EMERGENCE OF DIFFERENT FORMS OF BUSINESS ORGANISATIONS
I. Fill in the blanks in the following sentences with
1.The concern that is owned and managed by a single person is called ___________
2.The Indian partnership Act was passed in the year
_____ to regulate the affairs of the partnership firms.
3.The Maximum number of partners in a firm which carries out banking business is ____________
4. The Head of the Hindu undivided family business is known as ___________
5.The only business concern under private business organization found in India is __________
Ans: (1) sole trading (2) 1932 (3) ten (4) Karta (5) Hindu undivided family business.
II. Answer the following questions in one or two sentences.
1.Which are the small scale business organizations?
Ans: Small Scale organizations under private sector are mainly
divided into three types. They are
a) Sole trading concern,
b) Partnership firm and
c) Hindu undivided family firms.
2.How do sole trading concerns help the consumers?
Ans: Sole trading concerns directly come into contact with the
consumers. They understand the likes and dislikes of the
customers and supply goods accordingly.
3.What are partnership firms?
Ans: In the partnership firms, two or more persons join together and carry out the business. The Partnership act defines the partnership firms as the relation between the persons to have agreed to share the profits of a business carried on by all or any of them acting for all.
4.Who are sleeping dormant partners?
Ans: The sleeping dormant partners contribute capital but, do not take active part in day-to-day transactions of the firm. The profits and losses are shared in proportion to their capital contribution.
5.How is the dissolution of partnership firm easy?
Ans: Partnership forms can be dissolved easily. An) partner can apply for dissolution by giving fourteen days notice or with the consent of all the partners it can be dissolved
III. Answer the following questions:
1.Mention any four merits of sole trading concerns.
Ans: The merits of sole trading concern are as follows:
1) No legal formalities are required to commence the business.
2) It can be started by own capital.
3) The owners enjoy all the profits and bear all the losses.
4) They directly come into contact with the consumer.
5) They render social service also.
2.Mention any four limitations of sole trading concerns.
Ans: The limitations of sole trading concerns are as follows:
1) Capital is limited and they cannot expand the business.
2) Since it is run by a single person the managerial ability is limited.
3) All losses are to be borne by a single person.
4) Life of the sole trading concerns may be short, with the death or insolvency of the sole trader.
3.How is partnership firms started? Explain briefly.
Ans: Partnership firm Act was passed in 1932. According to the section 4 of partnership act the partnership firm is defined as the relation between the persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The maximum number of partners is fixed to ten if they carry out the banking business and twenty in case of carrying out general business.
4.Who are the different types of partner's?
Ans: The different types of partners are as fallows-
(1) Active partners- they take active part in carrying out
day-to-day affairs. They contribute fixed amount of
capital, and share profits and losses in proportion to their
(2) Sleeping partners-they contribute capital but do not take active part in day-to-day transactions of the firm. The profits and losses are shared in proportion (0 their capital contribution.
(3) Nominal Partners- they neither contribute capital not
take active participation in day to day transactions of the firm. They are not entitled for any share in profit but are
liable for business losses.
(4) Minor partners- are those who have not yet attained
the age of 18 years. A minor cannot become a partner
but by mutual agreement of partners, he can be admitted
as a partner.
5. Mention any four merits of partnership firms.
Ans: Merits of partnership firms are as follows:
(1) Easy to form-no legal formalities are required for the
formation of partnership firm.
(2) More capital-Partnership is formed by more than two persons, so the capital investment is more.
(3) Better efficiency-Division of labour can easily be adopted so there is better managerial ability and efficiency.
(4) Credit worthiness-the liability of partners is unlimited so it leads to increase in credit worthiness.
(5) Sharing of business loss- the entire partners share the profit and loss.
6. Mention any four demerits of partnerships firms.
Ans: The demerits of partnerships firms are as follows:
(1) The disunity among the partners may hamper business and it leads to disputes.
(2) Since the' number of partners is limited, the capital
contribution is also limited.
(3) Liability is unlimited, so it discourages many people to
join as partners.
(4) Reckless and foolish decisions of some partners may lead to heavy setbacks.
(5) Partnership firms lack continuity, the death or insolvency of one partner may lead to dissolution.
7.What are the advantages of registering a partnership
Ans: The advantages of registering a partnership firm are as follows:
(1) A Registration firm can file a suit in the court of law
against third party. But it is not possible in case of an
(2) A registered firm can file a case against the other partners against the loans they owe to the firm.
(3) However third parties can file a case against an
unregistered firm for the recovery of loans.
(4) Any partner can file a case against the firm or other
partners for the dissolution of the firm or the settlement
8. Explain briefly about "Hindu undivided family business".
Ans: Hindu undivided family business: They are found only in India. They are in accordance with 'Hindu Law'. They are the firms which consist of all the male members of the Hindu family, descendants from a common male ancestor. Only three successive generations of male members namely sons, grandsons and great grandsons acquire the birth right or interest in the ancestral property. The eldest or senior most member of the family manages the business and he is called 'Karta'. The liability of Karta is unlimited.