CASE STUDIES QUESTIONS BST CLASS - 11 CH - 2 FORMS OF BUSINESS ORGANISATION
CLASS -11 BUSINESS STUDIES
CHAPTER - 2 FORMS OF BUSINESS ORGANISATION
CASE STUDY AND VALUE-BASED QUESTIONS WITH ANSWERS
Q1. In which form of organisation is a trade agreement made by one owner binding on the others? Give reasons to support your answer.
Ans. In a partnership from of organisation, a trade agreement is made by one owner on the others. The Indian Partnership Act 1932, defines partnership as "the relation between have agreed to share the profit of a business carried on by all or any one of them acting for all. The definition of partnership highlights the fact that it is a business carried on by all or anyone of the partners acting for all. The partners share amongst themselves the responsibility of decision making and control of day to day activities.
Q. 2. The business assets of an organisation amount to ?50,000 but the debts that remain unpaid are ? 80,000. What course of action can the creditors take if persons who
(a) The organisation is a sole proprietorship firm?
(b) The organisation is a partnership firm with Anthony and Akbar as partners? Which of the two partners can the creditors approach for repayment of debt? Explain giving reasons.
Ans. (a) They can claim over the personal property of sole proprietor as his liability is unlimited.
(b) Creditors can approach both Anthony and Akbar and they are liable to pa y back in their profit sharing ratio but in case one of the partners becomes insolvent then creditor can claim from only one partner also.
0.3. Kiran is a sole proprietor. Over the past decade, her business has grown from operating a neighborhood corner shop selling accessories such as artificial jewelry bags, hair clips and nail art to a retail chain with three branches in the city. Although she looks after the varied functions in all the branches, she is wondering whether she should form a company for better management of the business. She also has plans to open branches countrywide.
(a) Explain two benefits of remaining a sole proprietor.
(b) Explain two benefits of converting it to a joint stock company.
(c) What role will her decision to go nationwide play in her choice of form of the organisation?
(d) What legal formalities will she have to undergo to operate business as a company?
Ans. (a) Two benefits of remaining sole proprietor are:
(i) Sole beneficiary of profits
(ii) Personal touch
(b) Two benefits of converting in joint stock company are:
(i) Large amount of capital
(ii) Limited liability
(c) If she plans to go nationwide then she will have to manage her form of business from sole proprietorship to joint stock company.
(d) If she plans to operate as joint stock co., she will have to complete many legal formalities such as: (i) getting certificate of incorporation
(ii) getting certificate of commencement of business, if she plans to operate as public Ltd. CO.
(iii) appoint professional experts, brokers, who charge high fees.
(iv) prepare various documents such as: Prospectus, Memorandum of Association, Articles of Association etc.
Q 4. Rajiv is the sole owner of a shirt manufacturing factory. He took loan of 7 30 lac from Jain finance company for expansion of his business. In beginning business was running well but later on he started facing losses and due to continuous losses he was not able to repay the loan. After receiving many reminders from finance company, Rajiv planned to close the business. He sold all his machines and other assets and collected 720 lac. He requested the finance Co. to settle the accounts by taking 20 lac. The finance company refused and plan to file a case against him in court. In court, Mr. Rajiv gave the argument that he has sold all his business assets and loan was taken by him for business and not for personal use. So finance company must settle the account by taking 720 lac. The court did not agree with the argument of Rajiv and gave the decision in favour of finance company and order Rajiv to pay full loan amount by selling his personal asset.
(a) Name the form of business carried by Rajiv?
(b) State the feature of sole Proprietorship which is kept in mind by court while taking decision.
(c) Is Rajiv's argument of saying he and business are separate entity is correct.
Ans. (a) Sole Proprietorship.
(b) Unlimited Liability.
(c) No, as sole proprietor does not, enjoy separate legal entity.
Q.8 Sharma brethers inherited some ancestoral property, They decided to form a Hindu wndivided family consisting of four male members. Mr. Raman Sharma was eldest brother so he became Karta'. The business took a loan of 20 lac from Canara Bank, which was to be returned within 3 years. Due to poor financial position of the business, they were unable to repav the loan. Brothers sold the ancestoral property for 10 lac and paid the amount to Canara Bank. The bank filed a case for recovery of balance amount. Mr. Raman Sharma pleaded the court that the loan was taken for the purpose of Business: so all members of business are liable to repay. The court said all members are responsible only to the extent of their share in business and business property is already sold, but you being Karta will have to repay whole amount even by selling your personal property.
(a) In this case who has unlimited liabilitY.
(b) Was the decision of court to claim only from Raman is justified?
Ans. (a) Karta' has unlimited liability.
(b) Yes because only Karta has unlimited liability remaining members have limited liability.
Q.6. ABC Lad. took a loan of 50 lac from a Bank for its growth and expansion plans. The company was unable to repay because of heavy losses. The company asked its shareholders to come forward and contribute towards repayments of loan. The shareholders refused as they had already paid the full amount due on their shares. Bank filed a case against ABC Lad. The court said that company could not call shareholders to repay loan as they have no unpaid amount of shares. It was the duty of ABC Ltd. to use company's assets to repay loan.
(a) In the above case what kind of liability is enjoyed by the shareholders of ABC Ltd.?
(b) Which feature of company protected shareholders, i.e., owner of business not to pay?
Ans. (a) Limited Liability,
(b) Separate Legal Entity.
Q.7 The business assets of a firm are worth 70,000 but the debts remain unpaid are worth R1,00,000. What course of action can the creditors take in the following cases?
(a) The organisation in sole proprietorship firm
(b) The organisation in partnership firm with A and B, two partners sharing profit equally
Ans. (a) The creditors may claim from the personal property of the proprietor as he has limited liability.
(b) A and B are jointly and individually liable to pay back the debts. Both are responsible to pay back the debt in the profit sharing ratio and if one of the partners becomes insolvent then the other is liable to pay back the full debt.
Q.9 Bhuvan Ltd. issues 5,00,000 shares of 10 each for public subscription. Application along with money was received for 4,00,000 shares. Can company allot these shares? Explain.
Ans :No company cannot allot these shares because as per Companies Act, 1956 a company rerrive minimum 90 o subscription within 120 days from the date of issue otherwise allotment cannot be made.
In this case, the allotment will be valid only when at least application money for 4,50,000 sliares is received i.e. 90%. But they have received only 80% i.e. for 4,00,000 shares, so allotment can not be made.
Q.10. Youngistan Pvt. Ltd., the famous group of promoters submitted an application to the registrar of the company for the approval of the name for shoe manufacturing company. They choose 'Niky Ltd.' as the name of the company so as to increase the sales because Nike was a well known and well established brand.
(a) Who selects the name of the company?
(b) Would the proposed name be accepted by the registrar? Give reason.
Ans. (a) Promoter.
(b) No, the selected name of the company is not accepted. Reason is name of the company should not be identical or similar or too close resembling the name of existing company. In this case name is too closely resembling the name of existing company Nike.
Q.11. Mrs. Indu started a voluntary association of 10 peoples, who are also consumers. She collected the capital by selling shares to members and opened a retail shop so that they can eliminate middlemen and get the goods at low price.
(a) State the type of organisation mentioned in above case.
(b) State different types of that organisation.
Ans. (a) Cooperative Store
(b) Consumer Cooperative Society
- Producer Cooperative Society.
- Co-operative Credit Societies
- Marketing Cooperative Society
- Housing Cooperative Society
- Co-operative Farming Societies
Q. 12. What values are involved in:
(a) Cooperative organisation.
(b) Partnership.
Ans. (a) Cooperative organisation:
(i) Values of mutual help.
(ii) Values of protecting the interest of economically weaker section of society.
(b) Partnership: (i) Values of sharing.
(ii) Values of mutual agency.
Q.13 A company attached its drainage system with a near by Canal. So that the waste directly go in canal without affecting the local area. What values are missing?
Ans. 1. Spreading water pollution.
2. Throwing untreated waste material which may cause damage of fishes etc. in the canal.
3. It is affect the health of birds and animals who will drink that water. 4. Irrigation with that land will spoil the fertility of land.
Q. 14. A Firm Manufacturing Spices adultrate spices and sell at low price to various restaurants, hotels and shops. What values are being violated?
Ans, 1. Harming the health of people who consume dishes made with those spices. 2. Violation of antiadultration law.
3. Providing false information to buyer.
Q.15. The partner of a partnership entered into a contract with an outsider favoring him personally, ignoring the interest of partnership firm. What value is ignored?
Ans. 1. Value of honesty and integrity.
2. Breach of mutual trust.
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