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Commerce Exam  >  Commerce Tests  >  Business Studies (BST) Class 11  >  Test: Forms of Business Organisation- Case Based Type Questions - Commerce MCQ

Test: Forms of Business Organisation- Case Based Type Questions - Commerce MCQ


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12 Questions MCQ Test Business Studies (BST) Class 11 - Test: Forms of Business Organisation- Case Based Type Questions

Test: Forms of Business Organisation- Case Based Type Questions for Commerce 2024 is part of Business Studies (BST) Class 11 preparation. The Test: Forms of Business Organisation- Case Based Type Questions questions and answers have been prepared according to the Commerce exam syllabus.The Test: Forms of Business Organisation- Case Based Type Questions MCQs are made for Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Forms of Business Organisation- Case Based Type Questions below.
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Test: Forms of Business Organisation- Case Based Type Questions - Question 1
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Direction: Manish is a student pursuing a final year B.Tech. from IIT Kharagpur. His father Mr. Sambal Singh who owned a small general store in Jaipur had a heart attack and became completely paralysed. There was no other source of income for the family, so, Manish left his studies and decided to take charge of his father’s general store. While checking the books of accounts, he found that his father had taken a loan of ₹ 2 lakhs from the Bank of Baroda to be repaid this year only, but the business is running into losses due to his father’s illness. Hence, his mother advised him to close the business and to look for a job outside. Based on the given case, answer the following questions:

Q. The form of business organisation formed by Sambal Singh is:

Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 1

- The business organization formed by Sambal Singh is a Sole Proprietorship.
- A sole proprietorship is a business owned and operated by one individual, without any legal distinction between the owner and the business.
- This form of business is typical for small enterprises, like a general store.
- It allows the owner complete control over operations but also means personal liability for debts, as seen with the loan from the Bank of Baroda.

Therefore, the correct answer is Option C. 

Test: Forms of Business Organisation- Case Based Type Questions - Question 2
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Direction: Manish is a student pursuing a final year B.Tech. from IIT Kharagpur. His father Mr. Sambal Singh who owned a small general store in Jaipur had a heart attack and became completely paralysed. There was no other source of income for the family, so, Manish left his studies and decided to take charge of his father’s general store. While checking the books of accounts, he found that his father had taken a loan of ₹ 2 lakhs from the Bank of Baroda to be repaid this year only, but the business is running into losses due to his father’s illness. Hence, his mother advised him to close the business and to look for a job outside. Based on the given case, answer the following questions:

Q. Which of the following shows merit and a demerit of the type of business organisation mentioned in the above case?

Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 2

The correct answer is:

Option B: Limited resources and unlimited liability

Explanation:

  • The type of business organization mentioned in the case is a sole proprietorship (since the store was owned by Manish's father alone).
  • Merit (advantage): Limited resources (as the business is run by a single individual).
  • Demerit (disadvantage): Unlimited liability, meaning the owner is personally responsible for all debts and obligations of the business, which is evident as Manish's father had taken a loan that needs to be repaid.

This choice correctly highlights both a key advantage and a significant disadvantage of a sole proprietorship.

 

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Test: Forms of Business Organisation- Case Based Type Questions - Question 3
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Direction: Manish is a student pursuing a final year B.Tech. from IIT Kharagpur. His father Mr. Sambal Singh who owned a small general store in Jaipur had a heart attack and became completely paralysed. There was no other source of income for the family, so, Manish left his studies and decided to take charge of his father’s general store. While checking the books of accounts, he found that his father had taken a loan of ₹ 2 lakhs from the Bank of Baroda to be repaid this year only, but the business is running into losses due to his father’s illness. Hence, his mother advised him to close the business and to look for a job outside. Based on the given case, answer the following questions:

Q. ”Loan of ₹ 2 lakhs from Bank of Baroda to be repaid this year only, but the business is running into losses.” Identify the nature of liability of the owner in the stated line.

Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 3

- In a small general store, typically structured as a sole proprietorship, the owner has unlimited liability.
- Unlimited liability means the owner is personally responsible for all business debts and obligations.
- Manish's father's loan of ₹2 lakhs is a liability that Manish must address, as there is no separation between personal and business assets.
- This liability means creditors can pursue the owner's personal assets if the business assets are insufficient to cover debts.

Therefore, the correct answer is Option B.

Test: Forms of Business Organisation- Case Based Type Questions - Question 4
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Direction: Manish is a student pursuing a final year B.Tech. from IIT Kharagpur. His father Mr. Sambal Singh who owned a small general store in Jaipur had a heart attack and became completely paralysed. There was no other source of income for the family, so, Manish left his studies and decided to take charge of his father’s general store. While checking the books of accounts, he found that his father had taken a loan of ₹ 2 lakhs from the Bank of Baroda to be repaid this year only, but the business is running into losses due to his father’s illness. Hence, his mother advised him to close the business and to look for a job outside. On the basis of the given case, answer the following questions:

Q. ” ....decided to take charge of his father’s general store.” As per the stated line, what will be the status that Manish holds in the business of his father?
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 4

- Manish becomes the owner of the general store because he takes charge of the business, assuming full responsibility and control.
- Ownership implies having the right to make decisions, manage operations, and be accountable for profits and liabilities, such as the outstanding loan.
- Unlike a partner, employee, or trustee, an owner has complete authority over the business's assets and direction.
- Manish’s decision to manage the store indicates he has assumed this role, making him the business owner. 

Therefore, Option D is the correct answer. 

Test: Forms of Business Organisation- Case Based Type Questions - Question 5
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Direction: Read the following text and answer the questions on the basis of the same:

Madhu, Himanshu and Mayank, after completing a B.E. in civil engineering, have jointly taken a project of constructing three government school buildings in a village near Agra within the time period of 6 months. As per the written agreement between them, only Madhu and Mayank will contribute the capital, and take all managerial decisions, whereas Himanshu will contribute capital only but will not be actively involved in management.

Q. What type of a partner is Himanshu?
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 5

Himanshu is a dormant partner. A sleeping partner is also known as a “dormant partner”. This partner does not participate in the day-to-day functioning activities of the partnership firm. A person who has sufficient money or interest in the firm, but cannot devote his time to the business, can act as a sleeping partner in the firm.

Therefore, the correct answer is Option B. 

Test: Forms of Business Organisation- Case Based Type Questions - Question 6
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Direction: Read the following text and answer the questions on the basis of the same:

Madhu, Himanshu and Mayank, after completing a B.E. in civil engineering, have jointly taken on a project of constructing three government school buildings in a village near Agra within the time period of 6 months. As per the written agreement between them, only Madhu and Mayank will contribute the capital, and take all managerial decisions, whereas Himanshu will contribute capital only but will not be actively involved in management.

Q. If the partners are not able to complete the project effectively and efficiently, then who will be held liable for the losses incurred on account of noncompletion of the project?
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 6

- In a partnership, all partners are generally liable for the actions and obligations of the business, unless specified otherwise.
- The project agreement indicates that Madhu and Mayank manage the project, but Himanshu is also a capital contributor.
- Legally, all partners are accountable for business outcomes, including losses.
- Thus, if the project fails, Madhu, Mayank, and Himanshu are all liable, making option D the correct choice. If the partners are not able to complete the project effectively and efficiently, then all of the partners will be held liable for the losses incurred on account of noncompletion of the project.

Therefore, the correct answer is Option D. 

Test: Forms of Business Organisation- Case Based Type Questions - Question 7
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Direction: Read the following text and answer the questions on the basis of the same:

Madhu, Himanshu and Mayank, after completing a B.E. in civil engineering, have jointly taken a project of constructing three government school buildings in a village near Agra within the time period of 6 months. As per the written agreement between them, only Madhu and Mayank will contribute the capital, and take all managerial decisions, whereas Himanshu will contribute capital only but will not be actively involved in management.

Q. Specify the kind of partnership mentioned in the above case.
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 7

- Particular Partnership:
- This type of partnership is formed for a specific project or transaction.
- In the scenario, Madhu, Himanshu, and Mayank have partnered solely to construct three school buildings.
- The partnership dissolves once the project is completed.
- It contrasts with a general partnership, which operates continuously and for an indefinite duration.
- The agreement specifies specific roles and contributions, typical of a particular partnership, focused on a single venture. It is a particular partnership. A partnership formed for a single transaction or enterprise is distinguished from one organized for carrying on a general business.

Therefore, the correct answer is Option B. 

Test: Forms of Business Organisation- Case Based Type Questions - Question 8
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Direction: Read the following text and answer the questions on the basis of the same:

Madhu, Himanshu and Mayank, after completing a B.E. in civil engineering, have jointly taken a project of constructing three government school buildings in a village near Agra within the time period of 6 months. As per the written agreement between them, only Madhu and Mayank will contribute the capital, and take all managerial decisions, whereas Himanshu will contribute capital only but will not be actively involved in management.

Q. Name the written agreement which defines the terms and conditions of such partnership.
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 8

- A partnership deed is a formal written agreement between partners in a business venture.
- It outlines the terms and conditions, roles, responsibilities, and capital contributions of each partner.
- In this scenario, Madhu and Mayank manage the project, while Himanshu contributes capital without managing.
- The partnership deed helps prevent disputes by clearly defining each partner's duties and rights.
- It's a necessary document for legal and financial clarity in a partnership. The written agreement that defines the terms and conditions of such a partnership is the Partnership deed.

Therefore, the correct answer is Option C.

Test: Forms of Business Organisation- Case Based Type Questions - Question 9
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Direction: Read the following text and answer the questions on the basis of the same:

Ramkrishan Agrawal is running a Jewellery showroom at a prime location in Jaipur, which he inherited from his father. His joint family consists of his three sons and a younger brother, who are also working in the same showroom. Being head of the family, Ramkrishna makes all the decisions of business, which sometimes causes conflicts among the members. He decided to open one more branch, and the business took a loan of ` 1 crore from Syndicate Bank for three years. But the opening of the new branch proved to be a wrong decision and the business suffered heavy losses. Due to financial crises, Ramkrishna had to pay a part of the loan amount from his self-acquired property.

Q. Which form of a business organisation does the above case indicate?
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 9

  • This case indicates a Joint Hindu Family Business.

  • Joint Hindu Family Business: It refers to a form of business organization which is owned and carried on jointly by the members of the Hindu Undivided Family (HUF). It is also known as Hindu Undivided Family Business.

 

Test: Forms of Business Organisation- Case Based Type Questions - Question 10
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Direction: Read the following text and answer the questions on the basis of the same:

Ramkrishan Agrawal is running a Jewellery showroom at a prime location in Jaipur, which he inherited from his father. His joint family consists of his three sons and a younger brother, who are also working in the same showroom. Being head of the family, Ramkrishna makes all the decisions of business, which sometimes causes conflicts among the members. He decided to open one more branch, and the business took a loan of ` 1 crore from Syndicate Bank for three years. But the opening of the new branch proved to be a wrong decision and the business suffered heavy losses. Due to financial crises, Ramkrishna had to pay a part of the loan amount from his self-acquired property.

Q. ”Due to financial crises, Ramkrishna had to pay a part of the loan amount from his self-acquired property.” Identify the reason which made him use his personal property to repay the loan.
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 10

- The structure of a Hindu Undivided Family (HUF) business involves a "Karta," who is the head and has the authority to manage the family business.
- The Karta has unlimited liability, which means he is personally responsible for the debts of the business.
- If the business cannot fulfil its obligations, the Karta must use personal assets to cover the debts.
- In this scenario, Ramkrishna, as the Karta, used his self-acquired property to repay the loan due to his unlimited liability. The reason which made him use his personal property to repay the loan was the Unlimited liability of Karta.

Therefore, the correct answer is Option A. 

Test: Forms of Business Organisation- Case Based Type Questions - Question 11
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Direction: Read the following text and answer the questions on the basis of the same:

Ramkrishan Agrawal is running a Jewellery showroom at a prime location in Jaipur, which he inherited from his father. His joint family consists of his three sons and a younger brother, who are also working in the same showroom. Being head of the family, Ramkrishna makes all the decisions of business, which sometimes causes conflicts among the members. He decided to open one more branch, and the business took a loan of ` 1 crore from Syndicate Bank for three years. But the opening of the new branch proved to be a wrong decision and the business suffered heavy losses. Due to financial crises, Ramkrishna had to pay a part of the loan amount from his self-acquired property.

Q. ”Ramkrishna takes all the decisions of business, which sometimes causes conflicts among the members.” Identify the demerit of the type of business stated here.
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 11

The demerit is the Dominance of Karta: In a Joint Hindu Family business, the Karta is the head and has complete control over decision-making.
- This dominance can lead to conflicts as other family members may disagree with the decisions taken.
- The centralized authority of the Karta can stifle input from others, leading to potential discord and dissatisfaction, especially if the decisions lead to negative outcomes, as seen in Ramkrishna's case with the unsuccessful branch expansion.

Dominance of Karta: The karta individually manages the business and takes all the decisions that may at times not be acceptable to others.

Therefore, the correct answer is Option A. 

Test: Forms of Business Organisation- Case Based Type Questions - Question 12
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Direction: Read the following text and answer the questions on the basis of the same:

Ramkrishan Agrawal is running a Jewellery showroom at a prime location in Jaipur, which he inherited from his father. His joint family consists of his three sons and a younger brother, who are also working in the same showroom. Being head of the family, Ramkrishna makes all the decisions of business, which sometimes causes conflicts among the members. He decided to open one more branch, and the business took a loan of ` 1 crore from Syndicate Bank for three years. But the opening of the new branch proved to be a wrong decision and the business suffered heavy losses. Due to financial crises, Ramkrishna had to pay a part of the loan amount from his self-acquired property.

Q. ”But opening of new branch proved to be a wrong decision and the business suffered heavy losses.” Which of the following reasons best suits the given statement?
Detailed Solution for Test: Forms of Business Organisation- Case Based Type Questions - Question 12

Limited managerial skills of Karta.

Management skills are a collection of abilities that include things such as business planning, decision-making, problem-solving, communication, delegation, and time management. While different roles and organizations require the use of various skill sets, management skills help a professional stand out and excel no matter what their level. In top management, these skills are essential to run an organization well and achieve desired business objectives.

Therefore, the correct answer is Option B. 

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