Case-Based Questions: Forms of Business Organisations | Business Studies (BST) Class 11 - Commerce PDF Download

Carefully read the following case studies, which present real-world business scenarios, and answer the question(s) that follow each case to test your understanding and application of business studies concepts.

Case 1: Manish’s General Store
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 paralyzed. 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, but the business is running into losses due to his father’s illness. Hence, his mother advised him to close the business and look for a job outside.

Correct Answer: Option (c)

Sambal Singh’s general store is a sole proprietorship, as it is owned and operated by one individual with no legal distinction between the owner and the business. This is typical for small businesses like a general store, where the owner has full control but is personally liable for debts, such as the ₹2 lakh loan. A joint stock company involves shareholders, a partnership requires multiple owners, and a co-operative society is formed for mutual benefit, none of which apply here.

Correct Answer: Option (b)

The business is a sole proprietorship. A merit is limited resources, as it relies on the owner’s capital and capabilities, which can be a constraint. A demerit is unlimited liability, meaning the owner is personally responsible for all debts, as seen with the loan repayment obligation. Option (a) is incorrect because sole proprietorships do not have limited liability. Option (c) mentions secrecy (a merit) but direct incentive is vague. Option (d) is partially correct but “no diffusion of risk” is not a standard demerit term compared to unlimited liability.

Correct Answer: Option (b)
In a sole proprietorship, the owner has unlimited liability, meaning personal assets can be used to settle business debts if the business fails. The ₹2 lakh loan is a personal obligation for Sambal Singh, and Manish inherits this responsibility. Limited liability (a) applies to companies, not sole proprietorships. No liability (c) and partial liability (d) do not fit, as the owner is fully accountable.

Correct Answer: Option (d)
By taking charge of the general store, Manish assumes the role of owner, with full control and responsibility for operations and liabilities, including the loan. A partner (a) implies co-ownership, an employee (b) works for wages, and a trustee (c) manages assets for others, none of which apply. Manish’s decision to manage the business makes him the sole proprietor.

Case 2: Civil Engineering Project
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 a time period of 6 months. As per the written agreement between them, only Madhu and Mayank will contribute capital and take all managerial decisions, whereas Himanshu will contribute capital only but will not be actively involved in management.
Q5: What type of a partner is Himanshu?
(a) Active
(b) Dormant
(c) Nominal
(d) Secret

Correct Answer: Option (b)
Himanshu is a dormant (or sleeping) partner, as he contributes capital but does not participate in management. Active partners (a) manage the business, nominal partners (c) lend their name without investment, and secret partners (d) are undisclosed to the public but active, none of which describe Himanshu’s role.

Correct Answer: Option (d)
In a partnership, all partners are jointly and severally liable for business debts and losses unless otherwise specified. Despite Himanshu’s dormant role, his capital contribution makes him liable alongside Madhu and Mayank, who manage the project. Thus, all partners share responsibility for losses. Options (a), (b), and (c) exclude some partners, which is incorrect.

Correct Answer: Option (b)
The partnership is a particular partnership, formed for a specific project (constructing three school buildings) with a defined duration (6 months). A limited partnership (a) involves limited liability partners, a partnership at will (c) has no fixed term, and a general partnership (d) is ongoing without a specific project focus, none of which apply here.

Correct Answer: Option (c)
A partnership deed is the written agreement that outlines the terms, roles, and responsibilities of partners, such as Madhu and Mayank’s management roles and Himanshu’s capital contribution. An MOU (a) is a non-binding agreement, an MOA (b) is for companies, and partnership registration (d) is a legal process, not the agreement itself.

Case 3: Jewellery Showroom
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 also work in the showroom. Being head of the family, Ramkrishna makes all business decisions, which sometimes causes conflicts among members. He decided to open a new 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 part of the loan from his self-acquired property.

Correct Answer: Option (d)
The business is a Joint Hindu Family (HUF) Business, owned and managed by members of a Hindu Undivided Family, with Ramkrishna as the Karta (head). It involves family members (sons and brother) and inherited property, typical of an HUF. A partnership (a) requires a formal agreement, a sole proprietorship (b) involves one owner, and a joint stock company (c) has shareholders, none of which fit.

Correct Answer: Option (a)
As the Karta in an HUF business, Ramkrishna has unlimited liability, meaning he is personally responsible for business debts, requiring him to use his self-acquired property to repay the loan. Coparceners (b) have limited liability, the loan’s name (c) is irrelevant, and coparceners’ refusal (d) is not mentioned.

Correct Answer: Option (a)
A demerit of an HUF business is the dominance of the Karta, as Ramkrishna’s sole decision-making causes conflicts. Limited managerial skills (b) is not directly indicated, lack of loyalty (c) is not mentioned, and effective control (d) is a merit, not a demerit.

Correct Answer: Option (b)
The failure of the new branch suggests limited managerial skills of the Karta, as poor planning or decision-making led to losses. Control (a) and dominance (c) refer to authority, not skill, and limited liability of coparceners (d) is irrelevant to the decision’s outcome.