ISC Class 12 Commerce Board Exam Question Paper 2017 with Solutions

ISC Class 12 Commerce Board Exam Question Paper with Solutions

Part - I (20 Marks)

Question 1. [10 × 2]
Answer briefly each of the questions (i) to (x):

(i) What is meant by Macro Environment ? [2 Marks]

Answer:
A macro environment is the condition that exists in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in gross domestic product (GDP), inflation, employment, spending and monetary and fiscal policy. The macro environment is closely linked to the general business cycle as opposed to the performance of an individual business sector.

Teacher's Note:
a) Ensure students understand that macro environment relates to external forces affecting all businesses in the economy.
b) A common mistake is confusing macro environment with micro environment (like suppliers and customers).

(ii) What is the importance of finance to a business concern ? [2 Marks]

Answer:
Finance is an important functional area of business. It deals with timely procurement of funds and their effective utilisation. For optimal procurement, different sources of finance are compared in terms of their costs and associated risks.

Teacher's Note:
a) Finance is regarded as the lifeblood of any business concern.
b) Students should mention both procurement and effective utilisation to score full marks.

(iii) Give two merits of Inter Corporate Deposits. [2 Marks]

Answer:
(a) No Procedural Delays
(b) Easy availability of finance.

Teacher's Note:
a) Inter Corporate Deposits (ICDs) are short-term deposits made by one company with another company.
b) Mentioning clear and precise points without heavy legal formalities fetches full credit.

(iv) Define Management as a process. [2 Marks]

Answer:
As a process, management refers to a series of inter-related functions or elements to achieve stated objectives through the effective utilization of human and other resources. It involves five functions, namely, planning, organizing, staffing, directing or leading and controlling.
As shown in Fig. 1 it is through the performance of these functions that management is able to effectively utilize manpower and physical resources such as money or capital, machines, materials, methods, etc. to produce goods and services required by the society.

[Figure: Flowchart diagram showing Men and Women, Money, Machines, Materials, Methods, Markets being processed through Planning, Organising, Staffing, Directing, Controlling to produce Goods and Services]

Teacher's Note:
a) Management is considered a process because it involves a continuous sequence of functions.
b) Students must list the core management functions to provide a complete definition.

(v) Explain the principle of Authority and Responsibility, as laid down by Henry Fayol. [2 Marks]

Answer:
Authority and Responsibility : Authority is the right to give orders to the subordinates and to use the resources of organisation. Responsibility is the duty which the subordinate is expected to perform by virtue of his position in the organisation. Responsibility must be expressed either in terms of functions or in terms of objectives. When a subordinate is asked to control the working of a machine, the responsibility is stated in terms of function and when a subordinate is asked to produce a certain number of pieces of a product, the responsibility is created in terms of targets.

Teacher's Note:
a) Fayol emphasized that authority and responsibility must go hand in hand (parity between authority and responsibility).
b) A common error is defining only authority or only responsibility while explaining this principle.

(vi) What is Demand Draft ? [2 Marks]

Answer:
A demand draft is a negotiable instrument similar to a bill of exchange. A bank issues a demand draft to a client (drawer), directing another bank (drawer) or one of its own branches to pay a certain sum to the specified party (payee).

Teacher's Note:
a) A demand draft is pre-paid, meaning the drawer must pay the amount upfront, so there is no risk of dishonour.
b) Clearly state that it is drawn by a bank on its own branch or another bank.

(vii) State any two features of advertising. [2 Marks]

Answer:
1. It is a paid form of communication: Advertisements appear in newspapers, magazines, television or on cinema screens because the advertiser has purchased some space or time to communicate information to the prospective customers.
2. It is a non-personal presentation of message: There is no face to face contact with the customers. That is why, it is described as non-personal salesmanship. It is a non-personal form of presenting products and promoting ideas and it supports personal selling.

Teacher's Note:
a) Advertising targets a mass audience simultaneously.
b) Students should use technical terms like "paid form" and "non-personal communication".

(viii) Give two points of difference between training and development. [2 Marks]

Answer:

Teacher's Note:
a) Training is job-oriented whereas development is career-oriented.
b) Presenting differences in a tabular format is the standard expected board presentation.

(ix) Mention two physical functions of marketing. [2 Marks]

Answer:
1. Gathering and Analyzing Information : Gathering and analyzing market information is necessary to identify the needs of the customers and take various decisions for the successful marketing of products and services.
2. Packaging and Labelling : Packaging is traditionally done to protect the goods from damage in transit and to facilitate easy transfer of goods to customers, while also helping to establish brand image.

Teacher's Note:
a) Physical distribution and handling functions deal with the actual movement and storage of goods.
b) Ensure proper headings are mentioned as given in standard marketing functions.

(x) Agrim purchased a Diesel Car for ₹ 7 Lakhs from an automobile Company and found its engine to be defective. Despite many complaints, the defect was not rectified. Suggest the appropriate authority where Agrim under his right as a consumer, could file a complaint [2 Marks]

Answer:
District Forum

Teacher's Note:
a) Under the Consumer Protection Act, cases where the value of goods and compensation claimed does not exceed ₹ 20 Lakhs fall within the jurisdiction of the District Forum (Note: under updated acts limits have changed, but according to the 2017 exam context, District Forum is correct).
b) Students must specify the exact tier of the consumer dispute redressal agency.

Part - II (60 Marks)
Answer any five questions.

Question 2.
(a) Explain three disadvantages of Preference shares from the investors’ point of view. [2]
(b) Effectiveness of leadership depends on the qualities of the Leader. Explain any four qualities that a good leader should possess. [4]
(c) Explain the importance of Business Environment in shaping the future of a business. [5]

Answer:
(a) Disadvantages of Preference shares from the investors point of view are :
1. No voting right: Generally preference shareholders do not have any voting rights. Hence, they cannot have the control over the management of the company.
2. Fixed dividend only: Preference shares can get only fixed rate of dividend. They may not enjoy more profits of the company.
3. Taxation : In the taxation point of view, preference shares dividend is not a deductible expense while calculating tax. But, interest is a deductible expense. Hence, it has disadvantage on the tax deduction point of view.

(b) Qualities of a good leader are as follows :
1. Appreciative: A wise leader values their team and the person. Success is only achieved with the help of others. What is more, genuine appreciation provides encouragement, develops confidence, and builds on strengths.
2. Confident: Trust and confidence in leadership is a reliable indicator of employee satisfaction. Good leaders are not afraid of being challenged. Their confidence inspires.
3. Compassionate : A good leader uses compassion to perceive the needs of those they lead and to decide a course of action that is of greatest benefit to the person and the team.
4. Courageous : A courageous leader is prepared to take risks when no one else will. A courageous leader has faith in other people. A courageous leader raises difficult issues, is ready to give difficult feedback, and share unpopular opinions.

(c) Proper understanding of the social, political, legal and economic environment helps the business in the following ways :
1. Determining Opportunities and Threats : The interaction between the business and its environment would identify opportunities for and threats to the business. It helps the business enterprises for meeting the challenges successfully.
2. Giving Direction for Growth : The interaction with the environment leads to opening up new frontiers of growth for the business firms. It enables the business to identify the areas for growth and expansion of their activities.
3. Continuous Learning : Environmental analysis makes the task of managers easier in dealing with business challenges. The managers are motivated to continuously update their knowledge, understanding and skills to meet the predicted changes in realm of business.
4. Image Building : Environmental understanding helps the business organisations in improving their image by showing their sensitivity to the environment within which they are working.
5. Meeting Competition : It helps the firms to analyze the competitors strategies and formulate their own strategies accordingly.

Teacher's Note:
a) For part (a), focus on the lack of control and capped returns for investors.
b) For parts (b) and (c), headings must be written clearly followed by crisp explanations.

Question 3.
(a) Give three differences between advertising and personal selling. [3]
(b) Explain any four features of a budget. [4]
(c) You are the finance manager of a newly established company. The Directors have asked you to determine the amount of fixed capital requirement for the company. Explain any five factors that you will consider while determining the fixed capital requirement for the company. [5]

Answer:
(a)

(b) Features of budget are as follows :
1. A budget is a statement of expected results expressed in quantitative terms.
2. It provides a standard by which actual observation can be measured and by which variations can be checked.
3. It is a single use plan since it is prepared for a particular period of time.
4. A budget forces an enterprise to make in advance a numerical compilation of expected cash flows, expenses and revenues, capital outlays or machine hour utilization.

(c) The requirement of fixed capital depends upon various factors which are explained below :
1. Nature of Business : The type of business company is involved in is the first factor which helps in deciding the requirement of fixed capital. A manufacturing company needs more fixed capital as compared to a trading company, as trading company does not need plant, machinery, etc.
2. Scale of Operation : The companies which are operating at large scale require more fixed capital as they need more machineries and other assets whereas small scale enterprises need less amount of fixed capital.
3. Technique of Production : Companies using capital-intensive techniques require more fixed capital whereas companies using labour-intensive techniques require less capital because capital-intensive techniques make use of plant and machinery.
4. Technology Up-gradation : Industries in which technology up-gradation is fast need more amount of fixed capital as when new technology is invented old machines become obsolete and they need to buy new plant and machinery.
5. Growth Prospects : Companies which are expanding and have higher growth plan require more fixed capital as to expand, they need to expand their production capacity and need more plant and machinery.

Teacher's Note:
a) Tabular distinction ensures clarity and prevents loss of marks.
b) For fixed capital determinants, students must distinguish between manufacturing/trading and capital/labor intensive techniques.

Question 4.
(a) Give three points in support of the statement, "Organizing is an important function of management." [3]
(b) What is social environment ? Enumerate any three components of social environment. [4]
(c) Briefly discuss any five features of principles of management. [5]

Answer:
(a) The benefits of a sound organisation are discussed below :
1. Benefits of Specialization : Organisation is based on division of work which leads to specialization. In other words, jobs are created which require special qualifications, training and aptitude, leading to efficiency.
2. Clarity of Working Relationships : Organisation helps in creating well defined job and also clarifying the limits of authority and responsibility of each job, reducing conflicts and duplication.
3. Optimum Utilization of Resources : Organisation leads to creation of distinct jobs and departments by systematic division of activities, avoiding overlapping of duties.

(b) Social Environment consists of the customs and traditions of the society in which business exists. It includes the standard of living, taste, preferences and education level of the people living in the society where business exists.
Three components of Social Environment are:
1. Quality of life
2. Birth and Death rates
3. Tradition, customs and habits of people

(c) The principles of management have the following characteristics or features :
1. Universal Application : The principles of management are universal in nature. They are applicable to all kinds of organisations and situations.
2. General Guidelines : Management principles have been evolved by management thinkers out of their experience and analysis. They are general statements, not rigid rules.
3. Developed by Practice and Experimentation : Many of the management principles have been developed by practitioners including Henry Fayol, F.W. Taylor and L. Urwick through observation and experimentation.
4. Flexibility : The principles of management are flexible in nature. Refinements in principles can take place as per need of the situation faced.
5. Influence Human Behavior : The principles of management are meant for influencing human behavior and getting higher performance from them.

Teacher's Note:
a) Ensure all sub-parts are answered with proper headings.
b) Emphasize that management principles are flexible and not absolute like physical science laws.

Question 5.
(a) What are the objectives of personal selling ? [3]
(b) Explain the following :
(i) SMS alerts
(ii) ATM [4]
(c) Explain any five points of importance of controlling, as a function of management. [5]

Answer:
(a) Personal selling is used to meet the following objectives of promotion :
1. Building Product Awareness : A common task of salespeople is to educate customers on new product offerings and discuss products directly.
2. Creating Interest : Personal selling involves person-to-person communication which is a natural method for getting customers to experience a product for the first time.
3. Increases Sales : Salesmen can clarify doubts and objections raised by customers on the spot, thereby increasing sales conversion.

(b)
(i) SMS Alerts : It is a facility used by banks or other financial institutions to send messages (notifications or alerts) to customers mobile phones using SMS messaging, enabling customers to stay updated on financial transactions.
(ii) ATM : ATM stands for Automated Teller Machine. It is an electronic telecommunications device that enables customers of a financial institution to perform financial transactions, particularly cash withdrawal, without the need for a human cashier, clerk or bank teller.

(c) The following benefits may be derived from a sound system of control :
1. Accomplishment of Organisational Goals : Control helps in achieving business objectives and ensures regular supply of factors of production at economical costs.
2. Judging Accuracy of Standards : Through controlling, a manager can judge whether the standards or targets set are accurate or not and revise them when necessary.
3. Making Efficient Use of Resources : Each activity is performed in accordance with predetermined standards, reducing wastages and inefficiencies.
4. Improving Motivation of Employees : Clear-cut performance standards have a positive impact on employee behavior, making them feel motivated while performing duties.
5. Ensuring Order and Discipline : Controlling insists on continuous check on employee activities, creating an atmosphere of order and discipline.

Teacher's Note:
a) Part (b) requires precise definitions of modern banking/financial terms.
b) For part (c), emphasize how controlling acts as a backward-looking and forward-looking management tool.

Question 6.
(a) Distinguish between marketing and selling. [3]
(b) Explain any four objectives of communication. [4]
(c) Explain the first five steps involved in selecting suitable work force in an organisation. [5]

Answer:
(a)

(b) The objectives of communication are as follows :
1. To Motivate Employees : Communication seeks to make employees interested in their duties and in the company as a whole, inspiring workers to achieve objectives.
2. To Promote Managerial Efficiency : Communication aims at improving management efficiency by providing proper guidance to employees.
3. To Implement Decisions Quickly : Effective communication is designed to implement decisions quickly so that subordinates understand and take action.
4. To Carry Out Change : Free flow of ideas and information reduces workers resistance to new technology and changes.

(c) Efficient performance of staffing involves the following first five steps :
1. Estimating Manpower Requirements or Human Resource Planning : Determining the number and type of staff required for the organisation by making inventory of current human resources and assessing future needs.
2. Recruitment : Involving the attraction of suitable people to apply for vacant jobs in the organisation by identifying sources of manpower availability.
3. Selection : Choosing and appointing the right candidates for various jobs through receiving and screening applications, tests, interviews, and medical examinations.
4. Placement and Orientation : Placing the employee on the job for which they are best suited and familiarizing new employees with their units, supervisors, and rules.
5. Training and Development : Systematic training to increase the skills and knowledge of employees in doing their jobs effectively.

Teacher's Note:
a) Marketing vs Selling is a high-frequency board question; tabular differentiation is mandatory.
b) Ensure staffing steps are written strictly in chronological order.

Question 7.
(a) Explain Buying and Assembling, as function of marketing. [3]
(b) What is meant by R.T.G.S ? Give any two features of R.T.G.S. [4]
(c) Management is the dynamic, life giving element in every business. In the context of this statement, explain the importance of management in modern times. [5]

Answer:
(a)
1. Buying : Buying is the first step in the process of marketing. It involves deciding what to buy, what quality, how much, from whom, when, and at what price to increase sales or decrease costs.
2. Assembling : After buying materials, they are collected at a central place, which is called assembling. Assembling is required for all kinds of products whether agricultural, consumer, or industrial.

(b) Real Time Gross Settlement (RTGS) is an electronic form of funds transfer where the transmission takes place on a real time basis. In India, transfer of funds with RTGS is done for high value transactions, the minimum amount being ₹ 2 Lakh. The beneficiary account receives the funds transferred on a real time basis.
Features of RTGS:
1. An RTGS electronic fund transfer facilitates fund transfer on real time basis. In case of a holiday, the amount gets credited on the next working day.
2. RTGS avoids the cost involved in other instruments of fund transfer such as demand draft.

(c) Importance of Management in modern times :
1. Helps in accomplishment of organisational goals : It is the management which determines organizational goals and coordinates all activities towards achieving them.
2. Helps in efficient utilization of resources : Management ensures efficient utilization of resources to reduce costs and increase productivity and profitability by eliminating wastages.
3. Creates dynamic organisation : All organisations operate in a dynamic environment. Management helps employees adapt to changes so that the organisation maintains its competitive edge.
4. Helps in accomplishment of personal objectives : Management motivates group members to achieve personal objectives while working toward organizational goals.
5. Helps in development of society : Efficient management aids societal development through good quality products, employment creation, and economic growth.

Teacher's Note:
a) Distinguish clearly between buying (acquiring goods) and assembling (bringing them to a central place).
b) Mention the ₹ 2 Lakh limit for RTGS clearly.

Question 8.
(a) Give three points of difference between Taylor’s and Fayol’s Principles of Management [3]
(b) Explain four advantages of raising funds from commercial banks. [4]
(c) Discuss any five points of importance of marketing. [5]

Answer:
(a)

(b) Following are the advantages of raising funds from commercial banks :
1. Raising funds from commercial banks are available for the specified period according to business needs.
2. It provides benefit of trading on equity.
3. Repayment can be made easily out of future earnings.
4. Interest paid on bank loan is deductible for determining taxable profits.

(c) Importance of marketing are as follows :
1. Standardization and Grading : Setting quality standards to achieve uniformity and classifying products based on size and quality to fetch better prices.
2. Packaging and Labelling : Protecting goods in transit, building brand image, and providing necessary information through labels acting as silent salesmen.
3. Branding : Giving a distinct individuality to a product through names, symbols, or marks so that customers recognize it instantly.
4. Customer Support Services : Developing after-sales services, handling complaints, and providing maintenance services to ensure customer satisfaction and brand loyalty.
5. Pricing : Determining the exchange value of a product based on costs, profit margins, competitor pricing, and government policy.

Teacher's Note:
a) Taylor vs Fayol is a key comparative concept; highlight Taylor shop-floor focus versus Fayol administrative focus.
b) Ensure proper headings are provided for marketing importance.

Question 9.
Write short notes on :
(a) Publicity. [4]
(b) Secured Debentures. [4]
(c) Programme, as a type of plan. [4]

Answer:
(a) Publicity is an effective non-personal promotional tool which has very high credibility. It is any non-paid mention of an organisation and its products in mass media like newspapers, journals, radio, and TV. Any organisation can come to the attention of the public by doing something which is newsworthy.
Salient features of publicity:
1. It is a non-paid form of dissemination of information involving no direct payment.
2. It is a non-personal form of communication.
3. It does not have any sponsor as information is passed as a news item.

(b) Secured Debentures are debentures secured by a charge on the assets of the company, also called mortgage debentures. Holders have the right to recover their principal amount along with interest out of the assets mortgaged by the company in case of default.

(c) Programme, as a type of plan is a detailed statement about a project which outlines objectives, policies, procedures, rules, tasks, and human and physical resources required to implement any course of action. It is action-based and result-oriented, and serves as a single-use plan formulated for a specific project.

Teacher's Note:
a) Ensure short notes contain both definition and key features to secure maximum marks.
b) Highlight that publicity is non-paid while advertising is a paid form of promotion.