Question 8.
Plant nursery is an example of extractive industry.
Answer:
False

Question 9.
Industry creates form utility.
Answer:
True

Question 10.
Retailer is the link between manufacturer and wholesaler.
Answer:
False

1. (E) Find the odd one

Question 1.
Agriculture industry, Extractive industry, Genetic industry, Manufacturing industry.
Answer:
Manufacturing industry

Question 2.
Import trade, Export trade, Wholesale trade, Entrepot trade.
Answer:
Wholesale trade

Question 3.
Banking, Insurance, Transport, Manufacturing.
Answer:
Manufacturing

Question 4.
Tea, Milk, Coffee, Machinery.
Answer:
Machinery

1. (F) Complete the sentences

Question 1.
Economic activities are those activities which are conducted to ………………
Answer:
earn money

Question 2.
……………… Includes marketing of goods and services.
Answer:
commerce

Question 3.
Business is an ……………….. activity.
Answer:
economic

Question 4.
The basic purpose to is to ………………… earn profit.
Answer:
business

Question 5.
Professional charges …………………… in exchange of expert services.
Answer:
fees

Question 6.
……………… is the person who offers the work.
Answer:
employer

Question 7.
………………. is considered as a reward for assuming several business risks.
Answer:
profit

Question 8.
Industry creates ………………… utility.
Answer:
form

Question 9.
In ………………. trade, goods, are purchased and sold in bulk.
Answer:
wholesale

Question 10.
……………….. is the link between wholesaler arid customer.
Answer:
Retailer

1. (G) Select the correct option

Question 1.
(Export trade, Foreign trade, Wholesaler, Import Trade, Economic objective of business)

Group A	Group B
(i) Trade between different countries	—————
(ii) Purchase of goods and services from another country	————–
(iii) ————–	Selling of goods and services to foreign customer
(iv) ————–	Link between producer and retailer
(v) Spending money on Research and Development for development of business	——————–

Answer:

Group A	Group B
(i) Trade between different countries	Foreign Trade
(ii) Purchase of goods and services from another country	Import Trade
(iii) Export Trade	Selling of goods and services to foreign customer
(iv) Wholesaler	Link between producer and retailer
(v) Spending money on Research and Development for development of business	Economic objective of business.

1. (H) Answer in one sentence

Question 1.
What is an economic activity?
Answer:
Activity done for earning money is an economic activity.

Question 2.
What is a non-economic activity?
Answer:
Activities are done to satisfy human wants other than monetary demands.

Question 3.
What do you mean by wholesale trade?
Answer:
Trade conducted on large scale is wholesale trade.

Question 4.
What is the meaning of retail trade?
Answer:
Trade conducted on small scale is retail trade.

Question 5.
What do you mean by import trade?
Answer:
When the goods or services are bought from other countries, to home country it is called import trade.

Question 6.
What do you mean by export trade?
Answer:
When the goods or services are sold to other countries, form home country it is called export trade.

Question 7.
What is an entrepot trade?
Answer:
Goods brought in the country from one country and sold to some other country, it is called entrepot trade.

Question 8.
What is meant by auxiliaries to trade?
Answer:
Auxiliaries to trade are the services which help the smooth conduct of trade.

Question 9.
What is trade?
Answer:
Buying and selling of goods and services is called trade.

Question 10.
What do you mean by commerce?
Answer:
Commerce is a part of business activity which is concerned with the distribution of goods and services.

Question 11.
What is primary industry?
Answer:
Industry which depends upon nature for production is called primary industry.

Question 12.
What is secondary industry?
Answer:
Industry which depends upon primary industry for production is called secondary industry.

Question 13.
What do you mean by genetic industry?
Answer:
Genetic industry means the industry engaged in reproduction and multiplication of plants.

1. (I) Correct the underlined word and rewrite the following sentences

Question 1.
Profession can be transferred to other person.
Answer:
Profession cannot be transferred to other person.

Question 2.
Capital is required for employment.
Answer:
Capital is required for business.

Question 3.
Industry creates place utility.
Answer:
Transport creates place utility.

Question 4.
Commerce represents supply side of market.
Answer:
Industry represents supply side of market.

Question 5.
The basic purpose of business is to provide services.
Answer:
The basic purpose of business is to make profit.

Question 6.
Business is non-economic activity.
Answer:
Business is an economic activity.

Question 7.
Barter exchange is an exchange with money.
Answer:
Barter exchange is an exchange with goods.

2. Explain the following terms/concepts

Question 1.
Business.
Answer:

1. Business is one of the economic activities.
2. Business is done to earn profit.
3. It is done by individuals or organisations.
4. Business includes all those activities done for production, processing and distribution of goods.
5. Business has a risk involved.

Question 2.
Profession.
Answer:

1. Profession is a part of economic activity.
2. A person who practices profession is called a professional.
3. A professional has to acquire particular knowledge under formal education system.
4. He practices and obtain skill in his profession. E.g. Doctors, Lawyers, Chartered Accountants, Architects etc.
5. A professional gets fees for his services.

Question 3.
Employment.
Answer:

1. Employment is an economic activity.
2. A person works for others to earn his livelihood.
3. A person who works is called an employee and a person who offers work is an employer.
4. Employee gets remuneration after certain period which is called salary or wages.

Question 4.
Home Trade.
Answer:

1. Trade means buying and selling of goods and services.
2. Trade conducted within the boundaries of the country i.e. buying and selling of goods and services within the country is called home trade or internal trade.
3. Home trade is divided into two parts; Wholesale trade and retail trade.

Question 5.
Foreign Trade.
Answer:

1. Buying and selling of goods and services is called trade.
2. Trade can be conducted within the country or with other countries.
3. Trade conducted with other countries is called foreign or external trade.
4. Foreign trade is divided into three parts; they are import, export and entrepot trade.

Question 6.
Economic Activity.
Answer:

1. Human beings are engaged in various activities throughout the day.
2. Some activities are done to earn money or livelihood.
3. These activities are called economic activities.
4. Economic activities are of three types; they are business, employment and profession.
5. Because of the economic activities a person can earn for himself and his family.
6. These activities are required for the survival of a human being.

Question 7.
Non-economic Activity.
Answer:
(i) Human activities are divided into two types – economic and non-economic activities.

(ii) Non-economic activities are those which are conducted by a person to satisfy his non monetary requirements. They include personal, social, cultural, religious activities, etc. E.g. singing, playing games, gardening etc.

3. Study the following case/situation and express your opinion.

1. Jaysukh oil mills produce refined oil. The entire production is purchased by Rupesh Oil Depot, who in turn sells it to various retailers. Mrs. Prachi purchased 2kg oil from Balaji Groceries.

Question 1.
Wholesaler
Answer:
Wholesaler – Rupesh Oil Depot

Question 2.
Retailer
Answer:
Retailer – Balaji Groceries

Question 3.
Consumer
Answer:
Consumer – Mrs. Prachi

2. Mr. Pranav is a tin manufacturer in India. Mr. Jack of England sells goods to M/s Frank Corporation in North America and Mr. Williams of USA buys various goods from Brazil.

Question 1.
Who is the importer?
Answer:
Importer – M/s Frank Corporation in North America, Mr. Williams in USA

Question 2.
Who is the manufacturer?
Answer:
Manufacturer – Mr. Pranav

Question 3.
Who is the exporter?
Answer:
Exporter – Mr. Jack

4. Distinguish between the following

Question 1.
Industry and Commerce.
Answer:

	Industry	Commerce
(1) Meaning	Industry is engaged in the production of goods and services.	Commerce looks after the distribution of goods and services.
(2) Location	Industries are located in the industrial belts which are usually away from residential areas.	Infact there is no particular location of commerce. It gives its services at any location.
(3) Utility	Industries create form utility.	Commerce creates place, time and possession utility.
(4) Resources	Industries require mainly machinery, materials and man power for production	Commerce mainly works with the help of man power.
(5) Capital	Industries require huge capital. It mainly depends upon the size of industry.	Activities of commerce comparatively require less capital.
(6) Interdependence	Industries depend on commerce for the supply of raw materials and carrying finished goods to markets.	Commerce cannot function unless supported by the goods provided by the industries.
(7) Conducted by	Manufacturers	Traders or mercantile agents
(8) Classification	Industries are divided into Primary, secondary and tertiary types.	Commerce is divided into Trade and auxiliaries to trade.
(9) Market Force	Industries represent supply side of the market.	Commerce represents demand side of markets.
(10) Status	It has primary importance.	It has secondary importance.

Question 2.
Business and Commerce.
Answer:

	Business	Commerce
(1) Meaning	It is an economic activity engaged in production and distribution of goods and services.	Commerce takes care of distribution of goods and services.
(2) Concept	Business is a wider term than business.	Commerce is a narrower term than business.
(3) Part of	Business is a part of economic activity.	Commerce is a part of business.
(4) Skill	Industries require more of technical, managerial and marketing skills.	Commerce mainly require managerial and marketing skills.
(5) Classification	Business is classified into two parts industry and commerce.	Commerce is divided into two parts trade and auxiliaries to trade.
(6) Capital	It requires large capital.	It requires limited capital.
(7) Investment	Heavy investment is required.	Less investment is required.

Question 3.
Business and Profession.
Answer:

	Business	Profession
(1) Meaning	It is an economic activity where goods and services are produced and distributed.	Profession is also an economic activity under which a person uses his knowledge and provide expect services.
(2) Nature	A person invests his capital and starts business. He may or may not have proper skill or knowledge.	A professional has to take formal training before starting his profession.
(3) Special education	Business does not require special formal education though it is advisable.	Professional is required to take formal education to practice a profession.
(4) Returns	A businessman gets profit.	A professional gets fees from clients.
(5) Registration	A businessman need not register with a particular body or association.	A professional has to register under the respective body or association eg. A Lawyer has to register himself with the Bar Council of India before carrying out his profession.
(6) Capital requirement	More capital is required to run a business. Capital is brought by a businessman.	Comparatively less capital is required to carry out a profession. The required capital is brought by a professional.
(7) Code of conduct	There is no specific code of conduct for the businessmen. They are the owners so they may form the code of conduct for their organisation.	There is specific code of conduct for a professional. This code is decided by the respective association.
(8) Examples	Manufacturer of textiles, retailer, courier service provider, etc.	Doctor, Lawyer, Architect, Chartered Accountant, etc.

Question 4.
Employment and Profession.
Answer:

	Employment	Profession
(1) Meaning	Business is an economic activity, conducted to earn remuneration.	Profession is also an economic activity under which a person uses his knowledge and provide services.
(2) Nature	A person works for other person or organisation to get his livelihood.	A professional has to take formal training before starting his profession.
(3) Special education	It depends on the nature of employment. Some type of employment requires a specific type of education. Whereas in some cases any education is acceptable.	Professional is required to take formal education to practice a profession.
(4) Returns	An employee gets remuneration in the form of wages or salary.	A professional gets fees from clients.
(5) Registration	An employee does not require registering himself with specific associations.	A professional has to register under the respective body or association eg. A Lawyer has to register himself with the Bar Council of India before carrying out his profession.
(6) Capital requirement	Employee need not invest money in the business. He does not require capital.	Comparatively less capital is required to carry out a profession. The required capital is brought by a professional.
(7) Code of conduct	Employee has to follow the rules and regulations of his organisation.	There is specific code of conduct for a professional. This code is decided by the respective association.
(8) Decisionmaking	Employee has no right to take decisions in the organisations unless he is asked.	Professional can take his own decisions as he is the owner.
(9) Tenure	Every employment has a specific tenure. It means the maximum period for which an employee can remain in the employment is fixed. The employee has to retire after that period.	Professional can work throughout his life also.

5. Answer in brief

Question 1.
State any four features of profession.
Answer:
Profession is a part of economic activity. A professional acquires formal knowledge to practice profession. Following are the features of profession:
(i) Qualification : A particular qualification is required to practice a profession. A professional needs to acquire knowledge through formal education. Unless he gets a formal knowledge and training, he cannot practice profession, e.g. A Doctor cannot prescribe medicines without having a degree in medicine.

(ii) R eturns: A professional charges fees for the services rendered to the clients, The fees charged by a professional depends on different factors like his knowledge, experience, skill etc. His income is not fixed.

(iii) Capital : Professional requires capital to set up or run his practice. The amount of capital depends upon the nature of practice a professional wants to do.

(iv) Work Nature : A professional who is expert in a particular field, provides services in his field of expertise, eg. an architect will provide his services in the field of building houses.

Beside the above features, there are other features like-

1. Aim
2. Registration and Membership
3. N on transferability

Question 2.
State any two types of industries.
Answer:
Industries is a part of business. They look after the production of goods and services. Industries creates form utility. There are various types of industries. They can be broadly divided into three categories.
(i) Primary Industry :
These are the industries which depend on nature for their production. They include agriculture, mining, fishing, wood cutting etc. Primary industries are further divided into three types; agriculture industry, extractive industry and genetic industry.

(ii) Secondary Industry :
These are the industries which depend upon primary industries for their production. They mainly categorized as manufacturing industries and construction industries. Secondary industries use the raw materials of primary industries and convert them into finished products which is then sold in the market.

Question 3.
Give two types of Foreign Trade.
Answer:
Trade with other countries is called foreign trade. Foreign trade is of three types.

1. Import trade : When the goods or services are purchased from other countries it is called import trade,
2. Export trade : When the goods are sold to other countries, it is called export trade.
3. Entrepot trade : It is also called re-exporting. In this case goods are first brought from one country and again resale to other country, e.g. A buyer from India imports goods from France and exports them to Australia.

Question 4.
State any four auxiliaries to trade.
Answer:
Auxiliaries to trade are all those services which help in the smooth conduct of trade. There are different types of services which help trade. They are explained below.
(i) Warehousing: Warehousing helps to store the goods safely. There is a gap between the time of production and the time of consumption. Warehousing fills up this gap by conveniently storing the goods till they are demanded in the market. Warehousing, thus, creates time utility. Care is taken that the goods do not get damaged in the warehouse.

(ii) Advertising : Advertising is an important tool in the hands of a businessman to communicate to potential buyers. In today’s world producer/seller is situated at one place and consumers are spread over wider area. Through advertisement, producer or seller can contact the consumers. There are different mediums of advertisement, e.g. T.V., Radio, Hoardings, Print etc.

(iii) Insurance : Business is exposed to many risks. A businessman has to be careful about the risks. Some risks can be avoided, some can be minimized and some can be transferred. Insurance is an auxiliary which helps the businessman to handle the risk. Businessman can transfer some of the risks to insurance company. Insurance company, by accepting premium from the businessman, assures him to pay compensation in case of loss.

(iv) Transport: Transport is an important auxiliary to trade. Transport carries raw materials and people to place of production and brings finished goods to markets. Thus transport creates place utility. Transport can be conducted by different modes e.g. rail, road, water or air.

Beside the above features, there are other features like-

1. Banking
2. Mercantile Agents
3. Communication

Question 5.
State any four features of employment.
Answer:
Employment is an economic activity. A person works for others to earn his livelihood.
Following are the features of employment:
(i) Aim : The main aim of person accepting employment is to earn money.

(ii) Qualification : Qualifications are required depending upon the nature of employment. Some types of work require educational qualifications, some require some specific skill, some require both. But qualifications are necessary for employment.

(iii) Monetary returns : The person who accepts employments and work for the employer gets remuneration after specific intervals. Remuneration can be wages or salary. Usually wages are paid daily or weekly and salaries are paid monthly.

(iv) Capital: Capital is not required for the person who is in employment.

Question 6.
Write any four objectives of business.
Answer:
Business is done with some objectives. These can be divided as (a) Economic objectives and (b) Social objectives. Following are the Economic Objectives:

1. Earning Profit: Business is done with the main objective of earning profit. Profit is always a motivating factor for a businessman.
2. Searching New Customers : To maximize profit a business organisation has to search new customers. It is required to expand the business. It is also important to retain the old customers.
3. Best possible use of Resources : Making best use of available resources is the objective of business. This ensures avoiding of wastage and saving valuable money. This ultimately leads to increase in profit.
4. Innovation : One of the important objectives of business is to make innovations for the development of business. Therefore research and development becomes an important part of the working of any business organisation.

Question 7.
State any four features of business.
Answer:
Business is an economic activity which is done to earn profit.
Following are the features of business:
(i) An economic activity : Business is an economic activity. Because it is done to earn profit for livelihood.

(ii) Two parties : Business is mainly concerned with the production and distribution of goods and services. It means business transactions involve exchange and in any exchange two parties are involved. Thus business involves two parties.

(iii) Profit motive: Every business is done with a motive of making profit. Therefore all the activities of business revolve around profit. A businessman is not satisfied with the profit he gets, but he tries to maximize the profit either by increasing the production or by reducing the cost. He tries to find out new customers and new markets.

(iv) Production of Goods and Services : Business includes the production of goods and services. Raw materials are used and the finished goods are produced.

Question 8.
State any two types of primary industry.
Answer:
Primary industries are those industries which depend on nature for production. Primary industries are of three types which are given below.

1. Agriculture industry: Agriculture includes cultivation of land. It is an important primary sector industry.
2. Extractive industry : Extractive industry draws out the produce from natural resources like land, river or sea etc. The products extracted are usually in raw form they are converted into finished products and sold in the market.
3. Genetic industry : Genetic industries are engaged in the reproduction and multiplication of plants and animals e.g. poultry, plant nursery, etc.

6. Justify the following statements.

Question 1.
Retailer is in direct contact with ultimate consumers.
Answer:

1. Retailer in a trader operating in the chain of distribution.
2. He deals with the ultimate consumer.
3. Retailer is the last link in the chain of distribution.
4. Goods flow from the producer to consumer in the following way:
   Producer → Wholesaler → Retailer → Consumer
5. Thus, retailer comes into direct contact with the ultimate consumer.

Question 2.
Commerce is a wider term than trade.
Answer:

1. Commerce is a part of business. Business is divided into two parts; industry and commerce,
2. Commerce is concerned with the distribution of goods.
3. Commerce is divided into two parts. One is trade and the other is auxiliaries to trade.
4. Trade is concerned with buying and selling of goods and services.
5. Trade is’a part of commerce.
6. Along with trade, commerce also includes auxiliaries or services to trade.
7. These services help in the smooth running of trade.
   Thus, it clearly indicates that commerce is a wider term than trade.

Question 3.
Risk is inevitable in business activities.
Answer:

1. Every business is exposed to various risks. A businessman cannot avoid risks in the business.
2. These risks include goods remaining unsold due to changes in fashions, risks of losses due to fire or theft, damage to goods during transportation or warehousing, risks of bad debts, etc.
3. A businessman has to be prepared to handle these risks.
4. These risks cannot be totally eliminated. But they can be minimized or transferred to insurance company.
5. A businessman must be ready for the risks as they are inevitable.
6. Thus, risk is inevitable in business activities.

Question 4.
Combination of import-export trade is entrepot trade.
Answer:

1. Import, export and entrepot trade are the parts of foreign trade.
2. When the goods are purchased from other countries it is called import trade.
3. When the goods are sold to other countries it is called export trade.
4. A combination of import and export trade is called entrepot trade.
5. In case of entrepot trade goods are first purchased from one country i.e. imported and then sold to or exported to other country.
6. E.g. Indian trader purchased some computers from Japan and sold them to Sri Lanka will be included in entrepot trade.
7. Thus, entrepot trade is a combination of import and export trade.

Question 5.
Transport creates place utility.
Answer:

1. Transport is one of the important auxiliaries to trade.
2. Transport brings raw materials and people to the place of production and carries finished products to markets.
3. There are different modes of transport through it carries goods and people from one place to another. They are rail, road, water and air.
4. If goods are produced at one place, it may not have demand at that place only.
5. Transport carries them to other place where they are demanded and create place utility.
6. Thus, we can say that transport creates place utility.

Question 6.
Industrial activities take place before commerce starts its role.
Answer:

1. Industry and commerce are the two parts of business.
2. Both the parts are complimentary to each other.
3. One cannot function without other.
4. Industries look after the production of goods and services and commerce takes care of the distribution of the goods produced.
5. Obviously production of goods comes first and it is followed by distribution or selling of goods.
6. Thus, industrial activities take place before commerce starts its role.

Question 7.
Available resources should be used to its maximum.
Answer:

1. Resources are always scarce. The demand for resources is more and the availability of resources is less.
2. Similarly, resources belong to the society but the businesses use them for production and provide the finished products to the society.
3. So it is necessary to use the resources carefully.
4. Wastage of resources should be avoided.
5. Wherever possible, recycling and reusing the resources should be considered by the businesses.
6. Thus, whatever resources available should be used to its maximum.

Question 8.
Wholesalers is a link between retailer and manufacturer.
Answer:

1. Wholesaler and retailer are the important intermediaries in trade.
2. They help to bring the goods from the manufacturer to ultimate consumer.
3. Wholesaler is a trader who deals in large quantities i.e. the wholesaler purchases the goods in bulk from the manufacturer and sells it to retailer in small quantities.
4. Both the wholesalers and retailers are the part of chain of distribution, which is shown below.
   Producer → Wholesaler → Retailer → Consumer
5. Thus, it is true that wholesaler is the link between the manufacturer and retailer.

Question 9.
Business is a part of economic activities.
Answer:

1. Economic activities are those activities which are done with the intention of making money.
2. A person has to earn money for his livelihood.
3. However all economic activities are not same. They can be conducted mainly in three different ways.
   (a) Employment (b) Profession and (c) Business.
4. Business is conducted to earn profit.
5. businessman invests his own capital, takes decisions and carries out business activities.
6. He also takes risk for carrying business activities.
7. Thus, a businessman is responsible for the business activities. The profit earned is enjoyed by the businessman. So business is a part of economic activity.

Question 10.
Changing fashions is one of the important causes of business risk.
Answer:

1. Business is exposed to various kinds of risk.
2. The risks can be due to the loss of goods by fire or theft, bad debts, changes in government policies, goods remaining unsold etc.
3. Goods remaining unsold due to changes in fashion, is also an important type of risk in the business.
4. Due to this risk businessman can suffer loss.
5. However this risk is there in case of some goods only e.g. clothes, footwear, jewellery, accessories, sun glasses etc.
6. This risk is not there in case of food grains or vegetables as they are essentials and their demand remains somewhat constant.
7. Thus, changes in fashion is an important risk in the business.

7. Answer the following questions

Question 1.
What do you mean by commerce ?
Answer:
Commerce involves distribution of goods and services. Commerce is a part of business. Business is divided into two parts. They are (i) industry and (ii) commerce. Industries are concerned with the distribution of goods and commerce does the distribution of those goods in the market. Commerce helps in bringing the goods from the manufacturer to consumer by making uninterrupted flow of goods. Commerce includes main two activities – (i) Trade and (ii) Auxiliaries to trade.
(i) Trade means buying and selling of goods and services. Any buying and selling is included in trade. It can be industrial goods, consumer goods or buying and selling of services, etc.

(ii) Auxiliaries of trade are all those supportive services which help in the smooth conduct of trade. They include transport, banking, insurance, advertising, etc.

Question 2.
What is the meaning of export trade?
Answer:
Trade is divided into two parts, (i) Home trade and (ii) Foreign trade. Home trade is a trade conducted within the country where as foreign trade is trade with other countries. When the goods are purchased from and sold to other countries it is included in foreign trade.

Foreign trade is divided into three parts, (i) Import trade, (ii) Export trade and (iii) Entrepot trade. In case of export trade goods are sold to other countries e.g. A garment trader from India selling his garments to England will be included in export trade. Export trade plays an important role in the economy of any country, It helps a country to get valuable foreign exchange for the country, It also helps to enhance the reputation of the country in the foreign market.

Question 3.
State the role of auxiliaries to trade in trading activities.
Answer:
Role of auxiliaries to trade:

1. Auxiliaries to trade are all the services which help trade.
2. Trade means buying and selling of goods. However buying and selling is not possible unless it is supported by different services which will make the trade easy.
3. There are different auxiliaries or services which support buying and selling. They are : transport, warehousing, banking, insurance, advertising, etc.
4. These services help the trader as well as the buyers. They remove the hindrances in the process of distribution and ensure smooth flow of goods from the manufacturer to consumer.
5. In modern world, the manufacturers and’ consumers stay away from each other. It becomes very difficult for the manufacturer to contact the buyers and sell goods directly to them.
6. In this regard auxiliaries to trade help in establishing a link between the manufacturer or seller to consumer.

Question 4.
What are the different types of secondary industries?
Answer:
Secondary industries are those which depend upon primary industry for production. Secondary industries take raw materials from primary industries and carry out their production.
Secondary industries are of two types:
(i) Manufacturing industry : These industries are engaged in the manufacturing of various types of goods. They may be consumer goods or industrial goods. These industries convert raw materials into finished products. They make use of men, material and money for production. The examples of these industries include chemical industry, electronics industry, textile industry, paper industry.

(ii) Construction industry : These types of secondary industries are engaged in the construction activities such as dams, bridges, buildings, roads, tunnels etc. In case of other industries the goods are produced at one place but sold at different places. However in case of construction industry the construction takes place at one place only. Thus this industry creates immovable property.

Question 5.
State the types of human activities.
Answer:
There are various activities conducted by a person in a day. These activities can be divided into two parts.
Human Activities:
Economic activities
Non-economic activities

1. Economic activities : These activities are conducted to earn money. A human being requires money for livelihood. Economic activities are divided into three types.

• Business
• Profession
• Employment

Business is done to earn profit. Profession is done by acquiring special knowledge to provide services to people. A professional gets fees for the services rendered. Whereas when a person works for other person or” organisation to earn wage or salary, is called employment.

2. Non-economic activities : Non-economic activities are conducted by the person to satisfy their needs other than financial needs. These activities include cultural, social, religious, sports, health related etc.

Question 6.
Describe the scope of internal trade.
Answer:
Internal trade is a part of trade. It includes buying and selling of goods within the country. Internal trade is further divided into two parts.
(i) Wholesale Trade : Wholesale trade is a trade conducted on large scale. A wholesaler purchases goods in bulk from the manufacturer and sells them to the retailers. Wholesaler forms a large network through which he helps to distribute goods at distant places. Wholesaler is an expert trader in his field. He acts as a link between the manufacturer and the retailer.

(ii) Retail Trade : Retail trade is a trade conducted on small scale. He purchases goods from the wholesalers and sells them to the consumers in required quantities. Retailer comes into direct contact with the consumers. A retailer caters to the needs of consumers by providing them various goods in whatever quantities they want.

Question 7.
How does banking and insurance help trading?
Answer:
Commerce includes trade and auxiliaries to trade. Trade means buying and selling of goods and services. But buying and selling is not possible unless it is supported by the auxiliaries of trade. Thus auxiliaries to trade are the services which help trade. Banking and insurance are two important auxiliaries to trade.
(i) Banking : Banking services help traders in many ways. Branches of banks are spread over wider areas. Traders can open an account in bank and take the advantage of various banking services. Banks offer loans, overdrafts, transfer of money, letter of credit, foreign exchange facilities to the traders.

(ii) Insurance : There are various kinds of risks in the business. A businessman can transfer some risks on the insurance company. Goods can be destroyed by fire, theft or damaged in transportation. The businessman can transfer these risks on the insurance company. He has to pay premium to the insurance company and make a contract with the insurance company. In case of loss, insurance company pays compensation to the trader.

(iii) Thus, the risks cannot be avoided completely but can be minimized by taking insurance policy.

8. Answer the following in details.

Question 1.
Give comparative analysis of business, profession and employment.
Answer:
Business, profession and employment are the part of economic activities. These activities are conducted to earn money. However the nature of all the three activities is different. A comparative analysis of all the three activities is given below:

Question 2.
Define business. Explain its features.
Answer:
Business is a part of economic activities. Business is done to earn profit. It is done by an individual or a group of individuals. Business can be defined in many ways by thinkers. Some of them are given below:
Prof. Haney : “ Business activities are all those activities which are directed towards the production and processing of wealth”.
Prof. Pride, Huges and Kapoor: “The organised efforts of individuals to produce and sell for a profit, the goods and services that satisfy society’s needs”.

The term business also refers to the organised efforts and activities of individuals to produce and sell goods and services for profit.

Following are the features of business:
1. Continuity in Dealings : Continuity is most important in case of any business. Business requires regularity. Business activity should be carried on for a Longer time. A transaction carried on only for one time or few times cannot be called as a business activity, e.g. Sale of own old motor car cannot be considered as a business activity.

2. Uncertain Returns : The returns in any business are not fixed. They are uncertain and fluctuating. The profit of business is not fixed or guaranteed.

3. Risk Element: Business is exposed to many risks. These risks arise out of some unforeseen circumstances or wrong decisions or misjudgements of the businessman. A businessman cannot avoid the risks but he can minimize the risks by taking proper steps. Some risks can be transferred to insurance company.

4. Satisfaction : Customer is an integral part of any business activity. Without a customer there cannot be buying or selling. Businesses need customers to fulfil their monetary objective and therefore customer satisfaction is the most important part of any business activity. Modern thinking on business gives top most priority to customer satisfaction. If the customers are satisfied, there will be more sale and profit to the business.

5. Two Parties : Business includes production and distribution. Every business transaction involves exchange. For carrying out any exchange two parties are required. These two parties are the seller and the buyer. There is an oral or written agreement between the buyer and the seller to buy or sell the goods or services.

6. Economic Activity : Business is an economic activity. The intention of carrying out any business is to earn money. Business is not conducted for satisfying sentimental needs of a person. Business activity is purely monetary.

7. Profit Motive : Business is basically conducted to earn profit. Every businessman tries to get maximum profit out of the business. Profit is required for the businessman to earn the livelihood and also for the survival of the business. It is also required for the expansion of business. Thus profit plays a vital role in business.

8. Production of Goods and Services :: Business has two aspects. One is production of goods and services and distribution of them. Goods are produced by the industries. Providing of services also form an important part of business activities.

9. Exchange of Goods and Services : Goods and services are exchanged for money or money’s worth. It is a business activity as there is a seller and a buyer and they exchange goods or services for a value. In modern days almost all the transactions are carried out with money as a medium of exchange. In case of very few transactions, goods are exchanged for goods.

10. Dealings in Goods and Services : In case of business, goods or services are bought and sold. There cannot be business without the exchange of goods or services. Goods can be consumer goods or industrial goods. Services are of different types like banking, insurance etc. Services are also exchanged for a value.

Question 3.
Describe various objectives of a business.
Answer:
Business is an economic activity which includes production and distribution of goods and services. Business is done to get profit. Even though business is done with the intention of making profit, that is not the only objective of the business. There are other objectives of business.
The objectives of business are explained below:

A. Economic Objectives:
(i) Searching of New Customers : Business needs expansion. So that it can earn more profit. Therefore searching new customers or new markets becomes an important economic objective of business.

(ii) Earning Profit: Making profit always becomes the main economic objective of any business.

(iii) Best possible Use of Resources : It is the responsibility of any businessman to make proper use of available resources. It is because resources are limited and the demand for resources is more. When a businessman uses resources carefully and economically, he can save his money. It will ultimately result in the increase of profit.

(iv) Innovation : Business needs change according to current situation. New products, new processes should be found out to remain in the competition in the market. Then only a business can survive and continue making profit. Therefore making innovations is one of the economic objectives of the business.

(B) Social Objectives:
Following are the social objectives:
(i) Contributing to the Welfare of the Society : Social objectives incliude the working for the betterment of the society in general. It is the responsibility of the business to work for the welfare of the society by carrying out social welfare programmes.

(ii) Avoiding Unfair Trade Practices : Unfair trade practices are those practices which are not advisable in business. They include black marketing, hoarding, adulteration, wrong representation, false advertisements etc. Unfair trade practices make adverse effect on the business. Therefore one of the important social objective of business is to keep itself away from such practices.

(iii) Supplying Quality Products : It is the social objective of business, to provide quality products to the customers. Customer is the important part of any business. Without customers, a business cannot function. Therefore it is the responsibility of the business to provide safe, non ad ulterated, durable products to the customers.

(iv) Help to Solve Social Problems : In modern world many social problems are occurring in the society. Business is a part of the society and therefore one of the social objectives of business is to help solving the social problems.

(v) Employment Generation : A business can provide employment to many people. It becomes the social objective of the business to generate more and more employment. This will help to reduce the problem of poverty and unemployment.

(vi) Welfare of Employees : Employees is an integral part of any organisation. Business cannot function without the employees. It is therefore the responsibility of the businessman to provide better working conditions to employees. Better working conditions help to improve the productivity of the employees.

Question 4.
Explain the importance of profit in business.
Answer:
Business is such activity which involves earning profit. Any business organisation, whether small or large, production unit or service industry; works for getting maximum profit. Profit plays a very important role in business.
The role of profit is explained below:
(i) Growth and Expansion : Profit acts as an internal source of raising funds. Business can keep aside excess profit and use it for its own expansion or diversification purpose. Expansion results into more profit, which can be used for other purposes.

(ii) Research and Development : When a business gets good profits it can spend money on research and development. Research and development helps to find out the processes that help to reduce the cost of production and provide better quality products. This helps to increase the production ultimately resulting in increase in profit.

(iii) Returns to lnvestors: The owner of business needs returns on the money he has invested in the business. These returns are in the form of profit. If there are good profits, the businessman gets fair returns on his investment.

(iv) Means of Livelihood : A biusiness is mainly carried on for getting the livelihood. A result of business is profit. Thus the main role of profit is to help the businessman earn his living.

(v) Increasing Efficiency : Profit acts as a motivating factor. A businessman who is working hard for the business and gets substantial profits gets a motivation to work hard. Profit thus helps in increasing the efficiency. Similarly an employer can give good remuneration to the employees when there is good profit. This helps to increase the efficiency of the employee also.

(vi) Reward for Risks : Every business is exposed to various types of risks. A businessman has to consider these risks. As a businessman takes risks and performs business activities, buyers get the necessary commodities. The result of these business activities is profit. Profit in this case acts a reward for the risk taken by the businessman.

(vii) Survival: The most important role of profit is to help the business to carry on the activities continuously. Survival of business depends upon the continuous supply of finance. Profit enables business to continue with the uninterrupted supply of funds.

Thus profit plays a vital retie in the business. Profit is an inevitable part in every business. It helps a businessman to earn his livelihood, carry on research and development activities and most importantly survival of the business.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 12 Correspondence with Statutory Authorities Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 12 Correspondence with Statutory Authorities

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
_____________ is the main authority to regulate the administration of Companies Act, 2013 in India.
(a) MCA
(b) Company Secretary
(c) Board of Directors
Answer:
(a) MCA

Question 2.
The headquarters of MCA is at _____________
(a) Mumbai
(b) New Delhi
(c) Pune
Answer:
(b) New Delhi

Question 3.
To administer the provisions of the Companies Act, 2013 is the objective of _____________
(a) MCA
(b) ROC
(c) Directors
Answer:
(a) MCA

Question 4.
_____________ is responsible for registering companies.
(a) ROC
(b) SEBI
(c) Auditors
Answer:
(a) ROC

Question 5.
The Certificate of Incorporation is issued by _____________
(a) ROC
(b) MCA
(c) NCLT
Answer:
(a) ROC

Question 6.
_____________ can strike off or remove the name of a company from the Register of Companies.
(a) MCA
(b) ROC
(c) SEBI
Answer:
(b) ROC

Question 7.
Central Government exercises administrative control over ROCs through the _____________
(a) MCA
(b) SEBI
(c) Regional Directors
Answer:
(c) Regional Directors

Question 8.
_____________ is the quasi-judicial body set up by the Central Government to grant certain approvals and decide disputes under the provisions of the Companies Act.
(a) MCA
(b) ROC
(c) NCLT
Answer:
(c) NCLT

Question 9.
_____________ can hear appeals against the orders issued by NCLT.
(a) NCLAT
(b) SEBI
(c) MCA
Answer:
(a) NCLAT

Question 10.
An appeal against the order of NCLAT can be filed in the _____________
(a) MCA
(b) SEBI
(c) Supreme Court
Answer:
(c) Supreme Court

Question 11.
_____________ was established as a statutory body to regulate the securities market in India.
(a) NCLT
(b) MCA
(c) SEBI
Answer:
(c) SEBI

Question 12.
_____________ regulates the functioning of Stock Exchange in India.
(a) SEBI
(b) MCA
(c) ROC
Answer:
(a) SEBI

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Administration of Companies Act, 2013	(1) SEBI
(b) ROC	(2) Hears appeals against orders of NCLT
(c) NCLAT	(3) NCLT
(d) Regulator of Securities Market	(4) Incorporation of companies
(e) Quasi-judicial body	(5) MCA
	(6) Board of directors
	(7) Companies Act 2013
	(8) Regional Director
	(9) Chennai
	(10) Liquidator

Answer:

Group ‘A’	Group ‘B’
(a) Administration of Companies Act, 2013	(5) MCA
(b) ROC	(4) Incorporation of companies
(c) NCLAT	(2) Hears appeals against orders of NCLT
(d) Regulator of Securities Market	(1) SEBI
(e) Quasi-judicial body	(3) NCLT

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
The main authority is concerned with the administration of the Companies Act.
Answer:
MCA

Question 2.
The organization is responsible for administering the Companies Act and regulating professional bodies like ICAI, ICSI, etc.
Answer:
MCA

Question 3.
The authority which issues Certificate of Incorporation to company.
Answer:
ROC

Question 4.
Every company has to apply for incorporation to this authority situated in the state where its head office is to be located.
Answer:
ROC

Question 5.
The authority that handles corporate civil disputes in India.
Answer:
NCLT

Question 6.
An appeal against the orders of NCLT is heard by this authority.
Answer:
NCLAT

Question 7.
Regulator of the securities market in India.
Answer:
SEBI

Question 8.
An institution that regulates the functioning of stock exchanges and intermediaries in the securities market.
Answer:
SEBI

1D. State whether the following statements are True or False.

Question 1.
MCA regulates the functioning of the corporate sector as well as administers the Companies Act.
Answer:
True

Question 2.
MCA has no supervisory authority over professional bodies like ICSI, ICAI, etc.
Answer:
False

Question 3.
ROC is concerned with the registration of companies.
Answer:
True

Question 4.
On payment of fees, ROC allows the public to inspect certain documents filed with it.
Answer:
True

Question 5.
NCLT has jurisdiction over proceedings on matters of disputes arising under the Companies Act.
Answer:
True

Question 6.
NCLAT can hear appeals against the order of NCLT.
Answer:
True

Question 7.
NCLAT may confirm, modify or reject the orders passed by the NCLT.
Answer:
True

Question 8.
SEBI protects the interest of investors in the securities market.
Answer:
True

Question 9.
ROC is the regulator of the securities market.
Answer:
False

1E. Complete the sentences.

Question 1.
Administration of Companies Act and other laws related to corporate world is the responsibility of _____________
Answer:
MCA (Ministry of Corporate Affairs)

Question 2.
Registration of companies is done by _____________
Answer:
ROC (Registrar of Companies)

Question 3.
The authority which handles corporate civil disputes is called as _____________
Answer:
NCLT (National Company Law Tribunal)

Question 4.
The authority which hears appeals against the orders of NCLT is called as _____________
Answer:
NCLAT (National Company Law Appellate Tribunal)

1F. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Regulator of Securities Market	……………………….
(2) MCA	……………………….
(3) ……………………	Hears appeals against orders of NCLT

(NCLAT, Administers Companies Act, SEBI)
Answer:

Group ‘A’	Group ‘B’
(1) Regulator of Securities Market	SEBI
(2) MCA	Administers Companies Act
(3) NCLAT	Hears appeals against orders of NCLT

1G. Answer in one sentence.

Question 1.
Name the authority which administers the Companies Act and Partnership Act.
Answer:
MCA (Ministry of Corporate Affairs).

Question 2.
Name the authority attached to the High Court which helps in the winding up of companies.
Answer:
The authority attached to the High Court which helps in the winding up of Companies is the Official Liquidator.

1H. Correct the underlined word and rewrite the following sentences.

Question 1.
ROC supervises and controls the operations of stock exchanges in India.
Answer:
SEBI supervises and controls the operation of stock exchanges in India.

Question 2.
An appeal can be made against the order issued by NCLT to NCLAT within 90 days.
Answer:
An appeal can be made against the order issued by NCLT to NCLAT within 45 days.

2. Explain the following terms/concepts.

Question 1.
Ministry of Corporate Affairs (MCA)
Answer:

• The MCA is primarily concerned with the administration of the Companies Act, 2013.
• The MCA is responsible to prevent practices from having an adverse effect on competition, to promote and sustain competition in markets.
• MCA supervises certain professional bodies like the Institute of Chartered Accountants of India. (ICAI), Institute of Company Secretaries of India (ICSI), Institute of Cost Accountants of India.
• It works with the help of Regional Directors, ROC, and Official Liquidator.

Question 2.
Registrar of Companies (ROC)
Answer:
The Registrar of Companies (ROC) is an office under the Ministry of Corporate Affairs (MCA) which deals with the administration of Companies and Limited Liability Partnerships in India.

• At present 22 Registrar of Companies is operating in all major states.
• States like Tamilnadu and Maharashtra have more than one ROC.
• ROC is a full-time field officer who has wide powers and responsibilities in administering the Companies Act.
• ROC has to examine various documents filed with it by the companies in compliance with the Companies Act, 2013.
• The ROC has to take decisions on documents filed with it and reply within 30 days from the date of filing the documents.

Question 3.
National Company Law Tribunal (NCLT)
Answer:

• The Central Government has constituted National Company Law Tribunal in June 2016.
• It is a quasi-judicial body, which grants approvals and handles Corporate Civil Disputes.
• The Tribunal operates through 15 ‘Benches’ consisting of 2 members i.e. a judicial member and a technical member.
• The Tribunal has to dispose of every application or petition within 3 months of receiving it.
• An appeal against the order of NCLT can be made to National Company Law Appellate Tribunal (NCLAT).

Question 4.
National Company Law Appellate Tribunal (NCLAT)
Answer:
National Company Law Appellate Tribunal was constituted for hearing appeals against the orders of the National Company Law Tribunal.

• NCLAT is also the Appellate Tribunal for hearing appeals against the order passed by the Insolvency and Bankruptcy Board of India.
• It is headed by a chairperson and has a maximum of 11 members comprising of judicial and technical members.
• An appeal can be made against the order issued by NCLT to NCLAT within 45 days.
• An appeal can be made against the orders of NCLAT to Supreme Court within 60 days.

Question 5.
Securities and Exchange Board of India (SEBI)
Answer:

• SEBI was established in 1992 as a statutory body to regulate the Securities Market in India.
• Its head office is in Mumbai.
• It supervises and controls the operations of Stock Exchanges, Companies issuing securities, and other intermediaries like Underwriters, Merchant Bankers, Brokers, etc.
• It protects and safeguards the interest of the investors in the security market.
• The main objective is to regulate the functioning of securities markets and stock exchanges.
• It develops a code of conduct for fair practices by intermediaries.

3. Answer in brief.

Question 1.
State the powers of ROC.
Answer:
The Registrar of Companies (ROC) is an office under the Ministry of Corporate Affairs (MCA) which deals with the administration of Companies and Limited Liability Partnerships in India. At present 22 Registrar of Companies is operating in all the major states. States like Tamilnadu and Maharashtra have more than one ROC. ROC is a full-time field officer who has wide powers and responsibility in administering the Companies Act.

Following are the powers of ROC:

• To extend the time of the Annual General Meeting other than the first AGM by a period not more than 3 months.
• To inspect or call for books of account, other books, and papers.
• To seek in writing any information or explanation with regard to any document furnished to ROC.
• Seek the Special Court to issue an order for seizure of books and papers of the company, if the ROC feels that such records may be destroyed, altered, or falsified.
• To strike off the name of a company from the Registrar of Companies.

Question 2.
State the powers of NCLT.
Answer:
Meaning of NCLT:
The Central Government has constituted National Company Law Tribunal in June 2016. The NCLT is a quasi-judicial body, which grants approvals and handles Corporate Civil disputes.

Powers of NCLT:

• To hear and decide all proceedings related to compromise, arrangement, and reconstruction of a company.
• To hear and decide all winding up petitions on the ground of inability to pay its debts and on other grounds.
• To hear and decide petition for an extension of time for repayment of deposits.
• To hear and decide cases pertaining to oppression and mismanagement of a company.
• To call for holding AGM or EOGM of a company.
• To direct a company not to dispose of funds of a company and to freeze the assets of a company for being used against the interest of the company.
• To hear and decide grievances of rejection in transferring shares and securities.

Question 3.
What are the objectives of MCA?
Answer:
The MCA is primarily concerned with the administration of the Companies Act, 2013.
It frames the rules and regulations for regulating the functioning of the corporate sector in accordance with the law.

Objectives of MCA:

• To administer the provisions of the Companies Act, 2013, and other allied laws.
• To quickly identify non-compliance with the Companies Act.
• To encourage companies to improve Corporate Governance and adopt responsible business practices.
• To promote fair competition.
• To make available to the public, corporate data.
• To offer various services to the stakeholders.

4. Justify the following statements.

Question 1.
The MCA was set up by Central Government to fulfill certain objectives.
Answer:
The MCA is primarily concerned with the administration of the Companies Act, 2013.
It frames the rules and regulations for regulating the functioning of the corporate sector in accordance with the law.

Objectives of MCA:

• To administer the provisions of the Companies Act, 2013, and other allied laws.
• To quickly identify non-compliance with the Companies Act.
• To encourage companies to improve Corporate Governance and adopt responsible business practices.
• To promote fair competition.
• To make available to the public, corporate data.
• To offer various services to the stakeholders.

Question 2.
The Companies Act, 2013 has given certain Powers to ROC.
Answer:
The Registrar of Companies (ROC) is an office under the Ministry of Corporate Affairs (MCA) which deals with the administration of Companies and Limited Liability Partnerships in India. At present 22 Registrar of Companies is operating in all the major states. States like Tamilnadu and Maharashtra have more than one ROC. ROC is a full-time field officer who has wide powers and responsibility in administering the Companies Act.

Following are the powers of ROC:

• To extend the time of the Annual General Meeting other than the first AGM by a period not more than 3 months.
• To inspect or call for books of account, other books, and papers.
• To seek in writing any information or explanation with regard to any document furnished to ROC.
• Seek the Special Court to issue an order for seizure of books and papers of the company, if the ROC feels that such records may be destroyed, altered or falsified.
• To strike off the name of a company from the Registrar of Companies.

Question 3.
The Central Government has empowered NCLT with certain powers.
Answer:
Meaning of NCLT:
The Central Government has constituted National Company Law Tribunal in June 2016. The NCLT is a quasi-judicial body, which grants approvals and handles Corporate Civil disputes.

Powers of NCLT:

• To hear and decide all proceedings related to compromise, arrangement, and reconstruction of a company.
• To hear and decide all winding up petitions on the ground of inability to pay its debts and on other grounds.
• To hear and decide petition for an extension of time for repayment of deposits.
• To hear and decide cases pertaining to oppression and mismanagement of a company.
• To call for holding AGM or EOGM of a company.
• To direct a company not to dispose of funds of a company and to freeze the assets of a company for being used against the interest of the company.
• To hear and decide grievances of rejection in transferring shares and securities.

5. Attempt the following.

Question 1.
Write a letter to ROC seeking an extension of time to hold the AGM.
Answer:

STARTRACK LIMITED Registered Office: Galaxy House Rainbow Township, Mira Road, Mumbai – 400609 CIN: L13471 MH 2012 PLC 000222 Phone: 022-22135649, 91-9910190332 Website: www.startracklimited.com Email: startrack@limited.com Date: 30th July 2019. Ref No: ROC/AGM – 99. The Registrar of Companies Churchgate, Mumbai – 400019. Sub: Extension of time for holding 6th Annual General Meeting. Dear Sir, As per the Companies Act, 2013, our Company must hold its 6th Annual General Meeting on or before 30th September 2019, for the financial year ending on 31st March 2019 We are extremely sorry to inform, that due to most of our directors are on travel abroad during that period, we will not be able to hold the Annual General Meeting before 30th September 2019. We, therefore, request you to grant us an extension period of two months for holding the said AGM i.e. up to 30th November 2019. We will be highly obliged if you grant us the permission to extend the said meeting. Thanking you, Yours faithfully, for STAR TRACK LIMITED. Sign Company Secretary Encl: Copy of Annual Report 2017-18.

Question 2.
Write a letter to MCA with regard to ‘Ticket Raising’.
Answer:

STARTRACK LIMITED Registered Office: Galaxy House Rainbow Township, Mira Road, Mumbai – 400609 CIN: L13471 MH 2012 PLC 000222 Phone: 022-22135649, 91-9910190332 Website: www.startracklimited.com Email: startrack@limited.com Date: 1st April 2019. Ref No: MCA/ST – 19 The Manager (Web-service Dept) Vaibhav Apartment, Vaibhav Nagar, New Delhi – 110003 Sub: Difficulty in downloading e-form. Dear Sir, This is to inform you that company is intending to download e-form (Form SH-7) to intimate the ROC about the alteration made in the share capital of our company. However, we are not able to download the form due to some technical error, and the message that pops up on pressing the ‘ENTER’ button is “The file is damaged and cannot be repaired”. In spite of our repeated effort, we are not able to download the form. So we earnestly request you to look into the matter at your earliest. Also, let us know the next step to resolve the above matter. Thanking you, Yours faithfully, for STAR TRACK LIMITED. Sign Company Secretary Encl: Copy of message as appearing on the website.

Question 3.
Write a reply to a complaint by the Investor.
Answer:

STARTRACK LIMITED Registered Office: Galaxy House Rainbow Township, Mira Road, Mumbai – 400609 CIN: L13471 MH 2012 PLC 000222 Phone: 022-22124745, 91-9920380555 Website: www.startracklimited.com Email: startrack@limited.com Date: 2nd June 2019. Ref No: IC/ 219. Ms.Vaishali Rane, Birla House, Bhagwati Road, Kandivli (W). Mumbai – 400018. Sub: Non-Receipt of Annual Report. Dear Sir, We are in receipt of your letter dated 20th May 2019 regarding the non-receipt of the Annual Report. As per the Companies Act, 2019, we have sent by post to all the members, the notice of 8th AGM along with the Annual Report well in advance, as per the address provided by you in our Register of Members. It is however unfortunate to know that you have not received the Notice and the Annual report. We are once again sending you the same to the address mentioned in your letter. Yours faithfully, for STAR TRACK LIMITED Sign Company Secretary Encl: Annual Report 2018-19 CC to: SEBI

Question 4.
Write a letter to NCLT seeking an extension of time to repay Public Deposits.
Answer:

STARTRACK LIMITED Registered Office: Galaxy House Rainbow Township, Mira Road, Mumbai – 400609 CIN: L13471 MH 2012 PLC 000222 Phone: 022-22135649, 91-9910190332 Website: www.startracklimited.com Email: startrack@limited.com Date: 30th July 2019. Ref No: NCLT/99 The National Company Law Tribunal Board. ‘C’ wing, 25th Floor, Priyadarshini Bhavan, M.G. Road, New Delhi – 110004. Sub: Extension of time to repay Pubic Deposit. Sir, The company had accepted Public Deposits worth 20 lacs on 1st April 2016 for a period of two years. The Deposits are to be repaid on or before 31st March 2018. However, as the company is passing through financial problems, we are is unable to repay deposits on the above-mentioned date. The board held a meeting on 29th December 2017 and passed a resolution for seeking an extension from NCLT for a period of three months, to repay deposits. Therefore, we request you to grant us an extension for three months to repay it. Copy of the petition is attached in two sets. We assure you that the company will pay the deposits on or before 30th June 2019. Yours faithfully, for STAR TRACK LIMITED Sign Company Secretary Encl: Certified copy of Board Resolution. Petition for Extension of time. Challan for fees paid.

 

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 11 Correspondence with Banks Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 11 Correspondence with Banks

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
A company usually opens _____________ account in a bank.
(a) Current
(b) Saving
(c) Recurring
Answer:
(a) Current

Question 2.
Bank is a _____________ institution.
(a) financial
(b) social
(c) cultural
Answer:
(a) financial

Question 3.
The appointment of banker is usually made by the _____________
(a) Board of Directors
(b) Secretary
(c) Chairman
Answer:
(a) Board of Directors

Question 4.
Resolution for opening Bank Account is passed in the _____________ meeting.
(a) Board
(b) Statutory
(c) Annual General
Answer:
(a) Board

Question 5.
Bank provides overdraft facility to _____________ account holder.
(a) Current
(b) Saving
(c) Fixed Deposit
Answer:
(a) Current

Question 6.
_____________ is used for depositing cash into a bank account.
(a) Pay-in-slip
(b) Withdrawal slip
(c) Cheque
Answer:
(a) Pay-in-slip

Question 7.
Borrowing/Accepting and lending money are considered as _____________ functions of bank.
(a) Primary
(b) Secondary
(c) Agency
Answer:
(a) Primary

Question 8.
Withdrawals are not permitted from the _____________ deposit account.
(a) Fixed
(b) Current
(c) Savings
Answer:
(a) Fixed

Question 9.
_____________ account is suitable to salaried people.
(a) Savings
(b) Current
(c) Fixed
Answer:
(a) Savings

Question 10.
Generally Interest is not paid on _____________ deposit account.
(a) Current
(b) Saving
(c) Fixed
Answer:
(a) Current

Question 11.
A deposit which is kept for fixed period in bank is called _____________ deposit.
(a) Fixed
(b) Current
(c) Recurring
Answer:
(a) Fixed

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Lost cheque	(1) Board of Directors
(b) Appointment of Banker	(2) Higher rate of interest
(c) Cash credit	(3) Used for depositing cash and cheque
(d) Fixed Deposit Account	(4) Stop Payment
(e) Savings Account	(5) Restrictions on withdrawals
(f) Pay-in-slip	(6) Separate Account
(g) Overdraft facility	(7) Current Account
	(8) Recurring Account
	(9) Shareholders
	(10) No interest is paid
	(11) Used for withdrawing amount from the account
	(12) Long term credit facility
	(13) Certain restrictions on withdrawals
	(14) Dealing in foreign exchange

Answer:

Group ‘A’	Group ‘B’
(a) Lost cheque	(4) Stop Payment
(b) Appointment of Banker	(1) Board of Directors
(c) Cash credit	(6) Separate Account
(d) Fixed Deposit Account	(2) Higher rate of interest
(e) Savings Account	(5) Restrictions on withdrawals
(f) Pay-in-slip	(3) Used for depositing cash and cheque
(g) Overdraft facility	(7) Current Account

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
A slip is used for depositing cash and cheque in the Bank account.
Answer:
Pay-in-slip

Question 2.
Permission to withdraw excess amount from Current Account.
Answer:
Overdraft

Question 3.
Separate loan account under which the short-term loan facility is given by the bank to the business.
Answer:
Cash credit

Question 4.
The short-term credit facility is given by the bank to the current account holder.
Answer:
Overdraft

Question 5.
The account is generally opened by the business organization.
Answer:
Current Account

Question 6.
The request of Secretary to the bank not to make the payment of the cheque.
Answer:
Stop payment request

Question 7.
The type of account for which a higher rate of interest is paid to bank depositors.
Answer:
Fixed Deposit Account

Question 8.
The slip is used for withdrawing money from Savings Account.
Answer:
Withdrawal Slip

Question 9.
Negotiable Instrument which can be discounted with the bank.
Answer:
Bill of exchange

1D. State whether the following statements are True or False.

Question 1.
Joint Stock Company opens Current Account.
Answer:
True

Question 2.
Generally, no interest is paid by the bank on the Current Account.
Answer:
True

Question 3.
In cash credit, the customer’s account is credited by the bank with the sanctioned amount.
Answer:
True

Question 4.
Board resolution is not required to open the Current Account with the bank.
Answer:
False

Question 5.
The bank account of the company is operated by shareholders.
Answer:
False

Question 6.
Overdraft facility is granted to Savings account holders.
Answer:
False

Question 7.
Bank correspondence should be brief and to the point.
Answer:
True

Question 8.
It is necessary to instruct the bank to stop the payment of a cheque that is lost.
Answer:
True

Question 9.
A bank overdraft facility is a long-term facility.
Answer:
False

Question 10.
Banks grant long-term loans only.
Answer:
False

1E. Find the odd one.

Question 1.
Saving Deposit, Recurring Deposit, Cash Credit. Fixed Deposit
Answer:
Cash Credit

Question 2.
Overdraft, Fixed Deposit, Discounting of Bills, Cash Credit
Answer:
Fixed Deposit

1F. Complete the sentences.

Question 1.
A financial institution which receives deposits and lends money is called as _____________
Answer:
Bank

Question 2.
Accepting deposits and lending money are the primary functions of _____________
Answer:
Commercial Bank/Bank

Question 3.
A facility under which a customer can overdraw money from his account is called as _____________
Answer:
Overdraft facility

Question 4.
Overdraft facility is given to _____________
Answer:
Current Account Holder

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Overdraft	…………………………
(2) Primary Function	………………………..
(3) International Trade Transactions	………………………..
(4) ………………………	Current Account

(Accepting Deposits, Current Account, Letter of Credit, Businessman)
Answer:

Group ‘A’	Group ‘B’
(1) Overdraft	Current Account
(2) Primary Function	Accepting Deposits
(3) International Trade Transactions	Letter of Credit
(4) Businessman	Current Account

1H. Answer in one sentence.

Question 1.
What is a Letter of Credit?
Answer:
A letter of credit is a payment method generally used for international trade transactions. Letter of credit is issued by a bank on behalf of its client, promising to pay a certain amount of money to the seller, in case the buyer fails to pay it.

Question 2.
Which facility is given to the Current Account holder?
Answer:
Overdraft facility is given to Current Account Holder by the Bank.

Question 3.
What do you mean by stop payment of cheque?
Answer:
When a cheque is issued by the company, there is a possibility of misplacement of the cheque or loss in transit. Then it is necessary to inform the bank to stop payment of such cheque.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
Accepting deposits is the secondary function of Banks.
Answer:
Accepting deposits is the primary function of Banks.

Question 2.
Businessman opens Fixed Deposit Account.
Answer:
Businessman opens Current Account.

Question 3.
Under cash credit facility businessman/account holder can overdraw from his account.
Answer:
Under an overdraft facility, a businessman/account holder can overdraw from his account.

2. Explain the following terms/concepts.

Question 1.
Bank
Answer:
A bank is a financial institution, in which people deposit their idle or surplus cash, and those who need funds borrow from banks.

Question 2.
Demand Deposits
Answer:
The deposits which are repayable on demand are called Demand Deposits.

Question 3.
Time Deposits
Answer:
The deposits which are not repayable on demand are called Time Deposits.

Question 4.
Savings Deposits
Answer:
To encourage saving habit among the people, the bank allows depositors to open a savings account. There are restrictions on the frequency and amount of withdrawals.

Question 5.
Current Deposits
Answer:
This account is normally opened by businessmen, firms, or companies. There is no limit on the amount or number of withdrawals.

Question 6.
Recurring Deposits
Answer:
The account which encourages the customers to make regular savings and to deposit a fixed sum of money for a specific period of time is called Recurring Deposits.

Question 7.
Fixed Deposits
Answer:
Fixed Deposits are the deposits received for a fixed period. The rate of interest is high for fixed deposits. The longer the period of deposit, the higher is the rate of interest.

Question 8.
Loans
Answer:
A loan granted for a specific time period against personal security, gold or silver, and other moveable or immovable assets is called a term loan.

Question 9.
Advances
Answer:
Advances is a credit facility provided by the bank to its customers. It differs from loans in the sense that loans may be granted for a longer period, while advances are for a shorter period.

Question 10.
Cash Credit
Answer:
Under a cash credit facility, a bank allows the borrower to withdraw amounts up to the specified limit. Such credits are allowed against the security of stock of raw material, finished goods, etc.

Question 11.
Overdraft
Answer:
It is a facility where the bank allows its customers to overdraw an amount up to a particular limit. Such facility is allowed against collateral securities like shares, FDR, LIC Policy, etc.

Question 12.
Discounting of Bill
Answer:
It is a short-term finance facility provided by the bank to its customers by allowing discounting of bills and making payment of bills before their due date.

Question 13.
Letter of Credit
Answer:
A letter of credit is a payment method generally used for international trade transactions. A letter of credit is issued by a bank on behalf of its client, promising to pay a certain amount of money to the seller in case the buyer fails to pay it.

Question 14.
Stop payments of cheque
Answer:
When a cheque is sent by the Company, there is a possibility of misplacement of cheque or loss in transit. In that case, it is necessary to inform the bank to stop the payment of such cheques.

3. Distinguish between the following.

Question 1.
Current Account and Savings Account.
Answer:

Basis	Current Account	Savings Account
1. Meaning	It is a type of bank account that is generally opened by the businessman to carry out their business activities.	It is a type of bank account which is opened by salaried and household people with an aim of saving their part of the income and earn interest.
2. Withdrawals	There are no restrictions on the number of withdrawals. They can withdraw money by cheque.	There are restrictions over the number of withdrawals. They can withdraw money either by cheque or by withdrawal slip.
3. Facilities	Such account holder gets the facilities of Passbook, Cheque Book, Statement of Account and Pay-in-Slip Book.	Such account holders get the facilities of Passbook, Cheque Book, and Pay-in-Slip Book.
4. Rate of Interest	Generally, no interest is allowed on the Current Account. If it is allowed it is a very nominal rate.	The rate of interest on the Saving Account is higher than the Current Account but less than fixed deposits.
5. Overdraft facility	Overdraft facility is allowed to Current Account holders.	Overdraft facility is not allowed to Saving Account holder.
6. Suitability	It is suitable for traders, business firms, and institutions.	It is suitable for salary earners, households, and fixed income groups.

Question 2.
Loan and Overdraft
Answer:

Basis	Loan	Overdraft
1. Meaning	Amount granted for a specific period of time, against personal security, gold or silver, and other movable or immovable assets is called a loan.	Overdraft is a credit facility granted by the bank to Current account holders. Under an overdraft facility, the bank allows its customers to overdraw an amount up to a particular limit.
2. Eligibility	Savings account, Fixed, Recurring, and Current account holders are eligible for the loan facilities.	Only Current account holders are eligible for an overdraft facility.
3. Duration	The loan is a long period facility.	Overdraft is a short period facility.
4. Purpose	The purpose is to meet long-term requirements.	The purpose is to meet short-term working capital requirements.
5. Repayment	The amount of the loan may be repaid in installments or in a lump sum on its due date.	The amount of overdraft is adjusted against the balance of Deposits in the Current account.
6. Security	It is provided against personal security, gold or silver, and other movable or immovable assets.	It is provided against collateral securities like shares, FDR, LIC Policy, etc.

Question 3.
Fixed Deposit Account and Recurring Deposit Account.
Answer:

Basis	Fixed Deposit Account	Recurring Deposit Account
1. Meaning	Fixed Deposits are the deposits received for a fixed period of time.	A Recurring Deposit account is that account where depositors regularly deposit a fixed amount for a specific period of time.
2. Facilities	The bank gives a Fixed Deposit Receipt to the Fixed Deposit holders.	The bank gives a Pass Book and Pay-in-Slip book to Recurring Deposit holders.
3. Rate of Interest	The rate of interest allowed is higher. The longer the period of deposit, the higher will be the rate of interest.	The rate of interest is less than Fixed Deposit Account.
4. Suitability	It is suitable for those people having surplus income in hand.	It is suitable for fixed-income groups and lower-income groups.

4. Answer in brief.

Question 1.
What are the points to be kept in mind by a Secretary while corresponding with Banks?
Answer:
The following precautions must be taken by the secretary while corresponding with banks:

• Prompt reply: For any correspondence with the bank, the reply must be sent without delay is the responsibility of a secretary.
• Brevity/Conciseness: Secretary should provide maximum information in minimum words. A letter should not be lengthy. Unnecessary details, irrelevant information or explanation, lengthy paragraphs should be avoided.
• Courtesy: The letter to the bank should show empathy, respect, and mutual understanding. It is helpful for getting favourable responses and built up goodwill for the organization.
• Accuracy: While corresponding with Bank ‘Accuracy’ and ‘Perfectness’ are very important. Whatever information or data provided must be accurate. No haphazard remarks or statements are to be made.
• Clarity: The secretary must provide true, factual updates and clear information about his organization to the banker. Clarity is required to avoid misunderstandings with bankers.

Question 2.
Under what circumstances will a secretary correspond with the Banks?
Answer:
The following are the circumstances under which a secretary has to correspond with the banks:
(i) Letter for opening a Current Account with the Bank:
The decision of opening a Current account is taken in the Board meeting by passing a resolution. The Board instructs the secretary for opening a Current account. The Secretary has to write a letter to the Bank accordingly and enclose the necessary documents.

(ii) Letter requesting a bank to stop payment of cheque:
When cheques are sent by Companies, there are possibilities of misplacement of cheques or loss in transit. Thus, it is necessary to inform the bank to stop the payment of such cheques.

(iii) Letter requesting a Bank for granting an overdraft facility:
Certain credit facilities are provided by the Bank to their customers. The Bank allows a Current Account holder to withdraw excess amount than the available balance. Secretary has to correspond with the bank to prevail this facility.

(iv) Letter requesting bank to issue a letter of credit:
A letter of credit is a payment method generally used for international trade transactions. Letter of credit is issued by Bank on behalf of its client promising to pay a certain amount of money to the seller in case the buyer fails to pay it. Secretary has to correspond with the bank to obtain this letter of credit.

Question 3.
State the agency functions of Banks.
Answer:
Agency functions of banks are part of secondary functions.
Following are the agency functions of the Bank:

• Bank collects the cheques and Bill of Exchange on behalf of the customers or account holders.
• Bank collects dividends, interest, and salary and credits the account holder’s account.
• Bank makes payment of rent, insurance premium, electricity bill, etc.
• Bank act as a Depository Participant for purchase and sale of securities.
• Transfer of money.
• Fulfill standing instructions of depositors.
• The bank acts as a trustee, an executor of the will, and an attorney for the account holder.
• The bank acts as a Banker to the issue, Lead Manager, etc. for the companies.

Question 4.
State the utility functions of Banks.
Answer:
Commercial Bank provides general utility services to their customers or account holders to attract customers.
Utility functions of Banks are as follows:

• Provide locker facility to customer utility function of banks are as follows.
• Provide a letter of credit facility to account holders for international business transactions.
• Helps to deal in Foreign Exchange.
• Provide Credit cards, Debit cards, and A.T.M. facilities.
• To assist in the purchase and sale of securities.
• Provide traveler’s cheque to customers.

Question 5.
Explain the different types of Deposits.
Answer:
The Bank accepts two types of deposits from the people.
(i) Demand Deposits:
Demand Deposits are deposits, where money is repaid by the bank on the demand made by the depositors or customers of the bank.

Such deposit accounts are:
(a) Savings Deposits:
As the name indicate this account is opened and operated by that person who have regular and fixed income e.g. salary. In order to ‘save’ something out of current income, this account is opened.
Features of this account are:

• It is mainly for saving purposes.
• Money can be withdrawn on demand.
• Minimum balance must be maintained.

(b) Current Deposits:
This account is opened by the businessman, firm, company, etc. for business purposes. There is no limit on the number of withdrawals. Generally, interest is not payable on this account. Overdraft facilities are also allowed to these depositors.

(ii) Time Deposits:
The deposits which are not repayable on demand are called ‘Time Deposits’. These deposits are payable after a specific period of time.

• Fixed Deposits: In this deposit account, a certain sum is kept deposited for a fixed period. A higher rate of interest is paid on Fixed Deposit.
• Recurring Deposits: In this deposit account, the customer deposit’s fixed amount on regular basis for a specific period. The money is deposited periodically. The rate of interest is more than Saving Deposits.

5. Justify the following statements.

Question 1.
The secretary has to correspond with the Banks under certain circumstances.
Answer:
Following are the circumstance under which a secretary has to enter into correspondence with banks:

• Letter for opening a Current account with Bank.
• Letter requesting a bank to stop payment of the cheque.
• Letter requesting a bank for granting overdraft facility.
• Letter requesting a bank to issue a letter of credit.
• Letter to a bank enquiring about new banking facilities.
• Letter to the bank for a long-term loan.
• Thus, the secretary has to correspond with the Banks under certain circumstances.

Question 2.
The secretary should observe certain precautions while corresponding with the Banks.
Answer:
The following precautions must be taken by the secretary while corresponding with the banks:

• Secretary should give a prompt reply.
• Secretary should take care that the letter should not be lengthy.
• Unnecessary details should be avoided.
• Not to use any harsh or rude words while corresponding with the banker.
• Provide true factual updates and clear information about his organization to the bankers.
• Thus, the secretary should observe certain precautions while corresponding with the Banks.

Question 3.
The primary functions of Commercial Banks include-Accepting deposits and Lending funds.
Answer:
The main object of a commercial bank is to accept deposits and lending money to customers or account holders:

• To encourage the people who have surplus funds.
• To encourage the saving habit among the people.
• To give support to businessmen for opening a current account.
• To encourage people to make regular savings.
• To lend loans and advances through various modes i.e. short-term loan, medium-term loan, long term loan, overdraft facility, cash credit facility, and discounting of the bill of exchange, etc.
• Thus, the primary functions of Commercial Banks include-Accepting deposits and Lending funds.

Question 4.
The Bank accepts two types of deposits from the public i.e. Demand and Time Deposits.
Answer:

• The basic aim of the bank is to pool the excess money to the bank and develop the habit of saving amount people.
• Bank accepts deposits in two forms i.e. Demand Deposits and Time deposits.
• Demand Deposits include – Current Deposits and Savings Deposits.
• Time Deposits includes – Fixed Deposits and Recurring Deposits
• Thus, the Bank accepts two types of deposits from the public i.e. Demand and Time Deposits.

Question 5.
There is a difference between Loans and Advances given by the Bank.
Answer:

• Bank lends money in two ways – i.e. Loans and Advance.
• The loan is granted for a specific period of time against personnel security, gold or silver, and other movable or immovable properties.
• Advances is a credit facility provided by the bank to its customers against collateral securities like – shares, Government shares, F.D.R., L.I.C. Policy, Stock of raw materials, or finished goods.
• Loans are granted for a longer period while Advances are granted for a shorter period.
• Loans may be short-term, medium-term, or long-term while advances are in form of overdraft, cash credit, and discounting of bills.
• Thus, there is a difference between Loans and Advances given by the Bank.

Question 6.
Overdraft facility is given only to current depositors.
Answer:
Overdraft is a credit facility allowed to current account holders:

• Under an overdraft facility, the bank allows, customers, to withdraw an amount, up to a particular limit.
• The collateral securities are usually accepted for an overdraft facility.
• The rate of interest charged by commercial banks for overdraft is low.
• Overdraft facility is given only to existing current depositors because they have good relations with the Bank.
• Thus, an overdraft facility is given only to current depositors.

6. Attempt the following.

Question 1.
Write a letter to the bank for opening a Current Account.
Answer:

PRAGAT KRUSHI SEVA COMPANY LTD. Registered office: Milind Sally Manjul, Nashik Pune Highway, Sangamner CIN: H353558 MH 2019 PLO 227244 Phone: 02425 – 223019 Fax: 02425 – 227230 Website: www.pragatksltd.com Email: milinadkulkarni@gmail.com Date: 10th March 2019. Ref No. BlbRbl212019 The Bank Manager, IDBI Bank, New Nagar Road, Jantar Raja Maidan, Sangamner. Sub: Opening of Current Account. Dear Sir, The Board of Directors of a company have passed a resolution on 3rd March 2019 to open a Current Account in your bank in the name of the company i.e. “PRAGAT KRUSHI SEVA COMPANY LTD.” and to appoint you as the company’s banker. Please find enclosed herewith the following documents for the purpose of opening the Current Account of our company. Account opening form duly filled, signed and dated. Certified copy of Memorandum of Association. Certified copy of Articles of Associations. Certified copy of Incorporation Certificate. Certified copy of Board resolution regarding opening a Current Account. Specimen signature of two directors Mr. Maithily Kulkarni and Mr. Ajit Godse and the company secretary Certified copy of the list of present Directors of the company. Duly filled up Pay-in-slip along with ₹ 5,000 (Rupees Five thousand only) in cash as initial deposit. Certified copies of PAN and TAN. Thanking you, Yours Faithfully, for PRAGAT KRUSHI SEVA CO. LTD. (Sign) Company Secretary. Encl: As above

Question 2.
Write a letter to the bank to stop the payment of the cheque.
Answer:

AVANI GLASS LIMITED COMPANY Registered Office: Janata Raja Maidan, Vidya Nagar, Sangamner. CIN: B45453 MH 1992 PCL 123272 Phone: 02425 – 227244 Website: www.avaniglass.com Fax: 02425 – 222340 Email: renukrushna@gmail.com Date: 15th March 2019 Ref. No. B/PC/1/19-20 The Bank Manager, New Nagar Road, Sangamner. Sub: Stop Payment of Cheque No 303592 Ref: Our Account No 30357090414   Dear Sir, It is to bring to your notice, to stop payment of the Cheque no. 303592 dated 10th March 2019 of ₹ 75,000 (Rupee Seventy Five Thousand) issued by the company from Current Account no. 30357090414 in favour of Mr. Krushna Chaudhari, Nashik. The said cheque is reported to be lost by the party. So we kindly request you to stop the payment of the said cheque. We highly regret the inconvenience caused to you and wishing your kind co-operation in the above matter. Thanking you, Yours Faithfully, for AVANI GLASS LIMITED COMPANY (Sign) Company Secretary.

Question 3.
Letter requesting a bank to issue a Letter of Credit.
Answer:

B.K. INDUSTRIES LTD. Registered Office: 240, Apeksh. F.C. Road, Pune 4 CIN: B40418 MH 2010PIL 373078 Phone: 020 – 3070901 Fax: 020 – 3145402 Website: www.BKundu.com Email: unvitkrusha@gmail.com Date: 25th May 2019 Ref. No. BP/23/19-20 The Bank Manager, Bank of Maharastra, F.C. Road, Pune – 4. Sub: Issue of Letter of Credit. Ref: Our Current Account No 020304147911 Dear Sir, We are pleased to inform you that, we want to import printing machine from America. As per the quotation received from Mark Industries, America we have to place an order along with a letter of credit. We, therefore, request you to issue a letter of credit in favor of the said company USD 4,50,0000. This letter may be issued on the basis of the credit balance in our current account and as per the prevailing exchange rate. Kindly issue the letter of credit and oblige. This will enable us to place an order at an early date. Thanking you, Yours Faithfully for B.K. INDUSTRIES LTD. (Sign) Company Secretary.

Question 4.
Write a letter requesting the bank to grant an overdraft facility.
Answer:

JAI MATA GLASS AGENCIES LTD. Registered Office: 285, M.G. Road, Dwarka. Nashik. Phone: 0253 – 27304580 Fax: 0253 – 283048800 Website: jaymata.com Email: jaymata@gmail.com Date: 10th January, 2019 Ref. No. BK/7/20-19 The Manager, RDBI Bank Dwarka, Nashik. Sub: Request for overdraft facility Ref: Account No. 00303540451 Dear Sir, The Board of Directors in their meeting held on 2nd January 2019 has decided to request you to grant our company an overdraft facility up to ₹ 10 lakhs for a period of 5 months from March 2019 to July 2019. We are the manufacturer of Tuffen glass and we have a large export order for which we need to have working capital to fulfill our daily needs. We request you to accept our security of Fixed Deposit worth ₹ 10 lakhs with your bank. We would also like to bring to your notice that we are being your customer for the last 10 years. Expecting your early reply in favor of our overdraft facility. Thanking you, Yours Faithfully, for JAI MATA GLASS AGENCIES LTD. (Sign) Company Secretary

Activity (Textbook Page No. 168)

Visit a Bank and collect the form of opening a bank account and find out. The detail to be filled in and Documents needed to open an account.
Answer:
Yesterday, I visited the IDBI Bank of India, Sangamer Branch.
I collected the account opening form from Mr. Abhay Kulkarni Bank Officer.
The following are the details to be filled in in the Account opening form.

1. Branch Name
2. Date of opening account
3. Branch Address
4. Scheme Codes
5. Account Number
6. Type of Account
7. Full name in Capital Letter
8. Date of Birth
9. Occupation
10. PAN
11. Name of Guardian
12. Relationship with minor
13. Operating instruction
14. Facilities required
15. Statement of Account through
16. Other information
17. Declaration, if any
18. Specimen signature
19. Signature

Document required for opening a Bank Account.

1. Certified copy of Articles of Association and Memorandum of Association.
2. Certified copy of Board Resolution regarding the opening of a Current Account.
3. Specimen signature of Directors and Secretary.
4. List of Directors
5. Certificate of Incorporation.

Balbharati Maharashtra State Board Class 11 Information Technology Solutions Chapter 2 Introduction to DBMS Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Information Technology Solutions Chapter 2 Introduction to DBMS

1. Complete the following activity.

Question 1.
Tick whichever box is not valid.

Answer:

Question 2.
The student wants to create a field Pincode in a table, which data type he will choose?

Answer:
Int

Question 3.
Tick the appropriate box.

Answer:
Uniquely identifies a record

Question 4.
Tick the appropriate circle.

Answer:
One or Many Tables

2. Observe the field names of a database given below in ‘Column A’ related to Bus reservation. Write suitable data types for each field in front of the respective field in ‘Column B’.

Question 1.

Answer:

Column A (Field Name)	Column B (DataType)
Passenger Name	Varchar
Age	Int
Gender	Char
Mobile Number	Int

3. Write the use of the following SQL command.

Question 1.

Answer:

4. Create a table for the information given below by choosing appropriate data types. Specify proper primary key for the table (1) Movie (2) Actor

Question 1.
Movie (Registeration_no, movie_name, Realease_Date)
Answer:
CREATE TABLE Movie (Registeration_no int(20) PRIMARY KEY, movie_name VARCHAR(20), Realease_Date DATE);

Question 2.
Actor (actor_id, Actor_name, birth_date )
Answer:
CREATE TABLE Actor (actor_id int(20) PRIMARY KEY, Actor_name VARCHAR(20), Birth_Date DATE);

5. Consider the following table Stationary. Write SQL commands for the following statements.

Table: Stationary

Question 1.
Write SQL command to create above Table.
Answer:
CREATE TABLE Stationary (S_ID int(20) PRIMARY KEY, S_Name VARCHAR(20), C_Name VARCHAR(20), Price int(20), Quantity int(20));

Question 2.
Write SQL command to insert the above-mentioned record in the table.
Answer:
INSERT INTO Stationary Values (001, ‘Note Book’, ‘ABC’, 20,50);
INSERT INTO Stationary Values (002, ‘Note Book’, ‘XYZ’, 10,80);
INSERT INTO Stationary Values (003, ‘Note Book’, ‘PQR’, 600,02);

Question 3.
To delete the above table.
Answer:
DROP TABLE Stationery;

6. Answer the following questions.

Question 1.
What is a database?
Answer:
A DBMS is a collection of programs (computer-based system) that enables the user to create and maintain a database it is used to define, construct and manipulate the data in the database for various applications. It provides information storage, organization, and retrieval capabilities. The DBMS also enforces necessary access restrictions and security measures in order to protect the database.

Various types of control systems within the DBMS make sure that the database continues to function properly. They Include Integrity system Security system Concurrency control system Recovery control system Some DBMS enables us to define “views” of the database. A view is how the database appears to the user. This enables us to show only the relevant information to different types of users and it increases security, as certain users will not be able to see data which they are not meant to see.

Question 2.
What are the advantages of a DBMS?
Answer:
Advantages of a DBMS:
1. Redundancy is controlled: In File Processing System, duplicate data is created in many places because all the programs have their own files. This creates data redundancy which in turn wastes labor and space. ‘In Database Management System, all the files are integrated into a single database. The whole data is stored only once in a single place so there is no chance of duplicate data.

2. Sharing of Data: In a database, the users of the database can share the data among themselves. There are various levels of authorization to access the data. And consequently, the data can only be shared based on the correct authorization protocols being followed.

3. Data Security: Data Security is a vital concept in a database. Only authorized users should be allowed to access the database and their identity should be authenticated using a username and password. Unauthorized users should not be allowed to access the database under any circumstances as it violates the integrity constraints.

4. Enforces integrity constraints: Constraints are used to store accurate data because there are many users who feed data in the database. Data stored in the database should always be correct and accurate. DBMS provides the capability to enforce these constraints on the database.

5. Provides backup and recovery of data: Data loss is a very big problem for all organizations. In a traditional tile processing system, a user needs to back up the database after a regular interval of time that wastes lots of time and resources. If the volume of data is large then this process may take a very long time.

Question 3.
What do you understand by Data Model?
Answer:
A Database model defines the logical design and structure of a database and defines how data will be stored, accessed, and updated in a database management system. While the Relational Model is the most widely used database model.

Relational Model:
It is the most popular data model in DBMS. The relational model is the primary data model. Which is widely used for data processing. This model has all properties required to Process data with storage efficiency.

Question 4.
What is a primary key?
Answer:
Primary Key: A column in the table that uniquely identifies each row in that table is called a primary key.

Question 5.
What is DDL (Data Definition Language)
Answer:
DDL statements or commands are used to define and modify the database structure of your tables or schema. When you execute a DDL statement, it takes effect immediately.
Some examples of DDL commands are CREATE, ALTER, and DROP.

7. In a company the data is stored in a table under the following fields Employee number, Last name, Date of birth, Address. Which data type will you use for the above field?

Question 1.

Answer:

Field Name	Data Type
Employee Name	Char
Last Name	Char
Address	Varchar
Date of Birth	Date

8. Multiple choice select three correct answers.

Question 1.
Valid relationships in RDBMS are
(a) one to one
(b) one to two
(c) one to many
(d) many to two
(e) many to many
(f) one to three
Answer:
(a) one to one, (c) one to many, (e) many to many

9. Complete the following.

Question 1.

Answer:

Use	Command
To remove access rights or privileges from the database	Revoke
Extracts data from a table	Insert into Select

Balbharati Maharashtra State Board Class 11 Information Technology Solutions Chapter 1 Basics of Information Technology Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Information Technology Solutions Chapter 1 Basics of Information Technology

1. Complete the following activity.

Question 1.

Answer:

Question 2.
Tick the appropriate box.
Internet is a ____________ network connecting millions of computer.

Answer:
Global

Question 3.

Answer:

Question 4.
Tick the appropriate box.

Answer:

Question 5.

Answer:

2. Divide the following list of devices into appropriate categories.

Question 1.
Monitor, Barcode reader, Printer, Keyboard. Optical character reader, Speaker

Answer:

Categories	Names
Input Devices	Barcode reader, Keyboard, Optical Character reader
Output Devices	Monitor, Printer, Speaker

3. Multiple choice two correct answers.

Question 1.
The primary memory consists of ____________ and ____________
(a) Pendrive
(b) Hard Disk
(c) RAM
(d) Scanner
(e) ROM
Answer:
(c) RAM, (e) ROM

Question 2.
The network architectures which are widely used are ____________
(a) Server
(b) Client
(c) Peer to peer
(d) Client-server
(e) Internet
Answer:
(c) Peer to peer, (d) Client-server

4. Match the following.

Question 1.

1. IS	(a) change directory
2. FTP	(b) Translates Network Address
3. CD	(c) List of Directory
4. DNS	(d) To transfer file on interent

Answer:

1. IS	(c) List of Directory
2. FTP	(d) To transfer file on interent
3. CD	(a) change directory
4. DNS	(b) Translates Network Address

5. Name the following and complete the diagram.

Question 1.

Answer:

6. Complete the following with Linux commands with their use.

Question 1.

Answer:

7. Complete the list of the following protocols.

Question 1.

Answer:

8. Complete the following Long form.

Question 1.

Answer:

9. Identify the following activity.

Question 1.
You are typing a letter using a computer and suddenly there is a power failure.
Which type of Memory does this activity deal with?
Answer:
Random Access Memory

10. Answer the following.

Question 1.
What are Data and Information? Give examples of data and information.
Answer:
Data can be any character, text, word, number, or raw facts.
Example of Data:
Mumbai, 1234, Aditya, MG Road, Maharashtra, 9444444441, 411004

Information is data formatted in a manner that allows it to be utilized by human beings in some significant way.
Example of Information:
Aditya, 1234, MG Road, Mumbai 400004, Maharashtra, 944444444114.

Question 2.
Explain functional units of a computer system.
Answer:
The computer system has the following three basic components:
Input Unit:
An input device is any hardware device that sends data to a computer, allowing you to interacts with and controls it. Data can be in the form of words, symbols, numbers, etc. The function of the input device is to direct commands and data into the computer.
For example keyboard, mouse, scanners, digital cameras, joysticks, and microphones.

Central Processing Unit:
After receiving data and commands from the user, a computer system has to process the instructions provided using Central Processing Unit (CPU). It has three elements:

(a) Arithmetic and Logic Unit: An arithmetic logic unit (ALU) is a major component of the central processing unit of a computer system. It does all processes related to arithmetic and logic operations like add, subtract, multiply, etc.

(b) Control Unit: The control unit (CU) is a component of a computer’s central processing unit (CPU) that directs the operation of the processor. It tells the computer’s memory, arithmetic, and logic unit, and input and output devices how to respond to the instructions that have been sent to the processor.

(c) Memory Unit: A memory unit is the amount of data that can be stored in the storage unit. Once the data has been entered using input devices, the system stores the data in the memory unit.

Types of Memory: Primary Memory & Secondary Memory.

• Primary Memory: It has 18 internal memory of the computer also known as main memory. It is of two types RAM and ROM.
• RAM (Random Access Memory): RAM stands for Random Access Memory also known as reading/write memory. Information stored in this memory is lost as the power supply to the computer is switched off; it is also called “Volatile Memory”.
• ROM(Read Only Memory): ROM stands for Read-Only Memory. ROM is a permanent type of memory. The contents are not lost as the power supply to the computer is switched off. ROM cannot be overwritten by the computer. It is also called “Non Volatile Memory”.
• Secondary Memory: It is the external memory of the computer which is used to store a large amount of data. The secondary storage devices are a Hard disk, Pen drive, CD, DVD, etc.

Output Unit:
An output device is any device used to send data from a computer to another device or user. Most computer data output that is ‘meant for humans is in the form of audio or video. Thus, most output devices used by humans are in these categories. Examples include monitors, projectors, speakers.

Question 3.
What is a storage unit? Explain types of primary memory storage.
Answer:
When a user enters data using input devices, the computer system stores this data in a memory unit i.e. storage unit. The storage unit uses a set of pre-programmed instructions to further transmit this data to other parts of the CPU. There are two types of memory

• Primary Memory
• Secondary Memory

RAM: It stands for Random Access Memory. RAM is known as reading/write memory. It is the main memory of the computer system. The information stored in this memory is lost as the power supply to the computer is switched off, so it is also called as “Volatile Memory”.

ROM: It stands for Read-Only Memory. ROM is permanent memory. The content is not lost when the power supply is switched off. ROM cannot be overwritten by the computer, so it is also called “Non-Volatile Memory”.

Question 4.
Explain how Linux is different from Windows.
Answer:

• Linux is open sources system whereas the window operating system is commercial.
• Linux has access to source code and alters the code as per user need whereas a window does not have access to source code.
• Linux distribution doesn’t collect user data” whereas Windows collects all the user details which leads to privacy concerns.
• As the software is open to the public, it constantly updates, improves, and expands as more people can work on its improvement.

Question 5.
Write down the difference between LAN, MAN, and WAN.
Answer:

LAN (Local Area Network)	MAN (Metropolitan Area Network)	WAN (Wide Area Network)
LAN Stands for Local Area Network.	MAN stands for Metropolitan Area Network.	WAN stands for Wide Area Network.
A LAN is a network of connected devices that exist within a specific location.	A public or private network is used to connect various locations including suburbs in metropolitan cities.	A WAN is any network that crosses metropolitan, regional, or national boundaries.
LANs may be found in homes, offices, educational institutions, or other areas.	A MAN is a network, which covers an entire city, but uses LAN topology.	Most networking professionals define a WAN as any network that uses routers and public network links (e.g. Telephone lines).
LAN is easy to set up.	MANs are formed by connecting multiple LANs.	Due to long-distance transmission, the noise and errors are more in WAN.
Data transmits at a very fast rate.	Examples of a MAN are the cable TV network in a city.	The best example of WAN is the Internet.

Balbharti Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 10 Single Entry System Textbook Exercise Questions and Answers.

Maharashtra State Board Bookkeeping and Accountancy 11th Solutions Chapter 10 Single Entry System

1. Answer in One sentence only.

Question 1.
What do you mean by a Single Entry System?
Answer:
A system of bookkeeping in which an accountant or businessman records only one aspect of business transaction (either debit or credit and ignores the other aspect is called ‘Single Entry System’.

Question 2.
What is a Statement of Affairs?
Answer:
A list of all assets and liabilities prepared under a single entry system to find out capital balance is called a statement of affairs.

Question 3.
Which type of accounts are normally not kept under the Single Entry System?
Answer:
Under a single entry system, records of impersonal accounts i.e. real accounts and nominal accounts are not maintained.

Question 4.
Which statement is prepared under the Single Entry system to ascertain the capital balances?
Answer:
A statement of Affairs is prepared under a single entry system to ascertain capital balances.

Question 5.
How Opening Capital is calculated under the Single Entry System?
Answer:
Under a single entry system, opening capital is ascertained by preparing the opening statement of affairs.

Question 6.
Which types of accounts are maintained under the Single Entry System?
Answer:
Under a single entry system, all personal accounts and cash accounts are maintained.

Question 7.
Can a Trial Balance be prepared under a Single Entry System?
Answer:
A trial balance cannot be prepared under a single entry system.

Question 8.
Which type of organizations generally follow the Single Entry System?
Answer:
Organizations having small sizes of business such as sole trading concerns and partnership firms follow a single entry system.

2. Write a word, term, or phrase which can substitute each of the following statements.

Question 1.
A statement that is similar to the Balance Sheet.
Answer:
Statement of Affairs

Question 2.
The system of Accounting is normally suitable for small business organizations.
Answer:
Single Entry System

Question 3.
A statement similar to the Balance Sheet is prepared to find out the amount of opening capital.
Answer:
Opening Statement of Affairs

Question 4.
An excess of assets over liabilities.
Answer:
Capital

Question 5.
Excess of closing capital over opening capital of proprietor under Single Entry System.
Answer:
Profit

Question 6.
Name of the method of accounting suitable to firms having limited transactions.
Answer:
Single Entry System

Question 7.
A System of accounting that is unscientific.
Answer:
Single Entry System

Question 8.
Further capital introduced by the proprietor in the business concern over and above his existing capital.
Answer:
Additional Capital

3. Select the most appropriate answer from the alternatives given below and rewrite the sentence.

Question 1.
The capital balances are ascertained by preparing _______________
(a) Statement of Affairs
(b) Cash Account
(c) Drawings Accounts
(d) Debtors Accounts
Answer:
(a) Statement of Affairs

Question 2.
Under Single Entry System, Opening Capital = Opening Assets less _______________
(a) Opening Liabilities
(b) Closing Liabilities
(c) Debtors Account
(d) Creditors Account
Answer:
(a) Opening Liabilities

Question 3.
Additional Capital introduced during the year is _______________ from closing capital in order to find out the correct profit.
(a) Added
(b) Deducted
(c) Divided
(d) Ignored
Answer:
(b) Deducted

Question 4.
Single Entry System may be useful for _______________
(a) Sole traders
(b) Company
(c) Government
(d) None of these
Answer:
(a) Sole traders

Question 5.
In order to find out the correct profit, drawings is _______________ from closing capital.
(a) Multiplies
(b) Divided
(c) Deducted
(d) Added
Answer:
(d) Added

Question 6.
The difference between assets and liabilities is called _______________
(a) Capital
(b) Drawings
(c) Income
(d) Expenses
Answer:
(a) Capital

Question 7.
When Closing Capital is greater than the Opening Capital, the difference is _______________
(a) Profit
(b) Loss
(c) Assets
(d) Liabilities
Answer:
(a) Profit

Question 8.
Opening Capital is ₹ 30,000; Closing Capital is ₹ 60,000; Withdrawals are ₹ 5,000; and further capital brought in is ₹ 3,000; Profit is _______________
(a) ₹ 45,000
(b) ₹ 35,000
(c) ₹ 32,000
(d) ₹ 22,000
Answer:
(c) ₹ 32,000

4. State True or False with reasons:

Question 1.
The double Entry System of Book-keeping is a scientific method of books of accounts.
Answer:
This statement is True.
In the double-entry system of book-keeping, there are two-fold effects. Both the effects are recorded simultaneously with an equal amount. This system also follows principles and rules of debit and credit. Due to this, there are very fewer chances of mistakes. So double entry system of Book-Keeping is a scientific method of the book of accounts.

Question 2.
Preparation of Trial Balance is not possible under the Single Entry System.
Answer:
This statement is True.
Under the single entry system, only cash and personal accounts of debtors and creditors are open. So it is not possible to prepare. Trail balance under single entry system as it has incomplete information of Accounting.

Question 3.
Statement of Affairs and Balance Sheet are one and the same.
Answer:
This statement is False.
There is a difference between a statement of Affairs and the Balance sheet. Statement of Affair shows estimated values of assets and liabilities.

Question 4.
The single Entry System is not useful for large organizations.
Answer:
This statement is True.
Under the Single Entry System, only the cash book and personal account of Debtor and Ciygditor are maintained. Real and Nominal accounts are not maintained. It has no proper set of rules to be followed. It is useful for small organisations and not for a large organisations.

Question 5.
Only Cash and Personal accounts are maintained under the Single Entry System.
Answer:
This statement is True.
The single Entry System is an ancient and unscientific method of recording business transactions. This system maintains minimum accounts so it is easy for traders to write books of accounts. This system does not follow any accounting rules. To know the cash collections and amount payable or receivable only cash and personal accounts are maintained under a single entry system.

5. Do you agree with the following statements?

Question 1.
Further capital introduced during the year increases profit.
Answer:
Disagree

Question 2.
Interest in Drawings decreases the amount of profit under the Single Entry System.
Answer:
Disagree

Question 3.
Real and Nominal accounts are not maintained under the Single Entry System.
Answer:
Agree

Question 4.
The single Entry System is based on certain rules and principles.
Answer:
Disagree

Question 5.
Statement of Profit is just like Profit and Loss Account.
Answer:
Disagree

6. Fill in the Blanks.

Question 1.
Statement of Affairs is just like _______________
Answer:
Balance Sheet

Question 2.
Under Single Entry System, Profit = Closing Capital Less _______________
Answer:
Opening Capital

Question 3.
In order to find out the correct profit, drawings are _______________ to the closing capital.
Answer:
Added

Question 4.
In _______________ Book Keeping System, in every business transactions we find two effects.
Answer:
Double Entry System

Question 5.
The difference between Assets and Liabilities is called _______________
Answer:
Capital

Question 6.
Single Entry System is more popular for _______________
Answer:
Sole Trader

Question 7.
Additional Capital introduced during the year is _______________ from Closing Capital in order to find out the correct profit.
Answer:
Deducted

Question 8.
Single Entry System is Suitable for _______________ business.
Answer:
Small

7. Find the odd one:

Question 1.
Interest on Drawings, Outstanding Expenses, Undervaluation of Assets, Prepaid Expenses.
Answer:
Outstanding Expenses

Question 2.
Interest on Capital, Interest on Loan, Overvaluation of Liabilities, Depreciation on Assets.
Answer:
Overvaluation of Liabilities

Question 3.
Creditors, Bills Payable, Bank Overdraft, Stock in Trade.
Answer:
Stock in Trade

8. Complete the following table:

Question 1.

Answer:
₹ 5,000

Question 2.

Answer:
₹ 30,000

Question 3.

Answer:
₹ 5,000

Question 4.

Answer:
₹ 25,000, ₹ 20,000

Question 5.

Answer:
₹ 19,000

9. Complete the following table. Put Proper mark in Box.

Question 1.

Answer:

1. Add
2. Add
3. Add
4. Less
5. Add
6. Less
7. Add
8. Less
9. Less
10. Less

Practical Problems

Question 1.
Mr. Poonawala keeps his books under the Single Entry System and gives the following information.
Capital as of 31.3.2017 – ₹ 60,000
Capital as on 31.3.2018 – ₹ 1,00,000
Drawings made during the year ₹ 2,000
Additional capital introduced during the year ₹ 12,000
Calculate Profit or Loss during the year.
Solution:
In the books of Mr. Poonawala
Statement of Profit or Loss for the year ended 31st March 2018

Question 2.
Sujit a small trader provides you with the following details of his business.

Additional information:
1. Sujit withdraws ₹ 5,000 for his personal use, on 1st Oct. 2017.
2. He had also withdrawn ₹ 30,000 for rent of his residential flat.
3. Depreciation Furniture by 10% p.a. and writes off ₹ 1,000 from Motor Van.
4. Charge interest on Drawings ₹ 3,000.
5. 10% Govt. Bonds were purchased on 1st Oct. 2017.
6. Allow interest on capital at 10% p.a.
7. ₹ 1,000 is written off as bad debts and provides 5% p.a. R.D.D. on Debtors.
Prepare Opening Statement of Affairs, Closing Statement of Affairs, and Statement of Profit or Loss for the year ending 31st March 2018.
Solution:
In the books of Sujit
Opening and closing statement of Affairs as on _______________

Statement of Profit or Loss for the year ended 31st March 2018

Question 3.
Anjali keeps her books by the Single Entry System. Her position on 1.4.2016 was as follows.
Cash at Bank ₹ 4,000, Cash in Hand ₹ 1,000, Stock ₹ 6,000; Sundry Debtors ₹ 8,400, Plant and Machinery ₹ 7,500, Bill Receivable ₹ 2,600, Creditors ₹ 3500; Bills Payable ₹ 4,000
On 31.3.2017 her position was as follows; cash at Bank ₹ 3,900, Cash in Hand ₹ 2,000. Stock ₹ 9000, Sundry Debtors, ₹ 7,500; Plant and Machinery ₹ 7,500; Bills Payable ₹ 2,200, Bills Receivable ₹ 3,400; Creditors ₹ 1,500.
During the year Anjali introduced further Capital of ₹ 1,500 and she spent ₹ 700 per month for her personal use.
Depreciation Plant and Machinery by 5% p.a. and create Reserve for Doubtful debts @ 5% p.a. on the debtor. Prepare Opening and Closing Statement of Affairs and Statement of Profit or Loss for the year ended 31.3.2017.
Solution:
In the books of Anjali
Opening and closing statement of Affairs as on _______________

Statement of Profit or Loss for the year ended 31st March 2017

Question 4.
Mr. Vijay is dealing in the business of fruits. He maintains an accounting record with a single entry. The following figures are taken from his record.

Additional information:
1. Mr. Vijay introduced ₹ 7,000 as fresh capital.
2. He spent ₹ 40,000 from his business for his daughter’s marriage.
3. Depreciate Building by ₹ 6,000.
4. Create a 5% reserve for doubtful debts on Sundry Debtor.
Prepare:
1. Opening Statement of Affairs.
2. Closing Statement of Affairs
3. Statement of Profit or Loss for the year ended 31.3.2018.
Solution:
In the books of Mr. Vijay
Opening and closing statement of Affairs as on _______________

Statement of Profit or Loss for the year ended 31st March 2018

Question 5.
Miss. Fiza keeps her books on the Single Entry System and disclosed the following information about her business.

Additional information:
1. Miss. Fiza transferred ₹ 2,000 per month during the first half-year and ₹ 1000 per month for the second half-year from a business account to her personal account.
2. She sold her private asset for ₹ 40,000 and brought the proceeds into her business.
3. She also took goods worth ₹ 12,000 for private use.
4. Plant and Machinery is to be depreciated by 10% p.a.
5. Provide R.D.D. on debtors at 5% p.a.
Prepare:
1. Opening Statement of Affairs
2. Closing Statement of Affairs
3. Statement of Profit or Loss for the year ended 31.3.2018
Solution:
In the books miss Fiza
Opening and closing statement of Affairs as on _______________

Statement of Profit or Loss for the year ended 31st March 2018

Question 6.
Miss. Sanika keeps her books on the Single Entry System. The statement of affairs is given on 31st March 2018.

On 31st March 2018 their Assets and Liabilities were as follows:
Plant and Machinery ₹ 42,000, Stock ₹ 38,000, Cash in Hand ₹ 10,000, Creditors ₹ 7,000, Debtors ₹ 25,000, Bills Payable ₹ 6,000
Drawings during the year were ₹ 5,500, Plant and Machinery were found Overvalued by 5% p.a. and Stock was found Undervalued by 20% p.a., R.D.D. was to be created at 10% p.a. on Debtors, Interest on Capital was allowed at 10% p.a.
Prepare:
1. Closing Statement of Affairs.
2. Statement of Profit or Loss for the year ended 31st March 2018.
Solution:
In the books of miss Sanika
Closing statement of Affairs as on 31.03.2018

Statement of Profit or Loss for the year ended 31st March 2018.

Question 7.
Mr. Suhas commenced his business with the Capital of ₹ 1,50,000 on 1st April 2017. His financial position was as follows as on 31st March 2018, Cash ₹ 20,000, Stock ₹ 15,000, Debtors ₹ 30,000, Premises ₹ 90,000, Vehicles ₹ 45,000, Creditors ₹ 18,500, Bills Payable ₹ 10,000.
Additional information:
1. He brought additional capital ₹ 10,000 on 30th Sept. 2017, Interest on capital is to be provided at 5% p.a.
2. He withdrew ₹ 15,000 for personal use on which interest is to be charged at 5% p.a.
3. Write off Bad debts ₹ 500.
Prepare:
1. Closing Statement of Affairs
2. Statement of Profit or Loss for the year ended 31.3.2018.
Solution:
In the books of Mr. Suhas
Closing statement of Affairs as on 31.3.2018

Statement of Profit or Loss for the year ended 31st March 2018.

Question 8.
Ganesh keeps his books by the Single Entry Method. Following are the details of his business:

During the year he has withdrawn ₹ 25,000 for his private purpose and goods of ₹ 3,000 for household use. On 1st Oct. 2016. He sold his household furniture for ₹ 4,000 and deposited the same amount in a business Bank Account.
Provide Depreciation on Plant and Machinery at 10% p.a. (assuming additions were made on 1st Oct. 2016) and Furniture at 5%.
Prepare:
1. Opening Statement of Affairs
2. Closing Statement of Affairs
3. Statement of Profit or Loss for the year ended 31.3.2017.
Solution:
In the books of Ganesh
Opening and Closing statement of Affairs as on _______________

Statement of Profit or Loss for the year ended 31st March 2017

Question 9.
Peter keeps his books on the Single Entry System. From the following particulars, Prepare Opening and Closing Statement of Affairs and Statement of Profit or Loss for the year ending 31st March 2018.

Additional Information:
1. Peter has withdrawn ₹ 15,000 from the business for his personal use.
2. He has introduced additional capital of ₹ 10,000 in the business on 1st January 2018.
3. Depreciate furniture @ 10% p.a.
4. Maintain reserve for doubtful debts @ 5% on Sundry Debtors.
5. Closing Stock is overvalued by 25% in the books.
Solution:
In the books of Peter
Opening and closing statement of Affairs as on _______________

Statement of Profit or Loss for the year ended 31st March 2018

Question 10.
Suresh keeps his books by the Single Entry System. His position on 1.4.2017 was as follows.
Cash at Bank ₹ 4,000, Cash in Hand ₹ 3,000; Stock ₹ 8,000; Sundry Debtors ₹ 9,000; Plant & Machinery ₹ 10,000; Bills Receivable ₹ 3000; Creditors ₹ 1500; Bills Payable ₹ 2000.
On 31st March 2018, his position was as follows:
Cash at bank ₹ 6,400; Cash in Hand ₹ 1,800; Stock ₹ 10000; Sundry and Debtors ₹ 8,000; Plant & Machinery ₹ 10,000; Bills Payable ₹ 4,000; Bills Receivable ₹ 5,200; Creditors ₹ 2,000 During the year Suresh introduced further capital of ₹ 3,000 and his drawings were ₹ 700 per months. Depreciate Plant & Machinery by 5% and create a reserve for bad doubtful debts @ 5%.
Prepare:
1. Opening Statement of Affairs
2. Closing Statement of Affairs
3. Statement of Profit or Loss for the year ended 31.3.2018.
Solution:
In the books of Suresh
Opening and closing statement of Affairs as on _______________

Statement of Profit or Loss for the year ended 31st March 2018

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 5 Members of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 5 Members of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
____________ is a person whose name is entered in the Register of Members.
(a) Member
(b) Creditors
(c) Registrar
Answer:
(a) Member

Question 2.
A person can be called as a Member when the name is entered in ____________
(a) Register of charges
(b) Register of Members
(c) List of Members
Answer:
(b) Register of Members

Question 3.
A ____________ cannot be a member of a company.
(a) foreigner
(b) woman
(c) minor
Answer:
(c) minor

Question 4.
When a person buys shares of a company by filling up an application form, a person becomes a member by ____________
(a) Application and Allotment of shares
(b) Subscribing to Memorandum
(c) Transmission of Shares
Answer:
(a) Application and Allotment of shares

Question 5.
____________ means a person ceases being a member of the company of membership.
(a) Termination of membership
(b) Acquisition of membership
(c) Subscription to membership
Answer:
(a) Termination of membership

Question 6.
A member has right to participate in General Meetings means, he has a right to ____________
(a) receive dividends
(b) receive notice and agenda of a meeting
(c) to transfer his shares
Answer:
(b) receive notice and agenda of a meeting

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Insane person	(1) Transfer of shares by operation of law
(b) Foreigner	(2) Cannot be a member
(c) Transmission of shares	(3) Cessation of membership
(d) Surrender of shares	(4) To get copies of Auditor’s, Directors’ Report, etc.
(e) Right of Members	(5) Can be a Member
	(6) To attend a board meeting
	(7) Duties of member
	(8) Surrendering all assets to the company
	(9) Demand or claim money from the company
	(10) Transfer of shares by order of Secretary

Answer:

Group ‘A’	Group ‘B’
(a) Insane person	(2) Cannot be a member
(b) Foreigner	(5) Can be a Member
(c) Transmission of shares	(1) Transfer of shares by operation of law
(d) Surrender of shares	(3) Cessation of membership
(e) Right of Members	(4) To get copies of Auditor’s, Directors’ Report, etc.

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
End of membership of a person.
Answer:
Termination of membership

Question 2.
A person whose name is entered in the Register of Members.
Answer:
Member

Question 3.
Book in which names of all members are entered.
Answer:
Register of Members

Question 4.
Becoming a member of a company.
Answer:
Acquisition of membership

Question 5.
The subscribers of this document are considered Members of the company.
Answer:
Memorandum of Association

1D. State whether the following statements are True or False.

Question 1.
Buying shares is the most common way to become a Member of the company.
Answer:
True

Question 2.
Both individuals and body corporates can be members of the company.
Answer:
True

Question 3.
Legal competency to enter into contracts is one of the criteria to become a member of the company.
Answer:
True

Question 4.
Limited Liability Partnership cannot be a member of the company.
Answer:
False

Question 5.
Karta of HUF can be a member of the company.
Answer:
True

Question 6.
Member of the company is conferred with several rights.
Answer:
True

Question 7.
Member is entitled to profits of the company when a dividend is declared.
Answer:
True

Question 8.
Members of the company can attend general and Board meetings of the company.
Answer:
False

Question 9.
The right to appoint Director is given to Members.
Answer:
True

Question 10.
Minor can be a member of the company.
Answer:
False

1E. Find the odd one.

Question 1.
Subscribing to Memorandum, Forfeiture of Shares, Application, and allotment of shares.
Answer:
Forfeiture of shares

Question 2.
Death or insolvency of member, Application, and allotment of shares. Surrender of shares.
Answer:
Application and Allotment of shares

1F. Complete the sentences.

Question 1.
A person whose name is entered in the Register of Member of a company is called ____________
Answer:
Member

Question 2.
In case of death or insolvency of a member, he will cease to be a ____________
Answer:
Member of a Company

Question 3.
Members have a right to appoint and remove the ____________
Answer:
Director

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Minor	……………………..
(2) Co-operative society	………………………
(3) ……………………	Can hold shares in the name of partners

(Partnership firm, Cannot become a member of a company, Can become a member of a company)
Answer:

Group ‘A’	Group ‘B’
(1) Minor	Cannot become a member of a company
(2) Co-operative society	Can become a member of a company
(3) Partnership Firm	Can hold shares in the name of partners

1H. Answer in one sentence.

Question 1.
Which individuals cannot become a member of a company?
Answer:
Minor, insolvent, insane, or lunatic cannot become a member of a company.

Question 2.
What is the common way of becoming a member of a company?
Answer:
Buying shares is the common way of becoming a member of a company.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
A Minor can be a member of a company.
Answer:
A Guardian/Mai or person can be a member of a company.

Question 2.
Partnership Firm can be a member of the company.
Answer:
The Partnership firm cannot be a member of a company.

2. Explain the following terms/concepts.

Question 1.
Member
Answer:
A person who is a subscriber to the Memorandum of Association of a Company is called a member.
OR
A person whose name is entered in the Register of Members of the company is called a member of a company.

Question 2.
Transmission of shares
Answer:
Transmission of shares refers to the transfer or passing of property or titles in shares by the operation of law from a member to his legal representative. When transmission of shares takes place the membership of the original shareholder is terminated.

Question 3.
Cessation of Membership
Answer:
Cessation of Membership of a company means the discontinuation of membership. The name of the old member is removed from the Register of the member.

Question 4.
Acquisition of Membership
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for the membership of the company.

Question 5.
Eligibility of Membership
Answer:
Buying shares amount to making a contract, so any entity i.e. person/organization competent to make contact can be a member of the company.

3. Study the following case/situation and express your opinion.

1. Mrs. & Mr. A work in a Bank. They have a daughter named Ms. Z who is 11 years old.

Question (a).
Can Mrs. & Mr. A invest in shares of the company?
Answer:
Yes, Mrs & Mr. A can invest in shares of the Company.

Question (b).
Can they buy shares in the name of their daughter Ms. Z?
Answer:
Yes, Mrs. A and Mr. A can buy shares in the name of their daughter Ms. Z.

Question (c).
Justify your answer in (a) & (b) in one sentence only.
Answer:
Justification:
Mrs. A and Mr. A can invest in shares of the Company as they are major citizens.
Similarly, they can buy shares on behalf of their daughter as they are guardians of Ms. Z.

2. M/s. ABC is a Partnership firm owned by Dr. A, Dr. B, Dr. C. The doctors want to invest the profits of ABC in the shares of a company.

Question (a).
Can M/s ABC buy the shares of the company?
Answer:
Yes M/s ABC can buy the shares of the company.

Question (b).
Can profits of M/s. ABC be invested in shares held in the names of Dr. A or Dr. B or Dr. C?
Answer:
They can invest profit of M/s ABC in the names of Dr. A or Dr. B or Dr.C.

Question (c).
Are the doctors eligible to invest in shares of the company?
Answer:
Yes, doctors are eligible to invest in shares of the company.

3. ZEN Limited has some investible profits. Please guide Zen limited with respect to the following?

Question (a).
Can ZEN Limited invest in the shares of itself?
Answer:
No, ZEN Limited cannot invest in the shares of itself.

Question (b).
Can ZEN Limited invest in the shares of TEN Limited?
Answer:
Yes, ZEN Limited can invest in the shares of TEN Limited.

Question (c).
Justify your answers in (a) & (b) in one sentence only.
Answer:
Justification:
ZEN limited being a legal person can be a member of another company TEN Limited. It cannot be a member of its own company as per the Companies act.

4. Answer in brief.

Question 1.
State any four ways of acquiring membership of a company.
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for membership in a company.
The different ways to acquire membership of a company are explained below:
(i) By Subscription:

• The subscriber to the Memorandum of Association of a company, who are signatories to the Memorandum of the company is deemed to have agreed to become the members of the company.
• When the company is registered, their names are entered as the members in the Register of Members. In this case, neither an application nor the allotment of shares is important to become a member.

(ii) By Application and Allotment of shares:

• This is one of the methods of acquiring membership. An application for shares is made by an applicant in response to the invitation given by the company through its prospectus.
• The company then allots the shares as an acceptance to his application and offers the shares. The applicant then becomes the shareholder and his name is entered in the ‘ Register of Members’.

(iii) By Transfer of shares:

• After acquiring the shares by way of sale or gift, the buyer (transferee) is required to get the shares registered in his name in the Register of Members of the company.
• For this an instrument of transfer signed by the buyer and the seller accompanied by the share certificate is to be lodged (sent to) with the company.
• When the company approves the transfer, the name of the transferee is entered in the Register of Members and thus, be becomes a member of a company. The name of the earlier member is struck off from the Register.

(iv) By Transmission of shares:

• In the event of the death or lunacy of a member, his legal heir or representative automatically becomes the shareholder.
• He is entitled to have his name entered in the Register of Members. He can do so by making an application to the company, supported by legal evidence of his title.
• When the company approves the title the name of the legal representative is entered in the Register of Members and thus, he becomes a member of a company.
• This transfer of shares by the operation of law is called the transmission of shares.

Question 2.
State any four ways of cessation of membership of a company.
Answer:

• Cessation/Termination of a member means the discontinuation of membership. His relationship with the company comes to an end.
• The name of the members is removed from the Register of Members as cessation.
• The original member is thus prevented from exercising his rights of membership.

The membership of a person may be terminated in any one of the following ways:

• Winding up of a company: When a company is ‘winding up’ or exists no more due to the process of law, the membership of all the members stands terminated or cessation automatically.
• Surrender of shares: When the company accepts surrender of partly paid-up shares, if permitted by its Articles, the membership of the shareholder is terminated.
• Transmission of shares: Transmission of shares refers to the transfer or passing of property or titles in shares by the operation of law from a member to his legal representatives. Such an automatic transfer of shares takes place in the event of the death or lunacy of a shareholder. When the transmission of shares takes place, the membership of the original shareholder is terminated.
• Transfer of shares: The transfer of shares is effected by registering an instrument called ‘Instrument of Transfer’ with the company. When the company approves the transfer, the Secretary cancels the name of the seller from the Register of Members and thus the membership of the shareholder is terminated.
• Forfeiture of shares: When the company forfeits the shares on account of non-payment of call money, the membership of the shareholder whose shares are forfeited comes to an end.

Question 3.
State the rights of members with regard to participation in general meeting.
Answer:
As an integral part of a company, a member enjoys certain rights and has to fulfill certain duties and liabilities.
Following are the rights of members:

• Right to receive the notice and agenda of all general meetings, attend them in person or appoint a proxy, speak and vote at the meeting, demand to call Extra-Ordinary General meeting and pass resolutions.
• Right to receive the copy of annual reports, auditors’ reports, statutory reports, and the annual account are on his registered address.
• Right to transfer shares, if any, imposed by the Article of Association.
• Right to receive bonus shares whenever issued by the company.
• Right to get the name entered in the Register of members and be registered as a member of the company,
• Right to receive a share in the surplus property and assets of the company on winding up of the company after all other claims have been paid.

5. Justify the following statements.

Question 1.
Member and Shareholder are interchangeable terms.
Answer:

• A person whose name is entered in the register of members of a company is called a member and a person who owns shares of a company and holds actual possession of shares is called a shareholder of a company.
• A shareholder becomes a member of a company only when his name is recorded in the Register of Members. A person who buys a share in an open market is a shareholder. But he cannot be called a member until the procedure of transfer of shares in his name is completed.
• In the case of death, or lunacy of a member of a company, his legal representative becomes the shareholder but he cannot be called a member until the procedure for transmission of shares in his name is completed.
• A shareholder who transfers his share to another person is not a member until the transfer is registered and the name of the transferee is recorded in the Register of Members.
• A person who subscribes to the Memorandum of Association may not be called a member until the shares are actually allotted to them. Thus, I agree with the above statement.

Question 2.
A foreigner can invest in shares of an Indian company.
Answer:

• A foreigner can enter into contract.
• Foreigners can buy shares and become a member of an Indian company, subject to provisions of FEMA Act 1999.
• ‘FEMA’ aims at facilitating external trade and promote the foreign exchange market in India.
• Foreigner falls under the category of individual eligibility to be a member of a company.
• Thus, I agree with the above statement.

Question 3.
The insolvent person ceases to be a member of the company.
Answer:
Yes, I agree with the statement.

• On, becoming insolvent, a person’s beneficial rights of shareholders passes to Official Receiver or Assignee.
• Thus, the insolvent person stops being a member of the company on his insolvency.
• Official Receiver is an officer appointed by the court, to deal with the property and assets of the insolvent person.
• On being insolvent a member ceases to be a member of the company and thus he can neither attend Annual General
• Meeting nor can he vote on matters of the company.
• Thus, I agree with the above statement.

Question 4.
The Co-operative Society is eligible to be a member of the company.
Answer:

• The Co-operative Society falls under the category of Organizations eligible for membership of a company.
• Co-operative Societies are registered under the State Co-operative Societies Act of respective states.
• A Co-operative Society is a registered entity, it can become a member of the company.
• Thus, it can invest in shares of the company and also enjoys all the rights of membership.
• It also has a right to receive notice of meeting, attend the meeting, vote in meeting, etc.
• Thus, I agree with the above statement.

Question 5.
Subscribers to the Memorandum of Association are the first members of the Company.
Answer:

• There are different ways for the acquisition of membership in a company.
• Subscribing to Memorandum of Association is one is of the way of acquiring membership in a company,
• Subscribers to the Memorandum of Association of companies are different in different cases i.e. Seven (7) members in the case of a Public Company, Two (2) members in the case of a Private company, and One (1) in case of One Person Company.
• Thus, I agree with the above statement.

Question 6.
The nominee of the member of OPC becomes its member on the death of the member.
Answer:

• In an acquisition of membership, there are different ways to become a member of the company.
• In the case of One Person Company, the name of the nominee is given beforehand in the Memorandum of One Person Company.
• So, in case of the death of a member, his nominee automatically becomes the sole owner of the company.
• But he cannot be called as a member of the company until all procedure of transmission of shares is completed.
• Thus, I agree with the above statement.

Question 7.
Members of the company are entitled to several rights.
Answer:

• Being an integral part of a company, members enjoy certain rights and have to fulfill the duties and liabilities.
• Member has the right of accessing books and documents of a company. He can make copies of the Memorandum and Article of Association. He has the right to appoint Auditors and Directors and decide their salary and remuneration.
• He can inspect the Register of Members and Debentureholders register.
• He has right to make a Fundamental Corporate Decision like – Change of Registered office of the company, increase authorized capital, change in the object of the company, make amendment in Articles of Association, right of winding up the company, etc.
• He has the right to receive the notice and agenda of a meeting. He can attend the Annual General Meeting in personal or he can send his proxy to attend the meeting.
• Thus, I agree with the above statement.

Question 8.
Members of the company have some fundamental corporate decision-making rights.
Answer:

• Members hold powers to decide at meetings on important matters.
• He has certain fundamental rights like a change of registered office of the company.
• He can increase the authorized capital of the company.
• He can change the objects of the company because he is a member of the company as well as the owner of the company.
• He also has a right to amend the Articles of Association.
• He also has a right to acquisitions, mergers, and takeovers by the company. He can appoint sole selling agents for the company.
• He also has a fundamental right to close or wind up the company.
• Thus, I agree with the above statement.

Question 9.
Transfer of shares results in termination of membership.
Answer:

• On termination of membership, the name of the member is removed from the Register of Members.
• Companies Act empowers every shareholder to transfer his share in the manner laid down in the Articles and in accordance with the provisions of the law.
• A transfer of share takes place when a registered shareholder transfers his shares by sale or gift to another person voluntarily.
• Transfer of shares by operation of law in event of death or insolvency of members is called the transmission of shares. The legal representative/heir in case of death, official receiver in case of insolvency, and administrator in case of insanity replaces the concerned member.
• When the company approves the transfer, the Secretary cancels the name of the seller i.e. (transferor) from the Register of Members, and the membership of the shareholder stands terminated after transferring the shares.
• Thus, I agree with the above statement.

6. Answer the following questions.

Question 1.
Explain the circumstances when Member is not a shareholder and vice-versa.
Answer:
An organization is formed for purpose of education, sports, health, business with well-defined objectives and relationships. The organization is by ‘members’ and ‘only for members.’
“Member means a person whose name is entered in the Register of Members of the company and are the holder of equity shares and are a beneficial owner in the records of Depository.
Buying shares is the most common and easy way where a person becomes a member of the company.

Following are different circumstances when Member is not a shareholder:

• Member without being a shareholder:
  • Signatories to the Memorandum of Association: They are members of the company but not shareholders till the shares are not allotted to them.
  • Company Limited by Guarantee Amount: This company does not have any share capital. Therefore, it has only members, not the shareholders.
  • Transfer of shares: Transferor (seller) of shares continue to be a member of the company, till his name is removed from the Register of Members and is replaced by transferee’s (buyer)name.
  • On the death of a member: On the death of a member, his legal heir becomes the holder of deceased member shares. But he is not a member of a company until the procedure of transmission of shares is completed.
  • On insolvency of member: Shares of insolvent member are held by court-appointed Official Receiver.
    So the insolvent person continues to be a member but not the shareholder.
• Shareholder without being a member: The buyers of the shares, Official Receiver in case of insolvency; legal heir in case of death as explained above are shareholders but not the members of the company.

Question 2.
Explain the eligibility of memberships of a company.
Answer:

• The organization is formed and managed by persons termed as ‘Member’.
• So it is rightly said organization is by ‘member’ and ‘only for members’.
• Any entity i.e. person or organization who is competent to make a contract can become a member of the company.
• Subject to provisions of the Companies Act, 2013, Memorandum of Association, and Articles of Association, any person who is legally competent to manage their own affairs (‘Sui-Juris) can become a member of the company.

Eligibility Criteria:
(A) Individuals:

• Major person: Any person domiciled (staying) in India, having completed 18 years of age, having a sound mind, and not be disqualified by law can become a member of the company.
• Minor: A minor cannot be a member of a company but a guardian can be a member of a company on behalf of a minor.
• Insolvent: Insolvent person cannot be a member of a company as his beneficial rights of shareholding are held by the Official Receiver, an officer appointed by the court.
• Insane/Lunatic: Insane/Lunatic person is unable to enter into a contract which makes him ineligible to be a member of a company.
• Foreigner: A foreigner or Non-resident Indian can become a member of a company, subject to provisions of FEMAAct, 1999.

(B) Organizations:

• Company: A company being a legal person can be a member of another company if authorized by its Memorandum of Association. It cannot be a member of its own company.
• Co-operative Society: Since co-operative societies are registered entity, they can be a member of the company.
• Limited Liability Partnership (LLP): Such, firms are treated as a juristic person, hence it can be a member of the company.
• Hindu Undivided Family: HUF firm is prohibited to be a member of a Company, but ‘Karta’ can buy a share in his name on behalf of Hindu Undivided Family firm.
• Partnership Firm: Since the partnership firm is not a registered entity. It cannot be a member of the company. But partners themselves can buy shares in their individual names.
• Trust: Registered trust can become a member of a company in its own name.

Question 3.
Explain different ways to acquire membership of the company briefly.
Answer:
Any person who is competent to contract can become a member after fulfilling certain requirements for membership in a company.
The different ways to acquire membership of a company are explained below:
(i) By Subscription:

• The subscriber to the Memorandum of Association of a company, who are signatories to the Memorandum of the company is deemed to have agreed to become the members of the company.
• When the company is registered, their names are entered as the members in the Register of Members. In this case, neither an application nor the allotment of shares is important to become a member.

(ii) By Application and Allotment of shares:

• This is one of the methods of acquiring membership. An application for shares is made by an applicant in response to the invitation given by the company through its prospectus.
• The company then allots the shares as an acceptance to his application and offers the shares. The applicant then becomes the shareholder and his name is entered in the ‘ Register of Members’.

(iii) By Transfer of shares:

• After acquiring the shares by way of sale or gift, the buyer (transferee) is required to get the shares registered in his name in the Register of Members of the company.
• For this an instrument of transfer signed by the buyer and the seller accompanied by the share certificate is to be lodged (sent to) with the company.
• When the company approves the transfer, the name of the transferee is entered in the Register of Members and thus, be becomes a member of a company. The name of the earlier member is struck off from the Register.

(iv) By Transmission of shares:

• In the event of the death or lunacy of a member, his legal heir or representative automatically becomes the shareholder.
• He is entitled to have his name entered in the Register of Members. He can do so by making an application to the company, supported by legal evidence of his title.
• When the company approves the title the name of the legal representative is entered in the Register of Members and thus, he becomes a member of a company.
• This transfer of shares by the operation of law is called the transmission of shares.

(v) By holding shares in the Dematerialized form:
The person holding shares in dematerialized form and has his name as a beneficial owner in the records of Depository is treated as a member of the company.

(vi) Nominee of One Person Company (OPC):
In the case of One Person Company, the name of the nominee is given beforehand in the Memorandum of One Person Company. He becomes the sole owner of the shareholdings of the deceased member.

(vii) By Acquiescence:
If a person is wrongly entered in the Register of Members or holds or allows his name as the Register of Members without informing the company about its mistake, he is treated and made liable as a member in the event of liquidation of a company.

Question 4.
Explain how membership of the company terminates.
Answer:
Cancellation of membership of a shareholder is called Termination or Cessation of membership. On termination of membership, all rights of a member are canceled.

Following are the ways of Termination of membership:
(i) Transfer of shares: Transfer of shares is effected by registering an instrument called Instrument of Transfer with the company. The secretary cancels the name of the seller from the Register of Members and thus the membership of the shareholder is terminated.

(ii) Transmission of shares: Transmission of shares refers to the transfer of shares by operation of law. This is an automatic transfer of a share in the event of death or lunacy of a shareholder. When the transmission of shares takes place, the membership of an original shareholder is terminated.

(iii) Winding up: When a company is winding up, the membership of all the members stands terminated automatically.

(iv) Forfeiture of shares: When a company forfeits the shares on account of non-payment, of calls on shares, shareholder’s shares are forfeited and he ceases to be a member of the company.

(v) Surrender of shares: When a company accepts surrender of partly paid-up shares if permitted by its Articles, the membership of the shareholder is terminated.

(vi) Redemption of Preference shares: When the redeemable preference shares are redeemed (repaid) to the shareholder by the company as per the terms of issue, the membership comes to an end.

(vii) Right of lien as shares: When a shareholder has some obligation towards the company, it is said to be lien on shares by the company. It means shareholders cannot sell their shares until they clear their dues or obligations if any. In case of his failure to pay his dues company cancels his shares and his membership comes to an end.

Question 5.
Explain the Rights of a Member of a company.
Answer:
Being a part of a company, a member enjoys certain rights and has to fulfill certain duties.
Right of members are as follows:

1. Right of accessing books and documents: A member can get copies of Memorandum and Articles of Association, Auditors and Directors Reports, Balance Sheet and Profit and Loss A/c. Members can also check the Register of members.
2. Right to participate in General meetings: Members have the right to receive notice and agenda of all general meetings, attend the meeting personally or appoint a proxy, vote at the meeting, etc.
3. Right to appoint and remove a Director: Member of a company has the right to appoint and remove the directors.
4. Shareholding rights: Shareholders have the right to receive a share certificate, transfer his shares, to get right issue and bonus issue shares.
5. Right to Class Action Suit: The Act confers the right of Class Action Suit to members against the company or their directors in the time of any unlawful or wrongful act. They can file a petition to wind up the company.
6. Right to receive surplus assets: In the event of the winding-up of the company, the member has the right to get a share in surplus assets of the company.
7. Right with respect to the company’s accounts and its audit: Members have the right to approve the annual accounts at the Annual General Meeting. He can appoint auditors, fix their salary, and has a right to remove the auditors.
8. Right to participate in the profit of the company: Members invest money in the company and expect a certain return in form of dividends. They have the right to receive dividends within 30 days of its declaration in the Annual General Meeting.
9. Right to make Fundamental Corporate Decision: Members hold powers to decide at a meeting on important matters like a change of Registered office of the company, increase authorized capital of the company, change the objects of the company, to amend an Articles of Association, right of acquisitions, mergers and takeovers by the company, appoint a sole selling agents for the company, rights to close or wind up the company.

Activity (Textbook Page No. 72)

Find the composition of shareholding of a listed public company.
Answer:
“Listed Public Companies” means a public company that has any of its securities listed in any recognized stock exchange. One of the advantages to the shareholder(s) of a Public Company is free transferability of shares and in the case of Listed Companies such free transferability also ensures quick liquidity of the investment. However, such liquidity is only possible when there is an existence of buyers and sellers in the market. In many Listed Companies, a large chunk of the paid-up capital is held by the promoter group which reduces the public shareholding to a great extent.

The promoter group usually refrains from trading in their shares which in turn reduces the number of buyers and sellers in the market and the liquidity factor also gets affected. In order to ensure a minimum level of Public Shareholding in Listed Public Companies and to provide liquidity to the investors, the Ministry of Finance amended the Securities Contracts (Regulation) Rules, 1957 [SCCR, 1957] twice in the year 2010. The press note released by the Ministry of Finance upon the first amendment of SCCR, 1957 stated “A dispersed shareholding structure is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to discover fair prices”.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 4 Documents Related to Formation of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 4 Documents Related to Formation of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
___________ is a primary document of the company which contains the aims and objectives of the company.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
Answer:
(a) Memorandum of Association

Question 2.
___________ describes the relationship between company and outsiders.
(a) Memorandum of Association
(b) Articles of Association
(c) Prospectus
Answer:
(a) Memorandum of Association

Question 3.
The ___________ clause describes the range of activities a company can undertake.
(a) Name
(b) Capital
(c) Object
Answer:
(c) Object

Question 4.
Any act done by the company beyond the Powers of Memorandum is called as ___________
(a) Doctrine of indoor management
(b) Ultra-Vires
(c) Mis-statement
Answer:
(b) Ultra-Vires

Question 5.
___________ acts are void or legally ineffective.
(a) Object clause
(b) Main object
(c) Ultra Vires
Answer:
(c) Ultra Vires

Question 6.
___________ clause contains the details of liability of the members.
(a) Name
(b) Liability
(c) Object
Answer:
(b) Liability

Question 7.
___________ clause states the amount of Authorised capital with which the company is registered.
(a) Liability
(b) Object
(c) Capital
Answer:
(c) Capital

Question 8.
___________ contains rules and regulations for internal management of the company.
(a) Articles of Association
(b) Prospectus
(c) Memorandum of Association
Answer:
(a) Articles of Association

Question 9.
Articles establishes relationship between company and ___________
(a) members
(b) outsiders
(c) ROC
Answer:
(a) members

Question 10.
___________ is an invitation to the public to subscribe for shares of the company.
(a) Memorandum
(b) Prospectus
(c) Articles of Association
Answer:
(b) Prospectus

Question 11.
For making multiple issue of shares within a year, a company can prepare a ___________ Prospectus.
(a) Abridged
(b) Shelf
(c) Red Herring
Answer:
(b) Shelf

Question 12.
___________ is an incomplete prospectus.
(a) Red Herring Prospectus
(b) Shelf Prospectus
(c) Abridged Prospectus
Answer:
(a) Red Herring Prospectus

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Capital clause	(1) Details of capital structure of a company
(b) Liability clause	(2) Used for multiple issues of shares
(c) Acts beyond the Powers of Memorandum	(3) Abridged Prospectus
(d) Red Herring Prospectus	(4) Describes main objectives
(e) Shelf Prospectus	(5) Used for Right Issue
	(6) Incomplete Prospectus
	(7) Ultra-Vires
	(8) Doctrine of Indoor management
	(9) Extent of liability of members
	(10) Articles of Association

Answer:

Group ‘A’	Group ‘B’
(a) Capital clause	(1) Details of capital structure of a company
(b) Liability clause	(9) Extent of liability of members
(c) Acts beyond the Powers of Memorandum	(7) Ultra-Vires
(d) Red Herring Prospectus	(6) Incomplete Prospectus
(e) Shelf Prospectus	(2) Used for multiple issues of shares

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
The primary document of a company states the aims and objectives of a company.
Answer:
Memorandum of Association

Question 2.
The document establishes the company’s relationship with outsiders.
Answer:
Memorandum of Association

Question 3.
The document states the limits within which a company has to operate.
Answer:
Memorandum of Association

Question 4.
The document contains Name Clause, Registered Office Clause, Capital Clause, etc.
Answer:
Memorandum of Association

Question 5.
The document is subordinate to the Memorandum of Association.
Answer:
Articles of Association

Question 6.
The document contains rules and regulations for internal management.
Answer:
Articles of Association

Question 7.
A term used for acts beyond the scope of the Memorandum of Association.
Answer:
Ultra-Vires

Question 8.
The clause describes the main activities a company can undertake.
Answer:
Object Clause

Question 9.
The clause gives details of Authorized Capital or Registered Capital.
Answer:
Capital Clause

Question 10.
The clause describes the extent of liability of members.
Answer:
Liability Clause

Question 11.
The last clause of the Memorandum contains the name, signature, and other details of all the subscribers of the Memorandum.
Answer:
Association or Subscription Clause

Question 12.
The document establishes a relationship between a company and its members.
Answer:
Articles of Association

Question 13.
Document issued by public company inviting the public to subscribe to its shares.
Answer:
Prospectus

Question 14.
Prospectus attached with every share application form.
Answer:
Abridged Prospectus

Question 15.
Prospectus used for multiple issues of shares within a year.
Answer:
Shelf Prospectus

Question 16.
It is an incomplete prospectus.
Answer:
Red Herring Prospectus

Question 17.
This prospectus does not contain information about the quantum of shares to be issued or the price at which shares will be issued.
Answer:
Red Herring Prospectus

1D. State whether the following statements are True or False.

Question 1.
A Memorandum of Association and Articles of Association are prepared at the time of incorporation of a company.
Answer:
True

Question 2.
Memorandum of Association describes the nature and character of the company.
Answer:
True

Question 3.
Memorandum establishes the relationship between Company and Members.
Answer:
False

Question 4.
Any act done by the company beyond the Powers of Memorandum is Ultra-Vires.
Answer:
True

Question 5.
Articles of Association can have provisions that contradict the Memorandum.
Answer:
False

Question 6.
Memorandum need not have a Liability Clause.
Answer:
False

Question 7.
Articles of Association are subordinate to Memorandum.
Answer:
True

Question 8.
A memorandum contains rules and regulations for the internal management of a company.
Answer:
False

Question 9.
Every subscriber who signs the Memorandum must also sign the Articles.
Answer:
True

Question 10.
Entrenched Articles cannot be easily altered.
Answer:
True

Question 11.
Prospectus can be issued by a private company.
Answer:
False

Question 12.
Only public companies can issue Prospectus.
Answer:
True

Question 13.
The prospectus must be issued within 1 year from the date of filing it with the ROC.
Answer:
False

Question 14.
Actions can be taken against a company or its officers for misstatements in the prospectus.
Answer:
True

Question 15.
Every company has to issue a shelf prospectus every time it offers shares to the public.
Answer:
False

Question 16.
Red Herring prospectus does not contain details of the price at which shares will be sold by the company.
Answer:
True

Question 17.
Letter of the offer is issued at the time of Rights Issue.
Answer:
True

1E. Find the odd one.

Question 1.
Name Clause, Rights of Board of Directors, Object Clause.
Answer:
Rights of Board of Directors

Question 2.
Rights of shareholders, Appointment and remuneration of Directors, Liability clause.
Answer:
Liability Clause

Question 3.
Shelf prospectus, Abridged Prospectus, Articles of Association.
Answer:
Articles of Association

1F. Complete the sentences.

Question 1.
The documents which state the aims and objectives of a company is called as ___________
Answer:
Memorandum of Association

Question 2.
Any act done by the company which goes beyond the powers of Memorandum of Association will be called as ___________
Answer:
Ultra-Vires

Question 3.
The document which is subordinate to the Memorandum of Association is called ___________
Answer:
Articles of Association

Question 4.
The document which contains the rules and regulations governing the internal management of a company is called ___________
Answer:
Articles of Association

Question 5.
The document issued by a company to invite investors to buy its securities is called as ___________
Answer:
Prospectus

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) …………………….	Memorandum of Association
(2) Liability clause	………………………….
(3) Incomplete Prospectus	………………………….
(4) ………………………	Establishes relationship between the company and its members

(Articles of Association, Red Herring Prospectus, Primary document, Details of liability of members)
Answer:

Group ‘A’	Group ‘B’
(1) Primary Document	Memorandum of Association
(2) Liability clause	Details of liability of members
(3) Incomplete Prospectus	Red Herring Prospectus
(4) Articles of Association	Establishes relationship between the company and its members

1H. Answer in one sentence.

Question 1.
Which document contains the aims and objectives of the company?
Answer:
Memorandum of Association contains the aims and objectives of the company.

Question 2.
What does the capital clause describe?
Answer:
The capital clause states the amount of capital with which the company is registered and the division of it into shares of a fixed amount.

Question 3.
When is Abridged Prospectus issued?
Answer:
Abridged Prospectus is issued only in case of a public offer made by a company.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
Articles of Association states the aims and objectives of the company.
Answer:
Memorandum of Association states the aims and objectives of the company.

Question 2.
The prospectus is subordinate to the Memorandum of Association.
Answer:
Articles of Association are subordinate to Memorandum of Association.

Question 3.
The prospectus contains a liability clause.
Answer:
Memorandum of Association contains a liability clause.

1J. Arrange in proper order.

Question 1.
(a) Subscription clause
(b) Name clause
(c) Object clause
Answer:
(a) Name clause
(b) Object clause
(c) Subscription clause

2. Explain the following terms/concepts.

Question 1.
Memorandum of Association
Answer:

• It is a secondary document.
• A Memorandum of Association is a primary document of a company.
• It states the objects for which the company is formed.
• A Memorandum of Association of a company is a charter or constitution of a company.
• It describes the range of activities a company can undertake.
• No company can be registered without a Memorandum of Association.
• Memorandum establishes a relationship between the company and an outsider.

Question 2.
Articles of Association
Answer:

• Articles of Association is a secondary document.
• It contains rules and regulations that govern the internal management of the company.
• Articles of Association is also known as Bye-laws of a company.
• It defines the powers, duties, and rights of managers officers, and board of directors.
• It establishes a relationship between the company and its members.
• This document is subordinate to Memorandum.

Question 3.
Name Clause
Answer:

• This clause contains the name of the company.
• The name of the company should not be identical to any existing company.
• If it is a private company, then it should have the word Private Limited at the end.
• And in the case of a public company, then it should add the word limit at the end of its name.
• For eg ABC Private Limited in the case of the private and ABC Ltd for a public company.

Question 4.
Object Clause
Answer:

• This clause states the objective with which the company is formed.
• It is the most important clause of the Memorandum of Association.
• The clause defines the scope and limitations of the activities of the company.
• The objects must be clearly defined keeping in mind the following conditions.
  • The objects of the company must be legal.
  • The objects should not be against the provisions of any law.
  • The objects must not be immoral.

Question 5.
Liability Clause
Answer:

• This clause defines the liability of the members of the company.
• In the case of companies limited by shares, the liability of the members is limited to the extent of unpaid shares.
• In the case of a company limited by guarantee, the liability is limited to the amount of guarantee given by each member.
• In the case of an unlimited liability company with or without share capital, this clause states that the liability of its members is unlimited.

Question 6.
Capital Clause
Answer:

• This clause states the amount of capital with which the company is registered.
• The capital with which the company is registered is called registered capital or authorized capital.
• A company can issue only that number of shares that are authorized by its memorandum.
• The company has to alter the capital clause if the company wants to issue more shares than authorized capital.

Question 7.
Registered Office Clause
Answer:

• This clause contains the name of the state in which the registered office of the company is to be situated.
• Every company must have a registered office within 30 days of its incorporation.
• A registered office is a place where all the important documents of the company are kept.
• The registered office clause determines the jurisdiction of the Registrar of Companies and of the court.

Question 8.
Ultra Vires act
Answer:

• The word Ultra means beyond and the word Vires means the powers.
• Thus Ultra-Vires means beyond the powers of Memorandum.
• The doctrine of ultra-vires states that any activity done by a company that is beyond the powers of the company will be null and void.
• The purpose of the Doctrine of Ultra-Vires is to protect all the stakeholders.
• The stakeholders have the right to see that the company uses their money for the objects mentioned in Memorandum.

Question 9.
The doctrine of Indoor Management
Answer:

• The doctrine of Indoor Management states that persons entering into a contract with the company need not inquire whether the company or its officers have properly followed the internal proceedings.
• It is assumed that the company acts as per its Memorandum and Articles of Association.
• The doctrine of Indoor Management protects the interest of outsiders when they act based on the Memorandum of Association and Articles of Association.

Question 10.
Prospectus
Answer:

• A prospectus is any document that invites deposits or offers from the public for the purchase of any shares or debentures of a company.
• When a public company is collecting capital by issuing shares to the public has to issue a prospectus.
• The prospectus must be true and factual as investors decide to invest based on the information given in the prospectus.
• The types of the prospectus issued by a company are:
  • Abridged Prospectus
  • Shelf Prospectus
  • Red Herring Prospectus
  • Letter of offer
  • Offer Letter

Question 11.
Mis-statements in Prospectus
Answer:

• Mis-statements means:
  • The statement is misleading in form or content.
  • Where any inclusion of statement or omission is likely to mislead the reader.
• If the investor has purchased shares based on the misleading information in the prospectus he can take action against the company.
• The company and persons will be responsible for issuing mis-statement prospectus and have to face liability.

Question 12.
Abridged Prospectus
Answer:

• Abridged Prospectus contains the main contents of a prospectus in brief.
• It is attached with the application form issued by the company while offering securities.
• The abridged prospectus is issued only in case of a public offer made by a company.
• It contains all the salient features of a prospectus.

Question 13.
Shelf Prospectus
Answer:

• The company instead of preparing a fresh prospectus for every issue prepares a shelf prospectus.
• Shelf Prospectus can be used for all issues made by the company for up to one year.
• An Information Memorandum has to be filed with ROC every time during the validity period of one year of the shelf prospectus.
• Information Memorandum contains latest material facts such as new charges, changes in financial position, etc.

Question 14.
Red Herring Prospectus
Answer:

• A red herring prospectus is a kind of incomplete prospectus as it does not include complete particulars of the quantity/price of the securities.
• It is usually issued at the time of IPO (Initial Public Offer).
• A red herring prospectus shall have the same obligations that are applicable to the prospectus.
• A company must file a Red Herring Prospectus with ROC at least 3 days prior to the opening of the subscription list and the offer.

3. Study the following case/situation and express your opinion.

1. The Articles of a company stated that while borrowing any money from outsiders, the document must have the signatures of the Managing Director (MD) and any one of the Director. The Articles of Association clearly stated the procedure to be followed while borrowing money. The Managing Director did not follow all the procedures but still borrowed money from Mr. X. Mr. X assumed that the MD has followed the required procedures.

Question (a).
Can the MD be held punishable for his act?
Answer:
He can be held liable for his actions and can be insisted to pay back the loan amount.

Question (b).
Under which Doctrine can Mr. X take action against the company?
Answer:
Under Doctrine of Indoor Management.

Question (c).
Explain the Doctrine.
Answer:

• According to this doctrine, persons dealing with the company need not inquire whether internal proceedings relating to the contract are correctly followed.
• They are satisfied that the transactions are in accordance with the memorandum and articles of association.
• If there are any internal irregularities then the company will be liable as the person has acted in good faith and he did not know about the internal arrangement of the company.
• Similarly with X as he has acted in good faith and lent money to the managing director, but the managing director did not follow the procedure. So there is an irregularity that can make the director liable for his actions.

2. Mr. A entered into a contract with Star Limited Company and as advance payment gave a cheque of ₹ 1 lac to a Director Mr. Sam. Mr. Sam is not the Managing Director. Articles state that only the MD is authorized to sign any contracts or receive any payments on behalf of the company.

Question (a).
Did Mr. Sam have the authority to accept the cheque? Why?
Answer:
Sam did not have the authority to accept the cheque because usually, individual directors do not have the authority to act on the company’s behaviour unless expressly authorized.

Question (b).
Can Mr. Sam’s action be called as Ultra-Vires? Why?
Answer:
Mr. Sam’s action cannot be called ultra-vires because any act done by him beyond the powers of the memorandum is called Ultra-Vires.

3. The Object clause of Memorandum of a Company stated the main object as manufacturing of plastic chairs and tables and any other activity in furtherance of achievement of its main activity. The Board of Directors wants also to produce T.V. Serials and feels that the shareholders may give their permission.

Question (a).
Can the company with immediate effect start producing T.V. serials? Why?
Answer:
No, a company cannot start producing T.V. serials with immediate effect. A company cannot indulge in activities other than those provided in the object clause. The activities carried outside the scope drawn by the Memorandum of Association are called Ultra-Vires activities.

Question (b).
How can the object clause of the company be altered?
Answer:
A special resolution must be passed in the General Meeting for altering the object clause.

4. A public limited company has issued all the shares mentioned in its Memorandum as Authorised Capital. Now the company wants to make a public issue of 10,000 shares at a face value of ₹ 100 per share, to raise more funds for its expansion activities.

Question (a).
Which clause of Memorandum needs to be altered?
Answer:
The capital clause of the memorandum needs to be altered.

Question (b).
In which meeting the alteration can be approved?
Answer:
A capital clause is altered by passing an ordinary resolution in a general meeting of the company.

Question (c).
Which document should the company issue to invite the public to buy its shares?
Answer:
The prospectus is the document issued to invite the public to buy its shares.

5. A Company stated in its prospectus that it has been making profits for the last 5 years. However, Mr. X., an investor found out that two years back the company had not made any profit. The prospectus was filed with ROC on 1st January 2017 and was issued to the public on 10th February 2018.

Question (a).
Can Mr. X state that there was mis-statement in the prospectus?
Answer:
Yes, Mr. X can state mis-statement in the prospectus.

Question (b).
If found guilty which two types of liability will the company and its officers face?
Answer:

• Civil liability (Pay compensation for loss suffered by the investor)
• Criminal liability companies or their officers will be fined or imprisoned or both.

Question (c).
Can the prospectus be valid for the issue to the public on 10th February 2018?
Answer:
No, the prospectus will not be valid for the issue to the public on 10th February 2018.

6. A Company plans to offer Rights Issues.

Question (a).
Which document must it send to its shareholders for offering the rights issue?
Answer:
Letter of the offer must be sent to its shareholders for offering the rights issue.

Question (b).
Instead of the rights issue, if the company wants to issue shares to the public which document must it issue for inviting the public to subscribe to it.
Answer:
The prospectus is the document to be issued by the company if it wants to issue shares to the public instead of rights issues.

Question (c).
Name the document which is called an incomplete prospectus.
Answer:
Red Herring prospectus is called an incomplete prospectus.

4. Distinguish between the following.

Question 1.
Memorandum of Association and Articles of Association.
Answer:

Basis	Memorandum of Association	Articles of Association
1. Meaning	Memorandum of Association is a document that contains all the fundamental information which are required for the incorporator of the company.	Articles of Association is a document containing all the rules and regulations that govern the company.
2. Defined in	Section 2(56)	Section 2(5)
3. Types of information contained	Powers and objects of the company.	Rules for internal management of a company.
4. Status	It is subordinate to companies Act.	It is subordinate to Memorandum.
5. Retrospective effect	The memorandum of the company cannot be amended retrospectively.	The Articles of Association can be amended retrospectively.
6. Major contents	A memorandum must contain 6 clauses.	The Articles can be drafted as per the choice of the company.
7. Filing with registrar	Memorandum of Association must be filed with Registrar of Company by all types of companies.	Filing of Articles of Association is optional for a public company as it may adopt Table (A).
8. Alteration	Alteration can be done after passing special resolution in Annual General Meeting and previous approval of central government or company law board is required.	Alteration can be done in the Articles by passing special Resolution at Annual General Meeting.
9. Relation	Define the relationship between company and outsider.	Regulates the relationship between company and members.
10. Acts done beyond the scope	Absolutely void.	Can be satisfied by shareholders.

5. Answer in brief.

Question 1.
State any four clauses of Memorandum of Association.
Answer:
Memorandum of Association is a basic document, which gives information about the aims and objects of the company. It is also a charter of a company.

The following are four clauses of Memorandum of Association:
(i) Name Clause:

• This clause state the company’s proposed name.
• It must end with the word limited if its a public company or private limited if its a private company.
• It can’t be identical to any existing company’s name.
• It can’t resemble any registered Trade Mark.
• It should not be misleading in any way.

(ii) Registered office clause:

• The registered office clause lists the name of the state where the company’s registered office is physically located.
• The registered office’s physical location determines which jurisdiction the Registrar of companies and which court the company would fall under.
• It also confirms the company’s nationality .
• The registered office’s full address must be provided to the Registrar of companies to simplify further communications.

(iii) The object clause:

• This clause defines the objects for which a company is formed. It indicates the range of activities a company can undertake. This clause states in detail the main object for which the company is to be incorporated.
• The objects of the company must not be illegal, immoral or against the public policy.
• A company cannot do anything beyond or outside the scope of its objects.

(iv) Liability clause:

• The liability clause explains what liability each of the company’s member faces. If the company is limited by shares the liability that each member faces can be no more than the face value of share.
• If the company is limited by guarantee, this clause must define how much liability each individual company member holds.

Question 2.
State any four contents of Articles of Association.
Answer:
Articles of Association is a document which contains rules and regulations that governs the internal management.
The following are the four contents of Articles of Association:

• Share capital – Shares and their value and their division into different types of shares.
• Rights of each class of shareholders and procedure for variation of their rights.
• Procedure relating to allotment of shares, making of calls and forfeiture of shares.
• Rules relating to transfer and transmission of shares and the procedure to be followed.

Question 3.
State the statutory requirements in relation to Prospectus.
Answer:
Prospectus is an invitation to public to purchase its share and debentures. It is issued after the formation of company.
The following are the statutory requirements in relation to Prospectus:

• Draft Prospectus to be made Public: A draft prospectus filed with SEBI by the company should be made available to the public and to the stock exchange where the company wants to lists its shares.
• Signed by Director’s: Prospectus must be signed by all directors or by duly authorised attorney.
• Registration of Prospectus: A copy of the prospectus must be registered with ROC before issuing it to the public.
• Dating of Prospectus: A prospectus has to be dated. The date on the prospectus is considered as the date of publication of prospectus.
• Issuing Prospectus to Public: Prospectus must be issued to the public within 90 days from the date of registering a copy with the ROC.

6. Justify the following statements.

Question 1.
Memorandum of Association defines the limitations of the powers of the company.
Answer:

• The Memorandum of Association is a basic or fundamental or primary document of a company.
• It contains the following clauses: Name clause, Address clause, Object clause, Liability clause,Capital clause, Association of subscription clause.
• The entire business centres around its object clause.
• Object clause of the Memorandum of Association defines the area beyond which the company cannot do anything.
• It determines the powers of the company.
• It helps the stakeholders to know what is its permitted range of operation.
• A company is governed by Memorandum of Association and any act beyond it shall be considered as ultra-vires.
• Hence, Memorandum of Association defines the limitations of the power of the company.

Question 2.
Ultra-vires acts are null and void.
Answer:

• A Memorandum of Association of a company is a basic charter of the company.
• If a company departs from its Memorandum of Association such an act is ultra-vires.
• The doctrine of ultra vires is a fundamental rule of company law.
• An act legally in itself but not authorized by the object clause of Memorandum of Association of a company is ultra-vires.
• Hence if the company does an act or enters into a contract beyond the powers of the company then the act is said to be null and void.
• The company cannot sue on an ultra-vires transaction or it cannot be sued.
• Thus, I agree with the above statement.

Question 3.
Contents of Articles can be altered.
Answer:

• As per section 2(2) of the companies Act, 1956 ‘Articles’ means Articles of Association of a company as originally framed or as altered from time to time in pursuance of any previous companies’ law or of this Act.
• The Articles regulate the internal management of a company.
• It states the relationship between the company and its members.
• The articles, being the internal regulations of a company can be altered easily.
• The articles are required to be altered from time to time as per changes made by the government in the company law or as per changing situations in the corporate sector.
• Thus, the Articles of Association can be altered by passing a ‘Special Resolution’ at a general meeting.

Question 4.
The doctrine of Indoor Management protects outsiders who are unaware of the correctness of the internal proceedings of a company.
Answer:

• The doctrine of Indoor Management states that a person entering into a contract with the company need not inquire whether the company has followed the internal processing.
• It is assumed that the company acts as per the Memorandum of Association and Articles of Association.
• Because certain information which is internal to a company cannot be known to outsiders.
• So the doctrine of Indoor Management protects the interest of the outsider when the act is based on the Memorandum of Association and Articles of Association.

Question 5.
A prospectus is an important document issued by a public company.
Answer:

• A prospectus usually is in the form of a statement giving all material information about the company and showing its future prospectus.
• It aims at inviting investors to subscribe to its shares and debentures.
• It is a must for every public company to prepare its prospectus.
• It is through the prospectus that the prospective investors know the details of the shares offered by the company.
• Otherwise, the investors would have no idea of the shares that a public company is selling.
• All detailed information about a company like its business management, financial structure, etc., are provided in the prospectus.
• The main idea to issue a prospectus is to collect capital for the company from the general public.
• It should contain true, fair, and correct information.
• Hence, the prospectus is very important for a public company.

Question 6.
Company and officers responsible for issuing Prospectus are liable for mis-statements in Prospectus.
Answer:

• The prospectus is a written document giving an invitation to the public to purchase shares or debenture of the company.
• It provides all the necessary information about a company, its business, the management, financial structure, etc., of a company.
• A prospectus must be prepared very carefully and accurately.
• It should contain true and correct information and honest disclosure of facts.
• A company and all those officials can be held responsible for any mis-statement in the prospectus.
• These people have to face severe consequences.
• The shareholder can cancel the contract.
• Persons authorizing the issue of prospectus containing mis-statement are punishable with imprisonment of two years and a fine up to ₹ 5,000.
• Thus, I agree with the above statement.

7. Answer the following questions.

Question 1.
Briefly explain the clauses of the Memorandum of Association.
Answer:

• The Memorandum of Association is the principal document of a company.
• It is considered the charter of the company.
• It contains the powers and objectives of the company.
• It can be altered only according to the provisions made in the companies act regarding its alterations.
• Memorandum of Association provides information to the outsiders.

The Memorandum of Association contains the following clauses:
1. Name clause:

• This clause contains the complete name of the company.
• The company can choose any name subject to the following restrictions.
• The name of the company must end with the word limited in the case of a public limited company and with the word private limited in the case of a private limited company.
• The name should not be similar or identical to the name of any other company.
• The name should not contain the word cooperative.
• The name should not convey any connection or link of the company with the government department.

Alteration of name clause: A company can change its name by passing a special resolution and by obtaining approval from the central government.

2. Address clause:

• This clause contains the name of the state in which the registered office of the company is to be located.
• It is necessary because a company gets the registration from that state only.
• A registered office is a place where all the important documents are kept.
• A company must have a registered office when it starts its business activities or within 30 days whichever is earlier.

Alteration of address clause: A company may change its Registered office from

• One place to another place within the same city or town.
• One town or city to another town or city within the same state.
• One state to another state.
• In both these cases, a special resolution is to be passed in General Meeting.

3. Object clause:

• It is the most important clause of the Memorandum of Association.
• It contains the main object of the company.
• This clause defines the scope and limitations of the activities of the company.
• The objects must be defined keeping in mind the following conditions:
• the objects of the company must be legal.
• the objects should not be contrary to the provisions of any law.
• the objects must not be immoral.

Alteration in object clause: In order to alter its object clause, a company must pass a special resolution.

4. Liability clause:

• This clause defines the liability of the members of the company.
• In the case of a company limited by shares, the liability of the members is limited to the extent of the unpaid amount of share capital.
• In the case of a company limited by guarantee, the liability is limited to the amount of guarantee.

Alteration of liability clause: If a company wants to make any alteration in its liability clause then it must pass a unanimous resolution in a meeting.

5. Capital clause:

• The clause specifies the amount of share capital with which a company is to be registered.
• The capital with which a company is registered is called registered capital.
• A company can issue only that number of shares that are authorized by its memorandum.

Alteration of the capital clause: A company can alter its capital clause by passing a special resolution and by obtaining approval from the company law board.

6. The Association clause or Subscription clause:

• A company is an association of persons, who subscribe to its capital.
• For a public company minimum of 7 persons must subscribe to a memorandum by signing it and giving their undertaking that each one shall buy at least one share of a company.
• For a private company minimum of 2 persons must subscribe to the Memorandum of Association by signing it and they also give an undertaking that each one shall buy at least one share of a company.
• Each subscriber has to put his name address and occupation in the presence of at least one witness who shall also put in his details.

Question 2.
Define Memorandum of Association. Explain briefly its features.
Answer:
Definition:
As per section 2(28) of the companies Act 1956 “Memorandum of Association means the Memorandum of Association of a company as originally framed or altered from time to time in pursuance of any previous company laws or of this Act”.
As such this definition does not state exactly the scope, use, and importance of memorandum in a company.

• Lord Cairns observed that – “The memorandum of association is a charter and defines the limits of the powers of a company. The memorandum contains the fundamental conditions upon which alone the company is allowed to incorporate”.
• Lord Macmillan states that – “The purpose of the memorandum is to enable the shareholders, creditors and those who deal with the company to know what is its permitted range of enterprise”.

Meaning:
In simple words, the Memorandum of Association of a company means

• a basic or fundamental primary document of a company.
• a charter or constitution of a company
• no company can be incorporated without the Memorandum of Association.
• It lays down the range of its activities.
• It is a public document and can be inspected by those who deal with the company.

Features of Memorandum of Association:
The following are the features of the Memorandum of Association:

• Memorandum of Association states the nature of business activities to be conducted by the company.
• It informs about the scope of activities of the company.
• It is prepared by promoters of the company.
• It is signed by at least 7 persons in the case of a public company and 2 persons in the case of a private company.
• It is submitted to the registrar of companies for registration.
• All companies must prepare their own Memorandum of Association.
• It defines the relationship between the company and outsiders.
• It is an unalterable charter of the company.
• It is a public document.

Question 3.
What are Articles of Association? Explain briefly its content.
Answer:
Articles of Association contain rules and regulations regarding the management of the company’s internal affairs.

• It defines the powers, duties, and rights of managers, officers, and the board of directors.
• It establishes a relationship between the company and its members.

Contents of Articles of Association:

• The amount of share capital and different classes of shares
• Rights of each type of shareholders
• Procedure for making allotment of shares
• Procedure for issuing share certificates
• Procedure for transfer of shares
• Procedure for forfeiture of shares
• Procedure for reissue of forfeited shares
• Procedure for conducting meetings
• Procedure for appointment and removal of directors
• Duties powers and remuneration of directors
• Procedure for declaration and payment of dividend
• Procedure regarding the keeping of books of accounts and their audit
• Procedure regarding winding up of the company
• Seal of the company

Alteration of Articles of Association:

• A company may change its Article of Association by passing a special resolution.
• A company can alter its Articles of Association in the following ways:
  • by the adoption of a new set of an Articles
  • by deletion of an article
  • by addition or insertion of a new article
  • by substitution of an article
  • by amendment of an article

Question 4.
Define Prospectus. Explain its contents.
Answer:
Definition: “Sec 2(70) of Companies Act, 2013 defines prospectus as any document described or issued as a prospectus and includes 32a Red Herring Prospectus or shelf prospectus or/and notice, circular advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate”.

Meaning: Prospectus is a document that contains information about various aspects of the company and invests the investors to buy the securities offered by the company.

Contents of Prospectus:
A prospectus must contain the following:
(i) Information and Reports:
As per the Companies Act, the prospectus must contain information such as the name of the issuing company its full registered office address with phone numbers, email address, nature, number and price of securities being offered, details of a lead merchant banker, registrar to the issue, name of the stock exchange where the shares are listed.

• It must also have listed a clause of general risk date of opening and closing of issue etc.
• It must also have reported on financial information.

(ii) Declaration:
There should be a declaration by the company saying that all the provisions of the Companies Act have been complied with and that the prospectus does not contain anything contrary to the provisions of the Companies Act.

(iii) Statement of an Expert:
A prospectus may contain a statement made by an expert like Company Secretary, Chartered Accountant, Cost Accountant, Valuer, Engineer, etc., relating to matters that they have looked into.

• Any other matter as may be prescribed by the Companies Act.
• The expert has to give written consent to issue the prospectus.

(iv) Any other matter as may be prescribed by the Companies Act.

Balbharti Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company Textbook Exercise Questions and Answers.

Maharashtra State Board Class 11 Secretarial Practice Solutions Chapter 3 Formation of a Company

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
A company is ____________
(a) a human being
(b) an artificial person created by law
(c) a natural individual
Answer:
(b) an artificial person created by law

Question 2.
____________ are the persons who undertake the process of formation of a company.
(a) Promoters
(b) Directors
(c) Registrar of companies
Answer:
(a) Promoters

Question 3.
A ____________ company needs minimum two or more members.
(a) Public
(b) Private
(c) One person Company
Answer:
(b) Private

Question 4.
In a public company there must be minimum ____________ or more members.
(a) one
(b) two
(c) seven
Answer:
(c) seven

Question 5.
____________ refers to contracts entered into by the promoters on behalf of a proposed company.
(a) Pre-incorporation/Prehminary contracts
(b) Fiduciary contracts
(c) Memorandum of Association
Answer:
(a) Pre-incorporation/Preliminary contracts

Question 6.
A Director must have a ____________ to be appointed as a Director of a company.
(a) PAN
(b) DIN
(c) CIN
Answer:
(b) DIN

Question 7.
____________ has 21 digit alpha-numeric code which is a unique number assigned to every company at the time of
Incorporation.
(a) DIN
(b) PIN
(c) CIN
Answer:
(c) CIN

Question 8.
____________ is a document that invites the public to buy the shares of a company.
(a) Articles of Association
(b) Prospectus
(c) Certificate of Incorporation
Answer:
(b) Prospectus

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(a) Minimum 7 members	(1) Persons who conceive the idea of setting up a company
(b) DIN	(2) Public company
(c) Preliminary contracts	(3) Promoters
(d) Fiduciary duties towards the company	(4) Eight Digit alpha-numeric number
(e) CIN	(5) Private company
	(6) Unique number assigned to each Director
	(7) ROC
	(8) 21 digit alpha-numeric code number
	(9) One Person Company
	(10) Contracts entered by Promoters with third parties

Answer:

Group ‘A’	Group ‘B’
(a) Minimum 7 members	(2) Public company
(b) DIN	(6) Unique number assigned to each Director
(c) Preliminary contracts	(10) Contracts entered by Promoters with third parties
(d) Fiduciary duties towards the company	(3) Promoters
(e) CIN	(8) 21 digit alpha-numeric code number

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
A term which means registering a company as per provisions of Companies Act, 2013.
Answer:
Incorporation

Question 2.
Persons who undertake the necessary steps to set up a company.
Answer:
Promoters

Question 3.
The term refers to contracts entered into by Promoters with third parties on behalf of the proposed company.
Answer:
Preliminary contracts

Question 4.
The Birth Certificate of a company.
Answer:
Certificate of Incorporation

D. State whether the following statements are True or False.

Question 1.
A company is an artificial person.
Answer:
True

Question 2.
To form a Public company, there must be minimum of 2 persons/promoters.
Answer:
False

Question 3.
Promoters are persons who take the necessary steps to set up a company.
Answer:
True

Question 4.
Promoters can make secret profits while setting up a company.
Answer:
False

Question 5.
In India, companies have to be incorporated as per the provisions of the Companies Act, 2013.
Answer:
True

Question 6.
DSC is needed by Directors when they have to sign documents for e-filing.
Answer:
True

Question 7.
A company can be registered even without submitting a Memorandum of Association and Articles of Association.
Answer:
False

Question 8.
Every Director has to quote his DIN while giving his consent to be a Director of a company.
Answer:
True

Question 9.
ROC issues CIN only to certain companies.
Answer:
False

Question 10.
All companies need a Certificate of Incorporation.
Answer:
True

Question 11.
All companies need a Certificate of Commencement of business.
Answer:
False

1E. Find the odd one.

Question 1.
CIN, DIN, PAN
Answer:
PAN

Question 2.
Promoter, Prospectus, Incorporation of a company
Answer:
Prospectus

1F. Complete the sentences.

Question 1.
Promoters are the persons who undertake the process of ____________
Answer:
Formation of a company

Question 2.
The document issued by the Registrar of Companies when a company is incorporated is called as ____________
Answer:
Certificate of Incorporation

Question 3.
On incorporation of a company the ROC allows a unique identity number called as ____________
Answer:
Corporate Identity Number (CIN)

Question 4.
On behalf of a proposed company, preliminary contracts with third parties are entered by ____________
Answer:
Promoters

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) Promoter	……………………
(2) …………………….	Certificate of Incorporation
(3) CIN	……………………
(4) RUN is used for	…………………..

(Corporate Identity Number, Reserving name of a company, Formation of a company, Birth certificate of a company)
Answer:

Group ‘A’	Group ‘B’
(1) Promoter	Formation of a company
(2) Birth Certificate of a company	Certificate of Incorporation
(3) CIN	Corporate Identity Number
(4) RUN is used for	Reserving name of a company

1H. Answer in one sentence.

Question 1.
Who is a Promoter?
Answer:
A person/a group of persons who take initiative efforts for a formation of a company is/are called as ‘Promoter/s’.

Question 2.
What is CIN?
Answer:
It is the Corporate Identity Number, issued by ROC at the time of incorporation of the Company.

Question 3.
Which company needs a Certificate of Commencement of Business?
Answer:
Public and Private companies having share capital and which are incorporated after 2nd November 2018 need a Certificate of Commencement of Business.

Question 4.
What are Preliminary Contracts?
Answer:
Promoter entering into a contract with third parties on behalf of the company before incorporation is called as Preliminary Contracts.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
ROC prepares draft Memorandum and Articles of Association.
Answer:
Promoter prepares draft Memorandum and Articles of Association.

Question 2.
Certificate of Commencement of Business is like a birth certificate of a company.
Answer:
Certificate of Incorporation is like a birth certificate of a company.

1J. Arrange in proper order.

Question 1.
(a) Appoint First Directors
(b) Prepare Draft Memorandum of Association and Articles of Association.
(c) Come up with the business idea
Answer:
(a) Come up with the business idea
(b) Appoint first Directors
(c) Prepare draft Memorandum of Association and Article of Association.

Question 2.
(a) Incorporation of a company
(b) Commencement of a company
(c) Promotion
Answer:
(a) Promotion
(b) Incorporation of a company
(c) Commencement of Business

2. Explain the following terms/concepts.

Question 1.
Promoters
Answer:
A person who take lead to form the company is called a “Promoter”. As per Companies Act, 2013; Section 2(69) Promoter is defined as,

• A person, who has been named in the prospectus or identified by the company in Annual Return or
• Who has control on company’s affairs directly or indirectly whether as a shareholder, director or otherwise or
• In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.

Question 2.
Promotion
Answer:
It is the first stage of Company formation. It means taking necessary steps to incorporate a company as per the provisions of the Companies Act, 2013.

Question 3.
Certificate of Incorporation
Answer:
It is a certificate issued by the ROC, after verifying all the documents and information provided by the promotors. It is like the Birth Certificate of the company. The company becomes a legal person or a body corporate having perpetual succession on getting incorporation certificate.

Question 4.
Simplified Proforma for Incorporating Company Electronically (SPICe)
Answer:
As per new rule 38 of Companies (Incorporation) (Fourth Amendment) Rules, only one form like FORM INC-32 (SPICe) needs to be submitted at the time of incorporation.
SPICe is to be filed for applying for:

• Reservation of Name of Company
• Incorporation of the new company
• DIN for Directors
• PAN and TAN for a new company.

Question 5.
Corporate Identity Number (CIN)
Answer:
The company needs to incorporate with the Registrar of Companies. Such ROC gives CIN to the company. It is a unique identity number. CIN is a 21 digit alphanumeric code. It is to be quoted in every form and correspondence. CIN includes details of the company like listed or unlisted, industry code, state of the location, year of registration, type of ownership, and registration number.
E.g. CIN of Air India Ltd. – U62100DL1992GOI048581

3. Study the following case/situation and express your opinion.

1. Mr. Ram, Mr. Sam, and Mr. Tom who are partners have come together to convert their business into a company. They have finalized all the details about the business they want to do, the capital needed, etc. However, they do not know how to proceed with the legal formalities. Hence they appoint Mr. Shah who is a Practicing Company Secretary to help them prepare documents needed for incorporating the proposed company.

Question (a).
Can Mr. Ram, Mr. Sam, and Mr. Tom convert their partnership firm into a company?
Answer:
Mr. Ram, Mr. Sam, and Mr. Tom can convert their partnership firm into a company easily.

Question (b).
Name 2 most important documents needed to incorporate a company.
Answer:
Memorandum of Association and Articles of Association are the two most important documents for the Incorporation of the Company.

Question (c).
Will Mr. Shah be considered a Promoter of the Company? Why?
Answer:
Mr. Shah will not be considered a Promoter. Mr. Shah is an advising company secretary and will help to prepare documents needed for incorporation. Promoter means a person or group of persons who take initiative efforts for the formation of the company. Here Mr. Ram, Mr. Sam, and Mr. Tom are in the role of Promoter.

2. Mr. T along with his 5 friends have submitted all the necessary documents for incorporation of TRIM private limited company.

Question (a).
How many minimum promoters are needed to incorporate a private company?
Answer:
Minimum 2 promoters/persons are needed to incorporate a private company.

Question (b).
When can TRIM Private limited company be said to have come into existence?
Answer:
After getting Incorporating Certificate, TRIM Private limited company be said to have come into existence.

Question (c).
Name the two most important documents that must be submitted at the time of Incorporation of a company.
Answer:
There are various documents, which are needed for the Incorporation of a company like Memorandum of Association, Articles of Association, Director’s consent, etc.

3. Sagar company limited got its Certificate of Incorporation on 1st September 2018. The application for Incorporation was submitted on 16th August 2018. There were 10 promoters who took the steps to incorporate the company.

Question (a).
State the date on which Sagar company limited came into existence legally?
Answer:
Sagar Company Limited came into existence legally after receiving an incorporation certificate on 1st September 2018.

Question (b).
On which date will the company get its Corporate Identity Number?
Answer:
At the time of issuing the Incorporation Certificate, ROC allows a CIN to the company, which is 1st September 2018.

Question (c).
How many minimum promoters are needed for incorporating a public company?
Answer:
There are three types of companies like Public Company, Private Company and One Person Company, in which Public Company needs minimum 7 Promoters/Persons for incorporating.

4. Answer in brief.

Question 1.
State the contents of the Certificate of Incorporation.
Answer:
Contents of Certificate of Incorporation:

• The name of the company.
• Date of issue of Certificate of Incorporation.
• Corporate Identity Number (CIN).
• Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) of the company.
• Signature of Registrar with the date and his seal.

Question 2.
State the importance of the Certificate of Incorporation.
Answer:
Importance of Certificate of Incorporation:

• Certificate of Incorporation is like a Birth Certificate of a Company.
• It is proof by which company comes into existence.
• After getting an Incorporation Certificate, the company becomes a legal person distinct from its members.
• It is a document that gives status to the company about its perpetual succession from its date of Incorporation.
• After getting such a certificate, the company can sue and be sued by others.

Question 3.
Write a note on – Role of the Promoter.
Answer:
Role of Promoter:

• To conceive (discover) the idea of forming a business.
• To decide aims and objects of business, amount of capital, scale/size of business, etc.
• Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
• Drafting Prospectus to invite investors.
• To appoint first directors and first subscribers to Memorandum of Association and Articles of Association.
• To enter into ‘Preliminary Contract’ like hiring office premises, preparing and drafting Memorandum of Association and Articles of Association.

Question 4.
Draw the flow chart of steps in the promotion of a company.
Answer:
Steps in promotion of a company:

5. Justify the following statements.

Question 1.
Certificate of Incorporation is like a Birth Certificate of a company.
Answer:

• Certificate of Incorporation is issued by ‘Registrar of Companies, after successful completion of the Incorporation step of formation.
• It is proof by which company comes into existence.
• An incorporation Certificate brings legal status to the company.
• After getting the Incorporation Certificate company achieves the status of ‘Perpetual Succession’.
• The company can sue and can be sued after getting an Incorporation Certificate.
• The company can enter into various contracts.
• After getting an Incorporation Certificate, the company is considered an artificial person.
• Thus, a Certificate of incorporation is like a Birth Certificate of a company.

Question 2.
Every Company on incorporation gets a CIN.
Answer:

• CIN means Corporate Identity Number.
• ROC allots CIN to every company at the time of issue of Incorporation Certificate after completion of all formalities.
• It is a unique identification number that is given to every company.
• It shows details like whether a company is listed or unlisted, industrial code, state-wise location, year of incorporation, type of ownership, and registration number.
• All correspondence with ROC is conducted on basis of such CIN.
• It is compulsory given to all types of companies.
• Thus, every company gets CIN on incorporation.

Question 3.
Promoters play important role information of a company.
Answer:

• Promoter discovers the idea of business formation.
• Promoter decides aims and objects of business, amount of capital, scale/size of business.
• Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
• Drafting prospectus to invite investors.
• To appoint first directors and first subscribers of Memorandum of Association and Articles of Association,
• To enter into ‘Preliminary Contracts’ like hiring office premises, etc.
• To protect and promote the interest of the proposed company.
• Thus, promoters play important role in theformation of a company.

6. Answer the following questions.

Question 1.
Explain briefly the steps involved in the incorporation of a company.
Answer:
(i) Obtaining Digital Signature Certificate (DSC): Promoters and the proposed first directors has to obtain a DSC for e-filing.

(ii) Register DSC in the name of the Director with MCA: DSC has to be registered with MCA (Ministry of Corporate Affairs). MCA maintains details of every Director including their DIN, personal details, etc.

(iii) Obtain Director Identification Number (DIN): Proposed first Directors must apply for DIN in electronic form SPICe-32 at the time of incorporation. Every director must have DIN.

(iv) Apply for Reservation of Name: Promoter has to get the name of company approved from Central Registration Centre (CRC) by filling form RUN (Reserve Unique Name) along with prescribed fees on MCA portal. Promoters have to suggest more than one name in order of their preference. CRC will approve the name within 20 days from the date of application.

(v) Finalize Memorandum of Association and Articles of Association: It states the aims and objectives of the business. It contains legal and technical information. The promoter should finalize it. The promoters finalize both the documents with the help of the Company Secretary, legal experts, etc.

(vi) Signing, Stamping, and Dating of Memorandum and Articles of Association: Both documents must be signed by each subscriber and shall add his name, detailed address, occupation, etc. The signature of at least one witness is needed. Due stamp duty as per the Indian Stamp Duty Act, 1899 is required to be paid at the time of incorporation.

(vii) Preparation of other necessary documents for incorporation:

• Consent of Directors: Directors should give written consent in the prescribed format, about their approval to act as a director.
• Details of manager, secretary, etc Articles of Association include the names of the manager, secretary, etc.
• Declaration by subscribers to the Memorandum and First Directors: A declaration by first Directors should be taken who has subscribed to Memorandum of Association stating that he is not convicted of any offense in connection with the promotion, formation of company and has not found guilty of any fraud, etc.

(viii) Address for communication and notice of Registered office address: A company is required to have a Registered office within 30 days of incorporation. The promoter has to provide an address for communication at the time of incorporation.

(ix) Obtain a statutory declaration from Declaration by Company Secretary, Chartered Accountant, advocates, etc. is also necessary to be obtained along with Director, manager, etc. declaration status that all necessary requirements are fulfilled related to incorporation.

(x) Filing of application and document for incorporation of a company: Finally, after preparation of all documents, it has to be submitted to ROC in the prescribed form along with necessary prescribed fees for incorporation.

Question 2.
Promoters play an important role in the formation of a company. Explain.
Answer:
Promoters:
A person who take lead to form the company is called a “Promoter”.
As per Companies Act, 2013; Section 2(69) Promoter is defined as.

• A person who has been named in the prospectus or identified by the company in Annual Return or
• Who has control on company’s affairs directly or indirectly whether as a shareholder, director or otherwise or
• In accordance with whose advice, directions, or instructions, the Board of Directors is accustomed to act.

Role of Promoters:

• To conceive (discover) the idea of forming a business.
• To decide aims and objects of business, amount of capital, scale/size of business, etc.
• Drafting the ‘Memorandum of Association’ and ‘Articles of Association’.
• Drafting Prospectus to invite investors.
• To appoint first directors and first subscribers to Memorandum of Association and Articles of Association.
• To enter into ‘Preliminary Contract’ like hiring office premises, preparing and drafting Memorandum of Association and Articles of Association.

Activity (Text Book Page No. 42)

From the following CIN, identify the type of companies:

Question 1.
U74999TN20140PC098340
Answer:

Question 2.
L28920MH1945PLC004520
Answer:

Question 3.
U72900KA2003PTC033028
Answer: