Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 10th Lesson Micro, Small and Medium Enterprises (MSMEs) Textbook Questions and Answers.
AP Inter 1st Year Commerce Study Material 10th Lesson Micro, Small and Medium Enterprises (MSMEs)
Essay Answer Questions
Question 1.
Define MSMEs and explain their significance. [Mar. 2019 – T.S.]
Answer:
The term (enterprise) has been defined under section 2(e) so as to mean ‘any industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services’.
In accordance with the provision of Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in two classes. They are
- Manufacturing enterprises
- Service enterprises.
1) Manufacturing enterprises :
Manufacturing enterprises are those business enterprises which are engaged in the manufacturing or production of goods or commodities. More specifically, these enterprises involve in converting the raw material into finished products by using plant and machinery for creating value addition to the final products.
- A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh.
- A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.
- A medium enterprise is an enterprise where in the investment in plant and machinery is more than Rs. 5 crore but does not exceed Rs. 10 crore.
2) Service enterprises :
The enterprises involve in providing or rendering services are defined as below.
- A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh.
- A small enterprise is an enterprise where the investment in equipment is more than Rs. 10 lakh but does not exceed Rs. 2 crore.
- A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.
Significance of MSMEs:
MSMEs contribute nearly 8% of the country’s GDP, 45% of the manufacturing output and 40% of the exports. They provide the largest share of employment after agriculture. They are the nurseries for entrepreneurship and innovation. The Ministry of MSME has undertaken number of programmes to help and assist entrepreneurs and small businesses. Entrepreneurs who are planning to set up business, may contact National Institute for Entrepreneurship and Small Business Development (National Institute for Micro, Small and Medium Enterprises).
The significance of MSMEs can be understood from the following :
a) 90% of MSMEs in India are unregistered (out of which nearly 80% are sole proprietor firms)
b) 40% of exports in India are through MSME channel
c) 40% of employment opportunity in India is provided by MSME sector
d) MSMEs provide opportunities to the budding entrepreneurs by providing various channels of investment opportunity according to their class of investment.
e) MSMEs provide a good market for foreign companies to start venture capital businesses in India.
Question 2.
Discuss the privileges enjoyed by MSMEs.
Answer:
MSMED Act 2006 provides the following privileges to Micro, Small and Medium Enterprises.
1) Buyer’s Liability to Make Timely Payment for Goods and Service :
Section 15 envisages to ensure timely receipt of payment for their goods and services by micro and small enterprises. It casts an obligation upon the buyer of any goods or services, to make payment to the supplier, by the specified date as follows :
a) When there is an agreement in writing :
On or before the date agreed upon between them in writing. Further, in no case the period so agreed shall exceed 45 days from the day of acceptance.
b) When there is no agreement:
Before the appointed day, which means the day following immediately after the expiry of 15 days from the day of acceptance or day of deemed acceptance.
The terms ‘buyer’, ‘supplier’, day of acceptance’ have been defined in the Act, as under:
- Buyer’ means a person buying any goods or receiving any services from a supplier for consideration.
- Supplier’ means a micro or small enterprise.
- ‘Day of acceptance’ means the day of actual delivery of goods or rendering of services.
2) Interest for Delayed Payment by Buyer :
Where a buyer fails to make payment as required above, he shall be liable to pay interest on the outstanding amount. The interest shall be payable for the period of delay from the date immediately following the agreed date. The interest shall be payable at a rate three times the bank rate and compounded at monthly rests.
3) Reference of Disputes :
Any dispute relating to amount payable for any goods or services, and any interest thereon, may be referred by any party, to the Micro and Small Enterprises Facilitation Council, which shall conduct conciliation in the matter.
Short Answer Questions
Question 1.
Define Manufacturing enterprises as per MSMEs Act, 2006.
Answer:
Manufacturing enterprises are those business enterprises which are engaged in the manufacturing or production of goods or commodities. More specifically, these enterprises involve in converting the raw material into finished products by using plant and machinery for creating value addition to the final products. From the point of view of MSMEs, the manufacturing enterprises are defined in terms of investment made in plant and machinery.
- A micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh.
- A small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.
- A medium enterprise is an enterprise where in the investment in plant and machinery is more than Rs. 5 crore but does not exceed Rs. 10 crore.
Question 2.
Define Service enterprises as per MSMEs Act, 2006.
Answer:
These enterprises involve in providing or rendering services. Service sector may be defined in terms of investment made in equipment.
- A micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh.
- A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs. 2 crore.
- A medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.
Question 3.
Briefly explain the registration process of MSMEs. [May 17 – A.P.]
Answer:
The following are the registration requirements under the MSMED Act, 2006. As per the Act any person intending to establish-
- a micro or small enterprise, may, at his discretion.
- a medium enterprise engaged in providing or rendering of services may, at his discretion.
- a medium enterprise engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, shall file the memorandum of micro, small or, as the case may be, of medium enterprise with authority specified by the State Government or the Central Government.
Very Short Answer Questions
Question 1.
Define Micro Enterprises. [May 17-T.S.]
Answer:
In case of manufacturing enterprises a micro enterprise is an enterprise where investment in plant and machinery does not exceed Rs. 25 lakh. In case of service enterprises a micro enterprise is an enterprise where the investment in equipment does not exceed Rs. 10 lakh.
Question 2.
Define Small Enterprieses. [Mar. 15- A.P.]
Answer:
In case of manufacturing enterprises small enterprise is an enterprise where the investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore. In case of service enterprises, a small enterprise is an enterprise where the investment in equipment is more than Rs. 10 lakh but does not exceed Rs. 2 crore.
Question 3.
Define Medium Enterprises. [Mar. 17 – A.P.]
Answer:
In case of manufacturing enterprises a medium enterprise is an enterprise where in the investment in plant and machinery is more than Rs. 5 crore but does not exceed Rs. 10 crore. In case of medium enterprises a medium enterprise is an enterprise where the investment in equipment is more than Rs. 2 crore but does not exceed Rs. 5 crore.
Question 4.
Define Manufacturing Enterprise. [(Mar. 2019 – A.P.) (Mar. 17 – T.S)]
Answer:
Manufacturing Enterprise :
- Micro – Investment in plant and machinery does not exceed Rs. 25 lakh
- Small – Investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore
- Medium – Investment in plant and machinery is more than Rs. 5 crore but does not exceed Rs. 10 crore
Question 5.
Define Service Enterprise. [(Mar. 2019, 15 – T.S.) (Mar. 2018 – A.P. – T.S.)]
Answer:
Micro – Investment in equipment does not exceed Rs. 10 lakh
Small – Investment in equipment is more than Rs. 10 lakh but does not exceed Rs.2 crore
Medium – Investment in equipment is more than Rs. 2 crore but does not exceed Rs.5 crore