ISC Class 12 Commerce Board Exam Question Paper 2019 with Solutions

ISC Class 12 Commerce Board Exam Question Paper with Solutions 2019

Part - I (20 Marks)
Answer all questions.

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

(i) What is meant by the term Business Environment ? [2 Marks]

Answer:
The business environment is a mixture of complex, dynamic and uncontrollable external factors within which a business is to be operated.

Teacher's Note:
a) Ensure you mention that these factors are external and generally uncontrollable by the individual enterprise.
b) Avoid writing vague definitions; highlight keywords like 'complex', 'dynamic', and 'external factors'.

(ii) State any four short-term sources of finance for a Joint Stock Company. [2 Marks]

Answer:
1. Public Deposits
2. Trade Credits
3. Customer Advances
4. Factoring

Teacher's Note:
a) Short-term sources generally refer to funds required for a period not exceeding one year.
b) List distinct financial sources clearly to fetch full marks without mixing up with long-term sources like debentures.

(iii) Mention any two advantages of e-Banking to the customers. [2 Marks]

Answer:
1. Customer can do transactions on a 24 × 7 basis.
2. Customer can do transactions from anywhere, such as home or workplace, using a computer, laptop, or mobile, eliminating the need to visit the bank branch.

Teacher's Note:
a) Focus on customer-centric benefits rather than bank-centric advantages.
b) Mentioning convenience factors like round-the-clock access or remote access is crucial.

(iv) Differentiate between Fixed Capital and Working Capital. [2 Marks]

Answer:

Teacher's Note:
a) Differences must be presented in a tabular format with corresponding points for clarity.
b) Ensure the distinction is based on purpose (non-current vs. current assets) and liquidity.

(v) Management is universal. Comment. [2 Marks]

Answer:
Management is universal in the sense that it is a common and essential element in all enterprises. Managerial skills are transferable from one person to another, can be transferred from one organization to another, and can be imported and exported from one country to another.

Teacher's Note:
a) Explain that management is required in all types of organizations, whether economic, social, or political.
b) Clearly state why it is termed universal by pointing out the applicability across borders and sectors.

(vi) State any two points of difference between recruitment and selection. [2 Marks]

Answer:

Teacher's Note:
a) Remember that recruitment is a positive process (attracting candidates), while selection is a negative/rejective process (eliminating unsuitable candidates).
b) Present points cleanly in a table.

(vii) Explain feedback as a part of the process of communication. [2 Marks]

Answer:
The observation of the receiver's response is called feedback. It enables the sender to evaluate the effectiveness of the message. Without feedback, two-way communication is either ineffective or incomplete. Feedback is the only way to gain the receiver's response, and depending on it, the sender can take further steps.

Teacher's Note:
a) Highlight that feedback converts one-way communication into a complete two-way process.
b) Emphasize its role in helping the sender verify if the message was understood correctly.

(viii) Mention any two facilitating functions of marketing. [2 Marks]

Answer:
1. Standardization and grading
2. Financing

Teacher's Note:
a) Marketing functions are divided into primary functions and facilitating/auxiliary functions.
b) Students must specifically quote facilitating functions like risk-taking, financing, or standardization.

(ix) Name two types of markets on the basis of nature of transactions. [2 Marks]

Answer:
1. Spot markets
2. Future markets

Teacher's Note:
a) Spot markets involve immediate delivery and payment.
b) Future markets involve transactions where delivery and payment take place at a specified future date.

(x) Mr. Kappa has recently purchased a refrigerator from TUTU Enterprises, paying Rupees 30,000. After using it for a day or two, he found mechanical defects in the refrigerator. Immediately, he informed the dealer about the defect but there was no response from the dealer. Mr. Kappa decided to lodge a complaint against TUTU Enterprises.
(a) Which court should Mr. Kappa approach to file a complaint ?
(b) State any one relief the concerned court may order in favour of Mr. Kappa. [2 Marks]

Answer:
(a) District Consumer Forum
(b) Replacement of the defective product with a new defect-free product.

Teacher's Note:
a) Under the Consumer Protection Act, claims up to Rupees 1 crore (as per amended limits, though original 1986 act limit was Rupees 20 lakhs, District Forum handles up to Rupees 20 lakhs originally; however, standard forum for this value range is the District Commission/Forum) fall under the District Forum jurisdiction.
b) Other valid reliefs include refund of the price paid or removal of defects.

Part - II (60 Marks)
Answer any five questions

Question 2.

(a) Explain three important characteristics of Management. [3 Marks]

Answer:
1. Management is a goal-oriented process: Management always aims at achieving organizational objectives. The functions and activities of managers lead to the achievement of these predetermined goals.
2. Management is pervasive: Management is a universal phenomenon. It is applicable not only to business firms but also to profit-making, non-profit-making, business, or non-business organizations. Even a hospital, school, club, and household must be managed properly.
3. Management is a continuous process: All the functions of management are performed continuously. Planning, organizing, staffing, directing, and controlling are performed by all managers all the time.

Teacher's Note:
a) Mention any three clear characteristics with proper sub-headings.
b) Avoid writing general descriptions without core management terminology.

(b) Briefly explain any four external factors of Micro environment of business. [4 Marks]

Answer:
1. Suppliers: Suppliers provide the inputs, such as raw materials and components, required by the business. Without a reliable supplier, it is not possible to carry on business operations smoothly.
2. Customers: Customers are the buyers of goods and services. Since a business exists to satisfy customer needs, if no one buys the products, the business cannot survive.
3. Marketing Intermediaries: Middlemen such as wholesalers, distributors, and retailers form a vital link between the firm and its customers, helping in the promotion, sale, and distribution of goods.
4. Financiers: Financiers provide the capital required for starting, running, and expanding the business. The growth and stability of a business depend upon its ability to obtain timely funds and loans.

Teacher's Note:
a) Micro environment factors directly affect the specific business unit rather than the entire industry.
b) Give clear examples for each factor to score full marks.

(c) What is meant by barriers to communication ? Explain three suitable measures to overcome barriers to effective communication. [5 Marks]

Answer:
Barriers to communication refer to the obstacles or hindrances that arise in the process of communication, causing misunderstanding, distortion, or complete failure of the message between the sender and the receiver.

Measures to overcome barriers to effective communication:
1. Use of Simple Language: Use of simple, clear, and unambiguous words should be emphasized. Technical jargons should be avoided unless necessary.
2. Reduction and elimination of noise levels: Noise is a major physical barrier. It must be overcome on a priority basis by identifying the source of noise and eliminating it.
3. Active Listening: Listen attentively and carefully. Active listening means hearing with proper understanding. The receiver should provide feedback, and the sender can ask questions to ensure the message is understood correctly.

Teacher's Note:
a) Define the term clearly before listing the corrective measures.
b) Ensure practical measures like active listening and clear language are explained briefly.

Question 3.

(a) Give three differences between Shares and Debentures. [3 Marks]

Answer:

Teacher's Note:
a) Tabular presentation makes comparison questions easy to evaluate.
b) Cover distinct parameters like ownership, return, and status.

(b) What is meant by supervision ? Explain three functions of a Supervisor. [4 Marks]

Answer:
Supervision means guiding, instructing, and overseeing the work and activities of subordinates or workers at the operational level to ensure targets are met.

Functions of a supervisor:
1. Planning and Organizing: The basic role of a supervisor is to plan the daily work schedule of workers, guide them regarding the nature of work, and allocate tasks according to their skills and interests.
2. Leadership and Guidance: A supervisor acts as a leader for the workers. He guides them in achieving production targets and provides day-to-day instructions.
3. Motivation: A supervisor plays an important role by providing various monetary and non-monetary incentives to inspire workers to perform better.

Teacher's Note:
a) Clearly define supervision as a direct face-to-face relationship between superior and subordinates.
b) Explain distinct supervisory functions accurately.

(c) Explain the importance of Delegation of Authority. [5 Marks]

Answer:
Delegation of authority means the downward transfer of authority and responsibility from a superior to a subordinate.

Importance of Delegation of Authority:
1. Effective Management: By passing routine work to subordinates, managers are relieved from overwork and can concentrate on higher-level strategic matters.
2. Employees Development: Delegation gives subordinates opportunities to utilize their talents, gain experience, and develop complex skills, preparing them for future leadership roles.
3. Motivation of Employees: Sharing authority builds trust and confidence between superiors and subordinates, fulfilling their psychological needs for recognition and responsibility.
4. Facilitates Organizational Growth: Delegation leads to division of work and specialization, enabling the enterprise to expand and take up new activities efficiently.
5. Better Coordination: It establishes clear reporting relationships and helps in defining authority and responsibility, leading to smooth coordination among departments.

Teacher's Note:
a) Write at least four to five well-explained points for a 5-mark question.
b) Emphasize how delegation relieves managers and empowers subordinates.

Question 4.

(a) Explain any three disadvantages of issuing equity shares, from the company's point of view. [3 Marks]

Answer:
1. No Trading on Equity: If a company issues only equity shares, it cannot take advantage of trading on equity, as it does not employ cheaper sources of fixed-cost bearing funds like debentures.
2. Danger of Over-Capitalization: Since equity capital cannot be redeemed during the lifetime of the company, it may lead to excess capital remaining idle, resulting in over-capitalization.
3. Risk of Manipulation: Equity shareholders have voting rights and can form pressure groups or manipulate management decisions to serve their vested interests.

Teacher's Note:
a) Ensure disadvantages are stated strictly from the company's perspective, not the investor's perspective.
b) Clearly explain terms like 'trading on equity' and 'over-capitalization'.

(b) What is meant by NEFT ? Give any two features of NEFT. [4 Marks]

Answer:
NEFT stands for National Electronic Funds Transfer. It is a nationwide centralized payment system operated by the Reserve Bank of India (RBI) which enables individuals, firms, and corporates to electronically transfer funds from any bank branch to any other bank branch participating in the scheme.

Features of NEFT:
1. Settlement takes place in batches rather than on a gross individual transaction basis.
2. There is no minimum or maximum limit on the amount of funds that can be transferred through NEFT.

Teacher's Note:
a) Expand the acronym correctly and explain the operation.
b) Highlight batch processing as a key feature distinguishing it from RTGS.

(c) Explain five factors that should be taken into consideration while determining the price of a product or service. [5 Marks]

Answer:
1. Cost of Production: Cost is the foundation of pricing. No business can sell its product below the cost of production in the long run. Total cost (fixed plus variable cost) must be covered.
2. Demand for Product: Intensive study of demand is essential. If demand is high relative to supply, a higher price can be charged; if demand is elastic and weak, lower prices are fixed.
3. Price of Competing Firms: Prices charged by competitors for similar products must be analyzed. In case of cut-throat competition, prices are kept competitive or low to maintain market share.
4. Pricing Objectives: The pricing objective of the firm affects price determination. If the objective is to maximize short-term profits, a higher price is set; for market penetration, a lower price is fixed.
5. Government and Legal Regulations: Prices of certain essential goods are regulated or controlled by the government to protect public interest, which the firm must comply with.

Teacher's Note:
a) List five distinct factors influencing pricing decisions.
b) Explain how cost and demand act as primary determinants of price.

Question 5.

(a) Explain any three objectives of Marketing. [3 Marks]

Answer:
1. Creation of Demand: The primary objective is to create demand through various marketing tools by identifying consumer tastes and preferences and informing them about product utility.
2. Customer Satisfaction: Modern marketing is customer-oriented. The goal is to satisfy customer needs effectively, as customer retention depends on satisfaction.
3. Generation of Profits: A business must earn adequate profits to survive, grow, and diversify its operations successfully in the competitive market.

Teacher's Note:
a) Emphasize customer satisfaction as the core modern objective of marketing.
b) Profits are essential for business survival and growth.

(b) What are Public Deposits ? Briefly explain any two merits of Public Deposits. [4 Marks]

Answer:
Public deposits refer to unsecured deposits invited directly from the general public by companies to finance their short-term working capital requirements.

Merits of Public Deposits:
1. Simplicity: Raising funds through public deposits is simple and convenient as it does not involve complicated legal formalities or restrictive covenants compared to issuing debentures.
2. Economical: The interest paid on public deposits is generally lower than bank loans or debentures. Moreover, no underwriting commission or heavy floatation cost is incurred.

Teacher's Note:
a) Define public deposits clearly as an unsecured source of short-term finance.
b) State both merits concisely with valid economic reasoning.

(c) What is financial planning ? Explain three points of importance of financial planning for a business organisation. [5 Marks]

Answer:
Financial planning refers to the process of estimating the capital requirement of a business and determining the sources of funds to ensure smooth financial operations.

Importance of financial planning:
1. Ensures adequate funds: It ensures that sufficient funds are available at the right time for operations, expansion, and contingencies, avoiding shortage or surplus of funds.
2. Helps in smooth administration: Financial planning provides policies and procedures for the sound administration and control of the finance function.
3. Facilitates future growth: By preparing for future financial requirements, new projects and expansion programs can be undertaken smoothly without cash crunch.

Teacher's Note:
a) Define financial planning covering estimation of funds and identification of sources.
b) Highlight importance points like adequate liquidity and facilitation of growth.

Question 6.

(a) Explain any three points of importance of Planning. [3 Marks]

Answer:
1. Increases efficiency: Planning makes optimum utilization of all available resources, reduces wastage, avoids duplication of work, and aims at highest returns at lowest cost.
2. Reduces business-related risks: Planning helps managers forecast future uncertainties and risks, enabling them to take preventive steps and formulate contingency plans.
3. Facilitates proper coordination: It integrates the plans of various departments and ensures harmony between short-term and long-term organizational goals.

Teacher's Note:
a) Keep the points crisp and focused on organizational advantages.
b) Use standard management terminology such as 'optimum utilization' and 'forecasting risks'.

(b) Discuss any four features of Objectives, as a type of a Plan. [4 Marks]

Answer:
1. Objectives are the desired future positions that management seeks to achieve.
2. They are usually quantified and expressed in numerical terms (e.g., increase sales by 20 percent).
3. Objectives must be achievable and realistic, not based on impossible targets.
4. They are single-use or continuous guidelines that serve as the focal point for all business activities.

Teacher's Note:
a) Explain objectives as ends towards which activities are directed.
b) Highlight that objectives must be measurable and realistic.

(c) Explain the various steps involved in the process of Controlling, as a function of Management. [5 Marks]

Answer:
1. Establishment of Standards: Standards are benchmarks against which actual performance is measured. They serve as targets or thresholds to be achieved.
2. Ascertainment of Output: The second step is the measurement of actual performance in quantitative or qualitative terms to evaluate the results.
3. Comparison of Actual Performance with Standards: Actual performance is compared with established standards to find out the extent of deviations.
4. Identification of Deviations: Deviations are analyzed to identify the exact causes of differences between actual results and planned standards.
5. Taking Corrective Action: Finally, corrective measures are initiated to rectify deficiencies and ensure that such deviations do not recur in future.

Teacher's Note:
a) Controlling is a cyclical and continuous process; list the steps in chronological order.
b) The final step of taking corrective action is the most crucial part of the controlling process.

Question 7.

(a) Distinguish between advertising and sales promotion. [3 Marks]

Answer:

Teacher's Note:
a) Present the difference clearly in a tabular layout.
b) Emphasize that advertising builds brand equity over time, while sales promotion provides instant sales stimulus.

(b) Explain any four rights available to a consumer under the Consumer Protection Act, 1986. [4 Marks]

Answer:
1. Right to Safety: Consumers have the right to be protected against products, production processes, and services that are hazardous to health or life.
2. Right to Information: Consumers have the right to be informed about the quality, quantity, purity, standard, and price of goods or services so as to make an informed choice.
3. Right to Choose: Consumers have the right to be assured access to a variety of goods and services at competitive prices, preventing monopolistic trade practices.
4. Right to Seek Redressal: Consumers have the right to seek legal remedy against unfair trade practices or exploitation, including replacement, repair, or compensation for damages.

Teacher's Note:
a) Quote statutory rights accurately as per the Consumer Protection Act.
b) Provide clear explanations for each right.

(c) What is meant by promotion mix ? Briefly explain the elements of promotion mix. [5 Marks]

Answer:
Promotion mix refers to the combination of various promotional tools used by a business to communicate with customers, create awareness, and persuade them to buy its products or services.

Elements of promotion mix:
1. Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
2. Personal Selling: Direct face-to-face oral communication between a salesperson and prospective buyers to make a sale.
3. Sales Promotion: Short-term incentives such as discounts, coupons, and contests designed to encourage immediate purchase.
4. Public Relations: Building good relations with the company's various publics by obtaining favorable publicity and building a good corporate image.

Teacher's Note:
a) Define promotion mix first before detailing its core elements.
b) Enumerate the four traditional pillars of the promotional mix clearly.

Question 8.

(a) Explain three features of goods, as an element of Product Mix. [3 Marks]

Answer:
1. Tangibility: Goods are tangible physical objects that can be seen, touched, and felt.
2. Transfer of Ownership: Ownership of goods is transferred from the seller to the buyer at the time of sale.
3. Separation of Production and Consumption: The production and consumption of goods do not take place simultaneously; goods can be stored for future use.

Teacher's Note:
a) Distinguish features of physical goods from intangible services.
b) Highlight tangibility and storability as key characteristics.

(b) Discuss any four types of preference shares. [4 Marks]

Answer:
1. Cumulative Preference Shares: Holders are entitled to receive arrears of dividends from future profits if dividends are not paid in a particular year.
2. Non-Cumulative Preference Shares: Dividends do not accumulate if they are not paid in a given year; holders lose that year's dividend permanently.
3. Convertible Preference Shares: Holders have the right to convert their preference shares into equity shares after a specified period.
4. Redeemable Preference Shares: Shares that can be redeemed or repaid by the company after a specified period or as per the terms of issue.

Teacher's Note:
a) List four distinct types clearly.
b) Clearly explain cumulative vs. non-cumulative features.

(c) State and explain the principles of management as laid down by F.W. Taylor. [5 Marks]

Answer:
F.W. Taylor proposed four scientific management principles:
1. Science, not Rule of Thumb: Traditional hit-and-miss methods should be replaced with scientific investigation and analysis to determine standard output and methods.
2. Harmony, Not Discord: There should be complete mental harmony and understanding between management and workers, avoiding industrial conflicts.
3. Mental Revolution: It involves a complete change in the mindset of workers and management towards each other, cooperating fully to increase organizational productivity and profits.
4. Cooperation, Not Individualism: Extension of harmony, emphasizing mutual cooperation between workers and management rather than individual competition.
5. Development of each and every person to his or her greatest efficiency and prosperity: Scientific selection and training of workers to maximize their efficiency.

Teacher's Note:
a) Mention Taylor's scientific management principles clearly.
b) Explain 'Mental Revolution' and 'Science, not Rule of Thumb' as they are core to Taylor's theory.

Question 9.
Write short notes on the following :
(a) ESOP [4 Marks]
(b) Features of Management as an art [4 Marks]
(c) Channels of distribution [4 Marks]

(a) ESOP [4 Marks]

Answer:
ESOP stands for Employee Stock Ownership Plan. It is an employee benefit plan that offers employees an ownership interest in the organization. Under this scheme, the company grants options to employees to purchase company shares at a predetermined price, usually below market price, after serving for a specified period. It aligns employee goals with organizational growth and motivates workforce performance.

Teacher's Note:
a) Expand ESOP correctly.
b) Highlight its role as an incentive tool that fosters employee ownership and loyalty.

(b) Features of Management as an art [4 Marks]

Answer:
1. Practical Knowledge: Like any art, management requires practical application of theoretical principles rather than mere theoretical learning.
2. Personal Skill: Every manager has a personalized approach, style, and technique of handling situations based on experience and talent.
3. Creativity: Management is creative as it combines human and non-human resources to produce desired results and innovative solutions.
4. Perfection through practice: Just like an artist improves through continuous practice, a manager becomes proficient through experience and trial and error.

Teacher's Note:
a) Explain management as an art by drawing parallels with practical arts.
b) Mention personal skill and practical application as key characteristics.

(c) Channels of distribution [4 Marks]

Answer:
Channels of distribution refer to the network of intermediaries (such as wholesalers, retailers, distributors, and agents) through which goods and services move from the manufacturer to the ultimate consumer.

Main forms include:
1. Direct Channel (Manufacturer to Consumer): No intermediaries involved (e.g., mail order, online selling, door-to-door selling).
2. Indirect Channels: Involve middlemen such as Manufacturer-Retailer-Consumer, Manufacturer-Wholesaler-Retailer-Consumer, and Manufacturer-Agent-Wholesaler-Retailer-Consumer.

Teacher's Note:
a) Define distribution channels clearly.
b) Briefly classify them into direct and indirect channels.