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AP Inter 1st Year Civics Study Material Chapter 3 Nationalism

October 6, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Civics Study Material 3rd Lesson Nationalism Textbook Questions and Answers.

AP Inter 1st Year Civics Study Material 3rd Lesson Nationalism

Long Answer Questions

Question 1.
Define Nationality. Explain the Essential Elements of Nationality.
Answer:
Introduction :
The concepts of Nation and Nationality have become important components in the domain of International Relations and political science respectively. Both inspired the people of several countries with patriotic feeling prior to the two world wars.

The Events that took place in the erstwhile Soviet Union, ethnic Riots between Serbians and croatians in the former Yugo slavia, the unification of East and west Germanies, the peace talks between Israel and Palestine Liberation Organization (PLO) on West Asia etc., reflect the serious concern of the people for realising Nationality and Nation States.

Meaning :
The Word “Nation” is derived from a latin word “NATIO” which means “BORN” (BIRTH) or “Common Descent”.

Definitions :
1. R.G. Gettle:
“Nationality is a population having the common bonds of Race, Language, Religion, Traditions and History.

2. J.H. Rose :
“Nationality is a union of Hearts once made and never unmade”.

3. J.W. Garner:
“Nationality is a group or portion of population which is united by Racial and other bonds”.

Essential Elements of Nationality :

1) Purity of Race :
Racial purity helps in the formation and strengthening of the idea of Nationality. Race is a physical phenomenon. It depends on certain distinctions of skull, stature, hair, complexion etc. These distinctions serve as a cementing bond among the members of a group.

But we should remember that common race is not an indispensable factor in the growth of Nationality. Modem races are so mixed that none of them can claim to be pure. Pure races have disappeared because of wars and migrations. Racial purity is now a myth only.
Ex : Canada and United states have transformed into single nations inspite of their racial diversities in their respective populations. Similarly, Australia and Britain are two distinct Nations although they belong to one racial stock.

2) Common Language :
Language plays a key role in the promotion of nationality. The philosophers and scientists said that common language is essential for the development of nationality. Language is a medium to express all their feelings. It helps to express one’s ownselves to have cordial relations and to share the miseries and happiness in a group languages also promotes common feelings and traditions. Common language promotes the feeling of oneness and keeps the entire race on single track.

3) Common Religion:
Religion is one important factor to strengthen nationality. There are many instances when people of different nationalities with common religion remain citizens in the same state. For instance, the main reason for the partition of Indian subcontinent into India and Pakistan in 1947 lies in the religion.

4) Geographical Unity :
Geographical unity is necessary for the emergence of nationality. Nationality sentiments prevail and develop among the people living in a single geographical area. The people residing in such an area love, worship their country and make sacrifices for the sake of their motherland. People, who belong to one religion, converse the same language, same race living in a geographical area inculcate- and improve their nationality sentiments. The formation of Israel in 1946 was purely due to the feelings of the hitherto wandering Jewish people to live in a single geographical area. Hence their desire of live in a territory made them united- This ultimately transformed them as patriotic persons.

5) Common History :
Common History is considered as an important element of Na-tionality. It invokes an inspiration among the people and binds them together. Some historical incidents may give a chance to the people to develop national sentiments. Ex : Indians have learnt the lessons of Nationalism from the British legacy.

6) Common Culture:
Culture in its broad sense means a way of life. It is reflected through certain common elements like dress, customs, conventions, food habits, religious beliefs, ethical values etc. They easily develop into a single Nation. These elements bind the people together and hold together.

7) Common Political aspirations :
Nationality sentiments prevail and develop among the people having common political aspirations. The political ideas, conventions, and institutions which were formed due to the single political rule will have a considerable impact and influence over the people. For instance, the Swiss people love very much their direct democratic devices in political matters. Similarly the Americans express the feeling of worship towards their constitution. The British people also feel proud of their political and judicial institutions like rule of law, parliamentary democracy and judicial review etc.

8) Common Economic ties:
This element of nationality has been stressed by ‘Karl Marx’. Since then onwards the importance of this element has been increasing. The Russians have great regard for their economic system, eventhough there exist diversities. Their unflinching love for socialism inspired nationalism among them. They successfully repulsed the attacks of Germany during the Second World War. Thus the common economic ties made them united and integrated them into a nation.

Question 2.
Discuss the relation between Nation and Nationalism.
Answer:
Introduction :
The concepts of Nation and Nationalism have become important components in the domain of International Relations and political science respectively. Both inspired the people of several countries with patriotic feelings prior to the two world wars.

Meaning :
The word “Nation” and “Nationalism” are used as complementary to each other.

The word Nation is derived from a latin word “NATIO” which means “BORN” (BIRTH) or “Common descent”.

Nation:
“Nation is a Nationality which has organised itself into a political body, either independent or desiring to be independent”.

Nationalism :
“Nationalism is a state of mind in which the supreme loyalty of the individual is felt to be due to the Nation state.”

Relationship between “Nation” and “Nationalism”:

Nationalism is a psychological feeling prevailing in the minds of the people.
People through the feeling of Nationalism sacrifice all their interests for the sake of their Nation.
The strong desire of the people of a nationality to emerge as a nation state is nationalism.
The seeds of nationalism originated in the cultural renaissance of Europe in 16th century.
In French Revolution (1789) pushed the nationalism further in Europe and took to the great heights.
The Vienna congress (1815) further supported the cause of nationalism in Europe.
The Italian and German unifications boosted the cause of nationalism.
The American War of Independence (1774) was a great leap forward in spreading nationalism among the people.
The much publicized theory of Nation’s self-determination of Woodrow Wilson in 1917 was further generated hope among the people of the world to form Nation States.
The two world wars completed to redraft the European map with the formation of Nation-states.
The Freedom struggles and national aspiration of the people of the Asia, Africa, and Latin America are fulfilled with the formation of Nation states immediately after the end of II-World war.
The Indian national movement from 1885 to 1947 had fulfilled with the formation of India and Pakistan as an Independent States.

In this regard, we can understand that the feeling of nationalism when it acquires unity and independence. It becomes a Sovereign Nation.
There were some writers who treated the two terms as synonymous.

Question 3.
Write a short note on demand for National Self-Determination.
Answer:
The theory of National self-determination was advocated by the former president of the United States of America, Woodrow Wilson in 1917. It was much publicized and generated hope among the people of the world to form Nation states.

From then onwards, Demands for National self-determination has been raising in different parts of the world. The Right to national self determination has also asserted the national liberation movements in Asia and Africa, when they were struggling against colonial rule. Nationalist movements maintained that political independence would ensure dignity and recognition to the colonised people. They also helped the people by protecting their collective interests. Many Nationalist movements were inspired by the goal of bringing justice and prosperity to the nation.

However, it proved almost impossible to ensure that each cultural group, which claimed to be a distinct nation, could acheive political independence and statehood. As a result, migration of people, border wars and violence have continued to plague many countries in the region. Thus we have the paradoxical situation of nation-states which themselves had acheived independence through struggle now acting against minorities with in their own territories which claim the right to national self-determination. Virtually every state in the world today faces the dilemma of how to deal with the movements of national self-determination and raised doubts about the right to national self-determination.

More and More people began realising that the solution does not lie in creating new states but in making existing states more democratic and equal. That is in ensuring that people with different cultural and ethmic indentives live and co-exist as partners (arising) and equal citizens with in the country. This may be essential not only for resolving problems arising out of new claims for self-determination but also for building a strong and United State.

Question 4.
Write a short note on “Whether India is a Nation”?
(or)
Explain breifly whether India is a Nation.
Answer:
Many western and oriental writers described that India is indeed a Nation. There are strong reasons to justify that India is a nation.

Indians have a common history and culture.
They have demonstrated their distinct qualities of National integration on many occassions.
Indians have expressed their dedication to make unparalled and supreme sacrifices for the accomplishment of Independence.
They fought unitedly against the foreign yoke under the leadership of Mahatma Gandhi.
Although the people belong to different regions and provinces, they realised the basic fact that they are all first and fore most Indians. Then only, they owe indebtedness to their respective religions and languages.
Some common elements concerning national anthem, national heritage, culture constitution and the government inspire the nationalist feelings and inculcate the national integration among the people.
Indians demonstrated their distinct qualities of National integration on many occassions. During India’s Aggression by China and Pakistan, the Indians extended unequivocal support to the government.

Short Answer Questions

Question 1.
Briefly explain the essential elements of Nationality.
Answer:
Introduction :
The concepts of Nation and Nationality have become important components in the domain of International Relations and political science respectively. Both inspired the people of several countries with patriotic feeling prior to the two world wars.

Meaning :
The Word “Nation” is derived from a latin word “NATIO” which means “BORN” (BIRTH) or “Common Descent”.

Definitions :
1. R.G. Gettle:
“Nationality is a population having the common bonds of Race, Language, Religion, Traditions and History.

2. J.H. Rose :
“Nationality is a union of Hearts once made and never unmade”.

3. J.W. Garner:
“Nationality is a group or portion of population which is united by Racial and other bonds”.

Essential Elements of Nationality :

7) Common Political aspirations :
Nationality sentiments prevail and develop among the people having common political aspirations. The political ideas, conventions and institutions which were formed due to the single political rule will have a considerable impact and influence over the people. For instance, the Swiss people love very much their direct democratic devices in political matters. Similarly the Americans express the feeling of worship towards their constitution. The British people also feel proud of their political and judicial institutions like rule of law, parliamentary democracy and judicial review etc.

Question 2.
In what way do “Nation” and “State” differ from each other?
Answer:
Several Nation-States came into existence after the two world wars, on the basis of the principle of self-determination. The terms “Nation” and “State” were used synonymously. Even the political experts used both these words homogeneously and intermixingly as if both had same meaning. However, in practice both these terms are not same and identical.

Nation:
“Nation is a nationality which has organized itself into a political body either Independent or desiring to be independent”.

State :
“State is a people organized for law within definite territory”.

Differences:
The concepts of Nation and State differ from one another from the following points of view:

Nation	State
1) Nation is an independent political community or an integral part of a multi-national state.	1) State may consist of the people of the same nation or many nations.
2) Nation preceeds the state.	2) State follows the nation. The final form of a nation is the accomplishment of statehood.
3) Nation is historical and cultural in its evolution.	3) State is political and legal structure.
4) Nation is the community of people who exist together for a common goal and who were united by psychological feeling of oneness.	4) State is a people organised by law in a definite territory.
5) Nation is the culmination of a long coexistence of the people.	5) State need not be evolutionary in nature. It may come into existence either by unification of the smaller independent political communities or by partition.

Question 3.
Describe the various phases of Nationalism.
Answer:
Introduction :
Nationalism is an effective force in modern politics. Nationalism is a psychological feeling prevailing in the minds of the people. People through this feeling sacrifice all their interests for the sake of their nation.

Meaning :
Nationalism is a state of mind in which the supreme loyalty of the Individual is felt to be due to the Nation State.

Broadly speaking the term “Nationalism” is generally used to describe two phenomenon. They are mentioned as follows :

The attitude of the members of a Nation towards their national identity.
The action of the members of a Nation towards the goal of achieving self-determination.

Different (or) various phases of Nationalism :
According to Snyder, there are four phases of nationalism namely.

1) Integrative Nationalism (1815 – 71) :
During this period nationalism was a unifying force and found solid expression in the unification of Italy and Germany.

2) Disruptive Nationalism (1871-90) :
During this period, subject nationalities of Austria – Hungary and other multinational states clamoured for independence.

3) Aggressive Nationalism (1890-1945) :
During this period, Nationalism became virtually identical with aggressive imperialism. This led to the clash of opposing national interests in the form of two world wars.

4) Contemporary Nationalism :
During the early years of the contemporary period, political nationalism manifested in the form of revolts against European Masters. Nationalism indeed has become a slogan, A school of thought, a movement and a fight for certain political or sovereign objective in Afro-Asian and Latin American countries.

Question 4.
Describe the relative importance of”Nation” and “Nationality”.
Answer:
The concepts of Nation and Nationality laid formidable foundations to several modem political systems. These concepts promoted the bonds of unity, fraternity and integrity among the people of a particular country. The existence of the modem states is by and large, rooted in these zealous concepts.

The two concepts have similarity in their origin. Both the words were derived from a latin word “Natio” which means birth or descent. Some political writers like lord Bryce and Hayes described that people will form into a nation when they achieve political independence. Such a nation originates when people had sentiments.

A state emerges due to the influence of nationality and nation. Nationalism and nationality profoundly influenced the people of a nation in building their own states and moulding their economic prosperity. The concepts of the nation and nationality transformed the people of Europe, Afro-Asian and latin American countries into nation-states hence, these great ideals strengthened understanding and unity among the people.

Question 5.
What are the differences between Nation and Nationality? [A.P. Mar. 19, 18; T.S. Mar. 15]
Answer:
The concepts of Nation and Nationality laid formidable foundations to several modem political systems.

Nation :
“Nation is a nationality which has organised itself into a political body either independent or desiring to be independent”.

Nationality:
“Nationality is a population having the common bonds of race, language, religion, traditions and history”.

Differences between Nation and Nationality :

Nation	Nationality
1) Nation is a political concept.	1) Nationality is a psychological feeling.
2) Nation is always a politically organised state.	2) Nationality is always an unorganised and flexible feeling.
3) Nation is always independent.	3) Nationality is not independent.
4) There can’t be a nation without nationaltiy.	4) There can be nationality without a nation.
5) People who form into a nation should obey the laws of the state.	5) Untill the people of nationality form into a nation. There can’t be constitutional laws. But they oblige certain common rules in their best interests.

Question 6.
Write a short notes on National Self-Determination.
Answer:
The theory of national self-determination was advocated by the former president of the United States of America, Woodrow Wilson in 1917. From then onwards nationalism became a world-wide phenomenon. This principle implies that every nation should be organised as an independent political entity. It raises the question whether every nationality has the right to be a self governing or sovereign state.

Nations, unlike other social groups, seek the right to govern themselves and determine their future development. In making this claim, a nation seeks recognition and acceptance by the international community of its status as a distinct political entity or state. Quite often these claims come from the people who lived together in a given land for a long period having sense of common identity. Such claims of self-determination were frequently made in the 19th century in Europe. The nation of one culture – one state began to gain acceptability at that time. Subsequently, this idea was employed while reordering state boundaries after the first World war. The treaty of Versailles led to the formation of several small and newly independent states.

The Right to national self-determination has asserted the National liberation movements in Asia and Africa when they were struggling against colonial rule. Nationalist movements maintained that political independence would ensure dignity and recognition to the colonised people.

Question 7.
Is India a Nation State? Explain.
Answer:
It is interesting to know whether India is a Nation-State. Some say that India is a uni-national state. As against this some state that it is a Multi-National State. It is argued that India is a Uni-National State rather than a Multi-National State due to the following reasons.

It consists of people who possess the features of uni-national state like common history, common culture and traditions.
The Indians showed their spirit of National integration on many occassions after in-dependence.
They stood as one and extended support to their government when our country was faced with wars from Pakistan and China in 1962 and 1965 respectively.
They stood united under the leadership of Mahatma Gandhi throughout the freedom struggle against the British rule in India.
From the begining, our country won name and fame for its unity in diversity. Even- though the people of India belong to different regions, they are Indians first and Indians in the last resort i.e., they owe indebtedness to their respective religions and languages.
Some common elements concerning national anthem, national heritage, culture, constitution, national flag and the government inspire the nationalist feelings and inculcate the national integration among the people.
People celebrate all the national festivals with great enthusiasm and spirit.

Hence we may say that India is a nation state with the characteristic features of unity in diversity.

Very Short Answer Questions

Question 1.
What is meant by Nationality?
Answer:
Nationality is derived from the Latin word “Natio”. which means birth. It is a spiritual sentiment or feeling of oneness. This emotional feeling of oneness or unity is caused due to factors like common race, common language, common religion, common territory, common history and culture, common political aspirations etc. Nationality is not politically organised. There can be no nation without nationality.

Question 2.
Define Nation.
Answer:
Nation is derived from two Latin words – “Nates” and “Natio” which means birth. Lord Bryce defined it as “A Nation is a nationality which has organised itself into a political body, either independent or desiring to be independent. “It means that the people of country are called as a National if they are united by characteristics of nationality and have a strong desire for political independence or if they are politically free.

Question 3.
Write any two differences between Nation and State.
Answer:

Nation	State
1. Nation is an independent political community or an integral part of a Multi-National state.	1. State may consist of the people of the same Nation or many nations.
2. Nation is Historical and cultural in its evolution.	2. State is a political and Legal structure.

Question 4.
Mention any two connotations of Nationality.
Answer:

Nationality Refers to the legal status of citizens in a particular state. Here it refers to one’s status as a citizen of the state which he belongs to.
Nationality denotes a particular kind of feelings and sentiments that binds the people together. It differentiates such people from these of other Nationalities.

Question 5.
Mention any two essential elements of Nationality.
Answer:
Nationality is derived from the Latin word “Natio”. Which means birth. It is a spiritual sentiment or feeling or oneness. This emotional feeling of oneness or unity is caused due to factors like common race, common language, common religion, common territory, common history and culture, common political aspirations etc. Nationality is not politically organised. There can be no nation without nationality.

Question 6.
What is the importance of Nationalism?
Answer:
Nationalism is an effective force in modem politics and it played prominent role in the world Affairs. It’s importance can be analysed from the following points.

Nationalism inspired the people and created deep hatredness among the people.
It helped in liberalising the people from oppressive rule.
It became a deciding factor in the breakup of many empires and states.

Question 7.
Write any two merits of Nationalism.
Answer:

Nationalism made the people obey the government.
It helped in achieving the progress of a nation in a short period.

Question 8.
Mention any two de-merits of Nationalism.
Answer:

Nationalism makes the people extremely proud, Jealous and arrogant as was clear from the history of Germany and Italy.
It leads to unnecessary and unhealthy competition among the nations is economic matters.

AP Inter 1st Year Civics Study Material Chapter 2 State

October 6, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Civics Study Material 2nd Lesson State Textbook Questions and Answers.

AP Inter 1st Year Civics Study Material 2nd Lesson State

Long Answer Questions

Question 1.
Define State and explain its essential elements.
Answer:
Introduction:
State is an important political organisation. The study of political science begins and ends with the state. The term state for the first time, was used by an Italian political thinker, Machiavlly in his famous book “The Prince” in 16th century.

Meaning :
The word state is derived from a Tuetonic word “status” which means political organisation.

Definitions:

“State is a people organised for law within a definite Territory” – Woodrow Wilson.
“State is a politically organised people of a definite Territory” – Bluntschlli.
“State is a territorial society divided into government and subjects claiming within its allotted physical area, a supremacy over all other institutions. – Harold. J. Lasld.

Essential elements of state:
State is the predominant and superior politico – social institution existing in the society. It consists of 4 essential elements. These elements of state may be explained in a detailed way in the following paragraphs.

1) Population :
Population is the fundamental and essential element of state. There can be no state without population. Plato, Aristotle, Rousseau and others considered this feature as an important one. The famous poet Sri. Gurajada Apparao also states that it is the people, rather than the land, that comprise the state. Political writers differ in their opinions regarding the exact size of population possessed by the state.

While Plato fixed 5,040, Rousseau fixed 10,000 to be an ideal population for a state. But today we can find the countries like China and India which have more than 100 crores of population on one hand and the countries like Andora, San Marino are having small number of people on the other hand is the modem world.

2) Territory:
Territory is another essential element of the state. It is necessary for the origin and existence of the state. There can be no state without territory. Every state must have more or less territory of its own. There is no unanimous opinion among the political writers regarding the size of territory of the state. Some preferred vast territory, where as others preferred small territory. But today we can find the countries like America and Canada having large territory on one hand, and the countries like Vatican, Monaco having very less territory on the other hand in the modem world.

3) Government:
Government is the third essential element of the state. There can be no state without government. State enforces its authority through the government. Government consists of 3 organs namely
Legislature – which makes laws
Executive – which implements laws and
Judiciary – which interpretes laws.

Government are of different kinds namely, Unitary, Federal, Parliamentary and Presidential governments. Governments are at different levels like Local, State level and National level.

4) Sovereignty:
Sovereignty is the most essential element of the state. It is spirit and soul of the state. There can be no state without sovereignty. It distinguishes the state from other associations and institutions. Sovereignty is the supreme political power of the state over citizens and subjects.

Question 2.
In what aspects do state and Government differ from each other? Explain.
Answer:
Introduction :
We often use the terms “State” and “Government” indiscriminately one for the other”. State means government in practice” said by H.J. Laski. “State means almost government machinery”.

Relationship between State and Government:
The relationship between state and government can be discussed as follows.
1) Both are established by individuals :
State and government are two important organizations established by Individuals. The two came into existence for protecting the people and for regulating the conditions between them.

2) Complementary :
State is the government for all practical purposes. Government carries on its activities in the name of the state whatever government does. It does in the name of the state. The Stuart king in England and Louis XIV in France viewed the state and government as complementary.

3) The will of the state expressed by the government:
Government is an important element of state. The collective will of the state is expressed and implemented through government. Government is described as the “Brain of state”. Laws which reflect the will of the state are formulated and given effect only by the government.

Differences between State and Government :
The following are the differences between state and government.

State	Government
1. State has four elements namely population, territory, government and sovereignty.	1. Government is one of the essential elements of the state.
2. State is a permanent organisation.	2. Government is a temporary organisation.
3. State consists of the whole body of people – The rulers and the ruled.	3. Government consists of only the rulers.
4. State has the sovereignty.	4. Government does not have sovereignty.
5. State is the master.	5. Government is the servant.
6. Membership of the state is compulsory.	6. Membership in government is not compulsory. to that of state is narrow.
7. All states are alike in the sense they possess the same four features (or) elements like Population, Territory, Government and Sovereignty.	7. Governments are different types, viz. Parliamentary – Presidential – Unitary – Federal, Democratic – Dictatorial etc.
8. Peoples are not entitled to revolt against the state.	8. People have the right to oppose and criti-cize the policies and programmes of the government.
9. The scope of state when compared to that of government is wider.	9. The scope of government when compared to that of state is narrow.

Question 3.
Explain the relationship and differences between State and Society.
Answer:
Introduction :
State and society are two important human organizations. Maclver described that blood relationship (kinship) created society and society in turn led to the state.

State :
State is a people organized for law within a definite territory.

Society :
Society is a group of men brought together by a system of common ideas, interests and aspirations.

Relationship between State and Society :
The relationship between state and society can be discussed as follows.

1) Common features:
State and society have some common features. The two sometimes include practically. The same persons most cases, a vast majority of the members of a society may be included in the same state.

2) Complementary:
State and society go hand in hand. They help each other. Social progress depends upon the progress of the state. The working of the state is influenced by social customs and traditions.

3) Synonymous :
State and society were considered as the same in the past. In the beginning the Greek Philosophers and later the Idealists viewed the city states and society as synonymous.

4) Inter related:
State regulates the external conduct of individuals in society through laws. It provides a broad frame work of social order. Society nourishes the state with economic, cultural, religious and humanitarian activities. Thus state and society cannot be completely separated as different entities.

Differences between State and Society:
Inspite of close relationship, state and society differ from one another. This may be informed through the following table.

State	Society
1. State is a political organization.	1. Society is a social organization.
2. State regulates only the external relation of men in society.	2. Society controls both internal and external activities of men in society.
3. State possess the power of compulsion. Disobedience to its laws leads to punishment.	3. Society does not possess the power of compulsion. Disobedience to its principles does not leads to any physical punishment.
4. State derives its strength mainly from laws.	4. Society derives its strength from customs, conventions and traditions.
5. State has definite territory.	5. Society has no definite territory.
6. State has the sovereignty.	6. Society has no sovereignty.
7. Membership of the state is compulsory.	7. Membership of the society is voluntary.
8. State is permanent.	8. Society is not permanent.
9. Laws of the state are uniform.	9. Rules of society are not uniform.
10. State came into existence after the origin of society.	10. Society is much older institution than the state.

Question 4.
Describe the relationship and differences between State and Association.
Answer:
Introduction :
The social nature of man finds expression in numerous groups and associations which satisfy his various needs in life. Man cannot live in isolation. He seeks the cooperation and help of others to fulfill his needs and to develop his personality.

Intimate social relationship for achieving certain ends or purposes gives rise to the formation of associations.

State :
State is people organized for law within a definite territory.

Association :
Association is a group of people united for a specific purpose or a limited number of purposes.

Relationship between State and Association :
The state and association are related in the following aspects.
1) Same membership :
Both the state and other associations consist of a group of same human beings. So the same individuals remain members of both the state and associations.

2) Common interests:
Both are created and organized for the pursuit of an interest or a group of interests. Promotion of common interests in the moving force behind all forms of associations including the state.

3) Organization:
Both are characterized by organizations and a well-knit framework for realizing their objectives. Both regulate the activities of members. Both view cooperation as the basis among the members.

4) Code of conduct:
Both have a code of conduct denoting some rules and regulations. The code of conduct keeps the members together. It ensures stability to the organization.

5) Executive :
Every state will have an executive agency known as the government. Similarly every association will have an executive council for implementing its decisions.

Differences between State and Association :
State and association differ from one another in the following matters.

State	Association
1. State is a political organization.	1. Association is a social organization.
2. State has definite territory.	2. Association has no definite territory.
3. State has the sovereignty.	3. Association has no sovereignty.
4. Membership of the state is compulsory.	4. Membership of the association is not compulsory.
5. State is permanent.	5. Association is not permanent.
6. State is superior to the associations.	6. Associations are inferior to the state.
7. The scope of state is wide.	7. The scope of association is limited.
8. State can interfere in the affairs of the associations.	8. Associations can’t interfere in the affairs of the state.
9. Laws of the state are uniform.	9. Rules of association are not uniform.
10. State strives for the welfare and progress of all the people.	10. Associations are meant for realising the interests of the members only.

Short Answer Questions

Question 1.
Explain any two essential elements of the State.
Answer:
Essential elements of state :
State is the predominant and superior politico-social institution existing in the society. It consists of 4 essential elements. These elements of state may be explained in a detailed way in the following paragraphs.

Question 2.
What are the other elements of State?
Answer:
Introduction:
State is an important political organization. It was established for regulating and improving the relations between individuals.

Definition :
“State is a people organised for law within a definite territory”. -Woodrow Wilson

Besides essential elements namely, population, territory, government and sovereignty, state will also have the other elements.

Other elements of the state :
1) International recognition :
It implies recognition of the sovereign status of a state by other states. This feature has gained currency due to the immerse technologlical and scientific advancements. The man of today is not only a member in his state but also a member of the entire world at large. Today majority of the countries of the world are joining in one or the other international associations to obtain certain benefits.

The United Nations Organisation is the best example for such associations. It’s membership is considered to be necessary for attaining perfect and complete statehood. Whenever a .new state comes into existence, it’s recognition by other states and by UN is considered as very essential.

2) Permanence :
State is a permanent institution. If the state surrenders to the other states during war or Aggression. It loses its significance but not the feature of permanence. Sometimes through the process of integration or disintegration, the states will change the form of their existence for instance. In 1990’s Soviet Union (Former USSR) got disintegrated and new 15 independent states came into being.

3) General obedience :
General obedience implies the supreme power of the state overall the individuals and institutions within its territorial limits. No person or association can deny the power or authority of the state. People can criticise the policies and programmes of the government but not the state. The obedience to the state is mandatory on the part of the people.

4) Popular will:
Willoughby stated that the will of the people is an important element of the stae. State continues to exist as long as it is supported by the majority of the people. The strong desire for protecting the state against invasions and internal revolutions is compulsory for the continuation of the state.

Question 3.
What do you know about Government and Sovereignly as the two essential elements of State?
Answer:
Government: Government is the third essential element of the state. There can be no state without government. State enforces its authority through the government. Government consists of 3 organs namely
Legislature – which makes laws
Executive – which implements laws and
Judiciary – which interpretes laws.

Government are of different kinds namely, Unitary, Federal, Parliamentary and Presidential governments. Governments are at different levels like Local, State level and National level.

Sovereignty :
Sovereignty is the most essential element of the state. It is spirit and soul of the state. There can be no state without sovereignty. It distinguishes the state from other associations and institutions. Sovereignty is the supreme political power of the state over citizens and subjects.

Question 4.
Describe the relationship between State and Society.
Answer:
Introduction : State and society are two important human organizations. Maclver described that blood relationship (kinship) created society and society in turn led to the state.

State :
State is a people organized for law within a definite territory.

Society :
Society is a group of men brought together by a system of common ideas, interests and aspirations.

Relationship between State and Society :
The relationship between state and society can be discussed as follows.

3) Synonymous :
State and society were considered as the same in the past. In the beginning the Greek Philosophers and later the Idealists viewed the city states and society as synonymous.

4) Inter-related:
State regulates the external conduct of individuals in society through laws. It provides a broad frame work of social order. Society nourishes the state with economic, cultural, religious and humanitarian activities. Thus state and society cannot be completely separated as different entities.

Question 5.
Point out the differences between State and Society. [A.P. Mar, 19, 15]
Answer:
Introduction :
State and society are two important human organizations. Maclver described that blood relationship (kinship) created society and society in turn led to the state.

State :
State is a people organized for law within a definite territory.

Society :
Society is a group of men brought together by a system of common ideas, interests and aspirations.

Differences between State and Society :
Inspite of close relationship, state and society differ from one another. This may be informed through the following table.

State	Society
1. State is a political organization.	1. Society is a social organization.
2. State regulates only the external relation of men in society.	2. Society controls both internal and external activities of men in society.
3. State has definite territory.	3. Society has no definite territory.
4. State has sovereignty.	4. Society has no sovereignty.
5. Membership of the state is compulsory.	5. Membership of the society is voluntary.
6. State is permanent.	6. Society is not permanent.
7. Laws of the state are uniform.	7. Rules of society are not uniform.
8. State came into existence after the origin of society.	8. Society is much older institution than the state.

Question 6.
What is the relationship between State and Association.
Answer:
Introduction :
The social nature of man finds expression in numerous groups and associations which satisfy his various needs in life. Man cannot live in isolation. He seeks the cooperation and help of others to fulfill his needs and to develop his personality.

State :
State is people organized for law within a definite territory.

Association :
Association is a group of people united for a specific purpose or a limited number of purposes.

Relationship between State and Association :
The state and association are related in the following aspects.

1) Same membership :
Both the state and other associations consist of a group of same human beings. So the same individuals remain members of both the state and associations.

4) Code of conduct:
Both have a code of conduct denoting some rules and regulations. The code of conduct keeps the members together. It ensures stability to the organization.

5) Executive :
Every state will have an executive agency known as the government. Similarly every association will have an executive council for implementing its decisions.

Question 7.
Mention the differences between State and Association.
Ansnswer:
Introduction :
The social nature of man finds expression in numerous groups and associations which satisfy his various needs in life. Man cannot live in isolation. He seeks the cooperation and help of others to fulfill his needs and to develop his personality.

State :
State is people organized for law within a definite territory.

Association :
Association is a group of people united for a specific purpose or a limited number of purposes.

Differences between State and Association :
State and association differ from one another in the following matters.

State	Association
1. State is a political organization.	1. Association is a social organization.
2. State has definite territory.	2. Association has no definite territory.
3. State has sovereignty.	3. Association has no sovereignty.
4. Membership of the state is compulsory.	4. Membership of the association is not compulsory.
5. State is permanent.	5. Association is not permanent.
6. State is superior to the associations.	6. Associations are inferior to the state.
7. Laws of the state are uniform.	7. Rules of association are not uniform.
8. State can interfere in the affairs of the associations.	8. Associations can’t interfere in the affairs of the state.

Question 8.
In what way are State and Government related?
(Or)
Explain the relationship between State and Government.
Answer:
Introduction :
We often use the terms “State” and “Government” indiscriminately one for the other”. State means government in practice” said by HJ. Laski. “State means almost government machinery”.

State :
State is a people organized for law within a definite territory.

Government:
Government is an instrument which fulfills aims and goals of the state

Relationship between State and Government:
The relationship between state and government can be discussed as follows.

1) Both are established by individuals :
State and government are two important organizations established by Individuals. The two came into existence for protecting the people and for regulating the conditions between them.

2) Complementary :
State is the government for all practical purposes. Government carries on its activities in the name of the state. Whatever government does. It does in the name of the state. The Stuart king in England and Louis XIV in France viewed the state and government as complementary.

Question 9.
Distinguish between State and Government.
Answer:
Introduction :
We often use the terms “State” and “Government” indiscriminately one for the other”. State means government in practice” said by H.J. Laski. “State means almost government machinery”.

State :
State is a people organized for law within a definite territory.

Government:
Government is an instrument which fulfills aims and goals of the state.

Differences between State and Government :
The following are the differences between state and government.

State	Government
1. State has four elements namely population, territory, government and sovereignty.	1. Government is one of the essential elements of the state.
2. State is a permanent organisation.	2. Government is a temporary organisation.
3. State consists of the whole body of people – The rulers and the ruled.	3. Government consists of only the rulers.
4. State has the sovereignty.	4. Government does not have sovereignty.
5. State is the master.	5. Government is the servant.
6. Membership of the state is compulsory.	6. Membership in government is not compulsory.
7. All states are alike in the sense they possess the same four features (or) elements like Population, Territory, Government and Sovereignty.	7. Governments are different types, viz. Parliamentary – Presidential – Unitary – Federal, Democratic – Dictatorial etc.

Very Short Answer Questions

Question 1.
Mention any two definitions of state.
Answer:

“State is a people organised for law within a definite Territory”. – Woodrow Wilson
“State is a politically organised people of a definite Territory”. – Bluntschlli.

Question 2.
How many essential elements does the State possess? What are they? [T.S. 2017]
Answer:
State consists of four essential elements. They are :

Population
Territory
Government and
Sovereignty.

Question 3.
What do you mean by ‘Government’? [T.S. Mar, 15]
Answer:
Government is the third essential element of the state. There can be no state without government. It is an instrument which fulfills aims and goals of the state.

Question 4.
How many other elements does the State possess? Name them.
Answer:
Besides Population, Territory, Government, and Sovereignty, state will also possess four other elements. They are :

International recognition
Permanence
General obedience and
Popular will.

Question 5.
What do you know about ‘Society’?
Answer:
The term “Society” refers to the interaction of complex norms among the people. It can be defined as a group of men brought together by a system of common ideas, interests, and aspirations. It is a voluntary association. It’s membership is optional. It originated much earlier than the state.

Question 6.
What do you mean by ‘Association’?
Answer:
Association is a group of people united for a specific purpose or a limited number of purposes. Associations are of various types viz., social, economic, political, cultural, religious etc. It’s membership is optional. A person can be a member of a numer of associations.

Question 7.
Write about the qualitative aspect of the population of a State.
Answer:
The qualitative aspect of the population is more important for a state. Aristotle rightly said that good citizens make a good state. If the people are committed, disciplined, hard working, honest and intelligent, then the state achieves rapid progress.

Question 8.
Does a state require International recognition?
Answer:
It implies recognition of the sovereign status of a state by other states. This feature has gained currency due to the immerse technologlical and scientific advancements. The man of today is not only a member in his state but also a member of the entire world at large. Today majority of the countries of the world are joining in one or the other international associations to obtain certain benefits.

The United Nations Organisation is the best example for such associations. It’s membership is considered to be necessary for attaining perfect and complete statehood. Whenever a new state comes into existence, it’s recognition by other states and by UN is considered as very essential.

Question 9.
Mention any two differences between State and Society.
Answer:

State	Society
1. State is a political organization.	1. Society is a social organization.
2. State regulates only the external relation of men in society.	2. Society controls both internal and external activities of men in society.

Question 10.
Write about any two differences between State and Government.
Answer:

State	Government
1. State has four elements namely population, territory, government and sovereignty.	1. Government is one of the essential elements of state.
2. State is the master.	2. Government is the servant.

Question 11.
How many organs of Government are there? Explain their functions briefly.
Answer:
Government is the third essential element of the state. It is an instrument which fulfills aims and goals of the state. Government consists of three organs viz.,
i) Legislature :
Law making organ. Ex : Parliament.

ii) Executive :
Law implementing organ. Ex : Council of Ministers.

iii) Judiciary:
Justice administering organ. Ex : Supreme court and High courts.

Question 12.
Mention any two differences between State and Association.
Answer:

State	Association
1. State is a political organization.	1. Association is a social organization.
2. State has sovereignty.	2. Association has no sovereignty.

AP Inter 1st Year Civics Study Material Chapter 1 Scope and Significance of Political Science

October 6, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Civics Study Material 1st Lesson Scope and Significance of Political Science Textbook Questions and Answers.

AP Inter 1st Year Civics Study Material 1st Lesson Scope and Significance of Political Science

Long Answer Questions

Question 1.
Define Political Science and explain its scope. [A.P. Mar, 17, 16, 15]
(or)
Explain the scope of Political Science.
Answer:
Introduction :
Political Science is a premier social science. It is mainly concerned with the study of the state in its relation to Society, Citizens, Associations, and the world at large. Aristotle is hailed as the Father of Political Science. He wrote the famous book “THE POLITICS”.

Origin of the word Politics :
Aristotle, the Father of Political Science used the term “POLITICS” for the first time in his famous book “POUTICS”. The term “POLITICS” is derived from a greek word “POLIS” and latin word “POLITICUS” which means the city state.

Definitions of Political Science :
Political Scientists gave various definitions on Political Science. They are as follows :
1. J.W. Gamer:
“Political Science begins and ends with the state”.

2. Stephen Leacock:
“Political Science deals with the government”.

3. David Easton :
“Political Science is concerned with the authoritative allocation of values for a society”.

Scope of Political Science :
The scope of Political Science means the subject matter covered by it or the topics which are included in its study. It may be explained in the following ways :

i) Study of man in Relation to the Society and State :
Aristotle stated that “Man is a Social Animal”. Man can satisfy his basic needs like food, clothing, shelter and protection in the society. Political Science explains the relationship beween man and society. It examines how man should adjust himself with the societys. It is imperative that the modem man should develop proper attitude towards the society. This is possible only when he identifies himself with the society.

Political Science is concerned with the perennial and central issue of establishing proper relationship between the state and the individuals. It deals with many topics of state activity, such as limitations of Political Authority and sphere of Individual Freedoms.

ii) Study of State :
Aristotle also stated that man is a Political Animal. State is a human and political institution. It came into existence for the sake of man and continue in existence for providing happy and prosperous life for man. Individuals became members of the state since, its inception. We can’t imagine the life of individuals outside of the state. Political Science studies the intimate Relationship between the state and the citizens. It also studies the Nature, Functions and Various theories of state authority.

It also comprises a study of the various activities of the state from that of ancient police state to the modem welfare state. Thus, Political Science deals with the Present, Past and FUture aspects of the state.

iii) Study of the Government :
Government is an important essential element of Modem State. It is an instrument which fulfills aims and goals of the state. There can be no state with out a government. Government formulates, expresses and implements the will of the state. Government consists of three organs namely Legislature, Executive and Judiciary. Legislature makes the laws, Executive implements the laws and Judiciary interpretes the laws. Political Science studies the meaning, forms, structure, nature and functions of the government. It also discusses the relationship among the various organs of the government. Hence, Political Science is treated as a science of government.

iv) Study of Associations and Institutions :
Associations and Institutions help the Individuals for their moral, religious, cultural, scientific and technological progress. These carry on their activities at local, regional, national and international levels. Individuals join as members in these Associations out of their interests or purposes. There prevails a great linkage between these voluntary Associations and Institutions. Associations and Institutions in Modem times play a significant role in the Formulation and Implementation of policies of the state and government. Voluntary bodies such as trade unions, peasant groups, professional bodies etc., will have a great impact on the state and government. Political Science explains the nature, structure and functions of the various Associations and Insti-tutions.

v) Study of Rights and Responsibilities:
Scope of Political Science includes the study of Rights and Responsibilities of citizens. Citizens in democratic states enjoy certain rights such as right to life, right to liberty, right to property etc. Political Science enumerates the definition, classification and different theories of Rights. Similarly, citizens will have some Responsibilities towards the state. These include paying taxes, obeying the laws etc. It explains the significance of Rights and Responsibilities of the citizens. Hence, Political Science examines the Realtionship between Rights and Responsibilities.

vi) Study of National and International Issues:
The scope of Political Science covers various issues of Modem state in relation with other states in matters of safeguarding Ter-ritorial integrity and Sovereignty. It studies the topics like Cold war, Balance of power, Disarmament, Detente etc. Modem states are not isolated. They depend upon other states in many spheres like importing raw materials, exporting finished goods, transport, technology, services and communications. This requires close relations among the states in international sphere. Political Science discusses not only the domestic policies of the state but also the issues of international dimensions. It covers a wide range of topics such as diplomacy, international politics, international law, international organisations etc.

vii) Study of Power:
The behaviouralists of 20th century regarded Political Science as a study of sharing and shaping of power. They pointed out that Political Science discusses how power is grabbed, manipulated anti perpetuated to have a control over the society. Morgenthau defined the power as “Man’s control over the Minds and Actions of other Men”.

viii) Study of Public Policy:
Modem Political Scientists like David Easton and Gabriel Almond argued that Political Science is a “Policy Science”. They considered Political Science as the study Of formulation, execution and evaluation of Public Policy, with the advent of Public Policy the scope of Political Science has further widened to include the dimensions of vital topics such as Industrial Policy, Agricultural Policy, Land Reform Policy, Education Policy, Population Policy etc. Public Policy of a Nation in the context of International Relations plays a crucial role in the formulation of diplomatic, economic, military and scientific strategies.

Conclusion:
The above contents show the wide range of subjects that come under the purview of Political Science.

Question 2.
Discuss the significance of the study of Political Science. [A.P. Mar. 19]
Answer:
The study of Political Science is very useful and valuable. It’s knowledge is indispensible to the rulers as well as the ruled. Its significance or importance is analysed as follows.

i) Information about the State :
The primary aim of studying Political Science is to inculcate knowledge of the state. It’s origin, nature, Structure and functions. Knowledge of the state is of great significance to every one. Solutions to various political issues are found only when we have a proper understanding of the political institutions.

ii) Knowledge of Government and Administration :
The Administrators, political leaders and diplomats who manipulate the affairs of the state require a sound knowledge of political science in order to perform their functions with efficiency. Political Science creates awareness about the organisation, control and coordination of Administrative machinery. It also covers the study of local self-governments like Gram Panchayats, Mandal Parishads, Zilla Parishads, Municipalities, Corporations etc.

iii) Provides information about Democratic values :
Political Science provides accurate information about the various political terms such as State, Government, Nation, Con-stitution, Democracy, Sovereignty, Law etc., which are used commonly. Political Science also provides a good knowledge and awareness about the Democratic values like Liberty, Equality, Fraternity, Justice and Rights.

iv) Makes Democracy Successful:
At present Democracy is in vogue in several coun-tries of the world. It is the best form of government. People in democracy elect their repre-sentatives and are ruled by them. If honest, selfless and committed representatives are not elected, the expectations of the people will not be fulfilled. Political Science explains the significance of Franchise. It educates the common men on the conditions essential for the successful functioning of democratic government.

v) Awareness about rights and responsibilities:
The study of Political Science makes people conscious of their rights and responsibilities. It also enables the citizens to be familiar with their rights and responsibilities and the interrelationship between the two. Its study makes the citizens to realize the fact that a proper exercise of rights and responsibilities is a must for leading civilised life.

vi) Teaches the Qualities of Good Citizenship :
Political Science impacts the best civic knowledge by explaining the qualities of good citizenship like cooperation, sacrifice, patriotism, obedience to the state and to the laws, farsightedness, social service etc. It trains the people to become ideal citizens.

vii) Knowledge about World Affairs:
The study of Political Science enriches individual’s knowledge on World Affairs. Political Science is useful for observing and understanding the contemporary world affairs. It stimulates right thinking, broad vision and universal understanding of various phenomena of international politics. It’s study is useful for proper’ analysis and solution of various National and International Issues.

viii) Provides knowledge about International Organizations :
A citizen of the present is not only a member of the state but also a member of the world at large. The study of Political Science promotes the spirit of internationalism. It provides a good knowledge about International Organizations like United Nations Organisation, SAARC, ASEAN, NAM, OPEC etc. It teaches about the need for harmonious relations among the nations.

ix) Develops Political Awareness :
The study of Political Science is of great impor-tance in the sense that it imports best political knowledge. It explains about the structure and functioning of different political institutions like State Government, Political parties, Occupational Associations. Hence the study of Political Science is the best training ground for knowing, following and practising the art of leadership.

x) Explains the need for Co-Operation and Toleration :
National Integration has become a crucial factor in several states. Many obstacles like communalism, linguism, sub-national regional and sub-regional feelings etc., have been threatening the national inte-gration in these states. In this context, the study of Political Science teaches about the need for adjustment, cooperation and toleration.

xi) Knowledge of Political Science is Indispensable :
The study of Political Science helps everyone to understand the mechanism and constitutional system of modem govern-ments. It creates awareness about the contemporary issues in national and international spheres. If creates awareness about Rights and Responsibilities. It’s study is essentially indispensable for the people in developing nations like India. As the majority people in these states are poor, ignorant, illiterate and sentimental in their out look. The study of Political Science inculcates a good political knowledge among them.

Aristotle regarded Political Science as the supreme science and the master of all social sciences.

Question 3.
Define Political Science and explain its nature.
Answe:
Political Science is a premier Social Science. It is mainly concerned with the study of the state in it’s relation with society, citizens, associations and the world at large. Aristotle is hailed as the Father of Political Science. He wrote famous book ‘THE POLITICS”. The term “politics” is derived from a greek word” “POLIS” and latin word “POLiTICUS” which means the city state.

Definition of Political Science:
Political Scientists gave various definitions on Political Science. They are as follows :
1. J.W. Gamer:
“Political Science begins and ends with the state”.

2. Stephen Leacock:
“Political Science deals with the government”.

Nature of Political Science:
There prevailed a controversy among the political scien-tists in regard to the nature of Political Science. Some viewed Political Science as a science others treated it as an art. Let us examine the two aspects (Science and Art) of Political Science.

i) Political Science is a SCIENCE :
According to political philosophers like Aristotle, Bluntschli, Hobbes, Montesque and others Political Science is considered as a science on the following grounds.

Political Science is studied in a systematic manner.
Experimentation is possible in politics. Principles are applied in the actual organisation of Political Institutions.
Political Science, like other sciences, has absolute and universal laws.
Predictions are easily applicable in politics.
Certain generally agreed principles can be incorporated into the study of Political Science.
Political Science, like other sciences, gives scope for establishing relationship be-tween cause and effect.

ii) Political Science is an ART :
According to political writers like Barker, J.S. Mill, Laski and others Political Science is considered as an ART on the following grounds.

Political Science has no absolute and universal laws like physical sciences.
The phenomena studied in Political Science are interpreted in various ways de-pending upon the context and situation. So it lacks uniformity in the interpretation of various concepts.
Political Science is not evolutionary in nature as its concepts are not developed in a steady, regular and continuous manner.
Scientific methods of observation and experimentation are not applicable in political science.
Complete objectivity and detachment are not found in the case of various phenom-ena in Political Science.
Political Science gives no scope for accuracy.

Short Answer Questions

Question 1.
Write about the traditional definitions of Political Science.
Answer:
Traditional definitions of Political Science may be classified under three sub catego-ries. They are mentioned as follows.
i) Political Science – A Study of the State :
Political philosophers like J.W.Gamer, R.G.Gettle, Appadovai and others defined Political Science as a study of the state.

1. J.W.Gamer:
“Political Science begins and ends with the state”.

2. R.G.GettIe :
“Political Science is a historical investigation of what the state has been, an analytical study of what the state is and a politico-ettical discussion of what the state should be”.

3. Appadorai:
“Political Science is concerned with the conditions essential for the existence and development of the state”.

ii) Political Science – A study of the Government:
Some political philosophers like Stephen Leacock, J.R.Seely and others defined Political Science as a study of the govern-ment.

1. Stephen Leacock :
“Political Science deals with the Government”.

2. J.R.Seely :
“Political Science investigates the phenomenon of the Government”.

iii) Political Science – A study of the State and the Government:
Political philoso-phers like Paul Janet, Gilchrist, Catlin and others defined political science as a study of the state and the government.

1. Paul Janet:
“Political Science is that part of social science which treats the founda-tions of state and the principles of the government”.

2. R.N.Gilchrist :
“Political Science is a study of foundations of the state and the government”.

3. Catlin :
“Political Science is a study of the political activities of individuals and various organs of government”.

Question 2.
What are the various modem definitions of Political Science?
Answer:
Modem definitions of Political Science can be classified into two sub-categories. They are discussed as follows..
i) Political Science – A study of power:
1. Lasswell and Kaplan :
“Political Science as an empirical discipline, is the study of shaping and sharing of power”.

2. William A.Robson :
“Political Science is primarily concerned with the power in society”.

ii) Political Science – A study of Allocation of values :
1. David Easton :
“Political Science is concerned with the authoritative allocation of values for a society”.

2. Hill Man :
“Politics is the Science of who gets what, when, and why”.

Question 3.
Explain about the nature of Political Science.
Answer:
Political Science is a premier Social Science. It is mainly concerned with the study of the state in it’s relation with society, citizens, associations and the world at large. Aristotle is hailed as the Father of Political Science. He wrote famous book ‘THE POLITICS”. The term “politics” is derived from a greek word” “POLIS” and latin word “POLiTICUS” which means the city state.

Definition of Political Science:
Political Scientists gave various definitions on Political Science. They are as follows :
1. J.W. Gamer:
“Political Science begins and ends with the state”.

2. Stephen Leacock:
“Political Science deals with the government”.

i) Political Science is a SCIENCE :
According to political philosophers like Aristotle, Bluntschli, Hobbes, Montesque and others Political Science is considered as a science on the following grounds.

Political Science is studied in a systematic manner.
Experimentation is possible in politics. Principles are applied in the actual organisation of Political Institutions.
Political Science, like other sciences, has absolute and universal laws.
Predictions are easily applicable in politics.
Certain generally agreed principles can be incorporated into the study of Political Science.
Political Science, like other sciences, gives scope for establishing relationship be-tween cause and effect.

ii) Political Science is an ART :
According to political writers like Barker, J.S. Mill, Laski and others Political Science is considered as an ART on the following grounds.

Political Science has no absolute and universal laws like physical sciences.
The phenomena studied in Political Science are interpreted in various ways de-pending upon the context and situation. So it lacks uniformity in the interpretation of various concepts.
Political Science is not evolutionary in nature as its concepts are not developed in a steady, regular and continuous manner.
Scientific methods of observation and experimentation are not applicable in political science.
Complete objectivity and detachment are not found in the case of various phenom-ena in Political Science.
Political Science gives no scope for accuracy.

Question 4.
Mention any three topics coverd under the scope of Political Science.
Answer:
i) Study of man in Relation to the Society and State:
Aristotle stated that “Man is a Social Animal”. Man can satisfy his basic needs like food, clothing, shelter and protection in the society. Political Science explains the relationship beween man and society. It exam- ines how man should adjust himself with the societys. It is imperative that the modem man should develop proper attitude towards the society. This is possible only when he identifies himself with the society.

ii) Study of State :
Aristotle also stated that man is a Political Animal. State is a hu-man and political institution. It came into existence for the sake of man and continue in existence for providing happy and prosperous life for man. Individuals became members of the state since its inception. We can’t imagine the life of individuals outside of the state. Political Science studies the intimate Relationship between the state and the citizens. It also studies the Nature, Functions and Various theories of state authority.

iii) Study of Associations and Institutions :
Associations and Institutions help the Individuals for their moral, religious, cultural, scientific and technological progress. These cany on their activities at local, regional, national and international levels. Individuals join as members in these Associations out of their interests or purposes. There prevails a great link-age between these voluntary Associations and Institutions. Associations and Institutions in Modem times play a significant role in the Formulation and Implementation of policies of the state and government. Voluntary bodies such as trade unions, peasant groups, professional bodies etc., will have a great impact on the state and government. Political Science explains the nature, structure and functions of the various Associations and Institutions.

Question 5.
Describe the scope of Political Science in the sphere of Government.
Ansnswer:
Scope of Political Science includes the study of government. Some political scientists like Stephen Leacock and John Richard Seeley confined the scope of the discipline to the government alone. Political Science mainly studies about the government Government is an agency of the state. There can be no State without a government. The state realises its aims through the instrument of government. Government formulates, expresses and implements the will of the state. There must be some men or body of men who are authorised to issue orders on behalf of the state. They are known as the government.

Political Science studies the meaning, forms, structure, nature and functions of the government. It discusses the relationship among the various organs of the government. It makes a differentiation between the State and Government. While dealing with the government, Political Science narrates the classification of various governments as given by Aristotle, Leacock and others. Political Science discusses the various merits and demerits, essential conditions and manifold activities of the above governments. Hence, political Science is treated as a science of government.

Question 6.
”Political Science is a study of the present, past and future of the state”. Analyse this statement
Answer:
Political scientists like Gamer and Paul Janet viewed Political Science as a study of the affairs of the state. They conceived the state as a Political Institution. The state is indispensable for every individual. Political Science studies the intimate relationship between the state and the citizens. Political Science studies the state in present, in the past and in future.

i) Study of state in the Present :
Political Science deals with the state as it exists today. It explains the meaning, nature, purpose, growth and functioning of the state. It also deals with public opinion, political parties and pressure groups which seek to capture the political power or influence public policies.

ii) Study of state in the Past:
Political Science explains about the origin and transfor-mation of the state. It also discusses about the diverse political institutions that existed within the state. It studies various factors that influenced the origin and evolution of the state. This sort of historical study is possible only in political science.

iii) Study of State in Future :
Political Science tries to determine the principles and concepts of a model state. It lays down the conditions under which a perfect state is real-ized. Political Scientists conceive the future with a view to improve the standards of political institutions and their activities in the light of changing conditions.

On the whole, the scope of Political Science includes the study of various activities; of the state from that of ancient police state to the modem welfare state. Thus, Political Science deals with the present, past and future aspects of the state.

Very Short Answer Questions

Question 1.
Write about Ancient city states.
Answer:
Ancient Greece consisted of a large number of city states. They were small both in size and population. For example, Athens,Sparta, Corinth. Each city state had its own gov-ernment. The greeks based their political philosophy on the concept of city-state. The popu-lation of the city-state was divided into three groups : 1) Citizens 2) Aliens and 3) Slaves.

Question 2.
Give any two traditional definitions of Political Science.
Answer:
Political scientists gave various definitions on Political Science. They are as follows.

1. J.W.Gamer:
“Political Science begins and ends with the State”.

2. Stephen Leacock:
“Political Science deals with the Government”.

3. David Easton :
“Political Science is concerned with the authoritative allocation of values for a society”.

Question 3.
Write about any two modem definitions of Political Science.
Answer:
Modem definitions of Political Science can be classified into two sub-categories. They are discussed as follows..
i) Political Science – A study of power:
1. Lasswell and Kaplan :
“Political Science as an empirical discipline, is the study of shaping and sharing of power”.

2. William A.Robson :
“Political Science is primarily concerned with the power in society”.

ii) Political Science – A study of Allocation of values :
1. David Easton :
“Political Science is concerned with the authoritative allocation of values for a society”.

2. Hill Man :
“Politics is the Science of who gets what, when and why”.

Question 4.
How does Political Science teach the qualities of good citizenship?
Answer:
Political Science imparts the best civic knowledge by explaining the qualities of good citizenship like cooperation, sacrifice, patriotism, obedience to the state and to the laws, forsightedness, social service etc. It trains the people to become ideal citizens.

Question 5.
Justify the statement that Political Science in an Art.
Answer:
Political Science is an ART:
According to political writers like Barker, J.S. Mill, Laski and others Political Science is considered as an ART on the following grounds.

Political,Science has no absolute and universal laws like physical sciences.
The phenomena studied in Political Science are interpreted in various ways de pending upon the context and situation. So it lacks uniformity in the interpretation of various concepts.
Political Science is not evolutionary in nature as its concepts are not developed in a steady, regular and continuous manner.
Scientific methods of observation and experimentation are not applicable in political science.
Complete objectivity and detachment are not found in the case of various phenom-ena in Political Science.
Political Science gives no scope for accuracy.

Question 6.
On what grounds is Political Science considered as a Science?
Answer:
Political Science is a SCIENCE :
According to political philosophers like Aristotle, Bluntschli, Hobbes, Montesque and others Political Science is considered as a science on the following grounds.

Political Science is studied in a systematic manner.
Experimentation is possible in politics. Principles are applied in the actual organisation of Political Institutions.
Political Science, like other sciences, has absolute and universal laws.

Question 7.
Name any four topics covered under the scope of Political Science.
Answer:
The scope of Political Science comprises the following points.

Study of man in relation to the society and state.
Study of the state.
Study of the government.
Study of Associations and Institutions.

Question 8.
In what way is Political Science considered as a study of Government?
Answer:
Study of the Government: Government is an important essential element of Modem State. It is an instrument which fulfills aims and goals of the state. There can be no state with out a government. Government formulates, expresses and implements the will of the state. Government consists of three organs namely Legislature, Executive and Judiciary. Legislature makes the laws, Executive implements the laws and Judiciary interpretes the laws. Political Science studies the meaning, forms, structure, nature and functions of the government. It also discusses the relationship among the various organs of the government. Hence, Political Science is treated as a science of government.

AP Inter 1st Year Commerce Study Material Chapter 12 Emerging Trends in Business

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 12th Lesson Emerging Trends in Business Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 12th Lesson Emerging Trends in Business

Essay Answer Questions

Question 1.
Define E – business and explain the scope of E – business.
Answer:
Ther term E-business refers to the integration of business tools based on ICT to improve the functioning of the company. “E-business” refers to the use of an online support for the relationship building between a company and clients. E – business was first used by IBM in 1997. It defined E – business as “the transformation of key business processes through the use of internet technologies”. E – business is defined as the application of information and communication technologies (ICT) which support all the activities and realms of business.

E-Business uses web based technology to improve relationships with customers. Implementing an E-business project necessarily involves the deployment of a network or web – interface connecting company specific services to the client.

Scope of E – Business :
E – business can be divided into following areas.
a) E – business within the organisation

b) Business to business (B2B) :
E – business refers to an exchange of products and services by one business and another.

c) Business to customer (B2C) :
E – business refers to an exchange of products and services from a business to a customer.

d) Customer to customer (C2C) :
E – business refers to C2C transactions are being facilitated by websites like quicker, olx, where customers offer their products online to be bought by other customers.

e) Customer to business (C2B) :
C2B transactions involve provision of project work by customers on internet to the needy companies.

Most of us are aware of buying products online through some sites like Flipkart, Jabong and Amazon. Almost everything from gym equipment to laptops, apparels to Jewelries are available online in this age of E-commerce. Even people are also buying services online. Business consultants, lawyers and doctors are offering their services or advices to their potential clients via internet.

Electronic business is a super set of business cases. E – commerce is one of the aspects of e – business. Some other important aspects of e – business, which are successfully carried through the internet, are e – auctioning, e – banking, e – directories, e – engineering, e – franchising, e – gambling, e – learning, e – mailing, e – marketing e – operational resource management, etc.

i) E-commerce :
Transacting or facilitating business through internet is called e-commerce. E-commerce is short for “Electronic commerce”.

ii) E – auctioning :
The internet enables people to participate in the auction without sacrificing their personal time. In e – auctioning the people who want to participate in the auction, visit the website with a click and go through the details.

iii) E-banking :
Electronic banking is one of the most successful online businesses. E-banking allows customers to access their accounts and execute orders through use of website. Online banking allows the customers to get their money from an ATM.

iv) E-marketing :
Electronic marketing provides a worldwide platform for buying and selling of goods without having any geographical barriers. The internet allows companies to react to individual customer demands immediately without any loss of time. It does not matter where the customer is located.

v) E – trading :
E-trading is also known as “online trading” or e – broking. It is used for buying and selling stocks in stock exchanges.

Question 2.
Explain the benefits of E – business.
Answer:
E-business has many advantages which can be broadly classified into the following categories.
A) Benefits to Customer
B) Benefits to Organisation
C) Benefits to Society

A) Benefits to Customer:
i) Shopping at ease :
E – business enables customers to shop or do other transactions 24 hours a day, round the year from almost any location.

ii) Wide choice :
Customers will have more choices or more alternative products and services.

iii) Price savings :
E – business provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons.

iv) Exchange of information :
Allows customers to interact with other customers and exchange their opinions and experiences on products purchased.

B) Benefits to Organisation :
i) Reach beyond boundaries :
Extends the market place to national and international markets.

ii) Cost savings:
Reduces the cost of creating, processing, distributing, storing, and retrieving information. Allows reduced inventories and overheads.

iii) Competitive benefits :
Reduced processing time allows for customization of products and services for achieving competitive advantages.

iv) Earlier capital collection :
Reduces the time between the outlay of capital and the receipt of products and services.

C) Benefits to Society :
i) Environmental benefits :
Enables more individuals to work at home and to do less travelling for shopping, resulting in less traffic on the roads and lower air pollution.

ii) Public welfare :
Allows some merchandise to be sold at lower prices benefiting the poor ones.

iii) Availability of products :
Enables people in Third World countries and rural areas to enjoy produces and services which otherwise are not available to them.

Question 3.
Explain the opportunities of business enterprises in 21^st century.
Answer:
The following are the opportunities of business enterprises in 21^st century:

i) LPG :
The economic reforms initiated in the form of Liberalization, Privatization, and Globalization (LPG) have brought in structural changes which ultimately created favourable environment for business enterprises in India.

ii) Increase in size and diversification :
The 21^st century business enterprises are characterized with large-sized and highly diversified organisations. Companies are able to reduce their costs and thereby increase in profits.

iii) Increase in per capita income :
India has emerged as the fourth largest economy globally with a high growth rate with its improved per capita income. Per capita income is the measure of living standards of its people in a country. As India’s per capita income is increasing, the business opportunities are also increasing in India.

iv) Market economies:
The Indian economy being one of the largest economies in the world with a population of more than 1.2 billion is flourishing and attracting industrial, trade and service sectors all around the world.

v) E-Commerce – A gate way to global markets :
Business enterprises across the globe are discovering the benefits of electronic commerce.

vi) Technological advancements :
21^st century business enterprises are able to use ultramodern technology. With the advancement of technology, organisations are able to offer services.

vii) Expansion of financial services :
Banking insurance, debt and equity financing, micro finance sectors are helping the people to save money and to get liberal credit for their future needs.

viii) Automation of business processes :
Business Process Automotion (BPA) is the strategy that a business uses to automate processes in order to curtail costs. The objective of BPA is not only to automate business processes,but also to simplify and improve business workflows in terms of achieving greater efficiency, adapting to changing business needs and reducing potentiality human error.

ix) Growing mergers, acquisitions and foreign collaborations :
Mergers and acquisitions is a strategy of modern business enterprises for improving innovation, profitability, market share and stock prices. This helps in generating cost effectiveness.

x) Scope for international enterpreneurship :
In 21^st century, many organizations are globalizing their businesses in terms of manufacturing, service delivery, capital sourcing, or talent acquisition as a defensive strategy. Similarly these are discovering a new business opportunities in more than one country to create new products or services to suit to the diversified needs of the customers.

Question 4.
Explain the challenges of business enterprises in 21^st century.
Answer:
The following are the challenges of business enterprises in 21^st century:
1) Threat of technology :
Business organisations have to adopt themselves in tune with the changing technology and modernize their plant and equipment and processes, if not they will become outdated in the market.

2) Growing consumer awareness:
Growing consumer awareness about the products and services will continue to drive sustainability of business in 21st century. Businesses need to respond to consumer demand to gain customers and avoid losing their market share.

3) Challenges of globalization :
Globalization is leading to strategic challenges of mixed cultures and languages in the business environment.

4) Depleting natural resources:
Most of the manufacturing enterprises depend upon certain natural resources which is a key source of raw materials.

5) Economic recession :
Economic recession took place in the United States and Europe is slowly showing its affects on performance of business enterprises in other countries also.

6) Information challenges :
Information technology supported by a new world infra-structure of data communications and telecommunications i.e. use of internet, wireless, e-commerce as part of management tools and easing of technology transfer has posed a bigger challenge for 21^st century business enterprises.

7) The challenge of the environment :
Environmental degradation is one of the biggest challenges of business organisations facing today. Pollution and global warming are the challenges, which all countries are facing.

8) Corruption and bureaucratic hurdles :
Corruption is a very big hurdle for doing business. It is a barrier to the effective development of the private sector and poses business risks.

9) Changing regulatory frame work:
A changing regulatory environment is always of concern in certain industries. Two key areas of regulatory challenges are taxes and health care. The threat of increased costs due to new carbon taxes and presser to “go green” is another challenge.

10) Transparency and governance :
Corporate governance involves organizing and prioritizing a variety of interests. Modern companies are in surveillance of transparency and governance issues.

11) Corporate social responsibility:
The practical implementation of corporate social responsibility is facing lot of problems. Lack of understanding, inadequate trained personnel, coverage, etc. are a few hurdles of CSR programmes.

12) Foreign exchange risk :
Foreign exchange risk is another factor causing constant instability in the running of business organisation.

13) Security Issues:
Security threat to business has become more pronounced in 21^st century. With the proliferation of Electronic Commerce and the “Virtual Office”, threats are becoming everyday occurrence to business.

14) Human resource challenges:
One of the biggest challenges of 21^st century business is human resources – finding the right staff, training, and retaining them are concerns of the HR function.

Short Answer Questions

Question 1.
Explain the scope of E-business.
Answer:
The scope of E-business can be divided into following areas :
a) E-business within the organisation
b) Business to business (B2B) dealing
c) Business to customer (B2C) transactions
d) Customer to customer (C2C)
e) Customer to business (C2B)

The following a and b category E-business refers to an exchange of production and services by one business and another business from a business to a customer and c and d category E-business refers to transactions are being facilitated by websites where customers offer their products online, to be bought by other customers and provision of project work by customers on internet to the needy companies.

Some other important aspects of e – business, which are successfully carried through the internet, are e – auctioning, e – banking, e – directories, e – trading, etc. In the age of e – commerce almost everything from gym equipment to laptops are available online. Even people are also buying services online. Business consultants, lawyers and doctors are offering their services or advices to their potential clients via internet.

Question 2.
What are the benefits ofE – business to organizations?
Answer:
The following are the benefits of E-business to organizations.
i) Reach beyond boundaries:
Extends the market place to national and international markets.

ii) Cost savings :
Reduces the cost of creating, processing, distributing, storing and retrieving information. Allows reduced inventories and overheads.

iii) Competitive benefits:
Reduced processing time allows for customization of products and services for achieving competitive advantages.

iv) Earlier capital collection :
Reduces the time between the outlay of capital and the receipt of products and services.

Question 3.
What are the benefits ofE – business to customers?
Answer:
The following are the benefits of E – business to customers.
i) Shopping at ease:
E-business enables customers to shop or do other transactions 24 hours a day, round the year from almost any location.

ii) Wide choice :
Customers will have more choices or more alternative products and services.

iii) Price savings :
E-business provides customers with less expensive products and services.

iv) Exchange of information :
Allows customers to interact with other customers and exchange their opinions and experiences on products purchased.

Question 4.
Briefly outline the risks faced while involving in a E-business transaction.
Answer:
The following are the risks faced while involving in a E-business transaction.

Risk of the information being unauthorized altered while travelling the internet.
Risk related to confidentiality of personal information and banking information.
Risk relating to legal enforceability of transactions.
Risk of failure of electronic communications.
Risk to the management in controlling and clearing the E-commerce transactions.
Risks relating to technology like viruses and hacking.

Question 5.
What are the benefits of E-business to society?
Answer:
The following are the benefits of E-business to the society.

i) Environmental benefits:
Enables more individuals to work at home and to do less travelling for shopping, resulting in less traffic on the roads, and lower air pollution.

ii) Public welfare:
Allows some merchandise to be sold at lower prices benefiting the poor ones.

iii) Availability of products:
Enables people in Third World countries and rural areas to enjoy produces and services which otherwise are not available to them.

Very Short Answer Questions

Question 1.
business [May 17-T.S.]
Answer:
The term ‘E-business’ refers to the integration of business tools based on ICT to improve the functioning of the company. The term e-business was first used by IBM in 1997. It defined E-business as “the transformation of key business processes through the use of internet technologies”. E-business uses web based technology to improve relationship with customers.

Question 2.
E-banking [Mar. 2019, 15 -T.S.]
Answer:
Electronic banking is one of the most successful online businesses. E-banking allows customers to access their accounts and execute orders through use of website. Online banking allows the customers to get their money from an Automated Teller Machine (ATM), instead of walking up to the cash desk in the bank, can view their accounts, transfer funds and can pay bills. Eg. Net Banking.

Question 3.
E-marketing
Answer:
Electronic marketing provides a worldwide platform for buying and selling of goods without having any geographical barriers. The internet allows companies to react to individual customer demands immediately without any loss of time. It does not matter where the customer is located by e-mails, etc.

Question 4.
E-commerce
Answer:
Transacting or facilitating business through Internet is called E-commerce. E-commerce is short for “Electronic commerce”. A form of business transactions conducted electronically in E-commerce.

Question 5.
E – auctioning
Answer:
The internet enables people to participate in the auction without sacrificing their personal time. In E – auctioning the people, who want to participate in the auction, visit the website with a click and go through the details of goods offered.

Question 6.
E – trading [Mar. 17 – T.S.]
Answer:
E-trading is also known as “online trading” or E – broking. It is used for buying and selling stocks in stock exchanges.

AP Inter 1st Year Commerce Study Material Chapter 11 Multi National Corporations (MNCs)

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 11th Lesson Multi National Corporations (MNCs) Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 11th Lesson Multi National Corporations (MNCs)

Essay Answer Questions

Question 1.
Define MNC and explain its features.
Answer:
The word ‘Multinational’ consists of two words Multi and National. Multi means ‘many’ and national means “country or nation”. Therefore Multinational company means a company that operates in several countries.

Multinational companies are also known as Transnational corporations International corporations or Global corporations. They conduct business in two or more countries. These corporations possess huge capital resources, the latest technology along with worldwide goodwill.

Definition :
According to International Labour Organisations (ILO) report –
“An enterprise whose managerial headquarters are located in one country, while it carries out operations in a number of other countries as well.”

According to Neil. H. Jocoby “A multinational corporation owns and manages business in two or more countries.”

David E. Liliental, considering a wider parameter, defines the MNCs as “Corporations which have their home in one country but operate and live under the laws and customs of other countries as well.” For brevity, MNC refers to the business enterprise operating in more than one nation.

The essential feature of a MNC is that headquarters are located in home country and they carry operations in a number of other countries i.e. host countries.

Characteristics of MNCs:
a) Giant size :
The sales and assets of MNCs are quite large. Hence they earn supernormal profits.

b) Global operations :
MNCs carry production and marketing operations in different countries of the world. They possess all the infrastructural facilities.

c) Centralized control :
MNC has its headquarters in the home country. It exercises control over all branches and subsidiaries.

d) Dominant position and status :
MNCs carry on operations in bulk and cover many people. Hence they control the market and enjoy a dominant position and status in all operated countries.

e) Sophisticated technology :
Generally MNCs had advance technology so as to produce quality goods and services to the consumers.

f) Professional management:
MNCs employ professional trained managers to integrate and manage world wide operations to maximize profits.

g) International research and development :
MNCs internationalize their research and development operations in order to caputre the market of the host countries.

h) Easy entry :
MNCs can enter into any country easily with their huge capital, technology, and managerial skills.

i) Higher revenues :
MNCs generate huge revenues with their large size sales and benefits of large scale economies

Question 2.
Define MNC and explain the advantages of MNCs.
Answer:
The word Multinational consists of two words Multi and National. Mutli means many and national means “nations or countries”. Therefore Multinational company means a company that operates in several countries.

Multinational companies are also known as Transnational Corporations or International Corporations-or Global Corporations. They conduct business in two or more countries. These corporations possess huge capital resources, latest technology along with worldwide goodwill.

According to Neil. H. Jocoby “A multinational corporation owns and manages business in two or more countries.”

David E. Liliental, considering a wider parameter, defines the MNCs as.”Corporations which have their home in one country but operate and live under the laws and customs of other countries as well.” For brevity, MNC refers to the business enterprise operating in more than one nation.

The essential feature of a MNC is that headquarters are located in home country and they carry operations in a number of other countries i.e. host countries.

Advantages to Host Countries:
1) Provide Capital :
The MNCs provide required capital for the development of industries in under developing countries. The direct foreign investment is quite useful to the developing countries.

2) Transfer of Technology:
MNCs serve as vehicles for transfer of advanced technology to the developing countries.

3) Generate Employment :
MNCs create employment in various cadres and pay attractive salaries in the host countries.

4) Foreign Exchange :
MNCs enable the host countries to increase their exports and reduce the imports. It improves the position of balance of payments.

5) Managerial Revolution :
MNCs help to professionalise management in host countries. They employ modern management techniques and trained manager.

6) Break Monopoly :
MNCs encourage healthy competition and break domestic monopolies.

7) Growth of Domestic Business Firms:
MNCs encourage domestic suppliers, ancillary units, bankers, and other institutions to expand their activites.

8) Innovation :
MNCs bring out innovation in their production and distribution activities which are required to provide goods and services to needs of the consumers of the host country.

9) Better Standard of Living :
MNCs help to improve standard of living in host countries by providing superior products and services at a reasonable rate.

10) Improves Public Relations among Nations :
They encourage international brotherhood through international business.

Advantages to Home Countries :
1) Availability of resources:
MNCs procure the land, labour, materials at cheap rates and can supply goods and services at reasonable rates.

2) Develop exports :
MNCs encourage the export of several products. This will imporve their foreign exchange earnings.

3) Generate income :
They can earn huge income from dividends, licenising fees, royalty and profits from their operations. This will improve the home country’s income.

4) Provides employment:
MNCs provide employment to the people of home country, as managers, technicians and other staff members.

5) Make use expertise :
The MNCs make use the latest technical knowledge and expertise of managers of different countries to run their business.

Question 3.
Define MNC and explain the limitations of MNCs.
Answer:
The word Multinational consists of two words Multi and National. Mutli means many and national means “nations or countries”. Therefore Multinational company means a company that operates in several countries.

Multinational companies are also known as Transnational Corporations or International Corporations or Globed Corporations. They conduct business in two or more countries. These corporations possess huge capital resources, latest technology along with worldwide goodwill.

According to Neil. H. Jocoby “A multinational corporation owns and manages business in two or more countries.”

The essential feature of a MNC is that headquarters are located in home country and they carry operations in a number of other countries i.e. host countries.

Disadvantages of MNCs:
1) Monopolize the markets :
MNC may join hands with big business units in host country to monopolize the markets. This ultimately leads to concentration of economic power.

2) Disregard host countries’ priorities :
MNCs invest only in porfitable business and ignore priorties set by the host countries. This results in regional backwardness in the host country.

3) Imbalance in the foreign exchange remittances :
MNCs and their subsidiaries collect huge amounts in the form of dividend. This creates an imbalance in the foreign exchange remittances.

4) Transfer of outdated technology :
The MNCs transfer the outdated technology, which is unsuitable and absolute by charging higher rates.

5) Impose restrictions :
MNCs try to impose restrictions with host countries related to non transfer of technical knowlege, determination of price, etc. to discourage the exports.

6) Threat to sovereignty :
MNCs may interfere in the political affairs of the country and try to create internal disturbances.

7) Spread of foreign culture :
MNCs cause damage to the cultural values of the host countries. They spread the foreign culture and change the attitudes, desires and fashions of the people.

8) Depletion of natural resources:
MNCs cause rapid depletion of some of the natural resources in host countries.

9) Retard growth of employment :
MNCs try to provide employment to their own nations. This bias attitude of the MNCs may lead to unemployment in the host country.

10) Business strategies and practices :
MNCs dump harmful products, give deceptive advertisements attract the consumers to purchase outdated and unwanted goods.

Question 4.
What is globalisation and explain the necessity of Globalisation?
Answer:
Globalisation refers to the increasing integration of markets (exchange) and production, to include the mobility of resources (capital, labour, ‘organisation and knowledge’).

The world is moving away from self-contained national economies toward an interdependent, integrated global economic system. Globalisation refers to the shift toward a more integrated and interdependent world economy.

Globalization has two facets :

The globalization of markets
The globalization of production

1) Globalization of Markets:

The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace
Falling trade barriers make it easier to sell internationally
The tastes and preferences of consumers are converging on some global norm
Firms help create the global market by offering the same basic products worldwide

2) Globalization of Production :

The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantages of national differences in the cost and quality of factors of production like land, labour and capital
Companies compete more effectively by lowering their overall cost structure or improving the quality or functionality of their product offering

There are two macro factors that underlie the trend toward greater globalization :
1) Low Trade Barriers:
The decline in barriers to the free flow of goods, services and capital. Advanced countries made a commitment to lower barriers to trade and investment.

2) Technological change:
Technological change has made the globalization of markets a reality. Important advances have occurred in microprocessors, telecommunications, Internet and World Wide Web, transportation technology, etc.

Short Answer Questions

Question 1.
Explain the meaning of MNC.
Answer:
The word Multinational consists of two words Multi and National. Mutli means many and national means “nations or countries”. Therefore Multinational company means a company that operates in several countries.

Multinational companies are also known as Transnational Corporations or International Corporations or Global Corporations. They conduct business in two or more countries. These corporations possess huge capital resources, latest technology along with worldwide goodwill.

According to Neil. H. Jocoby “A multinational corporation owns and manages business in two or more countries.”

The essential feature of a MNC is that headquarters are located in home country and they carry operations in a number of other countries i.e. host countries.

Question 2.
List out the features of MNCs. [Mar. 2018 – A.P. & T.S.]
Answer:
a) Giant size :
The sales and assets of MNCs are quite large. Hence they earn supernormal profits.

b) Global operations :
MNCs carfy production and marketing operations in different countries of the world. They possess ail the infrastructural facilities.

c) Centralized control :
MNC has its headquarters in the home country. It exercises control over all branches and subsidiaries.

d) Dominant position and status:
MNCs carry on operations in bulk and cover many people. Hence they control the market and enjoy a .dominant position and status in all operated countries.

e) Sophisticated Technology :
Generally MNCs had advance technology so as to produce quality goods and services to the consumers.

f) Professional Management :
MNCs employs professional trained managers to integrate and manage world wide operations to maximize profits.

g) International research and development:
MNCs internationalize their research and development operations in order to caputre the market of the’host countries.

h) Easy entry :
MNCs can enter into any country easily with their huge capital, technology and managerial skills.

i) Higher revenues :
MNCs generate huge revenues with their large size sales and benefits of large scale economies.

Question 3.
State any four merits of MNCs to host country. [Mar. 2019 – A.P. Mar. 17 – T.S.]
Answer:
MNCs help the host country in the following ways.

The investment level, employment level and income level of the host country increases due to the operation of MNCs.
The industries of host country get latest technology from foreign countries through MNCs.
The host country’s business also gets management expertise from MNCs.
The domestic traders and market intermediaries of the host country gets increased business from the operation of MNCs.
MNCs break protectionalism, curb local monopolies, create competition among domestic companies and thus enhance their competitiveness.
Domestic industries can make use of R & D outcomes of MNCs.
The host country can reduce imports and increase exports due to goods produced by MNCs in the host country. This helps to improve balance of payment.
Level of industrial and economic development increases due to the growth of MNCs in the host country.

Question 4.
Explain any four merits of MNCs to home country. [Mar. 15 – T.S.]
Answer:
MNCs home country has the following advantages.

MNCs create opportunities for marketing the products produced in the home country throughout the world.
They create employment opportunities to the people of home country both at home and abroad.
It gives a boost to the industrial activities of home country.
MNCs help to maintain favourable balance of payment of the home country in the long run.
Home country can also get the benefit of foreign culture brought by MNCs.

Question 5.
Explain any four disadvantages to the host country. [Mar. 17, 15 – A.P.]
Answer:

MNCs may transfer technology which has become outdated in the home country.
As MNCs do not operate within the national autonomy, they may pose a threat to the economic and political sovereignty of host countries.
MNCs may kill the domestic industry by monopolising the host country’s market.
In order to make profit, MNCs may use natural resources of the home country indiscriminately and cause depletion of the resources.

Question 6.
State any four disadvantages to home country.
Answer:

MNCs may join hands with big business units in host country to monopolize the markets. This ultimately leads to concentration of economic power.
The MNCs transfer the outdated technology, which is unsuitable and absolute by charging higher rates.
MNCs may interfere in the political affairs of the country and try to create internal disturbances.
MNCs try to provide employment to their own nations. This bias attitude of the MNCs may lead to unemployment in the host country.

Very Short Answer Questions

Question 1.
Define Globalisation.
Answer:
The world is moving away from self contained national economies toward an interdependent integrated global economic system. Globalization refers to the shift toward a more integrated and interdependent world economy.

Globalisation has two facets :

The globalization of markets
The globalization of production

Question 2.
Define FDI.
Answer:
Foreign Direct Investment (FDI) is the control of production which takes place in one country (host country) by a firm based in another country (home). FDI is the defining feature of the MNC. Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country.

Question 3.
Define MNC. [May, 17 – A.P.]
Answer:
The word ‘Multinational’ consists of two words Multi and National. Multi means ‘many’ and national means “country or nation”. Therefore Multinational company means a company that operates in several countries.

Multinational companies are also known as Transnational corporations or International corporations or Global corporations. They conduct business in two or more countries. These corporations possess huge capital resources, latest technology along with world wide goodwill.

Examples of MNCs are :
Pepsi, Hyundai, Nike, Reebok, LG, Samsung and many more.

AP Inter 1st Year Commerce Study Material Chapter 10 Micro, Small and Medium Enterprises (MSMEs)

October 3, 2022

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

AP Inter 1st Year Commerce Study Material Chapter 9 Sources of Business Finance-II

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 9th Lesson Sources of Business Finance-II Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 9th Lesson Sources of Business Finance-II

Essay Answer Questions

Question 1.
1. Explain various sources of business finance available to Indian businessmen.
Answer:
A businessman can raise funds from various sources. On the basis of the period, sources of finance can be categorized into three. They are

Long-term sources
Medium-term sources
Short-term sources

1) Long-term sources of finance :
It includes i) Equity shares and preference shares ii) Debentures iii) Retained earnings.

i) Equity Shares :
Equity shares are the most important source of raising long-term capital by a company. Equity shares, also known as ordinary shares and also known as ownership capital or owner’s funds. Equity shareholders do not get a fixed divident but are paid on the basis of earnings by the company. They enjoy the rewards as well as bear the risk of ownership. Their liability, however, is limited to the extent of capital contributed by them in the company.

Preferences shares :
The capital raised by issue of preference shares is called preference share capital’. In other words, as compared to the equity shareholders, the preference shareholders have a preferentail claim over dividend and repayment of capital. Preference shareholders generally do not enjoy any voting rights. A company can issue different types of preference shares by raising capital.

ii) Debentures:
Debentures are an important instrument for raising long-term debt capital. A company can raise funds through issue of debentures. It bears a fixed rate of interest. The debenture issued by a company is an aknowledgement that the company has borrowed a certain amount of money, which it promises to repay on a future date. ‘Debenture holders’ are, therefore, termed as ‘creditors of the company’.

iii) Retained Earnings :
A company generally does not distribute all its earnings amongst the shareholders as dividends. A portion of the net earnings may be retained in the business for use in the future. This is known as ‘retained earnings’. It is a source of internal financing or self financing or ‘ploughing back of profits’.

2) Medium-term sources of finance :
It includes i) Public deposits ii) Loans, from banks iii) Lease financing

i) Public deposits:
The deposits that are raised by organisations directly from the public are known as ‘Public deposits’. Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. The organisation in return issues a deposit receipt as acknowledgement of the debt. Public deposits can take care of medium-term financial requirements of a business.

ii) Commercial Banks:
Commercial banks occupy a vital position as they provide funds for different purposes as well as for different time periods. Banks extend loans to firms of all sizes and in may ways, like, cash credits, overdrafts, term loans, purchase/discounting of bills, and issue of letter of credit.

iii) Lease Financing :
A lease is a contractual agreement whereby one party i.e. the owner of an asset grants the other party the right to use the asset in return for a periodic payment. In other words it is a renting of an asset for some specified period. The owner of the assets is called the “lessor” while the party that uses the assets is known as the ’lessee’. Lease finance is an important means for modernisation and diversification in the firm. Such financing is resorted to acquiring assets like computers and electronic equipment.

3) Short-term sources of finace :
It includes i) Bank credit ii) Trade credit iii) Installment credit iv) Advances v) C.P (Commercial Paper)

i) Bank credit :
Commercial banks extend the short-term financial assistance to business firms by means of bank credit. Bank credit may be provided in the following forms i) loans ii) cash credit iii) overdraft.

ii) Trade credit:
Trade credit is the credit extended by one trader to another for the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment. Trade credit is commonly used by business organisations as a source of short-term financing.

iii) Installment credit:
This is another method by which the assets are purchases and possession of goods is taken immediately but the payment is made in installment over a pre-determined period of time. Generally, interest is charged on the unpaid price.

iv) Advances:
Some business organisations get advances from their customers and agents against orders and this source is short term source of finance for them.

v) Commercial Paper (CP) :
Commercial paper is an unsecured promissory note issued by a firm to raise funds for short period, varying from 90 days to 364 days. It is issued by one firm to other business firms, insurance, companies, pension funds and banks. The amount raised by CP is generally very large. As the debt is totally unsecured, the firms having good credit rating can issue the CP.

Question 2.
Discuss the main sources of finance available to companies for meeting long-term as well as short-term financial requirements.
Answer:
A businessman can raise funds from various sources. On the basis of period, sources of finance can be categorized into three. They are Q

Longterm sources
Mediumterm sources
Short-term sources

Long-term sources of finance :
It includes i) Equity shares and preference shares ii) Debentures iii) Retained earnings.

Preferences shares :
The capital raised by issue of preference shares is called ‘preference share capital’. In other words, as compared to the equity shareholders, the preference shareholders have a preferentail claim over dividend and repayment of capital. Preference shareholders generally do not enjoy any voting rights. A company can issue different types of preference shares by raising capital.

Short-term sources of finance :
It includes i) Bank credit ii) Trade credit iii) Installment credit iv) Advances v) C.P
(Commercial Paper)

i) Bank credit:
Commercial banks extend the short-term financial assistance to business firms by means of bank credit. Bank credit may be provided in the following forms i) loans ii) cash credit iii) overdraft.

iv) Advances:
Some business organisations get advances from their customers and agents against orders and this source is short term source of finance for them.

v) Commercial Paper (CP) :
Commercial paper is an unsecured promissory note issued by a firm to raise funds for short period, varying from 90 days to 364 days. It is issued by one firm to other business firms, insurance, companies, pension funds, and banks. The amount raised by CP is generally very large. As the debt is totally unsecured, the firms having good credit rating can issue the CP.

Question 3.
Write a comparative evolution of the various methods that are opend to meet the financial requirements of a business firm.
Answer:
A businessman can raise funds from various sources. On the basis of period, sources of finance can be categorized into three. They are

Long-term sources
Medium-term sources
Short-term sources

i) Long-term sources of finance :
It includes i) Equity shares and preference shares ii) Debentures iii) Retained earnings.

i) Equity Shares:
Equity shares are the most important source of raising long-term capital by a company. Equity shares, also known as ordinary shares and also known as ownership capital or owner’s funds. Equity shareholders do not get a fixed divident but are paid on the basis of earnings by the company. They enjoy the rewards as well as bear the risk of ownership. Their liability, however, is limited to the extent of capital contributed by them in the company.

iii) Retained Earnings :
A company generally does not distribute all its earnings amongst the shareholders as dividends. A portion of the net earnings may be retained in the business for use in the future. This is known as ’retained earnings’. It is a source of internal financing or self financing or ‘ploughing back of profits’.

2) Medium-term sources of finance :
It includes i) Public deposits ii) Loans from banks iii) Lease financing

i) Public deposits :
The deposits that are raised by organisations directly from the public are known as ‘public deposits’. Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form. The organisation in return issues a deposit receipt as acknowledgement of the debt. Public deposits can take care of medium-term financial requirements of a business.

ii) Commercial Banks :
Commercial banks occupy a vital position as they provide funds for different purposes as well as for different time periods. Banks extend loans to firms of all sizes and in may ways, like, cash credits, overdrafts, term loans, purchase/discounting of bills, and issue of letter of credit.

iii) Lease Financing :
A lease is a contractual agreement whereby one party i.e. the owner of an asset grants the other party the right to use the asset in return for a periodic payment. In other words it is a renting of an asset for some specified period. The owner of the assets is called the “lessor” while the party that uses the assets is known as the ‘lessee’. Lease finance is an important means for modernisation and diversification in the firm. Such financing is resorted to acquiring assets like computers and electronic equipment.

3) Short-term sources of finance :
It includes i) Bank credit ii) Trade credit iii) Installment credit iv) Advances v) C.P (Commercial Paper)

i) Bank credit:
Commercial banks extend the short-term financial assistance to business firms by means of bank credit. Bank credit may be provided in the following forms i) loans ii) cash credit iii) overdraft.

iv) Advances:
Some business organisations get advances from their customers and agents against orders and this source is short term source of finance for them.

Question 4.
What do you mean by Specialized Financial Institutions? Why are these needed?
Answer:
Specialised financial institutions are the institutions which have been set up to serve the increasing financial needs of commerce and trade in the area of venture capital, credit rating and leasing, etc.

1) IFCI Venture Capital Funds Ltd. (IVCF):
Formerly known as Risk Capital and Technology Finance Corporation Ltd. (RCTC), is a subsidiary of IFCI Ltd. It was promoted with the objective of broadening entrepreneurial base in the country by facilitating funding to ventures involving innovative product or process or. technology.

2) ICICI Venture Funds Ltd :
Formerly known as Technology Development and Information Company of India Limited (TDICI), was founded in 1988 as a joint venture with the UTI. Subsequently, it became a fully owned subsidiary of ICICI. It is a technology venture finance company, set up to sanction project finance for new technology ventures. The industrial units assisted by it are in the fields of computer, chemicals, drugs, diagnostics, engineering, etc.

3) Tourism Finance Corporation of India Ltd (TFCI) :
TFCI is a specialised financial institution set up by the Government of India for promotion and growth of tourist industry in the country. Apart from conventional tourism projects, it provides financial assistance for non-conventional tourism projects like amusement parks, ropeways, car rental services, ferries, etc.

Question 5.
Critically examine the advantages and disadvantages of raising funds by issuing shares of different types.
Answer:
Joint stock companies’ capital is divided into number of equal parts known as shares. A company can issue different types of shares to get funds from the investors to suit their requirement. Under the Companies Act 1956 a company can issue only two types of shares.

Preference shares
Equity shares.

1) Preference shares :
As compared to the equity shareholders, the preference shareholders have a preferential claim over divided and repayment of capital. Preference shares resemble debentures as they bear fixed rate of return. Preference shares have some characteristics of both equity shares and debentures. Preference shareholders generally do not enjoy any voting rights.

Merits or Advantages:

Preference shares provide reasonably steady income in the form of fixed rate of return and safety of investment.
Preference shares are useful for those investors who want to get fixed rate of return with comparatively low risk.
It is a superior security over equity shares.
Payment of fixed rate of dividend to preference shares may enable a company to declare higher rates of dividend for the equity shareholders in good times.
Preference capital does not create any sort of charge against the assets of a company.

Limitations:

Preference shares are not suitable for those investors who are willing to take risk and are interested in higher returns.
Preference capital dilutes the claims of equity shareholders over assets of the company.
The rate of dividend on preference shares in generally higher than the rate of interest on debentures.

2) Equity shares :
Equity shares are the most important source of raising long-term capital by a company. Equity shares, also known as ordinary shares represent the ownership of a company and thus the capital raised by issue of such shares is known as ownership capital or owner’s funds. Equity shareholders do not get a fixed dividend but are paid on the basis of earnings by the company. Their liabilities, however, is limited to the extent of capital contributed by them in the company. They have a right to participate in the management of a company.

Merits:

Equity shares do not create any obligation to pay a fixed rate of dividend.
Equity shares can be issued without creating any charge over the assets of the company.
It s a permanent source of capital and the company need not repay it except under liquidation.
Equity shareholders are the real owners of the company who have the voting rights.

Limitations:

Investors who want steady income may not prefer equity shares as equity shares get fluctuating returns.
The cost of equity shares is generally more as compared to the cost of raising funds through other sources:
Issue of additional equity shares dilutes the voting power, and earnings of existing equity shareholders.
More legal formalities and procedural delays are involved while raising funds through issue of equity shares.

Short Answer Questions

Question 1.
What are the sources of Short-term finance?
Answer:
The short-term loans and credits are raised by a firm for meetings its working capital requirements. There are generally for short-period not exceeding accounting period, i.e. one year. The main sources of short-term funds are as follows.
1) Bank credit :
Commercial banks extend the short-term financial assistance to business firms by means of bank credit. Bank credit may be provided in the form of loans and cash credit, overdraft, etc.

2) Trade credit:
Trade credit is the credit extended by one trader to another for the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment. Trade credit is commonly used by business organisations as a source of short-term financing.

3) Installment credit:
This is another method by which the assets are purchases and possession of goods is taken immediately but the payment is made in installment over a pre-determined period of time.

4) Advances :
Some business organisations get advances from their customers and agents against orders and this source is short term source of finance.

5) Commercial paper :
Commercial paper emerged as a source of short term finance in our country in the early nineties. Commercial paper is an unsecured promissory note issued by a firm to raise funds for a short period, varying from 90 days to 364 days. It is issued by one firm to other business firms, insurance companies, pension funds and banks.

Question 2.
What are the sources of Long-term finance?
Answer:
The sources of long-term finance are i) Issue of shares ii) Issue of debentures iii) Retained earnings.

i) Issue of shares:
The capital obtained by issue of shares is known as ‘share capital’. The capital of a company is divided into small units called ‘shares’. Each share has its nominal value. There are two types of shares normally issued by a company. These are ‘equity shares’ and ‘preference shares’. The money raised by issue of equity shares is called ‘equity share capital’ while the money raised by issue of preference share is called ‘preference share capital’. It is important method of raising long-term finance.

ii) Issue of debentures:
Debentures are an important instrument for raising long-term debt capital. A company can raise funds through issue of debentures. It bears a fixed rate of interest. The debenture issued by a company is an acknowledgment that the company has borrowed a certain amount of money, which it promises to repay on a future date. ‘Debenture holders’ are, therefore, termed as ‘creditors of the company’.

Question 3.
What are the sources of Medium-term finance?
Answer:
The sources of Medium-term finance are

Public deposits
Loans from Banks
Lease Financing

i) Public deposits :
Industries receive deposits from the public. These deposits are called public deposits. The period of public deposits used to be short (i.e for three years). So public deposits have been a very important source for working capital requirements.

ii) Loans from Banks :
Commercial banks occupy a vital position as they provide funds for different purposes and for different periods. They extend loan facility in the form of cash credit, overdraft, term loans and purchasing discounting bill of exchange. The borrower is required to provide some security or to create a charge on the assets of the firm before a loan is sanctioned.

iii) Lease Financing :
A lease is a contractual obligation whereby the lessor or owner grants the lessee the right to use the asset in return for a periodic payment known as lease rent. At the end of the lease period the asset goes back to the lessor. Lease financing is an Important means for modernisation and diversification in the firm. Such R&smcing is resorted to in acquiring assets like computers and electronic equipment.

Question 4.
Discuss the need for specialized financial institutions.
Answer:
Specialised financial institutions are the institutions which have been set up to serve the increasing financial needs of commerce and trade in the area of venture capital, credit rating and leasing, etc.
1) IFCI Venture Capital Funds Ltd. (TVCF) :
Formerly known as Risk Capital and Technology Finance Corporation Ltd. (RCTC), is a subsidiary of IFCI Ltd. It was promoted with the objective of broadening entrepreneurial base in the country by facilitating funding to ventures involving innovative product or process or technology.

Question 5.
Explain the advantages and disadvantages of equity source of Finance. [Mar. 2019. 17 – A.P.]
Answer:
Advantages of equity source of Fiance :

Equity shares do not create any obligation to pay a fixed rate of dividend.
Equity shares can be issued without creating any charge over the assets of the company.
It is a permanent source of capital and the company need not repay it except under liquidation.
Equity shareholders are the real owners of the company who have the voting rights.
In case of profits, equity shareholders are the real gainers by way of increased dividends and appreciation in the value of shares.

Limitations:

Investors who want steady income may not prefer equity shares as equity shares get fluctuating returns.
The cost of equity shares is generally more as compared to the cost of raising funds through other sources.
Issue of additional equity shares dilutes the voting power, and earnings of existing equity shareholders.
More legal formalities and procedural delays are involved while raising funds through issue of equity shares.

Question 6.
Differentiate between the Equity shares and Preference shares. [Mar. 2019; May 17 -T.S.]
Answer:

Basis of difference	Preference Shares	Equity Shares
1) Choice to issue these shares	It is not compulsory to issue these shares.	It is compulsory to issue these shares.
2) Payment of dividend	Dividend is paid before paying dividend on equity shares.	Dividend is paid after paying dividend on preference shares.
3) Return of captial	In case of winding up capital is repaid before the payment of equity share capital.	in case of winding up capital is refunded after the payment of preference share capital.
4) Voting rights	Limited voting -rights.	Absolute voting rights.
5) Rate of dividend	Rate of dividend prefixed and precommunicated.	Dividend rate is not fixed and it is rcommended by the Board of Directors.
6) Speculation	No scope for speculation.	Scope for speculation.
7) Trading on equity	Enable the company to trade on equity.	Company cannot take advantage of trading on equity.
8) Risk	Less risk.	High risk.
9) Bonus shares	Bonus shares are not offered to preference shareholders.	Bonus shares are offered to equity shareholders.
10) Participation in management	The preference shareholders have no right to participate in the management.	The equity shareholders as owners of the company can participate in the management.

Question 7.
Differentiate betwene a Share and a Debenture. [Mar. 2019, 18, 17 – A.P. & T.S.; May 17; Mar. ’15 – A.P.; May 17 – T.S.]
Answer:

Shares	Debentures
1) A share is a part of owned capital.	A debenture is an acknowledgement of a debt.
2) A share carries voting rights.	A debenture does not carry voting rights.
3) Shareholders are paid dividend.	Debenture holders are paid interest.
4) Dividends on share is appropriation of profits.	Interest on debenture is a charge against profit.
5) Rate of dividends depends upon the profits.	The rate of interest is fixed.
6) Shareholders have control over the company.	Debenture holders have no control over the company.
7) Captial is repaid only at the time of liquidation.	Debentures are repaid after the expiry of specified period.
8) Shareholders have no charge on the assets of the company.	They have charge on the assets of the company.
9) Shareholders have no priority over debentures in the repayment of capital.	They have priority over shareholders in the repayment of capital.
10) Shareholders can attend the meetings.	They have no right to in the meetings of the company.
11) Payment of dividend is not an obligation.	Payment of interest is an obligation of the company.
12) Lucrative to adventurous investors.	Lucrative to cautious investors.

Very Short Answer Questions

Question 1.
Business finance
Answer:
The rquirements of funds by business firm to accomplish its various activities is called business finance. Finance is considered as the life blood of any organisation. The success of an industry depends on the availability of adequate finance. Finance is also labeled as capital of a company.

Question 2.
Bank loan
Answer:
A loan is a direct advance made in lumpsum against some security. A specified amount is sanctioned by the bankers to the customer. The loan amount is paid in cash or credited to customers a/c. The customer has to pay interest on the amount from the date of sanctioning the loan.

Question 3.
Debentures
Answer:
Debentures are an important instrument for raising long term debt capital. A company can raise funds through issue of debentures. It bears a fixed rate of interest. The debentures issued by a company is an acknowledgement that the company has borrowed a certain amount of money which it promises to repay on a future date. ‘Debenture holders’ are therefore, termed as ‘creditors of the company’.

Question 4.
Trade credit
Answer:
Trade credit is the credit extended by one trader to another for the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment. Such credit appears in the records of the buyer of goods as ‘sundry creditors’ or ‘accounts payable’.

Question 5.
Equity share [Mar. 2018, 15 -A.P.]
Answer:
According to Companies Act, 1956, shares which are not preference shares are equity shares. Equity shares are earlier known as ordinary shares. These are so called because they do not have any special right in payment of dividend and repayment of capital earlier all equity shareholders had equal voting rights. But the recent amendment in the Companies Act 2000, permits companies to issue equity shares with differential voting rights. Equity capital need not be refunded during the life time of the company. Equity shares facilitate the company to get the benefits of leverage.

Question 6.
Preference share [Mar. 2018 – T.S.; Mar. 17 – A.P. & T.S.]
Answer:
As per Section 85 of the Indian Companies Act 1956, preference shares are those shares which carry special rights in respect of dividends and also repayment of capital at the time of winding up. The rate of dividend on these shares are fixed.

Preference shareholders arerpaid dividends when the company makes profits.

If nothing is mentioned in the Articles of Association, preference means preference as to both the payment of dividend and repayment of capital.

Preference shareholders have no voting rights. Hence they have no voice in the management. Investors who prefer a constant rate of return and less risk purchase preference shares.

Question 7.
Retained earnings [Mar. 15; May, 17 – T.S.]
Answer:
Retained earnings is also known as “Ploughing back of profits”. Retained earnings refers to the reinvestment of undistributed profits. It is a very good source of business finance. A part of profit is transferred to the reserves every year. After a few years, it becomes a large amount which is then employed for modernisaton and expansion of business.

As per Indian Companies Act, 1956, Companies are required to transfer a part of their profits to reserve.

Question 8.
Deferred shares
Answer:
The rights of the deferred shareholders with regard to payment of dividend and repayment of capital are deferred (postponed). Deferred shareholders rank last so far as payment of dividend and return of capital is concerned. These shares are generally small in denomination. These shareholders try to manage the company with economy and efficiency.

These shares are issued to the promoters of the company. So these shares are also called promoters shares or management shares. When the company prospers, the deferred shareholders get dividend.

According to Companies Act 1956, no public company or which is subsidiary of a public company cannot issue deferred shares.

Question 9.
State Financial Corporation
Answer:
The State Financial Corporation was established by the Government of India in 1951 with a view to provide financial assitance to small and medium scale industries which are beyond the scope of Industrial Finance Corporation of India. Its share capital is subscribed by respective state governments, RBI, LIC and commercial banks.

Question 10.
Commercial Banks
Answer:
Commercial banks occupy a vital position as they provide funds f or different purposes as well as for different time periods. Banks extend loans to firms of all size and in many ways, like, cash credits, overdrafts, term loans, purchase/discounting of bills and issue of letter of credit.

Question 11.
Financial Institutions
Answer:
Banks provide funds for different purposes. Another important source of rasing finance is from the finanical institutions like Industrial Finance Corporation of India, Industrial Development Bank of India, Industrial Credit and Investment Corporation of India. Such institutions provide long term and mediun terms on easy installments to big industrial and business houses.

AP Inter 1st Year Commerce Study Material Chapter 8 Sources of Business Finance-I

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 8th Lesson Sources of Business Finance-I Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 8th Lesson Sources of Business Finance-I

Essay Answer Questions

Question 1.
What is business finance? Explain its need and significance in the business organizations. [Mar. 2018, 17, 15 – A.P. & T.S.; May 17 – A.P. & T.S.]
Answer:
Finance is considered as the life blood of any organisation. The requirements of funds by business firm to accomplish its various activities is called business finance. According to B.O. Wheeler “Finance is that business activity which is concerned with the acquisition and conservation of capital funds in meeting the financial needs and overall objectives of a business enterprise.”

Need and significance in the business finance:
1) For fixed capital requirement of business :
In order to start business, finance is required to purchase fixed assets like land and buildings, plant and machinery, furniture and fixture, etc.

2) For working capital requirement of business :
Working capital is utilised for holding current assets such as purchase of material, payment of wages, transporta¬tion charges, etc.

3) For expansion and growth of business :
Finance is required to increase produc¬tion, to install more machines to set up a R & D centre etc.

4) For diversification :
Business finance is needed to start new activity in business. Entering into new business and new lines of activities is known as diversification.

5) For Survival :
Business finance is required to carry out the various business operations in continuity. Without the required finance, organisations cannot survive for long.

6) For liabilities :
To meet liabilities of business, be it long-term or short, a business requires sufficient finance, e.g. for payment of loan installments, creditors, etc.

7) For payment of expenses :
Business finance is needed for paying salaries, wages, taxes, advertisements and other expenses like rents, etc.

Question 2.
What are the various factors that determine the selection of sources of finance? [Mar. 2019 – T.S. Mar. 17 – A.P.]
Answer:
Financial needs of business are of different types-long term, short term, fixed and fluctuating. Therefore, business firms resort to different types of sources for raising funds.

i) Cost :
The fact of cost is of two types i) cost of procurement of funds ii) cost of utilising funds. These cost factors deciding about the source of funds will be utilised by an organisation.

ii) Financial strength and stability of operations:
In the choice of source of funds for business should be in a sound financial position so as to be able to repay the principal amount and interest on the borrowed amount.

iii) Form of organisation and legal status :
The form of unit organisation and status influences the choice of a source for raising money.
Ex : A partnership firm cannot raise money by issue of equity shares.

iv) Factor of time period :
Business units should plan according to the time period for which the funds are required. Ex : Short term need purposes depend upon by the business unit through trade creditors for long term finance sources such as issue of shares and debentures.

v) Risk profile factor:
Business should evaluate each of the source of finance in terms of the risk involved Ex: Issued equity shares, these are to be repaid only at the time of winding up and dividends are not paid if the profits are not available. There is little risk involved. On the other hand a loan is to be repaid as per schedule and the interest is to be paid whether the firm earns profit or not.

vi) Control:
A particular source of fund may affect the control and power of the owners on the management of a firm. As equity shareholders enjoy voting rights, financial institutions may take control of the assets or impose conditions as part of the loan agreement.

vii) Effect on credit worthiness :
Depending on certain sources of finance may affect the credit worthiness in the market. Ex: Issue of secured debentures may affect the interests of the creditors and they may not be willing to extend further loans to the company.

viii) Flexibility and ease :
Another aspect affecting the choice of a source of finance is the flexibility and ease of obtaining funds. Restrictive provisions, detailed investigation and documentation in case of borrowings from banks and financial institutions for example may be the reason that business organisations may not prefer it, if other options are readily available.

ix) Tax benefits :
Various sources may also be weighed in terms of their tax benefits. Tax is not deducted on dividend of preference shares. Interest paid on loans and debentures is tax deductible. In order to take advantages of tax benefits firms may issue debentures to take loans.

Short Answer Questions

Question 1.
What are the various types of capital required for business enterprises?
Answer:
Nature of Business Fiances :
Whether it be manufacturing or trading concern business finance is required which is called initial capital. The amount of capital required depends upon the nature and size of business. It consists of owner’s contribution and borrowing from different sources.

On the basis of the purpose of financial requirements of a business, business finance may be classified into two types.

1) Fixed capital:
The capital which is used to acquire fixed assets such as land and buildings, plant and machinery, etc. is called the “Fixed Capital”. These assets remain with the business for a long period. Capital required by the business concern to meet its long term needs is known as fixed capital. It is permanently kept in the business. It cannot be easily realised.

2) Working capital:
The capital required by a business organisation to run its day- to¬day operations such as payment of wages, salaries, electricity bills, purchase of raw-material, etc. is called working capital. The capital used in current assets is called working capital.

Current assets are those which can be converted into cash within a period of one year. Therefore it is also called circulating or revolving capital.

The working capital of the business concern depends on the nature of the business, size of business, production policy, etc.

Question 2.
Explain the classification of sources of finance.
Answer:
A brief explanation of classifications and the sources of finance is given below.

1) On the basis of period:
On the basis of period, sources of funds can be categorized into 1) Long term 2) Medium-term finance 3) Short-term finance. The long-term sources fulfil the financial requirements of an enterprise for a period exceeding five years. Such financing is generally required for the acquisition of fixed assets. Where the funds are required for a period more than one year but less than five years, medium-term sources of finance are used. Short term funds are those which are required for short duration i.e. a period not exceeding one year.
Ex : Trade credit, Bank Overdrafts, etc.

2) On the basis of ownership :
On the basis of ownership, the sources can be classified into owner’s funds and borrowed funds. Owner’s funds are those which are provided by the owners which include issue of equity shares and retained earnings. Borrowed funds refer to the funds raised through loans or borrowings. The sources include loans from commercial banks, loans from financial institutions, issue of debentures, public deposits, and trade credit.

3) On the basis of generation :
Sources of finances can be generated from internal or from external sources. Internal sources of funds are those that are generated from within the business. Ex : Retained earnings, depreciation of funds, etc. External sources of funds include those sources that lie outside an organisation. E.g: Shares, debentures, public deposits, etc.

Very Short Answer Questions

Question 1.
Business finance:
Answer:
The term finance means money for funds. Financing means making money available when it is needed. It refers to money required for business purposes. Finance is the life blood of every organisation. The prosperity of a business unit mainly depends upon the availability of finance.

Question 2.
Fixed Capital [Mar. 2019 – A.P. m Mar. 2018, 17 – T.S. ; May 17 – A.P.]
Answer:
The capital which is used to acquire fixed assets such as land and buildings, plant and machinery, etc. is called “Fixed Capital”. These assets remain with the business for a long period. These items are not purchased for sale. In other words, capital required by the business concern to meet its long term needs is known as ‘Fixed capital’. It is permanently kept in the business. It cannot be easily realised.

Question 3.
Working Capital: [Mar. 2019; May 17 – T.S.]
Answer:
The capital required by a business organisation to run its day- to-day operation such as payment of wages, salaries, electricity bills, purchase of raw-material, etc. is called “Working Capital”. The capital used in current assets is also called “Working capital”.

Current assets are those which can be converted into cash within a period of one year. Therefore it is also called circulating or revolving capital.

The working capital of the business concern depends on the naturee of the business, size of the business, production policy, etc.

Question 4.
Long – term finance :
Answer:
The capital required for long period are termed as long term finance. This is usually required for period between 7 years to 20 years. This type of capital is used to acquire fixed assets such as land and buildings, plant and machinery, for working capital and also for expansion and modernization of the business. Long term finance can be raised through issue of shares, issues of debentures, loan from banks and other financial institutions, retained earnings, etc.

Depending upon the need any one of the above sources can be conveniently used to procure long term capital or finance.

Question 5.
Short – term finance :
Answer:
Funds raised for a period not exceeding one year is called short-term capital or short-term finance. This type of finance is used to meet day-to-day operating expenses of business such as purchase of raw materials, wages, salaries, etc. The amount of funds required depends upon nature of business, time gap between order and delivery of stocks, operating cycle and the volume of business.

It can be raised through Trade credit, Bank Credit, Advances from Customers, Bank Loans, Retained earnings and Bills of Exchange.

Question 6.
Internal sources of finance :
Answer:
Internal sources of funds are those which are generated from within the business. E.g.: Ploughing back of profits, retained earnings, collection of receivables disposing of surplus inventories, and depreciation of funds, etc.

Question 7.
External sources of finance :
Answer:
External sources of funds include those sources that lie outside an organisation, such as shares, debentures, public deposits, borrowing from commercial banks and financial institutions, suppliers, lenders, and investors.

AP Inter 1st Year Commerce Study Material Chapter 7 Formation of a Company

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 7th Lesson Formation of a Company Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 7th Lesson Formation of a Company

Essay Answer Questions

Question 1.
Discuss the procedure to form a company.
Answer:
A Joint Stock Company requires a number of legal formalities to be complied with before it is brought into existence. Formation means the establishment of a company by fulfilling all formalities. The important steps to be taken by the company for formation are shown in the following chart.
AP Inter 1st Year Commerce Study Material Chapter 7 Formation of a Company 1

1) Promotion :
Promotion is the first stage in the formation of a company. It involves identification of business opportunity or idea, detailed investigation, assembling the requirements, and financing proposition. Promotion is the process of organization and planning the finance of business enterprise under the corporate firm.

2) Incorporation or Registration :
A company being an artificial person comes into existence only after its registration with the Registrar of Companies. It is the legal process through which an enterprise obtains recognition as a separate legal entity. Private or public limited companies must file all the necessary documents with the Registrar to obtain the Incorporation Certificate. With this certificate the company gets a separate legal entity. For this purpose a number of steps have to be taken for registration.

3) Capital subscription :
After incorporation of a company the next step will be to raise the capital. A public company cannot commence business unless the minimum subscription as stated in the prospectus is subscribed. If a company does not receive 90 percent of the issue amount from the public as subscription within 120 days, it has to refund the amount to the applicant as per the guidelines of Securities Exchange Board of India (SEBI) guidelines within 10 days.

4) Commencement of business:
A public company has to file the following certificates, to get the certificate of commencement.

A declaration that a prospectus or statement in lieu of prospectus has been filed
A declaration that directors have taken up their qualification shares and paid them.
A declaration that minimum subscription amount has been allotted and collected.
A statutory declaration by the Secretary of the company or a Director that all the formalities relating to commencement of business are duly complied with.

A scrutiny is made by the Registrar with all the documents and issues a “Certificate of commencement of business”. The process of company formation comes to an end with the issue of this certificate.

Question 2.
Describe various steps involved in promoting a company.
Answer:
Promotion is the first stage in the formation of a company. It involves identification of a business opprotunity or idea, analysis of its prospects, gathering the relevant information and taking steps to implement it. Promotion is considered as putting an idea into practice.

Definition:
“Promotion is the process of organizing and planning the finance of a business enterprise under the corporate form.” – L.H. Haney

“Promotion starts with the conception of the idea from which the business is to evolve and continue down to the point at which the business is fully ready to begin operation as a going concern.” – Guthmann and Dougal

To be successful the idea of business must be exposed and investigation chart given the stages of promotion.
AP Inter 1st Year Commerce Study Material Chapter 7 Formation of a Company 2

1) Discovery of an idea :
The success of business depends on the selection of a business line. The promoter has to form an idea about the type of business and its prospects. The promoter should analyse the strengths and weaknesses of the proposed idea, and develop the idea with the help of technical experts.

2) Detailed investigation :
At this stage various factors relating to the proposed unit are to be studied from the pratical point of view. To find out the strong and weak points of the idea a detailed investigation is conducted. The promoter shall estimate demand for the product, and then thinks of arranging finance and also considers the availability of workers, plant and machinery, raw materials, and cost of production. For this purpose technical experts, financial consultants, etc. are consulted.

3) Assembling requirements :
After making sure that proposed business is feasible and profitable the promoters make arrangements to assemble the requirements like directors appointment, selecting the place for unit, contacting the suppliers of raw materials purchasing of plant and machinery, etc.

4) Financing proposition :
The promoter decides about the capital structure of the company. In this process, he determines how much share capital will be issued, type of shares and debentures to be issued, and the nature of loans to be borrowed from financial institutions or banks for a long period.

Question 3.
Explain the process involved in Incorporation of a company.
Answer:
A company being an artificial person comes into an existence through incorporation. A Joint Stock Company whether private or public limited must be registered with the Registrar of Companies. It is called incorporation. For that purpose the joint stock companies must file all the necessary documents with the Registrar to obtain the Incorporation Certificate. With this certificate the company gets a status of legal entity.

A number of steps have to be taken up before getting a company registered.

1) Application for approval of name :
For approval, an application is to be submitted to the Registrar of Companies of the state and obtain the approval name. A company may adopt any name which is not prohibited under the Emblems and Names Act, 1950. The Registrar is expected to approve the name within 14 days of the receipt of application.

2) Preparation of Memorandum of Association (MoA) :
MoA is the constitution of company which describes its objects, scope and the relationship with outside world. This main document must be carefully drafted, stamped and signed by seven members in case of a public company and two members in case of a private company. As per the new amendment of the Act, 1950 one member is enough to sign on MoA in case of private company.

3) Preparation of Articles of Association (AoA) :
This is the second document which contains rules and regulations relating to the internal management and also the capital structure of the business. A public limited company may not require to file its own Articles of Association. However, it may adopt model clauses prescribed in Table A, Schedule I of the Act. A private company is required to submit its articles and duly signed by the signatories.

4) Preparation of other documents :
At the time of incorporation of a company the following documents are to be prepared and submitted to the Registrar of Companies.

Consent of the first directors
Promoters should execute a power of attorney in favour of one of the promoters or an advocate who is to carry out the formalities required for registration.
When the location of the registered office is finalized, prior to incorporation, the notice of it is to be filed. If not, within 30 days of its registration it is to be submitted.
When a company by its Articles appoints any person to act as Director, Manager, Secretary their particulars have to be filed within 30 days along with MoA and AoA of the company.

5) Statutory declaration :
A declaration that all the requirement under, the Companies Act, 1950 have been complied with in Form no. 1 is to be filed with the Registrar.

6) Payment of registration fee :
If the prescribed fees has to be paid towards registration of company.

7) Incorporation certificate :
The Registrar is satisfied with all requirements under the Companies Act, 1950, issues a certificate called “Certificate of Incorporation. With the receipt of this certificate, the company gets its recognition as a corporate body.

Question 4.
What is Memorandum of Association? Explain its clauses.
Answer:
The Memorandum of Association is the most important main document of the company. It is constitution and charter of the company. It provides the foundation on which the company structure is built. It defines the scope of the company’s activities as well as its relation with the outside of the company. The contents of the MoA cannot be altered at the option of directors or even the shareholder. It is to be altered only with Government’s and court approval in many cases. The purpose of the memorandum is to enable the shareholders, creditors, and those who deal with the company to know what is the permitted range of activities of the enterprise.

The memorandum has to be divided into paragraphs consecutively numbered and has to be printed. It should be signed by seven members in case of public company and by two members in case of private company.

Memorandum of association contains the following clauses :

1) Name clause :
The name of the company should be specified in this clause. A company can choose any name it likes, however it should fulfil the following conditions.

The proposed name should not be identical or similar to the name of existing company.
The proposed name should not convey any connection or link with a government department or local authority.
The name of the public company should end with the word ‘Limited’, while that of private company should contain the word ’Private limited1.
The proposed name should not be objectionable under the provisions of Emblems and Names Act, 1950.

The name of the company must appear on the outside of every office, or place of business, in one of the local languages and on all cheques, bills, letters, notices and other official publications, etc. of the company.

2) Situation Clause :
Every company will have a registered office. This clause should specify the place and the state in which registered office is located. It is necessary to determine the legal jurisdiction and to make correspondence. If the registered office is not confirmed on the date of incorporation, it should communicate the address to the registrar within 30 days of its incorporation. The purpose of stating the registered office is that all communications, notices, circular, etc. are sent to the registered office.

3) Objects Clause:
It is the most important clause in the memorandum of association. It defines powers of the company and the scope of its activites. A company is not authorised to do any business outside the purview of the objects clause. The objects of the company must be legal and very clearly defined. It contains main objects and other objects. Great care should be taken in drafting this clause.

4) Liability Clause :
It contains the nature of liability of its members. It means that the liability of a member is limited to the nominal value of shares held by him. The sharholders are not liable for the debts of the company. A company registered with unlimited liability is not required to give this clause in memorandum.

5) Capital Clause :
It contains the capital structure of the company. The amount of capital required by the company is stated in this clause. This is called Authorised capital or Registered capital. The capital is divided into small units called ‘Shares’. The company must mention the number and kinds of shares issued and the value of each share. Company is not authorised to issue shares over and above authorised capital.

6) Subscription or Association Clause :
This clause contains the names of signatories to the memorandum. The memorandum must be signed by at least seven persons in case of public limited company and by at least two persons in case of a private limited company. Each subscriber must take at least one share in the company. The subscribers declare that they agree to incorporate the company and agree to take the shares stated against their names. The signatures of the subscribers are attested by at least one witness each.

Question 5.
What is Articles of Association and also explain its contents.
Answer:
The Articles of Association of a company are its bye-laws or rules and regulations that govern the internal management of the company and the conduct of the business. It determines the relationship between the company and its members as well as among the members themselves. Articles of Association determine the powers of the directors and officers of the company. It must be printed, divided into paragraphs, numbered consecutively and signed by each subscriber of the memorandum and filed with the Registrar.

The contents of Articles of Association:

The Articles of Association is the document which contains the rules and regulations to be followed for the purpose of internal management of the company. It generally contains the following.

Rules and regulations.
Rules of preliminary contracts.
Provisions regarding use of common seal.
Procedure of issuing share capital, number and value of shares, issue of shares, , calls on shares, lien on members’ shares, etc.
Procedure for transfer and forfeiture’ of shares.
Procedure for issue of debentures and stocks.
Procedure for alteration of capital
Provisions regarding conducting the general meetings, special meetings, voting, proxies, etc. resolutions.
Rules regarding appointment of Directors and their remuneration.
Provisions relating dividends and reserves.
Preparation of Accounts and Audit, and method of appropriation of profits.
Winding-up procedure
Maintenance of Bank Accounts.

These bye-laws are very useful in inter management of the company.

Question 6.
What is prospectus? Explain the contents of prospectus.
Answer:
A private company can start its business immediately after receiving the Certificate of Incorporation. Whereas a public company has to raise the necessary capital from the public. In that connection the company have to invite the public to subscribe for shares in their company. This invitation to the public is known as “Prospectus”.

Definition :
As per Section 2(36) of the Companies Act, 1956, a prospectus is defined as “Any document described for issued as propectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for purchase of any shares in, or debentures of a body corporate”.

Any advertisement offering shares or debentures of the company for sale to the public is called’Prospectus’.

Contents of Prospectus:
Every prospectus should disclose the matter as specified in Part -1 of Schedule-II to the Compnies Act. Some of the contents which every prospectus must include are

Name and full address of the company.
The particulars of the signatories to the memorandum of association and the number of shares taken up by them.
Name, addresses, and occupations of members of the Board of Directors.
The minimum subscription amount fixed by the promoters.
The details of property acquired if any.
The time of opening of the subscription list.
The capital structure of the company, and particulars of issue.
The amount payable on application, allotment, and calls.
Basis for the issue price
The particulars of preferential treatment given to any person for subscribing shares or debentures.
The addresses of the underwriters if any.
Particulars about reserves and surpluses.
The amount of preliminary expenses.
The name and address of Auditor.
Particulars regarding voting rights at the meetings of the company.
Management perception of risk factors.
‘Disclosure of investors’ grievances and redressal system.

Short Answer Questions

Question 1.
What are different types of promoters?
Answer:
The following are different types of promoters.
1) Professional promoters :
The professional promoters are specialized promoters. Specialized promotion is their whole time occupation.

2) Accidental promoters :
They are not specialists in company formation. They promote own firms as entrepreneurs.

3) Financial promoters :
These are the promoters who float new enterprises during favourable conditions in the securities market.

4) Technical promoters :
This type of promoters promote new enterprises on the basis of their specialised knowledge and training in technical fields.

5) Institutional promoters :
These are promoters who provide technical, managerial and financial assistance for the promotion of a company.

Question 2.
Discuss the differences between Memorandum of Association and Articles of Association.
Answer:
Differences between Memorandum of Association and Articles of Association :

Memorandum of Association	Articles of Association
1) Nature : Memorandum is the charter of the company. It defines the objects and scope of the company.	It is a subsidiary document and contains the rules and regulations for the internal management of the company.
2) Scope : It defines the relationship between the company and the outsiders.	If defines the relationship between and its members and also the relationship among the members themselves.
3) Contents : It contains the objects and powers of the company.	It lays down the rules by which those objects are achieved.
4) Filing : At the time of incorporation, filing of memorandum is compulsory.	The filing of articles is optional. A public company need not file it. It can adopt rules stated in Table – A.
5) Status : Memorandum is sub-ordinate to Companies Act.	Articles of Association is subordinate to both Memorandum and Companies Act.
6) Alteration : It can be altered only under special circumstances with the prior approval of and central govt, court.	It can be altered by passing special resolution of the shareholders. In some cases only the approval of the cental govt, required.
7) Legal effects: The legal effects are more harsh on memorandum. Companies Act regulated it.	The legal effects are less on articles. The shareholders can modify the Articles and ratify it.

Question 3.
Explain the functions of promoters. [May 17 – T.S.]
Answer:
Promoter is the person who assembles the men, money and the materials into a going concern. Promoters are those who take various steps in setting up a business organisation. Promoter is mainly concerned with the promotion of a business venture. Discovery, investigation, assembling and financing, etc. are performed by the promoter.

Functions:

A promoter conceives an idea for the setting up of a business.
Promoter makes preliminary investigation and ensures the future prospects of business.
Promoter brings together various individuals who agree to associate with him and share the business responsiblities.
He prepares various documents and gets the company incorporated.
Promoter raises the required finances and gets the company going.

Very Short Answer Questions

Question 1.
Define Promotion.
Answer:
Promotion means undertaking such a step, which would persuade a large number of people to come together for achieving a common goal through the company form of organisation. According to L.H. Haney, “Promotion may be defined as the process of organising and planning the finance of a business enterprise under the corporate form”.

Question 2.
Define MOA.
Answer:
According to Lord Cairns, “Memorandum of Association of a company is charter and defines the limitation of the powers of a company. It contains the fundamental conditions upon which alone the company is allowed to be incorporated”. The Memorandum of Association is the constitution of the company. It is the charter of the company. It provides the foundation on which the company structure is built. It defines the scope of the company’s activities as well as its relation with the outside world.

Question 3.
Minimum Subscription :
Answer:
The minimum amount of capital to be collected by a public limited company before its allotment of shares is known as “minimum subscription”. A public limited company cannot start business unless a minimum subscription as stated in the prospectus has been subscribed. It is fixed by taking into account the following requirements.

Amount required for the purchase of property.
Amount required for working capital.
Amount required for payment of preliminary expenses.
Amount required for any other expenditure for the formation of company.

Question 4.
Statement in lieu of prospectus :
Answer:
If the public company does not raise its capital by the public issue of shares, then it need not publish a prospectus. In such a company capital may be collected privately and shares may be allotted by the mutal agreement of a few people. Such public company having a share capital, and not issuing prospectus must prepare a statement in lieu of the prospectus and file it with the Registrar of Companies.

Question 5.
Criminal liability for misstatements in Prospectus:
Answer:
In case of Mis-statements or Misrepresentation in Prospectus, it gives rise to impose civil or criminal liability to pay compensation to the persons, who subscribed the shares relying on such false information in the prospectus and also criminal libaility to pay a fine up to Rs. 5000/- or imprisonment up to 2 years or both.

Question 6.
Certificate of commencement of business:
Answer:
A public limited company cannot commence its business unless it received a certificate of business commencement. This certificate is not compulsory for private limited company. It means private company can commence its business without the certificate of business commencement. The Registrar of Companies issues this certificate only when all the legal documents are submitted. Further, the registrar issues this certificate only on the confirmation of collection minimum subscription.

Question 7.
Prsopectus.
Answer:
A prospectus is a document which invites the public to promote funds to the company by way of subscribing to its shares and debentures. The history, nature, and profitability of the company is depicted in the prospectus.

AP Inter 1st Year Commerce Study Material Chapter 6 Joint Stock Company – Formation

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 6th Lesson Joint Stock Company – Formation Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 6th Lesson Joint Stock Company – Formation

Essay Answer Questions

Question 1.
What is a joint stock company? What are its features of it?
Answer:
Business units may be classified into two types. They are :
1) Non-corporate business units
2) Corporate business units.
The basic demerits of non-corporate business units (i.e., sole proprietorship concerns, partnership firm, joint Hindu undivided family concerns) are limited sources, unlimited liability. To overcome these demerits new business units i.e. corporate business units came into existence.

Joint Stock Company is one of the kind of corporate business units. A joint stock company is a voluntary association of persons formed for undertaking some big business activity. It is established by law and can be dissolved by law. The company has a separate legal entity, so that even if its members die, the company remains in existence. The money so contributed constitutes capital of the company. The capital of the company is divided into small units called shares. Since members invest their money by purchasing the shares of the company they are known as shareholders and the capital of the company is known as share capital.

Company – Definition :
“A company is an artificial person created by law, having a separate legal entity with a perpetual succession and a common seal.” – Section 566 of the Companies Act, 1956

“A Joint Stock Company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership.

Features:
1) An artificial person created by law :
A company is an aritficial person created by law and existing only in contemplation of law. It is intangible and invisible legal person having no body and soul. .

2) Seperate legal entity :
A company has an independent existence a part from its members. Its assets and liabilities belong to the company and not to its members. It can own property, have a bank account, take a loan, sue (file a case in court) and be sued in its own name.

3) Formation :
A company comes into existence through the operation of law. So, registration must be under the Companies Act.

4) Common seal as a substitute for signature:
A company cannot sign the documents as it is not a natural person. So, each company has a common seal which is like its signature. When any authorised person puts the seal on any paper or document, it is a legal evidence of an act done by the company.

5) Perpetual existence :
A company is an artificial person created by a process of law. Hence, it enjoys perpetual succession (permanent existences) i.e. it never dies. It is said that “members may come and members may go but the company goes on forever”. A company is not affected by death of a member or a new member coming in place of an old member. A company is wound up by law only. It has to act through its directors and employees.

6) Limited liability of members:
The liability of every shareholder is limited to issue price of the shares allotted to him. If the shares are fully paid up-, he is not subject to any further liability.

7) Transferability of shares:
The members of the company (public company) are free to transfer or dispose the shares held by them to any person as and when they like. They do not need the consent of other shareholders to transfer their shares. But in case of private company some restrictions are imposed for transfering shares.

8) Membership :
To form a joint stock company, a minimum of two members are required in case of private limited company and seven members in case to public limited company. The maximum limit is fifty in case of private limited company. There is no maximum limit on the number of members in case of a public limited company.

9) Democratic management:
Since the number share holders are very large and may be distributed at different geographical locations, it becomes difficult for them to carry on operational management of the company on day-to-day board. This gives rise to the need of separation of the management and ownership.

10) Statutory regulations are to be followed :
A company has to comply with and abide by a number of statutory requirements. A company is governed by the Companies Act and it has to invariably follow the various provisions of the Act. For ‘ instance, such companies should submit a number of returns to the government and also its accounts have to be audited by a Chartered Accountant.

Question 2.
Explain the advantages and disadvantages of a joint stock company.
Answer:
A joint stock company is an artificial person created by law with a fixed capital, divisible into transferable shares, with perpetual succession and common seal. The company has a separate legal entity. It must be compulsorily registered. The capital of a company is divided into small units called shares. Any one who holds or buys share in a company is called shareholder.

Joint Stock Company – Advantages:
1) Limited liability :
The liability of shareholders is limited. The risk of loss is limited to the issue price of theshares.

2) Large financial resources :
Company form of organisation enables to mobilise huge financial resources because of principles of limited liabilities and diffusion of ownership. It collects funds in the form of shares of small denominations so that people with small means can also buy them. Benefits of limited liability and transferability of shares attract investors.

3) Continuity of existence :
A company has perpetual or continuous existence. Members may go or new members may come in, but the company goes on for ever.

4) Benefits of large scale operation :
A joint stock company can undertake business on large scale. As a result it can derive all the advantages of large scale production.

5) Liquidity :
The transferability of shares act as an added incentive to investors. The shares of a public company can be traded easily in the stock exchange. The public can buy shares when they have money. The prospective investors can invest and convert shares into cash whenever they need money.

6) Professional management :
Companies, because of their complex nature of activities and large volume of business, require professional managers at every level of their operation. This leads to efficiency in management of their business affairs.

7) Research and development :
A company generally invests a lot of money on research and development for improved processes of production, designing and innovating new products, improving quality of product, new ways of training its staff, etc.

8) Tax benefits :
Although the companies are required to pay tax at a high rate, in effect, their tax burden is low as they enjoy many tax exemptions under Income Tax Act.

Joint Stock Company – Disadvantages :
1) Too many legal formalities:
Formation of a company is a time – consuming process and also expensive. Many legal formalities have to be observed and several legal documents have to be prepared and filed. Delay in formation may deprive the business the momemtum of an early start.

2) Lack of motivation :
The directors and other officers of a company have little personal involvement in the efficient management of a company. Separation between ownership and control and absence of a direct link between effort and reward may lead to lack of personal interest and incentive. It is difficult to keep peronal touch with all the customers and employees. As a result, efficiency of business operations may be low.

3) Delay in decisions :
Redtapism and bureaucratic hurdles do not permit quick decisions and prompt action in company form of organisation. There is little scope for personal initiative and a sense of responsibility. Paid employees like to play safe and tend to shift responsibility. There is lack of flexibility of operations in a company.

4) Economic oligarchy :
The management of company is supposed to be carried on according to the collective will of its members. But in practice, there is rule by a few (Oligarchy). Often directors try to mislead the members and manipulate voting power to maintain and continue their control.

5) Corrupt management:
In a company, there is often danger of fraud and misuse of property by dishonest management. Fake companies may be formed to deprive the investors of their hard-earned money. Unscrupulous people may manipulate annual accounts to show artificial profits or losses for their personal gain.

6) Excessive government control :
A company has to submit many statements and returns to the government. Excessive government control leads to waste of time for the company.

7) Unhealthy speculation :
A few individuals may corner the shares to gain control over the company.

8) Conflict of interests :
Company is the only form of business wherein a permanent conflict of interests may exist. In a company conflicts may continue between shareholders and board of directors or between shareholders and creditors or between management and workers.

9) Lack of secrecy :
Under the Companies Act, a company is required to disclose and publish a variety of information on its working. Widespread publicity of affairs makes it almost impossible for the company to retain its business secrets. The accounts of a public company are open for inspection to public.

Question 3.
Distinguish between a private company and a public company. [Mar. 2019 – A.P. & T.S. – Mar. 2018 – T.S.]
Answer:
On the basis of number of members or public interest companies may be classified into

Public company
Private company

1) Public company :
According to Companies Act, Public company means a company which (a) is not a private company; (b) has a minimum paid-up capital of ₹ 5 lakhs or such higher paid-up capital and (c) is a private company which is a subsidiary of a company which is not a private company.

2) Private company:
According to Companies Act, Private company means a company which has a minimum paid up capital of one lakh rupees or such higher paid up capital as may be prescribed and by its articles. Restricts the right of members to transfer its shares. Limits the number of its members to 50. Prohibits any invitation to the public to subscribe to any shares in, or debentures of the company. Prohibits any invitation or acceptance of deposits from persons other than its members, directors, and relatives.

Differences between Private company and Public company

Basis of Comparison	Private Company	Public Company
1) Minimum number of persons	Two members	Seven members
2) Maximum number of members	50 members	No limit
3) Minimum paid up capital	₹ One lakh	₹ Five lakh
4) Identification	Must suffix ‘Private Limited’ to its name	Must suffix ‘Public Limited’ to its name
5) Transfer of shares	It cannot transfer their shares.	It can freely sell their shares to others.
6) Public issue of capital	It cannot secure capital irom the public.	It can secure capital from the public.
7) Commencement	It can start its business immediately upon its incorporation.	It cannot start its business immediately alter its incorporation. It has to obtain a certificate for starting.
8) Board of directors	Minimum: Two Maximum: No limit	Minimum: Three Maximum: 20
9) Appointment and Retirement of Directors	Single resolution is enough to appoint or retire the directors.	Separate resolution is required.
10) Managerial remuneration	There are no restrictions on the remuneration of Directors and Managing Directors.	There are restrictions.

Short Answer Questions

Question 1.
List out and briefly explain different types of companies.
Answer:
AP Inter 1st Year Commerce Study Material Chapter 6 Joint Stock Company – Formation 1

1) Chartered Companies:
The companies which are established by the Royal charter or special sanction of the Royal Head of the State are called chartered companies. Such companies are granted special privileges and powers to achieve the defined objectives.
E.g.: East India Company.

2) Statutory Company :
These companies are formed by the enactment of special Act by Parliament or State Assembly. The Reserve Bank of India, the State Bank of India, Life Insurance Corporation of India, etc. are the examples of Statutory Companies.

3) Registered Company:
All those companies that are registered under the Companies Act 2013 are called Registered Companies.

4) Government Company :
Government company means any company in which not less than 51% of the paid up capital is held by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a government company.

5) Private Company :
A private company is a very suitable form for carrying on the business of family and small concerns. It is registered under the Companies Act 2013.

6) Public Company :
According to the section 2 (71) of the Companies Act of 2013 a company is a said to be public company (a) It is not a private company (b) It has a minimum paid up capital of ₹ 5,00,000 and above (c) It is a private company which is subsidiary of any public company.

7) Companies limited by shares :
In these compaines the liability of the members is limited to the extent of the value of shares held by them.

8) Companies limited by guarantee :
In these companies the members’ liability is not only up to the face value of the shares but also extended to the amount guaranteed by them.

9) Unlimited Companies:
In these companies the liability of the members is unlimited. The members are fully liable for all the debts of the company.

10) Holding Company :
Where one company controls the management of another company, the controlling company is called ‘Holding Company’.
E.g.: If.company A holds more than 5,1% of paid1 up share capital of company B, the company A is called holding company.

11) Subsidiary Company :
Where one company controls the management of another company such- company so controlled fs called subsidiary company.
E.g. : If company A holds more than 51% of paid up share capital of company B, the company B is called subsidiaiy company.

12) Indian Company:
A company registered in Indian having place of business in India called Indian company. It may be a private company or a public company.

13) Foreign Company :
A foreign company is one that is incorporated outside India but has business operations in India.

14) National Company:
Such companies confine their operations within the boundaries of the country in which they are registered.

15) Multi-national Company :
Such companies which extend the areas of their operations beyond the country in which they are registered.

Question 2.
What are the features of a public company?
Answer:
A joint stock company is an artifical person created by law with a fixed capital, divisible into transferable shares, with perpetual succession and common seal. The company has a seperate legal entry. It must be compulsorily registered. The capital of the company is divided into small units called shares. Any one who holds or buys share in a company is called shareholder. Thus a company is defined as an association of persons, having a separate legal existence, perpetual sucession and a common seal.

On the basis of public interest company may be classified into two types.

Private Limited Company
Public Limited Company.

Public Limited Company – Features :
It is suitable form of company for carrying on the business at large scale involving huge amount of capital. According to section 2(71), Public company is one which has the following features.

The minimum paid up capital is ₹ 5,00,000.
The minimum number of members is seven.
The maximum number of members is unlimited. Such a company must use the word “Ltd” as part of its name.

A public company must write public limited or simply limited after its name. Steel Authority of India Limited, Bajaj Auto Limited, Reliance Industries Limited, and Hindustan Lever Limited are the examples of public companies.

Question 3.
What are the features of a private company?
Answer:
Sole proprietorship, Joint Hindu family and partnership form of business organisations could not meet the needs of modern industry and commerce because of their limitations like limited resources, unlimited liability, etc. The need for another form of organisation free of the above limitations was felt thus joint stock type of company came into existence as it can raise large resources with risk of unlimited liability, deploy huge capital, use modern technology, introduce specializations and run with professionalism.

On the basis of public interest company may be classified into two types

Private limited company
Public limited company.

Private Limited Company – Features :
According to section 2(68) of the Companies Act 2013 private company means company which has a minimum paid up capital of one lakh rupees or such higher paid – up-capital as may be prescribed and by its articles.

Restricts the rights of members to transfer its shares.
Limits, the number of its member to 50.
Prohibit any invitation to the public to subscribe to any shares in, or debentures of the company.
Prohibits any invitation or acceptance of deposits from persons other than its members, directors, and relatives.

Very Short Answer Questions

Question 1.
Define company.
Answer:
The word ‘Company’ implies a group of people who voluntarily agree to form a company and derived from the Latin word ‘com’ i.e., with or together and ’panis’ i.e., bread. It refers to an association of persons discussing matters and taking food together. However, in law company is termed as a company which is formed and registered under the Companies Act 2013.

“A Joint Stock Company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership.” -L.H. Haney

Question 2.
What is a Government company? [Mar. 2019 – A.P. & T.S.Q Mar. 2018 – A.P.]
Answer:
Government company means any company in which not less than 51% of the paid up capital is held by the Central Government or by any State Government or Governments or partly by the Central Government and partly by one or more State Governments and includes a company which is a subsidiary of a government company.

Question 3.
What do you mean by a statuatory company?
Answer:
There are companies formed by the enactment of special Act by Parliament or State Assembly. The Reserve Bank of India, the State Bank of India, Life Insurance Corporation of India, etc. are the examples of Statutory Companies.

Question 4.
Chartered Company
Answer:
The companies which are established by the Royal charter or special sanction of the Royal Head of the State are called chartered companies. Such companies are granted special privileges and powers to achieve the defined objectives.
iE.g.: East India Company.

AP Inter 1st Year Commerce Study Material Chapter 5 Partnership

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 5th Lesson Partnership Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 5th Lesson Partnership

Essay Answer Questions

Question 1.
Define Partnership. Discuss its merits and limitations. [Mar. 2019; May 17 – T.S. M Mar. 15 – A.P. & T.S.]
Answer:
Partnership is an association of two or more persons who pool their financial and managerial resources and agree to carry on a business with profit motive. The persons who are enter into partnership individually called ‘Partners’ and collectively known as ‘Firm’.

Partnership – Definition :
Partnership is “the relation between two or more persons who have agreed to share the profits of a business carried on by all or any one of them acting for all” – Section 4 of the Indian Partnership Act, 1932.

Merits:
1) Easy to form :
A partnership can be formed easily without many legal formalities. Since it is not compulsory to get the firm registered, a simple agreement, either in oral, writing or implied is sufficient to create a partnership firm.

2) Availability of larger resources :
A partnership firm consists of more than one person, it may be to pool more resources as compared to sole proprietorship.

3) Better decisions :
In partnership firm each partner has a right to take part in the management of the business. All important decisions are taken in consultation with and with the consent of all partners. Thus, collective wisdom prevails and there is less scope for reckless and hasty decisions.

4) Flexibility:
The partnership firm is a flexible organisation. Changes in the business can be adopted easily. At any time the partners can change the size or nature of business or area of its operation after taking the necessary consent of all the partners.

5) Sharing of risks:
The losses of the firm are shared by all the partners equally or as per the agreed ratio.

6) Protection of interest:
In partnership form of business organisation, the rights of each partner and his/her interests are fully protected. If a partner is dissatisfied with any decision, he can ask for dissolution of the firm or can withdraw from the partnership.

7) Secrecy :
Business secrets of the firm are known to the partners only. It is not required to disclose any information to the outsiders. It is also not mandatory to publish the annual accounts of the Partnership firm.

Limitations:
1) Unlimited liability :
The partners liability is unlimited. This is the most important drawback of partnership. The partners are personally liable for the debts and obligations of the firm. In other words, their personal property can also be utilised for payment of firm’s liabilities.

2) Limited capital:
Since the total number of partners cannot exceed 20, the capacity to raise funds remains limited as compared to a joint stock company where there is no limit on the number of share holders.

3) Non-transferability of share :
In partnership firm, the partners cannot transfer his share of interest to other without consent of remaining partners.

4) Possibility of conflicts:
Differences and disputes among the partners are common. These conflicts harm to the firm. Difference of opinion may give rise to quarrels and lead to dissolution of the firm.

Question 2.
Is registration of Partnership compulsory under the Partnership Act, 1932? Explain the procedure required for registration of a firm.
Answer:
Partnership is an association of two or more persons who pool their financial and managerial resources and agree to carry on a business, and share its profits or losses. The persons who form a partnership are individually known as ‘Partners’ and collectively a firm or partnership firm.

The Indian Partnership Act, 1932 does not make it compulsory for a firm to be registered; but there are certain disabilities which attach to an unregistered firm. These disabilities make its virtually compulsory for a firm to be registered. Registration can take place at any time.

The procedure for registration of a firm is as follows:

The firm will have to apply to the Registrar of Firms of the state concerned in the prescribed form.
The firm will have to apply to the Registrar of firms of the state concerned in the prescribed form. For this, a form containing the following particulars, accompanied by a fee of ₹3/- has to be sent to the Registrar of Firms.
a) The name of the firm
b) Location of the firm
c) Names of other places where the firm carries on business
d) The name in full and addresses of the partners
e) The date on which various partners joined the firm.
f) The duration of the firm
The duly filled in form must be signed by all the partners. The filled in form along with prescribed registration fee must be deposited in the office of the Registrar of Firms.
The Registrar will scrutinise the application, and if he is satisfied that all formalities relating to registration have been duly complied with, he will put the name of the firm in his register and issue the Certificate of Registration.

Question 3.
Discuss different types of Partners. [Mar. 2019; May 17 – A.P. Mar. 17 – T.S.]
Answer:
A Partnership firm can have different types of partners with different roles and liabilities. Some of them may take part in the management while other may contribute capital.
AP Inter 1st Year Commerce Study Material Chapter 5 Partnership 1

1) Active Partners or Working Partners:
The partners who actively participate in the day-to-day operations of the business are known as active partners or working partners.

2) Sleeping Partners :
The partners, who simply provide capital and do not participate in the management activities of the firm are called sleeping partners.

3) Nominal Partners :
Nominal partners allow the firm to use their name as partner. They neither invest any capital nor participate in the day-to-day operations. They are not entitled to share the profits of the firm. However they are liable to third parties for all the acts of the firm.

4) Partners in Profits :
A person who shares the profits of the business without being liable for the losses is known as partner in profits. This is applicable only to the minors who are admitted to the benefits of the firm and their liability is limited to their capital contribution.

5) Limited Partners :
The partners whose liability is limitied in a firm are called limited partners. They are also known as special partners.

6) General Partners :
The partners having unlimited liability are called general – partners. According to Indian Partnership Act, 1932 the liability of the partner is unlimited. So they are general partners (excpet minor partner).

7) Partner by Estoppel:
A person, who behaves in the public is such a way as to give an impression that he/she is a partner of the firm, is called partner by Estoppel. Such partners are not entitled to share the profits of the firm, but are, fully liable if somebody suffers because of his/her false representation.

8) Partner by Holding out:
Sometimes, the firm may use the name of a person in its activities, creating a sense in the public that he is also a partner. If that person accepts the same, he becomes automatically responsible to the third parties. Such person is known as “Partner by Holding out”.

4. What is Partnership Deed? And also explain its contents. [Mar. 2018 – T.S.]
Answer:
Partnership is an association of two or more persons who pool their financial and managerial resources and agree to carry on a business, and share its profits or losses. Partnership was established among partners through an agreement. Such agreement may be in the form of oral or written. If partnership agreement is in registration it is known as Partnership Deed.

Partnership Deed is a document containing the terms and conditions of a partnership. It is an agreement in writing signed by the partners duly stamped and registered. The Partnership deed defines certain rights, duties and obligations of partners and governs relations among them in the conduct of business affairs of the firm.

The Partnership deed must not contain any term which is contrary to the provisions of the Partnership Act. Each partner should have a copy of the deed.

The following points are generally included in the deed.

Partnership Deed – Contents

Name of the firm
Nature of the business
Names and addresses of partners
Location of business
Duration of partnership, if decided
Amount of capital to be contributed by each partner
Profit and loss sharing ratio
Duties, powers and obligations of partners
Salaries and withdrawals of the partners
Preparation of accounts and their auditing
Procedure for dissolution of the firm
Procedure for settlement of disputes

Short Answer Questions

Question 1.
Define Partnership and state its important features. [Mar. 17 – A.P.]
Answer:
Partnership is an agreement between two or more persons to carry on business with profit motive, carried on by all or any one of them acting for all.

Partnership – Definition :
“Partnership is the relation existing between persons competent to make contract, who agree to carry on a lawful business in common with a view to private gain.” – L.H. Haney

“The relation between persons who have agreed to share the profits of a business carried on by all of them acting for all.” – Indian Partnership Act, 1932, Section 4

Partnership Firm – Features:
The following are the important features of partnership organisation.

Formation
Unlimited liability
Existence of lawful business
Principal agent relationship
Voluntary registration

1) Formation :
The partnership form of business organisation is governed by the provision of Indian Partnership Act, 1932. It comes into existence through a legal agreement where in the terms and conditions governing the relationship among partners. Partnership formation is very easy.

2) Unlimited Liability :
The liability of partner is unlimited, joint and several. Personal assets may be used for repaying debts in cases the business assets are insufficient. All the partners are responsible for the debts and they contribute in proportion to their share in business and as such are Habile to that extent.

3) Existence of lawful business:
The business to be carried on by a partnership must always be lawful. Any agreement to indugle in sumuggling, black marketing, etc. cannot be called partnership business in the eyes of law.

4) Principal agent relationship :
Each partner is an agent of the firm. He can act on behalf of the firm. He is responsible for his own acts and also the acts on behalf of the other partners. There must be an agency relationship between the partners.

5) Voluntary registration :
The registration of a partnership firm is not compulsory. But an unregistered firm suffers from some limitations which make it virtually compulsory to be registered.

Question 2.
Discuss the registration procedure of partnership.
Answer:
The Indian Partnership Act, 1932 does not make it compulsory for a firm to be registered; but there are certain disabilities which attach to an unregistered firm. These disabilities make it virtually compulsory for a firm to be registered. Registration can take place at any time. The procedure for registration of a firm is as follows:

The firm will have to apply to the Rigistrar of Firms of the state concerned in the prescribed form.
The firm will have to apply to the Registrar of Firms of the state concerned in the prescribed form. For this, a form containing the following particulars, accompanied by a fee of Rs. 3/- has to be sent to the Registrar of Firms.
a) The name of the firm
b) Location of the firm
c) Names of other places where the firm carries on business
d) The name in full and addresses of the partners
e) The date on which various partners joined the firm
f) The duration of the firm
The duly filled in form must be signed by all the partners. The filled in form along with prescribed registration fee must be deposited in the office of the Registrar of Firms.
The Registrar will scrutinise the application, and if he is satisfied that all formalities relating to registration have been duly complied with, he will put the name of the firm in his register and issue the Certificate of Registration.

Question 3.
Briefly explain the rights of partners.
Answer:
The rights and duties of the partners of a firm are usually governed by the partnership agreement among the partners. In case the Partnership Deed does not specify them, then the partners will have rights and duties as laid down in the Indian Partnership Act, 1932.

Rights of Partners :

Every partner has a right to take part in the management of the business.
Right to be consulted and expressed his opinion on any matter related to the firm.
Partner has a right to inspect the books of accounts or to copy them.
Right to have an equal share in the profits or losses of the firm, unless and otherwise agreed by the partners.
Right to receive interest on loan and advances made by partner to the firm.
Right to the partnership property unless and otherwise mentioned in the partnership deed.
Every partner has power or authority, in an emergency, to do any such acts, for the purpose of protecting the firm from losses.
Right to prevent the introduction of a new partner without consent of other partners.
Right to act an agent of the partnership firm in the ordinary course of business.
Right to be indemnified for the expenses incurred and losses sustained by partner to the firm.

Question 4.
Briefly explain the duties of partners.
Answer:
Generally, the Partnership Deed contains rights and duties of the partners. If deed is not prepared, the provisions of the Partnership Act will apply. Also when deed is in silent on any point, the relevant provisions of the act will apply.

Duties of Partners

Every partner has to attend diligently to his duties in the conduct of the business.
Should act in a just and faithful manner towards other partner and partners.
Should bound to share the losses of the firm equally unless and otherwise agreed upon by all partners.
No partner shall carry on any business competing with the firm. If he does so, he has to render to the firm any profits arising out of such business.
Must maintain true and correct accounts relating to the firm’s business.
No partner should make secret profits by way of commission or otherwise from the firm’s business.
Every partner is bound to keep and render true and proper accounts of the firm to his copartners.
No partner is allowed to assign or transfer his rights and interest in the firm to an ‘ outsider without the consent of other partners.

Question 5.
Explain the ways of dissolution of a Partnership Firm.
Answer:
The partnership is established through an agreement among partners. The partnership firm is established through partnership. A distinction should be made between the “Dissolution of partnership” and “Dissolution of firm”.

Dissolution of Partnership:
Dissolution of partnership implies the termination of the original partnership agreement or change in contractual relationship among partners. A partnership is dissolved by the insolvency, retirement, incapacity, death, expulsion, etc. of a partner or on the expiry/ completion of the term of partnership.

A partnership can be dissolved without dissolving the firm.
In dissolution of partnership, the business of the firm does not come to an end. The remaining partners continue the business by entering into a new agreement. On the Other hand, dissolution of firm implies dissolution between all the partners. Thus, business of the partnership firm comes to an end. The remaining partners continue the business by entering into a new agreement.

Dissolution of Firm:
Dissolution of firm implies dissolution between all the partners. The business of the partnership firm comes to an end. Its assets are realised and the creditors are paid off. Thus, dissolution of firm always involves dissolution of partnership but the dissolution of partnership does not necessarily mean dissolution of the firm.

Dissolution of the firm takes place under certain circumstances.
1) Dissolution by agreement:
A partnership firm may be dissolved with the mutual consent of all the partners or in accordance with the terms of the agreement.

2) Dissolution by notice :
In case partnership-at-will, a firm may be dissolved, if any partner gives a notice in writing to other partners indicating his intention to dissolve the firm.

3) Contingent dissolution :
A firm may be dissolved on the expiry of the firm, completion of the venture, death of a partner, adjudication of a partner as insolvent.

4) Compulsory dissolution:
A firm stands automatically dissolved if all partners or all but one partner are declared insolvent, or business becomes unlawful.

5) Dissolution through Court:
Court may order the dissolution of a firm, when any partner becomes members unsound, permanently incapable of performing his duties, guilty of misconduct, wilfully and persistently commits breach of the partnership agreement, unauthorised transfers the whole of his interest or share in the firm to a third person.

Very Short Answer Questions

Question 1.
Partnership Firm
Answer:
Partnership is an association of two or more persons who pool their financial and managerial resources and agree to carry on a business, and share its profits or losses. Partnership was established among partners through an agreement. Such agreement may be in the form of oral or written. If partnership agreement is in registration, it is known as partnership deed.

Question 2.
Partnership Deed [May 17 -A.P.]
Answer:
Partnership Deed is a document containing the terms and conditions of a partnership. It is an agreement in writing signed by the partners duly stamped and registered. The partnership deed defines certain rights, duties and obligations of partners and gov- erj^s relations among them in the conduct of business affairs of the firm.

Question 3.
Active Partner [Mar. 2018, -A.P. & T.S.]
Answer:
The partners who actively participate in the day-to-day operations of the business are knovyn as active partners or working partners.

Question 4.
Sleeping Partner
Answer:
The partners, who simply provide capital and do not participate in the management activities of the firm are called sleeping partners.

Question 5.
Partner by Estoppel
Answer:
A person who behaves in the public in such a way as to give an impression that he/she is a partner of the firm is called partner by estoppel. Such partners are not entitled to share the profits of the firm, but are fully liable if somebody suffers because of his/her false representation.

Question 6.
Prartner by Holding out
Answer:
Sometimes, the firm may use the name of a person in its activities, creating a sense in the public that he is also a partner. If that person accepts the same, he becomes automatically responsible to the third parties. Such person is known as “Partner by Holding Out”.

AP Inter 1st Year Commerce Study Material Chapter 4 Joint Hindu Family Business & Co-op Society

October 3, 2022

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 4th Lesson Joint Hindu Family Business & Co-op Society Textbook Questions and Answers.

AP Inter 1st Year Commerce Study Material 4th Lesson Joint Hindu Family Business & Co-op Society

Essay Answer Questions

Question 1.
What is Joint Hindu Family Business and discuss its main features? [May 17 – T.S.]
Answer:
A joint Hindu Family Business is a form of business, which is owned and managed by the members of a Joint Hindu Family. It is also known as a Hindu undivided family business. It is a unique Indian business institution, governed by the provisions of Hindu law. It is managed by the head of the family, known as Karta. The other members are called ‘Co-parceners’. All of them have equal ownership right over the properties of the business.

The membership of the JHF is acquired by virtue of birth in the same family. There is no restriction for minors to become members of the business. The Joint Hindu Family Business is governed by two Hindu laws. They are

Dayabhaga
Mitakshara

Features :
The important features of the Joint Hindu Family Business are as under.

1) Formation :
In JHF business there must be at least two members in the family, having some ancestral property. It is not created by an agreement but by operation of law.

2) Legal Status :
The Joint Hindu Family business is a jointly owned business. It is governed by the Hindu Succession Act, 1956.

3) Membership:
Outsiders are not allowed as members in the JHF. Only the members of undivided family acquire coparcenership rights by birth.

4) Profit Sharing :
Profits are distributed among coparceners in the JHF equally.

5) Management :
JHF is managed by the eldest male member of the family called Karta.

6) Liability:
The liability of Karta alone is unlimited while liability of other coparceners is limited to their share or interest in the coparcenary.

7) Continuity :
Death of any coparceners does not affect the continuity of business. Even on the death of the Karta, it continues to exist as the eldest of the coparceners takes position of Karta. However, JHF business can be dissolved either through mutual agreement or by partition suit in the court.

Question 2.
Define the Cooperative Society. Explain its features.
Answer:
The term ’cooperation’ is derived from the Latin word ’co-operari’. The word ‘Co’ means ’with’ and ’operari’ means ’to work’. Thus, the term cooperation means working together. So, those who want to work together with some common economic objective can form a society, which is termed as Cooperative Society.

Cooperative Society – Definition : “A society which has its objectives for the promotion of economic interests of its members in accordance with cooperative principles.” – The Indian Cooperative Societies Act 1912, Section – (4).

Features:
1) Voluntary association :
In cooperative society the membership is voluntary. Anybody having a common interest is free to join a cooperative society.

2) Number of members :
A minimum of 10 members are required to form a cooperative society. In case of multi-state cooperative societies, the minimum number of members should be 50 from each state in case the members are individuals. However, after the formation of the society, the member may specify the maximum number of members.

3) Separate legal entity :
A cooperative society is based on the service motive of its members. Its main objective is to provide service to the members and not to maximize profit.

4) Limited liability :
The liability of the members of the cooperative society is restricted to the extent of shares subscribed by them.

5) Capital :
The capital of the cooperative society is contributed by its members. Since the members’ contribution is very limited, it often depends on the loan from government, and apex cooperative institutions or on the grants and assistance from state and central government.

6) Service motive :
The primary objective of all cooperative societies is to provide services to its members.

7) Equal voting rights:
In a cooperative society, the principle of one man one vote is adopted.

8) Democractic management:
The management of a cooperative society is based on democratic lines. The members of the society elect directors to conduct and control the business.

9) Distribution of surplus :
After giving a limited dividend to the members of the society, the surplus is distributed in the form of bonus, keeping aside a certain percentage as reserve and for general welfare of the society.

10) Registration of the society :
In India, cooperative societies are reistered under the Cooperative Society Act 1912 or under the State Cooperative Societies Act. The Multi-state Cooperative Societies are registered under the Multi-state Cooperative Societies Act 2002. Once registered, the society becomes a separate legal entity and attains certain characteristics.

Question 3.
A cooperative form of organisation is a method of ‘Self Help’ – Discuss.
Answer:
The term ‘cooperation’ is derived from the Latin word ‘co-operari’. The word ‘Co’ means ‘with’ and ‘operari’ means ‘to work’. Thus, the term cooperation means working together. So, those who want to work together with some common economic objective can form a society, which is termed as ‘Cooperative Society’.

Cooperative Society is a voluntary association of persons who work together to promote their economic interests. It works on the principle of slef-help and mutual help. The primary objective is to provide support to the members. The motto of a cooperative society is “Each for all and all for each”. People come forward as a group, pool their individual resources, utilise them in the best possible manner and derive some common benefits out of it.

The primary objective of all cooperative societies is to provide services to its members. The membership is open to all those haying a common economic interest. Any person can become a member irrespective of his/her caste, creed, religion, colour, sex, etc. Cooperative societies are started not for profit but for service. The members are provided with goods at cheaper rates. Financial help is also given to members at concessional rates. A feeling of cooperation is created among members. So, a cooperative form of organisation is a method of “self help through mutual help”.

Question 4.
State the advantages and disadvantages of Hindu undivided family business organisation.
Answer:
Joint Hindu Family Business in the form of business which is owned and managed by the members of a Joint Hindu Family. It is also known as Hindu undivided family business.

JHF – Advantages:
1) Continuity :
It is not dissolved by the death or insanity of a coparcener.

2) Centralized and efficient management:
The management of Joint Hindu Family firm is vested in the hands of Karta only. This results in the unity of command and disciplined management.

3) No limit to membership:
It can have any number of members unlike other organisations. The members of the family become members only by birth. So there is no limit to membership.

4) Better credit:
This form of business firm is having better credit worthiness than the sole trader.

5) Limited liability :
The liability of the members is limited. But the liability of Kartha is unlimited.

JHF – Disadvantages:
1) Lack of direct relationship :
Karta alone looks after the business of the firm. But benefits are shared by all the coparceners. Thus incentive to Karta for efficient and painstaking management may be lacking.

2) Limited managerial ability :
For expansion and growth of the business in Joint Hindu Undivided Family, the managment and control of the business becomes difficult, as the Kartha alone has to manage.

3) Limited resources :
The resources of a Joint Hindu Family are limited as compared with the patnership and joint stock company.

Question 5.
Discuss the merits and demerits of cooperative form of organization.
Answer:
Cooperative Societies – Merits:
1) Simple Formation :
It is easy and simple to form a cooperative society. There is no need to comply with a number of legal formalities as in the case of a joint stock company. Cooperative society can be formed with minimum 10 members. The procedure for registration is very simple.

2) Democractic management:
Every member has only one vote irrespective of the number of shares held by him. Meeting are well attended and voting by proxy is not allowed. As such the management of the society is democratic.

3) Voluntary service :
The members serve the society voluntarily. Hence the management expenses are minimized. “Self help#through mutual help” is the main principle.

4) Low operating cost :
The administrative expenses of a cooperative society are usually low. Many members provide administrative services honorarily.

5) Limited liability :
The liability of the members, is limited to the extent of the value of their shares.

6) Perpetual existence :
A cooperative enterprise is not effected by the retirement, death, or insanity by any .member. It has continuous existence.

7) State patronage :
The government is helping cooperative organisation to their r success. A number of concessions and tax relief are given by the government for encouraging society form of organization.

8) Aim of mutual prosperity :
Cooperatives function on the principle of “Each for all . and all for each” with the aim of mutual prosperity.

Cooperative Societies – Demerits :
1) Limited financial resources :
Restriction on divided and the principle of “one member, one vote” discourage rich people from joining the society. Due to shortage of funds, there is limited scope for expansion and growth.

2) Lack of unity among members:
Many cooperatives fail because of constant group rivalry and quarrels among members.

3) Non-transferability of shares :
A member cannot transfer his shares freely but he can be allowed to withdraw his capital.

4) Political interference :
Government nominates members to the managing commit¬tees. Every government tries to send their own party members to these societies.

Short Answer Questions

Question 1.
Briefly explain the different types of cooperative societies.
Answer:
The main object of cooperative society is rendering services to its members. The members associate together on the basis of equity. They contribute capital to the business on democratic lines. Every person has one vote irrespective of the capital contributed by him. They undertake reasonable risk.

Types of Cooperative societies :
According to services rendered, cooperatives may be classified into the following categories.

Consumers’ cooperative societies
Producers’ cooperative societies
Marketing cooperative societies
Housing cooperative societies
Farming cooperative societies
Credit cooperative societies

1) Consumers’ cooperative societies :
A consumers cooperative society is set up to ensure a steady supply of essential goods of standard quality at fair prices.

2) Producers’ cooperative societies :
These societies are formed to protect the interest of small producers and artisans by making available items of their need for production, like raw materials, tools and equipments, etc.

3) Marketing cooperative societies :
Small producers form together as marketing cooperative societies to solve the marketing problems of their products.

4) Housing cooperative societies :
The housing cooperative societies are formed to provide residential accommodation to their members either on ownership basis or at fair rents. Housing cooperative buys land and constructs flats which are allotted to members.

5) Farming cooperative societies:
These societies are formed by the small farmers to get the benefit of large scale farming.

6) Credit cooperative societies :
There societies are started by persons who are in need of credit. They accept deposits from the members and grant them loans at reasonable rate of interest.

Very Short Answer Questions

Question 1.
Karta
Answer:
The business of a Joint Hindu Family is managed by the senior most male member of the family Who is known as Karta. The Karta has only the legal right to enter into contracts on behalf of the family business. Other members cannot question the decisions taken by the Karta.

Question 2.
Coparcener
Answer:
In a Joint Hindu Family business, the members of a Hindu Joint Family own the business jointly. Only the male members of the family up to three successive genera¬tions become members by virtue of their birth. They are called “Coparceners”.

Question 3.
Dayabhaga
Answer:
This school of Hindu law prevails only in West Bengal, Assam states. According to this law, if the deceased male coparcener has not left behind a male issue his widow (or in her absence daughter) will become a coparcener.

Question 4.
Mitakshara
Answer:
This school of HUF prevails in entire India except in West Bengal and Assam. Family members of male line and their wives, unmarried daughters are its members. By birth in the family, he gets the right on existing property. By birth a member gets a share in common propety, it continues till his death. In this way shares in the property get fluctuated in accordance with number of coparceners.

Question 5.
What do you mean by Cooperative Society?
Answer:
Cooperative society is a voluntary association of persons who work together to promote their economic interest. It works on the principle of self-help and mutual help. The primary objective is to provide support to the members. The motto of a cooperative society is “Each for all and all for each”.

Question 6.
Consumers’ cooperative societies
Answer:
Consumers’ cooperative societies are set up to ensure a steady supply of essential goods of standard quality at reasonable rates.
Eg : Vijay Krishna super markets.

Question 7.
Producers’cooperative societies
Answer:
These societies are formed to protect the interest of small producers and artisans by making available items of their need for production, like raw material, tools and equipments, etc.

Question 8.
Credit cooperative societies
Answer:
These societies are started by persons who are in need of credit. They accept deposits from the members and grant them loans at reasonable rate of interest.

Question 9.
Housing cooperative societies
Answer:
The housing cooperative societies are formed to provide residential accommodation to their members either on ownership basis or at fair rents. Housing cooperative buys land and constructs flats which are allotted to members.

Question 10.
Farming cooperative societies
Answer:
These societies are formed by the small farmers to get the benefit of large scale farming.

Question 11.
Marketing cooperative societies
Answer:
Small produces form together as marketing cooperative societies to solve the marketing problems of their products.