Journal Entry | Crash Course of Accountancy - Class 12 - Commerce PDF Download

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 Page 1


 
     
 
10% debenture application& allotment a/c 100 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
To premium on redemption a/c                              10 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
5 
 
At premium(issued at 105) 
Bank a/c            105      
  To10% debenture application& allotment a/c 105 
 
10% debenture application& allotment a/c 105 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
 To security premium a/c                                         5 
 To premium on redemption a/c                              10 
 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
6 At discount (issued at 90) 
Bank a/c            90      
  To10% debenture application& allotment a/c 90 
 
10% debenture application& allotment a/c 90 
discount on issue a/c                                   10 
loss on issue a/c                                          10 
 To10% debenture a/c                                           100 
 To premium on redemption a/c                              10 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
Writing-off Discount/Loss on Issue of Debentures 
? The discount/loss on issue of debentures is a capital loss or a fictitious asset and, therefore, must be written-off 
during the life time of debentures. 
? The amount of discount/loss on issue of debentures should normally not be written-off in the year of issue itself 
since the benefit of the debentures would accrue to the company till their redemption 
? The discount/loss on it is, therefore, treated as capital loss. The discount may be charged to securities premium 
A/c or may be written-of fover 3 to 5 years through statement of profit and loss as per guidelines issued by ICAI. 
On the asset side of Balance Sheet. 
 
Journal entry. 
Statement of Profit and Loss A/c Dr. 
To Discount/Loss on Issue of Debentures A/c 
(Discount/loss on issue of debentureswritten-off) 
 
Case 1 
When debentures are redeemed in equal instalments 
A Ltd. Company has issued Rs.1,00,000, 10% debentures at a discount of 6%.These debentures are to be redeemed 
equally, spread over 5 annual instalments.Show Discount on issue of debentures account for five years. 
 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 5 5/15 X 6000 = 2000 
Page 2


 
     
 
10% debenture application& allotment a/c 100 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
To premium on redemption a/c                              10 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
5 
 
At premium(issued at 105) 
Bank a/c            105      
  To10% debenture application& allotment a/c 105 
 
10% debenture application& allotment a/c 105 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
 To security premium a/c                                         5 
 To premium on redemption a/c                              10 
 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
6 At discount (issued at 90) 
Bank a/c            90      
  To10% debenture application& allotment a/c 90 
 
10% debenture application& allotment a/c 90 
discount on issue a/c                                   10 
loss on issue a/c                                          10 
 To10% debenture a/c                                           100 
 To premium on redemption a/c                              10 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
Writing-off Discount/Loss on Issue of Debentures 
? The discount/loss on issue of debentures is a capital loss or a fictitious asset and, therefore, must be written-off 
during the life time of debentures. 
? The amount of discount/loss on issue of debentures should normally not be written-off in the year of issue itself 
since the benefit of the debentures would accrue to the company till their redemption 
? The discount/loss on it is, therefore, treated as capital loss. The discount may be charged to securities premium 
A/c or may be written-of fover 3 to 5 years through statement of profit and loss as per guidelines issued by ICAI. 
On the asset side of Balance Sheet. 
 
Journal entry. 
Statement of Profit and Loss A/c Dr. 
To Discount/Loss on Issue of Debentures A/c 
(Discount/loss on issue of debentureswritten-off) 
 
Case 1 
When debentures are redeemed in equal instalments 
A Ltd. Company has issued Rs.1,00,000, 10% debentures at a discount of 6%.These debentures are to be redeemed 
equally, spread over 5 annual instalments.Show Discount on issue of debentures account for five years. 
 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 5 5/15 X 6000 = 2000 
 
     
 
2 80,000 4 4/15 X 6000 = 1600 
3 60,000 3 3/15 X 6000 = 1200 
4 40,000 2 2/15 X 6000 = 800 
5 20,000 1 1/15 X 6000 = 400 
 Total 15  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
2000 
4000 
  6000   6000 
2 yr To balance b/d 4000 2 yr By Statement of Profit and Loss A/c 
By balance c/d 
1600 
2400 
  4000   4000 
3 yr To balance b/d 2400 3 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
1200 
  2400   2400 
4 yr To balance b/d 1200 4 yr By Statement of Profit and Loss A/c 
By balance c/d 
800 
400 
  1200   1200 
5 yr To balance b/d 400 5 yr By Statement of Profit and Loss A/c 
 
400 
  400   400 
 
Case 2 
When debentures are redeemed in lumpsum  
A Ltd. Company has issued Rs.1,00,000, 10% debentures at a discount of 6%.These debentures are to be redeemed after 
5 years .Show Discount on issue of debentures account for five years. 
 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 1 1/5 x 6000 = 1200 
2 1,00,000 1 1/5 x 6000 = 1200 
3 1,00,000 1 1/5 x 6000 = 1200 
4 1,00,000 1 1/5 x 6000 = 1200 
5 1,00,000 1 1/5 x 6000 = 1200 
 Total  5  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
1200 
4800 
  6000   6000 
2 yr To balance b/d 4800 2 yr By Statement of Profit and Loss A/c 1200 
Page 3


 
     
 
10% debenture application& allotment a/c 100 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
To premium on redemption a/c                              10 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
5 
 
At premium(issued at 105) 
Bank a/c            105      
  To10% debenture application& allotment a/c 105 
 
10% debenture application& allotment a/c 105 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
 To security premium a/c                                         5 
 To premium on redemption a/c                              10 
 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
6 At discount (issued at 90) 
Bank a/c            90      
  To10% debenture application& allotment a/c 90 
 
10% debenture application& allotment a/c 90 
discount on issue a/c                                   10 
loss on issue a/c                                          10 
 To10% debenture a/c                                           100 
 To premium on redemption a/c                              10 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
Writing-off Discount/Loss on Issue of Debentures 
? The discount/loss on issue of debentures is a capital loss or a fictitious asset and, therefore, must be written-off 
during the life time of debentures. 
? The amount of discount/loss on issue of debentures should normally not be written-off in the year of issue itself 
since the benefit of the debentures would accrue to the company till their redemption 
? The discount/loss on it is, therefore, treated as capital loss. The discount may be charged to securities premium 
A/c or may be written-of fover 3 to 5 years through statement of profit and loss as per guidelines issued by ICAI. 
On the asset side of Balance Sheet. 
 
Journal entry. 
Statement of Profit and Loss A/c Dr. 
To Discount/Loss on Issue of Debentures A/c 
(Discount/loss on issue of debentureswritten-off) 
 
Case 1 
When debentures are redeemed in equal instalments 
A Ltd. Company has issued Rs.1,00,000, 10% debentures at a discount of 6%.These debentures are to be redeemed 
equally, spread over 5 annual instalments.Show Discount on issue of debentures account for five years. 
 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 5 5/15 X 6000 = 2000 
 
     
 
2 80,000 4 4/15 X 6000 = 1600 
3 60,000 3 3/15 X 6000 = 1200 
4 40,000 2 2/15 X 6000 = 800 
5 20,000 1 1/15 X 6000 = 400 
 Total 15  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
2000 
4000 
  6000   6000 
2 yr To balance b/d 4000 2 yr By Statement of Profit and Loss A/c 
By balance c/d 
1600 
2400 
  4000   4000 
3 yr To balance b/d 2400 3 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
1200 
  2400   2400 
4 yr To balance b/d 1200 4 yr By Statement of Profit and Loss A/c 
By balance c/d 
800 
400 
  1200   1200 
5 yr To balance b/d 400 5 yr By Statement of Profit and Loss A/c 
 
400 
  400   400 
 
Case 2 
When debentures are redeemed in lumpsum  
A Ltd. Company has issued Rs.1,00,000, 10% debentures at a discount of 6%.These debentures are to be redeemed after 
5 years .Show Discount on issue of debentures account for five years. 
 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 1 1/5 x 6000 = 1200 
2 1,00,000 1 1/5 x 6000 = 1200 
3 1,00,000 1 1/5 x 6000 = 1200 
4 1,00,000 1 1/5 x 6000 = 1200 
5 1,00,000 1 1/5 x 6000 = 1200 
 Total  5  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
1200 
4800 
  6000   6000 
2 yr To balance b/d 4800 2 yr By Statement of Profit and Loss A/c 1200 
 
     
 
By balance c/d 3600 
  4800   4800 
3 yr To balance b/d 3600 3 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
2400 
  3600   3600 
4 yr To balance b/d 2400 4 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
1200 
  2400   2400 
5 yr To balance b/d 1200 5 yr By Statement of Profit and Loss A/c 
 
1200 
  1200   1200 
 
Case 2 
When debentures are redeemed in unequal insatlments 
 
On 1.4.2013, X Ltd. issued 1,000 15% Debentures of Rs.100 each at 94% redeemable at par as follows:  
Year end Nominal Value of Total Debentures to be redeemed 
2 20,000 
3 30,000 
5 10,000 
8 40,000 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 10 10/50 x 6000 = 1200 
2 1,00,000 10 10/50 x 6000 = 1200 
3 80,000 8 8/50 x 6000 = 960 
4 50,000 5 5/50 x 6000 = 600 
5 50,000 5 5/50 x 6000 = 600 
6 40,000 4 4/50 x 6000 = 480 
7 40,000 4 4/50 x 6000 = 480 
8 40,000 4 4/50 x 6000 = 480 
 Total 50  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
1200 
4800 
  6000   6000 
2 yr To balance b/d 4800 2 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
3600 
  4800   4800 
3 yr To balance b/d 3600 3 yr By Statement of Profit and Loss A/c 
By balance c/d 
960 
2640 
  3600   3600 
4 yr To balance b/d 2640 4 yr By Statement of Profit and Loss A/c 600 
Page 4


 
     
 
10% debenture application& allotment a/c 100 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
To premium on redemption a/c                              10 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
5 
 
At premium(issued at 105) 
Bank a/c            105      
  To10% debenture application& allotment a/c 105 
 
10% debenture application& allotment a/c 105 
loss on issue a/c                                             10 
 To10% debenture a/c                                           100 
 To security premium a/c                                         5 
 To premium on redemption a/c                              10 
 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
6 At discount (issued at 90) 
Bank a/c            90      
  To10% debenture application& allotment a/c 90 
 
10% debenture application& allotment a/c 90 
discount on issue a/c                                   10 
loss on issue a/c                                          10 
 To10% debenture a/c                                           100 
 To premium on redemption a/c                              10 
At premium(repayable at 110) 
10% debenture a/c              100 
premium on redemption a/c 10 
   To debenture holder a/c        110 
 
debenture holder a/c      110  
   To bank a/c     110  
 
 
Writing-off Discount/Loss on Issue of Debentures 
? The discount/loss on issue of debentures is a capital loss or a fictitious asset and, therefore, must be written-off 
during the life time of debentures. 
? The amount of discount/loss on issue of debentures should normally not be written-off in the year of issue itself 
since the benefit of the debentures would accrue to the company till their redemption 
? The discount/loss on it is, therefore, treated as capital loss. The discount may be charged to securities premium 
A/c or may be written-of fover 3 to 5 years through statement of profit and loss as per guidelines issued by ICAI. 
On the asset side of Balance Sheet. 
 
Journal entry. 
Statement of Profit and Loss A/c Dr. 
To Discount/Loss on Issue of Debentures A/c 
(Discount/loss on issue of debentureswritten-off) 
 
Case 1 
When debentures are redeemed in equal instalments 
A Ltd. Company has issued Rs.1,00,000, 10% debentures at a discount of 6%.These debentures are to be redeemed 
equally, spread over 5 annual instalments.Show Discount on issue of debentures account for five years. 
 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 5 5/15 X 6000 = 2000 
 
     
 
2 80,000 4 4/15 X 6000 = 1600 
3 60,000 3 3/15 X 6000 = 1200 
4 40,000 2 2/15 X 6000 = 800 
5 20,000 1 1/15 X 6000 = 400 
 Total 15  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
2000 
4000 
  6000   6000 
2 yr To balance b/d 4000 2 yr By Statement of Profit and Loss A/c 
By balance c/d 
1600 
2400 
  4000   4000 
3 yr To balance b/d 2400 3 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
1200 
  2400   2400 
4 yr To balance b/d 1200 4 yr By Statement of Profit and Loss A/c 
By balance c/d 
800 
400 
  1200   1200 
5 yr To balance b/d 400 5 yr By Statement of Profit and Loss A/c 
 
400 
  400   400 
 
Case 2 
When debentures are redeemed in lumpsum  
A Ltd. Company has issued Rs.1,00,000, 10% debentures at a discount of 6%.These debentures are to be redeemed after 
5 years .Show Discount on issue of debentures account for five years. 
 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 1 1/5 x 6000 = 1200 
2 1,00,000 1 1/5 x 6000 = 1200 
3 1,00,000 1 1/5 x 6000 = 1200 
4 1,00,000 1 1/5 x 6000 = 1200 
5 1,00,000 1 1/5 x 6000 = 1200 
 Total  5  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
1200 
4800 
  6000   6000 
2 yr To balance b/d 4800 2 yr By Statement of Profit and Loss A/c 1200 
 
     
 
By balance c/d 3600 
  4800   4800 
3 yr To balance b/d 3600 3 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
2400 
  3600   3600 
4 yr To balance b/d 2400 4 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
1200 
  2400   2400 
5 yr To balance b/d 1200 5 yr By Statement of Profit and Loss A/c 
 
1200 
  1200   1200 
 
Case 2 
When debentures are redeemed in unequal insatlments 
 
On 1.4.2013, X Ltd. issued 1,000 15% Debentures of Rs.100 each at 94% redeemable at par as follows:  
Year end Nominal Value of Total Debentures to be redeemed 
2 20,000 
3 30,000 
5 10,000 
8 40,000 
Solution 
Particulars l.f. Dr. Cr. 
Bank a/c                
  To10% debenture application& allotment a/c  
 
10% debenture application& allotment a/c  
discount on issue a/c                                    
 To10% debenture a/c                                            
 94,000 
 
 
94,000 
6,000 
 
94,000 
 
 
 
1,00,000 
 
Working note for writing off discount on issue 
 
Year Outstanding debentures  
 (beginning) 
Ratio  Propotion in discount 
1 1,00,000 10 10/50 x 6000 = 1200 
2 1,00,000 10 10/50 x 6000 = 1200 
3 80,000 8 8/50 x 6000 = 960 
4 50,000 5 5/50 x 6000 = 600 
5 50,000 5 5/50 x 6000 = 600 
6 40,000 4 4/50 x 6000 = 480 
7 40,000 4 4/50 x 6000 = 480 
8 40,000 4 4/50 x 6000 = 480 
 Total 50  
 
 Ledger  
Discount on Issue of Debentures Account 
Date Particulars Amount Date Particulars Amount 
1 yr To10% debenture a/c 6,000 1 yr By Statement of Profit and Loss A/c 
By balance c/d  
1200 
4800 
  6000   6000 
2 yr To balance b/d 4800 2 yr By Statement of Profit and Loss A/c 
By balance c/d 
1200 
3600 
  4800   4800 
3 yr To balance b/d 3600 3 yr By Statement of Profit and Loss A/c 
By balance c/d 
960 
2640 
  3600   3600 
4 yr To balance b/d 2640 4 yr By Statement of Profit and Loss A/c 600 
 
     
 
By balance c/d 2040 
  2640   2640 
5 yr To balance b/d 2040 5 yr By Statement of Profit and Loss A/c 
By balance c/d 
600 
1440 
  2040   2040 
6 yr To balance b/d 1440 6 yr By Statement of Profit and Loss A/c 
By balance c/d 
480 
960 
  1440   1440 
7 yr To balance b/d 960 7 yr By Statement of Profit and Loss A/c 
By balance c/d 
480 
480 
  960   960 
8 yr To balance b/d 480 8 yr By Statement of Profit and Loss A/c 
 
480 
  480   480 
 
 
 
  
 
 
 
 
  
 
 
 
   
 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
   
  
  
  
  
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FAQs on Journal Entry - Crash Course of Accountancy - Class 12 - Commerce

1. What is commerce?
Ans. Commerce refers to the exchange of goods and services between businesses or individuals. It involves various activities such as buying, selling, and distributing products, as well as financial transactions and the exchange of information.
2. What are the different types of commerce?
Ans. There are three main types of commerce: 1. Trade Commerce: This involves the exchange of goods and services between two or more parties, either within a country (domestic trade) or between different countries (international trade). 2. E-commerce: This refers to conducting business activities online, using electronic platforms and technologies. It includes online shopping, electronic banking, online advertising, and other internet-based transactions. 3. Social Commerce: Social commerce combines social media and e-commerce, allowing users to buy and sell products directly on social media platforms. It leverages social networks to facilitate transactions and drive customer engagement.
3. What are the advantages of e-commerce?
Ans. E-commerce offers several advantages, including: 1. Global Reach: Businesses can reach customers worldwide, breaking geographical barriers and expanding their market reach. 2. Convenience: Customers can shop online anytime, from anywhere, eliminating the need to visit physical stores. It provides 24/7 accessibility and saves time. 3. Cost Savings: E-commerce eliminates the need for physical stores, reducing overhead costs associated with rent, utilities, and staffing. This often leads to lower prices for customers. 4. Personalization: Online businesses can use customer data to personalize the shopping experience, offering tailored product recommendations and advertisements. 5. Efficient Inventory Management: E-commerce platforms enable businesses to track inventory in real-time, minimizing stockouts and optimizing supply chain management.
4. How does social commerce work?
Ans. Social commerce integrates social media and online shopping. It allows users to browse, share, and purchase products directly within social media platforms. Here's how it works: 1. Product Discovery: Users come across products while scrolling through their social media feeds. They may discover items through influencers, friends, or targeted advertisements. 2. Product Display: Businesses showcase their products using images, videos, or carousel ads on social media platforms. Users can view product details, descriptions, and pricing. 3. In-App Purchase: Social media platforms provide options to buy products directly within the app. Users can add items to their cart, choose payment methods, and complete the purchase without leaving the platform. 4. User Reviews and Recommendations: Social commerce encourages users to leave reviews and ratings, helping others make informed purchase decisions. Recommendations from friends or influencers can also influence buying behavior.
5. How does commerce contribute to economic growth?
Ans. Commerce plays a crucial role in driving economic growth. Here's how it contributes: 1. Job Creation: Commerce activities, such as manufacturing, retail, and logistics, create employment opportunities, reducing unemployment rates and improving income levels. 2. Increased Trade: Commerce facilitates trade between regions, countries, and continents, promoting economic cooperation and specialization. It stimulates economic growth by expanding market access for businesses. 3. Innovation and Technology: Commerce drives innovation as businesses strive to develop new products, services, and technologies to stay competitive. This leads to advancements that benefit various sectors of the economy. 4. Tax Revenue: Commerce generates tax revenue for governments, which can be invested in public infrastructure, education, healthcare, and other areas that support economic development. 5. Consumer Spending: Commerce drives consumer spending, which boosts demand for goods and services. Increased consumer spending stimulates production and investment, leading to economic growth.
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