HOTS Questions: Forms of Business Organisation | Business Studies (BST) Class 11 - Commerce PDF Download

Q1: Archana visited her native village during her vacations and found that the money lender in the village was exploiting the farmers. He was charging a very high rate of interest on the money he had lended to the farmers. Archana decided to help farmers. She met all the farmers along with her grandfather and told them about the various options for raising funds instead of going to money lender. She was able to convince farmers to pool their own resources and form an organisation, so that the members can take loan from this organisation at reasonable interest, as and when funds are required. The purpose of opening such organisation was not to make profits but to provide help to members.
(a) Name the form of organisation opened by farmers on the plea of Archana.
(b) Who can become the members of the above identified organisation?
(c) What is the motive of this kind of organisations?
(d) What is the minimum number of persons required to form such organisation?
(e) Under which Act, these organisations are governed?
(f) Is registration compulsory for the above Socities?
Ans: (a) Co-operative organisation-Farmers’ co-operative societies.
(b) Any person who is above 18 years and has a common interest can become a member.
(c) Welfare of members.
(d) Minimum 10 individuals.
(e) Indian Cooperatives Act, 1912.
(f) Yes.

Q2: Mr. Savinder is in the business of school books for the past 20 years. To help his friend, Mr. Gaurav, a beginner he projected himself as a partner in front of Mr. Ashu, a wholesaler of school and college books. Mr. Ashu gave Mr. Gaurav the stock without asking for payment and gave him credit limit of one month. Will Mr. Savinder be liable to Mr. Ashu if Mr. Gaurav does not pay him on time? Classify Mr. Savinder’s role along with an explanation.
Ans: Yes because Mr. Savinder is a nominal partner-Partner by Estoppel.

Q3: Rohit operates a textile business. His family is joint and has a lot of ancestral property. All the 15 family members are a part of this business. He is the eldest male member in the family so he heads the business. He is liable to all the creditors of the business as he is the decision-maker.
Rohit’s grandson has just born a few days ago and he is also the member of the business.
(a) Which form of business is being undertaken by Rohit?
(b) Identify the features of this form of business highlighted in the above para.
(c) Textile business is a part of which type of industry according to you? State.
Ans: (a) Hindu Undivided Family Business.
(b) Features of Hindu Undivided Family Business:
(i) Liability
‘He is liable ... the decision-maker.’
(ii) Minor members
‘Rohit’s grandson ... member of the business.’
(iii) Control
‘He is the eldest ... heads the business.’
(iv) Formation
‘His family is joint ... a part of this business.’
(c) Secondary Industry-Processing Industry.

Q4: Shenoy, Lakshay and Sagar are brothers living in a village. Shenoy is a farmer. He grows sugarcane in his field. Lakshay is a manufacturer of sugar who is doing the business with his friends Deepanshu and Yatin. Sagar is a transporter. Lakshay sells the sugar in the city using his truck. This year the sugar got spoiled due to heavy rain. Lakshay and his friends reduced the wages of his workers to cut down their losses.
(a) Classify the business activity undertaken by Shenoy and Sagar.
(b) What form of business is Lakshay doing with his friends. State any two features of it.
(c) Which value is violated by Lakshay and his friends?
(d) What type of business risk is faced by them.
Ans: (a) Shenoy-Profession. Sagar-Business.
(b) Partnership. For its features.
(c) Value Points:
(i) Honesty.
(ii) Commitment.
(iii) Faithfulness. (any one)
(d) Insurable risk.

Q5: For which of the following types of business do you think a partnership form of organisation would be more suitable, and why?
(a) Grocery store.
(b) Medical clinic.
(c) Legal consultancy.
(d) Craft centre.
(e) Internet cafe.
(f) Chartered accountancy firm.
Ans: (c) and (f)
Reasons:
(a) In a partnership, the capital is contributed by a number of partners. This helps in expanding business and earning higher profits.
(b) Partnership has flexibility in its operations. Balanced decision-making is possible.
(c) The risks are shared by all the partners.
(d) Partnership firm integrates brains of two or more people and thus ensures better management of the business.

Q6: Gupreet is a sole proprietor. Over the past decade, his business has grown from operating a neighbourhood corner shop selling accessories such as artificial jewellery, lipsticks, nail polish, hair clips and bags to a retail chain with three branches in the city. Although he looks after the varied functions in all the branches, he is wondering whether he should form a company to better manage the business. He also has plans to open branches countrywide.
(a) Explain two benefits of remaining a sole proprietor.
(b) Explain two benefits of converting into a joint stock company.
(c) What role will his decision to go nationwide play in his choice of form of the organisation?
(d) What legal formalities will he have to undergo to operate business as a company.
Ans : (a) Two benefits of remaining sole proprietor are:
(i) He is the sole recipient of all the profits.
(ii) One-man control.
(b) Two merits of converting to a joint stock company:
(i) Scope for expansion and growth.
(ii) Limited Liability.
(c) If he plans to go nationwide then he will have to change his form of business from sole proprietorship to joint stock company.
(d) If he takes decision to operate as Joint Stock Company, he will have to complete various legal formalities such as :
(i) Getting certificate of incorporation.
(ii) Getting certificate of commencement of business, if he plans to operate as public limited company.
(iii) Appoint professional experts such as brokers, who charge high fees.
(iv) Prepare many documentation such as : Prospectus, Memorandum of Association, Articles of Association, etc.

Q7: Compare the status of a minor in a Joint Hindu Family Business with that in a partnership firm.
Ans: A minor is a person who has not attained the age of 18 years (21 years in some case).

• In case of a Joint Hindu Family Business, membership is by birth. That is why, minors can also be members of the business. The liability of minor is limited to his share in the business. They have to share losses also.
• In case of a partnership firm, a minor cannot become a partner because he is not capable of entering into a valid contract but he can be admitted to the benefits of partnership firm with mutual consent of all other partners. He cannot be asked to bear the losses.

Q8: Name the following:
(a) A company having at least 7 members.
(b) An enterprise owned by a single person.
(c) A company in which the number of members cannot exceed 200.
(d) Its main aim is to provide services to the members.
(e) This form of business organisation is owned, financed, managed and controlled by a single person.
(f) A document containing terms and conditions of partnership.
Ans: (a) Public company.
(b) Sole proprietorship.
(c) Private company.
(d) Cooperative society.
(e) Sole proprietorship.
(f) Partnership deed.

Q9: What is the minimum number of persons needed to form following forms of business organisation:
(a) Sole proprietorship.
(b) Joint Hindu Family Business.
(c) Private company.
(d) Cooperative society.
(e) Partnership.
(f) Public company.
Ans: (a) One.
(b) Two.
(c) Two.
(d) Ten.
(e) Two.
(f) Seven.

Q10: Documents for registration were filed before the Registrar of Companies by the promoters of a proposed company on 6th January. ‘Certificate of Incorporation’ was issued on 8th January.
But the date mentioned on the certificate was 6th January. The company allotted some shares to Rahul on 6th January. Was the allotment valid? Give reason.
Ans: Yes, the allotment of shares to Rahul was valid because in the eyes of law the company was registered on 6th January since the date mentioned on the ‘Certificate of Incorporation’ was 6th January. The ‘Certificate of Incorporation’ is the conclusive proof of the legal existence of the company.

Q11: “If a company suffers heavy losses and its assets are not sufficient to payoff its liabilities, the balance can be recovered from the personal property of its members.” Do you agree? Give reasons.
Ans: No, I do not agree with this because the ‘liability clause’ of Memorandum of Association limits the liability of the members to the amount unpaid on the shares held by them. For example, suppose Shrenik, a shareholder is holding 2,000 shares of Rs. 10 each on which he has already paid Rs. 8 per share. In the event of losses or company’s failure to pay debts, he is liable to pay only Rs. 4,000 (2,000 shares @ Rs. 2 unpaid). Beyond this, he could not be called upon to bear losses from his personal assets.

Q12: Name the following:
(a) The most important or fundamental document of a company.
(b) The document containing the rules and regulations for the internal management of the affairs of a company.
(c) The amount of money which must be raised before allotment of shares.
(d) The clause specifies the maximum capital which the company will be authorised to raise through the issue of shares.
(e) The document called ‘Doctrine of Indoor Management’.
Ans: (a) Memorandum of Association.
(b) Articles of Association.
(c) Minimum subscription.
(d) Capital clause.
(e) Articles of Association.

Q13: Is it necessary for every company to file a prospectus?
Ans: No, it is not necessary for every company to file a prospectus. Since a private company is prohibited to raise funds from public, it does not need to issue a prospectus. A public company which does not raise funds from the public (as it is confident of obtaining the required funds from private sources) need not issue a prospectus. However, it will have to fill a statement in lieu of prospectus with the Registrar of Companies.

Q14: A public limited company cannot make allotment of shares unless it receives in cash 90% of the issued amount within 120 days from the date of the closure of the issue. By what name this amount is known?
Ans: Minimum subscription.

Q15: Arun and his family is engaged in gold business.
(a) Identify the form of business organisation highlighted above.
(b) State any three features of such business organisation.
Ans: (a) Hindu Undivided Family Business.
(b) For its features.

Q16: Ten farmers in a village, decided to form a business organisation with a view to assist them by providing better seeds, fertilizers and agricultural tools, etc.
(a) Identify the form of business organisation referred above.
(b) State its any three merits.
Ans: (a) Cooperative societies.
(b) For its mertis.  

Q17:  A group of 5 people intends to start a private company in the name of Asian Paints Private Limited. They submit application to the Registrar with all the documents. The Registrar rejected it. Identify the possible reason and also give your justification.
Ans. Explain the step of promotion-Name Approval.

Q18: Amir, his parents, grandparents and his siblings are living together. They have a family business in West Bengal.
(a) Identify the form of business organisation referred here.
(b) State its any four features.
Ans: (a) Hindu Undivided Family.

Q19:  Mr. Karanpreet intends to start a business in the form of a private limited company. But he has no idea about the formalities to be followed in the formation of a company.
(a) Suggest him a specialised person who would undertake all activities for the formation of a company.
(b) Explain the functions of that specialised person.
Ans: (a) Promoter

Q19: Gurpreet, Subhash and Poonam are partners of a garment manufacturing firm is planning to manufacture bags for the utilisation of waste material of one of their garment units. They decidedthat this m anufacturing unit will be set up in a rural area of Rajasthan where people have very less job opportunities and labour is available at very low rates. They also decided to donate 10% of the revenue generated from the sale of bags to a nearby Orphanage. Out of three partners, Poonam is that partner whose relation with the firm is not known to the general public.
(a) Which type of human activity is highlighted in the above case?
(b) Name the category of the human activity identified in (a) above.
(c) In the above case, which type of partner Poonam is?
(d) Identify any two values which are reflected in the above para.
Ans: (a) Economic activity.
(b) Business activity.
(c) Secret partner.
(d) Values: (any two)
(i) Providing job opportunities in rural areas.
(ii) Optimum utilisation/management of waste resources.
(iii) Economic development and upliftment of backward areas.
(iv) Fulfilment of social responsibility.

Q20:  “Coca-Cola was produced by Dr. Johan S. Pemberton, a local pharmacist in Atlanta, Georgia, in 1986. He get the syrup sampled and introduced it in the market for 5 cents a glass.” By reading this information, what do you think the form of business Coca-Cola initially had? Also state any one merit and one limitation of this form.
Ans: Sole proprietorship. For its merit and demerit.

Q21:  Harish Kalra, Dinesh and Mahesh Munjal were partners in a financing firm. Harish Kalra and Mahest Munjal had gone for a meeting in London for analysing business prospects in that country. In the meanwhile, Dinesh invested a huge amount in buying shares of a new company by borrowing money from Mr. Gautam. This turned out to be a bad deal as the share prices soon felt down. When Harish kalra and Mahesh Munjal back they said they were not liable to pay to Mr. Gautam as they did not take the money. Were Harish Kalra and Mahesh Munjal right in doing So? Under which aspect of partnership are they bound? State.
Ans: No. Mutual agency.