ISC Class 12 Commerce Board Exam Question Paper 2023 with Solutions

ISC Class 12 Commerce Board Exam Question Paper with Solutions

SECTION A - 16 MARKS

Question 1

(i) The type of plan considered as a guide to decision making in repetitive situations is called: [1 Mark]
(A) Policy.
(B) Rule.
(C) Programme.
(D) Strategy.

Answer: (A) Policy.

A policy is a general guide that channels thinking and decision making in repetitive situations within an organization.

Teacher's Note:
a) Policies provide a broad framework for managerial decision making.
b) Students often confuse a policy with a rule, which is a rigid statement that allows no discretion.

(ii) ABC company plans to capitalise its undistributed profits. Which one of the following shares will the company issue to its existing shareholders? [1 Mark]
(A) Rights Shares
(B) ESOP
(C) Sweat Equity Shares
(D) Bonus Shares

Answer: (D) Bonus Shares

Bonus shares are issued free of cost to existing shareholders out of accumulated profits or reserves (capitalisation of profits).

Teacher's Note:
a) Bonus shares increase the paid-up capital without bringing in fresh cash inflow.
b) Rights shares involve cash payment by existing shareholders to purchase additional shares.

(iii) When XYZ company acquired a toy manufacturing company, it paid a large amount for the goodwill. Which source of business funds of XYZ company was impacted? [1 Mark]
(A) Fixed capital.
(B) Special Working capital.
(C) Circulating capital.
(D) Gross Working capital.

Answer: (A) Fixed capital.

Purchase of intangible assets like goodwill on acquisition of a business involves long-term investment affecting fixed capital requirements.

Teacher's Note:
a) Fixed capital refers to funds invested in long-term and fixed/intangible assets.
b) Working capital relates to day-to-day operations and current assets.

(iv) Rita wants to transfer her first salary to her mother's bank account through RTGS. What is the minimum amount that she can transfer through RTGS? [1 Mark]
(A) Rs. 50,000
(B) Rs. 2,00,000
(C) Rs. 1,00,000
(D) Rs. 20,000

Answer: (B) Rs. 2,00,000

The minimum threshold limit for a Real Time Gross Settlement (RTGS) transaction is Rs. 2,00,000.

Teacher's Note:
a) RTGS is meant for high-value fund transfers on a real-time basis.
b) For amounts below Rs. 2,00,000, NEFT is typically used.

(v) Which one of the following is NOT a component of the legal environment? [1 Mark]
(A) Acts passed by the government.
(B) Political stability in the country.
(C) Decisions taken by various commissions.
(D) Verdict given by the court.

Answer: (B) Political stability in the country.

Political stability is a component of the political environment, not the legal environment.

Teacher's Note:
a) Legal environment consists of legislation, court judgments, and administrative orders.
b) Political environment includes government stability, ideology, and relations with foreign countries.

(vi) The changes in technology and the tastes and preferences of consumers cannot be predicted. Which feature of business environment is highlighted here? [1 Mark]
(A) Non-controllable
(B) General and Specific forces
(C) Interrelatedness
(D) Uncertainty

Answer: (D) Uncertainty

Uncertainty refers to the inability of businesses to predict future environmental changes accurately, especially regarding tastes and technology.

Teacher's Note:
a) Environmental changes happen frequently, making future forecasting very difficult.
b) Do not confuse uncertainty with complexity or relativity.

(vii) State whether the following are True or False. [4 Marks]

(a) When Equity Shares dominate the capital structure, the capital is considered as high geared. [1 Mark]

Answer: False.

When equity shares dominate, it is low geared; high gearing occurs when fixed-interest/dividend-bearing securities (debt and preference shares) dominate.

Teacher's Note:
a) Gearing ratio establishes the proportion of fixed-cost bearing capital to equity capital.
b) High gearing means high financial risk.

(b) The organisational structure and the composition of the board of directors, are one of the internal factors of micro environment of a business organisation. [1 Mark]

Answer: True.

Internal factors like board composition, corporate culture, and organizational structure form part of the internal micro environment.

Teacher's Note:
a) Micro environment includes factors close to the company that affect its ability to serve customers.
b) Internal environment is completely within the control of the organization.

(c) A market where products are transferred immediately from seller to buyer is called a future market. [1 Mark]

Answer: False.

A market where goods are exchanged immediately is called a spot market, whereas a future market involves delivery at a future specified date.

Teacher's Note:
a) Spot market involves immediate delivery and payment.
b) Future market deals with contracts for future delivery.

(d) Inventory control is not an element of Physical distribution. [1 Mark]

Answer: False.

Inventory control is a crucial element of physical distribution, determining the level of stock to maintain customer service while minimizing costs.

Teacher's Note:
a) Physical distribution includes transportation, warehousing, inventory control, and order processing.
b) Proper inventory control prevents stockouts and holding costs.

(viii) ____________________ is not a separate function but the essence of Management. [1 Mark]

Answer: Coordination.

Coordination is considered the essence of management as it is required in all managerial functions to synchronize efforts.

Teacher's Note:
a) Coordination binds all other functions of management together.
b) It ensures unity of action in the realization of common organizational goals.

(ix) A ____________________ is a comprehensive plan designed to implement the policies and accomplish the objectives of an organisation. [1 Mark]

Answer: Strategy.

A strategy is a comprehensive plan formulated to achieve organizational objectives and execute policies in a competitive environment.

Teacher's Note:
a) Strategy takes environmental factors into account.
b) It outlines resource deployment to secure competitive advantage.

(x) Deepti and Sudha are managers in ABC Ltd. and are working together on a project. They report to Mrs. Verma, a Senior Manager. Sudha asks Deepti to submit a report on the project to her without informing Mrs. Verma. Which Principle of Management is not followed in this case? [1 Mark]

Answer: Principle of Scalar Chain (or Unity of Command).

The principle violated is scalar chain because communication bypassing the established chain of command is being requested without informing the superior.

Teacher's Note:
a) Scalar chain is the formal line of authority from top to lowest rank.
b) Gang plank is permitted only in emergencies under strict conditions.

(xi) A wholesaler sold adulterated goods which were hazardous to the customers' health. Which consumer right was violated in this case? [1 Mark]

Answer: Right to Safety.

The right to safety protects consumers against products, production processes, and services that are hazardous to health or life.

Teacher's Note:
a) Consumers have the right to be protected against dangerous goods.
b) Selling adulterated goods directly infringes upon consumer safety.

(xii) Which force exerts a direct and immediate influence on the working of a business organisation? [1 Mark]

Answer: Micro environment forces (or specific forces).

Specific forces such as customers, suppliers, competitors, and investors exert a direct and immediate influence on the business organization.

Teacher's Note:
a) Micro environment forces affect particular enterprises exclusively.
b) General forces (macro environment) affect all enterprises in the economy indirectly.

(xiii) Assertion : Marketing and Selling are not synonymous with each other.
Reason : Selling is narrow in scope, whereas Marketing is wide. [1 Mark]
(A) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.
(B) Both Assertion and Reason are true, but Reason is not the correct explanation of Assertion.
(C) Assertion is true but Reason is False.
(D) Assertion is False but Reason is true.

Answer: (A) Both Assertion and Reason are true, and Reason is the correct explanation of Assertion.

Marketing is a wide concept encompassing customer satisfaction, product planning, pricing, and promotion, whereas selling focuses only on transferring title and possession of goods.

Teacher's Note:
a) Selling is only a part of the broader process of marketing.
b) Marketing begins before production and continues long after sales.

SECTION B - 32 MARKS

Question 2 [4 Marks]

Planning is of vital importance in the managerial process. Give any four reasons to support this statement.

Answer:
1. Planning provides direction by stating in advance what needs to be done and which way to go.
2. Planning reduces the risk of uncertainty by anticipating future events and making provisions for them.
3. Planning reduces overlapping and wasteful activities by clarifying roles and eliminating duplication of efforts.
4. Planning promotes innovative ideas as it requires creative thinking and encourages managers to suggest new ways of doing work.

Teacher's Note:
a) Students must list any four valid points with brief explanations.
b) Keywords like direction, uncertainty, and coordination must be highlighted.

OR

(ii) Directing is the heart of management process. Give any four reasons to support this statement. [4 Marks]

Answer:
1. Directing initiates action by instructing, guiding, and motivating employees to work towards organizational goals.
2. It integrates employee efforts by coordinating individual goals with organizational objectives.
3. It helps in introducing changes in the organization by overcoming employee resistance through effective communication and leadership.
4. It provides stability and balance in the organization by maintaining cooperation and commitment among staff.

Teacher's Note:
a) Directing involves four elements: supervision, motivation, leadership, and communication.
b) Ensure all points emphasize why directing is central to executing managerial plans.

Question 3 [4 Marks]
Ratan Ltd. needs to raise funds from the financial market and hence, considers issuing equity shares. State any four reasons to explain why this source of raising funds is considered by the company.

Answer:
1. Permanent source: Equity capital is a permanent source of finance as it is not refunded during the lifetime of the company.
2. No fixed burden: Payment of dividend on equity shares is not legally compulsory; dividends are paid only when there are profits.
3. Borrowing capacity: Issuing equity shares increases the creditworthiness and borrowing capacity of the company.
4. Control: Equity shareholders enjoy voting rights, giving them control over the management of the company.

Teacher's Note:
a) Equity shares represent ownership capital.
b) Clearly mention permanence and absence of fixed obligation as key advantages.

Question 4 [4 Marks]
Explain any two advantages and any two disadvantages of Public deposits.

Answer:
Advantages:
1. Simple procedure: Raising funds through public deposits is relatively simple compared to issuing shares or debentures, with fewer legal formalities.
2. Cost-effective: The cost of raising public deposits is generally lower than the cost of borrowings from banks and financial institutions.
Disadvantages:
1. Uncertainty: Public deposits are an uncertain source of finance because depositors may not respond positively during financial stringency.
2. Risk for new companies: Raising public deposits is risky for new or unestablished companies as investors hesitate to repose trust in them.

Teacher's Note:
a) Public deposits are unsecured short-term or medium-term borrowings from the general public.
b) Ensure two distinct advantages and two distinct disadvantages are clearly listed.

Question 5 [4 Marks]
Discuss any four objectives of Management.

Answer:
1. Survival: Ensuring the organization survives and exists in the market by earning enough revenue to cover costs.
2. Profitability: Earning adequate profit, which is essential for covering business costs and risks.
3. Growth: Expanding business operations by increasing sales volume, capital investment, and number of branches.
4. Social objectives: Providing quality products at fair prices, generating employment opportunities, and contributing to community welfare.

Teacher's Note:
a) Organizational objectives of management are generally categorized into survival, profit, and growth.
b) Social objectives ensure fulfillment of corporate social responsibility towards society.

Question 6 [4 Marks]
Explain any four differences between training and development.

Answer:

Teacher's Note:
a) Present differences in a tabular format with a clear basis of distinction for full marks.
b) Emphasize that training is job-oriented while development is career-oriented.

Question 7 [4 Marks]
Briefly explain the following terms:

(i) Management by Exception [2 Marks]

Answer:
Management by Exception (MBE) is a control technique where managers focus attention only on significant deviations or exceptional problems that exceed acceptable tolerance limits, leaving routine matters to subordinates.

Teacher's Note:
a) It saves valuable executive time by filtering out minor variations.
b) Only critical exceptions requiring corrective action are escalated to top management.

(ii) Span of Control [2 Marks]

Answer:
Span of Control refers to the number of subordinates who can be effectively and efficiently supervised by a single superior.

Teacher's Note:
a) It determines the shape of the organizational structure (flat or tall).
b) Narrow span results in a tall structure while wide span results in a flat structure.

Question 8 [4 Marks]
A patient suffering from high fever was hospitalised for few days. During the treatment, he was given an injection which caused a permanent nerve damage resulting in paralysis. The cost of treatment was Rs. 2,00,000 which was disputed by the patient's family.
Which consumer dispute redressal authority can be approached by the patient's family? Explain any three rights of the consumers.

Answer:
Since the claim/cost of treatment is Rs. 2,00,000, which does not exceed Rs. 1 crore, the patient's family can approach the District Consumer Disputes Redressal Commission.
Three rights of consumers are:
1. Right to Safety: Right to be protected against products and services that are hazardous to health or life.
2. Right to be Informed: Right to have information about the quality, quantity, purity, standard, and price of goods or services.
3. Right to Seek Redressal: Right to get compensation against unfair trade practices or exploitation.

Teacher's Note:
a) District Commission handles claims up to Rs. 1 crore under the Consumer Protection Act.
b) Students must correctly identify the appropriate forum based on the monetary limit and explain any three rights.

Question 9 [4 Marks]

(i) Explain any four points on the need for Consumer Protection. [4 Marks]

Answer:
1. Rampant exploitation: Consumers face exploitation through adulteration, underweight goods, high prices, and misleading advertisements.
2. Ignorance: Most consumers are ignorant of their rights and remedies, making consumer protection essential.
3. Unorganized consumers: Consumers are widely scattered and unorganized, needing statutory protection.
4. Social responsibility: Business has a moral and social obligation to protect consumer interests and avoid unfair trade practices.

Teacher's Note:
a) Highlight both consumer perspective and business perspective in the need for protection.
b) Keep points concise and well-structured.

OR

(ii) Explain any four features of Advertising. [4 Marks]

Answer:
1. Paid form: Advertising is a paid form of communication where the sponsor bears the cost of messaging.
2. Impersonal presentation: There is no direct face-to-face contact between the buyer and the seller.
3. Identified sponsor: The source or sponsor of the advertising message is clearly identified.
4. Wide reach: Advertising can reach a massive audience spread across vast geographical areas simultaneously.

Teacher's Note:
a) Advertising is a key element of the promotion mix.
b) Emphasize that it is non-personal mass communication.

SECTION C - 32 MARKS

Question 10

(i) Explain any five internal factors of micro environment that influence a Business Organisation. [5 Marks]

Answer:
1. Objectives: The goals and objectives of the organization guide its strategic decisions and operational priorities.
2. Policies: Company policies regarding finance, marketing, and personnel dictate day-to-day functioning.
3. Board of Directors: The composition and vision of the board of directors significantly shape corporate governance and strategic direction.
4. Company Image and Brand Equity: The reputation and goodwill of the firm help in attracting customers, talent, and investors.
5. Human Resources: The skills, commitment, and morale of the workforce are crucial internal determinants of operational success.

Teacher's Note:
a) Internal factors are controllable forces within the organization.
b) Give five clear points with headings for maximum credit.

(ii) What is meant by technological environment? Explain any two components of Technological Environment. [3 Marks]

Answer:
Technological environment consists of forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.
Two components of technological environment are:
1. Scientific research and development (R&D) activities and innovations.
2. Pace of technological changes and adoption of new IT and digital systems.

Teacher's Note:
a) Technology changes rapidly and can make existing products obsolete.
b) Businesses must adapt to technological advancements to remain competitive.

Question 11

(i) What are preference shares? Give any four types of Preference Shares. [5 Marks]

Answer:
Preference shares are those shares which carry preferential rights over equity shares regarding the payment of dividend at a fixed rate and repayment of capital in the event of company winding up.
Four types of preference shares are:
1. Cumulative and Non-cumulative preference shares.
2. Participating and Non-participating preference shares.
3. Convertible and Non-convertible preference shares.
4. Redeemable and Irredeemable preference shares.

Teacher's Note:
a) Preference shareholders generally do not have voting rights.
b) Clearly define preference shares and list any four clear classifications.

(ii) State any three advantages of e-banking to customers. [3 Marks]

Answer:
1. 24/7 Availability: Customers can access banking services round the clock, 365 days a year, from anywhere.
2. Convenience: It saves time and effort as financial transactions can be conducted online without visiting bank branches physically.
3. Transparency and tracking: Customers can view account statements instantly and track transactions in real-time, reducing errors.

Teacher's Note:
a) Electronic banking (e-banking) leverages internet connectivity.
b) Focus on benefits specifically experienced by the customer.

OR

(i) What are retained earnings? Explain any four disadvantages of Retained Earnings. [5 Marks]

Answer:
Retained earnings refer to that portion of net profits which is not distributed as dividends but retained and reinvested in the business.
Four disadvantages of retained earnings are:
1. Dissatisfaction of shareholders: Ploughe-back of profits reduces the immediate dividend payout, leading to shareholder dissatisfaction.
2. Uncertain source: It is an uncertain source of finance as profits fluctuate from year to year.
3. Monopoly control: Excessive accumulation of reserves may lead to monopolistic tendencies and concentration of economic power.
4. Misuse of funds: Availability of surplus funds may encourage management to undertake risky or unprofitable ventures.

Teacher's Note:
a) Also known as ploughing back of profits or self-financing.
b) List both definition and four clear disadvantages.

(ii) State any three differences between a debit card and a credit card. [3 Marks]

Answer:

Teacher's Note:
a) Use a tabular format for clear distinction.
b) Highlight the core difference between own funds utilization and borrowing.

Question 12

(i) Controlling is a systematic process involving a series of steps. Explain these steps of Controlling. [5 Marks]

Answer:
1. Setting performance standards: Standards are the criteria against which actual performance is measured.
2. Measurement of actual performance: Actual performance is measured in objective terms to enable comparison with standards.
3. Comparing actual performance with standards: This step reveals deviations between actual results and planned standards.
4. Analyzing deviations: Critical point control and management by exception are used to analyze significant deviations.
5. Taking corrective action: Corrective measures are implemented to bring performance back on track or revise unrealistic standards.

Teacher's Note:
a) Controlling is a continuous and forward-looking process.
b) Steps must be written in chronological order for full credit.

(ii) Give any three differences between Centralisation and Decentralisation. [3 Marks]

Answer:

Teacher's Note:
a) Centralization and decentralization represent two contrasting philosophies of authority delegation.
b) Tabulate differences clearly with appropriate basis.

Question 13

Read the case given below and answer the questions that follow.

Spice and Cheese Burgers has various outlets to sell burgers and deal with the customers directly. This channel of distribution was adopted by the organisation keeping in mind the nature of the product. In order to boost its sales, the management decides to introduce 'Buy one Get one free' offer to its customers.

(i) Identify the channel of distribution used by Spice and Cheese Burgers. [1 Mark]

Answer: Direct channel (Zero level channel / Manufacturer to Consumer).

The case mentions dealing with customers directly through their various outlets.

Teacher's Note:
a) Direct selling is suitable for perishable food items to maintain freshness.
b) No intermediaries are involved in zero-level channels.

(ii) Briefly explain the channel of distribution identified in (i) above. [2 Marks]

Answer:
A direct channel of distribution is one where the manufacturer sells goods directly to the consumers without involving any intermediaries such as wholesalers or retailers.

Teacher's Note:
a) It gives the manufacturer direct control over distribution and customer service.
b) Common methods include company-owned outlets, online portals, and direct mail.

(iii) Which element of promotion mix is highlighted in the above case? [1 Mark]

Answer: Sales Promotion ('Buy one Get one free' offer).

Sales promotion refers to short-term incentives designed to encourage immediate purchase of products.

Teacher's Note:
a) 'Buy one Get one free' is a classic example of sales promotion.
b) It helps in boosting short-term sales significantly.

(iv) State any four objectives of the element of promotion mix identified in (iii) above. [4 Marks]

Answer:
1. To boost short-term sales and encourage customers to buy more during lean periods.
2. To introduce new products in the market by attracting consumer attention and trial.
3. To clear existing excess inventory or obsolete stock quickly.
4. To meet competition effectively by countering promotional offers of rival brands.

Teacher's Note:
a) Sales promotion techniques include discounts, free samples, contests, and bonus offers.
b) Ensure objectives specifically address sales promotion tools.