ISC Class 12 Commerce Sample Paper 2025 with Solutions

SECTION A - 16 MARKS

Question 1

(i) A company is facing liquidity crunch, hence offers relatively higher interest rates for upfront borrowing in comparison to commercial banks.
Which source of short-term finance would be suitable in the above case? [1 Mark]
(a) Factoring
(b) Customer advances
(c) Public Deposits
(d) Instalment credit

Answer: (c) Public Deposits

Public deposits are unsecured fixed deposits accepted directly from the public by companies, usually offering higher interest rates than commercial banks to meet short-term liquidity needs.

Teacher's Note:
a) Public deposits are a popular source of raising short-term funds directly from the public, bypassing traditional banking channels.
b) Students must carefully distinguish between various sources of short-term finance based on cost, risk, and urgency.

(ii) The Supreme Court clarified that its firecracker restrictions are applicable not only to Delhi-NCR but to all states. It directed state governments to control air and noise pollution, addressing petitions seeking a nationwide ban on the sale and use of firecracker. The court emphasised the importance of raising awareness and noted its previous orders must be implemented.
(Source (edited): Economic Times-Nov 07, 2023, 12:22:00 PM IST)
How does the decision of the Supreme Court affect the businesses? [1 Mark]
(P) Changes in preference of people affect consumer spending.
(Q) Political changes influence the decisions of the business.
(R) Judicial decisions impact business.
(S) Social concerns change the mindset of consumer.
(a) (P), (Q) and (R) are correct.
(b) (P), (R) and (S) are correct.
(c) (Q), (R) and (S) are correct.
(d) (P), (Q) and (S) are correct.

Answer: (b) (P), (R) and (S) are correct.

Judicial rulings on pollution and public health reflect changing consumer preferences and social concerns, directly impacting business operations and product lines.

Teacher's Note:
a) The question tests the understanding of dimensions of the business environment, specifically legal, social, and consumer dimensions.
b) Judicial decisions form part of the legal environment and have binding effects that shape market demand and corporate strategy.

(iii) Which one of the following is a disadvantage of e-Banking? [1 Mark]
(a) It gives a 24 \times 7 access to customers.
(b) Monitoring of each transaction by the customer inculcates financial discipline.
(c) It reduces the load on the branch of the bank.
(d) It requires technological proficiency on the part of bank and customer.

Answer: (d) It requires technological proficiency on the part of bank and customer.

A major barrier and disadvantage of electronic banking is the technical knowledge and infrastructure required by both users and financial institutions.

Teacher's Note:
a) Options (a), (b), and (c) represent inherent advantages of e-Banking such as convenience, reduced branch traffic, and accessibility.
b) Security risks and technological dependency are key limitations often tested in board questions regarding digital banking.

(iv) Criya Automobiles Ltd. plans to increase its production services in India, hence they want to analyse the economic environment of the business.
Which one of the following factors should the company focus on? [1 Mark]
(a) Increase in the disposable income of the people.
(b) Facilities available for usage of automation in the production process.
(c) Modification in the Foreign Policy of the Government.
(d) The age composition of potential buyers.

Answer: (a) Increase in the disposable income of the people.

Disposable income is a core macroeconomic factor determining the purchasing power and demand capacity of consumers for automobiles.

Teacher's Note:
a) Economic environment includes factors like inflation rates, interest rates, disposable income, and economic policies.
b) Students must not confuse technological factors (automation) or demographic factors (age composition) with economic variables.

(v) Analyse the organisation chart given below carefully and identify the Principle of Management, as given by Henri Fayol, that is being violated here. [1 Mark]
Rex (Sales Manager) Ronald (Purchase Manager)
Sania (Sales Clerk) Anuroop (Sales Clerk) Regina (Sales Clerk) Dev (Purchase Clerk)
(a) Unity of Direction
(b) Equity
(c) Unity of Command
(d) Discipline

[Figure: Organizational chart showing Sales Manager Rex having authority over Sales Clerks Sania, Anuroop, and Regina, while Purchase Manager Ronald also issues instructions to Sales Clerk Sania, creating dual subordination.]

Answer: (c) Unity of Command

Unity of command states that an employee should receive orders from one boss only; here Sania receives instructions from both Rex and Ronald.

Teacher's Note:
a) Dual subordination leads to confusion, divided loyalties, and difficulty in fixing responsibility.
b) Always trace reporting lines carefully in organization charts to identify violations of command structures.

(vi) Identify the element of Promotion Mix used in the image shown below. [1 Mark]
(Source: Yahoo Images)
(a) Sales Promotion
(b) Publicity
(c) Advertising
(d) Personal Selling

[Figure: An image displaying discount coupons and promotional flyers stating "DISCOUNT 50% OFF" and "SPECIAL OFFERS FOR ALL BRANCHES".]

Answer: (a) Sales Promotion

Discount coupons and promotional offers are short-term incentives designed to encourage immediate purchase of products or services, falling under sales promotion.

Teacher's Note:
a) Sales promotion includes tools like discounts, contests, free samples, and coupons to boost short-term sales.
b) Distinguish clearly between advertising (mass media non-personal communication) and sales promotion (direct incentives).

(vii) Study the relation between first and the second words given below and fill in the fourth word on that basis. [2 Marks]
(a) Commodity Market: Gold :: Capital Market: ____________
(b) Advertiser: Advertising :: Publicity ______________

Answer:
(a) Financial institutions / Stock exchange
(b) Media

Teacher's Note:
a) Analogy questions require establishing the exact functional or structural relationship between the first pair of terms.
b) Ensure precise business terminology is used for filling in the blanks.

(viii) State whether the following are TRUE or FALSE. [2 Marks]
(a) A company can identify its strengths by analysing its external micro environment.
(b) Planning helps in identifying deviations and taking corrective actions.

Answer:
(a) False
(b) False

Teacher's Note:
a) External environment analysis helps identify opportunities and threats, whereas internal analysis reveals strengths and weaknesses.
b) Identifying deviations and taking corrective actions is the function of controlling, not planning (though planning sets the standards).

(ix) The diagram below shows that ______________ is inherent in all the functions of management [1 Mark]

[Figure: Venn diagram showing central overlapping circle marked with a question mark (?) surrounded by planning, organising, staffing, directing, and controlling.]

Answer: Coordination

Coordination runs as a binding thread across all management functions to ensure harmony and unity of action.

Teacher's Note:
a) Coordination is often called the essence of management because it permeates every managerial process.
b) Students must recognize standard conceptual diagrams from textbook illustrations.

(x) Which element of Directing is responsible for preparing the following chart in an organisation? [1 Mark]
(Source: buildremote.com)

[Figure: A 5-2 (8-hour) work schedule chart displaying shifts across teams with schedule notes and shift timing legends.]

Answer: Supervision

Supervision involves overseeing the work of subordinates, guiding daily operations, and ensuring work schedules and shift allocations are properly implemented.

Teacher's Note:
a) Supervision is a key element of directing that involves face-to-face contact between superior and subordinates.
b) Work scheduling and shift allocation fall directly under operational supervision and guidance.

(xi) Aradhya bought a tricycle online, but upon delivery found that its dimensions were not as big as she had expected. When attempting to return it, she realised that the item was non-returnable.
Which consumer responsibility was overlooked by her? [1 Mark]

Answer: Asking for full information / Reading terms and conditions carefully before purchase.

Consumers have a responsibility to carefully read product descriptions, dimensions, and return policies before completing an online transaction.

Teacher's Note:
a) Consumer responsibilities complement consumer rights under the Consumer Protection Act.
b) Failing to check return policies or product specifications constitutes a lapse in exercising consumer responsibility.

(xii) Fretta Tech Ltd. has expanded and opened multiple branches. To cope with the situation, the CEO starts transferring some of his authority to the General Manager. The General Manager feels overburdened and with the approval of the CEO disperses a part of his authority to different levels of management throughout the organisation.
Which concept of management has made Fretta Tech Ltd. a decentralised organisation? [1 Mark]

Answer: Delegation of authority

Decentralization is systematically extended delegation of authority right down to the lower levels of the organization.

Teacher's Note:
a) Delegation is between one superior and subordinate, whereas decentralization is a policy decision across the entire organization.
b) Thorough understanding of delegation and decentralization is essential for solving case-based questions.

(xiii) Mohan, the manager of a business organisation, is very lax with his employees and subordinates. He does not give them parameters or rules for reporting to work and deadlines for completion of assignments.
Which principle of management given by Henri Fayol is NOT being followed by Mohan? [1 Mark]

Answer: Discipline

Discipline requires obedience, clear rules, and adherence to established guidelines and deadlines within the organization.

Teacher's Note:
a) Fayol's principle of discipline implies compliance with organizational rules and employment agreements.
b) Absence of rules and punctuality parameters indicates a breakdown of discipline.

(xiv) Given below are two statements marked as Assertion and Reason. Read the statements carefully and choose the correct option.
Assertion: Consumers must always be conscious of quality certification marks.
Reason: Quality certification marks act as a proof of purchase while filing a case in the Consumer Court. [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 and Reason is false.
(d) Both Assertion and Reason are false.

Answer: (c) Assertion is true and Reason is false.

Quality certification marks (like ISI, AGMARK) ensure product safety and quality, but proof of purchase is established by cash memos or bills, not certification marks.

Teacher's Note:
a) Assertion is correct because quality certification protects consumers from substandard goods.
b) Reason is incorrect because a cash memo/invoice serves as legal proof of purchase when filing complaints in consumer courts.

SECTION B - 32 MARKS

Question 2 [4 Marks]

(i) Illustrate any four ways by which comprehensive planning contributes to goal alignment within different levels of a business organisation.

Answer:
1. Planning sets out standards for controlling, ensuring that actual performance is measured against pre-determined objectives.
2. Planning provides direction by clarifying what actions need to be taken and in which direction across all organizational levels.
3. Planning decreases the chances of risk by enabling managers to look ahead, anticipate changes, and formulate contingency measures.
4. Planning decreases overlapping and wasteful activities by harmonizing departmental objectives and coordinating diverse operations.

Teacher's Note:
a) Students must explain each point clearly in the context of goal alignment and organizational efficiency.
b) Listing points without brief explanations will fetch partial credit.

OR

(ii) Outline any four benefits of decentralisation that enhance the overall resilience of an organisation in the face of unforeseen challenges. [4 Marks]

Answer:
1. Motivation of subordinates: Decentralization fosters trust, autonomy, and morale among lower-level managers.
2. Quick decision making: Authority is reposed near the point of action, eliminating delays caused by upward referrals.
3. Growth and diversification: Autonomous divisions can explore new product lines and expansion opportunities independently.
4. Better supervision and control: Performance can be evaluated department-wise, facilitating accountability and corrective measures.

Teacher's Note:
a) Benefits must highlight organizational resilience during unforeseen situations.
b) Ensure each benefit is written as a complete sentence as specified in official marking guidelines.

Question 3 [4 Marks]

Elucidate any four factors affecting the capital structure of a joint stock company.

Answer:
1. Cash flow ability: A company with stable and regular cash flows can afford higher debt service obligations.
2. Interest coverage ratio (ICR): A higher ICR indicates better capacity to service debt without financial distress.
3. Cost of debt: Lower borrowing costs make debt financing more attractive for enhancing return on equity.
4. Tax rate: Higher tax rates increase the tax shield benefit of debt interest, favouring debt financing.

Teacher's Note:
a) Capital structure refers to the mix between debt and equity funds in total capital.
b) Explaining financial leverage and trading on equity adds value to the answer.

Question 4 [4 Marks]

Background tech solutions, a rapidly growing start-up company, faced the challenge of attracting and retaining 'top talent' in a competitive market. To address this, the company decided to implement a shares programme aimed at rewarding and incentivising key employees and directors.
Name and explain the type of shares that can be issued by the company.

Answer:
The company can issue sweat equity shares.
1. Sweat equity shares are a type of equity share that a company issues to its employees or directors at a discount or for consideration other than cash.
2. The purpose of issuing sweat equity shares is to motivate employees to work harder and contribute to the company's success.
3. Sweat equity shares can be issued for providing know-how or for making intellectual property rights available.
4. The sweat equity shares issued to employees or directors must be subject to a lock-in period of three years from the date of allotment, during which they cannot be transferred or sold.

Teacher's Note:
a) Sweat equity is a specialized corporate finance tool designed to retain key intellectual capital in start-ups.
b) Mentioning the statutory lock-in period of three years is crucial for full credit.

Question 5 [4 Marks]

Outline any four fundamental characteristics of effective management in a modern business organisation.

Answer:
1. Management is a goal-oriented process that unites individual efforts toward achieving predetermined organizational objectives.
2. Management is all-pervasive, being required in all types of organizations, whether economic, social, or political, and at all levels.
3. Management is multi-dimensional, comprising management of work, management of people, and management of operations.
4. Management is a continuous process consisting of a series of continuous, composite, but separate functions like planning, organizing, and controlling.

Teacher's Note:
a) Characteristics must be written in complete sentences as required by the marking guidelines.
b) Core management principles form the foundation of business studies.

Question 6 [4 Marks]

XYZ manufacturing company faced challenges related to the following issues:
(i) The communication channels within the organisation were not clearly defined by the management, causing delays and misunderstandings.
(ii) The workplace was disorganised for both employees and material resources, affecting the overall efficiency.
Which principles of Henri Fayol can be applied to overcome the above challenges? Explain.

Answer:
(i) Principle of Scalar Chain: The formal line of authority from highest to lowest ranks needs to be enforced in XYZ company to establish a clear hierarchy of communication and prevent delays.
(ii) Principle of Order: This principle states that there should be an orderly placement of human and material resources in the right place at the right time to ensure structured and efficient operations.

Teacher's Note:
a) Case-based application questions require directly linking Fayol's 14 principles to the operational problems described.
b) Clearly state the principle name before providing its contextual explanation.

Question 7 [4 Marks]

Discuss the interplay between the goal setting during Planning phase and the use of these goals as benchmarks for performance evaluation in Controlling phase.

Answer:
1. Planning and controlling are intertwined and complementary functions; planning sets the goals while controlling ensures their accomplishment.
2. Planning establishes the quantitative and qualitative standards (benchmarks) against which actual performance is measured during controlling.
3. Controlling provides feedback to planning by identifying areas for improvement and reviewing past performance.
4. Without planning, controlling has no standards to measure against; without controlling, planning remains an empty exercise.

Teacher's Note:
a) The reciprocal relationship between planning (forward-looking/backward-looking) and controlling is a standard board evaluation topic.
b) Emphasize how plans serve as control standards.

Question 8 [4 Marks]

Enumerate any four distinctions between Marketing and Selling.

Answer:

Teacher's Note:
a) A tabular comparison with clear basis of distinction is the most effective way to answer this question.
b) Ensure the basis of distinction is explicitly stated in the first column.

Question 9 [4 Marks]

(i) As Packaging Manager of a leading manufacturing company, provide four specific features which you would take into consideration while designing the packaging for a smart phone.

Answer:
1. Protective and durable: The packaging must protect the delicate smartphone screen and internal components from transit damage and shock.
2. Attractive and fascinating: The design must appeal visually to consumers, enhancing brand image at the point of sale.
3. Communicative of the purpose: It must clearly display technical specifications, model details, and handling instructions.
4. Economical and cost-effective: The packaging cost should be optimized without compromising product safety and aesthetic appeal.

Teacher's Note:
a) Packaging functions as a silent salesperson in modern retail environments.
b) Features must be tailored specifically to fragile electronic products like smartphones.

OR

(ii) As a Marketing Manager, explain any four objectives of Advertising you will familiarise a new sales team with, during their training and orientation sessions. [4 Marks]

Answer:
1. Introduce a product to the customer: Creating initial awareness when launching new offerings in the market.
2. Inform the customer about the product: Educating buyers regarding features, usage instructions, and price points.
3. Brand building: Establishing long-term brand equity, reputation, and customer trust.
4. Increasing sales: Generating immediate customer interest and stimulating purchase volume.

Teacher's Note:
a) Advertising objectives guide promotional budgets and campaign strategies.
b) Training sales teams on advertising goals helps align personal selling efforts with broader promotional campaigns.

SECTION C - 32 MARKS

Question 10

(i) What are the five key points that highlight the significance of Environmental scanning in guiding organisations to adapt to rapidly changing business environment? [5 Marks]

Answer:
1. Identifying opportunities and getting the first-mover advantage: Environmental scanning helps firms spot emerging market trends early.
2. Identifying threats and early warning signals: It alerts management to impending challenges and external risks.
3. Tapping useful resources: It assists organizations in gathering necessary raw materials, capital, and human resources.
4. Coping with rapid changes: It enables businesses to adapt their strategies and structures to turbulent technological and economic shifts.
5. Assisting in planning and policy formulation: Environmental insights provide the factual foundation for long-term strategic plans.

Teacher's Note:
a) Environmental scanning is vital for strategic management and corporate survival.
b) Candidates must list and briefly explain five distinct points to secure full marks.

(ii) Explain any three fundamental differences between Recruitment and Selection. [3 Marks]

Answer:

Teacher's Note:
a) Recruitment and selection are often confused by students; clear distinction based on scope and nature is essential.
b) Using a comparative table ensures clarity for examiners.

Question 11

(i) As a Financial Manager for a growing tech start up, evaluate three advantages and two disadvantages of choosing debt financing for your long-term capital needs. [5 Marks]

Answer:
Advantages of Debt Financing:
1. Retention of control: Debt holders do not get voting rights, ensuring company control remains with existing equity shareholders.
2. Tax deductibility: Interest paid on debt is a tax-deductible expense, effectively lowering the real cost of borrowing.
3. Trading on equity: Fixed-cost debt financing can enhance earnings per share (EPS) for equity shareholders when return on investment exceeds borrowing cost.
Disadvantages of Debt Financing:
1. Fixed financial burden: Interest and principal repayment obligations must be met regardless of operating profits, increasing bankruptcy risk.
2. Financial risk: High reliance on debt increases financial leverage risks, making the firm vulnerable during economic downturns.

Teacher's Note:
a) Financial evaluation requires weighing cost of capital against risk factors.
b) Ensure exactly three advantages and two disadvantages are evaluated as demanded by the question.

(ii) Identify and explain two features of a plastic money having an overdraft facility which is issued by the commercial bank to its customers. [3 Marks]

Answer:
The instrument referred to is a Credit Card.
1. Bank-approved credit limit: It provides a pre-approved revolving credit line up to a specified limit determined by the customer's credit score.
2. Grace period for repayment: Cardholders can make purchases without immediate cash outflow and repay the balance within a specified interest-free grace period (usually around 30 days).

Teacher's Note:
a) Credit cards provide overdraft facilities, unlike debit cards which draw directly from deposit accounts.
b) Clearly identify the term 'Credit Card' before explaining its features.

OR

(i) Anjum is a first-time investor wanting to invest ₹10 lakhs in long term capital appreciation. She is willing to take risks in return for high growth.
Which type of security should she invest in? Suggest any four features of this type of security. [5 Marks]

Answer:
Anjum should invest in Equity Shares.
Features of Equity Shares:
1. Ownership rights: Equity shareholders are co-owners of the company with voting rights on key corporate matters.
2. Residual claim: They are entitled to residual profits (dividends) and residual assets during winding up.
3. High growth potential: They offer high capital appreciation alongside dividend earnings, aligning with high-risk investment profiles.
4. Permanent capital: Equity capital is not redeemable during the lifetime of the company, providing stable long-term funds.

Teacher's Note:
a) Equity shares carry higher risk and return compared to debentures or bonds.
b) First identify equity shares clearly, then explain any four features.

(ii) Identify an electronic fund transferred in batches and state any two of its features. [3 Marks]

Answer:
The electronic fund transfer system is NEFT (National Electronic Funds Transfer).
Features of NEFT:
1. Batch processing: Transactions are processed and settled in batches at hourly intervals throughout the day.
2. 24/7 availability: NEFT service is available round the clock on all days of the year for customer convenience.

Teacher's Note:
a) NEFT differs from RTGS, which settles transactions individually in real-time.
b) State both identification and two valid features explicitly.

Question 12

(i) The concept of marketing is customer centric which aims to achieve long term business growth. Justify the statement by explaining any five objectives of marketing. [5 Marks]

Answer:
1. Customer satisfaction: The primary objective is to satisfy consumer needs by offering quality goods and services at fair prices.
2. Profitability: Earning adequate profits through customer satisfaction ensures business survival and prosperity.
3. Coordination and integration: Aligning marketing activities with manufacturing, finance, and human resources for unified organizational performance.
4. Creation of demand: Identifying consumer preferences and stimulating demand through effective promotion and product development.
5. Service to society: Enhancing the standard of living and conserving environmental resources through responsible marketing practices.

Teacher's Note:
a) Customer centricity is the bedrock of modern marketing philosophy.
b) Detail all five core objectives to justify the statement comprehensively.

(ii) TeeJay Sales, a popular electronic retailer, sold a batch of smartphones with malfunctioning batteries to its customers. The manufacturing company misrepresented the products specifications in its advertisement. On being approached by the grieving customers, TeeJay sales refused to entertain any complaints from the customers or replace or refund the products.
State and explain any three rights of the consumers which were violated in this case, as per the Consumer Protection Act, 2019. [3 Marks]

Answer:
1. Right to Information: Violated because the manufacturing company misrepresented product specifications in its advertisements.
2. Right to be Heard: Violated because TeeJay Sales refused to entertain customer complaints or address their grievances.
3. Right to Seek Redressal: Violated because the retailer refused to replace or refund defective smartphones, denying fair settlement.

Teacher's Note:
a) Case analysis requires mapping factual violations directly to statutory consumer rights under the Consumer Protection Act, 2019.
b) Clearly state the violated right and link it to the scenario elements.

Question 13

Read the passage given below and answer the questions that follow.
By applying Maslow's Hierarchy of needs, the Human Resources Department in organisations strive to make the workplace a second home for the employees. The professional employees who studied Psychology and Organisational Behaviour create good working conditions in the workplaces. In offices, one can find comfortable places, places to rest and nap, kitchen and plenty of food and drinks, and transportation facility. Training programmes are conducted for employees on principles and ethics of workplace and respect for fellow employees. Some organisations also have rewarding systems club membership, profit shares and promotion, retirement plan and social insurance, medical insurance and annual paid vacations. All these conditions and benefits have a great impact on the behaviour of employees which eventually impacts the work environment and business of the organisation.
(Source, Alaa Etman (edited): Egypt case: How companies can use Maslow's Hierarchy of needs to enhance the motivation of their workforce?)

(i) Discuss how each need, as given by Maslow, is satisfied in the above case. [5 Marks]

Answer:
1. Physiological needs: Satisfied by providing comfortable workplaces, resting areas, kitchen facilities, and food and drink options.
2. Safety needs: Satisfied by offering social insurance, medical insurance, and retirement plans for financial and physical security.
3. Love and belonging needs: Satisfied by offering club memberships and annual paid vacations fostering social bonding.
4. Esteem needs: Satisfied through profit-sharing schemes, promotion opportunities, and performance recognition systems.
5. Self-actualization needs: Satisfied by conducting training programmes on workplace ethics, personal growth, and professional development.

Teacher's Note:
a) Maslow's Need Hierarchy theory is frequently tested through case studies.
b) Map each of the five hierarchy levels directly to the textual evidence provided in the case snippet.

(ii) To which level of management, does the Human Resource Manager belong? Mention any two functions performed by her. [3 Marks]

Answer:
The Human Resource Manager belongs to the Middle Level of Management.
Two functions performed by her:
1. Interpreting policies framed by top management to departmental personnel.
2. Assigning duties and responsibilities to employees within the department for execution.

Teacher's Note:
a) Departmental heads and HR managers operate at the middle management tier.
b) State the management level clearly followed by any two standard middle-level functions.