ISC Class 12 Commerce Sample Paper 2026 with Solutions

SECTION A - 16 MARKS

Question 1

(i) With reference to settlement of funds, what does the term 'Real Time' signify in RTGS? [1 Mark]
(a) Settlement after one hour
(b) Settlement at a fixed time every day
(c) Continuous processing and settlement
(d) Settlement only during bank hours

Answer: (c) Continuous processing and settlement

Funds are settled as and when instructions are processed without waiting for a batch time.

Teacher's Note:
a) RTGS stands for Real Time Gross Settlement where transactions are settled individually and continuously.
b) Students often confuse real-time settlement with periodic batch processing systems like NEFT.

(ii) With reference to Macro environment, select the odd one out. [1 Mark]
(a) Changes in technology
(b) Labour mobility to urban areas
(c) Political unrest
(d) Suppliers of raw materials

Answer: (d) Suppliers of raw materials

Suppliers form part of the micro environment, whereas technology, labour trends, and politics are macro environment factors.

Teacher's Note:
a) Micro environment consists of forces close to the organization that directly affect its operations, such as suppliers and customers.
b) Macro environment includes broader external forces like technological, demographic, political, and economic factors.

(iii) Sampark, a mobile company advertises its phone as having an 'unbreakable screen'. A customer buys it, but the screen cracks after a minor fall. He requests a replacement, but the company refuses it saying that the advertisement was only for marketing.
Which consumer rights are MOST relevant here for the customer? [1 Mark]
(P) Right to be Heard
(Q) Right to Redressal
(R) Right to Safety
(S) Right to Information
(a) Only (P) and (Q)
(b) Only (Q) and (R)
(c) Only (P) and (R)
(d) Only (Q) and (S)

Answer: (d) Only (Q) and (S)

The customer has the right to seek redressal against unfair trade practices and false claims, and the right to information regarding true product features.

Teacher's Note:
a) False advertising violates the Right to Information by misleading consumers with incorrect product details.
b) Refusal to replace a defective product violating guaranteed claims attracts the Right to Redressal.

(iv) Shine Ltd. is a company that encourages open communication, teamwork among its employees and rewards them for innovative initiatives. This leads to employee satisfaction which in turn increases their productivity.
Which internal factor of the micro environment is clearly responsible for this outcome? [1 Mark]
(a) Company's financial position
(b) Corporate culture
(c) Marketing strategy
(d) Government regulations

Answer: (b) Corporate culture

Values, teamwork, and communication within an organization define its corporate culture.

Teacher's Note:
a) Corporate culture represents the internal climate and values shared by members of the organization.
b) Financial position and marketing strategy relate to resources and commercial plans rather than employee engagement practices.

(v) To boost the employees' performance, a manager starts 'Star Employee of the Month' award to reward top achievers in the organisation. This results in an increase in the efforts by employees and improves productivity.
Choose the correct function of management and its corresponding element that the above situation refers to. [1 Mark]
(a) Planning - Supervision
(b) Directing - Motivation
(c) Organising - Communication
(d) Controlling - Leadership

Answer: (b) Directing - Motivation

Rewards and awards act as motivators, which fall under the directing function of management.

Teacher's Note:
a) Directing involves guiding, supervising, communicating, and motivating subordinates.
b) Motivation inspires employees to contribute their best towards organizational goals.

(vi) Sunrise Enterprise is a large company that groups its operations into separate product divisions like electronics, clothing, and furniture. Each division has its own marketing, finance and HR departments. Within the electronics division, a group of employees from different departments regularly interacts during breaks and helps each other with work-related advice.
What type of organisation and organisational structure are represented here? [1 Mark]
(a) Informal organisation - Divisional structure
(b) Formal organisation - Divisional structure
(c) Formal organisation - Functional structure
(d) Informal organisation - Functional structure

Answer: (a) Informal organisation - Divisional structure

Product-wise grouping denotes a divisional structure, while the spontaneous interaction among employees during breaks represents an informal organization.

Teacher's Note:
a) A divisional structure groups activities on the basis of products or services offered.
b) Informal organizations emerge naturally within workplaces due to social interactions among employees.

(vii) Given below are two statements marked Assertion and Reason. Read the statements carefully and choose the correct option. [1 Mark]
Assertion: Profit through customer satisfaction is one of the primary aims of Marketing.
Reason: Marketing begins after production and does not end with sale.
(a) Both Assertion and Reason are true and Reason is the correct explanation for Assertion.
(b) Both Assertion and Reason are true but Reason is not the correct explanation for 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.

Marketing begins long before production (with market research) and continues after sales (through customer service).

Teacher's Note:
a) Modern marketing encompasses pre-production analysis and post-sale support.
b) The statement that marketing begins after production is incorrect.

(viii) Study the relation between the first and the second words given below and complete the analogy. [1 Mark]
(a) Personal skills : Art :: Ethical Code of Conduct : ____________
Answer: Profession

(b) Creates a large pool of candidates : Recruitment :: Eliminates unsuitable candidates : ____________
Answer: Selection

Teacher's Note:
a) An art is based on personal skills, whereas a profession is governed by an ethical code of conduct.
b) Recruitment attracts a large candidate pool, whereas selection screens out unsuitable applicants.

(ix) State whether the following are True or False: [1 Mark each]
(a) As a facilitating function of Marketing, Packaging ensures protection of a product.
Answer: True

(b) According to Henri Fayol, mental revolution is a change in the attitudes of both employers and employees that increases productivity.
Answer: False

Mental revolution is a concept given by F.W. Taylor under Scientific Management, not Henri Fayol.

Teacher's Note:
a) Packaging protects goods from damage, spoilage, and breakage during transit and storage.
b) Fayol gave administrative principles, while mental revolution is associated with Taylor's scientific principles.

(x) A company borrows a loan at 10% interest and amplifies the returns of its equity shareholders by earning 18% return on investment.
The financial concept illustrated here is _______________. [1 Mark]

Answer: Trading on equity (or Financial leverage)

Teacher's Note:
a) Trading on equity refers to the use of fixed-charge capital to increase the return on equity shares.
b) It is beneficial when the rate of return on investment exceeds the cost of debt.

(xi) Chia Ltd. has earned a profit of Rs. 1,00,000 for the financial year ending 31st March 2025. After providing the Interest on Debentures for Rs. 15,000, Dividend on Preference Shares for Rs. 25,000 and Dividend on Equity Shares for Rs. 20,000, it paid Ranjana, a shareholder a share from the residual profits of Rs. 40,000 along with a fixed rate of dividend.
Identify the type of share held by Ranjana. [1 Mark]

Answer: Participating preference shares

Teacher's Note:
a) Participating preference shares carry a right to receive a fixed dividend plus a share in the residual profits after equity shareholders are paid.
b) Ordinary preference shares receive only a fixed rate of dividend without participating in surplus profits.

(xii) State one unique feature of the document shown below. [1 Mark]

[Figure: An image of a Bank Demand Draft issued by State Bank of India showing payee name, amount Rs. 1,25,00,000, and MICR/DD numbers]

Answer: A bank draft cannot be dishonoured under normal circumstances as it is drawn by a bank on its own branch.

Teacher's Note:
a) A demand draft is a negotiable instrument representing a guaranteed payment order issued by a commercial bank.
b) Since the issuing bank undertakes the liability, the risk of bouncing due to insufficient funds does not exist.

(xiii) A leading national newspaper publishes an article featuring a new electric car model launched by an automobile company. The article highlights the car's eco-friendly technology, sleek design and affordability creating a positive image and sparking public interest in the product.
Which element of promotion mix is highlighted in the above scenario? [1 Mark]

Answer: Publicity

Teacher's Note:
a) Publicity is a non-personal form of mass communication aired through news channels or articles without direct payment by the sponsor.
b) Unlike advertising, publicity enjoys higher credibility as it appears as independent editorial news.

(xiv) Management can be identified as the driving force in every organisation and at every level.
Identify the feature of management highlighted in the above statement. [1 Mark]

Answer: Management is all-pervasive (or Universal / Pervasiveness)

Teacher's Note:
a) Pervasiveness implies that management activities are applicable across all types, sizes, and levels of organizations.
b) Every enterprise requires managerial direction regardless of its commercial or non-commercial nature.

SECTION B - 32 MARKS

Question 2. Shreya owns a café in Bengaluru. She wants to explore different electronic payment methods to streamline transactions with customers. She also weighs the pros and cons of accepting debit cards and credit cards.
Compare these two methods of payment to help Shreya choose a suitable method of transaction. [4 Marks]

Answer:

Teacher's Note:
a) Students must compare payment methods on clear parameters such as credit availability, debit source, and interest charges.
b) Tabular comparison is preferred in board exams for clarity and precision.

Question 3. Krishna Tech Ltd., a growing Start-up in the Robotics industry, needs finance to meet its working capital requirements. Prerna Ltd., an Ed-Tech Company, had purchased Robotics Training Kits and Equipment from Krishna Tech Ltd. with a credit period of three months and is due to pay Rs. 15,00,000 on 30th July 2025.
Based on the above information, suggest a suitable form of short-term financing that Krishna Tech Ltd. can opt for. Explain any three of its features. [4 Marks]

Answer:
The suitable form of short-term financing is Trade Credit.
Three key features of Trade Credit:
1. Short-term financing: Trade credit typically covers a period of a few weeks to a few months, making it a useful tool for managing working capital.
2. No immediate payment: The buyer receives goods or services and pays later within a pre-agreed timeframe, helping suppliers like Krishna Tech Ltd. manage customer relationships.
3. Minimal documentation: It involves simple commercial documentation such as invoices, delivery notes, and purchase orders without elaborate legal formalities.

Teacher's Note:
a) Trade credit arises naturally in business transactions when goods are sold on delayed payment terms.
b) Students should correctly identify trade credit from the given buyer-seller credit arrangement before listing its features.

Question 4. Arjun is a Sales Manager in a company and is responsible for managing a team of five sales representatives in the Delhi region. Every morning, Arjun assigns sales targets, plans daily routine for his teams, checks the stock availability in retail stores and ensures proper display of the products.
(i) State the level of management that Arjun belongs to. [1 Mark]
(ii) Discuss any three functions of the level of management indicated in the above scenario. [3 Marks]

Answer:
(i) Middle Management (or Lower/Middle supervisory interface; Sales Manager is typically considered Middle-to-Lower operational management).
(ii) Three functions of this level of management:
1. To interpret the plans and policies framed by top management.
2. To monitor and control operating performance and assign daily tasks.
3. To train, motivate, and guide operational personnel to achieve targets.

Teacher's Note:
a) Departmental managers like Sales Managers act as a vital link between top management and operational workers.
b) Clear differentiation between top, middle, and supervisory functions is essential for scoring full marks.

Question 5
(i) Given below is a tabular representation of the Salary structure of a few employees at Horizon Ltd.

Explain the principle of Henri Fayol being violated in the above case. [2 Marks]
(ii) Observe the images shown below and answer the question that follows.
Identify and explain the principle of management, as suggested by Henri Fayol, that is not being followed in Image 1. [2 Marks]

[Figure: Image 1 shows a disorganized and cluttered office workspace with papers and equipment strewn about; Image 2 shows an organized, neat office workstation.]

Answer:
(i) Principle of Equity: This principle states that employees performing similar work with equal experience should be treated fairly and equally without discrimination regarding remuneration, gender, or position. Here, employees with identical designation and 5 years of experience receive vastly different salaries (Rs. 4,00,000 to Rs. 12,00,000), violating equity.
(ii) Principle of Order: This principle states that there should be a place for everything and everything should be in its place (material order), and a place for everyone and everyone in their place (social order). Image 1 depicts a messy, unorganized workplace violating material order.

Teacher's Note:
a) Fayol's 14 principles of management form a frequent basis for case-based analytical questions.
b) Students must explicitly name the principle and connect it directly to the facts provided in the question.

Question 6
(i) The organising function of management helps transform chaos into coordinated structure, clarifies communication and promotes effective teamwork.
In the light of this perspective, explain any four points highlighting the importance of organising function in management. [4 Marks]

Answer:
Four points highlighting the importance of the organizing function:
1. Specialization: Organizing divides work into manageable tasks, leading to routine execution and high employee specialization.
2. Optimum use of resources: Proper assignment of duties prevents duplication of work and ensures efficient utilization of material and human resources.
3. Clarity in working relationships: Establishing clear reporting lines and authority-responsibility relationships minimizes ambiguity and promotes smooth coordination.
4. Adaptation to change: A sound organizational structure allows the enterprise to adapt smoothly to environmental shifts and business expansion.

Teacher's Note:
a) Organizing bridges the gap between plans and operational execution.
b) Mentioning clear sub-headings with brief explanations ensures full marks.

OR

(ii) A school allocates Rs. 10 lakhs for infrastructural upgrades, Rs. 5 lakhs for staff training and Rs. 3 lakhs for student activities. This type of financial plan acts as a control while helping the school prioritise its objectives.
What type of plan has the school put into action? Enumerate any three of its inherent features. [4 Marks]

Answer:
Type of plan: Budget.
Three key features of a budget:
1. Financial Plan: A budget is a structured numerical document detailing expected income, expenditure, and fund allocations.
2. Resource Allocation: It guides the systematic distribution of financial resources to specific departments or activities.
3. Control and Accountability: It sets financial limits and acts as a standard for measuring performance and ensuring accountability.

Teacher's Note:
a) Budgets serve both as a planning tool and a control device.
b) Numerical monetary allocations point directly toward a budget plan.

Question 7. A Naval Academy needed to train new submarine crew members on complex equipment and emergency procedures. To ensure safety and hands-on-experience without risk, they created a training programme in a simulated submarine environment before actual deployment.
Briefly discuss the method used and the type of training given to the employees in the above case. [4 Marks]

Answer:
1. Training Method (Vestibule Training): Trainees learn job-specific skills in a simulated work environment that closely mirrors actual machinery and equipment, allowing practice in a safe, controlled setting without operational risks.
2. Type of Training (Safety Training / Operational Training): It involves specialized instruction on operating complex machinery safely, minimizing accidents, equipment damage, and crew injuries during emergencies.

Teacher's Note:
a) Vestibule training is ideal where on-the-job training involves high risks or expensive machinery.
b) Students must identify both the training method and the specific training objective accurately.

Question 8. A company producing weight loss pills hires a celebrity to promote the product. This advertisement claims rapid weight loss without mentioning the need for a balanced diet and regular physical activity. Also, it does not disclose the potential side effects or risks associated with the pill.
Specify the provisions of the Consumer Protection Act that would protect consumer's interests if the claims provided in the above case are found to be false. [4 Marks]

Answer:
Provisions under the Consumer Protection Act regarding misleading advertisements:
1. The Central Consumer Protection Authority (CCPA) can prohibit an endorser of a misleading advertisement from endorsing any product or service for up to one year, extendable up to three years for subsequent offenses.
2. The Act empowers courts to impose penalties on manufacturers or endorsers of up to Rs. 10 lakh and imprisonment of up to two years for false advertising, with fines extending up to Rs. 50 lakh and five years for subsequent offenses.

Teacher's Note:
a) Celebrity endorsers are held legally accountable under consumer protection laws for endorsing false claims.
b) Strict penalties aim to curb deceptive marketing practices that endanger consumer health and safety.

Question 9
(i) Many mobile phone companies charge a high price when releasing a new mobile phone with cutting-edge technology. This allows them to generate a substantial profit. When rivals create similar products, the price of that specific product is dropped to gain market value and increase sales. Other electronic products, such as fridges, televisions, and air conditioners, are priced similarly. This is because there are a lot of competitive markets and several other brands offering similar products.
(Source: edited from edrawmind.com)
Explain the pricing strategies used in the above case. [4 Marks]

Answer:
The pricing strategies indicated are:
1. Price Skimming: Setting a high initial price for innovative new products to maximize profits from early adopters willing to pay a premium, before gradually lowering prices as competition enters.
2. Competitive Pricing: Setting prices based on competitor rates when numerous substitute products exist in a stable market equilibrium, as seen with home appliances.

Teacher's Note:
a) Skimming strategy capitalizes on novelty and high initial demand.
b) Competitive pricing is essential in mature markets where brands face close substitutes.

OR

(ii) Ms. Sheena, a graduate in Human Relations with ten years of experience in the Corporate sector, plans to set up her start-up. She wants to set up a Soft Skills Training Academy to train and equip fresh graduates be industry ready.
Name the type of product that she is planning to offer. Explain any three of its features. [4 Marks]

Answer:
Type of product: Service.
Three key features of services:
1. Intangibility: Services cannot be touched or seen physically; they are experienced by the learner.
2. Inseparability: Services are produced and consumed simultaneously; the trainer must be present to deliver the training.
3. Perishability: Services cannot be stored or inventoried; if a scheduled training session goes unattended, that economic opportunity is lost.

Teacher's Note:
a) Training academies fall under the service sector (intangible products).
b) Students should quote service characteristics accurately with brief contextual explanations.

SECTION C - 32 MARKS

Question 10
(i) Business organisations use a certain technique to diagnose and analyse their respective micro and macro environment. Name and explain the technique. [5 Marks]

Answer:
The technique used is SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats).
Explanation of its components:
1. Strength: An inherent internal capability or advantage that gives the organization a competitive edge.
2. Weakness: An inherent internal limitation or vulnerability that creates a strategic disadvantage.
3. Opportunity: A favorable condition or trend in the external environment that can strengthen the company's position.
4. Threat: An unfavorable external condition, trend, or competitor action that could damage the organization's standing.

Teacher's Note:
a) SWOT analysis connects internal assessments (Strengths/Weaknesses) with external evaluations (Opportunities/Threats).
b) Explaining each component clearly is necessary for full credit.

(ii) Coordination is inherent in Planning, Organising and Staffing functions of management. Validate this statement by giving three suitable reasons. [3 Marks]

Answer:
Three reasons validating coordination across management functions:
1. In Planning: Coordination is required to synchronize the master plan of the enterprise with departmental and functional plans.
2. In Organising: Coordination ensures proper balance and harmony between the authority and responsibility assigned to every individual.
3. In Staffing: Coordination is achieved by placing the right person in the right job matching candidate competencies with job requirements.

Teacher's Note:
a) Coordination is often termed the essence of management.
b) Students must link coordination explicitly to planning, organizing, and staffing.

Question 11
(i) Ms. Surabhi wants to invest Rs. 2,00,000 in a debt security of a company for ten years. She prioritises safety of her investment.
Which debt security would you recommend for her investment? Explain any four of its features. [5 Marks]

Answer:
Recommended debt security: Debentures.
Four key features of debentures:
1. Acknowledgment of Debt: A debenture is a formal instrument issued by a company acknowledging its borrowing from the public.
2. Fixed Rate of Interest: Debentures carry a pre-specified rate of interest payable periodically regardless of profit fluctuations.
3. Charge on Assets: They are generally secured by creating a fixed or floating charge on the assets of the company.
4. No Voting Rights: Debenture holders are creditors of the company and do not possess voting rights or control over management.

Teacher's Note:
a) Debentures offer fixed returns with higher safety compared to equity shares.
b) Mentioning security and creditor status highlights the safety priority demanded in the question.

(ii) State any three features of IMPS. [3 Marks]

Answer:
Three features of IMPS (Immediate Payment Service):
1. Instant Transfers: IMPS facilitates immediate fund transfers 24x7, making it convenient for urgent payments.
2. Interbank Transfers: It enables secure fund transfers between accounts held in different banks instantly.
3. Multiple Channels: IMPS can be accessed through various platforms including mobile banking apps, internet banking, and ATMs.

Teacher's Note:
a) IMPS is regulated by NPCI (National Payments Corporation of India).
b) Instantaneous round-the-clock availability is its defining characteristic.

OR

(iii) Companies which follow a liberal dividend policy may not benefit from Self-financing method by retaining its profits.
Justify this statement by discussing any three advantages and any two disadvantages of Retained Earnings. [5 Marks]

Answer:
Justification: A liberal dividend policy means distributing a major portion of profits as dividends, leaving little surplus for ploughing back, thereby defeating self-financing objectives.
Three advantages of retained earnings:
1. Dependable Source: Being an internal source of finance, it is reliable and independent of external market fluctuations.
2. No Explicit Cost: Raising funds internally involves no floatation costs, brokerage, or advertising expenditure.
3. No Fixed Liability: There is no legal obligation to pay fixed dividends or interest on retained earnings.
Two disadvantages of retained earnings:
1. Dissatisfaction of Shareholders: Excessive ploughing back reduces current dividend payouts, disappointing investors.
2. Uncertainty: Since profits fluctuate annually, retained earnings are an uncertain and unstable source of long-term finance.

Teacher's Note:
a) Retained earnings represent self-financing through ploughed-back profits.
b) Students must clearly state both advantages and disadvantages as instructed.

(iv) Explain any three features of Digital Banking. [3 Marks]

Answer:
Three features of Digital Banking:
1. 24x7 Availability: Digitally enabled platforms allow users to access banking services round the clock.
2. Cashless Transactions: It promotes paperless and contactless transactions through UPI, e-wallets, and net banking.
3. Remote Accessibility: Customers can conduct banking transactions from anywhere globally without visiting brick-and-mortar branches.

Teacher's Note:
a) Digital banking automates traditional banking processes over secure internet networks.
b) Convenience and speed are key advantages of digital financial platforms.

Question 12
(i) Briefly explain Physical Distribution with any three of its key elements. [5 Marks]

Answer:
Physical Distribution: It encompasses all activities involved in moving finished goods from manufacturers to final consumers efficiently and economically.
Three key elements:
1. Transportation: Physical movement of goods using appropriate modes (road, rail, air, water) based on cost and speed.
2. Warehousing: Safe storage and holding of goods to bridge the gap between production and consumer demand.
3. Inventory Management: Maintaining optimum stock levels to meet customer orders without overstocking or stockouts.

Teacher's Note:
a) Physical distribution forms a core pillar of the marketing mix (Place).
b) Defining the term followed by clear elements ensures full marks.

(ii) Describe the types of market on the basis of subject of exchange. [3 Marks]

Answer:
Markets classified on the basis of the subject of exchange:
1. Commodity Market: Markets where physical goods and commodities (such as agricultural products, bullion, and industrial raw materials) are bought and sold.
2. Capital / Financial Market: Markets dealing in financial instruments, securities, shares, debentures, and long-term funds.
3. Money Market: Markets dealing in short-term monetary assets and debt instruments between banks and financial institutions.

Teacher's Note:
a) Classification by subject refers to what is being traded in the market.
b) Giving appropriate examples under each category enriches the answer.

Question 13
Read the passage given below and answer the questions that follow.
XYZ Company had planned to increase its profit margin by 30% in the current financial year. But it could not achieve the set target in the first quarter of the year due to cases of theft by employees. The Board of Directors formulated a policy of 'zero tolerance' for theft. To prevent such cases, it was decided to install CCTV cameras in the rooms where the expensive products were stored.
The team of Senior Managers communicated the same to all the employees of the organization. The decisions were implemented, and instructions were given to the concerned departments to impose a penalty if an employee was found guilty. The Human Resource department incorporated the same in the employee handbook.
(i) A few steps of Controlling have been emphasised in the above case. Discuss any two of them. [2 Marks]
(ii) Mention any two objectives of Communication with reference to the above case. [2 Marks]
(iii) Explain the importance of Controlling by giving any four points. [4 Marks]

Answer:
(i) Two steps of controlling emphasized in the case:
1. Establishment of Standards: Setting a target of increasing profit margin by 30% and formulating a zero-tolerance policy against theft.
2. Taking Corrective Action: Installing CCTV cameras and imposing penalties on guilty employees to prevent recurrence.
(ii) Two objectives of communication with reference to the case:
1. Implementing Decisions: Communicating the new security policy and CCTV installation decision across the organization.
2. Educating Employees: Updating the employee handbook through HR to inform staff about the penalties and rules regarding theft.
(iii) Four points highlighting the importance of controlling:
1. Achieving organizational objectives: It keeps operations on track to ensure targeted goals are met.
2. Ensuring efficient resource utilization: It prevents wastage and minimizes losses caused by theft or inefficiencies.
3. Improving employee morale: Strict monitoring and fair penal policies instill discipline and a sense of security.
4. Facilitating coordination: It integrates departmental efforts toward unified company goals.

Teacher's Note:
a) Case-based questions require precise identification of management functions from the given text.
b) Students must relate their answers directly to the facts in the passage to secure full credit.