ISC Class 12 Commerce Sample Paper 2023 with Solutions

SECTION A - 16 MARKS

Question 1

(i) At Support.com, there is no reward or appreciation for a good suggestion. Thus, the subordinates do not want to offer any useful suggestions to their superiors. Which type of barrier to communication has been created in the firm? [1 Mark]
(a) Semantic barrier
(b) Personal barrier
(c) Organisational barrier
(d) Psychological barrier

Answer: (c) Organisational barrier

Lack of reward or appreciation for suggestions represents an organisational policy and climate barrier.

Teacher's Note:
a) Organisational barriers arise due to organisational structures, rules, and lack of proper incentives or reward systems.
b) Students often confuse personal barriers with organisational barriers; remember that reward systems are controlled by management.

(ii) Capital structure shows: [1 Mark]
(a) debtor-creditor ratio.
(b) fixed assets-current assets ratio.
(c) debt-equity ratio.
(d) interest coverage ratio.

Answer: (c) debt-equity ratio.

Capital structure refers to the proportion of debt and equity used for financing operations.

Teacher's Note:
a) Capital structure represents the mix of long-term sources of funds.
b) Debt-equity ratio is the primary indicator reflecting the capital structure of a company.

(iii) Which one of the following is NOT counted as a Current Asset? [1 Mark]
(a) Inventory
(b) Cash
(c) Account receivable
(d) Equipment

Answer: (d) Equipment

Equipment is a fixed asset / non-current asset used in operations over a long period.

Teacher's Note:
a) Current assets are assets expected to be converted to cash or used within one year.
b) Inventory, cash, and accounts receivable are short-term operating assets.

(iv) A trader wants to transfer funds electronically through NEFT, but he does not have a bank account. What is the maximum amount that he can transfer? [1 Mark]
(a) 65,000
(b) 50,000
(c) 49,000
(d) 45,000

Answer: (b) 50,000

Walk-in customers without a bank account can transfer up to Rs. 50,000 through NEFT by depositing cash.

Teacher's Note:
a) RBI guidelines permit cash-based NEFT remittances up to Rs. 50,000 for non-account holders.
b) Always learn specific monetary limits associated with banking and financial services.

(v) Esprit de corps means _________. [1 Mark]
(a) buyer beware
(b) product is our strength
(c) service is our motto
(d) union is strength

Answer: (d) union is strength

Esprit de corps is one of Fayol's principles meaning harmony and team spirit among employees.

Teacher's Note:
a) Henri Fayol emphasized team spirit (union is strength) to build a cohesive workforce.
b) Do not confuse French management terms with marketing slogans.

(vi) Select and write the odd one out of the following: [1 Mark]
(a) Different elements of business environment are closely interrelated.
(b) Business environment is rigid in nature.
(c) Business environment is difficult to predict.
(d) Social and cultural forces exercise significant influence on business.

Answer: (b) Business environment is rigid in nature.

Business environment is dynamic and ever-changing, not rigid.

Teacher's Note:
a) Options (a), (c), and (d) are correct general features of the business environment.
b) The business environment is highly flexible and dynamic.

(vii) State whether the following statements are True or False. [4 Marks]
(a) The minimum amount of funds that can be transferred through RTGS is Rs. 2,00,000.
(b) Micro environment refers to an environment which is in direct contact with a specific business organisation.
(c) Warranty is not a part of place and promotion elements of marketing mix.
(d) Packaging is an innovative function.

Answer:
(a) True
(b) True
(c) True
(d) False

Teacher's Note:
a) RTGS has a minimum transfer limit of Rs. 2,00,000, whereas NEFT has no minimum limit.
b) Packaging is considered a vital marketing and protective function, but not strictly classified as an innovative function in basic marketing mix theory.

(viii) ___________ function of management is related to placing the right person in the right job. [1 Mark]

Answer: Staffing

Staffing involves manpower planning, recruitment, selection, and placement of personnel.

Teacher's Note:
a) Staffing ensures human resources match job requirements.
b) Memorize definitions and core focus areas of all management functions.

(ix) __________ is the hidden force that links all the functions of management. [1 Mark]

Answer: Coordination

Coordination is the essence of management that synchronizes all activities and functions.

Teacher's Note:
a) Coordination binds all other management functions together.
b) It is frequently described as the essence of management.

(x) When the photostat machines were introduced in the market, the carbon paper industry was adversely affected. Which component of macro environment is responsible for it? [1 Mark]

Answer: Technological environment

Technological changes and innovations lead to product obsolescence and impact existing industries.

Teacher's Note:
a) Technological environment includes forces relating to scientific improvements and innovations.
b) New inventions create substitutes that replace older products.

(xi) Sushant went to a shop to buy detergent. The shopkeeper forced him to buy a particular brand of detergent out of the various available brands, irrespective of the willingness of Sushant. Which right of Sushant, as a consumer, has been violated? [1 Mark]

Answer: Right to Choose

The right to choose gives consumers the assurance of availability of a variety of goods at competitive prices.

Teacher's Note:
a) Forcing a consumer to buy a specific brand violates the Right to Choose.
b) Clearly distinguish among the six consumer rights under the Consumer Protection Act.

(xii) Business environment differs from country to country and region to region. Which feature of business environment is being referred to here? [1 Mark]

Answer: Relativity

Business environment is relative because it differs from country to country and region to region.

Teacher's Note:
a) Relativity implies that political and cultural conditions vary across regions.
b) Conditions in India differ vastly from those in Western nations.

(xiii) Assertion : Advertising costs are extracted from the consumers in the form of higher prices.
Reason : Advertising helps in increasing sales and thereby in reducing cost. [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: (b) Both Assertion and Reason are true, but Reason is not the correct explanation of Assertion.

Advertising expenditure is initially added to product costs, but mass production scales down per-unit manufacturing costs.

Teacher's Note:
a) Both statements are economically true facts regarding advertising economics.
b) The reason explains economies of scale, not directly why advertising costs are extracted as higher prices.

SECTION B - 32 MARKS

Question 2

(i) Sometimes effective plans fail to achieve the desired result. In the light of this statement, explain any four limitations of planning. [4 Marks]

Answer:
1. Planning leads to rigidity: Plans spell out predetermined courses of action and managers may not have flexibility to change them.
2. Planning may not work in a dynamic environment: The business environment is turbulent and continuous changes can render plans ineffective.
3. Planning reduces creativity: Middle management and subordinates merely carry out pre-formulated plans without exercising personal initiative.
4. Huge costs are involved: Formulation of plans requires extensive data collection, analysis, and expert consultation which involves heavy financial costs.

Teacher's Note:
a) Explain each limitation with a brief subheading and explanatory sentence.
b) Do not confuse planning limitations with planning steps.

OR

(ii) Organisation is an important tool to achieve objectives of the enterprise. In the light of this statement, explain any four points on the importance of organisation. [4 Marks]

Answer:
1. Benefit of specialization: Work is divided into manageable tasks assigned to competent personnel, leading to high efficiency.
2. Clarity in working relationships: Establishes clear reporting lines and accountability, reducing ambiguity.
3. Optimum utilization of resources: Proper allocation of physical, financial, and human resources prevents duplication and wastage.
4. Adaptation to change: A sound organization structure permits structural modifications in response to environmental shifts.

Teacher's Note:
a) Organizing creates the framework for executing plans.
b) Highlight how specialization and clear roles drive enterprise efficiency.

Question 3. The management of Raj Ltd. has asked their finance manager to design the capital structure for the organisation. Explain any four factors that the finance manager will consider while planning the capital structure. [4 Marks]

Answer:
1. Cash Flow Position: The company must have stable cash flows to service fixed financial charges like interest on debt and preference dividends.
2. Interest Coverage Ratio (ICR): A higher ICR indicates lower risk of default, allowing the firm to raise more debt.
3. Return on Investment (ROI): If ROI is higher than the cost of debt, the company should use more debt to enhance earnings per share (trading on equity).
4. Floatation Costs: Raising funds through equity or debt involves expenses like underwriting and brokerage, which influence capital mix decisions.

Teacher's Note:
a) Capital structure decisions dictate the proportion of debt versus equity.
b) Clearly state financial terms like ROI and ICR to gain full marks.

Question 4. Explain trade credit and factoring as sources of finance for a business enterprise. [4 Marks]

Answer:
1. Trade Credit: It is credit extended by suppliers of goods and services to a business enterprise, enabling purchase of goods without immediate cash payment. It serves as a short-term spontaneous source of finance.
2. Factoring: It is a financial service wherein a financial institution (factor) takes over the responsibility of collecting receivables from debtors on behalf of the business, providing immediate cash advances against invoices.

Teacher's Note:
a) Trade credit acts as a bridge financing method for purchasing inventory.
b) Factoring provides liquidity along with debt collection services.

Question 5. Why is management considered an art? [4 Marks]

Answer:
Management is considered an art because it satisfies the fundamental features of art:
1. Existence of theoretical knowledge: Like practical arts, management has foundational principles, concepts, and literature.
2. Personalized application: The application of management principles varies from one manager to another based on personal skill, experience, and style.
3. Based on practice and creativity: Management requires continuous practice, imagination, and innovation to solve dynamic real-world problems successfully.

Teacher's Note:
a) Compare management features with the characteristics of art to construct the answer.
b) Emphasize personal application and practical execution.

Question 6. Explain the need for principles of management. [4 Marks]

Answer:
1. Providing managers with useful insights into reality: Principles guide managers on how to handle recurring organizational situations effectively.
2. Optimum utilization of resources and effective administration: Principles ensure minimal wastage of materials and human effort through systematic procedures.
3. Scientific decisions: Management principles enable managers to take objective, logical, and evidence-based decisions rather than relying on trial and error.
4. Meeting changing environment requirements: Principles help organizations adapt to dynamic business environments through flexible guidelines.

Teacher's Note:
a) Principles of management serve as broad guidelines for managerial decision-making.
b) Focus on utility and practical relevance in business operations.

Question 7. Explain any four functions of a supervisor. [4 Marks]

Answer:
1. Link between workers and management: Communicates management policies to workers and workers' grievances to top management.
2. Ensuring target achievement: Monitors daily operational progress and ensures targets are met efficiently.
3. Maintaining discipline: Fosters cordial relations, cooperation, and discipline among workers on the shop floor.
4. Providing guidance: Offers technical instruction and guidance to workers to resolve day-to-day operational problems.

Teacher's Note:
a) A supervisor operates at the operational or lower level of management.
b) Highlight the dual role of representing workers and management simultaneously.

Question 8. Manu bought an electric iron of a reputed brand for Rs. 500, but it caused an electric shock while in use. Manu wants to exercise his right as an aggrieved consumer. Identify and explain the Right under which he can protect himself. Explain any two remedies available to him as an aggrieved consumer. [4 Marks]

Answer:
Right Identified: Right to Safety.
Explanation: Consumers have the right to be protected against products, production processes, and services which are hazardous to health or life.
Two Remedies Available:
1. To repair the defective product or replace it with a new defect-free product.
2. To pay adequate compensation for any loss or injury suffered due to the defective product.

Teacher's Note:
a) Connect faulty electrical appliances directly to the Right to Safety.
b) List specific statutory remedies under the Consumer Protection Act.

Question 9

(i) Branding adds to the cost of the product, yet it has several benefits. State any four advantages of branding. [4 Marks]

Answer:
1. Enables product differentiation: Helps distinguish a firm's products from competing brands in the market.
2. Builds customer loyalty and repeat sales: Established brands create trust, leading to loyal customer bases.
3. Helps in advertising and display programmes: A brand name gives identity to promotional campaigns.
4. Differential pricing: A strong brand allows companies to charge premium prices compared to unbranded substitutes.

Teacher's Note:
a) Branding creates brand equity and recognition.
b) Explain how differentiation benefits manufacturers and consumers.

OR

(ii) A number of factors affect the fixation of the price of a product. Explain any four such factors. [4 Marks]

Answer:
1. Cost of production: Total cost of producing, distributing, and selling sets the floor price.
2. Demand and utility: Consumer utility and market demand set the upper ceiling price a buyer is willing to pay.
3. Competition in the market: Nature and degree of competition dictate pricing latitude.
4. Government and legal regulations: Price controls or statutory regulations enforced by government impact pricing decisions.

Teacher's Note:
a) Pricing is a critical element of the marketing mix.
b) Mention how cost establishes minimum limits and demand establishes maximum limits.

SECTION C - 32 MARKS

Question 10

(i) Explain any five features of business environment. [5 Marks]

Answer:
1. Totality of external forces: Business environment is the sum total of all external forces outside the control of business enterprises.
2. Specific and general forces: Includes specific forces (investors, customers) affecting individual enterprises directly, and general forces (social, political) affecting all enterprises indirectly.
3. Inter-relatedness: Different elements of business environment are closely connected to each other.
4. Dynamic nature: Business environment is constantly changing in terms of technology, consumer preferences, and government policies.
5. Uncertainty: It is difficult to predict future environmental changes accurately due to rapid developments.

Teacher's Note:
a) Features describe the inherent characteristics of business environments.
b) Use standard headings for each feature as prescribed in the syllabus.

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

Answer:
Social environment consists of social forces such as customs, traditions, values, social trends, and society's expectations regarding business.
Two Components:
1. Traditions and Customs: Social practices and festivals that dictate consumer demand patterns.
2. Values and Social Trends: Prevailing ethical standards, health consciousness, and lifestyle trends in society.

Teacher's Note:
a) Social environment shapes consumer buying habits and societal expectations.
b) Give real-world examples like increased demand during festive seasons.

Question 11

(i) What are debentures? Explain any four advantages of raising funds through the issue of debentures. [5 Marks]

Answer:
Debentures are acknowledgement of debt issued by a company under its seal, carrying a fixed rate of interest.
Four Advantages:
1. Suitable for investors seeking fixed income: Appeals to conservative investors who want regular returns with relatively lower risk.
2. No dilution of control: Debenture holders do not have voting rights, hence management control remains undisturbed.
3. Tax deductibility of interest: Interest paid on debentures is treated as a business expense and is tax-deductible.
4. Trading on equity: Fixed financial charges on debentures help enhance earnings per share for equity shareholders when ROI is high.

Teacher's Note:
a) Debentures represent long-term borrowed capital.
b) Emphasize that debenture holders are creditors, not owners.

(ii) State any three features of a credit card. [3 Marks]

Answer:
1. Provides revolving credit enabling cardholders to purchase goods and services without immediate cash payment.
2. Offers a pre-approved credit limit up to which purchases or cash advances can be made.
3. Provides a billing cycle with an interest-free grace period if dues are cleared by the payment due date.

Teacher's Note:
a) Credit cards facilitate cashless transactions and short-term credit.
b) Highlight the grace period and credit limit features.

OR

(i) State any five differences between shares and debentures. [5 Marks]

Answer:

Teacher's Note:
a) Structure differences in a tabular format for clarity.
b) Ensure key distinction points like ownership versus borrowing are clearly highlighted.

(ii) Explain any three advantages of raising finance through financial institutions. [3 Marks]

Answer:
1. Long-term finance: Financial institutions provide long-term funds which are difficult to raise from other sources.
2. Managerial advisory services: Specialized institutions provide expert financial, technical, and managerial advice.
3. Easy availability during depression: Funds can be secured even during economic downturns when public subscription to shares is low.

Teacher's Note:
a) Financial institutions act as development banks providing term loans.
b) Mention advisory support along with funding benefits.

Question 12

(i) State any three differences between the principles of Taylor and Fayol? [5 Marks]

Answer:

Teacher's Note:
a) Compare Taylor and Fayol based on perspective, focus, and application.
b) Mention functional foremanship as an exception to unity of command in Taylor's theory.

(ii) Organising involves a series of steps that need to be taken to achieve the desired goals. Explain these steps. [3 Marks]

Answer:
1. Identification and Division of Work: Breaking down total work into manageable activities in accordance with plans.
2. Departmentalisation: Grouping similar activities and employees into departments based on function or product.
3. Assignment of Duties: Allocating specific jobs to competent individuals matching their skills.
4. Establishing Reporting Relationships: Defining clear lines of authority and responsibility so employees know whom to report to.

Teacher's Note:
a) Organizing process steps must be written in logical sequence.
b) Emphasize assignment of duties and reporting relationships.

Question 13

After pursuing a course in gemology from Australia, Raj started a workshop in Surat to support his father's jewellery business in Delhi. He was used to speaking in English, but the local skilled workers could understand only Hindi and Gujarati. As a result, Raj started facing problems in the work due to miscommunications between him and the workers. He was not able to get the jewellery designs made in the desired manner.

(i) Define the term communication. [2 Marks]

Answer:
Communication is the process of exchange of information, ideas, feelings, and understanding between two or more persons to create mutual understanding.

Teacher's Note:
a) Include key elements like exchange of ideas and mutual understanding.
b) Standard definitions from business studies textbooks carry full credit.

(ii) Identify the type of communication barrier between Raj and his workers. [1 Mark]

Answer:
Semantic barrier (Language barrier).

Teacher's Note:
a) Differences in language prevent proper encoding and decoding of messages.
b) This falls under semantic/linguistic barriers.

(iii) Suggest any three measures by which Raj can make his communication effective. [3 Marks]

Answer:
1. Use local language: Raj should communicate in Hindi or Gujarati, which workers understand.
2. Ensure proper feedback: Ask workers questions to verify whether they have understood the exact jewellery designs.
3. Use visual aids: Provide diagrams, sketches, or pictorial representations of jewellery designs to overcome language barriers.

Teacher's Note:
a) Practical solutions tailored to the case study scenario score best.
b) Highlight feedback and use of common language.

(iv) With reference to planning as a function of management, explain the term programme as a type of a plan. [2 Marks]

Answer:
A programme is a single-use plan that outlines a detailed course of action specifying policies, procedures, rules, and budgets necessary to execute a major project or enterprise objective.

Teacher's Note:
a) Programmes combine objectives, policies, procedures, and budgets.
b) Classify programmes correctly as single-use plans.