P.P.

SAVANI CHAITANYA VIDYA SANKUL

BST

Class 11 - Business Studies

1.
(c) sleeping partner
Explanation:
A sleeping partner may not contribute to business decision making but is bound by acts of all other partners. He has unlimited
liability in the business.

2.
(d) Individual
Explanation:
Individual

3.
(d) Joint Stock Company
Explanation:
A Joint Stock Company has a legal status independent of its members. Members may come and go, but the company continues
to exist.

4.
(d) All of these
Explanation:
All of these

5.
(b) secret partner
Explanation:
A secret partner is associated with the business but outsiders have no knowledge about his status in the business. He carries
business activities on behalf of other partners and is bound by activities of other partners as well.

6.
(d) Nominal Partner
Explanation:
A nominal partner is one who allows the use of his/her name by a firm, but does not contribute to its capital.

7.
(c) as long as partners want
Explanation:
The partnership will continue at the will of all the partners. The business continues till all the partners mutually agree to do so.

8.
(c) 2 and 100 respectively
Explanation:
According to the Companies Act, 2013, the minimum and maximum persons allowed in a Partnership are 2 and 100
respectively.

9. (a) Secret partner

Explanation:

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 A secret partner is one whose association with the firm is unknown to the general public.
10.
(c) Partnership
Explanation:
Partnership business is not bound by any law. It is not required to submit or publish their financial results. Also, all the
important decisions and major business activities are carried by partners only. Hence, the partnership business is able to
maintain the confidentiality of information relating to its operations.

11.
(b) all of these
Explanation:
Partnership gets automatically dissolved on the death, retirement, insanity or insolvency of any of its partners. However, if the
remaining partners desire to continue, then they may do so on the basis of a new agreement.

12.
(c) Fifty
Explanation:
Rule 10 of the Companies (Miscellaneous) Rule, 2014 at present the maximum number of members can be 50.

13. (a) partner by holding out

Explanation:
A partner by ‘holding out’ is a person who though is not a partner in a firm but knowingly allows himself/herself to be
represented as a partner in a firm.
14.
(c) Particular partnership
Explanation:
Particular partnership is formed to do a specific project. It comes to an end automatically with the completion of the project.

15. a. Yes, Ved will be considered as a Nominal partner in this case. A nominal partner is the one who allows the use of his name by
a firm. He neither contributes to its capital nor takes an active part in managing the firm. He has no share in profits or lo sses of
the firm.
b. Ved will have to assume unlimited liability like other partners because people may have invested in the firm due to his
goodwill in the market. He is equally liable for the repayment of the firm's debts.
16. No, Mr. Neeraj Gutpa cannot be regarded as a partner of the firm, because on the basis of the contract he has been given some
powers, whereas to become a partner of the firm, the following conditions have to be fulfiled:
i. Contractual Relationship
ii. Existence of Business
iii. Division of Profit
iv. Principal-Agent Relationship
17. a. It shows the characteristics of the partnership organization.
b. i. "Whenever Monica went out of the city for 'Saheli Garments."
Utmost Good Faith.
ii. "On the other hand decided to dispose of his share in the firm to Gunjan."
Restriction on Transfer of Interest.
18. Gopal: Partnership at Will
Shankar: Particular Partnership
Vinod: Limited Partnership.
19. Balanced decision making is the merit being highlighted in the above case. More balanced decisions can be taken by considerin g
the knowledge, skills and experience of both the partners. Thus helps in reducing the possibility of errors and also reduces the
burden of work.
20. Prabhat and Ranjan have promoted their business as 'Partnership’. For its features, refer 'Features of Partnership'.

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21. i. In this paragraph information on the types of partners is communicated.
ii. a. Preeti Wadhwa: Active partner
b. Nitish Malik: Secret Partner
c. Rahul Saini: Partnership in Profit only
d. Mohit Khatri: Minor Partner
22. i. Partnership organisation
ii. Types of Partnership
iii. a. General Partnership
b. Limited Partnership
23. i. Razia will be liable for repayment of such debt because she acted like she is a partner of the firm. So, she is liable to that
extent.
ii. Values promoted by partnership form of organization are mutual understanding, co-operation, and team spirit, risk sharing,
optimum utilization of resources for a productive relationship among the partners.
24. Yes, a legally binding partnership may arise where no formal partnership agreement is in effect as in the case of Rajat, he i s a
Partner by Estoppel.
A person is considered a partner by estoppel if, through his/her own initiative, conduct or behaviour, he/she gives an impression to
others that he/she is a partner of the firm. Such partners are held liable for the debts of the firm because in the eyes of the third
party they are considered to be partners, even though they do not contribute capital or take part in the management. In the g iven
case, there is no formal partnership agreement in effect. However, Rajat has given an impression through his conduct that he is a
partner by estoppel. Hence, he is liable in the eyes of the third party.
25. i. Sharing of risks is the related merit of a Partnership form of business organization, as described above. Since the risks
involved in running a partnership firm are shared by all the partners it reduces the anxiety, burden, and stress on individua l
partners.
ii. 'Possibility of conflicts' is the related demerit of a partnership being described in the paragraph. It states that the w orking of a
partnership form of business may be adversely affected due to the conflicts which may arise due to the difference of opinions
between the partners on the various issues related to the business.
26. No, Ankit and Kishore are not correct in refusing the payment. They too are liable along with Shivam. According to the Indian
Partnership Act, 1932, partnership business is carried on by all or any one of the partners acting for all. It means every partner acts
in the capacity of an ‘agent’ as well as a ‘principal’.
As an agent, he represents other partners and thereby binds them through his acts.
Asa principal, he is bound by the acts of other partners.
The related feature highlighted in the given example is: ‘Mutual Agency’.
27. a. Yes, this wrong act of Bimesh is binding on Arun and Czar too. In partnership form of business organisation, the trade
agreements made by one partner are binding on the others due to the fact that mutual agency is a distinct feature of
partnership. As evident from the definition of partnership that it is a business carried on by all or any one of the partners acting
for all. Thus, every partner is both an agent and a principal. He is an agent of other partners as he represents them and the reby
binds them through his acts. He is a principal as he too can be bound by the acts of other partners.
b. No, Arun and Czar cannot file a case against Bimesh as their firm is not registered.
c. The two values being ignored by Bimesh are:
i. Trust
ii. Quality
28. a. Partnership is the form of business organization in which Rita and Mita are running a confectionery shop in a club.
b. The three merits of a partnership form of business organization are:
i. Ease of formation and closure: A partnership firm can be formed easily as there is no compulsion with respect to
registration of the firm. Through an agreement between the prospective partners, a business firm can be started. Also, the
closure of the firm is an easy task.
ii. Balanced decision making: Unlike a sole proprietorship, the decisions are taken jointly by the partners. Moreover, each
partner may look into different functions according to their areas of expertise. This leads to fewer errors in judgments and
facilitates balanced decision making.
iii. More funds: More funds are available in a partnership form of business organisation as the capital is contributed by a
number of partners. Therefore, it enables pooling in of financial resources.
29. a. The various types of partner which are being mentioned in the above paragraph are:

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 i. Rakesh (Active partner) - An active partner is the one who contributes capital, participates in the management of the firm,
shares its profits and losses, and is liable to an unlimited extent to the creditors of the firm.
ii. Sudhir (Secret partner) - A secret partner is the one whose association with the firm is unknown to the general public.
However, like other partners, he contributes to the capital of the firm, takes part in the management, shares its profits and
losses, and has unlimited liability towards the creditors.
iii. Mohit (Sleeping partner) - Partners who do not take part in the day to day activities of the business are called sleeping
partners. A sleeping partner, however, contributes capital to the firm, shares its profits and losses and has unlimited
liability towards the creditors.
b. The two values which are being fulfilled by the firm are:
i. Generating employment opportunities
ii. Raising the standard of living of people
30. a. The type of partnership being described above is a Particular Partnership. The particular partnership is a type of partnership
which is formed for the accomplishment of a particular project or for an activity to be carried on for a specified time perio d. It
dissolves automatically when the purpose for which it was formed is fulfilled or when the time duration expires. In the given
case, Karan knows Kunal's plans of moving abroad for studies and so they enter into a partnership only for a limited period of
3 years. This partnership will come to an end when Kunal moves abroad after 3 years. Hence, they are in a particular
partnership.
b. The particular partnership is classified under the basis of duration.
c. Yes, besides Particular Partnership, Partnership at Will is also classified on the basis of duration.
31. The consequences of non-registration of a firm that Kartik must have explained are:
a. A partner of an unregistered firm cannot file a suit against the firm or other partners in case of any fraud or non-completion of
contracts.
b. The firm cannot file a suit against third parties as it does not have any identity in the eyes of law.
c. The firm cannot file a case against the partners.
32. a. Yes, as an alternative to raising funds from the general public, a public company can raise the funds through friends, relatives
or some private arrangements as done by a private company.
b. In such cases, there is no need to issue a prospectus. A 'Statement in Lieu of Prospectus' is filed with the Registrar at least
three days before making the allotment.
33.
(b) Promotion
Explanation:
Promotion Stage is the first stage in the formation of a company.

34.
(c) Memorandum of Association
Explanation:
Memorandum of Association is the legal document that specifies the objectives of the company.

35. a. Drishti is referring to the Partnership deed. A partnership deed is a written agreement which specifies the terms and conditi ons
that govern the partnership.
b. A partnership deed generally includes the following aspects:
i. Name of firm
ii. Nature of business and location of the business
iii. Duration of business
36. a. Even if a person forges the signatures of others on the Memorandum of Association, the Incorporation will still be conside red
valid. Thus, whatever be the deficiency in the formalities, the Certificate of Incorporation once issued is conclusive evidence
of the existence of the company.
b. A private company can raise necessary funds from friends, relatives or through private arrangements and proceed to start a
business.
37. a. i. Memorandum of Association (MOA)
ii. Articles of Association (AOA)

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 b. Memorandum of Association
i. "All of them jointly selected. .......... would be set up."
a. Situation Clause (THE PLACE WHERE COMPANY IS SITUATED)
ii. After a thorough consideration........... was named 'Trimurti Limited'.
a. Name Clause (NAME OF THE COMPANY)
Articles of Association
i. "Along with it, with the advice of specialists. .......... for the issue and allotment of shares."
ii. "Before the registrations of the company .......... was also decided."
38. Yes, Merchant Ltd. can file a case against ABC Ltd. as the company was in existence on 5th March. Although, the wrong date is
entered in the certificate, still ‘Certificate of Incorporation’ is conclusive evidence of the regularity of incorporation of a company,
irrespective of any deficiency. So, the contract is valid and ABC Ltd. is under a legal obligation to honor the contract.
39. a. The type of contract that a company may enter into before obtaining the Certificate of Commencement of Business is known
as Provisional Contract.
b. A contract made by a public company after incorporation but before it is entitled to commence business is provisional, and is
not binding on the company. But, as soon as the certificate to commence business is obtained the contract becomes binding on
the company automatically. Therefore, 'Good Earth Ltd.' can enforce the contract and recover the price for its supplies from
Wellspring Ltd. after it obtains the Certificate of Commencement of Business.
40. a. SEBI (Securities and Exchange Board of India) is the regulatory authority in India and has issued guidelines for the disclosure
of information and investor protection. Therefore, any company who wishes to invite funds from the general public must make
adequate disclosure of all relevant information and must not conceal any material information from the potential investors.
b. In case a company is not reasonably assured of a good public response to the issue, it may appoint underwriters to the iss ue.
Underwriters undertake to buy the shares if these are not subscribed by the public. They receive a commission for
underwriting the issue. Appointment of underwriters is not necessary whenever a public company wishes to raise the required
funds from the public by means of the issue of shares and debentures.
41. a. The various kinds of feasibility studies that Shridhar has undertaken as a promoter are described below:
i. Technical feasibility
ii. Financial feasibility
iii. Economic feasibility
b. In order to get the name approval of his company, Shridhar will have to select a name for it and submit an application to the
Registrar of Companies of the state in which the registered office of the company is to be situated, for its approval. He will
have to give three names, in order of his priority in the application to the Registrar of Companies.
c. The proposed name of the company is likely to be rejected in the following cases:
i. If it is identical with or too closely resembles the name of an existing company.
ii. If it is misleading. It is so considered if the name suggests that the company is in a particular business or it is an
association of a particular type when it is not true.
iii. If it is violative of the provisions of 'The Emblem and Names (Prevention of Improper Use) Act 1950, as given in the
schedule to this Act.
42. a. A prospectus is 'any document described or issued as a prospectus including any notice, circular, advertisement or other
documents inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares or
debentures of a body corporate'.
b. Yes, Sunanda can sue for compensation of loss. As the investors make up their minds about investment in a company
primarily on the basis of the information contained in the prospectus, there must not be a misstatement in the prospectus and
all significant information must be fully disclosed. In this case, Sunanda had to sustain loss because she believed that the facts
given in the prospectus issued by Jolly Ltd. were true.
43. a. The two types of contracts being described above are 'preliminary contracts' and 'provisional contracts'.
b. The define between 'preliminary contracts' and 'provisional contracts' is as follows:
S.No Basis Preliminary Contracts Provisional Contracts

1. Timing Preliminary contracts are the ones that the Provisional Contracts are the ones which are signed after
promoters enter with third parties on behalf incorporation but before the commencement of business.
of the company during the promotion of the
company.

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 These contracts are not legally binding on
Legal the company but the promoters remain These become enforceable only after the company gets the
2.
status personally liable to third parties for these Certificate of Commencement of Business.
contracts.

Since a private company can commence its business

Type of Applicable in case of both private company immediately after obtaining a certificate of incorporation, the
3.
company and a public company question of provisional contracts in case of a private
company does not arise.

44. a. Promoters of a company are neither the agents nor the trustees of the company. Instead, they enjoy a fiduciary position with
the company, which they must not misuse. In the above case Akanksha, Ann, and Devesh have made a secret profit of Rs.
40,000. The promoters can make a profit only if it is disclosed but must not make any secret profits. Fiduciary relationship
means where one person places complete trust in another in regard to a particular transaction or one's general affairs or
business. The relationship is not necessarily formally or legally established as in a declaration of trust but can be one of moral
or personal responsibility, due to the superior knowledge and training of the fiduciary as compared to the one whose affairs the
fiduciary is handling.
b. In the event of non-disclosure, the company can cancel the contract and recover the purchase price paid to the promoters. It
can also claim damages for the loss suffered due to the non-disclosure of material information.
45. Below are the points expressed:
i. Kanika: Her point is related to Limited Liability.
ii. Rahul: His view is related to Managerial Ability.
iii. Anvi: Her view is related to Ease of Formation.
46. I will suggest to Mr. Kumar to set up a partnership organisation, because this organisation fulfils all his expectations, for example:
i. Setting up this form of organisation is quite easier than the company organisation.
ii. Since the number of partners is limited, operational decisions can easily be changed.
iii. In such an organisation sharing of profits is with limited persons.
iv. The availability of persons to look after the different business activities is more than one.
47. The next steps to be followed by Anil in the export trade are:
i. Manufacturing or Procuring of Goods.
ii. Clearance from Central Excise.
iii. Pre-Shipment Inspection.
iv. Appointment of Clearing and Forwarding Agents.
v. Goods to Port of Shipment.
vi. Port Formalities and Customs Clearance.
vii. Dispatch of Documents by Forwarding Agent to the Exporter.
viii. Dispatch of Shipment Advice to the Importer.
ix. Submission of Documents to the Bank.
48. a. Procedure of Export Trade.
Step 1: An international buyer may make a trade enquiry related to quality, price, and terms and conditions, among others.
Step 2: As a response to the enquiry of the buyer, the exporter sends the quotation in the form of ‘Proforma invoice’ indicating
quality, selling price, mode of delivery, quantity etc.
Step 3: The buyer, when he agrees on the quotation, places the order receipt to the exporter for importing the goods or
services.
b. Advantages of International Business:
i. Obtaining Valuable Forex: A country can earn valuable Forex by exporting its goods to other countries.
ii. Division of labor: International business leads to the specialization of product production. Therefore, high-quality
products that you have the greatest advantage.
Disadvantages of International Business:
i. Competition with developed countries: Developing countries cannot compete with developed countries. Unless
an international business is managed, it impedes the growth and development of developing countries.
ii. Exploitation: International business leads to exploitation from developing countries to developed countries.
Prosperous and dominant nations regulate the economies of poor nations.

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49. The next steps to be followed by Pradeep in the export trade are:
i. Production or Procurement of Goods
ii. Pre-shipment Inspection
iii. Excise Clearance
iv. Obtaining a Certificate of Origin
v. Reservation of Shipping Space
vi. Packing and Forwarding
vii. Insurance of Goods
viii. Customs Clearance
ix. Obtaining Mates Receipt
x. Payment of Freight and Issuance of Bill of Lading
xi. Preparation of Invoice
xii. Securing Payment.
50. Steps of the export procedure are:
i. Receiving trade inquiry and sending Quotation: Trade procedure starts when an exporter receives trade inquiry in written
form from the intending importer. In response to the trade inquiry, the exporter sends the quotation or a proforma invoice
containing necessary details regarding the detailed condition of sale as delivery schedule, mode of delivery, mode of packing ,
terms of payment, etc.
ii. Receiving Indent and sending a confirmation: After receiving the quotation from the exporter, the importer sends an order
called indent which contains all the important particulars of the transaction such as the description of goods, their price,
quantity, quality, instructions regarding packing, marking, insurance, mode of payment, date, and method of delivery, etc. Fo r
buying goods and the exporter confirms its receipt.
iii. Assessing importer's creditworthiness and securing a guarantee for payments: Before dispatching the goods, the exporter
assesses the creditworthiness of the importer. For this, the importer is requested to send a letter of credit in favor of the
exporter. It contains an undertaking of importer's bank that bills drawn by the exporter up to a specified amount shall be
honored by the importer.
iv. Obtaining an export license and completing other formalities: For exporting goods from India exporters are required to
obtain an export license, Import Export Code Number, registration membership certificate, RBI code number, and registering
with ECGC.
v. Obtaining pre-shipment finance and production or procurement of goods: After receiving a letter of credit, the exporter
obtains pre-shipment finance from his banker and starts manufacturing/ procuring goods as per the specifications of the export
order.
vi. Pre-shipment inspection: Before shipment of goods, export Inspection council/Authority inspects the quality of goods and if
satisfied, issues export inspection certificate which certifies the quality of goods to be exported. Pre-shipment finance is the
finance that the exporter needs for procuring raw material and other components, processing and packaging, and transportation
of goods to the port of shipment.
vii. vii.Pre-shipment inspection
viii. Excise clearance
ix. Obtaining a certificate of origin etc
51. Read the text carefully and answer the questions:
Mr. Ramesh started a partnership firm with his friends Sakhi, Pratham and Riya. He contributes capital in the business,
participates actively in the management of the firm, and shares its profits and losses. On the other hand, Riya doesn't participate in
the day-to-day activities of the business, however, contributes capital to the firm, shares its profits and losses, just like Ramesh.
Sakshi is a renowned artist and she allowed the use of her name by this partnership firm formed by her friends but does not
contribute to its capital. Pratham's association with the firm is unknown to the general public. Their partnership was runnin g
smoothly as they had enough funds for growth and expansion.
But suddenly, Riya dies and after some time they decide to continue their partnership with a new agreement. They thought of
raising the amount of money Riya contributed by contracting with Mr. Raj. As per the contract, he advanced a loan of ₹10 lakhs to
the firm and in exchange got the power to take few decisions regarding the firm's business. Besides, he got a 9% interest rate on
the loan and 12% of the profit earned by the firm.
(i) (a) Active Partner
Explanation:
Active Partner

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 (ii) (b) Nominal Partner
Explanation:
Nominal Partner
(iii) (d) Dormant Partner
Explanation:
Dormant Partner
(iv) (d) Secret Partner
Explanation:
Secret Partner
(v) (c) More funds
Explanation:
More funds
(vi) (a) Creditor
Explanation:
Creditor
52. (b) Hindu Undivided Family Business
Explanation:
Hindu Undivided Family Business
53. (a) Karta
Explanation:
Karta
54. (a) Limited Resources
Explanation:
Limited Resources
55. (b) Balanced decision making
Explanation:
Balanced decision making
56. (d) Unlimited Liability
Explanation:
Unlimited Liability
57. (b) Company
Explanation:
Company
58. Read the text carefully and answer the questions:
Elpis Ltd. took a loan of ₹ 50 lakh from a bank for its growth and expansion plans. The company was unable to repay the loan
amount because of heavy losses incurred in the business on a continuous basis. The management of the company asked its
shareholders to contribute towards repayment of the loan.
But the shareholders refused as they had already paid the full amount due on their shares. The bank filed a case against Elpis Ltd.
in the court. The court held that the shareholders of the company were not liable to repay the loan as they had not unpaid amount
on shares.
(i) (b) Yes, because the shareholders of a company are only liable to the extent of the amount unpaid on the shares held
by them.
Explanation:
Yes, because the shareholders of a company are only liable to the extent of the amount unpaid on the shares held by
them.
(ii) (b) Separate legal entity
Explanation:
Shareholders remain protected because Company has separate legal entity.
(iii) (d) Shareholders
Explanation:

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 The board of directors of a Joint stock company is elected by Shareholders.
(iv) (d) Unlimited
Explanation:
Maximum number of members in a private company must be unlimited because Elpis Ltd. is a Public Company as it
has the word Limited after its name.
(v) (d) 7
Explanation:
Minimum number of members in Elpis Ltd. must be 7 because it is a public company.

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