Previous Year Short & Long Questions With Answers: Business Services | Business Studies (BST) Class 11 - Commerce PDF Download

Short Answer Type Questions

Q1: Explain warehousing and its functions.
Ans: Warehousing was once conceived as scientifically preserving commodities to retain their quality, worth, and utility. It has grown more significant as a logistical service provider in modern times, emphasising delivering items on time and at a reasonable cost while maintaining value and quality.

The following are some functions of warehousing:

• Warehouses simplify keeping items and raw materials that won’t be sold or manufactured immediately while safeguarding them from rotting and damage.
• Product grading, packing, and labelling are examples of value-added services they give to manufacturers.
• Warehouses are in charge of breaking down vast amounts of commodities received from manufacturers into smaller quantities. The tiny batches are then transported according to customer needs.
• Before sending material/goods to a specific customer via a single transportation package, warehouses aggregate and consolidate material/goods from numerous production units.
• The receipt of the warehouse can also be used as collateral by the owner of the items or raw materials stored in the warehouse to borrow money from banks or other financial institutions.

Q2: What are the many sorts of financial services available? Briefly explain them.
Ans: The following new financial services have evolved in addition to the classic banking and insurance financial services.

• Loan Syndication: Loan syndication is the process of borrowers approaching various banks who are prepared to syndicate a loan and specifying the amount and period of the loan.
• Venture capital: Subscribing to borrowers’ equity shares in exchange for a portion of their ownership.
• Merchant banking: Merchant banking refers to the services of an intermediary concerning the issuing, management, and underwriting of corporate restructuring. They contribute to developing the capital market and increasing the numbers of investment in the country.
• Leasing: A legal transaction in which the user of an item pays a lease rent to the asset’s owner in exchange for use. The lessee gets custody of the assets at the end of the agreement.
• Mutual Funds: A service provided by experts who source money from individual investors to invest in stocks, bonds, and other short-term investments.
• Factoring: Factoring is selling accounts receivable to other businesses or organisations to raise revenue.

Q3: Define services and goods.
Ans: At the time of delivery, services are intangible activities that need face-to-face interaction between the consumer (service purchaser) and the service provider (service seller). There is no necessity that the services include product manufacturing or sales. Services are classified into the two categories below.

• Professional Services: Examples of professional services include legal services, medical counselling, and tax advice.
• Business Services: Business services include banking, insurance, and warehousing, to name a few.

In contrast to services, the term “goods” refers to actual, tangible items whose ownership is transferred to the buyer as soon as the product is acquired. Plants and machines, for example, are examples of products.

Q4: What are the three most significant insurances in Marine Insurance?
Ans: A marine insurance contract is an agreement between the insurer and the insured to reimburse them against maritime losses in the manner and to the degree agreed upon. Marine insurance covers damages resulting from marine risks, sometimes known as sea perils.

Under this, there are three significant insurances:

• Cargo insurance: While transported by ship, cargo or commodities are subject to several perils; this insurance covers the risk of the journey.
• Ship or Hull insurance: This insurance policy is meant to pay the insured for losses sustained due to ship damage because the ship is exposed to many perils at sea.
• Freight insurance: If the cargo is damaged or lost in transit, the shipping firm is not compensated for the freight payments; thus, the shipping company purchases this insurance policy to avoid this eventuality.

Q5: What are services? Explain their distinct characteristics.
Ans: At the time of delivery, services are intangible economic activities that need face-to-face interaction between the consumer and the service provider. Services are usually provided to suit the requirements of persons and do not need the manufacturing or sale of things.
The services are business services (such as banking, insurance, and warehousing) and professional services (including legal services, medical advice and tax consultancy).

The types of services are as follows:

• Inventory: Services can’t be kept in stock and sold later. When service users request them, they must be made available. This is because services lose value if they are not used immediately.
• Inseparable: The production and consumption of services appear inseparable due to the simultaneous activity of production and consumption. Unlike products developed today and sold later, services must be utilised as soon as they are made available.
• Intangible: Services are intangible since they cannot be seen or felt. They can only be discovered via personal experience. As a result, they are assessing the quality of services before their use is impossible. Hence, service providers must provide services tailored to the requirements of the persons involved.
• Inconsistent: Services have no set standards; they must be offered based on the demand and expectations of service users at any given time. Because each service user has different interests and preferences, the type and quality of services available differ.
• Engagement: The service user and provider must be involved during service delivery. The instructor and the students are actively participating in the exchange of knowledge-transfer services in a school.

Q6: Define the terms “double insurance” and “reinsurance,” as well as the differences between the two.
Ans: Double Insurance: Anyone can purchase several insurance policies for the same property or items. However, because an insurance policy is an indemnity contract, one can only collect the amount of damage they sustained. Double insurance is when you insure the same risk with two or more businesses. A claim can be submitted with any insurer, although it is limited to an actual loss in the case of fire and marine coverage. Each insurer will contribute a proportion to the amount covered.
Reinsurance: When an insurer faces risks beyond his control, he may choose to have all or part of his risk reinsured with other insurers. This derisking is referred to as reinsurance. It’s a sub-insurance agreement between the insurer and the reinsurer. The insured will file a claim with the original insurer, who will then file a claim with the reinsurers. Reinsurers are not compelled to contribute to losses in any way.

Q7: Explain in detail the warehousing services.
Ans:Warehousing used to be thought of as a static unit that kept and stored goods scientifically and systematically to preserve their original quality, value, and utility. Still, it is now considered a logistical service that makes the correct quantity at the right place and time available. The following are the many warehouse services available:

• Value-Added Services: They provide value-added services to manufacturers such as product grading, packing, and labelling.
• Storage: Warehouses simplify keeping items and raw materials that won’t be sold or manufactured immediately away while safeguarding them from rotting and damage.
• Consolidation: Before sending material/goods to a specific customer via a single transportation package, warehouses aggregate and consolidate material/goods from numerous production units.
• Breaking the Bulk: Warehouses are in charge of breaking down vast amounts of commodities received from manufacturers into smaller quantities. The smaller volumes are subsequently conveyed to clients’ locations by their needs.
• Financing: The warehouse receipt can also be used as collateral by the owner of the items or raw materials stored in the warehouse to borrow money from banks or other financial institutions.
• Price Stabilisation: Warehousing plays a role in price stabilisation by adjusting goods supply to market demand.
• Stockpiling: The subsequent use of warehousing is stockpiling, the seasonal storage of goods for specific industries. Warehouses store raw resources that aren’t needed immediately for sale or manufacture. They are made available to businesses based on how many customers they have.

Q8: What is the role of insurance in the company, and what are the benefits?
Ans: The future is always a guessing game. Uncertainty in the workplace renders plans useless and investments worthless. Different sorts of insurance policies are acquired to reduce risk. The following are some of the benefits of insurance policies:

Its benefits are:

• Indemnity: The insurance company compensates for the damage caused by fire and other mishaps. Insurance protects against losses, allowing business owners to feel comfortable and worry-free.
• Diffusion of Risk: Insurance distributes the risk of loss among many people. The impact of a loss on one industry is not overly severe, and the insurance firm can shift the risk to others.
• Protection: Insurance offers protection against the danger of financial loss. Although an individual’s loss cannot be repaid in the event of life insurance, receiving the covered sum from the Life Insurance Corporation aids him in standing. Insurance allows a business person to operate with confidence and peace of mind.
• Industrial development: Insurance firms collect a significant amount of money as a premium. This money is invested in industrial endeavours, resulting in the expansion of the industry.
• Social utility: Insurance creates social usefulness by ensuring the safety of the ordinary man. It’s a type of social insurance. It also creates new job possibilities.

Q9: What is e-banking? What are the advantages of e-banking?
Ans: Electronic banking, often known as e-banking, is the use of an electronic medium to execute various financial operations such as money transfers, account balance checks, applying for a cheque book, and applying for loans. Banks provide these services to assist their consumers in accessing financial services anywhere, anytime.

The following are some of the benefits of e-banking:

• It guarantees that most financial services are available 24 hours a day, seven days a week, making life easier for consumers.
• Banking transactions may be completed at any time using a mobile device, PC, or laptop.
• It eases the burden on banks by allowing transactions to be completed online.

Q10: What exactly do you mean when you say “merchant bankers”? Briefly describe the services offered by merchant bankers.
Ans: Merchant bankers, often known as lead managers, manage a company’s fresh capital offerings. A merchant banker assists a corporation in seeking new capital in producing the prospectus (or statement in place of prospectus), arranging underwriters, selecting brokers, publicising the issue, and appointing the registrar to the offer. Several banks in India have specific sections or subsidiaries dedicated to providing merchant banking services.
Merchant bankers offer a diverse range of financial services to businesses. They investigate the numerous legal and administrative elements of issuing securities and generating loans. They also offer advice on investment, capital restructuring, valuation, mergers and acquisitions, and other topics.

Q11: Write a note on various telecom services available for enhancing business.
Ans: There are many various kinds of telecom services that might help you improve your business. The following are some of them:

• Fixed-line service refers to voice, non-voice, and data services that use fibre optic lines to make long-distance connections.
• Cable Service: In cable service, media information is transferred in a designated region, and a licence is required to send such information. In this sort of service, the information flow is one-sided.
• Radio Paging Service: This service helps transmit information in the form of tones, numbers, or letters.
• Cellular mobile service: All sorts of voice, non-voice, and data transfer services are included in cellular mobile service.
• DTH (Direct-to-Home) Services: DTH (Direct-to-Home) Services are satellite-based media services in which media channels are sent via satellite and received using a tiny dish and antenna.
• VSAT Service: VSAT (Very Small Aperture Terminal) is a satellite-based communication system that transmits information to remote places.

Long Answer Type Questions

Q1: Briefly explain the principles of insurance with suitable examples.
Ans: The following are the insurance principles:

• Insurable Interest: An insurance policy owner should hold a stake in the subject matter or item being covered. The insurance is null and void if there is no insurable interest.

A truck driver, for example, has an insurable interest in his vehicle since it is his source of income; if he sells it, he will not be able to make any more money from it.

• Good faith: The concept of utmost good faith stipulates that the insurer and the insured must trust each other and the contract they have signed. For example, the claim may be denied if a person is diagnosed with cancer but fails to tell the insurance company.
• Contribution: If there are two insurers from which insurance is purchased, both insurers will contribute to covering the loss in the event of a loss. If a person takes a loan from two banks, both institutions should share equally in the event of payback.
• Subrogation: This theory argues that after the necessary compensation is given, the ownership of the property or item is passed to the insurer, preventing the insured from profitably selling it.

For example, if a guy receives 1 lakh in automobile insurance damage, he can fix the vehicle but not sell it for profit.

• Indemnity: The indemnity concept assures that the insurance contract safeguards and pays the insured in the event of a loss. For example, if a car insured for 2 lakhs sustains damage worth Rs.1 lakh, the insurance company would only reimburse the insured for that amount. The goal is to reimburse the insured rather than create a profit for him.
• Mitigation: The insured should take good care of the insured item. As though it had been taken care of before receiving the insurance. For example, if a car is acquired, the owner must adequately care for and maintain the vehicle.
• Proximate cause: This principle assesses the cause of loss and whether the insured object causes the loss. For example, if a fire burns a house down, an expert will investigate the cause, and reimbursement will be based on fire insurance.

Q2: Define the Reserve Bank of India and its key responsibilities:
Ans: It was established as a shareholders’ bank on April 1, 1935. The central government owned most of the stock. On April 1, 1949, the Reserve Bank of India was nationalised following India’s independence. The Reserve Bank of India has the following essential responsibilities:

The Reserve Bank of India performs the following functions:

Primary functions:

• Issuing banknotes (except one rupee note issued by the ministry of finance).
• The government’s bank.
• Working at a bank as a banker.
• Controlling the bank rate or interest rate.
• Controlling the rate of exchange.

Subsidiary functions:

• Buying and selling foreign currency.
• Different banks’ bills are discounted.
• Investing in government bonds.
• Accepting interest-free deposits.
• Taking care of clearing homes.
• Agricultural credit management.
• Providing banks and financial institutions with short-term loans.
• Governing India’s developmental, industrial, and commercial operations.

Q3: Explain the functions of commercial banks with an example of each.
Ans: Commercial banks oversee the following responsibilities:

• Lending funds: Banks give loans and advances based on the amount of money they have. Overdrafts, trade bill reductions, cash or consumer credit advances, and other advances are also available. Banks’ interest on these loans makes them a lot of money.
• Deposits: Banks take a range of public deposits, such as savings account deposits, current account deposits, and fixed account deposits, and pay interest on them. They owe it to the depositor to return the money they have deposited with them.
• Provision of ancillary services: Banks provide ancillary services such as lockers, underwriting, and bill payment in addition to their primary responsibilities. They also manage items like stock and debenture purchases and sales on behalf of their clients.
• Transferring funds: Banks help consumers transfer cash from one area to another. These transactions can be made using bank draughts and pay orders, and there are no commission costs.
• Extending the Cheque Facility: Banks function as clearing houses by collecting checks made on other banks. The two most frequent cheques are bearer cheques (instantly encashable at bank counters) and crossed checks (only deposited in the payees’ accounts).

Q4: What are the different types of warehouses?
Ans: The practice of storing items systematically and ordered to retain their value and quality is known as warehousing. Warehouses provide not just storage but also logistical services by identifying the correct amount in the right location at the right time and at the right price.

The following are the many types of warehouses:

• Private Warehouses: To suit their storage needs, large manufacturers and merchants own and operate private warehouses. Big companies with a lot of storage space regularly and the financial means to do so develop and maintain their warehouses.
• Duty-paid Warehouses: If an importer has trouble transferring goods after paying duty, the commodities might be stored in a duty-paid warehouse. All duty-paid warehouses are public warehouses and are available to all importers. Duty-paid warehouses help importers since the goods are well cared for and processed, such as sorting and repacking.
• Public Warehouses: A public warehouse is a type of business that charges a fee to provide storage space to the public. It might be owned and operated by a person or a cooperative organisation. It observes all necessary laws and regulations and operates under a government-issued licence. Small manufacturers and dealers can store their goods in public warehouses for free. These warehouses are well-built and secured 24 hours a day, seven days a week, to ensure the safe custody of supplies. Typically, public warehouses are located around railway, highway, and canal junctions.
• Cold storage warehouses: Cold storage facilities keep perishable goods, including fruits, flowers, vegetables, dairy products, and other perishable items, cool. In cold storage facilities, goods are kept and cooled at extremely low temperatures to preserve and use in the future. International trading is now possible thanks to these warehouses.
• Cooperative Warehouses: These warehouses are owned, managed, and administered by cooperative societies. They mainly offer warehousing services at the lowest possible cost. These warehouses benefit farmers, dealers, and the general public.
• Government Warehouses: These warehouses are owned, managed, and controlled by the federal and state governments, as well as public bodies. Because having a warehouse is difficult for small farmers, enterprises, and dealers, the government provides warehouses for a charge to help them store their goods.

Q5: Describe various types of insurance and examine the nature of risks protected by each type of insurance.
Ans: There are three types of insurance to choose from:

Fire Insurance:

• The insurer agrees to make good any loss or damage caused by fire during a defined period, up to the amount stated in the policy, in exchange for the premium paid.
• Fire insurance policies typically last a year and must be renewed regularly.
• A fire damage claim must fulfil two criteria: A monetary loss must exist, and the fire must be unintentional and unintentional.

Life Insurance:

• It is a contract between the insurer and the insured in which the insurer agrees to pay the insured a set sum if the insured dies or the insurance contract matures first, whichever comes first.
• If the insured individual dies before the contract’s maturity date, their family receives the guaranteed cash. If the insured survives to the conclusion of the contract’s term, the agreed-upon sum will be paid.
• In exchange for this assurance, the insured pays a specified amount to the insurer as a premium. Life’s uncertainties necessitate the acquisition of a life insurance policy.
• Risks Covered: Life insurance policies safeguard us from two types of dangers: The danger of dying too soon and The chance of dying is a real possibility.

Marine Insurance:

A marine insurance contract is an agreement between the insurer and the insured to reimburse them against maritime losses in the manner and to the degree agreed upon.

Risk covered: Maritime insurance covers damages caused by marine perils, sometimes known as sea perils. There are three things to think about:

• Hull Insurance: This insurance policy is meant to pay the insured for losses suffered due to ship damage because the ship is exposed to many perils at sea.
• Cargo Insurance: While being transported by ship, cargo or commodities are subject to several perils; this insurance covers the risk of the journey.
• Freight Insurance: If the cargo is damaged or lost in transit, the shipping firm is not compensated for the freight payments; thus, the shipping company purchases this insurance policy to avoid this eventuality.

Q6: Banking is essential to any economy’s survival. Mention banking’s function or significance in the economy.
Ans: Banking is the economy’s backbone , just as capital is the pillar of trade, commerce, and industry. Banking’s significance can be defended on the following grounds:
Without financial services, the modern economy is powerless. Banking has taken on the following signs as the economy’s lifeblood:

• Credit creation: Banks collect deposits, keep a little portion of the money as a cash reserve, and lend the remainder to trade, industry, and commerce at a higher interest rate. Credit creation is the term for it.
• Safe custody of possessions: Banks provide locker services and store our valuables such as jewellery, notes, and papers, which we may access anytime we need them.
• Savings mobilization: Banking accepts excess savings and returns them with interest when needed. It instils in people the habit of saving. It’s in charge of capital formation.
• Foreign trade promotion: Finance is the lifeblood of all business activity, including international commerce. Banks serve as a source of finances, assisting with payments and money transfers, providing foreign exchange, issuing letters of credit, and assisting with international trade in various ways.
• Social and National welfare: People’s surplus money is taken as deposits by banks and used as loan for trading, commerce, and industry for constructive uses, resulting in social and national welfare. It works to improve people’s lives.

Q7: Write a detailed note on various facilities offered by the Indian Postal Department.
Ans: The Indian Postal Department provides the following services:
Financial facilities: The public has access to various savings opportunities through post offices. These services are available through the post office’s savings plans, which include:

• Public Provident Fund (PPF)
• Kisan Vikas Patra for farmers
• Certificate of National Savings (NSC)
• The Recurring Deposit Scheme
• Fixed Deposit Plan

Mail facilities: Among the mail services available are:

• Parcel Facilities: They make transporting an item from one area to another easier.
• Registration Services: These services guarantee the security of the article being transmitted.
• Insurance coverage: This protects you from the dangers of mail delivery.

Some of the mail services provided by banks are as follows:

• Postcards:Postcards are the most cost-effective mode of letter delivery.
• Letter: Letters are enclosed in an envelope and ensure that the information is kept private.
• Registered mail: It guarantees that the mail sent to the recipient is delivered or, if not returned to the sender.

Additional services:These departments also include greeting cards, media mail, foreign money transfers, speed mail, passport services, and e-billing services.

Q8: Write a short note on using the RTGS and NEFT systems. Also, differentiate between them.
Ans: NEFT and RTGS have been explained below:
NEFT: NEFT is an abbreviation that stands for National Electronic Funds Transfer. It’s a method of transferring money from one bank to another in India using the internet (usually banks). The system was launched in November 2005 to replace the SEFT clearing system’s inquiry bank. The NEFT system is a Postponed Net Basis system in which transactions are packed and deferred for a certain time. NEFT also processes transactions in batches with no minimum or maximum constraints.
RTGS: RTGS is an acronym for Real-Time Gross Settlement. The Real-Time Gross Funds Transfer System (RTGS) is a real-time gross funds transfer system that allows money to move from one bank to another. When using the banking method, RTGS is the fastest way to transfer money. The term ‘real-time’ refers to the absence of delay in the payment procedure since the transaction will be completed upon processing completion. Furthermore, gross settlement denotes that a transfer is completed one at a time rather than being combined with other transactions.