1st PUC Business Studies Model Question Paper 3 with Answers

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Karnataka 1st PUC Business Studies Model Question Paper 3 with Answers

Time: 3.15 Hours
Max Marks: 100

Instructions to candidates:

  1. Write the serial number of questions properly as given in the question paper while answering
  2. Write the correct and complete answers.

Section – A


I. Answer any TEN of following questions in a word or a sentence each. While answering Multiple Choice Questions, write the serial number/alphabet of the correct choice and write the answer corresponding to it. Each question carries one mark. ( 10 × 1 = 10 )

Question 1.
Given an example for processing industry.

  • Sugar industry.
  • Paper industry.

Question 2.
The minimum number of partners in Partnership firm
(a) 20 (b) 10 (c) 2 (d) No limit
(c) 2

Question 3.
State any one feature of statutory corporation.
These corporation is managed by the Board of Directors.

Question 4.
Mention any one type of insurance.
Life Insurance.

KSEEB Solutions

Question 5.
Expand ATM.
Automated Teller Machine.

Question 6.
Social responsibility is ___________.
(a) Same as legal responsibility
(b) Broader than legal responsibility
(c) Narrower than legal responsibility
(d) None of the above
(c) Narrower than legal responsibility.

Question 7.
Which type of company issues prospectus?
Public Company.

Question 8.
State any one type of share.
Equity Share.

Question 9.
In which year MSMED act was enacted?
June 16, 2006 the MSMED act was enacted.

Question 10.
Which of the following is not a fixed shop retailer?
(a) General stores
(b) Chain stores
(c) Mail order houses
(d) Super markets
(a) General stores.

Question 11.
Given an example of business organisation that has entered into international business through franchising system.
General Motors.

KSEEB Solutions

Question 12.
Which of the following documents is not required in export procedure?
(a) Certificate of origin
(b) Certificate of inspection
(c) Mate’s receipts
(d) Bill of entry
(d) Bill of entry.

Section – B

II. Answer any ten of the following questions in two or three sentences each. Each question carries 2 marks: ( 10 × 2 = 20 )

Question 13.
State any two characteristics of business.
Characteristics of business are :

  1. An economic activity.
  2. Earning profit.

Question 14.
Give the meaning of co-operative societies.
Co-operative organisation is a society which its objectives for the promotion of economic interest of its members in accordance with co-operative principles.

Question 15.
State any two limitations for Departmental Undertaking.

  1. Departmental undertakings fails to providing with limited resources.
  2. Not allowed to take independent decision.

Question 16.
Give the meaning of outsourcing.
Outsourcing is the process by which a company contracts another company to provide particular services.

KSEEB Solutions

Question 17.
What do you mean by Telecom Services?
It is a service provided by a tele communications provider or a specified set of user information transfer capabilities provided to a group of users.

Question 18.
State any two arguments against social responsibility.

  1. Burden on consumers.
  2. Lack of social skills.

Question 19.
State any two steps in the formation of a company.

  1. Memorandum of Association.
  2. Articles of Association.

Question 20.
Who are the parties to a Lease Contracts?
Lessor and Lessee.

Question 21.
State any two features of Cottage Industries.

  1. These are organised by individuals with private resources.
  2. Normally use family labour.

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Question 22.
State any two features of Itinerant Retailers.

  1. They are small traders operating with limited resources.
  2. They normally deal in consumer products of daily use such as fruits and vegetables etc.

Question 23.
State any two benefits of International business to nations.

  1. Earning of foreign exchange.
  2. lncreased standard of living.

Question 24.
Name any two commodity Boards established by Government of India.

  1. Coffee Board.
  2. Rubber Board.

Section – C

III. Answer any seven of the following questions in 10-12 sentences. Each question carries 4 marks. ( 7 × 4 = 28 )

Question 25.
Explain briefly the different types of manufacturing industries.
The various types of industries are:

1. Primary industries: Primary industries refer to industries which are concerned with the production of goods mainly with the help of nature. Mining, agriculture, forestry, fishing, etc. are example for primary industries. Primary industries can be classified as:

(a) Genetic industries: Genetic industries refer to those activities which are undertaken for reproducing or multiplying plants and animals with the object of making profit from their sales. Example: Nurseries raising seedlings and plants, cattle breeding, poultry farming, etc.

(b) Extractive industries: Extractive industries refer to those activities which are concerned with the extraction or production of wealth from soil, air, water or from beneath the surface of the earth. Example: Agriculture, mining, fishing, forestry, hunting, fruit gathering, etc.

2. Secondary industries: Secondary industries refer to industries where human labour plays a more important role than nature. Secondary industries can be classified into:

(a) Manufacturing industries: Manufacturing industries refer to activities concerned with the conversion of raw materials or semi-finished goods into finished goods.
Example: Conversion of raw cotton into cotton textiles; conversion of raw jute into jute products; production of sugar from sugarcane, etc. Manufacturing industries may be sub-divided into four types. They are:

(i) Analytical industries: Analytical industries refer to those manufacturing industries which produce many types of product by analysing, i.e. separating, the same basic raw materials into different products. Example: In oil refining, the same crude oil is analysed or separated into different products like petrol, diesel oil, kerosene, lubricating oil, etc.

(ii) Synthetic industries: Synthetic industries refer to all those manufacturing industries where various materials are combined together in the manufacturing process to manufacture a new product. Example: Cement industry is a synthetic industry, in the sense that cement is produced by combining many materials, such as gypsum, coal, etc.

(iii) Processing industries: Processing industries refer to those manufacturing industries where different component processed through Trent processes into finished product. Paper industry, textile industry, etc. are the example processing industries.

(iv) Assembling industries: Assembling industries refer to those manufacturing industries where different component parts already manufactured are assembled into final products. Automobile industry is an example for assembling industries.

(b) Construction industries: Construction industries refer to those activities which are concerned with the creation of infrastructure necessary for economic development. In other words, they refer to those which are concerned with the construction of buildings, roads, bridges, railway lines, dams canals, etc.

Tertiary industries: Tertiary industries refer to industries which provide support services to primary and secondary industries and also to activities relating to trade. These days, services also are regarded as industries, and are called tertiary industries. These industries are regarded as part of commerce, i.e. as auxiliaries to trade.

KSEEB Solutions

Question 26.
Name any two merits and two limitations of departmental undertakings.
Departmental undertakings have certain advantages which are as follows:

  1. These undertakings facilitate the Parliament to exercise effective control over their operations.
  2. These ensure a high degree of public accountability.

The limitations of departmental undertaking are:

  1. Departmental undertakings fail to provide flexibility, which is essential for the smooth operation of business.
  2. The employees or heads of departments of such undertakings are not allowed to take independent decisions, without the approval of the ministry concerned. This leads to delays, in matters where prompt decisions are required.

Question 27.
What are the benefits of e-banking to customer?

  • E-banking provides 24 hours, 365 days a year services to the customer of the bank.
  • It offers convenience to customers as they are not required to go to the bank’s premises.
  • The customer can obtain funds at anytime from ATM machines.
  • The customer can easily transfer the funds from one place to another place electronically.

Question 28.
Explain any four limitation of e-business.
The limitation of e-business are:

  1. Inability to Experience the Product before Purchase: There are many products that consumers want to touch, feel, hear, taste and smell before they buy. E-commerce takes away that luxury.
  2. Less Security: The biggest obstacle in the growth of e-commerce is the issue of security. Internet is not a secured medium of communication. There are tools or options available to hackers whereby they cannot only monitor but also control any data communicated over the internet.
  3. Dependent on Internet: E-business is dependent on internet. Mechanical failures in system can cause unpredictable effects on the total processes.
  4. E-commerce Delays Goods: E-business takes more time to deliver the goods into consumer hands when compared to traditional business.

KSEEB Solutions

Question 29.
Explain the social responsibility of business towards
(a) Shareholders
(b) Consumer
Social responsibility of business towards shareholders:

  • A fair rate of dividend should be regularly paid by the business enterprises to their owners.
  • Management techniques should be effective and efficient so that the net present value of the business is maximized.
  • Owners should be given the right to participate in the affairs of the enterprise.
  • The tendency towards the growth of ‘Oligarchic management’ should be arrested.
  • The owners should be given the full information regarding the working of the company. In other words, accurate and comprehensive reports have to be supplied.
  • Financial information has to be disclosed and doubts have to be clarified.
  • Chairman and directors of the company should be easily accessible to the owner.

Social responsibility of business towards consumer:

  • Ensuring availability of products in the right quantity, at the right place and at the right time.
  • Maintaining the quality of the goods, increasing the quality to maximum extent so as to compete with any international product.
  • Charging reasonable prices to its products.
  • Correct weights and measures have to be used.
  • The company must provide after sale service for maintenance of goods.
  • The business firms should avoid restrictive trade practices and see that full justice is done to the amount that is spent by a consumer.
  • Constant investigation and discovery of growing wants of consumers, giving importance for research and development of new products that satisfy their wants.
  • Taking all such measures which promote consumer satisfaction, interest and welfare.

Question 30.
Explain briefly any 4 clause of memorandum of association.
1. Name Clause: It contains the name by which the company will be established. The approval of the proposed name is taken in advance from the Registrar of the companies.

2. Objects Clause: it contains detailed description of the objects and rights of the company, for which it is being established.

3. Capital Clause: It contains the proposed authorized capital of the company. It gives the classification of the authorized capital into various types of shares, (like equity and preference shares) with their numbers and nominal value. A company is not allowed to raise more capital than the amount mentioned as its authorized capital. However, the company is permitted to alter this clause as per the guidelines prescribed by the Companies Act.

4. Liability Clause: It contains financial limit up to which the shareholders are liable to pay off to the outsiders on the event of the company being dissolved or closed down.

KSEEB Solutions

Question 31.
Explain the financial needs of business.
An activity of business concerned with the acquisition and conservation of capital fund in meeting the financial needs and overall objective of the business.

  1. To purchase fixed assets: Every type of business needs some fixed assets like land and building, furniture, machinery, etc. A large amount of money is required for purchase of these assets.
  2. To meet day-to-day expenses: After establishment of a business, funds are needed to carry out day-to-day operations.
  3. To fund business growth: Growth of business may include expansion of existing line of business as well as adding new lines. To finance such growth, one needs more funds.
  4. To bridge the time gap between production and sales: The amount spent on production is realized only when sales are made. Normally, there is a time gap between production and sales and also between sales and realization of cash. Hence during this interval, expenses continue to be incurred, for which funds are required.
  5. To meet contingencies: Funds are always required to meet the ups and downs of business and for some unforeseen problems.

Question 32.
Write a short note on
(a) Retained earnings
(b) Trade credit
(a) Retained Earnings: A company generally does not distribute all its earnings amongst the shareholders as dividends but 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’. The profit available for ploughing back in an organisation depends on many factors like net profits, dividend policy and age of the organisation.

(b) Trade Credit: It 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. It is granted to those customers who have reasonable amount of financial standing and goodwill.

The volume and period of credit extended depends on factors such as reputation of the purchasing firm, financial position of the seller, volume of purchases, past record of payment and degree of competition in the market. Terms of trade credit may vary from one industry to another and from one person to another. A firm may also offer different credit terms to different customers.

Question 33.
Explain briefly the common incentives offered to attract small industries in rural areas by the government.
The contribution of small scale industries is remarkable. Thus, government has provided the following institutional support to solve the problem of finance and marketing in the small scale sector:

1. National Bank for Agriculture and Rural development (NABARD): NABARD was setup in 1982, to promote integrated rural development. Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans. It provides credit and offers counselling and consultancy services and organizes training and development programmes for rural entrepreneurs.

2. The Rural Small Business Development Centre (RSDC): It was set up by the world association for small and medium enterprises and sponsored by NABARD. It works for the benefit of socially and economically disadvantaged individuals and groups. It aims at providing management and technical support to current and prospective micro and small entrepreneurs in rural areas.

3. National Small Industries Corporation (NSIC): This was setup in 1955 with a view to promote aid and foster the growth of small business units in the country. Functions of NSIC include:

  • Supply of machines on easy hire-purchase terms.
  • Procure, supply and distribute raw materials.
  • Export the products of small business units and develop export-worthiness.
  • Mentoring and advisory services.
  • Serve as technology business incubators.
  • Creating awareness on technological up gradation.
  • Developing software technology parks and technology transfer centres.

4. Small Industries Development Bank of India (SIDBI): SIDBI was set up as an apex bank to provide direct / indirect financial assistance under different schemes, to meet credit needs of small business organizations and to coordinate the functions of other institutions in similar activities.

KSEEB Solutions

Question 34.
Explain any four services of wholesalers to retailers.
Services of wholesale sellers to retailers are:
1. Availability of goods: Retailers have to maintain adequate stock of varied commodities so that they can offer variety to their customers. The wholesalers make the products of various manufacturers readily available to the retailers. This relieves the retailers of the work of collecting goods from several producers.

2. Marketing support: The wholesalers perform various marketing functions and provide support to the retailers. They undertake advertisements and other sales promotional activities to induce customers to purchase the goods.

3. Grant of credit: The wholesalers generally extend credit facilities to their regular customers. This enables the retailers to manage their business with relatively small amount of working capital.

4. Specialised knowledge: The wholesalers specialise in one line of products and know the pulse of the market. They pass on the benefit of their specialised knowledge to the retailers. They inform the retailers about the new products. their uses, quality, prices, etc.

Section – D

IV. Answer any four of the following questions in 20-25 sentences each. Each question carries 8 marks: ( 4 × 8 = 32 )

Question 35.
Explain any four merits and demerits of Sole Proprietorship firm of business.

  1. Ease of formation and closure: Like sole proprietorship, the partnership business can be formed easily without any legal formalities.
  2. More funds: In a partnership, the capital is contributed by a number of partners. This makes it possible to raise larger amount of funds as compared to a sole proprietor and undertake additional operations when needed.
  3. Sharing risks: The risks involved in running a partnership firm are shared by all the partners. This reduces the anxiety, burden and stress on individual partners.
  4. Secrecy: A partnership firm is not legally required to publish its accounts and submit its reports. Hence it is able to maintain confidentiality of information relating to its operations.


  1. Limited capital: Since the total number of partners cannot exceed 20, the capital to be raised is always limited. It may not be possible to start a very large business in partnership form.
  2. Lack of continuity of business: A partnership firm concerns to an end in the event of death, lunacy or retirement of any partner. Even otherwise, it can discontinue its business at the partners. At any time, they may take a decision to end their relationship.
  3. Lack of public confidence: There is no governmental supervision over the affairs of the business of a partnership and publishing accounts is also not necessary. Hence, public may not have full confidence in them.
  4. Unlimited liability: The liability of each partner is not limited to the amount invested but his private property is also liable to pay the business obligations.

KSEEB Solutions

Question 36.
Explain the features of Joint Stock Company.
1. Artificial person: Just like an individual, who takes birth, grows, enters into relationships and dies, a joint stock company takes birth, grows, enters into relationships and dies. However, it is called an artificial person as its birth, existence and death are regulated by law and it does not possess physical attributes like that of a normal person.

2. Legal formation: No single individual or a group of individuals can start a business and call it a joint stock company. A joint stock company comes into existence only when it has been registered after completion of all formalities required by the Indian Companies Act, 2013.

3. Separate legal entity: Being an artificial person a company has its own legal entity separate from its members. It can own assets or property, enters into contracts, sue or can be sued by anyone in the court of law. Its shareholders cannot be held liable for any conduct of the company.

4. Perpetual existence: A joint stock company continues to exist as long as it fulfills the requirements of law. It is not affected by the death, lunacy, insolvency or retirement of any of its members.

5. Common seal: A joint stock company has a seal, which is used while dealing with others or entering into contracts with outsiders. It is called a common seal as it can be used by any officer at any level of the organisation working on behalf of the company. Any document, on which the company’s seal is put and is duly signed by any official of the company, become binding on the company.

6. Association of persons: A company is a voluntary association of persons established for profit motive. A private company must have at least 2 persons and the public limited company must have at least 7 persons to get it registered. The maximum number of persons required for the registration in case of private company is 50 and in case of public company there is no maximum limit.

7. Limited liability: The liability of the shareholders is limited to the extent of the face value of the shares held by them. The shareholders are not liable personally for the payment of debt of the company.

8. Transferability of shares: The shares of a public limited company are freely transferable and can be purchased and sold through the stock exchanges. A shareholder of a public limited company can transfer his shares without the consent of other except in case of private companies.

9. Large capital: A joint stock company can raise large amount of capital because the number of persons contributing towards capital are more in number when compared to sole proprietorship or partnership.

10. Democratic management: Joint stock companies have democratic management and control. That is, even though the shareholders are owners of the company, all of them cannot participate in the management of the company. Normally, the shareholders elect representatives from among themselves known as ‘Directors’ to manage the affairs of the company.

Question 37.
What are Commercial Banks? Explain their different functions.
The main functions of commercial banks are accepting deposits from the public and advancing them loans. However, besides these functions there are many other functions which these banks perform. All these functions can be divided under the following heads:

1. Accepting Deposits: The most important function of commercial banks is to accept deposits from the public. Various sections of society, according to their needs and economic condition, deposit their savings with the banks. Generally, there are three types of deposits which are as follows:

  • Saving Bank Account: These account are introduced by the bank to mobilise small saving of low and middle income group of people. The saving account’ is generally opened in bank by salaried persons or by the persons who have a fixed regular income.
  • Current account: This account is opened by businessmen who have a higher number of regular transactions with the bank.
  • Recurring Deposit Account: In recurring deposit account, certain fixed amount is invested every month for a specified period and the total amount is repaid with interest at the end of the particular fixed period.
  • Fixed Deposit Account: If the money deposited by customer with a bank for a fixed period of time for a fixed rate of interest. It is repayable on expiry of specified period of time.

2. Giving Loans: The second important function of commercial banks is to advance loans to its customers. Banks charge interest from the borrowers and this is the main source of their income. Banks advance loans not only on the basis of the deposits of the public rather they also advance loans on the basis of depositing the money in the accounts of borrowers. In other words, they create loans out of deposits and deposits out of loans. This is called as credit creation by commercial banks.

Banks generally give following types of loans and advances:

  • Bank Overdraft: An overdraft is an advance given by the bank allowing a customer to overdraw his current account up to an agreed amount. interest is charged at an agreed rate only on the amount overdrawn.
  • Cash Credits: Cash credit is a short term cash loan to a company. It is a financial accommodation under which an advance is granted on a separate account called cash credit account up to a specified limit.
  • Demand Loans: These are such loans that can be recalled on demand by the banks. The entire loan amount is paid in lump sum by crediting it to the loan account of the borrower, and thus entire loan becomes chargeable to interest with immediate effect.
  • Short-term Loans: These loans may be given as personal loans, loans to finance working capital or as priority sector advances. These are made against some security and entire loan amount is transferred to the loan account of the borrower.

Discounting of Bills of Exchange: It is a short term finance assistance extended by the bank usually to the businesses that they have current account with bank. When a bill of exchange is presented before the bank for encashment, bank credits the amount to customer’s account after deducting some discount, On maturity of the bill, the payment is received by the bank from the drawee.

3. Investment of Funds: The banks invest their surplus funds in three types of securities such as Government securities, other approved securities and other securities.

  • Government securities include both, central and state governments, such as treasury bills, national savings certificate, etc.
  • Other securities include securities of state associated bodies like electricity boards, housing boards, debentures of land development banks units of UTI, shares of regional rural banks, etc.

4. Agency Functions: Banks function in the form of agents and representatives of their customers. Customers give their consent for performing such functions. The important functions of these types are as follows:

  • Banks collect cheques, drafts, bills of exchange and dividends of the shares for their customers.
  • Banks make payment for their clients and at times accept the bills of exchange of their customers for which payment is made at the fixed time.
  • Banks pay insurance premium of their customers. Besides this, they also deposit loan instalments, income-tax, interest, etc. as per directions.
  • Banks purchase and sell securities, shares and debentures on behalf of their customers.
  • Banks arrange to send money from one place to another for the convenience of their customers.

5. Miscellaneous Functions: Besides the functions mentioned above, banks perform many other functions of general utility which are as follows:

  • Banks make arrangement of lockers for the safe custody of valuable assets of their customers such as gold, silver, legal documents, etc.
  • Banks give reference for their customers.
  • Banks collect necessary and useful statistics relating to trade and industry.
  • For facilitating foreign trade, banks undertake to sell and purchase foreign exchange.
  • Banks advise their clients relating to investment decisions as specialist.
  • Bank does the under-writing of shares and debentures also.
  • Banks issue letters of credit.
  • During natural calamities, banks are highly useful in mobilizing funds and donations.

KSEEB Solutions

Question 38.
Explain any four merits and demerits of equity shares as a sources of finance
From Shareholders Point of View:

  • The equity shareholders are the owners of the company.
  • It is suitable for those who want to take risk for higher return.
  • The value of equity shares goes up in the stock market with the increase in profits of the concern.
  • Equity shares can be easily sold in the stock market.
  • The liability is limited to the nominal value of shares.
  • Equity shareholders have a say in the management of a company as they are conferred voting rights.

From Management Point of View:

  • A company can raise capital by issuing equity shares without creating any charge on its fixed assets.
  • The capital raised by issuing equity shares is not required to be paid back during the lifetime of the company. It will be paid back only when the company is winding up.
  • There is no binding on the company to pay dividend on equity shares. The company may declare dividend only if there is enough profits.
  • If a company raises more capital by issuing equity shares, it leads to greater confidence among the creditors.


  • As equity capital cannot be redeemed, there is a danger of over capitalisation.
  • The dividend which a shareholder receives is neither fixed nor controllable by him. The management of the company decides how much dividend should be given.
  • Equity share investment is a risky share compared to any other investment.
  • Equity shareholders get dividend only if there remains any profit after paying debenture interest, tax and preference dividend. Thus, getting dividend on equity shares is uncertain every year.
  • Issue of fresh shares reduces the earnings of existing shareholders.
  • Cost of equity is the high when compared to other sources of finance.

Question 39.
Explain the merits and demerits of Mail order houses.

  1. Limited capital requirement: Mail order business does not require heavy expenditure on building and other infrastructural facilities. Therefore, it can be started with relatively low amount of capital.
  2. Elimination of middle men: The biggest advantage of mail-order business from the point of view of consumers is that unnecessary middlemen between the buyers and sellers are eliminated. This may result in lot of savings both to the buyers as well as to the sellers.
  3. Wide reach: Under this system the goods can be sent to all the places having postal services. This opens wide scope for business as a large number of people throughout the country can be served through mail.
  4. Convenience: Under this system goods are delivered at the doorstep of the customers. This results in great convenience to the customers in buying these products.
  5. Absence of bad debt: Since the mail order houses do not extend credit facilities to the customers, there are no chances of any bad debt on account of non-payment of cash by the customers.


  1. No credit: Super markets sell their products on cash basis only. No credit facilities are made available to the buyers. This restricts the purchasing power of buyers from such markets.
  2. No personal attention: Super markets work on the principle of self-service. The customers, therefore, don’t get any personal attention. As a result, such commodities that require personal attention by sales people cannot be handled effectively in super markets.
  3. Mishandling of goods: Some customers handle the goods kept in the shelf carelessly. This may raise costs in super markets.
  4. High overhead expenses: Super market incurs high overhead expenses. As a result these have not been able to create low price appeal among the customers.
  5. Possibility of abuse: This type of business provides greater possibility of abuse to dishonest traders to cheat the customers by making false claims about the products or not honoring the commitments made through hand bills or advertisements.
  6. High dependence on postal services: The success of mail order business depends heavily on the availability of efficient postal services at a place. But in a vast country like ours, where many places are still without postal facilities, this type of business has limited prospects.

KSEEB Solutions

Question 40.
Explain briefly the steps involved in import procedure.

1. Trade enquiry: The importing firm approaches the export firms with the help of trade enquiry they collecting information about their export prices and terms of exports. After receiving a trade enquiry, the exporter will prepare a quotation called proforma invoice.

2. Procurement of import licence: There are certain goods that can he imported freely, while others need licensing. The importer needs to consult the Export Import (EXIM) policy in force to know whether the goods that he or she wants to import are subject to import licensing.

3. Obtaining foreign exchange: Since the supplier in the context of an import transaction resides in a foreign country. he/she demands payment in a foreign currency. Payment in foreign currency involves exchange of Indian currency into foreign currency.

4. Placing order or indent: After obtaining the import licence, the importer places an import order or indent with the exporter for supply of the specified products. The import order contains information about the price, quantity size, grade and quality of goods ordered and the instructions relating to packing, shipping, ports of shipment and destination etc.

5. Arranging for finance: The importer should make arrangements in advance to pay to the exporter on arrival of goods at the port. Advanced planning for financing imports is necessary so as to avoid huge demur rages (i.e.. penalties) on the imported goods lying uncleared at the port for want of payments.

6. Obtaining letter of credit: If the payment terms agreed between the importer and the overseas supplier is a letter of credit, then the importer should obtain the letter of credit from its bank and forward it to the overseas supplier.

7. Receipt of shipment advice: After loading the goods on the vessel, the overseas supplier dispatches the shipment advice to the importer. A shipment advice contains information about the shipment of goods.

8. Retirement of import documents: Having shipped the goods, the overseas supplier prepares a set of necessary documents as per the terms of contract and letter of credit and hands it over to his or her banker for their onward transmission and negotiation to the importer in the manner as specified in the letter of credit.

9. Arrival of goods: Goods are shipped by the overseas supplier as per the contract. The person in charge of the carrier (ship or airway) informs the officer in charge at the dock or the airport about the arrival of goods in the importing country. It provides the document called import general manifest. Import general manifest is a document that contains the details of the imported goods.

10. Customs clearance and release of goods: All the goods imported into India have to pass through customs clearance after they cross the Indian borders. Customs clearance is a somewhat tedious process and calls for completing a number of formalities. It is, therefore, advised that importers appoint C&F agents who are well versed with such formalities and play an important role in getting the goods customs cleared.

Section – E

V. Answer any TWO of the following questions: ( 2 × 5 = 10 )

Question 41.
You are planning to start a new business. Make a list of any five factors you consider while selecting a suitable form of business organization.
The five factor that should be considered while selecting a suitable form of business organisation are:

  1. Cost
  2. Liability
  3. Continuity
  4. Management ability
  5. Degree of control
  6. Capital consideration
  7. Nature of business.

Question 42.
As a promoter, state five important documents to be prepared for the incorporation of a joint stock company.
Five document to be prepared for the incorporation of a joint stock company.

  1. Memorandum of association.
  2. Articles of association / Statement in lieu of the prospectus.
  3. Written consent of the proposed directors.
  4. A copy of the registrar’s letter approving the name of the company.
  5. A statutory declaration affirming that all legal requirements for registration have been complied with.

KSEEB Solutions

Question 43.
Being a consumer, name the types of large fixed retail shops which you would like to do your shopping.
The types of large fixed retail shops:

  1. Departmental stores
  2. Chain stores
  3. Consumer co-operative stores
  4. Supermarket
  5. Mail order houses.