Long Type Questions - Entrepreneurial Planning, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. Explain the categories of economic activities with the help of examples. (6 marks)
Ans. Three categories of economic activities are as follows :
(i) Business : Business refers to those economic activities which are connected with the production, purchase, sale or distribution of goods or services with the main objective of earning profit. Example : fishing, mining, manufacturing, etc.
(ii) Profession : Profession refers to the activities which require special knowledge and skill to be applied by an individual in his work to earn a living. These activities are subject to guidelines or codes of conduct laid down by the professional bodies. Example : lawyers, doctors, etc.
(iii) Employment : Employment refers to an activity in which an individual works regularly for a nother person and gets remuneration in return. Those who are employed by others are called employees and those who engage these employees are called employers. Remuneration paid to employees is known as salary or wages. Examples : Working in banks, clerks, salesman, etc.

Q2. Distinguish between business, profession and employment. (6 marks)
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Q3. Differentiate between Economic and Non-Economic Activities. (6 marks)
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Q4. Explain the categories of business enterprises. Give examples. (6 marks)
Ans. (i) Private Sector Enterprise : The business enterprises which are owned, controlled and managed by private individuals are known as private sector enterprises. Their main object is to earn profits. Example : Wipro, TATA, etc.
(ii) Public Sector Enterprises : The business enterprises which are owned, controlled and managed by the Central and State Government are known as public sector enterprises. Their main objective is service. Example : LIC.
(iii) Joint Sector Enterprises : The business enterprises which are owned, controlled and managed jointly by private entrepreneur and government are called joint stock enterprises. The day-to-day management lies in the hands of private entrepreneurs where as government control and supervise by its members in Board of Directors. Example : Maruti Udyog Ltd.

Q5. What are the characteristics/features of a sole properietorship firm. (6 marks)
Ans. Following are the characteristics/features of a sole proprietorship business :
(i) Individual Ownership : The sole proprietorship firm is exclusively owned by a single individual only. All the capital is supplied by the single individual from his own wealth or from borrowed funds.
(ii) One-man Management and Control : The proprietor is the sole owner of the firm and the affairs of business are managed and controlled by the sole proprietor. Hence, the ownership and management lies in the hands of one person only. Though competent people or manager may be employed to help the owner for efficient management.
(iii) Small Size : The sole proprietorship business operates on a very small scale. A sole propriet or can arrange limited funds and has limited ability. Therefore, the scale of operations is generally limited.
(iv) Individual Financing : Generally, all funds are arranged by the sole proprietor from its own sources. Though, if required the sole proprietor has to access to loans and debts to procure funds for smooth running of business.
(v) No Seperate Legal Entity : A sole proprietorship has no seperate legal entity distinct from its owner. Law makes no difference between the owner and the proprietership firm. Business and the owner exist together.
(vi) Limited Area of Operations : This form of business has limited area of operation due to :
(a) Limited finance availability.
(b) Limited managerial abilities.
(vii) Unlimited Liability : In sole proprietorship firm, the sole proprietor is personally liable for all the debts of the proprietorship business. In case the business assets are insufficient to pay off all business liabilities, the proprietor’s personal property can be called upon to pay off the liabilities.
(viii) Sole Beneficiary : In a sole proprietorship business, the proprietor alone is entitled to all the profits and losses of the business.

Q6. What are the legal formalities involved in Sole Proprietorship ? (5 marks)
Ans. The formation of sole proprietorship is a simple process because sole proprietor does not need to be registered. Few general formalities required to start sole proprietorship are below :
(i) Business Name : Legally it is not compulsory to select a track name but it is generally advisable to select a name of business.
(ii) Service Tax Registration : Service Tax Registration is compulsory for a sole proprietor whose taxable income is more than Rs. 10 lakhs and he has to fill Service Tax form No. 1 (Form ST-1)
(iii) VAT/CST Registration : If sole proprietor is selling goods within the state, then he has to get registered under VAT. If he selling goods interestate than CST Registration is mandatory.
(iv) Payment of Taxes : Sole proprietor has to comply with the rules regarding payment of taxes according to the state where the business is established.
(v) Others : Other formalities includes getting a Bank Account Number, Shop & Establishment Licence, Export Import Code No. (IF involved in International Business), etc.

Q7. What do you mean by HUF business and explain its features. (6 marks)
Ans. A business carried on by male members of Hindu Undivided Family is known as Joint Hindu Family or Hindu Undivided Family Business.

Following are the features of Hindu Undivided Family :
(i) Membership by Birth : A person automatically becomes a member in Joint Hindu Family by taking birth in that family.
(ii) Number of Members : In Joint Hindu Family Business minimum two members are required and there is no limit for maximum number of members. However, the membership is restricted to three successive generations.
(iii) Management : The Joint Hindu Family Business is managed and controlled by the senior-most male member of the family, who is called Karta. Only the Karta has legal rights to enter into contract with outsiders.
(iv) Liability : The liability of Karta is unlimited whereas liability of all others members of Joint Hindu Family Business is limited upto their share in the business.
(v) Minor Members : A child becomes a member by birth only so there is no restrictions for a minor to become a member of the HUF Business.
(vi) Registration : It is not compulsory for Joint Hindu Family business to get registration certificate as it is governed by the Hindu Law Act.
(vii) Perpectuality : The Joint Hindu Family Business continues even after the death of Karta. The next senior -most male member automatically becomes Karta and carries on the business.

Q8. What is Partnership form of Business. Explain its features. (6 marks)
Ans. Partnership is an association of two or more persons who have agreed to carry on a business and to share its profits and losses.

The features of partnership firm as explained below :
(i) Agreement : There must be an agreement between the partners to form a partnership. This agreement can be oral or written.
(ii) Membership : There must be minimum two members to form the partnership firm. Maximum there can be 20 members. In the case of banking business, maximum members can be only ten.
(iii) Profit Sharing : The profits of the partnership firm, should be distributed between the partners in the ratio specified in the agreement. In case, if no ratio is specified in the agreement then, the profile is divided equally among all the partners.

Q9. What are the points that a partnership deed generally contains ? (5 marks)
Ans. A partnership deed generally contains the following points :
(i) Name of the Firm.
(ii) Nature of the Business.
(iii) Name of Partners.
(iv) Place of Business.
(v) Amount of capital introduced by each partner.
(vi) Profit/loss sharing ratio between the partners.
(vii) Amount of salary or commission, if any, payable to partners.
(viii) Duties, Powers and Obligations of partners.
(ix) Maintenance of accounts and their audit.
(x) Arbitration is case of disputes among the partners.

Q10. What is a Private Company ? (5 marks)
Ans. A private company is one which :
(i) Has a minimum of 2 and maximum of 50 members excluding its part and present employees.
(ii) Restrict the right of its members to transfer shares.
(iii) Prohibits an invitation to the parties to subscribe for any shares in or debentures of the company, or accepts any deposits from persons other than its directions, members or relatives.
(iv) Minimum paid-up capital of  Rs. 1.00 lakhs.
(v) Uses the word ‘Pvt. Ltd.’ at the end of its name.

Q11. Write in brief about Co-operative Organizations. (6 marks)
Ans. (i) Motive : Its main motive is not earning profit but is mutual help.
(ii) Principle : It works with the principle of each for all and all for each.
(iii) Definition : “Co-operation is a form of organization where in persons voluntarily associate together as human beings on the basis of equality for the promotion of the economic interest of themselves.”—H.C. Calvert.

Q12. Which person/professionals, the entrepreneur should consult while preparing a business plan ? (6 marks)
Ans. Following persons/professionals are consulted by the entrepreneurs while preparing a business plan :
(i) Lawyers
(ii) Accountants
(iii) Marketing Consultants
(iv) Engineers
(v) Specialized Financial Institutions
(vi) Specialized agencies to promote the business of the entrepereneur.

Q13. Distinguish between Private Company and Public Company. (6 marks)
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Q14. Give the salient features of Limited Liability Partnership Act, 2008 ? (6 marks)
Ans. Salient features of Limited Liability Partnership Act, 2008 are as follows :
(i) Seperate legal entity.
(ii) Perpetual succession -entity survives even if the partners leave.
(iii) Provides flexibility in designing partnership agreement.
(iv) The liability of partners is limited to their contribution in the LLP.
(v) Atleast 2 designated partners required, with a maximum of 50.
(vi) Obligation to maintain annual accounts.

Q15. Enlist the privileges or benefits of a Private Company over Public Company ? (6 marks)
Ans. Following are some privileges or benefits to a Private Company over Public Company :
(i) A private company can be formed with only two members whereas in a public company at least seven members are needed.
(ii) A private company must have at least two directors, whereas a public company must have three directors.
(iii) It is not compulsory for a private company to maintain index of its members.
(iv) It is also not compulsory for a private company to hold a statutory meeting and file a statutory report with the Registrar, whereas it is essential for a public company.
(v) Private company can commence its business after getting certificate of registration whereas public company can start business only after receiving the certificate for the commencement of business.
(vi) It is not necessary for a private company to issue a pros pectus, whereas it is mandatory for a public company.

Q16. How many choices are there to start a business by a businessman ? Explain them. (TBQ) (5 marks)
Ans. A businessman has following choices to start a business :
(i) Sole Proprietorship : It is a business initiated and operated by one individual who carries all financial and administrative responsibilities, employing such assistants as may be necessary.
(ii) Partnership : A partnership is an association of two or more persons to carry on, as co -owners, a business and to share its profits and losses. Two or more persons may form a partnership by making a written or oral agreement to carry a business jointly and share its proceeds.
(iii) Joint stock company : A joint stock company is a voluntary association of individuals for profit, having a capital divided into transferrable shares, the ownership of which is the condition of membership.
(iv) Joint Hindu Family/HUFs : HUFs consists of male lineally descended from a common ancestor and included their wives and unmarried daughters. The relation of HUFs arises from the status not from legal contracts.
(v) Co-operative Organizations : Co-operation is a form of organization wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of the economic interest of themselves.