CBSE Class 11 Business Studies Forms of Business Organisation Assignment

MCQ Questions for Ncert Class 11 Business Studies Forms of Business Organisation

• Introduction:
Decision relating to the form of organization plays an important role if one has to start a business. The forms of organization are (i) Sole proprietorship (ii) Partnership (iii)
Joint Hindu Family business. (iv) Co‐operative society (v) Joint Stock Company.

• Important Concept
• Meaning of Sole Proprietorship: It refers to a form of business organization which is owned, managed and controlled by an individual who is in receipt of all profits and bearer
of all risks.

Features:
(i) Easy to form and close (ii) Liability (iii) Only bearer of profit and loss (iv) Control (v) No separate entity. (vi) Lack of business continuity.
Merits:
(i) Quick decision making (ii) Personal satisfaction (iii) Information will be kept secretly (iv) Direct incentive (v) Ease of formation and closure.

Demerits:
(i) Limited resources (ii) Limited life of a business concern. (iii) Unlimited liability (iv) Limited managerial ability.

• Meaning of Joint Hindu Family Business: Karta eldest member of the family controls the business.

Features:
(i) Formation (ii) Liability (iii) Control (iv) Continuity (v) Minor members.

Merits:
(i) Effective control (ii) Continuity of business (iii) limited liability of members (iv) Increased loyalty.

Demerits:

(i) Limited resources (ii) unlimited liability of karta (iii) Karta’s dominance (iv)limited managerial skills.
• Meaning of Partnership: Relation between persons to share the profits of the business carried on by all the partners or any one of the partner acting on behalf of all the other
partners

Features:
(i) Formation (ii) Liability (iii) Risk bearing (iv) decision making (v) continuity (vi) Member
Merits:
(i) Easy to start and close (ii) proper decision making (iii) More money (iv)secrets are maintained.

Limitations:
(i) Unlimited liability (ii) Fights exist (iii) Chances for closure (iv) No public confidence.
Types
(i) Active (ii) sleeping (iii) secret (iv) Nominal (v) partner by behaviors (vi) partner by holding out.

Kinds of partnership:
(i) At Interest (ii) Formed for completing a work Partnership deed: It contains the rules and regulations for carrying on partnership.

• Meaning of Cooperative Society: It is a voluntary association of persons formed for protecting the consumers from middlemen.

Features:
(i) Voluntary association (ii) service motive (iii) power to take decisions (iv) limited liability.(v) Registration is compulsory so they have legal status.

Merits:
(i) Equal voting rights. (ii) Continuous existence (iii) low cost of operation (iv) Government support (v) Easy to start (vi) limited liability.

Limitations:
(i) Resources are little (ii) Difference of opinion. (iii) Management is not proper (iv) Strict rules from the government.

Types:
(i) Consumer (ii) Producer (iii) Marketing (iv) Farmer’s (v) Credit (vi) Cooperative housing societies.

• Meaning Of Joint Stock Company: Company is an artificial person with continuous existence& common seal.

Features:
(i) Artificial person (ii) Formation is difficult (iii)Company has separate identity.(iv)Continuous existence (v) Control of the company is made by directors.(vi)liability is limited.(vii) Common seal.

Merits:
(i) Liability is limited (ii) Chances are there for expansion (iii) Managed by professional people (iv) Continuous existence (v) Shares can be easily transferred from one person to another person.

Demerits:
(i) Very difficult to form (ii) No secrecy (iii) No personal involvement.(iv)More rules and regulations. (v) very slow in decision making (vi) owners have less control.

Types of Companies:
(i) Private company (ii) Public company.

Choice of form of Business organization: (i) less costly in setting up the organization (ii) Limited liability (iii) continuous existence (iv) Form of raising capital (v) Control to
be made (vi) Nature of business.

• Formation of a Company
STAGES

Promotion: Functions of a Promoter:

(i) Finding out a business opportunity (ii) Conducting studies (iii) Getting the name approved. (iv) Fixing up persons to sign Memorandum of association (v) Appointment of professionals.(vii) preparation of necessary documents.

Documents: Memorandum of association:
(i) Name clause (ii) Registered office clause (iii) Objects clause (iv) Liability clause (v)

Capital clause (vi) Association clause. (vii) Articles of association. (viii) Consent of directors (ix) Agreement with managing director or whole time director (x) Statutory declaration

Incorporation: The memorandum of association must be duly stamped, signed and
witnessed. (ii) The articles of association duly stamped and witnessed. (iii) Written permission of the directors. (iv) Agreement with the managing director/manager.(v)A copy of the registrar’s letter giving permission for the name. (vi) A declaration that all the legal requirements are followed.(vii) A notice about the exact office of the registered office. (viii) Documents showing the payment of fees.

Capital subscription: (i) SEBI approval (ii) Filing of prospectus. (iii) Appointment of brokers, bankers etc., (iv) Collection of minimum subscription (v) Application to stock exchange (vi) Allotment of shares.

• Commencement of Business:
(i) A declaration about meeting minimum subscription requirement. (ii) A declaration regarding the application and allotment money paid by the directors as same as others.
(iii) A declaration that no money is payable to the applicants because of the failure of the company. (iv) A statutory declaration that the above particulars are followed. (v) The registrar shall examine the documents if these are found satisfactory a certificate of commencement of business will be issued.

• Key Concepts in Nutshell:

FORMS OF BUSINESS ORGANISATION

• Meaning Of Sole Proprietorship:
Sole means only
Proprietor means owner
Merits of sole proprietorship:
1. A sole proprietor can take decision quickly.
2. Information can be kept secretly without any leakage.
3. No need to share profits.
4. He gets self satisfaction for the work he has done.
5. Easy to start and to close because of less rules and regulations.

• Partnership
Types of Partners :
1. Active partner: An active partner is a partner who gives capital, participates in management, shares the profits and losses and has unlimited liability.
2. Sleeping partner: A Partner who do not take part in the business activities.
3. Secret partner: A partner who has association with the firm but unknown to the public.
4. Nominal partner: A partner who allows his name to be used by the firm
5. Partner by estoppel: A person who by behaviour sets an impression to others that he/she is a partner of the firm.
6. Partner by holding out: A person who is not a partner but allows himself to be represented as partner in a firm.

Consequences of Non Registration:
1. A Partner of an unregistered firm cannot file a case against the firm or other partners.
2. The firm cannot file a case against third parties.
3. The firm cannot file a case against the partners. 

• Public Company:
1. Members: Minimum 7, Maximum unlimited
2. Minimum number of directors: 3
3. Minimum paid up capital: 5 lakhs.
4. Index of members: Compulsory.
5. Transfer of shares: Shares can be transferred easily from one person to another.
6. Invitation to public: It can invite the public to purchase the share and debentures

• Private Company:
1. Members: Minimum 2, Maximum ‐50.
2. Minimum number of directors: 2
3. Minimum paid up capital: 1 lakh
4. Index of members: Not compulsory.
5. Transfer of shares: Shares cannot be transferred from one person to another.
6. Invitation to public: It cannot invite the public to purchase the share and debentures.

• Memorandum of Association:
1. It defines the objects for which the company is formed.
2. This is the main document of the company.
3. This defines the relationship of the company with outsiders.
4. Every company has to file Memorandum of Association.
5. Alteration of Memorandum of Association is difficult.

• Articles of Association:
1. It defines the objectives of the company that are to be achieved.
2. This is the subsidiary document of the company.
3. Articles define the relationship of the members and the company.
4. It is not necessary for the public limited company.
5. It can be altered by passing a special resolution.

Question. The members can be asked to contribute to the loss only to the extent of the unpaid amount of shares held by them. Identity the merit of a company highlighted here.
(a) Risk bearing
(b) Common seal
(c) Liability
(d) Control

Answer : C

Question. After passing his 12th class with entrepreneurship as an elective subject ‘Ayushman’ started his own business. He invested ₹ 4,00,000 as the seed capital which was gifted to him by his father.
He obtained a loan of ₹1,00,000 from his friend Mansi, who was working as an assistant manager in Bank of Baroda. In the first year, he incurred a loss of ₹ 1,00,000 and had to pay to his suppliers, their outstanding bills. This created a financial problem for him and he had to take another loan of ₹ 1,00,000 from the Bank of Baroda on the personal guarantee of his father.
 He started doing hard work, lowered the prices and informed his customers about the qualities of goods sold by him. Because of this the sales increased four times and he earned a net profit of ₹ 1,75,000 in the second year.
On the basis of the given information about Ayushman, identify the form of business organisation started by ‘him’.
(a) Partnership
(b) Company
(c) Sole proprietorship
(d) Cooperative society

Answer : C

Question. The liability of a shareholders is limited to the extent of the amount …….. on the shares held by them.
(a) paid
(b) unpaid
(c) re-paid
(d) None of the above

Answer : B

Question. Ayushi did her post-graduation from SIS University, Ukhrul. She had offers to join some reputed firms in metropolitan cities like Delhi and Mumbai. Instead of joining any of these firms, she decided to do some creative work in Ukhrul. She observed that a special type of chilli is grown by the farmers in most of the villages in Ukhrul. This chilli has a distinct flavour and pickle made from this chilli has a taste which may be liked by people from the rest of the country. But the farmers were neither trained for farming of this kind of chilli on a large scale nor was there a secured market for their produce. Ayushi met 15 like-minded women of the area and formed an organisation for doing the business of pickle manufacturing.
Each of them contributed ₹ 20,000 each towards its capital and were equally responsible for its management. 
On one hand, they assured the farmers to purchase their chilli and on the other hand, the organisation, with the help of local agriculture department arranged for the training of the farmers. 
They also employed 15 local unemployed graduate girls for doing the various operations of pickle making. Identify the kind of organisation that was formed by Ayushi.
(a) Sole proprietorship
(b) Joint hindu family
(c) Partnership
(d) Company

Answer : C

Question. ………….. clause limits the liability of the members to the amount unpaid on the shares owned by them.
(a) Name
(b) Registered office
(c) Objects
(d) Liability

Answer : D 

Question. It is a new category of company introduced to encourage startups and young entrepreneurs wherein a single person can incorporate the entity. It also promotes the concept of corporatisation of the business. It is not the same as a sole proprietorship firm, in a way as it has separate legal existence with limited liability. The sole member of the company has to mention a nominee while registering the company. Which type of company is being described in the given para?
(a) Public company
(b) Private company
(c) One person company
(d) None of these

Answer : C

Question. A group of five people decided to make a company and hence approached IQ Business Consultants, a professional unit for seeking appropriate advice. This company helped them in identifying the different business opportunities and suggested to set up a bags manufacturing company. 
Before converting this business opportunity into a real project, IQ Business Consultants made certain arrangements for conducting technical, financial and economic surveys. 
For this, they took the help of specialists like professional accountants, lawyers and engineers. On the basis of the given information above, what is this group of five people called as?
(a) Underwriters
(b) Promoters
(c) Board of directors
(d) Managers

Answer : B

Question. The principle of ‘one man one vote’ governs the cooperative society.
(a) True
(b) False
(c) Can’t say
(d) Partially false

Answer : A

Question. At which stage in the formation of a company does it interact with the SEBI?
(a) Promotion
(b) Incorporation
(c) Capital subscription
(d) Commencement

Answer : C

Question. Find out the liability of Anita in a company, who is a shareholder, holding 3,000 shares of ₹ 10 each. She has already paid ₹ 6 per share.
(a) ₹ 10,000
(b) ₹ 1,20,000
(c) ₹ 18,000
(d) ₹ 12,000

Answer : D 

Question. ………. clause defines the purpose for which the company is formed.
(a) Name
(b) Registered office
(c) Objects
(d) Liability

Answer : C

Question. The liability of all the co-parceners except the ......... is limited to their share in the business, and consequently their risk is well-defined and precise.
(a) karta
(b) partners
(c) members
(d) shareholders

Answer : A

Question. Abhishek and Nidhi want to start a shop to sell Rajasthani sweets. They did not know how to develop the agreement for this purpose. So, they approached a chartered accountant who advised them to prepare a document which may stipulate the terms and conditions of the agreement. On the basis of given information, name the document about which the chartered accountant advised Abhishek and Nidhi.
(a) MoA
(b) AoA
(c) Partnership deed
(d) Prospectus

Answer : C

Question. Rohan, Shikha and Arti decide to start a business which is created by law and only law can bring it to an end. Rohan has four sons so he wants that his business should be such in which he can easily shift the ownership to his sons whenever he wants.
Shikha believes that her functions should be performed by elected representatives. Arti suggests the owners should be responsible for the losses of the business only to a limited extent. On the basis of the given information, which form of business does the above case indicate?
(a) Joint stock company
(b) Partnership
(c) Cooperative society
(d) Sole proprietorship

Answer : A

Question. Mahesh Chandra Sharma operates a business of iron and steel for the last 30 years. 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. Sharma’s grandson was born a few days ago and he is also a member of the business.
On the basis of the given information about Mahesh Chandra Sharma, which form of business is being undertaken by Mahesh Chandra Sharma?
(a) Partnership
(b) Company
(c) Joint hindu family
(d) Cooperative society

Answer : C

Question. Partnership is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business and to share the profits between them.
(a) True
(b) False
(d) Can’t say
(c) Partly true

Answer : A

Question. The directors take all decisions on behalf of the shareholders, keeping in mind their own benefit. Identify the demerit stated above.
(a) Delay in decision-making
(b) Numerous regulations
(c) Lack of secrecy
(d) Oligarchic management

Answer : D 

Question. Indian Coffee House is a restaurant chain in India. It has strong presence across India with nearly 350 coffee houses. These are governed by managing committees elected by members. These are completely owned and managed by employees only. 
These have also received appreciation and support from Government and public. The voting rights in these are neither tied to investment nor patronage. On the basis of the given information about Indian Coffee House, which form of business organisation is highlighted in the above case?
(a) Cooperative society
(b) Company
(c) HUF
(d) Partnership

Answer : A

Question. Match the following forms of business organisation with the minimum numberof members required.

Codes
      A     B    C     D 
(a) (i)   (ii)  (iii)  (iv)
(b) (iv) (iii)  (ii)  (i)
(c) (ii)  (iv)  (iii) (i)
(d) (iii) (iv)  (ii)  (i)

Answer : D 

Question. Suppose Amit is a shareholder in a company holding 500 shares of ₹ 10 each on which he has already paid ₹ 8 per share. His liability in the event of losses or company’s failure to pay debts can be only up to
(a) ₹ 4,000
(b) ₹ 5,000
(c) ₹ 1,000
(d) ₹ 2,000

Answer : C

Question. It is optional for a partnership firm to get registered.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Answer : A

Question. A person is considered a …………. partner if, through his/her own initiative, conductor behaviour, he/she gives an impression to others that he/she is a partner of the firm.
(a) active
(b) sleeping or dormant
(c) secret
(d) partner by estoppel

Answer : D 

Question. A company is a creation of law and exists independent of its members. Identify the feature of company highlighted in the given line.
(a) Formation
(b) Separate legal entity
(c) Perpetual succession
(d) Artificial person

Answer : B

Question. Which form of organisation is suitable if direct control over operations and absolute decision-making power is required in business?
(a) Joint stock company
(b) Cooperative society
(c) Sole proprietorship
(d) HUF

Answer : C

Question. In a joint stock company, the board of directors are elected by the ……… .
(a) government
(b) customers
(c) shareholders
(d) promoter

Answer : C

Question. Registered office clause in MoA contains the legal and recognised name of the company, which has been approved by the registrar of companies.
(a) True
(b) False
(c) Can’t say
(d) Partially false

Answer : B

Question. A …………. is one who allows the use of his/her name by a firm, but does not contribute to its capital.
(a) active partner
(b) sleeping or dormant partner
(c) secret partner
(d) nominal partner

Answer : D 

Question. …………. is the most important document as it defines the objectives of the company.
(a) Articles of association
(b) Partnership deed
(c) Memorandum of association
(d) Incorporation certificate

Answer : C

Question. Themembers of these societies consist of people who are desirous of procuring residential accommodation at lower costs. Identify the society referred here.
(a) Consumer’s cooperative societies
(b) Producer’s cooperative societies
(c) Marketing cooperative societies
(d) Cooperative housing societies

Answer : D 

Question. Match the following forms of business organisation on the basis of control and management.

Codes
       A    B     C    D 
(a) (ii)  (iii)  (iv)  (i)
(b) (iv) (iii)  (ii)   (i)
(c) (iv)  (ii)   (i)   (iii)
(d) (ii)  (iv) (iii)   (i)

Answer : A

Question. The capital of a company is divided into number of parts, each one of which is called
(a) Dividend
(b) Profit
(c) Interest
(d) Share

Answer : D 

Question. The members of ….. society comprise of consumers desirous of obtaining good quality products at reasonable prices.
(a) consumer’s cooperative
(b) producer’s cooperative
(c) marketing cooperative
(d) farmer’s cooperative

Answer : A

Question. The aim of such societies is to protect the members from the exploitation of lenders who charge high rates of interest on loans. Identify the society referred here.
(a) Consumer’s cooperative societies
(b) Producer’s cooperative societies
(c) Credit cooperative societies
(d) Farmer’s cooperative societies

Answer : C

Question. Contracts assigned after incorporation but before commencement of business are provisional contracts.
(a) True
(b) False
(c) Can’t say
(d) Partly true

Answer : A

Question. Ravi and Akshay are doing separate business of installing centralised air conditioning units in Meerut. They enter into a partnership contract to install centralised AC unit in a hotel in Roorkee. Identify the type of partnership being highlighted in the given case.
(a) General partnership
(b) Particular partnership
(c) Partnership at will
(d) None of the above

Answer : B

Question. These partners take actual part in carrying out business of the firm on behalf of other partners. Identify the partner being referred here.
(a) Active partner
(b) Sleeping or dormant partner
(c) Secret partner
(d) Nominal partner

Answer : A

Question. Mr. John worked as a manager in ‘Northern Traders’ a trading company. He decided to start his own business selling similar products. After preparing all details, he realised that he does not have sufficient funds to start business on his own. He discussed the business plan with his friend Kishan and both decided to join hands as partners. 
They opened a bank account in the Indian Bank for business transactions and prepared all documents to register their business. Ranbir, John’s colleague in Northern Traders also wanted to be part of business but did not want to leave a secured job.
So he decided to invest money in business but not to take active part in the activities. Ranbir used his position to inform John about the important decisions and strategies followed by Northern Traders.
The CEO of Northern Traders came to know about the conspiracy of Ranbir and terminated him from his services. On the basis of the given information, identify what type of member Ranbir is in the organisation?
(a) Active
(b) Dormant
(c) Nominal
(d) Estoppel

Answer : B

Question. The shareholders do not have the right to be involved in the day-to-day functioning of the business. Which haracteristic of company is highlighted here?
(a) Risk bearing
(b) Common seal
(c) Liability
(d) Control

Answer : D 

Question. Ashima is a sole proprietor. Over the past decade, her business has grown from operating a neighbourhood corner shop selling accessories such as artificial jewellery, bags, hair clips and nail polish to a retail chain with three branches in the city.
She looks after the varied functions in all the branches, but now she wants to change her form of business as she also has plans to open branches countrywide. She is also planning to collect the funds by issue of shares. 
On the basis of the given information, which form of business is suitable for Ashima for the expansion of business?
(a) Company
(b) Partnership
(c) HUF
(d) Cooperative society

Answer : A

Question. ….... society’s aim is to gain the benefits of large scale farming and increase the productivity.
(a) Consumer’s cooperative
(b) Producer’s cooperative
(c) Marketing cooperative
(d) Farmer’s cooperative

Answer : D 

Important Questions for Ncert Class 11 Business Studies Forms of Business Organisation

 

 

Very Short Answer type Questions: 

Question. Name the type of cooperative society formed to protect the interest of small producers. 
Answer: Producers’ cooperative societies.

Question. Mention the various stages of formation of a company. 
Answer: (a) Promotion. (b) Incorporation. (c) Subscription of capital. (d) Commencement of business.

Question. Who are usually the first directors of the company? 
Answer: The signatories to the memorandum of association.

Question. Name the type of company which must have a minimum paid-up capital of ` 5 lakh. 
Answer: Public company.

Question. What is the maximum number of partners in a partnership firm carrying on (a) banking business, (b) non-banking business? 
Answer: (a) Banking business-10. (b) Non-banking business-20.

Question. Which form of organisation is considered to be the simplest form of organisation? 
Answer: Sole proprietorship.

Question. Within which period the permission from stock exchange should be received? 
Answer: Before the expiry of ten weeks from date of closure of subscription list.

Question. Why are business assets and liabilities of a joint stock company separate from those of its members? 
Answer: It has separate legal entity.

Question. Name the partner who does not have interest in the partnership business but lends his name to the firm. 
Answer: Nominal partner.

Question. Name the document which defines the objectives of a company. 
Answer: Memorandum of Association.

Question. Which form of business organisation is said to be an artificial legal person? 
Answer: Joint stock company.

Question. What is the role of underwriters in the capital subscription stage of public limited company?
Answer: Underwriters undertake to buy the shares if these are not subscribed by the general public.

Question. Name the form of business organisation which is established with the motive of welfare of the members. 
Answer: Cooperative society.

Question. Name any two factors considered by a person to start a new business. 
Answer: (a) Selection of line of business. (b) Scale of business.

Question. Alag Industries intends to open retail stores in every locality, but is not sure of profitability due to tough competition. Do you think the business opportunity is feasible? 
Answer: No, the business lacks economic feasibility.

Question. What is meant by incorporation of a company?
Answer: Incorporation of a company means the registration of the company as a body corporate.

Question. Name the smallest unit in which the capital of a company is divided.. 
Answer: Share.

Question. State the important features of partnership.
Answer: (i) Formation (ii) Liability (iii) Risk bearing (iv) decision making
(v) continuity (vi) Member .

Question. What are the consequences of nonregistration of a partnership firm?
Answer: A Partner of an unregistered firm cannot file a case against the firm or other partners.
The firm cannot file a case against third parties.
The firm cannot file a case against the partners.

Question. Explain any three features of a company.
Answer: (i) Artificial person (ii) Formation is difficult (iii) Company has separate Identity.

Question. Enumerate the various types of cooperative societies.
Answer: (i) Consumer (ii) Producer (iii) Marketing (iv) Farmer’s (v) Credit (vi) Cooperative housing societies

Question. What are the functions of a promoter?
Answer: (i) Finding out a business opportunity (ii) Conducting studies (iii) Getting the name approved.
(iv) Fixing up persons to sign Memorandum of Association.
(v)Appointment of professionals.(vii) preparation of necessary Documents.

Long Answer Type Questions:

Question. Distinguish between Memorandum of Association and Articles of Association.
Answer:
Memorandum of Association
1. It defines the objects for which the company is formed.
2. This is the main document of the company.
3. This defines the relationship of the company with outsiders.
4. Every company has to file Memorandum Of Association.
5. Alteration of Memorandum of Association is difficult.
Articles of Association
6. It defines the objectives of the company that are to be achieved.
7. This is the subsidiary document of the company.
8. Articles define the relationship of the members and the company.
9. It is not necessary for the public limited company.
10. It can be altered by passing a special resolution.

Question. Distinguish between a private company and public company.
Answer:
PUBLIC COMPANY:
Members: Minimum 7, Maximum unlimited
Minimum number of directors: 3
Minimum paid up capital: 5 lakhs.
Index of members: Compulsory.
Transfer of shares: Shares can be transferred easily from one person to another.
Invitation to public: It can invite the public to purchase the share and debentures
PRIVATE COMPANY:
Members: Minimum 2, Maximum ‐50.
Minimum number of directors: 2
Minimum paid up capital: 1 lakh
Index of members: Not compulsory.
Transfer of shares: Shares cannot be transferred from one person to another.
Invitation to public: It cannot invite the public to purchase the share and debentures.

Question. Describe the various partners in a partnership firm.
Answer:
TYPES OF PARTNERS
Active partner: An active partner is a partner who gives capital, participates in management, shares the profits and losses and has unlimited liability.
Sleeping partner: A Partner who do not take part in the business activities.
Secret partner: A partner who has association with the firm but unknown to the public.
Nominal partner: A partner who allows his name to be used by the firm Partner by estoppel: A person who by behaviour sets an impression to others that he/she is a partner of the firm.
Partner by holding out: A person who is not a partner but allows himself to be represented as partner in a firm.

Question. Why is company form of organization preferred than other forms of organization?
Answer:
Merits: (i) Liability is limited (ii) Chances are there for expansion iii) Managed by professional people (iv) Continuous existence (v) Shares can be easily transferred from one person to another person.

Question. List and explain the factors which help in choosing an appropriate form of Organization.
Answer:
Choice of form of Business organization: (i) less costly in setting up the Organization.(ii) Limited liability (iii) continuous existence (iv) Form of raising capital (v) Control to be made (vi) Nature of business.

HOTs

Question. “One man control is the best in the world if that man is big enough to manage everything”. Explain.
Answer:
Merits of sole proprietorship:
1. A sole proprietor can take decision quickly.
2. Information can be kept secretly without any leakage.
3. No need to share profits.
4. He gets self satisfaction for the work he has done.
5. Easy to start and to close because of less rules and regulations.

Question. “A private company avoids many of the defects of a public company”. Explain.
Answer:
Merits: (i) Liability is limited (ii) Chances are there for expansion
(iii) Managed by professional people (iv) Continuous existence (v) Shares can be easily transferred from one person to another person.

Question. State the reasons for issuing prospectus:
Answer:
1. It serves as an invitation to the public to invest in the shares and debentures of the company.
2. It acts as an advertisement for inducing the investors to invest in the company.
3. It serves as an record of the terms and conditions on which shares and debentures are issued.
4. It helps to protect the interest of the investors.

Question. “A company is said to be an artificial person created by law, having a separate entity with perpetual succession and a common seal”. Discuss the above statement.
Answer:
Features: (i) Artificial person (ii) Formation is difficult (iii)Company has separate identity.(iv)Continuous existence (v) Control of the company is made by
directors.(vi)liability is limited.(vii) Common seal.

Question. Describe the steps involved in the floatation of the company.
Answer:
Capital subscription:
1. SEBI Approval.
2. Filing of prospectus.
3. Appointment of bankers, brokers and underwriters.
4. Minimum subscription.
5. Application of stock exchange.
6. Allotment of shares.

Question. Name the form of business organisation in which the members are jointly and individually liable for payment of firm’s debts.
(a) Sole proprietorship
(b) Partnership
(c) Company
(d) HUF

Answer : B

Question. The cooperative society is compulsorily required to be registered under the Cooperative Societies Act, ........ .
(a) 1912
(b) 1956
(c) 1932
(d) 1965

Answer : A

Question. The documents for registration of a company were filed on 21st March, 2021. The Certificate of Incorporation was issued on 28th March, 2021. But the date mentioned on the Certificate of Incorporation was 27th March, 2021. From which date will the company be considered to be in existence and the contracts signed will be considered valid.
(a) 21st March, 2021
(b) 28th March, 2021
(c) 27th March, 2021
(d) None of these

Answer : C

Question. A ……… partner is one whose association with the firm is unknown to the general public.
(a) secret
(b) active
(c) sleeping
(d) nominal

Answer : A

Question. Avantika wanted to pitch in to reduce the financial crisis prevailing in her house and thought of working as a cook. She started working in three different households, one Punjabi, one Gujrati and one South Indian family. She soon realised that all the three households had different cuisine. 
It was indeed a challenge for her to learn the techniques of the cuisine. All the families greatly appreciated the time frame within which she had mastered the local cuisine. After working for them for a year, she decided to open a small eating joint of her own along with two of her friends by the name ‘Eat point’.
They decided to share profits and losses equally and that each of them will be liable for acts performed by the other two. Soon the eatery became a hot spot because of the fusion platter which was being offered.
On the basis of the given information, identify the kind of business organisation which was set up by Avantika and her friends.
(a) Partnership
(b) Cooperative society
(c) Sole proprietorship
(d) HUF

Answer : A

Question. The board of directors enters into an agreement with others by indicating the company’s approval through a ………. .
(a) risk bearing
(b) common seal
(c) liability
(d) control

Answer : B

Question. Match the forms of business organisation with their merits.

Codes
       A   B    C    D 
(a) (iv) (i)  (ii)  (iii)
(b) (i)  (ii)  (iii) (iv)
(c) (iv) (iii) (ii)  (i)
(d) (iii) (ii)  (i)  (iv)

Answer : A

Question. The purpose of this study is to assess if the raw materials and technology required to pursue a particular business proposal are easily available.
(a) Economic feasibility study
(b) Financial feasibility study
(c) Technical feasibility study
(d) None of the above

Answer : C

Question. Mr. Gupta, in order to promote local craftsmen of Gujarat, formed an organisation where in the persons voluntarily associate themselves to promote common economic interest.
The basic purpose of this organisation was to help these craftsmen to find market for their products. It had a managing committee that was elected on the basis of ‘one member one vote’. On the basis of the given information, identify the form of business  organisation set up by Mr. Gupta.
(a) Partnership
(b) Cooperative society
(c) Joint hindu family
(d) Company

Answer : B

Question. The risk of loss gets spread over a large number of shareholders. Identify the feature of company highlighted here.
(a) Risk bearing
(b) Common seal
(c) Liability
(d) Control

Answer : A

Question. Producer’s cooperative society is a society in which small farmers join together and pool their resources for cultivating their land collectively.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Answer : B

Question. Match the following business organisation with their limitations.

Codes
       A    B     C   D
(a) (ii)  (iv)  (i)  (iii)
(b) (i)   (ii)  (iii) (iv)
(c) (iv) (iii)  (ii)  (i)
(d) (ii)  (i)  (iv)  (iii)

Answer : A

Question. A ……….. has its objectives for the promotion of economic interest of its members in accordance with cooperative principles.
(a) sole proprietorship
(b) joint hindu family business
(c) partnership
(d) cooperative society

Answer : D

Question. ….. society aims to fight against the big capitalists and enhance the bargaining power of the small producers.
(a) Consumer’s cooperative
(b) Producer’s cooperative
(c) Marketing cooperative
(d) Farmer’s cooperative

Answer : B

Question. ................is a type of business unit where a person is solely responsible for providing the capital.
(a) Sole proprietorship
(b) Joint hindu family business
(c) Partnership
(d) Cooperative societies

Answer : A

Question. The society aims to eliminate middlemen and improve competitive position of its members by securing a favourable market for the products.
(a) Consumer’s cooperative societies
(b) Producer’s cooperative societies
(c) Marketing cooperative societies
(d) Farmer’s cooperative societies

Answer : B

Question. Ashish and Nipun felt that there was an opportunity of business in providing a service of online grocery stores to working people residing in Bengaluru. They analysed the idea in terms of technical, financial and economic feasibility. Once they found all the aspects to be satisfactory, they decided to start a company called ‘Grocery At your Doorstep Private Ltd’.
They got the name registered with the registrar of companies. On the basis of the given information, identify the step in the formation of company highlighted in above case.
(a) Promotion
(b) Capital subscription
(c) Incorporation
(d) Commencement

Answer : A

Question. The liability of members of a cooperative society is ………….. to the extent of their capital contribution.
(a) born
(b) shared
(c) unlimited
(d) limited

Answer : D

Question. Anish, Anuj and Harish mutually decided to start a partnership business of manufacturing bulbs. They also decided that Harish’s association with firm will not be disclosed to general public. Here, Harish will be associated with firm as a sleeping partner.
(a) True
(b) False
(c) Can’t say
(d) Partially true

Answer : B

Question. ……….. cooperative society is formed by consumers for obtaining good quality products at reasonable prices.
(a) Consumers
(b) Producers
(c) Marketing
(d) Farmers

Answer : A

Question. The company form of organisation is governed by The Companies Act, ...... .
(a) 1912
(b) 2013
(c) 1932
(d) 1965

Answer : B

Important Questions for Ncert Class 11 Business Studies Forms of Business Organisation